Annual Report 2022 | First International Bank & Trust

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ANNUAL REPORT 2022

PROUD of the past

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STEPHEN L. STENEHJEM a message from

CEO/CHAIRMAN OF FIRST INTERNATIONAL BANK & TRUST

When my grandfather Odin Stenehjem founded Farmers State Bank in Arnegard, North Dakota in 1910, he envisioned a strong community bank built on sound principles and an unwavering dedication to our customers. Over the past 112 years, First International Bank & Trust has weathered two world wars, the Great Depression, technological revolution, and catastrophic world events. Anything you can imagine, we’ve been through it before - from high unemployment rates and high taxes to economic booms and financial prosperity. The one constant is we always come out of those challenging situations stronger than we were before.

It’s a fact of life businesses need to change with the times to best serve their customers. That’s

why we embrace change and encourage new ideas within our organization. We consciously put independent consultants on our Board of Directors to gain valuable outside perspective. We provide vigorous leadership training for our employees and encourage life-long learning to make sure they’re prepared for future years. We diversify our assets through specialized divisions such as Kotapay and MineralTracker® which helps protect us from the ebbs and flows of market conditions and demands. We do these things so we can continue to be the community bank our customers want, need and appreciate.

To give you a glimpse of our accomplishments over this past year, I’m pleased to share the 2022 Annual Report.

• First International Bank & Trust saw loan growth take off with our total loans growing by 19.56%. We’re focused on maintaining both loan and deposit growth.

• Banking operations in Arizona continued to build on the momentum from the previous year with robust increases in both our loan and deposit portfolios. We feel our continued focus on relationship-building and customer service has been the key to our success.

• We’re continuing to grow in Sioux Falls and are seeing success in bringing our “Live First” form of community banking to South Dakota. The opening of our newest branch is allowing us to form deeper relationships

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FIRST INTERNATIONAL BANK & TRUST

with our customers and serve the community in new ways.

• Kotapay saw incredible growth in 2022 and experienced yet another year with zero fraud losses. The team set some new records including most dollars processed in a day, and highest number of monthly transactions. It’s a credit to the whole team that we exceeded our income and revenue goals and are poised to serve more clients than ever before in 2023.

This past year, I celebrated my 40th anniversary with the bank. When I first moved back to Watford City in 1982, it was hard to imagine the future that was in store for both me, my family, and the bank. I’m not only proud of our growth, but also the culture we’ve created. At First International Bank & Trust, we are truly a family.

Shortly after starting at the bank, I sat down with my dad and asked him what I should focus on. I thought he’d tell me to go out and develop

some loan business or work on some operational improvements. Instead, he told me that as a community banker, I’d spend a lot of my time keeping our small town alive. What that meant to my dad, and now to me, was investing time into the things that matter and making a difference in ways that improve the standard of living and economics for our communities. That’s something we’ll always be dedicated to, regardless of the circumstances or economic environment.

As we look forward to another year, I’m thankful for the continued support of our customers. On behalf of the entire First International Bank & Trust family, thank you for trusting us with your financial needs.

THANK YOU

For 112 years, First International Bank & Trust has developed a bond between our employees and our customers. We currently serve a wide range of rural and urban communities across North Dakota, South Dakota, Minnesota, and Arizona. On behalf of the Stenehjem family, thank you for your continued support. We remain committed to those relationships we’ve worked so hard to build and to our values that have helped us get to where we are today.

OUR MISSION

To be nationally recognized as a community bank whose innovation and drive for excellence is propelled by the best financial experts with heart.

OUR VISION

Our customers leave feeling like family.

OUR VALUES

Own the Choices You Make

Speak Up Respectfully

Make Decisions with Integrity

Take Pride in Your Work

Act Like Your Ride is Waiting

Learn from Yesterday, Rush for Mastery

Leave Your Mark on Our Communities

Seek the Sunshine Every Day

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FIRST INTERNATIONAL BANK & TRUST ON THE COVER: ODIN STENEHJEM

LIVING FIRST say yes to

We all want to spend our time on the things that truly matter, don’t we? At First International Bank & Trust, we have a phrase for that – we call it Living First. Our customers, employees, and future customers all have a different vision of what “Live First” means. That’s the beautiful part! Whether someone wants to buy a house with a bigger yard so the kids can run around or pack up to travel the country in a new RV, Living First always starts with a choice. It requires us to Say Yes.

Long-lasting, quality relationships built between our clients and our bankers are the foundation we’ve built upon for more than a century. As we continue to grow, we remain committed to that personal touch. We place tremendous importance on remaining local, caring for our customers, and staying involved in our communities.

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LIVE FIRST

Last year, we announced a $200,000 donation to the Staples-Motley Independent School District in Minnesota. The contribution, of which $100,000 has already been delivered, is supporting the school district on its upcoming activities and wellness facilities addition. We strongly believe this collaboration to enhance phase one of the school’s improvement plan will contribute to a healthier community for all and a pooling of resources will result in smart, collective, and impactful investments.

We also contributed to the Nistler College of Business and Public Administration capital project at the University of North Dakota. The new building features the Stenehjem Family/First International Bank & Trust Executive Boardroom on the second floor of the facility.

FIBT was a significant donor to the Heart of America Medical Center for a new medical facility in Rugby, North Dakota. The Heart of America Medical Center is Rugby’s largest employer, and this new facility will assure state of the art healthcare services for 11,000 citizens in the region.

FIBT also donated $50,000 to the Trinity Health Foundation’s Capital Campaign in support of its new hospital and medical facility that are currently under construction in Minot, North Dakota. We are passionate about funding projects that create and sustain strong communities and are honored to partner with Trinity in contributing to the health and wellness of our community members.

We continue to support Sanford Health initiatives and events in the Bismarck, Fargo, and Sioux Falls regions, particularly highlighting pediatric and adult behavioral health, children’s cancer treatment, and endowment funding.

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STENEHJEM FAMILY MEMBERS IN SIOUX FALL, SD TO CELEBRATE THE GRAND OPENING OF THE NEW FIBT BRANCH.

FRONTIER the digital

At its core, digital innovation is about optimizing processes and creating efficiencies so we can focus on relationships and better serving our customers. Through technology, there are many ways we’re able to protect you or your business. One of the most valuable tools for businesses is Positive Pay, our solution that helps you be proactive in reducing the possibility of losses incurred by fraud.

In the pages to come, you’ll hear about other ways we’re continuing to expand our services to help our customers, such as our brand-new Evolve Payment Solutions program. No matter the business climate or economic environment, we remain committed to innovation and finding new ways to optimize your banking experience.

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DIGITAL INNOVATION

“Working with Kotapay, I know the people on the other end of the phone/computer, and they know me. I’m not just a number to them. They are always happy to provide assistance when I call [and] ensure my company’s direct deposit transactions are handled properly, timely, and accurately. They provide an unrivaled service at a very reasonable price.”

MINIMIZING RISK

Our check Positive Pay system compares checks presented for payment to your issued-check files verifying check numbers, dollar amounts, and issue dates. It also gives you the control to designate approved payees. Exception items are presented to you daily for “pay or return” decisions, giving you peace of mind. ACH Positive Pay provides your business with similar control by allowing you to accept ACH transactions you authorize and return those you do not.

We also offer the FIBT CardApp, available for consumers and businesses in both Apple and Android app stores. CardApp allows you real-time access to transactional information and the ability to manage and monitor your spending. It gives you the capability to turn your card on and off with the click of a button. You can also restrict the use of your card to only certain types of transactions to protect yourself against fraud or put checks and balances in place.

KOTAPAY

Our electronic payments division, Kotapay, serves more than 107,268 companies nationwide and experienced remarkable growth in 2022. The team came together to enhance our internal processes, improve customer experience, and overall run an effective and streamlined service for our clients. Our comprehensive underwriting process, top-notch fraud detection systems, and the diligence of the Kotapay team, allowed for another year with zero fraud losses. In 2023, Kotapay will celebrate its 30th year of providing fast, accurate electronic transaction services to companies of all sizes.

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$99 BILLION PROCESSED IN 2022 UP FROM $90 BILLION IN 2021 | UP FROM $83 BILLION IN 2020 DIGITAL INNOVATION
®
- Tompkins, Forest Acres Payroll, LLC

SERVICE leading with

Not only did we launch our updated business card program, but we were also hard at work preparing an enhanced online banking experience for our business users. Rolling out in 2023, we are excited for the new features and functionality. Our goal will always be to elevate the experience for both our personal banking and business banking customers, so you can continue to effortlessly manage your finances from anywhere.

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CUSTOMERS FIRST

COMMERCIAL & AG BANKING

Overall, our Ag producers overcame weather concerns and high input costs to have a profitable 2022. A number of our communities were affected by an unprecedented April blizzard in North Dakota which caused losses for livestock operations and set back spring planting for many. Growing conditions in the upper Midwest were favorable early but the lack of late summer moisture reduced some crop yields. Commodity markets for grains were favorable with high levels in late summer, but declined later in the year. Cattle prices have improved over the prior four years while dairy and pork prices have been variable.

Our portfolio of Ag loans for producers increased by 11% in 2022 and our loans for agriculture real estate increased by 12% in 2022. Agriculture in the Dakotas and Minnesota is impacted by weather and economic conditions. Much of the region is drier than normal so timely moisture will be necessary in 2023 for strong production. Agriculture input costs remain at high levels, and we anticipate the 2023 crop will be the most expensive on record in terms of input costs.

We were excited to launch Evolve Payment Solutions. While it’s tempting to think of them as just credit or payment cards, they are much more. They are sophisticated payment mechanisms that allow your business to maximize cash flow, gain efficiencies and cost savings while earning rewards –just for directing payments through this payment resource. Evolve comes with an online system, eZBusiness, that allows the business administrators to access reports, control access levels for end users, and much more.

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CUSTOMERS FIRST

WEALTH MANAGEMENT

During times of uncertainty, managing your wealth is more important than ever. It takes skill to efficiently create, preserve, and grow wealth and having experts in your corner makes the job easier. First International Bank & Trust’s Wealth Management Division provides custombuilt solutions tailored specifically to you. We can help with retirement planning, annuities, mutual funds, stocks & bonds, estate planning, and college funding. Whatever your long-term goals, our financial planners listen to your needs and manage your investments, so you can focus on what matters most – Living First.

Oil prices have bounced back since 2020 and both oil and natural gas production is growing. First International Bank & Trust’s MineralTracker recently produced and presented a 40-page summary to the North Dakota Land Board estimating the total value of North Dakota-owned oil and gas mineral rights at $2.8 billion, an 18% increase from prior year. Joel Brown, Mineral Services Manager, says that North Dakota’s mineral rights may bring in an estimated $10 billion in royalties over the next few decades. To continue enhancing service to our customers, we updated our MineralTracker alert system so that users receive automatic alert emails when a new well is added.

* Not FDIC or any Federal agency insured | no bank guarantee | may lose value

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WEALTH
CUSTOMERS FIRST
MANAGEMENT
“...North Dakota’s mineral rights may bring in an estimated $10 billion in royalties over the next few decades”
- Joel Brown, Mineral Services Manager

RESERVE BASED LENDING

A new niche opportunity with Reserve Based Lending, that is secured by oil and gas assets brought in nearly $100 million of new loans. Reserves Based Lending allows individuals and enterprises to obtain a loan by putting their oil or gas field or a portfolio of undeveloped or developed and producing oil and gas assets up as collateral. The loan is then repaid using the proceeds from sales in the field or portfolio.

INSURANCE

Throughout life, unforeseen circumstances can pop up at any moment, whether it’s a medical emergency, an unexpected death, or damage to your vehicle or property. For many, bearing the financial impact of these situations can prove to be a major challenge. That’s why insurance is a key part of financial planning. Proper coverage for the things that matter most can provide you with greater peace of mind.

Whether it’s life insurance or coverage for your home, car, or business, our independent insurance agents will help you find the best policy to suit your needs and budget, giving you access to a wide portfolio of insurance products from more than 35 companies we represent.

MORTGAGE

Throughout 2022, the rate environment had an impact on our Mortgage Division. Market conditions caused a shift in buyer behaviors resulting in a drop in mortgage purchase volume. Despite that, we had a successful year. By the end of December, we were able to streamline our applicationto-final-approval time from 25 days to less than 15 days, which is nearly 50% faster than the industry norm of 30 days.

We are always looking to improve our experience so that we deliver the mortgage journey in the best way possible. When it comes down to it, we believe that a decision as big as homeownership should come with confidence and a team who cares. With First International Bank & Trust, not only will you work with our local experts to make the mortgage process simple and comfortable, but you’ll also have peace of mind knowing you’re partnering with a family-owned community bank that has your best interest at heart. If you’re thinking about buying a different home, refinancing, using the equity in your home, or becoming a landlord, our mortgage loan officers can help you Say Yes to the next step toward your dreams.

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CUSTOMERS FIRST
* Not FDIC or any Federal agency insured | no bank guarantee | may lose value

COMMUNITIES leaving a mark on our

Whether it’s a significant donation or spending a few hours helping a local organization, we believe in giving back to our communities. We challenge our employees to leave a mark on the areas we serve. They continually rise to the challenge and amaze bank and community leaders with their dedication to service. Thank you for the FIBT team members who made a commitment to better their communities in 2022!

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COMMUNITY INVOLVEMENT

COMMUNITY GIVING

$4.25 million donated to charitable organizations

Since its creation in 2014, our Live First Community Giving Campaign has awarded more than $185,000 in grants to 66 nonprofit organizations and community projects. This year, more than 150 community organizations applied for our Eighth Annual Live First Community Giving Campaign. We awarded $43,000 in grants to 15 nonprofits and community projects, including our grand prize winner: Camp Metigoshe out of Bottineau, North Dakota.

$15,000 Grand Prize Award – Camp Metigoshe, Bottineau, ND

Camp Metigoshe is a summer camp located in North Dakota’s Turtle Mountains. Rooted in the Lutheran tradition, the camp welcomes people of all background and faith traditionsincluding those who may not know what they believe.

In addition to our charitable donations and Community Giving Campaign, we also provide funding for higher education. Including fall semester of 2022, FIBT has given out $970,300 in student grants to our employees and employee’s students who are attending post-secondary education since the beginning of the program in 1997.

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COMMUNITY INVOLVEMENT

GROWTH a mindset of

Our priority is to deliver a top-notch experience to every customer, from start to finish. Taking great care in the design and layout of our locations helps us make an impactful first impression and sets a positive tone for the interaction ahead. To better serve our customers and expand our South Dakota and Minnesota footprints, we opened two new locations in early 2023.

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EXPANSION

EXPANSION & RENOVATION

Sioux Falls, South Dakota

Near the end of 2021, First International Bank & Trust purchased property on the southwest corner of 14th and Minnesota Avenue. This past year, we were hard at work on the beautiful building and celebrated the grand opening in January 2023.

Moorhead, Minnesota

In February 2023, First International Bank & Trust opened the doors of its new Moorhead location. The brand-new building is 8,200 square feet and features ten offices, two teller pods, and a two-lane drive-thru. It houses both the Moorhead banking and insurance teams.

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EXPANSION
THE WAITING AREA IN THE NEW SIOUX FALLS, SD BRANCH

2022 ODIN AWARD recipient of the

JOHN DRADY, MARKET PRESIDENT

Named after Odin Stenehjem, who founded our bank in 1910, this award is given annually to the employee who best exemplifies FIBT’s Mission, Vision, and Values. It recognizes those who execute service at its highest level and inspires those around them.

John Drady, our 2022 Odin Award recipient, currently serves as Market President of our Central North Dakota region and leads Treasury Management at FIBT. He has been with the bank for 29 years and is a prominent member of the Minot community. John has impacted countless customers and employees across our footprint. His confidence, banking expertise, and integrity will leave a legacy for years to come.

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AWARDS & HONORS

BOARD OF DIRECTORS

AWARDS & HONORS

CHAIRMAN OF THE BOARD

Stephen L. Stenehjem, CEO/Chairman

DIRECTORS

Blaine DesLauriers, Vice Chairman

Peter Stenehjem, President

Erik Stenehjem, Chief Credit Administrator Officer

Dennis Walsh, Chief Credit Officer

Michael Toy, Chief Operating & Strategy Officer

HONORED EMPLOYEES

ICBND 2022 Distinguished Community Banker Award

For the past 24 years, Independent Community Banks of North Dakota (ICBND) has given this prestigious award to an active or former community banker for exemplary and outstanding service to community banking over an extended career. The recipient must have served at the local and state level and may have served at the national level as well. Stephen’s father Leland M. Stenehjem was posthumously honored in 2017, making Stephen the second Stenehjem to receive the award

Jim Poolman, Independent Consultant, Jim Poolman Consulting

Mark Tollefson, General Partner, TNT Real Estate & Prairie Heights Apts., CEO Retired Tollefson’s Retail Group

Michelle Kommer, Founder and Owner, HighRoad Partners, LLC

Ty LeSueur, President, LeSueur Investments

Nancy Slotten, Executive Vice President, Treasurer, Border States Paving, Inc.

Top 25 Women in Business | Prairie Business Magazine

Top 40 Business Professionals

Under 40 | Prairie Business Magazine

COMMERCIAL LOAN OFFICER WATFORD CITY, ND

PB 50 Best Places to Work 2022

NAMED TO PRAIRIE BUSINESS MAGAZINE’S LIST OF THE TOP 50 BEST PLACES TO WORK FOR NINE CONSECUTIVE YEARS.

After 19 years of dedicated service, Nancy Slotten retired from the First International Bank & Trust Board of Directors. Thank you, Nancy!

Minot’s Readers’ Choice Awards 2022

VOTED BEST CUSTOMER SERVICE BY THE MINOT DAILY NEWS READER’S CHOICE AWARDS

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WENDY WILLS STEPHEN L. STENEHJEM DREW FLAAGAN CHIEF EXPERIENCE OFFICER SIOUX FALLS, SD CEO/CHAIRMAN | WATFORD CITY
HONORS READERS CHOICE AWARDS2022 AWARDS & HONORS
BANK

STATEMENT OF CONDITION

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ASSETS 1 2022 2021 Cash and Due From Banks $100,269,195 $377,711,787 U.S. Government Bonds $266,432,317 $390,705,907 State and Municipal Obligations $292,260,391 $368,757,800 Other Securities $32,360,296 $15,398,958 Current Assets $691,322,199 $1,152,574,452 Loans and Lease Financing Receivables $4,023,864,028 $3,365,517,627 Reserve for Possible Losses ($36,936,602) ($32,386,751) Net Loans $3,986,927,426 $3,333,130,876 Bank Premises & Equipment $153,365,239 $155,966,807 Other Assets $77,685,131 $64,996,279 Total Other Assets $231,050,370 $220,963,086 Total Assets $4,909,299,995 $4,706,668,414 LIABILITIES & CAPITAL 1 2022 2021 Demand Deposits $2,678,867,104 $2,689,298,782 Time & Savings Deposits $1,465,733,818 $1,478,972,941 Total Deposits $4,144,600,922 $4,168,271,723 Borrowed Funds $390,000,000 $140,000,000 Other Liabilities $29,855,996 $20,961,330 Total Deposits & Other Liabilities $4,564,456,918 $4,329,233,053 Total Capital $344,843,077 $377,435,361 Total Liabilities & Capital $4,909,299,995 $4,706,668,414 1 Assets, Liabilities and Capital as of December 31 - Unaudited BY THE NUMBERS

YEAR-END TOTAL ASSETS

GROWTH BY NUMBERS | YEAR OVER YEAR

INCREASE Net Income 24.84%

INCREASE Total Loan Growth 19.56%

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0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5 2016 2017 2018 2019 2020 2021 2022 $4,909,299,995 $4,706,668,414 $4,163,724,913 $3,460,539,345 $2,939,331,138 $2,463,283,849 $2,262,002,873 BY THE NUMBERS
20 ANNUAL REPORT 2022 FUTURE FIBT.com poised for the
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