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Small Banks, Small Commercial Loans

3 min read

J. Kendall Henry, president and CEO of Merchants & Planters Bank in Clarendon, was incredulous: His bank’s small commercial loans couldn’t possibly be No. 1 in the state because there is simply no commercial loan demand in Clarendon, the seat of Monroe County.

Yet that’s exactly what annual call reports submitted to the Federal Financial Institutions Examination Council show. Of Merchants & Planters’ $15.2 million loan portfolio as of Dec. 31, nearly 82% fell into two categories of small commercial lending: commercial and industrial loans of $1 million or less and loans of $1 million or less secured by property that is neither farmland nor residential.

There is an explanation, however. Few of the commercial loans on his bank’s books were originated by Merchants & Planters, Henry said. Instead he said about 70% are “participations” — portions of commercial loans purchased from other Arkansas banks.

Small banks without the resources to make large commercial loans dominate Arkansas Business’ first-ever list of Arkansas banks ranked by small commercial lending. The list ranks how much of a given bank’s total loan portfolio is dedicated to small commercial loans, not the number of loans or the amount loaned in the small commercial categories. (That data is included in the list.)

The biggest banks chartered in Arkansas make many more small commercial loans, but they are a tiny part of the large banks’ loan business. Centennial Bank of Conway and Simmons Bank of Pine Bluff each had more than $1 billion tied up in thousands of small commercial loans at the end of 2023, but that lending represented only 8.1% of Centennial’s loan portfolio and 6.3% of Simmons’ portfolio.

Bank OZK, the largest bank in Arkansas with assets that crept past $36 billion as of March 31, had less than 2% of its $26.5 billion loan portfolio in small commercial loans as of Dec. 31. That landed it at No. 79, just ahead of the three banks — Bank of Cave City, First National Bank of Izard County at Calico Rock and Logan County Bank at Scranton — that reported no small commercial loans at all in their portfolios.

The median percentage of small commercial loans among Arkansas-chartered banks is 15.4%. The borrowers are not necessarily small businesses and the borrowers may be located anywhere.

Merchants & Planters is one of only two banks chartered in Arkansas that had more than half their loan portfolios invested in the small commercial lending categories at the end of 2023. The other, First State Bank of Warren, reported that 40.5% of its $57.5 million loan portfolio was in commercial and industrial loans of $1 million or less, and loans of $1 million or less secured by commercial property represented another 21.8% of its total loan portfolio.

First State of Warren’s merger into Commercial Bank & Trust Co. of Monticello is to take effect on Monday. Both banks have been controlled by the Ryburn family for more than 50 years.

List Methodology

This list relies on call reports filed with the Federal Financial Institutions Examination Council for the year that ended Dec. 31, 2023. Small commercial loans are those that had original principal of $1 million or less.

The data comes from these lines on Schedule RC-C Part II:

► Lines 3(a), 3(b) and 3(c), where banks report on the number of and remaining balances on “loans secured by nonfarm nonresidential property” that had original principal in three different size categories: less than $100,000, between $100,000 and $250,000, and between $250,000 and $1 million.

► Lines 4(a), 4(b) and 4(c), where banks report on the number of and remaining balances on “commercial and industrial loans” in the same size categories.

The balances from these six lines were added together and the total was compared with total loans reported on Line 12 of Schedule RC-C Part I.

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