First Interstate BancSystem, Inc. Reports Solid First Quarter Earnings

BILLINGS, Mont.--()--First Interstate BancSystem, Inc. (NASDAQ:FIBK) reports first quarter 2014 net income of $21.4 million, or $0.48 per diluted share, a 3% increase over fourth quarter 2013 net income of $20.8 million, or $0.47 per diluted share, and a 7% increase over first quarter 2013 net income of $20.0 million, or $0.46 per diluted share.

FIRST QUARTER FINANCIAL HIGHLIGHTS

  • 3.52% net interest margin ratio remained unchanged from the third and fourth quarters of 2013
  • 4.5% growth in commercial loans from December 31, 2013
  • Non-performing assets of $106 million, a decrease of $6 million from December 31, 2013
  • Net recoveries of charged-off loans of $1 million, or 0.1% annualized
  • $5 million reversal of provision for loan losses

“We delivered solid year-over-year growth in earnings, driven by lower operating expenses and further reduction in our credit costs,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Overall loan growth remains relatively flat, although we had good commercial loan production, which resulted in a 4.5% increase in our commercial portfolio during the first quarter,” Mr. Garding continued.

“The most significant development of the quarter was the signing of a definitive agreement to acquire Mountain West Financial Corp. We believe that the addition of Mountain West’s strong franchise will enhance our market positioning in Montana, improve our ability to serve customers, and drive synergies that will increase the earning power of the Company,” said Mr. Garding.

RESULTS OF OPERATIONS

Net Interest Income. The Company’s net interest income, on a fully taxable equivalent, or FTE, basis, decreased $1.9 million to $59.2 million during first quarter 2014, as compared to $61.1 million during fourth quarter 2013, primarily due to two fewer accrual days during first quarter 2014 and a reduction in loan yield. The impact of the reduction in loan yield was partially offset by an increase in average loans outstanding and a one basis point reduction in funding costs during first quarter 2014, as compared to fourth quarter 2013. The Company’s interest margin ratio remained stable at 3.52% during first quarter 2014.

Non-Interest Income. Non-interest income decreased $1.6 million to $24.1 million during first quarter 2014, as compared to $25.7 million during fourth quarter 2013, primarily due to lower income from the origination and sale of mortgage loans. The dollar amount of the Company’s mortgage loan production decreased 18% during first quarter 2014, as compared to fourth quarter 2013, resulting in a reduction in income from the origination and sale of loans of $942 thousand to $4.7 million during first quarter 2014, as compared to $5.6 million during fourth quarter 2013. Loans originated for home purchases accounted for approximately 68% of the Company’s mortgage loan production during first quarter 2014, as compared to 33% during first quarter 2013. Inclement weather in the Company’s market areas delayed the closing of some residential mortgages, which contributed to the decrease in income from the origination and sale of loans during first quarter 2014, as compared to fourth quarter 2013.

Other service charges, commissions and fees decreased $302 thousand to $9.2 million during first quarter 2014, as compared to $9.5 million during fourth quarter 2013, primarily due to reductions in interchange fees earned on debit and credit card transactions, the result of normal seasonal declines in transaction volumes.

Non-Interest Expense. Non-interest expense decreased $3.5 million to $54.3 million during first quarter 2014, as compared to $57.8 million during fourth quarter 2013.

Salaries and wages expense decreased $1.9 million to $22.4 million during first quarter 2014, as compared to $24.3 million during fourth quarter 2013, primarily due to lower incentive compensation accruals.

Employee benefits expense increased $1.0 million to $8.3 million during first quarter 2014, as compared to $7.3 million during fourth quarter 2013, primarily due to higher payroll taxes typically occurring during the first part of the year until annual compensation tax limits are met and an increase in group health insurance expense.

The Company recorded net OREO income of $19 thousand during first quarter 2014, as compared to net OREO expense of $1.3 million during fourth quarter 2013. Variation in net OREO income/expense between periods was primarily due to fluctuations in fair value write-downs and net gains recorded on the sale of OREO properties. First quarter 2014 net OREO income included net gains of $435 thousand on the sale of OREO properties, which were offset by $416 thousand of net operating expenses. This compares to net gains of $37 thousand on the sale of OREO properties, which were more than offset by $381 thousand of net operating expenses and fair value write-downs of $948 thousand during fourth quarter 2013.

Other expenses decreased $1.2 million to $13.9 million during first quarter 2014, as compared to $15.1 million during fourth quarter 2013, primarily due to lower advertising expense due to fluctuations in the timing of advertising campaigns. The Company’s other expenses typically trend higher during the fourth quarter of each year and then return to a more normalized level in the first quarter.

BALANCE SHEET

Total loans increased $20 million to $4,365 million as of March 31, 2014, from $4,345 million as of December 31, 2013.

Commercial loans grew $30 million to $707 million as of March 31, 2014, from $677 million as of December 31, 2013. Management attributes this growth to business expansion in the Company’s market areas.

Residential real estate loans remained flat at $868 million as of March 31, 2014, and December 31, 2013. During first quarter 2014, nearly all of the Company’s residential loan production was sold to investors in the secondary market.

Consumer loans decreased $2 million to $670 million as of March 31, 2014, from $672 million as of December 31, 2013. Decreases in credit card and other consumer loans typically experienced by the Company during the first quarter of the year, were largely offset by increases in indirect consumer loans. Indirect consumer loans increased $5 million to $481 million as of March 31, 2014, from $476 million as of December 31, 2013. Management attributes this increase to continued expansion of the Company’s indirect lending program within existing markets.

Agricultural loans decreased $4 million to $108 million as of March 31, 2014, from $112 million as of December 31, 2013. Management attributes this decrease to seasonal reductions in credit lines that typically occur during the first part of the year. In addition, agricultural real estate loans decreased $13 million to $161 million as of March 31, 2014, from $174 million as of December 31, 2013, primarily due to scheduled repayments of the loans of one borrower.

Total deposits increased $1 million to $6,135 million as of March 31, 2014, from $6,134 million as of December 31, 2013. During first quarter 2014, the mix of deposits continued to shift away from higher costing time deposits to lower costing demand and savings deposits, the result of sustained low interest rates. As of March 31, 2014, time deposits comprised 18.9% of total deposits, as compared to 19.4% as of December 31, 2013 and 22.3% as of March 31, 2013.

OREO increased $1 million to $17 million as of March 31, 2014, from $16 million as of December 31, 2013. During first quarter 2014, the Company added new properties with aggregate carrying values of $3 million to OREO. Approximately 88% of the first quarter 2014 additions relate to the properties of one commercial and one residential real estate borrower. Offsetting first quarter 2014 additions were sales of OREO properties with aggregate carrying values of $2 million at a net gain of $435 thousand. As of March 31, 2014, the composition of OREO properties was 49% land and land development, 33% commercial and 18% residential real estate.

Company-owned life insurance increased $16 million to $138 million as of March 31, 2014, from $122 million as of December 31, 2013, due to the January 2014 purchase of $15 million of life insurance covering select officers and directors of the Company’s banking subsidiary.

ASSET QUALITY

Non-performing loans decreased $7 million to $90 million as of March 31, 2014, from $97 million as of December 31, 2013, primarily due to pay-downs aggregating $4 million on the loans of five borrowers and, to a lesser extent, the movement of non-accrual loans out of the loan portfolio through foreclosure or charge-off.

During first quarter 2014, the Company recorded net recoveries of charged-off loans of $1 million, which was comprised of gross charge-offs of $3 million and gross recoveries of $4 million. This compares to gross charge-offs of $6 million and gross recoveries of $2 million recorded during fourth quarter 2013.

Accruing loans past due 30-89 days increased $14 million to $41 million as of March 31, 2014, from $27 million as of December 31, 2013. Approximately 71% of the increase related to two loans in the process of renewal. The remaining increase was attributable to four adequately collateralized loans in process of collection.

During first quarter 2014, the Company reversed $5 million of provision for loan losses. This reversal of provision for loan losses was primarily due to the combined impact of reductions in specific reserves on impaired loans and lower general reserves reflective of improvement in economic conditions in the Company’s market areas, improvement in loss history trends used to estimate required reserves and decreases in the level of criticized real estate and construction loans, which typically require higher reserves based on loss history.

STOCK REPURCHASE

Pursuant to a stock repurchase program approved by the Company’s Board of Directors on November 25, 2013, during first quarter 2014 the Company repurchased and retired 100,355 of its shares of Class A common stock in a privately negotiated transaction at an aggregate purchase price of $2.5 million. Under the stock repurchase program, the Company may repurchase up to an additional 1,899,645 shares of its Class A common stock prior to expiration of the plan on November 25, 2014.

First Quarter 2014 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss first quarter 2014 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time ) on Thursday, April 24, 2014. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-888-317-6016 or by logging on to www.FIBK.com. The call will be recorded and made available for replay after 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on April 24, 2014, through 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) on May 23, 2014, by dialing 1-877-344-7529 (using conference ID 10043138). The call will also be archived on our website, www.FIBK.com, for one year.

About First Interstate BancSystem, Inc.

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

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

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified as those that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. The following factors, among others, may cause actual results to differ materially from current expectations in the forward-looking statements, including those set forth in this report: continuing or worsening business and economic conditions, adverse economic conditions affecting Montana, Wyoming and western South Dakota, credit losses, lending risk, adequacy of the allowance for loan losses, impairment of goodwill, changes in interest rates, access to low-cost funding sources, dependence on the Company’s management team, ability to attract and retain qualified employees, governmental regulation and changes in regulatory, tax and accounting rules and interpretations, failure of technology, inability to meet liquidity requirements, failure to manage growth, competition, ineffective internal operational controls, environmental remediation and other costs, reliance on external vendors, litigation pertaining to fiduciary responsibilities, failure to effectively implement technology-driven products and services, soundness of other financial institutions, inability of our bank subsidiary to pay dividends, implementation of new lines of business or new product or service offerings, change in dividend policy, volatility of Class A common stock, 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, voting control of Class B stockholders, anti-takeover provisions, controlled company status, and subordination of common stock to Company debt.

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

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

   

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary

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

 
2014 2013

CONDENSED INCOME STATEMENTS

1st Qtr 4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
Net interest income $ 58,136 $ 59,974 $ 58,956 $ 58,760 $ 59,277
Net interest income on a fully-taxable equivalent ("FTE") basis 59,243 61,109 60,066 59,879 60,405
Provision for loan losses (5,000 ) (4,000 ) (3,000 ) 375 500
Non-interest income:
Other service charges, commissions and fees 9,156 9,458 9,286 8,977 8,256
Income from the origination and sale of loans 4,660 5,602 7,934 10,043 10,675
Wealth management revenues 4,455 4,350 4,581 4,020 4,134
Service charges on deposit accounts 3,875 4,086 4,360 4,323 4,068
Investment securities gains (losses), net 71 (25 ) 30 (12 ) 8
Other income 1,889   2,203   1,416   2,228   1,678  
Total non-interest income 24,106 25,674 27,607 29,579 28,819
Non-interest expense:
Salaries and wages 22,411 24,321 22,806 23,470 23,405
Employee benefits 8,313 7,289 7,328 7,546 8,175
Occupancy, net 4,239 4,206 4,292 4,063 4,026
Furniture and equipment 3,201 3,192 3,147 3,163 3,052
Outsourced technology services 2,300 2,382 2,295 2,195 2,157
Other real estate owned (income) expense, net (19 ) 1,292 18 (915 ) 1,896
Other expenses 13,893   15,103   12,693   15,498   13,974  
Total non-interest expense 54,338   57,785   52,579   55,020   56,685  
Income before taxes 32,904 31,863 36,984 32,944 30,911
Income taxes 11,511   11,088   13,172   11,439   10,867  
Net income $ 21,393   $ 20,775   $ 23,812   $ 21,505   $ 20,044  
 

PER COMMON SHARE DATA

Net income - basic $ 0.49 $ 0.47 $ 0.54 $ 0.49 $ 0.46
Net income - diluted 0.48 0.47 0.54 0.49 0.46
Cash dividend paid 0.16 0.14 0.14 0.13
Book value at period end 18.60 18.15 17.98 17.56 17.69
Tangible book value at period end** 14.37 13.89 13.71 13.25 13.35
 

OUTSTANDING COMMON SHARES

At period-end 44,390,095 44,155,063 44,089,962 43,835,881 43,614,942
Weighted average shares - basic 43,997,815 43,888,261 43,699,566 43,480,502 43,140,409
Weighted-average shares - diluted 44,620,776 44,541,497 44,284,844 43,908,287 43,428,382
 

SELECTED ANNUALIZED RATIOS

Return on average assets 1.16 % 1.10 % 1.28 % 1.17 % 1.08 %
Return on average common equity 10.74 10.31 12.13 11.08 10.68
Return on average tangible common equity** 14.00 13.49 16.01 14.63 14.23
Net FTE interest income to average earning assets 3.52 3.52 3.52 3.56 3.55
 
 

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary - continued

(Unaudited, $ in thousands)

 
2014 2013

BALANCE SHEET SUMMARIES

Mar 31 Dec 31   Sep 30   Jun 30   Mar 31
Assets:
Cash and cash equivalents $ 610,531 $ 534,827 $ 542,343 $ 368,217 $ 498,543
Investment securities 2,095,088 2,151,543 2,145,083 2,138,539 2,221,595
Loans held for investment:
Commercial real estate 1,452,967 1,449,174 1,441,297 1,447,145 1,469,302
Construction real estate 354,349 351,635 341,284 337,211 330,886
Residential real estate 868,836 867,912 841,707 804,200 758,480
Agricultural real estate 160,570 173,534 176,594 176,799 172,522
Consumer 670,406 671,587 672,184 652,944 636,364
Commercial 707,237 676,544 681,416 680,751 688,844
Agricultural 108,376 111,872 123,565 121,530 111,411
Other 3,626 1,734 1,912 2,498 1,307
Mortgage loans held for sale 38,471   40,861   52,133   74,286   55,443  
Total loans 4,364,838 4,344,853 4,332,092 4,297,364 4,224,559
Less allowance for loan losses 81,371   85,339   92,990   98,528   97,904  
Net loans 4,283,467   4,259,514   4,239,102   4,198,836   4,126,655  
Premises and equipment, net 179,942 179,690 179,785 181,940 185,237
Goodwill and intangible assets (excluding mortgage servicing rights) 187,858 188,214 188,569 188,925 189,281
Company owned life insurance 138,027 122,175 76,701 77,602 77,158
Other real estate owned, net 16,594 15,504 18,537 22,782 32,470
Mortgage servicing rights, net 13,474 13,546 13,518 13,304 13,006
Other assets 92,844   99,638   96,462   101,363   95,372  
Total assets $ 7,617,825   $ 7,564,651   $ 7,500,100   $ 7,291,508   $ 7,439,317  
 
Liabilities and stockholders' equity:
Deposits:
Non-interest bearing $ 1,458,460 $ 1,491,683 $ 1,503,969 $ 1,393,732 $ 1,406,892
Interest bearing 4,676,677   4,642,067   4,604,656   4,536,600   4,621,453  
Total deposits 6,135,137   6,133,750   6,108,625   5,930,332   6,028,345  
Securities sold under repurchase agreements 488,898 457,437 428,110 421,314 467,205
Accounts payable, accrued expenses and other liabilities 48,770 52,489 50,900 50,292 52,767
Long-term debt 36,905 36,917 37,128 37,139 37,150
Subordinated debentures held by subsidiary trusts 82,477   82,477   82,477   82,477   82,477  
Total liabilities 6,792,187   6,763,070   6,707,240   6,521,554   6,667,944  
Stockholders' equity:
Common stock 286,553 285,535 283,352 279,232 274,929
Retained earnings 546,444 532,087 517,456 499,761 483,904
Accumulated other comprehensive income (loss) (7,359 ) (16,041 ) (7,948 ) (9,039 ) 12,540  
Total stockholders' equity 825,638   801,581   792,860   769,954   771,373  
Total liabilities and stockholders' equity $ 7,617,825   $ 7,564,651   $ 7,500,100   $ 7,291,508   $ 7,439,317  
 

CONSOLIDATED CAPITAL RATIOS

Total risk-based capital 16.83 % * 16.75 % 16.68 % 16.29 % 15.91 %
Tier 1 risk-based capital 15.16 * 14.93 14.85 14.45 14.07
Tier 1 common capital to total risk-weighted assets 13.55 * 13.31 13.33 12.83 12.41
Leverage Ratio 10.27 * 10.08 10.01 9.73 9.24
Tangible common stockholders' equity to tangible assets** 8.58 8.32 8.26 8.18 8.03
 
   

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Consolidated Financial Summary - continued

(Unaudited, $ in thousands)

 
2014 2013

ASSET QUALITY

Mar 31 Dec 31   Sep 30   Jun 30   Mar 31
Allowance for loan losses $ 81,371 $ 85,339 $ 92,990 $ 98,528 $ 97,904
As a percentage of period-end loans 1.86 % 1.96 % 2.15 % 2.29 % 2.32 %
 
Net charge-offs (recoveries) during quarter $ (1,032 ) $ 3,651 $ 2,538 $ (249 ) $ 3,107
Annualized as a percentage of average loans (0.10 )% 0.34 % 0.23 % (0.02 )% 0.30 %
 
Non-performing assets:
Non-accrual loans $ 88,114 $ 94,439 $ 94,015 $ 103,729 $ 98,594
Accruing loans past due 90 days or more 1,664   2,232   2,188   1,742   1,941  
Total non-performing loans 89,778 96,671 96,203 105,471 100,535
Other real estate owned 16,594   15,504   18,537   22,782   32,470  
Total non-performing assets 106,372 112,175 114,740 128,253 133,005
As a percentage of:
Total loans and OREO 2.43 % 2.57 % 2.64 % 2.97 % 3.12 %
Total assets 1.40 % 1.48 % 1.53 % 1.76 % 1.79 %
 
             

ASSET QUALITY TRENDS

Provision for
Loan Losses

Net
Charge-offs
(Recoveries)

Allowance
for Loan
Losses

Accruing
Loans 30-89
Days Past
Due

Accruing
TDRs

Non-
Performing
Loans

Non-
Performing
Assets

Q1 2011 $ 15,000 $ 11,034 $ 124,446 $ 68,021 $ 33,344 $ 216,534 $ 248,529
Q2 2011 15,400 15,267 124,579 70,145 31,611 231,856 260,179
Q3 2011 14,000 18,276 120,303 62,165 35,616 226,962 252,042
Q4 2011 13,751 21,473 112,581 75,603 37,376 204,094 241,546
Q1 2012 11,250 7,929 115,902 58,531 36,838 185,927 230,683
Q2 2012 12,000 25,108 102,794 55,074 35,959 136,374 190,191
Q3 2012 9,500 13,288 99,006 48,277 35,428 127,270 167,241
Q4 2012 8,000 6,495 100,511 34,602 31,932 110,076 142,647
Q1 2013 500 3,107 97,904 41,924 35,787 100,535 133,005
Q2 2013 375 (249 ) 98,528 39,408 23,406 105,471 128,253
Q3 2013 (3,000 ) 2,538 92,990 39,414 21,939 96,203 114,740
Q4 2013 (4,000 ) 3,651 85,339 26,944 21,780 96,671 112,175
Q1 2014 (5,000 ) (1,032 ) 81,371 41,034 19,687 89,778 106,372
 
       

CRITICIZED LOANS

Special Mention Substandard Doubtful Total
Q1 2011 $ 293,899 $ 299,072 $ 135,862 $ 728,833
Q2 2011 268,450 309,029 149,964 727,443
Q3 2011 261,501 305,145 134,367 701,013
Q4 2011 240,903 269,794 120,165 630,862
Q1 2012 242,071 276,165 93,596 611,832
Q2 2012 220,509 243,916 81,473 545,898
Q3 2012 223,306 229,826 66,179 519,311
Q4 2012 209,933 215,188 42,459 467,580
Q1 2013 197,645 197,095 43,825 438,565
Q2 2013 192,390 161,786 52,266 406,442
Q3 2013 180,850 168,278 42,415 391,543
Q4 2013 159,081 154,100 45,308 358,489
Q1 2014 174,834 161,103 31,672 367,609
 

*Preliminary estimate - may be subject to change.

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

 

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES

Average Balance Sheets

(Unaudited, $ in thousands)

 
Three Months Ended
March 31, 2014     December 31, 2013     March 31, 2013

Average
Balance

  Interest  

Average
Rate

Average
Balance

  Interest  

Average
Rate

Average
Balance

  Interest  

Average
Rate

Interest earning assets:            
Loans (1) (2) $ 4,344,993 $ 54,192 5.06 % $ 4,323,504 $ 55,920 5.13 % $ 4,216,934 $ 55,913 5.38 %
Investment securities (2) 2,108,643 9,370 1.80 2,134,052 9,649 1.79 2,204,458 9,980 1.84
Interest bearing deposits in banks 368,784 231 0.25 430,912 275 0.25 476,856 298 0.25
Federal funds sold 1,099     1     0.37   789     1     0.50   2,521     4     0.64  
Total interest earnings assets 6,823,519 63,794 3.79 6,889,257 65,845 3.79 6,900,769 66,195 3.89
Non-earning assets 664,441           601,996           598,283          
Total assets $ 7,487,960           $ 7,491,253           $ 7,499,052          
Interest bearing liabilities:
Demand deposits $ 1,837,714 $ 512 0.11 % $ 1,807,865 $ 510 0.11 % $ 1,728,813 $ 473 0.11 %
Savings deposits 1,639,484 595 0.15 1,600,723 592 0.15 1,550,146 653 0.17
Time deposits 1,172,866 2,317 0.80 1,219,796 2,484 0.81 1,365,232 3,229 0.96
Repurchase agreements 456,557 66 0.06 431,397 62 0.06 512,180 100 0.08
Other borrowed funds 6 14 7
Long-term debt 36,909 473 5.20 36,983 486 5.21 37,153 480 5.24
Preferred stock pending redemption 9,444 159 6.83
Subordinated debentures held by subsidiary trusts 82,477     588     2.89   82,477     602     2.90   82,477     696     3.42  
Total interest bearing liabilities 5,226,013 4,551 0.35 5,179,255 4,736 0.36 5,285,452 5,790 0.44
Non-interest bearing deposits 1,403,822 1,461,126 1,398,850
Other non-interest bearing liabilities 50,185 51,674 53,810
Stockholders’ equity 807,940           799,198           760,940          
Total liabilities and stockholders’ equity $ 7,487,960           $ 7,491,253           $ 7,499,052          
Net FTE interest income 59,243 61,109 60,405
Less FTE adjustments (2)     (1,107 )         (1,135 )         (1,128 )    
Net interest income from consolidated statements of income     $ 58,136           $ 59,974           $ 59,277      
Interest rate spread         3.44 %         3.43 %         3.45 %
Net FTE interest margin (3)         3.52 %         3.52 %         3.55 %
Cost of funds, including non-interest bearing demand deposits (4)         0.28 %         0.28 %         0.35 %
 

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

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

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

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

Non-GAAP Financial Measures

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

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

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

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

   

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

 
2014 2013
Mar 31 Dec 31   Sep 30   Jun 30   Mar 31
Total stockholders’ equity (GAAP) $ 825,638 $ 801,581 $ 792,860 $ 769,954 $ 771,373
Less goodwill and other intangible assets (excluding mortgage servicing rights) 187,858   188,214   188,569   188,925   189,281  
Tangible common stockholders’ equity (Non-GAAP) $ 637,780   $ 613,367   $ 604,291   $ 581,029   $ 582,092  
 
Total assets (GAAP) $ 7,617,825 $ 7,564,651 $ 7,500,100 $ 7,291,508 $ 7,439,317
Less goodwill and other intangible assets (excluding mortgage servicing rights) 187,858   188,214   188,569   188,925   189,281  
Tangible assets (Non-GAAP) $ 7,429,967   $ 7,376,437   $ 7,311,531   $ 7,102,583   $ 7,250,036  
 
Quarterly averages:
Total stockholders' equity (GAAP) $ 807,940 $ 799,198 $ 778,809 $ 778,760 $ 760,940
Less goodwill and other intangible assets (excluding mortgage servicing rights) 188,078   188,415   188,778   189,135   189,503  
Average tangible common stockholder's equity (Non-GAAP) $ 619,862   $ 610,783   $ 590,031   $ 589,625   $ 571,437  
 
Common shares outstanding 44,390,095 44,155,063 44,089,962 43,835,881 43,614,942
Annualized net income $ 86,761   $ 82,423   $ 94,472   $ 86,256   $ 81,290  
 
Book value per common share $ 18.60 $ 18.15 $ 17.98 $ 17.56 $ 17.69
Tangible book value per common share 14.37 13.89 13.71 13.25 13.35
Tangible common stockholders’ equity to tangible assets (Non-GAAP) 8.58 % 8.32 % 8.26 % 8.18 % 8.03 %
Return on average tangible common equity (Non-GAAP) 14.00 13.49 16.01 14.63 14.23

Contacts

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

Sharing

Contacts

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