Some regional banks intend to return federal dollars, others decline participation

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A growing number of banks are deciding that the negative publicity and scrutiny that come with participation in the U.S. Treasury’s Troubled Asset Relief Program (TARP) just aren’t worth the trouble.

U.S. Bank and TCF Bank, both which are based in Minnesota but have significant operations in Milwaukee, both said last week that they are working now to repay the federal dollars.

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U.S. Bancorp chief executive officer Richard Davis told analysts in a conference call last week that the Minneapolis-based company must first undergo a federal "stress test," but it will then seek to return $6.6 billion in TARP funds it had received

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"At this point in time, we’re dedicated and devoted to finishing the stress test … and I do believe we’ll perform quite well in that stress test," Davis said on the call. "Following those outcomes, it is my intent that, given permission and given the ability – financial ability – to do so, that this company would like to emerge from the TARP assets as soon as possible and return that money to the government and move forward unfettered as it were."

Chicago-based Northern Trust Corp., which has an office in downtown Milwaukee, announced last week that it would repay the $1.5 billion it received under the federal Capital Purchase Program as soon as possible, after several politicians decried its sponsorship of The Northern Trust Open, a PGA Tour event in California.

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TCF Financial Corp., which drew public scorn recently when it sent some of its employees on a luxury trip, announced last week that it plans to pay back more than $361.2 million in TARP funds it received. The company has filed notice with the U.S. Department of the Treasury to permit redemption of all of the 361,172 outstanding shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A.

"In November when we agreed to accept the funds under the Capital Purchase Program, it was with the understanding that only healthy banks would be granted the funds," said TCF chairman and chief executive officer William Cooper. "Recent actions by the U.S. Treasury and possible congressional or regulatory restrictions/mandates changed the rules. As a result, public perception views those banks that took the TARP money as having done so out of weakness and a need to survive without distinction among TARP programs or individual bank capital adequacy. We believe participation in TARP has created a competitive disadvantage for TCF and it is in the best interest of our shareholders to redeem these shares."

Also last week, Racine-based Johnson Bank declined participation in the TARP program. The bank was authorized to receive up to $100 million in federal funding.

"While in the short-term those dollars are attractive to a growing company like ours, in the long-term they would compromise the things we hold most dear – including the unique culture of our company," said Richard Hansen, president and chief executive officer of Johnson Financial Group. "You can’t place a value on values."

The privately owned financial services company is owned by members of the Samuel C. Johnson Family. The late Samuel Johnson’s daughter, Helen Johnson Leipold, serves as chairman of Johnson Financial Group.

The two largest Wisconsin-based banks that have received TARP funds – M&I Bank and Associated Bank – which received $1.3 billion and $500,000, respectively, have not announced plans to exit the program early.

An Associated spokeswoman said the bank has not created an early TARP exit program. 

Greg Smith, senior vice president and chief financial officer with Marshall & Ilsley Corp., said the bank has not determined if or when it would exit the TARP funds early.

"M&I continues to believe a strong capital base is an important factor in this economic environment," he said. "M&I has continued to maintain a strong capital base and believes the ongoing lack of economic clarity makes it difficult to determine when it would be prudent to repay the funds."


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