Lessons from a small bank

Sometimes one extreme sheds light on another extreme, and in a day when the nationâ??s financial system is under the microscope
for making all manner of rotten loans, the experience of tiny Kentland Federal Savings & Loan Association might be instructive.

The tiny thrift north of Lafayette hasnâ??t lost a loan in at least 20 years. Thatâ??s how long President and CEO James Sammons
has worked at the bank.

Most bank observers would quickly point out that Kentland is turning out a weak return on assets. The institution, which as
a mutual savings bank is owned by its depositors, certainly isnâ??t emphasizing growth. Moreover, Kentland only makes first
mortgages â?? no business loans.

Yet, Sammons, the fourth family member to run the institution since its founding in 1920, knows a thing or two about who will
make their payments and who wonâ??t.

Sammons scrutinizes assets, liabilities and credit history. And he asks borrowers if he can talk with other places where theyâ??ve
borrowed money.

But his efforts go much further. He looks for family history and personal character that indicate whether the borrower will
work with the bank in the event of a job loss.

When pressed to explain how he make the judgments, Sammons strains for words.

â??Some of itâ??s personality. Some of itâ??s knowing family,â?? he says. â??You get a feel for a personâ??s personality and their ability
to be honest with you when something comes up.â??

What can big banks learn from places like Kentland? Do bankers know enough about their borrowers? How would you feel sitting
across a desk from Sammons?