First Financial Bancorp. Q3 Earnings Call Highlights

Key Points

• Record third-quarter performance: Adjusted net income reached $87.8 million, or $0.84 per share, while revenue rose to a record $273.9 million. Net interest margin increased to 4.07%, supported by higher asset yields and record fee income.
• Loan growth and fourth-quarter outlook: Loans grew 5% annualized, led by broad-based commercial and industrial lending, and management expects low- to mid-single-digit annualized growth in the fourth quarter. Fee income is projected at $75 million to $78 million, with expenses forecast at $150 million to $153 million.
• Credit remains stable as Finward approval advances: Credit metrics were generally steady despite higher classified assets tied largely to one investor commercial real estate relationship. First Financial expects to close its Finward acquisition on January 1, 2027, pending remaining approvals, though higher interest rates have extended the tangible book value earnback period.

First Financial Bancorp. NASDAQ: FFBC reported record third-quarter earnings and revenue, supported by a higher net interest margin, record fee income and growth in commercial and industrial lending. The company also outlined a fourth-quarter outlook calling for continued loan growth, stable credit costs and moderating expenses.

Adjusted net income totaled $87.8 million, or $0.84 per share, for the third quarter of 2026. Chief Executive Officer Archie Brown said adjusted earnings per share rose 11% from the third quarter of 2025 and represented the highest level in the company’s history. Adjusted return on assets was 1.56%, while adjusted return on tangible common equity was 20.2%.

Third-quarter revenue reached a record $273.9 million. The company’s net interest margin increased nine basis points from the second quarter to 4.07%, as asset yields rose 13 basis points and total deposit costs increased four basis points.

Loan Growth Led by C&I Activity

End-of-period loan balances increased $170 million during the quarter, equivalent to 5% annualized growth. The increase was led by commercial and industrial, Summit and consumer portfolios, offsetting declines in investor commercial real estate, mortgage and Oak Street balances caused by prepayments and payoffs.

Brown said commercial and industrial growth was broad-based across markets and product categories rather than driven by increased line utilization. He cited growth in Chicago, Northeast Ohio and Southwest Ohio, among other markets.

The company expects low- to mid-single-digit annualized loan growth in the fourth quarter. Brown said anticipated strong C&I and Summit growth is expected to be partly offset by payoffs in investor commercial real estate.

Management said investor commercial real estate activity has faced pressure from softer multifamily production, increased competition in industrial lending and property sales. Brown said the company has observed thinner spreads and looser structures among competitors, though First Financial does not plan to loosen its underwriting structures.

Oak Street, which lends to insurance agencies and registered investment advisers, has also experienced higher payoff activity. Brown said some borrowers have sold their businesses, while other relationships have become too large for First Financial to continue financing.

Record Fee Income and Higher Expenses

Adjusted non-interest income reached a record $77.6 million, accounting for 28% of total revenue. Growth from the prior quarter was driven by foreign exchange, wealth management, client derivatives and bank card income. Wealth management and bank card income posted double-digit percentage growth, while the company’s Bannockburn foreign-exchange and Summit businesses also had solid quarters.

Brown said Bannockburn has historically grown at a high-single-digit to roughly 10% annual pace, though its results can develop in a “stair-step” pattern. Leasing income growth has moderated as amortization catches up with production, he said. Chief Financial Officer Jamie Anderson added that lease sales, typically representing about 10% to 15% of production, and end-of-term revenue can create quarterly variability.

Non-interest expenses increased $7.8 million from the second quarter. Anderson attributed the increase primarily to compensation tied to fee income and the company’s operating performance, along with higher credit and collection costs and healthcare expenses.

For the fourth quarter, First Financial expects non-interest expenses of $150 million to $153 million. Anderson said the outlook assumes fee income near the midpoint of management’s guidance and reflects lower credit and collection costs, moderation in healthcare costs and the absence of a third-quarter year-to-date adjustment to companywide incentive costs.

• Fourth-quarter fee income is projected at $75 million to $78 million.
• Foreign-exchange income is expected to be $18 million to $20 million.
• Leasing revenue is expected to be $21 million to $23 million.

Credit Trends Stable Despite Classified-Asset Increase

The allowance for credit losses remained at 1.38% of total loans, unchanged from the second quarter. First Financial recorded $8.9 million of provision expense, primarily reflecting loan growth and net charge-offs. Net charge-offs were 21 basis points on an annualized basis, while nonperforming assets represented 45 basis points of assets.

Classified assets rose to 1.26% of total assets, largely due to the downgrade of a single investor commercial real estate relationship with multiple loans. Brown said the downgrade resulted from problems at another business owned by the borrowers. He said the underlying loans have strong debt-service coverage, low loan-to-value ratios and cross-collateralization.

Chief Credit Officer Bill Harrod said the borrower is a multi-asset real estate investor with separate C&I businesses, and that the C&I business elsewhere drove the bankruptcy. The real estate collateral includes multifamily, retail and office properties. Harrod said market interest in the assets has been encouraging and characterized the issue as isolated rather than systemic, although execution on asset sales remains ahead.

Capital, Margin Outlook and Finward Transaction

Regulatory capital ratios increased from the second quarter and remained above internal and regulatory targets. However, higher long-term interest rates reduced the market value of the investment portfolio, resulting in a decline in accumulated other comprehensive income. Tangible book value per share fell 6% from the prior quarter to $15.65, while the tangible common equity ratio declined 43 basis points to 7.81%. Excluding the impact of accumulated other comprehensive income, the ratio would have been 9.65%, Anderson said.

The company expects fourth-quarter net interest margin of 4.08% to 4.12%, assuming a December rate increase. Anderson said approximately 60% of the loan portfolio is tied to short-term SOFR rates and would reprice within 15 to 30 days. Deposit costs would likely catch up over one to two quarters, reducing an initial estimated 7-to-8-basis-point margin benefit from a rate increase to roughly 3 to 4 basis points over time.

First Financial expects low-single-digit core deposit growth in the fourth quarter. Management said it remains comfortable with its loan-to-deposit ratio, which was in the high 70% range, and sees flexibility to manage deposit competition through securities balances or deposit pricing.

Brown also said First Financial has received regulatory approval for its acquisition of Finward and expects to close the transaction on Jan. 1, 2027, subject to state regulatory and Finward shareholder approvals. Anderson said higher rates have increased upfront tangible book value dilution in the transaction, but are also expected to produce additional accretion income; the tangible book value earnback period was estimated to extend to about 0.9 years from roughly 0.6 years at announcement.

About First Financial Bancorp. (NASDAQ:FFBC)

First Financial Bancorp. is a bank holding company headquartered in Cincinnati, Ohio. Through its principal subsidiary, First Financial Bank, the company provides banking and financial services to businesses, individuals and organizations.

First Financial Bank offers commercial and consumer lending, deposit accounts, treasury management, cash management and other traditional banking products. Its services also include wealth management, investment services and mortgage-related solutions, helping customers manage borrowing, deposits, payments and longer-term financial needs.

The company serves communities primarily in Ohio, Indiana and Kentucky through a network of banking offices and digital banking channels.

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