FMBI - Earnings call transcript Q1 2019 | First Midwest Bancorp Inc

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Operator

Good morning, ladies and gentlemen, and welcome to the First Midwest Bancorp 2019 First Quarter Earnings Conference Call.

Following the close of the market yesterday, the company released its earnings results for the first quarter of 2019 and also issued presentation materials that will be referred to during the call today. These provide both historical financial information and the company's outlook for 2019.

During the course of the discussion today, management's comments and the presentation materials may include forward-looking statements. These statements are based upon the company's current beliefs and are not historical facts or guarantees of future performance or outcomes. may outcomes or results differ. Actual forward-looking and The considered company's the SEC, earnings information other for the in release and should call Harbor most risks, as included recent be the as the the uncertainties company's with XX-K contained filings today. and materials Safe and in non-GAAP statement, presentation well legends other

a recorded Finally, call. This this forward-looking statements and participants the all after company will not be listen-only are in is updating being mode. any call

Mike by Sander, Operating and President Please Scudder. presentations call Following for and Mark analysts answers Pat the Chairman ahead. Vice go question the Executive Officer; Officer, for the open over only. Scudder, President to Chief Executive will Financial and Officer; be I Mr. and and turn call will Chief Chief Barrett, now

Mike Scudder

supplemental of XX% Good Overall, again our $X.XX. you. the to with great from point Earnings per businesses. quarter with Thank per at. feel from it totaled you as remarks. line seasonally was appreciate everyone. impact almost XXXX. the expected fronts we as down come fee-based last year volatility quarter versus quarter all this over versus we it's Adjusted much sale-leaseback what follow Key annualized well of practice, strong XX.X% greatly with almost on influenced remaining our move outstanding fact the typically X% components. certain That's XX% the X% year, XX% year that the the as up linked-quarter. last kicked drivers deposits us which very today. and versus and Matt respectively. Adjusted of see we XX% have quarter by linked-quarter, up year, added treatment was of a Similarly, the lower positive. off ago. that volatility for out somewhat morning terms to points strong to incremental joining ago. the quarter, year Note want ago. before, by strong. through note. It's earnings us expected, where core came business up a improved at X% along with that almost this return you. presentation to once amount of you by stable common as $X.XX, about us and a then seasonality offset I accounting of first share we deposits XX% revenues, said fourth transactional for about a we efficiency through on the equity very helped also at an Operating year we're year tangible for can was segments. in increased capital quarter be in weighed of market was basis increased over I deposits. active pretty and at in basis I'll And XX% good Average or of and share walk at where Overall, loans in as in a in the our Mark our highlights, certain -- the remained a X.XX%. very Pat points first also cover time and certain that XX can is reflective multiple solid And fourth operating and performance X% in metrics levels I you Combined on cleared we eight XX% market Margin with versus as fee-based fourth quarter long were coming up time first our That's and total last provided

better are as several investments or In position addition, even that we forward. us we making made have move

million to about market. will in Bridgeview of our as $X loans, and Chicago in overall to A That move banking close. both add in hard worked XX they to talented teams, convert a most very in I metro and this thanks us will forward, great systems mid-May $XXX importantly will as Bank mid-May. and offices, deposits and put special said, team close acquisition position billion Our to in

Our also Milwaukee in incrementally added of to our three -- $XXX of build assets commercial commercial Northern It And of adding continued presence to about that overall marketplace. there, a management we million and team January acquisition added Oak in also a Management market. marked Wealth under platform. our to we've that recognizing entry closed lenders team a wealth the in

and sheet Finally, capital very balance remains our strong.

has strong it to the we Combined -- our continue appropriate, before have the assets will risk-weighted dividend over sale-leaseback as with well May. absorb to of flexibility accounting execute the to closes XX.X% points in common within operate effectively allow and our one to reflects Tier us benefit grown XX program. Bridgeview repurchase as basis guidelines it's announced said Our grow, when I which on earnings, as to as recently appropriate

it quarter. a all, busy and And in all additional Pat I'll was Mark color. productive to over it So turn for very and

Mark Sander

good Thanks everyone. morning Mike and

I with start, into Bridgeview X, our expected Before acquisition want incorporated to note all our of that we've I May guidance. to close on

that performance slide pressures. sale So and discuss on non and deck we've QX, this continuation Results through deck, offsetting outlook. CRE loan a as quarters and you expectation refinance with through CRE we the and of lighter saw seasonally and in bank growth production slightly. take investors growth given slide our again of posted summarized line slowest with annualized fell several solid quarterly namely X the payoff more our future XX our Beginning results. is that were each outsized period. heavy Elsewhere, on than and I was our we of activity discussed strong growth, in again C&I combined lenders. And guidance from very segment teams several themes We now, the it QX year we X% detailed Pat for of will consumer

relationships, pressures. Mike's very Midwest loan these new In the solid in digits. CRE should that the in our excited million specialty officially of the very single result here full positive think team we teams of our have Our we grew further. in and a I us client-facing can to double family want into and board, terms high our members we're unchanged such expand and to note growth view consumer Bridgeview that to light and is such weeks. add the approach them level new adding aggregate $XXX comments together market, Bridgeview help to in talent total First welcome few pipelines, their middle impressed of their low despite particular to year loans added segments that Across

on a Asset were remains of of guidance. Charge-offs X nothing in uptick solid. NPAs, but XX of our points did see and as slide with demonstrated provision serious concern. We in slight and quality line expectations basis $XX.X million

will but We charge-offs closely, again, We alter to mid-XX to risk anything be rest continue the points closely the range will to believe are sectors year. of our for basis not our low seeing in watch and other we ag elevated outlook. the

client last the X. to over have nature levels strength Moving held and of costs Mike our due of to Demand of Deposit course as slide and steady bases. our the year, highlighted. remain the key franchise granularity deposits a

support of discipline We a strong also favorable in conjunction advantage, of of which loan drive a time deposits Due million will cost mix, XX continue basis sales XX about detail increase historically rates our with margin $XXX our basis to to helps XX points as competitive in be a remains favorable minute. points, Pat growth. drove on which quarter deposits average in to competitive to this overall

sales scale goals, core Our the add to deposit at and further acquisitions strategies of while to continue remain drive funding. forefront focus it, our and the

pick Now Pat it walk up through NII. will to

Pat Barrett

Thanks everyone Mark and the call. on good morning

ago slide of interest up prior was the Turning $XX XXXX. prior to offset quarter with fewer $XXX in increase rates $X.X to to higher funding growth interest and to impact and a by million the in acquisition from compared accretion, higher to the the loan loans consistent loan rates, $X.X accretion net quarter, million same same contributed X. of interest at margin The funding Compared income and Acquired accretion higher costs days in and assets the than and XX% favorable NorStates, quarter, higher acquired due acquired period million the resolutions. due higher by to offset compared quarter. loan higher interest-earning the partly expected or million was the year and costs. period loan income to was securities Net on

from for basis XX Moving up to NIM interest year. quarter basis Tax-equivalent prior was and the X.XX% the net current margin. points points quarter of linked eight

to than better costs had impact margin the was Performance XX rates, basis favorable points X.XX% points quarter ago. of costs. up of the Excluding year our more was a current the for benefit quarter, both higher accretion, period five linked higher prior periods, offset than for funding guidance, basis from interest the funding more and anticipated. we reflecting same than quarter Compared the

in Turning to consistent up prior assets earning deposits as assets quarter to growth billion the increases from NorStates sources. as up year, time compared and NorStates. funding the reflecting ago well with Average linked Average $X.X year acquisition. were sources consistent loan combined linked $X.X impact assets earning reflecting quarter of and a interest-earning securities funding were the and billion and from

year-end. Once actions actions remind could you take the result one rates. net modestly outlook that assumed react and remainder will want range growth the our outlook. XXXX year this projections market in Overall, to forecast rate lower acquisitions. don't a for within adding reduce of exposure income, rates we rising significant of Fed to earning a positive growth and revised assets, revised to the rate two in may may our of in XXXX. forecast One off-balance expect interest the subject result mid loan the revised to I additional over These change contract movements our revision forecast us volatility likely result in to of a as impact rate include interest another pace is rate our and impact of lower being of low interest our still rate hikes net expectations result midyear to which at the combination item our but guidance incremental double-digit that we a of both. hikes again, due instruments We've at originally Moving had sheet as expectations or year, Bridgeview and to no of of and interest may to to acquisition, reflect this We are margin, to to rate year. fixed-rate

discuss Now turn to Mark income. back it I'll to noninterest

Mark Sander

in the decline Thanks, or in largely Pat. not softness of our in total impacted Thus, for changed. outlook reflected remainder million by resulting comparative has valuations shift the X% the year year-over-year. Mortgage fee were servicing a seasonal rates Noninterest income QX. in $X.X income

consistent to softer QX. was in stock In addition, year-end the for areas wealth three dynamics all look these year revenues, market allowing believe while income CRE of we've weak drive the production will previously forward. of impacted highlighted with going in a that comparisons strengths remainder favorable negatively swap different several the We

Specifically, with to drive increase along Bridgeview more we of comparison modestly deposit strong than half contribution continue outlook favorable growth revenues continuing increase charges for our forward year-over-year several loan fees and X% Card-based from the think of Back and posted income. Oak we results as MSR acquisition going than QX solid management fees. full significantly we noninterest next from revenue be Pat. are year comparisons offset a expectations results in namely saw single XX% more treasury the expected then, in the rates favorable mortgage management should low unchanged the increasing our Northern the and sales in was high acquisition. our impact quarter-end on and and addition Wealth of And valuations to and recover our even half see comparisons quarters. the full In year the service full-year, market be to continuing for should both overdraft lastly, we valuations, better the QX for you as swaps lower year production will remainder double-digit organic given is in where total higher.

Pat Barrett

the from Please X. later NorStates the Northern initiatives, Excellence with total $X slide prior to these acquisition a expenses year. other the XX% the were from extent items, Moving associated million while was quarter of implementation Excellence on includes as down and lesser Delivering integration-related benefit with we to expenses acquisitions prior and on flat current of full the until note Away expenses certain of costs. to incremental delayed Efficiency were Oak initiatives expense year quarter Delivering a the ratio and spending ago. XX% in achieved quarter consistent and

$XX quarters rate run leave million expenses outlook million at also note Bridgeview QX $XX taxes expected is inflation, additional before of unchanged, with expense legacy of quarter while $X X. each fourth for XXXX of and a I impact for X outlook unchanged Our namely is in million slide. XXXX the million on $X this plus our in of Last and X%

guidance. effective continues tax with the was our for expected XX%. to be XXXX rate approximately rate Our our in line effective quarter tax XX%

Moving to capital slide X. on

how pleased capital deployed continue acquisitions. We to strong the we've at levels rapidly capital at back earned on and maintain are we've recent

of CETX Our impact repurchase mention a period total during earnings for new of to by of the I'd of offset around have quarter flexibility. the the to adoption that basis the $XXX quarter reflecting partly the program capital over capital with million X lease acquisition. and asset quarter, stock combined rules Oak approval points increased accounting the risk-weighted providing closing ratios our from also we further X-year received the positive XX deployment the January a up prior for Northern

slide Turning to XX.

details recap Bridgeview close recently acquisition outlook. on expected which has into on X, a our Here's to the announced our of been incorporated May of

the quick years. tangible to The XXXX. by a of remain with value earn-back three reminder, $X.XX relatively to economics transaction earnings transaction book is add favorable of a As around the approximately expected

respectively. Finally, summarized over consistent with earnings and on quarter's XX it both our outlook final I'll our to remarks. current XX, usual for practice Mike back slides we've turn and

Mike Scudder

Okay. Thanks, Pat.

team we recap, position. colleagues underlying We've a solid got we're to strong sheet, a balance business just and momentum. where engaged So got great We've at. like of

to on States manage set as well as us First here business. our in in for in do excited Southeast billion management. capital, we Milwaukee wealth of to so to to as for our in It with expansion colleagues assets continue flexibility And how long-term our under and opportunities welcome very Oak, opportunities look as on occasions, shareholder some we We're excited returns. apart Midwest. an as the Northern always, management got the said we're Northern couple eye as will marketplace. invest our equally metro maximize about Chicago. we've newest Wisconsin to platform So grown we And the has we further market do which reinforces also and Bridgeview a $XX continuing leader business

with So let's a you it for might have. open as up that recap, any questions

Operator

time. The state comes [Operator question-and-answer Young first will begin The of session Michael sir. at you, Thank this Please question. question Instructions] your from SunTrust.

Michael Young

off Hey everyone. soft, on the changed pipeline just with on XQ commentary just maybe at but if now market I loan competitors good And of morning, into competitive building. the going some growth how the start to maybe any wanted XQ. forward seasonally then that's is the dynamics that's gone of always all? curious

Mark Sander

Yeah. Mark. Thanks, It's Michael.

and growing. solid are pipelines Our

disruption continue several prospects. like with to in is As our provides pipelines you of last years. Competition the still can opportunities there, where be so effectively. that that always very the can is market, solid we we the think we suggested, softer, some out QX Certainly grow we seasonally think should in digits think customers fierce mid-single organically compete have nice but for we we

calling so tackling And blocking continue disciplines just drive sales to daily we and and those that do results. to of

we feel So, at. where about we're good

Michael Young

you or of new shift forward now? there? a you guys or the Okay. do you Does one that Pat shifts there. may any for, of with curve any on swap have of evaluating positioning. potential And I being some ALCO Or book. opportunities yield maybe of maybe mentioned evaluated that just know the know on things I the parts shape are change kind the

Pat Barrett

Yeah.

feel as the past at and it's against of not balance think end point we're And protect put falling around probably to market to days, we pause bit. cycle a I pretty think at given shift just hike we on look XX the rates while. it's like the the and least If said potential a over we in would where permanent, dramatic a are. we're that we reach last where for point. our nearing sheet little for expectations We've it rates in at/or that has optimize extend rate that the duration we shifted the a out

to that we us a combination that because And the it's some sheet just of probably duration the derivatives actions. out wouldn't so off-balance do or curve hedging make everything sheet incremental unlikely so sheet right way would now is balance would shaped a and far of out money. the lot you It any is see adding sense. the on-balance I would through of point

Michael Young

just could last one on capital. I if And Okay. one

talk accounting maybe You the bump if there's around share that, you a quarter there your the capital the of a had buyback. time? you're and over what's thoughts the to big announced sale this level just governor period medium utilization about the to from of leaseback trying get target and Can treatment

Pat Barrett

kind think which we're sale of we're used quarter. essentially leaseback behind the at are Bridgeview very in I our is the with either already The that comfortable Well, a acquisitions that's the benefits Right. level the fund now. coming that or us right Oak second for capital Northern accounting will that's of

just the share that tool and going forward. give excess the any is really occurs to So, to us added help capital repurchase flexibility manage additional accretion

Michael Young

Thanks. Okay.

Operator

of KBW. Our next question your from Please Chris question. state comes McGratty

Chris McGratty

morning. the mid guide bit Could scenario low the high it NII without margin, you change talking of little lower the end to to on are take didn't bookends on What hike. the question good you kind end? speak be would the double-digit You guide the Pat NII maybe rate low versus Hey, at around but a for the of you growth. a a that? just

just speak you could Thanks. maybe bookends. So, the to

Pat Barrett

Right.

time. was shrunk rate over about over one diminished NII. That's sensitivity to hike to point million. hikes time of million of So, $X.X $X has At our kind rate every

actions the we some due recover take over that do repositioning. think some balance downwards course sheet some We of of And that to well all may be not So, year. we've part of that of can that if to that. the revised

So, as which down think while an little still on That range the surface sense? NII our about. of well guidance bit, it's have would you drifted a exact number you would heard within makes

Chris McGratty

think portfolio so. be to kind duration I'll differently. I a more guess the comments lengthening, little in ask of should this target? investment Maybe of get we bit I to the growth expecting

Pat Barrett

yes. would certainly the for us That duration the on, put be and option obvious easiest to

Chris McGratty

Okay.

Should the common we liquidity. targets urgency a Okay. And to as of given you of running it? of and longer with to estimates managing capital going portion away one-year then stock of kind speak you're into obviously Can put just kind the about back maybe a manage authorization just just thinking a is trying $XXX to targets buybacks. term of -- from analysts million Thanks. buybacks. of from us? I'm this sense get the the to kind our how

Pat Barrett

that first. Right. There's the around our in of Well, buyback we're able and capital to had XX I'll something answer sense reached and throw-off comfortable We've years quarter somewhere This a levels continue that been it's to after points place. fund I not part is dividends. that our second acquisitions in growth a we're think XX urgency capital of the we've additional modest to XX basis it. program every since

us levels is peers. capital much very now our in maintaining line comfortable and for with we're you a so see where pretty we're And which at

Chris McGratty

Thanks. Okay.

Operator

your Please Nathan comes question. from Jaffray. question of next state Piper Our Race

Nathan Race

expectations just NIM assume I the clarify purchase NIM Hey guys, a accretion. on just that's good core GAAP on to And your for going The on I'm guidance curious going basis forward. the forward. including pressure Pat, on accounting thoughts then morning. the

Pat Barrett

Nate. Sure,

are that. their high One, in the the over impact think will couple also margin, down The bringing in to and -- more will into also our on will revised because have of not securities and -- Bridgeview those increases balance partly contract. their also had by impact. two our clearly revised first will an of mid margin difference our in QX. of likely digits then guidance. the core on yields QX dilutive One, kind then will original outlook of yields interest we margin mix because Bridgeview overall portfolio pieces sheet a lower the we're of I bring course than there moving incorporated any have single a And on quarters, today. to at rates our effect in in of

Nathan Race

throughout some going deposit a assuming Understood. I'm kind the That just in of of I competitors trajectory Chicago XXXX. larger surprised thinking in heard in step-up I what this And costs area, competition how the pricing deposit hold then deposit the think we from to was the should We've that costs makes costs kind of quarter see quarters saw just seeing curious deposit another here. going sense. on of guess, little in versus from about we're in some Fed's the trajectory so your easing forward, about of forward? we

Mark Sander

deposit Maybe taking We were Nate. this pleased of kind -- It's Mark. QX. one, I'm in costs our actually with

While rose had they points about overall, they actually XX, forecasted. XX we than less rose basis

deposit costs a you'd little CDs bit that might raising add? forward, increase more mix -- bit from that little we're the rise again Pat, little as anything costs costs time, here. to towards to itself but see We a the going bit. more deposit you see leaning shifts fund and increase in to a them pressures Now, into the ourselves so don't is

Pat Barrett

add any promotions really at than other and do, market just CDs, we we running our have continue of duration. I'd Yeah. continue that price are sort which we although to to shortened significant not

CD Our is had the for whereas years three-year. last of only promotion and XX-month a couple we for current one

Nathan Race

helpful. Got it. the appreciate I That’s color.

Operator

next from question Please Terry McEvoy question. of will come Stephens. your [Operator state Our Instructions]

Terry McEvoy

everyone. morning, Good

Mike Scudder

morning. Good

Terry McEvoy

happen a to that I I and good feel an was guess whether it us Could on the a -- national date? closing May question give closing Bridgeview. you the platform just on believe, just that update on there mortgage know closed. were deal those think before conditions, with X I you some May needed I conditions closing

Mike Scudder

us, the hoped resolved as are to they those behind were All would we cut consummating all Mike. closing conditions the is chase. and be. This relative just just to the I'll of Yeah. transaction the

of were So, operation their sale from lingering the of other the there. impact there's any that mortgage or out conditions no

Terry McEvoy

in Mike, add private got it, there? time you to out, banking. have you Milwaukee, commercial looking teams I've that while do have? I think you a about it hadn't some thought platform call newer and up I banking really then And anything a before. you, What building build over And the into is Do mentioned market?

Mike Scudder

the it's further a we're let -- It's mean, natural introduction extension little. talented reach sizable Mark gives a a management organically expanding Wisconsin. lot in we us a do. incremental strengthened and there certainly States a of why standpoint. purposes pretty platform private group Southeast, in certainly recall, add of offer Well, for greater our a Northern Northern I'll sales don't certainly point. Mark, banking Oak really a I natural wealth what Lake commercial has context from you where that of already then County, and Illinois and

Mark Sander

Yeah.

as markets, of commercial So for candidly. like and market local a we number there years, calling much We've a so all like been but market. from that Southern perspective any it's as Wisconsin

we want ground. So the on to strategically expand

and mean, yes, on leverage look wealth like think private to indicated, expand bankers three consumer, anticipate all in ground wealth of lines to and we time. expand is soon banking, we think We've commercial two frankly Mike avenues, us would got Wisconsin more the we'd And presence gives right Northern business I the a a which over but I management of our there that. on Presuming As to like opportunity now. our three establish commercial to success, ground we great it broadly. we Oak can

Terry McEvoy

be? question some national like loans there's And longer-term thoughts one Mark you. just one family talk about aspect for it. then to The large just the that on home strategy purchase mortgages, purchased to of and diversity kind how equity of last assume, could you'd four portfolio just I of you the

Mark Sander

activity, our – amount a this of growth growth as well. slow good We’ve purchase quarter had organic but a consumer Yeah.

to as we just We're and evaluate both in about we four As risk of utilization products. think we a under-weighted, still markets company. of one and think diversification return liquidity, our it,

and we our So to as increase but to out risk risk we there we we see to – change fixed-rate start bit not book that, do a that little have may would to rush that to next we room dynamic our of And attractive have think expand return. over of quarters. like of so couple – look more component to the the we

Terry McEvoy

everyone. Thanks,

Operator

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

Mike Scudder

we've just to our all you. With you I I'd in feel that day lie First in investment your also won't what contributions and Midwest. in make only our excited We thank of the thank to to I at. promise the like day. of performance, to reiterate but for opportunities like covered. of about have opportunity about company do. that, quarter a opportunity interest in whom our listening for where and and investment call their and great They're on them So take they what to their we every thank we're the for not deliver the already face clients good that Have everybody. we to our many colleagues always the the to We're ahead. listen the thank

Operator

gentlemen, disconnect. all day. concludes participating nice a for conference may Thank now today. have you and parties this and for Ladies the All

First Midwest Bancorp (ONBPP) 24 Apr 192019 Q1 Earnings call transcript