News Column

Fitch: No Near-Term Impact on First Interstate's Rtgs from Merger Announcement

February 11, 2014



CHICAGO--(BUSINESS WIRE)-- First Interstate BancSystem, Inc. (FIBK) recently announced its intention to acquire Mountain West Financial Corp. (MWFC) and its primary subsidiary Mountain West Bank, NA which at 4Q'13 had approximately $650 million in assets. This is FIBK's first whole-bank transaction since 2008. Given the nominal impact on the company's balance sheet, from the standpoint of assets as well as capital, Fitch does not anticipate the transaction will have any impact on FIBK's ratings in the near term.

On Feb. 10, 2014, FIBK announced a definite agreement had been reached with MWFC to acquire all of its assets (including 12 branches) and deposits. Fitch views the pricing of the deal to be reasonable with FIBK paying 1.24x tangible book value of MWFC as of 4Q'13 in a transaction that will effectively be 50% cash and 50% stock.

The post-merger company will have around $8.2 billion in total assets and the #1 market share in Montana with nearly 20% of the state's deposits. Given overlap in the two companies' branch networks, Fitch anticipates that FIBK will be able to realize noticeable cost-saves soon after the transaction closes.

Fitch has indicated in the past that over the long term, if FIBK was able to augment core earnings to equal those of higher rated peers while maintaining positive asset quality trends as well as reasonable capital levels, it could have a positive impact on the company's rating or Outlook. Fitch notes that FIBK's TCE ratio will be minimally affected by the transaction and should build to its current level over just a couple of quarters.

As with any merger or acquisition, there are risks relating to management's ability to effectively execute the transaction to realize full synergies. Given that this transaction is well within FIBK's operating footprint and the simplistic nature of MWFC's balance sheet, Fitch believes that execution risk is nominal.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings

Primary Analyst

Bain K. Rumohr, CFA, +1-312-368-3153

Associate Director

Fitch Ratings, Inc.

70 West Madison

Chicago, IL 60602

or

Secondary Analyst

Ryan Doyle, +1-212-908-0769

Director

or

Media Relations

Brian Bertsch, New York, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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