Officials of NS&T Bankshares Inc. and United Virginia Bankshares Inc. asked the D.C. City Council yesterday to adopt emergency interstate banking legislation that would enable the two banks to merge by the end of the year.
Without the special legislation, United Virginia, which plans to acquire NS&T, could lose about $4 million in earnings in 1986 under a provision in President Reagan's tax reform proposal pending in Congress.
That provision would prevent banks from deducting the interest on liabilities they incur to purchase tax-exempt bonds. The NS&T company holds $115 million in tax-free municipal and industrial revenue bonds. Even if the tax proposal passes, the tax benefit from the bonds would pass to United Virginia if the merger takes place before Jan. 1.
The merger application, which was discussed during a City Council committee hearing, is the first such application received since the council approved regional interstate banking legislation last month to allow banks in the District and 12 southeastern states to acquire each other.
But that legislation will not become law until a 30-day congressional review period ends on Nov. 22. The emergency legislation is needed to shorten the required council review period to enable bank officials to meet requirements of the Federal Reserve Board and the. Justice Department by Dec. 31.
Council member Charlene Drew Jarvis (D-Ward 4), chairman of the Housing and Economic Development Committee, which held the hearing, said she favors some type of action to speed up the merger process.
"I think this has been a fairly good merger proposal," said Jarvis. "The base of operation will remain in the District, other employes will be brought into the District and the loan line for a single project would be $60 million rather than the $10 million now offered by NS&T."
John Mason, chairman and chief executive officer for NS&T, said the two bank holding companies are "scrambling" to complete the merger and that emergency council action is crucial. If the merger is not completed by Dec. 31, the two bank boards would "have to review their willingness to sell and buy," Mason said.
Meanwhile, Jarvis is still trying to resolve the issue of whether the nation's largest banks, known as money centers, should be allowed to provide full banking services in the District under certain conditions.
Mayor Marion Barry vetoed the interstate banking bill after the City Council rejected proposals to allow banks outside the 12-state region to provide full banking services here after two years, or earlier if they make a substantial financial commitment to projects in distressed areas of the city.
The council overrode the veto, and Jarvis promised that within 30 days she would resolve the controversy in a separate bill aimed at creating a banking commission.
Jarvis said yesterday she is drafting legislation but said the merger proposal has delayed her efforts to strike a compromise between local banks and money centers.
Recommendations submitted to Jarvis by the D.C. Bankers Association indicated that local banks remain opposed to allowing money centers to compete with them for deposits.
Local bank officials suggested that banks outside the region be allowed to acquire existing banks rather than open new ones, provided they make economic commitments in advance.
"We have sent her what we consider negotiating points," said Michael Ryan, president of the D.C. Bankers Association. "I think the fact that we have some guidelines for talking is good, but in terms of substantial progress, we haven't made any yet."