8-K: First Financial Bancorp Announces Strong Fourth Quarter and Full Year 2024 Results

First Financial Bancorp reports solid earnings for Q4 and full year 2024, driven by loan and deposit growth, and increased noninterest income.

Summary

• First Financial Bancorp announced its financial results for the three and twelve months ended December 31, 2024.
• For the fourth quarter, net income was $64.9 million, or $0.68 per diluted common share, compared to $52.5 million, or $0.55 per diluted common share, for the third quarter of 2024.
• For the full year, earnings per diluted share were $2.40 compared to $2.69 for the same period in 2023.
• The return on average assets for the fourth quarter was 1.41%, and the return on average tangible common equity was 19.08%.
• The net interest margin was 3.91%, or 3.94% on a fully tax-equivalent basis.
• Noninterest income was $69.9 million, with record wealth management income and strong results from foreign exchange and leasing businesses.
• Loan balances increased by $208.7 million compared to the linked quarter, representing 7% annualized growth.
• Average deposits increased by $543.1 million, or 15.7% on an annualized basis.
• The total allowance for credit losses was $173.7 million.
• Annualized net charge-offs were 40 bps of total loans for the quarter and 30 bps for the full year.
• The total capital ratio decreased 15 bps to 14.43%, while Tier 1 common equity increased 12 bps to 12.16%.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong earnings, loan and deposit growth, and record noninterest income. However, there are some concerns about declining net interest margins and increasing noninterest expenses, which temper the overall positive outlook.

Positives

• Robust net interest margin of 3.91%, or 3.94% on a fully tax-equivalent basis.
• Strong average deposit growth of $543.1 million, or 15.7% on an annualized basis.
• Record wealth management income.
• Tangible book value per share increased from $12.38 to $14.15, which was a 14.3% increase.
• Net charge-offs as a percent of average loans declined 3 basis points to 0.30%.

Negatives

• Net interest margin declined from 4.40% to 4.05% due to declining short-term rates.
• Noninterest expenses increased by 5% from the linked quarter, driven by higher incentive compensation.
• Total capital ratio decreased 15 bps to 14.43%.

Risks

• The increase in classified assets was driven by the mutually agreed upon termination of a foreign exchange trade, resulting in a $45 million obligation from the customer.
• The company expects the customer to pay this obligation in 2025.

Future Outlook

Loan balances are expected to increase in the low single digits on an annualized basis, with a seasonal decline in public fund and business deposit balances expected. The investment portfolio is expected to remain stable. Total noninterest expense is expected to be $128 130 million. Credit costs are expected to be modestly lower, with net charge-offs expected to be lower in Q1. Stable to slightly increasing ACL coverage as a percentage of loans is expected. Total fee income is expected to be $63 65 million. The net interest margin is expected to be 3.85% 3.90%, assuming no rate cuts by the Fed. The company expects to maintain the dividend at $0.24.

Management Comments

• Archie Brown, President and CEO, stated he was very pleased with the fourth quarter performance.
• He noted that adjusted earnings per share were $0.71, leading to an adjusted return on assets of 1.47%, and an adjusted return on tangible common equity ratio of 19.90%.
• He mentioned that balance sheet trends were very strong for the quarter with loan growth exceeding 7% on an annualized basis and total deposits surging by approximately 16% on an annualized basis.
• Mr. Brown highlighted that 2024 was an excellent year for the Company, with adjusted earnings of $249 million, or $2.61 per share.
• He also thanked the Agile team for their contribution and noted continued momentum in expansion markets.

Industry Context

The results reflect a challenging interest rate environment with declining short-term rates impacting net interest margins, but strong growth in loans and deposits helped offset some of the negative impact. The company's focus on expansion markets and strategic acquisitions like Agile are contributing to growth.

Comparison to Industry Standards

• Comparing First Financial Bancorp's Q4 2024 ROA of 1.41% to peers like Fifth Third Bancorp (typically around 1.2-1.5%) and Huntington Bancshares (around 1.1-1.4%) suggests competitive performance.
• Their TCE ratio of 7.73% is within the range of regional banks, but lower than some more conservatively positioned institutions like U.S. Bancorp (typically above 8%).
• The NIM of 3.91% is solid, but the decline from previous periods mirrors the industry-wide pressure on margins due to interest rate fluctuations, similar to trends seen at KeyCorp and Regions Financial.
• The loan growth of 7% annualized is robust compared to some peers experiencing slower growth or even contraction in certain loan categories, such as commercial real estate, where companies like M&T Bank have shown caution.

Stakeholder Impact

• Shareholders will benefit from the strong earnings and continued dividend payments.
• Employees may be impacted by the workforce efficiency initiative, which includes the elimination of positions.
• Customers will benefit from the company's continued growth and expansion into new markets.
• The company's strong financial performance will benefit creditors.

Next Steps

• The company expects to complete its workforce efficiency initiative in 2025.
• The customer with the $45 million obligation from the terminated foreign exchange trade is expected to pay this obligation in 2025.
• First Financial's executive management will host a conference call to discuss the company's financial and operating results on Friday, January 24, 2025.

Key Dates