2021 CSBS Community Bank Case Study Competition Journal

SECOND PLACE: University of Arkansas

loan share has increased consistently between 2016 and 2020. In contrast, loans secured by 1-4 family residential property have decreased over time to 25.11 percent of loans. Non-farm non- residential loans have been relatively stable during the five-year period at around 24 percent of loans, roughly 8 percentage points below the peer ratio. SBB’s unique mission to promote community development in underserved communities means that many of its borrowers are small businesses and consumers with modest income. Consequently, Southern Bancorp Bank’s loan portfolio is comprised of smaller dollar loans compared to state and national averages. Call Reports define a small business loan as one with an original amount of $1 million or less.

According to Call Report data for year-end 2020, 2,294 C&I loans in the loan portfolio at SBB meet this criterion (see Table 2). 81% of current C&I small business loans at Southern Bancorp Bank have original balances of $100,000 or less compared to 79% in Arkansas peer banks and 68% in all peer banks in the United States. Nonfarm nonresidential (NFNR) small business loans at Southern Bancorp Bank differ widely compared to Arkansas and US peers. SBB has 808 NFNR loans outstanding with an average origination amount of $155,000 with 43% of the portfolio under $100,000. This compares to an average NFN loan size of $185,000 in Arkansas peer banks and $279,000 in US peers, with a share of 32% and 16% under $100,000, respectively.

Table 1. SBB Loan Mix 2016-2020

Panel A. Loan Mix, % Average Gross LN&LS Loan Category 2020

2019

2018

2017

2016

Peers 2020

Real Estate

73.17%

76.34%

75.23%

73.38%

72.37%

71.77%

Agricultural

4.73%

5.35%

5.83%

6.38%

7.29%

1.40%

C&I

17.59% 3.30% 3.30%

13.10% 3.74% 3.74%

13.08% 3.98% 3.98%

13.68% 4.35% 4.35%

13.83% 4.83% 4.83%

19.49% 2.72% 2.72%

Consumer Loans

Consumer Loans

Panel B. Breakdown of Real Estate Loans Loan Category 2020

2019

2018

2017

2016

Peers 2020

Construction & Dev.

6.84%

7.43%

7.33%

6.97%

5.94% 9.48% 28.75%

7.62% 2.80% 19.97%

Secured by Farmland

13.28% 25.11%

13.12% 27.09%

12.18% 27.55%

11.14% 28.39%

1-4 Family Res.

Multi-family

3.74%

4.23%

4.64%

3.74%

3.77%

4.54%

Non-Farm Non-Res.

24.20%

24.47%

23.54%

23.15%

24.44%

32.39%

Source: FFIEC Call Reports

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