Treasury Set to Take 60% Discount in Next Tarp Auction

The Treasury Department plans to sell shares in five community banks for a discount of approximately 60%.

The Treasury will receive $129.1 million for preferred and subordinated shares that it obtained in the banks in exchange for $320.8 million of Troubled Asset Relief Program aid. The auction is expected to take place on Aug. 12; the pricing was announced Friday.

The largest stake the Treasury plans to sell is 298,501 preferred shares of First Banks in Clayton, Mo., for which it has received bids worth $107.7 million. The Treasury paid $295.4 million for First Banks' shares in December 2008.

The Treasury will keep approximately 11,800 of First Bank's preferred shares for which it did not receive bids above the minimum price. The Treasury sets minimum auction prices to protect the taxpayers' interests, it said.

The second-largest stake to be auctioned is $9.9 million of shares in Universal Bancorp in Bloomfield, Ind., for which Treasury expects to receive approximately par.

It will also receive $3.4 million for its shares of First Intercontinental Bank in Doraville, Ga., for which it paid $6.4 million; $5 million for shares in Community Pride Bank Corp. in Ham Lake, Minn., for which it paid $4.4 million; and $3 million for its shares of Virginia Company Bank in Newport News, Va., for which it paid $4.7 million.

The auction is part of the Treasury's plan laid out in December to wind down its Tarp-related holdings. The agency has received more than $272 billion through the program, through repayments, dividends and stock sales, compared with an initial investment of $245 billion, it said.