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Fitch Affirms First Interstate BancSystem, Inc. on Acquisition Announcement.

NEW YORK -- Fitch Ratings has affirmed the ratings for Billings, Montana-based First Interstate BancSystem, Inc. (FIBS) and its banking subsidiary, First Interstate Bank. The Rating Outlook remains Positive. A list of the company's ratings is provided at the end of this release.

FIBS recently announced its intent to acquire for $251.4 million two banking subsidiaries along with other assets of First Western Bancorp adding approximately $900 million in assets and community banking operations in western South Dakota. These new markets are contiguous to FIBS markets in Wyoming and provide added geographical diversity. Additionally, like FIBS, the First Western Banks enjoy a solid market share in their markets as well as a history of sound credit quality and strong earnings.

FIBS' capital levels, which have improved due to earnings retention, will be adversely impacted by the acquisition although the expected issuance of Tier 1 eligible instruments will help keep regulatory capital levels adequate. Tangible equity will fall below 5.00% of tangible assets although it should improve overtime due to earnings retention. Fitch recently revised FIBS Outlook to Positive. This acquisition may increase the length of time that FIBS remains on Positive Outlook allowing time to integrate this acquisition and for Fitch to assess the timeline for capital build and management of increased debt burden at the holding company. However, while there is integration risk as with all acquisitions, the strategic rationale and turnkey view of these two banks should provide for a low risk transaction.

Ratings Affirmed:

First Interstate BancSystem, Inc.

--Long-term Issuer Default Rating (IDR) 'BBB';

--Short-term IDR 'F2';

--Individual 'B/C';

--Support '5';

--Rating Floor 'NF';

Rating Outlook Positive.

First Interstate Bank

--Long-Term Deposits 'BBB+';

--Long-Term IDR 'BBB';

--Short-Term Deposits 'F2';

--Short-Term IDR 'F2';

--Individual 'B/C';

--Support '5';

--Rating Floor 'NF';

Rating Outlook Positive.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Sep 21, 2007
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