8. Loans

The loan portfolio of the Company consists of the following (in thousands):


	June 30,		December 31,
	2020		2019
Commercial:
Commercial and industrial (non-PPP)	$	154,379	$	173,922
Paycheck Protection Program (PPP)		66,933		—
Commercial loans secured by owner occupied real estate		86,080		91,655
Commercial loans secured by non-owner occupied real estate		365,250		363,635
Real estate – residential mortgage		230,509		235,239
Consumer		17,010		18,255
Loans, net of unearned income	$	920,161	$	882,706

Loan balances at June 30, 2020 and December 31, 2019 are net of unearned income of $1,569,000 and $384,000, respectively. The unearned income balance at June 30, 2020 includes $1,184,000 of unrecognized fee income from the PPP loan originations. Real estate construction loans comprised 5.6% and 4.9% of total loans, net of unearned income at June 30, 2020 and December 31, 2019, respectively.

The second quarter of 2020 represented the first full quarter’s impact of the COVID-19 pandemic. Certain loans within our commercial and commercial real estate portfolios have been disproportionately adversely affected by the pandemic. Due to mandatory lockdowns and travel restrictions, certain industries, such as hospitality, travel, food service and restaurants and bars, have suffered as a result of COVID-19. The following table provides information regarding our potential COVID-19 risk concentrations for commercial and commercial real estate loans by industry type at June 30, 2020 (in thousands).


			Paycheck		Commercial loans		Commercial loans
	Commercial		Protection		secured by owner		secured by non-owner
	and industrial		Program		occupied real estate		occupied real estate		Total
1-4 unit residential	$	1,528	$	—	$	195	$	4,782	$	6,505
Multifamily/apartments/student housing		—		—		309		50,826		51,135
Office		32,380		9,545		9,791		37,171		88,887
Retail		8,406		1,782		19,629		105,085		134,902
Industrial/manufacturing/warehouse		90,727		28,618		17,408		40,112		176,865
Hotels		440		1,287		-		45,721		47,448
Eating and drinking places		878		13,608		4,430		575		19,491
Amusement and recreation		218		100		3,363		52		3,733
Mixed use		-		-		2,798		65,952		68,750
Other		19,802		11,993		28,157		14,974		74,926
Total	$	154,379	$	66,933	$	86,080	$	365,250	$	672,642

The significant increase from the prior quarter in the concentration within several industries (i.e. hotels, eating and drinking places, retail, office, and industrial/manufacturing/warehouse) relates, primarily, to the origination of Paycheck Protection Program loans to assist businesses within these hardest hit industries.

Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (SBA) to temporarily guarantee loans under a new 7(a) program called the Paycheck Protection Program (PPP). As a qualified SBA lender, the Company was automatically authorized to originate PPP loans.

An eligible business can apply for a PPP loan up to the lesser of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year (if originated prior to June 5, 2020) or five-year (if originated after June 5, 2020) loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers pursuant to standards as defined by the SBA. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and at least 60% of the loan proceeds are used for payroll expenses, with the remaining loan proceeds being used for other qualifying expenses such as interest on mortgages, rent, and utilities.

As of June 30, 2020, the Company has originated 437 PPP loans totaling $66.9 million and has recorded a total of $1.0 million of processing fee income and interest income from PPP lending activity.