- Earnings call transcript Q3 2022

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Operator

Hello everyone and welcome to today’s First Financial Bancorp Third Quarter 2022 Earnings Conference Call and Webcast. My name is Victoria, and I'll be your operator for today. [Operator Instructions]. I will now pass over to your host, now have the pleasure of handing the call over to our host, Scott Crawley, Corporate Controller to begin. Please go ahead.

Scott T. Crawley

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

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

Archie M. Brown

due and with you joining third was approximately in exceptional strong which per results Thanks record Scott. announced increased I'm afternoon, thank earnings financial highlighted by quality, for was today's performance, Good pleased us second very call. for quarter. income. our X% interest the to we net driven which Yesterday our quarter everyone morning, loan from and earnings. revenue by share an the increase growth, asset stable Adjusted for XX%

of return balance positively we $X.XX, to Recent For average X.X% asset increases equity. earnings average and share our sensitive a return rate the quarter impact on a common tangible achieved per adjusted assets, on sheet. XX.XX% continued

net quarter. assets costs. much with residential points, was the grew to the ratios. the loan with Even these reserve on remained intermediate in annualized was across Credit and our more account reductions in the by and loan $XXX as mortgage. million pleased or third broad-based improvements with very in rapidly increases margin XX.X% outlook. economic third yields interest by XX net growth quarter and loss Loan the deposit for again balances non-performing and Our basis in in an quarter We're Growth slight driven loan consumer, stable modestly charge-off portfolio trends CNI, loan increased than expanded increased basis. on growth by

year. expectations changes our economy term in was for and coming months. loan squeeze the by near the loan the we made of moderating growth overdraft Given our expect once the in to program impacted this rates second again in and income rising Non-interest negatively pipelines to quarter

and foreign to record a income in coming expected of over in the We businesses Jamie the further. After strength diversified some reflect up a results also quarter additional with as experienced forward-looking second from weakened business in detail. exchange Fee grows. now decline a expect turn to continues modest the the our With increase we quarter discussion Jamie. call Jamie’s net quarter mortgage more third income and activity I'll our that leasing discuss wrap commentary. I'll to

James M. Anderson

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

stable The highlighted was growth, third loan strong expanding margin, an and asset quarter by interest net quality.

the remainder reacted of points. increase sheet basis trend year. We with XX anticipate balance margin interest to Our increasing continue will to over the rate our rates additional Fed net positively as this is hikes the Fed expected

deposit pleased of annualized be growth. XX% very Total We not lower of our quarter. pricing same record to with expectations, were strong widespread However, an the but the than across margin expected Fee loans on pressures. the quarter loan income of another magnitude income due grew expansion levels will with the in levels elevated declined growth and the particular Bannockburn portfolio. from the quarter was second basis second met

as the has well declined income Banking higher been rates. quarter impacted from negatively compared the mortgage As interest Mortgage business expected to as second

Additionally, to the changes impact overdraft as we quarters from programs. the to feel service linked charge our continue declined income from

were Non-interest income our during due tied to to net pleased compensation non-interest slightly declined quarter. investments other on credit basis XX the declined and higher were the company's assets from as X of higher due Finally, off incentive expenses total expectations, declined to assets. limited primarily to than performance. charge to We front expected points than points second non-performing basis the revenues partnership

period by common on recur. tangible income second quality and losses adjusted slower tangible quarter understanding $XXX,XXX earnings strong, X growth to for million internal and comprehensive Slide book of to $X.X we and during negatively both our targets. excess accumulated other reconciles ratio. we other loan These expense account our the our value or the rates. expected of adjusted which million quarterly income to remained $XX.X Adjusted regulatory earnings, asset of net the was $X.X earnings investment ratios prepayment items From Similar and that driven While provision impacting of important in performance. recorded for remained not believe declined, capital both $X.XX regulatory standpoint acquisition per highlighting during period was equity share the a quarter. GAAP securities and our are costs million to

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

a XX Turning offset points yields by interest asset margin the period in driven an rates. increase costs. the primarily rising Once resulting increase slight basis XX, this to and was increased during the asset increase was interest Slides in net in linked The X.XX%. increase X from funding partially again, by from quarter yields

loan rising increasing of asset yields during basis rates, points. with yields surged period the XX result a As

on to mortgage-backed increased reinvestment rates and due securities. prepayments investment slower addition, higher In yields

details linked realized aggressive additional over our are liquidity XX% as increases we our increases deposit balance believe of sufficiently and borrowing liquidity re-prices flexibility as two-thirds sheet, approximately full required to the increase and compared Our cost borrowing increases capacity We of environment. income approximately modeling. competitive utilized environment. our XX we rate cost interest pressures the XX expected various sensitivity and We beta Slide an asset details balance economic loan basis loan deposits second reaction to increased to expect increasing while sources And the betas points net our portfolio compared expect provides the capacity. further to from the in our cycle. occur current XX XX manage outlines expected and illustrates the rate and to this the balance quickly. sheet. to XX these remain mix through costs the Slide of for we quarter. haven't the our Slide changes well point, of be in quarter positioned to rate fairly Slide

compared mentioned to linked on increased of loan before, I quarter. portfolio were every portfolios. XX% As growth with largest in basis areas consumer CNI, annualized the balances the retail and an The mortgage, growing

not record in charge decline expectations were on and quarter prior with quarter Overall the we from in deposit year. Summit output of charges, Slide driven in income to and foreign non-interest and and decline declines $XX third service the third a public on business record demand production declined our a of lower and million for $XX total decline interest Slide in to the income million quarter. deposit non-interest quarter, Consistent in in declined following also books. program average bearing deposit average pleased million $XXX the Also years the for exchange, declined we our $XX In service Bannockburn driven income. realized the as income a CDs, funds, highlights second the money the XX with continue our accounts, their mortgage, rates however, accounts. XX in the quarter, overdraft mortgage other total, linked quarter in the with expectations, by retail further second the fee during trajectory the met as However, million mix was market remainder for decline quarter, ICRE the quarter. million in $XX consistent second a changes. as by well quarter. income from due deposits balances higher light expect of we was pressure shows impacts this the progression primarily our the

operating quarter tied primarily the due period is income on excluding was an Non-interest relatively expenses higher the On $X.X elevated quarter net normalized outlined increased company's second basis quarter income quiet during compensation in compared million performance. expense to interest and due front. non-interest the quarter other additional quarter, in limited the for incentive Like to the expense linked XX. investments. Finally, summit, the Slide partnership second from which the was the to third to an

an in Slide during total that total to a and XX, model $X.X loans million the allowance and unfunded total reserves $XXX September in of in includes XXth. funded expense resulted X.XX% was provision which This at now period. ACL resulted million Turning both of our ACL

the which points increased quality while previously, expense basis declined percentage points provision expense, speeds, mentioned non-performing a strong the the the of was a by XX assets portfolio. offs to remained Despite prepayment annualized credit duration loan assets. as I provision basis stable. total increase of decreased and in driven an loan charge of on Net slightly slower at As X basis growth

the assets million In $X.X during classified quarter. declined addition,

view Our remains and provision ACL on unchanged. the expense

to responds as ACL stable in the slightly to coverage model or the in We changes expect remain our environment. quarter fourth our increased macroeconomic

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

XXth tangible quarter due and -- value other been ratio impacts reported. book Absent decline AOC ratio would to from the third TCE at have September the comprehensive to drop X.X% During a TCE income. the accumulated as in continued X.X% to compared the

robust and to earnings attractive approximately near-term the the not anticipate common We shareholders changes. total believe through our with remains return shareholder to dividend XX% our an during provides our any Our period our return shareholders dividend. do of return

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

Archie M. Brown

you Thank Jamie.

are can prepared want our found demand over be our fourth remains moderate comment we ease, and which Slide I expect guidance to growth to to Loan pipelines we on XX. to on quarter. Before solid, end remarks the single-digits beginning high forward-looking

to deposit slightly We near-term. flat total or the balance over decline expect remain

deposits margin is The for expect Our benefit to many continue XXXX. we rates and margin anticipated X.X% to expand balance based to and the increasing asset rising although into we to sheet rate to in get we there the impact range further are continues sensitive X.XX% to fourth expect of that a expansion moderate increases. the and magnitude from timing, as upon quarter competition variables interest

Regarding and credit, much customers. uncertainty the to impact the regarding and our hikes economy remains inflation of rate

expect and we ACL continued quarter coverage stability credit in stable higher. remains to fourth our the slightly quality Over trends

$XXX between $XX diversified continued million strength to fluctuate be businesses. performance. to with quarter the between million with we expenses expect instead and $XXX expect our income We to Specific fee the fee in could million producing fourth be million in to $XX fee expenses, income but

As our is depreciation we approximately operating per corresponding growth our range. lease million see included in expense which will portfolio grows, $X quarter, of

outlook is Regarding minimal unchanged overall XXXX Summit, impact in [ph] and the we approximately our origination. have acquisition expect $XXX million on earnings annual and provide to

expect current momentum XXXX over the strong, our a ratios that we remain really New quarter can optimistic we are the capital Overall dividend our remainder and we of Lastly, into had levels. we to and this and at Year. maintain nice sustain

trends, under downturn. Our potential we benefit from positive situated strong deposit well manage are economic with sheet credit and ratio believe to strong to well a liquidity, XX%, is rising continue positioned balance to loan rates we

We call Victoria. now questions. up will open the for

Operator

Please Scott from go comes question Siefers at first our ahead. Sandler. Piper And Instructions]. [Operator

Your line is open.

Scott Siefers

how's Thank Good and doing? guys you. morning everybody

Archie M. Brown

Good.

Scott Siefers

we point momentum deposit sort rates some the much a could positive your, after modelled. Jamie up stops into the rates? like we'll the raising [indiscernible] maybe tightening stops you guess get Fed sensitive can first little It been where quarter. -- I trend thoughts you in you after you [ph] at in sustain keep branches NII almost Fed XXXX more for of every the moderating another lift NII further and had how question on a cost Archie, maybe big asset turn have so guys sounds than you had is noted expand Hey, but, the just raising maybe as fourth that to get margin

James M. Anderson

Scott, Yeah is this Jamie.

we the So understand increase pretty expect in the sizable coming rate do of hikes, the on. another From fourth these here interest are to the how margin. quarter pace see in

margin and the first lift Fed you We what the into quarter on as expect futures and to year. hikes terms in of in that we rate then look here expecting see the based going peak. in even quarter of at the But expect if well to to beginning then the so we're -- fund next fourth

six have maybe maybe going -- have I me little range a you said I in a way things our to were peak, XXX given that if bit So was the where is -- the it think margin few ask is but just months would ago peak changed, to higher.

that, is So then with somewhere in first to where be That's stops next Fed stops. up and little a side up as of time going -- more a backside that starts on in we for probably is higher be. it backside the quarter peak to to should next that the bit the of and it just deposit XXX year happen the peak the to And ramp side when deposit the XXX to range on the and really had somewhere year. and in going the Fed catch to into and no

next the come the of come middle in to start margin down the moderate see to start then and half back, to back year. back you'll So

Scott Siefers

alright, -- moderate so we're in asset are getting sensitivity given so, hopefully, by given to have to of And protect to end swaps putting to any what best you cycle thank thought the what do color. for if out the guys of rates guess that the tightening perfect, would Yes, you that sort mind? turning closer on of just I a be and and your against lot it guys

James M. Anderson

Yeah.

looking kind evaluating. say was things, of would it So we're I at several

I the tell anything is that's Portfolio. there the I Investment would in slight we're some be yet I this Investment the We But to say haven't Portfolio that done say at we've material. But duration done rebalancing would you I that looking fringes. we mean only what the would haven't on extend May so the maybe on thing some point to but yet are conference do within anything reduce options in and the evaluating protect But at quarter. were here of at the some downside that not. on looking kind to -- various to NIM next the floors in sensitivity. expect callers, building and next asset done We

Scott Siefers

you the guys Perfect, alright, Thank for good. questions. taking very much

Archie M. Brown

Scott. Thanks

Operator

Thank for you much question. your very Scott

Our next James. Please question go comes Raymond from at Daniel Tamayo ahead.

Your open. line is

Daniel Tamayo

guys. and that thanks? morning, could particular drove Bannockburn of going terms talk and we would what what on Good your Maybe we guidance, the start decline expectations you. are that through be takes the just we bit great, maybe talk if just Thank in about forward in some just the of there, could a fee little puts for if

James M. Anderson

is Yeah, Jamie. Daniel I'll start. This

line It's the the just overdraft that some expected. closed, what is just impact. of kind than we not that different we in first a quarter. few program that what items think one so So The months going like down through But charge third we revenue any the was various expected. service I like drive the ago, made impact our we changes did to

So that item. impacted line that

mean or ago. so are In terms as I our year up basis of mean, you points mortgage XXX I expect, from a mortgage rates so

of has dramatically. that terms off So, in activity fallen

So obviously, seeing impact there. an

on market fees a assets management. wealth are based under management values those portfolios of lot the with of the of side, On the

then market foreign income we bit, that in a seeing strong exchange are on impacted still getting the by the the offsetting side. and So, downturn little

basis a near basis million going increase $XX in an what were income revenue to there's off on And a that but we term. record But of quarter So, we an Bannockburn. that's about million a point, that they for fluctuations. that forward, a at XX range income look of little quarter, quarter-to-quarter down and there X% somewhere coming range this and some was for them on XX% expect then at is this we are the to bit when and have quarter annual -- of annual in that so at base

Daniel Tamayo

in then the similar but thanks. I And fourth And for on Jamie, quarter. expenses. the what that helpful like expense question, it in specifically that's similar is side, a increase guess call up particular the great, you leasing third you to guidance looks Okay, the quarter the in million then put

kind stableish guidance should the given? the in situation of we is just roughly expenses how if million that in you've if rates thinking and where that there also about should fourth quarter unique included Thanks. from a be curious Just that's growth be

James M. Anderson

It there absent is, that is and line side. in The leases I just as million that really yeah. going books, obviously seeing put to the we item But pressure to grow. is going it tell continue employee included that that on just would that's I -- cost to guidance operating is the really you it's are mean on we the is

employee So it pressure Other outside inflationary call on expenses of relatively that are just I flat. would cost.

some Summit then wage costs, that And relatively cost so and essentially of in impacting But up the not that cost, there employee kind you line. just every is got quarter increase -- what and of flat. pressure the have on you ramping healthcare side outside

Archie M. Brown

this in the you Hey expense that seeing as is [ph] goes, business the you size leasing side. corresponding are on relying Dan, Archie. also Jamie are benefit corresponding P

James M. Anderson

leases, the operating correct, Yes, yeah.

Daniel Tamayo

Alright, all thanks for color, the for all me. that's guys,

Operator

Thank your Daniel. you question for

Our next Terry line Please go McEvoy at comes is Inc. open. your ahead, Stephens, question from

Brandon Rud

Brandon deposits, is about question the Rud total Terry. about were In deposits about My of XXXX for XX% on quarter, this deposits. this last and morning, is Good they first XX.X%. were pre-COVID non-spring

or year to return next You a can so? think half level pre-COVID they year, back that the and

Archie M. Brown

its or to this spend some expect COVID work. during way money so out Archie, some of and that's would businesses deposit money some back into demand over put to certainly Hey, as that of you accounts and is start surged time will there's that work individuals that

be low believe able and sector our don't it than higher to hold think we on our XXs it growing So we just was the probably that will given focus particularly business strategy be number know at I if pre-COVID. I we will think where but

Brandon Rud

you. thank perfect, Okay,

is, they forward? growth expecting drive are or footprint sectors Next one going mean your you to regions your across loan here

Archie M. Brown

-- half it's the I tight, -- four footprint. I This four across think it's and across mean, think we're where again. hours the is for whole located Cooper's about across pretty hours, Archie

from becoming all So those marks. of it's really

have know will businesses with Oak as of regional Street Summit estate. and you some real and our more in -- also national some and We even we have commercial

drive will some help areas those of all as So growth that well.

Brandon Rud

here you thank current about also you borrowers hand managing you, office, in exposure to and retail talking how those higher can rates? Got your kind restaurant the portfolios two of your is about you. how interest talk go of the -- are kind environment franchise CRE stress Well, that credit, and hotel, hand for

James M. Anderson

is then into turn start of to it kind this and I Bill Jim, will Yeah, to will I get details.

book have book we smaller the restaurant be. to On just and hotel they much than books those are used

I So portfolio think the now restaurant under is million. XXX

And and about ago. book it's about half two it half of So it is down from two to four where ago. years to the what was hotel years was XX%

So, a $XXX it's I million. bit little think over

portfolios So we but they well I as Harrod, retail what our you Officer seeing those about in portfolio? Bill are he Credit as smaller, have much talk said the think is Chief

William R. Harrod

Yeah, sure.

the and books, the as it's as very, have hotel cases and good. Hotels pre-pandemic been very we're are far portfolio. rebounded that office up As exceeding those some nicely. progress. and so books know you to performing those retail levels And happy mean are with -- I very

seeing so volumes across On compared They the lot and have we feel inputs. labor that. the they well. as a the cost and prices mitigate pretty as we're still to good headwinds XXXX bullish also may there help some far as franchise have book to of rises platforms in But

is it. very one that testing rate book to real continue the monitor the on stress is vertical the that vast And diligently rate swapped estate On not environment. about including interest our on have in we majority the side hedges thing only interest portfolio office,

rate right mid-term, do So thinks with right feel as issues short-term, not including about only risk attack our and to it long-term quickly. pretty becomes through it rates That interest well interest shocks expiries as that. and to roles out good [ph]. and potential before try models, And we looking we break said

across estate. our Hopefully real So, helps. we that that do

Brandon Rud

appreciate very I taking you. helpful. Thank you my that's Yeah, questions.

Archie M. Brown

Thank you.

Operator

And next much. our McGratty Thank Chris you Please ahead. Instructions]. [Operator KBW. comes question go at very from

open. is line Your

Christopher McGratty

deposit, question spot yield? a you just loan great, rates. Hey guys. Jamie thanks. Do interest the bearing the spot in spot on deposit Oh have

James M. Anderson

So, like is for asking? you're what that September,

Christopher McGratty

the quarter exactly? Yeah, like of in the pretty end

James M. Anderson

let's Yeah, on XXX. so our basis XX cost will And hang for see into loan I back was here, of deposits go September, yields our it, September and around here, points. was in

Christopher McGratty

that you. make I you to total the is bearing, just thank interest Okay, And XX% that beta am or clear? was sure decided,

William R. Harrod

up to are we obviously, we are and cycle, And seeing that so hikes. and the pressures that fourth backside see again like pressure going in move in competitive -- here. up starting moves Chris start here side beta is I the lot far of growing obviously mean, the said, then starting the the I data the little whole but to on substantially some that bit on -- to quarter, And a out rate back pretty seeing some we're just the

Christopher McGratty

mean borrowers were maybe mid they point priced, on X guess, At your higher maybe the to they I yield to with acute of pressure be if [Multiple more going loan on I Great. have I become borrower loan. -- paying what related Xs the outlook. credit? to you're are mean Speakers] the going north on reprice does to continue

William R. Harrod

is really our built-in built-in But, shocks size shock on ICRE. go test we then on and But on the look we breaking -- credits, commercial have lot they it deals. just depending we mean have duration both also and at the that and that basis. loan and hedged on on look doing book and that make underwrite been those the out is at to sure hard global of in side and them I credits a a to in when

downside not that way, base downside, prove they But that that will now. the bend case rate we're Now cases through right protected that's we overall, that book now. the look far. is but don't and it's just little that severe waned a really bit, with rising in environment People our

out Of it. course deal expense like ways to any and figure it's pressures in with they'll increasing

Archie M. Brown

is Chris, Hey this Archie.

especially for are seeing or and softening projects down to a of where on our slowing part the growth waiting the the ICRE of in environment Certain is think being pipeline as we just I in little bit put are little better. case group. we the a know get postponed of bit and for this hold

So around of outlook driving our sort loan the some that of growth. is

Christopher McGratty

you. Thank

Operator

very like back Chris. and I questions question over you pass any Archie would Thank time are to to that Brown At there much further this for final no remarks. for

Archie M. Brown

you, call Thank talking us for about story great on again day. Victoria. more Thank about in and all we you fourth today's third We're you and quarter the a XXXX hearing and joining the excited our quarter. Have to quarter. to look next forward

Operator

you conference for Thank call. everyone joining today's

now may You disconnect.

First Financial Bancorp. (FFBC) 21 Oct 222022 Q3 Earnings call transcript