Bank Receives $20 Million to Help Local Businesses

Penn Liberty Financial Corp, the holding company for Penn Liberty Bank, located in Wayne, received $20 million from the U.S. Department of Treasury’s on September 1 to be used to further enhance its business lending efforts.

The money Penn Liberty received was part of $32.1 million given to three Pennsylvania community banks provided through the Small Business Lending Fund (SBLF). The SBLF was created to encourage community banks to increase their lending to small businesses and help those companies to expand their operations and create new jobs.

According to Ted Aicher, Chief Financial Officer at Penn Liberty Bank, the bank has been very successful in lending to businesses and entrepreneurs within their community since their inception in September, 2004.

“In fact lending to small businesses is one of our key strategies,” said Aicher.

The bank applied for the SBLF in February, 2011. When they received the money, they repaid approximately $10.5 million to redeem all of the outstanding preferred stock issued to the Treasury under the Troubled Asset Relief Program (TARP). The rest of the money was contributed to Penn Liberty Bank as additional capital for future growth.

According to a statement released by the bank, they are very pleased to have been selected as one of the few qualified banks in their market to participate in the SBLF program. By supporting lending to businesses and entrepreneurs through SBLF, Penn Liberty Bank is able to continue to work within their community to help enhance creation and economic growth.

According to Aicher, the bank applied for the SBFL because they would need additional capital in the upcoming years to continue to grow at the pace that they wanted to.

“The dividend rate on the SBLF preferred stock varies based on the amount of qualified small business loans that we do,” said Aicher.” The lowest dividend rate is 1% which we expect to achieve shortly.  Our initial dividend rate based on growth that we have achieved to date is already down to 1.27%.  The SBLF is very cheap capital when compared to other alternatives.”

One of Penn Liberty Bank’s key strategies is to serve small businesses. They hold the Preferred Lender Program (PLP) status from the U.S. Small Business Administration (SBA) which is the highest lending designation awarded by the SBA.

Despite the struggling economy, Penn Liberty Bank has still been able to grow their loan portfolio significantly over the past several years.

“We are ready, willing and able to lend but many small businesses continue to struggle.  As such many are not borrowing,” Aicher said. “In fact some of them are repaying their borrowings faster than they normally would.”

The SBLF has helped the bank help small businesses.

According to Aicher, they view the SBLF as ideal “bridge” capital that will eventually be replaced with a more permanent and larger common equity raise as soon as market conditions are more favorable for community banks.