Philly area's smaller banks not hurrying to repay TARP funds

Banks nationwide have repaid $168 billion of the $205 billion the federal government poured into them in 2008 and 2009 as part of the huge economic bailout effort.

In the Philadelphia region, 19 banks took $1.5 billion. Four banks have repaid $811 million, but chief executives at a number of small banks said this week they were in no rush to redeem the investment that had allowed them to keep growing during the downturn at a relatively low cost.

"Stock prices are still depressed, so why go out and dilute your stock when you don't have to?" said Vito Pantilione, chief executive of Parke Bancorp Inc. in Sewell, referring to the willingness of bigger banks to sell new shares at a discount to repay the government investment.

Parke received $16.3 million from the U.S. Treasury in January 2009. A mature bank can typically lend $10 for every dollar of capital, meaning that the Treasury investment gave Parke the firepower to make $160 million in new loans. Since the investment, Parke has had a net gain of $84.78 million, or 16 percent, in loans outstanding.

Parke's growth was not unusual. Through Sept. 30, area banks with Treasury investments and less than $1 billion in loans boosted lending by 8 percent on average after receiving taxpayer money.

That is twice the average growth rate at area banks that did not take Treasury investments under the program known as TARP, an Inquirer analysis of Federal Deposit Insurance Corp. data found.

"It kept us lending at a time when we would have had to stop lending," said Glenn B. Marshall, CEO of First Resource Bank in Exton. Without the $5 million Treasury investment, "we would have stopped lending a year ago," Marshall said.

Executives stressed that small-bank gains had come at the expense of larger and troubled banks, rather than from pure economic growth.

Not every local bank boosted lending after receiving government money. Most notable are Wilmington Trust Corp. and National Penn Bancshares Inc.

Wilmington Trust, which has seen its loan book decline 23 percent despite a $330 million sale of preferred stock to the federal government, took massive losses on loans to homebuilders in southern Delaware. M&T Bank Corp. of Buffalo is buying the bank at a steep discount.

Loans at National Penn in Boyertown are off 12 percent despite a $150 million Treasury infusion. As in the case of Wilmington Trust, much of National Penn's loan decline is from the write-off of bad loans to homebuilders.