In the banking industry there are two pretty clear choices, said analyst Lew Sosnowik of Koonce Securities in Rockville: "Either 'grow' or 'shrink.' "

While some bigger local names in banking are getting smaller, two small but profitable local banks that recently merged are trying for "grow," Sosnowik said.

Bankshares 2000 Inc. of McLean, the holding company for Bank 2000 N.A. of Tysons Corner and Bankstar N.A. of Reston, in April acquired Jefferson Bank and Trust Co., a Greenbelt-based bank with four suburban Maryland branches.

Although Bankshares 2000 had assets of about $70 million to $75 million before the acquisition, compared with Jefferson's $90 million to $95 million, it was really a "merger of equals," Sosnowik said.

Where Bankshares 2000 surpassed Jefferson, said president and chief executive Dennis J. Roberts, is where it had the resources to make the acquisition: It had about $9.6 million in working capital to Jefferson's $8.2 million.

Roberts said Bankshares's plan to become a $300 million to $400 million interstate banking institution in the next several years could not be fulfilled simply by opening more branches. Rather than acquiring a small bank with only $30 million to $40 million in assets, the company wanted a deal that would accelerate its growth, he said. Jefferson, he said, was the most natural candidate to set that ball rolling.

"I think if you had looked a year-and-a-half ago at Jefferson's business plans and Bank 2000's, you would have thought they were written by the same author," said Raymond G. LaPlaca, the former chairman of Jefferson, who now serves as chairman of the executive committee for Bankshares. "Our goal was to expand and penetrate the Virginia market, and their goal was to expand and penetrate the Maryland market."

Beside taking the banks into new markets, the transaction was financially attractive to both institutions, Sosnowik said. Bankshares 2000, which is traded on the over-the-counter market, took a step toward expansion, and Jefferson, whose shares were traded privately, became part of a publicly traded company.

"Jefferson was a very profitable, very well-run bank," Sosnowik said. "But their stock {had} a terrible market -- totally inefficient. They obtain in the process freely tradable stock. I think it's a good deal."

"Today, assets are $160 {million} to $165 million, and its capital is just under $18 million," Roberts said of the combined bank. Because it has more than double the minimum capital base in relation to its assets that is required under new laws, it is in a position to make "substantial" further acquisitions, he said.

"We have enough capital to acquire $100 million in assets. We will do that in the next 12 to 18 months," Roberts said.

In a few years, when the bank has achieved its growth and profitability goals, Roberts said, "it will be a very attractive institution -- a manageable bite for one of the regionals to come in" and acquire.

"We are not grooming the bank specifically to sell it," he said. "But we are not unmindful of the value that would place on our stock."

For now, however, the issues include coming up with a name for the newly expanded institution, which is still operating under pre-acquisition identities.

"We believe that ultimately the entity should have a common name, maybe with Jefferson in it in some form," LaPlaca said. "But that's up for grabs right now."