Bellevue-Based Puget Sound Bank Gets Federal Money To Lend to Small Business

Bellevue-based Puget Sound Bank received $9.9 million to lend to small businesses, as part of the federal Small Business Lending Fund, the U.S. Department of the Treasury announced Wednesday.

Puget Sound Bank is one of 80 banks nationwide that have received a total of $1 billion to loan to small businesses, according to the Treasury Department.

The SBLF, established as part of the Small Business Jobs Act that President Obama signed into law in 2010, encourages community banks to increase their lending to small businesses, helping those companies expand their operations and create new jobs, according to the Treasury Department.

Additional SBLF funding announcements will be made on a rolling basis in the weeks ahead.  

"These funds will provide critical support to Main Street community banks so they can expand their lending to small businesses," said Deputy Secretary of the Treasury Neal S. Wolin, in a prepared statement. "This program helps entrepreneurs in communities across the country access the capital they need to grow their operations, invest in new equipment, and hire additional workers."

The banks, which received funding as a percentage of their size, are encouraged to make as many loans as possible, said Jason Tepperman, Director of the Small Business Lending Fund, in a conference call.

"They can make loans not only using the funding we provide, but leveraging the funding we provide, so that a dollar of capital from the Small Business Lending Fund can lead to multiples of that in small business lending," Tepperman said.

Tepperman said that the program is designed to have the banks work with local businesses with good credit, and it will be up to the banks to determine which small businesses will be approved for loans.

Puget Sound Bank CEO Jim Mitchell said in an interview Wednesday that entering into the SBLF program makes sense for its shareholders and for the growth of the bank.

Puget Sound Bank qualifies for the program's lowest dividend rate, 1 percent, after because its small business lending has grown by 10 percent since June 30, 2010, Mitchell said.

The bank used the money issued Aug. 11 to pay off the $4.7 million in preferred shares issued through the Treasury's Capital Purchase Program, and the loan money has already been issued to local small businesses customers, he said.

The SBLF program has a lower dividend rate than the Capital Purchase Program.

"We got out of that program, and into a better one," he said.

Mitchell addressed the award in the company's most recent earnings announcement in July.

"As a strong business bank, we believe we will be able to deploy this capital to help businesses in the region expand and create jobs,” he said in a prepared statement.

The bank, which trades over the counter as PUGB, reported net income of $869,269 for the first half of 2011, up 44 percent from $605,105 in the same period the year before.

"Despite weak demand for business loans, we continue to generate strong origination volume from a diversified customer and prospect base," said Mitchell in the prepared statement. "While many banks are seeing a reduced demand for new lending and/or have a diminished appetite to lend during these tougher economic times, we have had strong loan growth without compromising credit quality."

Total loans increased by 19 percent to $175 million at the end of June from $147 million a year ago.

The bank reported total assets of $225.4 million as of June 30.

To read more about the Small Business Lending Fund, click here to go to the U.S. Department of the Treasury's website.