Seeking to take advantage of the sluggish stock market, executives at mutual thrifts that have recently converted to public companies want regulators to ease restrictions on share repurchases.

"We would love to buy back stock right now," said Dwayne Powell, chief financial officer of Pocahontas (Ark.) Bancorp. "It would be a great investment for us."

The ban on share buybacks applies to mutual thrifts that become public companies using the so-called "second-step" conversion process, which means they issue shares to the public in two stages. The Office of Thrift Supervision bars stock repurchases for a year after the second offering of shares, though it has discretion to grant waivers after six months. Repurchases are limited to 5% of outstanding shares for the second and third years after the thrift converts.

Nine mutual thrifts are engaged in second-step conversions. In 1997 seven mutual thrifts converted to public companies this way.

Converting second-step thrifts have been hit hard in the recent stock plunge. Last year their stock rose, but now they are trading below book value and eager to repurchase.

Analysts agreed that aggressive repurchase programs may boost book value, value to potential acquirers, and earnings per share.

"I think these institutions are frustrated and feel they have their hands tied behind their backs," said Laurie H. Hunsicker, a thrift analyst at Friedman, Billings, Ramsey & Co., Arlington, Va. "They cannot streally bid on other banks and thrifts with a weak currency."

Lawrence C. Caldwell, president and chief executive officer of Homestead Bancorp, Ponchatoula, La., has seen his thrift's stock lose half its value since its July 17 conversion.

The $71 million-asset thrift recently asked the Office of Thrift Supervision for a special exemption to buy back shares to help buoy its stock price and use excess capital, but was turned down.

"It made real good sense and would have been a great opportunity," Mr. Caldwell said.

Wendell T. Breithaupt, president and CEO of Peoples Bancorp., Trenton, N.J., which completed its conversion in April, said the OTS should be more lenient in granting exemptions and "take the current market conditions into consideration."

Without immediate stock buybacks, industry watchers said, thrifts may feel compelled to boost profits by seeking high-yield but risky investments. For instance, they may enter the subprime or business loan markets.

OTS Deputy Director Richard M. Riccobono said the agency is aware of the complaints and has received numerous inquires since the stock prices of these thrifts started falling.

But he said the agency will not bend. These institutions may not buy back shares for at least six months after they convert to public companies, he said.

However, on a case-by-case basis, Mr. Riccobono said, the OTS may ease the 5% cap on repurchases in the subsequent two years under "extraordinary circumstances." Under this scenario, a thrift would be allowed to repurchase up to 15% of its outstanding shares between the sixth and 18th month after converting.

Sandler O'Neill analyst John M. Kline warned that share repurchases are not a panacea. The drop in stock price also reflects the high valuations placed upon these thrifts by the OTS during the conversion process. This means the stocks were already fully priced when they were offered to the market.

"This left little upside in after-market trading," he said.

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