Three suburban banks controlled by Financial General Bankshares Inc. will be merged to create the largest bank in Northern Virginia, the Washington bank holding company said yesterday.

Alexandria National Bank of Northern Virginia, Arlington Trust Company and Clarendon Bank and Trust will become one early next year.

The new bank will have assets of more than $700 million and 43 branches in the Virginia suburbs.

No name has been chosen for the merged bank, but it will not take thee name of any of the existing banks, said Jack W. Beddow, vice president and secretary of Financial General.

The merger is the first visible effect of the takeover of Financial General by associates of J. William Middendorf II, former Secretary of the Navy and Ambassador to The Nethherlands.

Middendorf's group acquired control of the company in April from International Bank of Washington, which linked the chain of banks under the leadership of George Olmstead, a retired army general.

Merger of the three suburban banks does not indicate that Financial General plans to combine all its Washington area banks, company officials said.

"These three banks physically fit together and can work together and can create some economies," said Beddow. "The merger makes them big enough and strong enough to be a significant factor in the area."

The merger bank will be able to loan up to $7 million - 10 per cent of its assets - to a single borrower, while none of the individual banks could loan more than about $2.5 million.

The bigger bank will also be able to offer business services the smaller banks could not afford and capitalize on business growth in Fairfax County, Beddow said.

From the consumer's point of view, the most important advantage will be additional branches and more convenience, he added. Although some branches of the three banks are in the same communities, there are no plans to close any offices.

The merged banks will have a single board of directors and a single chief executive, who is yet to be named.

Financial General does not own any of the three banks outright. It holds 83.9 per cent of the stock of the Alexandria bank, 80 per cent of the Arlington bank and 56 per cent of the Clarendon bank.

The minority stock of the Clarendon bank is widely held. No opposition to the merger is expected from minority owners of the three banks, Beddow said.

Approval of all three banks' boards, Virginia banking regulators and the Federal Deposit Insurance Corporation is required for the merger.

Though the Alexandria bank has a national charter, the merged institution will be a state bank. Restrictions of a federal charter outweight any advantages of creating a new national bank, Beddow explained.

A study of the possible merger of the three banks was started shortly after the change in management of Financial General.

In a recent interview, George Humphrey, vice president for operations, noted that there was "inherent cannibalization among the three.

"One of them opens a new branch and one of the others opens another branch right next to it. The question is, do we want that kind of duplication?" Humphrey said.

Arlington Trust is the largest of the three banks involved in the merger, with assets of as of June 30 of $277 million and deposits of $254 million. Clarendon Bank has assets of $249 million and deposits of $229 million. Alexandria National has assets of $150 million and deposits of $132 million.

Financial General's other local banks, which give it total deposits in the Washington area of $1.2 billion, are Union First National Bank of Washington, American Bank of Maryland, Eastern Shore National Bank, Chesapeake National Bank, Shenandoah Valley National Bank of Winchester, Valley National Bank of Harrisonburg, The Peoples National Bank of Leesburg, Round Hill National Bank and The First National Bank of Lexington.

With other banks in New York and Tennessee, Financial General's total deposits are $1.48 million and assets of $1.74 billion. For the six months ended June 30, the company had profits of $4.9 million compared to $4.35 million for the same period a year ago.

Financial General previously owned National Bank of Georgia, but sold it to Budget Director Bert Lance, whose borrowings to buy the bank are at the center of an investigation by the office of the Comptroller of the Currency.