First Interstate Bancsystem, Inc. · NASDAQ:FIBK
First Interstate Bancsystem — Investor Presentation (March 2019)
53 slides from First Interstate Bancsystem's investor presentation, Mar 15, 2019
Slide 1: Investor Presentation February | March 2019
Investor Presentation February | March 2019
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (1) the benefits of the mergers between First Interstate BancSystem, Inc. (
Slide 3: Important Additional Information
Important Additional Information This presentation is being made in respect of the proposed mergers between First Interstate and IIBK and First Interstate and CMYF. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any v
Slide 4: Why Invest in First Interstate BancSystem?
Why Invest in First Interstate BancSystem? • Committed to Increasing Shareholder Value • Long Track Record of Profitability • Strong Core Deposit Funding • Conservative Credit Strategy which Limits Exposure to Large Losses • Diversified Client Base Tempers Economic Volatility • Expansion into Northw
Slide 5: FIBK Overview
FIBK Overview OVERVIEW DESCRIPTION Headquarters Billings, MT • Headquartered in Billings, MT and focused on regional community banking in Idaho, Montana, Oregon, South Dakota, Washington, and Kroll Rating BBB+ Wyoming: Market Cap $2.36 Billion • Over 145 banking offices • 238 ATMs, plus 24,000 Money
Slide 6: Building the First Interstate Franchise
Building the First Interstate Franchise 2018 Inland Northwest Bank, filling in Announced in Fall 2018 footprint in the PNW $826.8 million 20 Branches Idaho Independent Bank $725 million 11 Branches 2016 Community 1st Bank Flathead Bank of Bigfork $130 million 3 Branches $225 million 7 Branches FIBK
Slide 7: Idaho Independent Bank (IIBK) Community 1st Bank (CMYF)
Idaho Independent Bank (IIBK) Community 1st Bank (CMYF)
Slide 8: Transaction Highlights
Transaction Highlights • Continued geographic diversification into attractive, high growth markets in Pacific Northwest • Strong Idaho presence in Boise and Coeur d’Alene Strategically • Cohesive set of banking franchises with similar cultures due to the management, market and ownership Compelling •
Slide 9: Overview of Idaho Independent Bank and Community 1st Bank
Overview of Idaho Independent Bank and Community 1st Bank IDAHO INDEPENDENT BANK OVERVIEW COMMUNITY 1st BANK OVERVIEW Headquarters Coeur d’Alene, Idaho Headquarters Post Falls, Idaho Footprint 11 branches Footprint 3 branches Assets $725 million Assets $129 million Gross Loans $362 million Gross Loa
Slide 10: Attractive, Low Cost Pacific Northwest Deposit Markets
Attractive, Low Cost Pacific Northwest Deposit Markets IIBK and CMYF have strong market share in complementary Pacific Northwest markets FIBK (149) IIBK (11) CMYF (3) Top MSAs - Deposit Market Share Market Deposits Deposits % Proj. Market Growth IIBK Rank Branches ($mm) of PF Total 5-Year CAGR Boise
Slide 11: Strong Pro Forma Idaho State Market Share
Strong Pro Forma Idaho State Market Share FIBK pro forma is the largest community bank in Boise and the second largest community bank in Coeur d'Alene Total Total COMMUNITY BANKS IN STRONG ECONOMIES Active Deposits Total Deposit YoY Deposit 5-Year Market Branches 2018 Market Share Growth 2018 Deposi
Slide 12: Top Ranked Idaho Community Banking Franchise
Top Ranked Idaho Community Banking Franchise Pro Forma¹ Total Assets $500,008 $725,016 $129,800 $1,354,824 Total Loans $479,565 $362,049 $78,283 $919,897 Total Deposits $656,378 $609,941 $115,526 $1,381,845 ID Deposit Market Share % 2.53% 2.35% 0.45% 5.33% Market Rank 12 13 25 6 • Moves First Inters
Slide 13: Diverse, Low Risk Loan Portfolio
Diverse, Low Risk Loan Portfolio LOAN OVERVIEW STRONG LOAN GROWTH CMYF IIBK $365,891 $361,798 • 9.4%/9.1% CAGR since 2013 for IIBK and CMYF $324,659 $292,202 $266,052 • 86%/63% of loans floating with Prime or LIBOR for IIBK and $241,581 CMYF • Expertise in business banking $76,236 $78,283 $58,102 $6
Slide 14: Attractive Low Cost Deposit Base
Attractive Low Cost Deposit Base IIBK DEPOSIT OVERVIEW CMYF DEPOSIT OVERVIEW COST OF DEPOSITS o 0.09% cost of deposits o 0.34% cost of deposits 0.34% 0.29% 0.28% o 21% transaction deposits o 42% transaction deposits 1 1 o ~99% core deposits o ~86% core deposits 0.09% FIBK IIBK CMYF Pro Forma FIRST I
Slide 15: Summary of Deal Terms
Summary of Deal Terms IIBK CMYF • 0.5 FIBK Class A common shares per IIBK share, • 0.3784 FIBK Class A common shares per CMYF or ~3.9mm FIBK shares in aggregate Consideration and share, or ~0.5mm FIBK shares in aggregate Deal Value1 • Implied purchase price of $22.73 per share • Implied purchase pri
Slide 16: Consolidated Financial Impact
Consolidated Financial Impact Financial Impact and Assumptions Consolidated Financial Impact to FIBK EPS Accretion • ~3.6% accretive to EPS in 2020 • Pro Forma TCE / TA of 8.5% Projected • ~1.4% Tangible Book Value dilution per share Combined Pro • Pro Forma Leverage Ratio TBV Impact • <2.0 year Tan
Slide 17: Comprehensive Due Diligence and Preparation
Comprehensive Due Diligence and Preparation • First Interstate management and employees have significant acquisition and integration Experienced And experience Disciplined • Five successful acquisitions in the last five years Acquisition And • Cascade acquisition already integrated and systems conve
Slide 18: Strengthens Outlook for First Interstate
Strengthens Outlook for First Interstate • Strong earnings contribution from IIBK and CMYF fully realized in 2020 • 3%+ Earnings Per Share accretion with conservative assumptions • Transaction cost savings result in improved pro forma efficiency ratio Benefits of Operating • Cross sell opportunities
Slide 19: Regional Overview
Regional Overview Firstinterstate .BancSystem
Slide 20: Stable Employment
Stable Employment WA 4.3% (RANKED 41ST) MT 3.7% OR (RANKED 27TH) 4.1% ID (RANKED 36TH) SD 2.6% 2.9% (RANKED 4TH) WY (RANKED 10TH) 4.1% (RANKED 37TH) B est 5 States 1 Iowa 2.4% 2 Hawaii 2.5% 3 New Hampshire 2.5% 4 Idaho 2.6% 5 North Dakota 2.7% Wo rst 5 States 50 Alaska 6.3% 49 West Virginia 5.1% 48
Slide 21: Idaho
Idaho STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS ID GDP: Industry % Contribution STRENGTHS INDEX RANK EXPANSION • Prominent drivers in high tech, agriculture. RECOVERY Government • Above-average population growth 99% 24 AGRICULTURE HIGH-TECH A
Slide 22: Montana
Montana STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS STRENGTHS MT GDP: Industry % Contribution INDEX RANK EXPANSION • Substantial coal and oil reserves. • Year-round tourist attractions. RECOVERY Government 99% 25 AGRICULTURE TOURIST ENERGY & •
Slide 23: Oregon
Oregon STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS OR GDP: Industry % Contribution STRENGTHS INDEX RANK EXPANSION • Diverse economy with strong export RECOVERY Government focus. 97% 33 • Low energy costs courtesy of a AT RISK TOURIST HIGH-TECH
Slide 24: South Dakota
South Dakota STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS SD GDP: Industry % Contribution STRENGTHS INDEX RANK EXPANSION • Some of the lowest costs of doing RECOVERY Government business in the nation. 85% 50 TOURIST MEDICAL FINANCIAL • High hous
Slide 25: Washington
Washington STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS WA GDP: Industry % Contribution STRENGTHS INDEX RANK EXPANSION • High-value-added commercial RECOVERY aircraft manufacturing. Government 98% 30 • Fast-growing information AT RISK Other serv
Slide 26: Wyoming
Wyoming STATE GDP OVERVIEW ECONOMIC DRIVERS STRENGTHS & WEAKNESSES BUSINESS COSTS BUSINESS CYCLE STATUS STRENGTHS WY GDP: Industry % Contribution INDEX RANK EXPANSION • Low debt burden relative to national average. RECOVERY Government • Abundant natural energy resources. 99% 26 ENERGY & AT RISK
Slide 27: Financial Overview
Financial Overview Firstinterstate .BancSystem
Slide 28: Diversified Loan Portfolio by Industry
Diversified Loan Portfolio by Industry LOAN MIX COMMERCIAL Health Care & Social Assistance Retail Trade All Other 10% 8% $8.50 Billion in Loans 37% Agriculture RE Transportation & Warehousing 3% Commercial 9% 15% Construction 7% Agriculture Finance & Insurance Real Estate & Rental & 6% 3% Leasing Ot
Slide 29: Improving Asset Quality
Improving Asset Quality NON-PERFORMING ASSETS TO TOTAL ASSETS 1.20% 0.96% 0.98% 1.00% 0.80% 0.80% 0.74% 0.74% 0.68% 0.63% 0.63% 0.60% 0.55% 0.40% 0.20% 0.00% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2017 2017 2017 2018 2018 2018 2018 NON-PERFORMING LOANS TO TOTAL LOANS NON-PERFORMING ASSETS TO TOTAL LOA
Slide 30: Criticized and Classified Loans
Criticized and Classified Loans CRITICIZED LOANS TO TOTAL LOANS 8.00% 7.10% 6.79% 7.00% 5.69% 5.60% 6.00% 5.26% 5.19% 4.93% 4.99% 5.00% 4.72% 4.00% 3.00% 2.00% 1.00% 0.00% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 CLASSIFIED LOANS TO TOTAL LOANS 5.00% 4.42% 4.50% 4.00%
Slide 31: ALLL and Purchase Discount Overview
ALLL and Purchase Discount Overview Allowance for Loan Losses (ALLL) $72,963 Remaining Loan Discount $37,603 Total ALLL + Remaining Discount $110,566 Pre-Discount Loan Balance $8,541,297 ALLL/Pre-Discount Loan Balance 0.85% Mark/Pre-Discount Loan Balance 0.44% (ALLL + Remaining Discount)/Pre-Discoun
Slide 32: Strong Deposit Base
Strong Deposit Base $10.68 Billion in Deposits CDs > $100k 5% Time Other 7% Demand Non-Interest Bearing 30% Savings 30% Demand Interest Bearing 28% Low Cost of Funds: 43 basis points Page 32 As of December 31, 2018
Slide 33: Market Share
Market Share MARKET MARKET ALLOCATION OF DEPOSITS LOCATION SHARE* LOCATION SHARE* JUNE 2018 JUNE 2018 Laramie, WY 48% Bozeman, MT 16% Washington 5% Riverton, WY 43% Kalispell, MT 15% Idaho 6% Sheridan, WY 40% Jackson, WY 14% South Dakota Missoula, MT 32% Cheyenne, WY 12% 8% Casper, WY 30% Nampa, ID
Slide 34: Balance of Consumer and Business Deposits
Balance of Consumer and Business Deposits (In billions) $12 47% $10 47% $8 47% 48% 49% $6 49% 49% 53% 53% $4 53% 52% 51% 51% 51% $2 $0 2012 2013 2014 2015 2016 2017 2018 Total Consumer Deposits Total Business Deposits Page 34
Slide 35: Investment Portfolio
Investment Portfolio Portfolio % Portfolio % Portfolio % Book Value Book Value Book Value Market Value Market Value Market Value 6/30/18 9/30/18 12/31/18 6/30/18 9/30/18 12/31/18 6/30/18 9/30/18 12/31/18 Treasury/Agency 21.7% 22.7% 21.8% $578,755,308 $598,992,908 $591,709,545 $564,620,057 $583,296,6
Slide 36: Interest Rate Sensitivity
Interest Rate Sensitivity • Asset sensitive in up-rate scenarios, despite conservative deposit beta methodology NETNET INTEREST INTERESTINCOME INCOME NETNET INTEREST INTERESTINCOME INCOME (NII) (NII) – -SHOCKS*Shocks $600M +400 bps 1.33% $476M $477M $478M $500M $462M $472M $474M +300 bps 1.09% $419M
Slide 37: Non-Interest Income
Non-Interest Income Payment Services 23% of TOTAL REVENUE • Business credit card volume growth is accelerating in the West, with significantly more opportunity available. • Completed hiring of two BBO’s in the West and expect additional Other Income credit card volume growth in future. 10.5% Other S
Slide 38: Growth Strategies and Capital Allocation
Growth Strategies and Capital Allocation Page 38
Slide 39: Maximizing Shareholder Value
Maximizing Shareholder Value Management’s priority is to deploy capital through: Organic Growth Strategic M&A Stock Repurchases Dividends Special Dividends Page 39
Slide 40: Building the Foundation for Future Growth
Building the Foundation for Future Growth • Chief Operating Officer: Jodi Delahunt Hubbell (Previously at Zions) • Chief Banking Officer: Renee Newman (Previously at Beneficial State Bank and Umpqua) • Chief Information Officer: Kade Peterson (Previously at MidSouth Bank, USAmeriBank, and Sterling B
Slide 41: Realignment of the Executive Team
Realignment of the Executive Team BOARD OF DIRECTORS Kevin Riley Chief Executive Officer Kirk Jensen Lisa Slayer-Bray Legal Counsel Executive Assistant Jolyn Kanning Lori Meyer Internal Audit Director of Enterprise Program Mgmt Renee Newman Jodi Delahunt Hubbell Marcy Mutch Phil Gaglia Kade Peterson
Slide 42: We are Delivering Results
We are Delivering Results Since the IPO in March 2010, FIBK has delivered a 225% total return to shareholders 350 300 250 200 225 150 100 Percent (%) Percent 50 0 -50 -100 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Sep-12 Sep-10 Sep-11 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Ma
Slide 43: Appendix
Appendix First Interstate .BancSystem
Slide 44: Strong Capital Allows Growth
Strong Capital Allows Growth 16% 14% 12.99% 12.26% 12% 10% 8.39% 8% 6% 4% 2% 0% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Total Risk Based Capital Tier 1 Risk Based Capital Tangible Common Equity to Tangible Assets Page 44 As of December 31, 2018
Slide 45: Mortgage Production
Mortgage Production QUARTERLY PRODUCTION VOLUME $350 $300 $250 $200 $150 $100 $50 $- Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Purchase Refinance Page 45 As of December 31, 2018
Slide 46: Credit Card: Industry Comparison
Credit Card: Industry Comparison BUSINESS GROSS DOLLAR VOLUME (GDV) GROWTH FIB vs. NATIONAL MONTHLY CHARGE-OFF AS A % of OUTSTANDING (LONG VIEW) 45.0% 1.00% FIB C/O National C/O FIB Mastercard Benchmark 40.0% 0.90% 35.0% 0.80% 30.0% 0.70% 0.60% 25.0% 0.50% 20.0% 0.40% 15.0% 0.30% 10.0% 0.20% 0.10% 5
Slide 47: Indirect Auto: Lending
Indirect Auto: Lending CONSUMER INDIRECT PRODUCTION INDIRECT LOAN PORTFOLIO Other $400 8.4% New 6.8% Auto $350 6.69% 28.7% 6.63% RV 22.0% $300 6.3% $250 $200 5.8% $150 Used Auto 5.49% 40.9% $100 $91.4 $77.4 $72.5 5.3% $50 • Total Portfolio Yield: 5.36% $0 4.8% 4Q17 3Q18 4Q18 • Average Life of RV: 47
Slide 48: Indirect Auto: Delinquency and Charge-Off
Indirect Auto: Delinquency and Charge-Off Originations from a credit quality perspective are improved • ~50% of our originations are above a 760 FICO score • ~72% of our originations are above a 720 FICO score • Not participating in the subprime space, less than 1% of the portfolio has a score below
Slide 49: Oil and Gas: Industry Exposure
Oil and Gas: Industry Exposure • $62 million in direct exposure (0.7% of total loan portfolio) • $16 million in unfunded commitments • $32 million in criticized loans category • 8.2% Allowance for Loan Loss Allocation NAICS NET PRINCIPAL MONTH DESCRIPTION UNFUNDED COMMITTMENT CODE BALANCE 211111 Cru
Slide 50: Oil and Gas: Industry Performance Metrics
Oil and Gas: Industry Performance Metrics • $12 million in impaired loan categories • 8.2% allowance allocation • $3.3 million in potential loss exposure DESCRIPTION CRITICIZED % CRITICIZED CLASSIFIED % CLASSIFIED IMPAIRED % IMPAIRED Crude Petroleum and Natural Gas Extraction $25,322,946 85.1% $24,6
Slide 51: Agriculture: Portfolio Exposure
Agriculture: Portfolio Exposure • 5.6% of total loan portfolio • $152 million in unfunded commitments • Beef Cattle Ranching/Farming accounting for 44% of total portfolio NAICS NET PRINCIPAL MONTH DESCRIPTION UNFUNDED COMMITTMENT CODE BALANCE 112111 Beef Cattle Ranching and Farming $209,918,114 $70,
Slide 52: Agriculture: Industry Performance Metrics
Agriculture: Industry Performance Metrics • $66.8 million in criticized loan categories • $15.6 million in impaired loan categories • $333 thousand in potential loss exposure DESCRIPTION CRITICIZED % CRITICIZED CLASSIFIED % CLASSIFIED IMPAIRED % IMPAIRED Beef Cattle Ranching and Farming $28,548,296
Slide 53: Mall and Retail Trade: Portfolio Exposure
Mall and Retail Trade: Portfolio Exposure • $55.6 million direct exposure to Malls1 (0.7% of total loan portfolio) • None in criticized loan categories • $41.7 million direct exposure to Retail Trade 2 (0.5% of total loan portfolio) • $1.3 million in criticized loan categories NAICS NET PRINCIPAL MO
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