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First Interstate BancSystem (FIBK)

Filed: 14 Dec 21, 5:24pm

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As filed with the Securities and Exchange Commission on December 14, 2021
Registration No. 333-260771
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST INTERSTATE BANCSYSTEM, INC.
(Exact Name of Registrant as Specified in Its Charter)
Montana
6022
81-0331430
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
401 North 31st Street
Billings, Montana 59101
(406) 255-5390
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Kirk D. Jensen, Esq.
Executive Vice President,
General Counsel and
Corporate Secretary
401 North 31st Street
Billings, Montana 59116
(406) 255-5390
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
George R. Bason, Jr., Esq.
Evan Rosen, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Donald J. Straka, Esq.
General Counsel and Secretary
Great Western Bancorp, Inc.
225 South Main Avenue
Sioux Falls, South Dakota 57104
(605) 334-2548
Jacob A. Kling, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon completion of the merger described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
 
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-l(d) (Cross-Border Third-Party Tender Offer)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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The information in this joint proxy statement/prospectus is not complete and may be changed. A registration statement relating to the securities described in this joint proxy statement/prospectus has been filed with the U.S. Securities and Exchange Commission. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This joint proxy statement/prospectus does not constitute an offer to sell or the solicitation of offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY-SUBJECT TO COMPLETION-DATED DECEMBER 14, 2021


To the Shareholders of First Interstate BancSystem, Inc. and the Stockholders of Great Western Bancorp, Inc.
MERGER PROPOSED-YOUR VOTE IS VERY IMPORTANT
On behalf of the boards of directors of First Interstate BancSystem, Inc. (“First Interstate”) and Great Western Bancorp, Inc. (“Great Western”), we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the proposed merger between First Interstate and Great Western. We are requesting that you take certain actions as a holder of First Interstate common stock or a holder of Great Western common stock.
The boards of directors of First Interstate and Great Western have each unanimously approved an agreement to merge our two companies. Pursuant to the Agreement and Plan of Merger, dated as of September 15, 2021, by and between First Interstate and Great Western (as amended from time to time, the “merger agreement”), Great Western will merge with and into First Interstate (the “merger”), with First Interstate as the surviving entity (the “surviving corporation” or “First Interstate”, as the case may be).
The proposed merger will leverage the strengths of both organizations, creating a diversified, community-focused banking franchise with a network of more than 300 branches across 14 states. We believe the merger will position the surviving corporation as a premier banking institution in the West, with increased scale, an expanded geographic footprint and an enhanced platform for future growth. In addition, we believe that the surviving corporation will benefit from the combination of two companies with talented management teams, similar core values and strong commitments to serving their customers and communities.
In the merger, holders of Great Western common stock will receive 0.8425 shares (the “exchange ratio” and such shares, the “merger consideration”) of First Interstate Class A common stock for each share of Great Western common stock they own. Holders of First Interstate Class A common stock will continue to own their existing shares of First Interstate Class A common stock. Based on the closing price of First Interstate Class A common stock on the Nasdaq Global Select Market (the “NASDAQ”) on September 15, 2021, the last trading day before public announcement of the merger, the exchange ratio represented approximately $35.65 in value for each share of Great Western common stock. Based on the closing price of First Interstate Class A common stock on the NASDAQ on December 10, 2021, the last practicable trading day before the date of the accompanying joint proxy statement/prospectus, of $39.95, the exchange ratio represented approximately $33.66 in value for each share of Great Western common stock. The value of First Interstate Class A common stock at the time of completion of the merger could be greater than, less than or the same as the value of First Interstate Class A common stock on the date of the accompanying joint proxy statement/prospectus. We urge you to obtain current market quotations of First Interstate Class A common stock (trading symbol “FIBK”) and Great Western common stock (trading symbol “GWB”).
We expect the merger will qualify as a reorganization for federal income tax purposes. Accordingly, holders of Great Western common stock generally will not recognize any gain or loss for federal income tax purposes on the exchange of shares of Great Western common stock for First Interstate Class A common stock in the merger, except with respect to any cash received instead of fractional shares of First Interstate Class A common stock.
Based on the number of shares of Great Western common stock outstanding and reserved for issuance, as of December 13, 2021, First Interstate expects to issue approximately 46.5 million shares of First Interstate Class A common stock in the aggregate in the merger. Following the completion of the merger, former holders of Great Western common stock will own approximately forty-three percent (43%) and former holders of First Interstate common stock will own approximately fifty-seven percent (57%) of the common stock of the surviving corporation.
The special meeting of holders of Great Western common stock will be held on January 19, 2022 virtually via the Internet, at www.virtualshareholdermeeting.com/GWB2022SM, at 4:30 p.m. central time. The special meeting of holders of First Interstate common stock will be held on January 19, 2022 at First Interstate Bank Great West Center, 1800 Sixth Avenue North, Billings, MT 59101, at 3:30 p.m., mountain time. At our respective special meetings, in addition to other business, we will each ask the holders of our common stock to approve the merger. Information about these meetings and the merger is contained in this joint proxy statement/prospectus. In particular, see “Risk Factors” beginning on page 36. We urge you to read this joint proxy statement/prospectus carefully and in its entirety.
Whether or not you plan to attend your special meeting, please vote as soon as possible to make sure that your shares are represented at the meeting. If you do not vote, it will have the same effect as voting “AGAINST” the merger.
Each of our boards of directors unanimously recommends that holders of common stock vote “FOR” each of the proposals to be considered at the respective meetings. We strongly support this combination of our companies and join our boards of directors in their recommendations.


Kevin Riley
President and Chief Executive Officer
First Interstate BancSystem, Inc.
Mark Borrecco
President and Chief Executive Officer
Great Western Bancorp, Inc.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this document is accurate or complete. Any representation to the contrary is a criminal offense.
The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either First Interstate or Great Western, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
The accompanying joint proxy statement/prospectus is dated December [   ], 2021, and is first being mailed to holders of First Interstate common stock and holders of Great Western common stock on or about December [   ], 2021.

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ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus incorporates important business and financial information about First Interstate and Great Western from other documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this document through the Securities and Exchange Commission website at http://www.sec.gov or by requesting them in writing, by e-mail or by telephone at the appropriate address below:
if you are a First Interstate shareholder:

First Interstate BancSystem, Inc.
401 North 31st Street
P.O. Box 30918
Billings, Montana 59116
(406) 255-5322
Attention: Investor Relations
if you are a Great Western stockholder:

Great Western Bancorp, Inc.
225 South Main Avenue
Sioux Falls, South Dakota 57104
(605) 334-2548
Attention: Investor Relations
You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must make your request no later than five (5) business days before the date of the applicable special meeting. This means that holders of First Interstate Class A common stock requesting documents must do so by Tuesday, January 11, 2022, in order to receive them before the First Interstate special meeting, and holders of Great Western common stock requesting documents must do so by Tuesday, January 11, 2022, in order to receive them before the Great Western special meeting.
No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated December [   ], 2021, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such incorporated document. Neither the mailing of this joint proxy statement/prospectus to holders of First Interstate common stock or holders of Great Western common stock nor the issuance by First Interstate of shares of First Interstate Class A common stock in connection with the merger will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in, or incorporated by reference into, this document regarding Great Western has been provided by Great Western and information contained in, or incorporated by reference into, this document regarding First Interstate has been provided by First Interstate.
See the section entitled “Where You Can Find More Information” beginning on page 162 of the accompanying joint proxy statement/prospectus for further information.

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First Interstate BancSystem, Inc.
401 North 31st Street
Billings, MT 59116
Notice of Special Meeting of Shareholders
To the Shareholders of First Interstate BancSystem, Inc.:
On September 15, 2021, First Interstate BancSystem, Inc. (“First Interstate”) and Great Western Bancorp, Inc. (“Great Western”) entered into an Agreement and Plan of Merger (as amended from time to time, the “merger agreement”), a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus.
NOTICE IS HEREBY GIVEN that a special meeting of holders of Class A common stock, no par value per share, of First Interstate (the “First Interstate Class A common stock”) and Class B common stock, no par value per share, of First Interstate (the “First Interstate Class B common stock” and, together with the First Interstate Class A common stock, the “First Interstate common stock”) (the “First Interstate special meeting”) will be held at First Interstate Bank Great West Center, 1800 Sixth Avenue North, Billings, MT 59101 on January 19, 2022 at 3:30 p.m., mountain time. We are pleased to notify you of and invite you to the First Interstate special meeting.
At the First Interstate special meeting, you will be asked to consider and vote on the following matters:
Proposal to approve the merger agreement (the “First Interstate merger proposal”);
Proposal to approve an amendment to First Interstate’s articles of incorporation to increase the number of authorized shares of First Interstate Class A common stock from one hundred million (100,000,000) shares to one hundred fifty million (150,000,000) shares (the “First Interstate authorized shares amendment” and such proposal, the “First Interstate authorized share count proposal”);
Proposal to approve an amendment to First Interstate’s articles of incorporation to make certain technical changes (together with the First Interstate authorized shares amendment, the “First Interstate articles amendment”), which are intended to incorporate into First Interstate’s articles of incorporation provisions that currently exist in First Interstate’s bylaws, relating to the classification of the board of directors of First Interstate (the “First Interstate board of directors”) into three classes, with directors in each class serving staggered three-year terms (the “First Interstate staggered board proposal”); and
Proposal to adjourn or postpone the First Interstate special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to holders of First Interstate common stock (the “First Interstate adjournment proposal”).
The First Interstate board of directors has fixed the close of business on December 13, 2021 as the record date for the First Interstate special meeting. Only holders of record of First Interstate common stock as of the close of business on the record date for the First Interstate special meeting are entitled to notice of, and to vote at, the First Interstate special meeting or any adjournment or postponement thereof.
The First Interstate board of directors unanimously recommends that holders of First Interstate common stock vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal and “FOR” the First Interstate adjournment proposal.
First Interstate has determined that holders of First Interstate common stock are not entitled to appraisal or dissenters’ rights with respect to the merger under Section 35-14-1302 of the Montana Business Corporation Act.
Your vote is important. We cannot complete the transactions contemplated by the merger agreement unless holders of First Interstate common stock approve the First Interstate merger proposal, the First Interstate authorized

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share count proposal and the First Interstate staggered board proposal. The affirmative vote of a majority of the votes entitled to be cast on the matter, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class, is required to approve each of the First Interstate merger proposal and the First Interstate staggered board proposal. The affirmative vote of a majority of the voting power of the issued and outstanding shares of First Interstate common stock, with the holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class, is required to approve the First Interstate authorized share count proposal.
Each copy of the joint proxy statement/prospectus mailed to holders of First Interstate common stock is accompanied by a form of proxy card with instructions for voting.
Whether or not you plan to attend the First Interstate special meeting, we urge you to please promptly complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope or authorize the individuals named on the accompanying proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the accompanying proxy card. If your shares are held in the name of a bank, broker, trustee or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee.
If you have any questions regarding the accompanying joint proxy statement/prospectus, you may contact MacKenzie Partners, Inc., First Interstate’s proxy solicitor, by calling toll-free at (800) 322-2885, or for banks and brokers, collect at (212) 929-5500.
We are monitoring the emerging public health impact of coronavirus (COVID-19). The health and safety of our shareholders, directors, officers, employees and other constituents are of paramount concern to the First Interstate board of directors and management. We currently plan to hold the First Interstate special meeting as presented in this notice. However, if public health developments warrant, we may need to change the date, time or location of the First Interstate special meeting, add a virtual component to the First Interstate special meeting or, if permitted by applicable law, hold the First Interstate special meeting solely by means of remote location and not in a physical location. Any such changes will be publicly announced as promptly as practicable before the meeting by press release and posting on our website, as well as through an SEC filing. This notice also constitutes notice of any such change in the time, date or location of the First Interstate special meeting and incorporates any future press releases or public filings with respect to the date, time or location of the First Interstate special meeting.
 
By Order of the Board of Directors
 
 
 

 
 
 
Kevin Riley
President and Chief Executive Officer
First Interstate BancSystem, Inc.
December [   ], 2021

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Great Western Bancorp, Inc.
225 South Main Avenue
Sioux Falls, South Dakota 57104
Notice of Special Meeting of Stockholders
To the Stockholders of Great Western Bancorp, Inc.:
On September 15, 2021, Great Western Bancorp, Inc. (“Great Western”) and First Interstate BancSystem, Inc. (“First Interstate”) entered into an Agreement and Plan of Merger (as amended from time to time, the “merger agreement”), a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus.
NOTICE IS HEREBY GIVEN that a special meeting of holders of Great Western common stock (the “Great Western special meeting”) will be held virtually, solely by means of remote communication, on January 19, 2022, at 4:30 p.m., central time. In light of the ongoing developments related to the COVID-19 pandemic and to protect the health of Great Western’s stockholders and the community, the Great Western special meeting will be held in a virtual-only format conducted via live audio webcast. You will be able to attend the Great Western special meeting by visiting www.virtualshareholdermeeting.com/GWB2022SM (the “Great Western special meeting website”) and inserting the 16-digit control number included in your proxy card or voting instruction form provided by your bank, broker, trustee, nominee or other holder of record if you hold your shares of Great Western common stock in “street name.” You will be able to vote your shares electronically over the Internet and submit questions online during the meeting by logging in to the website listed above and using the control number. We are pleased to notify you of and invite you to the Great Western special meeting.
At the Great Western special meeting, you will be asked to consider and vote on the following matters:
Proposal to approve and adopt the merger agreement (the “Great Western merger proposal”);
Proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Great Western’s named executive officers that is based on or otherwise relates to the merger (the “Great Western compensation proposal”); and
Proposal to adjourn or postpone the Great Western special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes to approve the Great Western merger proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to holders of Great Western common stock (the “Great Western adjournment proposal”).
The Great Western board of directors has fixed the close of business on December 13, 2021 as the record date for the Great Western special meeting. Only holders of record of Great Western common stock as of the close of business on the record date for the Great Western special meeting are entitled to notice of, and to vote at, the Great Western special meeting or any adjournment or postponement thereof.
The Great Western board of directors unanimously recommends that holders of Great Western common stock vote “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal and “FOR” the Great Western adjournment proposal.
Great Western has determined that holders of Great Western common stock are not entitled to appraisal or dissenters’ rights with respect to the merger under Section 262 of the Delaware General Corporation Law.
Your vote is important. We cannot complete the transactions contemplated by the merger agreement unless holders of Great Western common stock approve the Great Western merger proposal. The affirmative vote of the holders of a majority of the outstanding shares of Great Western common stock entitled to vote on the merger agreement is required to approve the Great Western merger proposal.
Each copy of the joint proxy statement/prospectus mailed to holders of Great Western common stock is accompanied by a form of proxy card with instructions for voting.

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Whether or not you plan to attend the Great Western special meeting, we urge you to please promptly complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope or authorize the individuals named on the accompanying proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the accompanying proxy card. If your shares are held in the name of a bank, broker, trustee or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee.
If you have any questions regarding the accompanying joint proxy statement/prospectus, you may contact Innisfree M&A Incorporated, Great Western’s proxy solicitor, by calling toll-free at (877) 750-9496, or for banks and brokers, collect at (212) 750-5833.
 
By Order of the Board of Directors,
 
 
 

 
 
 
Mark Borrecco
President and Chief Executive Officer
Great Western Bancorp, Inc.
 
 
 

 
 
 
James Brannen
Chairperson of the Board
Great Western Bancorp, Inc.
December [   ], 2021

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QUESTIONS AND ANSWERS
The following are some questions that you may have about the merger and the First Interstate special meeting or the Great Western special meeting, and brief answers to those questions. We urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the merger and the First Interstate special meeting or the Great Western special meeting. Additional important information is also contained in the documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 162.
In this joint proxy statement/prospectus, unless the context otherwise requires:
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“First Interstate” refers to First Interstate BancSystem, Inc., a Montana corporation;
“First Interstate’s articles of incorporation” refers to the Third Amended and Restated Articles of Incorporation of First Interstate;
“First Interstate Bank” refers to First Interstate Bank, a Montana-chartered bank and wholly- owned bank subsidiary of First Interstate;
“First Interstate board of directors” refers to the board of directors of First Interstate;
“First Interstate Class A common stock” refers to the Class A common stock, no par value per share, of First Interstate;
“First Interstate Class B common stock” refers to the Class B common stock, no par value per share, of First Interstate;
“First Interstate common stock” refers to the First Interstate Class A common stock and the First Interstate Class B common stock;
“Great Western” refers to Great Western Bancorp, Inc., a Delaware corporation;
“Great Western Bank” refers to Great Western Bank, a South Dakota state chartered bank and a wholly-owned bank subsidiary of Great Western;
“Great Western board of directors” refers to the board of directors of Great Western; and
“Great Western common stock” refers to the common stock, par value $0.01 per share, of Great Western.
Q:
Why am I receiving this joint proxy statement/prospectus?
A:
You are receiving this joint proxy statement/prospectus because First Interstate and Great Western have agreed to combine their companies through the merger of Great Western with and into First Interstate (the “merger”), with First Interstate as the surviving entity (the “surviving corporation” or “First Interstate”, as the case may be). A copy of the Agreement and Plan of Merger, dated as of September 15, 2021, by and between Great Western and First Interstate (as amended from time to time, the “merger agreement”) is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference herein. Following the completion of the merger, Great Western Bank will merge (the “bank merger”) with and into First Interstate Bank, with First Interstate Bank as the surviving bank (the “surviving bank”).
To complete the merger, among other things:
holders of First Interstate common stock must approve the merger agreement (the “First Interstate merger proposal”);
holders of First Interstate common stock must approve an amendment to First Interstate’s articles of incorporation to increase the number of authorized shares of First Interstate Class A common stock from one hundred million (100,000,000) shares to one hundred fifty million (150,000,000) shares (the “First Interstate authorized shares amendment” and such proposal, the “First Interstate authorized share count proposal”);
holders of First Interstate common stock must approve an amendment to First Interstate’s articles of incorporation to make certain technical changes (together with the First Interstate authorized shares
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amendment, the “First Interstate articles amendment”), which are intended to incorporate into First Interstate’s articles of incorporation provisions that currently exist in First Interstate’s bylaws, relating to the classification of the First Interstate board of directors into three classes, with directors in each class serving staggered three-year terms (the “First Interstate staggered board proposal”); and
holders of Great Western common stock must approve the merger agreement (the “Great Western merger proposal”).
First Interstate is holding a special meeting of holders of First Interstate common stock (the “First Interstate special meeting”) to obtain approval of the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal. Holders of First Interstate common stock will also be asked to approve the proposal to adjourn or postpone the First Interstate special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes at the time of the First Interstate special meeting to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of First Interstate common stock (the “First Interstate adjournment proposal”). A copy of the First Interstate articles amendment is attached as Annex B to this joint proxy statement/prospectus and is incorporated by reference herein.
Concurrently with the execution and delivery of the merger agreement, certain shareholders of First Interstate (the “Scott Family shareholders”) entered into a support agreement (the “support agreement”), pursuant to which they have agreed, among other things, to vote all of the shares of First Interstate common stock beneficially owned by them (constituting approximately 53.1% of the voting power represented by issued and outstanding shares of First Interstate common stock as of December 13, 2021, the record date for the First Interstate special meeting) in favor of the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal, on the terms and subject to the conditions set forth in the support agreement.
Holders of First Interstate common stock are not entitled to appraisal or dissenters’ rights.
Great Western is holding a special meeting of holders of Great Western common stock (the “Great Western special meeting”) to obtain approval of the Great Western merger proposal. Holders of Great Western common stock will also be asked (1) to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Great Western’s named executive officers that is based on or otherwise relates to the merger (the “Great Western compensation proposal”) and (2) to approve the proposal to adjourn or postpone the Great Western special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes at the time of the Great Western special meeting to approve the Great Western merger proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of Great Western common stock (the “Great Western adjournment proposal”).
Holders of Great Western common stock are not entitled to appraisal or dissenters’ rights.
This document is also a prospectus that is being delivered to holders of Great Western common stock because, in connection with the merger, First Interstate is offering shares of First Interstate Class A common stock to holders of Great Western common stock.
This joint proxy statement/prospectus contains important information about the merger and the other proposals being voted on at the First Interstate special meeting and the Great Western special meeting. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares of common stock voted by proxy without attending your meeting. Your vote is important and we encourage you to submit your proxy as soon as possible.
Q:
What will happen in the merger?
A:
In the merger, Great Western will merge with and into First Interstate. Each share of Great Western common stock issued and outstanding immediately prior to the effective time of the merger (the “effective time”) (other than certain shares held by First Interstate or Great Western) will be converted into the right to receive 0.8425 shares (the “exchange ratio” and such shares, the “merger consideration”) of First Interstate Class A common
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stock. After completion of the merger, Great Western will cease to exist, will no longer be a public company, and Great Western common stock will be delisted from the New York Stock Exchange (the “NYSE”), will be deregistered under the Exchange Act and will cease to be publicly traded. Holders of First Interstate common stock will continue to own their existing shares of First Interstate common stock. See the information provided in the section entitled “The Transaction Agreements—Description of the Merger Agreement—Structure of the Merger” beginning on page 120 and the merger agreement for more information about the merger.
Q:
When and where will each of the special meetings take place?
A:
The First Interstate special meeting will be held at First Interstate Bank Great West Center, 1800 Sixth Avenue North, Billings, MT 59101 on January 19, 2022 at 3:30 p.m., mountain time.
The Great Western special meeting will be held virtually via the Great Western special meeting website, on January 19, 2022, at 4:30 p.m., central time.
Even if you plan to attend your respective company’s special meeting, First Interstate and Great Western recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the applicable special meeting. Shares held in “street name” may be voted at the special meeting by you only if you obtain a signed legal proxy from your bank, broker, trustee or other nominee giving you the right to vote the shares.
Q:
What matters will be considered at each of the special meetings?
A:
At the First Interstate special meeting, holders of First Interstate common stock will be asked to consider and vote on the following proposals:
The First Interstate merger proposal. Approval of the merger agreement;
The First Interstate authorized share count proposal. Approval of an amendment to First Interstate’s articles of incorporation to increase the number of authorized shares of First Interstate Class A common stock from one hundred million (100,000,000) shares to one hundred fifty million (150,000,000) shares;
The First Interstate staggered board proposal. Approval of an amendment to First Interstate’s articles of incorporation to make certain technical changes, which are intended to incorporate provisions that currently exist in First Interstate’s bylaws, relating to the classification of the First Interstate board of directors into three classes, with directors in each class serving staggered three-year terms; and
The First Interstate adjournment proposal. Approval of the adjournment or postponement of the First Interstate special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes at the time of the First Interstate special meeting to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of First Interstate common stock.
At the Great Western special meeting, holders of Great Western common stock will be asked to consider and vote on the following proposals:
The Great Western merger proposal. Approval of the merger agreement;
The Great Western compensation proposal. Approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to Great Western’s named executive officers that is based on or otherwise relates to the merger; and
The Great Western adjournment proposal. Approval of the adjournment or postponement of the Great Western special meeting, if necessary or appropriate, to solicit additional proxies if, immediately prior to such adjournment or postponement, there are not sufficient votes at the time of the Great Western special meeting to approve the Great Western merger proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of Great Western common stock.
In order to complete the merger, among other things, holders of First Interstate common stock must approve the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal and holders of Great Western common stock must approve the Great Western merger
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proposal. None of the approvals of the First Interstate adjournment proposal, the Great Western compensation proposal or the Great Western adjournment proposal are conditions to the obligations of First Interstate or Great Western to complete the merger.
Q:
What will holders of Great Western common stock receive in the merger?
A:
In the merger, holders of Great Western common stock will receive 0.8425 shares of First Interstate Class A common stock for each share of Great Western common stock held immediately prior to the completion of the merger (other than certain shares held by First Interstate or Great Western). First Interstate will not issue any fractional shares of First Interstate Class A common stock in the merger. Holders of Great Western common stock who would otherwise be entitled to a fractional share of First Interstate Class A common stock in the merger will instead receive an amount in cash (rounded to the nearest cent) determined by multiplying the average of the closing-sale prices per share of First Interstate Class A common stock on the NASDAQ for the consecutive period of five (5) full trading days immediately preceding (but not including) the day on which the merger is completed (the “First Interstate closing share value”) by the fraction of a share (rounded to the nearest thousandth when expressed in decimal form) of First Interstate Class A common stock that such shareholder would otherwise be entitled to receive.
Q:
What will holders of First Interstate common stock receive in the merger?
A:
In the merger, holders of First Interstate common stock will not receive any consideration, and their shares of First Interstate common stock will remain outstanding and will constitute shares of the surviving corporation. Following the merger, shares of First Interstate Class A common stock will continue to be listed on the NASDAQ.
First Interstate expects that, based on the number of shares of First Interstate Class A common stock issued and outstanding as of December 13, 2021, the number of shares of First Interstate Class B common stock issued and outstanding as of December 13, 2021, and the number of shares of First Interstate Class A common stock that First Interstate will issue in the merger pursuant to the merger agreement, the number of shares of First Interstate Class B common stock outstanding as of the effective time will constitute less than twenty percent (20%) of the aggregate number of shares of First Interstate common stock then outstanding, such that, pursuant to First Interstate’s articles of incorporation, each share of First Interstate Class B common stock as of the record date of the first meeting of shareholders of First Interstate following the effective time will be automatically converted as of such record date into one (1) fully paid and non-assessable share of First Interstate Class A common stock (the “conversion”).
Q:
Will the value of the merger consideration change between the date of this joint proxy statement/prospectus and the time the merger is completed?
A:
Yes. Although the number of shares of First Interstate Class A common stock that holders of Great Western common stock will receive is fixed, the value of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus and the completion of the merger based upon the market value for First Interstate Class A common stock. Any fluctuation in the market price of First Interstate Class A common stock after the date of this joint proxy statement/prospectus will change the value of the shares of First Interstate Class A common stock that holders of Great Western common stock will receive. Neither First Interstate nor Great Western is permitted to terminate the merger agreement as a result, in and of itself, of any increase or decrease in the market price of First Interstate Class A common stock or Great Western common stock.
Q:
How will the merger affect Great Western equity awards?
A:
At the effective time:
each outstanding restricted stock unit award in respect of shares of Great Western common stock (a “Great Western RSU”) will, by virtue of the merger, fully vest and be cancelled and converted automatically into the right to receive the merger consideration, as if such Great Western RSU had been settled in shares of Great Western common stock immediately prior to the effective time; and
each outstanding performance stock unit award in respect of shares of Great Western common stock (a “Great Western PSU”) will, by virtue of the merger, vest at the greater of the target and actual levels of
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performance, as determined by the Great Western board of directors or a committee thereof prior to the effective time, and be cancelled and converted automatically into the right to receive the merger consideration, as if such Great Western PSU had been settled in shares of Great Western common stock immediately prior to the effective time.
Q:
How does the First Interstate board of directors recommend that I vote at the First Interstate special meeting?
A:
The First Interstate board of directors unanimously recommends that you vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal, and “FOR” the First Interstate adjournment proposal.
In considering the recommendations of the First Interstate board of directors, holders of First Interstate common stock should be aware that First Interstate directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of holders of First Interstate common stock generally. For a more complete description of these interests, see the information provided in the section entitled “The Merger—Interests of First Interstate’s Directors and Executive Officers in the Merger” beginning on page 110.
Q:
How does the Great Western board of directors recommend that I vote at the Great Western special meeting?
A:
The Great Western board of directors unanimously recommends that you vote “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal, and “FOR” the Great Western adjournment proposal.
In considering the recommendations of the Great Western board of directors, holders of Great Western common stock should be aware that Great Western directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of holders of Great Western common stock generally. For a more complete description of these interests, see the information provided in the section entitled “The Merger—Interests of Great Western’s Directors and Executive Officers in the Merger” beginning on page 111.
Q:
Who is entitled to vote at the First Interstate special meeting?
A:
The record date for the First Interstate special meeting is December 13, 2021. All holders of First Interstate common stock who held shares at the close of business on the record date for the First Interstate special meeting are entitled to receive notice of, and to vote at, the First Interstate special meeting.
Each holder of First Interstate Class A common stock is entitled to cast one (1) vote on each matter properly brought before the First Interstate special meeting for each share of First Interstate Class A common stock that such holder owned of record as of the record date. As of the close of business on the record date for the First Interstate special meeting, there were 41,686,490 outstanding shares of First Interstate Class A common stock. Each holder of First Interstate Class B common stock is entitled to cast five (5) votes on each matter properly brought before the First Interstate special meeting for each share of First Interstate Class B common stock that such holder owned of record as of the record date. As of the close of business on the record date for the First Interstate special meeting, there were 20,514,347 outstanding shares of First Interstate Class B common stock. Attendance at the special meeting is not required to vote. See below and the section entitled “The First Interstate Special Meeting—Proxies” beginning on page 47 for instructions on how to vote your shares without attending the First Interstate special meeting.
Q:
Who is entitled to vote at the Great Western special meeting?
A:
The record date for the Great Western special meeting is December 13, 2021. All holders of Great Western common stock who held shares at the close of business on the record date for the Great Western special meeting are entitled to receive notice of, and to vote at, the Great Western special meeting or any adjournment or postponement thereof.
Each holder of Great Western common stock is entitled to cast one (1) vote on each matter properly brought before the Great Western special meeting for each share of Great Western common stock that such holder owned of record as of the record date. As of the close of business on the record date for the Great Western special
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meeting, there were 55,199,193 outstanding shares of Great Western common stock. Attendance at the special meeting is not required to vote. See below and the section entitled “The Great Western Special Meeting—Proxies” beginning on page 55 for instructions on how to vote your shares without attending the Great Western special meeting.
Q:
What constitutes a quorum for the First Interstate special meeting?
A:
Shares representing a majority of the votes entitled to be cast on a matter must be present or represented by proxy at the First Interstate special meeting to constitute a quorum for action on that matter at the First Interstate special meeting. If you fail to submit a proxy or to vote at the First Interstate special meeting on a proposal, or fail to instruct your bank, broker, trustee or other nominee how to vote on a proposal, your shares of First Interstate common stock will not be counted towards a quorum with respect to that proposal. Abstentions are considered present for purposes of establishing a quorum.
Q:
What constitutes a quorum for the Great Western special meeting?
A:
Holders of a majority of the outstanding shares of Great Western common stock entitled to vote on a matter must be present or represented by proxy at the Great Western special meeting to constitute a quorum for the transaction of business at the Great Western special meeting. If you fail to submit a proxy or to vote at the Great Western special meeting, or fail to instruct your bank, broker, trustee or other nominee how to vote, your shares of Great Western common stock will not be counted towards a quorum. Abstentions are considered present for purposes of establishing a quorum.
Q:
If my shares of common stock are held in “street name” by my broker, will my broker vote my shares for me?
A:
If you hold your shares in a stock brokerage account or if your shares are held by a bank, broker, trustee or other nominee (that is, in “street name”) and fail to give voting instructions, your bank, broker, trustee or other nominee will not vote those shares. Please follow the voting instructions provided by your broker, bank, trustee or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to First Interstate or Great Western or by voting at either special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker, trustee or other nominee. Further, brokers who hold shares of First Interstate common stock or Great Western common stock may not give a proxy to First Interstate or Great Western to vote those shares on any of the First Interstate proposals or any of the Great Western proposals without specific instructions from their customers.
Q:
What vote is required for the approval of each proposal at the First Interstate special meeting?
A:
Proposal 1: First Interstate merger proposal. Approval of the First Interstate merger proposal requires the affirmative vote of a majority of the votes entitled to be cast on the merger agreement, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. Shares of First Interstate common stock not present, and shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as votes cast “AGAINST” the First Interstate merger proposal.
Proposal 2: First Interstate authorized share count proposal. Approval of the First Interstate authorized share count proposal requires the affirmative vote of a majority of the voting power of the issued and outstanding shares of First Interstate common stock, with the holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. Shares of First Interstate common stock not present, and shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as votes cast “AGAINST” the First Interstate authorized share count proposal.
Proposal 3: First Interstate staggered board proposal. Approval of the First Interstate staggered board proposal requires the affirmative vote of a majority of the votes entitled to be cast on the proposal, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. Shares of First Interstate common stock not present, and shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as votes cast “AGAINST” the First Interstate staggered board proposal.
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Proposal 4: First Interstate adjournment proposal. Approval of the First Interstate adjournment proposal requires the affirmative vote of the majority of the votes cast on the proposal, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. Accordingly, an abstention or a broker non-vote or other failure to vote or be present will have no effect on the outcome of the First Interstate adjournment proposal.
Concurrently with the execution and delivery of the merger agreement, the Scott Family shareholders entered into the support agreement, pursuant to which, among other things, each Scott Family shareholder has agreed, subject to the terms of the support agreement, to vote the shares of First Interstate common stock owned by it in favor of the approval and adoption of the merger agreement and the First Interstate articles amendment. As of December 13, 2021, the record date for the First Interstate special meeting, the Scott Family shareholders collectively owned approximately 53.1% of the voting power represented by issued and outstanding shares of First Interstate common stock.
Q:
What vote is required for the approval of each proposal at the Great Western special meeting?
A:
Proposal 1: Great Western merger proposal. Approval of the Great Western merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Great Western common stock entitled to vote on the merger agreement. Shares of Great Western common stock not present, and shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as votes cast “AGAINST” the Great Western merger proposal.
Proposal 2: Great Western compensation proposal. Approval of the Great Western compensation proposal requires the affirmative vote of the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter. An abstention will have the same effect as a vote “AGAINST” the Great Western compensation proposal. A broker non-vote will have no effect on the outcome of the Great Western compensation proposal.
Proposal 3: Great Western adjournment proposal. Approval of the Great Western adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter. An abstention will have the same effect as a vote “AGAINST” the Great Western adjournment proposal. A broker non-vote will have no effect on the outcome of the Great Western adjournment proposal.
Q:
Why am I being asked to consider and vote on the Great Western compensation proposal?
A:
Under SEC rules, Great Western is required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to Great Western’s named executive officers that is based on or otherwise relates to the merger.
Q:
What happens if holders of Great Western common stock do not approve, by non-binding, advisory vote, the Great Western compensation proposal?
A:
The vote on the Great Western compensation proposal is separate and apart from the votes to approve the other proposals being presented at the Great Western special meeting. Because the vote on the Great Western compensation proposal is advisory only, it will not be binding upon Great Western, First Interstate, or the surviving corporation in the merger or affect their obligation to pay or provide the compensation contemplated by the compensation agreements and arrangements. Accordingly, the merger-related compensation will be paid to Great Western’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the holders of Great Western common stock do not approve the Great Western compensation proposal.
Q:
What if I hold shares in both First Interstate and Great Western?
A:
If you hold shares of both First Interstate common stock and Great Western common stock, you will receive two (2) separate packages of proxy materials. A vote cast as a holder of First Interstate common stock will not count as a vote cast as a holder of Great Western common stock, and a vote cast as a holder of Great Western common stock will not count as a vote cast as a holder of First Interstate common stock. Therefore, please submit separate proxies for your shares of First Interstate common stock and your shares of Great Western common stock.
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Q:
How can I vote my shares while in attendance at my respective special meeting?
A:
Record holders. Shares held directly in your name as the holder of record of First Interstate common stock or Great Western common stock may be voted at the First Interstate special meeting or the Great Western special meeting, as applicable. If you choose to vote your shares of First Interstate common stock in person at the First Interstate special meeting, please bring your enclosed proxy card and proof of identification. If you choose to vote your shares of Great Western common stock virtually at the Great Western special meeting via the Great Western special meeting website, please follow the instructions on your proxy card.
Shares in “street name.” Shares of First Interstate common stock held in a brokerage or other account in “street name” may be voted in person by you only if you obtain a signed legal proxy from your bank, broker, trustee or other nominee giving you the right to vote the shares. If you choose to vote your shares of First Interstate common stock in street name in person at the First Interstate special meeting, please bring that signed legal proxy along with proof of identification. If your shares of Great Western common stock are held in street name and you wish to vote your shares at the Great Western special meeting via the Great Western special meeting website, you must have your specific 16-digit control number, which is included on your proxy card or the voting instruction form from your bank, broker, trustee or other nominee. Please contact your bank, broker, trustee or other nominee to obtain further instructions.
Even if you plan to attend the First Interstate special meeting or the Great Western special meeting, as applicable, First Interstate and Great Western recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the respective special meeting.
Additional information on attending the special meetings can be found under the section entitled “The First Interstate Special Meeting” on page 45 and under the section entitled “The Great Western Special Meeting” on page 53.
Q:
How can I vote my shares without attending my respective special meeting?
A:
Whether you hold your shares directly as the holder of record of First Interstate common stock or Great Western common stock or beneficially in “street name”, you may direct your vote by proxy without attending the First Interstate special meeting or the Great Western special meeting, as applicable.
If you are a record holder of First Interstate common stock or Great Western common stock, you can vote by proxy over the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. Please note that if you hold shares beneficially in “street name”, you should follow the voting instructions provided by your bank, broker, trustee or other nominee.
If you intend to submit your proxy by telephone or via the Internet, you must do so by 11:59 p.m., Eastern Time, on the day before your respective company’s special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to your respective company’s special meeting.
Additional information on voting procedures can be found under the section entitled “The First Interstate Special Meeting” on page 45 and under the section entitled “The Great Western Special Meeting” on page 53.
Q:
What do I need to do now?
A:
After carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote as soon as possible. If you hold shares of First Interstate common stock or Great Western common stock, please respond by completing, signing and dating the accompanying proxy card and returning it in the enclosed postage-paid envelope, or by submitting your proxy by telephone or through the Internet, as soon as possible so that your shares may be represented at your meeting. Please note that if you hold shares beneficially in “street name”, you should follow the voting instructions provided by your bank, broker, trustee or other nominee.
Q:
Why is my vote important?
A:
If you do not vote, it will be more difficult for First Interstate or Great Western to obtain the necessary quorum to hold its special meeting. In addition, your failure to submit a proxy or vote at the respective special meeting, or failure to instruct your bank, broker, trustee or other nominee how to vote, will have the same effect as a vote “AGAINST” the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal and the Great Western merger proposal, as applicable.
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The merger agreement must be approved by the affirmative vote of a majority of the votes entitled to be cast on the merger agreement by First Interstate shareholders, with the holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class, and the affirmative vote of the holders of a majority of the outstanding shares of Great Western common stock entitled to vote on the merger agreement.
The First Interstate staggered board proposal must be approved by the affirmative vote of a majority of the votes entitled to be cast on the proposal by First Interstate shareholders, with the holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. The First Interstate authorized share count proposal must be approved by the affirmative vote of a majority of the voting power of the issued and outstanding shares of First Interstate common stock, with the holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. The affirmative vote of the majority of the votes cast, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class, is required to approve the First Interstate adjournment proposal. The affirmative vote of the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter is required to approve each of the Great Western compensation proposal and the Great Western adjournment proposal. The First Interstate board of directors unanimously recommends that you vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal and “FOR” the First Interstate adjournment proposal. The Great Western board of directors unanimously recommends that you vote “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal and “FOR” the Great Western adjournment proposal.
Q:
Can I change my vote after I have delivered my proxy or voting instruction card?
A:
Yes. You can change your vote at any time before your proxy is voted at your meeting. You can do this by:
submitting a written statement that you would like to revoke your proxy to the corporate secretary of First Interstate or Great Western, as applicable;
signing and returning a proxy card with a later date;
attending the special meeting, notifying the corporate secretary and voting by ballot at the special meeting; or
voting by telephone or the Internet at a later time.
If your shares are held by a broker, bank, trustee or other nominee, you should contact your broker, bank, trustee or other nominee to change your vote.
Q:
Will First Interstate be required to submit the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal to its shareholders even if the First Interstate board of directors has withdrawn, modified or qualified its recommendation?
A:
Yes. Unless the merger agreement is terminated before the First Interstate special meeting, First Interstate is required to submit the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal to its shareholders even if the First Interstate board of directors has withdrawn or modified its recommendation.
Q:
Will Great Western be required to submit the Great Western merger proposal to its stockholders even if the Great Western board of directors has withdrawn, modified or qualified its recommendation?
A:
Yes. Unless the merger agreement is terminated before the Great Western special meeting, Great Western is required to submit the Great Western merger proposal to its stockholders even if the Great Western board of directors has withdrawn or modified its recommendation.
Q:
Are holders of First Interstate common stock entitled to appraisal or dissenters’ rights?
A:
No. Holders of First Interstate common stock are not entitled to appraisal or dissenters’ rights under the Montana Business Corporation Act, as amended (the “MBCA”). For more information, see the section entitled “The Merger—Appraisal or Dissenters’ Rights in the Merger” beginning on page 119.
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Q:
Are holders of Great Western common stock entitled to appraisal or dissenters’ rights?
A:
No. Holders of Great Western common stock are not entitled to appraisal or dissenters’ rights under the Delaware General Corporation Law, as amended (the “DGCL”). For more information, see the section entitled “The Merger—Appraisal or Dissenters’ Rights in the Merger” beginning on page 119.
Q:
Are there any risks that I should consider in deciding whether to vote for the approval of the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal or the Great Western merger proposal, or the other proposals to be considered at the First Interstate special meeting and the Great Western special meeting, respectively?
A:
Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 36. You also should read and carefully consider the risk factors of First Interstate and Great Western contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.
Q:
What are the material U.S. federal income tax consequences of the merger to holders of Great Western common stock?
A:
The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that First Interstate and Great Western each receive a legal opinion to the effect that the merger will so qualify. Assuming the receipt and accuracy of these opinions, holders of Great Western common stock generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their Great Western common stock for First Interstate Class A common stock in the merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of First Interstate Class A common stock. You should be aware that the tax consequences to you of the merger may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the merger. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 139.
Q:
When is the merger expected to be completed?
A:
First Interstate and Great Western expect the merger to close in the first quarter of 2022. However, neither First Interstate nor Great Western can predict the actual date on which the merger will be completed, or if the merger will be completed at all, because completion is subject to conditions and factors outside the control of both companies. First Interstate and Great Western must first obtain the approval of holders of First Interstate common stock and holders of Great Western common stock for the merger, as well as obtain necessary regulatory approvals and satisfy certain other closing conditions.
Q:
What are the conditions to completion of the merger?
A:
The obligations of First Interstate and Great Western to complete the merger are subject to the satisfaction or waiver of certain closing conditions contained in the merger agreement, including the receipt of required regulatory approvals and the expiration of statutory waiting periods without the imposition of any materially burdensome regulatory condition, tax opinions, approval by holders of First Interstate common stock of the First Interstate merger proposal, the First Interstate authorized share count proposal and the First Interstate staggered board proposal and approval by holders of Great Western common stock of the Great Western merger proposal. For more information, see the section entitled “The Transaction Agreements-Description of the Merger Agreement-Conditions to Completion of the Merger” beginning on page 133.
Q:
What happens if the merger is not completed?
A:
If the merger is not completed, holders of Great Western common stock will not receive any consideration for their shares of Great Western common stock in connection with the merger. Instead, Great Western will remain an independent public company, Great Western common stock will continue to be listed on the NYSE, and First Interstate will not complete the issuance of shares of First Interstate Class A common stock pursuant to the merger agreement. In addition, if the merger agreement is terminated in certain circumstances, a termination fee
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of $105 million may be payable by First Interstate to Great Western or a termination fee of $70 million may be payable by Great Western to First Interstate, as applicable. See the section entitled “The Transaction Agreements—Description of the Merger Agreement—Termination Fees” beginning on page 135 for a more detailed discussion of the circumstances under which a termination fee will be required to be paid.
Q:
Should I send in my stock certificates now?
A:
No. Please do not send in your stock certificates with your proxy. After the merger is completed, an exchange agent mutually agreed upon by First Interstate and Great Western (the “exchange agent”) will send you instructions for exchanging Great Western stock certificates for the consideration to be received in the merger. See the section entitled “The Transaction Agreements—Description of the Merger Agreement—Conversion of Shares; Exchange of Great Western Stock Certificates” beginning on page 122.
Q:
What should I do if I receive more than one set of voting materials for the same special meeting?
A:
If you hold shares of First Interstate common stock or Great Western common stock in “street name” and also directly in your name as a holder of record or otherwise or if you hold shares of First Interstate common stock or Great Western common stock in more than one (1) brokerage account, you may receive more than one (1) set of voting materials relating to the same special meeting.
Record holders. For shares held directly, please complete, sign, date and return each proxy card (or cast your vote by telephone or Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of First Interstate common stock or Great Western common stock are voted.
Shares in “street name.” For shares held in “street name” through a bank, broker, trustee or other nominee, you should follow the procedures provided by your bank, broker, trustee or other nominee to vote your shares.
Q:
Who can help answer my questions?
A:
First Interstate shareholders: If you have any questions about the merger or how to submit your proxy or voting instruction card, or if you need additional copies of this document or the enclosed proxy card or voting instruction card, you should contact First Interstate’s corporate secretary at 401 North 31st Street, Billings, Montana 59101, Telephone: (406) 255-5304, or First Interstate’s proxy solicitor, MacKenzie Partners Inc. (“MacKenzie”), at 1407 Broadway, 27th Floor, New York, New York 10018, Telephone: (800) 322-2885, Banks and Brokers: (212) 929-5500, Email: proxy@mackenziepartners.com.
Great Western stockholders: If you have any questions about the merger or how to submit your proxy or voting instruction card, or if you need additional copies of this document or the enclosed proxy card or voting instruction card, you should contact Great Western’s corporate secretary at 225 S. Main Ave., Sioux Falls, South Dakota 57104, Attention: Corporate Secretary, or by telephone at (605) 334–2548, or Great Western’s proxy solicitor, Innisfree M&A Incorporated (“Innisfree”), by calling toll-free at (877) 750-9496, or for banks and brokers, collect at (212) 750-5833.
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SUMMARY
This summary highlights selected information in this joint proxy statement/prospectus and may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus and the other documents we refer you to for a more complete understanding of the matters being considered at the special meetings. In addition, we incorporate by reference important business and financial information about First Interstate and Great Western into this joint proxy statement/prospectus. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus.
The Parties to the Merger (pages 60 and 61)
First Interstate BancSystem, Inc.
401 North 31st Street
Billings, MT 59101
(406) 255-5322
First Interstate is a financial and bank holding company focused on community banking. Since its incorporation in Montana in 1971, First Interstate has grown both organically and through strategic acquisitions. First Interstate operates 147 banking offices, including detached drive-up facilities, in communities across six states: Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming. Through its bank subsidiary, First Interstate Bank, First Interstate delivers a comprehensive range of banking products and services, including online and mobile banking, to individuals, businesses, municipalities, and others throughout its market areas. As of September 30, 2021, First Interstate had consolidated assets of $19.4 billion, deposits of $16.0 billion, loans held for investment of $9.6 billion, and total stockholders’ equity of $2.0 billion.
First Interstate Class A common stock is traded on the NASDAQ under the symbol “FIBK”.
Great Western Bancorp, Inc.
225 South Main Avenue
Sioux Falls, South Dakota 57104
(605) 334-2548
Great Western is a bank holding company incorporated in the state of Delaware and maintains its principal executive office in Sioux Falls, South Dakota. Great Western is a full-service regional bank holding company focused on relationship-based business banking through its wholly owned banking subsidiary, Great Western Bank. Great Western serves its customers through 175 branches in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. Great Western provides a wide range of services, including commercial and consumer loan and depository services, private banking, brokerage, trust, investment advisory and other traditional banking services. At September 30, 2021, Great Western had total consolidated assets of $12.9 billion, total consolidated loans of $8.2 billion, total consolidated deposits of $11.3 billion, and total consolidated stockholders’ equity of $1.2 billion.
Great Western common stock is traded on the NYSE under the symbol “GWB.”
The Merger and the Merger Agreement (pages 62 and 120)
The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the merger agreement carefully and in its entirety, as it is the primary legal document that governs the merger.
Structure of the Merger
Subject to the terms and conditions of the merger agreement, at the completion of the merger, Great Western will merge with and into First Interstate, with First Interstate as the surviving corporation. Following the completion of the merger, Great Western Bank will merge with and into First Interstate Bank, with First Interstate Bank as the surviving bank in the bank merger. Following the merger, Great Western common stock will be delisted from the NYSE and deregistered under the Exchange Act and will cease to be publicly traded.
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Prior to the completion of the merger, First Interstate and Great Western may, by mutual agreement, change the method or structure of effecting the combination of First Interstate and Great Western if and to the extent they both deem such change to be necessary, appropriate or desirable; provided that (unless the merger agreement is so amended in accordance with the terms thereof) no such change may (1) alter or change the exchange ratio or the number of shares of First Interstate Class A common stock received by holders of Great Western common stock in exchange for each share of Great Western common stock, (2) adversely affect the tax treatment of Great Western’s stockholders or First Interstate’s shareholders pursuant to the merger agreement, (3) adversely affect the tax treatment of Great Western or First Interstate pursuant to the merger agreement or (4) materially impede or delay the completion of the transactions contemplated by the merger agreement in a timely manner.
Merger Consideration
In the merger, holders of Great Western common stock will receive 0.8425 shares of First Interstate Class A common stock for each share of Great Western common stock they hold immediately prior to the effective time. First Interstate will not issue any fractional shares of First Interstate Class A common stock in the merger. Holders of Great Western common stock who would otherwise be entitled to a fraction of a share of First Interstate Class A common stock in the merger will instead receive, for the fraction of a share, an amount in cash (rounded to the nearest cent) based on the First Interstate closing share value.
First Interstate Class A common stock is listed on the NASDAQ under the symbol “FIBK”, and Great Western common stock is listed on the NYSE under the symbol “GWB”. The following table shows the closing sale prices of First Interstate Class A common stock as reported on the NASDAQ on September 15, 2021 and Great Western common stock as reported on the NYSE on September 15, 2021, the last full trading day before the public announcement of the merger agreement, and on December 10, 2021, the last practicable trading day before the date of this joint proxy statement/prospectus. This table also shows the implied value of the merger consideration to be issued in exchange for each share of Great Western common stock, which was calculated by multiplying the closing price of First Interstate Class A common stock on those dates by the exchange ratio of 0.8425.
 
First
Interstate
Class A
Common
Stock
Great
Western
Common
Stock
Implied Value
of One Share of
Great Western
Common Stock
September 15, 2021
$ 42.32
$ 28.60
$ 35.65
December 10, 2021
$ 39.95
$ 32.82
$ 33.66
For more information on the exchange ratio, see the section entitled “The Merger—Terms of the Merger” beginning on page 62 and the section entitled “The Transaction Agreements-Description of the Merger Agreement—Merger Consideration” beginning on page 121.
Treatment of Great Western Equity Awards (page 111)
At the effective time, each outstanding Great Western RSU and Great Western PSU will vest and be converted into the right to receive the merger consideration with respect to each share of Great Western common stock underlying such Great Western RSU or Great Western PSU as though such awards had been settled in shares of Great Western common stock immediately prior to the effective time, with the number of shares underlying Great Western PSUs determined assuming performance goals are satisfied at the greater of target and actual levels of performance as determined by the Great Western board of directors or a committee thereof prior to the effective time.
Material U.S. Federal Income Tax Consequences of the Merger (page 139)
The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that First Interstate and Great Western each receive a legal opinion to the effect that the merger will so qualify. Assuming the receipt and accuracy of these opinions, holders of Great Western common stock generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their Great Western common stock for First Interstate Class A common stock in the merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of First Interstate Class A common stock.
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You should be aware that the tax consequences to you of the merger may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the merger.
First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors (page 85)
The First Interstate board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of First Interstate and its shareholders and has unanimously adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. The First Interstate board of directors unanimously recommends that holders of First Interstate common stock vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal, and “FOR” the First Interstate adjournment proposal. For a more detailed discussion of the First Interstate board of directors’ recommendation, see the section entitled “The Merger—First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors” beginning on page 85.
Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors (page 73)
The Great Western board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Great Western and its stockholders and has unanimously adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Great Western board of directors unanimously recommends that holders of Great Western common stock vote “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal and “FOR” the Great Western adjournment proposal. For a more detailed discussion of the Great Western board of directors’ recommendation, see the section entitled “The Merger—Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors” beginning on page 73 of this joint proxy statement/prospectus.
Opinions of First Interstate’s Financial Advisors (page 88)
Opinion of Keefe, Bruyette & Woods, Inc.
In connection with the merger, Keefe, Bruyette & Woods, Inc. (“KBW”) delivered its opinion, dated September 15, 2021, to the First Interstate board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to First Interstate of the exchange ratio in the proposed merger. The full text of KBW’s opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached as Annex C to this joint proxy statement/prospectus. The opinion was for the information of, and was directed to, the First Interstate board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion did not address the underlying business decision of First Interstate to engage in the merger or enter into the merger agreement or constitute a recommendation to the First Interstate board of directors in connection with the merger, and it does not constitute a recommendation to any holder of First Interstate Class A common stock or First Interstate Class B common stock or any shareholder or stockholder of any other entity as to how to vote in connection with the merger or any other matter.
Opinion of Barclays Capital, Inc.
On September 15, 2021, Barclays Capital, Inc. (“Barclays”) rendered its opinion to the First Interstate board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to First Interstate of the exchange ratio in the proposed merger. The full text of Barclays’ written opinion, dated September 15, 2021, is attached as Annex D to this joint proxy statement/prospectus. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. Barclays’ opinion was for the use and benefit of the First Interstate board of directors and was rendered to the First Interstate board of directors in connection with its consideration of the merger, addresses only the fairness, from a financial point of view, of the exchange ratio to be paid by First Interstate in the merger and does not constitute a recommendation to any shareholder of
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First Interstate as to how such shareholder should vote with respect to the merger or any other matter. Barclays was not requested to opine as to, and its opinion does not in any manner address, First Interstate’s underlying business decision to proceed with or effect the merger or the relative merits of the merger as compared to any other transaction or business strategy in which First Interstate may engage.
Opinion of Great Western’s Financial Advisor (page 76)
Great Western retained Piper Sandler & Co. (“Piper Sandler”) to act as financial advisor to the Great Western board of directors in connection with Great Western’s consideration of a possible business combination.
At the September 15, 2021 meeting at which the Great Western board of directors considered the merger and the merger agreement, Piper Sandler delivered to the Great Western board of directors its oral opinion, which was subsequently confirmed in writing on September 15, 2021, to the effect that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the exchange ratio was fair to the holders of Great Western common stock from a financial point of view. The full text of Piper Sandler’s opinion is attached as Annex E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. The description of the opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. Holders of Great Western common stock are urged to read the entire opinion carefully in connection with their consideration of the merger and adoption of the merger agreement. Piper Sandler’s opinion was addressed to the Great Western board of directors (in its capacity as such) in connection with and for the purposes of its consideration of the merger and the merger agreement, and does not constitute a recommendation to any stockholder of Great Western as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the adoption of the merger and the merger agreement.
Appraisal or Dissenters’ Rights in the Merger (page 119)
Holders of First Interstate common stock are not entitled to appraisal or dissenters’ rights under the MBCA and holders of Great Western common stock are not entitled to appraisal or dissenters’ rights under the DGCL. For more information, see the section entitled “The Merger—Appraisal or Dissenters’ Rights in the Merger” beginning on page 119.
Interests of First Interstate’s Directors and Executive Officers in the Merger (page 110)
In considering the recommendation of the First Interstate board of directors to vote for the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal, and the First Interstate adjournment proposal, holders of First Interstate common stock should be aware that the directors and executive officers of First Interstate may have interests in the merger that are different from, or in addition to, the interests of holders of First Interstate common stock generally. The First Interstate board of directors was aware of these interests and considered them, among other matters, in making its recommendation that First Interstate shareholders vote to approve the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal and the First Interstate adjournment proposal.
These interests include:
eleven (11) legacy First Interstate directors, one of whom will be the Chief Executive Officer of First Interstate as of immediately prior to the effective time, will continue to serve on the First Interstate board of directors, as further described in the section entitled “The Merger—Governance of the Surviving Corporation After the Merger” beginning on page 115.
Mr. James R. Scott, Mr. James R. Scott Jr., Mr. Jonathon R. Scott and Mr. John M. Heyneman Jr. (the “Scott Family directors”) are party to the stockholders’ agreement, as discussed in further detail in “The Transaction Agreements—Description of the Stockholders’ Agreement” beginning on page 137.
The stockholders’ agreement provides for, among other things, First Interstate to make a contribution to the First Interstate BancSystem Foundation (the “FIBK Foundation”), as discussed in further detail in “The Transaction Agreements—Description of the Stockholders’ Agreement” beginning on page 137. Mr. Kevin Riley, President and Chief Executive Officer and a member of the First Interstate board of directors, Mr. James Scott, a member of the First Interstate board of directors, and certain members of the First Interstate management serve as directors on the board of directors of the FIBK Foundation.
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The Scott Family directors are party to the letter agreement, as discussed in further detail in “The Transaction Agreements—Description of the Letter Agreement” beginning on page 138.
The First Interstate board of directors was aware of and considered these respective interests when deciding to adopt and approve the merger agreement and the other transaction agreements. For more information, see the section entitled “The Merger—Interests of First Interstate’s Directors and Executive Officers in the Merger” beginning on page 110.
Interests of Great Western’s Directors and Executive Officers in the Merger (page 111)
In considering the recommendation of the Great Western’s board of directors to vote for the Great Western merger proposal, the Great Western compensation proposal and the Great Western adjournment proposal, holders of Great Western common stock should be aware that the directors and executive officers of Great Western may have interests in the merger that are different from, or in addition to, the interests of holders of Great Western common stock generally. The Great Western board of directors was aware of these interests and considered them, among other matters, in making its recommendation that Great Western shareholders vote to approve the Great Western merger proposal, the Great Western compensation proposal and the Great Western adjournment proposal.
These interests include:
each outstanding Great Western RSU and Great Western PSU will vest and be converted into the right to receive the merger consideration with respect to each share of Great Western common stock underlying such Great Western RSU or Great Western PSU as though such awards had been settled in shares of Great Western common stock immediately prior to the effective time of the merger, with the number of shares underlying Great Western PSUs determined assuming performance goals are satisfied at the greater of target and actual levels of performance as determined by the Great Western board of directors or a committee thereof prior to the effective time of the merger;
Great Western’s executive officers are party to employment agreements that provide for severance payments and benefits in connection with a termination of employment in connection with a change in control such as the merger;
certain of Great Western’s directors and executive officers are expected to continue to serve as directors or executive officers, as applicable, of the surviving corporation following the closing of the merger; and
Great Western’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.
The Great Western board of directors was aware of and considered these respective interests when deciding to adopt and approve the merger agreement. For more information, see the section entitled “The Merger—Interests of Great Western’s Directors and Executive Officers in the Merger” beginning on page 111.
Governance of the Surviving Corporation After the Merger (page 115)
Articles Amendment
In connection with the merger, First Interstate’s articles of incorporation will be amended to increase the number of authorized shares of First Interstate Class A common stock from one hundred million (100,000,000) shares to one hundred fifty million (150,000,000) shares. Further, First Interstate’s articles of incorporation will be amended to make certain technical changes, which are intended to incorporate provisions that currently exist in First Interstate’s bylaws, relating to the classification of the First Interstate board of directors into three classes, with directors in each class serving staggered three-year terms. A copy of the First Interstate articles amendment is attached to this joint proxy statement/prospectus as Annex B.
Except as described above, First Interstate’s articles of incorporation as in effect immediately prior to the effective time, as amended as described above, will be the articles of incorporation of the surviving corporation, until thereafter amended in accordance with applicable law.
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Bylaws
Prior to the closing of the merger (the “closing”), the First Interstate board of directors will take all actions necessary to cause the bylaws of First Interstate to be amended as set forth in Exhibit B to the merger agreement (such amendment, the “First Interstate bylaw amendment”), and as so amended, effective upon the completion of the merger, the bylaws of First Interstate will be the bylaws of the surviving corporation, until thereafter amended as provided therein or in accordance with applicable law. The First Interstate bylaw amendment provides that, from and after the effective time and until the date of the conversion, neither First Interstate nor the First Interstate board of directors may take any action that would prevent the conversion, and the provision in the bylaw amendment implementing such conversion arrangement may not be amended or repealed by the board of directors of the surviving corporation except by an affirmative vote of at least seventy-five percent (75%) of the entire board of directors of the surviving corporation (including at least one legacy Great Western director (as defined below)).
Board of Directors and Committees of the Board of Directors
The board of directors of the surviving corporation as of the effective time will have sixteen (16) members, consisting of:
the Chief Executive Officer of First Interstate immediately prior to the effective time;
ten (10) additional members of the First Interstate board of directors as of immediately prior to the effective time (together with the Chief Executive Officer of First Interstate as of immediately prior to the effective time, the “legacy First Interstate directors”); and
five (5) members of the Great Western board of directors as of immediately prior to the effective time (the “legacy Great Western directors”); provided that any legacy Great Western director must meet any applicable requirements or standards that may be imposed by a regulatory agency for service on the First Interstate board of directors.
Prior to the effective time, the parties will cooperate in good faith (coordinating through their respective Chairs) to mutually agree on the selection of the Great Western directors who will join the board of directors of the surviving corporation, their respective classes and their respective committee appointments, taking into account relevant considerations including skill sets, experience, diversity and inclusion, and the needs of the board of directors of the surviving corporation; provided, that (i) the legacy Great Western directors will be apportioned among the three (3) classes of the board of directors of the surviving corporation as nearly evenly as is possible, (ii) the Chair of the Great Western board of directors as of immediately prior to the effective time will be appointed to the Executive Committee of the board of directors of the surviving corporation effective as of the effective time and (iii) the legacy Great Western directors will be eligible and given due consideration for committee service to the same extent as the legacy First Interstate directors, and each legacy Great Western director will be appointed to at least two (2) standing committees of the board of directors of the surviving corporation effective as of the effective time.
In addition, pursuant to the merger agreement, the surviving corporation, the board of directors of the surviving corporation and the Governance and Nominating Committee of the board of directors of the surviving corporation will take all actions necessary to nominate the legacy Great Western directors for reelection to the board of directors of the surviving corporation at the first annual meeting of shareholders of the surviving corporation following the effective time, and thereafter (provided such directors continue to meet the director qualification and eligibility criteria of the Governance and Nominating Committee of the board of directors of the surviving corporation) any legacy Great Western director whose class term expires in fewer than three (3) years from the date on which closing of the merger occurs (the “closing date”) will be nominated for reelection to the board of directors of the surviving corporation upon the expiration of his or her term, so that each legacy Great Western director will serve as a member of the board of directors of the surviving corporation for a minimum of three (3) full years from the closing date.
In addition, pursuant to the merger agreement, First Interstate and Great Western have agreed to cooperate in good faith to develop, and make recommendations for approval by the board of directors of the surviving corporation with respect to, any advisable changes to the corporate governance guidelines and board committee charters of the surviving corporation to comply with applicable law and the listing requirements and corporate governance rules of NASDAQ in anticipation of the surviving corporation no longer qualifying as a “controlled company” under the NASDAQ Marketplace LLC Rules (the “NASDAQ rules”).
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Regulatory Approvals (page 117)
Subject to the terms of the merger agreement, First Interstate and Great Western have agreed to cooperate with each other and use reasonable best efforts to promptly prepare and file all documentation to obtain as promptly as practicable all permits, consents, orders, approvals, waivers, non-objections and authorizations of all third parties and governmental entities which are necessary or advisable to consummate the transactions contemplated by the merger agreement (including the merger and the bank merger), and to comply with the terms and conditions of all such permits, consents, orders, approvals, waivers, non-objections and authorizations of all such governmental entities. These approvals include the approval of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the Montana Division of Banking and Financial Institutions (“MDOB”) and the Division of Banking of the South Dakota Department of Labor and Regulation (“SDDB”).
Although neither First Interstate nor Great Western knows of any reason why it cannot obtain these regulatory approvals in a timely manner, First Interstate and Great Western cannot be certain when or if they will be obtained, or that the granting of these regulatory approvals will not involve the imposition of conditions on the completion of the merger or the bank merger.
Expected Timing of the Merger
First Interstate and Great Western expect the merger to close in the first quarter of 2022. However, neither First Interstate nor Great Western can predict the actual date on which the merger will be completed, or if the merger will be completed at all, because completion is subject to conditions and factors outside the control of both companies. First Interstate and Great Western must first obtain the approval of holders of First Interstate common stock and holders of Great Western common stock for the merger, as well as obtain necessary regulatory approvals and satisfy certain other closing conditions.
The Transaction Agreements (page 120)
Merger Agreement
Conditions to Completion of the Merger
As more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include:
approval of the merger agreement and the First Interstate articles amendment by the shareholders of First Interstate by the requisite First Interstate vote and approval of the merger agreement by the stockholders of Great Western by the requisite Great Western vote;
the authorization for listing on the NASDAQ, subject to official notice of issuance, of the shares of First Interstate Class A common stock that will be issued pursuant to the merger agreement;
the receipt of specified governmental consents and approvals, including from the Federal Reserve Board, the MDOB, and the SDDB, and termination or expiration of all applicable waiting periods in respect thereof, in each case without the imposition of any materially burdensome regulatory condition;
the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part, and the absence of any stop order suspending the effectiveness of the registration statement or proceedings for such purpose initiated or threatened by the SEC and not withdrawn;
no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement being in effect, and no law, statute, rule, regulation, order, injunction or decree having been enacted, entered, promulgated or enforced by any governmental entity which prohibits or makes illegal the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement;
the accuracy of the representations and warranties of First Interstate and Great Western in the merger agreement, generally as of the date on which the merger agreement was entered into and as of the closing date, subject to the materiality standards provided in the merger agreement (and the receipt by each party of a certificate dated as of the closing date and signed on behalf of the other party by its chief executive officer or chief financial officer to such effect);
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the performance in all material respects by each of First Interstate and Great Western of their respective obligations, covenants and agreements under the merger agreement (and the receipt by each party of a certificate dated as of the closing date and signed on behalf of the other party by its chief executive officer or chief financial officer to such effect); and
receipt by each of First Interstate and Great Western of an opinion of legal counsel to the effect that on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the completion of the merger, whether before or after the receipt of the requisite First Interstate vote or the requisite Great Western vote (except as indicated below), in the following circumstances:
by mutual written consent of First Interstate and Great Western;
by either First Interstate or Great Western if any governmental entity that must grant a requisite regulatory approval has denied approval of the merger or the bank merger and such denial has become final and nonappealable or any governmental entity of competent jurisdiction has issued a final and nonappealable order, injunction, decree or other legal restraint or prohibition permanently enjoining or otherwise prohibiting or making illegal the completion of the merger or the bank merger, unless the failure to obtain a requisite regulatory approval is due to the failure of the party seeking to terminate the merger agreement to perform or observe its obligations, covenants and agreements set forth in the merger agreement;
by either First Interstate or Great Western if the merger has not been completed on or before the termination date (September 15, 2022), unless the failure of the merger to be completed by such date is due to the failure of the party seeking to terminate the merger agreement to perform or observe its obligations, covenants and agreements set forth in the merger agreement;
by either First Interstate or Great Western (provided that the terminating party is not then in material breach of any representation, warranty, obligation, covenant or other agreement contained in the merger agreement) if there is a breach of any of the obligations, covenants or agreements or any of the representations or warranties (or if any such representation or warranty ceases to be true) set forth in the merger agreement on the part of Great Western, in the case of a termination by First Interstate, or First Interstate, in the case of a termination by Great Western, which breach or failure to be true, either individually or in the aggregate with all other breaches by such party (or failures of such representations or warranties to be true), would constitute, if occurring or continuing on the closing date, the failure of an applicable closing condition of the terminating party and which is not cured within forty-five (45) days following written notice to the other party, or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the termination date);
by Great Western, prior to the receipt of the requisite First Interstate vote, if (i) First Interstate or the First Interstate board of directors has made a recommendation change (as defined below) or (ii) First Interstate or the First Interstate board of directors breaches in any material respect its obligations relating to non-solicitation of acquisition proposals or its obligations related to shareholder approval and the First Interstate board recommendation;
by First Interstate, prior to the receipt of the requisite Great Western vote, if (i) Great Western or the Great Western board of directors has made a recommendation change or (ii) Great Western or the Great Western board of directors breaches in any material respect its obligations relating to non-solicitation of acquisition proposals or its obligations related to shareholder approval and the Great Western board recommendation; or
by either First Interstate or Great Western, if (i) the requisite First Interstate vote has not been obtained upon a vote thereon taken at the First Interstate special meeting (including any adjournment or postponement thereof) or (ii) the requisite Great Western vote has not been obtained upon a vote thereon taken at the Great Western special meeting (including any adjournment or postponement thereof).
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Termination Fees
If the merger agreement is terminated by either First Interstate or Great Western under certain circumstances, including circumstances involving alternative acquisition proposals and changes in the recommendation by First Interstate or Great Western or their respective boards, First Interstate may be required to pay a termination fee of $105 million to Great Western and Great Western may be required to pay a termination fee of $70 million to First Interstate.
Support Agreement
Concurrently with the execution and delivery of the merger agreement, the Scott Family shareholders entered into the support agreement pursuant to which, among other things, each Scott Family shareholder has agreed, subject to the terms of the support agreement, to (i) vote the shares of First Interstate common stock owned by it in favor of the approval and adoption of the merger agreement and the First Interstate articles amendment, and against any competing transaction and (ii) not transfer its shares of First Interstate common stock prior to the First Interstate special meeting, with certain limited exceptions. The support agreement will terminate upon termination of the merger agreement and certain other specified events, including, among others, if the First Interstate board effects a recommendation change under the merger agreement and a majority of the independent directors of First Interstate approve such recommendation change. Each of First Interstate and Great Western is an express third party beneficiary of the support agreement and has the right to directly enforce the obligations of the parties thereto. As of December 13, 2021, the record date for the First Interstate special meeting, the Scott family shareholders collectively owned 53.1% of the voting power represented by issued and outstanding shares of First Interstate common stock.
Stockholders’ Agreement
Concurrently with the execution and delivery of the merger agreement, the Scott Family shareholders entered into a stockholders’ agreement with First Interstate (the “stockholders’ agreement”), which will become effective as of the closing of the merger.
Under the stockholders’ agreement, for so long as the Scott Family shareholders and certain other related parties (collectively, the “Stockholders”) hold greater than or equal to 15% of the shares of First Interstate common stock, the Scott Family shareholders will have the right to designate three directors to the First Interstate board of directors. If the Stockholders hold greater than or equal to 10% (but less than 15%) of the shares of First Interstate common stock, the Scott Family shareholders will have the right to designate two directors to the First Interstate board of directors. If the Stockholders hold greater than or equal to 5% (but less than 10%) of the shares of First Interstate common stock, the Scott Family shareholders will have the right to designate one director to the First Interstate board of directors. The Scott Family shareholders will not have the right to designate any directors once the Stockholders hold less than 5% of the shares of First Interstate common stock. For so long as the Scott Family shareholders are entitled to designate at least one director, the Scott Family shareholders will also be entitled to certain rights to designate observers on the First Interstate board of directors and to designate directors on the Board of Directors of the FIBK Foundation. In addition, as promptly as practicable following the effective time, First Interstate will make a contribution of $21,500,000 to the FIBK Foundation.
Under the stockholders’ agreement, if the merger is consummated in accordance with the terms of the merger agreement, then First Interstate will pay to the Scott Family shareholders all reasonable and documented out-of-pocket expenses incurred by the Scott Family shareholders in connection therewith, up to a maximum of $8.5 million.
The stockholders’ agreement also provides the Stockholders (i) up to two “demand” registrations in the aggregate in any 12-month period in the case of a marketed underwritten offering, (ii) up to four underwritten block trades in the aggregate in any 12-month period and (iii) customary “piggyback” registration rights. The stockholders’ agreement also provides that First Interstate will indemnify the Stockholders against certain liabilities that may arise under the Securities Act.
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Letter Agreement
Concurrently with the execution and delivery of the merger agreement, the Scott Family shareholders entered into a letter agreement with First Interstate (the “letter agreement”). Under the letter agreement, First Interstate agrees that, in the event the merger agreement is terminated prior to the closing in a circumstance in which First Interstate receives payment of the termination fee from Great Western, First Interstate will pay to the Scott Family shareholders all reasonable and documented out-of-pocket expenses incurred by the Scott Family shareholders in connection therewith, up to a maximum of $3.5 million.
Accounting Treatment (page 116)
First Interstate and Great Western each prepare their respective financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The merger will be accounted for using the acquisition method of accounting, and First Interstate will be treated as the accounting acquirer for financial reporting purposes.
The Rights of Holders of Great Western Common Stock Will Change as a Result of the Merger (page 146)
The rights of holders of Great Western common stock are governed by Delaware law and by the certificate of incorporation and bylaws of Great Western. In the merger, holders of Great Western common stock will become holders of common stock of the surviving corporation, and their rights will be governed by Montana law and the articles of incorporation of First Interstate as amended by the First Interstate articles amendment and the bylaws of First Interstate as amended by the First Interstate bylaw amendment. Holders of Great Western common stock will have different rights once they become holders of common stock of the surviving corporation due to differences between the Great Western governing documents and Delaware law, on the one hand, and the First Interstate governing documents and Montana law, on the other hand. These differences are described in more detail under the section entitled “Comparison of Shareholders’ Rights” beginning on page 146.
Listing of First Interstate Class A Common Stock; Delisting and Deregistration of Great Western Common Stock (page 145)
The shares of First Interstate Class A common stock to be issued in the merger will be listed for trading on the NASDAQ. Following the merger, shares of First Interstate Class A common stock will continue to be listed on the NASDAQ. In addition, following the merger, Great Western common stock will be delisted from the NYSE and deregistered under the Exchange Act.
The First Interstate Special Meeting (page 45)
The First Interstate special meeting will be held at First Interstate Bank Great West Center, 1800 Sixth Avenue North, Billings, MT 59101, on January 19, 2022, at 3:30 p.m., mountain time. At the First Interstate special meeting, holders of First Interstate common stock will be asked to consider and vote on the following proposals:
the First Interstate merger proposal;
the First Interstate authorized share count proposal;
the First Interstate staggered board proposal; and
the First Interstate adjournment proposal.
You may vote at the First Interstate special meeting if you owned shares of First Interstate common stock at the close of business on December 13, 2021. On that date, there were 41,686,490 shares of First Interstate Class A common stock and 20,514,347 shares of First Interstate Class B common stock outstanding, of which approximately 1.1% of the First Interstate Class A common stock and 31.7% of the First Interstate Class B common stock were owned and entitled to be voted by First Interstate directors and executive officers and their affiliates. We currently expect that First Interstate’s directors and executive officers will vote their shares in favor of the First Interstate merger proposal and the other proposals to be considered at the First Interstate special meeting, although none of them has entered into any agreements obligating them to do so other than the Scott Family shareholders who are parties to the support agreement. As of December 13, 2021, the record date for the First Interstate special meeting, the Scott family shareholders collectively owned approximately 53.1% of the voting power represented by issued and outstanding shares of First Interstate common stock.
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Each of the First Interstate merger proposal and the First Interstate staggered board proposal will be approved if a majority of the votes entitled to be cast on the merger agreement, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class, are voted in favor of such proposals. The First Interstate authorized share count proposal will be approved if a majority of the voting power of the issued and outstanding shares of First Interstate common stock is voted in favor of such proposal, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. The First Interstate adjournment proposal will be approved if a majority of the votes cast are voted in favor of such proposal, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate merger proposal, the First Interstate authorized share count proposal, or the First Interstate staggered board proposal, it will have the same effect as a vote “AGAINST” such proposal. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate adjournment proposal, it will have no effect on such proposal.
The Great Western Special Meeting (page 53)
The Great Western special meeting will be held virtually on January 19, 2022, at 4:30 p.m., central time. At the Great Western special meeting, holders of Great Western common stock will be asked to consider and vote on the following proposals:
the Great Western merger proposal;
the Great Western compensation proposal; and
the Great Western adjournment proposal.
You may vote at the Great Western special meeting if you owned shares of Great Western common stock at the close of business on December 13, 2021. On that date, there were 55,199,193 shares of Great Western common stock outstanding, less than one percent (1.0%) of which were owned and entitled to be voted by Great Western directors and executive officers and their affiliates. We currently expect that Great Western’s directors and executive officers will vote their shares in favor of the Great Western merger proposal and the other proposals to be considered at the Great Western special meeting, although none of them has entered into any agreements obligating them to do so.
The Great Western merger proposal will be approved if the holders of a majority of the outstanding shares of Great Western common stock entitled to vote on such proposal vote in favor of such proposal. The Great Western compensation proposal and the Great Western adjournment proposal will each be approved if the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter vote in favor of such proposal. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the Great Western special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the Great Western merger proposal, it will have the same effect as a vote “AGAINST” the Great Western merger proposal. If you mark “ABSTAIN” on your proxy with respect to the Great Western compensation proposal or the Great Western adjournment proposal, it will have the same effect as a vote “AGAINST” such proposal. If you fail to submit a proxy or vote at the Great Western special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the Great Western compensation proposal or the Great Western adjournment proposal, it will have no effect on such proposal.
Litigation Related to the Merger (page 119)
On November 30, 2021, a complaint, captioned Laidlaw v. Borrecco et al., No. 49CIV21-003213, was filed by a purported stockholder of Great Western in the Circuit Court of the 2nd Judicial District, Minnehana County, South Dakota. The complaint names First Interstate, Great Western and the Great Western board of directors as defendants. The complaint alleges fraudulent misrepresentation, negligent misrepresentation and concealment under South Dakota law relating to the disclosures made in this joint proxy statement/prospectus. The complaint seeks, among other relief, an injunction preventing the closing of the merger, rescission of the merger if it is consummated, damages and an award of plaintiffs’ attorneys’ and experts’ fees. First Interstate and Great Western believe the claims asserted in the lawsuit are without merit.
Additional lawsuits arising out of or relating to the merger agreement and the transactions contemplated thereby may be filed in the future. If additional similar complaints are filed, absent new or different allegations that are material, neither First Interstate nor Great Western will necessarily announce such additional filings.
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Risk Factors (page 36)
In evaluating the merger agreement and the merger, including the issuance of shares of First Interstate Class A common stock in the merger, you should carefully read this joint proxy statement/prospectus and give special consideration to the factors discussed in the section entitled “Risk Factors” beginning on page 36 and in First Interstate’s Annual Report on Form 10-K for the year ended December 31, 2020 and Great Western’s Annual Report on Form 10-K for the year ended September 30, 2021 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.
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UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated financial information is based on the separate historical financial statements of First Interstate and Great Western after giving effect to the merger and the issuance of First Interstate Class A common stock in connection therewith, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed financial information. The unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2020 combines the historical consolidated statements of income of First Interstate and Great Western, giving effect to the merger as if it had been completed on January 1, 2020. The unaudited pro forma combined condensed consolidated statement of income for the period ended September 30, 2021 combines the historical consolidated statements of income of First Interstate and Great Western, giving effect to the merger as if it had been completed on January 1, 2021. The accompanying unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2021 combines the historical consolidated balance sheets of First Interstate and Great Western, giving effect to the merger as if it had been completed on September 30, 2021.
The following unaudited pro forma combined condensed consolidated financial information and related notes are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of First Interstate and the related notes included in First Interstate’s Annual Report on Form 10-K for the year ended December 31, 2020 and unaudited consolidated financial statements of First Interstate and the related notes included in First Interstate’s Quarterly Report on Form 10-Q for the period ended September 30, 2021, each of which is incorporated into this joint proxy statement/prospectus by reference, and (ii) the historical audited consolidated financial statements of Great Western and the related notes included in Great Western’s Annual Report on Form 10-K for the years ended September 30, 2020 and September 30, 2021, which, in the case of the Annual Report on Form 10-K for the year ended September 30, 2021, is incorporated by reference herein, and Great Western’s Quarterly Report on Form 10-Q for the periods ended December 31, 2020, March 31, 2021 and June 30, 2021, which are not incorporated into this joint proxy statement/prospectus by reference.
The historical consolidated financial information has been adjusted in the unaudited pro forma combined condensed consolidated financial information to give effect to the pro forma events that are (i) directly related to the merger, (ii) factually supportable and (iii) with respect to the unaudited pro forma combined condensed statement of income, expected to have a continuing effect on the results of the combined company. The unaudited pro forma combined condensed consolidated financial information contained herein does not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other synergies that may result from the merger. The following unaudited pro forma combined condensed consolidated financial information gives effect to the merger and includes adjustments for the following:
certain reclassifications to conform historical financial statement presentations between the companies;
application of the acquisition method of accounting under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification 805, “Business Combinations,” to reflect merger consideration of approximately $1.9 billion in exchange for 100% of all outstanding shares of Great Western common stock; and
transaction costs in connection with the merger.
Future results may differ materially from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 36 and appearing under the caption “Risk Factors” in First Interstate’s and Great Western’s most recently filed Annual Reports on Form 10-K and in any subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference in this joint proxy statement/prospectus, and the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 34. Among other factors, the actual amounts recorded as of the completion of the merger may differ materially from the information presented in these unaudited pro forma combined condensed consolidated financial statements as a result of:
changes in the trading price for First Interstate Class A common stock;
net cash used or generated in First Interstate’s or Great Western’s operations between the signing of the merger agreement and the completion of the merger;
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the timing of the completion of the merger, changes in total merger-related expenses, and integration costs, including costs associated with systems implementation, severance, and other costs related to exit or disposal activities;
other changes in First Interstate’s or Great Western’s net assets that occur prior to the completion of the merger, which could cause material differences in the information presented below; and
changes in the financial results of the combined company.
The risk of such variance is particularly significant with respect to the preliminary purchase price allocation, because such allocation is based, in large part, on the closing price per share of First Interstate Class A common stock as of the closing date. The pro forma adjustments are preliminary estimates for intangible assets and certain financial assets and financial liabilities. The purchase price allocation and related adjustments reflected in these unaudited pro forma combined condensed consolidated financial statements are preliminary and subject to revision based on final determination of fair value. The preliminary purchase price allocation reflected in the unaudited pro forma combined condensed consolidated financial information assumes a closing price per share of First Interstate Class A common stock of $40.26, the closing price of First Interstate Class A common stock on September 30, 2021. The financial markets have recently experienced extreme volatility, due in large part to the coronavirus pandemic and its widespread economic impacts. Continued financial market volatility, and its effect on the trading prices of First Interstate Class A common stock and Great Western common stock, will largely depend on future developments, which First Interstate and Great Western cannot accurately predict or control, including new information which may emerge, the effectiveness or ineffectiveness of governmental and private actions taken to contain or treat the coronavirus pandemic, and reactions by companies, consumers, investors, governmental entities and financial markets to such actions. Particularly given this volatility and uncertainty, the unaudited pro forma combined condensed consolidated financial information included in this joint proxy statement/prospectus may not be indicative of and does not purport to represent the combined company’s actual financial condition or results of operations as of the closing date or any future or other date or period.
The following unaudited pro forma combined condensed consolidated financial information and related notes are being provided for illustrative purposes only and do not purport to represent what the combined company’s actual results of operations or financial position would have been had the merger been completed on the dates indicated, nor are they necessarily indicative of the combined company’s future results of operations or financial position for any future period. The preparation of the unaudited pro forma combined condensed consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed consolidated financial statements should be read together with:
the accompanying notes to the unaudited pro forma combined condensed consolidated financial statements;
First Interstate’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2020, included in First Interstate’s Annual Report on Form 10-K for the year ended December 31, 2020 and unaudited consolidated financial statements of First Interstate and the related notes included in First Interstate’s Quarterly Report on Form 10-Q for the period ended September 30, 2021;
Great Western’s separate audited historical consolidated financial statements and accompanying notes as of September 30, 2021 and for the year ended September 30, 2020, included in Great Western’s Annual Reports on Form 10-K for the year ended September 30, 2021 and September 30, 2020 and unaudited consolidated financial statements of Great Western and the related notes included in Great Western’s Quarterly Reports on Form 10-Q; and
other information pertaining to First Interstate and Great Western contained in or incorporated by reference into this joint proxy statement/prospectus included elsewhere in this joint proxy statement/prospectus.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED BALANCE SHEETS
The following unaudited pro forma combined condensed consolidated balance sheet gives effect to the acquisition by First Interstate using the acquisition method of accounting assuming the acquisition was consummated on September 30, 2021.
(Amounts in millions, except share data)
First Interstate
9/30/2021
(as adjusted)*
Great Western
9/30/2021
(as adjusted)*
 
Pro Forma
Adjustments
 
Pro Forma
9/30/2021
Combined
Assets
 
 
 
 
 
 
Cash and due from banks
$227.6
$141.6
 
$(140.0)
(a)
$229.2
Interest bearing deposits in banks
2,005.8
1,410.7
 
 
3,416.5
Fed funds sold
0.1
 
 
0.1
Total cash and cash equivalents
2,233.5
1,552.3
 
(140.0)
 
3,645.8
Securities purchased under agreements to resell
104.3
 
 
104.3
Investment securities:
 
 
 
 
 
 
Available-for-sale
4,403.6
2,343.2
 
 
6,746.8
Held-to-maturity, net
1,618.1
367.7
 
(3.1)
(b)
1,982.7
Total investment securities
6,021.7
2,710.9
 
(3.1)
 
8,729.5
Mortgage loans held for sale, at fair value
42.5
2.9
(l)
 
45.4
Loans held for investment, net of deferred fees and costs
9,622.5
8,182.2
 
(102.4)
(c)
17,702.3
Allowance for credit losses
135.1
246.0
 
(7.5)
(c)
373.6
Net loans held for investment
9,487.4
7,936.2
 
(94.9)
 
17,328.7
Goodwill
621.6
 
750.8
(d)
1,372.4
Company-owned life insurance
300.5
184.8
 
 
485.3
Premises and equipment, net of accumulated depreciation
297.3
118.0
 
(2.0)
(e)
413.3
Core deposit intangibles, net of accumulated amortization
43.7
5.2
(m)
27.0
(f)
75.9
Accrued interest receivable
52.9
37.1
 
 
90.0
Mortgage servicing rights, net of accumulated amortization and impairment reserve
27.0
0.7
(n)
 
27.7
Other real estate owned (“OREO”)
2.3
4.5
 
 
6.8
Deferred tax asset, net
88.9
 
(2.0)
(g)
86.9
Other assets
241.8
165.7
 
 
407.5
Total assets
$19,372.2
$12,911.5
 
$535.8
 
$32,819.5
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
Non-interest bearing
$5,617.9
$2,608.6
 
$
 
8,226.5
Interest bearing
10,389.4
8,701.9
 
1.3
(h)
19,092.6
Total deposits
16,007.3
11,310.5
 
1.3
 
27,319.1
Securities sold under repurchase agreements
1,007.5
91.3
 
 
1,098.8
Long-term debt
112.4
120.0
 
5.2
(i)
237.6
Subordinated debentures and subordinated notes
87.0
109.0
 
(2.2)
(j)
193.8
Deferred tax liability, net
17.4
 
(17.4)
(g)
Allowance for credit losses on off-balance sheet credit exposures
3.2
1.3
(o)
 
4.5
Accrued expenses and other liabilities
152.6
77.9
(p)
(27.2)
(a)
203.3
Total liabilities
17,387.4
11,710.0
 
(40.3)
 
29,057.1
Total stockholders’ equity
1,984.8
1,201.5
 
576.1
(k)
3,762.4
Total liabilities and stockholders’ equity
$19,372.2
$12,911.5
 
$535.8
 
$32,819.5
*
Reclassification adjustments to align presentation were made as described in Note 3: Adjustments to the unaudited pro forma combined condensed balance sheet. These incorporated adjustments as outlined in Note 3 had no impact on previously reported stockholders equity.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The following unaudited pro forma combined condensed consolidated statements of income for the year ended December 31, 2020 gives effect to First Interstate’s acquisition of Great Western using the acquisition method of accounting assuming the acquisition was consummated on January 1, 2020.
 
For the year ended December 31, 2020
(Amounts in millions, except per share data)
First
Interstate
12/31/2020
(as adjusted)*
Great
Western
9/30/2020
(as adjusted)*
 
Pro Forma
Adjustments
 
Pro Forma
12/31/2020
Combined
Interest income:
 
 
 
 
 
 
Interest and fees on loans
$453.4
$449.5
 
$41.0
(1)
$943.9
Interest and dividends on investment securities
66.1
42.7
 
0.8
(2)
109.6
Interest on federal funds sold and other
4.1
1.4
(q)
 
5.5
Total interest income
523.6
493.6
 
41.8
 
1,059.0
Interest expense:
 
 
 
 
 
 
Interest on deposits
18.1
58.6
 
(0.7)
(3)
76.0
Interest on FHLB advances and other borrowings
0.9
11.0
(r)
 
11.9
Interest on other debt
4.6
1.7
(s)
(1.7)
(4)
4.6
Interest on subordinated debentures held by subsidiary trusts
3.0
2.8
(s)
0.2
(5)
6.0
Total interest expense
26.6
74.1
 
(2.2)
 
98.5
Net interest income
497.0
419.5
 
44.0
 
960.5
Provision for credit losses
56.9
118.4
 
79.5
(6)
254.8
Net interest income after provision for credit losses
440.1
301.1
 
(35.5)
 
705.7
Non-interest income:
 
 
 
 
 
 
Payment services revenues
41.1
14.9
(t)
 
56.0
Mortgage banking revenues
47.3
9.0
 
 
56.3
Wealth management revenues
23.8
11.8
 
 
35.6
Service charges and other fees
29.7
22.9
(u)
 
52.6
Investment securities gains, net
0.3
7.9
 
 
8.2
Other income
14.5
(66.5)
(v)
 
(52.0)
Total non-interest income
156.7
 
 
156.7
Non-interest expense:
 
 
 
 
 
 
Salaries and employee benefits
223.1
149.4
(w)
 
372.5
Outsourced technology services
32.8
24.4
 
 
57.2
Occupancy and equipment, net
44.0
21.3
(x)
(0.4)
(7)
64.9
OREO expense, net of income
(0.5)
12.9
��
 
12.4
Professional fees
10.9
12.6
(z)
52.3
(8)
75.8
Goodwill and intangible assets impairment
742.4
 
 
742.4
Core deposit intangibles amortization
10.9
1.4
(y)
4.5
(9)
16.8
Other expenses
66.3
43.0
(z)
87.7
(10)
197.0
Total non-interest expense
387.5
1,007.4
 
144.1
 
1,539.0
Income before income tax expense
209.3
(706.3)
 
(179.6)
 
(676.6)
Income tax expense (benefit)
48.1
(25.5)
 
(36.1)
(11)
(13.5)
Net income (loss)
$161.2
$(680.8)
 
$(143.5)
 
$(663.1)
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
63,611,891
55,612,251
 
(8,772,633)
(12)
110,451,509
Basic earnings per common share
$2.53
$(12.24)
 
 
 
$(6.00)
Diluted weighted average common shares outstanding
63,729,470
55,612,251
 
(8,772,633)
(12)
110,451,509
Diluted earnings per common share
$2.53
$(12.24)
 
 
 
$(6.00)
*
Reclassification adjustments to align presentation were made as described in Note 4: Adjustments to the unaudited pro forma combined condensed statements of income. These incorporated adjustments as outlined in Note 4 had no impact on previously reported net income.
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FIRST INTERSTATE BANCSYSTEM, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
The following unaudited pro forma combined condensed consolidated statements of income for the nine months ended September 30, 2021 gives effect to First Interstate’s acquisition of Great Western using the acquisition method of accounting assuming the acquisition was consummated on January 1, 2021.
 
For the nine months ended September 30, 2021
(In millions, except per share data)
First
Interstate
9/30/2021
(as reported)
Great
Western
9/30/2021
(as adjusted*)
 
Pro Forma
Adjustments
 
Pro Forma
9/30/2021
Combined
Interest income:
 
 
 
 
 
 
Interest and fees on loans
$325.1
$281.7
 
$30.8
(1)
$637.6
Interest and dividends on investment securities
52.9
25.9
 
0.6
(2)
79.4
Interest on fed funds sold and other
1.7
2.0
(q)
 
3.7
Total interest income
379.7
309.6
 
31.4
 
720.7
Interest expense:
 
 
 
 
 
 
Interest on deposits
6.4
10.8
 
(0.5)
(3)
16.7
Interest on FHLB advances and other borrowings
0.3
2.6
(r)
 
2.9
Interest on other debt
4.5
0.9
(s)
(1.3)
(4)
4.1
Interest on subordinated debentures held by subsidiary trusts
2.1
1.5
(s)
0.2
(5)
3.8
Total interest expense
13.3
15.8
 
(1.6)
 
27.5
Net interest income
366.4
293.8
 
33.0
 
693.2
(Reversal of) provision for credit losses
(5.1)
(46.6)
 
79.5
(6)
27.8
Net interest income after provision for credit losses
371.5
340.4
 
(46.5)
 
665.4
Non-interest income:
 
 
 
 
 
 
Payment services revenues
33.8
12.6
(t)
 
46.4
Mortgage banking revenues
32.8
7.3
 
 
40.1
Wealth management revenues
19.1
10.3
 
 
29.4
Service charges and other fees
17.2
14.9
(u)
 
32.1
Investment securities losses, net
0.2
 
 
0.2
Other income
10.0
7.3
(v)
 
17.3
Total non-interest income
113.1
52.4
 
 
165.5
Non-interest expense:
 
 
 
 
 
 
Salaries and employee benefits
166.3
116.7
(w)
 
283.0
Outsourced technology services
24.7
21.3
 
 
46.0
Occupancy and equipment, net
34.7
16.1
(x)
(0.3)
(7)
50.5
OREO income, net of expense
(0.1)
(2.1)
 
 
(2.2)
Professional fees
9.3
14.2
(z)
52.3
(8)
75.8
Core deposit intangibles amortization
7.4
0.8
(y)
3.4
(9)
11.6
Other expenses
54.4
16.3
(z)
87.7
(10)
158.4
Acquisition related expenses
6.6
 
 
6.6
Total non-interest expense
303.3
183.3
 
143.1
 
629.7
Income before income tax expense
181.3
209.5
 
(189.6)
 
201.2
Income tax expense (benefit)
40.3
47.6
 
(38.3)
(11)
49.6
Net income (loss)
$141.0
$161.9
 
$(151.3)
 
$151.6
Basic weighted average common shares outstanding
61,641,342
55,205,284
 
(8,772,697)
(12)
108,073,929
Basic earnings per common share
$2.29
$2.93
 
 
 
$1.40
Diluted weighted average common shares outstanding
61,732,822
55,509,432
 
(8,772,697)
(12)
108,469,557
Diluted earnings per common share
$2.28
$2.92
 
 
 
$1.40
*
As adjusted reflects Great Western’s financial information for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.
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NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1: Basis of pro forma presentation
The accompanying unaudited pro forma combined condensed consolidated financial statements and related notes were prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2020 combines the historical consolidated statements of income of First Interstate and Great Western, giving effect to the merger as if it had been completed on January 1, 2020. The unaudited pro forma combined condensed consolidated statement of income for the period ended June 30, 2021 combines the historical consolidated statements of income of First Interstate and Great Western, giving effect to the merger as if it had been completed on January 1, 2021. The accompanying unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2021 combines the historical consolidated balance sheets of First Interstate and Great Western, giving effect to the merger as if it had been completed on September 30, 2021.
First Interstate’s and Great Western’s historical financial statements were prepared in accordance with GAAP. As discussed in Note 3 and Note 4, certain reclassifications were made to align First Interstate’s and Great Western’s financial statement presentation. First Interstate has not identified all adjustments necessary to conform Great Western’s accounting policies to First Interstate’s accounting policies. Upon completion of the merger, or as more information becomes available, the combined company will perform a more detailed review of Great Western’s accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when combined, could have a material impact on the combined company’s financial information.
The accompanying unaudited pro forma combined condensed consolidated financial statements and related notes were prepared using the acquisition method of accounting under the provisions of ASC 805, with First Interstate considered to be the acquirer of Great Western. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma combined condensed consolidated balance sheet, the purchase consideration has been allocated to the assets acquired and liabilities assumed of Great Western based upon management’s preliminary estimate of their fair values as of September 30, 2021. First Interstate has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair value of Great Western’s assets to be acquired or liabilities assumed, other than a preliminary estimate for intangible assets and certain financial assets and financial liabilities. Accordingly, apart from the aforementioned, certain Great Western assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. Any differences between the fair value of the consideration transferred and the fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, the purchase price allocation and related adjustments reflected in these unaudited pro forma combined condensed consolidated financial statements are preliminary and subject to revision based on final determination of fair value.
All dollar amounts presented within these Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements are in millions of dollars, except per share data, unless otherwise indicated.
Note 2: Preliminary purchase price allocation
The following table summarizes the preliminary purchase price allocation to the estimated fair value of assets and liabilities of Great Western (in millions, except per share data):
 
Note
Amount
Shares of Great Western common stock outstanding
(i)
55,116,503
Price per share of First Interstate Class A common stock
(i)
$33.9191
Total pro forma purchase price from common stock
 
1,869.5
Existing Great Western performance based equity awards
 
9.7
Existing Great Western restricted stock awards
 
11.3
Total pro forma purchase price
 
$1,890.5
(i)
Under the terms of the merger agreement, holders of Great Western common stock have the right to receive a fixed exchange ratio of
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0.8425 shares of First Interstate Class A common stock for each share of Great Western common stock. For purposes of the unaudited pro forma combined condensed balance sheet, the estimated merger consideration is based on the total number of shares of Great Western common stock issued and outstanding as of September 30, 2021 and the closing price per share of First Interstate Class A common stock of $40.26 on September 30, 2021.
The preliminary estimated merger consideration as shown in the table above is allocated to the tangible and intangible assets acquired and liabilities assumed of Great Western based on their preliminary estimated fair values. As mentioned above in Note 1, First Interstate has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Great Western assets to be acquired or liabilities assumed, other than a preliminary estimate for intangible assets and certain financial assets and financial liabilities. Accordingly, apart from the aforementioned, certain assets acquired and liabilities assumed are presented at their respective carrying amounts and should be treated as preliminary values. The fair value assessments are preliminary and are based upon available information and certain assumptions, which First Interstate believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the unaudited pro forma combined condensed financial statements.
The following table sets forth a preliminary allocation of the estimated merger consideration to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed by First Interstate using Great Western’s consolidated balance sheet as of September 30, 2021:
Preliminary fair value of estimated total merger consideration
1,890.5
Fair value of assets acquired:
 
Cash and cash equivalents
1,552.3
Investment securities
2,707.9
Loans held for sale
2.9
Loans held for investment, net
7,841.2
Other real estate owned
4.5
Premises & equipment, net
116.0
Other intangible assets, CDI
32.2
Company owned life Insurance
184.8
Deferred tax asset, net.
86.9
Other assets
307.8
Total assets
12,836.5
Fair value of liabilities assumed:
 
Deposits
11,311.8
Borrowings
125.2
Subordinated debt
35.0
Trust preferred securities
71.8
Other liabilities
153.0
Total liabilities
11,696.8
Net assets acquired
1,139.7
Preliminary Pro Forma Goodwill
750.8
Note 3: Adjustments to the unaudited pro forma combined condensed balance sheet
Purchase Accounting Adjustments:
(a)
Adjustment reflects transaction costs, including investment banker, legal, contract cancellations, severance, change in control, contribution to First Interstate Foundation, and other merger related charges.
(b)
Adjustment reflects the fair value mark on securities based on the fair value of the securities portfolio.
(c)
Adjustment reflects the fair value interest rate marks and adjustments for the allowance for credit losses based on First Interstate’s evaluation of the acquired loan portfolio.
(d)
Adjustment reflects the goodwill generated as a result of the consideration paid being greater than the net assets acquired.
(e)
Adjustment reflects the fair value adjustments of the premises and equipment assets acquired.
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(f)
Adjustment reflects the core deposit intangible of $32.2 million on the acquired core deposit accounts and the removal of existing core deposit intangible of $5.2 million.
(g)
Adjustment reflects the reclassification of First Interstate’s deferred tax liability and reflects the deferred tax asset generated by the net fair value adjustments (at a tax rate equal to 22.5%) resulting in a net deferred tax asset position.
(h)
Adjustment reflects the fair value adjustment on certificates of deposit.
(i)
Adjustment reflects the fair value adjustments of the borrowings acquired.
(j)
Adjustment reflects the fair value adjustments of the trust preferred securities acquired.
(k)
Adjustment reflects the reversal of Great Western’s September 30, 2021 retained earnings, common stock, surplus, accumulated other comprehensive income, and the difference in par value of common stock from $0.01 at Great Western to $0.00 at First Interstate at the exchange ratio of 0.8425.
Pro Forma/Reclassification Adjustments:
(l)
Adjustment reflects the reclassification of mortgage loans held for sale from loans to a separate line item - First Interstate-related.
(m)
Adjustment reflects the reclassification of core deposit intangibles, net of accumulated amortization from other assets to a separate line item- First Interstate-related.
(n)
Adjustment reflects the reclassification mortgage servicing rights, net of accumulated amortization and impairment reserve from other assets to a separate line item- First Interstate-related.
(o)
Adjustment reflects the reclassification of allowance for credit losses on off-balance sheet credit exposures from other liabilities to a separate line item - First Interstate-related.
(p)
Adjustment reflects the reclassification of accrued interest payable into accrued expenses and other liabilities - Great Western-related.
Note 4: Adjustments to the unaudited pro forma combined condensed statement of income
Pro Forma Adjustments:
(1)
Accretion of loan interest income for estimated yield component on loan fair value adjustments of purchased loans using sum of the year digit methodology.
(2)
Accretion of investment income for fair value adjustment on securities using straight-line amortization.
(3)
Adjustment reflects straight-line amortization of the certificate of deposit premium based upon the scheduled maturities of the related deposits.
(4)
Adjustment reflects straight-line amortization of the fair value mark on other borrowed funds.
(5)
Adjustment reflects straight-line accretion of the fair value mark on trust preferred securities.
(6)
Adjustment reflects the provision for credit losses which includes $79.5 million for the non-purchase credit deteriorated Day 1 allowance for credit losses on the acquired portfolio.
(7)
Adjustment reflects the straight-line amortization of the fair value mark on premises and equipment.
(8)
Adjustment reflects First Interstate’s investment banker and legal transaction costs.
(9)
Adjustment reflects the incremental amortization of intangibles using sum of years digits over ten (10) years for the core deposit intangible net of $1.4 million reversal of Great Western expense for the twelve (12) months ended and $0.8 million reversal of Great Western expense for the nine (9) months ended.
(10)
First Interstate expects to incur approximately $21.5 million related to the contribution into the First Interstate Foundation in addition to significant merger charges related to contract cancellations, severance, change in control and other merger related charges.
(11)
Adjustment reflects 22.5% tax rate on net pro forma adjustments, adjusted for nondeductible merger charges.
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(12)
Adjustment reflects exchange ratio of 0.8425 multiplied by the number of outstanding shares of Great Western common stock in accordance with the merger agreement.
Pro Forma/ Reclassification Adjustments:
(q)
Adjustment reflects the reclassification of interest income on federal funds sold into interest on deposits in banks - First Interstate-related.
(r)
Adjustment reflects the reclassification of interest expense securities sold under repurchase agreements into Federal Home Loan Bank and other borrowings - Great Western-related
(s)
Adjustment reflects the reclassification of interest expense on subordinated notes payable into interest on other debt and interest on subordinated debentures into a separate line item - First Interstate-related.
(t)
Adjustment includes the reclassification of payment services revenue out of service charges and other fees - First Interstate-related.
(u)
Adjustment includes the reclassification of service charges on deposits accounts and other service charges, commissions and fees into service charges and other fees - Great Western-related.
(v)
Adjustment includes reclassification from derivative interest expense, change in the fair value of fair value option loans and related derivatives, and other derivative income - First Interstate-related.
(w)
Adjustment includes the reclassification of employee benefits into salaries and employee benefits - Great Western-related.
(x)
Adjustment includes the reclassification of furniture and equipment into occupancy and equipment, net - Great Western-related.
(y)
Adjustment includes the reclassification of core deposit intangibles amortization out of other expenses into a separate line item - First Interstate-related.
(z)
Adjustment includes the reclassification of Federal Deposit Insurance Corporation insurance premiums for First Interstate into other expenses and Federal Deposit Insurance Corporation insurance premiums out of professional fees into other expenses - Great Western-related.
Financial Accounting Standards Board issued Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”):
Beginning on January 1, 2020 and October 1, 2020, First Interstate and Great Western, respectively, adopted the Current Expected Credit Loss (“CECL”), as required. Great Western’s historical financial information included in the combined condensed consolidated statements of income for the year ended September 30, 2020 reflects a provision for loan loss using the incurred loss methodology under historical generally accepted accounting principles. The unaudited pro forma combined condensed consolidated balance sheet and income statements pro forma adjustments reflect CECL methodology.
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER COMMON SHARE DATA
The historical per share data for First Interstate Class A common stock and Great Western common stock below has been derived from the audited consolidated financial statements of First Interstate as of and for the year ended December 31, 2020, from the unaudited consolidated financial statements of First Interstate as of and for the period ended September 30, 2021, audited consolidated financial statements of Great Western as of and for the years ended September 30, 2020 and September 30, 2021, which, in the case of the Annual Report on Form 10-K for the year ended September 30, 2021 is incorporated by reference herein, and from Great Western’s Quarterly Report on Form 10-Q for the periods ended December 31, 2020, March 31, 2021 and June 30, 2021, which are not incorporated into this joint proxy statement/prospectus by reference.
The unaudited pro forma combined per share data set forth below gives effect to the merger as if it had occurred on January 1, 2020, in the case of earnings and dividend per share data, and September 30, 2021, in the case of book value per share data, assuming that each outstanding share of Great Western common stock had been converted into shares of First Interstate Class A common stock based on the exchange ratio of 0.8425 shares of First Interstate Class A common stock for each share of Great Western common stock in the merger. The unaudited pro forma
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combined per share data has been derived from the audited consolidated financial statements of First Interstate as of and for the year ended December 31, 2020, from the audited consolidated financial statements of Great Western as of and for the year ended September 30, 2020, and from the unaudited consolidated financial statements of each of First Interstate and Great Western as of and for the period ended September 30, 2021.
The unaudited pro forma combined per share data has been derived assuming that the merger is accounted for using the acquisition method of accounting. See the section entitled “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 24 for more information. Accordingly, the pro forma adjustments reflect the assets and liabilities of the combined company at their preliminary estimated fair values. Differences between these preliminary estimates and the final values in acquisition accounting will occur and these differences could have a material impact on the unaudited pro forma combined per share information set forth below.
The unaudited pro forma combined per share data does not purport to represent the actual results of operations that the combined company would have achieved had the merger been completed during the period presented or to project the future results of operations that the combined company may achieve after the merger.
The unaudited pro forma combined per share equivalent data set forth below shows the effect of the merger from the perspective of a holder of Great Western common stock. The information was calculated by multiplying the unaudited pro forma combined per share data by the exchange ratio of 0.8425.
You should read the information below in conjunction with the historical consolidated financial statements of First Interstate and Great Western and related notes that have been filed with the SEC, certain of which are incorporated by reference herein. See the sections entitled “Where You Can Find More Information” beginning on page 162. The unaudited pro forma combined per share data and the unaudited pro forma combined per share equivalent data has been derived from, and should be read in conjunction with, the unaudited pro forma combined condensed consolidated financial information and related notes included in this joint proxy statement/prospectus. See the section entitled “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 24, which is based on and should be read in conjunction with (i) the historical audited consolidated financial statements of First Interstate and the related notes included in First Interstate’s Annual Report on Form 10-K for the year ended December 31, 2020, and the unaudited consolidated financial statements and the related notes included in First Interstate’s Quarterly Report on Form 10-Q for the periods ended March 31, 2021, June 30, 2021 and September 30, 2021, and (ii) the historical audited consolidated financial statements of Great Western and the related notes included in Great Western’s Annual Reports on Form 10-K for the years ended September 30, 2020, and September 30, 2021, which, in the case of the Annual Report on Form 10-K for the year ended September 30, 2021, is incorporated by reference herein, and the unaudited consolidated financial statements of Great Western and the related notes included in Great Western’s Quarterly Report on Form 10-Q for the fiscal periods ended December 31, 2020, March 31, 2021 and June 30, 2021, which are not incorporated into this joint proxy statement/prospectus by reference.
 
First
Interstate
Historical
Great
Western
Historical
Pro Forma
Combined
Equivalent Pro
Forma Per share of
Great Western(a)
Comparative Per Share Data
(Unaudited)
Book value per share
 
 
 
 
As of September 30, 2021
$31.89
$21.80
$34.47
$29.04
As of December 31, 2020
$31.56
$21.14
$33.95
$28.61
Cash dividends paid
 
 
 
 
Nine months ended September 30, 2021
$1.62
$0.07
$1.69
$1.42
For the year ended December 31, 2020
$2.00
$0.76
$2.76
$2.33
Basic earnings
 
 
 
 
Nine months ended September 30, 2021
$2.29
$2.93
$1.40
$1.18
For the year ended December 31, 2020
$2.53
$(12.24)
$(6.00)
$(5.06)
Diluted earnings
 
 
 
 
Nine months ended September 30, 2021
$2.28
$2.92
$1.40
$1.18
For the year ended December 31, 2020
$2.53
$(12.24)
$(6.00)
$(5.06)
(a)
The equivalent pro forma per share amounts of Great Western were calculated by multiplying the pro forma combined amounts by the fixed exchange ratio of 0.8425 shares of First Interstate Class A common stock for each share of Great Western common stock.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained or incorporated by reference into this joint proxy statement/prospectus which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which First Interstate and Great Western operate and beliefs of and assumptions made by First Interstate management and Great Western management, involve uncertainties that could significantly affect the financial condition, results of operations, business plans and the future performance of First Interstate, Great Western or the surviving corporation.
Words such as “aim,” “anticipate,” “estimate,” “expect,” “goal,” “guidance,” “intend,” “is anticipated,” “is estimated,” “is expected,” “is intended,” “objective,” “plan,” “projected,” “projection,” “will affect,” “will be,” “will continue,” “will decrease,” “will grow,” “will impact,” “will increase,” “will incur,” “will reduce,” “will remain,” “will result,” “would be,” variations of such words or phrases (including where the word “could,” “may” or “would” is used rather than the word “will” in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Such forward-looking statements include, but are not limited to, statements about the strategic rationale and financial benefits of the transaction, including expected future financial and operating results and the surviving corporation’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future-including statements relating to projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; statements of plans and objectives of First Interstate or Great Western or their management or board of directors, including those relating to products or services; and statements of future economic performance-are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.
In addition to the factors relating to the merger discussed under the caption “Risk Factors” beginning on page 36 and the factors previously disclosed in First Interstate’s and Great Western’s reports filed with the SEC, the following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements or historical performance: (1) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (2) disruption to the parties’ businesses as a result of the announcement and pendency of the merger, (3) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement, (4) the risk that the integration of each party’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party’s businesses into the other’s businesses, (5) the failure to obtain the necessary approvals by the shareholders of First Interstate or the stockholders of Great Western, (6) the amount of the costs, fees, expenses and charges related to the merger, (7) the ability by each of First Interstate and Great Western to obtain required governmental approvals of the merger (and the risk that such approvals may result in the imposition of conditions that could adversely affect the surviving corporation or the expected benefits of the transaction), (8) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger, (9) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger, (10) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (11) the dilution caused by First Interstate’s issuance of additional shares of its common stock in the merger, (12) a material adverse change in the financial condition of First Interstate or Great Western, (13) general competitive, economic, political and market conditions, (14) major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, including the global coronavirus pandemic, the related disruption to local, regional and global economic activity and financial markets, and the impact of the global coronavirus pandemic on First Interstate or Great Western, the ability to complete the merger or any of the foregoing risks, (15) the outcome of any legal proceedings that may be instituted against First Interstate or Great Western, and (16) other factors that may affect future results of Great Western and First Interstate including changes in asset quality and credit risk; the inability to
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sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.
For any forward-looking statements made in this joint proxy statement/prospectus or in any documents incorporated by reference into this joint proxy statement/prospectus, First Interstate and Great Western claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the dates of the documents incorporated by reference in this joint proxy statement/prospectus. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, we caution you not to place reliance on these forward-looking statements. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Except as required by applicable law, neither First Interstate nor Great Western undertakes to update these forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made.
For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the reports that First Interstate and Great Western have filed with the SEC as described under “Where You Can Find More Information” beginning on page 162.
We expressly qualify in their entirety all forward-looking statements attributable to either of us or any person acting on our behalf by the cautionary statements contained or referred to in this joint proxy statement/prospectus.
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RISK FACTORS
An investment by Great Western’s stockholders in First Interstate Class A common stock as a result of the exchange of shares of First Interstate Class A common stock for shares of Great Western common stock in the merger involves certain risks. Similarly, a decision on the part of First Interstate shareholders to approve the merger agreement also involves risks for First Interstate shareholders, who will continue to hold shares of First Interstate common stock after the merger. Certain material risks and uncertainties connected with the merger agreement and the transactions contemplated thereby, including the merger and bank merger, and ownership of First Interstate Class A common stock are discussed below. In addition, First Interstate and Great Western discuss certain other material risks connected with the ownership of First Interstate Class A common stock and with First Interstate’s business, and with the ownership of Great Western common stock and Great Western’s business, respectively, under the caption “Risk Factors” appearing in their Annual Reports on Form 10-K most recently filed with the SEC and may include additional or updated disclosures of such material risks in their subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC or may be filed with the SEC after the date of this joint proxy statement/prospectus, each of which report is or will be incorporated by reference in this joint proxy statement/prospectus.
Holders of Great Western common stock and holders of First Interstate common stock should carefully read and consider all of these risks and all other information contained in this joint proxy statement/prospectus, including the discussions of risk factors included in the documents incorporated by reference in this joint proxy statement/prospectus, in deciding whether to vote for approval of the various proposals for which they may be entitled to vote at the Great Western special meeting or the First Interstate special meeting described herein. The risks described in this joint proxy statement/prospectus and in those documents incorporated by reference may adversely affect the value of First Interstate common stock that you, as an existing First Interstate shareholder, currently hold or that you, as an existing Great Western stockholder, will hold upon the completion of the merger, and could result in a significant decline in the value of First Interstate Class A common stock and cause the current holders of First Interstate common stock and/or the holders of Great Western common stock to lose all or part of their respective investments in First Interstate common stock.
Because the market price of First Interstate Class A common stock may fluctuate, holders of Great Western common stock cannot be certain of the market value of the merger consideration they will receive.
In the merger, each share of Great Western common stock issued and outstanding immediately prior to the effective time (other than certain shares held by First Interstate or Great Western) will be converted into 0.8425 shares of First Interstate Class A common stock. This exchange ratio is fixed and will not be adjusted for changes in the market price of either First Interstate Class A common stock or Great Western common stock. Changes in the price of First Interstate Class A common stock prior to the merger will affect the value that holders of Great Western common stock will receive in the merger. Neither First Interstate nor Great Western is permitted to terminate the merger agreement as a result, in and of itself, of any increase or decrease in the market price of First Interstate Class A common stock or Great Western common stock.
Stock price changes may result from a variety of factors, including general market and economic conditions, regulatory considerations, including changes in U.S. monetary policy and its effect on global financial markets and on interest rates, changes in First Interstate’s or Great Western’s businesses, operations and prospects, the global coronavirus pandemic and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on First Interstate or Great Western or the customers or other constituencies of First Interstate or Great Western, many of which factors are beyond First Interstate’s or Great Western’s control. Therefore, at the time of the First Interstate special meeting and the Great Western special meeting, holders of First Interstate Class A common stock and holders of Great Western common stock will not know the market value of the consideration to be received by holders of Great Western common stock at the effective time. You should obtain current market quotations for shares of First Interstate Class A common stock and for shares of Great Western common stock.
The market price of First Interstate Class A common stock after the merger may be affected by factors different from those affecting the shares of First Interstate Class A common stock or Great Western common stock currently.
In the merger, holders of Great Western common stock will become holders of First Interstate Class A common stock. First Interstate’s business differs from that of Great Western. Accordingly, the results of operations of the
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surviving corporation and the market price of First Interstate Class A common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of First Interstate and Great Western. For a discussion of the businesses of First Interstate and Great Western and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this joint proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 162.
First Interstate and Great Western are expected to incur significant costs related to the merger and integration.
First Interstate and Great Western have incurred and expect to incur certain non-recurring costs associated with the merger. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs and other related costs. Some of these costs are payable by either First Interstate or Great Western regardless of whether or not the merger is completed.
The surviving corporation is expected to incur substantial costs in connection with the integration of First Interstate and Great Western. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing and benefits. While First Interstate and Great Western have assumed that a certain level of costs will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration costs. Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately. These integration costs may result in the surviving corporation taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present.
Combining First Interstate and Great Western may be more difficult, costly or time consuming than expected and First Interstate and Great Western may fail to realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of First Interstate and Great Western. To realize the anticipated benefits and cost savings from the merger, First Interstate and Great Western must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized. If First Interstate and Great Western are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the merger could be less than anticipated, and integration may result in additional unforeseen expenses.
First Interstate and Great Western have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger will depend, in part, on the surviving corporation’s ability to successfully combine and integrate the businesses of both companies in a manner that does not materially disrupt existing customer relations or result in decreased revenue or reputational harm. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses, difficulties in integrating operations and systems, including communications systems, administrative and information technology infrastructure and financial reporting and internal control systems, or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Any disruption to either company’s business could cause its customers to remove their accounts and move their business to a competing financial institution. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on each of First Interstate and Great Western during this transition period and for an undetermined period after completion of the merger on the surviving corporation.
As companies operating in the financial services industry, the businesses and operations of each of First Interstate, Great Western and the surviving corporation following the completion of the merger may be adversely affected in numerous and complex ways, including as a result of adverse economic conditions, natural and human disasters or other international or domestic calamities, including the global coronavirus pandemic.
Each of First Interstate’s and Great Western’s businesses and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States. Uncertainty about federal
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fiscal monetary and related policies, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond the control of First Interstate, Great Western and the surviving corporation.
In addition, adverse economic, social and political conditions in the United States and in foreign countries, including adverse conditions resulting from natural disasters, acts of terrorism, outbreaks of hostilities or other domestic or international calamities, epidemics and pandemics, and other matters beyond the control of First Interstate, Great Western and the surviving corporation, and the government policy responses to such conditions, could have an adverse effect on the businesses, financial condition, results of operations, prospects and trading prices of each of First Interstate and Great Western during the time the merger is pending and the surviving corporation following the completion of the merger. For example, the impacts of the COVID-19 pandemic may make it more costly or more difficult to integrate the businesses of First Interstate and Great Western, which, in turn, may make it more difficult for the surviving corporation to realize anticipated synergies or cost savings in the amounts estimated or in the timeframe contemplated, or at all. All of these factors could be detrimental to First Interstate’s, Great Western’s and the surviving corporation’s businesses, and the interplay between these factors can be complex and unpredictable.
The future results of the surviving corporation following the merger may suffer if the surviving corporation does not effectively manage its expanded operations.
Following the merger, the size of the business of the surviving corporation will increase significantly beyond the current size of either First Interstate’s or Great Western’s business. The surviving corporation’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. The surviving corporation may also face increased scrutiny from governmental authorities as a result of the significant increase in the size of its business. There can be no assurances that the surviving corporation will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the merger.
The surviving corporation may be unable to retain First Interstate or Great Western personnel successfully while the merger is pending or after the merger is completed.
The success of the merger will depend in part on the surviving corporation’s ability to retain the talents and dedication of key employees currently employed by First Interstate and Great Western. It is possible that these employees may decide not to remain with First Interstate or Great Western, as applicable, while the merger is pending or with the surviving corporation after the merger is consummated. If First Interstate and Great Western are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, First Interstate and Great Western could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, if key employees terminate their employment, the surviving corporation’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating First Interstate and Great Western to hiring suitable replacements, all of which may cause the surviving corporation’s business to suffer. In addition, First Interstate and Great Western may not be able to locate or retain suitable replacements for any key employees who leave either company. For more information, see the section entitled “The Merger—Governance of the Surviving Corporation After the Merger” beginning on page 115.
The COVID-19 pandemic may delay and adversely affect the completion of the merger.
The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the business, financial condition, liquidity, capital, and results of operations of First Interstate and Great Western. Even as efforts to contain the pandemic, including vaccinations, have made progress and some restrictions have relaxed, new variants of the virus are causing additional outbreaks. The impact of the Delta variant, or other variants that may emerge, cannot be predicted at this time, and could depend on numerous factors, including the availability of vaccines in different parts of the world, vaccination rates among the population, the effectiveness of COVID-19 vaccines against the Delta variant and other variants, and the response by governmental bodies to reinstate restrictive measures or adopt additional requirements or restrictive measures. If the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the
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financial results of First Interstate or Great Western, or the business operations of First Interstate or Great Western are further disrupted as a result of the COVID-19 pandemic, efforts to complete the merger and integrate the businesses of First Interstate and Great Western may also be delayed and adversely affected. Additional time may be required to obtain the requisite regulatory approvals, and the Federal Reserve Board, the MDOB, the SDDB and other regulatory authorities may impose additional requirements on First Interstate or Great Western that must be satisfied prior to completion of the merger, which could delay and adversely affect the completion of the merger and could have a material adverse effect on First Interstate or Great Western’s results of operations and financial condition.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the surviving corporation following the merger.
Before the merger and the bank merger may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve Board, the MDOB, the SDDB and other authorities in the United States. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under “The Merger – Regulatory Approvals” beginning on page 117. These approvals could be delayed or not obtained at all, including due to any or all of the following: an adverse development in either party’s regulatory standing, or any other factors considered by regulators in granting such approvals; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment, including as a result of changes in regulatory agency leadership.
Even if those approvals are granted, they may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the surviving corporation’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the surviving corporation following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or governmental entity of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.
Despite the parties’ commitments to use their reasonable best efforts to resolve any objection that may be asserted by any governmental entity with respect to the merger agreement, under the terms of the merger agreement, neither First Interstate nor Great Western is required to take any action or agree to any condition or restriction in connection with obtaining these approvals that would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, results of operations or financial condition of the surviving corporation and its subsidiaries, taken as a whole, after giving effect to the merger (measured on a scale relative to First Interstate and its subsidiaries, taken as a whole). See the section entitled “The Merger—Regulatory Approvals” beginning on page 117.
The unaudited pro forma combined condensed financial information included in this joint proxy statement/prospectus is preliminary and the actual financial condition and results of operations of the surviving corporation after the merger may differ materially.
The unaudited pro forma combined condensed financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the surviving corporation’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma combined condensed financial information reflects adjustments, which are based upon preliminary estimates, to record the Great Western identifiable assets acquired and liabilities assumed at fair value, and to record the resulting goodwill recognized. The fair value estimates reflected in this joint proxy statement/prospectus are preliminary, and final amounts will be based upon the actual consideration paid and the fair value of the assets and liabilities of Great Western as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. For more information, see the section entitled “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 24.
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Certain of First Interstate’s and Great Western’s directors and executive officers may have interests in the merger that may differ from, or may be in addition to, the interests of holders of First Interstate common stock and holders of Great Western common stock generally.
Holders of First Interstate common stock and holders of Great Western common stock should be aware that some of First Interstate’s and Great Western’s directors and executive officers may have interests in the merger and have arrangements that are different from, or in addition to, those of holders of First Interstate common stock and holders of Great Western common stock generally. These interests and arrangements may create potential conflicts of interest. The First Interstate board of directors and the Great Western board of directors were aware of these respective interests and considered these interests, among other matters, when making their decisions to approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending that First Interstate shareholders vote to approve and adopt the merger agreement and Great Western stockholders vote to approve and adopt the merger agreement, as applicable. For a more complete description of these interests, please see the sections entitled “The Merger-Interests of First Interstate’s Directors and Executive Officers in the Merger” beginning on page 110 and “The Merger-Interests of Great Western’s Directors and Executive Officers in the Merger” beginning on page 111.
The merger agreement may be terminated in accordance with its terms and the merger may not be completed, which could negatively affect First Interstate and/or Great Western.
If the merger is not completed for any reason, including as a result of First Interstate shareholders failing to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal or Great Western stockholders failing to approve the Great Western merger proposal, there may be various adverse consequences and First Interstate and/or Great Western may experience negative reactions from the financial markets and from their respective customers and employees. For example, First Interstate’s or Great Western’s businesses may have been affected adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of First Interstate Class A common stock or Great Western common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. If the merger agreement is terminated under certain circumstances, First Interstate may be required to pay a termination fee of $105 million to Great Western or Great Western may be required to pay a termination fee of $70 million to First Interstate.
Additionally, each of First Interstate and Great Western has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this joint proxy statement/prospectus, and all filing and other fees paid to the SEC in connection with the merger. If the merger is not completed, First Interstate and Great Western would have to pay these expenses without realizing the expected benefits of the merger.
First Interstate and Great Western will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on First Interstate and Great Western. These uncertainties may impair First Interstate’s or Great Western’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with First Interstate or Great Western to seek to change existing business relationships with First Interstate or Great Western. In addition, subject to certain exceptions, First Interstate and Great Western have agreed to operate their respective businesses in the ordinary course consistent with past practice in all material respects prior to closing, and First Interstate and Great Western have agreed not to take certain actions, which could cause First Interstate or Great Western to be unable to pursue other beneficial opportunities that may arise prior to the completion of the merger. See the section entitled “The Transaction Agreements—Description of the Merger Agreement—Covenants and Agreements” beginning on page 125 for a description of the restrictive covenants applicable to First Interstate and Great Western.
The shares of First Interstate Class A common stock to be received by holders of Great Western common stock as a result of the merger will have different rights from the shares of Great Western common stock.
In the merger, holders of Great Western common stock will become holders of First Interstate Class A common stock and their rights as shareholders of First Interstate Class A common stock will be governed by Montana law and
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the governing documents of the surviving corporation. The rights associated with First Interstate Class A common stock are different from the rights associated with Great Western common stock. See the section entitled “Comparison of Shareholders’ Rights” beginning on page 146 for a discussion of the rights associated with First Interstate Class A common stock.
In connection with the merger, First Interstate will assume Great Western’s outstanding debt obligations, and the surviving corporation’s level of indebtedness following the completion of the merger could adversely affect the surviving corporation’s ability to raise additional capital and to meet its obligations under its existing indebtedness.
In connection with the merger, First Interstate will assume Great Western’s outstanding indebtedness. First Interstate’s existing debt, together with any future incurrence of additional indebtedness, could have important consequences for the surviving corporation’s creditors and the surviving corporation’s shareholders. For example, it could limit the surviving corporation’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; restrict the surviving corporation from making strategic acquisitions or cause the surviving corporation to make non-strategic divestitures; restrict the surviving corporation from paying dividends to its shareholders; increase the surviving corporation’s vulnerability to general economic and industry conditions; and require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the surviving corporation’s indebtedness, thereby reducing the surviving corporation’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.
Holders of Great Western common stock will have a reduced ownership and voting interest in the surviving corporation after the merger and will exercise less influence over management.
Holders of First Interstate Class A common stock and Great Western common stock currently have the right to vote in the election of the board of directors and on other matters affecting First Interstate and Great Western, respectively. When the merger is completed, each holder of Great Western common stock who receives shares of First Interstate Class A common stock will become a holder of common stock of the surviving corporation, with a percentage ownership of the surviving corporation that is smaller than the holder’s percentage ownership of Great Western. Based on the number of shares of First Interstate and Great Western common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of First Interstate Class A common stock expected to be issued in the merger, the former holders of Great Western common stock, as a group, are estimated to own approximately forty-three percent (43%) of the fully diluted shares of the surviving corporation immediately after the merger and current holders of First Interstate common stock as a group are estimated to own approximately fifty-seven percent (57%) of the fully diluted shares of the surviving corporation immediately after the merger. Because of this, holders of Great Western common stock may have less influence on the management and policies of the surviving corporation than they now have on the management and policies of Great Western.
The dilution caused by the issuance of shares of First Interstate Class A common stock in connection with the merger may adversely affect the market price of First Interstate Class A common stock.
In connection with the payment of the merger consideration, based on the number of shares of Great Western common stock outstanding as of December 13, 2021, First Interstate expects to issue approximately 46.5 million shares of First Interstate Class A common stock to Great Western stockholders. The dilution caused by the issuance of these new shares of First Interstate Class A common stock may result in fluctuations in the market price of First Interstate Class A common stock, including a stock price decrease.
Holders of First Interstate common stock and holders of Great Western common stock will not have appraisal rights or dissenters’ rights in the merger.
Appraisal rights (also known as dissenters’ rights) are statutory rights that, if applicable under law, enable security holders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to security holders in connection with the extraordinary transaction.
Under Section 35-14-1302 of the MBCA, the holders of First Interstate common stock will not be entitled to appraisal or dissenters’ rights in connection with the merger with respect to any shares of First Interstate common stock that remain outstanding after the consummation of the merger. If the merger is completed, holders of First
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Interstate common stock will not receive any consideration for their shares, and their shares of First Interstate common stock will remain outstanding and will constitute shares of the surviving corporation. Accordingly, holders of First Interstate common stock are not entitled to any appraisal or dissenters’ rights in connection with the merger.
Under Section 262 of the DGCL, stockholders do not have appraisal rights with respect to shares of any class or series of stock if such shares of stock, or depositary receipts in respect thereof, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Because Great Western common stock is listed on the NYSE, a national securities exchange, and because Great Western stockholders will receive in the merger only shares of First Interstate Class A common stock, which will be publicly listed on NASDAQ upon the effective time, and cash in lieu of fractional shares, Great Western stockholders are not entitled to any appraisal rights in connection with the merger.
Litigation relating to the merger has been filed against First Interstate, Great Western and the Great Western board of directors, and additional litigation may be filed against First Interstate and the First Interstate board of directors and/or Great Western and the Great Western board of directors in the future, which could prevent or delay the completion of the merger or result in the payment of damages.
In connection with the merger, litigation relating to the merger has been filed against First Interstate, Great Western and the Great Western board of directors, and it is possible that additional litigation by shareholders of First Interstate and/or stockholders of Great Western may be filed against First Interstate and the First Interstate board of directors and/or Great Western and the Great Western board of directors in the future. Among other remedies, these shareholders or stockholders could seek damages and/or to enjoin the merger or the other transactions contemplated by the merger agreement. The outcome of any litigation is uncertain and any such lawsuits could prevent or delay the completion of the merger and result in substantial costs to First Interstate, Great Western and the combined company. Any such actions may create uncertainty relating to the merger and may be costly and distracting to management. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the combined company’s business, financial condition and results of operations. For more information, see “The Merger—Litigation Related to the Merger.”
The merger agreement limits First Interstate’s and Great Western’s respective ability to pursue alternatives to the merger and may discourage other companies from trying to acquire First Interstate or Great Western.
The merger agreement contains “no shop” covenants that restrict each of First Interstate’s and Great Western’s ability to, directly or indirectly, initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals with respect to any acquisition proposal, engage or participate in any negotiations with any person concerning any acquisition proposal, provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any person relating to any acquisition proposal, subject to certain exceptions, or, unless the merger agreement has been terminated in accordance with its terms, approve or enter into any term sheet, letter of intent, commitment, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement in connection with or relating to any acquisition proposal.
The merger agreement further provides that, during the twelve (12)-month period following the termination of the merger agreement under specified circumstances, including the entry into a definitive agreement or consummation of a transaction with respect to an alternative acquisition proposal, First Interstate may be required to pay Great Western a termination fee of $105 million or Great Western may be required to pay a termination fee of $70 million to First Interstate. See the section entitled “The Transaction Agreements—Description of the Merger Agreement—Termination Fees” beginning on page 135.
These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of First Interstate or Great Western from considering or proposing that acquisition.
The merger will not be completed unless important conditions are satisfied or waived, including approval of the merger agreement by Great Western stockholders and approval of the merger agreement and the First Interstate articles amendment by First Interstate shareholders.
Specified conditions set forth in the merger agreement must be satisfied or waived to complete the merger and the bank merger. If the conditions are not satisfied or, subject to applicable law, waived, the merger and the bank
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merger will not occur or will be delayed and each of Great Western and First Interstate may lose some or all of the intended benefits of the merger. The following conditions must be satisfied or waived, if permissible, before Great Western and First Interstate are obligated to complete the merger:
approval of the merger agreement and the First Interstate articles amendment by the shareholders of First Interstate by the requisite First Interstate vote and approval of the merger agreement by the stockholders of Great Western by the requisite Great Western vote;
the authorization for listing on the NASDAQ, subject to official notice of issuance, of the shares of First Interstate Class A common stock that will be issued pursuant to the merger agreement;
the receipt of specified governmental consents and approvals, including from the Federal Reserve Board, the MDOB, and the SDDB, and termination or expiration of all applicable waiting periods in respect thereof, in each case without the imposition of any materially burdensome regulatory condition;
the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part, and the absence of any stop order suspending the effectiveness of the registration statement or proceedings for such purpose initiated or threatened by the SEC and not withdrawn;
no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement being in effect, and no law, statute, rule, regulation, order, injunction or decree having been enacted, entered, promulgated or enforced by any governmental entity which prohibits or makes illegal the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement;
the accuracy of the representations and warranties of the other party contained in the merger agreement, generally as of the date on which the merger agreement was entered into and as of the closing date, subject to the materiality standards provided in the merger agreement (and the receipt by each party of a certificate dated as of the closing date and signed on behalf of the other party by its chief executive officer or chief financial officer to such effect);
the performance by the other party in all material respects of the obligations, covenants and agreements required to be performed by it under the merger agreement at or prior to the closing date (and the receipt by each party of a certificate dated as of the closing date and signed on behalf of the other party by its chief executive officer or chief financial officer to such effect); and
receipt by such party of an opinion of legal counsel to the effect that on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
None of the opinions regarding the fairness, from a financial point of view, of the exchange ratio in the merger delivered to the Great Western board of directors or the First Interstate board of directors prior to the signing of the merger agreement reflect any changes in circumstances since the date on which such opinions were delivered.
The opinion rendered by Piper Sandler, financial advisor to Great Western, to the Great Western board of directors on September 15, 2021, and the opinions separately rendered by each of KBW and Barclays, financial advisors to First Interstate, to the First Interstate board of directors on September 15, 2021, were based upon information available to such financial advisors as of the date of each respective opinion. None of the opinions reflect any changes that may occur or may have occurred after the date on which each opinion was delivered, including changes to the operations and prospects of Great Western or First Interstate, changes in general market and economic conditions, or other changes which may be beyond the control of Great Western and First Interstate. Any such changes may alter the relative value of Great Western or First Interstate or the prices of shares of Great Western common stock or First Interstate Class A common stock by the time the merger is completed. The opinions do not speak as of the date the merger will be completed or as of any date other than the date of each respective opinion. For a description of the opinion that the Great Western board of directors received from Great Western’s financial advisor, please see “The Merger-Opinion of Great Western’s Financial Advisor” beginning on page 76. For a description of the opinions that the First Interstate board of directors received from First Interstate’s financial advisors, please see “The Merger- Opinions of First Interstate’s Financial Advisors” beginning on page 88.
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Risks Relating to First Interstate’s Business
You should read and consider risk factors specific to First Interstate’s business that will also affect the surviving corporation after the merger. These risks are described in the sections entitled “Risk Factors” in First Interstate’s Annual Report on Form 10-K for the year ended December 31, 2020, First Interstate’s Quarterly Report on Form 10-Q for the three months ended June 30, 2021 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.
Risks Relating to Great Western’s Business
You should read and consider risk factors specific to Great Western’s business that will also affect the surviving corporation after the merger. These risks are described in the sections entitled “Risk Factors” in Great Western’s Annual Report on Form 10-K for the year ended September 30, 2021, and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.
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THE FIRST INTERSTATE SPECIAL MEETING
This section contains information for holders of First Interstate common stock about the special meeting that First Interstate has called to allow holders of First Interstate common stock to consider and vote on the merger agreement and other related matters. This joint proxy statement/prospectus is accompanied by a notice of the special meeting of holders of First Interstate common stock and a form of proxy card that the First Interstate board of directors is soliciting for use by the holders of First Interstate common stock at the special meeting and at any adjournments or postponements of the special meeting.
Date, Time and Place of the Meeting
The First Interstate special meeting will be held at First Interstate Bank Great West Center, 1800 Sixth Avenue North, Billings, MT 59101 on January 19, 2022 at 3:30 p.m., mountain time.
We are monitoring the emerging public health impact of coronavirus (COVID-19). The health and safety of our shareholders, directors, officers, employees and other constituents are of paramount concern to the First Interstate board of directors and management. We currently plan to hold the First Interstate special meeting as presented in this notice. However, if public health developments warrant, we may need to change the date, time or location of the First Interstate special meeting, add a virtual component to the First Interstate special meeting or, if permitted by applicable law, hold the First Interstate special meeting solely by means of remote location and not in a physical location. Any such changes will be publicly announced as promptly as practicable before the meeting by press release and posting on our website, as well as through an SEC filing.
Matters to Be Considered
At the First Interstate special meeting, holders of First Interstate Class A common stock will be asked to consider and vote on the following proposals:
the First Interstate merger proposal;
the First Interstate authorized share count proposal;
the First Interstate staggered board proposal; and
the First Interstate adjournment proposal.
Recommendation of the First Interstate Board of Directors
The First Interstate board of directors unanimously recommends that you vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal, and “FOR” the First Interstate adjournment proposal. See “The Merger—First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors” beginning on page 85 for a more detailed discussion of the First Interstate board of directors’ recommendation.
Record Date and Quorum
The First Interstate board of directors has fixed the close of business on December 13, 2021 as the record date for determination of holders of First Interstate common stock entitled to notice of and to vote at the First Interstate special meeting. On the record date for the First Interstate special meeting, there were 41,686,490 shares of First Interstate Class A common stock and 20,514,347 shares of First Interstate Class B common stock outstanding.
Shares representing a majority of the votes entitled to be cast on a matter must be present or represented by proxy at the First Interstate special meeting to constitute a quorum for action on that matter at the First Interstate special meeting. If you fail to submit a proxy or to vote at the First Interstate special meeting on a proposal, or fail to instruct your bank, broker, trustee or other nominee how to vote on a proposal, your shares of First Interstate common stock will not be counted towards a quorum with respect to that proposal. Abstentions are considered present for purposes of establishing a quorum.
After a share of First Interstate common stock is represented at the First Interstate special meeting, it will be counted for the purpose of determining a quorum not only at the First Interstate special meeting but also at any adjournment or postponement of the First Interstate special meeting, unless a new record date is or must be fixed for that adjourned meeting. In the event that a quorum is not present at the First Interstate special meeting, it is expected that the First Interstate special meeting will be adjourned or postponed.
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At the First Interstate special meeting, each share of First Interstate Class A common stock is entitled to one (1) vote on all matters properly submitted to holders of First Interstate Class A common stock and each share of First Interstate Class B common stock is entitled to five (5) votes on all matters properly submitted to holders of First Interstate Class B common stock.
As of the record date, First Interstate directors and executive officers and their affiliates owned and were entitled to vote approximately 463,609 shares of First Interstate Class A common stock and 6,512,165 shares of First Interstate Class B common stock, representing approximately 1.1% and 31.7%, respectively, of the outstanding shares of First Interstate Class A common stock and First Interstate Class B common stock. We currently expect that First Interstate’s directors and executive officers will vote their shares in favor of the First Interstate merger proposal and the other proposals to be considered at the First Interstate special meeting, although none of them has entered into any agreements obligating them to do so other than the Scott Family shareholders who are parties to the support agreement. As of the record date for the First Interstate special meeting, the Scott family shareholders collectively owned approximately 53.1% of the voting power represented by issued and outstanding shares of First Interstate common stock.
Broker Non-Votes
A broker non-vote occurs when a bank, broker, trustee or other nominee is not permitted to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. It is expected that all proposals to be voted on at the First Interstate special meeting will be “non-routine” matters, and, as such, broker non-votes, if any, will not be counted as present and entitled to vote for purposes of determining a quorum at the First Interstate special meeting. If your bank, broker, trustee or other nominee holds your shares of First Interstate common stock in “street name,” such entity will vote your shares of First Interstate common stock only if you provide instructions on how to vote by complying with the voter instruction form sent to you by your bank, broker, trustee or other nominee with this joint proxy statement/prospectus.
Vote Required; Treatment of Abstentions; Broker Non-Votes and Failure to Vote
Proposal 1: First Interstate merger proposal:
Vote required: Approval of the First Interstate merger proposal requires the affirmative vote of a majority of the votes entitled to be cast on the merger agreement, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class (meaning that of the voting power of the shares entitled to vote, a majority of the voting power of the shares must be voted “FOR” the First Interstate merger proposal for it to be approved).
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate merger proposal, it will have the same effect as a vote “AGAINST” the First Interstate merger proposal.
Proposal 2: First Interstate authorized share count proposal:
Vote required: Approval of the First Interstate authorized share count proposal requires the affirmative vote of a majority of the voting power of the issued and outstanding shares of First Interstate common stock, voting as a single class (meaning that of the voting power of the issued and outstanding shares of common stock, a majority of the voting power of the shares must be voted “FOR” the First Interstate authorized share count proposal for it to be approved).
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate authorized share count proposal, it will have the same effect as a vote “AGAINST” the First Interstate authorized share count proposal.
Proposal 3: First Interstate staggered board proposal:
Vote required: Approval of the First Interstate staggered board proposal requires the affirmative vote of a majority of the votes entitled to be cast on the matter, with holders of First Interstate Class A common stock
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and First Interstate Class B common stock voting together as a single class (meaning that of the voting power of the issued and outstanding shares of common stock, a majority of the voting power of the shares must be voted “FOR” the First Interstate staggered board proposal for it to be approved).
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate staggered board proposal, it will have the same effect as a vote “AGAINST” the First Interstate staggered board proposal.
Proposal 4: First Interstate adjournment proposal:
Vote required: Approval of the First Interstate adjournment proposal requires the affirmative vote of the majority of the votes cast on the matter, with holders of First Interstate Class A common stock and First Interstate Class B common stock voting together as a single class (meaning the votes cast “FOR” the First Interstate adjournment proposal must exceed the votes cast “AGAINST” the First Interstate adjournment proposal).
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the First Interstate special meeting or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the First Interstate adjournment proposal, it will have no effect on the First Interstate adjournment proposal.
Attending the Special Meeting
Your proxy card is your admission ticket. When you arrive at the First Interstate special meeting, you will be asked to present photo identification, such as a driver’s license. If you are a beneficial owner of First Interstate common stock held by a bank, broker, trustee or other nominee, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. If you want to vote your First Interstate common stock held in nominee name in person, you must get a “legal proxy” in your name from the bank, broker, trustee or other nominee that holds your shares. First Interstate reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the First Interstate special meeting is prohibited without First Interstate’s express written consent.
Pursuant to First Interstate’s bylaws, the First Interstate board of directors is entitled to make such rules and regulations for the conduct of meetings of shareholders as it deems necessary, appropriate or convenient. Subject to such rules and regulations, if any, the presiding officer of the First Interstate special meeting has the power to determine all questions of order or procedure relating to the First Interstate special meeting. First Interstate is actively monitoring the emerging public health impact of coronavirus (COVID-19) and may make adjustments to the procedures for the First Interstate special meeting to ensure the safety of its shareholders, directors, officers and employees, including with respect to admission procedures.
Proxies
A holder of First Interstate common stock may vote by proxy or in person at the First Interstate special meeting. If you hold your shares of First Interstate common stock in your name as a holder of record, to submit a proxy, you, as a holder of First Interstate common stock, may use one of the following methods:
By telephone: by calling the toll-free number indicated on the accompanying proxy card and following the recorded instructions.
Through the Internet: by visiting the website indicated on the accompanying proxy card and following the instructions.
By mail: by completing and returning the accompanying proxy card in the enclosed postage-paid envelope. The envelope requires no additional postage if mailed in the United States.
If you intend to submit your proxy by telephone or via the Internet, you must do so by 11:59 p.m., Eastern Time, on the day before the First Interstate special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the First Interstate special meeting.
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First Interstate requests that holders of First Interstate common stock vote by telephone, over the Internet or by completing and signing the accompanying proxy card and returning it to First Interstate as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of First Interstate common stock represented by it will be voted at the First Interstate special meeting in accordance with the instructions contained on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal and “FOR” the First Interstate adjournment proposal.
If a holder’s shares are held in “street name” by a bank, broker, trustee or other nominee, the holder should check the voting form used by that firm to determine whether the holder may vote by telephone or the Internet.
Every vote is important. Accordingly, you should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not you plan to attend the First Interstate special meeting in person. Sending in your proxy card or voting by telephone or on the Internet will not prevent you from voting your shares personally at the meeting because you may subsequently revoke your proxy.
Shares Held in Street Name
If your shares are held in “street name” through a bank, broker, trustee or other nominee, you must instruct the bank, broker, trustee or other nominee on how to vote your shares. Your broker, bank or other nominee will vote your shares only if you provide specific instructions on how to vote by following the instructions provided to you by your bank, broker, trustee or other nominee.
You may not vote shares held in a brokerage or other account in “street name” by returning a proxy card directly to First Interstate or by voting in person at the First Interstate special meeting unless you provide a signed “legal proxy” giving you the right to vote the shares, which you must obtain from your bank, broker, trustee or other nominee. If you choose to vote your shares in street name in person at the First Interstate special meeting, please bring that signed legal proxy along with proof of identification.
Further, banks, brokers, trustees or other nominees who hold shares of First Interstate common stock on behalf of their customers may not give a proxy to First Interstate to vote those shares with respect to any non-routine matters without specific instructions from you, as banks, brokers, trustees and other nominees do not have discretionary voting power on any non-routine matters that will be voted upon at the First Interstate special meeting, including the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal and the First Interstate adjournment proposal.
Revocability of Proxies
If you are a holder of First Interstate common stock of record, you may revoke your proxy at any time before it is voted by:
submitting a written notice of revocation to First Interstate’s corporate secretary;
granting a subsequently dated proxy;
voting by telephone or the Internet at a later time, before 11:59 p.m., Eastern Time, on the day before the First Interstate special meeting; or
attending in person and voting at the First Interstate special meeting.
If you hold your shares of First Interstate common stock through a bank, broker, trustee or other nominee, you should contact your bank, broker, trustee or other nominee to change your vote.
Attendance at the First Interstate special meeting will not in and of itself constitute revocation of a proxy. A revocation or later-dated proxy received by First Interstate after the vote will not affect the vote. First Interstate’s corporate secretary’s mailing address is: 401 North 31st Street, Billings, Montana 59101. If the First Interstate special meeting is postponed or adjourned, it will not affect the ability of holders of First Interstate common stock of record as of the record date to exercise their voting rights or to revoke any previously granted proxy using the methods described above.
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Delivery of Proxy Materials
As permitted by applicable law, only one (1) copy of this joint proxy statement/prospectus is being delivered to holders of First Interstate common stock residing at the same address, unless such holders of First Interstate common stock have notified First Interstate of their desire to receive multiple copies of the joint proxy statement/prospectus.
If you hold shares of both First Interstate common stock and Great Western common stock, you will receive two (2) separate packages of proxy materials.
First Interstate will promptly deliver, upon oral or written request, a separate copy of the joint proxy statement/prospectus to any holder of First Interstate common stock residing at an address to which only one (1) copy of such document was mailed. Requests for additional copies should be directed to First Interstate’s corporate secretary at 401 North 31st Street, Billings, Montana 59101, Telephone: (406) 255-5304, or First Interstate’s proxy solicitor, MacKenzie, by calling toll-free at (800) 322-2885, or for banks and brokers, collect at (212) 929-5500.
Solicitation of Proxies
First Interstate and Great Western will share equally the expenses incurred in connection with the printing and mailing of this joint proxy statement/prospectus. To assist in the solicitation of proxies, First Interstate has retained MacKenzie Partners, Inc., for a fee of $20,000 plus reimbursement of reasonable and customary documented out-of-pocket expenses for their services. First Interstate and its proxy solicitor may also request banks, brokers, trustees and other intermediaries holding shares of First Interstate common stock beneficially owned by others to send this joint proxy statement/prospectus to, and obtain proxies from, the beneficial owners and may reimburse such record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of First Interstate. No additional compensation will be paid to First Interstate’s directors, officers or employees for solicitation.
Other Matters to Come Before the First Interstate Special Meeting
First Interstate management knows of no other business to be presented at the First Interstate special meeting, but if any other matters are properly presented to the meeting or any adjournments or postponements thereof, the persons named in the proxies will vote on them in accordance with the board of directors’ recommendations.
Assistance
If you need assistance in completing your proxy card, have questions regarding First Interstate’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact First Interstate’s 401 North 31st Street, Billings, Montana 59101, or by telephone at (406) 255-5304, or First Interstate’s proxy solicitor, MacKenzie, by calling toll-free at (800) 322-2885, or for banks and brokers, collect at (212) 929-5500.
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FIRST INTERSTATE PROPOSALS
Proposal 1: First Interstate Merger Proposal
First Interstate is asking holders of First Interstate common stock to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of First Interstate common stock pursuant to the merger agreement. Holders of First Interstate common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.
After careful consideration, the First Interstate board of directors, by a unanimous vote of all directors, determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of First Interstate and its shareholders and unanimously adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. See “The Merger-First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors” beginning on page 85 for a more detailed discussion of the First Interstate board of directors’ recommendation.
The First Interstate board of directors unanimously recommends a vote “FOR” the First Interstate merger proposal.
Proposal 2: First Interstate Authorized Share Count Proposal
In connection with the merger, First Interstate is asking its shareholders to approve an amendment to First Interstate’s articles of incorporation to increase the number of authorized shares of First Interstate Class A common stock from one hundred million (100,000,000) to one hundred fifty million (150,000,000), effective as of, and subject to, the completion of the merger.
If approved, Section 1 of Article IV of First Interstate’s articles of incorporation will be amended and replaced in its entirety with the following:
Section 1. Authorized Shares. The Corporation is authorized to issue 150,000,000 shares of Class A Common Stock, no par value per share (the “Class A Common Stock”), 100,000,000 shares of Class B Common Stock, no par value per share (the “Class B Common Stock”, and together with the Class A Common Stock, the “Common Stock”) and 100,000 shares of Preferred Stock, no par value per share. The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of Common Stock, voting together as a single class.
As of the close of business on the record date for the First Interstate special meeting, there were 41,686,490 outstanding shares of First Interstate Class A common stock and 895,153 shares of First Interstate Class A common stock reserved for issuance to directors and employees under various compensation and benefits plans, with the remaining 57,418,357 shares being authorized, unissued and unreserved shares available for other corporate purposes. In connection with the merger, based on the number of shares of Great Western common stock outstanding as of December 13, 2021, First Interstate expects to issue approximately 46,505,320 shares of First Interstate Class A common stock to holders of Great Western common stock. In addition, based on the number of issued and outstanding shares of First Interstate Class B common stock as of December 13, 2021, First Interstate expects to issue approximately 20,514,347 shares of First Interstate Class A common stock to holders of First Interstate Class B common stock upon conversion of the shares of First Interstate Class B common stock.
Based on current estimates, after giving effect to the First Interstate authorized shares amendment, First Interstate will have approximately 60,913,037 authorized but unissued shares of First Interstate Class A common stock available for issuance after completion of the merger and approximately 40,398,690 authorized but unissued shares of First Interstate Class A common stock available for issuance after completion of the merger and the conversion. The First Interstate board of directors considers the proposed increase in the number of authorized shares desirable because it will enable First Interstate to complete the merger and the conversion and it will provide greater flexibility in the capital structure of the surviving corporation following the merger and the conversion by allowing it to raise capital that may be necessary to further develop its business, to fund potential acquisitions, to have shares available for use in connection with stock plans and to pursue other corporate purposes that may be identified by the board of directors of the surviving corporation in the future.
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Each share of First Interstate Class A common stock authorized for issuance has the same rights as, and is identical in all respects with, each other share of First Interstate Class A common stock currently outstanding. The newly authorized shares of First Interstate Class A common stock will not affect the rights, such as voting and liquidation rights, of the shares of First Interstate Class A common stock currently outstanding. Under the First Interstate articles of incorporation, holders of First Interstate Class A common stock do not have preemptive rights. Therefore, should the First Interstate board of directors elect to issue additional shares of First Interstate Class A common stock, other than on a pro rata basis to all current holders of First Interstate Class A common stock, existing holders of First Interstate Class A common stock would not have any preferential rights to purchase those shares, and such issuance could have a dilutive effect on earnings per share (“EPS”), book value per share, and the voting power and shareholdings of current holders of First Interstate Class A common stock, depending on the particular circumstances in which the additional shares of First Interstate Class A common stock are issued. Please see the section entitled “Description of First Interstate Capital Stock” beginning on page 141 for a description of First Interstate capital stock and the rights of shareholders of First Interstate. The First Interstate board of directors continually considers First Interstate’s capital structure and will determine the terms and timing of any future issuance.
The First Interstate authorized shares amendment will become effective as of and subject to the effective time, subject to approval by the holders of First Interstate common stock of the First Interstate authorized share count proposal at the First Interstate special meeting.
The First Interstate board of directors unanimously recommends a vote “FOR” the First Interstate authorized share count proposal.
Proposal 3: First Interstate Staggered Board Proposal
First Interstate is asking its shareholders to approve an amendment to First Interstate’s articles of incorporation to make certain technical changes, which are intended to incorporate into First Interstate’s articles of incorporation provisions that currently exist in First Interstate’s bylaws, relating to the classification of the First Interstate board of directors into three classes, with directors in each class serving staggered three-year terms.
If approved, Article VI of First Interstate’s articles of incorporation will be amended to add the following new section:
Section 6. Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof in relation to the rights of the holders of Preferred Stock to elect directors under specified circumstances, the Board of Directors shall be and is divided into three classes, as nearly equal in number of directors as possible, designated: Class I, Class II and Class III. The Board of Directors is authorized to assign to such classes directors already in office at the time the First Amendment to the Third Amended and Restated Articles of Incorporation becomes effective (the “Effective Date”), provided that notwithstanding anything to the contrary any directors already in office at the Effective Date and who were elected, or whose appointment was ratified, at any annual or special meeting of shareholders for a term of office to expire at (i) the first annual meeting of shareholders following the Effective Date, shall be assigned to Class I, (ii) the second annual meeting of shareholders following the Effective Date, shall be assigned to Class II, and (iii) the third annual meeting of shareholders following the Effective Date, shall be assigned to Class III. Except as otherwise provided in this Section 6, the term of office of the directors initially assigned to Class I at the Effective Date will expire at the first annual meeting of shareholders following the Effective Date; the term of office of the directors initially assigned to Class II at the Effective Date will expire at the second annual meeting of shareholders following the Effective Date; the term of office of the directors initially assigned to Class III at the Effective Date will expire at the third annual meeting of shareholders following the Effective Date; and the term of office of any directors appointed by the Board of Directors to fill newly created directorships resulting from any increase in the number of directors or any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall expire at the next annual meeting of shareholders after their appointment in accordance with these Third Amended and Restated Articles of Incorporation, as amended, and the Bylaws of the Corporation. At each annual meeting of shareholders beginning with the first annual meeting of shareholders following the Effective Date, the successors of the directors whose terms expire at that meeting shall be elected for a term of three years. The directors of each class will hold office until the expiration of the term of such class and until their respective successors shall have been elected and
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qualified, or until such director’s earlier death, resignation or removal. Notwithstanding anything to the contrary, the Board of Directors is authorized to take appropriate steps, by designation of short terms or otherwise, to return the rotation of election of directors to staggered terms as contemplated by, and established and fixed in accordance with, this Section 6 and the Bylaws of the Corporation; provided that in all cases the Board of Directors shall comply with Section 6.12(b) of that certain Agreement and Plan of Merger, by and between Great Western Bancorp, Inc. and the Corporation, dated as of September 15, 2021 (as the same may be amended, supplemented or modified from time to time).
The amendment to First Interstate’s articles of incorporation relating to the classification of the First Interstate board of directors will become effective upon filing with the Montana secretary of state, subject to approval by the holders of First Interstate common stock of the First Interstate staggered board proposal at the First Interstate special meeting, and will become effective whether or not the First Interstate authorized share count proposal or the First Interstate merger proposal are approved and whether or not the merger is completed.
The First Interstate board of directors unanimously recommends a vote “FOR” the First Interstate staggered board proposal.
Proposal 4: First Interstate Adjournment Proposal
The First Interstate special meeting may be adjourned or postponed to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the First Interstate special meeting to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of First Interstate common stock.
If, at the First Interstate special meeting, the number of shares of First Interstate common stock present or represented and voting in favor of the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal is insufficient to approve the First Interstate merger proposal, the First Interstate authorized share count proposal or the First Interstate staggered board proposal, as applicable, First Interstate intends to move to adjourn or postpone the First Interstate special meeting in order to enable the First Interstate board of directors to solicit additional proxies for approval of the First Interstate merger proposal, the First Interstate authorized share count proposal, or the First Interstate staggered board proposal, as applicable. In that event, First Interstate will ask holders of First Interstate common stock to vote on the First Interstate adjournment proposal, but not the First Interstate merger proposal, the First Interstate authorized share count proposal, or the First Interstate staggered board proposal.
In this proposal, First Interstate is asking holders of First Interstate common stock to authorize the holder of any proxy solicited by the First Interstate board of directors on a discretionary basis to vote in favor of adjourning the First Interstate special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from holders of First Interstate common stock who have previously voted. Pursuant to the First Interstate bylaws, the First Interstate special meeting may be adjourned without new notice being given, so long as the new date, time and place of the reconvened special meeting are announced at the First Interstate special meeting, unless the adjournment is for a period of more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting.
The approval of the First Interstate adjournment proposal by holders of First Interstate common stock is not a condition to the completion of the merger.
The First Interstate board of directors unanimously recommends a vote “FOR” the First Interstate adjournment proposal.
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THE GREAT WESTERN SPECIAL MEETING
This section contains information for holders of Great Western common stock about the special meeting that Great Western has called to allow holders of Great Western common stock to consider and vote on the merger agreement and other related matters. This joint proxy statement/prospectus is accompanied by a notice of the special meeting of holders of Great Western common stock and a form of proxy card that the Great Western board of directors is soliciting for use by the holders of Great Western common stock at the special meeting and at any adjournments or postponements of the special meeting.
Date, Time and Place of the Meeting
The Great Western special meeting will be held virtually via the Internet on January 19, 2022, at 4:30 p.m. central time. The Great Western special meeting will be held solely via live webcast and there will not be a physical meeting location given the current public health impacts of the COVID-19 pandemic and our desire to promote the health and safety of Great Western stockholders, as well as Great Western directors, officers, employees and other constituents.
Only holders of Great Western common stock as of the close of business on the record date are entitled to receive notice of, and vote at, the Great Western special meeting via the Great Western special meeting website or any adjournment or postponement thereof. Great Western stockholders will be able to attend the Great Western special meeting via the Great Western special meeting website or by proxy, submit questions and vote their shares electronically during the meeting by visiting the Great Western special meeting website at www.virtualshareholdermeeting.com/GWB2022SM. Great Western stockholders will need the control number found on their proxy card or voting instruction form in order to access the Great Western special meeting website.
Matters to Be Considered
At the Great Western special meeting, holders of Great Western common stock will be asked to consider and vote on the following proposals:
the Great Western merger proposal;
the Great Western compensation proposal; and
the Great Western adjournment proposal.
Recommendation of the Great Western Board of Directors
The Great Western board of directors unanimously recommends that you vote “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal and “FOR” the Great Western adjournment proposal. See “The Merger—Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors” beginning on page 73 of this joint proxy statement/prospectus for a more detailed discussion of the Great Western board of directors’ recommendation.
Record Date and Quorum
The Great Western board of directors has fixed the close of business on December 13, 2021 as the record date for determination of holders of Great Western common stock entitled to notice of and to vote at the Great Western special meeting. On the record date for the Great Western special meeting, there were 55,199,193 shares of Great Western common stock outstanding.
Holders of a majority of the outstanding shares of Great Western common stock entitled to vote on a matter must be present or represented by proxy at the Great Western special meeting to constitute a quorum for the transaction of business at the Great Western special meeting. If you fail to submit a proxy or to vote at the Great Western special meeting, or fail to instruct your bank, broker, trustee or other nominee how to vote, your shares of Great Western common stock will not be counted towards a quorum. Abstentions are considered present for purposes of establishing a quorum.
In the event that a quorum is not present at the Great Western special meeting, it is expected that the Great Western special meeting will be adjourned or postponed. If the Great Western special meeting is postponed or
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adjourned, it will not affect the ability of holders of Great Western common stock of record as of the record date to exercise their voting rights or to revoke any previously granted proxy using the methods described below; however, if a new record date is set for an adjourned meeting, a new quorum will be required to be established.
At the Great Western special meeting, each share of Great Western common stock is entitled to one (1) vote on all matters properly submitted to holders of Great Western common stock.
As of the record date, Great Western directors and executive officers and their affiliates owned and were entitled to vote approximately 243,938 shares of Great Western common stock, representing less than one percent (1.0%) of the outstanding shares of Great Western common stock. We currently expect that Great Western’s directors and executive officers will vote their shares in favor of the Great Western merger proposal and the other proposals to be considered at the Great Western special meeting, although none of them has entered into any agreements obligating them to do so.
Broker Non-Votes
A broker non-vote occurs when a bank, broker, trustee or other nominee is not permitted to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. It is expected that all proposals to be voted on at the Great Western special meeting will be “non-routine” matters, and, as such, broker non-votes, if any, will not be counted as present and entitled to vote for purposes of determining a quorum at the Great Western special meeting. If your bank, broker, trustee or other nominee holds your shares of Great Western common stock in “street name,” such entity will vote your shares of Great Western common stock only if you provide instructions on how to vote by complying with the voter instruction form sent to you by your bank, broker, trustee or other nominee with this joint proxy statement/prospectus.
Vote Required; Treatment of Abstentions; Broker Non-Votes and Failure to Vote
Proposal 1: Great Western merger proposal:
Vote required: Approval of the Great Western merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Great Western common stock entitled to vote on the merger agreement.
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote at the Great Western special meeting via the Great Western special meeting website or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the Great Western merger proposal, it will have the same effect as a vote “AGAINST” the Great Western merger proposal.
Proposal 2: Great Western compensation proposal:
Vote required: Approval of the Great Western compensation proposal requires the affirmative vote of the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter.
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the Great Western compensation proposal. If you fail to submit a proxy or vote at the Great Western special meeting via the Great Western special meeting website or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the Great Western compensation proposal, it will have no effect on the Great Western compensation proposal.
Proposal 3: Great Western adjournment proposal:
Vote required: Approval of the Great Western adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Great Western common stock present or represented by proxy at the Great Western special meeting and entitled to vote on the subject matter.
Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the Great Western adjournment proposal. If you fail to submit a proxy or vote
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at the Great Western special meeting via the Great Western special meeting website or fail to instruct your bank, broker, trustee or other nominee how to vote with respect to the Great Western adjournment proposal, it will have no effect on the Great Western adjournment proposal.
Attending the Special Meeting
The Great Western special meeting may be accessed via the Great Western special meeting website, where Great Western stockholders will be able to listen to the Great Western special meeting, submit questions and vote online.
You are entitled to attend the Great Western special meeting via the Great Western special meeting website only if you were a stockholder of record as of the close of business on the record date, or you held your shares beneficially in the name of a bank, broker, trustee or other nominee as of the record date, or you hold a valid proxy for the Great Western special meeting. If you were a stockholder of record at the close of business on the record date and wish to attend the Great Western special meeting via the Great Western special meeting website, you will need the control number on your proxy card. If a bank, broker, trustee or other nominee is the record owner of your shares of Great Western common stock, you will need to obtain your specific control number and further instructions from your bank, broker, trustee or other nominee.
You may submit questions during the live audio webcast of the Great Western special meeting via the Great Western special meeting website. To ensure the Great Western special meeting is conducted in a manner that is fair to all stockholders, Great Western may exercise discretion in determining the order in which questions are answered and the amount of time devoted to any one question. Great Western reserves the right to edit or reject questions it deems inappropriate or not relevant to the Great Western special meeting’s limited purpose. Pursuant to the Great Western bylaws, the chairperson of the Great Western special meeting will have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the Great Western special meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of Great Western, restrictions on entry to the Great Western special meeting after the time prescribed for the commencement thereof, and the opening and closing of the voting polls for each item on which a vote is to be taken.
Technical assistance will be available for stockholders who experience an issue accessing the Great Western special meeting. Contact information for technical support will appear on the Great Western special meeting website prior to the start of the Great Western special meeting.
Proxies
A holder of Great Western common stock may vote by proxy or at the Great Western special meeting via the Great Western special meeting website. If you hold your shares of Great Western common stock in your name as a holder of record, to submit a proxy, you, as a holder of Great Western common stock, may use one of the following methods:
By telephone: by calling the toll-free number indicated on the accompanying proxy card and following the recorded instructions.
Through the Internet: by visiting the website indicated on the accompanying proxy card and following the instructions.
By mail: by completing and returning the accompanying proxy card in the enclosed postage-paid envelope. The envelope requires no additional postage if mailed in the United States.
If you intend to submit your proxy by telephone or via the Internet, you must do so by 11:59 p.m., Eastern Time on the day before the Great Western special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the Great Western special meeting.
Great Western requests that holders of Great Western common stock vote by telephone, over the Internet or by completing and signing the accompanying proxy card and returning it to Great Western as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of Great Western common stock represented by it will be voted at the Great Western special meeting in accordance with the instructions contained on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the Great Western merger proposal, “FOR” the Great Western compensation proposal and “FOR” the Great Western adjournment proposal.
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If a holder’s shares are held in “street name” by a bank, broker, trustee or other nominee, the holder should check the voting form used by that firm to determine whether the holder may vote by telephone or the Internet.
Every vote is important. Accordingly, you should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not you plan to attend the Great Western special meeting via the Great Western special meeting website. Sending in your proxy card or voting by telephone or on the Internet will not prevent you from voting your shares via the Great Western special meeting website at the meeting because you may subsequently revoke your proxy.
Shares Held in Street Name
If your shares are held in “street name” through a bank, broker, trustee or other nominee, you must instruct the bank, broker, trustee or other nominee on how to vote your shares. Your broker, bank or other nominee will vote your shares only if you provide specific instructions on how to vote by following the instructions provided to you by your bank, broker, trustee or other nominee.
You may not vote shares held in a brokerage or other account in “street name” by returning a proxy card directly to Great Western.
Further, banks, brokers, trustees or other nominees who hold shares of Great Western common stock on behalf of their customers may not give a proxy to Great Western to vote those shares with respect to any non-routine matters without specific instructions from you, as banks, brokers, trustees and other nominees do not have discretionary voting power on any non-routine matters that will be voted upon at the Great Western special meeting, including the Great Western merger proposal, the Great Western compensation proposal and the Great Western adjournment proposal.
Revocability of Proxies
If you are a holder of Great Western common stock of record, you may revoke your proxy at any time before it is voted by:
submitting a written notice of revocation to Great Western’s corporate secretary;
granting a subsequently dated proxy;
voting by telephone or the Internet at a later time, before 11:59 p.m., Eastern Time on the day before the Great Western special meeting; or
attending virtually and voting at the Great Western special meeting via the Great Western special meeting website.
If you hold your shares of Great Western common stock through a bank, broker, trustee or other nominee, you may change your vote by:
contacting your bank, broker, trustee or other nominee; or
attending and voting your shares at the Great Western special meeting virtually via the Great Western special meeting website if you have your specific 16-digit control number, which is included on your proxy card or the voting instruction form from your bank, broker, trustee or other nominee. Please contact your bank, broker, trustee or other nominee to obtain further instructions.
Attendance virtually at the Great Western special meeting will not in and of itself constitute revocation of a proxy. A revocation or later-dated proxy received by Great Western after the vote will not affect the vote. Great Western’s corporate secretary’s mailing address is: 225 S. Main Ave., Sioux Falls, South Dakota 57104, Attention: Corporate Secretary. If the Great Western special meeting is postponed or adjourned, it will not affect the ability of holders of Great Western common stock of record as of the record date to exercise their voting rights or to revoke any previously granted proxy using the methods described above; however, if a new record date is set for an adjourned meeting, a new quorum will be required to be established.
Delivery of Proxy Materials
As permitted by applicable law, only one (1) copy of this joint proxy statement/prospectus is being delivered to holders of Great Western common stock residing at the same address, unless such holders of Great Western common stock have notified Great Western of their desire to receive multiple copies of the joint proxy statement/prospectus.
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If you hold shares of both Great Western common stock and First Interstate common stock, you will receive two (2) separate packages of proxy materials.
Great Western will promptly deliver, upon oral or written request, a separate copy of the joint proxy statement/prospectus to any holder of Great Western common stock residing at an address to which only one (1) copy of such document was mailed. Requests for additional copies should be directed to Great Western’s corporate secretary at 225 S. Main Ave., Sioux Falls, South Dakota 57104, Attention: Corporate Secretary, or by telephone at (605) 334–2548, or Great Western’s proxy solicitor, Innisfree, by calling toll-free at (877) 750-9496, or for banks and brokers, collect at (212) 750-5833.
Solicitation of Proxies
Great Western and First Interstate will share equally the expenses incurred in connection with the printing and mailing of this joint proxy statement/prospectus. To assist in the solicitation of proxies, Great Western has retained Innisfree, for a fee of $30,000 plus reimbursement of out-of-pocket expenses for their services. Great Western may also request banks, brokers, trustees and other intermediaries holding shares of Great Western common stock beneficially owned by others to send this joint proxy statement/prospectus to, and obtain proxies from, the beneficial owners and may reimburse such record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of Great Western. No additional compensation will be paid to Great Western’s directors, officers or employees for solicitation.
Assistance
If you need assistance in completing your proxy card, have questions regarding Great Western’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Great Western’s corporate secretary 225 S. Main Ave., Sioux Falls, South Dakota 57104, Attention: Corporate Secretary, or by telephone at (605) 334–2548, or Great Western’s proxy solicitor, Innisfree, by calling toll-free at (877) 750-9496, or for banks and brokers, collect at (212) 750-5833.
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GREAT WESTERN PROPOSALS
Proposal 1: Great Western Merger Proposal
Great Western is asking holders of Great Western common stock to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger. Holders of Great Western common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.
After careful consideration, the Great Western board of directors, by a unanimous vote of all directors (or independent directors, as applicable), determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Great Western and its stockholders and unanimously adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. See “The Merger—Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors” beginning on page 73 of this joint proxy statement/prospectus for a more detailed discussion of the Great Western board of directors’ recommendation.
The Great Western board of directors unanimously recommends a vote “FOR” the Great Western merger proposal.
Proposal 2: Great Western Compensation Proposal
Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, Great Western is seeking a non-binding, advisory shareholder approval of the compensation of Great Western’s named executive officers that is based on or otherwise relates to the merger as disclosed in the section entitled “The Merger—Interests of Great Western’s Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to Great Western’s Named Executive Officers” beginning on page 114. The proposal gives holders of Great Western common stock the opportunity to vote, on a non-binding, advisory basis, on the merger-related compensation that may be paid or become payable to Great Western’s named executive officers.
The Great Western board of directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this joint proxy statement/prospectus, and is asking holders of Great Western common stock to vote “FOR” the adoption of the following resolution, on a non-binding advisory basis:
“RESOLVED, that the compensation that will or may be paid or become payable to the Great Western named executive officers, in connection with the merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Merger—Interests of Great Western’s Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to Great Western’s Named Executive Officers” are hereby APPROVED.”
The vote on the Great Western compensation proposal is a vote separate and apart from the votes on the Great Western merger proposal and the Great Western adjournment proposal. Accordingly, if you are a holder of Great Western common stock, you may vote to approve the Great Western merger proposal and/or the Great Western adjournment proposal and vote not to approve the Great Western compensation proposal, and vice versa. The approval of the Great Western compensation proposal by holders of Great Western common stock is not a condition to the completion of the merger. Because the vote on the Great Western compensation proposal is advisory only, it will not affect the obligation of Great Western or First Interstate to pay or provide the compensation contemplated by the compensation agreements and arrangements. Accordingly, if the merger is completed, the merger-related compensation will be paid to Great Western’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if holders of Great Western common stock fail to approve the advisory vote regarding merger-related compensation.
The Great Western board of directors unanimously recommends a vote “FOR” the Great Western compensation proposal.
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Proposal 3: Great Western Adjournment Proposal
The Great Western special meeting may be adjourned or postponed to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Great Western special meeting to approve the Great Western merger proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to holders of Great Western common stock.
If, at the Great Western special meeting, the number of shares of Great Western common stock present or represented and voting in favor of the Great Western merger proposal is insufficient to approve the Great Western merger proposal, Great Western intends to move to adjourn or postpone the Great Western special meeting in order to enable the Great Western board of directors to solicit additional proxies for approval of the Great Western merger proposal. In that event, Great Western will ask holders of Great Western common stock to vote on the Great Western adjournment proposal, but not the Great Western merger proposal or the Great Western compensation proposal.
In this proposal, Great Western is asking holders of Great Western common stock to authorize the holder of any proxy solicited by the Great Western board of directors on a discretionary basis to vote in favor of adjourning the Great Western special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from holders of Great Western common stock who have previously voted. Pursuant to the Great Western bylaws, the Great Western special meeting may be adjourned without new notice being given, so long as the new date, time and place of the reconvened special meeting are announced at the Great Western special meeting at which the adjournment is taken, and any business may be transacted at the reconvened special meeting that might have been transacted on the original date of the Great Western special meeting. Pursuant to the Great Western bylaws, if, however, the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting must be given to each stockholder of record entitled to vote at the meeting. The approval of the Great Western adjournment proposal by holders of Great Western common stock is not a condition to the completion of the merger.
The Great Western board of directors unanimously recommends a vote “FOR” the Great Western adjournment proposal.
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INFORMATION ABOUT FIRST INTERSTATE
First Interstate is a financial and bank holding company focused on community banking. Since its incorporation in Montana in 1971, First Interstate has grown both organically and through strategic acquisitions. First Interstate operates 147 banking offices, including detached drive-up facilities, in communities across six states: Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming. Through its bank subsidiary, First Interstate Bank, First Interstate delivers a comprehensive range of banking products and services, including online and mobile banking, to individuals, businesses, municipalities, and others throughout its market areas.
As of September 30, 2021, First Interstate had consolidated assets of $19.4 billion, deposits of $16.0 billion, loans held for investment of $9.6 billion, and total stockholders’ equity of $2.0 billion.
First Interstate Class A common stock is traded on the NASDAQ under the symbol “FIBK”.
First Interstate’s principal executive office is located at 401 North 31st Street, Billings, MT 59116. First Interstate’s telephone number is (406) 255-5000 and its website is https://www.fibk.com. The information on First Interstate’s website is not part of this joint proxy statement/prospectus, and the reference to First Interstate’s website address does not constitute incorporation by reference of any information on that website into this joint proxy statement/prospectus.
Additional information about First Interstate and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus.
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INFORMATION ABOUT GREAT WESTERN
Great Western is a bank holding company incorporated in the state of Delaware and maintains its principal executive office in Sioux Falls, South Dakota. Great Western is a full-service regional bank holding company focused on relationship-based business banking through its wholly owned banking subsidiary, Great Western Bank. Great Western serves its customers through 175 branches in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. Great Western provides a wide range of services, including commercial and consumer loan and depository services, private banking, brokerage, trust, investment advisory and other traditional banking services.
At September 30, 2021, Great Western had total consolidated assets of $12.9 billion, total consolidated loans of $8.2 billion, total consolidated deposits of $11.3 billion, and total consolidated stockholders’ equity of $1.2 billion.
Great Western common stock is traded on the NYSE under the symbol “GWB.”
Great Western’s principal executive office is located at 225 South Main Avenue, Sioux Falls, South Dakota 57104. Great Western’s telephone number is (605) 334-2548 and its website is www.greatwesternbank.com. The information on Great Western’s website is not part of this joint proxy statement/prospectus, and the reference to Great Western’s website address does not constitute incorporation by reference of any information on that website into this joint proxy statement/prospectus.
Additional information about Great Western and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus.
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THE MERGER
This section of the joint proxy statement/prospectus describes material aspects of the merger. This summary may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus and the other documents we refer you to for a more complete understanding of the merger. In addition, we incorporate important business and financial information about each of us into this joint proxy statement/prospectus by reference. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 162.
Terms of the Merger
Each of First Interstate’s and Great Western’s respective board of directors has approved the merger agreement. The merger agreement provides that Great Western will merge with and into First Interstate, with First Interstate as the surviving corporation. Following the completion of the merger, Great Western Bank will merge with and into First Interstate Bank, with First Interstate Bank as the surviving bank in the bank merger.
In the merger, each share of Great Western common stock issued and outstanding immediately prior to the effective time (other than certain shares held by First Interstate or Great Western) will be converted into the right to receive 0.8425 shares of First Interstate Class A common stock. No fractional shares of First Interstate common stock will be issued in connection with the merger, and holders of Great Western common stock will be entitled to receive cash in lieu thereof.
Holders of First Interstate common stock and holders of Great Western common stock are being asked to approve and adopt the merger agreement. See the section entitled “The Transaction Agreements—Description of the Merger Agreement” beginning on page 120 for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the completion of the merger and the provisions for terminating or amending the merger agreement.
Background of the Merger
The management of each of First Interstate and Great Western and each of the board of directors of First Interstate and the board of directors of Great Western (which we refer to in this section as the “First Interstate board” and the “Great Western board”, respectively) regularly review and assess the performance, strategy, competitive position, opportunities and prospects of their respective companies in light of the then-current business, interest rate, economic and regulatory environments, as well as developments in the financial sector and the opportunities and challenges facing participants in the sector, in each case with the goal of enhancing value for their respective stockholders or shareholders, as applicable, and delivering the best possible products and services to their respective customers and communities. These reviews have included periodic consideration of, and discussions with other companies from time to time regarding, potential strategic alternatives, including business combinations, acquisitions and dispositions to further the companies’ strategic objectives, as well as remaining independent companies. As part of these reviews, each of Mr. Mark Borrecco, the President and Chief Executive Officer of Great Western, and Mr. Kevin Riley, the President and Chief Executive Officer of First Interstate, has had, from time to time, informal discussions with the Chief Executive Officers of other financial institutions regarding trends and developments, and, on occasion, strategic alternatives available to their respective companies, including potential business combinations and other strategic transactions.
In early 2019, the President and Chief Executive Officer of Great Western at that time contacted Mr. Riley to gauge First Interstate’s interest in pursuing what the former Great Western CEO characterized as a potential merger of equals. Mr. Riley indicated that First Interstate was not interested in discussing a “merger of equals,” but would potentially be interested in discussing a merger transaction. No specific terms were discussed. These preliminary discussions did not result in any actionable proposal for a strategic transaction, and the parties determined not to move forward with the commencement of due diligence or negotiation of potential transaction terms at that time, and instead continued to focus on executing on their stand-alone plans as independent companies.
In the fall of 2019, Mr. Riley engaged in additional discussions with the former Great Western CEO regarding market conditions and trends in the financial sector, and other matters of mutual interest to their respective institutions. At the time, First Interstate understood that Great Western was engaged in a search for a new Chief Executive Officer. In the course of these conversations, Mr. Riley suggested that Great Western explore a potential
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business combination with First Interstate. In connection with these discussions, First Interstate indicated that it was interested in exploring the viability of a potential acquisition of Great Western by First Interstate at a range of exchange ratios corresponding to an implied market premium of between 10.7% and 15.5% based on Great Western’s closing stock price as of October 31, 2019, subject to various contingencies, including a due diligence review. These preliminary discussions did not result in any actionable proposal for a strategic transaction, and the parties determined not to move forward with the commencement of due diligence or negotiation of potential transaction terms at that time, and instead continued to focus on executing on their stand-alone plans as independent companies.
In November 2020, the Chief Executive Officer of a financial holding company of comparable, but smaller, size to Great Western, which we refer to as “Company A,” contacted Mr. Borrecco and inquired whether Great Western would be interested in discussing a potential strategic transaction between Company A and Great Western. Mr. Borrecco indicated that the Great Western board regularly reviews its strategic alternatives and considers any strategic options that might enhance value for Great Western’s stockholders, but that the Great Western board was focusing on executing on Great Western’s stand-alone plan and was not pursuing a strategic business combination at that time. In December 2020, Mr. Riley contacted Mr. Borrecco to inquire whether Great Western might be interested in discussing a potential strategic transaction between Great Western and First Interstate. As with Company A, Mr. Borrecco indicated that the Great Western board was focusing on executing on Great Western’s stand-alone plan and was not pursuing a strategic business combination at that time. At the time of these preliminary inquiries, Great Western’s share price was trading in the range of approximately $16 to $20 per share. During this period, Mr. Borrecco updated James P. Brannen, Chair of the Great Western board, regarding these preliminary discussions with First Interstate and Company A.
Through the first several months of 2021, Great Western management and the Great Western board continued to periodically review and monitor the company’s stand-alone plan and strategy as well as developments in the economic and interest rate environment and the financial sector and in the banking sector in particular. This included a review of the challenges facing Great Western as an independent company, including with respect to the need for enhanced investment in technology and the time horizon and costs associated with implementing these initiatives. In particular, as part of Great Western’s strategic planning activities, in meetings held in late April 2021, Great Western management discussed with the Great Western board the company’s organic growth prospects and near- and long-term strategic objectives. These discussions also included a review of recent developments and trends in the banking sector, including with respect to bank and non-bank competition, technological innovation, ongoing consolidation in the banking sector, the benefits of scale in light of the current environment, and an evaluation of how such developments and trends could affect the overall landscape in the banking sector and potential strategic opportunities available to Great Western, as well as a discussion of certain challenges facing Great Western specifically and the financial sector overall. During these meetings, Great Western management and the Great Western board discussed the strategic initiatives, including the substantial investments in technology, that management believed would be necessary in order for Great Western to remain competitive as an independent company. Great Western management and the Great Western board also met with representatives of Piper Sandler, an investment banking firm experienced in the financial sector, to review Great Western’s stand-alone plan and forecasts, the current mergers and acquisitions environment and potential strategic merger partners for Great Western as a possible way to enhance long-term value for Great Western and its stockholders relative to continuing to execute on the company’s stand-alone plan.
On April 27, 2021, the Great Western board held a special meeting to analyze and further consider the matters discussed during these strategy meetings. At the meeting, the Great Western board and management team continued to review and discuss Great Western’s organic growth plans and challenges under its stand-alone plan, including the investments, particularly in technology, that would be required to achieve growth as a stand-alone company, the likely cost of those investments and the potential time horizon for realizing the resulting benefits. The Great Western board also discussed the potential opportunities for Great Western to engage in a strategic transaction that could enhance long-term value for Great Western’s stockholders while avoiding the need for substantial investments in technology and reducing the risks and uncertainties in attempting to execute on Great Western’s stand-alone plan, and potentially accelerating the benefits for Great Western and its stockholders by combining with a counterparty whose investments in technology could be leveraged by the combined organization. Following these discussions, the Great Western board concluded that such a combination could potentially generate benefits for Great Western and its stockholders while reducing the execution risks in Great Western’s stand-alone plan, and indicated its support for Messrs. Borrecco
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and Brannen, with the assistance of Piper Sandler, to review possible merger counterparties for a potential strategic transaction and reach out to a limited number of potential counterparties to explore their level of interest in discussing a strategic transaction, while concurrently pursuing organic growth by continuing to progress Great Western’s internal initiatives.
Following this meeting, Messrs. Borrecco and Brannen met with representatives of Piper Sandler in early May 2021 to further discuss potential strategic merger counterparties identified by Piper Sandler as possible candidates for a strategic business combination based on, among other factors, their comparable size to Great Western, complementary branch footprints, financial and operational capacity to pursue a potential business combination with Great Western and strategic fit. Following discussion among Messrs. Borrecco and Brannen and representatives of Piper Sandler, Messrs. Borrecco and Brannen directed Piper Sandler to contact four of the potential strategic counterparties, which included First Interstate and Company A, to gauge their interest in discussing a potential combination with Great Western. Following preliminary introductory discussions with each of these parties, First Interstate and Company A expressed interest in engaging in further exploratory discussions regarding a potential business combination with Great Western, while the other two counterparties declined to engage in further discussions.
On May 5, 2021, Great Western and First Interstate entered into a mutual nondisclosure agreement in order to facilitate further discussions, and in early May, Messrs. Borrecco and Riley had exploratory conversations in which they discussed, at a high level, their respective businesses, organizational structures and performance. Also in May, Great Western entered into a mutual nondisclosure agreement with Company A, and Mr. Borrecco and the Chief Executive Officer of Company A had exploratory conversations in which they discussed, at a high level, their respective businesses, organizational structures and performance.
On May 26, 2021, the Great Western board convened a special meeting, which members of Great Western’s management also attended, to continue the board’s prior discussions around a potential strategic business combination transaction and the initial outreach made to the potential counterparties. The Great Western board directed management to continue to analyze and compare the potential benefits and risks of a strategic merger against Great Western’s stand-alone plan, and authorized Messrs. Borrecco and Brannen to engage in further discussions with First Interstate and Company A.
From May 26, 2021 to May 27, 2021, the First Interstate board held regularly scheduled meetings, which members of the First Interstate management also attended. At the meeting on May 27, 2021, Mr. Riley and Ms. Marcy D. Mutch, Executive Vice President and Chief Financial Officer of First Interstate, led a discussion regarding a potential business combination with Great Western, including consideration of Great Western’s business, financial performance and banking philosophy and a summary of previous discussions with the Great Western management. Ms. Mutch also led a discussion on the potential financial implications of the proposed transaction on First Interstate and the various factors to consider in a business combination, including strategic, financial and cultural considerations, opportunities and risks and the competitive landscape.
On June 2, 2021, Messrs. Riley, David Jahnke (Chair of the First Interstate board), Borrecco and Brannen continued the parties’ high-level discussions relating to their respective businesses, including company culture, current capabilities and current board composition.
On June 10, 2021, the Great Western board convened a special meeting, which members of Great Western management and representatives of Piper Sandler and Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), legal advisor to Great Western, also attended. At the meeting, a representative of Wachtell Lipton reviewed the directors’ fiduciary duties in connection with the Great Western board’s evaluation of a potential business combination transaction. Mr. Borrecco then updated the directors on the recent meetings with representatives of First Interstate and Company A, and led a discussion of certain anticipated financial and strategic aspects of the two potential transactions, including with respect to scale, synergies, talent, risk management and technology. The Great Western board discussed the relative merits of the two potential merger counterparties, including the execution risks associated with each potential transaction, the potential value each transaction could generate for Great Western’s stockholders, and the perceived cultural and strategic fit of each company with Great Western. Mr. Borrecco noted that Great Western management had identified First Interstate as a strong strategic fit based on, among other things, the preliminary due diligence on and discussions with representatives of First Interstate management regarding First Interstate’s business, competitive strengths, complementary geographic footprint, values-based culture and strong management team. With respect to Company A, Mr. Borrecco and the Great Western board discussed that Company
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A’s business model, which included a strong focus on wealth management services, was not fully compatible with Great Western’s, and Company A’s geographic footprint was less complementary than First Interstate’s. Mr. Borrecco and the Great Western board also discussed that Great Western, as the larger company, would be the more logical acquirer in a combination with Company A, that Great Western’s stockholders would not likely have an opportunity to receive the market premium for their shares that might be available in a combination with First Interstate, and that Company A had indicated it would expect Great Western to divest certain assets prior to any combination, which would create additional execution risk. Following discussion, including a preliminary financial analysis of a potential combination provided by Piper Sandler, the Great Western directors expressed their support for continuing exploratory discussions with First Interstate and undertaking further analysis to compare the potential risks and benefits of a combination with First Interstate against Great Western’s stand-alone plan, but determined that Company A was not as strong of a strategic or cultural fit for Great Western and that a transaction with Company A was not likely to generate comparable value for Great Western and its stockholders. At the direction of the Great Western board, Mr. Borrecco informed the Chief Executive Officer of Company A that Great Western would not be moving forward with further discussions with Company A at that time.
Over the following weeks, members of Great Western management and members of First Interstate management continued their prior exploratory discussions regarding their respective businesses, organizational structures and performance and continued to discuss at a high level a potential business combination transaction between the two parties.
On June 28, 2021, the Great Western board convened a special meeting, which members of Great Western management and representatives of Piper Sandler and Wachtell Lipton attended. At the meeting, the Great Western board and management team continued to discuss Great Western’s valuation, growth plans and challenges under its stand-alone plan, as well as Great Western’s strategic initiatives and alternatives, and a representative of Piper Sandler reviewed a comparison of Great Western’s current stand-alone plan with Piper Sandler’s preliminary financial analysis of a merger of Great Western and First Interstate. These discussions included a review of the risks, uncertainties and potential opportunities associated with the stand-alone plan in comparison to the benefits of a possible strategic transaction, including the possibility that a merger with First Interstate could accelerate the company’s strategic goals in areas such as technology and asset quality. A representative of Piper Sandler also reviewed again with the Great Western board the approach taken in identifying potential merger counterparties based on an assessment of, among other things, strategic fit with Great Western and perceived financial and operational capacity to complete a strategic transaction with Great Western. Following discussion, the Great Western board recommended that Great Western management request a non-binding letter of intent from First Interstate so that Great Western could evaluate First Interstate’s proposed transaction terms, and also directed Great Western management to continue to refine their analysis with respect to Great Western’s stand-alone plan.
Following the June 28, 2021 Great Western board meeting, members of Great Western management engaged in preliminary discussions with members of First Interstate management regarding potential transaction terms, including terms to be included in a non-binding letter of intent, and continued their prior discussions regarding their respective businesses, including personnel matters, the cultural and strategic fit of the two companies, their complementary branch footprints, and their respective positioning from a technology and systems perspective.
On July 1, 2021, the executive committee of the First Interstate board, consisting of Mr. Jahnke, Mr. Riley, Mr. James R. Scott, Mr. John M. Heyneman Jr., Mr. Ross E. Leckie and Ms. Patricia L. Moss (the “First Interstate executive committee”), held a special meeting, at which members of the First Interstate management were also present, to discuss the potential transaction terms considered during the preliminary discussions on June 28, 2021 between the members of the respective managements of First Interstate and Great Western and proposed terms of a non-binding indication of interest to deliver to Great Western. After the discussion, the First Interstate executive committee authorized First Interstate management to send a written non-binding indication of interest to Great Western.
On July 6, 2021, First Interstate delivered to Great Western a written non-binding indication of interest (the “July 6 IOI”), which contemplated an all-stock merger in which Great Western would be merged with and into First Interstate and Great Western stockholders would receive shares of First Interstate Class A common stock. The July 6 IOI proposed, among other things, (i) an exchange ratio of 0.8603 shares of First Interstate Class A common stock for each share of Great Western common stock, which corresponded to an implied market premium of 17.1% based on the closing stock price of Great Western common stock and First Interstate Class A common stock as of July 6, 2021, and an implied market premium of 10.6% based on a 20-day volume weighted average price (“VWAP”) of
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Great Western common stock and First Interstate Class A common stock as of that date and (ii) board nomination rights for Great Western to appoint four members of the Great Western board to serve as members of the initial board of directors of the combined company. The July 6 IOI was conditioned on First Interstate’s satisfactory completion of due diligence and required that Great Western agree to negotiate exclusively with First Interstate for a 60-day period.
On July 7, 2021, the Great Western board held a special meeting to discuss the July 6 IOI, which members of Great Western management and representatives of Wachtell Lipton and Piper Sandler also attended. At the meeting, representatives of Piper Sandler and Wachtell Lipton reviewed the terms of the July 6 IOI with the Great Western directors, and a representative of Piper Sandler reviewed with the Great Western board certain financial metrics based on the terms reflected in the July 6 IOI. Following discussion, the Great Western board identified three key issues in the July 6 IOI for further discussion: (i) the proposed exchange ratio and corresponding implied market premium to Great Western stockholders, (ii) seeking additional clarity that First Interstate’s Class B common stock would automatically convert into First Interstate Class A common stock after completion of the transaction and (iii) seeking greater representation of Great Western directors on the combined company’s board at closing. Following discussion, the Great Western board directed Great Western management and Piper Sandler to engage in discussions regarding these key issues with First Interstate and First Interstate’s financial advisors. Also at this meeting, Mr. Borrecco updated the Great Western board on his continuing discussions with Mr. Riley regarding the cultural and strategic fit of the two companies and certain personnel matters, including that, in the event definitive transaction terms were agreed, Mr. Riley would remain the Chief Executive Officer of the combined company and had indicated that First Interstate would expect Mr. Borrecco to become the Chief Banking Officer of the combined company, but that no specific employment terms had been proposed or discussed at this time.
On July 8, 2021, Great Western formally engaged Piper Sandler to act as financial advisor to the Great Western board in connection with a potential business combination transaction.
Over the course of the next several days, Piper Sandler and members of Great Western management engaged in discussions with First Interstate management and representatives of KBW, an investment banking firm, regarding the terms of the July 6 IOI, including the key issues identified by the Great Western board for further discussion. Great Western also advised First Interstate that it would require as a condition to signing and announcing a potential combination that the Scott Family shareholders, representing approximately 53.8% of the voting power represented by issued and outstanding shares of First Interstate common stock, agree to vote for and otherwise support the transaction.
Under the First Interstate articles of incorporation, because the proposed combination with Great Western would result in the number of shares of First Interstate Class B common stock outstanding falling below 20% of the aggregate number of shares of First Interstate common stock outstanding, the transaction would result in the outstanding shares of First Interstate Class B common stock converting into shares of First Interstate Class A common stock and the dual class structure sunsetting on the first record date for a shareholders’ meeting after the closing of such combination. On July 14, 2021, recognizing that Great Western had indicated that it would require, as a condition to signing and announcing the transaction, that the Scott Family shareholders agree to vote for, and otherwise support, the transaction, the Scott Family shareholders raised concerns to Mr. Jahnke as to the impact of the loss of voting control for the Scott Family shareholders in connection with the proposed combination arising from the application of these provisions in the First Interstate articles of incorporation.
Also on July 14, 2021, the Great Western board held a special meeting, which members of Great Western management and representatives of Wachtell Lipton and Piper Sandler also attended. At the meeting, the Great Western board continued its discussion of the July 6 IOI and members of Great Western management and a representative of Piper Sandler updated the Great Western board on the discussions since the prior meeting, and reviewed with the Great Western board a preliminary financial analysis of a potential merger with First Interstate based on the proposed terms. Representatives of Great Western management also reviewed with the Great Western board Great Western’s updated stand-alone plan and both the potential opportunities and the risks and challenges associated with the execution of that plan. Following discussion with representatives of Wachtell Lipton and Piper Sandler and Great Western management, including a discussion of the potential strategic benefits as well as the possible risks and uncertainties of a combination with First Interstate in comparison to the risks and uncertainties and potential benefits of Great Western’s stand-alone plan, the Great Western board determined that Great Western should continue to pursue discussions with First Interstate and directed Great Western management to seek to negotiate certain terms of the July 6 IOI, including to: (i) seek to increase the implied premium for Great Western’s
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stockholders by proposing an increased exchange ratio of 0.9, which corresponded to an implied market premium of 20.9% based on the closing stock price of Great Western common stock and First Interstate Class A common stock as of July 9, 2021, and an implied market premium of 16.2% based on a 20-day VWAP of Great Western common stock and First Interstate Class A common stock as of that date, (ii) propose covenants in the transaction documents and a bylaw amendment that would prohibit First Interstate from taking any action that would prevent the automatic conversion of First Interstate Class B common stock into First Interstate Class A common stock at the record date for First Interstate’s first shareholders meeting following completion of the transaction and (iii) seek increased board representation for Great Western by requesting that six members of the initial board of directors of the combined company be Great Western directors. Following the July 14, 2021 Great Western board meeting, Great Western sent a markup of the July 6 IOI to First Interstate, which reflected the changes discussed with the Great Western board.
On July 16, 2021, representatives of Davis Polk & Wardwell LLP (“Davis Polk”), legal advisor to First Interstate, and representatives of Latham & Watkins LLP (“Latham”), legal advisor to the Scott Family shareholders, had a call to discuss the proposed transaction with Great Western, during which Latham raised for discussion whether, in recognition of the impact of the loss of voting control for the Scott Family shareholders in connection with the proposed transaction with Great Western and the requirement that the Scott Family support the transaction through a support agreement, there were approaches that might address the impact on the Scott Family shareholders of the proposed combination, and discussed with Davis Polk differing structures that might address these concerns, including a possible voluntary exchange of First Interstate Class B common stock for First Interstate Class A common stock at a preferential rate.
On July 19, 2021, the independent members of the First Interstate board, consisting of Mr. David L. Jahnke, Mr. S. Biff Bowman, Ms. Alice S. Cho, Ms. Dana L. Crandall, Mr. Dennis L. Johnson, Mr. Leckie, Ms. Moss and Ms. Joyce A. Phillips (the “First Interstate independent directors”), held a special meeting, at which Mr. Riley and other members of First Interstate management and representatives of Davis Polk and KBW were also in attendance. At the meeting, the First Interstate independent directors discussed whether the concept of an exchange mechanism for the benefit of the Scott Family shareholders, as described above, to reflect the impact of the transaction on the Scott Family shareholders’ voting power was appropriate, including concerns over the transactional risks presented by this structure. After this discussion among the independent directors concluded, KBW led a discussion regarding implied transaction metrics for the proposed transaction with Great Western and the negotiation process with Great Western. Following the discussion, the First Interstate independent directors indicated that they supported continued discussions with Great Western regarding the potential transaction and approved First Interstate management moving forward to respond to Great Western’s counteroffer provided to First Interstate management on July 14, 2021.
On July 21, 2021, the First Interstate independent directors held a special meeting, at which Mr. Riley and other members of the management and representatives of Davis Polk were also in attendance. At the meeting, the First Interstate independent directors discussed (i) the provisions in First Interstate’s articles of incorporation related to First Interstate Class B common stock and the implications for the holders of the First Interstate Class B common stock relative to the proposed transaction and (ii) the potential of a preferential exchange option for the Scott Family shareholders in light of the requirement for the Scott Family shareholders to support the transaction and the impact of the proposed combination on the Scott Family shareholders. The First Interstate independent directors also discussed whether to appoint a new transaction committee for the proposed transaction that excluded members of the Scott Family and determined that the principal (although not exclusive) deliberative body going forward would be the full First Interstate board with the exclusion of interested directors from those portions of the meetings discussing matters as to which there was a potential conflict.
On July 26, 2021, the Scott Family shareholders and Goldman Sachs, as financial advisor to the Scott Family shareholders, together with Mr. Jahnke and Mr. Leckie, as representatives of the First Interstate board, Mr. Riley and Ms. Mutch, as representatives of First Interstate management, and representatives of KBW and Barclays, both of which were financial advisors to First Interstate in connection with the potential transaction with Great Western, attended a meeting, at which representatives of Davis Polk and Latham also attended via telephone and video conference. At the meeting, Goldman Sachs reviewed the terms of situations in which shareholders holding “high vote” shares were asked to agree to reduction or elimination of that higher vote. The participants discussed the counteroffer from Great Western on July 14, 2021 and First Interstate’s response to such counteroffer. Following the discussion regarding the potential transaction with Great Western, precedent transactions for the reclassification of dual class common stock were discussed.
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On July 27, 2021, the First Interstate independent directors held a meeting, where the First Interstate independent directors considered the matters discussed on July 26, 2021.
On July 28, 2021, the Great Western board held a regularly scheduled meeting, which members of Great Western management also attended. At the meeting, Mr. Borrecco updated the Great Western board on his continuing discussions with Mr. Riley since the July 14, 2021 special meeting, including the status of ongoing discussions between First Interstate and the Scott Family shareholders. Also during the meeting, the Great Western board reviewed, and engaged in a discussion of the risks and uncertainties of, Great Western’s stand-alone plan and forecasts reflected therein, as well as the costs, benefits and implementation timelines of Great Western’s strategic initiatives for fiscal years 2022, 2023 and 2024, including technology upgrades that Great Western management believed would be necessary for Great Western to remain competitive as an independent company in the current environment and the costs associated with those upgrades. As part of this discussion, the Great Western board reviewed Great Western management’s current forecasts reflected in Great Western’s stand-alone plan, which had been refined by Great Western management to reflect Great Western management’s current expectations for Great Western’s financial results. The assumptions used in Great Western management’s forecasts presented at the July 28, 2021 meeting relating to Great Western’s business, valuation and prospects were subsequently refined and updated to reflect changing market conditions and the operating environment to form the basis for the unaudited prospective financial information provided by Great Western management to the Great Western board and Piper Sandler, and to First Interstate.
From July 26, 2021 through July 29, 2021, there were various discussions between members of the Scott Family and members of the First Interstate board and First Interstate management. On a call between Mr. Jahnke and Mr. Scott on July 29, 2021, Mr. Scott indicated that the Scott Family shareholders understood that the First Interstate board was not willing to address the impact of the transaction on the Scott Family shareholders’ voting power through the preferential exchange option but requested that First Interstate consider the possibility of a stockholders’ agreement that would provide, among other things, appropriate protections to the Scott Family shareholders in light of the conversion of the First Interstate Class B common stock into First Interstate Class A common stock under the First Interstate articles of incorporation, and the resulting loss of their voting control, following the consummation of the proposed transaction with Great Western.
On July 30, 2021, the First Interstate independent directors held a meeting to discuss developments relating to the Scott Family shareholders from July 26, 2021 through July 29, 2021 and updates to be made to Great Western’s counteroffer on July 14, 2021. After the discussion, the First Interstate independent directors authorized the First Interstate management to deliver a revised indication of interest to Great Western.
Also on July 30, 2021, First Interstate delivered to Great Western a revised non-binding indication of interest (the “July 30 IOI”), which provided for, among other things, (i) an exchange ratio of 0.8700, which corresponded to an implied market premium of 18.4% based on the closing stock price of Great Western common stock and First Interstate Class A common stock as of July 30, 2021, and an implied market premium of 20.3% based on a 20-day VWAP of Great Western common stock and First Interstate Class A common stock as of that date, (ii) covenants in the merger agreement and a bylaw amendment that would prohibit First Interstate from taking any action that would prevent the automatic conversion of First Interstate Class B common stock into First Interstate Class A common stock at the record date for First Interstate’s first shareholders meeting following completion of the transaction and (iii) board nomination rights for Great Western to appoint five members of the initial board of directors of the combined company. The July 30 IOI, like the July 6 IOI, was conditioned on First Interstate’s satisfactory completion of due diligence and required that Great Western agree to negotiate exclusively with First Interstate for a 60-day period. Following receipt of the July 30 IOI, and after reviewing the terms with Great Western management, the Great Western directors unanimously approved execution of the July 30 IOI in order to move forward with the completion of mutual due diligence and negotiation of definitive transaction documentation, with any final decision to proceed with a transaction subject to the completion of such due diligence and the negotiation of definitive transaction documents with First Interstate and the Scott Family shareholders.
Separately, Davis Polk and Latham had a call, during which Latham reviewed precedent terms which the First Interstate board might consider in addressing the concerns of the Scott Family shareholders, including board designation rights, observer rights, a donation to the FIBK Foundation, board representation on the FIBK Foundation, access to information, customary registration rights and reimbursement of transaction expenses, and asked that First Interstate consider making a proposal to the Scott Family shareholders that incorporated some or all of the precedent terms.
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On August 2, 2021, each of Great Western and First Interstate was provided access to the other’s virtual data room. Thereafter, representatives of Great Western and First Interstate continued to perform mutual due diligence reviews and to discuss potential transaction terms, including through discussions between each party’s respective Chief Executive Officers and Chairs.
In August 2021, First Interstate formally engaged KBW and then also Barclays to act as financial advisors to First Interstate in connection with the proposed transaction.
On August 9, 2021, the First Interstate independent directors held a meeting, at which Mr. Riley and other members of management and representatives of Davis Polk were also in attendance, to discuss the potential sunset of the dual-class share structure of First Interstate. Members of First Interstate management and representatives of Davis Polk then led a discussion on contractual provisions that might be offered to the Scott Family shareholders in recognition of the fact that the transaction would cause the voting control of the First Interstate Class B common stock to terminate. An outline of potential terms was provided to the First Interstate independent directors, including proposals on director designation rights, the addition of representatives of the Scott Family shareholders to the board of the FIBK Foundation, a contribution to the FIBK Foundation, customary registration rights for holders of First Interstate Class B common stock and information rights. On the same day, Davis Polk also provided Latham a draft term sheet setting forth proposed terms that would be included in a stockholders’ agreement, which reflected the discussion with the First Interstate independent directors.
From August 17, 2021 to August 19, 2021, the First Interstate board held a series of meetings, all or portions of which were attended by members of First Interstate management, and board observers consisting of Mr. Jeremy Scott, Ms. Julie Rose Scott, Mr. Homer Scott and Ms. Susan Scott Heyneman (the “Scott Family board observers”). By invitation of the First Interstate board, Mr. Borrecco attended the First Interstate board meeting on August 18, 2021, and led a discussion on the strategic rationale for the proposed transaction from Great Western’s perspective, including factors relating to credit quality, the alignment of Great Western’s and First Interstate’s leadership structures and culture, Great Western’s footprint and the opportunities and operational challenges that presents and Great Western’s reasoning in considering a merger partnership. After Mr. Borrecco exited the meeting, the First Interstate board and the First Interstate management discussed the due diligence process and timeline, including First Interstate’s assessment of Great Western’s revenues, projected revenues and credit book, as well model assumptions included in the analysis. The First Interstate board and the First Interstate management also discussed various integration opportunities and challenges, including potential business opportunities, branch strategy and staffing considerations.
On August 20, 2021, Davis Polk provided an initial draft of a proposed merger agreement to Wachtell Lipton, and on August 24, 2021, Wachtell Lipton provided to Davis Polk and Latham an initial draft of a proposed support agreement to be entered into by the Scott Family shareholders, pursuant to which, among other things, each Scott Family shareholder would agree to vote the shares of First Interstate common stock owned by it in favor of the approval and adoption of the merger agreement and the First Interstate articles amendment and against any competing transaction. On August 26, 2021, Latham provided a revised term sheet for the stockholders’ agreement.
Also on August 26, 2021, the First Interstate board, the Scott Family board observers and First Interstate management held a special meeting, at which representatives of Davis Polk were also in attendance, to discuss the due diligence process for the proposed merger with Great Western and the current proposal to offer five director seats to the current members of the Great Western board, including the qualities to consider in the potential new directors. The Scott Family directors and the Scott Family board observers then recused themselves, and the First Interstate independent directors and management met in an executive session to discuss the Scott Family shareholders’ responses to the term sheet proposal provided on August 26, 2021, including the request for expense reimbursement of the Scott Family shareholders’ legal and financial advisors and a request to have Goldman Sachs, as the Scott Family shareholders’ financial advisor, to review with the First Interstate board the Scott Family’s perspectives on the proposed combination. Representatives of Davis Polk then led a discussion on the First Interstate board’s options in responding to the Scott Family shareholders’ aforementioned requests. The First Interstate board then discussed the responses to additional term sheet requests. After the discussion, the First Interstate board directed Davis Polk to update First Interstate’s responses to the term sheet as discussed with the First Interstate board, review the responses with First Interstate management and Mr. Jahnke, and return the responses to Latham.
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On August 27, 2021, Davis Polk had a call with Latham to discuss the term sheet, during which the advisors, on behalf of First Interstate and the Scott Family shareholders, discussed the Scott Family shareholders’ request that, following the closing of the potential transaction with Great Western, First Interstate would reimburse the Scott Family shareholders’ fees and make a contribution to the First Interstate Foundation.
On August 29, 2021, the Great Western board held a special meeting, which members of Great Western management and representatives of Wachtell Lipton and Piper Sandler also attended. At the meeting, Mr. Brannen updated the Great Western board, based on his discussions with Mr. Jahnke, regarding the proposed stockholders’ agreement terms under discussion between First Interstate and the Scott Family shareholders. Members of Great Western management then updated the Great Western directors on the status of the mutual due diligence process that was nearing completion, including the results of Great Western management’s reverse due diligence review of First Interstate, with the assistance of Great Western’s advisors. A representative of Wachtell Lipton also reviewed with the directors their fiduciary duties in connection with the potential transaction, as he had previously done, and reviewed with the directors First Interstate’s existing corporate governance structure. In addition, a representative of Piper Sandler reviewed with the Great Western board movements in the relative market prices of both Great Western and First Interstate shares since the execution of the July 30 IOI, and discussed with the Great Western board the substantial increase in the implied premium to Great Western’s stockholders that would result from those price movements based on the exchange ratio reflected in the July 30 IOI. Following discussion, the Great Western board expressed its support for the parties to continue due diligence and negotiation of definitive transaction terms.
On September 1, 2021, the First Interstate board held a meeting, at which representatives of Davis Polk, KBW and Barclays were also in attendance. Davis Polk presented on the proposed terms of the merger agreement and the management discussed its findings from due diligence of Great Western. Representatives of KBW then led a discussion on the potential financial implications of the proposed transaction on First Interstate.
Also on September 1, 2021, First Interstate provided Mr. Borrecco with a draft term sheet for discussion purposes outlining a potential compensation package and preliminary employment terms for Mr. Borrecco to serve as Chief Banking Officer of the combined company.
On September 2, 2021, First Interstate communicated to Great Western a revised proposed exchange ratio based on the final results of First Interstate’s due diligence and the changes in the relative stock prices of First Interstate and Great Western since the execution of the July 30 IOI. The revised proposal reflected an exchange ratio of 0.8300 shares of First Interstate Class A common stock for each share of Great Western common stock, corresponding to an implied market premium of 18.2% based on the closing stock price of Great Western common stock and First Interstate Class A common stock as of September 2, 2021, and an implied market premium of 17.7% based on a 20-day VWAP of Great Western common stock and First Interstate Class A common stock as of that date.
Over the following week, the parties, with the assistance of their respective advisors, continued to engage in negotiations regarding the exchange ratio and the other terms of the merger agreement, the support agreement and the other agreements to be entered into in connection with the potential transaction and related transaction documentation. During this period, the parties reached preliminary agreement on a proposed exchange ratio of 0.8425 shares of First Interstate Class A common stock per share of Great Western common stock based upon, among other things, the completion of their due diligence reviews, which corresponded to an implied market premium of 23.5% based on the closing stock price of Great Western common stock and First Interstate Class A common stock as of September 10, 2021, and an implied market premium of 21.3% based on a 20-day VWAP of Great Western common stock and First Interstate Class A common stock as of that date. In addition, it was agreed that, following the closing of the potential transaction with Great Western, First Interstate would reimburse the Scott Family shareholders’ fees up to $8.5 million and make a contribution of $21.5 million to the First Interstate Foundation.
On September 7, 2021, the First Interstate board held a meeting, at which the Scott Family board observers, Ms. Risa Scott, a member of the Scott Family shareholders, members of First Interstate management, representatives of Davis Polk, representatives of KBW, representatives of Barclays and a representative of Goldman Sachs were in attendance. At the meeting, members of First Interstate management presented their due diligence findings. In addition, at the meeting, Goldman Sachs discussed, at the request of the Scott Family shareholders, the Scott Family shareholders’ perspectives on the proposed combination. Representatives of KBW also reviewed publicly available information regarding selected precedent bank M&A transactions.
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The First Interstate board held another meeting on September 9, 2021, at which the Scott Family board observers and Ms. Risa Scott and representatives of Davis Polk were in attendance, to further discuss the potential transaction. Representatives of Davis Polk then led a discussion concerning the merger agreement and the support agreement.
On September 10, 2021, Latham requested that if First Interstate received a termination fee from Great Western in connection with termination of the proposed transaction, the Scott Family shareholders be entitled to a reimbursement of a portion of their expenses.
On September 11, 2021, Latham provided a draft of the expense reimbursement letter to Davis Polk. During the ensuing period and continuing until the transaction documents, including the merger agreement, stockholders’ agreement, support agreement and expense reimbursement letter, were executed, the parties and their counsel negotiated drafts of the transaction documents. Also during this period, KBW and Barclays continued to assist First Interstate with First Interstate’s evaluation of Great Western and the potential transaction, and Piper Sandler continued to assist Great Western with Great Western’s evaluation of First Interstate and the potential transaction.
On September 13, 2021, the Great Western board held a special meeting, which members of Great Western management and representatives of Wachtell Lipton and Piper Sandler also attended. At the meeting, Great Western management provided an update on the completion of the parties’ mutual due diligence review and the proposed terms of the potential transaction, including the proposed final exchange ratio of 0.8425 shares of First Interstate Class A common stock per share of Great Western common stock. A representative of Piper Sandler reviewed Piper Sandler’s financial analyses of the proposed transaction with First Interstate and reviewed with the Great Western board Great Western management’s current forecasts reflected in Great Western’s stand-alone plan. A representative of Wachtell Lipton then reviewed with the Great Western board the terms of the draft merger agreement, including the proposed charter and bylaw amendments of First Interstate provided for in the merger agreement, as well as the terms of the other transaction documents that were anticipated to be entered into in connection with the transaction, including the support agreement among the Scott Family shareholders and the stockholders’ agreement among First Interstate and the Scott Family shareholders, and reviewed with the independent directors the preliminary draft term sheet that First Interstate had provided to Mr. Borrecco for discussion purposes regarding his appointment as Chief Banking Officer of the combined company. During the meeting, the Great Western board engaged in further discussions regarding the benefits of the proposed transaction with First Interstate relative to Great Western’s available alternatives, including its stand-alone plan and the risks and uncertainties associated with the stand-alone plan in the current environment. Following discussion, the Great Western board unanimously expressed the view that the proposed transaction with First Interstate offered greater benefits to Great Western and its stockholders, with reduced risks, as compared to Great Western’s available alternatives, and unanimously authorized Great Western management to move forward with negotiating the transaction on the terms described to the Great Western board and to seek to finalize negotiations with First Interstate as promptly as practicable.
Also on September 13, 2021, the First Interstate independent directors held a special meeting, at which Mr. Riley and other members of First Interstate management and representatives of Davis Polk were also in attendance. Mr. Jahnke led a discussion on the stockholders’ agreement. A representative of Davis Polk then updated the First Interstate independent directors on the status of the transaction documents.
Over the following days, the parties, with the assistance of their respective advisors, negotiated the final terms of the merger agreement and the other agreements to be entered into in connection with the potential transaction and related transaction documentation.
On September 14, 2021, the First Interstate board held another special meeting to continue its discussion of the proposed transaction, at which the Scott Family observers, First Interstate management and representatives of Davis Polk, Barclays and KBW were also in attendance. At the meeting, Mr. Riley, the Scott Family directors, the Scott Family observers, First Interstate management, representatives of KBW and representatives of Barclays recused themselves, and the First Interstate independent directors discussed the stockholders’ agreement. Then, Mr. Riley and First Interstate management rejoined the meeting and, together with the First Interstate independent directors, discussed the support agreement. All attendees then rejoined the meeting, and a representative of Davis Polk discussed the merger agreement, the support agreement and the stockholders’ agreement with the full First Interstate board. KBW and Barclays made separate financial presentations to the First Interstate board concerning the proposed transaction, and representatives of Davis Polk led a discussion regarding the board resolutions that would implement the potential merger.
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On September 15, 2021, the First Interstate board of directors held a special meeting to consider and vote on the negotiated terms of the proposed transaction and entry into the merger agreement and ancillary agreements by First Interstate. Members of First Interstate management and representatives of Davis Polk, Barclays and KBW also attended the meeting. Representatives of KBW and Barclays confirmed that there had been no change to the respective financial analyses separately presented by them on September 14, 2021, and each of KBW and Barclays rendered a separate opinion to the First Interstate board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to First Interstate. For more information, see the section entitled “The Merger—Opinion of First Interstate’s Financial Advisors” and Annexes C and D. Representatives of Davis Polk then discussed the directors’ fiduciary duties in connection with the First Interstate board’s evaluation of the potential transaction and reviewed the updated proposed terms of the merger agreement. Mr. Riley, the Scott Family directors, the Scott Family observers, First Interstate management and representatives of KBW and Barclays then recused themselves, and the First Interstate independent directors reviewed and discussed the stockholders’ agreement that was anticipated to be entered into in connection with the transaction. Following the discussion, the First Interstate independent directors unanimously adopted and approved the stockholders’ agreement and the transactions contemplated thereby. Then, Mr. Riley and First Interstate management joined the First Interstate independent directors to review and discuss the support agreement that was anticipated to be entered into in connection with the transaction. Following the discussion, the First Interstate independent directors and Mr. Riley unanimously adopted and approved the support agreement and the transactions contemplated thereby. The Scott Family directors, the Scott Family observers and representatives of KBW and Barclays then joined the meeting, and the full First Interstate board reviewed and discussed the merger agreement, the merger and the other transactions contemplated by the merger agreement. After careful review and discussion, including consideration of the factors described below under “The Merger-First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors,” the First Interstate board unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable and in the best interests of First Interstate and its shareholders and other constituencies and unanimously adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement.
Also on September 15, 2021, the Great Western board held a special meeting to consider the negotiated terms of the proposed merger between Great Western and First Interstate and entry into the merger agreement by Great Western. Members of Great Western management and representatives of Wachtell Lipton and Piper Sandler were also in attendance at the meeting. A representative of Piper Sandler reviewed Piper Sandler’s financial analyses with respect to the proposed transaction and rendered Piper Sandler’s oral opinion, confirmed by delivery of a written opinion dated September 15, 2021, to the Great Western board to the effect that, as of such date and based upon and subject to the factors, assumptions, qualifications and limitations set forth therein, the exchange ratio in the merger was fair, from a financial point of view, to the holders of Great Western common stock. For more information, see the section entitled “The Merger—Opinion of Great Western’s Financial Advisor” and Annex E. A representative of Wachtell Lipton then reviewed with the Great Western directors the proposed final terms of the merger agreement, as well as the proposed final terms of the other transaction documents to be entered into in connection with the transaction. A representative of Wachtell Lipton also reviewed the directors’ fiduciary duties in connection with the proposed transaction, as he had previously done, and described the resolutions the Great Western directors would be asked to adopt if they were to approve the transaction. At the conclusion of the meeting, after careful review and discussion by the Great Western board, including consideration of the factors described below under “The Merger—Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors,” the Great Western board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Great Western and its stockholders and unanimously adopted and approved the merger agreement, the merger, and the other transactions contemplated by the merger agreement.
Following the meetings of the Great Western board and the First Interstate board on September 15, 2021, Great Western and First Interstate executed the merger agreement on the evening of September 15, 2021. The transaction was announced the morning of September 16, 2021, before the opening of the financial markets in New York, in a press release jointly issued by First Interstate and Great Western.
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Great Western’s Reasons for the Merger; Recommendation of the Great Western Board of Directors
In reaching its decision to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and to recommend that its stockholders adopt the merger agreement, the Great Western board of directors evaluated the merger agreement, the merger and the other transactions contemplated by the merger agreement in consultation with Great Western’s management, as well as Great Western’s financial and legal advisors, and considered a number of factors, including the following:
each of Great Western’s, First Interstate’s and the surviving corporation’s business, operations, financial condition, asset quality, earnings, and prospects. In reviewing these factors, including the information obtained through due diligence, the Great Western board of directors considered its assessment that Great Western’s business, operations, risk profile and geographic footprint complement those of First Interstate, and that the merger and the other transactions contemplated by the merger agreement would result in a surviving corporation with a larger scale and market presence than Great Western on a stand-alone basis, and would thereby enable Great Western to serve an expanded customer base and position it for continued growth and investment;
the strategic rationale for the merger, including the ability of the surviving corporation to serve the banking needs of consumers and businesses in highly attractive markets in the Western U.S. that present strong growth opportunities;
the Great Western board of directors’ belief that the merger will create, and enable Great Western stockholders to become shareholders of, a diversified, community-focused banking franchise with an enhanced platform for future growth;
the Great Western board of directors’ belief that First Interstate’s earnings and prospects, and the synergies potentially available in the proposed merger, would result in the surviving corporation having the opportunity to have superior future earnings and prospects compared to Great Western’s earnings and prospects on a stand-alone basis;
the Great Western board of directors’ belief that Great Western and First Interstate share similar cultures and community banking models, including with respect to strategic focus, client service and community development, and the Great Western board of directors’ belief that the complementary cultures would facilitate the successful completion of the transaction and integration following consummation of the transaction;
the complementary nature of the products, services, customers and markets of the two companies, which the Great Western board of directors believed should provide the opportunity to mitigate risks and increase potential returns;
the ability to leverage the scale and financial capabilities of the surviving corporation to accelerate investments in technology and digital capabilities in order to enhance the client and customer experience;
the expanded possibilities for growth that would be available to the surviving corporation, given its larger size, asset base, capital and footprint, and the fact that the surviving corporation following the merger is expected to be among the top fifteen (15) largest banks west of the Mississippi based on deposits;
the anticipated pro forma financial impact of the merger on the surviving corporation, including the expected positive impact on certain financial metrics;
the expectation of cost savings resulting from the transaction;
the fact that the implied value of the merger consideration based on the closing price of First Interstate Class A common stock as of September 14, 2021 of $41.99 for each share of Great Western common stock represented a 26.0% premium over the closing price of Great Western common stock on September 14, 2021 (the last trading day prior to the Great Western board meeting to approve the transaction) and a 21.4% premium based on the volume weighted average closing price of Great Western common stock and First Interstate Class A common stock for the twenty (20) days ended September 14, 2021;
the terms of the merger agreement and the fact that the exchange ratio is fixed, with no adjustment in the merger consideration to be received by Great Western stockholders as a result of possible increases or
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decreases in the trading price of Great Western common stock or First Interstate common stock following the announcement of the merger, which the Great Western board of directors believed was consistent with market practice for transactions of this type and with the strategic purpose of the transaction;
the fact that 100% of the merger consideration would be in the form of First Interstate Class A common stock, which would allow Great Western stockholders to participate in the future growth and opportunities of the surviving corporation and the anticipated pro forma impact of the merger and otherwise benefit from the financial performance of First Interstate and potential appreciation in the value of First Interstate Class A common stock;
the provisions of the merger agreement setting forth the corporate governance of the surviving corporation, including that upon the closing, the surviving corporation’s board of directors would be comprised of five (5) legacy Great Western directors and eleven (11) legacy First Interstate directors, which the Great Western board of directors believed would enhance the likelihood that the strategic benefits Great Western expects to achieve as a result of the merger would be realized;
the support of the merger by the Scott Family shareholders, who entered into a support agreement pursuant to which, among other things, each Scott Family shareholder agreed to (i) vote the shares of First Interstate common stock owned by it in favor of the approval and adoption of the merger agreement and the First Interstate articles amendment, and against any competing transaction and (ii) not transfer its shares of First Interstate common stock prior to the First Interstate special meeting, with certain limited exceptions, as more fully described below under “The Transaction Agreements—Description of the Support Agreement” beginning on page 137;
the fact that the surviving corporation is expected to benefit from Mr. Borrecco’s service as Chief Banking Officer of the surviving corporation;
the Great Western board of directors’ familiarity with and understanding of Great Western’s business, results of operations, asset quality, financial and market position and expectations concerning Great Western’s future earnings and prospects;
the Great Western board of directors’ understanding of the current and prospective environment in which Great Western and First Interstate operate, including economic conditions, the interest rate environment, the accelerating pace of technological change in the banking industry, increased operating costs resulting from regulatory and compliance mandates, the competitive environment for financial institutions generally and the challenges facing Great Western as an independent institution, including, among other things, the costs required to make necessary investments in technology and to continue to improve asset quality, and the likely effect of these factors on Great Western both with and without the merger;
the Great Western board of directors’ assessment, grounded in decades of bank management experience and a deep understanding of Great Western’s business, of the operating environment and Great Western’s stand-alone prospects and the opportunities, risks and challenges presented thereby;
the Great Western board of directors’ evaluation, with the assistance of management and Great Western’s financial and legal advisors, of Great Western’s stand-alone plan and other strategic alternatives available to Great Western for enhancing value over the long term and the potential risks, rewards and uncertainties associated with Great Western’s stand-alone plan and such other alternatives, and the Great Western board of directors’ belief that the proposed merger with First Interstate offered greater benefits, with reduced risks, as compared to the value that could reasonably be expected to be obtained from Great Western’s stand-alone plan and other alternatives available to Great Western;
the Great Western board of directors’ belief that the surviving corporation will be in a better position to address many of the key challenges currently facing Great Western, including the expense and time that would be required to be incurred to drive organic growth, including by improving asset quality and modernizing Great Western’s technology platform, as compared with Great Western on a stand-alone basis, and the Great Western board of directors’ belief that the surviving corporation will be able to address these matters on an accelerated basis;
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the Great Western board of directors’ review and discussions with Great Western’s management and advisors concerning Great Western’s due diligence examination of the operations, financial condition and regulatory compliance programs and prospects of First Interstate;
the process through which the Great Western board of directors, with the assistance of management and Great Western’s financial and legal advisors, conducted extensive analysis and considered the available alternatives for Great Western over an extended period of time, including consideration of informal inbound inquiries, a review of other potential strategic partners and the likelihood of any other party offering financial and other terms that would be superior to the proposed merger, and an evaluation and testing of Great Western’s stand-alone plan, and determined that no such alternative was as strategically and financially compelling as the transaction with First Interstate;
the availability of alternative transactions, including that, in a consolidating industry, institutions with an interest in merging with or acquiring another institution typically make that interest known and that no such institution, other than First Interstate, submitted a proposal regarding a potential acquisition or strategic business combination to Great Western during the course of the Great Western board’s consideration of a potential transaction with First Interstate, as well as the attractiveness and strategic fit of First Interstate as a potential merger partner, the likelihood of an actionable alternative transaction emerging on terms and conditions, including with respect to certainty of consummation, as beneficial to Great Western and its stockholders as those proposed by First Interstate, and the terms of the merger agreement that give Great Western the right, subject to certain conditions, to provide nonpublic information in response to, and to discuss and negotiate, certain bona fide unsolicited acquisition proposals made before Great Western’s stockholders approve the merger agreement;
the opinion, dated September 15, 2021, of Piper Sandler to the Great Western board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Great Western common stock of the exchange ratio in the merger, as more fully described below under “—Opinion of Great Western’s Financial Advisor” beginning on page 76 of this joint proxy statement/prospectus;
the regulatory and other approvals required in connection with the transaction and the expectation that such approvals would be received in a timely manner and without unacceptable conditions;
its review with Great Western’s outside legal advisor, Wachtell Lipton, of the terms of the merger agreement, including the representations, covenants, deal protection and termination provisions, tax treatment and closing conditions;
the fact that Great Western stockholders would own approximately 43% of the surviving corporation following completion of the transaction; and
First Interstate’s past record of integrating mergers and of realizing projected financial goals and benefits of acquisitions and the perceived strength of First Interstate’s management and infrastructure to successfully complete the integration process following the completion of the merger.
The Great Western board of directors also considered potential risks related to the merger but concluded that the anticipated benefits of the merger were likely to substantially outweigh these risks. These potential risks include:
the regulatory and other approvals required in connection with the merger and the bank merger and the risk that such regulatory approvals may not be received in a timely manner or at all or may impose unacceptable conditions;
certain anticipated merger-related costs that Great Western expects to incur, including a number of non-recurring costs in connection with the merger even if the merger is not ultimately consummated, including a potential $70,000,000 termination fee if the merger agreement is terminated under certain circumstances;
the possibility of encountering difficulties in achieving anticipated synergies and cost savings in the amounts estimated or in the time frame contemplated;
the possibility of encountering difficulties in successfully maintaining existing customer and employee relationships;
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the possibility of encountering difficulties in successfully integrating Great Western’s and First Interstate’s business, operations and workforce;
the risk of losing key Great Western or First Interstate employees during the pendency of the merger and thereafter;
the possible diversion of management attention and resources from the operation of Great Western’s business or other strategic opportunities towards the completion of the merger;
the potential effect of the COVID-19 pandemic on the completion, timing or benefits of the merger;
the fact that the merger agreement places certain restrictions on the conduct of Great Western’s business prior to the completion of the merger, which are customary for public company merger agreements involving financial institutions, but which, subject to specific exceptions, could delay or prevent Great Western from undertaking business opportunities that might arise or any other action it would otherwise take with respect to the operations of Great Western absent the pending completion of the merger;
the potential for legal claims challenging the merger; and
the other risks described under the sections entitled “Risk Factors” beginning on page 36 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 34 of this joint proxy statement/prospectus.
The foregoing discussion of the information and factors considered by the Great Western board of directors is not intended to be exhaustive, but includes the material factors considered by the Great Western board of directors. In reaching its decision to approve the merger agreement, the merger, and the other transactions contemplated by the merger agreement, the Great Western board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Great Western board of directors considered all these factors as a whole, including through its discussions with Great Western’s management and financial and legal advisors, in evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement.
For the reasons set forth above, the Great Western board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Great Western and its stockholders, and adopted and approved the merger agreement and the transactions contemplated thereby, including the merger.
In considering the recommendation of the Great Western board of directors, you should be aware that certain directors and executive officers of Great Western may have interests in the merger that are different from, or in addition to, interests of stockholders of Great Western generally and may create potential conflicts of interest. The Great Western board of directors was aware of these interests and considered them when evaluating and negotiating the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending to Great Western’s stockholders that they vote in favor of the Great Western merger proposal, the Great Western compensation proposal and the Great Western adjournment proposal. See “The Merger—Interests of Great Western’s Directors and Executive Officers in the Merger” beginning on page 110.
It should be noted that this explanation of the reasoning of the Great Western board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 34 of this joint proxy statement/prospectus.
For the reasons set forth above, the Great Western board of directors unanimously recommends that the holders of Great Western common stock vote “FOR” the Great Western merger proposal and “FOR” the other proposals to be considered at the Great Western special meeting.
Opinion of Great Western’s Financial Advisor
Great Western retained Piper Sandler to act as financial advisor to the Great Western board of directors in connection with Great Western’s consideration of a possible business combination. Great Western selected Piper Sandler to act as its financial advisor because Piper Sandler is a nationally recognized investment banking firm with
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a business specialty in financial institutions advisory services. In the ordinary course of its investment banking business, Piper Sandler is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Piper Sandler acted as financial advisor to the Great Western board of directors in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the September 15, 2021 meeting at which the Great Western board of directors considered the merger and the merger agreement, Piper Sandler delivered to the Great Western board of directors its oral opinion, which was subsequently confirmed in writing on September 15, 2021, to the effect that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the exchange ratio was fair to the holders of Great Western common stock from a financial point of view. The full text of Piper Sandler’s opinion is attached as Annex E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Great Western common stock are urged to read the entire opinion carefully in connection with their consideration of the merger and adoption of the merger agreement.
Piper Sandler’s opinion was directed to the Great Western board of directors in connection with its consideration of the merger and the merger agreement and does not constitute a recommendation to any stockholder of Great Western as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the adoption of the merger and the merger agreement. Piper Sandler’s opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Great Western common stock and did not address the underlying business decision of Great Western to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Great Western or the effect of any other transaction in which Great Western might engage. Piper Sandler also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of Great Western or First Interstate, or any class of such persons, if any, relative to the compensation to be received in the merger by any other stockholder. Piper Sandler’s opinion was approved by Piper Sandler’s fairness opinion committee.
In connection with its opinion, Piper Sandler reviewed and considered, among other things:
a draft of the merger agreement, dated September 15, 2021;
certain publicly available financial statements and other historical financial information of Great Western that Piper Sandler deemed relevant;
certain publicly available financial statements and other historical financial information of First Interstate that Piper Sandler deemed relevant;
certain internal financial projections for Great Western for the years ending September 30, 2021 through September 30, 2024, as provided by the senior management of Great Western;
publicly available mean analyst EPS and balance sheet estimates for First Interstate for the years ending December 31, 2021 through December 31, 2023 with a long-term annual EPS growth rate beginning with the year ending December 31, 2024 and estimated dividends per share for First Interstate for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of First Interstate;
the pro forma financial impact of the merger on First Interstate based on certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as well as the redemption of a certain amount of Great Western’s outstanding subordinated notes, as provided by the senior management of First Interstate and its representatives, and based on internal EPS estimates for Great Western, which were derived from the Great Western management estimates and adjusted to reflect certain strategic initiatives that were assumed not to be pursued in the event of the merger and to align with First Interstate’s fiscal year-end, for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of Great Western;
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the publicly reported historical price and trading activity for Great Western common stock and First Interstate common stock, including a comparison of certain stock market information for Great Western common stock and First Interstate common stock and certain stock indices as well as publicly available information for certain other similar companies, the securities of which are publicly traded;
a comparison of certain financial and market information for Great Western and First Interstate with similar financial institutions for which information is publicly available;
the financial terms of certain recent business combinations in the bank and thrift industry (on a nationwide basis), to the extent publicly available;
the current market environment generally and the banking environment in particular; and
such other information, financial studies, analyses and investigations and financial, economic and market criteria as Piper Sandler considered relevant.
Piper Sandler also discussed with certain members of the senior management of Great Western and its representatives the business, financial condition, results of operations and prospects of Great Western and held similar discussions with certain members of the senior management of First Interstate and its representatives regarding the business, financial condition, results of operations and prospects of First Interstate.
In performing its review, Piper Sandler relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Piper Sandler from public sources, that was provided to Piper Sandler by Great Western or First Interstate or their respective representatives, or that was otherwise reviewed by Piper Sandler, and Piper Sandler assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Piper Sandler relied on the assurances of the respective senior managements of Great Western and First Interstate that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading in any respect material to Piper Sandler’s analyses. Piper Sandler was not asked to and did not undertake an independent verification of any such information and Piper Sandler did not assume any responsibility or liability for the accuracy or completeness thereof. Piper Sandler did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Great Western or First Interstate, nor was Piper Sandler furnished with any such evaluations or appraisals. Piper Sandler rendered no opinion on, or evaluation of, the collectability of any assets or the future performance of any loans of Great Western or First Interstate. Piper Sandler did not make an independent evaluation of the adequacy of the allowance for loan losses of Great Western or First Interstate, or of the surviving corporation after the merger, and Piper Sandler did not review any individual credit files relating to Great Western or First Interstate. Piper Sandler assumed, with Great Western’s consent, that the respective allowances for loan losses for both Great Western and First Interstate were adequate to cover such losses and would be adequate on a pro forma basis for the surviving corporation.
In preparing its analyses, Piper Sandler used certain internal financial projections for Great Western for the fiscal years ending September 30, 2021 through September 30, 2024, as provided by the senior management of Great Western. In addition, Piper Sandler used publicly available mean analyst EPS and balance sheet estimates for First Interstate for the years ending December 31, 2021 through December 31, 2023 with a long-term annual EPS growth rate beginning with the year ending December 31, 2024 and estimated dividends per share for First Interstate for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of First Interstate. Piper Sandler also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as well as the redemption of a certain amount of Great Western’s outstanding subordinated notes, as provided by the senior management of First Interstate and its representatives. Piper Sandler also received and used in its pro forma analysis internal EPS estimates for Great Western, as adjusted to align with First Interstate’s fiscal year, for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of Great Western. With respect to the foregoing information, the respective senior managements of Great Western and First Interstate confirmed to Piper Sandler that such information reflected (or, in the case of the publicly available analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of those respective senior managements as to the future financial performance of Great Western and First Interstate, respectively, and Piper Sandler assumed that the financial results reflected in such information would be achieved. Piper Sandler expressed no opinion as to such information, or the assumptions on which such information was based. Piper Sandler also assumed that there had been no material change in the respective assets, financial condition, results of operations,
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business or prospects of Great Western or First Interstate since the date of the most recent financial statements made available to Piper Sandler. Piper Sandler assumed in all respects material to its analyses that Great Western and First Interstate would remain as going concerns for all periods relevant to its analyses.
Piper Sandler also assumed, with Great Western’s consent and to the extent material to Piper Sandler’s analyses, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements required to effect the merger, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Great Western, First Interstate, the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Piper Sandler expressed no opinion as to any legal, accounting or tax matters relating to the merger and the other transactions contemplated by the merger agreement.
Piper Sandler’s opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Piper Sandler as of, the date thereof. Events occurring after the date thereof could materially affect Piper Sandler’s opinion. Piper Sandler has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Piper Sandler expressed no opinion as to the trading value of Great Western common stock or First Interstate common stock at any time or what the value of First Interstate common stock would be once it is actually received by the holders of Great Western common stock.
In rendering its opinion, Piper Sandler performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Piper Sandler’s opinion or the presentation made by Piper Sandler to the Great Western board of directors, but is a summary of the material analyses performed and presented by Piper Sandler. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Piper Sandler believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Piper Sandler’s comparative analyses described below is identical to Great Western or First Interstate and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or transaction values, as the case may be, of Great Western and First Interstate and the companies to which they were compared. In arriving at its opinion, Piper Sandler did not attribute any particular weight to any analysis or factor that it considered. Rather, Piper Sandler made qualitative judgments as to the significance and relevance of each analysis and factor. Piper Sandler did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Piper Sandler made its determination as to the fairness of the exchange ratio to the holders of Great Western common stock on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.
In performing its analyses, Piper Sandler also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Great Western, First Interstate, and their respective representatives, including Piper Sandler. The analyses performed by Piper Sandler are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Piper Sandler prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Great Western board of directors at its September 15, 2021 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily
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reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Piper Sandler’s analyses do not necessarily reflect the value of Great Western common stock or First Interstate common stock or the prices at which Great Western or First Interstate common stock may be sold at any time. The analyses of Piper Sandler and its opinion were among a number of factors taken into consideration by the Great Western board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the Great Western board of directors with respect to the fairness of the exchange ratio.
Summary of Proposed Merger Consideration and Implied Transaction Metrics.
Piper Sandler reviewed the financial terms of the proposed merger. Pursuant to and subject to the terms and conditions of the merger agreement, at the effective time, each share of Great Western common stock issued and outstanding immediately prior to the effective time, except for certain shares as set forth in the merger agreement, will be converted into the right to receive 0.8425 shares of First Interstate Class A common stock. Based on the closing price of First Interstate common stock on September 14, 2021, Piper Sandler calculated an aggregate implied transaction value of approximately $2.0 billion and an implied purchase price per share of $35.38 consisting of the implied value of 55,116,095 shares of Great Western common stock and 92,936 vested but unissued Great Western RSUs held by non-employee members of the Great Western board of directors, and 490,227 unvested Great Western RSUs and Great Western PSUs that vest upon a change-in-control transaction. Based upon financial information for Great Western as of or for the last twelve months (“LTM”) ended June 30, 2021 and the closing price of Great Western common stock on September 14, 2021, Piper Sandler calculated the following implied transaction metrics:
Transaction Price / Great Western LTM EPS
12.0x
Transaction Price / Great Western Est. FY 2021 EPS (Consensus)(1)
10.3x
Transaction Price / Great Western Est. FY 2021 EPS (Mgmt. Budget)(2)
9.7x
Transaction Price / Great Western Est. FY 2022 EPS (Consensus)(1)
12.6x
Transaction Price / Great Western Est. FY 2022 EPS (Mgmt. Budget)(2)
10.4x
Transaction Price / Great Western Book Value Per Share
167.9%
Transaction Price / Great Western Tangible Book Value (“TBV”) Per Share
168.7%
Tangible Book Premium / Great Western Core Deposits (CDs > $100,000)
7.3%
Tangible Book Premium / Great Western Core Deposits (CDs > $250,000)
7.2%
Premium to Great Western Market Price (20-day Volume Weighted Average Price as of September 14, 2021)
21.4%
Premium to Great Western Market Price (as of September 14, 2021)
26.0%
(1)
Based on publicly available mean analyst EPS estimates for fiscal years 2021 and 2022
(2)
Based on internal Great Western management EPS projections
Comparable Company Analyses.
Piper Sandler used publicly available information to compare selected financial information for Great Western with a group of financial institutions selected by Piper Sandler. The Great Western peer group included banks and thrifts headquartered in the Midwest and Southwest whose securities are publicly traded on a major exchange with total assets between $10 billion and $20 billion, excluding targets of announced merger transactions (the “Great Western Peer Group”). The Great Western Peer Group consisted of the following companies:
BancFirst Corporation
First Merchants Corporation
Enterprise Financial Services Corp
Heartland Financial USA, Inc.
First Busey Corporation
Hilltop Holdings Inc.
First Financial Bancorp.
Independent Bank Group, Inc.
First Financial Bankshares, Inc.
International Bancshares Corporation
The analysis compared publicly available financial information for Great Western with corresponding data for the Great Western Peer Group as of or for the twelve months ended June 30, 2021 (unless otherwise noted) with pricing data as of September 14, 2021. The table below sets forth the data for Great Western and the median, mean,
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low and high data for the Great Western Peer Group. Certain financial data prepared by Piper Sandler, as referenced in the table presented below, may not correspond to the data presented in Great Western’s historical financial statements as a result of the different periods, assumptions and methods used by Piper Sandler to compute the financial data presented.
Great Western Comparable Company Analysis
 
Great Western
Great Western
Peer Group
Median
Great Western
Peer Group
Mean
Great Western
Peer Group
Low
Great Western
Peer Group
High
Market Value ($mm)
1,548
2,112
2,495
1,276
6,157
Price / TBV (%)
134
161
182
117
442
Price / LTM EPS (x)
9.6
11.2
12.2
5.5
27.7
Price / 2021E EPS (x)
8.1
10.3
12.1
7.9
28.2
Price / 2022E EPS (x)
10.0
12.6
14.1
9.8
30.2
Current Dividend Yield (%)
0.7
2.4
2.6
1.4
4.1
Total Assets ($mm)
13,070
15,117
14,686
10,347
18,448
Loans / Deposits (%)
73.5
67.3
69.6
54.2
83.6
Non-performing Assets (“NPAs”)(1) / Total Assets (%)
2.01
0.43
0.44
0.24
0.67
Loan Loss Reserves / Loans
3.19
1.34
1.45
1.09
2.19
Net Charge Offs / Average Loans
0.25
0.06
0.10
(0.02)
0.27
Tangible Common Equity (“TCE”) / Tangible Assets (“TA”) (%)
8.85
8.67
9.68
8.00
13.33
Total Risk-Based Capital (“RBC”) Ratio (%)
15.96
15.86
17.39
14.23
23.48
Most Recent Quarter (“MRQ”) Return on Average Assets (“ROAA”) (%)
1.80(2)
1.50
1.63
1.04
2.45
MRQ Return on Average Tangible Common Equity (“ROATCE”) (%)
21.10(2)
17.92
17.61
13.14
20.75
MRQ Net Interest Margin (“NIM”) (%)
21.28(2)
3.26
3.09
2.49
3.45
MRQ Cost of Deposits (%)
0.12
0.13
0.15
0.06
0.31
MRQ Efficiency Ratio (%)
50.9
52.8
53.5
34.7
76.5
(1)
NPAs / Assets = (Nonaccrual Loans + Troubled Debt Restructurings (“TDR”) + Other Real Estate Owned (“OREO”)) / Total Assets
(2)
Presented on a GAAP basis; adjusted profitability metrics for June 30, 2021 including adjusting the $20.7 million negative provision to $0 with an assumed 21% tax rate are as follows: Adjusted profitability metrics for the quarter ended June 30, 2021: Adj. ROAA = 1.36%; Adj. Return on Average Equity (“ROAE”) = 15.98%; Adj. ROATCE = 16.13%
Piper Sandler used publicly available information to perform a similar analysis for First Interstate by comparing selected financial information for First Interstate with a group of financial institutions selected by Piper Sandler. The First Interstate peer group included banks headquartered in the Midwest, Southwest and West whose securities are publicly traded on a major exchange with total assets between $15 billion and $35 billion, excluding (a) targets of announced merger transactions, (b) non-continental U.S. banks, (c) Axos Financial Inc., Cathay General Bancorp and Hope Bancorp, Inc., due to their non-traditional banking models, and (d) Old National Bancorp and First Midwest Bancorp, Inc., due to an announced and pending merger of equals transaction (the “First Interstate Peer Group”). The First Interstate Peer Group consisted of the following companies:
Associated Banc-Corp
Hilltop Holdings Inc.
Banner Corporation
Independent Bank Group, Inc.
Columbia Banking System, Inc.
International Bancshares Corporation
Commerce Bancshares, Inc.
Pacific Premier Bancorp, Inc.
CVB Financial Corp.
PacWest Bancorp
First Financial Bancorp.
Umpqua Holdings Corporation
Glacier Bancorp, Inc.
Washington Federal, Inc.
Heartland Financial USA, Inc.
 
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The analysis compared publicly available financial information for First Interstate with corresponding data for the First Interstate Peer Group as of or for the twelve months ended June 30, 2021 (unless otherwise noted) with pricing data as of September 14, 2021. The table below sets forth the data for First Interstate and the median, mean, low and high data for the First Interstate Peer Group. Certain financial data prepared by Piper Sandler, as referenced in the table presented below, may not correspond to the data presented in First Interstate’s historical financial statements as a result of the different periods, assumptions and methods used by Piper Sandler to compute the financial data presented.
First Interstate Comparable Company Analysis
 
First Interstate
First
Interstate
Peer Group
Median
First Interstate
Peer Group
Mean
First Interstate
Peer Group
Low
First Interstate
Peer Group
High
Market Value ($mm)
2,613
2,589
3,273
1,782
7,757
Price / TBV (%)
205
155
168
117
266
Price / LTM EPS (x)
13.8
11.4
11.3
5.5
15.2
Price / 2021E EPS (x)
13.9
11.1
11.7
7.9
17.5
Price / 2022E EPS (x)
14.5
12.9
13.2
9.8
19.8
Current Dividend Yield (%)
3.9
3.0
3.0
1.5
4.4
Total Assets ($mm)
18,941
18,448
21,960
15,311
34,868
Loans / Deposits (%)
63.2
67.0
72.0
56.9
89.5
NPAs¹ / Total Assets (%)
0.18
0.36
0.36
0.11
0.62
Loan Loss Reserves / Loans
1.37
1.25
1.31
0.86
1.71
Net Charge Offs / Average Loans
0.04
0.02
0.05
(0.11)
0.24
TCE/TA (%)
6.99
8.97
9.25
7.80
13.33
Total RBC Ratio (%)
13.89
15.04
15.90
14.02
23.48
MRQ ROAA (%)
0.91
1.36
1.58
0.97
2.45
MRQ ROATCE (%)
14.26
17.85
17.80
10.53
28.58
(1)
NPAs / Assets = (Nonaccrual Loans + TDR + OREO) / Total Assets
Stock Trading History.
Piper Sandler reviewed the publicly available historical reported trading prices of Great Western common stock and First Interstate common stock for the one-year and three-year periods ended September 14, 2021. Piper Sandler then compared the relationship between the movements in the price of Great Western common stock and First Interstate common stock, respectively, to movements in their respective peer groups, as well as certain stock indices.
Great Western’s One-Year Stock Performance
 
Beginning Value
9/14/2020
Ending Value
9/14/2021
Great Western
100%
211.9%
Great Western Peer Group
100%
143.8%
S&P 500 Index
100%
131.3%
NASDAQ Bank Index
100%
164.1%
Great Western’s Three-Year Stock Performance
 
Beginning Value
9/14/2018
Ending Value
9/14/2021
 
 
 
Great Western
100%
64.6%
Great Western Peer Group
100%
83.1%
S&P 500 Index
100%
154.4%
NASDAQ Bank Index
100%
103.2%
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First Interstate’s One-Year Stock Performance
 
Beginning Value
9/14/2020
Ending Value
9/14/2021
 
 
 
First Interstate
100%
131.0%
First Interstate Peer Group
100%
143.5%
S&P 500 Index
100%
131.3%
NASDAQ Bank Index
100%
164.1%
First Interstate’s Three-Year Stock Performance
 
Beginning Value
9/14/2018
Ending Value
9/14/2021
 
 
 
First Interstate
100%
91.7%
First Interstate Peer Group
100%
83.9%
S&P 500 Index
100%
154.4%
NASDAQ Bank Index
100%
103.2%
Analysis of Precedent Transactions.
Piper Sandler reviewed a group of recent merger and acquisition transactions involving banks and thrifts. The group consisted of nationwide bank and thrift transactions announced between March 1, 2020 and September 14, 2021 with disclosed deal values and where the target had total assets between $5 billion and $30 billion at the time of announcement (the “Nationwide Precedent Transactions”).
The Nationwide Precedent Transactions group was composed of the following transactions:
Acquiror
Target
Citizens Financial Group, Inc.
Investors Bancorp, Inc.
Old National Bancorp
First Midwest Bancorp, Inc.
New York Community Bancorp, Inc.
Flagstar Bancorp, Inc.
Independent Bank Corp.
Meridian Bancorp, Inc.
Webster Financial Corporation
Sterling Bancorp
BancorpSouth Bank
Cadence Bancorporation
Eastern Bankshares, Inc.
Century Bancorp, Inc.
WSFS Financial Corporation
Bryn Mawr Bank Corporation
SVB Financial Group
Boston Private Financial Holdings, Inc.
Bridge Bancorp, Inc.
Dime Community Bancshares, Inc.
Using the latest publicly available information prior to the announcement of the relevant transaction, Piper Sandler reviewed the following transaction metrics: transaction price to LTM earnings per share, transaction price to next twelve months (“NTM”) earnings per share, transaction price to tangible book value per share, core deposit premium, and 1-day market premium. Piper Sandler compared the indicated transaction metrics for the transaction to the median, mean, low and high metrics of the Regional Precedent Transactions group as well as to the median, mean, low and high metrics of the Nationwide Precedent Transactions group.
 
 
Nationwide Precedent Transactions
 
First Interstate/
Great Western(1)
Median
Mean
Low
High
Transaction Price / LTM EPS (x)
12.0
15.7
16.3
4.0
30.5
Transaction Price / NTM EPS (x)
12.6 ²
13.8
14.7
6.6
27.1
Transaction Price / TBV Per Share (%)
169
154
155
97
234
TBV Premium to Core Deposits (%)(3)
7.2
5.5
5.6
(0.6)
12.9
1-Day Market Premium (%)
26.0
11.9
13.3
3.2
29.5
(1)
Transaction metrics based on closing prices as of September 14, 2021
(2)
Based on mean wall street consensus analyst estimate for FY 2022 earnings per share (“EPS”) of $2.80
(3)
Core Deposits used in the Core Deposit Premium calculation defined as total deposits less time deposits with balances greater than $250,000
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Net Present Value Analyses.
Piper Sandler performed an analysis that estimated the net present value of a share of Great Western common stock assuming Great Western performed in accordance with certain internal financial projections for Great Western for the years ending September 30, 2021 through September 30, 2024, which assumed that a special dividend is paid in the terminal period (i.e., the year ended September 30, 2024) in order to bring Great Western’s terminal period TCE / TA ratio in line with the Great Western Peer Group median. To approximate the terminal value of a share of Great Western common stock at September 30, 2024, Piper Sandler applied price to year ended September 30, 2024 earnings multiples ranging from 10.0x to 14.0x and multiples of year ended September 30, 2024 tangible book value ranging from 130% to 170%. The terminal values were then discounted to present values using different discount rates ranging from 9.5% to 13.5%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Great Western common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Great Western common stock of $23.50 to $34.07 when applying multiples of earnings and $24.74 to $34.11 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount Rate
10.0x
11.0x
12.0x
13.0x
14.0x
9.5%
$26.34
$28.27
$30.21
$32.14
$34.07
10.5%
$25.59
$27.46
$29.34
$31.22
$33.10
11.5%
$24.86
$26.69
$28.51
$30.33
$32.15
12.5%
$24.17
$25.94
$27.71
$29.48
$31.25
13.5%
$23.50
$25.22
$26.94
$28.66
$30.38
Tangible Book Value Per Share Multiples
Discount Rate
130%
140%
150%
160%
170%
9.5%
$27.74
$29.33
$30.93
$32.52
$34.11
10.5%
$26.95
$28.49
$30.04
$31.59
$33.13
11.5%
$26.18
$27.69
$29.19
$30.69
$32.19
12.5%
$25.45
$26.91
$28.37
$29.83
$31.29
13.5%
$24.74
$26.16
$27.58
$29.00
$30.41
Interstate common stock, applying the price to the year ended December 31, 2024 earnings multiples range of 11.0x to 15.0x referred to above and a discount rate of 9.07%.
Earnings Per Share Multiples
Annual Estimate Variance
11.0x
12.0x
13.0x
14.0x
15.0x
(20.0%)
$25.62
$27.51
$29.41
$31.31
$33.20
(10.0%)
$28.22
$30.36
$32.49
$34.63
$36.76
0.0%
$30.83
$33.20
$35.57
$37.95
$40.32
10.0%
$33.44
$36.05
$38.66
$41.27
$43.87
20.0%
$36.05
$38.89
$41.74
$44.58
$47.43
Piper Sandler noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.
Pro Forma Transaction Analysis.
Piper Sandler analyzed certain potential pro forma effects of the merger on First Interstate assuming the merger closes on March 31, 2022. Piper Sandler also utilized the following information and assumptions: (a) internal EPS estimates for Great Western, as adjusted to align with First Interstate’s fiscal year, for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of Great Western, (b) publicly available mean analyst EPS and balance sheet estimates for First Interstate for the years ending December 31, 2021 through December 31, 2023 with a long-term annual earnings per share growth rate beginning with the year ending
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December 31, 2024 and estimated dividends per share for First Interstate for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of First Interstate, and (c) certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as well as the redemption of a certain amount of Great Western’s outstanding subordinated notes, as provided by the senior management of First Interstate. The analysis indicated that the merger could be accretive to First Interstate’s estimated EPS (excluding one-time transaction costs and expenses) in the years ending December 31, 2022 through December 31, 2024 and accretive to First Interstate’s estimated TBV per share at close and thereafter.
In connection with this analysis, Piper Sandler considered and discussed with the Great Western board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the merger, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.
Piper Sandler’s Relationship.
Piper Sandler is acting as Great Western’s financial advisor in connection with the merger and will receive a fee for such services in an amount equal to 0.90% of the aggregate merger consideration, which fee is contingent upon the closing of the merger. Piper Sandler also received a $5 million fee from Great Western upon rendering its opinion, which opinion fee will be credited in full towards the advisory fee that will become due and payable to Piper Sandler upon closing of the merger. Great Western has also agreed to indemnify Piper Sandler against certain claims and liabilities arising out of Piper Sandler’s engagement and to reimburse Piper Sandler for certain of its out-of-pocket expenses incurred in connection with Piper Sandler’s engagement.
In the two years preceding the date of Piper Sandler’s opinion, Piper Sandler did not provide any other investment banking services to Great Western. Piper Sandler did provide certain investment banking services to First Interstate in the two years preceding the date of its opinion. In summary, Piper Sandler acted as book manager in connection with the offer and sale of First Interstate subordinated debt, which transaction occurred in May 2020 and for which Piper Sandler received approximately $1 million in fees and expense reimbursement. In the ordinary course of Piper Sandler’s business as a broker-dealer, Piper Sandler may purchase securities from and sell securities to Great Western, First Interstate and their respective affiliates. Piper Sandler may also actively trade the equity and debt securities of Great Western, First Interstate and their respective affiliates for Piper Sandler’s own account and for the accounts of Piper Sandler’s customers.
First Interstate’s Reasons for the Merger; Recommendation of the First Interstate Board of Directors
In reaching its decision to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and to recommend that its shareholders approve the merger agreement, the First Interstate board of directors evaluated the merger agreement, the merger and the other transactions contemplated by the merger agreement in consultation with First Interstate’s management, as well as First Interstate’s financial and legal advisors, and considered a number of factors, including the following:
each of First Interstate’s, Great Western’s and the combined company’s business, operations, financial condition, asset quality, earnings, and prospects. In reviewing these factors, the First Interstate board of directors considered its assessment that Great Western’s financial condition was strong and that Great Western’s business, operations and geographic footprint complement those of First Interstate, and that the merger and the other transactions contemplated by the merger agreement would result in a combined company with a larger scale and market presence than First Interstate on a stand-alone basis;
the strategic rationale for the merger, including the unique strategic position and enhanced platform for growth, the compelling financial impacts, the enhanced leadership and bench strength, and the shared commitment to local communities;
the First Interstate board of directors’ belief that Great Western’s earnings and prospects, and the synergies potentially available in the proposed merger, would create the opportunity for the combined company to have superior future earnings and prospects compared to First Interstate’s earnings and prospects on a stand-alone basis;
the complementary nature of the cultures of the two companies, including with respect to corporate purpose, management philosophy, banking philosophy, strategic focus, client service and community commitment, which would facilitate the successful integration and implementation of the transaction;
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the ability to leverage the existing scale of First Interstate and financial capabilities of the combined company to make further enhancements in technology and products to better manage risk and provide an enhanced customer experience for clients across business lines;
the expanded possibilities for growth that would be available to the combined company, given its larger size, asset base, capital and geographic footprint;
the anticipated pro forma financial impact of the merger on the combined company, including the expected positive impact on financial metrics, including earnings per share and profitability;
the expectation of significant cost savings resulting from the transaction;
the terms of the merger and the fact that the exchange ratio is fixed, with no adjustment in the merger consideration to be received by Great Western stockholders as a result of possible increases or decreases in the trading price of Great Western common stock or First Interstate common stock following the announcement of the merger, which the First Interstate board of directors believed was consistent with market practice for transactions of this type and with the strategic nature of the transaction;
that, under the terms of the merger, First Interstate is entitled to pay regular quarterly cash dividends during the pendency of the merger;
that the executive management team of the combined company will represent a deeply experienced and highly respected management team with track records of superior operational execution;
the support of the merger by the Scott Family shareholders, who entered into a support agreement pursuant to which, among other things, each Scott Family shareholder agreed to (i) vote the shares of First Interstate common stock owned by it in favor of the approval and adoption of the merger agreement and the First Interstate articles amendment, and against any competing transaction and (ii) not transfer its shares of First Interstate common stock prior to the First Interstate special shareholder meeting, with certain limited exceptions, as more fully described below under “The Transaction Agreements—Description of the Support Agreement” beginning on page 137;
the flexibility provided to the First Interstate board of directors to change its recommendation if, after receiving the advice of its outside counsel and, with respect to financial matters, financial advisors, the First Interstate board of directors makes a good faith determination that not changing its recommendation would more likely than not result in a violation of its fiduciary duties under the applicable law, subject to the terms of the merger agreement, in which case, if such recommendation change is approved by the vote of a majority of the independent directors then serving on the First Interstate board of directors in accordance with the merger agreement, the voting commitments provided in the Scott Family support agreement will terminate;
the elimination of First Interstate’s dual class structure, which the First Interstate board of directors expects, among other things, would simplify the capitalization structure of First Interstate, provide the opportunity in the future for timely and cost-effective liquidity for First Interstate Class B shareholders, increase trading volume of First Interstate Class A common stock and eliminate public market trading confusion relating to First Interstate’s two existing classes of common stock;
its understanding of the current and prospective environment in which First Interstate and Great Western operate, including national, regional and local economic conditions, the interest rate environment, the accelerating pace of technological change in the banking industry, increased operating costs resulting from regulatory and compliance mandates, the competitive environment for financial institutions generally, and the likely effect of these factors on First Interstate both with and without the merger;
its review and discussions with First Interstate’s management and advisors concerning First Interstate’s due diligence examination of Great Western;
its expectation that First Interstate will retain its strong capital position and asset quality upon completion of the merger;
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the separate opinions, each dated September 15, 2021, of KBW and Barclays, to the First Interstate board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to First Interstate of the exchange ratio in the proposed merger, as more fully described below under “—Opinions of First Interstate’s Financial Advisors” beginning on page 88;
its expectation that the required regulatory and other approvals for the merger and the other transactions contemplated by the merger agreement could be obtained in a timely fashion;
its review with First Interstate’s outside legal advisor, Davis Polk, of the terms of the merger agreement, including the representations and warranties, covenants, deal protection and termination provisions, tax treatment and closing conditions; and
First Interstate’s past record of integrating mergers and acquisitions and of realizing projected financial goals and benefits of those mergers and acquisitions, and the strength of First Interstate’s management and infrastructure to successfully complete the integration process following the completion of the merger.
The First Interstate board of directors also considered potential risks related to the merger but concluded that the anticipated benefits of the merger were likely to substantially outweigh these risks. These potential risks include:
the risk that the regulatory and other approvals required in connection with the merger and the bank merger may not be received in a timely manner or at all or may impose unacceptable conditions;
the possibility of encountering difficulties in achieving anticipated synergies in the amounts estimated or in the time frame contemplated;
the possibility of encountering difficulties in successfully integrating First Interstate’s and Great Western’s business, operations and workforce;
the risk of losing key First Interstate or Great Western employees during the pendency of the merger and thereafter;
certain anticipated merger-related costs;
the diversion of management attention and resources from the operation of First Interstate’s business towards the completion of the merger;
the agreements reached with the Scott Family shareholders under (i) the stockholders’ agreement, as more fully described below under “The Transaction Agreements—Description of the Stockholders’ Agreement” beginning on page 137 and (ii) the letter agreement, as more fully described below under “The Transaction Agreements—Description of the Letter Agreement” beginning on page 138;
the merger’s effect on the combined company’s regulatory capital levels; and
the other risks described under the sections entitled “Risk Factors” beginning on page 36 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 34.
The foregoing discussion of the information and factors considered by the First Interstate board of directors is not intended to be exhaustive, but includes the material factors considered by the First Interstate board of directors. In reaching its decision to approve the merger agreement, the merger, and the other transactions contemplated by the merger agreement, the First Interstate board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The First Interstate board of directors considered all these factors as a whole, including through its discussions with First Interstate’s management and financial and legal advisors, in evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement.
For the reasons set forth above, the First Interstate board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of First Interstate and its shareholders, and adopted and approved the merger agreement and the transactions contemplated thereby, including the merger.
In considering the recommendation of the First Interstate board of directors, you should be aware that certain directors and executive officers of First Interstate may have interests in the merger that are different from, or in addition to, interests of shareholders of First Interstate generally and may create potential conflicts of interest. The
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First Interstate board of directors was aware of these interests and considered them when evaluating and negotiating the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending that First Interstate shareholders vote to approve the First Interstate merger proposal, the First Interstate authorized share count proposal, the First Interstate staggered board proposal and the First Interstate adjournment proposal. See “The Merger—Interests of First Interstate’s Directors and Executive Officers in the Merger.”
It should be noted that this explanation of the reasoning of the First Interstate board of directors and all other information presented in this section is forward looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 34.
For the reasons set forth above, the First Interstate board of directors unanimously recommends that the holders of First Interstate common stock vote “FOR” the First Interstate merger proposal, “FOR” the First Interstate authorized share count proposal, “FOR” the First Interstate staggered board proposal and “FOR” the other proposals to be considered at the First Interstate special meeting.
Opinions of First Interstate’s Financial Advisors
Opinion of Keefe, Bruyette & Woods, Inc.
First Interstate engaged KBW as one of its financial advisors in connection with the merger to render financial advisory and investment banking services to First Interstate, including an opinion to the First Interstate board of directors as to the fairness, from a financial point of view, to First Interstate of the exchange ratio in the proposed merger. First Interstate selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.
As part of its engagement, representatives of KBW attended the meeting of the First Interstate board of directors held on September 15, 2021 at which the First Interstate board of directors evaluated the proposed merger. At this meeting, KBW rendered an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to First Interstate. The First Interstate board of directors approved the merger agreement at this meeting.
The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.
KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the First Interstate board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio in the merger to First Interstate. It did not address the underlying business decision of First Interstate to engage in the merger or enter into the merger agreement or constitute a recommendation to the First Interstate board of directors in connection with the merger, and it does not constitute a recommendation to any holder of First Interstate Class A common stock or First Interstate Class B common stock or any shareholder or stockholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation as to whether or not any such shareholder or stockholder should enter into a voting, shareholders’, affiliates’ or other agreement with respect to the merger or exercise any dissenters’ or appraisal rights that may be available to such shareholder or stockholder.
KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.
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In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of First Interstate and Great Western and bearing upon the merger, including, among other things:
a draft of the merger agreement, dated September 14, 2021 (the most recent draft then made available to KBW);
the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2020 of First Interstate;
the unaudited quarterly financial statements and the Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2021 and June 30, 2021 of First Interstate;
the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended September 30, 2020 of Great Western;
the unaudited quarterly financial statements and the Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2020, March 31, 2021 and June 30, 2021 of Great Western;
certain regulatory filings of First Interstate and Great Western and their respective subsidiaries, including the quarterly reports on Form FR Y-9C and the quarterly call reports filed with respect to each quarter during the three-year period ended December 31, 2020 as well as the quarters ended March 31, 2021 and June 30, 2021;
certain other interim reports and other communications of First Interstate and Great Western to their respective shareholders or stockholders; and
other financial information concerning the respective businesses and operations of First Interstate and Great Western furnished to KBW by First Interstate and Great Western or which KBW was otherwise directed to use for purposes of its analysis.
KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:
the historical and current financial position and results of operations of First Interstate and Great Western;
the assets and liabilities of First Interstate and Great Western;
the nature and terms of certain other merger transactions and business combinations in the banking industry;
a comparison of certain financial and stock market information of First Interstate and Great Western with similar information for certain other companies, the securities of which were publicly traded;
financial and operating forecasts and projections of Great Western that were prepared by First Interstate management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of First Interstate management and with the consent of the First Interstate board of directors;
publicly available consensus “street estimates” of First Interstate, as well as assumed First Interstate long-term growth rates provided to KBW by First Interstate management, all of which information was discussed with KBW by such management and used and relied upon by KBW at the direction of such management and with the consent of the First Interstate board of directors; and
estimates regarding certain pro forma financial effects of the merger on First Interstate (including without limitation the cost savings and related expenses expected to result or be derived from the merger) that were prepared by First Interstate management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the First Interstate board of directors.
KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as
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its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in discussions held by the managements of First Interstate and Great Western regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as KBW deemed relevant to its inquiry.
In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to or discussed with it or that was publicly available, and KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon First Interstate management as to the reasonableness and achievability of the financial and operating forecasts and projections of Great Western, the publicly available consensus “street estimates” of First Interstate, the assumed First Interstate long-term growth rates, and the estimates regarding certain pro forma financial effects of the merger on First Interstate (including, without limitation, the cost savings and related expenses expected to result or be derived from the merger), all as referred to above (and the assumptions and bases for all such information), and KBW assumed that all such information was reasonably prepared and represented, or in the case of the publicly available consensus “street estimates” of First Interstate referred to above that such estimates were consistent with, the best currently available estimates and judgments of First Interstate management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and in the time periods estimated.
It is understood that the portion of the foregoing financial information of First Interstate and Great Western that was provided to KBW was not prepared with the expectation of public disclosure and that all of the foregoing financial information, including the publicly available consensus “street estimates” of First Interstate referred to above, was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions, and in particular, assumptions regarding the ongoing COVID-19 pandemic) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the management of First Interstate and with the consent of the First Interstate board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. Among other things, such information assumed that the ongoing COVID-19 pandemic could have an adverse impact, which was assumed to be limited, on First Interstate and Great Western. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.
KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either First Interstate or Great Western since the date of the last financial statements of each such entity that were made available to KBW. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with First Interstate’s consent, that the aggregate allowances for loan and lease losses for each of First Interstate and Great Western are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of First Interstate or Great Western, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of First Interstate or Great Western under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Such estimates are inherently subject to uncertainty and should not be taken as KBW’s view of the actual value of any companies or assets.
KBW assumed, in all respects material to its analyses:
the merger and any related transactions (including, without limitation, the bank merger) would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft version of the merger agreement reviewed by KBW and referred to above), with no adjustments to the exchange ratio and with no other consideration or payments in respect of Great Western common stock;
the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;
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each party to the merger agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;
there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transactions and all conditions to the completion of the merger and any related transactions would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and
in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of First Interstate, Great Western or the combined company, or the contemplated benefits of the merger, including without limitation the cost savings and related expenses expected to result or be derived from the merger.
KBW assumed that the merger would be consummated in a manner that complies with the applicable provisions of the Securities Act, the Exchange Act, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of First Interstate that First Interstate relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to First Interstate, Great Western, the merger and any related transaction, and the merger agreement. KBW did not provide advice with respect to any such matters.
KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to First Interstate. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the bank merger and the contemplated redemption of the trust preferred securities of Great Western or the contemplated conversion of First Interstate Class B common stock into First Interstate Class A common stock), including without limitation, the form or structure of the merger or any such related transaction, any consequences of the merger or any such related transaction to First Interstate, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. There has been widespread disruption, extraordinary uncertainty and unusual volatility arising from the effects of the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:
the underlying business decision of First Interstate to engage in the merger or enter into the merger agreement;
the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by First Interstate or the First Interstate board of directors;
any business, operational or other plans with respect to Great Western or the combined company that may be currently contemplated by First Interstate or the First Interstate board of directors or that may be implemented by First Interstate or the First Interstate board of directors subsequent to the closing of the merger;
the fairness of the amount or nature of any compensation to any of First Interstate’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of First Interstate Class A common stock or First Interstate Class B common stock or relative to the exchange ratio;
the effect of the merger or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of First Interstate, Great Western or any other party to any transaction contemplated by the merger agreement;
the actual value of First Interstate Class A common stock to be issued in connection with the merger;
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the prices, trading range or volume at which First Interstate Class A common stock or Great Western common stock would trade following the public announcement of the merger or the prices, trading range or volume at which First Interstate Class A common stock would trade following the consummation of the merger;
any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or
any legal, regulatory, accounting, tax or similar matters relating to First Interstate, Great Western, any of their respective shareholders or stockholders, or relating to or arising out of or as a consequence of the merger or any other related transaction, including whether or not the merger would qualify as a tax-free reorganization for United States federal income tax purposes.
In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, First Interstate and Great Western. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the First Interstate board of directors in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the First Interstate board of directors with respect to the fairness of the exchange ratio. The type and amount of consideration payable in the merger were determined through negotiation between First Interstate and Great Western and the decision of First Interstate to enter into the merger agreement was solely that of the First Interstate board of directors.
The following is a summary of the material financial analyses presented by KBW to the First Interstate board of directors in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the First Interstate board of directors, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.
For purposes of the financial analyses described below, KBW utilized an implied transaction value for the proposed merger of $35.38 per outstanding share of Great Western common stock, or $1,975.6 million in the aggregate, based on the 0.8425x exchange ratio in the proposed merger and on the closing price of First Interstate common stock on September 13, 2021. In addition to the financial analyses described below, KBW reviewed with the First Interstate board of directors for informational purposes, among other things, an implied transaction multiple for the proposed merger (based on the implied transaction value for the proposed merger of $35.38 per outstanding share of Great Western common stock) of 9.4x Great Western’s calendar year 2021 estimated EPS and 13.1x Great Western’s calendar year 2023 estimated EPS taken from financial and operating forecasts and projections of Great Western provided by First Interstate management and also 10.8x Great Western’s calendar year 2021 estimated EPS taken from publicly available consensus “street” estimates of Great Western.
Great Western Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of Great Western to nine selected major
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exchange-traded banks, including First Interstate, that were headquartered in the West and Midwest (as defined by S&P Market Intelligence) with total assets between $10 billion and $20 billion. Merger targets, mutual holding companies and banks headquartered in California and Hawaii were excluded from the selected companies.
The selected companies were as follows (shown in descending order of total assets):
Washington Federal, Inc.
First Interstate
Heartland Financial USA, Inc.
Columbia Banking System, Inc.
Banner Corporation
First Financial Bancorp.
First Merchants Corporation
First Busey Corporation
Enterprise Financial Services Corp.
To perform this analysis, KBW used profitability and other financial information for the most recent completed quarter or the latest 12 months ended, or as of, June 30, 2021 and market price information as of September 13, 2021. KBW also used calendar year 2021, 2022 and 2023 EPS estimates taken from consensus “street” estimates for Great Western and the selected companies to the extent publicly available (calendar year 2023 consensus “street” estimates were not publicly available for Great Western and one of the selected companies) and also from financial and operating forecasts and projections of Great Western provided by First Interstate management. Certain financial data presented in the tables below may not correspond to the data presented in Great Western’s historical financial statements, or the data presented under the section “The Merger—Opinions of First Interstate’s Financial Advisors—Opinion of Barclays Capital Inc.” or the section “The Merger—Opinion of Great Western’s Financial Advisor,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.
KBW’s analysis showed the following concerning the financial performance of Great Western and the selected companies:
 
 
Selected Companies
 
Great Western
Average
Median
25th Percentile
75th Percentile
MRQ Pre-Tax Pre-Provision ROAA
1.73%
1.47%
1.46%
1.25%
1.61%
MRQ Core ROAA(1)
1.81%
1.30%
1.34%
1.15%
1.46%
MRQ Core Return on Equity(1)
21.2%
11.1%
10.4%
9.8%
12.0%
MRQ Core ROATCE(1)
21.3%
16.2%
17.4%
14.3%
18.0%
MRQ NIM
3.22%
3.13%
3.22%
2.82%
3.37%
MRQ Fee Income / Revenue Ratio(2)
16.6%
19.8%
17.6%
15.2%
23.0%
MRQ Efficiency Ratio
50.9%
56.4%
58.2%
59.5%
54.4%
(1)
Core net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of held to maturity and available for sale securities, amortization of intangibles, goodwill impairment and nonrecurring items as defined by S&P Capital IQ.
(2)
Excluded gains / (losses) on sale of securities.
KBW’s analysis also showed the following concerning the financial condition of Great Western and the selected companies:
 
 
Selected Companies
 
Great Western
Average
Median
25th Percentile
75th Percentile
TCE / TA
8.85%
8.26%
8.32%
8.08%
8.46%
Tier 1 Common Capital (CET1) Ratio
13.70%
11.65%
11.45%
11.21%
11.94%
Total Capital Ratio
16.00%
14.78%
14.62%
14.23%
15.04%
Loans Held for Investment / Deposits
73.5%
72.7%
70.8%
64.1%
76.1%
Loan Loss Reserve / Loans
3.19%
1.53%
1.47%
1.32%
1.67%
NPAs / Loans + OREO
3.09%
0.60%
0.60%
0.80%
0.36%
MRQ Net Charge-offs / Average Loans
0.25%
0.06%
0.05%
0.06%
(0.00%)
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In addition, KBW’s analysis showed the following concerning the market performance of Great Western and, to the extent publicly available, the selected companies:
 
 
Selected Companies
 
Great Western
Average
Median
25th Percentile
75th Percentile
One-Year Stock Price Change
123.0%
49.4%
47.2%
36.8%
57.6%
One-Year Total Return
123.6%
54.2%
52.1%
42.6%
63.1%
Year-To-Date Stock Price Change
37.9%
13.9%
13.5%
5.6%
26.8%
Price / TBV per Share
1.37x
1.58x
1.59x
1.42x
1.65x
Price / 2021 EPS Estimate
8.8x / 7.7x(1)
11.4x
10.6x
10.4x
12.5x
Price / 2022 EPS Estimate
10.3x / 11.7x(1)
12.2x
12.9x
11.2x
12.9x
Price / 2023 EPS Estimate
10.6x(2)
11.5x
11.5x
10.5x
12.5x
Dividend Yield
0.7%
3.1%
3.1%
2.8%
3.9%
LTM Dividend Payout Ratio
6.8%
36.7%
38.0%
32.7%
43.2%
(1)
First multiple based on consensus “street” estimates for Great Western. Second multiple based on financial and operating forecasts and projections of Great Western provided by First Interstate management. Calendarized for December 31 year-end.
(2)
Multiple based on financial and operating forecasts and projections of Great Western provided by First Interstate management. Calendarized for December 31 year-end.
No company used as a comparison in the above selected companies analysis is identical to Great Western. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.
First Interstate Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of First Interstate to eight selected major exchange-traded banks that were headquartered in the West (as defined by S&P Market Intelligence) with total assets between $10 billion and $35 billion. Merger targets, mutual holding companies, specialty banks (Cathay General Bancorp, Hope Bancorp, Inc., and Silvergate Capital Corporation), and thrifts and banks headquartered in Hawaii were excluded from the selected companies.
The selected companies were as follows (shown in descending order of total assets):
PacWest Bancorp
Umpqua Holdings Corporation
Pacific Premier Bancorp, Inc.
Glacier Bancorp, Inc.
Washington Federal, Inc.
Columbia Banking System, Inc.
Banner Corporation
CVB Financial Corp.
To perform this analysis, KBW used profitability and other financial information for the most recent completed quarter or the latest 12 months ended, or as of, June 30, 2021 and market price information as of September 13, 2021. KBW also used calendar year 2021, 2022 and 2023 EPS estimates taken from consensus “street” estimates for First Interstate and the selected companies to the extent publicly available (2023 consensus “street” estimates were not publicly available for one of the selected companies). Certain financial data presented in the tables below may not correspond to the data presented in First Interstate’s historical financial statements, or the data presented under the section “The Merger—Opinions of First Interstate’s Financial Advisors – Opinion of Barclays Capital Inc.” or the section “The Merger—Opinion of Great Western’s Financial Advisor,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.
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KBW’s analysis showed the following concerning the financial performance of First Interstate and the selected companies:
 
 
Selected Companies
 
First Interstate
Average
Median
25th Percentile
75th Percentile
MRQ Pre-Tax Pre-Provision ROAA
1.18%
1.63%
1.74%
1.45%
1.81%
MRQ Core ROAA(1)
0.95%
1.53%
1.47%
1.36%
1.68%
MRQ Core ROAE(1)
9.2%
13.3%
13.7%
10.2%
14.8%
MRQ Core ROATCE(1)
14.3%
18.3%
17.7%
15.4%
18.9%
MRQ NIM
2.81%
3.24%
3.29%
3.12%
3.43%
MRQ Fee Income / Revenue Ratio(2)
23.0%
15.1%
14.0%
11.2%
16.0%
MRQ Efficiency Ratio
62.4%
52.1%
52.0%
58.7%
49.0%
(1)
Core net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of held to maturity and available for sale securities, amortization of intangibles, goodwill impairment and nonrecurring items as defined by S&P Capital IQ.
(2)
Excluded gains / (losses) on sale of securities.
KBW’s analysis also showed the following concerning the financial condition of First Interstate and the selected companies:
 
 
Selected Companies
 
First Interstate
Average
Median
25th Percentile
75th Percentile
TCE / TA
6.99%
8.73%
8.97%
8.30%
9.11%
Tier 1 Common Capital (CET1) Ratio
11.45%
12.15%
12.15%
11.10%
12.59%
Total Capital Ratio
13.89%
14.95%
14.81%
14.47%
15.46%
Loans Held for Investment / Deposits
63.2%
73.1%
68.9%
65.3%
81.1%
Loan Loss Reserve / Loans
1.37%
1.32%
1.29%
1.22%
1.49%
NPAs / Loans + OREO
0.35%
0.41%
0.34%
0.51%
0.24%
MRQ Net Charge-offs / Average Loans
0.04%
0.01%
(0.01%)
0.03%
(0.03%)
In addition, KBW’s analysis showed the following concerning the market performance of First Interstate and, to the extent publicly available, the selected companies:
 
 
Selected Companies
 
First Interstate
Average
Median
25th Percentile
75th Percentile
One-Year Stock Price Change
33.4%