Wilbur M. Feltner, chief executive of F&M National Corp., can't figure out why the big banks from cities like Washington and Baltimore have been pulling out of the rural communities of western Maryland and Virginia.

"They're just not interested in this area, and I don't understand it," said the 72-year-old Mr. Feltner from his Winchester, Va., office. "You can make more money out here than you can in the cities. And the competition isn't as tough here."

But Mr. Feltner isn't complaining about the likes of Bank of Baltimore and First National Bank of Maryland and NationsBank closing or selling their branches in his neck of the woods. His company is ready to pick up the business.

$1.4 Billion of Assets

F&M National has become western Virginia's most active acquirer of banks in recent years. Almost out of the blue, it has become a miniregional with nine banking subsidiaries and $1.4 billion of assets, up from $816 million four years ago.

In the last two months, it has acquired two banks that added about $250 million of deposits to its franchise. One of the purchased banks, Farmers and Merchants National Bank of Hamilton, Va., gave F&M its first entree into Loudoun County, an affluent outlying suburb of Washington, D.C., and one of the fastest growing counties in the region.

"The whole area ties well together," Mr. Feltner said of his bank's market area, now stretching from Loudoun County in the east to the panhandle of West Virginia in the west. "We've been very successful at building the organization around the community bank concept. All our banks operate as independently as possible."

Importantly, the F&M's five acquisitions in as many years have gone off without hurting profitability or the company's capital. It hasn't earned less than a 1% return on assets since 1982.

The nine banks in the organization are linked operationally only by their boards' interlocking with the holding company's. They save on legal and marketing costs, but beyond that don't participate in much economy of scale. Mr. Feltner said a data processing software for the banks to run on a centralized system will be on line by the end of the year.

"It's very well run and very profitable," said James Marks, an analyst with SNL Securities.

Mr. Feltner said F&M will continue to look for acquisition opportunities in rural areas, where he insists opportunities to buy abound. Small banks often have shareholders eager for a more liquid market for their stock.

"And small banks can last for a while on their own, but eventually they get tired of the massive amount of red tape and regulation," he added.

Mr. Feltner doesn't want to get much closer to the cities, however, especially Washington.

"I don't want to get to close to Congress," he said.

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