Executive Summary

Q3 2025 diluted EPS was $0.69, flat sequentially and up 27.8% YoY; total revenue of $250.5MM (net interest income + noninterest) rose modestly QoQ; EPS beat consensus, while revenue modestly missed. The net interest margin expanded 4 bps QoQ to 3.34% .
Credit continued to stabilize: net charge-offs fell to 0.06% annualized, non‑performing loans declined 6.1% QoQ, and ACL coverage rose to 1.30% of loans; other borrowed funds fell to zero, further de‑risking the balance sheet .
Strategic footprint optimization advanced: AZ/Kansas branch sale closed Oct 10 (~$300MM loans, ~$645MM deposits transferred), and sale of 11 Nebraska branches announced (early 2026 close). Company executed $57.2MM in buybacks through Oct 28 under a $150MM authorization and declared a $0.47 dividend .
Q4 2025 guidance: NII $203–$205MM, noninterest income $42–$44MM (ex‑gain), noninterest expense $155–$157MM; ending loans ~ $15.5B and deposits modestly >$22B; tax rate 23.5–24.0% for FY25; long‑term NCO guide maintained at 20–30 bps .
Near‑term stock narrative catalysts: margin expansion, zero wholesale borrowings, capital return via buybacks, and a ~$60MM pre‑tax gain expected in Q4 from the AZ/Kansas transaction; offset by loan balance runoff and competitive pricing pressure on new production .

What Went Well and What Went Wrong

What Went Well

Margin expansion continued: NIM rose to 3.34% (+4 bps QoQ, +33 bps YoY), with adjusted FTE NIM up 4 bps QoQ, driven by lower funding costs as borrowings fell to zero .
Credit stabilization: net charge‑offs dropped to $2.3MM (0.06% annualized), non‑performing loans fell to $182.2MM (‑6.1% QoQ), and criticized loans declined by $38.9MM QoQ .
Strategic capital deployment: $57.2MM of buybacks through Oct 28 and $0.47 dividend; management emphasized ongoing focus on organic growth, balance sheet optimization, and capital efficiency. “Our strong and flexible liquidity and capital levels provide a solid foundation to drive growth and returns for our shareholders,” said CEO Jim Reuter .

What Went Wrong

Loan balances declined $519MM QoQ (planned runoff of indirect lending, larger paydowns/payoffs); management guided to further decline in Q4 before an anticipated sequential rebuild in 2026 .
Competitive environment pressured new production (pricing/structure) and muted real estate demand; management remained disciplined, which constrained near‑term asset growth .
Noninterest expense increased $2.8MM QoQ (property valuation adjustment and unamortized costs tied to subordinated note payoff), while deposit costs ticked up ahead of anticipated Fed cuts, modestly higher than prior expectations .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Diluted EPS ($)	$0.49	$0.69	$0.69
Net Interest Income ($MM)	$205.0	$207.2	$206.8
Noninterest Income ($MM)	$42.0	$41.1	$43.7
Net Interest Margin (%)	3.19	3.30	3.34
Efficiency Ratio (%)	63.64	61.10	61.68
Net Charge‑offs (% avg loans, annualized)	0.21	0.14	0.06
ACL / Loans (%)	1.24	1.28	1.30
Non‑performing Loans ($MM)	$194.9	$194.1	$182.2

Segment/noninterest income breakdown:

Noninterest Income ($MM)	Q1 2025	Q2 2025	Q3 2025
Payment services revenues	$17.1	$17.8	$16.8
Mortgage banking revenues	$1.4	$1.8	$1.5
Wealth management revenues	$9.8	$9.7	$10.4
Service charges on deposit accounts	$6.6	$6.9	$7.0
Other service charges, commissions, and fees	$2.3	$2.1	$2.1
Other income	$4.8	$2.8	$5.9
Total Noninterest Income	$42.0	$41.1	$43.7

Key balance sheet and capital KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
Loans Held for Investment ($MM)	$17,377.3	$16,353.4	$15,834.4
Deposits ($MM)	$22,732.8	$22,630.6	$22,605.0
Other Borrowed Funds ($MM)	$960.0	$250.0	$0.0
Long‑term Debt ($MM)	$130.2	$252.0	$146.2
Loan/Deposit Ratio (%)	76.44	72.26	70.05
CET1 Ratio (%)	12.53	13.43	13.90
Total RBC Ratio (%)	14.93	16.49	16.62

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Income ($MM)	Q4 2025	n/a	$203–$205	New
Noninterest Income ($MM)	Q4 2025	n/a	$42–$44 (ex‑AZ/KS gain)	New
Noninterest Expense ($MM)	Q4 2025	n/a	$155–$157	New
Ending Deposits	FY 2025	n/a	Modestly >$22B	New
Ending Loans	FY 2025	n/a	~$15.5B (decline in Q4)	New
Effective Tax Rate	FY 2025	n/a	23.5%–24.0%	New
Long‑term Net Charge‑offs	LT	20–30 bps	20–30 bps (maintained)	Maintained
Dividend per Share	Q3 2025	$0.47 (historical)	$0.47 declared	Maintained

Additional guidance/context from call:

~$60MM pre‑tax gain expected in Q4 from AZ/Kansas sale; ongoing quarterly NII headwind ~$6MM and expense reduction ~$3.5–$4MM from exiting those states .
Management anticipates sequential margin/NII expansion through 2026, with mid‑single‑digit NII growth in 2026 under flat loans/modest deposit growth assumptions; deposit beta actions underway (CD rates reduced by 55 bps, shorter exception pricing duration) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1/Q2 2025)	Current Period (Q3 2025)	Trend
Balance sheet optimization / wholesale funding	Large reduction in other borrowed funds; BTFP paid off in Dec 2024; OB funds down to $960MM (Q1) and $250MM (Q2)	Other borrowed funds reduced to zero; sub debt payoff reduced funding costs	Continued de‑risking
Footprint changes / branch sales	Announced AZ/Kansas divestiture in April; preparing loans held for sale in Q2	Closed AZ/Kansas sale Oct 10; announced sale of 11 NE branches (early 2026 close)	Executed and expanded optimization
Credit normalization	NPA and criticized loans rose in Q1; stabilization noted in Q2 with NCOs down	NPLs declined 6.1% QoQ; NCOs muted at 6 bps; largest criticized loan (~$50MM) paid off in Oct	Improving
Margin trajectory	NIM expansion each quarter; adjusted FTE NIM +6–12 bps QoQ in Q1/Q2	NIM 3.34% (+4 bps); adjusted FTE NIM +4 bps; expect further expansion into 2026	Positive, but paced
Loan growth outlook	Production below replacement; indirect lending discontinued; loan runoff in Q1/Q2	Guided decline in Q4; building pipeline with disciplined pricing; optimistic for growth in 2026	Near‑term headwind, medium‑term cautious optimism
Deposit beta / pricing	Deposit cost management ongoing; cost of funds peaked	CD rate reduced by 55 bps; shortening exception pricing duration; targeting higher beta as cuts arrive	Positioning for cuts
Capital returns	Dividend maintained; CET1 up 37–90 bps in Q1/Q2	Buybacks at $57.2MM through Oct 28; CET1 13.90%; optionality for more repurchases	Increasing capital efficiency

Management Commentary

CEO strategic focus: “We continue to execute on our strategic plan… focus on organic growth and leverage our strong balance sheet… Our strong and flexible liquidity and capital levels provide a solid foundation to drive growth and returns for our shareholders” .
CFO on Q4/AZ-KS impact: “We anticipate recognizing an approximately $60 million pre‑tax gain in fourth quarter results… excluding the impact of the gain… quarterly impact on net interest income to be about $6 million. We anticipate a quarterly ongoing expense reduction… $3.5 to $4 million” .
CFO on deposit beta actions: “We have reduced our offered CD rate by 55 basis points from the level on June 30… We have also proactively managed our exception pricing book, shortening duration… providing more immediate flexibility in managing deposit costs” .
CEO on 2026 growth: “We’re now on the offense… given our growth communities and strong balance sheet, we’re optimistic about our growth in 2026” .

Q&A Highlights

Loan growth and pipeline: Management acknowledged slower production and competitive pricing but emphasized disciplined growth and streamlined approvals; optimistic for loan growth in 2026 with incentives aligned to targets .
Capital deployment optionality: $150MM buyback is a start; optionality remains for additional repurchases; securities restructuring not a priority given expected cash‑flow tailwinds and TBV accretion .
Margin/NII trajectory: Sequential NII/margin expansion expected through 2026; mid‑single‑digit NII growth in 2026 under flat loans/modest deposit growth; unsettled securities reduced reported NIM by ~2 bps in Q3 .
Credit normalization: Largest criticized loan (~$50MM) paid off in early October; long‑term NCO guide maintained at 20–30 bps, acknowledging quarterly volatility .
Deposit beta calibration: Actions support higher beta in 2026, with expected lag due to CDs (~10% of deposits) repricing over ~7 months .

Estimates Context

Metric	Q1 2025	Q2 2025	Q3 2025
EPS – Actual ($)	0.49*	0.69*	0.69*
EPS – Consensus ($)	0.5648*	0.5757*	0.6090*
EPS Surprise ($)	-0.0748*	+0.1143*	+0.0810*
Revenue – Actual ($MM)	227.0*	248.6*	250.5*
Revenue – Consensus ($MM)	254.6*	253.1*	254.5*
Revenue Surprise ($MM)	-27.6*	-4.5*	-3.9*

Values retrieved from S&P Global.*

Interpretation: EPS beat in Q2 and Q3, with a modest revenue miss each quarter. Results reflect margin expansion and funding cost improvements, offset by lower average earning asset balances and competitive dynamics on loan growth .

Key Takeaways for Investors

Margin expansion intact with wholesale borrowings at zero and deposit beta actions underway; expect sequential NII/margin improvement into 2026, supported by investment portfolio cash‑flows and back‑book repricing .
Credit normalization remains a tailwind: NCOs muted, NPLs down, ACL coverage rising; largest criticized exposure resolved early Q4 .
Near‑term loan growth muted; Q4 guided lower loan balances before expected 2026 inflection; disciplined approach to pricing/structure should protect returns and credit quality .
Capital efficiency rising: CET1 at 13.90%; buybacks of $57.2MM executed through Oct 28, with optionality for further repurchases depending on growth and valuation .
Q4 setup: ~$60MM pre‑tax gain from AZ/Kansas sale, NII $203–$205MM, expense $155–$157MM; watch deposit mix/price migration and CD repricing lag as cuts arrive .
Strategic footprint optimization reduces complexity and supports core market focus (AZ/Kansas closed; NE announced); expect opex benefits and capital ratio accretion at close .
Trading lens: The story hinges on margin trajectory, credit normalization, and capital return pace versus asset growth; catalysts include Q4 gain recognition, continued NIM expansion, and buyback execution .

FIRST INTERSTATE BANCSYSTEM INC (FIBK)·Q3 2025 Earnings Summary