While working at a now-defunct regional bank in Virginia, Wayne Lewis noticed time and again how executives of banks that got bought out would resurface as founders of community banks.

Now Mr. Lewis has joined the parade.

After First Union Corp. bought Roanoke-based Dominion Bank in 1993, where Mr. Lewis was executive vice president, he and several local investors decided to take on the North Carolina colossus with a start-up. The result was Valley Financial Corp., parent of two-year-old Valley Bank in Roanoke.

The venture has brought Mr. Lewis, Valley's executive vice president, and chief executive officer Ellis L. Gutshall, also a former regional banker, into a world in which lending decisions can be completed in hallway conversations.

"Sometimes I miss some of the sexy stuff I used to do at Dominion-the mergers and acquisitions, flitting around on the corporate jet," said Mr. Lewis, a Roanoke native. "At the same time, it's a wonderful feeling being a part of something you built from the ground up."

The $58 million-asset Valley exemplifies the value that small banks still possess in a fast-consolidating industry that has seen regional banks evolve into superregional powerhouses. Successful community banks can feed off the customer frustration caused when local bank ownership disappears.

"The Roanoke market was ripe for a community-based bank," said Edward E. Furash, chairman of Furash & Co., a consulting firm in Washington. "The timing was right."

Roanoke, a city tucked away in the shadow of the Blue Ridge Mountains, has a strong independent streak and community spirit.

"We want to know that the people we do business with are involved in our churches, community events, community clubs," said Roanoke Mayor David A. Bowers. "We like that in Roanoke."

Mayor Bowers is even considering shifting his deposits to Valley because his longtime bank, which he wouldn't name, closed a branch that he frequented.

But even with such support, Valley has had an uphill struggle to reach profitability. The holding company reported its first profit-a meager $3,831-in the fourth quarter last year, but the bank subsidiary lost about $5,000.

Industry experts say it typically takes about three years for new banks to show a profit.

Mr. Gutshall handed a dollar to each of his 18 employees to celebrate the first dollars the company made. Those dollars are still posted on employee bulletin boards or protected behind glass frames, he said.

Mr. Gutshall, who was senior vice president and chief lending officer of the bank at its inception, took over as president and CEO after the original chief executive, Guy W. Byrd Jr., resigned last year. Bank officials won't say why he left, and Mr. Byrd couldn't be reached for comment.

"It's really exciting to see it grow," said Mr. Gutshall, a former executive vice president of First Virginia Bank. "I don't think we would be anywhere near the size we are if the concept was not right for this town. They wanted this kind of bank."

But growth is difficult because Roanoke, city and county, are expanding economically at a slow 3% to 4% annually.

The area has branches of several major regional banks, and competition for customers among metropolitan Roanoke's 7,000 businesses and 200,000 residents is intense.

"Just the amount of new business coming in would not support a start-up bank," Mr. Gutshall said. "We knew we had to take existing business from other banks."

Mr. Furash said that in any market, 15% to 20% of households and small businesses don't want to do business with large financial institutions.

Valley Financial holds less than 2% of deposits in its area and is intent on bursting out of the single digits.

"If we had 15% to 25% market share, we would be fat and happy," Mr. Lewis said.

The bank is targeting small-business customers and has a goal of reaching $70 million of assets by yearend.

But market leader First Union doesn't exactly have much to fret about. The Charlotte, N.C., superregional holds 40% of Roanoke-area deposits.

A spokesman for $137 billion-asset First Union said its 15 branches there are managed much as community banks while offering big-bank products. "You're treated as if you're a hometown customer," spokesman David Scanzoni said.

Some Roanoke residents, however, took a very different view when First Union swept into Virginia by buying Dominion, a $9 billion bank that had had its share of troubles in the late 1980s and early 1990s.

Roanoke economic development officials said First Union, which employs about 2,000 people in the Roanoke area, has brought a net 200 new jobs to the area. But the merger eliminated numerous high-paying executive jobs.

The more intangible fallout from such mergers is what Mr. Gutshall and Mr. Lewis consider their biggest asset: hometown loyalty. It is not unprecedented for a community bank to thrive on a larger bank's weaknesses.

"I think a lot of small-business and personal bank customers sort of fell through the cracks" in Virginia bank mergers, said Patricia G. Satterfield, executive director of the Virginia Association of Community Banks. "I think you have to attribute some of that to the changing names of banks."

Unlike other southern states, where new banks have been springing up quickly in the aftermath of mergers, Virginia was considered overbanked and has spawned relatively few start-ups. Valley Bank was the first in years. Since its May 1995 opening, two banks have opened in the state, and another is in organization.

"They kind of come in bunches, like bananas," said Sidney A. Bailey, Virginia commissioner of financial institutions.

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