Michigan’s small and medium banks have played an outsized role in lending to struggling small businesses during the coronavirus crisis.
Michigan banks paid out $4.6 billion in potentially forgivable loans under the federal Paycheck Protection Program for Struggling Small Businesses in the first two weeks of April, data analysis shows of the Community Bankers of Michigan trade association, based in East Lansing.
Between April 3 and April 15, the first two weeks of the $349 billion program to ease the economic pain of the COVID-19 pandemic, Michigan businesses received 43,438 loans totaling nearly $10.4 billion. dollars, according to data from the US Small Business Administration.
Of that amount, Michigan-based banks allocated between $4.6 billion and $4.7 billion in PPP loans, according to data from Community Bankers. The primary SBA number takes into account all banks, credit unions, fintech companies that might lend, and other types of lenders.
The figures, which the trade group says include all but two of Michigan’s banks, represent 45% of dollars lent in the state. Meanwhile, Michigan-based banks, which include community banks and some large banks with regional footprints such as Detroit-based TCF Financial Corp. and Flagstar Bancorp. Inc., based in Troy, accounted for 49% of the total number of loans made in Michigan. businesses.
The average loan size for all Michigan loans was $239,000 and the average for Michigan banks was $218,000.
At the end of 2019, banks operating in Michigan held assets of about $181 billion, according to figures from the US Federal Deposit Insurance Corp.
Data compiled by Crain’s shows that of Michigan’s 25 largest banks by deposits, 10 are headquartered outside the state and account for approximately $157.4 billion in total deposits. That means Michigan banks, with about $24 billion in combined deposits, accounted for almost half of PPP lending in the state.
“Michigan banks have done a great job,” said Michael Tierney, president and CEO of the Community Bankers Association, who pointed to the long hours required for the often manual labor banks had to perform at the start of the program. “Banks worked late at night and on weekends.”
To that end, data released Wednesday night by the SBA confirms the role small lenders have played in the PPP.
The second tranche of funding – $310 billion – began Monday morning. As of Wednesday evening, 960,000 loans had been approved for a total of nearly $90 billion from 5,300 lenders, according to the SBA.
Of this total, about 61% of approved loans came from lenders with total assets of less than $10 billion. If we include medium-sized lenders between $10 billion and $50 billion, 82% of PPP loans were made by a small or medium lender. Those lenders had also processed about 70% of the $90 billion total, according to SBA figures.
The average PPP loan is under $95,000, according to SBA regional administrator Rob Scott, who oversees the Great Lakes region.
“Small businesses are creating two out of three net new jobs, and PPP is helping those here in the Great Lakes region keep their employees on the payroll,” Scott said in a statement. “This allows hard-working Americans to keep their jobs and small businesses vital to our local communities and national economy to position themselves to reopen as soon as they can.”
Earlier Wednesday, the SBA blocked access to its portal for all lenders over $1 billion for eight hours, in an effort to make loans available to smaller businesses and lenders.
Tierney notes that small business loans require, to some extent, a personal touch, which sources said smaller banks are better able to provide.
“The (first-round) banks really had to focus on the customers and prospects they knew,” he said. “They still had to meet all the bank secrecy requirements, which require them to know all the owners of any business they’re going to give a loan to. It’s a lot of groundwork and they didn’t have a lot of time. and they had so many customers that made them do it.”
Echoing this, Tim Marshall, President and CEO of Ann Arbor-based Arbor Bancorp Inc., said “the power of community banking has really come through throughout this program.”
The senior Bank of Ann Arbor executive praised the local banking institution’s “ability to be nimble and responsive” in the program’s two rounds of funding.
Marshall, whose bank was among those unable to access the portal during the eight-hour period, said he believed most of his customers had been served by this point.
“We are still seeing demand, but at a much lower frequency,” he said. “When (PPP) was unveiled, we were just shaken, as most were.”
Although data on PPP loans from individual banks has yet to be released, some institutions have. TCF, for example, said in its press release this week that as of April 23, it had lent $1.2 billion under the program.
Bank of Ann Arbor’s Marshall said he expects his bank to reach about $273 million in total loans. In a sign that the bank was able to implement processes to process loans more efficiently, Marshall said that in the two weeks of the first round, the bank approved 583 loans and that in the first two days of the second round, the bank had approved more than 700 .
Although the program is seen as a unique and much-needed lifeline at a time when the economy has come to a standstill due to the spread of the deadly coronavirus, it has also been marred by controversy.
During the first application period in early April, several large banks struggled to set up loan processing systems. The most notable of these, at least in southeast Michigan, is Dallas-based Comerica Inc., Michigan’s second-largest financial institution by total deposits.
Earlier this week, a spokesperson for the bank’s Michigan operations said Comerica is accepting PPP applications through its online portal and has received more than 15,000 applications across its five states. Spokesman Matthew Barnhart declined to comment further on the number of loans approved and the amount disbursed to customers.
JPMorgan Chase & Co., the state’s and nation’s largest bank, said Friday that in Michigan it lent to 9,3000 businesses with an average loan amount of $151,000. The New York-based bank’s PPP loans in the state total $1.4 billion, according to figures from the institution.
While acknowledging the program’s ongoing challenges, Tierney of the Community Bankers Association is also quick to note the sheer reach of PPP and the fact that it has gone from inception to real politics and a lifeline for companies that sink in just a few weeks.
“When you think about what was done, you had a year or 15 months loan that was done in less than two weeks,” Tierney said. “It was an incredible feat for government and business to try to do this.”