First Interstate BancSystem, Inc.

Good day and welcome to the first Interstate BancSystem first quarter 2020 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lisa Slater-Bray. Please go ahead, ma'am.

Thanks, Rocco. Good morning. Thank you for joining us for our first quarter earnings conference call. As we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those expressed by those statements. I'd like to direct all listeners to read the cautionary note regarding forward-looking statements and factors that could affect future results contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the annual report in our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any forward-looking statements made today, A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at fibk.com. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release, and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. Joining us for management this morning are Kevin Riley, our Chief Executive Officer, and Marcy Mutch, our Chief Financial Officer. At this time, I'll turn the call over to Kevin Reilly. Kevin?

Thanks, Lisa. Good morning, and thanks again to all of you for joining us on our call today. Along with our earnings release, we have published an updated investor presentation that has some additional disclosures that we'll be speaking to on our call today. The presentation can be accessed at our investor relations website, and if you haven't downloaded a copy yet, I encourage you to do so. I'm going to start today by providing a quick overview of our financial results, discussion on our response to the COVID-19 pandemic, and provide some additional information around our exposure to the various industries. And then I'll turn the call over to Marcie, and she'll provide more details on our financials. Despite the challenging environment, we delivered another quarter of solid operating performance. While our net Income and earnings per share were impacted by building our reserve to reflect a deteriorating economic condition resulting from the COVID-19 pandemic. We continue to generate strong pre-tax, pre-provision income and show positive trends in many key areas. We had a good stability in our core operating net interest margin, which includes the impact of interest recoveries and loan accretion. as we have been able to effectively offset the pressure on earning asset yields by reducing our cost of deposits. Our fee income continues to be a strong source of revenue as we saw a significant increase in mortgage banking revenues due to demand for refinancing. Our wealth management revenue also increased over the prior quarter despite the volatility in the market that pressured assets under management. Obviously the big development during the first quarter was the COVID-19 pandemic. We are fortunate that many of the markets that we operate in have been among the areas of the country least impacted by COVID-19. Montana and Wyoming have been very effective in managing the spread of the virus and rank among the lowest states in the country in terms of infection per capita. Early this week, Montana starts the process of opening up The economy back up, which is very encouraging. Wyoming never had a stay-at-home order in place, but did limit large gatherings through the end of April. And now the governor is looking at options to loosen those restrictions. Likewise, South Dakota never had a stay-at-home order. It has been in the news for an outbreak of the virus at a pork processing facility, but that is in the eastern portion of the state. and we have all of our presence in the western part of the state which really hasn't been impacted much. Idaho and Oregon have seen a bit higher impact but nowhere near some of the harder hit states in the country. The governor of Idaho has announced a phased approach to reopening their economy that begins today. The one state of our footprint that has been impacted quite a bit is Washington. But we have only a small portion of our employee base and loan portfolio in the western portion of the state that has been hit the hardest. While on a relative basis, we probably haven't experienced the same impact to other banks around the country, we've certainly seen the negative effects of the pandemic to one degree or another across our markets. And I want to say that I'm very proud of our leadership team and our employees for their incredible effort during this difficult time. As the threat of COVID-19 pandemic accelerated, we quickly made adjustments in our operations to protect the health and safety of our employees and our customers. Approximately 68% of our employees are now working from home, and we have closed all of our bank branch lobbies and reduced operating hours to limit exposure for both employees and clients. We have made significant investments to enhance our technology infrastructure over the past years, and this has enabled us to officially transition our employees to a remote work environment without losing productivity and the ability to handle the increased uses of our digital banking platform by our clients. Approximately 72% of our retail clients now utilize our digital platform, which is up 9% from this time last year. To assist our employees, we have put a number of new programs in place. We have continued to pay our employees who need to be absent due to COVID-19, either to care for themselves or a loved one, without having to lose their own vacation time. We have updated our medical plans to eliminate the coinsurance payment for COVID-19 testing. And we have expanded our First Relief Employee Assistance Fund so that employees experiencing financial challenges due to the COVID-19 can apply for additional support. Our foundation is also double matching contributions to that fund. In terms of our assistance for our clients, we recognize that there are folks out there who are really suffering and we wanted to make sure that we provide the support they need to make it through this difficult time by waiving fees and early withdrawal pendants as appropriate. For our borrowers, We are working with our clients to consider deferring loan payments and accepting interest-only payments for a certain period of time, including considering waiving fees for deferrals. For residential mortgage customers, we are offering forbearance plans that allow for reduced mortgage payments or no mortgage payments for a period of three to six months. To date, we have granted loan deferrals on approximately $1 billion of commercial and CRE loans and $45 million of consumer loans and approved $130 million of forbearance requests on residential mortgage loans. While we're agreeing some loan modifications to commercial clients, our primary means of support is providing them with access to the SBA Paycheck Protection Program. The investments we have made to adapt our lending to be scalable and to standardize process over the past years served us well in getting are all up and prepared for the PPP application process. As a result, during the first wave of funding, we were able to get more than 6,800 applications approved for approximately $1 billion in loans. In aggregate, the companies we were helped to access the PPP funding represented more than 107,000 employees in our markets. We received approximately $35 million in fees from the first batch of PPP funding. During the first round, we focused on just helping our existing clients. Over the past couple of weeks, we have expanded our process to include new clients that have opened up deposit accounts with the bank so we can perform our due diligence. These clients will be part of the applications that we process during the second wave of funding. In the updated investment presentation that we published, We have provided quite a bit of detail around our loan portfolio and individual segments, and I want to spend a few minutes discussing some of the key takeaways. As a general comment about our loan portfolio, we have not seen a meaningful drawdown on our credit lines since the crisis started, which we believe is a representative of two things, the strength of our borrowers and the lack of need to build up liquidity, and the limited disruption they have seen in their businesses. Looking at our exposure to high-risk industries or loan types, we have $369 million in outstanding loans to the hotel industry, which represents 4.1% of our total loans. It's a strong portfolio with more than 80% of the underlying properties being flagged hotels, and we have an average LTV of under 48%. As of March 31st, less than 1% of this portfolio was impaired. We have $483 million in ag loans, which represents 5.4% of our total loans. And at March 31st, just 2.3% of this portfolio was impaired. As we have mentioned in the past, the largest segment of this portfolio is beef, cattle, ranching, and farming. And within this ad segment, most of the borrowers raise feeder cattle, which are less than a year old, and they get sent to the feedlots in the Midwest, usually in the fall. So while there's some disruption to beef processing plants, our customers are really at the beginning of the supply chain, and that won't have a really meaningful impact on them unless those plants stay closed for a very long period of time. Our mall and retail trade exposure is only about 1% of our total loans, with almost none of these loans being in the criticized category as of March 31st. As we've mentioned in the past, We have a steadily reduced our exposure to the oil and gas industry and it now represents just one half of a percent of our portfolio and only four million of those loans are impaired as of March 31st. And lastly, I want to provide some information around our indirect portfolio, which primarily consists of loans for autos and RVs. It's a high quality portfolio in which approximately 50% of our originations have FICO scores above 750 and approximately 85% have FICO scores above 700. With our strong underwriting, we have consistently seen a delinquency rate that is well below our peer group in this business. And since the crisis has started, we have increased our collections effort, which has brought down our delinquency rate by 23 basis points during the month of April. and I think our experience in April is a good example of the point I touched on earlier. In our markets, our people are working or going back to work and they can make their payments. So we feel very comfortable with this portfolio and it should continue to perform better than the same type of loans in other parts of the country. At this point, I'm going to turn the call over to Marcie so she can provide a little more detail on our financials. Marcie, go ahead.