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First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

Stocks in this article: FIBK

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)

                       
December 31, September 30, December 31,
          2012         2012         2011
Assets
Cash and due from banks $ 177,978 $ 124,275 $ 142,502
Federal funds sold 730 1,215 309
Interest bearing deposits in banks         622,624           485,845           329,636
Total cash and cash equivalents         801,332           611,335           472,447
Investment securities:
Available-for-sale 1,995,258 1,979,154 2,016,864

Held-to-maturity (estimated fair values of $218,933, $199,078, $161,877 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively)

        208,223           187,573           152,781
Total investment securities         2,203,481           2,166,727           2,169,645
Loans held for investment 4,157,470 4,107,171 4,133,028
Mortgage loans held for sale         66,442           72,880           53,521
Total loans 4,223,912 4,180,051 4,186,549
Less allowance for loan losses         100,511           99,006           112,581
Net loans         4,123,401           4,081,045           4,073,968
Premises and equipment, net of accumulated depreciation 187,565 188,851 184,771
Goodwill 183,673 183,673 183,673
Company-owned life insurance 76,729 76,371 74,880
Other real estate owned ("OREO"), net of write-downs 32,571 39,971 37,452
Accrued interest receivable 28,869 33,416 31,974
Mortgage servicing rights, net of accumulated amortization and impairment reserve 12,653 12,334 11,555
Core deposit intangibles, net of accumulated amortization 5,937 6,291 7,357
Deferred tax asset, net 2,597 1,638 9,628
Other assets         62,953           59,500           68,177
Total assets         $ 7,721,761           $ 7,461,152           $ 7,325,527
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing $ 1,495,309 $ 1,443,773 $ 1,271,709
Interest bearing         4,745,102           4,591,959           4,555,262
Total deposits         6,240,411           6,035,732           5,826,971
Securities sold under repurchase agreements 505,785 460,805 516,243
Accounts payable and accrued expenses 48,208 40,386 42,248
Accrued interest payable 6,502 6,706 8,123
Long-term debt 37,160 37,170 37,200
Other borrowed funds 32 6 7
Preferred stock pending redemption 50,000
Subordinated debentures held by subsidiary trusts         82,477           82,477           123,715
Total liabilities         6,970,575           6,663,282           6,554,507
Stockholders’ equity:
Preferred stock 50,000 50,000
Common stock 271,335 270,553 266,842
Retained earnings 463,860 458,506 435,144
Accumulated other comprehensive income, net         15,991           18,811           19,034
Total stockholders’ equity         751,186           797,870           771,020
Total liabilities and stockholders’ equity         $ 7,721,761           $ 7,461,152           $ 7,325,527
 
       

CONSOLIDATED STATEMENTS OF INCOME

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

 
Three Months Ended
December 31,         September 30,         December 31,
          2012         2012         2011
Interest income:
Interest and fees on loans $ 57,470 $ 57,418 $ 60,529
Interest and dividends on investment securities:
Taxable 8,490 9,194 10,023
Exempt from federal taxes 1,256 1,223 1,196
Interest on deposits in banks 383 336 256
Interest on federal funds sold         2           4           2
Total interest income         67,601           68,175           72,006
Interest expense:
Interest on deposits 4,851 5,414 6,854
Interest on securities sold under repurchase agreements 127 144 150
Interest on long-term debt 486 502 493
Interest on preferred stock pending redemption 131
Interest on subordinated debentures held by subsidiary trusts         1,033           1,110           1,474
Total interest expense         6,628           7,170           8,971
Net interest income 60,973 61,005 63,035
Provision for loan losses         8,000           9,500           13,751
Net interest income after provision for loan losses         52,973           51,505           49,284
Non-interest income:
Income from the origination and sale of loans 12,321 11,665 8,087
Other service charges, commissions and fees 8,774 8,774 8,062
Service charges on deposit accounts 4,401 4,395 4,543
Wealth management revenues 3,659 3,557 3,280
Investment securities gains, net 53 66 1,488
Other income         1,427           1,725           1,537
Total non-interest income         30,635           30,182           26,997
Non-interest expense:
Salaries and wages 23,288 23,341 22,002
Employee benefits 6,113 7,447 6,871
Occupancy, net 3,968 3,793 3,815
Furniture and equipment 3,301 3,231 3,195
OREO expense, net of income 3,877 2,612 2,021
Outsourced technology services 2,199 2,182 2,245
FDIC insurance premiums 1,652 1,622 1,607
Professional fees 1,059 1,050 1,176
Mortgage servicing rights amortization 910 879 940
Mortgage servicing rights impairment (10 ) 55 427
Core deposit intangibles amortization 355 355 361
Other expenses         11,120           10,497           11,561
Total non-interest expense         57,832           57,064           56,221
Income before income tax expense 25,776 24,623 20,060
Income tax expense         8,931           8,468           6,795
Net income 16,845 16,155 13,265
Preferred stock dividends         731           863           863
Net income available to common shareholders         $ 16,114           $ 15,292           $ 12,402
 
Basic earnings per common share $ 0.37 $ 0.36 $ 0.29
Diluted earnings per common share         $ 0.37           $ 0.35           $ 0.29
 
       

CONSOLIDATED STATEMENTS OF INCOME

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

 
Twelve Months Ended
December 31,         December 31,
          2012         2011
Interest income:
Interest and fees on loans $ 230,882 $ 245,767
Interest and dividends on investment securities:
Taxable 36,847 41,304
Exempt from federal taxes 4,923 4,749
Interest on deposits in banks 1,235 1,050
Interest on federal funds sold         13           13
Total interest income         273,900           292,883
Interest expense:
Interest on deposits 22,306 33,533
Interest on securities sold under repurchase agreements 579 695
Interest on long-term debt 1,981 1,975
Interest on preferred stock pending redemption 131
Interest on subordinated debentures held by subsidiary trusts         5,117           5,828
Total interest expense         30,114           42,031
Net interest income: 243,786 250,852
Provision for loan losses         40,750           58,151
Net interest income after provision for loan losses         203,036           192,701
Non-interest income:
Income from the origination and sale of loans 41,790 21,153
Other service charges, commissions and fees 34,226 31,689
Service charges on deposit accounts 17,412 17,647
Wealth management revenues 14,314 13,575
Investment securities gains, net 348 1,544
Other income         6,771           6,264
Total non-interest income         114,861           91,872
Non-interest expense:
Salaries and wages 89,833 83,560
Employee benefits 29,345 27,792
Occupancy, net 15,786 16,223
Furniture and equipment 12,859 12,562
OREO expense, net of income 9,400 8,652
Outsourced technology services 8,826 8,933
FDIC insurance premiums 6,470 7,333
Professional fees 4,044 3,676
Mortgage servicing rights amortization 3,501 3,225
Mortgage servicing rights impairment (recovery) (771 ) 1,275
Core deposit intangibles amortization 1,420 1,446
Other expenses         48,922           43,735
Total non-interest expense         229,635           218,412
Income before income tax expense 88,262 66,161
Income tax expense         30,038           21,615
Net income 58,224 44,546
Preferred stock dividends         3,300           3,422
Net income available to common shareholders         $ 54,924           $ 41,124
 
Basic earnings per common share $ 1.28 $ 0.96
Diluted earnings per common share         $ 1.27           $ 0.96
 
     

AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)

 
Three Months Ended  
December 31, 2012           September 30, 2012           December 31, 2011  
Average             Average         Average             Average         Average             Average
        Balance       Interest       Rate         Balance       Interest       Rate         Balance       Interest       Rate
Interest earning assets:
Loans (1) (2) $ 4,197,665 $ 57,915 5.49 % $ 4,183,016 $ 57,872 5.50 % $ 4,236,228 $ 60,928 5.71 %
Investment securities (2) 2,156,668 10,471 1.93 2,098,576 11,123 2.11 2,071,372 11,910 2.28
Interest bearing deposits in banks 600,385 383 0.25 525,149 336 0.25 401,654 256 0.25
Federal funds sold       2,074         2         0.38           3,006         4         0.53           973         2         0.82  
Total interest earnings assets 6,956,792 68,771 3.93 6,809,747 69,335 4.05 6,710,227 73,096 4.32
Non-earning assets       623,822                           633,551                           618,712                  
Total assets       $ 7,580,614                           $ 7,443,298                           $ 7,328,939                  
Interest bearing liabilities:
Demand deposits $ 1,705,963 $ 548 0.13 % $ 1,613,136 $ 589 0.15 % $ 1,300,105 $ 601 0.18 %
Savings deposits 1,528,788 741 0.19 1,523,347 873 0.23 1,689,109 1,217 0.29
Time deposits 1,404,913 3,562 1.01 1,452,688 3,952 1.08 1,598,361 5,036 1.25
Repurchase agreements 496,321 127 0.10 501,640 144 0.11 487,734 150 0.12
Other borrowed funds 20 6 5,589
Long-term debt 37,163 486 5.20 37,174 502 5.37 37,315 493 5.24
Preferred stock pending redemption 7,609 131 6.85
Subordinated debentures held by subsidiary trusts       82,477         1,033         4.98           82,477         1,110         5.35           123,715         1,474         4.73  
Total interest bearing liabilities 5,263,254 6,628 0.50 5,210,468 7,170 0.55 5,241,928 8,971 0.68
Non-interest bearing deposits 1,475,600 1,399,585 1,269,423
Other non-interest bearing liabilities 49,855 43,511 47,956
Stockholders’ equity       791,905                           789,734                           769,632                  
Total liabilities and stockholders’ equity       $ 7,580,614                           $ 7,443,298                           $ 7,328,939                  
Net FTE interest income $ 62,143 $ 62,165 $ 64,125
Less FTE adjustments (2)               (1,170 )                         (1,160 )                         (1,090 )        
Net interest income from consolidated statements of income               $ 60,973                           $ 61,005                           $ 63,035          
Interest rate spread                       3.43 %                         3.50 %                         3.64 %
Net FTE interest margin (3)                       3.55 %                         3.63 %                         3.79 %
Cost of funds, including non-interest bearing demand deposits (4)                       0.39 %                         0.43 %                         0.55 %
 

(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.

 
       

AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)

 
Twelve Months Ended  
December 31, 2012           December 31, 2011  
Average             Average         Average             Average
          Balance       Interest       Rate         Balance       Interest       Rate
Interest earning assets:
Loans (1) (2) $ 4,176,439 $ 232,724 5.57 % $ 4,275,128 $ 247,492 5.79 %
Investment securities (2) 2,123,231 44,613 2.10 2,026,192 48,795 2.41
Interest bearing deposits in banks 486,203 1,235 0.25 414,375 1,050 0.25
Federal funds sold         2,341         13         0.56           2,231         13         0.58  
Total interest earnings assets 6,788,214 278,585 4.10 6,717,926 297,350 4.43
Non-earning assets         627,498                           618,454                  
Total assets         $ 7,415,712                           $ 7,336,380                  
Interest bearing liabilities:
Demand deposits $ 1,624,687 $ 2,390 0.15 % $ 1,269,676 $ 3,057 0.24 %
Savings deposits 1,496,254 3,562 0.24 1,714,294 6,448 0.38
Time deposits 1,473,501 16,354 1.11 1,737,401 24,028 1.38
Repurchase agreements 501,192 579 0.12 500,882 695 0.14
Other borrowed funds 16 5,582
Long-term debt 37,185 1,981 5.33 37,442 1,975 5.27
Preferred stock pending redemption 1,913 131 6.85
Subordinated debentures held by subsidiary trusts         102,307         5,117         5.00           123,715         5,828         4.71  
Total interest bearing liabilities 5,237,055 30,114 0.58 5,388,992 42,031 0.78
Non-interest bearing deposits 1,346,787 1,146,535
Other non-interest bearing liabilities 47,799 48,532
Stockholders’ equity         784,071                           752,321                  
Total liabilities and stockholders’ equity         $ 7,415,712                           $ 7,336,380                  
Net FTE interest income $ 248,471 $ 255,319
Less FTE adjustments (2)                 (4,685 )                         (4,467 )        
Net interest income from consolidated statements of income                 $ 243,786                           $ 250,852          
Interest rate spread                         3.52 %                         3.65 %
Net FTE interest margin (3)                         3.66 %                         3.80 %
Cost of funds, including non-interest bearing demand deposits (4)                         0.46 %                         0.64 %
 

(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; (v) tangible assets, and (vi) return on average tangible common equity.

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