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First Midwest Bancorp (ONBPP)

Participants
Mike Scudder Chief Executive Officer
Mark Sander Chief Operating Officer
Pat Barrett Chief Financial Officer
Chris McGratty KBW
Terry McEvoy Stephens
Michael Young SunTrust
Nathan Race Piper Jaffray
John Rodis Janney
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to the First Midwest Bancorp 2020 First Quarter Earnings Conference Call.

Following the close of the market yesterday, the company released its earnings results for the first quarter 2020 and also issued presentation materials that will be referred to during the call today.

During the course of the discussion today, management's comments and the presentation materials may include forward-looking statements and non-GAAP financial information. The company refers you to the forward-looking statement, non-GAAP and other legends included in this earnings release and presentation materials, which should be considered for the call today. [Operator Instructions]

Financial Mike and and Pat and Chief Vice and by Mark Executive Barrett, answers presentation will President President call Sander, Operating Chief for the analysts Scudder, for Chief Chairman Officer; Executive be only. Following opened the questions Officer, Officer; and

Scudder. will I Mr. turn call the now to over

Mike Scudder

while of today, our started quarter its to all perspective with the my plans going from to pivot away doing pretty healthy. Great. Thank to Thanks everyone, with cover when for not my these which And what the underlying necessities and of had of our you. calls, frankly, suggest everyone. have the COVID-XX display it's that with respond be we're was radically strength and we that we that team, you From certainly this along us are as go finds we less to and staying joining really really anticipated is Certainly prepare you. performance anticipated, for financials an one Good times. or the well and the and your the to core we and the have character as perspective, families, dealing began about understatement quarter I over year then, more were the unprecedented careers. course operating on of crisis. From morning, pandemic our company numbers would about great at me, for so when today. these and times our hope through It's times to this would

the frankly, team has a as extremely banking time as done across and I'm led together. just vast our whole of This has proud majority of been efforts an amazing and our pulled has those job. a one company industry tremendous Mark the how really reflects. absolutely And

that done front of of fell about talking outside before the accomplished him the opportunity the So to just we quarter. that on business. give we've course I want amount what cover We start ordinary specifics the to tremendous a of

our needs our doing part clients teams just And really our meet as of a and colleagues, to whole. our the

had we cash all to to of safety, so. business We our the And that, well. and clients needs send heighten teams, recognizing colleagues help distribution all platforms, on frontline had the adapt need as support influences and flow operations. our their collection simultaneously, So meet stress just do and our really communities our individuals the that's that and to of work for needs, of hard

cover So efforts specifically slide Mark, don't arena? talks why you that that about on the all that

Mark Sander

and Mike, Right. Thanks, morning, everyone. good

you through see our serve of page been can deck, to as lens numerous Mike of now. these clients is our to done we the said, unprecedented on more two colleagues, as communities. important on do, always, As times. responded, that and our supporting has we Everything fronts Never than

for remotely. As we all operating work we and for levels and pay who in employment adapted cannot maintained pay fact, enhanced our model, those colleagues,

many programs in out book. representing past. the We clients, awards support best clients, far, maintaining as for rolled us our nearly while to approved have Thus at Similarly, that can this $X.X we've services benefits payment X,XXX in XX% also we support of in to need. all levels colleagues expanded over deferrals billion won we our as commercial of

in our In funding. last we're colleagues payment that of about consumer the clients addition, $X.X deferrals as the to clients have the book. lives of X% for hundreds or approved X,XXX helped of month, $XXX program And consumed in secure pleased we've over protection million X,XXX billion

donation committing last employees. contribute. that their our well, charitable of communities $X.X to we lives the foundation, support our normally top have of course, is, but on XXX,XXX everything million these then increased of of to not Importantly, which our over impacted loans we from an as have additional And least,

reiterate I'm I said. want to So up, just sum responded to stress. tremendously what our proud to this Mike colleagues of have how

about It's people doing speaks culture done. built of volumes I and good, what think caring on really. company, our simply thing, that's the the it we've right

So you, Mike. back to

Mike Scudder

All Mark. right. Thank you,

implications need to an of I well of we with as closing And to pivot as well Park transitioning to our certainly, all practical on So acquisition implications side reflects our say of the that and of to talk the the additional as as the as was lead-in, of CECL. to impact Bank quarter. as respond said, a about want the It COVID-XX, one. least, active the of accounting the

So reconciliation the of recognizing pretty and I'll through the as Pat all's to need leave my desire we and you all all elements, leave heavy comments for walk I'll it. a Mark those and the high that keep to and at level them. of of lifting

about think go However, as give highlights we and a observations this. the I would you through as quarter I few

had March line $X.XX we that with do closed an Bank was as Park but the that additional it First, to COVID-XX were per the to to share provisioning on loan just $XX EPS, and in and companion share environment We expected due that. reflects per X. we we $X.XX going or to booked, million fact loss $X.XX, on what acquisition we related in costs, in

normal that of in. of we're elements worth didn't also that $X.XX. We I We had but fall were the adjustments, swings probably had environment what practical with certain dealing would call that security losses. of the $X.XX into MSR performance another were some operating We realities had

another cleaning costs different for the And one that did that went hit then things and as building. it, through $X.XX you to related we elevated probably had pandemic-related occupancy, maybe

about the and us a that provisioning the acquisitions, puts So back $X.XX you if at share. add just

quarter. back related the of for to acquisitions You if security generated a could and really solid $XX losses, perspective, $X.XX pre-provision the probably pre-tax, away elements $X.XX, yourself get to you add environment. other the a we million From some from

the largely on due that think and natural expected that drag what last the from change the to saw from pretty revenue accretion. interest rates relative in about the and to we in as away just goes much change it we performance we quarter's decline was from So provisioning,

other just the quarter fee was we fourth the of element And we year. had record levels in the really that saw

we then were the basis, Net million quarter. margin off compared the million. on a coming from So ago, of saying a high. first in period million. quarter up was $XXX pretty and income year goes linked-quarter $XXX obviously was really the to days $XXX $XXX million And our without fourth it That's down a there's fewer in interest

and the XX% in it points. in margin, quarter, offset you fourth shift relative was the the the you average grew annualized, think earning more than shift the benefit that days dropped really about for through Again, about go but quarter. If as XX in our and about assets which by to of accretion and X%. think That's fewer combination rates basis

lending look rest talk the from about pretty saw production. And assets will X% solid. up decline ago, closing growth X/X our was to and related Mark again that relative About a to this, and of That's largely there by to rates. average to then $XX year billion. the the up at year-end. you Loan were that margin which XX%, Park, increased due if our was it of really about to but growth the due we earning was offset was

acquisition away more largely things basis, finally, and costs, year noninterest income were expense to expenses due we in you capital those was if were down, activity ago. the look at from was And looking allow as quarter as XX% it a at as up relates the markets, quarter, record and were items. to relative size. essentially It from But then incremental from all, of a a fourth fourth revenues rate-sensitive where assets year in the percentage all for metrics. from both said, they a line really a on decline Fee swap-related flat average and improved mortgage growth ago, still we and

Our are goes and along and that. distorted metrics the of the ebb flow all and with credit by that CECL acquisitions combined impact really

and all certainly, can quality in much is quarter. the wipe explore as overall did all and from pretty further. COVID-XX, that that and it of provisioning unchanged to asset Obviously, you our million $XX relative the If out for relates position book we said additional we done, fourth

excited Park stepped Great up. close. great team, They've about really people. And finally, very

Our teams on continue and contribution be see obviously operations will our pace then ready which third conversion, we really the to to the grow combined are systems in for go, to a from mid-June start quarter.

give Mark? So it let of walk with me and and the color to of can additional they they as you Mark remainder materials. all the turn through Pat, over that,

Mark Sander

Mike. Thanks, Yes.

$XXX we welcome to and welcome our picking Park, relationships. delighted just high-quality in Wisconsin our working $XXX up a high of their this franchise. we But the to so $XXX At this through and alluded importantly, on $X.X for which in about quarter. colleagues. C&I about of as closed grew loans, four elements the reinforces to, challenges, from CRE really Clearly, million and stellar They've absolutely consumer. major from have current level, million billion commercial were page And our we're Park future on optimism been the new Mike million

In really and loan good Park strong had and draws we growth growth. was from away the of commercial, Away XX% line pandemic, quarter XX% a from production. our

production of commercial activity utilization line spoken having growth year-end. segments. of was draws level growth time remained about all only and we healthy saw increased pipeline payoff increases as some up Each More notably, mentioned we strong it's a line them our I the but of although And lines net that commercial levers, X% net by when this of our from some good advantage the of see $XXX had QX, quarter. see across driven we've and the million pandemic, a high, While quarter. in from nice our loan really about different about we business picked typically single activity in last for new very saw quarter,

QX, bought In HELOCs profile. high-quality consumer, their some early return risk attractive in given we

production We on also mortgage our quarter. the held more balance sheet of this

greater sentiment. the the first to it's the project this clients the future activity resumption tough while five So industry. speak of remain frankly in couple to uncertainty anticipation across the deeper given that stress book, around at forward, prospects, loan of and growth loan dialogue of of the active is quality asset timing a current pretty borrower looking with of and Page given the we and circumstances point, slides

a than and in loan exposures very corporate modest X% portfolio elevated risk sectors most segments have represent granular of the economy. diversified to These the book. corporate with We stressed our less

deeper parameters segments scores across to years. modest FICO upper of several get in area underwriting high lending and we active scores. of given residential book our PPP. lending. we navigate good risk on well very view demonstrated highest consumer as the some management last analyzed The current We our has much the feel and modest light And and certainly, believe relief loan entire disciplines we've about page serve regular as will portfolio us six, consumer that all uncertain all should end FICO and underwriting maintain diversity, a More their from very in our our over portfolio, deferral environment, the measure our of at stay and consumer broadly, the values here portion course, of as our portfolio of programs we Similarly, this total also they of is future. participation in

Pat? and pick specifics is credit talk metrics. now Pat's So going about around up it to some

Pat Barrett

Thanks, Mark.

to in on on the a million loans. Moving CECL X/X previously increased the allowance million day of to transition increase of with XX. CECL, of acquired increase communicated from seven, of due December to our to resulting with by million our in line total of to our credit impaired $XXX half X, increase this adoption driven was expectations. January of slide one marks was allowance allowance, $XX Approximately by credit previously $XX the start

of the the allowance In two $XX quarter COVID-XX. to day by for deterioration million, economic conditions reserving addition, reflecting due current increased expected

minimal our and basis relief one equity capital as Tier regulatory impact the COVID-XX retain was XX common transition There points we deferrals, to capital. CECL to in capital approximately regulatory which and elected us allowed

$XX our impaired in of Excluding noisy a economic improvement driving to all Park quarter or a million. very of reduction experienced reserving the virtually which $X related we actually credit of of of PCD approximately modest The approximately the Bank, allowance addition loans. piece final of was deterioration expectations, or increased acquired credit million, for reserves

charge-offs for million expense reserves quarter, established of allowance provision $XX Our for on reflects $XX the $X Park the $XX in million. million increase million and COVID in replenished around of

that credit We slide this any nonperforming. category, to does saw the deteriorated Moving change recharacterization asset in quality quarter, only largely to the there's Note of loans in on CECL in existing that a the purchase an definition. in increase eight. of been driven first not and nonperformers the adoption the deterioration by suggest

and normal modestly. net the asset requirements quarterly change, loan four were this CECL the entirely declined this fluctuations. consistent modest Excluding nonperforming Similarly, charge-offs by in point the increases and accounting. was during Absent impact, driven net actually increase of basis with charge-offs quarter

deposits a be as on declines the real We offset on touching good slide well Park. in Briefly This story CDs, normal strength of franchise. seasonal segments as by a see certain did to and nine. continues addition of our in

would further with cost Our XX% balances. although leave combined And nice somewhat. difference here. growth continues expect environment, industry's the to deposit structure the that to in in rate in us in low advantageous remain interest end competitive cost at core near we costs has funds, this declines likely an ratio low Nonetheless, with the narrowed of of term, it's

liquidity slide XX. and funding to on Turning

granular of liquidity. primary is $XX stable deposit Our long-term source billion our and base

Additionally, support policy and ample internal in part our CDs. Note additional we that through provide increased relative borrowings sources capacity This limits. capacity to capacity colleagues our funding funding of highlighted that brokered clients, as for billion is over sources $X have communities. to are

higher our of commitments total brokered loan than unfunded remains approximately $X CDs, capacity Excluding billion. significantly our

favorable XX. increase Turning XXXX. million It X% quarter. due was to to decrease decreased by of and and lower costs, of and Securities by the compared purchases, the from flat as prior on rates accretion up ago. quarter period interest $X acquisition closed to was of of million in net million the prior the nearly was prior finalization the resolution income interest allowance. same acquired Acquired same the the was down $X rates. adoption compared accretion to offset May the The that slide to CECL and year to impact $XX quarter, the loan margin certain or and marks credit a Compared in roughly accretion, interest period partly to higher to Net income of loans, than the XXXX. in as to and the cost the Accretion X% year, quarter funding prior contributed to of Bridgeview interest allocation expected due acquired offset loan due significantly well growth lower of loan lower funds. to compared lower

ago. X.XX% points equivalent from NIM net the and for quarter period was basis year XX down quarter same interest to XX Tax current points of the Moving margin. linked basis a

ago. compared Excluding was driven down the margin quarter, reduce points primarily X.XX% prior this a lower prior loan prior of quarter from for market points XX impact we partly basis the accretion, by the margin same to the the both prior by took was reflected also actions year, quarter, periods. to lower compression from yields cost year and XX rates Compared the of offset to basis Margin on compression rate was sensitivity. funds. Compared to period

of prior modestly loss XX% of accretion continues lower the current around results million, as provision from the million is of reduction of be excluding to for to compared quarter of remainder the $X this the a year. the accretion Moving after year, $X down in excluding impact $XX adjusting remainder we in environment rate at the growth assuming year, rest for loan per Note, NII, to the for nearly for of being Accretion outlook, the which million the NII the our is XXXX year. expected CECL, approximately loan XXXX. reflected approximately expect impact XXXX throughout

near-term, as down is can yields deposit more repricing compression Our to expected core for cost outlook continued is than continued by in fall. for NIM the loan bring

to guidance. offering our challenging. discuss we're settles year, that, to unpredictability of earning back remainder over XX. is it turn project the accordingly, slide forward Given And through detailed on to ability growth asset not ultimately more where NIM income noninterest of the the I'll Mark With

Mark Sander

Thanks.

than performance the capital were of as alluded in saw quarter, that, incremental We noninterest a almost of the see last where the as $X We guidance. our in million of solid a securities were mortgage quarter up seasonality despite line $X from and up our from decline servicing had fees you in XX, our given right expected, $X record QX. legacy slide linked additional strong, albeit this million $X all as million markets in year-over-year and million measure our did Mike elevated from Here, with valuation levels normal Swaps a to, lower well and we fees is other most remain rights. think very We we and better in loss on quarter year-over-year mortgage modest benefit We growth of levels XX% revenues and the as were comparison, in income. Away a QX. quarter acquisitions. categories. down our

rate cost charges, pressure the are fee QX run given and forward, client programs will as slowed and about have accommodation all income service in Going activities our million, activity. card see off pause our normal we economic some to drive swaps that in expected $X.X

result, pandemic full the XXXX year impact down noninterest levels. a of likely from the As drive will modestly income

you over Pat. to now, Back

Pat Barrett

merit a and to The due our investments by salary reflecting services in higher process increases, continuing year base mortgage to and due technology same XX. to higher Away to the expenses by of $X associated with that expenses, Park these current integration-related quarter slide the on cost compared Note from Moving and consistent fourth higher enhancements. items, higher year operating up anticipated the quarter ago. compared the acquisition largely were increase on larger volumes, production acquisitions, with XX% with combined expenses to quarter commissions total driven includes and related acquisition. million prior to professional driven was the expense,

expenses snow and in Compared removal related technology-related ongoing investments. to to the increases prior occupancy, reflected quarter,

efficiency to ratio on down and X.XX%, prior to quarter run a first the a up our from focused rate. year down XX assets And quarter, basis declines was in points overall revenue ticked as of be has expense due ago. points annualized expenses continue the while percentage average our We from three basis

outlook acquisition the up environment. pandemic-related modestly, reflecting with expect Our quarter normalize, costs and rates for a with will the quarter tick run from Bank expense that the we costs combined run second integration away will likely along acquisition, Park operating is from full the rate

I a on leave note Annualizing total year expenses should last slide. reasonable before on be estimate based expenses outlook. for this QX taxes our current full A

rate tax continue expect guidance, to the for was effective that and Our through year. our the with XX%, approximately consistent we quarter

capital to XX. slide Moving on

acquisition, and to through our capital addition In solid well-capitalized consumed Park in levels credit reserves excess of generation We basis loan the the impact. of capital a well the ongoing XX which quarter impact a first points as as quarter of strong growth. a point earnings, result are XX point had repurchases basis as levels. during XX the impact with at Share and the around of beginning basis

We one regulatory in CECL which points about the transition equity and basis retain relief, elected us capital. for XX capital common allowed to Tier

In a from tangible $XX.XX up addition, X% is book share year our nearly value per of ago.

million And the million cost $XX over on total we and a as deployment, economy. the during of colleagues, share quarter, strategically stabilizes. focus suspended we'll repurchases capital reassess around clients, repurchased broader environment this the March, shares During time operating to at supporting the common stock X.X communities quarter. we In

XX. XX. the and with are we of that XX the we've persistence of convenience, the and During the usual summary the a included significant also I'd as for update for summarized remaining quarter year. communicated emphasize year on our paid financial withdrawn on at practice, from on We've this the a impact updated on slide your a federal limited, representing and Bank activities. is of outlook period acquisition Any customer Consistent or quarter, same results increase stimulus commentary impact a results on the outlook our for we've of our of pandemic, full that formally for slide the status future beginning more we and integration guidance quarter an behaviors XXXX dependent the slide year had XX% XXXX ago. the dividend, than Park

Mike over back Now to remarks. I'll it final for turn

Mike Scudder

Pat. Thanks,

So to anxious sure questions. to get your

then we'll and remarks, up. it further open some So

what company the as that environment come to think from to Just Pat is absolutely on perspective that outcome one we no that juncture. and said, can reality practical add future in predict to my is, this is or as the about where at going the this it,

we a it, it, about As quarter and as pivot. largely this I quarter, off started with, I think about think the as was

where You invested your to to clients simply and of plans, and had to energy needs response needed your safety take health and to was in the needs continuing your tactical the drop them and your it colleagues, execute. and into put that really focus and most, the the operational of be

those as quarter, look the start we investments shift of second forward, see do impact as the we'll The you and to that.

associated programmatic costs with of and client revenue and those the see and fall accommodations impacts colleague You'll through. things incentives

impact standpoint. see full the and the operations of be influence production by X see, consumer the stimulus move and of funding impact and program to, and the and all to for as that You'll the some PPP distraction the And out, on that you'll offset as going rolls that, of impact quarter. rates so. And business the of from Mark degree, to of alluded will

And we're Park's full we'll the then and clients, which quarter, of onboarding the and it to in as conversion very also team circumstance relates about. see lastly, that second excited

we talked of So on go credit better away outlooks by you on new it important, unfolds, course and you better the the here. start of about quarter about looking But as a I read things reserves have normal that, think return to at from and are a what the as are obviously as and normalize, a think we've internally of is all forward. business a to and economic it's outlooks as would also second read extension to whatever on definition the expect folks impacts as

leverage manage systems. continue it talked your continue resources, and how our we're And investing efforts where team's those about to more a invest deliver important priorities. And XX the to on our us and your days our efficient. are doing to be your to ago, by particularly talent, and experience our in in processes XXXX, execute see business And better to efficient risk, It's work for to extension. technology invest going diversification, clients you're more what and we to just the you said we better are

XXXX's even from technology and my we're incentive the think of a thought all. that living capabilities hasn't we environment the diminished opportunity a environment to standpoint, to I then, In we're going that view, that. the create today greater do at

to started response make So the year as early those those and in investments the slowed starting all execute with that we actually things looking important continue of automation the more of that to think I this that incentive still remains. objective's has by processes XQ, stabilizes. And and to on number the while COVID a to there mind. and it's in environment been And

And environment, think a as positioned drive XXXX. up, as into work that this In we've leave we picks lot. us learned I back that will well

an team. I'll go open got up in for whatever invest going strong we by balance us engaged plan committed normal forward. systems as We've questions. clients as and well and executing We've got think supporting positioned as a And leaves new go we we here our and and our in on and that to back, our We're it I capabilities. our our means communities sheet. So extension to summary, continue navigate to

that given the with locations, it to queue and of Pat questions. to others for up respond I'll and kind questions. and we're open in So disparate quarterback all I'll Mark a serve of that, kind as

open it Let's up.

Operator

McGratty [Operator The comes go Instructions] Please Chris question of first KBW. from ahead.

Chris McGratty

morning. good Hey,

deck; Pat For or the were question. Mark, Mike the disclosures great. in or the

a had sectors. Just other of follow-ups on couple couple a of

you million just out, exposure. $XX so correct how if gotten exposure? of feeling of or think, around And of that imagine the one, have million to guess, second, that's direct that number right I'm attention. lot retail. would you But portfolio? I That me are You retail senior about And is then CRE. housing's a about wrong, $XXX called I also retail

healthcare. to could senior exposure us the you maybe remind in housing So

Mike Scudder

take you Mark, why don't off?

Mark Sander

be would yes. That great,

So answer question Chris, The you're is high. no, no. to little a that your

can. about don't CRE good $XXX million. we you how it Our as retail it's our have more box. not is about retail big feeling million, we're And is, mean, as $XXX I

We have small strip centers, service-oriented properties.

it's been a in and of obviously, pulled makeup but has I like portion well back. our I a composition just modest CRE impacted, book, it as relatively world the of So where can if it's as like the shopping you

million. say, $XXX that's like senior million. $XXX around more portfolio So is to housing, Relative that let it's

Again, feeling good It's an high-risk has that obviously, a infectious well. That matter there. with it's as a dealt course. industry as area diseases of is

so to by be about stretch. any it And mind don't I cavalier

think, that we we system On good kept don't feel hand, some facility what have really and far, has other case, the I operators so about multi is won, that we portfolio contained consists a multi they've it mostly of.

Chris McGratty

for book? the the weeks? missed had deferrals discussed the over maybe remarks, executed how the consumer I And commercial been past Mark, Great. repeat that just trending and have been it in your or prepared the few deferrals. that you then Could

Mark Sander

down about they've weeks. you'd in consumer $X.X that's significantly $XXX as great the it's deferrals. are, billion it's so a question. rather trending two specifics last And been commercial about And Yes, the The suspect, million deferrals. in

down coming again they're So but substantially. rather still in, trending

Chris McGratty

Great. And don't then I balance pro leave sheet maybe rate want to for you The credit? us on or is between if what one Maybe Pat. the remaining I all and color what is could in mark from had forma mark you acquisitions? the sneak the any could remind mark out. the you

Pat Barrett

Yes.

rate. Park some X/X in that's million we then interest range, back off added with then somewhere split some we I remain ran around credit and think we're and $XX the and and hovering about X/X

Chris McGratty

lot. a Thanks

Operator

of from McEvoy comes Terry ahead. next Our Please Stephens. go question

Terry McEvoy

Hi, good morning.

XX of or X a construction in from essentially million to two page on nonaccrual Just increase question starting loans maybe with release. plus. the $XX up The

days have bump XX also, Just then And due. up any curious to comments if you past in XX there. the

Mike Scudder

Mark, why that, don't too? you cover

Mark Sander

Sure.

about is, say as fighting as that one, nonperforming a I as one owners because good was among largely feel have nonaccrual as you themselves, we are to Terry feel So go loan good the the to can that I about first exposure, asset. much had

a I completed. and think The location. in it's of equity terrific have will it, building owners a in be that lot

it's XX, it in if unfortunately. It any, I Those that about are non-accrual, to XXs. got unfortunate good non-accrual, up but So the see caught was that honestly. I go can little feel pandemic, of bit A about as unfortunate.

largely was candidly, their borrowers. lead and One the our large It in agent we're by deal, participants time. where on get done X-bank driven a approval didn't two

of XX week in was those a current all that the became so into in week days. who good the is, of later, first a some payments. April. over disputing And The slipped And borrower news other is that both

So at increase those but frustrating up. by the was which end there March, to see cleared have it of the been X, both driven whole

Terry McEvoy

And for fee of better the level markets? service in recovery fee, charges, the on comments income. your thoughts that's quarter thanks the to run kind through mentioned And understanding in the step a Can I'm capital second card maybe down to trying base just model also, out then on on again of slide. outlook you the

Mark Sander

Sure.

from at Swaps will down our again, So take one X.X%. a time. swap came

was it X.X%. think the I

really pulled is $X.X be are those this has quarters best million Swaps drop. So though a going two back. to ever, still even again, our that's tough. next Activity quarter

loan come New now. are by to originations hard right

be will March quarter, increase one normally, this swaps saw think again, we XX% year, would a we in Card, was to frankly. almost in February second an the where quite I year, drop. So light last saw

until the can a where drop in. to comes And there people that as I back [Indiscernible] pandemic. you attribute entirely almost little get So out we're that recovery cautious spending, you again, think can to

cost fee I about us, waivers QX, $X.X Our I in will Terry. as million alluded alone, think, to,

to we a year-over-year probably fully run So That's a rate. down project full give you it's that's out we'll basis. try get hard that's a says that why answer of kind is be year modestly that number on a to a

Terry McEvoy

by And last kind That's just does five then it's When mean, it great. be trail acquisition Understood. close across expenses. year? that I this one. pretty systems the quick just and of X? sizable those integration-related pretty quarters, a of Will June Is after The fourth if to off? one conversion, I the the quarter number. look last

Mike Scudder

Pat?

Pat Barrett

midyear. Yes. likely Terry, largely by drop they'll off

the have then most we'll drop and to quarter, this million $X had roughly third afterwards. second at quarter, down this in $X quarter we in million million the quarter, So $X.X nothing which past and should

Terry McEvoy

Thanks everyone. healthy Stay

Operator

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

Michael Young

would be, are looking for are for Thanks. a out business viewing lot maybe I loan or and down if and But Hi, guys the ask open mentioned there purchases batting what holding of may growth? X-X still consumer might that you environment kind of And guess Wanted hatches in about, be that loan and growth the in this were Or generally. demand there be. some sheet? I demand, just you I guess, be how pulling of of you on then even to part the whole kind wasn't second coming? would question for you there. could balance Mark, mean, family

Mark Sander

Right.

return one have just to going a it between. when first I'd to that a for somewhere assume We're can't just the get figure little are you And in out things so practices. take you conservative to bit. and should therefore, your a so. is, So that's in much say, prudent. had think back normal, underwriting still dial very I look more But we business, open where to we've little

So business. conservatively. to a pulled I a gets you're us dialed as more across transactional back and say, very but willing go just Relative little certain think you'll look I are purchases. grow in portfolio the areas, have, little still asset much see don't open we purchases, we've taken It's to in bit a where for

we flat, do to keep with some this their final there We balance decisions would people just loading up made sheets are may actually as say. PPP, In look I to haven't there, environment, do determined, perhaps us that be see to us still that's buy. see grow you'll activity, I some Michael. But don't decent I And you'll assets could I be think think say. don't to would

terms In we had mortgages, mortgage. a of good April still in

still a there. to we're a continue business them we we'll we it keeping So model that certain price, have sheet. believe, the us balance And warrants for at open on

we'll And lens. them so putting that keep through

Michael Young

that bankers on loan of that that be the page, several number around over And show guys The give had team build the just helpful. I know maybe diversification book? five. would lift to outs have a Okay. Can any there. and of up you what's us variety kind you details just business last in years. that healthcare And then some some segment you

Mark Sander

Sure.

a total, I hundred said we have, in highlighted We long-term have would about in dollars the than earlier, practices. We say, about of I as care, million couple dental. in $XXX million physician

to $XXX practices other another as we miscellaneous, hospitals say. physician then have serve have a well We to relative would million thereabouts. I And hundred couple of million and

So all that's there. captured

Michael Young

the on the that. to be sustainability dividend of doesn't saw that's today. Maybe big last, like going Mike, an We on just Okay. And for a necessarily people. one picture But dividend just of and bank cut then lot issue thoughts, seem capital. maybe

is thinking your what curious Just there.

Mike Scudder

this with mean, I is overall mix go Yes. about XXXX, I you I the Board leverage. have as At got just transition make to that I nice, a through mix to that some what capital of comes good, levels, We've people you look We've those at seen of decisions do expansion XXXX, reserve navigate healthy, overall I've reporting have the solid least started off and our as think at the those strong to back capital from are if juncture, and operating as that, for allowing a talked do and back and it, to your got environment. to at broadly, CECL. continue even Pat base. capital we've pretty of alluded And what conversations.

to with that's talk to it with continue we're shareholders, talk like obviously, we're about about Board, something where we we'll our going So and the positioned. But too.

Operator

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

Nathan Race

me. a know I doesn't slide over excuse have elevated constitutive Hi guys, bulk start within more piece the five. the that's really good C&I quarters, show I And morning. well. risk everyone's Hope up the what when kind charge-offs at to But last look guys segment, of five general there. Wanted you on recorded doing of

curious, hold the you comments just So just going on could how book's you general if maybe, up. Mark, to think C&I just

been, As charge-offs I the bulk that have a it of downturn, seems said, just we like to given this enter historically.

Mark Sander

Yes. Again, a and little why the it happens bit a shape I Again, recovery pulled hard Nate. give most quickly would guidance against what So And point there, look to little backdrop we've our to does takes? it well-diversified book. does there. that's of And back if it to this happen? modest like? a it's what sectors, stress How hence, exposures

relative put to what see loan as added direct we did. provision analysis we You a the we estimate portfolio to loss forward, result of the

guess I you the $XX our take best will, give we that's like. estimates, So away that look of might sacked of is, if what the you I care million to as answer best could another

Nathan Race

that. It's like Appreciate the in the was there deal. difficult out costs industry. good future understood Obviously, kind segment some that C&I predict Totally the It. incredibly credit just for then to Yes. across quarter. strength that. And on the driven of organic in piece staying Park a moment. Seems

curious line of share. clients was maybe out Or liquidity did of credit in much draws some see given of Just you that bank? there did how just their them utilize And market as versus largely the drew just down sit that constraints today? lines, taking on just that kind

Mark Sander

Yes.

just it about to of XX% first half production. line it, and Last in was XX% of the million of draw. normalcy. The half line kind draws, draws did because of it sat attribute I'd say So we year, quarter, would about growth I the $XX saw line there was, it sit.

driven $XXX So half seem of the ones million. I to unusual. this point year, million. can we the pandemic maybe saw And that really doesn't It about that were $XXX kind of

growth In pleased What lost don't quarter as significant. this we had a year. I it's pipeline we in that into really factor. all going was, starting I had effect, So was a gets good down. a again, not what is loan about big, good see for just to because really the come significant

was it where to had was net it second units business our will be growth. QX see know That I And so quarter in of to and that all don't see. the nice great same, but

Nathan Race

changing for I to for we margin Pat if with executed kind and moving trajectory guidance sure. the to rate yields, exposure down roughly the late of PPP, various of looking forward. year just that well-timed core forth. maybe on the Yes, provide second think basis difficult some you gears obviously with a so it's in pieces, PPP But loan floating And on then guys core know I portfolio. hedges the about ex of quarter, brought, half your the think, all last

this should again, So go the XQ, we X.XX% exercise. loan where second PPP given think about core just just of kind excluding cut. quarter of from kind just maybe the yields Fed And in in the of how for recent sake

Pat Barrett

of exclude see of And lots to of because that the likely from But a will PPP Nate. we're our really to metrics. we're clouds it lot continue discussion going yield drop. for spending a just question, trying Thanks Yes. lot time to

in rate to LIBOR that one LIBOR, floating book month pretty the our in XX% the meaningfully. You'll probably Fed fall rates recall the rates and those what's of tied is lagged drop

points basis was while down points. So XXX basis the March, Fed cut one LIBOR only month in about XX

rate natural and the well benchmarks, come to I are yields spreads quarter quarter. repricing. So some of also down, We'll as continue of held that that a relocation catch-up normal kind repricings. say we the to pressure origination up going through of equal, would and those And see the all run we're organic other full see just first see on going to things that pretty although expect we'd of being

we and maybe on can it will that touch So wood occur. maybe

Nathan Race

Got helpful. on Got expense it. operating And That's then Okay. rate. it. just run

I uptick So said with Can think us, you're second the you in in Park of you just terms terms the help the modest up in full of quarter that in you amount a dollar for frame what expect quarter. expecting?

Pat Barrett

to pay the activity categories, as will that, staffing. rate with things run cost said, uptick Mark add to about had categories impact it cleaning but expect increase call Yes. away the increased Park the biggest was as QX than a you in rate due less run occupancy across quarter to and cleaning, And We will see month in it full across noteworthy obviously premiums $X the occupancy most probably because million well. impacted be of month, from noted various that, already continue pandemic-related a have increases will a and and in like a

Nathan Race

on just Understood. more ask the buyback. And if I could one

would two of the or so that that's of to Pat, when of one just you buyback. can point, looking top Mike appropriate Looking your in if curious maybe reengage kind [Indiscernible] terms at the be list it or forward, just maybe, you're

Mike Scudder

that goes comment. think to I Well, kind my of

like of some certainly and get normal overall sense to of got what You've some looks stability. sense

Pat to immediate in alluded normal that have buyback a suspended bit the off. requires That's I view certainly about it. little don't all is a until where are think I see things his term, it as remarks, was when when started being it they to that gauge And reengage the in talking hard here he that. more near we go would through because really on though. I

Mark Sander

the activity just activities no I'd long and resuming, think just see that your buying it be it's unlikely same I balance the funded then if stimulus much sheet. government other flowing so there's observation, add shares feels as much industry, are through to for at time you'd government reason, wrong buyback an through that that as funds that, back you're just think that and taxpayer that to this is I flowing

Nathan Race

guys with bought buybacks what out the average gave that price quarter? back the just but in to the Understood. the was some release, I Agreed. the shares in And clarify, quarter, you think in approximations first you

Mike Scudder

Go ahead, Pat.

Pat Barrett

or was a deploying good anticipated excess It advantage time. the less of taking at But about earnings. it's like opportunistically fluctuations and Seemed making really we're just deal price XX. around excess programmatically, sure

Michael Young

guys appreciate questions color great the I all the on Understood.

Pat Barrett

Great, thanks.

Operator

question of come our go from Janney. will Instructions] ahead. [Operator next And Please Rodis John

John Rodis

the on expect Maybe average now? the loans. billion is right morning, just fee a $X.X you PPP Good question that What on that

Mike Scudder

I or guys of you Mark, Pat don't that. take one which would

Pat Barrett

that. I could take

Mark Sander

Sure, Pat. go ahead,

Pat Barrett

after costs, averaged and partner net origination we we've execution. gross, about So processing and a X% third-party for on around with X% those and and

So $XXX,XXX of the bucket, fee majority that number based middle a limit category. rather the and $XXX,XXX on that we basis. million But average an that the than lowest $X of loans the have, based in are size well dollars, on below between somewhere vast suggests

John Rodis

Okay.

roughly. would sorry, I'm couple assume so the quarters? that to next net the majority fee, around you probably Pat, I of So the X% of over expect would And get

Pat Barrett

Correct.

John Rodis

been then what $X.X the pipeline for loans Is today? so doing guys for And does PPP approved have it Okay. look you billion. additional

Mike Scudder

that? take you don't why Mark,

Mark Sander

question did the Appreciate our getting in this everything through we're pipeline we open because Yes. it week. virtually up as back earlier

through. have but about applicants as work trying they right have I That still on progress haven't since made And more to XXX of so, morning, this because I we're last work that's night, so I'm that the might was But checked we still on down. modest XXX through. there. that small amounts Mostly side. through of yesterday trying it hoping we're the about night, to XXX work dollar as was Relatively applications.

John Rodis

portfolio. securities question Pat, a maybe just the for Maybe Okay. on you,

You that grew guys some quarter. this

Just how the should we think about portfolio of forward? the size going

Pat Barrett

John. Yes,

mix I like in of over kind of time, the we earning general, think assets.

pre-funding running a overall percentage with that not just to We're that the environment we we're a of and really bit quarter So of kind a pandemic. similar. roughly stay the of time, growing this At The it sheet growth balance or for year. and of it a was a needs loan bit that pretty down growth as anticipation harsh little growth, during in. liquidity catch-up reinvestment of was during of in the kind expect because total had of

million so first into in on put $XXX the we So February. half, about January

John Rodis

Okay.

portfolio? sort the it guess, So flattish the going forward, size I sounds of of

Pat Barrett

Yes.

cash. of reinvestment just think I

John Rodis

make just prior you heard about I question wanted expenses. I and on sure Pat, Okay. to a

I the think as quarter the you said quarter as far you full Park going said is to from around a second goes, quarter, first $X million?

Pat Barrett

Correct.

John Rodis

cost I some, saves? down be that And guess, running $X Okay. I then, would million guess, with

Pat Barrett

Sorry.

the Just first that. $X to incremental in let the me quarter second restate quarter. million

run over million, on it adds because So QX. year And in little $X.X recorded part quarter, $X a million $XX a only full was million we a rate. Park about

a tick to $X categories an So about about million run for of $X.X incremental so increase million rate, up Park. across that will

John Rodis

Okay. saves And that's $XX million? of cost with

Pat Barrett

of. Correct. That's Yes. majority

John Rodis

Okay, thanks guys.

Operator

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

Mike Scudder

Thank you.

together. questions. that the And So hopefully, pull materials the before closing, I presentation appreciate we able all were valued to you've

and response to been we're to commitment First what do to know what is tremendous. to the times and listen absolutely our Before Midwest once us and To me, the amazing. again, special absolutely I have opportunity I about close is just all really thank calls their take during just their these it, been they colleagues. I want living what makes

to fannies proud are good and who off for to working many for the and every clients their each very thing be communities I'm right so surrounded our people do by other. day our

thank interest me let for leave attention story. you our and with to So it your

is and continue stronger These through great believe other investment. for on work difficult Midwest We are side come to it. First a times. We'll out them the

everybody, Thank you. please and great a safe. day, have So stay

Operator

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