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): February 18, 2004

FIRST INTERSTATE BANCSYSTEM, INC.

(Exact name of registrant as specified in its charter)

Montana	000-49733	81-0331430
(State or other jurisdiction of	(Commission	(IRS Employer
incorporation or organization)	File No.)	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)

TABLE OF CONTENTS

	Item 1. Changes in Control of Registrant.
	Item 2. Acquisition or Disposition of Assets.
	Item 3. Bankruptcy or Receivership.
	Item 4. Changes in Registrant’s Certifying Accountant.
	Item 5. Other Events.
	Item 6. Resignations of Registrant’s Directors.
	Item 7. Financial Statements and Exhibits.
	Item 8. Change in Fiscal Year.
	Item 9. Regulation FD Disclosure.
	Item 10. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.
	Item 11. Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans.
	Item 12. Results of Operations and Financial Condition.
SIGNATURES
Fourth Quarter 2003 Shareholders' Letter

Item 1. Changes in Control of Registrant.

     Not Applicable.

Item 2. Acquisition or Disposition of Assets.

     Not Applicable.

Item 3. Bankruptcy or Receivership.

     Not Applicable.

Item 4. Changes in Registrant’s Certifying Accountant.

     Not Applicable.

Item 5. Other Events.

     Not Applicable.

Item 6. Resignations of Registrant’s Directors.

     Not Applicable.

Item 7. Financial Statements and Exhibits.

     (a) Not Applicable.

     (b) Not Applicable.

     (c) Exhibit 99 — Fourth Quarter 2003 Shareholders’ Letter

Item 8. Change in Fiscal Year.

     Not Applicable.

Item 9. Regulation FD Disclosure.

     The information furnished under Item 12 is also being furnished under this Item 9.

Item 10. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

     Not Applicable.

Item 11. Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans.

     Not Applicable.

Item 12. Results of Operations and Financial Condition.

On February 18, 2004, First Interstate BancSystem, Inc. (the “Registrant”) issued its fourth quarter 2003 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 (Unaudited),” 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.

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: February 18, 2004

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

EX-99

First Interstate BancSystem
Fourth Quarter 2003

To our shareholders,

We are pleased to announce First Interstate BancSystem has achieved record earnings for the 15th consecutive year. The company earned $40,752,000 in 2003, an 18% increase over last year’s earnings of $34,494,000. Diluted earnings per share were also a record $5.15, up $.74 from last year. 2003 return on average common equity was 15.79%, compared to 14.86% in 2002. Our efficiency ratio also improved to 65.43%, down from 68.01% in 2002.

A couple key factors contributed to our record results. First, residential real estate loan volume was very strong. Revenue from residential real estate loans generated and sold on the secondary market was $15,340,000 in 2003, a $6,151,000 increase over 2002 revenue. Second, our net interest income increased $4,797,000 from 2002 levels. This increase was due to strong loan and deposit growth. Since December 31, 2002, loans grew $318,349,000 or 14%, while deposits grew $244,874,000 or 8%. Excluding the impact of our Red Lodge acquisition our loans and deposits were up 13% and 7% respectively. The impact the balance sheet growth had on net interest income was partially offset by the decline in net interest margin from 4.66% in 2002 to 4.37% in 2003. The margin decline is largely due to the effect of continued low interest rates that occurred in the last half of 2002. Our earning assets repriced at lower yields, while we had limited ability to reprice deposits rates down any further.

Fourth Quarter

Earnings of $9,850,000 in the fourth quarter were the highest fourth quarter results in company history. Earnings were $1,252,000 or 15% higher than fourth quarter 2002. Earnings per common share of $1.24 were up $.14 from last year. Return on average common equity of 14.48% was up 26 basis points from the comparable quarter last year. The efficiency ratio was 67.67%, a 51 basis point improvement over 2002.

Compared with fourth quarter of 2002, net interest income increased $3,671,000, primarily as the result of balance sheet growth. Average loans grew $331,635,000 or 15%, while average deposits grew $227,540,000, or 8%. In addition, our net interest margin improved four basis points over fourth quarter 2002.

Financial Highlights
Three Months ended December 31

in thousands except per share data	2003		2002		% Change
(unaudited)
OPERATING RESULTS
Net income	$	9,850	$	8,598		14.6	%
Diluted earnings per share		1.24		1.10		12.7	%
Dividends per share		0.34		0.32		6.3	%
PERIOD END BALANCES
Assets		3,879,744		3,558,968		9.0	%
Loans		2,554,899		2,236,550		14.2	%
Investment Securities		799,587		799,292		0.0	%
Deposits		3,156,721		2,911,847		8.4	%
Common Stockholders’ Equity		274,226		243,854		12.5	%
Common Shares Outstanding		7,913		7,800		1.4	%
QUARTERLY AVERAGES
Assets		3,869,925		3,536,343		9.4	%
Loans		2,548,727		2,217,092		15.0	%
Investment Securities		793,005		751,287		5.6	%
Deposits		3,131,605		2,904,065		7.8	%
Common Stockholders’ Equity		269,955		239,850		12.6	%
Common Shares Outstanding		7,913		7,857		0.7	%

Non-interest expenses increased $2,594,000 or 8% over fourth quarter 2002. Salary and benefits accounted for $1,606,000 of this increase. In addition, we recorded a $400,000 estimated loss related to one of our banking facilities.

In January 2004, the company paid a $.34 dividend per common share. We are pleased to announce the company has increased the dividend to $.40 per common share effective April, 2004.

Thank you to our team of talented employees, directors, and officers for the achievement of another record earning year. As expected, we have already seen a decline in residential real estate activity. We are committed to our vision to “be the best.” Our number one strategic focus is improving our efficiency with many initiatives underway for improvement in processes and revenue enhancements.

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

Fourth Quarter 2003

Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)

	Three Months Ended				Twelve Months Ended
	December 31				December 31
	2003		2002		2003		2002
Total interest income	$	47,543	$	48,631	$	189,258	$	201,306
Total interest expense		10,822		15,581		48,614		65,459
Net interest income		36,721		33,050		140,644		135,847
Provision for loan losses		2,430		2,452		9,852		9,191
Net interest income after provision for loan losses		34,291		30,598		130,792		126,656
Noninterest income		16,625		16,092		70,152		60,901
Noninterest expense		36,099		33,505		137,925		133,816
Income before taxes		14,817		13,185		63,019		53,741
Income taxes		4,967		4,587		22,267		19,247
Net income	$	9,850	$	8,598	$	40,752	$	34,494
COMMON SHARE DATA:
Diluted EPS		1.24		1.10		5.15		4.41
Dividends		0.34		0.32		1.32		1.29
Book value						34.66		31.26
Tangible book value						29.47		26.47
Appraised value						*		46.00

* Currently not available, $49.50 as of September 30, 2003

Selected Ratios (Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31						December 31
	2003			2002			2003			2002
PERFORMANCE
Return on avg common equity		14.48	%		14.22	%		15.79	%		14.86	%
Return on avg common equity excl. market adj of securities		14.41	%		14.42	%		15.87	%		15.14	%
Return on avg assets		1.01	%		0.96	%		1.09	%		1.03	%
Net interest margin, FTE		4.34	%		4.30	%		4.37	%		4.66	%
Efficiency ratio		67.67	%		68.18	%		65.43	%		68.01	%
CREDIT QUALITY (Period End)
Provision for loan losses to average loans								0.40	%		0.42	%
Net charge offs to average loans								0.31	%		0.32	%
Allowance for loan losses to loans								1.52	%		1.62	%
Allowance for loan losses to non-accruing loans								160.60	%		126.89	%
CAPITAL ADEQUACY & LIQUIDITY
Leverage capital ratio								7.13	%		6.90	%
Avg loans to avg deposits								81.24	%		79.27	%

Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)

	12/31/2003		12/31/2002
ASSETS
Cash and due from banks	$	210,378	$	234,187
Federal funds sold		66,455		50,890
Interest bearing deposits		458		25,815
Investment securities		799,587		799,292
Loans		2,554,899		2,236,550
Less: allowance for loan losses		38,940		36,309
Net loans		2,515,959		2,200,241
Premises & equipment, net		112,441		92,907
Accrued interest receivable		19,411		20,702
Goodwill and core deposit intangibles		41,064		37,427
Other real estate owned, net		1,999		458
Other assets		111,992		97,049
Total Assets	$	3,879,744	$	3,558,968
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	3,156,721	$	2,911,847
Fed funds purchased		0		0
Securities sold under repurchase agreements		323,406		300,234
Other liabilities		29,426		31,418
Other borrowed funds		7,137		7,970
Long-term debt		47,590		23,645
Subordinated debentures and trust preferred securities		41,238		40,000
Total Liabilities		3,605,518		3,315,114
Common stockholders’ equity		274,226		243,854
Total Liabilities and Stockholders’ Equity	$	3,879,744	$	3,558,968

Earnings Per Common Share
Diluted

First Interstate BancSystem

P.O. Box 30918 • Billings, Montana 59116 • (406) 255-5390
www.firstinterstatebank.com