Community bankers worry more about competing head on with credit unions than moneycenter and regional banks, according to a survey by Grant Thornton.

The Chicago-based accounting firm found that 55% of community bankers participating in its survey listed credit unions as a major source of "concern."

"They believe that there is less than a level playing field and that credit unions can afford to pay higher rates on deposits principally because they don't have to pay income taxes," said Scott Reed, chairman of Grant Thornton's national financial institutions committee.

Besides credit unions, 50% of the bankers said they were concerned with brokerage firms, 33% listed regional or moneycenter banks, and 24% said community banks.

Playing by Different Rules

Grant Thornton sent questionnaires to chief executives of 5,757 community banks in January to gauge their views on a variety of topics, including competition, regulations, and government.

The firm received 1,155 surverys, for a response rate of 20%. The average size of a community bank in the survey was $75 million.

Mr. Reed said community bankers find it difficult to compete with credit unions because they don't play by the same rules.

"They don't consider them to be heavily regulated, yet they are competing for the same products," he said. "I think they feel very confident that they can compete very effectively with institutions such as themselves."

Despite the fight with credit unions, community banks are continuing to push for market share. Twenty-three percent of community bankers expect to try to acquire another institution this year, and only 6% plan to put their institution on the block.

"In an environment like we are in, each bank views itself as a survivor," Mr. Reed said. "One element that is critical to their continued success is to increase market share."

Many Expect New Banking Law

What is already fueling acquisitions this year is speculation that Congress will pass an interstate banking bill. More than 60% of the community banks polled expect Congress to pass major banking legislation this year.

According to the study, most community bankers do not believe consumers, their institutions, or the industry would benefit greatly if Congress expands banking powers and removes barriers to interstate banking.

When asked if expanded banking powers and nationwide interstate banking would be good for their bank in particular, 26% responded yes, 61% said no, and 13% said they didn't know.

The survey also found that:

* Community bankers' No. 1 management concern is the cost of regulatory compliance. It ranked above such concerns as providing employees with health insurance and increasing noninterest income.

* An overwhelming majority of community bankers, 77%, do not favor the Clinton administration's plan to create a "superregulator."

They are concerned that the checks and balances would be lost if Congress merges the regulatory agencies.


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