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Tag Archives: TARP

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

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).

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , . By Rob Klingler - Thursday, February 4, 2010

State of the Union – TARP Money for Community Banks

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.

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , . By Rob Klingler - Thursday, January 28, 2010

Miscellaneous TARP Stories

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

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , . By Rob Klingler - Tuesday, January 26, 2010

TARP Programs Completed

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 , , , . By Dustin Hall - Monday, January 25, 2010

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

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.

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , . By Dustin Hall - Friday, January 22, 2010

News Roundup — December 1, 2009 to December 22, 2009

Consumer Financial Protection Agency

On December 11, 2009, the U.S. House of Representatives approved sweeping new legislation to modernize America’s financial rules in response to the current recession. HR 4173, the Wall Street Reform and Consumer Protection Act, passed by a vote of 223 to 202 and includes a comprehensive set of reforms that addresses many of the problems that the nation faces today. Among the various actions facilitated by the bill, if signed into law, the Act would create the Consumer Financial Protection Agency and establish an orderly process for shutting down large, failing financial institutions that are deemed “too big to fail”.

Broox Peterson presents a short opinion piece on HR 4173. Whether the Senate version will survive intact is anyone’s guess. An article highlighting Sen. Christopher Dodd’s (D-CT) sponsorship of the bill appeared on National Public Radio on November 10, 2009.

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Email This Content Email This Content Posted in News Roundup. Tagged with , , , , , , , , , , . By Stan Santos - Tuesday, December 22, 2009

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

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. 

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , , , . By Dustin Hall - Wednesday, December 16, 2009

TARP Extension – Capital for Community Banks?

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 , , , . By Rob Klingler - Thursday, December 10, 2009

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

During the month of October, the Treasury completed rounds forty-six, forty-seven, and forty-eight of TARP Capital infusions.  In these three rounds, which closed on October 2,  October 23, and October 30, respectively, the Treasury purchased a total of approximately $58 million in securities from 6 financial institutions (1 of which previously received a TARP capital infusion).  Through October 2009, the Treasury had invested in 692 institutions, totaling approximately $204.7 billion.

In these three rounds, Premier Financial Bancorp, Huntington, West Virginia, received the largest infusion, $22 million, and Providence Bank, Rocky Mount, North Carolina, received the smallest infusion, $4 million.

Of note during the month of October, WashingtonFirst Bankshares, Inc. became the first insitution to receive a second investment from Treasury in connection with the TARP expansion for community banks.  WashingtonFirst received $6.8 million on October 30, 2009 and had already received $6.6 million on January 1, 2009.

During October, three financial institutions re-paid their TARP capital investments: Flushing Financial Corp. ($70 million), Commerce National Bank ($5 million), and LCNB Corp. ($13.4 million).  As of the end of October, 2009, 45 financial institutions had re-paid all, or some portion, of their TARP Capital investment, bringing the total amount re-paid to approximately $70.8 billion.  At the end of October 2009,  Treasury’s outstanding investment equaled approximately $133.9 billion.

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Email This Content Email This Content Posted in TARP Capital. Tagged with , , , . By Dustin Hall - Saturday, November 7, 2009

President Obama Announces Additional TARP Capital for Community Banks

On October 21, 2009, President Obama announced the broad outlines of a new program to provide additional capital to community banks in an effort to spur lending to smaller business.

Actual facts about the new program are currently very sparse.  A review of the currently available information does provide some details that may be attractive to community banks that current have TARP CPP funds, as well as those that currently do not have funds.  However, it does not appear that there will be any change in the Treasury’s determination of which community banks are eligible for TARP funds; participating institutions appear to still need to be viable without the funds.

There are three basic sources of official information:

  1. the text of President Obama’s speech in Landover, Maryland;
  2. the press release announcing the speech; and
  3. a fact sheet on the President’s Small Business Lending Initiatives.

Known Facts

  • The funds will be available to “viable banks with less than $1 billion in assets.”  The announcement does not give any indication that the Treasury will alter its existing viability standards.
  • Participants will be required to submit a small business lending plan explaining how the additional capital will allow them to increase lending to small businesses, and will be required to submit quarterly reports detailing their small business lending activities.
  • The initial dividend rate will be 3% rather than the 5% required under the current TARP Capital Purchase Program.  The dividend will rise to 9% after five years, consistent with the existing TARP Capital Purchase Program.  Presumably, Subchapter S institutions will receive a comparable reduction in the rate paid on the subordinated debt.
  • The amount of capital is limited to 2% or the institution’s risk-weighted assets.  This is less than the 3% permitted under the existing TARP Capital Purchase Program, and less than the 5% currently permitted for institutions that are less than $500 million in total assets.
  • The Treasury is working to finalize program terms “in the coming weeks.”
  • The Treasury will also determine how to handle existing Capital Purchase Program participants to allow them to replace existing capital with investments under the new program (effectively reducing their dividend costs in exchange for a commitment to increase small business lending).
  • Community Development Financial Institutions (CDFIs), including CDFI credit unions, will be able to apply for funds with a dividend rate of 2% for eight years, after which it will increase to 9%.

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Email This Content Email This Content Posted in Small Business, TARP Capital. Tagged with , , , . By Rob Klingler - Wednesday, October 21, 2009