|9 Months Ended|
Sep. 30, 2020
NOTE 5. LOANS, NET
Total loans held in portfolio consisted of the following at September 30, 2020 and December 31, 2019:
At September 30, 2020 and December 31, 2019, the Company had pledged loans as collateral for Federal Home Loan Bank (“FHLB”) advances of $793.0 million and $668.5 million, respectively. Additionally, at September 30, 2020, the Company had pledged loans as collateral associated with the Paycheck Protection Program Liquidity Facility (“PPPLF”) of $173.7 million. There were no loans pledged under the PPPLF at December 31, 2019. There were no recorded investments of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2020 and December 31, 2019.
The Company originates and sells loans secured by the SBA. The Company retains the unguaranteed portion of the loan and servicing on the loans sold and receives a fee based upon the principal balance outstanding. During the three months ended September 30, 2020 and 2019, the Company sold approximately $7.3 million and $13.8 million, respectively, in SBA loans to third parties. The loan sales resulted in realized gains of $612 thousand and $1.2 million for the three months ended September 30, 2020 and 2019, respectively.
During the nine months ended September 30, 2020 and 2019, the Company sold approximately $17.4 million and $40.3 million, respectively, in SBA loans to third parties. The loan sales resulted in realized gains of $1.4 million and $3.3 million for the nine months ended September 30, 2020 and 2019, respectively.
In April 2020, we began originating loans to qualified small businesses under the PPP administered by the SBA under the provisions of the CARES Act. Total PPP loans at September 30, 2020 were $421.1 million and are included in the commercial and industrial segment of our loan portfolio. These loans are fully guaranteed by the SBA, carry a contractual term of two to five years and an interest rate of 1.00%. In conjunction with originating PPP loans, the Company recorded deferred origination costs of $4.9 million and deferred origination fees of $15.3 million as of September 30, 2020. These fees net of costs will be recognized over the 1.6 year weighted average life of the loans or at the date of forgiveness if earlier. In conjunction with the PPP, we are also currently participating in the PPPLF which, through September 30, 2020, extended loans to banks who are loaning money to small businesses under the PPP. The amount outstanding at September 30, 2020, was $173.7 million and is non-recourse and secured by the amount of the PPP loans we originate. The maturity date of a borrowing under the PPP Facility is equal the maturity date of the PPP loan pledged to secure the borrowing and would be accelerated (i) if the underlying PPP loan goes into default and is sold to the SBA to realize on the SBA guarantee or (ii) to the extent that any loan forgiveness reimbursement is received from the SBA. Borrowings under the PPP Facility are included in long-term liabilities on the consolidated balance sheet and bear interest at a rate of 0.35%.
Due to the rights retained on certain loan participations sold, the Company is deemed to have retained effective control over these loans under ASC 860, “Transfers and Servicing.” These loans can no longer be reported as sold, and must be reported on the balance sheet as loans held for investment regardless of whether the Company intends to exercise its rights. These loans are reported as loans held for investment with the offsetting liability recorded as long-term borrowings. The amount of secured borrowings included in loans held for investment and long-term borrowings at September 30, 2020 and December 31, 2019 was $4.0 million and $14.7 million, respectively.
Loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of loans serviced for others, including SBA loans, were $199.5 million and $205.0 million at September 30, 2020 and December 31, 2019, respectively.
In the ordinary course of business, the Company makes loans to executive officers and directors. Loans to these related parties, including companies in which they are principal owners, are as follows for the periods presented:
There were $1.6 million in unfunded commitments to related parties at September 30, 2020. There were $861 thousand in unfunded commitments to related parties at December 31, 2019.
The entire disclosure for financing receivable.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef