First Interstate BancSystem, Inc. Reports First Quarter Earnings

BILLINGS, Mont.--(BUSINESS WIRE)-- First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports first quarter 2016 net income of $20.1 million, or $0.45 per share. This compares to net income of $23.4 million, or $0.51 per share, during fourth quarter 2015, and $21.0 million, or $0.46 per share, during first quarter 2015.

HIGHLIGHTS

• Core pre-tax, pre-provision net income of $34.4 million, a 5.4% increase from the same period in the prior year
• Net interest margin ratio of 3.54%, a 5 basis point improvement compared to fourth quarter 2015 and an 11 basis point improvement from the same period in the prior year
• Non-performing loans of $68.2 million, a 5.3% decrease from December 31, 2015
• Loans past due 30-89 days of $25.0 million, a 41.7% decrease from December 31, 2015
• Allowance for loan losses increased to 1.52% of period-end loans, as compared to 1.46% as of December 31, 2015
• 6.4% loan growth year-over-year, of which 5.7% was organic
• Non-interest expense remained stable at $60.9 million, as compared to $60.9 million during fourth quarter 2015
• Strong capital levels and continued share repurchases

“We are seeing positive year-over-year trends in most areas of the Company, which resulted in a 5.4% increase in our core pre-tax, pre-provision earnings,” said Kevin Riley, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Compared to the first quarter of 2015, we generated improvements in our revenue, net interest margin and efficiency ratio. We anticipate further improvement in our level of profitability as we enter the seasonally stronger periods of the year," Riley continued.

DIVIDEND DECLARATION

On April 18, 2016, the Executive Committee of Company's board of directors declared a dividend of $0.22 per common share payable on May 13, 2016 to owners of record as of May 2, 2016. This dividend equates to a 3.3% annual yield based on the $27.09 average closing price of the Company's common stock during first quarter 2016.

ACQUISITION

On April 26, 2016, the Company's bank subsidiary, First Interstate Bank, entered into a stock purchase agreement to acquire all of the outstanding stock of Flathead Bank of Bigfork ("Flathead Bank"), a Montana-based bank wholly owned by Flathead Holding Company. With total assets of $231.6 million as of December 31, 2015, Flathead Bank operates seven branches in western and northwestern Montana. Upon closing of the transaction, which is expected to occur during the third quarter of 2016, all Flathead Bank branches will become branches of First Interstate Bank.

“We were very pleased to further execute on our M&A strategy with the announcement of our acquisition of Flathead Bank. Flathead is a good cultural fit, deepens our penetration of the Gallatin and Flathead markets, and provides another catalyst for earnings growth. We look forward to completing this transaction and welcoming Flathead’s customers and employees to First Interstate Bank,” said Riley.

NET INTEREST INCOME

The Company's net interest income, on a fully taxable equivalent basis, decreased $480 thousand, or less than 1.0%, to $69.0 million during first quarter 2016, as compared to $69.5 million during fourth quarter 2015, primarily due to a reduction in recoveries of charged-off interest and one less accrual day during first quarter. Interest accretion attributable to the fair valuation of acquired loans contributed $1.6 million of interest income during first quarter 2016, of which approximately $549 thousand was related to early pay-offs. This compares to interest accretion of $1.3 million of interest income during fourth quarter 2015, of which approximately $327 thousand was related to early pay-offs. In addition, the Company recovered previously charged-off interest of $265 thousand during first quarter 2016, compared to $1.0 million during fourth quarter 2015.

The Company's net interest margin ratio increased 5 basis points to 3.54% during first quarter 2016, as compared to 3.49% during fourth quarter 2015. Exclusive of the accelerated interest accretion related to early payoffs of acquired loans and the impact of recoveries of charged-off interest, the Company's net interest margin ratio increased 11 basis points to 3.53% during first quarter 2016, compared to 3.42% during fourth quarter 2015.

PROVISION FOR LOAN LOSSES

The Company recorded a provision for loan losses of $4.0 million during first quarter 2016, compared to $3.3 million during fourth quarter 2015. The higher provision for loan losses in first quarter 2016, as compared to fourth quarter 2015, is reflective of increases in specific reserves primarily related to the loans of two energy sector borrowers, the application of historical loss factors to downgraded credits and an increase in the general economic loss factor applied to loans in the Wyoming market as a result of stress in the energy sector.

NON-INTEREST INCOME

Non-interest income decreased $3.7 million to $27.2 million during first quarter 2016, as compared to $30.9 million during fourth quarter 2015, primarily due to seasonal declines in fee-based revenues, particularly mortgage banking revenues, and lower returns on deferred compensation plan assets.

Mortgage banking revenues were $6.1 million during first quarter 2016, down from $7.3 million during fourth quarter 2015, primarily driven by a decrease in mortgage loan production. Historically, the Company's mortgage loan production is lower during the first quarter of each year and that held true in 2016. During first quarter 2016, the Company's overall mortgage loan production decreased 28%, as compared to fourth quarter 2015. Loans originated for home purchases accounted for approximately 59% of the Company's mortgage loan production during first quarter 2016, as compared to 66% during fourth quarter 2015 and 57% during first quarter 2015.

Fluctuations in returns on deferred compensation plan assets, which are included in other income, are offset by corresponding fluctuations in employee benefits expense and, therefore, have no impact on the Company's net income. Returns on deferred compensation plan assets decreased $1.0 million during first quarter 2016, as compared to fourth quarter 2015.

NON-INTEREST EXPENSE

Non-interest expense remained stable at $60.9 million during first quarter 2016 and fourth quarter 2015. First quarter 2016 non-interest expenses included seasonally higher employee benefits and incentive compensation expenses. In addition, during first quarter 2016, the Company recorded one-time separation and special bonus expense of $1.2 million. These higher expenses were offset by lower commissioned pay, advertising and payment services expenses, which typically decline during the first quarter. Effective January 1, 2016, the Company began capturing certain software costs separately from equipment costs, resulting in an increase of approximately $2.0 million in other expenses and a corresponding decrease in occupancy and equipment expense during first quarter 2016, as compared to fourth quarter 2015. The Company's core efficiency ratio was 62.40% during first quarter 2016, compared with 59.62% during fourth quarter 2015 and 63.04% during first quarter 2015.

"During first quarter, we continued to focus on getting the right people, processes and technology systems in place to increase our efficiency and allow us to continue to grow our business," said Riley. "This focus on infrastructure will continue through all of 2016," Riley continued.

LOANS

Total loans were $5.2 billion as of March 31, 2016 and December 31, 2015. Indirect consumer loans increased $29 million, or 4.6%, to $651 million as of March 31, 2016, from $623 million as of December 31, 2015 primarily due to the continued expansion of our indirect lending program within our existing market areas and increases in the average loan amounts advanced during first quarter. Commercial loans increased $33 million, or 4.1%, to $825 million as of March 31, 2016, from $792 million as of December 31, 2015, primarily due to continued business expansion in the Company's market areas.  Commercial real estate loans decreased $29 million, or 1.6%, to $1.8 billion as of March 31, 2016, from $1.8 billion as of December 31, 2015, primarily due to the repayment of one large loan and increases in loan participations.

Total loans increased 6.4% to $5.2 billion as of March 31, 2016, from $4.9 billion as of March 31, 2015. Exclusive of acquisitions, total loans grew organically 5.7%, with all loan categories except agricultural real estate showing increases. Management attributes organic year-over-year growth to continued business expansion in the Company's market areas, particularly in the Billings, Gallatin Valley, Rapid City and Flathead markets.

DEPOSITS

Total deposits were $7.1 billion as of March 31, 2016 and December 31, 2015. During the first quarter of 2016, the mix of deposits continued to shift away from higher costing time deposits into lower costing savings and demand deposits.

Securities sold under repurchase agreements decreased $45 million to $466 million as of March 31, 2016, from $511 million as of December 31, 2015, primarily due to fluctuations in the liquidity of our customers. All outstanding repurchase agreements were due in one day.

CAPITAL

At March 31, 2016, the Company exceeded all "well-capitalized" regulatory capital adequacy requirements. During first quarter 2016, the Company repurchased and retired 948 thousand shares of its Class A common stock at a weighted average price of $26.15 per share, which reduced period end common shares outstanding by 721 thousand shares after taking into account seasonal common stock issued under the Company's equity incentive plan and shares issued pursuant to stock option exercises. During first quarter 2016, the Company paid a quarterly common stock dividend of $0.22 per share, up from $0.20 per share a year ago.

CREDIT QUALITY

Credit quality remained stable during first quarter 2016, with non-performing assets declining to $77 million, or 0.89% of total assets, as of March 31, 2016, from $78 million, or 0.90% of total assets as of December 31, 2015. Non-accrual loans, the largest component of non-performing assets, decreased $2 million, to $64 million as of March 31, 2016, from $66 million as of December 31, 2015, primarily due to the movement of lower quality loans out of the portfolio through foreclosure. Other real estate owned increased $3 million, or 48.0%, to $9 million as of March 31, 2016, from $6 million as of December 31, 2015, primarily due to foreclosures on one residential real estate property and one land development property during first quarter 2016. Net loan charge-offs remained low at an annualized 0.07% of period-end loans.

Accruing loans past due 30-89 days were $25.0 million as of March 31, 2016, a 41.7% decrease from $42.9 million as of December 31, 2015. This decrease was primarily due to a concentrated focus on completing loan renewals within 30 days to prevent current loans in the process of renewal from becoming past due.

Criticized loans increased to $347 million, or 6.6% of total loans, as of March 31, 2016, compared to $320 million, or 6.1% of total loans as of December 31, 2015. This increase in criticized loans was primarily concentrated in commercial and commercial real estate loans to borrowers in the Company's energy sector.

The Company's allowance for loan losses was $80 million, or 1.52% of period end loans, as of March 31, 2016, as compared to $77 million, or 1.46% of period end loans, as of December 31, 2015.

“While our overall asset quality improved and credit losses continued to be very low in the first quarter, we increased the level of reserves against our oil and gas portfolio to 11.7% in light of the challenging conditions in the energy sector. We are using very conservative assumptions in our collateral valuations and our oil and gas portfolio represents just 1.3% of our total loan portfolio. Accordingly, we believe that this portfolio will have a limited impact on our future financial performance," said Kevin Riley.

NON-GAAP FINANCIAL MEASURES

In addition to results presented in accordance with generally accepted accounting principles in the United States of America, or GAAP, this release contains certain non-GAAP financial measures that management uses to provide supplemental perspectives on capital adequacy, operating results, performance trends and financial condition. These non-GAAP financial measures 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 Company adjusts certain capital adequacy measures to exclude intangible assets except mortgage servicing rights. Management believes these non-GAAP 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 the Company's capitalization to other companies.

The Company also adjusts earnings and certain performance ratios to exclude certain non-core revenues and expenses, including investment securities net gains or losses, acquisition expenses consisting primarily of travel expenses and professional fees, and nonrecurring litigation expenses. Management believes these non-GAAP financial measures are useful to investors in evaluating operating trends by excluding amounts which the Company views as unrelated to its normalized operations. These non-core income and expense adjustments may be presented before or net of estimated income tax expense.

In addition, the Company adjusts net income to exclude income tax expense and provision for loan losses. Management believes this non-GAAP financial measure is useful to investors in evaluating operating trends by excluding pre-tax amounts which the Company views as fluctuating widely based on economic conditions.

See the Non-GAAP Financial Measures table included herein for a reconciliation of the above described non-GAAP financial measures to their most directly comparable GAAP financial measures.

Cautionary Note Regarding Forward-Looking Statements and Factors that Could Affect Future Results

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified as those that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. 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 report: declining business and economic conditions, credit losses, adverse economic conditions affecting Montana, Wyoming and South Dakota, declining oil and gas prices, lending risk, adequacy of the allowance for loan losses, impairment of goodwill, failure to integrate or profitably operate acquired organizations, additional regulatory requirements if our assets exceed $10 billion, access to low-cost funding sources, changes in interest rates, dependence on the Company’s management team, ability to attract and retain qualified employees, governmental regulation and changes in regulatory, tax and accounting rules and interpretations, failure of technology, cyber-security, unfavorable resolution of litigation, inability to meet liquidity requirements, environmental remediation and other costs, ineffective internal operational controls, competition, reliance on external vendors, implementation of new lines of business or new product or service offerings, soundness of other financial institutions, failure to effectively implement technology-driven products and services, inability of our bank subsidiary to pay dividends, risks associated with introducing new lines of business, products or services, litigation pertaining to fiduciary responsibilities, change in dividend policy, uninsured nature of any investment in Class A common stock, volatility of Class A common stock, decline in market price of Class A common stock, voting control of Class B stockholders, anti-takeover provisions, dilution as a result of future equity issuances, controlled company status, and subordination of common stock to Company debt.

These factors are not necessarily all of the factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

All forward-looking statements attributable to us or persons acting on our 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 we do 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 we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

First Quarter 2016 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss first quarter 2016 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Tuesday, April 26, 2016. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-877-507-0356 or by logging on to www.FIBK.com. The call will be recorded and made available for replay after 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on April 26, 2016 through 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) on May 26, 2016, by dialing 1-877-344-7529 (using conference ID 10083354). 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 79 banking offices, including detached drive-up facilities, in 45 communities in Montana, Wyoming and 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.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
				Quarter Ended																								% Change
				Mar 31,					Dec 31,				Sep 30,					Jun 30,					Mar 31,					1Q16 vs				1Q16 vs
(In thousands, except per share data)				2016					2015				2015					2015					2015					4Q15				1Q15
Net interest income				$	67,950				$	68,420			$	66,330				$	65,288				$	64,325				(0.7	)%			5.6	%
Net interest income on a fully-taxable equivalent ("FTE") basis				69,012					69,492				67,400					66,399					65,381					(0.7	)			5.6
Provision for loan losses				4,000					3,289				1,098					1,340					1,095					21.6				265.3
Non-interest income:
Payment services revenues				7,991					8,367				8,574					8,437					7,372					(4.5	)			8.4
Mortgage banking revenues				6,141					7,282				7,983					8,802					5,906					(15.7	)			4.0
Wealth management revenues				4,575					4,840				5,233					4,897					4,937					(5.5	)			(7.3	)
Service charges on deposit accounts				4,463					4,655				4,379					4,053					3,944					(4.1	)			13.2
Other service charges, commissions and fees				2,608					2,652				2,521					2,736					2,495					(1.7	)			4.5
Total fee-based revenues				25,778					27,796				28,690					28,925					24,654					(7.3	)			4.6
Investment securities gains (losses)				(21		)			62				23					46					6					NM				NM
Other income				1,486					3,037				1,769					2,799					3,122					(51.1	)			(52.4	)
Total non-interest income				27,243					30,895				30,482					31,770					27,782					(11.8	)			(1.9	)
Non-interest expense:
Salaries and wages				24,682					24,549				25,460					26,093					25,349					0.5				(2.6	)
Employee benefits				8,802					7,576				7,312					8,070					7,780					16.2				13.1
Occupancy and equipment				6,920					8,624				8,262					8,232					8,285					(19.8	)			(16.5	)
Core deposit intangible amortization				827					837				842					855					854					(1.2	)			(3.2	)
Other expenses				19,670					19,060				18,780					19,558					17,315					3.2				13.6
Subtotal				60,901					60,646				60,656					62,808					59,583					0.4				2.2
Other real estate owned (income) expense				(39		)			129				(720		)			(823		)			(61		)			(130.2	)			(36.1	)
Non-core acquisition and litigation expenses				—					166				5,566					(7		)			70					NM				NM
Total non-interest expense				60,862					60,941				65,502					61,978					59,592					(0.1	)			2.1
Income before taxes				30,331					35,085				30,212					33,740					31,420					(13.5	)			(3.5	)
Income taxes				10,207					11,654				10,050					11,518					10,440					(12.4	)			(2.2	)
Net income				$	20,124				$	23,431			$	20,162				$	22,222				$	20,980				(14.1	)%			(4.1	)%
Weighted-average basic shares outstanding				44,719					45,066				45,150					45,143					45,378					(0.8	)%			(1.5	)%
Weighted-average diluted shares outstanding				45,114					45,549				45,579					45,607					45,840					(1.0	)			(1.6	)
Earnings per share - basic				$	0.45				$	0.52			$	0.45				$	0.49				$	0.46				(13.5	)			(2.2	)
Earnings per share - diluted				0.45					0.51				0.44					0.49					0.46					(11.8	)			(2.2	)
Core net income**				$	20,137				$	23,496			$	23,610				$	22,189				$	21,020				(14.3	)%			(4.2	)%
Core pre-tax, pre-provision net income**				34,352					38,478				36,853					35,027					32,579					(10.7	)			5.4
Core earnings per share - diluted**				0.45					0.52				0.52					0.49					0.46					(13.5	)			(2.2	)

NM - not meaningful

**Non-GAAP financial measure - see Non-GAAP Financial Measures included herein for a reconciliation of net income (GAAP) to core net income (non-GAAP) and core pre-tax, pre-provision net income (non-GAAP); and earnings per share - diluted (GAAP) to core earnings per share - diluted (non-GAAP).

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
																								% Change
			Mar 31,				Dec 31,				Sep 30,				Jun 30,					Mar 31,				1Q16 vs				1Q16 vs
(In thousands, except per share data)			2016				2015				2015				2015					2015				4Q15				1Q15
Assets:
Cash and cash equivalents			$	655,528			$	780,457			$	708,295			$	506,434				$	637,803			(16.0	)%			2.8	%
Investment securities			2,144,740				2,057,505				2,067,636				2,139,433					2,340,904				4.2				(8.4	)
Loans held for investment			5,191,469				5,193,321				5,120,794				5,028,624					4,871,548				—				6.6
Mortgage loans held for sale			52,989				52,875				55,686				75,322					55,758				0.2				(5.0	)
Total loans			5,244,458				5,246,196				5,176,480				5,103,946					4,927,306				—				6.4
Less allowance for loan losses			79,924				76,817				74,256				76,552					75,336				4.0				6.1
Net loans			5,164,534				5,169,379				5,102,224				5,027,394					4,851,970				(0.1	)			6.4
Premises and equipment			188,714				190,812				190,386				189,488					192,748				(1.1	)			(2.1	)
Goodwill and intangible assets (excluding mortgage servicing rights)			214,248				215,119				215,843				215,958					216,815				(0.4	)			(1.2	)
Company owned life insurance			188,396				187,253				185,990				177,625					154,741				0.6				21.7
Other real estate owned			9,257				6,254				8,031				11,773					15,134				48.0				(38.8	)
Mortgage servicing rights			15,574				15,621				15,336				14,654					14,093				(0.3	)			10.5
Other assets			109,689				105,796				110,789				103,459					104,334				3.7				5.1
Total assets			$	8,690,680			$	8,728,196			$	8,604,530			$	8,386,218				$	8,528,542			(0.4	)%			1.9	%
Liabilities and stockholders' equity:
Deposits			$	7,107,463			$	7,088,937			$	7,035,794			$	6,804,401				$	6,968,159			0.3	%			2.0	%
Securities sold under repurchase agreements			465,523				510,635				437,533				469,145					462,073				(8.8	)			0.7
Long-term debt			27,907				27,885				43,089				43,068					43,048				0.1				(35.2	)
Subordinated debentures held by subsidiary trusts			82,477				82,477				82,477				82,477					82,477				—				—
Other liabilities			65,296				67,769				67,062				62,272					58,335				(3.6	)			11.9
Total liabilities			7,748,666				7,777,703				7,665,955				7,461,363					7,614,092				(0.4	)			1.8
Stockholders' equity:
Common stock			288,782				311,720				309,167				313,125					310,544				(7.4	)			(7.0	)
Retained earnings			648,631				638,367				623,967				612,875					599,727				1.6				8.2
Accumulated other comprehensive income (loss)			4,601				406				5,441				(1,145		)			4,179				NM				10.1
Total stockholders' equity			942,014				950,493				938,575				924,855					914,450				(0.9	)			3.0
Total liabilities and stockholders' equity			$	8,690,680			$	8,728,196			$	8,604,530			$	8,386,218				$	8,528,542			(0.4	)%			1.9	%
Common shares outstanding at period end			44,707				45,428				45,345				45,507					45,429				(1.6	)%			(1.6	)%
Book value at period end			$	21.07			$	20.92			$	20.70			$	20.32				$	20.13			0.7				4.7
Tangible book value at period end**			16.28				16.19				15.94				15.58					15.36				0.6				6.0

NM - not meaningful

**Non-GAAP financial measure - see Non-GAAP Financial Measures included herein for a reconciliation of book value at period end (GAAP) to tangible book value at period end (non-GAAP).

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Loans and Deposits
(Unaudited)
																							% Change
			Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,				1Q16 vs				1Q16 vs
(In thousands)			2016				2015				2015				2015				2015				4Q15				1Q15
Loans:
Real Estate:
Commercial real estate			$	1,764,492			$	1,793,258			$	1,750,797			$	1,704,073			$	1,670,829			(1.6	)%			5.6	%
Construction:
Land acquisition and development			219,450				224,066				212,990				211,889				209,033				(2.1	)			5.0
Residential			113,317				111,763				112,495				101,023				101,689				1.4				11.4
Commercial			102,382				94,890				93,775				90,316				95,583				7.9				7.1
Total construction			435,149				430,719				419,260				403,228				406,305				1.0				7.1
Residential real estate			1,021,443				1,032,851				1,020,445				999,038				997,123				(1.1	)			2.4
Agricultural real estate			153,054				156,234				163,116				158,506				156,734				(2.0	)			(2.3	)
Total real estate			3,374,138				3,413,062				3,353,618				3,264,845				3,230,991				(1.1	)			4.4
Consumer
Indirect			651,057				622,529				616,142				589,479				566,225				4.6				15.0
Other			150,774				153,717				150,170				144,919				140,529				(1.9	)			7.3
Credit card			63,624				68,107				65,649				64,728				61,708				(6.6	)			3.1
Total consumer			865,455				844,353				831,961				799,126				768,462				2.5				12.6
Commercial			825,043				792,416				778,648				819,119				754,149				4.1				9.4
Agricultural			126,290				142,151				154,855				142,629				117,569				(11.2	)			7.4
Other			543				1,339				1,712				2,905				377				(59.4	)			44.0
Loans held for investment			5,191,469				5,193,321				5,120,794				5,028,624				4,871,548				—				6.6
Loans held for sale			52,989				52,875				55,686				75,322				55,758				0.2				(5.0	)
Total loans			$	5,244,458			$	5,246,196			$	5,176,480			$	5,103,946			$	4,927,306			—	%			6.4	%
Deposits:
Non-interest bearing			$	1,860,472			$	1,823,716			$	1,832,535			$	1,757,641			$	1,757,664			2.0	%			5.8	%
Interest bearing:
Demand			2,142,326				2,178,373				2,134,203				2,028,648				2,098,697				(1.7	)			2.1
Savings			2,001,329				1,955,256				1,918,724				1,868,877				1,906,773				2.4				5.0
Time, $100 and over			478,527				487,372				496,539				490,088				504,605				(1.8	)			(5.2	)
Time, other			624,809				644,220				653,793				659,147				700,420				(3.0	)			(10.8	)
Total interest bearing			5,246,991				5,265,221				5,203,259				5,046,760				5,210,495				(0.3	)			0.7
Total deposits			$	7,107,463			$	7,088,937			$	7,035,794			$	6,804,401			$	6,968,159			0.3	%			2.0	%
Total core deposits(1)			$	6,628,936			$	6,601,565			$	6,539,255			$	6,314,313			$	6,463,554			0.4	%			2.6	%

(1) Core deposits are defined as total deposits less time deposits, $100 and over

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Credit Quality
(Unaudited)
																												% Change
			Mar 31,					Dec 31,					Sep 30,					Jun 30,					Mar 31,					1Q16 vs				1Q16 vs
(In thousands)			2016					2015					2015					2015					2015					4Q15				1Q15
Allowance for Loan Losses:
Allowance for loan losses			$	79,924				$	76,817				$	74,256				$	76,552				$	75,336				4.0	%			6.1	%
As a percentage of period-end loans			1.52		%			1.46		%			1.43		%			1.50		%			1.53		%
Net charge-offs (recoveries) during quarter			$	893				$	728				$	3,394				$	124				$	(41	)			22.7				NM
Annualized as a percentage of average loans			0.07		%			0.06		%			0.26		%			0.01		%			—		%
Non-Performing Assets:
Non-accrual loans			$	63,837				$	66,385				$	66,359				$	70,848				$	73,941				(3.8	)%			(13.7	)%
Accruing loans past due 90 days or more			4,362					5,602					3,357					2,153					5,175					(22.1	)			(15.7	)
Total non-performing loans			68,199					71,987					69,716					73,001					79,116					(5.3	)			(13.8	)
Other real estate owned			9,257					6,254					8,031					11,773					15,134					48.0				(38.8	)
Total non-performing assets			$	77,456				$	78,241				$	77,747				$	84,774				$	94,250				(1.0	)%			(17.8	)%
Non-performing assets as a percentage of:
Total loans and OREO			1.47		%			1.49		%			1.50		%			1.66		%			1.91		%
Total assets			0.89					0.90					0.90					1.01					1.11
Accruing Loans 30-89 Days Past Due			$	25,001				$	42,869				$	38,793				$	31,178				$	40,744				(41.7	)%			(38.6	)%
Accruing TDRs			12,070					15,419					16,702					15,127					16,070					(34.1	)			(36.8	)
Criticized Loans:
Special Mention			$	144,993				$	127,270				$	155,157				$	155,707				$	140,492				13.9	%			3.2	%
Substandard			167,826					162,785					163,846					159,899					156,887					3.1				7.0
Doubtful			34,578					30,350					24,547					31,701					37,476					13.9				(7.7	)
Total			$	347,397				$	320,405				$	343,550				$	347,307				$	334,855				8.4	%			3.7	%
NM - not meaningful

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Selected Ratios
(Unaudited)
			Mar 31,					Dec 31,				Sep 30,				Jun 30,				Mar 31,
			2016					2015				2015				2015				2015
Annualized Financial Ratios (GAAP)
Return on average assets			0.94	%				1.07	%			0.94	%			1.06	%			1.00	%
Return on average common equity			8.60					9.83				8.60				9.68				9.38
Yield on average earning assets			3.77					3.73				3.70				3.70				3.66
Cost of average interest bearing liabilities			0.31					0.32				0.31				0.31				0.31
Interest rate spread			3.46					3.41				3.39				3.39				3.35
Net interest margin ratio			3.54					3.49				3.47				3.47				3.43
Efficiency ratio			63.94					61.36				67.66				63.86				64.70
Loan to deposit ratio			73.79					74.01				73.57				75.01				70.71
Annualized Financial Ratios - Operating** (Non-GAAP)
Core return on average assets			0.94	%				1.07	%			1.10	%			1.06	%			1.00	%
Core return on average common equity			8.60					9.86				10.07				9.66				9.40
Return on average tangible common equity			11.13					12.73				11.20				12.65				12.35
Core efficiency ratio			62.40					59.62				61.12				63.14				63.04
Tangible common stockholders' equity to tangible assets			8.59					8.64				8.62				8.68				8.39
Consolidated Capital Ratios:
Total risk-based capital			15.04	%	*			15.36	%			15.28	%			15.37	%			15.43	%
Tier 1 risk-based capital			13.72		*			13.99				13.83				13.88				13.94
Tier 1 common capital to total risk-weighted assets			12.43		*			12.69				12.52				12.55				12.58
Leverage Ratio			10.07		*			10.12				10.13				10.11				9.73

*Preliminary estimate - may be subject to change.

**Non-GAAP financial measures - see Non-GAAP Financial Measures included herein for a reconciliation of return on average assets, return on average common equity and efficiency ratio (GAAP) to core return on average assets, core return on average common equity, return on average tangible common equity, core efficiency ratio and tangible common stockholders' equity to tangible assets (non-GAAP).

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited)
			Three Months Ended
			March 31, 2016													December 31, 2015													March 31, 2015
			Average									Average				Average									Average				Average									Average
(In thousands)			Balance				Interest					Rate				Balance				Interest					Rate				Balance				Interest					Rate
Interest earning assets:
Loans (1) (2)			$	5,222,905			$	63,371				4.88	%			$	5,194,970			$	64,711				4.94	%			$	4,895,146			$	59,816				4.96	%
Investment securities (2)			2,107,977				9,424					1.80				2,059,585				8,958					1.73				2,294,433				9,641					1.70
Interest bearing deposits in banks			506,839				645					0.51				644,967				535					0.33				546,583				389					0.29
Federal funds sold			1,292				2					0.62				1,090				1					0.36				1,174				2					0.69
Total interest earnings assets			7,839,013				73,442					3.77				7,900,612				74,205					3.73				7,737,336				69,848					3.66
Non-earning assets			754,962													772,523													752,077
Total assets			$	8,593,975												$	8,673,135												$	8,489,413
Interest bearing liabilities:
Demand deposits			$	2,147,532			$	558				0.10	%			$	2,145,748			$	546				0.10	%			$	2,089,203			$	506				0.10	%
Savings deposits			1,985,233				650					0.13				1,949,512				645					0.13				1,882,816				628					0.14
Time deposits			1,118,049				2,020					0.73				1,142,342				2,127					0.74				1,220,590				2,175					0.72
Repurchase agreements			477,207				90					0.08				464,104				69					0.06				479,525				54					0.05
Other borrowed funds			8				—					—				5				—					—				4				—					—
Long-term debt			29,129				449					6.20				41,889				704					6.67				38,113				515					5.48
Subordinated debentures held by subsidiary trusts			82,477				663					3.23				82,477				622					2.99				82,477				589					2.90
Total interest bearing liabilities			5,839,635				4,430					0.31				5,826,077				4,713					0.32				5,792,728				4,467					0.31
Non-interest bearing deposits			1,755,515													1,847,528													1,723,001
Other non-interest bearing liabilities			57,145													54,068													66,391
Stockholders’ equity			941,680													945,462													907,293
Total liabilities and stockholders’ equity			$	8,593,975												$	8,673,135												$	8,489,413
Net FTE interest income							$	69,012												69,492													$	65,381
Less FTE adjustments (2)							(1,062		)											(1,072		)											(1,056		)
Net interest income from consolidated statements of income							$	67,950												$	68,420												$	64,325
Interest rate spread												3.46	%												3.41	%												3.35	%
Net FTE interest margin (3)												3.54	%												3.49	%												3.43	%
Cost of funds, including non-interest bearing demand deposits (4)												0.23	%												0.24	%												0.24	%

(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 an 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.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
						As Of or For the Quarter Ended
						Mar 31,					Dec 31,					Sep 30,					Jun 30,					Mar 31,
(In thousands, except per share data)						2016					2015					2015					2015					2015
Net income (GAAP)			(A)			$	20,124				$	23,431				$	20,162				$	22,222				$	20,980
Adj: investment securities (gains) losses, net						21					(62		)			(23		)			(46		)			(6		)
Plus: acquisition & nonrecurring litigation expenses						—					166					5,566					(7		)			70
Adj: income tax (benefit) expense						(8		)			(39		)			(2,095		)			20					(24		)
Total core net income (Non-GAAP)			(B)			$	20,137				$	23,496				$	23,610				$	22,189				$	21,020
Net income (GAAP)						$	20,124				$	23,431				$	20,162				$	22,222				$	20,980
Add back: income tax expense						10,207					11,654					10,050					11,518					10,440
Add back: provision for loan losses						4,000					3,289					1,098					1,340					1,095
Adj: investment securities (gains) losses, net						21					(62		)			(23		)			(46		)			(6		)
Plus: acquisition & nonrecurring litigation expenses						—					166					5,566					(7		)			70
Core pre-tax, pre-provision net income (Non-GAAP)						$	34,352				$	38,478				$	36,853				$	35,027				$	32,579
Weighted-average diluted shares outstanding			(C)			45,114					45,549					45,579					45,607					45,840
Earnings per share - diluted (GAAP)			(A)/(C)			$	0.45				$	0.51				$	0.44				$	0.49				$	0.46
Core earnings per share - diluted (Non-GAAP)			(B)/(C)			0.45					0.52					0.52					0.49					0.46
Total non-interest income (GAAP)			(D)			$	27,243				$	30,895				$	30,482				$	31,770				$	27,782
Adj: investment securities (gains) losses, net						21					(62		)			(23		)			(46		)			(6		)
Total core non-interest income (Non-GAAP)						27,264					30,833					30,459					31,724					27,776
Net interest income (GAAP)			(E)			67,950					68,420					66,330					65,288					64,325
Total core revenue (Non-GAAP)						95,214					99,253					96,789					97,012					92,101
Add: FTE adjustments						1,062					1,072					1,070					1,111					1,056
Total core revenue for core efficiency ratio (Non-GAAP)			(F)			$	96,276				$	100,325				$	97,859				$	98,123				$	93,157
Total non-interest expense (GAAP)			(G)			$	60,862				$	60,941				$	65,502				$	61,978				$	59,592
Less: acquisition & nonrecurring litigation expenses						—					(166		)			(5,566		)			7					(70		)
Core non-interest expense (Non-GAAP)						60,862					60,775					59,936					61,985					59,522
Less: amortization of core deposit intangible						(827		)			(837		)			(842		)			(855		)			(854		)
Adj: OREO (expense) income						39					(129		)			720					823					61
Non-interest expense for core efficiency ratio (Non-GAAP)			(H)			$	60,074				$	59,809				$	59,814				$	61,953				$	58,729
Efficiency ratio (GAAP)			(G)/[(D)+(E)]			63.94		%			61.36		%			67.66		%			63.86		%			64.70		%
Core efficiency ratio (Non-GAAP)			(H)/(F)			62.40					59.62					61.12					63.14					63.04

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - Continued
(Unaudited)
						As Of or For the Quarter Ended
						Mar 31,					Dec 31,					Sep 30,					Jun 30,					Mar 31,
(In thousands, except per share data)						2016					2015					2015					2015					2015
Annualized net income			(I)			$	80,938				$	92,960				$	79,991				$	89,132				$	85,086
Annualized core net income			(J)			80,991					93,218					93,670					89,000					85,248
Total quarterly average assets			(K)			8,593,975					8,673,135					8,495,436					8,427,110					8,489,413
Return on average assets (GAAP)			(I)/(K)			0.94		%			1.07		%			0.94		%			1.06		%			1.00		%
Core return on average assets (Non-GAAP)			(J)/(K)			0.94					1.07					1.10					1.06					1.00
Total quarterly average stockholders' equity (GAAP)			(L)			$	941,680				$	945,462				$	929,757				$	921,229				$	907,293
Less: average goodwill and other intangible assets (excluding mortgage servicing rights)						(214,797		)			(215,496		)			(215,829		)			(216,457		)			(218,511		)
Average tangible common stockholders' equity (Non-GAAP)			(M)			$	726,883				$	729,966				$	713,928				$	704,772				$	688,782
Total stockholders' equity, period-end (GAAP)			(N)			$	942,014				$	950,493				$	938,575				$	924,855				$	914,450
Less: goodwill and other intangible assets (excluding mortgage servicing rights)						(214,248		)			(215,119		)			(215,843		)			(215,958		)			(216,815		)
Total tangible common stockholders' equity (Non-GAAP)			(O)			$	727,766				$	735,374				$	722,732				$	708,897				$	697,635
Return on average common equity (GAAP)			(I)/(L)			8.60		%			9.83		%			8.60		%			9.68		%			9.38		%
Core return on average common equity (Non-GAAP)			(J)/(L)			8.60					9.86					10.07					9.66					9.40
Return on average tangible common equity (Non-GAAP)			(I)/(M)			11.13					12.73					11.20					12.65					12.35
Total assets (GAAP)			(P)			$	8,690,680				$	8,728,196				$	8,604,530				8,386,218					8,528,542
Less: goodwill and other intangible assets (excluding mortgage servicing rights)						(214,248		)			(215,119		)			(215,843		)			(215,958		)			(216,815		)
Tangible assets (Non-GAAP)			(Q)			$	8,476,432				$	8,513,077				$	8,388,687				$	8,170,260				$	8,311,727
Total common shares outstanding, period end			(R)			44,707					45,428					45,345					45,507					45,429
Book value per share, period end (GAAP)			(N)/(R)			$	21.07				$	20.92				$	20.70				$	20.32				$	20.13
Tangible book value per share, period-end (Non-GAAP)			(O)/(R)			16.28					16.19					15.94					15.58					15.36
Average common stockholders' equity to average assets (GAAP)			(L)/(K)			10.96					10.90					10.94					10.93					10.69
Tangible common stockholders' equity to tangible assets (Non-GAAP)			(O)/(Q)			8.59					8.64					8.62					8.68					8.39

View source version on businesswire.com: http://www.businesswire.com/news/home/20160425006529/en/

First Interstate BancSystem, Inc.
Marcy Mutch, 406-255-5322
Chief Financial Officer
[email protected]

Source: First Interstate BancSystem, Inc.