First Interstate BancSystem, Inc.

Hello and welcome to the first Interstate Bank System Inc. Q1 2023 earnings call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, please press star followed by one on your telephone keypad. I would now like to hand over to Lisa Sleiter-Bray. The floor is yours. Please go ahead.

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 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. Relevant factors that could cause actual results to differ materially from any other forward-looking statements are included in the earnings release and in our SEC filings. 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 Marcy 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 earnings release, we have published an updated investor presentation that has some additional disclosures that we believe would be helpful. The presentation can be accessed on our investor relations website, and if you have not downloaded a copy yet, I would encourage you to do so. I'm going to start today by providing an overview of the major highlights of the quarter, and then I'll turn a call over to Marcy to provide more details on our financials. Throughout our more than 50-year history, First Interstate has prioritized prudent risk management. And as a result, we have consistently been a source of strength and stability for our clients during times of economic stress. This was the case during the pandemic. It's also the case now in the wake of the recent bank failures that have created stress across the broader banking system. As a result of our relationship-focused approach, which has allowed us to build a loyal client base, we have seen stability in our insured deposit base and experienced limited attrition of larger uninsured business deposits since the recent bank failures. We are seeing net growth in new deposit accounts throughout all of our markets as clients seek stability in their financial partner. Given the strength of our balance sheet and the stability of our deposit base, we did not have to take any extraordinary balance sheet actions to mitigate deposit outflows or to otherwise address liquidity needs. As a result, we continue to deliver strong financial performance for our shareholders, generating $56.3 million in net income, or $0.54 per share, while increasing our tangible book value per share by 5% from the end of the prior quarter. This includes the impact of a $23.4 million loss we incurred on the sale of investment securities in the middle of March and a $1.9 million fair value mark on loans held for sale, which lowered our earnings by 18 cents. The proceeds from the sale of investment securities were largely used to pay down higher cost borrowings, which took place in early April. This will help stabilize the net interest margin and will add to net interest income over the next 12 months. The impact from this transaction is included in our revised outlook. The volatility in the markets as a result of bank failures has caused operational disruptions for many institutions. We feel very fortunate as our deposit base remains relatively stable, and I personally responded to a very few client concerns, leaving most communication in the hands of our very capable bankers. Our deposit declined by 3.9% during the first quarter. The majority of the outflow occurred in the first half of the quarter when we saw anticipated seasonal activity representing approximately two-thirds of the reported decline. The additional outflows was subsequent to the bank failures in March and mainly consisted of uninsured business deposits. Throughout the quarter, we continue to see the migration of deposits from non-interest bearing to interest bearing accounts and saw a greater reliance on borrowed funds to cover deposit outflows. This unfavorable change in our funding mix, along with increased rates on all deposit categories, resulted in a higher average cost of funds and a decrease in our net interest margin during the first quarter. As we indicated on our last earnings call, given the uncertainty in the macroeconomic environment and our focus on gaining full banking relationships, we were more selective in new loan production, which resulted in lower levels of loan growth as compared to the fourth quarter. As reflected in our first quarter performance, we are prioritizing C&I growth, which increased at a 20% annualized rate in the quarter. We continue to see quality lending opportunities across our footprint and increased total loans at a 3.2% annualized rate. Although the first quarter is typically slower for us, you should expect growth to remain in this low single-digit range for the full year. We feel this slower pace relative to our prior outlook is more prudent in the current environment, considering the heightened focus on C&I growth and the growth in full client relationships. Our deposit base remains very diverse and granular. Consumer deposits make up 54% of our deposit base, with an average account balance of less than $20,000. Business and municipal deposits are 46% of the base, with the average account balance of about $90,000. As of the end of the quarter, uninsured deposits not subject to collateralization represented about $6.2 billion, which we had immediate available liquidity of approximately $11 billion, which is over 1.7 times coverage. Moving to capital, it remains strong. And we're pleased to announce a dividend of $0.47 per share, which is about a 7% yield on our current stock price. From a sensitivity perspective, If we were to liquidate our entire available for sale portfolio and held to maturity portfolio and realize the market losses as of March 31, we would remain well capitalized for all regulatory ratios. And with that, I'll turn the call over to Marcie to provide some additional details around our first quarter results. Go ahead, Marcie.