Following SunTrust Banks’ recent repayment of nearly $5 billion in federal aid issued during the economic collapse, other state banks are floating hints of paying back taxpayers.
Each of the next two biggest banks based in Georgia — Synovus Financial and United Community Banks — has indicated recently that it is forming plans to shed its partial government ownership. But neither has given a time frame.
More than two dozen Georgia institutions received aid during the crisis through the Troubled Asset Relief Program, totaling about $6.3 billion. Three, including SunTrust, have fully repaid TARP, though the vast majority of TARP banks are making scheduled dividend or interest payments.
So far, about $5.5 billion has been paid back to the government, with most of that coming from SunTrust, according to an analysis of the latest government disclosure.
Before TARP loans are repaid, regulators want banks that received taxpayer funds to prove they are profitable and that the worst of the financial crisis is behind them.
Several Georgia community banks also are said to be considering repayments, including some that are waiting for their stock prices to improve before attempting to sell shares.
Most Georgia TARP banks received less than $10 million.
Kevin Jacques, a former economist for the U.S. Treasury Department and the Office of the Comptroller of the Currency, said TARP recipients want to pay back the government, but some currently may not have the blessing of federal regulators because they still may have significant problems.
“If you’ve got uncertainty about those issues, [regulators would] rather you hold on to that money than pay [the government] back,” said Jacques, a professor of finance at Baldwin-Wallace College in Ohio.
Kessel Stelling, president and CEO of Columbus-based Synovus, which received nearly $1 billion under TARP, has said discussions about paying back the government would come after the bank returns to the black. Synovus has paid more than $100 million in dividends to the government.
The parent to 30 Southeastern community banks, including Bank of North Georgia, has said it could return to profitability this year after more than two years in the red.
Stelling told analysts last month that the company has monitored the exits of rivals and is engaged in discussions with investment banks about its TARP repayment options.
Blairsville-based United last month raised $380 million that allowed it to restart interest payments on TARP that were suspended earlier this year.
United, which like nearly all Georgia banks has less than $10 billion in assets, could seek a conversion of TARP into another government program. One program, called the Small Business Lending Fund, would allow United and other banks, should they qualify, to pay off TARP through proceeds earned from small-business lending, said Rex Schuette, United’s chief financial officer.
Though the idea of the program is to stimulate business lending, it would also reduce the interest rate United must pay to the government. United received $180 million in taxpayer funds, and it has so far paid $17.5 million in dividends.
Schuette said United expects to return to profitability in the current quarter for the first time in more than two years.
Three state banks are currently prohibited by state law from paying dividends to anyone, including the government, because they are not “cumulatively profitable.”
In March, Treasury officials said the $245 billion in crisis aid to the nation’s banks had turned a modest profit, including interest and dividends. TARP as a whole stretches beyond banks, however, including aid to insurance giant AIG, General Motors and Chrysler.
Bobby Schwartz, a banking attorney with Smith Gambrell & Russell in Atlanta, said interest rates under TARP will increase to 9 percent after five years in the program. Most banks are currently less than three years in and paying 5 percent interest.
“They’re lining up to seek the advice of investment bankers to see what their options are,” he said.
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