Independent Banker - September 2020 - 63

out the window. We did close to
$80 million in the program loans,
which was 15% of our loan portfolio
pre-PPP. This obviously ballooned
our balance sheet as our asset size
increased. This negatively aff ects a
lot of asset-based ratios, so I have
tried to report to our board with and
without the program. It also has our
loan yield down considerably, causing
a negative drag on our net interest
margin. The benefi t is the associated
fees, which we hope will help us
off set future credit losses associated
with COVID-19, loan modifi cations
and customers hardest hit by the
economic lockdowns.
∠ Oldenberg: The amount of loans
we have provided has increased our
assets by approximately 10% and
required a signifi cant amount of time
from our loan department, which
has diverted their time from other
lending functions. To date, we have
recognized a signifi cant receivable and
started to recognize income, through
deferred expenses as part of our ASC
310-20 accounting.
∠ Standard: For us, the biggest
impact so far has been on liquidity.
We used a FHLB [Federal Home Loan
Bank] advance for six months to fund
75% of the PPP loans extended by
the bank. The next primary impact
will be how quickly and smoothly
the forgiveness process works and
to what extent our borrowers must
provide documentation.
Q: What else has PPP meant for
the bank?
∠ Joye Hunt: I have a diff erent
perspective on this, because we are
a small rural, agriculture-based
community bank in central Kentucky.
Less than a handful of customers
inquired about the PPP. Due to our
small size and the uncertainty of the
PPP, the decision was made to help
those customers obtain PPP loans
" I THINK A CFO
NEEDS TO PLAN
CONSERVATIVELY
FOR REDUCED
RETURNS AND
HOPE THAT YOU
CAN OUTPERFORM
THEM IN TIME
AND WHEN
CONDITIONS ARE
BETTER KNOWN. "
-JON DRAKE, PEOPLES BANK
from a larger regional bank, and that
worked well for everyone. PPP has
had very little eff ect on our bank.
∠ Denise Rautzhan: We opted to
work with a third-party vendor,
Kabbage, Inc., to handle the PPP
loan applications, processing and
funding, since our bank was not
an SBA-approved [Small Business
Administration] lender at the time.
Doing this in-house would have
placed a heavy operational burden on
the lending and loan operation staff s,
who were already stretched thinly
from the eff ects of the high volumes
of deferred loan payments and
loan modifi cations.
∠ Steven Zeman: For us, it has
created many extra hours in training,
webinars and consulting in order to
roll out the program properly. We
continue to spend a tremendous
amount of time understanding
the changes as PPP is still being
developed. We have had to set aside
some projects to accommodate this.
∠ Hofer: I think the major impact,
besides a tremendous number of
overtime hours, has been that our
customers are seeing the true value of
their relationship with a community
bank. We originated many PPP loans
for customers, many of whom only had
a deposit relationship with us or were
noncustomers. The PPP has enhanced
our reputation in the communities that
we serve. That will hopefully continue
to serve us well in the future.
∠ Brett Mills: We've also had the
opportunity to help new customers,
about 200 of them. Additionally, it has
given us an opportunity to work as a
team during a very challenging time,
with limited lobby access, and support
our local communities.
Q: What role has the PPP
played in your bank's deposit
gathering activities?
∠ Mills: We required our PPP
independentbanker.org Q 53
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Independent Banker - September 2020

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