Montana's largest homegrown bank, First Interstate BancSystem of Montana Inc., is laying the groundwork for expansion.

The Billings-based parent of First Interstate Bank of Commerce recently received approval from the Office of Thrift Supervision for a federal savings bank charter in Hamilton, an hour south of Missoula.

The strategy would give First Interstate an advantage over other commercial banks in the state. Montana law prohibits commercial banks from branching, except into communities without banks or through acquisition of existing branches.

Federal savings banks can branch freely throughout Montana, giving First Interstate another route by which it can move into communities across the state.

"If there's a community you're really interested in moving into and no one will sell to you, it's a good alternative way to get in," said Neil Klusmann, vice president of marketing. "We'd rather make an acquisition, but sometimes you have to look for other opportunities."

First Interstate trails only Norwest Corp. and First Bank System Inc., both of Minneapolis, in asset size in the state. The $1.3 billion-asset bank is buying three Montana branches and three Wyoming branches from Wells Fargo & Co., San Francisco.

Wells got the six branches this year when it purchased Los Angeles-based First Interstate Bancorp. The six branches were separate from 19 others that First Interstate BancSystem had built on its own in the two states as a franchisee of First Interstate Bancorp.

The franchise agreement, signed in 1984, had allowed the smaller Montana bank to use the First Interstate name and products without being a subsidiary, in exchange for a fee.

Wells wasn't interested in operating a handful of offices in the relative vastness of Montana and Wyoming. The company agreed to sell the six offices, along with the rights to the First Interstate name and logo in those states, to First Interstate BancSystem of Montana.

The deal would give First Interstate BancSystem almost $2 billion in assets in Montana. The sale is expected to completed by the end of 1996.

First Interstate BancSystem had already filed an application with the Office of Thrift Supervision when the deal with Wells was announced, Mr. Klusmann said. He said the Hamilton thrift probably will open by early 1997 but that the company will probably wait before seeking more savings branches.

"We might pursue that strategy down the road, but the Wells deal is going to keep us busy for a while," he said.

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