A tiny southern Illinois thrift is seeking to simultaneously convert from a mutual to stock institution and become a national bank.

The $13.5 million-asset Lawrenceville Federal Savings and Loan Association would be renamed Heritage National Bank upon the completion of its conversions, expected late next month.

The first known double switch of this nature was made last June by an Olney, Ill., savings bank now known as Community Bank and Trust. Another Illinois mutual, First Federal Savings and Loan Association of Herrin, has also applied to make such a move.

"The reason we're doing this is to survive," said president and chief executive Kevin J. Kavanaugh. "Doing all this just fits into our business strategy. We need more room to grow on the commercial side."

With its traditional mortgage loan business stagnating in recent years, Lawrenceville Federal has been grazing the 10% commercial lending limit for thrifts, he said.

Going from mutual to stock for business strategy reasons - as opposed to just seeking more capital - is a break from the past, said attorney Gary A. Lax of Silver Freedman & Taff, a Washington law firm that has advised the thrift.

Lawrenceville has high capital levels and has been a good performer, Mr. Lax said. A $120,000 loss in the quarter ended Dec. 31 resulted from increased tax expenses relating to the recapture of bad-debt reserves - a move necessary for obtaining a bank charter.

Mr. Kavanaugh predicted that with questions surrounding the future of thrift charters and the Savings Association Insurance Fund, more mutuals could take the extra step to a bank charter.

"If it fits in (other thrifts') business plans, they should do it," he said. "The disadvantage I see is if we didn't do anything. I think you're sitting in limbo and you're letting a lot of good business opportunities pass you by."

While Mr. Lax said he wouldn't be surprised if other thrifts followed suit, he added: "On the other hand, people may wait and see what Congress does with BIF-SAIF and forcing federal thrifts to convert to bank charters."

Lawrenceville Federal has already begun the stock offering - for approximately $5 million - which is to end March 19. The company has Office of Thrift Supervision approval for the mutual-to-stock switch and conditional approval from the Office of the Comptroller of the Currency for the bank charter. Deposits would continue to be insured by the thrift fund.

The Federal Reserve Board is expected to approve the bank holding company application next month and the mutual's members are expected to approve the conversions on March 22, the company said.

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