Treasury Department earmarks $25.2M for Lorain National Bank
Alicia Castelli | The Chronicle-Telegram
LORAIN — A local bank has preliminary approval to receive $25.2 million from the U.S. Treasury Department as part of the $700 billion bailout plan passed by Congress last month.
The money is part of the TARP (Troubled Assets Relief Program) Capital Purchase Program, a voluntary program designed to help healthy institutions build capital and support the national economy by increasing lending.
“We’re excited about the preliminary approval because it’s not only good for the bank, it’s also great for the communities we serve,” said Daniel Klimas, LNB Bancorp president and CEO. “It allows us to be more helpful in continuing to strive for economic development in the communities we’re involved with.”
Lorain National Bank is a subsidiary of LNB Bancorp, Klimas said, adding the bank applied for the money at the beginning of November.
“Over the next 30 days the legal agreement will be finalized and signed, and then we receive the capital,” Klimas said.
The law, which created the $700 billion bailout fund, authorized the U.S. Treasury to draw up to $250 billion for immediate injection into the nation’s banks. John Fuller, LNB Bancorp spokesman, said the capital purchase program is one part of the bailout package and the money received from the treasury department will ultimately be repaid.
LNB Bancorp intends to sell $25.2 million of primarily preferred stock to the U.S. Treasury. That will make the U.S. government a shareholder in Lorain National Bank, Fuller confirmed.
“Preferred stock is a guaranteed repayment to the government of their money with interest,” he said. “Preferred stock will give the government a 5 percent return on their investment, and in return we get an infusion of capital.”
Klimas said Lorain National Bank intends to use the money to increase its lending to the public.
“It gives us the capacity, more capacity, to grow our loan portfolios to both businesses and consumers,” Klimas said. “This capital will allow us to make loans more available to the public.”
Sub-prime mortgage loan defaults are one of the contributing factors in the current deterioration of the nation’s economy.
“We’ve never been involved in sub-prime lending,” Klimas said. “It’s never been part of our offering. We’ve been a very conservative lender on the mortgage side.”
LNB Bancorp is a $1.1 billion financial holding company. Its subsidiary, Lorain National Bank, is a full-service community bank specializing in commercial and personal banking services, residential mortgage lending and investment and trust services.
Lorain Mayor Tony Krasienko said he was pleased for the bank.
“Lorain National Bank has continuously over the decades been an excellent corporate citizen,” Krasienko said. “They’ve continuously supported different endeavors in the community. They have a very long history of being that community bank we rely on.”
Contact Alicia Castelli at 329-7144 or acastelli@chroniclet.com.
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Filed by Alicia Castelli | The Chronicle-Telegram November 21st, 2008 in Top Stories. Popularity: 1% |
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Comment from
reggiewanker
November 21, 2008, 10:43 am
I think that is great for a local bank. HOWEVER one has to wonder how Natinal City didn’t qualify but LNB did…what criteria were sued to make these decisions.
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