These big banks were the least likely to serve Bay Area communities … – San Francisco Chronicle


The economic crisis triggered by COVID-19 pummeled small businesses across the nation, especially those without safety nets and access to credit. To alleviate those struggles, Congress established the Paycheck Protection Program, designed to provide forgivable loans to needy businesses at no interest.
The federal government intended the program, which started in March 2020 and sunset last month, to prioritize businesses in underserved markets, including socially and economically disadvantaged areas.
But the initial rollout neglected the neediest of small businesses, especially those in underserved communities, with many lenders hurrying first to aid their wealthier customer base. The U.S. Small Business Administration introduced reform measures in response, which led to more businesses in lower-income and diverse neighborhoods getting loans in subsequent rounds of funding.
The damage, though, had already been done, said Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition, a nonprofit group advocating for banking equality and accountability. Many minority-owned businesses had shuttered, unable to weather the storm without help.
“That first phase was critical, and unfortunately, the government and banks did what they have been doing for a long time, which is redlining,” she said, referring to the historical and systematic denial of services, including banking and housing, to certain communities through discriminatory tactics.
The same disparities were apparent in the Bay Area, according to a Chronicle analysis of more than 100,000 PPP loans. It showed some lenders processing a much larger share of PPP loans to businesses in higher-income neighborhoods or predominantly white Census tracts, when compared to areas that are lower-income or had a higher percentage of Black and Hispanic residents.
The review was based on the records of 66 lenders who administered 100 or more Bay Area loans and granted at least one loan to a business in each of the Bay Area’s nine counties. These top lenders accounted for more than 90% of all loans in the Bay Area. Census tracts are small geographical areas that generally have a population between 1,200 and 8,000 people. The Chronicle designated higher-income tracts as areas with a household income of $150,000 or higher, and lower-income tracts as those with an income of $75,000 or lower.
The data offer a glimpse into which businesses these banks typically serve, as firms with existing banking relationships tended to be prioritized by banks for PPP loans, according to analysts and economists across the country. This was especially true in the early stages of the program, before many of the reform measures were instituted.
Experts say the data reflects generational failures of certain banks and their regulators to tighten the ever-widening gaps in lending and credit inequality, which the pandemic only served to exacerbate. Solutions to the disproportionate ways in which businesses were helped — and not helped — through PPP lie far beyond understanding this one program, but navigating the complexities of the root causes, they say.
“I don’t think any of us who have studied this issue for a long time were surprised (at) what happened with the banks,” Gonzalez-Brito said. The banking industry has historically discriminated against people of color, she said, and the pandemic exacerbated these inequities.
The lenders who administered the greatest share of loans to higher-income Census tracts were Silicon Valley Bank at 37% and First Republic Bank at 34%, compared with 22% for all banks.
Silicon Valley Bank is a specialty bank that works with innovation economy entrepreneurs, investors and the premium wine industry, said spokesperson Eileen Nolan. “We are not a retail bank and we work almost exclusively with companies in the tech and life sciences industries.”
When PPP first became available, the bank surveyed its clients to determine need and eligibility, and extended loans based on that analysis, she said. It also invited non-clients to become clients and apply for a PPP loan. However, “We recommended companies work with their existing banks for speed.”
Nolan said the bank’s own analysis of PPP data from 2020 showed that 64.5% of loans in the Bay Area were made to businesses in predominantly minority Census tracts. Similar trends can be observed in The Chronicle’s analysis, which shows the bank was one of the top lenders to businesses in predominantly Asian tracts.
“Because our technology and life science clients in the Bay Area tend to be based in higher-income Census tracts, we are actively working to expand our support to more diverse audiences and geographies within and beyond the sectors we serve,” Nolan said.
Major national banks, including Bank of America, Wells Fargo and JPMorgan Chase, also awarded loans at disparate rates. Bank of America was responsible for the most loans in the Bay Area, processing more than 20,000 for $1.8 billion. The bank, the data show, delivered a higher-than-average percentage of loans to businesses in higher-income Census tracts, but a lower-than-average share of loans to predominantly white tracts.
In their efforts to reach underserved communities, though, these and other major banks lent their borrowing power to Community Development Financial Institutions, or CDFIs, which are smaller financial institutions dedicated to helping disadvantaged communities but don’t have the same capacity. These efforts don’t show up in their PPP data.
“The way that the (PPP) program was structured, you could almost predict that … those outcomes would have happened, at least initially,” said Jeff Bellisario, executive director of the Bay Area Council Economic Institute. With banks put in charge of quickly disbursing an enormous amount of federal dollars, he said, “People didn’t know how to access them or they just didn’t have the connections to really make the process easy.”
A Bank of America spokesman, Bill Halldin, said the company provided more than $800 million in lending power to CDFIs. He noted that the bank was the first major one in the country to accept PPP applications — and received 100,000 online on the first day.
Christina Della Buono, a Chase spokesperson, said that more than 32% of the bank’s PPP loans nationwide in 2020 went to small businesses in communities of color. The bank did Spanish-language marketing to boost applications, including in the San Francisco-based El Reportero.
David Kennedy, a Wells Fargo spokesperson, said that in addition to the bank’s PPP participation, it engaged in philanthropic efforts in the Bay Area to support underserved small businesses, including by contributing to Mayor London Breed’s Give2SF Fund in March 2020.
“What we’ve learned from the pandemic is how important it is for the entire financial system to work together to reach those in need — the larger banks, the nonprofit lenders, and nonprofits that serve small businesses all have a role to play in helping owners stay open and we can scale up to meet the need if we collaborate,” he said.
Existing banking relationships, which low-income and minority business owners are far less likely to have, played a key role in which communities were served by certain banks and which weren’t, economists and analysts said.
“You almost needed to have an existing banking relationship in order to really have good access to the initial tranche of available loans,” Bellisario of the Bay Area Council Economic Institute said. “It was incumbent on the banks to get the dollars out. So many of those initial dollars went into entities that had initial existing banking relationships.”
Meanwhile, the federal agencies charged with overseeing the process — the Small Business Administration and the Department of the Treasury — failed to issue meaningful guidance to lenders on prioritizing underserved markets until the first round of the program was almost over, the congressional subcommittee investigation found.
Without that guidance, many lenders served bigger loans to wealthy customers first, in some cases at “more than twice the speed of smaller loans for the neediest of businesses,” according to the investigation. “As a result, small businesses that were truly in need of financial support during the economic crisis often faced longer waits and more obstacles to receiving PPP funding than larger, wealthier companies.”
At San Francisco-based First Republic Bank, managing relationships with customers has been a crucial and celebrated part of its success. The private bank and wealth management company caters to a high net-worth clientele, providing concierge-style services.
In 2020, First Republic Bank sent about $913 million in PPP loans to more than 4,500 Bay Area businesses, 34% of which went to Census tracts with a median household income of $150,000 or more — second-highest of the 66 banks The Chronicle analyzed.
First Republic was also among the lenders to have sent the largest percentage of loans to predominantly white areas and the smallest share to areas where more Black, Hispanic and low-income residents live. Data show the businesses that received the most loans through First Republic Bank were lawyers’ offices, software publishers, real estate agents and brokers, and consultants.
Through a spokesperson, the bank declined to comment.
Some other lenders stood out in the data for having sent a significantly larger-than-average share of their PPP loans to the least diverse Census tracts. These include San Rafael-based Westamerica Bank and Redwood Credit Union of Santa Rosa.
Both banks — regional banks with locations in less diverse counties — sent 65% of their Bay Area loans to Census tracts where 60% or more residents are white, compared to an average of 30% among all PPP lenders serving the region.
A Westamerica Bank spokesperson, Rob Thorson, told The Chronicle that the Federal Reserve has found the bank’s lending practices in general to be satisfactory. He said that through internal compliance reviews, “We’ve concluded that our PPP lending improved the level of our community development loans.”
Redwood Credit Union approved nearly all of the eligible PPP applications it received, Tracy Condron, a spokeswoman, said in a statement. “Our loan approval process was the same for all applicants and all communities,” she said, “And the vast majority of applicants did not state their ethnic background.”
From the beginning, the complexity of applying for PPP loans was not matched by the outreach necessary to make the process accessible and understandable for underserved businesses, said Jacob Denney, economic justice policy director for SPUR, a nonprofit policy research organization based in San Francisco.
“Every time we go through these economic shocks, whether it’s the pandemic or the Great Recession, what’s exposed over and over again is the fact that the whole country takes a step back, and in communities of color that are exposed to the greatest economic harm, they take 10 steps back,” he said.
Losses were felt across the board during the early stages of COVID-19, but Black businesses were hit the hardest, according to research by UC Santa Cruz economist Robert Fairlie. The number of Black-owned businesses dropped by 41% nationwide, while Latinx-owned businesses fell by 32%, compared with a 17% drop in white-owned businesses.
“These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality,” the report said.
The Small Business Administration said it has taken many measures to increase disadvantaged communities’ access to the Paycheck Protection Program, some of which have resulted in improvements.
One of the biggest ways in which the Small Business Administration — and lenders — sought to lessen disparities was by empowering and giving lending capacity to Community Development Financial Institutions. An example from the Bay Area is Opportunity Fund Community Development, which distributed 32% of its loans to areas with a higher concentration of Black residents — tracts where 7% or more of the residents are Black — and 36% to Hispanic — 30% or more of the residents are Hispanic — areas, compared with averages of 19% and 20%, respectively.
Supporting CDFIs helped, but they are but a small part of the ecosystem, experts said. Short-term lump sum investments into those institutions do not help address structural inequalities in the banking system. What’s needed are meaningful long-term investments in programs to help reverse generations-long trends, explained Denney of SPUR.
“There isn’t a silver bullet to this, because what we’re talking about is generations of exclusion and harm of really intentional economic harm that has deprived communities of color from accessing resources and achieving economic stability,” he said. “And you can’t fix that with one program.”
Methodology: The Chronicle analyzed data from Geocodio, a geocoding service, that geocoded business addresses from the PPP loan data provided by the Small Business Administration, as of Dec. 1, 2020.
We filtered this dataset to businesses located in the nine Bay Area counties, and further filtered to analyze lenders that distributed 100 or more loans to Bay Area businesses and to businesses in each of the nine counties. This resulted in 66 lenders.
Yoohyun Jung and Nami Sumida are San Francisco Chronicle staff writers. Email:, Twitter: @yoohyun_jung, @namisumida
Yoohyun Jung is a data reporter for The San Francisco Chronicle. Most recently, she worked as a data journalist for Honolulu Civil Beat, a watchdog news organization covering the Hawaiian islands. Born in Seoul, Yoohyun began her career in Arizona, where she worked for two of the state’s largest newspapers covering various beats, including criminal justice and education. She is also an alumna of Reveal from the Center for Investigative Reporting Investigative Fellowship and The New York Times Student Journalism Institute. 
Read more about the data team and their work.
Nami Sumida is a data visualization developer at The San Francisco Chronicle. Before joining in 2021, she created data-driven graphics for Industry Dive, a business journalism company covering 20+ industries. She also has experience conducting research on journalism and the news media at the Pew Research Center.
Read more about the data team and their work.


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