Western Independent Banker - March/April 2009 - (Page 21)

By Lee Bradley When should a secondary offering start? If possible, begin in 2009. If, as a public company, you raise funds equal to the TARP money, the amount of warrants issued to the U.S. Treasury are reduced by 50 percent. Note, however, that under TARP’s Private Bank Capital Purchase Program, while the warrants required are limited to 5 percent of the preferred shares issued, they will be exercised immediately on issuance, will require payment of a 9 percent dividend, and there is no ability to reduce the warrants by raising additional capital. Those are all pretty good reasons why you should seriously think about completing a secondary offering to replace the TARP money within a few years of receiving it. The good news is that the economy should recover over time, the current market situation should stabilize and banks will have more options for raising capital. The key is to raise Tier 1 capital, like common stock, that doesn’t pay any dividends. Then you can redeem the government money and reduce the associated dividends. Explore a Viable Option Despite the disappearance of the financing alternatives I’ve mentioned, I believe one alternative still remains viable, even in this market: the community public offering, or private placement. Th is economic storm will pass, and the “green” TARP will help. But you can’t and don’t want to keep it in place for too long. Start making plans to replace it with new capital that comes from your local community. Lee Bradley is managing director of Commerce Street Capital in Dallas, Texas. This article is for information purposes only and does not constitute a solicitation or of fer by Commerce Street Capital, LLC, to buy or sell any securities, futures, options, foreign exchange or other financial instrument, or to provide any investment advice or ser vice. Commerce Street Capital, LLC, is located at 1700 Pacific Ave., Suite 2020, Dallas, Texas 75201, 214-545-6800, Member FINRA and SIPC. www.commercestreetcapital.com. Western Independent Banker Building portfolios together. It’s what we do. • Merchant Bankcard Programs (Retained or outsourced liability) • PCI Compliant Payment Solutions • Automatic Monthly Billing • ATM Solutions • Contact Ms. Bobbi Wood bobbi.wood@umsbanking.com (800) 324-8323 VP Client Development Your path to superior service & technology www.umsbanking.com March/April 2009 415741_UMSBanking.indd 1 1/28/09 9:58:35 PM 21 http://www.umsbanking.com http://www.commercestreetcapital.com

Table of Contents Feed for the Digital Edition of Western Independent Banker - March/April 2009

Western Independent Banker - March/April 2009 Contents A Message from the President & CEO Profitable Liquidity: Yes, You Can Non-Performing Assets: The Keep Versus Sell Decision Is BOLI the Way to Go? The Troubled Asset Relief Program and Its Eff ect on Executive Compensation TARP Money or Not, Secondary Offerings Belong in Your Plan 52nd Annual Conference Private Equity: Another Capital Option Strengthening Your Bank’s Bottom Line by Adapting to Difficult Times Managing Your Branch Network Capital Dealing with a Hard Insurance Market WIB Service Corporation Report WIB Calendar New Members Index of Advertisers Advertiser.com

Western Independent Banker - March/April 2009

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