Executive Summary

Q4 delivered mixed results: diluted EPS fell to $0.50 from $0.54 q/q and $0.59 y/y as elevated charge-offs ($55.2M; 1.22% annualized) drove a higher provision ($33.7M), while core profitability improved with third consecutive NIM expansion to 3.18% (3.20% FTE; 3.08% adj FTE) .
Funding and liquidity improved: deposits rose $151.5M q/q, other borrowed funds declined $512.5M following the $1.0B BTFP payoff after December’s Fed cut; loan/deposit ratio fell to 77.5% .
Asset quality was mixed: non-performing assets fell 18.6% q/q, but criticized loans jumped to $773.3M, largely from four CRE/C&I relationships; the quarter also included a $49.3M charge-off of a previously disclosed C&I loan with reserve release .
2025 outlook: management guided to +5–7% y/y net interest income, non-interest income modestly higher ex-2024 property gains, non-interest expense +3–5%, NCOs 20–30 bps, and tax rate 23.5–24.0%; deposit growth low-single digits; indirect auto originations discontinued (30–40% amortization of balances over 12 months) .
Wall Street consensus (S&P Global) was not available at time of analysis due to access limits, so beat/miss vs estimates could not be determined (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

Net interest margin expanded meaningfully: NIM rose to 3.18% (FTE 3.20%; adjusted FTE 3.08%), up 17 bps q/q (FTE +16 bps; adj FTE +11 bps), driven primarily by lower funding costs as borrowings declined .
Funding progress: Deposits increased $151.5M q/q, with interest-bearing demand up $233.8M; non-interest-bearing declined $121.4M but overall loan/deposit ratio improved to 77.5% .
Liquidity and capital improved: other borrowed funds dropped $512.5M q/q after paying off the $1.0B BTFP; CET1 increased to 12.16% (+33 bps q/q) .
- CEO on core momentum and deposit-driven strategy: “Net interest margin…expanded… Growth in deposits exceeded our expectations and we were able to…reduce our funding costs.”

What Went Wrong

Elevated charge-offs and provision: NCOs were $55.2M (1.22% annualized), including a $49.3M C&I charge-off; provision rose to $33.7M (vs $19.8M in Q3; $5.4M in Q4’23) .
Criticized loans surged to $773.3M (+28.2% q/q), concentrated in four relationships (largely CRE and a construction/C&I exposure) in the eastern footprint; while NPLs improved, underlying risk grading tightened .
Loan balances contracted $182.2M q/q (broad-based declines ex CRE lifts from construction conversions); non-interest expense rose $1.5M q/q (up in benefits, occupancy, professional fees) .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Net Interest Income ($MM)	207.8	205.5	214.3
Total Non-Interest Income ($MM)	44.5	46.4	47.0
Provision for Credit Losses ($MM)	5.4	19.8	33.7
Non-Interest Expense ($MM)	166.0	159.4	160.9
Diluted EPS ($)	0.59	0.54	0.50
Net Interest Margin (GAAP, %)	2.99	3.01	3.18
Net Interest Margin (FTE, %)	3.01	3.04	3.20
Adj FTE NIM (%)	2.94	2.97	3.08
Efficiency Ratio (%)	64.25	61.85	60.20
L/D Ratio (%)	78.38	78.84	77.53

KPIs and Balance Sheet

KPI / Balance Sheet	Q4 2023	Q3 2024	Q4 2024
Loans HFI ($MM)	18,279.6	18,027.1	17,844.9
Deposits ($MM)	23,323.1	22,864.1	23,015.6
Non-Interest Bearing Deposits ($MM)	6,029.6	5,919.0	5,797.6
Other Borrowed Funds ($MM)	2,603.0	2,080.0	1,567.5
CET1 Ratio (%)	11.08	11.83	12.16
ACL / Loans (%)	1.25	1.25	1.14
NPLs ($MM)	111.3	174.5	141.3
Criticized Loans ($MM)	688.3	603.3	773.3
Net Charge-offs ($MM)	4.8	27.4	55.2
NCOs / Avg Loans (annualized, %)	0.10	0.60	1.22
TBVPS ($)	19.41	20.73	20.16
Dividend per Share ($)	0.47	0.47	0.47

Prior Quarter Context (Q2 and Q3 2024 headlines)

Q2 2024: NIM 2.97%; deposits +$60.7M q/q; non-performing assets down; criticized loans down; NCOs 0.30% .
Q3 2024: NIM 3.01%; deposits essentially flat with an underlying increase; criticized loans decreased but metro office charge-offs elevated; NCOs 0.60% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Income	FY2025	—	Increase 5–7% y/y	New quantitative guidance
Non-Interest Income	FY2025	—	Modestly higher vs 2024, excluding $4.7M 2024 property gains	New qualitative range
Non-Interest Expense	FY2025	—	Increase 3–5% y/y	New quantitative guidance
Effective Tax Rate	FY2025	—	23.5%–24.0%	New quantitative guidance
Net Charge-offs	FY2025	—	20–30 bps of average loans	New quantitative guidance
Deposits	FY2025	—	End-of-year balances up low single digits; normal seasonality	New qualitative guidance
Loans (ex Indirect)	FY2025	—	Modest growth, back-half weighted	New qualitative guidance
Indirect Lending	From Q1 2025	—	Discontinue new originations; 30–40% amortization over next 12 months	Strategic shift
Rate Assumption	FY2025	—	One 25 bps cut in Q2; minimal impact to NII	New assumption
Dividend	Q1 2025 payout	—	$0.47/share declared, payable Feb 20, 2025	Maintained

Note: Management also guided that Q1 2025 adj NIM should expand at a pace similar to/slightly slower than Q4; average interest-earning assets expected in low-$26B; Q1 NII to decline vs Q4 due to day count and Q4 accretion/recoveries .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2024)	Trend
Net interest margin trajectory	Q2: NIM 2.97% (+6 bps); Q3: 3.01% (+4 bps)	NIM 3.18% (FTE 3.20%; adj 3.08%); expansion led by lower funding costs	Improving
Deposits & betas	Q2 deposits +$60.7M; Q3 flat overall but + ex large temp deposit	Deposits +$151.5M; ability to lag down betas; focus on low-cost deposit growth	Stabilizing/improving
Asset quality/criticized loans	Q2/Q3 criticized loans trended down modestly	Criticized loans +$170M to $773.3M; 4 relationships majority of increase; NPA down	Worsening in Q4 (concentration)
Indirect lending strategy	No prior change disclosed	Exiting indirect originations; 30–40% amortization over next 12 months	Strategic pivot
Capital & borrowings	CET1 rising through 2024	CET1 12.16%; BTFP repaid; other borrowed funds -$512.5M q/q	Strengthening/deleveraging
Fee income	Q2/Q3 fee lines stable with property gains	Wealth mgmt +10% q/q; payment services softer; $2.1M property gain	Mixed/modest growth

Management Commentary

CEO strategic focus (prepared remarks): “Full relationship banking will be our main focus… We will align incentives with deposit growth, loan pricing and with new customer acquisition… you can expect the pace of M&A to decline compared to the past decade” .
Portfolio repositioning: “We made the decision to discontinue originations with the indirect lending business… This type of lending does not support our goals of generating organic growth through relationship banking… dilutive to our return targets.” .
Quarter tone: “Net interest margin expanded… Growth in deposits exceeded our expectations… Charge-offs were elevated… driven by a previously reported… C&I loan.” .
Credit process: Third-party review “confirmed the accuracy of our most recent risk ratings and general methodology” for large exposures .

Q&A Highlights

Criticized loan details: Four relationships (~$160M total; largest ~$58M, smallest ~$30M) drove >90% of the increase; largely within the former Great Western footprint; paying on time; no specific reserves established given collateral .
Reserve outlook: Management views reserve levels as adequate; with modest growth and expected NCOs, reserves likely “around here” (stable) absent mix changes .
Loan growth path: 2025 overall loans roughly flattish including indirect runoff; modest growth ex indirect, back-half weighted .
Deposit betas/NIM: Bank expects down betas to lag; deposit beta moving to high-30s in 2025, aiding deposit gathering while NIM expands sequentially .
Nonaccrual interest recovery: ~$1.8M in Q4; atypically high—model assumes zero going forward .
Capital/deployment: Dividend not under review presently; broader capital uses (e.g., buyback) to be addressed with strategic update next quarter .

Estimates Context

S&P Global (Capital IQ) consensus for EPS/revenue was unavailable at time of analysis due to access limits, so we cannot assess beat/miss versus Wall Street expectations. Management did not provide explicit quarterly guidance to benchmark against.
Where estimates may adjust: Given management’s 2025 guidance for +5–7% NII, +3–5% non-interest expense, and NCOs 20–30 bps, sell-side models may lift out-year NIM/NII trajectories but temper loan growth (flattish reported including indirect runoff) and incorporate higher credit costs near term .

Key Takeaways for Investors

Core margin momentum is the bright spot; sequential NIM expansion with falling funding costs and deleveraging should support 2025 NII growth (+5–7%) despite lower average earning assets in early 2025 .
Funding mix is improving: deposits rose and other borrowings fell sharply after BTFP payoff; continued investment portfolio amortization provides further deleveraging capacity in 2025 .
Credit remains the swing factor: criticized loans spiked on four relationships; watch for resolutions/refis (management expects some takeouts in 1H25) and NCO cadence within the guided 20–30 bps range .
Strategic pivot to relationship banking: exiting indirect auto originations should free cash flows for core customers; expect a multi-year efficiency and growth plan update next quarter—potential catalyst for the stock .
Operating leverage watch: efficiency ratio improved to 60.2%; 2025 expense “reset” (+3–5%) and stepped-up marketing aims to support organic growth; monitor trajectory vs. NII ramp .
Capital is ample (CET1 12.16%) and dividend maintained at $0.47; buyback or other capital actions may be addressed with strategy update .
Near-term setup: management flagged Q1 2025 NII down vs Q4 due to day count and outsized Q4 accretion/recoveries; core NIM should still expand sequentially—important for trading expectations into the print .

FIRST INTERSTATE BANCSYSTEM INC (FIBK)·Q4 2024 Earnings Summary