First Interstate BancSystem (NASDAQ:FIBK) outlined a year of balance sheet repositioning, footprint consolidation, and capital deployment during its fourth-quarter earnings call held Thursday, January 29, 2026. Management said the company took multiple actions in 2025 to improve core profitability and focus on markets where it has “brand density, strong market share, and high potential for growth,” while also stepping up share repurchases and reducing wholesale borrowings.
Strategic actions and footprint changes
Chief Executive Officer Jim Reuter said the company reoriented its footprint during 2025 by announcing branch divestitures in Arizona, Kansas, and Nebraska, outsourcing its consumer credit card product, and discontinuing originations and indirect lending. He added that the bank intentionally allowed certain larger transactional loans to run off in favor of growing full banking relationships that include deposits, loans, and fee-generating services.
In addition, the company plans to close its single branches in North Dakota and Minnesota in the first quarter, consolidating its footprint from 14 states to 10 contiguous states, according to Reuter.
Organizational redesign and growth investments
Reuter said that in the fourth quarter the company began a transformation of its banking organization, moving from a layered regional and market structure to a flatter model. He said new state presidents include a mix of internal promotions and select external hires, with the goal of speeding up local decision-making and aligning the organization with organic growth and return-on-capital discipline. Management expects the redesign to be nearly complete in the first quarter.
To support profitable organic growth, Reuter highlighted investments including building a new commercial banking team in Colorado and opening new branches in Montana. He said the company has a fully operational branch in Columbia Falls and another opening soon in Billings, and is relocating a branch in Sheridan, Wyoming to improve customer service in that market.
Fourth-quarter results lifted by branch sale gain
Chief Financial Officer David Della Camera reported net income of $108.8 million, or $1.08 per diluted share, in the fourth quarter, compared with $71.4 million, or $0.69 per diluted share, in the third quarter.
Net interest income totaled $206.4 million, down $0.4 million (0.2%) from the prior quarter. Della Camera said net interest income was down $7.9 million (3.7%) from the fourth quarter of 2024, primarily due to reduced earning assets and lower yields on earning assets, partially offset by lower interest expense on other borrowed funds. Management attributed a decline in interest-earning assets in the fourth quarter in part to the closing of the Arizona and Kansas branch sale in early October.
Net interest margin improved modestly. The fully tax-equivalent net interest margin was 3.38% in the fourth quarter, compared with 3.36% in the third quarter and 3.20% in the fourth quarter of 2024. Excluding purchase accounting accretion, adjusted fully tax-equivalent net interest margin rose 4 basis points sequentially to 3.34%.
Non-interest income increased to $106.6 million, up $62.9 million from the prior quarter, driven by a $62.7 million gain on sale associated with the Arizona and Kansas divestiture. Non-interest expense was $166.7 million, up $8.8 million from the third quarter. Expenses included $2.3 million of costs tied to branch closures in Nebraska, North Dakota, and Minnesota, as well as $4.2 million in severance largely related to the banking organization redesign and branch closures. Della Camera also cited a $5.6 million increase in incentive accruals compared to the prior quarter.
Credit trends and balance sheet movement
Management said credit quality improved after stabilizing in the third quarter. Reuter reported criticized loans declined $112.3 million (9.6%) in the fourth quarter and non-performing assets fell $47.3 million (26%). However, net charge-offs rose to $22.1 million, up $19.8 million from the prior quarter, driven mainly by one larger credit that already carried an $11.6 million specific reserve. For full-year 2025, net charge-offs were 24 basis points of average loans, which management said aligns with long-term expectations.
On the balance sheet, loans decreased $632.8 million in the fourth quarter, including $62.8 million of continued amortization in the indirect portfolio and $72.5 million moved to held for sale due to the Nebraska branch sale, along with larger loan payoffs that included some criticized loans. Total deposits declined $516.7 million to $22.1 billion at December 31, 2025, driven by the sale of $641.6 million of deposits in the Arizona and Kansas transaction; excluding sold deposits, management said deposits increased during the quarter. The loans-held-for-investment-to-deposits ratio was 68.8% at quarter-end, down from 70.1% in the third quarter and 77.5% a year earlier.
Reuter and Della Camera also highlighted funding and liquidity changes, including reducing other borrowed funds from $1.6 billion at the end of 2024 to zero at the end of 2025.
Capital return and 2026 outlook
Reuter said strategic actions generated capital over the past year, and management emphasized share repurchases as a priority. The company repurchased about 3.7 million shares through year-end for approximately $118 million, including about 2.8 million shares in the fourth quarter for roughly $90 million. The board approved an incremental $150 million authorization, bringing the total to $300 million; management said roughly $180 million of capacity remains under the program.
Della Camera said the company returned about $138 million to shareholders in the fourth quarter through repurchases and dividends, and tangible book value per share rose 2.9% to $22.40. The company declared a dividend of $0.47 per share, which management said equated to a 5.7% annualized yield based on the average closing price during the fourth quarter.
Capital ratios increased during the quarter. The Common Equity Tier 1 ratio ended at 14.38%, up 48 basis points from the prior quarter, while the leverage ratio was 9.61%.
For 2026, management’s guidance includes the impact of the Nebraska branch sale and branch closures while excluding the anticipated gain on sale related to the Nebraska transaction. Key elements included:
- Low single-digit deposit growth for 2026, with normal seasonality.
- Loans expected to be roughly flat to slightly lower for 2026, excluding indirect portfolio runoff, which management said adds an additional 1% to 2% loan decline; loans are expected to decline in the first half and grow modestly in the back half.
- Sequential improvement in net interest margin expected to continue; management said reported net interest income is assumed to be about 3% lower in the first quarter than the fourth quarter level due to fewer accrual days and seasonality.
- Expenses expected to be approximately flat to slightly lower versus reported full-year 2025, with guidance incorporating reinvestment (relationship managers, new branches, higher advertising) and normalization in medical insurance expense; Della Camera said the company’s guidance assumes total 2026 expenses are about 1% higher due to medical insurance normalization.
During Q&A, management reiterated expectations for continued margin expansion, with Della Camera stating the company still sees net interest margin “north of 350 by year-end 2026,” and expects the first quarter net interest margin to be higher than the fourth quarter despite lower reported net interest income. Reuter said loan production was impacted in the short term by credit culture adjustments and organizational changes, but he expressed confidence that the flatter structure and focused footprint can support improved organic growth while maintaining disciplined underwriting standards.
About First Interstate BancSystem (NASDAQ:FIBK)
First Interstate BancSystem, Inc is a bank holding company headquartered in Billings, Montana. Through its principal subsidiary, First Interstate Bank, the company provides a full range of commercial and consumer banking services. Its offerings include business lending, commercial real estate financing, agricultural loans, residential mortgage products, and deposit accounts suitable for individuals, small businesses, and large corporations.
The company traces its roots back to the late 1960s and has grown through a combination of organic expansion and strategic acquisitions across the Western United States.
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