(1)	Real estate construction loans constituted 4.9% and 5.6% of the Company’s total loans, net of unearned income as of March 31, 2022 and December 31, 2021, respectively.

Loan balances at March 31, 2022 and December 31, 2021 are net of unearned income of $596,000 and $826,000, respectively. The unearned income balance at March 31, 2022 includes $179,000 of unrecognized fee income from the PPP loan originations compared to $386,000 at December 31, 2021.

The ongoing COVID-19 pandemic is a fluid situation and continues to evolve, impacting the way many businesses operate. The pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, inflation, and consumer spending has resulted in less economic activity and significant volatility and disruption. 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 March 31, 2022 and December 31, 2021 (in thousands).

March 31, 2022

Paycheck

Commercial loans

Commercial

Protection

secured by owner

secured by non-owner

and industrial

Program

occupied real estate

Total

1-4 unit residential

1,194

—

7,687

8,881

Multifamily/apartments/student housing

—

327

74,423

74,750

Office

38,920

8,460

26,443

73,886

Retail

7,666

22,008

149,126

178,826

Industrial/manufacturing/warehouse

73,988

1,547

21,386

46,191

143,112

Hotels

101

1,235

—

42,112

43,448

Eating and drinking places

423

3,614

4,484

1,719

10,240

Personal care

1,117

173

—

4,278

5,568

Amusement and recreation

5,352

5,448

Mixed use

—

3,646

60,115

63,761

Other

11,304

1,171

32,811

18,005

63,291

Total

134,797

7,835

98,474

430,105

671,211


	December 31, 2021
			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	$	1,246	$	—	$	96	$	8,565	$	9,907
Multifamily/apartments/student housing		—		—		245		73,912		74,157
Office		37,386		203		8,644		28,500		74,733
Retail		7,253		444		20,439		148,668		176,804
Industrial/manufacturing/warehouse		74,508		5,940		21,468		44,316		146,232
Hotels		154		1,764		—		42,425		44,343
Eating and drinking places		484		6,591		4,537		1,752		13,364
Personal care		1,197		173		—		4,315		5,685
Amusement and recreation		92		53		5,402		12		5,559
Mixed use		—		—		4,031		62,088		66,119
Other		11,862		2,143		34,782		16,272		65,059
Total	$	134,182	$	17,311	$	99,644	$	430,825	$	681,962

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 and subsequent legislation 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 could 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 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.

In addition, PPP allows certain eligible borrowers that previously received a PPP loan to apply for a second draw loan with the same general loans terms described above. The maximum loan amount of a second draw PPP loan is 2.5 times, or 3.5 times for borrowers within the hospitality industry, the average monthly 2019 or 2020 payroll costs up to $2.0 million. Eligibility for a second draw PPP loan is based on the following criteria: (a) borrower previously received a first draw PPP loan and used the full amount for only authorized expenditures; (b) borrower has 300 or less employees; and (c) borrower can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The PPP loan program expired on May 31, 2021 for originating new loans.

As of March 31, 2022, the Company had 44 PPP loans outstanding totaling $7.8 million and has recorded a total of $240,000 of processing fee income and interest income from PPP lending activity in the first quarter of 2022. Also, there is approximately $179,000 of PPP processing fees that will be amortized into income over the time period that the loans remain on our balance sheet or until the PPP loan is forgiven, at which time the remaining fee will be recognized immediately as income.