A new group of smaller, regional banks have begun announcing their participation in the federal government's $700 billion rescue program.
Regions Financial Corp., based in
City National Corp. in
Although the investment program is only a few weeks old, some bank watchers already are questioning whether the recipients of the taxpayer money will use it to make loans and ease the credit crunch, or use it for other purposes, such as acquisitions.
Regions Financial said when it released third-quarter earnings last week that its profits plunged 79.8 percent and its non-performing assets doubled as a percentage of total loans. Nevertheless, the bank's financial conditional put it above the "well capitalized'' threshold set by federal standards.
"Regions believes this government program is important to restoring the flow of funds to consumers and businesses, both large and small, who are at the core of our economy," its chairman, C. Dowd Ritter, said in a prepared statement. "These funds, while still strengthening our capital base, will enable us to expand lending and step up acquisitions."
Regions said in its release that it would pay the government a 5 percent dividend on the preferred stock, or $175 million annually, for five years, and would pay 9 percent in later years unless it redeemed the stock. The government will also get 10-year warrants for common stock, which will give the Treasury the opportunity to benefit from any increase in its share price.
Regions also was chosen by the Federal Deposit Insurance Corp. in August to take over the deposits of failed Integrity Bank, which was based in
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