First Financial Q3 2026 Earnings: Net Interest Income Drives Record Revenue

First Financial Bancorp (Nasdaq: FFBC) reported Q3 2026 revenue of $273.9 million, up approximately 17.1% year over year, while GAAP diluted EPS increased to $0.77 from $0.75. Net interest income and fee revenue supported higher earnings, although operating expenses rose and one downgraded investment commercial real estate relationship increased classified assets.

Core Earnings Data

Net interest income increased 22.3% year over year as total interest income rose 15.6% while interest expense increased 3.6%. Noninterest income added 5.6%, resulting in record third-quarter revenue.

Net income grew 12.9%, but diluted EPS increased only approximately 2.7% because diluted weighted-average shares were about 9.7% higher than a year earlier. On a non-GAAP basis, adjusted net income was $87.8 million and adjusted EPS reached a company record $0.84, up 11% year over year.

Revenue represents net interest income plus noninterest income. Adjusted results and fully tax-equivalent measures cited in this article are non-GAAP.

Business and Portfolio Performance

Ending loans and leases reached $13.91 billion, increasing $170.2 million from the second quarter, or 4.9% on an annualized basis. Commercial and industrial loans rose 2.2% sequentially to $4.95 billion, home equity balances increased 4.5%, and lease financing grew 2.9%. Commercial real estate balances were nearly unchanged.

Adjusted noninterest income reached a record $77.6 million, up $5.7 million, or 8%, from the previous quarter. Foreign exchange income increased 33.5% sequentially to $17.5 million, while wealth management fees rose 10.7%, bankcard income increased 27.4%, and client derivative fees climbed 74.0%. Leasing business income remained the largest reported fee category at $23.0 million.

Ending deposits increased 0.7% from the second quarter to $17.70 billion. Average deposits grew $52.4 million, or 1.2% annualized, while average deposits excluding brokered certificates of deposit increased $144.0 million. Growth in interest-bearing demand accounts, money market accounts, and retail CDs offset declines in brokered CDs, savings balances, and average noninterest-bearing deposits.

Profitability, Credit, and Capital

Noninterest expenses increased 2.6% sequentially and 23.4% year over year to $165.7 million. Management attributed the quarterly increase primarily to incentive compensation tied to fee revenue, along with higher healthcare, credit, and collection costs. Adjusted expenses were $156.9 million after excluding $7.5 million of acquisition-related costs, $0.8 million of tax-credit investment amortization, and $0.6 million of other costs not expected to recur. The GAAP efficiency ratio was 60.5%, compared with 57.3% on an adjusted basis.

Credit costs remained relatively contained, but classified assets increased. Total provision expense was $8.9 million, and net charge-offs were $7.2 million, equivalent to 0.21% of average loans on an annualized basis. Nonperforming assets rose to 0.45% of total assets from 0.43%, while classified assets increased to 1.26% from 1.01%, primarily because of the downgrade of one investment commercial real estate relationship involving multiple loans.

The total allowance for credit losses was $209.8 million, including a $191.7 million allowance for loans and leases, equal to 1.38% of total loans. Preliminary regulatory capital ratios improved sequentially: the common equity tier 1 ratio rose 21 basis points to 12.54%, and the total capital ratio increased 8 basis points to 15.83%. The board also approved a quarterly dividend of $0.26 per common share.

Higher Rates Lifted Margin but Pressured Tangible Book Value

The fully tax-equivalent net interest margin expanded 9 basis points from the second quarter to 4.07%. Management attributed the improvement to a 13-basis-point increase in asset yields, partly offset by a 4-basis-point rise in funding costs. This supported the 3.1% sequential increase in net interest income.

At the same time, the sharp rise in interest rates during the second half of the quarter increased the accumulated other comprehensive loss from $223.7 million to $387.1 million. Tangible book value per share consequently fell 5.9% from the previous quarter to $15.65, while the tangible common equity ratio declined 43 basis points to 7.81%. The contrast between improving regulatory capital ratios and lower tangible book value reflects the effect of unrealized securities losses recorded through AOCI.

Earnings Guidance

Management expects low- to mid-single-digit loan growth as First Financial closes out 2026. It also expects expenses to moderate in the fourth quarter, although no quantitative expense range was provided.

Management Perspective

Management said loan pipelines remained healthy entering the fourth quarter and expects the downgraded ICRE relationship to be worked out over the next few quarters. First Financial has received federal regulatory approval for its acquisition of Finward and expects the transaction to close on January 1, 2027, subject to state regulatory and Finward shareholder approvals.

Risks Investors Need to Watch

• Classified asset growth: The downgrade of one ICRE relationship raised classified assets materially. The timing and outcome of the planned workout could affect future provisions and charge-offs.
• Expense pressure: Incentive compensation, healthcare claims, collection costs, and acquisition-related spending elevated expenses. Management expects moderation, but it did not provide a quantitative range.
• Interest-rate effects on tangible capital: Higher rates supported asset yields and net interest margin but also increased AOCI losses and reduced tangible book value.
• Deposit mix and funding costs: Average deposit growth was modest, and some growth came from interest-bearing products. Further mix changes could keep funding costs elevated.
• Finward transaction execution: The planned closing still depends on state regulatory and shareholder approvals, while acquisition and integration costs may continue to affect reported expenses.

Summary

First Financial’s Q3 2026 results combined record revenue, wider net interest margin, moderate loan growth, and diversified fee income. Those gains outweighed higher expenses and produced double-digit net income growth, although a larger share count limited GAAP EPS growth. The main items to monitor are the resolution of the downgraded ICRE relationship, expense moderation, interest-rate effects on tangible book value, and progress toward closing the Finward acquisition.