Third Quarter 2026 Earnings Conference Call - PREMIER FINANCIAL CORP

Explicit Guidance:

• Fourth Quarter 2026 (Q4) Metrics:
  • Net Interest Margin (NIM): Expected to be 2–3 basis points below Q3's 3.60% (approx. 3.57–3.58%) due to higher-cost wholesale funding mix, assuming stable competition and an upward-sloping yield curve.
  • Fee Income: Expected to grow 3%–5% year-over-year.
  • Operating Expenses: Expected to range around $153 million (excluding one-time credits).
  • Effective Tax Rate: Full-year 2026 rate anticipated at approximately 21%.
  • CET1 Capital Ratio: Expected to remain within the targeted range of 10.5%–11.0%.
  • Share Repurchases: No repurchases anticipated for Q4.
• 2027 Outlook:
  • Interest Rates: Management anticipates two Federal Reserve rate hikes (one in December 2026 with no meaningful impact on 2026 results; one in March 2027).
  • Expense Growth: Anticipates 3%–5% year-over-year increase in operating expenses for 2027, driven by continued hiring and benefits, with potential offsets to be finalized in Q1 2027 budgeting.
• Long-Term Financial Targets:
  • Loan Growth: Full-year 2026 loan growth expected to be mid-single-digit despite elevated CRE payoffs; 2027 loan production expected to exceed 2026's near-$5 billion production volume.
  • Loan-to-Deposit Ratio: Comfortable target range identified as mid-90s (approx. 95%), up from current ~91%.

Business-Segment Outlook:

• Florida Expansion:
  • Branch Openings: Three financial centers (Fort Lauderdale, West Palm, Naples) expected to open in H1 2027.
  • Loan Growth: Pipeline of ~$300 million in new relationships; expects franchise to reach $1 billion in loans by end of 2027 and $2 billion (loans + deposits) by 2028.
  • Deposit Flow: Strong deposit flow expected in Q4 and Q1 2027; branch production of strong deposits anticipated by mid-2027 in Tennessee and late-Q1 2027 in Florida.
• Tennessee Expansion:
  • Current Status: Loan portfolio exceeds $750 million (~4% of total); Knoxville office opened last June; expanded with 20 bankers.
  • Production: Closed $100 million in new relationships in <3 months; pipeline is strong.
  • Target: Nashville market expected to reach $1 billion in loans; Tennessee state portfolio expected to reach $1.5B–$2B (loans + deposits) by 2028.
• Core Markets:
  • Cincinnati/Columbus: Surpassed $1 billion in production for the year; record production.
  • Mid-Atlantic: Record production year; strong pipeline stability.
• Loan Production:
  • Total Production: On track to near $5 billion in 2026; potential for exceedance in 2027.
  • Pipeline: Commercial pipeline at $1.8 billion (as of Sept 30, 2026); stable post-quarter end.
• Deposit Dynamics:
  • Growth: Strong deposit growth anticipated for Q4 2026; delayed momentum expected to accelerate.
  • Product Mix: Incentive plans tweaked to heavily focus on non-interest-bearing and interest-bearing deposit acquisition for 2027.
  • Funding Costs: Total deposit funding costs expected to increase modestly as top-tier money market and CD rates are adjusted upward.

Market and Competitive Outlook:

• Pricing Dynamics:
  • Loan Pricing: No observed price differentials in Florida compared to legacy markets; fee income in Florida performing "better than average."
  • Asset Repricing: Significant upward repricing expected from securities ($250M/quarter cash flow repricing ~180 bps to >5%) and loans (approx. $400M fixed rate commercial book repricing +200 bps; variable book repricing +250–275 bps).
• Competition:
  • Loan/Deposit Competition: Management assumes competition remains stable; acknowledges deposit growth success is critical to defending NIM.
  • CRE Payoffs: Elevated CRE payoffs remain a headwind (~$370M in Q3, ~$1B over 12 months); outlook relies on pipeline to outpace these payoffs.
• Credit Quality:
  • Trend: Criticized and classified loans decreased $93M (55 bps) to 3.19% of total loans.
  • Allowance for Credit Losses (ACL): Expected to stabilize near 1.08% of total loans; lower bound identified around 1.08%–1.10% given qualitative factors.
  • Non-Performing Assets (NPLs): Three specific CRE credits from Premier acquisition expected to be resolved this quarter or Q1 2027 with no expected losses; slight NPL uptick due to one property with heavy existing reserve, expected to resolve in Q1 2027.

Macro / Industry Outlook:

• Interest Rate Environment:
  • Management expects a "back-book repricing" of loans and securities to drive NII growth, muting the impact of modest deposit cost increases.
  • Scenario Planning: Acknowledges that a massive 150–200 bps rate hike could slow lending, but does not forecast this scenario.
• Economic Conditions:
  • CRE Market: Observes developers seeking permanent financing and property sales, though at a slower pace than H1 2026; expects resolution of specific legacy CRE credits.
  • Regional Economic Health: Strong traction in Florida and Tennessee markets; Florida noted as a market with "disruption" that the bank is leveraging.

Strategic Initiatives:

• Branch Optimization:
  • Consolidation: Exploring "two-for-one" and "three-for-one" branch consolidation opportunities; potential cost savings to be announced with Q4 earnings (likely mid-single to low-double digit savings).
  • Real Estate: Evaluating optimization of back-office properties with vacant floors.
• Hiring Strategy:
  • Focus Areas: Expanding healthcare team (1–2 roles) and Florida market team (1–2 roles); leveraging known networks in community banking.
  • Future Openings: Targeting new Loan Production Offices (LPOs) only where proven talent teams exist; currently focused on Florida and healthcare verticals.
• Product & Service:
  • Fee Income: Full quarter benefit from June deposit account fee increase ($750k/quarter run-rate); treasury management revenues up ~40% YoY.
  • Incentives: Redesigned incentive plans for 2027 to prioritize deposit generation (breaking out non-interest vs. interest-bearing).

Risks and Headwinds to Outlook:

• CRE Payoffs: Elevated commercial real estate payoffs remain the primary risk to loan growth targets; requires outpacing with organic production.
• Deposit Competition: Intense competition for deposits could increase funding costs faster than asset repricing allows, pressuring NIM.
• Credit Quality: Potential changes in macroeconomic forecasts, credit quality metrics, or delinquencies could impact provision for credit losses and ACL levels.
• Rate Volatility: Unexpected massive interest rate hikes could slow loan demand and production volume.

Management Tone on the Future:

• Confidence Level: Highly confident in the "relationship-focused model" and ability to convert pipeline opportunities; describes the franchise as having "continued momentum."
• Guidance Adjustments: Confident in defending 3.60% NIM in 2027 despite potential Q4 compression; no meaningful changes to fee or expense guidance from prior quarter.
• Strategic Sentiment: Positive on expansion markets (FL/TN) as "proof points" and "success stories"; emphasizes disciplined growth and operational leverage as key drivers of profitability.

Miscellaneous:

• Regulatory/Compliance: Earned 9th consecutive "Outstanding" CRA rating from FDIC; recognized by Forbes as a top-performing bank.
• Accounting Adjustments: Q3 results excluded $2M one-time refund from healthcare prescription rebate program; annualized refund run-rate expected at $750k/quarter.
• Security Book: ~$4.5B securities portfolio (16% of total assets); generating ~$1B annual cash flow for reinvestment at higher rates.