June 14, 2012 / 5:57 PM / in 6 years

CORRECTED-US Treasury raises $245 mln from preferred stock sale

(Corrects number of shares sold in 10th paragraph)

By Shankar Ramakrishnan

NEW YORK, June 14 (IFR) - The US Treasury said it raised $245 million from the sale of preferred stock in seven financial institutions that it acquired during the financial crisis of 2007-2008.

The government has now recovered $264 billion from the Troubled Asset Relief Programme (TARP) through repayments, dividends, interest, and other income, the Treasury said in a statement late Wednesday. That compares to the $245 billion initially invested.

The latest preferred stock sale, conducted through joint bookrunners and auction agents Bank of America Merrill Lynch, and Sandler O’ Neill, priced through a modified Dutch auction that ended on June 13.

The stock sold was securities the Treasury held in TaylorCapital Group, Ameris Bancorp, First Defiance Financial Corp, Farmers Capital Bank, LNB Bancorp, First Capital Bancorp, and United Bancorp.

All the preferred stock was priced above the minimum bid price.

For instance, Taylor Capital Group’s 104,823 shares were priced at $893.50 per share versus the minimum price of $737, raising $92 million in net proceeds.

Ameris Bancorp’s 52,000 shares were priced at $930.60 per share versus the $763.5 minimum price, garnering $48 million in net proceeds.

First Defiance Financial Corp’s 37,000 shares priced at $962.66 per share versus $912 to raise $35 million; Farmers Capital Bank Corp’s 30,000 shares priced at $739.89 versus $671.25 to raise $22 million in net proceeds); and LNB Bancorp’s 25,223 shares priced at $869.17 versus $744.50 to raise $22 million proceeds).

United Bancorp’s 20,600 shares were priced at $825.50 versus a $706.25 minimum price raising $17 million.

About 10,958 shares in First Capital Bancorp were offered with a minimum bid price of $819.25 and sold at $920.11, raising $10 million.

The aggregate net proceeds to Treasury from the seven offerings of $245 million was 15% above the minimum prices set for the auctions.

The prices reflected a liquidation amount per share of $1,000 for the preferred stock of each institution. At settlement, winning bidders will be required to pay the clearing price for the preferred stock plus accrued and unpaid dividends on the preferred stock from and including May 15 2012.

The stock had a current dividend rate of 5% which steps up to 9% after February 2014.

The TARP’s bank programs have already earned a significant profit for taxpayers, said the Treasury.

The auctions are part of the strategy the Treasury outlined last month for winding down its remaining TARP bank investments in a way that protects taxpayer interests, promotes financial stability, and preserves the strength of the nation’s community banks.

Treasury intends to use a combination of repayments, restructurings, and sales to manage and recover those remaining investments. Treasury intends to announce additional CPP preferred stock auctions in the coming weeks.

“We’re pleased with the results of today’s auction, which enabled these community banks to replace temporary government support with new private capital, and keeps us on track to earn a positive return for taxpayers from TARP’s bank programs in excess of US$20bn,” said Assistant Secretary for Financial Stability Timothy G Massad.

The closing is expected to occur on or about June 19.

Merrill Lynch, and Sandler O‘Neill were auction agents and joint bookrunning managers for the offerings. (Reporting by Shankar Ramakrishnan)

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