8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): July 27, 2005

FIRST INTERSTATE BANCSYSTEM, INC.

(Exact name of registrant as specified in its charter)

Montana	000-49733	81-0331430
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(IRS Employer Identification No.)
401 North 31st Street, Billings, MT 59116
(Address of principal executive offices, including zip code)
(406) 255-5390
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

2nd Quarter 2005 Shareholders' Letter

Item 2.02  Results of Operations and Financial Condition.

On July 27, 2005, First Interstate BancSystem, Inc. (the “Registrant”) issued its second quarter 2005 performance report and shareholders’ letter (the “Shareholders’ Letter”) to holders of common stock of the Company as of that date.

Certain statements contained in the Shareholders’ Letter constitute “forward-looking statements” that involve risk and uncertainties. The Registrant desires to caution readers that the following factors, among others, may cause the actual results, performance or achievements of the Registrant to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions in those areas in which the Registrant operates, credit quality, demographic changes, competition, fluctuations in interest rates, changes in business strategy or development plans and changes in governmental regulations. These and other risk factors are set forth in the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The Shareholders’ Letter is attached as Exhibit 99 to this Current Report on
Form 8-K.

In the Shareholders’ Letter under the heading “Selected Ratios,” the Registrant included the ratio “Return on average common equity excluding market adjustment of securities,” which constitutes a non-GAAP financial measure (the “non-GAAP ratio”). The most directly comparable financial measure presented in accordance with GAAP is the ratio “Return on average common equity” which appears immediately prior to the non-GAAP ratio. A reconciliation between the two ratios is derived by including mark-to-market adjustment of securities as required under GAAP. The Registrant’s management believes the presentation of the non-GAAP ratio provides useful information to investors because the ratio does not take into account the mark-to-market adjustment of only a portion of the Company’s balance sheet.

Item 7.01   Regulation FD Disclosure.

The information furnished under Item 2.02 is also being furnished under this Item 7.01.

Item 9.01   Financial Statements and Exhibits.

(c) Exhibit 99 — Second Quarter 2005 Shareholders’ Letter

SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 27, 2005

FIRST INTERSTATE BANCSYSTEM, INC.
By:	/s/ LYLE R. KNIGHT
	Lyle R. Knight
	President and Chief Executive Officer

EX-99

EXHIBIT 99

To our shareholders,

We are pleased to report record quarterly net income in the second quarter of $12,880,000, or $1.59 per diluted share, compared to $12,572,000, or $1.58 per diluted share, in second quarter 2004. Return on average equity was 16.51% in second quarter 2005 compared to 17.52% in second quarter 2004, return on average assets was 1.22% versus 1.28%, and efficiency ratio was 64.11% versus 59.35%.

Quarterly Results

Net interest income of $40,872,000 in second quarter 2005 was $3,819,000 more than second quarter 2004. The net interest margin of 4.41% increased 5 basis points over the same period last year. Compared to first quarter 2005, net interest margin increased 2 basis points. Second quarter 2005 average loans grew $212,139,000, or 8%, while quarterly average deposits grew $127,648,000, or 4%, over the same period last year. Improved credit quality also contributed to the earnings growth in second quarter 2005. With improving loan quality, the provision for loan loss of $1,365,000 was $1,176,000, or 46%, lower than second quarter 2004.

Noninterest income of $17,840,000 was $571,000, or 3%, higher than second quarter 2004. The increase was driven by debit card income and technology services revenue increases of $355,000 and $245,000, respectively. Second quarter 2005 noninterest income included a $446,000 loss on the sale of approximately $40,000,000 of U.S. agency securities which were replaced with higher yielding securities. Excluding the loss on securities, nonin-terest income increased 6% from second quarter 2004.

Noninterest expense of $37,643,000 was $5,341,000, or 17%, higher than the comparable quarter in 2004. The increase can be attributed to increases in salary and benefits of $1,498,000 and furniture, equipment and occupancy of $993,000. Additionally, in second quarter 2005, we recorded a $150,000 mortgage servicing impairment compared to a $2,106,000 impairment reversal for the second quarter of 2004. Without the effect of mortgage servicing impairment, noninterest expense would have been $3,085,000 or 9% higher than last year.

Last quarter we announced our strategic decision to exit Wal-Mart locations. Expenses of $364,000, in addition to $533,000 recognized in the first quarter, were recognized directly as a result of preparing to close these locations. On June 30, 2005, we discontinued operation of five of the nine Wal-Mart locations. The remaining four Wal-Mart locations are expected to be closed within the next year.

On July 8, 2005, the Company paid a $.48 dividend per common share.

Year to Date

On a year to date basis, net income of $24,839,000, or $3.06 per diluted share, was $2,549,000, or 11.4%, higher than net income in the first two quarters of 2004 of $22,290,000, or $2.80 per diluted share. Return on average equity was 16.03% in the first two quarters of June 2005 compared to 15.88% last year, return on average assets was 1.19% versus 1.15%, and efficiency ratio was 64.39% versus 63.21%.

When comparing the year to date performance of 2005 to 2004, there are some significant items that affect comparability. One such item is a decrease in the expense for provision for loan losses. Due to improving credit quality, the provision for loan losses in 2005 is $2,990,000 as compared to the 2004 provision expense of $4,959,000, a difference of $1,969,000. Also, in 2005 we recorded

impairment reversal income of $313,000 related to our mortgage servicing rights, as compared to 2004 when we recorded income from the reversal of a previous impairment of $1,076,000. Additional expenses related to the closure of Wal-Mart branches total $897,000 in the first two quarters of 2005.

We have made good progress towards improving the Company’s return on assets, and although the numbers do not yet reflect it, good progress towards improving the efficiency of the Company. Excluding the losses on the sale of investments and costs of closing the Wal-Mart locations and considering new processes and systems becoming fully functional, there are positive signs of improvement. We, however, remain focused on becoming a more productive and competitive company over the next several quarters.

We continue to be led by our community banking strategy as well as our Company values. Our employees’, officers’ and advisory directors’ commitment to our goals has produced another record in quarterly earnings. Thank you.

Lyle R. Knight	Terrill R. Moore
President	Chief Financial Officer
Chief Executive Officer

Financial Highlights
Three Months ended June 30

(unaudited)	2005		2004		% Change
(in thousands except per share data)
OPERATING RESULTS
Net income	$	12,880	$	12,572		2.5	%
Diluted earnings per share		1.59		1.58		0.6	%
Dividends per share		0.48		0.40		20	%
PERIOD END BALANCES
Assets		4,277,610		4,002,056		6.9	%
Loans		2,891,674		2,660,375		8.7	%
Investment Securities		895,456		791,412		13.1	%
Deposits		3,310,372		3,228,765		2.5	%
Common Stockholders’ Equity		326,120		281,714		15.8	%
Common Shares Outstanding		7,981		7,887		1.2	%
QUARTERLY AVERAGES
Assets		4,250,589		3,951,500		7.6	%
Loans		2,830,362		2,618,223		8.1	%
Investment Securities		864,639		841,359		2.8	%
Deposits		3,294,110		3,166,462		4.0	%
Common Stockholders’ Equity		312,917		288,586		8.4	%
Common Shares Outstanding		7,964		7,891		1.0	%

Second Quarter 2005

Second Quarter 2005

Condensed Consolidated Statements of Income

	Three Months Ended				Six Months Ended
	June 30				June 30
(unaudited)	2005		2004		2005		2004
(in thousands, except per share data)
Total interest income	$	55,544	$	47,046	$	107,511	$	93,613
Total interest expense		14,672		9,993		27,306		20,077
Net interest income		40,872		37,053		80,205		73,536
Provision for loan losses		1,365		2,541		2,990		4,959
Net interest income after provision for loan losses		39,507		34,512		77,215		68,577
Noninterest income		17,840		17,269		34,789		33,751
Noninterest expense		37,643		32,302		74,039		67,871
Income before taxes		19,704		19,479		37,965		34,457
Income taxes		6,824		6,907		13,126		12,167
Net income	$	12,880	$	12,572	$	24,839	$	22,290
COMMON SHARE DATA:
Diluted EPS		1.59		1.58		3.06		2.80
Dividends		0.48		0.40		.90		.74
Book value						40.86		35.72
Tangible book value						36.18		30.95
Appraised value						*		54.50

*Currently not available, $63.50 as of March 31, 2005

Selected Ratios

	Three Months Ended						Six Months Ended
	June 30						June 30
(unaudited)	2005			2004			2005			2004
PERFORMANCE
Return on avg common equity		16.51	%		17.52	%		16.03	%		15.88	%
Return on avg common equity excl. market adj of securities		16.02	%		17.79	%		15.73	%		15.95	%
Return on avg assets		1.22	%		1.28	%		1.19	%		1.15	%
Net interest margin, FTE		4.41	%		4.36	%		4.40	%		4.38	%
Efficiency ratio		64.11	%		59.35	%		64.39	%		63.21	%
CREDIT QUALITY (Period End)
Annualized provision for loan losses to average loans								0.22	%		0.39	%
Annualized net charge offs to average loans								0.13	%		0.21	%
Allowance for loan losses to loans								1.50	%		1.55	%
Allowance for loan losses to non-accruing loans								223.04	%		189.76	%
CAPITAL ADEQUACY & LIQUIDITY
Leverage capital ratio								7.69	%		7.29	%
Avg loans to avg deposits								85.12	%		82.52	%

Condensed Consolidated Balance Sheet

	June 30
(unaudited)	2005		2004
(In thousands)
ASSETS
Cash and due from banks	$	199,645	$	256,809
Federal funds sold		32,000		41,040
Interest bearing deposits		4,136		3,879
Investment securities		895,456		791,412
Loans		2,891,674		2,660,375
Less: allowance for loan losses		43,368		41,174
Net loans		2,848,306		2,619,201
Premises & equipment, net		118,157		117,495
Accrued interest receivable		23,944		20,535
Goodwill and core deposit intangibles		39,100		40,497
Mortgage servicing rights		18,473		16,978
Bank owned life insurance		61,473		59,549
Other assets		36,920		34,661
Total Assets	$	4,277,610	$	4,002,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	3,310,372	$	3,228,765
Securities sold under repurchase agreements		499,404		366,358
Other liabilities		33,228		32,718
Other borrowed funds		7,568		8,266
Long — term debt		59,680		42,997
Subordinated debenture		41,238		41,238
Total Liabilities		3,951,490		3,720,342
Common stockholders’ equity		326,120		281,714
Total Liabilities and Stockholders’ Equity	$	4,277,610	$	4,002,056