First Interstate BancSystem, Inc. Q3 FY2025 earnings call

• Ongoing priorities: refocusing capital investment, optimizing balance sheet, and improving core profitability. • Announced share repurchase authorization and executing it. • Performed state-by-state review, closed branches in Arizona, Kansas, and announced sale of Nebraska branches; plans to close more in Eastern Nebraska. • Made investments in the franchise, like opening a location in Billings, MT and adding talent in growth markets. • Discussed balance sheet trends: loan balances declined due to intentional refocusing, production weaker than expected; credit quality stabilized with nonperforming assets and net charge-offs decreasing. • Divestiture of Arizona and Kansas branches to result in ~$60M pretax gain in Q4, impact on net interest income and expenses; Nebraska branch sale is dilutive to net interest income and reduces noninterest expense. • Financial results: net income $71.4M or $0.69 per diluted share; net interest income $206.8M, noninterest income $43.7M, noninterest expense $157.9M; credit metrics: net charge-offs decreased to $2.3M, criticized loans decreased; balance sheet: loans decreased $519M, deposits decreased $25.6M to $22.6B; regulatory capital ratios increased with CET1 at 13.9%.

No specific product segment financial performance details provided in the transcript.

• Anticipated ~$60M pretax gain in Q4 from Arizona and Kansas divestiture. • Net interest income expected to sequentially improve from Q4 levels into 2026 and 2027. • Expect mid-single-digit NII growth in 2026, with flat loans and modest deposit growth. • Expense growth expected to be low single-digit in 2025, with intentional focus on expenses. • Regulatory capital levels strong, with CET1 ratio at 13.9%, and share repurchase ongoing.

• Factors affecting loan growth: less demand in real estate and construction, higher payoff activity, less construction loan tailwind, and loans going to secondary market. • Competitive pricing pressures affecting production. • Lag in deposit beta impact from rate cuts.

Q: Andrew Terrell asked about loan growth outlook in 2026 and headwinds/tailwinds to balance sheet growth.

A: Jim Reuter responded that loan growth is the #1 focus, mentioned challenges like less demand, higher payoff activity, etc., but sees improved opportunity for growth with changes to credit culture and streamlined approval processes, optimistic for growth in 2026.

Q: Kelly Motta asked about loan production and branch recruiting.

A: David Camera and Jim Reuter answered on loan production trends, and Jim Reuter mentioned recruiting talent in growth markets.

Q: Jeff Rulis asked about credit metrics, including criticized loan size and net charge-offs guide.

A: David Camera said the criticized loan that paid off in October was just over $50M, and the net charge-off guide of 20-30 basis points is a longer-term expectation.

Q: Jared Shaw asked about growth in dense markets and NII guidance.

A: James Reuter and David Camera answered on competitive environment in metro vs. mid/small markets, and NII guidance being mid-single-digit in 2026 with sequential improvement.

Q: Matthew Clark asked about capital and deposit rates.

A: David Camera responded on CET1 target in line with peers and interest-bearing deposit costs in September being 1.8%, with actions to capture deposit beta.

Q: Timur Braziler asked about NII guidance and loan repricing, and M&A.

A: James Reuter and David Camera answered on loan repricing and M&A not being a focus, with focus on organic growth and share repurchase.