FIRST INTERSTATE BANCSYSTEM INC (FIBK) stock intrinsic value fair value estimate & owner earnings analysis

First Interstate BancSystem, through First Interstate Bank of Billings, Montana, runs about 289 branches across Montana, Wyoming, Idaho, Colorado, Oregon, Washington, South Dakota, North Dakota, Nebraska, Iowa, Minnesota and Missouri. It is a plain community bank: it gathers deposits in small and mid-sized towns, lends them out to farmers, small businesses, commercial real estate owners and households, and keeps the difference. At the end of June 2026 it held $21.4 billion of deposits, $14.3 billion of loans and $3.3 billion of shareholders' equity, of which $1.1 billion is goodwill from past acquisitions. How we measure earnings. For a bank, the cash that belongs to owners is not net income and not raw operating cash flow, which swings with mortgage loans parked for resale. We start from operating cash flow, strip out timing swings (including the mortgage loans held for sale), and then charge four ongoing costs: the provision for loan losses (the real cost of lending, which the cash statement adds back), stock compensation, the amortization of premiums paid on bonds (which reduces the true yield), and the branch spending needed to stay in business. On that basis owner earnings per share were $2.53 in 2022, $3.07 in 2023, $2.59 in 2024 and $2.67 in 2025. Each year ties to an independent rebuild from net income within about 2%. Two things are worth knowing. First, the 2025 net income of $2.94 a share included a one-time $62.7 million gain on the divestiture of the Arizona and Kansas branches; we exclude it. Second, about $14 million a year of amortization on acquired deposit relationships is added back. Those relationships do wear away over time, so we allow for that decay by keeping growth low rather than by cutting the earnings level. The starting level. We measure from 2022, when the Great Western Bancorp merger closed and the bank became the business it is today. Earlier years describe a bank about two-thirds the size with a different share count. The median of 2022 to 2025 is $2.63 a share. That window covers both a heavy credit-cost year (2024, with $68 million of provisions) and a light one (2025, $27 million), and the 2023 deposit-cost squeeze, so it is not a peak. The first half of 2026 is running somewhat above that level, helped by fewer shares after buybacks of $122 million in 2025 and $157 million in the first half of 2026. However, the branches divested carried $642 million of deposits, so their lost earnings roughly offset the buybacks, and we do not raise the level on two quarters. Growth. Owner earnings per share grew 2.9% in 2025. Year one of our base case assumes no growth from the $2.63 level ($2.65), which is below that pace. Over 2016 to 2025, per-share owner earnings rose from $2.29 to $2.67, about 1.7% a year, and much of that came from acquisitions. The repeatable part is that the bank retains about $0.75 a share a year after its $1.88 dividend and lends it out in its existing markets. We credit only that, at 1% a year, from year three. We give no credit to new acquisitions, market share gains or margin expansion. The cases. As a bank, borrowed money (deposits) is the bank's raw material, so we value earnings after interest and do not subtract debt. Its $99 million of subordinated notes is small against $2.5 billion of top-tier regulatory capital (a 14.4% ratio at the end of 2025). Base case, about $47 a share: earnings hold near $2.65 for two years, then grow 1% a year with retained earnings through year ten, and that earning power continues afterwards because it rests on a deposit franchise in rural Rocky Mountain and Plains markets that has operated since 1968. Bear case, about $34 a share: a full credit cycle like 2008-2010. Banks of this kind lost several percent of their loans over about three years in that cycle, and this bank's own earnings fell by roughly half. We charge cumulative excess loan losses of 5% of today's $14.3 billion loan book, plus a reserve build. That is about $680 million before tax, spread over years two to four, together with 10% lower pre-loss earnings from rate cuts and weaker deposits. Owner earnings fall to about $0.59 a share for three years, then recover only to $2.25 permanently, below today's level. Capital stays well above requirements throughout because earnings absorb the losses, so no dilutive share issue is needed, though the dividend would likely be cut. The bear value exceeds tangible book value of about $23 a share. That is because the low-cost deposit base in markets with few competitors keeps earning after the cycle, as it did after 2010. Bull case, about $54 a share: earnings reach $2.80 and then $2.95 as the slimmer post-divestiture bank and the lower share count show through, then grow 1.7% a year (the demonstrated long-run per-share rate) through year ten. What changed since our last look. Our earlier figures were built on net income and are not comparable. Since then, the 2025 net income has proved to contain a one-time branch-divestiture gain, and buybacks have reduced the share count by about 7%. Margin-of-safety price. We are fairly confident in the $2.6 earnings level: four post-merger years sit in a tight $2.53 to $3.07 band through both a deposit-cost shock and a heavy credit-cost year. The worst plausible event is a severe agricultural and commercial real estate downturn across the Plains states hitting at once, worse than our bear case. The structure would likely survive it: capital is high, the subordinated debt is small and there is no single large customer. But shareholders would lose years of dividends and could face dilution if losses ran to double our bear charge. The things we are most likely to be wrong about are credit losses and how much the bank's interest margin shrinks when rates fall. If both go the wrong way, the shares are worth around $30. The business pays $1.88 a share a year during the holding period. Measured against $21 that is a 9% yield, and if the base case plays out over five years it implies a total return well above 20% a year. The bear case implies a return only modestly short of that, because the dividend would likely be cut. Above about $23 the bear case would imply a return well short of the target, so the margin-of-safety price is $21.