More than 100 community bankers converged on Washington, this week to swap ideas, talk to regulators, and let the American Bankers Association know what's on their minds.

The ABA's Community Bankers Council, which includes bankers from every state, heard from Federal Reserve Board Vice Chairman Alice Rivlin, Federal Housing Finance Board Director Bruce Morrison, and Financial Accounting Standards Board Member John M. Foster.

Mr. Foster stirred up the most concern as community bankers tried to convince him that fair-value accounting is not appropriate for illiquid bank assets.

"FASB's ultimate goal is for us to price our whole balance sheet to market," said Alice Dittman, chairman of both the council and Cornhusker Bank in Lincoln, Neb. "It's not imminent, but it is certainly coming if they have their way."

Ms. Dittman opposes the move and said her involvement with the Community Bankers Council alerts her bank to potential regulatory changes and provides a chance to have some input.

"At your bank you respond to the immediate," she said. Meeting with regulators and other community bankers "definitely broadens your horizon."

Another hot topic was liquidity. At a session where council members listed their major challenges, about 75% of the bankers said they are having a tough time attracting deposits. According to the ABA, the average council member bank's loan-to-deposit ratio is 73.5%, compared with 89.1% for all banks.

Other leading concerns expressed by the bankers included: how to remain independent, how much to spend on technology, and how to attract and retain good employees.

Ms. Dittman said members debated whether banks ought to be allowed to pay interest on corporate checking accounts.

"With our continued declining market share, it's inevitable," said Ms. Dittman, who stressed that she was speaking for herself, not the council. Cornhusker Bank has studied the issue and figures the move would cut 6% from the $150 million-asset bank's annual net earnings, she said.

"I just think it's right," she said. "Why should we encourage our customers to invest their money" somewhere else?

Roughly a third of the council's 111 members are new each year. The banks represented on this year's council are larger, averaging $160 million of assets versus $130.4 million last year. Roughly a quarter of the banks are publicly traded, while only 37% defined themselves as "closely held."

Just more than half the banks are state-chartered and do not belong to the Federal Reserve system; 28% hold national charters, while 15% are state-chartered, Fed-member banks. Four percent are state savings banks.

The average return on assets for council members is 1.35%, compared with 1.23% for all banks under $500 million of assets and 1.25% for all banks. The net interest margin for the average council member bank is 4.77%, the ABA said, compared with 3.76% for all banks.

The next meeting for the entire group is scheduled for June 6-8 in Boise, Idaho. The ABA's community banking conference, expected to attract 650 bankers, is set for Feb. 1-4 in Palm Desert, Calif.

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