Some Idaho banks fall behind on TARP payments

BOISE (AP) - Three Idaho bank companies have fallen behind on their payments to the U.S. Treasury for money borrowed under the Troubled Asset Relief Program set up by the federal government to help banks at the height of the nation's financial crisis.

The Idaho Statesman (http://bit.ly/p7OtLh) reports that holding companies for Syringa Bank, Intermountain Community Bank and Idaho Banking Co. still owe a combined $3.5 million for past-due TARP payments. U.S. Treasury observers are also attending board meetings of the holding companies for Syringa Bank and Idaho Banking Co.

Delayed payments to the program, also known as TARP, is evidence that four years after the onset of the recession and three years after the nation's financial sector fell into disarray, some Idaho banks are still struggling.

"It's a challenge for right now," Scott Gibson, Syringa's president and CEO, told the Statesman.

The three banks with delayed TARP payments are not the only Idaho banks struggling in the wake of loan defaults and the collapse of the home and commercial real estate market that began to hit the state in late 2007. Syringa and Idaho Banking Co. are among six banks operating in the state under orders by government regulators to build up their cash reserves and shed troubled loans.

The recession also claimed as a victim one bank, the Ketchum-based First Bank of Idaho, which was shut down by the U.S. Office of Thrift Supervision in 2009.

Despite the ongoing challenges, many Idaho banking officials say they see a brighter future than a year ago. Investors have put $1.4 billion into banks operating in the state in the past 18 months, and more banks have managed to erase some of the red ink in their financial statements by resolving troubled loans.

For Syringa and Idaho Banking Co., the debt to the government under TARP is in the form of preferred stock, a form that pays guaranteed interest like bonds. The banks sold Treasury preferred stock with a 5 percent interest rate for the first five years and 9 percent after that. The late payments are based on dividends owed by the lenders, and officials at both banks say they have not sought permission to pay dividends owed on their TARP preferred stock.

Because Idaho Banking Co. and Syringa are under regulatory orders to increase their capital, they're actually prohibited from paying dividends to shareholders without permission of regulators, according to state banking regulators.

"We don't want them dividending their shareholders money that would strengthen capital," said Gavin Gee, director of Idaho's Department of Finance, which regulates state-chartered banks like Intermountain, Idaho Banking Co. and Syringa. "Once they are able to raise capital ... obviously they can pay dividends."

Idaho Banking Co. has missed eight TARP payments and Syringa seven through the end of June. They are among 34 banks nationwide to which the Treasury Department has assigned observers, a step that can be triggered by the Treasury after a bank misses five payments.

Intermountain Bancorp has missed six payments, but Treasury has not asked to send an observer, bank officials say. The holding company says it is permitted to defer payments, and the company has accounted for the money it owes in its financial statements, although it hasn't yet made the payments.