The steel-and-glass canyons of Center City Philadelphia are quiet, with office staff working from home, restaurants shut except for takeout, and residents under orders to avoid groups.
But at Republic Bank headquarters, upstairs at Liberty Place, it’s “all hands on deck” for the team charged with keeping small and mid-sized business clients from falling apart, says Vernon Hill, the bank’s executive chairman and lead investor.
Instead of holing up in his Moorestown mansion called Villa Collina, Hill, 74, and a small staff of veteran lenders, following coronavirus safety guidelines, are fielding calls from hotel and restaurant owners, doctors’ practices and truck terminals, adjusting loan payments as banks do in disasters. Hill and his team are urging borrowers to hang on until they can rush them a share of the $350 billion that Congress approved and President Donald Trump signed into law late last week for “forgivable” loans.
Eligible for the Paycheck Protection Program are the nearly six million U.S. employers, with 1 to 500 workers, who employ 60 million Americans, nearly half the private-sector workforce.
They don’t have to repay these loans if they keep workers employed through spring and use the money to pay wages (to workers making under $100,000) and cover occupancy costs. If the money is used for anything else, the borrower has 10 years to repay, at 4%, with a government guarantee protecting the bank from loss. (Bigger firms may be eligible for a slice of the $500 billion Congress voted for corporate loans.)
Republic is a small bank, not quite $2 billion in loans, versus $1 trillion each at J.P. Morgan or Bank of America. But it’s a top Philadelphia-area and New Jersey lender for federally guaranteed Small Business Administration loans. (The bank has lately expanded to New York.)
The SBA is managing the Payroll Protection Program through SBA-approved local banks.
The program will keep banks busy and generate fee income at a time when the economy is slow and bank stocks are down. Republic First Bancorp, Republic’s holding company, closed at $2.19 Tuesday, a seven-year low. Analysts at Keefe Bruyette & Woods in New York rank it among the least-profitable banks whose stocks they cover.
“This is a very good program, well-thought out, it’s going to be very effective,” says Hill, a past critic of government banking policy.
“All the other bailout programs, particularly in 2008, they helped the banks and the big borrowers, but did nothing for medium and small businesses. In a month, we’ll be telling you how we used it to save businesses and jobs. This program will succeed so fast, we’ll run out of the money, and they’ll give us more.”
With Republic’s SBA team, including people he led at his previous company, Commerce Bank, headed by Arnold Horvath, “we are ahead of where other banks are” and expect to start lending as soon as SBA finishes the rules and gives the signal to begin, Hill added.
What’s the demand? “We are hearing from a lot of business people, I mean a lot. Restaurants are really getting beat up. Hotels are hurt, but not killed. But at the Shore, they have to make money in May and June." Will the lockdowns ease by then?
Hill praised fast action by President Trump, an old golfing buddy whom he says he talks to monthly. “The Trump administration is very sharp. Guys at the top say, ‘We come up with an idea, we walk in, it gets approved. It doesn’t take much of a process. He makes it happen.' I think he’s doing an unbelievable job. I think we’re going to look back and say he saved America.” Trump helped Hill promote his former bank, Commerce, when it opened New York branches in 2001.
Democrats had suggested running the program directly through SBA’s regional offices, such as the one in King of Prussia. But U.S. Sen. Pat Toomey (R., Pa.) successfully urged the program be run directly by the 800 SBA-approved banks, according to Rodger Levenson, chief executive at Wilmington-based WSFS Corp.. Other lenders are expected to join the program.
Hill credited Toomey, who chairs the investment subcommittee of the Senate Banking Committee, and U.S. Rep. Dwight Evans (D., Phila), vice chair of the House Small Business Committee, among others, with helping speed the program through contentious debate in Congress. “Their staff were very responsive about making these work."
Not everyone is shut down. Coronavirus has made some unusual opportunities. One of Hill’s companies operates 44 Burger Kings in Bucks and Montgomery Counties. He said drive-through was “two-thirds of our business” before the coronavirus shutdowns. As with the bank, “we were all set up for higher volume,” and are getting it, with sit-down restaurants closed or trying to adapt to all-takeout conditions.
But at the Shore, Hill said, the coronavirus shutdowns — without cash infusions — are especially painful, and threaten a broader collapse than flooding storms, like Sandy in 2012. “Customer visits are way down — we only saw that with Sandy in a very small area."
He added that bankers didn’t anticipate the collapse of medical specialty practices. “Above the general-practice level, customer visits have just stopped.” Doctors are already showing interest in the Payroll Protection loans.
Truckers are also hurting because of truck stop shutdowns and limited hours, especially in Pennsylvania, which has also limited building construction “more strictly than in neighboring states.”
Does he worry whether governors are going too far in sacrificing business to spare hospitals and essential-services workers and slow the spread of coronavirus?
Hill says he leaves those decisions to the experts, and waits for better times, now that he’s got extra money to keep clients going for better times.
Application for PPP program, which can be filed by banks that make SBA loans (be careful who you are giving private information to) can be downloaded at the U.S. Treasury Web site here.