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The Montana state flag displays the State Seal beneath the word MONTANA.
There was an original banner used by the Montana Volunteers during the Spanish-American war of 1898. This flag displayed the words "First Montana Infantry, U.S.V." over the state seal. During the war, this was the flag carried by the volunteers while in the Philippines and was unofficially considered the Montana state flag for many years.
In 1905 official action was taken to adopt the banner as the state flag. This was brought forth by Representative Jacob M. Kennedy of Silver Bow County. House Bill 157 declared the banner to be used as the state flag with the exception of removing the words "First Montana Infantry, U.S.V". The Senate made this official on February 19, 1905.
In 1981 the design was modified by the legislature to add the word MONTANA above the state seal.



Sources for my data on the Montana State Flag:
MT.gov -     http://sos.mt.gov/About_Office/State_Flag.asp
Britannica Online Encyclopedia -      http://www.britannica.com/EBchecked/topic/1355620/flag-of-Montana
Wikipedia Online Encyclopedia-        http://en.wikipedia.org/wiki/Flag_of_Montana 

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 Page last updated Mar. 16, 2016.