First Interstate BancSystem Q2 2026 Earnings Report

First Interstate BancSystem EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.69
• Beat/Miss: Beat by +$0.18
• One Year Ago EPS: $0.69

First Interstate BancSystem Revenue Results

• Actual Revenue: $263.90 million
• Expected Revenue: $249.32 million
• Beat/Miss: Beat by +$14.58 million
• YoY Revenue Growth: +6.40%

First Interstate BancSystem Announcement Details

• Quarter: Q2 2026
• Date: 7/23/2026
• Time: After Market Closes
• Conference Call Date: Friday, July 24, 2026
• Conference Call Time: 9:30AM ET

First Interstate BancSystem (NASDAQ:FIBK) is a financial holding company headquartered in Billings, Montana. Through its principal subsidiary, First Interstate Bank, the company provides community banking services to individuals, businesses, governmental entities and nonprofit organizations.

Its products and services include personal and business deposit accounts, consumer and commercial lending, mortgage banking, treasury management, online and mobile banking, investment services, and wealth management. The bank also provides trust and fiduciary services through its wealth management operations.

Founded in 1971, First Interstate has expanded from its Montana roots through organic growth and acquisitions, including its 2022 acquisition of Great Western Bank. First Interstate Bank currently serves customers through a branch network across Idaho, Montana, Oregon, South Dakota, Washington and Wyoming. The company is led by President and Chief Executive Officer Kevin Riley.

First Interstate BancSystem Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net interest margin expanded for the ninth straight quarter to 3.48%, supported by lower deposit costs and ongoing fixed-asset repricing, which management says should continue to benefit profitability into 2027.
• Positive Sentiment: Second-quarter net income rose sharply to $83.9 million, or $0.87 per diluted share, up from $60.2 million and $0.61 in the prior quarter, helped by higher NII and a branch-sale gain.
• Neutral Sentiment: Loan balances declined by $447 million as payoffs accelerated, especially in criticized and non-relationship credits, and management expects payoff pressure to continue through the rest of 2026.
• Positive Sentiment: Criticized loans fell 9.3% sequentially and 22% over the past year, while deposit mix improved and non-interest-bearing balances resumed year-over-year growth adjusted for sold deposits.
• Positive Sentiment: The bank boosted its share repurchase authorization by $150 million to $450 million total and remains active in returning capital, having bought back about 8 million shares and returned $270 million since the program began.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the First Interstate BancSystem, Inc. Incorporated second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Nancy Vermeulen. Please go ahead.

[Nancy Vermeulen, Finance Strategy Implementation Manager and Investor Relations at First Interstate BancSystem]

Thanks very much. Good morning. Thank you for joining us for our second quarter earnings conference call. As we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes might differ materially from those expressed by those statements. I'd like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent quarterly report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the quarterly report and our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any of the forward-looking statements made today.

[Nancy Vermeulen, Finance Strategy Implementation Manager and Investor Relations at First Interstate BancSystem]

A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at fibk.com. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release. A reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. Again, this quarter, along with our earnings release, we've published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our investor relations website. If you have not downloaded a copy yet, we encourage you to do so. Please also note that as we discuss our financials today, unless otherwise noted, all of the prior period comparisons will be with the first quarter of 2026.

[Nancy Vermeulen, Finance Strategy Implementation Manager and Investor Relations at First Interstate BancSystem]

Joining us from management this morning are Jim Reuter, our Chief Executive Officer, David Della Camera, our Chief Financial Officer, and other members of our management team. Now I'll turn the call over to Jim Reuter. Jim?

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Thank you, Nancy. Thank you for joining us on our earnings call today. During the second quarter of 2026, we continued to improve the long-term earnings power and efficiency of the franchise. Net interest margin expanded for the ninth consecutive quarter. Deposit costs continued to decline. Criticized loans declined meaningfully, and we further executed on operating model efficiencies while investing in relationship-driven growth. Commercial loan production improved in the second quarter, especially in the Rocky Mountain region.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

However, reported loan balances declined more than expected, primarily due to elevated payoffs. The payoff activity was concentrated in credits with limited relationship value, including criticized loan payoffs, secondary market activity in loans in divested markets, and we anticipate continued payoff pressure in the near term. We continue to repurchase shares and maintain a disciplined approach to long-term value creation.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Our focus will remain on shareholder returns and disciplined growth as we work to optimize our balance sheet, improve our profitability and return metrics, and grow deposits and loans in a thoughtful manner. We have maintained our underwriting discipline and have chosen not to seek avenues for near-term balance growth that are not consistent with a relationship-based focus. Non-interest-bearing balance has increased year-over-year when adjusted for sold deposits. On the expense side, in the second quarter, we continued aligning staffing levels with our updated operating model with an emphasis on revenue-generating roles. We secured two highly sought-after locations in Colorado, and other locations are in progress in core markets. We introduced an updated advertising campaign and brand refresh, and we also made further investment in data management to support our ability to leverage new technology.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

We have seen improvement in digital engagement and digital payment activity, and our client satisfaction metrics remain strong. We continued repurchasing shares in the second quarter as part of the authorization we announced in August of last year. Since the inception of the program, we have purchased roughly 8 million shares, returning $270 million to shareholders. We have increased our repurchase authorization by an additional $150 million along with our earnings release, bringing the total authorization to date to $450 million. Share repurchases remain a key part of our capital deployment strategy. Many of the outcomes reflect deliberate actions that improve the long-term value of the franchise. Through ongoing fixed asset repricing, disciplined capital deployment, operating model optimization, and continued focus on relationship banking, we are building a more efficient organization. We remain confident in our ability to deliver improving returns over time.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Now I will hand the call over to David to discuss our results and our guidance in more detail. David?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Thanks, Jim. I'll start with our results for the quarter. The company reported net income of $83.9 million, or $0.87 per diluted share in the second quarter, compared to $60.2 million or $0.61 per diluted share in the first quarter. Net interest income increased by $1.5 million compared to the prior quarter, or 0.7% to $202.2 million. This was driven primarily by an expansion in the net interest margin and an extra accrual day in the quarter, and was partially offset by a decline in interest-earning assets due in part to the branch sale completed in April. Yield on average loans increased two basis points to 5.62%, and total deposit costs declined three basis points compared to the prior quarter. Total funding costs decreased four basis points compared to the first quarter.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Our fully taxable equivalent net interest margin was 3.48% for the second quarter, compared to 3.43% during the first quarter and to 3.32% during the second quarter of 2025. Non-interest income was $61.7 million, an increase of $20.6 million from the prior quarter. This increase was driven by a gain of $19.5 million from the branch transaction that closed during the second quarter. Non-interest expense was $158.9 million for the second quarter of 2026, an increase of $1.3 million from the prior quarter, driven by an increase in other expenses, including higher advertising expense, professional fees, mostly related to new branding efforts, an increase in donations expense, costs related to branch closures, and various smaller expense items. OREO expense increased $1.7 million compared to the prior quarter, driven by a valuation adjustment in the first quarter.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

These increases were mostly offset by a decline in salaries and wages and employee benefits from the prior quarter. Moving to the balance sheet. Loans decreased by $447 million in the second quarter. This included a continued decline in agricultural loans, a decrease in residential loans, and the ongoing amortization of the indirect portfolio, as well as a notable increase from the prior quarter in loan paydowns and payoffs. Payoff activity accelerated during the latter part of the quarter and included criticized loans and loans we would view as non-relationship in nature. In completing a detailed review of commercial loan payoffs during the quarter, we would categorize the vast majority as not affecting core relationships. Payoffs also included elevated secondary market activity and loans from divested markets, pulling forward some of our future payoff expectations.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

We expect accelerated payoff activity to continue through the rest of 2026, again pulling forward some of our previous out-of-year payoff expectations, which we anticipate will create variability in near-term reported balance growth despite improving commercial production. Total deposits decreased $441.7 million to $21.4 billion as of June 30th, 2026, with more than half of the impact in the quarter driven by the sale of $244 million of deposits in the Nebraska branch transaction. As Jim noted, our deposit mix improved in the quarter, and non-interest-bearing balances returned to growth not only during the quarter, but more importantly, also on a year-over-year basis, adjusted for the branch sales. Average deposits declined $212.3 million during the quarter, less than the periodic change in deposits, as we saw some end-of-period outflows related to larger customer deposit movements.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

We experienced declines in interest-bearing balances and specifically time deposits, as we allowed some higher-cost money to exit the balance sheet while focusing on relationship growth. While this pressures near-term deposit balances, we believe this is prudent given our balance sheet position, and we are focused on protecting and growing core relationships to continue driving an enhanced deposit profile. The ratio of loans held for investment to deposits was 66.6% at the end of the quarter, compared to 67.3% at the end of the prior quarter and 72.3% at the end of the second quarter of last year. Turning to credit. Net charge-offs increased by $7.3 million in the second quarter to $9.7 million, or 27 basis points of average loans, driven by partial or total resolutions of previously reserved credits.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

The company recorded a $3.2 million reduction of provision for credit losses in the second quarter, driven primarily by the decline in loans. Criticized loans decreased $95.8 million, or 9.3% from the prior quarter, and over the past 12 months, criticized loans have declined 22%. Our total funded allowance decreased to 1.28% of loans held for investment from 1.33% in the first quarter. The decrease in coverage this quarter broadly reflects the noted resolutions of previously reserved credits within non-performing loans. We repurchased approximately 1.9 million shares in the second quarter, totaling approximately $69 million, and repurchases since initiation of the program in August totaled about $270 million. As Jim stated, we have announced an increase to the authorization of $150 million, bringing the cumulative total authorization to $450 million. Share repurchases remain a key capital allocation tool to drive shareholder value, and we anticipate remaining active in coming quarters.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Finally, we declared a dividend of $0.47 per common share, which equates to a 5.3% annualized yield based on the average closing price of the company's common stock during the second quarter. Our Common Equity Tier 1 capital ratio ended the second quarter at 14.54%, an increase of 24 basis points from the prior quarter. Our leverage ratio was 9.59% at the end of the second quarter, compared to 9.56% at the end of the prior quarter. Our capital levels provide us with flexibility to continue enhancing shareholder returns while supporting long-term accretive growth. Moving to our guidance. Our balance sheet expectations now reflect lower-ending loans and a smaller earning asset base compared to the prior quarter. This includes more meaningful payoffs within our commercial loan portfolio and further success in exiting some non-relationship and out-of-market credits.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

While we have previously assumed these would exit the bank over the coming years, the proactive approach we have taken has resulted in accelerated payoffs in the second quarter, and we anticipate this to continue through the rest of 2026. On the deposit side, the guidance incorporates the positive trends we are seeing within customer acquisition, offset by an expectation for continued pressure in higher cost of deposit categories.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Mortgage production has trailed our expectations, and our forecast now includes a more meaningful near-term decline in that portfolio. Together, these expectations result in both a smaller near-term balance sheet and higher composition of investment securities, lowering our near-term revenue growth expectations. This is partially offset by a more favorable deposit mix and cost trend, and we anticipate continuing to deploy capital during this period of balance sheet transition to enhance shareholder returns.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

As Jim noted, our expense forecast includes continued reinvestment in our new branding efforts and the addition of 14 relationship managers year to date. The operational efficiencies we have created have enabled us to add these RMs while still managing to what we believe is a structurally lower staffing level compared to our pre-reorganization workforce. These recognized savings, as well as the noted expense additions, are mostly within our second quarter run rate. They inform our go-forward expense guidance. We expect the trend of meaningful asset repricing to extend over the coming years, with the near-term tailwinds accelerating into 2027. We anticipate this will drive sequential improvement in our return profile through the remainder of 2026, provide an even greater benefit to our net interest margin into 2027.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Overall, our ninth consecutive quarter of net interest margin expansion reflects the continued benefit of fixed asset repricing and improving funding costs. During a period in which the Fed funds rate was reduced 75 basis points, loan yields were relatively stable at 5.62% compared to 5.65% a year ago. Investment security yields increased from 2.72% to 2.98%, while total deposit costs declined from 1.33% to 1.17%. These trends highlight the continued improvement in the underlying profitability of the balance sheet. Finally, our investor presentation contains a new slide this quarter titled Enhancing Franchise Productivity, which highlights some key metrics we're focused on internally and believe will further improve over time, net interest margin, deposits per share, deposits per branch, and net interest income per share.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

We believe these metrics highlight the value of the company's low-cost deposit base and the benefit of fixed asset repricing, accretive capital deployment, and operating efficiencies generated through progress in branch optimization. Our intent is to drive greater earnings efficiency and strengthen our best-in-class deposit base, while our active capital deployment increases our shareholders' relative stake in the value of those deposits. Over the prior 12 months, net interest margin has improved 16 basis points, average deposits per average diluted share has improved approximately 2%, average deposits per branch has improved 6%, and net interest income per share has improved 4%. With that, I'll hand the call back to Jim.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Thank you, David. We remain committed to the strategy we have consistently outlined. While growth and balance sheet trends may be uneven from quarter to quarter, our focus remains on the long-term drivers of franchise value, which are deepening customer relationships, growing numbers of clients and core deposits, improving credit quality, optimizing our operating model, and deploying capital in a disciplined manner. We believe the consistent execution of this strategy will strengthen the core value of the franchise and create increasing value for our shareholders over time. Now I would like to open the call for questions.

[Operator]

We will now begin the question-and-nswer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Matthew Clark with Piper Sandler. Your line is now connected. Please go ahead.

[Matthew Clark, Analyst at Piper Sandler]

Hey, good morning. Just on the loan portfolio, how much of the loan book has no deposit relationship that you'd like to exit, or where you expect payoffs to happen? Just trying to ring-fence what portion of loan book might be slated for runoff. If you're not willing to answer that question, I guess maybe the easier question is when do you see earning assets stabilizing and starting to grow again?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Hey, Matthew. A couple of comments on that. I'll start with the earning asset. I think from an earning asset perspective, just given where the balance sheet is, it's really a deposit ending an average conversation. Based on our guide, we think 3Q would be the bottom from an average earning asset perspective because 2Q ended lower on an ending on an average basis, but kind of ending earning assets flat to improving from here and then higher into the back half. From a loan portfolio perspective, a couple of comments. I think we talked about that out-of-market portfolio. We kind of define that as about a mid $600 million number right now, and the payoffs from that portfolio were kind of a $100 million number in this quarter. That's kind of where the non-relationship is.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

I think just a couple of comments too on the portfolio decline in the quarter as a whole. You kind of start with that $447 million number. When you take out indirect residential and ag, it kind of gets you to a more mid $200s number, and then the criticized and those out-of-market payoffs gets you down to about $100. That $100 number is more of, kind of that commercial core, if you will. Most of the payoffs were really non-relationship in manner during the quarter. As we think about the forward, some of those recent RM additions that we talked about really supports the production level we think we need. While the balances declined more than we thought, we view it as a lot of pulling forward of some of those outer year payoffs that we expected.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

The pure relationship growth was actually very good in the quarter in our view, and it was really balances in relationship change were just different figures in the quarter. Then as we think about the forward, again, a lot of that is we think there are more payoffs in some of those books. We've increased our expectation for payoffs, for example, in that out-of-market portfolio, which again, paid off kind of a mid-teens, just periodic number in the quarter. That's more to, in our view, pulling forward some of that, as I said, in the near term asset mix.

[Matthew Clark, Analyst at Piper Sandler]

Okay. What kind of ROA improvement do you think you can generate next year?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah, I think we're probably too early to talk about 2027 guidance. I think if we can see continued underlying improvement in that non-interest bearing level and then help solve that interest-earning asset mix, we think there's some really strong imputed value in the imputed earnings profile. I think we're a little too early to give you an ROA number. I think needless to say, we think it continues to move higher from here over time.

[Matthew Clark, Analyst at Piper Sandler]

Okay. Thank you.

[Operator]

Your next question comes from the line of Kelly Motta with KBW. Your line is now open. Please go ahead.

[Kelly Motta, Analyst at KBW]

Hi. Good morning. Thanks for the question. As part of your prepared remarks, I know obviously payoffs and proactive portfolio management shrunk the size of the loan book, but you mentioned production was higher. Can you provide any color and detail around that and kind of your outlook from here with what you've done on the reorg team front in order to kind of help stave off some of that continued pressure from payoffs ahead? Thanks.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Good morning, Kelly. That's a good question. The inflection point we missed was, as you pointed out, largely due to increased payoffs. We've seen a significant positive movement in step-up in production. Keep in mind, the reorg was just completed at the end of the first quarter. As we mentioned in the opening comments, we've also added 14 additional RMs, and as David pointed out, we've actually had good expense control and efficiency gain, but we've used some of that to add production, and we're continuing to see growing pipelines.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

We mentioned in the opening that the Rocky Mountain region's been very strong for us, but we're seeing it across the whole footprint. The thing we like about our footprint, it's diverse. It's not equal across all states, and we're not going to force equal production because different economies give you different opportunities.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

We're seeing what we hope to see. We would like to see one more step-up function in that area. July is off to a good start, we like the results we're seeing from our reorg.

[Kelly Motta, Analyst at KBW]

Okay. Great. The revised guide implies some continued contraction at kind of an upper single-digit pace in the back half of the year. Just wondering if it was nice to see the improvement in criticized. I'm wondering how much of that is related to some of that proactive portfolio management credit workout versus just things moving to perm and kind of normal aspects there. Thanks.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah. Just a couple of comments, Kelly. I think to your point, it implies, say, a $600-ish million decline at the midpoint from current levels in the loan book. Kind of breaking down where that comes from, we think it's kind of a high 100s number in that out-of-market portfolio.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

We're expecting some continued pull forward of some of those future maturities there. We think it's probably kind of approaching $100 million decline in 1 to 4s and indirect. From there, we do see higher payoffs, that kind of gets you to the remainder of the commercial portfolio, maybe in the $200 range. We think the core portfolios is, to Jim's point, stable to improving. We believe there will be some additional larger payoffs in some of those non-relationship. We're obviously hopeful some of that is criticized given that proactive approach.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

There's an assumption for higher payoff and higher secondary market activity in there, which again, we think is some of that 27-28 number being pulled forward.

[Kelly Motta, Analyst at KBW]

Got it. That's helpful. Last question from me, if I can sneak it in. Just in light of the increased payoffs, it was nice to see margin higher. Loan yields were up slightly. Just wondering if there was any notable prepay fees within that and where new originations are coming on. Thank you.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah. No notable prepay fees in there for the quarter from a margin perspective. New loan yields kind of low to mid-sixes depending on type.

[Kelly Motta, Analyst at KBW]

Thanks. I'll step back.

[Operator]

Your next question comes from Timur Braziler with UBS. Your line is now open. Please go ahead.

[Timur Braziler, Analyst at UBS]

Hi. Good morning. Maybe talking to your expectation for fixed asset repricing to start driving, accelerating NII growth through next year. I guess if you look back since the 1Q24 trough in margin's up 55 basis points since then on the fixed asset repricing story. NII has essentially been flat throughout that whole period. I guess, what gives you comfort that there's greater NII growth next year through fixed asset repricing if the balance sheet does remain a little bit in flux here?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah. I think as you look back to that point you're referencing, there were a couple branch sales, of course, in there, so a smaller balance sheet due to that which results in some reduced NII relative to that. I think to your point, as you look at 2027, We have that slide in our investor presentation, those loans are maturing at what I would call reinvestment yields for investments. Obviously, ability to turn those into new loans provides some significant implied upside into NII. There's what we view as downside protection if some of those loans do leave the balance sheet. We think it's a good position from an optionality perspective. We talked about the production focus we have, the addition in RMs, and then some of the success we're seeing in pipeline.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

All of that gives us the optimism that we'll see some improvement there. To your point, it's a mix shift conversation. We think it's a combination of really strong downside protection to NII, upside optionality if we're able to see that improved production we're expecting.

[Timur Braziler, Analyst at UBS]

Okay, thanks for that. I guess, looking at the slide that has the payoff or the adjustable and fixed-rate loan maturing and repricing schedule, slide eight. $2.2 billion through 2027, that's about 16% of your loan book, not inclusive of the classified portion. Is this still an opportunity? Given some of the payoff trends, are you now expecting maybe more of that maturing/repricing balances to exit the balance sheet over the course of the next year and a half?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah, I think at the rate those are rolling off, it's certainly an opportunity given the current rate environment. As we talked about in one of the earlier comments, it's a relationship focus for us. We think there's a real opportunity here. It's either enhancing existing relationships, adding new relationships, or rolling assets into market rates. I think given that mid-fours roll-off coupon, there's a lot of opportunity for us.

[Timur Braziler, Analyst at UBS]

Okay. Thank you.

[Operator]

Your next question comes from Jeff Rulis with D.A. Davidson. Your line is now open. Please go ahead.

[Jeff Rulis, Analyst at D.A. Davidson]

Thanks. Good morning. David, I think you mentioned you want to stay away from 2027 guidance. Just wanted to just check in on the general direction if you are pulling forward or accelerating payoffs. Trying to get a sense for what that means for loan balances next year. If you're kind of targeting, say, 10% loan runoff this year, does that imply that your chances for flat or positive growth in 2027, does that improve that? Either specific numbers or just the trend and just would be helpful to kind of get where you view 2027, even if it's vague at this point.

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah, good question, Jeff. I think I'll add a couple things and then let Jim add as well. I think the intent of pulling forward some of those where we see an opportunity too is to provide greater visibility into the outer years. I think to the earlier comment, we're too early to give a guide for loans in 2027. We want to continue to see these new RMs as well as the org redesign results start to come through before we have a specific guide for next year. I think certainly our goal is to create a portfolio we think is a growth portfolio.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Yeah, Jeff, I don't really have anything to add to what David said other than what I said earlier to Kelly in terms of like the momentum, like what we're seeing. When you look at our balance sheet, we have just great optionality but we're going to be smart with how we grow the bank. We're going to focus on the low-cost deposits and proactive credit management expense control, and be disciplined with our capital management. We reset the inflection point, but that doesn't change our underlying confidence in the growth. Our bankers are doing a great job, and we're seeing that building.

[Jeff Rulis, Analyst at D.A. Davidson]

Understood. A follow-on, David. You said you'd anticipate the average earning asset balance to bottom in Q3, but period-end earning assets should be up in three Q versus two Q?

[David Della Camera, EVP and CFO at First Interstate BancSystem]

Yeah, we had some of those kind of late two Q deposit flows we talked about. The ending versus average from a deposit perspective, which translates into earning assets, is lower. Three Q, we think it's more kind of flattish from an ending down from an average, and then three Q, or excuse me, four Q being higher from an average is what our guide implies.

[Jeff Rulis, Analyst at D.A. Davidson]

Okay. Appreciate it. Thank you.

[Operator]

Just a reminder, if you would like to ask a question, please press star one to raise your hand. We will leave the line open for one more minute in case there are any more questions. We have reached the end of the Q&A session. I will now turn the call back to Jim for closing remarks.

[James A. Reuter, President, CEO and Director at First Interstate BancSystem]

Thank you, and thank you for the questions today. As always, we welcome calls from investors and analysts. Please reach out if you have any follow-up questions, and thank you for tuning into the call today. Have a great day.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Nancy Vermeulen, Finance Strategy Implementation Manager and Investor Relations
• James A. Reuter, President, CEO and Director
• David Della Camera, EVP and CFO

Analysts

• Matthew Clark, Analyst at Piper Sandler
• Kelly Motta, Analyst at KBW
• Timur Braziler, Analyst at UBS
• Jeff Rulis, Analyst at D.A. Davidson