• Net Income: $52.1 million or $0.50 per share for Q4.
• Deposit Growth: Increased by $151.5 million in Q4.
• Net Interest Margin: Increased 16 basis points to 3.2% in Q4.
• Loan Decline: Loans decreased by $182.2 million in Q4.
• Net Charge-offs: Totaled $55.2 million in Q4.
• Provision Expense: $33.7 million in Q4.
• Dividend: Declared $0.47 per share, yielding 5.8% for Q4.
• Common Equity Tier 1 Capital Ratio: 12.16% at the end of Q4.

• Warning! GuruFocus has detected 8 Warning Signs with FIBK.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Interstate BancSystem Inc (NASDAQ:FIBK) reported a net income of $52.1 million for the fourth quarter, demonstrating stable financial performance.
• The company achieved a deposit growth of $151.5 million in the fourth quarter, indicating successful efforts in deposit acquisition.
• The net interest margin increased by 16 basis points to 3.2%, reflecting effective asset repricing and margin expansion.
• The company reduced its borrowings significantly, with a $1 billion reduction in FHLB advances during 2024, improving its financial flexibility.
• First Interstate BancSystem Inc (NASDAQ:FIBK) declared a dividend of $0.47 per share, maintaining a strong yield of 5.8% for shareholders.

Negative Points

• The company experienced a decline in loan balances by $182.2 million in the fourth quarter, which could impact future revenue growth.
• Higher charge-offs and paydowns of nonperforming loans contributed to an elevated level of provision expense, totaling $33.7 million.
• Criticized assets increased in the fourth quarter, with significant downgrades in the commercial real estate portfolio.
• The company anticipates a modest increase in noninterest expenses in 2025, driven by higher medical insurance costs and advertising expenses.
• First Interstate BancSystem Inc (NASDAQ:FIBK) is discontinuing its indirect lending business, which may impact short-term loan growth and revenue.

Q & A Highlights

Q: Can you provide the spot rate on deposits and borrowings at year-end? A: David Redmon, Chief of Staff & Senior Vice President, stated that the December full month interest-bearing deposit cost was $187 million, slightly higher than the spot at the end of the month. The margin for the month was 310 basis points, excluding purchase accounting. Borrowing costs are expected to step down in January due to maturing higher-rate borrowings.

Q: What caused the increase in criticized assets this quarter, and can you provide details on the four CRE relationships that accounted for 90% of the increase? A: James Reuter, President and CEO, explained that the increase was not due to a third-party credit review but was confirmed by it. The loans are from the Great Western Bank footprint, with no marks against them. Marcy Mutch, CFO, added that the $160 million total of the four loans includes the largest at $58 million and the smallest at $30 million.

Q: What are your thoughts on longer-term targets for the bank, and any updates since you've been on board? A: James Reuter expressed confidence in the bank's strengths, such as a granular deposit base and strong market presence. He emphasized a focus on organic growth and relationship banking. Specific strategic updates will be shared in the near future as they work with the Board on the strategy.

Q: Can you provide guidance on reserves for the year, considering expected loan growth and net charge-offs? A: Marcy Mutch stated that the current reserve level is adequate, assuming similar portfolio growth. They do not expect material changes in reserves based on current trends and anticipate a balanced net charge-off pace throughout the year.

Q: What are your plans for capital allocation, particularly regarding dividends and potential buybacks? A: James Reuter mentioned there won't be a significant departure in capital philosophy. They will remain well-capitalized and evaluate capital use for shareholder returns. Specific guidance on capital allocation, including potential buybacks, will be provided in the next call.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.