Naugatuck-based Ion Bank has just experienced the busiest few days in its 150-year history, thanks to last Friday’s launch of a much sought-after small business stimulus program.
Ion, which has a loan portfolio of about $1 billion, reviewed and approved hundreds of applications totaling more than $100 million worth of federally backed stimulus loans between Friday and Monday.
That’s the quickest and most significant jump in the bank’s loan portfolio that’s ever happened.
“We definitely have a backlog now,” CEO David Rotatori said on Tuesday morning. “The good news is, we got the vast majority of our customers in [to the Small Business Administration] over the weekend.”
Ion Bank is far from alone. The low-interest stimulus loans — which are forgivable if employers adhere to various rules — have many Connecticut bankers busier than they’ve ever been.
There’s been major demand vying for $349 billion worth of so-called Paycheck Protection Program loans, launched last Friday, and that’s created headaches and anxiety for bankers and customers alike.
Rotatori said his team, which is working long hours already, is weighing whether to enter loan applications overnight, when the SBA’s computer system is less taxed.
While the program, which seeks to help small businesses cover payroll and other expenses during the COVID-19 pandemic, it will also help banks, which are otherwise facing expected drops in income and higher loan losses due to the ongoing partial shutdown of the economy, to alleviate some of their own financial worries.
The two-year loans carry a 1% interest rate, with principal deferred for the first six months. The SBA is also paying participating lenders processing fees ranging from 1% to 5%, depending on the size of a given loan.
For the $100 million in loan applications already processed by Ion Bank, which thus far has an average loan size of about $300,000, the surge in lending could amount to upwards of $6 million in income.
The bank has already pledged $1 million to the United Way, but the rest of the money it makes will help offset the need for Ion — which has received $120 million worth of loan modification requests during the ongoing pandemic — to set aside more money for expected loan losses due to the economic slowdown, Rotatori said.
“These funds will definitely help recover some of that,” he said.
