The New York State Banking Board is preparing to relax stock repurchase restrictions for state-chartered thrifts, many of which are loaded with excess capital.
The board is expected to vote Dec. 3 on a proposal that would let state thrifts buy back stock six months after a mutual-to-stock conversion. State thrifts now must wait one year to repurchase stock.
State banking officials said that would bring New York rules into line with the Office of Thrift Supervision's new stock repurchase policy for federally chartered thrifts. The rule change requires 11 votes to pass the 17-member state board.
"This would eliminate the disparity between state and federal thrifts in New York," said Steve Barras, assistant counsel in the New York State Banking Department.
"I don't see any reason not to grant this," said Charles Hamm, a member of the state banking board who is chief executive officer at Independence Bancorp of Brooklyn. His state-chartered thrift completed its conversion in March.
The OTS eased its repurchase policy in September. Until then, newly converted thrifts were banned from buying back more than 5% of their stock for one year after going public. But with market volatility depressing the stock prices of many newly public thrifts, the OTS amended its rule to let thrifts buy back up to 15% after six months.
New York banking officials said the proposed state policy would not limit the amount of stock a state thrift could repurchase after six months.
Converted thrifts use stock buybacks to reduce excess capital realized in the conversions. Hit hard by the recent market turmoil, many newly public thrifts are trading near or below their initial public offering prices, making repurchases cheap.
Analysts said buyback programs may boost book value and earnings per share.
Laurie Havener Hunsicker, an analyst at Friedman, Billings, Ramsey & Co., said some New York thrifts have Tier 1 capital ratios of 14% to 28% and could benefit from the change. These include Richmond County Financial Corp., Staten Island; CNY Financial, Cortland; Hudson River Bancorp; Niagara Bancorp, Lockport; and Sound Federal Bancorp.
Richmond County, for example, amended its merger agreement with Bayonne (N.J.) Bancshares last month to gain the opportunity to buy back stock. The deal will now be accounted for as a purchase rather than a pooling of interests.
Stock buybacks are prohibited in pooling-of-interest deals for six months after the merger is completed.