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): April 25, 2007

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 31^st 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

First Quarter 2007 Shareholders' Letter

Item 2.02 Results of Operations and Financial Condition.

On April 25, 2007, First Interstate BancSystem, Inc. (the “Registrant”) issued its first quarter 2007 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 — First Quarter 2007 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: April 25, 2007

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

EX-99

EXHIBIT 99

To our shareholders,

First Interstate BancSystem reported first quarter 2007 income of $16,496,000, or $1.97 per diluted share, compared to $16,134,000, or $1.95 per diluted share, in first quarter 2006. First quarter earnings, although lower than fourth quarter 2006 primarily due to the fourth quarter gain on sale of our iPay investment, are the highest first quarter earnings reported in our history. Return on average common equity was 16.14% in first quarter 2007 compared to 18.41% in first quarter 2006, return on average assets was 1.37% versus 1.44%, and efficiency ratio increased to 61.32% versus 59.19%.

Quarterly Results

Net interest income of $48,144,000 in first quarter 2007 was $2,529,000 more than first quarter 2006. The increase in net interest margin dollars over last year was the result of loan growth. First quarter 2007 average loans grew $262,764,000, or 9%, over the same period last year. Despite loan growth, the net interest margin decreased 13 basis points from first quarter 2006 to 4.46% for first quarter 2007. Net interest margin declined due to higher costs for deposits and securities sold under repurchase agreements (Repo). First quarter 2007 average deposits grew 197,868,000, or 6%, due mainly to demand deposit growth, over the same period last year. In order to provide business customers an alternative to our traditional Repo, a new money market cash sweep deposit product was introduced in the first quarter 2007. Money market cash sweep balances averaged $39,665,000 for first quarter 2007 and consisted mainly of customer migration from our current Repo product. The migration of customer balances out of our Repo product increases our liquidity as securities are required to be pledged as collateral for Repo balances. The provision for loan losses of $1,875,000 was $122,000, or 7%, higher than first quarter 2006.

Noninterest income of $21,697,000 was $2,404,000, or 12%, higher than first quarter 2006. Major components of the increase were gain on sale of assets, technology services revenue, debit/credit card revenue and income from sale of residential real estate loans held for sale of $1,046,000, $720,000, $422,000 and $297,000, respectively. Gain on sale of assets increased as a result of a $1,100,000 gain recorded in March 2007 on the sale of mortgage servicing rights for mortgage loans with principal balances of approximately $263,000,000. We had purchased these servicing rights from another mortgage originator in recent years.

Noninterest expense of $42,770,000 was $4,403,000, or 11%, higher than the comparable quarter in 2006. Salary and benefits expense increased $2,719,000, or 13%, as compared to first quarter 2006 primarily due to inflationary wage increases, increased number of employees and

Financial Highlights
Three Months ended March 31

(unaudited)	2007		2006		% Change
(in thousands except per share data)
OPERATING RESULTS
Net income	$	16,496	$	16,134		2.2	%
Diluted earnings per share		1.97		1.95		1.0	%
Dividends per share		1.02		0.50		104.0	%
PERIOD END BALANCES
Assets		4,959,855		4,632,647		7.1	%
Loans		3,363,981		3,116,927		7.9	%
Investment securities		984,245		995,861		-1.2	%
Deposits		3,863,224		3,512,581		10.0	%
Common stockholders’ equity		421,617		359,647		17.2	%
Common shares outstanding		8,183		8,108		0.9	%
QUARTERLY AVERAGES
Assets		4,884,328		4,548,963		7.4	%
Loans		3,322,149		3,059,385		8.6	%
Investment securities		1,075,443		966,262		11.3	%
Deposits		3,680,205		3,482,337		5.7	%
Common stockholders’ equity		414,502		355,327		16.7	%
Common shares outstanding		8,188		8,108		0.9	%

higher incentive bonus and profit sharing accruals. Also contributing to the increase in salary and benefits was an extra expense of $250,000 to fund our health insurance trust for employees. In addition, a $793,000 mortgage servicing impairment was recorded in first quarter 2007 compared to a $170,000 impairment reversal for the first quarter 2006.

On April 6, 2007, we paid a $.65 dividend per common share.

First Interstate BancSystem is the regional employer of choice. This commitment to our employees has helped generate yet another record in quarterly earnings. Through the dedication of our employees, officers, advisory directors, and corporate directors, we continue to develop new products and services to serve our customers in an ever evolving and challenging banking and financial services environment.

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

First Quarter 2007

Condensed Consolidated Statements of Income

	Three Months Ended
	March 31
(unaudited)	2007			2006
(in thousands, except per share data)
Total interest income	$	78,636		$	66,969
Total interest expense		30,492			21,354
Net interest income		48,144			45,615
Provision for loan losses		1,875			1,753
Net interest income after provision for loan losses		46,269			43,862
Noninterest income		21,697			19,293
Noninterest expense		42,770			38,367
Income before taxes		25,196			24,788
Income taxes		8,700			8,654
Net income	$	16,496		$	16,134
DATA PER COMMON SHARE:
Diluted EPS	$	1.97		$	1.95
Dividends		1.02			.50
Book value		51.52			44.36
Tangible book value		46.95			39.75
Appraised value		89.00	*		74.50	**

*   Based on the latest independent appraised minority share valuation as of December 31, 2006, effective for transactions on or after February 15, 2007.

** Based on the independent appraised minority share valuation as of March 31, 2006, effective for transactions on or after May 19, 2006.

Selected Ratios

	Three Months Ended
	March 31
(unaudited)	2007			2006
PERFORMANCE
Return on avg common equity		16.14	%		18.41	%
Return on avg common equity excl. market adj of securities		15.88	%		18.02	%
Return on avg assets		1.37	%		1.44	%
Net interest margin, FTE		4.46	%		4.59	%
Efficiency ratio		61.32	%		59.19	%
CREDIT QUALITY (Period End)
Annualized provision for loan losses to average loans		0.23	%		0.23	%
Annualized net charge offs to average loans		0.09	%		0.08	%
Allowance for loan losses to loans		1.45	%		1.40	%
Allowance for loan losses to non-accruing loans		312.96	%		273.58	%
CAPITAL ADEQUACY & LIQUIDITY
Leverage capital ratio		8.76	%		8.11	%
Avg loans to avg deposits		90.27	%		87.85	%

Condensed Consolidated Balance Sheet

	March 31
(unaudited)	2007		2006
(In thousands)
ASSETS
Cash and due from banks	$	152,028	$	197,400
Federal funds sold		162,515		37,713
Interest bearing deposits		19,063		11,916
Investment securities		984,245		995,861
Loans		3,363,981		3,116,927
Less: allowance for loan losses		48,621		43,633
Net loans		3,315,360		3,073,294
Premises & equipment, net		119,923		120,086
Accrued interest receivable		31,786		27,686
Goodwill		37,380		37,380
Mortgage servicing rights		20,359		22,721
Company owned life insurance		65,261		63,058
Other assets		51,935		45,532
Total Assets	$	4,959,855	$	4,632,647
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	3,863,224	$	3,512,581
Securities sold under repurchase agreements		568,042		618,307
Accrued interest payable		20,325		12,670
Other liabilities		33,952		33,271
Other borrowed funds		220		642
Long — term debt		11,237		54,291
Subordinated debenture		41,238		41,238
Total Liabilities		4,538,238		4,273,000
Common stockholders’ equity		421,617		359,647
Total Liabilities and Stockholders’ Equity	$	4,959,855	$	4,632,647

Total Deposits

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