FIBK - Earnings call transcript Q2 2024 | First Interstate BancSystem, Inc.

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Operator

Good day, and welcome to the First Interstate BancSystem, Inc.

Second Quarter Earnings. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to turn the call over to Andrea Walton. Please go ahead.

Andrea Walton

morning. Good joining second for call. earnings for us you quarter our conference Thank

outcomes from we the forward-looking will or that please statements. differ provided results As note call information begin, those expressed those by during this Actual may statements. materially contain

to direct filed to read to the reports in filed and release our with any statements statements forward-looking the listeners regarding annual Relevant periodic report in as the cause most earnings does in the recent identified update could in today. are filings. SEC made undertake actual statements the our all to with the and any recent note risk from well on forward-looking our SEC. materially of like I'd SEC cautionary factors and contained release company report our Form differ the factors as XX-K that earnings included annual results The forward-looking in most not

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

Mutch, Chief Officer, team. along Financial management Joining members Executive Officer; our us morning this management is our from and with Kevin Chief Riley, Marcy our of other

the call turn to I'll time, this Riley. At over Kevin Kevin?

Kevin Riley

additional an be release, which thanks this published will updated helpful. along us our Again, on Andrea. have again quarter, has presentation believe all that we joining for earnings our call Good to some investor Thanks, morning, of disclosures, and you with today. we

Investor encourage to be you can website. downloaded would so. a The accessed if our copy do you presentation I yet, And on have not Relations

on of to start our by and to provide an turn highlights the over details call I'm more overview Marcy of major going to the providing quarter, financials. I'll the today then

So results. let's our get to

$XX generated million in in the or income second net quarter share. We $X.XX per

in in expectations, second in and basis well continue margin generally point the quarter, with results our execute interest net were X%. our We to our to including a expansion X line

pleased were metrics. nonperforming criticized in asset improvements and to We see

liquidity for and losses remainder net our interest credit these allowance factors, profile. remains our our with reinforces and for are into of in for capital XXXX. credit strong, the that is Our steady and belief XXXX well positioned our position along we our anticipation sufficient expansion margin, of All

in than a primarily Expense ongoing second better control for quarter. salaries. base the tenet remains This in we of and was expected key prudent came expenses driven our us, the our management by

below and as Our continued said, on expectations our expenses. medical persistent to expenses run focus I controllable

managed into and the to people. reductions systems expense the time, We our internal same continuing while, have investments make at our

focal of quarter, success Last early internal for seeing points are solutions, investment said one in area. we is we treasury our and that

overall. our which which service treasury Our meet second our businesses our for helped a on digits income, expectations mid-single us the of in our accounts, charges deposit increased service quarter, fee component by is

line our our this of and business, model. customers are relationship our serve helping improve this in area. optimistic Within remain enhancements better successes future We about banking us

of in X.X% an quarter, income is the million quarter. which noninterest $XX.X in recorded We the second increase from prior

those update X.X%. quarters, X the classified declined period, you by nonperforming and In quality previous the And an loans. we moment. and nonperforming nonperforming Our a give Criticized, assets on loans declined asset Marcy in will X large discussed all in second quarter. the improved in

on deposits. Now to

incorporated third figure larger customer seasonality quarter impact deposits that will mute at is by want deposit our and partially in did one Our deposit our in note $XX.X was the that and which impact NII period end-of-period both guidance. increased million to normal our quarter. I than second end, growth. this This include

repricing Asset in any decrease deposit we and immediate of not cost. assuming projections, driver our material margin our are forward is the

stable remains and end. liquidity XX.X% our healthy Our with at loan-deposit ratio of quarter

want Marcy, strong the talents to the take just turn over have added I risk X that team. opportunity I we Before announce to to management call to our

The first as is at most this Officer Goldman retires Matt of Chief succeed Transaction Banking Credit Officer over the September. when our as Koukas, Chief Lugli Mike experience who in will in years has Matt of Credit field, Michael Sachs. XX recently

years of Risk Management, fraud also these creating have experience recently Director team. new great fintech area, start-ups. are a for individuals fit accomplished We many Both our very of this for a in who hired Fraud in programs of brings most X

And Marcy now to on I'd details some financials. like to over for turn our the call

Marcy Mutch

otherwise Thank walk unless noted, comparisons of through quarter be all of I and you, with statement. as I'll with period prior Kevin. our begin the financials, the XXXX, first income our will And

second interest the an in net Our was million income $X.X quarter, $XXX.X increase of million.

increase an improving on yields, reduction investment assets yields an X Our a points and shift in quarter-over-quarter securities. basis interest-earning mix driven in loan by increased

total by cost mix. declined basis fueled average funding Our by X borrowing lower of point, a

were second inflected net quarter. The the margin we anticipating as for interest

X As X%. FTE points Kevin our mentioned, net interest basis margin is to

accretion, margin accounting was the X.XX%, an purchase from points net increase quarter. prior X basis our interest Excluding of

and margin third We in in incorporated sequentially our same quarter, approximately increases the is continue the of to interest expect fourth in guidance. which our net magnitude

flat, our slightly loans that relatively from suggests we that the interest-earning be full quarter, portfolio year. to runoff borrowings. This this investment reduce the for remainder decline will to will anticipate we intend and the of the our through year assets Again, use

the income second X% we of believe of we When interest the in half year trajectory year. the we first the this, consider the our over half alongside increase to X% in foresee will margin, net

flexibility have XX position as strong us borrowings begin We light our This as toward we in basis a forecast [ relatively current more point in rate sheet rate rate moving the of that XXXX X liability-sensitive note ] cut mature. should neutral, view revised a our You balance in quarter. our to gives fourth term expectations.

commercial half of the undrawn in the our discussed our further quarters, on that and, particular, year. second For the our subside we construction negative will last the belief margin in the line impact several impact of have

that reinforced This view. quarter

Total unfunded were We a right will from X%. quarter lines million weighted lower point this not over as approximately unfunded ongoing around just at move average end materially at forward anticipate $XXX will balance level. us this of do rate the the of keep production the

As new the continue market to to at will normalize. rates, production average continues occur weighted rate

previous second us. in in Noninterest income priority quarter, Improvements of over quarter. the fee was X.X% businesses our the remain $XX.X for a increase an million

as in Kevin pleased solutions. movement the positive early So treasury said, we're with

business. a remains experiencing still challenge, minimal our mortgage we're and However, mortgage volume in

XXXX, that incorporated is guidance. our and view We into expect through this to continue

Moving also second declined to expenses. Kevin million Noninterest as in expense, $XXX.X million. to the $X.X mentioned, quarter by

to year, is into this quarter. guidance. insurance medical remained Our quarter, below also expense in the our our the in expectations level so anticipate reported lower consistently incorporated We third this which will has far contributing the normalize

focus investing maintained we our in while on where have our hires. strategic businesses We managing selectively And controllable expenses needed. making levels staffing while have reduced

quarter onetime guidance. the approximately and the net a in $XXX,XXX the credit on prior reclassification, from form reduction effect basis, net versus in quarter, taxes expense line. had expense reclassification accounting per had prior dollar of line expenses the $X On dollar a increases noninterest tax the change as go-forward reduced the by quarter income this moved to second which in million about per expectations. by of a result This expense X over also We is which a the reduces a tax

the X.X% we Our are over net In forward. be which increased tax by this rate, projecting income to incorporates $XX XX% to XX.X% prior summary, to million. moving treatment quarter

second relationships, Loan by Moving to permanent to declined $XX.X Loans sheet. increased million. balances loans as in quarter. increase offset modestly balances. C&I and was increased line draws. financing, along the customers, increase that to in several emphasis on by garner This potential the commercial balance where million full an our we our and industrial with Construction in a seasonal but $XXX.X our loans most and in deposits moved owner-occupied see reflects smaller customer

million $XX.X quarter. in by the increased Deposits

quarter-end balances. of larger-than-usual our balances include to Kevin noted, deposit year. be this did end from the through anticipate customer overall the in As relatively deposits one ending flat We

Moving we reserved. credit quarter X.XX% office $X was to the was million. our quarter to amount coverage for fully loans. charge-offs metro for and due Total credit. the to provision quarter expense of which property million, specific $XX.X increased points X of were that ACL the About in for were half total Net one basis

on Now the further the the for third-party the for had the Based update we in We to this X on an nonperforming Kevin in disclosed loans valuation, we first specific that quarter. loans. credit second nonperforming credit reserve the increased C&I mentioned. quarter moved

resolve We working of the closely entity management this situation. are to with still

discussed The quarter an other agricultural is XXXX earnings during relationship nonperforming we loan fourth call. Kevin that that our mentioned

our This in of this on relationship of paydown received positive restructure about optimism we the resolution a loan. XXXX. completed quarter, a supported balance later credit the on This partial and a has this

our to want nonowner-occupied we touch office define as cities. which also and office major located loans I within construction on briefly exposure, metro

to our quarter at third Our from of of prior declined disclosure end category basis points exposure loans, is having modestly about of total this the XX the XXXX.

declined and same which general commercial properties, During our to estate total under of period, as exposure, both office define X% loans. that construction total we nonowner-occupied real office general

a higher XX.XX%. saw capital. was quarter dividend $X.XX of Tier the of And a Tangible increasing XX per quarter improvement XXXX. equity or in our we ratios in We X capital X.XX%. Moving at X.X% equity continued yield second declared to to the points for with slightly common our second share basis of common

comment in I finally, weakness on briefly was that XX-K. And our did want the material included to

we'll glad week. XX-Q are and when We include we report this detail to our in area, additional progress positive file next

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

Kevin Riley

Marcy. Thanks,

characterized line are by with in we expectations. that pleased our were the Our was quarter and results stability,

rate manage We movements positioned are well. to

We this our point optimistic forward. returns improved about are to from generate ability

our XXXX. move of for losses inflection, to improving of the return in over expense stability our confidence allowance metrics coming combination asset ongoing The the us us with balance we our generate our provides margin quality discipline, quarters, well positioning ability into in and as core credit

of this transition conduct adviser would intention achieved firm this up leading until XX new retained CEO will start years to a deeply comprehensive thorough as during news about a recent of at the available to is a be retire. plan, my search with we continue the I ready as I company, Board as appropriate. have to updates has wrap and recruiting a an Under to and to and am and next but appointed President great CEO, I as life. my like I'm will The proud my what requested. we successor for then serve provide executive global chapter

would the for like I up now call to questions. open And

Operator

from Terrell take Andrew our [Operator Instructions] with first We'll question Stephens.

Andrew Terrell

a get little period? -- just the we Maybe to a period in third that I'm deposits, would commentary I'm get just see of as a inflated trying sense trying bit. starting maybe to the view being on like what for end the noninterest-bearing start appreciate sense maybe just was the the to you you can how in characterize balances this much point for Like outsized the quarter. as I

Marcy Mutch

to So going year, range, that noninterest-bearing deposit. deposits overall, the from just think Andrew, the are run on lumpiness that in for average we excluding XX%

Andrew Terrell

Okay. Got it.

model just So [indiscernible] XX%. at

Kevin Riley

Yes.

Andrew Terrell

on made million, credit. $X.X we that And this up to the Okay. or the ask in saw charge-off rest million out construction if charge-offs I The gross just $XX are of so. then -- these roughly the What gross quarter? the you quarter, wanted charge-offs still call the in I back

Marcy Mutch

and just... we consumer really have million various was always -- just just about It in $X

Kevin Riley

then some other And ones. just various

Marcy Mutch

other various large. ones, Yes, just nothing

Andrew Terrell

at Okay. Obviously, we this And has you from discussed prompted quarter? C&I we your with got that lens, last the about the last then, talked maybe I third-party comfortability all loan. the reserve valuation the quarter. guess deteriorated mean, like I since credit specific quarter,

means guidance, then from as at you're it to later kind year? there's should of least lumpier chance at that, charge-off charge-off excluding you the guidance, if assume of follow-up we that this here like the if a a charge-offs you're And think looking --

Kevin Riley

we said, with. What you agree

Marcy Mutch

Yes.

think there's loan for. off fully that that we'll that healthy reserved I that a a we're portion charging of chance pretty end up good

Andrew Terrell

credit? changed the speak Okay. And of you that, this can has view I anything to specific, understand.

Kevin Riley

Well, on just get information. we -- getting keep

kind from that is looking hoping we're Andrew, of the the the ultimately beginning, still company. would they progression company, of sell the were selling said what same that and right ship at we and As we that's

be different get-go. seeing a valuation we I from the than could is the we're think what anticipated little maybe

at looking larger maybe bit we're a why that's little So loss. probably

us. the to we trying But And the that just and happening. the be we at direction is We same quick looking It's we kick as past, behind can proven in road. to try realistic. take our to them things more don't we're down try lumps take get we've early, the

that worst-case hope but we're of a making can we're care sure here, better, credit. this to we be So take well scenario positioned taking really we're and it

Andrew Terrell

Understood.

kind it well you Okay, year, the a even feel with this this later of you're reserved quarter? charge-off with do like potentially reserve for

Kevin Riley

correct. That's

Andrew Terrell

I the retirement. Okay. it. Kevin, congrats you trips And have I planned. lot of appreciate a on hope fishing

Kevin Riley

than do better out with you. got to last the I I time was

Operator

We'll Piper Clark go with next to Sandler. Matthew

Matthew Clark

have On C&I quantify just nonperformer, it? you in against that set reserves larger can how you much aside

Kevin Riley

going to Matt. disclose that, not We're

Matthew Clark

to just forecast I'm charge-off is come might all, trying see, we the out of to that which going reserves. that's

Kevin Riley

Yes. is not it The should earnings. it's -- thing to not going affect

you're an to that's can impact the on you earnings, trying not when stream. at that shouldn't think have just look I it say earnings So --

Matthew Clark

Understood.

Just trying it. to forecast

the similar at core half. the to the maybe in accretion NIM, think average NIM? Okay. that the can core core speak down But I NIM the June just you a then continues reported And guide second step was the expansion NIM pace, and on

Marcy Mutch

the see would trajectory June The was there. NIM, expect The core core that to on X.XX%. X.XX%. NIM continue So same the we NIM expansion was we

Matthew Clark

And at interest-bearing on rate least deposits? to deposit increase the quarter. similar, was Do have Okay. you last spot interest-bearing, then cost

Marcy Mutch

the it ]. for -- XX end was X At [ the quarter June, of

Matthew Clark

Okay.

then that your given at on it's M&A on -- stage Kevin? assume the no in assume And interest to M&A, I Okay. fair this transition, there's

Kevin Riley

company would that. that time I it we'll moves still say point, the forward. picks At yes, it up as been just get that has a this would say moving and in I Hopefully, contact. But we're CEO forward this

to want CEO. to this departing But a that know going company, say selling if if want at I I to I our we're don't was So change would that much. think trajectory a sell I I into point, don't

much So things time. little bit this on a hold pretty are at

Marcy Mutch

company. strategy would they But that our we the be to forward of that Board's very acquisitive still clear made be it part expect that going an

Operator

from We'll with Barclays. Shaw Jared hear next

Jared David Shaw

the Kevin, next well. congratulations on as step

forward I what's When the a of trend the as couple time you move just And seeing of we deposit deposit Looking CD like. here. and to Maybe with costs growth? normalization, are what what the retention you return expect lower. that see to Does side, that at to not maybe that look follow-ups see for you're looks expecting rates lower expecting sort mean said DDA repricing deposits know you significantly there? should to

Kevin Riley

going you're point this return -- No. pretty flat, much from I don't think see to Jared, forward.

Marcy Mutch

see CD pretty Yes. And stable. I think we'll balances

Kevin Riley

Yes.

Jared David Shaw

for Okay. should point you down? and some deposit that do beta Maybe move reprice to we the But -- being what look be what on if of way after able guess, I expect aggressive expect, at we basis how first to on that, that? XX then

Kevin Riley

XX% short-term all, of to deposits first indexed Jared, rates. are Well, about of

of be repricing the of a a of move be a lag will will with XX% reprice they going probably to down repricing come say CDs but when just about bit say to that's our So I money bit quarter. XX-month period I immediately immediately. to going move little markets would down, would there's a little in of a rates they're lag even CD though regards a term. shorter that, because more down

didn't way a rates the we of rack our the goes over lot by it in index lot change our money moved Again, rates. down. when market, down A of contract, which up, go to customers really

Jared David Shaw

Okay.

-- that, a move mentioned, is shouldn't could move we on just then you again forward? and or And temporary that, in that deposit growth expect sort going of that was the that that expectation is that that Okay. level large of out

Kevin Riley

it larger end little normal. it out. It's quarter at and in, It just It bit [indiscernible] moved goes, was then comes and it a and a a than was temporary. moved

And control bump and periodically. but bumpy, comes don't we it, the at it goes timing of it's in the So end. was quarter and out

Jared David Shaw

Okay.

or now mentioned Okay. higher. And is in then the in you on but not sorry, Marcy, a is yes, see pricing lines? Where balances construction the about growth -- undrawn going undrawn you're expecting to growth new the on pricing commitments -- on construction, I'm

Marcy Mutch

Yes.

on higher little than around is X.X%. construction, loan Construction our on is So a bit average, that.

Jared David Shaw

Okay.

month finally could then be what's should guess, we flow down for the on wholesale? me, the And securities cash a towards that Okay. just going paying be thinking I

Marcy Mutch

deck in detail. the that's -- investor by in Jared,

what So remember I but... page can't it's on

Jared David Shaw

XX. Slide

I see that. right. yes. Yes, All Okay.

Okay.

Marcy Mutch

Yes.

Operator

now with turn Chris to We'll KBW. McGratty

Christopher McGratty

a into it low new Marcy, XXX the on you off go anything the take would on maps rate If there a If point next run single-digit right that, I rate year, a reason guide, expenses. inflation put any about way? and either question for we us roughly maybe quarter. jump is isn't this why to

Marcy Mutch

Yes.

quarter. So from I up bit a go think little a I XXX would

a then it'll rate. be yes, I that But slightly good than higher be should a that. pretty jump-off think little

Operator

go Braziler Fargo. Wells we'll with And to next Timur

Timur Braziler

again those moves up larger allowance charged that wondering to bit resolution, that is that circling down. okay the reserves a it as that kind Is on Or if anticipation see as it of is maybe C&I are loan ratio resolved? little come just reserves backfilled? it Just lower credit trend off, I'm is to

Kevin Riley

bit will a lower. The come allowance little ratio in

As large. asset third It's down you actual the quarter. improving quarter. for at straight outside is look our quality is Credit every

asset and this reflecting specific on credit. quality to the as improve, the continues as allowance reserve our So is well larger that

Timur Braziler

maybe reduction Okay. talk the just driver to And unfunded in linked there then the was. quarter what the reserves,

Marcy Mutch

of drove A And review of just it -- review -- down. reserves I'm unfunded methodology, just was kind of reserves we mean normal oh, that unfunded our it Yes, the on of sorry. -- reserve an the oh, our review I just again, [indiscernible] funding that methodology. change. okay. annual came

Kevin Riley

[indiscernible]. the But

Timur Braziler

the at least that's And looking looking when wholesale do know maybe as is the start mentioned I me, had pretty balance opportunity the the sheet you guess just there's funding. I good higher? you're I bond mean bond sheet going maturities. or for asset to on you lastly -- then then just overall and at some demand size. go side, to think here And stabilize balance paying on at going repricing okay. showing inflection down towards

Kevin Riley

Well, would -- actually I a think it it mix. difference change could show in

I what continue portfolio will I to expand. loan for we're to start balance would think investment that a think sheet and hoping -- the is it's the shrink, portfolio

would also. that earnings help So

the deposits can a in so things. start little down growth, pay stabilize deposit I and thing hopefully, we bit But think is growing

robust. a come the it not 'XX, part I in there's -- interest a rates little So of bit first little say more second would in the economy becomes 'XX. picks that the hopefully, part up of starts 'XX, down, bit, shifting And

Marcy Mutch

Yes, to waiting they feel kind one to of be of as sidelines to the as the people as we bankers, the the election, far be for economy the bit on the talk a clear. outcome the of little things -- are our of election, see kind more like trajectory

And as of to out, we'll see think so that of kind I all growth. loan settles begin some

Operator

hand And at Kevin time, over questions additional floor as the for are there closing comments. or to I'd back additional any no like to this Riley

Kevin Riley

Well, everybody And I'd to always, and our investors from for like analysts. questions. calls we thank are as for welcome their

So tuning to for want out please any today. in thank and everybody you questions, us I have if reach to follow-up Goodbye.

Operator

Once you again, ladies will and participation. your Thank gentlemen, today's call. conclude that for

disconnect may time. at this You

First Interstate BancSystem (FIBK) 26 Jul 242024 Q2 Earnings call transcript