The Treasury announced Thursday that it has received net proceeds of $11.2 million from the sale of warrants it obtained as part of its investment in New York-based Signature Bank (SBNY) through the Troubled Asset Relief Program (TARP) during the height of the financial crisis. In Mar 2009, Signature had repaid the entire $120 million of bailout money it had received from the government in Dec 2008.

The Treasury auctioned 595,829 warrants at $19.00 each. The final price was above the floor price of $16 per warrant set by Treasury. The Signature warrants have a strike price of $30.21 and expire in Dec 2018.

The current move will completely free Signature from government intervention. The auction for Signature warrants follows the sale of Washington Federal Inc.’s (WFSL) warrants on Wednesday and Bank of America Corp.’s (BAC) warrants last week. The government received net proceeds of $15.4 million from the sale of Washington Federal warrants and a record $1.5 billion from the sale of Bank of America warrants.

The amount received from the auction of Bank of America warrants exceeds $1.1 billion raised from the sale of Goldman Sachs (GS) warrants earlier.

Following Bank of America and Washington Federal, Signature is the third among four banks whose warrants are scheduled to be sold via auctions this month. The bank remaining is Texas Capital Bancshares (TCBI). The Treasury has already started auctioning 758,086 warrants of Texas Capital at a floor price of $6.50 each. At the floor price, gross proceeds from the sale would be $4.9 billion.

In similar transactions during Dec 2009, the Treasury received $1.1 billion from the sale of warrants of JPMorgan Chase & Co. (JPM), Capital One Financial Corp. (COF) and TCF Financial Corp. (TCB). The government expects to conduct similar auctions in the future for other warrants it holds in approximately 252 banks.

We think that the repayment of government money and repurchase of warrants can be viewed as a sign of recovery of the institutions as well as the economy. According to the Treasury, losses on TARP investments are likely to be significantly trimmed with the improvement in the overall financial condition.

Zacks Investment Research

1. (BAC) U.S. Treasury Gets $1.5B from Bank of America WarrantsThe Treasury has received net proceeds of $1.5 billion from the sale of warrants that...
2. (BAC) U.S. Treasury Sells Warrants of Four BanksThe U.S. Treasury Department is planning to auction off its warrant positions in four banks,...
3. (TCB) U.S. Treasury to Sell TCF Financial Corporation WarrantsThe U.S. Treasury Department said on Monday that it will auction 3.2 million warrants to...
4. (JPM) U.S. Treasury Sells JPMorgan Chase WarrantsJPMorgan Chase (JPM) warrants held by U.S. government’s bank bailout program were sold for $936.1...
5. (COF) U.S. Treasury Department Sells Capital One Financial WarrantsThe U.S. Treasury Department said on Tuesday that it will auction 12.7 million warrants to...
6. (JPM) Treasury to Auction TARP WarrantsAfter almost a year of initiating the $700 billion Troubled Asset Relief Program (TARP) to...

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