First Financial Bancorp. (FFBC) Earnings

Management highlights

### Overall Q2 2026 Financial Performance - Record adjusted net income of $83.9 million, or 80 cents per share, representing an 8% increase year-over-year, driven by higher earning assets from organic loan growth and recent acquisitions - Adjusted return on assets hit 1.5%, and adjusted return on tangible common equity reached 19.7% - Net interest margin was a stable 3.98%, as lower deposit funding costs offset a decline in loan accretion income from slower prepayment of acquired mortgage loans ### Balance Sheet and Capital Updates - Annualized loan growth of 7%, with broad-based growth across most portfolio segments; loan originations rose 23% quarter-over-quarter, with strong advanced-stage pipelines heading into H2 2026 - Average deposit balances increased $41 million, driven by a seasonal public funds influx and growth in interest-bearing demand accounts; 21% of total deposits remain non-interest bearing, and management remains focused on growing lower-cost deposits - Capital levels exceed all internal and regulatory requirements: tangible common equity ratio increased to 8.2%, and tangible book value per share rose 3% quarter-over-quarter to $16.64, exceeding pre-Westfield acquisition levels - The board of directors approved a common dividend increase to 26 cents per share, returning 34% of Q2 net income to shareholders via dividends ### Acquisition and Integration Progress - Post-integration efforts for the Westfield acquisition are complete, with virtually all expected cost reductions already realized - Bank Financial system conversion was successfully completed in June 2026; full cost savings from the acquisition will phase in by the end of Q3 2026 - Management announced a binding agreement to acquire Fenward Bancorp (holding company for People's Bank), a $2 billion asset bank headquartered in Munster, Indiana with 24 branches; the deal is expected to close by end of 2026 with system conversion in Q2 2027 - The Fenward acquisition strategically expands First Financial's footprint in the high-priority Chicagoland/Northwest Indiana market, adding $1.7 billion in deposits, $1.5 billion in loans, and $412 million in wealth assets under management

Guidance

- Net interest margin is expected to remain stable in a range of 3.96% to 4.01% in Q3 2026, assuming no changes to interest rates and purchase accounting accretion consistent with Q2 2026 - Loan growth is projected to be mid-single-digit (annualized) in Q3 2026, while core deposit balances are expected to grow at a low single-digit (annualized) pace - Third quarter total adjusted fee income is expected to rebound to between $74 and $77 million, driven by rebounds in foreign exchange and investment banking income - Third quarter adjusted non-interest expenses are projected to be between $149 and $152 million - Third quarter credit costs are expected to approximate Q2 2026 levels, with allowance for credit losses (ACL) coverage remaining stable as a percentage of total loans; net charge-offs are projected to be 25 to 30 basis points annualized for the full second half of 2026 - Full cost savings from the Bank Financial acquisition will be fully realized by the end of Q3 2026, with Westfield acquisition full cost savings included in the Q3 run rate - The Fenward acquisition is expected to be ~5% accretive to First Financial earnings per share, with only minor dilution to tangible book value per share and an earn-back period of just over half a year; combined with Bank Financial, the two acquisitions will add ~8% in total EPS accretion with no material long-term impact to tangible book value

Segment performance

First Financial Bancorp does not break out formal product segment financials in this call, but the loan portfolio growth drivers are CNI (Commercial and Industrial), Summit, and Agile, which collectively led the 7% annualized Q2 loan balance growth of $240 million. Non-interest income adjusted for one-time items was $72 million total, with leasing and foreign exchange contributing solid results; leasing is projected to contribute $22-24 million of third quarter revenue, while foreign exchange is projected to contribute $15-17 million of third quarter revenue. The newly announced Fenward acquisition, which adds $1.5 billion in loans and $1.7 billion in deposits, will expand the Chicago/Northwest Indiana segment, which will become the company's second largest market post-close, representing roughly 8% of total earnings per share accretion.

Risks & headwinds

- Non-interest income from lines including foreign exchange, investment banking, and wealth advisory is inherently lumpy and variable quarter-to-quarter due to the timing of large client transactions, which can lead to results below expectations in any given quarter - Net interest margin faces slight upward pressure on deposit costs as existing certificates of deposit reprice, which could create modest margin pressure if not offset by other factors - M&A integration carries execution risk, with cost savings realization dependent on successful system conversion and team integration, which can be delayed from projected timelines - Larger market positioning in the Chicago/Northwest Indiana market requires continued brand investment and organic growth execution to meet projected returns

Analyst Q&A

• Q: With three acquisitions in a short period, will First Financial pause M&A activity, and what is the updated plan for capital return to shareholders?

  A: The Fenward deal is a small, incremental strategic transaction that does not push the company to pause M&A entirely, but management will focus on closing and integrating Fenward over the next four quarters, with no near-term deals targeted. For capital return, the long-term plan allocates ~1/3 of earnings to dividends (currently targeting a 35-40% payout ratio, in line with current levels), ~1/3 for organic growth and small tuck-in M&A, and ~1/3 for share repurchases; repurchases were paused in Q2 for the Fenward deal, but will resume going forward.

• Q: What are your plans for the Fenward balance sheet, particularly loans and securities, and what is the long-term trajectory of First Financial's overall balance sheet?

  A: All Fenward loans will be retained and added to First Financial's balance sheet, as asset quality is strong and the existing Fenward lending team will be integrated to drive further organic growth. Most of Fenward's securities portfolio will be sold and reinvested at current market rates aligned with First Financial's investment strategy, with unrealized losses already accounted for in purchase accounting. Going forward, ~50% of future loan growth will be funded by running down the current outsized securities portfolio, with overall balance sheet growing at a modest pace, consistent with prior guidance.

• Q: When will full cost savings from the Fenward acquisition be realized, and what is the outlook for core net interest margin, including new loan yields and deposit costs?

  A: Fenward is expected to close at the end of 2026, with system conversion in mid-Q2 2027; full cost savings will be realized by the end of Q3 2027, with the first full quarter of all savings in Q4 2027. Absent interest rate changes, the margin will remain relatively stable; there is a slight expected uptick in deposit costs from CD repricing, but new origination yields are roughly equal to current payoff yields, offsetting this pressure. First Financial remains slightly asset sensitive: a 25bps rate hike would initially boost the margin by ~7-8bps, stabilizing at ~3-4bps higher after full deposit repricing.

• Q: How have First Financial been able to do M&A deals with very low tangible book dilution and fast earn-back periods, and is this sustainable?

  A: The favorable terms of recent deals are driven by unique situational factors, including a bargain purchase gain on Bank Financial and a large differential in price-to-tangible book between First Financial and Fenward. Management maintains strict capital discipline, targeting a maximum three-year earn-back period, so favorable terms like these are not guaranteed for every future deal but will be sought when opportunities arise.