Five Star Bank wants out of TARP program - Business First of Buffalo:

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, the Warsaw-based parent company of , would like to returnm its $37.5 million in TARP (troubledx assets relief program) funds to the federal government befor e the end ofthe year, said President and CEO Petedr Humphrey. The banking company accepted the money late last year in exchangs for selling senior preferred shares tothe “The rules have changed that makes this less attractive, so Five Star Bank is thinkinf maybe we ought to pay this back and get out from underneatg the program,” Humphrey said. “We’re exploring, ‘How do we pay back TARP whilwe still having an ample amounf of capital to support futuregrowth initiatives?
’ ” The bank has no definitived plans in place to return the money, but Humphrey is eager to get out of the federal program due to retroactivd changes to the initial Capital Purchasd Plan agreement, including limits on executive compensation that deny the paymenf of cash incentives to employees untilp TARP funds are repaid. “It’s just the fact that thered aremore certifications, more regulations, more complianc requirements and, frankly, with that comews risk,” Humphrey said. “We’rde heavily regulated anyway. How would you like to enter into a contractr and then four months later have the term of thatcontract change?
” Other area banks that borrowed TARP funds have not publicly announcefd plans to repay the money. Neither nor , which received $600 million and $2.5 billion have made commitments to return the according to spokespeople atboth banks. At press time, , whichh borrowed $184 million from the government and recentlyt completed a stock sale thatnetteds $360 million, was announcing no firm plans to repauy the funds. An announcemenrt was expected May 28 and updatesx will be postedon www.buffalo.bizjournals.
com Last month, M&T Bank’s chied financial officer, Rene Jones, said the bank “tend(s) not to be a firsyt mover” and plans to wait for more clarity from the government before repaying the money. KeyBank officials have said they want to pay back the fund as soonas possible, but there is no time framd in place. The Capital Purchase Plan was introduce d last fall by the government as a way to increase lending and jolt thefaltering economy. Under initiak terms of the plan, banks were required to raise privatre capital before TARP funds could be returned.
But some terms of the planxs changedfollowing February’s economic stimulusw bill, leaving repayment guidelines less than clear. According to a May 22 report fromthe U.S. Treasury Department, just 16 bankx around the country – includingv one Upstate New York bank, in Syracuse – have been allowecd by the government to repayyTARP funds. Several calls made to the U.S. Treasuryt Department to clarify TARP repaymenty terms werenot returned. As part of the Capitakl Purchase Plan, banks such as Five Star must make quarterluy interest payments tothe government.
So far, Five Star has made two paymentsztotaling $900,000, Humphrey The money has been used to leverage the bank’as growth, including its commercial, agriculture, residentiapl mortgage, home equity and indirect automobile loan business, he About $200 million has been lent by the bank from the time it receivedf TARP money through April, he said. Humphrey insistzs that the money was nota rather, it was intended for banks that were already And while the bank, early on, viewed the Capita l Purchase Plan as a positiv program, retroactive changes to the agreement have made it less he said.
But he wants to make sure his bank will supporgt both depositors and borrowers before returningthe money.