Suburban branches of Community Savings & Loan were thronged with depositors withdrawing their money yesterday after the disclosure that a real estate investment company affiliated with Community is unable to pay some of its debts.

Community President Clayton McCuistion said depositors' money is not endangered by financial problems at Equity Programs Investment Corp. (EPIC), a subsidiary of Community.

He said the Bethesda savings and loan "is not liable nor committed in any way on the $1.3 billion of [EPIC] mortgages." EPIC disclosed on Friday that it has not made payments owed to investors who hold about $1 billion worth of securities backed by home mortgages.

Maryland officials also said yesterday they do not expect EPIC's troubles to spread to Community. Community accounts of up to $100,000 are insured by the state-backed Maryland Deposit Insurance Fund, which took responsibility for savings and loan accounts when the state's private insurance fund collapsed in May.

Nonetheless, lines of customers formed at several of the thrift's branches, as nervous depositors sought to withdraw as much of their money as they were allowed to under state regulations. Community is one of many Maryland savings and loans still operating under withdrawal limits that were imposed after the Maryland savings and loan crisis began in May.

Community is the largest Maryland-insured savings and loan in the Washington suburbs that has not yet obtained either final or conditional approval for federal deposit insurance.

The Federal Home Loan Bank Board has told Community it will not qualify for federal insurance unless it severs it connections with the EPIC real estate investment business. Bank board Chairman Edwin Gray has said repeatedly that the federal government should not protect thrifts that want to venture into riskier lines of business.

McCuistion said on Friday that his institution was attempting to sell EPIC, but in the process payments due on a large volume of mortgage-backed securities sold to investors had become delinquent and "could be in a technical condition of default . . . by the end of the month.

"We are trying to make sure that [Community's] depositors are not affected" by the divestiture of EPIC, McCuistion added.

EPIC, based in Falls Church, has set up real estate partnerships that own 20,000 single-family homes across the country. Investors in the partnerships are entitled to large tax deductions and hope to make profits if the value of the homes goes up. To raise mortgage money, EPIC has sold more than $1 billion worth of securities backed by mortgages on the 20,000 houses. It is payments to holders of those securities that are overdue.

The disclosure of EPIC's inability to pay its debts alarmed a number of Community's 30,000 depositors. Lines of 40 to 60 people continued much of the day at the thrift's Rockville branch, which was open until 6 p.m. At 2 p.m. the office ran short of cash and began limiting cash withdrawals to $500, giving depositors checks for amounts over $500.

Lines at the Gaithersburg office, which was open until noon, spilled out the door and down the street, witnesses said.

Monique Offer, 19, waiting in line in Rockville, said she went by the Gaithersburg branch first, and "when I saw the line I thought they were giving away $100 or toasters." She said she was making a regular withdrawal, but a number of other customers indicated they were closing their accounts.

Ed Wolpov, 39, a Bethesda computer programmer, said he had not withdrawn any money throughout the three-month-long Maryland savings and loan crisis, figuring depositors had an obligation to give the institution a chance. But he said the latest reports had convinced him to close both of his accounts. "I figured I gave them a chance."

Peter Stein, 41, of Rockville, an auditor with the federal government, said, "This smells of the Old Court [Savings & Loan] situation, where we were reassured and then it snowballed. I fear the same thing is going to happen here. I fear Gov. Hughes is going to put restrictions on the money here.

"The bank made it sound like everything was okay. Now I feel differently. I'm afraid that this could turn into another situation like Old Court where we couldn't even take out $1,000 or receive interest payments," he said.

Interviews with those standing in line in Rockville indicated that many depositors did not fully understand the Community-EPIC situation, but did not want to take a chance on losing their money or having it tied up further.

Under orders from Maryland Gov. Harry Hughes, withdrawals from state-insured thrifts are limited to $1,000 a month from funds that were deposited before May, when the private Maryland Savings Share Insurance Corp. collapsed and was taken over by the state. There is no limit on withdrawal of money deposited since then.

State officials said Saturday they were watching the situation but planned no immediate action. Said Lou Panos, Hughes' spokesman: "There is nothing for the state government to do as long as Community has the money to pay" depositors.

Francis X. Pugh, counsel to the Maryland Deposit Insurance Fund, the state agency insuring thrifts not yet under federal coverage, said MDIF has had no contact with Community over the weekend. "We haven't lent them money. We are prepared to consider a request for borrowing. We'll have to take a look at it Monday morning," he said.

MDIF spokesman Norm Silverstein said the withdrawals were to be expected. "Given the front-page story in the paper, that is not an unusual response."

In addition to his statement that Community has no liability for the EPIC mortgages, McCuistion also said that the company had decided that "no funds were to be borrowed from Community" by EPIC.

Sources familiar with the situation said Friday and yesterday that Community had been pumping large sums into EPIC to offset the heavy cash losses of EPIC's real estate venture.

McCuistion insisted the amount of Community's loans to EPIC was exaggerated. He said that in the past there had been "some borrowing" from Community by EPIC, but that had been mostly to cover seasonal variations in cash flow, "and most of it was paid back within the same month."

He said EPIC's borrowing from Community never approached the $18 million a month reported by some Maryland savings executives. "In its largest month it never reached a quarter of" that, and most of the time was far less, he said, though he said he could not be more specific.

He said the Maryland savings and loan crisis had "put a strain on the organization, but not a strain of disastrous proportions. Given time, we can work this out.

"We've had 10 years of successful, profitable business" at EPIC, "without ever a missed mortgage payment or even a late payment," he said. He added that "the future is unsettled because of the time pressure" created by the need to sell EPIC. The state of Maryland has set a Dec. 31 deadline for all thrifts with more than $40 million in assets to get federal insurance or merge into a stronger institution or face being liquidated by the state.

He emphasized that EPIC is only delinquent on part of its portfolio. "Some loans are current, including this month's payment, some are current but late on this month's payment, and on some this month's payment isn't even due yet," he said.

He said EPIC executives are working to sell the company as quickly as possible. "We are in negotiations with a large number of significant organizations at this point."

Some industry sources have suggested that EPIC's announcement that it will miss a payment to investors is a form of "brinksmanship" designed to encourage one or more firms with large investments in EPIC to buy it.

Among those who face potentially large losses if EPIC defaults are the mortgage insurance companies that have written coverage on mortgages for EPIC. One of these is Ticor Mortgage Insurance Co. of Los Angeles, which is a subsidiary of American Can Co. Asked if American Can is one of the parties EPIC is talking to, McCuistion said, "I can't talk about that."

Some investors in EPIC's real estate limited partnerships, meanwhile, fear they will lose their money. One said she had $50,000 invested with EPIC, and "they have been telling me since January I'll never get anything back."

EPIC's limited partnerships, or real estate syndications, involve the purchase of single-family homes, many of them builders' model homes. EPIC organizes partnerships that buy the houses and rent them -- either to the builder as models or to tenants. The limited partners benefit from depreciation and other tax write-offs in these arrangements. If the houses' value increases, investors reap profits that are taxed at lower rates than ordinary income. In the words of an EPIC prospectus given to investors: "This offering involves a high degree of risk."

Sources familiar with the situation said that in many cases rental income from the houses was not enough to cover mortgage payments and operating costs. Appreciation in many markets -- especially in the Sun Belt, where EPIC has been active -- has been less than expected. The result has been large cash losses and difficulty in selling the homes when investors want out of the deal. CAPTION: Picture, Depositors lined up yesterday at Community Savings & Loan's Rockville branch, which ran short of cash at 2p.m. and began limiting withdrawals to $500. By Rich Lipski--The Washington Post