mutual to stock form were dashed again this month when federal regulators suddenly balked at granting a needed waiver of federal conversion rules. Under regulations adopted a year ago by the Federal Deposit Insurance Corp., a majority of a mutual's depositors must vote, either in person or by proxy, in favor of a conversion before regulators will approve the transaction. But Massachusetts law bars proxy voting, requiring instead a two-thirds affirmative vote by depositors present at a special meeting. Since many of Falmouth's depositors would likely not be able to attend a special meeting in person, chances are slim that the thrift could get a "majority" to vote in favor of the conversion. And state regulators have refused to approve Falmouth's conversion unless the FDIC waives its requirement. The FDIC board was slated to take up Falmouth's application at its regular meeting Nov. 14 and officials had told Falmouth that a waiver would likely be granted, permitting the conversion, said Falmouth attorney Richard A. Schaberg, of Thompson & Mitchell in Washington. But the application was suddenly removed from the agenda on Nov. 13 and officials informed Falmouth that regulators still had concerns, Mr. Schaberg said. On Nov. 15, Mr. Schaberg fired off a letter of protest to FDIC officials. "The staff was telling me that these waivers were no longer a problem," Mr. Schaberg said in an interview. "But apparently that's not an accurate reflection of where they are. We're a little bit back to square one."

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