Treasury commits nearly $1.2 billion in TARP money

The Treasury Department has approved nearly $1.2 billion in capital investments in five banks.

New York Community Bancorp Inc. said it was approved to sell $596 million in preferred stock to the government through the Troubled Asset Recovery Program (TARP). The Westbury, N.Y.-based company owns New York Community Bank and New York Commercial Bank It has more than $32 billion in assets.

New York Community Bancorp had a loss of $24.3 million for the first nine months of 2008, compared with a profit of $211.7 million in the same period of 2007. It took nearly $370 million in pre-tax charges in the second and third quarters, partly reflecting losses on investments in bankrupt Lehman Brothers Holdings Inc. and Freddie Mac, the government backed mortgage funder that was placed into conservatorship.

First Banks Inc., which has headquarters in Clayton, Mo., said it got $295.4 million in taxpayer capital. First Banks has branches in Missouri, Illinois, California, Texas and Florida. It has roughly $10.8 billion in assets. First Banks also raised capital in 2008 from its shareholders, bringing its total for the year to more than $400 million.

Flagstar Bancorp Inc., of Troy, Mich., said Friday it was approved for $266 million in public money. Flagstar announced another financing deal last month with an affiliate of MatlinPatterson Global Opportunities Fund III, L.P, a New York private equity firm that specializes in distressed companies.

Flagstar agreed to sell the fund $250 million in convertible preferred stock equal to a 70 percent fully diluted stake in the company. The financing deal was contingent on Flagstar being approved for at least $250 million in TARP money.

Flagstar has operations in Michigan, Indiana and Georgia. It posted a loss of $62.1 million for the third quarter, reflecting $86.9 million in loan loss provisions and a $17 million loss linked to the collapse of Lehman Brothers.

Legacy Bancorp Inc., of Pittsfield, Mass., said it was approved to sell $20 million in preferred stock to the Treasury Department. Community Partners Bancorp., of  Middletown, N.J., said it was approved for $10.35 million.

The stock the banks are selling to the government pays an annual dividend of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also gets warrants to buy common stock in the banks, which could provide a return to taxpayers if the shares increase in value.