Good morning and welcome to First Interstate BancSystem, Inc., First Quarter 2013 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mary Mutch [Marcy Mutch], IRO. Please go ahead.

Thanks Amy. Good morning. Thank you for joining us for our first quarter earnings conference call. As we begin, I would like to direct all listeners to the cautionary note regarding forward-looking statements and factors that could affect future results and our most recently filed Form’s 10-Q and 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 Terrill Moore, our Chief Financial Officer. Ed will begin by giving you an overview of the company’s results and Terry will follow-up with specific information behind the quarterly results. At this time, I would like to turn the call over to Ed Garding. Ed?

Thanks Marcy. Good morning and thanks again to all of you for joining us. Yesterday, we were delighted to report first quarter earnings of $20 million. This compares with last quarter’s earnings of $16.1 million, an increase of 24% and a strong start to the New Year. Earnings per share this quarter were $0.46 compared with last quarter’s $0.37 per share which is also a 24% increase. As is evident from our earnings release, the driver behind the earnings improvement was reduced credit cost. The first quarter provision of only $500,000 was a substantial decrease from last quarter and quite an improvement from what we've experienced over the last few hundred years. I am just waiting to see if anybody picked up on that few hundred year remark, but that truly is much lower than we would normally see in regards for provision. Okay, going on, income from the origination and sale of residential real estate loans remained strong this quarter with a little growth in the portion that was for purchased homes. Total volume of closed residential loans was up 8% over the first quarter of last year, but down 18% over the fourth quarter of 2012. Looking forward, we anticipate refinancing activity declining from 2012 levels and so total residential real estate income will also decline from the high marks we recorded in the later part of 2012. Wealth Management revenues of $4.1 million are up 13% from the fourth quarter. Our focus has been on generating new revenues from discretionary asset management fees, which includes trust, retirement and broker services. Assets under management continue to increase, approaching the $4 billion level, which is an increase of 17% over the first quarter of last year. Our Wealth Management department is aggressively reaching out to both bank and non-bank…

Thanks Ed. As Ed mentioned at the start of the call, we had a very strong quarter with earnings of $20 million and $0.46 earnings per share. I will start off by discussing provision expense as this was really the primary earnings boost for the quarter. The decrease in the provision expense of $500,000 was a result of several factors. First, gross charge-offs was $6 million for the quarter which is the lowest quarterly level in the last four years. In addition, we had $3 million in recoveries of previously charged off loans which is one of the highest levels of recoveries we’ve had in a number of years. This combined low level of net charge offs of $3 is very positive and a strong indicator of the improvement in our credit quality. Second, all credit metrics are improving. Total criticized loans are down 6% from last quarter, non-performing assets declined 7% to 1.79% of total assets at the end of the quarter. As we reviewed the factors impacting the allowance for loan loss for this quarter, charge-offs were down, credit quality improved and the third component, the macro economic factors, items like unemployment and housing prices had also improved from year-end. So while we have always indicated charge-offs and provision maybe lumpy, this quarter is now exception. We are just on the other end of the spectrum. Future provisions will be volatile from quarter-to-quarter and are likely to be higher than this quarter, but we expect them to be well under 2012 levels. In regards to other real estate activity, our inflow this past quarter and the OREO was $5 million. The first quarter is outside of what we typically consider our normal selling season and so sales of $3 million are considered a positive. We had net carrying…

Thanks, Terrill. I talked last quarter about the efficiency opportunities. Along those lines we recently made the decision to close a couple of our South Dakota branches. Size of the branches along with the proximity to our other locations led to the decision to close those branches. Just to be clear though, South Dakota continues to be a great place to do business and we feel positive about our future growth opportunities in that market, but we will continue to look at optimizing branch density throughout the company. Lastly, you are always curious about acquisitions. We continue to look across our footprint and into the five other contiguous states for opportunities that would make sense for our franchise, but we haven't found the right feet at the right price yet. We feel we’ve got a strong capital position, so we do have the flexibility to act on any other attractive opportunities. So with that, let’s open it up for questions.

(Operator Instructions) And our first quarter comes from Jeff Rulis at D.A. Davidson.

Hi, this is Simonas joining in for Jeff.

Good morning.

Hi, I just had a couple questions on your loan growth outlook. You are saying it might -- you are not going to sacrifice credit quality from loan growth, so what kind of growth are you expecting for the year, how the loan pipeline is holding up?

I am going to answer that as accurately as I can without giving you an actual number because I don't think I should do that, but in the first quarter as you can see we just basically held steady, and there is always a river of payments coming in and new launch being made and of course we have to get the new launch being made to exceed that river of payments coming in. And from a pipeline standpoint depending on your definition of pipeline, I will put it that way and I am going to say to us pipeline is not loans that have already been approved and committed, but it's more about talking with customers and what about this, what about that. So from a pipeline standpoint, we feel fairly optimistic, because we are seeing our customers and even in some cases people who would be new customers talking about building projects and talking about doing things over there in the oilfield in North Dakota. So with all of that, I think that we could see slight loan growth for the rest of year, but as you can tell I am being pretty cautious about that because at the same time we are seeing an awful lot of competition in the form of what I would consider to be lower underwriting standards and lower rates than we would be comfortable with.

Okay, that is helpful. And then just a question on the mortgage activity, with the decline you saw this quarter, do you expect that to continue at 10% to 15% debt or do you see a flattening out in terms of refinancing?

I see it flattening out, but I think the decline that we had is indicative of the year that we are going to have it’s not going to continue to decline and partially because we are seeing signals that purchase activity is increasing.

Okay. And then, are there any updates on the search for Terry’s replacement, I know that is pretty big shoes to fill and you have mentioned you hired a firm last quarter to help you with that search?

Terry, do you want to answer that one for me?

Well, the search is certainly underway and is active and Ed and board -- a few board numbers have interviewed a number of prospective candidates and so the transition will be established this summer probably when a name to replacement occurs and I will depart when we are ready which probably will be sometime in the next year.

Thanks, Terry. I specifically asked Terry to answer that so that you could tell that he is mad out of this. He is not going away mad and we are delighted about that. So we’ve certainly got Terry to rely on until we name a replacement and spend some time with on-boarding of that replacement.

Alright, that’s all from me and thanks, and a great quarter.

The next question comes from Brett Rabatin of Sterne, Agee.

I wanted to get a little more color if I could around just the pool that you have left in terms of recoveries on the credit side and then you gave kind of a pretty wide range in terms of how we should think about charge offs going forward. Basically, my understanding was your stand between this quarter and then what charge offs were last year so I didn't know if you had a little more color around kind of any projects that you are working on and kind of where you are seeing a sort of resolution occur you know in the non-performing pool just are they getting pretty close now or are they still having some writedowns as you get them off the books?

Yeah, that's about right. I talked about US pull on recoveries. I expect that our recoveries, they are going to be lumpy like they have been in the past and we are very conservative when we write something down so I would expect some recoveries, but again that's going to be lumpy. And charge-offs going forward as Ed mentioned, I don't expect to see this low; I think they will be much lower than they were last year, but again that's about as much color as I can really provide for you right now. And as far as asset resolutions and NPAs, those declining, we expect the same rate; we have a very aggressive goal of reducing our non-performing again this year, and so much last year on a percentage basis.

And then I was also hoping to get, I didn't hear if you mentioned that, but just on the mortgage banking side you mentioned a pipeline of improving purchase, applications, can you talk about what maybe the mix was in the first quarter purchase versus refi?

The first quarter mix was about 30%; actually alright 33% thanks Marcy, 33% purchase. The last month of the first quarter was actually better than that, it was closer to 40% purchase in the month of March and so the pipeline of applications that we are seeing would indicate that we are going to be closer to that 40% going forward in purchase activity than the 33%. Hopefully that answers your question.

That's great. And then just last quick one, just level where you are originating loans today in terms of thinking about origination versus payoffs; kind of trying to get a gauge for what you guys are doing in the loan portfolio?

And in that case you are talking about the total loan portfolio, not specific to mortgage lending?

Well, obviously mortgage is a piece of what you do business there, but just any thoughts around where you are originating loans today in your loan portfolio, C&I, CRE especially?

I think pretty similar to what I said a while ago. We're continuing to originate loans, but at the same time, of course payments are continuing to flow in and that’s a good thing that payments are coming in, but we haven't seen the originations exceed the level of payments by much yet, and again for us there is some seasonality and so we've just gone through what would typically be a very slow season and we’ve got that up that would show that that was a slow season. So we still have some optimism that building projects and even inventory increases and some of the energy projects will ramp-up a little more as we get into spring and summer.

I am sorry, Ed, what I meant was the rate where you are originating loans today?

You are talking about interest rates?

Right.

Thank you. And the average is 5.18%.

The next question comes from Gordon Jenkins, First Interstate Bank.

And I have a question; you mentioned when an earlier question was raised about loan opportunity she talked about the energy activity in Dakotas, I think he said specifically North Dakota, and that raised a question in my mind about where loans that are originated there would be managed and serviced and does the company have the energy expertise approximate to those locations to maintain credit quality?

Our energy experts are located in Casper and when we have had requests that are specific to say oil or gas exploration and production, they have been quick to help any of our other locations, so we feel comfortable with expertise we are providing. As far as where are those loans coming from, actually the highest percentage is coming right here from billings and that’s largely because of our proximity to that oilfield and some of the people in billings that work in that area. And then second highest would be Casper, again where the expertise is and of course there is also a lot activity in the Casper area. And then it's a pretty small numbers from there on out, but what I am talking about is only $137 million in commitments directly to what we would call energy lending oil, gas, coal wind. We don't know the number that is committed or loaned out to all other support services because they are classified differently you know whether it’s an electrician, a welder, a trucking company but we do know that there is lot of activity around that.

(Operator Instructions) And our next question comes from Jackie Chimera at KBW.

Good morning, this is David going for Jackie.

Good morning.

Just I wanted to get your update on M&A activity in the region be, has the pace of activity changed over the past few months?

I don't think I have seen the pace change. We sure haven't seen a flurry of activity. That said obviously one of our neighbors here Glacier Bank has announced two acquisitions in the last six weeks or so, but I don't know that I would call out a signal that the pace has increased. We are not seeing a lot of sellers contacting us. That said, we don't want to be just reaction area where we just sit and wait for somebody to contact us, so we want to have a strategy and we are working on that in regards of to defining target markets that we want to be and then once that is completed define target banks within those markets.

Your next question comes from Brett Villaume at FIG Partners.

I wanted to ask, if you wouldn’t mind, commenting a little bit more about your plans for future branch consolidations that I think you mentioned earlier on the call. Are those in specific areas that you have in mind or are they also in more rural areas or are they in maybe more metro areas?

The answer is both. And for example what we've done in South Dakota is had a pretty high density of branches in not very broad geographic area. And because we fully intend to continue to serve our customers whether they’d be rural or in metropolitan, but if we feel that we have more branches than we need within that geography, that's a big driver for us and that's probably really what we are looking at right now more than anything and some of that is driven by the movement of our customers to electronic, you know internet banking, mobile banking, ATM instead of face-to-face.

Okay, yeah, that was going to be my next question or follow-on question was, are you dedicating more resources to those endeavours lately, you wouldn’t mind telling me a little bit about that?

Absolutely, we are seeing teller transactions go down at the rate of about 7% a year and we are seeing customers using mobile internet and ATM technology more than they used to and in about 90 days ago e rolled out a new improved mobile banking product that we think we can compete with just about anyone with that product and we are really happy with the results and in terms of the number of customers that have already signed up for that and the tremendous amount of use they are making of that mobile product.

Okay. And one last question Ed if you don't mind, I know that in past years tourism from Canada has been very strong and some years not so, maybe normal, do you have any anticipated numbers on that or something that you guys have been hearing up in Montana about how strong tourism might be this year.

2012 was the largest year on a record for total number of tourists visiting Montana and much of that was from people from Canada visiting the resort sites in Northern Montana and we think 2013 will be similar. And the part that I don't know yet is I know that actual number of tourists broke a record, I don't know if they were freely spending because I have heard stories that while they were here that some of them didn't spend as freely as they have in past years, but we are very happy and optimistic about the tourism prospects throughout Montana and Wyoming and South Dakota.

Okay, well, thank you very much for answering my questions.

At this time we show no further questions. I would like to turn the conference back over to Ed Garding for any closing remarks.

Well, thanks for your interest in First Interstate. As always you can contact us through Investor Relations on our website and we would be glad to respond to any follow-up questions. Thanks for your time and have a good day.

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