First Interstate Bancsystem Inc. (NASDAQ:FIBK) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 11:00 am ET


First Interstate Bancsystem Inc. (NASDAQ:FIBK) Q3 2018 Earnings Conference Call Transcript


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Good morning, and welcome to the First Interstate BancSystem Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please also note, today's event is being recorded.

I would now like to turn the conference over to Lisa Slyter-Bray. Please go ahead, ma'am.

Lisa Slyter-Bray

Thank you for joining us for our third quarter earnings conference call. (Forward-Looking Cautionary Statements)

A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at Information regarding our use of 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 from management this morning are Kevin Riley, our CEO; and Marcy Mutch, our CFO, along with other members of our management team.

At this time, I'll turn the call over to Kevin Riley. Kevin?

Kevin Riley

I'm going to provide an overview of the major highlights of the quarter and discuss the two acquisitions we recently announced, and then Marcy will provide more details on our financials.

We executed well in the third quarter, delivering strong financial results, completing our acquisition of INB and making good progress on integration, which will take place over Veterans Day weekend. I couldn't be more proud of all of our team's accomplishments and believe we are firing on all cylinders, with strong earnings, successful acquisitions and continued efforts to strengthen our company's infrastructure.

We generated $41.4 million in net income in the third quarter or $0.71 per share, which included $3.1 million of INB merger-related expenses. Excluding these expenses, we generated earnings per share of $0.75, which compares to the $0.74 last quarter and a year-over-year of operating earnings per share are up 90% from the same period. The positive trends we are seeing in our net interest margin and the improved efficiency we are getting from our larger scale more than offset the $3.2 million decrease in revenue this quarter from the Durbin Amendment.

Excluding recovered interest and accretion income, our net interest margin increased another four basis points during the third quarter. And over the past year, we've seen our margin expand 24 basis points. This reflects the consistent benefit we are getting from the repricing of our earning assets and a higher loan-to-deposit ratio, combined with the effective management of our deposit cost. As we've talked about for the last year, we are focused on maintaining and growing our solid base of core deposits and believe this is important to our long-term success.

In the third quarter, we had $204 million in organic deposit growth or 8.1% on an annualized basis. We continue to push up our deposit pricing in order to provide our clients with a reasonable yield on their funds, which we believe will deter them from seeking other alternatives. Additionally, it will make it