WASHINGTON -- The Office of Thrift Supervision finalized four mutual-to-stock conversions before new rules on the deals took effect Tuesday, but not without stripping management benefits from them.
The four deals show the approach the agency will likely take for the 29 deals still pending. The OTS announced the approvals Monday.
The agency said the four institutions agreed "to revise their applications to eliminate certain benefit provisions proposed for insiders." The condition the agency imposed on executive compensation mirrors the limits found in the agency's new conversion rules.
The move suggests that even if the terms of the 29 pending deals do not meet the agency's new requirements, the agency will let them close as long as management agrees to give up the free stock and stock options they would have gotten.
Thrift Group Objects
The Savings and Community Bankers of America, a thrift trade group, objected to the move.
"Companies which started on this path when Management Recognition Plans and stock options were part of the mix should be given some consideration through grandfathering," said Randy McFarlane, SCBA director of government relations.
The four thrifts are selling minority stakes to the public by creating a mutual holding company to hold the bulk of the shares.
The four institutions are Jefferson Federal Savings & Loan Association of Morristown, Tenn.; Pulaski Bank in St. Louis, Mo.; Community Federal Savings Bank in Tupelo, Miss.; and Leeds Federal Savings & Loan Association in Baltimore.
The Federal Deposit Insurance Corp. must also approve the four deals for insurance purposes, and staffers said the agency is still debating whether to impose additional conditions on the pending deals.
FDIC Planned Rule Change
Acting OTS Director Jonathan L. Fiechter and acting FDIC Chairman Andrew C. Hove Jr. last month announced the changes in the agency's rules. Mr. Hove said then that the FDIC would also crack down on insider compensation in these deals in rules that would "parallel" the OTS rules.
However, the FDIC has not yet adopted its rules, and staffers from separate divisions within the FDIC are squabbling about what approach to take. An agency spokesman said, "The FDIC staff doesn't make policy."
Meanwhile, the FDIC has a virtual moratorium on conversions. It has announced approval of just two deals -- both involving troubled thrifts -- since Mr. Hove told Congress in February that his agency had the authority to adopt comprehensive rules on state-chartered savings banks' stock conversions.
But the FDIC spokesman said the agency has not halted the deals. Conversion applications "are going through the review process," he said.
"They are injecting some unnecessary delay and expense into this process," SCBA's Mr. McFarlane said.
