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VOL. 124 | NO. 115 | Monday, June 15, 2009

Local Banks Hanker To Repay TARP Money

By Andy Meek

Print | Front Page | Email this story | Email reporter | Comments ()
Dave Miller

Wall Street megabanks poised to repay the government’s bailout money aren’t the only ones eager to disentangle themselves from the grip of Uncle Sam.

Smaller banks on the local level also are intent to pay back loans they got last fall through the Troubled Asset Relief Program. And some of them want to dispose of those government IOUs soon – by the end of the year, if possible.

First Horizon National Corp., the Memphis-based holding company and parent of First Tennessee Bank, got $866 million in TARP funds. Internally, the bank considers itself one of the best-positioned TARP recipients to pay back the money.

“We certainly continue to give it a great deal of thought,” said First Horizon senior vice president of investor relations Dave Miller. “We’d prefer to have better clarity around the economy before returning the funds. … We’re not in a hurry to repay¸ but it is something we’d like to work with our regulators to accomplish in 2009.”


Magna Bank, which got $14 million in TARP money, also is eager to send it back. Kirk Bailey, Magna’s chairman, president and CEO, told The Daily News his bank is looking to do so as soon as possible.

The holding company for The Bank of Fayette County got a little more than $6 million in TARP money in January. McCall Wilson, the bank’s president and CEO, said federal regulators told his bank to wait until the end of the year before seeking permission to pay back its TARP funds.

If there are no major hiccups in the broader economy and if Wilson’s own market continues to stabilize, that’s what he intends to do.

“I believe we’re coming out of this. I believe the economy’s turning, I really do,” Wilson said. “If things keep in this direction at the end of the year, I’ll send my request in and say, ‘Hey, I want to pay it back.’”

“If things keep in this direction at the end of the year, I’ll send my request in and say, ‘Hey, I want to pay it back.’”
– McCall Wilson
President, Bank of Fayette County

His bank fits the classic definition of a community bank content to make money on the spread, the difference between the rate the bank pays customers for their investments and what it charges other customers on outstanding loans. That harkens back to what used to be standard operating procedure in banking, sometimes referred to as the 3-6-3 Rule: Pay 3 percent on customer deposits, charge 6 percent interest on loans and hit the golf course by 3 p.m.

What Wilson’s bank doesn’t do, unlike banking behemoths that lost their shirts in the subprime mortgage market, is gamble on speculative real estate ventures.

“I love my job,” Wilson said. “It’s a good place to be. We’re sending kids to college, people that would never have gotten to go to college. We make people loans for Christmas money. We’re doing things to help people.”

A longer view

Meanwhile, the appeal among banks to pay the TARP money back quickly may swell now that the U.S. Treasury Department has given permission to 10 of the country’s largest banks to do so. J.P. Morgan Chase, Morgan Stanley and American Express Co. are expected to pay back almost $37 million this week.

No banks in Tennessee that got TARP money will be among that early round.

The TARP program’s existence and effect on the economy has tended to be overshadowed by more looming dangers – soaring jobless numbers, foreclosure rates and the like.

The government has invested almost $200 billion in banks large and small throughout the country, according to the latest information available. It’s done so by buying ownership stakes in the form of preferred shares, which take priority over the stakes of common shareholders when dividends are paid and when a company is liquidated.

Through the end of May, banks in 48 states and in almost every banking market in the country had received TARP money.

To date, 21 banks in Tennessee have received $1.2 billion. The most recent TARP transaction involving a Memphis area bank came in early April, when Tri-State Bank of Memphis closed on a nearly $2.8 million investment of preferred stock from the government.

“The Troubled Asset Relief Program (TARP) funds … are an investment in our company,” First Horizon president and CEO Bryan Jordan wrote in a March 1 letter to shareholders included at the front of the company’s 2008 annual report. “We are responsible for using the TARP funds not just to deal with the current economic troubles, but to thrive in the long run.”

PROPERTY SALES 41 308 2,265
MORTGAGES 47 379 2,607
BUILDING PERMITS 128 1,018 6,068
BANKRUPTCIES 53 255 1,787