The nation's smallest banks are turning to advertising agencies to help polish their image.

The percentage of community banks-those with less than $100 million of assets-using advertising agencies doubled in 1996, according to a new study by the Bank Marketing Association.

The study, which was released last month, said 18% of banks in the under-$100-million class hired advertising agencies to create marketing materials during 1996. Experts said the increase from 9% in 1995 highlighted escalating competition in the industry. The trade group polled 300 bankers last year for the study of 1996 advertising activity.

"As more banks merge, it puts more pressure on community banks to put out an image that they're comparable to a regional bank," said Jim Turner, president of Etra Corp., the Naperville, Ill., marketing consulting firm that did the study for the association. The trade group is part of the American Bankers Association.

Larry J. Nussmeyer, president of Nussmeyer Advertising in Jacksonville, Fla., said more community banks are finding that local newspaper advertisement designers no longer fill the bill.

"The banks are realizing they have to be sharper," he said.

Charles Hall, executive vice president at Exchange Bank and Trust in Perry, Okla., said his $90 million-asset bank hired an advertising agency for the first time about a year ago after using local newspaper ad designs and canned national advertisements for years. Mr. Hall said these advertising standbys were no longer sophisticated enough.

"We are trying to project an image that's one of confidence, trust, and stability," he said. "We can't do that with a pencil-drawing ad."

First Bank of Tallahassee, an $85 million-asset Florida bank, uses an advertising agency to complement its own marketing ideas.

"We have a good idea of what appeals to the customer, but we need someone to help with the actual ad design," said F.C. Nixon, the bank's president and chief executive officer.

But many small community banks find it too expensive to hire advertising professionals. Dallas H. Enger, president and chief executive officer of Linn-Benton Bank, Albany, Ore., said he had wanted to hire a local firm to design a new marketing campaign but the ad agency couldn't work within Linn-Benton's $30,000 budget.

That figure is above what most banks its size pay for advertising.

The average annual expenditure for a bank with $50 million to $100 million of assets is $22,700, according to the survey.

For now, the $66 million-asset bank will stick to its marketing standbys, such as locally designed newspaper ads and the annual pancake feed for Linn-Benton customers.

"You can't buy many radio ads for the cost of that breakfast," Mr. Enger said.

However, Mr. Turner said he expects the ad agency hiring trend to continue as long as banks' earnings remain strong. In an industry downturn, advertising budgets are often the first to be clipped.

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