Long-divided Georgia bankers struck a historic pact for the first reform in decades of its branching law, one of the most restrictive in the country.
The agreement was forged at an unprecedented meeting between the boards of the Georgia Bankers Association and the Community Bankers Association of Georgia in a Macon hotel about a month ago. The deal was not made public until Wednesday.
"The ultimate goal of the meeting was met in that we got together," said J. Joseph Brannen, president of the Georgia Bankers Association, which initiated the talks. "And that was historic. Our job now is to go back to the CEOs and see what they think."
The most significant part of the agreement would allow a bank to branch up to 30 miles across county lines by moving its headquarters and then turning its original office into a branch. This would be permitted only once every five years.
Current state law allows a bank to branch into another county only through a much costlier process - acquiring a bank in the other county and then converting it into a branch. Georgia's high number of counties - 159, many of them very small - hinders smaller banks with statewide branching aspirations. At the same time, however, it boosts the franchise value of small banks because would-be competitors have to buy into a county's market.
Large regionals, such as First Union or NationsBank, have already built up statewide branching systems in Georgia through acquisitions.
The initiatives, if presented to the Legislature from a united bank community, are almost sure to pass. They would be the first reform of the state's branching laws in at least 20 years, observers said.
There are six other states that do not permit full statewide branching, but Georgia's law is considered among the most prohibitive.
Forty-six board members from the two groups, almost always at odds on the issue, met over the Labor Day weekend.
The compromise marked the first time the Georgia Bankers Association has dropped its neutral stance on intrastate branching. It has not taken a position before because its membership includes both large and small banks, which have been split over attempts to reform the law.
The rare show of unity is even more unusual given the discord that has surfaced within many bank associations this year. Issues such as interstate branching, for example, have sparked brutal fights in Colorado, Texas, and California, prompting members to quit the trade groups in some instances.
"We figured, 'Let's just do it and come up with something positive' - and we did," said Julian Hester, executive director of the Community Bankers of Georgia.
The other areas where a consensus was reached were:
*A bank can buy a branch from another bank in any other county, provided that the acquirer buys all of the seller's offices and facilities in that county. The seller, therefore, has to completely vacate the county. The selling bank also has to be at least five years old.
*A bank can set up an office in any county that does not have any banking services. There are currently two such counties in Georgia.
*Any bank in a county with a population of 400,000 or more can branch into a neighboring county with that population size. This provision would add Cobb County to the handful of counties around Atlanta where cross- county branching is currently allowed.
Though Mr. Brannen was optimistic about the developments, he cautioned that the larger question of "equitability" for all banks under the state's branching laws has not yet been addressed. Full statewide branching was voted down at the meeting, and no consensus was reached on a form of contiguous county branching.
Statewide and contiguous county branching are two areas the Georgia Bankers Association will continue to work on, Mr. Brannen said. The proposal that ultimately will be presented to the Legislature is still evolving, he stressed.
Mr. Brannen said that the impetus for the meeting came from a rancorous battle last year in the General Assembly over a contiguous county branching bill. The bill was eventually shelved primarily because the industry was so divided.
"We realized last year that if we can't figure this out, then certainly the General Assembly can't figure it out," Mr. Brannen said.
In a related development, the Community Bankers Association filed suit earlier this month against the Office of the Comptroller of the Currency and a national bank that received approval from the regulator to branch across county lines using the "30-mile rule."
Allowing banks to branch through the loophole, which to date has been used by more than 20 banks nationwide to branch across state lines, would violate the state's laws on branching, Mr. Hester said.
First National Bank and Trust Co. in Louisville has applied to the OCC to use the loophole, in this case to move its headquarters and buy branches.
