On March 12, 2012, Treasury released its February 2012 Dividends and Interest Report providing an updated look at the status of TARP CPP funds, including the first update following the February 2012 dividend due date under the terms of the TARP CPP investments. As of February 29, 2012, there were 163 TARP recipients that had missed at least one dividend payment (excluding any TARP recipients that have filed bankruptcy or who have been placed into receivership).
As a result of the missed dividends, Treasury has appointed a total of 13 directors to eight different institutions. In addition, the Treasury has appointed observers to an additional 39 institutions.
Although the Treasury has the right, under the terms of the TARP investments, to appoint two directors once a TARP recipient misses six dividend payments, Treasury has focused its efforts on the largest recipients. This likely partially reflects that it is not necessarily easy to identify qualified individuals who are willing to serve as directors of troubled financial institutions. Directors appointed by Treasury have the same rights and responsibilities as all other directors, and are not provided any additional legal or financial protection or benefit due to their appointment by Treasury. Treasury has only appointed one or more directors at institutions that have now missed at least nine quarterly dividend payments, and event amongst that group, have generally focused on the larger recipients, with a focus on those who are behind over $3 million in dividend payments. Based on the Treasury appointees that we’re aware of, the Treasury has identified highly qualified independent bank directors, that can act as a real benefit to the institution they’re being appointed to. As a general matter, they tend to be well-credentialed outside directors, frequently former bank executives that understand the condition of the bank. Technically, Treasury only has the right to appoint the directors at the holding company level, although we understand that Treasury has requested that they also be appointed to any subsidiary bank boards – and that most TARP recipients with appointed directors have done so, perhaps reflecting the quality of the appointed directors.