Turbulent and topsy-turvy, crazy and chaotic. Of all the adjectives that could be applied to the financial services industry, perhaps the most appropriate description is “troubled” – as in Troubled Asset Relief Program (TARP), the federal bailout program designed to infuse needy banks with capital.

About 200 banks nationwide have received close to $200 billion out of a possible $250 billion in relief funds allocated under the U.S. Treasury Department’s Capital Purchase Program, with about $90 billion of that going to just two banks, Citigroup and Bank of America.

In this process, the government buys shares of preferred stock from the banks, which pay the money back at an interest rate of 5 percent each year for five years; after the fifth year, the repayment interest rate rises to 9 percent as an incentive for banks to pay back the money quickly.

Ten banks in Tennessee, Mississippi and Arkansas have received TARP funds to date from the Capital Purchase Program, with Memphis-based First Horizon National Corp. getting $867 million.

Despite these efforts to stabilize and strengthen the U.S. financial system, bank stocks continue to slump and confidence has yet to be restored, placing the industry on shaky ground in early 2009.

“Last year certainly was a difficult, tumultuous year and this year has started off similarly with the issues at Citigroup and Bank of America and with the few banks that have released earnings so far,” said Andrew Gibbs, senior vice president at Memphis-based Mercer Capital. “The numbers have been disappointing, I suppose. That’s the best word for them.”

‘Unfortunately,’ no

TARP’s Capital Purchase Program has been on the minds of banking professionals and analysts since it began buying preferred shares of bank stock in October. Some bank officials, including those at Bank of Bartlett, don’t know if they’ve qualified yet for funds through the program.

Bank of Bartlett founder and chairman Bob Byrd, who said his directors haven’t decided if they’ll accept the funds even if the bank qualifies, is concerned about what a bank might be giving up by accepting the government money, which can range from $1 million to $25 billion.

“A great deal of this is going to be unknown,” Byrd said. “One effect of this is it will strengthen a bank’s balance sheet against economic erosion. That would be the primary benefit.”

Gibbs agreed that the recapitalization of banks on the heels of the subprime fallout and credit crunch could be the shot in the arm that many financial institutions desperately need.

BRISK BUSINESS: Tellers handle transactions at the First Tennessee Bank building Downtown. First Tennessee leads the Memphis Metropolitan Statistical Area in market share for deposits, but everything else related to the financial services industry has been less certain amid an economic slump. -- PHOTO BY ERIC SMITH

“In an environment where capital is hard to get, that is probably a reasonable step to take, to get it while it’s available,” Gibbs said. “If you don’t and you need it later, it’s going to be a tough market to raise the capital.”

But the idea that lending will quickly re-emerge as a result of the program is debatable.

Rick Wood, senior vice president for Financial Federal Savings Bank, noted that TARP funds were targeted toward the larger, troubled financial institutions, so whether many of those dollars flow into the market by way of new loans remains to be seen.

Wood said banks might instead use TARP money to replenish their capital and liquidity rather than direct it toward new commercial loans, especially in light of low demand for new retail, office or industrial projects.

“They’re going to hold that money, I believe, very close to the vest,” Wood said. “I do not think it’s going to lead to an exuberance of new lending on commercial or residential properties. Unfortunately.”

Many headaches

Nowhere in the financial services industry was the pain felt more than in the mortgage sector. Residential and commercial lending saw huge declines in 2008 as tightened credit dictated the availability of funds for potential homebuyers or business investors.

On the residential side, banks and mortgage companies made just 10,495 mortgages in Shelby County, a 33.9 percent dropoff from 15,877 made in 2007 and a 48.5 percent dropoff from 20,368 made in 2006, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

The average mortgage amount in 2008 fared well. At $150,180, it was down only 2.3 percent from $153,698 in 2007 and down only 1.3 percent from $152,110 in 2006, a nod to the Memphis region’s relatively stable home values.

But the total dollar amount sank severely last year. Mortgages tallied just $1.58 billion in 2008, marking a 35.4 percent decline from $2.44 billion in 2007 and a 49.1 percent decline from $3.1 billion in 2006.

The commercial side didn’t perform much better. The county saw just 424 commercial mortgages in 2008, down 37.1 percent from 674 mortgages made in 2007.

And the average mortgage amount of $1.1 million during 2008 was 67.2 percent down from $3.5 million in 2007, while last year’s total dollar amount of $484.9 million was 79.4 percent down from $2.35 billion in 2007.

(Residential and commercial reports included only loans taken at the time of sale, not refinancings.)

Reason for hope

Most lenders in 2008 were considerably below their 2007 numbers. Last year Wells Fargo Ltd. led Shelby County in total dollar amount with 585 noncommercial mortgages averaging $173,880 and totaling $101.7 million.

It was followed by First Tennessee Bank with 552 mortgages averaging $173,532 and totaling $95.8 million and Community Mortgage Corp. with 647 mortgages averaging $140,879 and totaling $91.1 million.

On the commercial side, Regions Bank, doing business as Regions Mortgage, was tops with 22 mortgages averaging $1.4 million and totaling $31.4 million. Regions was followed by GMAC Mortgage Corp. with three mortgages averaging $6.6 million and totaling $19.7 million, and Wells Fargo Ltd. with seven mortgages averaging $2.7 million and totaling $19.2 million.

First Tennessee Bank NA was the top lender in terms of number of mortgages with 38, followed by Regions’ 22 and BancorpSouth Bank’s 16.

As for deposits, First Tennessee Bank NA continued its dominance in Memphis, snaring 36.38 percent of the local market share with $7.82 billion in deposits, according to the most recent Federal Deposit Insurance Corp. numbers.

It was followed by Regions Bank with 15.08 percent market share on $3.24 billion in deposits and SunTrust Bank with 8.12 percent market share on $1.75 billion in deposits.

Despite all the tumult, turbulence and troubles that banks have experienced, it’s possible that this is the year things turn around with a new administration in Washington and a renewed emphasis on shoring up the nation’s financial sector.

“Hopefully, banks’ core activities of lending and taking deposits will get a bit more profitable in 2009,” Gibbs said, “and that can go some ways toward counteracting some of the negative factors.”

Chandler Reports is a division of The Daily News Publishing Co.