FMBI - Earnings call transcript Q2 2018 | First Midwest Bancorp Inc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the First Midwest Bancorp 2018 Second Quarter Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. [Operator Instructions] At the request of the Company, we will open the conference up for questions and answers for analysts only after the presentation. It is now my pleasure to turn the floor over to Nick Chulos, Executive Vice President, General Counsel and Corporate Secretary of First Midwest Bancorp. Sir, you may begin.

Nicholas Chulos

thank joining and today. everyone morning, you us for Good

presentation we the earnings of Following provide will both issued our today. of information for our yesterday, to XXXX that released during refer also historical quarter the close These second remainder market of our call we the results and and financial materials outlook for XXXX.

are or the like copy by at or may deck, they release Investor them of the in website section earnings If available our a calling our you area you would obtain code Relations on presentation us XXX-XXX-XXXX.

of of most today, upon SEC. performance may based filings are recent risks, The During our the the Safe or presentation These with other historical the the not comments our materials current course information outcomes. forward-looking statements future statements. contained and discussion in guarantees uncertainties XX-K our beliefs are and Harbor our and facts, and include not are

additional looking today. As in forward call well release as our our the GAAP statement, information be for earnings included should considered and non

would like to statements not forward-looking any I this we that call. updating following be will mention Lastly,

floor Officer. Chief this that, Mark Officer Officer; discuss morning quarter and second and to of With now are Barrett, our Scudder. and over Pat the Here and Mike and Mike Executive President Financial Chairman, I First President our outlook Midwest; Vice Senior Chief Sander, Scudder, Operating our results President to Executive Chief turn Vice Executive will

Michael Scudder

you. us It's Thanks, morning, Nick. great to for Good be with Thanks today. everyone. joining

with work go here we calls of you presentation provided carry and practice left of we As to and started, through load a the Mark Pat for of bulk couple will continuation supplemental we in certainly the have as that. we follow on and a that

then with components. let the you can Pat start walk that and I through highlights the me Mark as said, and with So

million strategic business a was very saw it fronts. For compares strong a of on of quarter that and per for quarter quarter. second the execution active share income share per second $X.XX perspective $X.XX earnings $X.XX us XXXX. number net From the was the a continued and for for We XXXX or XX.X a share first to of an really and quarter

expected signaled absorbed $X.XX acquisition by integration related have before our and expenses. last impacted as from we was patient related excellence As cost we quarter initiatives about this implement delivering year while and

were second we If would those you with the $X.XX that and we exclude are had earnings When both across solid following a improvement our production first highlight team. business represents sales and quarter the quarter XXXX. for considering the quarter, periods really over that XX% costs and operating XX% the over I the and quarter offer

X% ago. were about from annualized are up Our from last and loans they up year X% quarter

for is one quarter retained deposits Company higher also X% environment as our average result and transactional Importantly, respectively. basis the which quarter X% from and our three year combined hallmarks our two of core stands our with net currently prior income, interest margin increased rate XX those expanded year also the at Largely by of and by about the from still as improved a last factors, XX%. a which of we while mix, points,

our differential XX minute the up was between related activity Now amount had speak if out accretion last a there because more acquisition acquisition points. actual heavy in kind we for margin you underlying and can of year, the Pat basis take years

the provisioning Our level of expense lower came with charge of expectations in competing reflecting linked growth. incremental cost quarter in our offs line greater credit just impacts both with a loan

to from are included improved improvement for to initiatives. to we location do today. track be coming our very costs about our Separately headquarters on expectations new about XX% initiatives delivering share remains well-controlled, as speaking be performance per to related excellence our in corporate that continued from our overhead $X.XX ratio and you pleased which Our to efficiency moving

Our for will states million and us reminder pending continue fourth acquisition of in deposit deposits northern page outstanding. the of million are in remains financial a which see about conversion, close add quarter as well Corporation XXX about our XX% to also go XXX about which core on

we We for customer that pleased have very to also are this of collogue completed our us. with mentioned us the relocation and And progress new our to for headquarters so headquarters location. have as been well our with Chicago to overall very pleased continues action I opportunity earlier, in property very

our to co the capacity of space overall accessibility greater as of as greater for continued well provide the As quality locate number footprint, upgraded across the opportunity teams growth. reported and of our our

a So can and some as that Mark let turn Pat me with to and offer it backdrop, over color. additional they

Mark Sander

across Page the growth to Thanks we higher multiple growth slightly generated loan who broad-based Again our guidance quarter. in quarter, Mike. last We detail than On contributions are pleased X of teams our presentation. this net see QX.

Our strong these ongoing middle to and businesses. and groups market in posted commitment reflective investment the of particular in our prior specialty results

than Our commercial growth at in is a customers for solid real pressure reasons, we property through notably payoffs was for We consistently commercial prices. been be the Notwithstanding robust one across to teams. the C&I most our headwind good a estate. ever growth news this again but attractive us overall good saw CRE production due multiple here can sales for entitled have X%, offset which more significant continuing

half timing Loans lending group activity. were quarter. transaction from consumer and in posted growth half some bank strong $XXX Our our retail up million a of installment organic from the mortgage also and in

is end the namely for at and of would of unchanged likely upper range digits for we annualized I the year loan say what growth the today. remainder mid-single outlook Our given that see

the were outlook. credit of offs points expectations with in outsize Our basis as after actions our quarter, improved and last expected metrics XX QX consistent charge long-term

provision of our the is quality levels at for growth. such, respectively million was asset Our relatively simply recognized unchanged normalized and provision remainder slightly are basis points XX well-balanced Overall, as guidance and the charge-offs per year $XX at quarter. for approximate above loan and stronger guidance

Page deposits X. on to Moving on

also indicated, Mike here in deposits in are despite pressures. as very came expected deposits flows our planned. slightly were modest very performing QX. pricing and As promotions grew Core as our Seasonal results publican favorable time

deposit core XX% ratio well-controlled advantage the and explain. pricing margins With of strong will our funding Pat as into translated

Patrick Barrett

Thanks Mark. Good the morning, call. everyone on

and loan going forward. million Of in this the partially was second acquired offset income $XX and rates and expectations. reported schedule same $X interest periods million modest to the the first expect Turning XXXX in the loan and $X.X prior quarter. and period for to approximately half, Acquired interest to million Compared we in quarter from compared for higher up accretion prior up in by period and $X million net or both prior declines $XX Net in XXXX the X% interest Slide cost continue second from half and $X quarter loans accretion quarter funds. quarter, to our approximately or accretion year, and X. down $XX million per on $X in securities, project lower growth consistent net the benefited margin million the contributed to million to X% each compared have overall $X million million in income higher quarter with the of we interest same the

some As volatility should expected. always be

X.XX% up prior net margin basis to compared and same net interest Moving the was for period quarter Tax points margin. current equivalent XX interest three points from quarter in XXXX. to basis the of the

growth period well in interest the and accretion. benefited of higher Excluding same cost basis basis higher as XX our funding accretion a slower year prior for both increases increase asset and benefit to overall rates Compared of points the the XXX rates points XX drove periods margin as funds. offset by was from more quarter from ago. Compared partly and earning up mix favorable lower expectations, to margin the

sources driven growth Average funding million linked more Turning $XXX in loan million to the securities were more deposits, sources compared and increases purchases. deposits, FHLB and year earning core prior million funding assets up year-on-year, increase quarter due earning $XXX linked million average advances. to and $XXX by quarter $XXX and than interest assets than time up to by and

outlook. our to Moving

full-year XXXX. margin on in interest earning to single-digit growth range asset Net when XXXX income of full-year to single-digit to expect range the mid continue We basis earning excluding NorStates the of GAAP of in growth high lower offset compared the as interest FTE to full-year benefits rates stable the asset by is are net compared acquisition and to be accretion. higher growth relatively the expected and

with that, volatility loan we income over seasonal non-interest expect again, I want modest will an subject interest you it on remind Excluding turn and are projections in expansion interest to net due accretion growth. that rates, margin FTE municipal deposits to Mark movements X. growth on of to Slide Once you basis. to back pace I in discuss

Mark Sander

were On line you give due in which view year. measures well. try we a Pat. the Durban, down adjusted performance. to provide categories. we X% certain in to seven, to QX you little of linked our thanks this noisy asset our of reclassifications so Great as is you basis Year-over-year our guidance, across QX slightly remains accurate sales last was gains quarter provide This to right due forward unchanged an accounting going results in see with to are broad-based most and On outsized from increase

up fee versus X% year our period. were Excluding such gains the income streams ago

card and continue to you also well perform area. activity capital saw to management Back Our wealth in markets we businesses swap management, QX our in treasury and strong Pat.

Patrick Barrett

expense expenses to Moving run quarterly items effect on our Several X. on note Slide rate. to that

excellence First branch and driven the of employee with delivering the valuation adjustments, $XX includes services. associated restructuring primarily general severance, current implementation cost advisory quarter million initiatives by

Keep to each change earnings mentioned and million additional we had and not periods X Slide in As were XXXX disclosures on there interest quarter fees of by is Mark $X and some adjusted, impact income. both operating income. reclassification categories as tried so re-class release X. expenses for referenced Prior and bringing this or the merchant bridge no card net on of and is in to quarter, revenues mind of last to this been impacted non we

guidance of the from integration million with $XX impacted items acquisition was year modestly million from quarter with per to ratio first these ago. Away million remain quarter our in and expenses the up of and quarterly XX% X a $XX of from efficiency XX% second controlled Finally, down in XX% quarter expense an tightly line and XXXX.

from proxy. a delivering excellence, million Our these noninterest was million previous as ongoing costs quarter as XX guidance guidance largely remains of XX to impacts, on expense impact nonrecurring remains average initial total from well good benefits. Away unchanged expenses growth on per for aside the the our

remaining the delivering more half reflected expected in in while million likely heavily year the as benefits initiatives $X approximately is the one-time cost by about to million. in second to the are second and Both these expenses further costs half largely the $X one-time weighted reduce be the fourth excellence staff will be With recurring reductions expected to quarter. of costs the

Although, expect quarter. each a we do of to of these incur numbers around the third in third

nonrecurring year. which $XX to quarter Last costs to guidance the our of expect States the million Northern As to this fourth acquisition note we on expense of million updating slide. is expect benefits, a leave note continue Texas quarter for Also results are on in result million approximately before be including non per interest the I recurring closing XX when we in to to the average. at XX integration expected

benefit after the the excluding by corporate tax was with Our to quarter decrease based prior lower rate payments. driven year share tax This ago a for effective tax with XX% quarter $X compares the million consistent XX% rate. the

our - For lower be continues the may year reflecting effective as approximately adjustments that XX% there the be in of expected in grade. rate lower our tax routine. note, the reform are quarter finalized third a tax But to XXXX, impact

Moving on X. to Slide capital

the Mark at delivering consistent next risk on strong on general, capital prior ratios has of benefit are weighted We slides. continue the with comments assets the offset increases from the maintain capital by loan few quarter to In couple with of growth. in excellence earnings resulting levels.

Mark Sander

Pat. Thanks

program excellence we targets around the remain is we relationships or As the on beat highly track. impact. Mike We will and financial meet touched service improvements, simply delivering our on confident deepening client established

or feel We May, as targets XX. initiatives underway either disclosed this we complete underlying most well the are about of in point. Specifically to at on the the numbers Page as good

teams responsiveness require. our processes of remains to experience the upon leveraging And Our and longer-term improvement build will our service on and well client continuous focus to our and adjusting systems that commitment. are this culture

valuable further Our enhancements. keeping providing two college high for way communication engagement while the is necessary feedback

a we a Pat move implementation to transitions targeted for our to and remains us, now strategic excellence going as year, delivering usual. fourth the while acquisitions. is as become ongoing this past more announced key its cover result, priority a As business ongoing will recently more quarter

Patrick Barrett

XXXX. a valuation benefit be expect with States Financial $X.XX estimate Few by getting of to earnings its in is quick first full North at X.X on multiples. value to are On in than of year, back we approximately book of favorable Transaction run will The in economics less benefit would to details remarks. addition XXX% States reflecting best Northern our and earlier acquisition or of acquisition Corporation generate the Mikes XXXX of rate per expected quarterly a in earned the see tangible favorable full middle XXXX. around they we the relatively quick basis years that XX% are share

core presence as deposit base. as franchise very is the the similar Finally, about to accounting of the well we are addition our our of legacy deposit expansion excited

back turning final remarks. for Mike over Now to

Michael Scudder

Thanks Pat.

as active about about certainly been very We has busy we as with excited where and we started quarter, remain some positioning for So it time. I feel about good and us. teams our and our is at, core for outstanding, there our sales continue to investments sheet talent deposit our are strides are business remains as pay balance and hitting strong, base dividends talked

credit Our very are world, still low those line at environment average lumpy can given with to out today’s the times a continue in nature while at we historically operating expectations. favorable be and our low and of cost

we that that good our back we the anticipate feel pending we of We overall when about combination with excellence strengthen commitment, very continue operating to So drop, all and about against feel delivering to while future you our good our positive would northern about of ability states. in and a take good momentum. through business with market go our client feel positioning our

questions. Why we for So open with as a that don’t backdrop. it up

Operator

[Operator from question. your Instructions] first Milsaps question The you Thank of Sandler comes sir. state Please Brad O'Neill.

Brad Milsaps

guys. morning good Hey

Michael Scudder

Good morning Brad.

Brad Milsaps

color of this NIM. on quarter have yields than which I the the kind appreciate up just the of a more basis I different to want all past. and basis XX core was may maybe I around you business. loan points, on kind maybe be aspects little seen all more follow in up thought were the The on than

if in loan you that all else Just curious equal, we some the or prepayment higher hike of half kind move expansion there the a had the of around of in back I get there thoughts bigger some expect pay rate June similar fees book if your driven type another that may of CRE in know the the maybe in just LIBOR drivers downs would curious you yield of have are any year?

Patrick Barrett

its will that. Brad at Pat. I Hey a take run

and quarter. little $XXX,XXX typical run range $XXX,XXX our a the fees, average. on of a up this which was is quarter and our million rate but probably to than is actually lighter normal First still in below quarter, had $XXX linked just We

driver rates from being because meaningful a of the the rising wasn’t it year out but have ALN have of impact, about the just money, one. linked was probably that the quarter of money the of an we Probably slots the was $X we that billion the and into and those entered had swing have, those that from in gone same that quarter ago. So timing a a bigger $XXX,XXX to

around Depending that. trended pretty of definitely a little be that $XXX that to on could but are the So driver on versus to a lumpy was where that million average slots has $X.X bounce quarter. similar to rates bit,

Brad Milsaps

the taken have half for expansion the guidance you over of your that into year. core account back generally all modest But of

Patrick Barrett

quarter. stick same this really previously and surprised to points it meaningfully into expecting is a what We we that accelerated we just Yes. bit, mix year were of we But late to we with related the creep and NIM basis rate not will because a were six strength be are the different than of guidance. think expansion changes. five lower something we thought NIM probably by this been changes the Probably term expecting

a really though digit, from guidance to increasing half. are first strong mid We single reflecting our high NII

Brad Milsaps

XXXX helpful. when and of still back sort point initiatives. kind are and can way it to annualize save Got still still follow-up to savings? the of sense of of plus but makes Obviously is think as point? to benefit occupancy that the just last the you the actual you some gave your gave here starting a then you see best you really getting best that’s then expense it quarter you and year, in inflation in to into the XX go update updated Does your what then on that cost? I Is you And and the think the out half about starting some think start back million guidance you

Patrick Barrett

guidance an Well XX to kicked per XX or we down have quarter. improved from our it expense average of average of

a So from. point year we the of would starting to rate good will XX. about a probably be That exit annualize run with

some and which I can. then fair make on through discipline we maintain to and going think expense particularly in up just work inflation, are steadiness hard assume as as modest to try stability we rates our our run to and really And about base. initiative and much the half it’s about salaries benefits,

Brad Milsaps

Thank That’s much. helpful. you Great. very

Operator

question comes Michael SunTrust. The of from next Please Young ahead. go

Michael Young

in talk with start to and are CRE to of Hey range good puts the the still down obviously better that driving about are are the you you what the elevated a you pay just of Could some seeing year. and the expressed outlook? takes it half the back to the growth loan of end morning. maybe moving kind outlook with I wanted you on higher of confidence

Michael Scudder

fact same towards we with we pipeline pipeline was fact makes the loan cores best be upper we that a as of up that the is quarters Michael as maybe way it. midpoint our slightly that despite couple enter QX growth, the of after had the end pretty guess of have and feel two that it strong the here I outsize us the Michael. about held the Fundamentally, can pipeline to nicely, so that solid say range, the

faced repay a we we have previously say. grow the least as and across really it diversity at four of have of So of because would platforms. we able been offs quarters for And fewer through we have investments that teams to the headwind number of the said I made the

So yes quite again, upper end confident in. feel of single-digit we mid range that

Michael Young

give there any color, particularly you a just specific more that above small just could niches or any there? shrinks their color way winning punching broad little market kind are maybe are based middle are seeing, that you maybe And of just

Michael Scudder

quarters of their have which zoology. weights like our number above specialty the a So punched fraise zero analogy group to I

are getting production. teams market middle Our nice solid

business expectations. banking but has expectations, growth modest very Our still growth

So in little platform, again across the specialty diverse outsized areas.

Michael Young

the XXXX NorStates Okay one it Pat just sneak that last is I great guidance and could there on all if any. one in, excludes

Patrick Barrett

fourth going in that expense reflect acquisition be but of With integration trapped to the exception it activity, the little a is does what expense. guide quarter primarily bit of

the QX. in us hitting look primarily from would NorStates I So run be rate to for

I short answer guess So would be yes.

Michael Young

Okay, a perfect. Thanks lot.

Operator

The comes go next of from Race Nathan Piper ahead. Jaffray. Please question

Nathan Race

morning. good guys Hey

Michael Scudder

Good morning.

Nathan Race

incur clarify that on does delivering excellence. to one-time that you will include just any guidance with Pat, not cost the the expenses

Patrick Barrett

would all quarter estimate is expense in delivering will be that weighted our largely integration XX towards NorStates, the $X and million, excellence the fourth fourth for and on be NorStates Correct, that. best quarter about from the so

Nathan Race

impressive drive in obviously growth there participations loan that help or side you. so then national are curious shared to that the on see of growth, And just quarter. Got growth some high really credit the any if

Michael Scudder

Nathan, that. don't lot do we a really just of Not

So significant it a wasn’t quarter. this factor

Nathan Race

that the just was lastly then transactions And earlier obviously pretty perfect. a Chicago quarter. large announced in Okay, in

in or capture you current your higher transaction. of efforts that that you hopefully it the curious, see benefit gone benefit of will think having to you without from guys just how be the if wake or and So that benefits can if you transaction gives think calling some sufficient some

Michael Scudder

say I would Nathan. above to yes all the

so come and in course relative to our the possibilities of anytime So high our prospects forced in natural and on not of this being we degree I opportunity a changes of that one. would consider of an in should overlap business, disruption to a than what that fundamentally as some certainly be and that would most it’s we Relative perhaps in out of so - be might case suggest, think our competitors, that. local block more to

certainly, certainly come more and love opportunities So we as happen, let will see on view others so not to fight this things for us those few we to fronts. hard, again but

Nathan Race

Sure.

a Okay, the I quarter. all on color Congrats appreciate solid guys.

Michael Scudder

Thank you.

Patrick Barrett

you. Thank

Operator

Instructions] Motta comes KBW. Kelly go next of question Please The [Operator ahead. from

Kelly Motta

for are lot what is is seeing Hi on McGratty today. you in that a which during with of guess this banks version, deposit forward cost increase what terms is back the Kelly turning a data deposit margin, Chris I in of little to we quarter. in are there

you. of kind wondering seeing are what So Thank you there.

Michael Scudder

the welcome hey Sure, call. Kelly to

market for points last business. to XX low of but still experience point now they of We and seeing those coming both and and and municipals reprising very are just really clients, basis money beta basis our out cycle biggest on see the rate public funds impact our public beta. remain hike, those through the through republic reflected our we XX large of very, on XX Both accounts deposit corporate the

for pressure that is most hike. just that. savings So On remarkably and XX% competitions retail, us our which with little are essentially we seeing up really that in coming see we time folks to keeping account on exercise no are an and really again rate competition, starting certainly which our is XX%, for on deposits

reprising keep been days, one prices. quarters. remain with we XX XX last so we competitive generated have hikes months So promotions consistently pretty just billion over that those on have on And nearly money six those pretty rate fee running we of the new and

Kelly Motta

Thank you.

Operator

will Scudder turn no questions, [Operator over closing now to the further back Mr. comments. are call Instructions] If I for there

Michael Scudder

you. Okay, well, thank

us. lie our the business close pleased we before momentum, just So advantage take that extremely our before to just to about opportunities and of are reiterate, positioning we

of leave, for clients this. contributions opportunity their they we deliver to in colleagues our promise our take want to are the on They part that base reason want and performance, are all to investment to I a day they and thank our also the every the of Before Company. folks of our be to our

forward newest our Northern also First to from We welcoming look to team. States colleagues the Midwest

I you all interest attention Midwest of a to in story investment. that we and great First ongoing thank for would again your our share as is our once So belief

So great Thank have a day you. everybody.

Operator

has conference The attending today's you presentation. concluded. Thank now for

You may now disconnect.

First Midwest Bancorp (ONBPP) 25 Jul 182018 Q2 Earnings call transcript