FIRST INTERSTATE BANCSYSTEM INC

First Interstate BancSystem, Inc. operates as a financial and bank holding company focused on community banking, serving individuals, businesses, government entities, and others across 12 states: Colorado, Idaho, Iowa, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming ¹. The company competes with commercial banks, savings and loan associations, credit unions, financial technology companies, internet banks, consumer finance companies, brokerage firms, mortgage banking companies, insurance companies, securities firms, mutual funds, government agencies, and major retailers ². First Interstate competes on the basis of service and responsiveness to client needs, available loan and deposit products, rates of interest charged on loans, rates of interest paid for deposits, and the availability and pricing of services such as trust, employee benefit, investment, and insurance services ³.

The company's primary competitors include other commercial banks, savings and loan associations, credit unions, financial technology companies, internet banks, consumer finance companies, brokerage firms, mortgage banking companies, insurance companies, securities firms, mutual funds, government agencies, and major retailers ⁴. Some competitors have greater resources and higher lending limits and may offer other services that First Interstate does not provide ⁵. The company's community bank approach to providing client service is considered a competitive advantage that strengthens its ability to effectively provide financial products and services to businesses and individuals in its markets ⁶.

First Interstate generates revenue primarily through interest charged on loans and, to a lesser extent, from interest and dividends earned on fixed income investments ⁷. Noninterest income is derived from fees received in connection with various lending and deposit services, wealth management services such as trust, employee benefit, investment, and insurance services, mortgage loan originations, sales, and servicing, merchant and electronic banking services, and from time to time, gains on sales of assets and securities ⁸. The company's principal expenses include interest expense on deposit accounts and other borrowings, salaries and employee benefits, information technology and communication costs, furniture, equipment, and occupancy expenses, professional fees including FDIC insurance assessments, income tax expense, provisions for credit losses, intangible amortization, other real estate owned expenses, and other segment expenses including advertising and promotion, donations, credit card rewards expense, fees associated with originating and closing loans, insurance, and other expenses necessary to support employees and service clients ⁹. The company has one operating segment — community banking ¹⁰.

The company's loan portfolio consists of a mix of real estate, consumer, commercial, agricultural, and other loans, including fixed, adjustable, and variable rate loans ¹¹. Real estate loans comprise commercial real estate, construction (including residential, commercial, and land development construction loans), residential, agricultural, and other real estate loans ¹². As of December 31, 2025, the company had $10.5 billion of commercial loans, including $8.1 billion of commercial real estate loans, representing approximately 69.1% of the loans held for investment portfolio ¹³. The company offers traditional depository products including checking, savings, and time deposits ¹⁴. Wealth management services include the administration of estates and personal trusts, management of investment accounts for individuals, employee benefit plans and charitable foundations, and insurance planning ¹⁵. The company had $8.7 billion of assets under management at December 31, 2025 compared to $8.1 billion at December 31, 2024 ¹⁶.

In October 2025, the company completed the divestiture of its banking operations in Arizona and Kansas, closing twelve branches with Enterprise Bank & Trust, including approximately $641.6 million in deposits and certain commercially-oriented loans with outstanding balances of $291.5 million ¹⁷. The company also announced the contemplated sale of 11 branches in Nebraska, which transaction is expected to close at the beginning of the second quarter of 2026 ¹⁸. In January 2025, the company announced plans to stop originating indirect loans as of February 28, 2025 ¹⁹. In June 2025, the company completed the outsourcing of its consumer credit card portfolio resulting in the sale of $74.2 million of consumer credit card loans and recognition of a $4.3 million gain ²⁰. On August 15, 2025, the company redeemed in full the outstanding $100.0 million of aggregate principal amount of its 5.25% fixed-to-floating rate subordinated notes due 2030 ²¹. On October 7, 2025, the company redeemed in full the trust securities of HF Financial Capital Trust III at a redemption price of 100% of the principal amount of the issued and outstanding debt securities ($5.2 million aggregate principal amount) ²². On October 8, 2025, the company redeemed in full the trust securities of HF Trust IV at a redemption price of 100% of the principal amount of the issued and outstanding debt securities ($7.2 million aggregate principal amount) ²³. On August 28, 2025, the Board adopted a new stock repurchase program authorizing the repurchase of up to $150.0 million worth of issued and outstanding shares of common stock on or prior to March 31, 2027 ²⁴. On January 27, 2026, the Board authorized an increase to the repurchase program of an additional $150.0 million, bringing the total repurchase authorization since August 2025 to $300.0 million ²⁵. During 2025, the company repurchased and retired 3,653,914 shares of common stock under the stock repurchase program at a total cost of $117.6 million or a weighted average price of $32.18 per share ²⁶.

Net income increased $76.1 million, or 33.7%, to $302.1 million, or $2.94 per diluted share, in 2025, compared to $226.0 million, or $2.19 per diluted share, in 2024 ²⁷. The increase was primarily a result of the $62.7 million pre-tax gain from the sale of the Arizona and Kansas branches, a decrease in provision for credit losses, and lower FDIC insurance assessment rates, partially offset by lower payment services revenues and higher income tax expense ²⁸. Net interest income increased $3.8 million during 2025, as compared to 2024, primarily due to lower costs of funds ²⁹. The net interest margin ratio increased 28 basis points to 3.30% during 2025, as compared to 3.02% in 2024 ³⁰. Return on average assets was 1.09% for 2025, compared to 0.75% for 2024 ³¹. Return on average common stockholders' equity was 8.83% for 2025, compared to 6.92% for 2024 ³². The efficiency ratio was 59.19% for 2025, compared to 62.30% for 2024 ³³.

The company expects to see continued volatility in the economic markets, which may include recessionary signs in the economy resulting from, among other things, uncertain conditions due to changes in U.S. policies like the implementation of new tariffs, retaliatory tariffs, and other trade policies ³⁴. These uncertain conditions could have adverse impacts on the balance sheet and income statement of the company during 2026 ³⁵. A slowdown, downturn, or recession in the U.S. economy or changes in U.S. trade policies could impact the company by impacting the level of deposits held by clients, whether through a higher volume of withdrawals or through a lower volume of deposits ³⁶. The credit quality of the company's loans may also be impacted if clients must weather adverse economic conditions which could result in an increase in credit losses or other related expenses ³⁷.

The company's current strategy emphasizes disciplined organic growth by deepening and expanding full client relationships across deposits, lending and fee-based services ³⁸. The company is executing a strategic plan intended to refocus capital investment, optimize its balance sheet and improve core profitability, while continuing to advance its business in a disciplined and prudent manner ³⁹. This plan includes initiatives to enhance credit processes and risk culture, optimize its footprint and branch network, and emphasize disciplined, relationship-driven organic growth in existing market areas ⁴⁰. The company is prioritizing investment into existing market areas where it has brand density and is well positioned to serve the needs of its customers ⁴¹. Accordingly, the company is undertaking a comprehensive review of its branch network to optimize its physical footprint, including exiting markets that are not aligned with its strategic plan and reallocating capital, talent and resources to expand in markets where it has meaningful market share and attractive growth prospects ⁴². For example, in October 2025, the company completed the divestiture of its banking operations in Arizona and Kansas and also announced the contemplated sale of 11 branches in Nebraska, which transaction is expected to close at the beginning of the second quarter of 2026 ⁴³. The company opened one branch in Montana on February 2, 2026 and intends to close four branches in eastern Nebraska, one in Minnesota, and one in North Dakota at the end of February 2026 ⁴⁴. In 2025, the company took deliberate actions to reduce or exit selected exposures, including the intentional runoff of certain non-relationship and transactional credits and the discontinuation or outsourcing of lending products ⁴⁵. For example, the company exited its indirect lending origination business in early 2025 and outsourced its consumer credit card portfolio in mid-2025 ⁴⁶. During the fourth quarter of 2025, the company initiated a transformation of its banking organization, changing from a layered, regional and market structure to a flatter model ⁴⁷. The redesign includes new State Presidents at the Bank, a majority of whom are from within the Bank, supplemented by select external hires, and a more streamlined chain of responsibility designed to speed up local decision-making and align the decision framework with the relationship-driven organic growth strategy ⁴⁸. The company expects this redesign to be nearly complete in the first quarter of 2026 ⁴⁹.

The company's net FTE interest margin ratio, a non-GAAP financial measure, increased 28 basis points to 3.32% during 2025, as compared to 3.04% in 2024 ⁵⁰. Exclusive of the impact of interest accretion on acquired loans, the 2025 net FTE interest margin ratio increased 31 basis points over the similarly calculated net interest margin ratio in 2024 ⁵¹. The company expects to see continued volatility in the economic markets, which may include recessionary signs in the economy ⁵². The company's quarterly yield on interest earning assets decreased to 4.67% as of December 31, 2025 from 4.73% as of September 30, 2025, and decreased from 4.86% as of December 31, 2024 ⁵³. The company's cost of funds decreased to 1.35% during the three months ended December 31, 2025, from 1.45% during the three months ended September 30, 2025, and decreased from 1.72% during the three months ended December 31, 2024 ⁵⁴. During the fourth quarter of 2025, the changes in the mix and cost of funds was partially offset by the change in the mix and yield on earning assets, resulting in an increase of the company's net interest margin during the three months ended December 31, 2025 to 3.36% from 3.34% during the three months ended September 30, 2025 and from 3.18% for the three months ended December 31, 2024 ⁵⁵. The company's FTE net interest margin increased to 3.38% during the three months ended December 31, 2025, from 3.36% during the three months ended September 30, 2025, and increased from 3.20% during the three months ended December 31, 2024 ⁵⁶.

As of December 31, 2025, the company employed 3,376 employees, with none represented by a collective bargaining agreement ⁵⁷. This represents a decrease of 105 employees from December 31, 2024 ⁵⁸. As of December 31, 2025, approximately 67.2% of the workforce was female, 32.6% was male, and 0.2% have not declared ⁵⁹. The executive team is comprised of 37.5% female and 62.5% male, and the company's senior leadership team was 32.4% female and 67.6% male ⁶⁰. The company has centralized certain operational activities to provide consistent service levels to clients across the Bank, which helps gain efficiency in management of those activities as well as ensure regulatory compliance ⁶¹. Centralized operational activities generally support banking offices in the delivery of products and services to clients and include marketing, credit review, loan servicing, credit card servicing, mortgage loan sales and servicing, loan collections, and other operational activities ⁶². To reduce operating costs and capitalize on the technical capabilities of selected vendors, the company also leverages third-party service providers to selectively outsource certain bank operations and services, such as certain data processing, loan servicing, credit card issuance, and deposit processing systems ⁶³.

On August 28, 2025, the Board adopted a new stock repurchase program authorizing the repurchase of up to $150.0 million worth of issued and outstanding shares of common stock on or prior to March 31, 2027 ⁶⁴. On January 27, 2026, the Board authorized an increase to the repurchase program of an additional $150.0 million, bringing the total repurchase authorization since August 2025 to $300.0 million ⁶⁵. During 2025, the company repurchased and retired 3,653,914 shares of common stock under the stock repurchase program at a total cost of $117.6 million or a weighted average price of $32.18 per share ⁶⁶. As of December 31, 2025, following these repurchases, approximately $32.4 million remained available for future purchases under the program ⁶⁷. From January 1, 2026 to February 20, 2026, the company purchased approximately 600 thousand shares of common stock, for a total repurchase of approximately $23.0 million ⁶⁸. As of February 20, 2026, following these 2026 repurchases and the increase in the authorized aggregate dollar value of shares to be repurchased under the repurchase program, approximately $159.4 million remained available for future purchases under the program ⁶⁹. Regular cash dividends paid to common shareholders during 2025 amounted to approximately $194.3 million ⁷⁰. On January 27, 2026, the company declared a quarterly dividend to common stockholders of $0.47 per share, which was paid on February 20, 2026 to shareholders of record as of February 10, 2026 ⁷¹. The dividend equates to a 5.7% annual yield based on the $32.72 average closing price of the company's common stock as reported on NASDAQ during the fourth quarter of 2025 ⁷².

The company expects to see continued volatility in the economic markets, which may include recessionary signs in the economy resulting from, among other things, uncertain conditions due to changes in U.S. policies like the implementation of new tariffs, retaliatory tariffs, and other trade policies ⁷³. These uncertain conditions could have adverse impacts on the balance sheet and income statement of the company during 2026 ⁷⁴. A slowdown, downturn, or recession in the U.S. economy or changes in U.S. trade policies could impact the company by impacting the level of deposits held by clients, whether through a higher volume of withdrawals or through a lower volume of deposits ⁷⁵. Client deposits are one of the company's primary lending sources ⁷⁶. The credit quality of the company's loans may also be impacted if clients must weather adverse economic conditions which could result in an increase in credit losses or other related expenses ⁷⁷. In the fourth quarter of 2025, criticized assets improved as compared to the third quarter ⁷⁸. The company experienced slower lease-up in its commercial real estate multi-family portfolio, which contributed to an increase in criticized assets in the middle of 2025 before improving later in the year ⁷⁹. More recently, the company has experienced weaker than anticipated loan production, including muted demand for certain commercial real estate and construction lending and softer new construction activity in several of its markets ⁸⁰. If these conditions persist or the company is unable to generate sufficient new loan production to offset ongoing runoff, amortization and payoffs, loan balances may decline ⁸¹. In 2025, the company experienced increased credit stress in certain of its grain credit relationships as lower commodity prices and elevated input costs pressured borrower cash flows ⁸². If such conditions persist or recur, the company could experience higher criticized or nonperforming loans and increased credit losses in these portfolios ⁸³.

The company is subject to extensive government regulation and supervision under federal and state laws ⁸⁴. Regulatory enforcement and fines have increased across the banking and financial services sector ⁸⁵. The company expects its business will remain subject to extensive regulation and supervision ⁸⁶. Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states ⁸⁷. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the application of existing regulations ⁸⁸. In recent years, the CFPB has increased its scrutiny of fee-based business models and various fees on consumer financial products and services, including depositor, overdraft and late fee charges ⁸⁹. The CFPB has also focused on consumer data access, including through its final rule implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the "open banking" rule ⁹⁰. Open banking rulemaking has long been expected to have a significant impact on both financial institutions and third parties ⁹¹. The scope, timing, and compliance obligations associated with the open banking rule are subject to ongoing litigation, and the rule may be revised or replaced through further rulemaking, which could create regulatory uncertainty and require the company to make additional operational, technology, and compliance investments ⁹². In June 2024, the U.S. Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies ⁹³. As a result of this decision, the company cannot be sure whether there will be increased challenges to existing regulations with which it is required to comply or how lower courts will apply the decision in the context of regulatory schemes applicable to the company, leading to increased regulatory uncertainty and potential changes in the way laws or regulations applicable to the company are interpreted or enforced ⁹⁴.

The company's loan portfolio is concentrated in commercial real estate and commercial business loans, with $10.5 billion of commercial loans, including $8.1 billion of commercial real estate loans, representing approximately 69.1% of the loans held for investment portfolio as of December 31, 2025 ⁹⁵. Commercial loans may involve greater risks than other types of lending because payments are often dependent on the successful operation or development of the property or business involved, making repayment more sensitive to adverse conditions in the real estate market or the general economy ⁹⁶. In the fourth quarter of 2025, the company recognized a charge-off of approximately $15.8 million relating to a commercial real estate loan that had become impaired as a result of adverse developments impacting the borrower's business ⁹⁷. The company's profitability largely depends on the general economic conditions in Colorado, Idaho, Iowa, Missouri, Montana, Nebraska, Oregon, South Dakota, Washington, and Wyoming, unlike larger banks that are more geographically diversified ⁹⁸. Deterioration in economic conditions could result in loan delinquencies, problem assets, and foreclosures increasing, increases in the provisions for credit losses and loans and lease charge-offs, and decreases in net interest income derived from lending activities ⁹⁹. The company had goodwill of $1,100.9 million, or 31.9% of total stockholders' equity, as of December 31, 2025, and an impairment of goodwill could have a material adverse effect on financial condition and results of operations ¹⁰⁰. The company is subject to the interchange fee cap under the Durbin Amendment because its assets exceed $10 billion, and the Federal Reserve has proposed revising Regulation II to lower the cap from its current rate of 21 cents and 0.05% of the transaction, plus a one-cent fraud-prevention adjustment, to 14.4 cents and 0.04% per transaction and a 1.3 cents fraud-prevention adjustment ¹⁰¹.

Management's message emphasizes the company's long-term philosophy of providing high-quality financial products and services, delivering exceptional client service, influencing business leadership within communities through professional and dedicated bankers, supporting communities through financial contributions and socially responsible leadership, and cultivating a strong corporate culture ¹⁰². Building on this foundation, management is executing a strategic plan intended to refocus capital investment, optimize the balance sheet and improve core profitability, while continuing to advance the business in a disciplined and prudent manner ¹⁰³. This plan includes initiatives to enhance credit processes and risk culture, optimize the footprint and branch network, and emphasize disciplined, relationship-driven organic growth in existing market areas ¹⁰⁴. Management's strategic priorities for the period ahead include prioritizing investment into existing market areas where the company has brand density and is well positioned to serve the needs of customers, undertaking a comprehensive review of the branch network to optimize the physical footprint including exiting markets that are not aligned with the strategic plan and reallocating capital, talent and resources to expand in markets where the company has meaningful market share and attractive growth prospects, and transforming the banking organization from a layered, regional and market structure to a flatter model with new State Presidents and a more streamlined chain of responsibility designed to speed up local decision-making ¹⁰⁵. Management expects this redesign to be nearly complete in the first quarter of 2026 ¹⁰⁶.