FIRST INTERSTATE BANCSYSTEM INC - FORM 8-K - EX-99.1 - EXHIBIT

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8-K - 8-K - FIRST INTERSTATE BANCSYSTEM INC	a20121231-8k.htm



For Immediate Release
Contact:	Marcy Mutch	NASDAQ: FIBK
	Investor Relations Officer First Interstate BancSystem, Inc. (406) 255-5322 investor.relations@fib.com	www.FIBK.com

First Interstate BancSystem, Inc. Reports Fourth Quarter 2012 Results

Billings, MT - January 28, 2013 - First Interstate BancSystem, Inc. reports fourth quarter 2012 net income available to common shareholders of $16.1 million, or $0.37 per diluted share, as compared to $15.3 million, or $0.35 per diluted share, for third quarter 2012, and $12.4 million, or $0.29 per diluted share, for fourth quarter 2011.

Significant financial statement items for the fourth quarter of 2012 include:


•	Income from the origination and sale of residential mortgage loans increased to a record high level of $12.3 million during the three months ended December 31, 2012. This represented a 5.6% increase over the prior quarter and a 52.4% increase over the same quarter of the prior year;


•	Net interest margin ratio declined 8 basis points during fourth quarter 2012, as compared to third quarter 2012, and 24 basis points as compared to fourth quarter 2011, due to lower yields earned on loan and investment portfolios;


•	Non-performing assets continued to decrease to the lowest level since 2009, declining to $174.6 million, or 2.26% of total assets, as of December 31, 2012, compared to $202.7 million, or 2.72% of total assets, as of September 30, 2012, and $278.9 million, or 3.81% of total assets, as of December 31, 2011; and


•	Provision for loan losses was $8.0 million for the three months ended December 31, 2012, compared to $9.5 million for the three months ended September 30, 2012, and $13.8 million for the three months ended December 31, 2011.

RESULTS SUMMARY

(Unaudited; $ in thousands, except per share data)



	As Of or For the Three Months Ended									Sequential Quarter % Change		Year Over Year % Change
	December 31, 2012			September 30, 2012			December 31, 2011			Sequential Quarter % Change		Year Over Year % Change
Net income available to common shareholders	$	16,114		$	15,292		$	12,402		5.4	%	29.9	%
Diluted earnings per common share	0.37			0.35			0.29			5.7	%	27.6	%
Dividends paid per common share	0.2500			0.1200			0.1125			108.3	%	122.2	%
Book value per common share	17.35			17.29			16.77			0.3	%	3.5	%
Tangible book value per common share*	12.97			12.90			12.33			0.5	%	5.2	%
Net tangible book value per common share*	14.37			14.30			13.74			0.5	%	4.6	%
Return on average common equity, annualized	8.55		%	8.22		%	6.84		%
Return on average tangible common equity, annualized*	11.45		%	11.07		%	9.31		%
Return on average assets, annualized	0.88		%	0.86		%	0.72		%



	As Of or For the Year Ended
	December 31, 2012			December 31, 2011		Year Over Year % Change
Net income available to common shareholders	$	54,924		41,124		33.6	%
Diluted earnings per common share	1.27			0.96		32.3	%
Dividends paid per common share	0.61			0.45		35.6	%
Return on average common equity	7.46		%	5.86	%
Return on average tangible common equity*	10.07		%	8.06	%
Return on average assets	0.79		%	0.61	%


*	See Non-GAAP Financial Measures included herein for a discussion regarding tangible and net tangible book

value per common share.

“Our fourth quarter performance capped a strong year for the Company, resulting in a 32% increase in earnings per share year-over-year as well as significant improvements in return on equity and return on assets,” said Ed Garding, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Fourth quarter results were driven by continued robust activity in residential mortgage lending. Growth in this area is reflective of strong demand for refinancing in our markets, as well as enhancements we have made in our systems and processes that have enabled us to capture additional market share. We were also pleased to see further improvement in asset quality and a reduction in credit costs during the quarter. Total non-performing assets declined by 37% from the prior year, which reflects the diligent efforts of our lenders and credit officers in managing these assets to satisfactory resolutions,” Garding further noted.

“Moving into 2013, we expect to deliver another year of strong profitability. Although modest loan demand and continued compression in our net interest margin will present challenges for growing our net interest income, we believe we can offset these pressures through further increases in our non-interest income, continued improvement in operating efficiencies, and a reduction in credit costs resulting from continued improvement in asset quality,” said Mr. Garding.

REVENUE SUMMARY

(Unaudited; $ in thousands)



	For the Three Months Ended									Sequential Quarter % Change		Year Over Year % Change
	December 31, 2012			September 30, 2012			December 31, 2011			Sequential Quarter % Change		Year Over Year % Change
Interest income	$	67,601		$	68,175		$	72,006		-0.8	%	-6.1	%
Interest expense	6,628			7,170			8,971			-7.6	%	-26.1	%
Net interest income	60,973			61,005			63,035			-0.1	%	-3.3	%
Non-interest income:
Income from the origination and sale of loans	12,321			11,665			8,087			5.6	%	52.4	%
Other service charges, commissions and fees	8,774			8,774			8,062			—	%	8.8	%
Service charges on deposit accounts	4,401			4,395			4,543			0.1	%	-3.1	%
Wealth management revenues	3,659			3,557			3,280			2.9	%	11.6	%
Investment securities gains, net	53			66			1,488			-19.7	%	-96.4	%
Other income	1,427			1,725			1,537			-17.3	%	-7.2	%
Total non-interest income	30,635			30,182			26,997			1.5	%	13.5	%
Total revenues	$	91,608		$	91,187		$	90,032		0.5	%	1.8	%
Tax equivalent net interest margin ratio	3.55		%	3.63		%	3.79		%



	For the Year Ended						Year Over Year % Change
	December 31, 2012			December 31, 2011			Year Over Year % Change
Interest income	$	273,900		$	292,883		-6.5	%
Interest expense	30,114			42,031			-28.4	%
Net interest income	243,786			250,852			-2.8	%
Non-interest income:
Income from the origination and sale of loans	41,790			21,153			97.6	%
Other service charges, commissions and fees	34,226			31,689			8.0	%
Service charges on deposit accounts	17,412			17,647			-1.3	%
Wealth management revenues	14,314			13,575			5.4	%
Investment securities gains, net	348			1,544			-77.5	%
Other income	6,771			6,264			8.1	%
Total non-interest income	114,861			91,872			25.0	%
Total revenues	$	358,647		$	342,724		4.6	%
Tax equivalent net interest margin ratio	3.66		%	3.80		%

Net Interest Income

The Company's net interest margin ratio decreased to 3.55% during fourth quarter 2012, as compared to 3.63% during third quarter 2012. The fourth quarter 2012 net interest margin ratio included $425 thousand of recoveries of charged-off interest. Exclusive of these interest recoveries, the Company's net interest margin ratio was 3.53% during fourth quarter 2012. The decline in the net interest margin ratio, as compared to third quarter 2012, was primarily due to lower yields earned on the Company's loan and investment portfolios. The impact of lower asset yields was partially offset by increases in average outstanding loans and investment securities and a 5 basis point reduction in the cost of interest-bearing liabilities due to a continuing favorable shift in the mix of deposits from higher costing time deposits into non-interest bearing demand deposits.

Decreases in net interest margin ratio during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011, were due to lower outstanding loan balances and lower yields earned on the Company's loan and investment portfolios, which were partially offset by reductions in the cost of interest bearing liabilities combined with a shift from higher-costing savings and time deposits to lower-costing demand deposits.

Non-interest Income

Non-interest income increased during the three and twelve months ended December 31, 2012, as compared to the same periods in 2011 and the three months ended September 30, 2012, primarily due to increases in income from the origination and sale of residential mortgage loans. New loans for home purchases accounted for approximately 35% of our 2012 residential loan production, compared to 44% in 2011.

NON-INTEREST EXPENSE

(Unaudited; $ in thousands)



	For the Three Months Ended							Sequential Quarter % Change		Year Over Year % Change
	December 31, 2012			September 30, 2012		December 31, 2011		Sequential Quarter % Change		Year Over Year % Change
Non-interest expense:
Salaries and wages	$	23,288		$	23,341	$	22,002	-0.2	%	5.8	%
Employee benefits	6,113			7,447		6,871		-17.9	%	-11.0	%
Occupancy, net	3,968			3,793		3,815		4.6	%	4.0	%
Furniture and equipment	3,301			3,231		3,195		2.2	%	3.3	%
Other real estate owned ("OREO") expense, net of income	3,877			2,612		2,021		48.4	%	91.8	%
Outsourced technology services	2,199			2,182		2,245		0.8	%	-2.0	%
FDIC insurance premiums	1,652			1,622		1,607		1.8	%	2.8	%
Professional fees	1,059			1,050		1,176		0.9	%	-9.9	%
Mortgage servicing rights amortization	910			879		940		3.5	%	-3.2	%
Mortgage servicing rights impairment (recovery)	(10		)	55		427		-118.2	%	-102.3	%
Core deposit intangibles amortization	355			355		361		0.0	%	-1.7	%
Other expenses	11,120			10,497		11,561		5.9	%	-3.8	%
Total non-interest expense	$	57,832		$	57,064	$	56,221	1.3	%	2.9	%



	For the Year Ended					Year Over Year % Change
	December 31, 2012			December 31, 2011		Year Over Year % Change
Non-interest expense:
Salaries and wages	$	89,833		$	83,560	7.5	%
Employee benefits	29,345			27,792		5.6	%
Occupancy, net	15,786			16,223		-2.7	%
Furniture and equipment	12,859			12,562		2.4	%
OREO expense, net of income	9,400			8,652		8.6	%
Outsourced technology services	8,826			8,933		-1.2	%
FDIC insurance premiums	6,470			7,333		-11.8	%
Professional fees	4,044			3,676		10.0	%
Mortgage servicing rights amortization	3,501			3,225		8.6	%
Mortgage servicing rights impairment (recovery)	(771		)	1,275		-160.5	%
Core deposit intangibles amortization	1,420			1,446		-1.8	%
Other expenses	48,922			43,735		11.9	%
Total non-interest expense	$	229,635		$	218,412	5.1	%

Salaries and wages increased during the three and twelve months ended December 31, 2012, as compared to the same periods in the prior year, primarily due to higher incentive bonus accruals reflective of the Company's improved performance, inflationary wage increases and increases in commissions and overtime related to the substantial increase in residential real estate loan activity.

Employee benefits decreased during fourth quarter 2012, as compared to third quarter 2012 and fourth quarter 2011, primarily due to lower group health insurance costs. During fourth quarter 2012, the Company reversed $1.1 million of previously accrued group health insurance expense to reflect favorable claims experience in 2012.

Employee benefits increased during the twelve months ended December 31, 2012, as compared to the same period in 2011, primarily due to the combined effects of increases in the market values of securities held under deferred compensation plans, higher stock-based compensation expense and increases in profit sharing accruals reflective of the Company's improved performance. These increases were partially offset by decreases in group health insurance expense described above.

Increases in OREO expense during fourth quarter 2012, as compared to third quarter of 2012 and fourth quarter 2011, were primarily due to write-downs in the estimated fair values of OREO properties. During fourth quarter 2012, the Company recorded write-downs in the estimated fair values of OREO properties of $3.3 million, compared to $2.3 million during third quarter 2012 and $1.5 million during fourth quarter 2011. Approximately 75% of fourth quarter 2012 write-downs were attributable to three properties.

Increases in OREO expense during the twelve months ended December 31, 2012, compared to the same period in the prior year, were primarily attributable to additional carrying costs associated with properties foreclosed during the period. During 2012, OREO expenses included net operating expenses of $3.7 million, write-downs in the estimated fair value of OREO properties of $6.7 million and net gains on OREO sales of $1.0 million, as compared to net operating expenses of $1.8 million, write-downs in the estimated fair value of OREO properties of $7.5 million and net gains on OREO sales of $567 thousand during 2011.

Other expenses increased during fourth quarter 2012, compared to third quarter 2012. During fourth quarter 2012, the Company adjusted accruals related to its credit card loyalty program resulting in a reversal of $695 thousand of other expense. This decrease was offset by increases in advertising costs, which fluctuate based on the timing of advertising campaigns. Increases in other expenses during the twelve months ended December 31, 2012, as compared to the same period in 2011, were primarily due to non-recurring expenses recorded during the first and second quarters of 2012, including the accrual of $3.0 million of estimated collection and settlement costs, $1.5 million of donations expense associated with the sale of a bank building to a charitable organization and the write-off of $428 thousand of unamortized issuance costs associated with the redemption of junior subordinated debentures. In addition, debit card processing expenses increased $1.4 million in 2012, as compared to 2011, due to changes in per transaction processing costs and increases in transaction volumes. Increases in debit card processing expense were offset by corresponding increases in debit card processing revenues of $1.1 million, which are included in non-interest income from other service charges, commissions and fees in the tables above and the accompanying income statements.

ASSET QUALITY

(Unaudited; $ in thousands)



	For the Three Months Ended
	December 31, 2012			September 30, 2012			December 31, 2011
Allowance for loan losses - beginning of period	$	99,006		$	102,794		$	120,303
Charge-offs	(10,291		)	(14,813		)	(22,435		)
Recoveries	3,796			1,525			962
Provision	8,000			9,500			13,751
Allowance for loan losses - end of period	$	100,511		$	99,006		$	112,581

	December 31, 2012			September 30, 2012			December 31, 2011
Period end loans	$	4,223,912		$	4,180,051		$	4,186,549
Average loans, quarter	4,197,665			4,183,016			4,236,228
Non-performing loans:
Non-accrual loans	107,799			122,931			199,983
Accruing loans past due 90 days or more	2,277			4,339			4,111
Troubled debt restructurings	31,932			35,428			37,376
Total non-performing loans	142,008			162,698			241,470
Other real estate owned	32,571			39,971			37,452
Total non-performing assets	$	174,579		$	202,669		$	278,922

	As Of or For the Three Months Ended
	December 31, 2012			September 30, 2012			December 31, 2011
Net charge-offs to average loans, annualized	0.62		%	1.26		%	2.01		%
Provision for loan losses to average loans, annualized	0.76		%	0.90		%	1.29		%
Allowance for loan losses to period end loans	2.38		%	2.37		%	2.69		%
Allowance for loan losses to total non-performing loans	70.78		%	60.85		%	46.62		%
Non-performing loans to period end loans	3.36		%	3.89		%	5.77		%
Non-performing assets to period end loans and other real estate owned	4.10		%	4.80		%	6.60		%
Non-performing assets to total assets	2.26		%	2.72		%	3.81		%

As of December 31, 2012, total non-performing loans included $125 million of real estate loans, of which $34 million were construction loans and $74 million were commercial real estate loans. Non-performing construction loans as of December 31, 2012 were comprised of land acquisition and development loans of $23 million, commercial construction loans of $8 million and residential construction loans of $3 million. Decreases in non-performing loans as of December 31, 2012, as compared to September 30, 2012, are primarily due to the movement of non-accrual loans out of the loan portfolio through pay-off, charge-off or foreclosure.

Decreases in troubled debt restructurings as of December 31, 2012, compared to September 30, 2012, were due to the placement of two restructured commercial real estate loans on non-accrual status during fourth quarter 2012.

During fourth quarter 2012, the Company recorded additions to OREO of $6.7 million, recorded write downs in the fair value of OREO properties of $3.3 million and sold OREO with a net book value of $10.8 million at a net gain of $273 thousand.

Decreases in provisions for loan losses during fourth quarter 2012, as compared to third quarter 2012 and fourth quarter 2011, are reflective of continued improvement in credit quality as evidenced by declining levels of non-performing and criticized loans. As of December 31, 2012, non-performing assets were at their lowest level since fourth quarter 2009.

Recoveries of charged-off loans increased during fourth quarter 2012, compared to third quarter 2012 and fourth quarter 2011, primarily due to a $1.2 million recovery on one large commercial loan charged-off earlier in 2012.

CREDIT QUALITY TRENDS

(Unaudited; $ in thousands)



	Provision for Loan Losses		Net Charge-offs		Allowance for Loan Losses		Accruing Loans 30-89 Days Past Due		Non-Performing Loans		Non-Performing Assets
Q1 2009	$	9,600	$	4,693	$	92,223	$	98,980	$	103,653	$	122,300
Q2 2009	11,700		5,528		98,395		88,632		135,484		167,273
Q3 2009	10,500		7,147		101,748		91,956		125,083		156,958
Q4 2009	13,500		12,218		103,030		63,878		124,678		163,078
Q1 2010	11,900		8,581		106,349		62,675		133,042		177,022
Q2 2010	19,500		11,521		114,328		99,334		158,113		200,451
Q3 2010	18,000		12,092		120,236		47,966		202,008		237,304
Q4 2010	17,500		17,256		120,480		57,011		210,684		244,312
Q1 2011	15,000		11,034		124,446		68,021		249,878		281,873
Q2 2011	15,400		15,267		124,579		70,145		263,467		291,790
Q3 2011	14,000		18,276		120,303		62,165		262,578		287,658
Q4 2011	13,751		21,473		112,581		75,603		241,470		278,922
Q1 2012	11,250		7,929		115,902		58,531		222,765		267,521
Q2 2012	12,000		25,108		102,794		55,074		172,333		226,150
Q3 2012	9,500		13,288		99,006		48,277		162,698		202,669
Q4 2012	8,000		6,495		100,511		34,602		142,008		174,579

CRITICIZED LOANS

(Unaudited; $ in thousands)



	Other Assets Especially Mentioned		Substandard		Doubtful		Total
Q1 2009	$	163,402	$	231,861	$	40,356	$	435,619
Q2 2009	230,833		242,751		48,326		521,910
Q3 2009	239,320		271,487		60,725		571,532
Q4 2009	279,294		271,324		69,603		620,221
Q1 2010	312,441		311,866		64,113		688,420
Q2 2010	319,130		337,758		92,249		749,137
Q3 2010	340,075		340,973		116,003		797,051
Q4 2010	305,925		303,653		133,353		742,931
Q1 2011	293,899		299,072		135,862		728,833
Q2 2011	268,450		309,029		149,964		727,443
Q3 2011	261,501		305,145		134,367		701,013
Q4 2011	240,903		269,794		120,165		630,862
Q1 2012	242,071		276,165		93,596		611,832
Q2 2012	220,509		243,916		81,473		545,898
Q3 2012	223,306		229,826		66,179		519,311
Q4 2012	209,933		215,188		42,459		467,580

LOANS

(Unaudited; $ in thousands)



	December 31, 2012		September 30, 2012		December 31, 2011		Sequential Quarter % Change		Year Over Year % Change
Real estate:
Commercial	$	1,497,272	$	1,513,784	$	1,553,155	-1.1	%	-3.6	%
Construction:
Land acquisition & development	220,196		233,082		278,613		-5.5	%	-21.0	%
Residential	49,274		50,895		61,106		-3.2	%	-19.4	%
Commercial	65,059		56,097		61,054		16.0	%	6.6	%
Total construction loans	334,529		340,074		400,773		-1.6	%	-16.5	%
Residential	708,339		639,235		571,943		10.8	%	23.8	%
Agricultural	177,244		175,395		175,302		1.1	%	1.1	%
Total real estate loans	2,717,384		2,668,488		2,701,173		1.8	%	0.6	%
Consumer:
Indirect consumer loans	438,245		431,449		407,651		1.6	%	7.5	%
Other consumer loans	137,743		139,984		147,487		-1.6	%	-6.6	%
Credit card loans	60,806		58,324		60,933		4.3	%	-0.2	%
Total consumer loans	636,794		629,757		616,071		1.1	%	3.4	%
Commercial	688,753		672,100		693,261		2.5	%	-0.7	%
Agricultural	113,627		135,467		119,710		-16.1	%	-5.1	%
Other loans, including overdrafts	912		1,359		2,813		-32.9	%	-67.6	%
Loans held for investment	4,157,470		4,107,171		4,133,028		1.2	%	0.6	%
Mortgage loans held for sale	66,442		72,880		53,521		-8.8	%	24.1	%
Total loans	$	4,223,912	$	4,180,051	$	4,186,549	1.0	%	0.9	%

Loan demand continues to be challenging with total loans showing only slight growth as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. Management attributes growth in commercial construction loans as of

December 31, 2012, compared to September 30, 2012, to overall improvement in economic conditions in the Company's market areas. Residential real estate loans grew during fourth quarter 2012 due to continued retention of selected loan production. Agricultural loans decreased as of December 31, 2012, compared to September 30, 2012, due to seasonal reductions in credit lines. Land acquisition and development and residential construction loans continued to decrease during fourth quarter 2012 primarily due to further movement of lower quality loans out of the loan portfolio through pay-off, charge-off or foreclosure.

DEPOSITS

(Unaudited; $ in thousands)



	December 31, 2012		September 30, 2012		December 31, 2011		Sequential Quarter % Change		Year Over Year % Change
Non-interest bearing demand	$	1,495,309	$	1,443,773	$	1,271,709	3.6	%	17.6	%
Interest bearing:
Demand	1,811,905		1,637,214		1,306,509		10.7	%	38.7	%
Savings	1,547,713		1,531,359		1,691,413		1.1	%	-8.5	%
Time, $100 and over	594,712		613,586		681,047		-3.1	%	-12.7	%
Time, other	790,772		809,800		876,293		-2.3	%	-9.8	%
Total interest bearing	4,745,102		4,591,959		4,555,262		3.3	%	4.2	%
Total deposits	$	6,240,411	$	6,035,732	$	5,826,971	3.4	%	7.1	%

Total deposits increased as of December 31, 2012, compared to September 30, 2012 and December 31, 2011. The favorable shift in the composition of deposits away from higher costing time deposits into lower costing demand deposits continued during fourth quarter 2012. As a result, the Company's cost of funds, including non-interest bearing demand deposits, decreased to 0.39% in fourth quarter 2012, compared to 0.43% in third quarter 2012 and 0.55% in fourth quarter 2011.

Savings deposits decreased as of December 31, 2012, compared to December 31, 2011. As a result of regulatory changes allowing businesses to receive interest on checking accounts, the Company discontinued its savings sweep product resulting in a shift of approximately $300 million from savings deposits into demand deposits during first quarter 2012.

REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES HELD BY SUBSIDIARY TRUSTS

On June 26, 2012, the Company redeemed $41.2 million of 30-year junior subordinated deferrable interest debentures issued by the Company to an unconsolidated subsidiary trust. The redemption of the junior subordinated debentures caused a mandatory redemption of $40 million of 30-year floating rate mandatorily redeemable capital trust preferred securities issued by the unconsolidated subsidiary trust to third-party investors.

CAPITAL

(Unaudited, $ in thousands, except per share data)



	As of or For the Three Months Ended
	December 31, 2012		September 30, 2012		December 31, 2011		Sequential Quarter % Change		Year Over Year % Change
Preferred stockholders' equity	$	—	$	50,000	$	50,000	-100.0	%	-100.0	%
Common stockholders' equity	735,195		729,059		701,986		0.8	%	4.7	%
Accumulated other comprehensive income, net	15,991		18,811		19,034		-15.0	%	-16.0	%
Total stockholders' equity	$	751,186	$	797,870	$	771,020	-5.9	%	-2.6	%
Book value per common share	$	17.35	$	17.29	$	16.77	0.3	%	3.5	%
Tangible book value per common share*	12.97		12.90		12.33		0.5	%	5.2	%
Net tangible book value per common share *	14.37		14.30		13.74		0.5	%	4.6	%
Weighted average common shares outstanding for basic earnings per common share computation	43,032,697		42,989,564		42,783,770		0.1	%	0.6	%
Weighted average common shares outstanding for diluted earnings per common share computation	43,198,076		43,120,077		42,847,772		0.2	%	0.8	%


*	See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible book value per common share.

On December 18, 2012, the Company provided notice to preferred stockholders of its intention to redeem the preferred stock on January 18, 2013. Upon notice to holders of the redemption, the preferred stock was reclassified from stockholders' equity to a liability in accordance with generally accepted accounting principles. The preferred stock was redeemed on January 18, 2013 at an aggregate redemption price of $50.2 million, which represented par value plus unpaid and accrued dividends.

CAPITAL RATIOS

(Unaudited)



	December 31, 2012			September 30, 2012		December 31, 2011
Tangible common stockholders' equity to tangible assets*	7.46	%		7.67	%	7.43	%
Net tangible common stockholders' equity to tangible assets*	8.26	%		8.50	%	8.28	%
Tier 1 common capital to total risk weighted assets	11.94	%	**	11.81	%	11.04	%
Leverage ratio	8.81	%	**	9.56	%	9.84	%
Tier 1 risk-based capital	13.60	%	**	14.53	%	14.55	%
Total risk-based capital	15.59	%	**	16.52	%	16.54	%


*	See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible common stockholders' equity to tangible assets.


**	Preliminary estimate - may be subject to change.

As of December 31, 2012, the Company had capital levels that, in all cases, exceeded the “well capitalized” requirements under all regulatory capital guidelines.

Fourth Quarter 2012 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2012 results at 11:00 a.m. Eastern Standard Time (9:00 a.m. MST) on Tuesday, January 29, 2013. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-888-317-6016 or by logging on to www.FIBK.com. The call will be recorded and made available for replay after 1:00 p.m. Eastern Standard Time (11:00 a.m. MST) on January 29, 2013 through March 4, 2013 by dialing 1-877-344-7529 (using conference ID 10023660). The call will also be archived on our website, www.FIBK.com, for one year.

About First Interstate BancSystem, Inc.

First Interstate BancSystem, Inc. is a financial and bank holding company incorporated in 1971 and headquartered in Billings, Montana. The Company operates 72 banking offices in 42 communities in Montana, Wyoming and western South Dakota. Through First Interstate Bank, the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities and other entities throughout the Company's market areas.

Cautionary Statement

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are covered by the safe harbor provisions of such sections. These statements include statements about decreased levels of criticized loans, stabilization of the loan portfolio, the Company's level of allowance for loan losses, manageability of credit costs and levels of profitability. Therefore, the Company's actual results, performance or achievements may differ materially from those expressed in or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions.

The following factors, among others, may cause actual results to differ materially from current expectations in the forward-looking statements, including those set forth in this release: credit losses; concentrations of real estate loans; economic and market developments, including inflation; commercial loan risk; adequacy of the allowance for loan losses; impairment of goodwill; changes in interest rates; access to low-cost funding sources; increases in deposit insurance premiums; inability to grow business; adverse economic conditions affecting Montana, Wyoming and western South Dakota; governmental regulation and changes in regulatory, tax and accounting rules and interpretations; sweeping changes in regulation of financial institutions due to passage of the Dodd-Frank Act; changes in or noncompliance with governmental regulations; effects of recent legislative and regulatory efforts to stabilize financial markets; dependence on the Company’s management team; ability to attract and retain qualified employees; failure of technology; reliance on external vendors; disruption of vital infrastructure and other

business interruptions; illiquidity in the credit markets; inability to meet liquidity requirements; lack of acquisition candidates; failure to manage growth; competition; inability to manage risks in turbulent and dynamic market conditions; ineffective internal operational controls; environmental remediation and other costs; failure to effectively implement technology-driven products and services; litigation pertaining to fiduciary responsibilities; capital required to support the Company’s bank subsidiary; soundness of other financial institutions; impact of Basel III capital standards and forthcoming new capital rules proposed for U.S. banks; inability of our bank subsidiary to pay dividends; change in dividend policy; lack of public market for our Class A common stock; volatility of Class A common stock; voting control of Class B stockholders; decline in market price of Class A common stock; dilution as a result of future equity issuances; uninsured nature of any investment in Class A common stock; anti-takeover provisions; controlled company status; subordination of common stock to Company debt; uncertainties associated with introducing new products or lines of business; and, downgrade of the U.S. credit rating.

A more detailed discussion of each of the foregoing risks is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed February 28, 2012. These factors and the other risk factors described in the Company's periodic and current reports filed with the Securities and Exchange Commission from time to time, however, are not necessarily all of the important factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed in or implied by any of the Company's forward-looking statements. Other unknown or unpredictable factors also could harm the Company's results. Investors and others are encouraged to read the more detailed discussion of the Company's risks contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

All forward-looking statements attributable to the Company or persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made and the Company does not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.

CONSOLIDATED BALANCE SHEETS

(Unaudited, $ in thousands)



	December 31, 2012		September 30, 2012		December 31, 2011
Assets
Cash and due from banks	$	177,978	$	124,275	$	142,502
Federal funds sold	730		1,215		309
Interest bearing deposits in banks	622,624		485,845		329,636
Total cash and cash equivalents	801,332		611,335		472,447
Investment securities:
Available-for-sale	1,995,258		1,979,154		2,016,864
Held-to-maturity (estimated fair values of $218,933, $199,078, $161,877 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively)	208,223		187,573		152,781
Total investment securities	2,203,481		2,166,727		2,169,645
Loans held for investment	4,157,470		4,107,171		4,133,028
Mortgage loans held for sale	66,442		72,880		53,521
Total loans	4,223,912		4,180,051		4,186,549
Less allowance for loan losses	100,511		99,006		112,581
Net loans	4,123,401		4,081,045		4,073,968
Premises and equipment, net of accumulated depreciation	187,565		188,851		184,771
Goodwill	183,673		183,673		183,673
Company-owned life insurance	76,729		76,371		74,880
Other real estate owned ("OREO"), net of write-downs	32,571		39,971		37,452
Accrued interest receivable	28,869		33,416		31,974
Mortgage servicing rights, net of accumulated amortization and impairment reserve	12,653		12,334		11,555
Core deposit intangibles, net of accumulated amortization	5,937		6,291		7,357
Deferred tax asset, net	2,597		1,638		9,628
Other assets	62,953		59,500		68,177
Total assets	$	7,721,761	$	7,461,152	$	7,325,527
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	1,495,309	$	1,443,773	$	1,271,709
Interest bearing	4,745,102		4,591,959		4,555,262
Total deposits	6,240,411		6,035,732		5,826,971
Securities sold under repurchase agreements	505,785		460,805		516,243
Accounts payable and accrued expenses	48,208		40,386		42,248
Accrued interest payable	6,502		6,706		8,123
Long-term debt	37,160		37,170		37,200
Other borrowed funds	32		6		7
Preferred stock pending redemption	50,000		—		—
Subordinated debentures held by subsidiary trusts	82,477		82,477		123,715
Total liabilities	6,970,575		6,663,282		6,554,507
Stockholders’ equity:
Preferred stock	—		50,000		50,000
Common stock	271,335		270,553		266,842
Retained earnings	463,860		458,506		435,144
Accumulated other comprehensive income, net	15,991		18,811		19,034
Total stockholders’ equity	751,186		797,870		771,020
Total liabilities and stockholders’ equity	$	7,721,761	$	7,461,152	$	7,325,527

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, $ in thousands, except per share data)



	Three Months Ended
	December 31, 2012			September 30, 2012		December 31, 2011
Interest income:
Interest and fees on loans	$	57,470		$	57,418	$	60,529
Interest and dividends on investment securities:
Taxable	8,490			9,194		10,023
Exempt from federal taxes	1,256			1,223		1,196
Interest on deposits in banks	383			336		256
Interest on federal funds sold	2			4		2
Total interest income	67,601			68,175		72,006
Interest expense:
Interest on deposits	4,851			5,414		6,854
Interest on securities sold under repurchase agreements	127			144		150
Interest on long-term debt	486			502		493
Interest on preferred stock pending redemption	131			—		—
Interest on subordinated debentures held by subsidiary trusts	1,033			1,110		1,474
Total interest expense	6,628			7,170		8,971
Net interest income	60,973			61,005		63,035
Provision for loan losses	8,000			9,500		13,751
Net interest income after provision for loan losses	52,973			51,505		49,284
Non-interest income:
Income from the origination and sale of loans	12,321			11,665		8,087
Other service charges, commissions and fees	8,774			8,774		8,062
Service charges on deposit accounts	4,401			4,395		4,543
Wealth management revenues	3,659			3,557		3,280
Investment securities gains, net	53			66		1,488
Other income	1,427			1,725		1,537
Total non-interest income	30,635			30,182		26,997
Non-interest expense:
Salaries and wages	23,288			23,341		22,002
Employee benefits	6,113			7,447		6,871
Occupancy, net	3,968			3,793		3,815
Furniture and equipment	3,301			3,231		3,195
OREO expense, net of income	3,877			2,612		2,021
Outsourced technology services	2,199			2,182		2,245
FDIC insurance premiums	1,652			1,622		1,607
Professional fees	1,059			1,050		1,176
Mortgage servicing rights amortization	910			879		940
Mortgage servicing rights impairment	(10		)	55		427
Core deposit intangibles amortization	355			355		361
Other expenses	11,120			10,497		11,561
Total non-interest expense	57,832			57,064		56,221
Income before income tax expense	25,776			24,623		20,060
Income tax expense	8,931			8,468		6,795
Net income	16,845			16,155		13,265
Preferred stock dividends	731			863		863
Net income available to common shareholders	$	16,114		$	15,292	$	12,402

Basic earnings per common share	$	0.37		$	0.36	$	0.29
Diluted earnings per common share	$	0.37		$	0.35	$	0.29

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, $ in thousands, except per share data)



	Twelve Months Ended
	December 31, 2012			December 31, 2011
Interest income:
Interest and fees on loans	$	230,882		$	245,767
Interest and dividends on investment securities:
Taxable	36,847			41,304
Exempt from federal taxes	4,923			4,749
Interest on deposits in banks	1,235			1,050
Interest on federal funds sold	13			13
Total interest income	273,900			292,883
Interest expense:
Interest on deposits	22,306			33,533
Interest on securities sold under repurchase agreements	579			695
Interest on long-term debt	1,981			1,975
Interest on preferred stock pending redemption	131			—
Interest on subordinated debentures held by subsidiary trusts	5,117			5,828
Total interest expense	30,114			42,031
Net interest income:	243,786			250,852
Provision for loan losses	40,750			58,151
Net interest income after provision for loan losses	203,036			192,701
Non-interest income:
Income from the origination and sale of loans	41,790			21,153
Other service charges, commissions and fees	34,226			31,689
Service charges on deposit accounts	17,412			17,647
Wealth management revenues	14,314			13,575
Investment securities gains, net	348			1,544
Other income	6,771			6,264
Total non-interest income	114,861			91,872
Non-interest expense:
Salaries and wages	89,833			83,560
Employee benefits	29,345			27,792
Occupancy, net	15,786			16,223
Furniture and equipment	12,859			12,562
OREO expense, net of income	9,400			8,652
Outsourced technology services	8,826			8,933
FDIC insurance premiums	6,470			7,333
Professional fees	4,044			3,676
Mortgage servicing rights amortization	3,501			3,225
Mortgage servicing rights impairment (recovery)	(771		)	1,275
Core deposit intangibles amortization	1,420			1,446
Other expenses	48,922			43,735
Total non-interest expense	229,635			218,412
Income before income tax expense	88,262			66,161
Income tax expense	30,038			21,615
Net income	58,224			44,546
Preferred stock dividends	3,300			3,422
Net income available to common shareholders	$	54,924		$	41,124

Basic earnings per common share	$	1.28		$	0.96
Diluted earnings per common share	$	1.27		$	0.96

AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)



	Three Months Ended
	December 31, 2012							September 30, 2012							December 31, 2011
	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
Interest earning assets:
Loans (1) (2)	$	4,197,665	$	57,915		5.49	%	$	4,183,016	$	57,872		5.50	%	$	4,236,228	$	60,928		5.71	%
Investment securities (2)	2,156,668		10,471			1.93		2,098,576		11,123			2.11		2,071,372		11,910			2.28
Interest bearing deposits in banks	600,385		383			0.25		525,149		336			0.25		401,654		256			0.25
Federal funds sold	2,074		2			0.38		3,006		4			0.53		973		2			0.82
Total interest earnings assets	6,956,792		68,771			3.93		6,809,747		69,335			4.05		6,710,227		73,096			4.32
Non-earning assets	623,822							633,551							618,712
Total assets	$	7,580,614						$	7,443,298						$	7,328,939
Interest bearing liabilities:
Demand deposits	$	1,705,963	$	548		0.13	%	$	1,613,136	$	589		0.15	%	$	1,300,105	$	601		0.18	%
Savings deposits	1,528,788		741			0.19		1,523,347		873			0.23		1,689,109		1,217			0.29
Time deposits	1,404,913		3,562			1.01		1,452,688		3,952			1.08		1,598,361		5,036			1.25
Repurchase agreements	496,321		127			0.10		501,640		144			0.11		487,734		150			0.12
Other borrowed funds	20		—			—		6		—			—		5,589		—			—
Long-term debt	37,163		486			5.20		37,174		502			5.37		37,315		493			5.24
Preferred stock pending redemption	7,609		131			6.85		—		—			—		—		—			—
Subordinated debentures held by subsidiary trusts	82,477		1,033			4.98		82,477		1,110			5.35		123,715		1,474			4.73
Total interest bearing liabilities	5,263,254		6,628			0.50		5,210,468		7,170			0.55		5,241,928		8,971			0.68
Non-interest bearing deposits	1,475,600							1,399,585							1,269,423
Other non-interest bearing liabilities	49,855							43,511							47,956
Stockholders’ equity	791,905							789,734							769,632
Total liabilities and stockholders’ equity	$	7,580,614						$	7,443,298						$	7,328,939
Net FTE interest income			$	62,143						$	62,165						$	64,125
Less FTE adjustments (2)			(1,170		)					(1,160		)					(1,090		)
Net interest income from consolidated statements of income			$	60,973						$	61,005						$	63,035
Interest rate spread						3.43	%						3.50	%						3.64	%
Net FTE interest margin (3)						3.55	%						3.63	%						3.79	%
Cost of funds, including non-interest bearing demand deposits (4)						0.39	%						0.43	%						0.55	%


(1)	Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.


(2)	Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.


(3)	Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.


(4)	Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)



	Twelve Months Ended
	December 31, 2012							December 31, 2011
	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
Interest earning assets:
Loans (1) (2)	$	4,176,439	$	232,724		5.57	%	$	4,275,128	$	247,492		5.79	%
Investment securities (2)	2,123,231		44,613			2.10		2,026,192		48,795			2.41
Interest bearing deposits in banks	486,203		1,235			0.25		414,375		1,050			0.25
Federal funds sold	2,341		13			0.56		2,231		13			0.58
Total interest earnings assets	6,788,214		278,585			4.10		6,717,926		297,350			4.43
Non-earning assets	627,498							618,454
Total assets	$	7,415,712						$	7,336,380
Interest bearing liabilities:
Demand deposits	$	1,624,687	$	2,390		0.15	%	$	1,269,676	$	3,057		0.24	%
Savings deposits	1,496,254		3,562			0.24		1,714,294		6,448			0.38
Time deposits	1,473,501		16,354			1.11		1,737,401		24,028			1.38
Repurchase agreements	501,192		579			0.12		500,882		695			0.14
Other borrowed funds	16		—			—		5,582		—			—
Long-term debt	37,185		1,981			5.33		37,442		1,975			5.27
Preferred stock pending redemption	1,913		131			6.85		—		—			—
Subordinated debentures held by subsidiary trusts	102,307		5,117			5.00		123,715		5,828			4.71
Total interest bearing liabilities	5,237,055		30,114			0.58		5,388,992		42,031			0.78
Non-interest bearing deposits	1,346,787							1,146,535
Other non-interest bearing liabilities	47,799							48,532
Stockholders’ equity	784,071							752,321
Total liabilities and stockholders’ equity	$	7,415,712						$	7,336,380
Net FTE interest income			$	248,471						$	255,319
Less FTE adjustments (2)			(4,685		)					(4,467		)
Net interest income from consolidated statements of income			$	243,786						$	250,852
Interest rate spread						3.52	%						3.65	%
Net FTE interest margin (3)						3.66	%						3.80	%
Cost of funds, including non-interest bearing demand deposits (4)						0.46	%						0.64	%


(1)	Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.


(2)	Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.


(3)	Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.


(4)	Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principals in the United States of America, or GAAP, this release contains the following non-GAAP financial measures that management uses to evaluate capital adequacy: (i) tangible book value per common share; (ii) net tangible book value per common share; (iii) tangible common stockholders' equity to tangible assets; (iv) net tangible common stockholders' equity to tangible assets; (v) tangible assets, and (vi) return on average tangible common equity.

For purposes of computing tangible book value per common share, tangible book value equals common stockholders' equity less goodwill and other intangible assets (except mortgage servicing rights). Tangible book value per common share is calculated as tangible common stockholders' equity divided by shares of common stock outstanding.

For purposes of computing net tangible book value per common share, net tangible book value equals common stockholders' equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible book value per common share is calculated as net tangible common stockholders' equity divided by shares of common stock outstanding. The Company's goodwill as of December 31, 2012 was $184 million, of which approximately $159 million is deductible for income tax purposes over an original period of 15 years. The calculation of net tangible book value takes into account the full amount of tax benefit of approximately $60 million associated with deductible goodwill assuming the Company will continue to have income sufficient to allow it to recognize this benefit in future periods.

For purposes of computing tangible common stockholders' equity to tangible assets, tangible assets equals total assets less goodwill and other intangible assets (except mortgage servicing rights). Tangible common stockholders' equity to tangible assets is calculated as tangible common stockholders' equity divided by tangible assets.

For purposes of computing net tangible common stockholders' equity to tangible assets, net tangible common stockholders' equity equals common stockholders' equity less goodwill (adjusted for associated deferred tax liability) and other intangible assets (except mortgage servicing rights). Net tangible common stockholders' equity to tangible assets is calculated as net tangible common stockholders' equity divided by tangible assets.

For purposes of computing return on average tangible common equity, average tangible common equity equals average common stockholders' equity less average goodwill and average other intangible assets (except mortgage servicing rights). Return on average tangible common equity is calculated by dividing net income available to common shareholders by average tangible common equity.

Management believes that these non-GAAP financial measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of unrealized losses on securities and other components of accumulated other comprehensive income (loss) in stockholders' equity. Management also believes that such financial measures, which are intended to complement the capital ratios defined by banking regulators, are useful to investors in evaluating the Company's performance due to the importance that analysts place on these ratios and also allow investors to compare certain aspects of our capitalization to other companies. These non-GAAP financial measures, however, may not be comparable to similarly titled measures reported by other companies because other companies may not calculate these non-GAAP measures in the same manner. As a result, the usefulness of these measures to investors may be limited, and they should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.

The following table reconciles the above described non-GAAP financial measures to their most directly comparable GAAP financial measures as of the dates indicated.

NON-GAAP FINANCIAL MEASURES

(Unaudited; $ in thousands except share and per share data)



	December 31, 2012			September 30, 2012			December 31, 2011
Total stockholders’ equity (GAAP)	$	751,186		$	797,870		$	771,020
Less goodwill and other intangible assets (excluding mortgage servicing rights)	189,637			189,994			191,065
Less preferred stock	—			50,000			50,000
Tangible common stockholders’ equity (Non-GAAP)	561,549			557,876			529,955
Add deferred tax liability for deductible goodwill	60,499			60,499			60,499
Net tangible common stockholders’ equity (Non-GAAP)	$	622,048		$	618,375		$	590,454
Total assets (GAAP)	$	7,721,761		$	7,461,152		$	7,325,527
Less goodwill and other intangible assets (excluding mortgage servicing rights)	189,637			189,994			191,065
Tangible assets (Non-GAAP)	$	7,532,124		$	7,271,158		$	7,134,462

Common shares outstanding	43,290,323			43,252,383			42,984,174
Book value per common share	$	17.35		$	17.29		$	16.77
Tangible book value per common share	$	12.97		$	12.90		$	12.33
Net tangible book value per common share	$	14.37		$	14.30		$	13.74
Tangible common stockholders’ equity to tangible assets (Non-GAAP)	7.46		%	7.67		%	7.43		%
Net tangible common stockholders’ equity to tangible assets (Non-GAAP)	8.26		%	8.50		%	8.28		%



	Average For the Three Months Ended									Average For the Year Ended
	December 31, 2012			September 30, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Total stockholders’ equity (GAAP)	$	791,905		$	789,734		$	769,632		$	784,071		$	752,321
Less goodwill and other intangible assets (excluding mortgage servicing rights)	189,839			$	190,206		191,275			190,381			191,823
Less preferred stock	42,391			50,000			50,000			48,087			50,000
Tangible common stockholders' equity (Non-GAAP)	$	559,675		$	549,528		$	528,357		$	545,603		$	510,498

	As Of or For the Three Months Ended									As Of or For the Year Ended
	December 31, 2012			September 30, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Net income to available to common shareholders, annualized	$	64,106		$	60,836		$	49,204		$	54,924		$	41,124
Return on average tangible common equity (Non-GAAP)	11.45		%	11.07		%	9.31		%	10.07		%	8.06		%

First Interstate BancSystem, Inc.

P.O. Box 30918 Billings, Montana 59116 (406) 255-5390

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FIRST INTERSTATE BANCSYSTEM INC Reports