Thank you for standing by and welcome to the First Financial Bancorp Second Quarter 2025 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Scott Crawley. You may begin.

Good morning. Thank you, Rob. Good morning, everybody, and thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, we issued yesterday, and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations We'll make reference to the slides contained in the accompanying presentation during today's Additionally, please refer to the forward-looking statement disclosure contained in the second quarter 2025 earnings release, as well as our SEC filings, and we will not be updating any forward-looking statements or reflect facts.

Thank you, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our financial results for the second quarter, and I'm thrilled with our performance this quarter. We achieved record revenue of $226.3 million, which represents a 5% increase over the same quarter one year ago and drove adjusted earnings per share of 74 cents a return on assets of 1.54 percent and a return on tangible common equity of 20 percent the company's industry leading profitability was once again driven by a robust net interest margin loan growth was two percent on an annualized basis and we were pleased with broad-based growth in most portfolios apart from commercial real estate, which declined due to higher payoffs. Q3 scheduled maturities in the IC portfolio are lower, and we expect higher overall loan growth in the second half of this year. We recorded adjusted non-interest income of $67.8 million in the second quarter, which was an 11% increase over the linked quarter and a 10% increase over the second quarter of 2024. for growth in fees was broad based with mortgage bank card leasing business and foreign exchange income all increasing by double digit percentages over the linked quarter we were also pleased with our expense management with adjusted non-interest expenses increasing one percent compared to the first quarter excluding leasing business expenses which continue to increase as our operating lease portfolio grows adjusted non-interest expenses increased by less than two percent on a year over year basis. Asset quality was stable for the quarter. Net charge-offs declined 15 basis points from the first quarter to 21 basis points of total loans, and classified asset balances were relatively flat. Our outlook for asset quality remains positive, and we expect net charge-offs to be in the 20 to 25 basis points range for the remainder of this year. We're pleased with the strength of our capital levels. Regulatory ratios are very strong, and tangible common equity has continue to grow increasing 16 percent over last year to 8.4 percent as we look value per share increased to $15.40 which was a 4 percent increase from the linked quarter and a 19 percent over the same period by 19 percent increase of the same period last year we're also pleased to announce that our board of directors approved a 1 cent or 4.2 percent increase in the common dividend to 25 cents remains approximately 35 percent of net income and continues to provide an attractive yield with that i'll now turn the color to jamie to discuss these results in greater detail

after jamie's discussion i'll wrap up with some additional forward-looking commentary and closing remarks thank you archie good morning everyone slides four five and six provide a summary summary of our most recent financial results the second quarter results were excellent and included strong strong earnings, record revenues driven by a robust net interest margin, solid loan and deposit growth, and declining net charge-offs. Our net interest margin remains very strong at 4.05%, which represented a 17 basis point increase from the first quarter, which is driven by a 13 basis point decrease in deposit costs, while asset yields increased by modestly during the quarter as growth in C&I, consumer, and our specialty businesses offset elevated prepayments in the ICRE portfolio. Average deposit balances increased $114 million due primarily to a seasonal influx in public funds and non-interest-sparing accounts and remained focused on growing lower-cost income with solid in mortgage and bank card income. Additionally, our leasing and foreign exchange non-interest and incentive compensation, which is tied to the company's overall performance in the coming periods. slightly during the quarter to 1.34% of total loans during the period, which was driven by net charge-offs and loan growth. Quality trends were stable. Net charge-offs declined 42% to 21 basis points on an annualized basis, while NPAs as a percentage of assets increased slightly during the period. Classified asset balances relatively unchanged during the period at 1.15% of total standpoint. point, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.60 to $15.40, while our tangible common equity ratio increased 24 basis points to 8.4%. Additionally, our board of directors elected to increase our common dividend during the period. Increasing the common dividend is further proof of our commitment to deliver value to our shareholders and sells our gap earnings to adjusted earnings highlighting items that we believe are important to understanding our quarterly performance adjusted net income was 70.6 million dollars or 74 cents per share for the quarter non-interest income was adjusted for gains on the sales of security of investment securities adjustments exclude the impact of access and other expenses these adjusted earnings equate to a return on average assets four percent and a return on average tangible common equity, a pre-tax pre-provision ROA of 2.14%. 9 and 10, net interest margin increased 17 basis points from the linked quarter to 4.05%. Asset yields increased 5 basis points compared to the prior quarter, as loan yields increased 3 basis points and the yield on the investment portfolio increased Decline 12 basis points, driven by a 13 basis point decrease in deposit costs compared to the length quarter. Slide 12 illustrates our current loan mix and balance changes compared to the length quarter. Loan balances increased 2% on an annualized basis, with growth in C&I, consumer, and specialty businesses outpacing a decline in ICRE, driven by elevated prepayment activities, as well as a progression of average deposits from the length quarter. $18 million. And we had solid growth in retail CDs to help to offset declines in money market and interest-bearing demand accounts. $18 billion. 7% of our total deposits. We remain comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event. It provides our non-interest income for the course. It's fee income with $68 million, with leasing, mortgage, and interchange having strong growth quarters. Non-interest expense for the quarter is outlined on slide 17. Core expenses increased $1 million during the period. The efficiency initiative is positively impacting our results, and we expect this work to continue in the back half of 2025. 19, funded reserves of $176 million and $9.8 million of total provision expense during the period. We resulted in an ACL that was 1.34% of total loans, which was a slight increase from the first quarter, primarily driven by loan growth and net charge-offs, which were 21 basis points. Trends were stable, with a 42% reduction in net charge-off, totaling 1.15%. And we continue to believe we have modeled conservatively our portfolio, which will remain flat or increase slightly in future periods, as our model responds to changes in the macroeconomic environment. Finally, as shown on slides 20 and 21, capital ratios remain in excess of regulatory minimums and internal target ratio increased 24 basis points to 8.4%, and our tangible book value per share increased 4% to $15.46. The return remains strong, with 33% of our earnings returned to our shareholders during the period through the common dividend.

As I mentioned earlier, we were very pleased that the Board elected to illustrating our commitment to provide an attractive I'll now turn it back or looking guidance for the third quarter which can be found on slide 22 while pipelines remain strong over the second half of the year we expect easing payoff pressures combined with higher production to accelerate our growth specific to the third quarter we expect long growth to be in the low to mid single digits on an annualized basis core deposit balances are expected to be stable over the next quarter excluding margin remains very strong and industry leading and we expect it to be in a range between 4% and 4.05% over the next quarter, assuming a 25 basis point rate cut in September. Prior quarter levels and charge-offs to be in the 20 to 25 basis point range for the third quarter, while ACL coverage as a percentage of loans is expected to be stable to slightly increasing. State fee income to be between $67 and $69 million, $16 million for foreign exchange, and $19 to $21 million for leasing business revenue. non-interest expense is expected to be between 128 and 130 million dollars and reflect our continued focus on expense management about a recent announcement to acquire westfield bank in northeast ohio and are actively engaged in the integration process locations have been filed with our regulators and we continue to expect approval and closing to occur this year in summary we're very pleased with our second quarter and year-to-date financial performance

and we remain very excited about our outlook for the remainder of 2025 and beyond we'll now open up the call for questions thank you we will now begin the question and answer session if you would like to ask a question please press star one on your telephone keypad to raise your hand and join the queue if you would like to withdraw your question simply press star one again your first question comes from the line of daniel tamayo from raymond james your line is open thank you Good morning, guys.

Maybe we start just on the margin, but specifically on the funding side. So the second quarter, you showed a good ability to continue to lower deposit costs. Even non-maturity deposit costs came down pretty meaningfully. So just curious kind of how you see that continuing to play out here as we go forward and where maybe you would see a bottom in terms of funding costs absent any kind of rate cuts.

Yeah, I think, Danny, it's Jamie. I think we're pretty – we see down a little bit more than – in terms of lowering deposit costs in the last few basis points. So I think you'll see that 12 or 13 basis points drop in our deposit costs maybe a little bit more than the peer group, and that's that last – You know, when we look out here in the third quarter, included in that margin outlook, you know, in that 4 to 4.05 range is about a two to three point drop in the deposit cost.

Okay. So given that and then the fact that your asset yields are already pretty strong, the loan yields up towards pushing towards seven, you know, is it fair to say you think that the 4 to 4.05 will be a peak for you guys? and then maybe bounce around that level, again, you know, kind of before we consider what happens with rate cuts?

That's right, yeah. Again, when we look out and kind of start bleeding in the rate cuts into our model, you know, we can use the margin negatively, but those kind of quarterly 25 basis points rate cuts impact the margin by about 5%.

Okay. All right, helpful. And then just to clean up a question on the deposit outflows, the seasonal deposit outflows that you referenced that the guidance excludes, what would you expect those to be in the third quarter?

Yeah, on average, they're about $100 million. So we get a little – we get a pop in the second quarter, and these relate to Indiana property taxes at our public funds. so those come in in May and November and primary and May is kind of the big a bigger pop is some people pay the full year so we will with 50 basis for a million dollar and kind of mid okay great very helpful all right I'll step

back thanks for all the color your next question comes from a line of Terry McEvoy from Stevens Inc your line is open all right good morning guys Hey, Terry.

Archie, in the prepared remarks, you talked about the ongoing efficiency initiative producing results, and you can see that in the overall efficiency ratio. Can you just dig a little bit deeper and talk about kind of where across the company or within the bank you're really focused on cutting costs and driving that operating leverage?

Yeah, Terry, we've been at this more than a year now. and associates and understanding that they're using. In some cases, it's technology. In some cases, it's just some process redesign. So I would say we're probably 80% of the way through the company at this point in terms of the reviews that we've done and the work that we've done. And then there's probably 20% to go over the next several quarters. There's some technology in a couple of these areas we're implementing in the back half of this year. And then we'll probably do some final work as we get into early 2026. And then from there, I think we view, you know, the recently announced acquisition will also provide some additional help in terms of efficiency as we go deeper into 2026.

Thanks. And then as a follow-up, you just talked about the impact the payoffs are having on loan growth. I'm trying to get a sense of more normalized loan growth. I know it's low to mid-single digits over the near term, but that includes payoffs, which are subsiding. So kind of ex-payoffs, what's that underlying growth?

Terry, if you just said, if you had a norm to think about for us, the way we think about this is thinking how we have seen, as we've talked about, level of payoffs. What we're seeing for Q3 is scheduled maturities are lower, a little bit higher level of production coming for the quarter. commercial real estate in Q3 will probably, it probably won't grow. We're not forecasting that particular part of the book to grow in Q3, maybe slightly down, but it'll be a lot better than what we've seen in the last couple of quarters. And what that will allow is the other areas that are, their growth will be more reflected and show through the overall company. So that's why we're taking it up a little bit in Q3, but longer term, six to seven percent is how I think about it.

Thanks for taking my questions.

Your next question comes from a line of David Conrad from KBW. Your line is open.

Yeah, hey, good morning. Just a real quick question on asset quality. It's been really solid, and admittedly it's off of really low levels, but we did see a little bit of a growth there in C&I in terms of the nonaccruals. So any color on that growth rate there would be great.

Yeah, David, Bill will cover that a little bit here. Yeah, absolutely. So our quarter-over-quarter increase.

Great.

Okay, thank you. And then, Jamie, I appreciate the asset sensitivity color, and I know Westfield's not a big asset change for you, but I just wondered if your asset sensitivity would change a little bit next year as you integrate that balance sheet.

Yeah. First of all, welcome to the current debut one here. hoping you're all right. Thank you. Yeah, but again, obviously.

Great. Perfect. Thank you.

Thanks.

Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from a line of Carl Shepard from RBC Capital Markets. Your line is open.

Hey, good morning, guys.

Morning, Carl.

Just to start on loan growth real quick, I appreciate the comments on CRE trends. Are you guys signaling a consistent pace of growth in the other businesses, or do you think that there's, I guess, opportunity for a little acceleration there in the second half as well?

Yeah, this is Jamie, Carl. Yeah, so on the CRE side, in terms of the payoffs and some level of maturities, but really in the other business line, those business lines got, you know, you blend it all together, you know, around

20% of the half of the year summit, so they'll ramp up more in the back half.

Perfect. I love slide 12. And then one quick one on the margin, methodical cuts you guys could manage through. Can you just remind us a little bit of lead, leading impact to asset yields, though, and then the deposits? maybe catch up a half quarter later is that is that fair so just thinking about the timing of cuts and how that yeah one quarter you know we will see start to move down you know maybe starting and then and then you're right i mean we try to get in front of the deposit costs as much as we

can the loan side is and it's more you know market competition we tend you know given the fact that our margin is so high, we tend to lag the deposit side of liquidity and not bring them down.

Okay. Makes a ton of sense. Thanks so much.

And we have reached the end of our question and answer session. I will now turn the call back over to Archie Brown for some final closing remarks.

Thank you, Robin. I want to thank you for joining us on today's call and tracking with us on our really great second quarter. We look forward to talking to you again next quarter have a great day and weekend bye now this concludes today's conference call thank you for your participation