Finance

First Interstate's Margin Expansion Accelerates

The Tip Desk · October 24, 2026 · 3 min read

Net interest margin reached 3.53% in the third quarter of 2026, an 8-basis-point sequential gain after a 4-basis-point rise in the second quarter.

First Interstate BancSystem (FIBK), a community-banking holding company, reported net interest margin of 3.53% for the third quarter of 2026, an 8-basis-point increase from 3.45% in the second quarter after a 4-basis-point sequential gain in the prior period.

Net interest income rose $4.0 million to $206.2 million from $202.2 million in the second quarter. The company said the increase was driven by higher yields on interest-earning assets and lower interest expense on time deposits, partially offset by lower interest income from reduced loan balances and interest-earning assets. Excluding interest accretion from the fair value of acquired loans, the adjusted net FTE interest margin was 3.51%, up 9 basis points from the prior quarter.

Net income was $62.2 million, or $0.65 a share, compared with $83.9 million, or $0.87 a share, in the second quarter, which included a $19.5 million gain on the sale of eleven Nebraska branches. Noninterest income fell $18.4 million, or 29.8%, to $43.3 million, primarily because of that Nebraska-branch gain. Wealth management revenues rose $0.5 million to $11.1 million.

Loans held for investment declined $296.0 million, or 2.1%, to $13,985.4 million at September 30, 2026. The company attributed the quarter-over-quarter decline to $47.7 million of continued amortization of the indirect consumer portfolio, for which it stopped originating loans in the first quarter of 2025, plus payoffs and paydowns. Investment securities increased $59.6 million to $8,045.2 million. The loans-to-deposits ratio was 65.4%.

Total deposits decreased only $52.8 million, or 0.2%, to $21,388.5 million, a sharp slowdown from the $441.7 million, or 2.0%, decline in the second quarter. Interest-bearing deposit categories all declined; noninterest-bearing deposits partially offset those outflows. Year over year, deposits were down $1,216.5 million, or 5.4%, which the company said was primarily driven by the Arizona and Kansas branch sales in the fourth quarter of 2025 and the Nebraska sale in the second quarter of 2026.

Credit costs turned higher. The company recorded a $10.5 million provision for credit losses, after a $3.2 million provision reduction in the second quarter and no provision in the third quarter of 2025. Net charge-offs were $9.9 million, or an annualized 0.28% of average loans, versus $9.7 million, or 0.27%, in the second quarter. Non-performing assets decreased $10.0 million, or 6.1%, to $155.0 million, reversing a $2.5 million, or 1.5%, increase in the second quarter. Criticized loans increased $2.1 million to $939.5 million after a $95.8 million decline in the second quarter. Coverage of non-performing loans was 120.1%.

Noninterest expense decreased $1.8 million, or 1.1%, to $157.1 million. Other expenses fell $2.3 million on lower professional fees and donations; salaries and wages rose $1.0 million to $65.9 million.

The company repurchased approximately 2.04 million shares for $76.3 million in the third quarter. Through September 30, 2026, it had repurchased about 10.02 million shares for $346.6 million under the program authorized in August 2025, leaving $103.4 million of the $450.0 million authorization. The common equity tier 1 capital ratio decreased 18 basis points to 14.36%, after a 24-basis-point increase to 14.54% in the second quarter, as buybacks more than offset lower risk-weighted assets. The board declared a dividend of $0.47 a share, payable November 13, 2026.

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