Opening a community bank at the start of a recession sounds rough. But starting one just as the government authorizes low-interest, forgivable loans to harried small business owners may be a brilliant business strategy.
That’s what happened for CEO Ramsey Hamadi and Triad Business Bank, which closed its $52 million of financing and received regulatory approval to open on March 16, just days before the Paycheck Protection Program was approved.
As a result, the startup bank shifted from working on a $65 million pipeline of conventional loans to focus 100% on the unprecedented government-subsidized effort. He sent out a couple of emails to the bank’s directors, who are mostly small business owners, and they helped spread the word about the new bank in town. That was about it for marketing efforts, Hamadi says.
Three months later, the bank has originated 350 PPP loans totaling $108 million, generating $3 million in unexpected fee income. Jobs of about 12,000 employees were affected by Triad’s loans, he says. It’s also created significant goodwill and a batch of new small business owners who moved deposits from their previous banks, some of which didn’t do an effective job making PPP loans.
“We couldn’t have had a better introduction to the market,” Hamadi says.
The bank’s organizing principle is that the Triad region needs a strong locally based institution after virtually all of its predecessors were acquired — or in the case of Truist Financial, moved its headquarters from Winston-Salem to Charlotte. (Hamadi adds that he thinks Truist did an excellent job with its PPP program.)
So the PPP was a great vehicle to market Triad, which is owned by more than 300 mostly local investors and expects to be listed on the over-the-counter stock market later this year.
Hamadi, a former CFO at NewBridge Bank before its sale to Yadkin Financial, had projected six initial quarters of losses, but recognition of PPP fees may lead to an earlier profitable period, he says. For now, the bank’s 26 employees are back working on a pipeline of about $100 million in loans distinct from the PPP, he says.
Asked his view of the Triad economy, the CEO says most manufacturers and contractors appear to be doing well. The hospitality industry has been hit the hardest, of course.
“We were spot on with our assessment that there was a need for a specialized banking institution here to lend to small and mid-sized companies that have local leadership,” he says.
One other note about the PPP: Hamadi says the feds were supposed to pay banks their fees within 10 days of originating the loans. But that was impractical given that the PPP involves 4.5 million loans and the U.S. Small Business Administration is a relatively small agency that couldn’t handle such volume. The banks will get their money, just not as quickly as expected, he says.