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First Midwest Bancorp (ONBPP)

Participants
Mike Scudder Chairman and Chief Executive Officer
Mark Sander President and Chief Operating Officer
Pat Barrett Executive Vice President and Chief Financial Officer
Chris McGratty KBW
Daniel Tamayo Raymond James
Terry McEvoy Stephens
Nathan Race Piper Sandler
Michael Young Truist Securities
Call transcript
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Operator

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

Following the close of the market yesterday, First Midwest released its earnings results for the fourth quarter and full year of 2020 and issued presentation materials that will be referred to during the call today.

During the course of the discussion, 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 its earnings release and presentation materials, which should be considered for the call today. This call is being recorded and all participants are in a listen-only mode.

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 will I Mr. turn call the now to over Scudder. ahead. go Please

Mike Scudder

healthy for you. Thank be Thanks your you. New hope I everyone. doing with everyone families us and ready joining Great. for morning, and well, Year. staying this a Good to today. certainly finds Great

Let me to a want has close I we close offer gosh, as start, on some the wild been, certainly perspective year. quarter and what

plan Just then be record a it what rate of for certainly were to reflecting coming times, XXXX itself, environment. stable was And it. worst expected we the times of back all year has been address moving a we our When than into the XXXX, lower, monetary policy, immediacy off to on certainly been we damaging a relatively had best to like but set we looking and which to seemed to today to of of here feared. had have what fiscal be economic longer anticipated. stand last pandemic, shutdown, massive than as But in all all pivot is the would most a shift we initially less the

as character accomplished So I of industry, about to as whole and XXXX during our we testament company was from to a a as teams. frankly truly what our true the perspective, an a my it, amazing me and as think company and

still there. downside the So is believe XXXX, as we while off I kick risk,

are feeling positive We certainly more so.

us as unfold remains in conditions management lot very of a sheet with balance strong XXXX. that provides Our flexibility

XXX is at X basis when than capital over Tier we Our started XXXX. points that’s XX.X% higher now

when process and one higher X.X% XX stands what that’s almost day basis about on and started of revenue when was in expense. we loss double strength quarter kicked gosh, reserves provision the for move the or what faster The came than from expected quarter and timing greater last largely loss we hope to receipts been basis and loan that’s than $X.XX XXXX will up, The almost some Our points the offered as programs. all forgiveness know it program that’s quarter the EPS we what relatively versus have a several be PPP year XX XX% that’s at improvement off standpoint at points accelerated was and year. lower was reflected an XX% eventually also CECL would series of Certainly we highlights from XXXX. the of into finite and that the

drop The it’s efforts. going team’s is program second And our well. Thanks frankly pretty underway. to

year’s that’ll We’re rollout as second offset earlier from and really program the to into to partly help the community the pleased second our program of we some help drop in be clients able a acceleration XXXX. the

quarters costs. $X.XX expense were the aisle Pat that So essentially and benefit Mark some that low of adjust cash security benefit frankly to coming the those in, of some combined and cost XXXX determinate some more about of contracts that will trade performance, hedge us flows offset than the the redeploy remainder beyond position for a take into future move the to given rates, and the to further bit We in opportunity did the further. our little quarter trading of get

acquired meaningfully the stable. loan NPAs lower our They positive out the $X for for So and about Provisioning from would offs of in that’s at were import marks probably also was last lower than highlight as XX credit quarter. greater were charge a quarter. I away came stood basis million quarter points, the

all the here prudent hold pretty out there. to it positive, our stable felt that’s is reserve So levels more while certainly given our still bias we noise

on – pleased to also line well are retail with we our side, on performing with earlier, initiatives remain announced of a continue and consolidation business fronts, in that track number the and what we branch On expected. we

So the sometimes gets of noise it the lost pandemic. amid

continues about and go a Park $X Southeast platform business very Remember to an of Milwaukee market. team strong they the assets that our to added wealth well. billion acquisition really a in with Bank presence and Wisconsin rounded our Our commercial great and

for to continue they’re know I the So expand to very Milwaukee opportunities anxious to market. look in

And quarters then teams is least to engagement this for certainly pleased not and mortgage strong. very quarter post as exceedingly the record of last, We’re well our both but wealth.

out bank to in survey in in again fact, the to scores best think commercial Chicago. as as were and top the places of once Our are to we up we’re I very one be work And pleased here held listed Chicago.

as So XXXX. kick it’s very off for positive us all we

Let of and remainder the me the Pat, they expand of you some as deck. turn can the they to on Mark certainly it? and want to details take walk through over Mark,

Mark Sander

we largely from the years another million us dynamics. net the we production as a at us strategic Slide well-positioned million very that which decline purchase couple $XXX to shortly. of stress market short-term of prior due on saw Mortgage prices, significant after presentation, outlook again as Production progresses. market environment. team quarter. as by undertook year fee strong boosted $XXX favorable ago, And income and for while saw. the a approximately Mike would Mike, our into of strong I million enhanced had here mortgage The remains favorable Starting repositioning and was levels leads near X slow the growth referenced, our expect sheet to offset in of balances this strong. will market organic any team We compete nearly $XXX of record Pat take detail in mortgage advantage the that selling loans certainly we PPP as may of Thanks, allowed balance mortgages that that our to morning, good of the production organic remix one-to-four quarter everyone. increased

up we began trends commercial increased from by to to we’re QX XX% return as some see the normalcy. Turning encouraged nicely to over here. Production

While back saw estate the during are Mostly in half flat but enough we finance, real to and improvement higher and offset normal pipelines the spring. prior of two are. Line was from quarters, pre-pandemic longer quarter. we’ve nicely. That’s an kicked overall strong reflective at and than said recovered They’re activity That from was utilization still more all cautious are but in of CMBS we decrease levels levels, liquidity amortization. up. outlook. demand the increased, our clients the it not than to Commercial that willing lenders building somewhat up which non-recourse of were refinance slightly out C&I from not payoffs, go to away particular

strong As core, for pipeline this loan growth specialty organic, we in and a optimistic a result, are starting businesses. given return the XXXX, quarter in our near-term middle-market to commercial

day to forgiveness quarter for we saw every is occurred would far. which that expected, of decrease submitted really Turning about experience X,XXX great over program balances from the here has PPP, Similarly, our the little the the XXXX launched outcome The week prepared And all we great the about of were a window program I as applications year. for gone sooner just we six than start. on of to forgiveness a stage to out run first off opened. in thus this of clients. regard last of is nearly round We say million ultimate a remaining and well the $XXX course in very first the and client well months the expect this

phases did We year. the as fund round half we about expect initial in to as two this much

amount level, good just a gives of far. summarizes of a XX of already on loans Page $XXX high million we’ve confirmation received all what about I new So detail at but and thus said,

XXXX away digits PPP. from our to grow going and outlook loans to organically As we expect forward, mid-single in

again assume to income largely we near forgiveness be assist see repaid expect be those of this loans we also. As year as But end. benefit with what we round XXX% by net PPP, will will in a to course, we

matter be to have with industry’s of closely. to well-diversified or this watching loan call. delve the Looking most deeper we any modest are portfolio by that pandemic. to beginning We of X, we very on at into other a the the portion segments book any I’d for here exposures highlighted continue in impacted most the Slide the these industry segment happy one Q&A

relatively as we well payment it provide we landscape. For to say, modest. suffice granularity the us detailed on continue across are At deferrals very uncertain point, the we On somewhat to our exposure underwriting, this and serve are still conservative industry entire information feel our now, navigate deferrals. practices will management X, loan book by Slide portfolio

earlier help As year the the expired. objectives programs in their clients and accomplish ran we to

X one-to-four but so displays if also demand prime are engage and yield benefit offset higher prime work The with from parameters, has more highlight borrower any normal this residential. will external very on the consumer factors, limited. stimulus. as at of here back been level rate, dominated segment, down when Slide segment the we specialty charge-off need which on category by to portfolio, to course, they with XXXX this loan of the amortization We has which deliberately here combined yearend. should do borrowers. targeted a book to help, a Of continue our ones unsecured installment product clients Away underwriting we theoretically driven from enhanced the than of end XX% federal by higher over pulled tightening

outlook. this quarter versus we with As to again Mike credit to, better last alluded the feel regard

Slide elevated well, shown level the on course environment, our of including reflective segments. performing X, current of risk As uncertain is risk of but the

are Our controlling generating and the have stimulus programs helping. clients liquidity managing by expenses. and adapted well Certainly, also

stable. a of were NPAs all As result that

portfolio of in the and again, all we better risk We each But XXXX. reviews proactive course will to of constant dialogues over across quarter success continue sectors. identify our felt client order

previous charge-offs period, to basis were and charge-offs expected remain the We basis for seen ago. for I Yet, relatively years. modest still total a lower lowest XX charge-offs Turning changes forward but to the were in to Commercial mentioned short the Slide manageable points remain increased consumer minute ultimately we at XXXX. out. have as year in remain than charge-offs years range points minimal X, benign in XX underwriting the further full this the given forecast very level quarter

well with We X.X%. losses an are PPP loans, reserved of for to very allowance nearly excluding

that vaccinations our up the the fact continue uncertainty as Slide stimulus. Deposits reserves stated, franchise reflect we outlook core federal relative reopening remain feel better of and massive our elevated been as I about a virus, by to economy While on propped seen to has the strength the XX. the and the

with there. funding a but flush now, strength industry the still With muted our and little historical more liquidity, comparative costs is

deposits the financial in the basis points cost another down seen XX of last crisis. came levels basis to quarter Our X following points

Importantly, we of market opportunities. funding sources advantage have plenty take to in of dry powder

it So Pat, we’ll pick up here. Pat? from

Pat Barrett

Mark. Good everybody. morning, Thanks,

X% tax Continuing increased quarter, quarter than a lower period of forgiveness well loans. points loan income prior Park from margin, interest both linked-quarter, PPP due as income higher was quarter. year, partially XX million the Compared XX ago. resolution and same $X to lower impact and on net million the a with current to year NIM million compared points on period Slide interest the favorable to loans contributed same XX. the interest PPP during of the slide offset a of growth the to fourth Bank Accretion quarter lower the the result impact period of loan rates. as with Turning NII margin of compared acquisition reflected $XXX quarter in by consistent scheduled the consistent as as periods, $X offset to down to basis funding more rates. prior up for ago. and forgiveness the securities net same primarily looks the basis in and XXXX. Compared the prior Net positive on impact of by help same It down negative prior nearly as the with the costs Acquired was than the certain both equivalent accretion acquired X.XX% loan the year to well

customer year to was yields, XX was lower points basis basis the liquidity impact interest on down margin of up balances. margin primarily and accretion, and the XX X.XX% prior from year. quarter, points well ago, linked the impact the Compared as as higher compression loan by driven Excluding rates of for securities

million specifically, year. at of More XXXX throughout approximating $XX speaking of to in PPP actuales. the effect $XX of approximately impact half loans, for year’s relative stood million is at the and $XX with timing full accretion will impact this in is first expected year. this year, the million for XXXX just program of $XX be estimated core this from likely or compared by be is to PPP the million and outlook prior $XX getting half XXXX to quarter remaining excluding be XXXX so program, million accretion point the XX% the to of year’s the more end of point down million really of stability is PPP the XXXX to is pretax The the Our impact the NII X% which is to estimable first the magnitude of last year. impact the be NII. and the be Scheduled range the to in expected program, concentrated the up around this NIM, around program $XX of But much

on income Turning to non-interest Slide XX.

up Mortgage record income in XX% streams. our the to already $X.X fee in the We third factors were income was driven linked-quarter. up quarter from million total continue Mark see growth a referenced. XX% of by recovery Fees and solid overall

we As management. record quarter also posted a Mike wealth in mentioned,

robust these client sales teams beat miss results. helps, continuation The market in production growth the a didn’t retention While great of the XXXX. strong and

Additionally, posted our treasury management Park fee year-over-year solid away the from up acquisition. X% gains group

in opportunities treasury business return forecast As delivered the to management various near versus which linked saw trends substantially liquidity, capital we softer charges in markets, been short-term in was income estate reflecting few demonstrating relatively the production. in long-term has continued real year modest as a over loan these product both normalizes, spending well and years. Card upside of flat as see we’ve pressure past as the from SFEs commercial course is quarter streams the specifically boost prior service here and We we lower normalcy. said the we previously, offset growth unit customer

that balance improving and continue fully. a puts categories in underlying XXXX I’d economy to of areas single the current growth all XXXX, quarter normalcy excess executing longer million in terminated $XXX total, opportunities market This and in term fee we our resulted to to future results sheet expect see of resulting in our recovers light in involve more the rate takes we both strategy optimization deploy also the gradual continuing during management expect were – digit to several card. to in in as terminating swaps. and continue the We million interest return borrowings wealth remaining reductions highlight future by across the action after solid borrowings. hedged high take we management, treasury on liquidity. the benefit million that conditions, the swaps of to offset provides termination on lower fourth annually. further pretax during optimization This $XX in advantage of flexibility quarter, will costs costs is NII approximately $X In future This

quarter quarter both with dollars expenses we were Moving periods Slide executing integration well and Note items, deferred by these $X from retail and with Away strategy expenses. acquisition prior associated were related to million that lower period anticipated acquisition includes by optimization Bank that on same Park and to the up associated on optimization largely offset quarter. announced OREO costs costs on workout partly current and commissions, expenses XX. ago, the driven million a total the a expenses, X% the mortgages of primarily as as higher origination year third loan compared costs the versus advertising in higher both linked in

increase the increase. contributed the our technology true contributed the ago, accruals to and base In compensation pandemic expenses higher operating compensation and a to year linked elevated Park to related with higher yearend to up quarter same acquisition to Compared the due equity valuations and costs combined addition, quarter. larger

ticked annualized ratio as the expenses revenue year. X.X% run approximately loans up We average our of was down a expense from PPP due declines to assets, excluding ago. our focused while rate be continue Overall, a to percentage is X% during on efficiency our year

full XXXX very our million mortgage modest primarily mortgage additional for the $X in is associated portfolio. driven outlook larger for compared servicing XXXX, by with uptick Our for expenses in an loan to year costs

the of uptick year, half efficiency slide. an expect should leave expenses gradual elevated the servicing the of on declines a expenses process before we half overall XXXX, and ongoing second timing, this then in reflecting I taxes Last note first to benefits efforts. As of and reflecting the in the

XX%, asset XX% rate non-recurring approximately the from Our and million the finalizations. for other prior of resulting $X periods, around for tax deferred half adjustments reflective both tax return effective of in quarter benefits, prior was tax year

We cost expect strategies, and mortgages. optimization our revert $XXX that effective It NII XX% XXXX. flows our for due million pretax the to first family into on annually Slide reflects the including and summary The benefit X-X sheet ongoing growth the retail both XX $XX securities high included in in optimization, sheet, balance balance pretax tax and rate to upfront quarter million of going quality starting a forward of million, of more the expected of the cash to $X current normal remix XXXX. around net to

our In associated and associated execute addition, the to strategy, million quarter with optimization closing fourth previously as recognize we the costs locations we with announced. during branch $X.X XX other continue severance retail on

We run to optimization around reduction $X million this continue said I’ve full to pretax XXXX. as in rate the of impact expect be expense

both digital to during shift As steady us has previously, trend a continue we new we’ve see accelerated volumes to banking. is for clearly and This us, said more not online the transaction comprising pandemic. mobile a

of continue and of us outlook You our should and to of these these guidance capabilities. as strategies make result optimization changes I should enhance further all that expect all platform – our technology anticipated investments. to to see a and investments note digital contemplates investment

And on impact year Slide persistence summary that fourth consistent practice, a the our stimulus with outlook outlook which on quarter of and levels dividend dependent have included on and and of ago. the financial quarter assets Consistent Moving per We’ve summarize customer the emphasize strong the the Slide growth. for quarter prior Capital on for risk behaviors a the mix our quarter the and XX. year our of usual share of and XXXX federal I for the commentary for in with These earnings also significant $X.XX activities. continue XX. to XX. volume to to quarterly results convenience, capital support be impact levels our with Slide is your and contributing to weighted pandemic our of for

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

Mike Scudder

Pat. Thanks,

couple are us of and up, risks XX stretch I as of most So many this there’s in the out a a be here better not be would noticed before as feel time, as over us, just of to and the Clearly, reemphasize. per had say, many we in open things world been hopeful of we years about Midwest like to rarely operates we fashion. think today, linear At it this period there. still stand downside will XXXX. recovery of First at you year time, I’ve doing I’ve that same

think course vaccination of on of to As same. production about expect really we the second efforts from benefit the momentum we and the XXXX, the year over the the context monetary see half in and it of of would think the year about greater stimulus building I the effectiveness the and fiscal

conditions Volumes sheet reserves work improve. there, this, through are of are recovering. all again strong liquidities create outlooks we is opportunity I which our with our balance stabilize reemphasize, as what just is So to start and to as and going stable credit robust, all really of

ultimately higher deposit point. the we some move undervalued this that. help interim, will base efforts as quarter differentiate at that will navigate strength Our In the remains core rates undertook an also that

building those as capital stuff optimization the working have that what emphasize clearly one and is it’s are focus Pat is it accomplish. experience, rate would that important suggests focus flexibility Our broader client efficiency extended is our important again, they said, trying what there of we also as on that our are I teams in equally low pipelines the activities operates and building are to a offer hard ultimately around And while there. which Mark that are aligned and we’re a with period. the and superior priorities those, remain

and investments we’ve us all online experience. to Our and and with will of become will are that our in sets more processes our made skill making and those the and also digital deliver help efficient mature on efforts

growth those remain experience. our and efficient team driving to near-term, returns So building advantage focus and colleagues, of and opportunities as will and navigate as present we a said, the to higher. priorities on I continuing franchise continue retaining same on of take sustainably requires that talented much building pretty with That that a focus goals. themselves, superior a the driver we breadth those And revenue, align

such our talk franchise. they about build strong continue with people, the needs these ultimately clients, the the our opportunities financial goal on long-term all of engagement and present enhancing and serve leverage challenges, of present Times, but we as strength also our value teams. of time this tremendous our opportunities, our relationships So better to our the their with to

that, to just from turn us, to as come where each questions, answer it then and of with will just us among it it up practice, let’s I’ll from. our help for So the take just three question this the talking the other. direct and open it over

Operator

you, question-and-answer from ahead. session is begin time. [Operator go Chris Thank Instructions] The KBW. first at question Please with The this McGratty will sir.

Chris McGratty

Hey, good morning.

Mike Scudder

Chris. Hi,

Chris McGratty

to source pipelines, you in growth, but that mid doing also mortgages, I’m the of I’m MBS. you digit like alternative And see the for The building interested allocation interested the you the Mike. do more Thanks. in you kind to how about some on buying given your quarter. have Hey, the be talked better of mortgages of expect single been XXXX. peers loan bought

Mike Scudder

Go Mark. ahead,

Mark Sander

Sure.

good Chris, So morning.

expect We consumer. commercial come growth from and to both that organically

per not those we purchases. both planning expect digits. from of would this single mid again, grow point, businesses, At transactional organically se on purchases So away we’re to

in gave. like that, what if on And contemplated we through may, than XXXX, did our not depends but much it happens that’s guidance course, So we it liquidity. digit with higher of we all of expect mid the stays single

Chris McGratty

the Pat, accretion stable your including or on reported And like that number, is – point maybe that just a Okay. relatively that PPP is stripping XX, and NIM out does. Slide the the is guide clarification that a NII, of

Pat Barrett

be That would core NIM. our

out the wouldn’t I the with say that had PPP minus volatility how new quarterly I So liquidity basis timing the of depending plus to particularly and points XX we basis, will of stripping booked to pretty we the a PPP, predict we’re modestly quarterly of away expect challenging which course is already a on from basis. finding over to three forgiveness exceed or each would program of on on handle the see, a flows, But year the impact, quarter. remaining be accretion, hit surprised the

Chris McGratty

great. That’s Okay.

is the or NII, reported interest net that On Is is the income, stable core. comment. that that the

Pat Barrett

It both. actually to be turns out

If the a core each – modest And it of you flat growth, quarter. that’s to loan the basis, of impact of look at on on of purely PPP. so course, from accretion very modest, we’ll away see like timing dependent increases

Chris McGratty

Okay. the tax just that’s a a Got housekeeping, that then tax of you And guide gap, it. gave couple a right. equivalent, not that’s

Pat Barrett

would stated tax afforded that our effective be rate. and Well,

Chris McGratty

Okay.

Pat Barrett

differential the is a modest. We fully of tax screams. equivalent, have don’t lot the tax pretty exempt for So

Chris McGratty

chart left doing one-timers from plans you balance first in with sheet from Okay. quarter? the any And the been the the have guys

Pat Barrett

de say I would minimis.

think it’s is in the $X – there dollar to any So of kind I be range. in million if likely

Chris McGratty

Got it.

lot. a Thanks Okay.

Operator

Tamayo The is ahead. James. go Raymond question with Daniel next from Please

Daniel Tamayo

guys. you? morning, Good are How

Mike Scudder

Danny. Good morning,

Daniel Tamayo

it that prior was efforts. asset see How first the maybe were do optimization increase sensitivity. to an impacts now optimization we to that compare on does your to in Yes, what if sheet the how the short balance rates and

Mike Scudder

Go ahead, Pat.

Pat Barrett

a it’s modest Danny, improvement.

X%, an interest at significant say, shock from perspective. risk to of but take not rate from X% modest. that, not earnings and would puts modestly doesn’t an It So changes It it us meaningfully. us

Daniel Tamayo

and Okay, the got capital do excess And now it. here. environment then improving on is have maybe – you

How having, out having potential and targets. what you’re months extent, few others? the be the kind should those with may changing expectations you’re to If there say by I last conversations over of are

Mike Scudder

things through in us how align and do I with with, how to conversation culturally. can fundamentally, environment, starts trying what up just it do does one, current always any time strategically that take this but not we’re match any for

as bid of always spreads broader terms again, those perspectives fronts, In on there. are wide. these They’re

state sell value just For is than natural buy. some a their are always to reason, who to people looking looking people higher affairs. And that’s think of

So how people think just most out. forward trying get are but going that, out to that’s I look than environment relative and the feet under their other to as to them play to

Daniel Tamayo

priorities helpful. And geographically us about you’re there? area, just you can That’s Okay. sides, remind your and how thinking of

Mike Scudder

business, again, our the operating we diverse in and up strong our a as say, focused in a look metropolitan we operating market. in marketplace and very platform Well, on presence Chicago with broad we’re really

anchoring adjacent we just we So Midwestern real what as the And we – franchise. look to here is did then the Milwaukee. there, value from that a like expand opportunities urban at to of continue much markets in to that

Daniel Tamayo

how And size you recently? Or that is all shifted size? thinking there a particular at are about

Mike Scudder

Well, obviously, we’re a larger company.

size So opportunity. about you have of the to relative to think how does that the change

the a looking strong really on and financial a that commercial grow got and a I aligns really for probably to culturally. into and in and trying it you’ve thing, from easier scale to does to said, mean, brings platform At same do lending the it be able are we build small think with more relationship we’re platform look the as start a start, difficult you billion it’s how up a on that Again, what at does I the of standpoint, where with is do a us to based smaller, context market really it it so. integrate do. what to we important So time, Park to institution

Daniel Tamayo

guys. all appreciate the Understood. I color

Operator

with question is Terry Stephens. McEvoy ahead. next Please from go The

Terry McEvoy

Good morning, everyone.

Mike Scudder

Terry. Hi,

Terry McEvoy

was like a bias Just on when outlook, expense it the downward to maybe a question expenses. presentation, seemed there I read the

it Pat, then You something to But efficiency identifying in you’d would investing talked year. also and be about listening further this on benefits. focus process like, sounded technology that technology

– my cost this over that that dollar there’s of call it a are do guess saves is, Or spending? Does year? just I offset technology maybe expense by the question improve think So you outlook that’s is course if identified. the to of there really opportunities

Mike Scudder

Pat. ahead, Go

Pat Barrett

question. Terry, that’s great Yes. a

includes people which we’re from but a think platform significantly this, to product perspective, I platform, because it year. this in that is also continuing pretty invest

likely flat that think outlook. kind guidance be of the I to is our XXXX reasonably

the that operating go I sort that this to away improvements with XXXX. service as your if growth investments drive ourselves setting efficiency for we further So into the how we’re think customer that? hopeful trends ask the way And investments we’re year, expense I up we and transaction question, digital Roundabout once from start better opportunity do answer volume from we’re further improvements again. is, is impact. how to which so completing self of away obviously impact making it does leverage has potential physical, didn’t

Terry McEvoy

No, follow-up, And Pat. fall focus, Slide some as may of a retail those kind of on great. office of off. an that’s investment X, of XXXX, maybe then other some think of among And the about community. grow those CRE areas importance as elevated CRE, kind I may Thanks, kind risks

those that risk So I have of know, Mark, on of do trends course maybe Thanks. could we’ll you and improved don’t there’s whether retail keep XXXX office, on comment kind some the slide. think it maybe additional where over and this you

Mark Sander

little our and has we’ve the I this rent out way, seen say would – still the quarter collections. Yes. terms in last view, a Terry, think jury stability in over But is of here been occupancy what these I bit.

we’ve business CRE inherently. higher so a for leveraged we’ve as important finance years, about quite an retail talked business, We’ve used as And few some risk time. last on our but cautious been

So these notable still be original over that murky on – that’s time, as will very the where seen. the I few two of in there’s story what mixed think like CRE, to some I our because say, again, as I probably underwriting, remains most will And such are that’s strong, look think feel office years? for we values here stay about good anything, as strong. the been collections about There’s rent success views there. but does And that loan have those a

so there think those these And I I time. see for say, some three as stay – you’ll

Terry McEvoy

everyone. Thanks Great.

Operator

with [Operator Instructions] Race Piper The from Sandler. ahead. Nathan is question next go Please

Nathan Race

Good guys. Hi, Yes. morning.

Mike Scudder

Nate. Hi,

Nathan Race

or here. XXXX continuing in the more or credit just on half of stimulus back off that to through? a in loans of a get abating with we the we just increased guys drive just saw of the somewhat that expected Is perhaps function increase this thoughts worked the kind couple kind that during the as Maybe last of curious further quarters the get just that charge some year just of as some so of is particularly, of you guidance discussion, of function it may out criticized

Mike Scudder

ahead, Go Mark.

Mark Sander

Yes.

I think question. you your answered own

not I them with it’s if take see we like would obviously now. think we that saw clarity. – offs it is charge We really, anything

out there amount make out of But think us look that level believe itself again, some time. we quarter with have the of – enough you they we muted. may seem that two, criticizing that pretty still you to uncertainty believe As next the we there’s when that to over just there’s or classified have, manifest

our best really it So is guess migration. reflects all on that’s that

Nathan Race

take function And for gears then of recently. the X% Understood. that’s share in just seen kind M&A kind guidance Curious X% growth and year market a are going and Chicago that of or to tuning moderation little the this some of just transactions payoffs continuing and some demand think we’ve bit this a the shifting of to guys at of you just around point. client about if to loans. just Or with

Mark Sander

bit – say compete strongly of that this having above you guess, with little team bit the which can right that by we Nathan, A it I little starts of of win, do. feel all a the I at feel would and sorry way,

up little think – share. market of pick it’s I I can So a bit we think

just team, up we lot, market We’ve again of our we because normalcy, can not core added few expect a pick but there. amount I the share to There’s to years, people built-in last of few say, as a of I all have businesses. win. over that I course the certain and think compete go return a in think

Nathan Race

got quarter in If trading ongoing capital more M&A know is ask the appetite well, one thoughts buyback the ratios board, any could buyback, as year. I an any believe I fourth and on or increased Okay, buybacks, capital obviously particularly consideration thoughts just this across it. today. here. I just share but I just on guess where given the really stocks on the just

Mike Scudder

Pat. ahead Go

Pat Barrett

to more and The the payout powder foremost or are probably for for already which priorities a that means. first talked fund Yes, rate, we steady, about utilization dry which be last is organic in a from good we and Mike’s as to buybacks about through laid normal have expect of or would near-term feel sustaining where kind ratio we’ve pretty to other capital M&A, then kind optimization be our to returning level, capital normal outlook which remain dividend is of out, and growth. growth a

from until are credit though even I classified in think about do up positive the now a quarter. criticized at but washed a tick where to There’s fourth get a level expectation that levels will through confidence our we reserve we loan actually and levels start feel those right and that. of this near see record very credit. the for around is higher we We have, we see still perspective, good

but bit little planning have. that a discussion recurring to it going us to about share for, quarterly we’ll this be is talking to think premature you or I feels a repurchases, guiding for should expect be

So and more we I’d around growth say gain more come credit outcomes. both as ultimate certainty to

Mike Scudder

have would I and well be with dialogue is what inactive Pat that a tail end. as emphasize we add investors ongoing and so. Yes. an This there at frankly, the ongoing will to said the board with and that

Nathan Race

taking Okay, great. I Thank questions. you you. guys appreciate

Mike Scudder

Great, thanks.

Mark Sander

Nathan. Thanks,

Operator

with The next Michael Truist question from is Please go Young Securities. ahead.

Michael Young

mentioned. the the taking you capital just to return ask question. a for commentary thanks on Hey, Wanted follow-up

that I valuation times over levels. criticized X.X Is share activity despite would So little buyback assume a increases understand are be would fair? stocks at but the at elevated, tangible, in classifieds I priority these M&A M&A

Mike Scudder

best shareholders to the is always us. kind to return and answer deployment stated me what available choice our the of we same, let goal that to – have differently that of the for capital the is is Yes, the

So if time. every the so have look those be it screen those – an to that through against yes, of you’re kind opportunities relative right, returns standpoint, if risk the weighed the and that’s from projects, we come world in a acquisition where

you’re a where operating have in how to deploy world that So relative today so. to with about valuations, you where think are it they

Michael Young

Mike, can maybe be of you – And I a more where around as interest strategy just get geographic follow-up once level kind once you to get back we on M&A guess evaluation you Is cost bolt-on on expand early cycle there kind there. still acquisitions? to just and need active of feel geographically like focus you kind do of Or from this the is out here? and

Mike Scudder

where We of go really haven’t we are terms in who to strategically our what we changed and do. thoughts relative

in continue think markets terms reasonable of operate in on in but urban which the Chicago, to We’re well operates relationship we sense franchise. us those of here and just those We based build make to a for commercial Midwestern for be our size not where able that that. markets, to adjacencies,

is our there hasn’t changed size our really other larger. than So strategy

us, the opportunities what that larger the be changed. really available So of to certainly strategic to trying impact – to be the to relative impactful, be hasn’t we’re are have goal and do can more but

Michael Young

And then in last me, lot of kind just growth of your one organic there’s opportunities, hiring market. on for a and the been M&A

loan costs, it of I want talent of potentially up adders kind an at of this rationalization to focus here, the point with producers as in opportunity from net do out sets of be cycle? assume think we there’s would you hearing some So there. Should or a on

Mark Sander

Mike. me take Let that

Mike Scudder

ahead, Mark. Go

Mark Sander

good themselves want It’s just net Yes. always not quickly. I producers, relationship managers, Good I a pay managers relationship loans, might full say clear. very good loan relationship. would its be Michael to for

producers. in the market strong we And always will be so for

times, of we in lot I the And the so targets to we changing and to growth up topping add opposed even don’t we as our good more have. bad it’s anything that few people add but need talent a that’s a have, we’ll think out that expect of hit but to that people, to philosophy. times

Michael Young

Okay. Thanks.

Operator

Daniel Raymond ahead. from James. The with go next Please Tamayo question is a follow-up

Daniel Tamayo

Hey, thanks.

net sure to that for that from XXXX I million $XX here, just understand the round, your quickly program. guidance kind the does interest PPP $XX million include to make Just you income second expectation the of I want the

Mike Scudder

Go ahead, Pat.

Operator

Mr. still line ours. your Barrett, on open did you on end? You’re your meet

Pat Barrett

does, it apologies. and the guide. PPP or essentially the offsets not, same decline you in offset that Well, with Danny, make include accretion – but up still sense? the that end you Is whether

Daniel Tamayo

correctly that I the I that of that, side. understand. No, sure just I understood terms to in make wanted reported

Pat Barrett

Yes. of I impact for but quite just mean just I all, ongoing at reflecting steady, accretion NII, away the our improvement away quarterly, core from modest would expect PPP growth.

the for year. X%-ish like So

actual So XXXX. expect offset in improved would or PPP not include PPP decline in in that versus have the will you significant, accretion kind the we of accretion, increased if that we scheduled

those a to delta the between tends So year-on-year. two be wash

Daniel Tamayo

going about mortgage Is then big mortgage really banking the the Or the XXXX quarter of that the to really Is in from that forward. down? XX% side. fall numbers fourth forecast awesome. of And that the margin driving spike is within decline? that origination thinking fourth you’re right. kind on that quarter, in to issue? assuming talked off elevated That’s what’s industry the in you similar to XX% a number work banking, about of you a that All going how was Okay. the I’m a through are is side kind margin the

Mike Scudder

Go Mark. ahead,

Mark Sander

answer a Danny. short This Yes. is

said decline this a a but expecting little versus QX to we’re that quarter of was we’ll now it favorable a have bit come a XXXX, first robust, bit of QX overall expecting so the not – down presumably We’re that the year. comparison

Daniel Tamayo

in margin Okay. a that, And the really spike that it in big quarter fourth the was that drove increase.

Mark Sander

price sale is in The Yes. mortgage.

really fourth we’re strong – nice the in quarter. We’re

And sheet not on or We to just sale. balance trade so took price advantage advantage we between putting of of the take enough the just was it. sale attractive the our

Daniel Tamayo

Understood, for okay, thanks. thanks. That’s me, all

Operator

from from Please Instructions] [Operator question McGratty follow-up from go Chris him next KBW. ahead. Our is a

Chris McGratty

about special did it, might’ve what portfolio any which color Yes, maybe? went thanks. mentions, in What provide $XX up but about the you I million? increase the missed

Mike Scudder

ahead, Go Mark.

Mark Sander

almost We did entirely and quarter, came in fitness the not Chris. from recreation that

Chris McGratty

in notable And you just given it Okay. coming there, reopening – improvement just off Mark? story COVID the changes are seeing what’s with those deferral, loans pace of the is

Mark Sander

downgrade The clarity caused of the it credits improvement long and us how on, might latter, Chris, really go the that few a there. that, pace with just to which it’s

Chris McGratty

Okay, thanks.

Pat Barrett

Chris, Hey this you’re correct I wanted on, myself. Pat, to just is while

that million, QX. were said should million, up. optimization You $X asking costs And I I but wrap should kind around have it ongoing in about said of $X one-time

Chris McGratty

thanks. Got it,

Operator

further I the turn now there Scudder over to closing back Mr. will If any no for are remarks. questions, call

Mike Scudder

thanks. Great,

calls continued these for and who about again the company us values once It’s believe they and I and makes know I all that our a special. just we them to and close, want we’re particularly on what want their to these recognize their and of times. we the I commitment thank response, to during opportunity before all represent as Midwest of are First we to So take behalf thank of listened colleagues. all

proud do to communities, the to for for So be we’re clients, surrounded and very good people each many other. every our try right thing day by our so who

we would that attention I’d that, all for of to and our to in thank take I with Midwest it. a you story. share you your encourage First as interest like our to And of investment opportunity. great is So advantage ongoing belief,

day. So great a have

Operator

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