Loans Receivable and Allowance for Loan Losses | Note 7 - Loans Receivable and Allowance for Loan Losses The following tables present the recorded investment in loans receivable as of June 30, 2020 and December 31, 2019 by segment and class: June 30, 2020 December 31, 2019 (In Thousands) Residential one-to-four family $ 247,471 $ 248,381 Commercial and multi-family 1,643,954 1,606,976 Construction 111,463 104,996 Commercial business (1) 309,284 177,642 Home equity (2) 63,481 64,638 Consumer 603 682 2,376,256 2,203,315 Less: Deferred loan fees, net ( 3,821 ) ( 1,174 ) Allowance for loan losses ( 28,842 ) ( 23,734 ) Sub-total ( 32,663 ) ( 24,908 ) Total Loans, net $ 2,343,593 $ 2,178,407 (1) Includes business lines of credit and Paycheck Protection Plan (“PPP”) loans of $ 127.5 million (2) Includes home equity lines of credit. Note 7 – Loans Receivable and Allowance for Loan Losses (Continued) Allowance for Loan Losses The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a general allocated reserve for performing loans, a specific reserve for impaired loans and an unallocated portion. The Company consistently applies the following comprehensive methodology. During the quarterly review of the allowance for loan losses, the Company considers a variety of qualitative factors that include: Lending Policies and Procedures Personnel responsible for the particular portfolio - relative to experience and ability of staff Trend for past due, criticized and classified loans Relevant economic factors Quality of the loan review system Value of collateral for collateral dependent loans The effect of any concentrations of credit and the changes in the level of such concentrations Other external factors The methodology includes the segregation of the loan portfolio into two divisions. Loans that are performing and loans that are impaired. Loans which are performing are evaluated by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent, troubled debt restructured, or adversely classified. These loans are individually evaluated for loan loss either by current appraisal, or net present value. Management reviews the overall estimate for feasibility and establishes the loan loss provision accordingly. The loan portfolio is segmented into the following loan segments, where the risk level for each class is analyzed when determining the allowance for loan losses: Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential real estate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying properties may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower. Commercial and multi-family real estate lending entails additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as economic conditions generally. Construction lending is generally considered to involve a high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence. Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In many cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance. Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the collateral value securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower. Home equity line of credit lending entails securing an equity interest in the borrower’s home. In many cases, the Bank’s position in these loans is as a junior lien holder to another institution’s superior lien. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. Other consumer loans generally have more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In many cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan. An unallocated component is maintained to cover uncertainties that could affect management’s estimates of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended June 30, 2020, and the related portion of the allowances for loan losses that is allocated to each loan class, as of June 30, 2020 (in thousands): Residential Commercial & Multi-family Construction Commercial Business (1) Home Equity (2) Consumer Unallocated Total Allowance for loan losses: Originated Loans: $ 2,787 $ 14,867 $ 1,105 $ 3,004 $ 621 $ 5 $ 1,762 $ 24,151 Acquired loans initially recorded at fair value: 306 63 - 910 - - - 1,279 Acquired loans with deteriorated credit: 38 19 - 43 4 - - 104 Beginning Balance, March 31, 2020 3,131 14,949 1,105 3,957 625 5 1,762 25,534 Recoveries: Originated Loans: - - - - - 4 - 4 Acquired loans initially recorded at fair value: - - - - 4 - - 4 Sub-total: - - - - 4 4 - 8 Provisions: Originated Loans: ( 138 ) 1,830 229 154 59 ( 3 ) 727 2,858 Acquired loans initially recorded at fair value: 85 163 - 200 ( 4 ) - - 444 Acquired loans with deteriorated credit: ( 2 ) - - - - - - ( 2 ) Sub-total: ( 55 ) 1,993 229 354 55 ( 3 ) 727 3,300 Totals: Originated Loans: 2,649 16,697 1,334 3,158 680 6 2,489 27,013 Acquired loans initially recorded at fair value: 391 226 - 1,110 - - - 1,727 Acquired loans with deteriorated credit: 36 19 - 43 4 - - 102 Ending Balance, June 30, 2020 $ 3,076 $ 16,942 $ 1,334 $ 4,311 $ 684 $ 6 $ 2,489 $ 28,842 Ending Balance attributable to loans: Individually evaluated for impairment $ 8,233 $ 9,725 $ - $ 7,255 $ 1,625 $ - $ - $ 26,838 Collectively evaluated for impairment 239,238 1,634,229 111,463 302,029 61,856 603 - 2,349,418 Total Gross Loans: $ 247,471 $ 1,643,954 $ 111,463 $ 309,284 $ 63,481 $ 603 $ - $ 2,376,256 Ending ALLL Attributed to loans individually evaluated for impairment $ 398 $ 318 $ - $ 2,665 $ 20 $ - $ - $ 3,401 Ending ALLL Attributed to loans collectively evaluated for impairment 2,678 16,624 1,334 1,646 664 6 2,489 25,441 Total Ending ALLL: $ 3,076 $ 16,942 $ 1,334 $ 4,311 $ 684 $ 6 $ 2,489 $ 28,842 (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the activity in the Company’s allowance for loan losses for the six months ended June 30, 2020 (in thousands): Residential Commercial & Multi-family Construction Commercial Business (1) Home Equity (2) Consumer Unallocated Total Allowance for loan losses: Originated Loans: $ 2,422 $ 15,235 $ 1,244 $ 2,945 $ 330 $ - $ 273 $ 22,449 Acquired loans initially recorded at fair value: 261 58 - 803 - - - 1,122 Acquired loans with deteriorated credit: 39 79 - 42 3 - - 163 Beginning Balance, December 31, 2019 2,722 15,372 1,244 3,790 333 - 273 23,734 Charge-offs: Acquired loans initially recorded at fair value: 4 - - - - - - 4 Sub-total: 4 - - - - - - 4 Recoveries: Originated Loans: - - - 302 - 4 - 306 Acquired loans initially recorded at fair value: - - - - 6 - - 6 Sub-total: - - - 302 6 4 - 312 Provisions: Originated Loans: 227 1,462 90 ( 89 ) 350 2 2,216 4,258 Acquired loans initially recorded at fair value: 134 168 - 307 ( 6 ) - - 603 Acquired loans with deteriorated credit: ( 3 ) ( 60 ) - 1 1 - - ( 61 ) Sub-total: 358 1,570 90 219 345 2 2,216 4,800 Totals: Originated Loans: 2,649 16,697 1,334 3,158 680 6 2,489 27,013 Acquired loans initially recorded at fair value: 391 226 - 1,110 - - - 1,727 Acquired loans with deteriorated credit: 36 19 - 43 4 - - 102 Ending Balance, June 30, 2020 $ 3,076 $ 16,942 $ 1,334 $ 4,311 $ 684 $ 6 $ 2,489 $ 28,842 _____________________________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended June 30, 2019 (in thousands). Residential Commercial & Multi-family Construction Commercial Business (1) Home Equity (2) Consumer Unallocated Total Allowance for loan losses: Originated Loans: $ 2,471 $ 15,077 $ 1,209 $ 3,328 $ 265 $ - $ 32 $ 22,382 Acquired loans initially recorded at fair value: 404 - - - - - - 404 Acquired loans with deteriorated credit: 32 144 - 39 3 - - 218 Beginning Balance, March 31, 2019 2,907 15,221 1,209 3,367 268 - 32 23,004 Recoveries: Originated Loans: - - - 7 - - - 7 Acquired loans initially recorded at fair value: 3 - 10 2 8 - - 23 Sub-total: 3 - - 9 8 - - 30 Provisions: Originated Loans: 109 ( 826 ) 245 660 9 1 118 316 Acquired loans initially recorded at fair value: 324 - ( 10 ) ( 2 ) ( 8 ) - - 304 Acquired loans with deteriorated credit: 114 ( 7 ) - 28 - - - 135 Sub-total: 547 ( 833 ) 235 686 1 1 118 755 Totals: Originated Loans: 2,580 14,251 1,454 3,995 274 1 150 22,705 Acquired loans initially recorded at fair value: 731 - - - - - - 731 Acquired loans with deteriorated credit: 146 137 - 67 3 - - 353 Ending Balance, June 30, 2019 $ 3,457 $ 14,388 $ 1,454 $ 4,062 $ 277 $ 1 $ 150 $ 23,789 _____________________________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the activity in the Company’s allowance for loan losses for the six months ended June 30, 2019 (in thousands). Residential Commercial & Multi-family Construction Commercial Business (1) Home Equity (2) Consumer Unallocated Total Allowance for loan losses: Originated Loans: $ 2,374 $ 14,000 $ 1,003 $ 3,869 $ 313 $ 2 $ 189 $ 21,750 Acquired loans initially recorded at fair value: 335 - - - - - - 335 Acquired loans with deteriorated credit: 39 168 - 64 3 - - 274 Beginning Balance, December 31, 2018 2,748 14,168 1,003 3,933 316 2 189 22,359 Charge-offs: Originated Loans: - 111 - 145 - - - 256 Sub-total: - 111 - 145 - - - 256 Recoveries: Originated Loans: - - - 15 - - - 15 Acquired loans recorded at fair value: 3 10 - 3 11 - - 27 Sub-total: 3 10 - 18 11 - - 42 Provisions: Originated Loans: 206 362 451 256 ( 39 ) ( 1 ) ( 39 ) 1,196 Acquired loans initially recorded at fair value: 393 ( 10 ) - ( 3 ) ( 11 ) - - 369 Acquired loans with deteriorated credit: 107 ( 31 ) - 3 - - - 79 Sub-total: 706 321 451 256 ( 50 ) ( 1 ) ( 39 ) 1,644 Totals: Originated Loans: 2,580 14,251 1,454 3,995 274 1 150 22,705 Acquired loans initially recorded at fair value: 731 - - - - - - 731 Acquired loans with deteriorated credit: 146 137 - 67 3 - - 353 Ending Balance, June 30, 2019 $ 3,457 $ 14,388 $ 1,454 $ 4,062 $ 277 $ 1 $ 150 $ 23,789 _____________________________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the amount recorded in loans receivable at December 31, 2019. The table also details the amount of total loans receivable that are evaluated individually, and collectively, for impairment and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands). Residential Commercial & Multi-family Construction Commercial Business (1) Home Equity (2) Consumer Unallocated Total Allowance for credit losses: Originated Loans: $ 2,374 $ 14,000 $ 1,003 $ 3,869 $ 313 $ 2 $ 189 $ 21,750 Acquired loans initially recorded at fair value: 335 - - - - - - 335 Acquired loans with deteriorated credit: 39 168 - 64 3 - - 274 Beginning Balance, December 31, 2018 2,748 14,168 1,003 3,933 316 2 189 22,359 Charge-offs: Originated Loans: 1 111 - 145 - - - 257 Acquired loans initially recorded at fair value: 65 118 - 303 - - - 486 Sub-total: 66 229 - 448 - - - 743 Recoveries: Originated Loans: - - - 15 - - - 15 Acquired loans recorded at fair value: 3 10 - 5 16 - - 34 Sub-total: 3 10 - 20 16 - - 49 Provisions: Originated Loans: 49 1,346 241 ( 794 ) 17 ( 2 ) 84 941 Acquired loans initially recorded at fair value: ( 12 ) 166 - 1,101 ( 16 ) - - 1,239 Acquired loans with deteriorated credit: - ( 89 ) - ( 22 ) - - - ( 111 ) Sub-total: 37 1,423 241 285 1 ( 2 ) 84 2,069 Totals: Originated Loans: 2,422 15,235 1,244 2,945 330 - 273 22,449 Acquired loans initially recorded at fair value: 261 58 - 803 - - - 1,122 Acquired loans with deteriorated credit: 39 79 - 42 3 - - 163 Ending Balance, December 31, 2019 $ 2,722 $ 15,372 $ 1,244 $ 3,790 $ 333 $ - $ 273 $ 23,734 Ending Balance attributable to loans: Individually evaluated for impairment $ 8,455 $ 13,231 $ - $ 3,938 $ 1,288 $ - $ - $ 26,912 Collectively evaluated for impairment 239,926 1,593,745 104,996 173,704 63,350 682 - 2,176,403 Total Gross Loans: $ 248,381 $ 1,606,976 $ 104,996 $ 177,642 $ 64,638 $ 682 $ - $ 2,203,315 Ending ALLL Attributed to loans individually evaluated for impairment $ 380 $ 342 $ - $ 2,518 $ 24 $ - $ - $ 3,264 Ending ALLL Attributed to loans collectively evaluated for impairment 2,342 15,030 1,244 1,272 309 - 273 20,470 Total Ending ALLL: $ 2,722 $ 15,372 $ 1,244 $ 3,790 $ 333 $ - $ 273 $ 23,734 (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three and six months ended June 30, 2020 and 2019 (In thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2020 2019 2019 2020 2020 2019 2019 Average Interest Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Recorded Income Originated loans Investment Recognized Investment Recognized Investment Recognized Investment Recognized with no related allowance recorded: Residential one-to-four family $ 1,976 $ 20 $ 2,818 $ 18 $ 1,987 $ 40 $ 2,753 $ 46 Commercial and Multi-family 3,896 45 11,499 120 4,087 90 11,903 254 Commercial business (1) 2,444 110 1,145 41 1,999 151 1,088 83 Home equity (2) 813 7 680 6 737 13 707 12 Sub-total: $ 9,129 $ 182 $ 16,142 $ 185 $ 8,810 $ 294 $ 16,451 $ 395 Acquired loans initially recorded at fair value with no related allowance recorded: Residential one-to-four family $ 1,690 $ 18 $ 2,216 $ 25 $ 1,741 $ 36 $ 2,518 $ 50 Commercial and Multi-family 3,966 47 3,917 55 4,111 94 3,932 110 Commercial business (1) - - 51 1 - - 52 2 Home equity (2) 255 3 336 3 61 - 291 6 Consumer - - - - 218 6 7 - Sub-total $ 5,911 $ 68 $ 6,520 $ 84 $ 6,131 $ 136 $ 6,800 $ 168 Acquired loans with deteriorated credit with no related allowance recorded: Residential one-to-four family (3) $ 815 $ 14 $ 929 $ 14 $ 819 $ 28 $ 960 $ 30 Commercial and Multi-family (3) 718 7 5,461 7 1,516 14 5,850 13 Commercial business (1)(3) 864 2 829 - 865 4 823 - Home equity (2)(3) 34 - 45 - 35 - 46 - Sub-total: $ 2,431 $ 23 $ 7,264 $ 21 $ 3,235 $ 46 $ 7,679 $ 43 Total Impaired Loans with no related allowance recorded: $ 17,471 $ 273 $ 29,926 $ 290 $ 18,176 $ 476 $ 30,930 $ 606 __________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. (3) Does not include accretable yield on loans acquired with deteriorated credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three months ended June 30, 2020 and 2019. (In thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2020 2019 2019 2020 2020 2019 2019 Average Interest Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Recorded Income Originated loans Investment Recognized Investment Recognized Investment Recognized Investment Recognized with an allowance recorded: Residential one-to-four family $ 914 $ 2 $ 2,452 $ 24 $ 933 $ 10 $ 2,775 $ 49 Commercial and Multi-family - - - - - - 37 - Commercial business (1) 1,056 25 574 27 1,171 28 849 54 Home equity (2) 322 2 152 2 341 5 152 4 Sub-total: $ 2,292 $ 29 $ 3,178 $ 53 $ 2,445 $ 43 $ 3,813 $ 107 Acquired loans initially recorded at fair value with an allowance recorded: Residential one-to-four family $ 2,371 $ 4 $ 3,245 $ 28 $ 2,340 $ 30 $ 3,169 $ 52 Commercial and Multi-family 1,230 - 897 4 1,236 20 905 8 Commercial business (1) 997 30 189 - 790 30 126 - Home equity (2) 83 - 84 1 83 1 84 3 Sub-total: $ 4,681 $ 34 $ 4,415 $ 33 $ 4,449 $ 81 $ 4,284 $ 63 Acquired loans with deteriorated credit with an allowance recorded: Residential one-to-four family (3) $ 520 $ - $ 447 $ 7 $ 521 $ 7 $ 420 $ 12 Sub-total: $ 520 $ - $ 447 $ 7 $ 521 $ 7 $ 420 $ 12 Total Impaired Loans with an allowance recorded: $ 7,493 $ 63 $ 8,040 $ 93 $ 7,415 $ 131 $ 8,517 $ 182 __________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. (3) Does not include accretable yield on loans acquired with deteriorated credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at June 30, 2020 and December 31, 2019. (In thousands): As of June 30, 2020 As of December 31, 2019 Recorded Unpaid Principal Related Recorded Unpaid Principal Related Originated loans Investment Balance Allowance Investment Balance Allowance with no related allowance recorded: Residential one-to-four family $ 1,971 $ 2,070 $ - $ 2,010 $ 2,098 $ - Commercial and multi-family 3,891 3,936 - 4,469 4,527 - Commercial business (1) 3,887 8,133 - 1,108 4,069 - Home equity (2) 994 995 - 584 593 - Sub-total: $ 10,743 $ 15,134 $ - $ 8,171 $ 11,287 $ - Acquired loans initially recorded at fair value with no related allowance recorded: Residential one-to-four family $ 1,548 $ 1,638 $ - $ 1,843 $ 1,950 $ - Commercial and Multi-family 3,893 3,893 - 4,401 4,402 - Commercial business (1) - - - 183 589 - Home equity (2) 247 249 - 205 206 - Sub-total: $ 5,688 $ 5,780 $ - $ 6,632 $ 7,147 $ - Acquired loans with deteriorated credit with no related allowance recorded: Residential one-to-four family $ 810 $ 1,366 $ - $ 827 $ 1,383 $ - Commercial and Multi-family 715 1,769 - 3,113 4,166 - Commercial business (1) 862 5,048 - 867 5,052 - Home equity (2) 33 45 - 37 47 - Sub-total: $ 2,420 $ 8,228 $ - $ 4,844 $ 10,648 $ - Total Impaired Loans with no related allowance recorded: $ 18,851 $ 29,142 $ - $ 19,647 $ 29,082 $ - __________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at June 30, 2020 and December 31, 2019. (In thousands): As of June 30, 2020 As of December 31, 2019 Recorded Unpaid Principal Related Recorded Unpaid Principal Related Originated loans Investment Balance Allowance Investment Balance Allowance with an allowance recorded: Residential one-to-four family $ 911 $ 911 $ 38 $ 973 $ 973 $ 48 Commercial business (1) 1,025 1,768 960 1,403 3,037 1,029 Home equity (2) 269 274 17 379 382 20 Sub-total: $ 2,205 $ 2,953 $ 1,015 $ 2,755 $ 4,392 $ 1,097 Acquired loans initially recorded at fair value with an allowance recorded: Residential one-to-four family $ 2,474 $ 2,506 $ 357 $ 2,278 $ 2,293 $ 325 Commercial and Multi-family 1,226 1,424 318 1,248 1,442 342 Commercial business (1) 1,481 3,266 1,705 377 1,489 1,489 Home equity (2) 82 82 3 83 83 4 Sub-total $ 5,263 $ 7,278 $ 2,383 $ 3,986 $ 5,307 $ 2,160 Acquired loans with deteriorated credit with an allowance recorded: Residential one-to-four family $ 519 $ 566 $ 3 $ 524 $ 571 $ 7 Sub-total: $ 519 $ 566 $ 3 $ 524 $ 571 $ 7 Total Impaired Loans with an allowance recorded: $ 7,987 $ 10,797 $ 3,401 $ 7,265 $ 10,270 $ 3,264 Total Impaired Loans with no related allowance recorded: $ 18,851 $ 29,142 $ - $ 19,647 $ 29,082 $ - Total Impaired Loans: $ 26,838 $ 39,939 $ 3,401 $ 26,912 $ 39,352 $ 3,264 __________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) A troubled debt restructured loan (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a concession that would otherwise not be granted to the borrower. A loan that was current at December 31, 2019 and modified due to the COVID-19 pandemic is not considered a TDR. The types of concessions granted generally include, but are not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses. At June 30, 2020 At December 31, 2019 (In thousands) Recorded investment in TDRs: Accrual status $ 16,157 $ 17,030 Non-accrual status 1,097 702 Total recorded investment in TDRs $ 17,254 $ 17,732 There were no new TDRs for the three months ended June 30, 2020 and for the three months ended June 30, 2019. TDRs for the six months ended June 30, 2020 totaled $ 208,352 for one loan and $ 1.2 million for three loans for the six months ended June 30, 2019. There were no TDRs for which there was a payment default within twelve months of restructuring for the three or six months ended June 30, 2020. The following table sets forth the delinquency status of total loans receivable as of June 30, 2020: Loans Receivable 30-59 Days 60-90 Days Greater Than Total Past Total Loans >90 Days Past Due Past Due 90 Days Due Current Receivable and Accruing (In Thousands) Residential one-to-four family $ 813 $ 956 $ 450 $ 2,219 $ 245,252 $ 247,471 $ - Commercial and multi-family 998 - 829 1,827 1,642,127 1,643,954 - Construction - - - - 111,463 111,463 - Commercial business (1) 2,514 134 2,360 5,008 304,276 309,284 - Home equity (2) 446 76 427 949 62,532 63,481 - Consumer - - - - 603 603 - Total $ 4,771 $ 1,166 $ 4,066 $ 10,003 $ 2,366,253 $ 2,376,256 $ - _________ (1) Includes business lines of credit and PPP loans. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at June 30, 2020 and December 31, 2019, respectively. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of June 30, 2020 and December 31, 2019, non-accrual loans differed from the amount of total loans past due greater than 90 days due to loans which are maintained on non-accrual status for a minimum of six months until the borrower has demonstrated its ability to satisfy the terms of the restructured loan. There was $ 1.6 million in loans that were less than ninety days past due at June 30, 2020 and December 31, 2019, and $ 795,000 of loans which were more than ninety days past due and still accruing interest at December 31, 2019. Nonaccrual loans do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $ 1.1 million at June 30, 2020, and $ 3.5 million at December 31, 2019. Loans subject to COVID-19-related modifications are not be reported as non-accrual, in accordance with regulatory guidance. As of June 30, 2020 As of December 31, 2019 (In Thousands) (In Thousands) Non-Accruing Loans: Originated loans: Residential one-to-four family $ 788 $ 590 Commercial and multi-family 218 761 Commercial business (1) 1,129 1,428 Home equity (2) 608 347 Sub-total: 2,743 3,126 Acquired loans initially recorded at fair value: Residential one-to-four family 544 291 Commercial and multi-family 631 217 Commercial business (1) 513 513 Home equity (2) 64 13 Sub-total: 1,752 1,034 Total $ 4,495 $ 4,160 _________ (1) Includes business lines of credit. (2) Includes home equity lines of credit. Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the six months ended June 30, 2020 and December 31, 2019 would have been approximately $ 509,000 and $ 967,000 , respectively. Interest income recognized on loans returned to accrual status was approximately $ 509,000 and $ 1.1 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on nonaccrual status. At June 30, 2020 and December 31, 2019, there were $ 0 and $ 795,000 , respectively, of loans which were more than ninety days past due and still accruing interest. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) The following table sets forth the delinquency status of total loans receivable at December 31, 2019: Loans Receivable 30-59 Days 60-90 Days Greater Than Total Past Total Loans >90 Days Past Due Past Due 90 Days Due Current Receivable and Accruing (In Thousands) Originated loans: Residential one-to-four family $ 1,087 $ 401 $ - $ 1,488 $ 210,532 $ 212,020 $ - Commercial and multi-family 1,290 940 616 2,846 1,482,440 1,485,286 - Construction - - - - 104,996 104,996 - Commercial business (1) 1,874 278 1,265 3,417 153,996 157,413 142 Home equity (2) 161 63 116 340 49,760 50,100 - Consumer - - - - 674 674 - Sub-total: $ 4,412 $ 1,682 $ 1,997 $ 8,091 $ 2,002,398 $ 2,010,489 $ 142 Acquired loans initially recorded at fair value: Residential one-to-four family $ 265 $ 217 $ 330 $ 812 $ 34,198 35,010 $ 97 Commercial and multi-family 318 - 631 949 117,628 118,577 556 Construction - - - - - - - Commercial business (1) 300 - 513 813 18,506 19,319 - Home equity (2) 190 75 - 265 14,037 14,302 - Consumer - - - - 8 8 - Sub-total: $ 1,073 $ 292 $ 1,474 $ 2,839 $ 184,377 $ 187,216 $ 653 Acquired loans with deteriorated credit: Residential one-to-four family $ - $ - $ - $ - $ 1,351 $ 1,351 $ - Commercial and multi-family - - 2,500 2,500 613 3,113 - Construction - - - - - - - Commercial business (1) - - 856 856 54 910 - Home equity (2) 37 199 - 236 - 236 - Consumer - - - - - - - Sub-total: $ 37 $ 199 $ 3,356 $ 3,592 $ 2,018 $ 5,610 $ - Total $ 5,522 $ 2,173 $ 6,827 $ 14,522 $ 2,188,793 $ 2,203,315 $ 795 (1) Includes business lines of credit. (2) Includes home equity lines of credit. Note 7 - Loans Receivable and Allowance for Loan Losses (Continued) Criticized and Classified Assets Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.” When the Company classifies problem assets, the Company may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. As of June 30, 2020, we had $ 0 in assets classified as losses, and $ 13.6 million in assets classified as substandard, of which $ 13.6 million were classified as impaired. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued. The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below: 6 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency. 7 – Substandard - Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. Loans on “nonaccrual” status. The loan needs special and corrective attention. 8 – Doubtful - Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status. 9 – Loss - Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery. The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within t |