Good day and welcome to the First Interstate BancSystem Incorporated Third Quarter 2014 Earnings Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Ms. Marcy Mutch, Investor Relations Officer. Please go ahead.

Thanks Kate. Good morning. Thank you for joining us for our third quarter earnings conference call. As we begin, I'd like to direct all listeners to the cautionary note regarding forward-looking statements and factors that could affect our future results in our most recently filed form 10-K. Relevant factors that would cause actual results to differ materially from any forward-looking statements are listed in the earnings release and in our SEC filings. The Company does not intend to correct or update any of the forward-looking statements made today. Joining us from management this morning are Ed Garding, our Chief Executive Officer; and Kevin Riley, our Chief Financial Officer, along with other members of our management team. At this time, I'll turn the call over to Ed Garding. Ed?

Thanks, Marcy. Good morning and thanks again to all of you for joining us on the call. Yesterday, we reported earnings of $19.2 million or $0.42 per share. Included in our net income this quarter were acquisition costs and litigation related accruals of approximately $5.1 million. With respect to the acquisition costs, we had anticipated total cost of $7.2 million. We feel confident we'll beat this estimate when all merger related expenses are accounted for by the end of the year. Second, as most of you know we filed an 8-K earlier this quarter that disclosed a lender liability loss. So we also accrued a loss related to the potential outcome of that litigation. Now back to the acquisition. We were excited to complete our merger with Mountain West Financial at the end of July and the merger of Mountain West Bank into First Interstate Bank on October 17th. Since the end of July, we’ve been focused on bringing the two organizations together in a seamless manner as possible for both our new employees and our customers. As a result of the merger, we acquired $612 million in total assets, $360 million in loans and $515 million in deposits. We were pleased that the attrition of both loans and deposits between our announcement date and closed, was less than we had modeled. We also recorded provisional goodwill of $21 million and core deposit intangibles of $11 million which was also a little less than we had anticipated. As you all know, we had 100% market overlap with Mountain West. So I would call this a bolt-on type acquisition. This opportunity was unique for us and allow us to have significant cost savings going forward. In several cases, Mountain West branches were located within less than one mile of First Interstate…

Thanks, Ed, and good morning everyone. We are pleased with our third quarter results which reported core earnings per share at $0.49. This was up from $0.48 per share reported in the second quarter. GAAP earnings for the quarter were $0.42 per share and non core expenses reported in the quarter were approximately $5.1 million. As Ed had stated, this represented accruals associated with the potential loss of pending litigation that we disclosed earlier in the quarter as well as merger related expenses. Excluding non-core expenses, our pre-tax pre-provision income increased $3.6 million over the prior quarter or 11.5%. $2 million of this increase was due to two months of earnings from Mountain West Bank. As with any acquisition, it resets the baselines for revenue and expenses. So, I would try to do my best to make the organic trends in our financial results as transparent as possible. Let's start with the balance sheet. Overall loans grew by $348 million as compared to the second quarter. And as Ed indicated, all this growth was a result of the acquisition. I’ll have to say, this result was disappointing. But as you look into the fourth quarter, our pipeline appears solid. So, we’re anticipating our gain in growth this quarter which we believe will outpace our normal run-off. Our investments increased $76 million over the prior quarter to $2.2 billion and currently represents 26% of total assets. The duration of portfolio remains unchanged from the prior quarter at 3.1 years. As we will continue to keep the duration short in our invested portfolio in order to insulate our balance sheet to the sensitivity of an interest rate movement. If and when this may occur, we position ourselves to be ready. Deposits continue to show tremendous growth. Deposits for the quarter were up…

(Operator Instructions) Our first question comes from Jeff Rulis from D.A. Davidson. Please go ahead.

Thanks, good morning.

Good morning, Jeff.

Ed, you mentioned – you talked about maybe merger cost coming in below budget I guess in Q4, would that put it under $1.5 million in Q4, is that the idea?

No. They will come in below, but not under a $1.5 million, I think under $2 million would be more accurate.

Okay. And the systems convergent is set for when?

That was completed on October 17.

The back office, okay.

Yeah, the core processing, back office, everything completed and up and running on Monday, October 20th, and went very well for us.

Okay. And, Kevin you alluded to - maybe given us a run rate on expenses next quarter, but I guess as you budgeted kind of looking at the - maybe the post, cost saves, efficiency ratio kind of range, is there - you should infer kind of low 60%, is there anything you’re comfortable putting out there?

Well, originally when we modeled, we thought that the efficiency ratio should improve with the integration of Mountain West about 200 basis points from our kind of run rate.

Okay. And then just one last one on the, I guess anything on the litigation settlement or the appeal process, is there any update as far as recovery?

No. First and foremost, we don’t want to comment much on ongoing litigation. But secondly, you used the word recovery and certainly we wouldn't look for anything like that.

Okay. All right, thanks.

Thank you, Jeff.

Our next question comes from Brad Milsaps from Sandler O'Neill. Please go ahead.

Hey, good morning.

Hi, Brad.

Just a follow up on Jeff’s question on the litigation accrual you made. Maybe when you initially spoke, you thought you might accrue for the entire amount, and I know you may not be able to comment, just kind of curious, what changed to result and maybe the lesser accrual versus when you filed the 8-K?

I would say two things Brad, number one is that, we're using the term accrual because we’re not certain that if we use the term expense that would sound like it was all settled. And so, that would number one. But, number two, our attorneys have looked at case law and have said based on past case law that we’ve seen, we think this is the number that would be prudent.

Got it. That's fair. Okay, and then just to follow up on loan growth, Ed I know you talked some about pay downs effecting growth, but you continue to make the comment that, the economy continues to recover low unemployment. In your mind, is it still underwriting standards that just aren't up the part before you guys want pricing, I guess, your comments around the economy might lead you to believe that we'd translate into more loan growth but just not seeing it as of yet, just any additional color there would be very helpful.

I will say that, we don't see ourselves losing customers. We do see ourselves losing new deals that were essentially bidding on. And, we're okay with that because we’re just not going to compromise our quality, standards in the interest of loan growth. We have chased price occasionally on very high quality deals. But as I said, we're not going to compromise quality in the interest of growth, and so we have lost out on some potential new transactions. But we don’t see ourselves losing customers. And many of our customers are still very liquid and they're just doing well enough, they just don’t need to borrow but they’re not doing so well that they've decided to jump out and expand.

Great. Thank you, guys.

Our next question comes from Jared Shaw from Wells Fargo. Please go ahead.

Hi, good morning.

Welcome Jared.

Thank you. On the cost saves, the 35% target for cost saves on the deals, is that still a good target to use? And how long do you think it would take to fully implement that?

I am going to have Kevin answer that for us.

The 35% is definitely doable. We should probably do better than that because I think Ed went over the saves regards to employees and as you went over also about the branches being pretty much taking care of most of it that we closed by year end. We believe that most of the expense saves will be baked into our numbers by the end of 2014.

Okay. Great, thanks. And then, on the $5.1 million charge this quarter, can you provide the breakout between the litigation reserve and the deal costs in that $5.1 million?

We'd rather not. Again, because we just don't want to comment publicly on ongoing litigation. We’re still in the appeal process.

Okay. I understand that.

Thank you.

Shifting gears a little bit, looking at the assets under management, could you show – can you let us know what the growth was this quarter and then over that sequential growth on the fee side? What was due to new business versus market appreciation?

What was the question?

I assume you’re talking in regards to wealth management, and, we'll have more specific breakout in the 10-Q. And, I am going to try to answer your question as best as I can, but the growth revenue from the increase in assets under management and from a price increase jumped a little over $500,000 for the quarter - $500,000 more than we had budgeted. And the actual assets under management growth I think was about $200 million.

Okay. Great. Thank you very much.

(Operator Instructions) Our next question comes from Jackie Chimera from KBW. Please go ahead. Jacquelynne Chimera - Keefe, Bruyette & Woods: Hi, good morning everyone.

Good morning, Jackie. Jacquelynne Chimera - Keefe, Bruyette & Woods: Question on the accretion that was deal related. So, I understand that the $745,000 was due to an early payoffs. The $1.3 million number that was quoted in the press release, is the delta between those two just the general amortization that will happen as we move through?

Yes, Kevin.

Yes. Jacquelynne Chimera - Keefe, Bruyette & Woods: So, outside of large payoffs the delta between those two should be fairly steady on going forward?

Right. And it's kind of what we are going to see on our month-by-month basis if you just divide it by 2. Jacquelynne Chimera - Keefe, Bruyette & Woods: Okay. And then, the comment – I am sorry if this already discussed and I just missed it, but the comment also in the press release on the change in your fee schedule on July 1st and then some admin fees. What portion of that income generated in the quarter would be the admin fees that will be ongoing?

I'll let Kevin answer that one.

300,000 was due to the price increase and about 200,000 was admin fees. But the admin fees, they continue, there are fees that we earn on the settlement of Interstate or some. So there are just not a consistent month-to-month fee but they come in periodically as we do services for our wealth management of customers. It's just not assets under management. Jacquelynne Chimera - Keefe, Bruyette & Woods: So, that had nothing to do with the price increase? It was just something that fluctuates on a quarterly basis?

Yeah, that's correct. Jacquelynne Chimera - Keefe, Bruyette & Woods: Okay. And then just lastly, you did a really nice job of talking about the organic growth that the loan portfolio had in the quarter? What were the portfolios that contracted?

Well Cerkovnik, would you answer that.

Primarily in our commercial portfolio is where the contraction saw and somewhat to a lesser degree in our commercial real estate portfolio. Jacquelynne Chimera - Keefe, Bruyette & Woods: And was is it just general payoffs or was there anything unusual?

In the commercial side we saw about $21 million in larger, just reduction in people lines, the credit they just paid down their lines, which we thought was pretty unusual for this time of the year. But again as Ed spoke about the economies doing fairly well but we expect the people to start growing back up on those lines. Jacquelynne Chimera - Keefe, Bruyette & Woods: Okay. Just the normal seasonality of it?

Yes. Jacquelynne Chimera - Keefe, Bruyette & Woods: And how does the rest of the pipeline look as we head into the fourth quarter?

It looks good. We typically see a decline in the fourth quarter in our loan volume but we saw a lot of deals that got pushed back into – will probably get push back into the fourth quarter. So we are optimistic about loan growth in the fourth quarter. And as we talked about, we expect to exceed that 4% growth for the year. Jacquelynne Chimera - Keefe, Bruyette & Woods: Great. That's very helpful. Thank you everyone.

Thank you, Jackie.

Our next question comes from Tim Coffey from FIG Partners. Please go ahead.

Thank you. Good morning, gentlemen.

Hi, Tim.

Ed question on the legacy deposit growth in the quarter. How much of that came from new customers versus existing customers?

Kevin Riley, have you got that?

Yeah, well I’ll tell you the thing, Tim, we’ve seen a tremendous amount of new customer counts throughout the year. So, it seems like the balance increases have finally filed a lot of the new customer account growth that we have seen this year. So, its like you can't tie it to discuss from a net increase, but it's - we just believe it's – we’ve increased a lot of accounts and the balance are just increasing in those accounts.

Okay. That’s helpful. And, Kevin do you have a near term target for securities as a percentage of assets or as percentage of asset?

I think the percentage share we are currently at right now will probably be what you’ll see going forward. Again, we’re trying to keep the balance sheet as fluid as possible in case rates do arise. But right now we do have a lot of cash sitting idle overnight. So, you might look at it – but I would say you not the same percentage that we're currently at.

Okay. Do you think like – loan growth because I'm sure is preferable, do you see some of that cash going into securities in next couple of quarters.

We have some of the excess cash that we have will go into loan growth. Yes.

Okay. All right, and, then the $500,000 expense on the data bridge, does that cover the data bridge that you know about right now or do you anticipate initial expense in fourth quarter?

That covers what we know about, but that said, we’re pretty quick to shutdown the cards and so – and reissue. And, so we think we've got that faucet shut off. We did reissue 39,000 debit cards and about 10,000 credit cards, but when you reissue, then as I said that shuts off the ability of the criminals to use those numbers.

Okay. All right, thanks. Those were all my questions.

Thank you, Tim.

(Operator Instructions) There are no additional questions. This concludes our question-and-answer session. I would like to turn the conference back over to Ed Garding, for any closing remarks.

Thank you. And I’ll close by talking for a minute about the Bakken oil field because it would be – we missed not to mention that since it's such a big part of the economy over here in our region. Just a couple of comments, first, I am sure you're all following the price oil and yesterday I think for a while it was down to $79 and then finally closed at $81 and that's down from $100 a few months ago. And so there's been a lot of talk about that. All of the people that we talked to in the industry still say that it is profitable to extract oil over there in the Bakken even at the $80 price range and even at less than $80. They're like other industries, technology has made them more efficient and thus the cost of extracting is going down. One example is that, it used to be, if you put together a drilling pad site to drill one well, and now over there in the Bakken, the way they’re drilling, they often do four or five wells off of one pad, which just makes them more efficient. So, we still think that that economy is going to continue to boom. Now, all of that said, as you know we don’t have a lot of money loaned out for oil exploration. We have about $100 million loaned out and about $150 million committed to oil and gas exploration. But we do have customers who are involved in the services industry in many different ways over there, just another story. We have a customer who – they build and then operate motels in Williston and we loan them the money to further construction and then to get up and running. And then typically a year later or so, their operating numbers are so good that the motel appraises for more than the original cost. And so they sell it and take the profit and build another one. And we've seen their income statement just recently and believe me they’re doing very well with that business model. So, just some stories to tell you that the things are still going well in the Bakken. I think I’ll wrap it up there. As always we welcome calls from our investors and analysts throughout the quarter. So, call us any time if you have any follow-up questions and I would just close by saying, I'm Ed Garding and I approve this message. And if you like me, I promise to do nothing. Thank you and good bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.