The loan program is designed to help smaller American businesses survive the coronavirus recession, and was part of Washington’s $2 trillion economic stimulus package.
Smaller banks — those with assets under $250 million — also stand to get a significant windfall.
“It could be enormously profitable for us, maybe the most profitable thing we’ve done,” according to Rick Wayne, president and CEO of Northeast Bank, a community bank with nine branches in Maine that also handles commercial loans nationwide. The bank stands to collect $9.8 million in fees from PPP loans, according to S&P.
Fees range from 1% to 5%, depending on the loan.
While the optics of profiting from the misfortune that is the pandemic recession may look bad, proponents of the program say America’s banks have been a lifeline for businesses during a devastating downturn.
The Covid-19 pandemic forced America’s companies to shutter and lay off millions of workers during the height of the lockdown. As the economy reopens, many businesses still need help to survive the significant decline in revenues.
Unlike during the 2007-2009 financial crisis, banks are in better shape to weather the current storm, the Fed said.