L.A.'s biggest bank repays Uncle Sam
Regional financial powerhouse City National Corp. has finished repaying Uncle Sam $400 million, funds the U.S. Treasury invested in the bank in November 2008 during the government’s emergency efforts to bolster the nation’s financial system.
The company, the largest bank based in Los Angeles, wired a second $200-million installment to the government on Wednesday, City National Chief Executive Russell Goldsmith said in an interview. Goldsmith had hoped to repay the entire debt by the end of last year but regulators allowed him to pay only $200 million in late December.
To retire the debt, the bank repurchased preferred stock it had sold to the Treasury’s Troubled Asset Relief Program, or TARP. The repurchase Wednesday will result in an after-tax charge of $3.8 million, or 7 cents a share, City National said. A news release on the event was expected to be posted at a bank website this morning.
Of about 70 California banks that received TARP funds, City National is only the ninth to repay the government, according to the Treasury Department’s latest report on the bailout program. The others include San Francisco's giant Wells Fargo & Co.; CVB Financial Corp., the Ontario-based parent of Citizens Business Bank, and SVP Financial Group, the Santa Clara-based parent of Silicon Valley Bank.
All told, 627 U.S. banks received TARP funds, and about 70 have repaid at least some of the money. Reflecting paybacks from the biggest banks, $170 billion of the $240 billion invested in the banking system under TARP had been repaid as of Feb. 15, the Treasury said in a recent report.
For banks such as Goldsmith's, receiving TARP funds initially was regarded as a “badge of honor,” he noted, since community and regional banks were supposed to be strong already in order to receive the federal assistance.
However, the public soon turned resentful of what became known as the the bailout program. With that in mind, Goldsmith said City National, which remained well capitalized throughout the crisis and its aftermath, is “very pleased” to get the repayment behind it.
The Treasury still owns warrants it received as part of its investment, which give it the right to buy 1.1 million shares of City National stock for $53.16 apiece. The warrants aren't currently worth exercising because the stock closed Wednesday at $49.87 a share, down 16 cents. The bank said it plans to repurchase the warrants, “subject to negotiations with the Treasury Department.”
-- E. Scott Reckard
Photo: City National CEO Russel Goldsmith. Credit: Lawrence K. Ho / Los Angeles Times