A small Lexington, N.C., thrift's struggle with regulators over its future may be coming to an end.

Perpetual Savings Bank, a $38 million-asset thrift, last week got conditional approval from the state's thrift regulator to convert to a commercial bank, after switching from a mutual to a stock savings bank.

The North Carolina Savings Institution Division approved the thrift's application after rejecting one that had included a depositor payout plan -- valued at roughly $1 million or 15% of Perpetual's appraised value. The new application omitted the payout.

"We are extremely pleased with the commission's decision," said B. Glenn Smith, president of Perpetual, in a statement. "A state bank charter will provide us with a great deal of flxibility for future operations and strategic planning."

The Savings Institution Division's commissioner, Stephen E. Eubanks, had rejected Perpetual's previous application in November because he objected to the depositor payout plan. Such payouts could motivate ifluential depositors to force institutions to convert and, in the process, receive greater-than-normal payouts, he said.

Perpetual was frustrated with that decision because its payout plan had been approved by the Federal Deposit Insurance Corp. just weeks earlier. the state's decision seemed to place it and the FDIC at odds over such conversions.

Mr. Eubanks denied any such conflict, stating that he had considered additional criteria in his decision to reject the initial plan.

Perpetual still must get approval from federal regulators for its amended plan, which is expected by late January. A subscription offering will then begin. Once the conversion is completed, the institution will change its name to Perpetual State Bank.

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