For thrifts that have long harbored ambitions of converting to commercial banks, an upcoming regulatory merger is forcing hard decisions.

Home Federal Bank, for example, will soon go from being one of roughly 670 thrifts nationwide to the biggest state-chartered bank in Idaho. The $1.4 billion-asset unit of Home Federal Bancorp Inc. in Nampa applied late last month to convert to a state banking charter.

Len Williams, the company's chief executive, said it has long planned such a conversion as the thrift's focus shifted to commercial lending. This summer's merger of the Office of Thrift Supervision into the Office of the Comptroller of the Currency prompted management to expedite matters.

"We figured that if we are going to have to go to a new regulator anyway it would be a good time to consider our options," Williams said last week. "It seemed like a natural time to examine our business and figure out what would be the best way for us to accomplish our goals."

Lawrence Kaplan, a partner at the law firm of Paul Hastings, said thrifts with commercial bank operations "have to ask themselves, what do they want to be doing in the future? Will having a national charter benefit them or would a state charter be just fine? That is something they should consider every year as they are planning, anyway. Are we operating with the best charter for us?"

The board of the $90 million-asset Sykesville Federal Savings Association in Maryland had that discussion last year, and in July decided to switch to a state-chartered mutual bank and rename itself Carroll Community Bank. The bank is now converting to a stock company.

"We believed that consolidation of the regulators was not something that was necessarily going to be beneficial to us," said Russell Grimes, Carroll Community's chief executive. "We are a small bank. We have no need or desire to go out of state. A state charter is more than flexible enough for what we need."

Like banks that look to capitalize on market disruption following major bank mergers, it seems that state banking commissioners see this as an chance to gain some banks. While none have launched aggressive poaching campaigns, commissioners are touting the benefits of being local regulators.

"Community banks get a lot of focus here because that is all we regulate. We're not trying to be all things to all people," said Mark Kaufman, Maryland's commissioner of financial regulation. "As a general matter, it is not usually a good thing to be anyone's smallest client."

Jennifer Kelly, the OCC's senior deputy comptroller for midsize and community banks, said the agency is just as committed to community banks.

"My full-time job is overseeing community banks and some of the smaller regionals. Seventy-five percent of the agency's examiners oversee community banks," Kelly said. "It is a big part of our business. Our examiners live and work in the same communities as our banks."

However, the OCC is a big place. It regulates 1,200 community and regional banks and, by the end of July, will add 670 thrifts. In comparison, should Home Federal's conversion gain approval it will be one of 16 banks overseen by Idaho's banking agency.

"Our attention isn't divided," Gavin Gee, Idaho's director of finance, said.

Lawyers said that while thrifts weigh their options, they should not use fear of the unknown as a reason to switch. "We are getting a lot of questions, but we are telling our clients to wait it out and see what life is going to be like. Why do it now when you can't really evaluate what it is going to be like?" said Kip Weissman, a partner at Luse Gorman.

Kelly said the OCC is advising thrifts that are seeking a national bank charter to do the same thing. "When they ask, we say there is no reason to rush a decision. Get one exam under the OCC," she said. "That way everyone will know each other a little bit more."

For Home Federal, Williams said that fear was not a part of the discussion. Besides the local advantage, going with the state charter was just a little cheaper.

"I'm not afraid of the OCC. I have spent my career working with them," Williams said. "It is not materially less expensive, but at the end of the day every little bit helps."

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