On March 14, 2012, Treasury issued a press release announcing its intent to sell the preferred TARP CPP interests in six financial institutions on or about March 26, 2012.  Specifically, the Treasury plans to sell its preferred stock positions in Walla Walla, Wash.-based Banner Corp., Charleston, S.C.-based First Financial Holdings Inc., Greensburg, Ind.-based MainSource Financial Group Inc., Stuart, Fla.-based Seacoast Banking Corp. of Florida, Los Angeles-based Wilshire Bancorp Inc. and Wilmington, Del.-based WSFS Financial Corp.

Consistent with prior discussions, Treasury is commencing activities to exit the federal government’s involvement in the TARP CPP program, with an initial focus on large investments in relatively healthy, public institutions.  The Treasury’s results in this initial round of auctions is likely to influence policy and expectations going forward.  If Treasury is only able to get 70 to 80 cents on the dollar in the auctions for these relatively healthy and public institutions, its appetite to engage in further sales could be severely limited (while the willingness/ability to settle individual TARP investments for a discount – either directly by Treasury or via a third party purchaser – may significantly increase).

The TARP investments selected by Treasury are each among the largest 50 TARP investments that currently remain outstanding, and represent approximately 2.5% of the currently outstanding TARP CPP investments.  All six financial institutions selected by Treasury are presently current in their dividend payments (although Seacoast Financial had previously deferred its TARP dividends).

Upon sale of the Treasury’s position in the TARP CPP Preferred Stock, the financial institutions will automatically be freed from the executive compensation restrictions associated with TARP.  However, if the Treasury sells its position at a discount, the Treasury’s interpretation (via the office of the Special Master) is that a portion of any “long-term restricted stock” issued in accordance with the TARP executive compensation restrictions will become permanently non-transferable.  It remains to be seen how this will be interpreted and implemented going forward.

A brief summary of the six financial institutions selected by Treasury follows:

Banner Corporation received $124 million in TARP funds, and has a current market cap on its common stock of approximately $376 million.  As of December 31, 2011, it had $4.2 billion in assets, a tangible common equity/tangible assets ratio of 9.54%, a regulatory leverage ratio of 13.44% and 4.02% of its assets were non-performing.

First Financial Holdings received $65 million in TARP funds, and has a current market cap on its common stock of approximately $170 million.  As of December 31, 2011, it had $3.1 billion in assets, a tangible common equity/tangible assets ratio of 6.67%, a regulatory leverage ratio of 12.84% and 1.37% of its assets were non-performing.

Wilshire Bancorp received $62 million in TARP funds, and has a current market cap on its common stock of approximately $329 million.  As of December 31, 2011, it had $2.7 billion in assets, a tangible common equity/tangible assets ratio of 8.95%, a regulatory leverage ratio of 13.86% and 1.88% of its assets were non-performing.

MainSource Financial Group received $57 million in TARP funds, and has a current market cap on its common stock of approximately $236 million.  As of December 31, 2011, it had $2.8 billion in assets, a tangible common equity/tangible assets ratio of 7.86%, a regulatory leverage ratio of 10.80% and 2.81% of its assets were non-performing.

WSFS Financial Corporation received $53 million in TARP funds, and has a current market cap on its common stock of approximately $326 million.  As of December 31, 2011, it had $4.3 billion in assets  and 2.14% of its assets were non-performing. (Capital ratios not available due to thrift structure.)

Seacoast Banking Corporation of Florida received $50 million in TARP funds, and has a current market cap on its common stock of approximately $171 million.  As of December 31, 2011, it had $2.1 billion in assets, a tangible common equity/tangible assets ratio of 5.63%, a regulatory leverage ratio of 10.31% and 5.67% of its assets were non-performing.  It’s subsidiary bank has been subject to a written agreement with the Office of the Comptroller of the Currency since December 2008.