Community National Bank's Gerald Banmiller is looking for shells -- and not on the beach.

In a strategy he calls "hermit crab" branching, New Jersey's fledgling Community National is moving into the branch shells abandoned by bigger banks. In the last month, it has doubled its branch network to four offices using the strategy, and is still looking for more.

The effort provides a window on an increasingly popular technique for expansion. Across the country, ambitious community banks are finding cheap digs in branches shed by larger players undergoing consolidation.

'Neutron de Novos'

Community banks in the Middle Atlantic, Texas, and the Northeast have done it. In Washington, Spokane's Sterling Savings Association called its new branches "neutron de novos" when it bought six branches abandoned by Key Corp. last year.

"When these banks acquired retail networks [in New Jersey] they found a lot of duplicative locations," said Mr. Banmiller, a career retail guru for regional banks until he took the job as chief executive of Community National when it was formed in 1987 in Westmont, a suburb of Philadelphia.

"It's like they have two cars that are both running very well, but they don't need two cars. That doesn't mean there's anything wrong with the one they get rid of."

Picks Up Another Branch

Community National's first branch was from an old state-in-sured building and loan that liquidated after failing to get federal insurance in 1988.

The opportunity came up again this spring, in the form of a CoreStates branch in nearby Audubon on a heavily trafficked commercial corridor. The branch had been vacated in 1993 and put up for sale.

"I drove by this darned thing every day going to work," Mr. Banmiller said. "I saw the for sale sign getting older and older. So, I checked into it and brought the idea to my board. We flat out purchased the thing." That branch should open this month.

Just two weeks ago, Community National received permission to assume the lease on an abandoned Midlantic branch in Marlton, also on a heavily traveled artery. Costs for both branches, including renovation, and equipment, is estimated at a relatively cheap $600,000.

Mr. Banmiller is from southern New Jersey and spent 20 years with regional banks, starting out at the old Girard Bank and ending up at Florida National Bank.

Consumer Orientation

He's molded Community National around the consumer, even though most of its business is in small-business lending. It keeps its branches open from 7 a.m. to 7 p.m. And it pays the customer $5 when it screws up, including when a customer has to wait in a teller line more than five minutes.

To keep up with the growth, the bank's holding company, Community Financial Holding Corp., last month closed on a $4.7 million public offering, its first. The deal was underwritten by Pennsylvania Merchant Group, which sold 450,000 shares at $10.50 each.

"In a month we've doubled our branches and doubled our capital," Mr. Banmiller said. "Every day should be like that."

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