Attached files
| file | filename |
|---|---|
| 8-K - 8-K - FIRST INTERSTATE BANCSYSTEM INC | fibk20130630-8k.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 Increased Earnings of 77%
and Improved Credit Metrics
Billings, MT - July 22, 2013 - First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports second quarter 2013 net income available to common shareholders of $21.5 million, or $0.49 per diluted share, a 77% increase over second quarter 2012 net income to common shareholders of $12.2 million, or $0.28 per diluted share. For the first half of 2013, the Company reported net income to common shareholders of $41.5 million, or $0.95 per diluted share, compared to $23.5 million, or $0.55 per diluted share, during the same period in 2012.
SECOND QUARTER FINANCIAL HIGHLIGHTS
• | 1.76% non-performing assets to total assets, a decline from 2.60% as of June 30, 2012 |
• | 96% decrease in quarterly and year-to-date provisions for loan losses compared to the same periods in 2012 |
• | $4.1 million of recoveries, which exceeded loan charge-offs, resulting in net recoveries of $249 thousand |
• | $1.9 million net gain on the sale of $13 million of OREO properties |
• | 3.56% net interest margin, an increase of 1 basis point from first quarter 2013 |
• | 5% annualized growth in loans held for investment |
“We delivered another strong quarter driven by continued improvement in credit quality, a stable net interest margin, and strength in residential real estate and indirect consumer lending,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “We continue to see declines in problem loans and improvement in collateral valuations throughout our markets, which resulted in only a small amount of provision for credit losses required in the second quarter," Garding continued. "We are pleased with our performance in residential mortgage and indirect consumer lending, which both had strong loan production in the second quarter. Although we anticipate that residential lending will be impacted by higher interest rates, we are starting to see a stronger pipeline building for commercial and commercial real estate loans, which should help to offset any future declines in the mortgage business,” Garding further noted.
NET INTEREST MARGIN
The Company's net interest margin ratio was 3.56% during second quarter 2013. The Company recorded net recoveries of charged-off interest of $142 thousand during second quarter 2013, $620 thousand during first quarter 2013 and $766 thousand during second quarter 2012. Exclusive of net recoveries of charged-off interest, the Company's net interest margin ratio was 3.55% during second quarter 2013, as compared to 3.51% during first quarter 2013 and 3.70% during second quarter 2012. Declines in yields earned on the Company's loan and investment portfolios during second quarter 2013 were offset by increases in average outstanding loans, reductions in the cost of interest bearing liabilities and lower average outstanding interest bearing deposits in banks. Also offsetting the impact of lower asset yields during the three and six months ended June 30, 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.
1
NON-INTEREST INCOME
Income from the origination and sale of loans was $10.0 million during second quarter 2013, compared to $10.7 million during first quarter 2013, and $9.4 million during second quarter 2012. During second quarter 2013, the Company originated loans for home purchases of approximately $277 million, the highest level in the Company's history and a 21% increase over second quarter 2012. For the six months ended June 30, 2013, mortgage loan origination was flat, as compared to the same period in 2012, with loans originated for home purchases accounting for approximately 43% of the Company's mortgage loan production, compared to approximately 35% during the same period in 2012.
Other service charges, commissions and fees increased to $9.0 million during second quarter 2013, as compared to $8.3 million during first quarter 2013 and $8.3 million during second quarter 2012, primarily due to increases in debit and credit card interchange revenues, the result of higher transaction volumes.
Other income increased to $2.2 million during second quarter 2013, compared to $1.7 million during first quarter 2013 and $1.5 million during second quarter 2012, primarily due to proceeds from company owned life insurance. Increases in earnings on securities held under deferred compensation plans also contributed to the increase in other income during second quarter 2013, as compared to second quarter 2012.
NON-INTEREST EXPENSE
Salaries and wages expense increased to $23.5 million during second quarter 2013, as compared to $23.4 million during first quarter 2013 and $21.6 million during second quarter 2012. The increase from the same period in the prior year was primarily due to higher incentive compensation accruals reflective of the Company's improved financial performance.
Employee benefits expense decreased to $7.5 million during second quarter 2013, as compared to $8.2 million during first quarter 2013, primarily due to decreases in payroll taxes and the second quarter 2013 reversal of $500 thousand of group health insurance expense to reflect favorable claims experience. These decreases were partially offset by higher profit sharing accruals reflective of continued improved financial performance. Employee benefits expense increased to $7.5 million during second quarter 2013, as compared to $6.8 million during second quarter 2012, primarily due to increases in earnings on securities held under deferred compensation plans.
Variations in net OREO expense between periods were primarily due to fluctuations in write-downs of the estimated fair value of OREO properties, net gains and losses recorded on the sales of OREO properties and operating expenses for OREO properties. Second quarter 2013 net OREO expense included $678 thousand of net operating expenses, $259 thousand of fair value write-downs and net gains of $1.9 million on the sale of OREO properties. This compares to $411 thousand of net operating expenses, $2.3 million of fair value write-downs and net gains of $820 thousand during first quarter 2013, and $1.3 million of net operating expenses, $580 thousand of fair value write-downs and net gains of $75 thousand during second quarter 2012.
Other expenses increased to $15.5 million during second quarter 2013, as compared to $14.0 million during first quarter 2013, primarily due to $616 thousand of write-downs in the carrying value of long-lived assets pending disposal and higher advertising expense resulting from differences in the timing of advertising campaigns. Other expenses decreased to $15.5 million during second quarter 2013, compared to $17.6 million during second quarter 2012. During second quarter 2012, the Company recorded donation expense of $1.5 million associated with the sale of a bank building to a charitable organization and wrote-off $428 thousand of unamortized issuance costs associated with redeemed junior subordinated debentures.
BALANCE SHEET
Total loans increased to $4,297 million as of June 30, 2013, from $4,225 million as of March 31, 2013 and $4,170 million as of June 30, 2012, with the most notable growth occurring in residential real estate and consumer loans. Residential real estate loans increased to $804 million as of June 30, 2013, from $758 million as of March 31, 2013 and $572 million as of June 30, 2012, due in part to continued retention of certain residential loans with contractual terms of fifteen years or less.
Consumer loans grew to $653 million as of June 30, 2013, from $636 million as of March 31, 2013 and $621 million as of
June 30, 2012. Growth in consumer loans occurred primarily in indirect loans, which increased to $457 million as of June 30, 2013, from $444 million as of March 31, 2013 and $419 million as of June 30, 2012, due to expansion of the Company's indirect lending program within its existing market areas.
2
Commercial and commercial real estate loans decreased as of June 30, 2013, as compared to March 31, 2013 and June 30, 2012. Commercial loans decreased to $681 million as of June 30, 2013, from $689 million as of March 31, 2013 and $720 million as of June 30, 2012, and commercial real estate loans decreased to $1,447 million as of June 30, 2013, from $1,469 million as of March 31, 2013 and $1,517 million as of June 30, 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.
Total deposits decreased to $5,930 million as of June 30, 2013, from $6,028 million as of March 31, 2013, and increased from $5,901 million as of June 30, 2012. During second quarter 2013, the mix of deposits continued to shift away from higher costing time deposits to lower costing demand and savings deposits.
Other real estate owned ("OREO") decreased to $23 million as of June 30, 2013, from $32 million as of March 31, 2013, primarily due to sales of OREO properties. During second quarter 2013, the Company recorded OREO additions of $3 million, wrote-down the value of OREO properties by $259 thousand and sold OREO properties with carrying values of $13 million at a $1.9 million net gain. OREO sales were comprised primarily of commercial and residential real estate properties, with 64% of the sales attributable to three properties. As of June 30, 2013, the composition of OREO properties was as follows: 20% residential real estate; 54% land and land development and 26% commercial.
ASSET QUALITY
Non-performing loans increased to $105 million as of June 30, 2013, from $101 million as of March 31, 2013, primarily due to the loans of one commercial real estate borrower placed on non-accrual during second quarter 2013. Non-performing loans decreased to $105 million as of June 30, 2013, from $136 million as of June 30, 2012, primarily due to the movement of non-accrual loans out of the loan portfolio through charge-off or foreclosure.
The Company charged-off loans of $3.9 million during second quarter 2013, compared to $6.0 million during first quarter 2013 and $26.7 million during second quarter 2012. Recoveries of charged-off loans were $4.1 million during second quarter 2013, compared to $2.9 million during first quarter 2013 and $1.6 million during second quarter 2012. Approximately 32% of the second quarter 2013 recoveries related to one commercial real estate loan charged-off during second quarter 2010. Management expects lower levels of recoveries of previously charged-off loans in future quarters.
The provision for loan losses decreased to $375 thousand during second quarter 2013, as compared to $500 thousand during first quarter 2013 and $12.0 million during second quarter 2012. Decreases in the provision for loan losses during second quarter 2013, as compared to first quarter 2013 and second quarter 2012, are reflective of improvement in local and national economic trends, continued improvement in and stabilization of credit quality as evidenced by declining levels of non-performing assets and criticized loans and unusually high levels of recoveries of previously charged-off loans. As of June 30, 2013, non-performing assets were at their lowest level since first quarter 2009 and total criticized assets were at their lowest level since second quarter 2009.
Beginning in 2013, the Company no longer presents accruing loans modified in troubled debt restructurings as non-performing loans. While still considered impaired under applicable accounting guidance, these loans are performing as agreed under their modified terms and management expects performance to continue. Prior period balances and ratios have been adjusted to reflect this change.
CAPITAL
On July 2, 2013, the Federal Reserve Board finalized its rule implementing the Basel III regulatory capital framework. The Basel III capital rules, which will phase-in for the Company beginning January 1, 2015, increase minimum capital requirements for banking organizations in terms of both quantity and quality of capital held. Initial calculations indicate that as of June 30, 2013, the Company would meet all fully phased-in Basel III capital adequacy requirements.
Second Quarter 2013 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss second quarter 2013 results at 11:00 a.m. Eastern Time (9:00 a.m. MT) on Tuesday, July 23, 2013. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-877-317-6016 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. MT) on July 23, 2013 through August 23, 2013 by dialing 1-877-344-7529 (using conference ID 10030187). The call will also be archived on our website, www.FIBK.com, for one year.
3
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 Company’s 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 Company’s 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.
4
FIRST INTERSTATE BANCSYSTEM, INC AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousand, except per share data)
2013 | 2012 | |||||||||||||||||||
CONDENSED INCOME STATEMENTS | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||||||
Net interest income | $ | 58,760 | $ | 59,277 | $ | 60,973 | $ | 61,005 | $ | 61,174 | ||||||||||
Net interest income on a fully-taxable equivalent ("FTE") basis | 59,879 | 60,405 | 62,143 | 62,165 | 62,370 | |||||||||||||||
Provision for loan losses | 375 | 500 | 8,000 | 9,500 | 12,000 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||
Income from the origination and sale of loans | 10,043 | 10,675 | 12,321 | 11,665 | 9,420 | |||||||||||||||
Other service charges, commissions and fees | 8,977 | 8,256 | 8,774 | 8,774 | 8,254 | |||||||||||||||
Service charges on deposit accounts | 4,323 | 4,068 | 4,401 | 4,395 | 4,455 | |||||||||||||||
Wealth management revenues | 4,020 | 4,134 | 3,659 | 3,557 | 3,815 | |||||||||||||||
Investment securities gains (losses), net | (12 | ) | 8 | 53 | 66 | 198 | ||||||||||||||
Other Income | 2,228 | 1,678 | 1,427 | 1,725 | 1,520 | |||||||||||||||
Total non-interest income | 29,579 | 28,819 | 30,635 | 30,182 | 27,662 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and wages | 23,470 | 23,405 | 23,288 | 23,341 | 21,640 | |||||||||||||||
Employee benefits | 7,546 | 8,175 | 6,113 | 7,447 | 6,819 | |||||||||||||||
Occupancy, net | 4,063 | 4,026 | 3,968 | 3,793 | 4,037 | |||||||||||||||
Furniture and equipment | 3,163 | 3,052 | 3,301 | 3,231 | 3,189 | |||||||||||||||
Outsourced technology services | 2,195 | 2,157 | 2,199 | 2,182 | 2,179 | |||||||||||||||
Other real estate owned (income) expense, net | (915 | ) | 1,896 | 3,877 | 2,612 | 1,806 | ||||||||||||||
Other expenses | 15,498 | 13,974 | 15,086 | 14,458 | 17,629 | |||||||||||||||
Total non-interest expense | 55,020 | 56,685 | 57,832 | 57,064 | 57,299 | |||||||||||||||
Income before taxes | 32,944 | 30,911 | 25,776 | 24,623 | 19,537 | |||||||||||||||
Income taxes | 11,439 | 10,867 | 8,931 | 8,468 | 6,527 | |||||||||||||||
Net income | 21,505 | 20,044 | 16,845 | 16,155 | 13,010 | |||||||||||||||
Preferred stock dividends | — | — | 731 | 863 | 853 | |||||||||||||||
Net income available to common shareholders | $ | 21,505 | $ | 20,044 | $ | 16,114 | $ | 15,292 | $ | 12,157 | ||||||||||
PER COMMON SHARE DATA | ||||||||||||||||||||
Net income - basic | $ | 0.49 | $ | 0.46 | $ | 0.37 | $ | 0.36 | $ | 0.28 | ||||||||||
Net income - diluted | 0.49 | 0.46 | 0.37 | 0.35 | 0.28 | |||||||||||||||
Cash dividend paid | 0.13 | — | 0.25 | 0.12 | 0.12 | |||||||||||||||
Book value at quarter end | 17.56 | 17.69 | 17.35 | 17.29 | 17.03 | |||||||||||||||
Tangible book value at quarter end* | 13.25 | 13.35 | 12.97 | 12.90 | 12.63 | |||||||||||||||
OUTSTANDING COMMON SHARES | ||||||||||||||||||||
At period-end | 43,835,881 | 43,614,942 | 43,290,323 | 43,252,383 | 43,228,750 | |||||||||||||||
Weighted average shares - basic | 43,480,502 | 43,140,409 | 43,032,697 | 42,989,564 | 42,966,926 | |||||||||||||||
Weighted-average shares - diluted | 43,908,287 | 43,428,382 | 43,198,076 | 43,120,077 | 43,060,204 | |||||||||||||||
SELECTED ANNUALIZED RATIOS | ||||||||||||||||||||
Return on average assets | 1.17 | % | 1.08 | % | 0.88 | % | 0.86 | % | 0.71 | % | ||||||||||
Return on average common equity | 11.08 | 10.68 | 8.55 | 8.22 | 6.69 | |||||||||||||||
Return on average tangible common equity* | 14.63 | 14.23 | 11.45 | 11.07 | 9.04 | |||||||||||||||
Net FTE interest income to average earning assets | 3.56 | 3.55 | 3.55 | 3.63 | 3.74 | |||||||||||||||
5
FIRST INTERSTATE BANCSYSTEM, INC AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2013 | 2012 | |||||||||||||||||||
BALANCE SHEET SUMMARIES | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 368,217 | $ | 498,543 | $ | 801,332 | $ | 611,335 | $ | 536,653 | ||||||||||
Investment securities | 2,138,539 | 2,221,595 | 2,203,481 | 2,166,727 | 2,080,909 | |||||||||||||||
Loans held for investment: | ||||||||||||||||||||
Commercial real estate | 1,447,145 | 1,469,302 | 1,497,272 | 1,513,784 | 1,517,400 | |||||||||||||||
Construction real estate | 337,211 | 330,886 | 334,529 | 340,074 | 351,654 | |||||||||||||||
Residential real estate | 804,200 | 758,480 | 708,339 | 639,235 | 572,018 | |||||||||||||||
Agricultural real estate | 176,799 | 172,522 | 177,244 | 175,395 | 171,087 | |||||||||||||||
Consumer | 652,944 | 636,364 | 636,794 | 629,757 | 621,212 | |||||||||||||||
Commercial | 680,751 | 688,844 | 688,753 | 672,100 | 720,010 | |||||||||||||||
Agricultural | 121,530 | 111,411 | 113,627 | 135,467 | 138,115 | |||||||||||||||
Other | 2,498 | 1,307 | 912 | 1,359 | 2,319 | |||||||||||||||
Mortgage loans held for sale | 74,286 | 55,443 | 66,442 | 72,880 | 76,148 | |||||||||||||||
Total loans | 4,297,364 | 4,224,559 | 4,223,912 | 4,180,051 | 4,169,963 | |||||||||||||||
Less allowance for loan losses | 98,528 | 97,904 | 100,511 | 99,006 | 102,794 | |||||||||||||||
Net loans | 4,198,836 | 4,126,655 | 4,123,401 | 4,081,045 | 4,067,169 | |||||||||||||||
Premises and equipment, net | 181,940 | 185,237 | 187,565 | 188,851 | 187,367 | |||||||||||||||
Goodwill and intangible assets (excluding mortgage servicing rights) | 188,925 | 189,281 | 189,637 | 189,994 | 190,351 | |||||||||||||||
Company owned life insurance | 77,602 | 77,158 | 76,729 | 76,371 | 75,849 | |||||||||||||||
Other real estate owned, net | 22,782 | 32,470 | 32,571 | 39,971 | 53,817 | |||||||||||||||
Mortgage servicing rights, net | 13,304 | 13,006 | 12,653 | 12,334 | 11,985 | |||||||||||||||
Other assets | 101,363 | 95,372 | 94,392 | 94,524 | 101,076 | |||||||||||||||
Total assets | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | $ | 7,305,176 | ||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing | $ | 1,393,732 | $ | 1,406,892 | $ | 1,495,309 | $ | 1,443,773 | $ | 1,337,777 | ||||||||||
Interest bearing | 4,536,600 | 4,621,453 | 4,745,102 | 4,591,959 | 4,563,602 | |||||||||||||||
Total deposits | 5,930,332 | 6,028,345 | 6,240,411 | 6,035,732 | 5,901,379 | |||||||||||||||
Securities sold under repurchase agreements | 421,314 | 467,205 | 505,785 | 460,805 | 455,993 | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 50,292 | 52,767 | 54,742 | 47,098 | 41,811 | |||||||||||||||
Long-term debt | 37,139 | 37,150 | 37,160 | 37,170 | 37,181 | |||||||||||||||
Preferred stock pending redemption | — | — | 50,000 | — | — | |||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 82,477 | 82,477 | 82,477 | 82,477 | |||||||||||||||
Total liabilities | 6,521,554 | 6,667,944 | 6,970,575 | 6,663,282 | 6,518,841 | |||||||||||||||
Stockholders' equity: | ||||||||||||||||||||
Preferred stock | — | — | — | 50,000 | 50,000 | |||||||||||||||
Common stock | 279,232 | 274,929 | 271,335 | 270,553 | 269,698 | |||||||||||||||
Retained earnings | 499,761 | 483,904 | 463,860 | 458,506 | 448,372 | |||||||||||||||
Accumulated other comprehensive income | (9,039 | ) | 12,540 | 15,991 | 18,811 | 18,265 | ||||||||||||||
Total stockholders' equity | 769,954 | 771,373 | 751,186 | 797,870 | 786,335 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | $ | 7,305,176 | ||||||||||
CONSOLIDATED CAPITAL RATIOS | ||||||||||||||||||||
Total risk-based capital | 16.29 | % | s | 15.91 | % | 15.59 | % | 16.52 | % | 16.20 | % | |||||||||
Tier 1 risk-based capital | 14.45 | s | 14.07 | 13.60 | 14.53 | 14.22 | ||||||||||||||
Tier 1 common capital to total risk-weighted assets | 12.83 | s | 12.41 | 11.94 | 11.81 | 11.51 | ||||||||||||||
Leverage Ratio | 9.73 | s | 9.24 | 8.81 | 9.56 | 9.54 | ||||||||||||||
Tangible common stockholders' equity to tangible assets* | 8.18 | 8.03 | 7.46 | 7.67 | 7.67 | |||||||||||||||
6
FIRST INTERSTATE BANCSYSTEM, INC AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2013 | 2012 | |||||||||||||||||||
ASSET QUALITY | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | |||||||||||||||
Allowance for loan losses | $ | 98,528 | $ | 97,904 | $ | 100,511 | $ | 99,006 | $ | 102,794 | ||||||||||
As a percentage of period-end loans | 2.29 | % | 2.32 | % | 2.38 | % | 2.37 | % | 2.47 | % | ||||||||||
Net charge-offs during quarter | $ | (249 | ) | $ | 3,107 | $ | 6,495 | $ | 13,288 | $ | 25,108 | |||||||||
Annualized as a percentage of average loans | (0.02 | )% | 0.30 | % | 0.62 | % | 1.26 | % | 2.43 | % | ||||||||||
Non-performing assets: | ||||||||||||||||||||
Non-accrual loans | $ | 103,729 | $ | 98,594 | $ | 107,799 | $ | 122,931 | $ | 129,923 | ||||||||||
Accruing loans past due 90 days or more | 1,742 | 1,941 | 2,277 | 4,339 | 6,451 | |||||||||||||||
Total non-performing loans | 105,471 | 100,535 | 110,076 | 127,270 | 136,374 | |||||||||||||||
OREO | 22,782 | 32,470 | 32,571 | 39,971 | 53,817 | |||||||||||||||
Total non-performing assets | 128,253 | 133,005 | 142,647 | 167,241 | 190,191 | |||||||||||||||
As a percentage of: | ||||||||||||||||||||
Total loans and OREO | 2.97 | % | 3.12 | % | 3.35 | % | 3.96 | % | 4.50 | % | ||||||||||
Total assets | 1.76 | % | 1.79 | % | 1.85 | % | 2.24 | % | 2.60 | % | ||||||||||
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 | ||||||||||||||||||||
Q2 2010 | $ | 19,500 | $ | 11,521 | $ | 114,328 | $ | 99,334 | $ | 10,588 | $ | 147,525 | $ | 189,863 | |||||||||||||
Q3 2010 | 18,000 | 12,092 | 120,236 | 47,966 | 26,630 | 175,378 | 210,674 | ||||||||||||||||||||
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 | |||||||||||||||||||
CRITICIZED LOANS | Special Mention | Substandard | Doubtful | Total | |||||||||||
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 | |||||||||||
Q1 2013 | 197,645 | 197,095 | 43,825 | 438,565 | |||||||||||
Q2 2013 | 192,390 | 161,786 | 52,266 | 406,442 | |||||||||||
sPreliminary 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.
7
FIRST INTERSTATE BANCSYSTEM, INC AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
Three Months Ended | ||||||||||||||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | ||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,256,579 | $ | 55,270 | 5.21 | % | $ | 4,216,934 | $ | 55,913 | 5.38 | % | $ | 4,159,565 | $ | 58,564 | 5.66 | % | ||||||||
Investment securities (2) | 2,153,342 | 9,588 | 1.79 | 2,204,458 | 9,980 | 1.84 | 2,094,148 | 11,414 | 2.19 | |||||||||||||||||
Interest bearing deposits in banks | 335,761 | 212 | 0.25 | 476,856 | 298 | 0.25 | 442,698 | 279 | 0.25 | |||||||||||||||||
Federal funds sold | 3,322 | 5 | 0.60 | 2,521 | 4 | 0.64 | 3,668 | 6 | 0.66 | |||||||||||||||||
Total interest earnings assets | 6,749,004 | 65,075 | 3.87 | 6,900,769 | 66,195 | 3.89 | 6,700,079 | 70,263 | 4.22 | |||||||||||||||||
Non-earning assets | 601,023 | 598,283 | 633,454 | |||||||||||||||||||||||
Total assets | $ | 7,350,027 | $ | 7,499,052 | $ | 7,333,533 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Demand deposits | $ | 1,722,138 | $ | 475 | 0.11 | % | $ | 1,728,813 | $ | 473 | 0.11 | % | $ | 1,596,076 | $ | 606 | 0.15 | % | ||||||||
Savings deposits | 1,544,648 | 598 | 0.16 | 1,550,146 | 653 | 0.17 | 1,482,986 | 934 | 0.25 | |||||||||||||||||
Time deposits | 1,312,863 | 2,965 | 0.91 | 1,365,232 | 3,229 | 0.96 | 1,496,597 | 4,239 | 1.14 | |||||||||||||||||
Repurchase agreements | 466,533 | 74 | 0.06 | 512,180 | 100 | 0.08 | 493,450 | 152 | 0.12 | |||||||||||||||||
Other borrowed funds | 10 | — | — | 7 | — | — | 33 | — | — | |||||||||||||||||
Long-term debt | 37,142 | 483 | 5.22 | 37,153 | 480 | 5.24 | 37,184 | 495 | 5.35 | |||||||||||||||||
Preferred stock pending redemption | — | — | — | 9,444 | 159 | 6.83 | — | — | — | |||||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 601 | 2.92 | 82,477 | 696 | 3.42 | 120,996 | 1,467 | 4.88 | |||||||||||||||||
Total interest bearing liabilities | 5,165,811 | 5,196 | 0.40 | 5,285,452 | 5,790 | 0.44 | 5,227,322 | 7,893 | 0.61 | |||||||||||||||||
Non-interest bearing deposits | 1,356,133 | 1,398,850 | 1,277,091 | |||||||||||||||||||||||
Other non-interest bearing liabilities | 49,323 | 53,810 | 47,781 | |||||||||||||||||||||||
Stockholders’ equity | 778,760 | 760,940 | 781,339 | |||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,350,027 | $ | 7,499,052 | $ | 7,333,533 | ||||||||||||||||||||
Net FTE interest income | 59,879 | 60,405 | 62,370 | |||||||||||||||||||||||
Less FTE adjustments (2) | (1,119 | ) | (1,128 | ) | (1,196 | ) | ||||||||||||||||||||
Net interest income from consolidated statements of income | $ | 58,760 | $ | 59,277 | $ | 61,174 | ||||||||||||||||||||
Interest rate spread | 3.47 | % | 3.45 | % | 3.61 | % | ||||||||||||||||||||
Net FTE interest margin (3) | 3.56 | % | 3.55 | % | 3.74 | % | ||||||||||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.32 | % | 0.35 | % | 0.49 | % | ||||||||||||||||||||
(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. |
8
FIRST INTERSTATE BANCSYSTEM, INC AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
Six Months Ended | |||||||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||
Interest earning assets: | |||||||||||||||||
Loans (1) (2) | $ | 4,236,866 | $ | 111,184 | 5.29 | % | $ | 4,162,384 | $ | 116,938 | 5.65 | % | |||||
Investment securities (2) | 2,178,758 | 19,567 | 1.81 | 2,118,793 | 23,018 | 2.18 | |||||||||||
Interest bearing deposits in banks | 405,919 | 510 | 0.25 | 408,799 | 516 | 0.25 | |||||||||||
Federal funds sold | 2,924 | 9 | 0.62 | 2,139 | 7 | 0.66 | |||||||||||
Total interest earnings assets | 6,824,467 | 131,270 | 3.88 | 6,692,115 | 140,479 | 4.22 | |||||||||||
Non-earning assets | 599,661 | 626,295 | |||||||||||||||
Total assets | $ | 7,424,128 | $ | 7,318,410 | |||||||||||||
Interest bearing liabilities: | |||||||||||||||||
Demand deposits | $ | 1,725,457 | $ | 949 | 0.11 | % | $ | 1,589,440 | $ | 1,253 | 0.16 | % | |||||
Savings deposits | 1,547,381 | 1,251 | 0.16 | 1,466,113 | 1,948 | 0.27 | |||||||||||
Time deposits | 1,338,903 | 6,193 | 0.93 | 1,518,693 | 8,840 | 1.17 | |||||||||||
Repurchase agreements | 489,230 | 174 | 0.07 | 503,428 | 308 | 0.12 | |||||||||||
Other borrowed funds | 9 | — | — | 34 | — | — | |||||||||||
Long-term debt | 37,148 | 963 | 5.23 | 37,189 | 993 | 5.37 | |||||||||||
Preferred stock pending redemption | 4,696 | 159 | 6.83 | — | — | — | |||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 1,297 | 3.17 | 122,356 | 2,974 | 4.89 | |||||||||||
Total interest bearing liabilities | 5,225,301 | 10,986 | 0.42 | 5,237,253 | 16,316 | 0.63 | |||||||||||
Non-interest bearing deposits | 1,377,374 | 1,254,983 | |||||||||||||||
Other non-interest bearing liabilities | 51,554 | 48,926 | |||||||||||||||
Stockholders’ equity | 769,899 | 777,248 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,424,128 | $ | 7,318,410 | |||||||||||||
Net FTE interest income | 120,284 | 124,163 | |||||||||||||||
Less FTE adjustments (2) | (2,247 | ) | (2,355 | ) | |||||||||||||
Net interest income from consolidated statements of income | $ | 118,037 | $ | 121,808 | |||||||||||||
Interest rate spread | 3.46 | % | 3.59 | % | |||||||||||||
Net FTE interest margin (3) | 3.55 | % | 3.73 | % | |||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.34 | % | 0.51 | % | |||||||||||||
(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. |
9
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 table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.
2013 | 2012 | |||||||||||||||||||
Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | ||||||||||||||||
Total stockholders’ equity (GAAP) | $ | 769,954 | $ | 771,373 | $ | 751,186 | $ | 797,870 | $ | 786,335 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 188,925 | 189,281 | 189,637 | 189,994 | 190,351 | |||||||||||||||
Less preferred stock | — | — | — | 50,000 | 50,000 | |||||||||||||||
Tangible common stockholders’ equity (Non-GAAP) | $ | 581,029 | $ | 582,092 | $ | 561,549 | $ | 557,876 | $ | 545,984 | ||||||||||
Total assets (GAAP) | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | $ | 7,305,176 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 188,925 | 189,281 | 189,637 | 189,994 | 190,351 | |||||||||||||||
Tangible assets (Non-GAAP) | $ | 7,102,583 | $ | 7,250,036 | $ | 7,532,124 | $ | 7,271,158 | $ | 7,114,825 | ||||||||||
Quarterly averages: | ||||||||||||||||||||
Total stockholders' equity (GAAP) | $ | 778,760 | $ | 760,940 | $ | 791,905 | $ | 789,734 | $ | 781,339 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 189,135 | 189,503 | 189,839 | 190,206 | 190,563 | |||||||||||||||
Less preferred stock | — | — | 42,391 | 50,000 | 50,000 | |||||||||||||||
Average tangible common stockholder's equity (Non-GAAP) | $ | 589,625 | $ | 571,437 | $ | 559,675 | $ | 549,528 | $ | 540,776 | ||||||||||
Common shares outstanding | 43,835,881 | 43,614,942 | 43,290,323 | 43,252,383 | 43,228,750 | |||||||||||||||
Annualized net income available to common shareholders | $ | 86,256 | $ | 81,290 | $ | 64,106 | $ | 60,836 | $ | 48,895 | ||||||||||
Book value per common share | $ | 17.56 | $ | 17.69 | $ | 17.35 | $ | 17.29 | $ | 17.03 | ||||||||||
Tangible book value per common share | 13.25 | 13.35 | 12.97 | 12.90 | 12.63 | |||||||||||||||
Tangible common stockholders’ equity to tangible assets (Non-GAAP) | 8.18 | % | 8.03 | % | 7.46 | % | 7.67 | % | 7.67 | % | ||||||||||
Return on average tangible equity (Non-GAAP) | 14.63 | 14.23 | 11.45 | 11.07 | 9.04 | |||||||||||||||
First Interstate BancSystem, Inc.
P.O. Box 30918 Billings, Montana 59116 (406) 255-5390
www.FIBK.com
10