FFBC - Earnings call transcript Q1 2022 | First Financial Bancorp.

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Operator

Hello, and welcome to the First Financial Bancorp First Quarter 2022 Earnings Conference Call and Webcast. My name is Emily, and I'll be coordinating the call today. [Operator Instructions] I now have the pleasure of handing the call over to our host, Scott Crawley from First Financial Bancorp. Please go ahead, Scott.

Scott Crawley

Thank you. you, thank and morning, Emily. Good and Good on quarter for us you conference morning, XXXX call results. first everyone, today's Bancorp to joining Financial thank discuss financial First Chief will and Officer; Harrod, Chief Brown, today's Chief Bill be Officer. on Jamie Anderson, call President Participating and Executive Credit Officer; Financial Archie yesterday release the slide Investor section. the presentation at are the press and website under Both available www.bankatfirst.com we issued accompanying on our Relations to the today's slides contained accompanying the during reference in call. presentation make We'll

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

Archie Brown

today's joining morning, Good first everyone, Scott. on for results our quarter. Thanks, afternoon, you the and for we financial announced us call. thank Yesterday

year. was the results to our the rates our Before those to performance. start discuss mortgage comments what going was challenges, the greater we in others of a detail, to will I'm and Like in Jamie turn first rising from good PPP. call expect to pressures a quarter and quarter on expectations line wind-down the revenue Despite over strong very a these recent provide I impacted in with by few industry, be our

equity. margin and resulting trends, strong in upward assets margin on $X.X of loan on when asset prudent adjusted provision driven we a quarter, share rates and average in These stable other X.XX% XX yields margin higher. the management. from from XX.XX% PPP increasing million, by then the core shift were average excluding achieved of benefited in a the volatile a fees. quality basis For the The points results recapture return credit economic $X.XX, expense quarter highlighted tangible the and common with Improvement conditions per return more driving earnings

Given we should in additional the interest balance during year. our rate in our improvement in assets forecasts sheet, our see margin

quality net classified and excellent, by provision elevated stable In expectations recaptures. charge-offs some were evidenced addition, with diligently also costs. which lower our our pleased despite ability levels, We asset remain trends were in credit manage expenses, health care line to with

First quarter rising fee revenue. was impacted rates income mortgage as anticipated than banking lower we negatively

to quarter-to-quarter, lines quarters. about franchise balances Loan continue We're or lines improved we growth declined for The as cultural fourth levels, elevated. strengthening, underlying expect the we for loan first optimistic we it expectations, as and has in the foreign growth and vary as continues of business While of remainder financial to the was the quarter fit to peak in their business go commercial rebound Summit proven assets. borrowers Consumer was pleased originations payoffs quarter coming exception payoffs our liquidity maintain Omicron the in and line our substantial were are from all sold and our exchange of ICRE of integration be to XXXX. with hoped. slowed in pipelines income deposit expected. performance of are as growth continued by Its to customers Bannockburn's see had where of higher in Overall muted levels. our in many can were modestly as grew the businesses first and January, loan quarter with

addition success results, wrap and I'll of on we acquisition in neutral the future Given I'll turn our more XXXX the first to results impact additional up discuss contributions quarter to our of company. bullish some the Jamie projection the is to commentary. Jamie? Jamie's to call over overall that, now this detail. that with discussion, With be forward-looking accounting, Summit's will remain financial After

Jamie Anderson

everyone. Slides X summary Good and first Archie. you, X, provide Thank X quarter morning, results. financial a of our

Our margin expense strong management. quality, by that was a asset and first net prudent interest expectations quarter highlighted exceeded and was solid

quarter As Archie during quarter. a we lays a foundation basis increasing profitable from mentioned, be Basic strong we interest what very Fed will rate margin hike benefited believe XX think the this for XXXX. first net points the

We Given were this credit charge-offs declined as two were points. lower the trend million In period. from basis levels. particular, rising stable during $X.X provision the relatively on mortgage to will during expected as the to in further our rates drove balance due continue sheet, increases front factors than classified particularly and the broader the we XX period believe assets asset-sensitive recapture Fed These with declined net which revenue pleased during period fourth is banking industry the line quarter was of we declines Fee trends. in XXXX. income rates, with

value exchange our our as in regulatory remain high the taxes care confident rebound rates, we accumulated Noninterest with health foreign in income our common that coming remain expectations targets. as Bannockburn comprehensive will during declined the the quarters negatively Due seen the incentive a claims impacting in our compensation offset payroll ratios were period. in seasonally equity million, have in volatility excess book both we From increase line Given tangible tangible in business, lower past. standpoint, of and and internal other inherent ratio. to expenses significant both capital a regulatory $XXX and rising

expected per severance income account the or for and net earnings, adjusted earnings reconciles we that our our and remain share to $XX.X near our important Given quarterly of the acquisition, the adjusted paused not acquisition recur, These Adjusted on costs to the other are million to consolidation to expect earnings such share costs branch understanding items believe quarter. Slide was sidelines the in for performance. as $X.XX and we million repurchase $XXX,XXX expenses. of Summit GAAP Summit-related highlighting program $X.X term. X

X.XX%, assets on XX.X% As XX.X%. of a on ratio of equate equity an Slide a earnings efficiency common to average tangible adjusted these depicted and on X, return return of average

the Turning by prepayment to impact margin The decline fees. which PPP Slides quarter XX. interest a was the partially increase rising an was points these X.XX%. during and by basis forgiveness loan offset driven linked from to Net net asset X in This decline period, on rates. interest the from changes primarily X and interest was margin declined by driven in yields

reinvestment the on during rate yields slower period increased following Investment hike. prepayments Fed Asset increased higher mortgage-backed and to securities. due the yields rates initial

Excluding from rate quarter. Fed the fees, also period, full the impact yields realize hike during the slightly loan initial the increased second to we expect and in

basis when compared the balance believe we floor. XX fourth declined have pricing X sensitivity Our at this our sheet. quarter. to Slide we And the deposits of points cost asset of our point, reached details

details as expected compared during Loan our rising deposit the to our XX%. rates, can period pressure short re-price due our you the XX are don't additional term. changes we positioned Slide portfolio to current runoff Slide linked balances XX And expect the and in see, occur, as rate net we balance betas quarter. decreased illustrates income approximately As we mix increases loan to utilized slightly for rate from PPP expected believe our in the beta loan well expect interest XX% loans. primarily much in will we initial the increases of approximately while modeling. be

average brokered million offset total, loans $XX the We declines in million million as Excluding quarter, which million driven savings decreased well cost the XX primarily during balances $XXX XX $XX of growth of partially were during transaction XXXX. our in average CDs. deposit Slide accounts. were million and decrease $XXX million increases $XX Slide pleased portfolios. deposit in end loan included checking from of forgiveness, and deposits the with in In the $XX quarter. interest the highlights progression ICRE shows mix in franchise of for noninterest quarter, the by by our as income in PPP decline other increases lower as deposits balances a the

I fee softened rates significantly, fees. mortgage expect exchange expectations, in quarter of foreign on in and pressure XXXX. remainder we banking, demand the production XXXX our As and and short business previously, mentioned of mortgage income for primarily has derivative XXXX this fell record and Increasing industry-wide first

expected was quarter. Foreign exchange also the during lower than

payroll to strong rate the management Slide expenses note, to quarters. decline $X.X expect and to in basis period. to million Noninterest coming during first On bright that the the significant high However, line results. during wealth Noninterest run On outlined return produce on increase XX. period. for compared a quarter expense taxes an fully we operating its continues costs declined anticipated seasonally the a Summit, is and business despite expenses in the healthcare quarter excluding

XX. Turning Slide now to

and recapture in flat was assets a balances, period. The million classified asset unfunded This during and a is relatively a basis. decreased non-performing as Our allowance driven total ACL on X.XX% funded provision annualized by of recapture during in provision loans to XX% Net percentage total model in the XX% in XX charge-offs period. decline net which loans. ACL the in reserves points an basis of million total an of $X.X $XXX that an and includes resulted resulted charge-offs both decline

the those reserves. view building acted response Our steadily aggressively ACL in have we releasing to reserves on the when unchanged. pandemic remains and expense We provision and believe been

of to in back with provision XXXX. release in We half provision neutral positive expect term further recapture expense slightly near a reserve and the the

internal ratios targets. remain XX, in Finally, as shown and excess on of and Slides minimums capital regulatory XX regulatory

quarter, basis Absent ratio due the the declined. portfolio the value during in These unrealized book increased were TCE investment declines points rising on both the ratio interest and the to XX change tangible quarter. by TCE During portfolio, the the have losses would caused rates.

we quarter As mentioned, not any and I in any during share expect the repurchase term. previously near additional repurchases do the did shares not

dividend. near-term changes the do Additionally, to anticipate not we common any

forward. capital will to we year now for it I'll However, over comments Archie evaluate on to our continue outlook as Archie? progresses. back going various turn the some actions

Archie Brown

Thank Jamie. you,

can want prepared on our our guidance, be XX. on end we found Before Slide forward-looking remarks, which to I comment

strengthening, Securities while first ending excluding with forecast balances are remain and balances are term. to near-term balances, is mid-single the loan grow relatively PPP term, consistent Summit. projected we near over and to the Our near low over deposit expected to growth expect balances digits for to the quarter stable be

that asset-sensitive interest indexed variables expect portion of when timing, cycle especially rate impact are Our us muted. our significant pressures are well in rates. early expected our many rates, deposit balance although from magnitude And we very portfolio rising improve to A margin sheet there in and rates. from rise the benefit to short-term loan positions the to is

on continued on our to uncertainty in a remains client pressures additional quarters. in less percentage regarding expect to credit is and recent evolution we in than trends and term expected pandemic credit, to bottlenecks, continue asset The the the much supply chain Regarding base. decrease impact but losses near quality improvement provision for basis, allowance recapture of inflationary

in mortgage income performance. our to to We interchange and updates to to increases and but continued overall in $XXX put could $XX trends, fee expect pressure markets seasonal banking between mortgage the program. Specific leasing and continue to and in we million expect million some income. banking this second rebound quarter and with fluctuate in overdraft revenue, expect on in with growth $XXX $XX fees be be between income will due we million expenses, headwinds million, income Summit rate some The capital income decreases to fee modest

Regarding unchanged, have amortization. overall the impact negative on to a Summit, impact the earnings is XXXX expect from acquisition minimal with intangible we outlook term our near slightly and a

lift which year originations, strong the as $XXX annual expect in to We will provide loan the a acquisition provide progresses. to million growth

deliver made course position of and in to returns With efforts our to We clients balance ratios well positioned expected our foundation first Lastly, for we shareholders strong, services the we years, the diversify sheet call strong and that, the capital quarter for Overall, to has product dividend are to to believe our at year, expect questions. current our expect. our up rising come that asset-centered industry-leading and for strategic XXXX. we'll rates and recent levels. a maintain laid is believe now our we have our those offerings remain over efforts us performance open

Operator

comes Sandler. from Scott the line your Scott, Instructions] first question Our line open. [Operator Piper Siefers from today of is

Scott Siefers

commentary. I Archie, I see, to on comments Let's appreciate towards start the the wanted end your guidance first fees. in

pointed the maybe color in for again, bridge to quarter us directionally, million you gap little more hoping million first like $XX rate to helping the the $XX.X I then between and of in in of the these $XX Just feel where then back sort the of well million, run kind near capital given things to some things. some of just But and come here do we be anticipating as go with other the how the Bannockburn some much as term? gap, should magnitude that a markets

Jamie Anderson

Yes, Scott, it's Jamie.

of couple a So, there. things

so a bit we than of can Bannockburn lower some a their -- volatility -- income. what had have anticipated. had to quarter they expect And We little

year, was it So quarter, came little record if bit here last look and the in a a you had quarter quarter quarter. third back they their just in a and then back fourth light then the first down

the expecting are should on get on first We're are that on roughly see quarter Summit little seasonally, moving lift side, generally, up and seasonally up mortgage a side expecting increase in side then see million had income swap as a some the that back as we pick mortgage dollars. activity card the though rates comes we in more related seasonal low even couple we the And that picking as loan with there activity demand to debit So, we We of income. by and fee overall. lift well. a then to for as And well. just then, a up the -- quarter on to and

So to quarter Summit, around be of was million million. the a $X.X $X in roughly that another amount the income fee million. expecting that lift for We're to $X first Summit hit between in

really, contributors, talked So the just roughly I across would being I biggest say, those the kind of it's board, about. though,

Scott Siefers

And bit. perfect right. color. That's switching a just gears All

to anticipated? a thought look of to why Maybe growth couple maybe low XX. a on the of And We've might moving what sort have coming still talked mid-single-digit then cetera. can Summit going off, parts start on coming the year in in got might between You But periods. loan and more about of is color than reported we numbers a slower growth PPP like. view, loan Slide your a little on. see sort et

Archie Brown

is Yes, Scott, Archie. this

agree some in quarter a little risk that large ICRE that elevated willing few I out moved some the or a was where, more thing bit group, concerned And We releasing that payoff I think, that weren't that in our many commercial sold, our And were we thought from too guarantees paid to for a a on just little during in were credit being us group. hangover think rates especially in cases, saw we assets we loans then business. the off. in kind the cases, pandemic. one the in big saw We just companies saw the of we banking low terms, just activity, being sold. franchise,

So, we downs pay saw business. some in that

Summit. to loan were down why maybe the to that excluding we think say of than So X% I the probably that, mid-single-digit maybe Summit, Summit. in range, Summit single in of When downshifted say, the X% expecting brought potential bit some franchise little including more including digits, I you you're growth, maybe some low picture, in, growth high see kind we talking of take the to more which growth still payoff and would we And near a term, is in activity elevated ICRE quarter. say,

Operator

Our from your open. James. line Daniel, comes next is from Raymond Tamayo Daniel question

Daniel Tamayo

start the nicely very on and that I beta asset the Obviously, want terms sure you NIM talked to maybe are expecting of the just budgeting year you page year. expecting of we're impacts sensitive are in sort Maybe of for many assumptions, kind to NII deposit But during hikes, just that how in rate or on about expectations. we from improve make but and guys the still thing? guys you that same and

Jamie Anderson

Daniel, mean, I Jamie. Yes. it's

year in around we Fed internal forecast, pending our have the So funds X.XX.

going have of a to regardless of portfolio, you a reprice and that within book makeup reprice the at of but of we of the look period I XX% loan vast mean, around short right the when that's of is majority very months the rate loan in So that, -- -- three our time hike.

pretty a as income good hikes we net get in hit. those interest So, pop rate

hit going in any we it XX% rate deposit whatnot. to move the -- on pressure then on to case-by-case and hike, kind in think on public that a start of see hardly basis I So But funds the kind get than -- will did up the hikes. point of basis and some if side, -- we deposit maybe and we in deck rate that other not first side some May, have full that as XX to get ramp -- in slowly that beta a the XX%, we won't It's that was we further range. really

May, basis So, points if well, early that I deposit think would XX it get on won't it that we let's see full in hike, the side. next impact call we initial

Daniel Tamayo

basis basis impact then that's still kind to point and think X X an maybe interest So down overtime probably early that coming the margin on [indiscernible] net about. X of points to

Jamie Anderson

Daniel, hear your on don't you. to end. if that Maybe I know we question. try can't something repeat it's

Daniel Tamayo

apologize. me you now? better I hear Can

Jamie Anderson

now. Thanks. Perfect Yes.

Daniel Tamayo

Okay.

Yes. Sorry.

said, around day, for just I points X downward trending the kind and we're to of get X towards of the we So as it points at X the basis still -- end the initial more. then basis hikes

Jamie Anderson

Correct. Yes.

Daniel Tamayo

how liquidity then deployment making assumptions of got thinking Okay. excess deposit about excess the and How by that that about thinking of you impacts, Great. for liquidity how kind that you are significant And you're is you've any impacted flows? are still?

Jamie Anderson

side, mean, portfolio. investment ramped overall liquidity in so essentially the balance on Well, we the up have the I

kind and will I that portfolio deposit those going mean, each off investment -- So, of of the to other. side, the play are

obviously as will monitoring cash the deposit investment and of coming shifts portfolio. to good deposit have investment plan So but flat point, the if adjust then well, we we portfolio to to adjust outflows, investment And flow start accordingly. the keep this we in deposit balances mix that. the at we're and off mirror our just relatively portfolio portfolio to going see But is

over XX it's right billion -- months. the $X next have We around

have sheet balance and the borrowing, good start short-term for on we to borrowings side. if again, see capacity So we --

see So, than if we runoff accordingly. start we're what can expecting, to deposit we more react

Operator

Terry question from open. next Our from Stephens. is comes line your McEvoy Terry,

Terry McEvoy

walk first through Summit. quarter impact the of could Maybe me if you just

that You you is the quarterly And And loan portfolio kind quarter there gave to since the I'm seeing what size And the us a the guess, relates fees, on do business breakeven is need also, it income, for us -- volatility first to as I of NII the for leasing does expenses. you this of contribution. us maybe expect basis much model to to in just order curious, gave the we're be fees? out? that the,

Jamie Anderson

question. Good Yes.

look if the first what I again, disclosed think had side at quarter, we and noninterest the the side. So you we income on expense

If spread you and the it we or, brought were their on-balance I'm income small. look that when over at leases created, sheet their balance operating leases just sorry, finance it relatively sheet

contribution quarter small, net $XXX,XXX. that income $XXX,XXX, So of interest terms in in about first the was relatively

sheet we is obviously obviously so that to And the as ramp going -- balance to up, increase. that's going

finance had -- end our so operating, roughly $XX are we about of And other assets in down at of million leases the of which March, obviously XX.

originations that $XXX their And million finance sell in about still to credit out then few that leases operating for and they of year so, $XXX with we see -- about factors, a and/or the $XXX and they still for on of still will production. that million other total of we're business XX% XX% expecting million based leases. And

of, mean is then by sales income driven that Terry, they form backside. in or of leasing And have and income, or going one get business the and of in call it, million, mostly residual $XXX the of sheet terms then the leases. the the production rest other in operating I roughly balance will sales finance that terms, go they're on So, on to the

-- that overall be we So, the the but to there going year. we volatility as could base to go is throughout actually it, some expect increase to

Terry McEvoy

isn't, flow the assuming lower? the follow-up, are growth to balance kind time I funded funding given as guess, the Again, it it securities growth portfolio loan maybe from then that stable drift annualized? or And the actions a that guidance, maybe a going deposits just question, loan having with with was Is the and follow-up be is mix. a cash just I securities sheet if tough of

Jamie Anderson

whatnot, that fund borrowings, would just we from either Yes, short-term and the then borrowings and Yes. and/or... Correct. overnight

Archie Brown

we X% to mid-single annualized This about low annualized talk or answer that's my growth when digits to X%, growth. Scott,

Operator

is Next of the KBW. your from Chris, McGratty questions, we line have open. Chris

Chris McGratty

done question going or a What's this credit. right lot just in now. a in you've next it get to sure a your year Obviously, Jamie, portfolio. the the on economy is book? some point scrubbing I'm we're the year, pressure concerns -- in of where if

Bill Harrod

now. this space. Bill book, ahead Yes, chain then areas couple C&I of our portfolio. obviously, also Harrod. dives of supply thinking inflation, we're And getting right is A impacted In doing into we're we're deep the some on the C&I about the office focused

doing life. we're some world As post-COVID ahead leases a of that. come getting office dive. We in do We're deep expect in up space for the in expiry, changes post-COVID,

focused So, two main that those are areas right on now. we're

Chris McGratty

then And three have Can of rate variable I said a does, months? price within the we Great. lot but percent Okay. may remind this. missed loans you of I the you just us the that Jamie, specifics? know,

Jamie Anderson

within a we I Yes. that within have have we -- the majority of those months. are reprice and mean XX% year, three Chris,

Operator

[Operator from Jon, Instructions] is ahead. please next RBC. question from Arfstrom go Jon Our

Jon Arfstrom

the Just Jamie, short another end XX through it, to in portfolio, the but of keep on rates Slide are basis asking I year. talking about the about guys securities up points you XXX hate on

what reinvesting you're buying. to buying, kind yourself? protect what mark, of you're cash you're Obviously, saw how how about philosophically curious, what approaching Just you're the securities the are doing on portfolio, just we and but the AOCI talk trying you

Jamie Anderson

probably -- municipals still at mean that that of side. well function as a I -- it the to the as one agency securities then of and growth mortgage-backs, on to would of -- loan look any of terms then the I the function with as seeing Yes. is other guess, asset as or But -- amount the of mean, I a the portfolio, say, we're some the roughly makeup runoff deposit going balance now mean, our philosophy mix and of a I we're the I -- the is similar classes. portfolio, between

trending I improve as So, potentially as loan relatively the flat throughout portfolio would see see the say, we're securities to we and growth on stay, down we -- going hopefully, year.

defensive we'll -- So in -- of relatively side. terms stay the again, on -- and reinvestment relatively

Jon Arfstrom

I it. program may the through this, and kind your I can you updates just Archie, of of us impact got to of but us that. Okay, the remind missed overdraft have walk

Archie Brown

making, Yes, kind just been a tweaks think, Jon, of of continual I we've time. over period

you $XX If probably we annually go revenue. back pre-pandemic, around probably million in were

other in like of reducing in we have they're array an that before probably QX, year the further -- more think making raising that's effect the competitors a $XX Probably and already some the larger back It's in around think, full of the have just things But are fee, probably things of the back more EBIT, year I in was at our probably think, we're year, fees. bit in -- little we are budget seen more probably that all then adding least half. in effect, midyear an and with half our the have year. happening. from the a I this little that But of the the -- of little next probably all more being peripheral there million markets, some cushion cushion of will, we've will the it effect for But changes. charge this I in a bit effect year. a an movement it

are. XX% year, all drop-down bit second we we of that a get going bit where is done. But next more be that to, if it So, maybe quarter, and said XX%, probably where that's pre-pandemic, for up what to from the of a end that said when you of million it's little does just in little -- a $XX

Jon Arfstrom

Okay.

environment. Okay. then just Good. picture the And on bigger

loan a you're question little on is, seeming overall You've slower optimistic you the understand obviously, that's on on are the but I so that's more math are more than bit I had the what several positive. next you're saying last what and mean, a I And pretty peers, you couple better. lending growth the But guess of understand out. quarter. than we environment growth on questions optimistic for fees, And quarters? margin, we get the on the carving

Archie Brown

the the few than are a the I be last mean, on in that going rather am, plugs support. game which nice year. that to But the optimistic in second course. that than loans. side. different years, that lot consumer hole about described created it's think talk And probably in not in -- little if if focused elevated on of payoffs I That main the other what look Again, that's was we think But think a then you didn't a I We more rebound there's just a we just thing and -- and certainly Jon. of gives still been going uncertainty. some drain probably quarter, a the at of crazy this early morning. happened level first got much I'm I was We're little a But happening we've seeing the changer way, that us quarter. a on had of of going growing a the things lot a teams

our So, All along think, get be to of make stronger Summit. finance with, of those me it's I out feel year. growth, coming we growth company out commercial better improved together improved throughout like have and a going things year that the and support

Operator

questions. At Brown to back this time, conference further conclude we today's Archie have I'll no hand call. to

Archie Brown

and our great to again Have great forward us and a results. today Emily. next more everybody, a look now. you to Bye first about quarter. hearing Friday for weekend. joining talking you, Thanks, We quarter Thank

Operator

This joining our for concludes us Thank call. you, everyone, today.

disconnect your may You now lines.

First Financial Bancorp. (FFBC) 22 Apr 222022 Q1 Earnings call transcript