Sunday, June 17, 2012

The SBA and phlegmatic



1. Having a sluggish temperament; apathetic.
2. Calm or composed.

From Latin phlegmaticus, from Greek phlegmatikos, from phlegm (inflammation, the humor phlegm supposedly as a result of heat), from phlegein (to burn).



Don’t be phlegmatic about SBA lending!

According to the FDIC’s quarterly banking profile, there are 7,307 banks still surviving in this country.  Many of them are starting to thrive.

The first quarter of 2012 saw net income in the banking industry rise to its highest level since the second quarter of 2007.  One of the biggest contributors to net revenue has been gains from loan sales, which were up 132 percent from a year ago.

According to the FDIC’s Insights on SBA Lending, the gain from the sale of a SBA guarantee loan can now be recognized as immediate fee income.

If your bank is not a SBA lender, you should ask them why.

If your bank would like to become a SBA lender, ask us how.

If your bank would like to become a better SBA lender, ask us how.

If you would like a copy of either the FDIC’s quarterly banking profile or their insights on SBA lending, send me an email.


SBA LIBOR Base Rate June 2012 = 3.24%
SBA Fixed Base Rate June 2012 = 4.58%


504 Debenture Rate for June  

The debenture rate is 2.47% but note rate is 2.46% and effective yield is only 4.50%. 



Sooner or later, interest rates are going to go up, right?

More like later or much later.

This phlegmatic attitude was reflected last week when $13 billion of 30 year Treasury bonds were sold to help pay for all the wonderful things the government is doing to us.  The long bonds yielded 2.72 percent which is a record low for a 30 year bond sale.  The previous record low at a long-bond auction was 2.925 percent at the Dec. 14 sale. Last month’s sale drew a yield of 3.09 percent.

Keep your eyes and ears open for this week’s meeting of the Federal Open Market Committee.  The last time the Federal Reserve met they said that they would be keeping interest rates exceptionally low at least through late 2014.

Exceptionally low at least through late 2014.  Those are their exact words, not mine.

So where then are interest rates going?

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC12- 0.53
DEC13- 0.60
DEC14- 0.83
DEC15- 1.28
DEC16- 1.82
DEC17- 2.28
DEC18- 2.62
DEC19- 2.85

What does all this mean?

I don’t know.

The market seems to think that interest rates won’t be going up any time soon, and when they do, it won’t be by much.

You can be phlegmatic about interest rates.



Talk about phlegmatic; I’ve got nothing.

Wednesday, June 13, 2012

SBA 504 Debenture Rate for June

504 Debenture Rate for June  

The debenture rate is 2.47% but note rate is 2.46% and effective yield is only 4.50%. 

Monday, June 11, 2012

SBA 7(a) Rate Update



SBA LIBOR Base Rate June 2012 = 3.24%

SBA Fixed Base Rate June 2012 = 4.58%

Lenders can charge up to 2.75% over these rates.

Wednesday, June 6, 2012

SBA 7(a) Weekly Lending Update

SBA 7(a) loan approvals for the month ending May 31 edged up by about $179,071,000 compared to the prior month.

May approvals totaled $1,352,404,000 while April was at $1,173,333,000.

May however had five weeks in it compared to only four for April.

Saturday, June 2, 2012

The SBA and stupefy


STOO-puh-fy, STYOO-

1. To make someone so bored or tired as unable to think clearly.
2. To amaze.

From French stupéfier (to astound), from Latin stupefacere (to make stupid or senseless), from stupere (to be numb or amazed) + facere (to make).



The endless revisions to SBA rules can stupefy.

The SBA has once again revised its standard operating procedure.

SBA SOP 50-10-5 (E) is now effective. 

Only 116 days until SBA SOP 50-10-5 (F) comes out.



SBA LIBOR Base Rate May 2012 = 3.24%
SBA Fixed Base Rate May 2012 = 4.84%


504 Debenture Rate for May 

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.462%. 

The effective yield for the temporary debt refinancing available with a 504 loan is 4.665%. 

Keep in mind that the temporary debt refinancing provisions expire soon.    



The economy continues to stupefy.

Over the past month, the yield curve has flattened, as short rates stayed even and long rates fell.

And long rates really fell.  

The 30 year Treasury bond hit a record low Friday.  It closed at only 2.52%.  At one point it got down to only 2.5089%, below the 2.5090% last seen on December 18th, 2008. 

This rally in the b0nd market ran when the Labor Department reported that U.S. employers added only 69,000 jobs in May.    April was also revised down from +115,000 to +77,000.

Here is a summary of net monthly payroll employment and this week’s interesting little table of data:

May 69,000
April 77,000
March 143,000
February 240,000
January 243,000
December 203,000
November 157,000
October 112,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

Job growth over the past three months is less than half the average 250,000-plus jobs added in the three earlier months.  There are a total of 12.7 million Americans still unemployed and 5.4 million have been unemployed for more than 6 months.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.   More generally, a flat curve indicates weak growth.

According to the Federal Reserve Bank of Cleveland, the flatter slope was not enough to cause an appreciable change in projected future growth, however. Projecting forward using past values of the yield curve spread and gross domestic product (GDP) growth suggests that real GDP will grow at about a 0.7 percent rate over the next year, equal to the past two months.

Gross domestic product grew at only a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate, revised Commerce Department figures revealed last week.   The U.S. economy grew more slowly in the first quarter than previously estimated, reflecting smaller gains in inventories and bigger government cutbacks.
 Interest rates obviously will be remaining low.



Stupefied yet?

The New York Mets have played 8,019 games and have lost 4,172 of those games.   Not only do they usually lose, they are one of the greatest losing teams of all time.   Their first year in the major leagues, 1962, they lost 120 games and set the record for modern era baseball futility.

Everyone has come to expect them to lose.  But when they don’t, stupedification sets in with deleterious effects. 

In October of 1969 the Mets finally made it to the World Series.  A recession soon followed.

In October of 1973 the Mets once again went to the World Series.  A recession soon followed.   

In October of 1986 the Mets went to the World Series.   The economy held its breath for as long as it could but when it finally had to gasp for air the stock market crashed. The stock market crash of 1987 was the largest one day stock market crash in history, larger than that of 1929.  The economy would soon slump into recession.

The economy recovered and the nation enjoyed the 1990 boom years.  The party ended when the Mets went to the World Series in 2000.  Soon after the 2000 World Series ended, the economy slid into recession.  That recession would end the longest economic expansion in United States history.1

In 2006 the Mets dominated the National League winning more games than any other team.  The next year they assembled an even stronger team and appeared a certainty to be in the World Series.  They then suffered the greatest collapse in baseball history.  The economy also soon collapsed.

Now they are one of the better teams in baseball and one of their pitchers, Johan Santana, just pitched a no-hitter.  It was the first no-hitter in the Mets 50-plus year history. 

No wonder the stock market is slumping, the yield curve is inverting, and the economy is slowing.  The animal spirits- John Keynes’ infamous forces of economic destiny - are worried that the Mets just might make it back to the World Series. 

Not to worry, while their win-loss record is 29-23; their Pythagorean win-loss is only 24-28.   Pythagorean win-loss?  It is a formula for estimating a team's winning percentage based on the number of runs it scores and allows.   To calculate Pythagorean Winning Percentage, you need a team's run scored, or "RS" (the number of times they scored) and their runs allowed, or "RA" (the number of times the opponent scored). The formula looks like this:

Pythagorean WP = RS x RA / (RS x RS) + (RA x RA)

The Pythagorean Winning Percentage is the percentage of games a team with that number of Runs Scored and Runs Allowed would be expected to win.  It does a pretty good job of predicting the number of wins a team will have when the season is over.

Based upon these Pythagorean calculations, the Mets are playing way over their heads and everything else is stupefying.