First Interstate BancSystem, Inc.

FIBK Details

First Interstate BancSystem, Inc. (NASDAQ: FIBK) is a community banking-focused financial and bank holding company that offers a variety of banking products and services, including online and mobile banking, to individuals, businesses, municipalities, and others across its market areas through its banking subsidiary, First Interstate Bank. It offers estate and personal trust administration, management of individual investment accounts, employee benefit plans and charity foundations, insurance planning and trust, employee benefit, investment management, agency, and custodial services in Idaho, Montana, Oregon, South Dakota, and Washington, FIBK banking offices, including detached drive-up facilities.

Latest News:

• Conversion of Stock: Before the markets opened for trading on March 25, 2022, FIBK announced that all outstanding shares of its Class B common stock would be automatically converted into Class A common stock on a one-for-one basis. The conversion had no impact on the economic rights of Class A or Class B common stockholders; it simply eliminated the differences in voting powers between the two classes of common stock. The conversion is not expected to impact FIBK's future operations significantly.
• Dividend Declaration: On January 26, 2022, the company declared a dividend of USD 0.41 per common share, payable on February 21, 2022, to shareholders of record on February 10, 2022.

FY21 Results:

• Slight Decline in Net Interest Income: The company reported a decline of 1.77% in net interest income to USD 488.2 million in FY21 (ended December 31, 2021) compared to USD 497.0 million in FY20. Interest income from loans, which constituted 84.93% of the total interest-earning assets in FY21, reduced by 5.17% YoY. The decline in the interest income can be accredited to a decrease of USD 292.90 million in average loan balances, which stood at USD 9.51 billion as of December 31, 2021, complemented by unfavourable average rates.
• Decline in NPAs: As of December 31, 2021, the company’s Nonperforming Assets (NPA) reduced to USD 29.7 million from USD 50.5 million on December 31, 2020.
• Growth in Net Income: In FY21, FIBK reported a net profit of USD 192.1 million, increased from USD 161.2 million in FY20, representing a YoY growth of 19.17% with a diluted EPS of USD 3.11.

Key Risk:

• Geographical Concentration Risk: FIBK primary customers are concentrated in Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming. As a result, any drop in the price of real estate in these key market areas and any unfavourable change in the economy could harm the company's financials.
• Voting Concentration Risk: Members of the Scott family hold a majority of the voting power in FIBK's outstanding common stock. As a result, it has gained significant control over its operations. This constrains the ability of other shareholders to influence corporate decisions.

Outlook:

• FY22 Guidance: In FY22, FIBK believes that its combination of organic and acquisitive growth will provide significant additional value to shareholders.

Valuation Methodology: Price/Book Value Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

FIBK's stock price has fallen 15.20% in the past twelve months and is currently leaning towards the lower end of its 52-week range of USD 36.01 to USD 49.25. We have valued the stock using the Price/Book Value Per Share-based relative valuation methodology and arrived at a target price of USD 43.31.

Considering the correction in the stock price, strong fundamentals, improvement in efficiency ratio, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 38.97, up 0.67% as of March 29, 2022.

Three-Year Technical Price Chart (March 29, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.