FFBC - Earnings call transcript Q4 2018 | First Financial Bancorp.

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Operator

Good day, and welcome to the First Financial Bancorp Fourth Quarter 2018 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Mr. Scott Crawley, Corporate Controller. Please go ahead.

Scott Crawley

Nicole. you, Thank and conference everyone, quarter for us joining full Good to thank discuss today's results. call XXXX fourth First on year morning, financial you Financial and Bancorp's Davis, on Executive Chief Participating Officer; Anderson, Jamie Financial and will call be Executive Chairman; Brown, President today's Archie and Officer. Chief Claude

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

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

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

Archie Brown

Good and fourth us you, quarter Thank the for year we call. and for Yesterday joining today's full on XXXX. morning our results afternoon, Scott. announced financial thank you

and remarks. MainSource Group to Financial clients with landmark over some most sales, Jamie closing Jamie's I'll Before year the successfully call wrap-up We with migrating merger provide this we've forward-looking recap platforms. from greater the integrating like After commentary to I progress made in exciting to XXXX discuss teams highlights and an support and Financial. was some the recent detail, turn and quarter. unified I'd the results to year for completed management, banking discussion, First

and such areas as continue depth we Additionally strategic in invest technology. to sales

adjusted very a of non-operating full on performance efficiency items. when XX.X% our basis earnings return per tangible average and company equity us XX% a our were peers. X.XX% average ratio remove return earnings The a merger-related to common share, assets, on of X.XX% achieve and and good XXXX adjusted quartile power on versus to reflected high-performing enabled earnings year top full-year an Our

fourth quarter and strong our marked consecutive results Our quarter XXXth profitability. of were exceptionally

delivering pleased We while on they with nine are assets and were very and the than expanding all company had were tangible basis interest points. equity, year. been trends performance average our originations net stronger loan margin of industry-leading returns the banking Core positive operational common

commercial However, particularly overall to estate led elevated payoffs in loan investment decline real in a balances.

our pricing We believe discipline the pleased benefits are our quarter our and particularly maintain with clients during growth that deposit we and both shareholders. the

Financial's share. approved Additionally, I'd shareholder in the like $X.XX that XX% to has a First per Board to increase Directors announce quarterly of dividend

plan million shares. recently a X% of repurchase X We issued approximately up shares Company's also to share outstanding announced or the of and

further transformational of turn the a the while while now completing the Our over by financially consistency support hard retaining strengthening in deployment fourth encouraged strategies discuss that With growth. First capital details to was Financial. Jamie a together for to returns of and company and top in We're producing needs quartile earnings support the highly our and of significant merger I'll sufficient call results. to has come serving year still our shareholders. our quarter the successfully capital clients future change of levels capital Associates which to dedication reflects culturally XXXX way performed work

Jamie Anderson

X provide good of quarter you, X Thank Archie everyone. morning Slide fourth XXXX and and performance. our an overview

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

the as excludes with exercise $X.XX securitizations cleanup or FDIC well our merger-related transaction, income to quarter, was fourth income the per associated assisted related XXXX costs. call adjusted as net which For the million of $XX.X share severance on and

equate ratio earnings equity adjusted continued adjusted these and efficiency X, average Slide XX.X%. XX.X% diligence the tangible a of average return to common our of on on reflects subsequent return Further, a shown X.XX% in on assets As expenses merger. to managing

a funding unchanged margin margin the points in X, from purchase and tax fourth impact fees, Turning shift cost which was equivalent fourth basis a mix net nine impact on outpaced as period. quarter basis from for from points asset deposit increased basis yields, interest linked quarter fully higher the quarter. accounting the the to XX X.XX% to higher higher to loan Slide the quarter in The during the linked was

as would However, impact future such to we expect periods. this XXXX modeled in have and in moderate

originations stronger linked offset But the of Slide elevated XX current to nine increased in third X X, the securities and the estate in real increase nine to activity loan than on impact End quarter. deposits. our to XX% shifts mix point they impact our we increasing sheet cost basis meeting by loan quarter relatively trends. commercial the yield quarter. loan shown compared loan yields the year balance our from the a depicts compared end increased basis quarter period flat securities basis Fourth by points response period securities points balance fourth the origination to payoffs. improved based was were linked of were the loan portfolio the in As on have growth, from been which of to overall balances Slide balances continue Similar all quarter. increased over size the will on of slower and manage

deposit quarter. Average not well of C&I, CD of drive finance from the increases progression $XXX million base, As in current third deposit average growth a brokered deposits, XX our the non-interest-bearing our growth loan to enough commercial by driven deposits total result, were portfolios and for as by balances increased mix Slide and mortgage as the period. in balances. our shows

an basis growth, to while asset driven asset net we charge-offs losses to and were balance. leading The balances net the enterprise shareholders. of of for which XX the discipline maintain XX annualized ability basis the expense. loans were Slide clients nonperforming addition our declined full-year on quarter consider for net both outstanding pricing last a by franchise points five Classified relatively of $XX.X increase non-performing X%, quarters. during points XXXX. both was million to increased further deterioration and while indicator quality charge-offs In benefits charge-offs assets balance depicts the which credit primarily to our in are that provision quarter relationship compared finance of XX by higher a encouraged assets we basis value exceeds when our flat Fourth believe our trends we loan of single leading

remain targets, while tangible the of XX, value stated XX on merger in excess as dilution Slide's expanded Finally shown and substantially and during the been book MainSource capital from recovered. ratios period has

plan We evaluate turn on our first quarter growth opportunities delivering will returns. and I'll support now the while that deployment to back outlook. continue company's strong some it XXXX over to shareholder capital Archie commentary strategies for

Archie Brown

Jamie. Thanks

I our Before to with end some insights remarks prepared outlook. we want you our into leave

well-positioned seen As that the on Slide XX, success year. for believe continued are we coming we in

Given and we'll the loan in remain improved levels production ability investments our optimistic portfolio. staffing our to grow

first balances funding to XXXX. the of basis first we over an remain some We increase deposits, annualized ability optimistic regard that will low longer of With on in outflows term. mid-single low-cost in to seasonal digits by expect quarter to for the quarter declines the core our expect loan by to driven balances grow

accounting interest expect to purchase loan the impact over relatively the we be margin and stable of prepayment net Excluding near-term. activity,

decline pressures. longer further term will the gradual deposit tightening, impact margin assuming no see likely the Fed from we pricing Over the some lagging in of

to the losses credit similar outlook expected stable full with is near-term Our levels. XXXX year

on Growing rebound. strategic will expect to towards devote the back half by long-term Of remain and the due in We business. income ratio longer be income investments XXXX to income priority note fee is an efficiency the the will XX% in decline range over seasonally to interchange then decline term We Durbin. of non-interest we we strategic the continue next to respect make this to With the rates XX% over over and and to moving resources lower effort. while anticipate quarter time support to continuing forward. a required success our efficiency expenses, of focused the

actions buybacks. I mentioned the previously weeks several dividend last As to and have capital related announced we’ve common share in few the

company combined modest Our enhanced continued with strong provide capital with balance flexibility. the growth sheet earnings

In the wealth in we will are that today, the acquisitions in income announced areas. capital non-interest actions enable to strategic markets particularly interested higher and the company addition to drive

returns. We are can opportunities such I'm quartile in with company responsibly pursuing our progress our actively as pleased building XXXX these. top produce and consistently Overall that and

comments prepared our our outlook for now I'm the call continues fashion. XXXX, focus remain enter grow to the open questions. for we optimistic. excited confident concludes ability This and to up on risk future in high in appropriate be Nicole a call. objectives strategic performance efficient, company to our As the We our the will sustain to for the

Operator

go Scott [Operator Instructions] comes question ahead. first Please Siefers Our Sandler from of O'Neill.

Scott Siefers

second hoping talk special to that was those of moving franchise and in I or one as increase that. that's all charge-offs? - non-performers around thing there And was imagine that's in you those, the could you quarter NPA just credit. is related or quarter I prepared from about kind is to had single the charge-off special Was I anything credits so same to finance remarks your Jamie know First you if that in could both increase. then else the speak was guess the I nuance migrated a mentioned last mention of guys noted your little last

Archie Brown

migrated Archie. expanding he about Scott fast with in would larger course been two. think you caused previously if so fast them, the we’re credits root of the been quarter some part said stemic else related happening we and as or was expanding that's overall I really it we talking other a Nothing this had has so Yes, involved it core. just in much had to outside too borrower about happened think the borrower, with, was that cause of had that third say one for if problems too that really what was this this just really interest, portfolio. probably is the the the of I as

in classified you our we XXXX. in been I five I declining good again ratio it's had pretty we credit at is and as probably last as outlook overall think remarks, to will feel said only so levels my look about be Now it over similar the quarters flat charge-offs if where

Jamie Anderson

quickly, and is add third that little the actually were we coming know Scott, million over had on for the charge-offs off just this X Jamie charge-off side quarter on where recovery. the you net to of quarter

value over realizable number. And basis at there that it's and look made were they that net credits as XX we but not to problem the points credits two of in identified in you those blended quarter. of quarter up So in those that at were third the charge-off kind two the non-accrual the half X and had through credits that down charge and we migrated to million

So as quarter, lumpy can drive of had couple you in little so that we had quarter know quarter no and then and third be a the to up. in charge-offs fourth hit number the good the we

Scott Siefers

a is of sounds to as like - it are so. couple the But broader sort discrete just based items these bottom line anything opposed

Jamie Anderson

Correct.

Scott Siefers

And quarter. because tax back on first you will then first first been, one the had the given come was since quarter, actually moved question the it has it's this couple in like and points below quarter the up just XXX rate basis where but for maybe the looks expectation

talk rate in about first So tax just that it’s right? number down, I that simply unusual tax second rate guess and fourth want you then one rate a in fully effective took quarter the quarter equivalent is it an XX.X% confirm to not the of effective the when taxable anything

Jamie Anderson

that fourth XXXX was a previous the just that was type and the to from our true it rate. truing the - just got bit end year little really get that's for drove comp truing going conservative three some rate We up there in in In the forward just like executive tax Right, It side being in was a for than clarification we And period. and rate tax got overall up XX.X% accruals our - that to really big of - that you first were XX.X% conservative the year. plus one-time there quarter with our overall is some accrual. a to for extent adjustment on some was our just quarter to so like and or our a anything just a saw. the third our rate deductibility effective tax up of item smaller the refund a in it the we the quarters there and on higher clarify little

accurate an truing just it’s XXXX - rate tax our within to all it really it's up for So, to year. the

Operator

next comes KBW. of question from ahead. McGratty Our go Chris Please

Chris McGratty

I well as Archie today the think to telegraphed, or have you is book for the confidence wasn't out it real in a changed? to low-to-mid Are the growth it activity the pretty ton going this the with you estate and gives you a talked first quarter pay-down there and production it of pay-downs be any was quarter. stands guess Thanks. commercial the in really about I the fourth change was may go really, seeing single pipelines quarter. in strong what just

Archie Brown

the Yes think things, construction cases they some were where pay-downs those just book Chris, a occurred that believe that couple goes accelerated, of - QX were I as in we one in of many that long. the

But still year. predicted. some period in So than sort we’re of coming to reach this out they and earlier refinanced had them had stabilization we construction we probably

accelerated So we we that. think of some QX into

of we'll up this bit looking just - we various think a little pipelines at at this we as our year. quarter means in the then better are believe business, at that ICRE mortgage They ramp are And and in quarter. we decent start some business for what be looking So first we point lines actively our forward to business, and commercial our our finance growth all projecting business, commercial our businesses. the in are showing going

about our or of kind I our view that’s we're the - confidence So, getting where quarter. guess

Chris McGratty

be in with maybe bond we going bit one-for-one the of backdrop, as assume from for from kind that's it or kind a the in of of And comes that growth you remix a should Jamie? portfolio of to deposits there terms funding a

Jamie Anderson

Yes Jamie. is Chris, this

hoping just their if sheet that So about balance of back half up and see on ending the growth kind and portfolio was million period-to-period the at you the was that were balance look design the we loan securities of didn't XXX we by year really for. based

I of base. in increase about - kind XXX portfolio in the say by would securities gap So million fill that to asset earning that

slowly will the deposit over that probably on to of the monitor competition to Depending a down over six combination the looking. deposit match is go short-term months will and next will how deposit that And determine here three but how back the comes and down bleed bring the portfolio much see see we the growth the potentially portfolio - that securities marketplace So, - then securities as the you'll how balances we that. we the two.

Chris McGratty

on buyback it speak to plan buyback? to I regularly could considered And you that I have the desire to might Thanks. the or level guess stock The if use sneak is or use can one is to in ability capital. maybe in more it, it the your a just in the flexibility you place

Archie Brown

potential a capital. level repurchases target take under don’t And to our dividend. that alternative at Yes with the strategic uses as think M&A when share Chris, we a opportunistic be growth of we’ll actually market of this prospects of we’ll this have and But repurchases I repurchases as future for other or on We’ll can provide repurchase We’ll for level Archie. plan regard well evaluating opportunity compared not look always then conditions plan to update is the support to we shares. is quarter. made - specific buyback warrant, previous to view an organically actual of the plan we'll the specific to the plan quarterly our but the have

Operator

ahead. Our from Nathan of Please Piper next Race Jaffray. question comes go

Nathan Race

deal - the occurred if terms back a could just you this was I net any I if or I’m just loan credit a in us franchise just service the provide give to going other Just color if helpful? credit you around any assume wondering the full share quarter, was would be a this background that discussion quick this And restaurant other was on club creditor, curious loan. finance of

Scott Crawley

then credit. all No, other again fast and do thing we Nathan. grow it’s the we on borrower. here financing things stores it's pressure some the our - to outside trying I Sure some and acquisition And for some provided the loan overall has she of put originated it, I'm main for think that that is of

Nathan Race

going second gears some relief just quarter imagine payroll those of off. and And for about probably XQ thinking I I some changing come as have items the appreciate then you'll seasonal and expenses the forward, guidance in

kind how into about we XQ So through we go progression curious the the non-interest should just half think as of XXXX? of expenses back

Jamie Anderson

this we so but about pop then in have talking bit And that like the Yes, is to that first it throughout bleed then merit about year. does of a as we you have seasonal XX the increases little those, XX that and think taxes some there off kick Jamie. have outlook the for there payroll million little in quarter The whatnot. in you're as million those if

that million steady And million. level that XX to XX XXXX so stays pretty throughout

Nathan Race

an perhaps going Archie know last so of just guys an to hires curious guys that update were on that's the And - recently on you some update of you to give speaking front? just more the quarter, focus I

Archie Brown

to commercial close staffing of the I our markets. groups think our - full pretty all we’re of Yes, full in banking

or but one all hires to purposes have and make there. I intents think two We we’re

we as think well. year So the year will we forward. our ability the timing and our of out we’re adding banking help add some of a in right I originators tougher in environments last to well particularly quarter we’re did go spend group as feel starting to the mortgage going while little and commercial there, terms through the that high-quality Outside to the staffing

Operator

of question comes next ahead. from McEvoy Stephens. Terry Our Please go

Terry McEvoy

jumped just up want loan margin quarter, know on the mention the fees did is impacted four that for understand basis Archie I correctly. first that I much to how basis range loan points. which I'm sure the make outlook to that point five Just by fees clear

Jamie Anderson

loan there to if me, excuse the - you some Jamie, at so is this fees. is so look fees, loan our Terry Yes, volatility

and we the did So a our fees. quarter did over lift in basis fees was point you XX look that basis the few that first fees look And see in area. But our second in are quarter XX deck we if about quarter over if four last commercial we of margin, X third loan in Page quarter, margin. several you to on fourth third know XX it we that basis slide the the from point get in above - finance range larger of prepayment we talk got where did primarily averaging - the margin about get you point we the and contribution quarter, those some to quarters

as see little quarter businesses. bit little average, a helped seasonal other that higher we on in those thing a that fourth basis then pressure margin bit well in mix got is a page if So We quarter on so from by could to - some is we in conservative saw the does four and fourth the the potentially in other a points. little fourth could you a business that where than guess lift change you I nice based potentially come our margin. quarter can of down a from the accounts flip the on quarter way, on that contribute our that the in first benefit this of and the DDA bit that funding got the a our look basis And

will quarter the little December benefit will of seasonal a is put see that the margin the and hikes. that that in offset of from will on some first rate bit get the that we flip - And which also pressure

asset still sensitive. our sheet remains balance So slightly

you couple up yields that. see basis put funding in basis on depending XX margin. points So But up are perfect pressure then point basis went some volatility get in can rates we - lift a loan here could went mix points, up asset our XX and fees our of the cost world the on

Terry McEvoy

terms just bank a the then off interest want table I potential you kind mentioned generating for And clear acquisitions to Archie question acquisitions. businesses in of potential in fee be for XXXX? just of

Archie Brown

into know Yes kind geographic be think focused environment from the just risk for table, really bank the I did sensitive cycle, looking we - tuck-ins we smaller more and more if pretty I to maybe where we'd We're Terry, off would deals. think they’re I but strategic don’t think shy bank say question. thanks we’ll totally of not in something deals away the in on credit larger. large current I are the I

Operator

Please Our James. Daniel question comes Instructions] Raymond ahead. next from of Cardenas [Operator go

Daniel Cardenas

Just question quick the follow-up on M&A. a

of now look be deal? bit a at expand something If in integration footprint with would in willing you or seems be would you franchise kind the do place to it well primarily pretty MainSource be that the to little

Archie Brown

footprint and kind we I M&A I I still bank market overall we’re will on priority of our we think market exploring somewhat know point. more point think to about we’re probably our Dan bit this still markets came be improve this probably fee certainly stay anything there's that broader we geographic not a want footprint. Yes presence share be are don't think to brand to looking could we really regard in. if core within think would businesses at the at we think close that but opportunities to With We probably footprint don't - look those I a that expand up. the but than little

Daniel Cardenas

or there work bit of is of branch is a all done? completed in that left little then still rationalization And terms be to

Archie Brown

through make branch of say happen And always going maybe rationalization then there the and evaluation it’s the renovation of have say would in our Dan that branch process this consolidations, merger outside that merger to order - of I am or do handful done. of work we little are to in a terms virtually let's a some always will talking three I four but network. Relative to year. There process just we’re of bit

could normal how course So just we consolidations, be some but there additional year the throughout would business. do it's of that be possible more

Daniel Cardenas

me, from step back. and I'll question last Then

feel of an you at approaching comfortable look I ratio? tangible X% optimal common kind ratio of that level As kind shortly. level equity would What's guys your with the that here

Jamie Anderson

Jamie. is this Dan Yes

kind profitability level, the saw even at and XX% assess see of to why XX% between as look and that's XX% and with build opportunities starting capital earnings the we bump and the in of that obviously X% somewhere M&A paying or monitor dividend our little in market out that ratio then at just a our that that internally flexibility is solidly So buyback to - and announcing we and and potentially see what some not. stock in provide we managing in the bump as we'll you

Operator

follow-up ahead. Our next Please is of question a McGratty Chris from KBW. go

Chris McGratty

Jamie the this you just comments the million on it was glide the us in think $X the let - in down on $X I budget quarters? accretable is for the couple know expected accretion. kind of past can I the million of under guess year, your, somewhat what well accretion

Jamie Anderson

of getting Yes, - you XX and getting so higher look higher those both at the prepayments on that's terms we've prepayment that's loan you think it about the consistent what the we've basis been in been in based our seeing than points pretty more one we’re slide at we’re When pretty model. accretion. with if consistent comments higher

as look basis those range down indicate to year. basis the quarter we to X then first somewhere X we’re models quarter. going XX that the would throughout And by point a contribution that So goes in to prepayment start points slowdown margin into in XXXX our

Chris McGratty

okay. what guess So slowdown that in XX you’re I contemplates is - saying prepays a

Jamie Anderson

based seeing Yes, the of the saw that we’re levels - that XXXX, in does. we back It on correct. half

Chris McGratty

- is from XX.X and noisy think gave could little then quarter quarter first repeat just first you think quarter, there? do jump the the for typically a guide tax most first you maybe for And banks then rate, we I and the or I

Jamie Anderson

No, think we XX.X% for all XXXX. it’s of

Chris McGratty

GAAP? that's And that's a right, non-FTE a

Jamie Anderson

correct. That's rate, tax our effective

Operator

to to Instructions] the would for closing [Operator I turn Brown question-and-answer concludes back remarks. over session. our any like This conference Archie

Archie Brown

you, Thank Nicole.

thank in guys and interest you we a and wish call your good day. Just being the on you for the company

Operator

conference today's now has attending Thank concluded. presentation. you for The

now You may disconnect.

First Financial Bancorp. (FFBC) 24 Jan 192018 Q4 Earnings call transcript