Get out while the getting's good.

• Author: Mildenberg, David
• Position: Savings and loan associations

Home Federal Savings Bank of Statesville and Granite Savings Bank of Granite Falls share much in common. Each has been business for decades, sticking to mortagage lending and avoiding fads that brought down more ambitious thrifts. Each has about $100 million in assets. Home Federal has stockholders' equity of $9.2 million, while Granite Savings' net worth is about $9.6 million.

And each is headed by an S&L veteran with more than 25 years' experience who believes his institution can no longer compete with banks. When it came time to sell out, however, each chose a different path.

Southern National Corp. is buying Home Federal, owned by stockholders since 1982, for stock worth $18.2 million. Employees get to keep their jobs, but the big winners are the thrift's 220 shareholders -- especially CEO Ron Hawkins, who owns more stock than anyone else.

Centura Banks Inc., has bought Granite, a mutual depositor-owned thrift, for $11 million of stock -- $7 million less than Home Federal will bring. Granite's eight-member board gets the gravy -- especially CEO J.D. Clawson, 58, who is guaranteed at least $137,000 a year until he turns 65. He was paid $80,791 last year.

Clawson also gets Centura stock worth $330,000 and options for 10,171 more shares. THe other seven directors each receive $1327,500 to $275,000 in Centura stock, options on 5,000 to 7,000 more shares, plus $1,000 a month for serving on Centura's local board. Employees' jobs are guaranteed, their pensions doubled. Local philantrophies picked by the directors will split a hal-million dollars.

What about depositors? They got the equivalent of a 15%-off coupon good on the purchase of Centura stock.

About a dozen such "merger-conversions," in which mutual thrifs offer themselves directly to banks, have been completed in the state, with grumbling limited to a few sophisticated investors and marverick thrift executives. "Those CEOs are getting hellacious contracts," Hawkins gripes," and they're selling something they don't own." But when word of those contracts spread, controversy flared, culminating in Shelby Savings Bank's decision Sept. 15 to cancel its merger-conversion with CCB Financial Corp.

To get Granite's $9.6 million in capital, CCB sold Granite's depositors an equivalent amount of its stock. The bank's out-of-pocket "cost" -- what it is paying officers, directors, employees and community groups, plus transaction fees -- totals less than $5 million.

"It's like free capital for the banks," says H. Edward Scarboro, chief financial officer at Regency Banchares, a Hickory-based S&L holding company that is being bought by Southern National. "I think members are giving away the shop in a merger-conversion. If you're doing one of those, it's basically a reason to give management a good retirement."

"How can we enrich management and the banking industry in North Carolina?" is how Greenboro stockbroker Park Urquhardt III, a veteran S&L investor, sums up merger conversions. "That's all that is occurring."

Unitil recently, the grumbling didn't apear likely to change anything. That's because disorganized mutual depositors seemed to be no match for the J.D. Clawsons and other S&L chieftains, who have friends in the right places. In this case, their pals are S&L regulators, state legislators and bank CEOs, who are tickled to get billions of dollars of loans and deposits cheap.

In the past three years alone, North Carolina's six midtier banks have acquired more than $8 billion in assets from 43 S&Ls. (That includes pending acquisitions and excludes another billion or so from even more lucrative government-assisted deals.) Much of the growth, particularly for BB&T, CCB, First Citizens and Centura, came through merger-conversions after S&L officials decided they didn't want to operate an independent, stock-owned institutions.

Nobody would care about this except for the dramatic success of thrifts that converted to stock ownership, selling shares exclusively to their depositors. In most cases, the S&Ls were bought by larger institutions, making millions for their investors.

Among the prime examples: FedFirst Branschares of Winston-Salem, which went public in March 1991 at $10 a share, then sold out 15 months later for a split-adjusted $40 a share; Regency Bancshares, owner of First Savings Bank of Hickory and Davidson Federal Savings Bank of Lexington, which went public on Dec. 31, 1990, for less than $7 a share and is selling out for...