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Government gooses small business lending in Texas

Monday, October 15, 2012 - 1:45pm

Texas banks that received capital through a government program designed to spur more small business have continued to lend, according to a new report on the Small Business Lending Fund (SBLF) from the U.S. Treasury Department.

According to the report, Texas banks participating in the program have increased small business lending by $932 million since receiving the funding in June 2011. For the quarter ending June 30, 2012, small business lending for participating banks in Texas was up $192 million over the prior quarter.

The SBLF, which was established as part of the Small Business Jobs Act that President Barack Obama signed into law in 2010, pumps ultra-cheap capital into smaller banks (less than $10 billion in assets) by purchasing Tier 1-qualifying preferred stock at a low dividend rate. The banks, in turn, were supposed to lend the money to small businesses that need it.

They have, for the most part.

The Treasury invested more than $4 billion in 332 qualifying institutions through the SBLF (a relatively small number of banks considering that roughly 7,000 community banks that fell under the $10 billion threshold) that has produced a $6.7 billion bump in lending to small businesses.

First Texas BHC, the parent company of $1 billion Southwest Bank, was the only institution based in Tarrant County to participate in the program. It received an investment of $29.8 million from the Treasury in June 2011.

Upon receipt of the funds, First Texas redeemed $13.5 million of preferred stock issued to the Treasury in 2009 under the Capital Purchase Program – which had been folded into the much-maligned Troubled Asset Relief Program, much to bank officials' consternation – and has since increased its business lending by more than $78 million, or about 57 percent.

Under the program, 89 percent of the participating community banks have increased their small business lending, the report said. More than 76 percent of participants have increased small business lending by 10 percent or more.

The report also showed that SBLF banks have outpaced other institutions in their lending to small businesses, with participating banks having increased their business lending by a median of 27 percent versus a 0.4 percent median decrease for non-SBLF banks.

It's hard not to consider the entire program a success at this point, though that success could possibly have been greater had more institutions been allowed to qualify. The Treasury had $30 billion at its disposal for the program, but would up using only a fraction of that amount, sending tens of billions of unused funds back to Congress.

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