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PF

PREMIER FINANCIAL CORP (PFC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 EPS was $0.45 and net income $16.2M amid continued margin pressure (tax‑equivalent NIM 2.46%) as deposit costs rose faster than asset yields .
  • Management canceled the Q2 earnings call alongside announcing a definitive merger agreement with WesBanco; dividend maintained at $0.31/share. CET1 was 11.91% (Tier 1 12.41%, Total 14.25%) .
  • Versus estimates: S&P Global consensus was unavailable; external sources indicated EPS consensus ~$0.50 (actual $0.45, miss) .
  • Near‑term catalysts: merger execution, deposit repricing momentum, credit normalization pace; medium‑term: NIM stabilization as rates eventually decline, opex discipline, mortgage banking recovery .

What Went Well and What Went Wrong

What Went Well

  • Core fee lines held up: service fees $7.0M, wealth management $1.8M, BOLI $1.2M; mortgage banking $2.0M despite rate volatility .
  • Capital remained strong (CET1 11.91%, Tier 1 12.41%, Total 14.25%) supporting dividend continuity and strategic flexibility .
  • Deposit base grew modestly to $7.18B with higher interest‑bearing balances offsetting lower noninterest‑bearing balances .

What Went Wrong

  • NIM compressed to 2.46% (from 2.72% in Q2’23) as interest‑bearing deposit costs rose 80 bps YoY to 3.24%, outpacing asset yield gains (up 38 bps to 4.92%) .
  • Credit costs increased: loan loss provision was $3.17M; non‑accrual loans totaled ~$64.2M at quarter‑end .
  • EPS fell sharply YoY given the non‑recurring $36.3M gain on the insurance agency sale in Q2’23 (EPS $1.35), while Q2’24 diluted EPS was $0.45 .

Financial Results

Performance vs prior quarters and YoY

MetricQ4 2023Q1 2024Q2 2024
Diluted EPS ($)$0.56 $0.50 $0.45
Net Income ($MM)$20.07 $17.79 $16.18
Net Interest Income (FTE, $MM)$52.59 $49.65 $49.30
Non‑interest Income ($MM)$11.79 $12.50 $12.08
NIM (FTE, %)2.65% 2.50% 2.46%
Loan Yield (%)5.21% 5.19% 5.26%
Interest‑Bearing Deposit Cost (%)2.83% 3.01% 3.10%

Notes: Q2’23 included a $36.3M gain on sale of the insurance agency (non‑recurring) .

Non‑interest Income Breakdown

Component ($MM)Q2 2024Q1 2024Q2 2023
Service fees & other charges$7.01 $7.19 $7.19
Mortgage banking income$2.05 $2.94 $2.94
Wealth management$1.84 $1.54 $1.54
BOLI income$1.21 $1.02 $1.02
Other$0.15 $0.10 $0.10
Insurance agency sale gain——$36.30
Total non‑interest income$12.08 $12.50 $53.35

KPIs and Balance Sheet

KPIQ2 2024Q1 2024
Total deposits ($MM)$7,178.6 $7,183.4
Noninterest‑bearing deposits ($MM)$1,438.8 $1,467.2
Brokered deposits ($MM)$382.7 $368.8
FHLB advances ($MM)$393.0 $253.0
Total loans, net ($MM)$6,604.9 $6,617.1
Non‑accrual loans ($MM)$64.16 $39.03
Allowance for credit losses ($MM)$77.22 $76.68
CET1 / Tier 1 / Total capital (%)11.91 / 12.41 / 14.25 11.99 / 12.49 / 14.35

Guidance Changes

(Management updated FY2024 assumptions on the Q1 2024 call vs initial Q4 2023 guide)

MetricPeriodPrevious Guidance (Q4 2023 call)Current Guidance (Q1 2024 call)Change
Net Interest Margin (FTE)FY 2024“Similar to 2023, trending upward from Q1” (with 3 Fed cuts modeled: May/Aug/Nov) Low‑260s to ~2.65% range (after removing May cut; expect improvement weighted to 2H) Lowered
Net Interest Income YoYFY 2024~+2% YoY ~−2% YoY (given fewer rate cuts, Q1 margin headwinds) Lowered
Non‑interest IncomeFY 2024~$48M midpoint $49M+ based on stronger Q1 and pipeline Raised
Total ExpensesFY 2024~$160M run‑rate ~$156M (deferring select projects; continued discipline) Lowered
Net Charge‑offsFY 2024~10 bps assumption ~5 bps (credit trends favorable) Improved
DividendQuarterlyMaintain $0.31/share Maintain $0.31/share Maintained

Earnings Call Themes & Trends

(Company did not host a Q2 call; themes reflect Q4’23 and Q1’24 calls, with Q2 updates from 10‑Q/press release)

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
Deposit pricing & elasticityTargeted promos helped deposit growth in Q4; plan to recapture pricing as Fed cuts occur; bucket‑level repricing tests underway Interest‑bearing deposit cost rose to 3.10%; continued mix migration; deposits up modestly; brokered deposits $383M Gradual improvement later 2024; near‑term elevated costs
Margin/NIINIM bottoming in Q1 then improving through year with rate cuts; fewer cuts could temper NII NIM 2.46%; asset yield +38 bps YoY vs liability cost +80 bps YoY Pressure persists; stabilization contingent on rates
Credit qualityCriticized assets up due to a few names; reserves modest; 2024 NCOs guided to 5 bps Non‑accrual loans ~$64.2M; ACL $77.2M; provision $3.17M Normalizing; pockets of stress
Mortgage bankingVolatile; MSR valuation swings tied to 10‑year rates; Q4 weakness, Q1 rebound Mortgage banking $2.05M; MSR net carrying value $18.14M (fair value $27.64M) Recovering
Capital & dividendsStrong CET1/Tier 1; buybacks opportunistic; dividend maintained CET1 11.91%, dividend declared $0.31 Stable

Management Commentary

  • “Premier’s earnings progression…flattened out a bit with Q2 more flat and more of an upward slope for Q3 and Q4…we still are on target with our full year expectations…less on the margin and more on other factors.” (Gary Small, Q1 call) .
  • “We have plans…to recapture cost where possible on the deposit front…money markets and CDs will start to reprice down…we’re putting all our plans in place to take advantage of rates starting to come our way.” (Paul Nungester, Q4 call) .
  • “Expense containment remains a high priority…we reduced our expense run rate by 11% to $152M annualized.” (Q4 release) .

Q&A Highlights

  • Deposit strategy: bucketed repricing and elasticity testing; aim to retain gathered balances while lowering rates as market allows .
  • Criticized assets: increases driven by a few credits (C&I and multifamily); expectation of working back to pass as adjustments are made .
  • Capital allocation: buybacks remain opportunistic given taxes and capital priorities; focus on building capital pre‑merger .
  • Wholesale funding: intent to keep levels flat with deposit growth funding assets .

Estimates Context

  • S&P Global consensus data for PFC Q2 2024 was unavailable via our tool.
  • External sources indicated EPS consensus ~$0.50 (actual $0.45, miss), and referenced “revenues” that are not directly comparable to bank net interest/non‑interest income (caution on definition differences) .
  • Given S&P Global data unavailability, we anchor comparisons on reported GAAP figures and bank‑specific metrics.

Key Takeaways for Investors

  • Near‑term: Expect continued margin pressure until deposit costs abate; watch deposit mix shifts, brokered balances, and pace of deposit repricing for NIM inflection .
  • Credit: Non‑accruals rose in Q2; reserve levels increased modestly—monitor criticized asset migration and provision trajectory into 2H .
  • Fee stability: Mortgage banking and wealth management provide ballast despite rate volatility; stronger activity should aid core revenues if volumes hold .
  • Capital strength: CET1 ~12%, dividend maintained; supports balance sheet resilience during merger execution .
  • Merger with WesBanco: Strategic scale, broader footprint; timing and synergies are key—focus on closing milestones and integration plans (proxy/S‑4 process, regulatory approvals) .
  • Setup for 2H: With fewer rate cuts modeled, NII guide shifted to −2% YoY; upside depends on deposit repricing traction, fee momentum, and credit cost containment .

Sources:
Q2 2024 10‑Q financials and MD&A .
Q1 2024 8‑K and call transcript .
Q4 2023 8‑K and call transcript .
Merger press release and SEC filings .
Q2 2024 earnings timing/call cancellation .
External estimates reference (non‑S&P) .