First Interstate BancSystem(US:FIBK)2025-07-30 16:02Financial Data and Key Metrics Changes - The company reported net income of $71.7 million or $0.69 per diluted share for the second quarter, compared to $50.2 million or $0.49 per diluted share in the first quarter [10] - Net interest income increased to $207.2 million, up by $2.2 million from the prior period, primarily due to a reduction in interest expense [10][11] - The net interest margin was 3.32% on a fully tax equivalent basis, with an increase of 12 basis points from the prior quarter [11] - Non-interest income decreased to $41.1 million, down by $0.9 million from the prior quarter [11] Business Line Data and Key Metrics Changes - The company experienced a decline in loans held for investment by $1 billion, influenced by strategic moves including the Arizona and Kansas transaction [16] - Non-interest expense declined by $5.5 million to $155.1 million, attributed to lower seasonal payroll taxes and reductions in incentive-based compensation [12] - Net charge-offs totaled $5.8 million, representing 14 basis points of average loans on an annualized basis [14] Market Data and Key Metrics Changes - Deposits declined by $102.2 million in the second quarter, remaining approximately flat compared to the prior year [17] - The company ended the quarter with a 72% loan to deposit ratio, indicating strong liquidity [8] Company Strategy and Development Direction - The company is refocusing capital investment, optimizing the balance sheet, and improving core profitability [6][24] - Strategic actions include outsourcing the consumer credit card product and ceasing new originations in indirect lending [6][7] - The company aims for organic growth through relationship banking and anticipates a high single-digit increase in net interest income in 2026 [8][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about stabilizing loan balances and returning to growth in the medium term despite near-term declines [16][19] - The company is focused on proactive credit risk management, with stability in nonperforming asset levels and a disciplined approach to repricing maturing assets [7][8] Other Important Information - The common equity tier one capital ratio improved to 13.43%, with expectations for continued accretion [17][19] - The company declared a dividend of $0.47 per share, yielding 7% [17] Q&A Session Summary Question: Timing on loan portfolio stabilization - Management anticipates modestly lower loans in the third quarter but is hopeful for stability in the fourth quarter [28][29] Question: Earning asset levels at year-end - The third quarter is expected to be the bottom for earning asset levels, with a shift towards investment securities [32][33] Question: Capital priorities and CET1 expectations - CET1 is expected to increase by approximately 40 basis points from the branch transaction, with strong capital levels providing flexibility for various options [34][35] Question: Special mention migration in classified loans - The increase in criticized loans was driven by new information on multifamily projects, but management remains confident in the underlying collateral [41][42] Question: Expense guidance and reinvestment of savings - Management anticipates higher reported expenses in the third and fourth quarters due to various timing factors, with no branch divestitures included in the guidance [43][44] Question: High single-digit growth in net interest income for 2026 - This growth expectation does not include the impact of the branch divestiture, which is not expected to materially alter the figure [47][48] Question: Loan portfolio and relationship-based loans - Most deliberate runoff has already occurred, with a focus on replacing loans with production and growth [69] Question: Capital deployment options - The company is considering various capital deployment options, including share buybacks and balance sheet restructuring, to enhance shareholder value [76][77]