July 19, 2011

More Capital for More Loans

Two and a half years ago, EagleBank was proud to participate in the TARP Capital Purchase.  In December 2008, we issued $38.2 million of preferred stock to the US Treasury. 

Unlike many banks at that time, we didn’t need a bailout; we were strong.  But we recognized that more capital would allow us to make more loans.  So we participated in TARP.  And as opposed to many other participants, we didn’t sit on the capital.  We went out and made more loans. (Between December 2008 and June 2011, our loans grew by 54%, to $1.9 billion.) 

In December 2009, we paid back $15 million of the TARP money.  I’m pleased to report we have now paid off the rest. 

I’m also excited to report that EagleBank has become one of the country’s first participants in the Small Business Lending Fund.  Approved by Congress and signed into law last September, the Small Business Jobs Act created a $30 billion fund to provide new capital to community banks to be used to encourage lending to small businesses.  The first fundings just occurred and we closed with the Fund on July 14.  We’ve issued $56.6 million in preferred stock in connection with the Fund. 

After paying off TARP, we have $33.3 million of new net capital, which will allow us to yet again to make more loans. 

The dividend a participating bank pays the Small Business Lending Fund is directly related to the increase in small business loans over a specified period.  In the case of EagleBank, based on our loan growth in the initial reporting period, we hit the lowest rate right out of the gate.  Our cost of funds for this capital is 1%. 

EagleBank is in the business of making loans, and the SBLF funds will further facilitate us doing just that.  We can leverage that capital about eight and-a-half times, so we have the capital to make so many more small business loans. 

Senator Mary Landrieu of Louisiana, Chair of the US Senate Committee on Small Business and Entrepreneurship, played a major leadership role in turning the SBLF into reality.  We’re proud to be among its first participants.  And now we look forward to underwriting and originating even more new loans to small businesses in the Washington metropolitan area.

See my comments in CNNMoney.com, “Small business program misses the mark.”