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First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

Decreases in troubled debt restructurings as of December 31, 2012, compared to September 30, 2012, were due to the placement of two restructured commercial real estate loans on non-accrual status during fourth quarter 2012.

During fourth quarter 2012, the Company recorded additions to OREO of $6.7 million, recorded write downs in the fair value of OREO properties of $3.3 million and sold OREO with a net book value of $10.8 million at a net gain of $273 thousand.

Decreases in provisions for loan losses during fourth quarter 2012, as compared to third quarter 2012 and fourth quarter 2011, are reflective of continued improvement in credit quality as evidenced by declining levels of non-performing and criticized loans. As of December 31, 2012, non-performing assets were at their lowest level since fourth quarter 2009.

Recoveries of charged-off loans increased during fourth quarter 2012, compared to third quarter 2012 and fourth quarter 2011, primarily due to a $1.2 million recovery on one large commercial loan charged-off earlier in 2012.

                                               

CREDIT QUALITY TRENDS

(Unaudited; $ in thousands)

 

 

Accruing Loans

Provision for Allowance for

30-89 Days Past

Non-Performing Non-Performing
          Loan Losses         Net Charge-offs         Loan Losses         Due         Loans         Assets
Q1 2009 $ 9,600 $ 4,693 $ 92,223 $ 98,980 $ 103,653 $ 122,300
Q2 2009 11,700 5,528 98,395 88,632 135,484 167,273
Q3 2009 10,500 7,147 101,748 91,956 125,083 156,958
Q4 2009 13,500 12,218 103,030 63,878 124,678 163,078
Q1 2010 11,900 8,581 106,349 62,675 133,042 177,022
Q2 2010 19,500 11,521 114,328 99,334 158,113 200,451
Q3 2010 18,000 12,092 120,236 47,966 202,008 237,304
Q4 2010 17,500 17,256 120,480 57,011 210,684 244,312
Q1 2011 15,000 11,034 124,446 68,021 249,878 281,873
Q2 2011 15,400 15,267 124,579 70,145 263,467 291,790
Q3 2011 14,000 18,276 120,303 62,165 262,578 287,658
Q4 2011 13,751 21,473 112,581 75,603 241,470 278,922
Q1 2012 11,250 7,929 115,902 58,531 222,765 267,521
Q2 2012 12,000 25,108 102,794 55,074 172,333 226,150
Q3 2012 9,500 13,288 99,006 48,277 162,698 202,669
Q4 2012         8,000           6,495           100,511           34,602           142,008           174,579
 
                               

CRITICIZED LOANS

(Unaudited; $ in thousands)

 
Other Assets
Especially
          Mentioned         Substandard         Doubtful         Total
Q1 2009 $ 163,402 $ 231,861 $ 40,356 $ 435,619
Q2 2009 230,833 242,751 48,326 521,910
Q3 2009 239,320 271,487 60,725 571,532
Q4 2009 279,294 271,324 69,603 620,221
Q1 2010 312,441 311,866 64,113 688,420
Q2 2010 319,130 337,758 92,249 749,137
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
 
                                       

LOANS

(Unaudited; $ in thousands)

 
Sequential Year
December 31, September 30, December 31, Quarter Over Year
          2012         2012         2011         % Change           % Change  
Real estate:
Commercial $ 1,497,272 $ 1,513,784 $ 1,553,155 -1.1 % -3.6 %
Construction:
Land acquisition & development 220,196 233,082 278,613 -5.5 % -21.0 %
Residential 49,274 50,895 61,106 -3.2 % -19.4 %
Commercial         65,059           56,097           61,054           16.0 %         6.6 %
Total construction loans         334,529           340,074           400,773           -1.6 %         -16.5 %
Residential 708,339 639,235 571,943 10.8 % 23.8 %
Agricultural         177,244           175,395           175,302           1.1 %         1.1 %
Total real estate loans         2,717,384           2,668,488           2,701,173           1.8 %         0.6 %
Consumer:
Indirect consumer loans 438,245 431,449 407,651 1.6 % 7.5 %
Other consumer loans 137,743 139,984 147,487 -1.6 % -6.6 %
Credit card loans         60,806           58,324           60,933           4.3 %         -0.2 %
Total consumer loans         636,794           629,757           616,071           1.1 %         3.4 %
Commercial 688,753 672,100 693,261 2.5 % -0.7 %
Agricultural 113,627 135,467 119,710 -16.1 % -5.1 %
Other loans, including overdrafts         912           1,359           2,813           -32.9 %         -67.6 %
Loans held for investment 4,157,470 4,107,171 4,133,028 1.2 % 0.6 %
Mortgage loans held for sale         66,442           72,880           53,521           -8.8 %         24.1 %
Total loans         $ 4,223,912           $ 4,180,051           $ 4,186,549           1.0 %         0.9 %
 

Loan demand continues to be challenging with total loans showing only slight growth as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. Management attributes growth in commercial construction loans as of December 31, 2012, compared to September 30, 2012, to overall improvement in economic conditions in the Company's market areas. Residential real estate loans grew during fourth quarter 2012 due to continued retention of selected loan production. Agricultural loans decreased as of December 31, 2012, compared to September 30, 2012, due to seasonal reductions in credit lines. Land acquisition and development and residential construction loans continued to decrease during fourth quarter 2012 primarily due to further movement of lower quality loans out of the loan portfolio through pay-off, charge-off or foreclosure.

                                       

DEPOSITS

(Unaudited; $ in thousands)

 
Sequential Year
December 31, September 30, December 31, Quarter Over Year
          2012         2012         2011         % Change           % Change  
Non-interest bearing demand $ 1,495,309 $ 1,443,773 $ 1,271,709 3.6 % 17.6 %
Interest bearing:
Demand 1,811,905 1,637,214 1,306,509 10.7 % 38.7 %
Savings 1,547,713 1,531,359 1,691,413 1.1 % -8.5 %
Time, $100 and over 594,712 613,586 681,047 -3.1 % -12.7 %
Time, other         790,772           809,800           876,293           -2.3 %         -9.8 %
Total interest bearing         4,745,102           4,591,959           4,555,262           3.3 %         4.2 %
Total deposits         $ 6,240,411           $ 6,035,732           $ 5,826,971           3.4 %         7.1 %
 

Total deposits increased as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. The favorable shift in the composition of deposits away from higher costing time deposits into lower costing demand deposits continued during fourth quarter 2012. As a result, the Company's cost of funds, including non-interest bearing demand deposits, decreased to 0.39% in fourth quarter 2012, compared to 0.43% in third quarter 2012 and 0.55% in fourth quarter 2011.

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