10-Q: First Interstate BancSystem Q1 2026 Earnings: Mixed Results

First Interstate BancSystem reported a net income increase to $60.2 million for Q1 2026, driven by lower provisions for credit losses, though net interest income saw a slight decrease.

Summary

• First Interstate BancSystem, Inc. reported a net income of $60.2 million for the three months ended March 31, 2026, an increase from $50.2 million in the same period of 2025.
• Diluted earnings per share were $0.61 for Q1 2026, up from $0.49 in Q1 2025.
• Net interest income decreased to $200.7 million from $205.0 million year-over-year, primarily due to a decrease in interest and fee income on loans.
• The provision for credit losses significantly decreased to $6.7 million from $20.0 million in the prior year's quarter.
• Total assets decreased by 0.8% to $26.4 billion as of March 31, 2026, compared to $26.6 billion at December 31, 2025.
• Investment securities increased by 5.0% to $8.0 billion.
• Net loans held for investment decreased by 3.1% to $14.7 billion.
• Non-performing assets increased by 17.5% to $162.5 million, primarily due to a single client relationship.
• The company completed the sale of eleven Nebraska branches on April 10, 2026, and closed four additional branches in Nebraska in Q1 2026.
• The company also exited North Dakota and Minnesota in Q1 2026 and opened a new branch in Montana.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral to slightly positive sentiment, with improved profitability driven by lower credit loss provisions being offset by declining net interest income and rising non-performing assets.

Positives

• Net income increased by $10.0 million to $60.2 million in Q1 2026 compared to Q1 2025.
• Diluted earnings per share increased to $0.61 from $0.49 year-over-year.
• Provision for credit losses decreased significantly to $6.7 million from $20.0 million, indicating improved credit quality or reduced expected losses.
• Net interest margin improved to 3.41% from 3.19% year-over-year.
• The company's capital ratios exceed all regulatory requirements to be deemed well-capitalized.
• The company has ample liquidity with $1.2 billion in cash and cash equivalents as of March 31, 2026.
• The company repurchased $84.0 million of its common stock during Q1 2026 under its repurchase program.

Negatives

• Net interest income decreased by $4.3 million to $200.7 million in Q1 2026 compared to Q1 2025.
• Total assets decreased by $213.8 million to $26.4 billion.
• Total deposits decreased by $205.3 million to $21.9 billion.
• Non-performing assets increased by 17.5% to $162.5 million, primarily due to a single client relationship.
• Non-accrual loans increased by $21.3 million to $154.8 million.
• Payment services revenues decreased by $1.5 million, mainly due to lower consumer credit card interchange fees.
• The company exited two states (North Dakota and Minnesota) and closed several branches, indicating a strategic consolidation.

Risks

• The company expects continued volatility in economic markets, potentially including recessionary signs, due to uncertain conditions from changes in U.S. policies like tariffs and geopolitical uncertainty.
• A slowdown, downturn, or recession in the U.S. economy or changes in U.S. trade policies could adversely impact the company's balance sheet and income statement.
• These economic conditions could affect the level of deposits held by clients, potentially leading to higher withdrawal volumes or lower deposit volumes.
• The credit quality of loans may be impacted by adverse economic conditions, potentially resulting in an increase in credit losses.
• The company has $7.8 billion in deposits in excess of FDIC insurance limits, which could be impacted by economic downturns.

Future Outlook

The company expects continued volatility in economic markets, including potential recessionary signs, due to uncertain conditions related to U.S. policies and geopolitical events, which could adversely impact its balance sheet and income statement.

Management Comments

• Our current strategy emphasizes disciplined, relationship-driven organic growth by deepening and expanding client relationships across deposits, lending and fee-based services.
• We continue to execute our strategic plan to refocus capital investment, optimize our balance sheet and improve core profitability, including by prioritizing investment in core markets where we have brand density and attractive growth prospects, optimizing our branch network, emphasizing relationship-based business and disciplined underwriting, and aligning our organization to support timely local decision-making.
• The Company has ample liquidity, and its capital ratios exceed all regulatory requirements to be deemed well-capitalized as of March 31, 2026.
• We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return-on-investment objectives of our shareholders.

Industry Context

StockSavvy.ai notes that First Interstate BancSystem's performance reflects broader trends in the banking sector, including the impact of interest rate fluctuations on net interest margins and the ongoing need for operational efficiency through branch network optimization. The increase in non-performing assets, while concerning, is attributed to a single client, which is a common risk factor for regional banks.

Legal Proceedings

• In the normal course of business, we may be named or threatened to be named as a party in various lawsuits. Management does not expect the ultimate disposition of any or a combination of any such ongoing or anticipated matters to have a material, adverse effect on our business, financial condition, or operating results.

Stakeholder Impact

• Shareholders may see continued volatility due to economic uncertainties and the company's strategic adjustments, but the increase in net income and share repurchases are positive signals.
• Employees may be impacted by branch closures and organizational redesigns aimed at efficiency.
• Customers may experience changes in branch access due to closures and sales, but the company emphasizes relationship-driven growth.

Next Steps

• The company intends to close two branches in Iowa and Oregon at the beginning of the third quarter of 2026.
• The company continues to monitor its interest rate risk exposure and may enter into new derivative contracts in the future.

Key Dates

Recommendation

The company shows improved profitability due to lower credit loss provisions, but this is tempered by declining net interest income and increasing non-performing assets. The outlook is uncertain due to economic conditions. A 'hold' recommendation reflects a balanced view of these factors, suggesting investors await further clarity on economic impacts and the success of strategic initiatives.

Keywords

First Interstate BancSystem, FIBK, 10-Q, Quarterly Report, Financial Statements, Net Income, Net Interest Income, Provision for Credit Losses, Loans, Deposits, Investment Securities, Non-Performing Assets, Capital Adequacy, Stock Repurchase