Cragin's Price Jumps on Offer To Depositors

Depositors in Cragin Financial Corp. like the Chicago thrift so much that they are eager to buy the company.

The offering of shares to Cragin's depositors was oversubscribed by a four-to-one margin. Cragin's stock opened for business Thursday afternoon and quickly jumped from its initial $10 price to $14. It traded as high as $15 on opening-day volume of four million shares.

50% Price Increase Expected

In fact, Cragin may quickly vault into the top dozen thrifts in the nation, measured by market capitalization, if, as industry analysts think is possible, its shares rapidly gain up to 50% in price from their $10 opening level.

A bull market for thrift institutions' stocks this year has proved to be an extraordinary windfall for managers and customers who bought shares during the initial equity offerings made by thrifts converting from mutual to stock status.

For instance, shares of N.S. Bancorp, parent of Chicago's Northwest Savings & Loan Association, traded on Thursday at $14.875. That is 86% above the $8.50 initial public offering price of the stock, which made its debut Dec. 20.

Cragin is the parent of Cragin Federal Bank for Savings. With assets of $2.5 billion, it is among the largest thrifts lately to go public.

The Chicago institution, named for its neighborhood on the city's northwest side, is the latest in a series of thrifts to move to the stock form of ownership despite having no pressing need to raise capital.

"Basically, they go public at a cheap price to benefit the collective owners, management, and customers," said Gary Gordon, thrift industry analyst at PaineWebber Inc. "They are structured as windfalls."

But Cragin needs little capital. It already has an 8% retained earnings-to-assets ratio. Following its successful debut, that ratio may hit 13% or 14%, as it has at other institutions. For example, N.S. Bancorp. had a yearend equity-to-assets ratio of 14.8% after its debut.

Managers Reap Benefits

Thrift managers are among the largest beneficiaries of these conversions, often buying large amounts of stock. At Bankers Corp., Perth Amboy, N.J., which went public last year, officers and directors own 26.8% of its shares, with chairman Joseph P. Gemmell owning 9.5%.

The price gains for such stocks after their debut are driven by institutional interest. At year-end, for instance, Wellington Management owned 11.6% of Bankers Corp.

But not all thrift stock offerings have been windfalls. New York's Anchor Bancorp., which has suffered financial reverses, went public in April 1987 at $11.50. On Thursday, the stock was available at $2.875.

Thrift Conversions Draw a Crowd Percent Date of change initial since offering issuedMagna Bancorp. 3/91 135%

Hattiesburg, Miss.

N.S. Bancorp. 12/90 86

Chicago

Bankers Corp. 3/90 76

Perth Amboy, N.J.

JSB Financial 6/90 64

Lynbrook, N.Y. FedFirst

Bancshares 3/91 36

Winston-Salem, N.C.

Sources: SNL Securities, Reuters

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