The Treasury Department is taking a roughly 45% discount its latest auction of Troubled Asset Relief Program shares.
The agency expects to receive $49.3 million for preferred shares in seven companies as part of an auction that closed Thursday. The banks originally received about $90 million for the shares.
The largest discount that the Treasury expects to take involves the sale of its stake in Bridgeview Bancorp in Illinois. The company received $38 million in Tarp funds in 2008; the Treasury expects to sell the shares for $11.2 million. The agency is also taking a significant discount on shares of Village Bank and Trust Financial in Midlothian, Va., which it expects to sell for $5.7 million; the company originally received $14.7 million.
However, the Treasury will receive a 29% premium for shares of Pacific City Financial in Los Angeles. The agency, which issued $16.2 million to the company, said it expects to sell its stake for $20.9 million.
"Treasury continues to make steady progress winding down the bank program through the auction process," Timothy Massad, the Treasury's Assistant Secretary for Financial Stability, said in a press release. "Tarp helped to stabilize the economy during the financial crisis and the program has already returned a significant profit to the taxpayers."
The other companies involved in the latest auction are Madison Financial in Richmond, Ky.; Midtown Bank & Trust in Atlanta; United American Bank in San Mateo, Calif.; and AB&T Financial in Gastonia, N.C. The Treasury said it plans to sell only 85% of its stake in AB&T because it did not receive enough bids above the minimum price.
The Treasury now holds Tarp shares in 102 of the 707 banks that originally participated, according to the agency's September report to Congress. Ten banks still in the program have partially repaid their Tarp funds, the report said.
Banks have been racing to exit the program before the dividend on Tarp shares rises to 9%, from 5%, at the five-year anniversary of the shares' issuance.