Maryland Federal Savings and Loan is closing its only District office in an effort to consolidate and expand in Maryland.

After more than a half century of service in downtown Washington, the S&L is shutting its 1629 K St. NW branch when the lease runs out in September becasue renewal would be too expensive, according to president T. Hammond Welsh Jr.

Under strict federal laws which today probhibit S&L branching across state lines, it is generally thought to be a plum for a suburban bank to have a downtown office grandfathered by the law as Maryland Federal's K Street branch was.

But Welsh said the branch served mostly as a convenience office for Maryland residents and has not grown as much as suburban branches have. As the downtown office is closing, a new branch in Wheaton will be opening, Welsh said.

Asked whether criticism from District and federal government officials about alleged red-lining practices - criticism which has been directed at many of the area's financial institutions - was a factor in the decision to leave Washington, Welsh said it did not enter into the decision at all.

He noted, however, that his S&L - the fourth largest in Maryland, with assets of $302 million - has never been able to get the District government to deposit funds with it.

"That's probably because of our name," Welsh said.

Maryland Federal officials have not yet told their downtown depositors of the scheduled closing, but plan to do so soon. Welsh said the S&L will try to get as many customers as possible to transfer their accounts to one of Maryland Federal's 10 other offices or the new Wheaton branch.