East West Bancorp Inc. on Wednesday said it fully repaid more than $306 million to the U.S. Treasury Department under the Troubled Asset Relief Program.
The Pasadena bank holding company, which is the county’s second largest by assets, said it used cash on hand to repurchase preferred stock and pay a final dividend of $1.8 million.
The payments are expected to reduce the company’s fourth quarter earnings by 14 cents per share. But by paying off its obligations, the company expects to save $15.3 million in preferred dividend payments, or 10 cents per share on an annual basis beginning next year.
Also, East West said that in the first quarter of next year it intends to repurchase outstanding warrants that would have allowed the U.S. Treasury to purchase 1.5 million shares of the its common stock.
The bank began discussions with regulators several months ago about exiting the program, but had to wait until regulators approved the move. Chief Financial Officer Irene Oh said the bank did not act sooner because it wanted to wait until it had sufficient capital to pay the government back out of pocket. “We wanted to be sure that we repaid without raising any additional capital,” Oh said.
TARP provided about $1.2 billion to 19 Los Angeles County-based banks as part of the federal government’s $250 billion initiative to help banks maintain liquidity during the credit crunch.
City National Corp., the downtown Los Angeles parent of City National Bank, was the first local bank to repay its TARP funds, but most of the other local banks that accepted TARP funds have yet to exit the program. Some, including Mission Valley Bancorp in Sun Valley, instead have exchanged the money received for funds to be dedicated to small-business lending.
Richard Clough contributed to this story.
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