First Interstate BancSystem(US:FIBK)2020-02-26 22:41Financial Position - As of December 31, 2019, the company had consolidated assets of $14.6 billion, deposits of $11.7 billion, total loans of $9.0 billion, and total stockholders' equity of $2.0 billion[7]. - The company reported goodwill of $621.6 million, representing 30.9% of total stockholders' equity as of December 31, 2019[133]. - Common Equity Tier 1 Capital Ratio stands at 12.62%, significantly above the well-capitalized minimum of 6.50%[152]. - Total Capital Ratio is reported at 14.10%, exceeding the well-capitalized minimum of 10.00%[152]. - Tier 1 Leverage Ratio is 10.13%, well above the required minimum of 5.00%[152]. Market Presence and Operations - The company operates 152 banking offices across Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming, with a market deposit share of 17.72% in Montana and 5.13% in Idaho[26]. - The company completed the acquisition of Idaho Independent Bank for $157.3 million and Community 1st Bank for $18.8 million in April 2019, enhancing its market presence[12][13]. - The company aims for organic growth in existing markets while exploring expansion into new and complementary markets when opportunities arise[10]. Regulatory Environment - The company is subject to extensive regulation under federal and state laws, impacting its operational activities and compliance costs[30][37]. - The bank holding company is required to maintain a "well-capitalized" status to engage in authorized financial activities[38]. - Federal regulations require a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, and a total capital to risk-based assets of 8.0%[49]. - The Dodd-Frank Act imposes additional supervisory measures on banking organizations when they exceed $10 billion in assets[63]. - The bank is subject to various regulatory restrictions relating to capital distributions, including dividends and regulatory capital minimums[44]. Risk Management - The company has a robust lending policy with minimum underwriting standards to limit risk, ensuring loans are appropriately collateralized and supported by current credit information[16]. - The bank's capital adequacy is assessed through both quantitative measures and qualitative judgments by regulators[54]. - The company faces risks related to the potential cessation of LIBOR, which is extensively used as a reference rate for various financial contracts[124]. - The company may experience increased funding costs if it loses deposits or if clients shift to higher-cost products[122]. - A significant portion of the loan portfolio is secured by real property, which may lead to adverse financial impacts due to foreclosure costs[165]. Economic and Market Conditions - Economic conditions in Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming significantly impact the Bank's profitability due to its geographical concentration[94]. - A decline in economic conditions could lead to increased loan delinquencies, problem assets, and foreclosures, adversely affecting the Bank's financial condition[95]. - Changes in U.S. trade policies and tariffs could materially harm the company's business and financial condition[108]. - The company may be adversely affected by declining oil and gas prices, which could impact the economies of its market areas[128]. Employee and Corporate Governance - The company employed 2,473 full-time equivalent employees as of December 31, 2019, indicating a strong workforce to support its operations[29]. - The company focuses on building a diverse workforce and maintaining good employee relations, as evidenced by its participation in annual engagement surveys[29]. - The Scott family controls a majority of the voting power of the company's common stock, which may limit other stockholders' influence on corporate matters[194]. - The company qualifies as a "controlled company" under NASDAQ rules, exempting it from certain corporate governance requirements[201]. Cybersecurity and Operational Risks - Cybersecurity threats remain high, with the Bank employing various measures to protect sensitive data and operations from potential attacks[89]. - The company faces significant cyber-security risks, including denial-of-service attacks and identity theft, which could adversely affect its business and reputation[153]. - Operational risks, including fraud and system failures, could adversely affect the company's ability to conduct business effectively[176]. - Legal risks remain high, with potential adverse financial effects from litigation impacting the company's reputation and business prospects[177]. Financial Products and Services - The company offers a wide range of financial products, including traditional depository products, wealth management services, and commercial banking services[21][22]. - The Bank's loan portfolio is concentrated in commercial real estate and commercial business loans, with $4.9 billion in commercial loans as of December 31, 2019, representing approximately 54.4% of the total loan portfolio[99]. - As of December 31, 2019, the company had $2.7 billion in agricultural, construction, residential, and other real estate loans, accounting for approximately 29.9% of its total loan portfolio[101]. - 51.4% of the company's loans were advanced on a variable or adjustable-rate basis, indicating potential increased loan defaults with rising interest rates[105]. Future Outlook and Challenges - The company anticipates competition for acquisition opportunities may increase, potentially raising prices and reducing returns[163]. - Changes in accounting standards, particularly the introduction of the CECL model, may require the company to increase its allowance for loan losses, impacting capital ratios and operational results[135]. - Future equity issuances could result in dilution of existing shares, negatively impacting the market price of Class A common stock[203].