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, 2004

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)

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
Second Quarter 2004 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 – Second Quarter 2004 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 July 27, 2004, First Interstate BancSystem, Inc. (the “Registrant”) issued its second quarter 2004 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: July 27, 2004

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

EX-99

First InterstateBancSystem
Reaching New Heights

To our shareholders,

We are excited to announce First Interstate BancSystem’s second quarter 2004 results. First, we achieved record quarterly earnings of $12,572,000, up $2,337,000, or 23%, from second quarter 2003. Second, our total assets exceeded $4 billion for the first time in Company history. Earnings per diluted share were $1.58 in second quarter 2004 compared to $1.30 second quarter last year, return on average equity (ROAE) 17.52% versus 16.40%, return on average assets (ROAA) 1.28% versus 1.12%, and efficiency ratio 59.46% versus 65.58%.

The quarterly results were positively impacted by the reversal of previous impairments of mortgage servicing rights (MSR), partially offset by related losses on the sale of investment securities. These two items had the net effect of increasing after tax income by $833,000. Excluding this amount, adjusted key numbers for the second quarter 2004 were ROAE of 16.37%, ROAA of 1.20%, and efficiency ratio of 62.49%.

Net interest income of $37,053,000 in second quarter 2004 was $1,386,000 more than the same period last year. Strong balance sheet growth drove the increased income in spite of net interest margin of 4.36% having declined 16 basis points. Quarterly average loans grew $218,068,000, or 9%; quarterly average deposits grew $212,049,000, or 7%. The net interest margin declined 4 basis points from first quarter 2004.

Non-interest income of $17,269,000 was $1,175,000 or 6% lower than second quarter 2003. Due to increased residential interest rates, residential real es- tate revenue decreased $2,334,000 or 50%. In the most recent quarter, we sold investment securities resulting in $740,000 of losses as a partial hedge to the MSR impairment reversal. In second quarter 2003, we recorded security gains of $33,000. Excluding the impact of investment security sale gains and losses, non-interest income declined $402,000 or 2%.

Non-interest expense was $3,182,000, or 9%, lower than the comparable quarter in 2003. In second quarter 2004, we recorded a reversal of previous MSR impairment of $2,106,000 compared to $335,000 impairment expense for the second quarter in 2003. Also, in second quarter 2003, we wrote off $1,936,000 of trust preferred securities issuance costs, as a result of replacing $40,000,000 of fixed rate trust preferred securities with variable rate securities of the same amount. Excluding the mortgage servicing impairment and the trust preferred issuance cost write off, non-interest expense increased $1,195,000, or 4%.

Year to date net income of $22,290,000 exceeded the first six months of 2003 by $3,218,000 or 17%. Fully diluted earnings per share were $2.80, compared to $2.42 for the same period last year. Net interest in-

come was up $5,079,000 due to strong loan and deposit growth. Non-interest revenue was down $2,340,000, the result of a $4,602,000, or 53%, decrease in residential real estate revenue. Non-interest expense was down $2,040,000 due to a $3,824,000 reduction in MSR impairment expense and the $1,936,000 trust preferred issuance cost write off in 2003.

Dividends of $.40 per share were paid on July 12th.

We are extremely pleased with our financial results this past quarter. Thanks to our talented team of employees, officers, and managers we were able to establish new records in earnings and asset size. Of equal gratification is the improvement we saw in our efficiency, which remains our primary strategic focus.

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

Financial Highlights
Three Months ended June 30

(unaudited)	2004		2003		% Change
(in thousands except per share data)
OPERATING RESULTS
Net income	$	12,572	$	10,235		22.8	%
Diluted earnings per share		1.58		1.30		21.5	%
Dividends per share		0.40		0.32		25.0	%
PERIOD END BALANCES
Assets		4,002,056		3,740,286		7.0	%
Loans		2,660,375		2,464,953		7.9	%
Investment Securities		789,091		812,152		-2.8	%
Deposits		3,228,765		3,039,482		6.2	%
Common Stockholders’ Equity		281,715		258,688		8.9	%
Common Shares Outstanding		7,896		7,852		0.6	%
QUARTERLY AVERAGES
Assets		3,951,500		3,657,364		8.0	%
Loans		2,618,223		2,400,155		9.1	%
Investment Securities		841,359		797,561		5.5	%
Deposits		3,166,462		2,954,413		7.2	%
Common Stockholders’ Equity		288,586		250,293		15.3	%
Common Shares Outstanding		7,891		7,861		0.4	%

Second Quarter 2004

Second Quarter 2004

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

	Three Months Ended				Six Months Ended
	June 30				June 30
	2004		2003		2004		2003
Total interest income	$	47,046	$	48,176	$	93,613	$	94,860
Total interest expense		9,993		12,509		20,077		26,403
Net interest income		37,053		35,667		73,536		68,457
Provision for loan losses		2,541		2,570		4,959		5,000
Net interest income after provision for loan losses		34,512		33,097		68,577		63,457
Noninterest income		17,269		18,444		33,896		36,236
Noninterest expense		32,302		35,484		68,016		70,056
Income before taxes		19,479		16,057		34,457		29,637
Income taxes		6,907		5,822		12,167		10,565
Net income	$	12,572	$	10,235	$	22,290	$	19,072
COMMON SHARE DATA:
Diluted EPS		1.58		1.30		2.80		2.42
Dividends		0.40		0.32		0.74		0.66
Book value						35.72		32.94
Tangible book value						30.95		28.15
Appraised value						*		47.00

* Currently not available, $52.50 as of March 31, 2004.

Selected Ratios (Unaudited)

	Three Months Ended						Six Months Ended
	June 30						June 30
	2004			2003			2004			2003
PERFORMANCE
Return on avg common equity		17.52	%		16.40	%		15.88	%		15.39	%
Return on avg common equity
excl. market adj of securities		17.79	%		16.38	%		15.95	%		15.51	%
Return on avg assets		1.28	%		1.12	%		1.15	%		1.06	%
Net interest margin, FTE		4.36	%		4.52	%		4.38	%		4.43	%
Efficiency ratio		59.46	%		65.58	%		63.31	%		66.92	%
CREDIT QUALITY (Period End)
Provision for loan losses to average loans								0.39	%		0.43	%
Net charge offs to average loans								0.21	%		0.29	%
Allowance for loan losses to loans								1.55	%		1.55	%
Allowance for loan losses to non-accruing loans								189.76	%		149.47	%
CAPITAL ADEQUACY & LIQUIDITY
Leverage capital ratio								7.29	%		7.07	%
Avg loans to avg deposits								82.52	%		80.28	%

Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)

	June 30
	2004		2003
ASSETS
Cash and due from banks	$	251,229	$	228,278
Federal funds sold		41,040		6,765
Interest bearing deposits		3,879		741
Investment securities		789,091		812,152
Loans		2,660,375		2,464,953
Less: allowance for loan losses		41,174		38,287
Net loans		2,619,201		2,426,666
Premises & equipment, net		117,495		105,080
Accrued interest receivable		20,535		20,869
Goodwill and core deposit intangibles		40,497		41,674
Other real estate owned, net		1,724		1,109
Other assets		117,365		96,952
Total Assets	$	4,002,056	$	3,740,286
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	3,228,765	$	3,039,482
Securities sold under repurchase agreements		366,358		304,818
Other liabilities		32,717		36,889
Other borrowed funds		8,266		7,998
Long — term debt		42,997		52,411
Subordinated debenture and trust preferred securities		41,238		40,000
Total Liabilities		3,720,341		3,481,598
Common stockholders’ equity		281,715		258,688
Total Liabilities and Stockholders’ Equity	$	4,002,056	$	3,740,286

Navigating our course

First Interstate BancSystem

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