First Interstate BancSys (NASDAQ:FIBK) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://events.q4inc.com/attendee/796780658
Summary
First Interstate BancSys reported net income of $60.2 million, or $0.61 per diluted share, for Q1 2026, a decrease from the prior quarter due to lower net interest income and non-interest income.
The company completed a major redesign of its banking organization, aiming to streamline operations and enhance customer experience, along with branch network optimization including closures and new openings.
Credit quality remained stable, with a modest increase in non-performing loans driven by a single credit issue; however, net charge-offs decreased significantly.
The company remains focused on disciplined growth, with an emphasis on relationship banking, digital channel investments, and leveraging AI for strategic initiatives.
Guidance anticipates sequential improvement in net interest margin and modest loan growth in the back half of the year, with continued share repurchases as a priority.
Full Transcript
Dennis (Conference Operator)
Hello and thank you for standing by. My name is Dennis and I will be your conference operator today. At this time I would like to welcome everyone to the First Interstate BancSys first first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. I would now like to turn the call over to Nancy Vermeulen. Please go ahead.
Nancy Vermeulen
Thanks very much. Good morning and thank you for joining us for our first-quarter earnings conference call. As we begin, please note that the information provided during this call will contain forward looking statements and actual results or outcomes might differ materially from those expressed by those statements. I’d like to direct all listeners to read the cautionary note regarding forward looking statements contained in our most recent Annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the Annual report and our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward looking statements are included in the earnings release and in our SEC filings and the Company does not undertake to update any of the forward looking statements made today. A copy of our earnings release which contains non-GAAP financial measures is available on our website at fibk.com information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. Again this quarter, along with our earnings release, we’ve published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our Investor Relations website and if you have not downloaded a copy yet, we encourage you to do so. Please also note that as we discuss our financials today, unless otherwise noted, all of the prior period comparisons will be with the fourth quarter of 2025. Joining us from management this morning are Jim Reuter, our Chief Executive Officer, David Delacamera, our Chief Financial Officer and other members of our management team. Now I’ll turn the call over to Jim Reuter.
Jim Reuter (Chief Executive Officer)
Jim thank you Nancy and thank you for joining us on our earnings call today. In the first quarter of 2026, we completed the redesign of our banking organization which was a major step forward in the ongoing strategic focus on full relationship banking. This, along with the expansion of our teams in key markets such as Colorado, is translating into an increase in production as we move into the second quarter. As a reminder, we initiated the redesign in the fourth quarter of last year with the intent of changing our banking organization from a layered structure to a flatter, more streamlined model resulting in a better client experience. We completed the transition in the first quarter successfully integrating top performers from within the company with exceptional external talent to create a more agile structure focused on delivering the full capabilities of the bank. We remain focused on disciplined earning asset growth, supporting earning asset repricing to drive the value inherent in our best in class deposit base. Over the course of 2025, we began reorienting our branch network to geographies that have high growth potential for us, which entailed divestitures of some of our lower density markets and planned branch openings in areas where we have opportunities to gain market share. We completed the previously announced consolidations of four branches in eastern Nebraska, the closures of the single branches in Minnesota and North Dakota, and the opening of an additional branch in Montana in the first quarter. On April 10 after quarter end, we completed the sale of 11 branches in rural Nebraska and later in the month completed a major upgrade of our branch location in Sheridan, Wyoming. We are currently consolidating two locations in Iowa and Oregon which will close early in the third quarter. We have made significant progress optimizing our branch network in the past 18 months and while we believe most of the large activity is behind us, branch optimization will always be an ongoing process to ensure we can serve our customers most effectively and efficiently. Our overall objective is disciplined growth, placing assets on the balance sheet that are accretive to our return profile as we work to unlock the underlying value in our balance sheet. As we focus our capital investment in 2025, we initiated a share repurchase authorization and have purchased about 6 million shares since announcing the program last August. We continue to see value and share buybacks and are in a position to return capital as well as grow organically. Turning to Credit in the first quarter of 2026, credit quality was generally stable with a modest decline in criticized loans. We experienced a modest increase in non performing loans that was driven by one individual credit net charge offs were 6 basis points of average loans. In addition to efforts to optimize our physical branch network mentioned earlier, we are also investing in digital channels to meet customers where they are, whether that be in a branch or online. We have made improvements to our online account opening experience and our Zelle peer-to-peer service. Both of these changes have produced positive results that are supporting our efforts to attract and retain customers. In addition, we are making investments in our management of data to ensure we are able to leverage new technologies and integrate the use of AI, which are key to many of our strategic initiatives. Finally, we brought a new marketing partner on board in the first quarter and this firm is now developing a creative campaign across consumer and business platforms. Given that the transformation at First Interstate is now visible in our footprint, our balance sheet, and our delivery of first class services and products, the timing is right to increase brand presence. You will begin to see that across our footprint over the summer months. And now I will hand the call over to David to discuss our results and our guidance in more detail.
David Delacamera (Chief Financial Officer)
David thanks Jim. I’ll start with our results for the quarter. The company reported net income of $60.2 million, or $0.61 per diluted share in the first quarter compared to $108.8 million, or $1.08 per diluted share in the fourth quarter. Net interest income decreased by $5.7 million compared to the prior quarter, or 2.8% to $200.7 million. This was driven primarily by fewer accrual days in the first quarter compared to the fourth quarter, a reduction in earning assets due mostly to seasonally lower deposits, and a reduction in the yield on earning assets due to fourth quarter rate movement. These impacts were partially offset by a reduction in the cost of interest bearing liabilities. Yield on average loans decreased 7 bps to 5.60% and total deposit costs declined 10 bps compared to the prior quarter. Total funding costs decreased 8 bps compared to the fourth quarter and results were broadly in line with our initial expectations. Shared on the prior earnings call. Our fully tax-equivalent net interest margin was 3.43% for the first quarter compared to 3.38% during the fourth quarter and to 3.22% during the first quarter of 2025. This is the eighth consecutive quarter in which we have seen margin expansion and we continue to anticipate sequential expansion over the near and medium term. Non interest income was $41.1 million, a decrease of $65.5 million from the prior quarter. The decline was driven by a gain on sale of $62.7 million associated with our divestiture from Arizona and Kansas and a $1.4 million gain from the sale of certain equity securities, both of which were recognized in the fourth quarter. The remainder of the decline was generally driven by seasonality in our fee businesses, including payment services. Non interest expense was $157.6 million for the first quarter of 2026, a decrease of $9.1 million from the prior quarter. Severance expense totaled $1.3 million during the quarter and was primarily related to the redesign of the banking organization and branch closures. As a reminder, fourth quarter results included $4.2 million in severance expense, $2.3 million in expenses related to the pending branch closures, and a $1.2 million reversal related to the FDIC special assessment. Accrual results this quarter benefited from medical expense favorability to expectations as well as an OREO valuation adjustment which benefited expenses by just over $1 million. We continue to exhibit discipline across expense categories while reinvesting in areas to support accretive organic growth, including the addition of relationship managers and increased advertising expense which is included in our forward expense guidance. Moving to the balance sheet, loans decreased by $473.2 million in the first quarter, which included $58.1 million of continued amortization of the indirect portfolio and a decline in agricultural loans as well as loan paydowns and payoffs. Total deposits decreased $205.3 million to $21.9 million as of March 31, 2026. Year over year, excluding the impact of the Arizona and Kansas sold deposits, deposits were little changed. Our deposit performance in the first quarter reflected what we view as normal seasonality and was modestly favorable to our initial expectations. We effectively captured beta on our interest bearing deposits with the cost declining 12 bps compared to the prior quarter. The ratio of loans held for investment to deposits was 67.3% at the end of the quarter compared to 68.8% at the end of the prior quarter and 76.4% at the end of the first quarter of the prior year. As a note, the previously disclosed sale of 11 branches in Western Nebraska that closed in April contained approximately $244 million in sold deposits. Turning to credit, net charge offs decreased by $19.7 million in the first quarter to $2.4 million or 6 bps of average loans. Total provision for credit losses was $6.7 million in the first quarter. Criticized loans decreased $18.6 million, or 1.8% from the prior quarter. Our total funded Provision increased to 1.33% of loans held for investment from 1.26% in the fourth quarter. The increase in coverage this quarter broadly …
This post was originally published here
