The unusual cooperation forged two months ago between Georgia's two banking trade groups to reform the state's controversial intrastate branching laws has crumbled.

In a departure from the apparent consensus formed by the two groups at an unprecedented meeting in August, the Georgia Bankers Association will lobby for full statewide branching to go into effect by July 1998.

The association, which has never before taken a stand on the contentious issue, also wants banks to phase into the new structure by being allowed to branch into up to three counties starting next July.

Georgia banks can now branch into another county only through a costly process of buying another bank and then converting it into a branch. Georgia is one of seven states in the country that restricts statewide branching in some manner.

The Community Bankers Association of Georgia, which has long opposed statewide branching, responded bitterly to the news of the decision by the Georgia Bankers.

"Apparently, the GBA board has buckled under the pressure of some of the larger, more powerful banks who want statewide branching primarily to facilitate their own agendas - growth in selected, higher population areas in Georgia," Julian Hester, president of the Community Bankers, said in a press release.

Mr. Hester pointed out that at the August meeting, in a Macon hotel, the 46 directors of the two associations voted overwhelmingly against any form of statewide branching. The Georgia Bankers' new proposal directly flouts those wishes, he said.

J. Joseph Brannen, president of the Georgia Bankers, defended his group's decision by saying that the consensus reached in Macon was just part of an "ongoing process" and that the proposals did not address the question of "equitability" for all banks in the state.

"Our board could not stand by and let the state bank franchise value erode on this issue," he said. "National banks and thrifts can branch anywhere they want, but not the state banks, and it would be irresponsible of us not to address that."

The renewed rift between the two associations on branching - an issue that has long-divided Georgia banks - does not bode well for the coming legislative session in January. A bill that would have allowed contiguous county branching was shelved last year because of industry discord over the issue.

The trade groups had sought to avoid repeating that ugly scenario this year by presenting a unified voice to the legislature - a prospect that is now bleak, bankers said.

"It's extremely important for these two groups to get together," said Elton S. Collings, chief executive of $260 million-asset Community Bank and Trust-Jackson, in Commerce. "The legislature wants to put this to bed, but we're not helping them. I think it will be awfully difficult for them to get together on this."

The Georgia Bankers group argues that, among other things, state banks are losing out to other institutions - both in-state and out-of-state - not subjected to the laws. The Community Bankers group retorts that allowing full branching would lead to more consolidation and ultimately less competition, not more.

Nearly every bank in the state is a member of the Georgia Bankers Association, but 10 of the largest banks in the state provide more than half of the association's dues. Mr. Brannen denied that that situation leads to a big-bank influence because its board is dominated by community bankers and small banks provide most of the association's $30 million in annual revenue from its various services.

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