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Prodded by Federal law, Bank finds good business on reservation

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BILLINGS, Mont. ? Maria Valandra, an enrolled member of the Chippewa-Cree Tribe, says she wouldn't work for the First Interstate BancSystem if the company wasn't sincere about helping American Indians.

"It's genuine," Valandra, the Billings-based holding company's vice president for community development, says of the firm's vow to help tribal economies expand. "It's a long-term commitment."

The current atmosphere is a sharp change from the bank's encounter ten years ago with the Northern Cheyenne Tribe, in which tribal activists successfully

invoked the federal Community Reinvestment Act against the holding company.

But bank officials insist that the precedent-setting fight brought them to see the business opportunities on Indian reservations. First Interstate is a $3 billion, family-owned banking organization operating 56 branches in 30 communities in Montana and Wyoming. Seven of its branches ? as well as its corporate headquarters ? are located on or adjacent to five different Indian reservations within the two-state area.

"We go out of our way to create business relationships with the tribes we're closest to," explains Lyle Knight, the bank's chief operating officer.

"This is where we live and where we work. These are our communities, and we're only as healthy as our communities. We have to be very, very focused on Montana and Wyoming for our own success, and a big part of Montana and Wyoming are reservations."

"The tribes are our neighbors," adds Chief Executive Officer Tom Scott, a member of the company's founding family. "We have a commitment to make the communities we live in a better place to live and work, and the tribes are the weakest (economic) link we have in the two states. It seems like there's great opportunities to help tribes prosper."

While many business and political leaders tout a desire to work closer with tribes, First Interstate, despite a rocky start more than a decade ago with the Northern Cheyenne Tribe, has clearly matched its words with deeds in recent years.

The bank initially ran into problems with federal regulators and Northern Cheyenne leaders in the late 1980s, when a merger attempt prompted the Lame Deer-based Native Action group to complain about the company's lending practices. Native Action Director Gail Small says the bank's Colstrip branch was profiting from Northern Cheyenne transactions, yet was making very few loans to tribal members at the time. That, she says, was in violation of the federal 1977 Community Reinvestment Act (CRA), which protects minorities and other low-income groups from discriminatory "red lining" by lending institutions. Native Action filed a formal challenge to the merger in early 1990, and First Interstate, federal regulators, and tribal activists hashed the issue over for several years before a historic agreement was reached. The ensuing compact detailed specific goals toward which the bank agreed to work, including expanding lending programs to Indians and addressing tribal-member credit needs. Among other measures, it also led Eve Benson, president of the Colstrip outlet, and other bank officials, to open a highly successful branch office in Lame Deer two years ago.

"It got very nasty," Small says of the fight. "It took half of my time for four years. It was huge. But it was actually the first time teeth were put into the CRA. What began as a confrontational relationship turned into an educational experience for all of us. We've seen a huge increase in lending on the reservation. I think overall it was one of the key ingredients to helping economic development here. (First Interstate) has done a real turnaround as far as their mindset."

Valandra and Knight said that part of the reason for the successes is that the Northern Cheyenne Tribe adopted a uniform commercial code, which helped ease investor anxiety about operating on the reservation.

"A lender can't lend if there's no foreclosure procedures," Valandra said.

The Northern Cheyenne Tribe and neighboring Crow Tribe, which is still working on a business code, are now two of First Interstate's top 10 customers. "The company is very committed to tribes as a business niche," Knight said.

"That only works if it's a win-win situation. Our vision is very

long-term. We're trying to create an economic environment that's good five to 10 years down the line. The uniform commercial code helps reservations become more business-friendly."

Business is so good at the bank's Lame Deer branch, where the manager, Barbara Braided Hair, and most other employees are tribal members, that the current building will soon be outgrown. But Valandra says the CRA is not the only thing driving the company's actions, and that the bank has gone far beyond federal requirements to help tribal economic development.

"If (the Lame Deer) community is not successful, the branch won't be successful," she explains. "I believe the CRA is not something we just comply with. It's another way that we can give back to our communities. What motivates us is that it's the right thing to do for a community, not just because we may get CRA credit for it."

In the most recent CRA evaluation, the Federal Reserve Bank of Minneapolis gave First Interstate's Montana operations an "outstanding" rating. The bank's Wyoming operations, which until late last year were evaluated by the Federal Deposit Insurance Corporation, received a "satisfactory" rating for CRA compliance during the last review in 1999. First Interstate operations in both Wyoming and Montana will be evaluated again later this year by the Federal Reserve Bank.

Going beyond the minimum requirements, First Interstate has developed a manager trainee program that's targeting Native Americans and is working on an internship program that will draw recruits from tribal colleges, Valandra says.

The bank has been heavily involved in helping tribal members both on and off reservations obtain housing loans, in part through the Native American Housing Lenders Task Force, which Valandra chairs. The group, formed last summer, has already sponsored housing fairs on the Crow and Northern Cheyenne reservations and plans similar events on the Fort Peck and Blackfeet reservations later this year. The bank also works with the Billings Housing Partners group to help minorities and others obtain loans for which they wouldn't otherwise qualify.

Also in the housing arena, First Interstate has sponsored grants to the Eastern Shoshone Housing Authority in Wyoming for building 10 new homes and studying the feasibility of constructing a new assisted-care facility on the Wind River Reservation, Valandra says.

In May 2000, the bank signed an agreement with the Native American Development Corporation (NADC) in Billings to help develop a micro-loan program for small business owners and other tribal entrepreneurs.

First Interstate also co-sponsors a variety of consumer education seminars aimed at tribal members and other minorities. Topics include training for cleaning up credit, writing a business plan, and learning the steps needed for applying for business loans. In addition, the partnership with NADC has resulted in additional technical training for leaders of Tribal Business Information Centers, which operate on each of Montana's seven reservations.

"To me, the education part of it is critical," Valandra said. "I see my role as facilitator to keep the educational pieces ongoing." "You have to establish trust," Scott adds. "That's a big thing ? getting people to understand that your motives are sincere. I think there are great opportunities for us as a bank to earn a trusted business relationship with tribes. We have faith in that, and that's why we're pursuing that. But we've got to work together to see that happen."

First Interstate executives in recent years appointed Browning banker Elouise Cobell, a member of the Blackfeet Tribe and the lead plaintiff in the much-publicized federal lawsuit over Department of Interior trust fund accounts, to their main board of directors. Tribal members also serve on advisory boards at the Flathead Reservation's Polson branch and at Hardin, located just outside the Crow Reservation, as well as at branches in Colstrip and Lander, Wyo. Knight says another Indian member is being sought for the bank's advisory panel in Cut Bank, which borders the Blackfeet Reservation. Knight says Cobell brought the concept of "mini banks" to First Interstate.

The program, funded through the First Interstate BancSystem Foundation, promotes education about financial institutions and basic banking practices through various reservation schools in the region.

The overseer is Holly Halsey-Ami, an Arikara-Cheyenne-Arapaho. "We want the students to take ownership of the program," Halsey-Ami told a workshop at last fall's National Indian Education Association convention in Billings. "The main thing that we teach them is to reach for goals. It also teaches them to work together." The foundation also awards annual grants to a number of tribal organizations, including the American Indian Business Leaders Association, the Northern Cheyenne Reservation's Boys and Girls Club, the Crow planning and economic development program, and Dull Knife Memorial College in Lame Deer.

Valandra, who holds a business degree from Montana State University and hopes to eventually earn a master's degree in business administration, says First Interstate is also involved with tribes in other ways, as well.

For example, the bank co-sponsored a major tribal economic development summit in Great Falls last year with U.S. Sen. Max Baucus, D-Mont., U.S. Sen. Mike Enzi, R-Wyo., the Montana-Wyoming Tribal Leaders Council and other private and nonprofit groups.