The recent megamerger wave is sending threatening but ultimately healthy vibes to every bank chief executive in America.

Some of these vibes are coming from Wall Street, which keeps adding to the list of banks it considers takeover bait. Seeking hefty buyout premiums, institutions and individuals are being herded toward bank stocks.

Other intimidating vibes are coming from the customer. As megamerger partners herald plans for new technology, Main Street's expectations are rising like bank stock prices.

The vibes are real, and they are good for both the consumer and the shareholder. They should make every bank chief executive give more thought than ever to the two options available in this environment:

*Earn big.


And though the pressure is greater than ever to choose the second option, the wave of big mergers also brightens the opportunity for agile banks to accomplish the first.

For some banks, pressure to sell is mounting. Banking technology is finally starting to deliver true benefits to customers, and the small banks that can't afford what's needed will be unable to compete.

Chief executives who have held out for their own good, at the expense of their shareholders, will have a harder time explaining their positions. And those who have vaguely touted "friendly service," instead of offering products customers really want, will increasingly lose market share.

But opportunities are available in this environment. The cost of technology is coming down, and banks of all sizes can harness it to get to know their customers better than ever. Backroom software can facilitate some of the same cost-saving measures promised in mergers. And on-line banking is within reach.

In fact, the very merger wave that's said in some corners to be the end of small banks could in fact ignite a new beginning for those nimble enough to respond. Here are five areas in which opportunities will arise:

First, the layoff of hundreds of accomplished bank managers creates a new resource for talent.

Second, the divestiture of brick and mortar offers the chance for other banks to reach adjacent geographic markets through branch purchases. Through the conventional wisdom is that branch banking is out of date, it's still the way millions of people in small towns want to bank.

Third, the technological experiments undertaken by the megabanks will serve as laboratories. As has been the case for decades, nimble small banks will watch the results, copy the successes, and dodge the mistakes, all without incurring the development costs.

Fourth, banks that really do distinguish themselves with excellent service will be more valuable to customers who disdain the standardization the megabanks are implementing.

And fifth, because the merger wave will indeed force many small banks to sell, other small banks will be in position to grow through acquisitions or merger-of-equals transactions.

This isn't to say that the megamergers constitute a holiday for small banks. On the contrary, it will be the end for many.

But for agile competitors, opportunity knocks.

Mr. O'Shane is president and chief executive of First Western Bancorp, New Castle, Pa.

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