WASHINGTON — The Treasury Department on Thursday announced that it lost about $50 million in the public offering of its preferred stock in six smaller banks this week, though the department netted a modest profit when counting dividends and interest paid on the investments over the past three years.
In the first-ever auction of preferred stock through the Troubled Asset Relief Program, the Treasury recouped about $362 million of the $410.8 million it invested in the six smaller banks, the Treasury said, a loss of about $50 million.
But the department said total income to taxpayers — counting dividends and interest along with auction proceeds — was $426.4 million, representing a net profit of about $15.6 million.
"Today's auction is part of our ongoing efforts to wind down TARP," said Assistant Treasury Secretary for Financial Stability Tim Massad, noting the program has turned a profit overall.
More than three years after the launch of TARP, the federal government still owns stakes in about 350 banks. While the biggest institutions have long since paid back their rescue funding, many smaller banks have been slow to exit the government.
The divide in part reflects the difficulties faced by many Main Street banks, often saddled with poorly performing commercial real estate loans and limited ability to raise new funds. Together with weak regional economies and a tough lending environment, the banks have not been able to exit TARP.
The Treasury sold its stakes in the six banks as it looks to recoup its investment. The six have kept up on dividend and interest payments to the Treasury, making them relatively healthy compared with institutions that have skipped payments in an effort to hold on to cash.
The inability of the Treasury to fully recoup its investment through the auction process suggests it will be more difficult to sell off stakes in other banks that are financially strapped; more than 150 have missed a quarterly dividend payment they are obligated to make under the terms of the rescue.
Despite some missed payments, the Treasury has turned a profit on the Capital Purchase Program, the main federal effort to help stabilize financial markets. It invested a little less than $205 billion in 707 banks, and as of mid-February had gotten about $211 billion back.
Overall, though, the rescued is expected to cost taxpayers money. The Treasury last month estimated that TARP would end up costing $67.82 billion.
The six banks were: Banner Corp. (BANR) of Walla Walla, Wash., First Financial Holdings Inc. (FFCH) of Charleston, S.C.; MainSource Financial Group Inc. (MSFG) of Greensburg, Ind.; Seacoast Banking Corp. of Florida (SBCF) of Stuart, Fla.; Wilshire Bancorp Inc. (WIBC) of Los Angeles; and WSFS Financial Corp. (WSFS) of Wilmington, Del.
The Treasury lost money overall at just one of the six banks, Seacoast, having netted just $48.3 million out of its $50 million investment, the Treasury said.
In addition to hundreds of smaller banks, the government still owns majority stakes in American International Group Inc. (AIG) and Ally Financial Inc., along with a minority stake in General Motors Co. (GM).
Before this week's transactions, $16.42 billion was outstanding under TARP's Capital Purchase Program.
