C&F Bank this week bought its way out of the remaining $10 million it received from the U.S. Treasury in 2009 as part of the TARP Capital Purchase Program.
It’s the second locally based bank to be free from TARP.
One of the few local banks to remain profitable throughout the recession, C&F took $20 million in TARP capital in January 2009. It repaid half in July.
As it did with the first $10 million, C&F used cash from its normal operations to fund the repayment, according to CFO Tom Cherry.
“We’re glad to be out of it,” Cherry said. “In particular, we’re pleased that we didn’t have to raise additional capital to do it.”
C&F and its $928 million West Point-based parent C&F Financial Corp. join Union First Market Bank as the only local institutions to be completely out from under the often controversial TARP program.
Between 2008 and 2009, eight local banks participated in the program, receiving a combined $191 million. In exchange, the banks gave the government thousands of shares of their stock.
Five local banks have yet to buy their way out: Central Virginia Bank ($11.3 million), Essex Bank ($17.6 million), EVB ($24 million), First Capital Bank ($10.9 million) and Village Bank and Trust ($14.7 million).
Union First Market Bank exited the program late last year.
Created amid the financial crisis, the TARP Capital Purchase Program was intended to provide capital to healthy banks of all sizes to help them weather the storm of the recession.
In exchange, banks gave up shares of preferred stock that the Treasury holds until the money is paid back. Banks pay a 5 percent quarterly dividend to the Treasury for the first five years. If the loan is not repaid after five years, the interest rate jumps to 9 percent.
Because the Capital Purchase Program was part of the TARP, it was widely labeled a “bailout” when it was introduced. And many bankers have been wary of the stigma.
“In hindsight, I don’t think it was worth it,” Cherry said. “The initial intent [from the government] was ‘we’re giving these funds to the strongest banks.’ Shortly thereafter, they made it sound like it was a bad thing to have it.”
But the extra cash did give C&F a buffer, he said.
“It kept our capital very strong during the crisis, whereas we didn’t have to cut back on lending,” Cherry said.
The Treasury Department still holds the right to own 167,000 shares of C&F common stock that were also issued as part of the TARP deal.
The bank said it would negotiate with the government to repurchase those warrants.