A statewide branching law that sharply divided Georgia's community bankers is now being embraced by the state's smallest banks.

Most of the 45 applications for start-up branches stemming from the new law are from national and state-chartered banks with less than $100 million in assets. Small banks were mostly against the new law when it was being debated last year.

"Obviously, some of the people who didn't want it, branched," said Julian Hester, chief executive officer of the Community Bankers Association of Georgia. "They are going on trying to make the best of what is now. They're being realistic."

The issue of whether to let Georgia's banks cross county lines without buying another bank created a schism among the state's banks and its two main trade groups that now seems just a memory, bankers and state banking officials say.

"The bulk of the usage of this law so far has been by community banks moving into adjacent counties," said Steve Bridges, deputy commissioner of the Georgia Department of Banking and Finance. "We have many situations in the state ... where a bank couldn't put a branch across the street without buying a whole bank in that county."

A majority of Mr. Hester's 320-member group - some 70% - had opposed the new law, which allowed banks to open up branches in counties statewide. Meanwhile, the Georgia Bankers Association, which is made up of 361 large and small banks, favored the legislation.

The law, which went into effect July 1, limits banks and holding companies to opening branches in three new counties until 1998, after which they can branch into as many new counties as they like.

Until the law's passage, Georgia was the only state in the Southeast - and one of only eight in the nation - that forbade statewide branching. The effect of the restrictive law was especially dramatic because Georgia has 154 counties and more than 360 banks.

"Prior to this our hands were chained," said T. Ken Driskell, chief executive of First Colony Bank in Alpharetta. "The government told us we couldn't do business outside our county. I don't see the free enterprise in that."

Mr. Driskell, who heads a $100 million-asset bank, converted the bank's loan production office in neighboring Forsyth County into a full-service branch. He said that previously customers in that county often asked why he didn't have a branch there.

J. Joseph Brannen, chief executive and president of the Georgia Bankers Association, said 45 branches pending or opened is what the group expected. He said most new applications will come from banks in the Atlanta region's high-growth areas.

Mr. Hester said he doesn't agree with some who say the new law hasn't had much effect on the state's banking industry.

"I think there will be some big winners if they do it right and there will be some big losers if they don't do it right," Mr. Hester said.

Mr. Bridges said that after an initial rush, applications have slowed to a trickle in the last few months. The department started accepting applications in April but approvals didn't occur until after the July 1 effective date. Only eight applications have been filed since July 1, he said.

"I think back during discussion and debate on this bill, one might have thought maybe there would be one application from every bank in the state," Mr. Bridges said. "That just hasn't been the case."

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