The Paycheck Protection Program, created by Congress earlier this year to keep small businesses afloat and avert mass layoffs during the coronavirus pandemic, has also created a revenue windfall for the nation's banks.
More than 30 banks across the country, including dozens of community lenders, could earn as much from fees paid out by the federal government for processing PPP loans as they reported in net revenue for all of 2019, according to a study published Tuesday by S&P Global Market Intelligence.
The $670 billion relief program, part of the massive $2.2 trillion CARES Act, launched at the beginning of April. At the onset, the program was heavily criticized for granting aid to publicly traded companies that had other avenues for relief -- even as small businesses languished.
But the SBA and Treasury Department, which jointly administer the program, scrambled to close the loopholes that allowed multimillion-dollar companies to tap the fund, including pledging to audit any loan worth more than $2 million. The fund has come under renewed scrutiny in recent days after the Trump administration revealed that millions went to companies backed by billionaires.
The government has since issued $521 billion in loans, with an average loan size of $107,000. Combined, the aid program supported about 51 million jobs, or roughly 84 percent of all employees working at small businesses, the SBA said on Monday.
JPMorgan Chase, the country's largest bank, issued the most PPP loans of any lender, processing $28.8 billion in aid as of June 20, according to S&P. That could yield the bank $863.9 million in fees. Bank of America, Truist Financial, PNC Financial Services and Wells Fargo were the other top lenders.
The PPP fee ranges from 1 percent to 5 percent, depending on the loan size. Analysts at Keefe Bruyette & Woods have reported a median fee of 3 percent across 200 banks.
Smaller banks, or those with less than $250 million in assets, also stand to reap millions from processing the loans.
"It could be enormously profitable for us, maybe the most profitable thing we've done," said Rick Wayne, president and CEO of Northeast Bank, a community bank with 10 branches in New Hampshire and Maine. The bank stands to collect as much $9.8 million in fees from PPP loans, according to S&P.
Still, the banks cannot count the fees as revenue immediately; they have to wait for the loan to either be forgiven or paid back by the company, which could take years. Some banks said they were unsure whether the extra fees would compensate for the extra hours worked and potential legal or reputational risk attached to the PPP loans (Chase Bank, Wells Fargo, Bank of America and U.S. Bank were all hit with a series of lawsuits earlier this year over their handling of the loans).
"I'll have to answer that question in 24 months," said Stephen Carmack, chairman and CEO of Legacy Bank, an Oklahoma-based bank that could earn nearly $9 million in fees. "Our smallest PPP loan is $100 ... We probably won't be adequately compensated on that one."