UPDATE: D.A. Davidson Downgrades First Interstate Bancsystem Following Q2'13 EPS Report

In a report published Wednesday, D.A. Davidson analyst Jeff Rulis downgraded First Interstate Bancsystem FIBK from Buy to Neutral, but raised the price target from $24.50 to $25.00.

In the report, D.A. Davidson noted, “First Interstate reported Q2'13 EPS of $0.49 versus our estimate of $0.41 and the Street consensus of $0.39. A lower than expected loan loss provision led to the bulk of the variance (~$0.06 per share after tax), although higher fee income and reduced operating expenses also helped drive the upside surprise. Loan totals were positive and margins showed continued stability. The credit quality update was mostly positive. Overall, NPAs as a percent of assets dropped from 1.79% to 1.76% despite a modest increase in non-accrual loans. The good news on the credit side related to a $9.7 million decrease in OREO along with net recoveries. The fact that OREO balances were reduced by 30% without loss (and even at a modest gain at that) is a big positive and likely led to the moderate LLP. Loan growth picked up relative to past quarters, advancing a net $72.8 million (6.9% annualized). Nearly every category was positive, with the residential real estate segment producing the largest increase. Consumer balances also increased and management cited a growing pipeline for commercial and commercial real estate loans.”

First Interstate Bancsystem closed on Tuesday at $23.70.