First Financial Bancorp.

Hello and welcome to the First Financial Bank Corp Second Quarter 2022 Earnings Conference Call and Webcast. My name is Brika and I'll be coordinating the call today. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keyboard. I now have the pleasure of calling to our host, Scott. Thanks, Brika.

Good morning, everyone. Thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date 2022 financial results. Participating on today's call will be Arch Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Herrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankitfirst.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 2022 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, 2022, 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. Thank you, Scott. Good morning, everyone, and thank you for joining us for today's call. Yesterday afternoon, we announced our financial results for this quarter. Before I turn the call over to Jamie to discuss those results in greater detail, I'm going to say a few words regarding the quarter. I'm extremely pleased with our performance in the recent period, which was highlighted by a rapidly expanding margin, strong loan growth, and exceptional fee income. For the quarter, we achieved adjusted earnings per share of $0.56, a 1.31% return on average assets, and a 21.26% return on average tangible common equity. Earnings improved from the first quarter as our asset sensitive balance sheet was positively impacted by recent rate increases. In addition, credit quality was stable with lower net charge-offs and non-accrual loan balances. This led to a small provision recapture for the quarter. We are encouraged by our fee income performance for the quarter, which reflects the strength of our diverse fee businesses. Total fee income surpassed our expectations due to record foreign exchange income, higher income from limited partnership investments, and our growing leasing business. While second quarter mortgage banking income increased 35% from the linked quarter, we continue to experience headwinds due to rapid rise in interest rates. In addition, recent overdraft program changes led to a modest reduction in deposit account service charges during the second quarter, and we expect some further decline in the third quarter as these changes are fully integrated. We're very pleased with loan growth in the second quarter. Loans excluding PPP increased by $191 million, or 8.3% on an annualized basis. Loan growth was broad-based with increases in CNI, retail mortgage, and consumer banking. This more than offset a decline in the ICRE portfolio, which was driven by elevated prepayments. In addition, we were also pleased with summit growth in the quarter, which included a total of $50 million in leases and loans. Loan origination activity remains strong as we head into the third quarter. With that, I'll turn the call to Jamie to discuss the second quarter results in more detail. After Jamie's discussion, I will wrap up with some additional forward-looking commentary. Jamie. Thank you, Archie.

Good morning, everyone. Slides four, five, and six provide a summary of our second quarter financial results. The second quarter was highlighted by an expanding net interest margin, strong loan growth, increased fee income, and stable credit quality. As a result of the Fed rate hikes, our net interest margin increased 30 basis points during the quarter. Given our asset sensitive balance sheet, we believe this trend will accelerate into the third quarter as the Fed increases rates further. We were pleased with 8% annualized loan growth during the period, excluding PPP balances. The growth was widespread across the portfolio, with the biggest increases in C&I and residential mortgage. Fee income increased 21% during the quarter, surpassing our expectations. In particular, Bannockburg had a record quarter, while leasing business income increased 19%. Mortgage banking income increased compared to the first quarter. However, we do not expect this trajectory to continue as originations will be negatively impacted from higher interest rates. Additionally, service charge income was relatively flat compared to the first quarter as we made several changes to our overdraft program that are expected to reduce fees in the coming periods. Non-interest expenses were slightly higher than our expectations. due primarily to incentive compensation tied to elevated fee income. We were pleased on the credit front as net charge-offs declined to eight basis points and non-performing assets declined to 31 basis points of total assets. These two factors drove $800,000 of provision recapture during the period. From a capital standpoint, our regulatory ratios remain in excess of both internal and regulatory targets. Similar to the first quarter, accumulated other comprehensive income declined significantly, negatively impacting both tangible book value and our tangible common equity ratio. Slide seven reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $53 million or 56 cents per share for the quarter. These adjusted earnings account for $1.1 million of losses on investment securities and $900,000 of summit-related and other costs not expected to recur, such as severance and branch consolidation expenses. As depicted on slide 8, these adjusted earnings equate to a return on average assets of 1.31%, a return on average tangible common equity of 21%, and an efficiency ratio of 61%. Turning to slides 9 and 10, net interest margin increased 30 basis points from the linked quarter to 3.47%. This increase was primarily driven by an increase in asset yields during the period, resulting from rising interest rates. The increase in asset yields was partially offset by a slight increase in funding costs and a decline in PPP forgiveness fees. As a result of rising rates, Asset yields surged during the period, with loan yields increasing 34 basis points. In addition, investment yields increased due to higher reinvestment rates and slower prepayments on mortgage-backed securities. Our cost of deposits was relatively flat when compared to the first quarter, but we expect these costs to increase in future periods in reaction to competitive pressures from an increasing rate environment. Slide 11 details the asset sensitivity of our balance sheet. We remain well positioned for expected rate increases as approximately two-thirds of our loan portfolio will reprice fairly quickly. Slide 12 details the beta utilized in our net interest income modeling. And while we didn't realize a drastic increase in costs from the initial rate hikes, as additional rate increases occur, We expect our deposit beta to be approximately 30% over the full cycle. Slide 13 illustrates our current loan mix and balance changes compared to the linked quarter. As I mentioned before, loan balances increased 8% on an annualized basis, excluding PPP. With the exception of ICRE, every portfolio grew compared to the linked quarter. The largest areas of growth were in the C&I, retail mortgage, and Oak Street portfolios. However, we were also pleased with the trajectory of the consumer, franchise, and summit books. Slide 15 shows our deposit mix, as well as a progression of average deposits from the first quarter. In total, average deposit balances declined $246 million during the quarter, driven by a $136 million decline in brokered CDs, and a $104 million decline in money market accounts. These were isolated to a handful of larger accounts. We were pleased with the growth in lower-cost transaction deposits during the quarter, which included a $36 million increase in non-interest-bearing accounts and a $31 million increase in savings accounts. Slide 16 highlights our non-interest income for the quarter. As I mentioned previously, second quarter fee income surpassed our expectations, primarily due to record foreign exchange income, higher mortgage banking income, and an increase in other non-interest income. In addition, wealth management remained elevated and derivative fees increased 69% from the prior period. While mortgage banking exceeded first quarter levels, increasing rates and record production in prior years has softened mortgage demand significantly, and we continue to expect industry-wide pressure on this business for the remainder of 2022. Deposit service charge income was steady in the second quarter. However, as I mentioned before, we expect reductions in this income going forward as program changes are fully realized. Non-interest expense for the quarter is outlined on slide 17. The second quarter was relatively quiet on the non-interest expense front. On an operating basis and excluding summit, expenses increased $1 million compared to the linked quarter, due primarily to additional incentive compensation resulting from higher fee income at Bannock Burns. Turning now to slide 18, our ACL model resulted in a total allowance which includes both funded and unfunded reserves of $135 million and $800,000 in total provision recapture during the period. This resulted in an ACL that was 1.25% of total loans at June 30th. The provision recapture was driven by stable credit quality and lower net charge-offs during the period. Net charge-offs as a percentage of loans decreased to eight basis points on an annualized basis, while non-performing assets declined to 31 basis points of total assets. Classified assets increased slightly during the quarter due to the downgrade of two credits in the hotel and healthcare industry. However, these borrowers have good liquidity and are exhibiting improving trends. Our view on the ACL and provision expense remains unchanged. We acted aggressively when building reserves in response to the pandemic and have been steadily releasing reserves as credit has stabilized. We expect increasing provision expense in the back half of 2022. Finally, as shown on slides 20 and 21, regulatory capital ratios remain in excess of regulatory minimums and internal targets. During the second quarter, tangible book value and the TCE ratio continued to decline. These declines were caused by a $101 million decline in accumulated comprehensive income as a result of unrealized losses on the investment portfolio from rising interest rates. Absent this decline, the TCE ratio would have been 7.1% at June 30th compared to 6.4% as reported. We returned over 40% of our earnings to our shareholders during the period and believe our dividend yield is attractive to potential shareholders. We do not anticipate any near-term changes to the common dividend. However, we will continue to evaluate various capital actions as the year progresses. I'll now turn it back over to Archie for some comments on our outlook going forward. Archie?