Premier Financial (US:PFC)2020-05-02 00:47Financial Data and Key Metrics Changes - First quarter 2020 net income on a GAAP basis was a loss of $22.5 million or $0.71 per diluted common share compared to a profit of $11.5 million or $0.57 per diluted common share in Q1 2019 [14] - Core net income for the first quarter was $7.5 million or $0.24 per diluted share [14] - The company announced a second quarter dividend of $0.22 per share, representing a 16% increase from the previous year [15] Business Line Data and Key Metrics Changes - Net loans acquired from the merger were $2.34 billion, with a positive rate mark of $8.8 million and credit marks of $34.9 million [18] - Organic loan growth was $36.6 million, representing a 5.3% annualized growth rate, primarily from commercial loans [20] - Deposits increased by $41.2 million, resulting in a 5.7% annualized growth rate [21] Market Data and Key Metrics Changes - The company reported a significant increase in mortgage banking income, with gains on the sale of mortgage loans rising to $4.9 million from $1.3 million in the previous year due to increased volumes [32] - The 10-year treasury yield declined significantly from 1.92% at the end of 2019 to 0.7% by the end of Q1 2020, impacting the valuation of mortgage servicing rights [34] Company Strategy and Development Direction - The company executed a strategic pandemic plan, focusing on remote work arrangements and promoting self-service tools to ensure physical distancing [12] - The merger with United Community Financial Corporation (UCFC) was completed, with expectations of achieving annual cost savings of $17 million [52] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the uncertainty of future financial performance due to the COVID-19 pandemic [9] - The forecast for national unemployment is projected to rise to 12.5% in Q2, significantly impacting the economic environment [24] Other Important Information - The company suspended share buyback activities during the uncertain times [16] - The allowance coverage to loans was 1.68%, with a core provision expense of $17.8 million attributed to the adoption of CECL [25][41] Q&A Session Summary Question: Can you run us through some of the macroeconomic assumptions used for reserve levels? - The company uses Moody's forecast, with national unemployment projected to jump to 12.5% for Q2 due to COVID-19 impacts [69][72] Question: What is the best way to think about ongoing provisioning? - Ongoing provisioning will depend on economic forecasts; if conditions stabilize, reserves should align with historical trends [76][87] Question: What is the sense about the deferrals and their potential increase? - The company anticipates that deferrals could increase, with many loans having six-month deferrals [82] Question: Can you provide an update on the expense run rate and expected synergies from the merger? - The company expects to realize most synergies post-core conversion in July, with expenses better than expected due to strong mortgage activity [102][107] Question: How does the company view the commercial pipeline and closings? - The company expects good growth in the commercial business for Q2, although visibility for Q3 and Q4 is limited [118] Question: What are the expectations for purchase accounting adjustments for the rest of the year? - The company expects to see a benefit from accretion in the margin, with a projected core margin contraction in Q2 [127][128] Question: Have any internal stress tests been conducted for the combined company? - Internal stress tests indicate that the company remains well-capitalized under moderate to severe stress scenarios [134]