First Financial Bancorp Announces Third Quarter 2020 Financial Results

CINCINNATI, Oct. 22, 2020 /PRNewswire/ -- 

• Earnings per diluted share of $0.42; $0.44 on an adjusted(1) basis
• Return on average assets of 1.04%; 1.09% as adjusted(1) 
• Record core fee income driven by $18.6 million of mortgage banking and $10.5 million of foreign exchange income
• Provision for credit losses of $13.4 million; 34% reduction from second quarter

First Financial Bancorp. (Nasdaq: FFBC) ("First Financial" or the "Company") announced financial results for the three and nine months ended September 30, 2020. 

For the three months ended September 30, 2020, the Company reported net income of $41.5 million, or $0.42 per diluted common share.  These results compare to net income of $37.4 million, or $0.38 per diluted common share, for the second quarter of 2020 and $50.9 million, or $0.51 per diluted common share, for the third quarter of 2019.  For the nine months ended September 30,  2020, First Financial had earnings per diluted common share of $1.10 compared to $1.51 for the same period in 2019.

Return on average assets for the third quarter of 2020 was 1.04% while return on average tangible common equity was 13.61%.  These compare to returns on average assets of 0.96% and 1.41%, and returns on average tangible common equity of 12.90% and 16.15%, in the second quarter of 2020 and the third quarter of 2019, respectively.

Third quarter 2020 highlights include:

• After adjustments(1) for certain nonrecurring and certain COVID-19 related items:
• Net income of $0.44 per diluted common share
• 1.09% return on average assets
• 14.18% return on average tangible common equity

• Adjustments(1) to net income include:
• $0.1 million of costs directly related to COVID-19
• $2.1 million of other nonrecurring costs such as merger related and branch consolidation costs

• Strong noninterest income of $49.5 million, an increase of 15.9% from the linked quarter
• Mortgage banking revenue increased $1.9 million, or 11.6%
• Record foreign exchange income of $10.5 million; 60.1% increase from linked quarter
• Service charges on deposits, including overdrafts, increased $1.4 million, or 22.6%

• Noninterest expenses of $97.5 million, or $95.3 million as adjusted(1)
• Includes $7.0 million of incremental incentive compensation expenses directly related to strong operating results and fee income generation
• Includes $0.5 million contribution to First Financial Foundation
• Efficiency ratio of 60.3%; 58.9% as adjusted(1)

• Loan balances were relatively unchanged at $10.2 billion
• Average transactional deposit balances grew $434.5 million compared to the linked quarter; 19.0% on an annualized basis

• Total Allowance for Credit Losses of $183.3 million; Total quarterly provision for credit losses of $13.4 million
• Loans and leases - ACL of $168.5 million, 1.65% of total loans; 1.81% of loans excluding PPP
• Unfunded Commitments - ACL of $14.8 million
• Third quarter provision expense driven by expected economic impact from COVID-19, partially offset by higher prepayment rates

• Net interest margin of 3.36% on a fully tax-equivalent basis(1)
• 8 basis point decline compared to the linked quarter; 19 basis point decline due to loan yields partially offset by 14 basis point impact from reduced funding costs
• 3 basis points of incremental dilution from PPP from the linked quarter
• Impact of decline in short term rates, partially offset by funding cost reductions and higher loan fees

• Strong capital ratios
• Total capital of 15.37%
• Tier 1 common equity of 11.63%
• Tangible common equity of 8.25%; 8.79% excluding PPP loans 
• Tangible book value per share of $12.56; $0.30 increase compared to linked quarter

Archie Brown, President and Chief Executive Officer, remarked, "We are pleased with our strong third quarter operating results while maintaining focus on three important pandemic related priorities: maintaining the health and safety of our associates, assisting our clients and communities and strengthening our Company."

Mr. Brown continued, "Despite continued interest rate headwinds and difficult business conditions, we posted strong earnings as reflected in our adjusted earnings per share of $0.44, adjusted return on assets of 1.09%, and an adjusted efficiency ratio of 58.9%.  Additionally, we were encouraged that credit trends remained relatively stable for the quarter.  Given the backdrop of increasing Covid-19 cases in the Midwest and uncertainty about the timing of vaccines to bring the pandemic under control, we recorded $13.4 million of provision expense in anticipation of credit deterioration in future quarters, leading to an increase in our allowance for credit losses to 1.81% of total loans, excluding PPP."

Mr. Brown further commented, "Third quarter results were primarily driven by exceptional fee income, well exceeding second quarter results, which at the time was our highest core fee income on record.  The steadfast diligence of our mortgage team capitalized on the continued historic low interest rate environment to drive another sensational quarter in mortgage banking revenue, and Bannockburn recorded its highest income quarter ever.  We were also pleased to see service charges improve as local economies continued to gradually reopen and consumer spending increased.  Total expenses increased during the quarter as a direct result of our strong operating performance and fee income generation leading to higher incentive and commission expense."

Mr. Brown concluded, "We are encouraged by our improved operating performance and by the resiliency of our associates.  Six months into a global pandemic, we now have 98% of our banking centers fully open to service the needs of our clients, and associates in our corporate offices and operations centers have begun gradually returning, albeit at significantly reduced capacity levels.  We continue to provide a bridge for our clients to navigate the environment with approximately $630 million, or 6.2% of total loans, receiving a round two deferral and all capital ratios have improved to equal or surpass pre-pandemic levels.  Additionally, this year we have added $125 million to our Allowance for Credit Losses, which brings our total ACL to greater than three times the balance at December 31, 2019.  We remain committed to managing pandemic priorities and positioning the Company for even stronger performance when the health crisis subsides."

Full detail of the Company's third quarter performance is provided in the accompanying financial statements and slide presentation.

Teleconference / Webcast Information First Financial's executive management will host a conference call to discuss the Company's financial and operating results on Friday, October 23, 2020 at 8:30 a.m. Eastern Time.  Members of the public who would like to listen to the conference call should dial (877) 506-6873 (U.S. toll free), (855) 669-9657 (Canada toll free) or +1 (412) 380-2003 (International) (no passcode required).  The number should be dialed five to ten minutes prior to the start of the conference call.  The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company's website at www.bankatfirst.com.  A replay of the conference call will be available beginning one hour after the completion of the live call at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 1048538.  The webcast will be archived on the Investor Relations section of the Company's website for 12 months.

Press Release and Additional Information on Website This press release as well as supplemental information are available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com.

Use of Non-GAAP Financial Measures This earnings release contains GAAP financial measures and Non-GAAP financial measures where management believes it to be helpful in understanding the Company's results of operations or financial position.  Where Non-GAAP financial measures are used, the comparable GAAP financial measures, as well as a reconciliation to the comparable GAAP financial measure, can be found in the section titled "Appendix: Non-GAAP to GAAP Reconciliation" in the accompanying slide presentation.

Forward-Looking Statement

Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as ''believes,'' ''anticipates,'' "likely," "expected," "estimated," ''intends'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Examples of forward-looking statements include, but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements.

As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements.  Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements.  Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation:

• economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business;
• future credit quality and performance, including our expectations regarding future loan losses and our allowance for credit losses
• the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry; (iv) management's ability to effectively execute its business plans;
• mergers and acquisitions, including costs or difficulties related to the integration of acquired companies;
• the possibility that any of the anticipated benefits of the Company's acquisitions will not be realized or will not be realized within the expected time period;
• the effect of changes in accounting policies and practices;
• changes in consumer spending, borrowing and saving and changes in unemployment;
• changes in customers' performance and creditworthiness;
• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
• current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;
• the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 ("COVID-19"), global pandemic, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products;
• our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;
• financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;
• the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;
• the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;
• a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;
• the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; and
• our ability to develop and execute effective business plans and strategies.

Additional factors that may cause our actual results to differ materially from those described in our forward-looking statements can be found in our Form 10-K for the year ended December 31, 2019, as well as our other filings with the SEC, which are available on the SEC website at www.sec.gov. 

All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing.  Except as required by law, the Company does not assume any obligation to update any forward-looking statement.

About First Financial Bancorp. First Financial Bancorp. is a Cincinnati, Ohio based bank holding company.  As of September 30, 2020, the Company had $15.9 billion in assets, $10.2 billion in loans, $11.6 billion in deposits and $2.2 billion in shareholders' equity.  The Company's subsidiary, First Financial Bank, founded in 1863, provides banking and financial services products through its six lines of business: Commercial, Retail Banking, Investment Commercial Real Estate, Mortgage Banking, Commercial Finance and Wealth Management.  These business units provide traditional banking services to business and retail clients.  Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.8 billion in assets under management as of September 30, 2020.  The Company operated 143 full service banking centers as of September 30, 2020, primarily in Ohio, Indiana and Kentucky, while the Commercial Finance business lends into targeted industry verticals on a nationwide basis.  Additional information about the Company, including its products, services and banking locations, is available at www.bankatfirst.com.