Plans by a consortium of some of the largest financial institutions in the region to form a shared automatic teller machine network have become unraveled over differences among participants.

And much to the chagrin of the prime movers of the original group, a rival regional network called Maryland Switch remains intact and expects to become operational by summer. The chairman of Suburban Bancorp of Bethesda announced to stockholders recently that Maryland Switch will have 275 ATMs operational in a regional network by August.

Meanwhile, only three banks--Virginia National of Norfolk, Riggs National in the District and Mercantile Bank of Baltimore--remain committed to sharing in the Mid-Atlantic Exchange, which was thought by members to be the more prestigious of the two when plans were disclosed last fall.

However, American Security Bank, NS&T Bank, Perpetual American Federal Savings and Loan Association and Columbia First Savings and Loan Association, all of the District, and Dominion Bankshares Corp. of Roanoke have decided on a different course.

"It's been a constant shifting of the sands in this regional project," Virginia National Vice President David O'Connor lamented.

The Mid-Atlantic Exchange would be tied to a "switch," or electronic funds transfer system, operated by Virginia National. The consortium had planned to employ the ATM network to link eight financial institutions and their customers in the District, Virginia and Maryland.

Using the ATMs, customers of participating institutions could withdraw money from checking or savings accounts, transfer funds from one account to another and obtain information about balances in various accounts. Those transactions could be completed on ATMs owned by the consortium anywhere in the District and the two states.

Mid-Atlantic members still plan to be operational by late summer, but the outlook is rather uncertain.

"The fact of the matter is that the group has begun to move in two directions," O'Connor said.

Essentially, the five institutions that split with Virginia National and the others apparently will "step back and re-evaluate what they're going to do," O'Connor said.

However, T. William Blumenauer, Columbia First's president, insists that his association and the other four institutions are "part of the original group," and they are proceeding with plans to form a regional network that won't be tied to Virginia National's switch.

In a somewhat puzzling statement, Blumenauer said his group has retained the name adopted by the original participants despite Virginia National's ownership of Mid-Atlantic Switch. "We didn't pull out," Blumenauer insists. "They pulled out."

In the meantime, Blumenauer acknowledged, "This thing is still in a state of organization and flux."

But the unraveling of the original participants is a setback for both groups.

"Unfortunately, we will be behind rather than before them," O'Connor said, referring to Maryland Switch.

That doesn't mean, he added, that Virginia National, Riggs and Mercantile want to be "precipitous in trying to be first in the marketplace."

While neither side will say what precipitated the split, knowledgeable sources say some members of the original group wanted to make major commitments to vendors of hardware that would be used in the ATM network. Others apparently feared such a commitment would cause the consortium to lose control over the switch, which would also be operated as a clearinghouse for checks.

Moreover, there apparently was considerable concern over what one source calls "strategic considerations" involved in tying the ATM network to a point-of-sales or payments system, which has to be coordinated with other principals, such as utilities and retail merchants.

In the wake of the split, there has been considerable speculation that one group might agree to join a national ATM network recently announced by 26 banks. That really isn't a problem, even if it is true, O'Connor said. Participating in the nationwide network doesn't preclude membership in a regional link, he said.