First Interstate Bank Shrinks After Years of Rapid Growth

Montana-based regional bank reconfigures business model under new CEO Jim Reuter

Published on Feb. 5, 2026

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After quadrupling its asset size over eight years through acquisitions, First Interstate BancSystem in Billings, Montana is now shrinking its branch network, running off certain loans, and refocusing its investments. The changes are part of a strategic shift under new CEO Jim Reuter, who joined the bank in late 2024 after retiring from FirstBank Holding Company in Colorado. Reuter is steering First Interstate away from its previous growth-through-acquisition model and towards a more relationship-based banking approach focused on organic growth.

Why it matters

First Interstate's shift in strategy comes after years of rapid expansion through M&A, which some analysts believe may have run its course. The bank's moves to shrink its footprint and loan portfolio could position it for more sustainable, profitable growth, but also raise questions about whether the bank is setting itself up to be an acquisition target.

The details

Under Reuter's leadership, First Interstate has already sold a dozen branches in Arizona and Kansas, ended its indirect auto lending, and outsourced its consumer credit card product. The bank's loan portfolio shrank 14.8% in 2025 as it ran off certain loans, and deposit growth has also been impacted by branch closures. First Interstate is now focused on relationship banking, organic growth, and deploying capital in markets where it can better compete. The transition has not been without challenges, including credit quality issues in the commercial real estate portfolio.

  • In late 2024, Jim Reuter joined First Interstate as CEO after retiring from FirstBank Holding Company in Colorado.
  • In January 2025, during his first earnings call as CEO, Reuter outlined the bank's new strategic plan focused on relationship banking, organic growth, and optimizing the franchise.
  • By mid-2025, First Interstate had signed a deal to outsource its consumer credit card product, pushing $74 million in affiliated loans off its balance sheet.
  • In October 2025, First Interstate announced a deal to sell 11 branches in Nebraska with $280 million in deposits and $70 million in loans.
  • In early 2026, First Interstate is closing 4 additional branches in eastern Nebraska, leaving it with 29 branches in the state.

The players

Jim Reuter

The CEO of First Interstate BancSystem since late 2024, who previously served as CEO of FirstBank Holding Company in Colorado for 37 years.

Kevin Riley

The predecessor of Jim Reuter as CEO of First Interstate, who led the bank through seven acquisitions between 2014 and 2022 that expanded it into eight new states.

HoldCo Management

An activist investor that accused First Interstate's board of making "value-destructive" acquisitions and called for the bank to swear off future M&A.

Homer Scott

The Wyoming cattle rancher who purchased First Interstate in 1968.

Timothy Coffey

An analyst at Brean Capital who has been following First Interstate's strategic shift under Reuter.

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What they’re saying

“I like where we are today. I think 2026 is going to be a year where we get to see [benefits] because 2025 was a lot of recalibrating and refocusing.”

— Jim Reuter, CEO, First Interstate BancSystem (American Banker)

“It's gone from growth mode to mature mode, I would say, and Jim's leading that.”

— Timothy Coffey, Analyst, Brean Capital (American Banker)

“To me, they've moved past the identification stage, and they're into the execution stage. But it feels like, at least for 2026, it's going to take that full year to reposition.”

— Jared Shaw, Analyst, Barclays (American Banker)

What’s next

Some analysts are wondering if First Interstate is positioning itself to be an acquisition target, given the momentum in the regional bank M&A space. However, the bank remains focused on "disciplined organic growth" according to CEO Jim Reuter.

The takeaway

First Interstate's strategic shift from a growth-through-acquisition model to a more relationship-based, organic growth approach under new CEO Jim Reuter highlights the challenges regional banks face in optimizing their franchises and positioning themselves for sustainable profitability in a changing industry.