First Interstate BancSystem(FIBK) - 2025 Q2 - Quarterly Results

Executive Summary This section provides a high-level overview of the company's financial performance and key operational highlights for the quarter Q2 2025 Financial Performance Overview First Interstate BancSystem, Inc. reported a significant increase in net income and diluted EPS for Q2 2025 compared to both the previous quarter and the prior year, driven by improved net interest margin and prudent expense management | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------- | :-------------- | :-------------- | :-------------- | | Net Income | $71.7 million | $50.2 million | $60.0 million | | Diluted EPS | $0.69 | $0.49 | $0.58 | Key Operational and Financial Highlights The company achieved an improved net interest margin, reduced other borrowed funds, and saw decreases in non-performing assets and net charge-offs, while strategic actions included outsourcing the consumer credit card product and strengthening capital ratios - Net interest margin increased to 3.30% in Q2 2025, an 11-basis point increase from Q1 2025 and a 33-basis point increase from Q2 2024[4] - Other borrowed funds decreased by $710.0 million (74.0%) to $250.0 million as of June 30, 2025, from $960.0 million as of March 31, 2025[4] - Non-performing assets decreased by $0.9 million (0.5%) to $197.5 million as of June 30, 2025, from $198.4 million as of March 31, 2025[4] - Net charge-offs decreased by $3.2 million (35.6%) to $5.8 million, or an annualized 0.14% of average loans outstanding, in Q2 2025[4] - Completed the outsourcing of the consumer credit card portfolio, resulting in the sale of $74.2 million of loans and a $4.3 million gain[4] - Common equity tier 1 capital ratio increased 90 basis points to 13.43% in Q2 2025, primarily due to lower risk-weighted assets[4] Dividend Declaration The Board of Directors declared a quarterly dividend of $0.47 per common share, reflecting an annualized yield of 7.0% based on the average Q2 2025 closing price - A dividend of $0.47 per common share was declared on July 28, 2025, payable on August 21, 2025, to stockholders of record as of August 11, 2025[5] - The dividend equates to a 7.0% annualized yield based on the $26.95 per share average closing price during Q2 2025[5] Financial Performance Analysis This section provides a detailed analysis of the company's financial performance, including net interest income, credit losses, and non-interest income and expenses Net Interest Income Net interest income increased sequentially and year-over-year, primarily due to lower interest expense on other borrowed funds, despite decreases in average loan and investment security balances, with the net interest margin also seeing significant improvement | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Q-o-Q Change | Y-o-Y Change | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :----------- | :----------- | | Net Interest Income | $207.2 million | $205.0 million | $201.7 million | +1.1% | +2.7% | | Net Interest Margin Ratio | 3.30% | 3.19% | 2.97% | +11 bps | +33 bps | | Adjusted Net FTE Interest Margin Ratio | 3.26% | 3.14% | 2.92% | +12 bps | +34 bps | - The increase in net interest income was primarily due to lower interest expense on other borrowed funds, resulting from decreased average balances and rates[6] - Interest accretion from acquired loans contributed $4.2 million in Q2 2025, down from $4.7 million in Q1 2025 and $5.1 million in Q2 2024[7] Provision for Credit Losses The company recorded a reduction in provision for credit losses in Q2 2025, a significant improvement from prior quarters, while net charge-offs also decreased, and the allowance for credit losses as a percentage of loans remained stable year-over-year | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----------------------------------------- | :-------------- | :-------------- | :-------------- | | Provision for Credit Losses | $(0.3) million | $20.0 million | $9.0 million | | Net Charge-offs | $5.8 million | $9.0 million | $13.5 million | | Annualized Net Charge-offs (% of avg loans) | 0.14% | 0.21% | 0.30% | | Allowance for Credit Losses (% of period-end loans) | 1.28% | 1.24% | 1.28% | | Coverage of Non-Performing Loans | 108.0% | 110.5% | 138.4% | - Net loan charge-offs in Q2 2025 were composed of $13.0 million in charge-offs offset by $7.2 million in recoveries[10] Non-Interest Income Total non-interest income decreased due to a significant drop in 'other income,' which included a valuation allowance for loans transferred to held-for-sale, partially offset by a gain from the credit card portfolio sale and increased life insurance proceeds | Category | Q2 2025 | Q1 2025 | Q2 2024 | Q-o-Q Change | Y-o-Y Change | | :------------------------------------- | :-------------- | :-------------- | :-------------- | :----------- | :----------- | | Payment services revenues | $17.8 million | $17.1 million | $18.6 million | +4.1% | -4.3% | | Mortgage banking revenues | $1.8 million | $1.4 million | $1.7 million | +28.6% | +5.9% | | Wealth management revenues | $9.7 million | $9.8 million | $9.4 million | -1.0% | +3.2% | | Service charges on deposit accounts | $6.9 million | $6.6 million | $6.4 million | +4.5% | +7.8% | | Other service charges, commissions, fees | $2.1 million | $2.3 million | $2.1 million | -8.7% | 0.0% | | Other income | $2.8 million | $4.8 million | $4.4 million | -41.7% | -36.4% | | Total Non-Interest Income | $41.1 million | $42.0 million | $42.6 million | -2.1% | -3.5% | - The decrease in other income was primarily due to a $7.3 million valuation allowance for loans transferred to held-for-sale related to the pending sale of Arizona and Kansas branches[12] - Partially offsetting the decrease was a $4.3 million gain from the sale of the consumer credit card loan portfolio and an increase in life insurance proceeds[12] Non-Interest Expense Total non-interest expense decreased both sequentially and year-over-year, mainly driven by lower salaries and wages due to reduced severance and short-term incentive accruals, and a significant reduction in other real estate owned expense | Category | Q2 2025 | Q1 2025 | Q2 2024 | Q-o-Q Change | Y-o-Y Change | | :---------------------------- | :---------------- | :---------------- | :---------------- | :----------- | :----------- | | Salaries and wages | $65.0 million | $68.6 million | $66.3 million | -5.2% | -2.0% | | Employee benefits | $17.9 million | $20.0 million | $16.9 million | -10.5% | +5.9% | | Occupancy and equipment | $18.6 million | $18.7 million | $16.9 million | 0.0% | +10.1% | | Other intangible amortization | $3.4 million | $3.4 million | $3.7 million | 0.0% | -8.1% | | Other expenses | $50.2 million | $49.4 million | $51.1 million | +1.6% | -1.8% | | Other real estate owned expense | $0.0 million | $0.5 million | $2.0 million | -100.0% | -100.0% | | Total Non-Interest Expense | $155.1 million | $160.6 million | $156.9 million | -3.4% | -1.1% | - Salaries and wages decreased primarily due to lower severance and short-term incentive accruals compared to Q1 2025, and lower short-term incentive accruals compared to Q2 2024[14] - Employee benefit expenses decreased sequentially due to lower payroll taxes and long-term incentives, but increased year-over-year due to higher health insurance costs[15] Balance Sheet Analysis This section analyzes the company's balance sheet, focusing on changes in assets, liabilities, and capital ratios Assets Total assets decreased significantly, primarily driven by reductions in investment securities and loans, with funds used to pay down debt and offset deposit decreases - Total assets decreased by $713.4 million (2.5%) to $27,566.4 million as of June 30, 2025, from $28,279.8 million as of March 31, 2025[17] - Total assets decreased by $2,723.1 million (9.0%) from $30,289.5 million as of June 30, 2024[17] Investment Securities Investment securities continued to decline due to normal pay-downs, maturities, and called securities, partially offset by fair market value increases and new purchases | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :---------------------- | :--------------- | :--------------- | :--------------- | :----------- | :----------- | | Investment Securities | $7,312.2 million | $7,503.8 million | $8,401.6 million | -2.6% | -13.0% | - The decrease was primarily due to normal pay-downs, maturities, and called securities, partially offset by a $44.7 million increase in fair market values and $25.7 million in purchases during Q2 2025[18] Loans Held for Investment Loans held for investment experienced a notable decline across most categories, particularly in commercial real estate and consumer loans, influenced by the cessation of indirect loan originations, credit card portfolio sale, and branch sales | Category | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :---------------------------- | :---------------- | :---------------- | :---------------- | :----------- | :----------- | | Commercial Real Estate | $8,750.9 million | $9,196.1 million | $9,054.5 million | -4.8% | -3.4% | | Construction | $1,004.6 million | $1,097.3 million | $1,519.9 million | -8.4% | -33.9% | | Total Real Estate | $12,548.6 million | $13,132.9 million | $13,544.3 million | -4.4% | -7.4% | | Total Consumer | $741.5 million | $886.8 million | $948.8 million | -16.4% | -21.8% | | Commercial | $2,529.9 million | $2,770.6 million | $3,052.9 million | -8.7% | -17.1% | | Total Loans Held for Investment | $16,353.4 million | $17,377.3 million | $18,235.0 million | -5.9% | -10.3% | - The decline in loans was impacted by $73.1 million amortization of the indirect portfolio (originations stopped in Q1 2025), sale of $74.2 million consumer credit card loans, and transfer of $338.3 million loans to held-for-sale for branch sales[20] - The ratio of loans held for investment to deposits decreased to 72.3% as of June 30, 2025, from 76.4% in Q1 2025 and 79.7% in Q2 2024[21] Liabilities Total liabilities decreased, primarily driven by a significant reduction in other borrowed funds, partially offset by an increase in long-term debt due to new subordinated notes issuance, while deposits saw a slight decrease Deposits Total deposits experienced a slight decrease, mainly in interest-bearing savings deposits, while noninterest-bearing deposits also saw a minor reduction | Category | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :---------------------- | :---------------- | :---------------- | :---------------- | :----------- | :----------- | | Noninterest bearing | $5,579.0 million | $5,590.2 million | $6,174.0 million | -0.2% | -9.6% | | Total Interest bearing | $17,051.6 million | $17,142.6 million | $16,696.7 million | -0.5% | +2.1% | | Total Deposits | $22,630.6 million | $22,732.8 million | $22,870.7 million | -0.4% | -1.0% | - The sequential decrease in total deposits was primarily due to an $86.8 million decrease in interest-bearing savings deposits[22] Borrowed Funds and Debt Other borrowed funds significantly decreased, funded by investment securities and loan paydowns, while long-term debt increased due to the issuance of new subordinated notes | Category | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :---------------------------- | :--------------- | :--------------- | :--------------- | :----------- | :----------- | | Securities sold under repurchase agreements | $509.3 million | $528.0 million | $741.8 million | -3.5% | -31.3% | | Other borrowed funds | $250.0 million | $960.0 million | $2,430.0 million | -74.0% | -89.7% | | Long-term debt | $252.0 million | $130.2 million | $383.4 million | +93.5% | -34.3% | - Other borrowed funds decreased by $710.0 million (74.0%) to $250.0 million, funded by cash flows from paydowns and maturities of investment securities and loans[25] - Long-term debt increased by $121.8 million due to the issuance of $125.0 million of subordinated notes in Q2 2025[24] Capital Ratios The company maintained a 'well-capitalized' status, exceeding all regulatory capital adequacy requirements, with capital ratios, particularly the common equity tier 1 capital ratio, showing improvement due to lower risk-weighted assets - The Company is considered 'well-capitalized' as of June 30, 2025, exceeding all regulatory capital adequacy requirements[26] | Capital Ratio | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Common Equity Tier 1 Capital Ratio | 13.43% | 12.53% | 11.53% | | Tier 1 Risk-Based Capital to Total Risk-Weighted Assets | 13.43% | 12.53% | 11.53% | | Total Risk-Based Capital to Total Risk-Weighted Assets | 16.49% | 14.93% | 13.80% | | Leverage Ratio | 9.37% | 9.06% | 8.44% | - The common equity tier 1 capital ratio increased 90 basis points to 13.43% compared to Q1 2025, primarily due to lower risk-weighted assets[4] Credit Quality This section details the company's credit quality, including non-performing assets and classified and criticized loans Non-Performing Assets Non-performing assets saw a slight decrease sequentially, driven by reductions in accruing loans past due, while non-accrual loans remained relatively stable | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :----------- | :----------- | | Non-accrual loans | $192.7 million | $191.9 million | $165.6 million | +0.4% | +16.4% | | Accruing loans past due 90 days or more | $1.4 million | $3.0 million | $2.6 million | -53.3% | -46.2% | | Total Non-Performing Loans | $194.1 million | $194.9 million | $168.2 million | -0.4% | +15.4% | | Other real estate owned | $3.4 million | $3.5 million | $6.7 million | -2.9% | -49.3% | | Total Non-Performing Assets | $197.5 million | $198.4 million | $174.9 million | -0.5% | +12.9% | - Non-performing assets decreased by $0.9 million (0.5%) to $197.5 million as of June 30, 2025, compared to $198.4 million as of March 31, 2025[27] Classified and Criticized Loans Classified loans decreased sequentially, while criticized loans significantly increased, primarily due to downgrades in the commercial real estate loan portfolio | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Q-o-Q Change | Y-o-Y Change | | :----------------- | :---------------- | :---------------- | :---------------- | :----------- | :----------- | | Classified Loans | $458.1 million | $482.5 million | $455.3 million | -5.1% | +0.6% | | Criticized Loans | $1,203.0 million | $1,026.1 million | $618.0 million | +17.2% | +94.7% | - Criticized loans increased by $176.9 million (17.2%) to $1,203.0 million, primarily due to $200.3 million of commercial real estate loan downgrades, partially offset by upgrades, paydowns, and payoffs[28] Non-GAAP Financial Measures The report includes several non-GAAP financial measures, such as tangible common stockholders' equity and adjusted net FTE interest margin ratio, which management uses to evaluate performance and provide investors with a consistent view of organic operations, excluding acquisition-related costs and other unpredictable adjustments - Non-GAAP measures include tangible common stockholders' equity, tangible assets, tangible book value per common share, and various adjusted net FTE interest income/margin ratios[29] - Management believes these non-GAAP measures are useful for investors by complementing regulatory capital ratios and presenting organic continuing operations without regard to acquisition costs and other unpredictable adjustments[30] Forward-Looking Statements The report contains forward-looking statements subject to inherent risks and uncertainties that could cause actual results to differ materially, including regulatory changes, economic conditions, credit quality, interest rate fluctuations, cybersecurity risks, and risks related to acquisitions and competition - Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates, and other important factors that could cause actual results to differ materially[32] - Key risk factors include changes in governmental regulations, negative developments in the banking industry, economic downturns, loan credit losses, changes in interest rates, cybersecurity risks, and risks related to acquisitions[32] - The company does not undertake any obligation to publicly update these statements to reflect actual results, new information, or future events, except as required by applicable laws[34] Company Information This section provides details about the company, including conference call information, a brief overview, and contact information for investor relations Conference Call Details First Interstate BancSystem, Inc. will host a conference call on July 30, 2025, to discuss Q2 2025 results, accessible via telephone and internet, with a replay available for a month - A conference call to discuss Q2 2025 results will be held on Wednesday, July 30, 2025, at 11:00 a.m. Eastern Time[35] - Participants can join by dialing 1-800-549-8228 (access code 98659) or via **www.FIBK.com**[35](index=35&type=chunk) - A replay will be available from July 30, 2025, to August 29, 2025, by dialing 1-888-660-6264 (access code 98659) and archived on the website[35] About First Interstate BancSystem, Inc. First Interstate BancSystem, Inc. is a financial and bank holding company headquartered in Billings, Montana, operating banking offices across 14 states and offering a comprehensive range of banking products and services - First Interstate BancSystem, Inc. is a financial and bank holding company focused on community banking, incorporated in 1971 and headquartered in Billings, Montana[36] - The company operates banking offices in Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming[36] - Through its subsidiary, First Interstate Bank, it provides a comprehensive range of banking products and services to individuals, businesses, and municipalities[36] Contact Information Contact information for investor relations is provided for inquiries regarding First Interstate BancSystem, Inc.'s financial results - Contact: David P. Della Camera, CFA, Chief Financial Officer, at (406) 255-5363 or investor.relations@fib.com[37] Financial Statements This section contains the complete set of financial statements, including consolidated statements of income, balance sheets, and detailed breakdowns of loans, deposits, and credit quality metrics Consolidated Statements of Income The consolidated statements of income provide a detailed breakdown of the company's revenues, expenses, and net income for the second quarter of 2025 and comparative periods - Refer to the table for detailed Consolidated Statements of Income[39] Consolidated Balance Sheets The consolidated balance sheets present the company's financial position, including assets, liabilities, and stockholders' equity, as of June 30, 2025, and comparative period-ends - Refer to the table for detailed Consolidated Balance Sheets[41] Loans and Deposits This section provides a detailed breakdown of the company's loan portfolio by category and deposit composition, highlighting changes over recent quarters - Refer to the tables for detailed Loans held for investment and Deposits composition[43][44] Credit Quality Tables Detailed credit quality metrics, including allowance for credit losses, net loan charge-offs, non-performing assets, and criticized loans, are presented for the current and prior quarters - Refer to the table for detailed Credit Quality metrics[46] Selected Ratios - Annualized This section provides key annualized financial ratios, including profitability, efficiency, and capital adequacy ratios, for the current and historical periods - Refer to the table for detailed Selected Ratios - Annualized[48] Average Balance Sheets The average balance sheets provide a breakdown of average interest-earning assets and interest-bearing liabilities, along with associated interest income/expense and rates, for the three months ended June 30, 2025, and comparative periods - Refer to the table for detailed Average Balance Sheets[52] Non-GAAP Financial Measures Reconciliation This section provides a reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, offering transparency into the adjustments made - Refer to the table for detailed Non-GAAP Financial Measures Reconciliation[54]