Less than a year ago, New Hampshire vaulted into the forefront of interstate branching, becoming one of the first states in the Northeast to pass enabling legislation under the federal branching law.

But the state's version may not have gone far enough.

"I've changed my opinion on the legislation," said New Hampshire Banking Commissioner A. Roland Roberge. "It's obviously protective, but is it effective? I'm not convinced. I do not believe that the enabling legislation is doing the job that it was originally intended to do."

Industry officials are worried that the state's law, by far the most restrictive in New England, could hinder regional unity and competitiveness, thereby harming the state's banks rather than protecting them.

Already, an out-of-state thrift with a state-chartered operation in New Hampshire has converted to a federal charter to bypass the law's restrictions.

Under New Hampshire's legislation, which does not take effect until June 1997, out-of-state banks may enter the state only by acquiring an entire bank that is at least five years old. Entry by de novo branching or buying a single branch is prohibited. In addition, the cap on statewide deposit share was set at 20%, compared to 30% in federal law.

By contrast, the region's other states have either passed or are considering much more liberal laws to opt in early and allow entry by purchase of a branch. Some states already allow de novo branching or permit even new banks to be bought by out-of-staters.

The New Hampshire law "really does mess up things a bit because of reciprocity," said Donald McGowan, president and chief executive of Flagship Bank and Trust Co. in Worcester, Mass. "It certainly limits the ability of banks to go across the border into what would normally be traditional markets. They could be hamstringing their own banks."

Bankers in New Hampshire admit they were caught off-guard by the more liberal rules adopted in nearby states. Officials at the New Hampshire Bankers Association are comparing their statute to others in the region to "make sure that whatever we do doesn't frustrate the intent of interstate banking and branching," said association president Jerry Little.

And lawmakers might consider changes this summer, when they plan to study other issues related to interstate branching, including taxation.

Mr. Roberge, the state banking commissioner, is particularly frustrated by the Office of the Comptroller of the Currency's aggressiveness in letting national banks and trust companies branch across state lines under the so-called 30-mile rule, even in violation of laws in New Hampshire and many other states.

Observers both inside and outside the state say its restrictive law could hurt the state's ability to attract out-of-state capital, as well as encourage state banks to flip their charters.

Last November, for example, Haverhill, Mass.-based Family Bancorp gave up its state charters in both states because New Hampshire's refusal to opt-in early meant the thrift would have had to wait until 1997 before consolidating operations.

"If their position is so restrictive, they might run the risk of losing more state-chartered banks and therefore control over the banking industry in the state of New Hampshire," said David Hindle, president and chief executive of Family. "You can restrict what the state banks do, but you can't make them continue to be state banks."

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