Tiny Banks Lending Large

Feb. 4, 2009— -- Michael Daniels runs a small bank in Green Bay, Wis., that recently received $15 million in taxpayer money.

When he got the money, Daniels did something a bit rare in banking circles these days: He lent it out to homebuyers and small businesses.

"We're making loans," Daniels said. "The window is open. It's never been closed."

That's exactly what government leaders want banks to do with money from the Troubled Assets Relief Program, but what apparently not enough of them are doing.

A Federal Reserve study released just this week showed that banks are continuing to make it harder for people to get all types of loans.

But Daniels and a handful of executives -- mostly at smaller banks -- are doing everything possible to help their communities out.

"This bank can only be as good as the community it operates in," said Daniels, president and chief operating officer of the five-branch Nicolet National Bank. "We're very invested in this community."

Daniels did take the TARP money as "a bit of a safety net" in case the economy "totally tanks." But, for the most part, Nicolet National Bank plans to pump that cash back into the local economy.

In fact, Daniels and the bank officers have so much confidence in their loans that they raised another $9.5 million through a private stock offering at the same time they got the TARP funds at the end of December. About 40 percent of that new private capital came from bank directors and insiders.

"We put our own money right alongside it," Daniels said. "You put your money where your mouth is."

Like many other banks, Nicolet has had its fair share of loans go bad. But it still has plenty of capital on hand because its own investments, in Daniels' words, are "chocolate and vanilla."

To date, the government has pumped $387.4 billion of TARP funds into the nation's financial system. Of that, $195.33 billion went to 359 institutions in 45 states and Puerto Rico. (The rest of it went to insurance giant AIG, General Motors, Chrysler and to guarantee other bank loans.)