THE OFFICE OF THRIFT Supervision has agreed to hear depositors' complaints about the merger-conversion proposed by a mutual thrift.

Depositors at Avondale Federal Savings Bank, a $503 million-asset thrift in Chicago, contend that they will lose money in the deal.

The thrift maintains that the merger is in depositors' best interests.

Both sides will present oral arguments to the OTS, most likely by mid-December, according to Philip Gerbick, deputy director of the agency's central region.

Mr. Gerbick said this is the first time the OTS has heard such complaints in his 10 years on the job.

The quarrel began in August, when Avondale said it was switching from the standard stock conversion it had announced in June to a merger-conversion with Central Resource Group, an insurance and financial services holding company. The Des Moines company owns $938 million-asset Midland Savings Bank, Iowa's largest thrift.

Under the terms of the merger with Central Resource, which is not now a public company, that company's stock would first be offered to Avondale depositors and employees and then to Midland depositors in its initial public offering.

Missing Out on Run-Up

In the standard conversion, which Avondale abandoned, account holders and management would get the right to buy stock in Avondale in an initial public offering. In the merger-conversion the thrift opted for, Avondale will not issue stock-instead, Central Resource will issue stock, some of which will be sold to Avondale's account holders.

Depositors would probably have benefited from a run-up in price of Avondale's stock had it gone public on its own, said depositor Linda Stromberg.

Also, with the merger-conversion, Avondale's depositors do not get to buy stock in the Chicago thrift they know, she said.

Less than 30% Stake

At the most, Avondale depositors will hold less than 30% of Central Resource, because that company's nonpublic parent will hold more than 70%, said Ms. Stromberg, a thrift analyst with Howe Barnes Investments Inc. in Chicago who has been a vocal opponent of the merger-conversion.

"I am ... convinced that this deal is like a perfume packet in a magazine," Ms. Stromberg said in a letter to the OTS earlier this month. "The more you scratch it, the more it smells."

More than 40 depositors have filed written complaints with the OTS on the proposed deal.

Robert S. Engelman Jr., Avondale's president and chief executive, said he welcomes the chance to address the OTS and depositors: "I think the OTS is doing the right thing. This will give us our chance to explain what the transaction is."

Study of Prospectus Urged

Mr. Engelman said he has told Avondale depositors to examine the complete prospectus on the deal before judging it.

The OTS knew the thrift was considering several options when Avondale filed for a standard conversion in June, he said. "We were still negotiating with a couple of parties," Mr. Engelman said. "It was part of our game plan. We decided the best course of action was to become a stock company and simultaneously go down two paths," he said.

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