First Financial Bancorp Announces Second Quarter 2023 Financial Results

• Earnings per diluted share of $0.69; $0.72 on an adjusted⁽¹⁾ basis, 29% increase YoY
• Return on average assets of 1.55%; 1.62% on an adjusted⁽¹⁾ basis
• Net interest margin on FTE basis⁽¹⁾ of 4.48%; 7 bp decrease from linked quarter
• Loan growth of $117 million; 4.5% on an annualized basis
• Strong adjusted⁽¹⁾ fee income of $53.5 million driven by foreign exchange and wealth management
• ACL to total loans of 1.41%; Classified assets declined 13% from linked quarter
• All capital ratios increased from the linked quarter; Regulatory ratios well in excess of targets

CINCINNATI, July 20, 2023 /PRNewswire/ -- First Financial Bancorp. (NASDAQ:FFBC) ("First Financial" or the "Company") announced financial results for the three and six months ended June 30, 2023. 

For the three months ended June 30, 2023, the Company reported net income of $65.7 million, or $0.69 per diluted common share.  These results compare to net income of $70.4 million, or $0.74 per diluted common share, for the first quarter of 2023.  For the six months ended June 30, 2023, First Financial had earnings per diluted share of $1.43 compared to $0.98 for the same period in 2022.

Return on average assets for the second quarter of 2023 was 1.55% while return on average tangible common equity was 25.27%⁽¹⁾.  These compare to return on average assets of 1.69% and return on average tangible common equity of 29.02%⁽¹⁾ in the first quarter of 2023. 

Second quarter 2023 highlights include:

• Net interest margin of 4.43%, or 4.48% on a fully tax-equivalent basis⁽¹⁾

• 7 bp decrease to 4.48% from 4.55% in the first quarter due to increasing deposit costs

• Higher asset yields significantly offset 40 bp increase in cost of deposits

• Average deposit balances decreased $98.3 million with growth in brokered and retail CDs offsetting declines in noninterest bearing checking and savings accounts

• Noninterest income of $53.3 million, or $53.5 million as adjusted⁽¹⁾

• Foreign exchange income of $15.0 million reflected continued strong activity

• Record  wealth management fees of $6.7 million; 6.0% increase from first quarter

• Leasing business income of $10.3 million; 24.9% decline from first quarter due to change in mix

• Adjusted⁽¹⁾ $0.2 million for losses on investment securities and gain related to the LIBOR cessation

• Noninterest expenses of $120.6 million, or $116.9 million as adjusted⁽¹⁾

• $3.9 million increase from first quarter driven primarily by higher employee costs and online banking conversion

• Second quarter adjustments⁽¹⁾ include $1.0 million tax credit investment writedown, $1.7 million of costs related to our online banking conversion and $1.0 million of other costs not expected to recur such as acquisition, severance and branch consolidation costs

• Efficiency ratio of 56.8%; 54.9% as adjusted⁽¹⁾

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⁽¹⁾ Non-GAAP measure.  For details on the calculation of these non-GAAP financial measures and a reconciliation to the GAAP financial measure, see the sections titled "Use of Non-GAAP Financial Measures" in this release and "Appendix: Non-GAAP to GAAP Reconciliation" in the accompanying slide presentation.

⁽²⁾ The consolidated balance sheets at December 31, 2022, September 30, 2022, and June 30, 2022, include assets acquired and liabilities assumed in the Summit Financial transaction.  The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.  These fair value measurements were considered final as of December 31, 2022.

• Moderate loan growth during the quarter

• Loan balances increased $116.8 million compared to the first quarter

• Growth of 4.5% on an annualized basis

• Residential mortgage and equipment leases drove quarterly growth

• Total Allowance for Credit Losses of $166.9 million; Total quarterly provision expense of $10.7 million

• Loans and leases - ACL of $148.6 million; increased 5 bps to 1.41% of total loans

• Unfunded Commitments - ACL of $18.2 million

• Provision expense driven by slower prepayment speeds, net charge-offs and loan growth

• Classified assets declined 12.6% to $138.9 million; Net charge-offs 22 bps of total loans

• Capital ratios remain solid

• Total capital ratio increased 28 bps to 13.94%

• Tier 1 common equity increased 30 bps to 11.30%

• Tangible common equity increased 9 bps to 6.56%⁽¹⁾; 8.76%⁽¹⁾ excluding impact from AOCI

• Tangible book value per share of $11.02⁽¹⁾

Archie Brown, President and CEO, commented on the quarter, "I continue to be pleased with our performance this year.  Earnings in the second quarter were once again very strong as an expected increase in deposit costs was mostly offset by higher asset yields.  Adjusted⁽¹⁾ earnings per share were $0.72, which was a 29% increase compared to the same quarter in 2022, while the adjusted⁽¹⁾ returns on assets and tangible common equity were 1.62% and 26.46%, respectively.  Net interest margin exceeded expectations during the period as our asset sensitive balance sheet has enabled the company to successfully navigate the higher interest rate environment.  We were encouraged by the stabilization of deposit balances in the last half of the quarter.  Personal, business and public fund deposits were stable to increasing from May to June while the mix continued to shift to interest bearing products."

Mr. Brown continued, "Our fee income largely exceeded our expectations this quarter, with strong performance from mortgage banking, client swaps and wealth management.  Summit Funding Group had another nice quarter in originations although the mix has shifted to a higher level of finance leases and loans.  This shift has bolstered our net interest income but resulted in less fee income during the period."  

Mr. Brown commented on loan growth and quality, "Loan growth was in line with expectations for the period.  While loan activity slowed early in the quarter and we experienced higher commercial line pay downs, loan pipelines strengthened in recent weeks. We expect moderate loan growth in the second half of the year.  We were pleased that asset quality remained strong during the quarter.  Net charge-offs were 22 bps on an annualized basis after being zero last quarter and a net recovery in the fourth quarter of 2022 while classified assets declined 13% from the linked quarter."

Mr. Brown concluded, "We are extremely pleased with our results this quarter.  The position of our balance sheet, strong net interest margin, consistent loan growth, robust fee income and stable asset quality is expected to sustain our performance in the back half of the year.  Additionally, our earnings power, strong and increasing capital levels and high reserve levels provide additional support in the event of a downturn in the economy."

Full detail of the Company's second quarter 2023 performance is provided in the accompanying financial statements and slide presentation.

Teleconference / Webcast Information

First Financial's executive management will host a conference call to discuss the Company's financial and operating results on Friday, July 21, 2023 at 8:30 a.m. Eastern Time.  Members of the public who would like to listen to the conference call should dial (888) 550-5723 (U.S. toll free) or (646) 960-0471 (U.S. local), access code 5048068.  The number should be dialed five to ten minutes prior to the start of the conference call.  A replay of the conference call will be available beginning one hour after the completion of the live call at (800) 770-2030 (U.S. toll free), (647) 362-9199 (U.S. local), access code 5048068.  The recording will be available until August 5, 2023.  The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company's website at  www.bankatfirst.com.  The webcast will be archived on the Investor Relations section of the Company's website for 12 months.

Press Release and Additional Information on Website

This press release as well as supplemental information are available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com.

Use of Non-GAAP Financial Measures

This earnings release contains GAAP financial measures and Non-GAAP financial measures where management believes it to be helpful in understanding the Company's results of operations or financial position.  Where Non-GAAP financial measures are used, the comparable GAAP financial measures, as well as a reconciliation to the comparable GAAP financial measure, can be found in the section titled "Appendix: Non-GAAP to GAAP Reconciliation" in the accompanying slide presentation.

Forward-Looking Statements

Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as ''believes,'' ''anticipates,'' "likely," "expected," "estimated," ''intends'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Examples of forward-looking statements include, but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements.

As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements.  Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements.  Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation:

• economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business;

• future credit quality and performance, including our expectations regarding future loan losses and our allowance for credit losses

• the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry;

• Management's ability to effectively execute its business plans;

• mergers and acquisitions, including costs or difficulties related to the integration of acquired companies;

• the possibility that any of the anticipated benefits of the Company's acquisitions will not be realized or will not be realized within the expected time period;

• the effect of changes in accounting policies and practices;

• changes in consumer spending, borrowing and saving and changes in unemployment;

• changes in customers' performance and creditworthiness;

• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;  

• current and future economic and market conditions, including the effects of changes in housing prices, fluctuations in unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;

• the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 ("COVID-19"), global pandemic, and the impact  on the performance of our loan and lease portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products;

• our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;

• financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;

• the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;

• the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;

• a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;

• the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; and

• our ability to develop and execute effective business plans and strategies.

Additional factors that may cause our actual results to differ materially from those described in our forward-looking statements can be found in our Form 10-K for the year ended December 31, 2022, as well as our other filings with the SEC, which are available on the SEC website at www.sec.gov. 

All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing.  Except as required by law, the Company does not assume any obligation to update any forward-looking statement.

About First Financial Bancorp.

First Financial Bancorp. is a Cincinnati, Ohio based bank holding company.  As of June 30, 2023, the Company had $17.1 billion in assets, $10.6 billion in loans, $12.8 billion in deposits and $2.1 billion in shareholders' equity.  The Company's subsidiary, First Financial Bank, founded in 1863, provides banking and financial services products through its six lines of business: Commercial, Retail Banking, Investment Commercial Real Estate, Mortgage Banking, Commercial Finance and Wealth Management.  These business units provide traditional banking services to business and retail clients.  Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $3.3 billion in assets under management as of June 30, 2023.  The Company operated 130 full service banking centers as of June 30, 2023, located in Ohio, Indiana, Kentucky and Illinois, while the Commercial Finance business lends into targeted industry verticals on a nationwide basis.  Additional information about the Company, including its products, services and banking locations, is available at www.bankatfirst.com

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SOURCE First Financial Bancorp.