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Susquehanna repays two-thirds of TARP funding

April 22, 2010|By ANDREW SCHOTZ

TRI-STATE -- Susquehanna Bancshares said Thursday it has repaid two-thirds of the $300 million in Troubled Asset Relief Program (TARP) funding it received from the federal government.

In 2008, the U.S. Department of the Treasury announced a voluntary TARP Capital Purchase Program, in which the government would buy up to $250 billion of preferred shares of banks, giving them capital to make more loans.

Susquehanna Bancshares, which has bank branches throughout the Tri-State area, received $300 million in December 2008, said Steve Trapnell, a communications manager for Susquehanna.

"We believe it is the right time to redeem a portion of the Capital Purchase Program funds, which will help to improve earnings by reducing the amount we pay in preferred dividends," William J. Reuter, Susquehanna's chairman and CEO, said in a news release. "In keeping with our conservative approach to managing the company, we do not expect to redeem the remaining $100 million of preferred stock until we see further evidence of a sustained economic recovery and related improvement in our credit metrics."

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Banks were required to pay a 5 percent dividend on the Capital Purchase Program stocks, according to the Treasury. After five years, the dividend requirement increases to 9 percent.

Since receiving the TARP money, Susquehanna Bancshares has paid the Treasury more than $19 million in dividends, the company said in a news release Thursday.

Trapnell said TARP funds helped make it easier to lend money, but there's no way to document the exact effect.

"Susquehanna participated in the Capital Purchase Program in order to support the Treasury's efforts to stimulate the U.S. economy, and the capital we received enhanced our capacity to make loans," Reuter said in the news release. "During 2009, Susquehanna Bank made new loans totaling $2.3 billion, helping families and businesses in our local communities to achieve their financial goals."

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