Starion Bank recognized for Main Street Lending program

BISMARCK – A North Dakota bank has been recognized in the U.S. Congress for its use of the newly-minted Main Street Lending Program.

Starion Bank can count one of the loans as a first in the country. The bank has 16 locations in North Dakota and Wisconsin, with $1.4 billion in assets.

Don Morgan, president of Starion Bank, said the Main Street Lending program was developed by the Federal Reserve Bank of Boston to encourage lending and help financial institutions share credit risk load.

“The Fed has come out with this program, essentially saying, ‘If we like your underwrite, if we like your deal, we’ll share in up to 95% of that credit risk with you,’” Morgan said.

The bank still leads the loans, he said, and they still maintain the primary relationship with the business. Rates and other loans terms are “a little more favorable” for customers than they would be in normal times, he said.

There are five “facilities” through which the Main Street Lending program loans operate through: the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility and the Nonprofit Organization Expanded Loan Facility.

“Really it’s a motivator to banks to continue lend money in this environment,” he said.

Like many financial institutions during the coronavirus pandemic, Starion is constantly on the lookout for avenues of support for their small to midsize business customers who have been hit financially hard by the virus and its economic consequences.

But Starion was the first to get an approved loan through the new program, an achievement noted by U.S. Treasury Secretary Steven Munuchin in his report to Congress during the first week in August.

The $12.3 million loan was facilitated out of Starion’s Middleton, Wisc., office, on the outskirts of Madison, by Business Banking Officer Josh Resch, who’s been with the bank for more than four years.

“When this pandemic hit, and the uncertainty is really what it came down to, it created the need to keep businesses solvent and liquid as a top priority of the bank,” Resch said.

He’d been keeping his eye on the Main Street Lending program since it was announced in April, although it didn’t open until July, and he was surprised Starion was the first to get a loan through.

“We’d been working on it for two months,” he said. “We were really building it while we were flying it. The program changed and evolved a few times.”

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Most of Starion’s customers, and indeed the $12.3 million loan Resch wrote, will typically “best fit” into the Main Street Priority Loan Facility, he said. The program is designed specifically for businesses who were in “sound financial condition” prior to the pandemic.
“You take their 2019 EBITA (essentially net income, or earnings, with interest, taxes, depreciation, and amortization added back), you multiply that by six, which is the multiplier, and then you subtract out their existing debt, and that’s the amount they could qualify for,” he said.

Unlike EIDL and PPP loans, and other programs offered through the U.S. Small Business Administration, Resch said, this particular program wasn’t fashioned for smaller businesses.

“This Main Street (program) was meant to help bridge the gap for these midsize companies that may have been left out on some of these other programs,” he said.

To date, Starion hasn’t submitted any loans through the program in the Fargo area, but Market President Dan Staller said it’s one of the many tools available to their customers.

“Our business banking team at Starion Bank has access to regional, state and national programming and they have the expertise to understand business needs, assess all available options, and provide recommendations to provide the greatest benefit,” Staller said via email. “We pride ourselves on being banking experts. We are engaged in helping our communities grow and prosper. That’s the foundation on which we’ve built our bank over the past 50 years.”