Small banks consistently charge lower fees, according an Independent Bankers Association of America analysis of a Federal Reserve survey.

Large banks charge as much as 50% more for withdrawing cash from an automated teller machine, processing bounced checks, or maintaining a passbook savings account, the IBAA found.

Kenneth Guenther, the group's executive vice president, said he was not surprised. Community bankers "are generally closer to our customers" and intentionally keep fees low, he said.

Small banks charged less than larger ones last year for each category of product and service in the Fed survey.

The average charge to stop payment on a check differed by 50% between large and small banks, while customers at large banks paid 14% more to check their account balances at the ATM than small bank customers did.

Rich Whiting, general counsel for the Bankers Roundtable, defended big banks' fees. He said larger banks, defined as those with more than $1 billion of assets, offer more services and invest more in technology than smaller banks. The Fed survey did not address these factors.

Mr. Whiting also said large banks' fees were down in 1997 from the previous year. He attributed the decline to consolidation among larger banks, which led to increased efficiencies and decreased costs.

Community bankers said they intentionally price below the competition.

Richard A. Loundy, chairman of Devon Bank in Chicago, said he checks competitors' prices on some products as often as every week to ensure that his $235 million-asset bank keeps its fees among the lowest for his market. For example, Devon charges $20 to $25 for each bounced check, but some competitors charge as much as $30, he said.

Mr. Loundy said the low fees let his bank compete for customers against large banks with big advertising budgets.

"For us to get the word out to the same degree that our competitors do would be impossible," he said. "We have to compete on service and price."

Small banks are also able to keep their fees low because they have less overhead than their larger competitors, said Thomas J. Sheehan, president of Grafton State Bank in Wisconsin. Mr. Sheehan said his $100 million-asset bank keeps its costs down by employing only 38 full-timers.

The community bankers said they carefully consider whether to increase fees-or even charge at all-when it comes to ATMs. Both Mr. Loundy and Mr. Sheehan said their banks were considering charging noncustomers to use their ATMs to help defray costs.

Small banks are expected to rely more heavily on fees as interest rate margins shrink and competition heats up, Mr. Guenther said.

"The good times aren't going to roll as much," he said.

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