First Financial Bancorp. Aktie

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Financial Bancorp. First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the call over to Scott Crawley, Corporate Controller. Please go ahead.

Thanks, Kate. Good morning, everyone. Thank you for joining us on today's conference call to discuss First Financial Bancorp's first quarter financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Bill Harrod, Chief Credit Officer.

Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the first quarter 2026 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we will provide today is accurate as of March 31, 2026, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I'll now turn the call over to Archie Brown.

Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our first quarter results, and I'm very pleased with our overall performance. The first quarter was a busy one as we closed the BankFinancial acquisition, completed the conversion of Westfield Bank and wrapped up the sale of the BankFinancial multifamily loan portfolio. Adjusted earnings per share were $0.77 with an adjusted return on assets of 1.45% and an adjusted return on tangible common equity of 19.2%.

Adjusted earnings per share increased 22% compared to the first quarter of last year, driven by a robust net interest margin and strong fee income. Our net interest margin was resilient despite the Fed funds rate cut in December as the expected decline in loan yields was offset by a similar decline in deposit costs. Assuming no short-term rate reductions by the Fed, we expect the margin to remain stable in the near term. Loan balances increased slightly for the quarter due to the BankFinancial acquisition. Excluding the BankFinancial portfolio, loans declined for the quarter as seasonally strong loan production was offset by extended payoff pressure in the ICRE portfolio.

Compared to the first quarter of 2025, originations increased approximately 45%. And excluding Westfield and BankFinancial, originations were up by over 25%. Our expectation for loan growth for 2026 has not materially changed. Loan pipelines are very healthy, and we expect strong production in the second quarter. We also expect payoff activity in ICRE to approach more normal levels, leading to solid loan growth in the second quarter.

Adjusted fee income was strong for the quarter. Historically, fee income significantly dips early in the year. However, we successfully combated this trend in the first quarter. Adjusted noninterest income was $75.6 million, which was 24% higher than in the first quarter of 2025 and only a slight decline from the linked quarter. These results were driven by record wealth management income, strong client derivative income and record leasing business income. Additionally, expenses were well controlled during the quarter with total noninterest expenses coming in well below our expectations and acquisition-related cost savings exceeding our initial estimates.

Net charge-offs were 35 basis points of total loans and were impacted by one large commercial relationship. Other asset quality indicators were stable with nonperforming assets slightly declining from the linked quarter to 44 basis points, while there is certainly more uncertainty in the economy due to the impact of the war in Iran and, our current expectations are for asset quality to gradually improve throughout the year, similar to our performance in 2025. Capital ratios are strong and continued to climb in the first quarter. All regulatory ratios were well in excess of regulatory minimums and the tangible common equity increased to 7.9%.

Tangible book value per share was $16.15, which was a 2.6% increase over the linked quarter and a 9% increase compared to the first quarter of 2025. Tangible book value was at approximately the same level as the third quarter of 2025 just prior to the Westfield Bank acquisition. This month, the Board of Directors authorized a $5 million share repurchase plan, replacing the plan we had in place through 2025, and we are evaluating opportunities to employ buybacks as part of our overall capital planning.

I'd like to take a minute and discuss our recent acquisitions. During the quarter, we successfully completed the conversion of Westfield Bank. And then for the quarter, Westfield deposit and loan balances were stable, we maintained high associate retention, and we have achieved the financial results that we expected from the transaction to date. We're happy with the quality of the bank we acquired and with the talented team that has joined us. We also completed the purchase of BankFinancial on January 1 and plan to convert systems in early June. We remain excited about the opportunities in the Chicago market and continue to see growth potential from this transaction.

Now I'll turn the call over to Jamie to discuss these results in greater detail. And after Jamie, I'll wrap up with some additional forward-looking commentary and closing remarks.

Thank you, Archie, and good morning, everyone. Slides 4, 5 and 6 provide a summary of our most recent financial performance. The first quarter results were excellent and included strong earnings, record revenues driven by a robust net interest margin and higher-than-expected fee income. Our net interest margin remains very strong at 3.99%, increasing 1 basis point during the quarter. Cost of funds declined 13 basis points, while asset yields declined 12 basis points.

End-of-period loan balances increased $71 million, which included $228 million acquired in the BankFinancial transaction. This was partially offset by a $152 million decrease in ICRE balances, reflecting the payoff pressure that Archie mentioned earlier. Total average deposit balances increased $1.7 billion, including $1.2 billion acquired in the BankFinancial transaction and the full quarter impact from Westfield. We maintained 20% of our total deposit balances and noninterest-bearing accounts and remain focused on growing lower cost deposit balances.

Turning to the income statement. First quarter fee income overcame seasonal headwinds with strong performance across all income types. Additionally, we had an $8.9 million gain on bargain purchase related to the BankFinancial acquisition. Noninterest expenses increased from the linked quarter due primarily to the impact of our most recent acquisitions. Our ACL coverage decreased slightly during the quarter to 1.36% of total loans and we recorded $8.5 million of provision expense during the period, which was driven primarily by net charge-offs.

On asset quality, net charge-offs were 35 basis points on an annualized basis an increase of 8 basis points from the fourth quarter, while NPAs as a percentage of assets were 44 basis points, declining 4 basis points from the fourth quarter. Classified assets as a percentage of total assets also declined slightly during the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.41 to $16.15, while our tangible common equity ratio increased to 7.88%.

Slide 8 reconciles our GAAP earnings to adjusted earnings highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $80.5 million or $0.77 per share for the quarter. Noninterest income was adjusted for $1.3 million of losses on the sales of investment securities, the $8.9 million gain on bargain purchase related to the BankFinancial acquisition and a $1.4 million loss on the surrender of a bank-owned life insurance policy. Noninterest expense adjustments exclude the impact of acquisition costs, tax credit investment write-downs and other expenses not expected to recur.

As depicted on Slide 9, these adjusted earnings equate to a return on average assets of 1.45% and a return on average tangible common equity of 19% and a pretax pre-provision ROA of 1.99%. Turning to Slides 10 and 11. Net interest margin increased 1 basis point from the linked quarter to 3.99%. Total deposit costs declined 13 basis points from the linked quarter, offsetting the impact of lower asset yields. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased $71 million during the period. As you can see on the right, we acquired $228 million of loans in the BankFinancial transaction. This was offset by a $152 million decrease in ICRE balances. [ Absent ] the acquisition, loan balances decreased 4.7% on an annualized basis, driven by elevated payoffs and ICRE.

Slide 15 depicts our NDFI exposure. As you can see, our total NDFI balances are approximately 3% of our total loan book and all NDFI loans were pass rated at the end of the first quarter. The majority of our NDFI lending is concentrated in loans to REITs, which we believe further mitigates our risk. Slide 16 shows our deposit mix as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $1.7 billion, including a $1.2 billion impact from the BankFinancial transaction as well as a full quarter impact from Westfield.

Slide 18 highlights our noninterest income. Total adjusted fee income was $76 million, with leasing and wealth management both posting record results. Foreign exchange delivered strong results and client derivative fees increased during the period as well. Noninterest expense for the quarter is outlined on Slide 19. Core expenses increased $12.9 million as expected during the period. This was driven primarily by our recent acquisitions.

Turning now to Slides 20 and 21. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $207 million, which includes $3.1 million of initial allowance on the BankFinancial portfolio. This resulted in an ACL that was 1.36% of total loans, which was a 3 basis point decline from the fourth quarter. We recorded $8.5 million of provision expense during the period. Provision expense was primarily driven by net charge-offs, which were 35 basis points. Additionally, our NPAs to total assets decreased slightly to 44 basis points, while classified asset balances as a percentage of total assets decreased to 1.02%.

Finally, as shown on Slides 22 and 23, capital ratios remain in excess of regulatory minimums and internal targets. During the first quarter, tangible book value increased to $16.15, while the TCE ratio increased to 7.88% at the end of the period. Our total shareholder return remains strong with 35% of our first quarter earnings returned to our shareholders during the period through the common dividend. The Board also approved a $5 million share repurchase program. We maintain our commitment to providing an attractive return to our shareholders and we'll evaluate capital actions that support that commitment.

I'll now turn it back over to Archie for some comments on our outlook. Archie?

Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our second quarter outlook, which can be found on Slide 24. On the balance sheet, we expect mid-single-digit loan growth on an annualized basis during the second quarter as loans filter through our strong pipelines and ICRE payoffs slow.

On the deposit side, we expect core deposit balances to remain relatively flat compared to the first quarter. Our net interest margin remains among the highest in the peer group, and we expect it to hold steady in a 3.99% to 4.04% range over the next quarter, assuming no rate cuts. Related to credit, we expect second quarter credit costs to approximate first quarter levels and ACL coverage to remain relatively stable as a percentage of loans. As I mentioned earlier, similar to last year, we expect credit trends to gradually improve over the course of the year.

Further down the income statement, we expect fee income to be between $75 million and $77 million, which includes $14 million to $16 million for foreign exchange and $20 million to $22 million for leasing business revenue. Noninterest expenses are expected to be between $151 million and $154 million. We successfully completed the Westfield conversion in March and are scheduled to convert BankFinancial over the summer, we're on pace to achieve our modeled cost savings in the Westfield acquisition and should realize full savings beginning in the third quarter, and we expect full BankFinancial savings to be realized beginning in the fourth quarter.

Before I wrap up, I want to thank our associates for the incredible work they've done this year integrating Westfield into First Financial and the work they're now doing as they prepare for the BankFinancial conversion I also want to mention how proud I am that First Financial was selected for the Gallup Exceptional Workplace Award for associate engagement. This marks the second consecutive year that we have received this honor which is awarded to 4% of the thousands of companies that Gallup works with worldwide. We have partnered with Gallup for more than 6 years, and we've made associate engagement a core tenet of our corporate strategy. I want to commend our associates and leaders who work throughout the year to drive engagement, knowing that by doing so, we're also improving the client experience and shareholder value.

To conclude, we're really happy with our first quarter results. We've made substantial progress across the company, and we worked diligently to be a bank that consistently produces top level results. We remain focused on the right things and are determined to build on the momentum generated by our first quarter performance. We've had a very strong start to 2026, and we believe that this is going to be another very successful year for First Financial. Kate will now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Daniel Tamayo with Raymond James.

So I guess maybe first, starting on the loan growth side. You talked about the impact from the payoffs in the first quarter, $152 million, I think, is the number you gave. So we talked to a lot of banks this earnings season about this headwind and kind of what's going to change to remove that headwind going forward. So just curious on your thoughts on that, kind of what drives your confidence those headwinds on the paydown side slow? And just a little bit more timing if it's second quarter or you think it's back half of the year. As it relates to the timing of the paydowns?

Yes. Thanks, Danny. Yes, I'll maybe start with some color, and then I'll come back to the kind of how we see our outlook on it. We talked about this primarily being ICRE. We had -- we don't show REITs in the ICRE totals, but we also had some REIT paydowns or exits, if you will, and that shows up more in our commercial line. That was probably another $23 million, but it's all related in the commercial real estate space, if you will.

Look, it's been a mix. We probably saw about 30% of our ICRE balances were exited because of the properties were sold. So there's been a little more, I think, a little more volume of sales occurring as some of the developers owners are saying, look, this is -- I'm getting good pricing. It's a good time to do it with the uncertainty. So that's a piece of it. We've seen about maybe close to 1/4 of it go to the secondary market.

And then we've seen other banks come back in. We've seen -- for several years, we weren't seeing the larger regionals in the space. They're back in and they're aggressive and they're taking out loans. In some cases, for us, hotels, we don't have a big book, but that's where some of it's come from. Other cases, loans that they're taking and they're taking for very aggressive pricing or, in some cases, structure that we don't think is appropriate. So we're seeing some of it move like that.

So if you said property sales, secondary market, larger banks coming back in and then some REIT exits that's sort of been the mix of what we've seen happen. We talked to our commercial real estate team, just what we're seeing in their conversation with borrowers and just with the level of payoff requests coming in, they just are slowing. And what our team sees is that over the course of the second quarter, that will slow -- continue to slow.

In addition, our production ramps up more in the quarter. So it's a combination of the 2, we don't know exactly where this is going to fall, of course. There's timing of payoff things that can occur. But they're hopeful that they're going to be somewhere that portfolio around flattish for the quarter. And if they're flattish along with the other activity we have, I think that drives our growth overall.

That's great. Very helpful detail there, Archie. I guess the other side of that, and you touched on it at the end, is the production I think you talked a little bit about it in the prepared remarks, but maybe talk about the pipeline and some of the drivers within that, particularly on the commercial side for the rest of the year?

The pipeline, I think we signaled is pretty strong. Now look, I guess everybody can define what a pipeline means. In our -- in the language we're using here, we call these advanced stage pipeline or a late-stage pipeline. Generally, this is where we've been awarded the business. That doesn't mean we'll close them all. Sometimes they'll fall out for different reasons, but that's how we're looking at this. And it's just -- it's up substantially from the early part of the year, and we think that activity is continuing.

The sentiment in the market, I know there's a lot of macro activity going on, but demand is pretty strong. Borrowers are pretty active, and we think the pipeline will continue to build. So that's given us some confidence that we'll see the growth we've talked about. And it's pretty much across the board. When you look at all of the areas that we lend into. We're seeing good pipeline activity.

Okay. Great. And then lastly, again on the same topic, but just curious where you guys stand, I mean, in Chicago right now? You closed the BankFinancial deal. It was really for the deposit side? I know you had some presence there prior to the deal. So maybe update us on where you stand from like a lender perspective and where you're looking to get to over time?

Sure. So Danny, as you said, we closed early in the year, convert early June. As you said, it's been primarily a deposit play deposits are holding, I think, pretty well at this point. And we're sort of building out the team, if you will. So we've added some commercial banking talent. We had a team I think we've added one here in the last month or two. We plan to add more bankers to the commercial banking team.

We've added wealth advisers to the team, private bankers to the team. So we're kind of filling out, if you will, what I call the more of the wholesale commercial team to complement the retail strategy. And we think there's good opportunity. If you go back and look at that bank, they really weren't generating activity in those areas to speak of. So we think it's -- as we get the team filled out, almost anything we do there is going to be additive to the bank's balance sheet.

Your next question comes from the line of Brandon Rud with Stephens.

I guess maybe my first one, the cost of interest-bearing deposits was 2.33% for the full quarter. I'm just curious, embedded within your NIM guide, is that kind of a good starting base for the second quarter or I guess, I guess, yes, is that still a good starting point for the second quarter?

Yes, we talked -- when we're talking deposits, Brandon, we really talk more kind of the overall -- like our overall cost of deposits. So that -- but that number that you're quoting there, I mean that's the -- I guess, the exit cost going into the second quarter would be slightly lower than that.

And so we're showing our overall cost of deposits in the first quarter was 1.83%, and we think we can get that down in the second quarter, another 2 or 3 basis points. So the cost of interest-bearing deposits would just kind of flow right off of that as well, obviously. So the -- so our starting cost of deposits in the second quarter. Again, 1.83% for the full quarter in the first quarter, the starting point is around 1.80%, 1.81%.

Okay. Perfect. And then I think you said the fourth quarter of this year, I think, is going to be the first clean quarter with all the expenses taken out. So thank you for the guide for the second quarter. I'm assuming kind of stair steps down from there. I guess what is that all-in run rate with all the cost saves kind of look like in the fourth quarter then?

Yes. So we'll get a stair step down here in the -- let's see here. In the second quarter, call it down into that range where we guided to. And we think then it is relatively flat for the remainder of the year. We may get a little bit more coming down. But obviously, we have some other stuff outside of the acquisitions where we're making other investments and whatnot where costs are moving up, just like normal in that 2% or 3% range that's going to offset the decline really from the from the BankFinancial deal.

And the BankFinancial deal, obviously, was a little bit smaller in their expense base. But the fourth quarter, so we should see that step down in the second quarter, which gets us to that guide that we put in the outlook, and then it's relatively flat for those -- for the out quarters.

Got you. Okay. So the cost savings effectively fund the investments and that's a stable rate?

Right.

Your next question comes from the line of Karl Shepard with RBC Capital Markets.

I guess I just want to start on the margin quick. We have the guide for 2Q. But just thinking about your balance sheet, I'm guessing if we don't see any cuts, that's probably a pretty good spot to be for the rest of the year? Or should we be thinking about loan growth maybe changing the mix a little bit and helping the margin?

Yes. Yes, this is Jamie, Karl. Yes. So that guide, obviously, with rate cuts getting looks like getting pushed out in either later in the year or into '27 at this point, obviously helps us from a margin standpoint, being slightly asset sensitive.

But yes, so when we -- as we remix out of some of the securities balances that we've put on with the liquidity that we got from -- especially from the BankFinancial deal, you could see -- and it's not a lot, obviously, because based on the earning asset base of -- based on the earning asset base that we have, that rotation is relatively small out of the securities book into the -- if we have loan growth in that 5% to 7% range, you're talking about a couple of hundred million dollars a quarter, right? So if we rotate out of securities for a portion or all of that, it's just not -- it's not that much to basically get a lot of lift in the margin, but you might see a basis point or 2.

Okay. And then I saw in the deck a new branch in the Westfield markets. I'm assuming that was planned ahead of the merger, but just we talked a little bit about Chicago expectations and investments there, 2 questions ago. But anything in Westfield markets to flag?

Yes, Karl, this is Archie. So specific to that branch, that was actually a branch underway when we were negotiating and announcing a deal, they already had that branch under construction. So we just completed. Actually, we opened it up as a First Financial branch prior to the conversion which is, I think, a good thing from training and letting people get to use -- kind of get to introduce to First Financial.

With regard to other things we're doing in the Northeast Ohio market, I think altogether, so I think there's about 4 FTE added because of Wadsworth that branch. I think we've added about another 9 producers whether they be on the commercial, small business side, wealth, private banking. We've added about 9 producers to that market. to kind of round out all the things that we do. That's all baked into the expense numbers as well. But we think there's upside of adding the additional production capability.

Your next question comes from the line of Brian Foran with Truist.

Your capital has rebuilt pretty quickly here, which is a good problem to have. I mean, in some ways, maybe just an open-ended question on what you're thinking going forward. I think you mentioned maybe evaluating more buybacks. And then as part of that, if there's anything notable to share around Basel III or around how you're thinking about the binding minimum between CET1 and TCE and things like that. But yes, really just kind of focused on the excess capital and what you're thinking for the next 12 months or so?

Yes. Yes, Brian, this is Jamie. So yes, if you -- we are compounding capital at a high rate just based on our earnings level. And if you look back pre Westfield and BankFinancial, I mean, maybe to a lesser extent, BankFinancial. But if you look back pre-acquisition, at the end of the third quarter, and I'm talking about our tangible book value per share we're basically back to where we were now pre-acquisition level.

So what we were very pleased with. So we are piling in at this earnings level, a lot of capital. And really, when you think about it for us, I mean our regulatory ratios are fine. We have a lot of cushion there. Typically, our constraint when we look at -- like if we look at an acquisition, our constraint typically is in the TCE ratio. We're close to 8% now, just below 8%. Obviously, we have some AOCI impact in there. And then rates moved against us a little bit in the first quarter to -- or that would have been even a little bit higher.

So our typical constraint is to TCE ratio. We would like to be that -- like to have that above 8% and we're getting there pretty quickly. But when we talk about buyback and looking at that, obviously, we're going to be mindful of price and the earnback on that -- on a buyback and looking at that TCE ratio. But we are -- so we have a -- when we look at the common dividend, we have a payout ratio in the low 30s, call it, 30% to 35% now based on our earnings level post acquisition.

So we wanted to get a couple -- a quarter or 2 of impact in from the acquisitions to see where we were from a capital ratio standpoint, where everything was going to fall out -- and then so we had the Board approve the share buyback. We haven't done any buybacks in several years, mainly because of, well, several things. We've had -- we had a couple of nonbank acquisitions during that -- so we haven't done a buyback since '21.

And we had a couple of the nonbank acquisitions in there, which aid up a pretty significant amount of capital for us because they were all basically all cash deals. And so all goodwill aid into the TCE ratio. So we think we're at a level now, especially with our earnings, the amount of capital we're bringing in, where we can look at buybacks and potentially, I think what we're looking at is looking at that total payout ratio, again, which now with just the common dividend is in the low 30s of increasing that somewhere in that 50% to 60% range.

And so if you do that math, the other -- obviously, the other piece of that is the buyback. So you're talking about another 20 to 30 points of where the buyback would play into that. And then -- but that we're -- I don't know if we're saying we're guaranteeing we we're going to do that, you could probably see us execute some on the buyback. It would be dependent on some other factors, potentially macro factors and then we would -- if we see a strategic M&A deal, we would prioritize that in front of the buyback. But yes, I think absent that, I think you would see us start executing on the buyback.

That's great. If I could ask one follow-up. The CRE paydown discussion was really helpful. I think the last point you made was seeing some pricing and structure that you don't necessarily want to match. I wonder if just anecdotally, kind of at the aggressive end of the market, could you share where you're seeing yields or spreads get to? And are there any particular points in structure that you're seeing people give on? Is it an LTV thing? Is it a personal guarantee thing? What are the kind of things you're seeing in the market that you don't want to match?

Yes. This is Archie. I mean we had a deal that we were -- we thought we were within days of closing. It's like a $25 million or $30 million transaction. We thought we were in days of closing and one of the large regionals had been competing on it. And then, I guess, when they realized they had lost it, they came back and basically eliminated the covenants. So it wouldn't even change and just eliminated the covenants.

So we're seeing that. Certainly on a fixed charge coverage ratio, those numbers may be coming down. It's those kind of things in particular. Our pricing is aggressive also, I may have mentioned earlier, but certainly sub-200 basis points of spread, 170, 180, in some cases, lower for some commercial, really high-quality commercial deals even lower on spread. So it tends to be really aggressive pricing, loosening up some of the coverage ratios would be probably the primary areas we're seeing it.

All right. Hopefully, it's not true with swooping in with no covenants.

Yes. Well, I think the point here too is, I mean we're -- I think everybody is excited about activity and wanting loan growth, and we want it too, but we don't want to give our skis. So we're going to get growth, but we need -- we want it to make sense, and we want to be happy about it 2 years from now.

[Operator Instructions] Your next question comes from the line of Brendan Nosal with Hovde Group.

Maybe just starting off here on some of the -- just the overall balance sheet. It looks like there's some pretty big discrepancies between where spot balances were for kind of loans, cash and securities versus average balances for the quarter, and I guess there's a lot of noise. So I guess, can you fill us in on when the BankFinancial loan sale occurred during the quarter? And then where do you see overall average earning assets landing in the second quarter?

Yes. Great question, Brendan. This is Jamie. So the loan sale closed on at the end of -- the very end of the quarter, it closed on March 30. So when you look at our cash and securities we had call it, roughly $400 million sitting in cash, not in securities, it was sitting in cash at the end of the quarter. And so that $400 million-ish we will not put that to work in the securities portfolio. We will kind of slowly let higher cost either borrowings or deposits or broker deposits run out, and we'll fund that with the cash from that loan sale.

And then so when you're talking about earning assets, the earning asset base for the first quarter kind of spot at the end of the quarter was around $19.7 million -- around [ $9 million to $15.7 million ]. So if you take that $400 million out sitting in cash, I guess, it's sitting in interest-bearing deposits at banks. So that will come out, and then you'll start to see again, with the loan growth that we guided to, if that is -- again, if that's in that 5% to 7% range, you're talking about a couple of hundred like $200 million a quarter. Our plan is to fund about half of that with cash flows from the securities portfolio and then the rest, we'll grow the earning asset base. So if you're talking about maybe $100 million or so increase in earning assets each quarter. Does that make sense?

Yes. Yes. And then just I guess there's still a bit of a discrepancy on my end of just kind of where that number will land in the second quarter just with the moving pieces. Can you just maybe help a little more on kind of where [ AAAs ] land.

Yes. So you're talking around $19.5 million.

Okay. All right. Fantastic. Maybe turning back to the margin just kind of unpacking the core NIM ex accretion versus the accretion piece. I think you had 10 basis points this quarter of fair value accretion. Just kind of curious when you kind of look at the path for that, what does that number look like?

Yes. We think that will be relatively steady at that 10 basis points. Obviously, it could move around if we get either slowdown, and it's all based on the amount of payoff/prepayments that we get on that portfolio. But somewhere around that 10 basis point range in that -- and the dollars would be around that $4 million to $5 million of accretion income.

Okay. Perfect. Last one for me here. Just when you kind of look out at growth expectations for the balance of the year, can you kind of dissect that between the core commercial bank versus your various specialty businesses?

Yes, this is Archie. So when you say the specialty, are you meaning core versus like specialty including Summit and Oak Street, things like that?

Yes. So yes, when I say essentially Oak Street, Summit, Agile, those books versus kind of the traditional commercial bank.

Yes. I mean it's the top of my head, but I'd say it's slightly tilted towards the core commercial. Agile is going to grow, but they're going to grow. It's just the base is not that huge, and they'll -- if they grow I can't recall now $20 million, $30 million. Summit it will grow, but their amortizations have picked up, so their growth rates are just not as strong as they used to be.

So specialty is contributing -- but I would say we're talking commercial core commercial consumer is going to be, as you said, 50% to 60%, maybe 65%.

Yes. This is Jamie. Yes, it's about -- I would say it's about 2/3, 1/3. And then Agile, they have a -- the second quarter is their big quarter for growth. Yes.

I'll now turn the call back over to Archie Brown for closing remarks.

Thank you, Kate. I want to thank everybody for joining us today and following along our progress during the first quarter. We look forward to talking again in the second quarter. And hopefully, we'll be sharing even more good news with you. Have a great day. Have a great weekend. Bye now.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Jay, and I'll be conference operator today. At this time, I would like to welcome everyone to the First Financial Bancorp. Fourth Quarter 2025 Earnings Conference Call and webcast. [Operator Instructions]

I'd now like to turn the conference over to Scott Crawley, Corporate Controller. You may begin.

Thanks, JL. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's fourth quarter and full year financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Bill Harry, Chief Credit Officer.

Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call.

Additionally, please refer to the forward-looking statement disclosure contained in the fourth quarter 2025 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we provide today is accurate as of December 31, 2025, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I'll now turn it over to Archie Brown.

Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our fourth quarter and full year financial results. I'm very pleased with our record earnings performance for the quarter. Adjusted earnings per share were $0.80, leading to an adjusted return on assets of 1.52% and an adjusted return on tangible common equity of 20.3%. The net interest margin, which declined slightly from the third quarter has proven resilient as a reduction in funding costs negated most of the impact of short-term rate reductions by the Federal Reserve. Balance sheet trends were solid for the quarter with loan growth of 4% on an annualized basis. Total average deposits increasing by approximately 7% on an annualized basis, excluding the impact from the Westfield acquisition.

I'm especially pleased with our robust noninterest income for the quarter. Total adjusted fee income was $77 million and increased 5% compared to the linked quarter. Wealth Management and foreign exchange income both increased by double-digit percentages, while leasing and mortgage income also remained strong.

While adjusted noninterest expenses increased by 6% from the linked quarter, most of the increase was driven by the Westfield acquisition.

Asset quality was relatively stable for the quarter and provision expense was in line with our expectations at $10.1 million. Nonperforming assets increased slightly to 0.48% of assets and classified assets declined slightly to 1.11% of assets. Three loans drove the increase in NPAs, while net charge-offs for 27 basis points, which was within our range of expectations.

Turning to the full year. 2025 was another great year for First Financial. On an adjusted basis, our net income was $281 million or $2.92 per share. Adjusted return on assets was 1.49% and adjusted return on tangible common equity was 19.3%. We're pleased with the performance of the net interest margin for the full year. While the margin did decline year-over-year from 4.05% to 3.98%, we were able to offset most of the impact of short-term rate decreases through the diligent management of deposit costs.

Adjusted noninterest income increased by 16% to a record $280 million, led by growth in wealth management, foreign exchange and mortgage income. Result was record revenue for the company of almost $922 million, an 8% increase over 2024.

Similar to the fourth quarter, asset quality was relatively stable for the year. Provision expense declined 21% from 2024. Net charge-offs as a percent of average loans declined 5 basis points to 25 basis points, and our ACL coverage increased by 6 basis points to 1.39%.

Capital levels remained strong during 2025. While the acquisition of Westfield negatively impacted our capital, our strong earnings drove increases to tangible book value per share of 11% from $14.15 to $15.74.

I'll now turn the call over to Jamie to discuss these results in more detail. And after Jamie talks, I'll wrap up with some additional forward-looking commentary and closing remarks.

Thank you, Archie, and good morning, everyone. Slides 4, 5 and 6 provide a summary of our most recent financial results.

The fourth quarter was another outstanding quarter, highlighted by record earnings, a strong net interest margin organic growth in both loans and deposits and the acquisition of Westfield Bank. Our net interest margin remains very strong at 3.98%. Funding costs declined 15 basis points from the linked quarter, while asset yields decreased 19 basis points. Loan balances decreased $1.7 billion, including $1.6 billion acquired in the Westfield transaction.

Organic growth was $131 million or 4% on an annualized basis and was driven by Summit and C&I. Total deposit balances increased $2 billion, including $1.8 billion acquired in the Westfield transaction. Organic growth was $264 million with increases in the majority of our deposit types. We maintained 21% of our total balances in noninterest-bearing accounts and remain focused on growing lower cost deposit balances.

Additionally, we issued $300 million of subordinated debt during the fourth quarter. These notes have a 10-year maturity and carry a 6-3/8% interest rate.

Turning to the income statement. Adjusted fourth quarter fee income was a record, led by leasing, foreign exchange and wealth management. Noninterest expenses increased from the linked quarter due primarily to the impact of the Westfield acquisition. Our ACL coverage remained relatively unchanged during the quarter at 1.39% of total loans, despite a large increase in the ACL balance. Most of that balance change was due to the Westfield acquisition.

In addition, we recorded $10.1 million of provision expense during the period, which was driven primarily by net charge-offs and loan growth.

Asset quality trends were relatively stable as net charge-offs increased 9 basis points from the third quarter and classified assets as a percentage of total assets declined 7 basis points. Net charge-offs were 27 basis points on an annualized basis, while NPAs as a percentage of assets were 48 basis points.

From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value was $15.74, while our tangible common equity ratio was 7.79%.

Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $77.7 million or $0.80 per share for the quarter. Noninterest income was adjusted for $12.6 million of losses on the sales of investment securities, while noninterest expense adjustments were primarily related to acquisition activity.

As depicted on Slide 8, these adjusted earnings equate to a return on average assets of 1.52%, a return on average tangible common equity of 20% and a pretax pre-provision ROA of 2.14%.

Turning to Slides 9 and 10. Net interest margin decreased 4 basis points from the linked quarter to 3.98%. Asset yields declined 19 basis points compared to the prior quarter. Total deposit costs declined 15 basis points, partially offsetting the impact of lower asset yields.

Slide 12 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased $1.7 billion during the period. As you can see on the right, $1.6 billion was a result of the Westfield transaction. Absent the impact from the acquisition, organic loan growth was $131 million or 4% on an annualized basis. Organic growth was driven by C&I and Summit.

Slide 14 shows our deposit mix as well as a progression of average deposits from the linked quarter. In total, average deposit balances increased $1.4 billion, including a $1.2 billion impact from the Westfield transaction. Organic growth during the quarter included increases in the majority of our product types while some were seasonal in nature.

Slide 16 highlights our noninterest income. Total adjusted fee income increased to $77.3 million, which was the highest quarter in the history of the company. Bank [indiscernible] and Summit both had strong results. Wealth had a record quarter, while mortgage and deposit service charge income also increased from third quarter levels.

Noninterest expense for the quarter is outlined on Slide 17. Core expenses increased $8.6 million during the period. This was driven by the impact from the Westfield acquisition.

Turning now to Slides 18 and 19. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $207 million. This includes $26 million of initial allowance on the Westfield portfolio. We recorded $10.1 million of total provision expense during the period. At December 31, the ACL was 1.39% of total loans, which was up slightly from the linked quarter.

Provision expense was primarily driven by net charge-offs and loan growth. Additionally, our NPAs to total assets increased slightly to 48 basis points, while classified asset balances as a percentage of total assets decreased to 1.11%.

Finally, as shown on Slides 20 and 21, capital ratios remain in excess of regulatory minimums and internal targets. During the fourth quarter, tangible book value in the TCE ratio were negatively impacted by the Westfield acquisition. Tangible book value was $15.74, and the TCE ratio was 7.79% at the end of the period. Our total shareholder return remains strong with 40% of our earnings returned to shareholders during the period through the common dividend. We maintain our commitment to providing an attractive return to our shareholders and we'll evaluate capital actions that support that commitment.

I'll now turn it back over to Archie for some comments on our outlook. Archie?

Thanks, Jamie. Before we conclude our prepared remarks, I want to comment on our outlook for the first quarter, which can be found on Slide 22. Excluding the impact from Bank Financial, we expect payoff pressure to ease in the coming quarter, resulting in a low single-digit organic loan growth on an annualized basis during the first quarter. And for the full year, as originations ramp up, we expect loan growth to be in the 6% to 8% range.

We expect core deposit balances to decline modestly in the near term due to seasonal outflows of public funds. Our net interest margin remains among the highest in the peer group, and we expect it to be in a range of between 3.94% and 3.99% over the next quarter, assuming a 25 basis point rate cut in March.

We expect first quarter credit cost to approximate fourth quarter levels and ACL coverage to remain stable as a percentage of loans. We expect fee income to be between $71 million and $73 million, which includes $14 million to $16 million for foreign exchange and $19 million to $21 million for leasing business revenue. This range includes the impact from both Westfield and Bank Financial.

Noninterest expense is expected to be between $156 million and $158 million and reflect our continued focus on expense management. This range includes the impact from both Westfield and Bank Financial, which should approximate $11 million and $10 million, respectively. While we remain confident that we will realize our modeled cost savings, we expect those savings to materialize -- to materialize later in 2026 once both banks have been fully integrated.

To conclude, we're very proud of our overall performance in 2025. In addition to outstanding financial results, we successfully launched our Western Michigan banking office in Grand Rapids and acquired 2 banking companies, which strengthened our core funding and provides us with a platform for growth and 2 of the largest metropolitan markets in the Midwest. We received our second consecutive outstanding CRA rating, demonstrating our commitment to creating opportunities for lower income communities in our footprint, and we were one of only 70 companies worldwide to be recognized by Gallup as an exceptional workplace.

Finally, I want to recognize and thank our associates for their hard work and commitment. It's due to their efforts that First Financial consistently delivers industry-leading performance. And with that, we'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Daniel Tamayo of Raymond James.

Maybe starting on the fee income guidance. I mean, fourth quarter was a good quarter. The guidance was a little bit below where I was looking for. Within that, FX is -- looks like it's going to be down and then leasing over the last couple of quarters has trended down. So just curious if you can kind of walk us through where you're seeing the path for the rest of the year in those 2 line items and then more broadly, the fee income path for the rest of the year?

Sure, Danny. As you said, fourth quarter was a great quarter all around, and FX certainly shined. I think they had their best quarter ever. There's a little bit of seasonality in Q1 and they have added quite a bit of talent where nonsolicits will burn off after the first quarter, which I think is going to create more opportunity for them as they go forward. But with that, I'll have Jamie maybe talk about if you could talk about FX or go beyond that and maybe fees more broadly for the year.

Yes, Danny. So for the fourth quarter, obviously, you saw -- we had a record quarter, huge revenue quarter for panic burn on the foreign exchange side. And we do see some seasonality to that business in terms of the revenue coming in. The fourth quarter is -- the back half of the year is typically large. And so we do see that coming down in the first quarter, but then ramping up as the year moves on and some of these -- a couple of these teams that we've brought on over the past year, again Archie mentioned the nonsolicit starts to wear off on those and we start to see some impact from those teams.

And then it's just -- I would say the big difference is the overall seasonality from the fourth quarter to the first quarter across really all the lines. And so as you look out into -- as you look out into the back half of '26 or even the second quarter -- second, third and fourth quarter, you start to get into that $75 million to $80 million range of fee income as the year moves on.

Okay. All right. That's helpful. So I mean, I guess, the FX business would -- you would expect growth year-over-year for that businesses as we look for kind of overall '26 and then leasing, is that business slowing the growth rates? Or are they slowing you think?

Yes. On FX, we do expect, as Jamie said, Danny, for it to keep growing. If you look at it, we acquired it in 2019, I think their compounded annual growth rate is probably close to 14% or 15%. Year over that time, and they're still going to grow probably low double-digit over the next few years. So we think foreign exchange will continue to grow in capital markets overall at nice clips.

In the case of Summit, I mean, the origination numbers were up last year. They'll be up some more this year. It's sometimes more of a question of what the mix is. And they've probably been doing more financial leases and a little bit less operating leases as a percentage of the mix that's probably why you're seeing that number maybe a little bit on the flatter side.

Yes. And Danny, it's Jamie. So I think we were seeing growth in that on the leasing side and past years in that 10% to 15% range. And I would say, it's more high single digits. We're just -- we're starting to -- that portfolio is starting to become seasoned. We acquired that company 4 or 5 years ago. The leases generally have terms in that range. And so you're starting to see things kind of turn at this point in that portfolio.

Okay. That's helpful. I appreciate it. And then maybe one bigger picture here for you, Archie, just on the plan for growth in Grand Rapids. You mentioned that in your commentary and in the release. Just curious what you have in place there and what you're planning to do in terms of investments there?

We brought a team over -- it was not all at once, but we brought a team over throughout most of the first quarter last year. And they've ramped up nicely. I mean they're not quite at, but close to $100 million in commitments on the loan side. I think $20 million to $30 million range in deposits. We've added other -- some other banking team members on the wealth side, in particular, private banking. We're looking at -- I think have a full banking office up there this year, adding some mortgage as well. So we're going to keep building it out.

And we think we don't have anything yet, Danny, but we think there's more opportunities in Michigan, especially with some of the larger M&A that's going on with some of the banks. We think that's going to potentially create some opportunity for us to do some add-on in that market over the years. So we think it's close to a home run in terms of investment that we could make.

All right. Well, I will step back.

Your next question comes from the line of Brendan Nosal of Hovde Group.

Maybe just to circle back to the loan growth outlook, I think you guys said 6% to 8% growth for the full year. Just want to confirm that, that's on an organic basis and not including Bank Financial, which closed earlier this quarter.

Yes, I think that's right, Brendan. Maybe a little more commentary on loans overall. We had an incredible origination quarter in Q4. It was our best quarter by a lot in 2025. I think it was up 36% over the linked quarter in terms of fundings. But what we also saw in Q4 was a record level of payoff activity. I think it was up 56% over Q3 last year and by far, our largest quarter of payoffs. And so Q1 tends to be a little bit of a lower point from an origination just more seasonality and then it ramps up. Pipelines look healthy as more probably more than even last year look healthy, and we think originations will certainly come in strong as the year goes on.

And we think payoffs -- well, they won't hit a low point in Q1, but they're going to come down from where they were. So we think we'll eke out a little bit of growth in Q1 and then it will ramp up, but we are projecting out 6% to 8% for the year, and that would be the legacy bank.

Yes, yes. So that would exclude any of the acquired balances.

Okay. Perfect. Perfect. Maybe turning to the margin outlook for the first quarter, that $3.94 to $3.99. Can you break out the estimated purchase accounting accretion number with Bank Financial coming in, in a full quarter of Westfield, TAI think, 4 basis points this quarter. What does that look like in the guide for 1Q?

Yes. So the -- so the 4 basis points for Westfield should pretty much hold, we don't see a big impact in terms of purchase accounting from the bank financial deal for one -- for a couple of reasons. For one, the -- they didn't have a lot of loans to begin with. And we are selling a big chunk of their -- the multifamily portfolio like we announced with the deal. So they have about $700 million in loan balances that we acquired. We're selling about $450 million. And so really, I would -- so they're going to have $200 million to $250 million of loan balances that carry over. So you can imagine the purchase accounting isn't going to be significant for that.

So if you look at Westfield, it was 4 basis points in the fourth quarter. So -- and we had them for 2 months. So you can kind of look at like a 5 or 6 basis point purchase accounting impact from the deals.

Okay. Okay. That's really helpful. One more from me just staying on the topic of margin. Like outside of short-term rate cuts, just kind of walk us through the major driver of margin over the course of 2026? If there's no more cuts, is there a natural drift in the margin one way or the other? Or is it really just dependent on what the short end does?

I would say it's really dependent on what the short end does for us. Now if we do not get any cuts, what we will see, I mean, our margin, we're showing for '26 is staying relatively level. We do get some impact now from the rate cuts. And we are forecasting -- in our forecast, we have rate cuts in 2 rate cuts, 1 in March, 1 in June, and our margin for the year goes down slightly kind of in the low 3.90s -- 3.90 to 3.95. So there is some impact if we have those rate cuts. If we don't, it essentially stays flat at just a higher level.

Fantastic. I really appreciate the color on the commentary.

Welcome. Thanks, Brendan.

Your next question comes from the line of Terry McAvoy of Stephens.

It really sounds like a Friday morning, not a Thursday morning. You kind of threw off this quarter. And I'm going to be today. I'll run that by the boss. Just a question. The quarterly expenses, the $156 million to $158 million. Where does that trend through the fourth quarter once you achieve the cost savings? I'm just trying to get a better sense for the quarterly trajectory.

Yes. So Terry, it's Jamie. So we have a couple of things going on there that kind of go, I would say, in opposite direction. So we have -- so for the 2 deals for Westfield, we have the major conversion, major events happened in March. So we'll start to realize much more of the cost savings for that deal after that. We've already achieved some of that, but not the -- not the big amount that you typically get.

And then in June, we have the conversion for Bank Financial. And so that will come a quarter later. And again, we'll start to see cost savings off of that. However, like we were mentioning, I think it was Danny's question about fees. What we then see in the back half of the year is a pickup in foreign exchange revenue, which we will then -- which then ramps up commissions and whatnot related to that, the variable comp related to the -- of not only bank, but also a few of our other fee businesses. So that partially offset some of the cost savings that we will get. But obviously, then we have the revenue too on the other side. So when we are -- when we look out kind of in the back half of the year, we're kind of in the low $150 million range, $150 million of -- on the expense side.

And I think, Jamie, we're kind of looking at it like conversion plus 90 days, you get say convert Westfield in March by June, pretty much all the expenses run out that we're going to get out of the out of that integration. And then Bank Financial happens in June conversion. And then 3 months later, we've got some employees that are contracted to say, with us 90 days after. So once we get to 90 days after conversion, that's when all the expenses burn out.

Perfect. Great color there. And then maybe as my follow-up, what are the plans in Chicago, the $1.2 billion that comes from Bank Financial. It's a massive market. What's the strategy to grow? Is it de novo hiring bankers? Or is that an M&A market for you potentially?

Yes, Terry, this is Archie again. It's a little we'll focus on what we control, which is we're going to do organically. And we have a commercial banking team in the market that we had already put in prior, 1.5 years ago or 2 years prior to the big financial closing. What we'll be adding to that team a little bit, we'll be adding wealth bankers in the market, wealth, private banking in the market. They did not do mortgage banking. We'll be adding mortgage bankers in the market. And then we're going to retool what they're doing in their retail centers. They really weren't originating lending in the retail center. So we're training and retooling that so we can originate -- we'll be strong HELOC lender. So we're going to ramp that up.

So a little bit of organic and then adding a little bit of talent in some spots where we needed. There's a couple of folks that had doing smaller kind of smaller CRE that we've retained. They had a leasing team doing a few things on the leasing side. They've kind of filled in some holes that we had, and we're going to -- we're bringing them over. We think there'll be some expansion of that business as a result. A little bit of both.

As far as M&A in Chicago, we do think there's opportunity for add-on there. And if the right thing happens, maybe so, but that's not really our focus at the moment.

[Operator Instructions] Your next question comes from the line of David Konrad of KBW.

Just a follow-up question on the expenses. Just wondered how the efficiency ratio will trend through the year? It feels like it's going to be like very low 50s based on your commentary.

Yes, David, this is Jamie. We sound sick. I'm sorry about that.

I'm trying to be great.

We got a good front. Yes. So on the back half of the year when the -- again, that will be kind of when we started to realize what I would call full cost savings for the 2 deals, which you look out, it's more -- it's not quite low 50s is kind of in that mid-50% range, 55%, 56% range.

A couple of things that kind of nuance with our efficiency ratio, one of those is the impact from Summit. And the equipment leasing side, the way you account for operating leases and it's a pretty good sized chunk of our fee income and also on the expense side. So you get the rental payment in. The rental payment is a -- goes into fee income and then you depreciate the asset on an operating lease. And that kind of isolated efficiency ratio for that business. There is about in the mid- to high 60s. And so that skews our efficiency ratio a little bit, maybe by a couple of hundred basis points. So absent that, it would be kind of in that what you're talking about in that $52 million, $53 million range.

Got it. Okay. And then trust, really strong quarter there. How much did Westfield that? And what are you looking for, for the first quarter?

Yes, David. Westfield didn't have a wealth or private banking team. That's more on the banking side. So we're actually adding -- we already hired one wealth adviser in the market. We're adding a second one here soon to try to grow well kind of the wealth management assets in Northeast Ohio, but they didn't have any when acquired. But they did have a great quarter and it was a combination of just continue to bringing in new assets and growing overall assets under management.

And then we do have our M&A -- small M&A advisory unit in that group, and that group had a strong Q4, which added to their number.

Your next question comes from the line of Brian Foran of Trust.

Just going back to the loan growth commentary, 2 things I wanted to check. So one, would you expect total earning assets to kind of generally follow loan growth this year? Or is there anything we need to be mindful of as we're kind of penciling in cash and securities?

Yes. So Yes, Brian, this is Jamie. The -- so when you look at it, we are getting a big influx of liquidity, cash and on the Bank Financial deal. So what we will do is put that money to work kind of mindful of cash flow off of the securities portfolio. So the securities portfolio might get a little bit bloated for us in terms of size.

We typically like to keep the securities portfolio somewhere around 20% of assets. So you'll see that peak maybe around $5 billion, so a little bit higher than what we would historically run on a percentage basis because at that point, we'll be around $22 billion and change in assets. So what we will do then as loan growth kind of ebbs and flows, we will bring the securities portfolio down. And really, if you kind of want to look at kind of maybe a rule of thumb for that, it would be loan growth and about half of that would come off of the securities portfolio. So we will bring that down yes.

And then just on the timing of loan growth improving, I guess, was it more tied to getting through elevated paydowns in 1Q? Or is it more tied to getting through the conversions and we should see the strengthening more in the back half of the year? I just -- maybe you could just revisit the catalyst for the step-up and the best guess of when we would start seeing it.

Brian, it's probably a couple of things. One, there is just a lower -- typically a little bit lower origination quarter in Q1 for us than you would see as the year ramps up, a little bit of seasonality, I guess, is what I'm saying. Summit, for example, our leasing group tends to have a really strong back half and the early part of the year tends to be a little bit lower than the back half, although we think they'll do a little more this year. But some seasonality is a piece of this.

We think the Westfield team, for example, in [indiscernible] Ohio is already running strong. So we'll be ramping up more resources in FTE and the Bank Financial markets, and that will, in the back part of the year, also add more assets -- earning assets and our loans. So seasonality, combined with bringing on more people in the Chicago market over the year.

With no further questions, that concludes our Q&A session. I'll now turn the conference back over to Archie Brown for closing remarks.

Thank you, JL. I want to thank everybody for joining us today. We're really pleased with the year and the quarter. Look forward to another great year in 2026, and look forward to talking to you again next quarter. Have a great day.

This concludes today's conference call. You may now disconnect.

Thank you for standing by, and welcome to the First Financial Bancorp Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] I'd now like to turn the call over to Scott Crawley. You may begin.

Thank you, Rob. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's third quarter and year-to-date financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Bill Harrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call.

Additionally, please refer to the forward-looking statement disclosure contained in the third quarter 2025 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we will provide today is accurate as of September 30, 2025, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I'll now turn it over to Archie Brown.

Thanks, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our financial results for the third quarter. The third quarter of '25 was another outstanding quarter for First Financial. Adjusted net income was $72.6 million and adjusted earnings per share were $0.76, which resulted in an adjusted return on assets of 1.55% and an adjusted return on tangible common equity of 19.3%. We achieved record revenue in the third quarter, driven by a robust net interest margin and record noninterest income. We have successfully maintained asset yields while moderating our funding costs, which combined to result in an industry-leading net interest margin. In addition, our diverse income streams remained a positive differentiator for us with our adjusted noninterest income representing 31% of total net revenue for the quarter.

Expenses continue to be well managed. Excluding incentives tied to strong performance and the record fee income, total noninterest expenses were flat compared to the second quarter. Our workforce efficiency efforts continued during the period. And to date, we've successfully reduced our full-time equivalents by approximately 200 or 9% since we began the initiative 2 years ago. We expect further efficiencies subsequent to the integration of our pending acquisitions. Loan balances declined modestly during the quarter, falling short of our expectations. Lower production in our specialty businesses along with a greater percentage of construction originations, which fund over time drove the modest decline. Loan pipelines are very healthy as we enter the fourth quarter, and we expect to return to mid-single-digit loan growth to close out the year. Asset quality metrics were stable for the third quarter.

Nonperforming assets were flat as a percent of assets and annualized net charge-offs were 18 basis points, which was a slight improvement from the linked quarter. We're very happy that our strong earnings led to continued growth in tangible book value per share and tangible common equity during the quarter. Tangible book value per share of $16.19 increased 5% from the linked quarter and 14% from a year ago, while tangible common equity increased 47 basis points from June 30 to 8.87% at the end of September.

I'll now turn the call over to Jamie to discuss these results in greater detail. And after Jamie is done, I'll wrap up with some additional forward-looking commentary and closing remarks.

Jamie?

Thank you, Archie, and good morning, everyone. Slides 4, 5 and 6 provide a summary of our most recent financial results. The third quarter was another exceptional quarter with outstanding earnings, robust net interest margin and record fee income. Our net interest margin remains very strong at 4.02%. Asset yields declined slightly while we managed deposit costs to a modest increase. Loan balances declined slightly during the quarter as production slowed in our specialty lending areas and slower funding construction originations increased as a percentage of the portfolio. Average deposit balances increased $157 million due to higher broker deposits and money markets, offset by a seasonal decline in public funds. We maintained 21% of our total balances in noninterest-bearing accounts and remain focused on growing lower-cost deposit balances. Turning to the income statement. Third quarter fee income was another record, led by our leasing and foreign exchange businesses.

Additionally, we had higher syndication fees and income on other investments. Noninterest expenses increased from the linked quarter due to an increase in incentive compensation, which is tied to fee income. Our efficiency efforts continue to impact our results positively and remain ongoing. Our ACL coverage increased slightly during the quarter to 1.38% of total loans. We recorded $9.1 million of provision expense during the period, which was driven by net charge-offs. Overall, asset quality trends were in line with expectations with lower net charge-offs and nonperforming asset balances remaining flat. Net charge-offs were 18 basis points on an annualized basis, while NPAs and classified assets were both relatively flat for the period. From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.79 to $16.19, while our tangible common equity ratio increased 47 basis points to 8.87%.

Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $72.6 million or $0.76 per share for the quarter. Noninterest income was adjusted for a small loss on the sale of investment securities, while noninterest expense adjustments exclude the impact of acquisition and efficiency costs, tax credit investment write-downs and other expenses not expected to recur. As depicted on Slide 8, these adjusted earnings equate to a return on average assets of 1.55%, a return on average common equity of 19% and a pretax pre-provision ROA of 2.15%. Turning to Slides 9 and 10. Net interest margin decreased 3 basis points from the linked quarter to 4.02%. Asset yields declined 2 basis points from the prior quarter, while total funding costs increased 1 basis point. Slide 12 illustrates our current loan mix and balance changes compared to the linked quarter.

Loan balances decreased $72 million during the period. As you can see on the right, the decline was driven by decreases in the Oak Street, ICRE and C&I portfolios, which outpaced growth in Summit and consumer. Slide 14 shows our deposit mix as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $157 million during the quarter, driven primarily by a $166 million increase in brokered CDs and a $106 million increase in money market accounts. These increases were offset by a seasonal decline in public funds. Slide 16 highlights our noninterest income for the quarter. Total fee income increased to $73.6 million during the quarter, which was the highest quarter in the history of the company. Bannockburn and Summit both had solid quarters. Additionally, other noninterest income increased $2.8 million for the quarter due to higher syndication fees and elevated income on other investments. Noninterest expense for the quarter is outlined on Slide 17.

Core expenses increased $5.7 million during the period. This was driven by higher incentive compensation related to fee income and the overall strong performance by the company. Turning now to Slides 18 and 19. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $180 million and $9.1 million of total provision expense during the period. This resulted in an ACL that was 1.38% of total loans, which was a 4 basis point increase from the second quarter. Provision expense was primarily driven by net charge-offs, which were 18 basis points for the period. Additionally, our NPAs to total assets held steady at 41 basis points and classified asset balances totaled 1.18% of total assets. We continue to believe that we have modeled conservatively to build a reserve that reflects the losses we expect from our portfolio. We anticipate our ACL coverage will remain relatively flat in future periods as our model responds to changes in the macroeconomic environment. Finally, as shown on Slides 20 and 21, capital ratios remain in excess of regulatory minimums and internal targets.

During the third quarter, tangible book value increased to $16.19, while the TCE ratio increased 47 basis points to 8.87%. Our total shareholder return remains strong with 33% of our earnings returned to our shareholders during the period through the common dividend. We maintain our commitment to provide an attractive return to our shareholders, and we continue to evaluate capital actions that support that commitment.

I'll now turn it back over to Archie for some comments on our outlook.

Archie?

Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our outlook for the fourth quarter, which can be found on Slide 22. As we close the year, we expect origination volumes to increase, which should accelerate our growth. Specific to the fourth quarter, excluding Westfield, we expect loan growth to be in the mid-single digits on an annualized basis. We expect core deposit balances to increase and combined with seasonal public fund inflows to result in strong deposit growth. Our net interest margin remains among the highest in the peer group, and we expect it to be in a range between 3.92% and 3.97% over the next quarter, assuming a 25 basis point rate cut in both October and December. This includes a modest bump in margin from the addition of Westfield in early November.

We expect our fourth quarter credit cost to approximate third quarter levels and ACL coverage to remain stable as a percent of loans. We're estimating fee income to be between $77 million and $79 million, which includes $18 million to $20 million for foreign exchange and $21 million to $23 million for the leasing business revenue. This range includes the expected impact from Westfield. Noninterest expense is expected to be between $142 million and $144 million and reflect our continued focus on expense management. This range includes the impact from Westfield, which is expected to approximately -- to be approximately $8 million for the month of November and December. While we remain confident that we will realize our modeled cost savings, we expect the majority of those savings to materialize in the middle of 2026 once Westfield has been fully integrated. With respect to our pending acquisitions, we have received formal regulatory approval for the Westfield transaction and anticipate closing in early November.

Our initial preparations for the BankFinancial close are underway, and we are more excited than ever to expand our reach into the Chicago market. We have filed the necessary applications and expect to receive approval from the regulators in coming months, eyeing a close during the first quarter of 2026. We're very excited to have the Westfield and BankFinancial associates join our team. In summary, we're very proud of our financial performance through the first 9 months of the year, which resulted in industry-leading profitability. We expect to have another strong quarter to close 2025 and build positive momentum as we head into 2026.

With that, we'll now open up the call for questions. Rob?

Your first question today comes from the line of Brendan Nosal from Hovde Group.

Maybe just starting off here on a topic that's of interest today, NDFI loan exposure. I think if I look at your reg filings from last quarter, it's a little over $450 million or 4% of loans. I know that it's not huge, but can you just kind of walk us through that book and let us know whether that exposure falls into any of the known commercial verticals that you already have today?

Yes. Brendan, we'll have Bill Harrod cover that. All right. Great. We've got, as of the end of the quarter, about $434 million in the NDFI portfolio. It's a diversified, conservatively managed and anchored in high investment grade tier with currently no adversely rated credit. The bulk of the portfolio is made up of traditional REITs of about $304 million across 46 notes, averaging about $7 million, consisting of a variety of public traded or privately held entities with investment grade or equivalent. We do have a securitization book within that portfolio of $73 million across 7 relationships with loans structured using S&P methodology to high investment-grade ratings. And we monitor those on a monthly basis with borrowing bases and independent third-party exams on a routine basis. And that makes up the bulk of what we have in that NDFI portfolio.

Awesome. That's really helpful color. Maybe turning to the net interest margin. I totally get the guide for next quarter, no surprise given recent and forthcoming rate cuts. I'm just kind of curious, so if we get those 2 cuts in the fourth quarter, how should we think about margin early in next year? I think in the past, you said that each cut is 5 to 6 basis points of near-term pressure before it grinds back up on lag funding costs. So any color there would be helpful.

Yes, Brendan, this is Jamie. So on the margin, and again, so the other thing you have to keep in mind is we have Westfield coming into the mix. So that's going to create a little bit of noise, and it actually helps us going forward here, mitigate a little bit of our asset sensitivity. So -- but if you look at kind of the legacy, the legacy company and the margin, the way that it reacts to those 25 basis point cuts, like I said, and you mentioned it as well, we get about 5 basis points of margin pressure for each of those 25 basis point cuts. And the way -- the timing of that, the way that will kind of fold in is that you get a little bit more pain immediately from the cut. And then as deposit costs catch up, we start to actually move that back up. So -- but really 5 basis points of pressure.

So if you think about our margin right now in that 4% range, if we get those 2, then we kind of start the year in that [ 3.90-ish ] range. But then when you factor in Westfield and with the purchase accounting and how that will work, we get a little bit of improvement in the margin from them. So it starts to help mitigate some of that pressure if we have those expected rate cuts here at the end of the year.

Your next question comes from the line of [ Mark Shootley ] from KBW.

Maybe one more on the margin. I'm trying to think about on the asset side, loan yields were strong and actually ticked up in the quarter. So I was just curious like what new loan originations are coming on today with you guys sort of returning to growth and what you're expecting for the total sort of portfolio yield in the near term?

Yes, Mark, this is Archie. I'll start, and Jamie, you can kind of comment on me if you want to amplify. But the rate cut certainly that we had affects origination yields as well. And so we were probably before the cut around 7% on origination yields, and it's closer, I guess, high 6s. So you said 6.80%, 6.90% and it's going to come in closer to the mid-6s you look at the month of September, it was probably right around 6.50%, maybe 6.50% and change. So we'd say sort of right now in that range, maybe drop down a little bit more with some more rate cuts because, again, a lot of we do is commercial oriented tied to variable rates.

Yes. And Mark, I mean, like we've talked about in previous quarters, if you -- again, looking at the legacy First Financial portfolio, absent Westfield, we still have about 60% of our loan book that moves on the short end. So obviously, those cuts will impact the yield on the loan side.

Yes, that makes sense. And then maybe just on the growth -- so you mentioned the pipelines are strong, and I was just curious like what specific verticals or markets you expect to drive that growth over the next couple of quarters?

Yes, Mark, this is Archie again. Yes, maybe talk about loan growth kind of overall. Our production, if you just look at total commitments, Q3 was on par with Q2. So pretty strong. I would argue it's the strongest of the year in both cases. But we saw the actual fundings from that drop compared to what we saw in prior quarter. So lower fundings, primarily construction related. And then we did see a dip in line utilization on the commercial side that accounted for a little bit of the -- little bit of lower overall growth in the quarter. As we look in Q4, strong commercial is the biggest driver.

We've got different verticals within commercial, but strong commercial is the big driver. Summit funding, this is always their peak quarter for production. So that will be another big driver. Commercial real estate will have a little bit of growth is what we're projecting in Q4. And probably the only vertical that has a little bit of pressure is in our Oak Street Group. Just it looks like they've got a lot more payoff pressure that we're expecting here in Q4. But the combination of it all gets you to the number that we're projecting of 5% annualized growth.

[Operator Instructions] your next question comes from the line of Daniel Tamayo from Raymond James.

Maybe just one on the fees and expenses. So the 4Q guide pulling out Westfield just for a second was higher than what we were looking for and certainly what the 3Q number was. Just curious if there's something seasonal, unusual, unique in the fourth quarter? Or maybe if you can kind of give us some indication of what the run rates would look like going into '26.

Yes, Danny, it's Jamie. Really, the big impact from the third quarter to the fourth quarter in that -- like again, I think you're looking at just ex-Westfield kind of the legacy First Financial numbers is really coming from Bannockburn. The forecast that we're getting from them for the fourth quarter is a little higher even than what we had in the strong third quarter. A little bit of bump as well as the Summit related to the operating leases. And then our wealth department, especially on the M&A and the investment banking side, up just a little bit from that division that we have there. So it's really those 3 areas, primarily though, driven by Bannockburn.

And like we have talked before, Dan, I mean, they can -- that can bounce around a little bit. So I mean, to kind of talk about that long, long term, we look at that business kind of year-over-year now is growing in that -- generally in that 10% range.

Yes. And Dan, those are all commission-based kind of businesses. So when they do well, you're going to see more commission paid out, which drives the salary costs.

Yes.

That's great. That's very helpful. And my other question, I guess, on the credit side. So a good quarter from a credit perspective, guiding to similar credit costs. Just curious how long you think those play out? I think in the past, we've talked about a little bit higher run rate on the charge-off side. Any read-throughs in the near term past the fourth quarter on credit?

Yes, Dan, this is Archie. I don't -- I mean, I think it's kind of steady as we go. We've, I think, been saying all year, 25 to 30 basis points, kind of mid-20s seems to be the run rate for us in the current environment. And I think over a period of quarters, that's what we would expect.

Understood. Okay. And then lastly, on the capital front, so you got the 2 deals closing here in the near term, take a little bit of a hit to capital. But curious, you'll still have pretty strong CET1. How you're thinking about buybacks? You probably think the stock is a little undervalued right now. Once we get past the deals, like if there's a bogey you're looking at on the capital side or any color there would be great.

Yes, Dan, this is Jamie. So yes, I think you said it well. What we'll do here over the next really probably 2 to 3 quarters is let the deals flow in and kind of see where we're shaking out in terms of capital ratios at that point. I mean we are building TCE relatively and tangible book value relatively quickly at this point. And we will take -- so the TCE takes about 120 basis point hit in the -- once we close the Westfield deal just because of the all-cash nature of it. And then -- so we'll let the next 2 or 3 quarters kind of play out and then see where we are and see where we're trading in terms of multiple at that point. If we're trading anywhere in that 150% of tangible book value or below, we would potentially look at buybacks at that point.

Your next question comes from the line of Terry McEvoy from Stephens.

From talking to some of the other banks that are in your metro markets in your footprint, kind of surprised with the deposit competition a bit stronger than I would have guessed. And your cost of funds up a few basis points quarter-over-quarter. So can you maybe just talk about deposit competition? And you didn't have loan growth this quarter. Next quarter, you're guiding towards that. Does that kind of drive those deposit costs higher as you look to fund that growth?

Yes, Terry, this is Archie. I'll start. It was modestly up for the quarter. I mean I would argue it is flattish. And with the rate cut that occurred, we did take some, I think, decisive actions on the deposit side that went into effect really this quarter. So now we have more -- of course, more short-term rate cuts coming. But we would expect a reduction in our deposit cost going forward in Q4. I mean it was pretty -- did a pretty aggressive cut. And yes, I mean, the market is competitive, but if you look at our current loan-to-deposit ratio, and we felt even with some loan growth, we felt we could take a little bit more aggressive actions. And we'll look to do more here with more Fed cuts.

And then I think one of the things we like about BankFinancial, again, one, they have lower deposit and funding costs than we do. And that market from what we can see, still has a little more rational pricing than what we're seeing here kind of in Southwest Ohio.

Yes. The other thing, Terry, to keep in mind, I mean, we do have the a little bit higher -- some loan growth in the fourth quarter and then going forward. But we don't think that puts a lot of pressure on our deposit costs because of the liquidity that we get coming in -- especially in the BankFinancial deal. If it closes in the first part of '26. So they already have a relatively low loan-to-deposit ratio, and then we're selling the multifamily portfolio, which will then create even more liquidity for us to utilize for loan growth or to pay off borrowings or to reinvest.

That's great. And nice to see the FX trading and the 4Q guide higher at $18 million to $20 million. I just want to make sure that run rate looking out into '26, do you think that is more consistent of next year? Or is this more of just a couple of strong quarters and next year we will go back to some of your prior comments on the outlook for that revenue line?

Well, certainly, Q4 would be a peak for them, Terry, if they hit the numbers that are being projected. And as Jamie said, it sort of bounces around. We look at it more on kind of an annual kind of 4-quarter basis rolling even. They will -- we've owned them now for quite a while. And what we've observed is they grow, they may flatten out a little bit, then they hit another growth spurt. But if you think 5% to 10% kind of growth rate I think you're in the ballpark for what we would expect them to do.

Yes, Terry, this is Jamie. As we get into -- as we look out kind of into '26, I mean, that will -- I wouldn't annualize this fourth quarter number that we're talking about. So I would look more into '26 at like a $65 million to $70 million type of a run rate for them.

Your next question comes from the line of Jon Arfstrom from RBC.

Jamie, in your prepared comments, you touched on the workforce efficiency efforts. And can you talk a little bit about where you are in that journey? And then when you look at the 2 acquisitions, what kind of opportunities do you see there? Because it seems like you're going to apply this framework over the top of those 2 deals.

Yes, Jon, this is Archie. I'll start. We're probably 90% of the way through the company, the First Financial legacy company now. So there's a little bit left in some areas, but it's probably going to be a couple of quarters more to get a little bit of opportunity out of those areas. So as I think we alluded to in our comments that we think the opportunity to continue to get efficiency comes from the 2 acquisitions. And I think in the Westfield case, we had said around 40% expense reduction from the combination. And we're -- I think we're well on our way to achieve that, maybe slightly exceed it.

BankFinancial was maybe just a little bit less because there's bigger branch count. But what we had modeled, again, we're well on our way to exceed that. And that includes us in both those markets, adding back roles to drive more revenue. Some of the businesses we have that maybe those banks didn't have, we're adding the appropriate people to help us grow in those markets. And even with that, we would still achieve the expense that we've -- reductions that we modeled in those deals.

Yes. Okay. That makes sense. Yes, some good opportunities there, obviously, for production. And Terry took a couple of my questions on deposits. But Jamie, can you just remind us of the typical seasonal flows on deposits that you see in the fourth quarter?

Yes. So we -- just -- yes, to remind you and everybody else, we get a seasonal bump in public funds, mainly from Indiana, where property taxes reduced. So we get those in May and November. And so typically, we will get, call it, around $150 million to $200 million kind of extra of deposits in those quarters on average. And then they -- a little bit more skewed, I would say, to the second quarter, but call it, $150 million to $200 million in both of those quarters, and then they run out in the subsequent quarter and kind of go back down to the base level. But that's pretty much like clockwork. I mean it happens pretty much every quarter. And then so that's what you saw here in the third quarter where those public funds running down by $100 million to $150 million. And then we just replaced those with -- sometimes we just replace those with brokered CDs or borrowings.

And that concludes our question-and-answer session. I will now turn the call back over to Archie Brown for closing comments.

Thank you, Rob. I want to thank everybody for joining us today. We really feel great about the quarter we had and are excited about fourth quarter and the momentum we're building for 2026 with the pending acquisitions. We look forward to talking to you again in a quarter. Have a great day and weekend.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you for standing by, and welcome to the First Financial Bancorp Second Quarter 2025 Earnings Conference Call and Webcast [Operator Instructions] I'd now like to turn the call over to Scott Crawley, you may begin.

Good morning. Thank you, Rob. Good morning, everybody, and thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Bill Harrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the second quarter 2021 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we will provide today is accurate as of June 30, 2025, and we will not be updating any forward-looking statements to reflect facts or circumstances after the call. I'll now turn it over to Archie Brown.

Thank you, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, we announced our financial results for the second quarter and I'm thrilled with our performance this quarter. We achieved record revenue of $226.3 million, which represents a 5% increase over the same quarter 1 year ago and drove adjusted earnings per share of $0.74, a return on assets of 1.54% and return on tangible common equity of 20%. The company's industry-leading profitability was once again driven by a robust net interest margin. Loan growth was 2% on an annualized basis, and we were pleased with broad-based growth in most portfolios apart from commercial real estate, which declined due to higher payoffs. Q3 scheduled maturities in the IC portfolio are lower, and we expect higher overall loan growth in the second half of this year. We recorded adjusted noninterest income of $67.8 million in the second quarter, which was an 11% increase over the linked quarter and a 10% increase over the second quarter of 2024. .

Growth in fees was broad-based with mortgage, bankcard, leasing business and foreign exchange income, all increasing by double-digit percentages over the linked quarter. We were also pleased with our expense management with adjusted noninterest expenses increasing 1% compared to the first quarter. Excluding leasing business expenses, which continue to increase as our operating lease portfolio grows, adjusted noninterest expenses increased by less than 2% on a year-over-year basis.

Asset quality was stable for the quarter. Net charge-offs declined 15 basis points from the first quarter to 21 basis points of total loans, and classified asset balances were relatively flat. Our outlook for asset quality remains positive, and we expect net charge-offs to be in the 20 to 25 basis points range for the remainder of this year.

We're pleased with the strength of our capital levels. Regulatory ratios are very strong, and tangible common equity has continued to grow, increasing 16% over last year to 8.4%. Tangible book value per share increased to $15.40, which was a 4% increase from the linked quarter and 19% over the same period -- a 19% increase over the same period last year.

We're also pleased to announce that our Board of Directors approved a $0.01 or 4.2% increase in the common dividend of $0.25. The dividend payout remains approximately 35% of net income and continues to provide an attractive yield.

With that, I'll now turn the call over to Jamie to discuss these results in greater detail. After Jamie's discussion, I'll wrap up with some additional forward-looking commentary and closing remarks.

Thank you, Archie. Good morning, everyone. Slides 4, 5 and 6 provide a summary of our most recent financial results. The second quarter results were excellent and included strong earnings, record revenues, record revenues driven by a robust net interest margin, solid loan and deposit growth and declining net charge-offs.

Our net interest margin remains very strong at 4.05%, which represented a 17 basis point increase from the first quarter. Funding costs declined 12 basis points driven by a 13 basis point decrease in deposit costs, while asset yields increased 5 basis points. Loan balances increased modestly during the quarter as growth in C&I, consumer and our specialty businesses offset elevated prepayments in the ICRE portfolio.

Average deposit balances increased $114 million due primarily to a seasonal influx in public funds and higher noninterest-bearing deposits. We maintained 21% of our total balances in noninterest-bearing accounts and remain focused on growing lower-cost deposit balances.

Turning to the income statement. Second quarter fee income was solid, led by double-digit percentage growth in mortgage and bank card income. Additionally, our leasing and foreign exchange businesses had good quarters. Noninterest expenses increased slightly from the linked quarter due to increases in marketing expenses and incentive compensation, which is tied to the company's overall performance.

Our efficiency efforts continue to impact our results positively and we expect to see further benefits in the coming periods. Our ACL coverage increased slightly during the quarter to 1.34% of total loans. We recorded $9.8 million of provision expense during the period, which was driven by net charge-offs and loan growth.

Overall asset quality trends were stable. Net charge-offs declined 42% to 21 basis points on an annualized basis, while NPAs as a percentage of assets increased slightly during the period. Classified asset balances were relatively unchanged during the period of 1.15% of total assets.

From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased $0.60 to $15.40, while our tangible common equity ratio increased 24 basis points to 8.4%. Additionally, our Board of Directors elected to increase our common dividend during the period. Increasing the common dividend is further proof of our commitment to deliver value to our shareholders.

Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $70.6 million or $0.74 per share for the quarter. Noninterest income was adjusted for gains on the sales of security -- of investment securities, while noninterest expense adjustments exclude the impact of acquisition and efficiency costs and other expenses not expected to recur.

As depicted on Slide 8, these adjusted earnings equate to a return on average assets of 1.54% and a return on average tangible common equity of 20% and a pretax pre-provision ROA of 2.14%.

Turning to Slides 9 and 10, net interest margin increased 17 basis points from the linked quarter to 4.05%. Asset yields increased 5 basis points compared to the prior quarter as loan yields increased 3 basis points and the yield on the investment portfolio increased 9 basis points. Total funding costs declined 12 basis points, driven by a 13 basis point decrease in deposit costs compared to the linked quarter.

Slide 12 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased 2% on an annualized basis, with growth in C&I, consumer and specialty businesses outpacing a decline in ICRE, driven by elevated prepayment activity.

Slide 14 shows our deposit mix as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $114 million during the quarter. There was a seasonal influx in public funds, and we had solid growth in noninterest-bearing deposits. While on the consumer side, growth in retail CDs helped to offset declines in money market and interest-bearing demand accounts.

Slide 15 illustrates trends in our average personal, business and public fund deposits as well as the comparison of our borrowing capacity to our uninsured deposits. On the bottom right of the slide, you can see our adjusted uninsured deposits were $3.8 billion. This equates to 27% of our total deposits. We remain comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event that would stress our larger deposit balances.

Slide 16 highlights our noninterest income for the quarter. Total adjusted fee income was $68 million, with leasing, mortgage and interchange having stronger growth quarters.

Noninterest expense for the quarter is outlined on Slide 17. The core expenses increased $1 million during the period. This was driven primarily by higher incentive compensation tied to the company's strong results as well as increases in marketing expenses. As I mentioned earlier, our ongoing efficiency initiative is positively impacting our results, and we expect this work to continue in the back half of 2025.

Turning now to Slides 18 and 19, our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $176 million and $9.8 million of total provision expense during the period. This resulted in an ACL that was 1.34% of total loans, which was a slight increase from the first quarter. Provision expense was primarily driven by loan growth and net charge-offs, which were 21 basis points for the period. Overall credit trends were stable with a 42% reduction in net charge-offs and classified asset balances totaling 1.15% total assets.

As expected, our ACL coverage was relatively flat compared to the linked quarter, and we continue to believe we have modeled conservatively to build a reserve that reflects the losses we expect from our portfolio. We anticipate our ACL coverage will remain flat or increase slightly in future periods as our model responds to changes in the macroeconomic environment.

Finally, as shown on Slides 20 and 21, capital ratios remain in excess of regulatory minimums and internal targets. The TCE ratio increased 24 basis points to 8.4%, and our tangible book value per share increased 4% and to $15.40. Our total shareholder return remains strong, with 33% of our earnings returned to our shareholders during the period through the common dividend. As I mentioned earlier, we were very pleased that the Board elected to increase the common dividend, demonstrating our commitment to provide an attractive return to our shareholders.

I'll now turn it back over to Archie for some comments on our outlook. Archie?

Yes. Thanks, Jamie. Before we end our prepared remarks, I want to comment on our forward-looking guidance for the third quarter, which can be found on Slide 22.

Loan pipelines remain strong. Over the second half of the year, we expect easing payoff pressures combined with higher production to accelerate our growth. Specific to the third quarter, we expect loan growth to be in the low to mid-single digits on an annualized basis. Core deposit balances are expected to be stable over the next quarter, excluding seasonal deposit outflows.

Our net interest margin remains very strong and industry leading, and we expect it to be in the range between 4% and 4.05% over the next quarter, assuming a 25 basis point rate cut in September. We expect our credit cost to approximate prior quarter levels and charge-offs to be in the 20 to 25 basis point range for the third quarter, while ACL coverage as a percentage of loans is expected to be stable to slightly increasing.

We anticipate fee income to be between $67 million and $69 million, which includes $14 million to $16 million of foreign exchange and $19 million to $21 million for leasing business revenue. Noninterest expense is expected to be between $128 million and $130 million and reflect our continued focus on expense management.

We're excited about our recent announcement to acquire Westfield Bank in Northeast Ohio and are actively engaged in the integration process. Appropriate applications have been filed with our regulators, and we continue to expect approval and closing to occur this year.

In summary, we're very pleased with our second quarter and year-to-date financial performance, and we remain very excited about our outlook for the remainder of 2025 and beyond. We'll now open up the call for questions. Rob?

We will now begin the question-and-answer session [Operator Instructions] Your first question comes from the line of Daniel Tamayo from Raymond James.

Thank you. Good morning, guys. Maybe we start just on on the margin, but specifically on the funding side. So the second quarter, you really had -- you showed a good ability to continue to lower deposit costs even non-maturity deposit costs came down pretty meaningfully. So just curious kind of how you see that continuing to play out here as we go forward and where maybe we -- you would see bottom in terms of funding costs, absent any kind of rate cuts?

Yes. I think -- Danny, it's Jamie. I think we're pretty close to that at this point. And when we look out over the next -- really the next quarter, we see deposit costs just coming down slightly now like 2 or 3 basis points.

And then -- so with our outlook included in our outlook is a rate cut in September and a rate cut in December. So as we get into fourth quarter that we see deposit costs maybe coming down a little bit more than that. But I think we're kind of close -- with rates stabilizing here, I think we were -- we were maybe a quarter behind some of our competition in terms of lowering deposit costs and really kind of ringing out those last few basis points.

So I think you'll see that 12 or 13 basis point drop in our deposit costs, maybe a little bit more than the peer group, and that's that lag that I was referring to. So when we look out here in the third quarter, included in that margin outlook in that $4 to $4.05 range is about a 2- to 3-point drop in the deposit costs.

Okay. So given that and then the fact that you're your asset yields are already pretty strong loan yields up towards -- pushing towards 7, is it fair to say you think that the 4 to [ 405 ] will be a peak for you guys and then maybe bounce around that level, again, kind of before we consider what happens with rate cuts?

That's right. Yes. When we -- again, when we look out and kind of start bleeding in the rate cuts into our model. And we said this kind of all along that the slow kind of methodical 25 basis point rate cuts, we can manage through those. Obviously, like you mentioned, we're asset sensitive. So it's going to impact the margin negatively. But those kind of quarterly 25 basis point rate cuts impact the margin by about 5 or 6 basis points each.

Okay. All right. Helpful. And then just a cleanup question on the deposit outflows. The seasonal deposit outflows that you referenced that the guidance excludes, what would you expect those to be in the third quarter? .

Yes. The -- on average, they're about $100 million. So we get a little -- we get a pop in the second quarter. And these relate to Indiana property taxes at our public funds. So those come in May and November. And in May is kind of a bigger pop as some people pay the full year.

So we will -- we see that 100 to 150 basis points -- or $150 million jump in public funds in the second quarter, those flow out. Those come in kind of mid -- early May start to flow out. So on average, we see that -- it's roughly $100 million. And those flow out towards the end of the quarter. So quarter-to-quarter, down $100 million.

Your next question comes from the line of Terry McEvoy from Stephens Inc.

Archie, in the prepared remarks, you talked about the ongoing efficiency initiative producing results, and you can see that in the overall efficiency ratio. Can you just dig a little bit deeper and talk about kind of where across the company or within the bank, you're really focused on cutting costs and driving that operating leverage? .

Yes, Terry, we've been at this more than a year now. And we really are going through the whole bank to do the work. So literally looking at every function, every department. We like to say we're kind of going need to need with our associates in understanding the task and looking for ways to improve the processes that they're using. In some cases, it's technology. In some cases, it's just some process redesign.

So I would say we're probably 80% of the way through the company at this point in terms of the reviews that we've done and the work that we've done. And then there's probably 20% to go over the next several quarters. There's some technology in a couple of these areas we're implementing in the back half of this year. And then we'll probably do some final work as we get into early 2026.

And then from there, I think we view the recently announced acquisition will also provide some additional help in terms of efficiency as we go deeper into 2026.

And then as a follow-up, can you just talk about the impact the payoffs are having on loan growth? I'm trying to get a sense of more normalized loan growth. I know it's low to mid-single digits over the near term, but that includes payoffs, which are subsiding. So kind of ex payoffs, what's that underlying growth?

Terry, if you just had a -- if you had a norm to think about for us the way we think about this is, yes, 6%, 7% loan growth over the longer term is kind of how we think and how we've been planning. We have seen, as we've talked about some higher level of payoffs, specifically in our commercial real estate group. What we're seeing for Q3 is scheduled maturities are lower, a little bit higher level of production coming for the quarter.

Commercial real estate in Q3 will probably -- it probably won't grow. We're not forecasting that particular part of the book to grow in Q3, maybe slightly down, but it will be a lot better than what we've seen in the last couple of quarters. And what that will allow is the other areas that are have really good production, their growth will be more reflected and show through the overall company. So that's why we're taking it up a little bit in Q3. But longer term, 6% to 7% is how I think about it.

Your next question comes from the line of David Konrad from KBW.

Just real quick question on asset quality. It's been really solid and admittedly, it's off a really low levels, but we did see a little bit of a growth there in C&I in terms of the nonaccruals. So any color on that growth rate there would be great.

Yes, David, Bill will cover that a little bit here. .

Yes, absolutely. So our quarter-over-quarter increase in the NPAs is driven by downgrades of 2 commercial borrowers one of which was significantly impacted by the tariffs. But recently, they have shown some improvement as the dust is settling and their impacts.

The other relationship is a contract manufacturer, which is currently going through a sale process. We've taken the bulk of our expected charge-off this quarter with the remainder in reserve for -- as the dust settles before the end of the year, and we expect a resolution by the end of the year.

Great. Okay. And then Jamie, I appreciate the asset sensitivity color, and I know Westfield is not a big asset change for you. But I just wondered if you sense change a little bit next year as you integrate that balance sheet.

Yes. First of all, welcome to the call on your debut on here. So yes Yes. Yes. We're doing a great job.

No, I would say, of course, the size of this acquisition is relatively small, but -- so they're slightly liability sensitive. So -- and obviously, then you got to kind of wash through here for a while, some of the purchase accounting noise that takes place in the first couple of years. But overall, they're going to help our asset sensitivity and bring us a little bit more closer to neutral.

But again, obviously, the size of their earning asset base is roughly around 10%-ish of our earning assets. So it's on the margin, but it does help for sure.

[Operator Instructions] Your next question comes from the line of Karl Shepherd from RBC Capital Markets.

Just to start on loan growth real quick. I appreciate the comments on CRE trends. Are you guys signaling a consistent pace of growth in the other businesses? Or do you think that there's, I guess, opportunity for acceleration there in the second half as well?

Yes. This is Jamie, Karl. Yes. So what we're really seeing is really just that headwind on the CRE side in terms of the payoffs and prepayments, some level of maturities. But -- and really in the other business lines, we're seeing consistent growth.

Now those business lines would have varying levels of growth. So like when you look at consumer, C&I, consistently on the C&I, we had a good quarter in the second quarter on the C&I side. But C&I, consumer are going to be -- if we're talking 5% to 7% loan growth, we're getting kind of maybe the lower end from those types of businesses, and then our specialty lines will grow maybe in that 10% to 12% range. And when you blend it all together, it's in that, call it, 7%. Obviously, the specialty lines make up around 20% of the loan book.

And Karl, what you'll see typically in the back half of the year, Summit their volume really strengthened, especially as we get into Q4. So they'll ramp up more in the back half compared to the first half.

Perfect. I love Slide 12. And then one quick one on the margin. methodical cuts you guys could manage through, is it -- can you just remind us a little bit of leading impact to asset yields, though, and then the deposits maybe catch up a half quarter later. Is that fair? So just thinking about the timing of custom...

Yes, that's a good question. And so when we're looking out and we have like the September cut, obviously, it doesn't have a whole lot of impact for the third quarter. But as rates start to move down in anticipation of that cut, we will see our loan yields start to move down, maybe starting 30, 45 days in advance of that. .

And then you're right. I mean we try to get in front of the deposit cost as much as we can. But that's more -- that's obviously not contractual, like the loan side is, and it's more market competition-type base. So yes, typically, that will have a quarter lag on the deposit side. And that's kind of what you saw here in the second quarter with us.

And we tend to -- given the fact that our margin is so high, we tend to we tend to lag the deposit side just to make sure we're retaining balances more and are kind of on the side of liquidity and not bring them down and maybe have to readjust and bring them back up. So yes. So you'll see that lag on the deposit side typically with us.

And we have reached the end of our question-and-answer session. I will now turn the call back over to Archie Brown for some final closing remarks.

Thank you, Robin. Thank you by for joining us on today's call and tracking with us on our really great second quarter. We look forward to talking to you again next quarter. Have a great day and weekend. Bye now.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you for standing by, and welcome to the First Financial Bancorp announces acquisition of Westfield Bancorp Conference Call. [Operator Instructions] I'd now like to turn the call over to Archie Brown. You may begin.

Thank you. Good morning, everyone, and thank you for joining us today's call. Yesterday afternoon, we announced the agreement to acquire Westfield Bancorp from Ohio Farmers Insurance Company. I'll provide some comments on the deal and then turn the call over to Jamie to provide further details.

I'm very pleased to announce this acquisition, Westfield Bank is a premium brand, a very well-respected and well-operated banking company and a strong and consistent earner in a market that's very attractive to us with specialty lines that match the businesses that we operate.

As you may be aware, we entered the Cleveland, Ohio market in late 2023 with a commercial loan office after originating and servicing clients in the region for a number of years. The acquisition of Westfield more than triples our loan commitments in Northeast Ohio to approximately $1.5 billion and adds $1.5 billion in local deposits. It provides us with a highly efficient branch network and talent across multiple business lines to accelerate growth as a premium brand and the alternative to the big banks. The acquisition also adds approximately $500 million in loans and $250 million in deposits in insurance agency and RIA banking and in premium finance.

The deal is financially attractive with strong earnings accretion, tangible book value earn back within our parameters and it enables us to maintain strong pro forma capital ratios. A unique aspect to this deal is the mix of cash and stock. We knew upfront that Ohio Farmers preferred cash. We're happy to be able to incorporate some stock into the deal and keep capital levels higher.

We view this merger combination as lower risk. The size of Westfield adds approximately 11% of pro forma assets. The company has a stellar record regarding asset quality with net charge-offs averaging 4 basis points over the last 5 years. Westfield's approach to lending and credit administration is very similar to ours. There's a strong cultural alignment between the companies with deep expertise in commercial and specialty banking. And finally, both companies share a strong commitment to associates, clients and the communities in which we serve.

Looking at the information in the investor deck, Slide 5 provides an overview of Westfield Bank. The branch network is near 3 major cities in Northeast Ohio, a region which nearly 40% of the state population is located. Slide 6 shows pro forma market share in our position in Ohio. Post acquisition, First Financial will be the fourth largest Ohio-based banking company and the only one in the banks in the top 8 in the state that's a community bank, again, we believe the alternative to the big banks.

Slide 7 shows the complementary nature of the 2 companies. In addition to core banking, Westfield's focus on agency and RIA banking and premium finance are a direct match to the businesses operated at First Financial.

I'll now turn the call over to Jamie to cover some of the next few slides.

Thank you, Archie, and good morning, everyone. On Slide 8, you can see our similar profiles in terms of lending focus and deposit mix, as well as the pro forma loan-to-deposit ratio at 82%. Again, we feel that the 2 banks are culturally compatible, which will make it easier to serve current Westfield customers while also attracting new customers given our larger lending limit and more robust product offering.

Slide 9 summarizes the structure of the transaction, which is roughly 80% cash and 20% stock. Shareholder approval from Ohio Farmers has already been received. We will not need to obtain approval from our shareholders given the size of the transaction.

On Slide 10, you will see the transaction metrics. Transaction is nicely accretive to earnings and will leave our capital ratio strong along with top quartile projected return on assets. On Slide 11, we lay out the primary transaction assumptions. One item of note is that Ohio Farmers has already crossed the $10 billion in asset threshold. So there will be no incremental Durbin impact.

I'll now turn it back over to Archie for some closing remarks before we take questions. Archie?

Thanks, Jamie. On Slide 12, you'll see First Financial's long history of acquisitions in the banking and nonbanking spaces. We have a strong presence in Southwest Ohio and end markets such as Central and Southern Indiana, Northwest Indiana, Louisville, Kentucky and Western and Central Ohio. And now we're excited to be able to add a strong presence in another large and attractive market in the Midwest.

While we did not include any revenue synergies in our modeling, we are excited about future opportunities that will come from our combination with Westfield. Our size will create opportunities to add more credit availability to Westfield clients as they grow. We're adding more product offerings, including wealth management, M&A advisory services, equipment finance and foreign exchange services. We believe there's a significant opportunity in consumer lending and in growing checking relationships.

And finally, we believe this transaction builds upon our combined strengths in specialty banking. We're very excited about the acquisition of Westfield Bank and the strategic fit. We look forward to adding talented Westfield team members as we now focus on helping our clients and our communities thrive. This concludes our remarks regarding the announced acquisition.

We'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Terry McEvoy from Stephens.

Maybe first question, has the systems conversion date been scheduled? And I'm asking -- just thinking about the timing of the cost savings? And then maybe one other expense question. What is the branch renovations? Is that something that's occurring kind of before the merger or those plans after the deal closes?

Terry, this is Archie. I'll take the first part, and Jamie will take the second part. We don't have a conversion date yet. We're circling that, though, to be in the first quarter. So we'll get a little kind of more permanent view with that here in the next few weeks. So right now, some of this is predicated upon when we close. We think the closing could occur by the end of the year. And then looking to try to convert as soon thereafter as we can, but somewhere in the first quarter.

Yes. Terry, this is Jamie. The branch refresh number we have in there, branch renovation number for $800,000 or $900,000 is more, it's a small amount per branch that we would do for branding and just kind of small refresh of the branch inside, that's a pain carpet and stuff like that. It's small stuff per branch, $100,000 to $150,000 or so per branch.

And then as a follow-up, when I think about your call it, 4% NIM or pretty close to that, it really speaks to the profitability component of the company. Westfield's margin a little bit lower, and it looks like it's the loan side. So I guess my question is, what's the strategy to rebuild the NIM back to, I'll say, 4%-ish, and it looks like there's some opportunities, there would be opportunities to remix some of the acquired loans.

Yes, Terry. This is Archie. I think first, there's a -- it is quite a bit of a mix difference on the -- especially the mortgage side. If you look, resi mortgages make up a pretty small percent of the First Financial balance sheet to make up a greater percentage of what you see on Westfield's balance sheet.

So that's a piece of it. Agency is a little bit lower yield than what we see on the first financial side, but what Westfield has done a really nice job of is penetrating those agency relationships with greater deposits and deposit relationships. So they make some of it up on the deposit side. But I think as we add some of the other commercial products in, along with the change in how the mortgage works, we will be selling probably more of those originations. That will start to remix the balance sheet.

Our next question comes from the line of Chris McGratty from KBW.

Jamie, a question for you on the balance sheet. Obviously, higher for longer seems to be playing out. Is there anything contemplated given this deal that you would do to your own balance sheet around close to kind of lock in a margin or protect the downside?

No. I mean, nothing -- I would say, nothing major, Chris. I mean, we may do a little bit of more -- and we've done this in the past few quarters, some securities restructuring, but nothing major that we have planned at this point.

Okay. And then maybe a couple of housekeeping items. Wonder if -- Jamie, if you could give us a little help on the cash and bonds that will come over. I didn't see anything in the fees. And then I was backing into kind of a mid-$50 million expense -- mid-$50 million kind of before the cost saves. I just want to check the algebra there.

Yes. Yes. All good. Yes. So their cash balance is right now around $110 million-ish with securities of about $340 million, $350 million. On the -- I think you just mentioned something about fee income. Their fee income is around $8.5 million annually and their expense rates are a little high there. I think maybe you might have -- I don't know if the tax effect came into play there, but their expense base right now is about $50 million. And again, we have the cost savings assumption of 40% built in with 75% of that being realized in 2026 and then fully phased in, in 2027.

Perfect. That was helpful. And then, Archie, maybe just -- we're starting to see deals a little bit more frequently, you're getting approved and closed pretty quick. Is this at all change, I guess, future appetite to do something given this is such a manageable size?

Chris, I don't think so. I think -- again, the pro forma is incrementally about 11% to the pro forma assets of the company. I think it would certainly depend on size and timing, but we still think there's potentially something to do over the course of the next year beyond this. This is certainly our primary focus right now, but you're right about the environment. And I think if it's the right size and certainly probably more stock, there's probably something else we could potentially do within the realm.

Yes, you've done that in the past.

Your next question comes from the line of Daniel Tamayo from Raymond James.

Maybe we could talk about the specialty businesses a little bit. Just curious, you guys certainly have quite a few of these now looking at Slide 7. And you've done a good job of growing the past businesses that you've acquired. So just curious kind of how you're thinking about growth expectations within those businesses? And if you have any kind of color on the yields that those businesses are producing, that would be helpful as well?

Yes. Danny. This is Archie. So looking back at Slide 7, certainly, Oak Street for First Financial Agency, RIA. Again, those are sort of matched up and we think this gives us a little bit of extra opportunity for growing the business. Westfield brought on some additional team here over the last year that is producing nicely for them. They've got a different set of clients. So I think the combination of the 2 will learn from each other and create -- continue to create some decent steady growth in the agency financing side.

Agile, they've done a nice job. We bought a company about a year, 15 months ago or so, that's doing well. I think the combination of the 2, again, will just create more opportunities with more agencies. So we expect both those businesses to grow, I think, quite nicely. I mean, Agile is probably growing a little bit faster for us since it's newer, but I think the combination of 2 will create nice growth on that side. And the yields, look at Jamie, I think Agile and premium finance for Westfield, both are -- if you said they're in the 9% to 10% range, that's about where they are today.

On the Oak Street side, I think Oak Street again, we said earlier, a little bit higher than what you may see at Westfield, but Westfield is making it up with more deposit penetration. So we're going to take the 2 businesses and learn from each other. I think we'll hope to grow deposits a little bit faster rate out of that group although you can see on the slide, it's about $1.2 billion in loans and $400 million in deposits in that business. So we can grow the deposits a little bit more. We'll find a way to have the yields maybe be somewhere in between and create a little bit more growth opportunity out of the 2 groups.

Okay. Great. That's helpful. And it looks like Westfield's had a good credit history from what we've seen over the last several years. But just curious how you think about that -- the credit of the new businesses and what is their book overall relative to what you have on the legacy side, if that changes at all, the thought process on kind of your longer-term guidance on the charge-off side?

Well, on the margin, it should help our charge-offs come down slightly. Again, it's not relative to the whole balance sheet, it's not huge. But the margin will help some. And if you look at our Oak Street and Agile businesses, the asset quality there is really good as well. So it will help some, but it's not going to drop it significantly.

[Operator Instructions] Your next question comes from the line of Brian Foran from Truist Securities.

I just had a couple of questions. I had a couple of questions on Slide 14. So not just this deal, every deal, I think investors struggle a little bit with the purchase accounting adjustments, how much of it is core, how much of it is noncore. I mean, you kind of touched on it, I think, with Terry's question, but that $22.4 million, do you view it as all replaceable as you originate new assets? And can you give us some color like the assets that are driving the marks, like what yield are you marking them to?

Yes. Brian, this is Jamie. So yes, that $22.4 million is obviously a combination of 2 things, the loan mark and then the mark on the securities book. So about 1/4 of that is the mark on the securities book. So that's -- to me, that's an easy one that you're going to -- we're going to be able to obviously replace that by reinvesting at current rates.

On the loan side, I mean, like you know, they're a little bit more liability sensitive from us and have some more fixed rate paper on the book. So -- and then as Archie mentioned, some of the agency yields are slightly lower than ours would be. And so I think remixing that and also getting a little bit away from some of the -- putting the fixed rate loans on the books and then increasing the yields on the other side and reinvesting at current rates, I think it's very replaceable to the bottom line.

Yes. And Brian in terms of -- just overall, I mean, we would expect the balance sheet to be able to grow from the combination. So we said earlier on RIA and agency and on premium finance, those all should grow at, I think solid rates, high single digits to maybe low double in those groups. And then we're going to -- we've looked at, for example, on the retail side, there's tremendous opportunity to grow on consumer loans, in particular, HELOCs, there's a real opportunity to grow on the core checking side of the business. We just kind of compared average branch to First Financial back to Westfield.

We see some good opportunities there. There's more opportunity to grow mortgage. And then on the commercial side, we're just adding a lot of product capability back into what we do -- we think will help the overall client base there and just create more opportunities. So we feel pretty good about replacing and growing the assets overall and then that contribution is going to be there.

Perfect. I mean, you kind of preempted my next question, but I was going to ask if we look at that [$308] as a guidepost, and I realize it's a somewhat stylized exercise, but that's the number a lot of people will use for the pro forma EPS. If you were to think about the key upside and downside risk to that, I mean, it sounds like the ability to grow and some of these revenue synergies is one of the upside risk. But just kind of what's top of mind that we should think about that might drive that [$308] a little higher or lower in the ultimate outcome?

Yes. The downside is pretty simple. If we can maintain the clients, maintain the business and then hit our expense targets, we'll protect the downside and we feel pretty confident in that. And then on the upside, again, we're -- we just think we're adding a lot of capability to what Westfield is able to do today. And that capability, along with their talented bankers in those local markets and their local relationships is going to add -- is just going to add more opportunities for us. So we're pretty confident in that side that there will be some incremental upside.

If I could sneak in one last one. I think someone asked the question about opportunity to do future deals. As part of that, can you just remind us like what's the minimum capital range you'd be willing to go down to, obviously, even with an 11% pro forma here, you're still pretty high. But where is the pipeline that you wouldn't want to cross?

Yes. So -- maybe Jamie can pipe in here in a minute as well, Brian. Our Board long-term -- targets long term of a TCE between 7.5% and 8%. So we would say, and if a deal dips us a little bit below in a number of quarters, we're going to come back into that range. We feel comfortable with that. I wouldn't want to probably be below 7% TCE, but we would certainly say, if it gets back in the year into the 7.5%, 8% range, we're going to feel pretty good about it.

Your next question comes from the line of Terry McEvoy from Stephens.

Just a quick follow-up. I'm wondering if I could get your thoughts on the early adoption of the new CECL kind of double count proposal where you stand today? And I really like that you guys put kind of the with and without within the side deck.

Yes. Terry, it's Jamie. So yes, that's -- the reason we put that in there is just I think it's a little bit of an unknown at this point, whether the rule is going to get written quickly enough where we can adopt it for this deal. So if you look at the numbers, it's not a huge impact for this deal. It moves it a little bit. Let's see here.

So yes, just including the double count, you just have a little bit more tangible book value dilution, but we had some more accretion. But for this one, it is a -- given the really clean credit profile of Westfield, the with and without just doesn't have that much of an impact. So it's just -- I think we're just waiting to see if the rules get written and we can adopt it.

And that concludes our question-and-answer session. I will now turn the call back over to Archie Brown for closing remarks.

Thank you, Rob. I want to thank everybody for being on the call this day as we announced the acquisition of Westfield Bancorp. We're really excited about this opportunity and what it does for us in the market and its strategic fit overall. Look forward to talking you again soon. Have a great day. Bye now.

This concludes today's conference call. Thank you for your participation.