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First Interstate BancSystem(FIBK) - 2024 Q1 - Earnings Call Transcript
FIBKFirst Interstate BancSystem(FIBK)2024-04-25 22:02
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Financial Data and Key Metrics Changes - The company generated 58.4millioninnetincome,equatingto58.4 million in net income, equating to 0.57 per share, indicating solid performance in the first quarter [8] - Net interest income decreased by 7.7millionto7.7 million to 200.1 million, with a net interest margin on an FTE basis decreasing by 8 basis points to 2.93% [17][18] - Total noninterest expenses were reported at 160.2million,adecreaseof160.2 million, a decrease of 5.8 million from the previous quarter [22] - The CET1 ratio improved by 29 basis points to 11.37% [28] Business Line Data and Key Metrics Changes - Loan balances declined by 76.8million,primarilyduetoseasonaldeclinesinagriculturallines[23]−Noninterestincomewas76.8 million, primarily due to seasonal declines in agricultural lines [23] - Noninterest income was 42 million, a decrease of 2.4millionfromthepriorperiod,drivenbyapriorquartergainonassetdisposition[20]−Theconstructionportfoliosawadeclineof2.4 million from the prior period, driven by a prior quarter gain on asset disposition [20] - The construction portfolio saw a decline of 217.3 million, while the commercial real estate portfolio increased by 191.2million[23]MarketDataandKeyMetricsChanges−Totaldepositsdeclinedby191.2 million [23] Market Data and Key Metrics Changes - Total deposits declined by 513.1 million, with a notable decision to allow 185millionofhigh−costmunicipaldepositstoleavethebalancesheet[24]−Interest−bearingdepositcostsincreasedbyonly6basispointsquarter−over−quarter,indicatingaslowdownincostincreases[11]CompanyStrategyandDevelopmentDirection−Thecompanyanticipatesmarginexpansioninthesecondquarterandcontinuestofocusoncontrollableexpenseswhileinvestinginfee−basedbusinesses[9][21]−Themanagementexpressedoptimismaboutthecompany′sabilitytorespondtomarketopportunitiesduetostrongliquidityandcapitallevels[30][31]ManagementCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatloandemandremainsmuted,particularlyinrealestate,buttheyaremaintainingdisciplineinunderwritingandpricing[10]−Thecompanyexpectsaflatteningoftotalcostoffundsinthesecondquarterandreiteratedguidancefornetinterestincomedespitereducedratecutexpectations[14][19]OtherImportantInformation−Thecompanyiscautiouslyoptimisticaboutresolvingissuesrelatedtoa185 million of high-cost municipal deposits to leave the balance sheet [24] - Interest-bearing deposit costs increased by only 6 basis points quarter-over-quarter, indicating a slowdown in cost increases [11] Company Strategy and Development Direction - The company anticipates margin expansion in the second quarter and continues to focus on controllable expenses while investing in fee-based businesses [9][21] - The management expressed optimism about the company's ability to respond to market opportunities due to strong liquidity and capital levels [30][31] Management Comments on Operating Environment and Future Outlook - Management noted that loan demand remains muted, particularly in real estate, but they are maintaining discipline in underwriting and pricing [10] - The company expects a flattening of total cost of funds in the second quarter and reiterated guidance for net interest income despite reduced rate cut expectations [14][19] Other Important Information - The company is cautiously optimistic about resolving issues related to a 54 million C&I loan placed on nonaccrual, indicating management changes and consulting support [34] - The company does not expect any costs related to resolving a material weakness identified in the quarterly report, with remediation efforts ongoing [42][43] Q&A Session Summary Question: Update on the 54 million C&I loan placed on nonaccrual - The loan is from a distribution company in the construction sector, and management is optimistic about a positive resolution due to management changes and consulting support [34] Question: Core NIM expectations for the back half of the year - Management confirmed that they still expect to maintain a core NIM above 3% in the latter half of the year [35] Question: Impact of potential rate cuts on NII guidance - Management believes that their guidance for net interest income will remain stable even if rate cuts do not occur, due to recent balance sheet restructuring [36] Question: Timing and rate of municipal funding - The 185 million in municipal deposits had rates over 5%, with timing split between January and March [38] Question: Context of the 54 million C&I loan in terms of largest relationships - This loan is one of the bank's larger relationships, with only five relationships exceeding 50 million [41] Question: Update on material weakness resolution costs - Management does not expect any costs related to resolving the material weakness and anticipates completing remediation within the calendar year [42][43] Question: Reserves allocated to the C&I credit and nonperforming loans - Reserves have been recognized for the C&I credit, and management feels comfortable with the current level of reserves in relation to nonperforming loans [54][56]