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A U.S. Treasury spokesman characterized the write-off as a “restructuring agreement.” In the agreement, Treasury officials agreed to sell Capital Purchase Program securities back to Flatirons Bank at a discount, the spokesman said, declining to be named.
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In return, Flatirons Bank agreed to raise a certain amount of capital and reduce certain indebtedness, the spokesman said. He did not give further details, other than to say that functioning banks are more valuable to the economy than bankrupt banks.
The Capital Purchase Program was part of the Troubled Asset Relief Program, or TARP, which was created in 2008 to bail out big national banks following a subprime mortgage crisis that sent the national economy into a recession. Officials from TARP loaned $3.035 million to FBHC Holding Co. in 2009.
When contacted for comment, Flatirons Bank President Kyle Heckman said only that FBHC Holding Co. exited TARP in March 2011.
The TARP write-off to FBHC came to light this month after the Boulder County Business Report requested a list of Colorado banks that had received TARP funds from the Office of the Special Inspector General for TARP.
Of 11 Colorado banks on the list, three paid their TARP loans in full and four sold their stock at a loss back to the U.S. Treasury. Four others, including FBHC Holding Co., owed missed dividend and interest payments.
From 2009 to 2011, FBHC paid back $154,592 in dividends and interest on its TARP loan, according to Troy Gravitt, a spokesman for the Office of the Special Inspector General for TARP.
In March 2011, Treasury officials wrote off the remaining investment at a loss of $2.385 million, Gravitt said. The federal agency also forfeited its right to collect an additional $123,127 in two dividend and interest payments when it wrote off the debt, he said.
Flatirons Bank had other financial issues at the time, the Treasury spokesman said. From 2005 to 2010, former chairman Mark Yost masterminded a financial fraud scheme that allowed him to defraud banks and investors out of $10.8 million.
Yost is serving a six-and-a-half-year prison sentence in connection with his crimes.
While many banks across the nation have repaid the TARP loans they took, the U.S. Treasury department has written off $1.83 billion in losses, according to the spokesman.