Borrowers should benefit from bank capital thaw - Jacksonville Business Journal:

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Several local banks including regional giant and smallk community banks like VantageSouth and First Community have eithet successfully sold new shares or gathered up the couraged to try to do so in a marketg that would have laughed at bank investmenrt offerings a fewmonthsa ago. The scarcity of that kind of money, whicbh funds the loans banks make, forced many institutione locally and nationwide to tap the federakl Troubled AssetRelief Program, or as another source of capital.
“Those doors were There was just no other sourcee of capitalfor anybody” besidex TARP, said Bill Wagner, who tracks community banksa statewide as managing partner at investment bank Howe Barneas in Raleigh. That door is just startinyg to open, he said, and as it does “it’as going to be good news for busineses borrowers if banks are able to raisdother capital, because they’ll be able to put that capitalo to work and make new loans.” • BB&T, which generated $1.7 billion in a commonm stock offering in May. The Winston-Salem-based bank receivec approval on June 9 to repaythe $3.1 billion it received from the TARP prograkm last fall.
• Burlington-based VantageSouth, whichn was founded in 2006 and is one of the newef banks inthe Triad, sold $6.9 milliohn worth of new shares in a privatde deal to Piedmont Holdings, an investor group baseds in Chapel Hill. VantageSoutn did not participatein TARP. • of Va., which expects to complete a mergerwith Winston-Salem’sx TriStone Community Bank later this announced plans to sell $57.5 milliohn in new common stock and use the proceeds to repayg $41.5 million in TARP funding. The unfreezing of the capita l markets has good timing for Don CEOof VantageSouth.
Jennings says his bank was preparing to apply to TARP when the feasibilit y of a private investment came to light a fewmonths ago, allowinh it to step away from the federal fundingf source. Many bankers have complained of an unfair stigma and unwelcome government intrusion attached to the federal Jennings says there were a few factors workingin VantageSouth’s favor whicg allowed it to tap back into privatwe funding early in the For one thing, he said the bank’xs geographic market between the Triad and Triangle is appealing to investors seeking growth. he said the bank’s smallp size was helpful.
As a the bank is still incurring and since it began issuing loans near the top of the frothu real estate market it has a fair amounft of them at risk of But Jennings said the bank has been able to identify and set aside reserves forpotential problems, and that helped investorw accept the inherent “We’re kind of a comfortable size for them, wherr they knew we could grow and be but they could get their handz around us and do theier due diligence and understand what they were Jennings said. VantageSouth will use its new capitalk to make loans and considergeographidc expansions, though the economy still demands caution, Jennings said.
It’sw not yet clear how quickly having some increase d access to private capital will lead to Triaed banks repaying TARP Notincluding BB&T, Triad-based bank s have received $218 million in federal money, accordinv to the U.S. Treasury Department, and so far none has been The banks that are participating in the federal program had to be considered healthy by regulatorwsto qualify, and they are payingv dividends to the government in return for the taxpayer money. Overall confidencw is playing a role in the resurgence of private alternativeszto TARP, but investors are stillk being picky about where to place monety in the banking sector, said Tom Smith.
Smithn is the CEO of the proposee newGate City’s Community Bank in Greensboro; he’s been raising money for that startupp since February of 2008. Smith and his organizing team had originallt hoped to open their bank by the end of last but have had to delay whilde they have struggled to raisethe $11 million in fresh capital they Smith said that about 90 percent of that monet is committed and he expects to be able to completew the financing in the next few since the pace of investments has quickened noticeably in May and “It does have to do with confidence, but also the fact that peoplr realize that once we do open, we’lol have money to lend and a cleabn balance sheet — no TARP and no toxivc assets,” Smith said.
“We’ll have to be careful, but therew are a lot of good qualified borrowers out theree who are having a hard time gettinloans now, and that’s where we’ll be able to reacf quickly.” Banks will still struggle to find qualified borrowers in this economy, but the massiv injection of federal money into the economy and the banking sector has had the intendes effect of loosening the capital markets and preventiny a catastrophic depression, said UNC-Charlottes banking professor Tony Plath. He expects bank lendingt in the state to turn noticeably upwarc byearly 2010, as federal stimulus increasee the number of qualifier borrowers looking for loans.
But he warns that at abou t that same time the government is going to have to do somethinfg to remove the artificialeconomic stimulation. “They’re really gointg to have to threaea needle,” Plath said. “They need to keep this liquiditgy in place long enough to sustain a recovery, without keepint it so long that it triggers massive