A prominent banking consultant is telling community banks that the window of opportunity to sell is quickly closing and may not open again anytime soon.

Christopher L. Hargrove, president of Professional Bank Services, Louisville, Ky., sent a letter to community banks last week warning that year-2000 concerns would take active buyers out of the market this fall.

"Many potential acquirers have informed our company that they will suspend acquisition activity in the third or fourth quarter of 1998," Mr. Hargrove wrote.

And even community banks not considering a sale could be affected. If some potential buyers leave the market, reduced competition could drive down premiums being paid, which in turn could affect the value of banks remaining independent, he cautioned.

In an interview, Mr. Hargrove, who has advised in nine bank deals announced this year, said he does not anticipate the market for community banks to heat up after 2000, either.

"The regionals have become nationals, and they have no desire to talk to the community banks anymore," he said. "That means the only active acquirers of small banks are the $2 billion to $5 billion holding companies. And I question how long it will be before those companies merge into larger banks themselves."

He said he is already seeing some effects.

"If I have a $100 million-asset bank to sell," he said, "the number of companies that I have to offer it to is significantly less now than it was a few years ago."

Such was the experience of Hoosier Hills Financial Corp., which agreed in May to sell to National City Bancshares, Evansville, Ind., for $29.6 million of stock.

Fred Crum, president of the Ripley County Bank subsidiary of Osgood, Ind.-based Hoosier Hills, said the company had considered offers from a couple of larger banking companies that it felt "matched our commitment to community banking." The decision to sell now was based partially on the belief that some of these companies would not be around in a few years.

"I don't know when it will be shut, but I believe the window is closing," Mr. Crum said.

Other investment bankers echoed Mr. Hargrove.

"Without a doubt, the $2 billion to $15 billion range of companies are disappearing rapidly," said Jon D. Holtaway, senior vice president of Danielson & Associates Inc., Rockville, Md.

For example, a community bank in the Baltimore-Washington market that put itself on the block could expect about eight potential buyers to show interest, "four of which will probably disappear in the next few years," Mr. Holtaway said.

But there will always be exceptions, he added.

"I think that institutions in urban markets that large banks are interested in will always get some attention," Mr. Holtaway said.

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