Home Business How small NJ bank Cross River distributed $5.4B in PPP funds

How small NJ bank Cross River distributed $5.4B in PPP funds

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JPMorgan Chase’s closest local rival in the race to lend out US coronavirus loans wasn’t Citigroup or BNY Mellon — it was a tiny, tech-savvy lender based in New Jersey.

Jamie Dimon’s megabank handed out nearly $29 billion of government money to small businesses during the throes of the pandemic shutdown — the most of any US bank — and bagged an estimated $864 million in fees.

But Cross River Bank of Fort Lee, NJ, with net assets of just $2.5 billion, says it partnered with more than 30 tech firms to create an agile lending platform that doled out nearly $5.4 billion in loans.

The privately held lender snagged $160 million in fees, according to S&P Global, dwarfing the bank’s entire net revenue of $96 million last year.

The eye-popping volume made Cross River the 13th most active of all US lenders participating in the US government’s Paycheck Protection Program. Citi and BNY didn’t even make the top 15.

The fees have been controversial because the loans are backed by US taxpayers, making them virtually risk-free for the banks. While Chase, Bank of America and Wells Fargo have pledged to distribute their PPP profits to distressed small businesses who missed out, thousands of other banks are free to keep their winnings.

Cross River, founded in 2008 by 53-year-old, French-born Chief Executive Gilles Gade, said the secret to its PPP success is its DNA as a community bank that serves a community of financial tech companies.

Indeed, a bank spokesman said it will share its PPP windfall with a slew of fintech partners that are clients. Those include payroll app Gusto, the Kabbage lending platform, payments startup Veem, and Intuit, the maker of the QuickBooks accounting software — all of which funneled their customers to Cross River during the crisis.

“We said how much can we automate? Can we partner with tech companies on originations?” recounted the Cross River spokesman, who asked not to be named. “And we thought, if we can, we should.”

Cross River has just 320 employees, and when COVID struck, only 10 of them were underwriters. Sensing the moment, Gade had his team dramatically shift almost its entire focus to PPP lending.

While many small banks ended up with tellers and salespeople working 20-hour days, Cross River’s glitch-free hookups with its fintech partners enabled it to process applications at a much higher speed.

Cross River has made 134,472 PPP loans, more than US megabanks like US Bank, Truist Bank, and PNC. KeyBanc, which has about $156 billion in total assets, made just over 41,000 loans in the same period.

Cross River’s average loan size was under $40,000, by far the smallest of the biggest PPP lenders and an indication that the bank capitalized on SBA rules that give higher fees on smaller PPP loans.

Cross River confirms that it will hold onto much of its government-sponsored capital, using it as a buffer to address any future economic fallout from the pandemic. The bank has hired 22 people during the COVID crisis, and has purchased roughly $1 billion in PPP loans originated at other banks.

“We’re committed to growth,” said the spokesman.

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