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The BAN Report: Stimulus & PPP Update / Huntington & TCF Merge / Low Rates for Years / Zoom Life-12/17/20

Stimulus & PPP Update

While there are still some last-minute haggling and horse-trading, Congress appears to be on the brink of agreeing to a $900 billion stimulus bill.

The developing aid agreement would not include liability protections for businesses or aid to state and local government, CNBC confirmed. Disagreements over those issues have blocked lawmakers from crafting a year-end rescue package.

“We’re still close and we’re going to get there,” Mitch McConnell, R-Ky. told reporters Wednesday evening.

On the Senate floor earlier in the day, he said: “We made major headway toward hammering out a targeted pandemic relief package that would be able to pass both chambers with bipartisan majorities.”

Speaking after McConnell, Senate Minority Leader Chuck Schumer, D-N.Y., said “we are close to an agreement” but noted “it’s not a done deal yet.” He added that Democrats “would like to have gone considerably further” to offer relief and will press for more aid after President-elect Joe Biden takes office on Jan. 20.

The measure would contain a direct payment to Americans in some amount, as well as enhanced federal unemployment insurance, NBC News reported. In addition, Republican Sen. Steve Daines of Montana told CNBC the deal would have roughly $300 billion in small business aid including Paycheck Protection Program loans, money for Covid-19 vaccine distribution and testing and relief for hospitals.

Here is what we know so far about SBA & PPP:

“Subtitle A: Paycheck Protection Program & Small Business Support

  • $300 billion to Small Business Administration

  • Funding to allow to allow the hardest-hit small businesses to receive a second forgivable Paycheck Protection Program (PPP) loan.

    • Eligibility would be limited to small businesses with 300 or fewer employees that have sustained a 30 percent revenue loss in any quarter of 2020.

    • Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices, would become eligible for PPP.

    • Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely.

    • Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act.

    • Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.

    • Set-asides are included to ensure that smaller borrowers and underserved communities get the help they need, such as: for small businesses with 10 or fewer employees; for loans made by small community lenders, including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs), and farm service lenders; and for the Minority Business Development Agency.

  • Funding for independent live venue operators, including eligible independent movie theatres and museums, affected by COVID-19 stay-at-home orders.

  • Extension of Section 1112 of the CARES Act, which provides payment of principal, interest, and associated fees on qualifying Small Business Administration (SBA) 7(a), 504 and microloans.

  • Funding for SBA loan products to increase guarantees on SBA 7(a) loans and reduce fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; and provide Economic Injury Disaster Loan grant advances.

  • Includes re-purposing of $138 billion in unspent allocations to be reinvested in the PPP program”


Attached is the latest bill text.  Hopefully, the next round of PPP stimulus is far more targeted.Woody Hayes once said, “there are only three things that can happen on a pass, and two of them are bad.”There were four things that could happen with a PPP loan, and three were suboptimal (Fraud, a loan to a business that never needed it, and a loan to a business that failed anyway).

Nevertheless, small businesses are struggling.

Most small business owners in the United States believe the worst of the coronavirus pandemic is still ahead of them, with half saying their operations would permanently close within a year unless the business environment improves, the U.S. Chamber of Commerce said on Tuesday.

A new U.S. Chamber-MetLife poll of small businesses taken from Oct. 30-Nov. 10 showed that 74% of the owners said they need further government assistance to weather the pandemic. That percentage rises to 81% for minority-owned businesses.

The quarterly poll found that the 62% of small business owners fear that the worst is still to come with COVID-19's economic impact. Only 40% said they believe their small businesses can operate indefinitely during the current business environment.

Huntington & TCF Merge

The big are getting bigger. The Midwest banking market was jolted this week by the announced merger between Huntington Bank and TCF.  

The companies on Sunday announced an all-stock deal, confirming an earlier report by The Wall Street Journal. It would be one of the larger recent bank combinations, valuing Detroit-based TCF at nearly $6 billion, or about an 11% premium. Columbus, Ohio-based Huntington has a market value of $13 billion.

Together, the banks would have about $170 billion in assets, with a network of branches around the country that is especially concentrated in Midwestern states such as Illinois and Michigan.

The deal, if completed, would vault Huntington closer to its fiercest in-state competitors, Fifth Third Bancorp and Key Corp., which have about $200 billion and $170 billion in assets, respectively.

TCF’s network would add about 475 new branches, including in a handful of states where Huntington lacks a physical presence. Huntington’s 839 branches are spread across seven states.

The combined company will have two headquarters——one for its larger commercial segment in Detroit, and one for its consumer business in Columbus, Huntington Chief Executive Steve Steinour said. He will remain CEO while TFC’s executive chairman, Gary


Torgow, will remain chairman. Talks between the men, who have known each other for decades, began in October and progressed quickly, Mr. Steinour said.

Let’s go back to January 2016 to see how quickly a state like Michigan has consolidated.    Here was the state deposit share from June 2015.


The BAN Report: PPP Update / FDIC Quarterly Banking Profile / Black Friday Results / Lockdown Cost / Quite a Lot!-12/3/20

PPP Update

After a district judge ordered the release of more info on PPP borrowers, SBA provided this week the names, addresses, and precise loan amounts for each PPP borrower.

The Small Business Administration on Tuesday released detailed loan information for millions of borrowers under the Paycheck Protection Program, amid signs of fraud in the federal government’s signature coronavirus relief effort for small businesses.

The disclosure provides the names, addresses and precise loan amounts for each PPP borrower. The SBA had previously issued some detailed information for PPP loans above $150,000, although the bulk of the program’s loans were smaller than that.

U.S. District Judge James Boasberg ordered the release of more information on PPP borrowers, in response to a lawsuit filed by news organizations under the Freedom of Information Act. Plaintiffs included Dow Jones & Co., publisher of The Wall Street Journal.

Along with PPP, it includes recipients of EIDL loans as well. Here is the link.The information was already available for loans over $150K, although SBA only provided ranges, so now there is the exact loan amounts.   And all loans under $150K can now be scrutinized.   There is already some analysis of this data, and some are concluding that the funds went to too many large businesses.

Detailed loan information released by the Small Business Administration late on Tuesday showed that a mere 1 percent of the program’s 5.2 million borrowers — those seeking $1.4 million and above — received more than a quarter of the $523 billion disbursed.

There are increasing prospects for another round of PPP, but details on what it would look like are unclear, but there is a bipartisan consensus at slightly under $300 billion.Small businesses are still hurting.For example, about 30% of New jersey businesses are now closed, according to the Star Ledger.

As of Nov. 16, about 31.2% of New Jersey’s small businesses were closed compared to January, according to, a Harvard University-based data project tracking the economic impact of the pandemic.

That’s similar to the national figure of 28.9% of businesses closed.

New Jersey’s number hit a low on April 13, at the height of the pandemic’s first wave, when about 53.9% were closed at least temporarily. Numerous businesses have reopened as the state has eased restrictions, though many never did.

Broken down by industry in New Jersey, 45.6% of leisure and hospitality businesses, 29.5% of health and education services, 23.5% of retail and transportation businesses, 20.8% of professional and business services were closed compared to the beginning of the year.

Meanwhile, the IRS ruled last month that borrowers cannot deduct expenses associated with PPP loans.

In guidance issued late on Wednesday, the IRS reiterated its position that taxpayers cannot claim a deduction for any otherwise deductible expense if the payment of the expense results in forgiveness of a Paycheck Protection Program (PPP) loan because the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136

Meanwhile, it does appear that PPP forgiveness is moving along slowly.   According to a large lender in the program, they have only received PPP forgiveness on 1% of their loan portfolio, and they estimate that the whole lending community is at 5%.Only a fraction of borrowers (approximately 11%) have even applied for forgiveness.

FDIC Quarterly Banking Profile

The FDIC released its quarterly banking profile this week. The Quarterly Banking Profile is the most comprehensive overview of the performance of the banking industry because it includes all banks, both public and private. A few highlights:

  • The most depressing news for banks is the extremely difficult rate environment. Net interest margin, the difference between asset yields and funding costs, is at a record low level.     It now stands at 2.68% - a 68 basis point decline from Q3 2019. It declined by 13 basis points from the prior quarter. As loans and investments are re-priced, yields go down while there’s only so much banks can do to lower funding costs as they can’t go below zero. And while this trend may be bottoming out, it will be a while before banks get to healthy net interest margins, which means they have to find fee income and cut costs, while keeping an eye on credit costs.

  • Because of the ability to modify COVID-impacted loans without penalty, which expires at year-end, there has been extremely modest growth in problem loans through 3 quarters in 2020.    Total problem assets (Loans and leases, 30-89 days past due, noncurrent loans and leases, restructured loans and leases, and other real estate owned) stood at $240 billion through Q3 – versus $217 billion at the beginning of the year.   To put it in perspective, the last financial crisis saw a nearly 6-fold increase in problem loans from nadir to peak.   But, reserve levels have increased substantially nearly doubling for the publicly traded banks, so the market does expect these numbers to rise.

  • While the noncurrent loan rate increased by only 9 basis points, noncurrent loan balances on 1-4 loans increased by 22% - although much of that was due to banks bringing Ginnie Mae loans back on their balance sheets.    Nevertheless, the noncurrent rate for 1-4 residential mortgage loans did increase by 44 basis points to 2.53%

  • Thank goodness for mortgages. Banks are seeing decent noninterest income growth (4.5%) from the prior year, including a near 100% increase in loan sales – a big percentage of that is from mortgages. As we’ve discussed, the mortgage industry is on fire right now.

  • Deposit growth is stabilizing, and only great 0.9% from the prior quarter after growing by 7.5% in the prior one from Q1.

  • Loan growth is negative as total loan and lease balances fell by 0.8% from the prior quarter.

Overall, market conditions are challenging for banks, although many market participants do believe that bank stocks have bottomed out. Last month, the financial sector of the S&P 500 had its best month since April 2009.

Black Friday Results

Black Friday was a mixed bag this year. The period from Thursday to Sunday was disappointing, but it appears more shoppers are shopping earlier in the week, and more are doing it online.

Consumer spending fell 22.4% year over year during the period from Thanksgiving to Sunday, according to GlobalData, which uses consumer panels and data from retailers, mall owners and brands to forecast sales. Yet the numbers look much better when the broader timeframe is considered. Spending prior to the Black Friday weekend rose by 65.7% year over year.

Black Friday has traditionally been associated with busy malls. Not this year. The event drove clicks to websites, rather than footsteps at shopping malls. Spending online soared nearly 22% to $9 billion, according to Adobe Analytics. The company analyzes website transactions from 80 of the top 100 U.S. online retailers.

U.S. consumers spent an average of $27.50 per person, or roughly $6.3 million per minute, shopping online on Black Friday, Adobe found.

While some bemoan the “loneliness of one-click shopping,” the growth of online shopping isn’t necessarily just benefiting Amazon, and companies like Shopify are helping retailers compete effectively online.

Though Shopify’s operations are by nature low-profile, the company’s success has made it a linchpin in what Ben Thompson, the author of the tech newsletter Stratechery, recently referred to as the “Anti-Amazon Alliance.” (Another member of the would-be alliance, whose name recognition probably resonates more than Shopify’s: Google Shopping.) In the last few years especially, Shopify has struck up partnerships with ad giants like Facebook and taken on the kind of real-world functions that Amazon dominates. The dream for businesses that sell online has long been to have the ability to offer things like two-day shipping, easy returns, premium customer service and overall operational efficiency without having to be on Amazon’s website. Except for established juggernauts like Nike, individual businesses seem unlikely to realize that vision. But in creating software infrastructure that can be shared between merchants, Shopify has not only strengthened the competitive prospects of existing e-commerce businesses; it has also facilitated the emergence of new ones — including, as it turns out, my own.

For those worried about Amazon dominating retail, Shopify has a behind the scenes approach that allows retailers to leverage their e-commerce platform.

Lockdown Cost

So, what’s been the economic cost of the lockdowns this year? Researchers have come up with a figure of $6 million per live saved.

There's little doubt that government-ordered business shutdowns to stop the spread of Covid-19 damaged the US economy, but the exact cost has not been clear.

Researchers from HEC Paris business school and Bocconi University in Milan have reached a sobering calculation: the closures beginning at the pandemic's onset in March through May saved 29,000 lives -- at a cost of $169 billion, or around $6 million per person.

"Governors saved lives on the one hand, but reduced economic activity on the other," Jean-Noel Barrot, a professor at HEC Paris and member of France's National Assembly, told AFP.

Interesting analysis.Other studies have concluded that these restrictions had more dramatic results, as a June study in Nature found that cases would have hit 5.2 million in early April without social distancing and busines restrictions, versus the 365,000 actual.For what it's worth the Consumer Product Safety Commission uses a figure of 8.7 million, the EPA 7.4 million, and the FAA at 9.6 million.The data is early and somewhat inconclusive, but expect academics to continue to mine the data and see which approaches to lockdowns had the best results.

Quite a Lot!

A one-acre parcel in Beverly Hills has been sold 6 times since 2007 and 4 times since 2016. David Geffen just flipped it for a $4MM profit in just over a year.

The property was owned by late SoCal real estate developer Nathan Shapell until his heirs sold it in 2007 for about $7 million to British entrepreneur Peter Jones who held on to it until early 2013 when it was sold for $12.5 million. The buyer, a corporate entity tied to East Coast-based financier Ed Parisi, tore the existing house down and sold off the newly vacant property in March of 2014 for $15 million to Emirati businessman Khadem Al-Qubaisi.

Turns out Al Qubaisi was neck deep in the sprawling, multibillion-dollar 1MDB scandal — he was sentenced last year to 15 years in prison for corruption and money laundering — and as a result the Department of Justice stepped in to orchestrate a 2016 sale for $22.4 million to private equity billionaire Alex Soltani, the same guy who’d previously paid $32 million for Dr. Dre’s former house above the Sunset Strip and tore it down to make way for another even more lavish house.

Soltani owned the Trousdale Estates property for just two months before he flipped it for $32 million, an eye-watering profit of almost $10 million, to Thai businessman Sumet Jiaravanon whose estimated $4.3 billion fortune means he can comfortably afford to weather the $2 million loss he took on the property when it was sold to Geffen in mid-2019 for exactly $30 million

Now, it's in the hands of a real estate developer, who is likely to build a house and try to sell a house for $100 million plus. has the lot and the prior development plan.

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