First Financial surges on record earnings, dividend hike
Regional bank delivers 67% profit jump, surpasses $4B in loans
First Financial Corporation shares climbed Tuesday after the Indiana-based regional bank reported fourth-quarter earnings that handily beat analyst expectations, while boosting its dividend by nearly 10% and notching its ninth consecutive quarter of loan growth.
The Terre Haute lender posted diluted earnings per share of $1.81 for the quarter ended December 31, 2025, surpassing consensus estimates of $1.59, according to analyst data compiled by Zacks. The company delivered revenue of $70.5 million against expectations of $65.5 million, driven by what executives characterized as exceptional performance across core banking operations.
The standout metrics extended beyond the earnings surprise. Net interest income reached a record $60.6 million, up 22.2% from the prior year, while the net interest margin expanded to 4.66% from 3.94%. That margin performance significantly exceeds the 3.5% to 4.5% range typical for community banks, according to industry benchmarks. Full-year net income jumped 67% to $79.2 million from $47.3 million in 2024.
"We are pleased with our fourth quarter and full year 2025 performance, marking the ninth consecutive quarter of loan growth and surpassing $4 billion in loans for the first time," said Norman D. Lowery, president and chief executive officer, in the earnings announcement. "Additionally, we achieved another record in net interest income and record net income for 2025."
Total loans outstanding reached $4.06 billion at year-end, an increase of $218 million or 5.7% compared to December 2024. That loan growth trajectory aligns with broader industry trends—community banks nationwide experienced approximately 5% growth in loan balances during the second quarter of 2025, according to Federal Reserve data. First Financial's expansion was particularly strong in Commercial Construction and Development, Commercial Real Estate, and Consumer Auto loans.
The board of directors declared a quarterly dividend of $0.56 per share, up from $0.51—a 9.8% increase that brings the annual payout to $2.24 per share. The dividend was paid on January 15, 2026, according to regulatory filings. At the current share price of $66.12, the stock yields 3.2%.
The earnings report highlighted several efficiency improvements that bolstered profitability. The efficiency ratio improved to 57.92% for the full year from 64.67% in 2024, indicating lower operating costs relative to revenue. Return on average common shareholder's equity climbed to 13.30% from 8.82%, while tangible book value per share increased to $45.15 from $36.10.
Credit quality remained solid despite the rapid loan expansion. Nonperforming loans represented just 0.36% of total loans, essentially unchanged from 0.35% in the prior year. The allowance for credit losses stood at 1.18% of loans, compared to 1.22% at year-end 2024, while net charge-offs declined to 0.18% of average loans from 0.35%.
First Financial's performance comes amid a broader resurgence for regional banks, which have seen net interest margins expand as deposit costs ease and higher-yielding assets replace legacy positions. Community bank margins are expected to continue expanding through 2026, according to S&P Global Market Intelligence, as modest interest rate decreases allow banks to reduce funding costs while deploying capital into more profitable loans.
The quarter's results included some one-time items that affected comparisons. Non-interest income declined to $9.9 million from $12.2 million in the prior year, attributed to $4.6 million in losses from an investment portfolio restructuring and a $2.4 million accrual adjustment related to paid time-off transition. Non-interest expense increased to $41.8 million from $39.8 million, including $1.4 million tied to the pending acquisition of CedarStone Financial and $1.3 million in other one-time costs.
Looking ahead, the company enters 2026 with strong momentum and capital ratios that provide flexibility for growth. Tier 1 leverage improved to 11.25% from 10.38%, while risk-based capital Tier 1 rose to 13.21% from 12.43%. Analysts maintain a consensus "hold" rating on the stock with an average price target of $60, according to MarketBeat data.
First Financial operates 73 banking centers across Indiana and Illinois, with $5.76 billion in assets. The company's focus on community banking relationships and commercial lending has positioned it to capitalize on the economic recovery in the Midwest, where business investment has remained relatively resilient despite broader economic uncertainty.