The Philadelphia Saving Fund Society (PSFS), the oldest thrift in the country, announced yesterday it has received regulatory approval to take over two ailing savings institutions in the Washington area -- Capital City Federal Savings and Loan Association and Northern Virginial Savings and Loan Association.
The estimated cost of the merger to the Federal Savings and Loan Insurance Corp., the government agency that insures S&Ls, is $79.4 million.
The two Washington area thrifts will be merged into a single new institution, PSFS Savings Bank, FSB (federal savings bank), with headquarters in Arlington. It will be owned by a PSFS subsidiary, and its president will be Leonard Ebert, retiring vice chairman of PSFS in Philadelphia.
According to the Federal Home Loan Bank Board, Capital City has $392.7 million in assets and Northern Virginia has $268.9 million. However, they both are technically insolvent with larger liabilities than assets. As of Dec. 31, 1984, Capital City had negative net worth of $24.1 million. Northern Virginia had negative net worth of $5.1 million. Both had lost money for many consecutive quarters. They each have nine offices.
The Bank Board required PSFS to acquire not only the local pair, but also a third troubled thrift, First Federal of Titusville, Fla., as the fee for the interstate purchase of one healthy thrift, First Federal of Winter Haven, Fla. Last year, PSFS offered $19 million for its stock, but shareholders of the Winter Haven thrift have not yet approved the sale.
This is the first acquisition for PSFS, although it has consumer credit operations nationwide. PSFS was founded in 1816 and has $14 billion in assets. No FSLIC assistance was given for the merger.
In exchange for taking over Capital City and Northern Virginia, PSFS received a cash contribution, whose amount was not made public, plus indemnification against capital losses and undisclosed liabilities. FSLIC will purchase subordinated debentures and supply income capital certificates as well in exchange for promissory notes.
Capital City's president, James Schwartz, hailed the action. "We're ecstatic and celebrating. We're looking forward to opening the champagne at the end of the week. It's a dream come true for everybody." Schwartz said plans call for all personnel to remain, although he did not know what his new position would be.
Northern Virginia, a state chartered stock association, will become a federally chartered stock company. Executives there yesterday referred calls to Philadelphia.
The acquisition of a District thrift by the largest savings institution in the country may give a needed boost to the local industry. Last year, only two of the seven D.C. thrifts operated in the black. Losses for all D.C. thrifts last year exceeded $20 million.
Last week, PSFS's chairman announced at the annual meeting that total net income in 1984 was $72 million, up from $26 million in 1983. Operating net income for 1984 was $10 million. He predicted a substantial increase in 1985 earnings over last year.