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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from to
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COMMISSION FILE NUMBER 333-3250
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FIRST INTERSTATE BANCSYSTEM, INC.
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(Exact name of registrant as specified in its charter)
Montana 81-0331430
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
PO Box 30918, 401 North 31st Street, Billings, MT 59116-0918
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 406/255-5390
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X No
--- ---
The Registrant had 8,021,906 shares of common stock outstanding on March 31,
1998.
1
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
<TABLE>
<CAPTION>
Index Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Income
Three months ended March 31, 1998 and 1997 4
Consolidated Statements of Stockholders' Equity
Three months ended March 31, 1998 and year ended
December 31, 1997 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition And Results of Operations 9
Item 3 - Quantitative and Qualitative Disclosures about Market
Risk 12
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults on Senior Securities 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31,
Assets 1998 December 31,
------ (unaudited) 1997
----------- ------------
<S> <C> <C>
Cash and due from banks $ 125,567 136,025
Federal funds sold 70,015 58,675
Interest bearing deposits in banks 20,068 34,447
Investment securities:
Available-for-sale 252,040 188,650
Held-to-maturity 214,094 236,953
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466,134 425,603
Loans 1,461,818 1,470,414
Less allowance for loan losses 29,022 28,180
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Net loans 1,432,796 1,442,234
Premises and equipment, net 61,792 61,274
Accrued interest receivable 21,204 22,046
Goodwill, net of accumulated amortization of $9,122 at
March 31, 1998 (unaudited) and $8,486 at December 31, 1997 31,165 31,801
Other real estate owned, net 1,441 1,362
Deferred tax asset 6,015 5,946
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Other assets 15,003 15,351
$ 2,251,200 2,234,764
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Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 351,991 372,056
Interest bearing 1,485,253 1,432,950
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Total deposits 1,837,244 1,805,006
Federal funds purchased 2,000 4,025
Securities sold under repurchase agreements 159,578 176,350
Accounts payable and accrued expenses 21,765 20,599
Other borrowed funds 9,676 11,591
Long-term debt 31,355 31,526
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Total liabilities 2,061,618 2,049,097
Mandatorily redeemable securities of subsidiary trust 40,000 40,000
Stockholders' equity:
Common stock without par value; authorized 20,000,000 shares;
issued and outstanding 8,021,906 shares as of March 31, 1998
(unaudited) and 8,030,799 shares as of December 31, 1997 11,214 11,490
Retained earnings 137,586 133,277
Accumulated other comprehensive income 782 900
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Total stockholders' equity 149,582 145,667
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$ 2,251,200 2,234,764
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Book value per common share $ 18.65 18.14
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------
1998 1997
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<S> <C> <C>
Interest income:
Interest and fees on loans $ 35,191 33,330
Interest and dividends on investment securities:
Taxable 6,323 5,343
Exempt from Federal taxes 326 251
Interest on deposits with banks 195 85
Interest on Federal funds sold 966 152
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Total interest income 43,001 39,161
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Interest expense:
Interest on deposits 16,237 13,387
Interest on Federal funds purchased 38 318
Interest on securities sold under repurchase agreements 1,774 1,325
Interest on other borrowed funds 108 73
Interest on long-term debt 661 1,289
Interest on mandatorily redeemable securities of subsidiary trust 888 -
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Total interest expense 19,706 16,392
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Net interest income 23,295 22,769
Provision for loan losses 1,065 1,223
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Net interest income after provision for loan losses 22,230 21,546
Other operating income:
Income from fiduciary activities 1,206 1,033
Service charges on deposit accounts 2,490 2,379
Data processing 2,304 1,841
Other service charges, commissions, and fees 869 892
Net investment securities gains 42 58
Other real estate income, net of expense 185 134
Other income 414 422
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Total other operating income 7,510 6,759
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Other operating expenses:
Salaries and wages 7,797 6,987
Employee benefits 2,807 1,996
Occupancy expense, net 1,611 1,600
Furniture and equipment expenses 2,052 1,819
FDIC insurance 54 51
Other expenses 5,630 5,384
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Total other operating expenses 19,951 17,837
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Income before income taxes 9,789 10,468
Income tax expense 3,715 4,006
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Net income $ 6,074 6,462
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Basic earnings per common share $ 0.75 0.76
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Diluted earnings per common share $ 0.75 0.76
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Dividends per common share $ 0.22 0.22
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
-----------------------
1998 1997
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<S> <C> <C>
Net income $ 6,074 6,462
Other comprehensive income, net of tax:
Unrealized gains on investment securities:
Unrealized holding gains arising during period (143) (361)
Less: reclassification adjustment for gains included in net income 25 35
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Other comprehensive income (118) (326)
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Comprehensive income $ 5,956 6,136
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,074 $ 6,462
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and other real estate losses 1,065 1,223
Depreciation and amortization 2,189 2,177
Net premium amortization on investment securities (143) 246
Gain on sales of investments (42) (58)
Gain on sales of other real estate owned (232) (185)
Loss on sales of property and equipment 94 3
Provision for deferred income taxes (6) (136)
Decrease in interest receivable 842 323
Decrease in other assets 148 1,835
Increase in accounts payable and accrued expenses 1,166 6,920
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Net cash provided by operating activities 11,155 18,810
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Cash flows from investing activities:
Purchases of investment securities:
Held-to-maturity (5,597) (170,215)
Available-for-sale (111,356) (442)
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(116,953) (170,657)
Proceeds from maturities and paydowns of investment securities:
Held-to-maturity 28,599 162,989
Available-for-sale 22,675 5,696
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51,274 168,685
Proceeds from sales of available-for-sale investment securities 25,152 20,000
Increase in interest bearing deposits in banks 14,379 4,512
Extensions of credit to customers, net of repayments 7,321 (27,010)
Recoveries of loans charged-off 797 734
Proceeds from sales of other real estate 408 853
Capital distributions from joint venture 200 -
Capital expenditures, net (2,165) (1,978)
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Net cash used in investing activities (19,587) (4,861)
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Cash flows from financing activities:
Net increase (decrease) in deposits 32,238 (29,968)
Net increase (decrease) in Federal funds and repurchase agreements (18,797) 1,874
Net increase (decrease) in other borrowed funds (1,915) 10,827
Proceeds from long-term borrowings 1,428 250
Repayments of long-term borrowings (1,599) (658)
Proceeds from issuance of common stock 58 139
Payments to retire common stock (334) (604)
Dividends paid on common stock (1,765) (1,722)
Dividends paid on preferred stock - (421)
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Net cash provided by (used in) financing activities 9,314 (20,283)
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Net increase (decrease) in cash and cash equivalents 882 (6,334)
Cash and cash equivalents at beginning of period 194,700 165,907
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Cash and cash equivalents at end of period 195,582 159,573
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest 20,242 18,250
Cash paid during the period for taxes - 300
</TABLE>
Noncash investing and financing activities - the Company transferred loans of
$255 to other real estate owned during the three months ended March 31, 1998.
No loans were transferred to other real estate owned during the same period in
1997.
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
6
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except share and per share data)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (all of which are of a normal
recurring nature) necessary to present fairly the consolidated financial
position at March 31, 1998 and December 31, 1997, and the results of
consolidated operations and cash flows for each of the three month periods
ended March 31, 1998 and 1997 in conformity with generally accepted
accounting principles. The balance sheet information at December 31, 1997
is derived from audited consolidated financial statements, however, certain
reclassifications have been made to conform to the March 31, 1998
presentation.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. This statement requires that
all items required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements.
The Company adopted the provisions of SFAS No. 130 as of January 1, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement requires public
business enterprises to disclose selected information about operating
segments including segment income, revenues and asset data. Operating
segments, as defined in SFAS No. 131, include those components for which
financial information is available and evaluated regularly by the chief
operating decision maker in assessing performance and making resource
allocation determinations for operating components such as those which
contribute 10 percent or more of combined revenue, income or assets. The
Company adopted the provisions of SFAS No. 131 as of January 1, 1998. As
of March 31, 1998, the Company had no reportable segments as defined by
SFAS No. 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which revises disclosure
requirements for pensions and other postretirement benefits. The Company
adopted the provisions of SFAS No. 132 as of January 1, 1998. Adoption did
not have a material effect on the consolidated financial statements.
(2) COMPUTATION OF EARNINGS PER SHARE
Basic earnings per common share (EPS) is calculated by dividing net income
less preferred stock dividends by the weighted average number of shares of
common shares outstanding during the period presented. Diluted earnings
per common share is calculated by dividing net income less preferred stock
dividends by the weighted average number of common shares and potential
common shares outstanding during the period. Weighted average common
shares outstanding for the three month periods ended March 31, 1998 and
1997 were 8,023,800 and 7,941,616, respectively. Weighted average
potential common shares were 77,510 and 34,565 for the three month periods
ended March 31, 1998 and 1997, respectively.
7
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
(Dollars in thousands, except share and per share data)
(3) CASH DIVIDENDS
On April 14, 1998, the Company declared and paid a cash dividend on first
quarter earnings of $0.23 per share to stockholders of record on that date.
It has been the Company's practice to pay quarterly dividends based upon
earnings. The April 1998 dividend represents 30% of the Company's net
income for the quarter ended March 31, 1998.
(4) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in various claims
and litigation. In the opinion of management, following consultation with
legal counsel, the ultimate liability or disposition thereof will not have
a material adverse effect on the consolidated financial condition, results
of operations or liquidity.
The Company owns a 50% ownership interest in an aircraft and is jointly and
severally liable for aircraft indebtedness of $1.2 million as of March 31,
1998.
The Company is an anchor tenant in a building owned by a joint venture
partnership in which the Company owns a 50% partnership interest. The
Company is jointly and severally liable for joint venture partnership
indebtedness of $10.3 million as of March 31, 1998.
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. These instruments involve, in
varying degrees, elements of credit and interest rate risk in excess of
amounts recorded in the consolidated balance sheet.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Company to guarantee the performance of a
customer to a third party. Most commitments extend for no more than two
years. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company holds various collateral supporting those
commitments for which collateral is deemed necessary.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the commitment
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management's credit
evaluation of the customer. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
8
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion focuses on significant factors affecting the
financial condition and results of operations of First Interstate BancSystem,
Inc. and subsidiaries ("the Company") during the three month period ended March
31, 1998, with comparisons to 1997 as applicable.
FORWARD LOOKING STATEMENTS
Certain statements contained in this review are "forward looking
statements" that involve risk and uncertainties. The Company wishes to caution
readers that the following factors, among others, may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include general economic and business
conditions in those areas in which the Company operates, credit quality,
demographic changes, competition, fluctuations in interest rates, changes in
business strategy or development plans and changes in governmental regulations.
OVERVIEW
The Company reported net income of $6.1 million, or $0.75 per share for the
three months ended March 31, 1998, as compared to $6.5 million, or $0.76 per
share recorded in the same period in 1997. Net income available to common
shareholders of $6.1 million the three months ended March 31, 1998 increased
slightly from $6.0 million for the same period in 1997.
EARNING ASSETS
Earning assets of $2,018.0 million at March 31, 1998 increased $28.9
million, or 1.5%, from December 31, 1997. The mix of earning assets changed
little from December 31, 1997 with loans comprising approximately 72%,
investment securities comprising approximately 23% and interest bearing deposits
and federal funds sold comprising the remaining 5%.
LOANS. Total loans decreased $8.6 million, or 0.6%, to $1,461.8 million as
of March 31, 1998 from $1,470.4 million as of December 31, 1997. Average loan
volumes, however, increased $17.7 million, or 1.2%, to $1,459.5 million as of
March 31, 1998 from $1,441.8 million as of December 31, 1997. The growth rate
for all major categories of loans, except commercial, declined from previous
quarters. Management attributes this decline in growth rate to increasingly
competitive loan pricing by competitors in the Company's market areas and a
tightening of the Company's credit standards for certain consumer loans.
INVESTMENT SECURITIES. The Company's investment portfolio is managed to
result in the highest yield while meeting the Company's liquidity needs and
meeting pledging requirements for public funds deposits and securities sold
under repurchase agreements. The portfolio is comprised of U.S. Treasury
securities, U.S. government agency securities, tax exempt securities, corporate
securities, other mortgage-backed securities and other equity securities.
Investment securities increased $40.5 million, or 9.5%, to $466.1 million
as of March 31, 1998, from $425.6 million as of December 31, 1997. Additions to
the investment portfolio during the three-month period were funded through
growth in funding sources, primarily deposits.
INTEREST BEARING DEPOSITS IN BANK AND FEDERAL FUNDS SOLD. Interest bearing
deposits in bank consist of funds on deposit with the Federal Home Loan Bank.
These deposits, along with Federal funds sold, are used by the Company's banking
subsidiaries to fund the daily liquidity needs of the Company, including cash
requirements of correspondent banks. Interest bearing deposits in bank
decreased $14.4 million to $20.1 million as of March 31, 1998. This decrease
was offset by increases in Federal funds sold, which
9
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increased $11.3 million to $70.0 million as of March 31, 1998. Average interest
bearing deposits in banks and Federal funds sold increased $37.2 million to
$84.6 million as of March 31, 1998 from $47.4 million as of December 31, 1997.
Funds generated from deposit growth during the first quarter of 1998 exceeded
the funding requirements of the loan portfolio and were temporarily invested in
Federal funds and interest bearing deposits in bank.
INCOME FROM EARNING ASSETS. Interest income increased $3.8 million, or
9.8%, to $43.0 million for the three months ended March 31, 1998 from $39.2
million for the same period in 1997. This increase resulted from greater
volumes of interest earning assets generated through internal growth. Total
average earning assets at March 31, 1998 of $1,990.5 million yielded 8.76%
during the first quarter of 1998 while average earning assets of $1,879.6
million at March 31, 1997 yielded 8.88% for the same period.
FUNDING SOURCES
The Company utilizes traditional funding sources to support its earning
asset portfolio including deposits, borrowings, federal funds purchased and
repurchase agreements.
DEPOSITS. Total deposits increased $32.2 million, or 1.8%, to $1,837.2
million as of March 31, 1998 from $1,805.0 million as of December 31, 1997.
Seasonal decreases in total deposits that have historically occurred during the
first quarter of the year were offset in 1998 by internal growth resulting from
the Company's successful efforts to gain market share system-wide. Yields on
interest-bearing deposits increased 15 basis points to 4.46% during the first
quarter of 1998 compared to 4.31% during 1997.
OTHER FUNDING SOURCES. Other funding sources include Federal funds
purchased for one day periods, other borrowed funds consisting primarily of
short-term borrowings from the Federal Home Loan Bank repurchase agreements with
primarily commercial depositors and long-term debt. These other funding sources
decreased $20.9 million, or 9.3%, to $202.6 million as of March 31, 1998 from
$223.5 million as of December 31, 1997. Because the Company's funding
requirements were primarily met through deposit growth, other funding sources
decreased during the first quarter of 1998.
RECAPITALIZATION. During the fourth quarter 1997, the Company issued $40.0
million of mandatorily redeemable preferred securities of subsidiary trust
("trust preferred securities"). Proceeds from the issuance were used to redeem
long-term indebtedness and preferred stock. As a result of this
recapitalization, interest expense on long-term indebtedness decreased $628, or
48.7%, to $661 for the three months ended March 31, 1998 from $1.3 million for
the same period in 1997 and interest expense of $888 on the trust preferred
securities was recorded during the first quarter of 1998.
COSTS OF FUNDS. Interest expense increased $3.3 million, or 20.2%, to
$19.7 million for the three month period ended March 31, 1998 compared to $16.4
million for the same period in 1997. This increase is due to higher volumes of
interest bearing liabilities, primarily deposits, the issuance of $40.0 million
of trust preferred securities and increases in the average costs of funds.
Total average interest-bearing liabilities and trust preferred securities of
$1,704.6 million at March 31, 1998 increased $109.2 million from March 31, 1997.
Costs of average funds of 4.69% during the first quarter of 1998 were 32 basis
points higher than the same period last year.
NET INTEREST INCOME
Net interest income of $23.3 million for the quarter ended March 31, 1998
increased $525, or 2.3%, from $22.8 million for the same period in the prior
year. However, increasing competitive pressure on both deposit rates and loan
pricing combined with significant deposit growth and a slower rate of loan
growth have caused the net interest margin ratio to decrease 41 basis points to
4.79% for the three months ended March 31, 1998, from 5.20% for the same period
in 1997.
10
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PROVISION FOR LOAN LOSS
The provision for loan losses is maintained at a level that is, in
management's judgment, adequate to absorb losses inherent in the loan portfolio
given past, present and expected conditions. Fluctuations in the provision for
loan losses result from management's assessment of the adequacy of the allowance
for loan losses. Actual loan losses may vary from current estimates. The
provision for loan losses decreased $158, or 12.9%, to $1.1 million for the
three months ended March 31, 1998 from $1.2 million for the same period in the
prior year.
ASSET LIABILITY MANAGEMENT
INTEREST RATE SENSITIVITY. The primary objective of the Company's asset
liability management process is to optimize net interest income while prudently
managing balance sheet risks by understanding the levels of risk accompanying
its decisions and monitoring and managing these risks. The ability to optimize
net interest margin is largely dependent on the achievement of an interest rate
spread that can be managed during fluctuations of interest rates. Interest
sensitivity is a measure of the extent to which net interest income will be
affected by market interest rates over a period of time. Management monitors
the sensitivity of net interest margin by utilizing income simulation models and
traditional gap analysis.
LIQUIDITY. The objective of liquidity management is to maintain the
Company's ability to meet the day-to-day cash flow requirements of its customers
who either wish to withdraw funds or require funds to meet their credit needs.
The Company manages its liquidity position to meet the needs of its customers,
while maintaining an appropriate balance between assets and liabilities to meet
the return on investment objectives of its stockholders. The Company monitors
the sources and uses of funds on a daily basis to maintain an acceptable
liquidity position, principally through deposit receipts and repayments; loan
originations, extensions, and repayments; and management of investment
securities.
Alternate sources of liquidity are provided by Federal funds lines carried
with upstream and downstream correspondent banks. Additional liquidity could
also be generated through borrowings from the Federal Reserve Bank of
Minneapolis and the Federal Home Loan Bank of Seattle. Additionally, the
Company had $19.3 million available on its revolving term loan at March 31,
1998.
OTHER OPERATING INCOME AND EXPENSE
OTHER OPERATING INCOME
The Company's principal sources of other operating income include service
charges on deposit accounts, other service charges, data processing fees and
income from fiduciary activities. Other operating income increased $700, or
10.6%, to $7.3 million for the three months ended March 31, 1998 from $6.6
million for the same period in 1997 primarily due to increases in data
processing fees and income from fiduciary activities.
DATA PROCESSING FEES. The Company serviced approximately 690 locations in
its ATM network at March 31, 1998 compared to approximately 500 locations at
March 31, 1997. Data processing fees increased $463, or 25.2%, to $2.3 million
for the quarter ended March 31, 1998 from $1.8 million for the same period in
1997 primarily due to a non-recurring termination fee of $300 recorded during
the first quarter of 1998. The remaining increase is due to a greater number of
data processing customers using the Company's ATM network and increases in core
processing transaction volumes.
INCOME FROM FIDUCIARY ACTIVITIES. Revenues from fiduciary activities increased
$173, or 16.8%, to $1.2 million for the three months ended March 31, 1998 from
$1.0 million for the same period in 1997. The increase in revenues results
primarily from increases in the value of assets under trust management.
11
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OTHER OPERATING EXPENSE
Other operating expenses increased $2.1 million, or 11.7%, to $19.8 million
for the quarter ended March 31, 1998 from $17.7 million for the same period in
1997. The main components of this increase include salaries and wages,
employee benefits and furniture and equipment expenses.
SALARIES AND WAGES EXPENSE. Salaries and wages expense increased $810, or
11.6%, to $7.8 million for the three months ended March 31, 1998 as compared to
$7.0 million for the same period in the prior year primarily due to: 1)
inflationary wage increases; 2) increases in administrative personnel providing
support services for the data processing division and the banks acquired in late
1996; and, 3) staffing for the five new branches opened since March 31, 1997.
EMPLOYEE BENEFITS EXPENSE. Employee benefits expense increased $811, or
40.6%, to $2.8 million for the quarter ended March 31, 1998 from $2.0 million
for the same period in 1997. During the first quarter, the Company recorded an
adjustment to its regular stock option accrual of $270 for stock appreciation
rights as a result of a 16% increase in the appraised value of its common stock
during the first quarter of 1998. The Company also recorded a non-recurring
expense of $290 for group health insurance premiums due to a change in the
provider's billing periods. The remaining increase in employee benefits expense
resulted from increases in salaries and wages.
FURNITURE AND EQUIPMENT EXPENSE. Furniture and equipment expense increased
$233, or 12.8%, to $2.1 million for the three months ended March 31, 1998 from
$1.8 million for the same period in 1997 primarily due to increases in
depreciation expense. Contributing to the increase in depreciation expense
were: 1) data processing equipment additions; 2) upgrades of various other
computer hardware and software used in the Company's operations; and, 3)
building, furniture and equipment additions associated with new branch openings.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of March 31, 1998, there have been no material changes in the quantitative
and qualitative information about market risk provided pursuant to Item 305 of
Regulation SK as presented in the Company's December 31, 1997 Form 10-K.
12
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PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR INDEBTEDNESS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable or required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) No reports were filed on Form 8-K during the quarter ended
March 31, 1998.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
FIRST INTERSTATE BANCSYSTEM, INC.
Date May 14, 1998 /s/ THOMAS W. SCOTT
------------------------ -------------------------------------
Thomas W. Scott
President and Chief Executive Officer
Date May 14, 1998 /s/ TERRILL R. MOORE
------------------------ -------------------------------------
Terrill R. Moore
Senior Vice President and
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Income found on pages
3 and 4 of the Company's Form 10-Q for the year-to-date and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 125,567
<INT-BEARING-DEPOSITS> 20,068
<FED-FUNDS-SOLD> 70,015
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 252,040
<INVESTMENTS-CARRYING> 214,094
<INVESTMENTS-MARKET> 215,711
<LOANS> 1,461,818
<ALLOWANCE> 29,022
<TOTAL-ASSETS> 2,251,200
<DEPOSITS> 1,837,244
<SHORT-TERM> 171,254<F1>
<LIABILITIES-OTHER> 61,765
<LONG-TERM> 31,355
0
0
<COMMON> 11,214
<OTHER-SE> 138,368
<TOTAL-LIABILITIES-AND-EQUITY> 149,582
<INTEREST-LOAN> 35,191
<INTEREST-INVEST> 6,649
<INTEREST-OTHER> 1,161
<INTEREST-TOTAL> 43,001
<INTEREST-DEPOSIT> 16,237
<INTEREST-EXPENSE> 19,706
<INTEREST-INCOME-NET> 23,295
<LOAN-LOSSES> 1,065
<SECURITIES-GAINS> 42
<EXPENSE-OTHER> 19,766
<INCOME-PRETAX> 9,789
<INCOME-PRE-EXTRAORDINARY> 6,074
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,074
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 4.68
<LOANS-NON> 9,826
<LOANS-PAST> 5,770
<LOANS-TROUBLED> 886
<LOANS-PROBLEM> 76,118
<ALLOWANCE-OPEN> 28,180
<CHARGE-OFFS> 1,020
<RECOVERIES> 797
<ALLOWANCE-CLOSE> 29,022
<ALLOWANCE-DOMESTIC> 3,095
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 25,927
<FN>
<F1>Includes $40,000 mandatorily redeemable securities of subsidiary trust.
</FN>
</TABLE>
