FFBC - Earnings call transcript Q3 2018 | First Financial Bancorp.

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Operator

Good morning, and welcome to the First Financial Third Quarter 2018 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Scott Crawley. sir. ahead, go Please

Scott Crawley

today's Good Officer; conference Thank Financial call year-to-date and President Chief Participating quarter Keith. Executive Stollings, Claude us Archie Tony Anderson, Chairman; Bancorp's for Chief on and Brown, on results. financial today's to Chief XXXX Officer. will morning, you, be you Davis, Executive everyone. and joining third call Jamie Thank Banking discuss Officer; First Financial

website presentation release press and issued www.bankatfirst.com are Relations available Investor we our slide the So, the section. on yesterday at the under accompanying

We the will call. contained make references to the accompanying slides in today's presentation during

and the Additionally, The as not forward-looking as to facts or today the well of refer we'll information the a will any statements disclosure I release, third SEC XXXX, our contained call. of call filings for turn provide please this in XX, September to will the to we as full forward-looking accurate now earnings over circumstances factors. reflect quarter updating risk XXXX be discussion statements Brown. is Archie after company's

Archie Brown

our will we'll on further some Good to details. third Scott. us for quarter. joining for we call. morning, for financial Yesterday thank turn afternoon, This the I you call you, morning, announced of the then and highlights our Thank results Jamie today's and results provide over

Finally, I'll wrap up with some forward-looking commentary and closing remarks.

company. to continue high-performing power the demonstrate our We of earnings

items. XX% mark us which consecutive efficiency a XX.X% to reflect on $X.XX quarter tangible on and XXXth common results, return our adjusted merger-related to share, adjusted when achieve equity return enabling quarter earnings quartile assets Third remove average of X.XX% performance, ratio per profitability, top and average of

disciplined margin, strong Third and credit quarter income, by stable fee was expense highlighted management growing a quality.

to fully cost on focused invest realizing continue targeted remain strategic areas. we in we phase, While

banking, wealth levels full During growth banking, the and to our and teams approaching in added business advisory staffing mortgage are our commercial targeted we debt quarter, markets.

of XXXX build us achieve to and optimistic our end through investments position targets. will XXXX momentum these the staffing We enable growth us that to are

capital strong X.XX% book ratios, earnings $XX.XX. quarter's our to common strengthening value tangible of increasing tangible with This per share to equity led increasing to further and

in which our $X.XX Directors second in I'll our a dividend third increase dividend results. an to share, discuss XXXX. call of per from to common Board now July, As quarter $X.XX was With over such, increase approved the to further turn to Jamie of details that, the

Jamie Anderson

Archie, third and our you, X X morning, quarter an Thank good Slides overview everyone. and performance. provide of

interest efficiency we we with by that results, stable a Archie net of are Slide earnings, adjusted X, our performance. earnings, we a provided and pleased quarterly quarterly our margin. highlighted quality, credit important to items strong understanding earnings our As highlighting On increased mentioned, excellent are to GAAP believe reconciliation

to Group. not items impacted primarily Financial second third While quarter, was related quarter merger as MainSource by with as the significant the the

Excluding to the XX.X% the which continued maintain $XX these and as to $X.XX equity ratio cost realized common the reflects merger average ability the adjusted net return of managing quarter equates in Slide XX.X% in tangible shown our efficiency third income on synergies and items, our million Further, the on quarter, a was expenses. from of or X. per assets average a share on X.XX% of for return diligence

quarter interest basis. loan day X.XX% by in decrease driven our the Turning interest X. from the on The third net quarter to linked to the in for and margin the Net quarter fully Slide impact decline primarily a count. was X points margin declined equivalent of basis fees tax a

changes mix. muted periods in modest a our did June, due compared previous it asset from but Fed in the benefit to we Given funding rate slight somewhat sensitivity, receive hike was to

secure the strategies loan-to-deposit future our periods loan evaluate funding we needed maintain as support funding in to our continue Given to low-cost selectively and to sub-XX% is likely trend growth. ensure ratio, anticipated this we

As the shown as by as points. cost increased X basis X of end less on Fed Loan while basis our missed rate our from current during prior by one-month Slide LIBOR loan Overall X third loan second deposits much improved loan than increase Slide only expected, quarter as period loan mix points, of yields yields our hikes. depicts quarter. the in increased expectations. X, our did not progression growth and

the with pleased compared were quarter which lines to we reflecting However, volumes, all second XX% origination improvement. increased business with higher

compared X%, increased fundings addition, quarter. second to In the

was this utilization. offset lower than by line increase elevated payoffs more However, and

and the banking the in of shown progression of loan was our This decline previously mix right-hand small in lower-than-expected second As was the from balances on of decline shows of as result XX well planned current business slide, of average loan exit portfolio. the in acquired deposit Slide most deposits the the the progression the production as of side quarter. a the base, relationships.

anticipated the to of credits nonperforming quarter, migration while outflow due as This average Excluding seasonal, flat two recoveries partially $XX the months of compared X a basis resolution had attract first funds, the remains CDs historical increased anticipated relationship balances deposits and quarter. Classified to decreased resulted both of large in bill of remain with impact a the reserve maintain of the was was of were the required of related branch to dollars in some and deposit low, of mentioned brokerage which the decline for branch XX of status. decline confident lower-cost the and the nonperforming percentage divestitures merger, We norms. assets, over On and excellent. time. in asset and remains We special million. six by Much provision public in this XX, XXXX. expense to during our and offices overall points quality Slide consolidation in the asset ability to balances net

reserve of balances. pointing balance worth migration none downward the during that While we did credit it affected to period, add out the the is nonperforming

stated expect ratios further our with note earnings. targets period all shown conjunction Finally, the ratios expanded coming I'll of as we on in strong in that XX, capital and excess expansion quarters. in Slide the during remain

support We opportunities company's some the will are comments. that capital now continue initiatives. it continuing closing for evaluate I'll solid over while growth with Archie to providing back to shareholder deployment to in-line turn returns

Archie Brown

you, Thank Jamie.

Before remarks, some a client conversion quarter company give two Even seen technology, want focus truly merger our with company of going from closing internal view I new quarters our resolving priorities, having been Having our combined potential on quarter as than conversion. as that resulted on MainSource. I you the successful. much the the a We're outlook first the excited with to along achieving stabilization return for our the to when with the and return play as more removed common now the forward. combined systems we tangible we're and announced prepared related thoughts core our end quarter during around Much quartile as focus on was any of teams, out on first we assets the from average were issues we equity, today merger. through and top processes on

integration, As presentation. the made from stages outlook remove of the to decision the we're in the we now earnings later slide our

Our growth our more to build work ability quarter the teams loan over in us makes optimistic sales in longer-term. mid-single-digit return to to the third

be term, expect loan but offset near payoffs. commitments we levels to of the by continue increase, continued elevated Over to

With managing purchase company accounting activities we prepayment stable at be we're most to depending though strategic margin and relatively conversion on on an efficient, interest now net accretion behind loan fashion. merger expect growing focused remain of activity. risk on and as focused initiatives costs, funding the it We the aimed us, fluctuate in could appropriate

end prepared and of to clients. near objectives disciplined third approximate with year on focusing noninterest With to results financial for and strategic income expect quarter now term, our executing wealth remains spending the consumer third of guided open Keith from adjusted respect the the forward on concludes the a we to of outlook quarter expenses will approach mid-to-upper questions. last adjusted credit, to This our needs look in comments for management We range the call. decrease the up and slightly We the to stable. line our quarter. business, the the results remainder

Operator

O'Neill. Scott first Siefers you. with comes Sandler [Operator Yes, the Instructions] thank And from question

Scott Siefers

Good is everyone doing. morning guys, how

Archie Brown

Scott. Hi

Scott Siefers

see, the first margin. Let's question on

I on margin guess for said, on on Archie, had to call. guided So, that so braced I with based guys was quarter more stability, the you comments second the appreciate what the erosion likely I

maybe, takes other one roughly and fourth within in the to And the better? the reported in see context words, had come Can Jamie, FTE X.XX%. that to able sort basis? outlook the how course, as on in it quarter. or X.XX% of, in then stable of you puts was margin you how So, a you the And of coming of the then, margin core the for maybe from parse

nuance that move other in So, how around? words, does

Jamie Anderson

the say, driver Yes. the was it I do the margin came we the delta what potentially where main that would expecting were in to to related quarter between third loan fees. and I in, mean

in quarter third guiding we were loan assuming that we the when were volatility – just fees there's number. in So, that

points, come basis expecting the were in And delta to So, to amount XX loan come expecting we fees. side, fees We in core slightly. loan biggest then came there was purchase also, XX the accretion. the on of related down at it accounting were modeled at points. to basis But

out then expecting of the what we So, were what loan purchase if fees, stable. margin we're that's that take you out question margin? seeing stable about, of you in fees be kind think to I were no So, in And assuming your loan take terms the – quarter-to-quarter. pretty to forward, volatility asking were going accounting, and assume

but yields. our in due and cost So, low third change in asset cost really deposits, a increase point to of X-basis of X what a point our you mix saw funding basis the increase X quarter funds on in increase about was the to in a

margin a here margin may change increase We an cost see and was be side. all on less the the deposit the so, mix trends the of in relatively core of And stable. similar really of happening more our given that, short-term – was with

categories out fourth into think of the the the but what then of deposits of We higher some sensitive we So, won't – deposits the is saw more increase happen migration deposits. in into – slighter interest see borrowing rate a and the cost quarter, you'll of necessarily that of side. in that on that, out a and

Scott Siefers

Okay.

such change sort you're that correctly, cosmetically, Is conclusion? it a similar as with that the guess, funding of up if so then flattish wash how X.XX% a I interpreted guessing it margin side, I sounds on the that and some saying ends overall So, impact like fair PAA with it core I'm looks well. just in being

Jamie Anderson

Well, the modeled fourth is purchase accounting accretion XX quarter basis points. for the

– it's fees third the fourth for that So, quarter, we got we XX quarter. and XX second the assumed, in on and based the had the XX model and we prepayment the have

Scott Siefers

Okay.

PAA means a in the is the than fourth and little a the then less same? quarter reported the So, core better little XQ then in

Jamie Anderson

Right.

Scott Siefers

okay, Right, in I then sneak Right? more. perfect. one could And if

were So, Is completely the be the upper mid in savings any XXXX, to cost? $XX to I looks weren't go until And range side if million I like costs $XX fourth million should think be the there Is from all Because supposed noticed is the decrease said forward? correctly, the anything there you charge to on yes, additional well. opportunity I the quarter. thereafter? to it supposed you early to as then we end deal recall thinking for cost severance of about expense cost – there so else had

Archie Brown

be we're – as mean, would talked close. range slight from some building our as said, with on I there quarter, of – I we down other additional getting kind Archie. is we are guided will, may last revenue this that to of some upper we of investment side, teams, were if any. if saying, what and here, the mid it you kind building Scott, but you going – things about into it some be you

Scott Siefers

right, the then Okay. severance read And additional to in quarter? into charge All that perfect. nothing third

Archie Brown

No.

Jamie Anderson

kind reduction, of continued conversion. a post That's No.

Archie Brown

merit that as expenses we just would Scott, the costs, We XXXX, with think health off base. about normal QX about think of things or see like increases being you and kind increase Yes, kind that. care it's just XXXX the of

Scott Siefers

much. Okay, perfect. Thank very guys, you,

Operator

with question next RBC. the Jon And comes from you. Thank Arfstrom

Jon Arfstrom

Good morning guys.

Archie Brown

morning, Good Jon.

Jon Arfstrom

Just on of a lending. couple questions

planned in about business general down. the the much out small payoffs versus maybe you of exits how the being You was Can the break for payoffs? guys us talked line decline

Archie Brown

assets sitting will Probably are Hey, really probably to was – bucket. Jon, what of of we portfolio. happening that absolute so call three it actually like quarter it's had related we – exit that special in there things would kind loans a in There those. a probably we

then and to Another the maturing to, we're third, then tighten prepayments. that's – probably going those trying the another we're talking small And which those then that call, what bar related can't ICRE amortization and terms the up. And get is would to them probably so I forward we're be about either other piece. or piece if credits with tightened we they're exiting, okay just

Jon Arfstrom

on And better origination given Okay. mid-single-digit activity seeing of And about hear XXXX the into we QX? about, growth overall longer term. you're growth, Are some the the persist message on this some feel talking you you're I outlook? you of when the growth likely hit

Archie Brown

– that bit will payoffs, banking portfolio, more same I'm probably not Yes. is, near-term maybe the we make phenomenon areas elevated that see when talk They that One us to feel little are a same small currently quite there's the of in way. seeing extent. business three we the really

ago have construction the we construction – the do several done seeing in periods maturities ICRE buckets stabilized. are loans, years scheduled We where

seeing highly coming recent just into little in refinanced but latter the this the here, we than part through And third now, years. in company, there right in a as finance more our market the really market, so still we're insurance quarter. get competitive business, Street we're will of is into that those payoffs of higher the are a schedule in permanent our Oak is, few get year. a that seeing then Some And

into I all finance we'll So, think start we to will as year, start core – going the the to keep on trends get the what's in businesses watching company. and abate will new those

Jon Arfstrom

what's give the left of can additions, Seems early Okay, update, us being like but some there, and related, to an then completed please. give color do? somewhat And results us on close little good. to just maybe you bit you're personnel

Archie Brown

light talked quarter most about probably quarter. that a that we we one lot are want we're a – progress we into couple Last this [ph] we get and next over were of metropolitan market where markets Sure. this, still front banker’s done We here had our had bankers upgrading footprint, that to of that on quarter. adding metro we our of made in the more and

positions origination but with the we those we quarter improved levels the into they're activity. So, earlier QX. than filled that, But other pipeline see did commitment and of we build and and that in even think to so get some levels, additions during most of and can continue got starting QX,

Jon Arfstrom

Thanks. the growth, Great luck getting Okay. you guys. job Great the growth good going. performance and on

Archie Brown

Thanks Jon.

Operator

Piper Thank Nathan comes next question you. Jaffray. And from the of Race

Nathan Race

guys, Hi good morning.

Archie Brown

Good morning.

Nathan Race

circle to environment, expectations areas? it's just continue the of curious probably you deposit couple perhaps kind in get over guys little flows back seasonal in some for deposits some Jamie, and just a deposit price comments but just cost guys pricing what curious, It can in competitive XQ Obviously, sounds to I there's next just quarter. deposit on off expect you And what the But of your thoughts of deposit price quarters? kind just lag want into your more here to aspect to higher the like to extent your run on some of continue some impacted XXXX? things here. are to how

Archie Brown

is and to we – to if pressure rate wants start, a add Archie. little move in we I'll the But pressure. it. have Yes, more Nathan. see seen each with Jamie This Fed

coming to, little interest core recent not. the this change just are will rate to checking, bit we more if starting would of other – they're to – And to those lower tweaks got those calls down. Jamie – of costs a clients, we're mix maybe a we'll dollars. see typically rates dollars few decision, kind we some retain be we'll or think of clients, increase time. one, And have Things alluded With those more to we with work a like we'll interest attrition did of retain QX, few to And again, market, most it see we to in offset Fed our experienced and from more see deposit higher that We with dollars see the pressure. of slowing slowing I do money sensitive as in try areas. we then compared that we're each but public into make buckets. make a a fund our what And

So, those the big things. two probably are

our of September. consumer thing clients relative June quarter-over-quarter, look and The that kind at relatively you other to looking clients, I to noninterest-bearing business flat, if did our observe at our balances

feel in stable So, we are like that those pretty areas things right now.

Nathan Race

kind just is Okay, here appreciate from side going XXXX portfolio of in think XQ got any on that. the quarter, relative It thinking lending was are I thoughts securities size – you absolute growth just the as the of sounds about and things helpful, it. so be that thinking And like just absolute curious into should the in of liquidity on little a in securities That's then book? and to about portfolio well? the the how still fourth reinvesting here. size how And and of excess I about any relative guys we challenging

Jamie Anderson

Yes, Jamie. this – is this is Nathan,

– we're – – the but as are of portfolio over in the couple we that here being, next our going is the side plan the we're the could outlook then to for flat. securities the to short term, loan And we're growth quarters, keep monitoring it So, just change, keep time on flat.

Nathan Race

appreciate the Thanks. color all guys. Alright, I

Jamie Anderson

Thanks.

Operator

And D.A. Kevin next from question Davidson. the Reevey you. comes Thank with

Kevin Reevey

morning Good gentlemen, are how you?

Archie Brown

you? Good Kevin. How are

Kevin Reevey

thanks. Good,

it is in back which to it are Louisville loan getting So, your Is it you seeing in the originations, markets Cincinnati? Is strongest Indianapolis? growth, market?

Archie Brown

Archie. Yes, This is Kevin.

markets lot – happen teams showing starting little But further I there. now, of a are this I think growth metropolitan we and other right we and greater Louisville market, markets, we've good things point, ahead building our earlier, in Columbus, headquarters’ showing stability Columbus a nonmetro so to not were got so are Cincinnati, strength, certainly those as pretty coming Our in and we're discussed is and And strength. in at yet. stabilization

Kevin Reevey

you then at what number was quarter prepared versus you the about talked your us in end Can line that the was down. quarter? tell And the third second remarks, utilization of

Archie Brown

Yes.

XX% I went think from, it XX%. to about like,

$XX of percentage change utilization, a So, has impact in around million. about an point X which

Kevin Reevey

Great. Thank you very much.

Operator

Thank you. comes from the And with next Stephens. McEvoy question Terry

Terry McEvoy

Good guys. morning,

Archie Brown

Hi, Terry.

Terry McEvoy

there of expenses call and it, wealth kind and in expenses first into the the comfortable fourth and to to really back of with just shouldn't up to The I half year related of built the comments new quarter hires management. the your on expenses That's behind want next and commercial be, Circling first hires? again, get step a quarter XXXX.

Archie Brown

That's correct, Terry.

Jamie Anderson

That's correct, yes.

Terry McEvoy

Okay. then And Thank thinking synergies. revenue you. about just

As I versus ran release? through highlight the $X companies in to maybe just jumped million. as else can the we have seeing you the maybe income that statement, some of of internally kind derivative two fees come together and client synergies you're can see the what And up anything

Archie Brown

expect Terry, bit and that's footprint one. a advisory we We and strong. charge was the rolled seen And we here the advisers, although that generally or that's side, mentioned, a more program our we've obvious QX anticipate, we wealth wealth out throughout service additional would some one wealth. two. improving hired was did really really robust little on recent We month in

So, I start of Those in saw you there. swap big drivers momentum the the see think to we probably outside the will what are income.

Terry McEvoy

question. Jamie, just, then last one And

whether that of was mentioned you run As that slide, statement going you the credits? themes a moved any into quality kind the few through you there common those classified and loans just Could category. were among again through asset

Jamie Anderson

clarify. to Yes, just

that the those common the no mentioned obviously, no credits, classified no into the those two. There's provision to theme that so into But there two helped that for there, – special but to large large just well, it theme drive – two credits bucket. they just with, the moved expense on just start – So quarter. bucket move was credits clarify,

into went they So, substandard. mention, didn't it go special into

Terry McEvoy

clearing for guys. Thanks that Great. Thanks up.

Archie Brown

You’re welcome.

Operator

comes Thank McGratty question you. of [Operator Instructions] And from KBW. the next Chris

Chris McGratty

good morning Hi, everybody.

Archie Brown

Good morning, Chris.

Chris McGratty

breakdown. Jamie, maybe the a deposit on question

MainSource, deposit think base. the if merits segregate portfolio? still of was two. granularity a I'm I'm but deposit in legacy between in kind interested the of and Financial far, guys betas, just strategic of the First just I kind one you on of responsiveness of the not deal sure either the high-level differences thus of comment MainSource's

Jamie Anderson

Alright. in Yes. I had mention pool deposit you first. to the betas

two So, I because we whatnot. consolidated betas branches don't we've segregate still think – – the so deposit I and

went I think When So of mean the look – the to second overall at basis funding but the up at you I overall base points. you you you quarter look – really the quarter. when third cost from that at and look base X – it funding at look when funds,

going have our basis – low. – are – we're we points. think X went the I to But see going we the do beta costs to had at only quarter we funding only mix change deposit and in third really very and the up when look overall our we and was It not that deposit like from So, really third the – cost at and fourth funds the of in that here the quarter. forward, we're looking

– the So, basis a we over change higher as here may points, we to borrowings. doesn't going move X into let rate beta mix dollars just of because of moving I funds some up deposit you're But as movement of that move higher see think going the we the see happen. cost cost forward up

Archie Brown

seeing some the some specials transaction the In very in rates the rate CDs. retain probably terms in accounts, increases CD dollars, we portfolio quarter, running Yes, Chris, the CD public Archie. were movement quarter-over-quarter. We're this to really of bucket in but in is and only is fund little

forward, as sensitive a higher go transaction little more public well especially may the see more As Jamie as some pressure. we as deposits, of said, there, kind we fund interest pressure

Chris McGratty

quarter. Jamie, and or on And between breakout if have? struggled then much you I exposure balance months LIBOR us in three have Most you headwind remind you just could ask That's loan could the just LIBOR the great. other one the banks whatever how sheet. side one with the this of And portfolio?

Jamie Anderson

Yes.

that of if tied tied of XX% the XX% to majority would have so all – LIBOR. loan is to of have we and LIBOR. of the look be About vast we And book that one-month floating So, at virtually XX% that book, LIBOR. would you be the is loan

three-month XX% side, would On the is of be tied about portfolio floating, that security to LIBOR. the have we and that

Chris McGratty

then lastly, And run I Great. a has going QX rate can rate the question. sneak tax if decent forward?

Jamie Anderson

Yes.

Chris McGratty

lot. a thanks Awesome,

Jamie Anderson

Chris. Thanks

Operator

with next And from comes Daniel Thank Raymond you. James. the question Cardenas

Daniel Cardenas

Good morning, guys.

Jamie Anderson

Daniel. Hi,

Daniel Cardenas

a Just question on quick the margin.

look remind Can here As you the us are rate number the you you at many forward. how have going viewing increases? next of you over guys rate do How kind budgeted year? increases

Jamie Anderson

rate – Yes, mean one next more margin we is the side. at call asset we that, the would, here I – basically mean, short XX and then point be of increase when up going – because the have occurs stable cost increase December I – we coming mean in is our to up I either offsetting it essentially funds movement two think the here year. the that basis in on But what are we X we to way, term,

the Just pressures from deposit competitive on side. the

Daniel Cardenas

in XXXX, little share is Okay, the economies sidelines market are local Or off look that's at terms see you come a that aggressively? you expectations, seeing primarily loan And hope something still we'll borrowers, kind of in that growth then as takeaway? of more your bit you alright. giving

Archie Brown

This Dan. Yes, Archie. is

the I taking another economy and then of a markets. been some from – our is from which from we existing all in, it's of environment getting get in role we've is just kind the strong competitor clients, think some we're getting client

the and activity and place optimism cautious getting in staffed year. next So, it kind around bankers we're I more the over on getting then high-quality getting starting that all those. is and of our to comes team think generate really, from But

Daniel Cardenas

other my All good. Okay, have been answered. Thanks, questions guys.

Archie Brown

Dan. you, Thank

Operator

to does to as the And comments. conference there you. question-and-answer at the Brown our time, session. no any for closing like are would questions Thank turn conclude more over this back I present Archie

Archie Brown

Thank our And going thanks the where have day. today you, Keith. Have that a can we joining our us forward. great quarter company we and for optimistic everybody of view talk just about

Operator

now concluded. now Thank you conference Thank you your for you. lines. attending The disconnect may presentation, today's is

First Financial Bancorp. (FFBC) 19 Oct 182018 Q3 Earnings call transcript