Banks adopted new software and strategic outlooks thanks to the Paycheck Protection Program that could offer advantages when competing against bigger lenders.

While most of its loans have already been or likely will be forgiven, the Paycheck Protection Program has transformed community financial institutions, forcing banks to explore new processes and technologies to handle loan volumes while expanding their customer relationships. And its effects are likely to continue for years. 

Even as they compete with big banks, financial technology firms and the financial products of big technology companies, local banks see the PPP as reaffirming their role in communities. 

“As a community bank, we were a little concerned [before the pandemic] that the bigger banks would just eat our lunch because of their automation, but because we were able to adapt, we felt now that we can compete,” said Peter Brown, president and CEO of Dedham Savings Bank. “At the end of the day, when we finally came up for air, we felt really good that there still is that niche for a community bank.” 

Customers Exposed to New Products 

After the PPP resumed in January 2021, Massachusetts small businesses and nonprofit organizations received nearly $6.9 billion in funding, taking 103,507 loans. Combined with loans processed when the PPP ran from April to early August last year, lenders have provided Massachusetts businesses and nonprofit organizations with more than 221,000 loans. 

Dedham Savings Bank staff were surprised at the start of the pandemic by how many of these small business owners were customers of the bank, Brown said. Some had never needed a loan before, so lending teams often did not know about them. The PPP deepened relationships with these customers, Brown added.  

The latest round of PPP brought even more small businesses into the mix. In this round, certain small businesses that received loans in 2020 could get a second loan, but banks also worked with small business owners who did not participate last year. The Institution for Savings in Newburyport processed 271 PPP loans in 2021, and about 20 percent were for first-time PPP borrowers, David Boudreau, the bank’s senior vice president and senior commercial lender, said in an email. 

Needham Bank took a proactive approach in 2021 to reaching more minority- and women-owned businesses, a priority that the U.S. Small Business Administration established in January to address concerns last year with the struggles many businesses, especially in underserved communities, had with accessing the PPP.  

Joe Campanelli, Needham Bank’s president and CEO, said the bank worked with accountants and organizations that provided referrals to small businesses, and Needham Bank ended up with 28 percent of its 2021 PPP loans going to minority- and women-owned small businesses.   

“It really showed that we were effective in trying to make sure that everybody had equal access, and it’s important,” Campanelli said. “If you really want to walk the talk of making our communities more vibrant, the core of it is the small business owners.” 

Needham Bank has joined Lender Match, the SBA’s referral network, so that it can continue to reach more small businesses by helping them access the SBA’s traditional products. With small businesses dealing with both the financial challenges and emotional burdens of the pandemic, Campanelli said, small businesses will need the kind of help community banks can provide. 

“It’s an opportunity to really walk the talk when it comes to being high-tech and high-touch,” Campanelli said. “We all talk about it, but to really execute on it based on today’s world of technology, compliance, cybersecurity – all those things – you have to be all in on it.” 

Experience Drives Improvements 

Before the pandemic, North Easton Savings Bank was not an active SBA preferred lender. Along with reestablishing its status, the bank had to learn the SBA’s lending system and started off by processing PPP applications manually, President and CEO Rich Spencer said.  

The bank worked to streamline the process and eventually began using a third-party lending platform from Lenders Cooperative during the latter stages of the 2020 round and in 2021, Spencer said. He added that North Easton Savings Bank plans to expand its use of the platform going forward, including for traditional SBA lending.  

“It comes down to the roots of the organization,” Spencer said. “The local community banks providing small local loans is really what we should be doing, so it’s something that’s a major initiative of ours as we move forward.” 

North Easton Savings Bank hopes to continue making back-office work more efficient and automate more internal processes. Having gone through the PPP, which also required collaborations across the bank, the bank’s staff members understand the importance of change, Spencer said.   

“We’re in an environment where technology is going to continue to change, and we need to be open to that mindset,” he said. “I feel that the folks here have done a great job of adopting that mindset and the ability to utilize things and understand that things may not be the same as they were yesterday, but we can figure out how to make it work and move forward.” 

Forgiveness Showcases Lenders’ Value 

While the lending program has ended, banks are still working on the forgiveness portion of last year’s loans. Institution for Savings and Needham Bank said they have processed forgiveness applications for 95 percent of the 2020 loans, with the vast majority fully forgiven, IFS said. 

Diane McLaughlin

Still, that leaves some borrowers still needing to go through the process before loans need to start being repaid. Some customers are dealing with backlogs at their accountants, Spencer said, but are aware of the need for forgiveness.  

For those borrowers who have not yet been in touch about forgiveness, Dedham Savings Bank has put together a team to contact these borrowers. While the process is manual, Brown said it’s the type of initiative that a community bank can take to help customers.  

“There is just a certain level of handholding and customer service that we can provide at a completely different level,” Brown said. “This isn’t a knock on the big banks…but it made us feel good that there still is a need for banks like ours out there.”