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Allowance For Credit Losses
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Allowance For Credit Losses Allowance For Credit Losses
 
The following table summarizes the activity in the allowance for credit losses, by portfolio loan classification, for the three months ended March 31, 2020 and 2019 (in thousands).  The allocation of a portion of the allowance in one portfolio segment does not preclude its availability to absorb losses in other portfolio segments.
Commercial andCommercialResidentialDDA
IndustrialReal EstateReal EstateHome EquityConsumerOverdraftsTotal
Three months ended March 31, 2020
Beginning balance$2,059  $2,606  $3,448  $1,187  $975  $1,314  $11,589  
Impact of adopting CECL1,715  3,254  2,139  (598) (810) 60  5,760  
Charge-offs(77) (383) (483) (45) (55) (703) (1,746) 
Recoveries9  203  95  47  13  451  818  
Provision for credit losses2,149  3,709  1,759  111  110  134  7,972  
Ending balance$5,855  $9,389  $6,958  $702  $233  $1,256  $24,393  
Three months ended March 31, 2019       
Beginning balance$4,060  $4,495  $4,116  $1,268  $319  $1,708  $15,966  
Charge-offs—  (45) (328) (46) (185) (625) (1,229) 
Recoveries135  32  75  —  97  419  758  
(Recovery of) provision(1,225) 158  (43) 26  237  (2) (849) 
Ending balance$2,970  $4,640  $3,820  $1,248  $468  $1,500  $14,646  

Management systematically monitors the loan portfolio and the appropriateness of the allowance for credit losses on a quarterly basis to provide for probable incurred losses inherent in the portfolio. Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance and other relevant factors. The provision for credit losses recorded during the three months ended March 31, 2020 largely reflects the expected economic impact from the COVID-19 pandemic. The Company's estimate of future economic conditions utilized in its provision estimate is primarily dependent on expected unemployment ranges over a two-year period. Beyond two years, an immediate straight line reversion to historical average loss rates is applied over the life of the loan pool in the migration methodology. The vintage methodology applies future average loss rates based on net losses in historical periods where the unemployment rate was within the forecasted range. As a result of COVID-19, expected unemployment ranges have significantly increased and resulted in an increase in the Company's provision for credit losses.

Individual credits in excess of $1 million are selected at least annually for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the appropriateness of the allowance. Due to the nature of commercial lending, evaluation of the appropriateness of the allowance as it relates to these types of loan types is often based more upon specific credit reviews, with consideration given to the potential impairment of certain credits and historical loss rates, adjusted for economic conditions and other inherent risk factors.

Non-Performing Loans

Interest income on loans is accrued and credited to operations based upon the principal amount outstanding, using methods that generally result in level rates of return.  Loan origination fees, and certain direct costs, are deferred and amortized as an adjustment to the yield over the term of the loan.  The accrual of interest generally is discontinued when a loan becomes 90 days past due as to principal or interest for all loan types.  However, any loan may be placed on non-accrual status if the Company receives information that indicates a borrower is unable to meet the contractual terms of its respective loan agreement.  Other indicators considered for placing a loan on non-accrual status include the borrower’s involvement in bankruptcies, foreclosures, repossessions, litigation and any other situation resulting in doubt as to whether full collection of contractual principal and interest is attainable.  When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for credit losses.  Management may elect to continue the accrual of interest when the net realizable value of collateral exceeds the principal balance and related accrued interest, and the loan is in the process of collection.
Generally for all loan classes, interest income during the period the loan is non-performing is recorded on a cash basis after recovery of principal is reasonably assured.  Cash payments received on nonperforming loans are typically applied directly against the outstanding principal balance until the loan is fully repaid.  Generally, loans are restored to accrual status when the obligation is brought current, the borrower has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The following tables present the amortized cost basis of loans on non-accrual status and loans past due over 90 days still accruing as of March 31, 2020 (in thousands):
Non-accrual With NoNon-accrual WithLoans Past Due
Allowance forAllowance forOver 90 Days
Credit LossesCredit LossesStill Accruing
Commercial & Industrial$207  $968  $—  
Commercial Real Estate2,522  5,343  —  
   1-4 Family—  1,488  —  
   Hotels—  2,752  —  
   Multi-family—  —  —  
   Non Residential Non-Owner Occupied—  594  —  
   Non Residential Owner Occupied2,522  509  —  
Residential Real Estate437  2,313  26  
Home Equity41  208  —  
Consumer—  1  —  
Total$3,207  $8,833  $26  

The following table presents the Company's loans on non-accrual status and loans past due over 90 days still accruing as of December 31, 2019 (in thousands):
Loans Past Due
Over 90 Days
Non-accrualStill Accruing
Commercial and industrial$1,182  $184  
Commercial real estate6,384  —  
Residential real estate3,393  83  
Home equity531  —  
Consumer—  —  
Total$11,490  $267  

The Company recognized less than $0.1 million of interest income on nonaccrual loans during each of the three months ended March 31, 2020 and 2019.

The following table presents the amortized cost basis of collateral-dependent loans as of March 31, 2020 (in thousands). Changes in the fair value of the collateral for collateral-dependent loans are reported as credit loss expense or a reversal of credit loss expense in the period of change.
Secured by
Real EstateEquipment
Commercial and industrial$—  $207  
Commercial real estate5,386  —  
   1-4 Family—  —  
   Hotels2,861  —  
   Multi-family—  —  
   Non Residential Non-Owner Occupied—  —  
   Non Residential Owner Occupied2,525  —  
Total$5,386  $207  

The following table presents the Company’s impaired loans, by class (in thousands) as of December 31, 2019. The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off. There were no impaired residential, home equity, or consumer loans.

December 31, 2019
Unpaid
RecordedPrincipalRelated
InvestmentBalanceAllowance
With no related allowance recorded:
Commercial and industrial$501  $501  $—  
Commercial real estate3,546  3,572  —  
Total$4,047  $4,073  $—  
With an allowance recorded:
Commercial and industrial$—  $—  $—  
Commercial real estate2,644  2,644  87  
Total$2,644  $2,644  $87  

The following table presents information related to the average recorded investment and interest income recognized on the Company’s impaired loans, by class (in thousands), for the three months ended March 31, 2019:
2019
AverageInterest
RecordedIncome
InvestmentRecognized
With no related allowance recorded:
Commercial and industrial$618  $—  
Commercial real estate6,521  36  
Total$7,139  $36  
With an allowance recorded:
Commercial and industrial$—  $—  
Commercial real estate2,985  30  
Total$2,985  $30  

  Approximately $0.1 million interest income would have been recognized during the three months ended March 31, 2019, respectively, if such loans had been current in accordance with their original terms.
Generally, all loan types are considered past due when the contractual terms of a loan are not met and the borrower is 30 days or more past due on a payment.  Furthermore, residential and home equity loans are generally subject to charge-off when the loan becomes 120 days past due, depending on the estimated fair value of the collateral less cost to dispose, versus the outstanding loan balance.  Commercial loans are generally charged off when the loan becomes 120 days past due.  Open-end consumer loans are generally charged off when the loan becomes 180 days days past due.
 
The following table presents the aging of the amortized cost basis in past-due loans as of March 31, 2020 by class of loan (in thousands):

30-5960-8990+TotalCurrentTotal
Past DuePast DuePast DuePast DueLoansLoans
Commercial and industrial$53  $18  $—  $71  $308,496  $308,567  
Commercial real estate1,018  3  —  1,021  1,469,928  1,470,949  
   1-4 Family291  —  —  291  120,561  120,852  
   Hotels—  —  —  —  294,072  294,072  
   Multi-family—  —  —  —  205,684  205,684  
   Non Residential Non-Owner Occupied175  3  —  178  627,674  627,852  
   Non Residential Owner Occupied552  —  —  552  221,937  222,489  
Residential real estate5,664  2,125  26  7,815  1,621,763  1,629,578  
Home Equity361  69  —  430  145,604  146,034  
Consumer159  18  —  177  54,572  54,749  
Overdrafts465  2  —  467  2,706  3,173  
Total$7,720  $2,235  $26  $9,981  $3,603,069  $3,613,050  

The following presents an aging analysis of the Company's past-due loans, by class, as of December 31, 2019 (in thousands):
30-5960-8990+TotalCurrentTotal
Past DuePast DuePast DuePast DueLoansLoans
Commercial and industrial$243  $31  $184  $458  $307,557  $308,015  
Commercial real estate 1,514  66  —  1,580  1,458,157  1,459,737  
Residential real estate5,758  1,643  83  7,484  1,632,912  1,640,396  
Home equity840  116  —  956  147,972  148,928  
Consumer156  32  —  188  54,075  54,263  
Overdrafts644  86  —  730  4,030  4,760  
Total$9,155  $1,974  $267  $11,396  $3,604,703  $3,616,099  

Troubled Debt Restructurings ("TDRs")

The Company’s policy on loan modifications typically does not allow for modifications that would be considered a concession from the Company. However, when there is a modification, the Company evaluates each modification to determine if the modification constitutes a troubled debt restructuring (“TDR”) in accordance with ASU 2011-02, whereby a modification of a loan would be considered a TDR when both of the following conditions are met: (1) a borrower is experiencing financial difficulty and (2) the modification constitutes a concession. When determining whether the borrower is experiencing financial difficulties, the Company reviews whether the debtor is currently in payment default on any of its debt or whether it is probable that the debtor would be in payment default in the foreseeable future without the modification. Other indicators of financial difficulty include whether the debtor has declared or is in the process of declaring bankruptcy, the debtor’s ability to continue as a going concern, or the debtor’s projected cash flow to service its debt (including principal and interest) in accordance with the contractual terms for the foreseeable future, without a modification.
Regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged by the bankruptcy court and the borrower has not reaffirmed the debt. The filing of bankruptcy is deemed to be evidence that the borrower is in financial difficulty and the discharge of the debt by the bankruptcy court is deemed to be a concession granted to the borrower.

The following tables set forth the Company’s TDRs (in thousands). Substantially all of the Company's TDRs are accruing interest.
March 31, 2020December 31, 2019
Commercial and industrial$—  $—  
Commercial Real Estate5,163  4,973  
   1-4 Family128  N/R  
   Hotels2,861  N/R  
   Multi-family1,940  N/R  
   Non Residential Non-Owner Occupied—  N/R  
   Non Residential Owner Occupied234  N/R  
Residential real estate21,413  21,029  
Home equity2,294  3,628  
Consumer184  —  
Total$29,054  $29,630  
N/R = Not reported. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company has allocated $0.7 million and $0.8 million of the allowance for credit losses for these loans as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, the Company has not committed to lend any additional amounts in relation to these loans.

The following table presents loans by class, modified as TDRs, that occurred during the three months ended March 31, 2020 and 2019, respectively (dollars in thousands):
March 31, 2020March 31, 2019
Pre-Post-Pre-Post-
ModificationModificationModificationModification
OutstandingOutstandingOutstandingOutstanding
Number ofRecordedRecordedNumber ofRecordedRecorded
ContractsInvestmentInvestmentContractsInvestmentInvestment
Commercial and industrial—  $—  $—  —  $—  $—  
Commercial real estate—  —  —  —  —  —  
   1-4 Family—  —  —  N/R  N/R  N/R  
   Hotels—  —  —  N/R  N/R  N/R  
   Multi-family—  —  —  N/R  N/R  N/R  
   Non Owner Non-Owner Occupied—  —  —  N/R  N/R  N/R  
   Non Owner Owner Occupied—  —  —  N/R  N/R  N/R  
Residential real estate9  807  805  23  1,729  1,729  
Home equity2  70  70  5  69  69  
Consumer—  —  —  —  —  —  
Total11  $877  $875  28  $1,798  $1,798  
N/R = Not reported. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
The TDRs above increased the allowance for credit losses by less than $0.1 million in each of the three months ended of March 31, 2020 and 2019 and resulted in charge-offs of less than $0.1 million during those same time periods.

The Company had one TDR that subsequently defaulted in 2019. The loan balance was approximately $3.0 million and the subsequent default resulted in a charge-off of $0.7 million and the remaining balance was transferred to OREO during 2019. The Company has had no TDRs that subsequently defaulted in 2020.

COVID-19 Pandemic

In March of 2020, in response to the COVID-19 pandemic, regulatory guidance was issued that clarified the accounting for loan modifications. Modifications of loan terms do not automatically result in a TDR. Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extension of repayment terms, or other delays that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time the modification program was implemented.

As of May 1, 2020, the Company has granted deferrals of approximately $99.0 million for mortgage borrowers and $391.3 million for commercial borrowers. As of May 1, 2020, none of these deferrals were considered TDRs.

Credit Quality Indicators
 
All commercial loans within the portfolio are subject to internal risk rating.  All non-commercial loans are evaluated based on payment history.  The Company’s internal risk ratings for commercial loans are:  Exceptional, Good, Acceptable, Pass/Watch, Special Mention, Substandard and Doubtful.  Each internal risk rating is defined in the loan policy using the following criteria:  balance sheet yields; ratios and leverage; cash flow spread and coverage; prior history; capability of management; market position/industry; potential impact of changing economic, legal, regulatory or environmental conditions; purpose; structure; collateral support; and guarantor support.  Risk grades are generally assigned by the primary lending officer and are periodically evaluated by the Company’s internal loan review process.  Based on an individual loan’s risk grade, estimated loss percentages are applied to the outstanding balance of the loan to determine the amount of probable loss.
 
The Company categorizes loans into risk categories based on relevant information regarding the customer’s debt service ability, capacity and overall collateral position, along with other economic trends and historical payment performance.  The risk rating for each credit is updated when the Company receives current financial information, the loan is reviewed by the Company’s internal loan review and credit administration departments, or the loan becomes delinquent or impaired.  The risk grades are updated a minimum of annually for loans rated Exceptional, Good, Acceptable, or Pass/Watch.  Loans rated Special Mention, Substandard or Doubtful are reviewed at least quarterly.  The Company uses the following definitions for its risk ratings:
Risk RatingDescription
Pass ratings: 
   (a) ExceptionalLoans classified as exceptional are secured with liquid collateral conforming to the internal loan policy.  Loans rated within this category pose minimal risk of loss to the bank. 
   (b) GoodLoans classified as good have similar characteristics that include a strong balance sheet, satisfactory debt service coverage ratios, strong management and/or guarantors, and little exposure to economic cycles. Loans in this category generally have a low chance of loss to the bank.
   (c) AcceptableLoans classified as acceptable have acceptable liquidity levels, adequate debt service coverage ratios, experienced management, and have average exposure to economic cycles.  Loans within this category generally have a low risk of loss to the bank. 
   (d) Pass/WatchLoans classified as pass/watch have erratic levels of leverage and/or liquidity, cash flow is volatile and the borrower is subject to moderate economic risk.  A borrower in this category poses a low to moderate risk of loss to the bank. 
Special MentionLoans classified as special mention have a potential weakness(es) that deserves management’s close attention.  The potential weakness could result in deterioration of the loan repayment or the bank’s credit position at some future date.  A loan rated in this category poses a moderate loss risk to the bank. 
SubstandardLoans classified as substandard reflect a customer with a well defined weakness that jeopardizes the liquidation of the debt.  Loans in this category have the possibility that the bank will sustain some loss if the deficiencies are not corrected and the bank’s collateral value is weakened by the financial deterioration of the borrower. 
DoubtfulLoans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that make collection of the full contract amount highly improbable.  Loans rated in this category are most likely to cause the bank to have a loss due to a collateral shortfall or a negative capital position. 

Based on the most recent analysis performed, the risk category of loans by class of loans at March 31, 2020 is as follows (in thousands):

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial and industrial
Pass$11,278  $73,573  $47,077  $40,534  $10,855  $16,258  $74,776  $274,351  
Special mention—  53  21  138  —  92  467  771  
Substandard62  1,462  1,180  684  9,363  2,135  18,559  33,445  
Total$11,340  $75,088  $48,278  $41,356  $20,218  $18,485  $93,802  $308,567  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Total
Pass$79,795  $351,869  $243,124  $184,499  $171,409  $345,185  $41,261  $1,417,142  
Special mention—  5,190  913  730  364  7,343  113  14,653  
Substandard4,250  1,765  4,759  2,247  10,648  15,393  92  39,154  
Total$84,045  $358,824  $248,796  $187,476  $182,421  $367,921  $41,466  $1,470,949  
Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
1-4 Family
Pass$6,891  $23,018  $11,600  $9,806  $8,887  $39,410  $11,705  $111,317  
Special mention—  —  —  26  338  3,249  —  3,613  
Substandard—  240  —  228  111  5,330  13  5,922  
Total$6,891  $23,258  $11,600  $10,060  $9,336  $47,989  $11,718  $120,852  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Hotels
Pass$13,862  $111,220  $35,026  $49,583  $21,516  $55,359  $—  $286,566  
Substandard—  —  —  —  4,538  2,968  —  7,506  
Total$13,862  $111,220  $35,026  $49,583  $26,054  $58,327  $—  $294,072  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Multi-family
Pass$5,862  $58,377  $20,114  $34,045  $35,008  $49,075  $611  $203,092  
Special mention—  1,940  565  —  —  —  —  2,505  
Substandard—  —  —  —  —  87  —  87  
Total$5,862  $60,317  $20,679  $34,045  $35,008  $49,162  $611  $205,684  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Non Residential Non-Owner Occupied
Pass$51,209  $122,311  $143,394  $59,571  $82,003  $139,639  $23,383  $621,510  
Special mention—  320  287  561  —  600  —  1,768  
Substandard—  99  1,187  322  1,519  1,368  79  4,574  
Total$51,209  $122,730  $144,868  $60,454  $83,522  $141,607  $23,462  $627,852  
Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Non Residential Owner Occupied
Pass$5,943  $35,860  $31,896  $29,802  $23,223  $69,589  $6,009  $202,322  
Special mention—  2,930  61  92  25  3,106  113  6,327  
Substandard—  1,317  3,330  1,447  3,631  4,115  —  13,840  
Total$5,943  $40,107  $35,287  $31,341  $26,879  $76,810  $6,122  $222,489  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Residential real estate
Performing$67,016  $300,014  $253,660  $183,583  $143,910  $556,686  $121,900  $1,626,769  
Non-performing—  —  —  317  186  2,168  138  2,809  
Total$67,016  $300,014  $253,660  $183,900  $144,096  $558,854  $122,038  $1,629,578  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Home equity
Performing$1,673  $8,793  $8,012  $2,924  $2,392  $10,702  $111,289  $145,785  
Non-performing—  —  —  —  41  —  208  249  
Total$1,673  $8,793  $8,012  $2,924  $2,433  $10,702  $111,497  $146,034  

Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Consumer
Performing$5,884  $21,327  $14,100  $5,394  $3,143  $2,315  $2,585  $54,748  
Non-performing—  —  1  —  —  —  —  1  
Total$5,884  $21,327  $14,101  $5,394  $3,143  $2,315  $2,585  $54,749  


The following table presents the Company’s commercial loans by credit quality indicators, by portfolio loan classification (in thousands):
Commercial and IndustrialCommercial Real EstateTotal
December 31, 2019   
Pass$276,847  $1,408,644  $1,685,491  
Special mention2,472  13,838  16,310  
Substandard28,696  37,255  65,951  
Total$308,015  $1,459,737  $1,767,752  
  
The following table presents the Company's non-commercial loans by payment performance, by portfolio loan classification (in thousands):
PerformingNon-PerformingTotal
December 31, 2019
Residential real estate$1,636,920  $3,476  $1,640,396  
Home equity148,397  531  148,928  
Consumer54,263  —  54,263  
Total$1,839,580  $4,007  $1,843,587