The Federal Reserve Bank of Minneapolis predicts that community banks in the upper Midwest will ride the wave of technology into the next century.

Although the region's total number of community banks is expected to keep shrinking, those who intend to stick around plan to beef up their offerings of technology-based products to stay in the game, according to a recent Minneapolis Fed survey of community banks.

The poll, with responses from 400 banks with less than $150 million in assets that are not part of bank companies larger than $150 million, "reinforced the role of technology" in survival strategies, said Minneapolis Fed economist David S. Dahl.

In a study that could be an indicator of where the thousands of independent banks in the Midwest are headed, the Minneapolis Fed surveyed banks in its district, which covers Minnesota, Montana, North Dakota, South Dakota, Wisconsin, and Michigan's Upper Peninsula for insights on the future of community banking. Respondents averaged $42 million in assets and return on assets of 1.2%.

Although just 1.3% offered home banking via computer and 5.1% boasted World Wide Web home pages, banks targeted both areas for growth by the end of the decade. About 36.6% of those not now offering home banking said they plan to do so in the next few years, and the figure for home pages was 22.5%.

In addition, 138 of respondents not currently offering bank-by-phone service plan to within five years; 217 offer it now.

Community banks also anticipated increases in nontechnology products, including debit cards and financial-planning services.

The survey also asked community banks where they see themselves in five years. Most expected the status quo, neither acquiring or selling. However, 36% said they planned to acquire another bank during that time frame, a rate that could cost the region as many - or more - banks than the early 1990s, when it lost 223, the Minneapolis Fed concluded.

"We have a 20% decline so far in the first half of the decade," Mr. Dahl said. "A decline of that magnitude seems plausible over the next few years."

He said the survey's would-be buyers are likely to find more sellers than indicated by the meager 6% of banks who said they expect to sell to a community bank.

"If you're going to sell or not - that's kind of a meaningless question unless you ask at what price," Mr. Dahl said. "At certain prices, everybody will sell, and at certain prices, nobody will sell."

Just 3% of respondents said they planned to sell to large bank companies.

Minnesota had a higher percentage of acquisition-minded banks, 41.2%, than any other state. Montana had the lowest, 21%.

Banks in Michigan's Upper Peninsula were the most likely to sell to other community banks, with 15.4% predicting they would. Banks in Montana again were the least likely.

Regarding competition, community banks said they expected intense competition from other community banks (63.5%), brokerage firms (63.4%), credit unions (61.8%), and lending subsidiaries of nonbanks, such as General Motors Acceptance Corp. or John Deere Credit Co. (61.4%).

About 38.9% of the banks cited regional banks, a figure Mr. Dahl said is lower than might be expected given small banks' frequent concerns about big-bank holding company powers. "There's a lot of other people they consider more serious competition," he noted.

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