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First Interstate BancSystem, Inc. Reports Second Quarter 2012 Results

Stocks in this article: FIBK

Decreases in net interest margin ratio during the three and six months ended June 30, 2012, as compared to the same periods in 2011, were due to lower outstanding loan balances and lower yields earned on the Company's loan and investment portfolios, which were partially offset by reductions in the cost of interest bearing liabilities combined with a shift from higher-costing savings and time deposits to lower-costing demand deposits.

Non-interest Income

Non-interest income increased during the three and six months ended June 30, 2012, as compared to the same periods in the prior year and the three months ended March 31, 2012, primarily due to increases in income from the origination and sale of residential mortgage loans. While refinancing activity represented 59% of the Company's residential loan origination activity during second quarter 2012, new loans for home purchases increased 68% over the prior quarter and 41% from second quarter 2011.

Other income decreased during second quarter 2012, as compared to first quarter 2012 and second quarter 2011, primarily due to fluctuations in earnings on securities held under deferred compensation plans. Decreases in earnings on securities held under deferred compensation plans were partially offset by a $581 thousand gain on the sale of a bank building during second quarter 2012.

 
NON-INTEREST EXPENSE

(Unaudited; $ in thousands)

 
For the Three Months Ended   Sequential Quarter

% Change

  Year Over Year

% Change

  June 30,2012   March 31,2012   June 30,2011        
Non-interest expense:    
Salaries and wages $ 21,640 $ 21,564 $ 20,554 0.4 % 5.3 %
Employee benefits 6,819 8,966 7,335

-23.9

%

-7.0

%

Occupancy, net 4,037 3,988 4,013 1.2 % 0.6 %
Furniture and equipment 3,189 3,138 3,129 1.6 % 1.9 %
Outsourced technology services 2,179 2,266 2,212

-3.8

%

-1.5

%

Other real estate owned ("OREO") expense, net of income 1,806 1,105 2,042 63.4 %

-11.6

%

FDIC insurance premiums 1,601 1,595 1,629 0.4 %

-1.7

%

Professional fees 1,002 933 726 7.4 % 38.0 %
Mortgage servicing rights amortization 817 895 671

-8.7

%

21.8 %
Mortgage servicing rights impairment (recovery) 52 (868 ) 27 106.0 % 92.6 %
Core deposit intangibles amortization 355 355 361 0.0 %

-1.7

%

Other expenses 13,802     13,503     11,493     2.2 %   20.1 %
Total non-interest expense $ 57,299     $ 57,440     $ 54,192    

-0.2

%

  5.7 %
 
  For the Six Months Ended   Year Over Year% Change
    June 30,2012   June 30,2011    
Non-interest expense:    
Salaries and wages $ 43,204 $ 40,757 6.0 %
Employee benefits 15,785 14,834 6.4 %
Occupancy, net 8,025 8,228

-2.5

%

Furniture and equipment 6,327 6,349

-0.3

%

Outsourced technology services 4,445 4,453

-0.2

%

FDIC insurance premiums 3,196 4,095

-22.0

%

OREO expense, net of income 2,911 3,753

-22.4

%

Professional fees 1,935 1,505 28.6 %
Mortgage servicing rights amortization 1,712 1,478 15.8 %
Mortgage servicing rights impairment recovery (816 ) (320 ) 155.0 %
Core deposit intangibles amortization 710 723

-1.8

%

Other expenses   27,305     21,295     28.2 %
Total non-interest expense   $ 114,739     $ 107,150     7.1 %

Salaries and wages expense increased during the three and six months ended June 30, 2012, as compared to the same periods in the prior year primarily due to increases in incentive compensation paid in the form of commissions and overtime to the Company's real estate lenders and processors, higher incentive bonus accruals reflective of the Company's improved performance during the first half of 2012 and inflationary wage increases.

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