Two major Virginia bank holding companies, Fidelity American Bankshares, Inc. of Lynchburg and Central National Corp. of Richmond yesterday announced plans to merge.

The merger would create the state's sixth largest banking institution, with assets of more than $1.5 billion and more than 120 branches throughout Virginia.

Fidelity American now ranks seventh among Virginia bank holding companies, with assets of $940 million and 81 branches of its 15 affiliated banks, all of which use the Fidelity American name.

Central National, with assets of $505 million, is Virginia's eighth largest. It owns seven banks - The Bank of Arlington, First Manassas Bank and Trust, Hamilton Bank and Trust, Central National Bank, City Savings Bank and Trust, Cavalier Central Bank and Trust and First National Bank of Yorktown.

Central National's planned acquisition of Citizens National Bank of Emporium, with assets of $30 million, also is pending.

No name has been chosen for the company created by the merger. In a joint announcement, the two companies said Alvin R. Clements, president of Fidelity, would become the chairman of the new bank and Carroll L. Saine, president of Central National, would become president.

Headquarters for the new company would be in Richmond, with executive offices in both Richmond and Lynchburg.

There is relatively little overlap of the communities now served by the two bank holding companies. After the merger they would have affiliates throughout Virginia's urban core, but would not be a major factor in the Washington suburbs.

In a joint statement, Clements and Saile said the affiliation "will improve our competitive position in relation to the larger state, regional and national banking organizations with which we presently compete."

The combination of the two banks - which has been agreed upon by their executive committee - still requires the drafting of a final agreement, securing the approval of both banks' boards and shareholders and getting federal regulatory consent.

Officials of both institutions refused yesterday to disclose which had initiated the merger, which is the latest in a long series of bank consolidations in Virginia.

The preliminary merger agreement calls for the newly formed company to issue 1 1/4 shares of stock for each of the 1,780,000 outstanding shares of Central National stock and one share for each share of Fidelity American's 2,591,000 outstanding shares. An additional share would be issued for each of the 52,000 shares of Fidelity's preferred convertible stock.

In the Virginia banking hierarchy, the new bank would rank, in total assets, behind United Virginia, Virginia National First and Merchants, Bank of Virginia and Dominion.