Over the objections of officials in Texas, a federal banking agency on Friday approved the merger of NationsBank Corp.'s North Carolina and Texas banks.

Approval from the Office of the Comptroller of the Currency was the latest victory for the Charlotte, N.C., banking company in its effort to circumvent a Texas prohibition on interstate branching.

But the fight isn't over yet. The Texas Banking Department in November asked U.S. District Court for Northern Texas to block the merger. That case has been on hold, pending the OCC ruling.

"I'm not surprised by the OCC decision," said Texas Banking Commissioner Catherine A. Ghiglieri. "That's why we went to court."

She argued that interstate mergers are outlawed in Texas until 1999 because state lawmakers took advantage of an escape provision in a federal law permitting cross-border consolidations.

But OCC Chief Counsel Julie L. Williams said the North Carolina company may merge with banks based in Texas because it already owns branches in the state.

The National Bank Act "authorizes mergers between two national banks that are 'located' in the same state," she wrote in the ruling permitting the merger, and its Texas branches 'locate' NationsBank there under the law.

On March 30, the Supreme Court turned down an appeal by Texas officials to prevent NationsBank from acquiring Sun World in Santa Teresa, N.M. That deal gave the North Carolina bank the Texas branches it needed to qualify for the merger with NationsBank-Texas.

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