Earnings call transcript Q2 2023

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Operator

Good morning and welcome to the Premier Financial Corp Second Quarter 2023 Earnings Conference Call. All participants will be in 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 conference over to Paul Nungester with Premier Financial Corp. ahead. go Please

Paul Nungester

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

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

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

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

Gary Small

to $X.XX Paul, falling the pleased Thank our quarter a $X.XX good core a sale of Insurance second from category to well-executed morning share team On all. the of earnings First you, Thank us. announce you for agency. I’m per $X.XX and another earnings of behalf of the and with joining Premier operating into share resulting Group

for shared over and expectations expectation to we Coming on our hard call, very a normalized quarter. out worked deliver quarterly the of first our earnings team our more call range quarter that

of core account the sale Insurance Group assessment business First segments, trajectory, The management. emanated of capital earnings comment and effective growth for strategic into on utilization, operating genesis a the First taking from a Premier's execution each transaction.

and par agency valuation position on today's a it its we environment. to While we on potential the by the been and be dynamic a from in better perspective, the pursuing would capital performance achieve agency higher currently with return felt industry, strategic alternatives consistently strong -- financial has agency's could achieve very

result, quarter, all tangible bump no value banking forward all Premier's to net effect core current and an increase we're in capital and on per liquidity for win fronts. with We and share, basis. support reported go growth a improved the on The book in EPS in well businesses, excellent earnings future positioned a dilution $X.XX our

move performance now highlights the banking to Premier's for quarter. I'll

continue XX% very existing excess for growth loan to totaled opportunities with supporting Annualized -- being the X% grew deposits was stay and commercial origination a commercial opportunities. on drop our annualized selective. our pace X% during the C&I C&I business We representing focused of loan in the course over clients see deposits quarter market, of in on the customer are but along in growth the terms the same quarter. X% slight We in targeted of with quarter. the absolute on new a with Total

products to continue industry. see higher to the deposits migration consistent earning We with of

with be the effect effects We offers Targeted remainder deposit last while felt year. track of non-interest expense higher The the deposit attracting income and high category. was of quarter second rate prior wealth digit the single at time premium having initiatives neutralizing money on related redirections repricing, primarily quarter full versus fee upon in with X.X% with time same the new the reporting the year category over on success increases. are are up the reduction to offers, in of income deposit core

income, for provide a recovery Consistent increases. charge while and quarter, are in we NPA also of early delinquency net expectations the margin interest well. unfavorable very rate June protecting off last hedging in boost net position in engaged we call will we with solid from the quarter. perform funds set numbers on which future to in activity continue with perspective check, to impacts were much and four net quarter portfolios Loan averages a our Fed near-term per

given sizing also additional trims softness the expectations continued doing We've residential operation, in and growth for so the of mortgage portfolio taken the business steps our right in balance our sheet segment. residential

year. unfunded construction versus commitments time this down Our XX% are last

And with more that, it Paul turn details. I'm over to going to for some

Paul Nungester

couple by the Gary. you, important I'll Thank begin describing during quarter. a transactions

increasing generated First June XX, $XX.X before gain of sale we of equity Group of of goodwill of points $X.XX Corporation. Gary This net tangible through EPS. $X.X of on taxes capital intangibles and First, and transaction Risk of million $X.X strengthened Insurance tangible the The the which recovery costs $XX.X or million said, a gain million, value. transaction sale million $X.XX added completed Strategies a basis to by and of million as significant representing $XX.X XX

hedges are and income of three-year. June, rate in These XX. We carry an had swaps annualized were will including asset accretive million variable proceeds earnings hedges deployed completed $XXX Separately, loans. average X.XX% balance of $XXX of the generate utilization $X.X million effectively as provide pre-tax against of swaps, of pre-tax a a forward, full the to and are they then all become quarter operations net and million rate XQ into to of increases. These sheet pay-fixed/received during series protection improve expected June going we agency's sensitivity as offset pay some additional interest and of two-year

in impact basis an now net increase net sheet, these million June, balance Including XX pre-tax new of by increase million interest XX. SOFR generate income we based on the expected each and our Federal impact of $X.X additional annualized swaps to net March, as estimate point annualized receive-fixed/pay-variable our XX $XXX to interest reduce basis million forward, Going could approximately swap. point funds pre-tax $XXX,XXX XX the in rate of including prior income, notional $X.X swaps is compared of the that all each

improved FIG XX sale. because points basis equity Tangible X.X% our terms, including X.XX% X.X%, the to sheet, For AOCI. excluding in the of AOCI TE the improved in during levels quarter dollar capital balance significantly increased or by ratio part and

impact guidelines also and AOCI. steady quarter. regulatory the ratios recoveries Credit of all quality a net increased for loans the while continued decrease to Our and criticized was net exceed they in including including capitalized

by to primarily an in increased deposits. due deposits Total X.XX%, increase broker

migration for million fund the deposit bearing public experienced from an million a offset savings quarter including as non-interest by also yields. net impact mostly during time mixed customers [ph] deposits and market, $XXX We decrease money a in look higher $XXX and increase deposits in demand

quantifiable $XXX successfully at expanding June, via the The the Federal capacity quarter second capacity borrowing million due XX. liquidity during XQ Total $X.X of was million primarily program. by increasing our Reserve than to $XXX improved borrower billion in than custody sources FHLB at with including more billion more $X.X the to in increase

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

uninsured we XQ. our XXX.X% of adjusted experienced Primarily at compression to previously additional liquidity total NIM mix a XX. As was due during result, deposit deposits the I June, mentioned migration

costs ICS/CDARS customers and broker Interest XQ, migrated was for to bearing for increased public deposits higher market time utilization X.XX% money rates points XX to for accounts deposits of increased basis accounts, as deposit which and yield. due primarily

average June increased monthly XXX from average of in rate, X.XX% cumulative interest-bearing secretion, in for deposits compared Federal points which from XX% deposit to December, the up beta effective funds X.XX% XX%, the customer basis a broker March and Excluding costs to marked XXXX. were during change

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

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

loan of income net the the during quarter. compression deposit to However yields interest and outpacing led margin second costs

from up primarily Next, income FIG security $X.X excluding income $X.X banking to million was in XQ. due increase million million and or due valuations. of XQ primarily to for the an a in gain, This increase lack $XX.X increase hedge $XX losses a mortgage XX.X%, was million non-interest

million transaction linked million, second of million cost initiatives or $X.X quarter for were $XX.X we to primarily during a on basis, expenses X.X% saving implementing sale the Excluding FIG began due down the $X quarter. costs

$XXX core million million estimate, of from our approximately other now from prior $X by FDIC total like costs full offset down year, million FIG, of the we $X For expect $X premiums. including expenses million, higher

performance our are the quarter. core pleased in with we second Overall,

million Excluding the $X.XX linked increased a impact pre-provision income X.XX% or pre-tax or basis and quarter return $X.X $X.XX. the on FIG increased of X.XX% XX% or Net sale EPS for return average assets, XX.X% increased $X.X income on a average to XX% assets. for on million

of of in the increases, our potential we assets, lead additional the inverted for FDIC sale the with FIG the front June, completed or the forward, saving continued and and curve environment execution proceeds impact such swaps Headwinds includes changes continued deposit positive of initiatives. migration rate As mix costs momentum in deployment that in premiums. to regulator runoff, include higher as increased even earning the could cost the the look full further possible

back financial That now to review, my turn completes his remarks. Gary closing and I'll over call the for

Gary Small

the growth, be Thank year. a you, your X% half. range less do quarter-to-quarter second I of set expect Paul. of do deposit will half We which much asset earning year. margin modeling but first helpful driven than we in some remainder be I would with of much we moderate saw plus for the compression will robust work. expect more earlier I'll share the the by than stick remainder movement, mix growth in in average some deposit additional movement year our X%, the the QX. that thoughts hopefully the for Customer the

X remainder for loss part four by perspective, figures improves in million in as of and basis expecting reflect of million and no quarter same without the the From expense $X to income to that of we're year. revise quarter remainder expectations for efficiency our organization, points. transaction the the adjust year FIG XXX a offs non-interest than a points basis about the for downwards the net more rationale. by will provision three the FIG note Revised charge I X total each ratio $X downward

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

Operator

you. of line comes Thank from So of question our [Operator the Perito first KBW. Instructions] Michael

Your now ahead. go line Please is open.

Michael Perito

you? Hey guys, are how

Gary Small

morning, Mike. Good

Paul Nungester

Mike. Hey,

Michael Perito

to in here. the but Thanks X% rough take grow on the of -- wants really on balance ton I the margin, questions. mentioned you a year, full -- start math Paul, the -- of sound curious, my to wanted it whoever back or for of I Gary, at the the pretty doesn't year, spread flat incremental just a my from of of or was kind sheet half earning it it, kind suggests guidance kind stab Gary the just like taking asset based should for

of to that trying year about and NIM, wondering, So say? deposits, what on the you're then trickle in the on it back half sure do down bring to going third like the to the for of I'm be of loans weeks incremental end we compression the guys just you're you to based still expect targeting few kind and quarter the first kind how moderate of how the first half what last relative the year of does of quarter, think to just seeing should the new you're sounds and which of customer originating the I so spread

Paul Nungester

you right Mike, Yes, that there. got

the construction But projecting loans seen in from side of of couple are on minimal as been the the best asset last through commercial back a are especially those the we've on even down but mortgage on on for good things additional that, in -- existing in down. like front, quarters deals a and looking Right? even there. they've we've we the comes lines as although that, growth been portion some commitments So burning production and cutting slowing always extent we're in

Right? terms loans. had So, especially in we've spreads. appropriate the commercial the definitely To get environment understanding the teams of pricing

about cost spread definitely that. borrowing being the our of in and thinking the of these So, on our starting there base incremental top -- then of with days kind fire a

on instead to trying fixed in some it door of and the the a to coming lot C&I eight, the loans nine adjustable. piece of the extent, new but So, seven, focus or also front even

So, commercial if float we've there increase think were I making been the progress would C&I terms up XX% to it's business from our continue in of obviously well. for good the those the front and on to rates as that, in to continue here on origination

the in said of asset if terms on as then, overall terms maintain just at In those bring Mike, an spread, we NIM in appropriate we as growth the of well what had importantly some and succeed quarter. of on migration while front our quarter, in of recent the we in trends, mixed deposit and it was initiatives a early the most lot the predominantly

April, basis a May, was each and Our other, monthly points June. within of NIM few

of and some NIM. impact if an continue then that to that settled kind So had were stabilization with would and early to migration help that down

that Our of we expectation see more would it so be major absent that a but would some few of bps could continue, movements. out

Gary Small

items improvement forth, hedging rates that to they and meaning that some quarter month have $XXX,XXX this the are that at Certainly liquidity activity a true quarters. that borrowing Paul based month the for just our so first see that does the the it we what into. the much true margin for and environment, we're weren't and Mike, that's and so got and we of a X% to two on looking movement unique with plus cash in FIG to you'll all will fourth well, mentioned, transaction third One converting numbers. also relative are two sort today's as

at million hasn't So do those looked loan of so combination $X interest balances tailwind deposit of net the more little to probably the much the base, when got the half, mix income. in changes second with and there. two, we It portfolio

Michael Perito

what make I kind on up really Gary. until up, a that is to environment sheet about just -- back supportive guys kind you you be to have of make hold you guys that's of the it are a or do guess guys mean, nature? how comfortably mean, generating Because I that at sense of I think mean, same the still margin the turn level does I team there's and flat still incremental being it does to above? balance imagine sense? not like you No, until all spreads, what at. there, changed, growth I in little still to look mean, get right you're X% more guys can share, to deliberate bit a willing you that back point I opportunities hasn't it's X% right. lenders kind take helpful. of follow is of mean, that just Right, I high just does

would moving Is what guess, when spreads? of you or why I the it that macro? So switch it as credit? guys does it we Is Is Like incremental are take considerations switch think that that forward? just some the turn? about

Gary Small

home amount to on ratio how bank conservative, a were and we you well. more results like loan spreads those we're do got are other our and ourselves, brokered through borrowed as the have Federal of before a trying in sheet right so We've we're balance the feeling now we and activity. a The much move reducing to money if little bit be will, We of we that loan stabilized put constraints to deposit the forth. of reasonable relative categories would

this trending commercial like will stepping, capacity we'll we'll away more in that's step the and that and and time that about for consumer the mentioned a you stepped indirect mortgage numbers in group. Retail, we the from have free it's and up slightly you so way we're forth the ourselves from down the business so that So, capacity. things those and with create create we and auto capacity the are see forth, away have, be--

And loans That's more in of get as a I nice when at even make on on balance safe at going making we're sheet growth. that the we those factors our position about mind sure borrowing thing it. worst was X% want we're we our probably to thinking think, X%, some and or It's rate are maintain that Paul position. first predictable mentioning, other on the about still so

as a and year, balance of to know, got in. at really the the had digest last as of sheet XX% right we good balance sheet get the we shape the side You left side in got we growth so loan

So…

Michael Perito

Makes sense.

ones Just two last quick from me.

be I of You little mortgage of year? but back Thank for guys Paul, have running willing the secondly, impacted the expectations kind of back bit, rate of sale to you of an know accrual talked kind sale that the around are just quarter. that a the rate then we any year around you. are do the half half you should gain the insurance share And using? this that for on budgeting tax guys kind you

Paul Nungester

that answer Mike. quick, last I'll Yes, real first one there

impact the is the XX% level patterns, around exclude right? when transaction, tax our kind So with the rate our you FIG of effective historical of consistent

Gary Small

was the an like Yes, because tax the incremental -- that rate FIG on transaction basis forth, difference in and of was XX%. so the it

Michael Perito

Yes.

Gary Small

That's how into normalized. the back we $X.XX

Michael Perito

Yep.

Paul Nungester

you Mike, piece, mortgage the on then And another…? had

Michael Perito

Yes, mortgage.

Paul Nungester

two expectation think reported for them the took about I you and be following split quarters if the into just forward your that two Mike, half going Oh, would quarters. Mortgage.

Michael Perito

back X so million take? or the the half X, about about give in bucks So year,

Paul Nungester

Give or take, yes.

Michael Perito

right. guys. and for Thanks yes, taking yes, my all it it. I I got Thank appreciate the all really guys. for Yes, Yes, color you, questions.

Paul Nungester

you. Thank

Gary Small

Thanks, Mike.

Operator

of comes [Operator Thank next Instructions] line the of from Piper Brendan you. question Our Sandler. Nosal

open. Your Please line is go ahead.

Brendan Nosal

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

Paul Nungester

Good morning, Brendan.

Gary Small

morning. Good

Brendan Nosal

should with of through wanted the well. recapture the walk interesting hand, other on after hand, so with rates up immediate the move one [indiscernible] Yes, this of hedges lower have you behind rates guess risen just rates rates income limit quarter much? higher, get the adding to little margin you're I thought down kind I a the fall, as already today of your on bit on process but benefit [ph], giving an

takes just hedges? these kind of and the right why to So, walk now and the through puts time add is

Gary Small

and may then let Paul I have comment I'll follow-up. a that Brendan, on

Paul Nungester

does as rise out and which to get continue Couple benefit it us give you Plus the things we helps NIM there, protection NIM Thanks, accretion here. a Yes, noted, immediate It as alluded stabilize to Brendan. as right, rates there. trade, of to fair PPNR is it's a yes, question. earlier. some I that

see and from the with you've to expecting truly back do to there's when any bps XX you it have more the from settle if or got it issue if you're it there it, at to stepping You it, Fed here hear we'll in, but know, they if the from Brendan, benefit. we're soon going is do

So trade, do right? you the swap well a can always opportunity,

there. The The the spreads were future curve weren't execution. the expected and where did between current the differences weren't we they when

benefits of the was dropping we So rates market benefit at continue when but of That almost the earlier, done to possibly a to stepped that the we even is got what near-term terms to what terms about it until created opportunity. or annualized year in. continues the rise, in just certainly then we'll wasn't time. hire between earlier million longer. talk there there be that expecting the in which and spread even quarters We have $X That's does was a benefit and a It for more. could near-term from weren't continue if it immediate benefit which will Fed here

didn't then. will levels at on just point the will if side. a And horizon continue this. go at then in which So and right? kept too why We off range us, we point, that our old be have terms to with positive near-term deal elevated them out these to the exposure, benefit that we in kept which that foresee into of rates have the for two to long back a fallen now that's by And long-term and them rates we we'll short, roll those three-year being then expectation the on position certainly is for one that

Gary Small

that aspect, but it of end for look expectations year better the left if the itself the a swap and be it do rest Yes, in in the lower I this the will the second it, we'll the the by like be the position benefit such think market great first the now, that, at of will portfolio lose money. positive swap you will high to longer looks of neutralize hire and two, come to leaves way extent beta believe year what of will, from that tea dollars. in rates our we'll year then retreat, its bear come the all as we and from in markets And just when three with we the

and on puts takes that. So,

have that balance on a and perfect XXXX, through would of I enough six had points were world, come gone another it we us. trade to waited I say But point, for first we probably the going also later protection, about of our the three as hat it be. it swap back if basis will Paul's were to in my the advantageous curve weeks window, than and planned XXX In the to back. never weeks do time, but price year, underwater see if to I ready sheet executed on at it. quarter never versus beginning to April was were we we the our going paid seemed before for the before have We wizard move of be to couple, we initially would to lost

Brendan Nosal

follow hedges All you book fair complicated you right, hedge the does the presumably on recapture I Maybe a of in securities there, down really thoughts how this decline, [indiscernible]. same the value would how would okay. AOCI more a on down up more materially counter? rates that appreciate these change one topic. captured of fast on securities much rates scenario, so Does the

Gary Small

don't we've $X.XX if out and from rates the over year. we're June, the of that stay of We've the the Yes, pool, from run the make be of numbers some coming as book. looking XX% at, quarters and accretion plays no, AOCI end AOCI if next that's in of themselves swaps the of securities, accretion got predominantly of at next curve tangible where curve, potential the a another by six most XX big securities that'd potential difference the they're to

Brendan Nosal

All right, perfect.

Gary Small

reflect Because debt we flatten piece in a our to that.

Brendan Nosal

the congrats and take on quarter. it. Thanks taking the for a Got I'll questions peek.

Gary Small

Thank you.

Paul Nungester

very Thank much, Brendan. you

Operator

Thank you.

no are closing Small Gary hand to remarks. like additional call questions to back at time, conference the this waiting for there I'd over As

Gary Small

good in seasonal been Well, appreciate your for Thank another news forward again, very organization and It's much. to all. I more interest interesting you next quarter thank you results. the look quarter.

Operator

quarter XXXX you Thank Earnings this call joining. second gentlemen, and for conference Premier Financial concludes Ladies call. today's

now disconnect You your line. may

Premier Financial (PFC) 26 Jul 232023 Q2 Earnings call transcript