Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Interstate BancSystem Inc (FIBK, Financial) generated $60 million in net income for the second quarter, or $0.58 per share.
- Net interest margin expanded by seven basis points to 3%, indicating improved profitability.
- Non-performing assets declined by 7.7% over the past two quarters, reflecting better asset quality.
- Deposits increased by $60.7 million in the second quarter, showing growth in customer deposits.
- The company added two experienced professionals to its risk management team, enhancing its risk oversight capabilities.
Negative Points
- The company recorded $13.5 million in net charge-offs for the quarter, indicating some credit quality issues.
- Non-interest income from the mortgage business remains minimal, posing a challenge for revenue diversification.
- A large non-performing C&I loan required an increased specific reserve, suggesting potential future losses.
- The company anticipates flat loan growth for the full year, which may limit revenue growth opportunities.
- A material weakness was reported in the 10K, although progress has been made to address it.
Q & A Highlights
Q: Can you provide more details on the non-interest bearing deposits and their expected trend?
A: We expect non-interest bearing deposits to run in the 26% range on average for the year, excluding any lumpiness from large deposits. (Marcy Mutch, CFO)
Q: What made up the rest of the gross charge-offs in the quarter, excluding the $6.8 million construction charge-off?
A: The remaining gross charge-offs were primarily smaller, varied amounts, including about $3 million in consumer and other segments. (Marcy Mutch, CFO)
Q: Has the large C&I credit deteriorated since last quarter, and should we expect a charge-off later this year?
A: The credit's valuation might be lower than initially anticipated, but we are prepared for a potential charge-off, which we are fully reserved for. (Kevin Riley, CEO)
Q: Can you quantify the reserves set aside for the larger C&I non-performer?
A: We are not disclosing specific reserve amounts, but it should not impact earnings. (Kevin Riley, CEO)
Q: What is the expected trajectory for the core net interest margin (NIM)?
A: We expect continued expansion in the core NIM, with the June average core NIM at 2.95%. (Marcy Mutch, CFO)
Q: What are your expectations for CD retention and repricing trends?
A: We expect CD balances to remain stable, with a slight lag in repricing down as rates decrease. (Kevin Riley, CEO)
Q: What is the expected deposit beta on the way down as rates decrease?
A: About 18% of deposits are indexed to short-term rates and will move immediately with rate changes. CD repricing will lag slightly. (Kevin Riley, CEO)
Q: What is the expectation for the large deposit mentioned in the call?
A: The large deposit was temporary and has moved out. We do not control the timing, but it was larger than usual at quarter-end. (Marcy Mutch, CFO)
Q: What is the current pricing on new construction loans?
A: New construction loans are priced slightly higher than the average loan rate of 7.5%. (Marcy Mutch, CFO)
Q: What is the expected cash flow from securities that will go towards paying down wholesale funding?
A: The expected cash flow from securities is detailed in our investor deck, specifically on slide 12. (Marcy Mutch, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
