FIBK — First Interstate BancSystem, Inc.

Summary of First Interstate BancSystem, Inc. (FIBK) Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $71.4 million, or $0.69 per diluted share, relatively flat compared to Q2 2025.
• Net Interest Income: Decreased slightly by 0.2% to $206.8 million; however, it increased by 0.6% year-over-year.
• Net Interest Margin: Improved to 3.36% from 3.32% in Q2 2025 and 3.04% in Q3 2024.
• Total Deposits: Decreased by $25.6 million to $22.6 billion.
• Loan Balances: Declined by $519 million, with a loan-to-deposit ratio of 70.1%.
• Credit Quality: Nonperforming assets decreased by 6% to $185.6 million, and net charge-offs were down 60% to $2.3 million (6 basis points of average loans).
• Capital Ratios: Common equity Tier 1 capital ratio rose to 13.9%, up 47 basis points from the previous quarter.

2. Strategic Updates and Business Highlights

• The company is focused on three priorities: capital investment refocusing, balance sheet optimization, and core profitability improvement.
• Recently closed the divestiture of branches in Arizona and Kansas, with plans to sell 11 branches in Nebraska, aiming to streamline operations and enhance market density.
• Investments include opening a new branch in Billings, Montana, and recruiting talent in growth markets.
• A share repurchase program was initiated, with approximately 1.8 million shares repurchased to date.

3. Forward Guidance and Outlook

• Anticipates a decline in loan balances in Q4 2025 due to higher payoffs and muted demand for real estate lending.
• Expects mid-single-digit growth in net interest income for 2026, assuming flat total loans and modest deposit growth.
• Plans to maintain low single-digit expense growth in 2026, incorporating benefits from branch divestitures.

4. Bad News, Challenges, or Points of Concern

• Loan production has been weaker than expected, attributed to increased competition, muted demand for real estate lending, and intentional runoff of nonrelationship loans.
• Anticipated larger loan payoffs could further impact loan balances in Q4.
• The competitive landscape in metro markets is intensifying, making it challenging to achieve desired growth without compromising credit quality.
• The company is cautious about growth, emphasizing disciplined underwriting and risk management.

5. Notable Q&A Insights

• Management expressed optimism about returning to net loan growth in 2026, supported by changes in credit culture and streamlined approval processes.
• The CET1 capital ratio is viewed as healthy, with management open to additional capital return options post-buyback.
• There is a focus on organic growth rather than M&A, with the Board evaluating opportunities that align with shareholder interests.
• Management acknowledged the lag in deposit beta and expects improvement in capturing interest-bearing deposit costs in the upcoming quarters.

Overall, while First Interstate BancSystem is navigating challenges related to loan growth and competitive pressures, it remains committed to its strategic initiatives and is optimistic about future profitability and shareholder value enhancement.