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: Decreased by $0.4 million (0.2%) to $206.4 million compared to Q3 2025, and down $7.9 million (3.7%) year-over-year.
• Net Interest Margin: Improved to 3.34% (excluding purchase accounting accretion), a 4 basis point increase from Q3 2025 and a 26 basis point increase 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, influenced by branch closure costs and severance expenses.
• Credit Quality: Criticized loans decreased by $112.3 million (9.6%), while non-performing assets fell by $47.3 million (26%). Net charge-offs were $22.1 million, driven by one significant credit.
• Capital Management: Returned approximately $138 million to shareholders, including $90 million in share repurchases and a dividend of $0.47 per share.

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 the footprint from 14 to 10 states.
• Organizational Restructuring: Transitioning to a flatter organizational model to enhance decision-making and local responsiveness, with a focus on organic growth.
• Investments in Growth: Building a new commercial banking team in Colorado and opening new branches in Montana, including a relocation in Wyoming.
• Share Repurchase Program: Increased authorization to $300 million, with approximately $118 million executed since August 2025.

3. Forward Guidance and Outlook

• Loan and Deposit Growth: Anticipates low single-digit deposit growth in 2026, with total loans expected to remain flat to slightly lower, influenced by ongoing runoff of the indirect portfolio.
• Net Interest Income: Projected to decline approximately 3% in Q1 2026 due to seasonal factors but expects sequential improvement throughout the year.
• Expense Management: Guidance for 2026 suggests flat to slightly lower expenses compared to 2025, with a focus on reinvestment in growth initiatives.

4. Bad News, Challenges, or Points of Concern

• Loan Production Decline: Loan balances decreased by $632.8 million in Q4 2025, attributed to strategic run-offs and lower production levels, raising concerns about organic growth.
• Competitive Pressures: Increased competition in the market affecting loan production and pricing, which could impact future growth.
• Credit Quality Variability: While criticized loans have decreased, there is uncertainty regarding future credit performance and potential fluctuations in charge-offs.

5. Notable Q&A Insights

• Loan Production Concerns: Management acknowledged that declines in loan balances were partly due to payoffs of criticized loans, but expressed optimism about improved loan production in December and the impact of the organizational redesign on growth.
• Margin Expansion: Management remains confident in achieving a net interest margin above 3.5% by year-end 2026, despite short-term fluctuations.
• Future Growth Strategy: Emphasis on building full banking relationships rather than focusing solely on loan growth, with management indicating that the new organizational structure would facilitate better client engagement and decision-making.
• Credit Quality Management: Management is optimistic about ongoing improvements in credit quality, although they recognize the inherent variability in credit performance.

Overall, FIBK is positioned for cautious growth amid strategic restructuring and optimization efforts, while navigating competitive pressures and maintaining a disciplined approach to credit management.