Four financial institutions get new government capital; one existing TARP bank switches programs

Four new TARP affiliates--including two credit unions--recently received low-rate financing through the Treasury Department's Community Development Capital Initiative (CDCI).


Additionally, one bank that got originally government aid through TARP's Capital Purchase Program has qualified as a community-development bank and traded its original assistance for the more favorable terms. 


According to Treasury's Sept. 21 TARP Transactions Report, Hope Community Credit Union, of Jackson, Miss., and Genesee Co-op Federal Credit Union, in Rochester, N.Y., were issued taxpayer capital through CDCI on September 17.


The government investments marked the first time that credit unions have secured CDCI funding.  Although traditional credit unions were not permitted to seek aid in the initial phases of the Troubled Asset Relief Program, they were given permission to apply for Treasury monies under the CDCI.   


Hope Federal Credit Union, which got $4.52 million in TARP aid, has worked extensively with victims of Hurricane Katrina and residents of depressed areas across the South. In the company's press release announcing the CDCI money, Chief Executive Bill Bynum applauded the Treasury's efforts to support "a key segment of the nation's finance sector," when more traditional lenders have restricted their lending over the past few years.


Hope plans to use the money to assist homeowners, small businesses and "distressed communities throughout Arkansas, Louisiana, Mississippi and Tennessee."


Much further north, Genesee Co-op Credit Union received only $300,000 from the program.  Genesee says on its website that it serves a predominantly lower-income clientele, helping its members to rebuild credit and eventually to own their own homes.


Genesee Co-op describes itself as "a place for first opportunities and second chances.''


Two new bank holding companies also joined the CDCI.  The Washington, D.C.-based CF Bank Corp., parent of City First Bank of DC, received $5.78 million in public aid. City First Bank describes itself as "Washington D.C.'s first and only bank solely dedicated to community development finance."  The bank commits itself to acquiring and renovating affordable housing. It works closely with non profit and faith based organizations, and injects capital into neighborhoods that need it most.


American Bancorp of Illinois, Inc. based in Oakbrook Ill., got 5.467 million in TARP cash on September 17.  The company is the parent of Pan American Bank, a community lending specialist. The bank says it aims to create local job opportunities in the disadvantaged neighborhoods it serves and to improve the quality of life of those who live in those neighborhoods.


Finally, the Hanover Park, Ill.-based First Eagle Bancshares, Inc., an existing TARP participant, swapped its $7.87 million in CPP funds, which carry a divided rate of 5 percent, for the same amount of community-development money, at 2 percent.


The parent company of First Eagle Bank also repurchased its warrants from the original Treasury transaction of Sept. 11, 2009.              


The CDCI allows banks such as First Eagle to exchange their 5 percent CPP funding for 2 percent CDCI funding, and in some cases allows the institutions to borrow even more money at the lower rate. No existing affiliate received any additional investment money during this round of funding.


The stated goal of the new program is to "invest lower-cost capital in Community Development Financial Institutions (CDFIs) that lend to small businesses 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."


Under the terms of the original CPP, 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.


The Treasury has invested more than $199 million in 20 institutions under the newer terms. 


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