The nation's banks had an aggregate profit of $21.6 billion in the second quarter, a vast improvement from the $4.4 billion net loss the sector had at this point a year ago, the Federal Deposit Insurance Corp. reported in its quarterly banking profile released Tuesday.

The quarter's earnings were the highest since the third quarter of 2007.

The FDIC also reported that noncurrent loans and leases had a year-to-year decline for the first time since the fourth quarter of 2006. Institutions charged off $49 billion in uncollectible loans in the second quarter, compared to $214 million in charge-offs the previous year.

More good news: Only 20 percent of institutions suffered a net loss in the quarter, an improvement over the 29 percent with losses a year ago.

"This is the best quarterly profit for the banking sector in almost three years," FDIC Chairman Sheila Bair said in a statement. "Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend."

Bair conceded that the industry "still faces challenges." Earnings are still low by historical standards, and the number of failed and problem banks remains high. She also said that although small banks are gradually recovering, they are doing so at a slower rate than their larger counterparts.

The FDIC attributed the improvements in earnings to reduced provisions for loan losses. Those amounted to $40.3 billion in the second quarter of 2010, more than 40 percent below the total from a year ago.

Still, there were troubling figures in the report. The number of institutions on the FDIC's super-secret list of "problem" banks rose from 775 to 829, the highest number since 1993. But the collective assets of those institutions, $431 billion, was down 7 percent from a year ago.

California Oaks State Bank, which received $3.3 million in TARP aid early last year, is being acquired by California United Bank in a deal valued at $17.3 million.

The deal is expected to close in the fourth quarter, California Oaks officials said in a statement.

John Nerland, president and chief executive of California Oaks, told BailoutSleuth that the deal is subject to the bank returning the taxpayer money it received through the Troubled Asset Relief Program. "We have not applied for payback as of yet, but it on the list of things to do."

California United Bank has four branches in Los Angeles County. The move will help it expand westward to Ventura County, where California Oaks' two branches are located.

Half the acqusition will be paid in cash, with the remainder to be paid in California United common stock.

"The combination is expected to create one of the largest banks headquartered in the San Fernando Valley and presents significant prospects for our communities and shareholders," California United's president and CEO, David Rainer, said in a statement.

Earlier this year, California Oaks announced plans to sell up to 8 million shares of common stock at a target price of $12.50 per share.

It had planned to use some of that money to help it exit TARP, increase its asset portfolio, and acquire the assets of failed banks. Those amibitous plans were unusual because they came as the bank was suffering losses and heavy nonperforming loans.

But on Aug. 5, California Oaks announced that it was shelving those plans. Bank offiicials said the offering was put on hold because they could not find enough investors willing to abide by a requirement that at least a third of the newly issued stock be held for at least three years.

California Oaks is barely profitable. It recently announced that it had net income of $8,456 in the first half of 2010, compared to $64,384 in the first half of 2009.

Still, the bank is growing. Its total assets of $136.7 million are up 7.7 percent from a year ago, and total deposits of $114 million are up 23 percent from a year ago.

Follow along as BailoutSleuth live-blogs the Financial Crisis Inquiry Commission hearings today and tomorrow, starting at 9 a.m. each day.

The hearings focus on the collapse of Wachovia and Lehman Brothers. Click on the headline to follow our running commentary.

BailoutSleuth will cover this week's Financial Crisis Inquiry Commission hearings live and in person from room 538 of the Dirksen Senate Office Building in Washington.

Check back to BailoutSleuth.com at 9 a.m. Wednesday and Thursday to view BailoutSleuth's live-blog coverage of hearings as they unfold. You'll be able to interact with writers and readers and contribute to the discussion of the hearings as they play out. Enter your e-mail in the box below to receive a note reminding you to return.

Wednesday's hearings will focus on the collapse of Wachovia Bank and Lehman Brothers. Several heavy hitters are scheduled to testify. They include:

• Scott G. Alvarez, General Counsel,
  Board of Governors of the Federal Reserve System


• John H. Corston, Acting Deputy Director, Division of Supervision and Consumer Protection at the Federal Deposit Insurance Corp.


• Robert K. Steel, former President and Chief Executive of Wachovia Corp.


• Thomas C. Baxter, Jr., General Counsel and Executive Vice President,
  Federal Reserve Bank of New York


• Richard S. "Dick" Fuld, Jr., Former Chairman and CEO of Lehman Brothers


• Harvey R. Miller, Business Finance and Restructuring Partner, Weil, Gotshal & Manges, LLP


• Barry L. Zubrow, Chief Risk Officer, JPMorgan Chase & Co.

Thursday will feature two separate sessions in which Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair will testify.

Regulators could go two weeks in a row without closing a bank for the first time in more than 18 months.

That's because banks that opened for business last Friday experienced something that is unusual these days: none were shut down by regulators at the end of the day.

Regulators have seized 118 banks so far this year, compared with 84 in the corresponding period of 2009.

Only once in the last year -- April 2 -- has a non-holiday weekend gone by without any bank closures, according to Federal Deposit Insurance Corp. records.

Since regulators often don't close banks on holiday weekends -- and Labor Day weekend begins Friday -- that means the country could potentially go two weeks in a row without bank closures.

At a time when banks are closed almost every weekend, a two-week span without a closure seems almost unheard of. The last time the country went two weeks without a bank failure was Christmas Day 2009 to New Year's Day 2010.

If you discount that weekend, the last time the U.S. saw two weeks in a row without closings was New Year's Day 2009 and the following week.

The last time there were two consecutive non-holiday weekends without a bank closure was Friday, Aug. 8, 2008 and Friday, Aug. 15, 2008.

BailoutSleuth asked the FDIC why there were no bank closures Friday. Greg Hernandez, a spokesman for the agency, said the FDIC isn't responsible for the closures -- that decision belongs toother state or federal regulatory agencies -- and the FDIC simply helps coordinate when it will be named receiver. "It's up to the respective regulators to decide when they want to close a bank," Hernandez said.

One reason for the lack of closures may be the quantity of banks that went under the week before, making the FDIC and other regulators busier than usual.

Eight banks were closed Aug. 20. The last time more banks failed on a single day was when nine failed on Oct. 30, 2009.

Still, it remains to be seen whether the FDIC will take a week off for Labor Day or plow through it.

Often, regulators do not close banks on the Friday of a three-day weekend. This year, for example, banks have been spared on the Friday before Independence Day, George Washington's Birthday, and New Year's Day.

But that's not a hard and fast rule. Banks were closed the Fridays before Memorial Day and Martin Luther King Day.

Five banks were closed on Friday, Sept. 4, 2009, a Labor Day weekend. And one was shuttered on Friday, Aug. 29, 2008, which also preceded Labor Day.

Undoubtedly, bank officials' whose institutions are teetering will be encouraging their colleagues at state and federal regulatory agencies to enjoy their upcoming long weekend and take some much-deserved time off.

Federal prosecutors have filed charges against the owner of a Minnesota company that allegedly duped banks out of nearly $80 million by selling them excessive participations in many of the same loans.

Corey N. Johnston, the owner and operator of First United Funding LLC, is charged with bank fraud as well as filing false income tax reports.

Two of Johnston's 17 alleged victims, The National Bank, of Bettendorf, Iowa, and Bank Forward of Jamestown, N.D., are subsidiaries of companies that got taxpayer aid through the Troubled Asset Relief Program.

National Bancshares Inc, parent company of The National Bank, sold nearly $24.7 million in preferred stock to the Treasury Department on Feb. 24, 2009.  Security State Bank Holding Co., which owns Bank Forward, got a little more than $10.75 million in TARP money on May 1, 2009.  Neither has repaid any of the principal, although both have made their required dividend payments.   

Based on the timeline in the fraud case, one of The National Bank's ill-fated deals came after it received its government assistance.

The U.S. Attorney's Office for the District of Minnesota charged that, between 2005 and 2009, Johnston blatantly oversold participations in large commercial and personal loans arranged by First United Funding.  Johnston is accused of "selling more than 100 percent participation in at least ten different loans that FUF had made with third parties."

In other words, Johnston allegedly sold and resold the same loans, to the point that the total dollar value of the participations held by the banks was several times the original value of the loans.

Prosecutors say Johnston used the proceeds from the duplicative loan sales  to pay principal and interest to the banks that he had earlier courted, buying time and perpetuating the Ponzi scheme. The indictment also claims that Johnston diverted funds for his and his family's personal benefit.

Both TARP banks were allegedly duped in a plan for a project known as "White Out Way Investments." According to court documents, the original White Out Way loan was sold for $7 million to Western National Bank of Midland, Texas, in January 2008. Johnston sold another 100 percent participation to The National Bank for $7 million. He also placed a $2 million participation with Bank Forward, and sold additional interests to three other banks. All in all, Johnston allegedly received $23.65 million from the six banks for their participations in the single $7 million White Out Way Loan.

A second scheme evolved in March of 2009, around what came to be known as the JM Land II Loan.  Western National was again the first to buy full participation, for $8 million. The National Bank purchased what it thought was full participation for $8 million, raising its stake in First United Funding's deals to $15 million. 

Although Bank Forward did not buy into the second scheme, Johnston still managed to solicit $38.65 million in participations from eight banks for the JM Land II Loan.

The U.S. Attorney asserted that Johnston received $79.95 million in combined excess participations from these two schemes and at least eight other loans.

The alleged fraud began to unravel for Johnston in October 2009, when Community First Bank of Wisconsin, which held partial participations in both the White Way Out Loan and the JM Land II Loan, filed an emergency motion for a restraining order. The federal judge in Minnesota who granted the order also appointed a local management group as receiver for First United Funding. 

The FBI's Minneapolis Bureau became fully involved in the case by mid-November 2009 when Western National Bank, $25 million deep in First United's loan participations, began to speak to federal agents through the bank's attorneys.  The case was also investigated by the Internal Revenue Service-Criminal Investigation Division and the Federal Deposit Insurance Corporation.

According to the FBI press release, Johnson could receive thirty years in prison for bank fraud and an additional three years on the false income tax charge.

Nine banks that received TARP aid through the Capital Purchase Program were sanctioned by the Federal Deposit Insurance Corp. in July for violating bank standards, according to the agency's monthly release of enforcement actions today.

The banks include:

• CB&S Bank, Inc., Russellville, Ala.
(CBS Banc-Corp)

• Metro United Bank, San Diego, Calif.
(MetroCorp Bancshares Inc.)

• TIB Bank, Naples, Fla.
(TIB Financial Corp)

• Pinnacle Bank, Orange City, Fla.
(Pinnacle Bank Holding Co.)

• First Bank and Trust, New Orleans, La.
(First Trust Corp.)

• Main Street Bank, Kingwood, Tex.
(MS Financial Inc.)

• Cascade Bank, Everett, Wash.
(Cascade Financial Corp)

• West Bank, West Des Moines, Iowa
(West Bancorporation)

• Tri-State Bank of Memphis, Memphis, Tenn.

To see the full list of FDIC enforcement actions in July, and for links to copies of the action, click here.

Metro United Bank is a subsidiary of Texas-based MetroCorp Bancshares, which accepted $45 million in taxpayer aid in January 2009. That holding company accepted more aid than any other on the July enforcement list.

In terms of deposits, TIB Bank is the largest bank on the list, with $1.34 billion. In terms of assets, Cascade Bank is the largest, with $1.68 billion. TIB Bank got a $37 million TARP investment in December 2008; Cascade got $39 million in November of that year.

Earlier this summer, TIB Bank entered into a deal with North American Financial Holdings, Inc. which would give the company 99 percent ownership of TIB's common stock. That should aid its recapitalization efforts.

North American Financial, a new institution led by former Bank of America Corp. executives, earlier this year took over three failed banks in Florida, as BailoutSleuth has previously reported.

Two directors on the board of Cascade Bank's parent company resigned following the FDIC's cease and desist order. The directors cited irreconciable differences with the bank's chief executive officer and other board members, as well as the "unreasonable and untenable conditions" imposed by the order, as their reason for resigning.

The bank reported net operating losses of $55.6 million through June 30 of this year, compared to losses of $26.6 million at this point a year ago.

West Bank and Tri-State Bank of Memphis were given relatively small fines for violating banking standards and were not subject to heightened restrictions.

The other seven banks, however, werl issued cease-and-desist orders that called for them to make significant changes, such as getting their boards of directors more involved in company oversight; increasing capital ratios; restricting growth; addressing problem loans and developing liquidity plans.

The FDIC specifically said that two of the banks -- Metro United Bank and Main Street Bank -- must retain qualified CEOs. 

A total of 30 banks received cease-and-desist orders in July.

BailoutSleuth reported earlier this year on the high rate of enforcement action against banks and bank holding companies that got taxpayer money through the Troubled Asset Relief Program.

Supporters of TARP say that the enforcement record does not necessarily mean that the banks were unhealthy at the time of the CPP loan, as enforcement action is just one component of determining a bank's viability, and a bank's condition may have deteriorated in the months since it received aid.

But critics say that the growing number of penalties against TARP banks may indicate that Treasury should have shown greater scrutiny when determining who would receive aid.

Three of the TARP banks on the latest enforcement list got their TARP aid in March 2009. CBS Banc-Corp received $24.3 million that month, while Main Street Bank's parent company got $7.72 million and Pinnacle Bank's parent got $4.39 million.

First Trust Corp., which owns First Bank and Trust in New Orleans, got $18 million in June 2009.

House Majority Leader John Boehner (R-Ohio) urged Treasury Secretary Timothy Geithner to resign during a speech Tuesday in Cleveland.

The administration, unsurprisingly, indicated that it's not inclined to follow his advice on personnel.

"The American people are asking 'where are the jobs' and all the president's economic team has to offer are promises of 'green shoots' that never seem to grow," Boehner said, in prepared remarks that were posted on his website. "The worse things get, the more they circle the wagons and defend the indefensible."

Boehner spoke at the City Club of Cleveland, which has hosted many presidents and other political leaders over the years.

"President Obama should ask for - and accept - the resignations of the remaining members of his economic team, starting with Secretary Geithner and Larry Summers, the head of the National Economic Council," Boehner said.

In addition to calling for the resignations, Boehner also reiterated many conservative talking points, reiterating his desire for the extension of Bush-era tax cuts and reduced government spending.

The crux of Boehner's speech centered around small businesses, and the Ohio congressman argued that uncertainty about the economy has prevented them from being able to hire more workers.

"It's time to put grown-ups in charge," Boehner said. "It's time for people willing to accept responsibility. It's time to do what we say we're going to do."

Following Boehner's speech, Rep. Connie Mack (R-Fla.) called for Geithner's resignation as well. He first pushed for the Treasury Secretary to resign in March 2009.

Mack cited Geithner's role in the bailout of American International Group Inc. and "his mishandling of the economic recovery" as reasons for his to step down.

Shortly after Boehner's speech, Vice President Joe Biden sarcastically dismissed Boehner's comments. "Very constructive advice -- thanks," Biden said, according to prepared remarks.

He accused Boehner and other Republican leaders of being responsible for the economic slump, and argued that they are responsible for allowing the economy to slide under eight years of President George W. Bush's leadership.

"Mr. Boehner is nostalgic for those good old days...the American people are not," Biden said. "They don't want to go back. They want to move forward."

Bailed-out insurance giant American International Group, Inc. announced Monday it had repaid $3.95 billion of the debt it owes the Federal Reserve Bank of New York, reducing its outstanding principal to just over $15 billion.

The payment is the largest single payment that AIG has made since it exchanged equity interest in subsidiaries AIA Group Ltd. and American Life Insurance Co. for a $25 billion reduction in its outstanding balance.

The funds for the most recent repayment came from the sale of $4.4 billion in debt by International Lease Finance Corp., AIG's aircraft leasing subsidiary.

As a result of the payment, $10 billion in collateral pledged to the New York Fed by the leasing unit has been released.

AIG's credit line from that organization has now been reduced to about $30 billion from $34 billion.

"This is continuing tangible evidence of AIG's progress in repaying the American taxpayers," said Robert Benmosche, AIG's president and chief executive, in a statement. "AIG is getting stronger every day. We still have more work to do, but we will finish the job and make sure we repay the American taxpayers."

AIG now owes a total of about $21 billion on the New York Fed credit facility, an amount that includes principal and interest.

Regulators closed eight banks Friday night including Chicago's ShoreBank, the politically connected institution that, despite its efforts, could not be saved from oblivion by investors.

It was one of the busiest nights for the Federal Deposit Insurance Corp. in recent memory. The last time more banks were closed in a single day was Oct 30, 2009, when regulators seized nine banks.

ShoreBank was by far the largest closure of the night. The bank had $2.16 billion in assets and $1.54 in deposits.

Friday's closures also include: 

The FDIC arranged for other financial institutions to take over the branches, deposits and most of the assets of those failed banks. The combined cost of the closings to the FDIC's deposit insurance fund is an estimated $473.5 million, with ShoreBank's failure costing $367.7 million.

Friday night's bank failures bring the 2010 total to 118. Sonoma Valley Bank had received $8.3 million in taxpayer aid through the Troubled Asset Relief Program. Its failure likely means that the Treasury Department's investment is now worthless.

Despite ShoreBank's relatively small size -- it had just 15 branches -- it had strong community support and the backing of prominent politicians, including U.S. Sen. Richard Durbin (D-Ill.). Rumors abound that Wall Street faced pressure to help shore up the bank.

According to the Chicago Tribune, ShoreBank developed a name as a community development bank and sought to reinvest in declining black neighborhoods starting in the 1970s.

ShoreBank had been trying to raise capital for about a year. Earlier this spring, financial instituions pledged $150 million to recapitalize the bank in hopes that the federal government would step in and provide aid through the Troubled Asset Relief Program. That government assistance never came.

But even with those connections, the bank was struggling. The bank lost $39.6 million in the first half of this year, and lost $119.2 million in 2009.

In January, the Federal Reserve took action against ShoreBank, ordering it to stop paying dividends and issuing new debt, and instructing it to develop a capital plan. In March, the FDIC stepped in and issued a cease-and-desist order highlighting "unsafe or unsound" practices at the bank and calling for higher capital levels.

The bank is taken over by Urban Partnership Bank, a new institution. The Wall Street Journal reports that Urban Partnership Bank is led by William Farrow -- ShoreBank's president and chief operating officer -- and is backed by Bank of America, Goldman Sachs Group Inc. and Morgan Stanley, among others. That group includes some of the same firms that tried to bail out the bank.

Eight participants in TARP's Capital Purchase Program have exchanged their Treasury aid for lower-cost funding through the government's newly instituted Community Development Capital Initiative (CDCI).

The initiative allows pre-approved banks and thrifts to exchange their 5 percent Capital Purchase funding for 2 percent CDCI funding, and in some cases allows the institutions to tap even more money at the lower rate.  Credit unions -- which were not allowed to apply for earlier Troubled Asset Relief Program initiatives -- also may apply for the new program.

The CDCI was unveiled on February 3, but the first transactions related to the program did not materialize until July 30.  The aim of the newer program is to "invest lower-cost capital in Community Development Financial Institutions (CDFIs) that lend to small business in the country's hardest-hit communities."  Participation requires the Treasury's certification that the bank, thrift or credit union targets more than 60 percent of its small business lending and other economic development activities to "underserved communities."

On July 30, Guaranty Capital Corp.  of Belzoni, Miss., and University Financial Corp. of St. Paul, Minn., became the first to exchange their 5 percent government funding for lower-rate capital.  Guaranty Capital traded its $14 million CPP aid for the same amount of CDCI funding.  University Financial Corp. not only swapped its $11.9 million in CPP funds, but received an additional $22.1 million at the 2 percent rate.  

One week later, Southern Bancorp of Arkadelphia, Ark., followed University Financial's lead, swapping $11 million in CPP monies while receiving an additional $22.8 million in TARP funding.  The entirety of the Treasury's investment in Southern--more than $33.8 million--now stands at the 2 percent rate.

Under the terms of TARP's Capital Purchase Program, the 5 percent dividend jumps to 9 percent after five years.  The CDCI program, however, does not require the recipient to pay more than a 2 percent dividend for the first eight years.  After that time, the dividend would rise to 9 percent until payoff.

On August 13, 2010, five more banks swapped their TARP funding dollar-for-dollar to the CDCI program.  Premier Bancorp of Wilmette, Ill; Citizens Bancshares Corp., of Atlanta;  PGB Holdings Inc., of Chicago, First American International of Brooklyn, N.Y., and Tri-State Bank of Memphis, Tenn., traded a total of about $37 million in initial TARP funding for the same amount of CDCI money.

To date the Treasury has invested nearly $107 million in eight institutions under the newer terms.

Southern First Bank N.A., which received $17.3 million in taxpayer aid last year, signed an enforcement agreement with the Office of the Comptroller of the Currency last month, according the regulator's most recent release of bank enforcement actions.

Southern First Bank is based in Greenville, S.C., and is the lone subsidiary of holding company Southern First Bancshares Inc., which was the recipient of the Capital Purchase Program aid.

In its June 8 agreement with Southern First, the OCC cited "unsafe and unsound" practices at the bank related to credit administration, credit risk management, and liquidity risk management.

The six-branch bank was ordered to overhaul its lending policies and reduce its credit risk, largely by strengthening its underwriting standards in its commercial real estate portfolio.

Art Seaver, the bank's chief executive, told The Greenville News in June, shortly after the company divulged the order in a Securities and Exchange Commission filing, that the issues the OCC found date largely to the first half of 2009 and have already been addressed.

The findings were based on a bank examination as of March 31, 2009, according to the company. "Since the completion of the examination, the board of directors and management of the bank have aggressively worked to address the findings of the exam and has developed formal action plans to comply with any remaining requirements of the formal agreement," the company said in a filing. "In addition, entry into the formal agreement does not change the bank's 'well-capitalized' status as of the date of this current report."

The company's net income for the fist six months of the year was $113,000, compared to $843,000 for the first of 2009, according to the company's most recent quarterly report.

The company attributed the dip to a $2 million additional provision for loan losses.

The bank's nonperforming assets are at 2.4 percent -- up from 1.77 percent a year ago -- but still well-above the average rate of 5.19 percent among South Carolina banks.

Another month, another poor mark for the Treasury Department's mortgage modification program.

In July, Treasury booted more than twice as many people from its Home Affordable Modification Program than were granted permanent modifications, according to the latest figures released by the department.

Last month, Treasury converted 36,695 trial modifications to permanent modifications. In contrast, 96,025 trial modifications were cancelled.

The HAMP program is part of the Troubled Asset Relief Program, and pays incentives to servicers who modify the loans of homeowners who are at risk of default. Participants are initially placed in trial modifications, and ideally -- if they meet the program's criteria and make their restructured payments on time -- their trial modifications are made permanent after three months.

But for several months, the program has actually been removing more people from trial modifications than it has successfully transitioned to permanent modifications.

Herb Allison, who oversees TARP at the Treasury Department, said during a Friday conference call with reporters that Treasury is encouraging servicers to clear their backlogs of "aged" HAMP trials that have been in the program more six months or more without a decision being made.

Many of those aged modifications have remained in limbo because Treasury initially allowed applicants to seek HAMP assistance based on "stated income" rather than having their earnings fully documented. Now, it appears that many of those applicants weren't actually eligible for the program. Removing them has been a lengthy process, as checks must be  conducted to ensure eligible borrowers aren't inadvertently given the boot.

Since June 1, the program has required up-front documentation, a move that administration officials say will make HAMP more affordable.

Servicers are continuing to clear those backlogs, and cancellations can be expected to exceed new permanent modifications for the next few months, Allison said.

Since its launch in the spring of 2009, HAMP has given, 434,716 borrowers permanent modifications, compared to more than 1.3 million trials that have been started.

Those who get permanent modifications have seen their payments reduce by an average of 36 percent, or about $500 per month.

Allison defended the numbers, saying that people removed from HAMP either didn't qualify for the program, failed to make their payments, or opted out. They were not "simply dropped," he said.

Although people have been removed from the program, Allison said, they enjoyed the benefit of reduced mortgage payments for months at no cost to taxpayers. He added that most of those removed from the program received other forms of relief such as proprietary modifications from their servicers. That aid, however, is outside of the HAMP program, and although Treasury  officials tout that assistance, they reluctantly admit they don't know the level of aid it has provided.

Raphael Bostic, assistant secretary for the Department of Housing and Urban Development, said that some issues in the administration's monthly housing report have taken on "disproportionate influence" -- apparently a reference to the HAMP numbers.

Treasury and HUD officials have urged observers to focus on the health of the nation's housing system as a whole, and Bostic emphasized the country's historically low interest rates. "We are in a period where the financing environment promotes affordability, and that is quite important," Bostic said.

The administration also noted that last month, housing prices remained level after 30 months of decline.

General Motors Co. filed paperwork Thursday that would open the door to an initial public offering, marking one of the first steps necessary for the U.S. government to reduce its 60.8 percent ownership stake in the company.

The "new GM" does not have any publicy traded securities. The number of shares the company may offer, and their price, have not yet been determined.

In addition to owning a majority of GM's common stock, the Treasury Department holds $2.1 billion of the automaker's Series A preferred stock. The Series A stock is not included in the IPO. Right now, it's unclear how much of its common stock Treasury would offer.

Community Bankers Trust Corp., which got $17.7 million in TARP aid in December 2008,  has skipped its latest dividend payment to the government.

The Glen Allen, Va.-based company is the holding company for Essex Bank. It was slated to pay $221,000 to the Treasury Department this week as a quarterly dividend, but announced Friday that it would defer the payment.

This has been another difficult year for Community Bankers Trust. The company suffered a $19.8 million second quarter loss, bringing its total loss for the first half of the year to $22.9 million. That compares with a loss of $13.2 million in the first half of 2009.

Community Bankers Trust said its loss for the latest quarter reflected an additional $21.3 million in loan loss provisions and a significant write-down in goodwill. The company  suspended the quarterly dividend to its common stockholders after the payment of a cash dividend in February. 

Under TARP's Capital Purchase Plan, companies that sold preferred stock to the government in return for taxpayer capital are permitted to defer dividend payments on the shares, but not without consequences.  The dividend is cumulative and accrues for payment in the future.  Additionally, failure to pay six dividends gives Treasury the right to appoint two of its representatives of the company's board of directors, giving it a bigger say in a company's activities.

Community Bankers Trust says that, given its financial challenges, retaining capital is crucial.  Indeed, according to George M. Longest, Jr., president and chief executive officer, it is of the "utmost priority until such time as we experience a return to consistent quarterly profitability."  He also cited the assessment of each branch in light of the franchise, as well as unspecified "expense reductions," as keys to restructuring and steadying the balance sheet. 

Community Bankers Trust posted a $29.3 million loss for all of 2009, yet increased the total compensation of both its chief executive officer and chief financial officer.  Longest saw his salary rise by more than 18 percent, to $250,000. He also got a $35,000 bonus, up from $25,000 in 2008.