Regional Banks Reject TARP Funding

"We need no shelter from the elements. We don't need a TARP to cover anything up. We are strong and continue to do just fine on our own."

Those are my words. But around the country, they may just be an accurate paraphrase of many a conservative bank CEO.

First let's look at three snippets from Wikipedia. They may explain why the majority of strong bank leadership these days has said "No Thanks" to TARP assistance.

1) The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen the financial sector. It is the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

2) Tarps have multiple uses, including as shelter from the elements.

3) The word tarpaulin originated as a compound of the words tar and palling, referring to a tarred canvas pall used to cover objects.

Ok, so let's look at some examples (I own none of these bank stocks):

From the Mountain Time Zone, you may remember, Glacier Bank (GBCI)... On Dec. 30, 2008, Glacier issued this statement:

"We greatly appreciate the federal government's recognition of our financial strength in approving Glacier's participation in the TARP Capital Purchase Program. However, with the $94 million in net proceeds from our successful common stock offering, we are already one of the most strongly capitalized banking companies in the country, with total risk-based capital of approximately 16%. Consequently, we do not believe that participation in TARP is in our shareholders' best interests."

On the West Coast, the Bank of Napa (BNNP.OB) announced right before Christmas that,

"it will not participate in the Department of Treasury’s Capital Purchase Program (TCPP), and will not accept TARP funds. CEO Tom LeMasters stated, “Having considered our strong balance sheet, well capitalized position, and solid credit quality we determined that TCPP provided no material benefit to the shareholders and customers of Bank of Napa.”

With assets of $32.1 billion, New York Community Bancorp, Inc. (NYB) is the 29th largest US bank and a leading producer of multi-family loans in New York City and the northeast. Last week it announced,

"that it has declined to participate in the Capital Purchase Program of the U.S. Treasury’s Troubled Asset Relief Program (“TARP”)." Chairman, President, and Chief Executive Officer Joseph R. Ficalora continued, “We believe that our current capital position is sufficient to support the communities we serve and to enhance shareholder value by growing our assets, our franchise, and our earnings capacity."

From the Mid-Atlantic region, Bryn Mawr Bank Corp (BMTC) also has declined TARP help: Bryn Mawr CEO Ted Peters said the bank has enough capital and access to a variety of liquidity sources to support its loan growth initiatives. Peters said the bank decided it wasn’t necessary to participate in the program.

“As a community bank we did not make sub-prime loans and as a result of our conservative lending practices our balance sheet is strong,” Peters said in a statement. “We are very optimistic about our ability to serve the future borrowing needs of the communities we serve.”

And Friday from Fort Lauderdale, OptimumBank Holdings (OPHC) Chairman of the Board, Albert J. Finch said,

"After careful consideration of all factors associated with receipt of TARP funds and the fact that the Company has capital well in excess of that required to be considered well-capitalized under banking regulations, we have decided to decline the TARP money."

So from across the country you see banks with strong balance sheets, access to liquidity, well capitalized asset portfolios, and solid credit quality. Why is that not highlighted in the national press headlines?

It is indeed frustrating, because you know that given all the data, there is no credit crunch at most banks.

Comments

[tomburge:]

Capitalism in reverse: reward the losers, the reckless and greedy.Next step is increase FDIC fees on the others to pay for some of it.

Jan 25 09:35 AM

[kruser53:]

Question - Why have not some of the mega-banks been run by some of these regional executives?

Answer - As things shake out I believe that is what will occur.

Jan 25 09:59 AM

[Steven Suro...:]

Don't forget that when TARP was first announced Wells Fargo said the same thing. They tried to refuse government money and the government said 'too bad' and gave it too them anyway and took a stake in the company (via the stock purchase) even though Wells Fargo wanted nothing to do with it. This IS NOT about helping banks help customers, this is about nationalising the bank industry. Because if you read the news, that is clearly working wonders in Iceland right now. Want out of this financial mess? That's easy. EndTheFed.us

Jan 25 10:46 AM

[Sentinel:]

OMG,,,,Good News Economist you have got to be kidding me.

How many times did Bush the Idiot tell us the fundamentals were sound? What about John McCain? What about Helicopter Ben telling us the same and that the subprime crisis was contained? What about Paulson telling us the same?

What about all those Bankster CEO's who trotted out one week to tell the Feds to F-off...we're fine, only to come crying for a bailout the very next week?

What kind of economist are you? Obviously the regionals are fine now.....on paper. But the next big crisis is CRE. And the regionals are waist-deep in it.

You mean you... #1 believe what these guys are saying....and #2 that anything these guys say has anything to do with what the future holds in 2009 for CRE?

Jan 25 12:43 PM

[Donald Johnson:]

This morning, on Meet the Press, Larry Summers proclaimed that America's best years are ahead of us.

In other words,

The economy is fundamentally strong.

Just have to deal with a few glitches that a few trillion in pork barrel spending will take care of, after we increase taxes on the "rich."

Jan 25 12:50 PM

[thannagan:]

tomburge - The FDIC fees HAVE gone up - for everyone, including banks that didn't need or want TARP funds.

Tarp, IMO, was all about protecting seven orgs: GS,MS,Citi, BAC/ML, AIG, getting Wachovia sold to PNC and bailing FNM/FRE. The rest was political correctness (small banks access) and pork needed to grease the deal. The good news is Bush/Hank/Congress only blew $350B doing it. Now, the real handout process begins.

Jan 26 05:51 PM

[kruser53:]

thannagan - - -

Don't you mean getting Wachovia sold to WFC?

Jan 27 07:42 AM

[The Good Ne...:]

thannagan,

I totally agree that the TARP was focused on the elite banks. And history will show that those big banks spent tons on lobbying for TARP.

If any handout is still needed, it will be primarily for those elite whose junk stinks to high heaven.

For the most part, the second tiers are steering clear of TARP. The don't have toxic waste on their books that needs a tarpaulin to cover it up...

Jan 29 03:09 PM

[George Guarini:]

Right now the focus appears to be on those banks deemed "Systemically Important". A shift to community banks may be in order. Maybe consideration should be given to break up some of the concentrations and spread them to well healed, well run banks.

Feb 25 01:41 PM