Chicago : Four banks refinance TARP funds

(Crain's) — The first of the Chicago area’s small banks that got bailout funds from the federal government are paying the money back.

But the news isn’t as good as it first appeared: The four small lenders that recently redeemed preferred shares they issued to the Treasury Department under the Troubled Asset Relief Program have effectively refinanced into a cheaper federal bailout program.

The four all are designated as community development financial institutions — institutions that lend to low-income or underserved communities or individuals — and have transferred their original TARP funds into a new, lower-interest program to provide federal assistance to CDFIs.

The two largest are the Hanover Park-based parent of $327-million-asset First Eagle Bank, which refinanced $7.5 million in TARP shares on Sept. 17, and the Wilmette-based parent of $338-million-asset Premier Bank, which refinanced $6.8 million on Aug. 13, according to the Treasury Department.

First Eagle received the funds on Sept. 11, 2009, while Premier got them on May 8, 2009.

The smaller banks are two Asian-American-owned lenders in the city: International Bank of Chicago, which refinanced $4.2 million on Sept. 10, and Chinatown’s Pacific Global Bank, which refinanced $3 million on Aug. 13.

International Bank received the TARP funds on May 15, 2009, and Pacific Global on Feb. 16, 2009.

All but one of the four banks were profitable through the first six months of this year. The exception was Pacific Global, which posted a $207,000 loss.

International Bank of Chicago CEO Frank Wang said the move effectively reduced the interest his bank is paying on the federal investment to 3.1% from 7.7%.