Interstate banking marks time while judges explore the merits

Southeastern states have taken several long strides over the past several weeks toward making regional interstate banking a reality. But as they have done so, it has been with one eye on the 2nd US Circuit Court of Appeals in New York.

A case before that court will determine the constitutionality of the regional interstate banking concept. ''And the shoe may drop any day,'' as one lawyer puts it.

At issue is whether regional interstate banking is an unconstitutional restraint of interstate commerce - if states, once they decide to open their doors to out-of-state banks, can pick and choose which states to let in. ''Basically they're trying to avoid dealing with money center banks,'' especially New York banks, says one observer.

Banks in this country are now limited - in theory at least - to one state. In practice, though, we have interstate banking by loophole. ''Money center'' banks - primarily the big ones in New York and Chicago - have commercial loan production offices, ''consumer finance'' (i.e., personal loan) companies, credit-card-by-mail operations, and other banking services across state lines.

And full interstate banking is widely seen as just a matter of time. But many states around the country want to ensure that their own major banks don't get swallowed up by money-center banks when the barriers come down. ''It would be staggering to go national all at once,'' says Robert B. Kay, executive vice-president of the South Carolina Bankers Association.''

So the regional interstate banking concept has caught on. ''The purpose of regional banking is to provide an interim to develop our own regional banks,'' says Ida Roberts, spokeswoman for Southeast Bank in Miami. ''We're the 27th largest bank in the country, but the size disparity between us and Citibank, with $130 billion in assets, is critical.''

By being able to expand across state lines but still within their own regions , banks will be able to mature into true regional banks, able to hold their own against New York banks when they are ultimately allowed in. The regions will get the economic benefit of having banks with a broader deposit base but will not have to worry that all the strings are pulled from New York or Chicago.

Thus, Connecticut, Massachusetts, and Rhode Island have passed laws that allow banking across state lines; two interstate mergers - between CBT Corporation of Hartford, Conn., with Bank of New England Corporation of Boston, and Hartford National Corporation with Arltru Bancorporation of Lawrence, Mass. - have been approved by the Federal Reserve Board.

But Citicorp of New York and Northeast Bancorp Inc. of New Haven, Conn., are appealing these approvals. They also are seeking to block the Bank of Boston's proposed acquisition of Colonial Bank of Waterbury, Conn.

Northeast has a merger agreement with the Bank of New York which it cannot implement because Connecticut law excludes New York from its ''region.'' Citicorp and Northeast argue the state laws are an unconstitutional restraint of interstate commerce.

Proponents of the regional banking concept maintain that the Douglas amendments to the Bank Holding Company Act allow states to let out-of-state banks in; the question is whether they may choose which to let in.

''We can find no clear and unequivocal delegation of authority'' to the states on this matter, says Daniel Glassberg, corporate counsel to Northeast Bancorp.

If indeed the court agrees with this view, the interstate banking region being pieced together by Southeastern legislatures could be overturned like a jigsaw puzzle on a card table.

But Southern legislators and bankers remain undisturbed. ''We're not concerned,'' says Jack Dunn, Georgia banking commissioner. He adds he expects Congress to include in one of the banking bills before it some provision explicitly recognizing regional compacts this year. ''They've promised us that.''

The much publicized difficulties of Continental Illinois Bank are having little effect on the mood in Congress as far as regional interstate banking goes. ''Congressmen are saying that they accept that the problems Continental Illinois has been having are problems growing out of banking practices that have been common for 150 years,'' says Bill Bosies, senior federal administrative counsel for the American Bankers Association.

The Georgia legislature's passage in late winter of a bill effective July 1, 1985, allowing regional banking reciprocally with other states spurred Florida and South Carolina, already keen to move in this direction, to pass their own bills.

An interstate bill in North Carolina has cleared committee and is expected to come before the House ''any day,'' says Fred Alphin, assistant to the state banking commissioner. ''It's fairly safe to say it has a good chance. There are no real objections to it.''

Passage of legislation in North Carolina could trigger the effectiveness of the Georgia and Florida laws.

South Carolina's law doesn't become effective until July 1, 1986, the result of a compromise with the savings and loan associations, who wanted a still later date. (''We couldn't have got the bill through without the S&Ls,'' says Mr. Kay, of the bankers association.) But pressure from neighboring states could lead to a change in the effectiveness date in the Palmetto State.

Kentucky has also passed a regional interstate bill - but ironically, it defines its region as ''contiguous states,'' thereby excluding the other Southeastern states which have passed interstate bills. As of July 13, 1986, however, Kentucky will let banks in from any state that allows Kentucky banks in.

Of the dozen and a half states that have considered some form of regional banking legislation this year, each has defined its region a little differently, notes one observer, with the ''potential for some real strange results.'' To keep money-center banks from ''hopscotching'' across the Southeast, Georgia and South Carolina have required that a bank holding company wanting to move across state lines must have 80 percent of its assets within the region.

Regional interstate banking has by no means been a shoo-in across the country , though. Several states have considered and rejected bills this year, particularly in the central part of the country.

Many states still do not have full statewide branching - states where local banks are more worried about the big fellow across the county line than they are about being gobbled up by Citicorp. Kentucky's interstate bill also provided for statewide bank holding companies for the first time. ''Emotions are running high ,'' says Ballard W. Cassady Jr., commissioner of banking and securities, ''though there aren't a lot of grounds for it, from what we can see.''