FIRST FINANCIAL BANCORP /OH/ Q3 FY2024 earnings call

• Adjusted earnings per share was $0.67, return on assets was 1.42%, and return on tangible common equity was 19.77%. - Net interest margin was 4.08% with a 2 basis point decline from the second quarter, durable due to high asset yields from Agile investment portfolio restructuring and moderating funding costs. - Average deposit balances grew 4.9% on an annualized basis. - Loan growth slowed in the third quarter, impacted by higher payoffs, but loan pipelines strengthened and expected to grow faster at year-end. - Noninterest income was $45.7 million or $58.8 million adjusted, with strong earnings from foreign exchange, wealth management, and leasing; had large nonrecurring items like $17.5 million losses on securities. - Noninterest expenses relatively flat, with workforce efficiency initiative eliminating 120 positions to date. - Asset quality stable, ACL 1.37% of total loans, third quarter net charge-offs 25 basis points annualized, nonperforming assets as a percent of assets increased 1 basis point to 36 basis points. - Tangible book value per share increased 10% from linked quarter, tangible common equity increased 75 basis points to 7.98% by end of September.

Adjusted earnings per share was $0.67, resulting in a return on assets of 1.42% and return on tangible common equity of 19.77%. The net interest margin was 4.08% with only a 2 basis point decline from the second quarter. Average deposit balances grew 4.9% on an annualized basis. Loan growth slowed during the third quarter. Third quarter noninterest income was $45.7 million or $58.8 million on an adjusted basis. Noninterest expenses were relatively flat. Asset quality was stable with ACL increasing to 1.37% of total loans. Third quarter net charge-offs were 25 basis points on an annualized basis. Tangible book value per share increased 10% from the linked quarter and over 30% from the same quarter last year to $14.26, while tangible common equity increased 75 basis points to 7.98% as of the end of September.

• Expect net interest margin to come down to between 3.85% to 3.95% for the next quarter assuming another 25 basis point rate cut in November and December. - Expect mid-single-digit growth on an annualized basis for the fourth quarter due to strengthened loan pipelines and seasonally high production in Summit business unit. - For full year, expect net charge-offs to be approximately 25 to 30 basis points. - Fee income expected to be between $63 million and $65 million, including $13 million to $15 million for foreign exchange and $18 million to $20 million for leasing business revenue. - Noninterest expense expected to be between $126 million and $128 million, with potential variability in leasing business and fee-based incentive expense.

• Interest rate reductions may lead to margin contraction in coming periods. - Economic uncertainty may impact asset quality. - Deposit costs may continue to be a factor with deposit mix shifting towards higher cost deposits.

Q: Daniel Tamayo asked about loan growth slowing in Q3 and future growth expectations.

A: Archie Brown said loan pipelines strengthened in Q3 and expected mid- to upper single digits annualized loan growth in 2025, with discipline around lower return relationships.

Q: Terry McEvoy asked about $8 million losses from securities restructuring activity.

A: Jamie Anderson said sales of $140 million of securities occurred in the middle of the quarter, reinvestment picked up about 330 basis points, and the $8 million loss's full benefit would be seen in Q4 with a go-forward run rate of about $4.5 million.

Q: Chris McGratty asked about capital deployment priorities and noninterest income guidance.

A: Archie Brown said focused on organic growth and M&A opportunities, with no stock buybacks at present and dividend increased; Jamie Anderson said noninterest income growth driven by Bannockburn wealth side, capital markets group growth, and Summit ramping up operating leases with fee income to continue growing as balance sheet ramps up