August 5, 2011
Authored by: Barry Hester and Bryan Cave Leighton Paisner
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, North Carolina, Tennessee, or Mississippi. Top states have been California (5) and Pennsylvania (5). Two recipients are based in Nebraska.
Asset quality is not surprisingly in pristine condition among recipient banks. Non-performing assets as a percentage of total assets (NPAs) have generally been between 1-3%. To our knowledge, no recipient had NPAs of more than 4% as of June 30, 2011.
In addition, no recipient so far had a March 31, 2011 Tier 1 leverage ratio of less than 7.0% and only two had a Tier 1 risk-based capital ratio on that date of less than 10%. The average March 31, 2011 Tier 1 leverage and risk-based capital ratios among recipients to date are 10.0% and 13.3%, respectively.
We hope to see further use of the $30 billion SBLF pool in the coming weeks. Based on our experience, we note that the SBLF closing process is tracking CPP/CDCI investments in at least two ways: form-driven documentation with little room for negotiation and an aggressive closing timetable. The Treasury’s authority to make SBLF investment expires on September 27, 2011.