August 2009 Archives

An Idaho-based bank has quietly withdrawn its application for bailout funding in response to concerns about its capitalization levels.

Cascade's announcement that it had withdrawn its application is a clear sign that it would not have qualified for assistance in its current condition. To avoid creating stigmas on already struggling banks, the Treasury's policy has been to signal to banks that it would not be approved and then permit the withdrawal without comment.

Regulators closed three more banks on Friday, pushing the number of failures this year to 84.

Manufacturers and Traders, better known as M&T Bank, counts billionaire investor Warren Buffett's Berkshire Hathaway Inc. among its large shareholders.

Although banks that took public money through the Troubled Asset Relief Program agreed to temporary limits on executive salaries, compensation committees continue to find ways to boost overall pay... even if there are a few strings attached.

The company said that their increases, too, will be paid in stock that they cannot transfer until Webster Financial has repaid the Treasury. The company also will limit the long-term incentive compensation for each executive to $394,793, $237,958 and $232,132, respectively.

A Texas-based bank plans to sell stock through an initial public offering and use some of the proceeds to pay back $87.6 million it received as part of the federal bailout program.

"If they had any hesitation, if they saw their asset quality was deteriorating or any sign their bank was going to go through tough times, they wouldn't have done this," Dan Bass, an investment banker with Houston-based Carson Medlin Co. told the Dallas Morning News.

The number of troubled banks rose 36 percent in the second quarter, the Federal Deposit Insurance Corp.reported, as combined losses among banks insured by the agency totaled $3.7 billion.

The FDIC earlier this year announced a special assessment to cover anticipated losses prompted by the collapse of the housing market. The agency said the surcharge had raised $5.5 billion. Nevertheless, the FDIC loss reserve fund declined to $10.4 billion from $13 billion in the first quarter.

Another bank has repurchased the stock warrants it issued the government in exchange for bailout funding.

In a statement, Northern Trust said its payments to the Treasury for warrants, stock, and accrued dividends totaled $1.71 billion. The bank said the payments represent a 14 percent annualized return on investment to taxpayers.

The Federal Reserve Bank must identify the companies that have accessed its emergency loan programs, a federal judge ruled this week.

The ruling came in response to a lawsuit by Bloomberg News, which, along with numerous other news organizations, had sought details about the companies that borrowed money under a swathe of 11 different lending programs.

The Federal Reserve had refused to provide the names or terms of the deals, arguing that confidentiality was critical if the program was to meet the goal of injecting liquidity into the market. Because of the stigma attached to the programs, the fear was that banks would stay away strictly to avoid a public relations headache.

U.S. District Court Judge Loretta Preska said the Federal Reserve "improperly withheld agency records" by "conducting an inadequate search" after Bloomberg News filed a Freedom of Information Act request. She ordered the bank to turn over the requested documents within five days.

The ruling is a rare victory for reporters covering the bailout. In two separate cases earlier this summer, judges denied requests by news organizations for the same information.

Large financial institutions are forcing top executives to sign contracts that make their compensation packages contingent on approval by the Treasury Department's "pay czar."

The clauses, first reported by the Reuters news agency, appear to act as a legal backstop for the companies. Kenneth R. Feinberg, the Treasury Department's special master for compensation issues, is currently reviewing compensation plans at seven of the largest firms to received bailout funding.

"If you enter into an agreement and the pay czar comes back and says, 'You can't pay that,' then you would be stuck between a contractual obligation to the individual and a legislative or government mandate," Laura Thatcher, a lawyer with Alston & Bird, told Reuters.

The companies known to be insisting on the new language -- Citigroup Inc., American International Group Inc., and Bank of America Corp. -- are among those subject to Feinberg's immediate oversight.

AIG, whose attempts earlier this year to pay $165 million in bonuses to employees of its financial services division largely prompted the Treasury to create the pay czar position, included a contingency clause in its recently announced contract with Robert H. Benmosche, its chief executive.

That deal was worth $10.5 million, much of it in company stock. It is contingent on Feinberg's "formal review and approval" and other "applicable regulations," Reuters reported after reviewing the contract.

Bank of America Corp. told a federal judge that its own attorneys were responsible for failing to adequately disclose the terms of the bank's purchase last year of Merrill Lynch & Co. But it failed to identify the executives who signed off on their work.

The claim was latest attempt to satisfy Judge Jed S. Rakoff of the Southern District of New York that a $33 million settlement reached by the two parties over the merger deal should be approved.

The agreement between the SEC and Bank of America was intended to lay to rest charges that the bank failed to disclose to shareholders that it had promised to pay $3.6 billion in bonuses to Merrill Lynch executives after the deal went through.

Shareholders eventually approved the purchase, but the deal was criticized almost from the beginning because of the impression that Treasury Department officials played a leading role in brokering it.

News that the bank failed to disclose its commitment to pay Merrill Lynch's bonuses contributed to further outrage because the two companies together received $45 billion in bailout money under the Troubled Asset Relief Program.

Earlier this month, Judge Rakoff put a hold on the settlement and demanded to know who was responsible for the failure to disclose the bonus payments. He also called into question the value of the settlement, and called the relationship between the $33 million settlement and the size of the overall merger agreement "strangely askew."

In the filing yesterday, Bank of America blamed two law firms -- Wachtell, Lipton, Rosen & Katz and Shearman & Sterling - for the error. At the same time, however, the bank produced a 500-page document detailing the extent of information regarding the matter that it believes is subject to the attorney-client privilege.

The approach may prove problematic. In recent weeks Judge Rakoff told the parties that any attempt to affix responsibility on the lawyers that worked on the deal would dissolve such a privilege, raising the possibility of a lengthy court fight over the matter, the New York Times reported.

In a separate filing, the SEC said it had interviewed the bank's top executives but that none could adequately explain why the company had presented misleading proxy material.

A former executive for a failed Texas bank alleged that his superiors refused to acknowledge the company's heavy exposure to the housing market, which eventually led to its collapse.

Craig Wolfe, who served previously as vice president for loss mitigation at Houston-based Franklin Bank, claimed in a whistleblower letter prior to the failure that others at the institution improperly shifted losses that should have been booked in 2007 into 2008.

A behind-the-scenes account of the events leading to the $5.1 billion bank's collapse last November was posted Monday on FinCriAdvisor.com, another site that has been tracking issues related to the economic crisis and the government bailout of financial companies.

Wolfe's letter was included in documents that the Federal Deposit Insurance Corp. filed as part of a lawsuit seeking access to internal Franklin Bank documents.

Wolfe said in the letter that he refused on three different occasions to sign the bank's Sarbanes-Oxley attestation certifying its balance sheet and financial statements. He was swiftly demoted, and the company moved forward with the statements as presented to him.

After Franklin Bank shut its doors, a loss review conducted by the FDIC identified major accounting errors and raised "significant questions about the competency of the management."

In addition to facing continued regulatory scrutiny, the bank's parent company was hit with several securities class-action suits alleging that it misled investors.

Last week was a busy one for Wintrust Financial Corp.  Wintrust, a financial services holding company, is located in Lake Forest, Ill.  It has 15 wholly-owned banks with a variety of names in the Chicago and Milwaukee areas, and approximately $11.4 billion in assets (although its web site puts the number at about $10 billion).

We're watching Wintrust because last December it got $250 million in public money through the Treasury Department's Troubled Asset Relief program, in exchange for preferred stock and warrants.  

On Aug. 18, the company filed an 8-K with the Securities and Exchange Commission, documenting a presentation it gave at the 14th annual Howe Barnes Hoefer & Arnett Bank Conference.  The presentation itself was pretty unusual - or so it seemed to those of us who don't usually think that banking strategies have much in common with boxing.

However, Wintrust - which said that changes that it noticed in the first quarter of 2005 made it "apparent to us that a negative credit cycle was soon to be upon us" - said in the presentation (see slide 17) that it has responded with the "Rope-a-Dope" strategy.

For those who may have only a passing familiarity with boxing, rope-a-dope is a risky strategy that a competitor uses to wear out his opponent; the hope is that once the opponent is exhausted, the competitor will prevail.

So how does this relate to Wintrust?

Well, Wintrust defines its "rope-a-dope" strategy as:

• No change in loan underwriting - do not chase the herd!!
• Slow growth
• Shrink larger banks (run-off of CD-only customers)
• Grow newer banks
• Reduce relative cost of funds
• Discipline
• Mix
• Get paid for making loans - hand out credit with an eye dropper
• Control expenses
• Hunker down and ride it out

And according to the bank, its strategy is working pretty well.  It says that of the 14 publicly-traded bank holding companies in its geographical area, it is one of only six that turned a profit last year. Its percentage of charge-offs was 0.51%, whereas the rate for its competitor group was 1.98%.  And its rate of non-performing assets (NPAs) was 1.58%, compared to 4.74% for its competitors.  "Relatively speaking, and knock on wood, we are weathering the storm relatively well," the bankers said (see slide 18).

Wintrust said that $300 million of new capital ($250 million of which appears to be from the govenrment) allowed it to "start coming off the ropes - but cautiously" in the fourth quarter of 2008.  The bank said its hopes during the remainder of the year to "clear the 'junk' off the balance sheet" and "start 2010 with strong core earnings and a relatively clean balance sheet."  It also says that it will "retire TARP when it makes sense to do so. (see slide 32)"

Wintrust paid nearly $5.1 million in dividends to the Treasury at the end of May.

On Aug. 20, Wintrust filed another 8-K, which revealed changes to the compensation packages for several executives. According to the filing:

The salary adjustments are not intended to increase total annual compensation for the executive officers, but instead only to adjust the mix between fixed and variable compensation paid to them.

As a result of the changes, annual base salary increased for Edward J. Wehmer, President, Chief Executive Officer and Director, by $300,000 to $1,100,000, for David A. Dykstra, Senior Executive Vice President and Chief Operating Officer, by $225,000 to $825,000, for John S. Fleshood, Executive Vice President/Risk Management, by $30,000 to $308,000, for Richard B. Murphy, Executive Vice President and Chief Credit Officer, by $70,000 to $450,000, and for David L. Stoehr, Executive Vice President and Chief Financial Officer, by $75,000 to $355,000.

The Committee also determined that, in the case of Messrs. Wehmer and Dykstra, $100,000 and $75,000, respectively, of each year's base salary will be paid in Wintrust's common stock granted under Wintrust's 2007 Stock Incentive Plan....

Messrs. Wehmer and Dykstra may not sell or otherwise transfer the stock they receive in payment of base salary until the later of three years from the date of grant or until Wintrust repays the (TARP) investment in Wintrust, except upon their death or permanent disability.

Another bank that received bailout money has decided to offer its top executives large stock packages in an attempt to satisfy federal regulators concerned about excessive executive compensation.

In a filing with the Securities and Exchange Commission, PNC Financial Services Group Inc. said it would give raises "entirely in the form of stock units" to its chief executive, president and three other leading employees.

The decision came as seven of the largest financial institutions to received bailout funding under the Troubled Asset Relief Program on Friday submitted proposed executive-compensation packages to Kenneth R. Feinberg, the Treasury Department's "pay czar."

Last week, American International Group Inc. said Feinberg had approved a stock-heavy compensation package for its top executive. Robert H. Benmosche, the company announced, will receive an annual salary of $7 million, consisting of $3 million in cash and $4 million in AIG stock.

PNC, which received $7.6 billion in bailout funding, is not subject to Feinberg's direct oversight. Rather, the company's decision to pay out raises in stock was a response to a Treasury rule prohibiting "the payment or accrual of bonuses (including equity-based incentive compensation) to the five 'senior executive officers'" by companies getting public aid.

The raises bring Chief Executive Officer Jim Rohr's salary up to $3.5 million, with $1 million of that in base salary and the balance instock.  Among other top executives, Senior Vice Chairman William Demchak's pay will increase to $3.3 million from $600,000, and President Joseph Gayaux will see a bump from $620,000 to $1.5 million.

Regulators seized four more financial institutions on Friday, including one big Texas bank that had been on the brink for months.

The latest closings brought the total for the year to 81, compared to 25 for all of 2008.

The Office of Thrift Supervision shut down Guaranty Bank, which was based in Austin, Texas and had $13 billion in assets. The Federal Deposit Insurance Corp. arranged for BBVA Compass, of Birmingham, Ala., to assume the failed bank's 162 branches in Texas and California, and most of its $12 billion in deposits.

BBVA also bought $12 billion of Guaranty Bank's assets, with $11 billion of that amount subject to a loss-sharing deal with the FDIC.

Guaranty Financial Group, the banks' parent company, said in a Securities and Exchange Commission filing last month that writeoffs tied to mortgage-backed securities had left it dangerously undercapitalized. It acknowledged then that it was unlikely to continue as a going concern.

Alabama regulators closed CapitalSouth Bank, of Birmingham. The FDIC arranged for Iberiabank, of Lafayette, La., to take over CapitalSouth's branches and its $546 million in deposits.

Iberiabank also bought $589 million of the failed bank's $617 million in assets. Iberiabank and the FDIC have a loss-sharing agreement on $499 billion of the acquired assets.

Regulators also seized two banks in Georgia, which has had more failures this year than any other state.

First Coweta Bank, in Newman, Ga., and Ebank, of Atlanta, were the latest casualties, brining the total since January to 19.

The FDIC arranged for United Bank, of Zebulon, Ga., to take over First Coweta's four branches, as well as its $155 million in deposits. United Bank paid a 1.01 percent premium for the deposits, and also agreed to buy $155 million of the failed bank's $167 million in assets, with $124 million subject to a loss-sharing agreement.

Stearns Bank NA, based in St. Cloud, Minn., assumed Ebank's sole branch and its roughly $130 million in deposits. Stearns also agreed to buy virtually all of the failed bank's $143 million in assets, with $111 million of that subject to loss sharing.

Stearns has taken over four closed banks in the past year through deals arranged by the FDIC.

The FDIC said this week's closings would cost its insurance fund an estimated $3.26 billion, with Guaranty Bank accounting for $3 billion of that figure.

When we posted last about Fannie Mae, (FNM), it appeared unlikely that it would be able to repay the government the money it borrowed to stay afloat.

That is still the case, and it's also clear that Fannie Mae is going to need more money from the Treasury Department.

Earlier this month, Fannie Mae filed an 8-K with the Securities and Exchange Commission; you can find it here (although the real meat of this filing is in this press release and this slide presentation).

But if you want more detail about how the battered mortgage giant is really doing, you'll learn more from its 217-page second quarterly report (10-Q), which you can find here.

Although there is plenty of room for debate about how well Fannie Mae was run before President Bush appointed a conservator (the Federal Housing Finance Agency, or "FHFA") to manage its operations in September 2008, it is currently in an impossible position, which Fannie Mae describes as follows:

"Our pursuit of our mission creates conflicts in strategic and day-to-day decision-making that could hamper achievement of some or all of these objectives....

Concentrating our efforts on keeping people in their homes and preventing foreclosures while continuing to be active in the secondary mortgage market, rather than concentrating solely on returning to long-term profitability, is likely to contribute, at least in the short term, to additional financial losses and declines in our net worth. Continuing deterioration in the housing and mortgage markets, along with the continuing deterioration in our book of business and the costs associated with these efforts pursuant to our mission, will increase the amount of funds that Treasury is required to provide to us. In turn, these factors put additional pressure on our ability to return to long-term profitability. If, however, the Making Home Affordable Program is successful in reducing foreclosures and keeping borrowers in their homes, it may benefit the overall housing market and help in reducing our long-term credit losses."

Fannie Mae reported that its net worth deficit as of June 30 was $10.6 billion - a staggering number, yet one that was down from $18.9 billion on March 31 and $15.2 billion on Dec. 31, 2008.

These numbers are important, because if the conservator (the FHFA's director) determines that if Fannie Mae's assets "are, and during the preceding 60 days have been, less than [its] obligations," then he must place it into receivership.  Fannie Mae said that the 60-day countdown starts when it files its quarterly and annual reports with the SEC.  

However, if the Treasury gives Fannie Mae enough money during that 60-day window to eliminate its net worth deficit, the FHFA's Director will not put it into a receivership.  

Under the agreements made in September (and amended in May), the Treasury committed to providing Fannie Mae with "up to $200 billion under specified conditions."

So far, the Treasury has eliminated those quarterly deficits.  It provided $15.2 billion to erase the Dec. 31 deficit, and $19.0 billion to eliminate the March 31 deficit.  It said that on Aug. 6, the Director of FHFA requested another $10.7 billion to eliminate the latest deficit, asking that the money be issued no later than the end of September.

And there appears to be no end in sight to the cycle.  The filing states:

"Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement. As a result, we are dependent on the continued support of Treasury in order to continue operating our business. Our ability to access funds from Treasury under the senior preferred stock purchase agreement is critical to keeping us solvent and avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions."

That's a grim prediction, indeed.  But Fannie Mae is also providing assistance to struggling homeowners. It entered into 124,000 loan workouts in 2008 and another 88,000 in the first half of this year.  Other homeowners are in trial workout programs, and there were additional workouts that weren't completed by the end of June, and  thus were not included in the statistics.

Continuing to pay billions of dollars every quarter to keep Fannie Mae afloat is distasteful.  But the alternative is much worse:  More homeowners would lose their homes, more foreclosed homes would keep real estate prices depressed, and the economy's recovery would take that much longer.

Regulators closed five more insolvent financial institutions Friday, including Colonial Bank, the biggest to fail since IndyMac Federal Bank went under last summer.

Colonial Bank, based in Montgomery, Ala., had $25 billion in assets and roughly $20 billion in deposits. The Federal Deposit Insurance Corp. said it arranged for BB&T Corp. to take over much of Colonial's operations, including its deposits and its 346 branches in Alabama, Florida, Georgia, Nevada and Texas.

BB&T agreed to buy $22 billion of Colonial's assets, with $15 billion of that amount covered by a loss-sharing arrangement with the FDIC.

Colonial was undone by its heavy exposure to mortgage and real-estate development loans. It had been seeking federal aid through the Treasury Department's Troubled Asset Relief Program, and through private investors.

On Thursday, Bank of America Corp. sued Colonial Bank's parent company, Colonial BancGroup Inc., seeking $1 billion in cash and loans. A judge granted its request for a freeze on the assets, helping to seal Colonial's fate.

Regulators also shut down Community Bank of Nevada, with headquarters in Las Vegas; Community Bank of Arizona, based in Phoenix; Union Bank, of Gilbert, Ariz., and Dwelling House Savings and Loan Association in Pittsburgh.

The latest closings bring the total for the year to 77.

The FDIC could not find a taker for Community Bank of Nevada, so it set up a new entity, Deposit Insurance National Bank of Nevada, to wind up its operations over the next 30 days.

Community Bank of Nevada had $1.52 billion in assets and $1.38 billion in deposits.

The FDIC arranged for MidFirst Bank, of Oklahoma City, Okla., to take over Community Bank of Arizona's four branches, and its $143.8 million in deposits. MidFirst also bought $125.5 million of the failed bank's $158.5 million in assets.

MidFirst and the FDIC have a loss-sharing agreement on $55.1 million of those assets.

MidFirst also bought the remains of Union Bank, the other Arizona institution that was shut down Friday. MidFirst took over the bank's lone branch, and its $112 million in deposits.

It also agreed to buy $11 million of the bank's $124 million in assets. The FDIC will hold the remaining assets for later disposition.

PNC Bank took over the operations of Dwelling House Savings and Loan, a small African-American owned thrift whose history goes back nearly a century. Dwelling House said earlier this year that it was the victim of cyber thieves who siphoned money through electronic bank transfers.

The savings and loan had been ordered by the federal Office of Thrift Supervision to raise $3 million to replenish its capital. Dwelling House had $13.4 million in assets and $13.8 million in deposits as of March 31.

PNC agreed to buy all of the savings and loan's deposits, and $3 million of its assets.

The FDIC said that the five closings Friday would cost its insurance fund an estimated $3.67 billion. 

Last November, E*Trade Financial Corp., the parent company of E*Trade Bank, applied for a capital infusion through the Treasury Department's Troubled Asset Relief Program. The application has not yet been approved or denied.  But in a 10-Q report that the company filed last week, E*Trade said that it's moving its business forward, regardless of whether it receives government aid.

The filing said:  "We continue to view TARP funding as a possible component of our capital planning program. We cannot predict when or if our application will be acted upon. However, given the success of our capital raising efforts to date, we believe that our financial health is not dependent upon receiving TARP funding."

A few months ago, the Office of Thrift Supervision told E*Trade to raise its equity levels and reduce its debt.  The company agreed to do so, and reported that it raised $586 million from two stock offerings in the second quarter.  It also started the process to convert $1.7 billion of its corporate debt to non-interest bearing convertible debentures It  increased its excess risk-based capital by nearly $200 million and its corporate cash by more than $92 million.

The company reported on July 1 that "approximately $1.3 billion and $429.6 million of the 12 1/2% Notes and 8% Notes, respectively, had been irrevocably tendered and accepted for exchange," adding that it still needed both shareholder and regulatory approval for the exchange.  This press release said that the OTS gave its approval for the exchange offer last Friday.

Of course, the fact remains that E*Trade had a second quarter loss of $375.9, which the company claims "was due principally to our provision for loan losses of... $858.5 million...."  Those loan losses exceeded by far the "strong performance" of the company's trading and investing segment, which earned segment income of $300.2 million in the first half of 2009.

Yet E*Trade's filing ends on an optimistic note.  It said: "Management believes that our common stock offerings combined with the expected completion of the pending debt exchange offer, will substantially improve the regulatory capital levels at E*TRADE Bank as well as significantly enhance parent company liquidity, especially through the end of 2011."

Regulators closed three banks Friday, two in Florida and one in Oregon. The number of failures this year now stands at 72, compared to 25 for all of 2008.

The Florida Office of Financial Regulation shut down First State Bank of Sarasota, Fla., and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC arranged for Stearns Bank N.A. of Minnesota to take over all of First State Bank's deposits, its nine branches and most of its assets.

Stearns Bank also agreed to take over the remains of Community National Bank of Sarasota County, which was closed by the Office of the Comptroller of the Currency.

The third bank that failed on Friday was Community First Bank in Prineville, Ore.  Home Federal Bank, of Nampa, Idaho, took over Community First's deposits, its eight branches and most of its assets.

First State Bank, the bigger of the two Florida banks, had $463 million in assets and $387 million in deposits. Stearns Bank agreed to buy $451 million of the failed bank's assets, with $364 million of that amount subject to a loss-sharing arrangement with the FDIC.

Community National Bank, of Venice, Fla., had $97 million in assets and $93 million in deposits. Stearns Bank paid a premium of 0.25 percent to buy the deposits.

It also agreed to take Community National's four branches and $94 million of its assets, with $79 million of that subject to a loss-sharing arrangement.

Stearns Bank is based in St. Cloud, Minn. It has taken over four failed banks since October, in deals arranged by the FDIC. It also has been buying loans from other closed banks through FDIC auctions.

Community First Bank in Oregon had $209 million in assets and $182 million in deposits. Home Federal agreed to buy $191 million of the failed bank's assets, with $155 million of that amount covered by a loss-sharing deal with the FDIC.

The FDIC said the three bank closings would cost its insurance fund an estimated $185 million.

For four top executives at San Francisco's Wells Fargo & Co., there's a lot to celebrate this weekend.

In a press release attached to an 8-K filed with the Securities and Exchange Commission yesterday, Wells Fargo disclosed that its board of directors approved some generous stock awards for John Stumpf, its president and chief executive, and for three other officers.

The board issued the additional compensation to the executives in the form of stock because Wells Fargo still must abide by the restrictions of the Treasury Department's Troubled Asset Purchase Program.

According to the company, Wells Fargo has $1.3 trillion in assets and provides banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores and 12,000 ATMs in North America and internationally.

We've noted some interesting developments lately at TCF Financial Corporation.  

TCF, the holding company for TCF Banks, is based in Wayzata, Minn.  According to its web site, the company has 444 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota.

TCF got $361.2 million in public aid last November through the Treasury Department's Troubled Asset Relief Program. On April 22, it repaid the money and redeemed the preferred stock it had issued to the government.

In a press release issued July 22, TCF announced that it earned $23.5 million for the second quarter of 2009.  William A. Cooper, chairman and chief executive, also pointed out the the company was paying a dividend for the 85th consecutive quarter (although the latest payout is only 5 cents a share).

But the bigger change at TCF affects Cooper himself.  According to an 8-K filed Tuesday, the company has entered into an amended employment agreement with Cooper that will remain in effect for the next 5-1/2 years.  The agreement signed July 31 will pay Cooper a base salary of $950,000, plus "such cash bonus as may be awarded from time to time by the Board of Directors of the Company... or the Compensation Committee of the Board."  The other benefits that he got last year (some of which are described below) remain the same.

It's widely known that executives who work for banks that took TARP money are subject to restrictions on their compensation, so we wanted to take a look at Cooper's prior agreement.  

Surprisingly, as this Exhibit 10(e).11 to the July, 2008 employment agreement shows, Cooper received no cash compensation, salary, or incentive bonus last year.  He did receive stock options and 450,000 shares of restricted stock, and he was allowed to use the company's plane without cost (except that he was responsible to pay income taxes if he used the airplane for personal travel).  He also got 800,000 shares from a restricted stock grant.

Cooper's experience is surely an inspiring reminder to other bankers whose companies have yet to repay their loans.  Once the TARP money has been repaid to the Treasury, a return to hefty paychecks might be just around the corner. 

Regulators wrapped up July with five more bank closings, bringing the total for the first seven months of the year to 69.

The biggest casualty was Mutual Bank, of Harvey, Ill., which had $1.6 billion in assets. The Federal Deposit Insurance Corp. arranged for United Central Bank, of Garland, Texas, to assume all of its $1.6 billion in deposits, its 12 branches and virtually all of its assets.

The FDIC and United Central entered into a loss-sharing arrangement on $1.3 billion of the failed bank's assets.

A total of 24 four banks were declared insolvent in July, one fewer than the total for all of 2008.

The Office of Thrift Supervision on Friday shut down Peoples Bank, of West Chester, Ohio, which had $705.8 million in assets. First Financial Bank N.A., of Hamilton, Ohio, agreed to take over Peoples Bank's deposits, its 19 branches and most of its assets.

First Financial Bank paid a 1.5 percent premium to acquire the failed bank's $598.2 million in deposits. It agreed to a loss-sharing deal with the FDIC on $657.6 million of Peoples Bank's assets.

The other three closed banks each had between $100 million and $170 million in assets.

New Jersey regulators shut down First BankAmericano, in Elizabeth, N.J., on Friday and appointed the FDIC as receiver. It arranged for Crown Bank, of Brick, N.J., to assume all of the failed bank's $157 in deposits and nearly all of its $166 million in assets.

Florida regulators closed Intregrity Bank, a one-branch institution in Jupiter, Fla., which had $102 million in deposits and $119 million in assets. Stonegate Bank, of Fort Lauderdale, paid a premium of 0.2 percent to acquire all of the failed bank's deposits. It also bought $52 million of its assets.

Oklahoma regulators shut down First State Bank, of Altus, Okla., and the FDIC arranged for its $98.2 in deposits, along with its branches, to be acquired by Herring Bank, of Amarillo, Texas.  Herring Bank also agreed to buy $64.4 million of the failed bank's $103.4 million in assets.

The FDIC estimated that the five bank closings would cost its insurance fund around $911.7 million.