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First Interstate BancSystem, Inc. Reports Solid First Quarter Earnings

First Interstate BancSystem, Inc. (NASDAQ:FIBK) reports first quarter 2014 net income of $21.4 million, or $0.48 per diluted share, a 3% increase over fourth quarter 2013 net income of $20.8 million, or $0.47 per diluted share, and a 7% increase over first quarter 2013 net income of $20.0 million, or $0.46 per diluted share.

FIRST QUARTER FINANCIAL HIGHLIGHTS

  • 3.52% net interest margin ratio remained unchanged from the third and fourth quarters of 2013
  • 4.5% growth in commercial loans from December 31, 2013
  • Non-performing assets of $106 million, a decrease of $6 million from December 31, 2013
  • Net recoveries of charged-off loans of $1 million, or 0.1% annualized
  • $5 million reversal of provision for loan losses

“We delivered solid year-over-year growth in earnings, driven by lower operating expenses and further reduction in our credit costs,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Overall loan growth remains relatively flat, although we had good commercial loan production, which resulted in a 4.5% increase in our commercial portfolio during the first quarter,” Mr. Garding continued.

“The most significant development of the quarter was the signing of a definitive agreement to acquire Mountain West Financial Corp. We believe that the addition of Mountain West’s strong franchise will enhance our market positioning in Montana, improve our ability to serve customers, and drive synergies that will increase the earning power of the Company,” said Mr. Garding.

RESULTS OF OPERATIONS

Net Interest Income. The Company’s net interest income, on a fully taxable equivalent, or FTE, basis, decreased $1.9 million to $59.2 million during first quarter 2014, as compared to $61.1 million during fourth quarter 2013, primarily due to two fewer accrual days during first quarter 2014 and a reduction in loan yield. The impact of the reduction in loan yield was partially offset by an increase in average loans outstanding and a one basis point reduction in funding costs during first quarter 2014, as compared to fourth quarter 2013. The Company’s interest margin ratio remained stable at 3.52% during first quarter 2014.

Non-Interest Income. Non-interest income decreased $1.6 million to $24.1 million during first quarter 2014, as compared to $25.7 million during fourth quarter 2013, primarily due to lower income from the origination and sale of mortgage loans. The dollar amount of the Company’s mortgage loan production decreased 18% during first quarter 2014, as compared to fourth quarter 2013, resulting in a reduction in income from the origination and sale of loans of $942 thousand to $4.7 million during first quarter 2014, as compared to $5.6 million during fourth quarter 2013. Loans originated for home purchases accounted for approximately 68% of the Company’s mortgage loan production during first quarter 2014, as compared to 33% during first quarter 2013. Inclement weather in the Company’s market areas delayed the closing of some residential mortgages, which contributed to the decrease in income from the origination and sale of loans during first quarter 2014, as compared to fourth quarter 2013.

Other service charges, commissions and fees decreased $302 thousand to $9.2 million during first quarter 2014, as compared to $9.5 million during fourth quarter 2013, primarily due to reductions in interchange fees earned on debit and credit card transactions, the result of normal seasonal declines in transaction volumes.

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