Credit union joins list of lenders selling PPP originations
A Nevada credit union has joined the ranks of lenders that have opted to sell their Paycheck Protection Program loans.
Greater Nevada Credit Union in Carson City has sold “substantially all” of its $556 million PPP portfolio to Fountainhead Commercial Capital in Lake Mary, Fla., Fountainhead CEO Chris Hurn said Monday in an interview. The $1.1 billion-asset Greater Nevada did not disclose sale terms.
The loan sale follows decisions by several community banks to sell their PPP portfolios or outsource the forgiveness process. The $5.3 billion-asset Bryn Mawr Bank in Pennsylvania said on June 29 that it had sold the lion’s share of its $300 million portfolio to The Loan Source, another nonbank small-business lender; the price was not disclosed.
The $1.2 billion-asset Northeast Bank in Portland, Maine, said on June 26 that it had struck a deal with The Loan Source to sell its $458 million portfolio for $9.8 million.
While the $18 billion-asset Atlantic Union Bankshares in Richmond, Va., is not selling its $1.7 billion-asset portfolio, it hired an outside company to handle its forgiveness workload after determining that it could not spare the personnel to do the job in-house.
Recent data from the Small Business Administration shows credit unions issued 196,000 PPP loans, with an average loan size of just under $50,000. Credit unions accounted for 4% of the nearly 5 million in PPP loans on the books through June 30.
Greater Nevada, which was one of the most active credit union PPP lenders, is very active in Department of Agriculture loans. As its USDA business picked up, the credit union feared its staff might struggle to simultaneously navigate the PPP forgiveness process.
“We made a choice from a resource-allocation perspective,” CEO Wally Murray said in an interview.
Forgiveness “is definitely a manpower issue,” Hurn said. “We’re dealing with it ourselves. We’re trying to pivot more people back to our traditional lines of business, as we continue making Paycheck Protection loans.”
Through Tuesday afternoon, Fountainhead had originated 1,976 PPP loans for $288.3 million.
Fountainhead sees profit potential in buying discounted portfolios from sellers frustrated by the complexity and unanswered questions surrounding PPP forgiveness.
Offered to businesses with 500 or fewer employees impacted by the coronavirus pandemic and resulting economic shutdowns, PPP loans can be forgiven by the SBA if proceeds are spent on employee salary and benefits, rent or mortgage interest, utilities and other business expenses.
However, PPP lenders, which are expected to process the applications and make forgiveness decisions, subject to final approval from the SBA, are still waiting for answers on crucial questions, including how closely they will be expected to review the millions of applications they’re expected to receive.
Trade groups representing borrowers and the financial services industry have called repeatedly in recent weeks on the SBA and the Treasury Department, the program's administrators, to implement blanket forgiveness for loans under $150,000. That would cover nearly 90% of PPP borrowers, according to the American Bankers Association and the National Association of Federally-Insured Credit Unions.
“Lenders and borrowers would benefit tremendously from forgiveness,” Hurn said. “For the borrowers, it’s like going through another tax season. I’d like to see [the threshold] increased to $350,000.”
Under a bill introduced on June 30 by a bipartisan group of senators, PPP loans under $150,000 would be automatically forgiven once the borrower submitted a one-page attestation form to the lender.
Fountainhead and The Loan Source are looking to buy more PPP loans. Both are licensed as small-business lending companies by the SBA. Fountainhead has held conversations with more than a dozen potential PPP sellers, Hurn said.
“We’d love to buy from more sellers,” he said. “If they have $25 million or more, then it starts to get interesting.”