Earnings call transcript Q1 2023

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Operator

Hello everyone, good morning and welcome to the Premier Financial Corp First Quarter 2023 Earnings Conference Call. All participant will be in a listen-only mode. After today’s presentation there will an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the call over to Paul Nungester with Premier Financial Corp. ahead. go Please

Paul Nungester

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

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

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

now his comments. to turn Gary for the And call over I'll

Gary Small

performance unfavorable you, And included to we quarterly everyone. repricing, results we expected for related net the income and mix share. funding, management, $XX.X changes. Last that quarter $X.XX a non-recurring reflected number we We to figure. also a morning Paul, provide recognizable to more of of wanted items release. and reported the The in million highlighted challenges evening, or Thank our path margin good per

outlined and timing part, While on non-recurring more be that share elements our were happy color our of performance for call will we'll in the most on focus (ph) release. [ALCO] the the items to

C&I on in touch that's up which sheet few the is with made balance focus a highlights. business our progress annualized XX% first for the day. prior consistent the to the X.X% basis quarters, Commercial was QX we've main and on period of loans moving that topics, oriented, performance management I'll were an Before and

any saw new first business best strong. had growth was the management we've asset and and that quarter of the growth team Wealth quarter in very years two in

property up of Our continuation well and revenue driven year. saw theme the in remainder we Credit for insurance quarter business our check. and remains the premium expectations expect over a the of versus casualty that $XXX,XXX

lower are on process, stress-testing effectively. ongoing and are an steady We with all our that. it's environment NPAs, new credit our handling At delinquency, point, that rigorous review this commercial goes and review, the a clients very

quarter towards reflected margin began landed full for we basis quarter Results deterioration quarter quarter. that to the First the experience year. at points of that end the of margin XXX impact fourth last of

Our programs January efforts February two adjusting points. mix stabilize, repricing they promotional and focused margin to and stabilize by deposit addressing movement, March, basis did product velocity, were separated our margins. just on

in March events commercial fund drove headline in and grabbing Although, unfavorable mix industry sectors. public the the activity more

Going sides both our work to income balance we're interest focused of grow efficiency, that We'll sheet elastic and looking most capital of of in net sources all money segments. loan to forward, we're on to then components and as ratio the our to going our addressing new improve continue needs need well, Ultimately, deposit deposit business base. utilization. attract We equation. to improve the funding margin

our XXXX To drive to timeframe, with out business offering existing give history, in new beginning little mid-November great the strong deposit a retain consumer we very book. came and

pause deposits, months. two in the than a periods touch velocity activity over Premier We experienced too data the to higher a a years, as over next and the movement last end generated for is book. much This our opportunity quarter. of base have for us deposit to certainly, recalibrate our a betas, an industry few of we're bit we strength promotions the promotional that first new That's existing running that business the we in Our see within available. come

a expected what handful of to It's we a received. clients that's a and and isolated the in systemic decline We issue. book cyclical it's not

events remain commercial as clients but more those ICS less the over costly month, did bit. steady However, more and March forth. mix given was the Balances the a solutions so were such look changed protection circumstances story favorable for and the as

We regarding all of capital, uninsured have share issues details to deposits, liquidity, the today.

turn I'm to Paul back it to going specifics. provide more to

Paul Nungester

you, discuss the unique impacted results. items some first of I'll Thank Gary, that quarterly

couple negative impact March; last quarter stocks the equity bank XXXX the of million pre-tax first the will following $X.X not mortgage weeks in that occur and noted $X.X that annual XXXX; $X.X losses recur downturn pipeline an update the of charge-offs related in As million earnings $X.X hedged adjustment investment due of the first a million in in items: of our of XXXX; expenses commercial the only timing-related appraisal of release, included that million in in to should quarter. to revert

each, share. have quarter per earnings first $X.XX Excluding would items the $X.XX were these XXXX been of impact that

implementing actions estimated could federal pre-tax interest the million Separately, that represent as income net approximately $X by based $X.X on sheet we in hedges. XXXX points assuming estimate our each quarter. last, didn't per that take XX, annualized we impact funds beginning and basis such balance XX any in pre-tax we change March rate quarter are million currently an cost And cuts second the

quarter. Capital terms basis AOCI XX levels. including solid Now excluding improved points to equity levels TE Tangible AOCI. improved and in our capital and during the by or X.X% sheet X% X.XX%, regarding balance increased ratio the dollar remained

even the Our increased regulatory during AOCI. well-capitalized of including important quarter. It ratios to they that the also impact note guidelines, exceed is all when

the a turmoil to which the X% increase deposits. interest-bearing deposits, bank two partly offset to in failures. decrease did was During note due It's March, about by following large bearing deposits non-interest prior happened in critical an that decline to quarter, occurred the in this first total industry

deposits during month the million total March. fact, consumer In increased of $XX

and to as the commercial $XXX clients using prior acquisitions, the related dispositions The in million funds early in on to run-off related well nature of funds credit of we experienced was our as anomalous more commercial year-end. repayment lines moving their business to quarter with

into million non-interest customers bearing deposit bearing of combination the out of deposits experienced protection investments mixed other sought a as with or also quarter and We transferring ICS deposits insurance a yield. migration and $XX interest during

Speaking to when deposits accounts. XX.X% of or of uninsured deposits, internal deposit insurance, for declined deposits, as the as XX.X% our insured such collateralized adjusting PDIF level other and such OPCS, Indiana

which March capacity Our including sources of of press $X.XX release billion, XX, billion the liquidity list provided borrowing FHLB. with quantifiable a detailed at $X.XX exceeded

increase in million capacity at of by at our the expect Reserve We process in $XXX are also and the second quarter. to that least expanding Federal the

reliance XXXX. deposit experienced to higher accelerated an and XQ. migrated Public/ICS/CDARS, costs protection for yield. due increasing compression as to Interest during basis due cost was deposit deposit we and insurance XX increase beta, primarily customers X.XX% FHLB, on increased This accounts XQ deposits to our money Primarily market and for points NIM runoff, time bearing

basis the as March. of However, December costs result of X velocity increasing average basis took, month in funds points to of federal from This of by in the increased to beta the which cumulative rate, effective a XX% XXXX. interest to during during the bearing X.XX% actions increase deposit XXX X.XX% slowed points resulting only change we represents average monthly the a compared quarter,

X.XX%, impacted previous which from the was up XQ and basis XXXX. combination margin points loan by interest positively XX growth of loan Net were higher yields,

rate marks, XXXX and monthly the an December cumulative in which same PPP of for impact basis of change points loan increase about funds for represents beta the yields XXXX, compared effective to XX federal the were average a the of March X.XX% since period. Excluding XX% in

deposit However, led the yields of runoff of from and net to loan FHLB the the compression combination interest and costs, during income first reliance quarter. deposit on margin outpacing heavier

million down $X.X of income in million losses from decrease $X.X $X.X and to XQ prior compared million gain result as securities. from valuations MSR in quarter due due production, mortgage first a $X.X in a from a million valuation of gain of non-interest XXXX gains from $X.X decreased a a on XQ securities in from the of for Separately, $X.X $X.X $X.X the compared declined primarily to million XQ quarter, lower of of in Next, $XX.X sale XXXX. a million equity XXXX, non-interest hedge gains decline $X.X million the loss valuations XQ, banking on the million million plus of primarily to million a equity to was security of income

movements. even over but and prices less to hedge out have can depending individual on rate time, sensitivity valuations results previously volatile market rate discussed, in quarters environments, volatile short-term be and As rates changes less

within the larger to interest in dispersion limited liquidity wide due monthly results. rates have hedge and experienced markets, pipeline the we and of quarterly However, volatility and

for non-recurring such annual about or X% on a linked as $XX.X taxes basis payouts. and payroll benefits million million down of $X and items, timing-related of Expenses were incentive included quarter

of As over the versus in mentioned estimate. $XXX cost implementing full we our are million million savings remainder $XXX year, our million bringing expenses year plans earlier, original $X to approximately the

relationship credit no was total update Overall, delinquencies of recur our loans. non-performing $X.X million not XXXX. remainder will were increases with stable XXX% in meaningful X.XX% in an loans was allowance loans. and due annual decrease of charge appraisal the primarily quality commercial or Net a during and offs for that NPAs of the criticized significant On of a XX, during to coverage quarter March

completed financial review. I my

call over the back to Gary some turn I'll for Now closing remarks.

Gary Small

thoughts some and XXXX. Paul for share of I'll you, Thank remainder the

for asset reduction the still us. is ratio looking Focus key earning Our December growth, for element the X% year. point-to-point a on loan of XX, over deposit to at remainder X% the year and we're

reflective new very commitments. some First is quarter growth in loans was effort XXXX and contained business funding The in of growth. of really zeroed on focused XXXX more

and Paul us portfolio will provision Credit severity as pacing on indicators uncertainties control, And we very feel recession, expectations still side. unemployment, around such and at as good we what factors remain macro so there are the provision prospects. strong, mentioned, but our about help forth, lower

side, there, improvement equal. February discussed, and you as beta we've Margins we're end the loan March, in all the being of is on things year improvement deposit some funded lag, but stable a will by targeting over the see betas and

idea, options. And would our near stability sure item to to list can from Fed we partial you and, A of maintain balance term the cost have of -- and the but installation earnings sheet funding the costs. of we stable second impact are There's increases. many of we embedded that toolbox trim opportunities continued evaluation could looking the to help ALCO be are I'm a provide environment at on, hedge The corresponding Examples the to well. would tools many be the of get and that as industry go supported. funding potential position wholesale lower future that components the

income improved a performance. and to margin have an We net path interest

strong the on-sale on continued and Although volume, balance to of in some made, expect the XXXX. commitments the remain gain go realized challenging the remainder assess until we've we'll mentioned, we front, and Residential fee the the expected Paul to be management curve. the performance sheet expense And businesses. for full will income not got earnings realization continue forward. the asset we insurance on well power unwinding as and We underway inverted see as of we're of the mortgage, progress is can

that, with And it operator, for over questions. turn I'll

Operator

you. Our Perfect. Brendan, ahead. comes is Sandler. Piper [Operator Please first go open. Instructions] your from Thank now question from line Nosal Brendan

Brendan Nosal

good Hey, doing Hope guys. well. morning, you're

Gary Small

Brendan. morning, Good

Brendan Nosal

kind Just off maybe on of to start margin. deposits here and

flattening of increases margin of means in factors deposit trying of pricing and help But hand, other loan to on couple to which balance what that one over March. of the the and us hand, next just the On can for kind I quarters? some environment. in be the costly grow this of lower you’re think Thanks. you two you understand kind deposits saw Can those ratio, maybe the

Gary Small

with detail, book I will follow-up but portions, Brendan. the couple a better would let into Paul break of I

will and On growth private initiatives the deposit the to relative growth I side, you'll you expect. to think come the consumer typical the see banking that

to is and I side, to the bit more to uncertainty non-interest volatility velocity the is segment. where from more that we're whether business think interest-bearing relative provides to probably of relative on that the growth bearing interest-bearing it's margin most or movement, feeling interest-bearing lesser

Paul Nungester

Brandon. not performing that disturb are We're Yes, well. piles that's looking right, the to

your beta that, savings, those are even holding consumer I cycle. from this basic things think a staff, some whole money steady checking, and market frankly perspective like moved haven't

of have can In earlier, to recoup as of his some where in up we terms some and to that. coming margin, of from promotions opportunities we're costs we comments the the to alluded near-term Gary looking do some help

Now, additional rate depend part of on movement, will of course. that fund Fed

that those a that piles. we'll lead we're So keeping abilities eye run-off in close that repricing on to and some into factor could our

continuing to benefit And a then deposit be the on trying would separately, book. focus grow to it overall overall, betas. But our to

bonds play book. of it's will that increases FHLB public that their, grow somewhat that CDs, like that's then where will of (ph), comes [indiscernible] additional to And deposits Some [come before help the seasonality things like and given at Fed from costs in fund time but into a that's top push things in] ultimately, chunky end, are. the

the our So our on stabilize of then or to And would make strategies alluded potentially other are from an cost improvements. out to of hedging interest-bearing pick spots perspectives funds, last to the for. maintain the of is and total at that some and The we and we're try ideas liabilities, all-in kind be looking there. that piece our maybe benefits intention where some

pretty look much all taking point. options at we're So at this a

Gary Small

of the in came of book in got we're started sensitive of but comments, if of of around wealth and my fast Brendan, you not we will, private really that into price Fed balances banking on feel moved management, the on we relative when the one movement, dimension bit we decisions more to next existing for QX that in out did gate other of couple we the rounds and comment in the little stood. management in our ahead did mentioned pretty But pack will any made probably wealth our repricing books. and business, sit consumer January adjustments, a were, we our I that. we hands mix the and one

we ourselves size November way things, in discussion. and of and very and the not was just January-February with than by two that's still comes well in of here timeframe or well be might a out-of-the-gate diligent of very movements moved December suspect, of different being about those didn't pace we return pretty either or twosie the way, us can supporting late to the it's more out form book how it. one that all in we're quarter, Fed degree, that there say, movements, is latest in moves. elasticity that's actual go active If if So in onesie, any fourth matter But you we've sort there in the a the we

Brendan Nosal

release us adjustments the hedging do over on all obviously, comments run-rate on the Can Thanks of from quarters the well. of couple noise. as the those the the next Yes, just mortgage of past for item? line, understood. a And sense MSR one the kind lot the Perhaps monthly what and and line more detail for quarters? in of as you over me, give trends you you that view just a heading where see several it on

Gary Small

Brendan.

we January. our out as setting we're in guidance were on think I that

for that's net the a fee stronger side, We and are but right and of $X the $X we will on million out on regular amortization that $X.X because challenging to of with on couple about number got the income that to of $X a in on sitting now, everything the or changes mortgage servicing income, is gain of it that environment. to and it's ever, coming was stand than And on take remaining we've gain get sale. going sale,

can net And the any you because that construction we $X in ahead as about say a at on down the track be one-quarter, should make quarters, to $X could the in what million do these cycles up or but lumpiness. is last which pieces period Paul houses. what When -- the [indiscernible] I six-quarter But that we of that be, Paul $X.X we're about over mentioned, understand we that it look million five gave million.

were program, two were of quarters down example. that a there another good uptick are had taken So, -- in it's quarter granted. the our of But We we last not year. for first last the a third stroke rates in a big falling and the effectiveness was these quarter But check fourth in hedge overall one had quarter the falling. as

hidden an pace on be the a of that But to XX% we're number. sales, lumpiness last mortgage our in used in external larger running as industry volume I down the the quarter year. XX% of with at it's first So, about to sale bit gain think

you hedge. visibility standard activity what not So towards lot and lumpiness a the more just see market of to mark

Paul Nungester

Yes. the and I kind was in it going [indiscernible] is, does partly production and hit stick just Reality this from always nowadays bit normal volatility we on in said, of as didn't the little the out background. on for less side but, bigger just activity. Gary

Brendan Nosal

the for questions. Thank quite Okay, helpful. you taking that's

Gary Small

Thank you.

Operator

next [Operator is comes go Instructions] Please DeFranco Andrew, your question now from from ahead. Andrew Our open. KBW. line

Andrew DeFranco

my in Andrew is Mike. taking Thank questions. you this filling Hi, for for

Gary Small

Andrew. morning, Good

Andrew DeFranco

touch for you're in and could opportunities you've there focused and about here you I the regards talked new was the I seeing just some business contained minute. wondering where mentioned? the if provide color we on can good more know the to book but remarks, prepared on just you loan a C&I growth growth in that

Gary Small

I'll of it down the will. break segments, if you into portfolio

on We real-estate for constraining as those going to residential portfolio far as Keeping down indirect XXXX, commitments forth. residential in growth commercial the of capacity consumers, so of and think auto, on do have the particularly the construction and books commercial first from purposefully in expand. equity growth into construction flat that see, that and leaving lending balanced commitments are forward, XXXX. home to so ourselves our are you funding book part real-estate We half both

we than an that would targeted think on to X% as it's situation. perhaps side our action, looking some I the so perhaps we're a in the the was our to on liability handle side or containment side left growing balance our of less at because get But take We broader max to closer commercial the to generally X% January And guidance speaking, earning X%. or get more that was now, growth well. and earning way was down about between balance grow at say so back sheet -- our of and commercial want the on that better book asset asset asset

so our we're -- is there are need And We're existing always. existing we're there's exceptions now of that, the And with our selective. fulfill very the to right but there. clients working And that's clients. capacity spending being where to business that's

Andrew DeFranco

front? a all excited there. happening M&A me, lastly appreciate you discussions just one. guys anything on today Any I from are the Okay. And then that colors quick or about

Gary Small

share to this Nothing point. at

Andrew DeFranco

from That's me. Okay, all my great. you questions. taking Thank for

Gary Small

Andrew. Thanks,

Operator

currently to Gary hand like questions. final for ahead. have back Small to Please the further no I call would We remarks. go

Gary Small

thanks morning. this again, joining I Well, and in think for very challenges us everyone we our all and have industry deliver a of ahead I'm quarter squad's ability to Turbulent the year. confident good us for good

looking you So, to future. the in forward to talking

Operator

concludes gentlemen, and today’s this Ladies call.

You may Thank lines. now disconnect you. your

Premier Financial (PFC) 26 Apr 232023 Q1 Earnings call transcript