First Interstate BancSystem Inc Reports Q1 EPS of $0.49, Missing Estimates; Net Interest Income at $205 Million

Net Income Declines Amid Rising Non-Performing Assets and Criticized Loans

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Apr 29, 2025
Summary
  • Earnings Per Share (EPS): Reported EPS of $0.49, missing the estimated EPS of $0.56.
  • Revenue: Not explicitly provided, but net interest income was $205.0 million, indicating a decrease from the previous quarter.
  • Net Income: $50.2 million, a decrease from $52.1 million in the previous quarter and $58.4 million in the same quarter last year.
  • Net Interest Margin: Increased to 3.19%, up 1 basis point from the previous quarter and 28 basis points year-over-year.
  • Non-Performing Assets: Increased by 36.3% to $198.4 million, primarily due to non-accrual loans in commercial and agricultural real estate.
  • Criticized Loans: Rose by $252.8 million to $1,026.1 million, driven by downgrades in the commercial real estate loan portfolio.
  • Dividend Declaration: A dividend of $0.47 per common share was declared, equating to a 6.1% annualized yield.
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On April 29, 2025, First Interstate BancSystem Inc (FIBK, Financial) released its 8-K filing detailing its financial performance for the first quarter of 2025. The company reported a net income of $50.2 million, or $0.49 per diluted share, falling short of the analyst estimate of $0.56 per share. This represents a decrease from the $52.1 million, or $0.50 per diluted share, reported in the previous quarter and $58.4 million, or $0.57 per diluted share, in the same quarter last year.

Company Overview

First Interstate BancSystem Inc is a financial holding company and the parent of First Interstate Bank, a community bank offering a wide range of banking and financial services across several states including Idaho, Montana, and Wyoming. The company primarily generates income from interest on loans and investments, serving a diverse clientele in industries such as agriculture, construction, and healthcare.

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Performance and Challenges

First Interstate BancSystem Inc's performance in the first quarter of 2025 was marked by a slight increase in net interest margin to 3.19%, up from 3.18% in the previous quarter and 2.91% in the same quarter last year. However, the company faced significant challenges with a 36.3% increase in non-performing assets to $198.4 million and a 32.7% rise in criticized loans to $1,026.1 million. These increases were primarily driven by downgrades in the commercial real estate loan portfolio, posing potential risks to the company's financial stability.

Financial Achievements

Despite the challenges, First Interstate BancSystem Inc achieved a notable reduction in net charge-offs, which decreased by 83.7% to $9.0 million from $55.2 million in the previous quarter. This improvement is crucial for maintaining the company's financial health and reflects effective credit risk management strategies.

Key Financial Metrics

The company's net interest income for the quarter was $205.0 million, a decrease of 4.3% from the previous quarter but a 2.4% increase from the same quarter last year. The provision for credit losses was $20.0 million, down from $33.7 million in the previous quarter but significantly higher than the $5.3 million recorded in the first quarter of 2024. The allowance for credit losses as a percentage of period-end loans was 1.24%, indicating a cautious approach to potential loan defaults.

Balance Sheet and Cash Flow

Total assets decreased by 2.9% to $28,279.8 million from the previous quarter, primarily due to reductions in investment securities and loans. Total deposits also saw a decline of $282.8 million, with noninterest-bearing deposits decreasing by $207.4 million. The company's capital ratios improved, with the common equity tier 1 capital ratio increasing to 12.53%.

Commentary

“We are pleased to see continued improvement in our net interest margin. As expected, net interest margin expanded for the fourth consecutive quarter, and we continue to prudently manage expenses while investing in the future growth of the Company. We are pleased with the continued reduction in our outstanding borrowings, and our balance sheet remains flexible as we move forward. Criticized and non-performing assets increased quarter over quarter, as we continue to take a prudent, proactive approach to credit risk management,” said James A. Reuter, President and Chief Executive Officer of First Interstate BancSystem, Inc.

Analysis

First Interstate BancSystem Inc's first-quarter performance highlights the ongoing challenges in managing credit risk and maintaining asset quality. While the company has made strides in improving its net interest margin and reducing net charge-offs, the increase in non-performing assets and criticized loans could pose significant risks if not addressed. The company's ability to navigate these challenges while continuing to invest in growth will be crucial for its future performance.

Explore the complete 8-K earnings release (here) from First Interstate BancSystem Inc for further details.