First Interstate in Montana Shifts Growth Strategy Under New Leadership
In a significant departure from its long-standing growth strategy, First Interstate BancSystem in Billings, Montana, is now taking a more targeted approach under the leadership of its CEO, Jim Reuter. Previously known for expanding through acquisitions, the bank has intentionally allowed some loans to run off and has been closing branches, reducing its balance sheet with the aim of achieving sustainable, disciplined organic growth.
Jim Reuter, who previously served as the CEO of FirstBank Holding Company in Colorado, joined First Interstate in late 2024. Known for his strong advocacy of relationship banking, Reuter believes in fostering comprehensive relationships with clients that go beyond loans to include deposits and service fees. This approach, he argues, is key to driving sustainable profitability.
Change in Strategy
During his tenure, Reuter has overseen the sale of several branches, ceased the origination of indirect loans such as auto loans, and outsourced its consumer credit card product. This strategic shift came after the bank found itself under pressure from activist investor HoldCo Management, which criticized the bank’s “value-destructive” acquisitions. Reuter’s emphasis on organic growth resonated with the investors, leading them to withdraw their threat of a proxy battle.
First Interstate’s change in strategy followed a period of aggressive expansion through acquisitions under Reuter’s predecessor, Kevin Riley. Over eight years, Riley led the bank through seven acquisitions, expanding its footprint into Oregon, Washington, and Idaho. However, according to analyst Timothy Coffey of Brean Capital, the acquisition strategy had run its course. With Reuter’s appointment, the bank’s focus shifted to consolidation and profitability.
Potential Acquisition Target?
As First Interstate continues to shrink and consolidate, some analysts are speculating that the bank may be setting itself up to be an acquisition target. This speculation is fueled by the current momentum in the regional bank mergers-and-acquisitions space. However, Reuter maintains that the bank remains “focused on executing our strategic plan — disciplined organic growth through full relationship banking.”
Optimization Over Expansion
Reuter’s strategy involves more relationship banking, fewer one-off loans, a focus on organic growth, and the deployment of capital into markets where the bank could better compete. While this approach has resulted in a temporary shrinkage of the loan book and a reduction in deposits due to branch closures, Reuter believes the bank is well-positioned for future growth.
Despite some credit-quality issues, particularly within the bank’s commercial real estate portfolio, First Interstate is making steady progress in redefining itself as a relationship-based bank. However, as analyst Jared Shaw of Barclays notes, it takes time for client relationships to form, and it may take a while for actual growth to materialize.
“Organic growth is the goal, but right now it’s organic integration,” Shaw said. “But it feels like, at least for 2026, it’s going to take that full year to reposition.”
Reuter remains optimistic about the bank’s future. “I think the bank did a great job through that M&A time period of building out a good franchise,” he said. “And now it’s about optimizing the franchise that’s available.”
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