Contributed by Mike Donnell
COMMUNITY BANKS PULLED THEIR WEIGHT DURING PPP APPLICATION PROCESS
Pueblo, Colo. May 12, 2020 — When congress passed and President Trump signed phase one and two of the Coronavirus Aid, Relief and Economic Security Act (CARES Act ) they did so in part based on their faith that the nation’s banking system, including its nearly 2,500 community banks, could navigate the flood of small business loan applications that were certain to follow.
Andrew Trainor’s position on the Independent Bankers of Colorado Board and as Regional President of Legacy Bank’s seven branches throughout the southeastern portion of the state; provided him with a front row seat to watch the application process unfold.
The process was not without its challenges. During phase one banks faced many unknowns in the application and approval process while recognizing that the funds needed to be dispersed to small businesses as quickly as possible.
“Community banks like ours worked as hard as humanly possible to provide funds to small business owners while adapting to ongoing changes in technology and required procedures,” Trainor noted.
The speed with which the coronavirus spread and the similar speed with which the state and federal government reacted created the perfect banking storm according to Trainor.
“First came the federal government‘s business-closing policy followed by the issuance of state-wide stay-at-home orders in Colorado. This created an immediate demand for financial relief among small businesses that were required to close or face the prospect of laying off employees; including many of those, who despite downturned revenue, were considered essential.
Trainor believes community banks met the challenge primarily because local leaders were able to adapt and amend as needed. The adaptation that was required fit the local leadership model community banks operate from.
“According to the Small Business Administration which accepted the applications and guaranteed the loans, Legacy and other Colorado banks processed nearly 42,000 loans with a value of more than $7 billion during phase one of the program and during the second phase, banks in the state processed more than 46,000 applications valued in excess of $3 billion,” he noted.
As a comparison, he pointed out that during the entire 2019 fiscal year the SBA approved a total of 58,000 loans for a total of $28 billion dollars.
Legacy and its branches fit the commonly accepted definition of a community bank which is a commercial bank that derives funds from and lends to the community where it operates. Community banks are not affiliated with multibank holding companies. Nationally, these banks played a major role in providing PPP money to small businesses. For example those with less than $10 billion in assets approved about 60 percent of phase one applications and banks with less than $1 billion in assets, such as Legacy, approved 20 percent. During phase two, banks with assets of less than $10 million handled nearly half of the applications.
“American community banks are the reason that Main Street businesses received necessary funding to stay afloat. The efforts of organizations like the Independent Community Bankers of America who advocated for perimeters and guardrails essential in issuing critical funds to those most in need; helped protect many small businesses that are the backbone of our local economy,” commented Trainor.
Legacy Bank processed nearly 120 loans, totaling $10.7 million with an average loan size of $89k. As of the first of May, the State of Colorado has approved 46,157 loans with a total amount of just over $3 billion dollars. The average loan size in Colorado was just under $80k.
Fitting to Legacy Bank’s community footprint, the organization processed Paycheck Protection funding for businesses in Wiley, Lamar, Pueblo, Pueblo West, Canon City, Colorado Springs, and Buena Vista. The scope of markets reflected the impact community banks made throughout our country.
“Our staff, and many in our industry, devoted long hours to helping business owners navigate the confusing loan application process,” said Trainor. “Although technical and administrative glitches were expected, due to the historic volume of applications, I am proud of the professionals in our industry who kept level heads, adjusted as needed, and in the end were a valuable partners in the distribution of government assistance in these difficult times.”
Funding for the Paycheck Protection program remained available at time of press. Due to the overwhelming amount of applicants funding cannot be guaranteed to remain available. Parties interested in still applying are encouraged to contact their local community banker for assistance.