Country's small business-friendly banks identified

Northwestern Financial Review, Sep 19, 1998 by Olmsted, Monte

A recent nationwide study of banks has identified the top small business-friendly financial institutions in each state.

The Office of Advocacy of the U.S. Small Business Administration identified 449 of the 9,293 U.S. banks, based on the commercial banks' micro-lending habits through June 1997. Micro-loans are classified as being valued at $100,000 or less.

Of the 449 banks, 96 are from Northwestern Financial Review's eightstate readership area. The Upper Midwestern states and number of banks making the list include: Wisconsin (15); Illinois (14); Minnesota (12); Nebraska (12); Montana (11); North Dakota (11); South Dakota (11) and Iowa (10)

Charles Ou, senior economist with the Washington-based Office of Advocacy, said the group has been ranking banks since 1994. "The size of the banks has a lot to do with loan sizes. Most of the small banks have a lot of micro-loans," Ou said.

The banks are rated on four criteria: ratio of micro-business loans to total bank assets; ratio of micro-business loans to total business loans; dollar value of micro-business loans outstanding, and total number of micro-business loans.

According to the Office of Advocacy study:

The number of micro-business loans increased by 27 percent through June 1997, compared with the same time the previous year.

449 banks were identified as micro-business friendly, meaning the institutions had significant business lending activity in loans of less than $100,000.

Although the 449 banks hold only 3.4 percent of total bank assets, they had 13.2 percent ($14.8 billion) of the dollar value of micro-business loans outstanding from all U.S. banks.

Nineteen banks had at least $100 million in micro-business loans outstanding as of June 1997. Three of those banks come from Northwestern Financial Review's readership area. They are: Hills Bank & Trust Co. of Hills, Iowa, with $108.4 million; Bank of Edwardsville in Edwardsville, Ill., with $147.5 million, and Community First National Bank of Fergus Falls, Minn., with $158 million.

Eleven banks with assets in excess of $1 billion were found to be active in micro-business lending. None of them were in Northwestern Financial Review's coverage area.

The dollar amount of microbusiness loans ranged from $4.1 million to $616.6 million in the 449 banks.

The micro-business-friendly banks' average ratio of micro-loans to total assets was 21.2 percent compared with 8.6 percent for all banks.

The micro-business-friendly banks' average ratio of micro-loans to business loans was 88.8 percent compared with 56.8 percent for all banks. Some 375 banks had a business loan portfolio of strictly micro-business loans. Of the 96 Upper Midwestern banks, all but one had business loan portfolios consisting of strictly microbusiness loans. The only bank not at 100 percent was the First Citizens Bank of Billings in Montana at 55.2 percent.