AFS Best Practices Leadership Council Webinar PPP: The Big Picture A Retrospective Update April 8, 2021 Vision to see the future...experience to get you there. afsvision.com Agenda Program History & Timeline • Legislative • Financial • Regulatory 2021 Key Features • Second-Draw Loans • Small/Minority Borrowers • Forgiveness PPP Overall Performance • Political/Legal • Regulatory • Operational • Media • The AFS Perspective • PPP Lenders Lender Experiences: Discussion April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 2 PPP Legislative Timeline Mar Jan Authorizing Act Apr May Jun Jul Aug Sep Oct Nov Dec Feb Mar 2020 2021 CARES Act Initial funding of Initial funding depleted by 4/16/20; application deadline 3/27/20 $349 billion 6/30/20; program expires 12/31/20 PPP and Health Care Authorized additional Enhancement Act funding of $310 billion 4/24/20 PPP Flexibility Act Various amendments – 60/40 cost ratio, 24 weeks 6/5/20 covered period by 12/31/20, forgiveness rules PPP Extension Act Application deadline extended to 8/8/20; 7/3/20 $137 billion remaining at deadline, returned to Treasury Re-launched with new Economic Aid Act product, $284 billion 12/26/20 funding, 3/31/21 expiry American Rescue Plan Act Authorized additional PPP 3/11/21 funding of $7.25 billion PPP Extension Act of 2021 Application deadline extended to 5/31/21, 3/30/21 SBA approval deadline to 6/30/21 April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 3 2021 Key Features New Funding, Second Loans & Set-Asides • $284 billion new funding • Second-Draw Loans – $2M maximum, first loan fully used, documented 25% sales reduction, 300 employees (vastly larger volume than first-draws) • Set-Asides for Small Lenders & Minority Borrowers – exclusive access windows • Set-Asides for Hard-Hit Industries – live venues, restaurants, hotels (including American Rescue Plan Act) • Forgiveness Process – one-page form for under $150K, self-select forgiveness period (8-24 weeks) • Processing Fees changes – smaller of 50% or $2500 for loans under $50,000 • New Allowable Expenses – protective measures, business software, supplies • Public companies prohibited April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 4 Loan Volumes by Funding Rounds New Funds Approved Net Approved Average Unused Funds Time Frame Lenders Authorized Loan Count Dollars Loan Size Returned Round 1 April 2–16 $349 Billion 1,661,367 $342.3 Billion $206,022 ---- 4,975 2020 Round 2 Apr 27–Aug 8 $310 Billion 3,671,659 $208.4 Billion $56,765 $137 Billion 5,460 2020 Round 3 $291.25 Jan 11–Mar 31 3,584,826 $211.8 Billion $59,084 ??? 5,236 Billion 2021 Grand Total $813.7 8,728,494 $734.1 Billion $84,104 TBD 5,476 (net of adjustments) Billion Approvals through 03/28/2021 Source: SBA April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 5 PPP Loan Funding Timeline Aggregate PPP Loan Data 9 900 Volume of Loans Number of Loans Round Round Round Approved ($ Billions) Approved (Millions) 8 800 1 2 3 7 700 6 600 5 **************** 500 4 Rounds 1-2 $137B remaining at Round 3 400 3 authorized August deadline, authorized 300 $659B returned to Treasury $291.25B 2 200 1 100 - 0 Loans Approved (#) Loans Approved ($000) April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 6 Loan Breakdown for 2021 PPP First Draw Loans Loans Approved Net Dollars Average Loan Size Lender Count Total First Draw Loans 1,562,181 $31.4B $20,126 5,123 First Draw – 10 or fewer employees 1,528,650 $23.0B $15,055 5,108 First Draw – LMI & less than $250K 442,085 $7.6B $17,230 4,455 Second Draw Loans Loans Approved Net Dollars Average Loan Size Lender Count Total Second Draw Loans 2,022,645 $180.4B $89,174 5,209 Second Draw – 10 or fewer employees 1,550,726 $48.7B $31,424 5,189 Second Draw – LMI & less than $250K 431,180 $20.8B $48,150 4,609 Total 2021 Loans Loans Approved Net Dollars Average Loan Size Lender Count Total First & Second Draw Loans 3,584,826 $211.8B $59,084 5.236 Approvals through 03/28/2021 Source: SBA April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 7 PPP Aggregate Loan Approvals (as of 03/28/21) Source: SBA April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 8 Top PPP Lenders by Total Number of Loans (as of 3/28/2021) Rank Rank Rank Total Net Dollars Average Lender Name Total Loans Approved Total 2020 2021 ($MM) Loan Size 1 1 4 Bank of America 473,864 $33,555 $70,811 2 2 3 JPMorgan Chase Bank 412,309 $39,461 $95,707 3 3 2 Cross River Bank 397,547 $11,265 $28,336 4 4 6 Wells Fargo Bank 264,933 $13,422 $50,661 5 *** 1 Itria Ventures (Biz2Credit) >250,000 >$6,303 $25,212 6 *** 5 Customers Bank >225,365 $7,710 $34,211 7 5 8 U.S. Bank 161,751 $10,317 $63,783 8 6 10 TD Bank 123,499 $11,509 $93,191 9 8 9 PNC Bank 113,082 $16,937 $149,776 10 7 11 Truist Bank 110,072 $15,416 $140,053 11 9 *** Citizens Bank 74,008 $5,259 $71,059 12 10 12 Zions Bank 71,689 $9,558 $133,325 13 11 14 KeyBank 66,010 $10,734 $162,611 14 *** 7 ReadyCap Lending >58,049 >$1,856 $31,972 15 14 15 M&T Bank 55,422 $9,360 $168,886 Source: SBA, AFS BI April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 9 PPP Aggregate Loan Forgiveness The forgiveness process is in place only for 2020 loans so far. 2020 Loans by Number 2020 Loans by Dollars Total Volume 5.2 million $521.2 billion Forgiven 2.3 million $194.5 billion Not Forgiven --- $0.6 billion Under Review 246K $87.8 billion Applications Not Yet Received 2.6 million $238.3 billion Data as of 03/25/2021 Source: SBA April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 10 PPP Overall Performance: Political & Legal • CARES Act was put together hastily and rushed through the legislative process in a matter of days in order to speed implementation and distribution. • SBA became “owner” of the program because it involved the 7(a) program, yet it overwhelmed the agency with expectations for immediacy, untested technology updates, and massive loan volumes. • Partisan disagreements in Congress created long gap in funding from April to August – biggest issues were aid to state/local governments and effects on budget deficit. • Legal but ethically questionable – loans to public companies; companies owned by members of Congress/spouses/families; administration officials/families; and loans to churches, anti-vaccine organizations. • SBA created 9-page “necessity questionnaire” for companies receiving loans over $2 million. • Political actions sometimes created more operational ones – two-week window in Feb/March “came too late” for many and caused application backlog for all others. • Are there potential legal issues to come? April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 11 PPP Overall Performance: Regulatory • Give SBA some credit – given a rushed and vague law, with expectation of immediate implementation, they were on the defensive with rules and technology glitches throughout. • Political requirements and pressures forced changes to be implemented virtually immediately – technology updates were rushed and inadequately tested. • SBA Inspector General issued report critical of SBA for setting stricter rules than CARES Act, causing “unintended burden to borrowers.” • GAO report stated SBA urgency to implement PPP caused undue confusion for duration of program. • Small businesses were uncertain whether they would qualify for forgiveness, causing many to return loans. More than 170,000 loans ($38B) returned by June 2020 over lack of clarity. • SBA Inspector General report in March 2021 found $692 in duplicate loans issued in 2020 to companies with same Tax ID; SBA “did not always have sufficient controls in place.” • Bankers praised technology improvements made by SBA to get ready for 2021 loans – new origination portal with improved user interface. April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. 12 PPP Regulatory Timeline CARES Act Enacted Mar 27, 2020 Mar Jan Apr May Jun Jul Aug Sep Oct Nov Dec Feb Mar TOTAL 2020 2021 New or -- 10 10 8 -- 2 -- 1 -- -- 3 -- 1 35 Amended Rules Procedural -- 2 1 1 1 -- -- -- -- -- 5 2 -- 12 Notices New or -- 2 1 5 2 -- 1 3 -- 2 1 -- 4 21 Amended Forms FAQs -- 39 9 2 -- 3 -- 1 -- 2 -- -- 1 57 Interagency 1 2 2 1 -- -- 2 1 1 -- 1 -- -- 11 Guidance April 8, 2021 Vision to see the future...experience to get you there. ©2021 Automated Financial Systems, Inc. All Rights Reserved.