Kilmichael Bancorp received more than $3 million through the Treasury Department's Community Development Capital Initiative earlier this month, becoming the first bank to enter the TARP program since December.
The company, which owns the Bank of Kilmichael in Kilmichael, Miss., sold $3.15 million in preferred stock to the Treasury on Sept. 3. Bank of Kilmichael is a community bank chartered by the state of Mississippi and insured by the Federal Deposit Insurance Corp. The bank has assets of slightly more than $64 million. It currently is opening just its second brick-and-mortar branch, in Mathiston, Miss.
Treasury's TARP Transaction Report for the period ending Sept. 20 also shows that three banks that got taxpayer aid through TARP's Capital Purchase Program exchanged that funding for new money through the Community Development program, which offers a lower dividend rate.
One of those banks also received an additional investment from the government as part of the swap.
The Community Development Capital Initiative (CDCI) allows banks and thrifts to exchange their original TARP funding, which costs them 5 percent a year, for new money at 2 percent a year. In some cases, institutions can get even more money at the lower rate. Banks that have not previously participated in TARP also are eligible for aid, as are credit unions, which were barred from the Capital Purchase Program.
The goal of the initiative 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."
United Bancorporation of Alabama and IBW Financial Corp. both swapped their funds on September 3, 2010. The former is the holding company for United Bank, which, according to its latest SEC filing, has "a primary mission of promoting community development." The latter is the parent of the Industrial Bank of Washington, D.C., a national commercial bank. United exchanged $10.3 million while Industrial swapped $6 million.
IBC Bancorp, holding company for the International Bank of Chicago, not only swapped its original $4.2 million in subordinated debentures, but received an additional $3.88 million in CDCI monies. The Treasury is now invested in the company to the tune of more than $8 million, all of it at the two percent level.
Under the terms of the original Capital Purchase Program, the five percent dividend jumps to nine 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 nine percent until potential payoff.
According to the Sept. 20 transactions summary, the Treasury has invested more than $170.7 million in 15 institutions under the newer terms. All recipients except Kilmichael had originally received TARP aid through the Capital Purchase Program.