TARP generates $28M in profits from area banks

Four of the five banks in the Springfield area that borrowed nearly $128 million from the federal government under the Troubled Asset Relief Program have exited the program.

Great Southern Bancorp, Liberty Bancorp and Guaranty Federal Bancorp, all based in Springfield, and Hawthorn Bancorp, which has its headquarters in Lee’s Summit, have paid off the Treasury Department loans and generated more than $28 million in profit for the U.S. federal government.

The fifth TARP recipient from the area, Gregg Bancshares – the holding company for Glasgow Savings Bank -– has failed, and its principal shareholder, Richard Thomas Gregg, was indicted on 17 charges totaling $3.3 million, including bank and wire fraud, money laundering and bankruptcy fraud.

Despite Springfield’s banks paying off their TARP debts, Missouri remains the top in outstanding investments in the central region made through the Capital Purchase Program, a program under the umbrella of TARP, as of April 30, according to the Treasury Department’s monthly report.

The first two area banks to receive TARP funds, Hawthorn Bank and Great Southern, entered the program in December 2008.

Hawthorn Bancorp received $30.3 million through the CPP in exchange for preferred stock in the company.

“In December 2008, the financial markets were very unsettled. We were seeing significant deterioration in liquidity and asset valuations in periods as short as a weekend,” Hawthorn Senior Vice President Kathleen Bruegenhemke said via email.

“We didn’t know how bad the economy was going to get. Hawthorn’s decision was based on ensuring that the company had more than enough capital to weather the storm, which the U.S. Treasury was encouraging all banks to take.”

Through purchasing back the remainder of its preferred stock with capital held as cash from the Treasury Department on May 15 – nearly five-and-a-half years early – Bruegenhemke said the company will save more than $1.5 million in after-tax interest costs annually.

Hawthorn Bank paid TARP a total of nearly $35.8 million through paying off its initial loan and dividends from the preferred stock held by the Treasury.

Great Southern Bancorp, Great Southern Bank’s holding company, received $58 million in exchange for preferred stock in the company and a warrant to purchase shares of common stock.

Great Southern redeemed its preferred stock in August 2011 when the Treasury bought $57.9 million worth of Small Business Lending Fund Preferred Stock from the company, according to a news release and 8-K filing, both issued Aug. 18, 2011. Great Southern used the money from the SBLF preferred stock loan to pay off the CPP debt.

The company had paid $7.8 million in dividends to the federal government in the nearly three years it had the stock.

Great Southern completed its exit from TARP in September 2011 when it repurchased the warrant held by the Treasury for $6.4 million.

Great Southern President and CEO Joe Turner, who was unavalibale for comment, said in a news release, “The repurchase of the warrant at this agreed-upon price concludes our participation in the TARP Capital Purchase Program and underscores our commitment to increasing long-term value for our shareholders.

“The capital position of the company continues to be strong, significantly exceeding the ‘well-capitalized’ thresholds established by regulators.”

Through this repurchasing, dividend payments and the initial loan payback, Great Southern paid the Treasury Department nearly $72.2 million.   

Guaranty Federal Bancshares entered TARP in January 2009 when it received $17 million in exchange for preferred stock and a warrant for common stock.

Guaranty paid $3.1 million in dividends for the preferred stock and $2 million to repurchase its warrant, which was finalized May 15.

“We are pleased to have been able to negotiate a fair price with the Treasury on the repurchase of the warrant,” Guaranty President and CEO Shaun Burke, who could not be reached for comment, said in a May 16 news release. “This investment evidences our financial strength and will eliminate the shareholder dilution that would have occurred had the warrant been exercised rather than repurchased.”

Last June, Guaranty repurchased $5 million of the $17 million in preferred stock. The Treasury Department sold the remainder of the stock at a private auction to entities not related to Guaranty in April, according to the release.

Through its warrant repurchasing, dividend payments and the initial loan payback, Guaranty paid the Treasury Department nearly $21.6 million. 
 
Liberty Bancshares entered TARP in February 2009 when it received $21.9 million in exchange for preferred stock and a warrant. Liberty paid $3 million in dividends on those shares while the Treasury had them. Liberty repurchased its warrant on Aug. 18, 2011 – the same day Great Southern’s warrant repurchasing also was finalized – for nearly $1.1 million.

Through its warrant repurchase, dividend costs and initial loan debt, Liberty paid nearly $26 million to the Treasury Department.

Liberty Bank officials were not available for comment.

Gregg Bancshares, formerly based in Ozark, received $825,000 from TARP also in February 2009 in exchange for preferred stock and a warrant.

The company paid the Treasury $45,200 in dividends from the preferred stock before the company went under in 2012 and its primary shareholder was arrested in March.

Regions Financial Corp. and U.S. Bancorp, both with branches in the greater Springfield area, also took part in TARP. Regions Financial Corp. received a $3.5 billion loan and exited the program – giving the Treasury a $638 million profit. U.S. Bancorp received $6.6 billion in loans, leaving the program with $334.2 million in profit for the Treasury.

TARP was established in October 2008 through the Emergency Economic Stabilization Act in response to the financial crisis that began in summer 2007.

As of March 31, the government had recovered nearly 94 percent of the almost $419 billion it has disbursed since it began, according to the U.S. Treasury Department’s website.

The Treasury’s April report stated Missouri had nearly $391 million in outstanding investments with seven institutions outstanding and four institutions with missed payments.

Clayton-based First Banks Inc. tops the list in the central region with outstanding investments, and is fourth out of all institutions with outstanding investments. As of April 30, the private bank had missed 15 payments with a total of $295.4 million outstanding.

The central region of the CPP includes 14 states; Missouri currently owes the most in the region, with Illinois in second, followed by Wisconsin in third. Illinois has less than half the amount of Missouri in outstanding investments, at almost $167 million.