In only the second bank IPO since mid-2007, a Montana company's shares debuted on the Nasdaq this week.

Analysts say the initial public offering from First Interstate BancSystem Inc. of Billings, which raised $145 million Wednesday, is another sign that the capital markets are thawing and companies are starting to take advantage of that.

"We are aware that there are growing lines at the door at both of the exchanges, Nasdaq and the NYSE," said Jason Frankl, who leads the listing advisory services practice at FTI Consulting in Washington. Frankl said a number of companies, including banks, are moving more quickly to register securities with the Securities and Exchange Commission, the first step in the process of listing on an exchange.

"That tells me that investment banks and management teams see a window right now," Frankl said.

The bank IPO window had been slammed shut for more than two years when 1st United Bancorp of Boca Raton, Fla., raised $70 million from an offering in September. (The company had previously traded on pink sheets.) Before that, the most recent IPO was by Encore Bancshares Inc. in Houston, which went public in July 2007, according to data from SNL Financial.

Although analysts are not predicting an onslaught of bank IPOs, they expect to see more this year as the economy improves.

David Menlow, the president of, said banks without "an absolutely pristine profile" will be unlikely to go public in this environment. "The perception in the marketplace is that there are a lot of skeletons in the closets of these companies," Menlow said of banks. "And it's just an uphill sale to get investors not only interested in the IPO but in pursuing it in the aftermarket."

Investors did appear receptive to First Interstate's entry into the market. The $7.1 billion-asset company announced Tuesday that it sold 10 million shares of class A common stock at $14.50 a piece, 1.3 million more shares than expected.

The shares began trading Wednesday at $16, up 10.3%, before closing at $15.70. In its second day on the market, the stock — trading under the symbol FIBK — opened at $16.25.

First Interstate, which operates 72 branches in Montana, Wyoming and South Dakota, plans to use the proceeds to repay variable-rate term notes issued under its syndicated credit agreement and pursue potential acquisitions, according to a prospectus.

First Interstate's CEO, Lyle R. Knight, citing a quiet period, declined to comment on the offering or what the company planned to do with the proceeds. But he did say that over the past 20 years, 70% of First Interstate's growth has been organic. "We have an active de novo strategy and we've been in growing markets," Knight said.

Jeffrey Rulis, an analyst with D.A. Davidson & Co., called First Interstate "one of the more impressive franchises in the Northwest."

"There's certainly buying interest there, and people think it's a viable franchise," Rulis said. "Those are good signals."

Rulis said an IPO is a good way for a company to gain visibility, liquidity and access to capital.

On the flip side, publicly traded companies face a number of requirements, including meeting a minimum trading price and market value and following SEC disclosure rules and corporate governance standards.

Wes Brown, a managing director at St. Charles Capital in Denver, said First Interstate has built a reputation as a stable institution. According to its prospectus, it had a Tier 1 risk-based capital ratio of 9.74% and a total risk-based capital ratio of 11.68% at the end of 2009.

But it has not been immune to economic stress in the region. Net chargeoffs more than doubled in 2009, to $30 million, and nonperformers increased 68%, to 3.57% of total loans.

Still, Brown said First Interstate has maintained a balanced loan portfolio without high concentrations in any one sector.

The bank, purchased by Homer C. Scott Sr. in 1968, also has a strong family culture, Brown said. Scott's son, Thomas W. Scott, serves as the chairman of the board of directors, and more than one-third of the board seats are held by family members.

The family controls 79% of the company's class B common stock.

"I think that their desire to build for a long haul has caused them to be a little more cautious and has served them very well in the current market," Brown said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.