First Interstate BancSystem(US:FIBK)2021-01-29 19:35Financial Data and Key Metrics Changes - The company generated net income of $46.9 million or $0.76 per share in Q4 2020, with pretax pre-provision income of $64.9 million [7] - Net interest income increased by $5.4 million from the prior quarter, driven by PPP loan fee acceleration, contributing $16.7 million in Q4, up from $10.6 million [16] - The net interest margin decreased by 4 basis points to 3.25%, with a decline of 17 basis points attributed to deposit growth deployed at lower yields [17] Business Line Data and Key Metrics Changes - Loans held for investment decreased by $345 million primarily due to the forgiveness of approximately $425 million of PPP loans [23] - Noninterest income decreased by $10.8 million quarter-over-quarter to $33.9 million, mainly due to lower mortgage banking revenues [19] - The company expects refinancing volumes in the mortgage business to decline by about 50% in 2021, with total production projected to decline by about 30% [21] Market Data and Key Metrics Changes - Total deposits increased at an annualized rate of 9.5% in Q4 2020, with growth primarily in lower-cost deposit categories [9] - The company reported a decline in nonperforming loans by $6.4 million and nonperforming assets by $9.6 million, indicating improved asset quality [26] - The delinquency rate in the indirect portfolio declined from 2019 levels and remained below industry averages [25] Company Strategy and Development Direction - The company is committed to a balanced approach to capital deployment, focusing on organic growth, acquisitions, stock repurchases, and dividends [13] - Plans to launch a digital small business lending portal in May 2021 to enhance customer acquisition [32] - The company aims to leverage its technology platform to refine digital capabilities and improve revenue generation [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic recovery and the potential for loan growth in the mid-single-digit range, excluding PPP impacts [33] - The company anticipates a solid year of earnings growth if the vaccine rollout and stimulus measures positively impact the economy [34] - Management noted that they are not facing significant legacy issues, allowing them to focus on driving profitable growth [28] Other Important Information - The company repurchased over 1 million shares of common stock during Q4 2020 and declared an increase in the quarterly dividend to $0.41 per share, an 8% increase from the previous quarter [13] - The allowance for credit losses as a percentage of loans held for investment increased to 1.47% [27] Q&A Session Summary Question: What is the mix of the mortgages being retained? - The company retains a mix of 10, 15, and 30-year fixed loans, with the yield on 30-year loans at about 3.26% [39] Question: What will drive the return to CECL day 1 levels for the allowance? - Management indicated that the vaccine rollout and economic recovery will be key factors in determining reserve levels [41] Question: What factors could lead to upside in commercial lending growth? - Management noted that economic growth and migration into their markets could drive increased demand for commercial lending [42] Question: What is the appetite for the next round of PPP loans? - Management expects additional deposit growth from the second round of PPP loans, with current applications around 15% [44] Question: Are there any opportunities for M&A? - Management is open to considering acquisitions of banks with higher loan-to-deposit ratios to enhance liquidity [60]