Feature Article: 

The FDIC’s Small-Dollar Loan Pilot Program: 

A Case Study after One Year 

The FDIC’s Small-Dollar Loan Pilot Program began in 

February 2008. The pilot is a two-year case study 

designed to illustrate how banks can profitably offer 

affordable small-dollar loans as an alternative to highcost credit products, such as payday loans and fee-based 

overdraft protection.1 This article summarizes results 

from the first four quarters of the pilot, highlights 

factors that have contributed to the success of participating banks’ programs, and presents the most common 

small-dollar loan business models through case study 

examples. 

During the first four quarters of the pilot, participating 

banks originated a total of 16,000 loans with an aggregate principal balance of $18.5 million. Bankers cited a 

number of common factors that contributed to the 

success of their loan programs, including strong senior 

management and board support; an engaged and 

empowered “champion” in charge of the program; proximity to large populations of consumers with demand 

for small-dollar loans; and, in some rural markets, 

limited competition. 

Only a few participating banks have indicated that 

short-term profitability is the primary goal for their 

small-dollar loan programs. Rather, most pilot banks are 

using the small-dollar loan product as a cornerstone for 

long-term relationship-building that also creates goodwill in the community. Moreover, a few banks’ business 

models focus exclusively on building goodwill and 

generating an opportunity for positive Community 

Reinvestment Act (CRA) consideration.2 Regardless of 

business model, all of the banks have indicated that 

small-dollar lending is something they believe they 

should be doing to serve their communities. 

1 See “An Introduction to the FDIC’s Small-Dollar Loan Pilot Program,” 

FDIC Quarterly, vol. 2, no. 3 (2008), http://www.fdic.gov/bank/ 

analytical/quarterly/2008_vol2_3/2008_Quarterly_Vol2No3.html, 

which summarizes the key parameters of the pilot, the proposals that 

participating banks described in their applications, and the first quarter 

2008 results. 

2 The extent to which an institution’s small-dollar loan program may 

be subject to positive CRA consideration is described in the FDIC’s 

Affordable Small-Dollar Loan Guidelines issued on June 19, 2007, 

which can be found at http://www.fdic.gov/news/news/press/2007/ 

pr07052a.html. 

Background 

Thirty-one banks are currently participating in the 

pilot program.3 The banks, which are headquartered 

in 15 states, range in asset size from $26.0 million to 

$10.0 billion and have a total of 446 banking offices in 

26 states (see Table 1). To be considered for the pilot, 

banks were required to meet certain supervisory criteria 

and to submit applications describing their small-dollar 

loan programs.4 

A primary goal of the pilot is to observe and report on 

ways banks can successfully offer affordable small-dollar 

loans. Therefore, the FDIC encourages innovation in 

program design and execution, and provided only 

general guidelines for banks that volunteered for the 

pilot. The FDIC anticipated that most programs would 

be consistent with the Affordable Small-Dollar Loan 

Guidelines (SDL Guidelines), but banks are allowed 

some flexibility. The primary loan product features 

described in the SDL Guidelines include the following: 

•	 Loan amounts up to $1,000

•	 Payment periods beyond a single paycheck cycle

•	 Annual percentage rates (APRs) below 36 percent

•	 Low or no origination fees

•	 Streamlined underwriting

•	 Prompt loan application processing

•	 Automatic savings component

•	 Access to financial education

3 As expected at the outset of the pilot, the composition of pilot banks 

has changed somewhat, but the overall number of participants has 

remained at 30 or above. 

4 The pilot is open to additional volunteer banks. For more information 

about the small-dollar loan pilot program application process, see the 

FDIC’s Small-Dollar Loan Pilot Program Web site at http://www.fdic. 

gov/smalldollarloans/. 

FDIC QUARTERLY 29 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1 

Small-Dollar Loan Pilot Program Participants 

Bank Location Total Assets ($000s) Number of Branches 

Amarillo National Bank Amarillo, TX 2,782,020 15 

Armed Forces Bank Fort Leavenworth, KS 833,062 51 

Bank of Commerce Stilwell, OK 92,014 3 

BankFive Fall River, MA 707,596 13 

BBVA Bancomer USA Diamond Bar, CA 148,467 27 

Benton State Bank Benton, WI 43,997 3 

Citizens Trust Bank Atlanta, GA 403,740 10 

Citizens Union Bank Shelbyville, KY 634,107 20 

Community Bank & Trust Cornelia, GA 1,272,478 44 

Community Bank of Marshall Marshall, MO 90,612 6 

Community Bank - Wheaton/Glen Ellyn Glen Ellyn, IL 308,019 4 

The First National Bank of Fairfax Fairfax, MN 26,049 1 

First United Bank Crete, IL 470,955 5 

Kentucky Bank Paris, KY 679,193 16 

Lake Forest Bank & Trust Lake Forest, IL 1,519,128 8 

Liberty Bank New Orleans, LA 404,104 17 

Liberty National Bank Paris, TX 248,375 3 

Main Street Bank Kingwood, TX 325,283 3 

Mitchell Bank Milwaukee, WI 76,209 11 

National Bank of Kansas City Kansas City, MO 748,438 6 

Oklahoma State Bank Guthrie, OK 42,549 4 

Pinnacle Bank Lincoln, NE 2,390,981 55 

Red River Bank Alexandria, LA 733,932 14 

State Bank of Alcester Alcester, SD 86,646 1 

State Bank of Countryside Countryside, IL 976,088 6 

The Heritage Bank Hinesville, GA 839,552 29 

The Savings Bank Wakefield, MA 398,397 9 

Washington Savings Bank Lowell, MA 160,150 3 

Webster Five Cents Savings Bank Webster, MA 550,939 8 

White Rock Bank Cannon Falls, MN 151,049 7 

Wilmington Trust Wilmington, DE 9,956,298 44 

Source: FDIC. 

Note: Participants and data are as of first quarter 2009. 

Some exceptions to the SDL Guidelines exist among 

the loan programs of participating banks. For example, 

depending on their business plan and consumer demand, 

a number of banks in the pilot originate loans larger 

than $1,000. In addition, while several participating 

banks require automatic savings linked to small-dollar 

loans, others encourage but do not require savings. 

Pilot banks are asked to provide quarterly information 

to help identify best practices related to successful 

small-dollar loan programs. The pilot is a case study and 

not a statistical sample, but some information, such as 

the total number and dollar amount of loans made, is 

relatively straightforward for participating banks to 

report and for the FDIC to aggregate. Other useful 

information cannot be collected in a standardized fashion because it is more subjective, difficult for banks to 

calculate, or anecdotal. To obtain information that is 

difficult to quantify, the FDIC has engaged in extensive 

one-on-one discussions with bank management to help 

identify important elements related to program 

feasibility. 

Year One Financial Results 

Pilot banks provide separate data on two categories of 

loans: small-dollar loans (SDLs) up to $1,000 and 

nearly small-dollar loans (NSDLs) over $1,000 and up 

to $2,500. The SDL threshold of $1,000 was chosen for 

consistency with the FDIC’s SDL Guidelines and to 

determine whether $1,000 can be viewed as a “bright 

line” for a replicable small-dollar loan program 

template. As a result, more detailed data for SDLs have 

been collected thus far. 

FDIC QUARTERLY 30 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 

Small-Dollar Loan Pilot Program 

Table 2 

Small Dollar Loan Pilot Cumulative 

Originations 

Statistics 1Q08 – 4Q08 

SDLs NSDLs 

1Q08 Number 

Volume 

1,523 

$1,013,118 

1,617 

$2,696,996 

2Q08 Number 

Volume 

2,388 

$1,495,661 

1,918 

$3,202,358 

3Q08 Number 

Volume 

2,225 

$1,502,456 

2,113 

$3,651,934 

4Q08 Number 

Volume 

2,210 

$1,492,273 

2,033 

$3,434,906 

Total Number 

Volume 

8,346 

$5,503,508 

7,681 

$12,986,184 

Source: FDIC. 

Note: SDLs are small-dollar loans of up to $1,000. NSDLs are nearly small-dollar loans 

over $1,000 and up to $2,500. 

During the first four quarters of the pilot, participating 

banks originated 8,346 SDLs with a balance of $5.5 

million and 7,681 NSDLs with a balance of $13 million 

(see Table 2). At the end of the fourth quarter, 5,550 

SDLs totaling $2.5 million and 5,679 NSDLs totaling 

$7.9 million were outstanding. The total dollar amount 

of SDLs delinquent 30 days or more at the end of the 

fourth quarter was $184,636, or 7.3 percent of loans 

outstanding. The total dollar amount of SDLs charged 

off to date was $187,378, or 3.4 percent of loans originated under the pilot.5 A few banks indicated that job 

losses and other economic problems in their market 

areas have recently led to increases in delinquencies 

and losses across loan categories and to a general reduction in the pool of acceptable borrowers. 

Table 3 shows loan volume data for fourth quarter 2008 

by originator size. Because several banks with longstanding programs have disproportionately large origination volumes, results for banks originating 50 or more 

loans per quarter are isolated from the rest of the group 

to prevent skewing the loan volume. Smaller originators 

made, on average, 9 SDLs and 13 NSDLs in the fourth 

quarter. This compares with an average of eight SDLs 

and eight NSDLs in the first quarter. 

All banks in the small-dollar loan pilot offer only 

closed-end installment loans. In addition, all of the 

5 Charge-off and delinquency data for NSDLs have not been tracked 

for purposes of the pilot. Industry-wide results showed that 2.6 

percent of loans to individuals were 30 to 89 days past due in fourth 

quarter 2008, and 3.4 percent were charged off. See “Quarterly Banking Profile Fourth Quarter 2008,” FDIC Quarterly, vol. 3, no.1 (2009), 

http://www2.fdic.gov/qbp/2008dec/qbp.pdf. 

pilot banks’ SDLs and NSDLs are within the recommended 36 percent maximum APR, including origination or similar upfront fees. Basic loan characteristics, 

such as interest rates, fees, and repayment terms, do not 

vary between banks that make a few loans and those 

that are large originators. Therefore, there is no distinction between large and small originators in the fourth 

quarter loan term data shown in Table 4. 

Loan terms have remained fairly consistent quarter to 

quarter. For example, the average size of SDLs has 

hovered around $675, the interest rate has remained at 

about 15 percent, and loan terms have ranged from 10 

to 12 months in each of the first four quarters. Similarly, 

for NSDLs, the average size has been close to $1,700, 

the interest rate has remained between 14 and 15 

percent, and the term has ranged from 14 to 16 months. 

While underwriting processes vary somewhat among 

pilot banks, most use streamlined underwriting criteria. 

All pilot banks require proof of identity, address, and 

income, and a credit report to determine loan amounts 

and repayment ability. Of the few banks that use credit 

scoring in the underwriting process, most call for a 

minimum Fair Isaac Corporation (FICO) threshold of 

500 to 550. All pilot banks can underwrite SDLs and 

NSDLs within 48 hours, and many indicate that loans 

can be processed in less than an hour if the borrower 

has the appropriate documentation. The bank’s size and 

business model determine whether the bank uses a 

centralized approval process or vests lending authority 

with branch managers or similar personnel. 

Ten banks require SDL customers to open a savings 

account linked to SDLs, while nine encourage, but do 

not require, customers to open a savings account. For 

fourth quarter 2008, 339 new linked savings accounts 

were opened with a balance of $78,000 at the end of 

the quarter. Many banks have reported that their 

programs provide good opportunities to cross-sell other 

products and services. Although it can be difficult to 

track and quantify, a majority of participating banks 

reported selling other products to SDL customers. The 

most commonly cross-sold products were checking 

accounts. 

Elements Related to Program Feasibility 

According to bank interviews, a number of overarching 

elements directly affect the feasibility of SDL and 

NSDL programs. For example, almost all banks in the 

pilot indicated that strong senior management and 

board of directors support is a key factor in ensuring the 

FDIC QUARTERLY 31 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

Table 3 

Small-Dollar Loan Pilot Program 4Q08: Summary of Loan Number and Volume Data 

Number of 

Banks Reporting Total Average Minimum Maximum 

Loans Up to $1,000 

All Banks 

# of Notes 24 2,210 92 1 1,548 

Note Volume 24 $1,492,273 $62,178 $900 $1,019,450 

Banks Originating Fewer Than 50 Loans 

# of Notes 19 179 9 1 39 

Note Volume 19 $137,234 $7,223 $900 $34,900 

Banks Originating More Than 50 Loans 

# of Notes 5 2,031 406 60 1,548 

Note Volume 5 $1,355,039 $271,008 $27,950 $1,019,450 

Loans Over $1,000 

All Banks 

# of Notes 15 2,033 136 1 849 

Note Volume 15 $3,434,906 $228,994 $2,550 $1,379,266 

Banks Originating Fewer Than 50 Loans 

# of Notes 10 129 13 1 39 

Note Volume 10 $216,261 $21,626 $2,550 $62,135 

Banks Originating More Than 50 Loans 

# of Notes 5 1,904 380 86 849 

Note Volume 5 $3,218,645 $643,729 $177,064 $1,379,266 

Source: FDIC. 

Table 4 

programs’ success. In addition, all participants expressed 

a strong commitment to their communities and felt that 

offering SDLs and NSDLs is part of that commitment. 

Pilot banks also cited the importance of having an 

engaged “champion” in charge, preferably with lending 

authority, significant influence over bank policy decisions, or both. 

Bank location was also linked to program feasibility. 

Nine pilot banks consider their market areas to be rural, 

Small-Dollar Loan Pilot Program 4Q08: Summary of Loan Characteristics 

Number of 

Banks Reporting Average Minimum Maximum 

Loans Up to $1,000 

Loan Amount 24 $675 $399 

Term (months) 24 12 3 

Interest Rate (percent) 24 15.34 3.25 

Non-zero Fees (dollars) 12 $28 $1 

$1,000 

24 

32.00 

$70 

Loans Over $1,000 

Loan Amount 15 $1,690 $1,350 

Term (months) 15 16 7 

Interest Rate (percent) 15 14.04 8.00 

$2,550 

36 

30.00 

Source: FDIC. 

with limited competition for SDL and NSDL products. 

Eleven banks target SDL and NSDL customers by offering small-dollar products in offices with large populations of low- and moderate-income (LMI), immigrant, 

and military households that may have a greater 

demand for these products. In addition, many of the 

banks, regardless of location, cite the importance of 

strong partnerships with nonprofit community groups to 

refer, and sometimes qualify, potential borrowers. 

FDIC QUARTERLY 32 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Small-Dollar Loan Pilot Program 

Moreover, banks indicated that these partnerships foster 

word-of-mouth advertising for their SDL and NSDL 

products. As the pilot has progressed, word of mouth 

has emerged as the predominant marketing method. 

However, some banks also use radio, print, and billboard advertising; statement stuffers; branch brochures 

and placards; and outbound calling based on purchased 

customer lists to promote SDL and NSDL products. 

Business Models: Case Study Examples 

Generally, the SDL and NSDL programs offered by 

pilot banks can be categorized into three business 

models, depending on the bank’s program goals. While 

some banks have overlapping goals, most have designed 

their programs to be long-term, relationship-building 

tools that also create goodwill in the community. Some 

banks are engaging in SDL and NSDL lending exclusively for the goodwill aspect and the opportunity to 

receive positive CRA consideration. Finally, a few 

banks report that SDL and NSDL programs have been 

designed to generate short-term profits. The following 

section summarizes the three business models and 

features case studies of banks operating under each 

model. 

Long-Term, Relationship-Building Business Model 

Nine banks in the pilot were already operating SDL/ 

NSDL programs—some for 20 years or more—prior to 

the start of the pilot. Banks with existing programs were 

the most likely to report that overall relationships with 

SDL and NSDL customers are profitable. These banks 

indicate that costs related to originating and servicing 

an SDL or NSDL are similar to other loans. However, 

given the small size of SDLs and to a lesser extent, 

NSDLs, the interest income and fees generated are 

often not sufficient to achieve short-term profitability. 

Nevertheless, banks with existing programs have been 

able to generate long-term profitability through volume 

and by using the SDL and NSDL products to cross-sell 

additional products. 

For example, as described in the text box on page 35, 

Amarillo National Bank in Amarillo, Texas, has been 

offering SDLs and NSDLs for more than 100 years.6 

The bank has not officially tracked the profitability of 

its SDLs and NSDLs or the number of additional products sold to SDL and NSDL customers. However, bank 

management firmly believes that offering these products 

has resulted in strong and profitable business and 

community relationships through cross-selling over the 

long term. 

Twenty-two of the pilot banks operate new SDL/NSDL 

programs. While they are beginning to attract new 

customers and cross-sell other products, on a standalone basis, most new programs are not yet profitable. 

Most of the banks with new programs are interested in 

the long-term, relationship-building model. One such 

bank is Citizens Trust Bank in Atlanta, Georgia, (see 

text box on page 36). The bank recently revamped its 

SDL/NSDL program by broadening its target market 

from military personnel to the general population, 

including the military, after encountering strong 

competition and modest consumer interest in its initial 

program. Bank management also modified underwriting, 

advertising, and the approval process, among other 

areas. Although the long-term profitability and feasibility of this new program are still being assessed, Citizens 

Trust Bank has experienced a robust consumer response 

to the revamped SDL/NSDL product. 

Short-Term Profitability Business Model 

While most of the banks with new SDL or NSDL 

programs are interested in pursuing the long-term 

relationship-building business model, a few have 

achieved, or intend to achieve, short-term profitability 

from these programs. All of these banks are located 

primarily in census tracts with high concentrations of 

LMI households, immigrant households, or both, and 

have identified a need for small-dollar loan products 

among these consumers. In general, these banks are 

better positioned to generate higher transaction 

volumes and tend to impose interest rates and fees at 

the higher end of the range, although they remain 

within the recommended 36 percent APR limit. 

For example, as described in the text box on page 37, 

Bank of Commerce in Stilwell, Oklahoma, identified a 

demand for SDL products among its large base of LMI 

customers by, among other things, observing that a 

number of its customers were writing checks to payday 

and similar lenders. Bank management leveraged this 

demand into a profitable program in the short term by 

designing a streamlined, reasonably priced SDL product, 

with linked savings and multiple opportunities for crossselling products. 

6 Banks listed in this article are for illustration only. The FDIC does not 

endorse any bank or product. 

FDIC QUARTERLY 33 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Community Goodwill and CRA Business Model 

A few banks in the pilot, both those with existing and 

new programs, offer SDL or NSDL products solely for 

the goodwill they generate in the community and the 

potential for positive CRA consideration. Most such 

banks are located in suburban areas with few LMI or 

immigrant-dense census tracts. These banks are likely to 

work primarily or exclusively with consumer and 

community groups that refer clients. 

For example, as described in the text box on page 38, 

Wilmington Trust Bank, Wilmington, Delaware, offers 

its SDL program exclusively through a partnership with 

West End Neighborhood House, a social services organization that has worked with the bank on various 

projects for a number of years. The bank’s goal is to 

enhance the availability of affordable credit to LMI 

consumers in its community, rather than to increase 

profitability or build customer relationships. 

Conclusion 

After one year, the FDIC’s Small-Dollar Loan Pilot 

Program has provided evidence that banks can offer 

reasonably priced alternatives to high-cost, short-term 

credit. Most participating banks have determined that 

using SDL and NSDL products as a cornerstone for 

building long-term profitable relationships is the most 

feasible business model. Some banks believe that their 

location, underwriting processes, and pricing structures 

will allow for short-term profitability. Others focus 

solely on providing a service to the community by 

ensuring that reasonably priced credit is available to a 

broad range of consumers. The FDIC will continue to 

explore the feasibility of participant banks’ programs as 

the pilot continues over the next year. Banks and 

others interested in the pilot can contact the FDIC at 

smalldollarpilot@fdic.gov. 

Authors: Susan Burhouse, Senior Financial Economist 

Rae-Ann Miller, Special Advisor to the Director 

of the Division of Insurance and Research 

Aileen G. Sampson, Financial Economist 

The authors would like to thank the following individuals for 

their review of this article: Luke Reynolds, Chief, Outreach 

and Program Development Section, Division of Supervision 

and Consumer Protection, FDIC; Beryl Barmore, Vice 

President and CRA Manager, Wilmington Trust Bank; 

Lilia Escajeda, Vice President and CRA Officer, Amarillo 

National Bank; Jason Garhart, Vice President, Bank of 

Commerce; and Sharnell Reynolds, Assistant Vice President 

and Director of Consumer Lending, Citizens Trust Bank. 

FDIC QUARTERLY 34 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

Small-Dollar Loan Pilot Program 

Long-Term Feasibility through Volume and Relationships 

Amarillo National Bank 

Amarillo, Texas 

Amarillo National Bank is a $2.7 billion, family-owned 

bank located in Amarillo, Texas. In addition to its main 

office, the bank has 14 branches, all of which are in, or 

close to, Amarillo. Located in the center of the Texas 

panhandle, Amarillo is the nation’s 120th largest city. 

Amarillo has a diverse economy composed of farm and 

ranch operations, cattle feeding and processing operations, extensive cancer research and medical facilities, 

and petroleum-related industries. It is also the home of 

Bell Helicopter’s Osprey production facility, as well as 

Pantex, a nuclear assembly and disassembly facility. 

The city’s populace is diverse; about 26.3 percent of 

households are Latino or Hispanic, compared to the 

nationwide average of 14.7 percent.a 

The bank’s SDL/NSDL program has existed for more 

than 100 years, and bank management believes that 

making these loans is in line with the bank’s local focus 

and desire to serve its community. There are no established parameters for loan amounts, but the standard 

minimum is $500. The bank may make loans exceeding 

$2,500 on a case-by-case basis, but it is only reporting 

loans up to this limit in accordance with the NSDL 

threshold. All loans are closed-end, and terms generally 

range from 9 to 12 months. The average interest rate is 

about 14 percent, with a maximum rate of 18 percent, 

and the bank does not charge an origination fee. 

In addition, the bank offers a discount for consumers 

who choose to have their payment automatically 

debited from their checking account. Proof of income, 

identity, and address is required. A credit report is also 

obtained as part of the underwriting process, but the 

bank does not require a particular credit score. Underwriting is delegated to branch managers, and if the 

customer’s documents are in order, a loan can be underwritten in just a few minutes. 

a U.S. Census Bureau, “2005–2007 American Community Survey.” 

In the first four quarters of the pilot, Amarillo National 

Bank originated 1,074 SDLs and 1,911 NSDLs. As of 

the end of the fourth quarter, 640 SDLs with a cumulative balance of $487,000 and 1,594 NSDLs with a 

cumulative balance of $2.8 million were outstanding. 

Twenty-one SDLs originated in the first four quarters 

have been charged off, and 155 were 30 days or more 

delinquent as of the end of the fourth quarter. 

The bank does not require linked deposit products and 

does not formally track the profitability of SDL or 

NSDL products or overall relationships with these 

customers. Indeed, the bank only recently began to 

tally cross-selling of products for the purposes of this 

pilot; for the last half of 2008, the bank opened 64 

savings and checking accounts for SDL customers. 

However, bank management strongly believes that 

providing SDLs and NSDLs is a service to the community that pays off over the long term through goodwill 

and stronger customer relationships. According to the 

program administrator, Vice President and CRA Officer Lilia Escajeda, “Amarillo National Bank has been 

making these loans for as long as I have been here [30 

years], and I still see people with houses, successful businesses, kids in college, who tell me that the small-dollar 

loan I made to them was their first step in establishing 

a relationship with a bank.” 

Amarillo National Bank does not formally advertise its 

SDL and NSDL products. Rather, after many years of 

offering these loans, the bank relies on word of mouth 

in the community. Bank management also attributes 

the success of the program to the bank’s strong commitment to and partnerships with civic and business organizations, schools, community groups, and other 

organizations. Many bank employees volunteer to work 

with these groups to provide financial education and 

promote the bank’s relationship-based approach to 

banking, which includes SDLs and NSDLs. 

FDIC QUARTERLY 35 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Re-evaluating Program Features Based on the Marketplace 

Citizens Trust Bank 

Atlanta, Georgia 

Citizens Trust Bank is a $348 million, African-Americanowned bank in Atlanta, Georgia. In addition to its main 

office, Citizens Trust has seven metropolitan Atlanta 

branches; one branch in Columbus, Georgia; one branch 

in Birmingham, Alabama; and one in Eutaw, Alabama. 

Four of the Atlanta branches, both Alabama branches, 

and the Columbus branch are located in LMI census 

tracts. Columbus, Georgia, is a metropolitan area 

bordering Alabama and is close to a large military population at the Fort Benning Military Reserve. 

Beginning in early 2008, through its Columbus office 

only, Citizens Trust Bank targeted military personnel at 

Fort Benning exclusively for its SDL product. After 

several months of advertising in the Bayonet—the Fort 

Benning newspaper—and airing radio advertisements, 

the bank originated only a few of the military-targeted 

SDLs. Originations were hampered by competition 

from programs offered on the military base that had 

already gained a large share of the market among Fort 

Benning consumers. 

As a result of low loan volumes, management decided 

to significantly change its program by expanding the 

target market beyond military personnel to include the 

general public. In December 2008, the bank began 

offering a new small-dollar product called the “Community Relief Loan” at all of its branches. Citizens Trust 

Bank primarily used radio advertising and signs in bank 

branches to promote the product. According to Citizens Trust Bank’s Assistant Vice President and Director 

of Consumer Lending Sharnell W. Reynolds, in the 

first two months of the program, the Community Relief 

Loan campaign had generated 574 applications and 81 

originations totaling more than $116,000. 

Unlike the military-focused loan program that required 

linked savings accounts, linked savings are optional 

under the Community Relief Loan program. Nevertheless, in the first two months of the program, Community 

Relief Loan customers had opened a total of 52 new 

savings and checking accounts. Borrowers are strongly 

encouraged to authorize automatic debits of loan 

payments from a savings or checking account. Although 

none of the loans were delinquent or in default as of the 

fourth quarter, the program is still very new. 

The Community Relief Loan ranges from $500 to 

$1,500. Each loan carries a $48 origination fee, and the 

interest rate is 15 percent. The maximum term on a 

$500 Community Relief Loan is six months; one year is 

the maximum term on larger loans. To qualify, borrowers must have a FICO credit score of at least 500, proof 

of regular income for six months, no outstanding liens 

or judgments, and have been at their current address for 

at least one year. The bank also has alternative underwriting processes to accommodate prospective borrowers with thin or no credit histories. The maximum loan 

amount for these applicants is $500, and they must 

provide proof of employment for the previous six 

months and show an alternate form of good credit 

history. For instance, borrowers might provide proof 

that they have paid their rent or utility bills on time for 

the previous six months. 

The loan approval process is decentralized and managed 

at each of the bank’s ten branches by Financial Relationship Managers. Each Financial Relationship 

Manager has Community Relief Loan approval authority and uses a standard underwriting checklist to guide 

routine application determinations. Those who recommend exceptions to the checklist guidelines route their 

requests to the corporate offices in Atlanta. With or 

without an exception, it generally takes less than 24 

hours from the time an application is submitted to 

deliver a check to an approved borrower. If all of the 

required borrower documentation is on hand at the 

time an application is submitted, same-day delivery is 

possible. 

Because the revamped program is still new, bank 

management continues to evaluate the program’s 

success and ongoing feasibility. Going forward, they 

will assess its profitability, consider its usefulness as a 

tool for building new business relationships and crossselling, and gauge how well it meets the needs of the 

communities served by Citizens Trust Bank. 

FDIC QUARTERLY 36 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

Small-Dollar Loan Pilot Program 

Leveraging Location for Profits, Relationships, and Community Service 

Bank of Commerce 

Stilwell, Oklahoma 

Bank of Commerce is a $92 million bank in Stilwell, 

Oklahoma. In addition to its main office, the bank has 

a branch in Stilwell and a branch in Park Hill, Oklahoma. Most of the bank’s SDLs are originated out of the 

main office in Stilwell. Located in northeastern Oklahoma in southern Adair County (of which it is the 

county seat), Stilwell is east of Muskogee, Oklahoma, 

about seven miles from the Arkansas border. According 

to bank management, Stilwell is rural, with a large 

concentration of LMI households. 

The bank’s SDL program was new at the time it applied 

to the pilot program, and its application indicated that 

these loans would be an extension of the bank’s desire 

to meet the needs of its customers. Loans range from 

$200 to $1,000, and all are closed-end with a 12-month 

term. The interest rate varies, in accordance with the 

bank’s general interest rate policy, and currently does 

not exceed 13.75 percent for these loans. The origination fee is $25 to $50, depending on the size of the loan, 

which, combined with the interest rate, has resulted in 

an average APR of 25 percent. Proof of income, identity, and address is required. A credit report is obtained 

as part of the underwriting process, but the bank does 

not require a particular credit score. If the customer’s 

documents are in order, a loan can be underwritten in 

less than one hour. A centralized loan officer approves 

all of the SDLs. 

In the first four quarters of the pilot, Bank of Commerce 

originated 84 loans. As of the end of the fourth quarter, 

41 loans, with a cumulative balance of $8,200, were 

outstanding. Two loans have been charged off to date, 

and two were 30 days or more delinquent as of the end 

of the fourth quarter. 

Bank of Commerce encourages, but does not require, 

SDL customers to open savings accounts linked to their 

SDL. For linked savings accounts, the bank adds 25 

percent to each monthly payment and deposits it into a 

savings account. For example, if a monthly payment is 

$50, the loan payment book or automated clearinghouse ticket reflects $62.50, with $50 debited for loan 

repayment and $12.50 applied to savings. As of the end 

of the fourth quarter, SDL customers had accumulated 

a total of $1,000 in linked savings. 

In addition to linked savings accounts, the bank strongly 

encourages SDL customers to open checking accounts. 

Consumers may choose to have their loan payment 

debited from their checking account. The bank also 

attempts to graduate SDL customers to other credit 

products after satisfactory performance with SDLs. In 

the second, third, and fourth quarters of the pilot, Bank 

of Commerce reported that a total of 74 credit products 

were sold to SDL customers.b 

Bank management has indicated that SDLs are profitable on a stand-alone basis and have provided a gateway to establishing customer relationships. Management 

attributes profitability to the bank’s pricing structure, 

streamlined product design, attentive underwriting, 

and solid demand from a large base of LMI consumers. 

According to Vice President Jason Garhart, “We offer 

check-cashing services and see lots of folks that we’d 

like to have as customers, and we see our own customers 

writing checks to payday lenders and such. We thought 

that an affordable small-dollar loan product might be a 

good way to build relationships with new customers, 

strengthen our relationships with existing customers, 

and do some good for the community.” 

Bank of Commerce initially advertised its SDL program 

through a mass mailing to existing customers. Branch 

personnel have also been trained to discuss the SDL 

product with consumers and refer potential borrowers 

to the lending staff. Early in the program, bank personnel advertised SDLs in local newspapers, although they 

do not believe these advertisements yielded many 

potential applicants. A more effective method has been 

placing promotions for SDLs in a rotation of bank product advertisements on an electronic billboard located 

on a highway close to the bank’s main office. 

b Information regarding cross-selling of other credit products in 

the first quarter is not available. 

FDIC QUARTERLY 37 2009, VOLUME 3, NO. 2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partnering with Nonprofits to Help the Community 

Wilmington Trust 

Wilmington, Delaware 

Wilmington Trust Company is a $10 billion institution 

headquartered in Wilmington, Delaware, with 44 

branches throughout the state. Wilmington Trust is a 

leading retail and commercial bank in Delaware and is 

one of the largest personal trust providers in the country. The bank is a wholly owned subsidiary of Wilmington Trust Corporation and has three major business 

lines: regional banking, corporate client services, and 

wealth advisory services. 

To enhance the accessibility of credit for LMI borrowers in the Delaware market, Wilmington Trust has 

collaborated with West End Neighborhood House 

(WENH), a large community organization in the city of 

Wilmington, for about 15 years on a number of community initiatives. WENH is a nonprofit organization that 

delivers coordinated social services to help low-income 

and underserved individuals attain self-sufficiency. In 

late 2007, just prior to the start of the FDIC’s SmallDollar Loan Pilot Program, WENH created the Worker’s Loan Program to compete with payday lenders and 

provide a more affordable option for individuals needing to borrow cash quickly. 

The Worker’s Loan Program provides loans between 

$250 and $500 at interest rates ranging from 12 to 15 

percent with no fees. Loans are repaid in a maximum of 

four installments based on the borrower’s pay schedule. 

To qualify, applicants must present the same types of 

information that payday lenders often require: a recent 

bank statement showing no overdrafts, recent pay stubs, 

a driver’s license or state photo identification card, and 

a current utility bill. A unique feature of this program is 

that WENH screens the applicants, performs the underwriting, and then faxes the loan application to the bank 

for processing, all of which can be completed in less 

than two hours. Although customers apply for the loans 

at WENH, once approved, they are directed to one of 

Wilmington Trust’s branches to collect loan proceeds. 

Qualified borrowers submit postdated checks for each 

planned installment to WENH at the time the loan is 

approved, and WENH deposits the checks to Wilmington Trust on the payment due dates. 

One of the most important elements of the partnership 

between WENH and Wilmington Trust is that borrowers can receive a full range of social services from 

WENH that can enhance their ability to remain current 

on their loan payments. All borrowers receive credit 

and budget education, but clients can also receive case 

management, crisis intervention, and other services. 

Throughout 2008, Wilmington Trust originated 238 

Worker’s Loans totaling nearly $100,000. At the end of 

fourth quarter 2008, 13 loans were delinquent and 14 

had been charged off. Wilmington Trust Vice President 

and CRA Manager Beryl Barmore reported that the 

Worker’s Loans have been performing somewhat better 

than might be expected given the borrowers’ risk 

profiles, although not as well as the bank’s other 

consumer loans. She noted, however, that the capacity 

of applicants to take on even small loans declined 

during the difficult economic environment in early 

2009. All loans made through the Worker’s Loan 

Program are fully guaranteed by WENH and are collateralized by a loan loss reserve funded by grants and 

donations from other program partners, including 

financial institutions and social service organizations. 

The Worker’s Loan Program is prominently featured on 

WENH’s Web site (www.westendnh.org). The United 

Way of Delaware is working with WENH to implement 

a comprehensive marketing and public relations plan, 

in addition to helping WENH expand the program 

throughout the entire state. Wilmington Trust and 

WENH have observed, however, that careful attention 

must be paid to reaching the right target audience. For 

example, early efforts to publicize the program by 

broadly encouraging social services agencies to disseminate information were not successful because many 

clients at those agencies would not qualify for the loan 

program. Ongoing and future marketing strategies will 

make clear that, like payday loans, the Worker’s Loan 

Program is targeted toward individuals who are 

employed and have a bank account in good standing. 

Wilmington Trust does not assess the profitability of 

the program and has not sought to cross-sell or develop 

banking relationships with Worker’s Loan Program 

borrowers, most of whom are not deposit customers of 

the bank. The Worker’s Loan Program was developed 

to provide a reasonably priced alternative to payday 

loans in an efficient manner, and bank management 

believes it has succeeded. According to WENH, anecdotal evidence suggests that borrowers are using fewer 

high-cost debt products than they did before acquiring 

a Worker’s Loan. In addition, several individuals in 

WENH’s housing counseling program have been able 

to use this loan program to pay off small debts, improve 

their credit rating, and thereby qualify for a mortgage. 

FDIC QUARTERLY 38 2009, VOLUME 3, NO. 2