For Immediate Release | ||||
Contact: | Marcy Mutch | NASDAQ: FIBK | ||
Investor Relations Officer First Interstate BancSystem, Inc. (406) 255-5322 investor.relations@fib.com | www.FIBK.com | |||
First Interstate BancSystem, Inc. Reports First Quarter Earnings
Billings, MT - April 27, 2015 - First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports first quarter 2015 net income of $21.0 million, or $0.46 per share. This compares to net income of $22.8 million, or $0.49 per share, during fourth quarter 2014, and $21.4 million, or $0.48 per share, during first quarter 2014.
FIRST QUARTER HIGHLIGHTS
• | Pre-tax, pre-provision net income of $32.5 million, a 16.5% increase from the same period in the prior year |
• | Net interest margin ratio of 3.43%, a 5 basis point improvement compared to fourth quarter 2014 |
• | Net interest income of $64.3 million, a 10.6% increase from the same period in the prior year |
• | Criticized loans declined to 6.8% of total loans as of March 31, 2015, compared to 7.2% as of December 31, 2014 |
• | 12.9% loan growth year-over-year, of which 4.6% was organic |
• | 13.6% deposit growth year-over-year, of which 5.2% was organic |
“We had strong year-over-year improvement in our core earnings during the first quarter of 2015, with an 11% increase in total revenue and a 17% increase in pre-tax, pre-provision income,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Our strong growth in pre-tax, pre-provision income reflects the positive benefits of the Mountain West Bank acquisition, as well as consistent organic growth across most of our key business lines," Garding continued. "We are excited about our pending acquisition of Absarokee Bancorporation, the parent company of United Bank, which will provide a strong presence in a complementary market adjacent to our Billings, Montana headquarters and serve as another catalyst for the profitable growth of our franchise,” said Mr. Garding.
DIVIDEND DECLARATION
On April 20, 2015, the Executive Committee of the Company's board of directors declared a dividend of $0.20 per common share payable on May 15, 2015 to owners of record as of May 1, 2015. This dividend equates to a 3.1% annual yield based on the $26.12 average closing price of the Company's common stock during first quarter 2015.
ACQUISITION
On March 26, 2015, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") to acquire Absarokee Bancorporation, Inc. (“Absarokee”), parent company of United Bank, headquartered in Absarokee, Montana. With total assets of $74 million, Absarokee currently operates United Bank branches in the Montana communities of Absarokee, Columbus and Laurel. Pursuant to the terms of the Merger Agreement, the Company will pay cash consideration of approximately $7.2 million, subject to certain financial performance and other adjustments, the amount of which will be determined prior to the closing date of the transaction. Subject to regulatory approval, the transaction is currently expected to close during third quarter 2015. The Company expects to merge United Bank with its existing bank subsidiary, First Interstate Bank, upon consummation of the transaction.
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RESULTS OF OPERATIONS
Net Interest Income. The Company's net interest income, on a fully taxable equivalent basis, decreased $1.2 million to $65.4 million during first quarter 2015, as compared to $66.6 million during fourth quarter 2014, primarily due to two fewer accrual days during first quarter 2015. The impact of the reduction in loan yield was more than offset by an increase in average loans outstanding and a 2 basis point reduction in funding costs during first quarter 2015, as compared to fourth quarter 2014. Interest accretion related to the fair valuation of acquired loans contributed $1.1 million of interest income during both first quarter 2015 and fourth quarter 2014, and recoveries of charged-off loan interest were $591 during first quarter 2015, as compared to $956 during fourth quarter 2014.
The Company's net interest margin ratio increased 5 basis points to 3.43% during first quarter 2015, as compared to 3.38% during fourth quarter 2014. Exclusive of the accelerated interest accretion related to early payoffs of acquired loans and the impact of recoveries of charged-off interest, the Company's net interest margin ratio increased 6 basis points to 3.38% during first quarter 2015, compared to 3.32% during fourth quarter 2014. This increase was primarily driven by a shift in the mix of interest earning assets from lower yielding interest bearing deposits in banks to higher yielding loans and investment securities, which increased the Company's net interest margin ratio by approximately 8 basis points compared to fourth quarter 2014. This increase was partially offset by a 2 basis point decline in the net interest margin ratio due to lower yields on average outstanding loans during first quarter 2015.
Non-Interest Income. Non-interest income decreased $3.6 million to $27.8 million during first quarter 2015, as compared to $31.4 million during fourth quarter 2014. During fourth quarter 2014, the Company recognized gains aggregating $1.2 million on the sale of two bank buildings, received an insurance death benefit of $823 thousand and recorded a volume bonus of $616 thousand from its card payment network. Also contributing to the decrease in non-interest income during first quarter 2015, as compared to fourth quarter 2014, were decreases of $1.2 million in debit card interchange fees resulting from normal seasonal declines in transaction volumes. These decreases were partially offset by a $1.0 million reversal of accrued costs associated with the settlement of secondary investor claims acquired as part of the 2014 Mountain West Financial Corp acquisition.
First quarter 2015 non-interest income increased $3.7 million, as compared to the same period in 2014, primarily due to the reversal of previously accrued settlement costs discussed above combined with increases in income from the origination and sale of mortgage loans. Income from the origination and sale of loans increased $1.2 million, or 27%, to $5.9 million during first quarter 2015, as compared to $4.7 million during first quarter 2014. Overall mortgage loan production increased 53% during first quarter 2015, as compared to first quarter quarter 2014. Loans originated for home purchases accounted for approximately 57% of the Company's mortgage loan production during first quarter 2015, as compared to 71% during fourth quarter 2014 and 68% during first quarter 2014.
Non-Interest Expense. Non-interest expense decreased $2.1 million to $59.6 million during first quarter 2015, as compared to $61.7 million during fourth quarter 2014. First quarter 2015 and fourth quarter 2014 non-interest expense includes $70 thousand and $2.4 million, respectively, of acquisition expenses which the Company considers non-core. Exclusive of these non-core expenses, non-interest expense remained flat during first quarter 2015, as compared to fourth quarter 2014. During first quarter 2015, decreases in advertising, business meals, donations, occupancy and furniture and equipment expenses were largely offset by higher incentive bonus accruals and increases in payroll tax expense that typically occur during the first part of the year until annual compensation tax limits are met.
First quarter 2015 non-interest expense increased $5.3 million, as compared to the same period in 2014, due to the additional operating costs of Mountain West Financial Corp, which was acquired on July 31, 2014, and inflationary wage increases.
BALANCE SHEET
Total loans increased $30 million, or less than 1%, to $4.9 billion as of March 31, 2015, as compared to December 31, 2014. The most notable growth occurred in commercial real estate, commercial and indirect consumer loans, which grew 1.9%, 1.9% and 2.4%, respectively, as compared to December 31, 2014. Growth in commercial real estate, commercial and indirect consumer loans during first quarter 2015, as compared to December 31, 2014, was partially offset by seasonal declines in agricultural and agricultural real estate loans.
Commercial real estate loans increased $31 million, to $1,670 million as of March 31, 2015, from $1,639 million as of December 31, 2014, and commercial loans increased $14 million, to $754 million as of March 31, 2015, from $740 million as of December 31, 2014. Management attributes this growth to continuing business expansion in the Company's market areas and the movement of completed commercial construction projects from construction loans to permanent financing.
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Indirect consumer loans grew $13 million to $566 million as of March 31, 2015, from $553 million as of December 31, 2014, due to continuing expansion of the Company's indirect lending program within existing markets.
Agricultural loans decreased $7 million to $118 million as of March 31, 2015, from $125 million as of December 31, 2014. Management attributes this decrease to seasonal reductions in credit lines that typically occur during the first and fourth quarters of each year. In addition, agricultural real estate loans decreased $11 million to $157 million as of March 31, 2015, from $168 million as of December 31, 2014, primarily due to scheduled repayments.
Total deposits decreased $38 million, or less than 1.0%, to $7.0 billion as of March 31, 2015, as compared to December 31, 2014, with all deposit categories except savings deposits showing decreases. The mix of deposits continued to shift away from time deposits to savings and non-interest bearing demand deposits. As of March 31, 2015, the mix of total deposits was 25% non-interest bearing demand, 30% interest bearing demand, 28% savings and 17% time. This compares to 26% non-interest bearing demand, 30% interest bearing demand, 26% savings and 18% time as of December 31, 2014.
ASSET QUALITY
Non-performing assets grew to $94 million, or 1.11% of total assets, as of March 31, 2015, from $78 million, or 0.91% of total assets as of December 31, 2014. Non-accrual loans, the largest component of non-performing assets, increased $12 million, to $74 million as of March 31, 2015, from $62 million as of December 31, 2014, primary due to placement of the loans of one commercial and one commercial real estate borrower on non-accrual status.
Criticized loans declined to $335 million, or 6.8% of total loans as of March 31, 2015, compared to $353 million, or 7.2% of total loans as of December 31, 2014. This decline in the level of criticized loans is primarily due to borrower repayment of loan balances.
The Company recorded a provision for loan losses of $1.1 million during first quarter 2015, compared to $118 thousand during fourth quarter 2014. Higher provision for loan losses recorded during first quarter 2015, as compared to fourth quarter 2014, is reflective of increases in loss exposure on non-performing loans. The Company's allowance for loan losses as a percentage of period end loans remained stable at 1.53% as of March 31, 2015, compared to 1.52% as of December 31, 2014.
CAPITAL
Pursuant to a stock repurchase program approved by the Company's Board of Directors on January 22, 2015, the Company repurchased and retired 565,875 shares of its Class A common stock during first quarter 2015. The shares were repurchased in open market transactions at an average purchase price of $25.93 per share. Under the stock repurchase program, the Company may repurchase up to an additional 434,125 shares of its Class A common stock.
On January 1, 2015, the Company adopted the revised regulatory capital framework in accordance with the Basel III international accord. At March 31, 2015, the Company exceeded all "well-capitalized" regulatory capital adequacy requirements.
First Quarter 2015 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss first quarter 2015 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Tuesday, April 28, 2015. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-877-507-0356 or by logging on to www.FIBK.com. The call will be recorded and made available for replay after 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on April 28, 2015 through 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) on May 28, 2015, by dialing 1-877-344-7529 (using conference ID 10063615). The call will also be archived on our website, www.FIBK.com, for one year.
About First Interstate BancSystem, Inc.
First Interstate BancSystem, Inc. is a financial and bank holding company incorporated in 1971 and headquartered in Billings, Montana. The Company operates 80 banking offices, including detached drive-up facilities, in 42 communities in Montana, Wyoming and western South Dakota. Through First Interstate Bank, the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities and other entities throughout the Company's market areas.
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Cautionary Note Regarding Forward-Looking Statements and Factors that Could Affect Future Results
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified as those that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. The following factors, among others, may cause actual results to differ materially from current expectations in the forward-looking statements, including those set forth in this report: continuing or worsening business and economic conditions, adverse economic conditions affecting Montana, Wyoming and western South Dakota, credit losses, lending risk, adequacy of the allowance for loan losses, impairment of goodwill, changes in interest rates, access to low-cost funding sources, dependence on the Company’s management team, ability to attract and retain qualified employees, governmental regulation and changes in regulatory, tax and accounting rules and interpretations, failure of technology, inability to meet liquidity requirements, failure to manage growth, competition, ineffective internal operational controls, environmental remediation and other costs, reliance on external vendors, litigation pertaining to fiduciary responsibilities, failure to effectively implement technology-driven products and services, soundness of other financial institutions, inability of our bank subsidiary to pay dividends, implementation of new lines of business or new product or service offerings, change in dividend policy, volatility of Class A common stock, decline in market price of Class A common stock, dilution as a result of future equity issuances, uninsured nature of any investment in Class A common stock, voting control of Class B stockholders, anti-takeover provisions, controlled company status, and subordination of common stock to Company debt.
These factors are not necessarily all of the factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.
All forward-looking statements attributable to us or persons acting on our 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 we do 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 we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
First Interstate BancSystem, Inc.
P.O. Box 30918 Billings, Montana 59116 (406) 255-5390
www.FIBK.com
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RST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousands, except per share data)
2015 | 2014 | |||||||||||||||||||
INCOME STATEMENT SUMMARIES | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | |||||||||||||||
Net interest income | $ | 64,325 | $ | 65,516 | $ | 65,082 | $ | 59,727 | $ | 58,136 | ||||||||||
Net interest income on a fully-taxable equivalent ("FTE") basis | 65,381 | 66,585 | 66,129 | 60,806 | 59,243 | |||||||||||||||
Provision for loan losses | 1,095 | 118 | 261 | (2,001 | ) | (5,000 | ) | |||||||||||||
Non-interest income: | ||||||||||||||||||||
Other service charges, commissions and fees | 9,867 | 11,429 | 10,458 | 9,699 | 9,156 | |||||||||||||||
Income from the origination and sale of loans | 5,906 | 5,554 | 7,346 | 6,380 | 4,660 | |||||||||||||||
Wealth management revenues | 4,937 | 4,775 | 5,157 | 4,609 | 4,455 | |||||||||||||||
Service charges on deposit accounts | 3,944 | 4,432 | 4,331 | 3,929 | 3,875 | |||||||||||||||
Investment securities gains (losses), net | 6 | (19 | ) | (8 | ) | 17 | 71 | |||||||||||||
Other income | 3,122 | 5,190 | 2,079 | 1,937 | 1,889 | |||||||||||||||
Total non-interest income | 27,782 | 31,361 | 29,363 | 26,571 | 24,106 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and wages | 25,349 | 23,717 | 25,914 | 24,440 | 22,442 | |||||||||||||||
Employee benefits | 7,780 | 6,812 | 7,841 | 7,164 | 8,313 | |||||||||||||||
Occupancy, net | 4,492 | 4,770 | 4,534 | 4,253 | 4,239 | |||||||||||||||
Furniture and equipment | 3,793 | 4,120 | 3,338 | 3,157 | 3,201 | |||||||||||||||
Outsourced technology services | 2,463 | 2,468 | 2,346 | 2,309 | 2,300 | |||||||||||||||
Other real estate owned income, net | (61 | ) | (61 | ) | (58 | ) | (134 | ) | (19 | ) | ||||||||||
Core deposit intangible amortization | 854 | 855 | 688 | 354 | 354 | |||||||||||||||
Non-core expenses | 70 | 2,368 | 5,052 | 597 | — | |||||||||||||||
Other expenses | 14,852 | 16,604 | 15,303 | 13,780 | 13,508 | |||||||||||||||
Total non-interest expense | 59,592 | 61,653 | 64,958 | 55,920 | 54,338 | |||||||||||||||
Income before taxes | 31,420 | 35,106 | 29,226 | 32,379 | 32,904 | |||||||||||||||
Income taxes | 10,440 | 12,330 | 10,071 | 11,302 | 11,511 | |||||||||||||||
Net income | $ | 20,980 | $ | 22,776 | $ | 19,155 | $ | 21,077 | $ | 21,393 | ||||||||||
Core net income** | $ | 21,020 | $ | 24,260 | $ | 22,302 | $ | 21,438 | $ | 21,349 | ||||||||||
Pre-tax, pre-provision net income** | $ | 32,515 | $ | 35,224 | $ | 29,487 | $ | 30,378 | $ | 27,904 | ||||||||||
PER COMMON SHARE DATA | ||||||||||||||||||||
Net income - basic | $ | 0.46 | $ | 0.50 | $ | 0.43 | $ | 0.48 | $ | 0.49 | ||||||||||
Net income - diluted | 0.46 | 0.49 | 0.42 | 0.47 | 0.48 | |||||||||||||||
Core net income - diluted | 0.46 | 0.53 | 0.49 | 0.48 | 0.48 | |||||||||||||||
Cash dividend paid | 0.20 | 0.16 | 0.16 | 0.16 | 0.16 | |||||||||||||||
Book value at period end | 20.13 | 19.85 | 19.40 | 18.95 | 18.60 | |||||||||||||||
Tangible book value at period end** | 15.36 | 15.07 | 14.61 | 14.71 | 14.37 | |||||||||||||||
OUTSTANDING COMMON SHARES | ||||||||||||||||||||
At period-end | 45,429,468 | 45,788,415 | 45,672,922 | 44,255,012 | 44,390,095 | |||||||||||||||
Weighted-average shares - basic | 45,378,230 | 45,485,548 | 44,911,858 | 44,044,260 | 43,997,815 | |||||||||||||||
Weighted-average shares - diluted | 45,840,191 | 46,037,344 | 45,460,288 | 44,575,963 | 44,620,776 | |||||||||||||||
SELECTED ANNUALIZED RATIOS | ||||||||||||||||||||
Return on average assets | 1.00 | % | 1.05 | % | 0.93 | % | 1.12 | % | 1.16 | % | ||||||||||
Core return on average assets** | 1.00 | 1.12 | 1.09 | 1.14 | 1.16 | |||||||||||||||
Return on average common equity | 9.38 | 10.09 | 8.55 | 10.18 | 10.74 | |||||||||||||||
Core return on average common equity** | 9.40 | 10.75 | 9.96 | 10.36 | 10.72 | |||||||||||||||
Return on average tangible common equity** | 12.35 | 13.34 | 11.17 | 13.16 | 14.00 | |||||||||||||||
Net FTE interest income to average earning assets | 3.43 | 3.38 | 3.55 | 3.54 | 3.52 | |||||||||||||||
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2015 | 2014 | |||||||||||||||||||
BALANCE SHEET SUMMARIES | Mar 31 | Dec 31 | Sept 30 | Jun 30 | Mar 31 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 637,803 | $ | 798,670 | $ | 819,963 | $ | 503,648 | $ | 610,531 | ||||||||||
Investment securities | 2,340,904 | 2,287,110 | 2,169,774 | 2,093,985 | 2,095,088 | |||||||||||||||
Loans held for investment: | ||||||||||||||||||||
Commercial real estate | 1,670,829 | 1,639,422 | 1,686,509 | 1,464,947 | 1,452,967 | |||||||||||||||
Construction real estate | 406,305 | 418,269 | 367,420 | 361,009 | 354,349 | |||||||||||||||
Residential real estate | 997,123 | 999,903 | 957,282 | 894,502 | 868,836 | |||||||||||||||
Agricultural real estate | 156,734 | 167,659 | 158,940 | 162,428 | 160,570 | |||||||||||||||
Consumer | 768,462 | 762,471 | 745,482 | 707,035 | 670,406 | |||||||||||||||
Commercial | 754,149 | 740,073 | 736,908 | 727,482 | 707,237 | |||||||||||||||
Agricultural | 117,569 | 124,859 | 136,587 | 130,280 | 108,376 | |||||||||||||||
Other | 377 | 3,959 | 2,316 | 2,016 | 3,626 | |||||||||||||||
Mortgage loans held for sale | 55,758 | 40,828 | 62,938 | 56,663 | 38,471 | |||||||||||||||
Total loans | 4,927,306 | 4,897,443 | 4,854,382 | 4,506,362 | 4,364,838 | |||||||||||||||
Less allowance for loan losses | 75,336 | 74,200 | 74,231 | 78,266 | 81,371 | |||||||||||||||
Net loans | 4,851,970 | 4,823,243 | 4,780,151 | 4,428,096 | 4,283,467 | |||||||||||||||
Premises and equipment, net | 192,748 | 195,212 | 207,181 | 180,341 | 179,942 | |||||||||||||||
Goodwill and intangible assets (excluding mortgage servicing rights) | 216,815 | 218,870 | 218,799 | 187,502 | 187,858 | |||||||||||||||
Company owned life insurance | 154,741 | 153,821 | 152,761 | 138,899 | 138,027 | |||||||||||||||
Other real estate owned, net | 15,134 | 13,554 | 18,496 | 16,425 | 16,594 | |||||||||||||||
Mortgage servicing rights, net | 14,093 | 14,038 | 13,894 | 13,443 | 13,474 | |||||||||||||||
Other assets | 104,334 | 105,418 | 100,333 | 89,040 | 92,844 | |||||||||||||||
Total assets | $ | 8,528,542 | $ | 8,609,936 | $ | 8,481,352 | $ | 7,651,379 | $ | 7,617,825 | ||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing | $ | 1,757,664 | $ | 1,791,364 | $ | 1,637,151 | $ | 1,533,484 | $ | 1,458,460 | ||||||||||
Interest bearing | 5,210,495 | 5,214,848 | 5,322,348 | 4,645,558 | 4,676,677 | |||||||||||||||
Total deposits | 6,968,159 | 7,006,212 | 6,959,499 | 6,179,042 | 6,135,137 | |||||||||||||||
Securities sold under repurchase agreements | 462,073 | 502,250 | 432,478 | 462,985 | 488,898 | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 58,335 | 72,006 | 63,713 | 51,456 | 48,770 | |||||||||||||||
Long-term debt | 43,048 | 38,067 | 36,882 | 36,893 | 36,905 | |||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 82,477 | 102,916 | 82,477 | 82,477 | |||||||||||||||
Total liabilities | 7,614,092 | 7,701,012 | 7,595,488 | 6,812,853 | 6,792,187 | |||||||||||||||
Stockholders' equity: | ||||||||||||||||||||
Common stock | 310,544 | 323,596 | 321,132 | 283,697 | 286,553 | |||||||||||||||
Retained earnings | 599,727 | 587,862 | 572,362 | 560,469 | 546,444 | |||||||||||||||
Accumulated other comprehensive income (loss) | 4,179 | (2,534 | ) | (7,630 | ) | (5,640 | ) | (7,359 | ) | |||||||||||
Total stockholders' equity | 914,450 | 908,924 | 885,864 | 838,526 | 825,638 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 8,528,542 | $ | 8,609,936 | $ | 8,481,352 | $ | 7,651,379 | $ | 7,617,825 | ||||||||||
CONSOLIDATED CAPITAL RATIOS | ||||||||||||||||||||
Total risk-based capital | 15.43 | % | * | 16.15 | % | 16.34 | % | 16.69 | % | 16.83 | % | |||||||||
Tier 1 risk-based capital | 13.94 | * | 14.52 | 14.71 | 15.02 | 15.16 | ||||||||||||||
Tier 1 common capital to total risk-weighted assets | 12.58 | * | 13.08 | 12.89 | 13.45 | 13.55 | ||||||||||||||
Leverage Ratio | 8.78 | * | 9.61 | 10.42 | 10.35 | 10.27 | ||||||||||||||
Tangible common stockholders' equity to tangible assets** | 8.39 | 8.22 | 8.07 | 8.72 | 8.58 | |||||||||||||||
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
2015 | 2014 | |||||||||||||||||||
ASSET QUALITY | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |||||||||||||||
Allowance for loan losses | $ | 75,336 | $ | 74,200 | $ | 74,231 | $ | 78,266 | $ | 81,371 | ||||||||||
As a percentage of period-end loans | 1.53 | % | 1.52 | % | 1.53 | % | 1.74 | % | 1.86 | % | ||||||||||
Net charge-offs (recoveries) during quarter | $ | (41 | ) | $ | 149 | $ | 4,296 | $ | 1,104 | $ | (1,032 | ) | ||||||||
Annualized as a percentage of average loans | 0.00 | % | 0.01 | % | 0.36 | % | 0.10 | % | (0.10 | )% | ||||||||||
Non-performing assets: | ||||||||||||||||||||
Non-accrual loans | $ | 73,941 | $ | 62,182 | $ | 71,915 | $ | 79,166 | $ | 88,114 | ||||||||||
Accruing loans past due 90 days or more | 5,175 | 2,576 | 1,348 | 1,494 | 1,664 | |||||||||||||||
Total non-performing loans | 79,116 | 64,758 | 73,263 | 80,660 | 89,778 | |||||||||||||||
Other real estate owned | 15,134 | 13,554 | 18,496 | 16,425 | 16,594 | |||||||||||||||
Total non-performing assets | 94,250 | 78,312 | 91,759 | 97,085 | 106,372 | |||||||||||||||
As a percentage of: | ||||||||||||||||||||
Total loans and OREO | 1.91 | % | 1.59 | % | 1.88 | % | 2.15 | % | 2.43 | % | ||||||||||
Total assets | 1.11 | % | 0.91 | % | 1.08 | % | 1.27 | % | 1.40 | % | ||||||||||
ASSET QUALITY TRENDS | Provision for Loan Losses | Net Charge-offs (Recoveries) | Allowance for Loan Losses | Accruing Loans 30-89 Days Past Due | Accruing TDRs | Non-Performing Loans | Non-Performing Assets | ||||||||||||||||||||
Q1 2012 | $ | 11,250 | $ | 7,929 | $ | 115,902 | $ | 58,531 | $ | 36,838 | $ | 185,927 | $ | 230,683 | |||||||||||||
Q2 2012 | 12,000 | 25,108 | 102,794 | 55,074 | 35,959 | 136,374 | 190,191 | ||||||||||||||||||||
Q3 2012 | 9,500 | 13,288 | 99,006 | 48,277 | 35,428 | 127,270 | 167,241 | ||||||||||||||||||||
Q4 2012 | 8,000 | 6,495 | 100,511 | 34,602 | 31,932 | 110,076 | 142,647 | ||||||||||||||||||||
Q1 2013 | 500 | 3,107 | 97,904 | 41,924 | 35,787 | 100,535 | 133,005 | ||||||||||||||||||||
Q2 2013 | 375 | (249 | ) | 98,528 | 39,408 | 23,406 | 105,471 | 128,253 | |||||||||||||||||||
Q3 2013 | (3,000 | ) | 2,538 | 92,990 | 39,414 | 21,939 | 96,203 | 114,740 | |||||||||||||||||||
Q4 2013 | (4,000 | ) | 3,651 | 85,339 | 26,944 | 21,780 | 96,671 | 112,175 | |||||||||||||||||||
Q1 2014 | (5,000 | ) | (1,032 | ) | 81,371 | 41,034 | 19,687 | 89,778 | 106,372 | ||||||||||||||||||
Q2 2014 | (2,001 | ) | 1,104 | 78,266 | 24,250 | 23,531 | 80,660 | 97,085 | |||||||||||||||||||
Q3 2014 | 261 | 4,296 | 74,231 | 38,400 | 20,956 | 73,263 | 91,759 | ||||||||||||||||||||
Q4 2014 | 118 | 149 | 74,200 | 28,848 | 20,952 | 64,758 | 78,312 | ||||||||||||||||||||
Q1 2015 | 1,095 | (41 | ) | 75,336 | 40,744 | 16,070 | 79,116 | 94,250 | |||||||||||||||||||
CRITICIZED LOANS | Special Mention | Substandard | Doubtful | Total | |||||||||||
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 | |||||||||||
Q1 2013 | 197,645 | 197,095 | 43,825 | 438,565 | |||||||||||
Q2 2013 | 192,390 | 161,786 | 52,266 | 406,442 | |||||||||||
Q3 2013 | 180,850 | 168,278 | 42,415 | 391,543 | |||||||||||
Q4 2013 | 159,081 | 154,100 | 45,308 | 358,489 | |||||||||||
Q1 2014 | 174,834 | 161,103 | 31,672 | 367,609 | |||||||||||
Q2 2014 | 160,271 | 155,744 | 29,115 | 345,130 | |||||||||||
Q3 2014 | 156,469 | 156,123 | 39,450 | 352,042 | |||||||||||
Q4 2014 | 154,084 | 163,675 | 34,854 | 352,613 | |||||||||||
Q1 2015 | 140,492 | 156,887 | 37,476 | 334,855 | |||||||||||
*Preliminary estimate - may be subject to change.
**See Non-GAAP Financial Measures included herein for a discussion regarding core net income, pre-tax, pre-provision net income, tangible book value per common share, core return on average assets, core return on average common equity, return on average tangible common equity and tangible common stockholders' equity to tangible assets.
7
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
Three Months Ended | ||||||||||||||||||||||||||
March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||||||||||||||||||
Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,895,146 | $ | 59,816 | 4.96 | % | $ | 4,870,509 | $ | 61,619 | 5.02 | % | $ | 4,344,993 | $ | 54,192 | 5.06 | % | ||||||||
Investment securities (2) | 2,294,433 | 9,641 | 1.70 | 2,195,178 | 9,413 | 1.70 | 2,108,643 | 9,370 | 1.80 | |||||||||||||||||
Interest bearing deposits in banks | 546,583 | 389 | 0.29 | 745,171 | 504 | 0.27 | 368,784 | 231 | 0.25 | |||||||||||||||||
Federal funds sold | 1,174 | 2 | 0.69 | 597 | — | — | 1,099 | 1 | 0.37 | |||||||||||||||||
Total interest earnings assets | 7,737,336 | 69,848 | 3.66 | 7,811,455 | 71,536 | 3.63 | 6,823,519 | 63,794 | 3.79 | |||||||||||||||||
Non-earning assets | 752,077 | 774,963 | 664,441 | |||||||||||||||||||||||
Total assets | $ | 8,489,413 | $ | 8,586,418 | $ | 7,487,960 | ||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Demand deposits | $ | 2,089,203 | $ | 506 | 0.10 | % | $ | 2,148,522 | $ | 538 | 0.10 | % | $ | 1,837,714 | $ | 512 | 0.11 | % | ||||||||
Savings deposits | 1,882,816 | 628 | 0.14 | 1,845,601 | 634 | 0.14 | 1,639,484 | 595 | 0.15 | |||||||||||||||||
Time deposits | 1,220,590 | 2,175 | 0.72 | 1,252,410 | 2,369 | 0.75 | 1,172,866 | 2,317 | 0.80 | |||||||||||||||||
Repurchase agreements | 479,525 | 54 | 0.05 | 481,901 | 56 | 0.05 | 456,557 | 66 | 0.06 | |||||||||||||||||
Other borrowed funds | 4 | — | — | 11 | — | — | 6 | — | — | |||||||||||||||||
Long-term debt | 38,113 | 515 | 5.48 | 38,037 | 558 | 5.82 | 36,909 | 473 | 5.20 | |||||||||||||||||
Subordinated debentures held by subsidiary trusts | 82,477 | 589 | 2.90 | 98,930 | 796 | 3.19 | 82,477 | 588 | 2.89 | |||||||||||||||||
Total interest bearing liabilities | 5,792,728 | 4,467 | 0.31 | 5,865,412 | 4,951 | 0.33 | 5,226,013 | 4,551 | 0.35 | |||||||||||||||||
Non-interest bearing deposits | 1,723,001 | 1,751,023 | 1,403,822 | |||||||||||||||||||||||
Other non-interest bearing liabilities | 66,391 | 74,378 | 50,185 | |||||||||||||||||||||||
Stockholders’ equity | 907,293 | 895,605 | 807,940 | |||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 8,489,413 | $ | 8,586,418 | $ | 7,487,960 | ||||||||||||||||||||
Net FTE interest income | 65,381 | 66,585 | 59,243 | |||||||||||||||||||||||
Less FTE adjustments (2) | (1,056 | ) | (1,069 | ) | (1,107 | ) | ||||||||||||||||||||
Net interest income from consolidated statements of income | $ | 64,325 | $ | 65,516 | $ | 58,136 | ||||||||||||||||||||
Interest rate spread | 3.35 | % | 3.30 | % | 3.44 | % | ||||||||||||||||||||
Net FTE interest margin (3) | 3.43 | % | 3.38 | % | 3.52 | % | ||||||||||||||||||||
Cost of funds, including non-interest bearing demand deposits (4) | 0.24 | % | 0.26 | % | 0.28 | % | ||||||||||||||||||||
(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 an 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. |
8
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America, or GAAP, this release contains certain non-GAAP financial measures that management uses to provide supplemental perspectives on capital adequacy, operating results, performance trends and financial condition. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies because other companies may not calculate these non-GAAP measures in the same manner. As a result, the usefulness of these measures to investors may be limited, and they should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.
The Company adjusts certain capital adequacy measures to exclude intangible assets except mortgage servicing rights. Management believes these non-GAAP financial measures, which are intended to complement the capital ratios defined by banking regulators, are useful to investors in evaluating the Company's performance due to the importance that analysts place on these ratios and also allow investors to compare certain aspects of the Company's capitalization to other companies.
The Company also adjusts earnings and certain performance ratios to exclude certain non-core revenues and expenses, including investment securities net gains or losses, acquisition expenses consisting primarily of travel expenses and professional fees, and nonrecurring litigation expenses. Management believes these non-GAAP financial measures are useful to investors in evaluating operating trends by excluding amounts which the Company views as unrelated to its normalized operations. These non-core income and expense adjustments are presented net of estimated income tax expense.
In addition, the Company adjusts net income to exclude income tax expense and provision for loan losses. Management believes this non-GAAP financial measure is useful to investors in in evaluating operating trends by excluding pre-tax amounts which the Company views as fluctuating widely based on economic conditions.
The following table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.
9
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited, $ in thousands, except share and per share data)
2015 | 2014 | |||||||||||||||||||
As Of or For the Quarter Ended | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |||||||||||||||
Net income | $ | 20,980 | $ | 22,776 | $ | 19,155 | $ | 21,077 | $ | 21,393 | ||||||||||
Add back: income tax expense | 10,440 | 12,330 | 10,071 | 11,302 | 11,511 | |||||||||||||||
Add back: provision for loan losses | 1,095 | 118 | 261 | (2,001 | ) | (5,000 | ) | |||||||||||||
Pre-tax, pre-provision net income | $ | 32,515 | $ | 35,224 | $ | 29,487 | $ | 30,378 | $ | 27,904 | ||||||||||
Net income | $ | 20,980 | $ | 22,776 | $ | 19,155 | $ | 21,077 | $ | 21,393 | ||||||||||
Adj: investment securities (gains) losses, net | (6 | ) | 19 | 8 | (17 | ) | (71 | ) | ||||||||||||
Plus: acquisition & nonrecurring litigation expenses | 70 | 2,368 | 5,052 | 597 | — | |||||||||||||||
Adj: income taxes | (24 | ) | (903 | ) | (1,913 | ) | (219 | ) | 27 | |||||||||||
Total core net income | (A) | 21,020 | 24,260 | 22,302 | 21,438 | 21,349 | ||||||||||||||
Total non-interest income | $ | 27,782 | $ | 31,361 | $ | 29,363 | $ | 26,571 | $ | 24,106 | ||||||||||
Adj: investment securities (gains) losses, net | (6 | ) | 19 | 8 | (17 | ) | (71 | ) | ||||||||||||
Total core non-interest income | 27,776 | 31,380 | 29,371 | 26,554 | 24,035 | |||||||||||||||
Net interest income | 64,325 | 65,516 | 65,082 | 59,727 | 58,136 | |||||||||||||||
Total core revenue | $ | 92,101 | $ | 96,896 | $ | 94,453 | $ | 86,281 | $ | 82,171 | ||||||||||
Total non-interest expense | $ | 59,592 | $ | 61,653 | $ | 64,958 | $ | 55,920 | $ | 54,338 | ||||||||||
Less: acquisition & nonrecurring litigation expenses | (70 | ) | (2,368 | ) | (5,052 | ) | (597 | ) | — | |||||||||||
Core non-interest expense | $ | 59,522 | $ | 59,285 | $ | 59,906 | $ | 55,323 | $ | 54,338 | ||||||||||
Total quarterly average stockholders' equity | (B) | $ | 907,293 | $ | 895,605 | $ | 888,464 | $ | 830,117 | $ | 807,940 | |||||||||
Less: average goodwill and other intangible assets (excluding mortgage servicing rights) | (218,511 | ) | (218,407 | ) | (208,346 | ) | (187,710 | ) | (188,078 | ) | ||||||||||
Average tangible common stockholders' equity | (C) | $ | 688,782 | $ | 677,198 | $ | 680,118 | $ | 642,407 | $ | 619,862 | |||||||||
Total stockholders' equity, period-end | $ | 914,450 | $ | 908,924 | $ | 885,864 | $ | 838,526 | $ | 825,638 | ||||||||||
Less: goodwill and other intangible assets (excluding mortgage servicing rights) | (216,815 | ) | (218,870 | ) | (218,799 | ) | (187,502 | ) | (187,858 | ) | ||||||||||
Total tangible common stockholders' equity | (D) | $ | 697,635 | $ | 690,054 | $ | 667,065 | $ | 651,024 | $ | 637,780 | |||||||||
Total assets | $ | 8,528,542 | $ | 8,609,936 | $ | 8,481,352 | 7,651,379 | 7,617,825 | ||||||||||||
Less: goodwill and other intangible assets (excluding mortgage servicing rights) | (216,815 | ) | (218,870 | ) | (218,799 | ) | (187,502 | ) | (187,858 | ) | ||||||||||
Tangible assets | (E) | $ | 8,311,727 | $ | 8,391,066 | $ | 8,262,553 | $ | 7,463,877 | $ | 7,429,967 | |||||||||
Total quarterly average assets | (F) | $ | 8,489,413 | $ | 8,586,418 | $ | 8,150,404 | $ | 7,556,122 | $ | 7,487,960 | |||||||||
Total common shares outstanding, period end | (G) | 45,429,468 | 45,788,415 | 45,672,922 | 44,255,012 | 44,390,095 | ||||||||||||||
Weighted-average common shares - diluted | (H) | 45,840,191 | 46,037,344 | 45,460,288 | 44,575,963 | 44,620,776 | ||||||||||||||
Core earnings per share, diluted | (A/H) | $ | 0.46 | $ | 0.53 | $ | 0.49 | $ | 0.48 | $ | 0.48 | |||||||||
Tangible book value per share, period-end | (D/G) | 15.36 | 15.07 | 14.61 | 14.71 | 14.37 | ||||||||||||||
Annualized net income | (I) | $ | 85,086 | $ | 90,361 | $ | 75,995 | $ | 84,540 | $ | 86,761 | |||||||||
Annualized core net income | (J) | 85,248 | 96,249 | 88,481 | 85,988 | 86,582 | ||||||||||||||
Core return on average assets | (J/F) | 1.00 | % | 1.12 | % | 1.09 | % | 1.14 | % | 1.16 | % | |||||||||
Core return on average common equity | (J/B) | 9.40 | 10.75 | 9.96 | 10.36 | 10.72 | ||||||||||||||
Return on average tangible common equity | (I/C) | 12.35 | 13.34 | 11.17 | 13.16 | 14.00 | ||||||||||||||
Tangible common stockholders' equity to tangible assets | (D/E) | 8.39 | 8.22 | 8.07 | 8.72 | 8.58 | ||||||||||||||
10