Loans and Credit Quality | Loans and Credit Quality The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on the Company's asset quality rating ("AQR") criteria: (In Thousands) Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deeds of trust Consumer other Total September 30, 2020 AQR Pass $821,117 $37,256 $82,661 $138,886 $302,902 $40,191 $13,726 $23,023 $1,459,762 AQR Special Mention 5,782 — — 2,677 17,178 2,172 176 — 27,985 AQR Substandard 8,971 702 — 7,430 613 1,176 148 110 19,150 AQR Doubtful 308 — — — — — — — 308 Subtotal $836,178 $37,958 $82,661 $148,993 $320,693 $43,539 $14,050 $23,133 $1,507,205 Less: Unearned origination fees, net of origination costs (14,485) Total loans $1,492,720 December 31, 2019 AQR Pass $394,107 $34,132 $61,808 $129,959 $295,482 $38,771 $15,860 $24,464 $994,583 AQR Special Mention 2,279 3,337 — 3,828 17,478 2,559 179 — 29,660 AQR Substandard 16,304 1,349 — 5,104 — 1,176 159 121 24,213 Subtotal $412,690 $38,818 $61,808 $138,891 $312,960 $42,506 $16,198 $24,585 $1,048,456 Less: Unearned origination fees, net of origination costs (5,085) Total loans $1,043,371 The above table includes $375.6 million in Paycheck Protection Program ("PPP") loans administered by the U.S. Small Business Administration ("SBA") within the Commercial loan segment as of September 30, 2020. Additionally, unearned origination fee, net of origination costs includes $8.8 million associated with SBA PPP loans. Nonaccrual loans: Nonaccrual loans net of government guarantees totaled $11.0 million and $14.0 million at September 30, 2020 and December 31, 2019, respectively. Nonaccrual loans at the periods indicated are presented below by segment: (In Thousands) 30-59 Days 60-89 Days Greater Than Current Total September 30, 2020 Commercial $115 $— $4,634 $2,082 $6,831 Real estate construction one-to-four family — — 702 — 702 Real estate term owner occupied — 226 2,729 809 3,764 Real estate term other — — 1,176 — 1,176 Consumer secured by 1st deeds of trust — — — 65 65 Consumer other — — — 109 109 Total nonperforming loans 115 226 9,241 3,065 12,647 Government guarantees on nonaccrual loans — — — (1,600) (1,600) Net nonaccrual loans $115 $226 $9,241 $1,465 $11,047 December 31, 2019 Commercial $270 $385 $2,862 $5,636 $9,153 Real estate construction one-to-four family — — 1,349 — 1,349 Real estate term owner occupied 1,641 — 623 1,225 3,489 Real estate term other — — 1,176 — 1,176 Consumer secured by 1st deeds of trust — — — 68 68 Consumer other 26 89 — 6 121 Total nonperforming loans 1,937 474 6,010 6,935 15,356 Government guarantees on nonaccrual loans (268) — — (1,137) (1,405) Net nonaccrual loans $1,669 $474 $6,010 $5,798 $13,951 Past Due Loans: Past due loans and nonaccrual loans at the periods indicated are presented below by segment: (In Thousands) 30-59 Days 60-89 Days Greater Than Total Past Nonaccrual Current Total September 30, 2020 Commercial $— $— $— $— $6,831 $829,347 $836,178 Real estate construction one-to-four family — — — — 702 37,256 37,958 Real estate construction other — — — — — 82,661 82,661 Real estate term owner occupied — 1,421 — 1,421 3,764 143,808 148,993 Real estate term non-owner occupied — 691 — 691 — 320,002 320,693 Real estate term other — — — — 1,176 42,363 43,539 Consumer secured by 1st deed of trust 236 — — 236 65 13,749 14,050 Consumer other — — — — 109 23,024 23,133 Subtotal $236 $2,112 $— $2,348 $12,647 $1,492,210 $1,507,205 Less: Unearned origination fees, net of origination costs (14,485) Total $1,492,720 December 31, 2019 Commercial $270 $— $— $270 $9,153 $403,267 $412,690 Real estate construction one-to-four family — — — — 1,349 37,469 38,818 Real estate construction other — — — — — 61,808 61,808 Real estate term owner occupied 338 — — 338 3,489 135,064 138,891 Real estate term non-owner occupied — — — — — 312,960 312,960 Real estate term other 26 — — 26 1,176 41,304 42,506 Consumer secured by 1st deed of trust 750 — — 750 68 15,380 16,198 Consumer other 150 — — 150 121 24,314 24,585 Subtotal $1,534 $— $— $1,534 $15,356 $1,031,566 $1,048,456 Less: Unearned origination fees, net of origination costs (5,085) Total $1,043,371 Impaired Loans: The following table presents information about impaired loans by class as of the periods indicated: (In Thousands) Recorded Investment Unpaid Principal Balance Related Allowance September 30, 2020 With no related allowance recorded Commercial - AQR substandard $8,668 $8,872 $— Commercial - AQR doubtful 308 308 — Real estate construction one-to-four family - AQR substandard 702 702 — Real estate term owner occupied - AQR substandard 7,430 7,515 — Real estate term non-owner occupied - AQR pass 177 177 — Real estate term non-owner occupied - AQR substandard 613 613 — Real estate term other - AQR pass 322 322 — Real estate term other - AQR substandard 1,176 1,176 — Consumer secured by 1st deeds of trust - AQR pass 116 116 — Consumer secured by 1st deeds of trust - AQR substandard 148 148 — Consumer other - AQR substandard 84 88 — Subtotal $19,744 $20,037 $— With an allowance recorded Commercial - AQR substandard $202 $202 $41 Subtotal $202 $202 $41 Total Commercial - AQR substandard $8,870 $9,074 $41 Commercial - AQR doubtful 308 308 — Real estate construction one-to-four family - AQR substandard 702 702 — Real estate term owner-occupied - AQR substandard 7,430 7,515 — Real estate term non-owner occupied - AQR pass 177 177 — Real estate term non-owner occupied - AQR substandard 613 613 — Real estate term other - AQR pass 322 322 — Real estate term other - AQR substandard 1,176 1,176 — Consumer secured by 1st deeds of trust - AQR pass 116 116 — Consumer secured by 1st deeds of trust - AQR substandard 148 148 — Consumer other - AQR substandard 84 88 — Total $19,946 $20,239 $41 (In Thousands) Recorded Investment Unpaid Principal Balance Related Allowance December 31, 2019 With no related allowance recorded Commercial - AQR substandard $15,517 $15,582 $— Real estate construction one-to-four family -AQR substandard 1,349 1,349 — Real estate term owner occupied - AQR substandard 5,104 5,104 — Real estate term non-owner occupied - AQR pass 178 178 — Real estate term other - AQR pass 417 417 — Real estate term other - AQR substandard 1,176 1,176 — Consumer secured by 1st deeds of trust - AQR pass 122 122 — Consumer secured by 1st deeds of trust - AQR substandard 159 163 — Consumer other - AQR substandard 90 94 — Subtotal $24,112 $24,185 $— With an allowance recorded Commercial - AQR substandard $561 $561 $17 Subtotal $561 $561 $17 Total Commercial - AQR substandard $16,078 $16,143 $17 Real estate construction one-to-four family -AQR substandard 1,349 1,349 — Real estate term owner occupied - AQR substandard 5,104 5,104 — Real estate term non-owner occupied - AQR pass 178 178 — Real estate term other - AQR pass 417 417 — Real estate term other - AQR substandard 1,176 1,176 — Consumer secured by 1st deeds of trust - AQR pass 122 122 — Consumer secured by 1st deeds of trust - AQR substandard 159 163 — Consumer other - AQR substandard 90 94 — Total $24,673 $24,746 $17 The unpaid principal balance included in the tables above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes. The following tables summarize our average recorded investment and interest income recognized on impaired loans for the three and nine-month periods ended September 30, 2020 and 2019: Three Months Ended September 30, 2020 2019 (In Thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded Commercial - AQR substandard $8,564 $42 $17,616 $107 Commercial - AQR doubtful 308 — — — Real estate construction one-to-four family - AQR substandard 488 — 1,482 — Real estate term owner occupied- AQR substandard 6,998 47 5,896 34 Real estate term non-owner occupied- AQR pass 177 3 242 4 Real estate term non-owner occupied- AQR substandard 619 19 — — Real estate term other - AQR pass 348 6 438 8 Real estate term other - AQR substandard 1,228 — 1,198 — Consumer secured by 1st deeds of trust - AQR pass 117 3 125 3 Consumer secured by 1st deeds of trust - AQR substandard 269 — 93 2 Consumer other - AQR substandard 84 — 93 — Subtotal $19,200 $120 $27,183 $158 With an allowance recorded Commercial - AQR substandard $226 $8 $391 $— Consumer secured by 1st deeds of trust - AQR substandard — — 74 — Subtotal $226 $8 $465 $— Total Commercial - AQR substandard $8,790 $50 $18,007 $107 Commercial - AQR doubtful 308 — — — Real estate construction one-to-four family - AQR substandard 488 — 1,482 — Real estate term owner-occupied - AQR substandard 6,998 47 5,896 34 Real estate term non-owner occupied - AQR pass 177 3 242 4 Real estate term non-owner occupied - AQR substandard 619 19 — — Real estate term other - AQR pass 348 6 438 8 Real estate term other - AQR substandard 1,228 — 1,198 — Consumer secured by 1st deeds of trust - AQR pass 117 3 125 3 Consumer secured by 1st deeds of trust - AQR substandard 269 — 167 2 Consumer other - AQR substandard 84 — 93 — Total Impaired Loans $19,426 $128 $27,648 $158 Nine Months Ended September 30, 2020 2019 (In Thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded Commercial - AQR pass $— $— $711 $35 Commercial - AQR substandard 9,899 138 17,205 292 Commercial - AQR doubtful 103 — — — Real estate construction one-to-four family - AQR substandard 808 — 2,109 — Real estate term owner occupied- AQR substandard 6,586 125 5,896 83 Real estate term non-owner occupied- AQR pass 177 10 269 15 Real estate term non-owner occupied- AQR substandard 312 20 307 — Real estate term other - AQR pass 380 20 457 24 Real estate term other - AQR substandard 1,194 — 998 — Consumer secured by 1st deeds of trust - AQR pass 119 9 127 9 Consumer secured by 1st deeds of trust - AQR substandard 149 3 215 5 Consumer secured by 1st deeds of trust - AQR loss 44 — — — Consumer other - AQR substandard 87 — 63 — Subtotal $19,858 $325 $28,357 $463 With an allowance recorded Commercial - AQR substandard $1,794 $8 $715 $— Real estate term other - AQR substandard — — 218 — Consumer secured by 1st deeds of trust - AQR substandard — — 97 — Subtotal $1,794 $8 $1,030 $— Total Commercial - AQR pass $— $— $711 $35 Commercial - AQR substandard 11,693 146 17,920 292 Commercial - AQR doubtful 103 — — — Real estate construction one-to-four family - AQR substandard 808 — 2,109 — Real estate term owner-occupied - AQR substandard 6,586 125 5,896 83 Real estate term non-owner occupied - AQR pass 177 10 269 15 Real estate term non-owner occupied - AQR substandard 312 20 307 — Real estate term other - AQR pass 380 20 457 24 Real estate term other - AQR substandard 1,194 — 1,216 — Consumer secured by 1st deeds of trust - AQR pass 119 9 127 9 Consumer secured by 1st deeds of trust - AQR substandard 149 3 312 5 Consumer secured by 1st deeds of trust - AQR loss 44 — — — Consumer other - AQR substandard 87 — 63 — Total Impaired Loans $21,652 $333 $29,387 $463 Troubled Debt Restructurings: Loans classified as troubled debt restructurings (“TDR”) totaled $8.5 million and $10.1 million at September 30, 2020 and December 31, 2019, respectively. A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise. The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company has elected to adopt these provisions of the CARES Act. As of September 30, 2020, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of: (Dollars in thousands) Interest Only Full Payment Deferral Total Portfolio loans $46,056 $74,337 $120,393 Number of modifications 16 59 75 The Company has granted a variety of concessions to borrowers in the form of loan modifications. The modifications granted can generally be described in the following categories: Rate Modification : A modification in which the interest rate is changed. Term Modification : A modification in which the maturity date, timing of payments, or frequency of payments is changed. Payment Modification : A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category. Combination Modification : Any other type of modification, including the use of multiple categories above. AQR pass graded loans included above in the impaired loan data are loans classified as TDRs. By definition, TDRs are considered impaired loans. All of the Company's TDRs are included in impaired loans. The following table presents the breakout between newly restructured loans that occurred during the nine months ended September 30, 2020 and restructured loans that occurred prior to 2020 that are still included in portfolio loans. As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019. The below disclosed restructurings were not related to COVID-19 modifications: Accrual Status Nonaccrual Status Total Modifications (In Thousands) New Troubled Debt Restructurings Commercial - AQR substandard $1,565 $163 $1,728 Subtotal $1,565 $163 $1,728 Existing Troubled Debt Restructurings $802 $5,946 $6,748 Total $2,367 $6,109 $8,476 The following tables present newly restructured loans that occurred during the nine months ended September 30, 2020 and 2019, by concession (terms modified): September 30, 2020 Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications (In Thousands) Pre-Modification Outstanding Recorded Investment: Commercial - AQR substandard 2 $— $3,249 $164 $— $3,413 Total 2 $— $3,249 $164 $— $3,413 Post-Modification Outstanding Recorded Investment: Commercial - AQR substandard 2 $— $1,565 $163 $— $1,728 Total 2 $— $1,565 $163 $— $1,728 September 30, 2019 Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications (In Thousands) Pre-Modification Outstanding Recorded Investment: Commercial - AQR substandard 5 $— $— $509 $1,350 $1,859 Real estate term owner occupied- AQR substandard 1 — — 192 — 192 Total 6 $— $— $701 $1,350 $2,051 Post-Modification Outstanding Recorded Investment: Commercial - AQR substandard 5 $— $— $425 $1,340 $1,765 Real estate term owner occupied- AQR substandard 1 — — 188 — 188 Total 6 $— $— $613 $1,340 $1,953 The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs. There were no in charge-offs in the nine months ended September 30, 2020 on loans that were newly classified as TDRs during the same period. All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the allowance for loan losses ("Allowance"). There were no TDRs with specific impairment at September 30, 2020 and December 31, 2019, respectively. The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the nine months ended September 30, 2020 and 2019, respectively. |