First Interstate BancSystem, Inc. Reports Improved Core Earnings and Strong Loan Growth

BILLINGS, Mont.--(BUSINESS WIRE)-- First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports third quarter 2015 net income of $20.2 million, or $0.44 per share. This compares to net income of $22.2 million, or $0.49 per share, during second quarter 2015, and $19.2 million, or $0.42 per share, during third quarter 2014. During third quarter 2015, the Company recorded non-core expenses of $5.6 million, including $5.0 million of legal and settlement expenses and $566 thousand of acquisition costs. Exclusive of non-core expenses, third quarter 2015 core net income was $23.6 million, or $0.52 per share, as compared to $22.2 million, or $0.49 per share, during second quarter 2015, and $22.3 million, or $0.49 per share, during third quarter 2014.

THIRD QUARTER HIGHLIGHTS

• Core pre-tax, pre-provision net income of $36.9 million, a 5.2% increase over the prior quarter and a 6.7% increase from the same period in the prior year.

• Organic loan growth of 5.9% year-over-year, total loan growth of 6.6% year-over-year.

• Loan to deposit ratio of 73.6% as of September 30, 2015, compared to 69.8% a year ago.

• Net interest margin ratio of 3.47% was unchanged from the prior quarter.

• Improvement in non-performing assets, which declined to 0.90% of total assets as of September 30, 2015, as compared to 1.01% of total assets as of June 30, 2015.

• Successful completion of the acquisition of Absarokee Bancorporation, Inc. and integration of United Bank operations into First Interstate Bank.

“We delivered a strong performance in the third quarter with positive trends across most areas of the Company,” said Kevin Riley, President and Chief Executive Officer of First Interstate BancSystem, Inc. “Our loan growth was solid across most of the major portfolios. We had strong deposit inflows, good expense management and further improvement in asset quality. As a result, we generated a 7% increase in core pre-tax, pre-provision income compared to the third quarter of 2014," Riley continued. "We also had a smooth integration of United Bank’s operations and we are realizing the synergies we projected for this acquisition. We are continuing to see good loan demand entering the fourth quarter, which should help us to deliver future strong performance for our shareholders,” said Riley.

DIVIDEND DECLARATION

On October 6, 2015, the Executive Committee of the Company's Board of Directors declared a dividend of $0.20 per common share payable on November 13, 2015 to shareholders of record as of November 2, 2015. This dividend equates to a 2.9% annual yield based on the $27.41 average closing price of the Company's common stock during third quarter 2015.

ACQUISITION

On March 26, 2015, the Company entered into an agreement and plan of merger to acquire all of the outstanding stock of Absarokee Bancorporation, Inc. ("Absarokee"), a Montana-based bank holding company that operated one subsidiary bank, United Bank, with branches located in three Montana communities adjacent to the Company's existing market areas. The acquisition was completed on July 24, 2015 for cash consideration of $7.2 million. Immediately subsequent to the acquisition, United Bank was merged with and into the Company's existing bank subsidiary, First Interstate Bank. As of the date of the acquisition, Absarokee had total assets of $73 million, loans of $38 million and deposits of $64 million.

RESULTS OF OPERATIONS

Net Interest Income. The Company's net interest income, on a fully taxable equivalent basis, increased $1.0 million to $67.4 million during third quarter 2015, as compared to $66.4 million during second quarter 2015, primarily due to the combined impact of one additional accrual day during the third quarter, loan growth and a shift in the mix of interest earning assets from lower yielding investment securities to higher yielding loans.

The yield on average loans decreased 6 basis points to 4.83% during the third quarter of 2015, as compared to 4.89% during second quarter 2015, partially due to quarter-over-quarter reductions in recoveries of charged-off interest and interest accretion related to the early pay-off of acquired loans. The impact of the reduction in loan yield was more than offset by a 3.0% increase in average loans outstanding during third quarter 2015, as compared to second quarter 2015. Interest accretion related to the fair valuation of acquired loans contributed $1.4 million of interest income during third quarter 2015, of which $307 thousand was related to early payoffs. This compares to interest accretion of $1.6 million of interest income during second quarter 2015, of which $470 thousand was related to early payoffs. Recoveries of charged-off loan interest were $679 during third quarter 2015, as compared to $753 during second quarter 2015.

The Company's net interest margin ratio remained stable at 3.47% during the second and third quarters of 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 2 basis points to 3.42% during third quarter 2015, as compared to 3.40% during second quarter 2015, due to a shift in the mix of interest earning assets from lower yielding investment securities to higher yielding loans.

Non-Interest Income. Non-interest income decreased $1.3 million, or 4.1%, to $30.5 million during third quarter 2015, as compared to $31.8 million during second quarter 2015, primarily due to decreases in other income and income from the origination and sale of mortgage loans.

Other income decreased $1.0 million, or 36.8%, to $1.8 million during third quarter 2015, as compared to $2.8 million during second quarter 2015. Included in second quarter 2015 other income was a one-time gain of $863 thousand on the sale of land. In addition, reductions in deferred compensation plan returns also contributed to the decrease in other income during third quarter 2015, as compared to second quarter 2015.

Income from the origination and sale of loans decreased $819 thousand, or 9.3%, to $8.0 million during third quarter 2015, as compared to $8.8 million during second quarter 2015. Included in second quarter 2015 results was a $410 thousand gain on the sale of seasoned portfolio loans. Refinancing loans accounted for approximately 26% of the Company's loan production during third quarter 2015, as compared to 35% during second quarter 2015.

Partially offsetting decreases in other income and income from the origination and sale of loans were increases in service charges on deposit accounts and wealth management revenues. Service charges on deposit accounts increased $326 thousand, or 8.0%, to $4.4 million during third quarter 2015, compared to $4.1 million during second quarter 2015, primarily due to the implementation of revenue enhancement strategies.

Wealth management revenues increased $336 thousand, or 6.9%, to $5.2 million during third quarter 2015, as compared to $4.9 million during second quarter 2015. This increase was the result of the addition of new wealth management customers.

Non-Interest Expense. Non-interest expense increased $3.5 million, or 5.7%, to $65.5 million during third quarter 2015, as compared to $62.0 million during second quarter 2015.

During third quarter 2015, the Company recorded non-core expenses of $5.6 million, including $5.0 million of legal and settlement costs and $566 thousand of acquisition costs related to the Absarokee acquisition.

Salaries and wages expense decreased $633 thousand, or 2.4%, to $25.5 million during third quarter 2015, compared to $26.1 million during second quarter 2015, primarily due to lower incentive compensation accruals, which were partially offset by additional salaries and wages expense.

Employee benefits expense decreased $758 thousand, or 9.4%, to $7.3 million during third quarter 2015, as compared to $8.1 million during second quarter 2015, primarily due to reductions in deferred compensation plan returns and decreases in payroll taxes as employees meet compensation tax limits.

Other expenses decreased $705 thousand, or 4.2%, to $16.3 million during third quarter 2015, as compared to $17.0 million during second quarter 2015. During third quarter 2015, the Company recorded valuation write-downs aggregating $806 thousand related to two vacated bank buildings held for sale. These write-downs were partially offset by a decrease of $467 thousand in advertising expense due to timing of advertising campaigns and lower fraud losses, which declined $185 thousand during third quarter 2015, as compared to second quarter 2015. Second quarter 2015 other expenses included a one-time contract termination expense of $876 thousand related to a change in payment service provider.

BALANCE SHEET

Total assets increased $218 million, or 2.6%, to $8.6 billion as of September 30, 2015, from $8.4 billion as of June 30, 2015. Approximately $73 million of the increase was attributable to the Absarokee acquisition. The remaining increase was primarily due to the deployment of funds, which were generated primarily though organic deposit growth, into loans and interest bearing deposits in banks.

Total loans increased $73 million, or 1.4%, to $5.2 billion as of September 30, 2015, from $5.1 billion as of June 30, 2015. Approximately $38 million, or 50.4%, of this increase was attributable to the Absarokee acquisition. All major loan categories, except commercial loans, experienced organic growth.

Commercial real estate loans increased $47 million, or 2.7%, to $1,751 million as of September 30, 2015, from $1,704 million as of June 30, 2015. Approximately $12 million of the increase was attributable to the Absarokee acquisition. Management attributes the remaining organic growth in commercial real estate loans to continuing customer business expansion in the Company's market areas.

Construction real estate loans increased $16 million, or 4.0%, to $419 million as of September 30, 2015, from $403 million as of June 30, 2015, with approximately $1.2 million of the increase attributable to the Absarokee acquisition. The most notable growth occurred in residential construction loans, which grew $11 million, or 11.4%, to $112 million as of September 30, 2015, from $101 million as of June 30, 2015. Management attributes growth in residential construction loans to increased demand for housing in the Company's market areas.

Agricultural loans increased $12 million, or 8.6%, to $155 million as of September 30, 2015, from $143 million as of June 30, 2015. Approximately $7 million of the increase was attributable to Absarokee acquisition. The remaining organic growth in agricultural loans was primarily due to seasonal increases in credit lines.

Consumer loans grew $33 million or 4.1%, to $832 million as of September 30, 2015, from $799 million as of June 30, 2015, with approximately $3 million attributable to the Absarokee acquisition. Indirect consumer loans grew organically $27 million, or 4.5%, to $616 million as of September 30, 2015, from $589 million as of June 30, 2015, due to the combined impact of heightened consumer demand for recreational vehicles and increased dealer volume resulting from the Company's expansion efforts within its existing market areas.

Commercial loans decreased $40 million, or 4.9%, to $779 million as of September 30, 2015, from $819 million as of June 30, 2015. Exclusive of commercial loans acquired in the Absarokee acquisition, commercial loans decreased $45 million, or 5.4%, from June 30, 2015 to September 30, 2015, primarily due to the repayment of several loans due to business consolidations and seasonal pay-downs of existing credit lines.

Total deposits grew $231 million, or 3.4%, to $7.0 billion as of September 30, 2015, from $6.8 billion as of June 30, 2015. Exclusive of $64 million in deposits acquired in the Absarokee acquisition, total deposits returned to more normalized levels as of September 30, 2015, following a seasonal decline during second quarter 2015. As of September 30, 2015, the mix of total deposits was 26% non-interest bearing demand, 30% interest bearing demand, 27% savings and 17% time.

ASSET QUALITY

Non-performing assets declined $7 million, or 8.3%, to $78 million, or 0.90% of total assets, as of September 30, 2015, from $85 million, or 1.01% of total assets, as of June 30, 2015. Non-accrual loans decreased $5 million, or 6.3%, to $66 million as of September 30, 2015, from $71 million as of June 30, 2015, primarily due to the paydown of the loans of one commercial real estate borrower, the partial charge-off of the loans of one land development borrower and the upgrade of the loans of one commercial real estate borrower to accrual status.

OREO decreased $3.7 million, or 31.8%, to $8.0 million as of September 30, 2015, from $11.8 million as of June 30, 2015. During third quarter 2015, the Company recorded OREO additions of $984 thousand, wrote down the value of OREO properties by $73 thousand and sold OREO properties with carrying values of $4.7 million.

The Company recorded a provision for loan losses of $1.1 million during third quarter 2015, compared to $1.3 million during second quarter 2015. The lower provision for loan losses recorded during third quarter 2015, as compared to second quarter 2015, is reflective of the decline in non-performing and criticized loans combined with reductions in historical loss rates. The Company's allowance for loan losses as a percentage of period end loans declined slightly to 1.43% as of September 30, 2015, from 1.50% as of June 30, 2015, partially due to the acquisition of Absarokee loans, which were initially recorded at fair value with no carryover of the related allowance for loan losses.

STOCK REPURCHASE

Pursuant to a stock repurchase program approved by the Company's Board of Directors on January 22, 2015, the Company repurchased and retired 200,000 shares of it Class A common stock during third quarter 2015. These shares were purchased in open market transactions at an aggregate weighted average purchase price of $26.23 per share. On September 24, 2015, the Company's Board of Directors reauthorized the repurchase of up to one million shares of the Company's Class A common stock under the stock repurchase program.

Third Quarter 2015 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss third quarter 2015 results at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Tuesday, October 27, 2015. 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 October 27, 2015 through 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) on November 26, 2015, by dialing 1-877-344-7529 (using conference ID 10073446). 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 81 banking offices, including detached drive-up facilities, in 45 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 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: continuing or worsening business and economic conditions, adverse economic conditions affecting Montana, Wyoming and western South Dakota, credit losses, lending risk, adequacy of the allowance for loan losses, impairment of goodwill, changes in interest rates, access to low-cost funding sources, 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, inability to meet liquidity requirements, failure to manage growth, competition, ineffective internal operational controls, environmental remediation and other costs, reliance on external vendors, litigation pertaining to fiduciary responsibilities, failure to effectively implement technology-driven products and services, soundness of other financial institutions, inability of our bank subsidiary to pay dividends, implementation of new lines of business or new product or service offerings, change in dividend policy, volatility of Class A common stock, 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, voting control of Class B stockholders, anti-takeover provisions, 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 INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary
(Unaudited, $ in thousands, except per share data)
		2015												2014
INCOME STATEMENT SUMMARIES		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr
Net interest income		$	66,330			$	65,288			$	64,325			$	65,516			$	65,082
Net interest income on a fully-taxable equivalent ("FTE") basis		67,400				66,399				65,381				66,585				66,129
Provision for loan losses		1,098				1,340				1,095				118				261
Non-interest income:
Other service charges, commissions and fees		11,095				11,173				9,867				11,429				10,458
Income from the origination and sale of loans		7,983				8,802				5,906				5,554				7,346
Wealth management revenues		5,233				4,897				4,937				4,775				5,157
Service charges on deposit accounts		4,379				4,053				3,944				4,432				4,331
Investment securities gains (losses), net		23				46				6				(19		)		(8		)
Other income		1,769				2,799				3,122				5,190				2,079
Total non-interest income		30,482				31,770				27,782				31,361				29,363
Non-interest expense:
Salaries and wages		25,460				26,093				25,349				23,717				25,914
Employee benefits		7,312				8,070				7,780				6,812				7,841
Occupancy, net		4,413				4,529				4,492				4,770				4,534
Furniture and equipment		3,849				3,703				3,793				4,120				3,338
Outsourced technology services		2,520				2,593				2,463				2,468				2,346
Other real estate owned income, net		(720		)		(823		)		(61		)		(61		)		(58		)
Core deposit intangible amortization		842				855				854				855				688
Non-core expenses (income)		5,566				(7		)		70				2,368				5,052
Other expenses		16,260				16,965				14,852				16,604				15,303
Total non-interest expense		65,502				61,978				59,592				61,653				64,958
Income before taxes		30,212				33,740				31,420				35,106				29,226
Income taxes		10,050				11,518				10,440				12,330				10,071
Net income		$	20,162			$	22,222			$	20,980			$	22,776			$	19,155
Core net income**		$	23,610			$	22,189			$	21,020			$	24,260			$	22,302
Core pre-tax, pre-provision net income**		$	36,853			$	35,027			$	32,579			$	37,611			$	34,547
PER COMMON SHARE DATA
Net income - basic		$	0.45			$	0.49			$	0.46			$	0.50			$	0.43
Net income - diluted		0.44				0.49				0.46				0.49				0.42
Core net income - diluted		0.52				0.49				0.46				0.53				0.49
Cash dividend paid		0.20				0.20				0.20				0.16				0.16
Book value at period end		20.70				20.32				20.13				19.85				19.40
Tangible book value at period end**		15.94				15.58				15.36				15.07				14.61
OUTSTANDING COMMON SHARES
At period-end		45,345,007				45,506,583				45,429,468				45,788,415				45,672,922
Weighted-average shares - basic		45,150,104				45,143,122				45,378,230				45,485,548				44,911,858
Weighted-average shares - diluted		45,578,978				45,606,686				45,840,191				46,037,344				45,460,288
SELECTED ANNUALIZED RATIOS
Return on average assets		0.94		%		1.06		%		1.00		%		1.05		%		0.93		%
Core return on average assets**		1.10				1.06				1.00				1.12				1.09
Return on average common equity		8.60				9.68				9.38				10.09				8.55
Core return on average common equity**		10.07				9.66				9.40				10.75				9.96
Return on average tangible common equity**		11.20				12.65				12.35				13.34				11.17
Net FTE interest income to average earning assets		3.47				3.47				3.43				3.38				3.55
Core efficiency ratio**		61.12				63.14				63.04				59.71				62.07

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
		2015												2014
BALANCE SHEET SUMMARIES		Sept 30				Jun 30				Mar 31				Dec 31				Sept 30
Assets:
Cash and cash equivalents		$	708,295			$	506,434			$	637,803			$	798,670			$	819,963
Investment securities		2,067,636				2,139,433				2,340,904				2,287,110				2,169,774
Loans held for investment:
Commercial real estate		1,750,797				1,704,073				1,670,829				1,639,422				1,686,509
Construction real estate		419,260				403,228				406,305				418,269				367,420
Residential real estate		1,020,445				999,038				997,123				999,903				957,282
Agricultural real estate		163,116				158,506				156,734				167,659				158,940
Consumer		831,961				799,126				768,462				762,471				745,482
Commercial		778,648				819,119				754,149				740,073				736,908
Agricultural		154,855				142,629				117,569				124,859				136,587
Other		1,712				2,905				377				3,959				2,316
Mortgage loans held for sale		55,686				75,322				55,758				40,828				62,938
Total loans		5,176,480				5,103,946				4,927,306				4,897,443				4,854,382
Less allowance for loan losses		74,256				76,552				75,336				74,200				74,231
Net loans		5,102,224				5,027,394				4,851,970				4,823,243				4,780,151
Premises and equipment, net		190,386				189,488				192,748				195,212				207,181
Goodwill and intangible assets (excluding mortgage servicing rights)		215,843				215,958				216,815				218,870				218,799
Company owned life insurance		185,990				177,625				154,741				153,821				152,761
Other real estate owned, net		8,031				11,773				15,134				13,554				18,496
Mortgage servicing rights, net		15,336				14,654				14,093				14,038				13,894
Other assets		110,789				103,459				104,334				105,418				100,333
Total assets		$	8,604,530			$	8,386,218			$	8,528,542			$	8,609,936			$	8,481,352
Liabilities and stockholders' equity:
Deposits:
Non-interest bearing		$	1,832,535			$	1,757,641			$	1,757,664			$	1,791,364			$	1,637,151
Interest bearing		5,203,259				5,046,760				5,210,495				5,214,848				5,322,348
Total deposits		7,035,794				6,804,401				6,968,159				7,006,212				6,959,499
Securities sold under repurchase agreements		437,533				469,145				462,073				502,250				432,478
Accounts payable, accrued expenses and other liabilities		67,062				62,272				58,335				72,006				63,713
Long-term debt		43,089				43,068				43,048				38,067				36,882
Subordinated debentures held by subsidiary trusts		82,477				82,477				82,477				82,477				102,916
Total liabilities		7,665,955				7,461,363				7,614,092				7,701,012				7,595,488
Stockholders' equity:
Common stock		309,167				313,125				310,544				323,596				321,132
Retained earnings		623,967				612,875				599,727				587,862				572,362
Accumulated other comprehensive income (loss)		5,441				(1,145		)		4,179				(2,534		)		(7,630		)
Total stockholders' equity		938,575				924,855				914,450				908,924				885,864
Total liabilities and stockholders' equity		$	8,604,530			$	8,386,218			$	8,528,542			$	8,609,936			$	8,481,352
CONSOLIDATED CAPITAL RATIOS
Total risk-based capital		15.25		%	*	15.37		%		15.43		%		16.15		%		16.34		%
Tier 1 risk-based capital		13.80			*	13.88				13.94				14.52				14.71
Tier 1 common capital to total risk-weighted assets		12.49			*	12.55				12.58				13.08				12.89
Leverage Ratio		10.13			*	10.11				9.73				9.61				10.42
Tangible common stockholders' equity to tangible assets**		8.62				8.68				8.39				8.22				8.07

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Consolidated Financial Summary - continued
(Unaudited, $ in thousands)
		2015												2014
ASSET QUALITY		Sep 30				Jun 30				Mar 31				Dec 31				Sep 30
Allowance for loan losses		$	74,256			$	76,552			$	75,336			$	74,200			$	74,231
As a percentage of period-end loans		1.43		%		1.50		%		1.53		%		1.52		%		1.53		%
Net charge-offs (recoveries) during quarter		$	3,394			$	124			$	(41	)		$	149			$	4,296
Annualized as a percentage of average loans		0.26		%		0.01		%		—		%		0.01		%		0.36		%
Non-performing assets:
Non-accrual loans		$	66,359			$	70,848			$	73,941			$	62,182			$	71,915
Accruing loans past due 90 days or more		3,357				2,153				5,175				2,576				1,348
Total non-performing loans		69,716				73,001				79,116				64,758				73,263
Other real estate owned		8,031				11,773				15,134				13,554				18,496
Total non-performing assets		77,747				84,774				94,250				78,312				91,759
As a percentage of:
Total loans and OREO		1.50		%		1.66		%		1.91		%		1.59		%		1.88		%
Total assets		0.90		%		1.01		%		1.11		%		0.91		%		1.08		%

ASSET QUALITY TRENDS		Provision for Loan Losses				Net Charge-offs (Recoveries)				Allowance for Loan Losses				Accruing Loans 30-89 Days Past Due				Accruing TDRs				Non-Performing Loans				Non-Performing Assets
Q3 2012		$	9,500			$	13,288			$	99,006			$	48,277			$	35,428			$	127,270			$	167,241
Q4 2012		8,000				6,495				100,511				34,602				31,932				110,076				142,647
Q1 2013		500				3,107				97,904				41,924				35,787				100,535				133,005
Q2 2013		375				(249		)		98,528				39,408				23,406				105,471				128,253
Q3 2013		(3,000		)		2,538				92,990				39,414				21,939				96,203				114,740
Q4 2013		(4,000		)		3,651				85,339				26,944				21,780				96,671				112,175
Q1 2014		(5,000		)		(1,032		)		81,371				41,034				19,687				89,778				106,372
Q2 2014		(2,001		)		1,104				78,266				24,250				23,531				80,660				97,085
Q3 2014		261				4,296				74,231				38,400				20,956				73,263				91,759
Q4 2014		118				149				74,200				28,848				20,952				64,758				78,312
Q1 2015		1,095				(41		)		75,336				40,744				16,070				79,116				94,250
Q2 2015		1,340				124				76,552				31,178				15,127				73,001				84,774
Q3 2015		1,098				3,394				74,256				38,793				16,702				69,716				77,747

CRITICIZED LOANS		Special Mention				Substandard				Doubtful				Total
Q3 2012		$	223,306			$	229,826			$	66,179			$	519,311
Q4 2012		209,933				215,188				42,459				467,580
Q1 2013		197,645				197,095				43,825				438,565
Q2 2013		192,390				161,786				52,266				406,442
Q3 2013		180,850				168,278				42,415				391,543
Q4 2013		159,081				154,100				45,308				358,489
Q1 2014		174,834				161,103				31,672				367,609
Q2 2014		160,271				155,744				29,115				345,130
Q3 2014		156,469				156,123				39,450				352,042
Q4 2014		154,084				163,675				34,854				352,613
Q1 2015		140,492				156,887				37,476				334,855
Q2 2015		155,707				159,899				31,701				347,307
Q3 2015		155,157				163,846				24,547				343,550

*Preliminary estimate - may be subject to change.

**See Non-GAAP Financial Measures included herein for a discussion regarding core net income, pre-tax, pre-provision net income, tangible book value per common share, core return on average assets, core return on average common equity, return on average tangible common equity, tangible common stockholders' equity to tangible assets and core efficiency ratio.

FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES
Average Balance Sheets
(Unaudited, $ in thousands)
		Three Months Ended
		September 30, 2015											June 30, 2015											September 30, 2014
		Average Balance				Interest				Average Rate			AverageBalance				Interest				AverageRate			Average Balance				Interest				Average Rate
Interest earning assets:
Loans (1) (2)		$	5,141,484			$	62,577			4.83	%		$	4,991,416			$	60,911			4.89	%		$	4,751,928			$	61,445			5.13	%
Investment securities (2)		2,097,835				8,927				1.69			2,319,636				9,642				1.67			2,094,449				8,953				1.70
Interest bearing deposits in banks		471,682				342				0.29			369,345				271				0.29			548,794				374				0.27
Federal funds sold		2,876				4				0.55			3,168				5				0.63			1,909				3				0.62
Total interest earnings assets		7,713,877				71,850				3.70			7,683,565				70,829				3.70			7,397,080				70,775				3.80
Non-earning assets		781,559											743,545											753,324
Total assets		$	8,495,436										$	8,427,110										$	8,150,404
Interest bearing liabilities:
Demand deposits		$	2,086,112			$	528			0.10	%		$	2,086,443			$	524			0.10	%		$	2,100,931			$	532			0.10	%
Savings deposits		1,924,612				645				0.13			1,874,508				624				0.13			1,751,595				616				0.14
Time deposits		1,150,223				2,068				0.71			1,175,753				2,091				0.71			1,217,023				2,339				0.76
Repurchase agreements		433,007				55				0.05			448,810				53				0.05			439,739				52				0.05
Other borrowed funds		6				—				—			7				—				—			1,781				27				6.01
Long-term debt		43,200				544				5.00			43,039				538				5.01			36,886				482				5.18
Subordinated debentures held by subsidiary trusts		82,477				610				2.93			82,477				600				2.92			89,142				598				2.66
Total interest bearing liabilities		5,719,637				4,450				0.31			5,711,037				4,430				0.31			5,637,097				4,646				0.33
Non-interest bearing deposits		1,787,419											1,739,329											1,570,121
Other non-interest bearing liabilities		58,623											55,515											54,722
Stockholders’ equity		929,757											921,229											888,464
Total liabilities and stockholders’ equity		$	8,495,436										$	8,427,110										$	8,150,404
Net FTE interest income						67,400											66,399											66,129
Less FTE adjustments (2)						(1,070		)									(1,111		)									(1,047		)
Net interest income from consolidated statements of income						$	66,330										$	65,288										$	65,082
Interest rate spread										3.39	%										3.39	%										3.47	%
Net FTE interest margin (3)										3.47	%										3.47	%										3.55	%
Cost of funds, including non-interest bearing demand deposits (4)										0.24	%										0.24	%										0.26	%

(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
Average Balance Sheets
(Unaudited, $ in thousands)
		Nine Months Ended
		September 30, 2015											September 30, 2014
		Average Balance				Interest				Average Rate			AverageBalance				Interest				AverageRate
Interest earning assets:
Loans (1) (2)		$	5,010,251			$	183,305			4.89	%		$	4,512,726			$	171,656			5.09	%
Investment securities (2)		2,236,581				28,209				1.69			2,098,125				27,341				1.74
Interest bearing deposits in banks		462,262				1,002				0.29			425,489				830				0.26
Federal funds sold		2,412				11				0.61			1,658				7				0.56
Total interest earnings assets		7,711,506				212,527				3.68			7,037,998				199,834				3.80
Non-earning assets		759,169											695,924
Total assets		$	8,470,675										$	7,733,922
Interest bearing liabilities:
Demand deposits		$	2,087,241			$	1,558			0.10	%		$	1,940,007			$	1,556			0.11	%
Savings deposits		1,894,132				1,897				0.13			1,681,782				1,810				0.14
Time deposits		1,181,931				6,334				0.72			1,179,735				6,872				0.78
Repurchase agreements		453,610				162				0.05			444,952				181				0.05
Other borrowed funds		5				—				—			475				27				7.60
Long-term debt		41,469				1,596				5.15			36,897				1,431				5.19
Subordinated debentures held by subsidiary trusts		82,477				1,800				2.92			84,723				1,778				2.81
Total interest bearing liabilities		5,740,865				13,347				0.31			5,368,571				13,655				0.34
Non-interest bearing deposits		1,750,152											1,473,003								.
Other non-interest bearing liabilities		60,149											49,879
Stockholders’ equity		919,509											842,469
Total liabilities and stockholders’ equity		$	8,470,675										$	7,733,922
Net FTE interest income						199,180											186,179
Less FTE adjustments (2)						(3,237		)									(3,234		)
Net interest income from consolidated statements of income						$	195,943										$	182,945
Interest rate spread										3.37	%										3.46	%
Net FTE interest margin (3)										3.45	%										3.54	%
Cost of funds, including non-interest bearing demand deposits (4)										0.24	%										0.27	%

(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.

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.

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

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

			2015												2014
As Of or For the Quarter Ended			Sep 30				Jun 30				Mar 31				Dec 31				Sep 30
Net income			$	20,162			$	22,222			$	20,980			$	22,776			$	19,155
Add back: income tax expense			10,050				11,518				10,440				12,330				10,071
Add back: provision for loan losses			1,098				1,340				1,095				118				261
Pre-tax, pre-provision net income			$	31,310			$	35,080			$	32,515			$	35,224			$	29,487
Net income			$	20,162			$	22,222			$	20,980			$	22,776			$	19,155
Adj: investment securities (gains) losses, net			(23		)		(46		)		(6		)		19				8
Plus: acquisition & nonrecurring litigation expenses			5,566				(7		)		70				2,368				5,052
Adj: income taxes			(2,095		)		20				(24		)		(903		)		(1,913		)
Total core net income		(A)	23,610				22,189				21,020				24,260				22,302
Net income			$	20,162			$	22,222			$	20,980			$	22,776			$	19,155
Add back: income tax expense			10,050				11,518				10,440				12,330				10,071
Add back: provision for loan losses			1,098				1,340				1,095				118				261
Adj: investment securities (gains) losses, net			(23		)		(46		)		(6		)		19				8
Plus: acquisition & nonrecurring litigation expenses			5,566				(7		)		70				2,368				5,052
Core pre-tax, pre-provision net income			$	36,853			$	35,027			$	32,579			$	37,611			$	34,547

			2015													2014
As Of or For the Quarter Ended			Sep 30					Jun 30				Mar 31				Dec 31				Sep 30
Total non-interest income			$	30,482				$	31,770			$	27,782			$	31,361			$	29,363
Adj: investment securities (gains) losses, net			(23		)			(46		)		(6		)		19				8
Total core non-interest income			30,459					31,724				27,776				31,380				29,371
Net interest income			66,330					65,288				64,325				65,516				65,082
Total core revenue		(B)	$	96,789				$	97,012			$	92,101			$	96,896			$	94,453
Total non-interest expense			$	65,502				$	61,978			$	59,592			$	61,653			$	64,958
Less: acquisition & nonrecurring litigation expenses			(5,566		)			7				(70		)		(2,368		)		(5,052		)
Core non-interest expense		(C)	$	59,936				$	61,985			$	59,522			$	59,285			$	59,906
Total quarterly average stockholders' equity		(D)	$	929,757				$	921,229			$	907,293			$	895,605			$	888,464
Less: average goodwill and other intangible assets (excluding mortgage servicing rights)			(215,829		)			(216,457		)		(218,511		)		(218,407		)		(208,346		)
Average tangible common stockholders' equity		(E)	$	713,928				$	704,772			$	688,782			$	677,198			$	680,118
Total stockholders' equity, period-end			$	938,575				$	924,855			$	914,450			$	908,924			$	885,864
Less: goodwill and other intangible assets (excluding mortgage servicing rights)			(215,843		)			(215,958		)		(216,815		)		(218,870		)		(218,799		)
Total tangible common stockholders' equity		(F)	$	722,732				$	708,897			$	697,635			$	690,054			$	667,065
Total assets			$	8,604,530				$	8,386,218			$	8,528,542			8,609,936				8,481,352
Less: goodwill and other intangible assets (excluding mortgage servicing rights)			(215,843		)			(215,958		)		(216,815		)		(218,870		)		(218,799		)
Tangible assets		(G)	$	8,388,687				$	8,170,260			$	8,311,727			$	8,391,066			$	8,262,553
Total quarterly average assets		(H)	$	8,495,436				$	8,427,110			$	8,489,413			$	8,586,418			$	8,150,404
Total common shares outstanding, period end		(I)	45,345,007					45,506,583				45,429,468				45,788,415				45,672,922
Weighted-average common shares - diluted		(J)	45,578,978					45,606,686				45,840,191				46,037,344				45,460,288
Core earnings per share, diluted		(A/J)	$	0.52				$	0.49			$	0.46			$	0.53			$	0.49
Tangible book value per share, period-end		(F/I)	15.94					15.58				15.36				15.07				14.61
Annualized net income		(K)	$	79,991				$	89,132			$	85,086			$	90,361			$	75,995
Annualized core net income		(L)	93,670					89,000				85,248				96,249				88,481
Core return on average assets		(L/H)	1.10		%			1.06		%		1.00		%		1.12		%		1.09		%
Core return on average common equity		(L/D)	10.07					9.66				9.40				10.75				9.96
Return on average tangible common equity		(K/E)	11.20					12.65				12.35				13.34				11.17
Tangible common stockholders' equity to tangible assets		(F/G)	8.62					8.68				8.39				8.22				8.07
Core non-interest expense		(C)	$	59,936				$	61,985			$	59,522			$	59,285			$	59,906
Less: amortization of core deposit intangible			(842		)			(855		)		(854		)		(855		)		(688		)
Adj: OREO (expense) income			720					823				61				61				58
Non-interest expense for core efficiency ratio		(M)	$	59,814				$	61,953			$	58,729			$	58,491			$	59,276
Total core revenue		(B)	$	96,789				$	97,012			$	92,101			$	96,896			$	94,453
Add: FTE adjustments			1,070					1,111				1,056				1,069				1,047
Total core revenue for core efficiency ratio		(N)	$	97,859				$	98,123			$	93,157			$	97,965			$	95,500
Core efficiency ratio		(M/N)	61.12		%			63.14		%		63.04		%		59.71		%		62.07		%

View source version on businesswire.com: http://www.businesswire.com/news/home/20151026006464/en/

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

Source: First Interstate BancSystem, Inc.

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