An arm of the U.S. Treasury Department is awarding $70 million in grants to small banks that operate in economically distressed communities, mostly in the Deep South.
The awards are being made to 184 banks in increments of up to around $450,000. The grants equal two years' worth of congressional funding for the Bank Enterprise Award Program, which is administered by the Treasury's Community Development Financial Institutions Fund.
Congress appropriated $35 million to the program in both fiscal year 2022 and fiscal year 2023. The awards announced this week are the largest ever for a program that dates back more than two decades, and which aims to boost banks that serve distressed communities.
The program defines such communities as places where at least 30% of residents have incomes that are less than the national poverty level, and where the unemployment rate is at least 1.5 times the nationwide rate.
Marcia Sigal, acting director of Treasury's CDFI Fund, offered praise for the banks that will receive funding. "They are providing critically needed loans and investments that other financial institutions will not make," Sigal said in a press release.
Of the nearly 200 banks that will receive the grants, 49 are located in Mississippi, 42 are in Louisiana and 17 are in Alabama.
The Mer Rouge State Bank, a $47 million-asset bank in northern Louisiana, will get about $415,000 from the program. The bank, which has around 11 employees, is located about 20 miles from the Arkansas border in the rural village of Mer Rouge.
President Robin Tyson said that he joined the bank about three years ago and learned about the Treasury program from a friend who is the president of another community bank in the area.
"He said, 'This has been really helpful for us small community banks,'" Tyson recalled. "We had never participated in the CDFI grant process in the past for whatever reason."
The Mer Rouge State Bank, which is located in an area dotted with soybean and corn farms, focuses primarily on agricultural lending. The bank plans to use the Treasury funds to build its capital, which will lead to an increase in its lending limit, Tyson said. "We're trying to grow our loan volume," he explained.
Not all of the banks that will receive funding are in the rural South. Mission National Bank in San Francisco is one of six California banks that got approved.
The $177 million-asset bank is located in the city's Mission District — an area that has historically been a center of the Mexican-American community and, despite recent gentrification, remains home to many mom-and-pop businesses.
Mission National's CEO, Ray Skinner, said that the majority of the bank's loans go to minority- or women-owned businesses.
The bank, which will receive about $451,000, had 40 full-time equivalent employees as of June 30, according to Federal Deposit Insurance Corp. data. It plans to use the Treasury funds mainly to build its staff in an effort to increase the size of its loan book, Skinner said.
"What's great about that is it gives us an opportunity to continue our strategic plan, which is investing in the Bay Area's low- to moderate-income areas," he said.
