First Interstate BancSystem Q2 Earnings Call Highlights

First Interstate BancSystem posted second-quarter net income of $83.9 million, or $0.87 per share, up from $60.2 million in Q1, helped by a $19.5 million gain from a branch transaction. Profitability continued to improve as net interest margin expanded for the ninth straight quarter to 3.48%, with lower deposit and funding costs offsetting some pressure from reduced earning assets. Loan balances fell $447 million on accelerated payoffs, while deposits declined after the Nebraska branch sale; even so, the bank said credit quality improved, capital remained strong, and it continued repurchases and dividend payments.

First Interstate BancSystem NASDAQ: FIBK reported second-quarter 2026 net income of $83.9 million, or $0.87 per diluted share, compared with $60.2 million, or $0.61 per diluted share, in the first quarter. Results included a $19.5 million gain from a branch transaction completed during the quarter. Management said it continued to prioritize long-term profitability, deposit mix, credit quality and operating efficiency, even as elevated loan payoffs drove a larger-than-expected decline in reported loan balances.

Net interest income rose 0.7% from the first quarter to $202.2 million, supported by net interest margin expansion and an additional accrual day. The increase was partly offset by lower interest-earning assets, including the impact of the branch sale completed in April. Fully taxable equivalent net interest margin rose to 3.48%, from 3.43% in the first quarter and 3.32% a year earlier. The second quarter marked the company’s ninth consecutive quarter of margin expansion. Chief Financial Officer David Della Camera said average loan yields increased two basis points sequentially to 5.62%, while total deposit costs declined three basis points and total funding costs fell four basis points. He also noted that, over the past year, investment-security yields increased to 2.98% from 2.72%, while total deposit costs declined to 1.17% from 1.33%.

“These trends highlight the continued improvement in the underlying profitability of the balance sheet,” Della Camera said.

Loans declined $447 million during the second quarter, reflecting continued reductions in agricultural and residential loans, amortization in the indirect lending portfolio, and higher loan paydowns and payoffs. Management said the increased payoff activity accelerated late in the quarter and was concentrated in criticized loans, secondary-market activity, loans in divested markets and credits considered to have limited relationship value. Chief Executive Officer James Reuter said the company has not pursued near-term balance-sheet growth that would conflict with its relationship-banking strategy. Commercial loan production improved during the quarter, particularly in the Rocky Mountain region, he said, though production was outweighed by payoffs. Della Camera said the company categorizes its out-of-market portfolio at roughly the mid-$600 million level, with approximately $100 million of payoffs from that portfolio during the second quarter. He said most commercial loan payoffs did not affect core relationships. Management expects accelerated payoff activity to continue through the rest of 2026, pulling forward some exits that the company previously expected in later years. The company’s updated outlook incorporates a smaller near-term balance sheet, including additional expected runoff in mortgage, indirect and out-of-market lending categories.