Busey trades TARP obligation for a Small Business Lending Fund loan

Busey trades TARP obligation for a Small Business Lending Fund loan

CHAMPAIGN — First Busey Corp. is using one U.S. Treasury program to get out of another.

The parent company of Busey Bank announced Thursday it has exited the Treasury's Troubled Asset Relief Program, better known as TARP.

To enable that, First Busey decided to take part in the Treasury's Small Business Lending Fund, a program created last year to stimulate bank lending.

Here's a short history:

First Busey got a $100 million infusion of TARP money in March 2009 and in return issued $100 million of preferred stock to the Treasury.

The bank agreed to pay the Treasury dividends equal to 5 percent a year on that stock through March 2014. After that date, the dividends would have gone up to 9 percent a year.

To get out of its TARP obligation, First Busey paid the Treasury $27.4 million and agreed to let the Treasury's Small Business Lending Fund make a $72.6 million investment in First Busey.

In essence, the Treasury provides First Busey with capital by buying preferred stock in it. The company will initially pay dividends of 5 percent a year on that stock.

But if the bank's small-business lending increases by 10 percent or more, the dividend rate will fall to as low as 1 percent. Banks that increase lending by less than 10 percent would pay dividend rates between 2 percent and 4 percent.

If lending doesn't increase in the first two years, the dividend rate escalates to 7 percent.

After 4 1/2 years, the rate would increase to 9 percent if First Busey hasn't repaid the $72.6 million.

In a statement released Thursday, First Busey CEO Van Dukeman said Busey Bank is "one of the few qualified banks in our market areas to participate" in the Small Business Lending Fund.

The bank has 33 offices in central Illinois, an office in Indianapolis and seven offices in southwest Florida.

The legislation that created the Small Business Lending Fund defines small-business lending as loans of up to $10 mil- lion to businesses with up to $50 million in annual revenues. The loans can include commercial and industrial loans, farm loans and loans secured by farmland, among others.

Busey Bank President Chris Shroyer called the Small Business Lending Fund "a great opportunity to continue our tradition of serving entrepreneurs and small businesses."

As a result of paying off TARP, First Busey is no longer subject to limits on executive compensation and other restrictions under the Capital Purchase Program.

Participation in the Small Business Lending Fund is limited to depository institutions with assets of less than $10 billion. First Busey has assets of about $3.5 billion.

Institutions on the Federal Deposit Insurance Corp.'s list of "problem banks" aren't eligible to participate in the fund.

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John O'Connor wrote on August 26, 2011 at 11:08 am

It's a good thing the 'tea party' extremist faction of the GOP wasn't in control of congress when these bills came up for a vote or they would, of course, have defeated them with stupid grins on their faces.

Love until it Hurts then Lo... wrote on August 26, 2011 at 2:08 pm

I wish the 'tea party' extremist faction was in control cause then 1.2 trillion dollars would not haven secretly lent to banks, and the crazy TARP program would not have passed. Only thing the TARP program did is delay the recovery of the recession. Stimulus does not work; you have to let it ride out. Only people you should blame is those that made the policies for banks like Busey to dive in deep without any air supply or rescue plan to help them out of the depths of the ocean. Thanks Congress for giving away our hard earned tax dollars to these top executives who treat these dollars like monopoly money.

I say, everyone take your money out of Busey and go to a bank that did it right and didn't overextend themselves.

UIUCHoopFan wrote on August 26, 2011 at 2:08 pm

Still sounds to me like another larger business has found a way around paying its bills. John Q. Public goes to debter's prison and businesses get to play shell games with their financial obligations and pay big bonuses to the suits at the top.

Wow...I wish I had an option of making up the rules as I play the game,

Donna L. Adams wrote on April 24, 2012 at 3:04 pm
WOW wrote on May 24, 2013 at 1:05 pm

WOW, they managed their business soooo poorly that they had to get $100,000,000.00 in cash from the government to cover their losses. They agreed to pay 5% interest for the first 5 years, but ONLY 2 YEARS into it, they get yet another super sweetheart deal of only 1% interest. I have never had a financial institution drop my interest by 80%, instead, Busey's credit card company regularly increases it by 200% for those that miss a couple of payments. Very unethical all around.

Uncle Sam, please loan me $100 Million at 1%!!!!!

If you owe Busey only $1500 they will take you to court, file for judgements against you, wipe your accounts, trash your credit reports, try and get you jailed for "contempt of court" (yes there is a debtor's prison after all), sick their lawyers on you, and treat you like garbage. They imprisoned a poor lady for kiting checks for a total less than $3,000. No one at Busey even was fingerprinted.

For this $100 million dollar scam, EVERY one of their board of directors and upper level executives should have been forced to leave! Now we are giving them millions more dollars in bonuses. White collar crooks... are rarely punished, and usually are lavishly rewarded.

If you are going to rob a bank, make sure you are on the board of directors!