First Midwest Bancorp (ONBPP)

Mike Scudder Chairman & Chief Executive Officer
Mark Sander President & Chief Operating Officer
Pat Barrett Executive Vice President & Chief Financial Officer
Michael Young Truist
Nathan Race Piper Sandler
Chris O'Connell KBW
Call transcript
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Good morning, ladies and gentlemen, and welcome to the First Midwest Bancorp 2021 Second Quarter Earnings Conference Call.

Following the close of the market yesterday, First Midwest released its earnings results for the second quarter of 2021 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 presentations will President President call Sander, Operating Chief for the analysts Scudder, for Chief Chairman Officer; Executive be only. Following open the questions Officer, Officer; and will I Mr. turn call the now to over Scudder.

Mike Scudder

healthy It's go. finds morning. with old. you. be National, are Good you. of over everyone Thank little here at to well, to all for a to with just you now First our hope great this and for exciting times Great. Midwest, month a Thanks Old joining These announced doing staying us ready today. us I combination with

Overall, process. continues tough, Obviously, obviously, here the to quick the for year pleased on the Mark we is recovering economy. near-term two you the plan with comparisons this as do what's So perspectives sharing very benefits that call pandemic. or for a of end. this performance is focus the are ago at certainly improve, the on the see to But or give a will our focus are of quarter. Performance integration because a update on quarter. the we

as strong center benefited think comments the performance, certainly importantly, Pat help that about my nuances find operating on walk the production. our from year-over-year going So, I to and are Most largely necessary. through momentum. quarter, quarterly Mark can loan as you

on managing environment continue time, focus for we've costs. in our businesses been some also fee-based and obviously We see that in the strong to from performance continued our operating

through for first $X.XX. the quarter. walk EPS highlights. I'll at XX% came the That's up So, in quickly

and XX% prior adjustments, revenue largely $X.XX. stronger That's and from provisions and lower comparatively you allow again EPS loan expenses. lower was loss If the for due to periods up

as benefit this and from expense record last was the National from which record normalize. remember can are quarter the we and Net the offset quarter. tightly this last Our controlling the Net as falloff away but last falloff liquidity, fees mortgage pipelines X% revenue, wealth combination. was depth, Fee-based management from costs, by speak to what much was about from again continue expected was one weighs we it's That's X% still then recovery as $XXX Mark the said which loan saw about solid, levels obviously, our million. up quarter, but obviously pretty from our before, year-end our attended and annualized up more we transaction And from greater again, impacted stronger from interest quarter, have we from I and -- was so elevated remain income as the reflects to to and growth in capital from revenues PPP quarter, revenue, inflated percentages. the effort Non-interest strong. to margin to perspective, down on economic X.XX%, again once which robust, we continuing. was by day see Credit saw seasonality reserves obviously remain X% in linked expenses. Old quarter,

we losses credit elevated total if of is last quarter, from which stood for allowance Our to exclude but you at loans PPP, and relative that's down where XXXX. X.XX% still started

-- they just During in we credit didn't improved charge-offs problem and economic the where recovery. continue levels and as our past dues nonperforming our are further while reserved did climate quarter, improve, have we the given XX absorbed potential credits, to two the provisioning, for to as previously Overall, warrant simply XX. outlook

trends So positive. look to those continue

they Mark walk can details Pat, some through deck. me and let it to and that, turn Mark? and the of with So recap, on as expand a over the

Mark Sander

strong was slide as our on and loan quarter, in and X% PPP, growth clients' Mike, in last improved Away generated loans from morning were line teams, results mortgage, QX. everyone. Starting market or $XXX distributed Thanks, expectations. annualized up good with our of million and middle X widely presentation, from specialty our all

at multifamily call, in the as added about from commercial The production of as we add we also allowed robust levels. QX, growth in year. to and sales. $XXX fruition in our we was discussed over balance was million, net quarter nice Chicago. about the prior Milwaukee quarter, $X remain came that That with some first and still loan some income $XXX view Mortgage million time X% outlook million last our believe a steady net pre-pandemic had fee results in another saw sheet, to excess line nearly our which likely favorable, us asset commercial of draws generating pipelines term, pipeline. for the in posted quarter We our for near while rising to are continue through in clients We this for production given the earnings up to

Lastly, paper home we some buy from to activity. in full total, remains unchanged. PPP our mid loans refinance declines then see for outlook loan continuing away single-digits did year we installment offset of In really the from high-quality equity growth

we clients new As our further to in in appendix in there's loans PPP this, some saw and loans will we as his end over in XX. June early ended shortly. supported most the will Pat million we and believe quarter before $XXX the balances we forgiven million be outstanding incremental then the a Again, year with discussion with summarizes margin forgiven which page $XXX detail as our by of repaid but here quarter,

declined XX as highlighted. will due, large expected as and X, slide all they solely QX. We previously Asset the substandard, continue reserved believe slide XX categories; XX, mention special over fully half for. of Mike this as favorable migration had in X Charge-offs to year. that risk-weighted on this did days we two quality credits due increase like back to expected beginning past improve adverse All NPAs, on to continued shown

commercial XXXX our outlook than thus While consumer they in across came for these isolated little our year charge-offs full And If were anything and the changed. slightly as a really not benign. both earlier issues were has forecast. improved elsewhere we it's thought

Given improved million allowance charge-offs for very of the year. our well-reserved outlook, $XXX continuing the we rest leaves the foresee lower our us

Turning franchise. on of X. core Funding to deposits remains our a strength slide

our industry historical cost flush but with more the there. With is advantage liquidity, still comparative muted now it's

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

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

So it Pat net from on will here income. pick up now interest

Pat Barrett

morning to everyone Good Mark. Thanks, the on call.

as down quarter to in period increase quarter in on offset accretion. loans from X% million quarter. and to approximately X% higher partly in was acquired forgiven additional million linked Mike down mentioned driven decrease in same PPP XXXX. Compared up to day interest interest the by by the X. $XXX PPP margin prior quarter was in first compared the quarter income was million loan periods. Continuing lower the slide and The both an Net Turning PPP cost accretion fees income the approximately net and for the NIM than $XXX in NII and lower from interest the approximately rates X loan on forgiveness X.XX% prior to quarter net on $X loan in increased the the from the same second higher margin. year, and second the year ago. growth. slide Accretion anticipated in Tax-equivalent offset funds quarter loan with due period basis XX the basis and to acquired certain of points favorable current quarter to points same interest million by prior income partly down of $X Acquired loans. loans, down was of $X resolution lower was was of due compared linked-quarter a million to

interest quarter higher the liquidity points PPP prior Linked-quarter year. interest for margin since from accretion, Note margin modestly, margin PPP accelerated that year trend down Compared the was the quarters, quarter on partly well liquidity loan income. the and offset the to cost of X and municipal funds continued basis increase of loans. lower Excluding ago, XX primarily and that that as second PPP higher driven customer higher a adjusted XXXX. was to adjusted seasonal net the securities margin was lower occurs of to interest and third increase impact in by by the rates excluding in impact on we've forgiveness impact late been of experiencing points basis compression and X.XX% linked net normal compression customer offset the income due deposits of yields a by partly as net interest

for remainder with approximate stable, excluding is million are relatively the two remaining is approximately the over XXXX income expected and remain Our net PPP SBA's roughly with full the XXXX. PPP margin $XX though year dependent million accretion to expected year for the is process interest unchanged full of to the expected of completely second the quarter, modestly levels. forgiveness. $XX for quarter million million be net expected of while expected the the in upon to outlook income the amounts for timing Aggregate the by exact for from XXXX $X year remainder evenly net quarters the and is interest of year grow is $XX Accretion to interest and coming

a $X record slide linked million recovery first income ago, except Mortgage robust environment. strong million X% quarter a versus levels quarter were reflecting management, linked continuing deposits Service client quarter. income. up income XX% X% as year income on ago. from and Non-interest ago. capital on linked see ago, or $X quarter ago. as year of card normalized year production posted to flat year and revenue a a XX% reflecting $X for The is was up areas XXXX million levels, up retention. quarter We up from XX% up from most X% Turning quarter pipeline and transaction streams strengthen ago, we and and solid while continue $X during to another quarter X% pre-pandemic income was XX% year from charges second returning was our income quarter both was and the year markets but linked in X, linked well volume wealth much Capital a up to to non-interest markets more was relatively down record a million XX% from markets from fee-based sales

over the levels growth the year full to total QX of normalization remains high Our income second from continued the the half the mortgage double-digit stable record to expected at of for year, be levels non-interest beginning to income with unchanged, despite low expected non-interest of year. income guidance the its in single-digit quarterly for

second expenses to Moving quarter X% National note expenses total includes on QX payroll Old costs quarter. the the seasonal pending and down the slide linked were by period merger. from impacted items on were of acquisition which the X% of down these the and weather-related with absent quarter were impact both current Away million same from costs timing expenses year a associated in ago. integration X, tax $X

lower valuations quarter addition, more In ago, optimization higher the and of compensation and accruals, expense decrease, contributed benefits lower plan increases. a pension offset equity offset, compensation ongoing strategies ongoing higher benefits plan partly linked payouts optimization payouts and year pension the expenses costs. by higher and to Compared of than pandemic-related advertising to strategies the merit

We ongoing effective second continue rate the of leave non-interest in compared lowering increased by period to same acquisition for which expense relative lower on approximately Last Away from prior our rate, is I expense tax the in quarter this quarter, approximately Compared integration ago. XX% in efficiency for due effective XX% focused equity to income. impacted down run before outlook to on the QX million our year XX% was period in to tax run compensation costs $X from year expense. note slide, be our in a vesting a quarter rates. taxes the the the the XX% stability our XX% quarter, and to the same XX% compared concentration and first rate from to ratio XX% ago, tax-exempt was a to

Our XX% tax an guidance remains XXXX of effective for for rate unchanged.

quarter. per provide capabilities support strong share I'll with be volume customers. growth prior Moving These prior turn of $X.XX borrowing and earnings Mark. levels and second back and the in of to risk-weighted capital and our it XX, capital assets the year dividend mix slide consistent over to support levels quarterly strong retained our quarter continue with contributing needs to to to of on the

Mark Sander

summarize tried on National. Old great opportunity So in XX briefly we combining to slide with ahead the

some we merger. are as has how highlights The it and Slide working announced we on excited together. X.X months since these and I we mentioned, the process. we're Recognizing clear. pleased processes. discussed, to with But we anticipated about the tremendously Mike cultural when as and teams would alignment progress extremely we're Xst, fit XX importantly as As say, remain benefits through feel our making June only the work announcement, of great we been strategic are the about continue the financial

we all year-end. much made efforts on work our team the experienced that while track I have colleagues. We encompassing appropriate over our all to leading XXX have remains still on emphasize filings. prior would fronts are and we close And of an hoping simply

it hand to I'll back So Mike. you

Mike Scudder

Thanks Jim communities, couple this markets, of we opportunity who ahead to with comment certainly And board. its that comments. -- core what firmly leaves certainly as culture to had to for shared for the This morning, our Old for Mark. add what two before us means is their we and speak for open National, a strategy in companies, our a things colleagues very echoed National it you the a strong Mark's that of really future. just positioned very vision clients, share And for across we about those we growth it Old a are and well at me just and listen Obviously, let up partnership lies was that excited in the believe questions. for our have our comments, our

open let's might that, questions for with have. So it any up you


Thank Michael go this is Young It at you. time. Instructions] begin will The [Operator of from Please ahead. Truist. question-and-answer session

Michael Young

of I deal terms of maybe expect terms those proactive in interim marketing of Hey. in like Should qualitative Thanks or efforts was other we qualitatively to of out before Old you decline. the just the for related National there? things and what any question. in any expenses the taking curious should closes Yes. just sort retention to things higher expect undertake any any put we may you'd

Mike Scudder

to and us active some This that. expect opportunity. make is outreach along we've markets I on positives continue what or can the as all established to great build Mike. excuse can reinforce clients And here come and thought speak it's I across certainly the transaction the the marketplace strategically, me, -- and cost to that certainly you of described. continue we've a to the to to

rate So lot run But embedded in of really our we time as energy. largely go that's a spent we and forward.

that think guided what you anything see had So different I wouldn't would today. to than Pat

Mark Sander

here. It Michael Yes. I for starts as guess this thanks I just is add, would the its I can with Mark. say business -- question. usual

to expect We continue to grow.

clients market proactively reaction tell We the And very favorable. continue been think our to call story. on has and I

that So, outlined it's we certainly and -- have into were we as any expenses were built modeling that transaction. built into the retention efforts our

Michael Young

closes? the or more of Okay, just areas remarks. obviously demand are great. that anything on picture comments that heard about merger seeing about a maybe think of I the loan maybe then, few there the there demand. strength? But prepared or And sort kind are should higher bigger in we going growth, in any of loan limitations into terms you're growth half And before back

Mark Sander

seeing far. we the competitors again in are -- Mark seen most nice competitors would strength we've and pesky we The you're went recovery those think be so. Michael C&I all face really sectors. that across before do and a and thus to We've competed won continue I and there. out it's But, headwinds the --

don't so be cheek mean I about tongue it. to So, in

market headwinds I there's no that we think see. that

economy the little we that of large, to all overall strength are pockets But, good slower by recover. and our recovering. are I There's some sectors. in businesses across still think a see

Michael Young

And for Okay. one last maybe me.

try with close maybe move there be geographically starting of until or look quo you're are as to it going you kind to to the proactively areas of certain or will you or ahead one fee expand the status National, of sort actual at merger business otherwise, into the closing as Old Just lines that day closing?

Mark Sander

as my answer to this business -- It try best I'll way. I'll is really usual.

quarter, that solid continue we continue. and talent. to particularly plans, growth to selectively core management, had growth treasury nice and saw to this of around look of expect management We'll all a So which add wealth card, we nice businesses our

to -- with would we're I hit it talent path to these the you'll we the dramatically nice So, areas. don't But, But in we on certainly have. staff that the look think Michael. see a that dynamic forecasted add we we think change won't numbers all

Michael Young

for Thanks. all Okay, great. That’s me.


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

Nathan Race

Good everyone. Hi, Yes. morning.

Mark Sander

Nathan. Hi,

Nathan Race

to think back you past in the outlook, purchases loan had that growth the And some in growth. of Going portfolio. in the I the that's have growth the guys augmented of one discussion drivers like terms installment in it was that segment looks within the consumer quarter

kind pipeline And range that as expect in if one, XXXX? a you over guys that of where to quarter? of driver two, again balance the do of was growth look curious, just the you So at see kind this mid-single-digit

Mark Sander

saw decline Yes. to Nate, installment this home answer much effort Mark. was we our it equity. as in growth you it's way. The I'd the in forestall saw

So categories some consumer of the other declined.

in we and growth our in multifamily we was our that continue. growth really where done like amount broadly installment I'd of That's But The and area. -- They've relatively CRE CRE continue we see flat. grow. nice that that growth that to to fair so more to production a C&I quarter levels. see this overall mortgage. And pay-offs to expect net in saw from keep was came really has

again So not view. driven it's relatively our was installments C&I growth and been flat this our But from in away multifamily. multifamily mortgage quarter

Pat Barrett

our Nate, -- book. close to Pat, purchase Just though of transactional kind loop on it's the

normal augment, houses now more one ones. and to to crazy continued purchases a were people because run-off a Those be a their that So from pace they're perspective mix residential refinancing and call sell than, we fours. continuing at to has do to buy new what with from primarily time and like time perspective I'd higher first yield

activity. So still higher

just the that loans kind the we're not from be But periodically to purchased maintain to contemplating our coming do of anticipating status just balances. quo portfolio to guiding we for of any top So in year up growth clear. or

Nathan Race

kind sheet the Got next it. and balance the And earning along the I base couple that. of thinking those closes. then of up overall about asset lines over appreciate growth until deal just quarters

anticipate continues expect as forgiveness some liquidity earning trend play guys' the and curious to As that inflows, get Should thoughts kind unfold, some dynamics ensuing. PPP with forward? of asset out growth do we process liquidity you on guys continued how I'm maybe to shrinkage some going your of those process or balances

Pat Barrett

to of going things. a forecasting, those again. see keep it's been I'd yes run-off for say marked both Hey and liquidity that We pretty we've year. Pat, believing almost a we're to balances in

stimulus commercial this So like which particularly on first that and quarter spending start time for as we point, at ticked up patterns. continued a offset see naturally quarters things expect by does do the line number balances. some customers whatever will consumer is with to their draw of utilization, consumer we off-set the get in just That

$XXX anticipate $XXX point So assets continue to some we early the this between that at is simply of that's year, have earning which would or just we run-off difficult for into somewhere going there to probably because that is sitting run-off reasonably yielding of longer-term million cash deploy following. million and to the belief later

Nathan Race

along opportunities ask quarters? couple are that liquidity absent the of lending sit if from I And around over the lines. Understood. follow-up some If going next the to you of to see could guys one securities redeploy book does the a that appetite what's just perspective those

Pat Barrett

we're looking book. to opportunities always top up the for Well securities

new see significant as heavier we to seen in this opportunities will We're get kind kind been same a X.XX% yields higher have buy between on basis than month-to-month Those experience jump struggling as the X.XX% and much week-to-week and roughly you've on rates pretty day-to-day throughout we of and that. few purchases quarter. yields year. far So was absolutely of which to And QX. do more and volatility this

we to do would premium during and of in the kinds -- our attractive saw sure. excess out the yields. year start volumes But opportunities park that point. is higher more places were net we that's that expecting and liquidity we one So that net than get some cash to at liquidity look certainly do low for when securities we we're purchases lower of that would last And that for we'll could very something again be the outflows we if few see high had of

Nathan Race

appreciate color. I understood. nice Okay, the guys, Thanks quarter

Pat Barrett


Mark Sander



is Chris of question from McGratty Please The ahead. KBW. go next

Chris O'Connell

the is gentlemen. on I questioning to management. in deposit yet, seen filling year stable or just you've that wanted good NIM Chris I regards the into the that's the NII kind for This movements more Hi, far O'Connell liquidity of past have come curious up so have of the the late of guidance to little think you've customers kind around the start a or any given strong from still on McGratty. there guys down of trend growing. you with do you any just of seen that XQ same line But those appreciate or guide? XXXX morning, a follow unchanged of to inflows or moderate XXXX over with bit half

Pat Barrett


Municipal the consistent. in balances think commercial Those a declining consumer previous stable typical. inflows which typically paid-off relatively the people of inflows balances balances late they things see linked-quarter, year. accumulated pace and very bit. remain year would always isn't the early I We as that were slowed from

most in say the But seasonal has checks growth for out the every package. inflow we're CARES moderated immediately. recent see little middle I'll a hit the And can we stimulus of the stimulus as see millions went so And there's hundreds the bit of the -- package, of normal multiple we almost municipal stimulus of that part a QX late kind absent it can outflow, that that deposits. time

far growth. on anything is there you'd persisting be as Mark that? to add as So it just seems balanced

Mark Sander

summarized think you well, that I Pat.

Chris O'Connell

to I aggressive into be hear be environment kind -- as been guys or it that great or you'd, Understood. are a deployment -- a And yield is threshold where to point it. you rates where disclose? take securities in. Got more the for allowed Is on certain all to far of, the hasn't recently it a going you as and there there opportunities certain go

Pat Barrett

cash cash just Well, out that's $XXX always we've our a be the from That's deployed I got to needs quarter million flows normal mean, that book. coming of through roughly.

we're make potentially investing see where our where from to going grow hard that quarter for modestly. to the look this that. yields. tick just rates sure future yields generally opportunities haven't so work to cash pre-invest flows as Away those up generally to falling or were And we're we many seen pretty We opportunities to of past book

So we'll continue to rate watch for those. Volatility day seems to be the given the rule of low the environment.

and So advantage investing. there of we'll expect opportunistic take

Chris O'Connell

to industry where utilization a particular stronger beat the if any or area I guidance Got where Thanks. Is then bit and or single-digit? anything on on it. if The stable side, come one is back see the And than growth guess, kind one there in there to guidance commercial mid last along could. line seems expected little And opportunities those loan you of there track. I be could lines? somewhere

Mark Sander

particular. is nothing answer expect I of But to business would maybe our in medium it which all I'd modest way in we better, say this lines. growth

little banking in of core in our units -- all so growth every few we outsized growth again, to had netting these to years. of growth specialty And have one a some rates our CRE some a we've markets there, mid-single digit. get units expect be where But business but higher and our of might little might different those business some lower some so and a last

Chris O'Connell

Understood. Thanks.

Pat Barrett

you. Thank


like to call [Operator would closing Mr. Instructions] over turn further questions. back I Scudder now the There to comments. no are for

Mike Scudder

you all. Great. Thank you. Thank

to closing for right commitment do to values their of the it's calls our Old to to I so every Before special. and is exciting I nice communities to strive our people who It our our here newest I'm time partners thank continued them opportunity surrounded listen which for makes take all again day at think really what proud good very opportunity our National for to And our always and of other. thing, thank be and enthusiasm colleagues us. work. who all once each all collective is the so two have frankly companies many the for both by for to clients, living want to hard our with an their

So your investment. that thank belief our all for great you a in story we're our and ongoing attention and interest

day, have So, a great everybody.


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