Attached files
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| EX-99.1 - EXHIBIT 99.1 - FIRST FINANCIAL BANCORP /OH/ | a8k1q18earningsreleaseex991.htm |
| 8-K - 8-K - FIRST FINANCIAL BANCORP /OH/ | a8kearningsrelease1q18.htm |
Earnings Presentation
First Quarter 2018
Exhibit 99.2
2
Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as „„believes,‟‟ „„anticipates,‟‟ “likely,” “expected,” “estimated,” „„intends‟‟ and other similar expressions are
intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Examples of forward-looking statements include,
but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per
share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the
assumptions that underlie our forward-looking statements.
As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual
results to differ materially from those set forth in the forward-looking statements. Forward-looking statements are not historical facts but instead express only
management‟s beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management‟s control. It is
possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements.
Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation: (i)
economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company‟s business; (ii) the effect of and changes in
policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating
to the banking industry; (iii) management‟s ability to effectively execute its business plans; (iv) mergers and acquisitions, including costs or difficulties related to
the integration of acquired companies; (v) the possibility that any of the anticipated benefits of the Company‟s recent merger with MainSource Financial Group,
Inc. will not be realized or will not be realized within the expected time period, or that integration of MainSource's operations with those of the Company will be
materially delayed or will be more costly or difficult than expected; (vi) the effect of changes in accounting policies and practices; (vii) changes in consumer
spending, borrowing and saving and changes in unemployment; (viii) changes in customers‟ performance and creditworthiness; and (ix) the costs and effects of
litigation and of unexpected or adverse outcomes in such litigation. Additional factors that may cause our actual results to differ materially from those described in
our forward-looking statements can be found in the Form 10-K for the year ended December 31, 2017, as well as its other filings with the SEC, which are
available on the SEC website at www.sec.gov.
All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing. Except as
required by law, the Company does not assume any obligation to update any forward-looking statement.
.
Forward Looking Statement Disclosure
3
1Q 2018 Highlights – 110th Consecutive Quarter of Profitability
Total assets increased $1.5 million compared to the linked quarter to $8.9 billion.
EOP loans increased $88.8 million, or 6.0% annualized, compared to the linked quarter.
EOP deposits increased $115.5 million, or 6.8% annualized, compared to the linked quarter.
EOP investment securities decreased $10.4 million, or 2.0% annualized, compared to the linked quarter.
Balance Sheet
Profitability
Asset Quality
Income Statement
Capital
Noninterest income = $16.9 million.
Noninterest expense = $52.3 million; $49.9 million1 as adjusted for significant items impacting quarterly
performance.
Efficiency ratio = 56.4%. Adjusted efficiency ratio = 53.8%1
Effective tax rate of 20.1%. Adjusted effective tax rate of 20.1%1
Net interest income = $75.8 million, a $0.2 million increase compared to the linked quarter.
Net interest margin of 3.80% on a GAAP basis; 3.84% on a fully tax equivalent basis, a 2 bp increase from the
linked quarter.
Average earning assets grew 4.19% on an annualized basis.
Net income = $30.5 million or $0.49 per diluted share. Adjusted net income = $32.4 million or $0.52 per diluted share1
Return on average assets = 1.40%. Adjusted return on average assets = 1.49%1
Return on average shareholders‟ equity = 13.31%. Adjusted return on average shareholders‟ equity = 14.14%1
Return on average tangible common equity = 17.17%1. Adjusted return on average tangible common equity = 18.24%1
Provision expense = $2.3 million. Net charge offs = $1.9 million. NCOs / Avg. Loans = 0.13% annualized.
Nonperforming Loans / Total Loans = 0.74%. Nonperforming Assets / Total Assets = 0.52%.
ALLL / Nonaccrual Loans = 179.57 % . ALLL / Total Loans = 0.89%. Classified Assets / Total Assets = 0.98%.
Total capital ratio = 13.17%.
Tier 1 capital ratio = 10.77%.
Tangible common equity ratio = 8.41%.
Tangible book value per share = $11.75.
1) See Appendix for non-GAAP reconciliation and Slide 4 for Adjusted Earnings detail.
4
Adjusted Net Income1
1 See appendix for non-GAAP reconciliation
All dollars shown in thousands, except per share amounts
The table below lists certain items that we believe are significant to understanding our quarterly performance.
53.8%
58.0% 57.0%
59.7% 59.6%
1Q184Q173Q172Q171Q17
Adjusted Efficiency Ratio
$0.52
$0.45
$0.39 $0.36 $0.39
1Q184Q173Q172Q171Q17
Adjusted EPS
1.49%
1.26%
1.11% 1.06% 1.16%
1Q184Q173Q172Q171Q17
Adjusted ROA
18.2%
15.5%
13.9% 13.4% 14.7%
1Q184Q173Q172Q171Q17
Adjusted ROTCE
1Q 2018
As
Reported Adjusted
Net interest income $ 75,812 $ 75,812
Provision for loan and lease losses $ 2,303 $ 2,303
Noninterest income $ 16,938 $ 16,938
Total noninterest income $ 16,938 $ 16,938
Noninterest expense $ 52,288 $ 52,288
less: merger-related expenses 1,985 A
less: final loss share settlement 527 A
less: other (113) A
Total noninterest expense $ 52,288 $ 49,889
Income before income taxes $ 38,159 $ 40,558
Income tax expense $ 7,653 $ 7,653
plus: tax effect of adjustments (A) @ 21% statutory rate 504
Total income tax expense $ 7,653 $ 8,157
Net income $ 30,506 $ 32,401
Net earnings per share - diluted $ 0.49 $ 0.52
5
Profitability
Net Income & Diluted EPS Return on Average Assets
Return on Tangible Common Equity1
1 Non-GAAP financial measure; see Appendix for non-GAAP reconciliation
All dollars shown in millions, except per share data
$30.5
$24.8 $24.8
$22.7
$24.4
$0.49
$0.40 $0.40
$0.37
$0.39
1Q184Q173Q172Q171Q17
Net Income EPS - diluted
$8,830 $8,732 $8,717 $8,583 $8,409
1.40%
1.13% 1.13%
1.06%
1.18%
1Q184Q173Q172Q171Q17
Average Assets ROAA
$720
$711
$698
$680
$661
17.17%
13.85% 14.10% 13.42%
14.98%
1Q184Q173Q172Q171Q17
Average Tangible Equity ROATCE
6
Net Interest Income / Net Interest Margin
1 Gross loans include loans held for sale & FDIC indemnification asset
All dollars shown in millions
Net Interest Income Average Loans1
Average Securities Average Deposits
1
$75.8 $75.6
$70.5
$68.5 $68.9
3.84% 3.82%
3.57%
3.56%
3.70%
1Q184Q173Q172Q171Q17
Net Interest Income Net Interest Margin (FTE)
$2,043 $2,020 $2,042 $2,035
$1,907
3.04%
2.90% 2.85%
2.77% 2.76%
1Q184Q173Q172Q171Q17
Average Investment Securities
Investment Securities Yield
23% 24% 23% 23% 23%
21% 22% 22% 23% 23%
36% 37% 37% 37% 35%
21% 17% 18% 18% 19%
$6,903 $6,840 $6,680 $6,570 $6,442
0.60%
0.54%
0.61%
0.53%
0.44%
1Q184Q173Q172Q171Q17
Avg NIB Demand Avg IB Demand
Avg Savings Avg Time
Cost of Deposits
$6,018 $5,960 $5,911 $5,800 $5,748
5.05%
4.90%
4.71%
4.61% 4.64%
1Q184Q173Q172Q171Q17
Gross Loans Loan Yield
7
Net Interest Margin
Net Interest Margin (FTE) 1Q18 NIM (FTE) Progression
3.69%
3.58%
3.43% 3.41%
3.48%
0.15%
0.24%
0.14% 0.15%
0.22%
3.84% 3.82%
3.57% 3.56%
3.70%
1Q184Q173Q172Q171Q17
Basic Margin (FTE) Loan Fees
4Q17 3.82%
Asset Yields 0.17%
Rising interest rates and yield
expansion
Covered/formerly
covered loans 0.04% Loss share termination
Loan Fees -0.09% Higher 4Q17 prepayment fees
Asset Drivers 0.12%
Funding Costs -0.05%
Increased wholesale funding and
deposit costs
Funding Mix -0.05%
Mix shift toward higher wholesale
funding balances
Liability Drivers -0.10%
Other 0.03% Day count
FTE Adjustment -0.03% Impact from tax reform
1Q18 3.84%
8
Loan Portfolio
Loan Product Mix (EOP) Net Loan Change (Linked Quarter)
* Includes residential mortgage, home equity, installment, & credit card loans.
All dollars shown in millions
33% 33% 33% 33% 32%
11% 11% 12% 12% 12%
31% 30% 30% 30% 29%
8% 8% 7% 8%
8%
17% 18% 18% 18%
18%
$6,102 $6,013 $5,977 $5,874
$5,754
1Q184Q173Q172Q171Q17
Commercial & Leasing Owner Occupied CRE Investor CRE
Construction Consumer Lending*
-$11.6
$42.0
-$18.7
-$3.7
$65.5
$30.6
-$15.3
Commercial & Leasing
Commercial Finance
Owner Occupied CRE
Owner Occupied Construction
Investor CRE
Investor Construction
Consumer Lending*
Total
C&I
$8.0
9
Asset Quality
Nonperforming Assets / Total Assets Classified Assets / Total Assets
Allowance / Total Loans Net Charge Offs & Provision Expense
All dollars shown in millions
$87.6 $87.3
$94.3
$98.4
$114.6
0.98% 0.98%
1.08% 1.13%
1.34%
1Q184Q173Q172Q171Q17
Classified Assets Classified Assets / Total Assets
$46.3 $44.4
$52.9
$62.7
$68.4
0.52% 0.50%
0.60%
0.72%
0.80%
1Q184Q173Q172Q171Q17
NPAs NPAs / Total Assets
$54.4 $54.0 $54.5 $54.9 $56.3
0.89% 0.90% 0.91% 0.93%
0.98%
1Q184Q173Q172Q171Q17
Allowance for Loan Losses ALLL / Total Loans
$2.0 $1.9
$3.3
$0.3
$1.9
$0.4 $0.5
$3.0
-$0.2
$2.3
0.13%
0.02%
0.22% 0.13% 0.14%
1Q17 2Q17 3Q17 4Q17 1Q18
NCOs Provision Expense NCOs / Average Loans
10
Capital
Tier 1 Common Equity
Tangible Book Value Total Capital
Tangible Common Equity
All capital numbers are considered preliminary
All dollars shown in millions
$730.9 $721.3
$705.2
$688.1
$669.7
$11.75 $11.62
$11.36
$11.07
$10.78
1Q184Q173Q172Q171Q17
Tangible Book Value
Tangible Book Value per Share
$730.9 $721.3
$705.2
$688.1
$669.7
8.41% 8.30% 8.25% 8.09% 8.05%
1Q184Q173Q172Q171Q17
Tangible Book Value Tangible Common Ratio
$953.2 $929.1 $920.6 $905.2 $892.2
13.17% 13.07% 12.98% 13.05% 13.19%
12.50%
1Q184Q173Q172Q171Q17
Total Capital Total Capital Ratio Target
$779.5
$755.7
$746.7 $731.0 $716.7
10.77%
10.63%
10.53% 10.54% 10.59%
10.50%
1Q184Q173Q172Q171Q17
Tier 1 Common Equity Tier 1 Common Ratio Target
11
MSFG Standalone 1Q 2018 Highlights1
Total assets decreased $95.0, to $4.6 billion, or 8.3% annualized, compared to the linked quarter.
EOP loans decreased $58.9 million, to $3.0 billion, compared to linked quarter
EOP deposits decreased $66.5 million, to $3.4 billion, compared to linked quarter
EOP investment securities of $1.1 billion
Balance Sheet
Profitability2
Asset Quality
Income Statement
Capital
Noninterest income = $12.5 million.
Noninterest expense = $30.0 million2.
Efficiency ratio = 59.3%2.
Net interest income = $37.0 million, a $0.7 million decrease compared to the linked quarter.
Net interest margin of 3.71% on a fully tax equivalent basis, a 7 bp decrease from the linked quarter driven by
the lower FTE adjustment due to tax reform.
Net income = $16.4 million or $0.63 per diluted share
Return on average assets = 1.45%
Return on average shareholders‟ equity = 12.6%
Return on average tangible common equity = 17.6%
Provision expense = $0.4 million. Net charge offs = $3.7 million.
Nonperforming loans declined $4.3 million to $14.3 million
Nonperforming Loans / Total Loans = 0.47%. Nonperforming Assets / Total Assets = 0.29%.
ALLL / Nonaccrual Loans = 161.97%. ALLL / Total Loans = 0.64%. Classified Assets / Total Assets = 0.70%.
EOP Total Equity of $519.3 million
Tangible common equity ratio = 8.38%.
Tangible book value per share = $14.40.
1 MainSource merged with First Financial on April 1, 2018. The Highlights on this page provide selected financial data prepared by management for the
quarter ended March 31, 2018. First Financial will file an amendment to Form 8-K on or before June 10, 2018 that will include financial statements for
MainSource and combined pro forma financial information for First Financial and MainSource as if the Merger was effective on March 31, 2018. The pro
forma financial information will reflect various adjustments required by applicable acquisition accounting rules that are not reflected in these Highlights.
2 Adjusted for merger-related expenses.
12
Outlook – Combined Company1
Taxes
Annualized loan growth expected to be in the mid-single digits on a percentage basis,
excluding divestitures and purchase accounting adjustments
No significant deposit attrition expected, excluding divestitures and market exits
Projected to be 3.85% - 3.90% on a GAAP basis based on static interest rates
Includes estimated purchase accounting adjustments of 16 basis points
Does not include FTE adjustment of approximately 7 basis points
Modestly asset sensitive balance sheet, though benefits from future rate increases could be
muted by market competition on deposit pricing
Expected 2Q18 noninterest expense of $80 million
Does not include not reflect fully phased in cost savings
Quarterly noninterest expense base of $75 - $77 million by end of 2018
Fully phased in efficiency ratio of 50 – 52%
Noninterest
Expense2
Net Interest Margin
Balance Sheet
Effective tax rate of approximately 19.5%
Credit Stable credit outlook, no systemic credit issues are anticipated
Capital
Target dividend payout ratio of 35 – 40%
All capital ratios expected to exceed current internal targets
Noninterest income2
Estimated to be $29 - $31 million on a quarterly basis
Mortgage headwinds expected due to market conditions
1 See Forward Looking Statement Disclosure on page 2 of this presentation for a discussion of factors
that could affect management‟s expectations and results in future periods
2 Excludes merger-related activities
13
Merger Integration Update
Governance
Merger Integration
Financial
Considerations
Executive management team transition complete
Combined Board of Directors in place
Phase 1 complete
Technology Assessment – Complete
Organizational Structure / Staffing Assessment – Complete
Phase 2 ongoing
Action teams actively engaged across all functional areas
Contract Negotiations / Terminations – In Process; mostly complete
Branch divestiture – In Process; target close mid-May
Targeted cost saves expected to be realized by the end of 2018
Loan Marks:
Credit mark of 1.25% - 1.75%
Rate mark of 2.25% - 2.75%
Core deposit intangible between 1.75% - 2.00%
Branch network – 41 banking centers consolidated by conversion with additional
consolidations expected prior to year end, in addition to 5 branch divestitures
Merger Timeline
Merger finalized on 4/1/2018
System and brand conversions remain on target for late May
14
Appendix: Non-GAAP to GAAP Reconciliation
Net interest income and net interest margin - fully tax equivalent
Three months ended
Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31,
2018 2017 2017 2017 2017
Net interest income $ 75,812 $ 75,614 $ 70,479 $ 68,520 $ 68,932
Tax equivalent adjustment 718 1,387 1,353 1,294 1,225
Net interest income - tax equivalent $ 76,530 $ 77,001 $ 71,832 $ 69,814 $ 70,157
Average earning assets $ 8,087,848 $ 8,005,100 $ 7,989,969 $ 7,855,564 $ 7,695,717
Net interest margin* 3.80 % 3.75 % 3.50 % 3.50 % 3.63 %
Net interest margin (fully tax equivalent)* 3.84 % 3.82 % 3.57 % 3.56 % 3.70 %
* Margins are calculated using net interest income annualized divided by average earning assets.
This presentation includes certain non-GAAP ratios, including net interest income-tax equivalent. The tax equivalent adjustment to net interest income
recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 21% tax rate for 2018 and a 35% tax rate for 2017.
Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax
equivalent basis. Therefore, management believes these measures provide useful information to investors by allowing them to make peer
comparisons. Management also uses these measures to make peer comparisons.
15
Appendix: Non-GAAP to GAAP Reconciliation
Additional non-GAAP ratios
Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31,
(Dollars in thousands, except per share data) 2018 2017 2017 2017 2017
Net income (a) 30,506$ 24,811$ 24,826$ 22,736$ 24,414$
Average total shareholders' equity 929,474 920,194 908,057 889,604 871,215
Less:
Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324)
Average tangible equity (b) 720,421 710,815 698,327 679,559 660,891
Total shareholders' equity 939,985 930,664 914,954 898,117 880,065
Less:
Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324)
Ending tangible equity (c) 730,932 721,285 705,224 688,072 669,741
Total assets 8,898,429 8,896,923 8,761,689 8,710,042 8,531,170
Less:
Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324)
Ending tangible assets (d) 8,689,376 8,687,544 8,551,959 8,499,997 8,320,846
Risk-w eighted assets (e) 7,240,731 7,108,629 7,090,714 6,936,665 6,765,336
Total average assets 8,830,176 8,731,956 8,716,917 8,582,961 8,409,071
Less:
Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324)
Average tangible assets (f) 8,621,123$ 8,522,577$ 8,507,187$ 8,372,916$ 8,198,747$
Ending shares outstanding (g) 62,213,823 62,069,087 62,061,465 62,141,071 62,134,285
Ratios
Return on average tangible shareholders' equity (a)/(b) 17.17% 13.85% 14.10% 13.42% 14.98%
Ending tangible equity as a percent of:
Ending tangible assets (c)/(d) 8.41% 8.30% 8.25% 8.09% 8.05%
Risk-w eighted assets (c)/(e) 10.09% 10.15% 9.95% 9.92% 9.90%
Average tangible equity as a percent of average tangible assets (b)/(f) 8.36% 8.34% 8.21% 8.12% 8.06%
Tangible book value per share (c)/(g) 11.75$ 11.62$ 11.36$ 11.07$ 10.78$
Three months ended
This presentation includes certain non-GAAP ratios. These ratios include: (1) Return on average tangible shareholders' equity; (2) Ending tangible shareholders' equity as a percent
of ending tangible assets; (3) Ending tangible shareholders' equity as a percent of risk-w eighted assets; (4) Average tangible shareholders' equity as a percent of average tangible
assets; and (5) Tangible book value per share. The Company considers these critical metrics w ith w hich to analyze banks. The ratios have been included to facilitate a better
understanding of the Company's capital structure and f inancial condition.
16
Appendix: Non-GAAP to GAAP Reconciliation
Additional non-GAAP ratios
3Q17 2Q17 1Q17
As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted
Net interest income (f) 75,812$ 75,812$ 75,614$ 75,614$ 70,479$ 70,479$ 68,520$ 68,520$ 68,932$ 68,932$
Provision for loan and lease losses 2,303 2,303 (205) (205) 2,953 2,953 467 467 367 367
plus: provision expense adjustment 799
Noninterest income 16,938 16,938 18,382 18,382 22,942 22,942 17,454 17,454 17,364 17,364
less: gains from the redemption of off balance sheet securitizations 5,764
less: tax related adjustment to a limited partnership investment (119)
less: gains on sale of investment securities - 19 275 838 516
Total noninterest income (g) 16,938 16,938 18,382 18,363 22,942 16,903 17,454 16,735 17,364 16,848
Noninterest expense 52,288 52,288 82,898 82,898 54,443 54,443 51,556 51,556 51,045 51,045
less: severance expense 3,818 533
less: charter conversion expenses
less: historic tax credit investment w rite-dow n 11,328
less: merger-related expenses 1,985 8,444 800
less: indemnification asset impairment 1 527 5,055
less: charitable foundation contribution 3,000
less: other (113) 577 154 (92)
Total noninterest expense (e) 52,288 49,889 82,898 54,494 54,443 49,825 51,556 50,869 51,045 51,137
Income before income taxes (i) 38,159 40,558 11,303 39,688 36,025 35,403 33,951 33,919 34,884 34,276
Income tax expense 7,653 7,653 (13,508) (13,508) 11,199 11,199 11,215 11,215 10,470 10,470
plus: tax effect of adjustments 504 9,935 (178) (11) (213)
plus: tax reform impact on DTLs & tax partnerships 8,191
plus: after-tax impact of historic tax credit w rite-dow n @ 35% - 7,363 -
Total income tax expense (h) 7,653 8,157 (13,508) 11,981 11,199 11,021 11,215 11,204 10,470 10,257
Net income (a) 30,506$ 32,401$ 24,811$ 27,707$ 24,826$ 24,382$ 22,736$ 22,715$ 24,414$ 24,019$
Average diluted shares (b) 62,181 62,181 62,132 62,132 62,190 62,190 62,234 62,234 62,140 62,140
Average assets (c) 8,830,176 8,830,176 8,731,956 8,731,956 8,716,917 8,716,917 8,582,961 8,582,961 8,409,071 8,409,071
Average shareholders' equity 929,474 929,474 920,194 920,194 908,057 908,057 889,604 889,604 871,215 871,215
Less:
Goodw ill and other intangibles (209,053) (209,053) (209,379) (209,379) (209,730) (209,730) (210,045) (210,045) (210,324) (210,324)
Average tangible equity (d) 720,421 720,421 710,815 710,815 698,327 698,327 679,559 679,559 660,891 660,891
1 - Impairment charge related to preliminary agreement to terminate FDIC loss sharing agreements.
Ratios
Net earnings per share - diluted (a)/(b) 0.49$ 0.52$ 0.40$ 0.45$ 0.40$ 0.39$ 0.37$ 0.37$ 0.39$ 0.40$
Return on average assets - (a)/(c) 1.40% 1.49% 1.13% 1.26% 1.13% 1.11% 1.06% 1.06% 1.18% 1.16%
Return on average tangible shareholders' equity - (a)/(d) 17.17% 18.24% 13.85% 15.46% 14.10% 13.85% 13.42% 13.41% 14.98% 14.74%
Efficiency ratio - (e)/((f)+(g)) 56.4% 53.8% 88.2% 58.0% 58.3% 57.0% 60.0% 59.7% 59.2% 59.6%
Effective tax rate - (h)/(i) 20.1% 20.1% -119.5% 30.2% 31.1% 31.1% 33.0% 33.0% 30.0% 29.9%
(Dollars in thousands, except per share data)
1Q18 4Q17
17