Daniel Gross

10 More Banks Exit TARP by. . .Borrowing From Treasury

Last week we reported that many banks that participated in the Capital Purchase Program (CPP), the central component of TARP in which Treasury bought five-percent-yielding preferred shares from banks, are exiting TARP with the assistance of another Treasury-backed program, the Small Business Lending Fund. The SBLF, created as part of the bi-partisan Small Business Jobs Act, passed last fall, makes cash available to banks with assets of $10 billion or less, and then gives them incentives or rewards for making small-business loans. Unlike TARP, SBLS sets up carrots and sticks that encourage banks to lend and discourage them from hoarding capital. SBLF preferred shares can bear interest rates as low as 1 percent (if banks increase their lending to small business) or as high as 9 percent if banks simply sit on the funds for several years.

On July 14, eight banks exited TARP by paying back a total of $103.3 million. In each instance, the report reflected that the banks did so all or in part by using funds raised from SBLF. Of course, the program was designed to enable such activities. And as a reader notes, plenty of banks that did not participate in TARP have received funds from SBLF. Still, it's clear that several banks are paying back Treasury loans and shucking the stigma of one bank-support program by borrowing from another Treasury bank-support program.

Last week, SBLF-enabled bailout exits continued. On July 21, 10 more banks paid back $128.5 million in CPP funds. Each entry carried a reference to footnotes 49 and 50, which indicate the buybacks were enabled in whole or in part by participation in the SBLF. If you're counting at home, that's about $232 million in SBLF-assisted TARP repayments so far.

The banks that exited were:

Southern Missouri Bancorp, Poplar Bluff, MO: $9.55 million for preferred stock

Redwood Capital Bancorp, Eureka, CA: $3.8 million for preferred stock plus $190,000 for preferred stock granted Treasury in lieu of warrants

Liberty Bancshares, Inc., Jonesboro, AR: $57.5 million for preferred stock plus $2.875 million for preferred stock granted Treasury in lieu of warrants

Adbanc, Inc., Ogallala, NE: $12.7 million for preferred stock plus $636,000 for preferred stock granted Treasury in lieu of warrants

First Bank of Charleston, Inc., Charleston, WV: $3.345 million for preferred stock plus $167,000 for preferred stock granted Treasury in lieu of warrants

Financial Security Corporation, Basin WY: $5 million for preferred stock plus $250,000 for preferred stock granted Treasury in lieu of warrants

Regent Capital Corp., Nowata, OK: $2.655 million for preferred stock plus $130,000 for preferred stock granted Treasury in lieu of warrants

Medallion Bank, Salt Lake City, UT: $21.5 million for preferred stock plus $645,000 for preferred stock granted Treasury in lieu of warrants

Catskill Hudson Bancorp, Inc., Rock Hill, NY: $6.5 million for preferred stock plus $263,000 for preferred stock granted Treasury in lieu of warrants

Farmers State Bankshares, Inc., Holton, KS: $700,000 million for preferred stock plus $40,000 for preferred stock granted Treasury in lieu of warrants

Daniel Gross is economics editor at Yahoo! Finance.

email him at grossdaniel11@yahoo.com; follow him @grossdm.

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