BILLINGS – First Interstate Bank CEO Kevin Riley said Friday he expects to cut about 155 jobs after completing the bank’s largest ever acquisition. But, he insists the customer experience will improve in all of the bank's system from South Dakota to the Pacific Northwest.
“As we get bigger, we can afford a better system and services to meet their needs,” Riley said in an interview at First Interstate’s headquarters in downtown Billings.
On Thursday, parent company First Interstate BancSystem announced it will acquire Bend, Oregon-based Cascade Bank for $589 million, extending its reach into the Pacific Northwest.
The deal, expected to close in the middle of 2017, would add $3.2 billion and 50 branches in Oregon, Washington and Idaho to First Interstate’s portfolio.
Shares of publicly traded First Interstate fell about 6 percent on Friday to $36.05 in response to the announcement.
Cascade Bank has about 600 employees, and First Interstate Bank has 1,727 employees in Montana, Wyoming and South Dakota. Riley said he hopes to cut most jobs through attrition at both banks. If necessary, layoffs would likely be targeted at former Cascade branches, and employees would be offered severance, he said.
The acquisition, which requires regulatory approval, would push First Interstate to $12.1 billion in assets and cement its status as Montana’s largest banking company.
Kalispell-based Glacier Bancorp., which announced it is acquiring Yuma, Arizona-based Foothills Bank last week, has roughly the same assets as First Interstate. Glacier owns Western Security Bank in Billings.
In a Friday conference call with analysts, Riley said First Interstate is excited to enter into growing markets in Bend and Boise, Idaho. Cascade also has branches in Seattle and Portland, which would represent First Interstate’s largest markets.
Riley insisted that First Interstate will retain the character of a community bank, even as it grows. The bank’s average commercial loan is under $300,000, he said.
“We serve small communities. Not only do we serve the customers, but we give back to the communities. ... If you all of a sudden break that model, you’re in trouble,” Riley said.
When the Cascade Bank acquisition if finalized, First Interstate will fall under new federal Dodd-Frank regulations that apply to banks above $10 billion in assets. First Interstate has been preparing for this benchmark for almost two years, hiring compliance experts and undergoing stress tests to ensure the bank can remain fiscally sound.
First Interstate also will forfeit about $11.5 million in fees collected annually on bank cards from retailers – known as interchange fees – because of a Dodd-Frank provision called the Durbin amendment.
These new regulations likely will apply to First Interstate in 2019, Riley said, adding that the bank has already adjusted its budget to reflect them.
It could all be a moot point: Republican President-elect Donald Trump has indicated he wants to curb or eliminate Dodd-Frank. Such a move would require approval by the Republican-controlled Congress.
Riley said he would like to see reform for the Durbin amendment and better control of the authority of the Consumer Financial Protection Bureau.
He added other parts of Dodd-Frank, specifically stress tests, are things bank should be doing anyway to ensure they’re healthy.
“Regulations are not that bad. People complain about it, but they’re not that bad,” Riley said.