On March 31, 2009, five banks announced that they had completed redemptions of their TARP preferred stock.
- Signature Bank – $120 million
- Old National Bancorp – $100 million
- Bank of Marin Bancorp – $28 million
- IBERIABANK Corporation – $90 million
- Centra Financial Holdings, Inc. - $15 million
In their respective press releases, four institutions emphasized in one form or another their financial strength following the redemption. Two institutions emphasized the changing operating restrictions of participation that caused them to decided to repurchase the preferred shares.
On March 30, 2009, the Wall Street Journal reported that the Treasury Department estimates that about $134.5 billion remains under the Troubled Asset Relief Program, or TARP. In order to reach that figure, the Treasury considered funds already invested under the TARP Capital Purchase Program and then added $25 billion as a “conservative estimate” of funds that the Treasury believes will be paid back shortly.
The New York Times estimate, on the other hand, shows a total of $106.6 billion that is either uncommitted or pending (under the Capital Purchase Program). Assuming that you add the same “conservative estimate” of repayments, that would lead to a total of $131.6 billion remaining, or $2.9 billion less than the Treasury’s estimate.
Neither the Wall Street Journal nor the Treasury has provided a breakdown of how $134.5 billion is remaining out of the $700 billion TARP total. Assuming $134.5 billion would be remaining after $25 billion is redeemed, total expenditures to date should be $589.5 billion. (Assuming The New York Times’ estimate is correct, expenditures to date would be $593.4 billion.)
On March 31, 2009, the Treasury Department unveiled a completely updated site for the Financial Stability Plan programs (FinancialStability.gov). Besides requiring visitors to learn an entirely new navigation system to find documents on the site, the new site contains a number of new features that may be of interest to BankBryanCave.com readers:
- a map showing the local impact of the TARP Capital Purchase Program (larger view). Like BankBryanCave.com, the Treasury also provides a Google Map of TARP Recipients. Unfortunately, the Treasury’s Google Map suffers from a “feature” of Google Maps that limits the number of pins shown on the map; as a result, only the first 100 or so recipients (alphabetically) are included on the map. The BankBryanCave.com Map of TARP Capital Infusions shows all TARP Capital Purchase Program recipients, and also differentiates between recipients based on when the TARP Capital funds were received. (For comparison purposes, the Treasury’s map was created on March 11, 2009 and, as of March 31, 2009, has been viewed 265 times. Our map was created on November 25, 2008 and has been viewed over 11,294 times.)
- simplified economic data, which may help citizens (and bank customers) understand and monitor the need and impact of TARP.
- a secret decoder ring* to help translate the various terms and acronyms used under TARP. ABS, AGP, CAP, CPP, EESA, MBS, SSFI, TIP and TARP are all included.
*It’s not actually a decoder ring, but is called the “Decoder.”
The website appears to still be actively being developed and revised, as links to various documents from the previous website have appeared while this post was being edited.
Despite the fact that no Subchapter S institution has yet received TARP Capital funds, and a term sheet for mutual organizations has not yet been announced, the Treasury has now provided documentation on how a TARP Capital recipient would redeem their investment, as permitted by the American Recovery and Reinvestment Act of 2009. On March 25, 2009, the Treasury published TARP Capital Purchase Program repurchase documents for public and private TARP Capital recipients.
Both the public and private documents contemplate the repurchase of all, or a portion of, the Company’s TARP Capital investment. Under the public company repurchase documents, if a Company repurchases 100% of the Treasury’s preferred stock, then the Company is also given 15 days to either repurchase the warrant for common stock at fair market value, or to issue a replacement warrant that does not contain the adjustment to reduce the number of shares covered by the warrant in the event of a qualified equity offering. Under the private company repurchase documents, once a Company repurchases 100% of the primary preferred shares (the ones initially paying 5%), it can also repurchase up to 100% of the warrant preferred shares (paying 9%).
We have just received some insight into two of the more unclear issues presented when the EESA was amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”): Executive Compensation Compliance Certification and the Say-on-Pay Proposal. As we’ve indicated repeatedly since ARRA was passed, many of its provisions are unclear and present trouble to institutions that have received TARP Capital or are contemplating taking TARP Capital.
Executive Compensation Compliance Certification:
Treasury has confirmed that to us that the Interim Final Rule issued in January is not effective. The Treasury believes that ARRA supersedes the provisions of this Interim Final Rule because the Rule was not actually published prior to the passage of the ARRA, and when the ARRA was passed, Treasury withdrew the Rule from publication. Thus, Treasury is waiting, much like the rest of us, for new a rule to be issued. (more…)
As of February 11, 2009, those banks qualifying as “primary dealers” were:
- BNP Paribas Securities Corp.
- Bank of America Securities LLC
- Barclays Capital Inc.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Daiwa Securities America Inc.
- Deutsche Bank Securities Inc.
- Dresdner Kleinwort Securities LLC.
- Goldman, Sachs & Co.
- Greenwich Capital Markets Inc.
- HSBC Securities (USA) Inc.
- J. P. Morgan Securities Inc.
- Mizuho Securities USA Inc.
- Morgan Stanley & Co. Incorporated
- UBS Securities LLC.
On March 3, 2009, the FDIC published Financial Institution Letter FIL-13-2009 on the use of volatile or special funding sources by financial institutions that are in a weakened condition. The guidance generally suggests that banks should be run safely and soundly.
Directors and officers of institutions that are in a weakened financial condition are expected to oversee the operations of these institutions in a way that stabilizes the risk profile and strengthens the financial condition. Actions taken by a weak financial institution to increase its risk profile are inconsistent with this expectation.
While the guidance is overly broad, we believe the FDIC guidance may be focused on two practices:
On March 24, 2009, the Treasury announced the completion of the nineteenth round of TARP Capital infusions. The Treasury purchased a total of approximately $80.7 million in securities from 10 financial institutions on Friday, March 20, 2009, and has now invested in 520 institutions, totaling approximately $198.5 billion.
Heritage Oaks Bancorp, which was the only public institution to receive funds this round, received the largest infusion, $21 million. Farmers & Merchants Financial Corporation, Argonia, Kansas, received the smallest infusion: $442,000.
There are a couple of things to take immediate note of in this eighteenth round. First, this round marked the seventh consecutive round where less than 30 institutions received TARP Capital infusions. Second, the Treasury had never invested fewer than $280 million in any single round, yet in this round, the total amount invested was only $80.7 million — roughly $200 million less than the previous low. We noted in a previous post, that it is unclear what is contributing to or causing this diminishing number of TARP closings, but given the recent trend in fewer closings, it is clear that something is changing. We hope to provide some insight or commentary shortly.
Click here to view our updated TARP Map.
Click here to view our updated list of TARP Capital recipients and a description of our methodology in compiling the list.
On March 16, 2009, the Treasury announced the completion of the eighteenth round of TARP Capital infusions. The Treasury purchased a total of approximately $1.5 billion in securities from 19 financial institutions on Friday, March 13, 2009, and has now invested in 510 institutions, totaling approximately $198 billion.
Discover Financial Services, Riverwoods, Illinois, received the largest infusion, $1.2 billion, and was the first institution to receive over $1 billion since the ninth round (1/9/2009). Haviland Bancshares, Inc., Haviland, Kansas, received the smallest infusion: $425,000.
Of note in this eighteenth round, a Washington D.C.-based institution received TARP Capital funds. IBW Financial Corporation received $6 million. To date one territory, Puerto Rico, and the U.S. capital, Washington D.C., and all states except Montana, New Mexico, and Vermont, have institutions that have received TARP Capital.
This round marked the sixth consecutive round where less than 30 institutions received TARP Capital infusions. In fact, other than the eighth round (12/31/2008), where 7 institutions received TARP funds, this round saw the fewest number of TARP closings — this is second round in row where this is the case. As we noted in a previous post, it is unclear what is contributing to or causing this diminishing number of TARP closings.
Click here to view our updated TARP Map.
Click here to view our updated list of TARP Capital recipients and a description of our methodology in compiling the list.
Over the last two weekends, 60 Minutes has aired two interviews that are directly relevant to community bankers.
On Sunday, March 15, 2009, Federal Reserve Chairman Ben Bernanke sat down with 60 Minutes for a rare interview. Chairman Bernanke discusses the current financial condition of the country as well as the actions taken by the Federal Reserve to address those conditions. (Video: Part I, Part II)