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Banks of all sizes rack up more than $1B in PPP loans

At least 50 banks have reported more than $1 billion in Paycheck Protection Program loans, according to an S&P Global Market Intelligence analysis.

Banks are expected to book significant fee income from the program, which offers forgivable loans to help small businesses survive the pandemic. As of May 26, the Small Business Administration, which guarantees the loans, reported lenders had approved $511.3 billion of loans.

Lenders have processed so many loans that analysts project an income boost in the second half of the year, and the billions in loans have skewed industrywide statistics on lending activity. Excluding PPP loans from Federal Reserve data, loan growth would be 8.1% year-to-date instead of the reported figure of 11.6%, wrote Christopher Marinac, an analyst for Janney Montgomery Scott LLC, in a May 22 note.

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The largest banks in the country reported the highest PPP loan totals, while community banks expanded their balance sheets through the program. On May 19, JPMorgan Chase & Co. reported it has funded over $30 billion in PPP loans. Bank of America Corp. reported on May 4 it had approved almost $25 billion in PPP loans.

For large banks, the PPP loans are still a small part of total lending, but smaller banks have approved loans that amount to a significant portion of existing loan books. Wyomissing, Pa.-based, Customers Bancorp Inc., a bank with just over $12 billion in total assets, partnered with New York City-based Ready Capital Corp., among other fintechs to process PPP loans. The bank's $5 billion in PPP lending is nearly 50% of its total lending at the end of the 2020 first quarter.

Even for a bank as large as Salt Lake City-based Zions Bancorp NA which had $71.47 billion in assets at the close of the first quarter, PPP loans represented 14.1% of total loans.

Fees from the loans range from 1% to 5%, depending on size, with several disclosures putting the average fee at roughly 3%. The loans could stay on banks' books for up to two years, but the loans may be forgiven more quickly, allowing banks to recognize fee income this year, wrote Keefe Bruyette & Woods analyst Kelly Motta. "The exact timing is difficult to predict," wrote Motta, projecting earnings volatility in the next two quarters due to the program.

Richmond, Va.-based Atlantic Union Bankshares Corp. had issued $1.7 billion in PPP loans as of May 5, with 90% of them going to Virginia-based businesses, said President and CEO John Asbury during an investor presentation. Like other community banks, Atlantic Union reported market share gains through the program. "What we're demonstrating is the power of dealing with a smaller institution that is more accountable to these local markets," Asbury said on the bank's first-quarter earnings call.

Some banks with exposure to industries hit hard by COVID-19 have reported large balances of PPP loans. Winter Haven, Fla.-based CenterState Bank Corp. issued about $1.1 billion in PPP loans. CenterState reported $1.6 billion in commercial real estate retail exposure for the first quarter of 2020, representing 13.4% of its loan book. Pittsburgh-based F.N.B. Corp. reported $2.4 billion in PPP loans, and had $1.5 billion in investment real estate exposure, or about 6.3% of its loan book.