Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2021

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

Note 4:   Loans and Allowance for Loan Losses

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

For loans at amortized cost, interest income is accrued based on the unpaid principal balance.

The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past-due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest collected on these loans is applied to the principal balance until the loan can be returned to an accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For all loan portfolio segments, the Company promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectable based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

When cash payments for accrued interest are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time

payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

The Company offers warehouse loans or credit to fund mortgage loans held for sale from closing until sale to an investor. Under a warehousing arrangement the Company funds a mortgage loan as secured financing. The warehousing arrangement is secured by the underlying mortgages and a combination of deposits, personal guarantees and advance rates. The Company typically holds the collateral until it is sent under a bailee arrangement instructing the investor to send proceeds to the Company. Typical investors are large financial institutions or government agencies. Interest earned from the time of funding to the time of sale is recognized as interest income as accrued. Fees earned agreements are recognized when collected as noninterest income.

Loan Sale and Freddie Mac Q Series Securitization

On May 7, 2021, the Company entered into an arrangement through a third-party trust and Freddie Mac, by which a $262.0 million portfolio of multi-family loans were sold to the trust and ultimately securitized through Freddie Mac and sold to investors. The Company purchased two of the securities for a total of $28.7 million. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $676,000 net loss on sale was recognized, which included the impact of establishing a risk share allowance and mortgage servicing rights associated with this transaction.  

Beyond holding the two securities, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation.  In connection with the securitization and purchase of one of the securities, Merchants maintains a first loss position in the underlying loan portfolio not to exceed 10% of the unpaid principal amount of the loans comprising the securitization pool at settlement, or approximately $26.2 million.  Therefore, a reserve of $1.4 million for estimated losses was established with respect to the first loss obligation at May 7, 2021, which is included in other liabilities on the consolidated balance sheets.  These estimated losses are consistent with the amount in allowance for loan losses that was released when the loans were sold. If the Company sells one of the securities, this first loss obligation would be eliminated.

As part of the securitization transaction, Merchants released all mortgage servicing obligations and rights to Freddie Mac who was designated as the Master Servicer. As Master Servicer, Freddie Mac appointed the Company with sub-servicing obligations, which include obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans. Accordingly, the company recognized a mortgage servicing asset of $730,000 on the sale date.

 Loan Portfolio Summary‌ 

Loans receivable at June 30, 2021 and December 31, 2020 include:

	June 30,		December 31,
	2021		2020
	(In thousands)
Mortgage warehouse lines of credit	$	1,177,940	$	1,605,745
Residential real estate		806,325		678,848
Multi-family and healthcare financing		2,970,770		2,749,020
Commercial and commercial real estate		409,710		387,294
Agricultural production and real estate		92,786		101,268
Consumer and margin loans		15,392		13,251
		5,472,923		5,535,426
Less
Allowance for loan losses		28,696		27,500
Loans Receivable	$	5,444,227	$	5,507,926

In response to the COVID-19 global pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) established the Paycheck Protection Program (“PPP”) to provide loans for eligible business/not-for-profits. These loans qualify for forgiveness when used for qualifying expenses during the appropriate period. Loans funded through the PPP are fully guaranteed by the U.S. government. Commercial and commercial real estate loans at June 30, 2021 and December 31, 2020 include PPP loans with principal balances of $53.6 million and $60.2 million, respectively, that had not yet been forgiven.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Mortgage Warehouse Lines of Credit (MTG WHLOC): Under its warehouse program, the Company provides warehouse financing arrangements to approved mortgage companies for the origination and sale of residential mortgage loans and to a lesser extent multi-family loans. Agency eligible, governmental and jumbo residential mortgage loans that are secured by mortgages placed on existing one-to-four family dwellings may be originated or purchased and placed on each mortgage warehouse line.

As a secured repurchase agreement, collateral pledged to the Company secures each individual mortgage until the lender sells the loan in the secondary market. A traditional secured warehouse line of credit typically carries a base interest rate of 30-day LIBOR, or mortgage note rate plus or minus a margin.

Risk is evident if there is a change in the fair value of mortgage loans originated by mortgage bankers in warehouse, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit.

Residential Real Estate Loans (RES RE): Real estate loans are secured by owner-occupied 1-4 family residences. Repayment of residential real estate loans is primarily dependent on the personal income and credit rating of the borrowers. First-lien HELOC mortgages included in this segment typically carry a base rate of 30-day LIBOR, plus a margin.

Multi-Family and Healthcare Financing (MF RE): The Company engages in multi-family and healthcare financing, including construction loans, specializing in originating and servicing loans for multi-family rental and senior living properties. In addition, the Company originates loans secured by an assignment of federal income tax credits by partnerships invested in multi-family real estate projects. Construction and land loans are generally based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent agency-eligible financing is obtained. These loans are considered to be higher risk than single-family real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area. Repayment of these loans depends on the successful operation of a business or property and the borrower’s cash flows.

Commercial Lending and Commercial Real Estate Loans (CML & CRE): The commercial lending and commercial real estate portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions, as well as loans to commercial customers to finance land and improvements. It also includes loans collateralized by mortgage servicing rights and loan sale proceeds of mortgage warehouse customers. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. PPP loans and Small Business Association (“SBA”) loans are included in this category.

Agricultural Production and Real Estate Loans (AG & AGRE): Agricultural production loans are generally comprised of seasonal operating lines of credit to grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. The Company also offers long term financing to purchase agricultural real estate.

Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry-developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. The Company is approved to sell agricultural loans in the secondary market through the Federal Agricultural Mortgage Corporation and uses this relationship to manage interest rate risk within the portfolio.

Consumer and Margin Loans (CON & MAR): Consumer loans are those loans secured by household assets. Margin loans are those loans secured by marketable securities. The term and maximum amount for these loans are determined by considering the purpose of the loan, the margin (advance percentage against value) in all collateral, the primary source of repayment, and the borrower’s other related cash flow.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to net interest income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience and expected loss from default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the fair value of the collateral if the loan is collateral dependent, the loan’s obtainable market price, or the present value of expected future cash flows discounted at the loan’s effective interest rate. For impaired loans where the Company utilizes discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as a provision for loan loss.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work out an alternative payment schedule with the borrower in

order to optimize collectability of the loan. A troubled debt restructuring (“TDR”) occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

Nonaccrual loans, including TDRs that have not met the six-month minimum performance criterion, are reported as nonperforming loans. For all loan classes, it is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until three months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is doubtful under the terms of the loan agreement. Most generally, this is at 90 or more days past due.

With regard to determination of the amount of the allowance for credit losses, restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each loan portfolio segment within troubled debt restructurings is the same as detailed previously above.

The following tables present, by loan portfolio segment, the activity in the allowance for loan losses for the three and six months ended June 30, 2021 and 2020 and the recorded investment in loans and impairment method as of June 30, 2021:

	At or For the Three Months Ended June 30, 2021
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Allowance for loan losses
Balance, beginning of period	$	3,321	$	3,600	$	17,136	$	4,264	$	632	$	138	$	29,091
Provision (credit) for loan losses		(386)		371		(1,354)		1,059		(21)		16		(315)
Loans charged to the allowance		—		(2)		—		(84)		—		—		(86)
Recoveries of loans previously charged off		—		—		—		—		—		6		6
Balance, end of period	$	2,935	$	3,969	$	15,782	$	5,239	$	611	$	160	$	28,696
Ending balance: individually evaluated for impairment	$	—	$	—	$	—	$	1,852	$	—	$	—	$	1,852
Ending balance: collectively evaluated for impairment	$	2,935	$	3,969	$	15,782	$	3,387	$	611	$	160	$	26,844
Loans
Ending balance	$	1,177,940	$	806,325	$	2,970,770	$	409,710	$	92,786	$	15,392	$	5,472,923
Ending balance individually evaluated for impairment	$	—	$	629	$	—	$	6,592	$	158	$	6	$	7,385
Ending balance collectively evaluated for impairment	$	1,177,940	$	805,696	$	2,970,770	$	403,118	$	92,628	$	15,386	$	5,465,538

	For the Three Months Ended June 30, 2020
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Allowance for loan losses
Balance, beginning of period	$	2,709	$	2,062	$	7,694	$	5,662	$	561	$	195	$	18,883
Provision (credit) for loan losses		494		248		2,184		(1,188)		49		(42)		1,745
Loans charged to the allowance		—		—		—		(131)		—		—		(131)
Balance, end of period	$	3,203	$	2,310	$	9,878	$	4,343	$	610	$	153	$	20,497

	For the Six Months Ended June 30, 2021
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Allowance for loan losses
Balance, beginning of period	$	4,018	$	3,334	$	14,731	$	4,641	$	636	$	140	$	27,500
Provision for loan losses		(1,083)		637		1,051		750		(25)		18		1,348
Loans charged to the allowance		—		(2)		—		(152)		—		(6)		(160)
Recoveries of loans previously charged off		—		—		—		—		—		8		8
Balance, end of period	$	2,935	$	3,969	$	15,782	$	5,239	$	611	$	160	$	28,696

	For the Six Months Ended June 30, 2020
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Allowance for loan losses
Balance, beginning of period	$	1,913	$	2,042	$	7,018	$	4,173	$	523	$	173	$	15,842
Provision (credit) for loan losses		1,290		268		2,860		257		87		(19)		4,743
Loans charged to the allowance		—		—		—		(131)		—		(1)		(132)
Recoveries of loans previously charged off		—		—		—		44		—		—		44
Balance, end of period	$	3,203	$	2,310	$	9,878	$	4,343	$	610	$	153	$	20,497

The following table presents the allowance for loan losses and the recorded investment in loans and impairment method as of December 31, 2020:

	December 31, 2020
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Allowance for loan losses
Balance, December 31, 2020	$	4,018	$	3,334	$	14,731	$	4,641	$	636	$	140	$	27,500
Ending balance: individually evaluated for impairment	$	—	$	7	$	—	$	1,606	$	—	$	—	$	1,613
Ending balance: collectively evaluated for impairment	$	4,018	$	3,327	$	14,731	$	3,035	$	636	$	140	$	25,887
Loans
Balance, December 31, 2020	$	1,605,745	$	678,848	$	2,749,020	$	387,294	$	101,268	$	13,251	$	5,535,426
Ending balance individually evaluated for impairment	$	—	$	2,761	$	—	$	9,591	$	2,100	$	12	$	14,464
Ending balance collectively evaluated for impairment	$	1,605,745	$	676,087	$	2,749,020	$	377,703	$	99,168	$	13,239	$	5,520,962

Internal Risk Categories

In adherence with policy, the Company uses the following internal risk grading categories and definitions for loans:

Average or above – Loans to borrowers of satisfactory financial strength or better. Earnings performance is consistent with primary and secondary sources of repayment that are well defined and adequate to retire the debt in a timely and orderly fashion. These businesses would generally exhibit satisfactory asset quality and liquidity with moderate leverage, average performance to their peer group and experienced management in key positions. These loans are disclosed as “Acceptable and Above” in the following table.

Acceptable – Loans to borrowers involving more than average risk and which contain certain characteristics that require some supervision and attention by the lender. Asset quality is acceptable, but debt capacity is modest and little excess liquidity is available. The borrower may be fully leveraged and unable to sustain major setbacks. Covenants are structured to ensure adequate protection. Borrower’s management may have limited experience and depth. This category includes loans which are highly leveraged due to regulatory constraints, as well as loans involving reasonable exceptions to policy. These loans are disclosed as “Acceptable and Above” in the following table.

Special Mention (Watch) – This is a loan that is sound and collectable but contains potential risk. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these

potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Special Mention (Watch) – COVID-19 Deferrals – This is a loan that is sound and collectable but contains potential risk because the borrower has requested to defer payments, typically for 90 days, in response to COVID-related hardships. Interest is still accruing on these loans and they were not more than 30 days late at the time the deferral was granted. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. This category includes only those loans that were not already in the Traditional Special Mention (Watch) or Substandard categories.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of June 30, 2021 and December 31, 2020:

	June 30, 2021
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Special Mention (Watch)	$	—	$	821	$	143,906	$	2,342	$	1,932	$	5	$	149,006
Special Mention (Watch) - COVID-19 Deferrals		—		25		185		—		—		—		210
Substandard		—		629		—		6,592		158		6		7,385
Acceptable and Above		1,177,940		804,850		2,826,679		400,776		90,696		15,381		5,316,322
Total	$	1,177,940	$	806,325	$	2,970,770	$	409,710	$	92,786	$	15,392	$	5,472,923

	December 31, 2020
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Special Mention (Watch)	$	222	$	853	$	145,050	$	2,620	$	4,160	$	34	$	152,939
Special Mention (Watch) - COVID-19 Deferrals		—		383		185		110		—		—		678
Substandard		—		2,761		—		9,591		2,100		12		14,464
Acceptable and Above		1,605,523		674,851		2,603,785		374,973		95,008		13,205		5,367,345
Total	$	1,605,745	$	678,848	$	2,749,020	$	387,294	$	101,268	$	13,251	$	5,535,426

The Company evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the past year.

Delinquent Loans

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of June 30, 2021 and December 31, 2020. There were 4 loans totaling $37.0 million at June 30, 2021 that have been modified in accordance with the CARES Act and therefore not classified as delinquent.  These loans have been granted extended dates to make payments and no payments were due as of June 30, 2021.

	June 30, 2021
	30-59 Days		60-89 Days		Greater Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Loans
	(In thousands)
MTG WHLOC	$	—	$	—	$	—	$	—	$	1,177,940	$	1,177,940
RES RE		—		—		—		—		806,325		806,325
MF RE		151		157		197		505		2,970,265		2,970,770
CML & CRE		—		50		2,279		2,329		407,381		409,710
AG & AGRE		410		39		—		449		92,337		92,786
CON & MAR		4		—		6		10		15,382		15,392
	$	565	$	246	$	2,482	$	3,293	$	5,469,630	$	5,472,923

	December 31, 2020
	30-59 Days		60-89 Days		Greater Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Loans
	(In thousands)
MTG WHLOC	$	—	$	—	$	—	$	—	$	1,605,745	$	1,605,745
RES RE		364		80		630		1,074		677,774		678,848
MF RE		—		36,760		—		36,760		2,712,260		2,749,020
CML & CRE		608		76		3,582		4,266		383,028		387,294
AG & AGRE		3,769		—		1,934		5,703		95,565		101,268
CON & MAR		7		—		19		26		13,225		13,251
	$	4,748	$	36,916	$	6,165	$	47,829	$	5,487,597	$	5,535,426

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in TDRs.

Impaired Loans

The following tables present impaired loans and specific valuation allowance information based on class level as of June 30, 2021 and December 31, 2020:

	June 30, 2021
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Impaired loans without a specific allowance:
Recorded investment	$	—	$	629	$	—	$	933	$	158	$	6	$	1,726
Unpaid principal balance		—		629		—		933		158		6		1,726
Impaired loans with a specific allowance:
Recorded investment		—		—		—		5,659		—		—		5,659
Unpaid principal balance		—		—		—		5,659		—		—		5,659
Specific allowance		—		—		—		1,852		—		—		1,852
Total impaired loans:
Recorded investment		—		629		—		6,592		158		6		7,385
Unpaid principal balance		—		629		—		6,592		158		6		7,385
Specific allowance		—		—		—		1,852		—		—		1,852

	December 31, 2020
	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Impaired loans without a specific allowance:
Recorded investment	$	—	$	2,704	$	—	$	3,319	$	2,100	$	7	$	8,130
Unpaid principal balance		—		2,704		—		3,319		2,100		7		8,130
Impaired loans with a specific allowance:		—
Recorded investment		—		57		—		6,272		—		5		6,334
Unpaid principal balance		—		57		—		6,272		—		5		6,334
Specific allowance		—		7		—		1,606		—		—		1,613
Total impaired loans:
Recorded investment		—		2,761		—		9,591		2,100		12		14,464
Unpaid principal balance		—		2,761		—		9,591		2,100		12		14,464
Specific allowance		—		7		—		1,606		—		—		1,613

The following tables present by portfolio class, information related to the average recorded investment and interest income recognized on impaired loans for the three and six month periods ended June 30, 2021 and 2020:

	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Three Months Ended June 30, 2021
Average recorded investment in impaired loans	$	—	$	2,201	$	—	$	6,113	$	175	$	6	$	8,495
Interest income recognized		—		16		—		55		—		—		71
Three Months Ended June 30, 2020
Average recorded investment in impaired loans	$	171	$	2,916	$	—	$	9,229	$	2,092	$	17	$	14,425
Interest income recognized		—		19		—		94		—		—		113

	MTG WHLOC		RES RE		MF RE		CML & CRE		AG & AGRE		CON & MAR		TOTAL
	(In thousands)
Six Months Ended June 30, 2021
Average recorded investment in impaired loans	$	—	$	2,442	$	—	$	7,254	$	1,000	$	7	$	10,703
Interest income recognized		—		27		—		259		—		—		286
Six Months Ended June 30, 2020
Average recorded investment in impaired loans	$	197	$	2,875	$	—	$	9,231	$	1,195	$	18	$	13,516
Interest income recognized		—		35		—		215		—		1		251

Nonperforming Loans

The following table presents the Company’s nonaccrual loans and loans past due 90 days or more and still accruing at June 30, 2021 and December 31, 2020.

	June 30,				December 31,
	2021				2020
			Total Loans >				Total Loans >
			90 Days &				90 Days &
	Nonaccrual		Accruing		Nonaccrual		Accruing
	(In thousands)
RES RE	$	556	$	—	$	578	$	69
CML & CRE		1,880		399		2,052		1,240
AG & AGRE		158		—		181		2,181
CON & MAR		6		—		12		8
	$	2,600	$	399	$	2,823	$	3,498

No troubled loans were restructured during the three or six months ended June 30, 2021 or 2020. No restructured loans defaulted during the three or six months ended June 30, 2021 or 2020. Loan modifications or forbearances related to the COVID-19 pandemic will generally not be considered TDRs.

The CARES Act included several provisions designed to help financial institutions like the Company in working with their customers. Section 4013 of the CARES Act, as extended, allows a financial institution to elect to suspend generally accepted accounting principles and regulatory determinations with respect to qualifying loan modifications related to COVID-19 that would otherwise be categorized as a TDR until January 1, 2022. The Company has taken advantage of this provision to extend certain payment modifications to loan customers in need. As of June 30, 2021, the Company has $37.0 million of outstanding loans that were modified during 2020 or 2021 under the CARES Act guidance, that remain on modified terms. The Company modified other loans under the guidance that have since returned to normal repayment status as of June 30, 2021.

There were no residential loans in process of foreclosure as of June 30, 2021 and 2020.