News
Email
Print
14 Triad banks ask for U.S. cash
Program aims to stabilize banking industry
ADVERTISEMENT
RELATED INFORMATION
Published: November 15, 2008
The need for capital -- or to fend off stiff competition -- has led at least 14 banks serving the Triad to apply for the U.S. Treasury capital program.
Yesterday was the deadline for publicly traded banks to decide whether to join the $250 billion capital-repurchase program, which is aimed at providing industry stability and spurring consolidation.
The combined amount requested by the 14 banks represents about $51.2 billion, or just more than 20 percent of the money available. Banks could have applied for up to 3 percent of their risk-weighted assets.
Seven banks have been fully or preliminarily approved for the capital. BB&T Corp. said yesterday that it has been fully approved for its $3.1 billion infusion.
Seven banks have applied but have not publicly disclosed whether they have been approved. Privately held banks, such as High Point Bank and Trust, have a later deadline.
The largest amount -- $25 billion -- has been fully approved for Wells Fargo & Co.
The smallest amount applied for may have been $5 million by Bank of the Carolinas Corp., which said yesterday that it would pursue between 1 percent and 3 percent of its risk-weighted assets.
Three banks -- Fidelity Bank, First Citizens BancShares Inc., Piedmont Federal Savings Bank -- turned down the offer. Each bank said that it was well-capitalized and didn't need the extra funds.
At least six banks had not publicly said whether they met the application deadline yesterday.
All of those decisions were made by boards of directors conducting as much due diligence as they would to a bank purchase.
That is because they knew that whatever decision they made -- taking the capital, turning down the offer, or worse, being rejected by the Treasury Department -- could send a wanted or unwanted message to customers about their financial stability.
The Treasury said that even though it will identify those banks that are approved for the capital infusion, it will not identify those that are rejected or withdraw their applications.
Dan Freed, an analyst for TheStreet.com, said that the program "is likely to end up deciding which banks survive and which either fail or get acquired at a bargain-basement price."
"Government officials administering the program have said it will not be used to prop up weak banks," Freed said. "That means any bank that applies and doesn't receive equity from the government will have what amounts to an official stamp of disapproval from its regulator."
The offer appears to be a no-brainer: Pay a 5 percent dividend rate on preferred shares to the Treasury for the capital. Access to such capital in the open market likely would require an interest rate twice as high -- if the capital were available at all.
But there are significant restrictions for banks that participate in the program, such as limits on executive pay and not having the only say on increasing stock dividends.
John Mendez, the chief executive and president of First Community, said he believes that applying for the capital is a sign of a bank's financial strength, not weakness. The bank has been temporarily approved for $42.5 million for what Mendez called "general bank purposes."
"We don't need the capital, and it's still up to our shareholders to approve providing the preferred shares," said Robert Braswell, the president and chief executive of Carolina Bank, which applied for $15 million.
"Yet, we know many of our competitors have applied, and so, in an effort to keep a level playing field, we decided to participate. We also know that if the game is changed on us, we can pay the money back."
Mark Whitley, the president of Fidelity Bank, said that the bank turned down the capital offer "because we have more than adequate capital and funds for making loans."
"We believe we remain competitive with our peers, even those who choose to participate," Whitley said.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
Email
Print
ADVERTISEMENT
See community events or add your own! Click here!
Advertisement
