In an apparent first for a converted mutual thrift, Enterprise Federal Bancorp of Cincinnati has received permission from the Internal Revenue Service to return some of its capital to stockholders tax-free.

The IRS decision, while it applies only to Enterprise, could pave the way for other thrifts to give back excess capital raised when they converted from mutual to stock ownership. Because stock prices have been higher than expected, many newly converted thrifts now have more capital than they need - which can depress return on equity and, over the long run, stock market appeal.

"This is a flexibility issue, another vehicle for optimizing return on investment to shareholders," said Stanley J. Quay, a partner with the accounting firm of Grant Thornton in Cincinnati who helped structure the Enterprise giveback.

Enterprise chief financial officer Thomas J. Noe said the $203 million- asset thrift, which converted from mutual to stock ownership in October 1994, has tried to find uses for its capital - making more loans, searching for possible acquisitions. But it still has a capital-to-assets ratio of 19%, well above the thrift industry average of 7.7%.

Other thrifts in this predicament have paid extra dividends or bought back stock to reduce capital levels, said Ron Copher, a Grant Thornton Cincinnati tax partner.

Both these moves are taxable, so Enterprise asked Grant Thornton for advice on making a tax-free capital distribution. Such distributions are commonly made in liquidations and leveraged buyouts, but never before by a just-converted former mutual savings and loan, Mr. Copher said.

"What this really is, is grown-up investment-banker strategies being used at an institution that is not a giant," said Brian Smith, director of policy development at America's Community Bankers, the thrift trade group.

The IRS approved the deal in a private letter, the thrift and its accountants said - though the letter won't be available to the public until early next year.

The capital distribution of $3 per share will be paid Nov. 3, and all but about 5 cents of it is expected to be tax-free.

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