The bulk of lower-Midwest community banks responding to a recent survey expect to remain independent, at least for the next few years.
And of the 14% of banks that believe they will be acquired within the next five years, only 3% said it would be by a much larger organization, according to the community banking survey conducted by the Federal Reserve Bank of Kansas City.
"For those who saw themselves being acquired, many saw themselves being acquired by a community bank," stressed Linda Schroeder, manager in the division of bank supervision and structure for the Kansas City Fed.
About 6% of banks thought they would be acquired by another community banking organization, while 5% thought they would be operating under new management but with the same structure.
Their potential acquirers are ready: 18% of respondents overall said they expected to acquire other community banks in the next five years.
The Kansas City Fed conducted the survey to see how community banks plan to deal with four main industry issues: competition from banks and nonbanks; changes in community bank operations, ownership and human resource concetus; and bank regulation impact.
The survey netted 676 usable responses from banks with less than $150 million of assets in the Tenth Federal Reserve District, which comprises Kansas, Oldahoma, Nebraska, Wyoming, Colorado, and parts of Missouri and New Mexico.
The survey's findings were not surprising, said James H. Jonson, vice president in the division of bank supervision and structure.
"It was more of a heartfelt reinforcement," he said. "The bankers feel that they will survive."
Nevertheless, smaller banks were more likely to be considering selling and having new owners provide management: 7% of banks with less than $25 million in assets said they were, while just 2% of respondents with more than $25 million in assets said they would.
They survey also found:
* While 60% of respondents reported no local competitors for loans or deposits, they expected significant competition over the next five years in both areas.
* The most frequently cited intense loan competitors expected were the lending subsidiaries of machinery and auto dealers. Other major competition was expected to come from other community banks and Farm Credit associations. Banks with credit unions located in their communities also expected them to be strong competitors.
* On the deposit side, community banks expected the most competition over next five years from mutual funds and brokerage firms.
* Most of the banks surveyed do not offer mutual funds, securities brokerage, or annuities themselves. But about 20% of respondents who don't offer those services said that they plan to do so in the future.
