Loan Closings in COVID-19

Amidst all banks, Savoy Bank stands out – bankers are buzzing with activity – with forbearing and extending existing loans to underwriting and processing loans under the Paycheck Protection Program (PPP), there is not much time left for processing new commercial real estate loans – not at Savoy Bank, a nearly $400 million community bank out of Rockefeller Center in Midtown NYC. “Many banks, if they take new business at all, take 90 days to close loans, Savoy finds time to underwrite new loan submissions, approve and close loans in less than half that time,” says Michael Kennedy, a real estate attorney representing Savoy Bank who recently closed a bridge loan in Harlem procured by Equicap.

Underscoring the need for efficient lenders is the $350 billion PPP, the centerpiece of the government’s efforts to stem the economic damage from the COVID-19 pandemic and bolster small businesses to weather the economic crisis.

Banks under $10 billion in assets approved about 60% of loans in the first round of the PPP according to the Treasury Department and Small Business Administration. An additional $320 billion were earmarked in the second round, during which large banks made up for lost ground.

After years of watching big banks scoop up deposits using their growing branch networks and digital apps, the coronavirus has given small community banks a chance to prove their worth and demonstrate the value of their ties to local businesses.

While large banks were putting off customers for days until they had online portals up and running, or were only giving the time of day to their most valued clients, banks under $1 billion in assets, constituting approximately 6% of all U.S. banking assets, approved nearly 20% of loan dollars while working out of home offices and lightly staffed branches to process applications immediately. Mac Wilcox, President and CEO of Savoy Bank, is proud of their ability to execute, “We provide amazing customer service that starts with returning phone calls and emails, and that approach was a huge advantage in working with our PPP clientele, many of whom came to us out of desperation when they couldn’t get answers from their long-time, larger banks.”

Many banks, particularly large regional and money center banks, had to decide to take applications from either existing customers or cast a wider net to non-customers. To avoid potentially being fined later by regulators, lenders had to collect sufficient information from first-time applications to manage compliance risk. Where large banks saw risk, small banks saw a chance to prospect new accounts.

With interest rates on the loans at 1%, the program won’t be a sustained moneymaker for small banks but it will strengthen ties within their communities and reconnect them with their customers. Magda Souffront, VP and Bank Market Manager, elaborated, “The strengths of our product and customer service capabilities were magnified by the urgency of and demand for PPP, but the reality is that’s the value we deliver to our clients, whether we’re in a crisis or just business as usual.”