Community banking executives are more concerned about day-to-day operations-such as controlling expenses and maintaining interest margins- than about mergers or financial modernization, a study found.

Getting the most out of technology and boosting fee income also ranked high in the study by Plano, Tex.-based Electronic Data Systems Corp. and Bank Earnings International LLP.

The study questioned chief executives of 40 banks and thrifts across the United States with assets of less than $5 billion. The survey, done last spring, began with the open-ended question: "What keeps you awake at night?"

The top answer: controlling operating expenses.

Bankers were also asked to rank 11 issues, ranging from product diversification to management succession and regulatory burden.

CEOs at banks and thrifts with more than $1 billion of assets were most concerned about using technology more effectively, but executives at smaller banks cared most about interest margins and daily expenses, the survey found.

Reducing regulatory burden was low on the priority lists of all the bankers surveyed.

Community bankers lamented that mergers of larger banks had put pressure on their interest margins. Cost savings from those transactions are being used to slash loan prices by up to 150 basis points, the study said.

"This has put enormous pressure on community banks," said Tom McGrath, a Bank Earnings partner. "Community banks must re-think their cost models."

The study also found that community bankers are struggling to maintain their net interest margins-a key measure of profitability. The average margin shrank 8 basis points from yearend 1995 through yearend 1997 at banks with less than $1 billion of assets, according to the Federal Deposit Insurance Corp., while margins at banks with assets of $1 billion to $10 billion rose 15 basis points.

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