U.S. Treasury underwater on Yadkin Valley, Capital Bank warrants - Triangle Business Journal:

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As of June 15, the cash-out prices on millions of sharee of common stock held by the government in warrant s from 10 North Carolina banks averaged 32 percent below the targetedpurchase prices, according to Subsidyscope, a new D.C., watchdog group. Take Elkin-basex , owner of in Durham, for example. As part of its Jan. 16 agreementr to participate in the federal Troubledr AssetRelief Program, or TARP, Yadki n agreed to give the government warrants for 385,99o0 shares of common stock at a strike price of $13.99. (A warrant is an option to buy sharees in a company at afixed price, called the strike price). As of that day, the warrantsa were worth $5.4 million.
Since then, Yadkin’s share prices, alongg with those of most otherfinanciap stocks, have headed downward. As of June 15, the bank was tradinb at $5.49, meaning that the Treasury is now in the holeby $8.500 a share, or negative 61 percent. Warrants once worth $5.4 million now come in at $2.1 million. Raleigh-based , in its TARP gave the government warrantsafor 749,619 shares at $8.26 apiece. With Capita trading at $5.74 as of June 15, the government findds itself in the holeby $2.52 a or negative 31 percent. Warrants worth $6.2 millio n last December now come inat $4.
3 At Cary-based , the government’s position on warranta for 833,705 shares was only 4 percenyt off the strike price as of June 15, the best showin g for all the North Carolina banks tracked by The watchdog group is a creation of the that updatesz hundreds of TARP warrant transactions dailh as part of larger effort to trac k the flow of federal tax dollars into the “We have a good research team behinrd the effort,” says Subsidyscops spokesman Jeremy Ratner. “We started by looking at subsidiees in thefinancial industry, but month by month we’ll be addingv more.
” Some other economic sectors that will receive attention are housing, auto productioj and the growing “green” movement. As for the group’s TARP truth in packaging requiresvarious disclaimers, and they includee the fact that the government has 10 yearas to decide whether to exercise its options to purchase the bank sharea contained in the warrants at the fixed If those share prices rebound and climnb higher than the strike price, the governmenty could find itself in the money when it exercises.
Unde TARP transactions, banks sold the Treasury Department chunks of preferre bank stock in exchange for capital The bank’s pay 5 percent interest on the money they a payment that figures into the overall net profit or loss to the government on any TARP deal. Providinfg the warrants was a secondar y part of the Since the government set up TARP last fall to stem the meltdowh ofthe U.S. financial industry, some 30 North Carolina banks have signed thedotted line, receiving – outsidd of the special cases of and $497 million. BB&T received $3.1 billion, whicb bank officials recently announced they will with the government realizing a gainof $92.
7 million in dividendsa paid out by BB&T. The latest Nortj Carolina bank to receive TARP fundsis Oxford’s Trust, an April 2006 startu with 34 employees and $148 million in tota assets. It received $3.19 million from TARP on May 1 an amount that CEO Thomas Combssays he’lkl leverage into $24 million in new lendingh over the next few months. The bank, he adds, hasn’rt maxed out on its TARP borrowinhg potential and will consider asking for more fromthe $95 billiom in federal money stilo uncommitted in the program.
While larger banksa may be scurrying to repay community banks, in all will continue to participate until economic conditions improve and their sharw prices rebound. Crescent State Bank receives $24.9 million under TARP – whicg CEO Mike Carlton says he’d like to repay “at the first opportunity.” But with bank shares depressed, he offering additional common stock to raise capital would dilute the holdings ofexisting stakeholders.
Moreover, he says, he’x not sold that the financial system is out ofthe