Executive Summary / Key Takeaways

• First Financial Bancorp (FFBC) is executing a disciplined growth strategy, leveraging strategic acquisitions and specialized lending to expand its market presence and diversify revenue streams. The company recently completed the acquisition of Westfield Bancorp and anticipates closing the BankFinancial Corporation acquisition in Q1 2026, significantly expanding its footprint in key Midwest markets.
• The company delivered strong financial performance in Q3 2025, reporting adjusted net income of $72.6 million and adjusted earnings per share of $0.76, translating to an adjusted return on average assets of 1.55% and an adjusted return on tangible common equity of 19.3%. This was supported by record total revenue of $234 million and record noninterest income of $73.6 million.
• FFBC maintains an industry-leading net interest margin (NIM), recorded at 4.02% on a fully tax equivalent (FTE) basis in Q3 2025. While asset-sensitive, management anticipates mitigating future NIM pressure from potential rate cuts through proactive deposit cost management and the integration of acquired balance sheets.
• Asset quality remains stable, with Q3 2025 annualized net charge-offs at 0.18% and an Allowance for Credit Losses (ACL) covering 1.38% of total loans. Management expects credit costs to remain consistent with Q3 levels in the near term, with ACL coverage remaining stable.
• FFBC's capital ratios are robust, exceeding regulatory minimums, with a tangible common equity (TCE) ratio of 8.87% and tangible book value per share of $16.19 as of September 30, 2025. The company is focused on continued capital generation, with potential share buybacks to be re-evaluated post-acquisition integration.

Forging Growth Through Niche Expertise and Strategic Expansion

First Financial Bancorp, founded in 1863 and headquartered in Cincinnati, Ohio, has evolved into a prominent financial holding company serving Ohio, Indiana, Kentucky, and Illinois. The company's overarching strategy centers on a local market focus, delivering superior service, and cultivating long-term client relationships. This approach is complemented by strategic acquisitions designed to expand its product lines and geographic reach. FFBC operates through six distinct lines of business: Commercial, Retail Banking, Mortgage Banking, Wealth Management (under the Yellow Cardinal Advisory Group brand), Investment Commercial Real Estate, and Commercial Finance, with the latter boasting a national footprint.

In the competitive landscape, FFBC positions itself as a mid-sized regional player, competing with larger institutions such as Huntington Bancshares (HBAN), Fifth Third Bancorp (FITB), PNC Financial Services Group (PNC), and Regions Financial (RF). While these larger rivals often possess extensive digital capabilities and broader market share, FFBC differentiates itself through its deep regional expertise, personalized services for small and medium-sized businesses, and specialized financing solutions. This localized, relationship-based banking model provides a competitive edge, particularly in community-focused segments.

Operational Excellence and Strategic Technology Adoption

First Financial Bancorp's operational excellence is underpinned by its strategic adoption and leveraging of financial technologies, rather than a single proprietary "core technology." The company utilizes sophisticated tools for risk management, including an internally-developed model to value the credit risk component of derivative assets and liabilities. This capability is crucial for managing its diverse portfolio of interest rate, foreign exchange, and commodity contracts, which are offered to clients for hedging purposes.

A significant operational achievement has been the ongoing workforce efficiency initiative, which has resulted in a reduction of approximately 200 full-time equivalents, representing a 9% decrease over the past two years. These efficiency gains are a direct response to competitive pressures and contribute to enhanced operational execution and cost management. Furthermore, FFBC has adopted new accounting standards, such as ASU 2023-2, to apply the proportional amortization method to qualifying tax credit structures, streamlining financial reporting. These strategic applications of technology and operational improvements bolster FFBC's competitive moat by enabling specialized services, enhancing risk management, and driving cost efficiencies, thereby supporting profitability and market positioning in its niche segments.

Strategic Acquisitions Fueling Expansion

FFBC's growth narrative is significantly shaped by its strategic acquisition strategy, which aims to diversify revenue and expand its geographic footprint. In February 2024, the company acquired Agile Premium Finance for $96.9 million in an all-cash transaction, adding specialized insurance premium financing to its portfolio. Agile is expected to see a 25% year-over-year production growth in 2025, with strong asset quality due to the short-term nature of its loans.

Further solidifying its market presence, First Financial completed the acquisition of Westfield Bancorp, Inc. on November 1, 2025, for $324.40 million, comprising $260 million in cash and 2.75 million shares of FFBC common stock. This acquisition significantly enhances FFBC's commercial banking and wealth management services in Northeast Ohio, adding retail banking locations and various commercial services. Looking ahead, FFBC anticipates closing the acquisition of BankFinancial Corporation in Q1 2026, an all-stock transaction valued at approximately $151 million. This move is designed to expand FFBC's presence in the Chicago market, bringing a strong core deposit franchise and benefiting from BankFinancial's lower deposit and funding costs and more rational pricing in that market.

Beyond acquisitions, FFBC's specialty lending platforms, including Summit Funding Group for equipment lease financing and Bannockburn Global Forex for foreign exchange services, are key drivers of revenue. Summit typically experiences its peak production in the fourth quarter, while Bannockburn has demonstrated consistent year-over-year growth, generally in the 10% range, with a projected run rate of $65 million to $70 million for 2026.

Robust Financial Performance and Sound Liquidity

First Financial Bancorp delivered a strong financial performance in the third quarter of 2025, with adjusted net income reaching $72.6 million and adjusted diluted earnings per share of $0.76. This translated into an adjusted return on average assets of 1.55% and an adjusted return on tangible common equity of 19.3%. The quarter also marked a record for total revenue at $234 million and noninterest income at $73.6 million.

For the first nine months of 2025, net interest income increased by 2.3% year-over-year to $468.05 million. Noninterest income saw a substantial 25.3% increase year-over-year to $192.70 million, driven by strong contributions from leasing business income (up 25.4%), net gains from sales of loans (up 34.3%), foreign exchange income (up 9.4%), client derivative fees (up 61.4%), and wealth management fees (up 12.1%). Noninterest expenses for the same period increased by 5.2% to $391 million, primarily due to growth in leasing business expenses, salaries and employee benefits, and data processing. The effective tax rate for Q3 2025 was 20.70%, reflecting higher taxable income and fewer federal income tax credits.

FFBC's net interest margin (FTE) stood at an industry-leading 4.02% in Q3 2025, a modest 3 basis point decrease from the prior quarter. This slight compression was due to a 2 basis point decline in earning asset yields and a 2 basis point increase in the cost of interest-bearing liabilities. The company's balance sheet is asset-sensitive, meaning a 25 basis point rate cut typically results in a 5-6 basis point reduction in NIM. However, management is proactively managing deposit costs and expects the Westfield acquisition to help mitigate some of this sensitivity.

Liquidity remains robust, with total deposits increasing by 0.7% to $14.40 billion as of September 30, 2025. Uninsured deposits totaled $6.10 billion, or 42.10% of total deposits, but an adjusted figure excluding public funds and intercompany accounts stands at $3.80 billion, or 26%. The company maintains diverse funding sources, including $1.10 billion in remaining borrowing capacity from the FHLB and $5.30 billion in unused overnight wholesale funding sources.

Asset Quality and Risk Management

FFBC maintains a strong focus on asset quality and risk management. As of September 30, 2025, nonaccrual loans increased by 15.10% to $76 million, representing 0.65% of total loans, primarily due to the downgrade of two large Commercial & Industrial (C&I) credits. However, Q3 2025 annualized net charge-offs improved to 0.18%, down from 0.21% in Q2 2025. The Allowance for Credit Losses (ACL) stood at 1.38% of total loans, an increase of 4 basis points from the prior quarter.

The company's exposure to non-owner occupied office space loans was $347.50 million, or 3% of the total loan portfolio, as of September 30, 2025, with strong original loan-to-value ratios and a concentration in suburban Class A and B assets. The NDFI (Non-Depository Financial Institutions) portfolio, totaling $434 million, is diversified and conservatively managed with no adversely rated credits. Management is actively monitoring potential impacts from tariff uncertainty on client cost structures and demand.

Capital ratios are strong and well above regulatory minimums. As of September 30, 2025, the Tier 1 capital ratio was 13.23%, the total capital ratio was 15.32%, and the leverage ratio was 10.50%. The tangible common equity ratio increased to 8.87%, and tangible book value per share grew to $16.19, reflecting strong earnings and an improvement in Accumulated Other Comprehensive Income (AOCI). While the Westfield acquisition is expected to result in approximately a 120 basis point hit to the TCE ratio, management plans to re-evaluate share buybacks after two to three quarters of integration, with a target consideration if the stock trades at or below 150% of tangible book value.

Outlook and Strategic Trajectory

First Financial Bancorp's outlook for Q4 2025 anticipates continued momentum. Excluding the Westfield acquisition, loan growth is projected to be in the mid-single digits on an annualized basis, driven by healthy pipelines in commercial segments and a seasonal peak for Summit funding. Net interest margin is expected to range between 3.92% and 3.97%, incorporating a modest boost from Westfield and assuming 25 basis point rate cuts in both October and December. Fee income is guided to be between $77 million and $79 million, with foreign exchange contributing $18 million to $20 million and leasing business revenue between $21 million and $23 million, including Westfield's impact. Noninterest expenses are forecast to be between $142 million and $144 million, reflecting ongoing efficiency efforts and the integration costs of Westfield.

Longer-term, FFBC aims for 6-7% loan growth, though the full-year 2025 projection was revised to 4-5% due to Q1 softness and elevated prepayment pressures in Investment Commercial Real Estate. The majority of cost savings from recent acquisitions are expected to materialize by mid-2026. The company's commitment to its communities is evidenced by its "Outstanding" Community Reinvestment Act rating and its recognition as a Gallup Exceptional Workplace Award winner for associate engagement.

Conclusion

First Financial Bancorp is a regional banking institution demonstrating a clear and effective strategy for growth and profitability. By focusing on its core Midwest markets, cultivating strong client relationships, and strategically expanding through targeted acquisitions like Westfield Bancorp and the pending BankFinancial Corporation deal, FFBC is diversifying its revenue streams and enhancing its operational scale. Its specialized lending platforms and disciplined approach to efficiency, as evidenced by significant FTE reductions, contribute to an industry-leading net interest margin and robust financial performance. While the company operates in a dynamic interest rate environment and faces competitive pressures from larger, more digitally advanced banks and fintechs, its strong capital position, stable asset quality, and proactive risk management provide a solid foundation. FFBC's strategic trajectory, marked by continued expansion and a commitment to operational excellence, positions it for sustained value creation for investors.