TARP – Where Are We Now?

May 7, 2013

Authored by: Robert Klingler

As of May 3, 2013, the U.S. Treasury has completed auctions for TARP CPP investments in 126 financial institutions, representing an original principal investment of $2.7 billion.  The Treasury continues to hold TARP CPP investments in 159 financial institutions, representing an original principal investment of $4.9 billion.  (Note, the Treasury has already received over $17 billion more in repayments then it originally invested as part of the TARP CPP program; even if Treasury receives zero return on the remaining investments, it will still be a profitable investment for the Treasury.)

Out of the 53 investments that Treasury identified in December 2012 as having opted out of a pooled auction process, 17 remain in the possession of Treasury.  The Treasury provided another opportunity for participating institutions to opt-out of a pooled auction process through April 30, 2013.  While that deadline has passed, we do not sense any urgency to move forward with a pooled auction, particularly so long as the individual auctions continue to deliver good results for the Treasury.

The size of the average investment remaining in Treasury’s hands is just over $30 million, but consistent with prior holding periods (and the banking industry generally) the average size is increased by a few investments.  The median size of the remaining investment is only $7.7 million, and over 59% of the remaining investments are $10 million or less.  The five largest remaining investments constitute $2.8 billion (or over 58% of the remaining investments), and the ten largest constitute $3.3 billion (of over 68% of the remaining investment).

The remaining investment portfolio is generally not as strong as the original portfolio of investments.  104 of the remaining investments (or 65%) are currently in deferral on their dividend or interest payments, including 22 institutions that are in deferral on their non-cumulative preferred instruments.