| Credit Quality and Allowance for Credit Losses | Credit Quality and Allowance for Credit Losses The following briefly describes the distinction between originated and acquired loans and certain significant accounting policies relevant to each category. Originated Loans Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest on an originated loan is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. For reporting periods prior to January 1, 2020, the Company maintained an ALL on originated loans that represented management’s estimate of probable losses incurred in this portfolio category. For reporting periods beginning on and after January 1, 2020, the Company maintains an ACL on all loans that reflects management's estimate of expected credit losses for the full life of the loan portfolio due to the adoption of the guidance under ASC Topic 326. Refer to Note 2 for more information on the adoption of ASC Topic 326. Acquired Loans Loans that were acquired as a result of business combinations are referred to as “acquired loans.” The Company's acquired loans were purchased prior to the adoption of ASC Topic 326 on January 1, 2020 and were recorded at estimated fair value at the acquisition date with no carryover of the related ALL. The acquired loans were segregated between those considered to be performing and those with evidence of credit deterioration (purchased credit impaired or "PCI"), and then further segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired performing and PCI loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates. The difference between the fair value of an acquired loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. For reporting periods beginning on and after January 1, 2020 and the adoption of ASC Topic 326: Management estimates the ACL for acquired loans under the same methodology as originated loans. Changes in the ACL for acquired loans are recognized through the provision for loan losses and the provision for credit losses on unfunded lending commitments. ASC Topic 326 replaced the guidance for PCI loans with the concept of purchased credit deteriorated ("PCD"). For reporting periods beginning on and after January 1, 2020, PCI loans have been re-classified as PCD loans. For PCD loans, the Company applied the guidance under ASC Topic 326 Note 2 for more information on the adoption of ASC Topic 326. PCD loans, under prior accounting policies, were excluded from nonperforming loans because they continued to earn interest income from the accretable yield at the pool level. With the adoption of ASC Topic 326, the pools were discontinued and performance is based on contractual terms for individual loans. For reporting periods prior to January 1, 2020 and the adoption of ASC Topic 326: Management estimated the ALL for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool was compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology was greater than the Company’s remaining discount, the additional amount called for was added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology was less than the Company’s recorded discount, no additional allowance or provision was recognized. Actual losses first reduced any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount was fully depleted, losses were applied against the allowance established for that pool. Acquired performing loans were placed on nonaccrual status and were considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio. The excess of cash flows expected to be collected from a PCI loan pool over the pool’s estimated fair value at acquisition was referred to as the accretable yield and was recognized in interest income using an effective yield method over the remaining life of the pool. Each pool of PCI loans was accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Management estimated cash flows expected to be collected on each PCI loan pool periodically. If the present value of expected cash flows for a pool was less than its carrying value, an impairment was recognized by an increase in the ALL and a charge to the provision for loan losses. If the present value of expected cash flows for a pool was greater than its carrying value, any previously established ALL was reversed and any remaining difference increased the accretable yield, which was taken into interest income over the remaining life of the loan pool. PCI loans were generally not subject to individual evaluation for impairment and were not reported with impaired loans, even if they otherwise qualified for such treatment . The Company’s loans, net of unearned income, consisted of the following as of the dates indicated. (dollars in thousands) September 30, December 31, Real estate loans: One- to four-family first mortgage $ 409,282 $ 430,820 Home equity loans and lines 67,766 79,812 Commercial real estate 707,638 722,807 Construction and land 201,575 195,748 Multi-family residential 86,619 54,869 Total real estate loans 1,472,880 1,484,056 Other loans: Commercial and industrial 443,480 184,701 Consumer 38,937 45,604 Total other loans 482,417 230,305 Total loans $ 1,955,297 $ 1,714,361 The net discount on the Company’s loans was $8,343,000 and $12,315,000 at September 30, 2020 and December 31, 2019, respectively. In addition, loan balances as of September 30, 2020 and December 31, 2019 are reported net of unearned income of $10,621,000 and $3,114,000, respectively. Unearned income at September 30, 2020 included $7,606,000 of deferred lender fees related to PPP loans. Accrued interest receivable on the Company's loans was $9,435,000 and $6,575,000 at September 30, 2020 and December 31, 2019, respectively, and is excluded from the estimate of the ACL. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition. Allowance for Credit Losses The ACL, which includes the ALL and the ACL on unfunded lending commitments, and recorded investment in loans as of the dates indicated are as follows. September 30, 2020 (dollars in thousands) Collectively Individually Total Allowance for credit losses: One- to four-family first mortgage $ 3,413 $ — $ 3,413 Home equity loans and lines 771 — 771 Commercial real estate 17,662 689 18,351 Construction and land 4,078 — 4,078 Multi-family residential 1,067 — 1,067 Commercial and industrial 4,006 431 4,437 Consumer 885 — 885 Total allowance for loan losses $ 31,882 $ 1,120 $ 33,002 Unfunded lending commitments (1) 3,637 — 3,637 Total allowance for credit losses $ 35,519 $ 1,120 $ 36,639 September 30, 2020 (dollars in thousands) Collectively Individually Evaluated (2) Total Loans: One- to four-family first mortgage $ 409,282 $ — $ 409,282 Home equity loans and lines 67,766 — 67,766 Commercial real estate 700,402 7,236 707,638 Construction and land 201,575 — 201,575 Multi-family residential 86,619 — 86,619 Commercial and industrial 442,868 612 443,480 Consumer 38,937 — 38,937 Total loans $ 1,947,449 $ 7,848 $ 1,955,297 December 31, 2019 (dollars in thousands) Collectively Individually Acquired with Deteriorated Credit Quality Total Allowance for loan losses: One- to four-family first mortgage $ 2,715 $ — $ — $ 2,715 Home equity loans and lines 736 348 — 1,084 Commercial real estate 6,243 298 — 6,541 Construction and land 2,670 — — 2,670 Multi-family residential 572 — — 572 Commercial and industrial 2,969 701 24 3,694 Consumer 592 — 592 Total allowance for loan losses $ 16,497 $ 1,347 $ 24 $ 17,868 December 31, 2019 (dollars in thousands) Collectively Individually Acquired with Deteriorated Credit Quality (3) Total Loans: One- to four-family first mortgage $ 429,745 $ 187 $ 888 $ 430,820 Home equity loans and lines 78,446 784 582 79,812 Commercial real estate 711,282 6,518 5,007 722,807 Construction and land 195,374 — 374 195,748 Multi-family residential 54,690 — 179 54,869 Commercial and industrial 183,141 1,223 337 184,701 Consumer 45,573 — 31 45,604 Total loans $ 1,698,251 $ 8,712 $ 7,398 $ 1,714,361 (1) At September 30, 2020, $3.6 million of the ACL related to unfunded lending commitments of $326.8 million. The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition. (2) At September 30, 2020, loans individually evaluated for impairment included $1.9 million of loans acquired with deteriorated credit quality. (3) At December 31, 2019, loans acquired with deteriorated credit quality were deemed to be PCI and were accounted for under ASC 310-30. A summary of activity in the ACL and ALL for the nine months ended September 30, 2020 and September 30, 2019 follows. Nine Months Ended September 30, 2020 (dollars in thousands) Beginning ASC Topic 326 Adoption Impact (1) Charge-offs Recoveries Provision Ending Allowance for credit losses: One- to four-family first mortgage $ 2,715 $ 986 $ (55) $ 12 $ (245) $ 3,413 Home equity loans and lines 1,084 (1) (575) 15 248 771 Commercial real estate 6,541 1,974 (5) 55 9,786 18,351 Construction and land 2,670 519 (688) — 1,577 4,078 Multi-family residential 572 (245) — — 740 1,067 Commercial and industrial 3,694 1,243 (977) 91 386 4,437 Consumer 592 157 (222) 122 236 885 Total allowance for loan losses $ 17,868 $ 4,633 $ (2,522) $ 295 $ 12,728 $ 33,002 Unfunded lending commitments — 2,365 — — 1,272 3,637 Total allowance for credit losses $ 17,868 $ 6,998 $ (2,522) $ 295 $ 14,000 $ 36,639 (1) On January 1, 2020 the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced a new model known as CECL. Refer to Note 2 for more information on the adoption of ASC Topic 326. Nine Months Ended September 30, 2019 (dollars in thousands) Beginning Charge-offs Recoveries Provision Ending Allowance for loan losses: One- to four-family first mortgage $ 2,136 $ (4) $ — $ 271 $ 2,403 Home equity loans and lines 1,079 (42) 10 41 1,088 Commercial real estate 6,125 (139) — 829 6,815 Construction and land 2,285 — — (113) 2,172 Multi-family residential 550 — — 22 572 Commercial and industrial 3,228 (744) 23 1,343 3,850 Consumer 945 (189) 34 (92) 698 Total allowance for loan losses $ 16,348 $ (1,118) $ 67 $ 2,301 $ 17,598 The following table presents the Company’s loan portfolio by credit quality classification and origination year as of September 30, 2020 Term Loans by Origination Year (dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Loans Total One- to four-family first mortgage: Pass $ 41,018 $ 70,884 $ 50,516 $ 51,480 $ 39,087 $ 128,564 $ 18,474 $ 1,149 $ 401,172 Special Mention — 123 170 796 23 1,057 — — 2,169 Substandard 134 — — 239 1,270 4,298 — — 5,941 Doubtful — — — — — — — — — Total one- to four-family first mortgages $ 41,152 $ 71,007 $ 50,686 $ 52,515 $ 40,380 $ 133,919 $ 18,474 $ 1,149 $ 409,282 Home equity loans and lines: Pass $ 707 $ 1,341 $ 2,155 $ 1,133 $ 2,098 $ 6,409 $ 53,065 $ 420 $ 67,328 Special Mention — 43 — 43 — 77 — 166 329 Substandard — — — 1 — 108 — — 109 Doubtful — — — — — — — — — Total home equity loans and lines $ 707 $ 1,384 $ 2,155 $ 1,177 $ 2,098 $ 6,594 $ 53,065 $ 586 $ 67,766 Commercial real estate: Pass $ 161,064 $ 167,785 $ 99,240 $ 106,999 $ 63,987 $ 71,310 $ 18,890 $ 55 $ 689,330 Special Mention 1,015 — — 54 54 — — — 1,123 Substandard 475 1,758 2,285 321 2,306 10,040 — — 17,185 Doubtful — — — — — — — — — Total commercial real estate loans $ 162,554 $ 169,543 $ 101,525 $ 107,374 $ 66,347 $ 81,350 $ 18,890 $ 55 $ 707,638 Construction and land: Pass $ 56,923 $ 99,081 $ 19,765 $ 5,858 $ 2,735 $ 2,109 $ 2,141 $ 449 $ 189,061 Special Mention 875 — — — — 624 — 10,415 11,914 Substandard — 53 — — 285 262 — — 600 Doubtful — — — — — — — — — Total construction and land loans $ 57,798 $ 99,134 $ 19,765 $ 5,858 $ 3,020 $ 2,995 $ 2,141 $ 10,864 $ 201,575 Term Loans by Origination Year (dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Loans Total Multi-family residential: Pass $ 34,726 $ 26,721 $ 10,466 $ 3,892 $ 2,944 $ 5,550 $ 2,121 $ — $ 86,420 Special Mention — — — — — — — — — Substandard — 92 — — — 107 — — 199 Doubtful — — — — — — — — — Total multi-family residential loans $ 34,726 $ 26,813 $ 10,466 $ 3,892 $ 2,944 $ 5,657 $ 2,121 $ — $ 86,619 Commercial and industrial: Pass $ 287,757 $ 35,391 $ 22,512 $ 7,150 $ 7,010 $ 3,030 $ 71,928 $ 506 $ 435,284 Special Mention 2,725 1,156 164 15 — — 1,000 553 5,613 Substandard 27 — 433 25 156 18 1,924 — 2,583 Doubtful — — — — — — — — — Total commercial and industrial loans $ 290,509 $ 36,547 $ 23,109 $ 7,190 $ 7,166 $ 3,048 $ 74,852 $ 1,059 $ 443,480 Consumer: Pass $ 4,533 $ 3,312 $ 1,399 $ 2,388 $ 1,383 $ 19,357 $ 6,090 $ 15 $ 38,477 Special Mention — — 4 — 21 159 — — 184 Substandard — 29 2 15 16 213 1 — 276 Doubtful — — — — — — — — — Total consumer loans $ 4,533 $ 3,341 $ 1,405 $ 2,403 $ 1,420 $ 19,729 $ 6,091 $ 15 $ 38,937 Total loans: Pass $ 586,728 $ 404,515 $ 206,053 $ 178,900 $ 119,244 $ 236,329 $ 172,709 $ 2,594 $ 1,907,072 Special Mention 4,615 1,322 338 908 98 1,917 1,000 11,134 21,332 Substandard 636 1,932 2,720 601 4,033 15,046 1,925 — 26,893 Doubtful — — — — — — — — — Total loans $ 591,979 $ 407,769 $ 209,111 $ 180,409 $ 123,375 $ 253,292 $ 175,634 $ 13,728 $ 1,955,297 The following tables present the Company’s loan portfolio by credit quality classification as of December 31, 2019. December 31, 2019 (dollars in thousands) Pass Special Substandard Doubtful Total Originated loans: One- to four-family first mortgage $ 248,483 $ 730 $ 2,133 $ — $ 251,346 Home equity loans and lines 56,029 53 882 — 56,964 Commercial real estate 517,615 207 11,317 — 529,139 Construction and land 164,310 8,107 1,270 — 173,687 Multi-family residential 48,661 — — — 48,661 Commercial and industrial 153,286 — 2,438 — 155,724 Consumer 35,545 46 89 — 35,680 Total originated loans $ 1,223,929 $ 9,143 $ 18,129 $ — $ 1,251,201 Acquired loans: One- to four-family first mortgage $ 173,482 $ 1,429 $ 4,563 $ — $ 179,474 Home equity loans and lines 22,370 128 350 — 22,848 Commercial real estate 181,090 1,593 10,985 — 193,668 Construction and land 19,877 747 1,437 — 22,061 Multi-family residential 5,487 502 219 — 6,208 Commercial and industrial 24,856 56 4,065 — 28,977 Consumer 9,668 166 90 — 9,924 Total acquired loans $ 436,830 $ 4,621 $ 21,709 $ — $ 463,160 Total loans: One- to four-family first mortgage $ 421,965 $ 2,159 $ 6,696 $ — $ 430,820 Home equity loans and lines 78,399 181 1,232 — 79,812 Commercial real estate 698,705 1,800 22,302 — 722,807 Construction and land 184,187 8,854 2,707 — 195,748 Multi-family residential 54,148 502 219 — 54,869 Commercial and industrial 178,142 56 6,503 — 184,701 Consumer 45,213 212 179 — 45,604 Total loans $ 1,660,759 $ 13,764 $ 39,838 $ — $ 1,714,361 The above classifications follow regulatory guidelines and can generally be described as follows: • Pass loans are of satisfactory quality. • Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values. • Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial performance. Such loans may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary. • Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable. In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates, among other factors, the extent of delinquencies and loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter. Age analysis of past due loans as of the dates indicated are as follows. September 30, 2020 (dollars in thousands) 30-59 60-89 Greater Total Current Total Originated loans: Real estate loans: One- to four-family first mortgage $ 500 $ 36 $ 1,147 $ 1,683 $ 259,246 $ 260,929 Home equity loans and lines 106 — 45 151 51,491 51,642 Commercial real estate 75 — 7,000 7,075 533,126 540,201 Construction and land 525 — — 525 186,044 186,569 Multi-family residential 1,499 — — 1,499 79,692 81,191 Total real estate loans 2,705 36 8,192 10,933 1,109,599 1,120,532 Other loans: Commercial and industrial 638 — 607 1,245 422,464 423,709 Consumer 221 52 130 403 31,950 32,353 Total other loans 859 52 737 1,648 454,414 456,062 Total originated loans $ 3,564 $ 88 $ 8,929 $ 12,581 $ 1,564,013 $ 1,576,594 Acquired loans: Real estate loans: One- to four-family first mortgage $ 3,567 $ 437 $ 1,210 $ 5,214 $ 143,139 $ 148,353 Home equity loans and lines 44 — 20 64 16,060 16,124 Commercial real estate 1,860 — 4,198 6,058 161,379 167,437 Construction and land — — 434 434 14,572 15,006 Multi-family residential — — — — 5,428 5,428 Total real estate loans 5,471 437 5,862 11,770 340,578 352,348 Other loans: Commercial and industrial 4 — 945 949 18,822 19,771 Consumer 67 23 63 153 6,431 6,584 Total other loans 71 23 1,008 1,102 25,253 26,355 Total acquired loans $ 5,542 $ 460 $ 6,870 $ 12,872 $ 365,831 $ 378,703 Total loans: Real estate loans: One- to four-family first mortgage $ 4,067 $ 473 $ 2,357 $ 6,897 $ 402,385 $ 409,282 Home equity loans and lines 150 — 65 215 67,551 67,766 Commercial real estate 1,935 — 11,198 13,133 694,505 707,638 Construction and land 525 — 434 959 200,616 201,575 Multi-family residential 1,499 — — 1,499 85,120 86,619 Total real estate loans 8,176 473 14,054 22,703 1,450,177 1,472,880 Other loans: Commercial and industrial 642 — 1,552 2,194 441,286 443,480 Consumer 288 75 193 556 38,381 38,937 Total other loans 930 75 1,745 2,750 479,667 482,417 Total loans $ 9,106 $ 548 $ 15,799 $ 25,453 $ 1,929,844 $ 1,955,297 December 31, 2019 (dollars in thousands) 30-59 60-89 Greater Total Current Total Originated loans: Real estate loans: One- to four-family first mortgage $ 1,524 $ 173 $ 967 $ 2,664 $ 248,682 $ 251,346 Home equity loans and lines 174 — 98 272 56,692 56,964 Commercial real estate 1,124 1,448 8,056 10,628 518,511 529,139 Construction and land — — 1,171 1,171 172,516 173,687 Multi-family residential — — — — 48,661 48,661 Total real estate loans 2,822 1,621 10,292 14,735 1,045,062 1,059,797 Other loans: Commercial and industrial 213 100 869 1,182 154,542 155,724 Consumer 533 57 34 624 35,056 35,680 Total other loans 746 157 903 1,806 189,598 191,404 Total originated loans $ 3,568 $ 1,778 $ 11,195 $ 16,541 $ 1,234,660 $ 1,251,201 Acquired loans: Real estate loans: One- to four-family first mortgage $ 4,555 $ 1,116 $ 1,108 $ 6,779 $ 172,695 $ 179,474 Home equity loans and lines 267 93 330 690 22,158 22,848 Commercial real estate 337 466 1,945 2,748 190,920 193,668 Construction and land 413 — 1,170 1,583 20,478 22,061 Multi-family residential — — — — 6,208 6,208 Total real estate loans 5,572 1,675 4,553 11,800 412,459 424,259 Other loans: Commercial and industrial 3 57 792 852 28,125 28,977 Consumer 259 127 60 446 9,478 9,924 Total other loans 262 184 852 1,298 37,603 38,901 Total acquired loans $ 5,834 $ 1,859 $ 5,405 $ 13,098 $ 450,062 $ 463,160 Total loans: Real estate loans: One- to four-family first mortgage $ 6,079 $ 1,289 $ 2,075 $ 9,443 $ 421,377 $ 430,820 Home equity loans and lines 441 93 428 962 78,850 79,812 Commercial real estate 1,461 1,914 10,001 13,376 709,431 722,807 Construction and land 413 — 2,341 2,754 192,994 195,748 Multi-family residential — — — — 54,869 54,869 Total real estate loans 8,394 3,296 14,845 26,535 1,457,521 1,484,056 Other loans: Commercial and industrial 216 157 1,661 2,034 182,667 184,701 Consumer 792 184 94 1,070 44,534 45,604 Total other loans 1,008 341 1,755 3,104 227,201 230,305 Total loans $ 9,402 $ 3,637 $ 16,600 $ 29,639 $ 1,684,722 $ 1,714,361 At September 30, 2020, $10,000 of loans were greater than 90 days past due and accruing. At December 31, 2019, excluding PCI loans, the Company did not have any loans greater than 90 days past due and accruing. The following table summarizes information pertaining to nonaccrual loans as of dates indicated. September 30, 2020 December 31, (dollars in thousands) With Related Allowance Without Related Allowance Total (1) Total (2) Nonaccrual loans: One- to four-family first mortgage $ 4,609 $ — $ 4,609 $ 3,948 Home equity loans and lines 109 — 109 1,244 Commercial real estate 15,486 — 15,486 13,325 Construction and land 515 — 515 2,469 Multi-family residential 95 — 95 — Commercial and industrial 1,750 — 1,750 3,224 Consumer 279 — 279 176 Total $ 22,843 $ — $ 22,843 $ 24,386 (1) Due to the adoption of ASC Topic 326, PCD loans of $2.1 million are included in nonaccrual loans at September 30, 2020. Prior to January 1, 2020, these loans were classified as PCI and excluded from nonperforming loans because they continued to earn interest income from the accretable yield at the pool level. At adoption, the pools were discontinued and performance is based on contractual terms for individual loans. (2) PCI loans which were being accounted for under ASC 310-30 were excluded from nonaccrual loans because they continued to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. PCI loans which were being accounted for under ASC 310-30 and which were 90 days or more past due totaled $2.2 million as of December 31, 2019. All payments received while on nonaccrual status are applied against the principal balance of nonaccrual loans. The Company does not recognize interest income while loans are on nonaccrual status. Collateral Dependent Loans The Company held loans that were individually evaluated for impairment at September 30, 2020 for which the repayment, on the basis of our assessment at the reporting date, is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The ACL for these collateral-dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the types of collateral that secure collateral dependent loans: • One- to four-family first mortgages are primarily secured by first liens on residential real estate. • Home equity loans and lines are primarily secured by first and junior liens on residential real estate. • Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose properties, including hotels and restaurants. • Construction and land loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment, and by raw land. • Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory and equipment. The table below summarizes collateral dependent loans and the related ACL at September 30, 2020 for which the borrower is experiencing financial difficulty. (dollars in thousands) Loans ACL One- to four-family first mortgage $ — $ — Home equity loans and lines — — Commercial real estate 7,236 689 Construction and land — — Multi-family residential — — Commercial and industrial 612 431 Consumer — — Total $ 7,848 $ 1,120 At September 30, 2020, collateral dependent commercial real estate loans included one loan acquired with deteriorated credit quality totaling $1.9 million. Foreclosed Assets and ORE Foreclosed assets and ORE include real property and other assets that have been acquired as a result of foreclosure, and real property no longer used in the Bank's business. Foreclosed assets and ORE totaled $1,985,000 and 4,156,000 at September 30, 2020 and December 31, 2019, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition. The carrying amount of foreclosed residential real estate properties held at September 30, 2020 and December 31, 2019 totaled $996,000 and $1,737,000, respectively. Foreclosed assets and ORE included certain bank buildings that meet the criteria to be classified as assets held for sale. The carrying value of these assets totaled $729,000 and $1,275,000 at September 30, 2020 and December 31, 2019, respectively. During the nine months ended September 30, 2020, the Company sold five of these properties, with a total carrying value of $410,000, for a gain of $64,000 recorded in foreclosed assets and ORE, net expense on the Consolidated Statements of Income. The expected timing of the sale of the remaining properties is uncertain due to the effects of the COVID-19 pandemic. Troubled Debt Restructurings During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. Loans are TDRs when the Company agrees to restructure a loan to a borrower who is experiencing financial difficulties in a manner that is deemed to be a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession either is granted through an agreement with the customer or is imposed by a court or by law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to: • a reduction of the stated interest rate for the remaining original life of the debt, • an extension of the maturity date or dates at an interest rate lower than the current market rate for new debt with similar risk characteristics, • a reduction of the face amount or maturity amount of the debt or • a reduction of accrued interest receivable on the debt. In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to: • whether the customer is currently in default on its existing loan, or is in an economic position where it is probable the customer will be in default on its loan in the foreseeable future without a modification, • whether the customer has declared or is in the process of declaring bankruptcy, • whether there is substantial doubt about the customer’s ability to continue as a going concern, • whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the debt, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future and • whether, without modification, the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for similar debt for a non-troubled debtor. If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR. For purposes of the determination of an ACL, larger (i.e., TDRs with balances of $250,000 or greater) commercial TDRs are individually evaluated for impairment. The ACL for loans that are individually evaluated is based on a comparison of the recorded investment in the loan with either the expected cash flows discounted using the loan’s original effective interest rate, observable market price for the loan or the fair value of the collateral underlying certain collateral-dependent loans. Residential, consumer and smaller balance commercial TDRs are included in the Company's pooled-loan analysis to calculate the ACL and, generally, do not have a material impact on the overall ACL. As of September 30, 2020, the Company had modified loans with an aggregate outstanding loan balance of $70.2 million, or 4% of total outstanding loans, via payment relief in the nature of principal and/or interest deferrals for 90 days. These modifications were done in accordance with Section 4013 of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and the Interagency Statement on Loan Modifications on Reporting for Financial Institutions Working With Customers Affected by the Coronavirus . Accordingly, these loans were not categorized as TDRs. The following table summarizes information pertaining to TDRs modified during the periods indicated. Nine Months Ended September 30, 2020 2019 (dollars in thousands) Number of Pre- Post- Number of Pre- Post- Troubled debt restructurings: One- to four-family first mortgage 7 $ 990 $ 385 6 $ 924 $ 911 Home equity loans and lines — — — — — — Commercial real estate 4 1,044 992 1 89 88 Construction and land — — — — — — Multi-family residential — — — — — — Commercial and industrial 3 41 38 — — — Other consumer 2 13 10 2 11 10 Total 16 $ 2,088 $ 1,425 9 $ 1,024 $ 1,009 Two residential mortgages totaling $543,000, one commercial real estate loan totaling $77,000 and one consumer loan totaling $4,000 were modified during the nine months ended September 30, 2020 and defaulted during the same period. The defaults did not have a significant impact on our allowance for credit losses at September 30, 2020. Two residential mortgages totaling $619,000 and one consumer loan totaling $6,000 were modified during nine months ended September 30, 2019 and defaulted within twelve months of modification. The defaults did not have a significant impact on our allowance for loan losses at September 30, 2019. |
