First Interstate BancSystem, Inc. Reports Results for Fourth Quarter 2010

BILLINGS, Mont.--(BUSINESS WIRE)--First Interstate BancSystem, Inc. (NASDAQ: FIBK) reports fourth quarter 2010 net income available to common stockholders of $10.0 million, or $0.23 per diluted share, as compared to $7.9 million, or $0.18 per diluted share, for third quarter 2010 and $10.7 million, or $0.34 per diluted share, for fourth quarter 2009. Return on average common equity and return on average assets were 5.68% and 0.58%, respectively, for the fourth quarter of 2010, compared to 4.52% and 0.48%, respectively, in the third quarter of 2010, and 8.07% and 0.65%, respectively, in the fourth quarter of 2009.

RESULTS SUMMARY
(Unaudited; $ in thousands, except per share data)	Three Months Ended									Sequential		Year
	December 31,			September 30,			December 31,			Quarter		Over Year
	2010			2010			2009			% Change		% Change
Net income	$	10,838		$	8,729		$	11,521		24.2	%	-5.9	%
Net income available to common stockholders		9,975			7,867			10,658		26.8	%	-6.4	%
Diluted earnings per common share		0.23			0.18			0.34		27.8	%	-32.4	%
Dividends per common share		0.1125			0.1125			0.1125		0.0	%	0.0	%
Book value per common share		16.05			16.23			16.73		-1.1	%	-4.1	%
Tangible book value per common share*		11.55			11.72			10.53		-1.5	%	9.7	%
Net tangible book value per common share*		12.96			13.14			12.46		-1.4	%	4.0	%
Return on average common equity		5.68	%		4.52	%		8.07	%
Return on average assets		0.58	%		0.48	%		0.65	%
	Twelve Months Ended						Year
	December 31,			December 31,			Over Year
	2010			2009			% Change
Net income	$	37,356		$	53,863			-30.6	%
Net income available to common stockholders		33,934			50,441			-32.7	%
Diluted earnings per common share		0.85			1.59			-46.5	%
Dividends per common share		0.4500			0.5000			-10.0	%
Return on average common equity		5.22	%		9.98	%
Return on average assets		0.52	%		0.79	%
* See Non-GAAP Financial Measures included herein for a discussion regarding tangible and net tangible book value per common share.

“Overall, First Interstate BancSystem performed well in 2010 in the midst of a difficult economy,” said Lyle R. Knight, President and Chief Executive Officer for First Interstate BancSystem, Inc. "The current low interest rate environment combined with diminished loan demand challenged us in 2010 and we expect these trends to continue in upcoming quarters. Improvement in our results from last quarter was largely due to strong income from the origination and sale of residential real estate loans and the reversal of previously recorded mortgage servicing rights impairment. The performance of the loan portfolio in the fourth quarter was consistent with our expectations, with previously identified problem assets continuing to migrate through the credit continuum without any surprises in terms of the degree of deterioration. While our provision for loan losses was slightly lower during the fourth quarter 2010, as compared to third quarter 2010, our allowance for loan losses as a percentage of total loans increased to 2.76%, a level we feel is sufficient to provide for estimated losses inherent in our loan portfolio. With this strong reserve and the conservative position we have taken on our impaired loans, we believe credits costs will be manageable in 2011. In addition, we will continue to strategically manage our balance sheet in order to optimize our net interest margin and will work to identify and implement changes to our cost structures to reduce the growth of non-interest expenses.”

REVENUE SUMMARY	Three Months Ended									Sequential		Year
(Unaudited; $ in thousands)	December 31,			September 30,			December 31,			Quarter		Over Year
	2010			2010			2009			% Change		% Change
Interest income	$	76,215		$	78,965		$	82,678		-3.5	%	-7.8	%
Interest expense		13,365			15,221			19,094		-12.2	%	-30.0	%
Net interest income		62,850			63,744			63,584		-1.4	%	-1.2	%
Non-interest income:
Other service charges, commissions and fees		7,421			7,821			7,124		-5.1	%	4.2	%
Income from the origination and sale of loans		8,027			7,355			5,246		9.1	%	53.0	%
Service charges on deposit accounts		4,327			4,497			5,038		-3.8	%	-14.1	%
Wealth management revenues		3,083			3,091			2,894		-0.3	%	6.5	%
Investment securities gains, net		62			66			11		-6.1	%	463.6	%
Other income		2,591			2,025			1,897		28.0	%	36.6	%
Total non-interest income		25,511			24,855			22,210		2.6	%	14.9	%
Total revenues	$	88,361		$	88,599		$	85,794		-0.3	%	3.0	%
Tax equivalent net interest margin ratio		3.72	%		3.89	%		4.05	%
	Twelve Months Ended						Year
	December 31,			December 31,			Over Year
	2010			2009			% Change
Interest income	$	314,543		$	328,034			-4.1	%
Interest expense		63,107			84,898			-25.7	%
Net interest income		251,436			243,136			3.4	%
Non-interest income:
Other service charges, commissions and fees		29,494			28,747			2.6	%
Income from the origination and sale of loans		22,868			30,928			-26.1	%
Service charges on deposit accounts		18,181			20,323			-10.5	%
Wealth management revenues		12,387			10,821			14.5	%
Investment securities gains, net		170			137			24.1	%
Other income		7,811			9,734			-19.8	%
Total non-interest income		90,911			100,690			-9.7	%
Total revenues	$	342,347		$	343,826			-0.4	%
Tax equivalent net interest margin ratio		3.89	%		4.05	%

Net Interest Income

During fourth quarter 2010, continued low loan demand negatively impacted net interest income and contributed to a 17 basis point reduction in net interest margin ratio. Average loans decreased $103 million, or 2.3% during fourth quarter 2010, as compared to third quarter 2010, resulting in an approximate 9 basis point reduction in the Company's net interest margin ratio. The remaining compression in net interest margin ratio was attributable to lower yields earned on the Company's investment security and loan portfolios, partially offset by a 16 basis point reduction in funding costs during fourth quarter 2010.

Non-interest Income

Refinancing activity remained elevated during the fourth quarter of 2010 resulting in an increase in income from the origination and sale of loans, as compared to third quarter 2010 and fourth quarter 2009. Refinancing activity accounted for approximately 72% of the Company’s residential real estate loan originations during fourth quarter 2010, as compared to 69% during third quarter 2010, and 53% during fourth quarter 2009. Increases in refinancing activity were partially offset by fewer originations of loans to purchase homes, which decreased 5% during fourth quarter 2010, as compared to third quarter 2010, and 12% as compared to fourth quarter 2009. Income from the origination and sale of loans decreased during the twelve months ended December 31, 2010, as compared to the same period in the prior year, due to a substantial decline in refinancing activity from early 2009.

Other income increased during fourth quarter 2010, compared to third quarter 2010 and fourth quarter 2009, primarily due to increases in earnings of securities held under deferred compensation plans and life insurance proceeds. Other income decreased during the twelve months ended December 31, 2010, as compared to the same periods in 2009, primarily due to a $2.1 million one-time gain on the sale of Visa Class B common shares recorded during third quarter 2009.

NON-INTEREST EXPENSE	Three Months Ended									Sequential		Year
(Unaudited; $ in thousands)	December 31,			September 30,			December 31,			Quarter		Over Year
	2010			2010			2009			% Change		% Change
Non-interest expense:
Salaries, wages and employee benefits	$	29,216		$	27,994		$	27,980		4.4	%	4.4	%
Occupancy, net		4,207			3,939			4,242		6.8	%	-0.8	%
Furniture and equipment		3,326			3,411			3,389		-2.5	%	-1.9	%
FDIC insurance premiums		2,584			2,337			2,389		10.6	%	8.2	%
Outsourced technology services		2,377			2,402			2,279		-1.0	%	4.3	%
Other real estate owned expense, net of income		1,541			2,608			318		-40.9	%	384.6	%
Mortgage servicing rights amortization		1,146			1,221			1,224		-6.1	%	-6.4	%
Mortgage servicing rights impairment (recovery)		(2,999	)		1,991			(255	)	-250.6	%	1076.1	%
Core deposit intangibles amortization		432			437			531		-1.1	%	-18.6	%
Other expenses		12,993			11,670			13,055		11.3	%	-0.5	%
Total non-interest expense	$	54,823		$	58,010		$	55,152		-5.5	%	-0.6	%
	Twelve Months Ended						Year
	December 31,			December 31,			Over Year
	2010			2009			% Change
Non-interest expense:
Salaries, wages and employee benefits	$	112,667		$	113,569			-0.8	%
Occupancy, net		16,251			15,898			2.2	%
Furniture and equipment		13,434			12,405			8.3	%
FDIC insurance premiums		10,044			12,130			-17.2	%
Outsourced technology services		9,477			10,567			-10.3	%
Other real estate owned expense, net of income		7,670			6,397			19.9	%
Mortgage servicing rights amortization		4,615			7,568			-39.0	%
Mortgage servicing rights impairment (recovery)		(787	)		(7,224	)		-89.1	%
Core deposit intangibles amortization		1,748			2,131			-18.0	%
Other expenses		45,885			44,269			3.7	%
Total non-interest expense	$	221,004		$	217,710			1.5	%

Salaries, wages and employees benefits expenses increased during fourth quarter 2010, as compared to third quarter 2010 and fourth quarter 2009. The increase is primarily due to higher group medical insurance costs.

Variations in net OREO expense between periods were primarily due to fluctuations in write-downs of the estimated fair value of OREO properties. Fourth quarter 2010 net OREO expense included $367 thousand of operating expenses, $1.2 million of fair value write-downs and net losses of $13 thousand on the sale of OREO properties.

FDIC insurance premiums increased during fourth quarter 2010, as compared to third quarter 2010, due to the adjustment of third quarter assessment estimates to actual amounts. FDIC insurance premiums decreased in 2010, as compared to 2009, due to a special FDIC insurance assessment levied during second quarter 2009. The special assessment, which was applicable to all insured depository institutions, resulted in additional FDIC insurance expense of $3.1 million in 2009.

Fluctuations in the fair value of mortgage servicing rights are primarily due to changes in assumptions regarding estimated prepayments of the underlying mortgage loans, which typically correspond with changes in market interest rates. Mortgage interest rates increased during fourth quarter 2010, resulting in a $3.0 million recovery of previously recorded impairment in the fair value of mortgage servicing rights.

On December 1, 2010, the Company sold mortgage servicing rights with a book value of $5 million. A loss of $1.5 million on the sale was included in other expense during fourth quarter 2010. In conjunction with the sale, the Company entered into an agreement with the purchaser whereby the Company continues to sub-service the loans underlying the sold mortgage servicing rights.

ASSET QUALITY	Three Months Ended
(Unaudited; $ in thousands)	December 31,			September 30,			December 31,
	2010			2010			2009
Allowance for loan losses - beginning of period	$	120,236		$	114,328		$	101,748
Charge-offs		(18,045	)		(12,789	)		(12,793	)
Recoveries		789			697			575
Provision		17,500			18,000			13,500
Allowance for loan losses - end of period	$	120,480		$	120,236		$	103,030
	December 31,			September 30,			December 31,
	2010			2010			2009
Period end loans	$	4,367,909		$	4,452,387		$	4,528,004
Average loans		4,402,141			4,504,657			4,561,237
Non-performing loans:
Nonaccrual loans		195,342			174,249			115,030
Accruing loans past due 90 days or more		1,852			1,129			4,965
Restructured loans		13,490			26,630			4,683
Total non-performing loans		210,684			202,008			124,678
Other real estate owned		33,632			35,296			38,400
Total non-performing assets	$	244,316		$	237,304		$	163,078
Net charge-offs to average loans (annualized)		1.56	%		1.06	%		1.06	%
Provision for loan losses to average loans (annualized)		1.58	%		1.59	%		1.17	%
Allowance for loan losses to period end loans		2.76	%		2.70	%		2.28	%
Allowance for loan losses to total non-performing loans		57.19	%		59.52	%		82.64	%
Non-performing loans to period end loans		4.82	%		4.54	%		2.75	%
Non-performing assets to period end loans and other real estate owned		5.55	%		5.29	%		3.57	%
Non-performing assets to total assets		3.33	%		3.24	%		2.28	%

The Company's loan portfolio continued to be adversely impacted by difficult economic conditions in certain of its market areas. The Flathead, Gallatin Valley and Jackson market areas, which are dependent upon resort and second home communities, accounted for approximately 68% of loans charged-off during fourth quarter 2010 and approximately 54% of the Company's non-performing assets as of December 31, 2010, versus only 21% of the Company's total loans as of the same date.

As of December 31, 2010, total non-performing loans included $170 million of real estate loans, of which $78 million were construction loans and $73 million were commercial real estate loans. Non-performing construction loans as of December 31, 2010 were comprised of land acquisition and development loans of $44 million, residential construction loans of $17 million and commercial construction loans of $17 million.

Nonaccrual loans increased during fourth quarter 2010, as compared to third quarter 2010, primarily due to the commercial and commercial real estate loans of three borrowers. Approximately 45% of the increase was attributable to one borrower in the Jackson market area. As of December 31, 2010, approximately 76% of the Company's nonaccrual loans were current with regard to principal payments.

During fourth quarter 2010, the Company placed the restructured loans of two commercial real estate borrowers on nonaccrual. These loans, which aggregated $7 million, are included in the nonaccrual loans balance in the above table. The remaining decrease in restructured loans at December 31, 2010, as compared to September 30, 2010, was primarily due to payments received on the loans of one commercial and commercial real estate borrower. As of December 31, 2010, all of the Company's restructured loans were performing in accordance with their restructured terms.

During fourth quarter 2010, the Company recorded additions to OREO of $4 million, wrote down the fair value of OREO properties by $1 million and sold OREO with a book value of $5 million.

Provision for loan losses reflects management’s estimation of the effect of current economic conditions on the Company’s loan portfolio. Approximately 50% of the fourth quarter provision for loan losses was attributable to the Flathead, Gallatin Valley and Jackson market areas. Management expects quarterly provisions for loan losses to remain at elevated levels until a leveling-off or decline in non-performing assets occurs.

Following is a summary of the Company’s credit quality trends since the start of 2008.

CREDIT QUALITY TRENDS
(Unaudited; $ in thousands)
	Provisions				Allowance		Loans						Potential
	for		Net		for		30 - 89 Days		Non-Performing		Non-Performing		Problem
	Loan Losses		Charge-offs		Loan Losses		Past Due		Loans		Assets		Loans
Q1 2008	$	2,363	$	766	$	68,415	$	55,532	$	58,047	$	58,921	$	74,348
Q2 2008		5,321		1,086		72,650		81,571		92,403		95,108		94,371
Q3 2008		5,636		1,192		77,094		58,085		89,800		92,971		87,176
Q4 2008		20,036		9,814		87,316		92,180		90,922		96,947		138,850
Q1 2009		9,600		4,693		92,223		98,980		103,653		122,300		181,263
Q2 2009		11,700		5,528		98,395		88,632		135,484		167,273		166,673
Q3 2009		10,500		7,147		101,748		91,956		125,083		156,958		207,961
Q4 2009		13,500		12,218		103,030		63,878		124,678		163,078		220,976
Q1 2010		11,900		8,581		106,349		62,675		133,042		177,022		254,314
Q2 2010		19,500		11,521		114,328		99,334		158,113		200,451		286,483
Q3 2010		18,000		12,092		120,236		47,966		202,008		237,304		279,128
Q4 2010		17,500		17,256		120,480		57,011		210,684		244,312		238,250

Potential problem loans consist of performing loans that have been internally risk classified due to uncertainties regarding the borrowers' ability to continue to comply with the contractual repayment terms of the loans. Potential problem loans decreased during fourth quarter 2010, as compared to third quarter 2010, primarily due to the movement of potential problem loans to the non-performing loan category.

ASSETS							Sequential		Year
(Unaudited; $ in thousands)	December 31,		September 30,		December 31,		Quarter		Over Year
	2010		2010		2009		% Change		% Change
Cash and cash equivalents	$	685,618	$	542,355	$	623,482	26.4	%	10.0	%
Investment securities		1,933,403		1,829,424		1,446,280	5.7	%	33.7	%
Loans		4,367,909		4,452,387		4,528,004	-1.9	%	-3.5	%
Less allowance for loan losses		120,480		120,236		103,030	0.2	%	16.9	%
Net loans		4,247,429		4,332,151		4,424,974	-2.0	%	-4.0	%
Other assets		634,520		625,271		642,917	1.5	%	-1.3	%
Total assets	$	7,500,970	$	7,329,201	$	7,137,653	2.3	%	5.1	%

The Company continued to invest excess liquidity into investment securities during fourth quarter 2010. The duration of the Company’s investment securities portfolio increased to an estimated 2.5 years as of December 31, 2010, from 1.7 years as of September 30, 2010. This increase in duration was primarily driven by higher market interest rates as of December 31, 2010 and the resulting extensions in the estimated lives of our mortgage-backed investment securities.

LOANS							Sequential		Year
(Unaudited; $ in thousands)	December 31,		September 30,		December 31,		Quarter		Over Year
	2010		2010		2009		% Change		% Change
Real estate loans:
Commercial	$	1,565,665	$	1,565,525	$	1,556,273	0.0	%	0.6	%
Construction:
Land acquisition & development		329,720		360,890		403,866	-8.6	%	-18.4	%
Residential		99,196		111,545		134,970	-11.1	%	-26.5	%
Commercial		98,542		91,713		98,056	7.4	%	0.5	%
Total construction loans		527,458		564,148		636,892	-6.5	%	-17.2	%
Residential		549,604		544,952		539,098	0.9	%	1.9	%
Agriculture		182,794		189,895		195,045	-3.7	%	-6.3	%
Mortgage loans originated for sale		46,408		53,722		36,430	-13.6	%	27.4	%
Total real estate loans		2,871,929		2,918,242		2,963,738	-1.6	%	-3.1	%
Consumer:
Indirect consumer loans		423,552		432,869		423,104	-2.2	%	0.1	%
Other consumer loans		162,137		165,725		195,331	-2.2	%	-17.0	%
Credit card loans		60,891		59,222		59,113	2.8	%	3.0	%
Total consumer loans		646,580		657,816		677,548	-1.7	%	-4.6	%
Commercial		730,471		739,151		750,647	-1.2	%	-2.7	%
Agricultural		116,546		134,689		134,470	-13.5	%	-13.3	%
Other loans, including overdrafts		2,383		2,489		1,601	-4.3	%	48.8	%
Total loans	$	4,367,909	$	4,452,387	$	4,528,004	-1.9	%	-3.5	%

Total loans declined during fourth quarter 2010, as compared to third quarter 2010, with the most significant decreases occurring in land acquisition and development and residential construction loans. Management attributes these decreases to a general decline in new home construction, particularly in markets that are dependent upon resort and second home communities including the Flathead, Gallatin Valley and Jackson market areas, and the movement of loans out of the loan portfolio through charge-off, pay-off or foreclosure.

LIABILITIES							Sequential		Year
(Unaudited; $ in thousands)	December 31,		September 30,		December 31,		Quarter		Over Year
	2010		2010		2009		% Change		% Change
Deposits	$	5,925,713	$	5,902,181	$	5,824,056	0.4	%	1.7	%
Securities sold under repurchase agreements		620,154		455,861		474,141	36.0	%	30.8	%
Other borrowed funds		4,991		5,674		5,423	-12.0	%	-8.0	%
Long-term debt		37,502		37,513		73,353	0.0	%	-48.9	%
Subordinated debentures held by subsidiary trusts		123,715		123,715		123,715	0.0	%	0.0	%
Other liabilities		52,093		59,554		62,531	-12.5	%	-16.7	%
Total liabilities	$	6,764,168	$	6,584,498	$	6,563,219	2.7	%	3.1	%

All outstanding repurchase agreements are with commercial and municipal depositors and are due in one day. Fluctuations in repurchase agreements are primarily due to changes in the liquidity needs of customers.

Long-term debt decreased during the year primarily due to the early extinguishment of variable rate term notes in March 2010 and, to a lesser extent, scheduled repayments of long-term Federal Home Loan Bank borrowings.

DEPOSITS							Sequential		Year
(Unaudited; $ in thousands)	December 31,		September 30,		December 31,		Quarter		Over Year
	2010		2010		2009		% Change		% Change
Non-interest bearing demand	$	1,063,869	$	1,098,375	$	1,026,584	-3.1	%	3.6	%
Interest bearing:
Demand		1,218,078		1,144,415		1,197,254	6.4	%	1.7	%
Savings		1,718,521		1,599,774		1,362,410	7.4	%	26.1	%
Time, $100 and over		908,044		981,941		996,839	-7.5	%	-8.9	%
Time, other		1,017,201		1,077,676		1,240,969	-5.6	%	-18.0	%
Total interest bearing		4,861,844		4,803,806		4,797,472	1.2	%	1.3	%
Total deposits	$	5,925,713	$	5,902,181	$	5,824,056	0.4	%	1.7	%

Increases in deposits were solely the result of organic growth. During 2010, the Company has experienced a slight shift in the mix of deposits away from higher-costing time deposits to lower-costing savings, interest bearing demand and non-interest bearing demand deposits.

STOCKHOLDERS' EQUITY							Sequential		Year
(Unaudited, $ in thousands, except per share data)	December 31,		September 30,		December 31,		Quarter		Over Year
	2010		2010		2009		% Change		% Change
Preferred stockholders' equity	$	50,000	$	50,000	$	50,000	0.0	%	0.0	%
Common stockholders' equity		677,427		671,755		509,359	0.8	%	33.0	%
Accumulated other comprehensive income, net		9,375		22,948		15,075	-59.1	%	-37.8	%
Total stockholders' equity	$	736,802	$	744,703	$	574,434	-1.1	%	28.3	%
Book value per common share	$	16.05	$	16.23	$	16.73	-1.1	%	-4.1	%
Tangible book value per common share*	$	11.55	$	11.72	$	10.53	-1.5	%	9.7	%
Net tangible book value per common share*	$	12.96	$	13.14	$	12.46	-1.4	%	4.0	%
*See Non-GAAP Financial Measures included herein for a discussion of tangible and net tangible book value per common share.

On March 29, 2010, the Company completed an IPO of 11,500,000 shares of Class A common stock. The Company received net proceeds of $153 million from the offering, after deducting underwriting discounts, commissions and other offering costs.

Decreases in book value per common share, tangible book value per common share and net tangible book value per common share during fourth quarter, as compared to third quarter 2010 and fourth quarter 2009, are due to fluctuations in the mark-to-market adjustment on available-for-sale securities.

On December 7, 2010, the Company declared a quarterly dividend to common stockholders of $0.1125 per share. This dividend was paid on January 17, 2011 to shareholders of record as of January 3, 2011.

CAPITAL RATIOS	December 31,	September 30,	December 31,
(Unaudited)	2010	2010	2009
Tangible common stockholders' equity to tangible assets*	6.76%	7.03%	4.76%
Net tangible common stockholders' equity to tangible assets*	7.59%	7.88%	5.63%
Tier 1 common capital to total risk weighted assets	10.12%	9.85%	6.43%
Leverage ratio	9.27%**	9.38%	7.30%
Tier 1 risk-based capital	13.53%**	13.22%	9.74%
Total risk-based capital	15.50%**	15.18%	11.68%
*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.

The Company exceeds “well capitalized” requirements under all regulatory capital guidelines. Significant increases in capital ratios at December 31, 2010, as compared to December 31, 2009, reflect the impact of additional capital raised from the Company’s IPO in March 2010.

Fourth Quarter 2010 Conference Call for Investors

First Interstate BancSystem, Inc. will host a conference call to discuss fourth quarter 2010 results at 11:00 a.m. Eastern Time (9:00 a.m. MST) on Friday, February 4, 2011. The conference call will be accessible by telephone and through the Internet. Participants may join the call by dialing 1-877-317-6789 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. MST) on February 4, 2011 through the end of the first quarter by dialing 1-877-344-7529 (using conference ID 447070). 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 monitoring credit quality, identifying and addressing problem loans, the Company’s level of allowance for loan losses, managing net interest margin, reducing growth of non-interest expenses, the effect of discontinuation of the TAG program on deposits, quarterly provisions for loan losses and non-performing assets. Forward-looking statements involve known and unknown risks and uncertainties that are difficult to predict. 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;
• changes in loan demand;
• adverse economic conditions affecting Montana, Wyoming and western South Dakota;
• governmental regulation and changes in regulatory, tax and accounting rules and interpretations;
• 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;
• 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 capital standards;
• inability of our bank subsidiary to pay dividends;
• change in dividend policy;
• lack of public market for our common stock;
• volatility of Class A common stock;
• voting control;
• decline in market price of Class A common stock;
• dilution as a result of future equity issuances;
• use of net proceeds;
• uninsured nature of any investment in Class A common stock;
• anti-takeover provisions;
• intent to qualify as a controlled company; and
• subordination of common stock to company debt.

A more detailed discussion of each of the foregoing risks is included in the Company’s periodic and current reports filed with the Securities and Exchange Commission and is contained in our most recently filed prospectus dated March 23, 2010, filed March 24, 2010. 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 most recently filed prospectus, which discussion in incorporated herein by reference.

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,		September 30,		December 31,
	2010		2010		2009
Assets
Cash and due from banks	$	107,035	$	124,933	$	213,029
Federal funds sold		2,114		774		11,474
Interest bearing deposits in banks		576,469		416,648		398,979
Total cash and cash equivalents		685,618		542,355		623,482
Investment securities:
Available-for-sale		1,786,335		1,692,426		1,316,429
Held-to-maturity (estimated fair values of $146,508, $141,543 and $130,855 as of December 31, 2010, September 30, 2010 and December 31, 2009, respectively)		147,068		136,998		129,851
Total investment securities		1,933,403		1,829,424		1,446,280
Loans		4,367,909		4,452,387		4,528,004
Less allowance for loan losses		120,480		120,236		103,030
Net loans		4,247,429		4,332,151		4,424,974
Premises and equipment, net		188,138		192,021		196,307
Goodwill		183,673		183,673		183,673
Company-owned life insurance		73,056		72,867		71,374
Other real estate owned		33,632		35,296		38,400
Accrued interest receivable		33,628		37,251		37,123
Deferred tax asset		18,472		-		-
Mortgage servicing rights, net of accumulated amortization and impairment reserve		13,191		14,505		17,325
Core deposit intangibles, net of accumulated amortization		8,803		9,235		10,551
Other assets		81,927		80,423		88,164
Total assets	$	7,500,970	$	7,329,201	$	7,137,653
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing	$	1,063,869	$	1,098,375	$	1,026,584
Interest bearing		4,861,844		4,803,806		4,797,472
Total deposits		5,925,713		5,902,181		5,824,056
Securities sold under repurchase agreements		620,154		455,861		474,141
Accounts payable and accrued expenses		38,915		44,313		44,946
Accrued interest payable		13,178		15,241		17,585
Other borrowed funds		4,991		5,674		5,423
Long-term debt		37,502		37,513		73,353
Subordinated debentures held by subsidiary trusts		123,715		123,715		123,715
Total liabilities		6,764,168		6,584,498		6,563,219
Stockholders' equity:
Preferred stock		50,000		50,000		50,000
Common stock		264,174		263,719		112,135
Retained earnings		413,253		408,036		397,224
Accumulated other comprehensive income, net		9,375		22,948		15,075
Total stockholders' equity		736,802		744,703		574,434
Total liabilities and stockholders' equity	$	7,500,970	$	7,329,201	$	7,137,653

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, $ in thousands, except per share data)
	Three Months ended
	December 31,			September 30,		December 31,
	2010			2010		2009
Interest income:
Interest and fees on loans	$	65,044		$	67,033	$	69,877
Interest and dividends on investment securities:
Taxable		9,665			10,540		11,327
Exempt from federal taxes		1,145			1,137		1,213
Interest on deposits in banks		360			252		228
Interest on federal funds sold		1			3		33
Total interest income		76,215			78,965		82,678
Interest expense:
Interest on deposits		11,202			12,973		16,587
Interest on securities sold under repurchase agreements		247			209		179
Interest on other borrowed funds		-			1		2
Interest on long-term debt		493			512		850
Interest on subordinated debentures held by subsidiary trusts		1,423			1,526		1,476
Total interest expense		13,365			15,221		19,094
Net interest income		62,850			63,744		63,584
Provision for loan losses		17,500			18,000		13,500
Net interest income after provision for loan losses		45,350			45,744		50,084
Non-interest income:
Other service charges, commissions and fees		7,421			7,821		7,124
Income from the origination and sale of loans		8,027			7,355		5,246
Service charges on deposit accounts		4,327			4,497		5,038
Wealth management revenues		3,083			3,091		2,894
Investment securities gains, net		62			66		11
Other income		2,591			2,025		1,897
Total non-interest income		25,511			24,855		22,210
Non-interest expense:
Salaries, wages and employee benefits		29,216			27,994		27,980
Occupancy, net		4,207			3,939		4,242
Furniture and equipment		3,326			3,411		3,389
FDIC insurance premiums		2,584			2,337		2,389
Outsourced technology services		2,377			2,402		2,279
Other real estate owned expense, net of income		1,541			2,608		318
Mortgage servicing rights amortization		1,146			1,221		1,224
Mortgage servicing rights impairment (recovery)		(2,999	)		1,991		(255	)
Core deposit intangibles amortization		432			437		531
Other expenses		12,993			11,670		13,055
Total non-interest expense		54,823			58,010		55,152
Income before income tax expense		16,038			12,589		17,142
Income tax expense		5,200			3,860		5,621
Net income		10,838			8,729		11,521
Preferred stock dividends		863			862		863
Net income available to common shareholders	$	9,975		$	7,867	$	10,658
Basic earnings per common share	$	0.23		$	0.18	$	0.34
Diluted earnings per common share	$	0.23		$	0.18	$	0.34

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, $ in thousands, except per share data)
	Twelve Months ended
	December 31,			December 31,
	2010			2009
Interest income:
Interest and fees on loans	$	266,472		$	279,985
Interest and dividends on investment securities:
Taxable		42,338			41,978
Exempt from federal taxes		4,621			5,298
Interest on deposits in banks		1,093			520
Interest on federal funds sold		22			253
Total interest income		314,546			328,034
Interest expense:
Interest on deposits		53,949			73,226
Interest on federal funds purchased		-			20
Interest on securities sold under repurchase agreements		879			776
Interest on other borrowed funds		3			1,347
Interest on long-term debt		2,433			3,249
Interest on subordinated debentures held by subsidiary trusts		5,843			6,280
Total interest expense		63,107			84,898
Net interest income		251,439			243,136
Provision for loan losses		66,900			45,300
Net interest income after provision for loan losses		184,539			197,836
Non-interest income:
Other service charges, commissions and fees		29,494			28,747
Income from the origination and sale of loans		22,868			30,928
Service charges on deposit accounts		18,181			20,323
Wealth management revenues		12,387			10,821
Investment securities gains, net		170			137
Other income		7,811			9,734
Total non-interest income		90,911			100,690
Non-interest expense:
Salaries, wages and employee benefits		112,667			113,569
Occupancy, net		16,251			15,898
Furniture and equipment		13,434			12,405
FDIC insurance premiums		10,044			12,130
Outsourced technology services		9,477			10,567
Other real estate owned expense, net of income		7,670			6,397
Mortgage servicing rights amortization		4,615			7,568
Mortgage servicing rights impairment (recovery)		(787	)		(7,224	)
Core deposit intangibles amortization		1,748			2,131
Other expenses		45,885			44,269
Total non-interest expense		221,004			217,710
Income before income tax expense		54,446			80,816
Income tax expense		17,090			26,953
Net income		37,356			53,863
Preferred stock dividends		3,422			3,422
Net income available to common shareholders	$	33,934		$	50,441
Basic earnings per common share	$	0.85		$	1.61
Diluted earnings per common share	$	0.85		$	1.59

AVERAGE BALANCE SHEETS
(Unaudited, $ in thousands)
	For the three months ended
	December 31, 2010							September 30, 2010							December 31, 2009
	Average					Average		Average					Average		Average					Average
	Balance		Interest			Rate		Balance		Interest			Rate		Balance		Interest			Rate
Interest earning assets:
Loans (1)(2)	$	4,402,141	$	65,482		5.90	%	$	4,504,657	$	67,473		5.94	%	$	4,561,237	$	70,325		6.12	%
Investment securities (2)		1,849,445		11,471		2.46			1,720,925		12,333		2.84			1,374,162		13,241		3.82
Interest bearing deposits in banks		562,277		360		0.25			392,149		252		0.25			357,974		228		0.25
Federal funds sold		1,208		1		0.33			2,299		3		0.52			42,866		33		0.31
Total interest earnings assets		6,815,071		77,314		4.50			6,620,030		80,061		4.80			6,336,239		83,827		5.25
Non-earning assets		636,062							658,680							698,022
Total assets	$	7,451,133						$	7,278,710						$	7,034,261
Interest bearing liabilities:
Demand deposits		1,183,446		878		0.29	%		1,127,006		842		0.30	%		1,103,095		755		0.27	%
Savings deposits		1,677,125		2,092		0.49			1,555,510		2,199		0.56			1,400,337		2,387		0.68
Time deposits		1,992,179		8,232		1.64			2,119,083		9,931		1.86			2,222,716		13,445		2.40
Repurchase agreements		535,543		247		0.18			464,655		209		0.18			459,029		179		0.15
Borrowings (3)		5,833		-		-			5,256		1		0.08			6,060		2		0.13
Long-term debt		37,506		493		5.21			37,658		512		5.39			76,139		850		4.43
Subordinated debentures held by subsidiary trusts		123,715		1,423		4.56			123,715		1,526		4.89			123,715		1,476		4.73
Total interest bearing liabilities		5,555,347		13,365		0.95			5,432,883		15,220		1.11			5,391,091		19,094		1.41
Non-interest bearing deposits		1,095,947							1,046,112							1,004,191
Other non-interest bearing liabilities		53,094							59,515							65,001
Stockholders' equity		746,745							740,200							573,978
Total liabilities and stockholders' equity	$	7,451,133						$	7,278,710						$	7,034,261
Net FTE interest income			$	63,949						$	64,841						$	64,733
Less FTE adjustments (2)				(1,099	)						(1,097	)						(1,149	)
Net interest income from consolidated statements of income			$	62,850						$	63,744						$	63,584
Interest rate spread						3.55	%						3.69	%						3.84	%
Net FTE interest margin (4)						3.72	%						3.89	%						4.05	%
(1) Average loan balances include nonaccrual 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) Includes interest on federal funds purchased and other borrowed funds. Excludes long-term debt.
(4) Net FTE interest margin during the period equals the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

AVERAGE BALANCE SHEETS
(Unaudited, $ in thousands)
	For the twelve months ended December 31,
	2010							2009
	Average					Average		Average					Average
	Balance		Interest			Rate		Balance		Interest			Rate
Interest earning assets:
Loans (1)(2)	$	4,482,219	$	268,279		5.99	%	$	4,660,189	$	281,799		6.05	%
Investment securities		1,663,211		49,626		2.98			1,152,561		50,335		4.37
Interest bearing deposits in banks		429,657		1,093		0.25			199,316		520		0.26
Federal funds sold		6,238		22		0.35			105,423		253		0.24
Total interest earnings assets		6,581,325		319,020		4.85			6,117,489		332,907		5.44
Non-earning assets		665,012							687,110
Total assets	$	7,246,337						$	6,804,599
Interest bearing liabilities:
Demand deposits		1,135,208		3,430		0.30	%		1,083,054		4,068		0.38	%
Savings deposits		1,530,844		8,934		0.58			1,321,625		10,033		0.76
Time deposits		2,143,899		41,585		1.94			2,129,313		59,125		2.78
Repurchase agreements		480,276		879		0.18			422,713		776		0.18
Borrowings (3)		5,779		3		0.05			57,016		1,367		2.40
Long-term debt		46,024		2,433		5.29			79,812		3,249		4.07
Subordinated debentures held by subsidiary trusts		123,715		5,843		4.72			123,715		6,280		5.08
Total interest bearing liabilities		5,465,745		63,107		1.15			5,217,248		84,898		1.63
Non-interest bearing deposits		1,021,409							965,226
Other non-interest bearing liabilities		58,778							66,862
Stockholders' equity		700,405							555,263
Total liabilities and stockholders' equity	$	7,246,337						$	6,804,599
Net FTE interest income			$	255,913						$	248,009
Less FTE adjustments (2)				(4,474	)						(4,873	)
Net interest income from consolidated statements of income			$	251,439						$	243,136
Interest rate spread						3.70	%						3.81	%
Net FTE interest margin (4)						3.89	%						4.05	%
(1) Average loan balances include nonaccrual 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) Includes interest on federal funds purchased and other borrowed funds. Excludes long-term debt.
(4) Net FTE interest margin during the period equals the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

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 and (iv) net tangible common stockholders’ equity to tangible assets.

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, 2010 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.

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	December 31,			September 30,			December 31,
(Unaudited; $ in thousands except share and per share data)	2010			2010			2009
Total stockholders' equity (GAAP)	$	736,802		$	744,703		$	574,434
Less goodwill and other intangible assets (excluding mortgage servicing rights)		192,518			192,952			194,273
Less preferred stock		50,000			50,000			50,000
Tangible common stockholders' equity (Non-GAAP)	$	494,284		$	501,751		$	330,161
Add deferred tax liability for deductible goodwill		60,499			60,499			60,499
Net tangible common stockholders' equity (Non-GAAP)	$	554,783		$	562,250		$	390,660
Common shares outstanding		42,800,694			42,798,040			31,349,588
Book value per common share	$	16.05		$	16.23		$	16.73
Tangible book value per common share	$	11.55		$	11.72		$	10.53
Net tangible book value per common share	$	12.96		$	13.14		$	12.46
Total assets (GAAP)	$	7,500,970		$	7,329,201		$	7,137,653
Less goodwill and other intangible assets (excluding mortgage servicing rights)		192,518			192,952			194,273
Tangible assets (Non-GAAP)	$	7,308,452		$	7,136,249		$	6,943,380
Tangible common stockholders' equity to tangible assets		6.76	%		7.03	%		4.76	%
Net tangible common stockholders' equity to tangible assets		7.59	%		7.88	%		5.63	%