Breaking ranks with Oklahoma's largest banking trade groups, some community banks are pushing to end the state's restrictions on branching.

About 60 community banks and thrifts-20% of the total based in the state-have formed the Progressive Bankers Association to fight against renewal of the branching curbs.

The group, which has hired about a dozen lobbyists, says the law puts state-chartered institutions at a competitive disadvantage.

The law, set to expire in June, forbids any state-chartered bank or thrift or any national bank to set up more than three branches, though it can buy more.

An institution affected can set up only two branch offices in its hometown, and only one in another town. The outlying branch must be within 25 miles of main office and in a community that lacks a local bank. Any additional branching must be done through acquisition.

Credit unions and federally chartered thrifts are exempt from the restrictions.

The Oklahoma Bankers Association and the Community Bankers Association of Oklahoma support a bill that would extend the 16-year-old branching law for an additional three years.

That would buck a national trend of states relaxing branching laws. But most Oklahoma banks want more time to adjust to open competition, said James P. McKeown, executive manager of the Community Bankers Association. "We need to give community banks another few years to get used to it," he said.

The current law helps keep community banks' prices high, since the banks must buy one another to grow, Mr. McKeown said. If the law is not extended, "the franchise value of 250 banks in the state would be seriously damaged," he said.

But Chuck Hall, president of Perry (Okla.) Bankshares, said the law stacks the deck against his $96 million-asset company, whose Exchange Bank and Trust wants to establish a Stillwater branch to serve customers who commute there from Perry.

"We've got credit unions and S&Ls zapping our market share," Mr. Hall said. "I just want to be on a level playing field."

Mr. Hall used to be the Oklahoma Bankers Association's paid lobbyist. He is now a consultant to the Progressive Bankers.

Roger Beverage, president of the Oklahoma Bankers Association, acknowledged that the industry is divided. "We are spending a lot of energy on this issue," he said.

In January the group's members voted 97-60 to extend the current law. Since then it has been lobbying on behalf of the majority view.

Mr. Beverage said it will be tough to get the branching law extended. Not only has the Progressive Bankers Association hired some of the best lobbyists in the state, he said, but lawmakers are uncertain how to vote when the bankers themselves cannot agree.

"If bankers are divided on the issue, there is no way an association can steamroll this through," Mr. Beverage said.

Those supporting the status quo won the first round, however. The Senate Finance Committee voted 9 to 5 on Tuesday to extend the branching restrictions another three years. The measure is expected to be heard by the full Senate within three weeks.

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