While most of Arizona’s state-chartered banks were mulling over their options for federal assistance late last year, Uncle Sam was injecting billions of dollars of new capital into national banking companies with Arizona subsidiaries. The question is whether any of that money from the Department of the Treasury’s $700 billion Troubled Asset Relief Program (TARP) will find its way here.
Although there were a couple of exceptions, nationally chartered banks with Arizona operations didn’t know whether portions of their capital infusions would be earmarked for deployment in Arizona, and they may not know until sometime during the first quarter. The capital comes in the form of federal purchases of senior preferred shares. The Treasury set aside $250 billion for the program.
The Treasury purchased $200 million of shares in Seattle-based Washington Federal Inc., the parent company of Washington Federal Savings. John Pirtle, senior vice president and Phoenix division manager for Washington Federal, estimates the thrift’s Arizona operations will receive about $20 million and use it for mortgage lending.
Western Alliance Bancorporation in Las Vegas, owner of Alliance Bank of Arizona, received $140 million from the Treasury. James Lundy, chief executive officer of the Arizona bank, expects his parent company to share the new capital.
“I would expect we’ll get somewhere between $8 million and $12 million,” Lundy says. “That would be a good estimate. We are well capitalized now, but we do have plans to continue our growth trajectory, which has been pretty strong.”
Alliance Bank would use the capital to “support a bigger balance sheet, so we can gather more deposits to make more loans,” Lundy says. “Banks like ours are the ones making loans to small and mid-size businesses. Despite the economic issues Arizona is facing, we have strong loan demand from borrowers we think are very creditworthy.”
Ten million dollars in new capital can be leveraged to generate $100 million in new loans, Lundy says.
The Treasury purchased $1.715 billion of stock in Milwaukee-based Marshall & Illsley Corporation.
“All the funds are going to be used throughout the franchise,” says Dennis Jones, chairman and president of M&I’s Arizona region. “It’s not a matter of allocating a certain amount of it for Arizona.”
Chicago-based Northern Trust Corporation, parent company of Northern Trust Bank, received a $1.576 billion capital infusion. David Highmark, chairman and chief executive officer of the Arizona subsidiary, says he expects enough of the capital will flow to his bank to allow it to keep growing. Northern Trust Bank’s loan volume is two to three times its normal level.
“If our loan volume continues to grow as it has, we will get a portion of that money allocated to us,” Highmark says.
The parent company is classified as well capitalized, “but we knew, based on our growth, that we would ultimately need more capital. This was a timely opportunity for us,” Highmark notes.
Zions Bancorporation in Salt Lake City, owner of National Bank of Arizona, received $1.4 billion from the Treasury. Keith Maio, president and chief executive officer of the Arizona bank, says he expects his bank will receive some of the capital, but the amount has not been determined. Maio says the funds will be used to bolster the bank’s capital ratios to keep it actively lending, targeting small to medium-size businesses.
Other Treasury stock purchases of nationally chartered banks with Arizona subsidiaries break down as follows:
JPMorgan Chase & Co., New York — $25 billion.
Bank of America, Charlotte, N.C. — $25 billion.
Wells Fargo & Company, San Francisco — $25 billion.
U.S. Bancorp, Minneapolis, owner of U.S. Bank — $6.599 billion.
Comerica Incorporated, Dallas, owner of Comerica Bank — $2.25 billion.
Mutual of Omaha in Omaha, Neb., which acquired First National Bank of Arizona, did not apply for TARP funding.
The Treasury gave publicly traded banks the first opportunity to receive capital infusions, with a Nov. 14 deadline to apply for stock purchases. It issued capital-infusion guidelines later for privately held banks, which had until Dec. 8 to apply. According to the Arizona Bankers Association, most of Arizona’s 33 state-chartered banks are privately held and had not applied to the Treasury while they weighed their options as their deadline neared. Jack Hudock with the Arizona Department of Financial Institutions said eight state-chartered banks or bank holding companies had applied, but he could not identify them and did not know the status of their applications.
Meridian Bank of Arizona, a privately held, nationally chartered bank owned by Marquette Financial Companies in Minneapolis, applied for a federal stock purchase and was awaiting a decision from the Treasury concerning how much capital it might receive. Doug Hile, president and CEO of Meridian, is not happy that publicly traded banks had first shot at a capital infusion. He does not mince his words in his displeasure over how the government treated privately held banks.
“From a public policy perspective, it’s not fair to small banks that have opted not to go public with their stock,” Hile says. “We are up in arms about it. This is harming Main Street banking by not allowing them to participate on an equal basis.”