The 504 Report - December 2008

Current Rates
December Bond Sale Rate: 7.09% (20 year fixed rate)

December 2008

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December Bond Sale Rates

The December rate dropped dramatically, but spreads remain high as a nearly $400 million pool was sold to a record 44 investors. Why are spreads on the 504 product still so high?

According to our bond strategist, the risks associated with product to buy can essentially be categorized in three buckets. Price, or spreads, directly reflect the range of risk involved. Federally guaranteed debt products are essentially broken down into “super-haves” and “haves” while non-federally guaranteed debt is in the “have not” bucket. What does he mean by those terms? The Federal government is repurchasing federally guaranteed debt - $600 billion is slated to purchase principally single family mortgage backed securities. Those products likely to be repurchased (and direct obligations, like the 10 year Treasury) would be rated “super-haves." Other federally guaranteed agency debt, like 504, would be rated “haves” while everything else (non-federally guaranteed products) would be rated “have-nots”. The chart below shows the change in yield for various categories over the last year:

Benchmark	Jan-08	Dec-08	Change (BP)	Category
10-Year Treasury	3.88	2.60	-128	Super Have
30-Year Conforming Mortgage	6.07	5.47	-60	Super Have
SBA 504 Debenture	5.17	6.22	105	Have
Agency Multifamily-Backed	5.11	6.22	111	Have
Tax-Exempt Municipal G.O.	4.32	5.85	153	Have-Not
Investment Grade Corporate	6.47	8.70	223	Have-Not
AAA Commercial MBS	5.37	11.97	660	Have-Not
High Yield Corporate	10.08	22.33	1225	Have-Not

While the 504 spreads have increased, our increase is modest compared to other products on the market, some of which are not selling at any price. What is critically important is that money is and has been available to help our small business borrowers and to pay down our lending partners throughout the crisis currently plaguing the financial markets.

BFG’s Annual Meeting and Holiday Open House

Business Finance Group held its annual open house and membership meeting on Dec. 4th at our Fairfax office. We were pleased to welcome guests from SBA and the lending community as well as several of our small business borrowers. Top lender awards were presented:

Presenting the awards to the top banks for 2008 were Eugene Cornelius, (left) District Director, SBA’s Washington Metro Area Office and Kerry Donley, (right) Chairman of Business Finance Group.

Donald Strehle, the Fairfax Regional President (center) accepting the first place award on behalf of BB&T.

Commerce First Bank won second place; however, this award was presented at the Maryland Lender Awards to Commerce First Bank's Presdient, Rick Morgan.

Joann Tobin (center) accepted a third place award on behalf of Bank of America. Joann manages the Business Banking group located in Fairfax, VA.

Tied for third place was Virginia Commerce Bank. Accepting on behalf of the bank is Chief Lending Officer Randy Anderson (center).

George Kapusta with Commerce First Bank was the top individual lender. Unfortunately, Mr. Kapusta was unable to attend our Annual Meeting, so this award was presented to him at the Maryland Lender Awards.

Scott Daily (right-center) joined BFG’s Chairman Kerry Donley (right) and Eugene Cornelius (left) for the presentation of the top individual lender awards.

Our second place award went to Valerie Trent (left-center) with Bank of America.

There was a three-way tie for third: Gloria Bragg (left-center) with BB&T accepted her third place award.

Mary Ann Martens (left-center) with Virginia Commerce Bank accepted her 3rd place award.

Also tied for third place was Cedric Spruill with Bank of America. Unfortunately, Mr. Spruill was unable to attend our Annual Meeting, so this award was presented to him at the Maryland Lender Awards.

Maryland Lender Awards Reception

The second Annual Maryland Lender Awards Reception was held on December 9th at the renowned Candlelight Inn (a 504 project!). The evening was very pleasant and our Maryland friends enjoyed good food, good company, and holiday cheer. Our Lender Awards were presented by Steve Umberge (left)r, SBA’s District Director for the Baltimore District Office and BFG’s Vice President and Maryland Loan Officer, Dennis "Denny" Kleppick (right).

The first place award was presented to Commerce First Bank, which was accepted by the bank's president, Rick Morgan (center).

Cedric Spruill (center) accepted the second place award for Bank of America.

On behalf of SunTrust Bank, Wendy Ridgeway (center) accepted the 3rd place award.

George Kapusta (center) with Commerce First Bank was both our top overall individual lender and our top Maryland lender.

Also with Commerce First Bank, Penny Cantwell (center) accepted the second place award.

The third place Individual Lender award for 2008 was presented to Cedric Spruill (center) with Bank of America.

We extend a big thank you to all of our banks and lenders for a great year. Next year promises to provide challenges for all of us, but we look forward to working cooperatively with our lending partners, SBA and our small business borrowers.