Spirit Bankcorp stock to be auctioned by Treasury
BY LAURIE WINSLOW World Staff Writer
Saturday, February 16, 2013
2/16/13 at 7:00 AM
Several thousand shares of non-voting perpetual preferred stock of Spirit Bankcorp Inc., the parent of SpiritBank, that were issued under the federal government's Troubled Asset Relief Program are to be sold off to the highest bidder in an upcoming auction.
Oklahoma City-based BancFirst Corp. has applied to the Federal Reserve for permission to bid on 31,500 shares.
BancFirst should know in 30 to 60 days if it has been approved to bid on the shares, said CEO David Rainbolt.
Rainbolt said BancFirst sees potential benefits in the move.
"The rate of return, if we are the successful bidder, would be higher than what we currently are getting on loan yields," he said. "Moreover, this would be a small portion of our portfolio. We make investments all the time, and this would be another investment."
Rainbolt said he expects other institutions will also want to bid on the shares.
In efforts to wind down TARP's Capital Purchase Program, the Treasury Department in December announced plans to auction its CPP preferred stock and subordinated debt positions for another 53 of the 218 remaining institutions in the program, including those such as SpiritBank that are behind in their dividend payments.
The CPP was established in October 2008 to stabilize and strengthen the financial system by increasing the capital base of healthy banks and enable them to lend to consumers and businesses. The voluntary program was designed to generate a positive return to taxpayers over time.
The funds must be repaid to the government at an interest rate of 5 percent for the first five years and 9 percent thereafter.
In 2009, SpiritBank began participating in the CPP and issued preferred stock to the government in exchange for $30 million, which it used to increase loan growth.
"The Capital Purchase Program is a stock investment, not a loan and not a bail-out, which allowed qualifying, strong banks to reinvest the capital to stimulate local economies," SpiritBank said in an emailed statement.
"We have been able to make loans exceeding several billion dollars in mortgage and other loans to date to fulfill the intent of the program."
To date, SpiritBank has made $2.3 million in dividend payments to the U.S. Treasury, but has missed $3.7 million in dividend payments, said Matt Anderson, a spokesman with the Treasury Department.
The government's $30 million investment in preferred stock of SpiritBank wasn't a loan, Anderson explained. Just as an investor buys stock, the Treasury invested in preferred stock of banks, which in turn have paid dividends or interest to the government.
At any time, the financial institutions that participated in the program could have repurchased their shares. In some cases, the Treasury has opted to sell off its investments to third parties or auction it to other bidders, Anderson said.
Whoever successfully bids on SpiritBank's preferred stock could end up acquiring it for less than what the government originally invested in the shares, which means that taxpayers ultimately would take a loss on that particular investment, sources say.
Anderson noted, however, that the government already has recovered $269 billion through repayments, dividends and interest, exceeding the original $245 billion investment it made in banks through the CPP.
SpiritBank is the only remaining Oklahoma-based bank left that has not repaid the investment made by the Treasury.
Last year, Southwest Bancorp, the parent of Stillwater National Bank, repaid $70 million to the Treasury.
Three other Oklahoma banks repaid the funds in 2011. Grand Capital Corp., of Tulsa, parent of Grand Bank, had received $4 million; Regent Capital Corp., of Nowata, received $2.7 million; and AmeriBank Holding Co., of Collinsville, received $2.5 million.
Last May, SpiritBank officials noted that the bank had accrued $2.2 million in dividends on the preferred stock. The bank said it planned to fully redeem the government's investment, but at the request of its primary regulator was delaying dividend payments.
"With good strategic plans, good financial projections and much of the national economic woes behind us, Spirit Bankcorp's CPP is a good investment and we are not surprised that there are investors making bids on this portion of our capital," the bank stated.
"Our CPP is comprised of preferred stock which is fully redeemable at Spirit's option at any time and we plan to redeem it in the future from whomever is the successful bidder."
Last April 23, SpiritBank signed a consent order with the Federal Deposit Insurance Corp. and the Oklahoma State Banking Department to address problem areas that included revising its loan policy and reducing additional loan losses.
Asked about the status of that agreement with regulators, the bank stated that it "remains the same for now, but we're on track with all plans and have a positive projection and outlook for the future."
At the end of the 2012 third quarter, SpiritBank had recorded a net income loss of $18.9 million. That compares to a loss of $6.4 million for all of 2011 and nearly $4.5 million in 2010, according to FDIC data.
"SpiritBank is positioned to remain a locally owned community bank with the Kelly family of Bristow as the largest shareholder," the bank stated. "Our bank has managed through challenging times, and we are pleased with our outlook for the future. We are also eager to have the CPP auction process settled, and look forward to working with the successful bidder or bidders towards the redemption of all preferred stock that they might acquire."
Original Print Headline: Feds to auction shares of bank
Laurie Winslow 918-581-8466