FIBK — First Interstate BancSystem, Inc.

Summary of First Interstate BancSystem Inc. (FIBK) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $108.8 million, or $1.08 per diluted share, up from $71.4 million, or $0.69 per diluted share in Q3 2025.
• Net Interest Income (NII): $206.4 million, a slight decrease of 0.2% from the prior quarter and a 3.7% decrease year-over-year.
• Net Interest Margin (NIM): Improved to 3.34% (excluding purchase accounting accretion), up 4 basis points from Q3 2025 and 26 basis points from Q4 2024.
• Non-Interest Income: Increased significantly to $106.6 million, primarily due to a $62.7 million gain from branch divestitures.
• Non-Interest Expense: Rose to $166.7 million, including costs related to branch closures and organizational restructuring.
• Credit Quality: Criticized loans decreased by 9.6%, while net charge-offs increased to $22.1 million, driven by one specific credit.
• Dividends: Declared at $0.47 per share, yielding 5.7% based on average stock price.

2. Strategic Updates and Business Highlights

• Branch Optimization: Continued divestitures in Arizona, Kansas, and Nebraska, with plans to consolidate branches in North Dakota and Minnesota, reducing footprint from 14 to 10 states.
• Focus on Organic Growth: Investments in a new commercial banking team in Colorado and new branch openings in Montana.
• Organizational Restructuring: Transitioning to a flatter organizational structure to enhance decision-making and efficiency.
• Share Repurchase Program: Executed approximately $118 million in share repurchases, with an increased authorization to $300 million.

3. Forward Guidance and Outlook

• Loan Growth: Anticipates flat to slightly lower total loans in 2026, with expectations for modest growth in the latter half of the year.
• Deposit Growth: Guidance includes low single-digit deposit growth for 2026.
• NII Expectations: Projected to be approximately 3% lower in Q1 2026 compared to Q4 2025, with sequential improvement expected throughout the year.
• Expense Management: Anticipates flat to slightly lower expenses in 2026, with some increases due to normalization of medical insurance costs.

4. Bad News, Challenges, or Points of Concern

• Loan Production Decline: Loan balances decreased significantly due to intentional run-off of non-relationship loans and branch sales.
• Competitive Pressures: Increased competition impacting loan production and pricing, particularly in the secondary market.
• Credit Quality Variability: While criticized loans improved, net charge-offs remain elevated, indicating ongoing credit risk management challenges.
• Market Conditions: Uncertainty in economic conditions, including mixed signals from the Federal Reserve and job market stability, could impact future performance.

5. Notable Q&A Insights

• Loan Production Concerns: Management acknowledged challenges in loan production and emphasized the importance of disciplined credit management.
• Margin Expansion: Expectations for NIM to improve sequentially, with a target of exceeding 3.5% by the end of 2026, despite short-term fluctuations.
• Credit Quality Management: Proactive measures are in place to manage criticized loans, with confidence in the bank's credit culture moving forward.
• Future Hiring: Plans for continued hiring in growth markets like Colorado, with a focus on building full banking relationships rather than just loan growth.

This summary encapsulates the key points from the earnings call, providing a balanced view of FIBK's financial performance, strategic initiatives, and outlook amid challenges.