Encouraged by a change in the Office of Thrift Supervision's stock buyback policy, a Florida thrift company is planning to repurchase 15% of its outstanding shares.

Harbor Florida Bancshares in Fort Pierce said last week that it would buy back 4.6 million shares to shore up its sliding stock price and reduce excess capital. It is the first company to take advantage of a revised OTS policy that lets thrifts repurchase up to 15% of their stock six months after going public.

Under the old rules, the OTS restricted buybacks to 5% of outstanding shares after six months.

"I give the OTS an 'A' for cooperation," said Michael J. Brown Sr., president and chief executive officer at $1.35 million-asset Harbor Florida.

The stock of many converted thrifts is trading below initial offering prices, and industry watchers anticipate the OTS will receive similar requests before the year ends.

"News of the 15% buyback is a long time coming," said thrift attorney Kenneth Lehman, a partner at Luse, Lehman, Gorman, Pomerenk & Schick, P.C. in Washington. "This should have been in place before the market headed south."

The OTS has wavered on the issue of stock buybacks in recent years. Before January 1995 thrifts could begin buying back stock immediately following the conversion and repurchase up to 30% of stock during the first three years.

Then the OTS changed the rules, arguing that buybacks led to abuse by insiders. In an OTS document dated April 7, 1994, then-acting director Jonathan L. Fiechter wrote that the "OTS has concerns that substantial buyback programs begun immediately after conversion may not have a valid business purpose ... and raise substantial issues regarding whether conversion stock has been appropriately valued."

The latest policy change was announced in an internal memo to its regional directors Sept. 15. Flooded with calls from newly converted thrifts eager to buy back stock, the OTS said thrifts would be eligible for a 15% buyback-as long as their stock was trading below the initial public offering price and was rated Camels 1 or 2.

Still, some question whether it came too late, goes far enough, or if the OTS should even have buyback restrictions at all.

"This OTS policy is fairly silly in economic reality," said Jeff Miller, managing partner of the Acacia Fund, a Villanova, Pa., hedge fund that owns shares in converted thrifts. "It puts these companies in the penalty box right away."

The OTS still caps repurchases at 25% in the first three years after a conversion and still bans buybacks in the first six months.

It recently denied a buyback request by PFF Bancorp because it would have pushed the $3 billion-asset thrift over the 25% threshold. And last Thursday, Catskill (N.Y.) Financial Corp. was turned down for a similar request-even though shares in the $310 million-asset thrift are trading below book value.

David Ellison, fund manager of Arlington, Va.-based FBR Funds, agreed that buybacks are a useful capital management tool. But he said they are not always effective in the long run and said the OTS is right for keeping them in check.

"Buybacks aren't the Holy Grail," said Mr. Ellison. "It's an overrated way for investors to make money on the stock in the short-term."

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