Good morning, and welcome to the First Interstate BancSystem Fourth Quarter 2019 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. At this time, I would like to turn the conference over to Ms. Lisa Slyter-Bray. Ma'am, please go ahead.

Thanks, Danny. Good morning. Thank you for joining us for our fourth 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. 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 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 Chief Executive Officer; and Marcy Mutch, our Chief Financial Officer, along with other members of our management team. At this time, I will turn the call over to Kevin Reilly. Kevin?

Thanks, Lisa. Good morning, and thanks again to all of you for joining us on our call today. I'm going to start off today by providing an overview of the major highlights of the quarter and then I'll turn the call over to Marcy to provide us more details around our financials. We ended 2019 with another strong quarter. We were facing a number of significant headwinds in the quarter, most notably challenging environment for generating quality loan growth, the seasonally low mortgage period, and the impact of recent reductions in short term interest rates. Despite all these challenges, we are still able to deliver sequential quarter improvement in our core earnings as well as key performance metrics including our efficiency ratio, our return on average assets and our return on average common equity. We believe this reflects the strength of the diverse business model we've built. The effectiveness of our balance sheet, management strategies and our continued focus on enhancing efficiencies throughout the organization. On a GAAP basis, we generated 52.4 million in net income in the fourth quarter, or $0.80 per share. Merger related expenses decreased earnings per share by $0.01 On an operating basis the merger related expenses are excluded in all the periods. Our fourth quarter earnings per share was up a penny from the prior quarter and up $0.05 or 6.6% from the fourth quarter of 2018. For full year, we believe we delivered a strong year of value creation. Despite the impact of two acquisitions, we increased our tangible book value per share approximately 14% while returning $79.2 million in capital to our shareholders through our normal quarterly dividends. Looking at our key trends in the fourth quarter. We are particularly pleased with the success in protecting our net interest margin against the impact…

Thanks, Kevin and good morning, everyone. As I walk through our financial results unless otherwise noted, all of the prior period comparisons will be with the third quarter of 2019. And I'll begin with our income statement. Our net interest income increased $2.7 million from the prior quarter, partially due to a $1.2 million increase in accretion income. On a reported basis, our net interest margin increased 1 basis point to 3.94% in the fourth quarter, excluding the impact of interest recoveries and loan accretions, our operating in interest margin decreased 3 basis points this quarter to 3.77%. The decline in operating net interest margin was primarily due to a reduction in operating loan yields, which exclude the impact of interest recoveries and accretion of 9 basis points. This negatively impacted our margin by 2 basis points. The remaining 1 basis point margin decline was due to continued high levels of excess liquidity, which we held in overnight funding, and with a lingering result of our strong deposit growth late in the third quarter. These factors were partially offset by a 14 basis point reduction in our cost of funds to 37 basis points. As we pass through the Fed rate cuts to our depositors, we saw steady decline in our cost of interest bearing liabilities throughout the fourth quarter. At this point, we do not plan to make any meaningful additional changes to our deposit rates. With a lower starting point for our cost of deposits as we enter the year, we're focused on the opportunities we have to reinvest our excess liquidity in higher yielding assets. We believe we can offset the continued pressure on our earning asset yields and keep our net interest margin relatively stable for the foreseeable future. Moving to non-interest income, we saw a…

Thanks, Marcy. I'm going to wrap up with a few comments about our outlook. During 2018, we executed well in our strategy for strengthening our franchise. We completed 2 acquisitions that increased our presence in faster-growing markets. In 2019, we had muted organic loan growth of approximately 1.3% for the year. With the faster growing West Division market comprising a larger percentage of overall footprint and higher levels of business and consumer confidence, we believe we can generate quality loan growth in the low to mid-single digits this year, as well as continue to generate increases in our fee revenue. We also completed major technology initiatives that expanded our products and services, improved our digital banking capabilities and streamlined our work process flows. As a result of these investments, we enter 2020 with an improved digital mortgage application portal, a new digital consumer business credit card application portal, all which should enhance our business development capabilities this year. One of our key initiatives this year is to focus on training of our employees on these new products so that we can effectively leverage the investment we have made to improve our client engagement. In 2020, we're also investing in a new teller system that will enhance efficiency in our branch network and improve experience for our customers. Over the past few years, we have talked a lot about how First Interstate has evolved from a community bank to a regional bank capable of serving a broader array of clients with a diverse range of products and services. We continue to evolve and we have made adjustments to our executive ranks to strengthen our commitment to remaining at the forefront of innovation in the banking industry. We recently created a new position called Chief Strategy Officer and appointed Renee Newman our…

Q - Jared Shaw Thanks. Good morning, everybody. Kevin, maybe just starting with your comment at the beginning of the call, just talking about the challenging environment for loan growth and the net loan growth you saw for the whole year and then tying that to your expectation for low to mid-single-digit loan growth in 2020. I guess what was most challenging as you look at 2019? And then how do you see that changing? Was it more pressure on pay downs or was it more self-imposed as you were trying to change the credit dynamics and move some of those weaker loans out? What's the dynamic there and what's changed? A - Kevin Riley We kind of hit a lot of the points, Jared. Nice job. The thing is that this year was a strange year. I think that with interest rate cuts, inverted yield curves, the whole trade war, I think competence with the business community all kind of weighed on the actual growth in our markets. Also in Wyoming coal has not -- continues to fall out of favor so that puts some pressure on Wyoming. So I think the thing is that that's kind of behind us. The trade war is kind of behind us. The inverted yield curve is behind us. Our asset quality, I think we've cleaned up effectively and that's kind of behind us. Our stick portfolio runoff, that's behind us. We're down under $15 million, so that won't have any more headwinds with us. So I think that a lot of the headwinds that we had back in 2019 have gone away. I think that we're seeing a little bit more confidence with our business partners out there because some of these things are behind them and they're starting to move forward…