First Financial Bancorp Announces Second Quarter 2020 Financial Results

CINCINNATI, July 23, 2020 /PRNewswire/ --

• Earnings per diluted share of $0.38; $0.40 on an adjusted(1) basis
• Return on average assets of 0.96%; 1.00% as adjusted(1)
• 57.5% efficiency ratio; 56.1% as adjusted(1)
• Record core fee income driven by $16.7 million of mortgage banking income
• $20.2 million total provision for credit losses

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

For the three months ended June 30, 2020, the Company reported net income of $37.4 million, or $0.38 per diluted common share.  These results compare to net income of $28.6 million, or $0.29 per diluted common share, for the first quarter of 2020 and $52.7 million, or $0.53 per diluted common share, for the second quarter of 2019.  For the six months ended June 30, 2020, First Financial had earnings per diluted common share of $0.67 compared to $1.00 for the same period in 2019.

Return on average assets for the second quarter of 2020 was 0.96% while return on average tangible common equity was 12.90%.  These compare to returns on average assets of 0.79% and 1.50%, and returns on average tangible common equity of 9.71% and 17.33%, in the first quarter of 2020 and the second quarter of 2019, respectively.

Second quarter 2020 highlights include:

• After adjustments(1) for certain nonrecurring and certain COVID-19 related items:
• Net income of $0.40 per diluted common share
• 1.00% return on average assets
• 13.47% return on average tangible common equity

• Adjustments(1) to net income include:
• $0.7 million of costs directly related to COVID-19
• $1.5 million of other nonrecurring costs such as branch consolidation costs

• Total Allowance for Credit Losses of $175.3 million; Total quarterly provision for credit losses of $20.2 million
• Loans and leases - ACL of $158.7 million, 1.56% of total loans; 1.71% of loans excluding PPP
• Unfunded Commitments - ACL of $16.7 million; $2.4 million provision expense
• Similar to first quarter, substantially all second quarter provision expense related to expected economic impact from COVID-19

• Strong noninterest income of $42.7 million, an increase of 20.7% from the linked quarter
• Mortgage banking revenue increased $13.8 million, or 488.6%
• Continued strong client derivative fee income
• Foreign exchange income of $6.6 million despite COVID-19 headwinds
• Service charges on deposits, including overdrafts, declined $2.4 million, or 28.9%

• Noninterest expenses of $88.7 million, or $86.5 million as adjusted(1)
• Efficiency ratio of 57.5%; 56.1% as adjusted(1)

• Loan balances grew $873.9 million, or 37.8% on an annualized basis
• Loan growth driven by $885.3 million of PPP loans, net of unearned fees

• Net interest margin of 3.44% on a fully tax-equivalent basis(1)
• 33 basis point decline compared to the linked quarter; 62 basis point decline due to loan yields
• 3 basis points of dilution from PPP
• Impact of downward movement in short term rates, including the normalization of LIBOR, partially offset by funding cost reductions, higher loan fees, and elevated purchase accounting accretion

• Strong capital ratios
• Total capital of 15.13%; bolstered by $150 million sub-debt issuance in early second quarter
• Tier 1 common equity of 11.44%
• Tangible common equity of 8.09%; 8.62% excluding PPP loans 
• Tangible book value per share of $12.26

In response to COVID-19, the Company has:

• Introduced hardship relief programs that include payment deferrals, fee-waivers and suspension of foreclosures
• Processed over $2.0 billion of commercial modifications
• Modified over $126 million of consumer loans including $103 million in residential mortgages

• Participated in CARES Act SBA Paycheck Protection Program
• Received in excess of 8,200 PPP applications; over $1.2 billion in requests
• Approximately 6,800 PPP requests, or 83% of applicants, approved by SBA
• $912.9 million in PPP balances as of June 30; to date forgiveness has not been requested on any loan

• Continued implementation of new processes and technologies to improve customer access to banking services

• Updated existing internal processes and systems to react to high customer demand for relief

• Donated $1.0 million to fund COVID-19 related relief in our geographic footprint in the first quarter

Archie Brown, President and Chief Executive Officer, remarked, "We are very pleased with our second quarter performance, especially when considering the unique circumstances in which we were operating due to COVID-19.  While second quarter earnings were negatively impacted by pandemic-related events, we posted solid results as reflected in our adjusted(1) earnings per share of $0.40, adjusted(1) return on assets of 1.00% and adjusted(1) efficiency ratio of 56.1%.  Additionally, credit trends remained stable while our allowance for credit losses increased to 1.71% of total loans, excluding PPP, and we recorded $20.2 million of provision expense in anticipation of credit deterioration in the latter part of the year and into 2021."

Mr. Brown continued, "The second quarter was our highest core fee income quarter on record and was the primary driver of our excellent performance.  Our mortgage team had a sensational quarter as the hard work of our team combined with the historic low interest rate environment to drive an almost 500% increase in total mortgage banking revenue to $16.7 million.  In addition, client derivative income remained steady during the quarter and Bannockburn revenue, while lower than the first quarter, was in line with our expectations given the challenges caused by business shutdowns.  Additionally, total expenses declined during the quarter as we limited discretionary spending and implemented additional controls on hiring."

Mr. Brown further commented, "We are pleased with and appreciative of the incredible work performed by our associates during the quarter.  We successfully implemented our pandemic management plan, which resulted in over 50% of our associates working remotely and our branches operating with closed lobbies for most of the quarter.  This required a prompt evaluation of our client service model and a shift to leveraging technology in new and innovative ways.  Our associates met the challenge, and went above and beyond to originate and fund over $900 million in PPP loans, provide customer deferrals for over $2 billion of loans, and process historic numbers of fee waivers and mortgage applications.  By the second half of the quarter, sales activity returned to near pre-pandemic levels which led to increases in new households with checking accounts, strong consumer loan originations and robust wealth production."

Mr. Brown continued, "At this time, approximately 60% of our banking center lobbies are fully open with the remainder servicing clients by appointment.  Physical staffing levels in our office buildings is currently limited to 25% of normal capacity, mostly on a volunteer basis, with the remainder of the staff continuing to work remotely.  We continually monitor conditions in our markets and banking centers, in addition to guidance provided by local and state governments with regard to safely returning to the workplace and opening our branch locations to customers."

Mr. Brown concluded, "The second quarter was historic and challenging, however it illuminated what we are capable of as a company and positioned us to build on the lessons learned in a meaningful way.  We continue to better leverage technology and are reevaluating our distribution model to better serve the needs of our customers.  The broader economic environment remains uncertain and our clients continue to face serious challenges.  We are committed to be a stabilizing presence in our communities and remain steadfast in our promise to manage the Company in a manner that prioritizes the physical and financial well-being of our associates and clients while delivering long-term value to our shareholders."

Full detail of the Company's second 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, July 24, 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 10145789.  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 June 30, 2020, the Company had $15.9 billion in assets, $10.2 billion in loans, $11.7 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 June 30, 2020.  The Company operated 141 full service banking centers as of June 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.