First Financial Bancorp delivered a solid Q3, with management attributing performance to record noninterest income and a resilient net interest margin. CEO Archie Brown pointed to the bank’s ability to maintain asset yields while managing funding costs, as well as the contribution from diverse income streams like leasing and foreign exchange. The quarter also benefited from ongoing workforce efficiency initiatives, which have reduced full-time equivalents by 9% over the past two years. Loan balances declined modestly due to lower production in specialty businesses and the timing of construction originations, but deposit balances increased, driven by brokered certificates of deposit and money markets.

Is now the time to buy FFBC? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From First Financial Bancorp’s Q3 Earnings Call

• Brendan Nosal (Hovde Group) asked about the NDFI loan portfolio and its associated risks. Chief Credit Officer Bill Harrod explained the portfolio is conservatively managed, anchored in investment-grade REITs, with no adversely rated credits.
• Mark Shootley (KBW) inquired about the expected trajectory of net interest margin following rate cuts and the impact of new loan originations. CFO Jamie Anderson indicated that each 25-basis-point cut typically results in a 5-basis-point margin decline, partially offset by the Westfield acquisition.
• Daniel Tamayo (Raymond James) questioned higher fee and expense guidance for Q4. Anderson attributed the increase to strong forecasts in foreign exchange, leasing, and wealth management, noting that incentive compensation drives higher salary costs when these businesses perform.
• Terence McEvoy (Stephens) asked about deposit competition and the outlook for funding costs. CEO Archie Brown noted aggressive deposit pricing actions and anticipated lower funding costs with future Fed rate cuts and the addition of BankFinancial’s lower-cost deposits.
• Jon Arfstrom (RBC) focused on workforce efficiency and the application of these efforts to upcoming acquisitions. Brown stated the bank is 90% through its internal efficiency program and expects to achieve or exceed targeted cost reductions at Westfield and BankFinancial.

Catalysts in Upcoming Quarters

Our team will be monitoring (1) the pace and success of integrating Westfield and BankFinancial, including realization of projected cost savings; (2) sustained momentum in noninterest income, especially in foreign exchange and leasing; and (3) evidence of renewed loan growth, particularly in commercial lending. The impact of interest rate changes and management’s ability to control funding costs will also be important signposts for future performance.

First Financial Bancorp currently trades at $23.58, down from $24.29 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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