XML 23 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Loans
 6 Months Ended
Jun. 30, 2020
Loans [Abstract]  
Loans
4.
Loans

Our assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent and historical loss experience, current economic conditions and other pertinent factors.

An analysis of the allowance for loan losses by portfolio segment for the three months ended June 30, follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
10,212
    
$
7,416
    
$
1,258
    
$
13,609
    
$
32,495
  
Additions (deductions)
                                        
Provision for loan losses
    
1,461
      
(130
)
    
175
      
3,682
      
5,188
  
Recoveries credited to the allowance
    
1,058
      
90
      
207
      
-
      
1,355
  
Loans charged against the allowance
    
(4,000
)
    
(115
)
    
(423
)
    
-
      
(4,538
)
Balance at end of period
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
                                         
2019
                                        
Balance at beginning of period
  
$
7,518
    
$
8,412
    
$
1,251
    
$
8,073
    
$
25,254
  
Additions (deductions)
                                        
Provision for loan losses
    
475
      
(386
)
    
209
      
354
      
652
  
Recoveries credited to the allowance
    
378
      
327
      
184
      
-
      
889
  
Loans charged against the allowance
    
(250
)
    
(291
)
    
(351
)
    
-
      
(892
)
Balance at end of period
  
$
8,121
    
$
8,062
    
$
1,293
    
$
8,427
    
$
25,903
  

An analysis of the allowance for loan losses by portfolio segment for the six months ended June 30, follows:

 
  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
 
  
(In thousands)
  
2020
                              
Balance at beginning of period
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
Additions (deductions)
                                        
Provision for loan losses
    
3,679
      
(638
)
    
304
      
8,564
      
11,909
  
Recoveries credited to the allowance
    
1,166
      
207
      
381
      
-
      
1,754
  
Loans charged against the allowance
    
(4,036
)
    
(524
)
    
(751
)
    
-
      
(5,311
)
Balance at end of period
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
 
                                        
2019
                                        
Balance at beginning of period
  
$
7,090
    
$
7,978
    
$
895
    
$
8,925
    
$
24,888
  
Additions (deductions)
                                        
Provision for loan losses
    
895
      
187
      
732
      
(498
)
    
1,316
  
Recoveries credited to the allowance
    
505
      
551
      
401
      
-
      
1,457
  
Loans charged against the allowance
    
(369
)
    
(654
)
    
(735
)
    
-
      
(1,758
)
Balance at end of period
  
$
8,121
    
$
8,062
    
$
1,293
    
$
8,427
    
$
25,903
  

Allowance for loan losses and recorded investment in loans by portfolio segment follows:

  
Commercial
    
Mortgage
    
Installment
    
Subjective
Allocation
    
Total
  
   
(In thousands)
  
June 30, 2020
                              
Allowance for loan losses:
                              
Individually evaluated for impairment
  
$
2,768
    
$
4,338
    
$
254
    
$
-
    
$
7,360
  
Collectively evaluated for impairment
    
5,963
      
2,923
      
963
      
17,291
      
27,140
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
8,731
    
$
7,261
    
$
1,217
    
$
17,291
    
$
34,500
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
18,913
    
$
41,680
    
$
2,645
            
$
63,238
  
Collectively evaluated for impairment
    
1,345,774
      
1,003,774
      
460,261
              
2,809,809
  
Loans acquired with deteriorated credit quality
    
1,281
      
560
      
305
              
2,146
  
Total loans recorded investment
    
1,365,968
      
1,046,014
      
463,211
              
2,875,193
  
Accrued interest included in recorded investment
    
3,012
      
4,330
      
1,188
              
8,530
  
Total loans
  
$
1,362,956
    
$
1,041,684
    
$
462,023
            
$
2,866,663
  
                                         
December 31, 2019
                                        
Allowance for loan losses:
                                        
Individually evaluated for impairment
  
$
1,031
    
$
4,863
    
$
261
    
$
-
    
$
6,155
  
Collectively evaluated for impairment
    
6,891
      
3,353
      
1,022
      
8,727
      
19,993
  
Loans acquired with deteriorated credit quality
    
-
      
-
      
-
      
-
      
-
  
Total ending allowance for loan losses balance
  
$
7,922
    
$
8,216
    
$
1,283
    
$
8,727
    
$
26,148
  
                                         
Loans
                                        
Individually evaluated for impairment
  
$
9,393
    
$
43,574
    
$
2,925
            
$
55,892
  
Collectively evaluated for impairment
    
1,158,906
      
1,058,917
      
457,370
              
2,675,193
  
Loans acquired with deteriorated credit quality
    
1,394
      
575
      
316
              
2,285
  
Total loans recorded investment
    
1,169,693
      
1,103,066
      
460,611
              
2,733,370
  
Accrued interest included in recorded investment
    
2,998
      
4,155
      
1,194
              
8,347
  
Total loans
  
$
1,166,695
    
$
1,098,911
    
$
459,417
            
$
2,725,023
  


Loans on non-accrual status and past due more than 90 days (“Non-performing Loans”) follow(1):

  
90+ and
Still
Accruing
    
Non-
Accrual
    
Total Non-
Performing
Loans
  
   
(In thousands)
  
June 30, 2020
                  
Commercial
                  
Commercial and industrial (2)
  
$
-
    
$
1,251
    
$
1,251
  
Commercial real estate
    
-
      
3,583
      
3,583
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
751
      
751
  
1-4 family owner occupied - non-jumbo (3)
    
5
      
2,789
      
2,794
  
1-4 family non-owner occupied
    
-
      
1,573
      
1,573
  
1-4 family - 2nd lien
    
-
      
1,381
      
1,381
  
Resort lending
    
-
      
404
      
404
  
Installment
                        
Boat lending
    
-
      
142
      
142
  
Recreational vehicle lending
    
-
      
74
      
74
  
Other
    
-
      
386
      
386
  
Total recorded investment
  
$
5
    
$
12,334
    
$
12,339
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  
                         
December 31, 2019
                        
Commercial
                        
Commercial and industrial (2)
  
$
-
    
$
565
    
$
565
  
Commercial real estate
    
-
      
735
      
735
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
1,179
      
1,179
  
1-4 family owner occupied - non-jumbo (3)
    
-
      
3,540
      
3,540
  
1-4 family non-owner occupied
    
-
      
1,039
      
1,039
  
1-4 family - 2nd lien
    
-
      
979
      
979
  
Resort lending
    
-
      
690
      
690
  
Installment
                        
Boat lending
    
-
      
332
      
332
  
Recreational vehicle lending
    
-
      
3
      
3
  
Other
    
-
      
470
      
470
  
Total recorded investment
  
$
-
    
$
9,532
    
$
9,532
  
Accrued interest included in recorded investment
  
$
-
    
$
-
    
$
-
  

(1)
Non-performing loans exclude purchase credit impaired loans.
(2)
Non-performing commercial and industrial loans exclude $0.053 million and $0.077 million of government guaranteed loans at June 30, 2020 and December 31, 2019, respectively.
(3)
Non-performing 1-4 family owner occupied – non jumbo loans exclude $0.551 million and $0.569 million of government guaranteed loans at June 30, 2020 and December 31, 2019, respectively.

An aging analysis of loans by class follows:

  
Loans Past Due
    
Loans not
    
Total
  
   
30-59 days
    
60-89 days
    
90+ days
    
Total
    
Past Due
    
Loans
  
   
(In thousands)
  
June 30, 2020
                                    
Commercial
                                    
Commercial and industrial
  
$
271
    
$
68
    
$
70
    
$
409
    
$
763,296
    
$
763,705
  
Commercial real estate
    
-
      
2,907
      
-
      
2,907
      
599,356
      
602,263
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,236
      
-
      
632
      
1,868
      
422,393
      
424,261
  
1-4 family owner occupied - non-jumbo
    
1,927
      
328
      
1,212
      
3,467
      
284,411
      
287,878
  
1-4 family non-owner occupied
    
1,481
      
387
      
848
      
2,716
      
160,046
      
162,762
  
1-4 family - 2nd lien
    
500
      
489
      
628
      
1,617
      
105,073
      
106,690
  
Resort lending
    
392
      
258
      
373
      
1,023
      
63,400
      
64,423
  
Installment
                                                
Boat lending
    
748
      
45
      
72
      
865
      
205,724
      
206,589
  
Recreational vehicle lending
    
161
      
26
      
46
      
233
      
157,396
      
157,629
  
Other
    
388
      
183
      
279
      
850
      
98,143
      
98,993
  
Total
  
$
7,104
    
$
4,691
    
$
4,160
    
$
15,955
    
$
2,859,238
    
$
2,875,193
  
Accrued interest included in recorded investment
  
$
91
    
$
24
    
$
-
    
$
115
    
$
8,415
    
$
8,530
  
                                                 
December 31, 2019
                                                
Commercial
                                                
Commercial and industrial
  
$
-
    
$
289
    
$
102
    
$
391
    
$
564,480
    
$
564,871
  
Commercial real estate
    
177
      
-
      
735
      
912
      
603,910
      
604,822
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,757
      
1,037
      
-
      
2,794
      
398,759
      
401,553
  
1-4 family owner occupied - non-jumbo
    
2,672
      
852
      
1,387
      
4,911
      
342,349
      
347,260
  
1-4 family non-owner occupied
    
695
      
136
      
623
      
1,454
      
168,083
      
169,537
  
1-4 family - 2nd lien
    
909
      
90
      
386
      
1,385
      
115,157
      
116,542
  
Resort lending
    
364
      
53
      
565
      
982
      
67,192
      
68,174
  
Installment
                                                
Boat lending
    
337
      
107
      
88
      
532
      
202,750
      
203,282
  
Recreational vehicle lending
    
161
      
97
      
3
      
261
      
153,184
      
153,445
  
Other
    
377
      
275
      
202
      
854
      
103,030
      
103,884
  
Total recorded investment
  
$
7,449
    
$
2,936
    
$
4,091
    
$
14,476
    
$
2,718,894
    
$
2,733,370
  
Accrued interest included in recorded investment
  
$
74
    
$
34
    
$
-
    
$
108
    
$
8,239
    
$
8,347
  


Impaired loans are as follows:

  
June 30,
2020
    
December 31,
2019
  
Impaired loans with no allocated allowance for loan losses
  
(In thousands)
  
Troubled debt restructurings ("TDR")
  
$
280
    
$
337
  
Non - TDR
    
1,542
      
1,550
  
Impaired loans with an allocated allowance for loan losses
                
TDR - allowance based on collateral
    
15,221
      
1,587
  
TDR - allowance based on present value cash flow
    
40,282
      
48,798
  
Non - TDR - allowance based on collateral
    
5,572
      
3,365
  
Total impaired loans
  
$
62,897
    
$
55,637
  
                 
Amount of allowance for loan losses allocated
                
TDR - allowance based on collateral
  
$
2,166
    
$
542
  
TDR - allowance based on present value cash flow
    
3,960
      
4,641
  
Non - TDR - allowance based on collateral
    
1,234
      
972
  
Total amount of allowance for loan losses allocated
  
$
7,360
    
$
6,155
  

Impaired loans by class  are as follows:

  
June 30, 2020
    
December 31, 2019
  
   
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
    
Recorded
Investment
    
Unpaid
Principal
Balance
    
Related
Allowance
For Loan
Losses
  
With no related allowance for loan losses recorded:
  
(In thousands)
        
Commercial
                                    
Commercial and industrial
  
$
84
    
$
84
    
$
-
    
$
257
    
$
257
    
$
-
  
Commercial real estate
    
-
      
-
      
-
      
796
      
796
      
-
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
632
      
632
      
-
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
424
      
448
      
-
      
212
      
217
      
-
  
1-4 family non-owner occupied
    
321
      
480
      
-
      
214
      
366
      
-
  
1-4 family - 2nd lien
    
364
      
364
      
-
      
407
      
438
      
-
  
Resort lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Installment
                                                
Boat lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
1
      
41
      
-
  
     
1,825
      
2,008
      
-
      
1,887
      
2,115
      
-
  
With an allowance for loan losses recorded:
                                                
Commercial
                                                
Commercial and industrial
    
2,409
      
2,510
      
653
      
1,655
      
1,706
      
453
  
Commercial real estate
    
16,420
      
20,934
      
2,115
      
6,685
      
6,661
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
525
      
887
      
52
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
22,334
      
23,092
      
2,462
      
10,163
      
10,695
      
1,031
  
1-4 family non-owner occupied
    
4,942
      
5,401
      
543
      
4,962
      
5,542
      
572
  
1-4 family - 2nd lien
    
575
      
579
      
116
      
14,059
      
15,243
      
1,695
  
Resort lending
    
11,563
      
12,017
      
1,165
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
72
      
99
      
25
      
-
      
-
      
-
  
Recreational vehicle lending
    
90
      
105
      
19
      
-
      
-
      
-
  
Other
    
2,483
      
2,630
      
210
      
2,924
      
3,153
      
261
  
     
61,413
      
68,254
      
7,360
      
54,005
      
56,708
      
6,155
  
Total
                                                
Commercial
                                                
Commercial and industrial
    
2,493
      
2,594
      
653
      
1,912
      
1,963
      
453
  
Commercial real estate
    
16,420
      
20,934
      
2,115
      
7,481
      
7,457
      
578
  
Mortgage
                                                
1-4 family owner occupied - jumbo
    
1,157
      
1,519
      
52
      
1,447
      
1,445
      
91
  
1-4 family owner occupied - non-jumbo
    
22,758
      
23,540
      
2,462
      
10,375
      
10,912
      
1,031
  
1-4 family non-owner occupied
    
5,263
      
5,881
      
543
      
5,176
      
5,908
      
572
  
1-4 family - 2nd lien
    
939
      
943
      
116
      
14,466
      
15,681
      
1,695
  
Resort lending
    
11,563
      
12,017
      
1,165
      
12,110
      
12,263
      
1,474
  
Installment
                                                
Boat lending
    
72
      
99
      
25
      
-
      
-
      
-
  
Recreational vehicle lending
    
90
      
105
      
19
      
-
      
-
      
-
  
Other
    
2,483
      
2,630
      
210
      
2,925
      
3,194
      
261
  
Total
  
$
63,238
    
$
70,262
    
$
7,360
    
$
55,892
    
$
58,823
    
$
6,155
  
                                                 
Accrued interest included in recorded investment
  
$
341
                    
$
255
                  


Average recorded investment in and interest income earned on impaired loans by class for the three month periods ending June 30, follows:

  
2020
    
2019
  
   
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
84
    
$
1
    
$
-
    
$
-
  
Commercial real estate
    
-
      
-
      
-
      
-
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
316
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
482
      
1
      
180
      
2
  
1-4 family non-owner occupied
    
355
      
3
      
304
      
-
  
1-4 family - 2nd lien
    
374
      
-
      
-
      
-
  
Resort lending
    
77
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
-
  
     
1,688
      
5
      
484
      
2
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,409
      
29
      
2,418
      
16
  
Commercial real estate
    
15,988
      
288
      
5,587
      
83
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,187
      
11
      
633
      
10
  
1-4 family owner occupied - non-jumbo
    
22,249
      
273
      
12,343
      
155
  
1-4 family non-owner occupied
    
4,774
      
52
      
18,510
      
251
  
1-4 family - 2nd lien
    
694
      
2
      
556
      
3
  
Resort lending
    
11,554
      
92
      
12,680
      
147
  
Installment
                                
Boat lending
    
74
      
-
      
67
      
-
  
Recreational vehicle lending
    
110
      
-
      
67
      
-
  
Other
    
2,546
      
35
      
3,258
      
43
  
     
61,585
      
782
      
56,119
      
708
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,493
      
30
      
2,418
      
16
  
Commercial real estate
    
15,988
      
288
      
5,587
      
83
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,503
      
11
      
633
      
10
  
1-4 family owner occupied - non-jumbo
    
22,731
      
274
      
12,523
      
157
  
1-4 family non-owner occupied
    
5,129
      
55
      
18,814
      
251
  
1-4 family - 2nd lien
    
1,068
      
2
      
556
      
3
  
Resort lending
    
11,631
      
92
      
12,680
      
147
  
Installment
                                
Boat lending
    
74
      
-
      
67
      
-
  
Recreational vehicle lending
    
110
      
-
      
67
      
-
  
Other
    
2,546
      
35
      
3,258
      
43
  
Total
  
$
63,273
    
$
787
    
$
56,603
    
$
710
  

Average recorded investment in and interest income earned on impaired loans by class for the six month periods ending June 30, follows:

 
  
2020
    
2019
  
 
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
  
With no related allowance for loan losses recorded:
  
(In thousands)
  
Commercial
                        
Commercial and industrial
  
$
142
    
$
2
    
$
-
    
$
-
  
Commercial real estate
    
199
      
-
      
-
      
-
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
211
      
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
392
      
4
      
120
      
2
  
1-4 family non-owner occupied
    
308
      
3
      
204
      
-
  
1-4 family - 2nd lien
    
385
      
-
      
-
      
-
  
Resort lending
    
51
      
-
      
-
      
-
  
Installment
                                
Boat lending
    
-
      
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
      
-
  
Other
    
-
      
-
      
-
      
-
  
 
    
1,688
      
9
      
324
      
2
  
With an allowance for loan losses recorded:
                                
Commercial
                                
Commercial and industrial
    
2,158
      
67
      
2,824
      
36
  
Commercial real estate
    
12,887
      
511
      
5,411
      
150
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,273
      
28
      
1,106
      
37
  
1-4 family owner occupied - non-jumbo
    
18,220
      
624
      
19,683
      
511
  
1-4 family non-owner occupied
    
4,837
      
118
      
11,171
      
315
  
1-4 family - 2nd lien
    
5,149
      
6
      
423
      
6
  
Resort lending
    
11,739
      
233
      
12,896
      
322
  
Installment
                                
Boat lending
    
49
      
-
      
44
      
-
  
Recreational vehicle lending
    
73
      
1
      
71
      
1
  
Other
    
2,672
      
76
      
3,269
      
95
  
 
    
59,057
      
1,664
      
56,898
      
1,473
  
Total
                                
Commercial
                                
Commercial and industrial
    
2,300
      
69
      
2,824
      
36
  
Commercial real estate
    
13,086
      
511
      
5,411
      
150
  
Mortgage
                                
1-4 family owner occupied - jumbo
    
1,484
      
28
      
1,106
      
37
  
1-4 family owner occupied - non-jumbo
    
18,612
      
628
      
19,803
      
513
  
1-4 family non-owner occupied
    
5,145
      
121
      
11,375
      
315
  
1-4 family - 2nd lien
    
5,534
      
6
      
423
      
6
  
Resort lending
    
11,790
      
233
      
12,896
      
322
  
Installment
                                
Boat lending
    
49
      
-
      
44
      
-
  
Recreational vehicle lending
    
73
      
1
      
71
      
1
  
Other
    
2,672
      
76
      
3,269
      
95
  
Total
  
$
60,745
    
$
1,673
    
$
57,222
    
$
1,475
  


Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance.

TDRs follow:

  
June 30, 2020
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
13,973
    
$
38,554
    
$
52,527
  
Non-performing TDRs (2)
    
1,234
      
2,022
(3) 
    
3,256
  
Total
  
$
15,207
    
$
40,576
    
$
55,783
  

 
December 31, 2019
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDRs
  
$
7,974
    
$
39,601
    
$
47,575
  
Non-performing TDRs (2)
    
540
      
2,607
(3) 
    
3,147
  
Total
  
$
8,514
    
$
42,208
    
$
50,722
  

(1)
Retail loans include mortgage and installment loan portfolio segments.
(2)
Included in non-performing loans table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We allocated $6.1 million and $5.2 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings (“TDR”) at June 30, 2020 and December 31, 2019, respectively.

During the six months ended June 30, 2020 and 2019, the terms of certain loans were modified as TDRs. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 36 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 360 months in certain circumstances.

Loans that have been classified as TDRs during the three-month periods ended June 30 follow:

  
Number of
Contracts
    
Pre-modification
Recorded
Balance
    
Post-modification
Recorded
Balance
  
   
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
6
    
$
1,108
    
$
1,108
  
Commercial real estate
    
1
      
5,835
      
5,835
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
54
      
58
  
1-4 family non-owner occupied
    
-
      
-
      
-
  
1-4 family - 2nd lien
    
2
      
45
      
46
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
-
      
-
      
-
  
Total
    
10
    
$
7,042
    
$
7,047
  
                         
2019
                        
Commercial
                        
Commercial and industrial
    
-
    
$
-
    
$
-
  
Commercial real estate
    
2
      
1,329
      
1,329
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
-
      
-
      
-
  
1-4 family non-owner occupied
    
1
      
506
      
505
  
1-4 family - 2nd lien
    
-
      
-
      
-
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
4
      
100
      
102
  
Total
    
7
    
$
1,935
    
$
1,936
  

Loans that have been classified as TDRs during the six-month periods ended June 30 follow:

 
  
Number of
Contracts
    
Pre-modification
Balance
    
Post-modification
Balance
  
 
  
(Dollars in thousands)
  
2020
                  
Commercial
                  
Commercial and industrial
    
7
    
$
1,207
    
$
1,207
  
Commercial real estate
    
4
      
7,012
      
7,012
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
2
      
103
      
108
  
1-4 family non-owner occupied
    
1
      
59
      
62
  
1-4 family - 2nd lien
    
2
      
45
      
46
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
1
      
33
      
34
  
Total
    
17
    
$
8,459
    
$
8,469
  
 
                        
2019
                        
Commercial
                        
Commercial and industrial
    
1
    
$
49
    
$
49
  
Commercial real estate
    
2
      
1,329
      
1,329
  
Mortgage
                        
1-4 family owner occupied - jumbo
    
-
      
-
      
-
  
1-4 family owner occupied - non-jumbo
    
1
      
281
      
281
  
1-4 family non-owner occupied
    
1
      
506
      
505
  
1-4 family - 2nd lien
    
-
      
-
      
-
  
Resort lending
    
-
      
-
      
-
  
Installment
                        
Boat lending
    
-
      
-
      
-
  
Recreational vehicle lending
    
-
      
-
      
-
  
Other
    
6
      
160
      
163
  
Total
    
11
    
$
2,325
    
$
2,327
  

The troubled debt restructurings described above for 2020 decreased the allowance for loan losses by $0.02 million and resulted in zero charge offs during the three months ended June 30, 2020, and increased the allowance for loan losses by $0.20 million and resulted in zero charge offs during the six months ended June 30, 2020.

The troubled debt restructurings described above for 2019 increased the allowance for loan losses by $0.04 million and resulted in zero charge offs during the three months ended June 30, 2019, and increased the allowance for loan losses by $0.05 million and resulted in zero charge offs during the six months ended June 30, 2019.

There were no troubled debt restructurings that subsequently defaulted within twelve months following the modification during the three and six months periods ended June 30, 2020 and 2019.

A loan is considered to be in payment default generally once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

Non-TDR Loan Modifications and Paycheck Protection Program (“PPP”) due to COVID-19 - On March 22, 2020, the federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”.  This guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19.  The guidance goes on to explain that in consultation with the Financial Accounting Standards Board staff that the federal banking agencies conclude that short-term modifications (e.g. six months or less) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs.  In addition, on March 27, 2020, President Trump signed the CARES Act.  Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs.  We are assisting both commercial and retail (mortgage and installment) borrowers with reduced or suspended payments. Commercial loan accommodations are typically a three month interest-only period while retail loan  (mortgage and installment) forbearances have primarily been payment suspensions for three months. For loans subject to these forbearance agreements  each borrower is required to resume making regularly scheduled loan payments at the end of the forbearance period.  The deferred principal and interest will be repaid based upon individualized agreements.  Options for repayment include separate repayment plans, extending the term of the loan or re-amortizing the loan based upon the affordability of the payment in relationship to a reduced income.  While some borrowers may elect to make a lump sum payment, we anticipate the majority will require some type of repayment plan.  During the forbearance period, the loan will not be reported as past due in keeping with the guidance discussed previously.

A summary of accommodations entered into under this guidance as of June 30, 2020 follows:

Commercial and Retail Loan COVID-19 Accomodations

  
Covid-19 Accomodations
    
Total
    
% of Total
  
Loan Category
  
Customers (#)
    
Loans (#)
    
Loans ($)
    
Loans
    
Loans
  
   
(Dollars in thousands)
  
Commercial
    
259
      
386
    
$
210,486
    
$
1,362,956
      
15.4
%
Mortgage portfolio loans
    
388
      
388
      
81,212
      
1,041,684
      
7.8
%
Installment & Other
    
280
      
280
      
7,459
      
462,023
      
1.6
%
Total
    
927
      
1,054
    
$
299,157
    
$
2,866,663
      
10.4
%
Mortgage loans serviced for others(1)
    
773
      
773
    
$
114,839
    
$
2,739,478
      
4.2
%

1) We have delegated authority from all investors to grant these deferrals on their behalf.

The CARES Act also included an initial $349 billion loan program administered through the U.S. Small Business Administration (“SBA”) referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP. The PPP opened on April 3, 2020 intending to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans through the SBA. In late April 2020 the Paycheck Protection Program and Health Care Enhancement Act, added an another $310 billion in funding while the Paycheck Protection Program Flexibility Act made certain changes to the program, by allowing for more time to spend the funds, and making it easier to get a loan fully forgiven.  Most recently, the PPP Extension Act extended the PPP to August 8, 2020. As of June 30, 2020, we had 2,012 PPP loans outstanding with a total balance of $259.4 million.  PPP loans are included in the commercial and industrial class of the commercial loan segment.  As these loans are 100% guaranteed through the SBA allowance for loan losses recorded on these loans is zero.  We have received approximately 35 forgiveness applications that we expect to submit to the SBA once the SBA Forgiveness portal is activated.  Interest and fees on loans include $1.0 million for the second quarter and first six months of 2020, related to the accretion of net loan fees on PPP loans. No such accretion is included in the comparable prior year periods.  At June 30, 2020 we had $7.7 million of remaining unaccreted net fees related to PPP loans.

Credit Quality Indicators – As part of our on-going monitoring of the credit quality of our loan portfolios, we track certain credit quality indicators including (a) weighted-average risk grade of commercial loans, (b) the level of classified commercial loans, (c) credit scores of mortgage and installment loan borrowers, and (d) delinquency history and non-performing loans.

For commercial loans, we use a loan rating system that is similar to those employed by state and federal banking regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:

Rating 1 through 6: These loans are generally referred to as our “non-watch” commercial credits that include very high or exceptional credit fundamentals through acceptable credit fundamentals.

Rating 7 and 8: These loans are generally referred to as our “watch” commercial credits. These ratings include loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends could weaken our asset or credit position. While potentially weak, no loss of principal or interest is envisioned with these ratings.

Rating 9: These loans are generally referred to as our “substandard accruing” commercial credits. This rating includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both principal and interest primarily due to collateral coverage.

Rating 10 and 11: These loans are generally referred to as our ‘‘substandard - non-accrual’’ and ‘‘doubtful’’ commercial credits. Our doubtful rating includes a sub classification for a loss rate other than 50% (which is the standard doubtful loss rate).  These ratings include loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.


Rating 12: These loans are generally referred to as our “loss” commercial credits. This rating includes loans to borrowers that are deemed incapable of repayment and are charged-off.

The following table summarizes loan ratings by loan class for our commercial loan segment:

  
Commercial
  
   
Non-watch
1-6
    
Watch
7-8
    
Substandard
Accrual
9
    
Non-
Accrual
10-11
    
Total
  
               
(In thousands)
              
June 30, 2020
                              
Commercial and industrial
  
$
719,372
    
$
39,374
    
$
3,708
    
$
1,251
    
$
763,705
  
Commercial real estate
    
583,060
      
4,827
      
10,793
      
3,583
      
602,263
  
Total
  
$
1,302,432
    
$
44,201
    
$
14,501
    
$
4,834
    
$
1,365,968
  
Accrued interest included in total
  
$
2,846
    
$
109
    
$
57
    
$
-
    
$
3,012
  
                                         
December 31, 2019
                                        
Commercial and industrial
  
$
515,955
    
$
44,384
    
$
3,967
    
$
565
    
$
564,871
  
Commercial real estate
    
580,516
      
23,036
      
535
      
735
      
604,822
  
Total
  
$
1,096,471
    
$
67,420
    
$
4,502
    
$
1,300
    
$
1,169,693
  
Accrued interest included in total
  
$
2,763
    
$
205
    
$
30
    
$
-
    
$
2,998
  

For each of our mortgage and installment segment classes, we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated semi-annually.

The following tables summarize credit scores by loan class for our mortgage and installment loan segments:

  
Mortgage (1)
  
   
1-4 Family
Owner
Occupied -
Jumbo
    
1-4 Family
Owner
Occupied -
Non-jumbo
    
1-4 Family
Non-owner
Occupied
    
1-4 Family
2nd Lien
    
Resort
Lending
    
Total
  
   
(In thousands)
  
June 30, 2020
                                    
_800 and above
  
$
61,362
    
$
45,892
    
$
34,101
    
$
14,203
    
$
13,872
    
$
169,430
  
_750-799
    
219,140
      
69,820
      
80,009
      
44,071
      
25,926
      
438,966
  
_700-749
    
91,257
      
82,755
      
27,631
      
29,110
      
13,507
      
244,260
  
_650-699
    
36,212
      
46,971
      
11,455
      
11,948
      
8,109
      
114,695
  
_600-649
    
12,173
      
21,487
      
5,213
      
3,707
      
1,589
      
44,169
  
_550-599
    
1,974
      
11,123
      
2,024
      
1,690
      
585
      
17,396
  
_500-549
    
2,143
      
7,798
      
996
      
1,425
      
644
      
13,006
  
_Under 500
    
-
      
2,032
      
1,333
      
536
      
191
      
4,092
  
_Unknown
    
-
      
-
      
-
      
-
      
-
      
-
  
_Total
  
$
424,261
    
$
287,878
    
$
162,762
    
$
106,690
    
$
64,423
    
$
1,046,014
  
Accrued interest included in total
  
$
1,382
    
$
1,687
    
$
600
    
$
363
    
$
298
    
$
4,330
  
                                                 
December 31, 2019
                                                
_800 and above
  
$
48,486
    
$
43,848
    
$
24,315
    
$
13,905
    
$
11,076
    
$
141,630
  
_750-799
    
198,491
      
111,521
      
84,656
      
50,012
      
29,364
      
474,044
  
_700-749
    
106,609
      
95,064
      
34,839
      
30,697
      
14,626
      
281,835
  
_650-699
    
31,553
      
51,174
      
13,995
      
14,267
      
8,063
      
119,052
  
_600-649
    
13,230
      
21,938
      
5,897
      
4,097
      
2,074
      
47,236
  
_550-599
    
514
      
12,308
      
1,863
      
1,703
      
673
      
17,061
  
_500-549
    
1,519
      
7,940
      
1,870
      
1,281
      
889
      
13,499
  
_Under 500
    
641
      
2,208
      
533
      
511
      
79
      
3,972
  
_Unknown
    
510
      
1,259
      
1,569
      
69
      
1,330
      
4,737
  
_Total
  
$
401,553
    
$
347,260
    
$
169,537
    
$
116,542
    
$
68,174
    
$
1,103,066
  
Accrued interest included in total
  
$
1,139
    
$
1,662
    
$
586
    
$
502
    
$
266
    
$
4,155
  

(1)
Credit scores have been updated within the last twelve months.


 
Installment (1)
  
   
Boat
Lending
    
Recreational
Vehicle
Lending
    
Other
    
Total
  
   
(In thousands)
  
June 30, 2020
                        
_800 and above
  
$
38,967
    
$
29,267
    
$
8,564
    
$
76,798
  
_750-799
    
112,736
      
88,056
      
35,270
      
236,062
  
_700-749
    
39,533
      
30,177
      
26,061
      
95,771
  
_650-699
    
11,494
      
7,427
      
21,857
      
40,778
  
_600-649
    
2,378
      
1,692
      
4,085
      
8,155
  
_550-599
    
769
      
584
      
1,469
      
2,822
  
_500-549
    
367
      
316
      
909
      
1,592
  
_Under 500
    
345
      
110
      
240
      
695
  
_Unknown
    
-
      
-
      
538
      
538
  
_Total
  
$
206,589
    
$
157,629
    
$
98,993
    
$
463,211
  
Accrued interest included in total
  
$
477
    
$
364
    
$
347
    
$
1,188
  
                                 
December 31, 2019
                                
_800 and above
  
$
28,041
    
$
24,470
    
$
7,611
    
$
60,122
  
_750-799
    
118,380
      
88,164
      
37,583
      
244,127
  
_700-749
    
41,490
      
31,055
      
27,204
      
99,749
  
_650-699
    
11,485
      
7,267
      
22,517
      
41,269
  
_600-649
    
2,254
      
1,411
      
4,470
      
8,135
  
_550-599
    
946
      
592
      
1,884
      
3,422
  
_500-549
    
377
      
464
      
1,127
      
1,968
  
_Under 500
    
309
      
22
      
284
      
615
  
_Unknown
    
-
      
-
      
1,204
      
1,204
  
_Total
  
$
203,282
    
$
153,445
    
$
103,884
    
$
460,611
  
Accrued interest included in total
  
$
490
    
$
378
    
$
326
    
$
1,194
  

(1)
Credit scores have been updated within the last twelve months.

Foreclosed residential real estate properties included in other real estate and repossessed assets on our Condensed Consolidated Statements of Financial Condition totaled $1.0 million and $1.2 million at June 30, 2020 and December 31, 2019, respectively.  Retail mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements totaled $0.5 million and $0.7 million at June 30, 2020 and December 31, 2019, respectively.

During the first quarter of 2020, we securitized $26.2 million of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.72 million.  We also sold $2.4 million of portfolio residential fixed rate mortgage loans servicing retained into the secondary market and recognized a gain on sale of $0.7 million.  These transactions were done primarily for asset/liability management purposes.

During the first quarter of 2019, we sold $40.6 million of residential adjustable rate mortgage loans servicing released (classified on the Condensed Consolidated Statements of Financial Condition as held for sale, carried at the lower of cost or fair value at December 31, 2018) to another financial institution and recognized a gain on sale of $0.01 million.  During the first quarter of 2019 we also securitized $29.8 million, of portfolio residential fixed rate mortgage loans servicing retained with Freddie Mac and recognized a gain on sale of $0.53 million. These transactions were done primarily for asset/liability management purposes.

PCI Loans

Loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of purchased loans, we consider a number of factors including, among others, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, and net present value of cash flows expected to be received. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income.

As a result of our acquisition of TCSB Bancorp, Inc. in the second quarter of 2018 we purchased loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. For these loans that meet the criteria of ASC 310-30 treatment, the carrying amount was as follows:

  
June 30,
2020
    
December 31,
2019
  
   
(In thousands)
  
Commercial
  
$
1,281
    
$
1,394
  
Mortgage
    
560
      
575
  
Installment
    
305
      
316
  
Total carrying amount
    
2,146
      
2,285
  
Allowance for loan losses
    
-
      
-
  
Carrying amount, net of allowance for loan losses
  
$
2,146
    
$
2,285
  

The accretable difference on PCI loans is the difference between the expected cash flows and the net present value of expected cash flows with such difference accreted into earnings using the effective yield method over the term of the loans. Accretion recorded as loan interest income is included in the table below.  Accretable yield of PCI loans, or income expected to be collected follows:

  
Three months ended
June 30,
    
Six months ended
June 30,
  
   
2020
    
2019
    
2020
    
2019
  
   
(unaudited)
    
(unaudited)
  
   
(In thousands)
    
(In thousands)
  
                         
Balance at beginning of period
  
$
608
    
$
788
    
$
640
    
$
462
  
New loans purchased
    
-
      
-
      
-
      
-
  
Accretion recorded as loan interest income
    
(35
)
    
(39
)
    
(67
)
    
(78
)
Reclassification from (to) nonaccretable difference
    
-
      
-
      
-
      
365
  
Displosals/other adjustments
    
-
      
-
      
-
      
-
  
Balance at end of period
  
$
573
    
$
749
    
$
573
    
$
749