FIBK - Earnings call transcript Q1 2020 | First Interstate BancSystem, Inc.

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Operator

Good day and welcome to the First Interstate BancSystem First Quarter 2020 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please also note, today’s event is being recorded.

I would like to turn the conference over to Ms. Lisa Slyter-Bray. ma’am. ahead, go Please

Lisa Slyter-Bray

morning. earnings for conference Good our us first quarter call. Thank Rocco. joining you for Thanks,

Report As most we results factors statements from risk The any earnings begin, those identified our to during today. in included and results differ as this read please future from company update filed that factors statements. note recent forward-looking that will to materially filings. filed in in with on our note release any direct release contained earnings periodic forward-looking could made the to the materially cause I’d recent contain the SEC the well like Form with in affect does and statements, forward-looking all as expressed Report cautionary statements could XX-K and our the actual SEC. those undertake statements SEC or Relevant results that factors Annual to may are call outcomes Annual our by information listeners the not provided and forward-looking reports regarding in actual more the differ

of GAAP A fibk.com. measures non-GAAP is the regarding website our our available use earnings financial financial at at and a for the the release end copy earnings release most non-GAAP be measures comparable on is earnings their release which of found may directly financial of of your measures our reference. in Information contains body the to reconciliation included

Kevin Officer. and Mutch, Financial Marcy morning Joining us Officer from our management Riley, our Executive are Chief this Chief

Kevin to call I this will time, At the Kevin? over turn Reilly.

Kevin Riley

to call we’ve Along joining our our again some call The at updated thanks presentation published can with disclosures that be us to presentation today. our morning on Good you Lisa. speaking accessed release, we’ll Thanks, for that relations all additional be investor investor on has an website. earnings and today. our of

to start to industries. information to discussion encourage haven’t financial going so. quick around overview of provide the a pandemic If our various do yet some to I’m today and copy downloaded our by the I COVID-XX a results, response you exposure providing you our on additional

And to another performance, our of Marcy to deteriorating more challenging over and Despite on environment provide building quarter net details financials. by resulting the the from pandemic. delivered were income reserve while share the the solid our now I’ll and we earnings our turn call she’ll economic condition reflect impacted COVID-XX operating per

income areas. show We continue many pretax, pre-provision in trends to generate positive and strong key

interest which We of had a net margin good impact accretion. excludes interest operating recoveries the and stability core loan in our

been have As pressure the we cost able deposits. of yield to effectively reducing our on offset asset earning by

continues revenue in Our increase a as demand mortgage strong saw for a to refinancing. to be fee banking we significant source due revenues income of

prior the over development pandemic. first during revenue COVID-XX also Our the that Obviously, assets under management. volatility market the the increased quarter the in wealth management pressured despite quarter the big was

managing the states among in country in capita. the We’re that and country the Montana have many spread we that the in among markets in of by areas per of and of infection been very rank Wyoming COVID-XX. have operate the least terms lowest fortunate been of impacted the effective virus

we the of hasn’t part the the in state for and place, home. has encouraging. through much. of is It have facility. back at the the April western the had is state which Early in of limit process Dakota Eastern home that our Governor this an Wyoming at But did really up gathering opening to all options the those now never processing but outbreak restrictions. order been had and in which stay the end a at starts Likewise, of the in looking of stay virus week, at a news pork the been is of presence impacted up portion Montana very South a loosen economy never large

higher our impact a near portion Idaho the that seen we one the has begins a their footprint loan phased nowhere approach bit, that But Oregon employee announced hardest. Idaho a has state bit portion have is has of the Washington. that of in only and some country. to the the portfolio impact been has state hit a in states small and reopening our been but of Governor Western of quite base today. of economy The hit The harder

of seen haven’t While our I at proud same that or pandemic the probably banks our employees to of country. this negative across incredible want to difficult leadership impact effects team the one relative basis, degree for and And during say other I’m times. effort a certainly experienced we another our the We’ve their very to around markets.

employees protect exposure have are and we and threat As COVID-XX pandemic of clients. now limit our reduced home made quickly adjustments both to from health to bank the and employees the our safety of employees and working closed our XX% branch of hours accelerated for and we our in customers, approximately our lobbies all operations operating of

technology productivity from digital significant this of by our years up past enabled have retail without platform environment our and clients, transition now the over utilize platform We ability made our time is year. to work has of our handle to investments our to the digital and XX% remote approximately X% infrastructure enhance us this which last increased banking losing juices to clients a employees our the officially

number our place. in assist of we in put To new programs have employees,

for either We pay their absent themselves to employees the own or vacation loved to be a to to have continued without time. who use our need having due one, care to COVID-XX

testing. challenges to Assistance plans apply have Employee co-insurance employees And we First eliminate our additional medical experiencing Relief our updated expanded payment so for have our due for the can that COVID-XX We Fund to COVID-XX support. financial

also fund. is contributions foundation to Our matching that double

to wanted for this through folks that by appropriate. difficult to In we the need are pendings terms and recognized and we make withdrawal early assistance who sure waiving are it clients, make suffering time our [ph] as of our provide there there we fees that they support out really

loan consider and considering only period with fees deferring For for we clients waiving for including our interest certain deferrals. payments our borrowers, time of a are accepting to working payments

customers of forbearance a offering mortgage mortgage payments to for for six months. plans three period no mortgage we’re allow or that residential reduced payments For

To-date mortgage and we’ve residential granted loan $XX deferrals approximately on billion CRE and of and loans request of of loans forbearance $XXX $X consumer million commercial on million loans. approved

clients, we’re SBA with Paycheck loan means commercial our support of with Program. them is modification the doing access While primary providing some to Protection

us for process. the lending up getting over in prepare PPP process investments made and be our standardize the and to to application scalable The to we’ve years adapt served past well

loans. aggregate, result a first access more the our markets. to applications we funding, employees we PPP helped get As $X represented wave companies In than in the X,XXX approximately during funding more XXX,XXX of to were for the billion in than approved able

the received in fees from funding. batch $XX In approximately PPP total, million we first of

round During helping focused our just the first we on existing clients.

expanded the have These include up perform of during Over clients couple wave bank of funding. opened with part the processed accounts will our due that our that process to of the diligence. deposit past be we’ve applications so the we second clients new weeks we can

provided I key takeaways. we’ve of loan individual In we minutes portfolio the to published and detail discussing spend updated in want investor the a few around quite segments that presentation bit a our some

disruption seen crisis limited lines general build meaningful a As businesses. comment have our of we liquidity, about the and of they representative since our seen in which is the we up portfolio to loan a the not and the on two strength drawdown credit lack started things: their of our believe borrowers need have

loan types portfolio flagged XX% in Looking which million the at under our outstanding of or more than of we industries XX%. and total exposure strong have underlying a risk our It’s hotel to properties represents loans. with of LTV being an the we average to loans have high hotels X.X% $XXX industry

of X% As of March impaired. was XX, this portfolio less than

in have represents this X.X% of which as March Ag $XXX our million loans and X.X% of XX, total was impaired. We just portfolio loans

of past are raised Ag labs mentioned ranching the farming. which they in the feeder have than we portfolio most the beef get this of borrowers the fall. Midwest the in usually largest old cattle less and year to feed segment and cattle segment sent And this a within As in the

So and while plants, beginning them have our processing those plants unless of the stay won’t chain long disruption a impact some at customers that the the really for supply time. close beef are in very there a of on is really meaningful period

a exposure category criticized retail total Our none on of mall trade these our March almost of with of is only XX. being loans and as about X% loans

I are FICO our high around of we XX% As X.X% oil and for the reduced million steadily information of portfolio March and industry just of loans past, above autos which now have those portfolio quality some we have approximately approximately our portfolio scores it above in provide It’s exposure RVs. to the want indirect as and originations and only lastly, XXX. $X represents consist XXX And scores gas XX. into primarily a which impaired at FICO of and loans mentioned in our XX% of

our have which that strong by started, touched the increased to April we month payments. efforts people seen our of well collections XX our their of on working work and has underwriting they since a With peer make points we good business. the in rate in our below going group I has have down a back delinquency our consistently crisis is our experience point And brought rate In is think delinquency our I this example during basis markets, or April. are And the earlier. can

very type continue at of loans feel same and portfolio than other the we of perform comfortable should it So better country. with the this to parts

Marcy And our turn to financials. at on the go provide to more I’m Marcy, can point ahead. over a she detail this little call going so

Marcy Mutch

good morning, and Thanks Kevin everyone.

our financial the comparisons through prior XXXX. I’ll fourth statement. all period noted of be As I quarter walked begin the our income with unless with will results of otherwise

was $X.X from earning decreased quarters partially The income to decrease primarily million income. assets. day in in interest quarter of a net decrease last Our accretion due to lower remaining $X.X the level a the one million and attributable prior

X.X% our a first basis, quarter. margin points X in On basis interest reported the net decreased to

impact of accretion, unchanged net Excluding interest and was operating loan X.XX%. our interest the at margin recoveries

mature our cost and yields. which our of lower still the pressure have opportunities CDs declined basis further from cost X reduce quarter points of rates. We as funds Our earning funds the at to renew helped on asset prior to our some offset

$XXX year have CDs rate yields will the cuts. in average pressure recent weighted offset decline interest will the and million carry some the us resulting on mature end the loan X.XX%. deposits of fed of We a of from repricing that rate these margin continue the by current to XX% net CD or portfolio our in The of help the from

of will portion the our For as excess loans accretive flat of fees the our net overnight we we’re Any in with loan be forgiveness quarter, able our PPP parked second large but not was should to this funds. quarter. result margin probably fund second to that margin, the be a impact expect interest liquidity to accelerated as a

Moving to by decreases higher to due increase income. payment to transaction in saw we revenue volume was related in increase decline mortgage $XX.X the of the increase see banking million. The services an half last which entirely offset COVID-XX. to in was non-interest seasonal $X.X We million normally This the impacted almost of March quarter-over-quarter revenue. further

other quarter. with major relatively prior were our of fee areas the All generating consistent

revenue due increased prior demand quarter for from higher the refinancing. banking $X.X Mortgage million by to

XX-XX and of mix for production about which refinancing is new this Our purchases quarter.

about a to closed nice new the our about million Our purchase channel contribution of $X through as in loans this application mortgage make activity we digital quarter. of or continues X% portal

Right channel. additional up be generate opened refinancing volumes it starting accepts May which to help this process only in But originations. online now our will through purchase should

We to activity in mortgage continue strong see May. heading origination

the the expect Although refinancing begins it we to we as approach off do drop end demand as second quarter to off. taper for of

probably our economy seasonal other again. of have muted that we’ll fully in a as terms areas until up spending consumer we expect up get pick In we not opens the services fee typically revenue our payments remain income to

last expenses non-interest with no had acquisitions. expense. compared total in to $XXX,XXX quarter acquisition Moving Expenses quarter. related We this

non-interest This rights increased increase from and speeds was million was to impact expense, due primarily expense higher acquisition A to servicing credit higher quarter. insurance prepayment seasonally that higher expense related $X.X last FDIC to tax the recognized Excluding mortgage $X.X refinancing. quarter. following of impairment due resulting from payroll the the prior our the million

cost. always travel lower estate the around expense reduced mindful from other training lastly, on reduced expenses the current resulting gains revenue control sale particularly of spending advertising, the with even and expenses while quarter-over-quarter the we’re real discretionary we’re And pressures properties, like tightening environment, our more of

for Required stopped effective or into virtually in whether has all for still continuing travel allowing manner. training are a not vendors outside of meetings our facilities. Business come still business employees we’re and our to very

second For these our reasons, to quarter. lower expense non-interest be the we in expect

were were quarter offset other in sheet, many Now our the quarter. the to were balance not from lines we Increases the One real estate moving prior of commercial our construction loans large our end and in about total unused this by portfolios. loans mentioned. other of downs small see the declines thing drawn have and flat banks did

As line our usage remained steady. unused

terms of pipeline has applying borrowers pre-crisis impacted utilizing or from many In and for lending are a PPP we’re uncertainty to loans program. opting our down focus other The loan bit demand macro level. on federal

customers a commercial from decline along decreases bearing savings were increases deposit. end decreases decreased and non-interest $XX prior million partially in demand These due deposit deposits. in offset interest deposits time the with bearing This of the from Our in to quarter. total by was

to asset most slight quality, asset saw categories. we problem Moving in increases

Our million to which than of our non-performing half assets adoption of loans CECL. attributable impaired reclassification increased purchase to was due credit more of $XX.X the

due that came documentation COVID-XX. of after half recorded amount getting with due past loans due past The delays status but and in the issues slip into was $XX.X week end. a quarter to companies to due approximately title Our million increased current

we’ve touch adoption presentation main of a our a like In of of included pieces our would and slides I few of couple discussing the information. CECL on to

consider it delaying best late At loss said, to at methodology. time to it’s the been Act allowed was adoption. this determined stay While the adopt we That CARES date, pretty interesting course. new to us loan CECL

Our XX-year data. CECL and model historical was considers look platform built on an our Oracle an period back of

a loss we or result our commitments This liabilities. $XX.X January which for increased lifetime is XX% of loans. portfolio on to amount in consider was CECL under million CECL, as the to about other million our included in As off required $X.X credit includes X, a allowance adopting sheet which attributable losses balance by

In the of the potential additional by to an COVID-XX first allowance consider quarter we portfolio. our increased million $XX.X on our impact

the Within of fourth as during our assumed in the with XXXX. model, Forecast Baseline levels of beginning XX, higher year, used we the along economy quarter of which the contraction CECL most March expansion unemployment Moody’s through with in

deck to We allowance. to also other of considered qualitative our adjustment economic develop within factors noted investor the as

are medical severity will our of our be impact ultimate that the the second stimulus hard on believe At increase economy. portfolio the but if of allowance To-date injected is portfolio to economy, to to to time this seen. that benefit variables positive the were it’s our extent full determine make this it all negative There we impossible a the from into many being the this outbreak. in impact the on impact the be of project of there crisis remain on reflective non-COVID-XX the the to impact

Our company. credit at history the been it’s today our is of as quality throughout strong

deck base. investor our small spent are the developing years resolving and discipline across relatively improving We credit diverse operational assets. industry and spread problem last size geographic our our of on note four you’ll and processes the around culture, loans the As our a

As positioned such, believe next recession. the we handle to we��re well

I’ll wrap on provision touching expense. by up

have million basis an $X.X of quarter or basis. net We during of charge-offs on points average the loans annualized XX

offset allowance liabilities off a to for million $XX commitments. was expense provision sheet was of million the [ph] by million adjustment $XX.X $X.X of in decrease which comprised Our a balance

Kevin? And back to turn over with I’ll that, it Kevin.

Kevin Riley

with through to Thanks wrap manage few Marcy. this our crisis. to I’m comments about a going up ability

pandemic. over we comprise refuse economy though been our about straying our bank. see years. knew spoken I’ve order conservative years of even the in to would few generate how underwriting to value in one of times a healthy don’t of It last always just has We approach. criteria to believe from past emergence the that over the the our several the growth, used no that ever global demonstrates manage we’ve number XXXX an disciplined approach loan Although we a relatively

conservative doing ample maintain and the our sheet our capital downturn all fortress and goal to a is always quality and level any to clients, reserves, By strong excess manage economy liquidity. of interest in asset high balance prepared of Our the underwriting based stakeholders, employees through with we’re a shareholders. our so, our criteria, protect on

back us and we this is positioned than ever anticipate get Accordingly, that, storm our before. of financial this the might part a our crisis speed way to enhance last any Recession are opportunity is we banking by of for we time We believe unlike news have solution. well what long long current great the or long-term. continue and weather can’t a I’ve Great the seen to how situation The might value industry caused been at different over the of be in work. the have to good franchise folks the slowdown to for

Advances bankers in service our circumstances. efficient interact with extraordinary and us to providing and exceptional manner technology safe are under letting our continue highly in clients productive an be allowing and

we’ve we to our manage capital and be for clients support and As standpoint, our sufficient crisis. through will management economic in plenty priorities have market. maintaining a to capital indicated, buy of our liquidity capital activities From this credit

dividend. The operating should well capital small supported As be claim by and well maintaining relatively our we on dividend quarterly a our is earnings. as cash continued

I extremely their on other team. For And coming I communities. also conditions the as have program concerned They job our in you stock we’ll They clients tough be of proud the They’ve of meet to to proven by gone I we warrant me have ensure the demonstrated of reliable, have our Interstate be the team up this responsive time care best think, I’ll of wrap being, heard mile I’m each mates. very resilient America. needs activity the we’re and taking banking and in America. before, team to this the say best suspending time. quarters. period First extra our repurchase reevaluating decision and have in in saying for the

So questions. with that, for the I’ll open call

Operator

Fargo [Operator Shaw Instructions] of comes Wells Jared first from go Please ahead. question today’s Securities.

Jared Shaw

put the quality. us effort thanks give overlook guess look stuffs, we’re you input, deck I factor time provision? been at qualitative provision that This I guess on as observe over great for appreciate looking starting how that. at and detail. the one asset a have the you would you baseline First, the and helps much slide the When can is increase just of really baseline otherwise of that, on that I’m the the assuming increased sort sense just the us into QX

Marcy Mutch

Most of of result first the the that increase two in - the the quarter for day qualitative factors. a was for

Jared Shaw

Okay, is more correct? than baseline, qualitative your so but severe factors that became Moody’s the

Marcy Mutch

correct. That’s

Jared Shaw

are sensitive slowdown I summer, with expected. customers if we saying sort then, and If in isn’t we that. you attendance as in to the hear your looking of - for the tourism reopen. look we guess is Okay strong when Montana I signs How warning potential to through as be should to get it tourism? going look summer any the So at we

Kevin Riley

warning are you anything. Jared, biggest probably if say to I of quarter, signs know, going would one tourist the as the the But going see industry. industry show is Montana third we our up into

to that back of are safe. whole the country during that So pandemic It’s get we’re interesting a Montana hoping that, hiding people to stay out this and from lot around York of New there’s we’ll that.

the is I it’s of might one places United States. come here because safer in and it So safe here think people

Jared Shaw

that in or [ph] Okay, some really a that the not through hedge? hedge we customers Ag they hedge chain jam any industry see the to of so those Do year, type the still there? an as the move at protein is all Do exposure, thanks and then on we log on of out side.

Kevin Riley

that. [indiscernible]. I don’t people hedge think many They’re

think they it. ride I just with

down. it stay So impact have yes if could an the prices

Marcy Mutch

We could the sure. off ask question, top my of that I’m head not

Kevin Riley

they is head to out I of theirs, producers cow XX,XXX year. family about XX put and think hedged largest they cows the of One don’t a so Scott the

their But think that. portfolio. back So get I We’ll into hedged they you. question, good look to don’t we’ll

Jared Shaw

a us the everything. is that, an then, can But know priority just update I is you give off M&A? given at table everybody to or have what obviously And quarters happen for to or point that’s happened seeing the on this something get this the not months or Okay. comfort to would for in deal a future. - years deal any I guess

Kevin Riley

settle their time. about down of that to to bankers have about. been thinking partnering during would help busy Jared clients period lot mean of this I were something things think trying have with come I really something, maybe they’ve to

So from I could - always think talks But when separate comes But time things of and the I think crisis I don’t that talks stabilize know. the that stalled. have continue really chaff. about, I if weak think kind

going about time, So people to who did are well really are going a I be well people who to continually and hard think to do had think independent. harder

Jared Shaw

great. Thanks jump for off. I’ll the color. Okay,

Operator

Our from go next comes Jeff with Please ahead. Rulis question Davidson. D.A.

Jeff Rulis

to tourism with, I more kind return the on work of you it. - less get - wanted to businesses a the of just follow-on to the for that the businesses on sense kind trying but on open just

local conversations they had had foot foresee us business the think some just conversations businesses is on thoughts their a of that minimized, phased return? you’ve of a for about but the traffic or you’ve of and sense do If kind give in how return and normalcy it’s you about

Kevin Riley

over thing I would like Montanans, they would and same act was Wyoming. with if tell is you it this

wearing I think of and tell pose the thing is to hold the scenario trying is, of would stuff. on back zero. But they’re mask the it that, part people mean some I is compliance about I you, stuff.

what’s predict Montana. think to some city getting in close which tell, look largest to normal. to slow then it’s time is if really what’s up pick But it’s be to pretty at first to of we’re you on going the back going it’s in that It’s will the going at happen. going in I harder the in. states Billings and

and establishments surprised the I’m amount the in of stuff. are various people that

where than which it’s had Yellowstone is, of say most I the we’ve days mean in back it’s faster would So county continues way then get cases never Billings and I last I a is zero three has no even would so that, the to area town the of Sky people brought that, of was that’s to area a I are to it’s turn probably Bozeman they of Montana when out and Big due it trying the hide had County in going going The to Montana. and out in areas were case. Gallatin But cases, lot if the expect. County the really biggest going Valley fact, it from normal. Montana. besides to back think

even in and Idaho the areas people the Sun think second their Valley stuff I biggest and to impacted going Idaho virus. again was homes bringing thing

I think it’s to to people are and you out, waiting back pretty back to if close get normal. look getting

Jeff Rulis

Got it.

mentioned and so. that But thanks issue? think I or sense Marcy PCI. half another was that of was build leaves NPA the what a a industry from Any think tipped that $X guess about that and COVID of you request Okay, over preexisting I of that that or you on million overall in by do pressure kind was was any of driven of

Marcy Mutch

I can was tell related. don’t it recall was I the a condition you that and not it COVID industry. preexisting But

Kevin Riley

our no of COVID We as have seen pressure related on date. portfolio

Jeff Rulis

a On credit perspective. Okay.

Kevin Riley

Yes. Right.

Jeff Rulis

You mean Got there. it.

out maybe Marcy one, last to ball the And crystal here. one Okay. pull then

second if quarter how the I Your positioning on are think margin bit be and the core you a second just can an in guess frame and half appreciate leverage impact of be half up second the sort Thanks. helpful. framing I will you you of that the margin kind but could pull of of manage the comment up, of in dots expectations Obviously, would puts you kind takes. PPP that.

Marcy Mutch

of for lowering So is our except that, see dry that CD off there. powder cost kind you I of will would say further know in run deposit terms we’ve the

I mean, spent So all [ph] there. powder our is

the deferred biggest and and margin the And those think benefit fees deferred is of as the the acceleration of see of so PPP the fees, second part will some we’re that into higher our from acceleration head the I loans we drive to year. going the of

Kevin Riley

some - of Marcy I give pay to we flat. I’ll quarter, be recognized. bets first pretty to like margin, It think those those going be my could all earlier, it’s - loans some because quarter up have fees Yes, But third so are the much off in if second flat north says really the off. being could of all but go fast the in pretty probably

I the customers. quarter. we’re hoping returned from a think rate addition normal the run What we lot new for maybe of corporate a growth and in to is, of it fourth

We’re relationships example fortunate X,XXX by it many so very and well our above lot process of going dissatisfied much the were They around. the of into all normal we’re about pretty hope of open able to take very round had We you a were come PPP customers to corporate second to our we their the move that in the month take over customers. normally open just we March that first an bank customers pretty of much relationship brought they a XXX up we that month. and the care new us. other banks to institutions in thing. the of I’ll give just goal We care

taking of hopefully have that will customers. the communities care a we with to into regard translate So our in lot people done that additional believe we of

Jeff Rulis

you. thank Great,

Operator

today Jackie from And our comes go Bohlen next KBW. of question Please ahead.

Jackie Bohlen

that on continue line to Just questioning. of

So give you also if sense said that be that was you customers April? into X,XXX a in continued us new Can will March.

Kevin Riley

pick this many in some April. that, customers the then, accounts been due to started even in the we actually have the I very that how never through our some. fact such and received communities number And done did their loans did a up say don’t because fact helped we up it’s job. letters to really wonderful them so and I we -. from talking mean probably I’ve time. just going to It’s that’s more they of care have about taking open humbling But employees when difficult little with picks it, would We it

So going to I it’s more additional think translate into customers.

through to I just none complaints mean the this would on are an them, letters just I like whole got normally and fell I a letters lot I coming tell only relationship and of that you I get likes Umpqua of stuff for and down But get I of But US over. just all take which it’s time and program. said down, that, the move of mean Banner and Worlds that. the going fell those

had we, couldn’t and well. been and customer said, sometimes own call they through. they’re already applied get the loans like I it well mean then we their for we where and because we it in were But and they them came helping up it’s bank Banner through and put approved we at

from own more getting bank loan than about guys information our you We’re our process.

it that of institutions. interesting number So different was in happened

So our out I just an But employees pick mean did that job. one. unbelievable just

Jackie Bohlen

Great, expectation from - that. is mean no. I this my

relative longer you could return is lift certainly little of in to we you loans and normal to these otherwise would see in relationships, As both deposits fair? bit term a the that the in new new growth expect, from

Kevin Riley

fair supported those banking why abnormal as to off with will to have new core hoping that say, are things relationships more That’s be that that’s we the at rolling fourth relationships. quarter I’m and start

Jackie Bohlen

the I timing want make comments your on that understood and to sure Okay I expectations.

correctly? XQ XQ much or not to today, So fees of expecting at write this really down expecting see those to that point, that hit in in you’re accelerated

Marcy Mutch

That’s correct.

Kevin Riley

correct. That’s

Jackie Bohlen

payoff And deferred referencing, accelerated right? or to PPP, referring other no some you’re Okay. that portfolio were fees the there’s other specifically you

Kevin Riley

That’s correct.

Jackie Bohlen

Okay. from and me I’ll And back. step one one then, then last just

of of item. the something that to not and usual the MSR was it’s both of specific more the housekeeping quarter? impairment MSR The raise just In given and very unique because environment terms first valuation a of part

Kevin Riley

just, that’s it’s just. No

Marcy Mutch

month Every actually.

Kevin Riley

speed Every at of said, as we the you quarter thing it’s just it. But the look prepayments.

reverse your the value that and You us down, as to might come some then prepayment of of it actually back have we - that future. speed might comes to MSRs in

Jackie Bohlen

wanted just clarify of some the things, geography the I Okay to expense.

you. Okay, thank

Operator

our And Please of comes next Gordon go today from question McGuire Stephens. ahead.

Gordon McGuire

Marcy I could was for hoping me. something you reconcile

in. your So was you’re to accelerated even where expecting next come from NIM for those guidance quarter, flat not PPP fees

Marcy Mutch

Right.

Gordon McGuire

Is that correct?

Marcy Mutch

correct. That’s

Gordon McGuire

run going so be funds loan to of replacement the Okay, I PPP, could to lift repricing. offset any just into repricing. the X% enough overnight a that’s guess of loan portfolio through kind of

Marcy Mutch

the through this then paid and accelerate term those on when So amortizing down. get or you fees, forgiven plus the you’re so X% have you’re earning they deferred they

interest from funds income were amortization XX because basis fees the the that funding points. X% earnings at which overnight between with the we’re and into goes So that

Kevin Riley

loans, XX and capitalize the FAS them off, because they the loans you of and then when those over yield X% quick will with These life fees story. fee comes So at loan PPP you income. about into amortize actually the remainder get pay

Marcy Mutch

Immediately.

Gordon McGuire

Marcy walk have point? of you at could you through loan do And right. repricing dynamics? this floor kind All the just protection What Okay.

Marcy Mutch

billion, You XX% so, billion bet that have a and remain our have loans have those that $X about which and floors. XX% hit is off those floors of floating floors, off $X.X and XX% those their

So we have have only about not floors. that hit million their $XXX

Gordon McGuire

mortgage Okay, implies but guess volumes sale on down pretty to been, have fees much anything you. noisy that I significantly, the there contributed gain number? that up a that then great. spread would that’s that have the And Thank than would I and were was thought in higher they

Marcy Mutch

actually. were volumes No,

Kevin Riley

up. Volumes were

Marcy Mutch

Up.

Gordon McGuire

deck slide were and the guess looking I’m down. it at looks like I volumes

were much up how Okay, volumes quarter-on-quarter?

Marcy Mutch

be What may last up - year. I looking They was first Quarter-over-quarter. not quarter quarter-over-quarter.

in sale gain we margin. on did some yes, have So our increase

Kevin Riley

because volumes the down the up for that were volume. the slow coming so and to And the we reason start had price

margin. got So we that’s a better why

Gordon McGuire

an MSR. nothing like so Okay,

Marcy Mutch

No.

Gordon McGuire

Benefit like or anything that.

now? And so far were margins Okay. trending into how May

Marcy Mutch

Just flat.

into Turning May.

Gordon McGuire

compared flat the Okay quarter? to first

Marcy Mutch

Yes.

Gordon McGuire

can what in saw you to last and you type quantify off within thing. of Okay then you just March February? and drop Could January relative the payments,

Marcy Mutch

you revenues last on to substantially. that was It the in weeks just Gordon. back off in I’ll and two fell it pretty services payment get

Kevin Riley

You’ll answered. have that

Gordon McGuire

you. thank Okay,

Operator

next question comes Sandler. of Piper Clark our go And Please from Matthew ahead.

Matthew Clark

me, deferrals. percentage I have received or of PPP? activity, one commercial PPP those to guess on just $X deferral going what are billion of the the First get from

Marcy Mutch

there’s overlap XX% XX%. of and deferrals an of the

Kevin Riley

XX%.

Matthew Clark

you. two something then of the expect to with and you coming the customers to new you wave Great a them to Are deposit overtime? that is account get initially or round requiring have just

Kevin Riley

But have operating to over to initial open for time they No, account. takes people it move accounts corporate deposit so.

Matthew Clark

first the we the quarter, purchase the up you can gross at end so the mark? and Okay then, quantify can discount for reserve of the

Kevin Riley

I the the don’t question. understand What question? was

Matthew Clark

book loan discount that purchase on accounting [indiscernible]. The your

Marcy Mutch

evaluate So without for I still mean amortizing - loan factor anymore. portfolio away I We CECL isn’t income mean goes any CECL. that there’s with kind that. not factor. same consideration it into under the of a full just we’re that Yes

Matthew Clark

Got it.

do emerged the not? business trying Just out there? reins certain any the the I you whether good years of opportunities sense a in there. you kind and guys standards and further production loan tightened that about over pandemic out or for for thinking opportunities Have you’re since see to have the get or additional Just not segments. made exist or you tightening tightening know

Kevin Riley

any reins we’re further. tightening not the No,

stay going same are lot lot for I the criteria. expansion. money everybody’s all with to pretty in We’re to same tell borrow There going not right there’s you now is a where much people this of seeing go. our of But that will to camp a

a are - that of to still their expand business. lot juncture. don’t businesses people money doing people of at not I this much borrow there’s So But

Matthew Clark

items. the in Yes, right? wealth they understood. terms on is is the end Are And based less in tied quarter of it management that minor of the then fees. just The of prior to market, revenue, a couple terms either

Marcy Mutch

little in wealth bit we a revenues. see of Yes, could pressure our management

Kevin Riley

Yes.

Matthew Clark

and lower going tax given the forward, just then of income. the Okay level rate

Marcy Mutch

probably it’s right Yes, around XX%.

Matthew Clark

you. thank Okay,

Operator

And our comes Holland ahead. Please go with question next Baird. Garrett from

Garrett Holland

forbearance. figure is level? to I you for in your recession that fairly severe appears how some on conservatism quality. still a out less wanted are do the But they expect asking of trend elevated of markets, But from impact asset start quarantine. great. there’s borrowers the which mean in XX% relief from And probably to I just are

Kevin Riley

like to be forbearance think that they not might trouble, ask they’re in because what it a people in rush get the something came ahead. to I just to ease most to was door just financial

- that So those a is the think I of took right a don’t people think to they visible forbearance so that they opportunity, due now. issue really was fact had They lot it.

I to opportunity think same get of loans. quickly. with A thing loans the lot took PPP people the

but don’t that’s now tip time So the of tell. of right see kind will I iceberg anything

Garrett Holland

shifting understand feel account and to new encouraging on acquisition That very trend income. with from interest the do takes income going spread to you is growth overall, and and But line. able margin Clearly, be puts you’re helpful. out grind here? then a net to And maybe the muted demand underlying

Marcy Mutch

lenders consistent. to to the a been little talk we consider time. our maintain of were credits the of borrowers smaller bit about environment It’s Again - doing. all of because that Trying to one those able some We’ve pretty orient have better. we you’re kind things the do to kind

Kevin Riley

We’re at are out trying credit to widening spreads keep as you there. debt corporate even - look

should and credit to credit high period really during of that lenders environment educate spread especially we’re So be pandemic. low. this is high. rate trying even though of The credit spread be spreads The our time should

the credit to So talking I they that, were real you quick tell rate stopped that came we would about of first the of and a in refinancing lower customers education of spread. because

So we’re more to the on time what spreads line understand going lending, pan we’re try keep be. to such out high. if do hold going that is think to and to environment credit I any we to this going Until we

Garrett Holland

That’s savings. expect progress from flexing one in how year? perspective fair. But the seasonally you’re run the to on higher and you are costs on a And just the one rate do quarter Obviously, quarterly expenses. through last expense first

Marcy Mutch

bit. it come So a should down little

gave rate $XX guidance $XX million quarter. we initially run think million a and between I

we be as down year. things that to back able remainder bit we expect at the normal. this Until and We of the to get head bring little into that a least quarter will

Kevin Riley

a the if that be. [indiscernible]. pretty I say is, we mean The you thing we’re MSR much back out I going think we we’re adjustment mark right can to on

Marcy Mutch

that’s a normally higher And quarter.

Kevin Riley

quarter, higher standpoint believe forward. so do a that’s from better that should going we we that So

Garrett Holland

helpful. taking Thanks question. Very for the

Operator

back And for the concludes any management final would question-and-answer remarks. ladies to to this I and team turn session. it gentlemen, over like

Kevin Riley

you for Thank your questions.

have you healthy. out in questions. any our and we tuning reach be Thank to analysts. Please today and welcome As for always, calls follow-up safe investors, from us if you

First Interstate BancSystem (FIBK) 1 May 202020 Q1 Earnings call transcript