Barring further legislative action, the approval window for new Paycheck Protection Program Loans came to a close on August 8, 2020. Since the original launch on April 3rd following the CARES Act, 5,212,128 small businesses have borrowed $525 billion under the Paycheck Protection Program. On August 11th, the SBA published a Paycheck Protection Program Report with additional details.

The overall average loan size under the Paycheck Protection Program was $101 thousand, and this average steadily fell during the lifetime of the Paycheck Protection Program. But even that average number emphasizes the statistical differences between median and mean. While the average loan was just over $100 thousand, over 68% of the loans were for $50 thousand or less (and over 81% of PPP loans were smaller than the average PPP loan).

From the launch of the Paycheck Protection Program (“PPP”) on April 3, 2020, through June 6, 2020, 5,458 lenders have approved loans to over 4.5 million small businesses for over $511 billion dollars. On June 7, 2020, the SBA published an updated Paycheck Protection Program Report with additional details.

To put some scale around the size of the program, for the last five years, the SBA has averaged annual total personal loans approved under its 7(a) small business loan program (the same umbrella under which PPP loans fall) of roughly $17.4 billion. Accordingly, in April and May of 2020, the SBA has processed roughly 29 years worth of SBA loans. While the rate of PPP loans being improved has slowed greatly, as discussed more below, this still highlights the size of the program and the strain under which the SBA has been operating.

Average Loan Size

The overall average size of a PPP loan is now approximately $113 thousand. This is down significantly from the first round of PPP funding, where the average approved PPP loan was $206 thousand. Based on the formula for PPP lending, this means the average borrower likely had monthly payroll costs of approximately $45 thousand.

Of course, the average size of PPP loan is certainly affected by a relatively small number of larger loans. As reflected above, the majority of loans made were for loans of less than $50 thousand (reflecting monthly payroll costs of less than $20 thousand). Over 85% of the total PPP loans made were for less than $150 thousand, and over 93% of the total PPP loans made were for less than $350 thousand. While significant ink (digitally and otherwise) has been spilled on larger PPP borrowers, less than 2% of the PPP loans made were for more than $1 million.

Whenever discussing bank charter types, I’m reminded of a comparison made by Walt Moeling. Walt would always say that the bank charter choice is like choosing between a Ford and a Chevy truck. There are strong, die-hard advocates for the superiority of one over the other. But either one is functionally adequate, and will enable you to get from location a to b. Of course, neither is going to be confused for a Lamborghini or a Maserati either.

Looking at the breakdown of charters as of the beginning of 2019, while the majority of all U.S. banks are state, non-member banks (i.e. with primary federal supervision by the FDIC), each charter choice appears to continue to have its advocates.

The Office of the Comptroller of the Currency, the primary federal prudential regulator for national banks, has earned a reputation as the regulator of the largest banks, but the underlying data doesn’t necessarily support that viewpoint. While all of the four largest U.S. banks are national banks, in all asset classifications, there remains a variety of bank charter, showing that no one charter type is necessarily better based purely on asset size.

The landscape of the banking industry in the United States continues to be highly concentrated when looking at asset sizes, but with the vast majority of the depository institutions continuing to be smaller institutions. As of June 30, 2019, approximately 84% of the assets held by depository institutions are held by less than 3% of U.S. banks.

85% of the banks in the United States, or 4,511 institutions, have less than $1 billion in total assets. 73% (or 3,855 institutions) have less than $500 million in total assets. 53% (or 2,799 institutions) have less than $250 million in total assets. 23% (or 1,230 institutions) have less than $100 million in total assets.

The concepts reflected above aren’t new. We showed the same thing in our Landscapes as of the end of 2016 and the end of 2017. In both of those reports, we attempted to look at the historical trends of consolidation (and that trend certainly continues). But this year, we’re taking a different tack and trying to dig deeper into the FDIC data. All of the data presented is based on the underlying data in the FDIC’s Statistics on Depository Institutions as of June 30, 2019.

As with all statistical reports, I’m well aware that all statistics can be massaged, with relatively innocuous adjustments, to tell different stories. Certainly, extremes can disrupt averages and otherwise minimize the value of the outcomes (or suggest that median or modal outcomes are more important than mean outcomes). Even if you never took a statistics class or have blocked all statistics concepts from your mind, I encourage you to check out Planet Money’s Modal American episode. The modal U.S. bank would have total assets of between $100 million and $250 million, would be taxed as a C-corporation, have a holding company and be a state-chartered, non-member bank. By comparison, the “average” bank would be $3.4 billion and the media bank would be the $228 million Bank of the Lowcountry, in Walterboro, South Carolina.

I am also reminded that no bank desires to be “average,” nor are investors generally looking for an “average” return. That said, I believe there is value in understanding what average is, and recognizing that expectations should be different for different institutions.