First Interstate BancSystem Stock Earnings Reports

First Interstate BancSystem Inc. Overall Financial Performance:

• Net Income: Reported net income was $52.1 million or $0.50 per share, down from $55.5 million or $0.54 per share in the previous quarter.
• Deposits: Increased by $151.5 million in Q4, thanks to improved deposit campaigns and a focus on low-cost deposits.
• Loan Balances: Loans declined by $182.2 million primarily across commercial real estate, resulting in a loan-to-deposit ratio of 77.5%.

Interest Margins:

• Net Interest Margin: Increased to 3.2%, with ongoing asset repricing anticipated in 2025. Excluding purchase accounting, the margin was 3.08%.
• Expectations: Continued margin expansion expected as the bank benefits from lagging deposit rates relative to interest rate cuts.

Credit Quality:

• Criticized Assets: Increased, particularly in commercial real estate, with four loans representing 90% of the increase.
• Provision for Loan Losses: Provision expense of $33.7 million, reflecting charge-offs from non-performing loans.
• Outlook for Charge-Offs: Anticipate net charge-offs of 20-30 basis points in 2025.

Strategic Focus Going Forward:

• Shift in Lending Strategy: The company will discontinue originations in indirect lending (affecting about 4% of loan balances) to prioritize relationship banking and organic growth.
• Organic Growth Emphasis: Management plans to slow M&A activity and focus on improving the deposit base and loan relationships.

Dividend Declaration:

A dividend of $0.47 per share was declared, resulting in a yield of 5.8%.

2025 Guidance:

• Deposits: Expected growth in low-single digits, with more substantial growth anticipated in the second half of the year.
• Loan Growth: Modest growth expected, primarily in the latter half, while some decline may occur in the first half due to loan payoffs.
• Non-Interest Income: Anticipated modest year-over-year increases, driven by treasury management and card products.

Capital Position:

The common equity Tier 1 capital ratio was 12.16% at year-end. Management reassures that capital allocation decisions will focus on maximizing shareholder returns.

Management Outlook:

CEO Jim Reuter emphasized confidence in the bank’s strategic priorities and community-driven approach, highlighting the strength of relationships and potential to unlock value.

Conclusion:

The call conveyed optimism regarding First Interstate BancSystem's strategic shift towards relationship banking, organic growth, and improved credit quality while managing credit risk. Investors should monitor the bank's progress on its initiatives, credit quality metrics, and its ability to maintain margins in a changing interest rate environment.