First Financial Bancorp. Posts Record Earnings, Eyes Synergies

First Financial Bancorp. ((FFBC)) has held its Q4 earnings call. Read on for the main highlights of the call.

First Financial Bancorp. Delivers Record Earnings Amid Integration Challenges

First Financial Bancorp.’s latest earnings call painted a broadly upbeat picture, with management highlighting record profitability, strong revenue growth, and robust fee income, all supported by both organic expansion and recent acquisitions. While executives acknowledged modest margin pressure, higher near-term expenses, and some credit normalization, the underlying tone was confident, emphasizing durable earnings power and a clear path to leveraging recent deals for future efficiency gains.

Record Quarterly Earnings and Strong Profitability

Adjusted earnings per share reached $0.80 in the fourth quarter, underscoring one of the strongest profit periods in the company’s history. Profitability metrics were equally impressive, with an adjusted return on assets of 1.52% and an adjusted return on tangible common equity of about 20.3% for the quarter. These levels place First Financial among the more profitable regional banks, signaling that the franchise is converting growth and pricing discipline into tangible bottom-line results.

Robust Full-Year Financial Performance

For the full year 2025, adjusted net income came in at $281 million, or $2.92 per share, reflecting sustained strength beyond a single quarter. The bank delivered an adjusted return on assets of 1.49% and an adjusted return on tangible common equity of 19.3%, reinforcing the message that its business model is generating consistently high returns. Investors focused on long-term earnings power will note that this performance was achieved even as the bank navigated acquisitions and a shifting interest-rate backdrop.

Net Interest Margin Resilience

Despite a modest quarter-over-quarter decline, First Financial’s net interest margin (NIM) held strong at 3.98% in Q4. Management emphasized that careful deposit cost management helped offset most of the impact from short-term rate decreases. While NIM dipped slightly from 4.05% a year earlier, maintaining a margin near 4% in a volatile rate environment suggests strong pricing power and balance sheet positioning, providing a solid foundation for future earnings.

Record Fee and Noninterest Income

Fee-based businesses were a standout contributor, with adjusted fee income in Q4 hitting a record $77.3 million, up 5% from the prior quarter. For the full year, adjusted noninterest income grew 16% to an all-time high of $280 million. This expanding stream of fee income diversifies revenue away from pure interest spread, making earnings less vulnerable to rate swings and underscoring the value of businesses such as foreign exchange, leasing, and other fee-generating lines.

Strong Revenue and Solid Loan and Deposit Growth

Total revenue for 2025 approached a record $922 million, an 8% increase over 2024, powered by both balance-sheet growth and stronger fee income. On the lending side, loan balances climbed by $1.7 billion in the fourth quarter, with $1.6 billion coming from the Westfield acquisition and $131 million from organic growth, equivalent to 4% annualized. Deposits also expanded, with total average balances up about 7% annualized excluding Westfield, and organic deposit growth of $264 million in the quarter, signaling continued customer acquisition and relationship deepening.

Improved Credit Metrics Year-over-Year

While Q4 showed some normalization in credit costs, the full-year story remains positive. Provision expense for 2025 declined 21% versus 2024, and net charge-offs improved by 5 basis points to 25 basis points of average loans. The allowance for credit losses rose about 6 basis points to 1.39% of loans, indicating that the bank has modestly strengthened its loss buffer even as performance improved. Overall, management framed credit quality as sound, with trends still supportive of growth.

Capital Strength and Shareholder Returns

First Financial’s capital position remained healthy, with tangible book value per share rising 11% to $15.74 over the year. Capital ratios stayed above both regulatory minimums and internal targets, giving the bank room to pursue growth and absorb acquisition impacts. Shareholders benefited directly from this strength, as the company returned roughly 40% of earnings through common dividends during the period, signaling confidence in the sustainability of cash flows.

Strategic M&A and Midwest Market Expansion

Strategic acquisitions were a central theme, with the completion of the Westfield deal adding about $1.6 billion in loans and the closing of Bank Financial further broadening the footprint. The bank also launched a new Western Michigan banking office in Grand Rapids, expanding its presence in attractive Midwest metropolitan markets. Management stressed that these moves enhance funding capabilities, deepen relationships in key regions, and create a larger platform for future growth and scale benefits.

Liquidity and Funding Actions

To support growth and bolster its capital and liquidity profile, First Financial issued $300 million of 10-year subordinated debt at 6.375%. This funding provides additional flexibility to manage the balance sheet, absorb acquisition-related impacts, and support ongoing loan origination. Management framed the issuance as a proactive step to sustain strong regulatory capital and liquidity standards while keeping capacity for further strategic initiatives.

Modest Net Interest Margin Compression Ahead

Management acknowledged that some modest NIM compression is likely, reflecting expectations for interest rate cuts. While margin decreased 4 basis points sequentially to 3.98% and slipped from 4.05% a year ago, guidance anticipates NIM in the 3.94%–3.99% range near term. The team indicated that careful management of deposit costs and balance-sheet mix should limit downside, suggesting that any compression will be manageable rather than disruptive.

Higher Noninterest Expense from Acquisitions

Expenses moved higher in Q4 as the bank absorbed integration costs from its acquisitions. Adjusted noninterest expense rose about 6% quarter over quarter, with core expenses up $8.6 million, largely tied to Westfield-related activities. While this near-term cost pressure weighs on the efficiency ratio, management framed it as a temporary investment to unlock future synergies and scale-driven savings once systems and operations are fully integrated.

Integration Costs and Delayed Cost Savings

A key theme was timing: cost savings from Westfield and Bank Financial will largely materialize later in 2026, after core systems conversions and roughly 90-day runout periods. In the meantime, Q1 guidance includes about $21 million of incremental expense tied to the two deals, keeping the expense base elevated. Management reiterated confidence that, once synergy capture is complete, the bank’s efficiency ratio should settle in the mid-50% range, with an even better profile when excluding leasing-related noise.

Asset Quality Pressure and Rising NPAs in Q4

Fourth-quarter asset quality showed some tactical pressure as nonperforming assets edged up to 0.48% of total assets, largely due to just three credits. Net charge-offs increased 9 basis points from the prior quarter to 27 basis points, and provision expense for Q4 was $10.1 million. While these are not alarming levels, they signal a move away from unusually benign credit conditions. Management emphasized that overall credit remains well within acceptable ranges and that the reserve ratio remains stable.

Capital Impact from Recent Acquisitions

The Westfield transaction came with a cost to capital ratios, temporarily weighing on tangible book value and the tangible common equity (TCE) ratio, which now stands at 7.79%. Executives were clear that it will take sustained earnings generation to rebuild these metrics. However, they argued that the earnings and growth benefits from the acquired portfolios and markets should, over time, more than offset the initial dilution.

Seasonality and Short-Term Fee Income Headwinds

Management flagged that fee income will likely step down in the first quarter due to normal seasonal patterns, particularly in foreign exchange and leasing. After a record Q4 for fees, these businesses are expected to moderate before picking back up later in the year. Investors are being encouraged to look past near-term lumpiness and focus on the longer-term growth trajectory of these franchise-defining fee businesses.

Leasing Revenue Moderation as Portfolio Matures

The bank’s leasing business, a key differentiator in its fee profile, is transitioning from rapid expansion to a more mature growth phase. Leasing income growth has slowed from prior double-digit rates to the high single digits as the portfolio seasons and experiences more churn. Management still views leasing as a strong contributor but cautioned that growth will be more measured, reflecting a larger, more stable installed base rather than early-stage ramp.

Temporary Securities Buildup and Deposit Seasonality

The closing of Bank Financial will temporarily inflate liquidity and cash levels, pushing the securities portfolio above the bank’s historical target of roughly 20% of assets. At the same time, management expects core deposit balances to decline modestly in the near term due to seasonal outflows in public funds. These shifts are framed as temporary, with the balance sheet expected to normalize as seasonal dynamics reverse and growth from new and legacy markets continues.

Forward-Looking Guidance and Outlook

Looking ahead, management guided to modest but steady loan and deposit dynamics and largely stable credit quality. For the first quarter (excluding Bank Financial), they expect payoff pressure to ease and target low single-digit annualized organic loan growth, with full-year legacy loan growth projected at 6%–8%. Net interest margin is forecast in a 3.94%–3.99% range next quarter, assuming a small rate cut, with additional cuts potentially nudging the full-year margin to the low 3.90s. Credit costs are expected to resemble Q4 levels, with allowance coverage staying near 1.39% of loans. Fee income for Q1 is guided to $71–$73 million and expenses to $156–$158 million, reflecting integration impacts. Management reiterated that modeled cost savings from acquisitions should emerge later in 2026, bringing the efficiency ratio toward the mid-50% range and reinforcing the bank’s longer-term earnings trajectory.

In summary, First Financial Bancorp.’s earnings call balanced record-setting performance with a candid discussion of near-term integration and margin headwinds. The bank is delivering strong profitability, healthy growth in loans and deposits, and a rising stream of fee income, all while maintaining solid credit and capital positions. Though expenses and margins may face pressure in the short run, management’s guidance suggests that the strategic acquisitions and disciplined balance-sheet management are positioning the company for sustained, high-quality earnings growth that should interest investors focused on the regional banking space.