In its Research & Trading Thoughts for Wednesday, November 12, 2008, FIG Partners analyzes the banks that publicly announced approval for TARP Capital funds.

TARP Recipients So Far – You Might Be Surprised: The subject of TARP capital and which banks are “In” versus who is “Out” is unavoidable today. It has become the overwhelming consideration for many investors, and fear of who could be on the “Out” list has led trading to virtually freeze within the sector for some stocks. We must reiterate that TARP is not just for the top performing or largest banks.  This can be seen in the attached list ( CLICK HERE) of performance metrics for the Treasury approved TARP recipients to-date which currently stands at 45, and as shown are far from a perfect bunch. Even with this limited list, banks who have received approval run the gamut with poor credit quality, lack of profitability and weak capital included in the mix.  Examples of each of these include BANR-Banner Corporation with NPAs-to-Assets of 3.10% and Reserve Coverage of NPAs at only 41%.  As mentioned in prior comments, SAGN-Saigon National Bank is a small $55 million asset bank who has never recorded a profit yet was approved for $1.2 million. Lastly, the best example that everyone has a shot at TARP is MBHI-Midwest Banc Holdings who as of 9-30-08 reported a Total Risk-based Capital Ratio that was barely above “adequately-capitalized” status at 8.04% yet was approved for $85.5 million in TARP capital equal to 3% of its risk-weighted assets. We clearly do not feel that inclusion in TARP should be the ultimate investment consideration these days, but since more often than not it is investors need to realistically consider what the true risk of being declined is.

While caution certainly needs to be taken to extrapolate too much from the 45 banks that have announced approval, the approvals do seem to indicate that: (a) banks of all sizes will be approved by the Treasury, and (b) asset quality does not have to be pristine.

On October 24, 2008, FIG Partners published an alert analyzing the opportunities for community banks under the TARP Capital plan.

We view the TARP Capital Purchase Program as an excellent opportunity for the banking industry to secure some much needed capital at relatively inexpensive and mildly dilutive terms. The opportunity is particularly attractive at a time when outside capital is extremely difficult to find. As such, we at FIG would like to urge any and all banks and thrifts to seriously consider participating in the program. Some of the immediate benefits of the initiative are:

• Improves capitalization ratios
• Provides capital for future growth, organic and M&A
• Solidifies the institution’s balance sheet and puts it in a position to take advantage of failed institutions/assisted transactions
• Implies that the institution received the “blessing” of Treasury/regulators – investors are likely to perceive the companies taking advantage of the TARP Capital Program as survivors

Again, we believe that all banks and thrifts should utilize the TARP Capital Purchase program, and since the November 14th deadline is fast approaching, we urge you to explore the program and familiarize yourself with all the details sooner rather than later.

Read FIG Partners’ full alert on the TARP Capital program.  To see all Investment Banker reports on this site, please see all posts tagged Investment Banker.