A Crofton, Md., savings and loan association has penetrated interstate banking barriers by opening an office in the District where it will compete for deposits with the city's financial institutions.

By opening a branch of its service corporation at 1120 20th St. NW, First Maryland Savings and Loan Inc. has outmaneuvered its larger Maryland competitors and may be a year ahead of them in the race to cross state lines.

What's more, First Maryland's innovative move, which has the approval of District, federal and Maryland officials, further blurs traditional lines separating area markets and financial institutions. he S&L's subsidiary, First Maryland Financial Services Corp., will offer several consumer and commercial services to District customers. But the one that is likely to cause most concern to District S&Ls is an 8 percent passbook rate -- 2 1/2 percent higher than the legal maximum paid by D.C. institutions.

And because First Maryland is a state-chartered S&L, it can offer more attractive rates on several other savings instruments.

Although First Maryland says it cannot open passbook accounts at its savings brokerage office, it does have authority to accept deposits. Cash and information provided by customers are transported twice daily to the parent S&L branch in Lanham where accounts are actually opened and processed.

"This office is specifically for brokering deposits," said Julian Seidel, chairman of First Maryland Savings and Loan and president of its services corporation subsidiary.

First Maryland opened the office in early October but has attracted little attention until now. In fact, officials at several Washington S&Ls declined to comment on the new office, explaining that they didn't know it existed.

Indeed, First Maryland Financial Services Corp. is one of the best kept secrets in Washington's business community.

"We've taken a very low profile at this point to check out the system and to make sure we're in compliance," Seidel explained, adding that the company plans to begin a major marketing program within the next week or so.

Like other state-chartered S&Ls First Maryland (and its subsidiary) were authorized to offer services that federally chartered S&Ls could not provide before recent legislation expanded their powers.

Armed with the flexibibility those powers provided, First Maryland negotiated sucessfully for approval by the Federal Home Loan Bank Board to move into the District.

In addition to taking deposits, the District office will do loan originations, make commercial loans, sell insurance, act as mortgage broker, developer and builder.

Asked to comment on how a $90-million institution with only three offices and a service corporation managed to get the jump on its competitors, Seidel remarked: "We are very creative that way. We have a very active board and we discuss these things and move ahead."

Although little is know thus far about First Maryland Financial, Seidel said it's his impression that some District bankers "aren't too happy."

But Seidel believes bankers and his company can benefit mutually from First Federal's move to the District.

"I feel we can be a very good source of business for them," Seidel said, "by participating in financing, by being a depositor with them -- because we have a very good cash flow -- and by sharing knowledge.

"This office is convenient to people living and working in Washington. That gives them better access to better rates offered in Maryland."

It is not First Financial's intent, Seidel added, to "steal" investments from within the District. About 20 percent of First Maryland Financial's assets are invested in the District, Seidel added.

"We are not taking D.C. money and investing it in Maryland. We feel Washington is a viable place to invest and we've invested in far Southeast, Capitol Hill, Chevy Chase and other areas."

The downtown brokerage office will have a staff of four or five, headed by Della Kloostra. Seidel said he expects to open at least three more District offices but he emphasized that the idea is not to have several offices. The concept is to have a large staff of marketing executives call on clients and prospective customers at their place of work.

"Our dramatic move into the District," Seidel added, "will establish a precedent that may open the doors for this type of enterprise elsewhere, as well as increasing competition for savings dollars in the area."