Bank redeems stock pledged for small business loan fund

QRC Holdings used money to pay back TARP funds

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QCR Holdings Inc., the corporate parent of Cedar Rapids Bank and Trust Co., redeemed $10.2 million of the $40.1 million in preferred stock it issued in September 2011 to receive funds intended for more loans to small businesses.

QCR Holdings of Moline, Ill., used the Small Business Lending Fund money to pay back funds it received from the Troubled Asset Relief Program, or TARP.

The Small Business Lending Fund was designed to raise capital at smaller banks, which typically lend more heavily to small businesses, in the hopes of jump-starting growth and employment.

More than half of the $4 billion in federal funds disbursed by the Treasury in 2011under the SBLF program was used to repay loans that the banks received at higher rates of interest under TARP. Of the 332 banks that received money through the lending fund, 137 used a portion $2.2 billion to pay off their TARP obligations, according to Treasury Department data reviewed by the Wall Street Journal.

The banks were not prohibited from using the SBLF program money to pay off their TARP obligations, according to the Treasury Department, which originally intended for TARP and SBLF to operate as separate programs.

The Independent Community Bankers of America lobbied successfully for a provision allowing TARP recipients to transfer from one Treasury program to the other.

Community bankers argued that paying off higher-interest loans under TARP was an effective way for them to free up capital that they could use for small-business lending. Other lenders said it was important to be rid of TARP, which had developed a stigma as public sentiment soured on the notion of bank and financial market bailouts.

"We were quite pleased to have been approved by Treasury for participation in the SBLF last year," said Douglas Hultquist, president and chief executive officer of QCR Holdings. "While our participation in SBLF has been a real positive for our company, and Treasury's approval for our participation in the program a significant indicator of the strength of QCR Holdings, it is time for us to execute on our previously stated objective of redeeming this SBLF capital over the next several years."

Heartland Financial of Dubuque, owner of Dubuque Bank & Trust Co., received $81.7 million from the SBLF program. Heartland Financial used the entire amount to retire its obligations under TARP.

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