Taxpayers Recover Nearly $900 Million From TARP Warrant Sales During Last Six Months

Cumulative Proceeds from Warrant Dispositions Now Reach More Than $9 Billion Since TARP’s Inception

WASHINGTON – The US Department of the Treasury today released the latest TARP Warrant Disposition Report including data during the six months ending June 30, 2011.  During that period, Treasury received more than $886 million in gross proceeds from the disposition of 20 warrant positions through repurchases and auctions of institutions in the Capital Purchase Program (CPP), the Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP). Since the TARP’s inception, Treasury has received more than $9 billion in gross proceeds from the disposition of warrants associated with investments made through CPP, TIP and AGP.    

As a result of these dispositions and other TARP repayments and income, taxpayers have now recovered $314 billion (76 percent) compared to the $413 billion disbursed to date for the program.

“Although the central purpose of TARP was to help stabilize the financial markets during a time of severe crisis, the receipt of these funds is positive news for taxpayers,” said Treasury Assistant Secretary for Financial Stability Tim Massad. “We will continue our diligent efforts to protect taxpayer interests as we wind down the TARP program.”

The TARP Warrant Disposition Report released today provides an overview of the warrants received by Treasury, an explanation of the warrant disposition process and the results achieved on behalf of taxpayers.

The Emergency Economic Stabilization Act of 2008 (EESA) generally required that Treasury receive warrants in connection with the purchase of troubled assets.  A major part of the TARP was the CPP. It was created in October 2008 to stabilize the financial system by investing capital in viable banks of all sizes nationwide. Under this program as well as other programs to support the financial system, Treasury invested $245 billion in more than 700 banks.  Treasury has already recovered $256 billion and will realize a profit on these programs.

Under the CPP, Treasury purchased shares of senior preferred stock or other securities from qualifying U.S.-controlled banks, savings associations, and other financial institutions. As part of its investment, Treasury also received warrants to purchase shares of common stock or other securities from the banks. The purpose of the warrants was to provide taxpayers with an additional potential return on the government's investment.

When a bank repays the CPP investment, it has the right to repurchase its warrants at an agreed upon fair market value. The warrants do not trade on any market and do not have observable market prices. Accordingly, Treasury has established a methodology for evaluating a company's determination of fair market value. If a bank chooses not to repurchase its warrants, then Treasury intends to sell the warrants to a third party.

The first CPP warrant repurchase was completed in May 2009, and Treasury began the public sale of warrants to third parties in December 2009. Treasury follows a consistent process to dispose of the CPP warrants for all banks, regardless of the size of the institution or the warrant position. This process is designed to ensure that taxpayers receive fair market value for the CPP warrants whether they are repurchased by the issuer or sold to a third party.

As of June 30, 2011, Treasury held warrants to purchase common stock in 19 financial institutions that have fully repaid their CPP investments and in 171 publicly traded companies in which the CPP investment is still outstanding. Treasury intends to continue to execute a consistent and transparent disposition process that achieves fair market values and protects taxpayer interests.

Treasury Elects Directors to CPP Banks’ Boards of Directors

WASHINGTON - The U.S. Department of the Treasury has exercised its right to elect John S. Poelker and Guy Rounsaville, Jr. to the First Banks, Inc. (First Banks) board of directors and Gerard M. Thomchick to the Royal Bancshares of Pennsylvania, Inc. (Royal Bancshares) board of directors.  As participants in Treasury’s Capital Purchase Program (CPP), First Banks and Royal Bancshares entered into securities purchase agreements with Treasury.  These agreements provide Treasury the contractual right to nominate up to two members to the board of a CPP recipient in the event that an institution misses a sixth dividend or interest payment on the preferred stock issued to Treasury.

John S. Poelker has spent more than 40 years in the financial services industry as both an executive and a consultant and has served in industry leadership positions throughout his career. From 1997 to 2005, Poelker served as the Chief Financial Officer of Old National Bancorp in Evansville, Indiana.    

Guy Rounsaville, Jr. is a lawyer with over 40 years of experience in the financial industry. He has served as the General Counsel of Wells Fargo & Company, Visa International and LaSalle Bank Corporation.  Mr. Rounsaville currently serves as the Director of Diversity at Allen Matkins Leck Gamble Mallory & Natsis LLP (Allen Matkins), a California law firm with approximately 230 attorneys.

Gerard M. Thomchick has more than 25 years of experience working in Pennsylvania’s banking sector.  He spent a number of years at First Commonwealth Financial, where he served in the role of Chief Operating Officer and Senior Executive Vice President, as well as President and Chief Executive Officer of a subsidiary bank.  He was previously Chairman of the Governance Committee of the Federal Home Loan Bank of Pittsburgh.

Board members elected by Treasury will have the same fiduciary duties and obligations to the shareholders of the financial institutions as any other board members.  They cannot be government employees, and they will not represent the United States government.  Treasury worked with executive search firm Spencer Stuart to help identify potential directors.