Community bankers worried about being swallowed by NationsBank Corp. can rest easy.

"We don't really look at small banks anymore," NationsBank president Kenneth D. Lewis said in a speech here last week. "And the definition of small bank is getting bigger."

Recalling NationsBank's purchase of a $7 billion-asset bank, Mr. Lewis said a deal of that size would be too small to interest NationsBank today. "It's just not worth our effort," he said.

While NationsBank will not be the buyer, Mr. Lewis predicted massive consolidation among community banks.

Rather than the barbell distribution experts have forecast-with many small and large banks sandwiching a few midsize banks-Mr. Lewis said he is "increasingly less sure those thousands of community banks will exist."

In a speech to the American Institute of Certified Public Accountants' 22d annual bank and thrift conference, Mr. Lewis predicted "several thousand" community banks will survive the consolidation wave, which should crest in a few years.

Roughly 9,000 banks operate today with less than $1 billion of assets.

Mr. Lewis also projected mergers among the largest banks, saying just five or six banks will operate nationwide. "The United States simply has too many banks," he said. "There are too many banks chasing too few deals."

NationsBank is spending $1 billion a year on technology, according to Mr. Lewis. Much of the investment is designed to help the Charlotte, N.C.- based giant understand what its customers want.

"Our challenge is how to be big-really big-and still respond to the customer," he said. Once its purchase of Barnett Banks Inc. is complete, NationsBank will be the country's third-largest bank and have $285 billion of assets.

Smaller banks, because they know their customers better, do not have to shell out huge sums on technology like large banks. "I think that gives them some advantage, not having to invest in the amount of technology that we will have to invest," he said.

But NationsBank plans to use technology to compete head-on with community banks. "The irony of all this is technology is going to allow us, through knowing our customers, to act more like that corner bank."

Asked if there is a future for the $500 million-asset bank, Mr. Lewis had this advice:

"You want to be careful in being very niche-oriented, play to your strengths, and stay with the geographic area, know it very well, and know your customers."

Mr. Lewis also said community banks must adapt their services to changing consumer needs. "For instance, a PC banking product over time will be something that will have to be in their array of products," he said.

The fortunes of community banks, he noted, are closely tied to their local economies.

"There is beauty in diversity-diversity in people, product, and geography," he said. "To the extent that you're confined to one area and there's a recession, no matter what you do ... your bank is going to reflect that economy.

"That's the fatal flaw in staying small."

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