FFBC Q1 Deep Dive: Margins Face Rate Pressures, Loan Growth Remains Modest

Regional banking company First Financial Bancorp (NASDAQ: FFBC) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 2.6% year on year to $200.4 million. Its non-GAAP profit of $0.63 per share was in line with analysts’ consensus estimates.

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

StockStory’s Take

First Financial Bancorp’s first-quarter results were met with a significant negative market reaction, as revenue came in below Wall Street expectations despite a modest increase from last year. Management pointed to stable net interest margins, disciplined expense control, and solid asset quality as key drivers. CEO Archie Brown explained that loan balances were flat, with seasonally lower production and ongoing payoffs in commercial and real estate portfolios shaping the period’s results. CFO Jamie Anderson highlighted that non-interest expenses declined due to lower incentive compensation and reduced fraud losses, while asset quality continued to improve, evidenced by fewer net charge-offs.

Looking ahead, management’s outlook is shaped by expectations for gradual margin expansion, modest loan growth, and ongoing efficiency gains. CEO Archie Brown noted that loan pipelines in consumer, commercial, and real estate remain healthy but cautioned that elevated prepayment activity in the real estate portfolio could temper growth. Anderson added that deposit costs are expected to decline further, providing some cushion against the impact of anticipated interest rate cuts. Management remains watchful of external risks, including tariffs and macroeconomic uncertainty, while emphasizing a commitment to strong capital and asset quality.

Key Insights from Management’s Remarks

Management attributed Q1 performance to lower loan growth, continued prepayments in real estate, and firm expense management, while highlighting stable deposit funding and asset quality.

• Loan growth tempered by payoffs: First quarter loan balances were stable as new loan production was offset by high prepayments in commercial and investor commercial real estate (ICRE) portfolios. Management noted that private credit markets and refinancing activities led to increased payoff pressure, particularly in multifamily and office-related credits.

• Deposit mix remains healthy: Although overall deposit balances decreased due to seasonal factors, core deposits excluding brokered funds increased. Management emphasized a focus on growing lower-cost funding sources, with non-interest-bearing accounts comprising 21% of total balances.

• Stable net interest margin despite pressures: The net interest margin declined slightly to 3.88% due to lower asset yields, but deposit costs also fell, helping to cushion the impact. Management expects further improvement as deposit repricing lags rate movements.

• Expense reduction through efficiency initiatives: Non-interest expenses declined by 3.3%, with management citing reduced incentive compensation, fewer fraud losses, and ongoing efficiency projects that led to a 7% full-time equivalent reduction (excluding recent acquisitions).

• Asset quality metrics improved: Net charge-offs and non-performing assets both declined, with management describing asset quality trends as stable to improving. The allowance for credit losses remained flat, reflecting a conservative approach to reserving.

Drivers of Future Performance

Management expects near-term results to hinge on modest loan growth, margin resilience, and continued operational discipline, all while monitoring external headwinds.

• Modest loan growth outlook: Management forecasts low single-digit loan growth due to healthy pipelines in consumer and commercial lines but expects elevated prepayments in real estate to persist. CEO Archie Brown indicated that overall annual growth expectations have been revised down slightly as a result.

• Margin resilience amid rate cuts: CFO Jamie Anderson explained that while the bank remains asset sensitive—meaning its earnings are affected by changing interest rates—declining deposit costs and ongoing repricing efforts should help mitigate some pressure from anticipated rate cuts. Management projects the net interest margin could remain in the 3.90% to 3.95% range even if rates decline.

• External risks and expense focus: Management is monitoring the impact of tariffs and broader economic uncertainty on clients, while continuing to prioritize expense management and efficiency gains as key levers for maintaining profitability.

Catalysts in Upcoming Quarters

Looking forward, our analysts will be closely monitoring (1) the pace of loan growth relative to ongoing payoff pressures—especially in real estate, (2) deposit cost trends and their impact on net interest margin as rate cuts materialize, and (3) any signs of asset quality deterioration or unexpected credit losses. Additionally, we will track management’s progress on efficiency initiatives and the effects of external risks such as tariffs.

First Financial Bancorp currently trades at $23.74, down from $24.03 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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