Virginia's Dominion Bankshares Buys Tennessee Bank under New State Law

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Virginia's Dominion Bankshares Buys Tennessee Bank Under New State Law

In the first interstate acquisition of a Tennessee bank since the passage of a new regional banking law in that state in 1985, Dominion Bankshares Corp. in Roanoke, Va., said Thursday it will acquire Nashville City Bank & Trust Co. for $102.9 million in common stock.

The deal did not come cheaply for the $5.1 billion-asset Dominion. The total purchase price represents about 2.6 times Nashville City's equity capital at yearend and 20.3 times its 1985 earnings.

While the proposed acquisition marks the first regional deal in which a Tennessee bank is the acquired institution, Dominion will not be the only out-of-state bank holding company to own a Tennessee bank.

Boatmen's Bancshares Inc. in St. Louis, by virtue of its recent acquisition of General Bankshares Corp., also of St. Louis, and First American Bankshares of Washington, D.C., own banks in Tennessee. They started their Tennessee banking operations before the passage of state and federal laws restricting interstate banking, and so are grandfathered there.

Under Tennessee law, banking companies from Virginia, West Virginia, Alabama, Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, and North and South Carolina can buy Tennessee banks on a reciprocal basis. Virginia permits entry to Tennessee banks.

One other Tennessee banking firm is involved in a regional deal. Earlier this year, First American Corp., Nashville, completed the acquisition of First Ashland Corp. in Ashland, Ky.

Blair J. Wilson, an analyst for Equitable Securities Corp. in Nashville, said a deal involving Nashville City Bank has been widely rumored since the $600 million-asset bank announced four months ago that it had hired Kidder, Peabody & Co. …