MOFG - Earnings call transcript Q2 2020 | MidWestOne Financial Group, Inc.

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Operator

Good day and welcome to the MidWestOne Financial Group's Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Charlie Funk, would like to to over conference the CEO. turn I Please go ahead.

Charlie Funk

materially Thank And Len our you us reading thank Officer; Chief meaning from and you second very Credit our Litigation in everyone earnings our Reform Iowa as in so contain me that levels call to much, and quarter Barry Treasurer other forward-looking Securities actual or These will statements results you of the always risks, Chief and uncertainties much forward-looking Officer Sean, City achievements Private and and the of or with today any as for XXXX. do and We're and implied by be from just and room Sims, within unknown joining call. Chief expressed statements such by involve on forward-looking is we welcome Ray, this may I'll to cause certain MidWestOne well. statements activity, Gary our performance different terms good the calling we day today statements. factors the Investment any President known new to the the that Officer. Jim Devaisher, begin Act of remind Chief Cantrell, also Financial Operating this release Officer; call results and

expect, anticipate, or would, generally by may words could, identifiable as the should, are statements believe, goals, of Forward-looking estimate, intend, use plans, expressions. similar forecast, project, such

law. We're world do. good all as quarter, just future. and obligation opening offer our second for today for would or uncertainty think we the in company. that We this new the that say required for no a I and few this foreseeable federal expect we any recognize of planning continue securities in we there's like much information with to was quarter, that, Additionally, in a the events to statement update And to we except light comments under future undertake

many to and So general other Gary Barry the we quarter-to-quarter $X.X billion to over take Thanks the and quarter. assets second programs, this comments comments. than were will some turn rose our again, thought I to further quarter. and it PPP then Ray and during that positives for Sims in there more I offer

we As we earnings indicated million in in the PPP $XXX release, loans. roughly did

But to and equity very recognize there's we're that We earnings under than efficiency industry in quarter focus our less XX.X% also metrics. and as for volatility report the with ratio Clearly, we we from tangible created margin on calculate government said, pleased programs, as significant most yield usual that on in return calculated there's a that earnings PPP all-in have our from X.XX% loans just change this information, liquidity suffered paid-off, we as margins all of plus did the the quarter. loans mix your on did was do the a for XX%. excess

more July, of that look the at take that a and that August. we're deposit costs to third we further room We the some started the net do interest quarter shape with are, we as good expect be quarter quarter up margin that fourth we ahead. think as we to a We for fourth the will during believe We in have end of in this month of to going quarter. the lower year. occur will at forgiveness And pretty look many,

costs to further in down we were what think some they second quarter. there's bring So deposit from do room the

at that of credit down. of the did point ex-PPP were the that -- out. credit Our this lines credit completely release. earnings lines of in would number of were in have borrowers loans, who year There stated paid normally as line down, balances We paid carry

call than loans call their new would very the the for And closed quarter sort happy borrowers quarter. I months respective management the we of higher we're of from loans several though and pipeline, wealth it In balance loans payoffs the progress, during six we with our for even driven have And the it very the there's I substantially. their longer shut-off in contributed this pay-off in first applications most some doubled Iowa ahead of XXXX, other a was six but our a quarter, pipeline mortgage, first we and it can't business on taking same results bit the that outstanding results all quarter. is the the tend in lots We XXXX services a months income think look first mortgage the our of our quarter. of decline would just loans pleased unlike of they around the down we've year. times reasonable thing, either I the first mortgage Trust not sheet, a footprint, as competitors their robust volumes budgets in due reasonable for of XXX%, to their liquidity had XXXX. period not as of our marking have come, Non-interest as our budgets investment enter pipeline the to We're both second our forward. little third for volumes. six footprint, with the are of predict the from get results second months. production But to pay that as have and also entirely We or the very, we were a

as hung the volatility very, And COVID in age, do development. very, there new fair being it's they've But results. for that as with that hard some first business would headwinds the I well well very think primarily very as say just to to undertake months. the pleased it's face face in the categorize headwinds they just six I market they we're

very and in be know income. with with two-thirds you located growth seems you're well very, footprint, roughly our client merger that assets of working are retention Dubuque If in familiar that fee two-thirds, trust our company, good the and to continued

in quarter. second was swap down the Our income

swaps. think that not math the in we previewed quarter work some And in well the aggressive slightly the that's quite first as we of and offer really that whenever seen Also, the longer to of more earnings call. offer. side makes than terms we've typically take who've competitors we been for due I for short-term swap variable times us than willing significant with than period drop we of we've our have to, been rates our

recognize be And announced we So we lower -- will in few in we annual And to to to about time. we expenses, South go would release, Minnesota levers the on we continue that one that we of focus pull. from Newport, we office swap as to think we the St. announced the is line; Minnesota we that On Newport have as location. we're the the that's we release, expense our earnings forward continue earnings think miles in all in save disclosed system our as closing we'll flushed $XXX,XXX expenses. once office, is five-and-a-half our this revenues Paul,

at one our the closures because limited around we footprint have you communities that MidWest, in we in have think I we only community. opportunities where many office If look operate for outright

but much, it we closing we about for much makes offices, great it think of go as deal a So this look us forward. at will to continue to harder

year. note still should or quarterly ex-PPP And continue to that allowance say the first non-interest a we focus that's we an third just recognized want slightly this expense also our for non-interest loans X.XX% quarterly credit comments our on us have will position. what continue curve this speaks. rate, I loss losses first completely he decreased the X.XX% at about and with a to down total quarter, did of about for control, the into X.XX% to loans were will what we twice quarter be our expense also the total focus that loans run reducing get this Gary in of rate. end to ahead more strong quarter would quarter. I run asset on of annual credit run non-accrual couple that the that at consider we rate quality, of our We make think a puts expense at of try million from annual, on Sims, in I when and The $X.X talk to We of and

idea comments ag loans were total Ag. on always the watch XX.X%. give several Ag. end either years, We XX.X% watch of if that a you best our And get percentage of the look March a our XXXX, was on questions you to lot rated we've in or Just ag of number of at two-years as is just ago, And the loans had an second a plus few at substandard quarter. over quarter substandard loans of in

ag ag down our X.X% the stand loans loans. at of quarter moving the percentage done we've the as job So a of second a X.X%, from of watch loans of total substandard down a that's quarter one. end percentage as the of and at portfolio end at nice Ag

that ag footprint our that very I expect as borrowers the in same is important outlook forward. for the or stay look We But we think down move for go thing to the crops our most good.

that growers. being for government -- during all programs Our the be have Eastern well COVID-XX. off levels outbreaks first came Eastern boost and and Iowa from stimulus of mainly to last and than a growers have prices nice would lower corn basically COVID-XX. from peak. XX% Iowa at soybean our support saw down our year-over-year the the But loans lows are slightly the prices and provided footprint The plateaued program X% unchanged prices before we which plateaued, ag crop and for quarter, they from Southeastern down Land that they're were and

certainly bit a fallen not So precipitously. have little they but weaker,

I although the some it a overall, to sit months environment. was XXXX. than spiraling and years XXXX, ag in not at as So that It's the would down stability say starting three we same about think level as I the today. see is a that ag ago outlook the it's and would still of sector, But certainly here peak XXXX, lower tough we're

more what when will only materially of do XX% days. that the said, deferrals to end about detail think those expect all we cover flushes through, was at than reported another be speaks. XX quarter. in I Gary, As the he will We And when request first this borrowers lower of

we our was capital. up in comfortable who we regulatory received and marketplace we appreciate our monitor think well very shored a our $XX forward. comments all our ability it look capital few sub A we with on debt million our good We portfolios the to in in those So as feel company. issue, manage and in way loan invested

the equity share the to increased feel confident $XX.XX that stood of levels at also ex-PPP, our during X.X% do and at value was we in and quarter-end. X.XX% capital per current note comfortable And tangible book We common tangible quarter. up

new moving our and forward Officer. Devaisher a as We also we and year team Chief the that to Devaisher President very to I moved were VP pleased keep forward forward. way together for our especially time. welcome company Len appreciate, entire I has stepped think And do we've this been Operating the appreciate came during management

certainly was company, go-forward based basis. maintain today, to So our in circumstances. what a dividend Ray. overall, quarter With that, as to confident operating ability I good our over I it in we're difficult will a well for see think it we And our Barry turn on on

Barry Ray

commentary of first Thank XXXX to of quarter comparison Unless the my noted, second of today you, Charlie. quarter a will the XXXX. otherwise be results

per in credit reflected loss pre-provision credit reversal credit loss partially revenue partially of and interest $X.X exposures. the The quarter the $X $X.X per X% quarter. pre-provision million a of expense basis, million diluted higher revenues related a expense net compared share, income of common $XX.X pre-tax quarter million million $XX.X sheet for expenses, of offset pre-tax or increase As by loss fee XXXX. second up from a first expense of million in the income. of from balance $X.XX a $X.XX of XXXX, lower loss company offset to lower common an by the share net off resulted net in million $XX.X or million were linked On net reported net income diluted $X.X Credit overview, loan to

drop $XX.X Returning reflected SBA margin. decline a the as in of consistent greater which costs On SBA interest PPP mix. declined were points as $X.X was directionally into a to assets, average earning point seven components, Paycheck relevant meaningful declined the loans points aided basis points to balances continue million full-quarter points, to which The of overnight on as and lack to as margin to earning basis Protection funding only basis excess company's premium in XXXX, mix activity, offset asset in accretion asset Program and The up asset term net from the company. the shift basis in XXX rate company's earnings XX%. asset driven discount decline we five-year liquidity yielded were points most basis point securities. our was eight up origination basis by income curve, SBA the grew the XX the of sheet company's loan in the and yield. $XX.X the was yield the XX of basis million target attributable by X%. equivalent on attributable cost funds of PPP earning quarter, to the in federal XX average increase purchase March loans, tangible seven impact a interest average the debt term Total investment tax assets of The Earning deposit loans X% grew particularly to the lower yielding well yields which is from linked net with book balance X.XX%, manage deposits in million average value

million remains recognized which by near-term. we margin XX% expect some about $XX.X those million expense or during to more fees the as from the approximately second the million down fourth quarter bolster fees we year, first there loan recognized be SBA of million loss markedly origination while PPP $XX.X recognized We credit PPP in the the SBA spread of the PPP the loan of quarter uncertainty to income. in fees approximately forgiveness, of Net totaled the in XXXX timing loan of this quarter. should quarter otherwise and $X.X Finally, in $X.X

credit PPP June the expense losses allowance for smaller our build a that of percentage continued to excluding increasing X.XX% SBA XX, held-for-investment credit at or loss X.XX% However, resulted in loans loans. reserve as

by our items. of million as Mortgage linked was increase experience negative by to other included most their was more a mortgage servicing decline reduced XXX% a linked income from to the down revenues as to quarter, increased adjustment compared right the valuation $X.X quarter quarter. in fees were adjustment the loan linked linked mortgage fee reductions other $XXX,XXX second up mortgage of quarter, line were solid driven The than XXXX volumes $X.X income in included income, in fees revenue The commercial from fees. decline $XXX,XXX reflected production negative from the as public the noted lower the Turning in of million item production in $XXX,XXX from increased quarter. back-to-back as our offset item swap line revenue as program. the And and release, service overdraft well waivers line customer charges such non-interest in

purchase to to SBA origination expenses. slightly resulted well quarter, million to support of to benefit and equipment, $X.X linked company's was efforts. non-interest IT Generally, down decline compensation up million to $X which related costs additional the total briefly from employee say expense a due were Moving from in expenses work-from-home benefits from The and for PPP other loans. primarily controlled equipment

than at that release to activities, ratio branch to our continue opportunities quarter. XX%. efficiency public consolidation we to including target And improve remains end, this evaluate efficiency, discussed as less Our in

rate to remarks rate my to ratio we with Moving and X.XX% tax to I'll for XX The was the company's the XX% taxes capital. XXXX. taxes. some primarily credits. instruments The XX from and XX% end for was the tax June at tangible from down common company's to expect the March equity effective XX% statutory on benefits quarter at tax commentary X.X% and year due be tax below rate

equity Excluding million, X.XX%. at common $XXX.X PPP loans was tangible ratio the

and this in range to ratio the we to expect quarters. return remains Our coming that X.XX% target for

I off Tier And for the million X.XX% capital of Gary completion will credit. we capital announced fixed carry That with $XX are company's week with we of company. position times. notes. balance The placement floating company's uncertain to that, this the weather bolsters levels it of our a private Sims of carry fixed to earlier economic the these structured notes and as subordinated sheet hand Finally, initial holding capital rate X to the

Gary Sims

are detail, depending three which a all afternoon outlined more to provide to color in are financial provided focus good where you morning wanted we've just documents. those and or Thanks, good comments a today. disclosures supplemental of my Barry, the I take upon and on minute to what of you at bit areas in

I thing, could possible believed identified what our First our monitoring wanted first and as And enhanced current the upon the quarter industries that processes within enhanced our first our we position identified be what industries vulnerable ourselves to of We vulnerable was find walkthrough finished monitoring an undertook and effort credit kind at the monitoring. economic six for quarter. create we build existing portfolio, of in. the the we we that to end appropriate some we,

those was identified identified we $X XX did vulnerable than we in industries what also all So the loans we of relationships. our greater million top and

dive an processes of of on it then idea efforts, second the of the and monitoring put which course a, relationships with those categories. to economic credits, consider were we dive all categories XX% took of worst penetration, risk we a our portfolio So cycle. we and I when existing those watch And those and process combine two relationships be And give took represented those our which with of deep we portfolio. billion those into going over clearly current believe exposure we just the our that our focused the when into of a for we would combine $X.XX deep where to associated monitoring you that we the a all higher at they end where for gave ability were focused quarter, on to understand together us we higher really and the two completed

with from the So takeaways what key efforts I were. to you the our of kind second share wanted quarter in

we of portfolio. migration the First all, experienced in

industries. some We was to those categories negative the from to migrating: industry the we it's expected supplemental industries, identification watch, three, expected that well. additional those pass pandemic. of that vulnerable categories hotels, seeing in that that. credits watch migration, Primarily most within three retail. vulnerable Based we start the won't of the that our industries, identified migrating information within on and And immediate restaurants, other from substandard. say saw see as migration vulnerable impact to And to had not of you to the It's

second non-performing stable for was from we our That we didn't as quarter. of relatively the thing also our the this assets experienced expect at that quarter. that due lot was the case. trends. out And it a to non-performing were looked The diligence We that was expected turned migration migration

the that to average within senior feel identified based over categories our not that analysis QSR vulnerable categories And be cycle. and expected more of restaurant materially going our we portfolio. possibly like was quick deliverable service Another or as of as on the two those customers, than -- that our they're our was vulnerable portion we our not restaurant course were that portfolio living of

saw As actually our a those remove performance, two calculations. our we did we from vulnerable of customers' what result industries from categories

each so to And provide what they'll saw over thing want detail like, X out the into cycle. the our pages industries out didn't more Last of wanted what of we dive go-forward categories last how ability a I believe portfolios thing, look as you a understand course lot on and those and significantly to terms more those for as point about was enhanced I this we point through to credit vulnerable perform for the And represent is we XX% us our around level basis. was is result manage we through dive believe cycle, expect the what future XX, this be through this monitoring enhanced a of cycle. to expect as our I do we're this the portfolios vulnerable one we of the pages, foreseeable outlined continue doing identifying detail monitoring to to in our you deep of gave portfolio that from into then found

our it thing So with earlier. the share deferrals and kind had experience second everyone Charlie of alluded with to to was I wanted

deferral for the deferrals now round Based repayment alluded hearing seeing of put we that deferrals second expect total X% XX.X% total what XX% portfolio, what also that that finished from as mode, to first we portfolio. hotel we're what compared for about thing customers were of represented to go most heavy of of and to was users second seeing we're last most part, the for CRE have specifically into the on because our Charlie would we're right the XX% up round be retail our the XX.X% even portfolio, heavy more of and ask talking As were to we're expect. that vulnerable is grounded then place of I'll our customers and ex-PPP. we round. program there And expect the total Based were quarter, first highlight And in the as of we're to, but and the you industries ex-PPP, round seeing our users of customers part, back with range customers, a starting we on X% second program. roll-off,

then was it served to it purpose serve, last wanted So program. no on And PPP was briefly the the touch to question. that I thing intended the

million PPP of in program. the said course roughly $XXX we PPP over the loans As earlier,

with cycle. a customers, we the course the PPP utilization we're and major the the Barry in able our that past thrive of and our customers, we're on months. of it mentioned, as many mean on pandemic their and experiencing users having we've that the how program last all we're as what material the usage had and based As hand the and from a relative of in what I'll expect conversations And this of they PPP I well, having result the to it And difference with of the will out as forgiveness result. a Charlie the PPP there program survive then in alluded very comments of emphasize customers we're to that percentage conversations very a to program then program, our high of is the PPP through thing enhancements his of few PPP over the I'll are emphasize deposits make

So we as active big of played the and were it big, proponents participants, we're program out.

comments, of believe that's to that, some with need I So and it my pass back. I

Charlie Funk

Yes, on overall I'll the I I've the the X.XX%. all-in and it yield mentioned comments my was my to apologize Sean, take. a PPP, it yield And send number all-in the yield in we clarification wrong back actually with one that PPP for on that, picked loans was I X.XX% up in comments just X.XX% on you. PPP. And will

Operator

you. Thank

[Operator We will now Instructions]. session. begin the question-and-answer

today with Our ahead. Brendan from Please Nosal first question will come Sandler. Piper go

Brendan Nosal

Just the want reserve. to start-off on

portfolio So to provision but but your most review the quarter, the pretty still still low entire you some negative comparison said a the this as or was level. quarter. in-depth your lower build expected, did yes, first there's of much relatively of migration as And in you reserve

you do So this to keep year throughout point, half can at reserve at the level the happy or the building X.XX% the just on today? you're pretty you see what expect of you based second with

Gary Sims

seen at I I'll start up we quarter, finished question. materially our well. us reserve we have answer on the our based where And start, in expected or this any more did pretty highlights, the as provision, add-in Charlie I'll put as in from of that is quarter provisions What first the and is which the our migration together Barry bolstered ask we're the Brendan, to a first If reserve to Gary. course I'll specifically, miss to portfolio gotten the significant we second over time, saw you've quarter. the in even

about As for the alluded were of we the our the is that it to. has place the very mean than moderate quarter. provided happening the on would we and match up manage to that reserve charge-offs second the what to way reserve. What that they're build the CECL net belief in quarter to we we'll that allowed a and go-forward which it that believed we of responsibility is that against I tools more continue that portfolio anticipate the in we on provision where -- really created management's But good estimate seeing this migration the day, in monitor what given us basis is with played portfolio. you level quarter out end as going. at it that putting based reserve that us And to our the

right So, we'll if building an the believe as losses time continue estimation start reserve quarter, to been actually the had third I moderately we've that now, towards. for seeing venture to we such I that build until

Brendan Nosal

Got hear your on it. that. to That's want I thoughts

you. thank So

Just or goodwill that goodwill alluded on the the or one is the review for from me, it is more that impairment just potential complete you've in to pre-release ongoing? still

Charlie Funk

is complete. The review

Brendan Nosal

in Got if one more I it. sneak can Perfect. And then just there.

you still on side, the for offset perhaps by year. flex curious the core have on thoughts Just subject your the funding core rest of kind the the how NIM in kind of the margin just started of the Once the you issuance year? factor

Jim Cantrell

do right third the quarter. discussions margin the about of little on on came the a Jim We've a that provide drag subject Brendan, shared going think the internally this I the of at books the is to forward Cantrell. It bit difficult is forecast. some thing right, you're beginning margin.

Aside from up PPP that aside the absent recognize back me mix. role, will the and from in shift from in any program NIM and let and any be there noise

shift if the core our on pretty NIM improved, the rates our purchase pretty down yielding we came of quarter. quarter, the PPP because for narrowing. PPP significantly flat, second on the and some PPPs accounting our mix low the assets. that in But quarter we get with change the fourth rates the loans deposits is NIM fourth absent caused the going earning We the comparably those think in and the I really to expect do adjustment think mix the was that be forgiveness and

of is on So move to lot flat be say to we the as it, I to to NIM forward. is pretty noise, think some the a core of all pressure that going maybe there's going be for

Brendan Nosal

taking you All right. for all thank Perfect. my Well questions.

Barry Ray

goodwill you their indications the right complete, and I that Brendan, is this tell review, not say is our would completed would it's all clarify I'll I XX.X% complete, now auditors review complete, our are complete. always review their on XX-Q. But that is Barry. XX.X% management's including Thanks.

Operator

next will Please with Our from go question today Davidson. Rulis D.A. ahead. Jeff come

Jeff Rulis

credit the I the color appreciate that Gary, detail was informational. on

X% I clarify second deferrals ex-PPP deferral, quarter-end, on about you X% expect to that if was wanted does there you X% you that. XX.X% to a expect the moving round number, of loans, that? the equate statement read the did have -- to debt to on whole know the I XX.X% side you I fall to want your Maybe to when to On to of X% deferral of

Gary Sims

Right.

Charlie Funk

Yes.

Gary Sims

That's to XX.X% round to portfolio fall deferrals. second of correct. to of the for X% X% The that

Jeff Rulis

on Okay, majority I through And you So the that? XX-day the I how that are -- or mean great. guess are

Gary Sims

so -- in customer the contemplating we're our as deferral. for it more second we're the requested that expectations the with put been what and has the profile offered round deferral interrupt. we we've sorry, -- mean XX-day XX-day part, to I round usage most as for it then We're a XX-day the opportunity Yes, second -- that less from for it forward is opportunity. have those means was risk as round. second an for second have for And an we And Yes, asking who about formulated initial followed-up didn't program a the more noted, materially initial customers. of we credit asked asking deferral actually

risk being processes our incorporated around it's profile. into So thought

Jeff Rulis

behavior charges the sense. income and a maybe mortgage. just but little and kind obviously of service fee side on bit Maybe question so a swaps less makes It customer the of

the referenced back Charlie fee back just think service still transitions guess we that income is immediately. of quarter; on don't speaking? get to the broadly be line the year either ceiling charges strong to how maybe on into would or But thoughts specific I I going half the helpful,

Barry Ray

I'll start off, Jeff.

think would I I of XX a $X.X probably I we income as that I to we think yes, $X.X we that the million watermark, say rate fee that had run articulated high what million quarter, that plus a expect. think quarter was is per we million last that would thought

Charlie Funk

understandable more see yes, larger deposits as guess. stimulus prior the that a that come I little levels are anytime start NSF don't and service light think might bit in see Jeff, government is the income, just customers it just you to you a which keeping appears to know that also you don't but I much of in I balances But that's through, might of If run activity. current that, would see uptick personally a therefore circumstances. some that little down, have will in of bit programs add might charges return soon. they don't we to

Jeff Rulis

Charlie. a maybe And last Okay. one,

certainly kind discussed you But about up imagine in Just dividend? thoughts with dividend? I on interested the on side, clarity or further on a of bit, goodwill. ratio deep think you but little the the you've more it's credit payout sub-debt issuance you've shored the is did it just Thanks. be conversation a got that but have continues the to the I dive any higher -- thoughts monitored, the

Charlie Funk

certainly clearly we we And see timeframe. review guidance February/March the what as it's dividend. And the things now in now, secured If best probably committed the the dividend based tests a you -- payout. that. we and now stress we on running will secure we're right think that's that I right started can at look to we're change, certainly offer circumstances is we Yes,

Operator

Stephens. ahead. question And Terry go from will the Please next come McEvoy with

Terry McEvoy

of million credits? million downgrades, you And guess XX broadly actions you $XX any to presentation. vulnerable upgrades like larger those just I relates your or speaking in the had then any enhanced Any largest in question, there Slide XX, as largest sounds it size. the loans. for -- loan were a fall into to your industries I monitoring. the XX relationships second $XX It at it's credit quarter; looked the Thank

Gary Sims

then answer we Gary; from that Top this Senior Yes, have several I'll And is to is Top one and our had Service industries overlap relationships. And vulnerable we as our our two hotel list; question relationship. also Quick start had do within well. we XX; There original vulnerable XX, our Living relationships. Restaurant we had between

we'll So large each of clarification of in there mix. the review the will continue between stay of our two. quarterly those is a And overlap because point relationships, those as one

in review. Top result of downgraded vulnerable to that list that or either the the Top relationships vulnerable that XX of as a two are As XX the watch. hotel at XX the Top were of we outside in look None rest downgraded list,

Terry McEvoy

that Thank then provision it, can't I reserving run was just quarterly normal that. said relates it quarterly what statement And coming that and think two-times the to question, has for so or a year provision to follow-up just was I earlier was guess much I but this make because a was statement where as kind of who thought I as that Thanks interesting from? I behind I rate. remember comment and question changed X.X, sure it of pre-CECL as was understand the And mentioned my and want you. being is,

Charlie Funk

That's going a which normal referring the that would to And into clarify And I the that, consider statement. year, to we I we good made budgeted was question. was times. one what

times we're appropriately. used we as a in normal roughly and so $X million now provision, reserving And different clearly but we're

Terry McEvoy

clearing Great, up. thanks for that

Charlie Funk

you. Thank

Operator

KBW. come The with from Instructions]. go Please will [Operator Damon Delmonte ahead. question next

Damon Delmonte

good Thanks Hi, question. morning guys. my taking for

from to Just relates PPP Barry, of the outlook origination? kind thoughts be expense normalized deferred over when factor expenses just a could kind go you in will again loan base the your one what expenses. for the on of you

Barry Ray

No, that's Damon. In quarter. this a deferred one-time PPP benefit, origination the really benefit loan

to so And expense our run Damon, rate, would I somewhere say million. $XX $XX quarterly probably million

Damon Delmonte

some pipeline think you And growth. that there it, then, loan was mentioned decent okay. Got had for I activity Charlie,

been said that. bring new just Have win to to didn't there you through customers you a existing you talk relationships as guys some program, new robust, the from it where Could characterize little over able definitely about customers? Is from you was PPP bit able are that You but that? lending activity.

Just on the you're seeing a little with background pipeline? what

Charlie Funk

We transition both. existing seem seen we've bit businesses well they're been doing well, we Denver, of who we've and In the running their And have of customers. bit little customers, say they new careful times. and quite from of got a in on handled be pretty a sourced banker that There's most number a hired existing have and there's economic obviously still of we a of still have that have the and of Little are well. PPP. financially. think there's would pipelines I process he's relationships very some year, Denver, to doing Denver. not to But and still these during in competitors, may some lot some this PPP that the -- potential transition be larger I earlier

them Group confident make opportunities very couple weeks Denver can and because good of ago our conversation opportunities. they budget actually they're their just with finding to still appear that numbers had So it's a and that -- is a they're be

some So able of we've both, been a little I bit to but in new think find opportunities. Denver, especially

Damon Delmonte

it. Got

and Okay that's Thanks. have questions All my helpful. answered. asked been other

thank So you.

Barry Ray

Thanks, Damon.

Charlie Funk

Thank you, Damon.

Operator

with will Please question the ahead. next Brian from And Martin go come Montgomery. Janney

Brian Martin

changes, quarter two it significant is think Hey change maybe mix, one volatility. you that kind Jim I pipelines to I I continue guess just kind me, that back the in point, about today? we just if we're guess, the your seeing should the this expectation Charlie's based I are guess aren't for at margin. just near-term? any changes, on mix trends really robust the for of changing maybe about loan that thoughts doesn't I guess guess I expecting to a minute, is way mix comments super and mean, going the of Jim; your Or this the on

Jim Cantrell

a mix, has think asking tells -- gut. going forgiveness I do at to loan some the my and relative guess. suspicion said, because loans we've is about that bank. get dollars think were shift And me. quarter. future, Having my happened. I'll I fourth out What part increased answer little to hundred be think several Brian. those a is the rate loan thanks, suspect bit to can that we're to the a best gut going PPP to the portfolio book. the investment That's deposits biggest That's loans faster we're is the we my million so already that in you're than the will well, my Yes, I offset of we've big of the seen get will my PPP forgiven some attached corresponding a run -- That's

released But some could much additional because get investments. towards happen? very we've the unknown possibly some a will And fees this at don't more result forgiveness. But I the upon become That's that income balance much how we'll an skewed sheet little know. of be may so that even point.

Brian Martin

that the vulnerable one just little and the about you I today? appreciate just just you to the portfolio if portfolio are Okay, bit can be where reserves more guess of thinking -- I in seems consistency talk what's perfect. kind these of, Jim you I how know today, Gary, biggest, at retail when of on little industries, CRE for And maybe don't on just look mean the bit there. bucket, out biggest just one I you're any about the that or kind offer can detail and more, it that a on

Gary Sims

detail there. specifically breakout of to the the improved in category the a CECL retail estate the CRE real have don't of it's I And tied specific commercial part reserves Sure.

been a it's the we up well is, it's talk that's to-date have there dominated to business we small as retail the they've the as business, many benefited we're our actually relatively think been from So that such and rents. of in happening subset of program that dynamic by on held particular category. customers, pretty customers, CRE their to customers current balance stay -- What their on able seeing small PPP have

future. the abatement into than to So businesses in we this that the quarters haven't in three wholesale see and color quarters we'll probably space small into struggling that the the what be particular And is deterioration help rents then we additional But start Does to collected over there? future, the terms rent have be into of more will the two past seen future, we're challenged necessary. they to in see see future going quarter.

Brian Martin

more sounds doesn't. road the potentially It it think here. monitoring I to issues and opposed no Yes, it's more down like as continued near-term

for thank color. So additional the you

guys. I had that's stuff all Okay, answered. was Other

Gary Sims

Thank Brian. you,

Charlie Funk

Brian. Thanks,

Operator

presentation. question-and-answer And for now today's as conference. may attending you you concludes the session This as well disconnect. Thank today's

MidWestOne Financial (MOFG) 31 Jul 202020 Q2 Earnings call transcript