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SBA PPP Update: Direct Forgiveness Processing, Forms, and Forgiveness Data

SBA released a Lenders Line notice yesterday to include information regarding PPP forgiveness, forms, and program data. In the release, SBA stated that it remains on schedule to begin taking Direct Forgiveness as of Tuesday, Aug 4. The pilot process reportedly went well with positive feedback from both participating lenders and borrowers. Participating lenders should have received a welcome package that includes sample messaging that may be used to welcome borrowers. SBA also encourages lenders to notify their borrowers of the Direct Forgiveness platform launch and the associated live customer service. SBA is to furnish frequent updates of the status of the program, lessons learned, and enhancements. SBA has already added several features to make it easier for borrowers to find their SBA Number and engage in the Direct Forgiveness process. SBA is to hold weekly direct borrower training.    

SBA also released new PPP Forgiveness Applications which have an effective date of July 31, and form expiration date of Jan 2022. WBA and FIPCO are in the process of making the newest version of the forms fillable. The forgiveness forms may be viewed at:

3508 Standard PPP Forgiveness Application

3508EZ Streamlined PPP Forgiveness Application for certain loans > $150,000

3508S Simplified PPP Forgiveness Application for loan < $150,000

3508D Borrower’s Disclosure of Certain Controlling Interests

SBA also released the latest PPP Forgiveness Platform Lender Submission Metric Report, effective Jul 30.

By, Cassie Krause

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Amid Recovering Economy, Wisconsin Bankers Wrestle with Excess Liquidity

Awash with deposits that have surged amid a pandemic-rocked economy and billions of dollars in federal aid, Wisconsin banks are trying to make the most of the excess liquidity. 

At the end of 2020, deposits at banks based in Wisconsin were up 15% from the year before, driven largely by federal covid relief aid to businesses and consumers, credit paydowns, and a reduction in consumer and corporate spending. 

The U.S. personal saving rate, which stood at 7.6% at the beginning of 2020, was 13.6% in February of this year. Now, with federal COVID relief of $2.3 billion headed to Wisconsin’s local governments over the next two years as part of the $1.9 trillion American Rescue Plan, deposits are expected to swell further. 

“Anecdotally, our members have told us they are swimming in liquidity,” said Ashish Tripathy, portfolio manager at the Federal Home Loan Bank of Chicago. 

Bankers in Wisconsin are strategizing to deal with the glut of deposits. The approaches are limited, and the excess liquidity can be especially problematic for small banks that are reliant on net interest margin and don’t have units such as insurance or wealth management to generate other fee income. 

“When spreads narrow, narrow, narrow down and money is really cheap and deposits aren’t worth anything, that’s when it’s tougher,” said Jim Popp, president and chief executive officer of Johnson Financial Group in Racine. 

Popp noted that about 40% of Johnson’s Financial’s income comes from fees, which is helping the company deal with the liquidity surge. 

“The banks that have complimentary fee-based business — that don’t rely so heavily or solely on net interest margin — are those that I think are managing,” Popp said. 

Some banks are buying securities to cope with the deposit growth, while some are repaying Federal Home Loan Bank advances or other debt borrowings. Some are trimming low deposit rates a bit more. All are looking for good loans to absorb some of the deposits that are piling up. 

Tripathy said bankers have to ask themselves: “Should I just keep this liquidity at the Fed and make just 10 basis points while waiting for loan demand to come back?” 

Tripathy also noted that bankers may choose to buy securities in the hope of getting a better rate. They can select between short-term securities with a skimpy return or long-term ones with a higher yield. Some choose both to keep balance while being prepared for a return to a better lending environment. 

Some banks are finding growth in several categories of loans, such as multifamily lending and mortgages. 

“Many are just sitting on liquidity, too, so it’s a mixed bag,” Tripathy said. 

Mike Molepske, CEO of Bank First in Manitowoc, said his bank currently is “sitting on $250 million in excess funds.” 

“And we have another $250 million of PPP (Payroll Protection Program loans) yet to get forgiven. On top of that, we just had the next round of stimulus checks going out, which is adding more liquidity,” he said. 

Molepske said much of the $2.3 billion in COVID relief money coming to local governments in the state will end up in banks until it’s utilized. 

Bank First has opted to pay off Federal Home Loan Bank borrowing as one way to cope with the excess liquidity. 

“It’s been a good opportunity for banks that have relied on wholesale funding – brokered deposits and such – it’s been a great opportunity to deleverage themselves from those other forms of wholesale funding,” Molepske said. 

His bank has experienced growth in business lending, which helps, Molepske. But it’s not enough yet to put much of a dent in deposit growth. 

“We are seeing good business loan growth, albeit it’s not going to be anywhere close to burn what we have in excess funds,” he said. 

Molepske said it’s important for banks, in a period of excess liquidity, not to make loans they wouldn’t normally make. 

“One thing the industry should really avoid doing is knee-jerk reactions. I call it ‘avoid stupid,’” Molepske said. “It’s OK to have a little extra money. It’ll be there tomorrow, it’ll be there a year from now, six months from now. The industry’s not in a rush to deploy all the liquidity. You need to be prudent about it.” 

Tripathy said it’s logical that banks will reduce deposit interest rates at a time like this. 

“You’ve got to look at your deposits, segment them, and pay only the good relationships the higher money, but reduce the interest rates to almost zero for everything else,” Tripathy said. 

Even that can be tricky, though, in a competitive market. 

“You don’t want to cut your spreads so low that you drive your customers someplace else, because eventually it’s going to normalize,” said Johnson Bank’s Popp. “You kind of have to grind through it and keep your customers through the process.” 

Kelly Brown said her Pewaukee-based firm, American Deposit Management, has been working on the excess liquidity issue. Banks in places where the economy is open and taking off, like Florida and Texas, can use deposits that are sitting in banks in states with long lockdowns, like New York and California. ADM connects banks that need deposits with banks that have too much. 

“By doing that, in 2020, we had the best year this company’s ever had,” Brown said. “It’s been unbelievably busy here.” 

Tripathy pointed out that the Federal Home Loan Bank of Chicago’s advance borrowing rates have come down “very close to Treasuries,” and that the agency pays a dividend. 

Although the excess liquidity situation would lessen if the economy takes off in a way that dramatically increases lending, no one knows how fast the economy will grow. 

“I really do think the economy is poised for some pretty strong growth this year, and that’s positive for this situation. The question is how quickly can we reopen the entire economy and get people spending all that money they’ve been saving up,” said James Hotchkiss, vice president and director of Member Strategy and Solutions for the Federal Home Loan Bank of Chicago. 

Large-scale vacationing and travel, for instance, would be an important boost to the economy. 

“Loan demand is still struggling right now,” Hotchkiss said. “It’s better at small banks than it is at larger banks, but if loans pick up at the same time deposit inflows slow down, banks could see a quicker normalization of their balance sheet. But it’s really how quickly that spending happens.” 

With so much money accumulating in bank deposits, and with another $2.3 billion on the way to Wisconsin’s local governments, legislation to protect public funds in the event of a bank failure is being drafted in the Wisconsin legislature. The bill would increase to $1 million – from the current $400,000 – the amount of compensation available from the Wisconsin Department of Financial Institutions for losses suffered by a state or local government if their money was on deposit at a financial institution that fails. 

The Department of Financial Institution said it couldn’t comment on the bill because it’s still only in draft form. 

Whether inflation is eventually coming because there’s so much money in the economy – or whether this time is different – is anyone’s guess. 

Popp said he believes Federal Reserve Chairman Jerome Powell doesn’t want to do anything that upsets the recovery. 

“I think it’s kind of how we’re viewing it, too,” said Popp. “We haven’t viewed inflation as being an overly problematic situation at this point. We’re more focused on let’s get back to an economy that’s really humming, and especially in sectors like hospitality, airlines, and some of the things that really drive growth in the economy.” 

Hotchkiss said if there is a “spending bonanza from all that cash” the country could see substantial inflation for the first time in 30 years. 

Although there are signs of price pressure in some reports, a rise in wages isn’t occurring, he said. 

“You can’t really have sustained inflation without wage growth,” Hotchkiss said. “Right now, wages are coming down, which normally is not a good thing. But in this case, it is a good thing because that means all of those lower-paid workers, in the service sector especially, are coming back into the economy and that’s lowering the average hourly earning number. But you really can’t see sustained inflation unless people have more money to spend.” 

Bank First’s Molepske said inflation is coming, but doesn’t know when. 

“In 2008 and during the pandemic, we really just threw out a lot of what we were taught in economics classes. But one thing that hasn’t been thrown out in economics is Economics 101. It’s called supply and demand,” he said. 

Molepske added: “It’s not different this time. There will be higher interest rates, in my opinion. It could be six months, it could be 18 months, it could be two years. But at some point, it has to happen.” 

The Federal Home Loan Bank of Chicago is a WBA Gold Associate Member.

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com 

By, Alex Paniagua

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Legal Q&A: Notice of PPP Extension, Clarification for Self-Employed Borrowers

Q: Can a Self-Employed Individual Use Gross Income from Both Schedule C and Schedule F to Calculate Loan Amount and Percentage Reduction for a Second Draw PPP Loan?

A: Yes. For a second draw paycheck protection program (PPP) loan, a self-employed individual who is eligible to use gross income from both Schedule C and Schedule F to calculate loan amount should add the gross receipts of their Schedule C business with the gross receipts of their Schedule F business together and compare this sum against the sum of their gross receipts of their Schedule C and Schedule F business gross receipts for their chosen reference period.

Q: Has the PPP Application Deadline Been Extended?

A: Yes. On March 30th, the PPP Extension Act of 2021 (Act) was signed into law, extending the Small Business Administration’s authority to guarantee PPP loans through June 30, 2021. 

However, the new application deadline is May 31st. Thus, while SBA will process loans through June 30th, it will not accept applications past May 31st. Any PPP loan guaranty applications submitted by lenders in the PPP platform before June 1, 2021, must be processed and receive an SBA loan number by 11:59 pm EDT on June 30, 2021. At 12:00 am EDT on July 1, 2021, SBA will shut down processing of any pending PPP loan guaranty applications from lenders for which an SBA loan number has not been issued. The additional time period for processing of PPP loan guaranty applications received before June 1, 2021, allows lenders and SBA to resolve hold codes and compliance check error messages.

Furthermore, SBA has issued a notice modifying SBA Form 3506, 3507, and 750 CA (when used for PPP purposes) (forms) to reflect the Act. The notice modifies the forms for previously-approved lenders by extending the termination date set forth in Section 8 or Section 19 in each such form (as applicable) from “April 1, 2021” to “July 1, 2021.” Revised SBA forms 3506 and 3507 for new lenders will be issued and will be made available at sba.gov/ppp.

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com.

Birrenkott is WBA assistant director – legal. For legal questions, please email wbalegal@wisbank.com. 

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution’s attorney for special legal advice or assistance. 

By, Alex Paniagua

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WBA Compliance: New WI Tax and COVID Liability Law Summary

The 2021 Wisconsin legislative session is off to a busy, and productive start. Two key pieces of legislation were recently enacted into law, which are discussed in this article. Both pieces of legislation were supported by WBA throughout the process that led to enactment. Each provides meaningful benefits to banks and their customers.  

This article is focused on law that has been passed. At the time of this article’s publication, the legislature is still in session. WBA and its government relations team remain hard at work. Bills that are later signed into law will be discussed in future publications.  
 
Tax Conformity and PPP Deductibility 

On February 18, 2021, Governor Evers signed Assembly Bill 2 into law as 2021 Wisconsin Act 1 (Act 1). Act 1 contains various provisions which conform state tax law to recent federal changes. It includes a section which permits deductibility of business expenses paid for with Paycheck Protection Program (PPP) loan proceeds at the state level, just as they are at the federal level. Without this change, Wisconsin businesses which received PPP loans would have faced over $400 million in unexpected tax implications over the next three years. 

To look at it more specifically, Wisconsin Statute section 71.05 provides for income tax computation for state and local revenues. Pursuant to Act 1, a provision has been added to that section which exempts from taxation certain allowances from the federal coronavirus relief fund, including grants to small businesses. Thus, Act 1 federalizes Wisconsin tax law with respect to treatment of certain economic support programs funded through the federal Coronavirus Aid, Relief, and Economic Security Act, including loans under the PPP, and deduction of expenses paid with funds from such loans. These provisions take effect for taxable years beginning after December 31, 2018. 

COVID Premises Liability Protection 

On February 25, 2021, Governor Evers signed Special Session Senate Bill 1 into law as 2021 Wisconsin Act 4 (Act 4). Act 4 provides immunity for entities from civil liability for a COVID-19-related injury or death, except in the case of reckless or wanton conduct or intentional misconduct. The immunity is retroactive to claims accruing on or after March 1, 2020, but does not apply to an action filed before its enactment.

Act 4 applies to “entities” which broadly includes partnerships, corporations, associations, governmental units, Tribal governments, schools, nonprofit organizations, and any employer covered by state unemployment insurance laws. The law also provides immunity beyond the employer-employee relationship and would apply, for example, to a business’ customers, a school’s students, or a nursing home facility’s patients. 

Thus, the civil liability protection created under Act 4 allows entities, including financial institutions, to continue operation or begin opening their doors with immunity from claims of liability for acts or omissions resulting in exposure to COVID-19. This is a significant piece of legislation as Wisconsin’s financial institutions continue to be on the economic frontlines of the crisis and have been since its inception. 

More specifically, Wis. Stat. section 895.476 provides that beginning March 1, 2020, an entity is immune from civil liability for the death of or injury to any individual or damages caused by an act or omission resulting in or relating to exposure, directly or indirectly, to the novel coronavirus identified as SARS−CoV−2 or COVID−19 in the course of or through the performance or provision of the entity’s functions or services. 

Immunity under Act 4 is in addition to, not in lieu of, other immunity granted by law, and nothing in the above section limits immunity granted under any other provision of law, such as workman’s compensation laws, which, for example, generally provides an exclusive remedy for sick or injured workers. Also, as noted above, this immunity does not apply if the act or omission involves reckless or wanton conduct or intentional misconduct. Thus, financial institutions should continue to take steps to mitigate the risk of exposure to COVID-19. Financial institutions are reminded to remain mindful of state and local mandates, guidance, and recommended procedures. For example, considering the standards issued by the Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, Wisconsin Department of Health Services, and local government issuances such as county orders. Banks should also consider consulting with its legal counsel for a fuller, more specific analysis of how it can obtain protections under Act 4. 
 
Conclusion 

WBA will continue to monitor existing bills and update the membership on any significant changes. If you have any additional questions on any of the above laws, do not hesitate to contact us at wbalegal@wisbank.com. 

Additional Resources 
 
2021 Wisconsin Act 1 

2021 Wisconsin Act 4 

WBA’s reopening resource center 

CDC Guidance for Businesses and Employers 

OSHA Guidance on preparing workplaces for COVID-19 

OSHA Updated Guidance on Mitigating and Preventing the Spread of COVID-19 in the workplace 

DHS Guidance for Employers 

By, Alex Paniagua

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A Year In the Pandemic

A novel virus, a global shutdown, and a drastic lifestyle change — the pandemic has continued for more than a year, and it can feel as though it has been a part of life for so much longer. Looking back at the components of this event, WBA spoke with bankers to discuss the industry’s year in the pandemic, what the effects have been, and what life might look like once it’s over. 

March 13, 2020 — Trump Declares COVID-19 a National Emergency 

Looking Back At the Start 

Take a moment to try and recall where you were on Friday, March 13 of 2020. This day for many has become the defining line between an old reality and the current one. When places shut down, it was hard to accept that this situation was actually happening. 

“I can remember specifically that when this hit, the immediate feeling was disbelief,” said Dan Peterson, president and CEO of Stephenson National Bank and Trust, Marinette. “We were thinking there was no way a virus could do this to the entire world. Then reality set in, and you realize that this is shutting things down. And I remember having such a certain feeling that it would pass in the next month or two, never believing it would last for a full year and now longer.” 

Scott Rockwell, president and CEO of Bank of Wisconsin Dells, had the same reaction at first. This shock was followed by an attempt to understand what the next step would be to assure things didn’t collapse under pressure. 

“It became a matter of figuring out how we were going to operate,” Rockwell said. “We got the senior management team together to address day-to-day operations and shutting down lobbies while making sure all tasks were taken care of, employees were safe, and customers were helped.” 

Peterson and Rockwell both had the benefit of being home in Wisconsin when the shutdown began. Others had to determine how to make sense of this situation while on a different side of the world. 

“I remember when things shut down,” said Paul Hoffmann, president and CEO of Monona Bank, “because I was over in Europe when the announcement came that they were locking down the borders.” 

Although Hoffmann was eventually informed that American citizens would be allowed back in the country, it was not initially communicated this way. Instead, he woke up to a phone call at 3 in the morning from his daughter. She was telling him and his wife that they had to leave now, because the U.S. borders were going to close.  

“We were able to reschedule our flight and we headed back,” said Hoffmann. “Thankfully, while this was going on, our CFO Tim Ryan and COO Julie Redfern already started working on a disaster recovery plan. By the time I got back and reconnected, we were already underway with closing our lobbies and ordering more equipment. It was very bizarre to have been gone during that moment, but I’m grateful to have such a prepared team.” 

“It was a lot to go through in such a short amount of time,” Rockwell admitted, “but we were all safe, we were all prepared, and we’re still moving forward.”  

March 26, 2020 — Senate Passes the CARES Act 

The Defining Moments 

With the passing of the CARES Act, the banker’s word (or words) of the year, became known across the country: Paycheck Protection Program (PPP). 

“The defining moment for me came when we had to scramble to get ready for the onslaught of PPP applications from the first round,” said Hoffmann. “Not knowing the volume of applications and making sure we got everyone processed on time was a huge challenge…It was really an all-hands-on-deck effort by almost the entire bank – exhausting and exhilarating at the same time.” 

The feeling toward PPP seems to be mutual across the industry: it was a lot to fully understand and distribute due to the constant changes, but the amount of people and businesses it continues to help far outweighs the complications. Outside of the many stories that are accompanied by the mention of PPP, the defining moments of the pandemic extend beyond the program. For many, these moments had everything to do with how members of their team reacted to things like PPP rather than the challenges of the program itself. 

“With PPP, we were thrust into this new program, and it’s all rolling out at different times of the night, so people were taking on extra hours to make sure the community was taken care of,” said Rockwell. “It was crazy, but we all came together on these issues quite often and we became a better team because of it.” 

Still, the question of ‘what moments defined this past year?’ has not been an easy one to answer. The only thing we have been able to expect is the unexpected, and through PPP, team development, and everything in between, each step felt like something new was being learned.  

“With all the different things we went through, they all feel like defining moments,” said Peterson. “The realization that the pandemic was here and it wasn’t going be easy – that was a defining moment. The fact that our entire industry stepped up was a defining moment. The understanding that each step during the process was a brand new one – that made every single update a defining moment.” 

July 2 — Many States Reverse Plans to Reopen by July 4 

The Setbacks and Challenges 

The hope that people could gather to celebrate the Fourth of July was strung on for a while and then quickly cut as a possibility. The concern surrounding health and safety was a priority. Much like states were making these choices quickly and decisively, banks were forced to do the same.  

“We were making big decisions on a daily basis,” said Peterson. “This certainly wasn’t something we conquered on the first day. It took a few months to really understand it.” 

Having people work from home, whether it was only for the shutdown or continuing still, was one of many major decisions being handled differently at each bank. When July came around, this became more pressing as some businesses were returning to the office. Deciding when and how to bring employees back into branches was complicated for several reasons. 

“I think working from home was initially fine, but it became a different question for so many banks once their remote workforce had to be out of the office for longer than anyone expected,” said Hoffmann. “This was mostly about new technology, but it’s also about trying to be fair and establishing that process.” 

For example, customers still needed some form of access to the bank. With everyone dealing with various circumstances, this meant some employees would have to stay home to take care of their kids. Others experienced early symptoms of sickness and feared spreading anything to coworkers or customers. Meanwhile, some people were coming into work every day, and managing that flexibility became a new task.  

“It was all about trusting each other and knowing that we’re being as fair as we possibly can to everyone,” Hoffmann continued. “It’s been a challenge, but I believe we’ve been successful.” 

September 16, 2020 — Trump Administration Releases Vaccine Distribution Plan 

What Has Been Missed the Most 

In the moment a vaccine distribution plan was announced, it was not uncommon for people to take a step back from this new reality and realize how much has truly been absent in our lives. In the financial services industry, being a banker means being an active part in a community. This breaking news made many reminiscent on how prevalent the term ‘community’ is in banking. 

“Meeting with customers face-to-face is what I’ve missed the most,” Hoffmann said. “The interaction with employees, catching up with people in the hallways, and those side conversations are hard to do without.” 

It’s not surprising that this theme continues throughout. Rockwell noted that he hears too often that Hoffmann’s point is felt throughout the industry. After a year of the pandemic, it’s the little things that begin to feel especially distant. 

“As community bankers, we’re all about the people,” Rockwell agreed. “You'll probably hear over and over that we miss the handshakes and the interactions that you have with your customers and community members. You can’t even really see a smile right now.” 

Though there has been a successful transition toward making these encounters virtual to accommodate for social distancing, Peterson added it’s not quite the same as the feeling of being in person. 

“The inability to network and connect with everyone has been difficult,” said Peterson. “Whether it’s conferences or interactions with customers, that networking just went away overnight.” 

Peterson noted that while the instructional part of virtual conferences has been every bit as effective, it’s the after-hours part that has not been the same. He reminisced on going out to dinner with fellow bankers, talking shop, and strengthening those relationships. 

“The fellowship that’s so present at events like Bank Execs – it’s tough to replace that,” he said. 

January 11, 2021 – A New Round of PPP Loans Begins Distribution 

The Strengths of the Industry 

The process of PPP unknowingly tried to determine the best word to describe bankers, and it did so successfully. Whichever synonym you decide to use (and each banker managed to use their own) the notable strength of the industry during this constant change was the same: adaptability.   

“Banks were able to pivot very quickly in a lot of different ways,” Hoffmann said. “We pivoted with PPP loans and worked through different systems. We had to pivot to figure out what kind of loan modifications had to be done and how to do certain loan deferrals. We had to pivot to new technology that needed to be rolled out quickly, whether it was with working from home or e-signatures. I felt like we were really able to respond to the crisis well, and overall our industry was prepared for disaster and prepared to serve our customers.” 

“Flexibility. That is what community banks are built on,” said Rockwell. “Seeing what customers need and how you can play a role in that. Last year was one of those wild rides that you go on with something new at every turn. That flexibility not only helps your community, but it helps your staff. A lot of your staff are working, teaching, and being caretakers, all at the same time. You’re trying to help them navigate through that and get the job done.” 

“We were able to be nimble,” Peterson said. “I can say for the whole industry, customers have been saying that banks were great about transitioning to the virtual world.” 

March 12, 2021 – Every Wisconsinite 16 & Older is Eligible for Vaccination Starting May 1 

What’s Going To Stay? 

When Gov. Tony Evers announced that May 1 would be the day all Wisconsinites aged 16 and older could receive their first vaccination dose, the light at the end of the tunnel was growing brighter by the second. With the news that the list of those eligible to receive their first dose of the vaccine was growing significantly, many began to wonder what life would like after a return to normalcy. Through all this forced change, what implementations would stay as a result of a global pandemic? 

“The technology that we’ve adopted for integrating e-signatures, increased online loan applications, and everything else really pushed us to not only be more efficient for the future, but to provide a better customer experience as well,” Hoffmann said. “We’re also going to allow a hybrid work-from-home model that allows more flexibility. The pandemic has shown us that we are more than capable of doing work at home.” 

Rockwell agreed that the adoption of new technologies has been a significant part of growing his team’s growth and development. The biggest question they now have is to what extend these changes will take form in daily routines. 

“That’s the next thing we have to figure out,” said Rockwell. “When further implementing these changes, the key thing we have to wonder about is the culture. If you go all the way virtual in some cases, then that culture of socialization becomes rethought and reshaped as well. These are all things that we’ll continue to use moving forward, but the question is, at what level?” 

The internal factor of the technology shift has also been most notable for Peterson. Especially for larger groups and individuals who are regularly in and out of meetings, that ability to stay in one place rather than running back and forth is a positive outcome now that it’s a more feasible option. 

“Virtual meetings will definitely be something we continue to do for the board of directors and senior management, and all levels of the bank,” he said. “It’s such an efficient way to meet as a team.”  

March 13, 2021 – An Official Year in the Pandemic 

Moving Forward 

A lot has changed over the course of a year. Although it has been challenging, there has been noteworthy action taken to assure everyone survives this crisis. Bankers have especially noticed the amount of generosity that has helped so many during these difficult times. 

“People really stepped up,” said Peterson. “They wanted to help, whether it was a friend or their family or a customer or a coworker. That’s what made all the difference.” 

The financial support provided by banks especially helped so many struggling individuals keep moving forward, but as Rockwell put it, it was by no means the only thing banks offered.  

“All the community banks were a place of stability,” added Rockwell. “It was where your customers could go, whether through appointment or drive-thru, where they could manage financial affairs, get advice, and sometimes just talk to that familiar person you’ve come to know as your banker. Financial needs, modifying payment structures, PPP, EIDL; we’ve been there through it all, and that stability factor is the role banks truly played through this year and each one to come.”  

Despite all of the challenges, there is much to be grateful for, proud of, and optimistic toward. One of the most unexpected outcomes of the pandemic is it emphasized that the future of the industry is in excellent hands. 

“We had a large number of younger associates step up and take a leadership role through all of this,” said Hoffmann. “It was such an impressive thing to witness, and it reminded me how fortunate we are that the newer people in our organization are so qualified and ready to show leadership. It’s great to know our industry’s future is going to be bright with the vast amount of talent we have at our banks.”  

By, Alex Paniagua

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SBA Issues IFR to Implement Changes Made by American Rescue Plan Act

SBA issued an interim final rule (IFR) to implement changes made to the Paycheck Protection Program (PPP) by the American Rescue Plan Act, enacted on March 11. Changes include: 

Shuttered Venue Operator (SVO), Page 6: 

If a PPP borrower receives a First Draw or Second Draw PPP Loan after December 27, 2020, the amount of any subsequently-approved SVO grant will be reduced by the amount of the First Draw or Second Draw PPP Loan.  

If a PPP borrower receives both a First Draw and a Second Draw PPP Loan after December 27, 2020, the amount of any subsequently-approved SVO grant will be reduced by the combined amount of both PPP loans. 

If a PPP applicant is approved for an SVO grant before SBA issues a loan number for the PPP Loan, the applicant is ineligible for the PPP loan and acceptance of any PPP loan proceeds will be considered an unauthorized use.  

Clarifying Changes, Pages  6 and 10 

SBA made a clarifying change to add, to the list of eligible entities for First Draw PPP Loans, businesses with a NAICS code beginning with 72 that employ no more than 500 employees per physical location. 

SBA also incorporated changes of eligibility for electronic cooperatives and telephone cooperatives. For PPP loans made after the effective date of the IFR, electronic cooperatives and telephone cooperatives are eligible if they have no more than 300 employees per physical location. (Previously, the employee cap to be eligible was no more than 500 employees.) Also, these entities are no longer permitted to use the employee-based SBA size standard for their industry or SBA’s alternative size standard to determine size. 

Payroll Costs Not Eligible for Loan Forgiveness, Pages 21-23 

The following payroll costs are not eligible for loan forgiveness: 

(a) qualified wages taken into account in determining  

(i) The Employee Retention Credit under section 2301 of the CARES Act, as amended by section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act);  

(ii) The Employee Retention Credit under section 3134 of the Internal Revenue Code; or 

(iii) The disaster credit under section 303 of the Relief Act, and Premiums for COBRA continuation coverage taken into account in determining the credit under section 6432 of the Internal Revenue Code. 

The IFR is effective upon publication in the Federal Register. The provisions which incorporate the American Rescue Plan Act changes to PPP apply to PPP loans approved, and forgiveness applications submitted, on or before March 11, 2021. 

By, Alex Paniagua

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SBA Updates PPP Portal for Certain Second Draw Loans

Origination Updates:    

As the 2021 (1st draw borrowers) are now becoming eligible for their 2nd draw PPP loan, SBA has provided the authorization to adjust the platform controls to ensure you can successfully submit second applications for these borrowers.  We plan to deploy these changes in production in the near future.  

As you know, the PPP platform already supports second draw loans for the borrowers who received their first draw loan last year (2020).  

Here is the summary of technical changes:  

  • If the 2021 first draw loan is fully disbursed, the lender can submit a second draw loan for the borrower.  This will be an important requirement to understand; the 2021 loans will still need to be fully disbursed in ETRAN. You can use the normal 1502 process or direct ETRAN. 
  • Get /api/origination/?tin=NNNNNNNNN&tin_type=N may return more than one Loan details in the response  
  • GET /api/etran_ppp_validation/?sba_number=NNNNNNNNNN can be used by Lenders to validate First draw loan  

With this advance notification, please think about your individual strategies to ensure your interface and systems will support more than one 2021 PPP loans for same borrower as applicable.  

All other PPP controls and requirements regarding 2nd draws will remain in place.  

GitHub will be updated by tomorrow to reflect these changes.

https://ussbappp.github.io/index.html 

Feel free to reach out to developer@ussbaforgiveness.com, if you have any technical queries.

By, Alex Paniagua

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American Rescue Plan Act Signed

The American Rescue Plan Act was signed by President Joe Biden on March 11, 2021, which includes provisions related to the Paycheck Protection Program, EIDL, and other items of interest to the banking industry, including the following: 

2021 Recovery Rebate to Individuals 

The new law offers another stimulus payment to individuals. In general, an eligible taxpayer is to receive the sum of $1,400 ($2,800 in the case of a joint return) plus $1,400 for each dependent of the taxpayer. Persons who are a nonresident alien individual, a dependent of another taxpayer, or an estate or trust is not considered eligible. Taxpayers with adjusted gross income over $75,000 or in the case of a joint return over $150,000 are also not eligible for the direct payment. The IRS has already taken steps necessary to send ACH files and to mail payments.  

Currently, there is no exemption in the new law from garnishment. WBA is working with others to encourage quick, standalone legislation to protect the new stimulus payment from garnishment orders.  

Modifications to PPP 

The new law adds additional funding into the program, increasing the CARES Act commitment of $806,450,000,000 to $813,700,000,000. The new law adds COBRA premium assistance costs as allowable payroll costs under PPP.  

The new law also expands eligibility to “an additional covered nonprofit” which is a nonprofit other than a 501(c)(3),(4),(6), or (19), and is exempt from tax under 501(a) of the Internal Revenue Code. To be eligible, the additional covered nonprofit entity cannot receive more than 15% of its receipts from lobbying activities; the costs of the lobbying activities of the nonprofit entity did not exceed $1,000,000 during the most recent tax year of the additional covered nonprofit entity that ended prior to February 15, 2020; and the nonprofit entity employs not more than 300 employees.  

The new law also makes eligible an Internet publishing organization. This includes a business concern or organization that was not eligible before the enactment of the new law that is assigned a NAICS code of 519130, certifies in good faith it is an Internet-only news publisher or Internet-only periodical publisher and is engaged in the collection and distribution of local or regional and national news and information. The organization is eligible to receive a covered loan for the continued provision of news, information, content, or emergency information. The entity cannot employ more than 500 employees, or the size standard established by SBA for that North American Industry Classification code, per physical location of the business concern or organization. The business concern or organization must make a good faith certification that proceeds of the loan will be used to support expenses at the component of the business concern or organization that supports local or regional news. 

The amendments apply only to applications for forgiveness of covered loans that are received on or after the date of enactment of the American Rescue Plan Act.  

Targeted EIDL Advance 

The law appropriated an additional $15,000,000,000 to the EIDL program. $5,000,000,000 is to be used in amounts of $5,000 to covered entities that suffered an economic loss of greater than 50% which employ not more than 10 employees.  

Relief to Restaurants  

The new law creates a Restaurant Revitalization Grant Program for those that suffered pandemic-related revenue loss. “Restaurants” include food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink. 

An eligible restaurant that receives a grant may use the grant funds for certain expenses incurred as a direct result of, or during, the COVID–19 pandemic, including: payroll costs, payments of principal or interest on any mortgage obligation (which shall not include any prepayment of principal on a mortgage obligation), rent payments, including rent under a lease agreement (which shall not include any prepayment of rent), utilities, and certain maintenance expenses.  

Agricultural Programs 

The new law creates an emergency rural development grants program for rural health care, funding for USDA Office of Inspector General for oversight of COVID-19 related programs, and farm loan assistance and USDA assistance and support for socially disadvantaged farmers and ranchers.  

Housing Provisions 

The new law provides emergency rental assistance not to exceed 18 months, including for the payment of rent, rental arrears, utilities and home energy costs and arrears, and other expenses related to housing to be defined. Appropriations were also made for homelessness assistance and supportive services program.  

The new law also creates a Homeowner Assistance Fund meant to mitigate financial hardships associated with the COVID-19 pandemic. Funds are to be provided to eligible entities for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship after January 21, 2020, through qualified expenses related to mortgages and housing.  

Qualified expenses include: mortgage payment assistance, financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing-related costs related to a period of forbearance, delinquency, or default, principal reduction, facilitating interest rate reductions, payment assistance for utilities, including electric, gas, home energy, and water, internet service, including broadband internet access service, homeowner’s insurance, flood insurance, and mortgage insurance, and homeowner’s association, condominium association fees, or common charges.   

Other Provisions 

The new law also offers relief in the areas of nutrition, education, public transportation, and an extension of unemployment assistance.  

WBA will report on more of the American Rescue Plan Act as programs begin and as Treasury implements the various new or revised programs. Click here to view the bill.    

By, Alex Paniagua

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Details Begin to Emerge on New PPP Changes

The Biden Administration announced changes to the PPP Monday morning with the goal of promoting equitable access to the program for small business relief. These changes were outlined in a White House Fact Sheet which can be found here. SBA held a 30-minute webinar yesterday afternoon to provide a little more clarity on the Administration’s announcement while also stating that more details will be released throughout the week. Below are the highlights of information shared by SBA during their webinar. 

  • Beginning Wednesday, Feb. 24 through March 9, SBA will only accept applications from borrowers with fewer than 20 employees. To determine whether you qualify, a borrower must count all employees regardless of whether they are full-time, part-time, or seasonal. Unlike other aspects of PPP, this threshold is a headcount threshold, not an FTE number. 
    • All applications pending beginning Wednesday due to hold codes or other reasons will continue to move through the resolution process during this 14-day window and may be approved during this time, assuming all criteria are met, despite the application coming from a business with 20 or more employees. 
    • If an application is submitted during this 14-day period for a borrower that has 20 or more employees, then SBA will reject the application rather than hold it in a queue. The application may be resubmitted beginning March 10. As a result, lenders are encouraged to take applications from such PPP borrowers during this 14-day period; however, they must hold them until March 10 at which time they may be submitted through SBA’s portal. 
  • SBA is working on a formula change for sole proprietors, independent contractors, and self-employed individuals; however, the new rules around this change will likely not be finalized until later this week and therefore not available until next week. It is uncertain at this time whether this change will be prospective only or retroactive. The change will allow a maximum loan amount to be determined from Line 7 of Schedule C rather than Line 31. SBA may also develop a special application form for such borrowers. 
  • SBA is clarifying that small business owners who are lawful U.S. residents and who use an ITIN to file taxes are eligible to apply for a PPP loan using their ITIN assuming all other criteria are met. 

WBA also continues to hear from other sources that it remains unlikely that the PPP will be extended beyond March 31. WBA is also expecting SBA to clarify the circumstances in which a borrower could obtain both a First Draw PPP loan in 2021 and a Second Draw PPP loan in 2021 without waiting for a full 8-week forgiveness covered period to expire. At this time, it is unknown how quickly this information will be released by SBA. WBA will continue to monitor all these developments and share updates with the membership promptly as they occur. 

By, Alex Paniagua

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SBA Update: PPP Processing Fees, EIDL Payments

On Monday, Feb. 8,  the SBA issued an updated procedural notice regarding the reporting process through which lenders report on Paycheck Protection Program loans and collect processing fees. The guidance addresses fees for new first-draw PPP loans and second-draw PPP loans and outlines reporting requirements for lenders. 

For first-draw PPP loans made on or after Dec. 27, 2020, lenders will receive processing fees in the following amounts: 50% or $2,500, whichever is less, for loans of not more than $50,000; 5% for loans of more than $50,000 and not more than $350,000; 3% for loans of more than $350,000 and less than $2 million; and 1% for loans of at least $2 million. 

For second-draw PPP loans, lenders will receive a 50% processing fee or $2,500, whichever is less, for loans of not more than $50,000; a 5% processing fee for loans of more than $50,000 and not more than $350,000; and a 3% processing fee for loans above $350,000. 

Lenders should use SBA Form 1502 to report fully disbursed loans to SBA within 10 calendar days after the disbursement of a PPP loan. You can read the procedural notice here. For further questions, contact wbalegal@wisbank.com.  

SBA Paycheck Protection Platform Update February 8, 2021 

EIDL Advance Reconciliation Payments – SBA will be remitting reconciliation payments beginning February 9, 2021 through February 19, 2021 for any loan with an SBA forgiveness payment that was reduced by the amount of an EIDL Advance. 

  • PPP lenders are not required to request remittance of the reconciliation payment. SBA will automatically identify loans where SBA remitted a forgiveness payment to a PPP lender that was reduced by an EIDL Advance. 
  • The amount of the reconciliation payment will be equal to the previously-deducted EIDL Advance amount, plus interest through the remittance date. SBA will use the interest accrual method currently identified in the Forgiveness Platform. 
  • SBA will remit the reconciliation payment to the ACH account identified by the PPP lender of record in the Forgiveness Platform. The ACH addenda for these payments will be identical to the on-going Forgiveness payment processing. 
  • After processing is complete, the amount of the reconciliation payment will be displayed on the Payment Dashboard under the Adjustment column. In addition, a payment reconciliation letter will be posted in the Forgiveness Platform for your records. 

The PPP Lender is responsible for notifying the borrower of the reconciliation payment. The PPP Lender is also responsible for re-amortizing the PPP loan and notifying the borrower of the amount of the next payment due or advising the borrower that the loan has been paid in full, whichever is applicable. If the amount remitted by SBA to the PPP lender exceeds the remaining principal balance of the PPP loan (because the borrower made a payment on the loan), the PPP lender must remit the excess amount, including accrued interest paid by the borrower, to the borrower. 

Additional resources pertaining to the Economic Aid Act and PPP – including application forms, lender guidance, and PPP program rules – can be found on SBA’s PPP website or the U.S. Treasury PPP website.  

By, Alex Paniagua

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