Ken Yount removes Wachovia signage at an Arlington branch as the bank begins the transition to Wells Fargo. (Jeffrey MacMillan/Capital Business)

A white tarp, emblazoned with Wachovia’s blue-and-green emblem, covers the pylon sign that for years hailed drivers on Old Dominion Drive to the bank branch in McLean. The crimson outline of Wells Fargo’s insignia peeks beneath the canvas, teasing the rebranding efforts underway in the Washington area.

The McLean branch is one of 175 locations in Virginia in recent weeks to have its sign swapped out and shrouded as the Wells Fargo stagecoach rolls into the region. All vestiges of Wachovia in Virginia will disappear by August, and in Maryland and the District by September, officially making Wells Fargo the largest bank in the Washington area.

The bank’s $15.1 billion purchase of Wachovia in late 2008 created a branch network that, after some pruning, adds up to more than 9,000 stores from coast to coast.

That deal capped months of frenzied, and often forced, mega-mergers to salvage the crumbling banking sector. While analysts say the industry is unlikely to see another wave of such unions soon, the realignment of local banking franchises is probably not through. Many anticipate that some of the regional players will merge or buy community banks as competition heats up and regulatory changes take root.

The dealmaking is not without risk. In this area’s competitive banking environment, a haphazard conversion can cost a bank customers.

Send in the wagon

Wells Fargo is well aware of that possibility. It spent nearly three years acclimating Wachovia customers to its services, while integrating existing products and offering new ones, such as a broader suite of insurance products. All but the local deposit system have been replaced by Wells Fargo systems at this point.

Converting one region at a time has taught the bank a few things along the way. After a flood of customer complaints in Georgia, for instance, Wells Fargo stopped replacing Wachovia-branded ATM cards unless they were due to expire.

Now that Wells Fargo is set to wrap up the entire conversion in mid-October the process has become far smoother, said Mike Golden, greater Washington regional president.

“It is really a nonevent for our customers,” he said. “We already have bridges built from the Wachovia system to the Wells system.”

Customers, he said, should expect no new fees upon conversion, though that’s not a guarantee they won’t pop up in the future. For instance, rules governing the exchange rate for debit cards could prompt changes.

“Every bank is looking at its fee structure to see what makes sense,” he said.

Some products will go away. Wells Fargo is discontinuing Wachovia’s free checking for new customers.

The most obvious changes will be cosmetic. All 117 Wachovia branches in the Washington area will don Wells Fargo’s red-and-gold colors on their walls and new lobby furniture. Of those outlets, about 35 percent will be fully remodeled with open floor plans, gold-flecked carpeting and a concierge station. About 28 stores will have murals depicting a community’s history.

Customers may also take notice of the increase in personnel, as some branches will have seven tellers instead of three. A key tenet of Wells Fargo’s banking model is cross-selling products. To that end, the bank is keen on robust staffing and has been adding employees at Wachovia since completing the merger.

In March, it put out the call in the Washington area for 500 tellers, lead tellers, personal bankers, regional bank private bankers and store managers. Golden said the bank has filled all but 100 of those jobs to date. The idea is to have the new staff fully trained before concluding the conversion.

“We want every household to have eight products with us,” Golden said. “That sales session takes time, and if you’ve got five customers waiting to see three bankers they’ll get frustrated and leave. So we have to have an adequate staff to service the needs of our business.”

Room to grow

William F. Hickey, principal and co-head of the investment banking group at Sandler O’Neill, estimates that banks in the Washington area are organically “growing at 3 to 4 percent right now, but anything beyond that is taking share from somebody else.”

Hickey said, “Everybody is struggling with growth right now.”

So where does that leave the region’s largest bank?

Wachovia/Wells Fargo may have $19.6 billion in assets locally, but its footprint could stand to grow. The bank has a robust 292 branches in Virginia, but a paltry 30 stores in the District and 82 sites in Maryland.

Golden said Wells Fargo is open to filling in gaps where needed, though he doesn’t see many in this marketplace. What the bank is focused on is increasing its network of ATMs and reshuffling some locations to better serve local communities. In July, for instance, the bank is relocating one of its downtown D.C. branches three blocks away, where demand is greater. Golden said the company is also gearing up to introduce a new design layout at roughly half of its locations in the District, though he declined to share details yet.

Marriages of convenience

The integration of Wells Fargo and Wachovia, following Capital One’s conversion of Chevy Chase and PNC’s absorption of Riggs National Bank, may be the Washington area’s last major conversion for a while. Still, analysts anticipate a dawn of smaller bank unions. Though bank failures have largely abated, there are still institutions across the country that are grappling with troubled assets and teetering.

That scenario may not play out in the Washington area, where the healthy local economy shielded the banking sector from the brunt of the pain felt elsewhere. But amid heightened competition, area institutions may simply find it advantageous to pair up.

“If you are going to remain profitable and competitive, maybe you don’t have to grow to be the size of Bank of America, but you may have to grow beyond the size of say Burke & Herbert,” said Goodwin Procter banking attorney Robert M. Kurucza. “The question is, where do you look to for that growth?”

Snagging a small institution with a healthy asset base, he said, may be less expensive than organic growth, but it still comes at a premium. Kurucza, like many industry observers, sees a bull’s-eye painted on institutions with less than $1 billion in assets, such as Alliance Bank Corp. in Chantilly. In its recent earnings report, Alliance President William E. Doyle Jr. said the bank is currently focused on “optimizing profitability while investing in repositioning the company for increased success in an improving economy.”

Hickey, however, expects the new regulatory environment will increase the cost of doing business and drive smaller banks into each other’s arms.

“It will become difficult for them to perform at a profitability level that is exciting to investors,” he said. “Banking, more so than ever, is an economy of scale business.”