It probably would be difficult to find anyone in metropolitan Washington with any reasonable objection to the proposed merger of NS&T Bank into United Virginia Bankshares Inc., judging from initial reaction to the proposal.
The merger proposal is one of the more logical developments to emerge in today's banking maze and could establish a trend that is long overdue. That is not to say that D.C. banks should line up to be taken over by Virginia and Maryland banks. On the contrary, Riggs National Corp. or American Security Corp. could just as easily launch a bid to acquire a Maryland or Virginia bank, assuming that all three jurisdictions have reciprocal banking agreements.
That is one of the keys, of course, to eliminating the geographic boundaries that have restricted the market so long for D.C. banks. To be sure, momentum is building toward regional reciprocal banking among the three jurisdictions. Virginia has already enacted a regional interstate banking law. Maryland apparently is close to enacting one, and the District began the legislative process late last month.
Under such a law, a state would permit a bank to be acquired by an out-of-state bank holding company if the latter's home state agrees to reciprocity. The District, Maryland and Virginia have indicated they will participate in a multistate (mostly in the Southeast) reciprocal pact. Under the Douglas Amendment to the Bank Holding Company Act, bank holding companies may acquire other bank holding companies across state lines only if the states involved have enacted legislation approving such takeovers.
What that means is that the authority for the kind of merger that is being proposed by UVB and NS&T was there all along. It is the kind of agreement that could have and should have been struck long ago among banks in the region. But, if the authority was there, the vision and the initiative weren't.
Instead, D.C. bankers spent years railing against "artificial barriers" that prevented them from expanding in their "natural market," meaning the Maryland and Virginia suburbs outside the District. Conversely, Maryland and Virginia bankers have been free to bank anywhere in their respective states and, until recently, saw no advantage in gaining entry to the District.
In the interim, the District, as well as the entire metropolitan Washington area, has become more attractive as a source of commercial and consumer business. Moreover, the Washington-Baltimore common market, which includes Northern Virginia, is one of the country's fastest-growing areas. Key indicators, for the next decade at least, point to sustained growth in employment, per capita income and most major business sectors. The story is the same from Towson in Baltimore County, to Dulles International Airport in Northern Virginia.
That hasn't gone unnoticed by the big money-center banks, which have engaged in a heated race to locate nonbank banks, limited-service banks, full-service banks, loan production offices, credit card facilities and mortgage lending offices in the Washington-Baltimore corridor. Against that background, Baltimore and Richmond banks have stepped up the competition for corporate and retail customers.
So it was inevitable that the big Virginia and Maryland banks would try to extend their markets across state lines in the Washington-Baltimore corridor. Indeed, UVB "has made no secret of its desire to expand in three market areas," Chairman Joseph A. Jennings said last week. Maryland, he hinted not too subtly, is the third leg in UVB's growth strategy.
In its 1984 annual report, UVB noted that "if the Supreme Court, as we hope, upholds the states' rights to regionally limit interstate banking, we will be free to expand our natural markets, especially in the Washington, D.C., metropolitan area."
Critics of the regional pacts contend that full interstate banking would stimulate sharper competition and provide greater benefits to depositors and borrowers. Perhaps. Congress has approached the interstate banking question with all the deliberate speed of a turtle, however. Until it decides to approve full interstate banking, the best hope for consumers and depositors appears to be sharper competition created by a UVB and NS&T-type merger.
Backed by $6 billion in assets, UVB almost certainly would change the calibre of competition in this market. One of 16 U.S. bank holding companies grandfathered in the insurance business, UVB this year will begin offering automobile, homeowners and life insurance through direct mail and bank branches. At the same time, United Virginia Bank, through its two subsidiaries, Capitoline Investment Services and United Virginia Mortgage Corp., has accelerated its offerings in discount brokerage services and mortgage financing.
Not only would the competition be forced to respond to a merger between a UVB and NS&T or any combination of regional banks; the region's banking industry and economy also would be strengthened.