First Financial Bancorp. · NASDAQ:FFBC
First Financial Bancorp — Q3 2020 Earnings Presentation
45 slides from First Financial Bancorp's earnings presentation, Nov 9, 2020
Slide 1: Investor Presentation Third Quarter 2020
Investor Presentation Third Quarter 2020
Slide 2: Forward Looking Statement Disclosure
Forward Looking Statement Disclosure 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,” “expe
Slide 3: Forward Looking Statement Disclosure
Forward Looking Statement Disclosure • 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; •
Slide 4: Presentation Contents
Presentation Contents About First Financial Bancorp Financial Performance Appendix 4
Slide 5: Our Franchise
Our Franchise $15.9B NASDAQ: FFBC in assets Headquarters: Cincinnati, Ohio $10.2B/$11.6B Founded: 1863 loans / deposits Banking Centers: 143 Employees: 2,065 $4.3B wealth management Market Cap (9/30/20): $1.2B Dividend Yield (9/30/20): 7.7% 1.67% TCE Ratio: 8.25% Adj. PTPP ROAA(1) Lines of Business
Slide 6: Key Investment Highlights
Key Investment Highlights Proven & sustainable business model spanning 150+ years • Well managed through past credit cycles • Conservative operating philosophy • Consistent profitability – 120 consecutive quarters Premier Midwest franchise with top quartile performance High quality balance sheet & r
Slide 7: Complementary Market Centric Strategies
Complementary Market Centric Strategies Loans $3.1B / Deposits $1.9B Loans $1.8B / Deposits $4.7B Loans $3.0B / Deposits $3.8B Loans $1.1B 7 Note: Loan and deposit balances exclude special assets, loan marks, other out of market and corporately held balances.
Slide 8: Diversified Lines of Business
Diversified Lines of Business 8
Slide 9: Revenue Growth Strategies
Revenue Growth Strategies LOB | Go-to-Market Distribution Technology Talent Product & Pricing Defined Models Enterprise Data Management Staffing Model • Regional pricing strategy • Community • Investment in data warehouse • Defined new company FTE targets • Treasury Management product • Metro • Enablin
Slide 10: Digital + Technology Investments
Digital + Technology Investments “ Enabling a simple, consistent & seamless customer experience across digital & physical channels & making it easier for associates to provide best- in-class customer service. 10
Slide 11: Digital + Technology Investments
Digital + Technology Investments 2020 expenses include $6 – 7 million of strategic technology investments Continued investment in foundational data enablement + automation capabilities Enterprise Digital Solutions formed, led by Digital consumer deposit Consumer digital Digital consumer new Chief Di
Slide 12: Presentation Contents
Presentation Contents About First Financial Bancorp Financial Performance Appendix 12
Slide 13: 3Q 2020 Results
3Q 2020 Results 120th Consecutive Quarter of Profitability Net income = $41.5 million or $0.42 per diluted share. Adjusted1 net income = $43.2 million or $0.44 per diluted share 2 Return on average assets = 1.04%. Adjusted1 return on average assets = 1.09% Profitability Return on average shareholder
Slide 14: 3Q 2020 Highlights
3Q 2020 Highlights Quarterly earnings impacted by elevated provision expense Adjusted1 earnings per share - $0.44 Adjusted1 return on assets – 1.09% Adjusted1 pre-tax, pre-provision return on assets – 1.67% Adjusted1 return on average tangible common equity – 14.18% Loan balances relatively flat; st
Slide 15: Adjusted Net Income
Adjusted Net Income1 The table below lists certain adjustments that the Company believes are significant to understanding its quarterly performance. 3Q 2020 2Q 2020 As Reported Adjusted As Reported Adjusted Net interest income $ 112,180 $ 112,180 $ 111,576 $ 111,576 Provision for credit losses-loans
Slide 16: Profitability
Profitability Diluted EPS Return on Average Assets 1.54% $0.56 1.41% $0.52 $0.44 $0.40 1.09% 1.00% $0.31 0.85% $0.51 $0.49 1.41% 1.34% $0.38 $0.42 $0.29 0.96% 1.04% 0.79% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 1 1 Diluted EPS Adjusted EPS ROA Adjusted ROA Return on Avg Tangible Common Equ
Slide 17: Net Interest Income & Margin
Net Interest Income & Margin Net Interest Margin (FTE) Net Interest Income 3.96% 3.89% 3.77% 0.21% 0.21% 0.15% 0.16% 0.14% 0.10% 3.44% $121.5 3.36% $118.9 0.17% $6.8 $114.3 0.16% $6.7 $111.6 $112.2 0.18% $4.6 $4.9 0.23% $4.5 $3.1 $4.5 $6.2 $5.8 $5.4 3.60% 3.54% 3.51% $3.3 $3.8 3.09% 2.97% 3Q19 4Q19
Slide 18: Diverse and Growing Fee Revenues
Diverse and Growing Fee Revenues Noninterest Income 3Q20 Highlights Total fee income 30.6% of net revenue Total $49.5 million $18.6 million of gains from sales of Other $3,837 loans; a $1.9 million, or 11.6%, increase 8% Service Charges $7,356 from 2Q20 15% $10.5 million of foreign exchange Wealth M
Slide 19: Well Managed Expenses
Well Managed Expenses Noninterest Expense 3Q20 Highlights Includes $0.1 million of COVID-19 Intangible amortization Total $97.5 million related expenses $2,779 3% Professional Other $2.1 million related to other non- services $2,443 $12,420 13% recurring expenses such as merger 3% related and branch
Slide 20: Average Balance Sheet
Average Balance Sheet Average Loans Average Deposits 5.58% 5.33% 0.80% 0.74% 5.04% 0.64% 4.25% 0.40% 4.00% 0.27% $10,002 $10,253 $9,014 $9,149 $9,221 $11,731 $11,563 $10,018 $10,222 $10,234 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Gross Loans Loan Yield (Gross) 1 Total Deposits Cost of Depo
Slide 21: Attractive Deposit Portfolio
Attractive Deposit Portfolio Deposit Product Mix (Avg) 3Q20 Average Deposit Progression Total $11.6 billion Interest-bearing demand $89.3 Public Funds Interest-bearing Noninterest-bearing $179.1 $1,667 demand 14% $1,611 14% Brokered CDs Savings $62.0 $683 6% Money Markets $87.0 Retail CDs $1,234 Non
Slide 22: Loan Portfolio
Loan Portfolio Loan LOB Mix (EOP) Net Loan Change-LOB (Linked Quarter) Total $10.2 Billion Franchise ICRE $88.0 $452 4% Commercial -$0.7 Oak Street Mortgage $609 $1,100 6% Small Business Banking -$27.6 11% PPP1 Consumer $886 Other Consumer -$1.6 $846 9% $74 8% 1% Mortgage -$7.8 Small Business Oak St
Slide 23: Loan Concentrations
Loan Concentrations C&I Loans by Industry 1 CRE Loans by Collateral 2 C&I Loans: $4.4B CRE Loans: $3.9B Strip Center Accommodation 6% Office & Food Services 14% 13% Manufacturing Real Estate Hotel/Motel 14% 10% 11% Nursing/Assisted Living 5% Health Care Retail 7% 17% Residential, 1-4 Finance & Famil
Slide 24: Loan Portfolio - Areas of Focus
Loan Portfolio - Areas of Focus Loans (EOP) Areas of Focus Total $10.2 Billion Franchise Asset classes with areas of focus $452 5% Hotels PPP: $910 million in balances or 9% $431 4% of total loans Retail ICRE $831 Franchise: $452 million in balances, All other loans 8% or 5% of total loans $7,577 74
Slide 25: Area of Focus – Paycheck Protection Program
Area of Focus – Paycheck Protection Program $910 million, or 9% of the total PPP Portfolio by Division portfolio; $24.2 million of unearned fees as of September 30 Total $910.3 Commercial Finance Forgiveness portal opened as of Consumer $64.8 7% 8/31/20 Banking $408.9 ICRE $26 45% 3% As of 9/30/20,
Slide 26: Area of Focus - Franchise Portfolio
Area of Focus - Franchise Portfolio $452 million in balances or 5% of Top 10 Concepts total loans $100 25.0% 89% of portfolio was pass rated as $90 $80 20.0% % of Portfolio $70 of 9/30 Balances $60 15.0% $50 $40 10.0% $91 million has moved into a Round $30 $20 5.0% 2 deferral with 81% paying interes
Slide 27: Area of Focus - Hotel Portfolio
Area of Focus - Hotel Portfolio $431 million balance represents 4% of Hotels by Flag the total loan portfolio $68 16% $326 million has moved into a Round 2 $32 deferral with 74% receiving full P&I relief $157 7% 93% of portfolio was pass rated as of 36% $41 10% 9/30 The overall health of the hotel p
Slide 28: Area of Focus - ICRE Retail
Area of Focus - ICRE Retail State $831 million, or 8% of the total portfolio $300 96% or $481 million of deferral $250 balances have returned to a $200 normal payment schedule $150 $100 67% of the overall Retail $50 portfolio is located within $0 footprint OH IN KY NY SC NC NE IL MD WV 2019 data (pr
Slide 29: Round 1 Deferrals
Round 1 Deferrals $2.2 billion of loans received an Round 1 Deferrals by loan type initial deferral Total $2.2 Billion Round 1 deferrals universally C&I Mortga ge $102 granted $826 5% 37% Approximately 20% of entire loan Cons umer portfolio received an initial deferral $29 1% $1.3 billion, or 57%, o
Slide 30: Round 2 Deferrals
Round 2 Deferrals Round 2 Deferrals $2.1 billion, or 96%, of the $2.2 billion deferral portfolio has exited Total $631.2 Million Round 1 Mortga ge C&I $ 12,511 $1.5 billion, or 70%, has returned to a $ 183,842 2% 29% normal payment schedule Cons umer $ 1,547 $631 million, or 6.2% of total loans, 0%
Slide 31: Areas of Focus - Round 1 Deferrals
Areas of Focus - Round 1 Deferrals Franchise Round 1 Deferrals $284 million, or 63%, of total franchise portfolio, Total $2.2 Billion secured a Round 1 deferral Other $177 million, or 66%, of $1,052 expired Round 1 deferrals 47% have returned to a normal payment schedule Fra nchise $284 13% Hotel Re
Slide 32: Areas of Focus - Round 2 Deferrals
Areas of Focus - Round 2 Deferrals Franchise Continued stress in sit-down concepts Round 2 Deferrals 81% of second deferrals making interest only Total $631.2 Million payments Other Hotel $173 Slowly improving occupancy rates (25-45%) Fra nchise 28% 93% of initial deferrals have been granted a secon
Slide 33: Asset Quality
Asset Quality Classified Assets / Total Assets Nonperforming Assets / Total Assets 0.92% 0.83% 0.79% 0.84% 0.56% 0.55% 0.42% 0.48% 0.49% 0.62% $134.0 $132.5 $125.5 $124.5 $87.3 $80.8 $78.1 $72.2 $89.3 $61.6 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Classified Assets Classified Assets / Total
Slide 34: Current Expected Credit Losses - Loans and Leases
Current Expected Credit Losses - Loans and Leases ACL/Total Loans 3Q20 Highlights $168.5 million, or 1.65% of loan balances; 1.81% 1.55% 1.56% 1.65% excluding PPP 1.29% $168.5 $158.7 $15.3 million provision expense driven by expected $143.9 economic impact of COVID-19, partially offset by $119.2 0.6
Slide 35: Investment Portfolio and Liquidity
Investment Portfolio and Liquidity Investment Portfolio Composition Liquidity Sources Non-Agency pass-through securities Total: $3.2B Corporate securities 3% Duration: ~3.0 Yrs In addition to deposits, First Financial has 3% approximately $6.0 billion of readily available Regulatory stock funding so
Slide 36: Solid Capital Base
Solid Capital Base Tier 1 Common Equity Ratio Tier 1 Capital Ratio 11.52% 11.27% 11.49% 11.63% 11.30% 11.91% 11.69% 11.66% 11.87% 12.02% 7.00% 8.50% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Tier 1 Common Equity Ratio Basel III minimum Tier 1 Capital Ratio Basel III minimum Total Capital Rat
Slide 37: Capital Strategy
Capital Strategy Tangible Book Value Per Share Strategy & Deployment 7.7% annualized dividend yield $12.42 $12.56 August 2020 stress testing indicates $12.33 $12.26 capital ratios above regulatory minimums in all modeled scenarios $11.82 1 Dividend payout ratio to remain elevated in near-term, but i
Slide 38: Outlook Commentary
Outlook Commentary1 Loan growth expected to be in low single digits, excluding impact of PPP Balance Sheet Deposit balances expected to remain elevated in near-term Expected to be positively impacted by PPP forgiveness Net Interest Margin Under slight pressure given low interest rate environment Cre
Slide 39: Presentation Contents
Presentation Contents About First Financial Bancorp Financial Performance Appendix 39
Slide 40: Appendix: Our Markets
Appendix: Our Markets Greater Cincinnati Indianapolis Loans $3.0 billion Loans $1.2 billion Deposits $3.8 billion Deposits $0.8 billion Deposit Market Share #4 (3.0%) Deposit Market Share #14 (1.4%) Banking Centers 51 Banking Centers 10 Fortune 500 Companies 8 Fortune 500 Companies 2 Columbus, OH Lo
Slide 41: Appendix: Non-GAAP Measures
Appendix: Non-GAAP Measures The Company’s Investor Presentation contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (GAAP). Such non-GAAP financial information should be considered supplemental to, a
Slide 42: Appendix: Non-GAAP to GAAP Reconciliation
Appendix: Non-GAAP to GAAP Reconciliation Net interest income and net interest margin - fully tax equivalent Three months ended Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, 2020 2020 2020 2019 2019 Net interest income $ 112,180 $ 111,576 $ 114,282 $ 118,902 $ 121,535 Tax equivalent adjustment 1,628
Slide 43: Appendix: Non-GAAP to GAAP Reconciliation
Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios Three months ended Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, (Dollars in thousands, except per share data) 2020 2020 2020 2019 2019 Net income (a) $ 41,477 $ 37,393 $ 28,628 $ 48,677 $ 50,856 Average total shareholders' equity 2
Slide 44: Appendix: Non-GAAP to GAAP Reconciliation
Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP measures 3Q20 2Q20 1Q20 4Q19 3Q19 (Dollars in thousands, except per share data) As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted Net interest income (f) $ 112,180 $ 112,180 $ 111,576
Slide 45: First Financial Bank
First Financial Bank First Financial Center 225 East Fifth Street Suite 800 Cincinnati, OH 45202-4248 45
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