Bank megamergers create consumer fear, opening up opportunities for smaller banks, a survey of Virginians indicates.

And Virginia community bankers are trying to exploit those openings. The survey found that an average of 17% of Virginians contacted in four income groups think recent bank combinations would lead to better service.

The survey was done by the Center for Public Policy at Virginia Commonwealth University. The center questioned 801 Virginians about recent mergers affecting the state: Winston-Salem, N.C.-based Wachovia Corp.'s planned acquisition of Jefferson National Bank and Central Fidelity Bank Inc., and Charlotte, N.C.-based First Union Corp.'s plan to acquire Signet Banking Corp.

Affluent and better-educated people were more likely to think banking services will decline. Twenty-two percent of college graduates and 24% of people from families with more than $50,000 of annual income said they expect service quality to deteriorate after the mergers.

"If I was a community banker, I'd be sending out announcements, putting up billboards, letting customers know there is a local bank in town," said Michael Pratt, professor of economics at Virginia Commonwealth and director of the policy center.

And that is exactly what small banks are doing.

Banking experts said smaller banks in Virginia have been thriving since the early 1990s, when First Union and NationsBank Corp. first entered the market via acquisitions.

One sign of success has been the rapid addition of community bank branches, according to the Virginia Association of Community Banks. For example, 53 branches were added last year by community banks in Virginia.

At first, the large out-of-state banks were not interested in small- business and consumer accounts, according to Ronald Miller, president of First Bank, Strasburg, Va. Mr. Miller's bank picked up customers, employees, and branches from merger-associated consolidations, including an office in nearby Winchester, bought from First Union for less than $500,000.

First Bank, which has $155 million of assets, is planning a marketing campaign to coincide with the latest conversion of big Virginia banks' branches to the North Carolina bank names in its area.

Second Bank and Trust, based in rural Culpeper, Va., has already seen a trickle of inquiries-mostly from small businesses-related to the Wachovia acquisitions. Signet Bank has no presence in Culpeper.

The $218 million-asset Second Bank has run ads in local papers since the Central Fidelity merger announcement and plans to boost advertising by 30% as branch conversion begins, said Ed Barham, president.

Central Fidelity and Second Bank have been rivals for top deposit market share in Culpeper, Mr. Barham said.

First Union and NationsBank representatives declined to discuss the survey.

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