UPDATE 3-US earns $33 mln on bank warrant auctions this week

* Texas Capital warrant auction nets US Treasury $6.6 mln

* Net proceeds for three auctions this week: $33.1 mln

* Auction seen positive for small bank warrant auctions

* Wells Fargo warrants valued at $880 million (Adds further detail on warrant proceeds)

By David Lawder

WASHINGTON, March 12 (Reuters) - The U.S. Treasury said on Friday it earned $6.56 million auctioning warrants in Texas Capital Bancshares Inc (TCBI.O), pushing taxpayers' take for three sales this week to $33.1 million and boding well for future auctions of small bank warrants.

The modified Dutch-style auction on Thursday of the 758,086 warrants to purchase common stock in Texas Capital represents the sale of the Treasury's remaining investment in the small Dallas-based bank holding company. The sale at $8.85 per warrant is expected to close on March 17.

The deal is the last of three auctions this week of warrants in banks that have paid back Treasury bailout funds. Together they earned $33.1 million in net proceeds for taxpayers after costs -- more than $10 million higher than the amount expected at the minimum bid price.

"The appetite for the Texas Capital warrants was very good, and I think that shows that investors would be very eager to own taxpayers' warrants in smaller banks," said Linus Wilson, an assistant professor of economics at the University of Lousiana-Lafayette who has been tracking Treasury warrant auctions.

He said the Texas Capital auction was a "test case" because it was the first auction for a bank that did not have publicly traded options. Most of the 242 banks for which Treasury still holds warrants do not have traded options, and this should encourage Treasury to auction more of these.

PAYBACK TIME

Treasury received the warrants as part of capital investments it made in financial institutions under the Troubled Asset Relief Program. The securities were meant to allow taxpayers to share in the sector's recovery after making hundreds of billions of dollars in bailout investments.

After negotiating some initial deals to sell warrants back to financial institutions and taking some criticism that it settled for too low a price, the Treasury has largely shifted to public auctions for warrants, run by Deutsche Bank Securities.

The Treasury on Tuesday earned $15.4 million on Washington Federal (WFSL.O) warrants and on Wednesday earned $11.15 million on warrants in Signature Bank (SBNY.O).

The Texas Capital warrants have a strike price of $14.84 a share and expire on Jan. 16, 2019. They were still "in the money" on Friday, even though Texas Capital shares were off 1.9 percent to $18.07 after reaching a 52-week high of $18.42 on Thursday.

Treasury offered the Texas Capital warrants in the auction at a minimum bid price of $6.50 each.

Gross proceeds from Treasury warrant sales have totaled about $5.6 billion so far, including private sales and about $2.7 billion from auctions. Costs for the auctions have totaled about $407 million so far, according to Treasury figures.

Last week, the Treasury held a record auction for Bank of America (BAC.N) warrants, netting proceeds of $1.5 billion.

Wilson said he believes the next major auction is likely to be for Wells Fargo & Co (WFC.N) warrants. His middle value estimate for these 110.3 million warrants is about $880 million, with a low estimate of $679 million and a high estimate of $1.27 billion.

He estimates the Treasury's PNC Financial Services Inc (PNC.N) warrants at about $256 million, with a low of $192 million and a high of $374 million.

His estimate for warrants in Citigroup (C.N), in which the government still holds a 27 percent equity stake, are currently valued at $204 million, with a low of $107 million and a high of $372 million. (Reporting by David Lawder; Editing by Chizu Nomiyama)