First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

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

$

12,402

5.4

%

29.9

%

Diluted earnings per common share

0.37

0.35

0.29

5.7

%

27.6

%

Dividends paid per common share

0.2500

0.1200

0.1125

108.3

%

122.2

%

Book value per common share

17.35

17.29

16.77

0.3

%

3.5

%

Tangible book value per common share*

12.97

12.90

12.33

0.5

%

5.2

%

Net tangible book value per common share*

14.37

14.30

13.74

0.5

%

4.6

%

Return on average common equity, annualized

8.55

%

8.22

%

6.84

%

Return on average tangible common equity, annualized*

11.45

%

11.07

%

9.31

%

Return on average assets, annualized

0.88

%

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

$

54,924

41,124

33.6

%

Diluted earnings per common share

1.27

0.96

32.3

%

Dividends paid per common share

0.61

0.45

35.6

%

Return on average common equity

7.46

%

5.86

%

Return on average tangible common equity*

10.07

%

8.06

%

Return on average assets

0.79

%

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 income

60,973

61,005

63,035

-0.1%

-3.3%

Non-interest income:

Income from the origination and sale of loans

12,321

11,665

8,087

5.6%

52.4%

Other service charges, commissions and fees

8,774

8,774

8,062

—%

8.8%

Service charges on deposit accounts

4,401

4,395

4,543

0.1%

-3.1%

Wealth management revenues

3,659

3,557

3,280

2.9%

11.6%

Investment securities gains, net

53

66

1,488

-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 income

243,786

250,852

-2.8%

Non-interest income:

Income from the origination and sale of loans

41,790

21,153

97.6%

Other service charges, commissions and fees

34,226

31,689

8.0%

Service charges on deposit accounts

17,412

17,647

-1.3%

Wealth management revenues

14,314

13,575

5.4%

Investment securities gains, net

348

1,544

-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 benefits

6,113

7,447

6,871

-17.9

%

-11.0

%

Occupancy, net

3,968

3,793

3,815