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Community Banks Take the Lead on PPP Loans During Pandemic

By Kailyn Lamb, Marketing Content Writer and Editor, PYA

In the confusion of the early days of the coronavirus pandemic, it was community banks that helped lead the charge on getting local businesses the funds they so desperately needed through the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).

Community banks, which are typically locally owned and operated, derive funds from, and lend to the communities they serve. This means they build strong relationships with clients, who often are family and friends.

“If you asked every community bank in the country, I bet every one of them is going to tell you that one of their core values is relationship banking,” said Mark Holder, President and Chief Executive Officer (CEO) of TnBank.

As the shutdown began in March 2020, there was immediate confusion and uncertainty. Community bank leaders such as Holder knew that something needed to be done for clients.

For Mike Baker, President and CEO of CBBC Bank in Blount County, it meant that all hands were on deck to call customers. Before the SBA launched the PPP program, Baker and his 80 staff members were reaching out to mortgage holders and businesses asking how they could help.

Baker said that because community banks are locally owned, they don’t have to reach up a corporate ladder when decisions need to be made. This enabled them to help a large percentage of CBBC’s loan portfolio straight out of the gate.

“What you’re able to do, good or bad, is make decisions for customers and for the bank in a timely fashion,” he said. “We were able, through the flexibility that we were granted, to offer them deferred payments with principal and interest, and in some cases, interest only, without really asking them for any additional information.”

It wasn’t long after this that the SBA opened its first round of PPP in April 2020, which totaled $349 billion.

At first, people were scrambling to get in line for funding, said Billy Carroll, President and CEO of SmartBank. Businesses were unsure how quickly the funding would last. “There was no playbook,” he added.

“A lot of our clients were looking at us saying ‘Hey, what do we do?’”

All three bank leaders said that one thing that was beneficial to them was that Colin Barrett, President and CEO of the Tennessee Bankers Association (TBA), immediately implemented a daily phone call for banks across the state. During these calls, they would share ideas and try to figure out the ever-changing regulations happening due to the pandemic.

It was like “building the airplane as you were flying it,” Barrett said. At their peak, the conference calls would have more than 700 lines connected as banks across Tennessee tried to figure out what it all meant. But in addition to the confusion, Barrett said there was also a lot of comradery.

“We were really learning together,” he said, adding, “the bankers being able to rely on each other was a big part of the success” of the calls.

Many of the earlier calls were about pandemic rules in general. Because banks were essential, some of the confusion revolved around how to continue to serve customers safely. Some of this involved rotating staff and closing lobbies.

“We were worried not only about taking care of our customers, taking care of our banks, but taking care of our employees,” Baker said.

Barely two weeks after the first round of PPP funds opened, the money ran out, leading the government to add an additional $310 billion. The funds lasted longer this time around. The SBA eventually opened a second round of PPP loans in January 2021, with $284 billion in funding.

According to the Independent Community Bankers of America(ICBA), data showed community banks handled 57.5 percent of all PPP recipients and 48.1 percent of small businesses, totaling 2.8 million loans. Their turnaround time was also five to 10 days faster than other PPP lenders, according to this news release.

For his part, Holder said he was not surprised community banks did the heavy lifting for the PPP. In times of confusion, people turn to those they trust, and relationships are the cornerstone of community banks. All three of the bank leaders said they had new clients come in for PPP loans because customers felt they didn’t have a relationship with their previous bank. Carroll said 30 percent of the loans SmartBank provided were to new clients. Working in building relationships is “invaluable,” Holder said.

Between the three banks, more than 1,000 loans were handled, and more than $300 million was distributed to local businesses. All three bank leaders said most of their first-round loans were forgiven through the SBA and they are in the process of forgiveness for round two.

It took time and manpower to understand exactly how the PPP funding worked, said Holder. He often came in early to read the regulations to make sure they got it right.

Carroll added that at the start of the program, nothing was automated, and staff had to take applications and manually put them together before submitting them. Despite the confusion, Carroll said that for a program that came together from scratch in the middle of a pandemic, PPP came together well. Barrett agreed, saying that the TBA worked on building relationships with the U.S. Treasury, the SBA, and the state’s Congressional Delegation in order to get some information on changes earlier, so banks were ready to handle them.

Barrett added that hearing about the impact on small businesses and employees pushed his team to do “anything we could to facilitate the economic strength of the state to keep it afloat.”

The sheer volume of loans was also new for banks. In the first round of PPP alone, Baker said CBBC staff handled more loans in a matter of months than they handle in a year.

“As time has gone on, the SBA has made the process easier both for the bank and for the customer,” Baker said.

One improvement occurred in the second round when the SBA streamlined applications for under $150,000, making the process easier. All three banks said that this was most of their applications. The SBA also changed the rules in favor of smaller businesses.

“One thing that was nice about the second round is we were able to help a lot of really small businesses because they changed the rules to make it a little more lucrative for sole proprietorships,” Holder said. “It was great to help the big businesses, don’t get me wrong, but seeing these small mom-and-pops come in and just say ‘I don’t know what I would have done without this money’ was really fulfilling.”

For all three bankers, taking the lead on PPP was partially done out of a sense of duty, but also for the love of their communities. Holder called it his proudest moment. While Carroll said he was particularly proud of the work his staff did, he also said that the banking industry as a whole stepped up during the pandemic. He also agreed that many community bankers take pride in working locally.

“It’s helping a person start a business, or buy that first home, or open that first checking account, or whatever it is,” he said. “When you’re dealing with peoples’ finances, there’s a certain amount of pride that you take in helping them navigate through that course.”

While the PPP was mainly about businesses, it was also about individuals. Carroll said it was important to remember “the whole root” of the program was to keep people on payroll.

For Baker, the pandemic has stressed the importance of community banking. “There’s a real need for what we do,” he said. He and his staff also took it as a learning opportunity, tuning up their crisis management.

“What’s good about it is, we’ve learned how to do things differently,” he said. “The processes that we developed and the things that we’ve put in place we can now say ‘I know what to do to keep businesses open.’”

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