Read between the lines of the latest issue of the Federal Reserve Bank of Atlanta's Financial Update and you will find good news for small- business borrowers but a warning for community bankers.

The Atlanta Fed has revamped this publication to make it more readable and useful to its subscribers-a radically different approach than that taken by some other regional Fed publications.

Some of these periodicals devote more and more space to academic articles that let the Fed banks' highly trained economists report on the deep research they are doing. And though other academics may find these highly quantitative articles interesting and useful, I doubt most bankers can understand them.

But when the regional offices concentrate their research on serving their members, some of their results are truly useful and memorable.

I still remember a Kansas City Fed study published over 30 years ago that explained why over half the banks in its region did not take advantage of the tax benefits then available by selling bonds whose price had been hurt by rising interest rates.

Why didn't they sell them? The K.C. Fed explained that the CEOs couldn't get the boards to understand that when interest rates rise, bond prices fall. So it was easier to do nothing.

But "Bank Consolidation Affects Lending in Southeastern Rural Markets" in the Atlanta Fed's July-September Financial Update is the type of article that Fed banks should be publishing.

The Fed was testing the often-presented thesis that consolidation in banking is a dangerous development for small businesses.

As banks have merged and been acquired, fewer and fewer institutions are left to serve each community, meaning small business has fewer opportunities to be served.

But this article shows that though there are fewer institutions accepting deposits in many of the communities in the Atlanta Fed's six- state region, Community Reinvestment Act small-business loan data showed quite different conclusions on competition.

Specifically, the average rural county in the six states had four banks, but an average of 11 financial services companies were making small- business loans in those regions.

That, of course, means that out-of-county banks and nonbanks are making small-business loans in ever-wider territories. And the number of competitors in rural markets is likely to increase further as credit scoring of small-business loans becomes more prevalent.

Some bankers might find the conclusion obvious, but the Atlanta Fed has done others a favor by highlighting this trend.

I remember years back when Willis Alexander, then head of the American Bankers Association and also owner of a bank in Trenton, Mo., went home to a board meeting and asked, "What are the credit unions doing to us?"

The resident CEO said he didn't think the bank was affected by credit union competition.

However, another staff member not involved in lending chimed in that he was talking to the Chevy dealer, who told him he sold two cars that week, both of them financed by the credit union.

Of course, as the Fed study pointed out, convenience has always been the community bank's strength.

"Even if out-of-market banks are significant small-business lenders, they cannot offer some of the banking products and services important to small businesses and consumers unless they have a nearby branch," the report said.

But the Fed study should remind bankers that they must not rest on their laurels. Rather, they must work on countering the weakness that long- distance small-business lending through credit scoring has brought to their door.

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