Safe and Sound

First Interstate Bank

Billings, MT
4
Star Rating
Started in 1916, First Interstate Bank is an FDIC-insured bank headquartered in Billings, MT. The bank holds equity of $1.43 billion on $12.15 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $9.93 billion on deposit at 135 offices in multiple states run by 2,049 full-time employees. With that footprint, the bank currently holds loans and leases worth $7.54 billion, including real estate loans of $5.16 billion.

Overall, Bankrate believes that, as of December 31, 2017, First Interstate Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial resilience. It acts as a bulwark against losses and as protection for accountholders during times of financial instability for the bank. From a safety and soundness perspective, the more capital, the better.

First Interstate Bank received a score of 6 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. First Interstate Bank's Tier 1 capital ratio was 11.46 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic challenges.

Overall, First Interstate Bank held equity amounting to 11.78 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

First Interstate Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.90 percent of First Interstate Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Interstate Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

First Interstate Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First Interstate Bank was 9.75 percent, above the national average of 8.10 percent.

The bank recorded net income of $135.8 million on total equity of $1.43 billion for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.12 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.