This New Orleans bank likes SBA so much, it bought a national lender

Small Business Administration lending keeps gaining new regional and nationwide participants.

Gulf Coast Bank & Trust in New Orleans is the latest institution to dive into national SBA lending, after buying CapitalSpring SBLC. The deal should allow the $1.5 billion-asset Gulf Coast to become one of the program’s 50 biggest lenders.

“We’ve been one of the largest SBA lenders in Louisiana,” said Guy Williams, Gulf Coast’s CEO. “This lets us step up and be a national player.”

The effort adds Gulf Coast to a growing list of expansion-minded banks.

The $9.2 billion-asset Berkshire Hills Bancorp in Pittsfield, Mass., paid $57 million in May for 44 Business Capital, an SBA lender in Pennsylvania that lends throughout the mid-Atlantic. Around that time, the $950 million-asset Radius Bank in Boston hired a veteran SBA lender to oversee a nationwide expansion of its SBA program.

The $4.2 billion-asset State Bank Financial in Atlanta and the $27.9 billion-asset BankUnited in Miami Lakes, Fla., have also made big moves to expand SBA lending.

Even big banks with well-established national SBA lending operations have been eager to bulk up further.

The $100 billion-asset Huntington Bancshares in Columbus, Ohio, has said it is keen to push SBA lending in Chicago, one of the markets it entered with its purchase of FirstMerit. Through Dec. 31, Huntington was the nation’s third most active SBA lender, closing nearly 840 loans under 7(a) program, totaling $163.8 million, since the agency’s 2017 fiscal year began on Oct. 1.

The SBA is on a two-year tear that shows no signs of slowing down.

Through March 13, the volume of 7(a) loans in fiscal year 2017 is up 7.6% from a year earlier, at $9.6 billion. Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, predicted during testimony Thursday before the House Small Business Committee that 7(a) guarantee volume could end the year at $26 billion.

As a result, Wilkinson’s group wants Congress to increase the 7(a) program’s funding authority from the current $26.5 billion to $30 billion.

“SBA 7(a) lending is a rare program where the federal agency has figured out how to get out of its own way and leverage private-sector expertise,” Wilkinson said. “Lenders know how to make loans.”

The 504 program, which finances construction, commercial real estate, heavy machinery and other big-ticket equipment, is also growing. Volume through March 13 is up 7.5% from fiscal 2016, at $2 billion.

The SBA guarantees up to 85% of 7(a) loans. With 504 loans, the agency provides a 100% guarantee for the debentures that certified development companies sell to fund their lending.

At Gulf Coast, Williams, who has been CEO since the bank’s 1990 founding, said he foresees continued SBA growth. “I’m fairly optimistic we’ll have a good environment the next few years,” he said.

Gulf Coast, which rebranded CapitalSpring as Gulf Coast SBA Lending, kept the company’s entire workforce.

Gulf Coast, which has been closely identified with New Orleans and Louisiana throughout its 27-year history, has been cautiously exploring way to expand into other states. Buying CapitalSpring accomplishes that goal in a big way.

“You really don’t want to have all your eggs in one basket,” Williams said. “This was a good opportunity to expand beyond our home base and do it with a government guarantee.”