Lake Sunapee Bank signs on to small business loan fund

Lake Sunapee Bank appears to be the second New Hampshire bank to take advantage of the Small Business Lending Fund, a U.S. Treasury program that’s a successor to the controversial Troubled Assets Relief Program.New Hampshire Thrift Bancshares Inc., the holding company that owns Lake Sunapee, announced Monday that it received $20 million, and will use half to pay off its Capital Purchase Program, part of the TARP. The other half will be used “to increase our lending activity with small businesses in need of commercial loan assistance or for owner-occupied commercial real estate loans,” said Stephen W. Ensign, NHTB’s chairman and CEO.The program, part of the Small Business Jobs Act of 2010, sets aside some $30 billion by offering the funds to small solvent banks.The TARP was launched at the start of the recession in an effort to shore up troubled banks and encourage lending by having the department purchase the banks’ preferred stock. Both liberals and conservatives alike castigated TARP as a bailout program for reckless big banks, with no strings attached. However, the CPP was aimed at smaller, secure banks, like Lake Sunapee, which received $10 million under the program.Unlike CPP, the new program is tied to increased lending. The bank has to pay its preferred investor (the U.S. Treasury) a dividend that decreases as the bank increases its lending to small businesses.The initial dividend rate will be 5 percent. If a bank’s small business lending increases by 10 percent or more, then the rate will fall to as low as 1 percent. Banks that increase their lending by amounts less than 10 percent can benefit from rates set between 2 percent and 4 percent. If lending does not increase in the first two years, however, the rate will increase to 7 percent.After 4 1/2 years, the rate will increase to 9 percent if the bank has not already repaid the funding.To be eligible, the bank has to have assets of less than $10 billion, and the institution can’t be on the FDIC problem bank list or a similar list.As of Aug. 17, the program’s investments total slightly over $1 billion to 80 banks, including Centrix Bank in Bedford, which accepted $24.5 million on July 28. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW