NEW YORK (TheStreet) -- Do you remember the Troubled Asset Relief Program established in 2008? Most think that the program has ended. It has not! There is a Special Inspector General to provide an oversight function called SIGTARP. It is investigating how some TARP funds were wasted, stolen or otherwise abused. On July 24, Christy L. Romero, the Special Inspector General, presented to Congress the SIGTARP quarterly report. Included in the 400-page report is information on the alphabet soup of all programs related to the Great Credit Crunch.
My focus is on the Capital Purchase Program, the facility through which the Treasury directly purchased preferred stock or subordinated debentures in FDIC-insured financial institutions. [Read: Elon Musk and the Case of Curious Tweets]
CPP intended to provide funds to stabilize the banking system by raising the capital base of banks deemed to be healthy. These funds were supposed to be used to increase lending to consumers and businesses. In my opinion, this program failed to accomplish that goal. The Treasury invested $204.9 billion in 707 institutions through the CPP facility within TARP. This source of funding was closed on December 29, 2009. As of June 30, 195 of the 707 CPP participants remained in TARP. Stripping out the 53 institutions from which Treasury holds only warrants to purchase stock, 142 of the financial institutions still have outstanding CPP principal balances in TARP funding. According to the Treasury, $193.8 billion of the $204.9 billion in CPP principal has been repaid as of June 30. The Treasury continues to manage its portfolio of CPP investments, and 96 banks are not current on their interest payments on these commitments. To make these payments, the state regulator of a TARP recipient must approve the payments owed to the government. In many cases, regulators don't approve this reduction of capital as that would put the institution at risk of failure.
[Read: Unfortunately Dell Is Staying the Course] Data from SNL Financial show the top 30 publicly traded FDIC-insured financial institutions that have TARP exposure outstanding as of June 11. Today I profile eight community banks that are tradable among these 30. Synovus Financial (SNV) is the largest bank on this list, but it competed its redemption of TARP funds on July 26.
Reading the Table
OV / UN Valued - The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
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VE Rating - A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy. Last 12-Month Return (%) - Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage. Forecast 1-Year Return - Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months. Value Level: is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: is the price at which to enter a GTC Limit Order to sell on strength. [Read: Should You Drop Your Traditional Bank for a Virtual One?] Popular (BPOP) ($29.09) is a community bank in Puerto Rico which has $935 million in TARP money. The stock set a multiyear high at $34.34 on Aug. 20 and is now declining toward its 200-day SMA at $28.22. My semiannual value level is $22.33 with a weekly pivot at $30.83 and monthly risky level at $38.37. Cathay General Bancorp (CATY) ($23.02) is a community bank in California which has $129 million in TARP money. The stock set a multiyear high at $24.85 on Aug. 5 and tested its 50-day SMA at $23.28 on Sep. 18. My annual value level is $20.69 with a semiannual pivot at $22.19 and weekly risky level at $23.23. [Read: A Well-Rooted Retail Investment] Eastern Virginia Bankshares (EVBS) ($6.03) is a community bank in Virginia with $24 million in TARP money. The stock set a multiyear high at $7.50 on March 25 and is now on the cusp of its 50-day SMA at $6.03. My quarterly value level is $4.99 with a weekly pivot at $6.20 and monthly risky level at $6.33.
First BanCorp (FBP) ($6.47) is another community bank in Puerto Rico. It has $222.7 million in TARP money. The stock set a multiyear high at $8.70 on July 23 and recently approached its 200-day SMA to the downside with a low at $6.09 on Sep.12 vs. the 200-day SMA at $6.10. My quarterly value level is $5.48 with a monthly risky level at $7.92.
First United Corp (FUNC) ($8.68) is a community bank in Maryland which has $30 million in TARP money. The stock set a multiyear high at $9.35 on Aug. 21, and since then, the stock has been above its 50-day SMA at $8.23. My quarterly value level is $7.05 with a monthly pivot at $8.97 and weekly risky level at $9.32.
[Read: Global Macro: The Fed Doesn't Taper for Good Reason] Heritage Oaks Bancorp (HEOP) ($6.41) is a community bank in California which has $21 million in TARP money. The stock set a multiyear high at $7 on July 24 and is now below its 50-day SMA at $6.51. My monthly value level is $6.17 with a quarterly pivot at $6.67 and annual risky level at $8.56.
Intervest Bankshares (IBCA) ($7.30) is a community bank in New York City which has $25 million in TARP money. The stock set a multiyear high at $7.75 on July 22 and is now on the cusp of its 50-day SMA at $7.21. My quarterly value level is $5.81 with a weekly pivot at $6.73 and monthly risky level at $8.62. [Read: Health Exchange Alert: Watch Out for Medical ID Theft] Independent Bank (IBCP) ($9.76) is a community bank in Michigan which has $74.4 million in TARP money. The stock set a multiyear high at $10.22 on Sep. 4. My quarterly value level is $5.79 with a weekly pivot at $10.36 and monthly risky level at $11.22. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.
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