Lessons from PPP: Which Lenders Came Out on Top?


The Paycheck Protection Program (PPP), with its mission to keep small businesses open and recovering through 2020 and into 2021, closed May 31, 2021.

Of the banks that issued PPP loans, whose portfolios performed best?

Following up on our February PPP post, with the program now complete, we compared portfolio performance to find out.

The analysis

We combined publicly available SBA data on PPP recipients, loan amounts and lenders with our Merchant Transaction Signals to examine the performance of more than two million businesses in our database that received PPP loans from the 50 lenders with the highest volumes of loans.

Though several alternative lenders, like Harvest Small Business Finance LLC and Prestamos CDFI, ranked high for loan volume, we focused our analysis on banks.

We compared percentages of banks’ PPP loan recipients with positive revenue growth in 2020 and the first half of 2021. Here’s what we found.

Top community banks outperformed top national banks

Top community banks’ portfolios had a higher share of businesses with positive revenue growth in 2021 than top national banks, with a difference of 11.67 percentage points between top performers in each category.

Chart 2

Performance of community banks with the strongest portfolios ranged from 67.14% on the low end (The Citizens National Bank of Meridian) to a high of 73.68% (Thomasville National Bank).

PPP Performance of Participating Top National Banks

Comparatively, the percentage of portfolios with positive revenue growth at the top national banks ranged from 56.20% (Capital One) to 62.01% (PNC).

This finding makes sense. Community lenders were a linchpin of the small business economy before the pandemic and accustomed to serving the needs of this diverse segment. According to the FDIC, at the end of 2019, community banks held about 25 percent of small business loans – though they held 15 percent of total banking industry loans overall.

The second phase of PPP also gave a head start to community banks, with the goal of reaching more underserved small businesses.

Agricultural banks had strong showing

Of the ten banks with the healthiest portfolios based on 2020 growth, six were agricultural banks.

The top performer of agricultural banks here, Compeer Financial, ACA, saw growing revenue rates across 74.26% of its portfolio.

H1 2020 Performance of PPP Recipients, Grouped by Lender
2021 Performance of PPP Recipients, Grouped by Lender

As with community banks, farm banks’ community roots and longevity – median operating age is 111 years – may be part of their secret sauce here. And according to a 2020 report from American Bankers Association, farm banks showed strong asset class quality and capital levels by focusing on lending locally and knowing their customers’ businesses.

No correlation between volume of loans distributed and portfolio performance

Looking across banks, we plotted the percentage of a bank’s loan recipients that had positive revenue growth rates and the total sum of loans that bank deployed.

We found little to no correlation between the total loans disbursed and portfolio performance.

Though it’s worth noting that the outlier top performers had fewer total loan sums, in general lenders didn’t have to sacrifice quality for quantity. This was surprising: conventional wisdom says that more stringent lending criteria are correlated with both smaller loan volumes and higher performance.

Our findings on PPP portfolio performance demonstrate the importance of community and local banks to small business vitality. Media coverage about uptake of PPP lending scams through new alternative lenders highlights the level to which this segment is still underserved.

As for banks, the Paycheck Protection Program brought a wave of new customer relationships. Now the question for many of those banks is, how will we broaden and deepen those relationships?

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We combined publicly available SBA data on PPP recipients, loan amounts and lenders with our Merchant Transaction Signals to examine the performance of more than two million businesses in our database that received PPP loans. We looked at monthly card revenues at each business from January 2019 through June 2021.

We then grouped these businesses by PPP lender. We focused our analysis on the 50 lenders with the highest volumes of loans, as well as the most prominent national and community banks (based on assets under management).

We calculated the percentage of each lenders’ PPP loan recipients who saw card revenue rates grow year-over-year in 2020 and in the first half of 2021. We examined both 2020 and 2021 performance in order to understand 1) how businesses survived the height of the Covid-19 pandemic and 2) how businesses recovered as the economy reopened in 2021.

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