A couple of weeks ago, I wrote that all of us are shareholders now in lots of banks, thanks to the $700 billion financial-rescue plan.
Because the word bailout is used so often as shorthand for the plan, many bankers feel defensive about participating in the Treasury Department’s $250 billion Capital Purchase Program.
After all, the Treasury says that its purpose is to “infuse capital into healthy viable banks with the goal of increasing the flow of financing available to small businesses and consumers.”
Well, I heard from one Philadelphia banker who just received capital who wanted to explain exactly why he sought it and what he’s going to do with the money.
Joseph M. Matisoff is president and CEO of Hyperion Bank, which is based in the city’s Northern Liberties neighborhood.
On Feb. 6, the Treasury bought preferred stock in the tiny bank, which opened in November 2006, in exchange for $1,552,000. Hyperion will pay a 5 percent dividend on that investment, which amounts to $77,600 annually.
Matisoff said his bank would have been trying to raise more capital this year, but it’s not a great time to do so. The federal program “buys me time,” he said.
It also will enable Hyperion to make up to $15 million in additional loans, Matisoff said.
Hyperion has $50.63 million in loans, according to its most recent call report. Only $95,000 are past due, he said.
Had his bank not tapped the Capital Purchase Program, Hyperion would not be able to expand its loan portfolio, Matisoff said.
Public tongue-lashings of big bank CEOs may give the impression that no bank is making loans. Matisoff says that’s just not true.
Capital is the key to lending activity. When banks reach the limits of their regulated capital ratios, they can’t make new loans.
You can read the list of all 387 banks that have received capital from the Treasury on its Web site.
At the top of that list is Bank of America Corp. with its $1.8 trillion in total assets. And near the bottom, with $71.9 million in assets, is Matisoff’s Hyperion.