THE OLD SIGNS HAVE JUST COME down from the 23 branch offices of the Syracuse Savings Bank, the oldest and most venerable financial institution in this upstate New York city of 643,000 souls. Since 1849, the bank has been a pillar of the Syracuse business establishment. But from now on, Syracuse Savings will be part of Norstar Bancorp Inc., the "Beast of the East," as it is known in the banking community -- an $11-billion regional powerhouse based in Albany. And starting next month, Norstar itself is slated to lose its independence when it joins forces with Providence-based Fleet Financial Group to form a superregional bank with $25 billion in assets.

Welcome to the brave new world of bigbank banking. Thanks to computer technology, government deregulation, bank failures, and competition from other financial institutions, consolidation is the name of the game in banking these days. By one estimate, the number of U.S. banks could drop from about 15,000 to 5,000 by the end of this century. And the prospect raises some profound and disturbing questions for American business owners and Washington policymakers.

The common fear is that big banks and small business just don't mix very well. Loan authority becomes centralized in faraway headquarters where decisions are made by number-crunching young M.B.A.s who know nothing about you, your business, or your community. And as part of the culture of large institutions, loan officers rotate from place to place and job to job, so that just when you think you've got one trained, another takes his place.

"Lending to small business is very tough," explains Oklahoma banker Bob McCormick, "because the most important part of the underwriting process is the evaluation of management. It is subjective, it is personal, and it takes time and effort by an experienced person. But with consolidation, I think you'll see that kind of personal touch go by the boards."

McCormick is president of Stillwater National Bank & Trust Co. (see "Smart Money," January 1986) and a past president of the Independent Bankers Association of America. Over the years, he has made something of a crusade against what he calls, ominniously, the "evils of bank consolidation." And he thinks the federal government should stop it before it threatens the very sector of the U.S. economy that lately has been producing all the new jobs and most of the new products.

"One reason small companies do so well in the United States is that we have thousands of small banks for them to work with," McCormick says. "And if those small banks disappear and you have to go into Bank of America, say, to find your loan, you are hurting."

Only time will tell if his gloomy predictions prove valid. In many areas, the first round of bank consolidation has only just begun. But it may be possible to take a glimpse further into the future in a place like Syracuse, where the proximity of New York City's megabanks has already made bank consolidation a small-business reality.

It has been more than a decade since New York State ushered in the era of bank deregulation. In 1976 the state legislature, over the objections of independent bankers and business owners, abolished the banking districts that had made it difficult for the Manhattan megabanks to move upstate. Cities such as Syracuse seemed easy pickings for the likes of Citibank, Chase Manhattan, Chemical Bank, and Manufacturers Hanover. Local bankers braced themselves for the invasion.

"Those big banks came up thinking they were going to blow away the locals," says a Syracuse banker who lived through it. "They thought everyone would want to do business with them because of their size. And it was almost the reverse reaction. The people here were comfortable with their banks, they felt loyalty to them, and they didn't switch."

Manhattan bankers may be callous, but they aren't stupid, and before long most found themselves paring back their Syracuse plans. Chase, however, came up with a different strategy: if you can't beat 'em, buy 'em. Faced with lackluster performance in Syracuse under its own name, in 1984 Chase Manhattan Corp. purchased the Rochester-based Lincoln First Banks Inc., with its 25 or so branches in the Syracuse area alone. In deference to local sensibilities, the new operation was called Chase Lincoln First Bank, and bank officers were told to continue to answer to a regional headquarters in Rochester.

Even before the change in state law, however, the colonization of Syracuse had already begun. Irving Trust Co. used its holding company to buy up the 17-branch Merchants National Bank & Trust Co. of Syracuse, and The Bank of New York had taken over Metropolitan National Bank of Syracuse. From Albany, the old National Commercial Bank & Trust Co. snatched up the 30-brach First Trust & Deposit Co. in Syracuse in 1971, later renaming the combined organization KeyCorp. And Buffalo's giant Marine Midland Banks, which was most recently a subsidiary of Hongkong & Shanghai Banking, had been operating more than a dozen branches in Syracuse since the 1950s.

As a result of these buys, and Norstar's purchase of Syracuse Savings, the big-bank sweep is now virtually complete in Syracuse. Within a 50-mile radius of the city, only two small banks and a few savings institutions remain independent. "Things are pretty well picked over," says an attorney who handles KeyCorp's acquisitions.

But if small banking is dead in Syracuse, small business definitely is not. Although the city's start-ups are relatively few, the annual INC. survey of metropolitan areas shows a healthy percentage of fast-growth companies among them. And although many of the business owners I spoke with have had their troubles with the big banking outfits, they've found that, so far, there has been enough competition among the banks to provide for their needs eventually.

When Jake Berdan bought EDRO Business Forms Inc. 15 years ago, for example, his bank was First Trust & Deposit. After First Trust was bought by KeyCorp and renamed Key Bank, "we just stuck with them," he says. "The personnel was the same, and I could see no change in their operations for the first 8 or 10 years. I had a good loan officer, and he took a real personal interest in us."

Since then, EDRO, a printer of customized business forms, has grown to 29 employees and annual sales of $1.7 million. Now, with three sons in the business, Berdan sees this as a perfect time to expand into the printing of continuous computer-printout forms, which he now brokers out of state. His problem: after eight months of consideration, Key Bank still wouldn't lend him $200,000 for the new press.

"I just feel that he doesn't understand what I'm talking about," says Berdan. "He has no enthusiasm for this piece of equipment. So I may have to go elsewhere to arrange my financing."

Berdan looks back somewhat longingly to the good old days of First Trust & Deposit, when he thinks this loan request would have been a pro forma matter. And he can't help but think that the reason for the bank's indifference has to do with the fact that his company is small.

Martin Yenawine's Eastern Ambulance Service Inc. is also small -- $2.7 million in sales last year. And because ambulances wear out every four years, banking is almost always on his mind. His bank is Norstar, and although he has been through three loan officers in seven years, he has few complaints.

"The thing is, we work at it," explains Yenawine. "As soon as we know we are getting a new banker, we ask the old banker to bring the new guy down to see us. A small firm that wants a successful relationship with a big bank has to constantly work at it -- just as hard as the bankers do."

And, indeed, Syracuse's big banks have been working at it. For the most part, they quickly learned to adapt their procedures to the sensibilities of local business owners. Bank officials in each region are allowed to set their own policies, develop their own products, and make their own loans -- as long as overall performance is in line.

"When Irving bought Merchants National, it promised that it would let Merchants run with relative autonomy," says Roger W. Eck. "A lot of bankers, myself included, were skeptical of that. But it turned out to be the case. We make our own loans up to about $4 million per customer. That's going to handle most small and midsize firms, and we compete for that market very aggressively -- frankly, it's quite profitable."

As Eck speaks, he is sitting in the office of Mike Busse, president of Microwave Systems Inc., in East Syracuse. Busse listens and nods in agreement. Two years ago, when he bought Microwave in a leveraged buyout from a Virginia company, it was Merchants that saw him through.

"When I walked into the bank and sat down with a loan officer, I told him what I wanted to do with the company," Busse remembers. "I had no money. I said I needed at least $100,000, and I really needed $400,000 on top of that. And the bank didn't throw me out."

At the time, Microwave was in sorry shape -- "essentially bankrupt," Busse admits. "Other than myself, there were three employees -- the former president and his daughter, who were on their way out, and a foreign-born engineer who couldn't be cleared for defense work. How many banks would take a flyer on something like that?"

Merchants stood him $100,000 at a time when even the Small Business Administration thought him too risky. And the rest of the buyout was financed by the seller. "We didn't do it stupidly," explains Dave DiRoma, the banker who handled the deal. "We felt there were sufficient personal assets to cover our tails." Nonetheless, Busse so liked the way DiRoma finessed the package that he hired him away from the bank to be his chief financial officer.

The bank's gamble has paid off handsomely. Busse now has 30 employees making customized electronics components for everything from TV sets to navy antisubmarine aircraft. He expects to do $2 million this year and projects $9 million by 1989. Merchants has upped his line of bank credit from $100,000 to $200,000.

More money, more sophistication, more competition -- these have always been the promises held out for a deregulated, bigbank environment. And yet for every Mike Busse you meet in Syracuse who's pleased with how things have turned out, you also meet someone like Tom Holmes.

T.A. Holmes Inc. fabricates the clear plastic bulk-food bins that you see in supermarkets. The company operates from a low, nondescript building on the east side of the city, and while its growth has not exactly set the world on fire -- sales last year were $600,000 -- it has done well enough to provide its owner with a comfortable living.

Holmes used to bank with Key Bank but grew restless after it rejected his application for $50,000 in working capital. As it happened, Citibank was just opening up in Syracuse and was hungry for new business, and Holmes got his line of credit there. But several years later, he noticed a shift in Citibank's attitude.

"I think they decided that, hey, this small-business stuff isn't too attractive," he says. "So they handed their small-business customers to the same guy who handled used-car loans. I'd be in there to discuss what was to me a terribly important matter, and the phone would ring. He'd pick it up, and I'd hear him say, '. . . a '77 Chrysler -- wait a minute. . . .' After that, I got out of Citibank fast."

Holmes ended up at the Bank of New York. He borrowed $70,000 to help finance his move to larger quarters and his switch from distribution to fabrication. When Syracuse's six Bank of New York outlets were bought by Norstar recently, Holmes saw few changes. Even his loan officer remained the same -- "they just gave him a different sweatshirt to wear to the softball games."

But 1986 proved to be a dismal year for Holmes's firm. His best salesman suffered serious health problems; his son, his right-hand man, up and quit; and Holmes had to fire his bookkeeper. The company lost nearly $50,000 that year, and Holmes had to put in $40,000 of his own funds to tide things over. And although in five years he never missed a payment to the bank (a few were late, he concedes), Norstar apparently wasn't satisfied.

"They came in not long ago and wanted additional collateral -- a mortgage on my house and my summer place," Holmes says. "And worse, they wanted me to pay the $1,000 to have the papers drawn up. That's what really galled me." But Holmes, for all his anger, is now complying with the bank's demands.

"My hunch is that Norstar laid out all this dough for acquisitions, then made the decision to really tighten up and get their risks as close to zero as possible," concludes Holmes. "I think that's the trouble when banks get out-of-sight bigger. Their disregard for individual situations becomes accentuated. They lose the feel for the man, the owner. You become just a number."

Holly Barlow Burns and Carroll Murray Palmer know the feeling. When their six-person advertising agency, Barlow Murray Advertising Inc., outgrew its offices, they shopped for a $200,000 loan to refurbish a large Victorian house, hard by the sprawling campus of Syracuse University. Key Bank was swift to offer the funds.

"Key was quick with a decision, but then they proceeded to give us a hard time as we progressed with the renovation -- they just hassled us right down the line," says Burns. "We drew money as we went along, until we got down to the $20,000 to finish the top floor. And they refused to give it to us until we had a tenant for it. We told them we couldn't get a tenant until it was finished. And they said, 'Too bad.' It was absurd."

Instead of fighting, the two marched out to Skaneateles Savings Bank, one of the area's few remaining small independents, less than half an hour's drive from Syracuse. In less than a week, the bank agreed to lend them $210,000 -- enough to pay off the loan to Key Bank, complete the renovation, and help recoup some of the personal funds they had invested in the project. And things have been copacetic ever since.

Even today, Burns complains about the annual turnover in loan officers she experienced at Key Bank -- a situation that had led to problems even before the renovation. "We had a $10,000 line of credit with Key, and our last lending officer -- he was really a disaster -- just let it slip through the cracks," she remembers. "We called to see if we could increase our line of credit to $50,000, so we could buy some equipment, and he said, 'Well, your line of credit is no longer in existence.' He said we hadn't updated our financial information. We suggested that he might have called to remind us. So we took a new line of credit from the bank in Skaneateles, and Key has never even bothered to call to see why we aren't doing business with them anymore."

Burns and Palmer are not the only Syracuse business owners I found to have opted for a nearby independent country bank. Out in Cazenovia, a picturesque lakeside village half an hour southeast of the city, Nicholas Christakos's Continental Cordage Corp. sells cords and braided-wire products for every-thing from venetian blinds to windshield-defogging systems. His customers include IBM, General Electric, 3M, General Dynamics, and Boeing. And his bank is the tiny State Bank of Chittenango.

Back in the early days, when Continental Cordage was based in a Quonset hut and funded by $85,000 of his own money, Christakos went to Key Bank for a modest loan. The local branch manager in Cazenovia said that all he could do was give him a $5,000 line of credit on his MasterCard. "That was my very first business loan, and I will never forgive them for the way they handled it," Christakos says.

Two years later, a stranger walked into the Quonset hut on Good Friday afternoon. His name was Bob MacDonald, and he was president of the State Bank of Chittenango. He wanted to do business with Continental Cordage. Christakos remembers being flattered by the call.

"We were very small then, and we needed $25,000 in a hurry to buy some machinery, and he loaned it to us virtually that same day," he recalls. "Then he said, 'Why don't I give you a line of credit?' So he gave us one for $75,000. The funny thing was, right after that, we learned of another machinery deal, for $95,000, down in Albany. We had to move on it or we'd lose it. I called him and he said, 'I'll have to run it by the board, but you guys go ahead with the deal; you'll end up with it.' So we went ahead with the negotiations, and we got the loan."

These days, now that he has annual sales of $7 million, all the big banks are knocking on Christakos's door wanting to loan him money. They point out that an independent such as State Bank of Chittenango, with only $35 million in assets, has limits on how much it can lend him, and possesses little sophistication when it comes to things like international letters of credit. The big banks also remind him that their loan rates can be as much as two percentage points below what State Bank of Chittenango is charging him. But Christakos isn't impressed. It would take a team of wild horses to drag him away.

Wild horses, that is, or an acquisition. For what worries Christakos most about his bank is that, sooner or later, some megabank will zero in on the profitable little Chittenango bank. President Bob MacDonald says so far there have been no formal offers. But some of the big boys have been around, he adds, "kind of kicking the tires."

Does big banking spell the end for small business? Probably not, if this unscientific sampling is any indication. In Syracuse today there are big banks that take risks, show loyalty to customers, and keep an eye on service, and there are big banks that don't.

Whether it is desirable or not, the trend toward ever bigger banks seems as inevitable as the changing seasons. The Reagan Administration is content to let the consolidation continue, while Congress has been reluctant to intervene. At the Federal Reserve Board, the idea of prohibiting mergers among the country's 10, 25, or 50 largest banks has been tossed around, but as yet there is no consensus on how much consolidation is too much.

Stillwater National Bank's Bob McCormick probably overstates the case when he warns that big banking threatens the viability of America's small-business economy. But in raising the issue, he expresses a common fear -- a fear about excessive concentration of economic power -- that has kept national banking at bay since the days of Andrew Jackson. There may now be some good reasons for setting aside some of those fears and proceeding with bank deregulation. But as we learned with telephones and airlines, deregulating an industry shouldn't be the same as ignoring it. Banking is too important to be left simply to the bankers.