Three District banks and six Advisory Neighborhood Commissions (ANCs) are entangled in a dispute over attempts to locate a new banking facility on Capitol hill between Sherrill's Restaurant and the Trover Shop on Pennsylvania Avenue.

One of the two applicants, Security National Bank, has accused the other applicant, American Security Bank, of using "monopolistic and illegal tactics" to obtain the location.

That charge was made by officials of Security National in letters and affidavits on file with the office of the regional administrator of national banks in Richmond. Both Security National and American Security applied to the regional administrator last fall for approval to open a branch bank at 229 Pennsylvania Ave. SE.

American Security officials have denied that they acted improperly in arranging a loan for the purchase and renovation of the building at 229 Pennsylvania Ave. SE contingent upon a lease agreement for the building. The bank's representatives have also denied allegations by the six ANCs that American Security has been discriminatory in its lending policies.

Last month, Security National was granted permission to open a new branch "in the 200 blocks of Pennsylvania SE, not necessarily 229," Elger N. Fleenor Jr. said last week. Fleenor is regional director of corporate activities for the administrator of national banks. American Security's application to locate a branch at 229 Pennsylvania SE is still in the review stage and there is no indication when a decision on its application might be made.

Security National President Robert K. Koontz Jr. and the bank's attorney, Leonard C. Collins, stated in letters and during a public hearing Jan. 10 that Security National had arranged an "oral agreement" to lease the building at 229 Pennsylvania Ave. SE before the bank filed its application last Sept. 9.

American Security officials, according to the public record in the case, negotiated a written lease with the landlord, George Pennington, subsequent to Security National's filing its application.

Attorneys and officers for both banks - as well as for National Capital Bank of Washington, which has objected to both applicants - have refused to discuss the tangled situation and referred inquiries to statements already in the public record.

National Capital is located at 316 Pennsylvania Ave. SE. Its president, George A. Didden Jr., and its vice president, George A. Didden III, have filed a statement contending that a new banking facility on Capitol Hill would seriously weaken the bank's financial base and siphon off depositors.

Although American Security filed its application Oct. 19 - 40 days after Security National had filed for the location - American Security's application was accepted for review because it said American Security had obtained a letter of intent from the landlord of the building to lease space to American Security. The application further stated that American Security officials anticipated Security National's withdrawal of its earlier application because the site was no longer available to that bank.

Four days before American Security filed its application, the bank completed negotiations of a $450,000 real estate loan to Pennington to finance the acquisition and renovation of the building at 229 Pennsylvania SE, which formerly had a liquor store on the street level. A clause in that Oct. 15 loan agreement reads: "Loan is conditioned upon, among other things, the negotiation of a lease, or agreement to lease . . . approximately 2,200 square feet of space on street level and basement.".

"Therefore," said Security National lawyer Collins in a Feb. 11 letter to Fleenor, "there can be no business justification for American Security and Trust Co. (AS&T, the holding company for American Security) telling the owner that it would not make him a loan if he leased to Security National, and this is precisely what AS&T did."

However, affidavitts from William C. Yowell, AS&T vice president, John W. Stefant, American Security assistant vice president, Frank C. Sandow, AS&T assistant real estate officer, and Pennington all state that the four men met on Aug. 20 to discuss the possibility of American Security leasing space in the building Pennington was in the process of buying.

Yowell stated that he did not mention the loan to Pennington until the end of this meeting and "my comment on this subject was not intended as an inducement to Mr. Pennington to lease the property to American Security."

Pennington had been accused by both sides of vacillating between the two banks, but during a recent interview he sided with American Security.

"I didn't have any oral agreement with Security National," he said. "AS&T were the first ones to show an interest in the site."

But Pennington himself seems uncertain about when he informed Security National officials of the possible lease agreement with American Security. During an interview, Pennington said he informed Security National officials "the same day (Aug. 20) that AS&T had come to see me regarding the site."

In a Feb. 3 letter to Carl L. Gell, legal counsel for American Security, Pennington said he did not mention American Security's interest in obtaining a lease agreement to Security National officials until Sept. 8, the day before Security National filed its application.

Asked for clarification, Pennington later said, "It was very, very close" to the date when Security National filed its application that he first mentioned American Security's interest in the building to Security National.

"It seemed like it was almost instantaneous," he explained, "which surprised me because they (Security National) filed their application without even talking to me."

"Security National was in as good as position to negotiate a lease with me as American Security," Pennington said during the interview.

Pennington has been criticized by both sides. During the public hearing, American Security's Gell characterized him as "the real 'bad guy'" in the tangled lease dispute.

"He (Pennington) is obviously playing both sides against each other," one Security National representative said.

Pennington compared being caught between two competing banks to "being caught in the middle of a pack of bulldogs."

"American Security has been very forthright in this matter," he continued."And Security National has been very helpful to me getting started as a real estate developer in this town."

Pennington is a partner in Mar Penn Ltd., a commercial real estate firm that owns several properties on Capitol Hill "within two blocks of the Capitol." Security National has provided financing for several of the firm's projects, Pennington said, including construction of an office building complex at 1st and D Streets SE "which we will be breaking ground on in about 30 days."

Jonathan Brown, an attorney with Public Interest Research Group (PIRG) who is representing the six ANCs in this matter, said the commissions are not taking a position on which bank should be allowed to open a branch facility on Capitol Hill.

"What they (commissioners) are saying is that American Security shouldn't be allowed to expand until it does a better job in its existing branch facilities," Brown explained. "If they (American Security officials) agree to change some of their lending policies and make financing available to minorities on more liberal terms, then the ANCs will consider withdrawing their opposition to the branch."

The six ANC districts which have intervened in the case are: ANC IA in upper northwest; 2C which includes the downtown and part of the Shaw area; 4B in upper northwest; 5C in lower northeast; 6A on Capitol Hill, and 7D in Anacostia.

American Security, the second largest bank in the District, has 11 branch offices in the protesting neighborhoods. A study of the bank's lending policies, prepared by PIRG at the request of the ANCs, revealed that eight of the branch facilities obtain at least half of their deposits from the six neighborhoods.

The PIRG study concludes that:

American Security has a selective lending policy of "providing credit for home purchases almost exclusively to predominantly white neighborhoods and have avoided predominantly black neighborhoods."

American Security has refused to participate in FHA/VA insured mortgage loan programs and has greatly restricted its credit programs for the minority-owned small businesses in the six neighborhoods.

Asked to comment on the PIRG study, American Security's Gell said the study was not relevant to the branch application matter and stated the study's conclusions were based on "questionable data" and a "number of guesses."