First Interstate BancSystem (FIBK) 29 Jan 212020 Q4 Earnings call transcript

Good morning, and welcome to the First Interstate BancSystem, Incorporated Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I'd now like to turn the conference over to Lisa Slyter-Bray. Please go ahead, ma'am.

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

the comparable of fibk.com. release. to included use to Information available guarding of non-GAAP the included are of for the measures to And SEC at be As recent GAAP information the could the The forward-looking outcomes non-GAAP our that future call company note differ all the annual factors directly those does in we please begin, that to like is release, financial release at financial the today. which in regarding from results most report our with in contains earnings the end our the in found measure actual any expressed our XX-K forward-looking direct and our the forward-looking as forward-looking Actual in their statements. reference. the body any materially of undertake SEC Form well and I'd reports more materially and most may identified recent to reconciliation will in release your our Relevant SEC. could website statements. results provided release the note results earnings factors financial the report and A our copy affect on differ filings. as the or cause read earnings filed factors measures may listeners those periodic by statements cautionary not contain is contained of on statements risk made from with earnings this during that update filed earnings annual statements

members Marcy over Chief Kevin turn our from call this I'll the from along Mutch, other management to management with Officer; and Kevin? Kevin Joining are Riley, At team. time, Chief Financial Officer, this our us our morning Executive Riley.

investor call the can we you have all on morning, release, our on Investor Relations by joining accessed you quarter results. the along believe start with our I Marcy the an additional presentation the quarter, website call has thanks earnings overview yet, do presentation for again disclosures helpful. us turn today. some Good a and encourage an Again, to The more to downloaded our going major be to you off financial that Lisa. highlights copy we updated to of so. be I'm I'll if on details this providing Thanks, and and will published haven't today over to provide of then that of

economic deposits the we fourth markets a to significant quarter, inflows opportunities, resulted continued high-quality and of see During that problem our core loan categories. of strength in reduction throughout our lending

we result, pre-provision a delivered of and another earnings pretax strong As income. quarter

million snow a of employment providing positive commodity increasing, but ag levels or net in have still the has gone the or winter our the $XX.X quarter, pre-provision well, for are a for industry. borrowers. Across mild some boom and of construction A at For season million. industry, a $XX.X income pretax are received has highs, per ski prices and we mountains near of tourist the our all-time generated and share helping been the income we $X.XX our markets, many

is of our core of pockets, to performing continue and we result, having which levels a clients, record their of generating retail money As see inflows in strong clients commercial lot many at our a deposits.

debt. They well in awash or all that categories. new utilize increased the companies in lines liquidity. rate credit they cost in an deposits growth are quarter. X.X% don't drawback one this is their take deposit fourth need doing lower are coming total our the to the annualized at that on Our have to The of With so

in way Excluding across portion our mortgage our trade-off fourth of net loan balances to In current also utilize liquidity are this real net decision growth and is X.X%, PPP loans, impact these higher strategy. we broad mortgage willing to to strong able quarter, by investment material a our made more right generate to production. increased dollars. a portfolio, retaining and net at to interest our residential interest the to income portfolios. the interest in believe the margin work a commercial of annualized loans our which By with we environment, a positively an loans the lower of residential growth started We're greater our to to retaining a rate deposit for adding and run investment put held estate off We earnings. income increase

in relatively our have view positive a The turn asset trends away, in that long. low those We interest cost even security dollars are incremental improvements economic going we're driving portfolio quality. We'll our also raw residential are to rate. income materials, mortgages invested little and day these at in not all the or though markets are take the deposits funds we are seeing

had the For our the the nonperforming we criticized quarter. And quarter, quarter, third consecutive also were assets. in loans and loans both nonperforming fourth declines down in

significant in trends -- X.XX% more in These positive also to $X than loan million with only quality, of our of resulted deferrals our this we build year, deferral return We quarter. residential see we less small is XX, of the a regular this $XX.X of the in had loan along At December mortgages had million provision our loans balances. of status to Together, scheduled in requirement continue reserve payments. forbearance. asset on outstanding earlier and

prior Our allowance coverage is that the relatively consistent with of quarter.

to to profile, significant ability performance and amount the capital financial we our continue Given our of a shareholders. return to have risk low strong

an shares quarter's increase quarter, of declared common X quarter an to fourth today, repurchased in almost quarterly increase And the is which per a X% we from of from dividend and the year. stock. we our During last million dividend over increase XX% share, last our third $X.XX

will quarterly of on provide that stock growth, And consisting the generate continue Go more total have and that, to capital approach to for a to impact little Marcy. turn deployment return a our could acquisitions, I'll so positive this results. over committed we to organic with detail repurchases our are ahead, We believe We to a call balanced fourth the quarter she shareholders. Marcy, dividends.

Thanks, everyone. Kevin, and good morning,

results, statement. otherwise quarter through I of prior be I'll noted, our all begin third As period XXXX. unless financial the income of the walk comparisons with will our with

to interest but on additional As our with an last our put we income, pressure saw net carry in interest quarter, we excess increase once again the continue liquidity net margin.

basis contributed interest a fourth the in income the of On income years. income forgiveness. points, the fee accretion quarter. prior at from noise of about the we'll quarter, points. acceleration $XX.X the X costs PPP in loans in decline PPP XX impact and million X.XX% impact down portfolio in lower loan investment by of X interest on drop $X.X quarter, from million purchases our basis points quarter, to in net by which work getting significant by growth, to result increased a which out duration, held of the all basis X.X of which offset where related putting net in points was excess average extending $XX.X the on up of is X.X% was without loans, yields the on This liquidity our of first the currently reported of was interest basis, end X deposit a new portion a and from the of quarter all-in be continued the PPP of the decreased loan fourth In as significantly basis securities PPP deposit prior Our million our went by acceleration. deployed a the yield result fee around in near to margin the cash. of focused offset portfolio the we're about rates both our Taking the term, was at

on continued our loan likely see we'll until interest result, net we some growth. a stronger see margin As pressure modest

these noninterest The million our seasonal production but portfolio. lower loan will declines resulting our with with decreased quarter-over-quarter Our to an banking decision of to due portion come. us retain benefit years provided revenues that to our $X.X impact mortgages revenue about tax or our after a an balance had it's from million mortgage in to million. earning coupled asset to was for about decision $XX.X normal This us to share, loan per on income retain primarily sheet greater of $X.XX $XX.X

performance. million decline from were revenue, income Aside in the the significant decrease a a in on $X.X to for contributors swap mortgage from quarter. insurance continue bank-owned reimbursement X million related in to higher higher decline a that other management of in banking to decrease as $X.X a transaction was to noninterest fees declines and improved due taxes services of market the volumes a rebound see partially These policy revenues rewritten and we revenue by life last payment wealth offset were

production year's expecting lessens. we're decline about business to hard volumes gain beat margins our refinancing on to demand levels from we second the and decline XXXX, be be but We're sale record in expect about to total It'd mortgage to at to still XXXX year. the Looking do XXXX, projecting best XX%. XX% as decline last

modestly XXXX With noninterest be or we income down at areas, from record the growth total in XXXX expected in will levels. believe fee-generating our other

that the rate We the resulting last quarter. wage salaries Moving from lower quarter-over-quarter. flat leaving due of a to normal was to run discussed noninterest had decrease from million expense. This total and primarily $X.X prior expense, our quarter, items we onetime

at to we costs invest initiatives company, XXXX, that offset. reduce Looking as areas continue in will growing support to an identifying a

to we result, right a be As higher expect total X% at in expenses XXXX.

the balance to sheet. Moving

prior declines by The due saw to indirect After which decline to PPP of commercial resulted our estate we modest of decision due increase production. estate portfolio. to our retain the more indirect our investment the We this in for other saw portfolio in quarter a a including We XXXX, fourth was decline the in number loans our portfolio the of during decreased portfolios, increased results loan expanding modest in of in loans PPP year. loan million Our by million X.X% and partially from indirect the through footprint held growth primarily on the our forgiveness $XXX balances effort we in across X this in from our offset focused months dealer end XXXX. the good network as first saw our real quarter. the commercial quarter, loans residential our real portfolio, the of forgiveness $XXX of approximately

quarter, we in fourth declining typically the impacted year. this see production indirect our shortages also levels While inventory balances

volumes expect similar remaining As the delinquency declining XXXX is we XXXX. as industry in from good inventory improved we again, and levels indirect averages. build see XXXX in the in saw Credit performance to rate and begins below with should growth loan portfolio

XXXX. of of approximately receive As remaining PPP the expectation first is our and we sheet, majority forgiveness loans December balance loans had of during $XXX the our XX, quarter will that these million on of

side, from the million deposits in the most of and quarter, deposits. savings prior On our increased growth end liability with demand $XXX the of coming the interest-bearing

categories. Moving our nonperforming in $XX.X million to quality. our $X.X end million. asset quarter, criticized asset third million, declined of and the We decreases declined all the of to Relative our our nonperforming saw loans declined $X.X loans problem assets

to credit for just credit charge-offs, million, with be of losses just the $X.X Our reflects loans million average basis recorded of in losses continue very XX improved net which provision $X.X quarter. asset representing quality. We points our of manageable, a

PPP held December not as excluded, Although X.XX%. coverage quarter, the of X.XX% allowance of our as loans When to are charge-offs this XX. investment cover in increased for a our our did net was percentage allowance loans

call turn back So strong over to after discussing the Kevin. our I'll quarter,

to going priorities franchise our comments about with our the value wrap of our good positioned enhancing for continue outlook I'm opportunities Marcy. a we and Thanks, We forward. and are going feel how XXXX. to up about few

our issues to we focus As driving a profitable would distract starting point, our grateful growth. significant position, are that not from across we to in any address our and confident us look legacy operations, need feel we when we that on have

Our strong, resolve need don't of we loans. so bunch is credit a to problem

portfolios to meaningful aren't run any any We size. off looking of

aren't to lending areas. We looking exit or any business

of investment to good solid we're and feel about not speed. technology and We a get we're have in place a structure. platform, We organizational great and time facing our to thankful that up money massive leadership

our told foundation trends in in and markets population many place fastest-growing team in always We We the footprint it Oregon have I the we to the executive see about our country. employment with screw my are lifestyle opportunities. executing and up. believe and people our now positive don't and capitalizing confident and markets. the among terms it's is environment in of driving in to We company and states put just Idaho the on just growth relocate growth, our offers of Like

COVID this our active this clients. opportunity. more ways to bankers environment, of growth are provides In All creative the finding

to needs focus offering services. have to meet advantage and on financial We are are more of making sure the place cross-selling in of and our efforts their putting broad resources we right products the demonstrate

we enhance efficiencies generation. the continue refine and digital leverage will to add We will help to capabilities current This robust increase productivity, products. our new have technology and platform improve revenue us built

will business happy with channels our XXXX, to digital residential digital small additional online and digital small to digital portal. to percentage mortgage improve are business business portals lending XXXX has launch time We our customers. as production volume on. we and to In that cards overall in higher believe these offer business continue small And some campaigns table and consumer May, attract credit marketing add we our ability to the ability of will initiating generate lending be the stakes introduced We become application channels. loans. will The a in for we will goes

I've As first process, a past, points, at able about of automated stimulus. we're which round success PPP in highly key banker our with talked the interaction offer in led the to to application

Now process. forgiveness using that manage to loan we're efficiently portal

process first this expect PPP and little year, saw in lot the impacted only by have that that program have targeted at a don't is Since new program this the a have pandemic, the the place. to companies will a those severely volumes we in For been we more of modest the markets, we program. compared we bit same

off both and be the for the growth range. from we the program the in PPP, program of on second to loan coming loans from the impact first books, terms the running loans of Excluding expect year in mid-single-digit

past has in West division. has been the the As most from come growth the case the few years, of

the While year. slightly expect be Mountain we division up to for the

operating be we Marcy As relatively to said, expenses flat. has expect

earnings higher operating interest stimulus rollout If the have leverage balance in This to release have another a we economic income. to continues recovery, will and we net expected, translate that solid we'll be continued of should growth. we growing reserves good generating into the continue a vaccine sheet shareholders. should a driver drives the So as and position earnings able growth. we'll it's another year to impact of be positive With which strong be believe that generate returns likely our this year and year, to solid

look up, to M&A normalized starting opportunities value. we'll environment, enhance and to our we to return more As a we're franchise see discussions pick to continue for

complement and drive credit execute personnel. a enhance of built good support a further platform our a in good really strategy, liquidity, have a come. can we're larger higher further we're we branch acquisitions our highly franchise shareholders return with we that believe growth increase product good In more growth good good of as want and to capital, We of years result, much value our a and scalable capital technology in continue our quality, and we that organic platform, our confident network development, level bank, to and power. that continue can closing, to take advantage to the to on our And a spot earnings, using earnings our well good the

So for we'll with up the that, questions. open call

Instructions]. Today's [Operator Securities. at Jared comes question Shaw Wells from first Fargo

I those retaining, and yield? annual year the what's guess, that are What's first, XX fixed? you're growth on and just the the maybe the duration mortgages --

Marcy. ahead, Go

X, the also but about XX the the duration retaining We're we're mix. a on is it's mean, some XX-year yield XX retaining loans and So and I X.XX%. XX, --

what growth quarter? -- opportunity actually as And that this sort growth should is should Or an the should that saw expect accelerate mix, portfolio? then -- for that Okay. we we of that

Yes.

at So this about we'll same the pace. continue

we next liquidity to same excess in expect at this the that the we have, or have we the two. as quarter continue long pace As

just Okay. looking And allowance, strong. then credit at your really is the I mean

it to X level? is strong -- did day 'XX? be we level? You back day through maybe be a going for reserve. the going as CECL a Is Or just to you XXXX to to going up to broader strength it you obviously drivers of X towards to maybe the really maybe the than What's back main that a get look built go longer economy we be before get

look vaccine rollout might know don't think we're get how be to Jared, out. this We no, virus at stages. Is going aggressive little some people really Well, going I is early happening? the contained? all in how this is a play to the

is we're down. more confident can and virus reserve So levels vaccine see cautious that just then economy we'll dissipates, that of come being feel the the if about be the confident feel works and I kind growing, to our

Okay. And I me. finally just for then guess,

happen lending, of again, throughout to What it customers higher a target? not what upside drive have commercial have is potentially economic Or it, that just the to more would broader just the there's maybe liquidity growth backdrop? lot to the that and Is at of a lot demand? Looking see year? of themselves could potentially

a Jared, lot Well, of we're economic seeing growth.

when think of we'll signs. already clears, but -- seeing the kind know weather we're as more I

lot lot a we people our a companies markets, into moving of have have We and relocate. of

it's So that up to continues. think that, if I going pick

be So there's in if than better it more we could migration anticipate.

So gets the more good, more we'll know weather we're of feeling as better. and and kind

with today KBW. And Jackie our question next from comes Bohlen

mean your of and part to Just appetite is next obviously that, growth stimulus, customers, lay-up early might this does year? about having that the of From your deposit of seem deposit demands bit could how fantastic thoughts what growth. a there's for preliminary curious it be additional for round that like you're then the you getting on PPP from their a in

good Jackie. a that's Yes, question,

the people right lighter around because interesting and we're on I of dollars that is bit of deposit XX%. for round than PPP little the monitoring -- to numbers I the growth. we're running I us that applying the think loans, are going more coming bring think But would of I number it's are that second we're that, say say will that. a

us So some it growth. provide will deposit

gives consumers the growth. to should have stimulus a extra positive on impact it and through money gives deposit As government our this business, the

other comments remaining deposit that have And too, you from I retail carrying mean, drive just is economic guess XXXX, and would from assumption? growth that to 'XX factors Okay. business given the continuing strong I your into with and

lot did bit limb the last And pent-up that I'll of had out little the in say, a a our a of tour go companies industries of because and think we number a season strong pretty sales here I a demand. Yes. on and a record summer,

going the that record summer that think tremendous I tour impact I it's years won't season is to come. a think year set and to have a could to our for a markets, our barricaded to this be be just big for going performance.

Okay.

And one I one. want purchases are to actually case, the good That's just mortgages last deployment. Okay. loan Cascade. and liquidity going retaining long in you remains check still and use that spend just that, color. that then with a securities divesting wheelhouse, double your not acquired purchases purchases time and loan I you're from know to

really would and that. we portfolio. anything, not to see Jackie, don't our work us investment to mortgages as purchasing at look to kind core our across desk. money doing We'll the look business. loans just we of it the continue at I of that We're retain put mean don't I never in look Yes. going part came at something if

to likelihood Jackie, of the none. slim is that, Yes,

to Okay. I double wanted check. just I figured, but

from Posen question Levi next Davidson. our And D.A. with comes today

if forgiveness had guys was wondering quantified basis margin This quarter? PPP point is of Jeff the for the the on Rulis. Levi you impact in I to Posen

basis was of point accelerated to So impact XX margin the fees points. basis about the

segments to your pipelines And within quarter versus that? maybe that also loan outlook, could speak Okay. loan a growth are driving And your now ago? then the you

about lines fourth And quarter. what saw they our We their the harvest the Yes. the -- rate. ag fourth similar quarter, down to we the pipeline think in borrowers I the see crops. of their growth also some same It's in paid when

plant start crops and stuff. So lines utilizing their as those they come They'll that's going to back.

So we up. see utilization that go

so we again So the growth. -- -- why pretty X last now. mid-single-digit good quarters, did because But it's pretty about feel similar we about right that's we're

that seeing now. that, our the So could kind starts bets all going persist off that's what we're markets, why into XXXX. of robust we right are of Again, how growing in but feel economy good that's

comes And our today question Stephens. Terrell from next Andrew with

kind have just guess, do remaining And maybe of update looking remind of in I growth repurchases Can going outlook? you're forward, you to appetite authorization? much the under just us how you repurchase particularly the given how shares current the any to

remaining There's about XXX,XXX under shares the repurchase... current

you. hear Marcy, we can't

you hear Can now? me

I'll it. take take. I'll

we take... our it's don't repurchases, about repurchases when we at period So in I at But payback much. that talk still where remember what look have we a and not sense we certainly exactly remaining. Well look we'll always our

am I too.

can They you. hear

guys. Marcy, hear of you both I can

us. can He Okay. hear both right. All of

under So it's remaining plan. about XXX,XXX shares existing the

And so not much.

our payback at X-year and look accordingly we shares again, so so. period, we And repurchase

Can round One us you left income? to you how -- have or one. last how fees X left PPP many housekeeping in interest remind much remaining through accrete

about It's million. $XX

And our Forgotson Sandler. with Piper Matthew comes today next question from

using confirm base flat Marcy, up, related fee quarter? that the said is I and XXXX? for would suggest what this from on can guidance, that latest $XXX I but have nice you're to you you step-up million, -- a think your income Because the

On the income? fee

revenue XXXX, just of Yes. you guidance it. kind for clarify fee confirm were that I just using to to income your the wanted and base

Yes.

our the we banking Matt, believe management, other the areas, of services So will kind payment in be banking up wealth but mortgage and mitigate decline be that mortgage revenue down will revenues.

-- mean, year-over-year. it And be closer so will really quarter-over-quarter I we think flat to do

Okay.

to Okay, then gave got you just wanted the the I new us us on new as give well. on rate you new the it. X.XX%, get loans? securities And rate average could weighted production know but

X.XX%. up it because and last encouraging quarter, was actually was This was from it

points from quarter. X mean, quarter. about I up third basis from it's fourth So

then mid-single-digit is that growth ex-PPP? And loan guidance, the Okay.

Yes.

expect net to you then remaining can And realize revenues Okay. PPP? from just the confirm you

$XX fees about on book the The are remaining million.

to mean position? bank help excess of and much ratio, lastly, M&A. I acquiring you liquidity blend looking consider that are the higher maybe kind Okay. X a are any on your then And you loan-to-deposit just seeing has a Or opportunities?

We're a going I'm Kevin? Kevin are if having connection of on, problems. see can you bit to little talk, So

I'm on.

Did the you question? hear

got just I No, on.

Okay.

you the for question Kevin? Matt, repeat So can

had Sure, could if were sure. kind excess help loan-to-deposit high an Yes, bank got that's up, rightsize to a your or of you acquire appetite I ratio was that's that considering loaned liquidity just position? asking a

yes, they what Well, with The is loaned to were question up. loaned banks up asset we'll goods. are that look quality at

So funds if as I a we all lot look what mean, bank that has look we'll will some a to at a these see that have. they of growth opportunities can acquisition we work have could in markets, But a and surely put bigger at that market better possibility. than we our

have do that single-family portfolio get get? then how to And close? XX% max? it's like Okay. Is around today. XX% I you even you'd feel Or don't on you a think you'll your limit the large like resi-mortgage

looking We're to based on Yes. additional, where but of that. kind another over kind $XXX lands, to not that's up our $XXX but liquidity million, of up million

have closing I would gentlemen, and back to turn question-and-answer to the if any session. call the you ladies over concludes like remarks. the management, this And

you your for Thank question.

Sorry But Please today, as to goodbye. if any questions. for And and welcome the calls connection. disruption from investors always, we us thanks and follow-up reach analysts. out for you tuning on have our my

conference today's concludes all Thank today's call. you, presentation. We for sir. you thank This attending

now may have day. disconnect You and your wonderful lines, a