Examiners find Chevy Chase has insufficient capital reserves

August 23, 1991|By Blair S. Walker

Chevy Chase Federal Savings Bank, which lost $3.5 million in the first three quarters of its current fiscal year, has been found by federal examiners to have insufficient reserves on hand to meet a federal capital requirement.

According to a Securities and Exchange Commission document filed Tuesday, the Montgomery County thrift had more than $330 million in risk-based capital on June 30, a little more than $27 million below the required amount. Risk-based capital, the strictest of three capital requirements, involves money set aside to protect against losses from bad loans.

Alexander Boyle, Chevy Chase's vice chairman of the board, said that customer accounts were never in jeopardy and remain insured up to $100,000 by the Federal Deposit Insurance Corp. He linked Chevy Chase's anemic financial performance and its failure to meet the federal soundness standard to a weak real estate portfolio.

The Office of Thrift Supervision asked the thrift to put up additional capital reserves to safeguard against the possibility of additional real estate losses, Mr. Boyle said. The resulting drain on profits caused Chevy Chase to generate red ink and made it miss its risk-based capital requirement, he said. Chevy Chase must submit a business plan to OTC indicating how it plans to reach with required capital levels.

The financial institution's home equity loan, credit card, line of credit and single-family mortgage portfolios continue to perform strongly, Mr. Boyle added. "We expect a small profit for the year that ends at the end of next month," he said.

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