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Inside The CPP

Recent capital purchase program activity

January 14, 2009

By MortgageDaily.com staff


Congress yesterday heard from regulators, trade associations and other groups about the effectiveness of the $750 billion Troubled Asset Relief Program -- with criticism coming from all sides. Meanwhile, more than 40 banks received nearly $15 billion in the latest round of TARP investments.

The U.S. House Financial Services Committee heard testimony yesterday about the capital purchase program established under the Emergency Economic Stabilization Act of 2008.

Among those testifying was John F. Bovenzi, chief executive officer of IndyMac Federal Bank FSB and deputy to the chairman and chief operating officer of the Federal Deposit Insurance Corporation. He noted that CPP investments were preceded by a significant contraction in the supply of new credit from banks.

"The Treasury Department implemented the CPP as a means of countering the pro-cyclical economic effects of financial sector de-leveraging," Bovenzi said, according to a statement of his prepared testimony. "The highest and best use by banks of CPP capital in the present crisis is to support prudent lending activity."

But Joe Robson, chairman-elect of the National Association of Home Builders -- whose members have seen a dramatic decline in new business -- criticized banks for not using CPP funds to increase lending. He said acquisition, development and construction financing has been severely impacted -- fueling a downward spiral by further depressing property values and increasing the number of distressed properties for sale.

"The bank regulators must improve accountability through monitoring and reporting requirements for banks receiving TARP funds," Robson stated. "The goal is to avoid unnecessary and onerous equity calls by financial institutions on projects that are bankrupting many small- and medium-sized builders that rely exclusively on bank funding."

American Bankers Association President and CEO Edward L. Yingling testified that healthy banks which utilize CPP investments are being publicly lumped together with troubled institutions like AIG, General Motors and Chrysler -- "a source of great frustration for banks." He also called for full CPP funding, noting that term sheets have still not been provided for more than 3,000 healthy mutual savings banks and S-corporation banks that may want to participate in the program.

The National Community Reinvestment Coalition testified that TARP money has been wasted so far. The group called for TARP funds to be used to purchase delinquent loans at a discount.

Neel Kashkari, interim assistant secretary for financial stability at the U.S. Department of the Treasury, said in a speech to the McDonough School of Business at Georgetown Tuesday that CPP demand has been "huge." He noted that thousands of applications are under review, and hundreds more have already been pre-approved.

The Treasury reported separately Tuesday that CPP investments have been made in 43 banks during the prior week for $14.8 billion. Total CPP investments since the $250 billion program was launched are $192 billion in more than 257 banks.

FDIC's Bovenzi testified that more than 1,200 community banks -- those with less than $1 billion in assets -- have applied for the program, and he encouraged to Treasury to ensure that adequate funding is available for them. He also recommended that the CPP strategy should be implemented in way that encourages private capital investments in addition to TARP investments.

Under the CPP, the Treasury typically receives senior preferred shares that pay 5 percent during the first five years then jump to a 9 percent. It also receives warrants as part of the investments -- which can be made for up to 3 percent of risk-weighted assets.

The Treasury has recently made CPP investments in -- or committed to make investments in -- the following institutions.


CPP Journal

Name of Institution

Date Announced Action

Amount

Bank of America Corp.

Jan. 13 sale completed

$10.0 billion

American Express Co.

Jan. 13 sale completed

$3.4 billion

New York Private Bank & Trust Corp.

Jan. 13 sale completed

$267 million

Central Pacific Financial Corp.

Jan. 13 sale completed

$135 million

FirstMerit Corp.

Jan. 13 sale completed

$125 million

F.N.B. Corp.

Jan. 13 sale completed

$100 million

Sun Bancorp Inc.

Jan. 13 sale completed

$89 million

Independent Bank Corp.

Jan. 13 sale completed

$78 million

First Bancorp

Jan. 13 sale completed

$65 million

Cadence Financial Corp.

Jan. 13 sale completed

$44 million

Centrue Financial Corp.

Jan. 13 sale completed

$33 million

First Security Group Inc.

Jan. 13 sale completed

$33 million

Farmers Capital Bank Corp.

Jan. 13 sale completed

$30 million

Peapack-Gladstone Financial Corp.

Jan. 13 sale completed

$29 million

Colony Bankcorp Inc.

Jan. 13 sale completed

$28 million

The First Bancorp Inc.

Jan. 13 sale completed

$25 million

Crescent Financial Corp.

Jan. 13 sale completed

$25 million

Shore Bancshares Inc.

Jan. 13 sale completed

$25 million

Eastern Virginia Bankshares Inc.

Jan. 13 sale completed

$24 million

Community Trust Financial Corp.

Jan. 13 sale completed

$24 million

C&F Financial Corp.

Jan. 13 sale completed

$20 million

MidSouth Bancorp Inc.

Jan. 13 sale completed

$20 million

First Financial Service Corp.

Jan. 13 sale completed

$20 million

Codorus Valley Bancorp Inc.

Jan. 13 sale completed

$17 million

Carolina Bank Holdings Inc.

Jan. 13 sale completed

$16 million

LCNB Corp.

Jan. 13 sale completed

$13 million

The Queensborough Co.

Jan. 13 sale completed

$12 million

Center Bancorp Inc.

Jan. 13 sale completed

$10 million

North Central Bancshares Inc.

Jan. 13 sale completed

$10 million

GrandSouth Bancorporation

Jan. 13 sale completed

$9 million

Carrollton Bancorp Jan. 8 preliminary approval
$9 million

American State Bancshares Inc.

Jan. 13 sale completed

$6 million

Security California Bancorp

Jan. 13 sale completed

$7 million

Security Business Bancorp

Jan. 13 sale completed

$6 million

Valley Community Bank

Jan. 13 sale completed

$6 million

Rising Sun Bancorp

Jan. 13 sale completed

$6 million

Commerce National Bank

Jan. 13 sale completed

$5 million

Mission Community Bancorp

Jan. 13 sale completed

$5 million

Texas National Bancorporation

Jan. 13 sale completed

$4 million

Congaree Bancshares Inc.

Jan. 13 sale completed

$3 million

Sound Banking Co.

Jan. 13 sale completed

$3 million

Redwood Financial Inc.

Jan. 13 sale completed

$3 million

Surrey Bancorp

Jan. 13 sale completed

$2 million

Independence Bank

Jan. 13 sale completed

$1 million

Political Mortgage News | Mortgage Laws
Mortgage people in politics. Political contributions by mortgage companies. Coverage of political support by lenders and executives. GSE lobbying and issues.




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