A Baltimore thrift association's plan to purchase and reopen the crippled First Maryland Savings and Loan is being stalled by new federal objections to the terms of the deal and the buyer's internal management practices, sources said yesterday.
Several state officials and others familiar with the proposed merger of the Baltimore-based Yorkridge-Calvert Savings and Loan and the debt-ridden First Maryland of Silver Spring said the new federal complaints could delay the transaction for weeks, if not kill it.
At the same time, they expressed guarded optimism that the objections will be resolved so that First Maryland's $281 million in deposits could eventually be freed.
"The pulse of this deal is very weak, but it's not dead yet," said one state official who has participated in negotiations on the proposed merger over the last six months and who asked not to be identified.
Gov. Harry Hughes banned wthdrawals from the 35,083 accounts at First Maryland last August, and a judge placed the thrift in conservatorship in November so the state could find a buyer for it.
The state has since charged in a civil suit that First Maryland's former officers ruined the association's soundness by engaging in risky lending practices over several years. Today, the liabilities of the thrift exceed its assets by $26 million.
On Thursday, the judge presiding over First Maryland's affairs extended the legal conservatorship for another 45 days despite the revelation that the state had encountered an unidentified but "significant" obstacle in the merger with Yorkridge-Calvert.
Sources familiar with the long-pending merger disclosed yesterday that the obstacle is essentially two-fold.
First, they said, the Federal Home Loan Bank Board, which regulates and insures Yorkridge-Calvert, wants to be certain that the thrift's two principal owners do not reap an enormous profit when the association makes a public stock offering to clear the way for the merger with First Maryland.
Second, federal regulators are questioning thousands of dollars in business expenses reported over a three-year period by top officers of Yorkridge-Calvert, according to sources. A comprehensive "travel and expense" audit was performed in January by federal examiners, one state official said.
Thomas H. Maddux, the Maryland secretary of economic and community development who has been at the center of the state's effort to resolve its year-long savings and loan crisis, said yesterday that he was "very, very disturbed" by the recent federal objections.
"To be perfectly blunt with you, this came as a surprise to us," said Maddux. "I don't know whether we can satisfy the feds, but we'll give it one more try."
Maddux said that Melvin Berger, the president of Yorkridge-Calvert, and Marvin Rosenthal, the thrift's chairman, had complied with earlier conditions that the Bank Board had placed on them, including one to relinquish day-to-day control of the merged association.
Berger and Rosenthal remain eager to consummate the deal, Maddux said.
An attorney for Berger and Rosenthal declined comment yesterday, as did spokesmen for the Bank Board.
Reopening First Maryland is one of the last major tasks facing the Hughes administration as it digs its way out of the protracted S&L crisis.
Depositors of the defunct Old Court Savings and Loan Association of Baltimore are shortly to receive an initial repayment of their money, and branches of the moribund Community Savings and Loan reopened earlier this week as new offices of the Pittsburgh-based Mellon Bank.