Georgia banks hold on to TARP money

Georgia banks have yet to join the growing number of financial institutions sending federal bailout money back to Uncle Sam.

Several of the state’s largest banks, including Synovus and United Community, plan to hold onto their government money for several years, saying it provides a cushion they need to ride out the recession.

Atlanta-based SunTrust, meanwhile, says it is eager to return its federal funds as quickly as possible, a move that would free the bank from restrictions on executive pay and dividends. But the process requires that SunTrust first prove to regulators it can stand on its own.

“We clearly are anxious to repay it as soon as we can,” said Steve Shriner, director of investor relations at SunTrust. “The timing is not completely up to us.”

Thus far, only a handful of the more than 600 financial institutions that received taxpayer bailout money have been allowed to return the funds.

But momentum is building. This week, 10 of the nation’s biggest banks repaid a total of $68 billion in bailout money. They included BB&T, which is based in North Carolina but is a significant player in the Atlanta market, along with JPMorgan Chase and Morgan Stanley.

The federal government has invested $6.2 billion in 22 Georgia-based banks through the U.S. Treasury’s Troubled Asset Relief Program, or TARP. The vast majority of the money has gone to SunTrust and Synovus, based on Columbus.

The program began last fall and winter. TARP’s goal was to stabilize the reeling banking industry by offering an emergency source of cash to help banks write off losses, make new loans and — perhaps most critically — shore up customer confidence.

Some bankers feel TARP has worked well and are in no hurry to exit the program.

Atlanta-based Fidelity Bank, one of the state’s larger community banks, says the $48 million in federal funds it received in December has helped it boost lending in recent months. Fidelity has hired about 90 people to handle the increased business, mostly mortgage refinances, said Jim Miller, Fidelity’s chairman.

“We had been pulling back on making loans, and once we got the TARP money we tuned around and made several hundred million in more loans than we otehrwise would have,” Miller said.

There’s little, if any, downside to holding onto the money, Miller said. The restrictions on executive pay don’t really affect banks like Fidelity, which are much smaller than the regional and national banks most eager to return TARP funds.

“We have more conservative salaries and bonuses than the Wall Street folks have, so that’s not an issue here,” he said.

Synovus, the state’s second-largest bank, received $973 million from the federal government last December. Bank officials say they have decided to keep the money for now, providing time to work though bad loans and return to profitability — and, it’s hoped, time for the company’s stock price to rebound.

If Synovus were to return the TARP money now, the bank would have to issue stock to rebuild its capital, Anthony said. At today’s depressed stock price, such a move would heavily dilute existing shareholders, he said.

“Once we get on an improving track and can begin to see our way to profitability, then we can issue stock and we can raise capital on our own, on more favorable terms,” Anthony said.

SunTrust feels the TARP money carries too great a cost. In addition to the strings attached, banks receiving government funds must pay a 5 percent dividend each year. For SunTrust, that amounts to $240 million a year — no chump change for a company that’s suffered heavy losses the past two quarters.

SunTrust executives declined to say if they’ve formally applied to pay back the money.

But the bank seems confident it will win approval. SunTrust recently sold $1.8 billion worth of shares, helping build a robust capital base that company officials said would leave them in sound financial shape even after repaying the government.

United Community, the state’s third-biggest bank, received $180 million in TARP funds last December. The money helped shore up a balance sheet battered by soured real estate loans made in suburban Atlanta and the north Georgia mountains.

Rex Schuette, the bank’s executive vice president and chief financial officer, said hecan’t afford to send the money back yet. Compared to what it would cost for United Community to raise capital on its own, the 5 percent interest on the TARP funds is cheap, he said.

“We all can’t wait to get rid of it, but you must balance that on the best interests of your shareholders,” Schuette said.

Georgia’s top TARP-takers

Bank, Amount, Plan

1. SunTrust, Atlanta, $4.84 bil, Return as soon as possible

2. Synovus, Columbus, $973 mil, Hold, for up to several years

3. United Community, Blairsville, $180 mil, Hold, for up to several years

4. Ameris Bancorp, Moultrie, $52 mil, Hold, no timeframe given

5. Fidelity Southern, Atlanta, $48 mil, Hold, no timeframe