Earnings call transcript: First Interstate BancSystem Q3 2025 earnings beat expectations

First Interstate BancSystem (FIBK) reported its third-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.69, compared to the forecasted $0.62. This represents an 11.29% positive surprise. Revenue, however, fell slightly short of projections at $250.5 million against a forecast of $254.47 million. Following the earnings release, the stock saw a modest increase, closing at $32.25, up 1.09% from the previous close.

Key Takeaways

• EPS exceeded expectations by 11.29%, reaching $0.69.
• Revenue underperformed, coming in at $250.5 million.
• Stock price increased by 1.09% post-earnings announcement.
• Net interest margin improved to 3.36%.
• Strategic branch divestitures and operational efficiency initiatives underway.

Company Performance

First Interstate BancSystem maintained stable earnings in Q3 2025, focusing on optimizing its balance sheet and managing capital efficiently. The company reported a net income of $71.4 million, driven by a slight increase in non-interest income and improved net interest margins. Despite a decrease in loan balances, the company’s disciplined approach to growth and risk management positions it well within the competitive mid-market banking sector.

Financial Highlights

• Revenue: $250.5 million (slightly below forecast)
• Earnings per share: $0.69 (exceeded forecast by 11.29%)
• Net interest income: $206.8 million (0.2% decrease quarter-over-quarter)
• Non-interest income: $43.7 million (increased by $2.6 million)
• Non-interest expense: $157.9 million (increased by $2.8 million)

Earnings vs. Forecast

First Interstate BancSystem’s EPS of $0.69 outperformed the forecasted $0.62, marking an 11.29% surprise. However, revenue fell short, coming in at $250.5 million compared to the anticipated $254.47 million, reflecting a negative surprise of 1.56%. This mixed performance aligns with the company’s historical trend of steady earnings but highlights challenges in meeting revenue expectations.

Market Reaction

Following the earnings announcement, First Interstate BancSystem’s stock price rose by 1.09%, closing at $32.25. This movement reflects a positive investor sentiment, driven by the EPS beat, despite the revenue miss. The stock remains within its 52-week range, indicating stability amidst broader market trends.

Outlook & Guidance

Looking ahead, First Interstate BancSystem anticipates mid-single-digit growth in net interest income for 2026, with flat total loans and modest deposit growth. The company is targeting low single-digit expense growth and continues its share repurchase program with a $150 million authorization. Strategic initiatives include organic growth strategies and focusing on the Rocky Mountain Northwest region for improved growth opportunities.

Executive Commentary

• "We’re not going to chase growth for growth’s sake, but we want to grow, and we’re going to be smart about it." - Jim Reuter, CEO
• "We have a really strong balance sheet. We have liquidity, we have strong capital. It’s a position of strength to operate from." - Jim Reuter, CEO
• "We’re focused on executing on our strategic plan because we’re really confident of our future success." - Jim Reuter, CEO

Risks and Challenges

• Muted real estate lending demand could impact future revenue growth.
• Increased competition in metropolitan markets may pressure margins.
• Potential challenges in maintaining loan growth amidst a soft new construction environment.
• Strategic branch divestitures may affect short-term operational efficiency.
• Macroeconomic pressures could influence consumer and business lending activities.

Q&A

During the earnings call, analysts inquired about loan growth challenges and future opportunities, capital management strategies, and deposit beta expectations. The management addressed these concerns, emphasizing a disciplined approach to growth and risk management, while confirming no immediate plans for mergers and acquisitions.

Full transcript - First Interstate BancSystem Inc (FIBK) Q3 2025:

Conference Call Operator: Good morning, ladies and gentlemen, and welcome to the First Interstate BancSystem Inc. third quarter earnings conference call. At this time, all lines are in listen-only mode, and following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, October 30, 2025. I would now like to turn the conference call over to Ms. Nancy Vermeulen. Please go ahead.

Nancy Vermeulen, Investor Relations, First Interstate BancSystem: Thank you very much. Good morning. Thank you for joining us for our third quarter earnings conference call. As we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes might differ materially from those expressed by those statements. I’d like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the annual report and our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any of the forward-looking statements made today.

A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at fibk.com. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release, and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. Again this quarter, along with our earnings release, we have published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our investor relations website, and if you have not downloaded a copy yet, we encourage you to do so. Please also note that as we discuss our financials today, unless otherwise noted, all of the prior period comparisons will be with the second quarter of 2025.

Joining us from management this morning are Jim Reuter, our Chief Executive Officer, David Della Camera, our Chief Financial Officer, and other members of our management team. Now I’ll turn the call over to Jim Reuter.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Jim, thank you, Nancy, and good morning, everyone, and thank you for joining us on our call today. This continues to be an exciting and busy time at First Interstate BancSystem. Last quarter, I opened the call by stating our three ongoing priorities, which are refocusing our capital investment, optimizing our balance sheet, and improving core profitability. We continued executing on those initiatives in the third quarter. In August, we announced a share repurchase authorization and are actively executing under that plan. As we’ve discussed in prior calls, we are continuing to perform our state-by-state review across the footprint. One of our goals is improving density in areas where we have strong market share and growth potential, which should improve our return on capital over time and drive long-term shareholder value.

As part of this effort, we closed on the previously announced divestiture of our branches in Arizona and Kansas on October 10th and announced the sale of 11 branches in Nebraska the following week. We also will be closing four branches in eastern Nebraska in the first quarter of 2026 to optimize our branch network in those markets. As we look to future growth, we continue to make investments in the franchise, including smaller actions like opening another location in Billings, Montana in early 2026 and adding talent in markets where we see growth opportunities. We look forward to continuing to share incremental progress over coming quarters. Looking at the Nebraska transaction announced on October 16, the 11 branches involved in the sale comprise a total of roughly $280 million in deposits and about $70 million in associated loans.

We were pleased to find a partner whose business strategy fits those locations well. We view this as a positive outcome for our customers, employees, and shareholders. We anticipate this transaction closing at the beginning of the second quarter of 2026, pending required approvals. Altogether, these optimizations further improve density across the footprint while also further streamlining our operations and increasing our average branch size. We remain focused on organic growth as a driver of long-term shareholder value. Our approach will focus on growing full relationships in a disciplined manner. The combination of our strategic actions and slower than expected recent growth has resulted in increasing capital ratios, which we are actively managing to enhance long-term shareholder value. David will cover this in more detail now. We’d like to spend a moment discussing our recent balance sheet trends.

Some of the decline in loan balances is due to intentional refocusing of our production to ensure consistent credit quality and to drive stability and long-term performance. This includes the actions we previously communicated, such as the discontinuation of indirect lending originations, the intentional runoff of some non-relationship loans, and the outsourcing of our consumer credit card product. With that said, production has been weaker than we anticipated over the past couple of quarters. We believe there are a few factors driving this. First, we have seen increased competition for certain deals, with some instances of structures we were unwilling to match and, in recent months, increased pricing competition. While organic growth will always be the top priority, we will do so in a disciplined way to drive long-term stability in our credit and financial results. Second, demand for real estate lending remains muted and new construction activity is soft.

Finally, while activity is picking up, expected production is below replacement levels today in light of known and expected payoff activity. This informs our view of a decline in loan balances in the fourth quarter, which is included in our guidance. This includes some criticized and larger loan payoffs anticipated in the fourth quarter. On the subject of credit, we were pleased to see credit quality stabilize in the third quarter. We believe our proactive approach to credit risk management, disciplined underwriting standards on new production, as well as lack of exposure to national non-traditional lending, positions us well. Non-performing assets decreased $11.9 million, or 6%, to $185.6 million as of September 30, 2025, from $197.5 million as of June 30. Net charge-offs decreased $3.5 million in the third quarter, or 60%, to $2.3 million.

Our largest criticized loan, which totaled just over $50 million, paid off in full at the beginning of October, providing a positive start to the fourth quarter results. Following this payoff, we now have only two customers with balances over $50 million, both of which are pass-rated credits. Credit risk management is an ongoing process within a bank, and while we won’t be providing a specific forecast for criticized loan levels over time, we believe our proactive approach to credit risk management puts us in a good position to continue managing loss content while resolving individual credits. We are optimistic that we will see continued improvement in reported credit levels from here. As noted, our charge-off activity in the third quarter was very muted at 6 bps. We maintain our long-term charge-off guidance of 20 to 30 bps, noting that charge-off activity can fluctuate on a quarterly basis.

With that, I will now hand the call over to David to discuss the results in more detail.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Thanks, Jim. I’ll start with our results for the quarter and then discuss capital. For the third quarter of the year, the company reported net income of $71.4 million, or $0.69 per diluted share, compared to $71.7 million or $0.69 per diluted share. In the second quarter, net interest income decreased $0.4 million compared to the prior quarter, or 0.2%, to $206.8 million. Net interest income increased $1.3 million compared to the third quarter of 2024, or 0.6%, primarily due to a decrease in interest expense resulting from decreased rates and average balances of other borrowed funds. Purchase accounting accretion decreased $0.7 million in the third quarter versus the prior period. Yield on average loans increased 3 basis points to 5.68% in the third quarter. Total deposit costs increased 2 basis points compared to the second quarter, with total funding costs decreasing 5 basis points.

Our fully taxable equivalent net interest margin was 3.36% for the third quarter compared to 3.32% during the second quarter and compared to 3.04% during the third quarter of 2024. Excluding interest accretion from the fair value of acquired loans, the adjusted FTE net interest margin was 3.30%, an increase of 4 basis points from the prior, primarily driven by lower interest expense resulting from decreased borrowings. Non-interest income was $43.7 million, an increase of $2.6 million from the prior quarter driven by a valuation allowance on loans transferred to held for sale in the second quarter and partially offset in that same quarter by the gain on sale from our credit card outsourcing. Non-interest expense was $157.9 million for the third quarter of 2025, an increase of $2.8 million from the prior period.

This includes $1.1 million associated with a property valuation adjustment for a branch included in the Arizona and Kansas divestiture which closed after the end of the third quarter, and $0.7 million of unamortized costs related to the payoff of the 2020 $100 million subordinated note issuance which was paid off in the third quarter. Turning to credit, as Jim mentioned, net charge-offs decreased $3.5 million in the third quarter to $2.3 million, representing 6 basis points of average loans. Total provision for credit losses was zero for the third quarter and criticized loans decreased $38.9 million or 3.2%. Our total funded provision increased to 1.3% of loans held for investment from 1.28% in the second quarter. Moving to the balance sheet, loans decreased by $519 million in the third quarter, which included $66.8 million of continued amortization of the indirect portfolio and larger loan paydowns and payoffs.

Total deposits decreased $25.6 million to $22.6 billion as of September 30, 2025. The ratio of loans held for investment to deposits was 70.1% at the end of the quarter compared to 72.3% at the end of the prior quarter and 78.8% at the end of September in the prior year. Finally, we declared a dividend of $0.47 per common share, which equates to a 6% annualized yield based on the average closing price of the company’s common stock. During the third quarter, our regulatory capital ratios continued to increase with our CET1 capital ratio ending the quarter at 13.9%, an increase of 47 basis points from the prior quarter driven by lower risk-weighted assets. Tier 1 capital was approximately unchanged as retained earnings were utilized to repurchase shares in the quarter.

Before we outline our guidance, we’d like to provide some detail on the impacts we anticipate from the two branch transactions we have discussed. With respect to the Arizona and Kansas divestiture that closed earlier in October, we anticipate recognizing an approximately $60 million pre-tax gain in fourth quarter results. The impact of this transaction is included in our guidance on a go-forward basis. Excluding the impact of the gain, we anticipate the quarterly impact on net interest income to be about $6 million. We anticipate a quarterly ongoing expense reduction versus third quarter levels in the $3.5 to $4 million range, which includes the benefit of some operating efficiencies gained from exiting those two states in their entirety.

Regarding the Nebraska branch sale we have just announced this month, we view this as approximately 1% dilutive to annual net interest income and reducing non-interest expense by about 1% on a run rate basis. Upon closing, we anticipate around 15 basis points of CET1 accretion. Moving to our net interest income results for the quarter and our forward expectations, net interest income was essentially flat quarter over quarter excluding purchase accounting accretion. While modestly lower than our prior expectations, this is reflective of a near-term change in asset composition. We continue to expect sequential improvement in the margin and net interest income from our fourth quarter levels into 2026 and 2027. On that front, we have expanded our fixed and adjustable rate repricing disclosure in the investor presentation to provide 2027 expectations. First, within the earning asset base, we would note a couple of items in the quarter.

As Jim mentioned, loan balances declined more than expected. We were pleased to see sequential improvement in our loan yield as the portfolio continues to reprice over time. As a reminder, just over 20% of the loan book is variable, and we do not have any active swaps within the investment portfolio. Call activity was elevated across multiple security types, including some higher-yielding bank sub debt. Given the significant spread tightening in this type of credit that occurred in the quarter, we reinvested proceeds in lower risk-weighted securities, which, while impacting near-term NII slightly, we view as accretive on a return on capital basis. Additionally, approximately 10% of our investment portfolio is comprised of AAA CLOs, which we hold in the context of our interest rate risk management to provide a natural hedge to our more fixed rate lending book.

During the quarter, as spreads tightened, more than half of these securities were called, and we actively reinvested in the new issuance market. This resulted in both less carry during the quarter as well as an impact on average balances as presented in the margin calculation. As the longer settlement periods resulted in higher average unsettled balances, the impact of higher unsettled securities, while not affecting net interest income, reduced reported net interest margin by about 2 basis points in the quarter. We believe the continued amortization of low-yielding mortgage-backed securities as well as other select maturities in the portfolio will provide us an earnings tailwind as we move through the next few years. While not included on our slide, our 2028-2030 cash flow expectations in the investment portfolio, based upon current market expectations, are roughly $1 billion in each year at around a 2.5% yield in total.

Our current expectation is that about two-thirds of the investment portfolio, excluding the CLO exposure, will cash flow through 2030. On the funding side, we ended the quarter with no other borrowed funds outstanding, a decline of $250 million from the prior quarter. Additionally, we paid our $100 million sub debt issuance in full in August, which had converted to its variable rate prior to being called. This will provide additional benefit to the cost of funds in the fourth quarter as compared to the third quarter. Our interest bearing deposit costs increased 3 basis points in the third quarter as we experienced select customer movement into higher yielding products ahead of the anticipated Fed rate cut. This activity resulted in deposit costs modestly higher than our prior expectations in the quarter, but we believe it was prudent to protect key relationships during the quarter.

We did take steps to capture interest bearing deposit beta in the fourth quarter. We have reduced our offered CD rate by 55 basis points from the level on June 30 and anticipate seeing the benefit of this reduction beginning in the fourth quarter and more meaningfully in 2026. We have also proactively managed our exception pricing book, shortening duration in preparation for Fed moves and providing more immediate flexibility in managing deposit costs, with the initial benefit of this action occurring in October. We are optimistic for a slightly higher beta in the coming quarters than we experienced in recent periods as we look to 2026. While we will provide more explicit guidance on our January call, we wanted to provide some commentary today. We have intentionally managed the balance sheet to what we view as a mostly neutral position, which we feel is prudent over a long horizon.

As we think about the impact of Fed cuts to our net interest income, the ability of the bank to move interest bearing deposit costs lower will be a key factor. We have taken an intentional approach to thoughtfully achieve the necessary beta and early results are positive. With that said, we would acknowledge there will be some lag in beta in the near term from the anticipated fourth quarter annualized level, which includes the impact of the Arizona and Kansas divestiture. We anticipate net interest income expansion around mid single digits in 2026, assuming approximately flat total loans and modest deposit growth. On the expense side, our current expectation is to keep expense growth to a low single digit increase over the anticipated full year 2025 level. Moving to capital, we are making balance sheet decisions with a long term view to enhance returns and shareholder value.

As we continue to communicate, our long-term strategy remains focused on generating well-priced organic growth within our markets where we have brand density and are well positioned to serve the needs of our customers. In addition to the strategic actions to date that have successfully generated capital in recent periods, risk-weighted assets have declined more than anticipated. While we look to drive growth, we will do so in a disciplined manner, ensuring that assets placed on the balance sheet are accretive to our return profile. With that in mind, regulatory capital levels are strong and continue to improve. As we have previously stated, we do not intend to hold excess capital. In August, we announced a share repurchase authorization and began executing shortly thereafter. This included entering into a 10b5-1 plan in early September.

We have repurchased about 1.8 million shares through October 28, or about 1.7% of common shares outstanding. We believe that the current valuation of our equity does not reflect the long-term fundamental earnings power of the franchise, given the meaningful gap to market rates in our investment portfolio as well as an expectation for improving core spread between our loan yields and deposit costs over time. As a result, we view share repurchases as our immediate capital allocation priority in addition to our ongoing focus on organic growth, which provides us the opportunity to drive EPS growth and excess net income growth. Now I’ll turn the call back to Jim.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Thanks, David. We continue to execute on our strategic plan to focus on organic growth and leverage our strong balance sheet to support our customers. One year in, I would like to reflect on what we have achieved as a team since arriving here in November of 2024. Over the past year, we have shifted our company to focus solely on organic growth and relationship banking. We have completed a deep dive on credit management that has brought about stability, positioning us for performance in various economic scenarios. We have exited non-relationship businesses and exited transactional loans. We have made significant progress assessing our branch footprint, exiting markets that do not make sense for our organic growth strategy and focusing investments in areas where we have strong share and growth opportunities.

We have taken capital freed up by these efforts and are returning it to our shareholders through share repurchases with a goal of creating long-term shareholder value. These efforts have positioned us for an exciting future as we look to 2026. I would like to open up the call for questions.

Conference Call Operator: Thank you, ladies and gentlemen. We’ll now begin the question and answer session. Should you have a question, please press the star followed by one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Andrew Terrell from Stephens. Please go ahead.

Andrew Terrell, Analyst, Stephens: Hey, good morning. Maybe just to start on the loan growth outlook. I appreciate the 4Q guidance and 2025 has been somewhat of a transition year, I guess. I’m just curious, as you look at it at 2026, do you think you’re in a position to return to net loan growth? Can you talk about the opportunities and the headwind to getting the balance sheet back to net growth?

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah, good morning Andrew, this is Jim. That’s a good question. Loan growth is our number one focus as you pointed out based on the trends, and I touched on some of this in the call. We’ve seen some challenges here in the last quarter, just less demand, both real estate and construction. We also had some higher payoff activity associated with non-relationship loans and their loan types that we’re not interested in renewing. The other thing, there’s just been less construction loan tailwind funding as we’ve originated fewer construction loans the last couple of years, and we also had some loans go to the secondary market. Your questions on the go forward, we do see improved opportunity for growth. We’ve made a number of changes to our credit culture, and the team’s comfortable with that new playbook.

In fact, we also just implemented some streamlined approval processes because speed to market matters. We actually just had four meetings where we got the teams together in Boise, Billings, Denver, and Omaha with a real focus on business development, growing the pipeline. We’re in the process of determining our goals for 2026, and there are incentives tied to these goals. What you measure is what you move, which includes not only loan growth, but also deposits. We’ve been intentional about setting us up for growth, refocusing the footprint and prioritizing our deployment of capital, as well as putting in a risk culture to support smart growth. We’re now on the offense, and given our growth communities and strong balance sheet, we’re optimistic about our growth in 2026. Great.

Andrew Terrell, Analyst, Stephens: I appreciate that. Jim, if I could ask, just on capital, you know, your CET1 has built pretty materially over the past year or so, and I think given the guidance and the branch downs, the fourth quarter should continue to build pretty nicely in the near term. You’ve got the buyback that you’re active on currently, but $150 million on the buyback doesn’t feel like it moves the needle a lot relative to the capital that you’ve built. I guess the question is, should we expect you to get more active on the buyback front or are you interested in securities restructuring transactions? Two thirds of the bond book sounds like cash flows before 2030, but that’s a decent ways out.

Timur Braziler, Analyst, Wells Fargo: Would you.

Andrew Terrell, Analyst, Stephens: Would you entertain a securities restructuring with the excess capital?

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Hey, Andrew, good morning. I think I’ll take that question backwards and start with the securities restructure. If you think about our recently announced buyback and kind of how we’re thinking about our capital priorities, we don’t view that as our priority right now. We think the tailwind, the combination of those cash flows and then the tangible book value accretion we’ll get over the next few years, we think that’s meaningful. Our focus right now isn’t on the securities restructure, it’s on the repurchases. To your point, the $150 million, it moves us towards our objectives, but there is optionality there. Whether it’s organic growth accretive to our return profile or additional return of capital to shareholders, that’s what we’ll be looking at as we execute that buyback. Like we said, we’re not intending to hold excess capital.

As we get through that buyback, we’ll obviously look and see what makes sense at that time and then consider additional repurchases if it makes sense at that time. Obviously, we manage capital through a few different lenses, looking at our capital ratios, holding company bank regulations, bottom up, build market assessment, all those things you’d expect. Our current analysis does indicate we have healthy capital levels relative to those lenses. We’ll be looking at additional actions as we go forward based on the facts and circumstances.

Andrew Terrell, Analyst, Stephens: Perfect. Thank you for taking the questions.

Conference Call Operator: Thank you. Your next question comes from Kelly Mata from KBW. Please go ahead.

Kelly Mata, Analyst, KBW: Hi, good morning. Thanks for the question. I appreciate the preliminary outlook for mid single digit NII growth next year. I’m just wondering if you could help us kind of put together. You get great disclosures on the roll off, but where new loan originations have been coming on, and if you could, I know that your commentary mentioned that it’s been a bit slower than you’ve expected. If you could size kind of what production has been this quarter and the past couple, that would be helpful as we look forward. Thank you.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Morning, Kelly. I think from a yield perspective, we’ve talked in the past that the five-year point of the curve is where we’re most sensitive from a new production standpoint. That’s, of course, come down a little bit in recent periods. If you look at pricing over the third quarter, we saw roll on July and August was higher than September.

Timur Braziler, Analyst, Wells Fargo: Right.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Kind of moving into the sixes into September, it’s going to depend on composition, of course, what those loans look like, what the types are, etc. Given where the five year is, anywhere from kind of low sixes to high sixes depending on, I know it’s a wide range, but kind of depends on where the curves are and what the composition looks like. I think Jim talked a little bit about production. There’s obviously a gap today between that and flat loans. I think that’s kind of how we would size that.

Kelly Mata, Analyst, KBW: Got it. That’s helpful. Your guidance here implies some additional larger payoffs as you look ahead to 2026. Is there any way to size kind of how much more of a headwind could come from some of this intentional runoff which results in a smaller balance sheet but is prudent from a risk-adjusted perspective. Thank you.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: I think we’ve been pretty intentional about that in 2025. It doesn’t mean more won’t occur as we go forward and we look at individual loans, but we feel like we’ve done a good job making our way through that process and we feel like we’re getting closer to where we’re comfortable from that perspective.

Kelly Mata, Analyst, KBW: Okay, that’s super helpful. Last question to close the loop on loans and production. Jim, you’ve mentioned now you have these branch sales to kind of redistribute some.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Of.

Kelly Mata, Analyst, KBW: The expense base and capital to where you see better opportunities for growth. Can you speak to anything you’ve done on the recruiting side and the opportunity there as you look ahead? Thank you.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah, as you mentioned, we’ve continued to refocus the footprint and reinvest where we see growth opportunities. Yes, we have acquired some talent in Colorado in specific because we see opportunities there. We’ve also just seen some additional opportunities in that Rocky Mountain Northwest part of our footprint, a little bit more activity. Yes, to answer your question, we recruited talent and I’ve been player coach on the ground as well.

Kelly Mata, Analyst, KBW: Great. Thanks for all the color. I’ll step back.

Conference Call Operator: Thank you. Your next question comes from Jeff Rulis from D.A. Davidson. Please go ahead.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Thanks.

Jeff Rulis, Analyst, D.A. Davidson: Good morning. A couple questions on credit. Wanted to first ask if you’ve got the size or the balance of that criticized loan that paid off in October.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Yeah. The October payoff on that criticized loan was just over $50 million.

Jeff Rulis, Analyst, D.A. Davidson: Okay, great.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Thanks, David.

Jeff Rulis, Analyst, D.A. Davidson: Just to kind of course correct on the net charge-offs, I think you’ve got about 13 basis points year to date and you’ve mentioned a couple of times muted and continue to reiterate 20% to 30%. Is that visibility on some of the credits that you’re running through? I just want to know, is that a historical years out or is it the 20% to 30% kind of in the next six to nine months type of guide?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Yeah, good question, Jeff. I think the way we think about our charge-off guide is that’s kind of our longer-term expectation given our loan book has a smaller consumer portion, it’s less consistent. A quarterly basis and charge-offs are going to be driven of course by unknown actions as well as resolution of credits on a quarterly basis. There might be volatility on a quarterly basis. Obviously, we’ve seen positive results year to date, but we think 20 to 30 is the right long-term expectation there.

Jeff Rulis, Analyst, D.A. Davidson: Okay, so nothing like a Q4 specific. Something’s coming down the pike that you’re happy to operate below that, but you’re just going to kind of put that guide out there. Is that fair to say?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Yeah, it’s going to depend on resolution of specific credits. Right. We’re not specifically guiding to any individual resolutions, but there could be quarters where there’s higher or lower figures depending on activity in that quarter.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Thanks.

Jeff Rulis, Analyst, D.A. Davidson: Did you guys have a classified assets number linked quarter? I didn’t see it in the release.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: I think it’s kind of midway through the release, up very slightly on a reported nominal basis there.

Jeff Rulis, Analyst, D.A. Davidson: Sorry, last question. Just on the margin, appreciate slide 9 and the earning asset yield. Quite a bit of roll off here coming on loans and securities. I don’t know if you’d hazard a sort of a terminal margin level other than you’ve guided towards upwards in the near term, but as you kind of exit 2026, is there a broader range that you think you kind of settle in at? That’s a lot of loans, a lot of securities coming off at below market rates. Just want to kind of, obviously, execution on the deposit side as you mentioned. Any thoughts on the margin as we exit 2026?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: The mid single digit flat loan guide would imply a north of $350 million ex purchase accounting exit rate through 2026, kind of around that $350 million for the full year and then an exit north of that. It is obviously going to depend on the curves and the level of loan and deposit growth. That is kind of what that would imply. We think our long term margin can be higher than that. You can look at the historical performance as well as just the current yield on the investment portfolio. That is kind of how we think about that.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Jeff, David touched on this in the opening comments, but we’ve also shortened the duration of exception priced deposit relationships and things just in anticipation. If we have further rate cuts, we have flexibility and can be nimble there as well.

Jeff Rulis, Analyst, D.A. Davidson: Appreciate it.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Thank you.

Conference Call Operator: Thank you. Your next question comes from Jared Shaw from Barclays Capital. Please go ahead.

Jared Shaw, Analyst, Barclays Capital: Hey guys, good morning.

Andrew Terrell, Analyst, Stephens: Good morning.

Jared Shaw, Analyst, Barclays Capital: Can you hear me?

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yep. Good morning, Jared.

Kelly Mata, Analyst, KBW: Sorry.

Jared Shaw, Analyst, Barclays Capital: Hey, just going back to the growth discussion and your focus on, I guess you could call it better markets or more dense markets. How does that sort of match up with your commentary on pricing and terms becoming more difficult? Jim, in the past you talked about the attractiveness of Denver and your background there, but it feels like from just hearing other banks that’s a target for a lot. Do you see the competitive environment moving in your direction where you’re going to be able to actually execute on some of that desire to grow in those markets, or do you think you end up having to change some of the parameters?

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: I can just tell you in general, and I think this holds true probably across everybody’s footprint. It’s more competitive in metro markets than it is mid and smaller markets. We have a pretty strong presence in mid and smaller markets. The thing is, Jared, we’ll remain disciplined. I touched on it in the opening that we’ve seen some efforts from a competition standpoint on structure and pricing. Those are 100% risk weighted assets, and they’re rated at that level for a reason. You want to be disciplined. We’re not going to chase growth for growth’s sake, but we want to grow, and we’re going to be smart about it because in these times, I think that chasing growth for growth’s sake isn’t a good decision either.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Okay.

Jared Shaw, Analyst, Barclays Capital: Just looking at David’s commentary about sort of flat loans after a bit of a.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Decline in fourth quarter, then your.

Jared Shaw, Analyst, Barclays Capital: About optimistic for growth in 2026, what’s the optimistic for growth in 2026? Is that production in sort of the early stages, or as we move through the year, maybe that growth increases.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Jerry, I’ll take the first half and then turn to Jim for the second half of the question. I think just on that 2026 discussion we had in the prepared remarks, our intent there was to help with our view of 2026 if loans were flat. That isn’t necessarily a loan guide at the current time, but that’s kind of our view of the underlying replacement pricing of the balance sheet.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah. Jared, on the reason for the optimism in 2026, I mentioned we just went on the road and there was a number of us executives that did that and met with the teams, brought everybody together, which hasn’t happened for a few years, and got them in the same room. I can see the talent, I’ve met all the talent out on the road. Getting everybody in a room together, sharing ideas, best practices, what’s working, and talking about the importance of growth makes a difference. We are in relationship banking, both internal and external. I look at that and then I just look at, you know, you look at our balance sheet, it is a really strong balance sheet. I mean, we have liquidity, we have strong capital. It’s a position of strength to operate from.

You combine that with the core low cost funding source, I just think we’re in a really good position for 2026.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Okay, thanks.

Jared Shaw, Analyst, Barclays Capital: Maybe shifting to the expenses, David, I guess the guide for next year is low single digit growth in expenses versus the full year 2025. That includes the benefits from the branch divestitures. Should we be looking, or is there an expectation for positive operating leverage in 2026? Are there any investment initiatives in systems or technology or maybe even incrementally new branches as you go through the year that’s included in that?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Yeah, a couple things I think to be clear on that. Low single digits. It’s low single digits. Right. We’re very focused on expenses and we’re being careful and thoughtful, and investment’s important and we’re continuing to make investments. There are some branches we’re adding. We mentioned branches in the prepared remarks. It’s a thoughtful approach as we wait to see that growth come. Broadly, yes, there is an expectation for improved operating leverage.

Jared Shaw, Analyst, Barclays Capital: Great, thank you.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah. Jared, we’re going to be, you know, until we see the growth, we’re going to be very disciplined, as David mentioned, on expenses. The same goes with our capital levels. I mean, if absent organic growth, you know, we already talked about the authorization for a stock buyback. You know, we will continue to make sure we’re enhancing shareholder return.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Thanks.

Conference Call Operator: Thank you. Your next question comes from Matthew Clark from Piper Sandler. Please, go ahead.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Hey, good morning. Thanks for the questions. First one for me, just on capital.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: You mentioned you don’t want to.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Hold excess capital, but your CET1 is 13.9%. What do you view as your CET1 target and how quickly can you get there? Yeah, I think it’s a good question. I think capital levels lag balance sheet a little bit. Right. When you see these type of changes in risk weighted assets, I think, from a target perspective, we’d kind of guide you from a CET1 perspective more in line with the peers in the near term. I talked before about kind of our process.

Timur Braziler, Analyst, Wells Fargo: Right.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: That does imply a significant amount of optionality.

Timur Braziler, Analyst, Wells Fargo: Right.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Which I mentioned earlier as well. You know, the $150 million starts to move us in that direction. There is optionality for us to consider additional return of capital and grow organically. We feel like we’re in a good position to continue to enhance returns. Okay.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Do you have the spot.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Rate on deposits at the end of September? Yeah. Interest bearing deposit costs in September were 1.8%. Like we said before, we’ve seen some positive movement into October as it relates to capturing data, but 1.8% interest bearing was the September spot. Okay. Your core loan yields were up three basis points, I think, to 5.68%.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Because what’s your view of the core.

Jeff Rulis, Analyst, D.A. Davidson: Loan yield outlook with the back book.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Repricing, you know, next year and assuming the forward curve plays out? Yeah, it’s a good question. Obviously, timing of rate cuts matter, 20% of the loan, but a little over 20% is variable. Each cut is about five basis points in immediate change in loan yield. Next year or over the next 12 months, if there’s, you know, four or so cuts, we think that probably broadly will offset a lot of the expansion. Right. Which is kind of how we talked about in the context of expanding spread between loans and deposits. What’s helpful in this environment to us is we do get that back book repricing, which helps offset some of that rate impact as rates move. Obviously, the five year is important as we think about that repricing, but we see it as an improving core spread story. Okay, great, thanks again.

Conference Call Operator: Thank you. Your next question comes from Timur Braziler from Wells Fargo. Please go ahead.

Timur Braziler, Analyst, Wells Fargo: Hi, good morning. Trying to tie the NII guidance for next year to the deposit side. It looks like deposit betas in 3Q ticked down a little bit as cost of deposits went up by 0.02%. I think in your ALCO disclosure the assumption is a 31% beta almost immediately on future cuts. Cycle to date beta is closer to 12% I guess. How do you calibrate those two? As you talk about 2026 NII, which beta assumption are you guys using?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: Yeah, Timur, I’ll take that in a couple different responses. I think to your point, we have seen lower beta to date than we would have expected, and we talked about that a little bit in our prepared remarks. We think from here, given some of the actions we’ve taken and we’re seeing that in October so far, we anticipate capturing a higher beta than that. We do, when we talk about the lag, that is a lag to that expected longer-term beta, right. I think where you see that lag is a little over 10% of our deposits are CDs, and those, of course, lag. The vast majority reprices in a 12-month period; around 7 months is kind of where we see most of our activity there, but that lags. We think that impact starts coming more meaningfully in 2026 as we see those rates come down.

Our guidance does assume some lag in deposit beta versus our expectation for a more 12-month period.

Timur Braziler, Analyst, Wells Fargo: Okay. I guess kind of some of the branch sales and the balance sheet movements, is it fair to say that much of the NII growth is kind of back end loaded next year?

David Della Camera, Chief Financial Officer, First Interstate BancSystem: We think of it sequentially. Yes, that’s how we think of it. The Q4 and our guidance includes the impact of the branch sale, the Arizona and Kansas branch sale. That does step down the near term, and then we see it as sequential through 2026. Q1 is always a lower NII period for us, just given the two fewer days and just how our loans accrue. Yes, we view it as sequential through the year.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Okay.

Timur Braziler, Analyst, Wells Fargo: On the loan side, I asked this last quarter as well, but it looks like low teens of outstanding loans reprice or reset over the next 12 months. Last quarter I asked if this was an opportunity or a potential threat. It seems like production at least now, to your point, is below replacement levels.

David Della Camera, Chief Financial Officer, First Interstate BancSystem: I guess.

Timur Braziler, Analyst, Wells Fargo: How are you thinking of that? Of those resets, reprices kind of over the next 12 months, is there incremental optimism that production starts to pick up, and if that’s the sense, maybe just give us a little bit of color as to what asset classes you see picking up and absorbing some of those loan runoffs.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah, Timur, that’s a good question. You know, the asset classes. I think one of the strengths of the bank, I’ll start with that, is the diversity of our balance sheet. I mean, our footprint lends to that. You’ll see we see opportunities in C&I as well as CRE, and as far as backfilling what will be maturing and coming up, there was more intentional runoff this year of things that just didn’t fit the profile of what we wanted to do on an ongoing basis as well as some large transactional loans. There’s less of that in 2026. When you combine that with production that I think we can achieve in 2026, I think you’ll see a return to some loan growth. Great, thanks.

Timur Braziler, Analyst, Wells Fargo: If I could just one more on M&A maybe, you know, you had some of the BMO branches were in your footprint. I’d love to hear your thoughts around, you know, how that played out and if that was something that you guys were potentially looking at and then maybe from the other side. Can you just take us inside the boardroom? I know there’s been a lot of change with, you know, Class A, Class B, share dissolution over the last years and social family ownership.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Can you just give us some thoughts?

Timur Braziler, Analyst, Wells Fargo: As to how the board is thinking about the franchise and if they’re at all open to potentially partnering with another institution and taking advantage of some of this recent M&A activity?

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Yeah, Timur, as we’ve stated in our earnings calls from day one, we’re focused on organic growth and believe our brand density and branch network in the growing markets combined with our strong balance sheet give us the growth opportunities in front of us. M&A is not something we’re focused on, and absent near term growth, given our current valuation, we’re going to buy back stock, but we’re focused on executing our strategic plan and around organic growth. Our board takes their fiduciary responsibility seriously. Anything that would come our way, they would certainly evaluate to look at what’s best for shareholders. We’re focused on executing on our strategic plan because we’re really confident of our future success.

Timur Braziler, Analyst, Wells Fargo: Great.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: Thanks for the questions.

Conference Call Operator: Thank you. There are no further questions at this time. Mr. Jim Reuter, you can continue.

Jim Reuter, Chief Executive Officer, First Interstate BancSystem: All right, thank you. Thank you everybody for your questions today. As always, we welcome calls from our investors and analysts. Please reach out if you have any follow up questions, and thank you for tuning into the call today. Have a good day.

Conference Call Operator: Ladies and gentlemen, this concludes today’s conference call. We thank you very much for your participation.

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