First Interstate BancSystem(US:FIBK)2022-07-31 12:58Financial Data and Key Metrics Changes - The company reported earnings per share of $0.92, excluding acquisition-related expenses and other items, reflecting a substantial increase in profitability [5] - Net interest income increased by $59.9 million, with the reported net interest margin rising 45 basis points to 3.25% [15][16] - The adjusted efficiency ratio improved to 50.8% from 62.2% in the prior quarter, indicating enhanced operational efficiency [6] Business Line Data and Key Metrics Changes - Loan production was 30% higher than the prior period, with an annualized loan growth rate of 6.4%, excluding PPP loans [6][7] - The legacy First Interstate branch network experienced an annualized loan growth rate of 15% in the second quarter, with significant contributions from Montana, Idaho, and Eastern Washington [8] - Non-interest income increased by $1.8 million quarter-over-quarter to $51 million, driven by strong results from payment services and the addition of Great Western's Wealth Management business [20] Market Data and Key Metrics Changes - The company noted healthy economic conditions across its markets, contributing to loan growth and overall performance [6][32] - Deposits decreased by $1.2 billion, primarily due to outflows in savings and jumbo CD balances, with a decline of 1.7% in the legacy footprint [26] Company Strategy and Development Direction - The company is focused on capitalizing on increased scale following the merger, with plans to deploy excess liquidity into higher-yielding assets [10][12] - Management emphasized maintaining discipline in pricing and strategically raising deposit pricing to attract new clients [19][50] - The company aims for mid-single digit annualized loan growth in the second half of the year, supported by strong economic activity and improved asset quality [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued loan growth and margin expansion, despite potential macroeconomic challenges [32][36] - The company is well-positioned to navigate various economic environments, with a strong capital position and proactive management practices [37] Other Important Information - The company repurchased 1.7 million shares at a weighted average price of $37.38 and paid a dividend yielding 4.6% on an annualized basis [13] - A $21 million donation to the foundation related to the acquisition includes a $1 million grant campaign to support local nonprofits [39] Q&A Session Summary Question: How much of the provision reversal was related to Great Western's performance? - The provision reversal of $1.7 million reflected the credit quality of the entire portfolio, slightly offset by a negative bias due to macroeconomic factors [41][42] Question: What is the pace of resolving remaining loans from Great Western? - The pace of resolution is proceeding as expected, with no wholesale selling of loans anticipated [46][47] Question: How will the company defend deposits at current levels? - The company plans to increase deposit pricing strategically to defend its market position without significantly impacting earnings projections [48][50] Question: What are the expectations for net deposit growth in the second half? - The company anticipates deposits will remain flat for the remainder of the year, with no significant outflows expected [62] Question: What is the outlook for the efficiency ratio in the second half? - Management is hopeful for continued improvement in the efficiency ratio, aiming for a lower percentage than the current quarter [63]