After 43 years as a state-chartered thrift, Interwest Bank in Oak Harbor, Wash., plans to shift to a state commercial bank charter.

The parent Interwest Bancorp, which has $2.8 billion of assets, also said it would meld its other depository institutions, Pacific Northwest Bank and Bank of Tukwila, with the savings bank. The resulting commercial bank would focus on business lending.

This would complete a transformation that began fours years ago, when Interwest Bank made its first business loan and the parent company began acquiring commercial banks.

"Since we are looking more and more like a commercial bank, we thought we ought to become one," said Patrick M. Fahey, the president and chief executive officer of the thrift and the holding company. "People don't think of a thrift as being expert in commercial lending, or even interested in it."

Commercial loans, now about 40% of Interwest's portfolio, would increase to roughly 60% after the conversion, Mr. Fahey said. The switch would also permit customers to bank at any of Interwest Bancorp's 55 offices.

The new bank would probably retain the Interwest name, Mr. Fahey said. Until the conversion, however, the subsidiary institutions will operate under their current names.

Mr. Fahey became president and CEO of Interwest Bank and the holding company on April 17, succeeding Steve Walden, who became chairman of the holding company. Mr. Fahey is also chairman of Interwest Bank and remains chairman, president, and CEO of Pacific Northwest Bank.

According to the Federal Deposit Insurance Corp. and the Office of Thrift Supervision, 232 state and federally chartered thrifts converted to commercial bank charters in 1993-99.

L. Wayne Fralin, Washington's director of banks, said Interwest's conversion should prove trouble-free. "It is not our intention to complicate the process," he said. "We view this as a reorganization; it is not as dramatic as two unrelated [banks] deciding to merge."

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