First Interstate BancSystem, Inc. (NASDAQ: FIBK) (the “Company”)
today reported financial results for the third quarter of 2023. For
the quarter, the Company reported net income of $72.7 million, or
$0.70 per share, which compares to net income of $67.0 million, or
$0.65 per share, for the second quarter of 2023, and net income of
$85.7 million, or $0.80 per share, for the third quarter of
2022.
There were no pre-tax acquisition costs in the second and third
quarters of 2023, compared to pre-tax acquisition costs of $4.0
million in the third quarter of 2022, 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 $0.03 per share during the third quarter of 2022.
HIGHLIGHTS
- Net income of $72.7 million, or $0.70 per share, for the third
quarter of 2023, compared to net income of $67.0 million, or $0.65
per share, for the second quarter of 2023.
- Total deposits increased $100.3 million, or 0.4%, to $23,679.5
million as of September 30, 2023 from $23,579.2 million as of June
30, 2023, resulting in a 1.6% annualized growth rate in deposits.
The Company does not hold brokered deposits.
- Net interest margin decreased to 3.05% for the third quarter of
2023, a 4 basis point decrease from the second quarter of 2023. Net
interest margin, on a fully taxable equivalent (“FTE”) basis,1
decreased to 3.07% for the third quarter of 2023, a 5 basis point
decrease from the second quarter of 2023.
- Allowance for credit losses as a percentage of period-end loans
held for investment increased to 1.24% at September 30, 2023 from
1.23% at June 30, 2023.
- Net charge-offs in the third quarter of 2023 were $1.1 million,
or an annualized 0.02% of average loans outstanding, compared to
net charge-offs of $11.4 million, or an annualized 0.25% of average
loans outstanding, in the second quarter of 2023.
- Asset quality improved in the third quarter of 2023, resulting
in an $8.7 million, or 1.4%, decrease in criticized loans as
compared to the second quarter of 2023 and non-performing assets as
a percentage of total assets improved in the third quarter of 2023
to 0.31% compared to 0.35% during the second quarter of 2023.
- Common equity tier 1 capital ratio2 was 11.02% in the third
quarter of 2023, or a 26 basis point increase, compared to 10.76%
in the second quarter of 2023, as a result of retained earnings and
a modest decrease in risk-weighted assets.
- 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 $29.38 as of September 30, 2023, compared to $29.72
as of June 30, 2023, and $28.77 as of September 30, 2022. As of
September 30, 2023, the accumulated other comprehensive loss
position is equal to $4.97 of book value per common share. Tangible
book value per common share1 was $17.82 as of September 30, 2023,
compared to $18.12 as of June 30, 2023 and $17.01 as of September
30, 2022.
“The strength of the franchise and balance sheet we have built
enabled us to deliver another quarter of strong financial
performance despite the impact of larger macroeconomic trends that
continue to present challenges for the broader banking industry,”
said Kevin P. Riley, President and Chief Executive Officer of First
Interstate BancSystem, Inc. “We are executing well on our strategic
priorities in the current environment, which enabled us to generate
positive trends in a number of key areas including an increase in
our total deposits, more stability in our net interest margin,
lower expenses, improved asset quality, and an increase in
regulatory capital ratios.
“While we will remain conservative in our new loan production,
we continue to believe that this is a favorable environment to add
new commercial and retail customers throughout our markets given
the financial strength, breadth of products and services, and
superior level of service that we offer. We believe our continued
success in adding new relationships will enhance our ability to
generate long-term profitable growth and create additional value
for our shareholders in the years to come,” said Mr. Riley.
____________________________
1
Non-GAAP financial measure - see Non-GAAP
Financial Measures included herein for a reconciliation to GAAP
measures.
2
Preliminary estimate - may be subject to
change.
DIVIDEND DECLARATION
On October 24, 2023, the Company’s board of directors declared a
dividend of $0.47 per common share, payable on November 16, 2023,
to common stockholders of record as of November 6, 2023. The
dividend equates to a 7.2% annualized yield based on the $26.10 per
share average closing price of the Company’s common stock as
reported on NASDAQ during the third quarter of 2023.
NET INTEREST INCOME
Net interest income decreased $4.7 million, or 2.2%, to $213.7
million, during the third quarter of 2023, compared to net interest
income of $218.4 million during the second quarter of 2023 and
decreased $53.1 million, or 19.9%, during the third quarter of 2023
from the third 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 third quarter of 2023, the second quarter of 2023, and
the third quarter of 2022, in the amounts of $5.2 million, $4.6
million, and $17.7 million, respectively.
The net interest margin ratio, on an FTE basis, was 3.07% for
the third quarter of 2023, compared to 3.12% during the second
quarter of 2023, and 3.71% during the third quarter of 2022.
Excluding interest accretion from the fair value of acquired loans,
on a quarter-over-quarter basis, the net interest margin ratio was
3.00%, a decrease of 5 basis points from the prior quarter,
primarily driven by higher interest-bearing deposit costs, which
was partially offset by loan yield expansion. Excluding interest
accretion from the fair value of acquired loans, on a
year-over-year basis, the net interest margin ratio decreased 47
basis points, primarily as a result of higher short-term borrowing
costs, and higher interest-bearing deposit costs, which was
partially offset by loan yield expansion and a modestly favorable
change in the mix of earning assets.
(REDUCTION OF) PROVISION FOR CREDIT LOSSES
During the third quarter of 2023, the Company recorded a
reduction of credit losses of $0.1 million, which included a
provision for credit losses of $3.2 million on loans held for
investment, reduction of credit losses for unfunded commitments of
$2.0 million, and reduction of credit losses for investment
securities of $1.3 million. This compares to a provision for credit
losses of $11.7 million during the second quarter of 2023 and a
provision for credit losses of $8.4 million during the third
quarter of 2022.
For the third quarter of 2023, the allowance for credit losses
included net charge-offs of $1.1 million, or an annualized 0.02% of
average loans outstanding, compared to net charge-offs of $11.4
million, or an annualized 0.25% of average loans outstanding, for
the second quarter of 2023, and net charge-offs of $12.0 million,
or an annualized 0.27% of average loans outstanding, for the third
quarter of 2022. Net loan charge-offs in the third quarter of 2023
were composed of charge-offs of $6.2 million and recoveries of $5.1
million.
The Company’s allowance for credit losses as a percentage of
period-end loans held for investment increased to 1.24% at
September 30, 2023 from 1.23% at June 30, 2023, and from 1.21% at
September 30, 2022. Coverage of non-performing loans increased to
268.0% at September 30, 2023, compared to 242.0% at June 30, 2023
and increased from 247.7% at September 30, 2022.
NON-INTEREST INCOME
For the Quarter Ended
Sep 30, 2023
Jun 30, 2023
$ Change
% Change
Sep 30, 2022
$ Change
% Change
(Dollars in millions)
Payment services revenues
$
19.2
$
20.1
$
(0.9
)
(4.5
)%
$
20.4
$
(1.2
)
(5.9
)%
Mortgage banking revenues
2.0
2.6
(0.6
)
(23.1
)
2.7
(0.7
)
(25.9
)
Wealth management revenues
8.7
8.8
(0.1
)
(1.1
)
8.5
0.2
2.4
Service charges on deposit accounts
6.0
5.8
0.2
3.4
5.7
0.3
5.3
Other service charges, commissions, and
fees
2.2
2.4
(0.2
)
(8.3
)
4.7
(2.5
)
(53.2
)
Investment securities loss
—
(0.1
)
0.1
100.0
(24.2
)
24.2
100.0
Other income
3.9
4.5
(0.6
)
(13.3
)
5.1
(1.2
)
(23.5
)
Total non-interest income
$
42.0
$
44.1
$
(2.1
)
(4.8
)%
$
22.9
$
19.1
83.4
%
Non-interest income was $42.0 million for the third quarter of
2023, decreasing $2.1 million compared to the second quarter of
2023. Compared to the third quarter of 2022, non-interest income
increased $19.1 million. The increase was primarily due to the
realized loss of $24.2 million on the disposition of
available-for-sale investment securities during the third quarter
of 2022 when there were no such losses realized in the third
quarter of 2023.
NON-INTEREST EXPENSE
For the Quarter Ended
Sep 30, 2023
Jun 30, 2023
$ Change
% Change
Sep 30, 2022
$ Change
% Change
(Dollars in millions)
Salaries and wages
$
65.4
$
68.1
$
(2.7
)
(4.0
)%
$
71.9
$
(6.5
)
(9.0
)%
Employee benefits
19.7
19.3
0.4
2.1
19.6
0.1
0.5
Occupancy and equipment
17.0
17.3
(0.3
)
(1.7
)
17.1
(0.1
)
(0.6
)
Other intangible amortization
3.9
3.9
—
—
4.1
(0.2
)
(4.9
)
Other expenses
54.6
54.7
(0.1
)
(0.2
)
56.5
(1.9
)
(3.4
)
Other real estate owned expense
0.5
0.6
(0.1
)
(16.7
)
—
0.5
100.0
Acquisition related expenses
—
—
—
—
4.0
(4.0
)
(100.0
)
Total non-interest expense
$
161.1
$
163.9
$
(2.8
)
(1.7
)%
$
173.2
$
(12.1
)
(7.0
)%
The Company’s non-interest expense was $161.1 million for the
third quarter of 2023, a decrease of $2.8 million from the second
quarter of 2023. The quarter-over-quarter decrease was primarily
due to decreases in severance costs and incentive accruals included
within salaries and wages during the second quarter of 2023.
Compared to the third quarter of 2022, non-interest expense
decreased by $12.1 million. The decrease is partially due to the
acquisition expenses incurred during the third quarter of 2022
related to the acquisition of GWB and partially due to lower
severance and incentive accruals included within salaries and wages
and lower advertising and donation expenses included within other
expenses during the third quarter of 2023.
BALANCE SHEET
Total assets decreased $435.5 million, or 1.4%, to $30,540.8
million as of September 30, 2023, from $30,976.3 million as of June
30, 2023, primarily due to a decrease in investment securities and
cash and cash equivalents which were used to paydown other borrowed
funds. Total assets decreased $803.9 million, or 2.6%, from
$31,344.7 million as of September 30, 2022, primarily due to a
decrease in investment securities, partially offset by increases in
loans held for investment.
Investment securities decreased $288.4 million, or 3.1%, to
$8,887.2 million as of September 30, 2023, from $9,175.6 million as
of June 30, 2023, primarily as a result of normal cash flow
activity and declines in fair market values. Investment securities
decreased $1,381.9 million, or 13.5%, from $10,269.1 million as of
September 30, 2022, which was primarily the result of the
disposition of $853.0 million of investment securities during the
first quarter of 2023, 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:
September 30, 2023
June 30, 2023
$ Change
% Change
September 30, 2022
$ Change
% Change
Real Estate:
Commercial
$
8,766.2
$
8,813.9
$
(47.7
)
(0.5
)%
$
8,026.9
$
739.3
9.2
%
Construction
1,930.3
1,836.5
93.8
5.1
2,023.0
(92.7
)
(4.6
)
Residential
2,212.2
2,198.3
13.9
0.6
2,127.7
84.5
4.0
Agricultural
731.5
755.7
(24.2
)
(3.2
)
800.9
(69.4
)
(8.7
)
Total real estate
13,640.2
13,604.4
35.8
0.3
12,978.5
661.7
5.1
Consumer:
Indirect
751.7
764.1
(12.4
)
(1.6
)
780.8
(29.1
)
(3.7
)
Direct and advance lines
142.3
144.0
(1.7
)
(1.2
)
155.0
(12.7
)
(8.2
)
Credit card
71.6
72.1
(0.5
)
(0.7
)
74.2
(2.6
)
(3.5
)
Total consumer
965.6
980.2
(14.6
)
(1.5
)
1,010.0
(44.4
)
(4.4
)
Commercial
2,925.1
3,002.7
(77.6
)
(2.6
)
2,966.1
(41.0
)
(1.4
)
Agricultural
690.5
688.0
2.5
0.4
658.2
32.3
4.9
Other, including overdrafts
5.0
1.7
3.3
194.1
3.8
1.2
31.6
Deferred loan fees and costs
(13.1
)
(13.6
)
0.5
(3.7
)
(13.1
)
—
—
Loans held for investment, net of deferred
loan fees and costs
$
18,213.3
$
18,263.4
$
(50.1
)
(0.3
)%
$
17,603.5
$
609.8
3.5
%
The ratio of loans held for investment to deposits decreased
modestly to 76.9%, as of September 30, 2023, compared to 77.5% as
of June 30, 2023, and increased from 68.0% as of September 30,
2022.
Total deposits increased $100.3 million, or 0.4%, to $23,679.5
million as of September 30, 2023, from $23,579.2 million as of June
30, 2023. Total deposits decreased $2,205.3 million, or 8.5%, from
$25,884.8 million as of September 30, 2022, with decreases in all
categories with the exception of time deposits.
Securities sold under repurchase agreements decreased $40.4
million, or 4.3%, to $889.5 million as of September 30, 2023, from
$929.9 million as of June 30, 2023, and decreased $186.1 million,
or 17.3%, from $1,075.6 million as of September 30, 2022, as a
result of normal 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 $522.0
million, or 20.2%, to $2,067.0 million as of September 30, 2023,
from $2,589.0 million as of June 30, 2023, and increased $1,442.0
million from September 30, 2022, as a result of changes in total
deposits and cash and cash equivalents.
The Company is considered to be “well-capitalized” as of
September 30, 2023, having exceeded all regulatory capital adequacy
requirements. During the third quarter of 2023, the Company paid
regular common stock dividends of approximately $49.2 million, or
$0.47 per share.
CREDIT QUALITY
As of September 30, 2023, non-performing assets decreased $11.0
million, or 10.3%, to $96.2 million, compared to $107.2 million as
of June 30, 2023, primarily due to a decrease in non-accrual loans
of $4.7 million, a decrease in accruing loans past due 90 days or
more of $3.5 million, and a decrease in property classified as
other real estate owned of $2.8 million.
Criticized loans decreased $8.7 million, or 1.4%, to $632.9
million as of September 30, 2023, from $641.6 million as of June
30, 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 ratio (FTE).
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 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, including the effect of the
conflict between Israel and Hamas on the global economy,
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.
Third Quarter 2023 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to
discuss the results for the third quarter of 2023 at 11 a.m.
Eastern Time (9 a.m. Mountain Time) on Thursday, October 26, 2023.
The conference call will be accessible by telephone and through the
Internet. Participants may join the call by dialing 1-888-259-6580;
the access code is 19044427. To participate via the Internet, visit
www.FIBK.com. The call will be recorded and made available for
replay on October 26, 2023, after 1 p.m. Eastern Time (11 a.m.
Mountain Time), through November 25, 2023, prior to 9 a.m. Eastern
Time (7 a.m. Mountain Time), by dialing 1-877-674-7070. The replay
access code is 044427. 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)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
3Q23 vs 2Q23
3Q23 vs 3Q22
Net interest income
$
213.7
$
218.4
$
238.9
$
258.4
$
266.8
(2.2
)%
(19.9
)%
Net interest income on a fully-taxable
equivalent ("FTE") basis
215.4
220.2
240.7
260.7
268.9
(2.2
)
(19.9
)
(Reduction in) provision for credit
losses
(0.1
)
11.7
15.2
14.7
8.4
(100.9
)
NM
Non-interest income:
Payment services revenues
19.2
20.1
18.7
19.4
20.4
(4.5
)
(5.9
)
Mortgage banking revenues
2.0
2.6
2.3
2.6
2.7
(23.1
)
(25.9
)
Wealth management revenues
8.7
8.8
9.0
8.4
8.5
(1.1
)
2.4
Service charges on deposit accounts
6.0
5.8
5.2
4.9
5.7
3.4
5.3
Other service charges, commissions, and
fees
2.2
2.4
2.4
2.9
4.7
(8.3
)
(53.2
)
Total fee-based revenues
38.1
39.7
37.6
38.2
42.0
(4.0
)
(9.3
)
Investment securities loss
—
(0.1
)
(23.4
)
—
(24.2
)
100.0
100.0
Other income
3.9
4.5
2.2
3.4
5.1
(13.3
)
(23.5
)
Total non-interest income
42.0
44.1
16.4
41.6
22.9
(4.8
)
83.4
Non-interest expense:
Salaries and wages
65.4
68.1
65.6
75.4
71.9
(4.0
)
(9.0
)
Employee benefits
19.7
19.3
22.8
17.3
19.6
2.1
0.5
Occupancy and equipment
17.0
17.3
18.4
17.9
17.1
(1.7
)
(0.6
)
Other intangible amortization
3.9
3.9
4.0
4.1
4.1
—
(4.9
)
Other expenses
54.6
54.7
54.8
54.5
56.5
(0.2
)
(3.4
)
Other real estate owned expense
0.5
0.6
0.2
2.2
—
(16.7
)
100.0
Acquisition related expenses
—
—
—
3.9
4.0
—
(100.0
)
Total non-interest expense
161.1
163.9
165.8
175.3
173.2
(1.7
)
(7.0
)
Income before income tax
94.7
86.9
74.3
110.0
108.1
9.0
(12.4
)
Provision for income tax
22.0
19.9
18.0
24.2
22.4
10.6
(1.8
)
Net income
$
72.7
$
67.0
$
56.3
$
85.8
$
85.7
8.5
%
(15.2
)%
Weighted-average basic shares
outstanding
103,822
103,821
103,738
104,445
106,526
—
%
(2.5
)%
Weighted-average diluted shares
outstanding
103,826
103,823
103,819
104,548
106,590
—
(2.6
)
Earnings per share - basic
$
0.70
$
0.65
$
0.54
$
0.82
$
0.80
7.7
(12.5
)
Earnings per share - diluted
0.70
0.65
0.54
0.82
0.80
7.7
(12.5
)
NM - not meaningful
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Consolidated Balance
Sheets
(Unaudited)
% Change
(In millions, except % and per share
data)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
3Q23 vs 2Q23
3Q23 vs 3Q22
Assets:
Cash and due from banks
$
371.5
$
479.0
$
332.9
$
349.2
$
390.4
(22.4
)%
(4.8
)%
Interest-bearing deposits in banks
219.5
201.4
747.7
521.2
201.4
9.0
9.0
Federal funds sold
2.1
0.1
0.1
0.1
0.1
NM
NM
Cash and cash equivalents
593.1
680.5
1,080.7
870.5
591.9
(12.8
)
0.2
Investment securities, net
8,887.2
9,175.6
9,425.5
10,397.9
10,269.1
(3.1
)
(13.5
)
Investment in Federal Home Loan Bank and
Federal Reserve Bank stock
189.5
210.4
214.5
198.6
131.9
(9.9
)
43.7
Loans held for sale, at fair value
59.1
76.5
80.9
79.9
93.6
(22.7
)
(36.9
)
Loans held for investment
18,213.3
18,263.4
18,245.7
18,099.2
17,603.5
(0.3
)
3.5
Allowance for credit losses
(226.7
)
(224.6
)
(226.1
)
(220.1
)
(213.0
)
0.9
6.4
Net loans held for investment
17,986.6
18,038.8
18,019.6
17,879.1
17,390.5
(0.3
)
3.4
Goodwill and intangible assets (excluding
mortgage servicing rights)
1,214.1
1,218.0
1,221.9
1,225.9
1,229.0
(0.3
)
(1.2
)
Company owned life insurance
500.8
502.0
499.4
497.9
495.6
(0.2
)
1.0
Premises and equipment
446.3
443.7
443.4
444.7
445.4
0.6
0.2
Other real estate owned
11.6
14.4
13.4
12.7
16.4
(19.4
)
(29.3
)
Mortgage servicing rights
29.1
29.8
30.1
31.1
31.8
(2.3
)
(8.5
)
Other assets
623.4
586.6
608.3
649.5
649.5
6.3
(4.0
)
Total assets
$
30,540.8
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
(1.4
)%
(2.6
)%
Liabilities and stockholders' equity:
Deposits
$
23,679.5
$
23,579.2
$
24,107.0
$
25,073.6
$
25,884.8
0.4
%
(8.5
)%
Securities sold under repurchase
agreements
889.5
929.9
970.8
1,052.9
1,075.6
(4.3
)
(17.3
)
Long-term debt
120.8
120.8
120.8
120.8
120.7
—
0.1
Other borrowed funds
2,067.0
2,589.0
2,710.0
2,327.0
625.0
(20.2
)
230.7
Subordinated debentures held by subsidiary
trusts
163.1
163.1
163.1
163.1
163.1
—
—
Other liabilities
535.4
473.1
405.7
476.6
470.0
13.2
13.9
Total liabilities
27,455.3
27,855.1
28,477.4
29,214.0
28,339.2
(1.4
)
(3.1
)
Stockholders' equity:
Common stock
2,484.9
2,481.4
2,478.7
2,478.2
2,477.4
0.1
0.3
Retained earnings
1,122.3
1,098.8
1,080.7
1,072.7
1,035.8
2.1
8.4
Accumulated other comprehensive loss
(521.7
)
(459.0
)
(399.1
)
(477.1
)
(507.7
)
13.7
2.8
Total stockholders' equity
3,085.5
3,121.2
3,160.3
3,073.8
3,005.5
(1.1
)
2.7
Total liabilities and stockholders'
equity
$
30,540.8
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
(1.4
)%
(2.6
)%
Common shares outstanding at period
end
105,011
105,021
104,382
104,442
104,451
—
%
0.5
%
Book value per common share at period
end
$
29.38
$
29.72
$
30.28
$
29.43
$
28.77
(1.1
)
2.1
Tangible book value per common share at
period end**
17.82
18.12
18.57
17.69
17.01
(1.7
)
4.8
**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 %)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
3Q23 vs 2Q23
3Q23 vs 3Q22
Loans held for investment:
Real Estate:
Commercial
$
8,766.2
$
8,813.9
$
8,680.8
$
8,528.6
$
8,026.9
(0.5
)%
9.2
%
Construction
1,930.3
1,836.5
1,893.0
1,944.4
2,023.0
5.1
(4.6
)
Residential
2,212.2
2,198.3
2,191.1
2,188.3
2,127.7
0.6
4.0
Agricultural
731.5
755.7
769.7
794.9
800.9
(3.2
)
(8.7
)
Total real estate
13,640.2
13,604.4
13,534.6
13,456.2
12,978.5
0.3
5.1
Consumer:
Indirect
751.7
764.1
817.3
829.7
780.8
(1.6
)
(3.7
)
Direct
142.3
144.0
146.9
152.9
155.0
(1.2
)
(8.2
)
Credit card
71.6
72.1
71.5
75.9
74.2
(0.7
)
(3.5
)
Total consumer
965.6
980.2
1,035.7
1,058.5
1,010.0
(1.5
)
(4.4
)
Commercial
2,925.1
3,002.7
3,028.0
2,882.6
2,966.1
(2.6
)
(1.4
)
Agricultural
690.5
688.0
660.4
708.3
658.2
0.4
4.9
Other
5.0
1.7
1.6
9.2
3.8
194.1
31.6
Deferred loan fees and costs
(13.1
)
(13.6
)
(14.6
)
(15.6
)
(13.1
)
(3.7
)
—
Loans held for investment
$
18,213.3
$
18,263.4
$
18,245.7
$
18,099.2
$
17,603.5
(0.3
)%
3.5
%
Deposits:
Non-interest-bearing
$
6,402.6
$
6,518.2
$
6,861.1
$
7,560.0
$
8,163.3
(1.8
)%
(21.6
)%
Interest-bearing:
Demand
6,317.9
6,481.9
6,714.1
7,205.9
7,595.1
(2.5
)
(16.8
)
Savings
7,796.3
7,836.7
8,282.9
8,379.3
8,497.2
(0.5
)
(8.2
)
Time, $250 and over
817.1
657.9
526.5
438.0
319.3
24.2
155.9
Time, other
2,345.6
2,084.5
1,722.4
1,490.4
1,309.9
12.5
79.1
Total interest-bearing
17,276.9
17,061.0
17,245.9
17,513.6
17,721.5
1.3
(2.5
)
Total deposits
$
23,679.5
$
23,579.2
$
24,107.0
$
25,073.6
$
25,884.8
0.4
%
(8.5
)%
Total core deposits (1)
$
22,862.4
$
22,921.3
$
23,580.5
$
24,635.6
$
25,565.5
(0.3
)%
(10.6
)%
(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 %)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
3Q23 vs 2Q23
3Q23 vs 3Q22
Allowance for Credit Losses:
Allowance for credit losses
$
226.7
$
224.6
$
226.1
$
220.1
$
213.0
0.9
%
6.4
%
As a percentage of loans held for
investment
1.24
%
1.23
%
1.24
%
1.22
%
1.21
%
As a percentage of non-accrual loans
278.50
260.86
279.83
371.79
268.26
Net loan charge-offs during quarter
$
1.1
$
11.4
$
6.2
$
1.1
$
12.0
(90.4
)%
(90.8
)%
Annualized as a percentage of average
loans
0.02
%
0.25
%
0.14
%
0.02
%
0.27
%
Non-Performing Assets:
Non-accrual loans
$
81.4
$
86.1
$
80.8
$
59.2
$
79.4
(5.5
)%
2.5
%
Accruing loans past due 90 days or
more
3.2
6.7
4.5
6.4
6.6
(52.2
)
(51.5
)
Total non-performing loans
84.6
92.8
85.3
65.6
86.0
(8.8
)
(1.6
)
Other real estate owned
11.6
14.4
13.4
12.7
16.4
(19.4
)
(29.3
)
Total non-performing assets
$
96.2
$
107.2
$
98.7
$
78.3
$
102.4
(10.3
)%
(6.1
)%
Non-performing assets as a percentage
of:
Loans held for investment and OREO
0.53
%
0.59
%
0.54
%
0.43
%
0.58
%
Total assets
0.31
0.35
0.31
0.24
0.33
Non-accrual loans to loans held for
investment
0.45
0.47
0.44
0.33
0.45
Accruing Loans 30-89 Days Past Due
$
51.2
$
49.5
$
52.3
$
62.3
$
52.5
3.4
%
(2.5
)%
Criticized Loans:
Special Mention
$
197.3
$
221.9
$
243.8
$
290.4
$
273.7
(11.1
)%
(27.9
)%
Substandard
414.6
386.9
355.0
316.2
277.7
7.2
49.3
Doubtful
21.0
32.8
22.8
8.5
25.5
(36.0
)
(17.6
)
Total
$
632.9
$
641.6
$
621.6
$
615.1
$
576.9
(1.4
)%
9.7
%
NM - not meaningful
FIRST INTERSTATE BANCSYSTEM,
INC. AND SUBSIDIARIES
Selected Ratios -
Annualized
(Unaudited)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Annualized Financial Ratios
(GAAP)
Return on average assets
0.94
%
0.86
%
0.71
%
1.07
%
1.07
%
Return on average common stockholders'
equity
9.20
8.44
7.25
11.16
10.49
Yield on average earning assets
4.63
4.52
4.43
4.24
3.99
Cost of average interest-bearing
liabilities
2.09
1.88
1.46
0.89
0.40
Interest rate spread
2.54
2.64
2.97
3.35
3.59
Net FTE interest margin ratio
3.07
3.12
3.36
3.61
3.71
Efficiency ratio
61.48
60.95
63.38
57.07
58.37
Loans held for investment to deposit
ratio
76.92
77.46
75.69
72.18
68.01
Annualized Financial Ratios -
Operating** (Non-GAAP)
Tangible book value per common share
$
17.82
$
18.12
$
18.57
$
17.69
$
17.01
Tangible common stockholders' equity to
tangible assets
6.38
%
6.40
%
6.37
%
5.95
%
5.90
%
Return on average tangible common
stockholders' equity
15.04
13.69
11.87
18.67
16.93
Consolidated Capital Ratios
Total risk-based capital to total
risk-weighted assets
13.18
%
*
12.90
%
12.63
%
12.48
%
12.50
%
Tier 1 risk-based capital to total
risk-weighted assets
11.02
*
10.76
10.52
10.45
10.49
Tier 1 common capital to total
risk-weighted assets
11.02
*
10.76
10.52
10.45
10.49
Leverage Ratio
8.22
*
7.99
7.72
7.75
7.67
*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
September 30, 2023
June 30, 2023
September 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)
$
18,317.4
$
251.5
5.45
%
$
18,351.5
$
243.2
5.32
%
$
17,543.8
$
220.2
4.98
%
Investment securities
Taxable
8,877.6
66.0
2.95
9,139.2
66.1
2.90
10,581.1
64.7
2.43
Tax-exempt
190.4
0.9
1.88
192.9
1.0
2.08
238.5
1.2
2.00
Investment in FHLB and FRB stock
202.6
2.9
5.68
225.2
3.4
6.06
121.7
1.3
4.24
Interest-bearing deposits in banks
208.5
3.0
5.71
419.4
5.4
5.16
244.4
1.4
2.27
Federal funds sold
0.3
—
—
0.6
—
—
1.7
—
—
Total interest-earning assets
$
27,796.8
$
324.3
4.63
%
$
28,328.8
$
319.1
4.52
%
$
28,731.2
$
288.8
3.99
%
Non-interest-earning assets
2,955.5
2,958.8
2,922.5
Total assets
$
30,752.3
$
31,287.6
$
31,653.7
Interest-bearing liabilities:
Demand deposits
$
6,361.5
$
13.3
0.83
%
$
6,417.2
$
9.9
0.62
%
$
7,824.3
$
5.1
0.26
%
Savings deposits
7,838.4
33.6
1.70
7,951.3
28.4
1.43
8,689.0
7.0
0.32
Time deposits
2,938.0
21.9
2.96
2,517.1
15.3
2.44
1,502.3
1.2
0.32
Repurchase agreements
895.2
1.7
0.75
1,020.6
1.5
0.59
1,107.7
0.8
0.29
Other borrowed funds
2,396.3
33.6
5.56
2,966.4
39.3
5.31
370.9
2.4
2.57
Long-term debt
120.8
1.5
4.93
120.8
1.4
4.65
120.4
1.5
4.94
Subordinated debentures held by subsidiary
trusts
163.1
3.3
8.03
163.1
3.1
7.62
163.1
1.9
4.62
Total interest-bearing liabilities
$
20,713.3
$
108.9
2.09
%
$
21,156.5
$
98.9
1.88
%
$
19,777.7
$
19.9
0.40
%
Non-interest-bearing deposits
6,401.2
6,521.9
8,212.6
Other non-interest-bearing liabilities
504.0
426.3
423.7
Stockholders’ equity
3,133.8
3,182.9
3,239.7
Total liabilities and stockholders’
equity
$
30,752.3
$
31,287.6
$
31,653.7
Net FTE interest income (non-GAAP)(3)
$
215.4
$
220.2
$
268.9
Less FTE adjustments (2)
(1.7
)
(1.8
)
(2.1
)
Net interest income from consolidated
statements of income
$
213.7
$
218.4
$
266.8
Interest rate spread
2.54
%
2.64
%
3.59
%
Net interest margin
3.05
3.09
3.68
Net FTE interest margin (non-GAAP)(3)
3.07
3.12
3.71
Cost of funds, including
non-interest-bearing demand deposits (4)
1.59
1.43
0.28
(1)
Average loan balances include loans held
for sale and loans held for investment, net of deferred fees and
costs, which include non-accrual loans. Interest income includes
amortization of deferred loan fees net of deferred loan costs,
which is not material.
(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)
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Total common stockholders' equity
(GAAP)
(A)
$
3,085.5
$
3,121.2
$
3,160.3
$
3,073.8
$
3,005.5
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,214.1
1,218.0
1,221.9
1,225.9
1,229.0
Tangible common stockholders' equity
(Non-GAAP)
(B)
$
1,871.4
$
1,903.2
$
1,938.4
$
1,847.9
$
1,776.5
Total assets (GAAP)
$
30,540.8
$
30,976.3
$
31,637.7
$
32,287.8
$
31,344.7
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,214.1
1,218.0
1,221.9
1,225.9
1,229.0
Tangible assets (Non-GAAP)
(C)
$
29,326.7
$
29,758.3
$
30,415.8
$
31,061.9
$
30,115.7
Average Balances:
Total common stockholders' equity
(GAAP)
(D)
$
3,133.8
$
3,182.9
$
3,147.0
$
3,050.1
$
3,239.7
Less goodwill and other intangible assets
(excluding mortgage servicing rights)
1,216.0
1,219.8
1,223.8
1,226.9
1,230.9
Average tangible common stockholders'
equity (Non-GAAP)
(E)
$
1,917.8
$
1,963.1
$
1,923.2
$
1,823.2
$
2,008.8
Net interest income
$
213.7
$
218.4
$
238.9
$
258.4
$
266.8
FTE interest income
1.7
1.8
1.8
2.3
2.1
Net FTE interest income
(F)
215.4
220.2
240.7
260.7
268.9
Less purchase accounting accretion
5.2
4.6
5.2
8.4
17.7
Adjusted net FTE interest income
(G)
$
210.2
$
215.6
$
235.5
$
252.3
$
251.2
Average interest-earning assets
(H)
$
27,796.8
$
28,328.8
$
29,059.4
$
28,680.9
$
28,731.2
Total quarterly average assets
(J)
30,752.3
31,287.6
32,010.9
31,716.0
31,653.7
Annualized net income available to common
shareholders
(K)
288.4
268.7
228.3
340.4
340.0
Common shares outstanding
(L)
105,011
105,021
104,382
104,442
104,451
Return on average assets (GAAP)
(K) / (J)
0.94
%
0.86
%
0.71
%
1.07
%
1.07
%
Return on average common stockholders'
equity (GAAP)
(K) / (D)
9.20
8.44
7.25
11.16
10.49
Average common stockholders' equity to
average assets (GAAP)
(D) / (J)
10.19
10.17
9.83
9.62
10.23
Book value per common share (GAAP)
(A) / (L)
$
29.38
$
29.72
$
30.28
$
29.43
$
28.77
Tangible book value per common share
(Non-GAAP)
(B) / (L)
17.82
18.12
18.57
17.69
17.01
Tangible common stockholders' equity to
tangible assets (Non-GAAP)
(B) / (C)
6.38
%
6.40
%
6.37
%
5.95
%
5.90
%
Return on average tangible common
stockholders' equity (Non-GAAP)
(K) / (E)
15.04
13.69
11.87
18.67
16.93
Net interest margin ratio (FTE)
(Non-GAAP)
(F*) / (H)
3.07
3.12
3.36
3.61
3.71
Adjusted net interest margin ratio (FTE)
(Non-GAAP)
(G*) / (H)
3.00
3.05
3.29
3.49
3.47
*Annualized
(FIBK-ER)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025795657/en/
David Della Camera, CFA Director of Financial Planning
and Analysis First Interstate BancSystem, Inc. (406)
255-5363 david.dellacamera@fib.com
www.FIBK.com
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