Midwestern community banks are starting to use their new powers to branch across state lines, but so far these typically cautious institutions are not straying far from home.

Most of the small state banks applying to branch interstate are looking just across the border-sometimes just over a bridge-said state regulators who review such applications.

The Riegle-Neal Interstate Banking and Branching Efficiency Act granted banks the right to branch into other states as of June 1 unless the target states "opted out." Only Montana and Texas rejected the idea.

Under the new law, Ohio Valley Bank Co. in Gallipolis has finally gotten its chance to move into West Virginia. The company recently received approval from Ohio state regulators to convert its West Virginia loan office, just over the Ohio River in Point Pleasant, into a full-service branch.

"We've had our eye on Point Pleasant for some time," said Hugh Graham, an assistant vice president. "The bank's been open for 125 years, and we've always had a lot of business from Mason County" in West Virginia.

South Bend, Ind.-based 1st Source Bank first branched into Michigan last year, after Indiana and Michigan "opted in" early under the new federal law.

Melissa Collins, corporate marketing manager for the $2.2 billion-asset company, said it was natural to branch across the border into Michigan, where people read the same newspapers and watch the same TV shows.

Many potential Michigan customers "are already familiar with the bank," Ms. Collins said. "They may have driven past our banks on the way to work in Indiana."

Like 1st Source, $1 billion-asset Valley American Bank and Trust Co. of South Bend is also setting up shop in Michigan. The banks will compete in Niles, Mich., where 1st Source opened a branch last year.

Valley American's branch, under construction in a new Martin's supermarket, is scheduled to open next month. Jerome Kearns, an executive vice president at Valley American, said the bank hopes to take advantage of traffic between South Bend and Niles, which are less than 10 miles apart.

"We think it's a good opportunity. We're anxious to get opened," he said.

Quad City Bank and Trust Co., based in Bettendorf, Iowa, recently turned its Illinois bank in Moline into a branch. The Quad Cities of the name - Moline and Rock Island in Illinois, Davenport and Bettendorf in Iowa-are clustered together on either side of the Mississippi River.

"The Quad Cities is really one market," said Doug Hiltquist, chairman of the $170 million-asset bank. "We're anxious to physically serve both sides of the river."

But whether many more banks will follow is still unclear. Few Iowa state banks seem interested in interstate branching, said Steve Moser, deputy superintendent of the Iowa Division of Banking, but that may not mean much. "It's not like it can be done overnight," he said. u

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