Out of the original investment of $204.9 billion in 707 institutions under the TARP CPP program, the U.S. Treasury currently only holds its original investment in 44 financial institutions representing a total outstanding investment of $422 million. In other words, the Treasury still holds its investment in about 6% of the financial institutions invested in through the CPP program, but those institutions represent only 0.2% of the amount invested. As the U.S. has already collected $225.9 billion in total TARP CPP proceeds, the ultimate disposition of the remaining 44 financial institutions will have no material impact on the $20 billion gain recognized by the U.S. Treasury through the TARP CPP program.

The 44 remaining TARP CPP investments range from $1 million to just over $50 million, with an average original investment of $9.6 million.  35 of the 44 remaining institutions have missed dividend/interest payments, with a total of $72 million in missed dividend payments (which includes $20 million in missed non-cumulative dividends that the institutions have no obligation to repay).  Overall, the remaining portfolio investments have missed 11.5 quarterly dividend payments, but if you exclude the 9 institutions that remain current, the average investment has missed 14.5 quarterly dividend payments.

Out of the original investment of $204.9 billion in 707 institutions under the TARP CPP program, the U.S. Treasury currently only holds its original investment in 67 financial institutions representing a total outstanding investment of $641 million. In other words, the Treasury still holds its investment in about 10% of the financial institutions invested in through the CPP program, but those institutions represent less than 0.4% of the amount invested. As the U.S. has already collected $225.0 billion in total TARP CPP proceeds, the ultimate disposition of the remaining 67 financial institutions will have no material impact on the $20 billion gain recognized by the U.S. Treasury through the TARP CPP program.

The 67 remaining TARP CPP investments range from $470 thousand to just over $50 million, with an average original investment of $9.6 million.  53 of the 67 remaining institutions have missed dividend/interest payments, with a total of $106 million in missed dividend payments (which includes $20 million in missed non-cumulative dividends in which the institutions have no obligation to repay).

In addition to the 67 institutions where Treasury continues to hold the original CPP investment, the Treasury also holds common stock in four institutions in which Treasury originally invested approximately $386 million and trust preferred securities in one institution in which the Treasury originally invested $935 million.  The average remaining institution received $9.6 million in TARP CPP funds, has missed 10 quarterly dividend payments, and currently owes an additional $1.6 million in missed dividend payments.

As of April 30, 2013, there were 154 institutions remaining in the TARP CPP program.  Courtesy of the April 2013 Monthly Report to Congress, here are the current regional breakdowns of the remaining TARP CPP institutions.

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.

In April, the U.S. Treasury completed its sixteenth round of individual auctions of TARP CPP securities.  By my calculations, Treasury has now completed auctions of its investments in 126 financial institutions, with auction sales totaling approximately $2.4 billion at an aggregate discount of approximately 15%.

The 126 institutions originally represented $2.75 billion in investments in U.S. depository institutions, ranging from investments as small as $430,000 to as large as $267 million.  When you combine the dividends that have been paid to the U.S. Treasury by these institutions, the Treasury has received a gross profit of approximately $110 million.  The fact that Treasury has recovered, in the aggregate, a profit on these investments is fairly remarkable, considering that 27 of the auctioned institutions had each missed four or more quarterly dividend payments.

As shown in the chart below (click on the chart for a larger version), the volatility of the discounts has increased significantly in the later auction rounds.

One item to keep in mind when looking at auctions results is the amount, if any, of outstanding unpaid dividends or interest.  While the intitial TARP CPP auctions included institutions that were current in their payment of dividends/interest (and purchasers were obligated to pay Treasury 100% of any accrued but unpaid dividends/interest at the time of purchase), subsequent auctions have included 27 institutions in which the institution has missed at least four quarterly dividend or interest payments.  In these instances, Treasury has not required the purchaser to pay to Treasury any amount for these unpaid dividends and interest payments, and purchasers will be entitled to retain any payments subsequently made.  Accordingly, in measuring the discount on these auctions, it is important to factor the unpaid dividends into the equation, either by adding the unpaid dividends/interest to the denominator (reflecting additional amounts owed to the holder) or subtracting the unpaid dividends from the numerator (assuming repayment in full of any unpaid dividends/interest).  Although Treasury has frequently insisted on 100% payment of unpaid dividends in the restructuring context, we believe adding the amount of unpaid dividends to the numerator more appropriately measures the potential returns to purchasers.

A collection of new banking resources from around the internet:

• Treasury Announces Next Round of TARP Auctions – The latest round of Treasury auctions includes the first TARP recipients that are currently in deferral on their TARP CPP investments, which could provide significant guidance on the value of a significant portion of the remaining pool of TARP investments.  In contrast to earlier statements regarding the intent to allow “all-or-none” bids, the Treasury elected not to permit the submission of such bids.
• Winding Down TARP: A Progress Report – Overall, to date, Treasury has recovered nearly 93 percent ($387 billion) of the funds disbursed for TARP ($418 billion); and TARP’s five bank investment programs have earned a significant profit for taxpayers. To date, Treasury has recovered $268 billion through repayments and other income, which represents a positive return of more than $23 billion compared to the amount ($245 billion) initially invested.
• Economic Indicators Dashboard Updated – Russell Investments updated its Economic Indicators Dashboard, which attempts to provide statistical evidence to establish the state of the economy.
• American Bankers Association Publishes “Business of Banking” – “The Business of Banking: What Every Policy Maker Needs to Know” reviews the basics of banking and provides a foundation for understanding how banking policy decisions affect communities and constituents.
• Dallas Fed Publishes “Financial Stability: Traditional Banks Pave the Way” – Dallas Fed concludes America’s numerous community banks, small and traditionally oriented, demonstrated stability during the crisis and its aftermath.
• Atlanta Fed Analyzes Southeastern Housing Market – Southeastern housing contacts ended on a positive note in 2012.
• The Fed iPad App – An official app of the United States Federal Reserve System is now available for your iPad! According to the Federal Reserve Bank of Chicago, “This app is a must-have for anyone interested in the work of the nation’s central bank.”
• 75 Facts About Secretary Geithner – Fact Number 76.  You really have to stretch to come up with 75 interesting facts about Secretary Geithner.

For banking-related content from around the web on a real-time basis, follow @RobertKlingler on Twitter.

A collection of new banking resources from around the internet:

• Doreen Eberley Appointed Director of Division of Risk Management Supervision – Former Acting Regional Director in Atlanta, Ms. Eberley will now be in charge of all risk management supervision for the FDIC.
• December 2012 TARP Monthly Report to Congress – Treasury reports that the bank investment programs under TARP have already generated $23 billion in positive returns to US taxpayers.
• Treasury Announces Another Delay to Pooled TARP Auctions – In light of “strong market receptivity” to the earlier auction rounds, Treasury is providing remaining smaller TARP entities another 90 days to opt-out of the pooled auctions.  This presumably indicates that Treasury has no plans to conduct pooled auctions until May at the earliest.
• Hilarious bad lip reading of NFL players – Worth it just to hear Peyton Manning extoll the benefits of potions to make his wide receivers run faster.  Rise up, Atlanta!
• Harvard Blog Post on Optimal Bank Capital Regulation – New paper concludes that BASEL III is a move in the “right direction” with regard to establishing better capital requirements in this review of the procyclical effects of bank capital.
• CFPB Publishes Revised RESPA and Truth in Lending Act Regulations – Further analysis forthcoming on BankBryanCave and a free webinar through BAI featuring Bryan Cave attorneys John ReVeal and Barry Hester on Tuesday, January 22, 2012.
• FSOC Extends Comment Period on Money Market Fund Reforms – The Financial Stability Oversight Council is providing another month for comments on for money market mutual fund reforms.
• Agencies Issue Final Rule on Appraisals for Higher-priced Mortgage Loans – The requirement for higher-priced home-purchase mortgage loans is intended to address fraudulent property flipping by seeking to ensure that the value of the property legitimately increased.

For banking-related content from around the web on a real-time basis, follow @RobertKlingler on Twitter.

On December 19, 2012, the recipient of smallest TARP CPP Investment repaid Treasury in full.   Freeport State Bank got $301,000 under the TARP Capital Purchase Program, and repaid in full, including $61,900 in dividends and ’s main bank rescue–the tiniest sum among the 707 institutions that signed up back in 2008 and 2009.  Speaking to the Wall Street Journal, the bank’s chairman and CEO, Leon Drouhard, explained the critical role TARP played in stabilizing the economy during the worst financial crisis since the Great Depression.

“[TARP] has been a very important thing and it has been a beneficial thing . . . It’s always referred to as a bailout but it was actually an investment in the financial system of the country as far as I’m concerned–and that investment turned out to be a good investment for the Treasury, and the country and the banks involved.”

If all bailouts were as profitable as the TARP CPP program, much less as necessary to stabilize the entire financial system, perhaps the term “bailout” wouldn’t have a negative connotation.

On December 18, 2012, the Treasury provided an update on the wind down of the TARP bank investment programs and also announced the future auction of 53 TARP investments, approximately 25% of the remaining pool of investments.

As previously announced, Treasury is pursuing three basic options to exit the TARP program:  (1) waiting for banks to repay; (2) selling investments (typically by auction); and, in limited circumstances,  (3) restructuring investments to facilitate repayment or sale.  Since March 2012, Treasury has completed 91 auctions and had an additional 49 banks repay Treasury at par value.  Treasury indicated that, in the aggregate, its returns in the auctioned investments exceed the Treasury’s last estimate of their current value.

Treasury indicates that it will auction approximately two-thirds of the remaining institutions (or about 145 institutions) and expects the majority of the remaining banks to repay at par.

Treasury also provided a preview of banks that Treasury intends to auction starting late in January.  Treasury stated that it was making this early announcement as a large number of the banks in light of potential regulatory concerns for investors associated with these investments.  Specifically, Treasury indicates that, for a large number of the institutions, the TARP securities represent a large portion of the equity capital of the depository institution or that the institution is in arrears on dividend payments, causing the TARP securities to become voting securities, or both.  Either of these scenarios can cause ownership of the securities to be subject to the Bank Holding Company Act or the Change in Bank Control Act.

A collection of new banking resources from around the internet:

• Congress Amends ATM Fee Disclosure Requirements – Pending the President’s signature, banks will no longer have to include duplicative signing informing customers of ATM fees going forward.
• Senate Rejects Bill to Extend Transaction Account Guarantee – Based on a Congressional Budget Office report that concluded “that, using recent history, the FDIC and NCUA would underestimate probable losses when setting fees to charge for this additional coverage,” the Senate was unable to overcome a procedural objection to the bill.  In the larger context, the bill was killed as part of a senate fight over the filibuster, a battle with credit unions over expansion of business lending, and objection to continued “bailouts,” but looking solely at the official record, the bill failed on the belief of Congress that the FDIC did a lousy job foreseeing the economic crisis.
• FDIC Updates Status of Professional Liability Suits – Despite the FDIC’s inability to foresee the economic crisis, the FDIC continues to pursue litigation against directors and executive officers, having authorized suits against 369 defendants in 2012.
• FDIC Publishes Regulatory Calendar for Community Banks – The online regulatory calendar is intended to help community banks stay up-to-date on changes in federal banking laws, regulations, and supervisory guidance.
• Treasury Announces Results of 5th Round of “Opt-Out” Auctions – Discounts ranged from less than 2% to 35%.