When the Hartford Financial Services Group closed its deal with the federal government for $3.4 billion in TARP money last week, the insurer became the seventh financial institution in Connecticut to receive government aid.
So far, six Connecticut banks and one state-based insurer have participated in the Troubled Asset Relief Program. They have received a combined $3.8 billion in funds.
TARP was originally established to purchase assets and equity from financial institutions in order to strengthen the financial sector, which was near collapse last fall.
The program has since changed and now the government is infusing capital into banks and insurance companies via preferred stock in order to clean up the financial institutions’ balance sheets.
The Hartford was one of six major life insurers that won approval in May from the government, granting it access to the $3.4 billion, which was by far the biggest chunk of money any financial institution in Connecticut received.
The insurer received the funds after experiencing tremendous strain over the last year due to heavy investment losses and an ailing variable annuity business. The property and casualty and life insurer posted a $1.2 billion loss for the first quarter of 2009, and a $2.7 billion loss for all of 2008.
The company is also going through a management shake up as current CEO and Chairman Ramani Ayer and president and chief operating officer Thomas Marra, are both leaving the company by the end of this year.
Connecticut-based banks have held up relatively well throughout the financial crisis, despite a tough recessionary environment and higher fees for FDIC insurance.
When the TARP program was unveiled last fall, some Connecticut banks, including Rockville Bank and Wethersfield-based Connecticut River Community Bank, immediately denounced the program and said they were not taking the money.
Banks have been skittish about accepting the funds due to concerns that the federal government will impose new conditions on those who take it.
TARP funds come with tough terms and conditions that can change after a bank has accepted the money. That means banks may be required to comply with measures that they didn’t originally agree to. Some banks were also concerned about the public’s reaction to their participation in the program, which has been penned a “government bailout.”
Among the Connecticut banks that have received TARP money is Waterbury-based Webster bank, which was granted $400 million in November. The banking company, with $17.3 billion in assets, announced earlier this year that it would trim expenses and boost capital by cutting 200 additional jobs and slashing its dividend after suffering a $300.5 million fourth-quarter loss.
The company’s net loss for the first quarter was $11.3 million compared with a net income of $24.4 million last year.
In December, First Litchfield Financial Corp., the holding company for The First National Bank of Litchfield, accepted $10 million in government aid. The bank, with $550 million in assets, reported $266,250 net income in the first quarter of 2009 and a $4 million net loss in 2008.
Lakeville-based Salisbury Bancorp in March received $8.8 million in government aid. Its subsidiary, Salisbury Bank and Trust Co., with $506 million in assets, reported about a $1.1 million net income in the first quarter of 2009 and all of 2008.
Connecticut Bank and Trust Co. in Hartford received $5.4 million in TARP funds in December and also reported its first-ever quarterly operating profit of $27,000 in the first quarter.
In February, BNC Financial Group, the parent of The Bank of Fairfield and The Bank of New Canaan, was granted $4.8 million in bail out funds.
For the first quarter of 2009, The Bank of New Canaan, with $253 million in assets, reported a $230,000 net income, while The Bank of Fairfield, with $33 million in assets, had a $536,000 net loss.
Finally in March, the parent of Simsbury Bank & Trust Co., SBT Bancorp, accepted $4 million in TARP funds. For the first quarter of 2009, Simsbury Bank, with $260 million in assets, reported a $146,000 net income. For 2008, Simsbury Bank reported a net loss of $645,000.
Greg Bordonaro is a Hartford Business Journal staff writer.
