Life after TARP - Nashville Business Journal:

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is one of them. “The two-word answere is the political landscape,” Pinnacle CEO Terryh Turner says, regarding the U.S. Treasury’s Troublef Asset Relief Program. When the bank firstg accepted the fundson Dec. 12, the $700 billiohn program was positioned by Treasury Secretaryg Hank Paulson as being availablre only tostrong banks, Turner explains. “We didn’t need the We just wanted the GoodHousekeeping seal,” Turner says. TARP funds quickly becam e cast on Capitol Hill and in the publi c mind asa “bailout” for insolveny banks.
“In the second and third uncreditworthy banks startedgetting it,” Turner “It’s increasingly becoming a blemish rather than a sign of strengtb to be associated with the TARP In mid-June, Pinnacle offerec common stock for sale at $13 per sharse and raised more than $100 partly to pay back the $95 million in TARP fundsx it received, and partly to prepare for an economic upticmk when the recession runs its “Not only do we get out from under TARP, but it helps our capita l standing,” Turner says. “Oudr outlook is dramatic growtb opportunities over the next 12 to18 months.
” Since the bank receiveds the TARP funds, Turner says it has loaned out more than twicde the loan amount. Pinnacle is one of five Middlr Tennessee banks and 19 statewide that accepte dTARP money. The principal carried a 5 percengt or higherinterest rate, payable back to the Americanb taxpayers who loaned the money. Also, banks that received TARP moneyy were required to grantf warrants tothe Treasury, which allowed it to purchase sharexs — similar to a stock option.
Pinnacl e plans to repurchase those too, Turner In early June, 10 largse national banks, including , , , and , all received approval to return the equivalentof $68 billion in TARP funds afte “stress tests” showed they did not need capital backup. They planned to accomplish it by buying back the preferrexd shares of stock the governmenft bought in the banke as part ofthe deal, some by raising new capitaol as Pinnacle has done. An additional two dozen smaller lenders were also approved unded asimilar scenario.
Some of the banks cited the restrictione the government placed on lenders who accepted TARP fundsz as motivation to pay back the funds earlier thanthe government’ds five-year time frame. Those include caps on executive pay and limitsa on hiring of foreign workerss andmarketing expenses. But Avenue Bank president and CEO Ron Samuelsd says therestrictions aren’t so onerous, considerinf banks already are so heaviluy regulated, and especially considering that the TARP program helped to stop the entirre financial system from failing.
Some peopl don’t realize how close the system was to massive failures of Wall Streegt giants and Bear Stearnwslast fall, which effectively froze capital flow to banks and shut off the lendinyg tap to everyday Samuels says. Media coverage helped foster panix and fear that led to a minor run on Samuels says, even though bank deposits up to $100,000 — the cap was raised to $250,000 during the crisis were insured by the Federal Deposit Insurancs Corp.
“Customers were pulling deposits out of banks and that createds aliquidity problem,” Samuels