It was more than a year ago when Tamara Gurney and her community bank were thrust into a frantic workplace. Customers were desperate, the rules of a new loan program changed – sometimes daily – and employees had to be massively redeployed. Many worked evenings and weekends for nearly two months.
“To say that it was chaotic for everyone, not just us, would be an understatement,” said Gurney, the founding president and chief executive of Mission Valley Bank in Sun Valley.
What sparked that chaos was the federal government’s Paycheck Protection Program that rolled out in the early weeks of the coronavirus pandemic. The program, commonly called PPP, offered businesses loans with a 1 percent interest rate but the loans didn’t have to be paid back at all so long as 60 percent of the proceeds were used for payroll and some other qualified expenses. It was a lifesaver for many businesses.
But only lately have community banks such as Gurney’s started to gain appreciation for their outsized role in supporting small businesses.
“Never have community banks rallied to do so much for their communities in as short a period as was the case during the pandemic with their Paycheck Protection Program lending and loan modifications,” read an article in the American Banker newspaper last month.
According to the Federal Deposit Insurance Corp., community banks – which typically are small, local banks – had a disproportionately greater share in PPP lending than their large bank counterparts. Community banks had only 15 percent of total commercial bank loans, yet they made 31 percent of all PPP loans last year.
In fact, that is one of the pointed observations about the PPP program: big banks made PPP loans to their big customers but not to many small businesses. That duty was left largely to the dwindling number of small, community banks – Mission Valley is the only one in the San Fernando Valley.
That was Gurney’s experience. She said she made loans to a number of desperate small business operators who were customers of big national banks but couldn’t seem to get their bank’s attention.
She particularly remembers that she answered a phone call one Friday after 5 p.m. from a frantic business owner who had been a 30-year customer of a national bank.
“Thought he had a great relationship, but the people in the branch that he had a relationship with had nothing to do with the PPP stuff,” Gurney said. He had put in an application for a loan but no one in his branch could get an answer for him.
“It was three or four weeks in, and the program money was going out the door fast, and he was scared he wasn’t going to get anything,” she continued.
So that Friday evening Gurney took his information and submitted a loan request. About 10:30 p.m., a loan number came back from the Small Business Administration, which administered the program. That meant his loan application had been accepted. It also meant that his longtime banker apparently had never submitted his application.
Because it was late, Gurney said she texted him shortly after 10:30 to tell him he would get a loan. “He called me the next day and was ecstatic,” she said.
“I had that conversation more times than I can count,” Gurney said.
500 loans
“I know for a fact that businesspeople were not sleeping,” said John Parker, a director of Mission Valley Bank and an owner of construction firm Parker Brown. “And in looking to the future, they were wondering, ‘How do I look after my employees? And what about payroll, rent and my business?’
“It was essential to get money out to them to keep these businesses going.”
Mission Valley may have kept well more than 500 local businesses going.
In the first round of PPP loans, Mission Valley gave 361 loans for a total of $71.2 million. In the second round, the bank made 217 loans for a total of $38.9 million.
The program totally has given $800 billion in loans to businesses. Criticism of PPP has focused partly on the charge that banks made billions of dollars from the program.
For processing the loans, the SBA gave banks from 1 percent to 5 percent of the loan proceeds with the lower percentages going to the higher-value loans. Those fees could have added significantly to banks’ revenue.
But the fees were paid out over time, and the bank got only 1 percent interest rate if the loan did not qualify for forgiveness and turned into a regular loan.
Indeed, an analysis published in December by the Federal Reserve Bank of Kansas City said PPP, on the whole, “lowered (banks’) profitability, at least initially.”
What’s more, banks’ profits from the program were held down because of the significant amount of time spent on the loans.
Gurney said for her bank, the fees amounted to about 2.5 percent of the loans.
“Given the amount of work involved, which included handling the forgiveness part, it’s a push as to whether it covers our hard and soft costs,” she said.
Like ‘race horses’
Gurney remembered vividly when PPP began on April 3 of last year. It was early in the pandemic, but many businesses had shut down and something akin to panic was spreading. After all, if a small business could get a forgivable loan, it might be able to survive. If not, it may be doomed.
“They were like race horses at the starting gate, waiting for the gun, and people were trying to get (loan) applications in at 12:01 in the morning, on the day that it went live.”
The first couple of weeks were chaotic. The program was rolled out so quickly that many provisions were unclear. Then when rules were cleared up, they often changed. That meant loan customers had to be notified of the changes and sometimes documents altered. Then the rules sometimes changed again, prompting another round of work.
About 20 of her 71 people directly dealt with PPP loan customers. A good deal of the work involved communication with desperate customers.
“Their blood pressure was off the scale,” Gurney said.
Internally, the bank redeployed people. “We were able to take some branch people off the teller line and put them on to some of the administrative elements of the data collection” and other duties, she said.
It was exhausting. And mentally draining.
Gurney said that during the nearly two-month stretch that the first PPP loan program was active, she worked long days at the office and went home only to work until 10:30 or 11 p.m. She worked weekends as well, as did many of the bank employees.
“Just when you thought that you were going to tear your hair out and that you were exhausted, all it took was talking to a business owner for just a few minutes about what it meant to them. How it helped them stay in business or be able to pay an employee,” Gurney said.
“Then you go home and you think, ‘You know, it was worth it.’”
