Wachovia Corp. has pulled out of the breakaway lobbying group it helped found only two and a half years ago.

The $65 billion-asset banking company said the cost of membership prompted its departure. Wachovia paid about $90,000 a year to belong to the group, which lobbies at the state and federal levels.

However, others close to the situation said Wachovia's defection had more to do with the trade group's position on the financial reform bill pending in Congress.

The group backs the legislation, which would require banks to offer many new products and services through holding company affiliates regulated by the Federal Reserve Board. Wachovia would prefer to see new activities authorized in operating subsidiaries owned directly by the bank and regulated by the Office of the Comptroller of the Currency.

"This issue perhaps is not as meaningful for some of the other members of the association," Wachovia general counsel Kenneth McAllister acknowledged.

Wachovia, based in Winston-Salem, N.C., helped start the North Carolina Association of Financial Institutions in January 1997 in a protest against a decision by the North Carolina Bankers Association to merge with the state's community bankers' group.

At the time, Wachovia-along with the former NationsBank Corp. (now Bank of America Corp.), First Union Corp., First Citizens Bancshares, and the old Southern National Corp. (now BB&T Corp.)-said the political and economic interests of big banks and small banks were diametrically opposed and could no longer be represented by a single lobbying group.

The North Carolina Association of Financial Institutions currently boasts Bank of America, First Union, BB&T, First Citizens, and Lexington State Bank as members.

Its president, Jim Lofton, said the association will miss Wachovia's membership. But "businesses have to make business decisions," he said.

Most of the other bank members of the association refused to comment on Wachovia's departure. The exception was First Union. Spokeswoman Sandra Deem said: "This may be worked out, and they may come back. They are certainly welcome to come back. You can have more influence and be more effective if you all work together."

Wachovia will use its own manager of public policy to provide the services supplied by the association, Mr. McAllister said.

Wachovia plans to remain with the American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable.

However, Mr. McAllister said the company looks "carefully at where we're putting our money."

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