TROUBLED ASSET 

RELIEF PROGRAM

Few Participants 

Remain as Treasury 

Continues to Wind 

Down Capital 

Purchase Program

Report to Congressional Committees

March 2017

GAO-17-422

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-422, a report to 

congressional committees

March 2017

TROUBLED ASSET RELIEF PROGRAM

Few Participants Remain as Treasury Continues to 

Wind Down Capital Purchase Program

What GAO Found

The Department of the Treasury (Treasury) continues to make progress winding 

down the Capital Purchase Program (CPP). As of December 31, 2016, 

investments outstanding stood at almost $0.2 billion (see figure), which 

represents about 0.1 percent of the original amount disbursed. Treasury had 

received almost $200 billion in repayments, including about $25 million in 2016. 

Further, Treasury’s returns for the program, including repayments and income, 

totaled about $227 billion, exceeding the amount originally disbursed by almost 

$22 billion. Of the 707 institutions that originally participated in CPP, 696 had 

exited the program, including 6 institutions in 2016.

Status of the Capital Purchase Program, as of December 31, 2016

Treasury officials expect that the majority of the remaining institutions will require 

a restructuring to exit the program. Restructurings allow institutions to negotiate 

terms for their CPP investments. With this option, Treasury requires institutions 

to raise new capital or merge with another institution and Treasury agrees to 

receive cash or other securities, typically at less than par value. Treasury officials 

expect to rely primarily on restructurings because the overall weaker financial 

condition of the remaining institutions makes full repayment unlikely.

The financial condition of the institutions remaining in CPP as of December 31, 

2016, appears to have improved since the end of 2011, but some institutions 

show signs of financial weakness. For example, 5 institutions had negative 

returns on average assets (a common measure of profitability) for the third 

quarter of 2016. View GAO-17-422. For more information, 

contact Daniel Garcia-Diaz at (202) 512-8678 

or garciadiazd@gao.gov.

Why GAO Did This Study

CPP was established as the primary 

means of restoring stability to the 

financial system under the Troubled 

Asset Relief Program (TARP). Under 

CPP, Treasury invested almost $205 

billion in 707 eligible financial 

institutions between October 2008 and 

December 2009. CPP recipients have 

made dividend and interest payments 

to Treasury on the investments. The 

Emergency Economic Stabilization Act 

of 2008, as amended, includes a 

provision that GAO report at least 

annually on TARP activities and 

performance. This report examines (1) 

the status of CPP, including 

repayments, investments outstanding, 

and number of remaining institutions; 

and (2) the financial condition of 

institutions remaining in CPP.

To assess the program’s status, GAO 

reviewed Treasury reports on the 

status of CPP. In addition, GAO 

reviewed information from Treasury 

officials to identify the agency’s current 

efforts to wind down the program. 

Finally, GAO used financial and 

regulatory data to assess the financial 

condition of institutions remaining in 

CPP.

GAO provided a draft of this report to

Treasury for its review and comment. 

Treasury provided technical comments 

that GAO incorporated as appropriate.
Page i GAO-17-422 Troubled Asset Relief Program

Letter 1

Background 3

CPP Proceeds Surpass Original Investments and Almost All 

Institutions Have Exited Program 4

Overall Financial Condition of Remaining CPP Institutions Has 

Improved but Some Show Signs of Financial Weakness 12

Agency Comments 16

Appendix I GAO Contact and Staff Acknowledgements 19

Figures

Figure 1: Status of the Capital Purchase Program, as of 

December 31, 2016 5

Figure 2: Status of Institutions That Received Capital Purchase 

Program Investments, as of December 31, 2016 7

Figure 3: Number and Amount of Outstanding Capital Purchase 

Program Investments, as of December 31, 2016 9

Figure 4: Capital Purchase Program Participants by Location, 

Investment Size, and Investment Status, as of December 

31, 2016 10

Figure 5: Median Financial Condition Indicators for Remaining 

Capital Purchase Program Institutions, from 2011 through 

Third Quarter 2016 13

Contents
Page ii GAO-17-422 Troubled Asset Relief Program

Abbreviations

CDCI Community Development Capital Initiative

CPP Capital Purchase Program

EESA Emergency Economic Stabilization Act of 2008

FDIC Federal Deposit Insurance Corporation

SBLF Small Business Lending Fund

TARP Troubled Asset Relief Program

Treasury Department of the Treasury

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Page 1 GAO-17-422 Troubled Asset Relief Program

441 G St. N.W.

Washington, DC 20548

March 29, 2017

Congressional Committees

From October 2008 through December 2009, the Department of the 

Treasury (Treasury) invested almost $205 billion in 707 financial 

institutions through its Capital Purchase Program (CPP). This was the 

first and largest initiative under the Troubled Asset Relief Program 

(TARP)—a federal effort to help stabilize U.S. financial markets.1 The 

Emergency Economic Stabilization Act of 2008 (EESA) gave Treasury the 

authority to buy or guarantee up to $700 billion, later reduced to $475 

billion, of the “troubled assets” that were believed to be at the heart of the 

financial crisis, including mortgages, mortgage-backed securities, and 

certain other financial instruments.2 Under this authority, in October 2008 

Treasury created CPP to provide capital to viable financial institutions by 

purchasing preferred shares and subordinated debt. In return for its 

investments, Treasury received dividend or interest payments and 

warrants.3 The program was closed to new investments on December 31, 

2009. Since then, Treasury has continued to oversee and divest its CPP 

investments, collect dividend and interest payments, and sell warrants.

EESA, as amended, includes a provision that GAO report at least 

annually on TARP activities and performance.4 We have been monitoring, 

analyzing, and providing updates on TARP programs, including CPP, in 

 1

The Emergency Economic Stabilization Act of 2008 (EESA), Pub. L. No. 110-343, 122 

Stat. 3765 (codified as amended at 12 U.S.C. §§ 5201-5261), established the Office of 

Financial Stability within Treasury and provided Treasury with broad authority to purchase 

and guarantee certain types of troubled assets to stabilize the financial markets. 

2

§§ 3(9), 101, and 115(a), 122 Stat. at 3767 and 3780 (codified as amended at 12 U.S.C. 

§§ 5202(9), 5211, and 5225(a)). The Dodd-Frank Wall Street Reform and Consumer 

Protection Act reduced Treasury’s authority to purchase or insure troubled assets to a 

maximum of $475 billion. Pub. L. No. 111-203, § 1302, 124 Stat. 1376, 2133 (2010) 

(codified as amended at 12 U.S.C. § 5225(a)). 

3

A warrant is an option to buy shares of common stock or preferred stock at a 

predetermined price on or before a specified date. 

4

EESA included a provision that GAO report at least every 60 days on TARP activities and 

performance. The GAO Mandates Revision Act of 2016 revised GAO’s reporting 

requirement to annually. See Pub. L. No. 114-301, § 3(a), 130 Stat. 1514 (codified at 12 

U.S.C. § 5226(a)(3)).

Letter
Page 2 GAO-17-422 Troubled Asset Relief Program

response to this provision.5 This report examines (1) the status of CPP, 

including repayments, investments outstanding, and number of remaining 

institutions; and (2) the financial condition of institutions remaining in 

CPP.

To assess the status of CPP, we analyzed data from Treasury. In 

particular, we used Treasury’s December 2016 Monthly Report to 

Congress to determine the dollar amounts of outstanding CPP 

investments and the number and geographical distribution of remaining 

participants as of December 31, 2016. We used data from Treasury’s 

December 2016 Cumulative Dividends, Interest, and Distributions report 

to determine the number of institutions that had missed dividend 

payments. We determined that the financial information used in these 

reports is sufficiently reliable to assess the status of CPP based on the 

results of our audits of fiscal years 2009 through 2016 financial 

statements for TARP. As part of the financial statement audits, we tested 

Treasury’s internal controls over financial reporting. To identify Treasury’s 

current efforts to wind down CPP, we reviewed information from Treasury 

officials knowledgeable about the agency’s efforts.

To assess the financial condition of the 11 institutions that remained in 

CPP as of December 31, 2016, we analyzed financial and regulatory data 

from SNL Financial, which provides comprehensive regulatory financial 

data on financial institutions.6 For example, we compared various 

indicators of financial health, such as return on average assets and 

reserves to nonperforming loans. Previous GAO studies assessed the 

reliability of these SNL data by testing required data elements, reviewing 

information about the data and the system that produced them, and 

interviewing SNL officials. We relied on these prior data reliability 

assessments and determined that the financial information we used is 

 5

For example, see, GAO, Troubled Asset Relief Program: Status of Housing Programs, 

GAO-17-236 (Washington, D.C.: Jan. 9, 2017); Financial Audit: Office of Financial Stability 

(Troubled Asset Relief Program) Fiscal Years 2016 and 2015 Financial Statements, 

GAO-17-125R (Washington, D.C.: Nov. 10, 2016); Troubled Asset Relief Program: New 

Effort to Wind Down Community Capital Development Initiative, GAO-17-96 (Washington, 

D.C.: Nov. 4, 2016); Troubled Asset Relief Program: Status of Prior GAO 

Recommendations, GAO-16-831 (Washington, D.C.: Sep. 6, 2016); and Troubled Asset 

Relief Program: Capital Purchase Program Largely Has Wound Down, GAO-16-524 

(Washington, D.C.: May 6, 2016).

6

SNL Financial recently became S&P Global Market Intelligence, a division of S&P Global. 

S&P Global Market Intelligence is a leading provider of financial data, news, and analytics. 

For this report, we refer to the source of the data for our analysis as SNL Financial. 
Page 3 GAO-17-422 Troubled Asset Relief Program

sufficiently reliable for this report. We also leveraged our past reporting on 

TARP to inform our assessments of the financial institutions.

We conducted this performance audit from November 2016 to March 

2017 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Treasury created CPP to help stabilize the financial markets and banking 

system by providing capital to qualifying regulated financial institutions 

through the purchase of preferred shares and subordinated debt.7 Rather 

than purchasing troubled mortgage-backed securities and whole loans, as 

initially envisioned under TARP, Treasury used CPP investments to 

strengthen the capital levels of financial institutions. Treasury determined 

that strengthening capital levels was the more effective mechanism to 

help stabilize financial markets, encourage interbank lending, and 

increase confidence in the financial system. On October 14, 2008, 

Treasury allocated $250 billion of the original $700 billion, later reduced to 

$475 billion, in overall TARP funds for CPP. In March 2009, the CPP 

allocation was reduced to $218 billion to reflect lower estimated funding 

needs, as evidenced by actual participation rates. On December 31, 

2009, the program was closed to new investments.

Institutions participating in CPP entered into securities purchase 

agreements with Treasury. Under CPP, qualified financial institutions 

were eligible to receive an investment of 1 percent to 3 percent of their 

risk-weighted assets, up to $25 billion.8 In exchange for the investment, 

 7

For CPP, qualifying financial institutions generally include stand-alone, U.S.-controlled 

banks and savings associations, as well as bank holding companies and savings and loan 

holding companies. 

8

Risk-weighted assets are all assets and off-balance-sheet items held by an institution, 

weighted for risk according to the capital standards of the federal banking regulators. In 

May 2009, Treasury increased the maximum amount of CPP funding that small financial 

institutions (qualifying financial institutions with total assets of less than $500 million) could 

receive from 3 percent to 5 percent of risk-weighted assets. 

Background
Page 4 GAO-17-422 Troubled Asset Relief Program

Treasury generally received preferred shares that would pay dividends.9

As of the end of 2014, all the institutions with outstanding preferred share 

investments were required to pay dividends at a rate of 9 percent, rather 

than the 5 percent rate that was in place for the first 5 years after the 

purchase of the preferred shares. EESA requires that Treasury also 

receive warrants to purchase shares of common or preferred stock or a 

senior debt instrument to further protect taxpayers and help ensure 

returns on the investments. Institutions are allowed to repay CPP 

investments with the approval of their primary federal bank regulator, and 

after repayment, institutions are permitted to repurchase warrants on 

common stock from Treasury.

Treasury continues to make progress winding down CPP. As of 

December 31, 2016, Treasury had received repayments and sales of 

original CPP investments for more than 97 percent of its original 

investment. For the life of the program, repayments and sales totaled 

almost $200 billion (see fig.1).10 In 2016, institutions’ repayments totaled 

about $25 million. Moreover, as of December 31, 2016, Treasury had 

received about $227 billion in returns, including repayments and income, 

from its CPP investments, which exceeds the amount originally disbursed 

by almost $22 billion. Income from CPP totaled about $27 billion, and 

included about $12 billion in dividend and interest payments, almost $7 

billion in proceeds in excess of costs, and about $8 billion from the sale of 

warrants. After accounting for write-offs and realized losses from sales 

totaling about $5 billion, CPP had about $0.2 billion in outstanding

investments as of December 31, 2016.11 Investments outstanding 

represent about 0.1 percent of the amount Treasury disbursed for CPP. 

 9

For S corporations, a federal business type that provides certain tax and other benefits, 

Treasury received subordinated debt rather than preferred shares in order to preserve 

these institutions’ special tax status. The Internal Revenue Code prohibits S corporations 

from having more than one class of stock outstanding. Interest rates for this debt are 7.7 

percent for the first 5 years and 13.8 percent for the remaining years. 

10Institutions had repaid about 90 percent of Treasury’s investments by December 2011.

11Write-offs and realized losses include losses sustained from investments in the 32 

institutions that have gone into bankruptcy or receivership and any losses sustained when 

Treasury sold its investments in CPP institutions. 

CPP Proceeds 

Surpass Original 

Investments and 

Almost All Institutions 

Have Exited Program
Page 5 GAO-17-422 Troubled Asset Relief Program

Treasury’s most recent estimate of lifetime income for CPP (as of Sept. 

30, 2016) was about $16 billion.12

Figure 1: Status of the Capital Purchase Program, as of December 31, 2016

a

The end date is the date on which the program stopped acquiring new assets and no longer received 

funding.

b

The total amount of repayments includes approximately $363 million from institutions that transferred 

to the Troubled Asset Relief Program’s Community Development Capital Initiative and $2.2 billion 

from institutions that transferred to Treasury’s Small Business Lending Fund.

c

Amount is as of September 30, 2016.

 12Treasury, in conjunction with the Office of Management and Budget, estimates lifetime 

costs (or income) for CPP four times a year, using the aggregate value of investments at 

market prices. Estimated lifetime cost represents Treasury’s best estimate of what the 

program ultimately will cost the taxpayer. Treasury’s methodology for estimating lifetime 

costs includes a discount rate that reflects market risk for future cash flows. Treasury’s 

estimate of lifetime income for CPP is consistent with an estimate by the Congressional 

Budget Office, which consists of a gain from transactions completed by Treasury partially 

offset by a subsidy cost for CPP’s outstanding investments. See Congressional Budget 

Office, Report on the Troubled Asset Relief Program—March 2016 (Washington, D.C.:

March 2016). For a comparison of estimated lifetime TARP costs over time, see 

GAO-17-125R.
Page 6 GAO-17-422 Troubled Asset Relief Program

As of December 31, 2016, 696 of the 707 institutions that originally 

participated in CPP had exited the program (see fig. 2).13 A total of 6 

institutions exited CPP in 2016. Among the institutions that had exited the 

program, 262 repurchased their preferred shares or subordinated 

debentures in full.14 Another 165 institutions refinanced their shares 

through other federal programs.15 In addition, 190 institutions had their 

investments sold through auction, 43 institutions had their investments 

restructured through non-auction sales, and 32 institutions went into 

bankruptcy or receivership.16 The remaining 4 merged with other CPP 

institutions.

 13The information on CPP in this report is as of December 31, 2016, unless otherwise 

noted. As of February 28, 2017, 10 institutions remained in CPP, as 1 institution recently 

exited the program—Citizens Commerce Bancshares, Inc., Versailles, Kentucky, on 

February 28, 2017.

14Preferred shares give the shareholder priority dividend and liquidation claims over 

common shareholders. Subordinated debentures are a form of debt security that rank 

below other senior claims on assets but have priority over all preferred and common 

shareholders. 

15Twenty-eight of the institutions refinanced investments through Community 

Development Capital Initiative (CDCI), a TARP program that provides capital to 

Community Development Financial Institutions that have a federal depository institution 

supervisor. CDCI is structured like CPP, but it provides more favorable capital terms, and 

also covers credit unions. The other 137 institutions refinanced their shares through Small 

Business Lending Fund (SBLF)—a program separate from TARP. SBLF, which closed in 

2011, was a $30 billion program that provided capital to qualified community banks and 

community development loan funds with assets of $10 billion or less. 

16When investments are restructured, Treasury receives cash or other securities, which 

generally can be sold more easily than preferred stock, but Treasury’s investments are 

sometimes sold at a discount. 
Page 7 GAO-17-422 Troubled Asset Relief Program

Figure 2: Status of Institutions That Received Capital Purchase Program 

Investments, as of December 31, 2016

a

When investments are restructured, Treasury receives cash or other securities that generally can be 

sold more easily than preferred stock, but Treasury’s investments are sometimes sold at a discount.

The method by which institutions have exited the program has varied over 

time. From 2009 through 2011, a total of 336 institutions exited the 

program. During this 3-year period, most institutions exited by fully 

repaying the investment or by refinancing the investment through another 

program. From 2012 through 2016, a total of 360 institutions exited the 

program. During this 5-year period, most institutions exited by Treasury 

selling the investment through an auction, repaying the investment to 

Treasury, or restructuring the investment.

• Repayments. Repayments allow financial institutions to redeem their 

preferred shares in full. Institutions have the contractual right to 

redeem their shares at any time provided that they receive the 

approval of their primary regulator(s). Institutions must demonstrate 

that they are financially strong enough to repay the CPP investments 

to receive regulatory approval to proceed with a repayment exit. As of 

December 31, 2016, 262 institutions had exited CPP through 

repayments.
Page 8 GAO-17-422 Troubled Asset Relief Program

• Restructurings. Restructurings allow troubled financial institutions to 

negotiate new terms or discounted redemptions for their CPP 

investment. Treasury requires institutions to raise new capital from 

outside investors (or merge with another institution) as a prerequisite 

for a restructuring. With this option, Treasury receives cash or other 

securities that generally can be sold more easily than preferred stock, 

but the restructured investments sometimes result in recoveries at 

less than par value. According to Treasury officials, Treasury 

facilitated restructurings as an exit from CPP in cases where new 

capital investment and the redemption of the CPP investment by the 

institutions otherwise was not possible. Treasury officials said that 

they approved the restructurings only if the terms represented a fair 

and equitable financial outcome for taxpayers. Treasury completed 43 

such restructurings through December 31, 2016.17

• Auctions. Auctions allow Treasury to sell its preferred stock 

investments in CPP participants. Treasury conducted the first auction 

of CPP investments in March 2012, and has continued to use this 

strategy to sell its investments. As of December 31, 2016, Treasury 

had conducted a total of 28 auctions of stock from 190 CPP 

institutions. Through these transactions, Treasury received over $3 

billion in proceeds, which was about 80 percent of the investments’ 

face amount. As we have previously reported, thus far Treasury has 

sold investments individually but noted that combining smaller 

investments into pooled auctions remained an option.18 Whether 

Treasury sells CPP investments individually or in pools, the outcome 

of this option will depend largely on investor demand for these 

securities and the quality of the underlying financial institutions.

As of December 31, 2016, 11 institutions remained in CPP (see fig. 3).19

The largest outstanding investment, about $125 million, accounted for 

 17This number does not include two additional investments that were restructured when 

Treasury exchanged its preferred shares for common shares because these institutions 

remained in CPP.

18Unlike Treasury’s auctions of individual CPP preferred stock investments, in which 

multiple bidders could receive an allocation of the preferred stock at a single clearing 

price, Treasury’s pooled auctions likely would allow the single highest bidder to purchase 

all of the securities included in the pool. See GAO-13-630.

19Among the 11 institutions remaining in the program, Treasury has converted its original 

investment into shares of common stock at two institutions. According to Treasury 

officials, Treasury will have to sell its common stock positions in those institutions for the 

institutions to exit CPP. As of February 2017, Treasury did not have a predefined written 

trading plan for the sale of these common stock positions.
Page 9 GAO-17-422 Troubled Asset Relief Program

almost two-thirds of the outstanding CPP investments. The investments 

at the 10 other institutions ranged from about $1.5 million to $17 million.

Figure 3: Number and Amount of Outstanding Capital Purchase Program Investments, as of December 31, 2016

As figure 4 illustrates, Treasury’s original CPP investments were 

scattered across the country in 48 states and Puerto Rico and the amount 

of investments varied. Almost 4 percent (25) of the investments were 

greater than $1 billion and almost half (314) of the investments were less 

than $10 million. The largest investment totaled $25 billion and the 

smallest investment totaled about $300,000. The 11 institutions that 

remained in CPP as of December 31, 2016 were in Arkansas, California 

(2), Colorado, Florida, Kentucky, Maryland (2), Massachusetts, Missouri, 

and Puerto Rico.
Figure 4: Capital Purchase Program Participants by Location, Investment Size, and 

Investment Status, as of December 31, 2016

Interactive graphic

Page 10 GAO-17-422 Troubled Asset Relief Program

Hover over the legend below to view the categories of exited and outstanding institutions 

separately.

Source: GAO analysis and map (MapInfo). | GAO-17-422

Alaska Hawaii

Puerto Rico

Notes:The 11 institutions that remained in CPP as of December 31, 2016, were located in Little Rock, 

Arkansas; Los Angeles and Westminster, California; Granby, Colorado; Orange City, Florida; Versailles, 

Kentucky; Baltimore and Elkton, Maryland; Boston, Massachusetts; St. Louis, Missouri; and San Juan, 

Puerto Rico.

Some cities had multiple CPP participants. For example, the following cities had four or more CPP 

participants: Little Rock, Arkansas (4); Los Angeles, California (11); Denver, Colorado (4); Atlanta, Georgia 

(7); Chicago, Illinois (12); New Orleans, Louisiana (4); Boston, Massachusetts (5); Baltimore, Maryland (4); 

Minneapolis, Minnesota (4); New York, New York (13); Greenville, South Carolina (4); Dallas (5) and 

Houston (9), Texas; and Milwaukee, Wisconsin (4).
Page 11 GAO-17-422 Troubled Asset Relief Program

Treasury officials said that they expect the majority of the remaining 

institutions will require a restructuring to exit the program in the future 

because the overall weaker financial condition of the remaining 

institutions makes full repayment unlikely.20 However, they added that 

repayments, restructurings, and auctions all remain possible exit 

strategies for the remaining CPP institutions.

Since we last reported in May 2016, Treasury continues to maintain its 

position of not fully writing off any investments.21 Treasury officials 

anticipate that the current strategy to restructure the remaining 

investments will result in a better return for taxpayers. According to 

officials, any savings achieved by writing off the remaining CPP assets 

and eliminating administrative costs associated with maintaining CPP 

would be limited, because much of the TARP infrastructure, such as staff 

resources, will remain intact for several years to manage other TARP 

programs. Treasury officials also noted that writing off the remaining 

assets, thereby not requiring repayment from the remaining institutions, 

would be unfair to the institutions that have already repaid their 

investment and exited the program. Treasury officials told us that they 

continue to have discussions with institutions about their plans to exit the 

program.

 20As discussed above, restructurings allow troubled financial institutions to negotiate new 

terms or discounted redemptions for their investments. Treasury requires raising new 

capital from outside investors (or a merger) as a prerequisite for a restructuring. 

21GAO-16-524. 
Page 12 GAO-17-422 Troubled Asset Relief Program

Overall, the financial condition of institutions remaining in CPP as of 

December 31, 2016, appears to have improved since the end of 2011.22

As shown in figure 5, the median of all six indicators of financial condition 

that we analyzed improved from 2011 to September 30, 2016.23 However, 

some institutions show signs of financial weakness.

 22For information about the financial condition of CPP institutions from 2008 through 2011, 

see GAO, Capital Purchase Program: Revenues Have Exceeded Investments, but 

Concerns about Outstanding Investments Remain, GAO-12-301 (Washington, D.C.: Mar. 

8, 2012). 

23We analyzed financial and regulatory data from SNL Financial. Financial information in 

the analysis reflects annual regulatory filings for 2011 through 2015 and the average of 

quarterly data from the fourth quarter of 2015 (Dec. 31, 2015) through the third quarter of 

2016 (Sept. 30, 2016). We used detailed regulatory data from the bank holding company 

when available (one participant) and bank-level data for the remaining institutions (10 

participants). According to Treasury staff, CPP investments were primarily provided to 

bank holding companies, which own or control one or more banks. Additional factors, such 

as a holding company’s ability to issue additional debt, may affect the holding company’s 

financial assessment and not that of the bank. Of the remaining 11 CPP institutions, 9 are 

bank holding companies.

Overall Financial 

Condition of 

Remaining CPP 

Institutions Has 

Improved but Some 

Show Signs of 

Financial Weakness
Page 13 GAO-17-422 Troubled Asset Relief Program

Figure 5: Median Financial Condition Indicators for Remaining Capital Purchase Program Institutions, from 2011 through 

Third Quarter 2016

a

The Texas ratio is defined as nonperforming assets plus loans 90 or more days past due divided by 

tangible equity and reserves.

As figure 5 illustrates, the median for the first three financial condition 

indicators—Texas ratio, noncurrent loan percentage, and net chargeoffs 

to average loans ratio—have decreased, which indicates stronger 

financial health.24 The median for the remaining three financial condition 

indicators—return on average assets, common equity Tier 1 ratio, and 

24The Texas ratio helps determine the likelihood of an institution’s failure by comparing its 

troubled loans to its capital and is calculated by dividing an institution’s nonperforming 

assets plus loans 90 or more days past due by its tangible equity and reserves. 

Noncurrent loan percentage is the sum of loans and leases 90 days or more past due and 

in nonaccrual status. The net charge-offs to average loans ratio is the total dollar amount 

of loans and leases charged off (removed from balance sheet because of uncollectibility), 

less amounts recovered on loans and leases previously charged off divided by the 

average dollar value of loans outstanding for the period. 
Page 14 GAO-17-422 Troubled Asset Relief Program

reserves to nonperforming loans—have increased, which also indicates 

stronger financial health.25

However, some institutions show signs of financial weakness. For 

example, 5 of the 11 institutions had negative return on average assets 

for the third quarter of 2016. Six institutions had a lower return on average 

assets for the third quarter of 2016, compared to the third quarter of 2011. 

The remaining institutions also had varying levels of reserves for covering 

losses, as measured by the ratio of reserves to nonperforming loans.26

For example, 4 institutions had lower levels of reserves for covering 

losses for the third quarter of 2016 compared to the third quarter of 2011. 

For 1 institution, four of the financial indicators had weakened from the 

third quarter of 2011 to the third quarter of 2016. Treasury officials stated 

that the remaining CPP institutions generally had weaker capital levels 

and poorer asset quality relative to institutions that had exited the 

program. They noted that this situation was a function of the life cycle of 

the program, because stronger institutions had greater access to new 

capital and higher earnings and were able to exit, while the weaker 

institutions had been unable to raise the capital or generate the earnings 

needed to exit the program.

Of the remaining 11 CPP institutions as of December 31, 2016, 1 of the 9 

required to pay dividends made the most recent scheduled dividend or 

interest payment.27 The 8 institutions that are delinquent have missed an 

average of 28 quarterly dividend payments, with 19 being the fewest 

 25The return on average assets shows how profitable an institution is relative to its total 

assets and how efficiently management uses its assets to generate earnings. It is 

calculated by dividing an institution’s net income by the average of its assets over a 

specific period, such as a quarter or year. Common equity Tier 1 ratio is an institution’s 

equity capital excluding any preferred shares, retained earnings, and disclosed reserves 

as a share of risk-weighted assets. Reserves to nonperforming loans are the funds an 

institution holds to cover loan losses divided by loans that are 90 days or more past due.

26Generally, a higher ratio of reserves to nonperforming loans demonstrates an 

institution’s ability to cover losses from nonperforming loans.

27This excludes those institutions that made payments towards a past-due amount or 

payments made by institutions that exited the program as of December 31, 2016. CPP 

dividend and interest payments are due on February 15, May 15, August 15, and 

November 15 of each year, or the first business day after those dates. The reporting 

period ends on the last day of the calendar month in which the dividend or interest 

payment is due. Therefore, payment data as of December 31, 2016, represent the most 

recently available information for this report. Two of the remaining CPP institutions are not 

required to pay dividends because Treasury exchanged its preferred shares in those 

institutions for common shares. 
Page 15 GAO-17-422 Troubled Asset Relief Program

missed payments and 32 being the most.28 Institutions can choose 

whether to pay dividends and may choose not to pay for a variety of 

reasons, including decisions they or their federal or state regulators make 

to conserve cash and capital. However, investors may view an 

institution’s ability to pay dividends as an indicator of its financial strength 

and may see failure to pay as a sign of financial weakness.

Treasury officials told us that Treasury regularly monitors all institutions 

remaining in the program. For example, Treasury’s financial agent has 

provided quarterly valuations and credit reports for all of the institutions 

remaining in the CPP portfolio. In addition, Treasury has requested to 

attend the Board of Directors meetings at nine of the remaining 

institutions and has observed meetings at eight institutions. One 

institution has declined Treasury’s request.29 Treasury officials said that 

the agency currently does not plan to take any other actions with respect 

to its request to send a board observer to that institution but will continue 

to monitor the institution’s financial condition. As discussed previously, 

Treasury officials told us that they have continued to have discussions 

with institutions remaining in the program.

 28Under CPP terms, institutions pay cumulative dividends on their preferred shares—

except for banks that are not subsidiaries of holding companies, which pay noncumulative 

dividends. Some other types of institutions, such as S corporations, received their CPP 

investments in the form of subordinated debt, and pay interest rather than dividends. 

29The securities purchase agreement provided Treasury with the contractual right to 

nominate up to two members to the board of directors upon the sixth missed dividend or 

interest payment. Treasury may also request to send observers to certain institutions once 

they miss five dividend or interest payments.
Page 16 GAO-17-422 Troubled Asset Relief Program

We provided Treasury with a draft of this report for review and comment. 

Treasury provided technical comments that we have incorporated as 

appropriate.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of the Treasury, and other interested parties. 

In addition, this report will be available at no charge on the GAO website 

at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report.

Daniel Garcia-Diaz

Director, Financial Markets and Community Investment

Agency Comments
Page 17 GAO-17-422 Troubled Asset Relief Program

List of Committees

The Honorable Thad Cochran

Chairman

The Honorable Patrick Leahy

Ranking Member

Committee on Appropriations

United States Senate

The Honorable Mike Crapo

Chairman

The Honorable Sherrod Brown

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Michael Enzi

Chairman

The Honorable Bernard Sanders

Ranking Member

Committee on the Budget

United States Senate

The Honorable Orrin G. Hatch

Chairman

The Honorable Ron Wyden

Ranking Member

Committee on Finance

United States Senate

The Honorable Rodney Frelinghuysen

Chairman

The Honorable Nita Lowey

Ranking Member

Committee on Appropriations

House of Representatives
Page 18 GAO-17-422 Troubled Asset Relief Program

The Honorable Diane Black

Chairwoman 

The Honorable John Yarmuth 

Ranking Member

Committee on the Budget

House of Representatives

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters

Ranking Member 

Committee on Financial Services

House of Representatives

The Honorable Kevin Brady

Chairman

The Honorable Richard Neal

Ranking Member

Committee on Ways and Means

House of Representatives
Appendix I: GAO Contact and Staff 

Acknowledgements

Page 19 GAO-17-422 Troubled Asset Relief Program

Daniel Garcia-Diaz, (202) 512-8678 or garciadiazd@gao.gov

In addition to the contact named above, Karen Tremba (Assistant 

Director), Anne Akin (Analyst-in-Charge), William R. Chatlos, Lynda 

Downing, Risto Laboski, John Mingus, Tovah Rom, Jena Sinkfield, and 

Tyler Spunaugle have made significant contributions to this report.

Appendix I: GAO Contact and Staff 

Acknowledgements

GAO Contact

Staff 

Acknowledgments

(101251)
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