Treasury Sells WFSL Warrants

The Treasury announced Wednesday that it has received net proceeds of $15.4 million from the sale of warrants it obtained as part of its investment in Washington Federal Inc. (WFSL) through the Troubled Asset Relief Program (TARP) during the height of the financial crisis. In May 2009, WFSL repaid the entire $200 million of bailout money it had received from the government.

The Treasury auctioned 1.71 million warrants at $9.15 each. The final price was above the floor price of $5 per warrant set by Treasury.

The current move will completely free WFSL from government intervention. The auction for WFSL warrants follows Bank of America Corp.'s (BAC - Analyst Report) warrants sale last week. The government received record net proceeds of $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 - Analyst Report) warrants earlier.

Bank of America is the first and WFSL is the second among four banks whose warrants are scheduled to be sold via auctions this month. The other two banks are Texas Capital Bancshares (TCBI - Analyst Report) and Signature Bank (SBNY - Snapshot Report).

In similar transactions during December 2009, the Treasury received $1.1 billion from the sale of warrants of JPMorgan Chase & Co. (JPM - Analyst Report), Capital One Financial Corp. (COF - Analyst Report) and TCF Financial Corp. (TCB - Snapshot Report). The government expects to conduct similar auctions in the future for other warrants it holds in approximately 254 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.

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