Queensborough, based in Louisville, Ga., has deferred seven scheduled payments to repurchase $12 million of its preferred stock purchased by the U.S. Treasury as a part of TARP in 2009.
President and CEO Bill Easterlin said the decision to defer payment was a recommendation of the primary regulator, the Federal Reserve Bank.
“They recommended, and we agree, that Queensborough should not pay back the money until our capital position is strengthened,” Easterlin said. “We believe it was the right thing to do.”
Queensborough has a capital ratio of 8.95 percent, higher than the government mandate of 8 percent. It intends to increase that ratio to 9 percent before repaying the TARP stock.
“Our plan is to be more conservative than the government requires us to be,” Easterlin said.
The bank plans to finish paying back the TARP money by 2016 and to pay the dividend as early as late 2012. There is no penalty for deferring the payment, but in 2014, the cost of capital will increase from 5 percent to 9 percent.
According to information published by the U.S. Treasury, the Treasury does not have the contractual right to demand quarterly payments. Instead, the institution’s board of directors decides when and how to deploy the institution’s capital, including whether to make dividend payments.
The TARP program has received mixed reviews from taxpayers, the Treasury Department’s assistant secretary for financial stability Tim Massad said earlier this year.
“Americans were rightfully angry that we had to use taxpayer dollars to help private banks,” Massad said. “We faced the very real risk of a catastrophic collapse of our financial system and a second Great Depression. Doing nothing was simply not an option.”
Easterlin said that he has not received negative feedback on the local level about the TARP money and that the highly selective program helped to stabilize nationwide confidence in banks.
“It wasn’t just handed out to anyone who wanted it,” he said. “We were proud to get it, and we’ll be proud to hand it back.”