A year after its TARP shares were purchased at auction by unknown bidders, a local bank spent $10 million to buy back a big chunk of the shares.
Eastern Virginia Bankshares, parent of EVB, said this week that it bought back 10,000 shares at $1,000 a piece of its preferred stock that was originally issued to the U.S. Treasury in exchange for TARP capital.
It’s EVB’s latest step toward fully ridding itself of weight leftover from the once-controversial TARP Capital Purchase Program. TARP (Troubled Asset Relief Program) was a 2008 initiative designed to give banks a cash buffer during the economic downturn in which the government bought bank assets and equity.
EVB still has another 14,000 shares left to redeem from those buyers. The company received $24 million from the program in 2009 and was one of eight local banks that participated at the height of the recession.
Joe Shearin, EVB’s chief executive, said the shares were bought back from several investment funds that purchased them from the Treasury at an auction in October 2013. The Treasury began auctioning TARP shares of certain banks as part of a winding-down process of the program in the last two years.
The bank at the time of the auction didn’t know the identity of the investors. Shearin said EVB has since found out but that he could not name them.
“They want to be kept anonymous,” he said.
EVB funded this initial $10 million buyback with money left over from the bank’s 2013 capital raise. It raised a total of $50 million from investors to be used in part to pay off TARP.
The bank also paid off dividends that were due on the TARP shares and said it will save $900,000 on dividends that would have been due on the 10,000 shares. It must still pay dividends on the remaining 14,000.
As for those remaining shares, Shearin said the bank will work on that over time.
“We’ll put another plan in place to figure out how to redeem that over the next few quarters,” he said.
The TARP buyback comes in the middle of EVB’s effort to acquire Newport News-based Virginia Company Bank.
The banks cleared one of the last hurdles of the pending deal this week when shareholders of both sides voted in favor of the merger. Regulators have already approved the deal.
EVB said it expects to close the transaction next month.