First Financial Bancorp. Q4 2024 Earnings Call Transcript

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January 24, 2025
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Operator

Thank you for standing by, and welcome to the First Financial Bancorp 4th Quarter 20 24 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. I'd now like to turn the call over to Scott Crawley. You may begin.

Scott Crawley
Scott Crawley
Senior VP, Controller & Principal Accounting Officer at First Financial Bancorp

Yes.

Scott Crawley
Scott Crawley
Senior VP, Controller & Principal Accounting Officer at First Financial Bancorp

Thank you, Rob. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's 4th quarter and full year financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer Jamie Anderson, Chief Financial Officer and Bill Harrod, 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.

Scott Crawley
Scott Crawley
Senior VP, Controller & Principal Accounting Officer at First Financial Bancorp

Additionally, please refer to the forward looking statement disclosure contained in the Q4 2024 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we will provide today is accurate as of December 31, 2024, and we will not be updating any forward looking statements to reflect facts or circumstances after this call. I'll now turn the call over to Archie Brown.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yesterday afternoon, we announced our financial results for the Q4 and full year 2024. Before I turn the call over to Jamie, I would like to provide some highlights from the most recent quarter and recap this year's exceptional performance. I'm very pleased with our strong Q4. Adjusted earnings per share were $0.71 leading to return on assets of 1.7% and return on tangible common equity ratio of 19.9%. As expected due to decreases in short term rates by the Fed, the decline in asset yields outpaced the decline in deposit costs leading to a reduction in our net interest margin to 3.94%.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Balance sheet trends were very strong for the quarter with loan growth exceeding 7% on an annualized basis and total deposits surging by approximately 16% on an annualized basis. Non interest income was robust in the Q4 with leasing, foreign exchange and wealth management income all increasing by double digit percentages from the linked quarter. While expenses increased by 5% from the linked quarter, the increase was driven by higher incentive compensation tied to the strong fee income and overall company performance. Our workforce efficiency initiative continued during the quarter and we've eliminated 145 positions to date. We expect to complete this work in 2025.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Asset quality was relatively stable for the quarter. Non performing assets were flat compared to the linked quarter at 0.36%, while classified assets increased by 7 basis points to 1.21%. The increase in classified assets was driven by the mutually agreed upon termination of a foreign exchange trade resulting in a $45,000,000 obligation from the customer which we believe is fully collateralized. We expect the customer to pay this obligation in 2025. Net charge offs were slightly elevated due to the resolution of 3 loans that have been longer term workouts.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

We believe that overall credit trends are improving and as a result, we anticipate lower credit costs going forward. 2024 was an excellent year for our company. On an adjusted basis, we earned $249,000,000 or $2.61 per share, while return on assets was 1.4% return on assets was 1.4% and return on tangible common equity was 19.9%. While the net interest margin declined from 4.4% to 4.05% due to declining short term rates, strong loan growth offset most of the impact with net interest income declining by only 2.5%. Non interest income increased by more than 13% to a record $241,800,000 led by growth in leasing and wealth management income.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

The result was record revenue for the company of approximately $854,000,000 which was a 2% increase over 2023. I'm very pleased with our balance sheet growth for the year. Total loans increased by 7.6 percent to $11,800,000,000 and total deposits increased by 7.2 percent to $14,300,000,000 Additionally, tangible common equity increased by 56 basis points to 7.73 percent and tangible book value per share increased from $12.38 to $14.15 which was a 14% increase. Similar to Q4, asset quality was relatively stable for the year. Net charge offs as a percentage of average loans declined 3 basis points to 30 basis points and nonperforming assets as a percent of total assets declined by 2 basis points to 0.36%.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

With that, I'll now turn the call over to Jamie to discuss these results in greater detail. After Jamie's discussion, I will wrap up with some additional forward looking commentary and closing remarks. Jamie?

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Thank you, Archie, and good morning, everyone. Slides 4, 5 and 6 provide a summary of our most recent financial results. The 4th quarter was highlighted by strong earnings and a net interest margin that exceeded our expectations as well as both loan and deposit growth. Our net interest margin remains very strong at 3.94 despite a decline of 14 basis points from the linked quarter. Deposit costs declined 13 basis points during the period, while loan yields decreased 37 basis points.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Loan growth exceeded our expectations during the quarter coming in at 7% on an annualized basis. The growth was not concentrated in one particular area, it's C and I, ICRE, mortgage and leasing all having strong quarters. Average deposit balances increased $543,000,000 or 16% on an annualized basis. We had broad based growth across all product types, excluding savings accounts and high cost brokered CDs. We maintained 21% of our total balances in non interest bearing accounts and are strategically focused on growing lower cost deposit balances.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Turning to the income statement. 4th quarter fee income was solid, led by foreign exchange, leasing and record wealth management income. Non interest expenses increased slightly from the linked quarter due to higher incentive compensation, which was tied to fee income and our overall company performance. However, the impact from our efficiency initiative is becoming more meaningful and we expect to see further benefits in the coming periods. Our ACL coverage decreased 4 basis points during the quarter to 1.33 percent of total loans.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

This resulted in $9,400,000 of provision expense during the period, which was driven by loan growth and net charge offs. Overall, asset quality trends were stable. NPAs as a percentage of assets were relatively flat at 36 basis points, while 4th quarter net charge offs were 40 basis points on an annualized basis. This put our year to date total in line with expectations at 30 basis points. Classified assets increased 7 basis points to 1 point 2 1 percent of total assets as a single asset offset an otherwise strong quarter of resolution efforts.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value was $14.15 while a tangible common equity ratio was 7.73%. Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $67,700,000 or $0.71 per share for the quarter. Non interest expense adjustments exclude the impact of efficiency costs, tax credit investment write downs and other expenses not expected to recur.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

As depicted on Slide 8, these adjusted earnings equate to return on average assets of 1.47%, a return on average tangible common equity of 20% and a pretax pre provision ROA exceeding 2%. Turning to Slides 9 and 10. Net interest margin declined 14 basis points from the linked quarter to 3.94%. Asset yields declined 31 basis points compared to the prior period as loan yields declined 37 basis points and the yield on the investment portfolio increased 4 basis points. Offsetting these increases, total funding costs declined 17 basis points from the linked quarter as deposit costs declined 13 basis points, while average deposit balances increased 4%.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Slide 11 outlines our various sources of liquidity and borrowing capacity. We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased 7% on an annualized basis with growth in almost every portfolio. As you can see on the right, growth was driven by C and I, leasing, ICRE and mortgage.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Slide 14 provides detail on our loan concentration by industry. We believe our loan portfolio remains sufficiently diversified to protect us from deterioration in any particular industry. Slide 15 provides detail on our office portfolio. Similar to last quarter, about 4% of our total loan book is secured by office space and the overall portfolio metrics remain strong. One office relationship was downgraded to non accrual during the quarter and our total non accrual balance for this portfolio is approximately 26,000,000 dollars Subsequent to year end, the remaining balance of this relationship of $9,000,000 paid off.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Slide 16 shows our deposit mix as well as a progression of average deposits from the linked quarter. In total, average deposit balances increased $543,000,000 during the quarter with increases in most core product types. There was a seasonal increase in public fund balances, while on the consumer side, growth was concentrated in money markets and retail CDs. Slide 7 illustrates trends in our average personal, business and public fund deposits as well as a comparison of our borrowing capacity to our uninsured deposits. On the bottom right of the slide, you can see our adjusted uninsured deposits were $3,700,000,000 This equates to 26% of our total deposits.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

We remain comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event that would stress our larger deposit balances. Slide 18 highlights our non interest income for the quarter. Total fee income was $70,000,000 during the quarter with Bannockburn and Summit having strong quarters while Wealth Management posted record results. Non interest expense for the quarter is outlined on Slide 19. Core expenses increased $6,000,000 during the period.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

This was driven by higher incentive compensation, which is tied to fee income and the company's overall performance. As I mentioned earlier, we are recognizing more of the expected benefit from our ongoing efficiency initiative and expect to complete this work in 2025. Turning now to Slides 20 21, our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $174,000,000 $9,400,000 of total provision expense during the period. This resulted in an ACL that was 1.33 percent of total loan. Provision expense was primarily driven by loan growth and net charge offs, which were 40 basis points for the period.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

However, about half of those charge offs have been reserved for in prior periods. Additionally, our NPAs to total assets held steady at 36 basis points. In other credit trends, classified asset balances increased to 1.21 percent of total assets. The largest driver of this increase was related to a single asset that was recorded following the mutually agreed upon termination of a foreign exchange transaction. Excluding this item, classified assets declined $27,000,000 during the quarter.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Our ACL coverage decreased slightly. However, we continue to believe that we have modeled conservatively to build a reserve that reflects the losses we expect from our portfolio. We anticipate our ACL coverage will remain relatively flat or increase slightly in future periods as our model responds to changes in the macroeconomic environment. Finally, as shown on Slides 2223, capital ratios remain in excess of regulatory minimums and internal targets. Absent the impact from AOCI, the TCE ratio would have been 9.39% compared to 7.73% as reported and our tangible book value decreased slightly to $14.15 Our total shareholder return remains strong with 35% of our earnings returned to our shareholders during the period through the common dividend.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

We maintain our commitment to provide an attractive return to our shareholders and we continue to evaluate capital actions that support that commitment. I'll now turn it back over to Archie for some comments on our outlook. Archie?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Thank you, Jamie. Before we end our prepared remarks, I want to comment on our forward looking guidance, which can be found on Slide 24. Loan pipelines remain healthy, but we expect loan growth to moderate as we approach seasonal lows and activity and be in the low single digits on an annualized basis for the Q1. For securities, we expect the portfolio to remain relatively stable. Deposit growth has been very strong in the last several quarters, though we expect some of the seasonal flows that came in this past quarter to reverse in the Q1 causing public funds and business balances to be slightly down.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Our net interest margin continues to be strong and industry leading and assuming no additional rate cuts, we expect it to be in the range between 3.85% and 3.9% over the next quarter. We expect our credit costs to be modestly lower over the next quarter with the net charge offs lower than the current period. ACL coverage as a percentage of loans is expected to be stable to slightly increasing. On fee income, we expect to be between $63,000,000 $65,000,000 which includes $11,000,000 to $13,000,000 for foreign exchange and $19,000,000 to $21,000,000 for leasing business revenue. Non interest expense is expected to be between $128,000,000 $130,000,000 and stay stable, excluding the leasing business and fee based incentive expense.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Related to capital, our capital ratios remain strong and we expect to maintain our dividend at the current level. During the year, we were excited to add the Agile team and I want to thank them for making an immediate contribution to our company. We continue to gain momentum in our expansion markets of Chicago, Evansville, Cleveland, Ohio and at the beginning of 2025, we expanded into Grand Rapids, Michigan with the commercial banking team. We look forward to the continued growth and success of our expansion strategies. Performing at a consistently high level requires an engaged team that is committed to its clients and that's what that describes the team here at First Financial.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

I want to thank our associates for the outstanding work in 2024. We'll now open up the call for questions.

Operator

Thank you. We will now begin the question and answer session. Your first question today comes from the line of Daniel Tamayo from Raymond James. Your line is open.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Thank you. Good morning, guys.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Good day, Daniel.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

So, yes, maybe first, you guys gave guidance for the Q1. I appreciate that on loan growth. But it's kind of down from what you did in 2024. So just curious if that's a there's some seasonality in the Q1 number or something unusual there that you expect you would expect growth to pick up as the year goes on or just kind of your comments on loan growth throughout the year if you have some? Thanks.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yes, Danny. This is Archie. We've seen some pickup in payoffs, primarily on the commercial real estate side. Rates dipped a little bit in the mid Q4 and the payoffs kind of accelerated. And of course rates backed up some by the end of the year.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

But we've got a little bit higher expectation for payoffs on that side of our book. Loan activity is good. Seasonally, it's a little bit lower in Q1. So it's kind of a combination of those two things. But overall pipelines are healthy as we said and outlook from our clients overall is I think generally positive.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Okay, terrific. And I guess then shifting over to the margin one for Jamie, similar type of question. You gave the range $385,000,000 to $390,000,000 in the Q1. Just curious how you're thinking about the rest of the year and how the Fed funds cuts would play into that?

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Yes. So we have we gave that guidance for the Q1. And then so in our forecast for 2025 at this point, we have a cut built into the forecast in June. So one cut during the year and our margin essentially remains in that $385,000,000 to $390,000,000 kind of band. So as we get into the 1st part here of $25,000,000 where we just had the cuts, deposit costs continue to come down.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Then obviously with the June cut that we have built into the forecast, we get an immediate impact from that which will bring the margin down slightly just due to the contractual nature, obviously, the loan book where those will come down. Then deposit costs start to pick back start to decline again and catch back up and our margin again stays relatively tight within that range of in that mid-380s call it.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Okay. That's helpful. Appreciate it, Jamie. And then I guess just a quick last one here for you Archie. You guys have been expanding into new markets as you pointed out with Grand Rapids, the latest here in 2025.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Just curious kind of the depth of those investments that you're making in those markets, How quickly you think they may turn into meaningful growth for the bank? And if there's any other markets that you've got your eye on for de novo?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yes. Thanks, Danny. I mean the ones we've I guess opened up in the last year to year and a half, I think are performing well both on the loan and deposit side. I wouldn't call them rapid growth or steady growth, which is appropriate. We want to build relationships not just build assets.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

So they're going well. We've got teams probably in those markets anywhere from, if you think Chicago is, I think around 5 to 7 people. Cleveland maybe just a little bit less 4 or 5 people to date. The team in Grand Rapids initially is 4. They were part of a bank that has a lot of market share.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

So I think they're hitting the ground running. We tend to look at these more opportunistically. So we've got a range of markets that are kind of in or adjacent to the First Financial footprint. And we kind of take the opportunity when something comes up that provides an opportunity to bring a team in that's I think that's when we sort of act. So that's how we think about it.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

We don't really have a certain number that we're going to add this year. It's just again when an opportunity presents itself that makes sense to us, we'll do that. We'll take the opportunity to capitalize on it.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

All right, great. Well, thank you for all the color.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Thanks, Danny.

Operator

Your next question comes from the line of Terry McEvoy from Stephens Inc. Your line is open.

Terry Mcevoy
Managing Director at Stephens Inc

Hi, good morning, everybody.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Hey, Terry. Terry.

Terry Mcevoy
Managing Director at Stephens Inc

Maybe just maybe sure I understand on the expense guide, if the FX is in the midpoint of say 12 and leasing is $20,000,000 in the Q1, that trend that's baked into the $128,000,000 to 130,000,000 dollars of total non interest expense?

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Yes, that's correct. Yes, we get and so just kind of working through a little bit of the dynamics there on the expense side From the Q4 to the Q1, we get about $1,500,000 or so of increase in expenses with just all the payroll taxes starting over. So that's part of why you see a little bit of that increase in the you're not seeing the expenses go down even when we have some of the variable costs going down. So that plays into that Q4 to Q1 expense trend. But yes, it's included in the $128,000,000 to $130,000,000 correct.

Terry Mcevoy
Managing Director at Stephens Inc

Okay. Thanks. And then as a follow-up, the classified asset, it was a kind of an FX transaction. And I guess my question is, is there credit risk in that or can you talk about the credit risk in that business? And do you have a specific reserve for that business?

Terry Mcevoy
Managing Director at Stephens Inc

And just provide a little bit more insight. We appreciate it. Yes.

William Harrod
William Harrod
Executive VP & Chief Credit Officer at First Financial Bancorp

Good morning. Yes, the trade itself, we entered into a series of forward contracts with the company that had changes in the value between the USD and CAD. And then the macroeconomic conditions in respect of interest rate policies of the central banks of Canada and the U. S. Have resulted in CAD depreciation versus the USD, which has created the negative mark.

William Harrod
William Harrod
Executive VP & Chief Credit Officer at First Financial Bancorp

Based on the size, we jointly decided to terminate the trade to lock in the negative position and then recorded that as a receivable. Okay. We have collateral to fully support the receivable, including cash on deposits, mortgages on real estate, pledges collateral including all the company's equity and personal guarantees. And on this, we do expect to be repaid in 2025.

Terry Mcevoy
Managing Director at Stephens Inc

Great. Appreciate it. Thanks for all the color there.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Thanks, Jerry.

Operator

Your next question comes from the line of Christopher McGratty from KBW. Your line is open.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

All right.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Good morning.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Hey, Chris.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Jamie or Archie,

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

the 30 basis I think

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

you mentioned 30 basis points of charge offs in your prepared remarks.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Is that how you think about normalized losses for this bank?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

I'm sorry, is that how we think? 30 basis points of charge offs, yes. Yes. I mean, when we look ahead, over a longer window, I think if we said to you 25 to 30 basis points feels kind of a norm.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

The last 2 years, I think 33 was 2 years ago, 30 was last year. The way we're starting out this year, we feel like it could be a little bit less than that. But if you said over the long term, Chris, kind of in that range, I'd say it's right.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Okay. Thanks.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

And then any kind of comment

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

that you could provide on inorganic growth? There's a lot of optimism in the banks for deregulation and you do have a multiple and strong capital. Thoughts on incremental M and A in 2025?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yes. Well, I think we all have a little more optimism for lots of reasons, Chris here at least in the next year or 2 that there'll be more opportunities. I think the window is a little more open. Certainly seems like getting deals approved will be a little bit quicker than maybe in the past, a little bit more certainty. We're having more active discussions with kind of banks that we think fit our profile and kind of things we're looking for.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Generally banks in that $1,000,000,000 to $5,000,000,000 space in or adjacent to our footprint. So we are having active discussions, but there's really I can't provide any more color than that in terms of the likelihood of something happening.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

All right. Perfect. Thank you. Yes.

Operator

Your next question comes from the line of Jon Arfstrom from RBC Capital Markets. Your line is open.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Thanks. Good morning.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Hey, Jon.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Can you guys talk a little bit about your overall non interest income growth expectations? I mean, you had a good great year in 2024 across categories. Just curious what you think might be possible for 2025 on fee income?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yes. John, I'll start. Jamie may have something to say here too. I mean, generally, it's if you exclude leasing business income for a moment, I think it's more gradual kind of steady growth, more of the traditional service charge categories. Wealth continues to do well.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

I think they'll continue to grow at a pace that's been similar over the last couple of years. Our swaps has probably been one of the areas, it's been a little down. So with more activity, I think that has an opportunity to improve. But I think outside of leasing business income, those numbers feel pretty much like a steady kind of a steady growth kind of trend line. Leasing business income of course can move up a little bit more just based on the amount of operating leases that we add to the balance sheet.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Yes. John, the only thing that I would add, I mean just on the foreign exchange side, and then in that Capital Markets Group, we just get there's some volatility to that revenue from quarter to quarter. I mean, we might but we average roughly in that $15,000,000 $15,000,000 $16,000,000 range where we get some chunky quarters where it's $17,000,000 and whatnot. So but we feel like that business is when you look at it over a 3 or 4 quarter window, it's just steadily growing 10% or 15% a year.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Okay, good. Thank you. And then you guys always you provide a nice slide on agile. It's more than doubled. Can you just talk a little bit about that business and how long do you think the runway is in terms of your balance sheet capacity for that?

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Yes. John, when we bought that, I think we only brought over around a little over $100,000,000 in receivables $110,000,000 in receivables at the time. So it we knew the production numbers were going to drive a lot of growth, especially in the 1st year. But again, even this year, I think we're expecting that that's probably going to grow 25% year over year production probably being a little healthier than last year's production because we got them we get first we have them for the whole year, last year we had them for 10 months. So production is going to go up a little bit more to I can't remember exactly the numbers at this point, Luke.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

2.50 ish for originations and that's kind of where we think the balances are going to end over the end of the year.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Okay. Good.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Yes. John, real quick on that. The one thing that on the Agile side, I mean, there is some seasonality to their business as well. That's why you saw the balances decline in the Q4, a little bit. It's not anything that we purposefully did or anything like that or it was essential.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

That's just the seasonality of their business. And so we get a run up in originations really in the middle of the year in Q2. And then it kind of bleeds off a little bit, but they are heavy in the Q2. So that's why you'll see that more here in 2025 as the business has stabilized a little bit and we're not ramping up the balances from what we bought.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Okay. That makes sense. And then Bill one for you just on the classifieds. If you take out the FX issue, it's a pretty big step down in classifieds. And I'm just curious how you're feeling about that.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

And do you think we may have hit a peak? Or is there anything new that you're seeing or concerning?

William Harrod
William Harrod
Executive VP & Chief Credit Officer at First Financial Bancorp

Yes. Great question, John. I appreciate it. The Q4, we finalized resolution on a number of credits that were sitting in the bucket, classified buckets for a while. And outside of the trade, as you mentioned, we did not have significant inflows.

William Harrod
William Harrod
Executive VP & Chief Credit Officer at First Financial Bancorp

And as we take a step back step up and look at our criticized, we did have some small increases there. But I feel much better about the trajectory based on what we our intake into the substandard and classified. So yes, I'm positive.

Jon Arfstrom
Jon Arfstrom
Managing Director - Associate Director of US Research at RBC Capital Markets

Okay. Okay, good. All right. Thanks guys. I appreciate it.

Jamie Anderson
Jamie Anderson
Chief Financial Officer, Chief Operating Officer at First Financial Bancorp

Thanks, Sean.

Operator

And there are no further questions at this time. I will now turn the call back over to Archie Brown for closing remarks.

Archie Brown
Archie Brown
President and CEO at First Financial Bancorp

Thank you, Rob. I want to thank everybody for joining us today and hearing about our quarter and our year. We're excited about 2025 and we look forward to talking with you again in a few months. Have a good day.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Analysts
    • Scott Crawley
      Senior VP, Controller & Principal Accounting Officer at First Financial Bancorp
    • Archie Brown
      President and CEO at First Financial Bancorp
    • Jamie Anderson
      Chief Financial Officer, Chief Operating Officer at First Financial Bancorp
    • Daniel Tamayo
      Vice President at Raymond James Financial
    • Terry Mcevoy
      Managing Director at Stephens Inc
    • William Harrod
      Executive VP & Chief Credit Officer at First Financial Bancorp
    • Christopher Mcgratty
      MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)
    • Jon Arfstrom
      Managing Director - Associate Director of US Research at RBC Capital Markets
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Earnings Conference Call
First Financial Bancorp. Q4 2024
00:00 / 00:00

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