Northeast Bank in Maine strikes deal to sell its PPP loans
Northeast Bank in Portland, Maine, has agreed to sell nearly $458 million in Paycheck Protection Program loans.
The $1.2 billion-asset bank said in a press release Friday that the buyer, The Loan Source in New York, has deals in place to buy another $815 million in PPP loans from other lenders. Northeast did not identify the other sellers.
Northeast said it would record a $9.8 million gain in the second quarter. It also agreed to serve as a correspondent bank to facilitate The Loan Source’s pledge of PPP loans to the Federal Reserve Bank of Minneapolis under the central bank's liquidity facility.
Northeast said it expects to generate $2.9 million in revenue over the next two years for the correspondent services and half of the net servicing income.
Those numbers could climb.
The Loan Source “is talking to a lot of banks” about buying their PPP loans, said Rick Wayne, Northeast’s president and chief executive.
For Northeast, the “big driver” behind its decision to sell was the complexity of servicing the loans, Wayne said.
“We looked at eight demos of software platforms for PPP servicing,” Wayne said. “We were thinking, 'How is this going to integrate with our core system? How much resources are we going to have to divert to train people? And can we do it correctly?' It’s very specialized.”
While the Small Business Administration, which is administering the program with the Treasury Department, recently released a simplified forgiveness application, bankers have complained that the agencies have left them in the dark on how detailed the review process will be, as well as how to submit approved applications.
Confusion surrounding forgiveness has driven banker groups to press for automatic, or blanket, forgiveness for small-dollar loans. In all, lenders have made more than 4.7 million loans for $517 billion under the program.
The PPP provides forgivable loans of up to $10 million for businesses with 500 or fewer employees impacted by the coronavirus pandemic.
ACAP SME, a firm created exclusively to service Paycheck Protection loans, will service the loans that The Loan Source buys from other lenders. Efforts to reach an ACAP spokesman were unsuccessful.
Northeast reported having $475.5 million in PPP loans on June 24. The bank plans to sell any other PPP loans it makes to The Loan Source.