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VOL. 123 | NO. 230 | Monday, November 24, 2008

Stronger Banks Keep Opting Into Bailout Program

By Andy Meek

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The impact that the U.S. Treasury Department’s capital purchase program will have on the banking landscape in Memphis is coming more clearly into view.

Bank of Bartlett has applied to participate in the government program, and bank chairman and CEO Bob Byrd said the bank probably will end up taking part in the program. Independent Bank is still evaluating whether it wants to participate.

A long list of others already have made their intentions known. Six of the top 10 banks ranked by the Federal Deposit Insurance Corp. according to their Memphis-area market share were getting fresh capital from the government as of Friday.

Memphis-based First Horizon National Corp., Regions Financial Corp., SunTrust Banks, Bank of America, Trustmark Corp. and Synovus Financial Corp. are taking the federal cash.

Two other local banks in that group of 10 – Renasant Bank and BancorpSouth – have declined to participate in the program.

A change in ‘optics’

Participating banks will sell preferred stock to the government in exchange for the infusion of capital. What has swayed some of the bankers who recently decided to accept a capital infusion from the government is the program’s shift in focus from its original mission of buying weak assets from banks to the new goal of giving capital to strong banks with the intent that it be put immediately to use.

In the words of Trustmark Corp. chairman and CEO Richard Hickson, “the optics of it changed.”

When it was first unveiled, Byrd considered the government’s plan to shore up the financial system with an offer of money that Bank of Bartlett didn’t need.

“As the program went from being a bailout and turned into a recapitalization of the entire banking industry – with the money going to the banks with the stronger regulatory ratings – we were encouraged to participate,” Byrd said. “And so we have determined that we probably will.”

A ‘why not’ effect

Susan Stephenson, co-founder of Independent Bank, told The Daily News the bank has not made a final decision about accepting the capital.

“We’re definitely evaluating it,” Stephenson said. “We’d like very much the ability to just get the final data and just make an informed decision about what we want to do. It could be a really great program for us.

“Our bank has a very different configuration than many of our peers – very low exposure to real estate, and our assets have performed well. We’re not in a distressed situation. The question for us will be if this is an opportunity for us to be able to grow more quickly or take advantage of other opportunities.”

The chairman and CEO of Jackson, Miss.-based Trustmark Corp., which is issuing $215 million in nonvoting senior preferred stock to the government, said his bank came to the decision to participate after a couple of weeks of “number-crunching and soul-searching.”

Trustmark, which expanded into the Tennessee market in 2001, has three branches in Memphis.

“You might wonder why a very profitable, absolutely healthy national bank who has been profitable all the way through and had a very profitable third quarter would participate in the capital purchase program,” Hickson said. “It is very good to have excess capacity to grow and to expand when in a downturn capacity is king, and you might get some really good opportunities to grow.”

When Treasury officials first unveiled the program, Hickson said his bank didn’t necessarily see the plan as the strongest government-sponsored solution to the credit crisis.

“But after about a week (the thinking became), ‘If you don’t get it – or if you don’t take it – it means you’re not a healthy bank and it means your stock is going to go down,” Hickson said. “So this was the, quote, good housekeeping seal of approval. Then it changed again over a couple of weeks after a couple of banks said they didn’t want it.

“It sort of came back around where Trustmark could have said we don’t need this, and people that can read and understand banks could say, ‘You’re right, you don’t need it.’”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
FORECLOSURE NOTICES 8 52 151
BUILDING PERMITS 158 699 2,751
BANKRUPTCIES 37 157 618
BUSINESS LICENSES 12 77 276
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0