By Chris Carey, Bailout Sleuth
Provident Financial Holdings Inc. filed a document with the Securities and Exchange Commission recently stating that it withdrew its applicationfor government aid through the Troubled Asset Relief Program.
The Riverside, Calif-based company, which operates Provident Savings Bank,had sought $29.5 millionthrough TARP's Capital Purchase Program on Oct. 31, 2008. It said in the new filing:
Participation in the CPP is no longer consistent with the Corporation's business strategy as it would make the Corporation ineligible to carry back its net operating losses from 2008 and 2009 for up to five years according to H.R. 3548, the Worker, Homeownership and Business Assistance Act of 2009 ("Act"), which became law on November 6, 2009. The Act specifically prohibits CPP participants from utilizing that favorable federal income tax benefit.
It's certainly not unheard of for a company's executives to change their minds about whether to take TARP money.
But here's the puzzling part: On Oct. 9, the company filed a 47-page S-1 (a "Form for Registration of Securities" also referred to as a prospectus), that actually contains only a one-paragraph mention of the company's potential involvement in the Capital Purchase Program.It's the 80-page amended filing, the S-1/A - which was filed on Nov. 13, the same day that the company reportedly withdrew its application for TARP aid - that goes into much more detail about Provident Financial's application. And in this amended "Form for Registration of Securities" (filed a week after H.R. 3548 was passed, and - again - the same day its application to borrow the money was withdrawn) pages 23 and 24 of the filing read as though the company still intends to take TARP money. That filing states:
Our decision to apply to participate in the CPP was based on our desire to mitigate customer and shareholder concerns regarding our financial stability during a period when the financial crises and challenges to the banking system presented a nationwide focus. Provident participated in each program it was eligible to participate in including the Temporary Liquidity Guarantee Program or TLGP and Transaction Account Guarantee Program or TAGP to do its part to help stabilize the banking system and provide confidence to our customers. Currently, since stability has largely returned to the banking system, we are interested in participating in the CPP to access additional capital to help execute our business strategy and expand lending and services to our community although we may elect not to participate in the CPP if we complete this offering. In that case, we may no longer be interested in CPP funds as a result of the numerous restrictions that have been placed on companies that receive CPP funds and our perception that participation in the CPP may have a negative stigma with the public.
Wedo not believe that whether or not we receive CPP funds will have a material effect on our liquidity, capital resources or results of operations. We have already operated for over one year without CPP funds and have chosen to proceed with this offering, which is consistent with our corporate strategy.
Ifin the future we participate in the CPP, however, our ability to pay dividends could be further restricted because participants in the CPP may not increase dividends paid on common stock during the first three years of participation without the consent of the Treasury. Further, participants in the CPP may not pay dividends unless all accrued dividends owed to the Treasury are fully paid. In addition, there are limits on the compensation and incentives to executive officers of CPP recipients and if we receive CPP funds we will make certain our compensation and benefits arrangements comply with those requirements."
Not to be unkind, but it kind of makes one wonder how well the company's leaders and attorneys are communicating.
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