Probe of First Interstate by SEC Extends to Arizona
First Interstate Bancorp revealed Thursday that the Securities and Exchange Commission has expanded its investigation of the company to include the firm’s troubled Arizona operations.
In an amended filing with the SEC, First Interstate also revealed that it is providing the Arizona operations with another $91 million in capital. And its upcoming stock offering is expected to generate $275 million, not the $325 million that had been expected.
The Los Angeles-based bank holding company also noted that it may reduce its size to meet future capital requirements. It now has $59.1 billion in assets. “We’re looking at various ways to shrink the balance sheet,” said Thomas P. Marrie, chief financial officer.
The amended filing was made as part of a stock offering scheduled to be priced next week at about $36 a share. Contrary to a report in the trade press, the stock offering has not been delayed, bank officials said.
Most of the money raised through the offering is intended to be injected into First Interstate’s troubled Texas operations, for which the bank recently set aside $400 million to cover problem loans. The company has also set aside $350 million for real estate problems in Arizona.
Earlier this month, First Interstate revealed that the SEC had launched an informal inquiry related largely to its problems in Texas. According to the amended filing, the SEC is also going to look into the bank’s methods for evaluating real estate assets in Arizona, as well as the adequacy of its books and internal accounting controls there.
The company also revealed that First Interstate Bank of Arizona is beefing up its capital and upgrading its credit policies under terms of an agreement reached with the Comptroller of the Currency.
The company said it has already put $61 million in new capital into First Interstate Bank of Arizona and will add another $30 million before June 30. The agreement also requires the Arizona operations to improve their loan administration, including policies to reduce problem loans and control loan concentrations.
