PPP Helps Businesses and Credit Unions

The Paycheck Protection Program is fading into history, but its effects on credit unions will continue both from experiences gained and impacts on their books that are still playing out.

The U.S. Small Business Administration administered the program, which was designed to help small businesses survive the shutdowns and curtailments caused by the COVID-19 pandemic. The loans were designed to be forgiven if borrowers met the requirements for using the funds primarily to support payroll.

The PPP’s first iterations ran from April to August 2020. It was revived in December and continued taking applications until the end of May, if they were coming from Community Development Financial Institutions (CDFIs).

A CU Times analysis of loan-level data from the SBA through May 10 showed only 965 of the nation’s 5,175 credit unions participated, with many relatively small credit unions taking inordinately large roles in the program. It also showed credit unions generated $15.1 billion from 361,980 PPP loans to help support 199,598 jobs.

And the participating credit unions stand to collect more than $614 million in processing fees paid by the SBA as the loans are forgiven.

The mix of credit union sizes can be seen among the 15 with the largest amounts of PPP loans for 2020 and 2021 through May 10. They included four with assets of less than $2 billion as of March 31:

• Greater Nevada Credit Union of Carson City, Nev. ($1.5 billion in assets, 79,463 members), which originated $737.7 million in PPP loans to support 73,474 jobs.
• Self-Help Federal Credit Union of Durham, N.C. ($1.7 billion in assets, 97,314 members), which originated $243.6 million in PPP loans to support 26,172 jobs.
• Notre Dame Federal Credit Union of Notre Dame, Ind. ($887.7 million in assets, 59,820 members), which originated $234.7 million in PPP loans to support 25,295 jobs.
• Vibrant Credit Union of Moline, Ill. ($1 billion in assets, 50,571 members), which originated $200.8 million in PPP loans to support 21,662 jobs.

(See how the top 15 credit union PPP originators stacked up against one another, and how all credit union PPP originators performed by region, in this infographic that appeared in the June 16, 2021 print issue of CU Times.)

Greater Nevada Credit Union led in 2020 with $348 million in loans and is running at No. 2 for 2021 loans at $149.6 million supporting 14,459 jobs. In the lead this year is Mountain America Federal Credit Union of Salt Lake City ($12.9 billion in assets, 977,090 members), which had originated $158.7 million supporting 20,265 jobs.

Jeremy Gilpin, EVP for Greater Commercial Lending, a CUSO of Greater Nevada, said he expected the final number for 2021 to come in at about 3,300 loans for close to $160 million. Like most lenders, its average loan size was smaller this year.

Overall, the average PPP loan through a credit union was $47,385 last year and $34,036 this year. For all lenders, the average was $101,554 last year and $43,975 this year.

The 2020 rounds from credit unions supported about 1.3 million jobs, or about six jobs per loan. The second round supported 670,171 jobs, or about four jobs per loan.

“More of the underserved were able to take advantage of this round,” Gilpin said. “This provided a lot of relief for the small business owner.”

Gilpin said the PPP lending helped deepen relationships with existing business borrowers and attracted new ones. “We broadened our membership base.”

One reason for the smaller averages was that the maximum loan for 2021 was $2 million, down from a $10 million maximum last year.

Credit unions made four loans at the $10 million maximum for the 2020 round. One was from KeyPoint Credit Union in Santa Clara, Calif. ($1.6 billion in assets, 59,781 members) to support 500 jobs at Catalyst Family Inc., a non-profit based in Santa Clara County with more than 150 childcare centers throughout California, serving over 20,000 children.

Credit unions made six loans for less than $100. The smallest was $70 from America First Federal Credit Union in Riverdale, Utah ($15.7 billion in assets, 1.2 million members) to support one job for a recipient in Long Beach, Calif.

Credit unions accounted for just under 2% of the total $778.6 billion in PPP loans the SBA approved from April 2020 to May 10, 2021. They also accounted for 2% of the $37.3 billion approved, but not yet disbursed by May 10.

PPP loans’ impact on credit unions showed up both on the balance sheet and income statement.

PPP loans represented just under 3% of total originations for the 12 months ending March 31.

They reprinted 2.8% of the $532.6 billion in total originations from April through December 2020, and the amount of PPP loans approved Jan. 1 through May 10 represented 2.9% of the first quarter’s $181.4 billion in total originations.

After the PPP began in April 2020, the NCUA told credit unions to record those forgivable loans under their Call Report’s balance sheet line for “All Other Unsecured Loans.”

As of March 31, 851 credit unions held 200,841 PPP loans on their balance sheets worth $8.5 billion. These credit unions account for more than half the assets and members of the nation’s credit unions.

Including PPP loans, the unsecured loan category for these 851 credit unions was $31.1 billion as of March 31, up 31% from a year earlier. Excluding PPP, their unsecured loans fell 4.8% to $22.6 billion.

For the 4,324 credit unions with no PPP loans on their books as of March 31, other unsecured loans fell 2.1% to $22 billion.

Combining all 5,175 credit unions, the unsecured loan category including PPP loans rose 14.9% to $53.2 billion by March 31. Excluding PPP, unsecured loans fell 3.5% to $44.6 billion.

Credit unions will also continue to collect processing fees as PPP loans are forgiven, a process lenders said might be completed soon for 2020 loans, but might take until this fall for the 2021 crop.

Fees are generally 5% of the amount granted for loans up to $350,000, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. Credit unions stand to generate $389 million in fees from 2020 PPP loans, and at least $227 million in fees from 2021 loans.

The 2021 amount is likely to be larger because the SBA has until the end of June to approve some applications submitted as late as May 31 by CDFIs.

Also, the new program raised fees for loans under $50,000 in a response to complaints that the 5% fees did not cover costs for the smallest loans. The changes allowed loans below $5,000 to receive a 50% fee, and those from $5,000 to $50,000 to receive a flat $2,500 fee.