7 Arkansas Lenders Still Indebted to Treasury After TARP Relief

by George Waldon  on Monday, Nov. 4, 2013 12:00 am  

Seven Arkansas lenders remain under the umbrella of the U.S. Treasury’s TARP program in the aftermath of the 2008 financial meltdown. The group collectively received more than $126 million through the Capital Purchase Program-Troubled Asset Relief Program.

The disposition of the financial institutions is as varied as their repayment history and respective exit strategies from the program. Some TARP participants are in the throes of severe financial distress, while some are merely capital-challenged.

Others continue to operate profitably and are biding their time to repay the low-cost funds. Some bankers are caught in a regulatory Catch 22.

“Under the consent order [with the Office of the Comptroller of the Currency], we’re prohibited from paying any dividends,” said Jerry Pavlas, president and CEO of Little Rock’s One Bank & Trust.

The $393 million-asset bank is among the lenders restricted from declaring dividends to repay the U.S. Treasury because of capital concerns. Without dividends flowing from One Bank to its holding company, OneFinancial Corp., quarterly payments on the holding company’s $17.3 million in TARP money become a fiscal impossibility.

It’s a situation shared by White River Bancshares Co. and its Signature Bank of Arkansas in Fayetteville. The $488 million-asset lender is under a consent order with the Federal Deposit Insurance Corp. that blocks dividends.

“We would like to have that lifted as soon as possible, but that’s not really in our control,” said Gary Head, chairman, president and CEO of Signature Bank. “We intend to pay back every bit of money we owe. Right now, it’s a decision I don’t have a choice in making.”

Head is uncertain what the future holds for White River Bancshares and the TARP program. Treasury officials have begun selling the government’s stake in some participating lenders. The preferred shares backing the government’s $16.8 million investment in Signature Bank’s holding company haven’t made the for-sale list.

“Whether they decide to sell them or not is up to them,” Head said. “There’s a lot of conversation about that.”

The only Arkansas TARP participant to exit the program through a sale was Corning Savings & Loan Association. The thrift received $638,000 on Feb. 13, 2009, from the U.S. Treasury, and the government sold its preferred shares securing the TARP investment at a 10 percent discount on Nov. 30, 2012.

Among Arkansas banking companies, White River Bancshares holds the distinction of taking TARP money but saying no to a requested Treasury observer attending board of directors meetings.

“Every other shareholder can’t put themselves on the board,” Head said. “My concern is what information could be FOI-able.”



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