Continuing its plan to dominate the Northwest, First Interstate BancSystem has acquired not one but two Idaho banks, in addition to the two it had previously acquired.
The Billings, Montana-based company announced Oct. 11 that it had acquired Idaho Independent Bank, based in Coeur d’Alene, and Community 1st Bank, based in Post Falls. In mid-August, the company closed on its April acquisition of Northwest Bancorporation Inc., which operated in Washington and Idaho as Inland Northwest Bank. Inland Northwest has three branches in Idaho, two in Coeur d’Alene and one in Spirit Lake. First Interstate entered Idaho in May 2017 through another acquisition, Bank of the Cascades. Before the new acquisitions, it had about 120 branches in Idaho, Montana, Oregon, South Dakota, Washington and Wyoming. The Idaho region, overseen from Boise, had 14 branches from Mountain Home to Fruitland with a total of 140 employees.
“When companies decide to merge, often their first consideration is whether the strategy and culture of the acquired company aligns with their own,” said Kevin Riley, president and CEO of First Interstate. “In this case, we are confident our individual strategies and cultures align well. In addition, the geographically complementary locations of Idaho Independent Bank, Community 1st Bank, and existing First Interstate and Inland Northwest Bank branches offer a tremendous opportunity to grow and better serve our clients and communities.”
Idaho Independent Bank, whose CEO, Kurt Gustavel, was appointed on Jan. 1 after being named president when he was just 35, has about 200 employees and 11 branches in Boise, Caldwell, Coeur d’Alene, Hayden, Meridian, Mountain Home, Nampa, Star and Sun Valley/Ketchum. It was established in 1993 as an Idaho state-chartered commercial bank. Community 1st Bank, founded in just 2007 in Post Falls as the first new community bank in that city in more than a century, now has three branches in Post Falls and Coeur d’Alene. That gives First Interstate a total of 28 branches in Idaho.
However, with the new acquisitions, there is overlap, particularly in Boise and Coeur d’Alene, Riley said.
“Some branches will undoubtedly be closed,” he said. He would not say how many, but said all three banks have implemented a hiring freeze in those markets to ensure as many existing employees as possible could remain with the company.
Both of the acquired banks, like First Interstate and its previous two acquisitions, are public. First Interstate paid $181.3 million for Idaho Independent and $21.5 million for Community 1st in all-stock transactions based on current stock prices. All of the acquisitions have been approved unanimously by their respective boards.
Idaho Independent has approximately $725 million in assets, $362 million in loans, $610 million in deposits, and $69 million in shareholders’ equity as of June 30. Community 1st has $130 million in assets, $78 million in loans, $116 million in deposits, and $13 million in shareholders’ equity as of June 30. Pro forma including both acquisitions, First Interstate will have approximately $14.1 billion in total assets, $8.9 billion in total loans, $11.4 billion in total deposits, and $1.8 billion in shareholders’ equity.
Gustavel will serve as regional president for Idaho and Eastern Washington. David Bobbitt, chairman and CEO of Community 1st, intends to retire, First Interstate said. Rob Perez, current regional president for First Interstate, will be retiring in the first half of 2019, according to Sara Becker, vice president and marketing manager.
Other than the new Ketchum/Sun Valley branches, much of Idaho east of Mountain Home remains without a First Interstate branch.
“While we find these regions very attractive, we have no immediate plans to move into these areas at this time, although we may consider it at some point in the future,” Riley said.
“Because of the increased capital for loans and the ability to offer new services, Idahoans stand to benefit as a result of this merger,” said Trent Wright, president of the Idaho Bankers Association in Boise. “Bank merger activity is a sign of a competitive industry. To meet or beat the competition, some banks choose to join other institutions that either offer more products or serve a different market.”
At the same time, the merger could create opportunities for other community banks to differentiate themselves from the larger bank, he added.
First Interstate’s move wasn’t surprising. Riley said during the earnings call on April 26 where the Inland Northwest deal was announced that it would consider other deals – likely starting at $1 billion and focused on filling in the six states in which it already operates, as opposed to entering other markets such as California.
“I anticipate continued acquisitions (of other banks),” Perez added in June. “I anticipate additional organic growth.”
Banking experts had suggested that the passage of S.2155 – the Economic Growth, Regulatory Relief and Consumer Protection Act, which was signed into law by President Donald Trump on May 24 – might encourage smaller banks to merge with or acquire each other, because even merged, they will still fall below that new threshold for compliance with large bank requirements. However, Riley said S.2155 wasn’t a factor in the acquisitions.
The company will announce earnings for the third quarter, which ended Sept. 30, on Oct. 25. Analyst estimates range from $0.70 to $0.84. In its previous quarter, it reported net income of $41.7 million, or $0.74 per share, compared with net income of $36.7 million, or $0.65 per share, for the first quarter of 2018, and $21.8 million, or $0.45 per share, for the second quarter of 2017.
This article was updated on October 12 to include Rob Perez’ status.