First Interstate BancSystem, Inc.
July 8, 2013 Issue
The Most Powerful Name In Corporate News and Information
Operating with a Personalized Touch, First Interstate BancSystem, Inc. is a Financial Holding Company and Community Bank Offering a Full Range of Banking and Financial Services throughout Montana, Wyoming and Western South Dakota
About First Interstate BancSystem, Inc. NASDAQ:FIBK:
First Interstate BancSystem,
Inc. is a $7.5 billion financial holding company headquartered in Billings,
Montana. It is the parent company of First Interstate Bank, a community bank
offering a full range of online, mobile, and other banking and financial
services throughout Montana, Wyoming, and western South Dakota.
First Interstate BancSystem, Inc.
North 31st Street
First Interstate BancSystem, Inc.
conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July
CEOCFO: Mr. Garding, would you give us an overview of First Interstate BancSystem?
Mr. Garding: There are two things that differentiate First Interstate from many of our competitors in this geographic region. Size would be the first difference. Most of the community banks in Montana, Wyoming, and South Dakota are closer to $100 million in total assets than they are to one billion. We are about $7.5 billion in total assets. Second would be customer service. Despite our size, we still consider ourselves a community bank and are very committed to the communities in which we do business. We operate our branches as independent community banks and have a personalized touch on most services that reach the customer. We emphasize and nurture customer relationships and try to give our customers a local, independent level of service. On the other hand, our size has allowed us to centralize and standardize most processes that do not reach the customer.
CEOCFO: Are there many differences among the communities you serve?
Mr. Garding: Yes, there are. Even though we are only located in three states, we cover a lot of land mass. There are 1,100 miles between our two furthest branches. The economy in the furthest Northwest branch is centered on forestry and tourism, but in many of the branches in other parts of our footprint, the economy is centered on agriculture or energy. By energy, I am referring to coal mining and/or oil and gas development. The economic drivers in the communities encompass the main differences, although the overall culture and lifestyles of the communities we serve are similar.
CEOCFO: Because of the differences in economy and industry, do you have people specializing in different areas?
Mr. Garding: Yes. However, we share our expertise that may be located in one or two branches, for instance the energy industry, across our company.
CEOCFO: Your bank description talks about your culture being driven by strong family and corporate values. Would you explain the culture, and how your philosophy affects things daily for your customers?
Mr. Garding: The culture of First Interstate drives us to make decisions based on values rather than short-term profitability. Because we are 55% family owned, we have a very long-term outlook. We make decisions based on total long-term relationships with customers. Sometimes, we may be on the fence with a decision, but with our culture, the driving force of the final decision is whether or not the decision matches up with our values.
CEOCFO: As you now have many branches and are spread out, how do you ensure that your culture filters through to all levels of the organization?
Mr. Garding: It starts with hiring the right people. We spend a lot of time training the people who interview prospective employees, because step one is to hire the right people in the first place. Step 2 is communication. We bring all of our senior managers in to headquarters three times a year for two-day meetings. We discuss technology and product lines, as well as culture and values. Additionally, I communicate by video with the entire company every month. The message is centered on what is important to our company at this time, which is our strategic plan and culture.
CEOCFO: Are there services that you are not currently offering but would like to add, or services you would like to focus more on than others?
Mr. Garding: Today, we offer a wide range of products and I cannot think of anything we are not offering that we would like to add. Being a financial holding company, the first option that comes to mind is whether or not we want to offer property and casualty insurance. The answer is no. We have looked at that and decided that insurance people are better suited to sell insurance than we are. I cannot think of anything I would like to add, but I would like to sell more of the products we offer today!
CEOCFO: Do you do much advertising? If so, what do you do to encourage new business as well as more business from your current customers?
We advertise on every
channel, meaning television, radio, newspaper, internet, and billboards. We
do a lot of brand and image advertising versus specific product advertising.
In order to keep our name out in the community, we tap into our culture of
being supportive of the communities in which we are located. For example,
last year our charitable giving was about $3.5 million. We also encourage
our employees to volunteer within the communities where they live. We are
committed with our time and our checkbook to our communities, because we
think it is good for the communities as well as our organization.
CEOCFO: Does the long history of the bank matter to people these days?
Mr. Garding: It depends on the people. Like any bank, we have a mixture of customers ranging from high school aged to well past retirement. The older customers value the history of the bank much more than the younger ones. However, the younger customers are interested in our technological advances, and we have done a good job keeping up with the industry in that area.
CEOCFO: First Interstate has a 25-year profitability record, which is hard to come by these days. How are you achieving results such as these?
Mr. Garding: I would credit our employees with that record. We have 1,700 employees, many of whom have been here for that entire 25-year span of profitability. Not only are they loyal, they are also very good bankers. I credit our people as the reason for our 25 years of profitability; whether it is because they were careful lenders, or they were better at going out and gathering new depositors, or auditors who made sure we met our compliance and lending standards. Our success is a combination of everyone working together.
CEOCFO: Would you tell us the key to keeping up with ever-changing regulations, and even more so the possibility of what might change? How do you prepare for the unexpected?
Mr. Garding: The key to dealing with increased regulation is attitude, which needs to come from the very top of the house. You can either wring your hands about new regulations or you can embrace them and move forward. We are going to move forward. Once the legislation is passed, we need to figure out how to work with it. This has been our attitude for a long time. We have a centralized compliance function. We have 12 regional compliance officers who report centrally to a chief compliance officer at our headquarters. This centralization has helped us stay ahead of the game.
CEOCFO: In your last quarterly report, you talked about improvement of asset quality and continued strength in residential mortgage lending. Would you tell me about those two areas?
Mr. Garding: In this geographic area, we were not hit as hard by the recession as the rest of the country, but we certainly were not immune. We, along with most of our competitors, ended up with a much higher level of problem loans than we were comfortable with and it cost us some money. Last year, we were able to reduce our level of non-performing assets by 35%, which was a step in the right direction. This year, we think we can achieve a 35% reduction again. We are certainly headed back toward a much healthier-looking loan portfolio. Concerning mortgage originations, business has been good to most banks because of the volume that was driven by the refinancing activity. We have seen many competitors get out of the business, whether they were small independent mortgage companies or some of the very small community banks. They did this because of the danger of making a compliance mistake, which is too great when you are a very small shop. We are continuing to see a high level of volume, partly because the economy is rebounding, there is still refinancing taking place and there is less competition than there used to be.
CEOCFO: Do you see the need for additional branches or possibly consolidation of branches?
Mr. Garding: Yes to both. We started construction on an additional branch just a month ago in a location on the West end of Billings, Montana. It is going to be a very good spot into the future and a location where we believe we need to be. Almost at the same time, we made the decision to close two very small branches in South Dakota, largely because they were located near other branches. We did not feel we created a hardship for our customers because there were other branches nearby as well as our online and mobile banking solutions to help meet their banking needs.
CEOCFO: Are acquisitions part of your strategy going forward?
Mr. Garding: It is part of our strategy, but not at all costs. Our real acquisition strategy is to figure out which communities we want to be located in, determine if there are banks in those communities we would like to own, and then start a dialogue to find which ones might be for sale. In some cases, there are banks that contact us, and in this situation we would be reactive versus proactive. We are certainly looking at our options, but to date we have not found the right target at the right price.
CEOCFO: Why should people in the business and investment community pay attention to First Interstate BancSystem?
Mr. Garding: What I view as special about the bank are the 1,700 people that work here. I would not trade them for any other group of employees. Secondly, our approach to doing business for the long-term is unique. We value relationships over transactions. That differentiates us from many of our competitors.
“We make decisions based on total long-term relationships with customers, not on short-term profitability. Sometimes, we may be on the fence with a decision, but with our culture, the driving force of the final decision is whether or not the decision matches up with our values. I credit our people as the reason for our 25 years of profitability; whether it is because they were careful lenders, or they were better at going out and gathering new depositors, or auditors who made sure we met our compliance and lending standards. Our success is a combination of everyone working together.”- Ed Garding
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