YOUNGSTOWN, Ohio – Local bankers credit the federal Paycheck Protection Program launched early in the pandemic for keeping many of their commercial customers afloat and for providing new customers.
Created to combat the economic devastation caused by the pandemic, PPP provided cash for businesses to use for payroll and other expenses. The loans were forgiven if certain conditions were met.
Nationally, the program provided nearly 11.5 million loans totaling $792 million through May 2021, says the U.S. Small Business Administration, which administered the program.
Representatives of four lenders that operate in the region – Premier Bank, Huntington National Bank, First National Bank of Pennsylvania and Farmers National Bank – shared their thoughts on the program and discussed their experiences.
During the first round of the program, all banks faced the same challenges, says Josh Toot, executive vice president and Mahoning Valley market president of Premier Bank. “You had a lot of volume [and] a program that was changing rapidly,” he says.
The challenge was different with the second PPP round, when – unlike the first round, financial activity outside of PPP was low – the bank had “a large pipeline of everyday loans” on top of PPP applications, and “really didn’t have the staff,” he says.
“The volume was a killer initially, as we were just trying to learn everything about” the program, Chad Paul, Premier Bank SBA lending specialist, affirms. “Everybody was trying to figure out the best way to process it with limited information. Then things kind of kept changing. So you had to carve out a bit of each day to make sure you understood any changes.”
Between the two rounds, Premier Bank processed about 5,100 PPP loans totaling $625 million, according to Paul. As of Nov. 15, about 4,450 loans totaling $535 million had been forgiven. Of the 640 loans remaining, about 480 borrowers haven’t applied for forgiveness. The bank is working with them to get their applications in and the remaining loans are in the review process.
“I’d say the program was extremely successful,” Toot says. “We were going into times that no one had seen. Clients were extremely worried. You had businesses shutting down and there was a definite need for immediate capital.”
The result is that companies were able to mitigate their lost revenue. Many clients now “are sitting on very healthy balance sheets” and there’s a lot of expansion taking place, something Toot expects to continue.
Unsure of how long PPP funds would last, Premier initially focused on its existing customers.
As the program continued and more money was added to it, the bank dealt more with what he termed “indirect clients” that had relationships with attorneys and accountants the bank worked with.
“We’ve now established those relationships and brought on those people as full-time clients,” Toot says. “It was a great opportunity for Premier and we’re gong to continue to work with that client base.”
First National Bank of Pennsylvania
Pittsburgh-based First National Bank of Pennsylvania originated more than 30,000 PPP loans totaling $3.6 billion. As of Sept. 30, $2.9 billion of that had been forgiven, the bank reports.
“FNB was proud to participate in the SBA’s Paycheck Protection Program and provide relief that protected hundreds of thousands of jobs for small businesses throughout our multistate footprint,” says Pete Asimakopoulos, executive vice president of small business banking and Youngstown Market president. In addition to strengthening FNB’s relationships with existing customers, PPP introduced the bank to “thousands of businesses” that turned to FNB for support during the crisis.
Technology investments enabled FNB to “quickly build a digital PPP loan application and forgiveness portal to accommodate the significant demand for funding,” Asimakopoulos adds.
Mindful of the broader impact of the pandemic, FNB also took steps to connect vulnerable communities with essential support.
On top of significant financial contributions, FNB reached out to more than 100 nonprofit and community organizations to ensure businesses in low- to moderate-income and historically underserved neighborhoods had resources and information regarding PPP and other available programs, he says. Nearly 24% of PPP loans the bank originated were for businesses in low- to moderate-income and predominantly minority neighborhoods.
Huntington National Bank
Maggie Ference, business banking director for credit restoration and SBA lending at Huntington National Bank, says PPP was a “critical difference” preventing the health crisis leading to a financial crisis on the level of the Great Recession a decade or so earlier.
“When the program first rolled out, it almost had like a Willy Wonka golden ticket feel about it. People were running to the banks, trying to find someone to help,” Ference says.
PPP provided an opportunity for Huntington to connect borrowers with funds to stay afloat and act as an adviser to help them though its nuances. The degree of financial information being sought was a level of detail more familiar to million-dollar borrowers, not businesses that were seeking $20,000 in payroll protection, Ference says.
Huntington systemwide provided more than 84,000 PPP loans totaling $11.2 billion. More than 95% of the loans approved during the first round have been processed and forgiven. About half of the second-round customers have either started the process for having their loans forgiven or had their loans forgiven.
“The challenges of this program were not unlike the challenges that small businesses were facing,” Ference says. There was this “monumental new product” that lenders were looking to facilitate at the same time a “catastrophic event” was occurring.
“We had to quickly find ways to create a process that could move customers through the process as quickly as we could, and then make sure that we’re getting that money in their hands in accordance with the expectations of the SBA,” she continues.
During the first round, Huntington made about 5% of its loans to borrowers that previously had not done business with the bank, a figure that increased to nearly 7% for the second round.
“We talk a lot about relief, sustainment and recovery being the three phases of the COVID crisis for small business,” Ference says. Banks were able to provide immediate relief to businesses by deferring existing commercial debt and suspending late payments. PPP provided income to sustain the banks when they weren’t generating revenue, “allowing us to focus on recovery” and help them focus on the future.
Farmers National Bank
The first week of the PPP program was “pretty intense,” says Tim Shaffer, executive vice president and chief credit officer at Farmers National Bank in Canfield. E-Tran – SBA’s electronic loan processing system – was overwhelmed and Farmers couldn’t submit applications at the same speed they were being received.
“There were periods of peak usage where you could get kicked off or you couldn’t get through,” Shaffer says.
The credit teams eventually determined that they had better success during off hours, he says. On some nights they would input the loans into the SBA portal at midnight. Bulk submissions by larger regional banks also created E-Tran problems but Farmers worked through that process as well.
The process was “much easier” for PPP’s second round, according to Shaffer. “When round two was approved earlier this year, we were ready to go,” he says.
Some industries didn’t qualify for participation and information that the businesses submitted had to be consistent with what other government databases reflected, he says. If applicants lacked accurate or necessary information, it was the role of the bank to help resolve that.
“If you hadn’t provided what the SBA was looking for to validate your payroll, your expenses, the things that were going to qualify for PPP reimbursement, that would slow it up,” he says. “But usually those got resolved by working with our credit team.”
For businesses that weren’t customers or just had a minor relationship with the bank such as a small checking account, Farmers was able to build on that goodwill. “It opened up many opportunities for us to expand to more full comprehensive banking relationships,” Shaffer says.
Like his colleagues, Shaffer says PPP was critical for helping companies to stay in business.
“It was a great relief, especially in that first-round money. Everybody knew the money was going to run out,” he says.
“We thought there’d be a round two. But it wasn’t certain. So there was a lot of gratitude for our ability to get funding for those businesses that were applying.”