Three Connecticut banks participating in a federal program that aims to stimulate small business loans have increased their lending 77 percent, an indication that the initiative has been effective, officials say.
The three Connecticut banks participating in the U.S. Treasury Department’s Small Business Lending Fund program are BNC Financial Group, Salisbury Bancorp and SBT Bancorp. Collectively, they made $108.3 million in small business loans between the day they entered the program and Sept. 30, 2012.
That increased their small business loan portfolios by 77 percent.
BNC Financial Group, which is the parent company of The Bank of New Canaan and The Bank of Fairfield, experienced the biggest boost in small business lending, making $83.4 million in loans as of Sept. 30, Treasury Department data shows. BNC received $10.9 million in SBLF funds in 2011.
SBT Bancorp, which is the parent of Simsbury Bank, increased lending $9 million as of Sept. 30, a 26 percent increase from its starting level of $34.5 million in loans.
Meanwhile, Salisbury Bancorp, which is the parent company of Salisbury Bank, saw its small business lending increase 21 percent, or $15.9 million, to $93.6 million. Salisbury Bancorp received $16 million in SBLF funds.
Richard J. Cantele Jr., the president and CEO of Salisbury Bancorp, said the program was a key for the $611 million bank to boost its lending and also access inexpensive capital.
“It provided us with a level of confidence in challenging economic times to go ahead and make loans to small businesses,” Cantele said.
Nationally, the 281 banks participating in the SBLF program have increased lending by $7.4 billion, with 84 percent of those banks having increased their lending.
The SBLF aims to spur small business lending by providing capital to qualified community banks with assets under $10 billion. It was enacted as part of the Obama Administration’s Small Business Jobs Act of 2010, with the hope that the added capital would help create jobs and promote economic growth.
Hundreds of banks applied to the program, but only three financial institutions in Connecticut actually received funds.
Nationally, the Treasury invested $4 billion in 332 institutions. Small business lending, under the program, is defined as loans under $10 million to companies with $50 million or less in revenue.
Of course, there was an added benefit to banks participating in the program. It also allowed community lenders to trade in Troubled Asset Relief Program (TARP) funds for lower cost capital with fewer government restrictions. It was a major bonus considering the negative stigma and onerous oversight that was attached to TARP money under the program created in late 2008 at the height of the financial crisis.
TARP recipients have been required to pay the Treasury Dept. a 5 percent dividend, which is scheduled to increase to 9 percent. The dividend rate on SBLF funding, however, is reduced as a participating bank increases its lending to small businesses. The initial dividend rate is, at most, 5 percent. But if a bank’s small business lending increases by 10 percent or more, the rate falls to as low as 1 percent.
All three financial institutions in Connecticut participating in SBLF were also TARP recipients.
Cantele, the Salisbury Bank CEO, said the SBLF provided his company significant savings. The $9 million in TARP funds the bank received had an annual 5 percent interest rate, but the SBLF capital that replaced those funds has an interest rate just over 1 percent.
“It’s almost impossible to find capital at that cost in this environment,” Cantele said.
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Credit union inside Walmart
Nutmeg State Federal Credit Union is expanding its Central Connecticut presence with the addition of two new branches inside Walmart stores in Bristol and Cromwell.
The Rocky Hill-based credit union, which has been trying to raise its profile and expand since John Holt took over as CEO and president a few years ago, will take up residence inside Walmart stores at 161 Berlin Rd. in Cromwell and Route 6 in Bristol.
The retail location strategy is not new for Nutmeg State Federal Credit Union. In 2011, the nonprofit cooperative opened a branch in a retail location inside a Newington Price Chopper.
Nutmeg State Federal Credit Union now has nine branches.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
