ATLANTA -- National Commerce Bancorp. has found a unique way to expand from its home base in Memphis: through the supermarket aisle.

The Tennessee company said Monday that it has applied for regulatory permission to operate six supermarket branches in Virginia.

The units are in Kroger supermarkets that previously housed Dominion branches.

Dominion Bankshares was purchased last year by North Carolina-based First Union Corp., which says it has no interest in supermarket banking.

Cross-Border Plan

National Commerce operates bank subsidiaries only in Tennessee. But, as a source of fee income, it has been helping other banks nationwide set up supermarket branches. Now it is ready to operate them on its own outside its home state.

As part of the plan, National Commerce on Monday announced the purchase of First Federal Savings Bank, a $5 million-asset thrift in Belzoni, Miss. Since a federal thrift charter carries full interstate branching powers, National Commerce will use the charter to operate the six supermarket branches in Virginia.

"It's a very interesting way to expand across state lines," said Peter Tuz, a banking analyst with Morgan Keegan Inc. in Memphis.

National Commerce officials said they plan to apply for instore branches later this year in North Carolina. They also are considering supermarket outposts in Mississippi, Alabama, and Texas.

The company expects to be operating in Virginia by mid-July, though it will be starting from scratch.

First Union will transfer about $30 million of Dominion's supermarket deposits and a few assets to nearby free-standing branches.

Purchase of Thrift

National Commerce is buying First Federal Savings Bank of Belzoni in a stock swap valued at $632,000.

Walter Howell, the Tennessee company's treasurer, said the purchase of the thrift will have no "material" impact on the bank's earnings this year or next. Within three to five years, he said, the deals should add to earnings.

National Commerce did not disclose terms for renting the supermarket space -- at five stores in Roanoke and one in nearby Blacksburg -- but the price is expected to be minimal.

The company already holds a master license to operate branches in Kroger stores.

Dominion had operated the branchhes as a sublicensee of National Commerce.

A Different Approach

First Union views supermarket branches as mere check-cashing facilities, the spokeswoman said. Indeed, it closed or sold nearly 10 supermarket branches in Florida that had been run by Southeast Banking Corp. after acquiring the failed company in 1991.

National Commerce takes a different view. In the mid-1980s, the Memphis bank entered Knoxville and Nashville through supermarket branches -- and today has nearly $200 million of assets in each city.

"We've been extremely successful in building both loan and deposit outstandings in supermarket branches," Mr. Howell said.

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