Update: 7 Iowa banks receive federal bailout money - KWWL - Eastern Iowa Breaking News, Weather, Closings

Update: 7 Iowa banks receive federal bailout money

WATERLOO (KWWL) -- The U.S. Treasury Department says seven Iowa banks, including ones in Cedar Rapids, Iowa City and Dubuque have now received federal money. 

A massive $700 billion economic recovery bill was to flow into local banks around the country to, in part, stabilize the economy, bailout troubled banks and save homes. It's called TARP: the Troubled Asset Relief Program.

Three banks received money under President George Bush's bank plan, another four got money from President Obama's plan.  In all, the seven Iowa banks have received more than $200 million since December 2008.  Another 48 Iowa banks have applied for the program.

The U.S. Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief Program, to help to stabilize and strengthen the U.S. financial system. Treasury allocated $250 billion under TARP's Capital Purchase Program to invest in U.S. financial institutions. 

Here is a list of the companies who have received federal funds, how much they received from the program and what the companies said they plan to do with the money:

12/19/08: Heartland Financial USA Inc., Dubuque
Holding company for Dubuque Bank and Trust and Galena (Ill.) State Bank, as well as 10 other banks
Money received: $81.7 million
Use: Increase lending, as well as look for potential acquisitions.

12/31/08: West Bancorporation Inc., West Des Moines
Holding company for West Bank and WB Capital Management
Money received: $36 million
Use: Increase lending to local businesses.

1/9/09: North Central Bancshares, Fort Dodge
Holding company for First Federal Savings Bank
Money received: $10.2 million
Use: Increase capacity to support economic activity and growth in each of the communities they serve through responsible lending.

2/6/09: MidWestOne Financial Group, Iowa City
Money received: $16 million
Use: Look for smart and responsible lending opportunities.

2/13/09: QCR Holdings Inc., Moline, Ill.
Holding company for Quad City Bank and Trust Co., Cedar Rapids Bank and Trust Co. and Rockford Bank and Trust Co.,
Money received: $38.24 million
Use: Enhance capacity to support communities they serve through additional lending opportunities.

2/27/09: Green Circle Investments Inc., Clive
Holding company for Peoples Trust & Savings Bank
Money received: $2.4 million
Use: Increase lending.

2/27/09: National Bancshares, Bettendorf
Holding company for the National Bank
Money received: $24.6 million
Use: As additional capital to continue to grow lending operations at its subsidiary, the National Bank.

KWWL contacted some of the bank presidents in Iowa whose institutions received federal money.  Top officials with Heartland Financial USA, Inc in Dubuque sent us the following answers to our questions.  We have not edited these responses in order to protect the intergirty of the company's reponse.

Background Information on Heartland Financial USA, Inc.:

  • Headquartered in Dubuque, Iowa
  • Heartland is the holding company for 10 community banks in 8 states including Dubuque Bank and Trust and Galena State Bank in the KWWL viewing area.
  • The company has 61 banking offices, serves 41 different communities and employs over 1,100 employees, with over 430 in the Dubuque/Galena area.
  • As a community banking group, the company's primary business is making loans to businesses and individuals and to help people save money for the future.

Preface Comments:  Strong community banking groups like Heartland were encouraged to participate in the government's Capital Purchase Program to ensure the flow of credit in communities throughout the country.  Heartland was specifically encouraged as the company's history demonstrates our strong lending capabilities.  By way of example, Heartland banks increased loans during 2008 by $124 million, or 5% over the previous year.

We believe the term, "bailout" is inappropriate as all Heartland banks have had and currently have strong capital ratios exceeding regulatory requirements. We want to emphasize, especially as you review the response to question 1below, that the company's participation in the program was not free.

Answers to Questions:

  • 1. "Preferred stock with warrants" means that Heartland has issued ownership shares with a guaranteed dividend to the US Treasury. These preferred shares require the company to pay a quarterly dividend at a pre-tax rate of 7 percent (after-tax 5 percent) on the $81.7 million investment for the first five years, or $4 million annually for the use of the funds. The company has already made its first payment to the US Treasury. The "warrants" give the US Treasury the right to buy approximately 700,000 shares of Heartland's common stock at a future time at a price of approximately $20 per share.
  • 2. Heartland's use of the money. We immediately put the capital to work and increased loans by over $40 million in the fourth quarter of 2008. Speaking to the intent of this program, we are actively seeking to make new loans to creditworthy borrowers along with evaluating opportunities for potential acquisitions.

The Heartland banks have had exceptionally strong mortgage loan demand so far in 2009, setting records for new loans processed and closed.  For families having trouble making payments, Heartland banks have restructured or modified over 200 mortgage loans so far in 2009 and are seeking every way possible to help our borrowers stay in their homes and avoid foreclosure during this time of financial stress.

In terms of lending, that is our major line of business, so naturally we are always seeking to make good loans to stimulate the economy, help businesses to grow, families to make major purchases and ultimately, provide jobs in the communities we serve.

  • 3. Sharing documents to demonstrate we are using the money responsibly. Two important thoughts on that subject: First, as a public company, Heartland's financial results are readily available to investors and the public. We are required to provide quarterly financial results to our stockholders, regulators and the public, so anyone can examine the numbers to determine if the company is increasing its loans and deposits. Current information is available at www.htlf.com. Second, since bank participation in the Treasury's Capital Purchase Program has received so much attention at the national level, the government is closely monitoring the lending activities of all banks.
  • 4. Use of funds for raises, bonuses or non-lending purposes. Heartland and its banks have only used the funds for purposes expressed by the US Treasury. Some of the company's senior managers declined to accept raises in 2008 and an expanded freeze on raises for all upper level employees is in effect for 2009. Some bonuses were paid for 2008 based on achievement of objectives at some of the Heartland banks, but those bonuses were substantially reduced or eliminated and paid out of the profits of the bank, not from TARP funds. One of the banks that earned bonus payments for 2008 was Dubuque Bank and Trust, which had its best year ever in 2008.

One of the approved purposes for TARP funds other than lending is to make acquisitions of other banks weakened in the current downturn.  We are open to the potential of using the funds to acquire banks in our current market areas and through an acquisition, look to improve the economic conditions in the communities we serve.

  • 5. Use of funds for home lending, car financing and business loans. As stated in several instances above, these types of loans are the essence of our business. We are always seeking to make more of these loans. During a recession, however, loan demand is often reduced as businesses restrict expansion plans and individuals put off major purchases. Be assured, we are doing everything possible to make good loans to creditworthy borrowers.

Summary comment: It is very unfortunate that a few large organizations, especially investment banks, have created the negative environment in which we operate today.  As local community banks, we were not involved in the types of activities that created massive losses for the largest banks in the country and around the world.  Our focus is Main Street - where our customers are - not Wall Street.

Click here for a map which represents locations where the Department has funded transactions and will be updated as new transactions are announced. Treasury has received applications from qualified institutions in all 50 states, the District of Columbia and Puerto Rico.

Investments have ranged from as small as $1 million to as large as $25 billion, financing community banking and Community Development Financial Institutions across the country. More information about specific investments can be found online in Treasury's transaction reports.

In January of 2009, The U.S. Government Accountability Office issued a report on efforts to address transparency and accountability issues.  Click here to read the report.

Online Producer:  JJ Murray

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