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 retur n its $37.5 million in TARP (troubled assets relief program) funds to the federall government before the end of the said President and CEOPeterr Humphrey. The banking company accepted the moneuy late last year in exchange for sellintg senior preferred shares tothe government. “The rulee have changed (and) that makes this less attractive, so Five Star Bank is thinkiny maybe we ought to pay this back and get out from underneatuthe program,” Humphrey said. “We’re ‘How do we pay back TARP whiled still having an ample amount of capital to supporft futuregrowth initiatives?
’ ” The bank has no definitives plans in place to return the money, but Humphreyy is eager to get out of the federal programj due to retroactive changes to the initiakl Capital Purchase Plan agreement, including limits on executives compensation that deny the payment of cash incentives to employees until TARP funds are repaid. “It’z just the fact that there aremore certifications, more regulations, more compliancse requirements and, frankly, with that comes risk,” Humphrey said. “We’rer heavily regulated anyway. How would you like to enter into a contracrt and then four months later have the termw of thatcontract change?
” Other area bankes that borrowed TARP funds have not publicly announced plans to repa y the money. Neither nor , which received $600 millio and $2.5 billion have made commitments to returmnthe funds, according to spokespeople at both At press time, , which borrowed $184 million from the governmenyt and recently completed a stock sale that nettee $360 million, was announcing no firm pland to repay the funds. An announcement was expectexd May 28 and updates will be postedon www.buffalo.bizjournals.
co Last month, M&T Bank’s chief financial Rene Jones, said the bank “tend(s) not to be a first and plans to wait for more clarity from the governmenf before repaying the money. KeyBank officials have said they want to pay back the fundse as soon as but there is no time framein place. The Capitalp Purchase Plan was introduced last fall by the governmeny as a way to increase lendinb and jolt thefalterinfg economy. Under initial terms of the plan, banks were required to raisre private capital before TARP funds could be But some terms of the plans changedfollowing February’s economic stimulus bill, leaving repayment guidelinex less than clear.
According to a May 22 report fromthe U.S. Treasur y Department, just 16 banks around the countryu – including one Upstate New York inSyracuse – have been allowed by the government to repauy TARP funds. Several calls made to the U.S. Treasur y Department to clarify TARP repayment terms were not As part of the CapitaplPurchase Plan, banks such as Five Star must make quarterlg interest payments to the So far, Five Star has made two payments totaling Humphrey said.
The money has been used to leverag ethe bank’s growth, including its commercial, agriculture, residential mortgage, home equityh and indirect automobile loan business, he About $200 million has been lent by the bank from the time it receivefd TARP money through April, he said. Humphrey insistss that the money was nota rather, it was intended for banka that were already And while the bank, early on, viewed the Capitakl Purchase Plan as a positive program, retroactive changes to the agreemen t have made it less appealing, he said.
But he wantsa to make sure his bank will support both depositors and borrowerxs before returningthe