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First Interstate BancSystem, Inc. Reports First Quarter 2012 Results

The net interest margin ratio remained stable at 3.72% for the three months ended March 31, 2012, as compared to 3.73% during the same period in 2011. Lower yields earned on the Company's loan and investment portfolios and lower outstanding loan balances during the three months ended March 31, 2012, as compared to the same period in 2011, were offset by a 22 basis point reduction in the cost of interest bearing liabilities.

Non-interest Income

Non-interest income decreased during first quarter 2012, as compared to fourth quarter 2011, primarily due to decreases in net gains on the sale of investment securities, which were partially offset by increases in the market values of securities held under deferred compensation plans. During fourth quarter 2011, investment security gains included the recognition of $1.4 million of unamortized discounts on investment securities called by the issuing agencies.

Non-interest income increased during first quarter 2012, as compared to the same period in the prior year, primarily due to increases in income from the origination and sale of residential mortgage loans. Low mortgage interest rates continued to spur refinancing activity in the Company's market areas, which accounted for approximately 71% of the Company's residential real estate loan originations during first quarter 2012, as compared to 68% during fourth quarter 2011 and 56% during first quarter 2011.

NON-INTEREST EXPENSE

             

(Unaudited; $ in thousands)

Three Months Ended

SequentialQuarter% Change

Year OverYear% Change

        March 31,2012     December 31,2011     March 31,2011            
Non-interest expense:        
Salaries and wages $ 21,564 $ 22,002 $ 20,203

-2.0

%

6.7 %
Employee benefits 8,966 6,871 7,499 30.5 % 19.6 %
Occupancy, net 3,988 3,815 4,215 4.5 %

-5.4

%

Furniture and equipment 3,138 3,195 3,220

-1.8

%

-2.5

%

Outsourced technology services 2,266 2,245 2,241 0.9 % 1.1 %
Other real estate owned ("OREO") expense, net of income 1,105 2,021 1,711

-45.3

%

-35.4

%

FDIC insurance premiums 1,595 1,607 2,466

-0.7

%

-35.3

%

Mortgage servicing rights amortization 895 940 807

-4.8

%

10.9 %
Mortgage servicing rights impairment (recovery) (868 ) 427 (347 )

-303.3

%

-150.1

%

Core deposit intangibles amortization 355 361 362

-1.7

%

-1.9

%

Other expenses       14,436       12,737       10,581       13.3 %     36.4 %
Total non-interest expense       $ 57,440       $ 56,221       $ 52,958       2.2 %     8.5 %
 

Employee benefits expense increased during first quarter 2012, as compared to fourth quarter 2011, primarily due to higher payroll tax expense and increases in the market values of securities held under deferred compensation plans. Employee benefits expense increased during first quarter 2012, as compared to first quarter 2011, primarily due to increases in group health insurance costs, higher stock-based compensation expense and increases in the market values of securities held under deferred compensation plans.

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