Articles · Lenders and fintech
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How Much Did Customers Bank Make From Pandemic Relief?
The SBA owed Customers Bank about $558 million in processing fees for the 249,661 PPP loans it made: 8.8 cents per dollar lent, against 4.8 cents for the program as a whole. Four-fifths of it came from 2021 loans, most of which paid a flat $2,500. The bank's parent, Customers Bancorp, told shareholders it earned "close to $350 million" in fees, "close to 8 times higher than what we initially expected." Of the SBA's money, $58 million went on to Kabbage, which marketed and processed tens of thousands of the bank's loans, under a settlement a bankruptcy court enforced in 2023.
I. Three numbers, one of them the bank's
The fee figures below are modeled loan by loan, the same way as Womply's fees. Customers Bancorp, a listed company, also reported a fee figure of its own.
| Question | Figure | Source | Kind |
|---|---|---|---|
| What did the SBA owe Customers on its 2020 loans? | $111.5 million on 68,765 loans | SBA loan-level data, priced loan by loan | modeled |
| And on its 2021 loans? | $446.7 million on 180,896 loans | SBA loan-level data, priced loan by loan | modeled |
| What did Customers owe Kabbage, its processing partner, on "Round 2" loans? | about $65.5 million accrued; settled at $58 million | Form 8-K, Oct. 27, 2022; bankruptcy court order, March 28, 2023 | company filing; court order |
| What does Customers say it earned in fees? | "close to $350 million of deferred origination fees from the SBA" | 2022 proxy statement | company filing |
| What did its PPP loans bring in, interest and fees together? | $65.5 million (2020), $279.2 million (2021), $79.4 million (2022): $424.1 million | Forms 10-K for 2021 and 2022 | company filing |
The modeled total, $558.2 million, is the 12th-largest among the 4,688 lenders in the SBA file (PPP lenders by estimated fees). The series ranking of fee collectors adds agents and contractors, and ranks a company on its own published fee figure where there is one. For Customers that is the proxy statement's "close to $350 million," which puts it 17th, in a ranking led by Womply (ranked on its billings and covered in its own piece); the nearest are Guidehouse, an SBA contractor, at $352.4 million and the Goldschmitt-CRI joint venture at $339.4 million. The model less Kabbage's share, $492.7 million to $500.2 million, would have put it 11th. The modeled figures are fees owed, before the cost of making the loans.
The bank's own figure is lower. Its accounting policy defers "origination fees, net of direct origination costs," so the $350 million is what remained after costs the filings do not itemize (2021 Form 10-K).
II. Who paid Customers, and for what
The SBA paid the lender of record a processing fee on every PPP loan and guaranteed the loan in full. For 2020 loans the fee was 5 percent of loans up to $350,000, 3 percent up to $2 million and 1 percent above that (85 FR 20811). For 2021 loans of $50,000 or less, the fee became the lesser of 50 percent of the loan or $2,500 (86 FR 3692; 86 FR 3712).
Say a house painter with no employees borrowed $12,000 in June 2020. The SBA paid the lender $600. Had he borrowed the same $12,000 in March 2021, it would have paid $2,500, a fee of 21 percent of the loan.
Customers made that kind of loan. Its PPP loans averaged $25,355, and 91.9 percent of them were for $50,000 or less (Customers Bank lender page). Its 2021 loans averaged $20,435. Of those 180,896 loans, 129,785 fell between $5,000 and $50,000 and paid the flat $2,500 each: $324.5 million, 58 percent of everything the model says the SBA owed the bank over two years. Another 40,487 were under $5,000 and paid half the loan.
| Customers' own PPP loans | Loans | Dollars | Modeled fees | Cents per dollar |
|---|---|---|---|---|
| 2020 | 68,765 | $2.63 billion | $111.5M | 4.2 |
| 2021 | 180,896 | $3.70 billion | $446.7M | 12.1 |
| Both years | 249,661 | $6.33 billion | $558.2M | 8.8 |
On the same model, JPMorgan Chase's book came to 4.1 cents per dollar, Bank of America's to 4.3 and Cross River Bank's to 8.0 (PPP per-lender totals; fee schedules by vintage). The nonbank lenders that worked with Womply and Blueacorn came out higher still: Prestamos 15.4 cents, Capital Plus 15.1, Benworth 16.5.
The small loans came later. Through April 16, 2020, the SBA file shows 1,153 Customers loans for $364.8 million, an average of about $316,000. Kabbage, the Atlanta online lender, signed a software-services agreement with Customers on April 24, 2020. Under a second agreement three days later it would market Customers' PPP loans, "process PPP Loans as CUBI's agent" and service them afterward (KServicing disclosure statement, Doc. 63 at 21). CUBI is the parent company's stock ticker.
III. The partners' share
Kabbage. Kabbage's bankruptcy disclosure statement counts about 58,000 Customers loans, $1.77 billion, in its "Round 1" and 41,000, $818 million, in "Round 2," and dates the relationship "from April 2020 to May 2021" (Doc. 63 at 19, 26). The SBA file lists 68,765 Customers loans for $2.63 billion in 2020. Kabbage's fees were to be paid "at or near the time of origination." For the Round 2 loans, Kabbage said, Customers had kept back "approximately $65 million in loan referral and servicing fees" for over 20 months. Kabbage sued in federal court in Atlanta on May 25, 2022, withheld about $34 million in payments due to the bank, and filed for bankruptcy on October 3 (Doc. 63 at 21, 26–27).
Customers settled on October 27. Its 8-K reported "a reduction of the approximately $65.5 million in previously accrued fees payable by the Bank to KServicing to $58 million," and added that "the final settlement of this matter is not expected to have a material financial impact." The parties then disagreed about how much of the $58 million the bank still owed in cash. On March 28, 2023, Judge Craig Goldblatt fixed the cash payment at $22,055,340 (order); Kabbage's holdbacks, $35,944,660, made up the rest (settlement payment calculation). What Customers paid Kabbage for the 2020 loans is not in any filing we read.
The House Select Subcommittee's December 2022 report names Customers Bank twice, both times as a Kabbage partner. Kabbage "signed contracts for round one of the PPP to market, process, and service PPP loans for two banks, Cross River and Customers Bank" (p. 63). Then: "Both Cross River and Customers Bank stopped working with Kabbage after the PPP's first round" (p. 69; "We Are Not the Fraud Police"). Kabbage's own filing counts 41,000 Customers loans in Round 2, and the SBA file lists 8,114 loans that Kabbage made in 2021 and Customers services.
Other banks. For the 2021 round Customers sold its application system to other lenders. "There will be a landing page branded with the bank's logo," Sam Sidhu, then vice chair, said in a January 2021 release. "The customer will not know it isn't their bank until late in the process" (Customers Bank, Jan. 12, 2021). By February, he told Banking Dive, more than 300 banks were using it. "Because it's a referral relationship, where we pay the bank a referral fee, and then we get paid by the SBA, the origination fee, it's reasonably simple" (Banking Dive, Feb. 4, 2021). On that description Customers, not the referring bank, collected the SBA fee. The referral fees it paid are not public.
The gap. In July 2020 Customers said its first $5.2 billion of PPP loans, made "directly or through fintech partnerships," would generate "an estimated $100 million in origination fees" (second-quarter 2020 results). Its 2022 proxy statement reported "close to $350 million." The model's gross figure is $558.2 million. The difference, about $208 million, is our subtraction. On the accounting policy quoted in section I, it would include the direct origination costs the bank netted out, along with any fees the model counts that were never paid; no filing breaks them down.
IV. 358,000 loans, 249,661 of them its own
Customers counted more loans than the SBA file gives it. Its 2022 proxy statement says the company "funded, either directly or indirectly," about 358,000 PPP loans totaling $10.3 billion. The SBA file lists 249,661 loans for $6.33 billion with Customers as lender of record. It also lists 107,999 loans, $3.94 billion, made by other lenders with Customers as the servicing lender:
| Lender of record | Year | Loans | Dollars |
|---|---|---|---|
| Readycap Lending | 2020 | 32,926 | $2.41 billion |
| Leader Bank | 2021 | 33,315 | $530 million |
| WebBank | 2021 | 21,336 | $529 million |
| Amur Equipment Finance | 2020–21 | 8,902 | $229 million |
| Kabbage | 2021 | 8,114 | $161 million |
| The Enterprise Center Capital Corporation | 2021 | 3,351 | $84 million |
| Four others | 2020–21 | 55 | $3.5 million |
Add them and the file gives 357,660 loans and $10.27 billion, the proxy's totals. The 2021 slice matches too: 255,904 loans and $5.23 billion, against the proxy's "about 256,000 PPP loans totaling $5.2 billion in 2021." The 2021 10-K says Customers had its PPP loans "directly or through fintech partnerships and acquisitions." Kabbage's filings record one such sale: loans Kabbage made and sold to Customers under an agreement of February 2, 2021. What Customers paid for these 107,999 loans, and what it earned on them, is not in its filings.
The series credits their fees to the lenders of record, as the SBA file does. Ready Capital's filing points one block of them elsewhere. Its 2020 annual report says it "sourced and underwrote approximately $2.5 billion of PPP loans, which were sold to the third-party" under a lender service provider agreement, for a fee of "one-half of the total fees received by the third-party from the SBA, less any agent fees," $43.3 million in all (Ready Capital Corp., Form 10-K for 2020). It does not name the buyer. The SBA file lists Customers as servicer on 32,926 of Readycap's 2020 loans, for $2.41 billion. If Customers was the buyer, the model's $97.2 million in fees on those loans went to Customers first, and its modeled total would be $655.4 million. That is an inference from the servicer field; the ranking keeps the fees with Readycap.
V. The Federal Reserve's money
A PPP loan paid the lender 1 percent interest. The Federal Reserve's Paycheck Protection Program Liquidity Facility made non-recourse loans against PPP loans, at 0.35 percent. Pledged loans also dropped out of the assets on which the bank's leverage ratio was measured (2021 Form 10-K).
Customers funded most of its 2020 PPP book this way. Its total assets went from $12.0 billion on March 31, 2020 to $17.9 billion on June 30 (second-quarter 2020 results). At the end of 2020 it owed the facility $4.4 billion, against $4.6 billion of PPP loans. It borrowed an average of $2.5 billion in 2020 and $2.6 billion in 2021, at 0.35 percent. It repaid the facility in full in 2021 "due to increased PPP loan forgiveness and funding from deposits" (2020 Form 10-K; 2021 Form 10-K).
Forgiveness also sped up the fees. Customers booked each loan's net fee over the loan's life, and forgiveness "accelerated the recognition of net deferred loan origination fees." In 2021 its PPP loans, carrying a 1 percent coupon, yielded 5.46 percent. The company reports a non-GAAP line for PPP net interest income, net of the related borrowings: $54.6 million in 2020, $261.3 million in 2021 and $60.4 million in 2022, $376.3 million in all (2021 and 2022 Forms 10-K). For 2021 it reported core earnings of $343.6 million, and $148.5 million "excluding PPP loans" (2022 proxy statement). By the company's own measure, the PPP book supplied $195.1 million of the year's core earnings, 57 percent.
VI. No PPP penalty on record
A week after the House report, the SBA suspended Womply and Blueacorn and said it would investigate eight lenders, Customers Bank among them, without suspending them (Banking Dive, Dec. 9, 2022). We found no public result of that investigation.
The bank's federal supervisor is the Federal Reserve. The one enforcement action against Customers that we found, a Fed written agreement of August 5, 2024, concerns risk management and anti-money-laundering and sanctions compliance; its recitals describe the bank's digital-asset strategy and a tokenized payments platform. It does not mention the PPP (written agreement). No PPP charge, penalty or settlement against Customers appears in any record we read.
The 10-K filed in February 2022 lists the program among its risk factors: "Considering our immediate response to originate PPP loans, the loans originated under this program may present potential fraud risk, increasing the risk that loan forgiveness may not be obtained by the borrowers and that the guaranty may not be honored."
VII. What Customers said
"Into this gap stepped the fintechs" (January 12, 2021 release), describing sole proprietors and "gig economy" workers without bank relationships. The same release credited Sam Sidhu with engineering "a hybrid bank-fintech partnership." The 2021 10-K says Customers "partnered with several leading fintechs" and does not name them. The one that appears in the court records and the House report is Kabbage.
"Funding more PPP loans than Bank of America, Wells Fargo, and PNC" (2022 proxy statement). For 2021 the SBA file agrees: Customers made 180,896 loans as lender of record, Bank of America 147,547, Wells Fargo 87,699 and PNC 45,441. Over both years Bank of America made 491,034 and Wells Fargo 280,717.
"Preserving about 1 million jobs" (July 30, 2020), on about 100,000 loans. Borrowers on the 101,756 loans of 2020 that Customers made or services reported 642,546 jobs on their applications.
"A patriotic obligation" (the January 12, 2021 release, on how Jay Sidhu saw it). Sam Sidhu, in the same release: PPP was "an opportunity for us to build more of a national presence and a national brand among small businesses and to acquire longer-term customers."
In February 2021 the compensation committee gave its five named executive officers, among other executives, one-time awards for the bank's PPP work. Jay Sidhu, chairman and chief executive, received $1,250,000 in cash. Sam Sidhu received 250,000 stock options valued at $3,116,421. The committee put the total, $5.2 million, at "approximately 1.5% of the total deferred fees earned from the PPP loans" (2022 proxy statement).
Method, and what would change the numbers
Modeled fees. Each loan in the SBA's PPP loan-level file (release of September 30, 2024) is priced under the fee rule for its approval date and draw, on its current approval amount; loans are counted by approval year. The result for Customers, $558,205,640.89, matches the published lender page to the cent. Pricing on the initial approval amount instead gives $558.15 million. The model assumes the SBA paid a fee on every loan in the file, so it measures fees owed, not received.
Ranked figure. Customers is ranked on its own published figure, "close to $350 million" of deferred origination fees (2022 proxy statement), a net figure under the accounting policy in section I. The executive award arithmetic, $5.2 million at about 1.5 percent, implies about $347 million, which gives the same rank. The proxy counts loans Customers "funded, either directly or indirectly," so the figure may include fees on loans it bought; the filings do not say.
Comparison range. The model less Kabbage's share: $65.5 million accrued or $58 million settled, on what Kabbage calls "Round 2" loans, gives $492.7 million to $500.2 million. Kabbage gives the relationship's dates as April 2020 to May 2021, and the loans it sold to Customers date from February 2021, so we read "Round 2" as the 2021 program; the filing does not define it. Kabbage's fees on earlier loans, referral fees to banks using the Customers platform and any other partner fees are not public, so the range is an upper bound.
Interest and funding. The 1 percent interest and the Federal Reserve funding are shown separately in section V and are not counted in the fee figures. Customers' filed PPP income figures bundle interest with fees.
Loan counts. Round-one and yearly counts are by SBA approval date among loans still in the September 2024 file. Loans with Customers as servicing lender and another lender of record are counted from the file's servicing-lender field.
What is not public. Customers' direct origination costs and what was in them; what it paid Kabbage for 2020 loans; the referral fees paid to banks on its platform; the terms on which it came to service 107,999 loans made by other lenders; who bought the loans Ready Capital underwrote in 2020; and the result of the SBA's 2022 investigation.
Sources: SBA PPP loan-level data (Sept. 30, 2024), priced under 85 FR 20811, 86 FR 3692 and 86 FR 3712 (Customers Bank lender page; PPP lenders by estimated fees; PPP per-lender totals; fee schedules by vintage); Customers Bancorp Forms 10-K for 2020, 2021 and 2022; Form 8-K, Oct. 27, 2022; proxy statement filed April 20, 2022; second-quarter 2020 results (Form 8-K exhibit, July 30, 2020); Customers Bank release, Jan. 12, 2021; Banking Dive, Feb. 4, 2021 and Dec. 9, 2022; In re Kabbage, Inc. d/b/a KServicing, Bankr. D. Del. No. 22-10951 (case filings): disclosure statement (Doc. 63, Oct. 5, 2022), settlement payment calculation (Doc. 671-4) and order enforcing the settlement (Doc. 732, March 28, 2023); House Select Subcommittee on the Coronavirus Crisis, "We Are Not the Fraud Police" (December 2022); Ready Capital Corp., Form 10-K for 2020; Federal Reserve written agreement with Customers Bancorp and Customers Bank (Aug. 5, 2024). Related: Customers Bank profile; Kabbage / KServicing; How Much Did Womply Make From Pandemic Relief? The House report is a partisan staff document released by the Democratic majority's staff in the final weeks of the 117th Congress, with no public hearing and no sworn testimony; an arbitrator refused it as "rank hearsay" that relied on companies then in arbitration with Womply, and a federal judge declined to take judicial notice of its findings (about the report).