Intangible Assets Remain After PPP Is Gone

The Paycheck Protection Program was created for the peculiar economic conditions of a pandemic. Hopefully, the forgivable loans will never be needed again.

But despite the one-off nature of the program, interviews with credit unions indicated that the PPP loan program was one of the tests of institutional capacity among credit unions presented by the pandemic. Some chose to aggressively meet the call by redeploying workers, standing up new systems and working with government agencies trying to do the same.

“During that time, many other financial institutions were not returning phone calls. There was a great deal of panic in the business community,” Notre Dame Federal Credit Union President/CEO Tom Gryp said. “We felt it was our obligation to mobilize quickly and be there for people when they needed it. It made a world of difference. That’s why we’re here.”

What was more surprising was that Notre Dame FCU, based in Notre Dame, Ind. ($887.7 million in assets, 59,820 members), wound up being the fifth-largest credit union originator of PPP loans despite ranking 441st among the nation’s 5,175 credit unions in assets. It generated 1,729 PPP loans worth $234.7 million, supporting 25,295 jobs in 29 states.

Self-Help Federal Credit Union, ranking 245th among credit unions by assets, was the third-largest PPP originator. It generated 2,616 PPP loans worth $243.6 million, supporting 26,172 jobs in 27 states and Washington, D.C. Half of them were for $20,833 or less, helping business owners from Mary Armentrout, a choreographer, performance artist and videographer in Oakland, Calif., to Rosa Daniels and her daughter Dana Myers, who own the Main Street Bakery & Gift Shop in Columbia, S.C.

Self-Help of Durham, N.C. ($1.7 billion in assets, 97,314 members) felt the same urgency, especially since its mission has included helping the smallest businesses and minority-owned businesses.

Tracy Ward, director of the SBA 504 Loan Program of the Self-Help Ventures Fund, a sister agency to Self-Help, said managers looked at the program in detail because it seemed that it might provide substantial help to many of the very small businesses that Self-Help organizations serve. Then it decided to create a program to reach members and non-members, take their applications and move them through the SBA process.

The loans were originated by Self-Help, but it pulled together 150 people across its sister organizations, which also include Self-Help Credit Union of Durham, N.C. ($1.6 billion in assets, 89,249 members) and the Self-Help Ventures Fund.

“We decided to go all in,” Ward said. “A lot of really small borrowers were having trouble accessing the program,” she said.

Branches worked with other non-profits in their communities to help find people who might benefit.

After the loans are forgiven and disappear from its books, Self-Help will have new intangible assets:

• More members – and deeper relationships with many of its existing members;
• New non-profit allies in its communities and a deeper level of trust with existing ones;
• Management that has tested their ability to conceive and create systems they never thought their members might need;
• A staff that has tested their ability to respond to strange and strenuous challenges; and
• Greater visibility in its communities.

Ward credited the SBA for building a program on the fly that, despite initial flaws, delivered cash quickly. SBA data through May 31 showed it handled 5.1 million PPP loans worth $522.1 billion last year and 6.7 million loans worth $277.7 billion this year.

“It was incredible they got so much money out so fast. It made a huge difference to members,” she said.

Notre Dame FCU gave credit to the NCUA for helping to reach people quickly. The credit union decided that it would try to serve people outside its Select Employer Groups (SEGs). That meant it had to rely on speedy approval of new applicants first by its board and then by the NCUA.

Getting approval from both the board and NCUA usually takes about four to six weeks. During the pandemic it took about one week for PPP loans.

“It was an interesting exercise,” Gryp said. “It was an exercise in our members believing in us, and our partners having trust to know the management and board was mobilizing quickly to really do some good.”

Also, Notre Dame FCU did not require PPP borrowers to move their checking accounts to the credit union. Gryp said it wouldn’t have been right to force further traumatic changes on new members in a time of crisis.

Nevertheless, he said many have chosen to move their operating accounts to the credit union anyway. “We became their primary checking accounts.”

Notre Dame FCU’s ability to respond aggressively was enhanced greatly by two prior events.

First, it had established a commercial lending department in 2015 and had been slowly building it. By March 2020 it had about 10 employees and a $41.5 million book of loans. This group provided a core around which it redeployed about 70 employees to stand up its PPP program.

Second, the ability of its employees to handle the flood of applications was due to the credit union’s adoption a few years earlier of technology to accept electronic signatures on documents and process loan applications electronically.

“We were prepared,” Gryp said. “We were very fortunate to be able to help as many people as we did. We all felt an incredible satisfaction.”

(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.)