First Federal Savings and Loan of Arlington and Arlington-Fairfax Savings and Loan will merge to become the largest thrift institution in Virginia, sources reported yesterday.
The two institutions have combined assets of $768 million.
The move, provided it receives regulatory approval, will catapult the new thrift ahead of Washington-Lee Savings and Loan and Virginia First, which announced their own $600 million union last week. (Washington-Lee is owned by First Financial of Virginia Corp., a holding company.)
Arlington-Fairfax is a state chartered S&L, while its larger partner is a federal association. The resulting thrift -- which as yet has no name -- is expected to be federally chartered. Their combined branches now number 31, compared with 35 for Washington-Lee and Virginia First. The officers of the new thrift have not yet been announced, but both associations are expected to be equally represented on the board.
Robert E. Johnson, president of Arlington-Fairfax, said the merger made sense in view of the expanded asset powers granted S&Ls. "Our [large] size opens up many exciting prospects," he said without elaborating.
This is a voluntary merger; both institutions were profitable last year, and they have combined reserves of $40 million. However, like many savings and loans around the country, they have seen some red ink on their ledgers this year.
Another Virginia union involves Jefferson Savings and Loan Association of Warrenton, which plans to take over Charlottesville Savings and Loan Association, pending stockholder approval. Jefferson, which has $178 million in assets, will be the survivor over Charlottesville, with $60 million. Jefferson's president, T. Lonwood May, said both S&Ls had reasonably good profits last year, but this year's operations are bordering on red. The new Jefferson S&L will have nine branch offices, with headquarters in Warrenton.
Several small Northern Virginia S&Ls also are said to be discussing mergers. Mark Sauers, executive director of the Virginia Savings and Loan League, said he expects more mergers among the 85 thrifts in his state as losses continue. The number is District S&Ls is being reduced from 16 to 11, and rumors of other mergers abound.
In 1980 the savings and loan industry had its worst earnings on record, just 17 cents on every $100 of assets. For the first half of this year, prospects are glum, according to Dale Riordan, chief economist of the National Savings and Loan League. Losses are expected to mount to between $600 million and 900 million.
Last week The Wall Street Journal stated, "The country's S&Ls and mutual savings banks are hemorrhaging. Their cost of funds to lend rose more in one day last month than in all of 1977."
Understandably, many thrift executives wish to avoid forced mergers by moving now to consolidate and costs. This has been the case thus far with all the mergers in the Washington area.