Stock prices of publicly traded community banks in the Mid-Atlantic region surged by an average of 20% for the first eight months of the year.

The group of 30 banks outperformed the 7% average advance by larger banks in the region, according to Wheat, First Securities Inc., a Richmond, Va.-based brokerage firm, which recently released the survey.

David C. Stumpf, a bank analyst with Wheat, said takeover speculation is driving stock prices up, and investors are looking further down the food chain for smaller, undervalued banks.

"There is more interest, even institutionally," in these banks, Mr. Stumpf said. "It is somewhat of a delayed recognition."

National Penn Bancshares Inc., Boyertown, Pa., led the pack with a 54.13% increase in its stock price performance for the first eight months of the year.

It was followed' by Oakland, Md.-based First United Corp.'s 44.12% increase, and a 41.80% increase posted by Commonwealth Bancshares, Williamsport, Pa.

"There are investors out there speculating that maybe we are going to be bought," said. Richard G. Stanton, chairman and chief executive of First United Corp., explaining the increase in the stock price. "Our philosophy is to stay independent."

The $360 million-asset bank's stock is selling at 220% of book value. First United is soundly run and profitable with a return on average assets of 1.30%.

For the first half of the year, it earned $2.5 million, down 5.74% from the prior year. The decline was due to added costs from the bank's expansion into West Virginia, Mr. Stanton said.

"We had a banner year in 1992," Mr. Stanton said. "We are going to come close to having as good a year."

Mountaineer Bankshares of West Virginia, in Martinsburg, is another bank that has benefited from merger talks. Its stock price jumped by more than 37%. Last August, the bank entered an agreement to merge with neighboring One Valley Bancorp in a deal valued at $130 million.

Lacy I. Rice Jr., Mountaineer's chairman and chief executive, said the increase in the bank's stock price cannot be pinned solely on the merger. He said the stock doubled in the two years before the announcement.

"We didn't have all of the loan problems that all of the larger banks had," Mr. Rice said. "I think the stock was underpriced for a long time."

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