Texas Capital warrants bring in $6.56M for Treasury

Updated 4m ago
By Martin Crutsinger, AP Economics Writer

WASHINGTON — The Treasury Department has received $6.56 million from the sale of warrants it held from Texas Capital Bancshares (TCBI) as part of the support it provided the bank during the financial crisis.

The Treasury said Friday that it sold 758,000 warrants in a auction with a sales price of $8.85 per warrant. Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.

The auction was the third and final auction this week and followed one last week that raised a record $1.54 billion from the sale of warrants the government had received from Bank of America.

The auction for Texas Capital Bancshares followed auctions this week that raised $11.15 million for warrants of New York's Signature Bank and $15.39 million for warrants of Seattle's Washington Federal.

Linus Wilson, a finance professor at the University of Louisiana at Lafayette, said the results showed Treasury followed the right course in holding the four auctions.

"This was a very successful set of auctions. The proceeds for every auction were much better than expected," Wilson said.

He said the $8.85 auction price for the Texas Capital Bancshares warrants indicated that investors were eager to own warrants in smaller banks.

Under the terms set for the Dallas bank, the owner of the warrant will have the right to purchase Texas Capital Bancshares stock at a price of $14.84. for a period that will expire on Jan. 16, 2019.

Under those terms, it will mean that the stock price will have to be above $23.69 for investors to break even in terms of getting back the amount they paid for the warrant plus the amount they would pay for the stock at a strike price of $14.84.

Texas Capital was trading Friday about $18 a share.

The sale of the warrants represents the last link that the Texas bank has with the government's $700 billion bailout fund known as the Troubled Assets Relief Program.

Financial institutions have been eager to exit from the TARP program to escape various restrictions imposed on institutions receiving government support including limitations on executive compensation.

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