FIRST FINANCIAL BANCORP annual report, FY2021

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First Financial Bancorp. — 2021 Form 10-K

Reporting period: Fiscal year ended December 31, 2021. First Financial Bancorp. is an Ohio-based regional bank holding company operating principally through First Financial Bank, with banking markets in Ohio, Indiana, Kentucky and Illinois and specialty finance businesses serving customers nationally.

Financial performance and condition

  • Revenue, net income, EPS, cash flow and margins: The supplied filing text does not provide clear values. The 10-K incorporates the financial statements and management discussion from the 2021 Annual Report to Shareholders, which are not included in the supplied text.
  • Credit provision: The company reversed $19.0 million of prior provision expense in 2021 as credit conditions related to COVID-19 were less severe than previously anticipated. Management cautioned that future pandemic developments could require additional provision expense.
  • Debt and liquidity: Company indebtedness was $706.0 million at year-end. The Bank had $166.2 million available to pay dividends to the parent without prior regulatory approval. These figures do not, on their own, establish overall liquidity or debt-service capacity.
  • Capital: The Bank met the regulatory capital ratios required to be deemed “well-capitalized” at December 31, 2021; specific reported ratios are not provided in the supplied text.
  • Other scale metrics: The company reported $3.4 billion of assets under management, 139 full-service banking centers and approximately 2,010 full-time employees.

Material changes versus the prior comparable period

  • COVID-19 relief-related payment deferrals declined to $16.5 million of loans at year-end 2021 from $320.2 million a year earlier. Outstanding PPP loans fell to $55.6 million, net of $2.6 million of unearned fees, from $594.6 million, net of $13.7 million.
  • In December 2021, First Financial acquired Summit Funding Group, an equipment-financing company, for approximately $127.1 million in aggregate consideration: $113.5 million cash, $10.0 million of First Financial common stock and a $3.6 million earn-out. Summit represented 1.5% of consolidated assets at year-end; its controls were excluded from the year-end controls evaluation because of acquisition timing.
  • The company terminated its 2020 share repurchase plan in December 2021, replacing it with a new plan effective January 1, 2022. It repurchased no shares under the 2020 plan in the fourth quarter.

Outlook, risks and unusual items

  • No specific earnings, revenue or balance-sheet guidance is provided in the supplied text. Management said COVID-19 effects continued in 2021, including supply-chain disruption, workforce constraints and higher wage pressure.
  • Key disclosed risks include economic deterioration and credit losses; exposure to commercial real estate, residential real estate, franchise and hospitality lending; interest-rate and securities valuation changes; deposit competition and funding costs; and the uncertain transition from LIBOR to replacement rates.
  • The company also highlights cybersecurity, operational and third-party service-provider risks; regulatory and compliance obligations; acquisition integration and execution; and possible goodwill impairment if market capitalization declines significantly or persistently.
  • At year-end, identified COVID-sensitive loan exposures included $795.9 million in retail investment commercial real estate, $896.1 million in residential real estate, $319.9 million in franchise lending and $326.5 million in hospitality lending.
  • Management considered pending litigation damages and related amounts unlikely to be material to consolidated financial position or results of operations, while noting ultimate liability could not be determined for certain matters. Disclosure controls and procedures were reported effective; no material fourth-quarter changes to internal control over financial reporting were reported.

Most important facts for investors to verify

  1. Review the incorporated 2021 Annual Report for complete income statements, balance sheets, cash flows, net interest margin, asset quality, capital ratios and year-over-year comparisons.
  2. Assess the adequacy and assumptions behind the allowance for credit losses, including the listed commercial real estate, residential, franchise and hospitality exposures.
  3. Examine Summit’s purchase accounting, integration progress, earn-out terms and expected contribution to earnings.
  4. Review debt maturities, funding sources, liquidity measures and dividend capacity, including restrictions on upstream dividends from the Bank.
  5. Track remaining PPP balances, borrower deferrals, LIBOR contract remediation and the effects of interest-rate changes on earnings and securities values.