(FORTUNE Magazine) – come tumbling down Interstate banking has arrived in a rush. Over the past year 34 states have enacted laws admitting out-of-state banks, mostly from neighboring states that return the favor. The latest, Illinois, opens its borders to banks from six contiguous states on July 1. Analysts expect a flurry of mergers as banks from Michigan to Missouri rush to set up shop in the Midwest's most important financial center. But some of Chicago's own banking giants may not take part in the expected merger binge. Says James McDermott, chief of research at Keefe Bruyette & Woods: ''I don't anticipate the major companies getting that involved. First Chicago is still in the transition phase from a troubled bank to a healthy one, and there's too much uncertainty surrounding Continental Illinois.'' Most other U.S. bankers aim to expand as far as the law will allow. And many states have stretched their laws beyond their immediate regions. Kentucky, New York, Alaska, and Maine permit banks from any other state to buy into their markets. Ten other states have enacted similar laws scheduled to go into effect over the next three years. Says Michael E. Sammon, banking analyst for Chicago Corp., a regional investment company: ''There is a domino effect. If one state makes a move, others will follow. The attitude used to be, We must be careful whom we let in. Now it's a question of, Where should we go? Nobody wants to lose business to someone else.''