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Loans
9 Months Ended
Sep. 30, 2022
Loans  
Loans

8.    Loans

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

September 30, 2022

December 31, 2021

Commercial:

Commercial and industrial

$

128,116

$

134,182

Paycheck Protection Program (PPP)

24

17,311

Commercial loans secured by owner occupied real estate (1)

 

80,247

99,644

Commercial loans secured by non-owner occupied real estate (1)

 

459,943

430,825

Real estate − residential mortgage (1)

 

297,384

287,996

Consumer

 

13,736

15,096

Loans, net of unearned income

$

979,450

$

985,054

(1)Real estate construction loans constituted 4.5% and 5.6% of the Company’s total loans, net of unearned income as of September 30, 2022 and December 31, 2021, respectively.

Loan balances at September 30, 2022 and December 31, 2021 are net of unearned income of $393,000 and $826,000, respectively. The unearned income balance at September 30, 2022 includes no 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.

The following table provides information regarding our potential COVID-19 risk concentrations for commercial and commercial real estate loans by industry type at September 30, 2022 and December 31, 2021 (in thousands).

September 30, 2022

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

$

5

$

$

$

8,778

$

8,783

Multifamily/apartments/student housing

 

 

 

267

 

82,181

 

82,448

Office

 

37,622

 

 

8,059

 

24,081

 

69,762

Retail

 

7,030

 

 

17,348

 

154,010

 

178,388

Industrial/manufacturing/warehouse

 

64,321

 

 

11,442

 

77,368

 

153,131

Hotels

 

 

 

 

41,162

 

41,162

Eating and drinking places

 

303

 

24

 

4,656

 

1,363

 

6,346

Personal care

 

959

 

 

 

2,666

 

3,625

Amusement and recreation

 

77

 

 

3,819

 

3

 

3,899

Mixed use

 

 

 

4,181

 

49,833

 

54,014

Other

 

17,799

 

 

30,475

 

18,498

 

66,772

Total

$

128,116

$

24

$

80,247

$

459,943

$

668,330

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 provided 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 allowed 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 was 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 was 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 September 30, 2022, the Company had 1 PPP loan outstanding totaling $24,000 and has recorded a total of $58,000 and $433,000 of processing fee income and interest income from PPP lending activity in the third quarter and first nine months of 2022, respectively.