FIBK — First Interstate BancSystem, Inc.

Summary of First Interstate BancSystem Inc. (FIBK) Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $83.9 million, or $0.87 per diluted share, up from $60.2 million, or $0.61 per diluted share in Q1 2026.
• Net Interest Income: Increased by $1.5 million (0.7%) to $202.2 million, driven by an expanding net interest margin.
• Net Interest Margin: Expanded for the ninth consecutive quarter to 3.48%, up from 3.43% in Q1 2026 and 3.32% in Q2 2025.
• Noninterest Income: Rose by $20.6 million to $61.7 million, primarily due to a $19.5 million gain from a branch transaction.
• Total Deposits: Decreased by $441.7 million to $21.4 billion, impacted by branch sales and higher customer deposit movements.
• Loan Balances: Declined by $447 million, attributed to increased payoffs, particularly in criticized loans and non-relationship credits.
• Credit Quality: Criticized loans decreased by 9.3% from the prior quarter, and net charge-offs increased to $9.7 million (27 basis points of average loans).

2. Strategic Updates and Business Highlights

• Continued focus on improving long-term earnings power and efficiency.
• Share repurchase program remains active, with approximately 1.9 million shares repurchased in Q2, totaling about $69 million.
• Increased repurchase authorization by $150 million, bringing the total to $450 million.
• Investments in staffing for revenue-generating roles, adding 14 relationship managers year-to-date.
• Enhanced digital engagement and client satisfaction metrics reported as strong.

3. Forward Guidance and Outlook

• Anticipated continued pressure on loan balances due to elevated payoffs, particularly in the commercial loan portfolio.
• Guidance reflects expectations for lower ending loans and a smaller earning asset base, with a forecast for a decline in mortgage production.
• Expected stabilization of earning assets in Q3 2026, with potential for growth in the latter half of the year.
• Confidence in improving return metrics and net interest margin into 2027, driven by fixed asset repricing and improved funding costs.

4. Bad News, Challenges, or Points of Concern

• Loan balances declined more than expected, primarily due to elevated payoffs, which are anticipated to continue through 2026.
• Total deposits decreased significantly due to branch sales and customer movements, impacting the bank's liquidity.
• The company faces challenges in stabilizing earning assets amidst ongoing portfolio management and proactive credit strategies.
• Mortgage production has not met expectations, contributing to a more conservative outlook for the loan portfolio.

5. Notable Q&A Insights

• Management indicated that the majority of loan payoffs were from non-relationship credits, with a focus on maintaining core relationships.
• The company is optimistic about the impact of new relationship managers on future production levels, particularly in diverse regional markets.
• There is a cautious approach to providing guidance for 2027, with management emphasizing the need to see results from recent organizational changes before making definitive forecasts.
• The potential for increased net interest income growth through fixed asset repricing was discussed, with management highlighting the importance of maintaining a strong deposit base.

Overall, while FIBK reported solid earnings growth and strategic initiatives aimed at enhancing shareholder value, it faces challenges with declining loan balances and deposit levels, necessitating careful management of its balance sheet moving forward.