Locals in SBLF program tap on brakes

Only Franklin Synergy grew small-biz loans during spring, summer

Three of the four Nashville-area banks taking part in a government program to spur small-business lending shrank their portfolios between the first and third quarters of last year, new Treasury data show.

As a group, Avenue Bank, Franklin Synergy Bank, InsBank and Sumner Bank & Trust were still up $112 million in two years (as of Sept. 30) when it came to small-business loans. And the first three of the group still qualify to pay the lowest interest possible on the investment the Treasury made under the Small Business Lending Fund in 2011. But between March 31 and Sept. 30 of last year, only Franklin Synergy grew its small-biz portfolio — by a whopping $22.3 million to $57.4 million — while the others combined to shed more than $9 million from their loan books. (The government's Sept. 30 report is here.)

It's likely a variety of factors were at play. In the case of Sumner Bank & Trust — which now must pay 7 percent on its SBLF investment versus 1 percent for the other local lenders — the bank was in the middle of trying to merge with a Kentucky company and put a number of initiatives on hold during that process. That deal was called off in August, opening the doors to a more normal order of operations. More broadly, a number of bankers have said in recent months that they're seeing a higher rate of loan paydowns and greater competition from various lenders new to the region. Both of those factors will make it harder for banks to put their money to work.

Across the country, the 307 institutions taking part in the SBLF had lent $7.7 billion to small business in the two years ended Sept. 30. About $2.7 billion of that has gone to businesses in the Southeast.