After spending last year slashing costs, cutting staff and moving operations to its sister bank in Nevada, First Interstate Bank of Utah, N.A., began 1989 as a lean, competitive institution, its president says.

As a result of the corporatewide austerity program, First Interstate of Utah has reduced its work force by 102 in administrative and staff positions and cut expenses by an undisclosed amount."The end result is service levels will remain high and reduced expenses will make us more price competitive as we move into the 1990s," said Richard W. Kieffer, president of the $950 million Utah affiliate of First Interstate Bancorp in Los Angeles.

During 1988, First Interstate closed down four branches - laying off 67 workers - and moved the deposits to the next closest offices. The move was part of the bank's plan to abandon unproductive neighborhoods and target the state's fastest growing areas.

In other moves in beefing up its retail and commercial services, the bank:

- Applied for branches in Orem and Holladay.

- Opened three outlets in Alpha Beta supermarkets along the Wasatch Front

- Opened three Business Banking Centers, a Consumer Loan Center and a local Auto Dealer Center.

- Filed a request with the Comptroller of the Currency to provide insurance services.

- Announced expansion of its Automatic Teller Machine network.

- Created a task force to come up with new products and services.

But, while First Interstate was building up products and services, it was aggressively cutting back and consolidating its "back room functions" of payroll, management reporting, auditing, marketing, human resources and other areas in finance and operations.

The consolidation was designed to cut non-interest expenses. But Kieffer declined to disclose a dollar figure on the amount cut. "We didn't have a goal to save a certain amount of dollars; we are just trying to drive down expenses."

As part of that strategy, data processing for Utah was moved to Phoenix, Ariz., and all of the other departments considered for consolidation were moved to Reno, where First Interstate Bank of Nevada is based. The result was lopping off 35 administrative positions in Utah.

With jobs being lost as operations moved to other states, it appeared that the Utah affiliate was getting the short end of the deal and reducing its 130-year-old presence in the Beehive State.

Not so, claims Kieffer.

"We are the oldest bank in the state and have a strong commitment to Utah. This (the consolidation) will enhance our position here" by becoming more efficient and price competitive, he said.

As for last year's layofffs, Kieffer said it doesn't mean 102 bankers and staff are roaming Salt Lake looking for work. "We offered them generous severance packages and job placement services and some were placed in other areas of the bank."

He added that the bank's emphasis on customer services and products has created 40 new jobs.

First Interstate, the nation's eighth largest financial institution with $58 billion in assets, has consolidated and eliminated in the 22 states it operates to reduce costs and focus on its strengths, a spokesman said in Los Angeles.

One analyst described the plan to consolidate into one state the operations of several states as the bank trying to live up to its "Interstate" name.

Kieffer concurred to a degree, saying it is positioning the bank when all states take down barriers to all out-of-state institutions.