FFBC - Earnings call 4 2023 | First Financial Bancorp.

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Operator

Thank you for standing by, and welcome to the First Financial Bancorp Fourth Quarter 2023 Earnings Conference Call and Webcast.

I would now like to welcome Scott Crawley, Corporate Controller to begin the call. Scott, over to you.

Scott Crawley

Thank you, Mandy. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's Fourth Quarter and Full Year 2023 financial results. will Anderson, Brown, Bill Chief Credit call Executive and Harrod, today's Officer. Jamie Officer; Financial on be President Archie Chief Chief Participating Officer; and

presentation yesterday press today's www.bankatfirst.com at call. presentation slides Investor make the we contained the We'll the available issued section. to Both accompanying our release under slide during reference that Relations website in are on accompanying and the the

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

turn to the over call now Archie I'll Brown.

Archie Brown

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

the call I'd recent this performance. record I from like year's quarter and Before most highlights some over the turn provide recap to Jamie, to

our equity with return X.XX% fourth on a of performance. tangible per share Adjusted pleased XX.X%. was in $X.XX, assets very I'm and on return a ratio earnings of which common resulted quarter

increase funding rising costs asset expected, As outpaced in the yields.

margin However, X.XX%. strong interest very our net at remained

on XX% XX% sheet balance or annualized an on basis or annualized loans trends $XXX and million million Additionally, were deposits $XXX positive with during basis. quarter increasing average increasing the an

at Bannockburn. in Noninterest on trade million income $X.X income during included loss we expected the quarter. and were noninterest The decline than expenses both lower a a

income term the due within lease a However, is fees income shifting mix leases. to our lower excluding also this expectations. was exchange of finance Leasing period of foreign and greater to origination end range during declined loss, of

period. interest income margin, income lower in noninterest increased it during While interest net resulted and the shift this

for which to income. compensation, the is due to quarter noninterest Noninterest expenses directly tied declined primarily lower incentive

one underlying with of fraud. charge-offs loan and for points was a year into the fully coming quarter XX Asset basis the was quarter. credit that most quarter during had nonaccrual were by Net fourth borrower trends quality the reserved for the stable relationship driven included improving. on were been almost This and

XX% Additionally, assets points unchanged were basis by the declined asset to third and XX nonperforming relatively classified quarter. from balances

Financial. revenue was for was XXXX and the to a and the $X.XX company's was prior was per common million increased highest XX.X% was return XX.X% ratio assets record tangible the of on year XX% year. $XXX.X earnings increasing First prior from our share Adjusted Return efficiency The in total while the on equity XX%. over X.XX%, year history,

responded interest balance environment, to XX% in resulting interest Our rate the net sheet income. a in favorably

from Wealth noninterest XX% Management Summit increase and years record in drove Additionally, income. a

increase happy the in sheet the point our of X% loan value the during performance exceeding increased balance pleased balances share the in balance the the banking growth, We're tangible in industry of XX% equity ratio turmoil year, expansion also And in prior deposit common production while in solid, the intangible with the very for given We're X.X% average especially extremely to the with XXX-basis year. and year. compared book XXXX. per first half was

Asset quality during a year. were elevated trends the bit

we at XXXX. to the ICRE portfolio assets well loans. asset points a by as coming loss for basis year, the ended manage we in positioned in XXXX. optimistic two the increase well to points, we're as total believe regarding and the large record basis of increased charge-offs low we're XX driven points small a X basis to sale assets Net on of XX XXXX This after of relationships Nonperforming cautiously year quality achieved was

wrap greater additional up detail. call now and in closing I will discuss these the I'll Jamie's results with over Jamie forward-looking remarks. turn some to that, to commentary discussion, With After

James Anderson

Thank you, interest loan financial earnings, quarter of quarter quality metrics The X and and and our Archie, expectations, exceeded was a deposit fourth solid summary X margin good that asset everyone. fourth strong X, highlighted results. net by provide stable Slides another morning, and good quarter, growth.

to to rate continues sheet the balance respond Our interest favorably current environment.

we our with an net interest annualized contraction periods finance, interest funding relatively our pace specialty anticipate in Loan the was less margin pricing on slightly, the due grew While changes portfolios. residential concentrated declined mortgage the Total and the CRE strong in deposit balances We loans further exceeded pressure books and stable expectations. net coming was additional other at remains very to than margin growth basis, expected mix. on X.XX%. leasing, investor XX% which in and in

largest declined in by The trade. negatively quarter. decline the impacted income the foreign was which loss fourth a on was $X.X exchange, million Noninterest

However, mostly this loss by offset was noninterest expenses. lower

Additionally, declined leasing business the income during quarter.

declined of a expenses. Summit of mix period. expenses costs However, larger function product as employee finance from to lower quarter this linked and the the was primarily due Noninterest originated leases during marketing a volume

Overall were points single net loan was assets the driven basis growth. asset balances. by period, during $X relationship reserved million during quality that and with for. lower of million provision by expense charge-offs XX nonperforming Annualized were period $XX.X net the trends classified asset charge-offs driven a net which We declining recorded charge-offs, we stable, were previously and and

ratios total Our loans. remains standpoint, of From capital regulatory and of X.XX% regulatory our a ACL excess in remain internal at targets. conservative coverage both

the other million during Accumulated income improved comprehensive period. $XXX

exclude earnings, expected per and Adjusted that result, understanding as our $XX our income a assessment $X.XX tangible XX impact of branch FDIC increased highlighting GAAP common for the period. not severance was XX.X%, as costs. value special recur, X the by the while earnings believe points during ratio equity share the million items as to consolidation performance. or to our we important basis quarter. tangible increased well reconciles costs Slide net such are Adjusted book As earnings acquisition, quarterly to adjusted

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

Turning X. X quarter basis points to the Net to linked margin Slide interest declined from X.XX%.

to increase in These asset XX-basis more the the in favorable were funding point increase balances asset a a shift a higher due in period. profitable to expected, of funding the costs deposits. due increase by Primarily in yields. mix outpaced and rates asset mix a partially of cost earning yields offset point we costs and XX-basis higher As during

in On in see you Slide an yields asset increase can increase XX, yields. point XX-basis included loan the

yield basis the increased on portfolio investment Additionally, points. the XX

first of a we slower linked costs in these the saw previously I fourth but pace cost the deposits As quarter. increased and our to quarter we in at basis than quarter, expect to compared increase the to mentioned, points XX continue

in fourth Slide utilized increased current quarter, in our our XX net X income moving the details up beta the percentage interest costs to greater betas velocity XX%. points with Deposit modeling.

various borrowing Slide Our approximately outlines liquidity modeling indicates our beta sources that of and XX%. XX is capacity. our through-the-cycle

continue required We the have to expected we to believe environment. balance the manage flexibility the sheet economic through

loan Slide balance illustrates the to our XX compared linked and changes current quarter. mix

our any our strong As industry. particular specialty before, remains loan balances sufficiently loan portfolio the protection increased on finance, Slide had believe XX diversified detail industry. on to portfolios from mentioned other growth. provides with loan flat. mortgage, I XX% provide all were loan concentration by relatively We Summit, and basis, deterioration while an in ICRE quarters annualized broad-based

million to X% space, declined concentrated our nonaccrual XX in average of our funds and our of In deposits Slide portfolio primarily were on million quarter. for and as $XXX office $XXX office market total, accounts this the increased mix $XX brokered a in book during $XXX downgraded from a Slide progression increase quarter, XX as the of driven million the No in deposit overall well balance About money total retail portfolio. detail portfolio combined is public balances increase and loan office is during $XXX in total average the the million and linked and strong. the shows by increase quarter, CDs. relationships provides LTV our deposit million.

This deposits in borrowing Slide decline higher-cost These environment trends fund the XX in average expected has noninterest-bearing current deposits driven interest products. as and deposit and a our public business savings to illustrates accounts. was offset personal, customers increases rate types. our deposit $XXX as well increasing business balances all and increasing $XXX million. million, $XX capacity fund in We deposits increases million our the deposits public saw comparison as personal increasing three of deposits. With to uninsured

our to On slide, see you the the adjusted were bottom deposits. deposits $X.X of XX% end can equates billion at uninsured total This of right the the year. our of

respond in business would a fourth to noninterest declined by during loss impacted costs driver with lower and provides offset flexibility We larger trade. exchange that the stress Slide quarter. related the lease was income the deposit loss event a our a by period. finance negatively declined highlights during of of our income to the was biggest this which balances. $XX to sufficient the are income decline comfortable on Fee to million was quarter. income million any borrowing noninterest and reduction believe for XX originations a expenses. capacity due heavier Leasing the The mix concentration This period foreign our employee during $X.X

income which expenses. to for higher had another period. fees. wealth expense income declined lower decrease million Core as XX. the noninterest the Noninterest This increased quarter as are outlined marketing during well Additionally, driven period, driven the was expenses costs, is lower management Slide quarter on $X.X by syndication by employee solid tied fee and during other

Turning XX XX. and Slides to now

Our million X-basis includes provision point $XX.X which ACL was resulted model an reserves resulted allowance, total and period. quarter. the X.XX% decrease the in was that third million from $XXX This which funded both unfunded total during ACL a a of of of and loans, expense in

primarily $XX.X period basis Provision during mentioned, Net relationship an for. by other credit balances and while that charge-off by or been I previously growth. flat were classified reserved to and were relatively on points trends, loan a asset decreased XX nonaccrual net the loans had previously charge-offs expense million driven basis the was quarter-over-quarter. million In were annualized charge-offs due $X driven

Our ACL coverage was year-end. X.XX% at

to reflected reserve the in expect As mentioned last build quarter, that portfolio. quarters from losses modeled we I have a conservatively we prior our

coverage flat ACL coming to our relatively the periods. expect We remain in

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

the ratio at tangible and a $XXX or the X.XX% million ratio and TCE to other the Absent would as year, from XX points XX.X% income. of comprehensive AOCI, quarter, been fourth XX.X%, the book During the due to value reported. basis the compared X.XX% increased have end increased accumulated income improvement TCE

will losses capital Slide unrealized XX demonstrates remain that regulatory targets, including of portfolio. in ratios the in securities the excess our

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

continue will actions we evaluate capital to However, various progresses. year the as

forward. going outlook it over I'll back Archie? some for turn comments our Archie now to on

Archie Brown

Jamie. you, Thank

I can Before remarks, near we be forward-looking on to on healthy, moderate though Slide found expect growth we be the over XX. activity end our seasonal guidance, prepared digits remain which to want approach as lows and the loan in we pipelines comment term. in mid-single Loan

of For portfolio we growth. support securities, we continue to balances cash in the decline flows utilize to a as expect loan

Deposit be stable to expect quarter in of growth seasonal in recent reverse strong, causing very the first slightly but to down. some we to was flows quarter the the balances

margin interest industry. resilient has the the deposit and net pressures remained Our despite impacting strong

as quarter, expected the range Fed We loan credit we to while remain credit, between first to increasing. costs assuming interest percentage to is expect to loans coverage consistent with in to quarter in prior our net stable a of no Specific X.XX%, -- ACL compression some margin slightly of the the expect be with further cuts. a the X.XX%

We and range to $XX foreign expect as more rebounds million $XX continues and noninterest between million levels to a the income to exchange be end-of-term operating portfolio in lease leasing normal income and grow.

capital, expenses million from million, remain to the level. our ratios dividend strong, we at depreciation be to portfolio. our and Specific the expect expect $XXX between current maintain which includes and $XXX the lease capital We expense

for Finally, commend I to results. associates want great year financial the our and record

the during uncertainty at proud high industry earlier work XXXX. despite team the a were very level focused They I'm the and client extremely year. our in of accomplished executed

year, in positions have XXXX team and some And diverse key well and new including areas, we markets, we strong wealth believe Evansville, We've a Chicago, have banking. Indiana. to the enter strengthened built including that into in we've As I and beyond. talent Cleveland commercial company us sustained success expanded by management adding new and our

we'll the that, up open call for questions. now With

Operator

Tamayo Daniel comes Our Instructions] line James. question [Operator first from of the with Raymond

Daniel Tamayo

outlook year, with First, I expanding of maybe the without to first Fed's relative you've just know back year. the on any But half think about the X the pressure got as some maybe in NIM quarter of cuts. the expected you guide. cuts rest the in the

income? Just impact curious net margin or interest how that the would you think

James Anderson

this Daniel, is Yes. Jamie.

yes, two the so last the parts deposit I'll When deposits anticipate it first quarter It kind and at lagging of of about do there. we maybe take looks behind we quarter. do way in We our pressure -- our a over look year So cost the from anticipate here so. has or were there pricing like a some perspective. in performed we

that's So deposits the in see I little than of moving fourth peer you'll our why up the here higher think a group. quarter, bit cost

And And We cut banks, we'll I going which that a I But the of another I going points so, of it's deposit as it think quickly on guides. -- move quarter what in we depend of first more to included which we we as -- think the X.XX% so -- from of have mean XX a around or one do pricing -- just it's that's so we lot so. -- get prices X.XX% is think we can can as in perspective, quarter basis we then or that. down. that, a forward, have how to lot

ones that some that that very -- first except first relief but relief then cuts side relief, cut, very the get but the further. we indexed, as from we so cut, are little deposit in would Fed get are start anticipating little basically And the to from and that

basis margin points, impact cut, mitigates basis of points. then cuts about from first there it's XX and where a XX quite you're or to talking X bit basis points, it that to a So and more further XX like around probably the dilutive X

So so forecast. -- have and we then cuts our -- four in

XXX in but each late have basically, 'XX March, of quarter, margin and in half of so one in the have one the our we quarter, back we obviously range. lot that impact. have in We a But

Daniel Tamayo

relates Okay. shift I'm appreciate your expectations very would I'm the the maybe mentioned to that rate That's what what business, are Is comments All the drove I and in related? question right. leasing drove What drive the helpful. just that future? what for leases. the curious, curious you to it. in finance that the next that -- that? just

James Anderson

Yes.

I bit of I think a business we're mean, more longer, years now. as it, obviously little we about really, own this we learning owned a it couple as for we've have it But more or it's are an whether of economics think I the is than the customer transactions it. same, us those to virtually the operating lease, a finance it really driving it's lease really

had more into fall So they customers just that category.

really an just as it's with finance margin and shows statements so it's and the opposed of to into the lease, income goes on amounts And the a gross expense. -- operating it a geography issue which just the noninterest financial type noninterest lease as

at had little anticipated. I year -- than the you what why a look we we had, overall the volume earning mean, that's So assets, than of I when what we bit our finished -- higher think

including in the of assets assets. off those driven is down earning more had fact including the that down those of finance we -- leases in other and that some and that And versus we are

Daniel Tamayo

Okay. I understand.

the line. there's ultimately around, So moving geography about some to but bottom neutral

James Anderson

Correct. Yes.

Operator

comes Our with the from next line Terry Stephens. of question McEvoy

Terence McEvoy

of I Or I ask, just the kind been can to loss? place on again? the that some is have just from guess of that light shed prevent $X.X What you happening to changes this million business? put got in trading nature

Archie Brown

here, the Yes. question the want our to loss. Chief answer Terry, trading on Bill I have Credit Officer,

Unknown Executive

XX,XXX you material kind when they're out, with year side customer trades some a their this about you trading had over business spot institution. in of to of lay unable thing. the interruption even trade. joining team trades. Terry. of They a and do Sure. out the it's And The year It [trick] the really onetime and before the long-term a fill was

through don't so And worse the systematic continue platform. we stuff. we expect have do be lodge to it and on normal right And oversight our the to and

it's one but materially things, not the enhanced thousands. some we've because So of

Terence McEvoy

term; then flip portfolios then should growth business the in in portfolios digits as loan in you and et mid-single is And quarter. interest growth side do is, that just the the a see you some loans provide expect areas think impressive the you the fourth economy What near the Perfect. to question, some over the had due to And you outlook? any be deemphasizing cetera? might rates, do or contraction given itself follow-up

Archie Brown

lot Yes. Terry, bit the little numbers a related rates up. were customers this continued somewhat line be have commercial, where since is pay the our the have assets and slide, liquidity chose in to seen of softer you liquidity and quarter, had Archie. will line think Look, just in commercial down that it paydowns I broad-based to use a and year, moved last may

So lot of line to we maybe draws a there's start go as into that. we don't If XXXX. more some should think see we anything,

stronger. But commercial -- I think so be banking will

Our Oak Street unit good QX. really had a

the they'll QX continue early quarter but their largest have think some I of is strength just to year. the some always Jamie about it was of talking Summit, into year.

also little up the been So year. little then will Mortgage kind one that's that be a but soften softer. softer, keep a the in originations steady mainly may through a grower, have ramping QX been of lot payoffs has been bit and a

was that it low continue don't of I drew the that on payoffs. And grow origination QX, line a is to a construction -- was there will we in little primarily little QX. in did because bit grew that, up. So that ICRE at quarter, Otherwise, then continue think know that in loans will activity draws softer. that pace that the the

the we're areas deemphasizing, So levels. get it probably regard decent be most won't growth, we'll portfolio. fixer some but broad-based I is notably to franchise With think higher at

the think the we -- billion the about portfolio that deemphasized that's or so. the And over $X.XX as the end side that that years, down down at know just originating of really of that. in amortize we will continue to year You have story

certain we're we and healthcare, is -- that have our team we're can deemphasized, as even really areas the office, you multifamily now, product On for But X industrial. on. very ICRE hotels, X years to side, in imagine, and we have focusing really selective

ICRE be the through as think we I go of slow kind year. a So will grower

Operator

comes question next of Chris line Our KBW. McGratty Instructions] [Operator the with from

Christopher McGratty

would if remixing about feel your Great. midyear, Jamie, that mid-XXXs. Is the income, of of put interest and kind QX, net it margin on together QX, right? the the earning that pieces of comments, kind maybe would trough of the be I assets

James Anderson

That's right. Yes.

Christopher McGratty

of that kind a fair And at Okay. step level, like kind is XXX XXX, of down?

James Anderson

That's right. Yes.

Christopher McGratty

And Okay. capital, you aren't maybe consistent a XXXX. been the on a capital then in -- have on buybacks Archie, there dividends priority. guys stable Is for and return narrative like bank strong

You guys that onerous. on is Obviously, be the horizon? are less But have marks might multiple. a M&A something

Archie Brown

thanks the Chris, for Yes, question.

growth, and got that think we a business supporting we grow. a diverse resilient think can is First, we've of kind pretty now diverse

support moving capital. And accounting We we're need so organic we I going purchase down in changes M&A growth, dynamics rates The to to growth how December, saw continue may -- in of first. impact saw some with internal think improve. some to

we that's in that needs XXXX. think to realistic And something to continue think, make that more improve really I more to

bank So we'll it since X about mind a We're years probably done not any on some. -- have our acquisition mergers. we've

and economy, like there interest use works the then think and could lot in. where, an But of we're the way have a about foremost, the I we year, So I types out think, extent a in And companies are to us capital maybe it. feel the There some that. good areas, in first organically. accounting see doing you markets, of not

Christopher McGratty

And have and terms than higher peers. your of a then little bit credit, Great. in charge-offs provisions Okay. been

what Should of can normal expect partly you in I is us kind help way? movement environment? range? in kind But stay it's about this think forecasting provision elevated do think of Or either levels business you this you mix.

Archie Brown

XX look the was the of were for just X at basis X window. if ROA than the our And at, higher maybe median of points KRX. some I looking last our is ROA, net you years -- over quartile example, that of this top or charge-offs back KRX kind for running of and Chris, over kind go

like performance. that's in provision points XX year trade at consistently If this at it basis year? of you is about plus reserve of the slightly much charge-offs, think we where or stable, current the of we earnings probably higher minus, to this So said said it how higher, current that levels And we increasing. and for staying level going as end

earnings side. We think can have a really and do good we the that year on

Operator

would I Archie call the remarks. over for Brown turn to closing now to like

Archie Brown

[ in we're the thank today's the you. results the to fourth our want joining results, excited I about for Lendy of hearing are and everybody year, XXXX. call quarter full and and about thank really we proud ],

you. talking day look to forward Have quarter. to next weekend. great We you again a and Thank

Operator

call. concludes today's This

now may You disconnect.

First Financial Bancorp. (FFBC) 26 Jan 242023 Q4 Earnings call transcript