Maryland S&Ls may be facing $116 million bill Congressional plans seek to replenish insurance fund

Protects deposits

Efforts to build coffer have sputtered due to bailouts

September 21, 1995|By Bill Atkinson | Bill Atkinson,SUN STAFF

Maryland savings and loans will be forced to pay a $116 million assessment under two congressional plans designed to recapitalize the industry's ailing insurance fund.

The one-time charge, which is expected to be levied by Dec. 31 or Jan. 1, will amount to about one year's worth of earnings.

"It is going to be very difficult to swallow," said Charles H. Kresslein Jr., president of the Maryland League of Financial Institutions, which represents most of the state's 79 thrifts. "Most guys are accepting it by saying let's get it done, let's get the . . . insurance fund capitalized so we can go on with life from here."

The industry has been trying to build the Savings Association Insurance Fund since its creation in 1989, which followed the demise of the Federal Savings and Loan Insurance Corp. But efforts have sputtered because money that went into the fund was used to bailout failed thrifts.

The fund was set up to protect the deposits of individuals up to $100,000. But today, the fund has reserves of $2.6 billion -- $6.2 billion short of its goal.

Under proposals sponsored by Rep. Jim Leach, R-Iowa, the chairman of the House Banking Committee, and Sen. Alfonse M. D'Amato, R-N.Y., the chairman of the Senate Banking Committee, savings and loans as well as banks that have acquired thrift deposits, would pay $6.1 billion, or 85 cents for every $100 in insured deposits, to recapitalize the fund.

Although the charge will dig into profits, Maryland thrift and bank executives said they shouldn't face significant earnings problems because they are generally healthy, and well capitalized. Also, thrifts that become undercapitalized because of the charge will be able to pay the fee over a four-year period, industry officials said.

"We can stomach it," said Richard E. Funke, chairman and chief executive of Atlantic Federal Savings Bank, which was acquired by Susquehanna Bancshares Inc. in March.

Mr. Funke said the Lititz, Pa.-based parent company expects to pay about $3 million for its thrift holdings, which include Atlantic and Reisterstown FSB.

Others that will have big payments include Chevy Chase Bank FSB, which has a recap payment of $35 million before taxes; Loyola Federal Savings Bank, $13.5 million; and Maryland Federal Savings & Loan Association, $6.7 million.

William Harris, chairman of Crestar Financial Corp.'s greater Washington/Maryland region, said the Richmond, Va.-based company expects to pay $22 million after taxes on its $4.3 billion in savings and loan deposits. The company agreed to acquire Loyola earlier this year and will now have to fork over a $7 million after-tax payment.

"It is absolutely a huge number," Mr. Harris said. "We are getting hit harder than most commercial banks. Our view is we have assisted the shareholders and even the U.S. government by bailing out some thrifts . . . and now we are being penalized."

Thrift industry executives see the payment as a necessary evil that will make future gains possible. The proposals by Mr. Leach and Mr. D'Amato would slash thrift insurance premiums to four cents for the best run institutions -- the same that the best-run banks pay -- down from 25 cents for every $100 in insured deposits.

The proposals would also merge the savings and loan and national bank regulators, and require banks to pay a portion of the $790 million-a-year interest payment on bonds used to finance the clean up of the failed Federal Savings and Loan Insurance Corp.

Thrifts have one worry, however. Under Mr. Leach's proposal they would be required to convert to either a national or state chartered bank. The thrifts worry that they will be taxed on their "bad debt reserve."

Thrifts set aside funds in the reserve, which is not taxed, to cover losses. The fear is that once they convert those funds they would be taxed and thrifts could end up paying an estimated $4 billion.

"That would be catastrophic for the industry," said Mr. Funke.

Mr. Kresslein doesn't expect it to go that far.

"You can't give them a double hit," he said.

"I'm very optimistic that is going to be resolved."

Who will pay what

How much 10 largest thrifts in Maryland will pay toward recapitalizing the Savings Association Insurance Fund.

Thrift -- Chevy Chase Bank FSB

Headquarters -- Chevy Chase

SAIF deposits -- $4.1 billion

Est. recap payment before taxes -- $35 million

Thrift -- Loyola Fed. Savings Bank

Headquarters -- Baltimore

SAIF deposits -- $1.6 billion

Est. recap payment before taxes -- $13.5 million

Thrift -- Maryland Federal S&L

Headquarters -- Hyattsville

SAIF deposits -- $790 million

Est. recap payment before taxes -- $6.7 million

Thrift -- Citizens Savings Bank

Headquarters -- Gaithersburg

SAIF deposits -- $481.5 million

Est. recap payment before taxes -- $4.1 million

Thrift -- Fairfax Savings Assn.

Headquarters -- Baltimore

SAIF deposits -- $390 million

Est. recap payment before taxes -- $3.3 million

Thrift -- Eastern Savings Bank

Headquarters -- Hunt Valley

SAIF deposits -- $385.5 million

Est. recap payment before taxes -- $3.3 million

Thrift -- American Nat'l Svngs Bank

Headquarters -- Baltimore

SAIF deposits -- $321.7 million

Est. recap payment before taxes -- $2.7 million

Thrift -- Rosedale Federal S&L

Headquarters -- Baltimore

SAIF deposits -- $292.3 million

Est. recap payment before taxes -- $2.5 million

Thrift -- First FSB of Western Md.

Headquarters -- Cumberland

SAIF deposits -- $284.8 million

Est. recap payment before taxes -- $2.4 million

Thrift -- Washington Savings Bank

Headquarters -- Waldorf

SAIF deposits -- $251.6 million

Est. recap payment before taxes -- $2.1 million

Source: FDIC

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