First Financial Bancorp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023 unless stated otherwise. First Financial is an Ohio-based bank holding company serving Ohio, Indiana, Kentucky and Illinois, with specialty lending activities extending nationally. Results are unaudited.
Financial performance
| Metric | Q1 2024 | Comparable period / change |
|---|---|---|
| Net interest income | $148.7 million | Down 6.6% year over year; down 3.3% from Q4 2023 |
| Net interest margin, fully tax-equivalent | 4.10% | 4.55% in Q1 2023; 4.26% in Q4 2023 |
| Noninterest income | $46.5 million | Down 16.3% year over year |
| Noninterest expense | $122.4 million | Up 4.9% year over year |
| Net income | $50.7 million | $70.4 million in Q1 2023; down 28.0% |
| Diluted earnings per share | $0.53 | $0.74 in Q1 2023 |
| Operating cash flow | $31.9 million provided | $172.2 million provided in Q1 2023 |
Net interest income after provision for credit losses was $137.6 million, compared with $148.8 million a year earlier. Income before tax was $61.7 million; income tax expense was $11.0 million and the effective tax rate was 17.9% (19.7% in Q1 2023). Return on average assets was 1.18%, versus 1.69%; return on average equity was 9.00%, versus 13.71%.
Balance sheet, funding and capital
- Total assets were $17.60 billion; loans and leases were $11.21 billion, up 2.5% from year-end. Deposits were $13.46 billion, up 0.7%. Shareholders’ equity was $2.29 billion.
- Cash and due from banks was $199.4 million and interest-bearing deposits with other banks were $751.3 million. Management reported $5.2 billion of unused available overnight wholesale funding sources. It also cited $1.4 billion of unpledged available-for-sale securities and $554.0 million of expected investment-portfolio cash flows over the next 12 months.
- Total borrowed funds were $1.21 billion, including $862.1 million of short-term borrowings and $343.2 million of long-term debt. FHLB short-term borrowings were $700.0 million, down from $800.0 million at year-end.
- Uninsured deposits were $5.5 billion, or 40.5% of deposits; adjusted uninsured deposits, excluding public funds and intercompany accounts, were $3.2 billion, or 24.0%.
- Consolidated regulatory ratios included 11.67% common equity Tier 1, 12.00% Tier 1, 14.31% total capital and 9.75% leverage. The company said it remained well-capitalized and met applicable requirements. Tangible common equity was 7.23% of tangible assets.
Material changes and notable items
- Deposit pricing pressure reduced margin: year over year, deposit interest expense rose to $76.1 million from $31.5 million, while net interest income fell despite higher loan yields and asset growth. Management attributed the linked-quarter margin decline to deposit costs rising faster than interest income.
- Noninterest income declined mainly because foreign-exchange income fell to $10.4 million from $16.9 million and the company recorded a $5.3 million net loss on investment-security sales. The security sales included a strategic repositioning of approximately $228.8 million of the portfolio: management reported a $5.2 million loss and estimated a 278-basis-point yield improvement with an approximately one-year earn-back. The company also sold its remaining Class B Visa shares.
- The allowance for loan and lease losses was $144.3 million, or 1.29% of loans, compared with $141.4 million at year-end. Q1 provision expense for loans and leases was $13.4 million. Net charge-offs were $10.6 million, or 0.38% of average loans and leases on an annualized basis.
- Nonaccrual loans decreased to $59.2 million from $65.8 million at year-end; nonperforming assets were $59.4 million, or 0.34% of assets. Classified assets rose to $162.3 million from $141.0 million, primarily following downgrades of one CRE and one C&I relationship.
- On February 29, 2024, First Financial acquired Agile Premium Finance for $96.9 million in cash. The acquisition added $93.4 million of commercial loans and $1.8 million of goodwill; purchase accounting remains preliminary.
- Cash dividends declared were $0.23 per share. No shares were repurchased in Q1 under the plan authorizing up to 5 million shares through December 2025.
Outlook, risks and contingencies
The filing provides no specific earnings or revenue guidance. Management expects the securities portfolio repositioning to improve yield, but its results depend on the estimated earn-back. The company described its interest-rate position as asset-sensitive: modeled immediate parallel rate changes of +100 and +200 basis points indicated Year 1 net interest income increases of 3.40% and 5.21%, respectively; a 100-basis-point decline indicated a 5.98% decrease. These are model estimates and depend on assumptions, including deposit repricing and migration to certificates of deposit.
- Key stated risks include deposit competition and funding costs, interest-rate changes, credit deterioration, liquidity and market conditions, CRE exposures, operational and cyber events, regulation, and acquisition integration and realization of expected benefits.
- Non-owner-occupied office loans were $439.4 million, 3.9% of total loans; 83.8% were pass-rated, and two relationships totaling $17.4 million were on nonaccrual. Management noted the portfolio’s collateral and sponsor-recourse characteristics while continuing to monitor the sector.
- Credit commitments totaled $4.4 billion and letters of credit $37.0 million. The reserve for unfunded commitments was $16.2 million. These commitments may create future funding and credit exposure.
- The company reported ordinary-course litigation but said losses were not probable or reasonably estimable; no litigation reserves were recorded. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether deposit costs stabilize and net interest margin holds up as deposits shift toward higher-cost savings and time accounts.
- Whether loan growth, criticized/classified assets, CRE and office performance, and net charge-offs support the current allowance.
- Whether the securities repositioning achieves the stated yield increase and approximately one-year earn-back, and how unrealized portfolio losses evolve.
- Whether liquidity and funding remain resilient, particularly given uninsured deposits, wholesale borrowing use, and substantial credit commitments.
- How Agile performs and whether preliminary purchase accounting or integration affects subsequent results.