As part of a continuing effort to wind down the government's Troubled Asset Relief Program (TARP) to bail out banks devastated by the financial crisis of six years ago, the U.S. Department of Treasury recently auctioned off preferred stocks for three institutions, gaining $35.6 million in aggregate gross proceeds.
The auction was part of Treasury's effort to recover remaining investments in the Capital Purchase Program (CPP). Treasury had outstanding investments in 39 CPP institutions heading into last week's auction.
As part of the auction, Treasury sold shares for the following institutions:
- First United Corporation of Oakland, Maryland – 30,000 shares of fixed rate cumulative perpetual preferred stock (series A) at $1,002.01 per share for, for a total of slightly more than $30 million in aggregate gross proceeds;
- Lone Star Bank of Houston, Texas – 3,072 shares of fixed rate non-cumulative perpetual preferred stock (series A) at $621.25 per share and 154 shares of fixed rate non-cumulative perpetual preferred stock (series B) at $600.01 per share for total aggregate gross proceeds of slightly more than $2 million; and
- Porter Bancorp of Louisville, Kentucky – 35,000 shares of fixed rate cumulative perpetual preferred stock (series A) at $100.00 per share for aggregate gross proceeds of $3.5 million.
Shares of Liberty Shares, Inc., located in Hinesville, Georgia, were up for sale, but they did not sell because none of the bids were above the minimum price set for the securities according to the auction procedures, according to Treasury.
The aggregate gross proceeds for the three institutions total about $35.6 million. Closings for the auctions are expected to occur on or about December 4.
Signed into law by the Bush administration, TARP was created in 2008 at the height of the nation's financial crisis in order to implement programs to stabilize the financial system during the financial crisis of 2008. Treasury initially invested $245 billion in TARP's bank programs, and to date Treasury has recovered $275 billion through repayments, dividends, interest, and other income. The $30 billion overage has resulted in a significant profit for taxpayers. The Small Business Lending Fund (SLBF) has resulted in the repayment of about $2.2 billion in TARP funds by CPP institutions that refinanced their repayments under the SLBF. Congress created the SBLF as a way for CPP institutions to repay TARP funds.
Every dollar raised from this point forward, including the $35.6 million raised by the recent auction, is profit for taxpayers.
Treasury originally outlined a strategy for winding down its remaining TARP bank investments in May 2012 "in a way that protects taxpayer interests and preserves the strength of our nation's community banks." The strategy to recover Treasury's investments includes using a combination of repayments, restructurings, and sales.