KBRA Affirms Ratings for First Financial Bancorp

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Cincinnati, Ohio-based First Financial Bancorp (NASDAQ: FFBC) ("First Financial" or "the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for its main subsidiary, First Financial Bank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

First Financial’s ratings are supported by its differentiated business model relative to similarly sized banks, reflecting greater diversification across revenue, lending, and geography. The core, middle market focused, banking franchise is well-entrenched in its legacy footprint with meaningful scale in Ohio and Indiana, while its national business lines, particularly commercial finance (RIA, insurance agency, franchise, equipment, and premium finance), augment growth and revenue diversification. These verticals contribute to sizable noninterest income, which typically represents 25%–30% of total revenues (30% during 1H25), and provide attractive risk-adjusted returns on the lending side. They also support growth in C&I lending while reducing reliance on investor CRE (below 200% of total risk-based capital as of 2Q25). While the loan portfolio is concentrated in Ohio and Indiana, which are comparatively stable markets, its national exposures provide a hedge against potential weakness in these local economies.

Profitability remains robust, with core ROA tracking around 1.4% in recent years, supported by a healthy NIM (~4.0%) that has benefitted from higher interest rates given FFBC’s moderately asset-sensitive balance sheet and emphasis on floating-rate C&I lending. Importantly, steady fee income growth and efficiency initiatives have further reinforced returns. Noninterest income streams - largely derived from foreign exchange, equipment leasing, and wealth management - have demonstrated durability and consistent growth, which KBRA views favorably. Looking forward, NIM will likely face modest downward pressure from recent and anticipated Fed rate cuts, but earnings should continue to compare favorably to peers.

Funding and liquidity are also key strengths. FFBC’s solid core deposit base reflects long-standing client relationships in its markets and a conservative approach to liquidity management. The deposit base is granular, with a minimal level of uninsured deposits (excluding collateralized balances). That said, deposit costs have tracked modestly above peers in recent years (2.11% during 2Q25), though partially in response to solid execution of deposit gathering initiatives. The pending acquisitions of Westfield Bancorp and BankFinancial Corporation, expected to close in 4Q25, are also expected to enhance funding diversity and liquidity. The acquisitions will provide increased growth opportunities in Chicago and Cleveland markets where management has opened LPOs in recent years, while also expanding specialty commercial finance verticals.

Credit quality has generally been sound, although FFBC has experienced modestly higher NPAs and NCOs at times. These instances have typically been isolated one-off events in the core portfolio or tied to national lending channels, which carry moderately higher credit risk but provide elevated loan yields. While the broader industry faces potential headwinds from CRE exposures, tariff-related pressures, and the impact of higher rates on C&I borrowers, KBRA believes that FFBC’s experienced management team, conservative underwriting, and strong knowledge of its core markets position the company to maintain sound credit performance.

Capitalization is appropriate, supported by a CET1 ratio of 12.6% as of 2Q25. While core capital ratios are projected to decline following the pending acquisitions, with the CET1 ratio reaching the low-11% range, management intends to rebuild capital over time, targeting a TCE ratio above 8.0%. KBRA views this as adequate for the company's risk profile and consistent with similarly rated peers. Importantly, First Financial's strong earnings capacity supports rapid internal capital generation, which helps offset temporary variability from M&A activity.

Rating Sensitivities

A rating upgrade is not expected over the medium term, though maintenance of strong earnings and rebuilding core capitalization post closing pending mergers could support positive momentum over time. Conversely, a downgrade is unlikely, though an uptick in asset quality issues, deterioration in the funding/liquidity position, or more aggressive capital management could potentially pressure the ratings.

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