Christmas is coming early for Tennessee banks, thanks to a budget surplus.

The state Department of Financial Institutions said this month that it will finish its fiscal year about $920,000 in the black. As a result, it plans to offer the 179 state-chartered banks rebates on their examination fees, said Bank Commissioner Bill C. Houston.

The average refund per bank: $5,000.

Mr. Houston said the surplus will also mean lower exam fees next year. He said he expects to charge 23 cents per $1,000 of assets, down from 25 cents per $1,000 this year.

Cutting fees is important, Mr. Houston said, to keep the state's bank charter competitive with the national bank alternative.

"It's our job to make the state charter the best charter to have," he said. "Granting bank powers and cutting fees are the best ways to do that."

While states such as Virginia, Michigan, and California have cut exam fees, it is rare for a state to issue a refund, said a spokeswoman for the Conference of State Bank Supervisors in Washington. Instead of rebating, some departments either pay the excess into their state's general fund or roll it over into next year's budget.

This is the third year in a row Tennessee has issued a rebate. Two years ago, the refund totaled about $400,000, and last year it was $100,000.

The Tennessee banking department gets all its funding through exam fees, and it sets them each year based on what it expects to spend. But "mergers and interstate branching laws have left us with fewer charters, which means a smaller budget," Mr. Houston said. His department regulates 12 fewer banks now than at the end of 1997, he said, and 17 fewer than in 1995.

The rebate-about 17% of the department's 1998 budget-is due largely to staff reductions and other cutbacks made in response to the industry's consolidation. Rebates will be prorated according to how much a bank paid in, but Mr. Houston said most refunds would be about the same as the average.

Not surprisingly, Tennessee banks are "delighted" to get money back from the government, said Timothy L. Amos, vice president and general counsel of the Tennessee Bankers Association.

"It speaks to how well the economy is doing, and how well the commissioner has done managing his office," said Daniel M. Weber, president and chief executive officer of First State Bank, Union City, Tenn.

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