Lending a Helping Hand, Sometimes Means Lending.

Lending a Helping Hand, Sometimes Means Lending.

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Loan volumes at the nation’s community banks grew over 10% during 2020. And that’s no coincidence. With help from the Government’s Paycheck Protection Plan (PPP) Program, Commercial & Industrial (C&I) Loans accounted for more than two-thirds of that growth. But there’s much more to this story.

On page 7 we have listed all community banks (except those that are brand new) that had more than 90% loan growth during 2020. (Those established in 2018 or later were excluded.) We were surprised to see that of the 54 banks listed, three had no PPP loans at all and several others had relatively small amounts.

Our neighbor, for example, 5-Star Professional Bank, Coral Gables, FL closed out 2020 with $190 million in PPP loans outstanding; but its total loan portfolio grew by $867 million. Professional Bank actually opened two new branches in 2020, both in wealthy areas of South Florida. That helped. The high demand for single family properties in South Florida did the rest. Right place, right time.

Both 4-Star Paramount Bank in MO and 5-Star One American Bank in SD are also heavy lenders in single family residential real estate accounting for 91% and 79% of total loans, respectively. That, and the desire to help out their communities may be all these two banks have in common.

One America Bank’s history began in 1883, six years before South Dakota was granted statehood. Chartered by early settlers as Bank of Centreville, One America Bank has been through depression, recession, pandemics, droughts and other challenges. Yet here it is, strong, and ready to lend.

By comparison, Paramount Bank is an infant. Started as a mortgage company in 1970, it didn’t become a bank, Superior Bank, until decades later, just in time for the mortgage bubble to burst. Needless to say, it went through quite a rough patch in those early years.

That changed in 2017 when a group of investors from nearby St. Louis took over and reimagined, rebuilt and renamed it from Superior to Paramount. The group did not stray from the bank’s roots, however. It remains a HUD approved lender and continues to offer a full range of mortgage products.

Drive a couple of hours Southwest from St. Louis and you’ll find the small town of Osage Beach, the setting for the TV series Ozark, on the Lake of the Ozarks. According to the 2010 census, only about 4,500 people call Osage Beach home, but it does attract a large number of tourists, which is probably why seven banks have a presence there.

Two of those banks are rooted in the small town and one, 4-Star First Bank of the Lake, is listed in the #2 spot on page 7. First Bank of the Lake grew from $115 million in assets at the end of 2019 to $648 million in assets at year-end 2020 ...and it shows no signs of slowing down. The majority of those new assets are in the form of loans, and the majority of the loans (89%) are Commercial & Industrial (C&I) Loans. Another 8.8% is Commercial Real Estate (CRE), which leaves very little room for anything else.

As a rule, Bauer would be concerned about such a heavy reliance on commerce, but this case is unique. In addition to $460 million in Paycheck Protection Plan (PPP) Loans outstanding (JRN 37:46), First Bank of the Lake has a Small Business Administration (SBA) Loan Production office in Greenville, SC. As a result, the vast majority of its loans have government guarantees.

Of course, there’s another way to grow your assets. 5-Star BayVanguard Bank, Sparrows Point, MD is a serial acquirer. After acquiring Kopernik Bank in 2019, it went on to make two more acquisitions last year: Madison Bank of Maryland in March and 1880 Bank, Cambridge, MD in November. These two additions helped grow BayVanguard assets from $294 million in assets to $809 million in the twelve month period. Part of the growth was also from PPP as it closed out 2020 with $36.5 million in outstanding PPP loans.

Mergers and acquisitions are nothing new to this bank. Established in 1873 as Light Street Savings and Building Association of Baltimore, it merged with two other small, local building and loans in the 1960s. The combined thrift continued to bring other local thrifts onboard. In 1996, the combined Bay Federal Savings merged with Vanguard Federal S&LA to become Bay-Vanguard FSB.

That, in turn, converted from a mutual to a stock institution (2013) and made another acquisition of Vigilant FSB, and was renamed again to what it is today: BayVanguard Bank. In spite of all of these changes, it has never strayed too far from its roots. The majority of its loans (56.5%) remain in single family residential real estate.

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