-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCOOMgqeNuDsJrNkxOyl1YEVtg0VPOe1s4Pu7gJBDZJ5yCbM9HlJuq9uOmP96sYd n60IUpm2vYiXxVXRqhSjLQ== 0000950124-00-003027.txt : 20000515 0000950124-00-003027.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950124-00-003027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCSYSTEM INC CENTRAL INDEX KEY: 0000860413 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 810331430 STATE OF INCORPORATION: MT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-64304 FILM NUMBER: 627002 BUSINESS ADDRESS: STREET 1: P O BOX 30918 STREET 2: 401 NO 31ST STREET CITY: BILLINGS STATE: MT ZIP: 59116-0918 BUSINESS PHONE: 4062555300 FORMER COMPANY: FORMER CONFORMED NAME: FIRST INTERSTATE BANCSYSTEM OF MONTANA INC DATE OF NAME CHANGE: 19930615 10-Q 1 FORM 10-Q 1 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 --------- 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 ------------ 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. 1 2 FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES Quarterly Report on Form 10-Q
Index Page ----- ---- PART I. FINANCIAL INFORMATION 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
2 3 FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except share and per share data) (Unaudited)
Assets ------ March 31, December 31, 2000 1999 ----------- ------------ 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 ============ ============
See accompanying notes to unaudited consolidated financial statements. 3 4 FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited)
For the three months ended March 31, ---------------------- 2000 1999 ---- ---- 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 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 4 5 FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Dollars in thousands) (Unaudited)
For the three months ended March 31, ----------------------------- 2000 1999 ---- ---- 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 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 5 6 FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
For the three months ended March 31, 2000 1999 ----------- ----------- 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
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. 6 7 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.
Three months ended 3/31/00 3/31/99 ------- ------- Weighted average common shares 7,960,660 7,982,673 Weighted average potential common shares 131,881 134,962
(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. 7 8 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. 8 9 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 9 10 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 10 11 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 11 12 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. 12 13 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
9 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. 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 151,477 4,302 9,135 0 347,537 241,198 233,866 1,788,928 30,297 2,677,711 2,142,010 270,662 63,335 23,237 0 0 8,759 169,708 2,677,711 40,598 8,812 198 46,908 18,024 22,576 27,032 1,245 0 23,812 10,913 10,913 0 0 7,017 0.88 0.87 8.60 22,872 6,738 3,230 39,377 29,599 1,297 750 30,297 22,210 0 8,087 (LIABILITIES-OTHER) Tag Includes $40,000 of preferred securities of subsidiary trust
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