Flooded with calls from publicly owned thrifts that desperately want to buy back stock, the Office of Thrift Supervision is easing its repurchase policy.
In a Sept. 15 memo circulated to OTS regional directors, the agency said thrifts may buy back up to 15% of their stock after six months following a conversion - provided the stock is trading below the initial public offering price.
The decision, effective immediately, is relief for many converted thrifts that have watched their stock prices slide in recent weeks.
Stock buybacks had been barred for a year after thrifts convert to public companies, except in special circumstances. The first six months is a particularly active time for new stock, and the OTS said it wants to ensure that management does not make any hasty decisions.
In the OTS letter, Deputy Director Richard M. Riccobono said recent market volatility has depressed stocks, prompting thrifts to seek shelter in stock buybacks.
"The agency has determined that stock of recently converted thrifts trading below initial public offering prices due to a confluence of economic conditions does establish an exceptional circumstance within the meaning" of OTS policy, he wrote.
Thrifts eligible for the 15% buyback must be rated Camels 1 or 2. Additionally, the repurchase transactions must not raise material safety- and-soundness concerns, Mr. Riccobono wrote.
Repurchases will continue to be limited to 25% of outstanding stock within the first three years after a conversion.
Analysts hailed the decision. They say recently converted thrifts were placed in difficult situations with aggressive appraisals - approved by the OTS - and burdened with high levels of excess capital following the IPOs.
"This is a positive development for these companies," said John M. Kline, a thrift analyst with Sandler O'Neill & Partners LP in New York. "Many of these companies came out of the box with too much capital."
Laurie Havener Hunsicker, a thrift analyst at Friedman, Billings, Ramsey & Co. in Arlington, Va., said the OTS needs to go a step further and allow buybacks at thrifts trading near, but not below, their IPO price.
