First Interstate BancSystem, Inc. (NASDAQ: FIBK) today reported
financial results for the second quarter of 2023. For the quarter,
the Company reported net income of $67.0 million, or $0.65 per
share, which compares to net income of $56.3 million, or $0.54 per
share, for the first quarter of 2023, and net income of $64.1
million, or $0.59 per share, for the second quarter of 2022.
For the second quarter of 2022, earnings included pre-tax
acquisition costs of $45.8 million, which were related to the
acquisition of Great Western Bancorp, Inc. (“Great Western”), the
parent company of Great Western Bank (“GWB”), which reduced
earnings by $0.34 per share during that quarter. The first and
second quarters of 2023 did not include comparable costs.
HIGHLIGHTS
- Net income of $67.0 million, or $0.65 per share, for the second
quarter of 2023, was impacted by $1.9 million in severance
expenses, or $0.01 per share, primarily a result of permanent
staffing reductions related to efficiency gains in our mortgage
fulfillment process.
- Overall total deposits decreased, as expected 2.2%, for the
second quarter of 2023, with growth of 1.6% during the month of
June 2023 offsetting seasonal declines occurring earlier in the
quarter. The Company does not hold brokered deposits.
- Net interest margin, on a fully taxable equivalent (“FTE”)
basis, decreased to 3.12% for the second quarter of 2023, a 24
basis point decrease from the first quarter of 2023. Excluding
income related to purchase accounting accretion, the adjusted net
interest margin1, on a FTE basis, decreased to 3.05% for the second
quarter of 2023, a 24 basis point decrease from the first quarter
of 2023.
- Loans held for investment increased $17.7 million, or an
annualized 0.4% during the second quarter of 2023 compared to the
first quarter of 2023. Commercial real estate loans increased
$133.1 million, or an annualized 6.1%, primarily a result of
construction loans transitioning to permanent financing. Loans held
for investment to deposit ratio remained relatively stable at
77.5%, as of June 30, 2023, compared to 75.7% as of March 31,
2023.
- Changes in accumulated other comprehensive loss related to
unrealized losses on available-for-sale securities partially offset
by an increase in retained earnings resulted in book value per
common share of $29.72 as of June 30, 2023, compared to $30.28 as
of March 31, 2023, and $30.36 as of June 30, 2022. Tangible book
value per common share1 was $18.12 as of June 30, 2023, compared to
$18.57 as of March 31, 2023 and $18.92 as of June 30, 2022. As of
June 30, 2023, the accumulated other comprehensive loss position is
equal to $4.37 of tangible book value per common share.
“We continued to deliver solid financial performance in the
second quarter in a difficult environment for banking and we are
encouraged that we are beginning to see a reversion to historical
trends in our deposit base,” said Kevin P. Riley, President and
Chief Executive Officer of First Interstate BancSystem, Inc. “Our
markets are experiencing healthy economic conditions, most notably
in the tourism and agriculture industries, where we are seeing
significant increases in visitors to our national parks and have
sufficient moisture levels in most parts of our footprint. We are
focused on staying true to our community banking model by taking
care of our clients and servicing our markets, which has allowed us
to continue growing our client base. Over the first half of the
year we have added a significant number of net new deposit
accounts, as clients look to move their banking relationship to a
strong financial institution with a reputation for service.”
“Over the rest of the year we are moving forward as planned with
a number of strategic initiatives, which includes rolling out a new
suite of consumer credit cards in August. In addition, recent
changes within our Mortgage department are focused on using the
strength of our branch network to originate mortgages within our
communities in a more efficient manner and evidence our continued
commitment to managing costs. We believe these initiatives will
help us to continue growing our customer base and expanding our
relationships with existing customers, particularly in our newer
markets, which will enable us to continue generating long-term
profitable growth and further enhancing the value of our
franchise,” said Mr. Riley.
___________
1 Non-GAAP financial measure - see Non-GAAP Financial Measures
included herein for a reconciliation to GAAP measures.
DIVIDEND DECLARATION
On July 25, 2023, the Company’s board of directors declared a
dividend of $0.47 per common share, payable on August 17, 2023, to
common stockholders of record as of August 7, 2023. The dividend
equates to a 7.5% annualized yield based on the $25.21 per share
average closing price of the Company’s common stock as reported on
NASDAQ during the second quarter of 2023.
NET INTEREST INCOME
Net interest income decreased $20.5 million, or 8.6%, to $218.4
million, during the second quarter of 2023, compared to net
interest income of $238.9 million during the first quarter of 2023
and decreased $20.6 million, or 8.6%, during the second quarter of
2023 from the second quarter of 2022, primarily due to an increase
in interest expense as a result of a higher levels and costs of
interest-bearing liabilities.
- Interest accretion attributable to the fair valuation of
acquired loans from acquisitions contributed to net interest income
during the second quarter of 2023, the first quarter of 2023, and
the second quarter of 2022, in the amounts of $4.6 million, $5.2
million, and $16.7 million, respectively.
The net interest margin ratio, on an FTE basis, was 3.12% for
the second quarter of 2023, compared to 3.36% reported during the
first quarter of 2023, and 3.25% during the second quarter of 2022.
Excluding interest accretion from the fair value of acquired loans,
on a quarter-over-quarter basis, the net interest margin ratio
decreased 24 basis points, primarily driven by higher short-term
borrowing costs, and higher interest-bearing deposit costs, which
was partially offset by loan yield expansion and a modestly
favorable earning asset mix. Excluding interest accretion from the
fair value of acquired loans, on a year-over-year basis, the net
interest margin ratio increased two basis points, primarily as a
result of increased yields on earning assets and a shift in the mix
of earning assets from investment securities and cash to loans,
partially offset by higher short-term borrowings and higher costs
of interest-bearing liabilities.
PROVISION FOR (REDUCTION OF) CREDIT LOSSES
During the second quarter of 2023, the Company recorded a
provision for credit losses of $11.7 million, including a provision
for unfunded commitments of $3.0 million and reduction of the
provision for credit losses for investment securities of $1.2
million. This compares to a provision for credit losses of $15.2
million during the first quarter of 2023 and a reduction of the
provision for credit losses of $1.7 million during the second
quarter of 2022.
For the second quarter of 2023, the allowance for credit losses
included net charge-offs of $11.4 million, or an annualized 0.25%
of average loans outstanding, compared to net charge-offs of $6.2
million, or an annualized 0.14% of average loans outstanding, for
the first quarter of 2023, and net charge-offs of $0.3 million, or
an annualized 0.01% of average loans outstanding, for the second
quarter of 2022. The net charge-offs for the second quarter of 2023
were largely comprised of one construction real estate credit in a
metro market.
The Company’s allowance for credit losses as a percentage of
period-end loans held for investment decreased to 1.23% at June 30,
2023 from 1.24% at March 31, 2023, and decreased from 1.28% at June
30, 2022. Coverage of non-performing loans decreased to 242.0% at
June 30, 2023, compared to 265.1% at March 31, 2023 and increased
from 200.5% at June 30, 2022. The allowance for credit losses on
off-balance sheet credit exposures increased to $20.8 million at
June 30, 2023, from $17.8 million at March 31, 2023.
NON-INTEREST INCOME
For the Quarter Ended
Jun 30, 2023
Mar 31, 2023
$ Change
% Change
Jun 30, 2022
$ Change
% Change
(Dollars in millions)
Payment services revenues
$
20.1
$
18.7
$
1.4
7.5
%
$
19.5
$
0.6
3.1
%
Mortgage banking revenues
2.6
2.3
0.3
13.0
5.0
(2.4
)
(48.0
)
Wealth management revenues
8.8
9.0
(0.2
)
(2.2
)
9.3
(0.5
)
(5.4
)
Service charges on deposit accounts
5.8
5.2
0.6
11.5
6.3
(0.5
)
(7.9
)
Other service charges, commissions, and
fees
2.4
2.4
—
—
3.6
(1.2
)
(33.3
)
Investment securities loss
(0.1
)
(23.4
)
23.3
(99.6
)
(0.1
)
—
—
Other income
4.5
2.2
2.3
104.5
6.3
(1.8
)
(28.6
)
Total non-interest income
$
44.1
$
16.4
$
27.7
168.9
%
$
49.9
$
(5.8
)
(11.6
)%
Non-interest income was $44.1 million for the second quarter of
2023, increasing $27.7 million compared to the first quarter of
2023. The primary driver of the increase was the realized loss of
$23.4 million on the disposition of available-for-sale investment
securities and a reduction of $1.9 million related to the fair
value of loans held for sale recognized through other income in the
first quarter of 2023.
Compared to the second quarter of 2022, non-interest income
decreased $5.8 million. The decrease was primarily due to decreases
in mortgage banking revenues, lower overdraft fees related to the
previously announced reduction to the Company’s non-sufficient
funds and overdraft practices, and other income. The decrease in
other income was related to gains on the sale of premises and
equipment and a recovery in the credit valuation discount on
derivatives acquired in the GWB acquisition during the second
quarter of 2022.
NON-INTEREST EXPENSE
For the Quarter Ended
Jun 30, 2023
Mar 31, 2023
$ Change
% Change
Jun 30, 2022
$ Change
% Change
(Dollars in millions)
Salaries and wages
$
68.1
$
65.6
$
2.5
3.8
%
$
74.8
$
(6.7
)
(9.0
)%
Employee benefits
19.3
22.8
(3.5
)
(15.4
)
19.4
(0.1
)
(0.5
)
Occupancy and equipment
17.3
18.4
(1.1
)
(6.0
)
17.0
0.3
1.8
Other intangible amortization
3.9
4.0
(0.1
)
(2.5
)
4.1
(0.2
)
(4.9
)
Other expenses
54.7
54.8
(0.1
)
(0.2
)
49.2
5.5
11.2
Other real estate owned expense
0.6
0.2
0.4
200.0
—
0.6
100.0
Acquisition related expenses
—
—
—
—
45.8
(45.8
)
(100.0
)
Total non-interest expense
$
163.9
$
165.8
$
(1.9
)
(1.1
)%
$
210.3
$
(46.4
)
(22.1
)%
The Company’s non-interest expense was $163.9 million for the
second quarter of 2023, a decrease of $1.9 million from the first
quarter of 2023. The quarter-over-quarter decrease was primarily
due to a decrease in payroll taxes included within employee
benefits which were partially offset by $1.9 million in severance
costs primarily related to permanent staffing reductions within the
mortgage group included within salaries and wages during the second
quarter of 2023.
Compared to the second quarter of 2022, non-interest expense
decreased by $46.4 million. The decrease is largely due to the
acquisition expenses incurred during the second quarter of 2022
related to the acquisition of GWB in addition to lower incentive
accruals included within salaries and wages during the second
quarter of 2023. These decreases were partially offset by an
increase in other expenses related to technology services, FDIC
insurance premiums, and credit card rewards.
BALANCE SHEET
Total assets decreased $661.4 million, or 2.1%, to $30,976.3
million as of June 30, 2023, from $31,637.7 million as of March 31,
2023, primarily due to a decrease in investment securities and cash
and cash equivalents as a result of a decline in deposits and the
paydown of other borrowed funds. Total assets decreased $1,085.5
million, or 3.4%, from $32,061.8 million as of June 30, 2022,
primarily due to declines in deposits and securities sold under
repurchase agreements, partially offset by an increase in
short-term borrowings.
Investment securities decreased $249.9 million, or 2.7%, to
$9,175.6 million as of June 30, 2023, from $9,425.5 million as of
March 31, 2023, and decreased $1,695.5 million, or 15.6%, from
$10,871.1 million as of June 30, 2022. The decrease from June 30,
2022 was the result of the disposition of $853.0 million of
investment securities during the first quarter of 2023 and normal
cash flow activity and declines in fair market values during the
period.
The following table presents the composition and comparison of
loans held for investment as of the quarters-ended:
June 30, 2023
March 31, 2023
$ Change
% Change
June 30, 2022
$ Change
% Change
Real Estate:
Commercial
$
8,813.9
$
8,680.8
$
133.1
1.5
%
$
7,857.7
$
956.2
12.2
%
Construction
1,836.5
1,893.0
(56.5
)
(3.0
)
1,759.5
77.0
4.4
Residential
2,198.3
2,191.1
7.2
0.3
2,060.4
137.9
6.7
Agricultural
755.7
769.7
(14.0
)
(1.8
)
821.5
(65.8
)
(8.0
)
Total real estate
13,604.4
13,534.6
69.8
0.5
12,499.1
1,105.3
8.8
Consumer:
Indirect
764.1
817.3
(53.2
)
(6.5
)
733.9
30.2
4.1
Direct and advance lines
144.0
146.9
(2.9
)
(2.0
)
157.3
(13.3
)
(8.5
)
Credit card
72.1
71.5
0.6
0.8
74.8
(2.7
)
(3.6
)
Total consumer
980.2
1,035.7
(55.5
)
(5.4
)
966.0
14.2
1.5
Commercial
3,002.7
3,028.0
(25.3
)
(0.8
)
3,036.0
(33.3
)
(1.1
)
Agricultural
688.0
660.4
27.6
4.2
672.0
16.0
2.4
Other, including overdrafts
1.7
1.6
0.1
6.3
—
1.7
100.0
Deferred loan fees and costs
(13.6
)
(14.6
)
1.0
(6.8
)
(10.6
)
(3.0
)
28.3
Loans held for investment, net of deferred
loan fees and costs
$
18,263.4
$
18,245.7
$
17.7
0.1
%
$
17,162.5
$
1,100.9
6.4
%
The ratio of loans held for investment to deposits increased to
77.5%, as of June 30, 2023, compared to 75.7% as of March 31, 2023,
and 63.9% as of June 30, 2022.
Total deposits seasonally decreased $527.8 million, or 2.2%, to
$23,579.2 million as of June 30, 2023, from $24,107.0 million as of
March 31, 2023, and decreased $3,284.6 million, or 12.2%, from
$26,863.8 million as of June 30, 2022, with decreases in all
categories with the exception of time deposits.
Securities sold under repurchase agreements decreased $40.9
million, or 4.2%, to $929.9 million as of June 30, 2023, from
$970.8 million as of March 31, 2023, and decreased $304.8 million,
or 24.7%, from $1,234.7 million as of June 30, 2022. The decreases
in securities sold under repurchase agreements correspond with
fluctuations in the liquidity needs of the Company’s clients.
Other borrowed funds is comprised of Federal Home Loan Bank
variable rate overnight and fixed rate borrowings with contractual
tenors of up to five-months. Other borrowed funds decreased $121.0
million, or 4.5%, to $2,589.0 million as of June 30, 2023, from
$2,710.0 million as of March 31, 2023, and increased $2,589.0
million from June 30, 2022.
Other liabilities increased $67.4 million, or 16.6%, to $473.1
million as of June 30, 2023, from $405.7 million as of March 31,
2023, primarily due to an increase in derivative liabilities of
$36.5 million, interest payable of $19.8 million, and accrued
salaries and employee benefits of $10.9 million. Year-over-year,
other liabilities increased $65.2 million, or 16.0%, as of June 30,
2023, from $407.9 million as of June 30, 2022, primarily due to an
increase in derivative liabilities of $63.6 million.
The Company is considered to be “well-capitalized” as of June
30, 2023, having exceeded all regulatory capital adequacy
requirements. During the second quarter of 2023, the Company paid
regular common stock dividends of approximately $48.9 million, or
$0.47 per share.
CREDIT QUALITY
As of June 30, 2023, non-performing assets increased $8.5
million, or 8.6%, to $107.2 million, compared to $98.7 million as
of March 31, 2023, primarily due to an increase in non-accrual
loans of $5.3 million, an increase in accruing loans past due 90
days or more of $2.2 million, and an increase in property
classified as other real estate owned of $1.0 million.
Criticized loans increased $20.0 million, or 3.2%, to $641.6
million as of June 30, 2023, from $621.6 million as of March 31,
2023.
NON-GAAP FINANCIAL MEASURES
In addition to results presented in accordance with accounting
principles generally accepted in the United States of America, or
GAAP, this press release contains the following non-GAAP financial
measures that management uses to evaluate our performance relative
to our capital adequacy standards: (i) tangible common
stockholders’ equity; (ii) tangible assets; (iii) tangible book
value per common share; (iv) tangible common stockholders’ equity
to tangible assets; (v) average tangible common stockholders’
equity; (vi) return on average tangible common stockholders’
equity; and (vii) adjusted net interest margin. Tangible common
stockholders’ equity is calculated as total common stockholders’
equity less goodwill and other intangible assets (excluding
mortgage servicing rights). Tangible assets are calculated as total
assets less goodwill and other intangible assets (excluding
mortgage servicing rights). Tangible book value per common share is
calculated as tangible common stockholders’ equity divided by
common shares outstanding. Tangible common stockholders’ equity to
tangible assets is calculated as tangible common stockholders’
equity divided by tangible assets. Average tangible common
stockholders’ equity is calculated as average stockholders’ equity
less average goodwill and other intangible assets (excluding
mortgage servicing rights). Return on average tangible common
stockholders’ equity is calculated as net income available to
common shareholders divided by average tangible common
stockholders’ equity. Adjusted net interest margin ratio (FTE) is
calculated as adjusted net FTE interest income divided by adjusted
average interest earning assets. 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. They also should not be
considered in isolation or as a substitute for measures prepared in
accordance with GAAP.
The Company adjusts the most directly comparable capital
adequacy GAAP financial measures to the non-GAAP financial measures
described in subclauses (i) through (vi) above to exclude goodwill
and other intangible assets (except mortgage servicing rights). To
derive the non-GAAP financial measure identified in subclause (vii)
above, the Company adjusts its net interest income to include its
FTE interest income and exclude purchase accounting interest
accretion on acquired loans. Management believes these non-GAAP
financial measures, which are intended to complement the capital
ratios defined by banking regulators and to present on a consistent
basis our and our acquired companies’ organic continuing operations
without regard to acquisition costs and other adjustments that we
consider to be unpredictable and dependent on a significant number
of factors that are outside our control, are useful to investors in
evaluating the Company’s performance because, as a general matter,
they either do not represent an actual cash expense and are
inconsistent in amount and frequency depending upon the timing and
size of our acquisitions (including the size, complexity and/or
volume of past acquisitions, which may drive the magnitude of
acquisition related costs, but may not be indicative of the size,
complexity and/or volume of future acquisitions or related costs),
or they cannot be anticipated or estimated in a particular period
(in particular as it relates to unexpected recovery amounts). This
impacts the ratios that are important to analysts and allows
investors to compare certain aspects of the Company’s
capitalization to other companies.
See the Non-GAAP Financial Measures table included herein and
the textual discussion 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, or the Exchange
Act, and Rule 3b-6 promulgated thereunder, that involve inherent
risks and uncertainties. Any statements about our, Great Western’s
or the combined company’s 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 change over
time and could cause actual results to differ materially from any
results, performance or events expressed or implied by such
forward-looking statements. Furthermore, 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 press release:
- new, or changes in, governmental regulations or policies;
- tax legislative initiatives or assessments;
- more stringent capital requirements, to the extent they may
become applicable to us;
- changes in accounting standards;
- any failure to comply with applicable laws and regulations,
including the Community Reinvestment Act and fair lending laws, the
USA PATRIOT ACT, Office of Foreign Asset Control guidelines and
requirements, the Bank Secrecy Act, and the related Financial
Crimes Enforcement Network and Federal Financial Institutions
Examination Council’s guidelines and regulations;
- lending and deposit risks and risks associated with sector
concentrations;
- a decline in economic conditions that could reduce demand for
our products and services and negatively impact the credit quality
of loans;
- loan credit losses exceeding estimates;
- the soundness of other financial institutions;
- the ability to meet cash flow needs and availability of
financing sources for working capital and other needs;
- a loss of deposits or a change in product mix that increases
the Company’s funding costs;
- changes in interest rates;
- changes to United States trade policies, including the
imposition of tariffs and retaliatory tariffs;
- competition from new or existing financial institutions and
non-banks;
- variable interest rates tied to London Interbank Offered Rate
that may no longer be available or may become unreliable;
- cyber-security risks, including “denial-of-service attacks,”
“hacking,” and “identity theft” that could result in the disclosure
of confidential information;
- privacy, information security, and data protection laws, rules,
and regulations that affect or limit how we collect and use
personal information;
- the potential impairment of our goodwill and other intangible
assets;
- exposure to losses in collateralized loan obligation
securities;
- exposure to losses in investment securities;
- our reliance on other companies that provide key components of
our business infrastructure;
- events that may tarnish our reputation;
- the loss of the services of key members of our management team
and directors;
- our ability to attract and retain qualified employees to
operate our business;
- costs associated with repossessed properties, including
environmental remediation;
- the effectiveness of our systems of internal operating
controls;
- our ability to implement new technology-facilitated products
and services or be successful in marketing these products and
services to our clients;
- difficulties we may face in combining the operations of
acquired entities or assets with our own operations or assessing
the effectiveness of businesses in which we make strategic
investments or with which we enter into strategic contractual
relationships;
- incurrence of significant costs related to mergers and related
integration activities;
- the volatility in the price and trading volume of our common
stock;
- “anti-takeover” provisions and the regulations, which may make
it more difficult for a third party to acquire control of us even
in circumstances that could be deemed beneficial to
stockholders;
- changes in our dividend policy or our ability to pay
dividends;
- our common stock not being an insured deposit;
- the potential dilutive effect of future equity issuances;
- the subordination of our common stock to our existing and
future indebtedness;
- the ongoing impact of the COVID-19 pandemic and the U.S., state
and local government’s response to the pandemic;
- changes in general economic conditions caused by inflation,
recession, acts of terrorism, and outbreak of hostilities, or other
international or domestic calamities, including wars or
international conflicts with respect to which the United States may
or may not be directly involved, unemployment, or other economic
and geopolitical factors;
- the effect of global conditions, earthquakes, volcanoes,
tsunamis, floods, fires, drought, and other natural catastrophic
events; and
- the impact of climate change and environmental sustainability
matters.
These factors are not necessarily all 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 and included and
described in more detail in our periodic reports filed with the
Securities and Exchange Commission, or SEC, under the Securities
Exchange Act of 1934, as amended, under the caption “Risk Factors.”
Interested parties are urged to read in their entirety such risk
factors prior to making any investment decision with respect to the
Company. 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 2023 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to
discuss the results for the second quarter of 2023 at 11 a.m.
Eastern Time (9 a.m. Mountain Time) on Thursday, July 27, 2023. The
conference call will be accessible by telephone and through the
Internet. Participants may join the call by dialing 1-888-886-7786;
the access code is 88467436. To participate via the Internet, visit
www.FIBK.com. The call will be recorded and made available for
replay on July 27, 2023, after 1 p.m. Eastern Time (11 a.m.
Mountain Time), through August 26, 2023, prior to 9 a.m. Eastern
Time (7 a.m. Mountain Time), by dialing 1-877-674-7070. The replay
access code is 467436. 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 focused on community banking. Incorporated in 1971
and headquartered in Billings, Montana, the Company operates
banking offices, including detached drive-up facilities, in
communities across Arizona, Colorado, Idaho, Iowa, Kansas,
Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South
Dakota, Washington, and Wyoming, in addition to offering online and
mobile banking services. Through our bank subsidiary, First
Interstate Bank, the Company delivers a comprehensive range of
banking products and services to individuals, businesses,
municipalities, and others 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, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
2Q23 vs 1Q23
2Q23 vs 2Q22
Net interest income
$
218.4
$
238.9
$
258.4
$
266.8
$
239.0
(8.6
)%
(8.6
)%
Net interest income on a fully-taxable
equivalent ("FTE") basis
220.2
240.7
260.7
268.9
241.1
(8.5
)
(8.7
)
Provision for (reduction in) credit
losses
11.7
15.2
14.7
8.4
(1.7
)
(23.0
)
NM
Non-interest income:
Payment services revenues
20.1
18.7
19.4
20.4
19.5
7.5
3.1
Mortgage banking revenues
2.6
2.3
2.6
2.7
5.0
13.0
(48.0
)
Wealth management revenues
8.8
9.0
8.4
8.5
9.3
(2.2
)
(5.4
)
Service charges on deposit accounts
5.8
5.2
4.9
5.7
6.3
11.5
(7.9
)
Other service charges, commissions, and
fees
2.4
2.4
2.9
4.7
3.6
—
(33.3
)
Total fee-based revenues
39.7
37.6
38.2
42.0
43.7
5.6
(9.2
)
Investment securities loss
(0.1
)
(23.4
)
—
(24.2
)
(0.1
)
(99.6
)
—
Other income
4.5
2.2
3.4
5.1
6.3
104.5
(28.6
)
Total non-interest income
44.1
16.4
41.6
22.9
49.9
168.9
(11.6
)
Non-interest expense:
Salaries and wages
68.1
65.6
75.4
71.9
74.8
3.8
(9.0
)
Employee benefits
19.3
22.8
17.3
19.6
19.4
(15.4
)
(0.5
)
Occupancy and equipment
17.3
18.4
17.9
17.1
17.0
(6.0
)
1.8
Other intangible amortization
3.9
4.0
4.1
4.1
4.1
(2.5
)
(4.9
)
Other expenses
54.7
54.8
54.5
56.5
49.2
(0.2
)
11.2
Other real estate owned expense
0.6
0.2
2.2
—
—
200.0
100.0
Acquisition related expenses
—
—
3.9
4.0
45.8
—
(100.0
)
Total non-interest expense
163.9
165.8
175.3
173.2
210.3
(1.1
)
(22.1
)
Income before income tax
86.9
74.3
110.0
108.1
80.3
17.0
8.2
Provision for income tax
19.9
18.0
24.2
22.4
16.2
10.6
22.8
Net income
$
67.0
$
56.3
$
85.8
$
85.7
$
64.1
19.0
%
4.5
%
Weighted-average basic shares
outstanding
103,821
103,738
104,445
106,526
109,107
0.1
%
(4.8
)%
Weighted-average diluted shares
outstanding
103,823
103,819
104,548
106,590
109,132
—
(4.9
)
Earnings per share - basic
$
0.65
$
0.54
$
0.82
$
0.80
$
0.59
20.4
10.2
Earnings per share - diluted
0.65
0.54
0.82
0.80
0.59
20.4
10.2
NM - not meaningful
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Consolidated Balance
Sheets
(Unaudited)
% Change
(In millions, except % and per share
data)
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
2Q23 vs 1Q23
2Q23 vs 2Q22
Assets:
Cash and due from banks
$
479.0
$
332.9
$
349.2
$
390.4
$
425.3
43.9
%
12.6
%
Interest-bearing deposits in banks
201.4
747.7
521.2
201.4
633.9
(73.1
)
(68.2
)
Federal funds sold
0.1
0.1
0.1
0.1
0.1
—
—
Cash and cash equivalents
680.5
1,080.7
870.5
591.9
1,059.3
(37.0
)
(35.8
)
Securities purchased under agreement to
resell
—
—
—
—
202.2
—
(100.0
)
Investment securities, net
9,175.6
9,425.5
10,397.9
10,269.1
10,871.1
(2.7
)
(15.6
)
Investment in Federal Home Loan Bank and
Federal Reserve Bank stock
210.4
214.5
198.6
131.9
107.4
(1.9
)
95.9
Loans held for sale, at fair value
76.5
80.9
79.9
93.6
127.4
(5.4
)
(40.0
)
Loans held for investment
18,263.4
18,245.7
18,099.2
17,603.5
17,162.5
0.1
6.4
Allowance for credit losses
224.6
226.1
220.1
213.0
220.4
(0.7
)
1.9
Net loans held for investment
18,038.8
18,019.6
17,879.1
17,390.5
16,942.1
0.1
6.5
Goodwill and intangible assets (excluding
mortgage servicing rights)
1,218.0
1,221.9
1,225.9
1,229.0
1,232.9
(0.3
)
(1.2
)
Company owned life insurance
502.0
499.4
497.9
495.6
492.8
0.5
1.9
Premises and equipment
443.7
443.4
444.7
445.4
442.7
0.1
0.2
Other real estate owned
14.4
13.4
12.7
16.4
16.8
7.5
(14.3
)
Mortgage servicing rights
29.8
30.1
31.1
31.8
32.1
(1.0
)
(7.2
)
Other assets
586.6
608.3
649.5
649.5
535.0
(3.6
)
9.6
Total assets
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
$
32,061.8
(2.1
)%
(3.4
)%
Liabilities and stockholders' equity:
Deposits
$
23,579.2
$
24,107.0
$
25,073.6
$
25,884.8
$
26,863.8
(2.2
)%
(12.2
)%
Securities sold under repurchase
agreements
929.9
970.8
1,052.9
1,075.6
1,234.7
(4.2
)
(24.7
)
Long-term debt
120.8
120.8
120.8
120.7
120.4
—
0.3
Other borrowed funds
2,589.0
2,710.0
2,327.0
625.0
—
(4.5
)
100.0
Subordinated debentures held by subsidiary
trusts
163.1
163.1
163.1
163.1
163.1
—
—
Other liabilities
473.1
405.7
476.6
470.0
407.9
16.6
16.0
Total liabilities
27,855.1
28,477.4
29,214.0
28,339.2
28,789.9
(2.2
)
(3.2
)
Stockholders' equity:
Common stock
2,481.4
2,478.7
2,478.2
2,477.4
2,607.9
0.1
(4.9
)
Retained earnings
1,098.8
1,080.7
1,072.7
1,035.8
993.8
1.7
10.6
Accumulated other comprehensive loss
(459.0
)
(399.1
)
(477.1
)
(507.7
)
(329.8
)
15.0
39.2
Total stockholders' equity
3,121.2
3,160.3
3,073.8
3,005.5
3,271.9
(1.2
)
(4.6
)
Total liabilities and stockholders'
equity
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
$
32,061.8
(2.1
)%
(3.4
)%
Common shares outstanding at period
end
105,021
104,382
104,442
104,451
107,758
0.6
%
(2.5
)%
Book value per common share at period
end
$
29.72
$
30.28
$
29.43
$
28.77
$
30.36
(1.8
)
(2.1
)
Tangible book value per common share at
period end**
18.12
18.57
17.69
17.01
18.92
(2.4
)
(4.2
)
**Non-GAAP financial measure - see
Non-GAAP Financial Measures included herein for a reconciliation of
book value per common share (GAAP) at period end to tangible book
value per common share (non-GAAP) at period end.
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Loans and Deposits
(Unaudited)
% Change
(In millions, except %)
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
2Q23 vs 1Q23
2Q23 vs 2Q22
Loans held for investment:
Real Estate:
Commercial
$
8,813.9
$
8,680.8
$
8,528.6
$
8,026.9
$
7,857.7
1.5
%
12.2
%
Construction
1,836.5
1,893.0
1,944.4
2,023.0
1,759.5
(3.0
)
4.4
Residential
2,198.3
2,191.1
2,188.3
2,127.7
2,060.4
0.3
6.7
Agricultural
755.7
769.7
794.9
800.9
821.5
(1.8
)
(8.0
)
Total real estate
13,604.4
13,534.6
13,456.2
12,978.5
12,499.1
0.5
8.8
Consumer:
Indirect
764.1
817.3
829.7
780.8
733.9
(6.5
)
4.1
Direct
144.0
146.9
152.9
155.0
157.3
(2.0
)
(8.5
)
Credit card
72.1
71.5
75.9
74.2
74.8
0.8
(3.6
)
Total consumer
980.2
1,035.7
1,058.5
1,010.0
966.0
(5.4
)
1.5
Commercial
3,002.7
3,028.0
2,882.6
2,966.1
3,036.0
(0.8
)
(1.1
)
Agricultural
688.0
660.4
708.3
658.2
672.0
4.2
2.4
Other
1.7
1.6
9.2
3.8
—
6.3
100.0
Deferred loan fees and costs
(13.6
)
(14.6
)
(15.6
)
(13.1
)
(10.6
)
(6.8
)
28.3
Loans held for investment
$
18,263.4
$
18,245.7
$
18,099.2
$
17,603.5
$
17,162.5
0.1
%
6.4
%
Deposits:
Non-interest-bearing
$
6,518.2
$
6,861.1
$
7,560.0
$
8,163.3
$
8,295.4
(5.0
)%
(21.4
)%
Interest-bearing:
Demand
6,481.9
6,714.1
7,205.9
7,595.1
8,133.3
(3.5
)
(20.3
)
Savings
7,836.7
8,282.9
8,379.3
8,497.2
8,939.4
(5.4
)
(12.3
)
Time, $250 and over
657.9
526.5
438.0
319.3
272.1
25.0
141.8
Time, other
2,084.5
1,722.4
1,490.4
1,309.9
1,223.6
21.0
70.4
Total interest-bearing
17,061.0
17,245.9
17,513.6
17,721.5
18,568.4
(1.1
)
(8.1
)
Total deposits
$
23,579.2
$
24,107.0
$
25,073.6
$
25,884.8
$
26,863.8
(2.2
)%
(12.2
)%
Total core deposits (1)
$
22,921.3
$
23,580.5
$
24,635.6
$
25,565.5
$
26,591.7
(2.8
)%
(13.8
)%
(1) Core deposits are defined as total
deposits less time deposits, $250 and over, and brokered
deposits.
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Credit Quality
(Unaudited)
% Change
(In millions, except %)
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
2Q23 vs 1Q23
2Q23 vs 2Q22
Allowance for Credit Losses:
Allowance for credit losses
$
224.6
$
226.1
$
220.1
$
213.0
$
220.4
(0.7
)%
1.9
%
As a percentage of loans held for
investment
1.23
%
1.24
%
1.22
%
1.21
%
1.28
%
As a percentage of non-accrual loans
260.86
279.83
371.79
268.26
205.98
Net loan charge-offs during quarter
$
11.4
$
6.2
$
1.1
$
12.0
$
0.3
83.9
%
NM
Annualized as a percentage of average
loans
0.25
%
0.14
%
0.02
%
0.27
%
0.01
%
Non-Performing Assets:
Non-accrual loans
$
86.1
$
80.8
$
59.2
$
79.4
$
107.0
6.6
%
(19.5
)%
Accruing loans past due 90 days or
more
6.7
4.5
6.4
6.6
2.9
48.9
131.0
Total non-performing loans
92.8
85.3
65.6
86.0
109.9
8.8
(15.6
)
Other real estate owned
14.4
13.4
12.7
16.4
16.8
7.5
(14.3
)
Total non-performing assets
$
107.2
$
98.7
$
78.3
$
102.4
$
126.7
8.6
%
(15.4
)%
Non-performing assets as a percentage
of:
Loans held for investment and OREO
0.59
%
0.54
%
0.43
%
0.58
%
0.74
%
Total assets
0.35
0.31
0.24
0.33
0.40
Non-accrual loans to loans held for
investment
0.47
0.44
0.33
0.45
0.62
Accruing Loans 30-89 Days Past Due
$
49.5
$
52.3
$
62.3
$
52.5
$
56.4
(5.4
)%
(12.2
)%
Criticized Loans:
Special Mention
$
221.9
$
243.8
$
290.4
$
273.7
$
275.9
(9.0
)%
(19.6
)%
Substandard
386.9
355.0
316.2
277.7
461.4
9.0
(16.1
)
Doubtful
32.8
22.8
8.5
25.5
42.7
43.9
(23.2
)
Total
$
641.6
$
621.6
$
615.1
$
576.9
$
780.0
3.2
%
(17.7
)%
NM - not meaningful
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Selected Ratios -
Annualized
(Unaudited)
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Annualized Financial Ratios
(GAAP)
Return on average assets
0.86
%
0.71
%
1.07
%
1.07
%
0.79
%
Return on average common stockholders'
equity
8.44
7.25
11.16
10.49
7.52
Yield on average earning assets
4.52
4.43
4.24
3.99
3.35
Cost of average interest-bearing
liabilities
1.88
1.46
0.89
0.40
0.14
Interest rate spread
2.64
2.97
3.35
3.59
3.21
Net interest margin ratio
3.12
3.36
3.61
3.71
3.25
Efficiency ratio
60.95
63.38
57.07
58.37
71.37
Loans held for investment to deposit
ratio
77.46
75.69
72.18
68.01
63.89
Annualized Financial Ratios -
Operating** (Non-GAAP)
Tangible book value per common share
$
18.12
$
18.57
$
17.69
$
17.01
$
18.92
Tangible common stockholders' equity to
tangible assets
6.40
%
6.37
%
5.95
%
5.90
%
6.61
%
Return on average tangible common
stockholders' equity
13.69
11.87
18.67
16.93
11.78
Consolidated Capital Ratios
Total risk-based capital to total
risk-weighted assets
12.90
%
*
12.63
%
12.48
%
12.50
%
13.16
%
Tier 1 risk-based capital to total
risk-weighted assets
10.76
*
10.52
10.45
10.49
11.09
Tier 1 common capital to total
risk-weighted assets
10.76
*
10.52
10.45
10.49
11.09
Leverage Ratio
7.99
*
7.72
7.75
7.67
7.72
*Preliminary estimate - may be subject to
change. The regulatory capital ratios presented include the
assumption of the transitional method as a result of legislation by
the U.S. Congress to provide relief for the economy and financial
institutions in the United States from the COVID‑19 pandemic. The
referenced relief ends on December 31, 2024 which allows a total
five-year phase-in of the impact of CECL on capital and relief over
the next two years for the impact on the allowance for credit
losses resulting from the COVID‑19 pandemic.
**Non-GAAP financial measures - see
Non-GAAP Financial Measures included herein for a reconciliation of
book value per common share to tangible book value per common
share, return on average common stockholders’ equity (GAAP) to
return on average tangible common stockholders’ 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, 2023
March 31, 2023
June 30, 2022
(In millions, except %)
Average
Balance
Interest(2)
Average
Rate
Average
Balance
Interest(2)
Average
Rate
Average
Balance
Interest(2)
Average
Rate
Interest-earning assets:
Loans (1)
$
18,351.5
$
243.2
5.32
%
$
18,273.6
$
237.2
5.26
%
$
17,220.4
$
193.5
4.51
%
Investment securities
Taxable
9,139.2
66.1
2.90
9,983.4
72.2
2.93
10,129.4
49.1
1.94
Tax-exempt
192.9
1.0
2.08
225.4
1.1
1.98
248.6
1.4
2.26
Investment in FHLB and FRB stock
225.2
3.4
6.06
210.5
3.0
5.78
103.9
1.1
4.25
Interest-bearing deposits in banks
419.4
5.4
5.16
365.7
4.2
4.66
2,050.0
3.4
0.67
Federal funds sold
0.6
—
—
0.8
—
—
0.1
—
—
Total interest-earning assets
$
28,328.8
$
319.1
4.52
%
$
29,059.4
$
317.7
4.43
%
$
29,752.4
$
248.5
3.35
%
Non-interest-earning assets
2,958.8
2,951.5
2,858.9
Total assets
$
31,287.6
$
32,010.9
$
32,611.3
Interest-bearing liabilities:
Demand deposits
$
6,417.2
$
9.9
0.62
%
$
6,973.4
$
8.7
0.51
%
$
8,103.7
$
1.8
0.09
%
Savings deposits
7,951.3
28.4
1.43
8,406.9
22.8
1.10
9,461.7
1.6
0.07
Time deposits
2,517.1
15.3
2.44
2,055.3
8.8
1.74
1,555.4
0.9
0.23
Repurchase agreements
1,020.6
1.5
0.59
1,005.8
1.1
0.44
1,182.2
0.3
0.10
Other borrowed funds
2,966.4
39.3
5.31
2,615.2
31.2
4.84
—
—
—
Long-term debt
120.8
1.4
4.65
120.8
1.5
5.04
120.4
1.4
4.66
Subordinated debentures held by subsidiary
trusts
163.1
3.1
7.62
163.1
2.9
7.21
163.1
1.4
3.44
Total interest-bearing liabilities
$
21,156.5
$
98.9
1.88
%
$
21,340.5
$
77.0
1.46
%
$
20,586.5
$
7.4
0.14
%
Non-interest-bearing deposits
6,521.9
7,064.9
8,288.0
Other non-interest-bearing liabilities
426.3
458.5
319.4
Stockholders’ equity
3,182.9
3,147.0
3,417.4
Total liabilities and stockholders’
equity
$
31,287.6
$
32,010.9
$
32,611.3
Net FTE interest income (non-GAAP)(3)
$
220.2
$
240.7
$
241.1
Less FTE adjustments (2)
(1.8
)
(1.8
)
(2.1
)
Net interest income from consolidated
statements of income
$
218.4
$
238.9
$
239.0
Interest rate spread
2.64
%
2.97
%
3.21
%
Net interest margin
Net FTE interest margin (non-GAAP)(3)
3.12
3.36
3.25
Cost of funds, including
non-interest-bearing demand deposits (4)
1.43
1.10
0.10
(1) Average loan balances include loans
held for sale and non-accrual loans. Interest income on loans
includes amortization of deferred loan fees net of deferred loan
costs of $0.9 million, $0.9 million, and $2.1 million at June 30,
2023, March 31, 2023, and June 30, 2022, respectively.
(2) Management believes fully taxable
equivalent, or FTE, interest income is useful to investors in
evaluating the Company’s performance as a comparison of the returns
between a tax-free investment and a taxable alternative. The
Company adjusts interest income and average rates for tax exempt
loans and securities to a FTE basis utilizing a 21.00% and 26.25%
tax rate for 2023 and 2022, respectively.
(3) Non-GAAP financial measure - see
Non-GAAP Financial Measures included herein for a reconciliation to
GAAP measures.
(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, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Total common stockholders' equity
(GAAP)
(A)
$
3,121.2
$
3,160.3
$
3,073.8
$
3,005.5
$
3,271.9
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,218.0
1,221.9
1,225.9
1,229.0
1,232.9
Tangible common stockholders' equity
(Non-GAAP)
(B)
$
1,903.2
$
1,938.4
$
1,847.9
$
1,776.5
$
2,039.0
Total assets (GAAP)
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
$
32,061.8
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,218.0
1,221.9
1,225.9
1,229.0
1,232.9
Tangible assets (Non-GAAP)
(C)
$
29,758.3
$
30,415.8
$
31,061.9
$
30,115.7
$
30,828.9
Average Balances:
Total common stockholders' equity
(GAAP)
(D)
$
3,182.9
$
3,147.0
$
3,050.1
$
3,239.7
$
3,417.4
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,219.8
1,223.8
1,226.9
1,230.9
1,235.1
Average tangible common stockholders'
equity (Non-GAAP)
(E)
$
1,963.1
$
1,923.2
$
1,823.2
$
2,008.8
$
2,182.3
Net interest income
$
218.4
$
238.9
$
258.4
$
266.8
$
239.0
FTE interest income
1.8
1.8
2.3
2.1
2.1
Net FTE interest income
(F)
220.2
240.7
260.7
268.9
241.1
Less purchase accounting accretion
4.6
5.2
8.4
17.7
16.7
Adjusted net FTE interest income
(G)
$
215.6
$
235.5
$
252.3
$
251.2
$
224.4
Average interest-earning assets
(H)
$
28,328.8
$
29,059.4
$
28,680.9
$
28,731.2
$
29,752.4
Total quarterly average assets
(J)
31,287.6
32,010.9
31,716.0
31,653.7
32,611.3
Annualized net income available to common
shareholders
(K)
268.7
228.3
340.4
340.0
257.1
Common shares outstanding
(L)
105,021
104,382
104,442
104,451
107,758
Return on average assets (GAAP)
(K) / (J)
0.86
%
0.71
%
1.07
%
1.07
%
0.79
%
Return on average common stockholders'
equity (GAAP)
(K) / (D)
8.44
7.25
11.16
10.49
7.52
Average common stockholders' equity to
average assets (GAAP)
(D) / (J)
10.17
9.83
9.62
10.23
10.48
Book value per common share (GAAP)
(A) / (L)
$
29.72
$
30.28
$
29.43
$
28.77
$
30.36
Tangible book value per common share
(Non-GAAP)
(B) / (L)
18.12
18.57
17.69
17.01
18.92
Tangible common stockholders' equity to
tangible assets (Non-GAAP)
(B) / (C)
6.40
%
6.37
%
5.95
%
5.90
%
6.61
%
Return on average tangible common
stockholders' equity (Non-GAAP)
(K) / (E)
13.69
11.87
18.67
16.93
11.78
Net interest margin ratio (FTE)
(Non-GAAP)
(F*) / (H)
3.12
3.36
3.61
3.71
3.25
Adjusted net interest margin ratio (FTE)
(Non-GAAP)
(G*) / (H)
3.05
3.29
3.49
3.47
3.03
*Annualized
(FIBK-ER)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726315949/en/
John R. Stewart, CFA Deputy Chief Financial Officer First
Interstate BancSystem, Inc. (406) 255-5311 john.stewart@fib.com
www.FIBK.com
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