Monadnock: Feds didn't want TARP payback money
Monadnock Community Bank of Peterborough wants to pay back its loan under the federal Troubled Asset Relief Program so it can complete its merger with GFA Federal Credit Union, but it can't, according to bank President William M. Pierce Jr. That's because the federal government has told the bank to keep its money, for now.
"They won't allow us to pay the money," Pierce said. "They told us to keep the money -- we want you to be solid. Now we are asking permission to give it back."
The bank borrowed $2 million at the end of 2008 in order to recapitalize as part of the TARP's Capital Purchase Program for small, stable banks. Monadnock made seven regular payments totaling $191,000 through Nov. 15, 2010, leaving an outstanding balance of $1.8 million. Then it stopped paying back the loan.
A recent report from the website ProPublica listed it as the only New Hampshire bank that still owes money under TARP. Five others borrowed money through the program, and they paid back a total of $38 million, leaving the federal government nearly $6 million ahead on the deal.
But the Office of the Comptroller of the Currency refused the money, Pierce said. The federal agency was concerned that Monadnock had too many troubled loans on its books. Pierce estimated that the bank took a "couple million" dollars of losses from bad loans.
"We did many loans to small business that were having a hard time," he said. And when the recession hit, some of the businesses couldn't pay the bank back.
Things are improving now, and Monadnock has more than enough money to repay the funds. Furthermore, it has to in order to close a $6.4 million deal with the Massachusetts-based GFA later this quarter.
The unusual nature of the deal has already attracted federal scrutiny. Never has a credit union acquired a shareholder control bank in the United States.
Monadnock, a former credit union itself, is no longer publicly traded. It delisted its stock back at the end of July 2009. However, it is still privately traded under on the Pink Sheets. Those shareholders approved the merger at the end of May of this year, but the bank still hasn't gotten the necessary approval from the Controller of the Currency.
"They are just crossing all their T's," Pierce explained "They want a good template for other credit unions. We are sort of blazing a new trail here."
The TARP payback has been wrapped into the whole process, contributing to the delay, he said.
"This has taken longer than we have hoped," he said.
The TARP payback would take place at closing, which should be sometime in November, said Pierce.