Community Based, Nationally Recognized (sm)

Category Archives: TARP Capital

Becoming a Certified Community Development Financial Institution and Participation in the Community Development Capital Initiative

By Amber Nash Hall - Friday, March 5, 2010

On February 3, 2010, the Treasury Department announced the final terms of the Community Development Capital Initiative (“CDCI”), a new TARP program that will invest lower-cost capital in certified Community Development Financial Institutions (“CDFIs”). A certified CDFI is a financial institution that works in markets that are underserved by traditional financial institutions and is certified by the Department of the Treasury’s CDFI Fund.

In order to become a certified CDFI, an institution must meet each of the following certification criteria:

Primarily Serve One or More of the following CDFI Designated Target Markets

1. Investment area, which includes, but is not limited to, geographic boundaries that (i) have a population poverty rate of at least 20%; (ii) have an unemployment rate 1.5 times the national rate; or (iii) are located within an Empowerment Zone or Enterprise Community.

2. Low-income targeted populations, which are comprised of populations with income of not more than 80% of the metropolitan area median family income, or, for rural areas, not more than the greater of 80% of either the area or statewide non-metropolitan median family income.

(more…)

Email This Content Email This Content Posted in TARP Capital.

Treasury Expands TARP Program for CDFI’s; Contemplates Private Matching Investments

By Rob Klingler - Thursday, February 4, 2010

On February 3, 2010, the Treasury Department announced enhancements to the TARP Capital Purchase Program for Community Development Financial Institutions (CDFIs).  In addition to significant improvements for CDFIs, for the first time the Treasury Department has formally announced that it will consider private matching investments to determine bank viability – which could be a significant signal of how the Treasury might treat community banks under the proposed $30 billion Small Business Lending Fund.

Basic Program Terms

  • CDFI’s can apply for capital equal to up to 5 percent of their total risk weighted assets.
  • The dividend rate on the preferred stock will be 2% for eight years (as opposed to 5% for five years under the original Capital Purchase Program) before increasing to 9%.
  • CDFI’s with existing TARP Capital Purchase Program investments will be eligible to transfer those investments into this program (effectively lowering the carrying costs of the capital and potentially providing additional capital, if desired).
  • Consistent with the previous terms for CDFI’s, CDFI’s will not be required to issue any warrants or other additional equity kickers to the Treasury Department under the program.

Matching Capital

As noted above, for the first time the Treasury Department has formally recognized the possibility of institutions raising matching private capital to become eligible for TARP capital.  Specifically, the new plan contemplates that if a CDFI might not otherwise be approved by its regulator, it will be eligible to participate “so long as it can raise enough private capital that – when matched with the Treasury capital up to 5 percent of risk-weighted assets – it can reach viability.”  The new private capital will have to be junior to the TARP investment (i.e. common stock or preferred stock with lower preferences – although potentially higher dividend rates – than the TARP preferred stock).

(more…)

Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , .

President Obama Proposes $30 Billion Small Business Lending Fund

By Rob Klingler - Tuesday, February 2, 2010

Carrying through with his announcement in the State of the Union, on February 2, 2010, President Obama provided the outlines of a proposed $30 billion Small Business Lending Fund to provide capital to community banks, with incentives to increase small business lending.  As proposed, the program will require Congressional approval to move the funds outside of TARP, which should remove the applicability of the executive compensation and governance restrictions and is also hoped to remove the stigma associated with TARP funds.

Based on the initial fact sheet, the terms appear generally comparable to the financial terms under the Capital Purchase Program, with reductions in the dividend rate for the first five years triggered by increases in small business lending.  Every 2.5% increase in small business lending through December 31, 2011 over 2009 levels would trigger a 1% decrease in dividend rate, down to a minimum rate of 1%.

Banks with less than $1 billion in assets would be eligible to receive a capital investment of up to 5% of their risk-weighted assets.  Banks with between $1 and $10 billion in assets would be eligible to receive a capital investment of up to 3% of their risk-weighted assets.  Participation in the program will require approval by the bank’s primary federal regulator, although no details are available as to the standards that will be employed.

(more…)

Email This Content Email This Content Posted in Small Business, TARP Capital. Tagged with , , .

State of the Union – TARP Money for Community Banks

By Rob Klingler - Thursday, January 28, 2010

In his January 27, 2010 State of the Union address, President Obama renewed his call for using some of the TARP money for community banks in an effort to drive small business lending.

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.

This proposal would be consistent with President Obama’s speech last October in which he stated the broad outlines of a new program to provide additional capital to community banks in an effort to spur lending to smaller business, as well as Secretary Geithner’s extension of the TARP program.

We understand that government officials have indicated that additional details on the program will be rolled out by Treasury officials in the coming days.  We have previously analyzed the known terms of such an expansion, based on the guidance provided last October.

(more…)

Email This Content Email This Content Posted in TARP Capital. Tagged with , , .

Miscellaneous TARP Stories

By Rob Klingler - Tuesday, January 26, 2010

We’ve identified a number of stories that or posts that never quite made it into individual BankBryanCave.com posts.  Rather than continuing to hold on to them, I’ve assembled them here.

The Simpsons

(more…)

Email This Content Email This Content Posted in TARP Capital. Tagged with , , .

TARP Programs Completed

By Dustin Hall - Monday, January 25, 2010

Two of the more commonly discussed programs that Treasury implemented pursuant to its discretion under TARP, the Capital Purchase Program (the “CPP”) and the Capital Assistance Program (the “CAP”), have been closed.

According to the Treasury’s FAQs, as of December 31, 2009, the Treasury will not make any additional investments under the CPP.  Over 700 institutions participated in the CPP, representing institutions from every state, except Montana and Vermont, and from Puerto Rico and Washington D.C.  California’s institutions were most highly represented, with 72 institutions receiving CPP funds.  Illinois and Missouri followed with 47 and 32 institutions, respectively, receiving CPP funds.

Although Treasury Secretary Geithner has extended TARP generally to October 3, 2010 and President Obama previously announced an that initiative would be developed for small community banks, there is currently no Treasury program aimed at providing capital support for community banks.

The CAP, which was intended to provide capital support to financial institutions in conjunction with the stress tests, was closed on November 9, 2009, without making any investments.

We will provide an update if the Treasury develops and implements any new program.

Email This Content Email This Content Posted in TARP Capital. Tagged with , , , .

December TARP Capital Infusions – TARP Map and List of Recipients Updated

By Dustin Hall - Friday, January 22, 2010

During the month of December, the Treasury completed rounds fifty-two, fifty-three, fifty-four, fifty-five, and fifty-six of TARP Capital infusions.  In these five rounds, which closed on December 4,  December 11, December 18, December 22, and December 29, respectively, the Treasury purchased a total of approximately $159 million in securities from 37 financial institutions (24 of which previously received a TARP capital infusion).  Through December 2009, the Treasury had invested in 709 institutions, totaling approximately $204.9 billion.

In these five rounds, First Community Financial Partners received the largest infusion, $22 million, and Valley Financial Group Ltd. received the smallest infusion, $1.3 million.

(more…)

Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , .

November TARP Capital Infusions – TARP Map and List of Recipients Updated

By Dustin Hall - Wednesday, December 16, 2009

During the month of November, the Treasury completed rounds forty-nine, fifty, and fifty-one of TARP Capital infusions.  In these three rounds, which closed on November 6,  November 13, and November 20, respectively, the Treasury purchased a total of approximately $38 million in securities from 7 financial institutions (3 of which previously received a TARP capital infusion).  Through November 2009, the Treasury had invested in 696 institutions, totaling approximately $204.7 billion.

In these three rounds, Presidio Bank, San Francisco, California, received the largest infusion, $10 million, and Community Pride Bank Corporation, received the smallest infusion, $4.4 million.

Of note during the month of November, F&M Bancshares, HPK Financial Corporation, and Metropolitan Capital Corp., joined WashingtonFirst Bankshares, Inc. as institutions to receive a second investment from Treasury in connection with the TARP expansion for community banks.  F&M Bancshares received an additional $3.5 million and had already received $4.6 million; HPK Financial Corporation received an additional $5 million and had already received $4 million; and Metropolitan Capital Corp. received an additional $2.4 million and had already received $2 million.

During November, nine financial institutions (one of which had already re-paid a portion of its funds) re-paid their TARP capital investments: Bank of Ozarks, Inc. ($75 million), LSB Corporation ($15 million), Wainwright Bank & Trust ($22 million), Union Bankshares Corp. ($59 million), Midwest Regional Bancorp, Inc. ($700,000), 1st United Bancorp, Inc. ($10 million), Magna Bank ($3.5 million, approximately 25% of the outstanding amount), Frontier Bancshares, Inc. ($1.6 million), and Westamerica Bancorporation ($41.9 million, completing its repayment).  As of the end of November, 2009, 53 financial institutions had re-paid all, or some portion, of their TARP Capital investment, bringing the total amount re-paid to approximately $71 billion.  At the end of November 2009,  Treasury’s outstanding investment equaled approximately $133.7 billion.

As discussed in another post,  TARP has been extended until October 3, 2010. 

(more…)

Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , .

Treasury Clarifies Interim Final Rule regarding TARP Executive Compensation Limitations

By Rob Klingler - Monday, December 14, 2009

On December 7, 2009, the Treasury Department published corrections to the preamble and certain provisions of the interim final rules regarding TARP Standards for Compensation and Corporate Governance.

The amendments are generally technical in nature and are designed to clarify certain ambiguities in the original interim final rule and to conform the certification language to reflect the deadlines generally set forth in the regulation and to correct certain cross-references.

The two most important clarifications relate to the identification of most highly compensated employees and the applicability of the “say on pay” requirements.

With regard to the identification of the most highly compensated employees, the correcting amendments make clear that the senior executive officers should NOT be excluded from determinations of the most highly compensated employees.  The rule also makes clear that senior executive officers should not be double-counted; if a provision is applicable to the senior executive officers and a certain number of the most highly compensated employees of the TARP recipient, the senior executive officers (because they are already subject to the provision) are excluded for purposes of determining the most highly compensated employees that are also subject to the provision.  Accordingly, for TARP recipients that received less than $25 million in Capital Purchase Program funding, the prohibition on the payment or accrual of bonus will apply only to the most highly compensated employee (regardless of whether such employee is a senior executive officer).

The correcting amendments also make clear that private companies are not subject to the requirement to provide shareholders a “say on pay.”  Only TARP recipients otherwise subject to SEC regulation are required to provide shareholders with a nonbinding resolution on executive compensation.

Email This Content Email This Content Posted in TARP Capital. Tagged with , .

TARP Extension – Capital for Community Banks?

By Rob Klingler - Thursday, December 10, 2009

On December 9, 2009, Treasury Secretary Geithner exercised his discretion to extend the TARP program through October 3, 2010.  In his letter to Congress certifying the extension, Geithner indicated that the Treasury Department would limit new commitments in 2010 to three areas:

  • mitigating foreclosure;
  • “recently launched initiatives to provide capital to small and community banks, which are important sources of credit for small businesses”  (including additional efforts to facilitate small business lending); and
  • increasing Treasury’s commitment to the Term Asset-Backed Securities Loan Facility (TALF).

The “recently launched initiatives to provide capital to small and community banks, which are important sources of credit for small businesses” presumably refers to the new capital program for community banks previously announced by President Obama on October 21, 2009. President Obama had indicated that the Treasury would be developing a program to provide TARP capital to community banks with less than $1 billion in total assets who committed to increase small business lending.  The capital investment, as proposed, would be limited to 2% of risk-weighted assets and would carry a 3% dividend rate for the first five years.  No indications were provided that the Treasury’s viability standard would be modified to permit additional banks to participate.

Secretary Geithner’s reference to this program is the first follow-up we’ve heard since Obama’s announcement.  As recently as last week, local FDIC officials were telling us that the program appeared to be “dead on arrival” in DC, and there appeared to be little support in Washington for further developments.  We understand the FDIC was advising interested banks to not anticipate any further action, and to seek capital elsewhere.

It remains to be seen whether Secretary Geithner’s letter to Congress represents a renewed interest in this program, merely a political statement indicating a focus on small business lending, or a simple preservation of flexibility going forward.

Email This Content Email This Content Posted in Small Business, TARP Capital. Tagged with , , , .