First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

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First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

BILLINGS, Mont.--(BUSINESS WIRE)-- First Interstate BancSystem, Inc. (NAS: FIBK) reports fourth quarter 2012 net income available to common shareholders of $16.1 million, or $0.37 per diluted share, as compared to $15.3 million, or $0.35 per diluted share, for third quarter 2012, and $12.4 million, or $0.29 per diluted share, for fourth quarter 2011.

Significant financial statement items for the fourth quarter of 2012 include:

  • Income from the origination and sale of residential mortgage loans increased to a record high level of $12.3 million during the three months ended December 31, 2012. This represented a 5.6% increase over the prior quarter and a 52.4% increase over the same quarter of the prior year;
  • Net interest margin ratio declined 8 basis points during fourth quarter 2012, as compared to third quarter 2012, and 24 basis points as compared to fourth quarter 2011, due to lower yields earned on loan and investment portfolios;
  • Non-performing assets continued to decrease to the lowest level since 2009, declining to $174.6 million, or 2.26% of total assets, as of December 31, 2012, compared to $202.7 million, or 2.72% of total assets, as of September 30, 2012, and $278.9 million, or 3.81% of total assets, as of December 31, 2011; and
  • Provision for loan losses was $8.0 million for the three months ended December 31, 2012, compared to $9.5 million for the three months ended September 30, 2012, and $13.8 million for the three months ended December 31, 2011.
        

RESULTS SUMMARY

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

 
As Of or For the Three Months Ended

Sequential Quarter
% Change

Year

Over Year
% Change

December 31,
2012
   September 30,
2012
   December 31,
2011
      
Net income available to common shareholders$16,114   $15,292   $12,4025.4%29.9%
Diluted earnings per common share0.370.350.295.7%27.6%
Dividends paid per common share0.25000.12000.1125108.3%122.2%
Book value per common share17.3517.2916.770.3%3.5%
Tangible book value per common share*12.9712.9012.330.5%5.2%
Net tangible book value per common share*14.3714.3013.740.5%4.6%
Return on average common equity, annualized8.55%8.22%6.84%
Return on average tangible common equity, annualized*11.45%11.07%9.31%
Return on average assets, annualized0.88%0.86%0.72%
 
   As Of or For the Year Ended 
      Year
December 31,December 31,Over Year
    2012   2011   % Change
Net income available to common shareholders$54,92441,12433.6%
Diluted earnings per common share1.270.9632.3%
Dividends paid per common share0.610.4535.6%
Return on average common equity7.46%5.86%
Return on average tangible common equity*10.07%8.06%
Return on average assets0.79%0.61%
 

* See Non-GAAP Financial Measures included herein for a discussion regarding tangible and net tangible book value per common share.

 

"Our fourth quarter performance capped a strong year for the Company, resulting in a 32% increase in earnings per share year-over-year as well as significant improvements in return on equity and return on assets," said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. "Fourth quarter results were driven by continued robust activity in residential mortgage lending. Growth in this area is reflective of strong demand for refinancing in our markets, as well as enhancements we have made in our systems and processes that have enabled us to capture additional market share. We were also pleased to see further improvement in asset quality and a reduction in credit costs during the quarter. Total non-performing assets declined by 37% from the prior year, which reflects the diligent efforts of our lenders and credit officers in managing these assets to satisfactory resolutions," Garding further noted.

"Moving into 2013, we expect to deliver another year of strong profitability. Although modest loan demand and continued compression in our net interest margin will present challenges for growing our net interest income, we believe we can offset these pressures through further increases in our non-interest income, continued improvement in operating efficiencies, and a reduction in credit costs resulting from continued improvement in asset quality," said Mr. Garding.

         

REVENUE SUMMARY

(Unaudited; $ in thousands)

 
For the Three Months Ended

Sequential Quarter
% Change

Year Over Year
% Change

    December 31,
2012
   September 30,
2012
   December 31,
2011
      
Interest income$67,601   $68,175   $72,006-0.8%-6.1%
Interest expense   6,628    7,170    8,971    -7.6%   -26.1%
Net interest income60,97361,00563,035-0.1%-3.3%
Non-interest income:
Income from the origination and sale of loans12,32111,6658,0875.6%52.4%
Other service charges, commissions and fees8,7748,7748,062—%8.8%
Service charges on deposit accounts4,4014,3954,5430.1%-3.1%
Wealth management revenues3,6593,5573,2802.9%11.6%
Investment securities gains, net53661,488-19.7%-96.4%
Other income   1,427    1,725    1,537    -17.3%   -7.2%
Total non-interest income   30,635    30,182    26,997    1.5%   13.5%
Total revenues   $91,608    $91,187    $90,032    0.5%   1.8%
Tax equivalent net interest margin ratio   3.55%   3.63%   3.79%        
 
   For the Year Ended   

Year Over Year
% Change

    December 31,
2012
   December 31,
2011
   
Interest income$273,900   $292,883-6.5%
Interest expense   30,114    42,031    -28.4%
Net interest income243,786250,852-2.8%
Non-interest income:
Income from the origination and sale of loans41,79021,15397.6%
Other service charges, commissions and fees34,22631,6898.0%
Service charges on deposit accounts17,41217,647-1.3%
Wealth management revenues14,31413,5755.4%
Investment securities gains, net3481,544-77.5%
Other income   6,771    6,264    8.1%
Total non-interest income   114,861    91,872    25.0%
Total revenues   $358,647    $342,724    4.6%
Tax equivalent net interest margin ratio   3.66%   3.80%    
 

Net Interest Income

The Company's net interest margin ratio decreased to 3.55% during fourth quarter 2012, as compared to 3.63% during third quarter 2012. The fourth quarter 2012 net interest margin ratio included $425 thousand of recoveries of charged-off interest. Exclusive of these interest recoveries, the Company's net interest margin ratio was 3.53% during fourth quarter 2012. The decline in the net interest margin ratio, as compared to third quarter 2012, was primarily due to lower yields earned on the Company's loan and investment portfolios. The impact of lower asset yields was partially offset by increases in average outstanding loans and investment securities and a 5 basis point reduction in the cost of interest-bearing liabilities due to a continuing favorable shift in the mix of deposits from higher costing time deposits into non-interest bearing demand deposits.

Decreases in net interest margin ratio during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011, were due to lower outstanding loan balances and lower yields earned on the Company's loan and investment portfolios, which were partially offset by reductions in the cost of interest bearing liabilities combined with a shift from higher-costing savings and time deposits to lower-costing demand deposits.

Non-interest Income

Non-interest income increased during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011 and the three months ended September 30, 2012, primarily due to increases in income from the origination and sale of residential mortgage loans. New loans for home purchases accounted for approximately 35% of our 2012 residential loan production, compared to 44% in 2011.

         

NON-INTEREST EXPENSE

(Unaudited; $ in thousands)

 
For the Three Months Ended

Sequential Quarter
% Change

Year

Over Year
% Change

    December 31,
2012
   September 30,
2012
   December 31,
2011
      
Non-interest expense:      
Salaries and wages$23,288$23,341$22,002-0.2%5.8%
Employee benefits6,1137,4476,871-17.9%-11.0%
Occupancy, net3,9683,7933,815
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