Big banks quickest to repay TARP funds
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Across the nation, the biggest banks have generally been the quickest to repay the federal bailout money they received during the financial crisis. The Pittsburgh region is no exception.
Among the nine Western Pennsylvania-based financial institutions that received help, the two that have returned the funds are also the largest: Pittsburgh-based PNC Financial Services Group, with assets of $269.9 billion, and FNB Corp. in Hermitage, assets of $8.7 billion.
PNC paid back all $7.6 billion last month, while FNB, parent of First National Bank, returned its $100 million in bailout funds in September.
In general, big banks have been in more of a rush to repay the funds because of the caps on executive pay that come with the federal aid and because of the generally negative public view of financial institutions holding on to taxpayer money.
Top executives of the remaining seven area banks that took bailout money say they have no immediate plans for repaying their piece of the $700 billion rescue pie under the Troubled Asset Relief Program. On the list are Ameriserv Financial, Johnstown; Enterprise Financial, Allison Park; Emclaire Financial, Emlenton; Fidelity Bancorp, West View; Parkvale Financial, Monroeville; S&T Bancorp, Indiana, Pa. and TriState Capital, Pittsburgh.
"We don't have a definitive timetable at this point of when we are going to repay it," Fidelity CEO Richard Spencer said in a response echoed by top executives at the other local TARP banks.
Part of the decision to repay the money hinges on the economy continuing to recover, Mr. Spencer said.
"We just feel right now, [the bailout money] is a good capital cushion for us."
The banks point out that even though they still hold the funds, taxpayers are receiving a return on their investment in the form of quarterly dividends that are supposed to be paid until the government funds are returned. The dividend rate is 5 percent for the first five years, jumping to 9 percent thereafter.
Most of the region's TARP banks said they expect to return the money within the five-year time frame, before the dividend rate rises.
"The plan all along was to repay within five years, and that plan has not changed," said Gil Riazzi, interim principal financial officer at Parkvale, which, like most of the other area banks, received the federal funds in December 2008.
Officials at TriState Capital Bank and S&T Bank were less specific about their plans.
S&T CEO Todd Brice said he did not want to comment beyond what he said in his letter to shareholders in the company's annual report.
In it, he said the bank would repay the funds "as soon as we feel it is appropriate."
At TriState Capital, the plan is to return the money when the privately-held boutique bank goes public.
"We intend at some point to take the bank public. We haven't identified that point yet," CEO Jim Getz said. "The markets at this point don't put a good valuation on banks."
Nationwide, a growing number of TARP banks have been missing their quarterly dividend payments, a disturbing trend, according to Linus Wilson, a finance professor at the University of Louisiana at Lafayette.
There were 82 financial institutions nationwide that failed to make the most recent dividend payment due in February, or roughly 13 percent of banks remaining in the government aide program, according to Dr. Wilson's analysis.
That's up from 56 delinquent banks in the November quarter and 33 in August. The missed payments totaled $78.1 million in the most recent period, for a total of $205 million since the program began, he said.
"Any bank that cannot pay the U.S. Treasury is likely struggling," Dr. Wilson said. "Undercapitalized banks are routinely seized by regulators or are forced to file for Chapter 11 bankruptcy."
Locally, all seven remaining TARP recipients made their February payments to the government, including Downtown-based TriState Capital, which missed the payout the previous quarter.
Mr. Getz said TriState, which as a start-up is under tighter regulatory scrutiny than older banks, was prohibited by the Federal Reserve from making the November payment because it lost $1.1 million in the third quarter. TriState opened in 2007 to serve midsized businesses and high net worth individuals.
"Most startups in the first couple of years don't make money, and we weren't making money," Mr. Getz said.
Because TriState turned a $2.9 million profit in the fourth quarter, its first since being formed, it was allowed to make the February payment, plus catch up on the November payment.
TriState was permitted to pay its TARP dividend in prior quarters even though it wasn't making money because the Fed was being more lenient at that time, Mr. Getz said.
First Published March 25, 2010 12:00 am