In one of the more unusual twists of corporate strategy, a southern Connecticut thrift is issuing stock in order to buy it back.

Four months after laying plans to repurchase 15% of its outstanding common stock, Southington-based Bancorp Connecticut has issued a 20% stock dividend. The buyback is still under way, but the dividend was paid last week.

Despite the apparent contradiction, thrift officials insist it was not a sign of confusion or an about-face by Bancorp. Instead, they say, it was purposely designed to loosen up some stock to help an otherwise moribund repurchase program.

"The hope with the 20% stock dividend is that maybe you'd be able to shake some of that stock loose," said Robert D. Morton, president and chief executive of Bancorp. "That should allow us to repurchase additional shares."

Facing a high capital-to-asset ratio of about 11%, Bancorp Connecticut turned to the stock repurchase program in February to reduce its excess capital.

But over the next four months, officials weren't able to make much progress on the buyback. The company has about 2.3 million outstanding shares, but most are held locally. There are no significant shareholders with more than 5% of the stock, Mr. Morton said, making it difficult to repurchase large blocks of shares.

Officials then decided on the 20% stock dividend, the thrift's second of that size in three years.

"The stock dividend was an intent to improve the liquidity and marketability of the stock, which I think has been happening," Mr. Morton said.

Gerard Cassidy, bank analyst at Hancock Institutional Equity Services in Portland, Maine, said Bancorp Connecticut is facing a problem many institutions struggle with: finding a way to boost its stock value through the buyback, while at the same time increasing the stock's liquidity through the dividend. But those two strategies usually run counter to each other, he said.

"They're kind of stuck between a rock and a hard place and they're trying to accomplish both," he said. If the two moves are successful in reducing capital, "we're going to see more of these transactions by community banks in the future," he added.

Though officials have seen a substantial increase in trading activity in the thrift's stock during the past month, there's still a ways to go. Only 50,000 shares of the 350,000 envisioned in the repurchase program have actually been bought back, and the thrift still has a 10.5% capital ratio.

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