First Southeast Financial Corp. is about to make a lot of shareholders very happy.

On Thursday, the Anderson, S.C.-based thrift is paying out a whopping $10 per share in a one-time special cash dividend. That's a total of at least $41 million doled out to shareholders, and about one-fourth of it will be tax-free.

The goal is to slash the thrift's capital base in half, bringing its capital ratio down to a more manageable 10%.

Company officials say they had already considered acquisitions, stock repurchases, wholesale leveraging, changes to the regular dividend, and even a sale of the company in order to reduce capital. But none of the options proved satisfactory.

"We felt it was time to make a move and make a bold one," said president and chief executive David C. Wakefield 3d.

Increasingly, banks and especially thrifts across the country are coming to the same conclusion about traditional options for reducing excess capital - they're just not enough.

In particular, thrifts which have recently converted to stock form have found themselves saddled with unusually high capital levels that hamper their return on equity and disappoint investors.

Analysts' estimates of excess capital in the industry range as high as $1 billion total, said Ben Plotkin, executive vice president of Ryan, Beck & Co., West Orange, N.J. Many institutions now have capital ratios in the 20% to 40% range, and $32 million-asset Reliance Savings Bank in Milwaukee has a 48% capital ratio.

Desperately seeking fast relief, institutions are turning more and more to large, one-time special dividends, or even a tax-free return of capital, following the example set by Cincinnati's Enterprise Federal Savings Bank last fall.

"The industry is facing something of a capital crisis," said Peter J. Ostrowski, managing director of Ostrowski & Co. in New York. "Profitability is up dramatically, but there's not a lot of growth. They're overwhelmed with the amount of capital that they have."

Last fall, Enterprise, with the help of the accounting firm Grant Thornton, caught the industry by surprise by declaring $2.95 of a $3 special cash dividend to be tax-free. The thrift had obtained a ruling from the Internal Revenue Service permitting the action.

"Enterprise gets credit for the idea," said John G. Cornwell, bank and thrift analyst for Cleary Gull Reiland & McDevitt in Milwaukee. "They seem to have started everybody's ball rolling."

Since the beginning of April, at least a dozen community banks have announced similar plans to declare special dividends of at least $1 per share, with some portion tax-free. Prior to that, only about seven had made such announcements in 1994 and 1995, although dozens of others have declared smaller special dividends of between 20 cents and $1 in the same period.

"We expect this trend to continue into the indefinite future until the alternatives for capital become so attractive that the banks are not forced to do this," said Gerard Cassidy, an analyst with Hancock Institutional Equity Services.

But eligibility for the tax-free return of capital is sharply restricted by federal tax laws. Generally, only newly converted thrift holding companies that have not already filed a consolidated tax return would qualify for a tax-free capital distribution.

That's because under IRS regulations, dividends must first be paid out of taxable earnings from the company's entire history. Once a consolidated return is filed, the holding company's history includes that of the subsidiary.

"Whether it's tax-free or not doesn't matter," said David Perlmutter, a lawyer for activist investor Jerome Davis of Greenwich, Conn. "It belongs with the shareholders, it should be with the shareholders. Nobody's going to profit from it."

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