First Interstate (NASDAQ:FIBK) BancSystem Inc. (NASDAQ:FIBK), a $3.33 billion market cap state commercial bank headquartered in Montana, announced on Thursday that it expects to recognize a significant charge-off of approximately $49.3 million for the quarter ending December 31, 2024.
According to InvestingPro analysis, the bank is currently trading below its Fair Value, despite maintaining dividend payments for 15 consecutive years and offering an attractive 5.9% dividend yield. This charge-off is related to a single commercial and industrial loan (C&I Loan) and exceeds the previously held specific reserve of $26.5 million as of September 30, 2024.
The Bank had placed the C&I Loan on non-accrual status earlier in 2024 due to the borrower's deteriorating financial performance and failure to comply with a forbearance agreement. This included the inability to complete an asset sale by the year-end. On Monday, First Interstate initiated legal proceedings against the borrower, seeking the appointment of a receiver and enforcement of loan rights.
A receiver was appointed on an emergency basis on Wednesday, and by Friday, the borrower had agreed under the receiver's control to sell substantially all of its assets. This sale is expected to close later in January 2025, subject to court approval and other closing conditions.
The C&I Loan is secured by the borrower's assets, and the estimated realizable value from the sale is expected to leave First Interstate with an exposure of $13.5 million. The bank is currently unable to determine if further recoveries or charges will be necessary.
In a positive turn, First Interstate also resolved a non-performing agricultural loan from the fourth quarter of 2023, receiving a full payoff of approximately $22.2 million in the fourth quarter of 2024, resulting in no loss for that period.
These developments are expected to reduce the number of non-performing loans in the fourth quarter of 2024, and the bank does not anticipate any significant future cash expenditures related to the C&I Loan enforcement and sale.
The information provided in this article is based on a press release statement from First Interstate BancSystem Inc. and its recent SEC filing, reflecting the company's financial condition and operational results. Investors looking for deeper insights can access the comprehensive Pro Research Report available on InvestingPro, which includes additional analysis of the bank's financial health and future prospects. The company's next earnings report is scheduled for January 29, 2025, where management is expected to provide further updates on these developments.
In other recent news, First Interstate BancSystem reported stable Q3 earnings with a net income of $55.5 million or $0.54 per share. This was accompanied by an improvement in net interest margin and an announcement of a dividend of $0.47 per share. The company also revealed a leadership change with the outgoing CEO Kevin Riley introducing Jim Reuter as the new CEO.
Analyst firms Piper Sandler and Barclays (LON:BARC) revised their earnings per share estimates for the upcoming years, prompting Piper Sandler to reduce its price target to $36 from $38, while Barclays maintained its price target of $32.
DA Davidson upgraded the bank's shares from Neutral to Buy, setting a price target of $42.00, citing the new CEO's appointment as a significant positive development. These recent developments indicate a company navigating transitional periods, with a focus on continued growth and margin expansion into 2025.
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