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First Interstate BancSystem unit purchasing Bigfork, Mont.-based bank in $34.2M cash deal

Billings, Mont.-based First Interstate BancSystem Inc. unit ($8.70 billion)agreed to buy Flathead Bank ofBigfork, Montana ($231.6 million) from in acash transaction valued at about $34.2 million.

The dealvalue is 129.4% of book, 134.9% of tangible book and 12.5xearnings, on an aggregate basis. It is also 18.23% of deposits and 14.77% ofassets and carries a tangible book premium-to-core deposits ratio of 5.00%. Forcomparison, SNL's valuations for bank and thrift targets in the West betweenApril 6, 2015, and April 6, 2016, averaged 137.94% of book and 140.79% oftangible book and had a median of 28.42x last-12-month earnings, on anaggregate basis.

The merger is slated to close in the third quarter andexpected to be immediately accretive to EPS. The seven Flathead Bank locations— across western and northwestern Montana — will become branches of FirstInterstate Bank, allowing First Interstate BancSystem to expand in FlatheadCounty, Mont., by three branches, to be ranked second with a 22.24% share ofapproximately $1.82 billion in total market deposits. It will also expand inGallatin County, Mont., by two branches, to be ranked second with a 14.64%share of approximately $2.33 billion in total market deposits. It will enterMadison County, Mont., with one branch, to be ranked third with a 10.77% shareof approximately $169.50 million in total market deposits, and enter GlacierCounty, Mont., with one branch to be ranked second with a 35.64% share ofapproximately $97.78 million in total market deposits.

Sandler O'Neill & Partners LP served as financialadviser to First Interstate Bank, and Luse Gorman PC was legal counsel.Flathead Bank was advised in the transaction by D.A. Davidson & Co., withTom Hayes as lead banker, as financial adviser and Lindquist & Vennum LLPas legal counsel.

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