FIBK Regional Banks · Community bank · Capital returns · Loan runoff · Thesis updated July 1, 2026

Buybacks fight a shrinking loan book

First Interstate makes most of its money from lending, deposits, and securities income.
The core problem is clear: loans fell $473.2 million in Q1 2026 after a large 2025 decline.
Management is trying to offset the shrink with heavy buybacks, including $84.0 million in Q1 repurchases.
The bank has sold or closed non-core branches, including eleven Nebraska branches sold in April 2026.
The next big test is whether loan balances stop falling and start modest growth in the back half of 2026.

01 Running thesis

Shrinking bank, active buyback

First Interstate is in a real tug of war. The bull case is that the cleanup is mostly done. The bank has left weaker or non-core areas, cut back products that did not fit, and is using cash to buy back stock. In Q1 2026, it repurchased 2,392,893 shares for $84.0 million, then bought about 303 thousand more shares for $10.4 million in April.

That buyback matters because it can lift earnings per share even when total profit is not growing much. Net interest margin, which is the spread between what the bank earns on assets and pays for funding, also improved. The Q1 2026 net interest margin was 3.41%, up from 3.36% in Q4 2025.

The bear case is just as simple. Loans held for investment fell another $473.2 million in Q1 2026 to $14,728.4 million. That followed a $2,643.3 million loan decline in 2025. A bank can only lean on buybacks for so long if the loan book keeps shrinking.

So the stock story is not about whether management can buy shares. It already is. The key question is whether the bank can prove that organic loan growth, meaning growth from new customer business instead of deals, starts in the second half of 2026.

May 2026→Q1 made the central debate sharper. Loans fell another $473.2 million, while the company repurchased $84.0 million of stock in the quarter and $10.4 million more in April.

Feb 2026▼The 2025 10-K showed a $2,643.3 million loan decline for the year. The larger $300.0 million buyback authorization helps, but it does not solve the organic growth problem.

Jan 2026→Q4 credit metrics improved, with criticized loans down 9.6% and non-performing assets down 26%. Management still guided for loans to decline in the first half of 2026 before modest growth later.

Nov 2025▲The bank completed the Arizona and Kansas branch sale, announced a Nebraska branch deal, and started a $150.0 million repurchase program. The strategy became more focused, but growth still had to be proven.

Oct 2025→Q3 credit quality stabilized and the largest criticized loan was paid off after quarter-end. Loan production was still weaker than expected, which pushed the expected loan trough later.

Aug 2025▼The Q2 10-Q showed non-accrual loans up 39.3% from year-end 2024. That brought credit risk back into focus while the loan portfolio continued to shrink.

Jul 2025▲Q2 results were better, with EPS of $0.69, net income of $71.7 million, and net interest margin of 3.30%. Management also pointed to a possible earning asset bottom.

May 2025▼Q1 2025 was mixed. Net interest margin improved to 3.22%, but non-accrual loans rose 38.8% and loans fell $467.6 million from year-end 2024.

02 Business model

Spreads pay the bills

First Interstate is a traditional community bank. It takes deposits from customers, lends money to households and businesses, and earns the spread between interest collected and interest paid. It also earns fee income from payments, wealth management, mortgage banking, deposit service charges, and other services.

For Q1 2026, net interest income was $200.7 million. Noninterest income was $41.1 million. That means the business still depends mainly on earning a healthy spread on loans and securities.

The strategy has shifted. Instead of growing mostly by buying other banks, First Interstate is trying to focus on stronger core markets, simplify its branch map, and make decisions closer to customers. It has exited Arizona, Kansas, North Dakota, and Minnesota, and reduced its Nebraska footprint.

Where it breaks is loan growth. If the bank cannot replace runoff and branch-sale loans with new relationship loans, net interest income can stay under pressure even if margins improve.

03 Product portfolio

Plain bank products, fewer side bets

Cash cow

Commercial lending

Commercial and commercial real estate loans are central to the loan book. These loans drive interest income, but they also carry credit risk when local economies weaken.

Steady

Consumer and residential banking

The bank offers deposit accounts, residential loans, and consumer banking services. This is useful for customer relationships, but the consumer loan book is shrinking as indirect lending runs off.

Cash cow

Deposits

Deposits are the main funding source for loans and securities. At March 31, 2026, deposits were $21.9 billion, with 64.4% FDIC insured when including accounts eligible for pass-through insurance.

Steady

Treasury, payment, and deposit fees

Payment services, deposit service charges, and other fees help diversify revenue. Payment services revenue was $15.6 million in Q1 2026, down from $17.1 million a year earlier.

Option

Wealth management

Wealth management adds fee income from trust, employee benefit, investment, and insurance services. It grew to $10.5 million in Q1 2026 from $9.8 million in Q1 2025.

Option

Mortgage banking

Mortgage banking adds fees from loan originations, sales, and servicing. It is smaller than the spread business and can be rate sensitive.

04 Business segments

Mostly spread income

Net interest income83%declining

Noninterest income17%declining

Mix is based on Q1 2026 operating revenue from the latest 10-Q: $200.7 million of net interest income and $41.1 million of noninterest income. This is a revenue stream view, not a legal segment split.

05 Risk factors

What could go wrong

Loan balances keep falling

High impact · High odds

This is the main risk. Loans held for investment fell $473.2 million in Q1 2026, a 3.1% decline from year-end 2025. Management had expected loans to decline in the first half of 2026 and grow modestly in the back half, so the second half matters a lot.

We watchQuarterly loans held for investment, plus management comments on second-half 2026 loan growth.

Buybacks become the only growth tool

High impact · Medium odds

The company is returning capital at a fast pace. It had $300.0 million of total authorization since August 2025, with about $88.0 million left after April 2026 repurchases. If buybacks slow before loan growth returns, earnings per share support could fade.

We watchRemaining repurchase authorization, shares repurchased each quarter, and earnings per share versus net income.

Reorganization does not lift production

High impact · Medium odds

The bank moved to a flatter structure in Q1 2026 so local leaders can make faster decisions. That reset is meant to improve relationship-driven growth. If new loan production stays weak, the branch cleanup may look more like shrinkage than focus.

We watchNew loan production, banker hiring or turnover, and management updates on the flatter model.

Margin cannot offset a smaller balance sheet

Medium impact · Medium odds

Net interest margin improved to 3.41% in Q1 2026, helped by lower funding costs. But net interest income still fell to $200.7 million from $205.0 million a year earlier because average loans were lower. A smaller loan base makes margin improvement harder to translate into growth.

We watchNet interest margin, adjusted FTE margin, average earning assets, and net interest income.

Credit quality worsens again

Medium impact · Medium odds

Credit risk looked better in late 2025, but Q1 2026 brought some renewed pressure. Non-performing assets rose 17.5%, mainly tied to one client relationship, and the provision for credit losses was $6.7 million. The issue is not alarming yet, but it is no longer off the table.

We watchNon-performing assets, non-accrual loans, criticized loans, net charge-offs, and provision for credit losses.

06 Quick answers

In one breath

What does First Interstate BancSystem do?

First Interstate is a community bank. It takes deposits, makes loans, invests in securities, and earns fees from services like payments, wealth management, and mortgage banking.

Why is FIBK buying back so much stock?

Management is using buybacks to return excess capital and support earnings per share. This is important because the loan book is shrinking, so buybacks are doing a lot of the near-term work for shareholders.

What is the biggest issue for FIBK stock?

The biggest issue is whether loans stop falling. If loan balances do not bottom and grow modestly in the second half of 2026, the market may view the bank as shrinking rather than resetting.

Is credit quality the main risk now?

Credit still matters, but the main risk has shifted to loan growth. Q1 2026 did show non-performing assets rising, so credit should still be watched closely.