Acquisitions

Absarokee Bancorporation, Inc. 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 $7,234. Immediately subsequent to the acquisition, United Bank was merged with and into the Company's existing bank subsidiary, First Interstate Bank ("FIB"). As of the date of the acquisition, Absarokee had total assets of $73,460, loans of $37,520 and deposits of $63,565.

The assets and liabilities of Absarokee were recorded in the Company's consolidated financial statements at their estimated fair values as of the acquisition date. The excess value of the consideration paid over the fair value of assets acquired and liabilities assumed is recorded as goodwill.

The following table summarizes the consideration paid, fair values of the Absarokee assets acquired and liabilities assumed and the resulting goodwill. All amounts reported are provisional pending completion of management review.



	As Recorded			Fair Value				As Recorded
As of July 24, 2015	by Absarokee			Adjustments				by the Company

Assets acquired:
Cash and cash equivalents	$	5,598		$	—			$	5,598
Investment securities	27,574			—				27,574
Loans	37,520			(876		)	(1)	36,644
Allowance for loan losses	(899		)	899			(2)	—
Premises and equipment	2,851			277			(3)	3,128
Core deposit intangible assets	—			695			(4)	695
Other assets	816			82			(5)	898
Total assets acquired	73,460			1,077				74,537
Liabilities assumed:
Deposits	63,565			—				63,565
Repurchase agreements	2,000			—				2,000
Long term debt	1,222			31			(6)	1,253
Other liabilities	79			440			(7)	519
Total liabilities assumed	66,866			471				67,337
Net assets acquired	$	6,594		$	606			7,200
Cash consideration paid								7,234
Goodwill								$	34



Explanation of fair value adjustments:
(1)	Write down of the book value of loans to their estimated fair values. The fair value of loans was estimated using cash flow projections based on the remaining maturity and repricing terms, adjusted for estimated future credit losses and prepayments and discounted to present value using a risk-adjusted market rate for similar loans.
(2)	Adjustment to remove the Absarokee allowance for loan losses at acquisition date as the credit risk is accounted for in the fair value adjustment for loans receivable described in (1) above.
(3)	Write up of the book value of premises and equipment to their estimated fair values based upon fair value estimates developed internally based upon comparable in-market transactions.
(4)	Adjustment represents the value of the core deposit base assumed in the acquisition based upon an internal valuation based on analysis of recent acquisitions.
(5)	Adjustment consists of a reduction in the value of accrued interest receivable, the write-off of pre-existing goodwill and recording the value of mortgage servicing assets acquired.
(6)	Adjustment represents increase in the book value of a Federal Home Loan Bank borrowing to its estimated fair market value based upon interest interest rates of similar advances with similar characteristics on the date of acquisition.
(7)	Adjustment represents the net deferred tax liability resulting from fair value adjustments related to acquired assets, assumed liabilities, core deposit intangible assets and other purchase accounting adjustments.

The core deposit intangible asset of $695 is being amortized using an accelerated method over the estimated useful lives of the related deposits of ten years.

Mountain West Financial Corp. On July 31, 2014, the Company acquired all of the outstanding stock of Mountain West Financial Corp ("MWFC"), a Montana-based bank holding company operating one subsidiary bank, Mountain West Bank, NA ("MWB"). MWB was merged with and into FIB in October 2014. During March 2015, the Company completed its review of MWFC tax items and finalized the fair value of acquired deferred tax assets. Finalization of provisional estimates resulted in a $1,199 decrease in goodwill.

The Company recorded third party acquisition-related costs of $566 and $1,052 during the three months ended September 30, 2015 and 2014, respectively. The Company recorded third party acquisition-related costs of $629 and $1,649 during the nine months ended September 30, 2015 and 2014, respectively. These costs are included in acquisition expenses in the Company's consolidated statements of income.