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Form 8-K FIRST INTERSTATE BANCSYS For: Jan 27

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January 27, 2016 4:39 PM EST



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 ------------------------------
FORM 8-K
 ------------------------------
 CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (date of earliest event reported): January 27, 2016
 ------------------------------
FIRST INTERSTATE BANCSYSTEM, INC.
(Exact name of registrant as specified in its charter)
 ------------------------------
 
 
 
 
 
Montana
 
001-34653
 
81-0331430
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File No.)
 
(IRS Employer
Identification No.)
 
 
 
 
401 North 31st Street, Billings, MT
 
59116
(Address of principal executive offices, including
 
(zip code)
(406) 255-5390
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
 ------------------------------
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a- 12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02 Results of Operations and Financial Condition.
On January 27, 2016, First Interstate BancSystem, Inc. (the “Registrant”) issued a press release regarding its financial results for the quarter ended December 31, 2015. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein. The information in this report shall not be treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibit 99.1 – Press Release dated January 27, 2016 regarding the Registrant’s financial results for the quarter ended December 31, 2015.





SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 27, 2016
 
 
 
 
 
FIRST INTERSTATE BANCSYSTEM, INC.
 
 
 
 
By:
/s/ KEVIN P. RILEY
 
 
Kevin P. Riley
 
 
President and Chief Executive Officer





For Immediate Release
 
 
Contact:
  
Marcy Mutch
  
NASDAQ: FIBK
 
  
Chief Financial Officer
First Interstate BancSystem, Inc.
(406) 255-5322
  
www.FIBK.com

    
First Interstate BancSystem, Inc. Reports Fourth Quarter Earnings;
Increases Dividend by 10%; Sets Annual Meeting Date

                
Billings, MT - January 27, 2016 - First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports fourth quarter 2015 net income of $23.4 million, or $0.51 per share, a 16% increase over third quarter 2015 net income of $20.2 million, or $0.44 per share. Exclusive of non-core acquisition and litigation expenses and net investment securities gains, the Company's fourth quarter 2015 core net income was $23.5 million, or $0.52 per share, as compared to core net income of $23.6 million, or $0.52 per share, for third quarter 2015.

For the year ended December 31, 2015, the Company reports net income of $86.8 million, or $1.90 per share, compared to $84.4 million, or $1.87 per share in 2014. During 2015, the Company recorded non-core expenses of $5.8 million, including $794 thousand of acquisition costs and $5.0 million of legal and settlement expenses. Exclusive of non-core acquisition and litigation expenses and net investment securities gains, the Company's 2015 core net income was $90.3 million, or $1.98 per share, as compared to core net income of $89.3 million, or $1.98 per share, in 2014.

HIGHLIGHTS

•
Core pre-tax, pre-provision net income of $38.5 million, a 4.4% increase over the prior quarter and a 2.3% increase from the same period in the prior year.
•
Annual core pre-tax, pre-provision net income of $142.9 million in 2015, a 9.2% increase over the prior year.
•
Net interest margin ratio of 3.49%, a 2 basis point increase from the prior quarter and an 11 basis point increase from the same period in the prior year.    
•
Organic loan growth of 6.4% year-over-year, total loan growth of 7.1% year-over-year.     
•
Loan to deposit ratio of 74.0% as of December 31, 2015, compared to 69.9% a year ago.

“We finished 2015 with a solid quarter driven by good loan and deposit growth, stable expense levels and a further reduction in criticized loans,” said Kevin Riley, President and Chief Executive Officer of First Interstate BancSystem, Inc. “We saw healthy loan demand throughout our markets and our loan growth was well balanced across our commercial, commercial real estate, construction, consumer and residential real estate portfolios. With the loan growth generating a higher level of revenue, we were able to improve our efficiency ratio and increase operating leverage," Riley continued.
“Moving into 2016, we anticipate a year of profitable growth driven by continued increases in both net interest income and non-interest income. We continue to implement cost rationalization plans across the organization so that we can maintain stable expense levels while increasing the investment in our digital banking platform. We are excited about enhancing our customer experience with a more robust set of digital banking products and services and believe the investment in our mobile and online banking capabilities will enhance our competitive positioning,” said Riley.

1


DIVIDEND DECLARATION

On January 21, 2016, the Company's board of directors declared a dividend of $0.22 per common share payable on
February 12, 2016 to owners of record as of February 1, 2016. This dividend equates to a 3.1% annual yield based on the $28.90 average closing price of the Company's common stock during fourth quarter 2015, and reflects a 10% increase from dividends paid during fourth quarter 2015 of $0.20 per common share.

ANNUAL MEETING DATE SET

On January 21, 2016, the Company's Board of Directors voted that the Annual Meeting of Shareholders be held on May 25, 2016, at the First Interstate Bank Operations Center, 1800 Sixth Avenue North, Billings, Montana at 4:00 p.m. Mountain Daylight Time. The record date for determination of shareholders entitled to notice of, and to vote at, the Annual Meeting is March 18, 2016.

RESULTS OF OPERATIONS

Fourth Quarter Results:

Net Interest Income. The Company's net interest income, on a fully taxable equivalent or FTE basis, increased $2.1 million to $69.5 million during fourth quarter 2015, as compared to $67.4 million during third quarter 2015, primarily due to an increase in loan yield combined with a 1.0% increase in average outstanding loans, a favorable shift in loan mix quarter-over-quarter and higher recoveries of charged-off interest. Interest accretion attributable to the fair valuation of acquired loans contributed $1.3 million of interest income during fourth quarter 2015, of which approximately $327 thousand was related to early pay-offs. This compares to interest accretion of $1.4 million during third quarter 2015, of which $307 thousand was related to early pay-offs. In addition, the Company recovered previously charged-off interest of $1.0 million during fourth quarter 2015, compared to $679 thousand during third quarter 2015.

The Company's net interest margin ratio increased 2 basis points to 3.49% during fourth quarter 2015, as compared to 3.47% during the third quarter 2015. 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 remained stable at 3.42% during the third and fourth quarters of 2015, and increased 10 basis points from 3.32% during fourth quarter 2014.

Provision for Loan Losses. The Company recorded a provision for loan losses of $3.3 million during fourth quarter 2015, compared to $1.1 million during third quarter 2015. The higher provision for loan losses in fourth quarter 2015, as compared to third quarter 2015, is reflective of loan growth and increases in specific reserves primarily related to the loans of one commercial real estate borrower.

Non-Interest Income. Non-interest income increased $413 thousand to $30.9 million during fourth quarter 2015, as compared to $30.5 million during third quarter 2015, primarily due to increases in other income resulting from higher returns on deferred compensation plan assets, which were partially offset by decreases in income from the origination and sale of mortgage loans.

Income from the origination and sale of loans decreased $701 thousand to $7.3 million during fourth quarter 2015, as compared to $8.0 million during third quarter 2015, due to seasonal declines in mortgage loan production which typically occur during the fourth quarter of each year. Mortgage loan production decreased 5% during fourth quarter 2015, as compared to third quarter 2015. This compares to an 11% decline during fourth quarter 2014, as compared to third quarter 2014. Loans originated for home purchases accounted for approximately 66% of fourth quarter 2015 loan production, as compared to approximately 74% during third quarter 2015.

Non-Interest Expense. Non-interest expense decreased $4.6 million to $60.9 million during fourth quarter 2015, as compared to $65.5 million during third quarter 2015. During the fourth quarter of 2015, the Company recorded non-core acquisition related expenses of $166 thousand, as compared to non-core acquisition, legal and settlement expenses of $5.6 million recorded during third quarter 2015. Exclusive of these non-core acquisition and litigation settlement expenses, non-interest expense increased $839 thousand, or 1.4%, to $60.8 million during fourth quarter 2015, compared to $59.9 million during third quarter 2015. During fourth quarter 2015, increases in employee benefits and OREO expenses were largely offset by decreases in salaries and wages expense.

Salaries and wages expense decreased $911 thousand to $24.5 million during fourth quarter 2015, as compared to $25.5 million during third quarter 2015. Lower incentive compensation accruals during the fourth quarter of 2015, as compared to third quarter 2015, were partially offset by separation payment expense of $730 thousand.

2



Employee benefits expense increased $264 thousand to $7.6 million during fourth quarter 2015, as compared to $7.3 million during third quarter 2015, primarily due to higher returns on deferred compensation plan assets and increases in group health insurance costs. These increases were partially offset by decreases in profit sharing plan accruals.

The Company recorded net OREO expense of $129 thousand during fourth quarter 2015, as compared to net OREO income of $720 thousand during third quarter 2015, due to decreases in net gains recorded on the sale of properties. During fourth quarter 2015, the Company recorded net gains of $129 thousand, as compared to net gains of $1.1 million recorded during third quarter 2015.
    
Year-to-Date Results:
    
Net Interest Income. Net FTE interest income increased $15.9 million to $268.7 million during 2015, as compared to $252.8 million in 2014, primarily due to growth in average loans and investment securities combined with a shift in the mix of deposits away from higher costing time deposit into lower costing demand and savings deposits.

The Company's net interest margin ratio was 3.46% during 2015, as compared to 3.49% in 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 was 3.40% during 2015, as compared to 3.43% during 2014.

Provision for Loan Losses. During the year ended December 31, 2015, the Company recorded provisions for loan losses of $6.8 million, as compared to a $6.6 million reversal of provisions for loan losses in 2014. Year-over-year increases in provisions for loan losses are reflective of loan growth and increases in specific reserves on impaired loans.
    
Non-Interest Income. Non-interest income increased $9.5 million to $120.9 million in 2015, as compared to $111.4 million in 2015. The increase was primarily driven by increases in income from the origination and sale of mortgage loans, increases in other service charges, commissions and fees and higher wealth management revenues.
    
Income from the origination and sale of loans increased $6.0 million to $30.0 million for the year ended December 31, 2015, as compared to $23.9 million in 2014, due to a 25% increase in mortgage loan production volume year-over-year. Loans originated for home purchases accounted for approximately 66% of 2015 loan production, as compared to approximately 75% of loan production in 2014.
    
Non-Interest Expense. Non-interest expense increased $11.1 million to $248.0 million in 2015, as compared to $236.9 million in 2014. Exclusive of non-core acquisition and litigation settlement expenses, non-interest expense increased $13.4 million to $242.2 million in 2015, compared to $228.9 million in 2014. The year-over-year increase is largely attributable to the additional operating expenses of Mountain West Financial Corp ("Mountain West"), which was acquired on July 31, 2014, and Absarokee Bancorporation, Inc. ("Absarokee"), which was acquired on July 24, 2015.
    
Salaries and wages expense increased $4.9 million to $101.5 million in 2015, as compared to $96.5 million in 2014 due to inflationary wage increases, higher commissions paid to mortgage loan originators due to higher loan production volumes, increased personnel costs resulting from the Mountain West and Absarokee acquisitions and separation payment expense recorded during fourth quarter 2015. These increases were partially offset by lower incentive compensation accruals reflective of changes to the Company's 2015 short-term incentive plan.
    
Employee benefits expense increased $608 thousand to $30.7 million in 2015, as compared to $30.1 million in 2014, primarily due to higher group health insurance cost reflective of increased claim costs in 2015 and increased benefits costs resulting from the Mountain West and Absarokee acquisitions. These increases were partially offset by lower returns on deferred compensation plan assets during 2015, as compared to 2014.
    
Furniture and equipment expense increased $1.7 million to $15.5 million in 2015, as compared to $13.8 million in 2014, primarily due to costs associated with the implementation of new software systems placed into service during the last half of 2014, the continued upgrade of systems during 2015 and increased maintenance and equipment costs resulting from the Mountain West and Absarokee acquisitions.
    
Net OREO income increased $1.2 million, to $1.5 million in 2015, as compared to $272 thousand in 2014, primarily due to increases in net gains recorded on the sale of OREO properties. The Company recorded net gains on the sale of OREO properties of $3.0 million in 2015, as compared to $1.8 million in 2014.
    

3


Other expenses increased $5.4 million to $64.6 million in 2015, as compared to $59.2 million in 2014. During 2015, the Company recorded write-downs aggregating $806 thousand in the fair value of two vacated bank buildings held for sale and recorded a one-time contract termination fee of $876 thousand related to a change in payment service provider. In addition, the Company recorded fraud losses of $1.7 million in 2015, as compared to $1.2 million in 2014, due to unusually high fraudulent credit card activity during the first half of 2015. The remaining year-over-year increase in other expense was primarily due to professional fees associated with the identification and execution of revenue enhancement strategies and a change in trust platform, additional legal expense of approximately $1.0 million in conjunction with legal settlements reached in 2015 and additional operating expenses resulting from the Mountain West and Absarokee acquisitions.

BALANCE SHEET
    
Total assets increased $124 million to $8.7 billion as of December 31, 2015, from $8.6 billion as of September 30, 2015. This increase was due to the deployment of funds generated primarily through organic growth in deposits and securities sold under repurchase agreements, into loans and interest bearing deposits in banks.

Total loans increased $70 million, or 1.3%, to $5.2 billion as of December 31, 2015, as compared to $5.1 billion as of September 30, 2015, with all major categories of loans, except agricultural loans, experiencing organic loan growth.

The most significant growth occurred in commercial real estate loans, which increased $42 million to $1.8 billion as of December 31, 2015, from $1.7 billion as of September 30, 2015. Management attributes this growth to continuing business expansion within the Company's market areas.

Agricultural loans decreased $13 million to $142 million as of December 31, 2015, from $155 million as of September 30, 2015, due to seasonal reductions in operating lines that typically occur during the fourth quarter of the year.

Total deposits increased $53 million, or less than 1.0%, to $7.1 billion as of December 31, 2015, as compared to $7.0 billion as of September 30, 2015. During the fourth quarter of 2015, the Company continued to experience a shift in the mix of deposits away from higher costing time deposits into lower costing savings and demand deposits. As of December 31, 2015, the mix of total deposits was 26% non-interest bearing demand, 31% interest bearing demand, 27% savings and 16% time.

Securities sold under repurchase agreements increased $73 million to $511 million as of December 31, 2015, from $438 million as of September 30, 2015, primarily due to fluctuations in the liquidity of our customers. All outstanding repurchase agreements were due in one day.

Long-term debt decreased $15 million to $28 million as of December 31, 2015, from $43 million as of September 30, 2015, due to the early repayment of a $15 million variable rate subordinated term loan with an original maturity date of February 28, 2018. There were no prepayment penalties associated with the repayment.

ASSET QUALITY
    
Asset quality remained stable during fourth quarter 2015 with non-performing assets ending the year at $78 million, or 0.90% of total assets, unchanged from September 30, 2015. Criticized loans showed improvement during fourth quarter, decreasing $23 million to $320 million as of December 31, 2015, from $344 million as of September 30, 2015, due to loan repayment and credit upgrades. In addition, net loan charge-offs declined to $728 thousand during fourth quarter 2015, as compared to $3 million during third quarter 2015.

The Company's allowance for loan losses as a percentage of period end loans increased slightly to 1.46% as of December 31, 2015, compared to 1.43% as of September 30, 2015.
 
ACQUISITION

On March 26, 2015, the Company entered into an agreement and plan of merger to acquire all of the outstanding stock of Absarokee Bancorporation, Inc. ("Absarokee"), a Montana-based bank holding company that operated one subsidiary bank, United Bank, with branches located in three Montana communities adjacent to the Company's existing market areas. The acquisition was completed on July 24, 2015 for cash consideration of $7.2 million. Immediately subsequent to the acquisition, United Bank was merged with and into the Company's existing bank subsidiary, First Interstate Bank. As of the date of the acquisition, Absarokee had total assets of $73 million, loans of $38 million and deposits of $64 million.


4


Fourth Quarter 2015 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2015 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Thursday, January 28, 2016. 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 January 28, 2016 through 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) on February 28, 2016, by dialing 1-877-344-7529 (using conference ID 10078575). 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 81 banking offices, including detached drive-up facilities, in 45 communities in Montana, Wyoming and 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.

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

5


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousands, except per share data)
 
 
2015
 
2014
INCOME STATEMENT SUMMARIES
 
4th Qtr
 
3rd Qtr
 
2nd Qtr
 
1st Qtr
 
4th Qtr
Net interest income
 
$
68,420

 
$
66,330

 
$
65,288

 
$
64,325

 
$
65,516

Net interest income on a fully-taxable equivalent ("FTE") basis
 
69,492

 
67,400

 
66,399

 
65,381

 
66,585

Provision for loan losses
 
3,289

 
1,098

 
1,340

 
1,095

 
118

Non-interest income:
 
 
 
 
 
 
 
 
 
 
Other service charges, commissions and fees
 
11,019

 
11,095

 
11,173

 
9,867

 
11,429

Income from the origination and sale of loans
 
7,282

 
7,983

 
8,802

 
5,906

 
5,554

Wealth management revenues
 
4,840

 
5,233

 
4,897

 
4,937

 
4,775

Service charges on deposit accounts
 
4,655

 
4,379

 
4,053

 
3,944

 
4,432

Investment securities gains (losses), net
 
62

 
23

 
46

 
6

 
(19
)
Other income
 
3,037

 
1,769

 
2,799

 
3,122

 
5,190

Total non-interest income
 
30,895

 
30,482

 
31,770

 
27,782

 
31,361

Non-interest expense:
 
 
 
 
 
 
 
 
 
 
Salaries and wages
 
24,549

 
25,460

 
26,093

 
25,349

 
23,717

Employee benefits
 
7,576

 
7,312

 
8,070

 
7,780

 
6,812

Occupancy, net
 
4,445

 
4,413

 
4,529

 
4,492

 
4,770

Furniture and equipment
 
4,179

 
3,849

 
3,703

 
3,793

 
4,120

Outsourced technology services
 
2,548

 
2,520

 
2,593

 
2,463

 
2,468

Other real estate owned (income) expense, net
 
129

 
(720
)
 
(823
)
 
(61
)
 
(61
)
Core deposit intangible amortization
 
837

 
842

 
855

 
854

 
855

Non-core acquisition and litigation expenses
 
166

 
5,566

 
(7
)
 
70

 
2,368

Other expenses
 
16,512

 
16,260

 
16,965

 
14,852

 
16,604

Total non-interest expense
 
60,941

 
65,502

 
61,978

 
59,592

 
61,653

Income before taxes
 
35,085

 
30,212

 
33,740

 
31,420

 
35,106

Income taxes
 
11,654

 
10,050

 
11,518

 
10,440

 
12,330

Net income
 
$
23,431

 
$
20,162

 
$
22,222

 
$
20,980

 
$
22,776

Core net income**
 
$
23,496


$
23,610

 
$
22,189

 
$
21,020

 
$
24,260

Core pre-tax, pre-provision net income**
 
$
38,478

 
$
36,853

 
$
35,027

 
$
32,579

 
$
37,611

 
 
 
 
 
 
 
 
 
 
 
PER COMMON SHARE DATA
 
 
 
 
 
 
 
 
 
 
Net income - basic
 
$
0.52

 
$
0.45

 
$
0.49

 
$
0.46

 
$
0.50

Net income - diluted
 
0.51

 
0.44

 
0.49

 
0.46

 
0.49

Core net income - diluted
 
0.52

 
0.52

 
0.49

 
0.46

 
0.53

Cash dividend paid
 
0.20

 
0.20

 
0.20

 
0.20

 
0.16

Book value at period end
 
20.92

 
20.70

 
20.32

 
20.13

 
19.85

Tangible book value at period end**
 
16.19

 
15.94

 
15.58

 
15.36

 
15.07

 
 
 
 
 
 
 
 
 
 
 
OUTSTANDING COMMON SHARES
 
 
 
 
 
 
 
 
 
 
At period-end
 
45,428,225

 
45,345,007

 
45,506,583

 
45,429,468

 
45,788,415

Weighted-average shares - basic
 
45,066,171

 
45,150,104

 
45,143,122

 
45,378,230

 
45,485,548

Weighted-average shares - diluted
 
45,549,075

 
45,578,978

 
45,606,686

 
45,840,191

 
46,037,344

 
 
 
 
 
 
 
 
 
 
 
SELECTED ANNUALIZED RATIOS
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.07
%
 
0.94
%
 
1.06
%
 
1.00
%
 
1.05
%
Core return on average assets**
 
1.07

 
1.10

 
1.06

 
1.00

 
1.12

Return on average common equity
 
9.83

 
8.60

 
9.68

 
9.38

 
10.09

Core return on average common equity**
 
9.86

 
10.07

 
9.66

 
9.40

 
10.75

Return on average tangible common equity**
 
12.73

 
11.20

 
12.65

 
12.35

 
13.34

Net FTE interest income to average earning assets
 
3.49

 
3.47

 
3.47

 
3.43

 
3.38

Core efficiency ratio **
 
59.62

 
61.12

 
63.14

 
63.04

 
59.71


6


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands, except per share data)
 
 
2015
 
2014
INCOME STATEMENT SUMMARIES
 
 
 
Net interest income
 
$
264,363

 
$
248,461

Net interest income on a fully-taxable equivalent ("FTE") basis
 
268,671

 
252,763

Provision for loan losses
 
6,822

 
(6,622
)
Non-interest income:
 
 
 
 
Other service charges, commissions and fees
 
43,154

 
40,742

Income from the origination and sale of loans
 
29,973

 
23,940

Wealth management revenues
 
19,907

 
18,996

Service charges on deposit accounts
 
17,031

 
16,567

Investment securities gains (losses), net
 
137

 
61

Other income
 
10,727

 
11,095

Total non-interest income
 
120,929

 
111,401

Non-interest expense:
 
 
 
 
Salaries and wages
 
101,451

 
96,513

Employee benefits
 
30,738

 
30,130

Occupancy, net
 
17,879

 
17,796

Furniture and equipment
 
15,524

 
13,816

Outsourced technology services
 
10,124

 
9,423

Other real estate owned (income) expense, net
 
(1,475
)
 
(272
)
Core deposit intangible amortization
 
3,388

 
2,251

Non-core acquisition and litigation expenses
 
5,795

 
8,017

Other expenses
 
64,589

 
59,195

Total non-interest expense
 
248,013

 
236,869

Income before taxes
 
130,457

 
129,615

Income taxes
 
43,662

 
45,214

Net income
 
$
86,795

 
$
84,401

Core net income**
 
$
90,314

 
$
89,349

Core pre-tax, pre-provision net income**
 
$
142,937

 
$
130,949

 
 
 
 
 
PER COMMON SHARE DATA
 
 
 
 
Net income - basic
 
$
1.92

 
$
1.89

Net income - diluted
 
1.90

 
1.87

Core net income - diluted
 
1.98

 
1.98

Cash dividend paid
 
0.80

 
0.64

 
 
 
 
 
OUTSTANDING COMMON SHARES
 
 
 
 
Weighted-average shares - basic
 
45,184,091

 
44,615,060

Weighted-average shares - diluted
 
45,646,418

 
45,210,561

 
 
 
 
 
SELECTED ANNUALIZED RATIOS
 
 
 
 
Return on average assets
 
1.02
%
 
1.06
%
Core return on average assets**
 
1.06

 
1.12

Return on average common equity
 
9.37

 
9.86

Core return on average common equity**
 
9.75

 
10.44

Return on average tangible common equity**
 
12.23

 
12.88

Net FTE interest income to average earning assets
 
3.46

 
3.49

Core efficiency ratio**
 
61.70

 
62.34




7


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
 
 
2015
 
2014
BALANCE SHEET SUMMARIES
 
Dec 31
 
Sept 30
 
Jun 30
 
Mar 31
 
Dec 31
Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
780,457

 
$
708,295

 
$
506,434

 
$
637,803

 
$
798,670

Investment securities
 
2,057,505

 
2,067,636

 
2,139,433

 
2,340,904

 
2,287,110

Loans held for investment:
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
1,793,258

 
1,750,797

 
1,704,073

 
1,670,829

 
1,639,422

Construction real estate
 
430,719

 
419,260

 
403,228

 
406,305

 
418,269

Residential real estate
 
1,032,851

 
1,020,445

 
999,038

 
997,123

 
999,903

Agricultural real estate
 
156,234

 
163,116

 
158,506

 
156,734

 
167,659

Consumer
 
844,353

 
831,961

 
799,126

 
768,462

 
762,471

Commercial
 
792,416

 
778,648

 
819,119

 
754,149

 
740,073

Agricultural
 
142,151

 
154,855

 
142,629

 
117,569

 
124,859

Other
 
1,339

 
1,712

 
2,905

 
377

 
3,959

Mortgage loans held for sale
 
52,875

 
55,686

 
75,322

 
55,758

 
40,828

Total loans
 
5,246,196

 
5,176,480

 
5,103,946

 
4,927,306

 
4,897,443

Less allowance for loan losses
 
76,817

 
74,256

 
76,552

 
75,336

 
74,200

Net loans
 
5,169,379

 
5,102,224

 
5,027,394

 
4,851,970

 
4,823,243

Premises and equipment, net
 
190,812

 
190,386

 
189,488

 
192,748

 
195,212

Goodwill and intangible assets (excluding mortgage servicing rights)
 
215,119

 
215,843

 
215,958

 
216,815

 
218,870

Company owned life insurance
 
187,253

 
185,990

 
177,625

 
154,741

 
153,821

Other real estate owned, net
 
6,254

 
8,031

 
11,773

 
15,134

 
13,554

Mortgage servicing rights, net
 
15,621

 
15,336

 
14,654

 
14,093

 
14,038

Other assets
 
105,796

 
110,789

 
103,459

 
104,334

 
105,418

Total assets
 
$
8,728,196

 
$
8,604,530

 
$
8,386,218

 
$
8,528,542

 
$
8,609,936

 
 
 
 

 
 
 
 
 
 
Liabilities and stockholders' equity:
 
 
 

 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
Non-interest bearing
 
$
1,823,716

 
$
1,832,535

 
$
1,757,641

 
$
1,757,664

 
$
1,791,364

Interest bearing
 
5,265,221

 
5,203,259

 
5,046,760

 
5,210,495

 
5,214,848

Total deposits
 
7,088,937

 
7,035,794

 
6,804,401

 
6,968,159

 
7,006,212

Securities sold under repurchase agreements
 
510,635

 
437,533

 
469,145

 
462,073

 
502,250

Accounts payable, accrued expenses and other liabilities
 
67,769

 
67,062

 
62,272

 
58,335

 
72,006

Long-term debt
 
27,885

 
43,089

 
43,068

 
43,048

 
38,067

Subordinated debentures held by subsidiary trusts
 
82,477

 
82,477

 
82,477

 
82,477

 
82,477

Total liabilities
 
7,777,703

 
7,665,955

 
7,461,363

 
7,614,092

 
7,701,012

Stockholders' equity:
 
 
 
 
 
 
 
 
 
 
Common stock
 
311,720

 
309,167

 
313,125

 
310,544

 
323,596

Retained earnings
 
638,367

 
623,967

 
612,875

 
599,727

 
587,862

Accumulated other comprehensive income (loss)
 
406

 
5,441

 
(1,145
)
 
4,179

 
(2,534
)
Total stockholders' equity
 
950,493

 
938,575

 
924,855

 
914,450

 
908,924

Total liabilities and stockholders' equity
 
$
8,728,196

 
$
8,604,530

 
$
8,386,218

 
$
8,528,542

 
$
8,609,936

 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED CAPITAL RATIOS
 
 
 
 
 
 
 
 
 
 
Total risk-based capital
 
15.36
%
*
15.28
%
 
15.37
%
 
15.43
%
 
16.15
%
Tier 1 risk-based capital
 
13.99

*
13.83

 
13.88

 
13.94

 
14.52

Tier 1 common capital to total risk-weighted assets
 
12.69

*
12.52

 
12.55

 
12.58

 
13.08

Leverage Ratio
 
10.12

*
10.13

 
10.11

 
9.73

 
9.61

Tangible common stockholders' equity to tangible assets**
 
8.64

 
8.62

 
8.68

 
8.39

 
8.22




8


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
 
 
2015
 
2014
ASSET QUALITY
 
Dec 31
 
Sep 30
 
Jun 30
 
Mar 31
 
Dec 31
Allowance for loan losses
 
$
76,817

 
$
74,256

 
$
76,552

 
$
75,336

 
$
74,200

As a percentage of period-end loans
 
1.46
%
 
1.43
%
 
1.50
%
 
1.53
%
 
1.52
%
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs (recoveries) during quarter
 
$
728

 
$
3,394

 
$
124

 
$
(41
)
 
$
149

Annualized as a percentage of average loans
 
0.06
%
 
0.26
%
 
0.01
%
 
—
%
 
0.01
%
 
 
 
 
 
 
 
 
 
 

Non-performing assets:
 
 
 
 
 
 
 
 
 

Non-accrual loans
 
$
66,385

 
$
66,359

 
$
70,848

 
$
73,941

 
$
62,182

Accruing loans past due 90 days or more
 
5,602

 
3,357

 
2,153

 
5,175

 
2,576

Total non-performing loans
 
71,987

 
69,716

 
73,001

 
79,116

 
64,758

Other real estate owned
 
6,254

 
8,031

 
11,773

 
15,134

 
13,554

Total non-performing assets
 
78,241

 
77,747

 
84,774

 
94,250

 
78,312

As a percentage of:
 
 
 
 
 
 
 
 
 
 
Total loans and OREO
 
1.49
%
 
1.50
%
 
1.66
%
 
1.91
%
 
1.59
%
Total assets
 
0.90
%
 
0.90
%
 
1.01
%
 
1.11
%
 
0.91
%
    
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
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

Q2 2015
1,340

 
124

 
76,552

 
31,178

 
15,127

 
73,001

 
84,774

Q3 2015
1,098

 
3,394

 
74,256

 
38,793

 
16,702

 
69,716

 
77,747

Q4 2015
3,289

 
728

 
76,817

 
42,869

 
15,419

 
71,987

 
78,241

    
CRITICIZED LOANS
Special Mention
 
Substandard
 
Doubtful
 
Total
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

Q2 2015
155,707

 
159,899

 
31,701

 
347,307

Q3 2015
155,157

 
163,846

 
24,547

 
343,550

Q4 2015
127,270

 
162,785

 
30,350

 
320,405


*Preliminary estimate - may be subject to change.
**See Non-GAAP Financial Measures included herein for a discussion regarding core 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.

9



FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
 
Three Months Ended
 
December 31, 2015
 
September 30, 2015
 
December 31, 2014
 
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (1) (2)
$
5,194,970

$
64,711

4.94
%
 
$
5,141,484

$
62,577

4.83
%
 
$
4,870,509

$
61,619

5.02
%
Investment securities (2)
2,059,585

8,958

1.73

 
2,097,835

8,927

1.69

 
2,195,178

9,413

1.70

Interest bearing deposits in banks
644,967

535

0.33

 
471,682

342

0.29

 
745,171

504

0.27

Federal funds sold
1,090

1

0.36

 
2,876

4

0.55

 
597

—

—

Total interest earnings assets
7,900,612

74,205

3.73

 
7,713,877

71,850

3.70

 
7,811,455

71,536

3.63

Non-earning assets
772,523

 
 
 
781,559

 
 
 
774,963

 
 
Total assets
$
8,673,135

 
 
 
$
8,495,436

 
 
 
$
8,586,418

 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
$
2,145,748

$
546

0.10
%
 
$
2,086,112

$
528

0.10
%
 
$
2,148,522

$
538

0.10
%
Savings deposits
1,949,512

645

0.13

 
1,924,612

645

0.13

 
1,845,601

634

0.14

Time deposits
1,142,342

2,127

0.74

 
1,150,223

2,068

0.71

 
1,252,410

2,369

0.75

Repurchase agreements
464,104

69

0.06

 
433,007

55

0.05

 
481,901

56

0.05

Other borrowed funds
5

—

—

 
6

—

—

 
11

—

—

Long-term debt
37,707

704

7.41

 
43,200

544

5.00

 
38,037

558

5.82

Subordinated debentures held by subsidiary trusts
82,477

622

2.99

 
82,477

610

2.93

 
98,930

796

3.19

Total interest bearing liabilities
5,821,895

4,713

0.32

 
5,719,637

4,450

0.31

 
5,865,412

4,951

0.33

Non-interest bearing deposits
1,847,528

 
 
 
1,787,419

 
 
 
1,751,023

 
 
Other non-interest bearing liabilities
58,250

 
 
 
58,623

 
 
 
74,378

 
 
Stockholders’ equity
945,462

 
 
 
929,757

 
 
 
895,605

 
 
Total liabilities and stockholders’ equity
$
8,673,135

 
 
 
$
8,495,436

 
 
 
$
8,586,418

 
 
Net FTE interest income
 
69,492

 
 
 
67,400

 
 
 
66,585

 
Less FTE adjustments (2)
 
(1,072
)
 
 
 
(1,070
)
 
 
 
(1,069
)
 
Net interest income from consolidated statements of income
 
$
68,420

 
 
 
$
66,330

 
 
 
$
65,516

 
Interest rate spread
 
 
3.41
%
 
 
 
3.39
%
 
 
 
3.30
%
Net FTE interest margin (3)
 
 
3.49
%
 
 
 
3.47
%
 
 
 
3.38
%
Cost of funds, including non-interest bearing demand deposits (4)
 
 
0.24
%
 
 
 
0.24
%
 
 
 
0.26
%

(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.


10


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets - continued
(Unaudited, $ in thousands)
 
Twelve Months Ended
 
December 31, 2015
 
December 31, 2014
 
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
Interest earning assets:
 
 
 
 
 
 
 
Loans (1) (2)
$
5,056,810

$
248,015

4.90
%
 
$
4,602,907

$
233,273

5.07
%
Investment securities (2)
2,191,968

37,167

1.70

 
2,122,587

36,755

1.73

Interest bearing deposits in banks
508,314

1,537

0.30

 
506,067

1,334

0.26

Federal funds sold
2,079

12

0.58

 
1,391

7

0.50

Total interest earnings assets
7,759,171

286,731

3.70

 
7,232,952

271,369

3.75

Non-earning assets
762,535

 
 
 
715,846

 
 
Total assets
$
8,521,706

 
 
 
$
7,948,798

 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
Demand deposits
$
2,101,988

$
2,105

0.10
%
 
$
1,992,565

$
2,094

0.11
%
Savings deposits
1,908,091

2,541

0.13

 
1,723,073

2,444

0.14

Time deposits
1,171,952

8,461

0.72

 
1,198,053

9,241

0.77

Repurchase agreements
456,255

231

0.05

 
454,265

237

0.05

Other borrowed funds
6

—

—

 
8

—

—

Long-term debt
40,521

2,300

5.68

 
37,442

2,016

5.38

Subordinated debentures held by subsidiary trusts
82,477

2,422

2.94

 
88,304

2,574

2.91

Total interest bearing liabilities
5,761,290

18,060

0.31

 
5,493,710

18,606

0.34

Non-interest bearing deposits
1,774,696

 
 
 
1,543,079

 
 
Other non-interest bearing liabilities
59,670

 
 
 
56,147

 
 
Stockholders’ equity
926,050

 
 
 
855,862

 
 
Total liabilities and stockholders’ equity
$
8,521,706

 
 
 
$
7,948,798

 
 
Net FTE interest income
 
268,671

 
 
 
252,763

 
Less FTE adjustments (2)
 
(4,308
)
 
 
 
(4,302
)
 
Net interest income from consolidated statements of income
 
$
264,363

 
 
 
$
248,461

 
Interest rate spread
 
 
3.39
%
 
 
 
3.41
%
Net FTE interest margin (3)
 
 
3.46
%
 
 
 
3.49
%
Cost of funds, including non-interest bearing demand deposits (4)
 
 
0.24
%
 
 
 
0.26
%

(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 interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by average interest earning assets for the period.
(4)
Calculated by dividing total interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.







11


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 may be presented before or 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 evaluating operating trends by excluding pre-tax amounts which the Company views as fluctuating widely based on economic conditions.

The following tables reconcile the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited, $ in thousands, except share and per share data)
 
 
2015
 
2014
As Of or For the Quarter Ended
 
Dec 31
 
Sep 30
 
Jun 30
 
Mar 31
 
Dec 31
Net income
 
$
23,431

 
$
20,162

 
$
22,222

 
$
20,980

 
$
22,776

Add back: income tax expense
 
11,654

 
10,050

 
11,518

 
10,440

 
12,330

Add back: provision for loan losses
 
3,289

 
1,098

 
1,340

 
1,095

 
118

Pre-tax, pre-provision net income
 
$
38,374

 
$
31,310

 
$
35,080

 
$
32,515

 
$
35,224

 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
23,431

 
$
20,162

 
$
22,222

 
$
20,980

 
$
22,776

Adj: investment securities (gains) losses, net
 
(62
)
 
(23
)
 
(46
)
 
(6
)
 
19

Plus: acquisition & nonrecurring litigation expenses
 
166

 
5,566

 
(7
)
 
70

 
2,368

Adj: income taxes
 
(39
)
 
(2,095
)
 
20

 
(24
)
 
(903
)
Total core net income
(A)
23,496

 
23,610

 
22,189

 
21,020

 
24,260

 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
23,431

 
$
20,162

 
$
22,222

 
$
20,980

 
$
22,776

Add back: income tax expense
 
11,654

 
10,050

 
11,518

 
10,440

 
12,330

Add back: provision for loan losses
 
3,289

 
1,098

 
1,340

 
1,095

 
118

Adj: investment securities (gains) losses, net
 
(62
)
 
(23
)
 
(46
)
 
(6
)
 
19

Plus: acquisition & nonrecurring litigation expenses
 
166

 
5,566

 
(7
)
 
70

 
2,368

Core pre-tax, pre-provision net income
 
$
38,478

 
$
36,853

 
$
35,027

 
$
32,579

 
$
37,611

 
 
 
 
 
 
 
 
 
 
 


12


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - continued
(Unaudited, $ in thousands, except share and per share data)
 
 
2015
 
2014
As Of or For the Quarter Ended
 
Dec 31
 
Sep 30
 
Jun 30
 
Mar 31
 
Dec 31
Total non-interest income
 
$
30,895

 
$
30,482

 
$
31,770

 
$
27,782

 
$
31,361

Adj: investment securities (gains) losses, net
 
(62
)
 
(23
)
 
(46
)
 
(6
)
 
19

Total core non-interest income
 
30,833

 
30,459

 
31,724

 
27,776

 
31,380

Net interest income
 
68,420

 
66,330

 
65,288

 
64,325

 
65,516

Total core revenue
(B)
$
99,253

 
$
96,789

 
$
97,012

 
$
92,101

 
$
96,896

 
 
 
 
 
 
 
 
 
 
 
Total non-interest expense
 
$
60,941

 
$
65,502

 
$
61,978

 
$
59,592

 
$
61,653

Less: acquisition & nonrecurring litigation expenses
 
(166
)
 
(5,566
)
 
7

 
(70
)
 
(2,368
)
Core non-interest expense
(C)
$
60,775

 
$
59,936

 
$
61,985

 
$
59,522

 
$
59,285

 
 
 
 
 
 
 
 
 
 
 
Total quarterly average stockholders' equity
(D)
$
945,462

 
$
929,757

 
$
921,229

 
$
907,293

 
$
895,605

Less: average goodwill and other intangible assets (excluding mortgage servicing rights)
 
(215,496
)
 
(215,829
)
 
(216,457
)
 
(218,511
)
 
(218,407
)
Average tangible common stockholders' equity
(E)
$
729,966

 
$
713,928

 
$
704,772

 
$
688,782

 
$
677,198

 
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity, period-end
 
$
950,493

 
$
938,575

 
$
924,855

 
$
914,450

 
$
908,924

Less: goodwill and other intangible assets (excluding mortgage servicing rights)
 
(215,119
)
 
(215,843
)
 
(215,958
)
 
(216,815
)
 
(218,870
)
Total tangible common stockholders' equity
(F)
$
735,374

 
$
722,732

 
$
708,897

 
$
697,635

 
$
690,054

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
8,728,196

 
$
8,604,530

 
$
8,386,218

 
8,528,542

 
8,609,936

Less: goodwill and other intangible assets (excluding mortgage servicing rights)
 
(215,119
)
 
(215,843
)
 
(215,958
)
 
(216,815
)
 
(218,870
)
Tangible assets
(G)
$
8,513,077

 
$
8,388,687

 
$
8,170,260

 
$
8,311,727

 
$
8,391,066

 
 
 
 
 
 
 
 
 
 
 
Total quarterly average assets
(H)
$
8,673,135

 
$
8,495,436

 
$
8,427,110

 
$
8,489,413

 
$
8,586,418

 
 
 
 
 
 
 
 
 
 
 
Total common shares outstanding, period end
(I)
45,428,225

 
45,345,007

 
45,506,583

 
45,429,468

 
45,788,415

Weighted-average common shares - diluted
(J)
45,549,075

 
45,578,978

 
45,606,686

 
45,840,191

 
46,037,344

 
 
 
 
 
 
 
 
 
 
 
Core earnings per share, diluted
(A/J)
$
0.52

 
$
0.52

 
$
0.49

 
$
0.46

 
$
0.53

Tangible book value per share, period-end
(F/I)
16.19

 
15.94

 
15.58

 
15.36

 
15.07

 
 
 
 
 
 
 
 
 
 
 
Annualized net income
(K)
$
92,960

 
$
79,991

 
$
89,132

 
$
85,086

 
$
90,361

Annualized core net income
(L)
93,218

 
93,670

 
89,000

 
85,248

 
96,249

 
 
 
 
 
 
 
 
 
 
 
Core return on average assets
(L/H)
1.07
%
 
1.10
%
 
1.06
%
 
1.00
%
 
1.12
%
Core return on average common equity
(L/D)
9.86

 
10.07

 
9.66

 
9.40

 
10.75

Return on average tangible common equity
(K/E)
12.73

 
11.20

 
12.65

 
12.35

 
13.34

Tangible common stockholders' equity to tangible assets
(F/G)
8.64

 
8.62

 
8.68

 
8.39

 
8.22

 
 
 
 
 
 
 
 
 
 
 
Core non-interest expense
(C)
$
60,775

 
$
59,936

 
$
61,985

 
$
59,522

 
$
59,285

Less: amortization of core deposit intangible
 
(837
)
 
(842
)
 
(855
)
 
(854
)
 
(855
)
Adj: OREO (expense) income
 
(129
)
 
720

 
823

 
61

 
61

Non-interest expense for core efficiency ratio
(M)
$
59,809

 
$
59,814

 
$
61,953

 
$
58,729

 
$
58,491

 
 
 
 
 
 
 
 
 
 
 
Total core revenue
(B)
$
99,253

 
$
96,789

 
$
97,012

 
$
92,101

 
$
96,896

Add: FTE adjustments
 
1,072

 
1,070

 
1,111

 
1,056

 
1,069

Total core revenue for core efficiency ratio
(N)
$
100,325

 
$
97,859

 
$
98,123

 
$
93,157

 
$
97,965

 
 
 
 
 
 
 
 
 
 
 
Core efficiency ratio
(M/N)
59.62
%
 
61.12
%
 
63.14
%
 
63.04
%
 
59.71
%
 
 
 
 
 
 
 
 
 
 
 

        

13


FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - continued
(Unaudited, $ in thousands, except share and per share data)
 
 
 
Dec 31,
 
 
Dec 31,
As Of or For the Year Ended
 
 
2015
 
 
2014
Net income
 
(A)
$
86,795

 
 
$
84,401

Add back: income tax expense
 
 
43,662

 
 
45,214

Add back: provision for loan losses
 
 
6,822

 
 
(6,622
)
Pre-tax, pre-provision net income
 
 
$
137,279

 
 
$
122,993

 
 
 
 
 
 
 
Net income
 
 
$
86,795

 
 
$
84,401

Adj: investment securities (gains) losses, net
 
 
(137
)
 
 
(61
)
Plus: acquisition & nonrecurring litigation expenses
 
 
5,795

 
 
8,017

Adj: income taxes
 
 
(2,139
)
 
 
(3,008
)
Total core net income
 
(B)
$
90,314

 
 
$
89,349

 
 
 
 
 
 
 
Net income
 
 
$
86,795

 
 
$
84,401

Add back: income tax expense
 
 
43,662

 
 
45,214

Add back: provision for loan losses
 
 
6,822

 
 
(6,622
)
Adj: investment securities (gains) losses, net
 
 
(137
)
 
 
(61
)
Plus: acquisition & nonrecurring litigation expenses
 
 
5,795

 
 
8,017

Core pre-tax, pre-provision net income
 
 
$
142,937

 
 
$
130,949

 
 
 
 
 
 
 
Total non-interest income
 
 
$
120,929

 
 
$
111,401

Adj: investment securities (gains) losses, net
 
 
(137
)
 
 
(61
)
Total core non-interest income
 
 
120,792

 
 
111,340

Net interest income
 
 
264,363

 
 
248,461

Total core revenue
 
(C)
$
385,155

 
 
$
359,801

 
 
 
 
 
 
 
Total non-interest expense
 
 
$
248,013

 
 
$
236,869

Less: acquisition & nonrecurring litigation expenses
 
 
(5,795
)
 
 
$
(8,017
)
Core non-interest expense
 
(D)
$
242,218

 
 
$
228,852

 
 
 
 
 
 
 
Total average stockholders' equity
 
(E)
926,050

 
 
$
855,862

Less: average goodwill and other intangible assets (excluding mortgage servicing rights)
 
 
(216,494
)
 
 
$
(200,740
)
Average tangible common stockholders' equity
 
(F)
$
709,556

 
 
$
655,122

 
 
 
 
 
 
 
Total average assets
 
(G)
$
8,521,706

 
 
$
7,948,798

 
 
 
 
 
 
 
Weighted-average common shares - diluted
 
(H)
45,646,418

 
 
45,210,561

 
 
 
 
 
 
 
Core earnings per share, diluted
 
(B/H)
$
1.98

 
 
$
1.98

 
 
 
 
 
 
 
Core return on average assets
 
(B/G)
1.06
%
 
 
1.12
%
Core return on average common equity
 
(B/E)
9.75

 
 
10.44

Return on average tangible common equity
 
(A/F)
12.23

 
 
12.88

 
 
 
 
 
 
 
Core non-interest expense
 
(D)
$
242,218

 
 
$
228,852

Less: amortization of core deposit intangible
 
 
(3,388
)
 
 
(2,251
)
Adj: OREO (expense) income
 
 
1,475

 
 
272

Non-interest expense for core efficiency ratio
 
(I)
$
240,305

 
 
$
226,873

 
 
 
 
 
 
 
Total core revenue
 
(C)
$
385,155

 
 
$
359,923

Add: FTE adjustments
 
 
4,308

 
 
4,032

Total core revenue for core efficiency ratio
 
(J)
$
389,463

 
 
$
363,955

 
 
 
 
 
 
 
Core efficiency ratio
 
(I/J)
61.70
%
 
 
62.34
%

14

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