On Wednesday, First Financial Bancorp (NASDAQ:FFBC) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://events.q4inc.com/attendee/657340574
Summary
First Financial Bancorp reported record adjusted net income of $83.9 million for Q2 2026, with an 8% increase in adjusted earnings per share over the previous year.
The company completed the integration of the Westfield acquisition and announced a new acquisition of Finward Bancorp to expand its presence in Northwest Indiana and Chicagoland.
Loan growth was strong at 7% on an annualized basis, driven by CNI, Agile, and Summit, with a stable net interest margin of approximately 4%.
Lower foreign exchange swap income and investment banking fees led to a decrease in adjusted fee income; however, the company anticipates a rebound in Q3.
The acquisition of Finward is expected to be 5% accretive to earnings per share, with a quick tangible book value earn-back, enhancing the company's strategic market presence.
The company's asset quality improved, with a decline in net charge-offs and strong capital levels, including a tangible common equity ratio of 8.2%.
Management expects mid-single-digit loan growth and stable net interest margins in Q3, with plans for cost savings from recent acquisitions to be fully realized by year-end.
Full Transcript
Leah, Operator
Hello everyone. Thank you for joining us and welcome to the First Financial Bancorp Second Quarter 2026 Earnings Conference Call and webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Scott Crawley, Corporate Controller. Scott, please go ahead.
Scott Crawley, Corporate Controller
Thank you, Leah. Good morning everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp second 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 will 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 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 June 30, 2026; 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.
Archie Brown, President and Chief Executive Officer
Thanks, Scott. Good morning everyone, and thank you for joining us on today's call. With second quarter earnings and the FinWord announcement, we have a lot to cover, so the format of our call will be a little different today. Our plan for today's remarks is that I will start with my summary of the quarter, then turn over to Jamie who will add his comments on the financial results. After Jamie's finished, I'll provide thoughts on our third quarter outlook and then once I've wrapped up the outlook commentary, we'll then pivot to discuss the details of the FinWord acquisition, which is a deal that we're very excited about.
After that, we'll open it up for questions. The second quarter was another active quarter as we remain focused on post-integration efforts related to the Westfield acquisition, successfully converted bank financial systems. Our second quarter operating results were strong and we're very pleased with our performance. Adjusted net income for the period was a record $83.9 million, or $0.80 per share, with an adjusted return on assets of 1.5% and an adjusted return on tangible common equity of 19.7%.
These adjusted earnings per share represent an 8% increase over the second quarter of 2025 and they were driven by increases in earning assets from a combination of organic loan growth and our recent acquisitions. Our net interest margin was stable at approximately 4% as lower funding costs offset a decline in loan accretion income. Assuming no significant changes in interest rates, we expect our margin to remain stable over the near term. Loan growth for the quarter was 7% on an annualized basis and reflected continued momentum across the portfolio with CNI, Agile and Summit being the primary drivers of our increase in balances.
Loan originations increased 23% over the first quarter and advanced-stage pipelines remain strong heading into the back half of the year. We expect loan production to remain healthy and contribute to solid loan growth in the third quarter. Second quarter adjusted fee income was below our expectations after a very strong first quarter. Lower foreign exchange swap income and investment banking fees led to a decline in total noninterest income compared to the linked quarter.
While results in these business lines can vary from quarter to quarter, we anticipate a rebound in the third quarter. Conversely, adjusted noninterest expenses were materially lower than the linked quarter driven by lower commission expense, payroll taxes and acquisition-related synergies. As of June 30, virtually all the expected Westfield cost reductions have been realized, while savings related to the Bank Financial acquisition will gradually phase in over the course of the third quarter with full savings expected by quarter end.
Asset quality was stable for the quarter with net charge-offs declining by 15 basis points to percent of total loans. Capital levels remain strong with tangible common equity increasing to 8.2% and tangible book value increasing 3% from the linked quarter to $16.64. No shares were repurchased during the quarter as we focus on integrating recent acquisitions and preparing for the acquisition of FinWord. Now I'll turn the call over to Jamie to discuss our second quarter results in greater detail.
Jamie Anderson, Chief Financial Officer
Thank you, Archie, and good morning, everyone. Slides 5, 6 and 7 provide a summary of our most recent financial results. The second quarter was another outstanding quarter highlighted by strong earnings, 7% loan growth, a solid net interest margin and positive credit trends. Our net interest margin remains very strong at 3.98%. Deposit costs declined 6 basis points from the linked quarter while asset yields decreased 7 basis points due to lower accretion income.
Loan balances increased $240 million, or 7% on an annualized basis. Growth was broad based with CNI, Summit and Agile all having strong quarters. Average deposit balances increased $41 million due primarily to a seasonal influx in public funds and higher interest-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, despite a decrease from the first quarter, second quarter fee income was solid, led by the leasing and foreign exchange business lines, while noninterest expenses declined from the linked quarter due to lower incentive-based compensation costs. Our ACL coverage increased 2 basis points during the quarter to 1.38% of total loans. We recorded $8.2 million of provision expense during the period, which was driven primarily by net charge-offs and loan growth. Overall asset quality trends were positive. Net charge-offs declined 15 basis points to 20 basis points of loans on an annualized basis, while NPAs and classified assets also declined during the period.
From a capital standpoint, our ratios are in excess of both internal and regulatory targets. Tangible book value increased to $16.64 while our TCE ratio increased to 8.2%. Slide 9 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $83.9 million, or $0.80 per share, for the quarter. Noninterest income was adjusted for losses on investment securities and $2.2 million of acquisition-related items.
Noninterest expense adjustments exclude the impact of acquisition costs, tax credit investment amortization and other expenses not expected to recur. As depicted on Slide 10, these adjusted earnings equate to a return on average assets of 1.5%, a return on average tangible common equity of 20% and a post-tax pre-provision ROA of over 2%. Turning to Slides 11 and 12, net interest margin decreased one basis point from the linked quarter to 3.98%. The core margin remains very strong with the slight decline from the linked quarter driven by a 5 basis point decline in loan accretion, which was impacted by low prepayment rates on our acquired mortgage loans. Total deposit costs declined 6 basis points from the linked quarter, partially offsetting the impact of lower asset yields. Slide 14 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances increased 7% on an annualized basis with growth across most of the portfolio, highlighted by CNI, Summit and seasonal growth from Agile. Slide 16 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 second quarter.
The majority of our NDFI lending is concentrated in loans to REITs, which we believe further mitigates our risk. Slide 17 depicts our average deposit mix as well as a progression of average deposits from the linked quarter. In total, average deposit balances increased $41 million during the quarter driven by a seasonal influx of public funds and growth in interest-bearing demand accounts. These increases were offset by declines in retail time deposits and brokered CDs.
Absent the decline in brokered CDs, average deposits increased $169 million from the first quarter. Slide 19 highlights our noninterest income. Total adjusted fee income was $72 million, with leasing and foreign exchange income both delivering solid quarters. Additionally, other noninterest income increased $3.6 million for the quarter due to higher income from bank-owned life insurance and other limited partnership investments. Noninterest expense for the quarter is outlined on Slide 20.
Core expenses decreased $5.7 million during the period driven by lower compensation costs tied to lower fee income. Turning now to Slides 21 and 22, our ACL model resulted in a total allowance, which includes both funded and unfunded reserves, of $208 million and $8.2 million of total provision expense during the period. This resulted in an ACL that was 1.38% of total loans, which was a 2 basis point increase from the first quarter. Provision expense was primarily driven by loan growth and net charge-offs, which were 20 basis points for the period, declining 15 basis points from the first quarter.
Overall credit trends were positive with a 42% reduction in net charge-offs and slight declines in both nonperforming and classified assets. Finally, as shown on Slides 23 and 24, capital ratios remain in excess of both regulatory minimums and internal targets. During the quarter, tangible book value increased to $16.64 while the TCE ratio increased to 8.2% at the end of the period. At this point our tangible book value exceeds pre-Westfield and Bank Financial levels.
Our total shareholder return remains strong with 34% of our second quarter earnings returned to our shareholders during the period through the common dividend. We're also very pleased that the Board of Directors voted to increase the common dividend going forward to $0.26 per share. 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 Brown, President and Chief Executive Officer
Thank you, Jamie. Before we conclude our prepared remarks, I want to comment on our third quarter outlook, which can be found on slide 25. In regard to the balance sheet, we expect mid-single-digit loan growth on an annualized basis, while on the deposit side we expect low-single-digit core deposit balance growth. Our net interest margin remains among the highest in the peer group, and we expect it will hold steady in a 3.96% to 4.01% range over the next quarter. That assumes no changes in interest rates.
This also assumes purchase accounting accretion that's in line with the second quarter. As for credit, we expect third quarter credit costs to approximate second quarter levels and ACL coverage to remain relatively stable as a percentage of loans. I was pleased to see positive trends in our credit quality metrics in the second quarter, and we see net charge-offs approximating 25 to 30 basis points for the back half of the year, consistent with our outlook for the last couple of years.
On fee income, we expect foreign exchange and investment banking income to rebound and total fee income to be between $74 and $77 million in the third quarter, which includes $15 to $17 million for foreign exchange and $22 to $24 million for leasing business revenue. Noninterest expenses are expected to be between $149 and $152 million. We successfully completed the Bank Financial conversion in June, and we are on pace to achieve our modeled cost savings with full savings realized in the fourth quarter.
Full savings from the Westfield acquisition will be in the third quarter run rate. Turning now to Finward: as we announced late yesterday, we've agreed to acquire Finward Bancorp, the holding company for Peoples Bank. Finward currently has 24 banking locations, is headquartered in Munster, Indiana, and as such, this acquisition is expected to strategically expand First Financial Bancorp's ability to serve the consumers and businesses of the Chicagoland and Northwest Indiana markets.
Finward has approximately $2 billion in assets, $1.7 billion in deposits, $1.5 billion in loans, and $412 million in wealth assets under management, and we're very excited to partner with a bank with a similar operating philosophy and strong credit culture. Not only does this transaction demonstrate our commitment to strategic growth in the Northwest Indiana and Chicagoland markets, we believe the transaction is also an attractive one for our shareholders.
Under the terms of the agreement, each outstanding share of Finward common stock will be converted into the right to receive 1.35 shares of First Financial Bancorp common stock, valuing the transaction at approximately $208 million based on First Financial Bancorp's closing price on July 20th. In addition, we expect the transaction to be approximately 5% accretive to First Financial Bancorp's earnings per share, and First Financial Bancorp's tangible book value per share at closing is estimated to be only slightly diluted, with an anticipated tangible book value earnback of just over half a year.
For further details on the transaction, please refer to slides 26 through 33 in our deck. Including our recent acquisition of Bank Financial, we will have added $2.9 billion in lower-cost deposits to our legacy operation in Northwest Indiana and have a total of $4.1 billion in deposits in Chicago and Northwest Indiana. We'll have a branch network of over 40 offices, and we'll have built an impressive combination of talent in commercial banking, mortgage banking, wealth management, and specialty bank solutions, complemented by our client-centered, community-focused business model that is the alternative to larger banks in the region.
Through these two acquisitions, we expect to add approximately 8% in earnings-per-share accretion with no impact to tangible book value, and the Chicago–Northwest Indiana market becomes the second-largest market in our company. To demonstrate our further commitment to this market, First Financial Bancorp is committed to donate $500,000 to its foundation for the benefit of local organizations in the communities served by Finward, in addition to the $1 million we donated to the foundation when we entered the Chicago market with the completion of the acquisition of Bank Financial in January of this year.
To wrap up my comments, the second quarter was another great quarter for our company. We achieved record earnings while successfully integrating two bank acquisitions and positioning the company for continued success in the second half of the year. Regarding the recently integrated Westfield and Bank Financial acquisitions, we're very pleased with how our newer associates have assimilated into the company. They remain deeply committed to serving their clients and communities, and their efforts have been instrumental in high client retention levels.
We are thankful for their dedication, hard work, and client-focused approach over the past year. I'm very proud of the work our teams have done throughout the integration process, and their efforts position us for success in our newly expanded markets. Finally, we're really excited to announce our expansion in Northwest Indiana and Chicago with Finward, and we look forward to the opportunities that this combination provides. With that, we'll now open up the call for questions.
Leah, over to the lines. Thank you.
Leah, Operator
We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Brendan Nosal with Hovde Group.
Your line is open. Please go ahead.
Brendan Nosal, Analyst at Hovde Group
Hey, good morning, guys.
Archie Brown, President and Chief Executive Officer
Hope you're doing well. Morning, Brendan.
Brendan Nosal, Analyst at Hovde Group
Morning. Maybe starting off here on capital, just in light of the Finward deal, I guess you're using some capital, but honestly not that much for the transaction. So I guess two parts: one, three deals in short order — are you on the M&A sidelines now, or is there still an ability to transact? And then two, last quarter you started talking about a higher total payout ratio, so curious for your updated thoughts in light of the Finward announcement.
Archie Brown, President and Chief Executive Officer
Yeah, Brendan, this is Archie. I'll answer the first part and have Jamie answer the second part. You're right, this is the third transaction. I think we closed, of course, Bank Financial in January, converted it in June. Finward we would hope we would close by year-end and convert sometime in the second quarter of next year. This is, relative to our size, a fairly smaller incremental deal — very strategic. We think it's very important for what we're doing in that part of our footprint, but it is somewhat incremental.
So we don't see ourselves on the sideline, but we're not — you know, there's just a window here where opportunities are popping up, and so we'll assess them as they come. We don't see anything in the near term, I would say near to intermediate term, that we're focused on other than, you know, getting Finward closed and integrated into the company. So that's probably our work the next, I'd say, four quarters or so, and then we'll just see what happens as we get into '27.
Jamie Anderson, Chief Financial Officer
And Brendan, this is Jamie. So on the return-of-capital part of the question you had there: with the common dividend, we kind of look in that 35% to 40% range. I think we're right in the mid-30s right now, and yeah, we talked about, I think last quarter, bumping that up to include some buybacks. And so with the deal kind of in process in the second quarter, we just held off on the buyback, but I think here, going forward, we'll be in the market. We're kind of looking at our capital and our earnings and breaking them up into three parts, with a third-ish getting returned through the common dividend, a third retained for organic growth and potentially some small M&A, like we're doing now, and then allocating a third for a buyback. So I think that's the plan — that's the plan kind of long term going forward.
Brendan Nosal, Analyst at Hovde Group
Okay, fantastic. That's helpful color from both of you. Maybe pivoting to fee income: as always, you give really good color on expectations for the lease and FX lines. Maybe just help us with client derivative fees and kind of the wealth management piece. I guess there was an investment banking component for wealth this quarter. So just kind of help us on what was going on this quarter and then how those kind of fit into the fee outlook going forward.
Archie Brown, President and Chief Executive Officer
Sure. Brendan, this is Archie again. So on foreign exchange, a little bit lower than Q1, a little bit lower maybe than their run rate. But if you look at it for the first half of the year — so Q1, Q2 — we've always said this has some lumpiness to it, so we don't typically look at it in one quarter isolation. But if you look at it even over the first half of this year and compare it to the first half of last year, they're up about almost 12% in revenue — so, you know, this year, 29.4; first half last year, 26.3. So they're doing fine. They do have lumpiness. You know, we've always said there's a core part of their business, a lot of small transactions, and then they have some chunky pieces a little bit larger based on some of the clients they work with, especially those who may be buying or selling companies. So that creates a bit of chunkiness in their results. So we look at it over longer windows to see how they're doing. But right now, for the first half of the year, they're on plan versus our internal budget and doing quite a bit better than last year.
On the wealth side, we have a small M&A advisory practice — really makes up our investment banking income. Again, it's very small. It probably does $5 to $6 million a year in revenue. So you think about it, kind of, you know, half a quarter would be kind of an average, but again, it's chunky. Coming into the quarter, we had two deals we expected to get done in the quarter, and they both just got pushed. We expect those to happen in the third quarter.
There's a nice pipeline of other deals, but they just get close when they get close. So it's just a small enough business that if you don't get one, then it changes what happens there.
Brendan Nosal, Analyst at Hovde Group
Okay, thank you for taking my questions. Much appreciated.
Archie Brown, President and Chief Executive Officer
You're welcome.
Leah, Operator
Yes. Your next question is from the line of Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo, Analyst at Raymond James
All right, thanks, guys. Still with Raymond James, by the way, but moving on.
Archie Brown, President and Chief Executive Officer
Hey, Danny.
Daniel Tamayo, Analyst at Raymond James
Hey, Archie and Jamie. So I guess first, just on the deal, curious what your plans are for the Finward balance sheet. Any sales considered in terms of anything in the loan side, securities book? I'm curious what you're going to do with that and, you know, bigger picture, how you see the size of the balance sheet trending over the next several quarters.
Archie Brown, President and Chief Executive Officer
Yeah, Danny. On the loan side, I mean, good news — the asset quality is strong, stable. We just see that we will bring in a team of actually talented bankers. We don't have that big of a team up there, so we're going to incorporate the bankers from Finward into our team, and we're going to add capacity for them and products and capabilities. So if anything, we can do more with the clients they have and, you know, go out and, I think, probably create a faster run rate for growth overall.
But as far as the loans on the books, we're going to retain those and incorporate them into our balance sheet overall, and then just again try to use that team to go deeper with their clients and bigger. On the securities side, Jamie will cover.
Jamie Anderson, Chief Financial Officer
Yeah. You know, so on the securities side, I mean, I think what we'll end up doing, just because, you know, typically these smaller banks will have a lot of different pieces and CUSIPs, and so we'll probably blow a lot of it out. But that gets accounted for in purchase accounting. So we already have their unrealized loss built into the accretion in the deal. So, you know, we'll basically blow it out and reinvest it at current rates, which is what purchase accounting does anyway. But nothing really, you know, any big change in the balance sheet.
Nothing like we had on BankFinancial where we sold, you know, the big chunk of loans. It's really just, you know, kind of, I would say selling and reinvesting into more of our philosophy on the investment side. But nothing, nothing radical that would change the math or anything.
Daniel Tamayo, Analyst at Raymond James
Okay. And in terms of, like, I know it's a tough question, but ultimate balance sheet, you know, the trajectory of the balance sheet post-close you expect, and this kind of wraps in a question on, you know, the legacy bank, but obviously you've been kind of staying flattish, maybe modest growth just overall balance sheet despite the sizable loan growth. Is that probably still the plan over the next several quarters as the bank or the balance sheet kind of continues to normalize?
Jamie Anderson, Chief Financial Officer
Yeah, Danny, this is Jamie. So, yeah, I think you're talking about last quarter. We talked about, going forward, what our plan was in terms of earning assets. And so I think with the loan growth that we see going forward, our plan, you know, if we look at our balance sheet now, the securities portfolio is a little bit outside compared to what we would normally run, just because of all the cash that we got in the first quarter from BankFinancial. And then, you know, they already had a fairly low loan-to-deposit ratio.
And then we sold, you know, about 400 million of their loans. So we basically got about a billion dollars in excess funding there, which we put most of that to work in the securities portfolio for the time being. And then, over time here—and really when I say over time, it's probably over the next, you know, year to two years—we'll let that securities portfolio kind of bleed back down. So our plan for the short term is that we're funding roughly about 50% of the loan growth through the cash flow in the securities portfolio.
So, you know, if we're growing loans in that kind of mid to high single digits—call it 6%, 7%—about half of that will get funded through the securities portfolio and half of that will be earning asset growth.
Daniel Tamayo, Analyst at Raymond James
Great, that's very helpful. Appreciate it. And then I guess this last one for you, Archie, on the M&A side, just more high level. I mean, does this feel like—you mentioned this is now, Chicago is now your second biggest market—does that feel like it's a good size for you post-close of this deal, that, you know, you're fine kind of growing organically going forward? Or are you still interested in opportunities to further the penetration in Chicago?
Archie Brown, President and Chief Executive Officer
Yeah, I think, Daniel, 4 billion at least gets us to a place where, you know, we've got a platform to grow with talent, which we, you know, when we're smaller, it's harder to do. So I think we've got ourselves to the level we can do that now. Also spend more money on the brand and introducing the brand to the market. We're probably better able to do that. I think there's opportunities in that market still. And I think, you know, these two companies that—well, the one we've closed and now the one that we are announcing yesterday—will give us opportunities to probably have some more conversations over the next year or two.
So we think there's more to do. But I think if this is where we landed, it's big enough.
Daniel Tamayo, Analyst at Raymond James
Okay, well great. Thanks for all the color, guys. Appreciate it.
Leah, Operator
Your next question from the line of Brandon Rudd with Stephens Inc. Your line is open. Please go ahead.
Brandon Rudd, Analyst at Stephens Inc.
Morning. I said maybe my first one on expenses with the close at the end of this year. Maybe kind of talk about when the conversion takes place and then in which quarter next year do you think you have 100% of the cost saves realized?
Jamie Anderson, Chief Financial Officer
Right. Yeah. So we are right now, you know, obviously we're early in the process through the application process and whatnot. But, you know, we are anticipating that we would close at the end of the year—so call it January 1st. You know, we think that the conversion then would take place sometime in the second quarter. So if you just said right now, let's just say that the conversion takes place in the middle of the second quarter, then we would realize cost savings for the—those would bleed in a little bit post-conversion.
So call it, you probably have 90 days after that conversion. So if you said as of the end of the third quarter of next year, everything would be fully baked in, and I guess the first full quarter of all the cost savings would be the fourth quarter of next year.
Brandon Rudd, Analyst at Stephens Inc.
Gotcha. Okay, perfect. Thank you for that. And then maybe can you talk about the trajectory for your kind of your core margin on a go-forward basis? And what I mean by that is, like, when you look at new balance sheet growth, where are you seeing new loan yields come on at on a blended basis, and then same for blended interest-bearing deposit costs?
Jamie Anderson, Chief Financial Officer
Yeah. So right now, I mean, I would say absent any changes in rates, we look at our margin here going forward as being relatively flat. And I guess the only variable there, which is what we had in the second quarter, would be on the accretion income front. So, you know, if we're at 3.98%, I mean, I think the bias here going forward is we see a little bit of a slight uptick in deposit costs, and that's mainly due to, on the CD side, those repricing slightly higher than what we have on the books right now.
And then the same thing on the loan side: in the second quarter, essentially our origination yields and payoff yields were right on top of each other. So we get the loan side, and then we get a little bit of growth, so we'll get a little bit of net interest income dollars growth. But we see the margin staying relatively flat now. I mean, here going forward, obviously the markets are indicating, you know, the next movement in rates could be rates going up, which would obviously help us from a margin standpoint.
And so at this point, post BankFinancial and Westfield, we're still asset sensitive—slightly less than what we were maybe a year or so ago, or a year or two ago—but we see a 25 basis point rate hike helps us initially about 7 or 8 basis points. And then, because the loans are going to move right away with SOFR and then the deposit costs will bleed in over time, as everything kind of stabilizes, a 25 basis point increase is about, call it, around 3 or 4 basis points of increase in the margin.
Brandon Rudd, Analyst at Stephens Inc.
Got it. Thank you, thank you very much for the color, and I appreciate you taking my questions.
Archie Brown, President and Chief Executive Officer
All right, Brandon. Thanks, Brandon. Yeah, take care.
Leah, Operator
Your next question comes from the line of Brian Soren with Truist Securities. Your line is open. Please go ahead.
Brian Soren, Analyst at Truist Securities
Oh hey, I had one question on M&A and then one follow-up on the new loan production yields. Maybe to start on M&A, I mean, it just feels like with other banks it's almost like a truism that, you know, you got to accept tangible book value dilution up front, you get the earnings accretion hopefully going forward, and you kind of solve for a three-year earn-back. You know, when we look at these deals you've done and the ability to generate, you know, 20% accretion now across the three deals with really not much impact on tangible book, would you say it was more just unique opportunities, or is there something you're doing in the type of deals you're looking for—the way you're structuring the transactions—that, you know, this is more of a sustained thing you can do going forward as well if opportunities arise?
Archie Brown, President and Chief Executive Officer
Yeah, Brian, this is Archie. Yeah, I wish we could bottle that and do it every time. I think it's probably unique circumstances. Certainly the BankFinancial case, you know, that was so, and I think we ended up with a bargain purchase gain there. And you think about this one, I think the big driver is just the differentiation in our price to tangible versus Finward. That's probably a significant part of this. So, I know that we can always find those opportunities that way, and we are disciplined that we certainly wouldn't want to go over three, and, you know, we like, I think, the size of this one, and the differentiation, the differential in price to tangible, the drivers for the earn-back math. So it's kind of going to be situational, but we are going to stay within a pretty tight discipline with regard to how we do the capital.
Brian Soren, Analyst at Truist Securities
And then maybe on the new loan yield, I know you all have been pretty intentional about building, you know, a pretty diversified platform and maybe that's serving you well in the current environment. You know, a lot of your peers are kind of starting to point to new production being below the existing book and creating some margin pressure. You know, as you break apart all the pockets of loans you have, is it kind of across the board that it's relatively equal, or are there maybe some unique or niche businesses or markets that are maybe coming in a little better and that's why, you know, maybe you're not seeing the same trend that some of the peers are citing?
Jamie Anderson, Chief Financial Officer
Yeah, Brian, hey, it's Jamie. So, like I mentioned, essentially the origination and payoff yields were right on top of each other for the second quarter—within, like, 5 to 10 basis points. So, and that's for the whole portfolio. But yeah, there are some, I would say, some puts and takes in there, and where we are picking up, I think, a little bit of yield and spread that's kind of offsetting the payoffs is really in the specialty lines that we have.
So I think the fact that that makes up, you know, about 15% to 20% of the loan book—and that's where we really saw, especially in the second quarter, a decent amount of our growth—I think that is helping prop those yields up a little bit. But, I mean, overall, we're seeing some deterioration in spreads and resulting yields on what I would call the core bank, but it's not significant. So again, we're able to kind of offset that with the specialty lines.
Brian Soren, Analyst at Truist Securities
Great, thank you so much.
Jamie Anderson, Chief Financial Officer
Yep, thanks, Brian.
Leah, Operator
As a reminder to ask a question, please press star one on your telephone keypad to raise your hand. Your next question comes from the line of Henry Walchak, private investor. Your line is open. Please go ahead.
Henry Walchak, Private Investor
Good morning, Archie and crew. Hey, I just got a small comment here. Thanks for buying Finward, or the old Northwest Indiana Bancorp. Hey, you guys are really making my summer super. And also thanks for buying BankFinancial. I also had positions in those two companies. And again, super—thanks for raising our dividend by a penny. It helps us all that are on Social Security. Thank you. I pull back.
Archie Brown, President and Chief Executive Officer
Thank you, Henry. We look forward to providing more value for shareholders. So we're glad that you feel good about the announcement.
Leah, Operator
This concludes the question and answer session. I will now turn the call back to Archie Brown for closing remarks.
Archie Brown, President and Chief Executive Officer
Thank you, Leah. Thanks, everybody, for joining us today. We're excited about the year. We're excited about the announcement of Finward and integrating it into the company and building a much bigger market in northwest part of our footprint. Thanks for following us. We look forward to talking to you again next quarter. Have a nice day. Bye now.
Leah, Operator
This concludes today's call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment