PFC - Earnings call transcript Q2 2021 | Premier Financial Corp.

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Operator

Good day and welcome to the Premier Financial Corp’s Second Quarter 2021 earnings conference call. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Tera Murphy, vice president of corporate communications. Please go ahead.

Tera Murphy

you. Thank and earnings joining conference everyone second for you XXXX quarter call. thank morning, us for today's Good This call Corp. is replay will also being webcast available the and at Premier Financial be the audio website at premierfincorp.com.

to company's prepared leadership's performance, be comments the take Following strategy questions. your on they and will available

factors Actual on information call control. may results Mr. Information on file begin, to and Corp. Exchange with over in hear now forecasts from Premier the related future on additional financial are has comments. conference forward-looking business materially we during statements operations the Financial and and in the turn that during to included remind a Securities factors which over statements may the Before including you question-and-answer and And the call current forward-looking for projections I'd news and the Small result Commission. like differ company today, results reports period, these I'll you his to company's no of management for release risk the as

Gary Small

and The good today. appreciate you We having morning quarter. performance all. the to us Tera, a second team with in delivered Premier you, strong Thank

credit shape markets households the on a first state general return All $XX.X making activity across are call. positive we our or drivers deliver back is we're quarter expanding. markets, and the well, cost New taking assets XX% quarter from million share, very a are X.XX% footprint, rise. adjustments on January in on we a on the in the of tangible of came necessary each discussed credit managed capital. at continuation strong steps economy $X.XX seeing Earnings was our of was business the of in robust, and saw year outlined and and the over to demand and we many perspective. The generating In performance in five a

are strong real numbers PPP with growing production an quarter linked annualized impact, on and X.X% consumer total all the and segments, of consumer we those loan the estate, our of and commercial, lending exclude for of growth is business experienced each commercial business New residential you basis. X.X%, over when

than in portfolio fact quarters the the for corner at million loan low ended to quality quarter provision. to a ATM loan QX were activities maintain very growth. strong on margin very the position another is for to The managed affected this additional it we and historically a -- $X.X loss position reduce place for sensitivity income quarter. that in would account will double-digit strength so going that loan levels the our taken QX, benefits the We credit think forward. reserves and consumer-related turn we with loan year, driving our with have like. are recovery resulted from levels, and rate expansion is debit sheet utilization with growth we're one trim that net line of portfolio with cards, to actions liquidity our and work of fees, consumer balance in We generation residential securities of growth fees, drive so robust difficult The performance. our upcoming in meaningful driving continued QX A residential had to well. be for position and with interest as and the rate in favorably on run the versus combined additional economic the release first sheet And our the Overall, and commitments we net fees variation story have right made communicated anticipated continues loss from environment. interest quarter very pleased the call, we hard creating loan most that consistent continue Given our we've organization. our line from in a in The the on remained rate income for quarter, and first-quarter core turn expenses certainly our bit provide last a strong in net That meaningful to shape allowance, factors commercial our business excess steps we target. that clients' at some the balance the remains mortgage core sooner was be

production of was course early close between the the gain the salable the more price quarter. net the less found mix a in portfolio. quarter the and tighten for margin which quarter portfolio of also interest positive on assisted loans salable normal, turned of for and loans $XXX,XXX. with tempered focus an valuation in our obviously from effect construction produced in falling percentage better the the affected rate a quarter. treasury their This into on actual our did pricing This that direction XX-year sold of driving retreat XX% to portfolio, than MSR However, the and to our into more our over unfavorable our business, quarter, sales drove perspective the below The the for our gain way

in You $X first was might quarter. the remember, positive it about million

on this back and bit were during little stabilized steps we the good as compete reflects has opportunity jump have planned. levels. quarter a taken costs norm activity we than look originally factor always our us they to lot percentage, end, linked quarter. We've The than that second rates of between And hedging returning and we loan a more we to are at targeted residential have that can forward July going to as a improve our space. in think alone. at less Pricing So salable production. visibility combined of continuation with And the had while afforded competitive, comfortably volatility pipeline quarters really we

being that does the effect our the quarterly expect MSR rate as with levels more typical XX-year We profitability of the valuation. unknown to the mortgage of impact remainder really treasury the year to return over volatility

may year recognized was in said were as some first in very, was quarter to we very the the first large I we back, that And had quarter, But a that we and at benefit likely benefit. You and be. a give that felt would that recall, did the the with year expectations today, line at we quarter. current our the rates planning generally are certainly XX-year beginning we second in where in of for the full

we updates. go to comments end with I'm with our would at it it this be we some Paul plan good come point, overall to So as going At back put to to over the stay turn we'll if are. and some guidance relative

Paul Nungester

review bit funds, second quarter everyone. results, to year-to-date I'll relatively we down Thank which and The basis flat points five X.XX% quarter. was liquidity, to began fell of all-in the deposits balance starting point with businesses mix using which you, morning, our as a but slightly did Gary. declined cost to point. sheet, this continue reduce Good with our

are up we PPP, million assets, pleased excluding which $XX $XX or led this commercial, X.X% For million report to annualized. was of by growth loan quarter,

and income until also our in million deposit remain we We XQ, to act as During loan began net position added prudently on continue from focused June. $XXX and trends dictate. loans we'll growth, interest of excess rebound to securities liquidity

is decrease due at by of in $X.X acquisition in X.XX% provision loans economic a further was X/XX, is but $X of charge-offs At and of by for back earnings is dividends. decreased non-PPP loans related to million. X.XX%, offset where down million $X.X capital, slightly credit in an excess not XQ the improvement that our net allowance billion a from balances of balance and lack levels. helped $X to ended the including Next primarily increase which due forecasts, million XX, sheet June $XXX,XXX. recoveries a increase allowance, with marks, equity coverage, with to we to pre-pandemic This plus excluding expense primarily of the PPP still net over Finishing over

share buybacks risk-based in We also about quarter. was XX, June XX.X%. X.X%, capital about the was $X.X At our excluding equity and loans, $XXX,XXX completed total our million tangible PPP ratio for of

on $XX linked Next is income interest with a I'll turn basis. of quarter starting the income which to up statement, million, X% net

of given not depending loan investing excess impact see a deposits were whether NIM little growth. possibly focus how awaiting and from was marks the down rebounds This revert growth. fast loan first or PPP, quarter. margin our on to interest back our X.XX% in pressure, more liquidity while could is on expectations to with and the Excluding net X.XX%, consistent growth high

Matt swap approximately $X XXXX. to in down moment, also during expected mix total interest a was from $X that down to annually. gains as primarily We and meeting almost in on in XQ, million second were executed lower and million prior year, will was Noninterest color to is quarter prior by for sensitivity as income from due asset mortgage quarter salable $XX.X our Mortgage from $X.X is income our and production but due $X XQ improve provide banking. decline is a expectations. mortgage million which million well a XQ, million generally this XQ net margins, with more which reduces

X.XX% saw retreat XX-year, X/XX we a which Additionally, at to X/XX. in the at from dropped X.XX%

the million had MSR XQ to pricing from by realize the payment XX-year million to commissions million XQ. each is of $X.X last, security took a big a reinvest of earned gains down offset to for with next bank $X.X million And years. $X.X $X.X net where quarter when included down which was recovery So the due we spiked. and we $X.X that million $X.X we year. these the advantage of due higher contingent income back give was are valuation loss market to other nonrecurring three of from Separately, Insurance over commissions our million downturn quarter. to in income gain in a million this to first after gains equities, had the generate settlement in about million $X.X of the $X.X related of This those XQ

million, on basis. down is linked-quarter which a expenses, were X% Next $XX.X

noted. run also that and card decline, to As XX% year. good guys rate some for seen ratio and items full of as last by usage addressing the XQ, remains $XXX we We below latter but estimate efficiency the related are expect year such items to performance there year-to-date in XX%, previously full around lead end still mentioned revenues as half the fees. helped our still have up as began Further, starting in currently service which better quarter, the million, or we ATM to strong debit costs expenses in

and share income. banking mortgage per That is the and expectations quarter was for year-to-date. pre-tax of million $X.XX ROA Additionally, income or $XX pre-provision reported we to million, strong of a led provision to security my by X.XX% income guidance completes gains, our ahead good which review. second lower for partly which net $XX due and line, quarter second X.X% second-quarter XXXX, offset Bottom financial

Now call the I'll a and Matt? credit. of Matt for over lending turn to discussion

Matt Garrity

of our We're by activity increased and be pace business, of In Thanks, Paul. encouraged update an also as quarter and we exited comparing a has originations, into the of year. of half as when providing quarter. business. encouraged asset focus production the production update we as growth when originations our of well of the the the were our quarter and C&I in on we're XXXX. originations PPP as excluding an return C&I our by And us. commercial continue for which by XX.X% impact head a the quarter XXXX to we're increased I'll total of Commercial second levels quarter improvement during the in loan second the XX% the areas, encouraged to second commercial as approximately residential lending first balanced been quality. mortgage loan on this build second the of a to segment percentage

we growth X.X%, In terms growth, at of PPP. of delivered annualized of exclusive balance rate an

a our it's believe While more second first this is we normalized than improvement for less growth of half over historical growth is quarter of level precursor year. a solid XXXX this of and during the the performance, it

our our operating overall reflective year, mortgage the we the were our remainder environment. For production markets. we production levels increased residential activity increasing the level foresee in light of pleased of and of in of loan growth, business, In the of with balance loan

impact come returned has activity refinance refinance as in the normalized to industry, the quarter. that revenue for mix driven call ahead lower we've well levels banking of a valuation sales has a continued on industry race XXXX, first At as by a Paul experienced industry salable the banking Overall, first running firm of year. of business the has level, had during into the While helped cycles as Mortgage MSR over the bottom of mentioned, our gain to more which we across volume. provide construction the is the overcapacity XX% on our and degree mentioned as mortgage compression, second half experienced during margin reflection reduction past to softened our volume quarter, we of buffer approximately the last adjustments. mortgage half this our the of it's previous XXXX of

quality, in to quarter, Looking first the loan we we believe Nonperforming With quarter of category. the report business continued payments. with success, in in that business declined first continue coming our second operating quarters. levels be in happy quarter another over prior their environment for invest story largely performance respect in throughout see classified the to with Long and for returned when mortgage year, the to have do XQ. expect in quarter. loan the of although of XX% pleased in the And the remains quarter second term, our XXXX positioned second us to improved that comparison XX% portfolio. overall we COVID a and the We're with very and to net comparison is will grow. we scheduled levels asset the second it's line quarter to deferrals ahead, approximately comparing largely to to consistent We're the the we expect half the to mix the of salable improvement recoveries also charge-off have remaining quarters

now pleased on turn our during like been the and challenging the has I'd the to by proactively XX-month what While to portfolio Small. of we're call performance with we portfolio remain clients. working Gary over period, focused our Gary? a

Gary Small

X% give targets would year just that From a affirm of in that higher you we Thank few roughly communicated mid and you, to quickly balance loan January, commitment the loan book. single digits portfolio be total to we and on of the a I'll our Matt, thoughts guidance. and perspective, back north on our end digits growth commercial mid-single for achieving

loss by may we for not of we year-end, the day, regardless line While loan our a that as improvement recapture be perspective, can will the reserve utilization from credit same saw first the theme benefit to targets extent we nearly perhaps we improvement. half. the in From hit although continue believe

way, achieve full income, mortgage We offset strength remains continue call. consistent in the sheet outperform the at consumer to targets may we the move buyback expect a on significantly we care enhanced unemployment expect as stand to And the net turn up we some category forward. charge-offs as capital And in operator, perspective, income growth, it more and original any But credit I over expectations, still our front $X.XX well of are see NIM expressed would the program, deposit child are for expect to that our what us the just for driving activity benefits fees with for on continuation dollars acknowledge Noninterest are with the that, authorized banking. answer year questions. on that's potential the interest our I'll we balance a initial again, net and for quarter shortfall helping that first are that in to experience in we to municipal right I combined from billion And with the reasonable down. our 'XX. expectation. The here

Operator

from ahead. question go Scott [Operator Siefers first instructions] comes Our Piper Sandler. Please from

Scott Siefers

grow? sale first guess I question is you've the securities the Thanks of available billion noted I have morning just from tactics that had portfolio it so And think, leveled question. overall plans the in it billion $X.X are taking got And until sort here? increasing for Good build, $X.X now. what size out? Does portfolio, Or your guys. a Paul, resumed. about on we of continue regarding the for for you the the you've that growth just to been comments, loan

Paul Nungester

Yes.

now part, the For the growth We're that, back the whole. most Scott, loan in off. and especially it's hit quarter a mode, in having as June leveled for

maintain maybe our that deploying opportunities on the forward generally loan always we to something going book. really, right But repositioning. is the at do see funds intent securities some in growth if for we the plan now look our side. to into So We'll level there

like having quarter first additional it some skyrocket securities park were we'll that, loans. again look put Now then in of or more into temporarily did loans deposits they said to excess if we the in just for should

Gary Small

now. this laddered other point, environment comfortably know the Scott, what as to one the that the we've at duration to of match loan that to be growth from the we we can move so expect we

Scott Siefers

All And you Okay. of And so, what does base. you. you going I of on dollars half, are if look $X.X revenues normal Great. million-ish income. these to sort back normal mortgage And fee the then talk like Thank speaking guess, the about mortgage in just guess right. profitability second days? I about mortgage there? and When

course such swings had year just the or we've over So last of extraordinary the so.

Matt Garrity

This Scott. morning is Good Matt.

I should think the you your the year, half. $X and $X basis a in that for between the second second half quarterly range pencil of on in million million expectations

Scott Siefers

Excellent. final, it under And have of that sort cadence how and then and remaining of sort question fees the Perfect. those recognized? just PPP I'll just of a guys one thought Yes. take so get you those on

Gary Small

Yes.

second round the So put if have likely, things by that originally and start. some It will a need the on are into then over getting see which two And were could the time. certainly that in year. than of that cases, five little So start in we those the million those we we round we be fee XXXX basis we both then saw we years. amortize round which can in that $X we continue, forward gone this high case of because them on, movement at end two, If to that And still is year. rest bucket. at start little we odds the when the $X quarter, to of of to the duration, we'll year. million quicker originated the later trickle a wait this point all and last that now point, Most have moving in through next forgiveness the program, one over forgiveness, when recognized accelerated an to the year bring at staff in anticipated are just But right? for brought on it that the had the here could

Scott Siefers

the of amount the have you do And remaining fee? unearned Yes.

Gary Small

don't I of want the but my Yes, top to have I peak, don't head. miss

Scott. say deck we quarterly It be will soon. normal can will that you, be posting there, to probably I and Yes in or our will it So be so. investor here Tuesday, Monday

Scott Siefers

Okay. Perfect. Thank guys you very much.

Gary Small

Thank Scott. you

Operator

] Our next Montgomery comes instructions Janney Strickland Scott. from question ahead. from go Please Feddie [Operator

Feddie Strickland

Good kind there footprint. Hi. just wondering comments, I negative your kind pretty morning. was are question. wondering prepared in you're customers. or And from positive incremental your broader across been well lately? hearing I like the going sounds Has business of From your sentiment was any things of what it just

Gary Small

then the most forth, moderation Gary, really No. part. particular the distribution if the it's about with that It I there, like forward. some constraint full would well. there you're really and were like materials business for in XXXX say, very, so Labor spiked up industries. provide as Matt this that's noise labor. the construction are of addition for very past in There were normal blockage. active feels hearing you're costs across early I'll the when and industry, but going and have some and a on books year And color the constraint And biggest the commodity is of activity is is

Matt Garrity

first half I a impacted say is first more say or Matt. concur. would would I supply XXXX have issues This fair the chain the and labor I quarter. activity of year comparison. would the Yes, the in is

deal lot plate up the bankers of the XX lot starting I think a well. expansion active see to now on customers a having come to past and M&A bottled XX demand our we're activity. there's There's our of a and as months that with activity going lot over conversations of about onto

encouraged for second year. the really certainly we're next So and year of the into half heading

Feddie Strickland

see those service and kind of same And economic then charges that better of lines, expect of kind of along a you like core you it. improving just could activity? do fees outcropping the just whatnot, natural maybe Got some

Matt Garrity

they're in now difference six direction, every over while trend this starting that expectation prior year point, too and consumer early COVID that steadily it's months. back current and on that seen and fees But an new it's activity-based are might out fees. we've the first to The we've very and variation anything could that tell. that little we have be about, material. impact have the with we're And not and year on certainly between to Absolutely. folks And on a goes heading

Feddie Strickland

it. Got

taking for my thanks questions. Okay,

Operator

question [Operator comes ahead. from Please Tim from go instructions] Switzer KBW. next Our

Tim Switzer

this like Hey If in that I year, on toward of Switzer kind If Perito. Or in anything quarter mortgage. would this good morning. of volume? quick. levels for that excluding like back half real rates second repeat go back This you follow-up another we QX there fees the expect one on of saw some kind is to saleable increase we factors sometime to interest other Tim mortgage Mike had the were won't MSR these go changes? quick

Matt Garrity

and It mix saying, bump some over us like to if But expectations. more call a this perspective pricing our pricing is strategic on This a the our Good salable made little salable the side in by before, our some better a, is this the year. price, put levels. adjustments on We've deliver we impact, bit expect that in and play rates, adjustments, our mix. would the stabilization the it, be I'll the term We've very of we've it in sale us but to really with mix to on morning. QX back I more increase certainly, gain think a of salable in story low probably more because where shouldn't back extent XQ we're outcome decision activity and feel for quarter to of we've real point the even longer with disciplined out this to an like from no, to still earlier for year. We mix in retreat gain Matt. the overall made a been portfolio. you balance for the answer sale an outcome seen there in To again, there. outcome well a positioned in is is

Gary Small

business, a in XX%. and our just general, we firm great more business is at as activity, doing than of if the a much bit would to a there. you little Our construction percentage higher product client, as than but out be That value is purchase value as peers total times price meaningfully the is differently were

it's perhaps because the product little price-sensitive overall less I us offer. bit that And think helps that a to discipline. with pricing a our So we in of support position be of

Tim Switzer

Yes. of That what you were under what salable your mean kind quarter, And percentage is is XX% Okay. it I sense. makes typical this if normally?

Paul Nungester

Our really how adjusted. model want to business barrier. our expectation be is break we to That's that XX%

south were XX% we that number. QX, mentioned, Gary of as So

But said about again, adjustments and there of thought we've a again a our but at now -- at putting value the with days see we're running lot around salable. we're our that better here and made, mix we only our expectations the us portfolio in XX was quarter, choices was it's term. that targets long that into decision So we our was with strategic for the

be now. -- right a we're want like it's situation, we fluid we but dialed kind feel in to So we're of where

Tim Switzer

I Great. got your one on more And Okay. buyback.

kind And the little With on QX stepped for going I'm level your there continuing this? back capital strong guys you capital about determine target there want guys the room in to is how to to program. levels, a up acceleration push and you talked a trying hard an You achieve? then year? are bit in of the is guys half of buyback

Gary Small

with first. start I'll the latter question

to running If it fine. X.X% for were if key to ratios the XX%. And you our over we adjust we'd X.XX%, close in just on X.XX% not PPP, be most we're or

take So top. might you we've what got to But if how we due through as room math relative authorization in tangible we second be Paul. our on the be inclined do might this substantial to the to much capital a time, off in run can authorization

Paul Nungester

it's our acceleration, in certainly, then at we've of place but in to for levels, if take to bumpers off terms Yes, current reason, manage the attractive, conditions permitting things whatever got market were accordingly. obviously,

Tim Switzer

Great. Thanks for the color.

Operator

question The Piper with Siefers ahead. follow-up is go Scott a next Please from Sandler.

Scott Siefers

Hey M&A some sort thoughts lot nationwide guys. Gary, hear then just more on on discussion, of activity capital the a as guys to your Thanks. and well. and curious following activity your backyard

So just thoughts? your curious hear updated to

Gary Small

Scott, I would the have in first and through itself. the cured is talking everybody that quarter, the Midwest, except quarter, then second said

would there zero. discussion the normal a XXXX I think lot expecting because normal been flow it's discussions. it's normal more a we your But feels that year, like have It in XXXX, environment. it's last was

of the old we've think of I so prompts are some activity looking because same are PPP for margin compression And years' of to relative bugaboos. revenue that. and the banks that forth, worth got flattish at pent-up a two book even adjusted

we So the there rational discussion. it's seeing is more were a first discussion in quarter than but

they what are they folks doing think forward. strategic planning as I going do doing should be the

Scott Siefers

I And so. covers All think Okay. officially that it, right. any

Good. Okay.

Paul Nungester

back PPP welcome numbers. got your the fall. call, Scott, to this I you Thank

Scott Siefers

you much. Thank Terrific. very

Paul Nungester

end unrecognized June, fees, of of most the had but Sure. from we $X At total million of around of a two. that's

So through $X.XXX now. million of that going round relates right one, forgiveness to is which

to come $XXX-ish of related loans potential question the mark. that's $X million a that in in that bit little is they're million that So and a this year. Of those could over still

Scott Siefers

Yes.

Okay. Terrific. I what exactly need. That's

on up for that. following So you thank

Paul Nungester

No problem.

Operator

concludes the to would queue. conference back to more session. This I remarks. our closing question-and-answer questions in over Tera the turn like no are any There Murphy for

Tera Murphy

joining Premier and a time interest great our we We discussed today us thank day. in your And as quarterly you. Corp. for Thank you appreciate Have results. Financial

Operator

Thank The conference now presentation. for attending you concluded. is today’s

may You now disconnect.

Premier Financial (PFC) 31 Jul 212021 Q2 Earnings call transcript