The Federal Home Loan Bank Board yesterday sanctioned the first interstate merger of savings and loan associations in metropolitan Washington by approving the acquisition of Washington-Lee Federal Savings and Loan Association of McLean by the District's Perpetual American Federal Savings and Loan Association.
The precedent-setting merger will increase Perpetual American Federal's assets to $1.8 billion and expand its network of branch offices to 42, strengthening its position as the biggest S&L in the region.
More importantly, the voluntary merger, which has been pending since November, places Perpetual American in the unique position of being the only S&L in the area with branches in the District, Maryland and Virginia.
At least three District S&Ls, including Perpetual American, have operated branches that were "grandfathered" in Maryland for several years. However, no District S&L has had an office in Virginia until now.
Under terms of the merger, Perpetual American will acquire the stock of First Financial of Virginia Corp., a holding company in which Washington-Lee is the principal subsidiary. First Financial and Washington-Lee will be combined and merged into Perpetual American.
The transaction is an unassisted supervisory merger, meaning that Perpetual American received no financial assistance from the Federal Savings and Loan Insurance Corp. However, the key factor in this type of merger is that it gives Perpetual American the same right as any Virginia-chartered S&L to branch in all areas of the state.
"It's logical to assume that we will be carefully evaluating the Washington-Lee branch network and doing everything we can to enhance that network through increased branches," said Thomas J. Owen, Perpetual American's chairman and chief executive officer.
The linking of Washington-Lee's 19 branches in Northern Virginia with an equal number of Perpetual American offices in the District is a "perfect marriage" because it involves no overlaps, observed Washington-Lee Chairman Richard S. Lawton.
Banks in the area are almost certain to cite the merger in renewed pleas to remove what they consider artificial barriers that prevent them from opening branches in a common market across state lines.
C. Jackson Ritchie, president of the D.C. Bankers Association, said the organization supports yesterday's action by the FHLBB. Richie also noted that the bankers adopted a strong resolution at their recent convention supporting the concept of interstate branching.
"As far as I'm concerned, it's great," W. Jarvis Moody, chairman of American Security Corp., said of the S&L merger. "It gets us closer to that level playing field," said the chief executive of the District's second-largest banking institution.
Moody said he hopes federal regulators will allow District banks to go across state lines now that the precedent has been established for S&Ls.
The Virginia Savings and Loan League has opposed interstate branching in the Washington area. League officials could not be reached yesterday for comment.
Based on the latest available industry rankings, the combined net-worth-to-savings-deposit ratio for Perpetual American and Washington-Lee would be the seventh highest among the nation's 100 largest S&Ls. The merged associations will have a combined net worth of $107 million.
Perpetual American also will become the 46th largest of the more than 3,600 S&Ls in the United States.
As a practical matter, it will be several months until necessary changes can be made in the computer systems of Perpetual American and Washington-Lee, enabling customers to utilize the entire branch network and a broad range of services, officials of the two institutions said.