The sixth largest Maryland bank holding company announced yesterday that it is purchasing Municipal Savings and Loan Association, a deal that could help the Baltimore area S&L qualify for federal insurance.

Baltimore Bancorp, the holding company for the Bank of Baltimore, will operate Municipal, with assets of $105 million, as a subsidiary, and the thrift will receive the $5 million in cash it needs to qualify for membership in the Federal Savings and Loan Insurance Corp. (FSLIC), according to Gerald Kracke, Bancorp's marketing director.

The agreement, which is subject to state and federal approval, comes as many of Maryland's privately insured thrifts are seeking federal insurance. Following last month's industry crisis, the Maryland Savings-Share Insurance Corp., the private firm that was insuring many thrifts, was dissolved, and the state required the thrifts with more than $25 million in deposits to seek federal insurance. But several S&Ls have had trouble meeting the FSLIC requirement that a thrift have accessible assets of at least 5 percent more than deposits.

Mike Koutek, vice president of operations for Municipal, called the arrangement a "very friendly, mutual agreement" and said he hopes it will allow Municipal to "resume normal business practices without any limitations."

Municipal is one of many Maryland thrifts whose customers have had to limit their withdrawals to $1,000 a month, a restriction put into effect May 14 by Gov. Harry Hughes in an effort to control the thrift crisis. While Koutek said that final approval of the purchase could take up to 45 days, he said he expects the limitation on withdrawals to be lifted immediately.

"We will not know until Monday when the restrictions will be lifted, but we assume that everything will be going our way," Koutek said yesterday afternoon in a telephone interview.

Bancorp Vice President Jerome Baroch said in an interview that the agreement will not only benefit Municipal but also allow Bancorp to enter the savings and loan industry, thus enabling it to engage in real estate and other ventures.

The purchase of Municipal is "the first significant acquisition" for Bancorp, which lists assets of $7.1 billion, according to Kracke.

Reached at his home, Francis Pugh, the assistant attorney general who is general counsel to the Department of Licensing and Regulation, said he was not aware of the terms of the agreement but that he was "glad to hear it." Pugh said he assumes "it will mean that Municipal will qualify for federal insurance." Md. Firm Buying Municipal S&L Deal Expect