First American Bankshares, Inc. has placed itself in a potential no-win situation by taking on a small rural community in Loudoun County in a fight for control of The Round Hill National Bank.

In a test of wills and financial strength, First American Bankshares would be expected to prevail. Directors of a small rural bank have little chance of prevailing in a fight with a company whose owners spent four years and millions of dollars to win control of First American Bankshares and its 11 subsidiary banks.

Round Hill's directors are determined, nonetheless, to stick to their guns after rejecting First American Bankshares' proposal to merge the Loudoun County bank with a larger subsidiary, First American Bank of Virginia.

"The odds are stacked against us" and "it's a gutsy thing to do," concedes Dennis M. East, Round Hill National's president and chief executive.

Unlike Round Hill National, four other small Virginia banks in which the holding company owns a majority of the stock have agreed to merge with First American of Virginia. The mergers would accomplish the holding company's goal of making First American of Virginia a more competitive statewide institution with 90 offices and assets of $2 billion.

First American Bankshares owns 63 percent of the stock in Round Hill National and conceivably it could kick out the dissenters and elect a new board of directors at the bank's next annual meeting. But that hasn't deterred Round Hill National officials. They are determined to fight for a principle as well as for what they regard as their responsibility to minority stockholders.

In the process, directors of the bank have picked up support among citizens of Western Loudoun County who have launched a campaign to buy out First American Bankshares.

"We are not interested in selling and we are not going to sell," insists a First American Bankshares official, making it clear that there will be no yielding in that position.

In the end, taking on the $2.6 billion holding company may be nothing more than another quixotic venture. In the meantime, however, First American Bankshares runs the risk of damaging its image by playing hardball in this fight with a $30 million affiliate. Even if it wins the fight, it will have suffered a public relations setback in a community that doesn't take kindly to being bullied by powerful business interests.

First American Bankshares is seen as a threat to a way of life in rural Virginia. And some residents of this little community west of Leesburg have made it clear they don't want one of their banks controlled solely by city slickers from Washington.

Moreover, there is still some resentment just below the surface over the fact that First American is owned now by a consortium of Middle East investors.

Officially, directors of Round Hill National rejected the merger proposal because, they argue, it could reduce the market value of the stock held by minority shareholders.

Round Hill's stock is currently trading at $45 a share and the proposal called for an exchange of stock in which each Round Hill share would be converted into 1.05 shares of First American Bank. The bid price of the latter's stock is $37 a share.

"We felt our stockholders were looking at an immediate decline in their stock," East explained.

At the same time, he added, stockholders weren't given an opportunity to exchange their shares for cash.

But Round Hill's stockholders should accept the merger proposal, a First American Bankshares official counters, because their earnings and dividends would be greater. Moreover, he contends, "very small banks like that are going to find it difficult to keep up with the competition and all of the changes that are taking place. I think in the future, big banks will be able to give better service than small banks."

Not only are small banks able to survive in smaller markets, but they also are more sensitive to the needs of individual customers where character lending is a major part of doing business, East counters. "As long as we're making a reasonable return on our investment, why kick the little people?"

With only two offices, Round Hill "isn't that important in the overall scheme of things," a First American Bankshares official concedes.

Why, then, is First American Bankshares so opposed to selling it? It already owns Peoples National Bank in Leesburg and would not be giving up a presence in that market. What's more, even if it did sell Round Hill for an estimated $2 million, it wouldn't be precluded from opening a First American branch across the street from Round Hill National.

By taking the approach that it has, First American Bankshares could win this fight but lose the war to larger competitors who already have branches in Western Loudoun.