The wild fluctuations in the stock market could be both a curse and a blessing for thrifts undergoing mutual-to-stock conversions.

As gyrating market conditions decrease demand for thrift stock and reduce appraisal values, some converting thrifts have been forced to drastically cut the number of shares they planned to offer to the public.

By selling fewer shares and thus raising less cash, fewer thrifts will enter the public limelight with excess capital on their books. Excess capital has been a problem for many converting thrifts this year, which in turn has forced some to buy back stock.

"With what has happened lately to the stock of former mutual holding companies, we see a silver lining in all of this," said Michael J. Donius, chief operating officer at Pulaski Financial Corp. in St. Louis. "With less capital, we will have a better opportunity to enhance our financial performance."

Pulaski, a $184 million-asset thrift, initially planned to sell up to six million shares in a subscription offering that began in September. Then demand dried up-many buyers ordered the minimum of 25 shares-and the thrift reduced the offering to 2.9 million shares at $10 each.

The roiling market has even killed one deal between two upstate New York thrifts that were to merge after one completed its mutual-to-stock conversion.

Cohoes (N.Y.) Savings Bank announced plans in July to buy SFS Bancorp and its subsidiary Schenectady (N.Y.) Federal Savings Bank with the proceeds from its conversion. But the estimated market value of Cohoes Savings has fallen about 30% since, disrupting the terms of the transaction.

"It really is a shame that the markets took this time to take a nosedive," said Harry L. Robinson, president and chief executive officer at Cohoes Savings, which is still planning the conversion. "It just made the purchase of Schenectady unworkable."

Despite the market turmoil, industry observers say that now is not necessarily the wrong time to convert.

Laurie Havener Hunsicker, thrift analyst at Friedman, Billings, Ramsey & Co. in Arlington, Va., said that because many thrifts are well capitalized before converting, "raising less capital is a good thing."

The downside is that stock in soon-to-be-public thrifts will not be as liquid, because fewer shares are available. This could make active trading difficult for companies such as Massachusetts Fincorp Inc. in Dorchester, Mass., which is reducing the number of shares it plans to offer in its upcoming conversion, to adjust for a 23.2% drop in its appraisal value.

Then again, thrift stocks are on the rebound.

As Paul C. Green, chairman and CEO of Massachusetts Fincorp put it: "It's not inconceivable that we'll be re-appraised again. Maybe we'll find that the original estimates are more suitable."

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