First Interstate BancSystem, Inc.

Hello, everyone, and welcome to the first Interstate Bank System third quarter earnings conference call. My name is Harry, and I'll be your operator today. If you wish to ask a question during the Q&A session, you may do so by pressing star followed by one on your telephone keypad. I will now hand the call over to Lisa Sleiter-Bray to begin. Lisa, please go ahead.

Thank you, Harry. Good morning. Thank you for joining us for our third 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 and our more recent periodic reports filed with the SEC. Prevalent factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filing. The company does not undertake to update any of the 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 Marcie Mutch, our Chief Financial Officer, along with other members of our management team. At this time, I'll turn the call over to Kevin Riley. Kevin?

Thanks, Lisa. Good morning and thanks again to all of you for joining us on our call today. Again, this quarter, along with our early release, we have published an updated investor presentation that has some additional disclosures that we believe will be helpful. The presentation can be accessed on our investor website. And if you haven't downloaded a copy yet, I encourage you to do so. I'm going to start off today by providing an overview of the major highlights of the quarter, And now I'll turn the call over to Marcie so she can provide more detail on our financials. During the third quarter, we saw a continuation of positive trends we have experienced this year. Most notably, quality balance sheet growth, higher revenue, and disciplined expense management. This resulted in another quarter of strong financial results with added income coming in at $47.1 million, or $0.76 a share, This includes $0.08 of merger-related expense and $0.02 of expense related to settlement of legal claims. Excluding these two items, our earnings per share was $0.86 or 25% higher than the prior quarter. While the quarter had less robust loan growth than we anticipated, we were still able to generate the growth in our operating pre-provision net revenue that we were expecting. Net interest income, excluding PPP, increased at a similar pace as the second quarter. Fee income showed strong, sequential increases, and expenses were flat, excluding the two items I noted earlier. All in all, it was another solid quarter for us, which reflected the underlying strength of our diverse business model. Despite the supply chain and labor challenges, Economic activity in our market remains very healthy, which continues to drive strong inflows of core deposits. Our third quarter is typically our strongest quarter for deposit growth, and this quarter did not disappoint. Total deposits increased $442 million, and close to half of the growth came in non-interest-bearing deposits. These strong inflows have enabled us to continue growing our earning assets, and driving increases in our net interest income. As we told you earlier to expect in July, our net interest income excluding PPP was up for the third quarter and we expect another good quarter to finish out the year. The healthy economic activity in our market is also having a positive impact on our fee generating businesses. As most of the major areas were up from the prior quarter, resulting in 12% growth in non-interest income. We were able to deliver strong performance despite loan growth coming in below our expectations. Across the organization, we are seeing strong demand and good production with the exception of Wyoming. Excluding Wyoming, our annualized loan growth was over 4% for the quarter. While our loan pipeline remains healthy, There's three key factors continue to impact both new loan fundings and draws on existing lines of credit. Supply chain disruption and very tight labor market is resulting in more projects and planned investments among our commercial clients taking longer to complete or being delayed. The underlying financial strength of our customers and markets, which you see reflected in our stellar credit metrics, is resulting in very little line usage. or higher levels of loan payoffs. Competition remains challenging, and we are declining opportunities to extend loan portfolio duration at unprofitable yields. One of the highlights this quarter is that the investments we've made in technology over the past few years are coming to fruition. We've hit an inflection point in the growth of our digital mortgage application portal. While currently available across the footprint, in a couple of months, we've rolled out training. In the last couple of months, we've rolled out training to the frontline staff on how to assist clients with this process, rather than channeling all mortgage activity coming into our branches to our mortgage loan originators. As a result, the digital channel is now accounting for roughly 5% of our total mortgage application volume, and it is growing rapidly. Once the training is fully rolled out, it should have an even greater impact on volumes and the overall profitability of our mortgage business. In addition, our small business digital delivery channel has now been rolled out, and we are seeing the applications coming in across our entire footprint. In this initial phase, we are seeing about 27% approval rate, with another 19% of the applications being off-boarded to another credit channel. In the first couple of weeks, it resulted in about $1 million of booked loans and attractive risk-adjusted yields with the average balances of around $50,000. As we get larger, this channel will ensure our ability to continue servicing our small business clients across our footprint. We're excited about the combination of our digital channels in mortgage, credit card, and now small business and expect these capabilities to enable higher levels of productivity out of our retail sales force. Of course, the biggest development in the third quarter was the signing of the Transmitted Merger Agreement with Great Western Bancorp. Since the announcement of the merger, we've had the pleasure of hosting town halls in Sioux Falls, Des Moines, Omaha, Fort Collins, and Denver, and have had the opportunity to meet about 70% of the Great Western employees. The response has been overwhelmingly positive, and we are excited to team up with this group of talented bankers. Their bankers recognize the opportunity to attract new clients and expand existing relationships with the collective resources and support of a $32 billion organization. What was evident throughout our travels is how vibrant these markets really are, which gives us increased confidence in our conservative growth assumptions for the next few years from the Great Western footprint. Longer term, we are confident that our exposure to these attractive markets is going to lead to higher levels of organic growth than we have historically generated. Overall, we've gotten off to a good start in our integration planning. Our senior leadership teams are collaborating very well and creating a smooth transition process for employees and customers, as well as developing plans to effectively leverage the collective strength of each organization to provide a superior banking experience and enhance our business development efforts. Before I turn the call over to Marcy, just a few comments on the great rest of the results you have all likely have seen by now. In short, we are pleased with the quarter, and at this point we see no changes in our expected financial metrics we announced last month. While XPPP loan balances declined a bit more than we anticipated, much of the decline resulted from the repayment of several criticized and special asset hotel loans we would have designated as PCP loans in our review. They have continued working through their problem loan portfolio while booking only $4 million in charge of this quarter. Another positive note is that in September they saw net positive loan growth. So that is also encouraging. Overall, it looks like we're off to a good start. And with that, I'll turn the call over to Marcy to provide some additional details around our third quarter results. Go ahead, Marcy.