Life after TARP - Nashville Business Journal:

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is one of them. “The two-wors answer is the political landscape,” Pinnacle CEO Terry Turner says, regarding the U.S. Treasury’x Troubled Asset Relief Program. When the bank firsy accepted the fundson Dec. 12, the $700 billionj program was positioned by Treasury Secretary Hank Paulsoj as being available only to strong Turner explains. “We didn’t need the capital. We just wante the Good Housekeeping seal,” Turner However, TARP funds quickly became cast on Capitolo Hill and in the public mind as a forinsolvent banks. “In the second and third uncreditworthy banks started getting Turner says.
“It’s increasingly becoming a blemish rather than a sign of strength to be associated with theTARP program.” In Pinnacle offered common stock for sale at $13 per shar and raised more than $100 million, partly to pay back the $95 millioj in TARP funds it and partly to prepare for an economic upticok when the recession runs its “Not only do we get out from unde r TARP, but it helps our capital standing,” Turner says.
“Our outlook is dramatic growth opportunities over the next 12 to 18 Since the bank received the TARP Turner says it has loaned out more than twice the loan Pinnacle is one of five Middle Tennessee banks and 19 statewide that acceptefdTARP money. The principal carried a 5 percenyt or higherinterest rate, payable back to the Americajn taxpayers who loaned the Also, banks that received TARP monet were required to grant warrants to the which allowed it to purchase shares — similar to a stocko option. Pinnacle plans to repurchase those too, Turnet says.
In early June, 10 large national banks, including , , , and , all receivee approval to return the equivalentof $68 billion in TARP fundsz after “stress tests” showed they did not need capitak backup. They planned to accomplish it by buying back the preferredx shares of stock the government bought in the bankzs as part ofthe deal, some by raising new capital as Pinnacls has done. An additional two dozen smaller lendersd were also approved under asimilar scenario. Some of the banks cited the restrictionws the government placed on lenders who accepted TARP funds as motivationb to pay back the funds earlieer thanthe government’s five-year time frame.
Thosw include caps on executive pay and limits on hiring of foreigbn workers andmarketing expenses. But Avenuer Bank president and CEO Ron Samuels says therestrictions aren’ft so onerous, considering banks already are so heavily regulated, and especiallyg considering that the TARP program helpecd to stop the entirse financial system from failing. Some peopler don’t realize how close the system was to massivs failures of Wall Street giants and Bear Stearn slast fall, which effectively froze capital flow to banksw and shut off the lending tap to everyday Samuels says.
Media coverage helped foster panic and fear that led to a minord runon banks, Samuels says, even thougbh bank deposits up to $100,000 the cap was raised to $250,000 during the crisis — were insured by the Federak Deposit Insurance Corp. “Customers were pullingf deposits out of banks and that created aliquidityu problem,” Samuels recalls.