September 2009 Archives

BankAtlantic Bancorp said it had completed a previously announced rights offering, a device that allows current shareholders to buy additional shares at a set price within a predetermined time period.

In a statement, the bank said the offering had raised $76 million in capital, which will be used for "general corporate purposes."

"We are pleased with the results of the offering and are grateful to our shareholders for their continued support," said Alan B. Levan, BankAtlantic's chief executive officer.

In a filing with the Securities and Exchange Commission, the Ohio-based company said it had adjusted its employment contracts with its senior executives and next 20 highest-earning employees in response to restrictions imposed in June.

That same month, Fifth Third took steps towards leaving the Troubled Asset Relief Program by completing a $1 billion stock offering and earmarking some of the receipts to help redeem the $3.4 billion in stock and warrants it sold the government in exchange for bailout assistance.

At the time, Fifth Third was following the lead of other bailed-out banks troubled by Treasury restrictions on executive pay, dividend distributions, and other similar business operations issues.

The complaint alleges that Bank of America executives hid the true state of Merrill's finances from shareholders asked to approve the purchase. They also failed to reveal promises made to former Merrill executives to pay them billions of dollars in bonuses after the deal was consummated, Attorney General Richard Cordroy claimed.

The general outline of the charges is not new, having been brought out in numerous investigations by the Securities and Exchange Commission, congressional panels, and other state attorneys general.

Earlier this month, a federal judge rejected a proposed $33 million settlement with the SEC over the charges, saying the deal did not do enough to punish the executives responsible for misleading investors. In addition, Andrew Cuomo, the attorney general of New York, has subpoenaed five Bank of America executives over the matter.

A different federal judge earlier this year gave Ohio the lead role in pursuing a class action on behalf of other states and nations and their retirement systems, many of which held large positions in Bank of America. The lawsuit filed yesterday amends an earlier complaint to take into account facts revealed during the SEC and congressional investigations.

IA Bancorp accepted $5.9 million in assistance under the Troubled Asset Relief Program, the Treasury Department said in its weekly report on bailout activity. The company, which operates as Indus American Bank, serves the Indian-American community in the New Jersey area.

Virginia-based Hometown Bankshares Corp. received $10 million in aid. In June, the bank announced plans to open additional branches in the state, a move it said could require it to seek assistance under the bailout program.

While IA Bancorp and Hometown Bankshares were accepting federal bailout funds, New Jersey-based Valley National Bancorp returned $125 million to the Treasury, an effort that gets the bank closer to fully repaying the $300 million it originally received. Earlier this month, BailoutSleuth reported that Treasury had approved the repayment of $75 million.

The Georgia Department of Banking and Finance seized Georgian Bank, of Atlanta, and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC arranged for First Citizens Bank and Trust Co. of Columbia, S.C., to assume the failed bank's five branches, its deposits and most of its assets.

Georgian Bank had roughly $2 billion in deposits and $2 billion in assets. According to its web site, it catered to entrepreneurs, business owners and high-net worth individuals.

The bank replaced its chairman and chief executive in July amid mounting loan losses, and had been ordered by the FDIC to significantly improve its capital position.

Georgian Bank was the 95^th bank to collapse this year, compared with 25 for all of 2008.

The FDIC and First Citizens entered into a loss-sharing arrangement in which the FDIC will absorb a big chunk of any losses on Georgian Bank's loan portfolio or other asset pools.

South Carolina-based First Financial Holdings Inc. announced a public stock offering valued at $65 million. In a statement, the bank said the capital injection would position the company for a withdrawal from the Troubled Asset Relief Program.

First Financial received $65 million in bailout funds.

In order to leave the program, banks must prove they would be financial stable without the assistance, and are capable of raising capital on the open market. Stock sales have become a popular means of meeting both requirements.

Pennsylvania-based S&T Bancorp said it had slashed its dividend from 31 cents to 15 cents in order to save capital and repay the $108.6 million it received under the TARP program.

In addition, the Treasury Department has failed to live up its promises of openness and transparency about how it allocates funds under the Troubled Asset Relief Program.

"TARP largely remains a program in which taxpayers are not being told what most of the TARP recipients are doing with their money and will not be told the full details of how their money is being invested," Neil M. Barofsky, the special inspector general for the TARP program, said in remarks prepared for testimony before Congress.

Although banks have returned approximately $70 billion out of the more than $200 billion they have so far received, many of the other programs under the TARP umbrella are unlikely to see much return at all, Barofksy said. Chief among them are the efforts to save the domestic automobile industry and modify home mortgages, both of which required large cash outlays with little potential upside.

Barofsky also charged the Treasury Department with failing to act on his earlier recommendations about transparency. In previous testimony, he had suggested that the department keep closer tabs on communications between regulators and members of congress seeking special bailout attention for constituent banks. He also had said that Treasury was not doing enough to make sure that bailout funds were being used to lend money into communities rather than support generic business activities.

The Government Accountability Office said that the insurance giant's operations had stabilized since last year, when the company faced imminent collapse because of its overinvestment in housing-related derivatives. At the time, government intervention was understood as key to preventing an economy-wide collapse.

To shore up AIG, Treasury extended as much as $182 billion in various forms of assistance, including loans, access to capital and stock purchases. So far, AIG has taken advantage of approximately $120 billion of the available aid.

According to the GAO, these efforts have succeeded in the primary purpose - to prevent AIG's total collapse. It said the company's credit rating had stabilized as it slashed debt and had shown a small profit in the last year.

Nevertheless, it said that the company's long-term prospects were murky, as was the possibility of taxpayers ever recovering the money spent propping it up.

"While federal assistance has helped stabilize AIG's financial condition, GAO-developed indicators suggest that AIG's ability to restructure its business and repay the government is unclear at this time," the report said. In particular, the GAO found that the company was still heavily reliant on federal assistance to meet its liquidity needs, raising questions about its long-term growth prospects.

The bank missed a Monday deadline to hand over documents related to its purchase of Merrill Lynch & Co. Rep. Edolphus Towns, chairman of the House committee on oversight and government reform, said he would meet with the bank's chief compliance officer Tuesday to discuss the matter.

"Whether it is through future hearings, a subpoena, or both, the committee will obtain this information," Towns said in a statement.

Towns' committee has been investigating whether Bank of America executives were aware of the depths of Merrill's precarious financial position when their company entered into the purchase agreement. Merrill later showed unexpected losses, forcing the federal government to extend additional bailout support to ensure the deal went through.

In related news, the bank said that it would pay the Treasury Department $425 million for unused financial guarantees acquired as part of the Merrill deal. The bank is also now in close consultation with Treasury over returning $45 billion in assistance it received as part of the Troubled Asset Relief Program, the New York Times reported.

Community Bancshares of Mississippi Inc. received $52 million under the Capital Purchase Program, the banking portion of the Troubled Asset Relief Program.

Other banks received much smaller bailout packages. New York-based Oswego Bancorp took home $6.7 million, Heartland Bancshares of Indiana received $7 million, and Illinois-based First Eagle Bancshares Inc. took $7.5 million.

In addition, Wisconsin-based PFSB Bancorporation received $1.5 million in bailout funding.

Overall, bailout activity appears to be on a swift decline. In June, 36 banks received TARP funding, but in July only 13 joined the program. Ten signed up in August and only six have taking bailout money so far in September.

Rep. Adolphus Towns of New York told Bank of America executives that they have until today to reveal how the bank received a second round of bailout funding to finance the purchase. They must also tell Town's oversight committee what legal advice the bank's management received regarding the deal, the New York Times reported.

Bank of America's purchase of Merrill Lynch was controversial from the outset, as critics wondered whether the federal government had become too involved in the private sector by helping prop up a failing company.

Outrage, however, developed when it was revealed that Bank of America had promised to pay as much as $5.8 billion in bonuses to Merrill employees but did not disclose the arrangement to shareholders asked to approve the deal. That error has led to multiple investigations by federal and New York State authorities.

Just last week, a federal judge in New York rejected a proposed $33 million settlement with the Securities and Exchange Commission, saying that the arrangement failed to hold executives accountable for misleading investors. In motions prior to the decision, Bank of America blamed its attorneys for the mistake.

Also last week, Andrew Cuomo, the attorney general of New York, subpoenaed five Bank of America executives over the matter.

While Mr. Cuomo and the SEC have focused on the Merrill bonuses, Mr. Towns is looking into a different aspect of the purchase, namely the massive losses at Merrill that would have scuttled the deal had the Treasury Department not been willing to provide additional financial support.

Both of the institutions were subsidiaries of Irwin Financial Corp. of Columbus, Ind.

The Indiana Department of Financial Institutions seized Irwin Union Bank and Trust Co., of Columbus, and appointed the Federal Deposit Insurance Corp. as receiver.

The FDIC arranged for First Financial Bank NA, based in Hamilton, Ohio, to assume the failed bank's branches, deposits and assets.

The Office of Thrift Supervision closed Irwin Union Bank FSB in Louisville, Ky. First Financial Bank also took over its branches, deposits and assets.

All 27 branches of the two banks will reopen today as branches of First First Financial. Between them, the banks had $2.54 billion in deposits and $3.19 billion in assets.

First Financial agreed to pay a 1 percent premium for Irwin Union Bank and Trust's $2.1 billion in deposits.

It entered into a loss-sharing arrangement with the FDIC on $2.5 billion of the failed banks' assets, meaning that the FDIC will bear much of the financial burden on their bad loans or investments.

First Financial Bank's parent company, First Financial Bancorp, got $80 million in taxpayer capital in December through the Troubled Asset Relief Program.

It also took over the remains of Peoples Community Bank, of West Chester, Ohio, which was shut down by regulators last month.

Heritage Financial Corporation, the Olympia, Wash.-based holding company that operates announced Wednesday that it plans to sell nearly 3.8 million shares of common stock in an attempt to raise about $43.4 million.

After deducting underwriting costs and commissions, Heritage hopes to net about $40.5 million. The offering is expected to close on Sept. 22.

Heritage intends to use the capital raised from the sale for "opportunistic acquisitions, organic growth and general corporate purposes." It said that the infusion of capital will also put it in a better position to redeem "some or all" of the preferred stock it issued to the U.S. Treasury under the TARP Capital Purchase Program in exchange for the $21 million it received onNov. 21.

Whenever Heritage receives approval to repay the loan, it also will have to pay the Treasury any dividends that accrued after it made a dividend payment of $580,000 on May 31.

Another bank, Home BancShares, Inc., of Conway, Ark., announced that it is offering 4.95 million shares of common stock, with the goal of netting $93.4 million in new capital.Home BancShares has 49 branches in Arkansas and 12 branches in Florida.

In a Form 424b5 prospectus filed Thursday with the SEC, Home BancShares said that after the offering it will "review a potential redemption of the Series A preferred shares and the warrant" it issued to the Treasury in exchange for $50 million in aid on Jan. 16.

Earlier this year, numerous news organizations reported that Ms. Waters had made two separate overtures on behalf of Boston-based One-United bank. The first was to complain about the Treasury Department's decision to put Freddie Mac and Fannie Mae under federal receivership.

OneUnited had significant investments in the two companies, and their collapsed share prices wiped out much of the bank's capital, leaving it below the level typically needed to qualify for assistance under the Troubled Asset Relief Program.

In the second episode, Ms. Waters reportedly arranged a meeting between OneUnited executives and federal regulators at which the company's CEO "seized the opportunity to plead for special assistance for his bank." The bank later received $12 million in bailout funding.

The meetings are controversial because Ms. Waters' husband, Sydney Williams, at the time owned shares whose value was somewhere between $250,000 to $500,000. Williams also served on the bank's board of directors until last year, and received six-figure dividends.

Andrew Cuomo, the attorney general, has been examining whether Bank of America broke state laws when it failed to tell shareholders that it had promised to pay Merrill executives as much as $5.8 billion in bonuses once the deal was complete.

Earlier this week, a federal judge in New York rejected a $33 million settlement with the Securities and Exchange Commission over the transaction, calling it a "contrivance designed to provide the SEC with the facade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry."

In the federal hearings, Bank of America officials blamed their own lawyers for approving the final proxy language. Because of attorney-client privilege, however, it is unlikely that investigators will be able to interview them.

Cuomo has subpoenaed board members in an attempt to find out if they met their obligations to shareholders. Those asked to cooperate include members of the bank's audit committee, which was charged with reviewing the matter from a legal standpoint.

"A big unanswered question is - where were the boards?" Cuomo said in an email exchange with the New York Times. "Were they misled, or were they little more than rubber stamps for management's decision-making."

New York-based Flushing Financial Corp. said this week it had initiated an $80 million public stock offering. It said it intended to use the proceeds to repurchase the $70 million worth of preferred stock it issued to the Treasury Department in return for assistance under the Troubled Asset Relief Program.

If approved to withdraw from the program, Flushing Financial will also have to pay accrued dividends.

Los Angeles-based Manhattan Bancorp also made for the exits this week. It paid $1.7 million to redeem the shares it sold the government, as well as $7,319 in dividends. The bank said it would also ask Treasury for permission to redeem stock warrants currently held by the government, a more complicated process.

Finally, James M. Wells III, the chief executive of SunTrust Banks Inc., said this week that he hopes to pay off the $4.9 billion it received under the bailout package "as soon as were are permitted to do so."

The FDIC chose Residential Credit Solutions Inc. (RCS) to invest in a pool of home loans from Franklin Bank, which was taken over by regulators in November.

The loans have an unpaid principal balance of roughly $1.3 billion, but because of the current housing woes, they are worth far less.

The Treasury Department said earlier this year that it would make money available from the $700 billion Troubled Asset Relief Program to help finance the purchase of mortgages and mortgage-backed securities, which it euphemistically refers to as "legacy assets.''

RCS, based in Fort Worth, Texas, agreed to pay $64.2 million for a 50 percent stake in a public-private partnership that will hold the Franklin Bank loans. Its proposal called for a leverage ratio of 6-to-1.

RCS and the FDIC will each own a 50 percent interest in the public-private partnership, which will be structured as a limited liability corporation and will be managed by RCS. The partnership will in turn issue a note to the FDIC in the amount of $727.8 million.

The FDIC said the present value of its deal translates to 70.6 percent of the outstanding principal of the loan portfolio.

RCS was among 12 bidders for the assets. RCS is a mortgage investment and servicing company founded in December 2006. Its investors include Equifin Capital Partners, a private equity group, and Och-Ziff Capital Management Group.

Bank executives met over the weekend to discuss a possible multibillion-dollar offering of new stock, which would include the simultaneously share sale by the Treasury Department, which holds a 34 percent stake in the company.

Citigroup has received $50 billion in government assistance under the Troubled Asset Relief Program. Just last week, Treasury redeemed preferred shares it received in exchange for 7.7 billion common shares in Citigroup.

The bank, like many of its competitors, has grown wary of the government's involvement in its operations, and those that are able to have been aggressive about abandoning the bailout program. Some, like Citigroup, are not yet strong enough to withdraw completely but are taking steps to reduce their dependence on taxpayers.

So far, Citigroup has held only informal discussions with Treasury about its plans. Officials there told the bank that they had no objections to the plan to share stock to so long as it was able to raise offsetting capital, the New York Times reported.

Citigroup executives told the paper they hoped to execute the joint sale as early as the fourth quarter.

U.S. District Court Judge Jed S. Rakoff of New York said the agreement with the Securities and Exchange Commission, under which the bank would pay a fine of $33 million for misleading investors,"does not comport with the most elementary notions of justice and morality."

The case dates back to the height of last year's financial crisis. At the time, Merrill faced imminent bankruptcy and federal authorities feared its collapse could cascade through the banking system. In a last minute deal arranged by the Treasury Department, Bank of America agreed to buy Merrill, pending shareholder approval.

It was the form of that approval that caused the SEC to initiate proceedings against Bank of America. According to its complaint, the bank failed to tell shareholders that it had committed to paying as much as $5.8 billion in bonuses to Merrill executives.

Bank of America eventually settled the charges for $33 million, but the agreement quickly came under harsh scrutiny from Judge Rakoff, who demanded to know who had made the initial decision not to reveal the agreement about bonuses.

In response, the bank blamed its own attorneys while the SEC defended the justice of the settlement in a series of court filings that argued that Rakoff has limited authority to peer into the bank's operations.

Rakoff rejected those arguments, as well as the settlement, in a blistering decision this week. He told both parties to return to court in February for a trial on the issues.

Located in Waldorf, Md, the company operates 10 retail banking centers throughout Southern Maryland.

Tri-County Financial got $15.5 million from the Treasury Department in December through the Troubled Asset Relief Program, in exchange for preferred stock and warrants. As of the end of May, it has paid the government $343,500 in dividends on the shares.

According to the letter, although income declined by more than $1.1 million in the first six months of 2009 compared to the same period in 2008, the bank reported that its total assets grew nearly $61.7 million in the first half of the year (mainly from a 7.49 percent increase in the bank's loan portfolio).

Michael Middleton, chairman and president, assured shareholders in the letter that "The quality of the Bank's portfolio of investments and loans continued to remain strong," and that the management is "carefully monitoring asset quality" and conservatively calculating its loan loss provisions.

Middleton said that the aid from the Treasury department, together with its own capital, had "allowed the Bank to capitalize on local market opportunities." As a result, he said that non-interest-bearing deposits had increased 32.5 percent, the bank had not borrowed as much, costs had been reduced, and the bank's capacity to borrow money - if needed - had strengthened.

And he ended the letter on a hopeful note:

As we progress through the year, new economic data demonstrates the broad scope and impact of the crisis on our economy. Our market area, due to its proximity to the center of our government, has not experienced the profound effects as some have felt in other areas. Your Board and management approached this crisis in a very conservative manner and we are carefully navigating towards the recovery. There are significant opportunities in Southern Maryland and we are well positioned to capitalize on them. To that point, Tri-County Financial and its banking subsidiary, Community Bank, were named by U.S. Banker Magazine as one of the top 200 community banks with assets under two billion. The performance criterion for this category was the three year trend on Return on Equity. I look forward to your continued support as we serve Southern Maryland's banking needs.

Pennsylvania-based FNB Corp. said it would pay the Treasury Department $100.3 million for the shares. The bank received $100 million under the Troubled Asset Relief Program. The balance represents accrued dividend payments.

"We believe that our repurchase of the preferred shares is in the best long-term interest of our shareholders," said Stephen J. Gurgovits, the bank's chief executive.

FNB is just the latest in a string of banks that have rushed to return bailout money, citing concerns about an uncertain and unwelcoming regulatory environment that has included limits on executive pay and other spending.

The Office of the Comptroller of the Currency seized Corus Bank N.A. and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC arranged for MB Financial Bank to take over Corus' eight branches and all of its roughly $7 billion in deposits.

MB Financial also agreed to buy $3 billion of the failed bank's $7 billion in assets. The FDIC will retained the remaining $4 billion in assets, which it said it expected to sell in the next 30 days through what it referred to as a "private placement transaction."

Corus had lent heavily for condominium projects in Florida, Georgia, California and other states that were hard hit by the real estate slump. It was turned down for taxpayer aid through the Treasury Department's Troubled Asset Relief Program and was facing an end-of-the-month deadline to raise additional capital or find a buyer.

Regulators also shut down Venture Bank, in Lacey, Wash., and Brickwell Community Bank in Woodbury, Minn.

The FDIC struck a deal with First-Citizens Bank & Trust Co. of Raleigh, N.C., to assume Venture Bank's 18 branches and $903 million in deposits. First-Citizens also bought $874 million of that failed bank's $970 million in assets, with $715 million of that amount subject to a loss-sharing deal.

CorTrust Bank, of Mitchell, S.D.,took over the lone branch of Brickwell Community Bank, as well as its $63 million in deposits and virtually all of its $72 million in assets. CorTrust and the FDIC entered into a loss-sharing deal on $65 million of the assets.

The FDIC estimated that this week's closings would cost its insurance fund around $2 billion, with Corus accounting for $1.7 billion of that total.

Popular, Inc. is based in San Juan, Puerto Rico, and is the holding company for Banco Popular, the territory's biggest bank. Its operations include 175 branches in Puerto Rico, eight branches in the U.S. Virgin Islands, and about 600 automated teller machines.

Recently, the company filed some reports with the Securities and Exchange Commission regarding a stock exchange it had already completed.

According to this article, the purpose of the exchange was to increase the
level of common equity so that the bank had higher levels of capital in case the economy took a turn for the worse. (A good summary of the exchange with more detail is available here.)

This 8-K, filed Aug. 21, notes that the Treasury agreed to exchange its 935,000 shares of Series C Preferred Stock -- which it received in exchange for the TARP money -- for 935,000 newly issued capital securities that were issued on Aug. 24. Like the prior securities, these pay the government a 5 percent dividend annually until Dec. 5, 2013 and a 9 percent dividend per year after that. As of May 31, 2009, Popular has paid the Treasury $20.8 million in
dividends.

Simultaneously, Popular issued $936 million of Popular's Fixed Rate Perpetual Junior Subordinated Debentures, Series A, with The Bank of New York Mellon serving as the trustee. Popular said the subordinated debentures are "the sole asset and only source of funds to make payments on the New Capital Securities" - in other words, the payments to the government.

The filing also said:

"Under the Guarantee Agreement, dated as of August 24, 2009, between Popular and The Bank of New York Mellon, as guarantee trustee, Popular has guaranteed the distributions on the New Capital Securities and the payment of the liquidation amount of the New Capital Securities upon liquidation of the New Trust, but only to the extent that the New Trust has funds available to make such payments."

Popular paid an exchange fee of $13 million to the U.S. Treasury to make the swap.

It also states in the 8-K that the warrant that Popular issued to the Treasury last December (which would allow the government to purchase almost 21 million shares of common stock at $6.70 per share) "remains outstanding without amendment." [With the stock currently trading at
$2.37 per share, though, it could be some time before this deal would turn a profit for taxpayers.]

More recently, on Sept. 3, Popular filed this 8-K, which documented a number of mergers of trusts (available in the first paragraph of the filing, if you want the names).

The Federal Deposit Insurance Corp. will soon announce plans to wind down the Debt Guarantee Program, which allowed banks to issue debt backed by the federal government, the Wall Street Journal reported.

Those guarantees kept down the cost of borrowing and reassured investors that participating banks remained secure. So far, the government has backed more than $304 billion in promissory notes, commercial paper, and other debt instruments.

In recent months, however, interest in the program has declined as normal credit markets have recovered and the banking crisis appears to have waned. According to the Journal, while the government backed 60 deals in the first quarter of 2009, it backed only eight in the third quarter.

General Electric Inc., Citigroup Inc., and GMAC were the program's most active participants, the paper said.

The program is scheduled to expire at the end of October, but the FDIC on Wednesday said it was considering keeping it open through April to handle "emergency" situations.

The Congressional Oversight Panel said in a new report that the $23 billion in aid extended late last year to Chrysler LLC and General Motors Corp. would probably not be repaid.

Under the federal auto bailout package, General Motors received $50 billion to retool and ease its transition into bankruptcy. Chrysler received $10.5 billion. In addition, the government gave $12.5 billion to auto financing firm GMAC and $3.5 billion to auto suppliers.

The market value of those companies -- and of the government's stock in them - would have to rise dramatically for the government to make back its initial investment. The report noted that, for taxpayers to break even, the restructured an streamlined General Motors would need to have a market capitalization higher than that the original, much larger company ever achieved.

Overall, taxpayers now hold 10 percent of Chrysler and 60 percent of General Motors.

"Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount," the panel said.

A spokesman for General Motors disagreed, telling the Associated Press that the company expects to fully repay the government.

"We are confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities," the automaker said in a statement.

The panel also continued to raise questions about the transparency of government investment decision-making, as it has for the housing-related aspects of the bailout program.

Pennsylvania-based National Penn Bancshares Inc. said it expected to raise $125 million through a public offering.

The bank said it would use the additional capital to support ongoing business operations and possibly repurchase some of the $150 million in stock and warrants it gave the Treasury Department in exchange for assistance under the Troubled Asset Relief Program.

Since the bailout program began, many participants have regretted their initial involvement and the concomitant restrictions on executive pay and dividend distribution.

In order to leave, however, Treasury has insisted that banks prove their ability to raise money on the open market, such as with a successful stock offering.

Virginia-based Union Bankshares Corp. said it too would take that approach, saying in a statement that it would sell $62.5 million in common stock with an eye towards the "possible repurchase" of bailout funds.

The biggest institution to be shut down in the pre-Labor Day wave of closings was Vantus Bank, in Sioux City, Iowa. The Federal Deposit Insurance Corp. arranged for Great Southern Bank, of Springfield, Mo., to take over Vantus' 15 branches and $368 million in deposits.

Great Southern also agreed to buy $387 million of Vantus' $458 million in assets, with $338 million of that amount subject to a loss-sharing arrangement with the FDIC.

The Office of Thrift Supervision closed Platinum Community Bank, in Rolling Meadows, Ill., a suburb of Chicago. Because no buyer could be found, the FDIC is returning all deposits to customers. It arranged for MB Financial Bank to take over Platinum's direct deposits from the federal government, such as Social Security payments, Veterans' payments and other benefit payments.

Platinum had $305 million in deposits and $345.6 million in assets.

Regulators closed a second Chicago-area institution, InBank, of Oak Forest, Ill. The FDIC arranged for MB Financial Bank to take over InBank's three branches, and most of its $199 million in deposits.

MB Financial also bought essentially all of the failed bank's $212 million in assets.

Arizona officials seized First State Bank, in Flagstaff. The FDIC arranged for Sunwest Bank, of Tustin, Calif., to take over First State's six branches and its $95 million in deposits. Sunwest also agreed to buy the bank's $105 million in assets.

The smallest bank to be shuttered on Friday was First Bank of Kansas City, in Kansas City, Mo. It had $15 million in deposits and $16 million in assets. Great American Bank of De Soto, Kan., agreed to take over First Bank's lone branch, and its deposits and assets.

In a registration filing detailing the plan, 1^st United Bancorp told the Securities and Exchange Commission that it would use $10.5 million of the money raised by the offering to redeem preferred shares held by the Treasury Department under the Troubled Asset Relief Program.

The bank initially received $10 million in assistance. The additional $500,000 covers accrued dividend payments, which are charged at 5 percent a year.

In a sign that the Florida banking market is beginning to recover, 1^st United said that it would the use the bulk of the money raised through the offering to purchase other regional banks, though it also said no agreements were imminent.

In a letter to members of congress, Neil M. Barofsky, the inspector general, said that the Treasury Department had withdrawn a request that the Justice Department prepare an opinion about his relationship with the Treasury Department.

"We view such withdrawal as Treasury's acknowledgement that Sigtarp is an independent entity within Treasury, and that my office and I are not subject to the supervision of the secretary," Barofksy wrote, using a shortened version of his official title, the Special Inspector General for the Troubled Asset Relief Program.

Strictly speaking, Barofsky's office has always been part of the Treasury Department. But the legislation creating the office also granted it a wide independent perch from which to access executive branch documents and interview Treasury officials.

Problems have developed, however, as Barofsky has moved aggressively to draw attention to failings with the $700 billion banking bailout program.

Under the law, Treasury officials must provide written explanations any time they decide not to cooperate with Barofsky's office. In response, department lawyers questioned whether the legislation was an unconstitutional interference in the operations of the executive branch and requested clarification that Barofsky was in fact under the supervision of Treasury Secretary Timothy F. Geithner.

Preferred Bank is the second bank this week to pull back on accepting government assistance under the Troubled Asset Relief Program. BailoutSleuth reported yesterday that Idaho-based Cascade Bancorp withdrew in the face of mounting equity problems.

According to Preferred Bank, however, its own decision was based on its success in raising money on the public market and not because of any regulatory concerns. In July, the bank raised $17 million in a common stock offering and later received approval from California regulators to sell additional shares.

"Our very successful common stock rights offering has supplied us with an additional level of capital that we feel will get us through this very difficult economic environment," said Li Yu, the bank's chief executive, in a statement. "Therefore, we feel that additional capital under the CPP program is not warranted."

The bank has told regulators that would like to pay off the $20 billion the government gave it to ease its purchase of Merrill Lynch & Co. earlier this year. That assistance pushed the company into the ranks of those receiving "exceptional" aid under the Troubled Asset Relief Program - a designation that comes with strict restrictions on executive pay and other matters.

The Wall Street Journal was the first to report on the ongoing discussions between Bank of America and the Treasury Department.

Under the terms of Bank of America's purchase of Merrill Lynch, the federal government agreed to provide $20 billion in direct assistance for the merger. It also promised to backstop losses incurred by Bank of America from the toxic assets it would be taking on its books, and promised to absorb losses directly on a particularly troublesome $118 billion asset pool held by Merrill.

In return for the guarantees, Bank of America gave the Treasury $4 billion in preferred stock and agreed to pay an 8 percent dividend, or $320 million a year. It also agreed to pay $236 million in annual fees on the $118 billion backstop.

While Bank of America was eager for the assistance when closing on the deal to purchase Merrill, it has since had second thoughts. Earlier this year, it tried to argue that the deal had never been signed, though it quickly abandoned that position in response to Treasury arguments
that the company had behaved as if the deal was finalized and had received market benefits from that perception.

In order to abandon the program now, Bank of America will have to pay fees of $300 million to $500 million. The Journal reported that regulators are leaning toward the latter figure.

Leaving the loan guarantee program now would mean that the bank would no longer be under the oversight of Kenneth R. Feinberg, the Treasury's special master for compensation issues, or pay czar.