XML 25 R13.htm IDEA: XBRL DOCUMENT v3.21.1
Allowance For Credit Losses
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
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, 2021 and 2020 (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, 2021
Beginning balance$3,644 $10,997 $8,093 $630 $163 $1,022 $24,549 
Charge-offs(34)(1)(93)(64)(147)(453)(792)
Recoveries46 164 74 23 39 413 759 
(Recovery of) provision for credit losses(131)(293)(14)19 96 (117)(440)
Ending balance$3,525 $10,867 $8,060 $608 $151 $865 $24,076 
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 

Management systematically monitors the loan portfolio and the appropriateness of the allowance for credit losses on a quarterly basis to provide for expected 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, 2021 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, a 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 significantly increased during the quarter ended March 31, 2020 and resulted in an increase in the Company's provision for credit losses. During the quarter ended March 31, 2021 no significant unemployment factor adjustments were necessary, resulting in minimal impact to 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.

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.

Non-Performing Loans

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 90 days still accruing as of March 31, 2021 (in thousands):
Non-accrual With NoNon-accrual WithLoans Past Due
Allowance forAllowance forOver 90 Days
Credit LossesCredit LossesStill Accruing
Commercial & Industrial$172 $1,028 $295 
   1-4 Family— 1,996 — 
   Hotels— 2,748 — 
   Multi-family— — — 
   Non Residential Non-Owner Occupied— 749 — 
   Non Residential Owner Occupied1,922 377 — 
Commercial Real Estate1,922 5,870 — 
Residential Real Estate1 3,003 — 
Home Equity— 88 — 
Consumer— — — 
Total$2,095 $9,989 $295 

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 90 days still accruing as of December 31, 2020 (in thousands):
Non-accrual With NoNon-accrual WithLoans Past Due
Allowance forAllowance forOver 90 Days
Credit LossesCredit LossesStill Accruing
Commercial & Industrial$172 $596 $— 
   1-4 Family— 2,056 — 
   Hotels— 2,951 — 
   Multi-family— — — 
   Non Residential Non-Owner Occupied— 508 — 
   Non Residential Owner Occupied2,297 589 — 
Commercial Real Estate2,297 6,104 — 
Residential Real Estate21 2,947 — 
Home Equity— 95 — 
Consumer— — — 
Total$2,490 $9,742 $— 
The Company recognized less than $0.1 million of interest income on nonaccrual loans during each of the three months ended March 31, 2021 and 2020.

The following table presents the amortized cost basis of individually evaluated impaired collateral-dependent loans as of March 31, 2021 and December 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.

March 31, 2021December 31, 2020
Secured bySecured by
Real EstateEquipmentReal EstateEquipment
Commercial and industrial$172 $— $173 $— 
   1-4 Family— — — — 
   Hotels2,863 — 2,837 — 
   Multi-family— — — — 
   Non Residential Non-Owner Occupied— — — — 
   Non Residential Owner Occupied1,922 — 2,296 — 
Commercial real estate4,785 — 5,133 — 
Total$4,957 $— $5,306 $— 


     The Company would have recognized less than $0.1 million of interest income during each of the three months ended March 31, 2021 and 2020 if such loans had been current in accordance with their original terms. There were no significant commitments to provide additional funds on non-accrual or impaired loans at March 31, 2021.

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 past due.
The following tables present the aging of the amortized cost basis in past-due loans as of March 31, 2021 and December 31, 2020 by class of loan (in thousands):

March 31, 2021
30-5960-8990+TotalCurrentNon-Total
Past DuePast DuePast DuePast DueLoansaccrualLoans
Commercial and industrial$1,063 $— $295 $1,358 $368,637 $1,200 $371,195 
   1-4 Family— 42 — 42 106,093 1,996 108,131 
   Hotels— — — — 290,428 2,748 293,176 
   Multi-family— — — — 212,561 — 212,561 
   Non Residential Non-Owner Occupied219 18 — 237 648,697 749 649,683 
   Non Residential Owner Occupied229 — — 229 196,602 2,299 199,130 
Commercial real estate448 60 — 508 1,454,381 7,792 1,462,681 
Residential real estate3,547 511 — 4,058 1,525,845 3,004 1,532,907 
Home Equity390 93 — 483 129,438 88 130,009 
Consumer10 — — 10 47,214 — 47,224 
Overdrafts210 2 — 212 2,495 — 2,707 
Total$5,668 $666 $295 $6,629 $3,528,010 $12,084 $3,546,723 


December 31, 2020
30-5960-8990+TotalCurrentNon-Total
Past DuePast DuePast DuePast DueLoansaccrualLoans
Commercial and industrial$1,213 $27 $— $1,240 $370,981 $768 $372,989 
   1-4 Family484 — — 484 107,272 2,056 109,812 
   Hotels— — — — 291,513 2,951 294,464 
   Multi-family— — — — 215,671 — 215,671 
   Non Residential Non-Owner Occupied119 — — 119 640,724 508 641,351 
   Non Residential Owner Occupied23 — — 23 210,575 2,886 213,484 
Commercial real estate626 — — 626 1,465,755 8,401 1,474,782 
Residential real estate5,177 816 — 5,993 1,578,733 2,968 1,587,694 
Home Equity575 — — 575 135,799 95 136,469 
Consumer63 50 — 113 47,575 — 47,688 
Overdrafts334 7 — 341 2,156 — 2,497 
Total$7,988 $900 $— $8,888 $3,600,999 $12,232 $3,622,119 

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. These modifications range from partial deferrals (interest only) to full deferrals (principal and interest). 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.

The following table sets forth the Company’s TDRs (in thousands). Substantially all of the Company's TDRs are accruing interest.
March 31, 2021December 31, 2020
Commercial and industrial$— $— 
   1-4 Family119 121 
   Hotels2,634 2,634 
   Multi-family1,862 1,883 
   Non Residential Non-Owner Occupied— — 
   Non Residential Owner Occupied— — 
Commercial real estate4,615 4,638 
Residential real estate18,572 19,226 
Home equity1,956 2,001 
Consumer211 277 
Total$25,354 $26,142 

The Company has allocated $1.6 million of the allowance for credit losses for these loans as of both March 31, 2021 and December 31, 2020. As of March 31, 2021, 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, 2021 and 2020, respectively (dollars in thousands):
March 31, 2021March 31, 2020
Pre-Post-Pre-Post-
ModificationModificationModificationModification
OutstandingOutstandingOutstandingOutstanding
Number ofRecordedRecordedNumber ofRecordedRecorded
ContractsInvestmentInvestmentContractsInvestmentInvestment
Commercial and industrial— $— $— — $— $— 
   1-4 Family— — — — — — 
   Hotels— — — — — — 
   Multi-family— — — — — — 
   Non Owner Non-Owner Occupied— — — — — — 
   Non Owner Owner Occupied— — — — — — 
Commercial real estate— — — — — — 
Residential real estate3 154 154 9 807 805 
Home equity— — — 2 70 70 
Consumer— — — — — — 
Total3 $154 $154 11 $877 $875 
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, 2021 and 2020 and resulted in charge-offs of less than $0.2 million during those same time periods.

The Company has had no significant TDRs that subsequently defaulted in 2020 or 2021.

Most TDRs above are reported due to filing Chapter 7 banktruptcy. Regulatory guidance requires that loans 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 debt by the bankruptcy court is deemed to be a concession granted to the borrower.

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 considered 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 of modification. In addition, modifications or deferrals pursuant to the CARES Act do not represent TDRs. However, these deferrals do not absolve the company from performing its normal risk rating and therefore a loan could be current and have a less than satisfactory risk rating.

Through March 31, 2021, the Company granted deferrals of approximately $145 million to its mortgage customers. These deferral arrangements ranged from 30 days to 90 days. As of March 31, 2021, approximately $3 million of these loans were still deferring, while approximately $142 million have resumed making their normal loan payment. As of March 31, 2021, approximately $4 million of these deferrals were previously and currently considered TDRs due to Chapter 7 bankruptcies.

Through March 31, 2021, the Company granted deferrals of approximately $480 million to its commercial customers. These deferral arrangements ranged from one month to six months. As of March 31, 2021, approximately $115 million of these loans were still deferring (including $105 million for hotel and lodging related loans), while approximately $365 million have resumed making their normal loan payment.
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 expected 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, 2021 is as follows (in thousands):
Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20212020201920182017PriorCost BasisTotal
Commercial and industrial
Pass$44,976 $95,266 $49,806 $56,963 $28,617 $21,944 $64,848 $362,420 
Special mention— 528 22 9 46 — 174 779 
Substandard188 862 1,447 981 618 1,976 1,924 7,996 
Total$45,164 $96,656 $51,275 $57,953 $29,281 $23,920 $66,946 $371,195 

Commercial real estate -
Total
Pass$30,034 $308,186 $283,738 $175,371 $140,245 $405,945 $24,986 $1,368,505 
Special mention62 725 10,091 1,131 118 3,469 — 15,596 
Substandard803 1,186 21,422 1,827 13,560 39,231 551 78,580 
Total$30,899 $310,097 $315,251 $178,329 $153,923 $448,645 $25,537 $1,462,681 

Commercial real estate -
1-4 Family
Pass$4,258 $19,691 $16,058 $7,388 $6,978 $36,788 $10,094 $101,255 
Special mention62 190 — — — 613 — 865 
Substandard— 119 332 — 752 4,808 — 6,011 
Total$4,320 $20,000 $16,390 $7,388 $7,730 $42,209 $10,094 $108,131 

Commercial real estate -
Hotels
Pass$1,978 $21,400 $89,927 $26,301 $42,317 $65,113 $— $247,036 
Special mention— 114 5,170 — — — — 5,284 
Substandard34 343 15,413 — 6,760 18,077 229 40,856 
Total$2,012 $21,857 $110,510 $26,301 $49,077 $83,190 $229 $293,176 

Commercial real estate -
Multi-family
Pass$1,901 $80,624 $56,025 $2,620 $20,549 $46,797 $1,565 $210,081 
Special mention— — 1,862 546 — — — 2,408 
Substandard— — — — — 72 — 72 
Total$1,901 $80,624 $57,887 $3,166 $20,549 $46,869 $1,565 $212,561 
Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20212020201920182017PriorCost BasisTotal
Commercial real estate -
Non Residential Non-Owner Occupied
Pass$16,067 $156,653 $96,180 $113,987 $50,396 $199,823 $8,480 $641,586 
Special mention— 191 194 535 31 145 — 1,096 
Substandard769 568 1,384 1,143 34 2,943 160 7,001 
Total$16,836 $157,412 $97,758 $115,665 $50,461 $202,911 $8,640 $649,683 
Commercial real estate -
Non Residential Owner Occupied
Pass$5,830 $29,818 $25,548 $25,075 $20,005 $57,424 $4,847 $168,547 
Special mention— 230 2,865 50 87 2,711 — 5,943 
Substandard— 156 4,293 684 6,014 13,331 162 24,640 
Total$5,830 $30,204 $32,706 $25,809 $26,106 $73,466 $5,009 $199,130 

Residential real estate
Performing$60,244 $397,522 $206,429 $156,546 $120,857 $477,462 $110,843 $1,529,903 
Non-performing— — — — 258 1,098 1,648 3,004 
Total$60,244 $397,522 $206,429 $156,546 $121,115 $478,560 $112,491 $1,532,907 

Home equity
Performing$1,376 $8,633 $5,736 $4,654 $1,858 $11,714 $95,950 $129,921 
Non-performing— — — — — — 88 88 
Total$1,376 $8,633 $5,736 $4,654 $1,858 $11,714 $96,038 $130,009 

Consumer
Performing$4,356 $14,613 $13,213 $8,016 $2,663 $2,668 $1,695 $47,224 
Non-performing— — — — — — — — 
Total$4,356 $14,613 $13,213 $8,016 $2,663 $2,668 $1,695 $47,224 
Based on the most recent analysis performed, the risk category of loans by class of loans at December 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$123,920 $51,972 $59,152 $30,440 $16,673 $6,942 $75,018 $364,117 
Special mention72 27 13 47 — 433 508 1,100 
Substandard783 1,553 918 589 268 1,733 1,928 7,772 
Total$124,775 $53,552 $60,083 $31,076 $16,941 $9,108 $77,454 $372,989 

Commercial real estate -
Total
Pass$312,363 $296,876 $179,038 $142,678 $147,772 $280,107 $25,560 $1,384,394 
Special mention442 5,288 1,196 127 159 3,370 — 10,582 
Substandard1,159 22,224 1,855 13,734 9,574 30,938 322 79,806 
Total$313,964 $324,388 $182,089 $156,539 $157,505 $314,415 $25,882 $1,474,782 


Commercial real estate -
1-4 Family
Pass$19,970 $17,540 $8,217 $7,444 $6,158 $33,075 $10,274 $102,678 
Special mention192 — — — 159 753 — 1,104 
Substandard119 343 — 863 102 4,603 — 6,030 
Total$20,281 $17,883 $8,217 $8,307 $6,419 $38,431 $10,274 $109,812 


Commercial real estate -
Hotels
Pass$23,886 $95,269 $26,206 $42,593 $21,490 $43,686 $— $253,130 
Substandard343 15,412 — 6,750 4,465 14,364 — 41,334 
Total$24,229 $110,681 $26,206 $49,343 $25,955 $58,050 $— $294,464 


Commercial real estate -
Multi-family
Pass$81,127 $56,371 $2,688 $20,730 $23,873 $27,009 $1,363 $213,161 
Special mention— 1,883 551 — — — — 2,434 
Substandard— — — — — 76 — 76 
Total$81,127 $58,254 $3,239 $20,730 $23,873 $27,085 $1,363 $215,671 
Revolving
Term LoansLoans
Amortized Cost Basis by Origination Year and Risk LevelAmortized
20202019201820172016PriorCost BasisTotal
Commercial real estate -
Non Residential Non-Owner Occupied
Pass$155,937 $101,011 $115,524 $51,329 $76,219 $125,349 $8,825 $634,194 
Special mention16 504 592 37 — 147 — 1,296 
Substandard580 1,385 1,159 52 1,187 1,338 160 5,861 
Total$156,533 $102,900 $117,275 $51,418 $77,406 $126,834 $8,985 $641,351 


Commercial real estate -
Non Residential Owner Occupied
Pass$31,443 $26,685 $26,403 $20,582 $20,032 $50,988 $5,098 $181,231 
Special mention234 2,901 53 90 — 2,470 — 5,748 
Substandard117 5,084 696 6,069 3,820 10,557 162 26,505 
Total$31,794 $34,670 $27,152 $26,741 $23,852 $64,015 $5,260 $213,484 


Residential real estate
Performing$407,135 $233,709 $176,523 $134,425 $102,828 $416,473 $113,633 $1,584,726 
Non-performing— — — 164 41 1,184 1,579 2,968 
Total$407,135 $233,709 $176,523 $134,589 $102,869 $417,657 $115,212 $1,587,694 


Home equity
Performing$9,038 $6,241 $5,375 $2,126 $1,309 $11,573 $100,712 $136,374 
Non-performing— — — — — — 95 95 
Total$9,038 $6,241 $5,375 $2,126 $1,309 $11,573 $100,807 $136,469 


Consumer
Performing$15,342 $14,977 $9,229 $3,154 $1,688 $1,422 $1,876 $47,688 
Non-performing— — — — — — — — 
Total$15,342 $14,977 $9,229 $3,154 $1,688 $1,422 $1,876 $47,688