First Interstate BancSystem, Inc. Reports Fourth Quarter Earnings; Increases Dividend by 14%; Sets Annual Meeting

Business Wire

BILLINGS, Mont.--(BUSINESS WIRE)--

First Interstate BancSystem, Inc. ( FIBK ) reports fourth quarter 2013 net income available to common shareholders of $20.8 million, or $0.47 per diluted share, a 29% increase over fourth quarter 2012 net income available to common shareholders of $16.1 million, or $0.37 per diluted share. For the year ended December 31, 2013, the Company reported net income available to common shareholders of $86.1 million, or $1.96 per diluted share, compared to $54.9 million, or $1.27 per diluted share, during 2012.

FOURTH QUARTER FINANCIAL HIGHLIGHTS

  • Net interest income of $61.1 million, an increase of 1.7% compared to third quarter 2013
  • 3.52% net interest margin ratio remained unchanged from third quarter 2013
  • 5.13% yield on loans, an increase of 6 basis points from third quarter 2013
  • 3% growth in total loans, as compared to December 31, 2012
  • 1.48% non-performing assets to total assets, a decline from 1.53% as of September 30, 2013 and 1.85% as of December 31, 2012
  • $4 million reversal of provision for loan losses

We had another solid quarter driven by further improvement in credit quality, with our non-performing assets and criticized assets reaching the lowest levels since 2008, said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. Although we havent yet seen a significant increase in loan demand in our markets, we continue to grow other parts of our business, such as Wealth Management, which produced a 19% increase in revenues during 2013," Garding continued.

For the full year of 2013, we were able to generate the highest level of net income in the Company's history and increase net income by 57% over 2012. Our strong performance has enabled us to increase our quarterly dividend another 14% to $0.16 per common share. We are pleased to be able to generate this strong return for our shareholders and we look forward to delivering another positive year in 2014, said Garding.

DIVIDEND DECLARATION

On January 23, 2014, the Company's Board of Directors declared a dividend of $0.16 per common share payable on February 14, 2014 to owners of record as of February 4, 2014. This dividend equates to a 2.5% annualized yield based on the $25.93 average closing price of the Company's common stock during fourth quarter 2013, and reflects a 14% increase from dividends paid during third quarter of $0.14 per common share.

ANNUAL MEETING DATE SET

On January 23, 2014, the Company's Board of Directors voted that the Annual Meeting of Shareholders be held on May 21, 2014, at the First Interstate Bank Operations Center, 1800 Sixth Avenue North, Billings, Montana at 4:00 p.m. Mountain Daylight Time. The record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting is March 14, 2014.

RESULTS OF OPERATIONS

Net Interest Income. The Company's net interest income, on a fully taxable equivalent, or FTE, basis, increased to $61.1 million during fourth quarter 2013, compared to $60.1 million during third quarter 2013, primarily due to higher yields earned on loans and investment securities, lower yields paid on time deposits and lower average outstanding time deposits. During fourth quarter 2013, the Company's loan yield increased 6 basis points to 5.13%, as compared to 5.07% during third quarter 2013, and investment securities yield increased 1 basis point to 1.79%. In addition, average outstanding time deposits decreased $40.7 million as of December 31, 2013, as compared to September 30, 2013, and the cost of these deposits declined 4 basis points to 0.81% during fourth quarter. The Company's net FTE interest margin ratio remained unchanged at 3.52% during third and fourth quarter 2013.

Net FTE interest income decreased $1.0 million to $61.1 million during fourth quarter 2013, as compared to $62.1 million during fourth quarter 2012, and $7.0 million to $241.5 million for the year ended December 31, 2013, as compared to $248.5 million during the same period in 2012. The Company's net FTE interest margin ratio decreased 3 basis points to 3.52% during fourth quarter 2013 and 12 basis points to 3.54% for the year ended December 31, 2013, as compared to the same respective periods in 2012. Declines in yields earned on the Company's loan and investment portfolios during the three and twelve months ended December 31, 2013, as compared to the same periods in 2012, were partially offset by increases in average outstanding loans, reductions in the cost of interest bearing liabilities and lower average outstanding time deposits. Also offsetting the impact of lower asset yields during the three and twelve months ended December 31, 2013, as compared to the same periods in 2012, was the December 2012 contractual repricing of $46 million of junior subordinated debentures from a weighted average fixed interest rate of 7.07% to variable rates averaging 2.60% over LIBOR.

Non-Interest Income. Non-interest income decreased to $25.7 million during fourth quarter 2013, as compared to $27.6 million during third quarter 2013 and $30.6 million during fourth quarter 2012, primarily due to lower income from the origination and sale of mortgage loans.

Income from the origination and sale of loans decreased to $5.6 million during fourth quarter 2013, as compared to $7.9 million during third quarter 2013, and $12.3 million during fourth quarter 2012. Management attributes these declines to the combined impact of lower demand for refinancing loans and seasonal declines in loans originated for home purchases. The Company's mortgage loan production decreased 24% during fourth quarter 2013, as compared to third quarter 2013, and 50%, as compared to fourth quarter 2012. Loans originated for home purchases accounted for approximately 67% of the Company's mortgage loan production during fourth quarter 2013, as compared to 72% during the third quarter 2013 and 32% during fourth quarter 2012. Income from the origination and sale of loans decreased 18% to $34.3 million for the twelve months ended December 31, 2013, as compared to $41.8 million in 2012, with production volume decreasing 23% year-over-year.

Wealth management revenues decreased to $4.4 million during fourth quarter 2013, as compared to $4.6 million during third quarter 2013. Third quarter 2013 wealth management revenues included revenues of $370 thousand related to the sale of two multi-million dollar life insurance policies. Wealth management revenues increased to $4.4 million and $17.1 million for the three and twelve months ended December 31, 2013, respectively, as compared to $3.7 million and $14.3 million during the same respective periods in 2012, due to the addition of new wealth management customers and increases in market values of new and existing assets under trust management.

Other income increased to $2.2 million during fourth quarter 2013, as compared to $1.4 million during third quarter 2013 and fourth quarter 2012, primarily due to increases in earnings on securities held under deferred compensation plans.

Non-Interest Expense. Non-interest expense increased to $57.8 million during fourth quarter 2013, as compared to $52.6 million during third quarter 2013, and remained flat as compared to $57.8 million during fourth quarter 2012. For the year ended December 31, 2013, non-interest expense decreased to $222.1 million, as compared to $229.6 million in 2012.

Salaries and wages expense increased to $24.3 million during the three months ended December 31, 2013, as compared to $22.8 million during third quarter 2013 and $23.3 million during fourth quarter 2012. Salaries and wages expense increased to $94.0 million for the year ended December 31, 2013, as compared to $89.8 million in 2012. These increases reflect higher incentive compensation accruals resulting from the Company's improved financial performance.

Variations in net OREO expense between periods were primarily due to fluctuations in fair value write-downs, net gains and losses recorded on the sales and net operating expenses. Fourth quarter 2013 net OREO expense included $381 thousand of net operating expenses, $948 thousand of fair value write-downs and net gains of $37 thousand on the sale of OREO properties. This compares to $542 thousand of net operating expenses and net gains of $525 thousand during third quarter 2013, and $883 thousand of net operating expenses, $3.3 million of fair value write-downs and net gains of $273 thousand during fourth quarter 2012. During the twelve months ended December 31, 2013, net OREO expense included $2.0 million of net operating expenses, $3.5 million of fair value write-downs and net gains of $3.2 million, compared to $3.7 million of net operating expenses, $6.7 million of fair value write-downs and net gains of $1.0 million during 2012.

Other expenses increased to $15.1 million during fourth quarter 2013, as compared to $12.7 million during third quarter 2013. Historically, the Company's other expenses trend higher in the fourth quarter of the year, as compared to the third quarter. Other expenses remained flat at $15.1 million during fourth quarter 2013, as compared to $15.1 during fourth quarter 2012, and decreased 10% to $57.3 million during year ended December 31, 2013, as compared to $63.6 million in 2012. During the first and second quarters of 2012, the Company accrued $3.0 million of loan collection and settlement costs related to one borrower, recorded donations expense of $1.5 million associated with the sale of a bank building to a charitable organization and wrote off $428 thousand of unamortized debt issuances costs. Exclusive of these non-core expenses, other expense decreased 2.4% during 2013, as compared to 2012, primarily due to decreases in FDIC insurance premiums.

BALANCE SHEET

Total loans increased to $4,345 million as of December 31, 2013, from $4,332 million as of September 30, 2013 and $4,224 million as of December 31, 2012, with the most notable growth occurring in residential real estate loans. Residential real estate loans increased to $868 million as of December 31, 2013, from $842 million as of September 30, 2013 and $708 million as of December 31, 2012, due to continued retention of certain residential loans with contractual terms of fifteen years or less and increased housing demand in the Company's market areas.

Consumer loans were $672 million as of December 31, 2013 and September 30, 2013, an increase from $637 million as of December 31, 2012. Year-over-year growth in consumer loans occurred primarily in indirect loans, which increased to $476 million as of December 31, 2013, from $438 million as of December 31, 2012, due to expansion of the Company's indirect lending program within existing markets.

Commercial real estate loans decreased to $1,449 million as of December 31, 2013, from $1,497 million as of December 31, 2012, primarily due to weak loan demand combined with the movement of lower quality loans out of the portfolio through charge-off, pay-off and foreclosure. Commercial real estate loans slightly increased to $1,449 as of December 31, 2013, from $1,441 as of September 30, 2013.

Agricultural loans decreased to $112 million as of December 31, 2013, from $124 million as of September 30, 2013 and $114 million as of December 31, 2012. Agricultural loans typically decline during the fourth quarter due to seasonal reductions in credit lines.

Total deposits increased to $6,134 million as of December 31, 2013, from $6,109 million as of September 30, 2013 and decreased from $6,240 million as of December 31, 2012. During fourth quarter 2013, the mix of deposits continued to shift away from higher costing time deposits to lower costing demand and savings deposits. As of December 31, 2013, time deposits comprised 19.4% of total deposits, as compared to 20.3% as of September 30, 2013 and 22.2% as of December 31, 2012.

OREO decreased to $16 million as of December 31, 2013, from $19 million as of September 30, 2013 and $32.6 million as of December 31, 2012. During fourth quarter 2013, the Company sold OREO properties with carrying values of $3 million at a $37 thousand net gain, and during the year ended December 31, 2013, the Company sold OREO properties with carrying values of $25 million at a $3.2 million net gain. As of December 31, 2013, the composition of OREO properties was 15% residential real estate, 60% land and land development and 25% commercial.

The Company purchased $45 million of bank owned life insurance covering select officers and directors of the Company's banking subsidiary during fourth quarter 2013. An additional $15 million of bank owned life insurance was purchased during first quarter 2014.

ASSET QUALITY

Non-performing loans increased slightly to $97 million as of December 31, 2013, from $96 million as of September 30, 2013, primarily due to an increase in commercial and commercial real estate loans on non-accrual status during fourth quarter. Non-performing loans decreased to $97 million as of December 31, 2013 from $110 million as of December 31, 2012, due to the movement of non-accrual loans out of the loan portfolio through pay-off, charge-off and upgrade.

The Company charged off loans of $6 million during fourth quarter 2013, compared to $5 million during third quarter 2013 and $10 million during fourth quarter 2012. Approximately 33% of fourth quarter 2013 charge-offs was attributable to one commercial loan. Recoveries of charged-off loans were $2 million during fourth quarter 2013, compared to $2 million during third quarter 2013 and $4 million during fourth quarter 2012.

During fourth quarter 2013, the Company reversed $4.0 million of provision for loan losses, as compared to reversing $3.0 million of provision during third quarter 2013 and recording of additional provisions of $8.0 million during fourth quarter 2012. The fourth quarter 2013 reversal of provision is reflective of continued improvement in and stabilization of credit quality as evidenced by declining levels of non-performing and criticized loans. As of December 31, 2013, non-performing assets and total criticized assets were at their lowest quarterly levels since 2008.

Fourth Quarter 2013 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2013 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time ) on Thursday, January 30, 2014. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-888-317-6016 or by logging on to www.FIBK.com . The call will be recorded and made available for replay after 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on January 30, 2014 through 9:00 a.m Eastern Time (11:00 a.m. Mountain Time) on March 4, 2014 by dialing 1-877-344-7529 (using conference ID 10038831). The call will also be archived on our website, www.FIBK.com , for one year.

About First Interstate BancSystem, Inc.

First Interstate BancSystem, Inc. is a financial and bank holding company incorporated in 1971 and headquartered in Billings, Montana. The Company operates 74 banking offices, including detached drive-up facilities, in 41 communities in Montana, Wyoming and western South Dakota. Through First Interstate Bank, the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities and other entities throughout the Company's market areas.

Cautionary Note Regarding Forward-Looking Statements and Factors that Could Affect Future Results

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified as those that include words or phrases such as believes, expects, anticipates, plans, trend, objective, continue or similar expressions or future or conditional verbs such as will, would, should, could, might, may or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. The following factors, among others, may cause actual results to differ materially from current expectations in the forward-looking statements, including those set forth in this press release: continuing or worsening economic conditions, adverse economic conditions affecting Montana, Wyoming and western South Dakota, credit losses, concentrations of real estate loans, commercial loan risk, adequacy of the allowance for loan losses, impairment of goodwill, changes in interest rates, access to low-cost funding sources, increases in deposit insurance premiums, repurchases of mortgage loans from or reimbursements to investors due to contractual or warranty breach, inability to grow business, governmental regulation and changes in regulatory, tax and accounting rules and interpretations, sweeping changes in regulation of financial institutions due to passage of the Dodd-Frank Act, changes in or noncompliance with governmental regulations, effects of recent legislative and regulatory efforts to stabilize financial markets, dependence on the Companys management team, ability to attract and retain qualified employees, failure of technology, reliance on external vendors, inability to meet liquidity requirements, lack of acquisition candidates, failure to manage growth, competition, inability to manage risks in turbulent and dynamic market conditions, ineffective internal operational controls, environmental remediation and other costs, litigation pertaining to fiduciary responsibilities, failure to effectively implement technology-driven products and services, capital required to support the Companys bank subsidiary, soundness of other financial institutions, impact of proposed Basel III capital standards for U.S. banks, inability of our bank subsidiary to pay dividends, implementation of new lines of business or new product or service offerings, change in dividend policy, lack of public market for our Class A common stock, volatility of Class A common stock, voting control of Class B stockholders, decline in market price of Class A common stock, dilution as a result of future equity issuances, uninsured nature of any investment in Class A common stock, anti-takeover provisions, controlled company status and subordination of common stock to Company debt.

These factors are not necessarily all of the factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made and we do not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary

(Unaudited, $ in thousands, except per share data)

 
  2013   2012

CONDENSED INCOME STATEMENTS

4th Qtr   3rd Qtr   2nd Qtr   1st Qtr 4th Qtr
Net interest income $ 59,974 $ 58,956 $ 58,760 $ 59,277 $ 60,973
Net interest income on a fully-taxable equivalent ("FTE") basis 61,109 60,066 59,879 60,405 62,143
Provision for loan losses (4,000 ) (3,000 ) 375 500 8,000
Non-interest income:
Other service charges, commissions and fees 9,458 9,286 8,977 8,256 8,774
Income from the origination and sale of loans 5,602 7,934 10,043 10,675 12,321
Wealth management revenues 4,350 4,581 4,020 4,134 3,659
Service charges on deposit accounts 4,086 4,360 4,323 4,068 4,401
Investment securities gains (losses), net (25 ) 30 (12 ) 8 53
Other income 2,203   1,416   2,228   1,678   1,427  
Total non-interest income 25,674 27,607 29,579 28,819 30,635
Non-interest expense:
Salaries and wages 24,321 22,806 23,470 23,405 23,288
Employee benefits 7,289 7,328 7,546 8,175 6,113
Occupancy, net 4,206 4,292 4,063 4,026 3,968
Furniture and equipment 3,192 3,147 3,163 3,052 3,301
Outsourced technology services 2,382 2,295 2,195 2,157 2,199
Other real estate owned (income) expense, net 1,292 18 (915 ) 1,896 3,877
Other expenses 15,103   12,693   15,498   13,974   15,086  
Total non-interest expense 57,785   52,579   55,020   56,685   57,832  
Income before taxes 31,863 36,984 32,944 30,911 25,776
Income taxes 11,088   13,172   11,439   10,867   8,931  
Net income 20,775 23,812 21,505 20,044 16,845
Preferred stock dividends         731  
Net income available to common shareholders $ 20,775   $ 23,812   $ 21,505   $ 20,044   $ 16,114  
 

PER COMMON SHARE DATA

Net income - basic $ 0.47 $ 0.54 $ 0.49 $ 0.46 $ 0.37
Net income - diluted 0.47 0.54 0.49 0.46 0.37
Cash dividend paid 0.14 0.14 0.13 0.25
Book value at period end 18.15 17.98 17.56 17.69 17.35

Tangible book value at period end**

13.89 13.71 13.25 13.35 12.97
 

OUTSTANDING COMMON SHARES

At period-end 44,155,063 44,089,962 43,835,881 43,614,942 43,290,323
Weighted average shares - basic 43,888,261 43,699,566 43,480,502 43,140,409 43,032,697
Weighted-average shares - diluted 44,541,497 44,284,844 43,908,287 43,428,382 43,198,076
 

SELECTED ANNUALIZED RATIOS

Return on average assets 1.10 % 1.28 % 1.17 % 1.08 % 0.88 %
Return on average common equity 10.31 12.13 11.08 10.68 8.55

Return on average tangible common equity**

13.49 16.01 14.63 14.23 11.45
Net FTE interest income to average earning assets 3.52 3.52 3.56 3.55 3.55
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary

(Unaudited, $ in thousands, except per share data)

 
  2013   2012

CONDENSED INCOME STATEMENTS

     
Net interest income $ 236,967 $ 243,786
Net interest income on a fully-taxable equivalent ("FTE") basis 241,460 248,471
Provision for loan losses (6,125 ) 40,750
Non-interest income:
Other service charges, commissions and fees 35,977 34,226
Income from the origination and sale of loans 34,254 41,790
Wealth management revenues 17,085 14,314
...
Service charges on deposit accounts 16,837 17,412 Investment securities gains (losses), net 1 348 Other income 7,525   6,771   Total non-interest income 111,679 114,861 Non-interest expense: Salaries and wages 94,002 89,833 Employee benefits 30,338 29,345 Occupancy, net 16,587 15,786 Furniture and equipment 12,554 12,859 Outsourced technology services 9,029 8,826 Other real estate owned (income) expense, net 2,291 9,400 Other expenses 57,268   63,586   Total non-interest expense 222,069   229,635   Income before taxes 132,702 88,262 Income taxes 46,566   30,038   Net income 86,136 58,224 Preferred stock dividends —   3,300   Net income available to common shareholders $ 86,136   $ 54,924    

PER COMMON SHARE DATA

Net income - basic $ 1.98 $ 1.28 Net income - diluted 1.96 1.27 Cash dividend paid 0.41 0.61 Book value at period end 18.15 17.35

Tangible book value at period end**

13.89 12.97  

OUTSTANDING COMMON SHARES

At period-end 44,155,063 43,290,323 Weighted average shares - basic 43,566,681 42,965,987 Weighted-average shares - diluted 44,044,602 43,092,978  

SELECTED RATIOS

Return on average assets 1.16 % 0.79 % Return on average common equity 11.05 7.46

Return on average tangible common equity**

14.59 10.07 Net FTE interest income to average earning assets 3.54 3.66
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary - continued

(Unaudited, $ in thousands)

 
  2013   2012

BALANCE SHEET SUMMARIES

Dec 31 Sep 30   Jun 30   Mar 31 Dec 31
Assets:
Cash and cash equivalents $ 534,827 $ 542,343 $ 368,217 $ 498,543 $ 801,332
Investment securities 2,151,543 2,145,083 2,138,539 2,221,595 2,203,481
Loans held for investment:
Commercial real estate 1,449,174 1,441,297 1,447,145 1,469,302 1,497,272
Construction real estate 351,635 341,284 337,211 330,886 334,529
Residential real estate 867,912 841,707 804,200 758,480 708,339
Agricultural real estate 173,534 176,594 176,799 172,522 177,244
Consumer 671,587 672,184 652,944 636,364 636,794
Commercial 676,544 681,416 680,751 688,844 688,753
Agricultural 111,872 123,565 121,530 111,411 113,627
Other 1,734 1,912 2,498 1,307 912
Mortgage loans held for sale 40,861   52,133   74,286   55,443   66,442  
Total loans 4,344,853 4,332,092 4,297,364 4,224,559 4,223,912
Less allowance for loan losses 85,339   92,990   98,528   97,904   100,511  
Net loans 4,259,514   4,239,102   4,198,836   4,126,655   4,123,401  
Premises and equipment, net 179,690 179,785 181,940 185,237 187,565
Goodwill and intangible assets (excluding mortgage servicing rights) 188,214 188,569 188,925 189,281 189,637
Company owned life insurance 122,175 76,701 77,602 77,158 76,729
Other real estate owned, net 15,504 18,537 22,782 32,470 32,571
Mortgage servicing rights, net 13,546 13,518 13,304 13,006 12,653
Other assets 99,638   96,462   101,363   95,372   94,392  
Total assets $ 7,564,651   $ 7,500,100   $ 7,291,508   $ 7,439,317   $ 7,721,761  
 
Liabilities and stockholders' equity:
Deposits:
Non-interest bearing $ 1,491,683 $ 1,503,969 $ 1,393,732 $ 1,406,892 $ 1,495,309
Interest bearing 4,642,067   4,604,656   4,536,600   4,621,453   4,745,102  
Total deposits 6,133,750   6,108,625   5,930,332   6,028,345   6,240,411  
Securities sold under repurchase agreements 457,437 428,110 421,314 467,205 505,785
Accounts payable, accrued expenses and other liabilities 52,489 50,900 50,292 52,767 54,742
Long-term debt 36,917 37,128 37,139 37,150 37,160
Preferred stock pending redemption 50,000
Subordinated debentures held by subsidiary trusts 82,477   82,477   82,477   82,477   82,477  
Total liabilities 6,763,070   6,707,240   6,521,554   6,667,944   6,970,575  
Stockholders' equity:
Common stock 285,535 283,352 279,232 274,929 271,335
Retained earnings 532,087 517,456 499,761 483,904 463,860
Accumulated other comprehensive income (loss) (16,041 ) (7,948 ) (9,039 ) 12,540   15,991  
Total stockholders' equity 801,581   792,860   769,954   771,373   751,186  
Total liabilities and stockholders' equity $ 7,564,651   $ 7,500,100   $ 7,291,508   $ 7,439,317   $ 7,721,761  
 

CONSOLIDATED CAPITAL RATIOS

Total risk-based capital 16.75 %

*

16.68 % 16.29 % 15.91 % 15.59 %
Tier 1 risk-based capital 14.93

*

14.85 14.45 14.07 13.60
Tier 1 common capital to total risk-weighted assets 13.31

*

13.33 12.83 12.41 11.94
Leverage Ratio 10.08

*

10.01 9.73 9.24 8.81

Tangible common stockholders' equity to tangible assets**

8.32 8.26 8.18 8.03 7.46
 

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary - continued

(Unaudited, $ in thousands)

 
  2013   2012
ASSET QUALITY Dec 31   Sep 30 Jun 30   Mar 31 Dec 31
Allowance for loan losses $ 85,339 $ 92,990 $ 98,528 $ 97,904 $ 100,511
As a percentage of period-end loans 1.96 % 2.15 % 2.29 % 2.32 % 2.38 %
 
Net charge-offs during quarter $ 3,651 $ 2,538 $ (249 ) $ 3,107 $ 6,495
Annualized as a percentage of average loans 0.34 % 0.23 % (0.02 )% 0.30 % 0.62 %
 
Non-performing assets:
Non-accrual loans $ 94,439 $ 94,015 $ 103,729 $ 98,594 $ 107,799
Accruing loans past due 90 days or more 2,232   2,188   1,742   1,941   2,277  
Total non-performing loans 96,671 96,203 105,471 100,535 110,076
Other real estate owned 15,504   18,537   22,782   32,470   32,571  
Total non-performing assets 112,175 114,740 128,253 133,005 142,647
As a percentage of:
Total loans and OREO 2.57 % 2.64 % 2.97 % 3.12 % 3.35 %
Total assets 1.48 % 1.53 % 1.76 % 1.79 % 1.85 %
 
ASSET QUALITY TRENDS Provision for Loan Losses   Net Charge-offs   Allowance for Loan Losses   Accruing Loans 30-89 Days Past Due   Accruing TDRs   Non-Performing Loans Non-Performing Assets
Q4 2010 $ 17,500 $ 17,256 $ 120,480 $ 57,011 $ 13,490 $ 197,194 $ 230,822
Q1 2011 15,000 11,034 124,446 68,021 33,344 216,534 248,529
Q2 2011 15,400 15,267 124,579 70,145 31,611 231,856 260,179
Q3 2011 14,000 18,276 120,303 62,165 35,616 226,962 252,042
Q4 2011 13,751 21,473 112,581 75,603 37,376 204,094 241,546
Q1 2012 11,250 7,929 115,902 58,531 36,838 185,927 230,683
Q2 2012 12,000 25,108 102,794 55,074 35,959 136,374 190,191
Q3 2012 9,500 13,288 99,006 48,277 35,428 127,270 167,241
Q4 2012 8,000 6,495 100,511 34,602 31,932 110,076 142,647
Q1 2013 500 3,107 97,904 41,924 35,787 100,535 133,005
Q2 2013 375 (249 ) 98,528 39,408 23,406 105,471 128,253
Q3 2013 (3,000 ) 2,538 92,990 39,414 21,939 96,203 114,740
Q4 2013 (4,000 ) 3,651 85,339 26,944 21,780 96,671 112,175
   

CRITICIZED LOANS

Special Mention Substandard Doubtful Total
Q4 2010 $ 305,925 $ 303,653 $ 133,353 $ 742,931
Q1 2011 293,899 299,072 135,862 728,833
Q2 2011 268,450 309,029 149,964 727,443
Q3 2011 261,501 305,145 134,367 701,013
Q4 2011 240,903 269,794 120,165 630,862
Q1 2012 242,071 276,165 93,596 611,832
Q2 2012 220,509 243,916 81,473 545,898
Q3 2012 223,306 229,826 66,179 519,311
Q4 2012 209,933 215,188 42,459 467,580
Q1 2013 197,645 197,095 43,825 438,565
Q2 2013 192,390 161,786 52,266 406,442
Q3 2013 180,850 168,278 42,415 391,543
Q4 2013 159,081

 

154,100 45,308 358,489
 
* Preliminary estimate - may be subject to change.

**See Non-GAAP Financial Measures included herein for a discussion regarding tangible book value per common share, return on average tangible common equity and tangible common stockholders' equity to tangible assets.

 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Average Balance Sheets

(Unaudited, $ in thousands)

 
  Three Months Ended
December 31, 2013   September 30, 2013   December 31, 2012
Average

Balance

  Interest   Average

Rate

Average

Balance

  Interest   Average

Rate

Average

Balance

  Interest   Average

Rate

Interest earning assets:            
Loans (1) (2) $ 4,323,504 $ 55,920 5.13 % $ 4,327,995 $ 55,345 5.07 % $ 4,197,665 $ 57,915 5.49 %
Investment securities (2) 2,134,052 9,649 1.79 2,115,301 9,479 1.78 2,156,668 10,471 1.93
Interest bearing deposits in banks 430,912 275 0.25 323,781 207 0.25 600,385 383 0.25
Federal funds sold 789     1     0.50   4,772     8     0.67   2,074     2     0.38  
Total interest earnings assets 6,889,257 65,845 3.79 6,771,849 65,039 3.81 6,956,792 68,771 3.93
Non-earning assets 601,996           602,316           623,822          
Total assets $ 7,491,253           $ 7,374,165           $ 7,580,614          
Interest bearing liabilities:
Demand deposits $ 1,807,865 $ 510 0.11 % $ 1,748,317 $ 504 0.11 % $ 1,705,963 $ 548 0.13 %
Savings deposits 1,600,723 592 0.15 1,568,744 601 0.15 1,528,788 741 0.19
Time deposits 1,219,796 2,484 0.81 1,260,452 2,716 0.85 1,404,913 3,562 1.01
Repurchase agreements 431,397 62 0.06 418,561 58 0.05 496,321 127 0.10
Other borrowed funds 14 10 20
Long-term debt 36,983 486 5.21 37,132 487 5.20 37,163 486 5.20
Preferred stock pending redemption 7,609 131 6.85
Subordinated debentures held by subsidiary trusts 82,477     602     2.90   82,477     607     2.92   82,477     1,033     4.98  
Total interest bearing liabilities 5,179,255 4,736 0.36 5,115,693 4,973 0.39 5,263,254 6,628 0.50
Non-interest bearing deposits 1,461,126 1,428,099 1,475,600
Other non-interest bearing liabilities 51,674 51,564 49,855
Stockholders’ equity 799,198           778,809           791,905          
Total liabilities and stockholders’ equity $ 7,491,253           $ 7,374,165           $ 7,580,614          
Net FTE interest income 61,109 60,066 62,143
Less FTE adjustments (2)     (1,135 )         (1,110 )         (1,170 )    
Net interest income from consolidated statements of income     $ 59,974           $ 58,956           $ 60,973      
Interest rate spread         3.43 %         3.42 %         3.43 %
Net FTE interest margin (3)         3.52 %         3.52 %         3.55 %
Cost of funds, including non-interest bearing demand deposits (4)         0.28 %         0.30 %         0.39 %
 

(1) Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.

 
(2) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.
 

(3) Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

 

(4) Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Average Balance Sheets

(Unaudited, $ in thousands)

 
Twelve Months Ended
December 31, 2013   December 31, 2012
Average

Balance

  Interest   Average

Rate

Average

Balance

  Interest   Average

Rate

Interest earning assets:        
Loans (1) (2) $ 4,281,673 $ 222,450 5.20 % $ 4,176,439 $ 232,724 5.57 %
Investment securities (2) 2,151,495 38,695 1.80 2,123,231 44,613 2.10
Interest bearing deposits in banks 391,515 992 0.25 486,203 1,235 0.25
Federal funds sold 2,852     18     0.63   2,341     13     0.56  
Total interest earnings assets 6,827,535 262,155 3.84 6,788,214 278,585 4.10
Non-earning assets 600,919           627,498          
Total assets $ 7,428,454           $ 7,415,712          
Interest bearing liabilities:
Demand deposits $ 1,751,990 $ 1,963 0.11 % $ 1,624,687 $ 2,390 0.15 %
Savings deposits 1,566,211 2,445 0.16 1,496,254 3,562 0.24
Time deposits 1,289,108 11,392 0.88 1,473,501 16,354 1.11
Repurchase agreements 456,840 294 0.06 501,192 579 0.12
Other borrowed funds 10 16
Long-term debt 37,102 1,936 5.22 37,185 1,981 5.33
Preferred stock pending redemption 2,329 159 6.83 1,913 131 6.85
Subordinated debentures held by subsidiary trusts 82,477     2,506     3.04   102,307     5,117     5.00  
Total interest bearing liabilities 5,186,067 20,695 0.40 5,237,055 30,114 0.58
Non-interest bearing deposits 1,411,270 1,346,787
Other non-interest bearing liabilities 51,587 47,799
Stockholders’ equity 779,530           784,071          
Total liabilities and stockholders’ equity $ 7,428,454           $ 7,415,712          
Net FTE interest income 241,460 248,471
Less FTE adjustments (2)     (4,493 )         (4,685 )    
Net interest income from consolidated statements of income     $ 236,967           $ 243,786      
Interest rate spread         3.44 %         3.52 %
Net FTE interest margin (3)         3.54 %         3.66 %
Cost of funds, including non-interest bearing demand deposits (4)         0.31 %         0.46 %
 

(1) Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.

 

(2) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.

 

(3) Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

 

(4) Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principals in the United States of America, or GAAP, this release contains the following non-GAAP financial measures that management uses to evaluate capital adequacy: (i) tangible book value per common share; (ii) tangible common stockholders' equity to tangible assets; (iii) tangible assets, (iv) tangible common stockholders' equity, and (v) return on average tangible common equity.

For purposes of computing tangible book value per common share, tangible book value equals common stockholders' equity less goodwill and other intangible assets (except mortgage servicing rights). Tangible book value per common share is calculated as tangible common stockholders' equity divided by shares of common stock outstanding. For purposes of computing tangible common stockholders' equity to tangible assets, tangible assets equals total assets less goodwill and other intangible assets (except mortgage servicing rights). Tangible common stockholders' equity to tangible assets is calculated as tangible common stockholders' equity divided by tangible assets. For purposes of computing return on average tangible common equity, average tangible common equity equals average common stockholders' equity less average goodwill and average other intangible assets (except mortgage servicing rights). Return on average tangible common equity is calculated by dividing net income available to common shareholders by average tangible common equity.

Management believes that these non-GAAP financial measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of unrealized losses on securities and other components of accumulated other comprehensive income (loss) in stockholders' equity. Management also believes that such financial measures, which are intended to complement the capital ratios defined by banking regulators, are useful to investors in evaluating the Company's performance due to the importance that analysts place on these ratios and also allow investors to compare certain aspects of our capitalization to other companies. These non-GAAP financial measures, however, may not be comparable to similarly titled measures reported by other companies because other companies may not calculate these non-GAAP measures in the same manner. As a result, the usefulness of these measures to investors may be limited, and they should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.

The following tables reconcile the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.

 

(Unaudited, $ in thousands, except per share data)

 
  2013   2012
Dec 31   Sep 30   Jun 30   Mar 31 Dec 31
Total stockholders’ equity (GAAP) $ 801,581 $ 792,860 $ 769,954 $ 771,373 $ 751,186
Less goodwill and other intangible assets (excluding mortgage servicing rights) 188,214   188,569   188,925   189,281   189,637  
Tangible common stockholders’ equity (Non-GAAP) $ 613,367   $ 604,291   $ 581,029   $ 582,092   $ 561,549  
 
Total assets (GAAP) $ 7,564,651 $ 7,500,100 $ 7,291,508 $ 7,439,317 $ 7,721,761
Less goodwill and other intangible assets (excluding mortgage servicing rights) 188,214   188,569   188,925   189,281   189,637  
Tangible assets (Non-GAAP) $ 7,376,437   $ 7,311,531   $ 7,102,583   $ 7,250,036   $ 7,532,124  
 
Quarterly averages:
Total stockholders' equity (GAAP) $ 799,198 $ 778,809 $ 778,760 $ 760,940 $ 791,905
Less goodwill and other intangible assets (excluding mortgage servicing rights) 188,415 188,778 189,135 189,503 189,839
Less preferred stock         42,391  
Average tangible common stockholder's equity (Non-GAAP) $ 610,783   $ 590,031   $ 589,625   $ 571,437   $ 559,675  
 
Common shares outstanding 44,155,063 44,089,962 43,835,881 43,614,942 43,290,323
Annualized net income available to common shareholders $ 82,423   $ 94,472   $ 86,256   $ 81,290   $ 64,106  
 
Book value per common share $ 18.15 $ 17.98 $ 17.56 $ 17.69 $ 17.35
Tangible book value per common share 13.89 13.71 13.25 13.35 12.97
Tangible common stockholders’ equity to tangible assets (Non-GAAP) 8.32 % 8.26 % 8.18 % 8.03 % 7.46 %
Return on average tangible common equity (Non-GAAP) 13.49 16.01 14.63 14.23 11.45
   
2013 2012
Average Balances:
Total stockholders' equity (GAAP) $ 779,530 $ 784,071
Less goodwill and other intangible assets (excluding mortgage servicing rights) 188,954 190,381
Less preferred stock   48,087  
Average tangible common stockholder's equity (Non-GAAP) $ 590,576   $ 545,603  
 
Net income available to common shareholders $ 86,136   $ 54,924  
 
Return on average tangible common equity (Non-GAAP) 14.59 % 10.07 %

Contact:
First Interstate BancSystem, Inc.
Investor Relations Officer
Marcy Mutch, 406-255-5322
investor.relations@fib.com

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