At the main office of Maryland Federal Savings and Loan in Hyattsville yesterday Executive Vice President Robert H. Halleck watched as two customers came in clutching competitors' ads. After consultations, they decided to invest at Maryland Federal. They were among the 18 persons who opened accounts there before lunch on the first day of sales of the new 30-month savings certificates paying near market rates.
In nearby Chevy Chase, at Century National Bank, it was a different story. President Jerome Baroch reported very little interest in the new certificate on the part of customers.
And so it went throughout the Washington area. A telephone survey of 16 financial institutions showed savings and loan associations enjoying considerable activity whereas the vast majority of banks reported some inquiries, but few sales.
The reason for this difference points up the growing sophistication of Washington savers in money market matters. Savings institutions this month are allowed to pay 10.4 percent. Compounded continuously, that amounts to an effective annual yield of 11.12 percent. Moreover, thrifts with few exceptions are offering the new certificate for a minimum deposit as low as $100. Home Federal is even offering gifts for depositing $1,000.
Most banks, on the other hand, have a $500 minimum. And they pay only 10.15 percent interest. Compounding results in a higher yield, but most banks prefer to concentrate on selling $10,000 money market certificates on which they can the same rates as savings associations.
The new certificates was created to give small savers a chance to earn near market rates on their accounts, much they way persons with $10,000 have been able to do for 18 months through purchase of money market certificates. The 30-month rate for thrifts is one-half percentage point below Treasury securities of the same maturity; for banks, it is three-quarters of a percentage point lower.
An earlier four-year certificate for small savers had little success because people were unwilling or unable to tie up their money for four years. Yesterday several institutions reported customers exchanging their longer-maturity certificates for 30-month ones.
Like many thrifts, First Commonwealth Savings and Loan in Alexandria had an "overwhelming" number of inquiries yesterday. It also had 20 new accounts, many people putting in more than the $100 minimum. "People come in and tell me what they want; they don't ask for advice any more," said Vice President Jim Connor. "It's more fun that way."
It may be "fun" for investors to try to get a few more hundredths of a percentage point here or there, but it isn't that much fun for the institutions that have to pay that much more interest on the same funds. Historically, noted a Suburban Trust spokesman, most of the money put into such certificates comes from existing passbook accounts and therefore does not represent a new source of funds for the bank.
While everyone questioned said it was too early to know how the new certificate was doing, several financial officers volunteered prognostications based on the first day's activity.
"We think it will be very successful" said Margaret Muller of Union Trust Bank in Maryland. Almost all thrift institution officials think the 30-month certificate will do better than the four-year certificate. Yet, Alton Swiger of Citizens Bank & Trust Company of Maryland believes the two will be comparable: "no big flurry of activity."