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| 8-K - 8-K - FIRST INTERSTATE BANCSYSTEM INC | fibk20130930-8k.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 Strong Third Quarter Earnings
on Improved Credit Quality
Billings, MT - October 21, 2013 - First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports third quarter 2013 net income available to common shareholders of $23.8 million, or $0.54 per diluted share, a 56% increase over third quarter 2012 net income available to common shareholders of $15.3 million, or $0.35 per diluted share. For the first nine months of 2013, the Company reported net income available to common shareholders of $65.4 million, or $1.49 per diluted share, compared to $38.8 million, or $0.90 per diluted share, during the same period in 2012.
THIRD QUARTER FINANCIAL HIGHLIGHTS
• | 1.53% non-performing assets to total assets, a decline from 1.76% as of June 30, 2013 and 2.24% as of September 30, 2012 |
• | Annualized net charged-off loans of 0.23% of average loans during the three months ended September 30, 2013 |
• | $3 million reversal of provision for loan losses |
• | $6 million of OREO sales during third quarter 2013 at a net gain of $525 thousand |
• | 3.52% net interest margin, a decrease of 4 basis points from second quarter 2013 and 11 basis points from third quarter 2012 |
• | 4% growth in loans held for investment, as compared to September 30, 2012 |
“Our earnings per share increased 54% over the prior year, driven primarily by lower credit costs as we continue to experience positive trends in asset quality," said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Over the past year, our non-performing assets have declined by 31% and our criticized loans have declined by 25%. As a result of the substantial improvement in credit quality, we determined that a lower level of allowance for credit losses was appropriate and recorded a $3 million negative provision for loan losses during third quarter," Garding continued. "I am pleased to report that even without the provision reversal, our third quarter earnings surpassed quarterly earnings reported for the first and second quarters of 2013," Garding further stated.
“Although an overall decline in residential mortgage volumes resulted in a lower level of income from loans sold into the secondary market, we had sufficient volume to drive a 5% increase in our retained residential real estate portfolio during the third quarter. We also continue to see strength in our indirect consumer loan portfolio, which increased 3% during the quarter. While commercial and commercial real estate loan demand continued to be relatively weak, when compared to the demand we have historically experienced, and negatively impacted our overall level of revenue, we did a good job of managing expenses in order to maintain a solid level of profitability,” said Garding.
DIVIDEND DECLARATION
On October 21, 2013, the Executive Committee of the Company's Board of Directors declared a dividend of $0.14 per common share. The dividend is payable on November 15, 2013 to owners of record as of November 1, 2013.
1
NET INTEREST INCOME
The Company's net interest income, on a fully taxable equivalent, or FTE, basis, was $60.1 million during third quarter 2013, as compared to $59.9 million during second quarter 2013 and $62.2 million during third quarter 2012. Our net FTE interest margin ratio decreased to 3.52% during third quarter 2013, as compared to 3.56% during second quarter 2013 and 3.63% during third quarter 2012. Declines in yields earned on the Company's loan and investment portfolios during third quarter 2013 were partially offset by increases in average outstanding loans, reductions in the cost of interest bearing liabilities and lower average outstanding time deposits. Also offsetting the impact of lower asset yields during the three and nine months ended September 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.
NON-INTEREST INCOME
Non-interest income decreased to $27.6 million during third quarter 2013, as compared to $29.6 million during second quarter 2013 and $30.2 million during third quarter 2012. These decreases were primarily due to lower income from the origination and sale of mortgage loans, which was partially offset by increases in wealth management revenues.
Income from the origination and sale of loans decreased to $7.9 million during third quarter 2013, as compared to $10.0 million during second quarter 2013, and $11.7 million during third quarter 2012, primarily due to lower demand for refinancing loans. The Company's total mortgage loan production decreased approximately 21% during third quarter 2013, as compared to second quarter 2013, and 33% as compared to third quarter 2012. Loans originated for home purchases accounted for approximately 72% of the Company's mortgage loan production during third quarter 2013, as compared to approximately 53% during the second quarter 2013 and approximately 38% during third quarter 2012.
Wealth management revenues increased to $4.6 million during third quarter 2013, as compared to $4.0 million during second quarter 2013 and $3.6 million during third quarter 2012. During third quarter 2013, the Company recorded revenues from the sale of two multi-million dollar life insurance policies aggregating $370 thousand. The remainder of third quarter 2013 increases, as compared to second quarter 2013 and third quarter 2012, were primarily due to the addition of new wealth management customers and increases in assets under trust management.
NON-INTEREST EXPENSE
Non-interest expense decreased to $52.6 million during third quarter 2013, as compared to $55.0 million during second quarter 2013 and $57.1 million during third quarter 2012, primarily due to decreases in salaries and wages expense and reductions in other expenses. Also contributing to the third quarter 2013 decrease in non-interest expense, as compared to the same period in the prior year, were reductions in other real estate owned, or OREO, expense.
Salaries and wages expense was $22.8 million for third quarter 2013, as compared to $23.5 million for second quarter 2013 and $23.3 million for third quarter 2012. Salaries expense, the largest component of salaries and wages expense, remained stable at $21.0 million during third quarter 2013, second quarter 2013 and third quarter 2012.
During third quarter 2013, the Company recorded net OREO expense of $18 thousand, as compared to net OREO income of $915 thousand during second quarter 2013 and net OREO expense of $2.6 million during third quarter 2012. Third quarter 2013 net OREO expense included $543 thousand of net operating expenses, which were offset by net gains on the sale of properties of $525 thousand. This compares to $678 thousand of net operating expenses, $259 thousand of fair value write-downs and net gains of $1.9 million during second quarter 2013, and $1.1 million of net operating expenses, $2.3 million of fair value write-downs and net gains of $775 thousand during third quarter 2012.
Other expenses decreased to $12.7 million during third quarter 2013, as compared to $15.5 million during second quarter 2013 and $14.5 million during third quarter 2012, primarily due to variations in the timing of expense recognition in the ordinary course of business. In addition, FDIC insurance premiums decreased $151 thousand during third quarter 2013, as compared to second quarter 2013, and $417 thousand as compared to third quarter 2012, primarily due to lower assessment rates reflective of improved credit quality.
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BALANCE SHEET
Total loans increased to $4,332 million as of September 30, 2013, from $4,297 million as of June 30, 2013 and $4,180 million as of September 30, 2012, with the most notable growth occurring in residential real estate and consumer loans. Residential real estate loans increased to $842 million as of September 30, 2013, from $804 million as of June 30, 2013 and $639 million as of September 30, 2012, due to continued retention of certain residential loans with contractual terms of fifteen years or less and increased housing demand in the Company's market areas.
Consumer loans grew to $672 million as of September 30, 2013, from $653 million as of June 30, 2013 and $630 million as of
September 30, 2012. Growth in consumer loans occurred primarily in indirect loans, which increased to $477 million as of September 30, 2013, from $457 million as of June 30, 2013 and $431 million as of September 30, 2012, due to expansion of the Company's indirect lending program within existing markets.
Commercial real estate loans decreased to $1,441 million as of September 30, 2013, from $1,447 million as of June 30, 2013 and $1,514 million as of September 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 increased to $6,109 million as of September 30, 2013, from $5,930 million as of June 30, 2013 and $6,036 million as of September 30, 2012, with a continued shift in the mix of deposits away from higher costing time deposits to lower costing demand and savings deposits. As of September 30, 2013, time deposits comprised 20.3% of total deposits, as compared to 21.1% as of June 30, 2013 and 23.6% as of September 30, 2012.
OREO decreased to $19 million as of September 30, 2013, from $23 million as of June 30, 2013, primarily due to sales of OREO properties. During third quarter 2013, the Company recorded OREO additions of $2 million and sold OREO properties with carrying values of $6 million at a $525 thousand net gain. OREO sales were composed primarily of commercial and land and land development properties. As of September 30, 2013, the composition of OREO properties was as follows: 19% residential real estate; 59% land and land development and 22% commercial.
ASSET QUALITY
Non-performing loans decreased to $96 million as of September 30, 2013, from $105 million as of June 30, 2013, primarily due to the movement of non-accrual loans out of the loan portfolio through pay-off, charge-off and upgrade. Non-performing loans decreased to $96 million as of September 30, 2013, from $127 million as of September 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 $5 million during third quarter 2013, compared to $4 million during second quarter 2013 and $15 million during third quarter 2012. Recoveries of charged-off loans were $2 million during third quarter 2013, compared to $4 million during second quarter 2013 and $2 million during third quarter 2012. Approximately 29% of the third quarter 2013 charge-offs related to the loans of one commercial and one commercial real estate borrower.
The Company reversed $3.0 million of provision for loan losses during third quarter 2013, as compared to recording provisions of $375 thousand during second quarter 2013 and $9.5 million during third quarter 2012. The third quarter 2013 reversal of provision is reflective of continued improvement in and stabilization of credit quality as evidenced by declining levels of non-performing assets and criticized loans. As of September 30, 2013, non-performing assets and total criticized assets were at their lowest quarterly levels since 2008.
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.
Third Quarter 2013 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss third quarter 2013 results at 11:00 a.m. Eastern Time (9:00 a.m. MT) on Tuesday, October 22, 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 Time (11:00 a.m. MT) on October 22, 2013 through November 22, 2013 by dialing 1-877-344-7529 (using conference ID 10034035). The call will also be archived on our website, www.FIBK.com, for one year.
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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.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousands, except per share data)
2013 | 2012 | |||||||||||||||||||
CONDENSED INCOME STATEMENTS | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||||||
Net interest income | $ | 58,956 | $ | 58,760 | $ | 59,277 | $ | 60,973 | $ | 61,005 | ||||||||||
Net interest income on a fully-taxable equivalent ("FTE") basis | 60,066 | 59,879 | 60,405 | 62,143 | 62,165 | |||||||||||||||
Provision for loan losses | (3,000 | ) | 375 | 500 | 8,000 | 9,500 | ||||||||||||||
Non-interest income: | ||||||||||||||||||||
Income from the origination and sale of loans | 7,934 | 10,043 | 10,675 | 12,321 | 11,665 | |||||||||||||||
Other service charges, commissions and fees | 9,286 | 8,977 | 8,256 | 8,774 | 8,774 | |||||||||||||||
Service charges on deposit accounts | 4,360 | 4,323 | 4,068 | 4,401 | 4,395 | |||||||||||||||
Wealth management revenues | 4,581 | 4,020 | 4,134 | 3,659 | 3,557 | |||||||||||||||
Investment securities gains (losses), net | 30 | (12 | ) | 8 | 53 | 66 | ||||||||||||||
Other Income | 1,416 | 2,228 | 1,678 | 1,427 | 1,725 | |||||||||||||||
Total non-interest income | 27,607 | 29,579 | 28,819 | 30,635 | 30,182 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and wages | 22,806 | 23,470 | 23,405 | 23,288 | 23,341 | |||||||||||||||
Employee benefits | 7,328 | 7,546 | 8,175 | 6,113 | 7,447 | |||||||||||||||
Occupancy, net | 4,292 | 4,063 | 4,026 | 3,968 | 3,793 | |||||||||||||||
Furniture and equipment | 3,147 | 3,163 | 3,052 | 3,301 | 3,231 | |||||||||||||||
Outsourced technology services | 2,295 | 2,195 | 2,157 | 2,199 | 2,182 | |||||||||||||||
Other real estate owned (income) expense, net | 18 | (915 | ) | 1,896 | 3,877 | 2,612 | ||||||||||||||
Other expenses | 12,693 | 15,498 | 13,974 | 15,086 | 14,458 | |||||||||||||||
Total non-interest expense | 52,579 | 55,020 | 56,685 | 57,832 | 57,064 | |||||||||||||||
Income before taxes | 36,984 | 32,944 | 30,911 | 25,776 | 24,623 | |||||||||||||||
Income taxes | 13,172 | 11,439 | 10,867 | 8,931 | 8,468 | |||||||||||||||
Net income | 23,812 | 21,505 | 20,044 | 16,845 | 16,155 | |||||||||||||||
Preferred stock dividends | — | — | — | 731 | 863 | |||||||||||||||
Net income available to common shareholders | $ | 23,812 | $ | 21,505 | $ | 20,044 | $ | 16,114 | $ | 15,292 | ||||||||||
PER COMMON SHARE DATA | ||||||||||||||||||||
Net income - basic | $ | 0.54 | $ | 0.49 | $ | 0.46 | $ | 0.37 | $ | 0.36 | ||||||||||
Net income - diluted | 0.54 | 0.49 | 0.46 | 0.37 | 0.35 | |||||||||||||||
Cash dividend paid | 0.14 | 0.13 | — | 0.25 | 0.12 | |||||||||||||||
Book value at quarter end | 17.98 | 17.56 | 17.69 | 17.35 | 17.29 | |||||||||||||||
Tangible book value at quarter end* | 13.71 | 13.25 | 13.35 | 12.97 | 12.90 | |||||||||||||||
OUTSTANDING COMMON SHARES | ||||||||||||||||||||
At period-end | 44,089,962 | 43,835,881 | 43,614,942 | 43,290,323 | 43,252,383 | |||||||||||||||
Weighted average shares - basic | 43,699,566 | 43,480,502 | 43,140,409 | 43,032,697 | 42,989,564 | |||||||||||||||
Weighted-average shares - diluted | 44,284,844 | 43,908,287 | 43,428,382 | 43,198,076 | 43,120,077 | |||||||||||||||
SELECTED ANNUALIZED RATIOS | ||||||||||||||||||||
Return on average assets | 1.28 | % | 1.17 | % | 1.08 | % | 0.88 | % | 0.86 | % | ||||||||||
Return on average common equity | 12.13 | 11.08 | 10.68 | 8.55 | 8.22 | |||||||||||||||
Return on average tangible common equity* | 16.01 | 14.63 | 14.23 | 11.45 | 11.07 | |||||||||||||||
Net FTE interest income to average earning assets | 3.52 | 3.56 | 3.55 | 3.55 | 3.63 | |||||||||||||||
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2013 | 2012 | |||||||||||||||||||
BALANCE SHEET SUMMARIES | Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 542,343 | $ | 368,217 | $ | 498,543 | $ | 801,332 | $ | 611,335 | ||||||||||
Investment securities | 2,145,083 | 2,138,539 | 2,221,595 | 2,203,481 | 2,166,727 | |||||||||||||||
Loans held for investment: | ||||||||||||||||||||
Commercial real estate | 1,441,297 | 1,447,145 | 1,469,302 | 1,497,272 | 1,513,784 | |||||||||||||||
Construction real estate | 341,284 | 337,211 | 330,886 | 334,529 | 340,074 | |||||||||||||||
Residential real estate | 841,707 | 804,200 | 758,480 | 708,339 | 639,235 | |||||||||||||||
Agricultural real estate | 176,594 | 176,799 | 172,522 | 177,244 | 175,395 | |||||||||||||||
Consumer | 672,184 | 652,944 | 636,364 | 636,794 | 629,757 | |||||||||||||||
Commercial | 681,416 | 680,751 | 688,844 | 688,753 | 672,100 | |||||||||||||||
Agricultural | 123,565 | 121,530 | 111,411 | 113,627 | 135,467 | |||||||||||||||
Other | 1,912 | 2,498 | 1,307 | 912 | 1,359 | |||||||||||||||
Mortgage loans held for sale | 52,133 | 74,286 | 55,443 | 66,442 | 72,880 | |||||||||||||||
Total loans | 4,332,092 | 4,297,364 | 4,224,559 | 4,223,912 | 4,180,051 | |||||||||||||||
Less allowance for loan losses | 92,990 | 98,528 | 97,904 | 100,511 | 99,006 | |||||||||||||||
Net loans | 4,239,102 | 4,198,836 | 4,126,655 | 4,123,401 | 4,081,045 | |||||||||||||||
Premises and equipment, net | 179,785 | 181,940 | 185,237 | 187,565 | 188,851 | |||||||||||||||
Goodwill and intangible assets (excluding mortgage servicing rights) | 188,569 | 188,925 | 189,281 | 189,637 | 189,994 | |||||||||||||||
Company owned life insurance | 76,701 | 77,602 | 77,158 | 76,729 | 76,371 | |||||||||||||||
Other real estate owned, net | 18,537 | 22,782 | 32,470 | 32,571 | 39,971 | |||||||||||||||
Mortgage servicing rights, net | 13,518 | 13,304 | 13,006 | 12,653 | 12,334 | |||||||||||||||
Other assets | 96,462 | 101,363 | 95,372 | 94,392 | 94,524 | |||||||||||||||
Total assets | $ | 7,500,100 | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | ||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing | $ | 1,503,969 | $ | 1,393,732 | $ | 1,406,892 | $ | 1,495,309 | $ | 1,443,773 | ||||||||||
Interest bearing | 4,604,656 | 4,536,600 | 4,621,453 | 4,745,102 | 4,591,959 | |||||||||||||||
Total deposits | 6,108,625 | 5,930,332 | 6,028,345 | 6,240,411 | 6,035,732 | |||||||||||||||
Securities sold under repurchase agreements | 428,110 | 421,314 | 467,205 | 505,785 | 460,805 | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 50,900 | 50,292 | 52,767 | 54,742 | 47,098 | |||||||||||||||
Long-term debt | 37,128 | 37,139 | 37,150 | 37,160 | 37,170 | |||||||||||||||
Preferred stock pending redemption | — | — | — | 50,000 | — | |||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 82,477 | 82,477 | 82,477 | 82,477 | |||||||||||||||
Total liabilities | 6,707,240 | 6,521,554 | 6,667,944 | 6,970,575 | 6,663,282 | |||||||||||||||
Stockholders' equity: | ||||||||||||||||||||
Preferred stock | — | — | — | — | 50,000 | |||||||||||||||
Common stock | 283,352 | 279,232 | 274,929 | 271,335 | 270,553 | |||||||||||||||
Retained earnings | 517,456 | 499,761 | 483,904 | 463,860 | 458,506 | |||||||||||||||
Accumulated other comprehensive income (loss) | (7,948 | ) | (9,039 | ) | 12,540 | 15,991 | 18,811 | |||||||||||||
Total stockholders' equity | 792,860 | 769,954 | 771,373 | 751,186 | 797,870 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 7,500,100 | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | ||||||||||
CONSOLIDATED CAPITAL RATIOS | ||||||||||||||||||||
Total risk-based capital | 16.68 | % | s | 16.29 | % | 15.91 | % | 15.59 | % | 16.52 | % | |||||||||
Tier 1 risk-based capital | 14.85 | s | 14.45 | 14.07 | 13.60 | 14.53 | ||||||||||||||
Tier 1 common capital to total risk-weighted assets | 13.33 | s | 12.83 | 12.41 | 11.94 | 11.81 | ||||||||||||||
Leverage Ratio | 10.01 | s | 9.73 | 9.24 | 8.81 | 9.56 | ||||||||||||||
Tangible common stockholders' equity to tangible assets* | 8.26 | 8.18 | 8.03 | 7.46 | 7.67 | |||||||||||||||
6
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2013 | 2012 | |||||||||||||||||||
ASSET QUALITY | Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |||||||||||||||
Allowance for loan losses | $ | 92,990 | $ | 98,528 | $ | 97,904 | $ | 100,511 | $ | 99,006 | ||||||||||
As a percentage of period-end loans | 2.15 | % | 2.29 | % | 2.32 | % | 2.38 | % | 2.37 | % | ||||||||||
Net charge-offs during quarter | $ | 2,538 | $ | (249 | ) | $ | 3,107 | $ | 6,495 | $ | 13,288 | |||||||||
Annualized as a percentage of average loans | 0.23 | % | (0.02 | )% | 0.30 | % | 0.62 | % | 1.26 | % | ||||||||||
Non-performing assets: | ||||||||||||||||||||
Non-accrual loans | $ | 94,015 | $ | 103,729 | $ | 98,594 | $ | 107,799 | $ | 122,931 | ||||||||||
Accruing loans past due 90 days or more | 2,188 | 1,742 | 1,941 | 2,277 | 4,339 | |||||||||||||||
Total non-performing loans | 96,203 | 105,471 | 100,535 | 110,076 | 127,270 | |||||||||||||||
Other real estate owned | 18,537 | 22,782 | 32,470 | 32,571 | 39,971 | |||||||||||||||
Total non-performing assets | 114,740 | 128,253 | 133,005 | 142,647 | 167,241 | |||||||||||||||
As a percentage of: | ||||||||||||||||||||
Total loans and OREO | 2.64 | % | 2.97 | % | 3.12 | % | 3.35 | % | 3.96 | % | ||||||||||
Total assets | 1.53 | % | 1.76 | % | 1.79 | % | 1.85 | % | 2.24 | % | ||||||||||
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 | ||||||||||||||||||||
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 | |||||||||||||||||||
Q3 2013 | (3,000 | ) | 2,538 | 92,990 | 39,414 | 21,939 | 96,203 | 114,740 | |||||||||||||||||||
CRITICIZED LOANS | Special Mention | Substandard | Doubtful | Total | |||||||||||
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 | |||||||||||
Q3 2013 | 180,850 | 168,278 | 42,415 | 391,543 | |||||||||||
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.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
Three Months Ended | ||||||||||||||||||||||||||
September 30, 2013 | June 30, 2013 | September 30, 2012 | ||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,327,995 | $ | 55,345 | 5.07 | % | $ | 4,256,579 | $ | 55,270 | 5.21 | % | $ | 4,183,016 | $ | 57,872 | 5.50 | % | ||||||||
Investment securities (2) | 2,115,301 | 9,479 | 1.78 | 2,153,342 | 9,588 | 1.79 | 2,098,576 | 11,123 | 2.11 | |||||||||||||||||
Interest bearing deposits in banks | 323,781 | 207 | 0.25 | 335,761 | 212 | 0.25 | 525,149 | 336 | 0.25 | |||||||||||||||||
Federal funds sold | 4,772 | 8 | 0.67 | 3,322 | 5 | 0.60 | 3,006 | 4 | 0.53 | |||||||||||||||||
Total interest earnings assets | 6,771,849 | 65,039 | 3.81 | 6,749,004 | 65,075 | 3.87 | 6,809,747 | 69,335 | 4.05 | |||||||||||||||||
Non-earning assets | 602,316 | 601,023 | 633,551 | |||||||||||||||||||||||
Total assets | $ | 7,374,165 | $ | 7,350,027 | $ | 7,443,298 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Demand deposits | $ | 1,748,317 | $ | 504 | 0.11 | % | $ | 1,722,138 | $ | 475 | 0.11 | % | $ | 1,613,136 | $ | 589 | 0.15 | % | ||||||||
Savings deposits | 1,568,744 | 601 | 0.15 | 1,544,648 | 598 | 0.16 | 1,523,347 | 873 | 0.23 | |||||||||||||||||
Time deposits | 1,260,452 | 2,716 | 0.85 | 1,312,863 | 2,965 | 0.91 | 1,452,688 | 3,952 | 1.08 | |||||||||||||||||
Repurchase agreements | 418,561 | 58 | 0.05 | 466,533 | 74 | 0.06 | 501,640 | 144 | 0.11 | |||||||||||||||||
Other borrowed funds | 10 | — | — | 10 | — | — | 6 | — | — | |||||||||||||||||
Long-term debt | 37,132 | 487 | 5.20 | 37,142 | 483 | 5.22 | 37,174 | 502 | 5.37 | |||||||||||||||||
Preferred stock pending redemption | — | — | — | — | — | — | — | — | — | |||||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 607 | 2.92 | 82,477 | 601 | 2.92 | 82,477 | 1,110 | 5.35 | |||||||||||||||||
Total interest bearing liabilities | 5,115,693 | 4,973 | 0.39 | 5,165,811 | 5,196 | 0.40 | 5,210,468 | 7,170 | 0.55 | |||||||||||||||||
Non-interest bearing deposits | 1,428,099 | 1,356,133 | 1,399,585 | |||||||||||||||||||||||
Other non-interest bearing liabilities | 51,564 | 49,323 | 43,511 | |||||||||||||||||||||||
Stockholders’ equity | 778,809 | 778,760 | 789,734 | |||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,374,165 | $ | 7,350,027 | $ | 7,443,298 | ||||||||||||||||||||
Net FTE interest income | 60,066 | 59,879 | 62,165 | |||||||||||||||||||||||
Less FTE adjustments (2) | (1,110 | ) | (1,119 | ) | (1,160 | ) | ||||||||||||||||||||
Net interest income from consolidated statements of income | $ | 58,956 | $ | 58,760 | $ | 61,005 | ||||||||||||||||||||
Interest rate spread | 3.42 | % | 3.47 | % | 3.50 | % | ||||||||||||||||||||
Net FTE interest margin (3) | 3.52 | % | 3.56 | % | 3.63 | % | ||||||||||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.30 | % | 0.32 | % | 0.43 | % | ||||||||||||||||||||
(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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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
Nine Months Ended | |||||||||||||||||
September 30, 2013 | September 30, 2012 | ||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||
Interest earning assets: | |||||||||||||||||
Loans (1) (2) | $ | 4,267,576 | $ | 166,530 | 5.22 | % | $ | 4,169,311 | $ | 174,809 | 5.60 | % | |||||
Investment securities (2) | 2,157,373 | 29,045 | 1.80 | 2,112,005 | 34,141 | 2.16 | |||||||||||
Interest bearing deposits in banks | 378,239 | 717 | 0.25 | 447,865 | 852 | 0.25 | |||||||||||
Federal funds sold | 3,547 | 17 | 0.64 | 2,430 | 11 | 0.60 | |||||||||||
Total interest earnings assets | 6,806,735 | 196,309 | 3.86 | 6,731,611 | 209,813 | 4.16 | |||||||||||
Non-earning assets | 600,556 | 628,732 | |||||||||||||||
Total assets | $ | 7,407,291 | $ | 7,360,343 | |||||||||||||
Interest bearing liabilities: | |||||||||||||||||
Demand deposits | $ | 1,733,161 | $ | 1,453 | 0.11 | % | $ | 1,597,397 | $ | 1,842 | 0.15 | % | |||||
Savings deposits | 1,554,581 | 1,853 | 0.16 | 1,485,330 | 2,821 | 0.25 | |||||||||||
Time deposits | 1,312,465 | 8,908 | 0.91 | 1,496,531 | 12,792 | 1.14 | |||||||||||
Repurchase agreements | 465,415 | 232 | 0.07 | 502,828 | 452 | 0.12 | |||||||||||
Other borrowed funds | 9 | — | — | 24 | — | — | |||||||||||
Long-term debt | 37,142 | 1,450 | 5.22 | 37,184 | 1,495 | 5.37 | |||||||||||
Preferred stock pending redemption | 3,114 | 159 | 6.83 | — | — | — | |||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 1,904 | 3.09 | 108,966 | 4,084 | 5.01 | |||||||||||
Total interest bearing liabilities | 5,188,364 | 15,959 | 0.41 | 5,228,260 | 23,486 | 0.60 | |||||||||||
Non-interest bearing deposits | 1,394,468 | 1,303,535 | |||||||||||||||
Other non-interest bearing liabilities | 51,557 | 47,108 | |||||||||||||||
Stockholders’ equity | 772,902 | 781,440 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,407,291 | $ | 7,360,343 | |||||||||||||
Net FTE interest income | 180,350 | 186,327 | |||||||||||||||
Less FTE adjustments (2) | (3,357 | ) | (3,514 | ) | |||||||||||||
Net interest income from consolidated statements of income | $ | 176,993 | $ | 182,813 | |||||||||||||
Interest rate spread | 3.45 | % | 3.56 | % | |||||||||||||
Net FTE interest margin (3) | 3.54 | % | 3.70 | % | |||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.32 | % | 0.48 | % | |||||||||||||
(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) 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 | |||||||||||||||||||
Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | ||||||||||||||||
Total stockholders’ equity (GAAP) | $ | 792,860 | $ | 769,954 | $ | 771,373 | $ | 751,186 | $ | 797,870 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 188,569 | 188,925 | 189,281 | 189,637 | 189,994 | |||||||||||||||
Less preferred stock | — | — | — | — | 50,000 | |||||||||||||||
Tangible common stockholders’ equity (Non-GAAP) | $ | 604,291 | $ | 581,029 | $ | 582,092 | $ | 561,549 | $ | 557,876 | ||||||||||
Total assets (GAAP) | $ | 7,500,100 | $ | 7,291,508 | $ | 7,439,317 | $ | 7,721,761 | $ | 7,461,152 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 188,569 | 188,925 | 189,281 | 189,637 | 189,994 | |||||||||||||||
Tangible assets (Non-GAAP) | $ | 7,311,531 | $ | 7,102,583 | $ | 7,250,036 | $ | 7,532,124 | $ | 7,271,158 | ||||||||||
Quarterly averages: | ||||||||||||||||||||
Total stockholders' equity (GAAP) | $ | 778,809 | $ | 778,760 | $ | 760,940 | $ | 791,905 | $ | 789,734 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) | 188,778 | 189,135 | 189,503 | 189,839 | 190,206 | |||||||||||||||
Less preferred stock | — | — | — | 42,391 | 50,000 | |||||||||||||||
Average tangible common stockholder's equity (Non-GAAP) | $ | 590,031 | $ | 589,625 | $ | 571,437 | $ | 559,675 | $ | 549,528 | ||||||||||
Common shares outstanding | 44,089,962 | 43,835,881 | 43,614,942 | 43,290,323 | 43,252,383 | |||||||||||||||
Annualized net income available to common shareholders | $ | 94,472 | $ | 86,256 | $ | 81,290 | $ | 64,106 | $ | 60,836 | ||||||||||
Book value per common share | $ | 17.98 | $ | 17.56 | $ | 17.69 | $ | 17.35 | $ | 17.29 | ||||||||||
Tangible book value per common share | 13.71 | 13.25 | 13.35 | 12.97 | 12.90 | |||||||||||||||
Tangible common stockholders’ equity to tangible assets (Non-GAAP) | 8.26 | % | 8.18 | % | 8.03 | % | 7.46 | % | 7.67 | % | ||||||||||
Return on average tangible equity (Non-GAAP) | 16.01 | 14.63 | 14.23 | 11.45 | 11.07 | |||||||||||||||
First Interstate BancSystem, Inc.
P.O. Box 30918 Billings, Montana 59116 (406) 255-5390
www.FIBK.com
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