WELLS LOSES KEY MOTION\1st Interstate stock buyback plan nixed.

Byline: Dawn Yoshitake Daily News Staff Writer

Wells Fargo & Co. lost a key preliminary court motion that could have forced First Interstate Bancorp to put itself on the auction block, banking officials said Friday.

And First Interstate's friendly merger partner, First Bank Systems Inc., said Friday that securities regulators approved its accounting method to do the deal but rejected its plan to buy back its stock 90 days after the merger's close. Regulators required a two-year suspension of the repurchase program - a move analysts say would hurt long-term earnings and the attractiveness of the deal.

Those are just some of the recent setbacks in a fluctuating scorecard between Wells Fargo of San Francisco and its adversaries Los Angeles-based First Interstate and Minneapolis-based First Bank. Both camps are looking to make points in the coming weeks with regulators, the courts and shareholders.

Next week, Federal Reserve regulators in Los Angeles and San Francisco will listen to more than 500 individuals and organizations during a three-day hearing on the proposed mergers' effects on jobs, banking service and the community. This session will be the largest public hearing federal officials have held for a bank merger, said Sandra Conlan, a Federal Reserve spokeswoman.

Regulators are scheduled to reach a decision by Feb. 18 on whether they will accept the banks' merger applications.

Meanwhile, Department of Justice officials have said they will not challenge First Interstate's merger proposal on antitrust grounds, and a similar decision on Wells Fargo's bid is expected in the coming weeks. California Attorney General Dan Lungren also will make antitrust decisions in several weeks regarding both merger proposals, the regulators said.

The U.S. District Court in Delaware will begin hearing the federal cases Jan. 29. Although First Interstate would like to have the issues resolved before shareholders meet, the bank still is planning for a late February or early March meeting, said Shirley Hosoi, a First Interstate spokeswoman.

Campbell Chaney, a Rodman & Renshaw analyst, said Wells' stock-swap offer is 16 to 17 percent higher than First Bank's stock-swap proposal. That will be a factor in swaying investors to a Wells merger proposal, especially in light of First Bank's announcement that it will have to delay its stock repurchase plan.