The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:

* Includes net premiums and discounts on acquired loans and net deferred fees and costs on loans originated.

On March 27, 2021 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) established a loan program administered through the U.S. Small Business Administration (“SBA”), referred to as the Paycheck Protection Program (“PPP”). PPP loans are 100% guaranteed by the SBA and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The outstanding balance of PPP loans of $10 million and $25 million as of March 31, 2022 and December 31, 2021, respectively, are included in commercial and industrial loans. PPP loans did not impact the Company’s allowance for loan losses as a result of the SBA guarantees. Fees collected from the SBA for these loans are deferred and amortized into interest income over the contractual period of the loan. Upon SBA forgiveness or sale of a PPP loan, unamortized fees are then recognized into interest income. PPP fees recognized into interest income were $0.5 million and $1.7 million in the three month periods ended March 31, 2022 and 2021, respectively. Unamortized PPP fees were $0.3 million and $0.8 million at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022, the outstanding principal balance and the carrying amount of acquired credit-impaired loans totaled $0.8 million and $0.7 million, respectively. At December 31, 2021, the outstanding principal balance and carrying amount of acquired credit-impaired loans totaled $0.8 million. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at March 31, 2022 or December 31, 2021. The Company is not recording interest on the acquired credit-impaired loans due to the uncertainty of the cash flows relating to such loans.

There were $585 million and $619 million in residential and commercial mortgage loans pledged to FHLBNY to serve as collateral for potential borrowings as of March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022, the Company’s FHLMC loan serving portfolio had $67 million in principal balances of residential real estate loans that were sold to FHLMC and the servicing rights are retained by the Company. No loans were sold to FHLMC by the Company during the three month periods ending March 31, 2022 and 2021.

The Company may also sell certain fixed rate residential mortgages to FNMA while maintaining the servicing rights for those mortgages. At March 31, 2022, the Company’s FNMA loan servicing portfolio was $61 million in principal balances. In the three month period ended March 31, 2022, the Company sold $2.9 million residential mortgages to FNMA. The Company did not sell any mortgages to FNMA in the three month period ended March 31, 2021.

At March 31, 2022 and December 31, 2021, the Company had loan servicing portfolio principal balances of $128 million and $131 million, respectively, upon which it earned servicing fees. The fair value of the mortgage servicing rights for that portfolio was $1.1 million and $0.9 million at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022 no residential mortgages were held for sale. At December 31, 2021 there were $0.2 million of residential mortgages held for sale.

Disclosures related to the basis for accounting for loans, the method for recognizing interest income on loans, the policy for placing loans on nonaccrual status and the subsequent recording of payments and resuming accrual of interest, the policy for determining past due status, a description of the Company’s accounting policies and methodology used to estimate the allowance for loan losses, the policy for charging-off loans, the accounting policies for impaired loans, the accounting policy for loans acquired in a business combination, and more descriptive information on the Company’s credit risk ratings are all contained in the Notes to the Audited Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Credit Quality Indicators

The Company monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”). The primary CQI for the commercial mortgage and commercial and industrial portfolios is the individual loan’s credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan losses:

Acceptable or better

Watch

Special Mention

Substandard

Doubtful

Loss

“Special mention” and “substandard” loans are weaker credits with a higher risk of loss and are categorized as “criticized” assets.

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process. Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information. Consumer loans also carry smaller balances. Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the primary credit quality indicator for consumer loans. However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.

The following tables provide data, at the class level, of credit quality indicators of certain loans for the dates specified:



	March 31, 2022
	(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	63,829	$	510,297	$	574,126	$	158,131
Watch		9,704		185,092		194,796		63,790
Special Mention		14,544		32,393		46,937		11,698
Substandard		6,078		36,587		42,665		8,652
Doubtful/Loss		-		-		-		-
Total	$	94,155	$	764,369	$	858,524	$	242,271


	December 31, 2021
	(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	65,211	$	480,159	$	545,370	$	152,675
Watch		19,108		182,502		201,610		64,406
Special Mention		7,045		33,219		40,264		10,200
Substandard		6,648		43,881		50,529		9,796
Doubtful/Loss		-		-		-		-
Total	$	98,012	$	739,761	$	837,773	$	237,077

The Company continues to evaluate its loan portfolio in response to the economic impact of the COVID-19 pandemic on its clients. During 2021, the Company identified a well-defined weakness in the hotel industry and classified the loans to clients within that industry as substandard. As of March 31, 2022, the Company’s hotel loan portfolio totaled approximately $75 million, of which $55 million or 5% of total commercial loans was classified as criticized. Total criticized assets were $110 million at March 31, 2022 and $111 million at the end of the 2021.

‎

Past Due Loans

The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:



	March 31, 2022
	(in thousands)
		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance
Commercial and industrial	$	230,668	$	6,909	$	-	$	-	$	4,694	$	242,271
Residential real estate:
Residential		410,466		4,668		481		-		3,438		419,053
Construction		3,839		-		-		-		-		3,839
Commercial real estate:
Commercial		739,677		15,071		96		3,354		6,171		764,369
Construction		88,906		2,112		774		-		2,363		94,155
Home equities		79,577		254		109		-		639		80,579
Consumer and other		658		3		1		-		-		662
Total Loans	$	1,553,791	$	29,017	$	1,461	$	3,354	$	17,305	$	1,604,928

Note: Loan balances do not include $(0.8) million of unaccreted yield adjustments as of March 31, 2022.



	December 31, 2021
	(in thousands)
		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance
Commercial and industrial	$	229,724	$	1,336	$	568	$	548	$	4,901	$	237,077
Residential real estate:
Residential		402,992		3,466		1,563		-		3,039		411,060
Construction		5,109		-		-		-		-		5,109
Commercial real estate:
Commercial		711,481		16,451		6,073		-		5,756		739,761
Construction		93,842		757		-		480		2,933		98,012
Home equities		79,644		627		209		-		758		81,238
Consumer and other		706		9		4		-		-		719
Total Loans	$	1,523,498	$	22,646	$	8,417	$	1,028	$	17,387	$	1,572,976

Note: Loan balances do not include $(1.1) million of unaccreted yield adjustments as of December 31, 2021.
‎

Allowance for loan losses

The following tables present the activity in the allowance for loan losses according to portfolio segment for the three month periods ended March 31, 2022 and 2021.



	March 31, 2022
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan	(in thousands)
losses:
Beginning balance	$	3,309	$	12,367	$	54	$	2,127		581	$	18,438
Charge-offs		(24)		-		(40)		-		-		(64)
Recoveries		17		-		6		-		-		23
Provision (Credit)		386		(88)		24		(10)		(91)		221
Ending balance	$	3,688	$	12,279	$	44	$	2,117	$	490	$	18,618

*Includes construction loans



	March 31, 2021
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan	(in thousands)
losses:
Beginning balance	$	4,882	$	13,249	$	45	$	1,658	$	581	$	20,415
Charge-offs		-		-		(60)		-		-		(60)
Recoveries		21		-		12		-		-		33
Provision (Credit)		(513)		819		60		51		(104)		313
Ending balance	$	4,390	$	14,068	$	57	$	1,709	$	477	$	20,701

* Includes construction loans

‎

The following table presents the allocation of the allowance for loan losses according to portfolio segment summarized on the basis of the Company’s impairment methodology as of March 31, 2022 and December 31, 2021:



	March 31, 2022
	(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-

Individually evaluated for impairment		91		24		-		74		42		231

Collectively evaluated for impairment		3,597		12,255		44		2,043		448		18,387
Total	$	3,688	$	12,279	$	44	$	2,117	$	490	$	18,618

Loans:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	786	$	-	$	786

Individually evaluated for impairment		4,803		11,776		-		3,005		1,068		20,652

Collectively evaluated for impairment		237,468		846,748		662		419,101		79,511		1,583,490
Total	$	242,271	$	858,524	$	662	$	422,892	$	80,579	$	1,604,928

Note: Loan balances do not include $(0.8) million of unaccreted yield adjustments as of March 31, 2022.

* Includes construction loans

‎



	December 31, 2021
	(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-

Individually evaluated for impairment		100		345		-		9		41		495

Collectively evaluated for impairment		3,209		12,022		54		2,118		540		17,943
Total	$	3,309	$	12,367	$	54	$	2,127	$	581	$	18,438

Loans:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	803	$	-	$	803

Individually evaluated for impairment		5,028		11,925		-		2,598		1,236		20,787

Collectively evaluated for impairment		232,049		825,848		719		412,768		80,002		1,551,386
Total	$	237,077	$	837,773	$	719	$	416,169	$	81,238	$	1,572,976

Note: Loan balances do not include $(1.1) million of unaccreted yield adjustments as of December 31, 2021.

* Includes construction loans

‎

Impaired Loans

The following tables provide data, at the class level, for impaired loans as of the dates indicated:


	At March 31, 2022						At December 31, 2021
(in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and industrial	$	4,709	$	5,530	$	-	$	4,874	$	5,712	$	-
Residential real estate:
Residential		3,443		3,826		-		3,297		3,654		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		9,241		9,704		-		8,821		9,338		-
Construction		2,218		2,414		-		1,395		1,499		-
Home equities		959		1,156		-		1,127		1,324		-
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	20,570	$	22,630	$	-	$	19,514	$	21,527	$	-


	At March 31, 2022							At December 31, 2021
(in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With a related allowance recorded:
Commercial and industrial	$	94	$	97	$	91	$	154	$	158	$	100
Residential real estate:
Residential		304		304		74		60		60		9
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		172		197		11		171		717		16
Construction		145		150		13		1,538		1,555		329
Home equities		109		109		42		109		109		41
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	824	$	857	$	231	$	2,032	$	2,599	$	495


		At March 31, 2022					At December 31, 2021
(in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Total:
Commercial and industrial	$	4,803	$	5,627	$	91	$	5,028	$	5,870	$	100
Residential real estate:
Residential		3,747		4,130		74		3,357		3,714		9
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		9,413		9,901		11		8,992		10,055		16
Construction		2,363		2,564		13		2,933		3,054		329
Home equities		1,068		1,265		42		1,236		1,433		41
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	21,394	$	23,487	$	231	$	21,546	$	24,126	$	495

‎


			Three months ended March 31, 2022				Three months ended March 31, 2021
	(in thousands)		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial		$	5,118	$	2	$	1,344	$	3
Residential real estate:
Residential			3,512		4		4,542		17
Construction			-		-		-		-
Commercial real estate:
Commercial			9,298		70		11,929		12
Construction			2,634		-		1,085		-
Home equities			1,000		5		1,719		2
Consumer and other			-		-		-		-
Total impaired loans		$	21,562	$	81	$	20,619	$	34


			Three months ended March 31, 2022				Three months ended March 31, 2021
	(in thousands)		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Commercial and industrial		$	98	$	-	$	4,139	$	-
Residential real estate:
Residential			304		-		627		-
Construction			-		-		-		-
Commercial real estate:
Commercial			178		-		2,943		-
Construction			146		-		2,528		2
Home equities			109		-		109		-
Consumer and other			-		-		-		-
Total impaired loans		$	835	$	-	$	10,346	$	2


			Three months ended March 31, 2022				Three months ended March 31, 2021
	(in thousands)		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Total:
Commercial and industrial		$	5,216	$	2	$	5,483	$	3
Residential real estate:
Residential			3,816		4		5,169		17
Construction			-		-		-		-
Commercial real estate:
Commercial			9,476		70		14,872		12
Construction			2,780		-		3,613		2
Home equities			1,109		5		1,828		2
Consumer and other			-		-		-		-
Total impaired loans		$	22,397	$	81	$	30,965	$	36

‎

Troubled debt restructurings

The following tables summarize the loans that were classified as troubled debt restructurings (“TDRs”) as of the dates indicated:



		March 31, 2022
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	931	$	822	$	109	$	-
Residential real estate:
Residential		975		622		353		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,242		-		3,242		-
Construction		-		-		-		-
Home equities		442		13		429		-
Consumer and other		-		-		-		-
Total TDR loans	$	5,590	$	1,457	$	4,133	$	-



		December 31, 2021
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,003	$	876	$	127	$	-
Residential real estate:
Residential		989		627		362		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,236		-		3,236		-
Construction		-		-		-		-
Home equities		490		12		478		-
Consumer and other		-		-		-		-
Total TDR loans	$	5,718	$	1,515	$	4,203	$	-

Any TDR that is placed on non-accrual status is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.

The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired.

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the borrower time to improve cash flow or sell the property. Other common concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.

In late March 2021, federal banking regulators issued guidance that modifications made to a borrower affected by the COVID-19 pandemic and governmental shutdown orders do not need to be identified as a TDR if the loan was current at the time a modification plan was implemented.

The following tables present TDR activity by the type of concession granted to the borrower for the three month period ended March 31, 2022 and 2021.



		Three months ended March 31, 2022					Three months ended March 31, 2021
		(Recorded Investment in thousands)					(Recorded Investment in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts			Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial	-		$	-	$	-	-	$	-	$	-
Residential Real Estate & Construction
Commercial Real Estate & Construction	-			-		-	-		-		-
Home Equities:				-		-	-		-		-
Extension of maturity and
interest rate reduction	1			38		38	-		-		-
Consumer and other loans	-			-		-	-		-		-
Other	-			-		-	-		-		-

The general practice of the Bank is to work with borrowers so that they are able to repay their loan in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan is determined to be uncollectible, the loan will be charged-off to its collateral value. A loan is considered in default when the loan is 90 days past due. Loans which were classified as TDRs during the previous 12 months which defaulted during the three month period ended March 31, 2022 and 2021 were not material.