Urban community banks are more concerned about competition and less about declining population than their rural counterparts, according to a survey by the Federal Reserve Bank of Minneapolis.

The annual survey of those district banks with less than $150 million of assets found that urban banks' chief competitors are mortgage companies. Of the banks in or near cities, 70% listed competition from mortgage companies and other financial institutions as their chief business worry.

"The urban banks have pretty strong economies, but they're facing tough competition," said David S. Dahl, public affairs economist at the Minneapolis Fed.

Rural banks, on the other hand, were most worried about maintaining the viability of their markets. One-quarter of the rural bank respondents listed aging and/or declining local populations as their No. 1 market worry.

Mr. Dahl, who compared responses from urban and rural banks for the first time this year, said the survey confirmed some intuitions about the differences between these banks. Urban banks, for example, were more likely to say they were experiencing "intense" or "very intense" competition than banks in rural areas. And urban banks typically offered a wider variety of products and services, such as automated teller machines and telephone banking.

Not that rural banks do not face competition. They are especially wary of Farm Credit System lenders, which can offer cheaper loans to farmers.

Liquidity is an issue that concerns both rural and urban banks. Thirteen percent of the respondents said they had refused loan requests in the past year because of insufficient funding.

Banks in both categories also said they expect to rely more heavily on the Federal Home Loan Bank for funding. Sixty percent of urban banks and 42% of rural banks said FHLB advances would make up a larger portion of their funding in the next two years.

Mr. Dahl said banks in both categories feel consolidation pressures, a trend noted throughout the survey's three-year life. In the next two years, 21% of the banks said, they expect to buy another bank. Moreover, 9% of rural banks and 3% of urban banks said they could see selling out themselves.

"If we would fast-forward 10 to 15 years, it may not be unusual to see 500 to 600 banks in the region," down from about 900 now, Mr. Dahl said.

In a separate survey released this month by the Minneapolis Fed, agricultural bankers said they were worried about their farm customers' cash flow.

Low cattle and grain prices are forcing some midwestern farmers out of the business. And with farm income declining, 71% of the bankers surveyed rated their customers' incomes "somewhat or substantially below average."

"Bankers across the district report increasing gloom as there are few signs on the horizon that give hope of higher prices," said agricultural economist Edward Lotterman.

Among the survey's other findings.

The region's top wheat growing states, Montana and North Dakota, reported the worst economic conditions; Minnesota and Wisconsin bankers were more upbeat about their farm economies.

North Dakota bankers said that 94% of farmers had reduced investment in new machinery or facilities, but in Wisconsin 80% said spending was normal.

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