WHITE MARSH, Md. - If ever there was a believer in the old-time virtues of mutual savings and loans, it was Terry Neifeld.

No longer.

"I don't think there's a place for mutuals anymore," said Mr. Neifeld, president and managing officer of Cowenton Federal Savings and Loan Association here, which in June became the first federally chartered mutual thrift to dissolve voluntarily since the 1930s.

In Mr. Neifeld's view, a mass of new laws and regulations have made it impossible to survive as the sort of neighborhood-oriented association Cowenton had been since its founding in 1888.

This isn't a unique opinion. But when Mr. Neifeld and his fellow Cowenton directors sat down a little over a year ago to decide what the future held for their $23 million-asset thrift, they came up with a unique way out.

They had entertained a merger offer from another mutual and merger- conversion proposals from several stock thrifts. But in the end, according to the plan of dissolution Cowenton submitted to the Office of Thrift Supervision, "the board concluded that the members would receive a greater economic advantage from the dissolution as opposed to either a merger or a conversion-merger."

Mr. Neifeld said it is unconscionable that more mutual boards haven't come to the same conclusion. "I think it's time mutual directors recognized what their fiduciary duty is," he said. "It's not to themselves but to the mutual members."

Thrift regulators also have voiced concerns about mutual executives' lack of regard for depositor interests in merger-conversion deals. But Cowenton's proposal to OTS, which handed members all the institution's leftover capital, or nearly a 15% bonus on their deposits, was so out of the norm that it took extended haggling to get the agency's approval, Mr. Neifeld said.

And after American Banker ran a story last month on the Cowenton deal and the voluntary dissolution of a state-chartered mutual, West Coast Mutual Savings Bank of Centralia, Wash., OTS Director of Supervision John Downey quickly reassured mutuals that the government wasn't out to liquidate them.

"The OTS does not now, nor has it ever encouraged mutuals to liquidate," Mr. Downey wrote in a letter to America's Community Bankers that the trade group then faxed to its mutual members. "OTS supports small businesses, many of which are mutuals."

Mr. Neifeld is not convinced of Uncle Sam's support for mutuals.

"I don't see where they've demonstrated that," he said. "Of course, OTS can say, 'Hey, all we're doing is just following the mandates of the government.' Maybe you can back away from it by saying that, but somebody doesn't care about us."

For Cowenton, housed in a five-room building next to the volunteer fire department in this Baltimore suburb, the first sign that somebody didn't care came in 1985, when Maryland's thrift insurance fund went belly up.

In the ensuing mini-panic, Cowenton actually gained deposits. But then the Maryland legislature voted to require all of Maryland's state-chartered thrifts, including Cowenton, to become insured by the Federal Savings and Loan Insurance Corp. by 1989.

Mr. Neifeld lobbied for legislation to allow Cowenton and other small mutuals to become state-chartered credit unions. After the bill passed in 1988, however, he discovered that as a credit union Cowenton would have to move away from its almost exclusive focus on mortgage lending and toward car loans, home equity loans, and other unfamiliar and potentially dangerous territory.

With federal deposit insurance, Cowenton was subject to vastly more supervision. Not only did inspections now cost more, but the thrift regulator also required that Cowenton be open every business day - which meant, among other things, that the thrift had to install its first bathroom.

Before 1989, Cowenton had been open to depositors just two hours a week, on Tuesday nights, with Mr. Neifeld on hand other nights to handle paperwork and consider loan applications. During the day he worked in his family's kitchen cabinet business.

Even after the change, Cowenton continued to do well. In 1991, IDC Financial Publishing Co. rated its financial health "perfect."

The thrift's liabilities were virtually all passbook accounts, and its assets almost all mortgage loans, but they grew steadily - from $1.1 million when Mr. Neifeld took over in 1975, to $11.4 million in 1985, to $19 million in 1990, to $23 million in 1994. So did profits, which were shared with members in the form of annual bonuses. In 20 years, Mr. Neifeld presided over only one foreclosure.

"What they did, they did very well," said Henry Elsnic, president of Madison and Bradford Federal Savings and Loan Association, a $97 million- asset mutual in Baltimore.

Still, with the higher overhead forced on Cowenton by federal regulators, and with thrifts' share of the mortgage business dropping steadily, Mr. Neifeld said he feared that "if we hit one of these blips where rates go back up, we'd be underwater."

Also, the increasing hassle and burden of OTS safety-and-soundness and Community Reinvestment Act examinations wore down the Cowenton board, he said.

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