First Interstate BancSystem (FIBK) Q3 Earnings call transcript Oct 25, 2024

In the third quarter earnings call for 2024, First Interstate BancSystem provided updates on its financial performance, focusing on its net income, credit quality, and strategic initiatives. With a net income of $55.5 million, or $0.54 per share, the company's earnings showed a slight increase compared to the previous quarter.

Net Interest Margin and Noninterest Income

One of the key highlights of the call was the net interest margin, which increased by 5 basis points to 2.97%, excluding purchase accounting accretion. The company expects this margin to exceed 3% in the fourth quarter. Noninterest income increased by approximately 3%, driven by the sale of one branch and the growth in fee business.

Credit Quality and Charge-offs

Credit quality improved slightly, with criticized and classified loans declining. However, there were notable charge-offs related to the metro-office portfolio, specifically two loans that accounted for approximately 80% of the total charge-offs. The company has taken a proactive approach to address these challenges and is optimistic that significant challenges in the metro-office portfolio are now behind them.

Deposits and Borrowings

Deposits remained essentially flat, with a modest decrease of $6.6 million compared to the prior period. However, when excluding the effect of a temporary outflow, deposits increased approximately 1%. The company also saw a decline in lower-yielding mortgage balances and experienced some seasonality in commercial and industrial balances.

Looking Ahead

Looking ahead to 2025, First Interstate BancSystem is optimistic about margin expansion and expense discipline leading to improved profitability. The company is in the midst of an earnings inflection and anticipates improving results going forward.

CEO Transition

During the call, Kevin Riley, the CEO, announced his retirement and welcomed Jim Reuter, who will be taking over the role. Riley expressed his gratitude to the team and shareholders for their support during his tenure.

Q&A Session

The call included a question-and-answer session with analysts, covering topics such as specific reserves for a C&I relationship, the metro-office portfolio, and the impact of borrowings repricing in the first quarter of 2025. The company provided detailed responses, offering insights into their strategic decisions and financial outlook.

In conclusion, First Interstate BancSystem's third quarter earnings call highlighted the company's financial performance and strategic initiatives. With a focus on improving net interest margin, managing credit risk, and preparing for the future, the company is poised for continued growth and success.