If you saw our e-news that went out yesterday, you might have read this item from National Public Radio touting a new web site: www.BankingGrades.com. The site “grades” banks using letter grades such as A, B all the way down to F, according to the level of small business loans made relative to the bank’s deposits. The site uses the FDIC definition of small business loan as any business loan under $1 million.
The Huffington Post ran this article about it. It notes that many smaller banks got better grades that many of the nation’s largest banks. The article includes a list of the top 10 banks in the country for small business loans according to BankingGrades.com; nine of the 10 banks are located in the Upper Midwest: three from Nebraska, two from Iowa, two from Minnesota, and one each from South Dakota and North Dakota.
I think the purpose of the BankingGrades.com site is to help small business owners who are looking for credit. By making it easy for a business owner to identify banks that have a history of making a lot of small business loans, it might give them a better idea of which banks to approach when they need credit.
The site actually ranks every bank in the country by the percentage of small business loans to domestic deposits. The Huffington Post says that Farmers State Bank in Hosmer, S.D., comes up ranked no. 1. When I checked it at BankingGrades.com it came us as ranked No. 2, but no matter. With $14.139 million in small business loans against $12.943 million in deposits, it has a percentage of 109.24 percent. Of course, the bank’s total assets are $18.8 million, so I am not sure how useful this is to small business owners looking for credit, other than to those who live and work in or near Hosmer.
It is important to note that BankingGrades.com uses year-end 2011 data and things may have changed during the first quarter. For example, the site ranks First Resource Bank in Savage, Minn., as the 5th leading small business lender in the country, citing its $4.296 million in small business loans against its $4.577 million in deposits. However, on Jan. 27, First Resource Bank acquired the failed Patriot Bank and now has deposits of $90 million and small business loans of $27.5 million. It’s current percentage of small business loans to deposits at 30.26 percent is considerably different from its year-end percentage of 93.86 percent.
Most of the banks in the top 10 list are small; the State Bank of Colon, Neb., for example, which Huffington Post tells us is No. 10, has $16.9 million in assets. All but four of the banks on the list have less than $50 million in assets; the largest bank in the Midwest is Community Bank, Nevada, Iowa, which has $157.3. The largest bank on the list is Wright Express Financial Services Corporation of Midvale, Utah, which is a $1.3 billion organization.
I am not sure how helpful the BankingGrades.com service is to small business owners, but it is interesting to a bank-stats geek like me. Certainly, bankers should take a minute to see what the site is saying about their bank. Some consumers or potential borrowers might find it particularly interesting to go beyond the BankingGrades.com grade and actually review the information the FDIC collects for every bank on small business lending. Getting at that info can be a bit of a trick, but let me offer these instructions:
At www.FDIC.gov home page, click on “Analysts” under “quick links”; then click on “Institution Directory” under “Top Picks”; then click on “Find Institutions” under “Use the FDIC Directory to:”, then enter your bank’s name and location and click “find”. For the sake of this example, I am entering Farmers State Bank, Hosmer, S.D. Then click on the “cert” number. Then, under “ID Report Selections” choose “All Summary Information,” then click on “Generate Report.” The third underlined item will be “net loans & leases.” Click on that. Then, scroll all the way to the bottom of the page and click on “Small business loans.” You will then be presented with a screen that gives you the dollar amount of small business loans in four categories, as well as the actual number of loans made in those categories.