There's no such thing as "business as usual" in community banking these days.

If a bank is not buying another bank, then it is finding another way to grow - whether by selling insurance, de novo branching, targeting small business customers, or taking deposits over the Internet. Whatever they're doing, it seems to be working in today's thriving economy.

As of Sept. 30, there were 9,038 community banks, with an average return on equity of 12.82% - the highest this decade. And another 188 new commercial banks opened last year. If you ask community bankers, there has never been a better time to do business.

"We're making more money now than I've ever seen in my banking career," said Betsy Duke, president of $160 million-asset Bank of Tidewater, Virginia Beach, Va. The bank boasts a 1.57% return on assets, a 15.39% return on equity, and a 10% equity-to-assets ratio.

"Life doesn't get any better than that," Ms. Duke said. "What I'm looking at is, how do you keep from dropping from this point?"

Indeed, many are wondering how banks can keep the profits rolling. What lies ahead is increasing competition from nonbank institutions, stronger pressure on interest margins, an eventual downturn of the economy, and possibly massive computer glitches at the turn of the century.

One thing is for sure, say bankers and industry experts: to survive the competition-soaked, merger-crazed 1990s, a bank must have a strategy.

One of the nation's more aggressive community banks, Premier Bancshares realized it could not compete in metropolitan Atlanta without some bulk.

Premier, which had only $270 million of assets a year ago, will have nearly $1.3 billion of assets after it completes three deals later this year. The holding company itself sprang up from Premier's merger last year with Central & Southern Holding Co.

"We both had the same strategic goal - and neither one of us felt like we were able to get there on our own," said Robert Oliver, president and chief operating officer of Premier Bancshares. "We felt the best thing was to join forces."

While banks such as Premier find their success in mimicking the strategies of their acquisitive larger rivals, such as NationsBank Corp. and First Union Corp., others are taking a different route.

"Most of the banks would obviously like to make an acquisition, but often banks are just not available at a reasonable price," said Robert D. Clore, a director at Cowen & Co., Albany, N.Y. "So they are buying branches. They're opening up branches in key markets."

Small banks have entered new markets and even doubled their assets by buying branches that large banks no longer wanted.

KeyCorp alone has sold or agreed to sell 150 branches to 15 community banks in the past 14 months.

And in Leawood, Kan., Gold Banc has more than doubled its assets by acquiring small rural community banks.

But John Carusone, president of the Bank Analysis Center in Hartford, Conn., said a bank doesn't have to buy other banks or even branches to thrive. It just has to make money.

"If community banks are well-managed, well-capitalized, they have a future," Mr. Carusone said. "If they're creative, they can run circles around larger institutions."

Creativity can take many forms.

Community bankers who once thought their small-town customers would not demand Internet banking are discovering they were wrong. And even the smallest banks are entering cyberspace.

Salem Five Cents Bank, a $1 billion-asset thrift in Massachusetts, was ahead of the game in 1995 when it created a "virtual branch" that offers checking and savings accounts on the Internet.

Los Angeles-based General Bank has become a specialist in serving immigrant communities.

Raymond P. Davis, president and chief executive officer of South Umpqua State Bank, Roseburg, Ore., has turned his branches into "retail stores" where customers can cruise the Internet and sip coffee while they bank.

Mr. Davis is part of an emerging group of bankers who are developing sales-savvy staffs that won't easily take no for an answer. Bankers, many of whom used to wait for customers to come to them, are now hawking mutual funds and annuities.

"We sell insurance. We sell stocks and bonds. We have a trust department," said James H. Tribbett, president and CEO of Bank of Whitman, Colfax, Wash. "We're trying to do on a personal basis with people, the same things big banks are trying to do with telephones and technology. Provide a full line of financial services with a personal touch."

Arthur C. Johnson, president and chief executive officer of United Bank of Michigan, Grand Rapids, said community banks need to find their niche in the banking world and focus on the personal service they can provide in that area.

He said United Bank is focusing on small business banking, and counting on the merger of larger banks in the area to attract customers who want a locally based lender.

But beyond finding a specialty, he said community banks should not be "ashamed" to charge for services.

"Many of the largest banks tend to be volume service deliverers," Mr. Johnson said. "Community banks very often are delivering quality and value- added into their services - and charging for that."

Bank of Whitman's Mr. Tribbett said banks must offer value for shareholders as well if they're going to remain independent. With stock prices at record highs at many community banks, shareholders who own a piece of a bank are increasingly demanding that they get more for their money.

"If you ignore the need to take care of your shareholders, then you're going to wind up in a sale," Mr. Tribbett said. "As long as you have value for your stockholders, you're going to be successful and keep marching."

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