First Financial Bancorp's Q1 2025: Unraveling Contradictions in Net Interest Margin, Loan Growth, and M&A Prospects

Net interest margin and rate cut impact, loan growth expectations, inorganic growth opportunities are the key contradictions discussed in First Financial Bancorp.'s latest 2025Q1 earnings call.



Financial Performance and Margins:
- First Financial Bancorp reported adjusted earnings per share of $0.63 with a return on assets of 1.33% and a return on tangible common equity of 17.8%.
- The net interest margin remained strong at 3.88%, although it declined slightly by 6 basis points from the linked quarter.
- The decline in loan yields outpaced the decrease in deposit costs, but the company expects the margin to expand in the near term due to current short-term interest rates.

Loan and Deposit Dynamics:
- Loan balances were stable during the quarter, with payoffs in C&I and ICRE offsetting modest growth in other portfolios, leading to a 1% annualized decrease in loan balances.
- Average deposit balances decreased by $99 million mainly due to seasonal declines in public funds and lower broker deposit balances.
- The company maintained 21% of its total balances in noninterest-bearing accounts and focused on lower-cost deposit balances.

Asset Quality and Credit Management:
- Net charge-offs declined by 4 basis points from the linked quarter, while nonperforming assets decreased by 9.5%.
- The company's Classified assets decreased by 5 basis points to 1.16% of total assets.
- The stable asset quality trends were driven by conservative lending practices and the company's focus on managing credit risk.

Capital and Liquidity:
- Capital ratios were strong, with all regulatory ratios well above regulatory minimums, and the tangible common equity ratio increased to 8.2%.
- The company's tangible book value per share increased to $14.80, representing a 5% increase from the linked quarter and 18% over the last year.
- This growth was attributed to the company's focus on growing tangible book value and efficient capital management.