First Financial: Fair Value Given Lackluster Growth Prospects

2025-05-18 09:15:00 ET

Summary

• First Financial (THFF) has improved its funding profile and net interest margin via the SimplyBank acquisition, with strong credit quality and solid capital.
• Despite recent outperformance, THFF's long-term organic growth is weak, with deposit growth mostly driven by acquisitions, not core expansion.
• The bank's valuation is fair at 9-10x earnings, reflecting limited growth prospects, a small market cap, and illiquid shares compared to larger peers.
• Given earnings may be peaking and growth is constrained, I rate THFF as a hold, with a fair value of $50-55 per share.

Shares of First Financial ( THFF ) have been a strong performer, gaining 35% over the past year. Its acquisition of SimplyBank has helped to meaningfully improve its funding profile, leading to a very strong expansion of net interest margin. At the same time, credit quality is very strong. Ultimately, I view THFF as a cheap bank but one with limited organic growth prospects. While the stock has performed well recently, shares are essentially at the same level as seen in 2016. This is in keeping with my view it is performing well at this moment in the cycle but that its long-term growth potential is unclear....

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