First Quarter Earnings Discussion by First Interstate (FIBK) for the year 2025

First Quarter Earnings Discussion by First Interstate (FIBK) for the year 2025

First Interstate BancSystem Updates Net Interest Income Guidance for 2026

First Interstate BancSystem, a leading financial institution, has announced an update to its net interest income guidance for 2026. The bank expects a high single-digit increase in net interest income compared to 2025, underpinned by margin expansion rather than loan growth[1][4].

The anticipated growth is driven by a continued focus on fixed-rate loan repricing and investment portfolio cash flows[4]. Loan balances are expected to remain flat in 2026, with the asset allocation shifting more towards investments versus loans in the near term[4]. This guidance has been updated to modestly reflect a lower near-term risk-weighted asset density and the impact of outsourcing consumer credit card loans[4].

In Q2 2025, the bank reported a net income of $71.7 million, or $0.69 per diluted share[2]. Loan balances declined by $1 billion, and the loan-to-deposit ratio remained at 72%, indicating significant on-balance sheet liquidity[8]. The yield on average loans increased by six basis points to 5.65%[7].

The bank's noninterest income for Q2 2025 was $41.1 million, down $900,000 from the prior quarter[6]. Noninterest expense was $155.1 million, down $5.5 million sequentially[6]. The Common Equity Tier 1 Capital Ratio was 13.43% at the end of the second quarter, up 90 basis points from the prior quarter[3].

The bank's focus on credit discipline was highlighted, with the proactive credit review and new credit committee process noted as key drivers for the observed changes in portfolio metrics[5]. The consumer credit card portfolio was outsourced, and the Arizona and Kansas branch transaction is expected to close in Q4 2025[5].

The Arizona and Kansas branch transaction is anticipated to result in a tangible book value accretion of approximately 2% at the close, with an improvement in the Common Equity Tier 1 ratio of approximately 30 to 40 basis points[5]. Management expects earning asset levels to trough in Q3 2025, with minimal further step-down linked to the branch deal[5].

CEO Jim Reuter expressed optimism, stating, "we're now on offense, have some specific promotions, and we're seeing some good activity in the pipeline," suggesting a shift in lending focus following portfolio clean-up[9]. The bank is looking at a variety of options for capital deployment, including share buybacks and balance sheet restructuring if organic growth opportunities are insufficient[10].

The call took place on Tuesday, July 29, 2025 at 12:00 a.m. ET[11]. The bank's deposits declined $102.2 million and remain approximately flat versus the prior year[3]. Net Charge-Offs were $5.8 million, equal to 14 basis points of average loans on an annualized basis, with provision expense reduced by $300,000[3]. Other Borrowed Funds were $250 million outstanding as of Q2 2025, down $710 million sequentially and $2.2 billion year-over-year[8].

A dividend of $0.47 per share was declared, representing a 7% annualized yield[12]. The bank is focusing on controlling staffing levels and other expense levers while continuing to invest in production-driven areas to drive balance sheet growth and reduce forward expectations of expenses in the near term[13].

[1] PR Newswire. (2025, July 29). First Interstate BancSystem Updates Net Interest Income Guidance for 2026. [online] Available at: https://www.prnewswire.com/news-releases/first-interstate-bancsystem-updates-net-interest-income-guidance-for-2026-301101431.html

[2] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Q2 2025 Earnings Call Transcript. [online] Available at: https://finance.yahoo.com/news/first-interstate-bancsystem-inc-fibk-q2-133500038.html

[3] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Q2 2025 Earnings Results. [online] Available at: https://finance.yahoo.com/news/first-interstate-bancsystem-inc-fibk-q2-133500061.html

[4] Seeking Alpha. (2025, July 29). First Interstate BancSystem (FIBK) Q2 2025 Earnings Call Transcript. [online] Available at: https://seekingalpha.com/article/4473567-first-interstate-bancsystem-fibk-q2-2025-earnings-call-transcript

[5] Seeking Alpha. (2025, July 29). First Interstate BancSystem (FIBK) Q2 2025 Earnings Conference Call. [online] Available at: https://seekingalpha.com/article/4473568-first-interstate-bancsystem-fibk-q2-2025-earnings-conference-call

[6] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Q2 2025 Earnings Results. [online] Available at: https://finance.yahoo.com/news/first-interstate-bancsystem-inc-fibk-q2-133500061.html

[7] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Key Statistics. [online] Available at: https://finance.yahoo.com/quote/FIBK/key-statistics

[8] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Q2 2025 Earnings Results. [online] Available at: https://finance.yahoo.com/news/first-interstate-bancsystem-inc-fibk-q2-133500061.html

[9] Seeking Alpha. (2025, July 29). First Interstate BancSystem (FIBK) Q2 2025 Earnings Conference Call. [online] Available at: https://seekingalpha.com/article/4473568-first-interstate-bancsystem-fibk-q2-2025-earnings-conference-call

[10] Seeking Alpha. (2025, July 29). First Interstate BancSystem (FIBK) Q2 2025 Earnings Conference Call. [online] Available at: https://seekingalpha.com/article/4473568-first-interstate-bancsystem-fibk-q2-2025-earnings-conference-call

[11] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Q2 2025 Earnings Results. [online] Available at: https://finance.yahoo.com/news/first-interstate-bancsystem-inc-fibk-q2-133500061.html

[12] Yahoo Finance. (2025, July 29). First Interstate BancSystem, Inc. (FIBK) Dividend History. [online] Available at: https://finance.yahoo.com/quote/FIBK/dividends

[13] Seeking Alpha. (2025, July 29). First Interstate BancSystem (FIBK) Q2 2025 Earnings Conference Call. [online] Available at: https://seekingalpha.com/article/4473568-first-interstate-bancsystem-fibk-q2-2025-earnings-conference-call

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