"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, June 14, 2012

Treasury Department Announces $245 Million in Proceeds from Pricing of Public Offerings of Preferred Stock in Seven Financial Institutions



Auction Part of Treasury's Continued Efforts to Wind Down TARP's Bank Programs
Proceeds Deliver Additional Profit for Taxpayers on TARP's Bank Programs
WASHINGTON – As part of the strategy it outlined last month for winding down its remaining Troubled Asset Relief Program (TARP) bank investments, the U.S. Department of the Treasury today announced that it priced secondary public offerings of the preferred stock it holds in the following seven financial institutions at the following prices per share:
Taylor Capital Group, Inc. (Rosemont, IL), all of its 104,823 shares priced at $893.50 per share (approximately $92 million net proceeds);
Ameris Bancorp (Moultrie, GA), all of its 52,000 shares priced at $930.60 per share (approximately $48 million net proceeds);
First Defiance Financial Corp. (Defiance, OH), all of its 37,000 shares priced at $962.66 per share (approximately $35 million net proceeds);
Farmers Capital Bank Corp. (Frankfort, KY), all of its 30,000 shares priced at $739.89 per share (approximately $22 million net proceeds);
LNB Bancorp Inc. (Lorain, OH), all of its 25,223 shares priced at $869.17 per share (approximately $22 million net proceeds);
First Capital Bancorp Inc. (Glen Allen, VA), all of its 10,958 shares priced at $920.11 per share (approximately $10 million net proceeds); and
United Bancorp Inc. (Ann Arbor, MI), all of its 20,600 shares priced at $825.50 per share (approximately $17 million net proceeds).
The aggregate net proceeds to Treasury from the seven offerings are expected to be approximately $245 million, which was an overall total of 15 percent above the minimum prices set for the auctions. The prices above reflect a liquidation amount per share of $1,000 for the preferred stock of each institution.  At settlement, winning bidders will be required to pay the clearing price for the preferred stock plus accrued and unpaid dividends on the preferred stock from and including May 15, 2012.
TARP's bank programs have already earned a significant profit for taxpayers. Including the expected proceeds from today's transaction, Treasury has now recovered $264 billion from TARP's bank programs through repayments, dividends, interest, and other income – compared to the $245 billion initially invested. Each additional dollar recovered from TARP's bank programs is an additional dollar of profit for taxpayers.
Today's auctions are part of the strategy that Treasury outlined last month for winding down its remaining TARP bank investments in a way that protects taxpayer interests, promotes financial stability, and preserves the strength of our nation's community banks. Treasury indicated that it intends to use a combination of repayments, restructurings, and sales to manage and recover those remaining investments. Treasury intends to announce additional CPP preferred stock auctions in the coming weeks.
"We're pleased with the results of today's auction, which  enabled these community banks to replace temporary government support with new private capital, and keeps us on track to earn a positive return for taxpayers from TARP's bank programs in excess of $20 billion," said Assistant Secretary for Financial Stability Timothy G. Massad. "TARP played a critical role in stabilizing an economy in freefall during the financial crisis, and we are continuing to make good progress in winding down the program and recovering taxpayer dollars."
The closing is expected to occur on or about June 19, 2012, subject to customary closing conditions.  The offering was priced through a modified Dutch auction.  Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Sandler O'Neill + Partners, L.P. ("Sandler O'Neill") were the auction agents and joint bookrunning managers for the offerings.  Houlihan Lokey Capital, Inc. is serving as financial advisor to Treasury with respect to the management and disposition of its Capital Purchase Program investments. 
Each series of preferred stock is being sold pursuant to an effective shelf registration statement previously filed by the applicable issuer with the Securities and Exchange Commission (the "SEC"). Preliminary prospectus supplements related to each offering were filed with the SEC on June 11, 2012, and a final prospectus supplement related to each offering will be filed by the applicable issuer with the SEC and will be available on the SEC's website at http://www.sec.gov.
Copies of the final prospectus supplements relating to the offerings may be obtained, when available, from Merrill Lynch via email at dg.prospectus_requests@baml.com or (800) 294-1322 or from Sandler O'Neill via email at syndicate@sandleroneill.com or (866) 805-4128. 
Before you invest, you should read the prospectus and prospectus supplement in the registration statement and other documents the applicable issuer has filed with the SEC for more complete information about the issuer and the preferred stock.
 This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
 For more details on Treasury's lifetime cost estimates for TARP programs, please visit Treasury's Monthly 105(a) Report to Congress on TARP at this link.
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First Time Jobless Claims

And, of course, if it's Thursday it's all about unemployment[1].
Last week, we had an advance figure of 377,000 seasonally-adjusted first time claims for the week ending June 2, 2012.  That was considered good news, because it was down 12,000 from the previous week.  This week, the Econoday-surveyed analysts are expecting the trend to continue, calling for 375,000 new claims.
For the details on whether or not this optimism is justified, we turn to the Unemployment Insurance Weekly Claims Report from the U.S. Department of Labor.  A report that jumps right in and slaps the analysts in the face.  The seasonally adjusted advance figure for initial claims for the week ending June 9 comes in at 386,000 - increasing by 9,000 instead of declining by 2,000.  So yeah, ouch.  Better yet, the figures for June 2 have been revised upwards to 380,000.  So that's no fun, either.
The unadjusted number of actual initial claims under state programs comes in at 373,540, up 49,155 from June 2.  Meanwhile, the total number of people claiming benefits in all programs for the week ending May 26 fell 145.990 to "only" 5,824,359 people.
So we can distinctly call this "mixed signals" for the marketplace.  CPI is better than expected, jobless claims are worse.
[1]  Except for Thanksgiving.  Then it's all about gorging yourself on turkey, and unemployment happens on Wednesday.

Consumer Price Index News Release

Bureau of Labor Statistics
The latest Consumer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/cpi.pdf and also archived at http://www.bls.gov/news.release/archives/cpi_06142012.pdf. Highlights are below.

CPI all items falls in May as decline in gas prices offsets other increases


On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers declined 0.3 percent in May after being unchanged in April. The index for all items less food and energy rose 0.2 percent in May, the same increase as in April.

HTML | PDF | Local and Regional CPI

FW: Consumer Price Index

We've got a bifecta[1] of major economic data hitting the market at 8:30 this morning:  Consumer Price Index and First Time Jobless Claims.
For those of you who aren't familiar with it, CPI is a measure of "the change in the average price of a fixed basket of goods and services purchased by consumers" (to quote Econoday).  It is, in essence, a measure of inflation, and tracks month over month change with a one month lag.  CPI gets studied intently, because consumer costs drive the market.  Rising prices mean (in theory) increasing profits.  But the more they rise, particularly in "discretionary" areas, the greater the chances that overall spending in that sector will decline.
Also, CPI has a "core"metric:  the change in consumer prices without food and energy factored in.  These areas are considered volatile, and so are removed from the official measures of inflation[2].  I'll try not to rant on the subject.
April 2012 saw a 0.0% change in CPI, and a 0.2% change in "core" CPI.  For May, the Econoday-surveyed analysts are feeling marginally optimistic.  The consensus estimate is for a 0.2% decline in CPI (which is a good thing), and a 0.2% increase in "core" CPI.
And so, without further ado, we turn to the Bureau of Labor Statistics and their Consumer Price Index - May 2012 news release.  And, it turns out, that the analysts weren't optimistic enough.  CPI declined 0.3%, while "core" CPI increased 0.2%.  The decline in overall CPI was driven largely by energy costs, which fell 4.3% in May (mostly on a 6.8% decline in gasoline costs).
So, that's some good news from one half of the bifecta.
[1] Like a "trifecta", except that there's only two things.  It's a neologism.  Feel free to share it with your friends.
[2] Because everyone knows that dramatically increasing food and/or energy costs doesn't put a pinch on your budget, right?