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TARP Exit Ramp for Community Banks: The SBLF

January 31, 2012

Authors

Bryan Cave

TARP Exit Ramp for Community Banks: The SBLF

January 31, 2012

by: Bryan Cave

Only about 1 % of principal repayment to Treasury through 2011 under the TARP Capital Purchase Program (CPP) was the result of SBLF refinancing, according to latest Quarterly Report to Congress issued by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).  Though the lion’s share of Treasury’s $4 billion investment under the Small Business Lending Fund was used for this purpose, the figure constitutes only a fraction of the $186 billion in CPP principal repaid thus far.  About $20 billion in CPP securities remains outstanding.

The rest of the story is that the smaller CPP participants have been much slower to repay CPP obligations, and the SBLF was a major boost for those institutions.  In all, 137 institutions exited TARP by refinancing their outstanding CPP investment using SBLF funds.  Through December 31, 2011, 279 banks in all had exited the CPP program either by fully repaying CPP or by virtue of Treasury’s having sold

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Small Business Lending Fund Map and Review

October 21, 2011

Authors

Bryan Cave

Small Business Lending Fund Map and Review

October 21, 2011

by: Bryan Cave

New investment under the Small Business Lending Fund ended on September 27, 2011, in accordance with its enabling legislation.  In the end, 332 institutions received over $4 billion in SBLF funds, and Treasury closed 97 deals worth $1 billion in the program’s final week of investment.  We have previously noted that recipient institutions were generally well-capitalized with low levels of non-performing assets.  While Treasury has published a version, we have developed our own interactive map of SBLF recipients:

Phoenix-based Western Alliance Bancorporation received the largest single investment under the program ($141 million).  More recipients were based in California (29) than anywhere else.  Only four entities based in Georgia received funding.  As one of those, Appalachian Community Enterprises, Inc., is a Community Development Loan Fund (CDLF), only three Georgia headquartered banks (two state-chartered and one national charter) received funding under the SBLF.

Pennsylvania entities did well under the program (23 recipients).  Pennsylvania had 208 FDIC-insured institutions reporting

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Treasury Scrambles to Close SBLF Investments

September 16, 2011

Authors

Bryan Cave

Treasury Scrambles to Close SBLF Investments

September 16, 2011

by: Bryan Cave

On September 14, 2011, Treasury announced additional disbursements under the Small Business Lending Fund (SBLF).  Total funding through the date of this release totals $2.38 billion to 191 institutions.  This is not even 10% of the $30 billion authorized under the program.  Treasury has stated in a whitepaper that 932 institutions ultimately applied for $11.8 billion in SBLF funding and that, as of September 1, it had issued preliminary approvals to all eligible and qualified applicants, 382 institutions in all for a total of $4.3 billion.  Best case, then, Treasury expects to utilize only about 14% of the total SBLF pot but one-third of the funds requested.

The figures in Treasury’s whitepaper suggest that there will be a rash of SBLF closings in the next ten days.  Under its enabling legislation, all SBLF disbursement must be made by September 27.  The number of disbursements to date (191) is

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A Statistical Look at SBLF Recipients To Date

August 5, 2011

Authors

Bryan Cave

A Statistical Look at SBLF Recipients To Date

August 5, 2011

by: Bryan Cave

On August 3, 2011, the Treasury released an updated transactions report that reflects a third round of Small Business Lending Fund (SBLF) disbursements.  To date, Treasury has invested over $590 million in 43 SBLF participants, an average investment of $13.7 million.  The largest single investment remains a $56.6 million boost for Eagle Bancorp, Inc., of Maryland.  Of the 43 investments thus far, 30 (70%) have been $15 million or less.  At least ten recipients, however, have been stand-alone banks or thrifts with less than $200 million in total assets (including Michigan-based Huron Valley State Bank with roughly $60 million in total assets as of March 31, 2011).

Twenty-four of the forty-three recipients (56%) have been CPP or CDCI participants that had outstanding investment from those programs as of December 16, 2010. 

Three of the recipients to date have been based in Alabama and two have been from Florida, while no disbursements have yet been made to entities based in Georgia, South Carolina,

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First SBLF Disbursements Announced

July 12, 2011

Authors

Bryan Cave

First SBLF Disbursements Announced

July 12, 2011

by: Bryan Cave

On Thursday, July 7, 2011, Treasury announced that two community banks and four holding companies have received the first $123 million in capital disbursements under the Small Business Lending Fund (SBLF).  The investments closed between June 21 and July 6, according to Treasury’s SBLF Transactions Report, and involved the following participants and amounts:

  • Community Trust Financial Corporation (Ruston, Louisiana) – $48.3 million
  • Level One Bancorp, Inc (Farmington Hills, Michigan) – $11.3 million
  • Pioneer Bank, SSB (Drippings Springs, Texas) – $3.0 million
  • ServisFirst Bancshares Inc. (Birmingham, Alabama) – $40.0 million
  • U&I Financial Corp (Lynnwood, Washington) – $5.5 million
  • Virginia Heritage Bank (Fairfax, Virginia) – $15.3 million

Treasury promises additional disbursement announcements in coming weeks.  As for the first wave of funding, the largest investment of $48.3 million was made in Community Trust Financial Corporation, Ruston, Louisiana, the $1.89 billion-holding company for the Louisiana-chartered Community Trust Bank.  This is also the

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California Holding Company Announces SBLF Approval

June 21, 2011

Authors

Bryan Cave

California Holding Company Announces SBLF Approval

June 21, 2011

by: Bryan Cave

First California Financial Group, Inc., Westlake Village, CA, holding company for the $1.8 billion First California Bank, announced last night that it has been approved to receive SBLF funding, “subject to the Treasury’s customary due diligence and closing conditions.”  According to the company’s press release, it expects to close within the next 30 days and will use the funds to refinance $25 million in CPP investment.  While no funds have been disbursed, we are aware of several similar preliminary approvals that have been issued within the last week.  The Treasury has stated that it will publish an online list of participating institutions on a rolling basis as funds are disbursed.

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Fed Confirms Tier 2 Treatment for Sub S SBLF Funds

June 13, 2011

Authors

Robert Klingler

Fed Confirms Tier 2 Treatment for Sub S SBLF Funds

June 13, 2011

by: Robert Klingler

On June 13, 2011, the Federal Reserve published an interim final rule nominally offering some relief from the capital effects of the Tier 2 treatment for SBLF funds for Sub S and Mutual bank holding companies.

As recognized by the Federal Reserve, “the SBLF Subordinated Securities, like the CPP Subordinated Securities, are issued to Treasury as part of a nationwide program to provide capital to eligible banking organizations that are in generally sound financial condition in order to increase the capital available for lending to small businesses, thereby mitigating the ongoing effects of the financial crisis on small business and promoting financial stability.”  The Federal Reserve also acknowledged that “the SBLF Subordinated Securities are in terms and substance substantially equivalent to the CPP Subordinated Securities.”  Not withstanding these goals and similarities, the SBLF Subordinated Securities will only be eligible for Tier 2 capital treatment, as required by the Collins Amendment

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Treasury Adds Restrictions on SBLF Eligibility

May 31, 2011

Authors

Robert Klingler

Treasury Adds Restrictions on SBLF Eligibility

May 31, 2011

by: Robert Klingler

On May 26, 2011, almost two weeks after the deadline for C-Corporation financial institutions to apply, the Treasury further restricted eligibility for participation in the Small Business Lending Fund.  The Treasury has determined that only institutions without any dividend restrictions may participate in the SBLF.

In order to be eligible to participate in the SBLF, the Treasury has determined that applicants must be able to pay dividends without being subject to approval by any third party, including the federal banking regulators. This requirement goes beyond the eligibility standards included in the authorizing statute, which provided that banks on the FDIC’s troubled bank list were ineligible.  In light of the Federal Reserve’s propensity to impose dividend restrictions, Treasury’s decision will further limit the potential positive impact of the Small Business Lending Fund.

This decision was communicated to applicants via an “Inquiry Regarding Dividend Payments” and an undated update

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Small Business Lending Fund for Sub S Banks

May 13, 2011

Authors

Robert Klingler

Small Business Lending Fund for Sub S Banks

May 13, 2011

by: Robert Klingler

On May 12, 2011, the Treasury department got around to posting term sheets for Subchapter S and mutual institutions that desire to participate in the Small Business Lending Fund.  The Treasury intends to use subordinated debentures for both Subchapter S and mutual institutions, and has adjusted the interest rates to reflect after-tax effective rates equivalent to the dividend rate that will be paid by other institutions participating in the Small Business Lending Fund.

The terms and eligibility restrictions are generally otherwise comparable to the term sheets provided for Subchapter C corporation banks and thrifts, with one major exception: the securities issued to Subchapter S and mutual institutions will only qualify for Tier 2 capital treatment.  Not only does this make the Small Business Lending Fund significantly less attractive to Subchapter S banks, it also may make it more difficult for a Subchapter S bank holding company to consider

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Summer Interns to Staff SBLF

April 19, 2011

Authors

Bryan Cave

Summer Interns to Staff SBLF

April 19, 2011

by: Bryan Cave

Treasury is currently recruiting unpaid summer interns to help administer the Small Business Lending Fund (SBLF).  Qualified undergraduate and graduate student volunteers “will be working closely with investment managers on the SBLF’s Application Review Team and will be expected to make a meaningful contribution to the program.” 

While we are all happy to see Treasury develop talent and conserve its resources, we think this may send the wrong message.  At a time when Subchapter S and mutual application guidelines are still unpublished, and over 600 SBLF applicants (all “healthy” and in a position to increase lending to America’s small businesses) are still waiting for disbursement of funds in “early 2011,” we would much rather be hearing about additional paid staffers who can actually get the program implemented.  We wonder whether the added responsibility of training and supervising interns will improve existing personnel’s ability to roll out the SBLF. 

On the other hand, perhaps the interns can

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