Good day and welcome to the First Interstate BancSystem First 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 note, this event is being recorded.

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

Thanks, Sean. 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 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 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 comparable GAAP financial measure 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'll turn the call over to Kevin Riley.

Kevin?.

Thanks, Lisa, and good morning and thanks again to all of you for joining us on our call today. I am going to start today by providing an overview of the major highlights of the quarter, and then, I'll turn the call over to Marcy so she can provide more details on our financials.

We had a good start to the year and saw positive trends in a number of key areas, our net interest margin, our expense management, and our asset quality. We generated $41.6 million in net income in the first quarter, or $0.69 per share, which included $2.3 million of merger-related expenses, which had a negative impact of $0.03 per share.

As we have talked about for several years, the first quarter is typically a seasonally slow period in our markets, both in terms of loan demand and fee income generation.

That again was the case this year as our total loans were pretty much flat from the end of the -- prior period, but we saw encouraging signs within our markets that reflected the positive impact of our acquisitions in faster-growing markets.

Our West division generated annualized loan growth of more than 6% in the first quarter with particular strong contributions coming from our Oregon markets. We saw decreases in three of our portfolios, our ag, our residential real estate and our consumer.

The ag portfolio decrease is attributable to the typical seasonal pay-downs that we see in this business. While the residential real estate reflects a continued intentional runoff of certain loans acquired in the Bank of the Cascades.

On the consumer side, the decline in the consumer portfolio in the first quarter can be attributed to seasonally low auto sales as well as underwriting refinements within our direct consumer channel. We believe these portfolios will rebound as we head into the second quarter.

These declines were largely offset by the growth in our commercial and commercial real estate portfolios, primarily coming from our West division markets. We also had a strong quarter of deposit growth with our total deposits increasing $134 million from the end of the prior quarter.

Most of the growth came in interest bearing deposits as we raised our offering rates a bit to gain share in the West division as well as to continue to apply competitive pressure to other banks in our Montana division. This has paid off in our West division as we have seen or saw deposit growth for the quarter.

Given the prevailing rates in our markets, we can continue to bring in attractively priced deposits that can be profitably deployed into earning assets. And with a broad range of products and services, we believe we have good opportunities to cross sell to these new customers.

Over the last year, we've instituted relationship review process with our commercial customers. This involves getting all the different product leads together with the customer to provide solutions to meet their financial needs.

Our employees have really embraced this process as we have seen the benefits of growing the existing relationships both in loans and deposits. We believe this will have a positive effect throughout the year, ultimately making these relationships more profitable for the Bank.

While our strategic decision to raise deposit rates has increased our cost of funds, we still more than offset these increases through our increases in our yield on earning assets. As a result, our operating net interest margin increased 3 basis points in the first quarter.

On our last earnings call, we talked about putting more emphasis on expense management. And I'm very pleased with the results we saw in the first quarter. Excluding our acquisition related expenses, our total non-interest expense declined by nearly $1 million from the prior quarter despite the seasonal impact of higher payroll taxes.

We are doing a particularly good job in managing our discretionary spending and I believe we will see improvements in our operating leverage as we enter in to the seasonally stronger quarters of revenues -- revenue generation.

We've also continued to make great progress on our digital and IT infrastructure initiatives that we have discussed on previous calls. Our digital guided wealth management capabilities rolled out this week and our ability to accept online residential mortgage application rolls out next week.

Our plans for the rest of the year includes the rolling out of our enhanced digital capabilities for online applications for credit cards, consumer and small business loans which will be on the same platform and provide the same client experience as our mortgage applications.

We invite you to visit our website, search for digital wealth and watch the guided wealth management video. We believe you'll like what you see. When we add to an update on our core system transformation in the first quarter, we completed the cleanup of our top system configuration reducing 27 pricing regions down to eight.

This went smoothly with no impact to our clients. This is phase one of the three-phased project to clean up our core systems. All this is happening while we are continuing to upgrade our IT infrastructure to allow us to more easily integrate new technologies in the future.

With regards to our loan transformation project, our process for improving the onboarding of new consumer clients is scheduled to be completed in May. The commercial loan process improvements are in progress and we expect them to be completed before the end of the year.

We have been able to execute on all these initiatives without disruption to customer service or taking our eye off the ball for business development.

I am very pleased on the way our team is able to execute on the key pieces of our long-term strategic plan, while continuing to do the basic blocking and tackling that produces strong financial results we saw in the first quarter. So, with those comments, I'd like to turn the call over to Marcy for a little more detail behind the numbers.

Go ahead, Marcy..

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 fourth quarter of 2018. And I'll begin with our income statement.

Our net interest income decreased 2.4% from the prior quarter, primarily due to two fewer accrual days and a slight decline in average earning assets. Included in net interest income this quarter was recoveries of previously charged-off interest of $900,000, a slight increase from last quarter.

Total accretion income on the acquired portfolios was $3.9 million this quarter, which was $200,000 less than the fourth quarter. Included in this was accretion related to early payoffs of $1.7 million this quarter, which was the same as last quarter.

Current scheduled accretion should run at approximately $2 million per quarter, excluding the two deals we just closed. We're in the process of marking those portfolios right now, which should result in a modest increase to scheduled accretion in the second quarter.

On a reported basis, our net interest margin increased 5 basis points to 4.04% in the first quarter. Excluding the impact of interest recoveries and loan accretion, our operating net interest margin increased 3 basis points to 3.87%.

The expansion in our operating net interest margin was driven by a 12 basis point increase in our yield on earning assets, again excluding interest recoveries and loan accretion, which offset a 9 basis point increase in our cost of funds.

The increase in our earning asset yields is being driven by increases in both the average loan yield and the yield on our investment securities. With a full-quarter impact of the rate increase in December, we saw the benefit from repricing in our loan portfolio which drove our average loan yields up 10 basis points to 5.12% on an operating basis.

The yields in our investment portfolio increased 12 basis points in the quarter to 2.44%. We're putting new money to work at around 3% and the duration of the portfolio remains short at about 2.2 years. Going forward, we're seeing no pressure to raise our deposit rates. As we stated many times, we've been ahead of our markets in that regard.

And while there is pressure on loan pricing, we stay disciplined. We would expect our margin to hold fairly steady heading into the second quarter. Moving to non-interest income.

We saw an increase of $200,000 quarter-over-quarter to $34.5 million as we were able to more than offset the seasonal softness we see in our payment services revenue with growth in other areas.

Our wealth management revenues increased $400,000 from the prior quarter, which was primarily attributable to a continued focus on expanding client relationship coupled with stronger financial markets as approximately 85% of our assets under management are fee-based. Assets under management stand at $5.1 billion at the end of the first quarter.

All of our other fee income lines were relatively consistent with the prior quarter. With respect to our mortgage revenue, it came in just about as expected despite a particularly harsh winter in our markets that delayed the typical start of the spring home buying season.

We continue to see lower demand for refinancing, which accounted for just 21% of our mortgage production in the first quarter. Looking ahead, the overall housing market in our footprint continues to be challenged by inventory constraints. However, we are seeing strong construction volume, which should help ease this pressure later in the year.

We're also expanding our product set within the mortgage area including offering more products specifically designed for the construction market. This, along with lower mortgage rates and the launch of the digital platform that Kevin mentioned earlier, should positively impact our production levels. Moving to noninterest expense.

We incurred $2.3 million in acquisition related expenses this quarter. Excluding these expenses in both periods, our non-interest expense decreased by just under $1 million. This was primarily due to lower salaries and wages, resulting from the staffing reductions at INB as we completed the integration process.

In the first quarter, we did have severance and hiring costs unrelated to the acquisition of about $700,000 and one-time maintenance cost related to a temporary facility of about $300,000.

Looking ahead, as a reminder, in the second and third quarters, our noninterest expense will include expenses related to the Idaho Independent and Community First Bank acquisitions pre cost saves, as we will not see the full benefit of these savings until the middle of the third quarter.

By the fourth quarter, we expect our expenses to level out right around $96 million a quarter. Kevin has already discussed out loan and deposit trends, so I'll move on to asset quality. Generally, we saw stable trends across the portfolio this quarter with just slight increases on our non-performing assets and criticized loans.

Within the non-performing asset bucket, our non-accrual loans decreased by $9.2 million, while our other real estate increased by $6.7 million, primarily due to an $8.4 million loan transferred to other real estate through foreclosure.

We had $4.3 million of net charge-offs during the quarter, or 21 basis points of average loans on an annualized basis. The quarter-over-quarter increase was the result of a $1.2 million charge-off and the resolution of a long-term classified commercial loan and $1.2 million increase in consumer charge-offs compared to the prior quarter.

Consumer charge-offs were elevated this quarter primarily due to a home equity loan charge-down and higher indirect loan charge-offs. Excluding these items, consumer charge-offs were at 9 basis points, which is in line with the two-year historical average.

We don't expect consumer charge-offs to continue at this pace, as our consumer delinquency rates are trending down. Consumer delinquencies at the end of the first quarter were 71 basis points versus 89 basis points at year-end and 82 basis points a year ago.

We recorded $3.7 million in provision expense, which was primarily driven by the higher level of charge-offs in the quarter. Our allowance for loan losses declined 1 basis point to 85 basis points of total loans, while our coverage of non-performing loans increased just 139%.

As you know, the allowance does not take acquired loans into consideration, but the combination of the allowance with the remaining loan discount on the acquired portfolios represents 126% of total loans. And with that I'll turn the call back over to Kevin..

Thanks, Marcy. Nice job. I'm going to wrap up with a few comments about our outlook. As we state today, I would say that we are more optimistic about the year than we were three months ago on our last earnings call.

Our loan pipeline is at a record level, which reflects not just a larger bank we've become but also the positive impacts of our push into Oregon, Washington and Idaho where we are seeing strong economic growth and loan demand and are effectively taking market share. And we would be remiss not to talk about our Mountain footprint.

The pipeline is strong in this region as well and we expect the Mountain region to be a solid contributor to the overall growth this year. Having just completed the acquisition of Idaho Independent and Community First, we are furthering increasing our exposure to faster-growing markets and improving our overall growth profile of the Company.

With our larger lending capacity and extended -- expanded product set, we expect to be able to enhance the business development capabilities of these teams we added through both banks by giving them the opportunity to pursue larger commercial relationships.

We're also making investments in our franchise including adding experienced and talented bankers that will add to the ability to capitalize on the robust growth occurring across our footprint. We are also at a point where we should start seeing to begin -- to see the fruit of our labors with respect to the rollout of our new digital capabilities.

Our digital online mortgage capability is launching next week just in time for the seasonally strong period for the housing market, which should have a positive impact on our loan production levels. Other new products and services will be steadily introduced as we move throughout the year.

In closing, as we look across the organization, we see improvements in many key areas. Our sales efforts are increasing. Our products and service offerings are expanding. Our infrastructure and technology capabilities are improving. Our ability to engage with and serve our customers is escalating.

And we are adding exceptional talent in all areas of the Company. As this is a positive outlook for loan growth and the rollout of our digital capabilities and our disciplined expense management, we feel very good about our ability to deliver strong results for our shareholders, not only this year but into future as well.

So, with that, we'll open the call up for questions..

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jeff Rulis with D.A. Davidson. Please go ahead..

Marcy, thanks for the detail on the expenses for Q4.

Just to further maybe question the -- at that point you would -- would you hope to have all cost savings from the latest transactions by Q4? Or would there be some tail of expected saves into 2020? And maybe secondarily, if you could even talk about 2020 kind of expense rate, big picture?.

So, I would say that we'll have all cost savings out by the end of the fourth quarter. And as we move into 2020, again we would expect a modest increase like 1% to 1.5% increase on our operating expenses.

But I think that the guidance that we provided on last quarter's call of overall expenses for this year does remain strong and it is pretty much in line with where we are in a consensus basis..

Got it. Okay..

Does that help?.

Yes. No, that's great. And then, just on the mortgage business, you've talked about some of the positives occurring there and the efforts and some of the investments.

But kind of from a run rate, from a -- on the mortgage line, kind of expectations for the full year, I can't remember if you have previously guided but maybe an updated view on that?.

It's pretty much in line with what we said last quarter. We expect a little bit of an uptick from the new markets that we're in, but it's -- overall, I think the industry is expecting some decline and we're expecting it to stay flat to last year with an uptick as a result of the new markets that we're in..

Got it..

Does that make sense? Does that….

Yes. I got you. Thank you. And then maybe Kevin just a one-off.

I mean, you disclosed a couple of acquisitions and integrating, but further M&A discussions, any -- anything to talk about from a M&A dialog standpoint?.

No. We remain focused on making sure if we're getting involved in an M&A thing, it's good for the franchise. We get calls all the time, but we're pretty disciplined on what we're looking at. We have our priority list and we kind of stay into that list. And if they come available then we will hopefully be able to cut a deal with them..

Our next question comes from Jared Shaw with Wells Fargo Securities. Please go ahead..

Maybe if we could just start on the margin side, Marcy, you said you expect margin to be relatively flat.

Is that -- as we're looking at that, should we expect to see a continued modest increase in cost of deposits as you continue to target those new markets and that's going to be offset by the growth in commercial helping the yield side, or do you think things overall are pretty stable here on both the funding side in both the yields?.

I think they're going to be pretty stable on both sides..

You might see a basis point here or there Jared, but nothing dramatic..

Yes..

Okay.

But no big restructuring, no big campaign going on in the new markets that's likely to drive a significant change in cost of deposits?.

No..

No..

Okay.

And then, as you look at the acquired portfolios, the securities portfolios, should we expect to see any type of restructuring there, maybe trying to reduce asset sensitivity or change the overall pro forma positioning of the broader balance sheet or pretty much steady as she goes as we’re looking at it here?.

It’s kind of stable, but we are extending a little bit duration on our investment portfolio and we're doing a little bit more maybe fixed rate lending in our commercial book. So we're slightly changing the structure of our balance sheet..

But in terms of having acquired securities portfolio come over, you'll see it invested in similar -- a similar profile to what we see today..

Okay. And then, I know that you said in second quarter we could see a modest uptick in the scheduled accretion coming in for the two deals.

Do you know what the overall -- what the total expected accretion from those deals are going to be that’s disposed?.

So, no, we don't have that number yet. So, what happened is at the day of close, we run it back through and that process hasn't completed yet. And so I don't have the overall explanation at this point..

Our next question comes from Matthew Clark with Piper Jaffray. Please go ahead..

You mentioned you have a record loan pipeline.

Could you maybe quantify the size of it at the end of the quarter and how much it was up since year-end?.

Sure, Matt. I'm going to have our Chief Banking Officer, Renee Newman to talk about that. Go ahead, Renee..

Good morning, Matt. So for the second quarter we have approximately $775 million that we have in our pipeline..

And how does that compare to year-end?.

Comparing to year-end, we typically see around $300 million to $320 million a quarter..

Okay. So we're up -- I'm just trying to get a percent change from December -- end of this past December..

Almost 100% higher..

Really, okay. Okay, great. And then, on the loan yields just wanted to get the weighted average rate on new production this quarter..

It was at 5.7%. So, it was 1 basis point less than last quarter..

And just following up on Jared's question, just about loan yield trends and interest-bearing deposit cost trends. On the loan side, again you're putting new business on above the portfolio. You would expect those yields to, I would think, drift higher. Accretion obviously will help as well even though I guess it's coming down here, linked quarter.

But -- and on the deposit side, I mean, are you suggesting that deposit costs are going to start to stabilize here? Or do you think we'll have some follow through in terms of the rate of increase with the fed on hold?.

Well, I think you are not going to see the size of the deposit cost increase we saw last quarter, because we went across the board increasing our rates. Will you see some drift of deposit cost going up? Sure, you're going to have, maybe some people go -- moving into the CD.

So like I said, you might see deposit costs go up a basis point or 2 basis points, but it's not -- we don't have plans right now to do a broad based increase across all our other core deposits..

Okay. And then just on the securities yields, I think last quarter we talked about new securities closer to 3%. I know the curve has flattened since then, but just curious where -- what the rates are on new securities..

Yes. So it actually was a little higher at the end of last quarter but right now it's about 3%. It's what we're being able to put new securities on for..

Okay.

So why aren't we going to see core margin expansion?.

Well again, I think we are seeing some pricing on the loan side and we did see some drift on deposits coming in at higher rates. If we continue to see some drift, again, I guess --.

It's really -- I think when we add the other two banks in there, they have a -- again lower loan to deposit ratio than ours currently. We have to --.

And lower deposit costs..

Lower deposit costs. We are going to have to increase their deposit cost up to our deposit levels. So they probably will have put a little pressure. If we didn't have the new acquisitions, our net interest margin probably would drift up. But with the new acquisition coming on, we believe it's going to be stable right about here..

Just slightly up..

Just slightly up..

I mean, it should be up a basis point or 2 basis points, but we're not expecting a huge change..

Okay. And then your overall fees this quarter being flat from the fourth quarter and what is typically a seasonally weaker quarter.

I mean, we can see the line items, but I guess what else was going on kind of behind the scenes here in terms of activity and traction with the recent acquisitions?.

And so in terms of that being flat versus down quarter?.

Yes..

Yes..

Yes. I think the strongest factor there was really in our swap fee income. We had higher levels of swap fee income this quarter. I think it was close [multiple speakers]. Yes. Like $800,000....

[Indiscernible] something like that. It was at a record level this quarter. That was one big factor..

And I think we have seen a pretty positive impact on the payment services revenue. If you take out the Durbin impact, if you look at year-over-year. So, that was about a $3 million hit from the first quarter of last year. And so we have seen some pretty good expansion in our payment services in what's typically a light quarter..

Great, thank you..

Our next question comes from Gordon McGuire with Stephens. Please go ahead..

So, in the past, Kevin, you've talked about the ability to attack the market and campaign your deposits a little bit more to drive better balance sheet growth and above that maybe would have been the case this quarter just given the growth you saw. But it sounds like based on the commentary around the deposit cost that wasn't the case.

Is there still an opportunity to do that? And how should I think about overall balance sheet growth this year? Are you still looking at that $13.9 billion on average?.

Yes, the balance sheet growth, it's still in line with what our expectations are and a little bit on the deposit side. We haven't really gone out with a lot of marketing campaigns with regards to attacking the market. We've been kind of just doing branch kind of walking and word of mouth and we’re growing deposit that way.

But we are starting to test market a new product in some markets to see if we can take market share and we're also using a little different and the way we do advertising which is just not print and media, but actually doing more digital advertising.

We're starting to do more of that where you look at personas of individuals and when they click on certain things, you can then market through the digital medium which is where we're always moving to. So, we are starting that process to -- right now to market to customers as they go onto the Internet.

So it's -- we're trying some new capabilities and so hopefully we'll get some more market share growth on that..

And also if you look at the deposit growth for the quarter, the West division was about double the Mountain division. So we are seeing some traction growing deposits in the West..

Got it, thanks.

And maybe quickly Marcy, do you have an updated -- updated on the diluted share count now that the deals are closed?.

On the….

Diluted share count..

Diluted share count..

On the closing of the acquisition..

I don't have it in front of me, but I'll get back to you with that. I'll just give you a call..

Our next question comes from Andrew Liesch with Sandler O'Neill. Please go ahead..

Hi. I just wanted to follow up, so just similar questions on the fee income here as to try to drill a bit down on the run rate. Also had a nice increase in wealth management revenue.

Was there anything unique in that quarter or is that just from maybe some increased selling efforts in your Western markets?.

Just increased selling efforts and that -- so nothing unique there, but that should continue to move hopefully North..

Great. Great.

And then the swap fee income, was that captured in the other line?.

Yes..

And then just staying with the payment services revenue, do you expect that to take a normal step up here this quarter or was some of the strength in the first quarter, do that maybe pull it -- pull some of it forward?.

Yes. If we follow our historical trends, yes, we will see. What normally happens is that the lowest quarter is the first quarter and it steps up each quarter as we go out throughout the year with the fourth quarter being our highest quarter. That steps down, and we always call it the kind of the holiday hangover.

But, we do anticipate that to continue to step up as we move out throughout the year..

Okay, great. I can fill everything else in myself. Thanks so much..

Thank you..

Our next question comes from Garrett Holland with Baird. Please go ahead..

Just to start maybe on provisioning.

What's a good run rate moving forward, some variability in credit metrics from low absolute levels, but what would be a reasonable expectation from a quarterly run rate?.

Well, when we look at the provisioning, we have a little hedging though we have a little bit -- more robust in the first quarter and the provisioning. We anticipate our provisioning to kind of return to the levels of last year, 2018 from this point on..

And then, maybe just as it relates to the balance sheet growth, do you have a organic loan growth expectation for 2019? I know we had been talking mid single-digit loan growth.

Has that been increased just given the strong pipeline activity?.

No, we're still hanging with our mid single-digit increase for the year..

Fair enough.

And if I could just squeeze one more in, just as we look out into 2020 and we transition to CECL accounting, which is a very fun subject, do you expect a sharper convergence between the reported and core NIM next year?.

Say that again. A sharper….

Do you expect the reported NIM and the core NIM to converge pretty quickly next year due to change in account treatment?.

We are not that far down the road to come up and give you any kind of direction at this time..

Fair enough. Thank you..

Our next question comes from Jackie Bohlen with KBW. Please go ahead..

Kevin, you see more bullish on the Mountain region than you have in the past. And I just wanted to see what the driver of that was and how it's contributing to the strong pipeline you're seeing..

Well, the thing is just that we had some issues in some markets where we had to slug through some, I think asset quality issues over the past year that were -- we got to the end of that pretty much last year. So we feel better that instead of kind of shoveling sand against the tide that the hole actually will be dug or will start making progress.

So some of this -- there were bigger markets where we had tough times last year in growing assets, one, I think we're not going to have the tide against us. And secondarily, I think the folks are doing a lot better job in bringing in business.

And also we have made some staff changes in our soft markets and we believe that the new staff is doing a far better job than the old staff. So that's why we feel a little bit better about what's going on. Oil price is also up and people are feeling pretty good about the drilling again.

So I just think that things are better in the Mountain region than they have been in the past..

Okay, that's helpful. Thank you.

And how does that contribute to the strength of the pipeline? Is the pipeline as strong as it's been because Mountain is doing better or are you seeing that kind of strength from the West as well?.

It's really both, the Mountain is doing better and the West is doing better. So the whole pipeline is a contribution of both groups..

And then, thinking about M&A, I know we touched on that briefly. If we were to have this conversation a couple years ago, I might not have anticipated an expansion into the Northwest and that's worked out beautifully for you.

As you think about how your footprint might grow in the future, would you look to expand beyond the states that you're currently in?.

I'd say our primary focus is in the states that we're in, but there are some institutions on our priority list that would take us into states that are connected to the states that we are in, but they're lower down the prioritization list. So -- but we don't want to miss opportunities.

As you look at as the landscape of potential partners, it's getting smaller. And so we have our priority list and we don't want to miss the opportunity to get the right partners that we have already targeted that we believe will make our franchise better..

Okay. So a definite end market footprint but paying attention to some, let's call them, stellar opportunities that might be in contiguous states..

That's correct. Well, you are not going to see -- you're not going to see a jump to Arizona or Nevada or -- even though, California is probably a contiguous state, I don't think we're going to enter that market anytime soon. So, we'll focus on the states that are kind of close to us..

Okay. And then just one last kind of housekeeping question.

Marcy, will there be any tax rate change between 2018 or 2019 or are you expecting that to be pretty steady?.

Overall, I think it ticks up slightly just because of the mix, but not anything -- maybe not even 0.5%. So it will be around 23%..

Okay..

22.5% to 23%. Yeah..

22.5% to 23%. Great. Thank you. Those are my questions..

All right. Thanks, Jackie..

[Operator Instructions] Our next question comes from Matthew Keating with Barclays. Please go ahead..

I just had a quick question for Marcy on the Idaho acquisitions. I understand, I guess the net additions after cost savings from those two deals is around $4 million or $5 million.

But what's sort of the growth -- as we think about 2Q, what's the growth incremental expenses that come from those two deals? And also, do you have a rough idea of their fee income contribution as well? Thanks..

In front of me -- so again, Matt, I guess where we'll end up for the year is about $379 million in total expenses. So if you think this quarter was $92 millionish, fourth quarter will be $96 million, the second and third quarters will fall out in the middle there..

And then, on the discussion on the inventory supply side impacting the mortgage banking operations, it's not really going to impact the traditional seasonality you have in 2Q and 3Q, though. So you are basically saying it will be similar to last year levels, given the inventory issue being offset by some of the technology initiatives.

Is that the right way to think about that?.

Yes..

That's correct..

That's good..

Okay, perfect. Everything else that I had has already been asked. So, thank you very much..

Thanks, Matt..

Thanks, Matt..

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Kevin Riley for any closing remarks..

Thank you for your questions. And as always, we welcome calls from our investors and analysts. Please reach out to us, if you have any follow-up questions. Thanks for tuning in today. Goodbye..

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect..