FIRST INTERSTATE BANCSYSTEM INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003

o Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _________

COMMISSION FILE NUMBER 000-49733

First Interstate BancSystem, Inc.
(Exact name of registrant as specified in its charter)


Montana		81-0331430

(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

PO Box 30918, 401 North 31st Street, Billings, MT		59116-0918

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 406/255-5390

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The Registrant had 7,865,134 shares of common stock outstanding on April 30, 2003.

TABLE OF CONTENTS


Part I Financial Information
	Item 1 — Financial Statements (unaudited)
	Consolidated Balance Sheets March 31, 2003 and December 31, 2002
	Consolidated Statements of Income Three months ended March 31, 2003 and 2002
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income Three months ended March 31, 2003 and 2002
	Consolidated Statements of Cash Flows Three months ended March 31, 2003 and 2002
	Notes to Unaudited Consolidated Financial Statements
	Item 2 — Management’s Discussion and Analysis of Financial Condition And Results of Operations
	Item 3 — Quantitative and Qualitative Disclosures about Market Risk
	Item 4 — Disclosure Controls and Procedures
PART II Other Information
	Item 1 — Legal Proceedings
	Item 2 — Changes in Securities and Use of Proceeds
	Item 3 — Defaults Upon Senior Indebtedness
	Item 4 — Submission of Matters to a Vote of Security Holders
	Item 5 — Other Information
	Item 6 — Exhibits and Reports on Form 8-K
Signatures
Certifications
EX-99.1 Certification Pursuant to Section 906

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q


	Index		Page

Part I	Financial Information

	Item 1 —	Financial Statements (unaudited)

		Consolidated Balance Sheets
		March 31, 2003 and December 31, 2002	3

		Consolidated Statements of Income
		Three months ended March 31, 2003 and 2002	4

		Consolidated Statements of Stockholders’ Equity and Comprehensive Income
		Three months ended March 31, 2003 and 2002	5

		Consolidated Statements of Cash Flows
		Three months ended March 31, 2003 and 2002	6

		Notes to Unaudited Consolidated Financial Statements	7

	Item 2 —	Management’s Discussion and Analysis of Financial Condition
		And Results of Operations	12

	Item 3 —	Quantitative and Qualitative Disclosures about Market Risk	16

	Item 4 —	Disclosure Controls and Procedures	16

Part II	Other Information

	Item 1 —	Legal Proceedings	17

	Item 2 —	Changes in Securities and Use of Proceeds	17

	Item 3 —	Defaults Upon Senior Securities	17

	Item 4 —	Submission of Matters to a Vote of Security Holders	17

	Item 5 —	Other Information	17

	Item 6 —	Exhibits and Reports on Form 8-K	17

Signatures			18

Certifications			19

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
(Unaudited)


				March 31,		December 31,
				2003		2002

Assets
Cash and due from banks				$	240,784		234,187
Federal funds sold					73,775		50,890
Interest bearing deposits in banks					437		25,815
Investment securities:
	Trading				1,173		799
	Available-for-sale				695,189		716,267
	Held-to-maturity				88,374		83,025

		Total investment securities			784,736		800,091
Loans					2,359,960		2,236,550
Less allowance for loan losses					38,254		36,309

	Net loans				2,321,706		2,200,241
Premises and equipment, net					95,023		92,907
Accrued interest receivable					20,261		20,702
Goodwill					37,626		33,031
Core deposit intangible, net of accumulated amortization					4,353		4,396
Mortgage servicing rights, net of accumulated amortization and impairment reserve					7,559		8,406
Other real estate owned, net					1,157		458
Deferred tax asset, net					6,391		3,044
Other assets					88,947		84,800

			Total assets	$	3,682,755		3,558,968

Liabilities and Stockholders’ Equity
Deposits:
	Noninterest bearing			$	581,720		571,932
	Interest bearing				2,385,862		2,339,915

		Total deposits			2,967,582		2,911,847
Federal funds purchased					150		—
Securities sold under repurchase agreements					296,702		300,234
Accrued interest payable					15,227		14,588
Accounts payable and accrued expenses					29,140		16,830
Other borrowed funds					3,898		7,970
Long-term debt					40,501		23,645
Trust preferred securities					80,000		40,000

		Total liabilities			3,433,200		3,315,114
Stockholders’ equity:
	Nonvoting noncumulative preferred stock without par value; authorized 100,000 shares; no shares issued or outstanding as of March 31, 2003 or December 31, 2002				—		—
	Common stock without par value; authorized 20,000,000 shares; issued and outstanding 7,869,228 shares as of March 31, 2003 and 7,799,748 shares as of December 31, 2002				31,199		3,085
	Retained earnings				217,908		236,724
	Accumulated other comprehensive income, net				448		4,045

		Total stockholders’ equity			249,555		243,854

			Total liabilities and stockholders’ equity	$	3,682,755		3,358,968

See accompanying notes to unaudited consolidated financial statements.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)


				For the three months
				ended March 31,

				2003			2002

Interest income:
	Interest and fees on loans			$	38,630			40,892
	Interest and dividends on investment securities:
		Taxable			6,920			8,295
		Exempt from Federal taxes			967			950
	Interest on deposits in banks				16			62
	Interest on Federal funds sold				151			159

			Total interest income		46,684			50,358

Interest expense:
	Interest on deposits				11,780			14,504
	Interest on Federal funds purchased				—			2
	Interest on securities sold under repurchase agreements				674			881
	Interest on other borrowed funds				20			29
	Interest on long-term debt				513			562
	Interest on trust preferred securities				907			882

			Total interest expense		13,894			16,860

			Net interest income		32,790			33,498
	Provision for loan losses				2,430			2,622

			Net interest income after provision for loan losses		30,360			30,876
Noninterest income:
	Income from fiduciary activities				1,188			1,150
	Service charges on deposit accounts				3,864			3,700
	Technology services				2,804			2,611
	Other service charges, commissions and fees				7,339			4,807
	Investment securities gains, net				1,475			1
	Other real estate expense, net of income				(16	)		(11	)
	Other income				1,138			903

			Total noninterest income		17,792			13,161

Noninterest expense:
	Salaries, wages and employee benefits				17,278			17,049
	Occupancy, net				2,714			2,546
	Furniture and equipment				3,046			3,135
	FDIC insurance				125			115
	Core deposit intangible amortization				305			320
	Other expenses				11,104			6,954

			Total noninterest expense		34,572			30,119

Income before income taxes					13,580			13,918
Income tax expense					4,743			5,046

			Net income	$	8,837			8,872

Basic earnings per common share				$	1.12			1.13

Diluted earnings per common share				$	1.12			1.13

Dividends per common share				$	0.34			0.30

See accompanying notes to unaudited consolidated financial statements.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and Comprehensive Income
(Dollars in thousands, except share and per share data)
(Unaudited)


										Accumulated
										other			Total
				Common			Retained			comprehensive			stockholders'
				stock			earnings			income			equity

Balance at December 31, 2002				$	3,085			236,724			4,045			243,854
Comprehensive income:
	Net income				—			8,837			—			8,837
	Unrealized losses on available-for-sale investment securities, net of income tax benefit of $1,725				—			—			(2,697	)		(2,697	)
	Less reclassification adjustment for gains included in net income, net of income tax expense of $575				—			—			(900	)		(900	)

		Other comprehensive income												(3,597	)

			Total comprehensive income											5,240

Common stock transactions:
	19,704 shares retired				(896	)		—			—			(896	)
	89,184 shares issued				4,010			—			—			4,010
Recapitalization of common stock from retained earnings					25,000			(25,000	)		—			—
Cash dividends declared:
	Common ($0.34 per share)				—			(2,653	)		—			(2,653	)

Balance at March 31, 2003				$	31,199			217,908			448			249,555

Balance at December 31, 2001				$	5,184			212,314			4,571			222,069
Comprehensive income:
	Net income				—			8,872			—			8,872
	Unrealized losses on available-for-sale investment securities, net of income tax benefit of $1,252				—			—			(1,958	)		(1,958	)
	Less reclassification adjustment for gains included in net income, net of income tax expense				—			—			(1	)		(1	)

		Other comprehensive income												(1,959	)

			Total comprehensive income											6,913

Common stock transactions:
	39,991 shares retired				(1,704	)		—			—			(1,704	)
	11,458 shares issued				489			—			—			489
Cash dividends declared:
	Common ($0.30 per share)				—			(2,353	)		—			(2,353	)

Balance at March 31, 2002				$	3,969			218,833			2,612			225,414

See accompanying notes to unaudited consolidated financial statements.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

For the three months

ended March 31,

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