2021 CSBS Community Bank Case Study Competition Journal

SECOND PLACE: University of Arkansas

sent a pre-note to each customer account which displayed the incoming deposit. SBB reopened nearly 400 accounts that had been closed due to bounced checks or personal choice so that those most in need could receive the stimulus money. Not only were those account holders allowed to collect their stimulus payments, but the bank also waived any fees due from prior charges when the accounts were reopened. During our conversations with the bank’s leadership, they stated that those with closed accounts were the most in need of aid during the pandemic. They have taken this action with each round of the stimulus payments. Participation in the Payroll Protection Program Community banks have played an outsized role in the Payroll Protection Program relative to their share of industry assets (Hanrahan and Hinton). SBB was highly active in the program, and it primarily served smaller businesses who were neglected by bigger banks. As Table 3 shows, during the first round of the PPP from April 4 to August 8, 2020, the bank issued 1,285

loans which summed to $112 million for an average loan amount of $87,159. In contrast, the average loan amount for all institutions was $101,000. While 69% of the number of PPP loans overall had principal amounts of $50,000 or less, nearly 85% of SBB’s PPP loans fell under this threshold. SBB chose to manually process loan applications even though it is an intense process that requires considerably more work hours than automatic filing. Manual processing better ensured that these small businesses received funding because the automated systems were unreliable during the first several weeks of the program. The second round of PPP loans began on January 15, 2021. According to the SBB 2021 Q1 Shareholder Report and interviews with the bankers, the bank originated $147M in total PPP loans through the first quarter of 2021, 87% of which were $50,000 or less in loan size. The average loan size was $47,000, similar to the average for all institutions of $45,487. SBB unexpectedly had the opportunity to significantly influence national policy toward helping steer PPP funds through CDFIs toward

Table 3. Loan Characteristics

SBB

All Institutions

2021 thru March 31

2021 thru May 10

PPP Loan Characteristics

2020

2020

1,285

745 $35

5,212,128

5,716,350

Number originated

$112

$525,012

$260,021

Loan amount ($mil)

100%

100%

4%

13% 91% 85%

Share from Comm Fin Institutions

78% 85%

n.a

n.a.

Share to businesses <10 employees

87%

69%

Share less than $50,000

Source: Southern Bancorp Shareholder Reports 2020, 2021 Q1. SBA PPP Loan Reports: August 8, 2020, May 9, 2021.

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