First Northern Community Bancorp · NASDAQ:FNRN
First Northern Community Bancorp — Investor Presentation (May 2020)
20 slides from First Northern Community Bancorp's investor presentation, May 26, 2020
Slide 1: Loan Forgiveness Under the Payroll Protection Program & FAQ's
Loan Forgiveness Under the Payroll Protection Program & FAQ’s Updated as of May 26nd 2020 The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This inf
Slide 2: Disclaimer
The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship,
Slide 3: Agenda
Agenda Economic necessity Qualifying expenses and spending during the eight-week window FTE limitation Restoring FTE’s Wage limitation Loan forgiveness application process Tax and other considerations 3 Last Updated May 26th, 2020
Slide 4: Economic Necessity
Economic Necessity “That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” CARES Act §1102(a)(2)(G)(i)(I) Treasury Department has listed factors including (1) current business activity, and (2) ability to acc
Slide 5: Qualifying Expenses
Qualifying Expenses ▪ Payroll (must spend at least 75% on payroll in order to maximize forgiveness) ▪ Wages, salaries, tips, commissions, bonuses, etc. with an annualized maximum of $100k ▪ Employer funding of health benefits ▪ Employer retirement plan contributions ▪ State and local employer payrol
Slide 6: Owner Compensation
Owner Compensation SBA published the loan forgiveness application and related instructions on May 15th. Final regulations were issued on May 22nd by the Treasury Dept. Wages for the owner-employees such as sole proprietors (i.e. schedule C business), or general partner are not to exceed 8-weeks’ wor
Slide 7: Accounting for the Funds
Accounting for the Funds Paid or incurred standards Differences between ‘incurred’ as the SBA uses the term, and ‘accrued’ as a general accounting principle. Alternative payroll covered period for businesses with bi-weekly or more frequent payroll. Allows organizations to align the 8-week payroll pe
Slide 8: Paid and Incurred Example
Paid and Incurred Example Loan origination date of June 1st Covered period extends from June 1st through July 26th Borrower pays their May and June utility during the covered period Borrower pays their July utility bill on August 10th The borrower may claim credit for the May and June bills paid dur
Slide 9: Other Accounting Questions
Other Accounting Questions What types of retirement plans are eligible? Can I pay my 2019 retirement plan obligation during the measurement period? Can I run a bonus? Are there limitations for self-rentals where the business owner is also the landlord? 9 Last Updated May 26th, 2020
Slide 10: Small Business Considerations
Small Business Considerations Some small businesses may find it helpful placing the funds in a separate bank account to ensure easier tracking. Using a new ‘PPP’ class in the QuickBooks can be a helpful way of tracking the expenses. No double dipping between loan and grant programs. Requires separat
Slide 11: FTE Limitation on Loan Forgiveness
FTE Limitation on Loan Forgiveness Average FTE’s for each payroll falling in the eight-week measurement period are compared with the lesser of: The average FTE’s for each payroll falling in the period 1/1/2020 through 2/29/2020, or The average FTE’s for each payroll falling in the period 2/15/2019 t
Slide 12: FTE Limitation FAQ's
FTE Limitation FAQ’s 40 hour per week FTE standard measured at the employee level (not in aggregate). Two methods: 1. Standard method: Hours for each in individual employee divided by 40 and rounded to the nearest tenth (not to exceed 1.0 for any employee) 2. Simplified method allows all partial FTE
Slide 13: SBA Loan Forgiveness Application
SBA Loan Forgiveness Application FTE Reduction Exceptions: Indicate the FTE of (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and (2) any employees
Slide 14: Common FTE Questions
Common FTE Questions Do temporary workers paid through payroll count? Do temporary workers paid through a temp agency count? What if someone doesn’t come back to work because they don’t feel safe? Can family members be hired and count towards the FTE calculations? 14 Last Updated May 26th, 2020
Slide 15: Restoring FTE's
Restoring FTE’s The CARES Act allows a company to not be penalized by the FTE limitation as long as they restore their (1) FTE and (2) pay levels by 6/30/2020. Applies to businesses that saw their FTE’s decline between 2/15/2020 and 4/26/2020. Functional challenge of paying sufficient payroll costs
Slide 16: Wage Limitation
Wage Limitation Forgiveness will be reduced when the wages of individual employees are reduced by more than 25%. Only applies to non-highly-compensated employees. Highly compensated employees received wages or salary at an annualized rate exceeding $100,000 for any pay period in 2019. What if an emp
Slide 17: Application Process
Application Process The CARES Act requires the borrower to complete the application Will need to send summary calculations accounting for how the money was spent, as well as all of the forgiveness limitations. It requires reporting information on each individual employee. Will need to send supportin
Slide 18: Audit of PPP Loans
Audit of PPP Loans All loans over $2M combined across affiliated entities will be subject to audit as a matter of policy. The primary focus point of these audits announced to-date is the economic necessity of the loan. Smaller loans are subject to review. Whistleblower complaints may be a driver of
Slide 19: Tax and Other Considerations
Tax and Other Considerations Loan forgiveness is tax-exempt federally, but is currently taxable to California. Related expenses are non-deductible federally, but are currently deductible for California. Ability to participate in the employer payroll tax deferral until notified of loan forgiveness. P
Slide 20: Questions?
Chris Bell, Partner Chris.Bell@mossadams.com (916) 503-8164 Questions? We’re here to help. Adam Hite, Senior Manager Adam.Hite@mossadams.com (209) 955-6173 20 Last Updated May 26th, 2020
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