As invading British troops approached Washington in 1814, the cashier at what would eventually become American Security Bank was ordered by bank officials to take the deposits and flee to the Bank of Hagerstown, 50 miles away in Maryland.

Now, nearly two centuries later, in an ironic twist of fate, American Security may be moving permanently to Maryland. As previously reported, MNC Financial Inc., of Baltimore, the parent company of American Security, is seeking permission from federal regulators to merge it into Maryland National Bank and move American Security's headquarters to Silver Spring.

The merger is necessary, MNC says, to eliminate duplication at the two subsidiary banks, reduce costs and improve earnings at the holding company, which has been jolted this year by a string of losses stemming mainly from sour real estate loans.

Under the proposed merger, American Security executives would remain at the bank's Washington headquarters and its branch network would remain intact under the same name.

Keeping a few executives in the District and retaining the American Security name would merely be cosmetic changes for the sake of public relations. In truth, the institution, which officially became American Security & Trust Co. 101 years ago this month, will cease to exist if regulatory approval for the merger with Maryland National is granted.

Like it or not, Washington may be about to lose another institution, adding to a lengthy list of banks, prominent retail establishments and others that have either failed or been bought out by outsiders in recent years. If American Security -- the District's second largest bank -- is merged into Maryland National, it will join the third and fourth largest banks that have disappeared in four years.

It's unfortunate that American Security has reached this stage. It has played a prominent role in helping to build the District and its suburbs. But for regulators to deny MNC's request to merge American Security and Maryland National would be inviting trouble, possibly leading to a federal bailout.

Troublesome real estate loans have severely damaged MNC financially, eroding investor confidence in the process. Only quick action by MNC to eliminate redundancy at its two principal subsidiaries and achieve savings will assure the viability of the organization.

The only issue that possibly stands in the way of MNC's request to regulators at this point is a federal law banning interstate mergers of national banks. In this case, however, the issue is moot and has been since 1987, when MNC's predecessor, Maryland National Corp., received approval to acquire American Security in a regional interstate merger.

Any concerns about market dominance would be just as ludicrous. MNC, which already controls American Security, is, after all, the largest bank holding company in the region.

American Security may have been permitted to operate autonomously to some extent after the 1987 merger, but there really never was any doubt that control of the bank rested in Baltimore. So a move to consolidate American Security with Maryland National Bank was inevitable, even though officials insisted after the takeover by MNC that the two banks would operate as separate subsidiaries. Some redundancies were eliminated, but apparently not nearly enough.

The architects of the 1987 merger -- former MNC chairman Alan P. Hoblitzell Jr. and American Security Chairman Daniel J. Callahan III -- went out of their way to emphasize the partnership's importance in the merger, one that most analysts described as a "perfect fit."

In theory it was a perfect fit. But the policies and strategies implemented by MNC and the two banks in the interim following the merger had serious flaws, as recent events have demonstrated. MNC has lost more than $240 million so far this year, a startling turn of fortune that officials attribute to the drastic downturn in the commercial real estate market.

Maryland National's and American Security's commercial loan portfolios have been battered by nonperforming real estate assets. Traditionally a major source of commercial loans, American Security has been especially hard hit by the disaster in the real estate sector. Like so many others in the industry, bankers at American Security and Maryland National rolled the dice with real estate speculators and lost big. It wasn't a question of wrongdoing. Loan officers, directors and management erred terribly in their judgment and allowed the quest for fees and higher profit to undermine established banking policies.

Now that Hoblitzell has escaped the flow of more red ink at MNC by resigning, Alfred Lerner, the new chairman and biggest stockholder of the company, wants to shore up weak spots by restructuring and cutting costs. He has no other choice.

Surely, American Security's board must have known when it approved the merger with MNC three years ago that further consolidation with Maryland National was inevitable. They and their counterparts at Maryland National may have hastened the time for it to occur.

To its credit, American Security, perhaps more than any bank in the District, added substance to the term corporate citizenship. Under Callahan it became a pioneer among local banks in financing the rehabilitation of housing in under-served communities in the District. Through its community lending group, American Security provided financing for neighborhood-based and small development projects in communities throughout the city, but primarily in the Anacostia area. By the end of the third year after starting the program in 1986, American Security had committed more than $200 million to those projects.

Even in a major restructuring of MNC, there can be no justification for ending American Security's role in fostering that kind of economic development in the District. In fact, it should be expected as long as MNC operates branches in the District, regardless of the name of the institution.

In last Thursday's column on competition among supermarket chains operating in the Washington area, some were said to be privately owned and therefore not required to make public their sales and earnings. The stock of Safeway Stores Inc., which became a private company in 1986, is again available to the public. Safeway, however, doesn't report sales and earnings individually for markets in which its stores are located.