Citizens South small business lending up 9 percent, U.S. Treasury reports

Gastonia-based Citizens South Banking Corp. increased small business lending by 9 percent since mid-2010, the U.S. Treasury reported this week, making it one of the 78 percent of community banks that received money from the criticized federal Small Business Lending Fund to increase its lending.

About $4 billion was put into 332 banks and community development loan funds through the program. From a baseline of $35.9 billion in small business lending -- taken from the average lending in the fourth quarters leading up to June 30, 2010 -- the institutions have since increased their lending by $3.5 billion, a 10 percent increase.

The figures come from a Treasury report to Congress on the Small Business Lending Fund, which was created in 2010 to provide capital to community banks.

Critics have called the Small Business Lending Fund a flop. About $30 billion was authorized, but only $4 billion spent after few banks applied for the funding. And about half of the money spent was used by banks to pay off TARP, the Wall Street Journal reported in October.

Citizens South was one of the banks to do that. The bank said in September that it used lending fund money to pay off the $20.5 million it owed the government through TARP.

Having money from the fund incentivizes banks to increase their small business lending. When it entered the program, Citizens South said it would initially be making 4.84 percent dividend payments quarterly, but that could be reduced to 1 percent by the middle of 2012 should it increase small business lending by 10 percent or more.

According to this week's Treasury report, Citizens South's baseline small business lending level was $126.4 million. As of Sept. 30, it had increased 9.2 percent, to $138 million. The bank now has a dividend payment of 3.3 percent.

A Charlotte-based bank hasn't fared as well. Premara Financial Inc., the holding company for Carolina Premier Bank, has shrunk its small business lending by 9.2 percent. It has $6.2 million in Small Business Lending Fund money outstanding.

Other N.C. banks with lending fund money, with their percent change in small business lending:

• First Bancorp, Troy. 2.7 percent
• Live Oak Bancshares Inc., Wilmington. 4.2 percent.
• Providence Bank, Rocky Mount. 20.7 percent.
• Select Bancorp Inc., Greenville. 50.3 percent.
• Union Bank & Trust Company, Oxford. 16.3 percent.

N.C. community development loan funds (unregulated financial institutions, generally nonprofit and reliant on grants) with SBLF money, with their percent change in small business lending:

• Mountain BizCapital Inc., Asheville. 13.8 percent.