First Interstate BancSystem Reports Stable Earnings, Strengthening Balance Sheet, and Continued Progress on Strategic Growth Priorities in Third Quarter of 2025
First Interstate BancSystem, Inc. the financial holding company for First Interstate Bank, announced its financial results for the third quarter of 2025, demonstrating stability in earnings, stronger asset quality metrics, and continued progress on strategic initiatives designed to drive sustainable, long-term growth.
For the quarter ended September 30, 2025, the Company reported net income of $71.4 million, or $0.69 per diluted share. This performance was largely consistent with the previous quarter, in which the Company earned $71.7 million, or $0.69 per diluted share. On a year-over-year basis, earnings increased meaningfully from $55.5 million, or $0.54 per diluted share, during the third quarter of 2024. The results reflect a strengthening net interest margin, improved credit performance, disciplined expense management, and a more resilient capital position.
Key Financial and Operational Highlights
- Net interest margin (NIM) rose to 3.34%, improving 4 basis points from the second quarter and 33 basis points compared to the third quarter of 2024.
- Other borrowed funds declined to zero, down from $250.0 million in the previous quarter and $2.08 billion a year earlier, reflecting enhanced liquidity and lower funding costs.
- Non-performing assets (NPAs) decreased to $185.6 million, a 6.0% improvement from the second quarter.
- Net charge-offs fell significantly to $2.3 million, representing an annualized 0.06% of average loans, compared to $27.4 million a year ago.
- Total deposits declined slightly by $25.6 million from the prior quarter and decreased 1.1% year-over-year, reflecting ongoing industry-wide deposit normalization.
- Under its $150 million share repurchase program, the Company repurchased approximately 1.8 million shares, totaling $57.2 million as of late October 2025.
- First Interstate’s Common Equity Tier 1 (CET1) capital ratio improved to 13.90%, reinforcing the strength and flexibility of the Company’s capital position.
James A. Reuter, President and Chief Executive Officer, emphasized the Company’s continued strategic progress and balanced approach to growth.
We continue to execute on our strategic plan, announced earlier this year, to focus on organic growth and leverage our strong balance sheet to support our customers. Our net interest margin continued to improve, and we maintained a clear focus on managing expenses prudently, with a goal to drive long-term, profitable growth. Our strong and flexible liquidity and capital levels provide a solid foundation to drive growth and returns for our shareholders.
Dividend Declaration
On October 28, 2025, the Board of Directors declared a quarterly dividend of $0.47 per common share, payable November 20, 2025, to shareholders of record as of November 10, 2025. Based on the Company’s average closing stock price of $31.11 during the third quarter, the dividend reflects a 6.0% annualized yield, reinforcing First Interstate’s commitment to returning capital to shareholders.
Net Interest Income and Margin Performance
First Interstate generated $206.8 million in net interest income during the quarter, a slight decline of $0.4 million from the second quarter, but an improvement of $1.3 million from the same quarter last year. The year-over-year growth reflects a reduction in interest expense due largely to the significant paydown of borrowed funds, which more than offset lower loan and securities revenue associated with declining balances.
The Company reported continued expansion in net interest margin to 3.34%, compared to 3.30% in the second quarter and 3.01% in the third quarter of 2024. On a fully taxable equivalent basis, net interest margin was 3.36%.
When excluding fair value loan accretion and acquisition-related adjustments, adjusted net interest margin increased to 3.30%, driven primarily by reduced borrowing costs and an improved asset mix. Year-over-year growth in adjusted margin was particularly notable, rising 33 basis points, evidencing the benefit of First Interstate’s focus on strengthening balance sheet composition.
Credit Quality and Provision for Credit Losses
The Company did not record a provision for credit losses during the third quarter, compared to a small provision reduction in the prior quarter and a $19.8 million provision in the third quarter of 2024. The stable provision reflects improving credit trends and a more favorable overall risk profile.
- Net charge-offs declined to $2.3 million, or 0.06% of average loans, down from $5.8 million in the prior quarter and $27.4 million a year earlier.
- Charge-offs were largely offset by recoveries in several categories, supporting the stabilization of credit outcomes.
The allowance for credit losses rose slightly to 1.30% of loans, compared with 1.28% in the prior quarter and 1.25% a year earlier. This level of reserve coverage, combined with strong capital ratios, positions the Company well to absorb potential future credit volatility.
Coverage of non-performing loans improved to 113.0%, reflecting strengthened credit protection and disciplined risk management.
Noninterest Income Trends
Total noninterest income was $43.7 million, up $2.6 million from the second quarter, but down $2.7 million from the same period a year ago.
- Payment services revenue declined from both the prior quarter and prior year due to the outsourcing of the consumer credit card portfolio.
- Wealth management revenue increased quarter-over-quarter, supported by stronger investment activity and advisory fee growth.
- Other income increased meaningfully compared to the prior quarter as valuation adjustments associated with pending branch divestitures flowed through results. However, it declined year-over-year due to a gain on asset sales recorded in the third quarter of 2024, which did not recur.
Expense Management and Operating Efficiency
Total noninterest expense amounted to $157.9 million, up $2.8 million from the prior quarter and down $1.5 million from the prior year.
- Salaries and wages rose modestly compared to the second quarter due to compensation accrual adjustments. Year-over-year declines reflected lower incentive accruals and the absence of prior executive transition-related expenses.
- Employee benefits costs increased slightly from the prior quarter but decreased year-over-year, reflecting lower healthcare costs.
- Occupancy and equipment costs declined slightly quarter-over-quarter but increased year-over-year, largely attributable to higher maintenance and facility-related spending.
- Other expenses rose compared to both periods due to the write-off of issuance costs tied to the redemption of subordinated notes and higher legal and consulting expenditures related to strategic initiatives.
Management emphasized ongoing efforts to balance cost flexibility with strategic investments needed to strengthen banking relationships, technology infrastructure, and customer experience.
Balance Sheet and Capital Strength
Total assets declined to $27.33 billion, reflecting reductions in loans and investment securities, which were used strategically to reduce higher-cost funding sources and bolster capital strength.
- Loans held for investment decreased to $15.83 billion, driven by amortization of the indirect lending portfolio and slower loan demand amid broader market conditions.
- Deposits remained stable quarter-over-quarter, decreasing only slightly. The year-over-year decline of 1.1% remained in line with broader industry deposit normalization.
- Other borrowed funds were fully eliminated, reflecting progress in derisking the funding base.
- Long-term debt declined following the redemption of $100 million in subordinated notes.
The Company continues to maintain a well-capitalized regulatory status, with its CET1 ratio rising to 13.90%, illustrating significant capital resilience.
Credit Quality Improvement
Non-performing assets improved during the quarter due to lower non-accrual loans, and criticized loans declined $38.9 million from the previous quarter due to loan repayments and improved credit migration. Management noted that credit performance trends remain stable, with no material signs of emerging stress across major loan categories.
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