Market Overview

First Interstate BancSystem, Inc. Reports Second Quarter Earnings

Share:

First Interstate BancSystem, Inc. (NASDAQ:FIBK) today reported
financial results for the second quarter of 2018. For the quarter, the
Company reported net income of $41.7 million, or $0.74 per share, which
compares to net income of $36.7 million, or $0.65 per share, for the
first quarter of 2018, and $21.8 million, or $0.45 per share, for the
second quarter of 2017.

HIGHLIGHTS

  • Net income of $41.7 million, a 13.6% increase from the first quarter
    of 2018, and a 91.3% increase from the same period in the prior year.
    Exclusive of acquisition costs in the first quarter of 2018 and in the
    second quarter of 2017, net income increased $3.4 million, or 8.9%,
    and $13.3 million, or 46.8%, respectively.
  • Net interest margin ratio increased to 3.87% during the second quarter
    of 2018, a 12 basis point increase from the prior quarter and reflects
    a 27 basis point increase from the same period in the prior year.
    Excluding the impact of charged-off interest and interest accretion on
    acquired loans, the net interest margin ratio was 3.69%, an increase
    of eight basis points from the prior quarter and 26 basis points from
    the same period in the prior year.
  • Total fee-based revenues of $35.0 million, a 11.8% increase from the
    first quarter of 2018 and an 11.5% increase from the same period in
    the prior year.
  • Total loans increased $111.9 million in the second quarter of 2018, or
    5.9% annualized growth. The increase was primarily driven by
    commercial and agricultural loans and commercial and agricultural real
    estate loans, partially offset by a decline in construction real
    estate loans.
  • Loan to deposit ratio of 78.01% as of June 30, 2018, compared to
    76.27% for the first quarter of 2018 and 75.41% from the same period
    in the prior year.
  • Efficiency ratio of 58.84%, as compared to 62.32% for the first
    quarter of 2018 and 68.10% for the same period in the prior year.

"We continue to see positive trends across most of our key metrics,
resulting in strong earnings growth and an improvement in our return on
average equity to 11.61% for the second quarter," said Kevin P. Riley,
President and Chief Executive Officer of First Interstate BancSystem,
Inc. "Consistent with the seasonal strength we typically experience in
the second quarter, we saw improved loan growth and higher non-interest
income, particularly within our payment services and mortgage banking
businesses. As a result of the higher revenue, our efficiency ratio
improved to 58.84% in the quarter. We are also seeing the positive
benefits of our asset sensitive balance sheet, as our net interest
margin continues to expand with additional increases in interest rates.
We expect to see a continuation of these positive trends, resulting in a
strong second half of 2018, and we believe the completion of our
acquisition of Northwest Bancorporation will provide another catalyst
for driving earnings growth in the years ahead."

ACQUISITION

On April 25, 2018, the Company entered into a definitive agreement to
acquire all of the outstanding stock of Northwest Bancorporation, Inc.,
the parent company of Inland Northwest Bank ("INB"), a Spokane,
Washington based community bank with 20 banking offices across Idaho,
Oregon and Washington in an all-stock transaction valued at
approximately $159.7 million in aggregate, or $20.69 per share of INB
stock. The Company believes the transaction, if completed on the terms
contemplated, will complement First Interstate's footprint and will
provide First Interstate with a presence in several high-growth markets,
including Spokane, Washington, Portland, Oregon and Coeur d'Alene,
Idaho. The transaction has been approved by the boards of directors of
both companies and is expected to close in the third quarter with
conversion occurring in the fourth quarter of 2018, subject to customary
conditions including, regulatory approval, and INB shareholder approval.

NET INTEREST INCOME

The Company's net interest income increased $4.0 million, or 4.0%, to
$103.8 million during the second quarter of 2018, compared to $99.8
million during the first quarter of 2018. Net interest income increased
$24.5 million, or 30.9%, from $79.3 million during the second quarter of
2017, as a result of the impact of the Bank of the Cascades ("BOTC")
acquisition that closed in May 2017 and an expansion to our net interest
margin.

Net interest income was positively impacted this quarter by the recovery
of previously charged-off interest of $1.9 million, compared to the
recovery of $0.7 million during the first quarter of 2018 and $2.1
million during the second quarter of 2017.

Interest accretion attributable to the fair valuation of acquired loans
contributed $2.9 million to net interest income during the second
quarter of 2018, of which approximately $1.1 million was related to
early payoffs. This compares to interest accretion of $3.1 million in
net interest income during the first quarter of 2018, of which
approximately $1.1 million was related to early payoffs and interest
accretion of $1.7 million in net interest income during the second
quarter of 2017, of which approximately $0.3 million was related to
early payoffs.

The Company's net interest margin improved to 3.87% during the second
quarter of 2018, or 12 basis points, as compared to the first quarter of
2018, primarily as a result of higher rates on interest earning assets
while also limiting increases in its cost of funds. Exclusive of the
impact of the recovery of charged-off interest and the impact of
interest accretion on acquired loans, the Company's net interest margin
ratio was 3.69% during the second quarter of 2018, compared to 3.61%
during the first quarter of 2018, and 3.43% during the second quarter of
2017.

PROVISION FOR LOAN LOSSES

The Company recorded a provision for loan losses of $2.9 million during
the second quarter of 2018, compared to $2.1 million during the first
quarter of 2018, and $2.4 million during the second quarter of 2017. The
Company's Allowance for Loan Losses as a percentage of period-end loans
was 0.96%, and coverage of non-performing loans was 98.3%.

NON-INTEREST INCOME

Total non-interest income increased $2.4 million, or 6.8%, to $37.6
million during the second quarter of 2018, as compared to $35.2 million
during the first quarter of 2018, primarily due to seasonally higher
revenue from payment services revenues. Total non-interest income
increased $0.4 million, or 1.1%, from $37.2 million during the second
quarter of 2017.

Payment services revenues increased $2.4 million, or 22.9%, to $12.9
million during the second quarter of 2018, as compared to $10.5
million during the first quarter of 2018. Payment services revenues
increased $2.7 million, or 26.5%, from $10.2 million during the second
quarter of 2017. The increases in payment services revenues is
attributable to increased debit card and credit card volume.

Mortgage banking revenues increased $1.8 million, or 33.3%, to $7.2
million during the second quarter of 2018, as compared to $5.4 million
during the first quarter of 2018. During the second quarter of 2018,
loans originated for home purchases accounted for approximately 80.0% of
loan production, as compared to 68.2% during the first quarter of 2018
and 78.5% during the second quarter of 2017. Mortgage banking revenues
decreased $0.4 million, or 5.3%, during the second quarter of 2018 from
$7.6 million during the second quarter of 2017.

NON-INTEREST EXPENSE

Non-interest expense decreased $1.0 million, or 1.2%, to $84.9 million
during the second quarter of 2018, as compared to $85.9 million during
the first quarter of 2018, primarily due to a decrease in acquisition
related costs. Non-interest expense increased $4.5 million, or 5.6%,
from $80.4 million during the second quarter of 2017 primarily due to
salaries and wages and other expenses related to the BOTC acquisition.

There were no acquisition related expenses for the second quarter of
2018. The first quarter of 2018 and the second quarter of 2017 included
$2.3 million and $10.1 million of acquisition related expenses,
respectively. The after-tax impact of acquisition related expenses on
earnings per share was $0.03 and $0.14 per share for the respective
quarterly periods.

Exclusive of acquisition related expenses, non-interest expense was
$84.9 million during the second quarter of 2018, compared to $83.6
million during the first quarter of 2018, primarily due to an increase
of $1.0 million in employee benefits. Exclusive of acquisition related
expenses, non-interest expense was $70.3 million during the second
quarter of 2017, with the year-over-year increase primarily attributable
to salaries and wages and employee benefits related to the BOTC
acquisition.

Employee benefit expenses increased $1.0 million, or 8.8%, to $12.3
million during the second quarter of 2018, as compared to $11.3 million
during the first quarter of 2018, as medical claims in the first quarter
of 2018 were significantly lower than historical averages. Employee
benefit expenses increased $2.5 million, or 25.5%, from $9.8 million
during the second quarter of 2017, primarily due to an increase in the
number of employees as a result of the BOTC acquisition.

Other expenses increased $1.5 million, or 5.7%, to $27.8 million during
the second quarter of 2018, as compared to $26.3 million during the
first quarter of 2018. This increase is primarily due to higher
professional fees paid to third parties related to process improvement
and CECL initiatives, along with the write-down of a bank property held
for sale. Year-over-year, other expenses increased $4.4 million, or
18.8%, from $23.4 million during the second quarter of 2017, primarily
due to an increase in the size of the Company due to the acquisition of
BOTC.

BALANCE SHEET

Total assets decreased $37.7 million, or 0.3%, over the first quarter of
2018 as a result of decreased investment securities which was partially
offset by an increase in outstanding loan balances. Total assets
decreased $0.7 million to $12,235.7 million as of June 30, 2018, from
$12,236.4 million as of June 30, 2017.

Total loans increased $111.9 million, or 1.5%, to $7,758.7 million as of
June 30, 2018, from $7,646.8 million as of March 31, 2018, due to
organic growth primarily in commercial and agricultural loans and
commercial and agricultural real estate loans. Total loans increased
$202.7 million, from $7,556.0 million as of June 30, 2017, primarily due
to commercial, consumer, and commercial and construction real estate
loans.

Total real estate loans increased $31.5 million, or 0.6%, to $5,232.9
million as of June 30, 2018, from $5,201.4 million as of March 31, 2018.
Within the portfolio, commercial loans increased $31.4 million, or 1.1%,
to $2,853.3 million and agricultural loans increased $18.8 million, or
12.0%, to $175.7 million as of June 30, 2018. This growth was offset by
declines in construction loans of $18.3 million. Total real estate loans
increased $105.9 million, or 2.1%, from June 30, 2017, primarily due to
commercial real estate loans.

Total consumer loans increased $24.1 million, or 2.3%, to $1,055.2
million as of June 30, 2018, from $1,031.1 million as of March 31, 2018,
and increased $24.8 million, or 2.4%, from $1,030.4 million, as of
June 30, 2017. The increases are primarily attributable to growth in the
indirect portfolio, as we expand into the Northwest.

Commercial loans increased $21.9 million, or 1.8%, to $1,266.0 million
as of June 30, 2018, from $1,244.1 million as of March 31, 2018, and
increased $55.1 million, or 4.6%, from $1,210.9 million as of June 30,
2017.

Agricultural loans increased $17.3 million, or 12.9%, to $151.2 million
as of June 30, 2018, from $133.9 million as of March 31, 2018, and
increased $2.1 million, or 1.4%, from $149.1 million as of June 30,
2017, due to organic growth.

The Company historically experiences a decrease in total deposits during
the second quarter of each year. Total deposits decreased $80.4 million,
or 0.8%, to $9,945.5 million as of June 30, 2018, compared to March 31,
2018, which is in line with historical seasonal declines. Exclusive of
the BOTC acquisition, this decrease compares to a 0.4% decline
experienced during the same period in the prior year. Year-over-year,
total deposits decreased 0.7%, from $10,020.0 million, as of June 30,
2017. As of June 30, 2018, the mix of total deposits remained consistent
at 29.0% non-interest bearing demand, 28.7% interest bearing demand,
30.8% savings, and 11.5% time deposits.

The Company's loan to deposit ratio was 78.0%, as of June 30, 2018,
compared to 76.3% as of March 31, 2018 and up from 75.4% as of June 30,
2017.

The Company is considered to be "well-capitalized" as of June 30, 2018,
having exceeded all regulatory capital adequacy requirements. During the
second quarter of 2018, the Company paid common stock dividends of
approximately $15.7 million, or $0.28 per share.

CREDIT QUALITY

As of June 30, 2018, non-performing assets increased $12.5 million, or
16.1% to $90.3 million, compared to $77.8 million as of March 31, 2018.
Non-accrual loans increased $6.2 million to $69.3 million as of June 30,
2018, as compared to $63.1 million during the first quarter of 2018
primarily due to one agriculture real estate loan being placed on
non-accrual which was partially offset by a decrease in commercial real
estate non-accrual loans. Accruing loans past due 90 days or more
increased $2.4 million, or 64.9%, primarily due to an increase in
residential real estate loans. Other real estate owned increased $3.9
million, or 35.5%, from March 31, 2018 primarily as a result of the
foreclosure of three commercial properties which were partially offset
by property dispositions.

Criticized loans decreased $14.3 million, or 3.6%, to $382.2 million as
of June 30, 2018, from $396.5 million as of March 31, 2018, driven
primarily by several upgrades and pay downs within the commercial,
commercial real estate, and construction real estate
categories. Criticized loans decreased $47.5 million from $429.7 million
as of June 30, 2017, primarily due to the execution and resolution of
workout strategies within the portfolio.

Net loan charge-offs increased $1.6 million to $2.3 million during the
second quarter of 2018, as compared to $0.7 million during the first
quarter of 2018. The increase was comprised of charge-offs of $5.0
million and recoveries of $2.7 million. Net charge-offs during the
second quarter of 2017 were $2.9 million.

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 the following non-GAAP financial measures that
management uses to evaluate capital adequacy: (i) tangible book value
per common share; (ii) tangible common stockholders' equity to tangible
assets; (iii) tangible assets; (iv) tangible common stockholders'
equity; and (v) return on average tangible common equity. 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 because we exclude the impact on
the Company's performance of the amortization of intangible assets
(except mortgage servicing rights) which, generally speaking, does not
represent an actual cash expense and is inconsistent in the amount and
frequency depending upon the timing and size of our acquisitions. This
impacts the ratios which are important to analysts and also allow
investors to compare certain aspects of the Company's capitalization to
other companies.

See the Non-GAAP Financial Measures table included herein for a
reconciliation of the above described non-GAAP financial measures to
their most directly comparable GAAP financial measures.

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 by words or phrases such as "believes,"
"expects," "anticipates," "plans," "trends," "objectives," "continues"
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: a
decline in business and economic conditions, in particular adverse
conditions affecting Idaho, Montana, Oregon, South Dakota, Washington,
and Wyoming, lending risks, changes in interest rates, failure to
integrate or profitably operate acquired businesses, inadequate
allowance for loan losses, additional regulatory requirements due to our
asset size exceeding $10 billion, loss of access to low-cost funding
sources, declining oil and gas prices and declining demand for coal,
impairment of goodwill, changes in accounting standards, dependence on
the Company's management team, ability to attract and retain qualified
employees, increased governmental regulation and changes in regulatory,
tax and accounting rules and interpretations, stringent capital
requirements, cyber-security, liquidity risks, inability to grow
organically or through acquisitions, environmental remediation and other
costs associated with repossessed properties, ineffective internal
operating controls, competition, reliance on external vendors,
unfavorable resolution of litigation, failure to effectively implement
technology-driven products and services, soundness of other financial
institutions, occurrences of catastrophic events or natural disasters,
volatility of Class A and Class B common stock, changes in dividend
policy, the uninsured nature of any investment in Class A or Class B
common stock, voting control of Class B stockholders, anti-takeover
provisions, controlled company status, dilution as a result of future
equity issuances, 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.

Second Quarter 2018 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss
the second quarter of 2018 results at 11 a.m. Eastern Time (9 a.m.
Mountain Time) on Thursday, July 26, 2018. 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 p.m.
Eastern Time (11 a.m. Mountain Time) on July 26, 2018 through 9 a.m.
Eastern Time (7 a.m. Mountain Time) on August 25, 2018, by dialing
1-877-344-7529 (using conference ID 10121725). 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 banking offices, including detached drive-up
facilities, in communities across Idaho, Montana, Oregon, South Dakota,
Washington, and Wyoming. 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.

 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income

(Unaudited)

 
      Quarter Ended     % Change
(In millions, except % and per share data)       Jun 30,
2018
    Mar 31,
2018
    Dec 31,
2017
    Sep 30,
2017
  Jun 30,
2017

2Q18 vs
1Q18

   

2Q18 vs
2Q17

Net interest income $ 103.8     $ 99.8     $ 100.8     $ 100.8   $ 79.3 4.0 %     30.9 %
Net interest income on a fully-taxable equivalent ("FTE") basis 104.5 100.3 102.0 101.9 80.4 4.2 30.0
Provision for loan losses 2.9 2.1 3.5 3.4 2.4 38.1 20.8
Non-interest income:
Payment services revenues 12.9 10.5 12.3 12.4 10.2 22.9 26.5
Mortgage banking revenues 7.2 5.4 6.5 8.2 7.6 33.3 (5.3 )
Wealth management revenues 5.8 5.9 5.4 5.5 5.1 (1.7 ) 13.7
Service charges on deposit accounts 5.3 5.6 6.0 5.9 5.1 (5.4 ) 3.9
Other service charges, commissions and fees 3.8       3.9       3.7       3.6     3.4   (2.6 )     11.8  
Total fee-based revenues 35.0 31.3 33.9 35.6 31.4 11.8 11.5
Investment securities gains (losses) (0.1 ) (0.3 ) NM NM
Other income 2.6       3.9       3.4       3.0     5.8   (33.3 )     (55.2 )

Total non-interest income

37.6 35.2 37.2 38.3 37.2 6.8 1.1
Non-interest expense:
Salaries and wages 34.3 34.6 34.3 34.7 28.0 (0.9 ) 22.5
Employee benefits 12.3 11.3 8.0 10.2 9.8 8.8 25.5
Occupancy and equipment 8.9 9.4 9.7 9.2 8.0 (5.3 ) 11.3
Core deposit intangible amortization 1.7 1.8 1.9 1.9 1.1 (5.6 ) 54.5
Other expenses 27.8 26.3 27.7 25.5 23.4 5.7 18.8
Other real estate owned (income) expense (0.1 ) 0.2 0.2 0.2 NM NM
Acquisition related expenses       2.3       3.3       13.0     10.1   (100.0 )     (100.0 )
Total non-interest expense 84.9       85.9       85.1       94.7     80.4   (1.2 )     5.6  
Income before taxes 53.6 47.0 49.4 41.0 33.7 14.0 59.1
Income taxes 11.9       10.3       15.2       13.7     11.9   15.5        
Net income $ 41.7       $ 36.7       $ 34.2       $ 27.3     $ 21.8   13.6 %     91.3 %
 
Weighted-average basic shares outstanding 56,335 56,241 56,022 56,094 47,613 0.2 % 18.3 %
Weighted-average diluted shares outstanding 56,699 56,652 56,479 56,531 48,074 0.1 17.9
Earnings per share - basic $ 0.74 $ 0.65 $ 0.61 $ 0.49 $ 0.46 13.8 60.9
Earnings per share - diluted 0.74 0.65 0.61 0.48 0.45 13.8 64.4
 
 
NM - not meaningful
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

(Unaudited)

 
                % Change
(In millions, except % and per share data)     Jun 30,
2018
    Mar 31,
2018
    Dec 31,
2017
    Sep 30,
2017
    Jun 30,
2017

2Q18 vs
1Q18

   

2Q18 vs
2Q17

Assets:            
Cash and cash equivalents $ 712.0 $ 744.2 $ 758.9 $ 882.8 $ 919.8 (4.3 )% (22.6 )%
Investment securities 2,618.9 2,743.0 2,693.2 2,617.7 2,609.6 (4.5 ) 0.4
Loans held for investment 7,708.4 7,614.5 7,567.7 7,502.4 7,525.6 1.2 2.4
Mortgage loans held for sale 50.3       32.3       46.6       49.7       30.4   55.7       65.5  
Total loans 7,758.7 7,646.8 7,614.3 7,552.1 7,556.0 1.5 2.7
Less allowance for loan losses 74.1       73.5       72.1       74.6       75.7   0.8       (2.1 )
Net loans 7,684.6       7,573.3       7,542.2       7,477.5       7,480.3     1.5       2.7  
Goodwill and intangible assets (excluding mortgage servicing rights) 519.2 520.9 521.8 524.0 525.2 (0.3 ) (1.1 )
Company owned life insurance 262.7 261.9 260.6 258.9 257.5 0.3 2.0
Premises and equipment 233.7 240.2 241.9 242.9 243.2 (2.7 ) (3.9 )
Other real estate owned 14.9 11.0 10.1 10.3 11.3 35.5 31.9
Mortgage servicing rights 26.0 25.2 24.8 24.4 23.7 3.2 9.7
Other assets 163.7       153.7       159.8       168.0       165.8   6.5       (1.3 )
Total assets $ 12,235.7       $ 12,273.4       $ 12,213.3       $ 12,206.5       $ 12,236.4   (0.3 )%     %
 
Liabilities and stockholders' equity:
Deposits $ 9,945.5 $ 10,025.9 $ 9,934.9 $ 9,933.5 $ 10,020.0 (0.8 )% (0.7 )%
Securities sold under repurchase agreements 641.8 633.8 643.0 635.3 579.8 1.3 10.7
Long-term debt 15.7 15.7 13.1 8.0 28.0 NM (43.9 )
Subordinated debentures held by subsidiary trusts 82.5 82.5 82.5 82.5 82.5 NM NM
Other liabilities 91.9       83.1       112.2       127.8       120.7   10.6       (23.9 )
Total liabilities 10,777.4       10,841.0       10,785.7       10,787.1       10,831.0   (0.6 )     (0.5 )
Stockholders' equity:
Common stock 690.7 688.0 687.0 686.5 685.3 0.4 0.8
Retained earnings* 802.6 776.7 752.6 731.9 718.1 3.3 11.8
Accumulated other comprehensive income (loss)* (35.0 )     (32.3 )     (12.0 )     1.0       2.0   8.4       NM
Total stockholders' equity 1,458.3       1,432.4       1,427.6       1,419.4       1,405.4   1.8       3.8  
Total liabilities and stockholders' equity $ 12,235.7       $ 12,273.4       $ 12,213.3       $ 12,206.5       $ 12,236.4   (0.3 )%     %
 
Common shares outstanding at period end 56,761 56,699 56,466 56,456 56,445 0.1 % 0.6 %
Book value at period end $ 25.69 $ 25.26 $ 25.28 $ 25.14 $ 24.90 1.7 3.2
Tangible book value at period end** 16.54 16.07 16.04 15.86 15.57 3.0 6.3

 

NM - not meaningful
*Retained earnings and accumulated other comprehensive income (loss)
amounts prior to March 31, 2018 included herein are exclusive of
reclassifications required by the proposed Accounting Standard
Update, "Income Statement—Reporting Comprehensive Income
(Topic 220)
" issued January 18, 2018 by the FASB and adopted
effective January 1, 2018.
**Non-GAAP financial measure - see Non-GAAP Financial Measures
included herein for a reconciliation of book value at period end
(GAAP) to tangible book value at period end (non-GAAP).
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Loans and Deposits

(Unaudited)

 
                % Change
(In millions, except %)     Jun 30,
2018
    Mar 31,
2018
    Dec 31,
2017
    Sep 30,
2017
    Jun 30,
2017

2Q18 vs
1Q18

   

2Q18 vs
2Q17

           
Loans:
Real Estate:
Commercial real estate* $ 2,853.3 $ 2,821.9 $ 2,822.9 $ 2,758.6 $ 2,759.7 1.1 % 3.4 %
Construction:
Land acquisition and development 355.6 364.6 348.7 352.2 339.9 (2.5 ) 4.6
Residential 227.8 230.6 240.2 234.0 219.7 (1.2 ) 3.7
Commercial 134.3       140.8       119.4       117.0       121.6   (4.6 )     10.4  
Total construction 717.7 736.0 708.3 703.2 681.2 (2.5 ) 5.4
Residential real estate* 1,486.2 1,486.6 1,487.4 1,499.0 1,522.9 (2.4 )
Agricultural real estate 175.7       156.9       158.2       160.3       163.2   12.0       7.7  
Total real estate 5,232.9 5,201.4 5,176.8 5,121.1 5,127.0 0.6 2.1
Consumer
Indirect 795.4 782.9 784.7 788.8 779.0 1.6 2.1
Other 182.5 173.0 175.1 177.6 175.8 5.5 3.8
Credit card 77.3       75.2       74.6       72.2       75.6   2.8       2.2  
Total consumer 1,055.2 1,031.1 1,034.4 1,038.6 1,030.4 2.3 2.4
Commercial 1,266.0 1,244.1 1,215.4 1,186.2 1,210.9 1.8 4.6
Agricultural 151.2 133.9 136.2 152.7 149.1 12.9 1.4
Other 3.1       4.0       4.9       3.8       8.2   (22.5 )     (62.2 )
Loans held for investment 7,708.4 7,614.5 7,567.7 7,502.4 7,525.6 1.2 2.4
Loans held for sale 50.3       32.3       46.6       49.7       30.4   55.7       65.5  
Total loans $ 7,758.7       $ 7,646.8       $ 7,614.3       $ 7,552.1       $ 7,556.0   1.5 %     2.7 %
 
*Certain reclassifications, none of which were material, have been
made to conform certain June 30, 2017 amounts to the other periods
presented. These reclassifications did not change previously
reported total loans.
 
Deposits:
Non-interest bearing $ 2,884.2 $ 2,897.6 $ 2,900.0 $ 2,965.3 $ 2,897.8 (0.5 )% (0.5

)%

Interest bearing:
Demand 2,859.2 2,853.3 2,787.5 2,693.3 2,853.4 0.2 0.2
Savings 3,062.0 3,140.3 3,095.4 3,092.7 3,066.0 (2.5 ) (0.1 )
Time, $100 and over 425.1 420.6 432.0 452.9 469.6 1.1 (9.5 )
Time, other 715.0       714.1       720.0       729.3       733.2   0.1       (2.5 )
Total interest bearing 7,061.3       7,128.3       7,034.9       6,968.2       7,122.2   (0.9 )     (0.9 )
Total deposits $ 9,945.5       $ 10,025.9       $ 9,934.9       $ 9,933.5       $ 10,020.0   (0.8 )%     (0.7 )%
 
Total core deposits(1) $ 9,520.4 $ 9,605.3 $ 9,502.9 $ 9,480.6 $ 9,550.4 (0.9 )% (0.3 )%

 

(1) Core deposits are defined as total deposits less time
deposits, $100 and over
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Credit Quality

(Unaudited)

 
                % Change
(In millions, except %)     Jun 30,
2018
    Mar 31,
2018
    Dec 31,
2017
    Sep 30,
2017
    Jun 30,
2017

2Q18 vs
1Q18

   

2Q18 vs
2Q17

           
Allowance for Loan Losses:
Allowance for loan losses $ 74.1 $ 73.5 $ 72.1 $ 74.6 $ 75.7 0.8 % (2.1 )%
As a percentage of period-end loans 0.96 % 0.96 % 0.95 % 0.99 % 1.00 %
 
Net charge-offs during quarter $ 2.3 $ 0.7 $ 6.0 $ 4.6 $ 2.9 228.6 % (20.7 )%
Annualized as a percentage of average loans 0.12 % 0.04 % 0.31 % 0.24 % 0.19 %
 
Non-Performing Assets:
Non-accrual loans $ 69.3 $ 63.1 $ 69.4 $ 74.5 $ 76.7 9.8 % (9.6 )%
Accruing loans past due 90 days or more 6.1       3.7       3.1       5.7       9.4   64.9       (35.1 )
Total non-performing loans 75.4 66.8 72.5 80.2 86.1 12.9 (12.4 )
Other real estate owned 14.9       11.0       10.1       10.3       11.3   35.5       31.9  
Total non-performing assets $ 90.3       $ 77.8       $ 82.6       $ 90.5       $ 97.4   16.1 %     (7.3 )%
 
Non-performing assets as a percentage of:
Total loans and OREO 1.16 % 1.02 % 1.08 % 1.20 % 1.29 %
Total assets 0.74 0.63 0.68 0.74 0.80
 
Accruing Loans 30-89 Days Past Due $ 40.0 $ 53.6 $ 49.0 $ 53.5 $ 44.6 (25.4 )% (10.3 )%
Accruing TDRs 7.2 6.9 12.6 10.9 15.0 4.3 (52.0 )
 
Criticized Loans:
Special Mention $ 165.2 $ 159.5 $ 155.1 $ 147.1 $ 163.1 3.6 % 1.3 %
Substandard 187.9 212.4 217.2 239.3 222.4 (11.5 ) (15.5 )
Doubtful 29.1       24.6       28.2       36.1       44.2   18.3       (34.2 )
Total $ 382.2       $ 396.5       $ 400.5       $ 422.5       $ 429.7   (3.6 )%     (11.1 )%
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Selected Ratios - Annualized

(Unaudited)

 
    Jun 30,
2018
      Mar 31,
2018
    Dec 31,
2017
    Sep 30,
2017
    Jun 30,
2017
Annualized Financial Ratios (GAAP)
Return on average assets 1.38 %     1.22 %     1.11 %     0.88 %     0.88 %
Return on average common equity 11.61 10.34 9.52 7.67 7.68
Yield on average earning assets 4.21 4.05 4.00 4.00 3.89
Cost of average interest bearing liabilities 0.47 0.41 0.40 0.40 0.40
Interest rate spread 3.74 3.64 3.60 3.60 3.49
Net interest margin ratio 3.87 3.75 3.71 3.71 3.60
Efficiency ratio 58.84 62.32 60.29 66.71 68.10
Loan to deposit ratio 78.01 76.27 76.64 76.03 75.41
 
Annualized Financial Ratios - Operating** (Non-GAAP)
Tangible book value per common share $ 16.54 $ 16.07 $ 16.04 $ 15.86 $ 15.59
Tangible common stockholders' equity to tangible assets 8.02 % 7.76 % 7.75 % 7.66 % 7.52 %
Return on average tangible common equity 18.16 16.23 15.04 12.23 10.97
 
Consolidated Capital Ratios:
Total risk-based capital to total risk-weighted assets 12.98 % * 12.90 % 12.76 % 12.76 % 12.56 %
Tier 1 risk-based capital to total risk-weighted assets 12.15 * 12.07 11.93 11.90 11.69
Tier 1 common capital to total risk-weighted assets 11.25 * 11.15 11.04 11.02 10.77
Leverage Ratio 9.28 * 9.07 8.86 8.71 10.65

 

*Preliminary estimate - may be subject to change.
**Non-GAAP financial measures - see Non-GAAP Financial Measures
included herein for a reconciliation of return on average common
equity (GAAP) to return on average tangible common equity, and
tangible common stockholders' equity to tangible assets (non-GAAP).
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets

(Unaudited)

 
    Three Months Ended
June 30, 2018     March 31, 2018     June 30, 2017
(In millions, except %)     Average
Balance
    Interest     Average
Rate
Average
Balance
    Interest     Average
Rate
Average
Balance
    Interest     Average
Rate
Interest earning assets:                        
Loans (1) (2) $ 7,688.0 $ 96.9 5.06 % $ 7,590.6 $ 92.0 4.92 % $ 6,128.9 $ 74.5 4.88 %
Investment securities (2) 2,691.2 14.7 2.19 2,695.6 14.0 2.11 2,285.7 11.1 1.95
Interest bearing deposits in banks 446.2 2.0 1.80 553.2 2.1 1.55 547.8 1.3 0.98
Federal funds sold 1.0             0.2             1.2            
Total interest earnings assets 10,826.4 113.6 4.21 % 10,839.6 108.1 4.05 % 8,963.6 86.9 3.89 %
Non-earning assets 1,324.2             1,319.6             1,012.2            
Total assets $ 12,150.6             $ 12,159.2             $ 9,975.8            
Interest bearing liabilities:
Demand deposits $ 2,811.7 $ 1.8 0.26 % $ 2,797.8 $ 1.6 0.23 % $ 2,434.7 $ 1.3 0.22 %
Savings deposits 3,089.0 2.7 0.35 3,134.2 2.3 0.30 2,463.5 1.8 0.30
Time deposits 1,135.1 2.6 0.92 1,142.0 2.3 0.82 1,061.5 1.8 0.69
Repurchase agreements 655.4 0.7 0.43 635.2 0.4 0.27 565.7 0.3 0.19
Other borrowed funds 1.5 3.1 0.1 18.36 NM
Long-term debt 14.2 0.3 8.47 14.2 0.2 5.64 28.1 0.5 6.85
Subordinated debentures held by subsidiary trusts 82.5     1.0       4.86   82.5     0.9       4.37   82.5     0.8       3.80  
Total interest bearing liabilities 7,789.4 9.1 0.47 % 7,809.0 7.8 0.41 % 6,636.0 6.5 0.40 %
Non-interest bearing deposits 2,825.6 2,819.8 2,131.1
Other non-interest bearing liabilities 94.6 92.2 67.3
Stockholders' equity 1,441.0             1,438.2             1,141.4            
Total liabilities and stockholders' equity $ 12,150.6             $ 12,159.2             $ 9,975.8            
Net FTE interest income $ 104.5 $ 100.3 $ 80.4
Less FTE adjustments (2)       (0.7 )             (0.5 )             (1.1 )      
Net interest income from consolidated statements of income       $ 103.8               $ 99.8               $ 79.3        
Interest rate spread 3.74 % 3.64 % 3.49 %
Net FTE interest margin (3) 3.87 % 3.75 % 3.60 %
Cost of funds, including non-interest bearing demand deposits (4) 0.34 % 0.30 % 0.30 %
 

(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.
 
 
FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures

(Unaudited)

 
        As Of or For the Quarter Ended
(In millions, except % and per share data)           Jun 30, 2018     Mar 31, 2018     Dec 31, 2017     Sep 30, 2017     Jun 30, 2017
Total common stockholders' equity (GAAP) (A) $ 1,458.3     $ 1,432.4     $ 1,427.6     $ 1,419.4     $ 1,405.4
Less goodwill and other intangible assets (excluding mortgage
servicing rights)
          519.2       520.9       521.8       524.0       525.2  
Tangible common stockholders' equity (Non-GAAP)     (B)     $ 939.1       $ 911.5       $ 905.8       $ 895.4       $ 880.2  
 
Total assets (GAAP) $ 12,235.7 $ 12,273.4 $ 12,213.3 $ 12,206.5 $ 12,236.4
Less goodwill and other intangible assets (excluding mortgage
servicing rights)
          519.2       520.9       521.8       524.0       525.2  
Tangible assets (Non-GAAP)     (C)     $ 11,716.5       $ 11,752.5       $ 11,691.5       $ 11,682.5       $ 11,711.2  
 
Average Balances:
Total common stockholders' equity (GAAP) (D) $ 1,441.0 $ 1,438.2 $ 1,427.8 $ 1,409.8 $ 1,141.4
Less goodwill and other intangible assets (excluding mortgage
servicing rights)
          519.7       521.5       523.5       525.3       341.6  
Average tangible common stockholders' equity (Non-GAAP)     (E)     $ 921.3       $ 916.7       $ 904.3       $ 884.5       $ 799.8  
 
Total quarterly average assets (F) $ 12,150.6 $ 12,159.2 $ 12,233.7 $ 12,251.2 $ 9,975.8
Annualized net income available to common shareholders (G) 167.3 148.8 136.0 108.1 87.7
Common shares outstanding (H) 56,761 56,699 56,466 56,456 56,445
 
Return on average assets (GAAP) (G)/(F) 1.38 % 1.22 % 1.11 % 0.88 % 0.88 %
Return on average common stockholders' equity (GAAP) (G)/(D) 11.61 10.34 9.52 7.67 7.68
Average common stockholders' equity to average assets (GAAP) (D)/(F) 11.86 11.83 11.67 11.51 11.44
Book value per common share (GAAP) (A)/(H) $ 25.69 $ 25.26 $ 25.28 $ 25.14 $ 24.90
Tangible book value per common share (Non-GAAP) (B)/(H) 16.54 16.07 16.04 15.86 15.59
Tangible common stockholders' equity to tangible assets (Non-GAAP) (B)/(C) 8.02 % 7.76 % 7.75 % 7.66 % 7.52 %
Return on average tangible common stockholders' equity (Non-GAAP) (G)/(E) 18.16 16.23 15.04 12.23 10.97

View Comments and Join the Discussion!