BILLINGS, Mont.--(BUSINESS WIRE)--First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports fourth quarter 2010 net income available to common stockholders of $10.0 million, or $0.23 per diluted share, as compared to $7.9 million, or $0.18 per diluted share, for third quarter 2010 and $10.7 million, or $0.34 per diluted share, for fourth quarter 2009. Return on average common equity and return on average assets were 5.68% and 0.58%, respectively, for the fourth quarter of 2010, compared to 4.52% and 0.48%, respectively, in the third quarter of 2010, and 8.07% and 0.65%, respectively, in the fourth quarter of 2009.
RESULTS SUMMARY | ||||||||||||||||||||||||
(Unaudited; $ in thousands, except per share data) | Three Months Ended | Sequential | Year | |||||||||||||||||||||
December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | ||||||||||||||||||||
Net income | $ | 10,838 | $ | 8,729 | $ | 11,521 | 24.2 | % | -5.9 | % | ||||||||||||||
Net income available to common stockholders | 9,975 | 7,867 | 10,658 | 26.8 | % | -6.4 | % | |||||||||||||||||
Diluted earnings per common share | 0.23 | 0.18 | 0.34 | 27.8 | % | -32.4 | % | |||||||||||||||||
Dividends per common share | 0.1125 | 0.1125 | 0.1125 | 0.0 | % | 0.0 | % | |||||||||||||||||
Book value per common share | 16.05 | 16.23 | 16.73 | -1.1 | % | -4.1 | % | |||||||||||||||||
Tangible book value per common share* | 11.55 | 11.72 | 10.53 | -1.5 | % | 9.7 | % | |||||||||||||||||
Net tangible book value per common share* | 12.96 | 13.14 | 12.46 | -1.4 | % | 4.0 | % | |||||||||||||||||
Return on average common equity | 5.68 | % | 4.52 | % | 8.07 | % | ||||||||||||||||||
Return on average assets | 0.58 | % | 0.48 | % | 0.65 | % | ||||||||||||||||||
Twelve Months Ended | Year | |||||||||||||||||||||||
December 31, | December 31, | Over Year | ||||||||||||||||||||||
2010 | 2009 | % Change | ||||||||||||||||||||||
Net income | $ | 37,356 | $ | 53,863 | -30.6 | % | ||||||||||||||||||
Net income available to common stockholders | 33,934 | 50,441 | -32.7 | % | ||||||||||||||||||||
Diluted earnings per common share | 0.85 | 1.59 | -46.5 | % | ||||||||||||||||||||
Dividends per common share | 0.4500 | 0.5000 | -10.0 | % | ||||||||||||||||||||
Return on average common equity | 5.22 | % | 9.98 | % | ||||||||||||||||||||
Return on average assets | 0.52 | % | 0.79 | % | ||||||||||||||||||||
* See Non-GAAP Financial Measures included herein for a discussion regarding tangible and net tangible book value per common share. |
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“Overall, First Interstate BancSystem performed well in 2010 in the midst of a difficult economy,” said Lyle R. Knight, President and Chief Executive Officer for First Interstate BancSystem, Inc. "The current low interest rate environment combined with diminished loan demand challenged us in 2010 and we expect these trends to continue in upcoming quarters. Improvement in our results from last quarter was largely due to strong income from the origination and sale of residential real estate loans and the reversal of previously recorded mortgage servicing rights impairment. The performance of the loan portfolio in the fourth quarter was consistent with our expectations, with previously identified problem assets continuing to migrate through the credit continuum without any surprises in terms of the degree of deterioration. While our provision for loan losses was slightly lower during the fourth quarter 2010, as compared to third quarter 2010, our allowance for loan losses as a percentage of total loans increased to 2.76%, a level we feel is sufficient to provide for estimated losses inherent in our loan portfolio. With this strong reserve and the conservative position we have taken on our impaired loans, we believe credits costs will be manageable in 2011. In addition, we will continue to strategically manage our balance sheet in order to optimize our net interest margin and will work to identify and implement changes to our cost structures to reduce the growth of non-interest expenses.”
REVENUE SUMMARY | Three Months Ended | Sequential | Year | |||||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | |||||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | ||||||||||||||||||||
Interest income | $ | 76,215 | $ | 78,965 | $ | 82,678 | -3.5 | % | -7.8 | % | ||||||||||||||
Interest expense | 13,365 | 15,221 | 19,094 | -12.2 | % | -30.0 | % | |||||||||||||||||
Net interest income | 62,850 | 63,744 | 63,584 | -1.4 | % | -1.2 | % | |||||||||||||||||
Non-interest income: | ||||||||||||||||||||||||
Other service charges, commissions and fees | 7,421 | 7,821 | 7,124 | -5.1 | % | 4.2 | % | |||||||||||||||||
Income from the origination and sale of loans | 8,027 | 7,355 | 5,246 | 9.1 | % | 53.0 | % | |||||||||||||||||
Service charges on deposit accounts | 4,327 | 4,497 | 5,038 | -3.8 | % | -14.1 | % | |||||||||||||||||
Wealth management revenues | 3,083 | 3,091 | 2,894 | -0.3 | % | 6.5 | % | |||||||||||||||||
Investment securities gains, net | 62 | 66 | 11 | -6.1 | % | 463.6 | % | |||||||||||||||||
Other income | 2,591 | 2,025 | 1,897 | 28.0 | % | 36.6 | % | |||||||||||||||||
Total non-interest income | 25,511 | 24,855 | 22,210 | 2.6 | % | 14.9 | % | |||||||||||||||||
Total revenues | $ | 88,361 | $ | 88,599 | $ | 85,794 | -0.3 | % | 3.0 | % | ||||||||||||||
Tax equivalent net interest margin ratio | 3.72 | % | 3.89 | % | 4.05 | % | ||||||||||||||||||
Twelve Months Ended | Year | |||||||||||||||||||||||
December 31, | December 31, | Over Year | ||||||||||||||||||||||
2010 | 2009 | % Change | ||||||||||||||||||||||
Interest income | $ | 314,543 | $ | 328,034 | -4.1 | % | ||||||||||||||||||
Interest expense | 63,107 | 84,898 | -25.7 | % | ||||||||||||||||||||
Net interest income | 251,436 | 243,136 | 3.4 | % | ||||||||||||||||||||
Non-interest income: | ||||||||||||||||||||||||
Other service charges, commissions and fees | 29,494 | 28,747 | 2.6 | % | ||||||||||||||||||||
Income from the origination and sale of loans | 22,868 | 30,928 | -26.1 | % | ||||||||||||||||||||
Service charges on deposit accounts | 18,181 | 20,323 | -10.5 | % | ||||||||||||||||||||
Wealth management revenues | 12,387 | 10,821 | 14.5 | % | ||||||||||||||||||||
Investment securities gains, net | 170 | 137 | 24.1 | % | ||||||||||||||||||||
Other income | 7,811 | 9,734 | -19.8 | % | ||||||||||||||||||||
Total non-interest income | 90,911 | 100,690 | -9.7 | % | ||||||||||||||||||||
Total revenues | $ | 342,347 | $ | 343,826 | -0.4 | % | ||||||||||||||||||
Tax equivalent net interest margin ratio | 3.89 | % | 4.05 | % | ||||||||||||||||||||
Net Interest Income
During fourth quarter 2010, continued low loan demand negatively impacted net interest income and contributed to a 17 basis point reduction in net interest margin ratio. Average loans decreased $103 million, or 2.3% during fourth quarter 2010, as compared to third quarter 2010, resulting in an approximate 9 basis point reduction in the Company's net interest margin ratio. The remaining compression in net interest margin ratio was attributable to lower yields earned on the Company's investment security and loan portfolios, partially offset by a 16 basis point reduction in funding costs during fourth quarter 2010.
Non-interest Income
Refinancing activity remained elevated during the fourth quarter of 2010 resulting in an increase in income from the origination and sale of loans, as compared to third quarter 2010 and fourth quarter 2009. Refinancing activity accounted for approximately 72% of the Company’s residential real estate loan originations during fourth quarter 2010, as compared to 69% during third quarter 2010, and 53% during fourth quarter 2009. Increases in refinancing activity were partially offset by fewer originations of loans to purchase homes, which decreased 5% during fourth quarter 2010, as compared to third quarter 2010, and 12% as compared to fourth quarter 2009. Income from the origination and sale of loans decreased during the twelve months ended December 31, 2010, as compared to the same period in the prior year, due to a substantial decline in refinancing activity from early 2009.
Other income increased during fourth quarter 2010, compared to third quarter 2010 and fourth quarter 2009, primarily due to increases in earnings of securities held under deferred compensation plans and life insurance proceeds. Other income decreased during the twelve months ended December 31, 2010, as compared to the same periods in 2009, primarily due to a $2.1 million one-time gain on the sale of Visa Class B common shares recorded during third quarter 2009.
NON-INTEREST EXPENSE | Three Months Ended | Sequential | Year | |||||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | |||||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | ||||||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||||
Salaries, wages and employee benefits | $ | 29,216 | $ | 27,994 | $ | 27,980 | 4.4 | % | 4.4 | % | ||||||||||||||
Occupancy, net | 4,207 | 3,939 | 4,242 | 6.8 | % | -0.8 | % | |||||||||||||||||
Furniture and equipment | 3,326 | 3,411 | 3,389 | -2.5 | % | -1.9 | % | |||||||||||||||||
FDIC insurance premiums | 2,584 | 2,337 | 2,389 | 10.6 | % | 8.2 | % | |||||||||||||||||
Outsourced technology services | 2,377 | 2,402 | 2,279 | -1.0 | % | 4.3 | % | |||||||||||||||||
Other real estate owned expense, net of income | 1,541 | 2,608 | 318 | -40.9 | % | 384.6 | % | |||||||||||||||||
Mortgage servicing rights amortization | 1,146 | 1,221 | 1,224 | -6.1 | % | -6.4 | % | |||||||||||||||||
Mortgage servicing rights impairment (recovery) | (2,999 | ) | 1,991 | (255 | ) | -250.6 | % | 1076.1 | % | |||||||||||||||
Core deposit intangibles amortization | 432 | 437 | 531 | -1.1 | % | -18.6 | % | |||||||||||||||||
Other expenses | 12,993 | 11,670 | 13,055 | 11.3 | % | -0.5 | % | |||||||||||||||||
Total non-interest expense | $ | 54,823 | $ | 58,010 | $ | 55,152 | -5.5 | % | -0.6 | % | ||||||||||||||
Twelve Months Ended | Year | |||||||||||||||||||||||
December 31, | December 31, | Over Year | ||||||||||||||||||||||
2010 | 2009 | % Change | ||||||||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||||
Salaries, wages and employee benefits | $ | 112,667 | $ | 113,569 | -0.8 | % | ||||||||||||||||||
Occupancy, net | 16,251 | 15,898 | 2.2 | % | ||||||||||||||||||||
Furniture and equipment | 13,434 | 12,405 | 8.3 | % | ||||||||||||||||||||
FDIC insurance premiums | 10,044 | 12,130 | -17.2 | % | ||||||||||||||||||||
Outsourced technology services | 9,477 | 10,567 | -10.3 | % | ||||||||||||||||||||
Other real estate owned expense, net of income | 7,670 | 6,397 | 19.9 | % | ||||||||||||||||||||
Mortgage servicing rights amortization | 4,615 | 7,568 | -39.0 | % | ||||||||||||||||||||
Mortgage servicing rights impairment (recovery) | (787 | ) | (7,224 | ) | -89.1 | % | ||||||||||||||||||
Core deposit intangibles amortization | 1,748 | 2,131 | -18.0 | % | ||||||||||||||||||||
Other expenses | 45,885 | 44,269 | 3.7 | % | ||||||||||||||||||||
Total non-interest expense | $ | 221,004 | $ | 217,710 | 1.5 | % | ||||||||||||||||||
Salaries, wages and employees benefits expenses increased during fourth quarter 2010, as compared to third quarter 2010 and fourth quarter 2009. The increase is primarily due to higher group medical insurance costs.
Variations in net OREO expense between periods were primarily due to fluctuations in write-downs of the estimated fair value of OREO properties. Fourth quarter 2010 net OREO expense included $367 thousand of operating expenses, $1.2 million of fair value write-downs and net losses of $13 thousand on the sale of OREO properties.
FDIC insurance premiums increased during fourth quarter 2010, as compared to third quarter 2010, due to the adjustment of third quarter assessment estimates to actual amounts. FDIC insurance premiums decreased in 2010, as compared to 2009, due to a special FDIC insurance assessment levied during second quarter 2009. The special assessment, which was applicable to all insured depository institutions, resulted in additional FDIC insurance expense of $3.1 million in 2009.
Fluctuations in the fair value of mortgage servicing rights are primarily due to changes in assumptions regarding estimated prepayments of the underlying mortgage loans, which typically correspond with changes in market interest rates. Mortgage interest rates increased during fourth quarter 2010, resulting in a $3.0 million recovery of previously recorded impairment in the fair value of mortgage servicing rights.
On December 1, 2010, the Company sold mortgage servicing rights with a book value of $5 million. A loss of $1.5 million on the sale was included in other expense during fourth quarter 2010. In conjunction with the sale, the Company entered into an agreement with the purchaser whereby the Company continues to sub-service the loans underlying the sold mortgage servicing rights.
ASSET QUALITY | Three Months Ended | |||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | |||||||||||||
2010 | 2010 | 2009 | ||||||||||||||
Allowance for loan losses - beginning of period | $ | 120,236 | $ | 114,328 | $ | 101,748 | ||||||||||
Charge-offs | (18,045 | ) | (12,789 | ) | (12,793 | ) | ||||||||||
Recoveries | 789 | 697 | 575 | |||||||||||||
Provision | 17,500 | 18,000 | 13,500 | |||||||||||||
Allowance for loan losses - end of period | $ | 120,480 | $ | 120,236 | $ | 103,030 | ||||||||||
December 31, | September 30, | December 31, | ||||||||||||||
2010 | 2010 | 2009 | ||||||||||||||
Period end loans | $ | 4,367,909 | $ | 4,452,387 | $ | 4,528,004 | ||||||||||
Average loans | 4,402,141 | 4,504,657 | 4,561,237 | |||||||||||||
Non-performing loans: | ||||||||||||||||
Nonaccrual loans | 195,342 | 174,249 | 115,030 | |||||||||||||
Accruing loans past due 90 days or more | 1,852 | 1,129 | 4,965 | |||||||||||||
Restructured loans | 13,490 | 26,630 | 4,683 | |||||||||||||
Total non-performing loans | 210,684 | 202,008 | 124,678 | |||||||||||||
Other real estate owned | 33,632 | 35,296 | 38,400 | |||||||||||||
Total non-performing assets | $ | 244,316 | $ | 237,304 | $ | 163,078 | ||||||||||
Net charge-offs to average loans (annualized) | 1.56 | % | 1.06 | % | 1.06 | % | ||||||||||
Provision for loan losses to average loans (annualized) | 1.58 | % | 1.59 | % | 1.17 | % | ||||||||||
Allowance for loan losses to period end loans | 2.76 | % | 2.70 | % | 2.28 | % | ||||||||||
Allowance for loan losses to total non-performing loans | 57.19 | % | 59.52 | % | 82.64 | % | ||||||||||
Non-performing loans to period end loans | 4.82 | % | 4.54 | % | 2.75 | % | ||||||||||
Non-performing assets to period end loans and other real estate owned |
5.55 | % | 5.29 | % | 3.57 | % | ||||||||||
Non-performing assets to total assets | 3.33 | % | 3.24 | % | 2.28 | % | ||||||||||
The Company's loan portfolio continued to be adversely impacted by difficult economic conditions in certain of its market areas. The Flathead, Gallatin Valley and Jackson market areas, which are dependent upon resort and second home communities, accounted for approximately 68% of loans charged-off during fourth quarter 2010 and approximately 54% of the Company's non-performing assets as of December 31, 2010, versus only 21% of the Company's total loans as of the same date.
As of December 31, 2010, total non-performing loans included $170 million of real estate loans, of which $78 million were construction loans and $73 million were commercial real estate loans. Non-performing construction loans as of December 31, 2010 were comprised of land acquisition and development loans of $44 million, residential construction loans of $17 million and commercial construction loans of $17 million.
Nonaccrual loans increased during fourth quarter 2010, as compared to third quarter 2010, primarily due to the commercial and commercial real estate loans of three borrowers. Approximately 45% of the increase was attributable to one borrower in the Jackson market area. As of December 31, 2010, approximately 76% of the Company's nonaccrual loans were current with regard to principal payments.
During fourth quarter 2010, the Company placed the restructured loans of two commercial real estate borrowers on nonaccrual. These loans, which aggregated $7 million, are included in the nonaccrual loans balance in the above table. The remaining decrease in restructured loans at December 31, 2010, as compared to September 30, 2010, was primarily due to payments received on the loans of one commercial and commercial real estate borrower. As of December 31, 2010, all of the Company's restructured loans were performing in accordance with their restructured terms.
During fourth quarter 2010, the Company recorded additions to OREO of $4 million, wrote down the fair value of OREO properties by $1 million and sold OREO with a book value of $5 million.
Provision for loan losses reflects management’s estimation of the effect of current economic conditions on the Company’s loan portfolio. Approximately 50% of the fourth quarter provision for loan losses was attributable to the Flathead, Gallatin Valley and Jackson market areas. Management expects quarterly provisions for loan losses to remain at elevated levels until a leveling-off or decline in non-performing assets occurs.
Following is a summary of the Company’s credit quality trends since the start of 2008.
CREDIT QUALITY TRENDS | |||||||||||||||||||||||||||||
(Unaudited; $ in thousands) | |||||||||||||||||||||||||||||
Provisions | Allowance | Loans | Potential | ||||||||||||||||||||||||||
for | Net | for | 30 - 89 Days | Non-Performing | Non-Performing | Problem | |||||||||||||||||||||||
Loan Losses | Charge-offs | Loan Losses | Past Due | Loans | Assets | Loans | |||||||||||||||||||||||
Q1 2008 | $ | 2,363 | $ | 766 | $ | 68,415 | $ | 55,532 | $ | 58,047 | $ | 58,921 | $ | 74,348 | |||||||||||||||
Q2 2008 | 5,321 | 1,086 | 72,650 | 81,571 | 92,403 | 95,108 | 94,371 | ||||||||||||||||||||||
Q3 2008 | 5,636 | 1,192 | 77,094 | 58,085 | 89,800 | 92,971 | 87,176 | ||||||||||||||||||||||
Q4 2008 | 20,036 | 9,814 | 87,316 | 92,180 | 90,922 | 96,947 | 138,850 | ||||||||||||||||||||||
Q1 2009 | 9,600 | 4,693 | 92,223 | 98,980 | 103,653 | 122,300 | 181,263 | ||||||||||||||||||||||
Q2 2009 | 11,700 | 5,528 | 98,395 | 88,632 | 135,484 | 167,273 | 166,673 | ||||||||||||||||||||||
Q3 2009 | 10,500 | 7,147 | 101,748 | 91,956 | 125,083 | 156,958 | 207,961 | ||||||||||||||||||||||
Q4 2009 | 13,500 | 12,218 | 103,030 | 63,878 | 124,678 | 163,078 | 220,976 | ||||||||||||||||||||||
Q1 2010 | 11,900 | 8,581 | 106,349 | 62,675 | 133,042 | 177,022 | 254,314 | ||||||||||||||||||||||
Q2 2010 | 19,500 | 11,521 | 114,328 | 99,334 | 158,113 | 200,451 | 286,483 | ||||||||||||||||||||||
Q3 2010 | 18,000 | 12,092 | 120,236 | 47,966 | 202,008 | 237,304 | 279,128 | ||||||||||||||||||||||
Q4 2010 | 17,500 | 17,256 | 120,480 | 57,011 | 210,684 | 244,312 | 238,250 | ||||||||||||||||||||||
Potential problem loans consist of performing loans that have been internally risk classified due to uncertainties regarding the borrowers' ability to continue to comply with the contractual repayment terms of the loans. Potential problem loans decreased during fourth quarter 2010, as compared to third quarter 2010, primarily due to the movement of potential problem loans to the non-performing loan category.
ASSETS | Sequential | Year | |||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | |||||||||||||||||
Cash and cash equivalents | $ | 685,618 | $ | 542,355 | $ | 623,482 | 26.4 | % | 10.0 | % | |||||||||||
Investment securities | 1,933,403 | 1,829,424 | 1,446,280 | 5.7 | % | 33.7 | % | ||||||||||||||
Loans | 4,367,909 | 4,452,387 | 4,528,004 | -1.9 | % | -3.5 | % | ||||||||||||||
Less allowance for loan losses | 120,480 | 120,236 | 103,030 | 0.2 | % | 16.9 | % | ||||||||||||||
Net loans | 4,247,429 | 4,332,151 | 4,424,974 | -2.0 | % | -4.0 | % | ||||||||||||||
Other assets | 634,520 | 625,271 | 642,917 | 1.5 | % | -1.3 | % | ||||||||||||||
Total assets | $ | 7,500,970 | $ | 7,329,201 | $ | 7,137,653 | 2.3 | % | 5.1 | % | |||||||||||
The Company continued to invest excess liquidity into investment securities during fourth quarter 2010. The duration of the Company’s investment securities portfolio increased to an estimated 2.5 years as of December 31, 2010, from 1.7 years as of September 30, 2010. This increase in duration was primarily driven by higher market interest rates as of December 31, 2010 and the resulting extensions in the estimated lives of our mortgage-backed investment securities.
LOANS | Sequential | Year | |||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | |||||||||||||||||
Real estate loans: | |||||||||||||||||||||
Commercial | $ | 1,565,665 | $ | 1,565,525 | $ | 1,556,273 | 0.0 | % | 0.6 | % | |||||||||||
Construction: | |||||||||||||||||||||
Land acquisition & development | 329,720 | 360,890 | 403,866 | -8.6 | % | -18.4 | % | ||||||||||||||
Residential | 99,196 | 111,545 | 134,970 | -11.1 | % | -26.5 | % | ||||||||||||||
Commercial | 98,542 | 91,713 | 98,056 | 7.4 | % | 0.5 | % | ||||||||||||||
Total construction loans | 527,458 | 564,148 | 636,892 | -6.5 | % | -17.2 | % | ||||||||||||||
Residential | 549,604 | 544,952 | 539,098 | 0.9 | % | 1.9 | % | ||||||||||||||
Agriculture | 182,794 | 189,895 | 195,045 | -3.7 | % | -6.3 | % | ||||||||||||||
Mortgage loans originated for sale | 46,408 | 53,722 | 36,430 | -13.6 | % | 27.4 | % | ||||||||||||||
Total real estate loans | 2,871,929 | 2,918,242 | 2,963,738 | -1.6 | % | -3.1 | % | ||||||||||||||
Consumer: | |||||||||||||||||||||
Indirect consumer loans | 423,552 | 432,869 | 423,104 | -2.2 | % | 0.1 | % | ||||||||||||||
Other consumer loans | 162,137 | 165,725 | 195,331 | -2.2 | % | -17.0 | % | ||||||||||||||
Credit card loans | 60,891 | 59,222 | 59,113 | 2.8 | % | 3.0 | % | ||||||||||||||
Total consumer loans | 646,580 | 657,816 | 677,548 | -1.7 | % | -4.6 | % | ||||||||||||||
Commercial | 730,471 | 739,151 | 750,647 | -1.2 | % | -2.7 | % | ||||||||||||||
Agricultural | 116,546 | 134,689 | 134,470 | -13.5 | % | -13.3 | % | ||||||||||||||
Other loans, including overdrafts | 2,383 | 2,489 | 1,601 | -4.3 | % | 48.8 | % | ||||||||||||||
Total loans | $ | 4,367,909 | $ | 4,452,387 | $ | 4,528,004 | -1.9 | % | -3.5 | % | |||||||||||
Total loans declined during fourth quarter 2010, as compared to third quarter 2010, with the most significant decreases occurring in land acquisition and development and residential construction loans. Management attributes these decreases to a general decline in new home construction, particularly in markets that are dependent upon resort and second home communities including the Flathead, Gallatin Valley and Jackson market areas, and the movement of loans out of the loan portfolio through charge-off, pay-off or foreclosure.
LIABILITIES | Sequential | Year | |||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | |||||||||||||||||
Deposits | $ | 5,925,713 | $ | 5,902,181 | $ | 5,824,056 | 0.4 | % | 1.7 | % | |||||||||||
Securities sold under repurchase agreements | 620,154 | 455,861 | 474,141 | 36.0 | % | 30.8 | % | ||||||||||||||
Other borrowed funds | 4,991 | 5,674 | 5,423 | -12.0 | % | -8.0 | % | ||||||||||||||
Long-term debt | 37,502 | 37,513 | 73,353 | 0.0 | % | -48.9 | % | ||||||||||||||
Subordinated debentures held by subsidiary trusts |
123,715 | 123,715 | 123,715 | 0.0 | % | 0.0 | % | ||||||||||||||
Other liabilities | 52,093 | 59,554 | 62,531 | -12.5 | % | -16.7 | % | ||||||||||||||
Total liabilities | $ | 6,764,168 | $ | 6,584,498 | $ | 6,563,219 | 2.7 | % | 3.1 | % | |||||||||||
All outstanding repurchase agreements are with commercial and municipal depositors and are due in one day. Fluctuations in repurchase agreements are primarily due to changes in the liquidity needs of customers.
Long-term debt decreased during the year primarily due to the early extinguishment of variable rate term notes in March 2010 and, to a lesser extent, scheduled repayments of long-term Federal Home Loan Bank borrowings.
DEPOSITS | Sequential | Year | |||||||||||||||||||
(Unaudited; $ in thousands) | December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||
2010 | 2010 | 2009 | % Change | % Change | |||||||||||||||||
Non-interest bearing demand | $ | 1,063,869 | $ | 1,098,375 | $ | 1,026,584 | -3.1 | % | 3.6 | % | |||||||||||
Interest bearing: | |||||||||||||||||||||
Demand | 1,218,078 | 1,144,415 | 1,197,254 | 6.4 | % | 1.7 | % | ||||||||||||||
Savings | 1,718,521 | 1,599,774 | 1,362,410 | 7.4 | % | 26.1 | % | ||||||||||||||
Time, $100 and over | 908,044 | 981,941 | 996,839 | -7.5 | % | -8.9 | % | ||||||||||||||
Time, other | 1,017,201 | 1,077,676 | 1,240,969 | -5.6 | % | -18.0 | % | ||||||||||||||
Total interest bearing | 4,861,844 | 4,803,806 | 4,797,472 | 1.2 | % | 1.3 | % | ||||||||||||||
Total deposits | $ | 5,925,713 | $ | 5,902,181 | $ | 5,824,056 | 0.4 | % | 1.7 | % | |||||||||||
Increases in deposits were solely the result of organic growth. During 2010, the Company has experienced a slight shift in the mix of deposits away from higher-costing time deposits to lower-costing savings, interest bearing demand and non-interest bearing demand deposits.
STOCKHOLDERS' EQUITY | Sequential | Year | |||||||||||||||||||
(Unaudited, $ in thousands, except per share data) |
December 31, | September 30, | December 31, | Quarter | Over Year | ||||||||||||||||
|
2010 | 2010 | 2009 | % Change | % Change | ||||||||||||||||
Preferred stockholders' equity | $ | 50,000 | $ | 50,000 | $ | 50,000 | 0.0 | % | 0.0 | % | |||||||||||
Common stockholders' equity | 677,427 | 671,755 | 509,359 | 0.8 | % | 33.0 | % | ||||||||||||||
Accumulated other comprehensive income, net |
9,375 | 22,948 | 15,075 | -59.1 | % | -37.8 | % | ||||||||||||||
Total stockholders' equity | $ | 736,802 | $ | 744,703 | $ | 574,434 | -1.1 | % | 28.3 | % | |||||||||||
Book value per common share | $ | 16.05 | $ | 16.23 | $ | 16.73 | -1.1 | % | -4.1 | % | |||||||||||
Tangible book value per common share* | $ | 11.55 | $ | 11.72 | $ | 10.53 | -1.5 | % | 9.7 | % | |||||||||||
Net tangible book value per common share* |
$ | 12.96 | $ | 13.14 | $ | 12.46 | -1.4 | % | 4.0 | % | |||||||||||
*See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible book value per common share. | |||||||||||||||||||||
On March 29, 2010, the Company completed an IPO of 11,500,000 shares of Class A common stock. The Company received net proceeds of $153 million from the offering, after deducting underwriting discounts, commissions and other offering costs.
Decreases in book value per common share, tangible book value per common share and net tangible book value per common share during fourth quarter, as compared to third quarter 2010 and fourth quarter 2009, are due to fluctuations in the mark-to-market adjustment on available-for-sale securities.
On December 7, 2010, the Company declared a quarterly dividend to common stockholders of $0.1125 per share. This dividend was paid on January 17, 2011 to shareholders of record as of January 3, 2011.
CAPITAL RATIOS | December 31, | September 30, | December 31, | |||||||
(Unaudited) | 2010 | 2010 | 2009 | |||||||
Tangible common stockholders' equity to tangible assets* | 6.76% | 7.03% | 4.76% | |||||||
Net tangible common stockholders' equity to tangible assets* | 7.59% | 7.88% | 5.63% | |||||||
Tier 1 common capital to total risk weighted assets | 10.12% | 9.85% | 6.43% | |||||||
Leverage ratio | 9.27%** | 9.38% | 7.30% | |||||||
Tier 1 risk-based capital | 13.53%** | 13.22% | 9.74% | |||||||
Total risk-based capital | 15.50%** | 15.18% | 11.68% | |||||||
*See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible common stockholders' equity to tangible assets. |
||||||||||
**Preliminary estimate - may be subject to change. | ||||||||||
The Company exceeds “well capitalized” requirements under all regulatory capital guidelines. Significant increases in capital ratios at December 31, 2010, as compared to December 31, 2009, reflect the impact of additional capital raised from the Company’s IPO in March 2010.
Fourth Quarter 2010 Conference Call for Investors
First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2010 results at 11:00 a.m. Eastern Time (9:00 a.m. MST) on Friday, February 4, 2011. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-877-317-6789 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. MST) on February 4, 2011 through the end of the first quarter by dialing 1-877-344-7529 (using conference ID 447070). 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 72 banking offices in 42 communities in Montana, Wyoming and western 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 Statement
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are covered by the safe harbor provisions of such sections. These statements include statements about monitoring credit quality, identifying and addressing problem loans, the Company’s level of allowance for loan losses, managing net interest margin, reducing growth of non-interest expenses, the effect of discontinuation of the TAG program on deposits, quarterly provisions for loan losses and non-performing assets. Forward-looking statements involve known and unknown risks and uncertainties that are difficult to predict. Therefore, the Company’s actual results, performance or achievements may differ materially from those expressed in or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions.
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 release:
- credit losses;
- concentrations of real estate loans;
- economic and market developments, including inflation;
- commercial loan risk;
- adequacy of the allowance for loan losses;
- impairment of goodwill;
- changes in interest rates;
- access to low-cost funding sources;
- increases in deposit insurance premiums;
- inability to grow business;
- changes in loan demand;
- adverse economic conditions affecting Montana, Wyoming and western South Dakota;
- governmental regulation and changes in regulatory, tax and accounting rules and interpretations;
- changes in or noncompliance with governmental regulations;
- effects of recent legislative and regulatory efforts to stabilize financial markets;
- dependence on the Company’s management team;
- ability to attract and retain qualified employees;
- failure of technology;
- disruption of vital infrastructure and other business interruptions;
- illiquidity in the credit markets;
- inability to meet liquidity requirements;
- lack of acquisition candidates;
- failure to manage growth;
- competition;
- inability to manage risks in turbulent and dynamic market conditions;
- ineffective internal operational controls;
- environmental remediation and other costs;
- failure to effectively implement technology-driven products and services;
- litigation pertaining to fiduciary responsibilities;
- capital required to support the Company’s bank subsidiary;
- soundness of other financial institutions;
- impact of Basel capital standards;
- inability of our bank subsidiary to pay dividends;
- change in dividend policy;
- lack of public market for our common stock;
- volatility of Class A common stock;
- voting control;
- decline in market price of Class A common stock;
- dilution as a result of future equity issuances;
- use of net proceeds;
- uninsured nature of any investment in Class A common stock;
- anti-takeover provisions;
- intent to qualify as a controlled company; and
- subordination of common stock to company debt.
A more detailed discussion of each of the foregoing risks is included in the Company’s periodic and current reports filed with the Securities and Exchange Commission and is contained in our most recently filed prospectus dated March 23, 2010, filed March 24, 2010. These factors and the other risk factors described in the Company’s periodic and current reports filed with the Securities and Exchange Commission from time to time, however, are not necessarily all of the important factors that could cause the Company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the Company’s forward-looking statements. Other unknown or unpredictable factors also could harm the Company’s results. Investors and others are encouraged to read the more detailed discussion of the Company’s risks contained in the Company’s most recently filed prospectus, which discussion in incorporated herein by reference.
All forward-looking statements attributable to the Company or persons acting on the Company’s 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 the Company does 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 the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.
CONSOLIDATED BALANCE SHEETS | ||||||||||||
(Unaudited, $ in thousands) |
||||||||||||
December 31, | September 30, | December 31, | ||||||||||
2010 | 2010 | 2009 | ||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 107,035 | $ | 124,933 | $ | 213,029 | ||||||
Federal funds sold | 2,114 | 774 | 11,474 | |||||||||
Interest bearing deposits in banks | 576,469 | 416,648 | 398,979 | |||||||||
Total cash and cash equivalents | 685,618 | 542,355 | 623,482 | |||||||||
Investment securities: | ||||||||||||
Available-for-sale | 1,786,335 | 1,692,426 | 1,316,429 | |||||||||
Held-to-maturity (estimated fair values of $146,508, $141,543 and $130,855 as of December 31, 2010, September 30, 2010 and December 31, 2009, respectively) |
147,068 | 136,998 | 129,851 | |||||||||
Total investment securities | 1,933,403 | 1,829,424 | 1,446,280 | |||||||||
Loans | 4,367,909 | 4,452,387 | 4,528,004 | |||||||||
Less allowance for loan losses | 120,480 | 120,236 | 103,030 | |||||||||
Net loans | 4,247,429 | 4,332,151 | 4,424,974 | |||||||||
Premises and equipment, net | 188,138 | 192,021 | 196,307 | |||||||||
Goodwill | 183,673 | 183,673 | 183,673 | |||||||||
Company-owned life insurance | 73,056 | 72,867 | 71,374 | |||||||||
Other real estate owned | 33,632 | 35,296 | 38,400 | |||||||||
Accrued interest receivable | 33,628 | 37,251 | 37,123 | |||||||||
Deferred tax asset | 18,472 | - | - | |||||||||
Mortgage servicing rights, net of accumulated amortization and impairment reserve |
13,191 | 14,505 | 17,325 | |||||||||
Core deposit intangibles, net of accumulated amortization | 8,803 | 9,235 | 10,551 | |||||||||
Other assets | 81,927 | 80,423 | 88,164 | |||||||||
Total assets | $ | 7,500,970 | $ | 7,329,201 | $ | 7,137,653 | ||||||
Liabilities and Stockholders' Equity | ||||||||||||
Deposits: | ||||||||||||
Non-interest bearing | $ | 1,063,869 | $ | 1,098,375 | $ | 1,026,584 | ||||||
Interest bearing | 4,861,844 | 4,803,806 | 4,797,472 | |||||||||
Total deposits | 5,925,713 | 5,902,181 | 5,824,056 | |||||||||
Securities sold under repurchase agreements | 620,154 | 455,861 | 474,141 | |||||||||
Accounts payable and accrued expenses | 38,915 | 44,313 | 44,946 | |||||||||
Accrued interest payable | 13,178 | 15,241 | 17,585 | |||||||||
Other borrowed funds | 4,991 | 5,674 | 5,423 | |||||||||
Long-term debt | 37,502 | 37,513 | 73,353 | |||||||||
Subordinated debentures held by subsidiary trusts | 123,715 | 123,715 | 123,715 | |||||||||
Total liabilities | 6,764,168 | 6,584,498 | 6,563,219 | |||||||||
Stockholders' equity: | ||||||||||||
Preferred stock | 50,000 | 50,000 | 50,000 | |||||||||
Common stock | 264,174 | 263,719 | 112,135 | |||||||||
Retained earnings | 413,253 | 408,036 | 397,224 | |||||||||
Accumulated other comprehensive income, net | 9,375 | 22,948 | 15,075 | |||||||||
Total stockholders' equity | 736,802 | 744,703 | 574,434 | |||||||||
Total liabilities and stockholders' equity | $ | 7,500,970 | $ | 7,329,201 | $ | 7,137,653 | ||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(Unaudited, $ in thousands, except per share data) |
|||||||||||||||
Three Months ended | |||||||||||||||
December 31, | September 30, | December 31, | |||||||||||||
2010 | 2010 | 2009 | |||||||||||||
Interest income: | |||||||||||||||
Interest and fees on loans | $ | 65,044 | $ | 67,033 | $ | 69,877 | |||||||||
Interest and dividends on investment securities: | |||||||||||||||
Taxable | 9,665 | 10,540 | 11,327 | ||||||||||||
Exempt from federal taxes | 1,145 | 1,137 | 1,213 | ||||||||||||
Interest on deposits in banks | 360 | 252 | 228 | ||||||||||||
Interest on federal funds sold | 1 | 3 | 33 | ||||||||||||
Total interest income | 76,215 | 78,965 | 82,678 | ||||||||||||
Interest expense: | |||||||||||||||
Interest on deposits | 11,202 | 12,973 | 16,587 | ||||||||||||
Interest on securities sold under repurchase agreements | 247 | 209 | 179 | ||||||||||||
Interest on other borrowed funds | - | 1 | 2 | ||||||||||||
Interest on long-term debt | 493 | 512 | 850 | ||||||||||||
Interest on subordinated debentures held by subsidiary trusts | 1,423 | 1,526 | 1,476 | ||||||||||||
Total interest expense | 13,365 | 15,221 | 19,094 | ||||||||||||
Net interest income | 62,850 | 63,744 | 63,584 | ||||||||||||
Provision for loan losses | 17,500 | 18,000 | 13,500 | ||||||||||||
Net interest income after provision for loan losses | 45,350 | 45,744 | 50,084 | ||||||||||||
Non-interest income: | |||||||||||||||
Other service charges, commissions and fees | 7,421 | 7,821 | 7,124 | ||||||||||||
Income from the origination and sale of loans | 8,027 | 7,355 | 5,246 | ||||||||||||
Service charges on deposit accounts | 4,327 | 4,497 | 5,038 | ||||||||||||
Wealth management revenues | 3,083 | 3,091 | 2,894 | ||||||||||||
Investment securities gains, net | 62 | 66 | 11 | ||||||||||||
Other income | 2,591 | 2,025 | 1,897 | ||||||||||||
Total non-interest income | 25,511 | 24,855 | 22,210 | ||||||||||||
Non-interest expense: | |||||||||||||||
Salaries, wages and employee benefits | 29,216 | 27,994 | 27,980 | ||||||||||||
Occupancy, net | 4,207 | 3,939 | 4,242 | ||||||||||||
Furniture and equipment | 3,326 | 3,411 | 3,389 | ||||||||||||
FDIC insurance premiums | 2,584 | 2,337 | 2,389 | ||||||||||||
Outsourced technology services | 2,377 | 2,402 | 2,279 | ||||||||||||
Other real estate owned expense, net of income | 1,541 | 2,608 | 318 | ||||||||||||
Mortgage servicing rights amortization | 1,146 | 1,221 | 1,224 | ||||||||||||
Mortgage servicing rights impairment (recovery) | (2,999 | ) | 1,991 | (255 | ) | ||||||||||
Core deposit intangibles amortization | 432 | 437 | 531 | ||||||||||||
Other expenses | 12,993 | 11,670 | 13,055 | ||||||||||||
Total non-interest expense | 54,823 | 58,010 | 55,152 | ||||||||||||
Income before income tax expense | 16,038 | 12,589 | 17,142 | ||||||||||||
Income tax expense | 5,200 | 3,860 | 5,621 | ||||||||||||
Net income | 10,838 | 8,729 | 11,521 | ||||||||||||
Preferred stock dividends | 863 | 862 | 863 | ||||||||||||
Net income available to common shareholders | $ | 9,975 | $ | 7,867 | $ | 10,658 | |||||||||
Basic earnings per common share | $ | 0.23 | $ | 0.18 | $ | 0.34 | |||||||||
Diluted earnings per common share | $ | 0.23 | $ | 0.18 | $ | 0.34 | |||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
(Unaudited, $ in thousands, except per share data) |
|||||||||||
Twelve Months ended | |||||||||||
December 31, | December 31, | ||||||||||
2010 | 2009 | ||||||||||
Interest income: | |||||||||||
Interest and fees on loans | $ | 266,472 | $ | 279,985 | |||||||
Interest and dividends on investment securities: | |||||||||||
Taxable | 42,338 | 41,978 | |||||||||
Exempt from federal taxes | 4,621 | 5,298 | |||||||||
Interest on deposits in banks | 1,093 | 520 | |||||||||
Interest on federal funds sold | 22 | 253 | |||||||||
Total interest income | 314,546 | 328,034 | |||||||||
Interest expense: | |||||||||||
Interest on deposits | 53,949 | 73,226 | |||||||||
Interest on federal funds purchased | - | 20 | |||||||||
Interest on securities sold under repurchase agreements | 879 | 776 | |||||||||
Interest on other borrowed funds | 3 | 1,347 | |||||||||
Interest on long-term debt | 2,433 | 3,249 | |||||||||
Interest on subordinated debentures held by subsidiary trusts | 5,843 | 6,280 | |||||||||
Total interest expense | 63,107 | 84,898 | |||||||||
Net interest income | 251,439 | 243,136 | |||||||||
Provision for loan losses | 66,900 | 45,300 | |||||||||
Net interest income after provision for loan losses | 184,539 | 197,836 | |||||||||
Non-interest income: | |||||||||||
Other service charges, commissions and fees | 29,494 | 28,747 | |||||||||
Income from the origination and sale of loans | 22,868 | 30,928 | |||||||||
Service charges on deposit accounts | 18,181 | 20,323 | |||||||||
Wealth management revenues | 12,387 | 10,821 | |||||||||
Investment securities gains, net | 170 | 137 | |||||||||
Other income | 7,811 | 9,734 | |||||||||
Total non-interest income | 90,911 | 100,690 | |||||||||
Non-interest expense: | |||||||||||
Salaries, wages and employee benefits | 112,667 | 113,569 | |||||||||
Occupancy, net | 16,251 | 15,898 | |||||||||
Furniture and equipment | 13,434 | 12,405 | |||||||||
FDIC insurance premiums | 10,044 | 12,130 | |||||||||
Outsourced technology services | 9,477 | 10,567 | |||||||||
Other real estate owned expense, net of income | 7,670 | 6,397 | |||||||||
Mortgage servicing rights amortization | 4,615 | 7,568 | |||||||||
Mortgage servicing rights impairment (recovery) | (787 | ) | (7,224 | ) | |||||||
Core deposit intangibles amortization | 1,748 | 2,131 | |||||||||
Other expenses | 45,885 | 44,269 | |||||||||
Total non-interest expense | 221,004 | 217,710 | |||||||||
Income before income tax expense | 54,446 | 80,816 | |||||||||
Income tax expense | 17,090 | 26,953 | |||||||||
Net income | 37,356 | 53,863 | |||||||||
Preferred stock dividends | 3,422 | 3,422 | |||||||||
Net income available to common shareholders | $ | 33,934 | $ | 50,441 | |||||||
Basic earnings per common share | $ | 0.85 | $ | 1.61 | |||||||
Diluted earnings per common share | $ | 0.85 | $ | 1.59 | |||||||
AVERAGE BALANCE SHEETS | ||||||||||||||||||||||||||||||||||||||||
(Unaudited, $ in thousands) |
||||||||||||||||||||||||||||||||||||||||
For the three months ended | ||||||||||||||||||||||||||||||||||||||||
December 31, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||||||||||||||||
Loans (1)(2) | $ | 4,402,141 | $ | 65,482 | 5.90 | % | $ | 4,504,657 | $ | 67,473 | 5.94 | % | $ | 4,561,237 | $ | 70,325 | 6.12 | % | ||||||||||||||||||||||
Investment securities (2) | 1,849,445 | 11,471 | 2.46 | 1,720,925 | 12,333 | 2.84 | 1,374,162 | 13,241 | 3.82 | |||||||||||||||||||||||||||||||
Interest bearing deposits in banks | 562,277 | 360 | 0.25 | 392,149 | 252 | 0.25 | 357,974 | 228 | 0.25 | |||||||||||||||||||||||||||||||
Federal funds sold | 1,208 | 1 | 0.33 | 2,299 | 3 | 0.52 | 42,866 | 33 | 0.31 | |||||||||||||||||||||||||||||||
Total interest earnings assets | 6,815,071 | 77,314 | 4.50 | 6,620,030 | 80,061 | 4.80 | 6,336,239 | 83,827 | 5.25 | |||||||||||||||||||||||||||||||
Non-earning assets | 636,062 | 658,680 | 698,022 | |||||||||||||||||||||||||||||||||||||
Total assets | $ | 7,451,133 | $ | 7,278,710 | $ | 7,034,261 | ||||||||||||||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||
Demand deposits | 1,183,446 | 878 | 0.29 | % | 1,127,006 | 842 | 0.30 | % | 1,103,095 | 755 | 0.27 | % | ||||||||||||||||||||||||||||
Savings deposits | 1,677,125 | 2,092 | 0.49 | 1,555,510 | 2,199 | 0.56 | 1,400,337 | 2,387 | 0.68 | |||||||||||||||||||||||||||||||
Time deposits | 1,992,179 | 8,232 | 1.64 | 2,119,083 | 9,931 | 1.86 | 2,222,716 | 13,445 | 2.40 | |||||||||||||||||||||||||||||||
Repurchase agreements | 535,543 | 247 | 0.18 | 464,655 | 209 | 0.18 | 459,029 | 179 | 0.15 | |||||||||||||||||||||||||||||||
Borrowings (3) | 5,833 | - | - | 5,256 | 1 | 0.08 | 6,060 | 2 | 0.13 | |||||||||||||||||||||||||||||||
Long-term debt | 37,506 | 493 | 5.21 | 37,658 | 512 | 5.39 | 76,139 | 850 | 4.43 | |||||||||||||||||||||||||||||||
Subordinated debentures held by subsidiary trusts |
123,715 | 1,423 | 4.56 | 123,715 | 1,526 | 4.89 | 123,715 | 1,476 | 4.73 | |||||||||||||||||||||||||||||||
Total interest bearing liabilities | 5,555,347 | 13,365 | 0.95 | 5,432,883 | 15,220 | 1.11 | 5,391,091 | 19,094 | 1.41 | |||||||||||||||||||||||||||||||
Non-interest bearing deposits | 1,095,947 | 1,046,112 | 1,004,191 | |||||||||||||||||||||||||||||||||||||
Other non-interest bearing liabilities | 53,094 | 59,515 | 65,001 | |||||||||||||||||||||||||||||||||||||
Stockholders' equity | 746,745 | 740,200 | 573,978 | |||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders' equity |
$ | 7,451,133 | $ | 7,278,710 | $ | 7,034,261 | ||||||||||||||||||||||||||||||||||
Net FTE interest income | $ | 63,949 | $ | 64,841 | $ | 64,733 | ||||||||||||||||||||||||||||||||||
Less FTE adjustments (2) | (1,099 | ) | (1,097 | ) | (1,149 | ) | ||||||||||||||||||||||||||||||||||
Net interest income from consolidated statements of income |
$ | 62,850 | $ | 63,744 | $ | 63,584 | ||||||||||||||||||||||||||||||||||
Interest rate spread | 3.55 | % | 3.69 | % | 3.84 | % | ||||||||||||||||||||||||||||||||||
Net FTE interest margin (4) | 3.72 | % | 3.89 | % | 4.05 | % | ||||||||||||||||||||||||||||||||||
(1) Average loan balances include nonaccrual 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 a FTE basis. | ||||||||||||||||||||||||||||||||||||||||
(3) Includes interest on federal funds purchased and other borrowed funds. Excludes long-term debt. | ||||||||||||||||||||||||||||||||||||||||
(4) 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. |
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AVERAGE BALANCE SHEETS |
|||||||||||||||||||||||||||
(Unaudited, $ in thousands) |
|||||||||||||||||||||||||||
For the twelve months ended December 31, | |||||||||||||||||||||||||||
2010 | 2009 | ||||||||||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||
Interest earning assets: | |||||||||||||||||||||||||||
Loans (1)(2) | $ | 4,482,219 | $ | 268,279 | 5.99 | % | $ | 4,660,189 | $ | 281,799 | 6.05 | % | |||||||||||||||
Investment securities | 1,663,211 | 49,626 | 2.98 | 1,152,561 | 50,335 | 4.37 | |||||||||||||||||||||
Interest bearing deposits in banks | 429,657 | 1,093 | 0.25 | 199,316 | 520 | 0.26 | |||||||||||||||||||||
Federal funds sold | 6,238 | 22 | 0.35 | 105,423 | 253 | 0.24 | |||||||||||||||||||||
Total interest earnings assets | 6,581,325 | 319,020 | 4.85 | 6,117,489 | 332,907 | 5.44 | |||||||||||||||||||||
Non-earning assets | 665,012 | 687,110 | |||||||||||||||||||||||||
Total assets | $ | 7,246,337 | $ | 6,804,599 | |||||||||||||||||||||||
Interest bearing liabilities: | |||||||||||||||||||||||||||
Demand deposits | 1,135,208 | 3,430 | 0.30 | % | 1,083,054 | 4,068 | 0.38 | % | |||||||||||||||||||
Savings deposits | 1,530,844 | 8,934 | 0.58 | 1,321,625 | 10,033 | 0.76 | |||||||||||||||||||||
Time deposits | 2,143,899 | 41,585 | 1.94 | 2,129,313 | 59,125 | 2.78 | |||||||||||||||||||||
Repurchase agreements | 480,276 | 879 | 0.18 | 422,713 | 776 | 0.18 | |||||||||||||||||||||
Borrowings (3) | 5,779 | 3 | 0.05 | 57,016 | 1,367 | 2.40 | |||||||||||||||||||||
Long-term debt | 46,024 | 2,433 | 5.29 | 79,812 | 3,249 | 4.07 | |||||||||||||||||||||
Subordinated debentures held by subsidiary trusts |
123,715 | 5,843 | 4.72 | 123,715 | 6,280 | 5.08 | |||||||||||||||||||||
Total interest bearing liabilities | 5,465,745 | 63,107 | 1.15 | 5,217,248 | 84,898 | 1.63 | |||||||||||||||||||||
Non-interest bearing deposits | 1,021,409 | 965,226 | |||||||||||||||||||||||||
Other non-interest bearing liabilities | 58,778 | 66,862 | |||||||||||||||||||||||||
Stockholders' equity | 700,405 | 555,263 | |||||||||||||||||||||||||
Total liabilities and stockholders' equity |
$ | 7,246,337 | $ | 6,804,599 | |||||||||||||||||||||||
Net FTE interest income | $ | 255,913 | $ | 248,009 | |||||||||||||||||||||||
Less FTE adjustments (2) | (4,474 | ) | (4,873 | ) | |||||||||||||||||||||||
Net interest income from consolidated statements of income |
$ | 251,439 | $ | 243,136 | |||||||||||||||||||||||
Interest rate spread | 3.70 | % | 3.81 | % | |||||||||||||||||||||||
Net FTE interest margin (4) | 3.89 | % | 4.05 | % | |||||||||||||||||||||||
(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material. |
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(2) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis. |
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(3) Includes interest on federal funds purchased and other borrowed funds. Excludes long-term debt. | |||||||||||||||||||||||||||
(4) 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. |
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Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principals in the United States of America, or GAAP, this release contains the following non-GAAP financial measures that management uses to evaluate capital adequacy: (i) tangible book value per common share, (ii) net tangible book value per common share, (iii) tangible common stockholders’ equity to tangible assets and (iv) net tangible common stockholders’ equity to tangible assets.
For purposes of computing tangible book value per common share, tangible book value equals common stockholders’ equity less goodwill and other intangible assets (except mortgage servicing rights). Tangible book value per common share is calculated as tangible common stockholders’ equity divided by shares of common stock outstanding.
For purposes of computing net tangible book value per common share, net tangible book value equals common stockholders’ equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible book value per common share is calculated as net tangible common stockholders’ equity divided by shares of common stock outstanding. The Company’s goodwill as of December 31, 2010 was $184 million, of which approximately $159 million is deductible for income tax purposes over an original period of 15 years. The calculation of net tangible book value takes into account the full amount of tax benefit of approximately $60 million associated with deductible goodwill assuming the Company will continue to have income sufficient to allow it to recognize this benefit in future periods.
For purposes of computing tangible common stockholders’ equity to tangible assets, tangible assets equals total assets less goodwill and other intangible assets (except mortgage servicing rights). Tangible common stockholders’ equity to tangible assets is calculated as tangible common stockholders’ equity divided by tangible assets.
For purposes of computing net tangible common stockholders’ equity to tangible assets, net tangible common stockholders’ equity equals common stockholders’ equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible common stockholders’ equity to tangible assets is calculated as net tangible common stockholders’ equity divided by tangible assets.
Management believes that these non-GAAP financial measures are valuable indicators of a financial institution’s capital strength since they eliminate intangible assets from stockholders’ equity and retain the effect of unrealized losses on securities and other components of accumulated other comprehensive income (loss) in stockholders’ equity. Management also believes that such 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 our capitalization to other companies. These non-GAAP financial measures, however, 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 following table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.
NON-GAAP FINANCIAL MEASURES | December 31, | September 30, | December 31, | |||||||||||||
(Unaudited; $ in thousands except share and per share data) | 2010 | 2010 | 2009 | |||||||||||||
Total stockholders' equity (GAAP) | $ | 736,802 | $ | 744,703 | $ | 574,434 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) |
192,518 | 192,952 | 194,273 | |||||||||||||
Less preferred stock | 50,000 | 50,000 | 50,000 | |||||||||||||
Tangible common stockholders' equity (Non-GAAP) | $ | 494,284 | $ | 501,751 | $ | 330,161 | ||||||||||
Add deferred tax liability for deductible goodwill | 60,499 | 60,499 | 60,499 | |||||||||||||
Net tangible common stockholders' equity (Non-GAAP) | $ | 554,783 | $ | 562,250 | $ | 390,660 | ||||||||||
Common shares outstanding | 42,800,694 | 42,798,040 | 31,349,588 | |||||||||||||
Book value per common share | $ | 16.05 | $ | 16.23 | $ | 16.73 | ||||||||||
Tangible book value per common share | $ | 11.55 | $ | 11.72 | $ | 10.53 | ||||||||||
Net tangible book value per common share | $ | 12.96 | $ | 13.14 | $ | 12.46 | ||||||||||
Total assets (GAAP) | $ | 7,500,970 | $ | 7,329,201 | $ | 7,137,653 | ||||||||||
Less goodwill and other intangible assets (excluding mortgage servicing rights) |
192,518 | 192,952 | 194,273 | |||||||||||||
Tangible assets (Non-GAAP) | $ | 7,308,452 | $ | 7,136,249 |
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$ | 6,943,380 | |||||||||
Tangible common stockholders' equity to tangible assets | 6.76 | % | 7.03 | % | 4.76 | % | ||||||||||
Net tangible common stockholders' equity to tangible assets | 7.59 | % | 7.88 | % | 5.63 | % |