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First Interstate BancSystem, Inc. Reports First Quarter 2012 Results

A more detailed discussion of each of the foregoing risks is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed February 28, 2012. These factors and the other risk factors described in the Company's periodic and current reports filed with the Securities and Exchange Commission from time to time, however, are not necessarily all of the important factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed in or implied by any of the Company's forward-looking statements. Other unknown or unpredictable factors also could harm the Company's results. Investors and others are encouraged to read the more detailed discussion of the Company's risks contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

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

CONSOLIDATED BALANCE SHEETS

(Unaudited, $ in thousands)

                   
March 31, December 31, March 31,
          2012       2011       2011
Assets
Cash and due from banks $ 128,341 $ 142,502 $ 120,814
Federal funds sold 304 309 3,108
Interest bearing deposits in banks         494,279         329,636         556,399
Total cash and cash equivalents         622,924         472,447         680,321
Investment securities:
Available-for-sale 1,955,436 2,016,864 1,841,281
Held-to-maturity (estimated fair values of $166,932, $161,877 and $147,401 at March 31, 2012, December 31, 2011 and March 31, 2011, respectively)         158,070         152,781         146,097
Total investment securities         2,113,506         2,169,645         1,987,378
Loans held for investment 4,099,936 4,133,028 4,242,772
Mortgage loans held for sale         58,680         53,521         20,992
Total loans         4,158,616         4,186,549         4,263,764
Less allowance for loan losses         115,902         112,581         124,446
Net loans         4,042,714         4,073,968         4,139,318
Premises and equipment, net of accumulated depreciation 185,230 184,771 185,702
Goodwill 183,673 183,673 183,673
Company-owned life insurance 75,342 74,880 73,545
Other real estate owned ("OREO"), net of write-downs 44,756 37,452 31,995
Accrued interest receivable 30,407 31,974 32,380
Mortgage servicing rights, net of accumulated amortization and impairment reserve 11,833 11,555 13,284
Deferred tax asset, net 9,571 9,628 19,112
Core deposit intangibles, net of accumulated amortization 7,002 7,357 8,441
Other assets         67,348         68,177         73,977
Total assets         $ 7,394,306         $ 7,325,527         $ 7,429,126
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing $ 1,284,823 $ 1,271,709 $ 1,110,940
Interest bearing         4,626,011         4,555,262         4,820,244
Total deposits         5,910,834         5,826,971         5,931,184
Securities sold under repurchase agreements 491,058 516,243 536,955
Accounts payable and accrued expenses 43,972 42,248 40,400
Accrued interest payable 8,255 8,123 12,162
Long-term debt 37,191 37,200 37,491
Other borrowed funds 6 7 5,522
Subordinated debentures held by subsidiary trusts         123,715         123,715         123,715
Total liabilities         6,615,031         6,554,507         6,687,429
Stockholders’ equity:
Preferred stock 50,000 50,000 50,000
Common stock 268,411 266,842 264,932
Retained earnings 441,370 435,144 417,117
Accumulated other comprehensive income, net         19,494         19,034         9,648
Total stockholders’ equity         779,275         771,020         741,697
Total liabilities and stockholders’ equity         $ 7,394,306         $ 7,325,527         $ 7,429,126
 

CONSOLIDATED STATEMENTS OF INCOME

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

       
Three Months Ended
March 31,       December 31,       March 31,
          2012       2011       2011
Interest income:
Interest and fees on loans $ 57,910 $ 60,529 $ 62,391
Interest and dividends on investment securities:
Taxable 9,705 10,023 9,911
Exempt from federal taxes 1,204 1,196 1,171
Interest on deposits in banks 237 256 367
Interest on federal funds sold         1         2         3  
Total interest income         69,057         72,006         73,843  
Interest expense:
Interest on deposits 6,262 6,854 9,871
Interest on securities sold under repurchase agreements 156 150 237
Interest on long-term debt 498 493 489
Interest on subordinated debentures held by subsidiary trusts         1,507         1,474         1,448  
Total interest expense         8,423         8,971         12,045  
Net interest income 60,634 63,035 61,798
Provision for loan losses         11,250         13,751         15,000  
Net interest income after provision for loan losses         49,384         49,284         46,798  
Non-interest income:
Other service charges, commissions and fees 8,424 8,062 7,380
Income from the origination and sale of loans 8,384 8,087 3,445
Service charges on deposit accounts 4,161 4,543 4,110
Wealth management revenues 3,283 3,177 3,295
Investment securities gains, net 31 1,488 2
Other income         2,099         1,640         1,927  
Total non-interest income         26,382         26,997         20,159  
Non-interest expense:
Salaries and wages 21,564 22,002 20,203
Employee benefits 8,966 6,871 7,499
Occupancy, net 3,988 3,815 4,215
Furniture and equipment 3,138 3,195 3,220
Outsourced technology services 2,266 2,245 2,241
FDIC insurance premiums 1,595 1,607 2,466
OREO expense, net of income 1,105 2,021 1,711
Mortgage servicing rights amortization 895 940 807
Mortgage servicing rights impairment (recovery) (868 ) 427 (347 )
Core deposit intangibles amortization 355 361 362
Other expenses         14,436         12,737         10,581  
Total non-interest expense         57,440         56,221         52,958  
Income before income tax expense 18,326 20,060 13,999
Income tax expense         6,112         6,795         4,493  
Net income 12,214 13,265 9,506
Preferred stock dividends         853         863         844  
Net income available to common shareholders         $ 11,361         $ 12,402         $ 8,662  
Basic earnings per common share $ 0.26 $ 0.29 $ 0.20
Diluted earnings per common share         $ 0.26         $ 0.29         $ 0.20  
 

AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)

 

 
Three Months Ended
March 31, 2012       December 31, 2011       March 31, 2011
Average         Average       Average         Average       Average         Average
    Balance     Interest     Rate       Balance     Interest     Rate       Balance     Interest     Rate
Interest earning assets:
Loans (1) (2) $ 4,165,203 $ 58,374 5.64 % $ 4,236,228 $ 60,928 5.71 % $ 4,303,575 $ 62,836 5.92 %
Investment securities (2) 2,143,438 11,604 2.18 2,071,372 11,910 2.28 1,948,422 11,758 2.45
Interest bearing deposits in banks 374,899 237 0.25 401,654 256 0.25 587,804 367 0.25
Federal funds sold   609       1       0.66         973       2       0.82         2,242       3       0.54  
Total interest earnings assets 6,684,149 70,216 4.23 6,710,227 73,096 4.32 6,842,043 74,964 4.44
Non-earning assets   619,137                     618,712                     622,539              
Total assets   $ 7,303,286                     $ 7,328,939                     $ 7,464,582              
Interest bearing liabilities:
Demand deposits $ 1,582,805 $ 646 0.16 % $ 1,300,105 $ 601 0.18 % $ 1,249,283 $ 834 0.27 %
Savings deposits 1,449,239 1,015 0.28 1,689,109 1,217 0.29 1,744,747 2,000 0.46
Time deposits 1,540,789 4,601 1.20 1,598,361 5,036 1.25 1,874,515 7,037 1.52
Repurchase agreements 513,407 156 0.12 487,734 150 0.12 569,881 237 0.17
Other borrowed funds 35 5,589 5,695
Long-term debt 37,194 498 5.39 37,315 493 5.24 37,496 489 5.29
Subordinated debentures held by subsidiary trusts   123,715       1,507       4.90         123,715       1,474       4.73         123,715       1,448       4.75  
Total interest bearing liabilities 5,247,184 8,423 0.65 5,241,928 8,971 0.68 5,605,332 12,045 0.87
Non-interest bearing deposits 1,232,874 1,269,423 1,070,744
 
Other non-interest bearing liabilities 50,071 47,956 51,013
Stockholders’ equity   773,157                     769,632                     737,493              
Total liabilities and stockholders’ equity   $ 7,303,286                     $ 7,328,939                     $ 7,464,582              
Net FTE interest income $ 61,793 $ 64,125 $ 62,919
Less FTE adjustments (2)         (1,159 )                   (1,090 )                   (1,121 )      
Net interest income from consolidated statements of income         $ 60,634                     $ 63,035                     $ 61,798        
Interest rate spread               3.58 %                   3.64 %                   3.57 %
Net FTE interest margin (3)               3.72 %                   3.79 %                   3.73 %
 
Cost of funds, including non-interest bearing demand deposits (4)               0.52 %                   0.55 %                   0.73 %
 

(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) net tangible book value per common share; (iii) tangible common stockholders' equity to tangible assets; (iv) net tangible common stockholders' equity to tangible assets; and (v) tangible assets.

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