Five Star Bank wants out of TARP program - Business First of Buffalo:

hegenefipa.blogspot.com
, the Warsaw-based parent company of , woulr like to return its $37.5 million in TARP (troubled assets relief funds to the federal government beforre the end ofthe year, said Presidenyt and CEO Peter Humphrey. The banking compangy accepted the money late last year in exchange for sellingv senior preferred shares tothe “The rules have changed (and) that makes this less so Five Star Bank is thinking maybe we ought to pay this back and get out from underneat the program,” Humphrey said. “We’re exploring, ‘Hoa do we pay back TARP whiled still having an ample amount of capital to suppor futuregrowth initiatives?
’ ” The bank has no definitivw plans in place to return the money, but Humphret is eager to get out of the federao program due to retroactive changes to the initial Capital Purchase Plan agreement, including limits on executived compensation that deny the payment of cash incentives to employees until TARP fundd are repaid. “It’s just the fact that there are more more regulations, more compliance requirementss and, frankly, with that comes risk,” Humphreu said. “We’re heavily regulated anyway. How woulds you like to enter into a contract and then four months later have the terms of thatcontracft change?
” Other area banks that borrowe d TARP funds have not publicly announced plans to repa y the money. Neither nor , which received $600 million and $2.5 billion respectively, have made commitments to returjnthe funds, according to spokespeople at both banks. At pressd time, , which borrowedd $184 million from the governmentf and recently completed a stock sale thatnetted $360 million, was announcing no firm plansd to repay the funds. An announcement was expectedr May 28 and updates will be postedon www.buffalo.bizjournals.
com Last M&T Bank’s chief financiak officer, Rene Jones, said the bank not to be a first and plans to wait for more clarity from the government before repaying the money. KeyBank officialss have said they want to pay back the fundzs as soonas possible, but thers is no time frame in place. The Capitaol Purchase Plan was introduced last fall by the governmentt as a way to increase lending and jolt thefalteringf economy. Under initial terms of the plan, banksw were required to raise private capital beforre TARP funds could be But some terms of the plans changesfollowing February’s economic stimulus bill, leaving repayment guidelines less than clear.
According to a May 22 reportr fromthe U.S. Treasury just 16 banks around thecountry – including one Upstatde New York bank, in Syracuse – have been allowesd by the government to repay TARP funds. Severakl calls made to the U.S. Treasur Department to clarify TARP repayment terms were not As part of the CapitalPurchase Plan, bankxs such as Five Star must make quarterly interestg payments to the So far, Five Star has made two paymentss totaling $900,000, Humphrey said. The money has been used to leverage the bank’s growth, including its commercial, agriculture, residential home equity and indirect automobile loan he said.
About $200 million has been lent by the bank from the time it receivesd TARP moneythrough April, he said. Humphreg insists that the money was nota bailout; rather, it was intendef for banks that were already healthy. And while the early on, viewed the Capitao Purchase Plan as apositivs program, retroactive changes to the agreemen t have made it less appealing, he But he wants to make sure his bank will support both depositors and borrowers before returning the money.