Two years ago, investing in a mutually owned savings institution was like betting on a race where every horse is declared a winner before the gates open.

At the time, investors routinely reaped substantial profits when such companies went public, in a process known as a "mutual conversion." It wasn't uncommon for stock prices to soar 30% and 40% on the first day of trading.

Even renowned stock picker Peter Lynch of Fidelity Investments once noted that when it comes to mutual saving banks, "it's hard to find a wrong stock."

Today, mutual savings banks and thrifts continue to convert to stock form at a healthy clip, but the appreciation of their shares has slowed to a crawl. Indeed, a fair number of recent mutual conversions trade beneath their IPO prices.

Experts say softness in the IPO market reflects a successful effort by Congress to control the windfalls investors were getting on the deals a few years ago.

Compounding the problem, they say, thrift stocks generally have been hit by rising interest rates this year. And the sector's valuations have been retreating from levels they had reached last year when merger speculation was at a high.

Conversions "have hit a weak market," said thrift analyst John Kline with Ryan, Beck & Co. "It picked up in 1995, but in the last run of deals the smaller, more illiquid ones have been trading down."

Thirty-three mutual conversions have taken place this year, up from 29 during the first six months of last year.

On average, shares of mutual banks that went public this year gained 10.263% on the day of issue, according to SNL Securities, Charlotte, N.C. Last year the average first-day rise was 10.7%.

The average stock price for this year's mutual conversions advanced 12.48% after several months, but six of the 33 mutual conversions trade beneath their IPO price.

Among the latter are First Bergen Bancorp, Wood-Ridge, N.J.; Yonkers (N.Y.) Financial Corp., and Lexington (Mo.) B&L Financial Corp. All three thrifts went public at $10 a share in the past three months - and all now trade for between $9 and $10.

*First Bergen, which went public April 1, saw its shares tumble to $9.75 by midafternoon that day. By 2 p.m. Tuesday, shares were trading at $9.125.

*Shares of Yonkers Financial, which began trading April 18, fell to $9.875 by the middle of that day. Shares were at $9.75 Tuesday afternoon.

*Lexington B&L dropped to $9.50 on June 6, the day of its public offering. Shares had made a partial comeback by Tuesday, trading at $9.875.

In 1994, Congress became concerned that professional investors and management were "profiting obscenely" from the initial surges in stock price that took place when thrifts went public, said Chris Smith, a conversion research editor at SNL Securities.

He said the companies that evaluate thrifts about to go public responded by awarding a higher value to the thrifts being converted. And that has taken away some of the opportunity to make a quick killing.

"Many of the companies were appraised at 75% of book value or between 15 and 20 times earnings,"said Martin S. Friedman, a senior analyst at Friedman Billings, Ramsey & Co. The overpricing eventually created "too much supply and not enough demand at discounted prices."

Michael Keller, who heads Keller & Co. of Dublin, Ohio, one of the firms appraising mutual thrifts planning to convert, conceded that some appraisal firms have overpriced such conversions.

But these firms "have been subject to review by regulators if their stocks had too much of an increase," he said. "And some may still be concerned over (that) regulatory action."

Although the mutual conversions have lost their sure-bet allure, some observers see good buying opportunities among the thrifts that are trading below their IPO price or have seen their stock take a hit in the last year.

For example, Cooperative Bank for Savings, in Wilmington, N.C., selected as a top thrift in 1991 by Peter Lynch, did not disappoint investors. Its stock price appreciated to $23 from $5.33 in less than three years.

But in the fall of last year, the company's "margins fell out of bed and earnings fell out bed with them," said analyst Christopher Marinac of Interstate/Johnson Lane in Atlanta. "Investors see that and they say let's move."

Cooperative's stock price has since fallen to $17.

Mr. Marinac, however, still remains optimistic.

Thrifts' stock prices often have less to do with earnings than with franchise value and book value, he explained.

"The industry continues to be on the decline, but if you buy a local thrift with market share you can make good money on the stock," he said. "There are profits to be made."

Indeed, although the market is weaker than it once was, the stock prices of some converted thrifts have performed as if nothing had changed.

First Federal Bancshares of Arizona opened trading May 3 at $10 a share. The stock price surged to $13 the first day; it now trades at $14.

Other big gainers include Green Street Financial Corp., Fayetteville, N.C., which opened at $10 on April 4, and now trades at $13.125; and Community Federal Bancorp, Tupelo, Miss., which opened at $10 on March 26, and now trades at $13.50.

"It is a good idea to look at each institution individually on its own merits now," said Mr. Kline. "If the fundamentals of a company seem strong, we will still recommend it as a buying opportunity. Stock that was trading down two years ago are back above their IPO prices."

Mr. Friedman noted that softness in the thrift industry is merely cyclical.

"In 1994 the thrift market was also soft, but the next round of conversions were priced much better in the first quarter (of 1995)," he said. "So there is a chance they will reprice it better in 1997."

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