Two local banks that last year took federal government funds to bolster their capital assets during troubled economic times say they have no plans to return the money in the near future.
Related Topics
Related Stories
"The last thing we want to do is pay it back and then need it" to make loans when the economy improves, explains R. Scott Smith Jr., Fulton Financial Corp.'s chairman and chief executive officer.
Officials at Susquehanna Bancshares Inc. say they also have made no decision on when to return money from the government's Troubled Asset Relief Program, or TARP.
Ten large banks nationwide announced last week that they have repaid a total of $68 million in TARP funds. Combined with money repaid earlier by smaller banks, more than $70 million has been returned to the U.S. Treasury.
But Smith says most banks are not returning the money at this time.
"In the scheme of things, a very small portion of banks have applied to pay it back and a smaller portion have paid it," he explains.
The government authorized as much as $700 billion to be disbursed late last year under the TARP program.
In December, Fulton took $376.5 million and Susquehanna took $300 million. They are the only banks headquartered in Lancaster County that took TARP money.
The government loaned the funds to the banks at 5 percent interest. The banks are making quarterly interest payments.
The government's rationale for providing TARP funds was to help stabilize banks and encourage them to make loans to customers.
Fulton and Susquehanna don't separate TARP funds from general capital, so they don't know how much federal money has financed local loans.
But they do know they have not used all of their TARP money because the demand for loans has fallen this year.
Fulton's loan growth during 2008 was $838 million, or 7.5 percent, according to Fulton spokeswoman Laura Wakeley. Loan growth during the first quarter of this year was essentially "flat," she says.
Susquehanna's loan growth during 2008 was $900 million, or 10 percent, according to Susquehanna spokesman Stephen Trapnell. He says the loan growth forecast for 2009 is only 5 percent.
Susquehanna's loan growth from January through May was $320 million, Trapnell adds. That amount includes TARP and non-TARP funds.
Demand for loans is down this year, Trapnell says, because, "given the challenging economy in recent months, families and businesses are evaluating how much debt they want to take on."
With demand for loans relatively low, says Wakeley, TARP money's primary value is that it "shores up our capital base. It helps to keep us a well-capitalized financial institution."
Staff writer Jack Brubaker can be reached at jbrubaker@LNPnews.com or 291-8781.
(102)
