DEF 14A: First Interstate BancSystem Announces 2025 Annual Meeting and Executive Compensation Details

First Interstate BancSystem's 2025 proxy statement outlines key proposals for the annual meeting, including director elections, executive compensation approval, and auditor ratification, while detailing the company's financial performance and governance practices.

Summary

• First Interstate BancSystem, Inc. will hold its annual shareholder meeting on May 20, 2025, to vote on the election of four directors, approve executive compensation, and ratify the appointment of Ernst & Young LLP as the independent auditor.
• In 2024, First Interstate reported net income of $226.0 million, or $2.19 per diluted share.
• The company's ROAE was 6.92% and ROATCE was 10.95%.
• The book value per share was $31.59 and the tangible book value per share was $20.16.
• During 2024, the company paid $1.88 in total dividends per share, representing approximately 87% of net income.
• The company provided nearly $7.1 million to communities through donations and grants to support hunger, houselessness, Native American Community Development efforts, mental health initiatives, and more.
• The Board is divided into three classes with staggered three-year terms.
• Jeremy P. Scott has been nominated as a new director, designated by the Scott Family.
• The company's executive compensation program emphasizes pay for performance and aligns with long-term shareholder value.
• The company's compensation committee has retained Pearl Meyer & Partners as an independent compensation consultant.
• The company's clawback policy allows for recoupment of erroneously awarded incentive-based compensation.
• Marcy D. Mutch will retire as CFO at the end of 2025, transitioning to Executive Advisor.
• James A. Reuter was appointed as President and Chief Executive Officer, effective November 1, 2024.
• Kevin P. Riley retired as President and Chief Executive Officer, effective November 1, 2024.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights positive financial performance and community involvement, it also acknowledges challenges such as higher charge-offs and declining deposit balances. The executive transitions and compensation details are presented neutrally.

Positives

• The company demonstrated a commitment to returning capital to shareholders, paying $1.88 in total dividends per share in 2024.
• The company actively supports its communities, providing nearly $7.1 million in donations and grants in 2024.
• The company has a strong corporate governance program, with independent directors chairing all board committees and regular executive sessions of independent directors.
• The company's executive compensation program is designed to align with shareholder interests and discourage excessive risk-taking.
• The company has a clawback policy in place to recoup erroneously awarded incentive-based compensation.
• The company's board is committed to diversity and inclusion.

Negatives

• The company experienced higher charge-offs in 2024, with net charge-offs of $104.5 million, or 0.57% of average loans outstanding.
• Deposit balances declined modestly in 2024.

Risks

• The company faces cybersecurity risks, which are expected to remain high across the financial sector.
• The company's business is subject to extensive laws and regulations, and changes to such laws can significantly affect how it operates.
• The company's success depends on its ability to attract, retain, and motivate talented and experienced executives.
• The company's performance is subject to various economic and market conditions, including interest rate risk, credit risk, and liquidity risk.

Future Outlook

The Board and the Governance and Nominating Committee regularly review the size and composition of the Board. Following the 2025 annual meeting and after considering the director changes discussed above, the Board and the Governance and Nominating Committee intend to evaluate whether to appoint one or more directors to the Board to fulfill the vacancies on the Board resulting from the resignations of Thomas E. Henning and James R. Scott and the decision by Frances P. Grieb not to stand for re-election at the annual meeting or whether to reduce the size of the Board pursuant to a resolution of the Board in accordance with the Companys bylaws, subject in each case to the rights of the Scott Family pursuant to the Scott Family Stockholder Agreement.

Industry Context

The document provides insight into the compensation practices and governance structure of a regional bank, which can be compared to those of its peers in the KBW Regional Banking Index (KRX Index).

Comparison to Industry Standards

• The document references the KBW Regional Banking Index (KRX Index) as a peer group for performance comparisons, particularly in relation to Total Shareholder Return and Adjusted Return on Average Equity.
• The company's compensation committee uses peer benchmarking analysis provided by Pearl Meyer & Partners to set executive compensation levels.
• The peer group consists of commercial banks or bank holding companies with geographic, operational, and business model characteristics similar to the Company and are traded on major national securities exchanges with total assets between 50% and 200% of our total assets.
• Specific comparable companies listed include Ameris Bancorp, Old National Bancorp, Associated Banc-Corp, Pacific Premier Bancorp, Inc., BankUnited, Inc., PacWest Bancorp, Cadence Bank, Pinnacle Financial Partners, Inc., Columbia Banking System, Inc., Prosperity Bancshares, Inc., Commerce Bancshares, Inc., Simmons First National Corporation, F.N.B Corporation, SouthState Corporation, Fulton Financial Corporation, UMB Financial Corporation, Glacier Bancorp, Inc., United Bankshares, Inc., Hancock Whitney Corporation, and Valley National Bancorp.

Management Changes

Corporate Governance

Related Party Transactions

• Certain executive officers, directors, and greater than 5% shareholders of the Company and certain entities and individuals related to such persons had transactions with the Company in the ordinary course of business.
• These parties were deposit clients of the Bank and incurred indebtedness in the form of loans, as clients, of $5.1 million and $11.1 million at December 31, 2024 and 2023, respectively.
• In 2024, the Company sold its share of an airport hangar used by the Company in conjunction with the use of its airplane for $0.4 million to an entity in which James R. Scott indirectly owned a one-third interest at the time, which sales transaction was ratified by the Governance and Nominating Committee as contemplated under the Companys Related Person Transaction Policy.
• Pursuant to the terms of the Riley Transition Agreement, as of his Separation Date of January 1, 2025, Mr. Riley continues to provide advisory and consulting services to the Company and is paid a monthly consulting fee of $70,833.

Stakeholder Impact

• Shareholders will have the opportunity to vote on key proposals at the annual meeting.
• Employees may be affected by changes in executive leadership and compensation programs.
• Communities benefit from the company's philanthropic support.
• Customers may be impacted by the company's financial performance and strategic decisions.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The Board and Governance and Nominating Committee will evaluate whether to appoint new directors or reduce the size of the Board following the annual meeting.
• The company will continue to monitor and mitigate cybersecurity risks.
• Marcy D. Mutch will transition to Executive Advisor after May 31, 2025, and continue consulting services through December 31, 2026.

Key Dates

Keywords

executive compensation, annual meeting, corporate governance, financial performance, board of directors, proxy statement, First Interstate BancSystem, directors, compensation, audit