TAKING STOCK         

SMALL BANKS, BIG POTENTIAL By JohnRubino See table of "Community Banking's Baby Boomers" below.

The game is just about over for Virginia's big banks. In the past year alone, Signet, Central Fidelity and Jefferson Bankshares were gobbled up by North Carolina superregionals. According to the conventional wisdom, it won't be long before Crestar and First Virginia succumb, leaving the Old Dominion with no locally headquartered big banks. That's bad from almost any angle -- except one: The process of big banks acquiring each other puts a lot of customers and bank employees "in play," which leads to the creation of new community banks. They lack some of the high-tech amenities of the big guys, but they make up for it by remembering your name and whisking you in to see the president when you have a problem. And many of them are attracting enough customers to make their investors a lot of money. Big winners of recent years include Martinsville-based MainStreet BankGroup, whose stock has more than doubled in the past two years, and Reston's First Patriot Bankshares, which parlayed $7 million of capital into $42 million between 1990 and 1996. First Patriot has since been acquired by United Bankshares of Parkersburg, W.Va.

Only one community bank formed in 1997, when the superregionals were pigging out. But now that the feasting has stopped, no fewer than six are coming to market. Here are their stories, courtesy of Scott & Stringfellow's Gary Penrose, who specializes in community banks.

Cardinal Bank is phase one of an audacious plan hatched by some ex-directors of First Patriot to set up a series of banks in Northern Virginia. First they lured away Burwell Gunn, a top Crestar executive, to run the show. Then they raised $10 million via a private stock placement, which will allow them to create a bank in Fairfax.

In April or May, they plan to hold a public offering designed to raise $25 million to $30 million, with the purpose of opening three additional banks serving other Northern Virginia localities. "A year and a half after opening their first bank, they'll have four banks, all serving the D.C. area," Penrose says.

First Capital Bank is designed to catch some of the cash shaken loose by the acquisitions of Richmond-based Signet and Central Fidelity. In charge of First Capital will be Esther Smith, the former head of The Women's Bank of Richmond. Among other things, "She'll do a good job of attracting the affluent women who were customers of her former bank," says Penrose.

Albemarle Community and Virginia National, both based in Charlottesville, "are starting primarily because of the Jefferson Bankshares transaction with Wachovia," says Penrose.

As for buying stock in these banks, there's good news and bad news. Many aren't listed on major exchanges and don't trade through brokers. That means that few investment pros cover them, so their stocks may be undervalued. But it also means that you have to work harder. Here's how you do it: Call your local community bank and ask if it's public, and at what price the stock has traded recently. Then ask for copies of 10-K and 10-Q reports. Read these to see what the bank might be worth (most takeovers are happening for between two and three times book value). Then call the bank and tell them you'd like to buy stock, and specify a price. They'll put you on the list, and when stock becomes available they'll call.

It's more complicated than simply calling your broker. But if the past is any guide, some of these little guys will be the source of big profits in the years ahead.

John Rubino, a free-lancer specializing in public companies, is the author of "Main Street, Not Wall Street."