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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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transaction period from _______ to _______
COMMISSION FILE NUMBER 333-3250
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FIRST INTERSTATE BANCSYSTEM, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Montana 81-0331430
-------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
PO Box 30918, 401 North 31st Street, Billings, MT 59116-0918
---------------------------------------------------------------------------
(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 7,947,846 shares of common stock outstanding on March 31,
2000.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
<TABLE>
<CAPTION>
Index Page
----- ----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 (unaudited) 3
Consolidated Statements of Income
Three months ended March 31, 2000 and 1999 (unaudited) 4
Consolidated Statements of Comprehensive Income
Three months ended March 31, 2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999 (unaudited) 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>
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Assets
------ March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Cash and due from banks $ 151,477 146,943
Federal funds sold 9,135 10,415
Interest bearing deposits in banks 4,302 4,948
Investment securities:
Available-for-sale 347,537 344,053
Held-to-maturity 241,198 246,456
------------ ------------
Total investment securities 588,735 590,509
Loans 1,788,928 1,722,961
Less allowance for loan losses 30,297 29,599
------------ ------------
Net loans 1,758,631 1,693,362
Premises and equipment, net 75,250 74,106
Accrued interest receivable 24,983 24,506
Goodwill and core deposit intangible, net of accumulated
amortization of $14,478 at March 31, 2000 and $13,714
at December 31, 1999 31,610 32,374
Other real estate owned, net 1,384 1,445
Deferred tax asset 10,549 9,674
Other assets 21,655 21,984
------------ ------------
$ 2,677,711 2,610,266
============ ============
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing $ 399,078 398,391
Interest bearing 1,742,932 1,719,792
------------ ------------
Total deposits 2,142,010 2,118,183
Federal funds purchased 33,755 900
Securities sold under repurchase agreements 194,289 188,024
Accrued interest payable 14,060 13,331
Accounts payable and accrued expenses 9,275 7,723
Other borrowed funds 42,618 41,875
Long-term debt 23,237 23,394
------------ ------------
Total liabilities 2,459,244 2,393,430
Mandatorily redeemable preferred securities of subsidiary trust 40,000 40,000
Stockholders' equity:
Nonvoting noncumulative preferred stock without par value; authorized 100,000
shares; no shares issued or outstanding as of
March 31, 2000 or December 31, 1999 -- --
Common stock without par value; authorized 20,000,000 shares;
issued and outstanding 7,947,846 shares as of March 31, 2000
and 7,993,250 shares as of December 31, 1999 8,759 10,788
Retained earnings 177,021 172,078
Accumulated other comprehensive loss, net (7,313) (6,030)
------------ ------------
Total stockholders' equity 178,467 176,836
------------ ------------
$ 2,677,711 2,610,266
============ ============
Book value per common share $ 22.45 22.12
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $ 40,598 34,623
Interest and dividends on investment securities:
Taxable 7,929 8,771
Exempt from Federal taxes 883 795
Interest on deposits in banks 22 58
Interest on Federal funds sold 176 292
----------- -----------
Total interest income 49,608 44,539
----------- -----------
Interest expense:
Interest on deposits 18,024 16,579
Interest on Federal funds purchased 451 16
Interest on securities sold under repurchase agreements 2,350 1,468
Interest on other borrowed funds 362 83
Interest on long-term debt 507 502
Interest on mandatorily redeemable preferred securities of subsidiary trust 882 882
----------- -----------
Total interest expense 22,576 19,530
----------- -----------
Net interest income 27,032 25,009
Provision for loan losses 1,245 786
----------- -----------
Net interest income after provision for loan losses 25,787 24,223
Non-interest income:
Income from fiduciary activities 1,184 1,104
Service charges on deposit accounts 2,861 2,562
Data services 2,117 1,631
Other service charges, commissions and fees 1,865 1,559
Other real estate income, net 60 380
Other income 851 430
----------- -----------
Total non-interest income 8,938 7,666
----------- -----------
Non-interest expense:
Salaries, wages and employee benefits 12,649 10,890
Occupancy, net 1,934 1,738
Furniture and equipment 2,645 2,261
FDIC insurance 108 58
Goodwill and core deposit intangible amortization 764 592
Other expenses 5,712 5,077
----------- -----------
Total non-interest expense 23,812 20,616
----------- -----------
Income before income taxes 10,913 11,273
Income tax expense 3,896 4,060
----------- -----------
Net income $ 7,017 7,213
=========== ===========
Basic earnings per common share $ 0.88 0.90
=========== ===========
Diluted earnings per common share $ 0.87 0.89
=========== ===========
Dividends per common share $ 0.26 0.24
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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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,
-----------------------------
2000 1999
---- ----
<S> <C> <C>
Net income $ 7,017 7,213
Other comprehensive income, net of tax:
Unrealized gains (losses) on investment securities:
Realized and unrealized holding losses arising during period (2,103) (3,020)
------------ -----------
Other comprehensive loss, before tax (2,103) (3,020)
Income tax benefit related to items of other comprehensive income 820 1,178
------------ -----------
Other comprehensive loss, after tax (1,283) (1,842)
------------ -----------
Comprehensive income $ 5,734 5,371
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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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,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,017 $ 7,213
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 1,245 786
Depreciation and amortization 2,902 2,292
Net premium amortization (discount accretion) on investment securities 199 (22)
Gain on sales of other real estate owned (62) (403)
Gain on sales of property and equipment (1) (25)
Provision for deferred income taxes (100) 634
Increase in interest receivable (477) (723)
Decrease (increase) in other assets 305 (472)
Increase (decrease) in accrued interest payable 729 (1,013)
Increase in accounts payable and accrued expenses 1,552 712
----------- ----------
Net cash provided by operating activities 13,309 8,979
----------- ----------
Cash flows from investing activities:
Purchases of investment securities:
Held-to-maturity (1,050) (25,574)
Available-for-sale (11,953) (32,582)
Proceeds from maturities and paydowns of investment securities:
Held-to-maturity 6,163 64,225
Available-for-sale 6,357 19,518
Extensions of credit to customers, net of repayments (67,264) (29,761)
Recoveries of loans charged-off 750 824
Proceeds from sales of other real estate 123 1,103
Capital expenditures, net (3,281) (2,762)
------------ -----------
Net cash used in investing activities (70,155) (5,009)
------------ -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 23,827 (28,226)
Net increase (decrease) in Federal funds and repurchase agreements 39,120 (28,282)
Net increase (decrease) in other borrowed funds 743 (2,822)
Repayments of long-term borrowings (157) (450)
Net decrease in debt issuance costs 24 24
Proceeds from issuance of common stock 462 178
Payments to retire common stock (2,491) (1,218)
Dividends paid on common stock (2,074) (1,917)
------------ -----------
Net cash provided by (used in) financing activities 59,454 (62,713)
------------ -----------
Net increase (decrease) in cash and cash equivalents 2,608 (58,743)
Cash and cash equivalents at beginning of period 162,306 204,019
------------ -----------
Cash and cash equivalents at end of period 164,914 145,276
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 21,847 20,543
Cash paid during the period for taxes 3,730 3,995
</TABLE>
Noncash investing and financing activities - The Company transferred loans of $0
and $255 to other real estate owned during the three month periods ended March
31, 2000 and 1999, respectively.
See accompanying notes to unaudited consolidated financial statements.
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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 financial position at
March 31, 2000 and December 31, 1999, and the results of operations and
cash flows for each of the periods ended March 31, 2000 and 1999 in
conformity with generally accepted accounting principles. The balance sheet
information at December 31, 1999 is derived from audited consolidated
financial statements, however, certain reclassifications have been made to
conform to the March 31, 2000 presentation.
In June 1998, the Financial Standards Accounting Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. In June 1999, FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities Deferral of Effective
Date of SFAS No. 133 - an amendment of FASB Statement No. 133," deferring
the effective date of SFAS No. 133 to all fiscal quarters or fiscal years
beginning after June 15, 2000. Management expects that adoption will not
have a material effect on the consolidated financial statements, results of
operations or liquidity of the Company. As of March 31, 2000, the Company
was not engaged in hedging activities nor did it hold any free-standing
derivative instruments.
(2) Computation of Earnings per Share
Basic earnings per common share (EPS) is calculated by dividing net income
by the weighted average number of common shares outstanding during the
period presented. Diluted earnings per common share is calculated by
dividing net income by the weighted average number of common shares and
potential common shares outstanding during the period. The following table
shows weighted average common shares and weighted average potential common
shares for the three month periods ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended
3/31/00 3/31/99
------- -------
<S> <C> <C>
Weighted average common shares 7,960,660 7,982,673
Weighted average potential common shares 131,881 134,962
</TABLE>
(3) Cash Dividends
On April 15, 2000, the Company declared and paid a cash dividend on first
quarter earnings of $0.27 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 2000 dividend represents 30% of the Company's net
income for the quarter ended March 31, 2000.
(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.
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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)
The Company owns a 50% ownership interest in an aircraft and is jointly and
severally liable for aircraft indebtedness of $1.5 million as of March 31, 2000.
The indebtedness is funded by a banking subsidiary of the Company.
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 $9.3
million as of March 31, 2000.
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.
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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, 2000, with comparisons to 1999 as applicable. All earnings per share figures
are presented on a diluted basis.
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.
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 check payments;
loan originations, extensions, and repayments; and management of investment
securities.
The Company's current liquidity position is also supported by the
management of its investment portfolio, which provides a structured flow of
maturing and reinvestable funds that could be converted to cash, should the need
arise. Maturing balances in the Company's loan portfolio also provide options
for cash flow management. The ability to redeploy these funds is an important
source of immediate to long-term liquidity. Additional sources of liquidity
include customer deposits, Federal funds lines, borrowings and access to capital
markets.
Capital Adequacy. The objective of capital adequacy is to provide adequate
capitalization to assure depositor, investor and regulatory confidence. The
intent is to provide sufficient capital funds to support growth and to absorb
fluctuations in income so that operations can continue in periods of uncertainty
while at the same time ensuring investable funds are available to foster
expansion.
OVERVIEW
The Company reported net income of $7.0 million, or $0.87 per share for the
three months ended March 31, 2000, as compared to $7.2 million, or $0.89 per
share recorded in the same period in 1999. Decreases in earnings for the first
quarter of 2000 as compared to the same period last year are largely due to
reduced residential real estate origination fees resulting from decreased demand
for loan refinancing as
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interest rates rise, a one-time gain on other real estate recorded during the
first quarter of 1999 and higher provisions for loan losses in 2000.
Additionally, the Company has opened or acquired eight new branches since March
1999. These new branches reduce short-term profitability.
EARNING ASSETS
Earning assets of $2,391 million at March 31, 2000 increased $62 million,
or 2.7%, from $2,329 million at December 31, 1999 primarily due to internally
generated growth in loans.
Loans. Total loans increased $66 million, or 3.8%, to $1,789 million as of
March 31, 2000 from $1,723 million as of December 31, 1999. All categories of
loans increased from December 31, 1999 with the most significant growth
occurring in commercial lending. Approximately 35% of loan growth is due to two
commercial loans advanced during the first quarter of 2000. Management
attributes the remaining growth in part to expansion of its market presence
through a combination of successful marketing activities, new branch openings
and generally strong loan demand in the Company's marketing areas.
Income from Earning Assets. Interest income increased $5.1 million, or
11.5%, to $49.6 million for the three months ended March 31, 2000 from $44.5
million for the same period in 1999. Increases in interest income generated by
increases in prime rate and strong loan demand more than offset decreases in
loan fee income, primarily residential real estate origination fees. On a fully
taxable equivalent basis, average earning assets for the three month period
ended March 31, 2000 of $2,350 million yielded 8.60% while average earning
assets of $2,179 million for the three months ended March 31, 1999 yielded
8.38%. New branches opened or acquired since March 1999 contributed $1.3 million
of interest income during the first quarter 2000 on average earning assets of
$61 million.
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 $24 million, or 1.1%, to $2,142 million
as of March 31, 2000 from $2,118 million as of December 31, 1999. Seasonal
decreases in total deposits that historically occur during the first quarter of
the year were offset in 2000 by internal growth. Increases in deposits were used
primarily to fund loan growth.
Other Funding Sources. In addition to deposits, the Company also uses
short-term borrowings from the Federal Home Loan Bank of Seattle, repurchase
agreements with commercial depositors, long-term borrowings and, on a seasonal
basis, Federal funds purchased. Other funding sources increased $40 million, or
15.7%, to $294 million as of March 31, 2000 from $254 million as of December 31,
1999 primarily due to increases in Federal funds purchased. Increases in other
funding sources were used to fund loan growth.
Cost of Funding Sources. Interest expense for the three months ended March
31, 2000 of $22.6 million increased $3.1 million, or 15.9%, from $19.5 million
for the same period in 1999 due to increases in the volume of interest-bearing
liabilities combined with increases in interest rates since March 31, 1999.
Average interest-bearing liabilities and trust preferred securities of $2,042
million during the three months ended March 31, 2000 yielded 4.45% while average
interest-bearing liabilities and trust preferred securities of $1,861 million
during the three months ended March 31, 1999 yielded 4.26%. New branches opened
or acquired since March 1999 recorded interest expense of $617,000 on average
interest-bearing liabilities of $56 million.
NET INTEREST INCOME
The most significant impact on the Company's net interest income between
periods is derived from the interaction of changes in the volume of and rates
earned or paid on interest earning assets and interest bearing liabilities. Net
interest income on a fully-taxable equivalent ("FTE") basis of $27.7 million for
the quarter ended March 31, 2000 increased $2.2 million, or 8.6%, from $25.5
million for the same period in the
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prior year. A higher mix of loans in earning assets has kept the net interest
margin ratio stable at 4.74% for the three months ended March 31, 2000 as
compared to 4.75% for the same period in 1999.
PROVISION FOR LOAN LOSS
Provision for Loan Losses. The provision for loan losses creates an
allowance for future loan losses. The loan loss provision is dependent on many
factors, including loan growth, net charge-offs, changes in the composition of
the loan portfolio, delinquencies, management's assessment of the quality of the
loan portfolio, the value of underlying collateral on problem loans and general
economic conditions in the Company's markets. The Company performs a quarterly
assessment of risks inherent in its loan portfolio, as well as a detailed review
of each asset determined to have identified weaknesses. Based on this analysis,
which includes reviewing historical loss trends, current economic conditions,
industry concentrations and specific reviews of assets classified with
identified weaknesses, the Company makes provision for potential loan losses.
The provision for loan losses increased $459,000, or 58.4%, to $1.2 million for
the three months ended March 31, 2000 from $786,000 for the same period in the
prior year primarily due to loan growth combined with increases in
non-performing loans.
Non-Performing Loans. Non-performing loans include loans past due 90 days
or more and still accruing interest, non-accrual loans and restructured loans.
Non-performing loans increased $13.4 million, or 69.1%, to $32.8 million as of
March 31, 2000 as compared to $19.4 million as of March 31, 1999 primarily due
to one commercial loan of $10 million placed on non-accrual during the fourth
quarter of 1999 and slight deterioration in the agricultural market sector in
1999. At March 31, 2000, the ratio of non-performing loans to total loans is
1.84%. Non-performing loans as of December 31, 1999 totaled $31.2 million, or
1.81% of total loans.
NON-INTEREST INCOME
The Company's principal sources of non-interest income include service
charges on deposit accounts, data services revenues, income from fiduciary
activities, comprised principally of fees earned on trust assets, and other
service charges, commissions and fees. Non-interest income increased $1.2
million, or 15.6%, to $8.9 million for the three months ended March 31, 2000
from $7.7 million for the same period in 1999 with all four of the principal
categories showing increases from prior year. Significant fluctuations are
discussed below:
Data Services Revenues. Data services revenues increased $486,000, or
30.4%, to $2.1 million for the quarter ended March 31, 2000 from $1.6 million
for the same period in 1999. Approximately 30% of this increase is related to
one new core processing customer added during the fourth quarter of 1999. The
remaining increase is primarily due to a greater number of ATMs supported in the
Company's network and a corresponding increase in transaction volumes.
Other Service Charges, Commissions and Fees. Other service charges,
commissions and fees increased $306,000, or 19.1%, to $1.9 million for the
quarter ended March 31, 2000 as compared to $1.6 million for the same period in
the prior year. Approximately 33% of this increase is related to loan servicing
income on a loan portfolio purchased in late January 1999. The remaining
increase is primarily attributable to higher debit card and foreign ATM
transaction volumes, increases in ATM fees on foreign transactions and increases
in number of correspondent banks using the Company's back-room processing
services.
Other Real Estate Income. Net other real estate (OREO) income decreased
$320,000 to $60,000 for the three months ended March 31, 2000 as compared to
$380,000 during the same period in 1999. Variations in net OREO income during
the periods resulted principally from fluctuations in gains and losses on sales
of OREO.
Other Income. Other income, primarily brokerage fees, check printing income
and foreign exchange fees, increased $421,000 to $851,000 for the three months
ended March 31, 2000 from $430,000 for the same period in the prior year.
Approximately 50% of this increase occurred in brokerage fees as the Company
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continued to expand the range and scope of brokerage services offered. The
remaining increase is primarily attributable to increases in foreign exchange
fees.
OTHER OPERATING EXPENSE
Other operating expenses increased $3.2 million, or 15.5%, to $23.8 million
for the quarter ended March 31, 2000 from $20.6 million for the same period in
1999. Significant components of this increase are discussed below:
Salaries, Wages and Employee Benefits Expenses. Salaries, wages and
employee benefits expenses increased $1.7 million, or 15.6%, to $12.6 million
for the three months ended March 31, 2000 as compared to $10.9 million for the
same period in the prior year. Approximately 30% of this increase is directly
attributable to new branches opened or acquired since March 1999. The remaining
increase is primarily due to inflationary wage increases and increases in
staffing levels resulting from expansion of brokerage services and growth in the
data services division.
Occupancy. Occupancy expense increased $196,000, or 11.5%, to $1.9 million
for the three months ended March 31, 2000 compared to $1.7 million for the same
period in 1999. Approximately 62% of this increase is directly attributable to
new branches opened or acquired since March 1999. The remaining increase is
primarily due to increased depreciation associated with the remodel of existing
facilities.
Furniture and Equipment. Furniture and equipment expenses increased
$384,000, or 17.0% to $2.6 million for the three months ended March 31, 2000
from $2.3 million for the same period in 1999. Approximately 20% of this
increase is directly attributable to the new branches opened or acquired since
March 1999. The remaining increase is largely due to depreciation expense
associated with the Company's continuing investment in technology and other
costs of upgrading computer hardware and software, principally associated with
introducing check-imaging technology.
Other Expenses. Other expenses increased $636,000, or 12.5%, to $5.7
million for the quarter ended March 31, 2000 from $5.1 million for the same
period in 1999. Approximately 71% of this increase is directly attributable to
the eight new branches opened or acquired since March 1999. The remaining
increase is primarily inflationary in nature.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of March 31, 2000, there have been no material changes in the quantitative
and qualitative information about market risk provided pursuant to Item 305 of
Regulation S-K as presented in the Company's December 31, 1999 Form 10-K.
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PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes in legal
proceedings from December 31, 1999.
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, 2000.
13
<PAGE> 14
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 12, 2000 /s/ THOMAS W. SCOTT
------------------------ -----------------------------
Thomas W. Scott
President and Chief Executive Officer
Date May 12, 2000 /s/ TERRILL R. MOORE
------------------------ -----------------------------------
Terrill R. Moore
Senior Vice President and
Chief Financial Officer
14
<TABLE> <S> <C>
<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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 151,477
<INT-BEARING-DEPOSITS> 4,302
<FED-FUNDS-SOLD> 9,135
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 347,537
<INVESTMENTS-CARRYING> 241,198
<INVESTMENTS-MARKET> 233,866
<LOANS> 1,788,928
<ALLOWANCE> 30,297
<TOTAL-ASSETS> 2,677,711
<DEPOSITS> 2,142,010
<SHORT-TERM> 270,662
<LIABILITIES-OTHER> 63,335<F1>
<LONG-TERM> 23,237
0
0
<COMMON> 8,759
<OTHER-SE> 169,708
<TOTAL-LIABILITIES-AND-EQUITY> 2,677,711
<INTEREST-LOAN> 40,598
<INTEREST-INVEST> 8,812
<INTEREST-OTHER> 198
<INTEREST-TOTAL> 46,908
<INTEREST-DEPOSIT> 18,024
<INTEREST-EXPENSE> 22,576
<INTEREST-INCOME-NET> 27,032
<LOAN-LOSSES> 1,245
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 23,812
<INCOME-PRETAX> 10,913
<INCOME-PRE-EXTRAORDINARY> 10,913
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,017
<EPS-BASIC> 0.88
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 8.60
<LOANS-NON> 22,872
<LOANS-PAST> 6,738
<LOANS-TROUBLED> 3,230
<LOANS-PROBLEM> 39,377
<ALLOWANCE-OPEN> 29,599
<CHARGE-OFFS> 1,297
<RECOVERIES> 750
<ALLOWANCE-CLOSE> 30,297
<ALLOWANCE-DOMESTIC> 22,210
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8,087
<FN>
<F1>(LIABILITIES-OTHER) Tag Includes $40,000 of preferred securities of subsidiary
trust
</FN>
</TABLE>
