The onset of interstate branching in less than 18 months will not only make state borders less important, but perhaps state banking associations as well.

Once the big banks begin converting their multistate subsidiaries into branches of their home-state office, they may no longer feel the need to be members of 15 or more different state trade groups.

For some of the larger banks, membership dues in both state and national associations can add up - to $750,000 or more. They may decide it's no longer worth it.

"It's a key, key issue," said Kenneth Guenther, executive director of the Independent Bankers Association of America. "The big boys will be pulling out. They just can't keep their hands in 20 to 30 pots; it's too expensive."

The obvious result: Membership in state banking associations, already hurt by rampant consolidation, could shrink further, to the point where the trade groups can no longer support themselves, some observers said.

Large regional banks often don't require the educational services and programs that most state trade groups provide, and some banks already have their own in-house lobbyists. Some said the only legislative issue that big banks would want to join forces on at the state level is interstate branching - and they already got that.

"The idea behind interstate branching is to get rid of the states, which in their minds only get in the way of efficiency," said Jim Thomas, executive manager of the Independent Bankers Association of Colorado. "They want to operate across the country with one regulator and one association."

The impact of interstate branching on the regulatory front is already being addressed. Last month, for example, bank commissioners from four Middle Atlantic states signed a pact that allows a state bank to be regulated by only its home-state regulator, wherever it operates in the four-state region.

The thinking behind that model, which other state regulators are expected to adopt, could carry over into a bank's trade group membership, some said.

"That's logical," said Ellen C. Lamb, spokeswoman for the Conference of State Bank Supervisors. "If a bank is operating in multiple states, does it need to be a member of the association in each state, when its home-state group can do it all?"

The answer for most trade group chiefs is yes. Robert E. Harris, president of the Texas Bankers Association - which receives 35% of its dues from out-of-state members - said the lobbying and public relations duties that his group provides cannot be matched by the big banks on a stand-alone basis.

"Individual banks can hire lobbyists, but they could not succeed as we have in coalescing the industry to work together for a common goal," he said. "And I don't see that changing."

Nevertheless, state trade groups are not blind to the likelihood of a membership drain. Several have pushed hard in recent years to diversify their revenue sources - though most still receive at least 60% to 70% of their income from dues.

The Tennessee Bankers Association, which has whittled down its dependence on dues to 22% of revenues, is expected to pass a bylaw this spring that will allow branches of out-of-state banks to become members.

The next step, which is probably still a few years away, would be the formation of regional trade groups. If the banking associations don't mirror the consolidation occurring among their members, they could go the way of the old savings and loan leagues, some suggested.

"We understand that the associations themselves are taking the lead in consolidating and aligning themselves so that their members can have more cost-effective services," said Betty Riess, a spokeswoman for Bank of America, which operates in 10 states. "So we will wait and see what they might come up with themselves."

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