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.
Two area banks with Treasury investments have missed dividend payments.
Royal Bancshares of Pennsylvania Inc. has missed six consecutive payments, giving federal officials the right to appoint two members to the bank's board, and is now $2.28 million in arrears, according to the information firm SNL Financial.
Before the government stepped in with $30 million in February 2009, capital at Narberth's Royal Bancshares had plummeted to $85 million at the end of 2008 from $140 million two years earlier. Further losses eroded Royal's capital to less than $100 million Sept. 30.
Stonebridge Financial Corp. of West Chester has failed to pay three consecutive dividends, for a total delinquency of $454,600.
Six CEOs of small banks said they felt little pressure to pay back the TARP money because pay restrictions under the program typically affected only them, each company's top-paid executive. Plus, at 5 percent for the first three years, the dividends are a bargain.
To replace that with private financing, "your rate would probably be 10 to 12 percent for a small bank," said David E. Sparks, CEO of First Priority Financial Corp. in Malvern.
Now, small banks are eyeing a new $30 billion Treasury investment program called the Small Business Loan Fund. Details were released Dec. 22. The investments are similar to TARP but would allow the dividend rate to be as little as 1 percent if participants increased small-business loans 10 percent.
"It would be a snap for us to do," said Joe Matisoff, CEO of Hyperion Bank in Philadelphia. "We are looking at it" as a way to refinance TARP and get more capital, he said.