Adam Butler : This is Adam on for Matthew Clark. First, I was just wondering if you could provide some commentary around the staffing reductions that were completed in December. I was curious if it was more surrounded by efficiency improvements in the back office or maybe lower producing — lower revenue producing producers?
Kevin Riley: It’s kind of broad with regards to that. I would say that we looked at the levels of staff that we needed in various areas based on the workload that people were doing, and we made reductions in order to bring efficiencies to the levels they should be at. I would say that, with that reduction, we also plan on adding, as we said in our remarks, putting more expense into, I would say, risk management as well as IT, so that bounce up. But we just really went through the company and looked at where we might have some excesses and took those out.
Adam Butler : Okay. I appreciate the color there. And then second, I appreciate the guidance on the NIM and NII down in the first quarter relative to the fourth quarter. Do you guys happen to have either the spot rate on interest-bearing deposits or the NIM in the month of December or at the end of December?
Kevin Riley: I’m sure we have that. Go ahead, Marcy.
Marcy Mutch: So our net interest margin in December was 2.86% and so it was lower than the fourth quarter average. And we saw pressure there because we had the vast majority of our early cycle CDs reprice in November and December. We also — that was impacted by the recovering fair market value on our investment portfolio and then our decision to reinvest those investment portfolio cash flows that resulted in a couple of basis point decline in NIM in December. And then lower noninterest-bearing deposits, higher borrowings were also a factor there. So that’s where when we talk about our first quarter NIM, we expect it to be lower than the fourth quarter average and more in line with that mid-280s number.
Adam Butler : I appreciate the color and thanks for the time.
Kevin Riley: I just want to clarify that thing. That was excluding purchase accounting. That NIM guidance.
Operator: Next question comes from Timur Braziler from Wells Fargo.
Timur Braziler : Maybe looking at some of the in-migration into your geographies during COVID, your construction balances doubled over that period. I know that leading up to it, there had been a shortage of supply of housing along with other things, just inability to find workers. Can you maybe give us an update on where your geographies stand now and just some of the population migration, maybe how that’s trending and if there are any areas within your geographies that you feel like might have been overbuilt given some of that migration over the past couple of years?
Kevin Riley: I would say I think the migration has probably slowed a bit, but there’s definitely a shortage of houses in the majority of our markets. So we don’t see really any markets right now having accesses. So there’s a need for housing. So we don’t — we’re not right now seeing anything in any one of our markets that we — there’s been any overbuilding. The only area I’d say that might not be where everybody’s flock into is some of the big cities like Portland and Seattle. But besides that, I think that the rest of our areas are in pretty good shape.
Timur Braziler : Okay. And Marcy, I guess the 4 basis points of NIM pressure from bond reinvestment at 5.5% in 1Q. I guess I don’t understand that. Did I hear that correctly that as you’re remixing the bond portfolio that’s driving incremental margin or maybe you can move slightly?
Kevin Riley: I think the biggest thing is just that the earning asset balance is bigger because first of all, the fair market value adds more to earning assets would really not any more earnings in NII. And then when our forecast before we were looking at bringing down the investment portfolio and reducing earning asset balances. It really doesn’t affect NII, but as you reinvest, you’re not getting that same net interest margin. But NII improves, but the overall margin is impacted by the greater denominator.
Timur Braziler : Got it. And then lastly, Kevin, would love to hear your updated thoughts on M&A with some of the headwinds of ’23 more or less in the rearview, purchase accounting a little bit easier as AOCI becomes less of a headwind. Maybe just give us an update on where you stand with M&A and how that fits into the capital deployment story at First Interstate?
Kevin Riley: That’s a great question, Timur. I would tell you that as you probably have heard from other institutions, I think there’s a lot more conversations that are being had out there. As you always know, we’re very disciplined on our M&A strategy. We have a priority list of institutions that we believe would make our franchise better and we have been in touch with these banks for many, many years. And it’s up to the seller itself. So I think there are more activities out there, but we’re going to stay steadfast to the institutions that we believe will make our franchise better. And if they come and wanted to partner with us, then we’ll probably put something together. But we’re open to do something, but we’re not going to just do something for the sake of doing something.
