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Report criticizes Small Business Lending Fund

By - Last modified: April 10, 2013 at 11:27 AM

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In 2011, Centric Bank received $7.5 million from the U.S. Treasury's Small Business Lending Fund, or SBLF. Since then, the Lower Paxton Township-based bank has increased its small-business lending by $32.13 million, or well over $4 for every $1 received, according to Treasury data.

That makes Centric an anomaly, according to a watchdog report released Tuesday.

Nationwide, many community banks used the SBLF to exit the earlier Troubled Asset Relief Program but without supplying the increased Main Street business lending that the SBLF was designed to encourage, the report says.

"Former TARP banks in SBLF have not effectively increased small-business lending and are significantly underperforming compared to non-TARP banks," said the report from the office of Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP.

The Treasury was able to disburse just $4 billion of the $30 billion Congress allocated to the SBLF, the report said. Of that, $2.7 billion went to 137 banks in TARP, which used $2.1 billion of the money to exit that program, the report said.

On average, the majority of former TARP banks that received SBLF money — 132 of the 137 — increased small-business lending by $1.13 for every $1 in SBLF funds they received, the report said. Non-TARP banks in the SBLF program increased their lending by $3.45 for every $1, the report said.

Banks that received only enough SBLF money to repay TARP increased lending by 13 cents for every $1 in SBLF funds, the report said.

In the midstate, however, Centric and others appear to have used the program more as intended, compared with their peers nationally.

Three midstate banks used SBLF money to exit TARP, according to Business Journal records: Centric, PeoplesBank and York Traditions. A fourth, Jonestown Bank & Trust Co., received SBLF money but was not in TARP.

Centric, PeoplesBank and York Traditions increased lending by $2.16 for every $1 in SBLF funds they received, according to data the Treasury released earlier this month.

The SIGTARP report criticized the Treasury and federal banking regulators, saying they did not communicate effectively with each other and did not adequately assess SBLF recipients' plans to boost lending.

"Treasury and the regulators lost sight of Congress' primary goal of the program — to increase lending to small businesses," the report said.

The Treasury, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve all issued comments disputing the SIGTARP report conclusions, saying their oversight was effective and the SBLF achieved Congress' intent.

"Former TARP banks report a median small business lending increase of 18.4 percent," and 73 percent have increased such lending by 10 percent or more, the Treasury said.

Write to the Editorial Department at editorial@cpbj.com

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