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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

May 2013: 

Capital Purchase Program: 

Status of the Program and Financial Health of Remaining Participants: 

GAO-13-458: 

GAO Highlights: 

Highlights of GAO-13-458, a report to congressional committees. 

Why GAO Did This Study: 

CPP was established as the primary means of restoring stability to the 
financial system under the Troubled Asset Relief Program (TARP). Under 
CPP, Treasury invested almost $205 billion in 707 eligible financial 
institutions between October 2008 and December 2009. CPP recipients 
have made dividend and interest payments to Treasury on the 
investments. TARP’s authorizing legislation requires GAO to report 
every 60 days on TARP activities. This report examines (1) the status 
of CPP; and (2) the financial condition of institutions remaining in 
the program. 

To assess the program’s status, GAO reviewed Treasury reports on the 
status of CPP. GAO also used financial and regulatory data to compare 
the financial condition of institutions remaining in CPP with those 
that had exited the program and those that did not participate. 

We provided a draft of this report to Treasury for its review and 
comment. Treasury generally concurred with our findings. 

What GAO Found: 

As of March 31, 2013, the Department of the Treasury (Treasury) had 
received about $222 billion from its Capital Purchase Program (CPP) 
investments, exceeding the approximately $205 billion it had 
disbursed. Treasury estimated at the end of December 2012 that CPP 
would have an approximate lifetime income of $15 billion after all 
institutions had exited the program. Treasury’s March 2013 data showed 
that 534 of the original 707 institutions had exited CPP. Most of 
these institutions exited by repurchasing their preferred shares in 
full or by refinancing their investments through other federal 
programs. In March 2012, Treasury began selling its investments in the 
institutions through auctions, expediting the exit of a number of CPP 
participants. A relatively small number of the remaining 173 
institutions accounted for most of the funds outstanding. 
Specifically, 25 institutions accounted for $4.2 billion, or 68 
percent, of the $6.1 billion in outstanding investments. These 
investments were relatively widely dispersed throughout the United 
States, with 39 states having at least one institution with 
investments outstanding and 12 states having at least 5 such 
institutions. 

Figure: Status of Capital Purchase Program Funds and Participants: 

[Refer to PDF or image: horizontal bar graph and pie-chart] 

Status of funding: 

Disbursed: $204.9 billion; 
Repayments: $193.1 billion; 
Auction proceeds: $2.3 billion; 
Dividends/interest/other income: $18.8 billion; 
Warrant income: $7.8 billion; 
Total proceeds: $222 billion; 
Write-offs and losses: $3.4 billion; 
Outstanding investments: $6.1 billion; 
Estimated lifetime income: $15.1 billion. 

Status of participants: 
Investments fully repaid: 203; 
Investments refinanced through other federal programs: 165; 
Investments sold through auction: 120; 
Other: 46; 
Institutions remaining in program: 173. 

Source: GAO analysis of Treasury data. 

Note: “Other” includes institutions that went into bankruptcy or 
receivership, had their investments sold by Treasury, or merged with 
another institution. 

[End of figure] 

The institutions remaining in CPP are generally less financially 
healthy than those that have exited. In particular, most remaining 
participants have missed scheduled dividend or interest payments. For 
example, 125 remaining institutions missed their February 2013 
payment. Further, 107 remaining CPP institutions were on the Federal 
Deposit Insurance Corporation’s problem bank list in December 2012—
that is, they demonstrated financial, operational, or managerial 
weaknesses that threatened their continued financial viability. 
Institutions that continue to miss dividend payments or find 
themselves on the problem bank list may have difficulty fully repaying 
their CPP investments. GAO’s analysis also showed that the remaining 
CPP institutions were financially weaker than those that had exited 
the program or had never participated. In particular, the remaining 
CPP institutions tended to be less profitable, hold riskier assets, 
and have lower capital levels and reserves. 

View GAO-13-458. For more information, contact A. Nicole Clowers at 
(202) 512-8678 or clowersa@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Treasury Estimates a Lifetime Gain for CPP as Institutions Continue to 
Exit the Program: 

Remaining CPP Institutions Are Generally Less Financially Healthy Than 
Those That Have Exited: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Office of Financial Stability: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Aggregate Financial Information on the Analysis Population, 
as of December 31, 2012: 

Figures: 

Figure 1: Status of the Capital Purchase Program, as of March 31, 2013: 

Figure 2: Status of Institutions That Received Capital Purchase 
Program Investments, as of March 31, 2013: 

Figure 3: Remaining Capital Purchase Program Investments, as of March 
31, 2013: 

Figure 4: Remaining Participation in the Capital Purchase Program by 
State, as of March 31, 2013: 

Figure 5: Number of Institutions Missing Scheduled Dividend or 
Interest Payments and Number of Institutions Participating in the 
Capital Purchase Program by Quarter, February 2009 through February 
2013: 

Figure 6: Number of Capital Purchase Program Institutions on FDIC's 
Problem Bank List, December 2008 through December 2012: 

Abbreviations: 

CDCI: Community Development Capital Initiative: 

CPP: Capital Purchase Program: 

EESA: Emergency Economic Stabilization Act of 2008: 

FDIC: Federal Deposit Insurance Corporation: 

SBLF: Small Business Lending Fund: 

TARP: Troubled Asset Relief Program: 

Treasury: U.S. Department of the Treasury: 

[End of section] 

United States Government Accountability Office: 
GAO: 
441 G St. N.W. 
Washington, DC 20548: 

May 7, 2013: 

Congressional Committees: 

From October 2008 through December 2009, the U.S. Department of the 
Treasury (Treasury) invested almost $205 billion in 707 financial 
institutions as part of the government's efforts to help stabilize 
U.S. financial markets and the economy. These investments were made 
through the Capital Purchase Program (CPP), the first and largest 
initiative under the Troubled Asset Relief Program (TARP).[Footnote 1] 
TARP gave Treasury the authority to buy or guarantee up to almost $700 
billion of the "troubled assets" that were believed to be at the heart 
of the financial crisis, including mortgages, mortgage-backed 
securities, and any other financial instruments deemed appropriate, 
such as equity investments.[Footnote 2] Under this authority, in 
October 2008 Treasury created CPP to provide capital to viable 
financial institutions by purchasing preferred shares and subordinated 
debt. In return for its investments, Treasury received dividend or 
interest payments and warrants.[Footnote 3] The program was closed to 
new investments on December 31, 2009, and since then Treasury has 
continued to oversee and divest its CPP investments, collect dividend 
and interest payments, and sell warrants. As of March 31, 2013, about 
three-quarters of CPP participants had exited the program, many by 
repurchasing their preferred shares or subordinated debt with the 
approval of their primary bank regulators. 

This report is based upon our continuing analysis and monitoring of 
Treasury's activities in implementing the Emergency Economic 
Stabilization Act of 2008 (EESA), which provided us with broad 
oversight authorities for actions taken under TARP and required that 
we report at least every 60 days on TARP activities and performance. 
[Footnote 4] To fulfill our statutorily mandated responsibilities, we 
have been monitoring and providing updates on TARP programs, including 
CPP.[Footnote 5] This report examines (1) the status of CPP, including 
repayments and other proceeds, as well as investments outstanding; and 
(2) the financial condition of institutions remaining in CPP. 

To assess the status of CPP, we analyzed Treasury reports on the 
status of CPP, including reports on outstanding investments, dividends 
paid, and the number of institutions that had repaid their 
investments. To assess the financial condition of institutions that 
received investments under CPP, we used financial and regulatory data 
to compare CPP participants remaining in the program with those that 
had exited the program and those that had never participated. We 
determined that the financial information we used was sufficiently 
reliable to assess the condition and status of CPP and institutions 
that participated in the program. We also leveraged our past reporting 
on TARP, as well as that of the Special Inspector General for TARP, as 
appropriate. Appendix I has more information on our scope and 
methodology. 

We conducted this performance audit from January 2013 to May 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Created in 2008, CPP was the primary initiative under TARP to help 
stabilize the financial markets and banking system by providing 
capital to qualifying regulated financial institutions through the 
purchase of senior preferred shares and subordinated debt.[Footnote 6] 
Rather than purchasing troubled mortgage-backed securities and whole 
loans, as initially envisioned under TARP, Treasury used CPP 
investments to strengthen financial institutions' capital levels. 
Treasury determined that strengthening capital levels was the more 
effective mechanism to help stabilize financial markets, encourage 
interbank lending, and increase confidence in lenders and investors. 
Treasury believed that strengthening the capital positions of viable 
financial institutions would enhance confidence in the institutions 
themselves and the financial system overall and increase the 
institutions' capacity to undertake new lending and support the 
economy. On October 14, 2008, Treasury allocated $250 billion of the 
original $700 billion in overall TARP funds for CPP. The allocation 
was subsequently reduced in March 2009 to reflect lower estimated 
funding needs, as evidenced by actual participation rates. The program 
was closed to new investments on December 31, 2009. The Office of 
Financial Stability was established within Treasury to implement TARP 
in consultation with federal banking regulators. 

Under CPP, qualified financial institutions were eligible to receive 
an investment of between 1 and 3 percent of their risk-weighted 
assets, up to a maximum of $25 billion.[Footnote 7] In exchange for 
the investment, Treasury generally received senior preferred shares 
that would pay dividends at a rate of 5 percent annually for the first 
5 years and 9 percent annually thereafter.[Footnote 8] EESA required 
that Treasury also receive warrants to purchase shares of common or 
preferred stock or a senior debt instrument to further protect 
taxpayers and help ensure returns on the investments. Institutions are 
allowed to repay CPP investments with the approval of their primary 
federal bank regulator and afterward to repurchase warrants. 

Nine major financial institutions were initially included in CPP. 
[Footnote 9] These institutions did not follow the application process 
that was ultimately developed, but were included because Treasury and 
the federal banking regulators considered them essential to the 
operation of the financial system. At the time, these nine 
institutions held about 55 percent of U.S. banking assets and provided 
a variety of services, including retail, wholesale, and investment 
banking and custodial and processing services. According to Treasury 
officials, the nine financial institutions agreed to participate in 
CPP in part to signal the program's importance to the stability of the 
financial system. Initially, Treasury approved $125 billion in capital 
purchases for these institutions and completed the transactions with 
eight of them on October 28, 2008, for a total of $115 billion. The 
remaining $10 billion was disbursed after the merger of Bank of 
America Corporation and Merrill Lynch & Co., Inc. was completed in 
January 2009. Treasury ultimately disbursed about $205 billion to 707 
financial institutions through December 2009. 

Treasury Estimates a Lifetime Gain for CPP as Institutions Continue to 
Exit the Program: 

Repayments and income from dividends, interest, and warrants from CPP 
investments have exceeded the amounts originally disbursed. Treasury 
disbursed $204.9 billion to 707 financial institutions nationwide from 
October 2008 through December 2009. As of March 31, 2013, Treasury had 
received $222.0 billion in repayments and income from its CPP 
investments, exceeding the amount originally disbursed by $17.1 
billion (see figure 1).[Footnote 10] The repayments and income amount 
included $193.1 billion in repayments and $2.3 billion in auction 
sales of original CPP investments as well as $18.8 billion in 
dividends, interest, and other income, and $7.8 billion in warrants 
sold. After accounting for write-offs and realized losses totaling 
$3.4 billion, CPP had $6.1 billion in outstanding investments as of 
March 31, 2013. Treasury had estimated a lifetime gain of $15.1 
billion for CPP as of December 31, 2012.[Footnote 11] 

Figure 1: Status of the Capital Purchase Program, as of March 31, 2013: 

[Refer to PDF for image: horizontal bar graph] 

Capital Purchase Program (CPP): 

Assets held: 
Preferred stock; 
Common stock; 
Warrants; 
Subordinated debt. 

Start date: October 2008; 
End date: December 2009; 
Approximate exit: Unknown. 

Status of funding: 

Disbursed: $204.9 billion; 
Repayments[A]: $193.1 billion; 
Auction proceeds: $2.3 billion; 
Dividends/interest/other income: $18.8 billion; 
Warrant income: $7.8 billion; 
Total proceeds: $222 billion; 
Write-offs and losses: $3.4 billion; 
Outstanding investments: $6.1 billion; 
Estimated lifetime income: $15.1 billion. 

Source: GAO analysis of Treasury data. 

[A] The total amount of repayments includes $336 million from 
institutions that transferred to the Community Development Capital 
Initiative and $2.2 billion from institutions that transferred to the 
Small Business Lending Fund. 

[End of figure] 

About 76 percent (534) of the 707 institutions that originally 
participated in CPP had exited the program as of March 31, 2013. Of 
the 534 institutions that exited CPP, 203 institutions exited by 
repurchasing their preferred shares in full (see figure 2).[Footnote 
12] Another 165 institutions exited CPP by refinancing their 
investments through other federal programs: 28 through the Community 
Development Capital Initiative (CDCI) and 137 through the Small 
Business Lending Fund (SBLF).[Footnote 13] An additional 120 
institutions had their investments sold through auction. Treasury 
began selling its investments in banks through auctions beginning in 
March 2012 as a way to expedite its exit from this program and 
transfer ownership to the private markets.[Footnote 14] Finally, the 
remaining 46 institutions went into bankruptcy or receivership (23), 
had their investments sold by Treasury (20), or merged with another 
institution (3). 

Figure 2: Status of Institutions That Received Capital Purchase 
Program Investments, as of March 31, 2013: 

[Refer to PDF for image: pie-chart] 

Investments fully repaid: 203; 
Investments refinanced through SBLF or CDCI: 165; 
Investments sold through auction: 120; 
Other: 46; 
Institutions remaining in program: 173. 

Source: GAO analysis of Treasury data. 

Note: "Other" includes institutions that went into bankruptcy or 
receivership, had their investments sold by Treasury, or merged with 
another institution. 

[End of figure] 

As of March 31, 2013, 24 percent (173) of the original 707 
institutions remained in CPP. These institutions accounted for the 
$6.1 billion in outstanding investments. The outstanding investments 
were concentrated in a relatively small number of institutions. 
Specifically, 25 remaining CPP investments accounted for $4.2 billion, 
or 68 percent of outstanding investments (see figure 3). In contrast, 
the remaining $2.0 billion (32 percent) was spread among the remaining 
148 institutions. 

Figure 3: Remaining Capital Purchase Program Investments, as of March 
31, 2013: 

[Refer to PDF for image: illustrated table and pie-chart] 

Number of institutions: 173. 

Percentage of outstanding CPP investment: 
Top 25 institutions: 68%; $4.153 billion; 
Other 148 institutions: 32%; $1.981 billion. 

Outstanding CPP investment by top 25 institutions: 

Institution: 1. Synovus Financial Corp. 
Location: Columbus, GA; 
Amount invested: $967.9 million; 
Percentage of total outstanding investment: 15.8%. 

Institution: 2. Popular, Inc. 
Location: San Juan, PR; 
Amount invested: $935.0 million; 
Percentage of total outstanding investment: 15.2%. 

Institution: 3. First BanCorp; 
Location: San Juan, PR; 
Amount invested: $400.0 million; 
Percentage of total outstanding investment: 6.5%. 

Institution: 4. Citizens Republic Bancorp, Inc. 
Location: Flint, MI; 
Amount invested: $300.0 million; 
Percentage of total outstanding investment: 4.9%. 

Institution: 5. First Banks, Inc. 
Location: Clayton, MO; 
Amount invested: $295.4 million; 
Percentage of total outstanding investment: 4.8%. 

Institution: 6. New York Private Bank & Trust Corp. 
Location: New York, NY; 
Amount invested: $267.3 million; 
Percentage of total outstanding investment: 4.4%. 

Institution: 7. Cathay General Bancorp; 
Location: Los Angeles, CA; 
Amount invested: $129.0; 
Percentage of total outstanding investment: 2.1%. 

Institution: 8. Anchor BanCorp Wisconsin, Inc. 
Location: Madison, WI; 
Amount invested: $110.0 million; 
Percentage of total outstanding investment: 1.8%. 

Institution: 9. Hampton Roads Bankshares, Inc. 
Location: Norfolk, VA; 
Amount invested: $80.3 million; 
Percentage of total outstanding investment: 1.3%. 

Institution: 10. Metropolitan Bank Group, Inc. 
Location: Chicago, IL; 
Amount invested: $78.4 million; 
Percentage of total outstanding investment: 1.3%. 

Institution: 11. Independent Bank Corporation; 
Location: Ionia, MI; 
Amount invested: $72.0 million; 
Percentage of total outstanding investment: 1.2%. 

Institution: 12. NewBridge Bancorp; 
Location: Greensboro, NC; 
Amount invested: $52.4 million; 
Percentage of total outstanding investment: 0.9%. 

Institution: 13. FNB United Corp. 
Location: Asheboro, NC; 
Amount invested: $51.5; 
Percentage of total outstanding investment: 0.8%. 

Institution: 14. U.S. Century Bank; 
Location: Miami, FL; 
Amount invested: $50.2 million; 
Percentage of total outstanding investment: 0.8%. 

Institution: 15. PremierWest Bancorp; 
Location: Medford, OR; 
Amount invested: $41.4 million; 
Percentage of total outstanding investment: 0.7%. 

Institution: 16. Reliance Bancshares, Inc. 
Location: Frontenac, MO; 
Amount invested: $40.0 million; 
Percentage of total outstanding investment: 0.7%. 

Institution: 17. Bridgeview Bancorp, Inc. 
Location: Bridgeview, IL; 
Amount invested: $38.0 million; 
Percentage of total outstanding investment: 0.6%. 

Institution: 18. Porter Bancorp, Inc. 
Location: Louisville, KY; 
Amount invested: $35.0 million; 
Percentage of total outstanding investment: 0.6%. 

Institution: 19. First Security Group, Inc. 
Location: Chattanooga, TN; 
Amount invested: $33.0 million; 
Percentage of total outstanding investment: 0.5%. 

Institution: 20. Centrue Financial Corporation; 
Location: St. Louis, MO; 
Amount invested: $32.7 million; 
Percentage of total outstanding investment: 0.5%. 

Institution: 21. Royal Bancshares of Pennsylvania, Inc.
Location: Narberth, PA; 
Amount invested: $30.4 million; 
Percentage of total outstanding investment: 0.5%. 

Institution: 22. First United Corporation; 
Location: Oakland, MD; 
Amount invested: $30.0 million; 
Percentage of total outstanding investment: 0.5%. 

Institution: 23. Spirit BankCorp, Inc.
Location: Bristow, OK; 
Amount invested: $30.0 million; 
Percentage of total outstanding investment: 0.5%. 

Institution: 24. Intermountain Community Bancorp;
Location: Sandpoint, ID; 
Amount invested: $27.0 million; 
Percentage of total outstanding investment: 0.4%. 

Institution: 25. Patriot Bancshares, Inc. 
Location: Houston, TX; 
Amount invested: $26.0 million; 
Percentage of total outstanding investment: 0.4%. 

Total top 25: 
Amount invested: $4.153 billion; 
Percentage of total outstanding investment: 67.6%. 

All other CPP outstanding: 
Amount invested: $1.981 billion; 
Percentage of total outstanding investment: 32.2%. 

ALL CPP outstanding: 
Amount invested: $6.134 billion; 
Percentage of total outstanding investment: 100.0%. 

Source: GAO analysis of Treasury data. 

[End of figure] 

On a geographical basis, outstanding CPP investments were relatively 
widely disbursed throughout the United States. Thirty-nine states had 
at least 1 institution with CPP investments outstanding, and 12 states 
had at least 5 such institutions (see figure 4). California had the 
highest number of remaining CPP institutions with 17, followed by 
Missouri with 11. In terms of total CPP investments outstanding, 
however, Puerto Rico had the largest amount ($1.3 billion), followed 
by Georgia ($1.0 billion), Missouri ($420 million), and Michigan ($379 
million). 

Figure 4: Remaining Participation in the Capital Purchase Program by 
State, as of March 31, 2013: 

[Refer to PDF for image: illustrated U.S. map] 

Alabama: 
Number of institutions participating in the CPP: 4; 
Outstanding CPP funds: $10.44 million. 

Alaska: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0.003 million. 

Arizona: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $8.05 million. 

Arkansas: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $92.74 million. 

California: 
Number of institutions participating in the CPP: 17; 
Outstanding CPP funds: $257.55 million. 

Colorado: 
Number of institutions participating in the CPP: 5; 
Outstanding CPP funds: $40.97 million. 

Connecticut: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Delaware: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

District of Columbia: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Florida: 
Number of institutions participating in the CPP: 7; 
Outstanding CPP funds: $101.29 million. 

Georgia: 
Number of institutions participating in the CPP: 9; 
Outstanding CPP funds: $1.028 billion. 

Hawaii: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0.002 million. 

Idaho: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $41.9 million. 

Illinois: 
Number of institutions participating in the CPP: 8; 
Outstanding CPP funds: $166.66 million. 

Indiana: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $17.87 million. 

Iowa: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $7.15 million. 

Kansas: 
Number of institutions participating in the CPP: 4; 
Outstanding CPP funds: $39.79 million. 

Kentucky: 
Number of institutions participating in the CPP: 6; 
Outstanding CPP funds: $71.94 million. 

Louisiana: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $5.34 million. 

Maine: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $10 million. 

Maryland: 
Number of institutions participating in the CPP: 8; 
Outstanding CPP funds: $94.64 million. 

Massachusetts: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $17.06 million. 

Michigan: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $378.79 million. 

Minnesota: 
Number of institutions participating in the CPP: 7; 
Outstanding CPP funds: $48.23 million. 

Mississippi: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $10.12 million. 

Missouri: 
Number of institutions participating in the CPP: 11; 
Outstanding CPP funds: $420.26 million. 

Montana: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0.001 million. 

Nebraska: 
Number of institutions participating in the CPP: 4; 
Outstanding CPP funds: $3.73 million. 

Nevada: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $2.67 million. 

New Hampshire: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

New Jersey: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $36.06 million. 

New Mexico: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $1.58 million. 

New York: 
Number of institutions participating in the CPP: 3; 
Outstanding CPP funds: $299.77 million. 

North Carolina: 
Number of institutions participating in the CPP: 9; 
Outstanding CPP funds: $196 million. 

North Dakota: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $30.84 million. 

Ohio: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Oklahoma: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $30 million. 

Oregon: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $44.62 million. 

Pennsylvania: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $42.94 million. 

Puerto Rico: 
Number of institutions participating in the CPP: 2; 
Outstanding CPP funds: $1.335 billion. 

Rhode Island: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $1.07 million. 

South Carolina: 
Number of institutions participating in the CPP: 5; 
Outstanding CPP funds: $48.6 million. 

South Dakota: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Tennessee: 
Number of institutions participating in the CPP: 4; 
Outstanding CPP funds: $57.37 million. 

Texas: 
Number of institutions participating in the CPP: 8; 
Outstanding CPP funds: $83.85 million. 

Utah: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Vermont: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Virginia: 
Number of institutions participating in the CPP: 8; 
Outstanding CPP funds: $171.36 million. 

Washington: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

West Virginia: 
Number of institutions participating in the CPP: 0; 
Outstanding CPP funds: $0. 

Wisconsin: 
Number of institutions participating in the CPP: 5; 
Outstanding CPP funds: $132 million. 

Wyoming: 
Number of institutions participating in the CPP: 1; 
Outstanding CPP funds: $3.1 million. 

Sources: GAO analysis of OFS data; Map Resources (map). 

[End of figure] 

Remaining CPP Institutions Are Generally Less Financially Healthy Than 
Those That Have Exited: 

Most Remaining CPP Participants Have Missed Dividend or Interest 
Payments: 

Of the 190 financial institutions remaining in CPP as of February 28, 
2013, 125 missed their most recent scheduled dividend or interest 
payment.[Footnote 15] The number of institutions missing dividend or 
interest payments increased steadily from 8 in February 2009 to 159 in 
August 2011 and has since declined each quarter to 125 in February 
2013 (see figure 5).[Footnote 16] Despite the recent decline, the 
proportion of the remaining institutions that missed scheduled 
payments has continued to rise. For example, the percentage of banks 
with missed payments when participation stood at 467 in February 2009 
was 2 percent, or 8 participants. In February 2013, with just 190 
participants, the percentage stood at 66 percent, or 125 participants 
with missed payments. Further, most of the institutions with missed 
payments have missed them in several quarters. In particular, 119 of 
the 125 institutions that missed payments in February 2013 had also 
missed payments in each of the previous three quarters. Moreover, 
prior to February 2013 these 125 institutions had missed an average of 
9.4 payments, and just 2 had never missed a previous payment. 

Figure 5: Number of Institutions Missing Scheduled Dividend or 
Interest Payments and Number of Institutions Participating in the 
Capital Purchase Program by Quarter, February 2009 through February 
2013: 

[Refer to PDF for image: multiple line graph] 

Date: February 2009; 
Institutions missing dividend or interest payments: 8; 
Institutions remaining in CPP: 467. 

Date: May 2009; 
Institutions missing dividend or interest payments: 18; 
Institutions remaining in CPP: 593. 

Date: August 2009; 
Institutions missing dividend or interest payments: 34; 
Institutions remaining in CPP: 637. 

Date: November 2009; 
Institutions missing dividend or interest payments: 54; 
Institutions remaining in CPP: 645. 

Date: February 2010; 
Institutions missing dividend or interest payments: 79; 
Institutions remaining in CPP: 645. 

Date: May 2010; 
Institutions missing dividend or interest payments: 97; 
Institutions remaining in CPP: 636. 

Date: August 2010; 
Institutions missing dividend or interest payments: 123; 
Institutions remaining in CPP: 616. 

Date: November 2010; 
Institutions missing dividend or interest payments: 132; 
Institutions remaining in CPP: 586. 

Date: February 2011; 
Institutions missing dividend or interest payments: 152; 
Institutions remaining in CPP: 562. 

Date: May 2011; 
Institutions missing dividend or interest payments: 156; 
Institutions remaining in CPP: 543. 

Date: August 2011; 
Institutions missing dividend or interest payments: 159; 
Institutions remaining in CPP: 464. 

Date: November 2011; 
Institutions missing dividend or interest payments: 158; 
Institutions remaining in CPP: 379. 

Date: February 2012; 
Institutions missing dividend or interest payments: 158; 
Institutions remaining in CPP: 363. 

Date: May 2912; 
Institutions missing dividend or interest payments: 153; 
Institutions remaining in CPP: 343. 

Date: August 2012; 
Institutions missing dividend or interest payments: 150; 
Institutions remaining in CPP: 300. 

Date: November 2012; 
Institutions missing dividend or interest payments: 145; 
Institutions remaining in CPP: 237. 

Date: February 2013; 
Institutions missing dividend or interest payments: 125; 
Institutions remaining in CPP: 190. 

Source: GAO analysis of Treasury data. 

Note: Dividend and interest payments are due on a quarterly basis. The 
number of participating institutions in any given quarter did not 
reach 707 (that is, the total number of institutions that participated 
in CPP) because institutions entered and exited the program at 
different times. Also, 190 institutions remained in CPP as of February 
28, 2013, but as of March 31, 2013, that number had decreased to 173. 

[End of figure] 

Institutions can elect whether to pay dividends and may choose not to 
pay for a variety of reasons, including decisions that they or their 
federal and state regulators make to conserve cash and maintain (or 
increase) capital levels. Institutions are required to pay dividends 
only if they declare dividends, although unpaid cumulative dividends 
generally accrue and the institution must pay them before making 
payments to other types of shareholders, such as holders of common 
stock. However, investors view a company's ability to pay dividends as 
an indicator of its financial strength and may see failure to pay full 
dividends as a sign of financial weakness. 

The Number of Remaining CPP Institutions on FDIC's Problem Bank List 
Has Declined: 

Showing a similar trend to missed dividend or interest payments, the 
number of CPP institutions on the Federal Deposit Insurance 
Corporation's (FDIC) "problem bank list" has decreased in recent 
months after months of steady increases. This list is a compilation of 
banks with demonstrated financial, operational, or managerial 
weaknesses that threaten their continued financial viability and is 
publicly reported on a quarterly basis.[Footnote 17] As of December 
31, 2012, 107 CPP institutions were on the problem bank list (see 
figure 6). The number of these institutions increased every quarter 
beginning in March 2009, hitting a high of 134 in June 2011, even as 
the number of institutions participating in CPP declined (see figure 
5). As figure 6 shows, the number of problem banks fell slightly for 
the first time in the third quarter of 2011 and has declined to 107. 
Federal and state bank regulators may not allow institutions on the 
problem bank list to make dividend payments in an effort to preserve 
their capital and promote safety and soundness. 

Figure 6: Number of Capital Purchase Program Institutions on FDIC's 
Problem Bank List, December 2008 through December 2012: 

[Refer to PDF for image: line graph] 

Date: December 2008; 
Number of institutions: 2. 

Date: March 2009; 
Number of institutions: 1. 

Date: June 2009; 
Number of institutions: 7. 

Date: September 2009; 
Number of institutions: 15. 

Date: December 2009; 
Number of institutions: 47. 

Date: March 2010; 
Number of institutions: 71. 

Date: June 2010; 
Number of institutions: 78. 

Date: September 2010; 
Number of institutions: 93. 

Date: December 2010; 
Number of institutions: 120. 

Date: March 2011; 
Number of institutions: 127. 

Date: June 2011; 
Number of institutions: 134. 

Date: September 2011; 
Number of institutions: 132. 

Date: December 2011; 
Number of institutions: 132. 

Date: March 2012; 
Number of institutions: 126. 

Date: June 2012; 
Number of institutions: 120. 

Date: September 2012; 
Number of institutions: 118. 

Date: December 2012; 
Number of institutions: 107. 

Source: FDIC. 

Note: The numbers presented in this figure were compiled by FDIC in 
response to our request and are not otherwise maintained or published 
by FDIC. FDIC's problem bank list does not include bank holding 
companies. Bank holding company recipients of CPP funds were accounted 
for if one or more of their subsidiary depositories were designated as 
problem banks. Each subsidiary depository appearing on the list was 
counted separately. 

[End of figure] 

Remaining CPP Institutions Are Financially Weaker Than Former CPP and 
Non-CPP Institutions: 

Institutions that remain in CPP tend to be financially weaker than 
institutions that have exited the program and institutions that did 
not receive CPP capital. Our analysis considered various measures that 
describe banking institutions' profitability, asset quality, capital 
adequacy, and ability to cover losses. We analyzed financial data on 
187 remaining CPP institutions and 422 former CPP institutions, which 
we split into three groups: (1) those that repaid their investments, 
(2) those that exited through an auction, and (3) those that 
refinanced their investments through SBLF. The current and former CPP 
institutions in our analysis accounted for 609 of the 707 institutions 
that participated in CPP. We compared the 609 institutions to a non-
CPP group (i.e., institutions that have not participated in CPP) of 
8,049 active financial institutions for which financial information 
was available. All financial information generally reflects quarterly 
regulatory filings on December 31, 2012. 

Our analysis shows that mostly smaller institutions remain in the 
program and that larger institutions tended to exit through repayment. 
For example, institutions that exited through repayment had a median 
asset size of $2.2 billion, compared with $550 million for those that 
refinanced through SBLF and $503 million for those that exited through 
an auction (see table 1). Moreover, in the aggregate, the remaining 
institutions were noticeably less financially healthy than each of the 
groups of former CPP participants. Further, as a group, institutions 
that exited through auctions were significantly less financially 
healthy than the group of institutions that repaid their investments 
or refinanced through SBLF. Finally, the group of institutions that 
never participated in CPP was also more financially healthy than the 
group of institutions that remain in the program, and based on some 
measures, more so than the group that had exited CPP. 

Table 1: Aggregate Financial Information on the Analysis Population, 
as of December 31, 2012: 

Number of institutions; 
Former CPP: 
Repaid: 176; 
Auctioned: 112; 
SBLF: 134; 
Total: 422; 
Remaining CPP: 187; 
Non-CPP: 8,049. 

Assets (dollars in thousands); 
Former CPP: 
Repaid: $2,214,200; 
Auctioned: $502,553; 
SBLF: $549,527; 
Total: $770,658; 
Remaining CPP: $368,545; 
Non-CPP: $194,708. 

Texas Ratio; 
Former CPP: 
Repaid: 20.77; 
Auctioned: 40.78; 
SBLF: 16.78; 
Total: 23.05; 
Remaining CPP: 49.72; 
Non-CPP: 15.22. 

Return on average assets; 
Former CPP: 
Repaid: 0.88; 
Auctioned: 0.61; 
SBLF: 0.77; 
Total: 0.78; 
Remaining CPP: 0.45; 
Non-CPP: 0.76. 

Noncurrent loan percentage; 
Former CPP: 
Repaid: 1.74; 
Auctioned: 2.81; 
SBLF: 1.24; 
Total: 1.76; 
Remaining CPP: 3.21; 
Non-CPP: 1.43. 

Net chargeoffs to average loans; 
Former CPP: 
Repaid: 0.33; 
Auctioned: 0.66; 
SBLF: 0.27; 
Total: 0.38; 
Remaining CPP: 0.90; 
Non-CPP: 0.19. 

Tier 1 risk-based capital ratio; 
Former CPP: 
Repaid: 13.10; 
Auctioned: 13.43; 
SBLF: 13.74; 
Total: 13.46; 
Remaining CPP: 12.87; 
Non-CPP: 15.24. 

Common equity Tier 1 ratio; 
Former CPP: 
Repaid: 12.28; 
Auctioned: 11.39; 
SBLF: 11.10; 
Total: 11.62; 
Remaining CPP: 10.58; 
Non-CPP: 15.09. 

Reserves to nonperforming loans; 
Former CPP: 
Repaid: 76.08; 
Auctioned: 48.49; 
SBLF: 80.07; 
Total: 65.51; 
Remaining CPP: 42.60; 
Non-CPP: 65.10. 

Loan loss provisions to net chargeoffs; 
Former CPP: 
Repaid: 86.25; 
Auctioned: 65.70; 
SBLF: 105.11; 
Total: 85.71; 
Remaining CPP: 35.13; 
Non-CPP: 59.38. 

Source: GAO analysis of SNL Financial data. 

Note: The figures in the table represent median values for all 
institutions in the particular population. We analyzed financial data 
on 187 remaining CPP institutions and 422 former CPP institutions, 
accounting for 609 of the 707 institutions that participated in CPP. 
Financial data were available from SNL Financial for 471 of the 609 
institutions, and we accounted for the remaining 138 institutions 
using SNL Financial information for the holding company's largest 
subsidiary. The 98 CPP institutions our analysis excluded had no data 
available in SNL Financial, had been acquired, or were defunct. 

[End of table] 

In particular, remaining CPP institutions had noticeably higher Texas 
Ratios than each group of former CPP institutions as well as the non-
CPP group. The Texas Ratio helps determine a bank's likelihood of 
failure by comparing its troubled loans to its capital.[Footnote 18] 
The higher the ratio, the more likely the institution is to fail. As 
of December 31, 2012, remaining CPP institutions had a median Texas 
Ratio of 49.72, compared with 23.05 for former CPP institutions and 
15.22 for the non-CPP group. Further, of the institutions that exited 
CPP, those that exited CPP through auctions had the highest median 
Texas Ratio (40.78), compared with those that exited through full 
repayments (20.77) or by refinancing to SBLF (16.78). 

Profitability measures for remaining CPP institutions were lower than 
those for former CPP participants and the non-CPP group. For example, 
the return on average assets measure shows how profitable a company is 
relative to its total assets and how efficient management is at using 
its assets to generate earnings. For the quarter ending December 31, 
2012, remaining CPP institutions had a median return on average assets 
of 0.45, compared with 0.78 for former CPP institutions and 0.76 for 
the non-CPP group.[Footnote 19] Further, among the institutions that 
had exited CPP, those that participated in Treasury's auctions had the 
lowest return on average assets at 0.61, compared with 0.88 for those 
that repaid their investments and 0.77 for those that refinanced to 
SBLF. 

Remaining CPP institutions also held relatively more poorly performing 
assets. For example, remaining CPP institutions had a higher 
percentage of noncurrent loans than former CPP institutions and the 
non-CPP group. As of December 31, 2012, a median of 3.21 percent of 
loans for remaining CPP institutions were noncurrent, compared with 
1.76 percent for former CPP institutions and 1.43 percent for the non-
CPP group. Remaining CPP institutions also had a higher median ratio 
of net charge-offs to average loans (0.90) than both former CPP 
institutions (0.38) and the non-CPP group (0.19), as of December 31, 
2012.[Footnote 20] For both of these ratios, the auction participants 
had higher values than institutions that made full repayments or 
refinanced to SBLF. 

Compared with former CPP institutions and the non-CPP group, remaining 
CPP institutions held less regulatory capital as a percentage of 
assets. Regulators require minimum amounts of capital to lessen an 
institution's risk of default and improve its ability to sustain 
operating losses. Capital can be measured in several ways, but we 
focused on Tier 1 capital, which includes both risk-based and common 
risk-based measures, because it is the most stable form of regulatory 
capital.[Footnote 21] The Tier 1 risk-based capital ratio measures 
Tier 1 capital as a share of risk-weighted assets, and the common 
equity Tier 1 ratio measures common equity Tier 1 as a share of risk-
weighted assets. Using these measures, the remaining CPP institutions 
had lower Tier 1 capital levels than former CPP institutions and the 
non-CPP group. These differences are similar to, but less pronounced 
than, those for other measures we analyzed. As of December 31, 2012, 
Tier 1 capital accounted for 12.87 percent of risk-weighted assets for 
remaining CPP institutions, compared with 13.46 percent for former CPP 
institutions and 15.24 percent for the non-CPP group. Among those that 
had exited CPP, however, the Tier 1 capital levels for auction 
participants were lower than those that refinanced to SBLF but higher 
than those that had repaid. 

Because Tier 1 capital for the remaining institutions includes funds 
received through TARP, ratios using common equity Tier 1--which 
generally does not include TARP funds--may better illustrate these 
institutions' capital adequacy. As with the Tier 1 risk-based capital 
ratio, the common equity Tier 1 ratio for remaining CPP institutions 
was below the ratios for the former CPP institutions and the non-CPP 
group. As of December 31, 2012, common equity Tier 1 for remaining CPP 
institutions had a median of 10.58 percent of risk-weighted assets, 
compared with 11.62 percent for former CPP institutions and 15.09 
percent for the non-CPP group. 

Finally, remaining CPP institutions had significantly lower reserves 
for covering losses compared with former CPP institutions and the non-
CPP group. As of December 31, 2012, the ratio of reserves to 
nonperforming loans was lower for remaining CPP institutions (42.60) 
than for former CPP participants (65.51) and the non-CPP group 
(65.10). We also compared loan loss provisions to net charge-offs and 
found that the remaining CPP institutions had lower ratios (35.13) 
than former CPP institutions (85.71) and the non-CPP group (59.38). 
For both of these ratios, the auction participants had lower values 
than institutions that made full repayments or refinanced to SBLF. 

These findings are consistent with the analysis in our March 2012 
report, which also showed that the remaining CPP institutions were 
financially weaker than institutions that had exited the program and 
institutions that did not receive CPP capital.[Footnote 22] In that 
report, we noted that Treasury's quarterly financial analysis of CPP 
institutions did not distinguish between remaining and former CPP 
institutions. Given the differences between these two groups, we 
recommended that Treasury consider analyzing and reporting on them 
separately. To date, Treasury has not implemented this recommendation. 
We maintain that doing so would provide greater transparency about the 
financial health of institutions remaining in CPP. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to Treasury for its review and 
comment. Treasury provided written comments that we have reprinted in 
appendix II. In its written comments, Treasury generally concurred 
with our findings. Treasury noted that it had realized a positive 
return of $17.1 billion on its CPP investments as of April 25, 2013, 
and that 164 institutions remained in the program representing a 
remaining investment of $5.7 billion. Treasury also emphasized its 
commitment to keeping the public informed of its progress in winding 
down CPP. 

We are sending copies of this report to the Financial Stability 
Oversight Board, Special Inspector General for TARP, interested 
congressional committees and members, and Treasury. The report also is 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact A. Nicole Clowers at (202) 512-8678 or clowersa@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made major contributions to this report are listed in appendix III. 

Signed by: 

A. Nicole Clowers: 
Director Financial Markets and Community Investment: 

List of Addressees: 

The Honorable Barbara Mikulski: 
Chairwoman: 
The Honorable Richard C. Shelby: 
Vice Chairman: 
Committee on Appropriations: 
United States Senate: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Mike Crapo: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Patty Murray: 
Chairman: 
The Honorable Jeff Sessions: 
Ranking Member: 
Committee on the Budget: 
United States Senate: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Orrin G. Hatch: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

The Honorable Hal Rogers: 
Chairman: 
The Honorable Nita Lowey: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Paul Ryan: 
Chairman: 
The Honorable Chris Van Hollen: 
Ranking Member: 
Committee on the Budget: 
House of Representatives: 

The Honorable Jeb Hensarling: 
Chairman: 
The Honorable Maxine Waters: 
Ranking Member: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Dave Camp: 
Chairman: 
The Honorable Sander Levin: 
Ranking Member: 
Committee on Ways and Means: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The objectives of our report were to examine (1) the status of the 
Capital Purchase Program (CPP), including repayments and other 
proceeds, as well as investments outstanding; and (2) the financial 
condition of institutions remaining in CPP. To assess the status of 
CPP at the program level, we analyzed data from the Department of the 
Treasury (Treasury). In particular, we used Treasury's March 2013 
Monthly Report to Congress to determine the dollar amounts of 
outstanding investments, the number of remaining and former 
participants, and the geographical distribution of each as of March 
31, 2013. 

To assess the financial condition of institutions that received 
investments under CPP, we used data from Treasury's Dividends and 
Interest reports from February 2009 through February 2013 to determine 
the extent to which participants had missed payments throughout the 
life of the program. We also obtained from the Federal Deposit 
Insurance Corporation (FDIC) summary information on its quarterly 
problem bank list to show the trend of CPP institutions appearing on 
the list from December 2008 through December 2012. We used financial 
measures for depository institutions that we had identified in our 
previous reporting on CPP[Footnote 23]. These measures help 
demonstrate an institution's financial health as it relates to a 
number of categories, including profitability, asset quality, capital 
adequacy, and loss coverage. We obtained such financial data for 
depository institutions using a private financial database provided by 
SNL Financial that contains publicly filed regulatory and financial 
reports. We merged the data with SNL Financial's CPP participant list 
to create the three comparison groups--remaining CPP institutions, 
former CPP institutions, and a non-CPP group comprised of all 
institutions that did not participate in CPP. 

We analyzed financial data on 187 remaining CPP institutions and 422 
former CPP institutions that exited CPP through full repayments, 
conversion to the Small Business Lending Fund, or Treasury's sale of 
its investments through an auction, accounting for 609 of the 707 CPP 
participants. The 98 CPP institutions our analysis excluded had no 
data available in SNL Financial, had been acquired, or were defunct. 
We compared the remaining and former CPP institutions to a non-CPP 
group of 8,049 active financial institutions for which financial 
information was available. Financial data were available from SNL 
Financial for 471 of the 609 CPP institutions, and we accounted for 
the remaining 138 institutions using SNL Financial information for the 
holding company's largest subsidiary. All financial information 
reflects quarterly regulatory filings on December 31, 2012, unless 
otherwise noted. We downloaded all financial data from SNL Financial 
on April 4, 2013. Finally, we leveraged our past reporting on the 
Troubled Asset Relief Program (TARP), as well as that of the Special 
Inspector General for TARP, as appropriate. 

We determined that the financial information used in this report, 
including CPP program data from Treasury and financial data on 
institutions from SNL Financial, was sufficiently reliable to assess 
the condition and status of CPP and institutions that participated in 
the program. For example, we tested the Office of Financial 
Stability's internal controls over financial reporting as they relate 
to our annual audit of the office's financial statements and found the 
information to be sufficiently reliable based on the results of our 
audits of fiscal years 2009, 2010, 2011, and 2012 financial statements 
for TARP.[Footnote 24] We have assessed the reliability of SNL 
Financial data--which is obtained from financial statements submitted 
to the banking regulators--as part of previous studies and found the 
data to be reliable for the purposes of our review. We verified that 
no changes had been made that would affect the data's reliability. 

We conducted this performance audit from January 2013 to May 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Office of Financial Stability: 

Department of The Treasury: 
Assistant Secretary: 
Washington, D.C. 

April 26, 2013: 

A. Nicole Clowers: 
Director: 
Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Clowers: 

I am writing in response to your draft report regarding the Capital 
Purchase Program (CPP), entitled, Capital Purchase Program: Status of 
the Program and Financial Health of Remaining Participants (Draft 
Report). The Department of the Treasury (Treasury) appreciates the 
efforts of the Government Accountability Office (GAO), and this letter 
provides our official comments to the Draft Report. 

The Draft Report provides a valuable snapshot of CPP and the 
institutions that remain in the program. We note that taxpayers have 
so far realized a nearly $26 billion positive return on their 
investments through TARP's bank programs. Treasury has recovered 
almost $271 billion from TARP's bank programs through repayments, 
dividends, interest, and other income — compared to the $245 billion 
invested in those institutions. As the Draft Report notes, Treasury 
estimated in December 2012 that the CPP program alone would provide a 
lifetime positive return of more than $15 billion to taxpayers. 
Indeed, as of today's date, Treasury has recovered $222 billion on an 
initial CPP investment of $204.9 billion — representing a profit of 
$17.1 billion. In addition, only 164 of the 707 CPP participants are 
currently in the program, representing a remaining Treasury investment 
of only $5.73 billion. 

Treasury has been winding down CPP through a three-pronged strategy 
that involves: (1) waiting for repayments from those banks who can 
repay in the near future, (2) selling through competitive auctions 
investments in banks that cannot repay in the near future, and (3) 
restructuring some investments. During this wind-down process, we 
remain committed to keeping the public informed of our progress. 

Treasury values GAO's review of CPP and looks forward to continuing to 
work with you and your team as we move forward. 

Sincerely, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Karen Tremba (Assistant 
Director), Christopher Forys, Michael Mikota, Emily Chalmers, William 
Chatlos, Marc Molino, and Patricia Moye made significant contributions 
to this report. 

[End of section] 

Footnotes: 

[1] As authorized by the Emergency Economic Stabilization Act of 2008 
(EESA), Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12 
U.S.C. §§ 5201 et seq. EESA, which was signed into law on October 3, 
2008, established the Office of Financial Stability within Treasury 
and provided it with broad, flexible authorities to buy or guarantee 
troubled mortgage-related assets or any other financial instruments 
necessary to stabilize the financial markets. 

[2] Section 3(9) of EESA, 12 U.S.C. § 5202(9). EESA required that the 
appropriate committees of Congress be notified in writing that the 
Secretary of the Treasury, after consultation with the Chairman of the 
Board of Governors of the Federal Reserve System, had determined that 
it was necessary to purchase other financial instruments to promote 
financial market stability. EESA originally authorized Treasury to 
purchase or guarantee up to $700 billion in troubled assets. The 
Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, 
Div. A, 123 Stat. 1632 (2009), amended EESA to reduce the maximum 
allowable amount of outstanding troubled assets under EESA by almost 
$1.3 billion, from $700 billion to $698.7 billion. 

[3] A warrant is an option to buy shares of common stock or preferred 
stock at a predetermined price on or before a specified date. 

[4] Section 116 of EESA, 122 Stat. at 3783 (codified at 12 U.S.C. § 
5226). 

[5] See, for example, GAO, Troubled Asset Relief Program: Treasury 
Sees Some Returns as It Exits Programs and Continues to Fund Mortgage 
Programs, [hyperlink, http://www.gao.gov/products/GAO-13-192] 
(Washington, D.C.: Jan. 7, 2013), Capital Purchase Program: Revenues 
Have Exceeded Investments, but Concerns about Outstanding Investments 
Remain, [hyperlink, http://www.gao.gov/products/GAO-12-301] 
(Washington, D.C.: Mar. 8, 2012), and Troubled Asset Relief Program: 
Opportunities Exist to Apply Lessons Learned from the Capital Purchase 
Program to Similarly Designed Programs and to Improve the Repayment 
Process, [hyperlink, http://www.gao.gov/products/GAO-11-47] 
(Washington, D.C.: Oct. 4, 2010). 

[6] For purposes of CPP, qualifying financial institutions generally 
include stand-alone U.S.-controlled banks and savings associations, as 
well as bank holding companies and most savings and loan holding 
companies. 

[7] Risk-weighted assets are all assets and off-balance-sheet items 
held by an institution, weighted for risk according to the federal 
banking agencies' regulatory capital standards. In May 2009, Treasury 
increased the maximum amount of CPP funding that small financial 
institutions (qualifying financial institutions with total assets of 
less than $500 million) could receive from 3 to 5 percent of risk-
weighted assets. 

[8] For S corporations, a federal business type that provides certain 
tax and other benefits, Treasury received subordinated debt rather 
than preferred shares in order to preserve these institutions' special 
tax status. The U.S. Internal Revenue Code prohibits S corporations 
from having more than one class of stock outstanding. Interest rates 
for this debt are 7.7 percent for the first 5 years and 13.8 percent 
for the remaining years. 

[9] The nine major financial institutions were Bank of America 
Corporation; Citigroup, Inc.; JPMorgan Chase & Co.; Wells Fargo & 
Company; Morgan Stanley; The Goldman Sachs Group, Inc.; The Bank of 
New York Mellon Corporation; State Street Corporation; and Merrill 
Lynch & Co., Inc. 

[10] Treasury, Troubled Asset Relief Program (TARP) Monthly Report to 
Congress - March 2013 (Apr. 10, 2013). 

[11] Treasury estimates lifetime costs on a quarterly basis using the 
aggregate value of investments at market prices in conjunction with 
the Office of Management and Budget and publishes them in its monthly 
reports to Congress. 

[12] Additionally, 17 institutions have made partial repayments but 
remain in the program. 

[13] SBLF was created by the Small Business Jobs Act of 2010, Pub. L. 
No. 111-240, 124 Stat. 2504 (2010) to encourage small business 
lending. SBLF was a $30 billion fund operated by Treasury but separate 
from TARP that provided capital to qualified community banks and 
community development loan funds with assets of less than $10 billion. 
When SBLF closed on September 27, 2011, the program had approved $4 
billion in disbursements to 332 institutions. Of the 332 institutions 
participating in SBLF, 137 were originally TARP participants with 
combined investments of $2.2 billion. The Community Development 
Capital Initiative (CDCI) is a TARP program that provides capital to 
Community Development Financial Institutions that have a federal 
depository institution supervisor. Structured like CPP, the program 
also covered credit unions and provides more favorable capital terms 
than CPP. 

[14] We plan to examine Treasury's wind-down strategy for CPP and the 
use of auctions in a future report. 

[15] Under CPP terms, institutions pay cumulative dividends on their 
preferred shares, except for banks that are not subsidiaries of 
holding companies, which pay noncumulative dividends. Some other types 
of institutions, such as S corporations, received their CPP 
investments in the form of subordinated debt and pay interest rather 
than dividends. CPP dividend and interest payments are due on February 
15, May 15, August 15, and November 15 of each year, or the first 
business day subsequent to those dates. The reporting period ends on 
the last day of the calendar month in which the dividend or interest 
payment is due. The first dividend payments were due in February 2009, 
and since then, 246 of the 707 participants had missed at least one 
payment, accounting for a cumulative total of 1,901 missed payments. 

[16] In its dividend and interest reports, Treasury no longer 
considers a payment to be missed or unpaid once the institution (1) 
repays its investment amount and exits CPP, (2) repays dividends by 
way of capitalization at the time of exchange, or (3) enters 
bankruptcy or has its bank subsidiary placed into receivership. 
However, we included such institutions in our counts. 

[17] While some CPP funds were disbursed to bank holding companies, 
FDIC's problem bank list does not include them. FDIC accounted for 
bank holding companies participating in CPP when their subsidiary 
depositories were designated as problem banks. It is possible that a 
bank holding company CPP recipient downstreamed CPP funds to a 
subsidiary depository that appeared on the problem bank list. However, 
it is unclear the extent to which this downstreaming occurred and thus 
the extent to which subsidiaries on the list may have benefited from 
CPP funds. Multiple subsidiary depositories of the same CPP bank 
holding company that were designated as problem banks were counted 
separately. 

[18] The Texas Ratio is defined as nonperforming assets plus loans 90 
or more days past due divided by tangible equity and reserves. 

[19] Return on average assets is net income divided by average total 
assets. 

[20] A charge-off occurs when a bank recognizes that a particular 
asset or loan will not be collectible and must be written off. 

[21] Tier 1 capital includes the core capital elements that are 
considered the most reliable and stable, such as common stock, 
noncumulative perpetual preferred stock, and minority interests in 
consolidated subsidiaries. Total capital includes Tier 1 capital and 
Tier 2 capital, or supplementary capital. Risk-weighted assets are on-
and off-balance sheet assets adjusted for their risk characteristics. 

[22] See [hyperlink, http://www.gao.gov/products/GAO-12-301]. 

[23] See GAO, Capital Purchase Program: Revenues Have Exceeded 
Investments, but Concerns about Outstanding Investments Remain, 
[hyperlink, http://www.gao.gov/products/GAO-12-301] (Washington, D.C.: 
Mar. 8, 2012). 

[24] See GAO, Financial Audit: Office of Financial Stability (Troubled 
Asset Relief Program) Fiscal Years 2012 and 2011 Financial Statements, 
[hyperlink, http://www.gao.gov/products/GAO-13-126R] (Washington, 
D.C.: Nov. 9, 2012); Financial Audit: Office of Financial Stability 
(Troubled Asset Relief Program) Fiscal Years 2011 and 2010 Financial 
Statements, [hyperlink, http://www.gao.gov/products/GAO-12-169] 
(Washington, D.C.: Nov.10, 2011); Financial Audit: Office of Financial 
Stability (Troubled Asset Relief Program) Fiscal Years 2010 and 2009 
Financial Statements, [hyperlink, 
http://www.gao.gov/products/GAO-11-174] (Washington, D.C.: Nov.15, 
2010); and Financial Audit: Office of Financial Stability (Troubled 
Asset Relief Program) Fiscal Year 2009 Financial Statements, 
[hyperlink, http://www.gao.gov/products/GAO-10-301] (Washington, D.C.: 
Dec. 9, 2009). 

[End of section] 

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