Thank you for standing by and welcome to the First Financial Bancorp third 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 one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Scott Crawley. You may begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us on today's conference with Archie Brown, President Jamie Anderson, Chief Financier Today, and the accompanying slide presentation under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today.

Updating any forward-looking statements to reflect $6 million, 76 cents, 18.3%, resulting in an industry-leading net interest margin. In addition, our diverse in total net revenue for the quarter and the record fee income for a sufficiency of approximately 200 or 9% since we began the initiative two years ago. We expect further efficiencies subsequent to the integration of our pending acquisitions. During the quarter, falling lower production in our specialty businesses, along with a greater percentage of construction originations in the fourth quarter, and we expect a return to mid-single-digit loan growth to close out the year. Nets were flat as a business net charge-offs were 18 basis points, which was a slight improvement from the linked quarter. We're very happy that our strong earnings led to continued growth in tangible look value per share and tangible common equity during the quarter, 5% from the linked quarter, and 14% basis points from June 30th to 8.87% at the end of September. We're going to discuss these results in greater detail, and after Jamie is done, I'll wrap up with some additional forward-looking commentary and closing remarks.

Thank you, Archie, and good morning, everyone. Slides 4, 5, and 6 provide a summary of our most recent standing earnings. Our net interest margin remains very strong. Asset yields declined slightly while we managed deposit costs to a modest increase in lending areas to the percentage of the portfolio. Average deposit balances increased $157 million to money markets, offset by a seasonal decline in public funds, interest-bearing accounts, and remain focused on growing lower-cost deposit statements, third-quarter fee income was another record, led by our leasing and foreign exchange businesses. Additionally, we had higher syndication fees due to an increase in incentive compensation, which is tied to fee income. Our efficiency efforts continue to impact our results positively and remain ongoing. It increased slightly during the quarter to 1.38% of total loans. We recorded 9.1 points during the period, which was driven by net charge-offs, and non-performing asset balances remaining flat. Net charge-offs were 18 basis points on an annualized basis, while NPAs and classified assets were both relatively flat for the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.79 to $16.19, while our tangible common equity ratio increased 47 basis points to 8.87%. That tells our gap earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $72.6 million, or $0.76 per share for the quarter. Non-interest income was adjusted for us. Non-interest expense adjustments exclude the impact of acquisition and efficiency credit investment write-downs and other expenses not expected to recur. These adjusted earnings equate to a return on average pre-tax pre-provision ROA of 2.15%. slides nine and ten net interest margin decreased three basis points from the linked quarter to four point zero two percent asset yields declined two basis points from the prior quarter while total funding costs increased one basis points and balance changes compared to the linked quarter loan balances decreased 72 million dollars during the period as you can see on the right the decline was driven by decreases in the oak street icre which outpaced growth in Summit and consumer deposit mix as well as the progress in total average deposit balances increased 157 million dollars during the quarter driven primarily by a 166 million dollar increase in brokered CDs and a 106 million dollar increase in money market account by a seasonal decline in public funds I'm increased to seventy three point six million dollars during the first income increased two point eight million dollars for the higher syndication fees and elevated income on other investments. Non-interest expense was driven by higher incentive compensation related to fee income and the overall strong $180 million and $9.1 million of total provision expense during the period. This resulted in an ACL that was 1.38% of total loans, which was a four basis point increase from the second quarter. Provision expense was primarily driven by net charge-offs, which were 18 basis points for the period. Additionally, our NPAs to total assets held steady at 41 basis points, and classified asset balances totaled 1.18%. We believe that we have modeled our portfolio. We anticipate our ACL coverage will remain relatively flat in future periods as our model responds to changes in the macroeconomic environment. As shown on slides 20 and 21, capital ratios remain in excess of regulatory minimums and internal targets. During the third quarter, tangible book value increased to $16.19, while the TCE ratio increased 47 basis points to 8.87%. Our total shareholder return remains strong, with 33% of our earnings returned to our shareholders during the period through the common dividend. We maintain our commitment to provide an attractive return to our shareholders, and we continue to evaluate capital actions. I'll now turn it back over to Archie for some comments on our outlook.

Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our outlook for the fourth quarter, which can be found on slide. We expect origination volumes to increase, which should accelerate our growth. Specific to the fourth quarter, excluding Westfield, we expect loan growth to be in the mid-single digits on an annualized basis. We expect core deposit balances to increase and combine with seasonal public fund inflows to result in strong deposit growth, 3.92% and 3.97% over the next quarter, assuming a 25 basis point rate cut in both October and December. A bump in margin from the addition of Westfield in early November remains stable. Fee income to be between $77 million and $79 million, which includes $18 million to $20 million for foreign exchange and $21 million to $23 million for the leasing business revenue. The expected impact from Westfield can reflect our continued focus on expense management. This range includes the impact from Westfield, which is expectedly $8 million for the months of November and December. While we remain confident that we realize our modeled cost savings, we expect the majority of those savings to materialize in the middle of 2026 once Westfield has been fully integrated. For our pending acquisitions, we have received formal regulatory approval for the Westfield transaction and anticipate closing in early November. Our initial preparations for the bank financial close are underway, and we are more excited than ever to expand our reach into the Chicago market. We have filed the necessary applications and expect to receive approval from the regulators in coming months, eyeing a close during the first quarter of 2026. We're very excited to have the Westfield and Bank Financial Associates join our team for the first nine months of the year, which resulted in industry-leading profitability in order to close 2025 and build positive momentum as we head into 2026.

Thank you. We'll now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question today comes from the line of Brendan Nozel from Hogue Group. Your line is open.

Hey, good morning, everybody. Hope you're doing well.

Good morning, Brendan.

Maybe just starting off here on a topic that's of interest today, NDFI loan exposure. I think if I look at your reg filings from last quarter, it's a little over 450 million or 4% of loans. I know that it's not huge, but can you just kind of walk us through that book and let us know whether that exposure falls into any of the known commercial verticals that you already have today?

Yeah, Brendan, we'll have Bill Harrod cover that.

All right, great. We've got, as of the end of the quarter, about $434 million in the NDFI portfolio. It's a diversified, conservatively managed, and anchored in high investment grade tier with currently no adversely rated credits. It's made up of traditional REITs of about $304 million across 46 notes, averaging about $7 million. Public traded or privately held into it, we do have a security of $73 million NDFI portfolio.

Awesome, that's a really helpful color. Thanks for having that prep for us. Maybe turning to the net interest margin, totally get the guide for next quarter, no surprise given recent and forthcoming rate cuts. I'm just kind of curious, so if we get those two cuts in the fourth quarter, how should we think about margin early in next year? I think in the past you said that each cut is five to six basis points of near-term pressure before it grinds back up on lag bonding costs. So any color there will be helpful.

Yeah, Brendan, this is Jamie. So, on the margin, and again, so the other thing you got to keep in mind is we have Westfield coming into the mix, so that's going to create a little bit of noise, and it actually helps us going forward here, mitigate a little bit of our asset sensitivity. But if you look at kind of the legacy company and the margin, the way that it reacts to those, and you mentioned it as well, we get about five basis points, those 25 basis point cuts. And, you know, the timing of that, the way that will kind of fold in is that you get, you know, a little bit more pain immediately from the cut. And then as deposit costs catch up, you know, we start to move that back up. And right now, you know, in that four range, if we get those two, then we kind of start the year in that 390-ish, in that 390-ish range. But then when you factor in Westfield, you know, and with the purchase accounting and how that will work, you know, we get a little bit of improvement in the margin from them. So mitigate some of that expected rate cuts. Yep.

Yep. Okay. That makes sense. Thank you for taking my questions.

Your next question comes from a line of Mark Shuteley from KBW. Your line is open.

Hey, guys. Good morning. Morning, Mark. mark um maybe one more on the margin i'm trying to think about um you know on the asset side loan yields were strong and actually picked up in the quarter so i was just curious like what new loan originations are coming on today with you guys sort of returning to growth and um and what you're expecting you know for the total sort of portfolio yield um in the near term yeah mark this starts to the mid sixes um then you look at the month of safety and change so we'd say sort of right now

in that range it may triple drop down a little bit more with some more rate cuts because again a lot of we do is uh is commercial oriented uh you know tied to variable rates yeah and mark i mean like like um we've talked about in uh in previous quarters you know if you again looking at the legacy First Financial Portfolio, Absinthe Loan Book.

Yeah, that makes sense. And then maybe just on the growth. So, you know, you mentioned pipelines are strong, and I was just curious, like, what specific verticals or markets you expect to drive that growth, you know, over the next couple quarters.

Yeah, Mark, this is Archie again. Yeah, maybe talk about loan commitments. Q3 was on par with Q2 so pretty strong yeah I would argue the strongest of the year in both cases but we saw the actual fundings from that drop compared to what we saw in prior quarter so lower fundings primarily construction related and then we did see a dip in line utilization in the commercial side that is accounted for a little bit of the a little bit of lower overall growth in the quarter as we look in Q4, strong commercial is the biggest driver. We've got, you know, different verticals within commercial, but strong commercial is the big driver. Summit funding, this is always their peak quarter for production, so that'll be another big driver. Commercial real estate will have a little bit of growth is what we're projecting in Q4, and probably the only vertical that has a little bit of pressure is in our Oak Street group just looks like they've got a lot more payoff pressure that we're expecting here in Q4. We'll get you to the number that we're projecting of 5% annualized growth.

Yeah, that makes sense. Appreciate it, Colin. Thanks for taking my questions.

Thanks, Mark. And again, if you'd like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from a line of Daniel Tamayo from Raymond James, your line is open.

Thank you. Good morning, guys.

Morning, Danny.

Maybe just one on the fees and expenses. So the 4Q guide, pulling out Westfield just for a second was higher than what we were looking for and certainly what the 3Q number was. Just curious you know, if there's something seasonal, unusual, unique in the fourth quarter, or, you know, maybe if you can kind of give us some indication of what the run rates would look like going into 26.

Yeah, Danny, it's Jamie. Really the big impact from the third quarter to the fourth quarter in that, like, again, I think you're looking at this ex-Westfield, kind of the legacy first financial numbers is um is in the uh in the as well as the uh um in on summit related to the uh and then um and then our wealth uh it's really those three and like like i mean to you know we we look at that business kind of year over year now is growing you know in that uh you know then And those are all commissions.

No, that's very helpful. Excuse me. And, you know, my other question, I guess, on the credit side. So a good quarter from a credit perspective guiding to similar credit costs. Just curious, you know, how long you think those play out. I think in the past we've talked about a little bit higher run rate on the charge-off side. any read-throughs in the near-term past the fourth quarter on credit?

Yeah, Dan, this is Archie. I'm kind of mid-20s. It seems to be the run rate for us in the current environment, and I think over a period of quarters, that's what we would expect.

Understood. Okay. And then lastly, on the capital front, so you've got the two deals closing here in the near-term. you know take take a little bit of a hit to to capital but you know curious you you'll still have pretty strong cet1 um how you're thinking about buybacks um you probably think that stock is a little undervalued right now um you know once we get past the the deals like if there's a bogey you're looking at on the capital side or or you know any color with it there will be would be great yeah Danny this is Jamie so yeah I think you said it well what we'll do here over the next really probably two to three quarters is you know let the deals flow in I mean we are

building tangible book value 120 basis point hit in the once we close the Westfield deal just because of the all cash nature of it and then um so we'll let the next two or three quarters kind of play out and then see where we are and see where we're trading in terms of uh um you know multiple at that point you know if we're trading anywhere in that you know 150 of tangible book value or below um you know we would we would potentially look at uh thanks for all the color

guys appreciate it your next question comes from a line of terry mcavoy from stevens your line is open hi thanks good morning everybody um from talking to some of the other banks that are in your metro markets in your footprint kind of surprised with the deposit competition a bit stronger than i would have guessed in your cost of funds up up a few basis points quarter over quarter so if you maybe just talk about deposit competition and you didn't have loan growth this quarter, next quarter, you're guiding towards that. Does that kind of drive those deposit costs higher as you look to fund that growth?

Yeah, Terry, this is Archie. I'll start. We did take some, I think, decisive action that went into effect. Now we have more coming, but we would expect going forward, Q4, I mean, it was pretty, did a pretty aggressive cut. And yeah, I mean, the market's competitive, but if you look at our current loan to deposit ratio, and we felt, you know even with some loan growth we felt we could take a little bit more aggressive actions and we'll look to do more here with more more fed cuts um again one day they have uh lower deposit and funding costs than we do from what we can see still has what we're seeing here kind of in southwestern keep in mind i mean we do have the um you know a little bit higher uh some loan growth in the fourth quarter and then going forward um but we don't think that puts a lot

of pressure the liquidity that we get coming in and that especially in the bank financial deal part of 26 relatively low loan to deposit ratio and then we're selling a multi-family portfolio which will then create even more liquidity for us to utilize for loan growth or to pay off borrowings or to to reinvest that's great thank you and nice to see the FX trading and the 4Q guide higher at 18 to 20.

I just want to make sure that run rate looking onto 26, do you think that is more consistent of next year or is this more just a couple strong quarters and next year we'll go back to some of your prior comments on the outlook for that revenue line?

Well, certainly Q4 would be a peak at the numbers that, as Jamie said, it sort of bounces around. We look at it more on kind of a rolling even uh you know they'll they will uh we've we've owned them now for quite a while and what we've observed is they grow they may flatten out a little bit then they hit another growth spurt but you know if you think five to ten percent kind of growth rate i think you're in the ballpark for what we would expect them to do yeah terry and this is jamie as we get into as we look out kind of into 26 i mean that that will um you know i wouldn't annualize this fourth quarter number that we're talking about.

So I would look more into 26 at like a $65 to $70 million.

Again, thanks for taking my questions. Have a nice weekend.

Thanks, Jerry. Thank you, Jerry.

Your next question comes from the line of John Arpstrom from RBC. Your line is open.

Hey, good morning, guys. Hey, Jamie, in your prepared comments, you touched on the workforce efficiency efforts. So can you talk a little bit about where you are in that journey? And then when you look at the two acquisitions, what kind of opportunities do you see there? Because it seems like you're going to apply this framework over the top of those two deals.

Yeah, John, this is Archie. I'll start. We're probably 90% of the way through. There's a little bit left in some areas, but we think the opportunity to continue to get issues. And I think in the Westfield case, we had set around a combination, and I think we're well on our way to achieve that, maybe slightly exceed it. Bank financial was maybe just a little bit less because there's bigger branch count, but what we had modeled, again, we were to exceed that. And that includes us in both those markets, some of the businesses we have that maybe those banks didn't have, we're adding the appropriate people to help us grow in those markets. And even with that, we would still achieve the expense that we've – Okay, that makes sense.

Yeah, some good opportunities there, obviously, for production. And Terry took a couple of my questions on deposits, but, Jamie, can you just remind us of the typical seasonal flows on deposits that you see in the fourth quarter? Yeah.

Yeah. So we just to remind you and everybody else, we get seasonal mainly from Indiana where property taxes are due. So we get those in May and November. And so typically we will get 200 million in both of them. And then they run out in the in the subsequent quarter and kind of go back down to the to the base level work. I mean, it happens pretty much every quarter. And then, so that's what you saw here in the third quarter were those public funds running down by $100 to $150 million. And then, you know, we just replaced brokered CDs.

That's helpful. Thanks a lot, guys.

Yep. See you, John.

And that concludes our question and answer session. I will now turn the call back over to Archie Brown for closing comments.

Thank you, Rob. I want to thank everybody for joining us today. We really feel great about the quarter we had and are excited about fourth quarter and the momentum we're building for 2026 with the pending acquisitions. We look forward to talking to you again in a quarter. Have a great day and weekend.

This concludes today's conference call. Thank you for your participation.