Colorado is expected to pass a bill that would allow interstate branching in 1997 with only moderate restrictions, a stunning reversal for a state that just weeks ago was nearly the first to opt out.

Even a leader of the movement to opt out of the Riegle-Neal Interstate Banking and Branching Act has switched sides.

"It's a compromise between the independent banks and the bigger banks in the state," said William Iwata, a spokesman for FirstBank Holding Co. of Colorado, the biggest independent and a proponent of opting out. "I believe everyone will support it."

Don Childears, executive vice president of the Colorado Bankers Association, said that after the acrimony of the last year the compromise was miraculous.

"To be at a point where all banking parties can rech a consensus is something we never dreamed could happen," he said.

Gov. Roy Romer's veto of legislation that would have opted Colorado out of interstate branching set the stage for the compromise.

The small banks are backing an opt-in bill that would bar out-of-state banks from entering the state by simply setting up branches or acquiring newly chartered banks. The bill would also ensure equal taxation and regulatory reporting regardless of a bank's headquarters state.

"The compromise was something that could be accomplished now," James Thomas, head of the Colorado Independent Bankers, said of the groups decision to support it. "It mandates strong reporting requirements on out- of-state holding companies. Once the out-of-state companies agreed to this, a consensus was reached among all the banking interests."

The compromise legislation, which was voted out of committee and is expected to pass both houses, should be on the governor's desk in a few weeks. Legislators and bankers said they expect Mr. Romer to sign th/e legislation.

Mr. Romer vetoed the earlier opt-out bill because, he said, it would isolate Colorado's financial services industry if it were the only state in the West to do so. After the veto, independent bankers considered an effort to either override the veto or mount a statewide referendum initiative. Both avenues were deemed too costly and unlikely to succeed.

In Texas, however, the opt-out movement is fairly assured of victory, barring a veto by Gov. George Bush. The state Senate passed a House bill that would opt Texas out of interstate branching.

The Texas bill, however, was amended in the Senate under intense lobbying from the state's largest banks, most of which are owned by out-of- state holding companies. The amendment calls for the opt-out bill to sunset, or automatically expire, in 1999, two years after Riegle-Neal would take effect.

The Texas Bankers Association and the Independent Bankers Association, which were at loggerheads over the opt-out issue, are both supporting the newly amended bill, which the Senate voted unanimously in favor of last week.

But the House passed the bill, without the sunset provision, unanimously last month, and several Senate staff members said they aren't sure the mostly rural lower chamber will accept the amendment. The opt-out movement was started in the House, where acrimony over the largest banks' scaling back of agricultural lending runs deep.

Christopher Williston, head of the Independent Bankers Association of Texas, said that even though the opt-out law sunsets in four years, Texas would have to pass a separate bill in 1999 to allow interstate branching.

Independent banks in Kansas, New Mexico, Nebraska, Missouri, and Oklahoma are pledging opt-out fights in the next two years before Riegle- Neal automatically takes effect.

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