A federal program designed to help banks boost small business lending has helped American Savings FSB promote economic growth in the region, according to the head of the Munster-based financial institution.
American Savings President Michael Mellon said the U.S. Treasury Department Small Business Lending Fund supports community banks by providing them an incentive structure to expand their commercial loan portfolios. The program also encourages applications from business that women, minorities and veterans own.
AMB Financial Corp., the holding company for American Savings, received nearly $3.9 million in September 2011 by participating in the program.
As of June 30, about $23 million of the bank's loan portfolio qualified as small business lending, which is up 7.9 percent from a baseline level, according to Treasury Department data. The baseline is a four-quarter moving average that ended June 30, 2010.
“This program is a win-win for the community and the bank," Mellon said in a news release. "It helps strengthen the local business community while simultaneously strengthening the bank’s commercial portfolio."
The program encourages banks to make certain business loans of $10 million or less to businesses with $50 million or less in revenue.
After receiving the funds, community banks pay interest on the capital supplied by the government, which is up to 5 percent initially. That percentage can rise or fall depending on how much the institution is able to increase lending to small businesses.
American Savings used the proceeds to redeem preferred shares the Treasury Department bought through the Troubled Asset Relief Program, or TARP.
The Treasury Department invested more than $4 billion in 332 institutions under the program, which Congress authorized and President Barack Obama signed as part of the Small Business Jobs Act of 2010. Michigan City-based Horizon Bancorp and American Savings are the only two banks in Northwest Indiana that are part of the program.
American Savings, which had $178.1 million in assets as of Sept. 30, has four branches in Munster, Hammond, Dyer and Schererville.