A Small Bank Finds a Way to Make a Troubled Loan Program Work
Regular readers of this column know that The Agenda has followed closely the progress of the America’s Recovery Capital program, the business stabilization loan program created by the stimulus bill and carried out by the Small Business Administration. The news, in general, has not been good: relatively few banks find the loans profitable or otherwise worthwhile enough to embrace. Borrowers and bankers alike are finding that A.R.C. requires a lot of effort for not a lot of money.
Yet if some of the nation’s most famous banking brands are conspicuous by their haplessness in, or complete absence from, the A.R.C. program, a handful of much smaller institutions are conspicuous for their full-throated participation. In all, as of the end of January, 1,109 banks had made an A.R.C. loan. The top three A.R.C. lenders are Chase, Wells Fargo and SunTrust. But the fourth-biggest is Zions First National Bank, a Western regional bank based in Salt Lake City, which made the country’s first A.R.C. loan back in June.
And the No. 5 purveyor? Tiny Peoples Bank of Mississippi has made 145 loans. A community bank based in Mendenhall (population 2,553), Peoples has five locations in four towns in the middle of the state. It had but $192 million in assets at the end of September, according to data from the Federal Deposit Insurance Corporation; that makes it the 3,342nd-largest institution operating in the United States (out of 8,109).
Peoples isn’t even an especially large lender of regular S.B.A. loans, though it is prolific for its size. In 2009, Peoples approved $8.2 million worth of loans and ranked 187th among S.B.A. banks, in the top 10 percent.
So what gives? Why is Peoples Bank of Mississippi an A.R.C. powerhouse? The Agenda put that question to the president of Peoples, Dennis Ammann. “We just thought it was a great program,” he said, “that would help businesses survive during this recession. Or it was just a really good service for those customers that needed a little cash-flow help during the tough times.”
The program, Mr. Ammann acknowledged, is “a lot of work.” Sometimes, he said, it can take up to a month to process a loan. Moreover, the bank absorbs the costs of securing collateral that some other banks pass on to their borrowers. “I think we probably lose money on the front end on these things,” Mr. Ammann said. “Over time, we feel like this is building our relationship with this small business, and if they survive and grow, they’ll remember that we got them into this program early on. If our customers do well, we’re going to do well over time.”
The Agenda will confess to hanging up the phone a little disappointed — we had hoped that Mr. Ammann’s answer might contain a surprise equal to that of the bank’s presence in the Top Five, something more electrifying than simple pride in customer service. In retrospect, it seems that “Why is Peoples Bank of Mississippi an A.R.C. powerhouse?” may be the wrong question, put to the wrong, um, people. Better, perhaps, to ask its competitors why so few of them have done the same
http://boss.blogs.nytimes.com/tag/peoples-bank-of-mississippi/