The restructuring of Washington's savings and loan industry enters a new phase today when National Permanent Federal Savings and Loan Association amends its charter, making it the District's first mutual savings bank.
After 92 years as a federally chartered savings and loan association, the institution will operate as National Permanent Savings Bank F.A., under a new charter approved by the Federal Home Loan Bank Board.
Federally chartered savings and loan associations are permitted under broader powers approved by Congress last year to convert to federal mutual savings banks. And you can bet your NOW account that it won't be long before other Washington-area S&Ls convert to savings banks.
Several S&L officials in metropolitan Washington have indicated strong interest in learning more about the conversion process, and at least one Northern Virginia association is said to be preparing an application for a new charter.
Thirty-six conversions to savings banks have been approved since January, and at least 30 applications are pending. Savings and loan industry leaders say they anticipate that more than 100 associations will have converted by the end of the year.
Despite the growing interest in conversion, thrift industry trade groups agree that there is very little difference between a savings and loan association and a savings bank.
In fact, the National Savings and Loan League has agreed to merge with the National Association of Mutual Savings Banks. And the U.S. League of Savings Associations has changed its name to the U.S. League of Savings Institutions, reflecting the diversity of its membership.
Nonetheless, it's what in a name that counts as far as some S&Ls are concerned. "I would say the key word is b-a-n-k," the president of a District S&L remarked.
Savings banks may invest 7 1/2 percent of their assets in unsecured commercial loans, while S&Ls are limited to only 5 percent. The ceiling will be 10 percent for both types of institutions, beginning Jan. 1, 1984.
The present tax structure also favors savings banks slightly. A savings and loan association is required to invest 82 percent of its assets in residential mortgage loans or related instruments to qualify for a full bad debt allowance.
The requirement for a savings bank is 72 percent, however, giving it more flexibility in its asset holdings.
But the overriding consideration in converting to a savings bank apparently is the appeal of having "bank" in the name of the institution. "If we're going to compete with banks in offering financial services, we should be called banks," acknowledged one S&L official.
In effect, "It's one more step in the homogenization of consumer financial institutions," says a lawyer whose firm represents several S&Ls.
"We felt our name ought to be indicative of what we do," explained Edgar F. Peterson, president and chief executive officer of National Permanent.
"The more we talked about it and how we see how National Permanent will operate down the road, we concluded that it made sense to convert," he added.
The new savings bank will be "dedicated to providing funds for housing," but it will "offer a wide array of services," Peterson said.
National Permanent, for example, will promote itself aggressively as a one-stop financial center where consumers can get traditional retail banking services. The new savings bank also will offer brokerage services through INVEST, a national thrift brokerage network.
Although converting to a mutual savings bank is seen as a significant change at National Permanent, winning approval to operate branches outside the District is more important in the long run.
To accomplish that, National Permanent has asked the bank board to transfer its charter to Maryland where it has operated a branch under a grandfather clause. Approval of the request would permit National Permanent to operate branches throughout Maryland.
In the meantime, National Permanent has asked the bank board to permit it to acquire Suburban Savings and Loan Association of Annandale.
With approval of both applications, National Permanent would be in a position to establish a network of branch offices extending from the Virginia-North Carolina line to Maryland's borders with Delaware and Pennsylvania.
National Permanent's bid to gain that type of advantage should come as no surprise to the bank board. The agency established a precedent last year when it allowed Perpetual Federal American Savings and Loan Association of McLean to do virtually the same thing.