Treasury Takes $48.8 Million Bath on TARP Auction (Update 1)

Updated with MainSource Financial Group's successful bid to purchase a portion of its TARP preferred shares from the U.S Treasury.

NEW YORK ( TheStreet) -- The U.S. Treasury on Thursday announced the results of its auction of preferred shares it held for six banks, with the bottom line being a $48.8 million loss for the government.

The Treasury was owed a combined $410.8 million by the six banks, and said "the aggregate net proceeds" to the government "from the six offerings are expected to be approximately $362 million," after expenses.

Two of the six banks bid on their own TARP preferred shares, and not surprisingly, wound up paying the highest prices:

Wilshire Bancorp ( WIBC) of Los Angeles, owed $62.158 million in TARP money. The Treasury sold all 62,158 shares, with a par value of $1,000, for $943.51 a share. After expenses, the net proceeds were $58 million.

Wilshire COF Alex Ko confirmed that the company "won 60,000 shares," with other bidders winning the remaining 2,158 shares.

"We will make a total payment of $57,010,800, for the TARP shares and accrued dividends," he said, adding that the company was "very pleased about this; it was a great success, because the California Department of Financial Institutions and the Federal Deposit insurance Corp. quickly approved a dividend upstream from main subsidiary Wilshire State Bank to the holding company. The Federal Reserve had to approve our bid as well."

MainSource Financial Group ( MSFG) of Greensburg, Ind., owed $57 million to the government. The Treasury said the 57,000 preferred shares, with a par value of $1,000, were sold for $931.11 a share, with net proceeds of roughly $52 million.

MainSource later said in a filing that it had "successfully bid for the purchase of 21,030 shares of the Preferred Stock for a total purchase price of $19,581,243, plus accrued and unpaid dividends on the Preferred Stock from and including February 15, 2012 to the date of closing. " The company added that the partial retirement of its TARP preferred shares would "be accretive to capital by approximately $1 million, and its dividends on the Preferred Stock will decrease by approximately $1 million on an annual basis. "

The company "intends to redeem the remainder of the Preferred Stock in such amounts and at such times as it deems prudent, and in any event it intends to redeem the remainder of the Preferred Stock in full no later than the first quarter of 2014."

Here's a summary of the Treasury's auction results for the remaining four banks:
  • Banner Corp. (BANR) of Walla Walla, Wash., owed $124 million in TARP money. The Treasury sold all 124,000 shares, with a par value of $1,000, for $884.82 a share, for net proceeds of $108 million, after expenses.
  • First Financial Holdings (FFCH) of Charleston, S.C., owed the government $65 million. The Treasury sold all 65,000 shares, with a par value of $1,000, for $873.51 a share. After expenses, net proceeds were about $56 million.
  • Seacoast Banking Corporation of Florida (SBCF), of Stuart, owed the Treasury $50 million. The Treasury sold all 2000 shares, with a par value of $25,000, for $20,510 a share, with net proceeds of approximately $40 million.
  • WSFS Financial (WSFS) of Wilmington, Del., owwed $52.625 million in TARP money. The Treasury sold all 52,625 shares, with a par value of $1,000, for $915.11 a share, with net proceeds of roughly $47 million.

When the auction deals settle on or about April 3, the buyers will be required to pay clearing costs and also pay any TARP dividends in arrears.

While the Treasury sold the TARP shares at discount, the agency pointed out that it had "recovered $260 billion from TARP's bank programs through repayments, dividends, interest, and other income - compared to the $245 billion initially invested," so that "each additional dollar recovered from TARP's bank programs is an additional dollar of profit for taxpayers."

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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