Two more privately insured Maryland savings institutions have joined Chevy Chase/Government Services Savings and Loan Association in applying for federal deposit insurance and another is in the process of completing an application.
Maryland officials said they were told by a fifth privately insured savings and loan association that it is considering pulling out of the Maryland Savings Share Insurance Corp. and applying for federal deposit insurance. The Federal Home Loan Bank Board, which regulates federally chartered savings and loans, said it has received additional inquiries from Maryland institutions.
Chevy Chase -- the largest MSSIC-insured S&L with assets of $2.3 billion -- said late last month it had applied to the Federal Savings and Loan Insurance Corp. This week Second National Building and Loan Inc. and Baltimore County Savings and Loan Association also applied for federal insurance. Chesapeake Savings and Loan Association announced that it would soon finish its application for federal deposit insurance.
Federal regulators have called for an end to private deposit insurance after the Ohio Deposit Guarantee Fund was wiped out last month by losses incurred by its biggest member.
To stop the run, Ohio Gov. Richard Celeste closed the state-chartered, privately insured S&Ls and will permit them to reopen only when they qualify for federal insurance.
None of the Maryland savings and loans said they want to shift to federal insurance as a result of the Ohio crisis. Instead, they said, the virtual end to federal interest rate regulations has removed most of the incentive to run a state-chartered, privately insured S&L. Maryland S&Ls used to be able to offer rates higher than those offered by federally insured institutions.
The executives said the Ohio crisis did prompt them to announce their applications before the Federal Savings and Loan Insurance Corp. acted on them.
Henry A. Berliner -- president of Second National, the seventh-largest MSSIC-insured S&L with $500 million in assets -- said he expected federal examiners would arrive at his institution in about a week. Second National has headquarters in Salisbury and has two branches in the State of Delaware. Berliner said the board decided last December to seek federal insurance because it is more acceptable than MSSIC insurance in Delaware.
However, Second National has no plans to convert its state charter to a federal charter, Berliner said. A state charter gives a savings and loan more latitude in its investments than does a federal charter. Second National has a $4.5 million equity investment in residential real estate, builds 20 town houses a year in Ocean City and has lots on which it could build in Ocean Pines.
Michael J. Dietz, executive vice president of Baltimore County Savings, said the institution submitted an application to FSLIC last August in the expectation FSLIC insurance would be cheaper. Baltimore County, whose $140 million in assets make it the 14th-largest MSSIC-insured institution, also expects examiners next week. Dietz said the S&L, which also has applied for a federal charter, will not make the final decision to convert to federal insurance until after it receives approval from the FSLIC.
Chesapeake -- the 19th-largest MSSIC institution with $97 million in assets -- plans to retain its state charter but is now completing its application for FSLIC insurance, said its president, Arthur Silber. He said it would be easier for Chesapeake to acquire federally insured S&Ls in Maryland and elsewhere.
MSSIC insures 102 state-chartered institutions, with total deposits of about $7 billion. Another 44 Maryland S&Ls are federally chartered and insured and 13 state-chartered S&Ls have federal insurance.
S&Ls will be able to withdraw their capital deposit funds -- which act as insurance premiums -- from MSSIC gradually over a year. MSSIC President Charles Hogg II said he expects the $167.8 million MSSIC insurance fund to decrease by about a third when the big S&Ls pull out and the deposits the fund covers decline by a like amount.
But Hogg said he does not expect a "wholesale exodus" from MSSIC because of the end of rate regulations by the federal government.