Premier Financial Corp.

Good day, and welcome to the Premier Financial Core's second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Tara Murphy, Vice President of Corporate Communications. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for today's second quarter 2021 earnings conference call. This call is also being webcast, and the audio replay will be available at the Premier Financial Corp website at premierfincorp.com. Following leadership's prepared comments on the company's strategy and performance, they will be available to take your questions. Before we begin, I'd like to remind you that during the conference call today, including during the question and answer period, you may hear forward-looking statements related to future financial results and business operations for Premier Financial Corp. Actual results may differ materially from current management forecasts and projections as a result of factors over which the company has no control. Information on these risk factors and additional information on forward-looking statements are included in the news release and in the company's reports on file with the Securities and Exchange Commission. And now, I'll turn the call over to Mr. Small for his comments.

Thank you, Tara, and good morning to all. We appreciate having you with us today. The Premier team delivered a strong performance in the second quarter. New business activity was very robust. Cost and credit was managed well. and we're taking steps and making the necessary adjustments to deliver on the year we outlined back in January from a performance perspective. Earnings came in at 31.4 million, or 84 cents a share, generating a return on assets of 1.67 percent and over 19 percent on tangible capital. The quarter saw a continuation of many of the positive drivers we discussed in our first quarter call. In each of the five markets, state markets across our footprint, we are seeing credit demand on the rise. All households are in strong shape, and the general economy is expanding. New business production for all of our lending segments, commercial, consumer, and residential real estate, are strong, and we experienced blink quarter total loan growth of 3.6% when you exclude the PPP impact, with the commercial and consumer business growing over 4.4%. Each of those numbers is on an annualized basis. Given the fact that the commercial line utilization continues to be at historically low levels, we're very pleased to turn the corner in Q2 on core loan growth. It was a bit sooner than we had anticipated and communicated last quarter. The loan portfolio quality remains very strong, and the economic factors that shape our loan loss allowance combined with the net recovery position that we're in for the year have resulted in another meaningful release of loan loss reserves for the quarter, ended with a $3.9 million credit provision. A robust expansion of our consumer activities is driving a double-digit growth in our consumer-related fees, so think debit cards, account fees, ATM fees, and the like. And we continue to work hard to drive net interest income and maintain margin in this difficult rate environment. The continued strength of our client's balance sheet is certainly creating excess liquidity for the organization. We, in turn, are driving growth in our securities portfolio, and we've taken some additional meaningful steps to reduce our balance sheet rate sensitivity and position it so that we would be favorably affected from a net interest income position going forward. We managed to trim our core expenses and run rate from Q2 versus Q1, consistent with our commitments made on the first quarter call, And we have actions in place that will provide additional benefits for upcoming quarters as well. The residential mortgage business line story is the one with the most variation from our first quarter performance. Overall, residential loan generation remained at very strong levels for the quarter, right on target. However, pricing did tighten early in the quarter, and our focus turned to the better price construction business, which drove more of our actual production into the portfolio. less was sold than normal, more loans found their way into the portfolio. This assisted in driving our net interest margin in a positive direction for the quarter. This obviously affected the mix between saleable and portfolio loans, with our saleable percentage falling below 60% for the quarter, and that tempered our gain from a gain-on-sales perspective for the quarter. The retreat of the 10-year Treasury rate over the course of the quarter also produced an unfavorable effect, on our MSR evaluation of close to $500,000. You might remember it was about 5 million positive in the first quarter, so a lot of volatility between the length of quarters on that factor alone. The pipeline at quarter end combined with this ability we have as we look at July activity reflects a continuation of really good residential loan production. We've taken steps to improve our saleable percentage, returning to targeted levels. Pricing has afforded us this opportunity to jump back in that space. And while always competitive, we think we can compete comfortably as we had originally planned. And rates have stabilized and our hedging costs are a little bit less going forward and more the norm than they were during the second quarter. We expect quarterly mortgage profitability to return to more typical levels over the remainder of the year. with the unknown being the effect of the 10-year Treasury rate volatility, is that really does impact our MSR valuation. You may recall, as I said, in the first quarter, a very, very large benefit, and we felt that was a full-year benefit that was recognized in the first quarter and that we were likely to give some back, and we certainly did in the second quarter. But at current rates today, we are generally in line with our planning expectations that we had at the beginning of the year for where the 10-year would be. So we'd be good to go relative to our overall plan if we stayed put as we are. At this point, I'm going to turn it over to Paul, and we'll come back with some comments at the end with some guidance updates.