Q1 2026 First Financial Bancorp Earnings Call

April 24, 2026

Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Financial Bancorp Q1 2026 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, press star 1 again. Thank you. I would now like to turn the call over to Scott Crawley, Corporate Controller. Please go ahead.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speakers' 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.

Speaker #2: If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Scott Crawley, Corporate Controller.

Speaker #2: Please go ahead. Thanks, Kate. Good morning, everyone. Thank you for joining us on today's conference call to discuss First Financial Bancorp's first quarter financial results.

Scott Crawley: Thanks, Kate. Morning, everyone. Thank you for joining us on today's conference call to discuss First Financial Bancorp's Q1 financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill O'Hara, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the investor relations section. We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the Q1 2026 earnings release, as well as our SEC filings for a full discussion of the company's risk factors. The information we'll provide today is accurate as of 31 March 2026, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

Speaker #2: Participating on today's call will be Archie Brown, President and Chief Executive Officer; James Anderson, Chief Financial Officer; and Bill Herod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com, under the Investor Relations section.

Speaker #2: We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the first quarter 2026 earnings release, as well as our SEC filings for a full discussion of the company's risk factors.

Speaker #2: The information we'll provide today is accurate as of March 31, 2026, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

Speaker #2: I'll now turn the call over to Archie Brown. Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our first quarter results, and I'm very pleased with our overall performance.

Scott Crawley: I'll now turn the call over to Archie Brown.

Archie Brown: Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our Q1 results, and I'm very pleased with our overall performance. Q1 was a busy one as we closed the BankFinancial acquisition, completed the conversion of Westfield Bank, and wrapped up the sale of the BankFinancial multifamily loan portfolio. Adjusted earnings per share were $0.77, with an adjusted return on assets of 1.45%, and an adjusted return on tangible common equity of 19.2%. Adjusted earnings per share increased 22% compared to Q1 of last year, driven by a robust net interest margin and strong fee income. Our net interest margin was resilient despite the Fed funds rate cut in December, as the expected decline in loan yields was offset by a similar decline in deposit costs.

Speaker #2: The first quarter was a busy one, as we closed the Bank Financial acquisition, completed the conversion of Westfield Bank, and wrapped up the sale of the Bank Financial multifamily loan portfolio.

Speaker #2: Adjusted earnings per share were $0.77, with an adjusted return on assets of 1.45% and an adjusted return on tangible common equity of 19.2%.

Speaker #2: Adjusted earnings per share increased 22% compared to the first quarter of last year, driven by a robust net interest margin and strong fee income.

Speaker #2: Our net interest margin was resilient, despite the Fed funds rate cut in December, as the expected decline in loan yields was offset by a similar decline in deposit costs.

Speaker #2: Assuming no short-term rate reductions by the Fed, we expect the margin to remain stable in the near term. Loan balances increased slightly for the quarter due to the bank financial acquisition, excluding the bank financial portfolio loans declined for the quarter, as seasonally strong loan production was offset by extended payoff pressure in the ICRE portfolio.

Archie Brown: Assuming no short-term rate reductions by the Fed, we expect the margin to remain stable in the near term. Loan balances increased slightly for the quarter due to the BankFinancial acquisition. Excluding the BankFinancial portfolio, loans declined for the quarter as seasonally strong loan production was offset by extended payoff pressure in the ICRE portfolio. Compared to Q1 2025, originations increased approximately 45%, and excluding Westfield and BankFinancial, originations were up by over 25%. Our expectation for loan growth for 2026 has not materially changed. Loan pipelines are very healthy, and we expect strong production in Q2. We also expect payoff activity in ICRE to approach more normal levels, leading to solid loan growth in Q2. Adjusted fee income was strong for the quarter. Historically, fee income significantly dips early in the year.

Speaker #2: Compared to the first quarter of 2025, originations increased approximately 45%, and, excluding Westfield and Bank Financial, originations were up by over 25%. Our expectation for loan growth for 2026 has not materially changed, loan pipelines are very healthy, and we expect strong production in the second quarter.

Speaker #2: We also expect payoff activity in ICRE to approach more normal levels, leading to solid loan growth in the second quarter. Adjusted fee income was strong for the quarter. Historically, fee income significantly dips early in the year.

Speaker #2: However, we successfully combated this trend in the first quarter. Adjusted non-interest income was $75.6 million, which was 24% higher than in the first quarter of 2025, and only a slight decline from the linked quarter.

Archie Brown: However, we successfully combated this trend in Q1. Adjusted non-interest income was $75.6 million, which was 24% higher than in Q1 2025, and only a slight decline from the linked quarter. These results were driven by record wealth management income, strong client derivative income, and record leasing business income. Additionally, expenses were well controlled during the quarter, with total non-interest expenses coming in well below our expectations and acquisition-related cost savings exceeding our initial estimates. Net charge-offs were 35 basis points of total loans and were impacted by one large commercial relationship. Other asset quality indicators were stable, with non-performing assets slightly declining from the linked quarter to 44 basis points.

Speaker #2: These results were driven by record wealth management income, strong client derivative income, and record leasing business income. Additionally, expenses were well controlled during the quarter, with total non-interest expenses coming in well below our expectations, and acquisition-related cost savings exceeding our initial estimates.

Speaker #2: Net charge-offs were 35 basis points of total loans and were impacted by one large commercial relationship. Other asset quality indicators were stable, with non-performing assets slightly declining from the linked quarter to 44 basis points.

Speaker #2: While there is certainly more uncertainty in the economy due to the impact of the war in Iran, our current expectations are for asset quality to gradually improve throughout the year, similar to our performance in 2025.

Archie Brown: While there's certainly more uncertainty in the economy due to the impact of the war in Ukraine, our current expectations are for asset quality to gradually improve throughout the year, similar to our performance in 2025. Capital ratios are strong and continued to climb in Q1. All regulatory ratios were well in excess of regulatory minimums, and the tangible common equity increased to 7.9%. Tangible book value per share was $16.15, which was a 2.6% increase over the linked quarter and a 9% increase compared to Q1 2025. Tangible book value was at approximately the same level as Q3 2025, just prior to the Westfield Bank acquisition.

Speaker #2: Capital ratios are strong and continue to decline in the first quarter. All regulatory ratios were well in excess of regulatory minimums, and tangible common equity increased 7.9%.

Speaker #2: Tangible book value per share was $16.15, which was a 2.6% increase over the linked quarter and a 9% increase compared to the first quarter of 2025.

Speaker #2: Tangible book value was at approximately the same level as the third quarter of 2025, just prior to the Westfield Bank acquisition. This month, the board of directors authorized a $5 million share repurchase plan, replacing the plan we had in place through 2025, and we are evaluating opportunities to employ buybacks as part of our overall capital planning.

Archie Brown: This month, the board of directors authorized a 5 million share repurchase plan, replacing the plan we had in place through 2025, and we're evaluating opportunities to employ buybacks as part of our overall capital planning. I'd like to take a minute and discuss our recent acquisitions. During the quarter, we successfully completed the conversion of Westfield Bank. Then for the quarter, Westfield deposit and loan balances were stable. We maintained high associate retention, and we have achieved the financial results that we expected from the transaction to date. We're happy with the quality of the bank we acquired and with the talented team that has joined us. We also completed the purchase of BankFinancial on 1 January 2026 and plan to converge systems in early June. We remain excited about the opportunities in the Chicago market and continue to see growth potential from this transaction.

Speaker #2: I'd like to take a minute and discuss our recent acquisitions. During the quarter, we successfully completed the conversion of Westfield Bank, and then for the quarter, Westfield deposit and loan balances were stable, we maintained high associate retention, and we have achieved the financial results that we expected from the transaction to date.

Speaker #2: We're happy with the quality of the bank we acquired and with the talented team that has joined us. We also completed the purchase of Bank Financial on January 1, and plan to convert systems in early June.

Speaker #2: We remain excited about the opportunities in the Chicago market and continue to see growth potential from this transaction. Now, I'll turn the call over to Jamie to discuss these results in greater detail. After Jamie, I'll wrap up with some additional forward-looking commentary and closing remarks.

Archie Brown: Now I'll turn the call over to James to discuss these results in greater detail. After James, I'll wrap up with some additional forward-looking commentary and closing remarks.

Speaker #2: Thank you, Archie, and good morning, everyone. Slides 4, 5, and 6 provide a summary of our most recent financial performance. The first quarter results were excellent and included strong earnings, record revenues driven by a robust net interest margin, and higher-than-expected fee income.

James Anderson: Thank you, Archie, and good morning, everyone. Slides four, five, and six provide a summary of our most recent financial performance. The Q1 results were excellent and included strong earnings, record revenues driven by a robust net interest margin, and higher than expected fee income. Our net interest margin remains very strong at 3.99%, increasing one basis point during the quarter. Cost of funds declined 13 basis points while asset yields declined 12 basis points. End-of-period loan balances increased $71 million, which included $228 million acquired in the BankFinancial transaction. This was partially offset by a $152 million decrease in ICRE balances, reflecting the payoff pressure that Archie mentioned earlier. Total average deposit balances increased $1.7 billion, including $1.2 billion acquired in the BankFinancial transaction and the full quarter impact from Westfield.

Jamie Anderson: Thank you, Archie, and good morning, everyone. Slides four, five, and six provide a summary of our most recent financial performance. The Q1 results were excellent and included strong earnings, record revenues driven by a robust net interest margin, and higher than expected fee income. Our net interest margin remains very strong at 3.99%, increasing one basis point during the quarter. Cost of funds declined 13 basis points while asset yields declined 12 basis points. End-of-period loan balances increased $71 million, which included $228 million acquired in the BankFinancial transaction. This was partially offset by a $152 million decrease in ICRE balances, reflecting the payoff pressure that Archie mentioned earlier. Total average deposit balances increased $1.7 billion, including $1.2 billion acquired in the BankFinancial transaction and the full quarter impact from Westfield.

Speaker #2: Our net interest margin remains very strong at 3.99%, increasing one basis point during the quarter. Cost of funds declined 13 basis points, while asset yields declined 12 basis points.

Speaker #2: End-of-period loan balances increased $71 million, which included $228 million acquired in the bank financial transaction. This was partially offset by a $152 million decrease in ICRE balances, reflecting the payoff pressure that Archie mentioned earlier.

Speaker #2: Total average deposit balances increased $1.7 billion, including $1.2 billion acquired in the bank financial transaction, and the full quarter impact from Westfield.

Speaker #2: We maintained 20% of our total deposit balances in non-interest-bearing accounts, and remained focused on growing lower-cost deposit balances. Turning to the income statement, first quarter fee income overcame seasonal headwinds with strong performance across all income types.

James Anderson: We maintain 20% of our total deposit balances in non-interest-bearing accounts and remain focused on growing lower-cost deposit balances. Turning to the income statement. Q1 fee income overcame seasonal headwinds with strong performance across all income types. Additionally, we had an $8.9 million gain on bargain purchase related to the BankFinancial acquisition. Non-interest expenses increased from the linked quarter due primarily to the impact of our most recent acquisitions. Our ACL coverage decreased slightly during the quarter to 1.36% of total loans, and we recorded $8.5 million of provision expense during the period, which was driven primarily by net charge-offs. On asset quality, net charge-offs were 35 basis points on an annualized basis, an increase of eight basis points from Q4, while NPAs as a percentage of assets were 44 basis points, declining four basis points from Q4.

Jamie Anderson: We maintain 20% of our total deposit balances in non-interest-bearing accounts and remain focused on growing lower-cost deposit balances. Turning to the income statement. Q1 fee income overcame seasonal headwinds with strong performance across all income types. Additionally, we had an $8.9 million gain on bargain purchase related to the BankFinancial acquisition. Non-interest expenses increased from the linked quarter due primarily to the impact of our most recent acquisitions. Our ACL coverage decreased slightly during the quarter to 1.36% of total loans, and we recorded $8.5 million of provision expense during the period, which was driven primarily by net charge-offs. On asset quality, net charge-offs were 35 basis points on an annualized basis, an increase of eight basis points from Q4, while NPAs as a percentage of assets were 44 basis points, declining four basis points from Q4.

Speaker #2: Additionally, we had an $8.9 million gain on bargain purchase related to the bank financial acquisition. Non-interest expenses increased from the linked quarter due primarily to the impact of our most recent acquisitions.

Speaker #2: Our ACL coverage decreased slightly during the quarter to 1.36% of total loans, and we recorded $8.5 million of provision expense during the period, which was driven primarily by net charge-offs.

Speaker #2: On asset quality, net charge-offs were 35 basis points on an annualized basis, an increase of 8 basis points from the fourth quarter, while NPAs as a percentage of assets were 44 basis points, declining 4 basis points from the fourth quarter.

Speaker #2: Classified assets as a percentage of total assets also declined slightly during the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets.

James Anderson: Classified assets as a percentage of total assets also declined slightly during the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.41 to $16.15, while our tangible common equity ratio increased to 7.88%. Slide 8 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $80.5 million, or $0.77 per share for the quarter. Non-interest income was adjusted for $1.3 million of losses on the sales of investment securities, the $8.9 million gain on bargain purchase related to the BankFinancial acquisition, and a $1.4 million loss on the surrender of a bank-owned life insurance policy. Non-interest expense adjustments exclude the impact of acquisition costs, tax credit investment write-downs, and other expenses not expected to recur.

Jamie Anderson: Classified assets as a percentage of total assets also declined slightly during the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.41 to $16.15, while our tangible common equity ratio increased to 7.88%. Slide 8 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $80.5 million, or $0.77 per share for the quarter. Non-interest income was adjusted for $1.3 million of losses on the sales of investment securities, the $8.9 million gain on bargain purchase related to the BankFinancial acquisition, and a $1.4 million loss on the surrender of a bank-owned life insurance policy. Non-interest expense adjustments exclude the impact of acquisition costs, tax credit investment write-downs, and other expenses not expected to recur.

Speaker #2: Tangible book value increased $0.41 to $16.15, while our tangible common equity ratio increased to 7.88%. Slide 8 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance.

Speaker #2: Adjusted net income was 80.5 million dollars or 77 cents per share for the quarter. Non-interest income was adjusted for 1.3 million dollars of losses on the sales of investment securities, the 8.9 million dollar gain on bargain purchase related to the bank financial acquisition, and a 1.4 million dollar loss on the surrender of a bank-owned life insurance policy.

Speaker #2: Non-interest expense adjustments exclude the impact of acquisition costs, tax credit investment write-downs, and other expenses not expected to recur. As depicted on slide 9, these adjusted earnings equate to a return on average assets of 1.45%, a return on average tangible common equity of 19%, and a pre-tax pre-provision ROA of 1.99%.

James Anderson: As depicted on slide nine, these adjusted earnings equate to a return on average assets of 1.45%, a return on average tangible common equity of 19%, and a pre-tax, pre-provision ROA of 1.99%. Turning to slides 10 and 11. Net interest margin increased one basis point from the linked quarter to 3.99%. Total deposit costs declined 13 basis points from the linked quarter, offsetting the impact of lower asset yields. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased $71 million during the period. As you can see on the right, we acquired $228 million of loans in the BankFinancial transaction. This was offset by a $152 million decrease in ICRE balances. Absent the acquisition, loan balances decreased 4.7% on an annualized basis, driven by elevated payoffs in ICRE. Slide 15 depicts our NDFI exposure.

Jamie Anderson: As depicted on slide nine, these adjusted earnings equate to a return on average assets of 1.45%, a return on average tangible common equity of 19%, and a pre-tax, pre-provision ROA of 1.99%. Turning to slides 10 and 11. Net interest margin increased one basis point from the linked quarter to 3.99%. Total deposit costs declined 13 basis points from the linked quarter, offsetting the impact of lower asset yields. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased $71 million during the period. As you can see on the right, we acquired $228 million of loans in the BankFinancial transaction. This was offset by a $152 million decrease in ICRE balances. Absent the acquisition, loan balances decreased 4.7% on an annualized basis, driven by elevated payoffs in ICRE. Slide 15 depicts our NDFI exposure.

Speaker #2: Turning to slides 10 and 11, net interest margin increased one basis point from the linked quarter to 3.99%. Total deposit costs declined 13 basis points from the linked quarter, offsetting the impact of lower asset yields.

Speaker #2: Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased 71 million dollars during the period. As you can see on the right, we acquired 228 million dollars of loans in the bank financial transaction.

Speaker #2: This was offset by a $152 million decrease in ICRE balances. Absent the acquisition, loan balances decreased 4.7% on an annualized basis, driven by elevated payoffs in ICRE.

Speaker #2: Slide 15 depicts our NDFI exposure. As you can see, our total NDFI balances are approximately 3% of our total loan book, and all NDFI loans were pass-rated at the end of the first quarter.

James Anderson: As you can see, our total NDFI balances are approximately 3% of our total loan books, and all NDFI loans were pass rated at the end of Q1. The majority of our NDFI lending is concentrated in loans to REITs, which we believe further mitigates our risk. Slide 16 shows our deposit mix as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $1.7 billion, including a $1.2 billion impact from the BankFinancial transaction, as well as a full quarter impact from Westfield Bank. Slide 18 highlights our non-interest income. Total adjusted fee income was $76 million, with leasing and wealth management both posting record results. Foreign exchange delivered strong results, and client derivative fees increased during the period as well. Non-interest expense for the quarter is outlined on slide 19. Core expenses increased $12.9 million as expected during the period.

Jamie Anderson: As you can see, our total NDFI balances are approximately 3% of our total loan books, and all NDFI loans were pass rated at the end of Q1. The majority of our NDFI lending is concentrated in loans to REITs, which we believe further mitigates our risk. Slide 16 shows our deposit mix as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $1.7 billion, including a $1.2 billion impact from the BankFinancial transaction, as well as a full quarter impact from Westfield Bank. Slide 18 highlights our non-interest income. Total adjusted fee income was $76 million, with leasing and wealth management both posting record results. Foreign exchange delivered strong results, and client derivative fees increased during the period as well. Non-interest expense for the quarter is outlined on slide 19. Core expenses increased $12.9 million as expected during the period.

Speaker #2: The majority of our NDFI lending is concentrated in loans to REITs, which we believe further mitigates our risk. Slide 16 shows our deposit mix as well as a progression of average deposits from the linked balances, which increased $1.7 billion, including a $1.2 billion impact from the bank financial transaction, as well as a full quarter impact from Westfield.

Speaker #2: Slide 18 highlights our non-interest income. Total adjusted fee income was $76 million, with leasing and wealth management both posting record results. Foreign exchange delivered strong results, and client derivative fees increased during the period as well.

Speaker #2: Non-interest expense for the quarter is outlined on slide 19. Core expenses increased $12.9 million as expected during the period. This was driven primarily by a recent acquisition.

James Anderson: This was driven primarily by our recent acquisitions. Turning now to slides 20 and 21. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $207 million, which includes $3.1 million of initial allowance on the BankFinancial portfolio. This resulted in an ACL that was 1.36% of total loans, which was a three basis point decline from Q4. We recorded $8.5 million of provision expense during the period. Provision expense was primarily driven by net charge-offs, which were 35 basis points. Additionally, our NPAs to total assets decreased slightly to 44 basis points, while classified asset balances as a percentage of total assets decreased to 1.02%. Finally, as shown on slides 22 and 23, capital ratios remain in excess of regulatory minimums and internal targets.

Jamie Anderson: This was driven primarily by our recent acquisitions. Turning now to slides 20 and 21. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $207 million, which includes $3.1 million of initial allowance on the BankFinancial portfolio. This resulted in an ACL that was 1.36% of total loans, which was a three basis point decline from Q4. We recorded $8.5 million of provision expense during the period. Provision expense was primarily driven by net charge-offs, which were 35 basis points. Additionally, our NPAs to total assets decreased slightly to 44 basis points, while classified asset balances as a percentage of total assets decreased to 1.02%. Finally, as shown on slides 22 and 23, capital ratios remain in excess of regulatory minimums and internal targets.

Speaker #2: Turning now to slides 20 and 21, our ACL model resulted in a total allowance, which includes both funded and unfunded reserves, of $207 million. This includes $3.1 million of initial allowance on the bank financial portfolio.

Speaker #2: This resulted in an ACL that was 1.36% of total loans, which was a 3 basis point decline from the fourth quarter. We recorded $8.5 million of provision expense during the period.

Speaker #2: Provision expense was primarily driven by net charge-offs, which were 35 basis points. Additionally, our NPAs to total assets decreased slightly to 44 basis points, while classified asset balances as a percentage of total assets decreased to 1.02%.

Speaker #2: Finally, as shown on slides 22 and 23, capital ratios remain in excess of regulatory minimums and internal targets. During the first quarter, tangible book value increased to $16.15, while the TCE ratio increased to 7.88% at the end of the period.

James Anderson: During Q1, tangible book value increased to $16.15, while the TCE ratio increased to 7.88% at the end of the period. Our total shareholder return remained strong with 35% of our Q1 earnings returned to our shareholders during the period through the common dividend. The board also approved a 5 million share repurchase program. We maintain our commitment to providing an attractive return to our shareholders, and we'll evaluate capital actions that support that commitment. I'll now turn it back over to Archie for some comments on our outlook. Archie?

Jamie Anderson: During Q1, tangible book value increased to $16.15, while the TCE ratio increased to 7.88% at the end of the period. Our total shareholder return remained strong with 35% of our Q1 earnings returned to our shareholders during the period through the common dividend. The board also approved a 5 million share repurchase program. We maintain our commitment to providing an attractive return to our shareholders, and we'll evaluate capital actions that support that commitment. I'll now turn it back over to Archie for some comments on our outlook. Archie?

Speaker #2: Our total shareholder return remained strong, with 35% of our first quarter earnings returned to our shareholders during the period through the common dividend. The board also approved a $5 million share repurchase program.

Speaker #2: We maintain our commitment to writing an attractive return to our shareholders and will evaluate capital actions that support that commitment. I'll now turn it back over to Archie for some comments on our outlook.

Speaker #2: Archie?

Speaker #1: Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our second quarter outlook, which can be found on slide 24.

Archie Brown: Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our Q2 outlook, which can be found on slide 24. On the balance sheet, we expect mid-single digit loan growth on an annualized basis during Q2, as loans filter through our strong pipelines and ICRE payoffs slow. On the deposit side, we expect core deposit balances to remain relatively flat compared to Q1. Our net interest margin remains among the highest in the peer group, and we expect it to hold steady in a 3.99% to 4.04% range over the next quarter, assuming no rate cuts. Related to credit, we expect Q2 credit costs to approximate Q1 levels and ACL coverage to remain relatively stable as a percentage of loans.

Speaker #1: On the balance sheet, we expect mid-single-digit loan growth on an annualized basis during the second quarter, as loans filter through our strong pipelines and ICRE payoffs slow.

Speaker #1: On the deposit side, we expect core deposit balances to remain relatively flat compared to the first quarter. Our net interest margin remains among the highest in the peer group, and we expect it to hold steady in a 3.99% to 4.04% range over the next quarter, assuming no rate cuts.

Speaker #1: Related to credit, we expect second-quarter credit costs to approximate first-quarter levels, and ACL coverage to remain relatively stable as a percentage of loans.

Speaker #1: As I mentioned earlier, similar to last year, we expect credit trends to gradually improve over the course of the year. Further down the income statement, we expect fee income to be between $75 and $77 million, which includes $14 to $16 million for foreign exchange and $20 to $22 million for leasing business revenue.

Archie Brown: As I mentioned earlier, similar to last year, we expect credit trends to gradually improve over the course of the year. Further down the income statement, we expect fee income to be between $75 and $77 million, which includes $14 to $16 million for foreign exchange and $20 to $22 million for leasing business revenue. Non-interest expenses are expected to be between $151 and $154 million. We successfully completed the Westfield conversion in March and are scheduled to convert BankFinancial over the summer. We're on pace to achieve our modeled cost savings in the Westfield acquisition and should realize full savings beginning in Q3, and we expect full BankFinancial savings to be realized beginning in Q4.

Speaker #1: Non-interest expenses are expected to be between $151 and $154 million. We successfully completed the Westfield conversion in March, and are scheduled to convert Bank Financial over the summer.

Speaker #1: We're on pace to achieve our modeled cost savings in the Westfield acquisition and should realize full savings beginning in the third quarter. And we expect full bank financial savings to be realized beginning in the fourth quarter.

Speaker #1: Before I wrap up, I want to thank our associates for the incredible work they've done this year integrating Westfield into First Financial, and the work they're now doing as they prepare for the bank financial conversion.

Archie Brown: Before I wrap up, I want to thank our associates for the incredible work they've done this year integrating Westfield into First Financial and the work they're now doing as they prepare for the BankFinancial conversion. I also want to mention how proud I am that First Financial was selected for the Gallup Exceptional Workplace Award for Associate Engagement. This marks the second consecutive year that we have received this honor, which is awarded to 4% of the thousands of companies that Gallup works with worldwide. We have partnered with Gallup for more than six years, and we've made associate engagement a core tenet of our corporate strategy. I want to commend our associates and leaders who work throughout the year to drive engagement, knowing that by doing so, we're also improving the client experience and shareholder value. To conclude, we're really happy with our Q1 results.

Speaker #1: I also want to mention how proud I am that First Financial was selected for the Gallup Exceptional Workplace Award for associate engagement. This marks the second consecutive year that we have received this honor, which is awarded to 4% of the thousands of companies that Gallup worked with worldwide.

Speaker #1: We have partnered with Gallup for more than six years, and we've made associate engagement a core tenet of our corporate strategy. I want to commend our associates and leaders who worked throughout the year to drive engagement, knowing that by doing so, we're also improving the client experience and shareholder value.

Speaker #1: To conclude, we're really happy with our first quarter results. We've made substantial progress across the company, and we've worked diligently to be a bank that consistently produces top-level results.

Archie Brown: We've made substantial progress across the company, and we work diligently to be a bank that consistently produces top-level results. We remain focused on the right things and are determined to build on the momentum generated by our Q1 performance. We've had a very strong start to 2026, and we believe that this is going to be another very successful year for First Financial. Kate will now open up the call for questions.

Speaker #1: We remain focused on the right things and are determined to build on the momentum generated by our first quarter performance. We've had a very strong start to 2026, and we believe that this is going to be another very successful year for First Financial.

Speaker #1: Kate will now open up the call for questions.

Speaker #2: At this time, I would like to remind everyone that in order to ask a question, please press star then the number one on your telephone keypad.

Operator: At this time, I would like to remind everyone, to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Speaker #2: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Speaker #3: Thank you. Good morning, Archie and Jamie. So I guess maybe first, starting on the loan growth side—you talked about the impact from the payoffs in the first quarter.

Daniel Tamayo: Thank you. Good morning, Archie and Jamie.

Archie Brown: Good morning.

James Anderson: Good morning.

Jamie Anderson: Good morning.

Daniel Tamayo: I guess maybe first starting on the loan growth side. You talked about the impact from the payoffs in Q1. $152 million, I think, is the number you gave. We talked to a lot of banks this earnings season about this headwind and kind of what's going to change to remove that headwind going forward. Just curious on your thoughts on that, kind of what drives your confidence those headwinds on the pay down side slow. Just a little bit more timing, if it's Q2 or you think it's H2 of the year as it relates to the timing of the pay downs. Thanks.

Speaker #3: 152 million, I think, is the number you gave. So, we've talked to a lot of banks this earnings season about this headwind and kind of what's going to change to remove that headwind going forward.

Speaker #3: So, just curious on your thoughts on that—kind of what drives your confidence that those headwinds on the paydown side will slow. And just a little bit more on timing: is it Q2, or do you think it's the back half of the year, as it relates to the timing of the paydowns?

Speaker #3: Thanks.

Speaker #1: Yeah, thanks, Danny. Maybe start with some color, and then I'll come back to how we see our outlook on it.

Archie Brown: Yeah. Thanks, Danny. Maybe start with some color, and then I'll come back to kind of how we see our outlook on it. We talk about this primarily being ICRE. We don't show REITs in the ICRE totals, but we also had some REIT paydowns or exits, if you will, and that shows up more in our commercial line. That was probably another $23 million, but it's all related in the commercial real estate space, if you will. Look, it's been a mix. We probably saw about 30% of our ICRE balances were exited because of the properties were sold. There's been, I think, a little more volume of sales occurring as some of the developers, owners who are saying, "Look, I'm getting good pricing. It's a good time to do it with the uncertainty." That's a piece of it.

Speaker #1: We talked about this primarily being ICRE. We had—we don't show REITs in the ICRE totals—but we also had some REIT paydowns, or exits, if you will, and that shows up more in our commercial line.

Speaker #1: That was probably another $23 million, but it's all related in the commercial real estate space, if you will. Look, it's been a mix. We probably saw about 30% of our ICRE balances were exited because the properties were sold.

Speaker #1: So there's been a little more—I think a little more—volume of sales occurring as some of the developers' owners are just saying, 'Look, I'm getting good pricing.'

Speaker #1: It's a good time to do it with the uncertainty. So that's a piece of it. We've seen about, maybe, close to a quarter of it go to the secondary market.

Archie Brown: We've seen about maybe close to a quarter of it go to the secondary market. We've seen other banks come back in. For several years, we weren't seeing the larger regionals in the space. They're back in and they're aggressive, and they're taking out loans. In some cases for us, hotels, we don't have a big book, but that's where some of it's come from. Other cases, loans that they're taking, and they're taking for very aggressive pricing or in some cases, structures that we don't think is appropriate. We're seeing some of it move like that. If you said property sales, secondary market, larger banks coming back in, and then some REIT exits, that's sort of been the mix of what we've seen happen.

Speaker #1: And then we've seen other banks come back in. For several years, we weren't seeing the larger regionals in the space. They're back in, and they're aggressive.

Speaker #1: And they're taking out loans. In some cases, for us hotels, we don't have a big book, but that's where some of it's come from.

Speaker #1: Other cases, loans that they're taking—and they're taking for very aggressive pricing. Or, in some cases, structures that we don't think are appropriate. So, we're seeing some of it move like that.

Speaker #1: So if you said property sales, secondary market, larger banks coming back in, and then some REIT exits, that's sort of been the mix of what we've seen happen.

Speaker #1: We can talk to our commercial real estate team—just what we're seeing in their conversation with borrowers. And just with the level of payoff requests coming in, they just are slowing.

Archie Brown: We've talked to our commercial real estate team, just what we're seeing in their conversation with borrowers and just with the level of payoff requests coming in, they just are slowing. What our team sees is that over the course of Q2, that will continue to slow. In addition, our production ramps up more in the quarter. The combination of the two, we don't know exactly where this is going to fall, of course. There's timing of payoffs, things that can occur. They're hopeful that they're going to be somewhere that portfolio around flattish for the quarter. If they're flattish, along with the other activity we have, I think that drives our growth overall.

Speaker #1: And what our team sees is that, over the course of the second quarter, that will continue to slow. In addition, our production ramps up more in the quarter.

Speaker #1: So the combination of the two we don't know exactly where this is going to fall, of course. There's timing of payoffs, things that can occur.

Speaker #1: But they're hopeful that they're going to be somewhere with that portfolio around flattish for the quarter. And if they're flattish, along with the other activity we have, I think that drives our growth overall.

Speaker #3: That's great. Very helpful detail there, Archie. I guess the other side of that, and you touched on it at the end, is the production.

Daniel Tamayo: That's great. Very helpful detail there, R.G. I guess the other side of that, and you touched on it at the end, is the production. I think you talked a little bit about it in the prepared remarks, but maybe talk about the pipeline and some of the drivers within that, particularly on the commercial side for the rest of the year.

Speaker #3: I think you talked a little bit about it in the prepared remarks, but maybe talk about the pipeline and some of the drivers within that, particularly on the commercial side.

Speaker #3: For the rest of the year.

Speaker #1: Yeah, the pipeline, I think we signaled, is pretty strong. Now, look, I guess everybody can define what a pipeline means. In the language we're using here, we call these advanced stage pipeline or a late stage pipeline.

Archie Brown: Sure. Yeah, the pipeline I think we signaled is pretty strong. Now look, I guess everybody can define what a pipeline means. In the language we're using here, we call these advanced-stage pipeline or a late-stage pipeline. Generally, this is where we've been awarded the business. That doesn't mean we'll close them all. Sometimes they'll fall out for different reasons. That's how we're looking at this, and it's up substantially from the early part of the year. We think that activity is continuing. The sentiment in the market, I know there's a lot of macro activity going on, but demand is pretty strong. Borrowers are pretty active, and we think the pipeline will continue to build. That's given us some confidence that we'll see the growth we've talked about. It's pretty much across the board.

Speaker #1: Generally, this is where we've been awarded the business. That doesn't mean we'll close them all. Sometimes they'll fall out for different reasons. But that's how we're looking at this.

Speaker #1: And it's up substantially from the early part of the year. And we think that activity is continuing. The sentiment in the market—I know there's a lot of macro activity going on—but demand is pretty strong.

Speaker #1: Borrowers are pretty active, and we think the pipeline will continue to build. So that's given us some confidence that we'll see the growth we've talked about.

Speaker #1: And it's pretty much across the board. When you look at all of the areas that we lend into, we're seeing good pipeline activity.

Archie Brown: When you look at all of the areas that we lend into, we're seeing good pipeline activity.

Speaker #3: Okay, great. And then lastly, again, on the same topic, but just curious, where do you guys stand? I mean, in Chicago right now, you closed the Bank Financial deal.

Daniel Tamayo: Okay, great. Then lastly, again, on the same topic, but just curious where you guys stand? In Chicago right now, you closed the BankFinancial deal. It was really for the deposit side. I know you had some presence there prior to the deal. Maybe update us on where you stand from a lender perspective and where you're looking to get to over time.

Speaker #3: It was really for the deposit side. I know you had some presence there prior to the deal, so maybe update us on where you stand from a lender perspective and where you're looking to get to over time.

Speaker #1: Sure. So, Danny, as we said, we closed early in the year, convert early June. As you said, it's been primarily a deposit play. Deposits are holding, I think, pretty well at this point.

Archie Brown: Sure. Daniel, as we said, we closed early in the year, conversion early June. As you said, it's been primarily a deposit play. Deposits are holding, I think, pretty well at this point, and we're sort of building out the team, if you will. We've added some commercial banking talent. We had a team. I think we've added one here in the last month or two. We plan to add more bankers to the commercial banking team. We've added wealth advisors to the team, private bankers to the team. We're kind of filling out, if you will, what I call the more wholesale commercial team to complement the retail strategy. We think there's good opportunity. If you go back and look at that bank, they really weren't generating activity in those areas to speak of.

Speaker #1: And we're sort of building out the team, if you will. So we've added some commercial banking talent. We had a team—I think we've added one here in the last month or two.

Speaker #1: We plan to add more bankers to the commercial banking team. We've added wealth advisors to the team, private bankers to the team. So we're kind of filling out, if you will, what I call more the wholesale commercial team, to complement the retail strategy.

Speaker #1: And we think there's good opportunity. If you go back and look at that bank, they really weren't generating activity in those areas, to speak of.

Speaker #1: So we think as we get the team filled out, almost anything we do there is going to be additive to the bank's balance sheet.

Archie Brown: We think as we get the team filled out, almost anything we do there is going to be additive to the bank's balance sheet.

Speaker #3: Got it. Thanks for all the color, Archie.

Daniel Tamayo: Got it. Thanks for all the color, R.G.

Speaker #1: Yeah, good seeing you, Danny.

Archie Brown: Yeah. Good seeing you, Danny.

Speaker #4: Your next question comes from Delaunay Brandon Rood with Stevens. Your line is open.

Operator: Your next question comes from the line of Brandon Rud with Stephens. Your line is open.

Brandon Rud: Morning, guys.

Speaker #3: Morning, guys. I guess maybe my first one—I think the cost of interest-bearing deposits was $233 million for the full quarter. I'm just curious, embedded within your NIM guide, is that kind of a good starting base for the second quarter?

Archie Brown: Good morning.

Brandon Rud: I guess maybe my first one. I think the cost of interest-bearing deposits was 233 for the full quarter. I'm just curious, embedded within your NIM guide, is that kind of a good starting base for Q2, or I guess, yeah. Is that still a good starting point for Q2?

Speaker #3: Or I guess, yeah, is that still a good starting point for the second quarter?

Speaker #1: Yeah, when we talked—when we're talking deposits, Brandon, we really talk more kind of the overall—I think our overall cost of deposits.

Archie Brown: Yeah. When we're talking deposits, Brandon, we really talk more kind of the overall, I think our overall cost of deposits. But that number that you're quoting there, that's I guess the exit.

Jamie Anderson: Yeah. When we're talking deposits, Brandon, we really talk more kind of the overall, I think our overall cost of deposits. But that number that you're quoting there, that's I guess the exit.

Speaker #1: So, that—but that number that you are quoting there, I mean, I guess the exit cost going into the second quarter would be slightly lower.

James Anderson: Going into Q2 would be slightly lower than that. We're showing our overall cost of deposits in Q1 was 183, and we think we can get that down in Q2 another 2 or 3 basis points. The cost of interest-bearing deposits would just kind of flow right off of that as well, obviously. Our starting kind of cost of deposits in Q2, again, 183 for the full quarter. In Q1, the starting point is around 180, 181.

Jamie Anderson: Going into Q2 would be slightly lower than that. We're showing our overall cost of deposits in Q1 was 183, and we think we can get that down in Q2 another 2 or 3 basis points. The cost of interest-bearing deposits would just kind of flow right off of that as well, obviously. Our starting kind of cost of deposits in Q2, again, 183 for the full quarter. In Q1, the starting point is around 180, 181.

Speaker #1: Than that. And so we are we're showing our overall cost of deposits in the first quarter was 183. And we think we can we think we can get that down in the second quarter another two or three basis points.

Speaker #1: So the cost of interest-bearing deposits would just kind of flow right off of that as well, obviously. So our starting kind of cost of deposits in the second quarter, again, 1.83% for the full quarter. In the first quarter, the starting point is around 1.80%, 1.81%.

Speaker #3: Okay, perfect. Thank you for that. And then I think you said the fourth quarter of this year, I think, is going to be the first clean quarter with all the expenses taken out.

Brandon Rud: Okay, perfect. Thank you for that.

Brandon Rud: Okay.

Jamie Anderson: Okay.

Brandon Rud: Then, I think you said Q4 of this year, I think is going to be the first clean quarter with all the expenses taken out. Thank you for the guide for Q2. I'm assuming it kind of stairsteps down from there. I guess, what does that all-in run rate with all the cost saves kind of look like in Q4 then?

Speaker #3: So, thank you for the guide for the second quarter. I'm assuming it kind of stair-steps down from there. I guess, what does that all-in run rate with all the cost saves kind of look like in the fourth quarter, then?

Speaker #1: Yeah, so we will—we'll get a stair-step down here in the, let's see here... in the second quarter. Call it down into that range where we guide it to.

James Anderson: Yeah. We'll get a stairstep down here in the, let's see here, in the Q2. Call it down into that range where we guided to, and we think then it is relatively flat for the remainder of the year. We may get a little bit more coming down, but obviously we have some other stuff outside of the acquisitions where we're making other investments and whatnot, where costs are moving up just like normal in that 2% or 3% range. That's going to offset the decline really from the BankFinancial deal. The BankFinancial deal obviously was a little bit smaller in their expense base. The Q4, so we should see that step down in the Q2, which gets us to that guide that we put in the outlook. Then it's relatively flat for the out quarters.

Jamie Anderson: Yeah. We'll get a stairstep down here in the, let's see here, in the Q2. Call it down into that range where we guided to, and we think then it is relatively flat for the remainder of the year. We may get a little bit more coming down, but obviously we have some other stuff outside of the acquisitions where we're making other investments and whatnot, where costs are moving up just like normal in that 2% or 3% range. That's going to offset the decline really from the BankFinancial deal. The BankFinancial deal obviously was a little bit smaller in their expense base. The Q4, so we should see that step down in the Q2, which gets us to that guide that we put in the outlook. Then it's relatively flat for the out quarters.

Speaker #1: And we think then it is relatively flat for the remainder of the year. We may get a little bit more coming down, but obviously, we have some other stuff outside of the acquisitions, where we're making other investments and whatnot, where costs are moving up just like normal in that 2 or 3 percent range.

Speaker #1: That's going to offset the decline, really, from the bank financial deal. And the bank financial deal, obviously, was a little bit smaller in there.

Speaker #1: And their expense base. But the fourth quarter, so we should see that step down in the second quarter, which gets us to that guide that we put in the outlook.

Speaker #1: And then it's relatively flat for those for the out quarters.

Speaker #3: Gotcha. Okay, so the cost savings effectively fund the investments, and that's a stable rate. Okay, got it. Thank you very much.

Brandon Rud: Got you. Okay, so the cost savings effectively fund the investments, and that's a stable rate.

Brandon Rud: Correct.

Jamie Anderson: Correct.

Brandon Rud: Okay. Got it.

James Anderson: That's right. Yep.

Jamie Anderson: That's right. Yep.

Brandon Rud: Thank you very much.

Speaker #1: Yep.

James Anderson: Uh.

Jamie Anderson: Uh.

Speaker #4: Your next question comes from Delaunay Carl Shepherd with RBC Capital Markets. Your line is open.

Operator: Your next question comes from the line of Karl Shepard with RBC Capital Markets. Your line is open.

Karl Shepard: Hey, good morning, guys.

Speaker #5: Hey, good morning, guys.

Speaker #1: Hey, Carl.

James Anderson: Hey, Karl.

Jamie Anderson: Hey, Karl.

Karl Shepard: I guess I just want to start on the margin quick. We have the guide for Q2, but just thinking about your balance sheet, I'm guessing if we don't see any cuts, that's probably a pretty good spot to be for the rest of the year. Should we be thinking about loan growth maybe at changing the mix a little bit and helping the margin?

Speaker #5: I guess I just wanted to start on the margin, quick. We have the guide for Q2, but just thinking about your balance sheet, I'm guessing if we don't see any cuts, that's probably a pretty good spot to be in for the rest of the year.

Speaker #5: Or should we be thinking about loan growth, maybe changing the mix a little bit and helping the margin?

Speaker #1: Yeah, yeah, this is Jamie, Carl. Yeah, so that guide, obviously, was rate cuts getting—looks like—getting pushed out, and either later in the year or into '27 at this point. Obviously, helps us from a margin standpoint, being slightly asset sensitive.

James Anderson: Yeah. This is Jamie Anderson, Karl Shepard. Yeah, so that guide, obviously with rate cuts, looks like getting pushed out, and either later in the year or into 2027 at this point, obviously helps us from a margin standpoint, being slightly asset sensitive. Yeah. As we remix out of some of the securities balances that we've put on with the liquidity that we got especially from the BankFinancial deal, you could see, and it's not a lot, obviously, because based on the earning asset base that we have, that rotation is relatively small out of the securities book into the. If we have loan growth in that 5% to 7% range, you're talking about $200 million a quarter, right?

Jamie Anderson: Yeah. This is Jamie Anderson, Karl Shepard. Yeah, so that guide, obviously with rate cuts, looks like getting pushed out, and either later in the year or into 2027 at this point, obviously helps us from a margin standpoint, being slightly asset sensitive. Yeah. As we remix out of some of the securities balances that we've put on with the liquidity that we got especially from the BankFinancial deal, you could see, and it's not a lot, obviously, because based on the earning asset base that we have, that rotation is relatively small out of the securities book into the. If we have loan growth in that 5% to 7% range, you're talking about $200 million a quarter, right?

Speaker #1: But yeah, so when we as we remix out of some of the securities balances, that we've put on with the liquidity that we got from especially from the bank financial deal, you could see and it's not a lot, obviously, because based on the earning asset base of based on the earning asset base that we have, that rotation is relatively small out of the securities book, into the if we have loan growth in that 5 to 7 percent range, you're talking about a couple hundred million dollars a quarter, right?

Speaker #1: So if we rotate out of securities for a portion or all of that, it's just not that much to basically get a lot of lift in the margin.

James Anderson: If we rotate out of securities for a portion or all of that, it's not that much to basically get a lot of lift in the margin. You might see a basis point or two.

Jamie Anderson: If we rotate out of securities for a portion or all of that, it's not that much to basically get a lot of lift in the margin. You might see a basis point or two.

Speaker #1: But you might see a basis point or two.

Speaker #5: Okay. And then I saw on the deck a new branch in the Westfield markets. I'm assuming that was planned ahead of the merger, but just—we've talked a little bit about Chicago expectations and investments there.

Karl Shepard: Okay. I saw on the deck, a new branch in the Westfield markets. I'm assuming that was planned ahead of the merger, but just, we talked a little bit about Chicago expectations and investments there a few questions ago, but anything in Westfield markets to flag?

Speaker #5: Two questions to go. But anything in Westfield markets to flag?

Speaker #1: Yeah, Carl, this is Archie. So, specific to that branch, that was actually a branch underway when we were negotiating and announcing a deal. They already had that branch under construction.

Archie Brown: Yeah, Carl, this is R.T. Specific to that branch, that was actually a branch underway when we were negotiating and announcing the deal. They already had that branch under construction. We just actually opened it up as a First Financial branch prior to the conversion, which was, I think, a good thing from training and letting people kind of get introduced to First Financial. With regard to other things we're doing in the Northeast Ohio market, I think all together, there's about 4 FTE added because of Wadsworth, that branch. I think we've added about another 9 producers, whether they be on the commercial, small business side, wealth, private banking. We've added about 9 producers to that market to kind of round out all the things that we do. That's all baked into the expense numbers as well.

Speaker #1: So we just completed—actually, we opened it up as a First Financial branch prior to the conversion. Which was, I think, a good thing from a training standpoint and letting people get to use, kind of get introduced to First Financial.

Speaker #1: With regard to other things we're doing in the Northeast Ohio market, I think altogether, I think there's about four FTE added because of Wadsworth, that branch.

Speaker #1: I think we've added about another nine producers, whether they be on the commercial, small business side, wealth, or private banking. We've added about nine producers to that market to kind of round out all the things that we do.

Speaker #1: That's all baked into the expense numbers as well, but we think there's upside in adding the additional production capability.

Archie Brown: We think there's upside adding the additional production capability.

Speaker #5: Okay. Thank you both.

Karl Shepard: Okay. Thank you both.

Speaker #1: Yep.

Archie Brown: Yep.

Speaker #4: Your next question comes from the line of Ryan Foreign with Truist. Your line is open.

Operator: Your next question comes from the line of Brian Foran with Truist. Your line is open.

Brian Foran: Hey, good morning. Your capital's rebuilt pretty quickly here, which is a good problem to have. In some ways, maybe it's just an open-ended question on what you're thinking going forward. I think you mentioned maybe evaluating more buybacks. And then as part of that, if there's anything notable to share around Basel III or around how you're thinking about the binding minimum between CET1 and TCE and things like that. Yeah, really just kind of focused on the excess capital and what you're thinking for the next 12 months or so.

Speaker #6: Hey, good morning. Your capitals rebuilt pretty quickly here, which is a good problem to have. I mean, in some ways, maybe it's just an open-ended question on what you're thinking going forward.

Speaker #6: I think you mentioned maybe evaluating more buybacks. And then, as part of that, if there's anything notable to share around Basel III or around how you're thinking about the binding minimum between CET1 and TCE and things like that.

Speaker #6: But yeah, really just kind of focused on the excess capital and what you're thinking for the next 12 months or so.

Speaker #1: Yeah. Yeah, Brian, this is Jamie. So yeah, if you we are compounding capital at a high rate just based on our based on our earnings level.

James Anderson: Yeah. Brian, this is Jamie. Yeah, we are compounding capital at a high rate just based on our earnings level. If you look back pre-Westfield Bank and BankFinancial, maybe to a lesser extent, BankFinancial. If you look back pre-acquisition, at the end of Q3, and I'm talking about our tangible book value per share, we're basically back to where we were now pre-acquisition level, which we were very pleased with. We are piling in at this earnings level a lot of capital. Really, when you think about it, for us, our regulatory ratios are fine. We have a lot of cushion there. Typically, our constraint when we look at an acquisition typically is in the TCE ratio. We're close to eight now, just below eight.

Jamie Anderson: Yeah. Brian, this is Jamie. Yeah, we are compounding capital at a high rate just based on our earnings level. If you look back pre-Westfield Bank and BankFinancial, maybe to a lesser extent, BankFinancial. If you look back pre-acquisition, at the end of Q3, and I'm talking about our tangible book value per share, we're basically back to where we were now pre-acquisition level, which we were very pleased with. We are piling in at this earnings level a lot of capital. Really, when you think about it, for us, our regulatory ratios are fine. We have a lot of cushion there. Typically, our constraint when we look at an acquisition typically is in the TCE ratio. We're close to eight now, just below eight.

Speaker #1: And if you look back, back pre-Westfield and bank financial, I mean, maybe to a lesser extent, bank financial, but if you look back pre-acquisition, at the end of the third quarter, and I'm talking about our tangible book value per share, we're basically back to where we were now pre-acquisition level.

Speaker #1: So what we were very pleased with. So we are piling in at this earnings level a lot of capital. And really, when you think about it for us, I mean, our regulatory ratios are fine.

Speaker #1: We have a lot of cushion there. Typically, our constraint when we look at if we look at an acquisition, our constraint typically is in the TCE ratio.

Speaker #1: We're close to 8 now. Just below 8, obviously, we have some AOCI impact in there. And then rates moved against us a little bit in the first quarter too, or that would have been even a little bit higher.

James Anderson: Obviously, we have some AOCI impact in there, and then rates moved against us a little bit in Q1 too, or that would've been even a little bit higher. Our typical constraint's the TCE ratio. We would like to have that above eight, and we're getting there pretty quickly. When we talk about buyback and looking at that, obviously we're going to be mindful of price and the earn back on a buyback and looking at that TCE ratio. When we look at the common dividend, we have a payout ratio in the low 30s, call it 30% to 35% now based on our earnings level post-acquisition. We wanted to get a quarter or two of impact in from the acquisitions to see where we were from a capital ratio standpoint, where everything was going to fall out.

Jamie Anderson: Obviously, we have some AOCI impact in there, and then rates moved against us a little bit in Q1 too, or that would've been even a little bit higher. Our typical constraint's the TCE ratio. We would like to have that above eight, and we're getting there pretty quickly. When we talk about buyback and looking at that, obviously we're going to be mindful of price and the earn back on a buyback and looking at that TCE ratio. When we look at the common dividend, we have a payout ratio in the low 30s, call it 30% to 35% now based on our earnings level post-acquisition. We wanted to get a quarter or two of impact in from the acquisitions to see where we were from a capital ratio standpoint, where everything was going to fall out.

Speaker #1: So our typical constraints to TCE ratio, we would like to be that like to have that above 8. And we're getting there pretty quickly.

Speaker #1: But when we talk about buyback and looking at that, obviously, we're going to be mindful of price and the earnback on that on a buyback, and looking at that TCE ratio.

Speaker #1: But we are so we have a when we look at the common dividend, we have a payout ratio in the low 30s. Call it 30 to 35 percent now based on our earnings level post-acquisition.

Speaker #1: So, we wanted to get a couple— a quarter or two— of impact in from the acquisitions to see where we were from a capital ratio standpoint, where everything was going to fall out.

Speaker #1: And then so we had the board approve the share buyback. We haven't done any buybacks in several years, mainly because of well, several things.

James Anderson: We had the board approve the share buyback. We haven't done any buybacks in several years, mainly because of, well, several things. We had a couple of non-bank acquisitions during that. We haven't done a buyback since 2021. We had a couple of the non-bank acquisitions in there, which ate up a pretty significant amount of capital for us because they were basically all cash deals. All goodwill ate into the TCE ratio. We think we're at a level now, especially with our earnings, the amount of capital we're bringing in, where we can look at buybacks and potentially, I think what we're looking at is looking at that total payout ratio again, which now with just the common dividend is in the low 30s of increasing that somewhere in that 50% to 60% range.

Jamie Anderson: We had the board approve the share buyback. We haven't done any buybacks in several years, mainly because of, well, several things. We had a couple of non-bank acquisitions during that. We haven't done a buyback since 2021. We had a couple of the non-bank acquisitions in there, which ate up a pretty significant amount of capital for us because they were basically all cash deals. All goodwill ate into the TCE ratio. We think we're at a level now, especially with our earnings, the amount of capital we're bringing in, where we can look at buybacks and potentially, I think what we're looking at is looking at that total payout ratio again, which now with just the common dividend is in the low 30s of increasing that somewhere in that 50% to 60% range.

Speaker #1: We’ve had a couple of non-bank acquisitions during that. So we haven’t done a buyback since ’21. And we had a couple of the non-bank acquisitions in there, which ate up a pretty significant amount of capital for us because they were all basically all-cash deals.

Speaker #1: And so all goodwill ate into the TCE ratio. So we think we're at a level now, especially with our earnings, the amount of capital we're bringing in, where we can look at buybacks.

Speaker #1: And potentially, I think what we're looking at is looking at that total payout ratio—again, which now, with just the common dividend, is in the low 30s—of increasing that somewhere in that 50 to 60 percent range.

Speaker #1: And so if you do that—if you do that math—the other, obviously, the other piece of that is the buyback. So you're talking about another 20 to 30 points of where the buyback would play into that.

James Anderson: If you do that math, obviously the other piece of that's the buyback. You're talking about another 20 to 30 points of where the buyback would play into that. I don't know if we're saying we're guaranteeing we're going to do that. You could probably see us execute some on the buyback. It would be dependent on some other factors, potentially macro factors. If we see a strategic M&A deal, we would prioritize that in front of the buyback. Yeah. I think absent that, I think you would see us start executing on the buyback.

Jamie Anderson: If you do that math, obviously the other piece of that's the buyback. You're talking about another 20 to 30 points of where the buyback would play into that. I don't know if we're saying we're guaranteeing we're going to do that. You could probably see us execute some on the buyback. It would be dependent on some other factors, potentially macro factors. If we see a strategic M&A deal, we would prioritize that in front of the buyback. Yeah. I think absent that, I think you would see us start executing on the buyback.

Speaker #1: And then, but that—we're, I don't know if we're saying we're guaranteeing we're going to do that. You could probably see us execute some on the buyback.

Speaker #1: It would be dependent on some other factors, potentially macro factors, and then we would, if we see a strategic M&A deal, we would prioritize that in front of the buyback.

Speaker #1: But yeah, I think absent that, I think you would see us start executing on the buyback.

Speaker #5: That's great. Thank you for all the detail. If I could ask one follow-up. The theory paydown discussion was really helpful. I think the last point you made was seeing some pricing and structure that you don't necessarily want to match.

Brian Foran: That's great. Thank you for all the detail. If I could ask one follow-up. The theory pay down discussion was really helpful. I think the last point you made was seeing some pricing and structure that you don't necessarily want to match. I wonder if just anecdotally, at the aggressive end of the market, could you share where you're seeing yields or spreads get to, and are there any particular points in structure that you're seeing people give on? Is it an LTV thing? Is it a personal guarantee thing? What are the kind of things you're seeing in the market that you don't want to match?

Speaker #5: I wonder if, just anecdotally, kind of at the aggressive end of the market, you could share where you’re seeing yields or spreads get to?

Speaker #5: And are there any particular points and structure that you're seeing people give on? Is it an LTV thing? Is it a personal guarantee thing?

Speaker #5: What are the kinds of things you're seeing in the market that you don't want to match?

Speaker #1: Yeah. This is Archie. Well, I mean, we had a deal that we were we thought we were within days of closing. It's like a 25 or $30 million transaction.

Archie Brown: Yeah. This is Archie. We had a deal that we thought we were within days of closing. It's like a $25 or $30 million transaction. We thought we were in days of closing, and one of the large regionals had been competing on it. I guess when they realized they had lost it, they came back and basically eliminated the covenants. It wasn't even changed. It just eliminated the covenants. We're seeing that. Certainly, on a fixed charge coverage ratio, those numbers may be coming down. It's those kind of things in particular. Pricing is aggressive also. I may have mentioned earlier, but certainly sub 200 basis points of spread, 170, 180, in some cases lower. For some commercial, really high-quality commercial deals, even lower on spread. It tends to be really aggressive pricing.

Speaker #1: We thought we were in days of closing, and one of the large regionals had been competing on it. And then, I guess, when they realized they had lost it, they came back.

Speaker #1: And, basically, eliminated the covenants. So it wasn't even changed; it was just eliminated, the covenants. So we're seeing that. We're certainly, on a fixed charge coverage ratio, those numbers may be coming down.

Speaker #1: It's those kind of things in particular. Pricing is aggressive also. I may have mentioned earlier, but certainly sub-200 basis points of spread. 170, 180 in some cases lower.

Speaker #1: For some commercial, really high-quality commercial deals, even lower on spread. So it tends to be really aggressive pricing. Loosening up some of the coverage ratios would be probably the primary areas we're seeing it.

Archie Brown: Loosening up some of the coverage ratios would be probably the primary areas we're seeing it.

Speaker #5: All right. Hopefully, it's not true with swooping in with no covenants. Thank you for that.

Brian Foran: All right. Hopefully it's not Truist swooping in with no covenants. Thank you for that.

Speaker #1: Yeah. Well, I think the point here, too, is—I mean, I think everybody's excited about activity and wanting loan growth. And we want it, too.

Archie Brown: Yeah. Well, I think the point here too is, I think everybody's excited about activity and wanting loan growth, and we want it too. We don't want to give up our skis. We're going to get growth, but we want it to make sense, and we want to be happy about it two years from now.

Speaker #1: But we don't want to give our skies. So we're going to get growth, but we need to—we want it to make sense, and we want to be happy about it two years from now.

Speaker #5: Agreed. Thank you.

Brian Foran: Agreed. Thank you.

Speaker #6: Before going to the next question, again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Lon of Brandon Nozel with Half Day Group.

Operator: Before going to the next question, again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Brendan Nosal with Hovde Group. Your line is open.

Speaker #6: Your line is open.

Speaker #5: Hey, good morning, guys. Hope you're doing well.

Brendan Nosal: Hey, good morning, guys. Hope you're doing well.

Speaker #1: Hey, Brandon.

Archie Brown: Hey, Brandon.

Speaker #5: Maybe just starting off here on some of the just the overall balance sheet. Looks like there's some pretty big discrepancies between where spot balances were for kind of loans, cash, and securities versus average balances for the quarter.

Brendan Nosal: Maybe just starting off here on some of the, just the overall balance sheet. Looks like there's some pretty big discrepancies between where spot balances were for loans, cash, and securities versus average balances for the quarter. I get there's a lot of noise. I guess can you fill us in on when the BankFinancial loan sale occurred during the quarter? Where do you see overall average earning assets landing in Q2?

Speaker #5: And I get there's a lot of noise. So I guess, can you fill us in on when the bank financial loan sale occurred during the quarter?

Speaker #5: And then, where do you see overall average earning assets landing in the second quarter?

Speaker #1: Yep. Yeah. Great question, Brandon. This is Jamie. So the loan sale closed on at the end of the very end of the quarter. It closed on March 30.

James Anderson: Yeah. Great question, Brandon. This is Jamie. The loan sale closed at the very end of the quarter. It closed on 30 March. When you look at our cash and securities, we had, call it roughly $400 million sitting in cash, not in securities. It was sitting in cash at the end of the quarter. That $400 million-ish, we will not put that to work in the securities portfolio. We will kind of slowly let higher cost either borrowings or deposits or broker deposits run out, and we'll fund that with the cash from that loan sale. When you're talking about earning assets, the earning asset base for the Q1 kind of spot at the end of the quarter was around $19.7 million. If you take that $400 out, as it was sitting in cash.

Jamie Anderson: Yeah. Great question, Brandon. This is Jamie. The loan sale closed at the very end of the quarter. It closed on 30 March. When you look at our cash and securities, we had, call it roughly $400 million sitting in cash, not in securities. It was sitting in cash at the end of the quarter. That $400 million-ish, we will not put that to work in the securities portfolio. We will kind of slowly let higher cost either borrowings or deposits or broker deposits run out, and we'll fund that with the cash from that loan sale. When you're talking about earning assets, the earning asset base for the Q1 kind of spot at the end of the quarter was around $19.7 million. If you take that $400 out, as it was sitting in cash.

Speaker #1: So when you look at our cash and securities, we had, call it, roughly $400 million sitting in cash—not in securities. It was sitting in cash at the end of the quarter.

Speaker #1: And so that $400 million-ish, we will not put that into work in the securities portfolio. We will kind of slowly let higher-cost either borrowings or deposits or broker deposits run out, and we'll fund that with the cash from that loan sale.

Speaker #1: And then, so when you're talking about earning assets, the earning asset base for the first quarter, kind of spot at the end of the quarter, was $19 billion.

Speaker #1: Around $19.7 million, so if you take that $400 out, it was sitting in cash. I guess it's sitting in interest-bearing deposits at banks.

James Anderson: I guess it's sitting in interest-bearing deposits at banks. That will come out and then you'll start to see, again, with the loan growth that we guided to. Again, if that's in that 5% to 7% range, you're talking about a couple hundred, like $200 million a quarter. Our plan is to fund about half of that with cash flows from the securities portfolio. Then the rest, we'll grow the earning asset base. You're talking about maybe $100 million or so increase in earning assets each quarter. Does that make sense?

Jamie Anderson: I guess it's sitting in interest-bearing deposits at banks. That will come out and then you'll start to see, again, with the loan growth that we guided to. Again, if that's in that 5% to 7% range, you're talking about a couple hundred, like $200 million a quarter. Our plan is to fund about half of that with cash flows from the securities portfolio. Then the rest, we'll grow the earning asset base. You're talking about maybe $100 million or so increase in earning assets each quarter. Does that make sense?

Speaker #1: So that will come out. And then you'll start to see again, with the loan growth, that we guided to if that is again, if that's in that 5 to 7 percent range, you're talking about a couple hundred like 200 million dollars a quarter our plan is to fund about half of that with cash flows from the securities portfolio and then the rest we will grow the earning asset base.

Speaker #1: So you're talking about maybe 100 million or so increase in earning assets each quarter. Does that make sense?

Speaker #5: Yeah, yeah. And then, just— I guess there's still a bit of a discrepancy on my end, just kind of where that number will land in the second quarter.

Brendan Nosal: Yeah. Just I guess there's still a bit of a discrepancy on my end of just kind of where that number will land in Q2, just with the moving pieces. Can you just maybe help a little more on kind of where AEAs land?

Speaker #5: Just with the moving pieces, can you maybe help a little more on kind of where AEAs land?

Speaker #1: Yeah, so you're talking around 19.5 million.

James Anderson: Yeah. You're talking around $19.5 million.

Jamie Anderson: Yeah. You're talking around $19.5 million.

Speaker #5: Okay. All right. Fantastic. Thank you. Thank you. Maybe turning back to the margin just kind of unpacking the core NIM execretion versus the accretion piece.

Brendan Nosal: Okay. All right. Fantastic. Thank you. Maybe turning back to the margin, just kind of unpacking the core NIM ex-accretion versus the accretion piece. I think you had 10 basis points this quarter of fair value accretion. Just kind of curious when you kind of look at the path for that, what does that number look like?

Speaker #5: I think you had 10 basis points this quarter of fair value accretion. Just kind of curious when you kind of look at the path for that, what does that number look like?

Speaker #1: Yeah, we think that'll be relatively steady at that 10 basis points. Obviously, it could move around if we get either a slowdown—it's all based on the amount of payoff or prepayments that we get on that portfolio.

James Anderson: Yeah. We think that'll be relatively steady at that 10 basis points. Obviously, it could move around if we get either a slowdown, and it's all based on the amount of payoffs/prepayments that we get on that portfolio. Somewhere around that 10 basis point range in that four to... and the dollars would be around that $4 to $5 million of accretion income.

Jamie Anderson: Yeah. We think that'll be relatively steady at that 10 basis points. Obviously, it could move around if we get either a slowdown, and it's all based on the amount of payoffs/prepayments that we get on that portfolio. Somewhere around that 10 basis point range in that four to... and the dollars would be around that $4 to $5 million of accretion income.

Speaker #1: But if you somewhere around that 10 basis point range, in that in the dollars would be around that 4 to 5 million dollars of accretion income.

Speaker #5: Okay. Okay. Perfect. Last one from me here. Just when you kind of look out at growth expectations for the balance of the year, can you kind of dissect that between the core commercial bank versus your various specialty businesses?

Brendan Nosal: Okay. Perfect. Last one from me here. Just when you kind of look out at growth expectations for the balance of the year, can you kind of dissect that between the core commercial bank versus your various specialty businesses?

Speaker #1: Yeah, this is Archie. So, when you say the specialty, are you meaning core versus specialty, including Summit and Oak Street, things like that?

Archie Brown: Yeah, this is Archie. When you say the specialty, are you meaning core versus like specialty including Summit and Oak Street, things like that?

Brendan Nosal: Yeah. Yeah, when I say specialty, Oak Street, Summit, Agile, those folks versus kind of the traditional commercial bank.

Speaker #5: Yeah, so, yeah. When I say especially Oak Street, Summit, Agile, those books versus kind of the traditional commercial bank.

Speaker #1: Yeah, I mean, it's just off the top of my head, but I'd say it's slightly tilted towards the core commercial. Agile is going to grow, but they're going to grow—it's just the base is not that huge, and if they grow, I can't recall now, $20 or $30 million.

Archie Brown: Yeah. It's just top of my head, but I'd say it's slightly tilted towards the core commercial. Agile is going to grow, but they're going to grow, it's just the base is not that huge. If they grow, I can't recall now, $20, $30 million. Summit will grow, but their amortizations have picked up, so their growth rates are just not as strong as they used to be. Specialty is contributing. I would say we're talking commercial, core commercial consumer is going to be, if you said 50% to 60%, maybe 65%.

Speaker #1: Summit will grow, but their amortizations have picked up, so their growth rates are just not as strong as they used to be. So, specialties are contributing, but I would say we're talking commercial, core commercial. Consumer is going to be, if you said 50% to 60%, maybe 65%.

Speaker #5: Yeah. Yeah. Excellent. Thanks, David.

Brendan Nosal: Yeah. Okay. Excellent. Thanks.

James Anderson: This is Jamie. Yeah. I would say it's about two-thirds, one-third. Agile, the Q2 is their big quarter for growth.

Jamie Anderson: This is Jamie. Yeah. I would say it's about two-thirds, one-third. Agile, the Q2 is their big quarter for growth.

Speaker #1: Yeah. Jamie. Yeah. That's about I would say it's about two-thirds, one-third, and then Agile, they have a the second quarter is their big quarter for growth.

Speaker #5: Big quarter. Yeah.

Archie Brown: Yes.

Speaker #1: Yes.

Speaker #5: Yeah. Yeah. Okay. Fantastic.

Brendan Nosal: Yep. Okay. Fantastic.

Speaker #3: I'll now turn the call back over to Archie Brown for closing remarks.

Operator: I'll now turn the call back over to Archie Brown for closing remarks.

Archie Brown: Thank you, Kate. I want to thank everybody for joining us today and following along our progress during the Q1. We look forward to talking again Q2, and hopefully we'll be sharing even more good news with you. Have a great day. Have a great weekend. Bye now.

Speaker #1: Thank you, Katie. I want to thank everybody for joining us today and following along our progress during the first quarter. We look forward to talking again in the second quarter, and hopefully, we'll be sharing even more good news with you.

Speaker #1: Have a great day. Have a great weekend. Bye now.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Q1 2026 First Financial Bancorp Earnings Call

Request DemoDemo

First Financial Bank

Earnings