Mt. Washington Bank last week opened a new branch in Boston’s Andrew Square.

Like a nimble guard threading his way through the giants on a basketball court, community banks in the Hub are finding the open spots.

The grand opening of a new branch in Andrew Square last Thursday by Mt. Washington Bank is just the latest example disproving predictions made several years ago that, with continued consolidation in the industry, large regional banks would push community-sized banks almost entirely out of Boston proper.

Indeed, considering FleetBoston Financial’s network of thousands of ATMs, the growing reach of Citizens Bank and the entry of Sovereign Bank into the city, what portion of the market share can a small bank with a limited advertising budget hope to gain?

Quite a lot, according to local bank executives.

Far from shutting community banks out, merger and acquisition activity at larger banks has led to disenfranchisement of individual consumers and opened new niche opportunities for smaller institutions, say industry watchers. From the BankBoston and Fleet merger right through the latest round of M&A activity such as Citizens Bank with Mellon Financial Corp. and Banknorth Group’s ravenous march through New England, each change in ownership leads a certain number of customers to reevaluate their banking relationships.

There are great numbers of people in the Boston’s neighborhoods looking for a personalized approach to banking, said Edward Merritt, president and chief executive officer of Mt. Washington. That boils down to the ability of community banks to deliver quick, local decision-making on loans and individualized attention.

“I think we put a huge premium on customer service. Some people may say it’s hokey or old-fashioned, but any time you go into a shop or a restaurant, if the person waiting on you smiles and says, ‘Thank you very much, I appreciate your business,’ that means a lot to people,” said Merritt.

During the three years Merritt has served as CEO of Mt. Washington, the bank has grown from $150 million in total assets to $270 million. The Andrew Square location will be the bank’s third branch. In addition to the drive-up ATM, there are two drive-up lanes. The location formerly was a vacant lot and the area was severely underserved in the banking arena, according to Merritt.

“Andrew Square is an area of South Boston that was always considered to be the lower-income part of South Boston,” he said. “It’s just an area that nobody ever paid attention to. We have.”

“Mt. Washington has moved into a neighborhood that has been looking for a stabilizing force,” said Michael Flaherty, Boston City Council president. “Andrew Square is the doorway to South Boston, Dorchester and Roxbury, and I credit Mt. Washington for their willingness to go into an area where larger banks seem to ignore.”

Merritt credits the ability of community banks to remain in the playground of the super-asset regionals to customer disenfranchisement, a downward trend in technology costs and an emphasis on customer service. Those attributes allow smaller banks to compete with the Goliath-like advertising budgets of the competition, which they cannot hope to match.

“The biggest disadvantage that we have is people don’t know us,” said Merritt. “Let’s face it, I can’t afford to have a billboard on Fenway Park.” But word of mouth and referrals from happy customers help.

‘Difficult Environment’

As the large banks flood the market with advertising, it’s difficult for a smaller bank to get the word out that they offer equally sophisticated products, said Merritt. He suggests thinking about the situation in political terms.

“Some politicians may spend a lot of money in advertising and others may go door to door. We’re more of a door-to-door [bank],” he said.

But an executive at a larger community bank said while the technology is affordable, that alone isn’t enough.

“Yes, [the products] are less expensive and more readily available for the small banks, but you still have to have a great deal of expertise to deliver the products correctly,” said Mark Primeau, executive vice president and director of consumer banking at Boston-based Eastern Bank.

In order to run offerings such as treasury services and cash management products that may be in demand for corporate clients, banks must hire highly trained employees. Smaller banks may not have the depth of staffing necessary to back up the product, he said.

Another problem with technology for small banks is the service provider, said Robert F. Verdonck, president and CEO of East Boston Savings Bank. The smaller banks tend to have contracts with national service providers that update systems and software every three years. While that’s a boon to customers, it’s sometimes necessary to replace hardware, often resulting in a major cost to a small bank, said Verdonck.

Community banks have held their own in the Hub, however.

Instead of shying away from the city, Eastern Bank implemented a strategy in 1997 that would transplant the heart of their institution from their Lynn home to Boston’s bustling Financial District.

“We realized from a commercial lending and commercial banking point of view that most of the support services and referral sources were based in Boston,” said Primeau, referring to law and accounting offices. After moving segments of its bank to Boston, about two years ago Eastern’s headquarters also moved into the city.

Its recent move to a more permanent location at 265 Franklin St. in the Hub signaled how well the strategy has worked for Eastern. “Fabulously,” said Primeau.

Of Eastern’s 47 retail branches, three are located in Boston.

“We see opportunity. It’s a difficult environment and it’s very difficult to expand with branches in Greater Boston because it is a very well-developed marketplace,” said Primeau. But the effects of regional consolidations continue to play another part in the ability of smaller banks to compete in the city marketplace. Dissatisfied and downsized workers from the large regionals have now found work with smaller banks, bringing with them high levels of expertise. Primeau said he doubts Eastern could attract as many highly qualified candidates if positions at the bank required a daily commute to the North Shore.

Additionally, Primeau said customers, especially at the commercial level, know that Eastern is not going to be sold out from under them anytime soon.

Publicly held community banks have also come to be seen as a safe haven and a good investment in these volatile times, said Bruce Spitzer, spokesman for the Massachusetts Bankers Association. “Their asset quality is really good,” he said, adding that low rates have also helped boost business.

Despite the good news for community banks, the fact remains that larger regional banks are successful in metropolitan areas such as Boston and New York, said James J. Clarke, an banking industry expert and principal of Clarke Consulting in Villanova, Pa. Community banks tend to perform best in suburban and rural areas. Generally large banks garner critical mass in city advertising, he said.

“As always, there are exceptions. The Boston community banks seem to be doing fine with enough market share to remain successful and competitive,” said Clarke.

While the big banks handle the big-credit customers and other business accounts, Verdonck said he thinks they’ll be hard-pressed to win back those customers they alienated with the consolidations.

“They’ve [large regional banks] let the retail side and retail customer go for so long that they themselves have said they are making this new initiative to win back customers,” said Verdonck.

East Boston Savings’ neighbor branch in Winthrop has changed its name five times in 15 years, causing customer frustration levels to continually rise and eventually, in many cases, triggering a switch in banks, he said.