Premier Financial Corp.

Good morning and welcome to today's Premier Financial Corp third quarter 2023 earnings conference call. My name is Ellen and I'll be the operator for today's call. During the presentation all participants will be in listen only mode. After today's presentation there'll be an opportunity to ask a question. If you'd like to ask a question at this time please press star followed by one on your telephone keypad. If your question has already been answered or you change your mind and would like to withdraw your question for any reason please press star followed by two on your telephone keypad. Please note that this event is being recorded. I would now like to turn the call over to Paul and Esther with Premier Financial Corp. Paul, please go ahead whenever you're ready.

Thank you. Good morning, everyone, and thank you for joining us for today's third quarter 2023 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 our prepared comments on the company's strategy and performance, we 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 I'll turn the call over to Gary for his opening comments.

Thank you, Paul, and good morning. Thank you all for joining us. On behalf of the Premier team, I'm pleased to announce third quarter earnings of $24.7 million, or 69 cents per share. Results were in line with our expectations for the quarter and represents favorable performance versus consensus expectations. Core net income was up a half a million dollars or 2% on a linked quarter basis. We posted an ROA of 1.14% and our return on average tangible equity came in at 15.6% for the quarter. EPS topped quarter two results with net interest income of 2% on an annualized basis and that interest margin improving slightly versus the prior quarter. Year-to-date loan growth stands at 4%, and our average loan growth for the quarter was up 2.9% on an annualized basis, and that was a bit better than we had anticipated. CNI originations were 40% of the third quarter commercial commitments. Commercial line utilization rate is at a two-year low point. Our clients are using their excess cash to pay down their loan positions. Customer deposits closed at 5.6% for the quarter on an annualized basis, with business deposit growth leading the way, climbing 11% annualized for the quarter. From a credit perspective, loan delinquency declined on a length quarter basis, and we finished the quarter in a net recovery position of $300,000-plus. The non-accrual category was up slightly due to a single commercial CNI credit, nothing systemic to report. We did see an increase in the special mention category driven by two loans, one a C&I loan, the other a multifamily. Each loan is performing, and the required adjustments expected are to be or expected to be achievable. We have strong guarantors in each situation. Nonowner-occupied office exposure was down 7.5% on a length quarter basis, coming in at just under $208 million. Premier benefits from relatively low concentration in this category and the portfolio has low release and repricing risk. We had a strong Q3 fee income. We were up 334,000, or 2.6%, on a length quarter basis when adjusting for insurance revenue. Wealth management and deposit-related fee income was up 11.3% and 6.1% respectively versus Q3 of the prior year. Residence for mortgage fee income totaled $3.3 million, and that was up 14% on a length quarter basis. The gain on sale margin improved and hedges in place to support the construction commitments benefited from the rising rate environment. Our cost reduction efforts continue to pay off. Our efficiency ratio improved to 56.5% for the quarter. Premier's always maintained a very low cost basis per earning asset ratio. And as a result, we are about 30 basis points lower than our peers on that factor. And that's really helping to keep offset our current margin challenges. Our low-cost structure will serve as a springboard for performance when combined with a more typical yield curve in the future. We've recently launched a new digital banking platform, improving our mobile and online banking capabilities. It has great new features and services, provides a better omni-channel experience for our clients. The consumer platform is in place, and a new small business banking digital platform is coming on board in early 2024. Each adds a great deal of ease and flexibility relative to future digital enhancements, additional middleware, et cetera. Our consumer clients have been clamoring for digital improvements, and the new product has been well received. Eighty-eight percent of our active users converted in just the first week. The system really delivers. In combination with our recent enhancements to our treasury management integrated payment product set, we're really well positioned to drive additional deposit growth going forward. Consumer clients as a whole are working deposits down, although balances are still above 2019 levels, and we see no issues at this time on the consumer credit front. Commercial clients are maintaining a conservative position, some slowing on expansion thoughts as rate and economic conditions vacillate. We have little to no exposure to the challenges facing the big three auto group or significant suppliers. There are plans within our markets that have been affected, but each market tends to be well-diversified industry-wise, and we all look forward to an amicable contract resolution. We have good commercial opportunities throughout our markets, and a number of regional and community banks are on the sidelines. We are expecting to capitalize on these opportunities selectively.