CHICAGO - Community banks in Illinois, where there are more small community banks than in any other state, are sizing themselves up.

Here, perhaps more than anywhere else, community banks are grappling with how big they are and how big they should be.

As the industry consolidates, the asset size for viable community banks will be $200 million to $500 million, estimated banking attorney Theodore L. Eissfeldt.

Most experts believe that operating economies of scale begin to be most acutely felt at $200 million in asset size. In Illinois alone, hundreds of rural banks have less than $200 million of assets.

Douglas V. Austin, who heads the bank consulting firm Austin Financial Services, Toledo, agreed that community banks need to reach a critical mass by the year 2000. He estimated viability at between $150 million and $250 million of assets.

"The reason for it is to be able to have enough revenue to have enough staff to be able to meet the regulatory burden," he said.

Mr. Austin said he thinks banks can survive below that range but could have compliance problems. Despite the recent movement to ease the regulatory burden on small banks, he said, the smallest by and large still lack the wherewithal to deal with the host of regulations.

Speaking at a recent industry conference, Mr. Eissfeldt, a lawyer in the Peoria, Ill., office of Schiff Hardin & Waite said community banks should consider alternatives to merging with other banks to bulk themselves up. Institutions such as stock and mutual thrifts and credit unions that convert to thrift charters could be merger candidates, he said.

"There aren't many strategic options out there for a mutual thrift," Mr. Eissfeldt said. "The reason it presents an opportunity to community banks in particular is there are so many of these out there that haven't converted."

If more credit unions switch to thrift charters, as New Jersey's Lusitania Federal Credit Union did, banks could pursue them as well, he said.

Bankers at the session found the suggestions intriguing but premature.

"It would certainly be something we'd look into," said Robert L. Cormier Sr., president and chief executive of $250 million-asset Home State Bank, Crystal Lake, Ill. "But that's in the early stage of development."

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