Attached files
| file | filename |
|---|---|
| 8-K - 8-K - FIRST INTERSTATE BANCSYSTEM INC | fibk20140630-8k.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 Second Quarter Earnings;
Loan Growth
Billings, MT - July 21, 2014 - First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports second quarter 2014 net income of $21.1 million, or $0.47 per diluted share. Included in second quarter 2014 net income are $597 thousand of acquisition expenses and $17 thousand of net gains on the sale of investment securities, which the Company considers to be unrelated to its normalized operations, or non-core. Exclusive of these non-core revenues and expenses, the Company's second quarter 2014 core net income was $21.4 million, or $0.48 per diluted share, as compared to core net income of $21.3 million, or $0.48 per diluted share, for first quarter 2014 and $21.5 million, or $0.49 per diluted share, for second quarter 2013.
SECOND QUARTER FINANCIAL HIGHLIGHTS
• | 3.2% growth in total loans |
• | Non-performing assets decreased $9 million to $97 million as of June 30, 2014 |
• | $2 million reversal of provision for loan losses |
• | 10% growth in non-interest income |
• | 3.54% net interest margin ratio remained stable, as compared to 3.52% for first quarter 2014 |
“We are very pleased with our second quarter results, which reflect positive trends across most areas of our operations,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “We are encouraged by the increase in loan demand we are seeing across our markets, which resulted in the strongest quarterly loan growth we have experienced in several years. Our loan portfolio increased 3% during the second quarter, with all of our major lending areas contributing to the growth. We are also pleased with the continued improvement in asset quality we are seeing, which is reflected in a 9% decrease in non-performing assets during the second quarter," Garding continued.
“Our operations continue to generate a significant amount of capital and we are highly focused on efficiently managing our capital position. We are reinvesting our capital to support growth through our pending merger with Mountain West Bank, while also returning capital to shareholders through strong dividends and our ongoing share repurchase program. We believe this formula of balanced capital management will continue to optimize our returns and create value for our shareholders,” said Mr. Garding.
RESULTS OF OPERATIONS
Net Interest Income. The Company's net interest income, on a fully taxable equivalent, or FTE, basis, increased $1.6 million to $60.8 million during second quarter 2014, as compared to $59.2 million during first quarter 2014, primarily due to loan growth and one additional accrual day during second quarter 2014. During second quarter 2014, the Company further reduced funding costs to 0.27%, a one basis point reduction from first quarter 2014 and a five basis point reduction from second quarter 2013.
1
The Company's interest margin ratio remained stable at 3.54% during second quarter 2014, as compared to 3.52% during first quarter 2014. During second quarter 2014, the Company recovered charged off interest of $1.4 million, compared to $532 thousand during first quarter 2014. Exclusive of these interest recoveries, the Company's net interest margin ratio was 3.46% during the second quarter 2014 and 3.49% during first quarter 2014.
Non-Interest Income. Non-interest income increased $2.5 million to $26.6 million during second quarter 2014, as compared to $24.1 million during first quarter 2014, primarily due to increases in income from the origination and sale of mortgage loans, higher debit and credit card interchange fees and increases in wealth management revenues.
Income from the origination and sale of loans increased $1.7 million to $6.4 million during second quarter 2014, as compared to $4.7 million during first quarter 2014, primarily due to increased mortgage loan production. The Company's mortgage loan production increased 57% during second quarter 2014, as compared to first quarter 2014, primarily due to seasonal fluctuations in production volumes combined with the completion of residential mortgage loan closings delayed by weather during the first quarter. Loans originated for home purchases accounted for approximately 76% of the Company's mortgage loan production during second quarter 2014, as compared to 68% during first quarter 2014 and 53% during second quarter 2013.
Other service charges, commissions and fees increased $543 thousand to $9.7 million during second quarter 2014, as compared to $9.2 million during first quarter 2014, primarily due to higher interchange fees earned on debit and credit card transactions resulting from higher transaction volumes.
Wealth management revenues increased $154 thousand to $4.6 million during second quarter 2014, as compared to $4.5 million during first quarter 2014, due to the combined effect of the continued addition of new wealth management customers and increases in the market values of new and existing assets under trust management.
Non-Interest Expense. Non-interest expense increased $1.6 million to $55.9 million during second quarter 2014, as compared to $54.3 million during first quarter 2014. Included in non-interest expense are $597 thousand of acquisition expenses, which the Company considers to be non-core. Exclusive of these non-core expenses, core non-interest expense was $55.3 million during second quarter 2014, $54.3 million during first quarter 2014 and $55.0 million during second quarter 2013. Increases in core non-interest expense during second quarter 2014, as compared to first quarter 2014, were primarily due to higher salaries and wages expense, which was partially offset by lower employee benefits expense.
Salaries and wages expense increased $2.0 million to $24.4 million during second quarter 2014, as compared to $22.4 million during first quarter 2014, primarily due to one additional salary accrual day, increases in commissioned pay reflective of increased mortgage loan origination and higher incentive compensation accruals.
Employee benefits expense decreased $1.1 million to $7.2 million during second quarter 2014, as compared to $8.3 million during first quarter 2014, primarily due to reductions in payroll taxes as annual compensation tax limits are met. In addition, during second quarter 2014, the Company reversed $500 thousand of previously accrued health insurance expense reflective of favorable claims experience during the first half of 2014.
BALANCE SHEET
Total loans increased $142 million to $4,506 million as of June 30, 2014, from $4,365 million as of March 31, 2014, with all major categories of loans showing growth. Loan growth during second quarter 2014 was spread across the Company's market areas and was largely attributable to improvement in the economic conditions of the areas served.
Residential real estate loans grew $26 million to $895 million as of June 30, 2014, from $869 million as of March 31, 2014. The increase was primarily due to the origination of 1-4 family residential real estate loans not meeting the requirements for sale on the secondary market. These loans are generally five to fifteen year adjustable rate and conventional mortgages. During the first half of 2014, substantially all of the Company's conforming residential loan production was sold to investors in the secondary market.
Consumer loans increased $37 million to $707 million as of June 30, 2014, from $670 million as of March 31, 2014, primarily due to increases in indirect consumer loans. Indirect consumer loans increased $31 million to $512 million as of June 30, 2014, from $481 million as of March 31, 2014. Management attributes the increase in indirect consumer loans to continued expansion of the Company's indirect lending program within existing markets combined with increases in the average loan amount advanced.
2
Continuing business expansion in the Company's market areas resulted in increases in commercial, commercial real estate and commercial construction loans during second quarter 2014. The most notable increase occurred in commercial loans, which grew $20 million to $727 million as of June 30, 2014, from $707 million as of March 31, 2014.
Agricultural loans increased $22 million to $130 million as of June 30, 2014, from $108 million as of March 31, 2014, primarily due to seasonal increases that typically occur during the second and third quarters of the year.
Total deposits increased $44 million to $6,179 million as of June 30, 2014, from $6,135 million as of March 31, 2014. During second quarter 2014, the mix of deposits continued to shift away from higher costing time deposits to lower costing demand deposits, the result of sustained low interest rates. As of June 30, 2014, time deposits comprised 18.4% of total deposits, as compared to 18.9% of total deposits as of March 31, 2014 and 21.7% as of June 30, 2013.
ASSET QUALITY
Non-performing assets continued to decrease during second quarter 2014, ending the quarter at $97 million, or 1.27% of total assets, as of June 30, 2014, their lowest level since 2008. This compares to $106 million, or 1.40% of total assets as of
March 31, 2014.
During second quarter 2014, the Company recorded net charged-off loans of $1 million, which was comprised of gross charge-offs of $3 million and gross recoveries of $2 million. This compares to gross charge-offs of $3 million and gross recoveries of $4 million recorded during first quarter 2014.
The Company reversed $2 million of provision for loan losses during second quarter 2014, 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 commercial 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, the Company repurchased and retired 225,063 shares of its Class A common stock during second quarter 2014. The shares were repurchased in a combination of open market and privately negotiated transactions at an aggregate purchase price of $24.91 per share. Under the stock repurchase program, the Company may repurchase up to an additional 1,674,582 shares of its Class A common stock prior to expiration of the plan on November 25, 2014.
ACQUISITION
On June 30, 2014, the Company received regulatory approval of its acquisition by merger of Mountain West Financial Corp., the parent company of Mountain West Bank, National Association. The acquisition is expected to close on July 31, 2014. Subsequent to the acquisition, and subject to further regulatory approval, the Company will merge Mountain West Bank, National Association into First Interstate Bank, the Company's bank subsidiary. The bank merger is expected to occur on October 18, 2014. As of June 30, 2014, Mountain West Financial Corp. had total assets of approximately $623 million, net loans of approximately $380 million and deposits of approximately $520 million.
Second Quarter 2014 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss second quarter 2014 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time ) on Tuesday, July 22, 2014. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-888-507-1071 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 July 22, 2014 through 9:00 a.m Eastern Time (7:00 a.m. Mountain Time) on August 22, 2014, by dialing 1-877-344-7529 (using conference ID 10048571). 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 42 communities in Montana, Wyoming and western South Dakota. Through First Interstate Bank, the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities and other entities throughout the Company's market areas.
Cautionary 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.
4
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousands, except per share data)
2014 | 2013 | |||||||||||||||||||||
CONDENSED INCOME STATEMENTS | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||||||||
Net interest income | $ | 59,727 | $ | 58,136 | $ | 59,974 | $ | 58,956 | $ | 58,760 | ||||||||||||
Net interest income on a fully-taxable equivalent ("FTE") basis | 60,806 | 59,243 | 61,109 | 60,066 | 59,879 | |||||||||||||||||
Provision for loan losses | (2,001 | ) | (5,000 | ) | (4,000 | ) | (3,000 | ) | 375 | |||||||||||||
Non-interest income: | ||||||||||||||||||||||
Other service charges, commissions and fees | 9,699 | 9,156 | 9,458 | 9,286 | 8,977 | |||||||||||||||||
Income from the origination and sale of loans | 6,380 | 4,660 | 5,602 | 7,934 | 10,043 | |||||||||||||||||
Wealth management revenues | 4,609 | 4,455 | 4,350 | 4,581 | 4,020 | |||||||||||||||||
Service charges on deposit accounts | 3,929 | 3,875 | 4,086 | 4,360 | 4,323 | |||||||||||||||||
Investment securities gains (losses), net | 17 | 71 | (25 | ) | 30 | (12 | ) | |||||||||||||||
Other income | 1,937 | 1,889 | 2,203 | 1,416 | 2,228 | |||||||||||||||||
Total non-interest income | 26,571 | 24,106 | 25,674 | 27,607 | 29,579 | |||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||
Salaries and wages | 24,440 | 22,442 | 24,335 | 22,843 | 23,470 | |||||||||||||||||
Employee benefits | 7,164 | 8,313 | 7,289 | 7,328 | 7,546 | |||||||||||||||||
Occupancy, net | 4,253 | 4,239 | 4,206 | 4,292 | 4,063 | |||||||||||||||||
Furniture and equipment | 3,157 | 3,201 | 3,192 | 3,147 | 3,163 | |||||||||||||||||
Outsourced technology services | 2,309 | 2,300 | 2,382 | 2,295 | 2,195 | |||||||||||||||||
Other real estate owned (income) expense, net | (134 | ) | (19 | ) | 1,292 | 18 | (915 | ) | ||||||||||||||
Non-core acquisition expenses | 597 | — | — | — | — | |||||||||||||||||
Other expenses | 14,134 | 13,862 | 15,089 | 12,656 | 15,498 | |||||||||||||||||
Total non-interest expense | 55,920 | 54,338 | 57,785 | 52,579 | 55,020 | |||||||||||||||||
Income before taxes | 32,379 | 32,904 | 31,863 | 36,984 | 32,944 | |||||||||||||||||
Income taxes | 11,302 | 11,511 | 11,088 | 13,172 | 11,439 | |||||||||||||||||
Net income | $ | 21,077 | $ | 21,393 | $ | 20,775 | $ | 23,812 | $ | 21,505 | ||||||||||||
Core net income** | $ | 21,438 | $ | 21,349 | 20,759 | $ | 20,791 | 20,759 | $ | 23,793 | $ | 21,512 | ||||||||||
PER COMMON SHARE DATA | ||||||||||||||||||||||
Net income - basic | $ | 0.48 | $ | 0.49 | $ | 0.47 | $ | 0.54 | $ | 0.49 | ||||||||||||
Net income - diluted | 0.47 | 0.48 | 0.47 | 0.54 | 0.49 | |||||||||||||||||
Core net income - diluted | 0.48 | 0.48 | 0.47 | 0.54 | 0.49 | |||||||||||||||||
Cash dividend paid | 0.16 | 0.16 | 0.14 | 0.14 | 0.13 | |||||||||||||||||
Book value at period end | 18.95 | 18.60 | 18.15 | 17.98 | 17.56 | |||||||||||||||||
Tangible book value at period end** | 14.71 | 14.37 | 13.89 | 13.71 | 13.25 | |||||||||||||||||
OUTSTANDING COMMON SHARES | ||||||||||||||||||||||
At period-end | 44,255,012 | 44,390,095 | 44,155,063 | 44,089,962 | 43,835,881 | |||||||||||||||||
Weighted-average shares - basic | 44,044,260 | 43,997,815 | 43,888,261 | 43,699,566 | 43,480,502 | |||||||||||||||||
Weighted-average shares - diluted | 44,575,963 | 44,620,776 | 44,541,497 | 44,284,844 | 43,908,287 | |||||||||||||||||
SELECTED ANNUALIZED RATIOS | ||||||||||||||||||||||
Return on average assets | 1.12 | % | 1.16 | % | 1.10 | % | 1.28 | % | 1.17 | % | ||||||||||||
Core return on average assets** | 1.14 | 1.16 | 1.10 | 1.28 | 1.17 | |||||||||||||||||
Return on average common equity | 10.18 | 10.74 | 10.31 | 12.13 | 11.08 | |||||||||||||||||
Core return on average common equity** | 10.36 | 10.72 | 10.32 | 12.12 | 11.08 | |||||||||||||||||
Return on average tangible common equity** | 13.16 | 14.00 | 13.49 | 16.01 | 14.63 | |||||||||||||||||
Net FTE interest income to average earning assets | 3.54 | 3.52 | 3.52 | 3.52 | 3.56 | |||||||||||||||||
5
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2014 | 2013 | |||||||||||||||||||
BALANCE SHEET SUMMARIES | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 503,648 | $ | 610,531 | $ | 534,827 | $ | 542,343 | $ | 368,217 | ||||||||||
Investment securities | 2,093,985 | 2,095,088 | 2,151,543 | 2,145,083 | 2,138,539 | |||||||||||||||
Loans held for investment: | ||||||||||||||||||||
Commercial real estate | 1,464,947 | 1,452,967 | 1,449,174 | 1,441,297 | 1,447,145 | |||||||||||||||
Construction real estate | 361,009 | 354,349 | 351,635 | 341,284 | 337,211 | |||||||||||||||
Residential real estate | 894,502 | 868,836 | 867,912 | 841,707 | 804,200 | |||||||||||||||
Agricultural real estate | 162,428 | 160,570 | 173,534 | 176,594 | 176,799 | |||||||||||||||
Consumer | 707,035 | 670,406 | 671,587 | 672,184 | 652,944 | |||||||||||||||
Commercial | 727,482 | 707,237 | 676,544 | 681,416 | 680,751 | |||||||||||||||
Agricultural | 130,280 | 108,376 | 111,872 | 123,565 | 121,530 | |||||||||||||||
Other | 2,016 | 3,626 | 1,734 | 1,912 | 2,498 | |||||||||||||||
Mortgage loans held for sale | 56,663 | 38,471 | 40,861 | 52,133 | 74,286 | |||||||||||||||
Total loans | 4,506,362 | 4,364,838 | 4,344,853 | 4,332,092 | 4,297,364 | |||||||||||||||
Less allowance for loan losses | 78,266 | 81,371 | 85,339 | 92,990 | 98,528 | |||||||||||||||
Net loans | 4,428,096 | 4,283,467 | 4,259,514 | 4,239,102 | 4,198,836 | |||||||||||||||
Premises and equipment, net | 180,341 | 179,942 | 179,690 | 179,785 | 181,940 | |||||||||||||||
Goodwill and intangible assets (excluding mortgage servicing rights) | 187,502 | 187,858 | 188,214 | 188,569 | 188,925 | |||||||||||||||
Company owned life insurance | 138,899 | 138,027 | 122,175 | 76,701 | 77,602 | |||||||||||||||
Other real estate owned, net | 16,425 | 16,594 | 15,504 | 18,537 | 22,782 | |||||||||||||||
Mortgage servicing rights, net | 13,443 | 13,474 | 13,546 | 13,518 | 13,304 | |||||||||||||||
Other assets | 89,040 | 92,844 | 99,638 | 96,462 | 101,363 | |||||||||||||||
Total assets | $ | 7,651,379 | $ | 7,617,825 | $ | 7,564,651 | $ | 7,500,100 | $ | 7,291,508 | ||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing | $ | 1,533,484 | $ | 1,458,460 | $ | 1,491,683 | $ | 1,503,969 | $ | 1,393,732 | ||||||||||
Interest bearing | 4,645,558 | 4,676,677 | 4,642,067 | 4,604,656 | 4,536,600 | |||||||||||||||
Total deposits | 6,179,042 | 6,135,137 | 6,133,750 | 6,108,625 | 5,930,332 | |||||||||||||||
Securities sold under repurchase agreements | 462,985 | 488,898 | 457,437 | 428,110 | 421,314 | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 51,456 | 48,770 | 52,489 | 50,900 | 50,292 | |||||||||||||||
Long-term debt | 36,893 | 36,905 | 36,917 | 37,128 | 37,139 | |||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 82,477 | 82,477 | 82,477 | 82,477 | |||||||||||||||
Total liabilities | 6,812,853 | 6,792,187 | 6,763,070 | 6,707,240 | 6,521,554 | |||||||||||||||
Stockholders' equity: | ||||||||||||||||||||
Common stock | 283,697 | 286,553 | 285,535 | 283,352 | 279,232 | |||||||||||||||
Retained earnings | 560,469 | 546,444 | 532,087 | 517,456 | 499,761 | |||||||||||||||
Accumulated other comprehensive income (loss) | (5,640 | ) | (7,359 | ) | (16,041 | ) | (7,948 | ) | (9,039 | ) | ||||||||||
Total stockholders' equity | 838,526 | 825,638 | 801,581 | 792,860 | 769,954 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 7,651,379 | $ | 7,617,825 | $ | 7,564,651 | $ | 7,500,100 | $ | 7,291,508 | ||||||||||
CONSOLIDATED CAPITAL RATIOS | ||||||||||||||||||||
Total risk-based capital | 16.69 | % | * | 16.83 | % | 16.75 | % | 16.68 | % | 16.29 | % | |||||||||
Tier 1 risk-based capital | 15.02 | % | * | 15.16 | 14.93 | 14.85 | 14.45 | |||||||||||||
Tier 1 common capital to total risk-weighted assets | 13.45 | % | * | 13.55 | 13.31 | 13.33 | 12.83 | |||||||||||||
Leverage Ratio | 10.35 | % | * | 10.27 | 10.08 | 10.01 | 9.73 | |||||||||||||
Tangible common stockholders' equity to tangible assets** | 8.72 | 8.58 | 8.32 | 8.26 | 8.18 | |||||||||||||||
6
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2014 | 2013 | |||||||||||||||||||
ASSET QUALITY | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | |||||||||||||||
Allowance for loan losses | $ | 78,266 | $ | 81,371 | $ | 85,339 | $ | 92,990 | $ | 98,528 | ||||||||||
As a percentage of period-end loans | 1.74 | % | 1.86 | % | 1.96 | % | 2.15 | % | 2.29 | % | ||||||||||
Net charge-offs (recoveries) during quarter | $ | 1,104 | $ | (1,032 | ) | $ | 3,651 | $ | 2,538 | $ | (249 | ) | ||||||||
Annualized as a percentage of average loans | 0.10 | % | (0.10 | )% | 0.34 | % | 0.23 | % | (0.02 | )% | ||||||||||
Non-performing assets: | ||||||||||||||||||||
Non-accrual loans | $ | 79,166 | $ | 88,114 | $ | 94,439 | $ | 94,015 | $ | 103,729 | ||||||||||
Accruing loans past due 90 days or more | 1,494 | 1,664 | 2,232 | 2,188 | 1,742 | |||||||||||||||
Total non-performing loans | 80,660 | 89,778 | 96,671 | 96,203 | 105,471 | |||||||||||||||
Other real estate owned | 16,425 | 16,594 | 15,504 | 18,537 | 22,782 | |||||||||||||||
Total non-performing assets | 97,085 | 106,372 | 112,175 | 114,740 | 128,253 | |||||||||||||||
As a percentage of: | ||||||||||||||||||||
Total loans and OREO | 2.15 | % | 2.43 | % | 2.57 | % | 2.64 | % | 2.97 | % | ||||||||||
Total assets | 1.27 | % | 1.40 | % | 1.48 | % | 1.53 | % | 1.76 | % | ||||||||||
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 | ||||||||||||||||||||
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 | ||||||||||||||||||
Q2 2014 | (2,001 | ) | 1,105 | 78,266 | 24,250 | 23,531 | 80,660 | 97,085 | |||||||||||||||||||
CRITICIZED LOANS | Special Mention | Substandard | Doubtful | Total | |||||||||||
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 | |||||||||||
Q2 2014 | 160,271 | 155,744 | 29,115 | 345,130 | |||||||||||
*Preliminary estimate - may be subject to change.
**See Non-GAAP Financial Measures included herein for a discussion regarding core net income, tangible book value per common share, core return on average assets, core return on average common equity, 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, 2014 | March 31, 2014 | June 30, 2013 | ||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,436,786 | $ | 56,019 | 5.06 | % | $ | 4,344,993 | $ | 54,192 | 5.06 | % | $ | 4,256,579 | $ | 55,270 | 5.21 | % | ||||||||
Investment securities (2) | 2,091,438 | 9,017 | 1.73 | 2,108,643 | 9,370 | 1.80 | 2,153,342 | 9,588 | 1.79 | |||||||||||||||||
Interest bearing deposits in banks | 356,911 | 225 | 0.25 | 368,784 | 231 | 0.25 | 335,761 | 212 | 0.25 | |||||||||||||||||
Federal funds sold | 1,958 | 3 | 0.61 | 1,099 | 1 | 0.37 | 3,322 | 5 | 0.60 | |||||||||||||||||
Total interest earnings assets | 6,887,093 | 65,264 | 3.80 | 6,823,519 | 63,794 | 3.79 | 6,749,004 | 65,075 | 3.87 | |||||||||||||||||
Non-earning assets | 669,029 | 664,441 | 601,023 | |||||||||||||||||||||||
Total assets | $ | 7,556,122 | $ | 7,487,960 | $ | 7,350,027 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Demand deposits | $ | 1,878,483 | $ | 513 | 0.11 | % | $ | 1,837,714 | $ | 512 | 0.11 | % | $ | 1,722,138 | $ | 475 | 0.11 | % | ||||||||
Savings deposits | 1,653,034 | 598 | 0.15 | 1,639,484 | 595 | 0.15 | 1,544,648 | 598 | 0.16 | |||||||||||||||||
Time deposits | 1,148,832 | 2,216 | 0.77 | 1,172,866 | 2,317 | 0.80 | 1,312,863 | 2,965 | 0.91 | |||||||||||||||||
Repurchase agreements | 438,744 | 63 | 0.06 | 456,557 | 66 | 0.06 | 466,533 | 74 | 0.06 | |||||||||||||||||
Other borrowed funds | 8 | — | — | 6 | — | — | 10 | — | — | |||||||||||||||||
Long-term debt | 36,897 | 476 | 5.17 | 36,909 | 473 | 5.20 | 37,142 | 483 | 5.22 | |||||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 592 | 2.88 | 82,477 | 588 | 2.89 | 82,477 | 601 | 2.92 | |||||||||||||||||
Total interest bearing liabilities | 5,238,475 | 4,458 | 0.34 | 5,226,013 | 4,551 | 0.35 | 5,165,811 | 5,196 | 0.40 | |||||||||||||||||
Non-interest bearing deposits | 1,443,239 | 1,403,822 | 1,356,133 | |||||||||||||||||||||||
Other non-interest bearing liabilities | 44,291 | 50,185 | 49,323 | |||||||||||||||||||||||
Stockholders’ equity | 830,117 | 807,940 | 778,760 | |||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,556,122 | $ | 7,487,960 | $ | 7,350,027 | ||||||||||||||||||||
Net FTE interest income | 60,806 | 59,243 | 59,879 | |||||||||||||||||||||||
Less FTE adjustments (2) | (1,079 | ) | (1,107 | ) | (1,119 | ) | ||||||||||||||||||||
Net interest income from consolidated statements of income | $ | 59,727 | $ | 58,136 | $ | 58,760 | ||||||||||||||||||||
Interest rate spread | 3.46 | % | 3.44 | % | 3.47 | % | ||||||||||||||||||||
Net FTE interest margin (3) | 3.54 | % | 3.52 | % | 3.56 | % | ||||||||||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.27 | % | 0.28 | % | 0.32 | % | ||||||||||||||||||||
(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, 2014 | June 30, 2013 | ||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||
Interest earning assets: | |||||||||||||||||
Loans (1) (2) | $ | 4,391,143 | $ | 110,211 | 5.06 | % | $ | 4,236,866 | $ | 111,184 | 5.29 | % | |||||
Investment securities (2) | 2,099,993 | 18,387 | 1.77 | 2,178,758 | 19,567 | 1.81 | |||||||||||
Interest bearing deposits in banks | 362,815 | 456 | 0.25 | 405,919 | 510 | 0.25 | |||||||||||
Federal funds sold | 1,531 | 4 | 0.53 | 2,924 | 9 | 0.62 | |||||||||||
Total interest earnings assets | 6,855,482 | 129,058 | 3.80 | 6,824,467 | 131,270 | 3.88 | |||||||||||
Non-earning assets | 666,748 | 599,661 | |||||||||||||||
Total assets | $ | 7,522,230 | $ | 7,424,128 | |||||||||||||
Interest bearing liabilities: | |||||||||||||||||
Demand deposits | $ | 1,858,211 | $ | 1,025 | 0.11 | % | $ | 1,725,457 | $ | 949 | 0.11 | % | |||||
Savings deposits | 1,646,296 | 1,193 | 0.15 | 1,547,381 | 1,251 | 0.16 | |||||||||||
Time deposits | 1,160,783 | 4,533 | 0.79 | 1,338,903 | 6,193 | 0.93 | |||||||||||
Repurchase agreements | 447,601 | 129 | 0.06 | 489,230 | 174 | 0.07 | |||||||||||
Other borrowed funds | 7 | — | — | 9 | — | — | |||||||||||
Long-term debt | 36,903 | 949 | 5.19 | 37,148 | 963 | 5.23 | |||||||||||
Preferred stock pending redemption | — | — | — | 4,696 | 159 | 6.83 | |||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 1,180 | 2.89 | 82,477 | 1,297 | 3.17 | |||||||||||
Total interest bearing liabilities | 5,232,278 | 9,009 | 0.35 | 5,225,301 | 10,986 | 0.42 | |||||||||||
Non-interest bearing deposits | 1,423,639 | 1,377,374 | |||||||||||||||
Other non-interest bearing liabilities | 47,223 | 51,554 | |||||||||||||||
Stockholders’ equity | 819,090 | 769,899 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,522,230 | $ | 7,424,128 | |||||||||||||
Net FTE interest income | 120,049 | 120,284 | |||||||||||||||
Less FTE adjustments (2) | (2,186 | ) | (2,247 | ) | |||||||||||||
Net interest income from consolidated statements of income | $ | 117,863 | $ | 118,037 | |||||||||||||
Interest rate spread | 3.45 | % | 3.46 | % | |||||||||||||
Net FTE interest margin (3) | 3.53 | % | 3.55 | % | |||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.27 | % | 0.34 | % | |||||||||||||
(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 principles in the United States of America, or GAAP, this release contains certain non-GAAP financial measures that management uses to provide supplemental perspectives on capital adequacy, operating results, performance trends and financial condition. These non-GAAP financial measures 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 Company adjusts certain capital adequacy measures to exclude intangible assets except mortgage servicing rights. Management believes these non-GAAP 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 the Company's capitalization to other companies.
The Company also adjusts earnings and certain performance ratios to exclude non-core revenues and expenses, including investment securities net gains or losses and acquisition expenses consisting primarily of travel expenses and professional fees. Management believes these non-GAAP financial measures are useful to investors in evaluating operating trends by excluding amounts which the Company views as unrelated to its normalized operations. These non-core income and expense adjustments are presented net of estimated income tax expense.
The following table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.
10
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited, $ in thousands, except share and per share data)
2014 | 2013 | |||||||||||||||||||
Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | ||||||||||||||||
Net income | $ | 21,077 | $ | 21,393 | $ | 20,775 | $ | 23,812 | $ | 21,505 | ||||||||||
Adj: investment securities (gains) losses, net | (17 | ) | (71 | ) | 25 | (30 | ) | 12 | ||||||||||||
Plus: acquisition expenses | 597 | — | — | — | — | |||||||||||||||
Adj: income taxes | (219 | ) | 27 | (9 | ) | 11 | (5 | ) | ||||||||||||
Total core net income | (A) | $ | 21,438 | $ | 21,349 | $ | 20,791 | $ | 23,793 | $ | 21,512 | |||||||||
Total non-interest income | $ | 26,571 | $ | 24,106 | $ | 25,674 | $ | 27,607 | $ | 29,579 | ||||||||||
Adj: investment securities (gains) losses, net | (17 | ) | (71 | ) | 25 | (30 | ) | 12 | ||||||||||||
Total core non-interest income | 26,554 | 24,035 | 25,699 | 27,577 | 29,591 | |||||||||||||||
Net interest income | 59,727 | 58,136 | 59,974 | 58,956 | 58,760 | |||||||||||||||
Total core revenue | $ | 86,281 | $ | 82,171 | $ | 85,673 | $ | 86,533 | $ | 88,351 | ||||||||||
Total non-interest expense | $ | 55,920 | $ | 54,338 | $ | 57,785 | $ | 52,579 | $ | 55,020 | ||||||||||
Less: acquisition expenses | (597 | ) | — | — | — | — | ||||||||||||||
Core non-interest expense | $ | 55,323 | $ | 54,338 | $ | 57,785 | $ | 52,579 | $ | 55,020 | ||||||||||
Total quarterly average stockholders' equity | (B) | $ | 830,117 | $ | 807,940 | $ | 799,198 | $ | 778,809 | $ | 778,760 | |||||||||
Less: average goodwill and other intangible assets (excluding mortgage servicing rights) | (187,710 | ) | (188,078 | ) | (188,415 | ) | (188,778 | ) | (189,135 | ) | ||||||||||
Average tangible common stockholders' equity | (C) | $ | 642,407 | $ | 619,862 | $ | 610,783 | $ | 590,031 | $ | 589,625 | |||||||||
Total stockholders' equity, period-end | $ | 838,526 | $ | 825,638 | $ | 801,581 | $ | 792,860 | $ | 769,954 | ||||||||||
Less: goodwill and other intangible assets (excluding mortgage servicing rights) | (187,502 | ) | (187,858 | ) | (188,214 | ) | (188,569 | ) | (188,925 | ) | ||||||||||
Total tangible common stockholders' equity | (D) | $ | 651,024 | $ | 637,780 | $ | 613,367 | $ | 604,291 | $ | 581,029 | |||||||||
Total assets | $ | 7,651,379 | $ | 7,617,825 | 7,564,651 | 7,500,100 | 7,291,508 | |||||||||||||
Less: goodwill and other intangible assets (excluding mortgage servicing rights) | (187,502 | ) | (187,858 | ) | (188,214 | ) | (188,569 | ) | (188,925 | ) | ||||||||||
Tangible assets | (E) | $ | 7,463,877 | $ | 7,429,967 | $ | 7,376,437 | $ | 7,311,531 | $ | 7,102,583 | |||||||||
Total quarterly average assets | (F) | $ | 7,556,122 | $ | 7,487,960 | $ | 7,491,253 | $ | 7,374,165 | $ | 7,350,027 | |||||||||
Total common shares outstanding, period end | (G) | 44,255,012 | 44,390,095 | 44,155,063 | 44,089,962 | 43,835,881 | ||||||||||||||
Weighted-average common shares - diluted | (H) | 44,575,963 | 44,620,776 | 44,541,497 | 44,284,844 | 43,908,287 | ||||||||||||||
Core earnings per share, diluted | (A/H) | $ | 0.48 | $ | 0.48 | $ | 0.47 | $ | 0.54 | $ | 0.49 | |||||||||
Tangible book value per share, period-end | (D/G) | 14.71 | 14.37 | 13.89 | 13.71 | 13.25 | ||||||||||||||
Annualized net income | (I) | $ | 84,540 | $ | 86,761 | $ | 82,423 | $ | 94,472 | $ | 86,256 | |||||||||
Annualized core net income | (J) | 85,988 | 86,582 | 82,486 | 94,396 | 86,284 | ||||||||||||||
Core return on average assets | (J/F) | 1.14 | % | 1.16 | % | 1.10 | % | 1.28 | % | 1.17 | % | |||||||||
Core return on average common equity | (J/B) | 10.36 | 10.72 | 10.32 | 12.12 | 11.08 | ||||||||||||||
Return on average tangible common equity | (I/C) | 13.16 | 14.00 | 13.49 | 16.01 | 14.63 | ||||||||||||||
Tangible common stockholders' equity to tangible assets | (D/E) | 8.72 | 8.58 | 8.32 | 8.26 | 8.18 | ||||||||||||||
First Interstate BancSystem, Inc.
P.O. Box 30918 Billings, Montana 59116 (406) 255-5390
www.FIBK.com
11