Community banks trying to exit the federal government’s Troubled Asset Relief Program will have more time to weigh their options.
The U.S. Treasury recently extended a deadline from Aug. 6 to Oct. 9 for banks to opt-out of auctions of their preferred stock, the method the government is using to cash out of its shares.
Under TARP, the federal government in 2008 and 2009 bought $245 billion in preferred shares to help banks shore up their balance sheets. Most of the banks have since raised money from private investors to buy back the shares, leaving about 343 banks, which are mainly community lenders, still in the program.
Treasury intends to wind down TARP by pooling its remaining shares and auctioning them to investors. That may or may not work out well for the banks, depending on the current state of their balance sheets.
Deciding whether to be included in a pooled auction requires a lot of detailed analysis and negotiation with third parties, Bank of Indiana CEO Joe Montel said, and the original deadline simply didn’t give him enough time. The Indianapolis-based bank still has $1.3 million in TARP money. A handful of other small banks around the state are in a similar situation.