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8-K - 8-K - FIRST INTERSTATE BANCSYSTEM INC | a20121231-8k.htm |
For Immediate Release | ||||
Contact: | Marcy Mutch | NASDAQ: FIBK | ||
Investor Relations Officer First Interstate BancSystem, Inc. (406) 255-5322 investor.relations@fib.com | www.FIBK.com |
First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results
Billings, MT - January 28, 2013 - First Interstate BancSystem, Inc. reports fourth quarter 2012 net income available to common shareholders of $16.1 million, or $0.37 per diluted share, as compared to $15.3 million, or $0.35 per diluted share, for third quarter 2012, and $12.4 million, or $0.29 per diluted share, for fourth quarter 2011.
Significant financial statement items for the fourth quarter of 2012 include:
• | Income from the origination and sale of residential mortgage loans increased to a record high level of $12.3 million during the three months ended December 31, 2012. This represented a 5.6% increase over the prior quarter and a 52.4% increase over the same quarter of the prior year; |
• | Net interest margin ratio declined 8 basis points during fourth quarter 2012, as compared to third quarter 2012, and 24 basis points as compared to fourth quarter 2011, due to lower yields earned on loan and investment portfolios; |
• | Non-performing assets continued to decrease to the lowest level since 2009, declining to $174.6 million, or 2.26% of total assets, as of December 31, 2012, compared to $202.7 million, or 2.72% of total assets, as of September 30, 2012, and $278.9 million, or 3.81% of total assets, as of December 31, 2011; and |
• | Provision for loan losses was $8.0 million for the three months ended December 31, 2012, compared to $9.5 million for the three months ended September 30, 2012, and $13.8 million for the three months ended December 31, 2011. |
1
RESULTS SUMMARY
(Unaudited; $ in thousands, except per share data)
As Of or For the Three Months Ended | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||||||||
Net income available to common shareholders | $ | 16,114 | $ | 15,292 | $ | 12,402 | 5.4 | % | 29.9 | % | |||||||
Diluted earnings per common share | 0.37 | 0.35 | 0.29 | 5.7 | % | 27.6 | % | ||||||||||
Dividends paid per common share | 0.2500 | 0.1200 | 0.1125 | 108.3 | % | 122.2 | % | ||||||||||
Book value per common share | 17.35 | 17.29 | 16.77 | 0.3 | % | 3.5 | % | ||||||||||
Tangible book value per common share* | 12.97 | 12.90 | 12.33 | 0.5 | % | 5.2 | % | ||||||||||
Net tangible book value per common share* | 14.37 | 14.30 | 13.74 | 0.5 | % | 4.6 | % | ||||||||||
Return on average common equity, annualized | 8.55 | % | 8.22 | % | 6.84 | % | |||||||||||
Return on average tangible common equity, annualized* | 11.45 | % | 11.07 | % | 9.31 | % | |||||||||||
Return on average assets, annualized | 0.88 | % | 0.86 | % | 0.72 | % |
As Of or For the Year Ended | |||||||||||||
December 31, 2012 | December 31, 2011 | Year Over Year % Change | |||||||||||
Net income available to common shareholders | $ | 54,924 | 41,124 | 33.6 | % | ||||||||
Diluted earnings per common share | 1.27 | 0.96 | 32.3 | % | |||||||||
Dividends paid per common share | 0.61 | 0.45 | 35.6 | % | |||||||||
Return on average common equity | 7.46 | % | 5.86 | % | |||||||||
Return on average tangible common equity* | 10.07 | % | 8.06 | % | |||||||||
Return on average assets | 0.79 | % | 0.61 | % |
* | See Non-GAAP Financial Measures included herein for a discussion regarding tangible and net tangible book |
value per common share.
“Our fourth quarter performance capped a strong year for the Company, resulting in a 32% increase in earnings per share year-over-year as well as significant improvements in return on equity and return on assets,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Fourth quarter results were driven by continued robust activity in residential mortgage lending. Growth in this area is reflective of strong demand for refinancing in our markets, as well as enhancements we have made in our systems and processes that have enabled us to capture additional market share. We were also pleased to see further improvement in asset quality and a reduction in credit costs during the quarter. Total non-performing assets declined by 37% from the prior year, which reflects the diligent efforts of our lenders and credit officers in managing these assets to satisfactory resolutions,” Garding further noted.
“Moving into 2013, we expect to deliver another year of strong profitability. Although modest loan demand and continued compression in our net interest margin will present challenges for growing our net interest income, we believe we can offset these pressures through further increases in our non-interest income, continued improvement in operating efficiencies, and a reduction in credit costs resulting from continued improvement in asset quality,” said Mr. Garding.
2
REVENUE SUMMARY
(Unaudited; $ in thousands)
For the Three Months Ended | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||||||||
Interest income | $ | 67,601 | $ | 68,175 | $ | 72,006 | -0.8 | % | -6.1 | % | |||||||
Interest expense | 6,628 | 7,170 | 8,971 | -7.6 | % | -26.1 | % | ||||||||||
Net interest income | 60,973 | 61,005 | 63,035 | -0.1 | % | -3.3 | % | ||||||||||
Non-interest income: | |||||||||||||||||
Income from the origination and sale of loans | 12,321 | 11,665 | 8,087 | 5.6 | % | 52.4 | % | ||||||||||
Other service charges, commissions and fees | 8,774 | 8,774 | 8,062 | — | % | 8.8 | % | ||||||||||
Service charges on deposit accounts | 4,401 | 4,395 | 4,543 | 0.1 | % | -3.1 | % | ||||||||||
Wealth management revenues | 3,659 | 3,557 | 3,280 | 2.9 | % | 11.6 | % | ||||||||||
Investment securities gains, net | 53 | 66 | 1,488 | -19.7 | % | -96.4 | % | ||||||||||
Other income | 1,427 | 1,725 | 1,537 | -17.3 | % | -7.2 | % | ||||||||||
Total non-interest income | 30,635 | 30,182 | 26,997 | 1.5 | % | 13.5 | % | ||||||||||
Total revenues | $ | 91,608 | $ | 91,187 | $ | 90,032 | 0.5 | % | 1.8 | % | |||||||
Tax equivalent net interest margin ratio | 3.55 | % | 3.63 | % | 3.79 | % |
For the Year Ended | Year Over Year % Change | |||||||||||||
December 31, 2012 | December 31, 2011 | |||||||||||||
Interest income | $ | 273,900 | $ | 292,883 | -6.5 | % | ||||||||
Interest expense | 30,114 | 42,031 | -28.4 | % | ||||||||||
Net interest income | 243,786 | 250,852 | -2.8 | % | ||||||||||
Non-interest income: | ||||||||||||||
Income from the origination and sale of loans | 41,790 | 21,153 | 97.6 | % | ||||||||||
Other service charges, commissions and fees | 34,226 | 31,689 | 8.0 | % | ||||||||||
Service charges on deposit accounts | 17,412 | 17,647 | -1.3 | % | ||||||||||
Wealth management revenues | 14,314 | 13,575 | 5.4 | % | ||||||||||
Investment securities gains, net | 348 | 1,544 | -77.5 | % | ||||||||||
Other income | 6,771 | 6,264 | 8.1 | % | ||||||||||
Total non-interest income | 114,861 | 91,872 | 25.0 | % | ||||||||||
Total revenues | $ | 358,647 | $ | 342,724 | 4.6 | % | ||||||||
Tax equivalent net interest margin ratio | 3.66 | % | 3.80 | % |
Net Interest Income
The Company's net interest margin ratio decreased to 3.55% during fourth quarter 2012, as compared to 3.63% during third quarter 2012. The fourth quarter 2012 net interest margin ratio included $425 thousand of recoveries of charged-off interest. Exclusive of these interest recoveries, the Company's net interest margin ratio was 3.53% during fourth quarter 2012. The decline in the net interest margin ratio, as compared to third quarter 2012, was primarily due to lower yields earned on the Company's loan and investment portfolios. The impact of lower asset yields was partially offset by increases in average outstanding loans and investment securities and a 5 basis point reduction in the cost of interest-bearing liabilities due to a continuing favorable shift in the mix of deposits from higher costing time deposits into non-interest bearing demand deposits.
Decreases in net interest margin ratio during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011, were due to lower outstanding loan balances and lower yields earned on the Company's loan and investment portfolios, which were partially offset by reductions in the cost of interest bearing liabilities combined with a shift from higher-costing savings and time deposits to lower-costing demand deposits.
3
Non-interest Income
Non-interest income increased during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011 and the three months ended September 30, 2012, primarily due to increases in income from the origination and sale of residential mortgage loans. New loans for home purchases accounted for approximately 35% of our 2012 residential loan production, compared to 44% in 2011.
NON-INTEREST EXPENSE
(Unaudited; $ in thousands)
For the Three Months Ended | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||||||||
Non-interest expense: | |||||||||||||||||
Salaries and wages | $ | 23,288 | $ | 23,341 | $ | 22,002 | -0.2 | % | 5.8 | % | |||||||
Employee benefits | 6,113 | 7,447 | 6,871 | -17.9 | % | -11.0 | % | ||||||||||
Occupancy, net | 3,968 | 3,793 | 3,815 | 4.6 | % | 4.0 | % | ||||||||||
Furniture and equipment | 3,301 | 3,231 | 3,195 | 2.2 | % | 3.3 | % | ||||||||||
Other real estate owned ("OREO") expense, net of income | 3,877 | 2,612 | 2,021 | 48.4 | % | 91.8 | % | ||||||||||
Outsourced technology services | 2,199 | 2,182 | 2,245 | 0.8 | % | -2.0 | % | ||||||||||
FDIC insurance premiums | 1,652 | 1,622 | 1,607 | 1.8 | % | 2.8 | % | ||||||||||
Professional fees | 1,059 | 1,050 | 1,176 | 0.9 | % | -9.9 | % | ||||||||||
Mortgage servicing rights amortization | 910 | 879 | 940 | 3.5 | % | -3.2 | % | ||||||||||
Mortgage servicing rights impairment (recovery) | (10 | ) | 55 | 427 | -118.2 | % | -102.3 | % | |||||||||
Core deposit intangibles amortization | 355 | 355 | 361 | 0.0 | % | -1.7 | % | ||||||||||
Other expenses | 11,120 | 10,497 | 11,561 | 5.9 | % | -3.8 | % | ||||||||||
Total non-interest expense | $ | 57,832 | $ | 57,064 | $ | 56,221 | 1.3 | % | 2.9 | % |
For the Year Ended | Year Over Year % Change | |||||||||||||
December 31, 2012 | December 31, 2011 | |||||||||||||
Non-interest expense: | ||||||||||||||
Salaries and wages | $ | 89,833 | $ | 83,560 | 7.5 | % | ||||||||
Employee benefits | 29,345 | 27,792 | 5.6 | % | ||||||||||
Occupancy, net | 15,786 | 16,223 | -2.7 | % | ||||||||||
Furniture and equipment | 12,859 | 12,562 | 2.4 | % | ||||||||||
OREO expense, net of income | 9,400 | 8,652 | 8.6 | % | ||||||||||
Outsourced technology services | 8,826 | 8,933 | -1.2 | % | ||||||||||
FDIC insurance premiums | 6,470 | 7,333 | -11.8 | % | ||||||||||
Professional fees | 4,044 | 3,676 | 10.0 | % | ||||||||||
Mortgage servicing rights amortization | 3,501 | 3,225 | 8.6 | % | ||||||||||
Mortgage servicing rights impairment (recovery) | (771 | ) | 1,275 | -160.5 | % | |||||||||
Core deposit intangibles amortization | 1,420 | 1,446 | -1.8 | % | ||||||||||
Other expenses | 48,922 | 43,735 | 11.9 | % | ||||||||||
Total non-interest expense | $ | 229,635 | $ | 218,412 | 5.1 | % |
4
Salaries and wages increased during the three and twelve months ended December 31, 2012, as compared to the same periods in the prior year, primarily due to higher incentive bonus accruals reflective of the Company's improved performance, inflationary wage increases and increases in commissions and overtime related to the substantial increase in residential real estate loan activity.
Employee benefits decreased during fourth quarter 2012, as compared to third quarter 2012 and fourth quarter 2011, primarily due to lower group health insurance costs. During fourth quarter 2012, the Company reversed $1.1 million of previously accrued group health insurance expense to reflect favorable claims experience in 2012.
Employee benefits increased during the twelve months ended December 31, 2012, as compared to the same period in 2011, primarily due to the combined effects of increases in the market values of securities held under deferred compensation plans, higher stock-based compensation expense and increases in profit sharing accruals reflective of the Company's improved performance. These increases were partially offset by decreases in group health insurance expense described above.
Increases in OREO expense during fourth quarter 2012, as compared to third quarter of 2012 and fourth quarter 2011, were primarily due to write-downs in the estimated fair values of OREO properties. During fourth quarter 2012, the Company recorded write-downs in the estimated fair values of OREO properties of $3.3 million, compared to $2.3 million during third quarter 2012 and $1.5 million during fourth quarter 2011. Approximately 75% of fourth quarter 2012 write-downs were attributable to three properties.
Increases in OREO expense during the twelve months ended December 31, 2012, compared to the same period in the prior year, were primarily attributable to additional carrying costs associated with properties foreclosed during the period. During 2012, OREO expenses included net operating expenses of $3.7 million, write-downs in the estimated fair value of OREO properties of $6.7 million and net gains on OREO sales of $1.0 million, as compared to net operating expenses of $1.8 million, write-downs in the estimated fair value of OREO properties of $7.5 million and net gains on OREO sales of $567 thousand during 2011.
Other expenses increased during fourth quarter 2012, compared to third quarter 2012. During fourth quarter 2012, the Company adjusted accruals related to its credit card loyalty program resulting in a reversal of $695 thousand of other expense. This decrease was offset by increases in advertising costs, which fluctuate based on the timing of advertising campaigns. Increases in other expenses during the twelve months ended December 31, 2012, as compared to the same period in 2011, were primarily due to non-recurring expenses recorded during the first and second quarters of 2012, including the accrual of $3.0 million of estimated collection and settlement costs, $1.5 million of donations expense associated with the sale of a bank building to a charitable organization and the write-off of $428 thousand of unamortized issuance costs associated with the redemption of junior subordinated debentures. In addition, debit card processing expenses increased $1.4 million in 2012, as compared to 2011, due to changes in per transaction processing costs and increases in transaction volumes. Increases in debit card processing expense were offset by corresponding increases in debit card processing revenues of $1.1 million, which are included in non-interest income from other service charges, commissions and fees in the tables above and the accompanying income statements.
5
ASSET QUALITY
(Unaudited; $ in thousands)
For the Three Months Ended | |||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Allowance for loan losses - beginning of period | $ | 99,006 | $ | 102,794 | $ | 120,303 | |||||
Charge-offs | (10,291 | ) | (14,813 | ) | (22,435 | ) | |||||
Recoveries | 3,796 | 1,525 | 962 | ||||||||
Provision | 8,000 | 9,500 | 13,751 | ||||||||
Allowance for loan losses - end of period | $ | 100,511 | $ | 99,006 | $ | 112,581 | |||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Period end loans | $ | 4,223,912 | $ | 4,180,051 | $ | 4,186,549 | |||||
Average loans, quarter | 4,197,665 | 4,183,016 | 4,236,228 | ||||||||
Non-performing loans: | |||||||||||
Non-accrual loans | 107,799 | 122,931 | 199,983 | ||||||||
Accruing loans past due 90 days or more | 2,277 | 4,339 | 4,111 | ||||||||
Troubled debt restructurings | 31,932 | 35,428 | 37,376 | ||||||||
Total non-performing loans | 142,008 | 162,698 | 241,470 | ||||||||
Other real estate owned | 32,571 | 39,971 | 37,452 | ||||||||
Total non-performing assets | $ | 174,579 | $ | 202,669 | $ | 278,922 | |||||
As Of or For the Three Months Ended | |||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Net charge-offs to average loans, annualized | 0.62 | % | 1.26 | % | 2.01 | % | |||||
Provision for loan losses to average loans, annualized | 0.76 | % | 0.90 | % | 1.29 | % | |||||
Allowance for loan losses to period end loans | 2.38 | % | 2.37 | % | 2.69 | % | |||||
Allowance for loan losses to total non-performing loans | 70.78 | % | 60.85 | % | 46.62 | % | |||||
Non-performing loans to period end loans | 3.36 | % | 3.89 | % | 5.77 | % | |||||
Non-performing assets to period end loans and other real estate owned | 4.10 | % | 4.80 | % | 6.60 | % | |||||
Non-performing assets to total assets | 2.26 | % | 2.72 | % | 3.81 | % |
As of December 31, 2012, total non-performing loans included $125 million of real estate loans, of which $34 million were construction loans and $74 million were commercial real estate loans. Non-performing construction loans as of December 31, 2012 were comprised of land acquisition and development loans of $23 million, commercial construction loans of $8 million and residential construction loans of $3 million. Decreases in non-performing loans as of December 31, 2012, as compared to September 30, 2012, are primarily due to the movement of non-accrual loans out of the loan portfolio through pay-off, charge-off or foreclosure.
Decreases in troubled debt restructurings as of December 31, 2012, compared to September 30, 2012, were due to the placement of two restructured commercial real estate loans on non-accrual status during fourth quarter 2012.
During fourth quarter 2012, the Company recorded additions to OREO of $6.7 million, recorded write downs in the fair value of OREO properties of $3.3 million and sold OREO with a net book value of $10.8 million at a net gain of $273 thousand.
Decreases in provisions for loan losses during fourth quarter 2012, as compared to third quarter 2012 and fourth quarter 2011, are reflective of continued improvement in credit quality as evidenced by declining levels of non-performing and criticized loans. As of December 31, 2012, non-performing assets were at their lowest level since fourth quarter 2009.
Recoveries of charged-off loans increased during fourth quarter 2012, compared to third quarter 2012 and fourth quarter 2011, primarily due to a $1.2 million recovery on one large commercial loan charged-off earlier in 2012.
6
CREDIT QUALITY TRENDS
(Unaudited; $ in thousands)
Provision for Loan Losses | Net Charge-offs | Allowance for Loan Losses | Accruing Loans 30-89 Days Past Due | Non-Performing Loans | Non-Performing Assets | ||||||||||||||||||
Q1 2009 | $ | 9,600 | $ | 4,693 | $ | 92,223 | $ | 98,980 | $ | 103,653 | $ | 122,300 | |||||||||||
Q2 2009 | 11,700 | 5,528 | 98,395 | 88,632 | 135,484 | 167,273 | |||||||||||||||||
Q3 2009 | 10,500 | 7,147 | 101,748 | 91,956 | 125,083 | 156,958 | |||||||||||||||||
Q4 2009 | 13,500 | 12,218 | 103,030 | 63,878 | 124,678 | 163,078 | |||||||||||||||||
Q1 2010 | 11,900 | 8,581 | 106,349 | 62,675 | 133,042 | 177,022 | |||||||||||||||||
Q2 2010 | 19,500 | 11,521 | 114,328 | 99,334 | 158,113 | 200,451 | |||||||||||||||||
Q3 2010 | 18,000 | 12,092 | 120,236 | 47,966 | 202,008 | 237,304 | |||||||||||||||||
Q4 2010 | 17,500 | 17,256 | 120,480 | 57,011 | 210,684 | 244,312 | |||||||||||||||||
Q1 2011 | 15,000 | 11,034 | 124,446 | 68,021 | 249,878 | 281,873 | |||||||||||||||||
Q2 2011 | 15,400 | 15,267 | 124,579 | 70,145 | 263,467 | 291,790 | |||||||||||||||||
Q3 2011 | 14,000 | 18,276 | 120,303 | 62,165 | 262,578 | 287,658 | |||||||||||||||||
Q4 2011 | 13,751 | 21,473 | 112,581 | 75,603 | 241,470 | 278,922 | |||||||||||||||||
Q1 2012 | 11,250 | 7,929 | 115,902 | 58,531 | 222,765 | 267,521 | |||||||||||||||||
Q2 2012 | 12,000 | 25,108 | 102,794 | 55,074 | 172,333 | 226,150 | |||||||||||||||||
Q3 2012 | 9,500 | 13,288 | 99,006 | 48,277 | 162,698 | 202,669 | |||||||||||||||||
Q4 2012 | 8,000 | 6,495 | 100,511 | 34,602 | 142,008 | 174,579 |
CRITICIZED LOANS
(Unaudited; $ in thousands)
Other Assets Especially Mentioned | Substandard | Doubtful | Total | ||||||||||||
Q1 2009 | $ | 163,402 | $ | 231,861 | $ | 40,356 | $ | 435,619 | |||||||
Q2 2009 | 230,833 | 242,751 | 48,326 | 521,910 | |||||||||||
Q3 2009 | 239,320 | 271,487 | 60,725 | 571,532 | |||||||||||
Q4 2009 | 279,294 | 271,324 | 69,603 | 620,221 | |||||||||||
Q1 2010 | 312,441 | 311,866 | 64,113 | 688,420 | |||||||||||
Q2 2010 | 319,130 | 337,758 | 92,249 | 749,137 | |||||||||||
Q3 2010 | 340,075 | 340,973 | 116,003 | 797,051 | |||||||||||
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 |
7
LOANS
(Unaudited; $ in thousands)
December 31, 2012 | September 30, 2012 | December 31, 2011 | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||
Real estate: | |||||||||||||||||
Commercial | $ | 1,497,272 | $ | 1,513,784 | $ | 1,553,155 | -1.1 | % | -3.6 | % | |||||||
Construction: | |||||||||||||||||
Land acquisition & development | 220,196 | 233,082 | 278,613 | -5.5 | % | -21.0 | % | ||||||||||
Residential | 49,274 | 50,895 | 61,106 | -3.2 | % | -19.4 | % | ||||||||||
Commercial | 65,059 | 56,097 | 61,054 | 16.0 | % | 6.6 | % | ||||||||||
Total construction loans | 334,529 | 340,074 | 400,773 | -1.6 | % | -16.5 | % | ||||||||||
Residential | 708,339 | 639,235 | 571,943 | 10.8 | % | 23.8 | % | ||||||||||
Agricultural | 177,244 | 175,395 | 175,302 | 1.1 | % | 1.1 | % | ||||||||||
Total real estate loans | 2,717,384 | 2,668,488 | 2,701,173 | 1.8 | % | 0.6 | % | ||||||||||
Consumer: | |||||||||||||||||
Indirect consumer loans | 438,245 | 431,449 | 407,651 | 1.6 | % | 7.5 | % | ||||||||||
Other consumer loans | 137,743 | 139,984 | 147,487 | -1.6 | % | -6.6 | % | ||||||||||
Credit card loans | 60,806 | 58,324 | 60,933 | 4.3 | % | -0.2 | % | ||||||||||
Total consumer loans | 636,794 | 629,757 | 616,071 | 1.1 | % | 3.4 | % | ||||||||||
Commercial | 688,753 | 672,100 | 693,261 | 2.5 | % | -0.7 | % | ||||||||||
Agricultural | 113,627 | 135,467 | 119,710 | -16.1 | % | -5.1 | % | ||||||||||
Other loans, including overdrafts | 912 | 1,359 | 2,813 | -32.9 | % | -67.6 | % | ||||||||||
Loans held for investment | 4,157,470 | 4,107,171 | 4,133,028 | 1.2 | % | 0.6 | % | ||||||||||
Mortgage loans held for sale | 66,442 | 72,880 | 53,521 | -8.8 | % | 24.1 | % | ||||||||||
Total loans | $ | 4,223,912 | $ | 4,180,051 | $ | 4,186,549 | 1.0 | % | 0.9 | % |
Loan demand continues to be challenging with total loans showing only slight growth as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. Management attributes growth in commercial construction loans as of
December 31, 2012, compared to September 30, 2012, to overall improvement in economic conditions in the Company's market areas. Residential real estate loans grew during fourth quarter 2012 due to continued retention of selected loan production. Agricultural loans decreased as of December 31, 2012, compared to September 30, 2012, due to seasonal reductions in credit lines. Land acquisition and development and residential construction loans continued to decrease during fourth quarter 2012 primarily due to further movement of lower quality loans out of the loan portfolio through pay-off, charge-off or foreclosure.
8
DEPOSITS
(Unaudited; $ in thousands)
December 31, 2012 | September 30, 2012 | December 31, 2011 | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||
Non-interest bearing demand | $ | 1,495,309 | $ | 1,443,773 | $ | 1,271,709 | 3.6 | % | 17.6 | % | |||||||
Interest bearing: | |||||||||||||||||
Demand | 1,811,905 | 1,637,214 | 1,306,509 | 10.7 | % | 38.7 | % | ||||||||||
Savings | 1,547,713 | 1,531,359 | 1,691,413 | 1.1 | % | -8.5 | % | ||||||||||
Time, $100 and over | 594,712 | 613,586 | 681,047 | -3.1 | % | -12.7 | % | ||||||||||
Time, other | 790,772 | 809,800 | 876,293 | -2.3 | % | -9.8 | % | ||||||||||
Total interest bearing | 4,745,102 | 4,591,959 | 4,555,262 | 3.3 | % | 4.2 | % | ||||||||||
Total deposits | $ | 6,240,411 | $ | 6,035,732 | $ | 5,826,971 | 3.4 | % | 7.1 | % |
Total deposits increased as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. The favorable shift in the composition of deposits away from higher costing time deposits into lower costing demand deposits continued during fourth quarter 2012. As a result, the Company's cost of funds, including non-interest bearing demand deposits, decreased to 0.39% in fourth quarter 2012, compared to 0.43% in third quarter 2012 and 0.55% in fourth quarter 2011.
Savings deposits decreased as of December 31, 2012, compared to December 31, 2011. As a result of regulatory changes allowing businesses to receive interest on checking accounts, the Company discontinued its savings sweep product resulting in a shift of approximately $300 million from savings deposits into demand deposits during first quarter 2012.
REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES HELD BY SUBSIDIARY TRUSTS
On June 26, 2012, the Company redeemed $41.2 million of 30-year junior subordinated deferrable interest debentures issued by the Company to an unconsolidated subsidiary trust. The redemption of the junior subordinated debentures caused a mandatory redemption of $40 million of 30-year floating rate mandatorily redeemable capital trust preferred securities issued by the unconsolidated subsidiary trust to third-party investors.
CAPITAL
(Unaudited, $ in thousands, except per share data)
As of or For the Three Months Ended | |||||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | Sequential Quarter % Change | Year Over Year % Change | |||||||||||||
Preferred stockholders' equity | $ | — | $ | 50,000 | $ | 50,000 | -100.0 | % | -100.0 | % | |||||||
Common stockholders' equity | 735,195 | 729,059 | 701,986 | 0.8 | % | 4.7 | % | ||||||||||
Accumulated other comprehensive income, net | 15,991 | 18,811 | 19,034 | -15.0 | % | -16.0 | % | ||||||||||
Total stockholders' equity | $ | 751,186 | $ | 797,870 | $ | 771,020 | -5.9 | % | -2.6 | % | |||||||
Book value per common share | $ | 17.35 | $ | 17.29 | $ | 16.77 | 0.3 | % | 3.5 | % | |||||||
Tangible book value per common share* | 12.97 | 12.90 | 12.33 | 0.5 | % | 5.2 | % | ||||||||||
Net tangible book value per common share * | 14.37 | 14.30 | 13.74 | 0.5 | % | 4.6 | % | ||||||||||
Weighted average common shares outstanding for basic earnings per common share computation | 43,032,697 | 42,989,564 | 42,783,770 | 0.1 | % | 0.6 | % | ||||||||||
Weighted average common shares outstanding for diluted earnings per common share computation | 43,198,076 | 43,120,077 | 42,847,772 | 0.2 | % | 0.8 | % |
* | See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible book value per common share. |
9
On December 18, 2012, the Company provided notice to preferred stockholders of its intention to redeem the preferred stock on January 18, 2013. Upon notice to holders of the redemption, the preferred stock was reclassified from stockholders' equity to a liability in accordance with generally accepted accounting principles. The preferred stock was redeemed on January 18, 2013 at an aggregate redemption price of $50.2 million, which represented par value plus unpaid and accrued dividends.
CAPITAL RATIOS
(Unaudited)
December 31, 2012 | September 30, 2012 | December 31, 2011 | ||||||
Tangible common stockholders' equity to tangible assets* | 7.46 | % | 7.67 | % | 7.43 | % | ||
Net tangible common stockholders' equity to tangible assets* | 8.26 | % | 8.50 | % | 8.28 | % | ||
Tier 1 common capital to total risk weighted assets | 11.94 | % | ** | 11.81 | % | 11.04 | % | |
Leverage ratio | 8.81 | % | ** | 9.56 | % | 9.84 | % | |
Tier 1 risk-based capital | 13.60 | % | ** | 14.53 | % | 14.55 | % | |
Total risk-based capital | 15.59 | % | ** | 16.52 | % | 16.54 | % |
* | See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible common stockholders' equity to tangible assets. |
** | Preliminary estimate - may be subject to change. |
As of December 31, 2012, the Company had capital levels that, in all cases, exceeded the “well capitalized” requirements under all regulatory capital guidelines.
Fourth Quarter 2012 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2012 results at 11:00 a.m. Eastern Standard Time (9:00 a.m. MST) on Tuesday, January 29, 2013. 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 Standard Time (11:00 a.m. MST) on January 29, 2013 through March 4, 2013 by dialing 1-877-344-7529 (using conference ID 10023660). 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 72 banking offices in 42 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 Statement
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are covered by the safe harbor provisions of such sections. These statements include statements about decreased levels of criticized loans, stabilization of the loan portfolio, the Company's level of allowance for loan losses, manageability of credit costs and levels of profitability. Therefore, the Company's actual results, performance or achievements may differ materially from those expressed in or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions.
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 release: credit losses; concentrations of real estate loans; economic and market developments, including inflation; 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; inability to grow business; adverse economic conditions affecting Montana, Wyoming and western South Dakota; 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 Company’s management team; ability to attract and retain qualified employees; failure of technology; reliance on external vendors; disruption of vital infrastructure and other
10
business interruptions; illiquidity in the credit markets; 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; failure to effectively implement technology-driven products and services; litigation pertaining to fiduciary responsibilities; capital required to support the Company’s bank subsidiary; soundness of other financial institutions; impact of Basel III capital standards and forthcoming new capital rules proposed for U.S. banks; inability of our bank subsidiary to pay dividends; 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; subordination of common stock to Company debt; uncertainties associated with introducing new products or lines of business; and, downgrade of the U.S. credit rating.
A more detailed discussion of each of the foregoing risks is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed February 28, 2012. These factors and the other risk factors described in the Company's periodic and current reports filed with the Securities and Exchange Commission from time to time, however, are not necessarily all of the important factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed in or implied by any of the Company's forward-looking statements. Other unknown or unpredictable factors also could harm the Company's results. Investors and others are encouraged to read the more detailed discussion of the Company's risks contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.
All forward-looking statements attributable to the Company or persons acting on the Company's 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 the Company does 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 the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.
11
CONSOLIDATED BALANCE SHEETS
(Unaudited, $ in thousands)
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Assets | |||||||||||
Cash and due from banks | $ | 177,978 | $ | 124,275 | $ | 142,502 | |||||
Federal funds sold | 730 | 1,215 | 309 | ||||||||
Interest bearing deposits in banks | 622,624 | 485,845 | 329,636 | ||||||||
Total cash and cash equivalents | 801,332 | 611,335 | 472,447 | ||||||||
Investment securities: | |||||||||||
Available-for-sale | 1,995,258 | 1,979,154 | 2,016,864 | ||||||||
Held-to-maturity (estimated fair values of $218,933, $199,078, $161,877 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively) | 208,223 | 187,573 | 152,781 | ||||||||
Total investment securities | 2,203,481 | 2,166,727 | 2,169,645 | ||||||||
Loans held for investment | 4,157,470 | 4,107,171 | 4,133,028 | ||||||||
Mortgage loans held for sale | 66,442 | 72,880 | 53,521 | ||||||||
Total loans | 4,223,912 | 4,180,051 | 4,186,549 | ||||||||
Less allowance for loan losses | 100,511 | 99,006 | 112,581 | ||||||||
Net loans | 4,123,401 | 4,081,045 | 4,073,968 | ||||||||
Premises and equipment, net of accumulated depreciation | 187,565 | 188,851 | 184,771 | ||||||||
Goodwill | 183,673 | 183,673 | 183,673 | ||||||||
Company-owned life insurance | 76,729 | 76,371 | 74,880 | ||||||||
Other real estate owned ("OREO"), net of write-downs | 32,571 | 39,971 | 37,452 | ||||||||
Accrued interest receivable | 28,869 | 33,416 | 31,974 | ||||||||
Mortgage servicing rights, net of accumulated amortization and impairment reserve | 12,653 | 12,334 | 11,555 | ||||||||
Core deposit intangibles, net of accumulated amortization | 5,937 | 6,291 | 7,357 | ||||||||
Deferred tax asset, net | 2,597 | 1,638 | 9,628 | ||||||||
Other assets | 62,953 | 59,500 | 68,177 | ||||||||
Total assets | $ | 7,721,761 | $ | 7,461,152 | $ | 7,325,527 | |||||
Liabilities and Stockholders’ Equity | |||||||||||
Deposits: | |||||||||||
Non-interest bearing | $ | 1,495,309 | $ | 1,443,773 | $ | 1,271,709 | |||||
Interest bearing | 4,745,102 | 4,591,959 | 4,555,262 | ||||||||
Total deposits | 6,240,411 | 6,035,732 | 5,826,971 | ||||||||
Securities sold under repurchase agreements | 505,785 | 460,805 | 516,243 | ||||||||
Accounts payable and accrued expenses | 48,208 | 40,386 | 42,248 | ||||||||
Accrued interest payable | 6,502 | 6,706 | 8,123 | ||||||||
Long-term debt | 37,160 | 37,170 | 37,200 | ||||||||
Other borrowed funds | 32 | 6 | 7 | ||||||||
Preferred stock pending redemption | 50,000 | — | — | ||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 82,477 | 123,715 | ||||||||
Total liabilities | 6,970,575 | 6,663,282 | 6,554,507 | ||||||||
Stockholders’ equity: | |||||||||||
Preferred stock | — | 50,000 | 50,000 | ||||||||
Common stock | 271,335 | 270,553 | 266,842 | ||||||||
Retained earnings | 463,860 | 458,506 | 435,144 | ||||||||
Accumulated other comprehensive income, net | 15,991 | 18,811 | 19,034 | ||||||||
Total stockholders’ equity | 751,186 | 797,870 | 771,020 | ||||||||
Total liabilities and stockholders’ equity | $ | 7,721,761 | $ | 7,461,152 | $ | 7,325,527 |
12
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, $ in thousands, except per share data)
Three Months Ended | |||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Interest income: | |||||||||||
Interest and fees on loans | $ | 57,470 | $ | 57,418 | $ | 60,529 | |||||
Interest and dividends on investment securities: | |||||||||||
Taxable | 8,490 | 9,194 | 10,023 | ||||||||
Exempt from federal taxes | 1,256 | 1,223 | 1,196 | ||||||||
Interest on deposits in banks | 383 | 336 | 256 | ||||||||
Interest on federal funds sold | 2 | 4 | 2 | ||||||||
Total interest income | 67,601 | 68,175 | 72,006 | ||||||||
Interest expense: | |||||||||||
Interest on deposits | 4,851 | 5,414 | 6,854 | ||||||||
Interest on securities sold under repurchase agreements | 127 | 144 | 150 | ||||||||
Interest on long-term debt | 486 | 502 | 493 | ||||||||
Interest on preferred stock pending redemption | 131 | — | — | ||||||||
Interest on subordinated debentures held by subsidiary trusts | 1,033 | 1,110 | 1,474 | ||||||||
Total interest expense | 6,628 | 7,170 | 8,971 | ||||||||
Net interest income | 60,973 | 61,005 | 63,035 | ||||||||
Provision for loan losses | 8,000 | 9,500 | 13,751 | ||||||||
Net interest income after provision for loan losses | 52,973 | 51,505 | 49,284 | ||||||||
Non-interest income: | |||||||||||
Income from the origination and sale of loans | 12,321 | 11,665 | 8,087 | ||||||||
Other service charges, commissions and fees | 8,774 | 8,774 | 8,062 | ||||||||
Service charges on deposit accounts | 4,401 | 4,395 | 4,543 | ||||||||
Wealth management revenues | 3,659 | 3,557 | 3,280 | ||||||||
Investment securities gains, net | 53 | 66 | 1,488 | ||||||||
Other income | 1,427 | 1,725 | 1,537 | ||||||||
Total non-interest income | 30,635 | 30,182 | 26,997 | ||||||||
Non-interest expense: | |||||||||||
Salaries and wages | 23,288 | 23,341 | 22,002 | ||||||||
Employee benefits | 6,113 | 7,447 | 6,871 | ||||||||
Occupancy, net | 3,968 | 3,793 | 3,815 | ||||||||
Furniture and equipment | 3,301 | 3,231 | 3,195 | ||||||||
OREO expense, net of income | 3,877 | 2,612 | 2,021 | ||||||||
Outsourced technology services | 2,199 | 2,182 | 2,245 | ||||||||
FDIC insurance premiums | 1,652 | 1,622 | 1,607 | ||||||||
Professional fees | 1,059 | 1,050 | 1,176 | ||||||||
Mortgage servicing rights amortization | 910 | 879 | 940 | ||||||||
Mortgage servicing rights impairment | (10 | ) | 55 | 427 | |||||||
Core deposit intangibles amortization | 355 | 355 | 361 | ||||||||
Other expenses | 11,120 | 10,497 | 11,561 | ||||||||
Total non-interest expense | 57,832 | 57,064 | 56,221 | ||||||||
Income before income tax expense | 25,776 | 24,623 | 20,060 | ||||||||
Income tax expense | 8,931 | 8,468 | 6,795 | ||||||||
Net income | 16,845 | 16,155 | 13,265 | ||||||||
Preferred stock dividends | 731 | 863 | 863 | ||||||||
Net income available to common shareholders | $ | 16,114 | $ | 15,292 | $ | 12,402 | |||||
Basic earnings per common share | $ | 0.37 | $ | 0.36 | $ | 0.29 | |||||
Diluted earnings per common share | $ | 0.37 | $ | 0.35 | $ | 0.29 |
13
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, $ in thousands, except per share data)
Twelve Months Ended | |||||||
December 31, 2012 | December 31, 2011 | ||||||
Interest income: | |||||||
Interest and fees on loans | $ | 230,882 | $ | 245,767 | |||
Interest and dividends on investment securities: | |||||||
Taxable | 36,847 | 41,304 | |||||
Exempt from federal taxes | 4,923 | 4,749 | |||||
Interest on deposits in banks | 1,235 | 1,050 | |||||
Interest on federal funds sold | 13 | 13 | |||||
Total interest income | 273,900 | 292,883 | |||||
Interest expense: | |||||||
Interest on deposits | 22,306 | 33,533 | |||||
Interest on securities sold under repurchase agreements | 579 | 695 | |||||
Interest on long-term debt | 1,981 | 1,975 | |||||
Interest on preferred stock pending redemption | 131 | — | |||||
Interest on subordinated debentures held by subsidiary trusts | 5,117 | 5,828 | |||||
Total interest expense | 30,114 | 42,031 | |||||
Net interest income: | 243,786 | 250,852 | |||||
Provision for loan losses | 40,750 | 58,151 | |||||
Net interest income after provision for loan losses | 203,036 | 192,701 | |||||
Non-interest income: | |||||||
Income from the origination and sale of loans | 41,790 | 21,153 | |||||
Other service charges, commissions and fees | 34,226 | 31,689 | |||||
Service charges on deposit accounts | 17,412 | 17,647 | |||||
Wealth management revenues | 14,314 | 13,575 | |||||
Investment securities gains, net | 348 | 1,544 | |||||
Other income | 6,771 | 6,264 | |||||
Total non-interest income | 114,861 | 91,872 | |||||
Non-interest expense: | |||||||
Salaries and wages | 89,833 | 83,560 | |||||
Employee benefits | 29,345 | 27,792 | |||||
Occupancy, net | 15,786 | 16,223 | |||||
Furniture and equipment | 12,859 | 12,562 | |||||
OREO expense, net of income | 9,400 | 8,652 | |||||
Outsourced technology services | 8,826 | 8,933 | |||||
FDIC insurance premiums | 6,470 | 7,333 | |||||
Professional fees | 4,044 | 3,676 | |||||
Mortgage servicing rights amortization | 3,501 | 3,225 | |||||
Mortgage servicing rights impairment (recovery) | (771 | ) | 1,275 | ||||
Core deposit intangibles amortization | 1,420 | 1,446 | |||||
Other expenses | 48,922 | 43,735 | |||||
Total non-interest expense | 229,635 | 218,412 | |||||
Income before income tax expense | 88,262 | 66,161 | |||||
Income tax expense | 30,038 | 21,615 | |||||
Net income | 58,224 | 44,546 | |||||
Preferred stock dividends | 3,300 | 3,422 | |||||
Net income available to common shareholders | $ | 54,924 | $ | 41,124 | |||
Basic earnings per common share | $ | 1.28 | $ | 0.96 | |||
Diluted earnings per common share | $ | 1.27 | $ | 0.96 |
14
AVERAGE BALANCE SHEETS
(Unaudited, $ in thousands)
Three Months Ended | ||||||||||||||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,197,665 | $ | 57,915 | 5.49 | % | $ | 4,183,016 | $ | 57,872 | 5.50 | % | $ | 4,236,228 | $ | 60,928 | 5.71 | % | ||||||||
Investment securities (2) | 2,156,668 | 10,471 | 1.93 | 2,098,576 | 11,123 | 2.11 | 2,071,372 | 11,910 | 2.28 | |||||||||||||||||
Interest bearing deposits in banks | 600,385 | 383 | 0.25 | 525,149 | 336 | 0.25 | 401,654 | 256 | 0.25 | |||||||||||||||||
Federal funds sold | 2,074 | 2 | 0.38 | 3,006 | 4 | 0.53 | 973 | 2 | 0.82 | |||||||||||||||||
Total interest earnings assets | 6,956,792 | 68,771 | 3.93 | 6,809,747 | 69,335 | 4.05 | 6,710,227 | 73,096 | 4.32 | |||||||||||||||||
Non-earning assets | 623,822 | 633,551 | 618,712 | |||||||||||||||||||||||
Total assets | $ | 7,580,614 | $ | 7,443,298 | $ | 7,328,939 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Demand deposits | $ | 1,705,963 | $ | 548 | 0.13 | % | $ | 1,613,136 | $ | 589 | 0.15 | % | $ | 1,300,105 | $ | 601 | 0.18 | % | ||||||||
Savings deposits | 1,528,788 | 741 | 0.19 | 1,523,347 | 873 | 0.23 | 1,689,109 | 1,217 | 0.29 | |||||||||||||||||
Time deposits | 1,404,913 | 3,562 | 1.01 | 1,452,688 | 3,952 | 1.08 | 1,598,361 | 5,036 | 1.25 | |||||||||||||||||
Repurchase agreements | 496,321 | 127 | 0.10 | 501,640 | 144 | 0.11 | 487,734 | 150 | 0.12 | |||||||||||||||||
Other borrowed funds | 20 | — | — | 6 | — | — | 5,589 | — | — | |||||||||||||||||
Long-term debt | 37,163 | 486 | 5.20 | 37,174 | 502 | 5.37 | 37,315 | 493 | 5.24 | |||||||||||||||||
Preferred stock pending redemption | 7,609 | 131 | 6.85 | — | — | — | — | — | — | |||||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 1,033 | 4.98 | 82,477 | 1,110 | 5.35 | 123,715 | 1,474 | 4.73 | |||||||||||||||||
Total interest bearing liabilities | 5,263,254 | 6,628 | 0.50 | 5,210,468 | 7,170 | 0.55 | 5,241,928 | 8,971 | 0.68 | |||||||||||||||||
Non-interest bearing deposits | 1,475,600 | 1,399,585 | 1,269,423 | |||||||||||||||||||||||
Other non-interest bearing liabilities | 49,855 | 43,511 | 47,956 | |||||||||||||||||||||||
Stockholders’ equity | 791,905 | 789,734 | 769,632 | |||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,580,614 | $ | 7,443,298 | $ | 7,328,939 | ||||||||||||||||||||
Net FTE interest income | $ | 62,143 | $ | 62,165 | $ | 64,125 | ||||||||||||||||||||
Less FTE adjustments (2) | (1,170 | ) | (1,160 | ) | (1,090 | ) | ||||||||||||||||||||
Net interest income from consolidated statements of income | $ | 60,973 | $ | 61,005 | $ | 63,035 | ||||||||||||||||||||
Interest rate spread | 3.43 | % | 3.50 | % | 3.64 | % | ||||||||||||||||||||
Net FTE interest margin (3) | 3.55 | % | 3.63 | % | 3.79 | % | ||||||||||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.39 | % | 0.43 | % | 0.55 | % |
(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. |
15
AVERAGE BALANCE SHEETS
(Unaudited, $ in thousands)
Twelve Months Ended | |||||||||||||||||
December 31, 2012 | December 31, 2011 | ||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||
Interest earning assets: | |||||||||||||||||
Loans (1) (2) | $ | 4,176,439 | $ | 232,724 | 5.57 | % | $ | 4,275,128 | $ | 247,492 | 5.79 | % | |||||
Investment securities (2) | 2,123,231 | 44,613 | 2.10 | 2,026,192 | 48,795 | 2.41 | |||||||||||
Interest bearing deposits in banks | 486,203 | 1,235 | 0.25 | 414,375 | 1,050 | 0.25 | |||||||||||
Federal funds sold | 2,341 | 13 | 0.56 | 2,231 | 13 | 0.58 | |||||||||||
Total interest earnings assets | 6,788,214 | 278,585 | 4.10 | 6,717,926 | 297,350 | 4.43 | |||||||||||
Non-earning assets | 627,498 | 618,454 | |||||||||||||||
Total assets | $ | 7,415,712 | $ | 7,336,380 | |||||||||||||
Interest bearing liabilities: | |||||||||||||||||
Demand deposits | $ | 1,624,687 | $ | 2,390 | 0.15 | % | $ | 1,269,676 | $ | 3,057 | 0.24 | % | |||||
Savings deposits | 1,496,254 | 3,562 | 0.24 | 1,714,294 | 6,448 | 0.38 | |||||||||||
Time deposits | 1,473,501 | 16,354 | 1.11 | 1,737,401 | 24,028 | 1.38 | |||||||||||
Repurchase agreements | 501,192 | 579 | 0.12 | 500,882 | 695 | 0.14 | |||||||||||
Other borrowed funds | 16 | — | — | 5,582 | — | — | |||||||||||
Long-term debt | 37,185 | 1,981 | 5.33 | 37,442 | 1,975 | 5.27 | |||||||||||
Preferred stock pending redemption | 1,913 | 131 | 6.85 | — | — | — | |||||||||||
Subordinated debentures held by subsidiary trusts | 102,307 | 5,117 | 5.00 | 123,715 | 5,828 | 4.71 | |||||||||||
Total interest bearing liabilities | 5,237,055 | 30,114 | 0.58 | 5,388,992 | 42,031 | 0.78 | |||||||||||
Non-interest bearing deposits | 1,346,787 | 1,146,535 | |||||||||||||||
Other non-interest bearing liabilities | 47,799 | 48,532 | |||||||||||||||
Stockholders’ equity | 784,071 | 752,321 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,415,712 | $ | 7,336,380 | |||||||||||||
Net FTE interest income | $ | 248,471 | $ | 255,319 | |||||||||||||
Less FTE adjustments (2) | (4,685 | ) | (4,467 | ) | |||||||||||||
Net interest income from consolidated statements of income | $ | 243,786 | $ | 250,852 | |||||||||||||
Interest rate spread | 3.52 | % | 3.65 | % | |||||||||||||
Net FTE interest margin (3) | 3.66 | % | 3.80 | % | |||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.46 | % | 0.64 | % |
(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. |
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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) net tangible book value per common share; (iii) tangible common stockholders' equity to tangible assets; (iv) net tangible common stockholders' equity to tangible assets; (v) tangible assets, and (vi) 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 net tangible book value per common share, net tangible book value equals common stockholders' equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible book value per common share is calculated as net tangible common stockholders' equity divided by shares of common stock outstanding. The Company's goodwill as of December 31, 2012 was $184 million, of which approximately $159 million is deductible for income tax purposes over an original period of 15 years. The calculation of net tangible book value takes into account the full amount of tax benefit of approximately $60 million associated with deductible goodwill assuming the Company will continue to have income sufficient to allow it to recognize this benefit in future periods.
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 net tangible common stockholders' equity to tangible assets, net tangible common stockholders' equity equals common stockholders' equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible common stockholders' equity to tangible assets is calculated as net 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.
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The following table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.
NON-GAAP FINANCIAL MEASURES
(Unaudited; $ in thousands except share and per share data)
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||
Total stockholders’ equity (GAAP) | $ | 751,186 | $ | 797,870 | $ | 771,020 | |||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 189,637 | 189,994 | 191,065 | ||||||||
Less preferred stock | — | 50,000 | 50,000 | ||||||||
Tangible common stockholders’ equity (Non-GAAP) | 561,549 | 557,876 | 529,955 | ||||||||
Add deferred tax liability for deductible goodwill | 60,499 | 60,499 | 60,499 | ||||||||
Net tangible common stockholders’ equity (Non-GAAP) | $ | 622,048 | $ | 618,375 | $ | 590,454 | |||||
Total assets (GAAP) | $ | 7,721,761 | $ | 7,461,152 | $ | 7,325,527 | |||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 189,637 | 189,994 | 191,065 | ||||||||
Tangible assets (Non-GAAP) | $ | 7,532,124 | $ | 7,271,158 | $ | 7,134,462 | |||||
Common shares outstanding | 43,290,323 | 43,252,383 | 42,984,174 | ||||||||
Book value per common share | $ | 17.35 | $ | 17.29 | $ | 16.77 | |||||
Tangible book value per common share | $ | 12.97 | $ | 12.90 | $ | 12.33 | |||||
Net tangible book value per common share | $ | 14.37 | $ | 14.30 | $ | 13.74 | |||||
Tangible common stockholders’ equity to tangible assets (Non-GAAP) | 7.46 | % | 7.67 | % | 7.43 | % | |||||
Net tangible common stockholders’ equity to tangible assets (Non-GAAP) | 8.26 | % | 8.50 | % | 8.28 | % |
Average For the Three Months Ended | Average For the Year Ended | ||||||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | |||||||||||||||
Total stockholders’ equity (GAAP) | $ | 791,905 | $ | 789,734 | $ | 769,632 | $ | 784,071 | $ | 752,321 | |||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 189,839 | $ | 190,206 | 191,275 | 190,381 | 191,823 | |||||||||||||
Less preferred stock | 42,391 | 50,000 | 50,000 | 48,087 | 50,000 | ||||||||||||||
Tangible common stockholders' equity (Non-GAAP) | $ | 559,675 | $ | 549,528 | $ | 528,357 | $ | 545,603 | $ | 510,498 | |||||||||
As Of or For the Three Months Ended | As Of or For the Year Ended | ||||||||||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | |||||||||||||||
Net income to available to common shareholders, annualized | $ | 64,106 | $ | 60,836 | $ | 49,204 | $ | 54,924 | $ | 41,124 | |||||||||
Return on average tangible common equity (Non-GAAP) | 11.45 | % | 11.07 | % | 9.31 | % | 10.07 | % | 8.06 | % |
First Interstate BancSystem, Inc.
P.O. Box 30918 Billings, Montana 59116 (406) 255-5390
www.FIBK.com
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