First Interstate BancSystem, Inc.

Good morning, ladies and gentlemen, and welcome to the first Interstate Bank System Inc. Q2 2023 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 27, 2023. I will now turn the conference over to Andrea Walton. Please go ahead.

Good morning. Thank you for joining us for our second 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 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 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.

Thanks, Andrea. Good morning, and thanks again to all of you for joining us on our call today. Again, this quarter, along with our 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 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 an overview of the major highlights of the quarter, and then I'll turn the call over to Marcie to provide more details on our financials. We performed well in a difficult environment during the second quarter, reflecting the strength of a franchise we've built, while we've seen pressure on deposit costs, balances performed as expected, benefiting from the strength of our markets, and the diversity of our client base. We have not had to take any extraordinary measures around liquidity. Credit continues to perform well. Our capital is strong. And importantly, we are beginning to see some stabilization in our net interest margin, which has remained flat around 3% for May, June, and July. Though we expect the environment to remain challenging for the banking industry for the remainder of the year, we are well-positioned to play offense. We generated 67 million in net income, or 65 cents per share, in the second quarter, which includes one cent of severance expense primarily related to the strategic repositioning of our home lending business, which we will discuss later in the call. As we indicated on our last earnings call, we did not see meaningful disruption in customer behavior following the bank failures in March during the second quarter it was very much business as usual in what we would characterize as a relatively normalized operating environment we continue to see healthy economic conditions throughout many of our markets and most notably in tourism in the agricultural industries where clients are performing well and In particular, Yellowstone is having a very strong tourist season with a number of visitors to the park up 19% compared to the first six months of last year. And we've seen sufficient moisture over most of our footprint, which bodes well for our ad clients. While deposits declined about 2% in the second quarter, this result was very much in line with the expectations we spoke to in April. Importantly, throughout the quarter, balances expressed very normal seasonality. We saw expected outflows in the first half of the quarter with broad seasonal strength into the end of June. For the month of June, total balances grew $375 million, or 1.6%, which is partially a result of our success in new client acquisition. It is worth noting that we continue to have no broker deposits on our balance sheet. Our noninterest-bearing deposits showed resiliency, and while down for the quarter, balances ended June modestly higher than April. Given the strength of our balance sheet and our reputation we have developed for providing superior level of service, we have been able to effectively capitalize on the current environment. Given our advantageous loan-to-deposit ratio, we have strategically raised our rates to provide a competitive value proposition to our current clients, which we believe is the right thing to do. At the same time, we are selectively raising rates and adding products to support new business development efforts, targeting new clients where we have the opportunity to develop deeper, more profitable relationships over the long term. As we indicated, On prior calls, we continue to be thoughtful in regards to new loan production, maintaining strong underwrite criteria and discipline in our pricing. As we expected, this resulted in a lower level of loan growth in the second quarter, but with improved risk adjusted yield. We expect both trends to continue for the balance of the year, excluding draws on construction lines The average yield on new loans funding in the second quarter was up about 80 basis points from the prior quarter to 7.1%. Asset quality also remains strong. Although we saw modest increase in non-performing and criticized loans this quarter, those balance make up just 51 basis points and 350 basis points of loans held for investments, respectively. Looking forward, based on our current evaluation of the loan portfolio, we anticipate a reduction in criticized balances over the remainder of the year. Charge-offs increased to $11.4 million this quarter, with about 85% coming from the restructuring of a single metro office construction property that we've discussed in the past. With the recent restructure, we expect this credit to perform going forward. Outside of this one credit, losses were negligible. With that, I'd like to turn the call over to Marcie to provide some additional details around the second quarter results. Go ahead, Marcie.