Loans and Allowance for Loan Losses | (5) Loans and Allowance for Loan Losses The following table presents the recorded investment in loans by loan class: June 30, 2019 (dollars in thousands) New York and other states* Florida Total Commercial: Commercial real estate $ 153,550 14,404 167,954 Other 22,280 273 22,553 Real estate mortgage - 1 to 4 family: First mortgages 2,461,857 876,259 3,338,116 Home equity loans 71,758 18,955 90,713 Home equity lines of credit 233,360 44,199 277,559 Installment 7,588 1,926 9,514 Total loans, net $ 2,950,393 $ 956,016 3,906,409 Less: Allowance for loan losses 44,365 Net loans $ 3,862,044 December 31, 2018 (dollars in thousands) New York and other states* Florida Total Commercial: Commercial real estate $ 156,278 15,275 171,553 Other 24,330 263 24,593 Real estate mortgage - 1 to 4 family: First mortgages 2,442,711 845,166 3,287,877 Home equity loans 71,523 17,308 88,831 Home equity lines of credit 243,765 45,775 289,540 Installment 9,462 2,240 11,702 Total loans, net $ 2,948,069 926,027 3,874,096 Less: Allowance for loan losses 44,766 Net loans $ 3,829,330 * Includes New York, New Jersey, Vermont and Massachusetts. At June 30, 2019 and December 31, 2018, the Company had approximately $27.7 million and $26.7 million of real estate construction loans, respectively. Of the $27.7 million in real estate construction loans at June 30, 2019, approximately $13.3 million are secured by second mortgages to residential borrowers while approximately $14.4 million were to commercial borrowers for residential construction projects. Of the $26.7 million in real estate construction loans at December 31, 2018, approximately $14.2 million are secured by second mortgages to residential borrowers while approximately $12.5 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market. TrustCo lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, a portion of its debtors’ ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory. The following tables present the recorded investment in non-accrual loans by loan class: June 30, 2019 (dollars in thousands) New York and other states* Florida Total Loans in non-accrual status: Commercial: Commercial real estate $ 902 - 902 Other 3 - 3 Real estate mortgage - 1 to 4 family: First mortgages 15,818 1,433 17,251 Home equity loans 342 - 342 Home equity lines of credit 3,473 131 3,604 Installment 1 - 1 Total non-accrual loans 20,539 1,564 22,103 Restructured real estate mortgages - 1 to 4 family 31 - 31 Total nonperforming loans $ 20,570 1,564 22,134 December 31, 2018 (dollars in thousands) New York and other states* Florida Total Loans in non-accrual status: Commercial: Commercial real estate $ 639 - 639 Other 6 - 6 Real estate mortgage - 1 to 4 family: First mortgages 18,202 1,812 20,014 Home equity loans 247 - 247 Home equity lines of credit 3,924 103 4,027 Installment 4 15 19 Total non-accrual loans 23,022 1,930 24,952 Restructured real estate mortgages - 1 to 4 family 34 - 34 Total nonperforming loans $ 23,056 1,930 24,986 * Includes New York, New Jersey, Vermont and Massachusetts. The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of June 30, 2019 and December 31, 2018, other estate owned included $2.1 million and $1.1 million of residential foreclosed properties, respectively. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $9.6 million and $12.4 million as of June 30, 2019 and December 31, 2018, respectively. The following tables present the aging of the recorded investment in past due loans by loan class and by region as of June 30, 2019 and December 31, 2018: June 30, 2019 New York and other states*: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ 478 - - 478 153,072 153,550 Other - - - - 22,280 22,280 Real estate mortgage - 1 to 4 family: First mortgages 2,746 932 11,363 15,041 2,446,816 2,461,857 Home equity loans 59 - 289 348 71,410 71,758 Home equity lines of credit 464 28 1,700 2,192 231,168 233,360 Installment 57 9 1 67 7,521 7,588 Total $ 3,804 969 13,353 18,126 2,932,267 2,950,393 Florida: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ - - - - 14,404 14,404 Other - - - - 273 273 Real estate mortgage - 1 to 4 family: First mortgages 555 822 623 2,000 874,259 876,259 Home equity loans - 50 - 50 18,905 18,955 Home equity lines of credit 141 - 80 221 43,978 44,199 Installment - 16 - 16 1,910 1,926 Total $ 696 888 703 2,287 953,729 956,016 Total: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ 478 - - 478 167,476 167,954 Other - - - - 22,553 22,553 Real estate mortgage - 1 to 4 family: First mortgages 3,301 1,754 11,986 17,041 3,321,075 3,338,116 Home equity loans 59 50 289 398 90,315 90,713 Home equity lines of credit 605 28 1,780 2,413 275,146 277,559 Installment 57 25 1 83 9,431 9,514 Total $ 4,500 1,857 14,056 20,413 3,885,996 3,906,409 * Includes New York, New Jersey, Vermont and Massachusetts. December 31, 2018 New York and other states*: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ 198 - 370 568 155,710 156,278 Other - - - - 24,330 24,330 Real estate mortgage - 1 to 4 family: First mortgages 3,276 898 13,267 17,441 2,425,270 2,442,711 Home equity loans 158 94 212 464 71,059 71,523 Home equity lines of credit 963 348 1,691 3,002 240,763 243,765 Installment 44 29 2 75 9,387 9,462 Total $ 4,639 1,369 15,542 21,550 2,926,519 2,948,069 Florida: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ - - - - 15,275 15,275 Other - - - - 263 263 Real estate mortgage - 1 to 4 family: First mortgages 417 407 721 1,545 843,621 845,166 Home equity loans 50 - - 50 17,258 17,308 Home equity lines of credit 40 - 50 90 45,685 45,775 Installment 12 7 15 34 2,206 2,240 Total $ 519 414 786 1,719 924,308 926,027 Total: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total 30+ days Past Due Current Total Loans Commercial: Commercial real estate $ 198 - 370 568 170,985 171,553 Other - - - - 24,593 24,593 Real estate mortgage - 1 to 4 family: First mortgages 3,693 1,305 13,988 18,986 3,268,891 3,287,877 Home equity loans 208 94 212 514 88,317 88,831 Home equity lines of credit 1,003 348 1,741 3,092 286,448 289,540 Installment 56 36 17 109 11,593 11,702 Total $ 5,158 1,783 16,328 23,269 3,850,827 3,874,096 * Includes New York, New Jersey, Vermont and Massachusetts. At June 30, 2019 and December 31, 2018, there were no loans that were 90 days past due and still accruing interest. As a result, non-accrual loans include all loans 90 days or more past due as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status. There are no commitments to extend further credit on non-accrual or restructured loans. Activity in the allowance for loan losses by portfolio segment is summarized as follows: For the three months ended June 30, 2019 (dollars in thousands) Commercial Real Estate Mortgage- 1 to 4 Family Installment Total Balance at beginning of period $ 3,734 39,985 952 44,671 Loans charged off: New York and other states* - 205 49 254 Florida - - - - Total loan chargeoffs - 205 49 254 Recoveries of loans previously charged off: New York and other states* 1 259 4 264 Florida - 25 - 25 Total recoveries 1 284 4 289 Net loans (recoveries) charged off (1 ) (79 ) 45 (35 ) (Credit) provision for loan losses 178 (101 ) (418 ) (341 ) Balance at end of period $ 3,913 39,963 489 44,365 For the three months ended June 30, 2018 (dollars in thousands) Commercial Real Estate Mortgage- 1 to 4 Family Installment Total Balance at beginning of period $ 4,255 39,359 765 44,379 Loans charged off: New York and other states* - 239 41 280 Florida - - 3 3 Total loan chargeoffs - 239 44 283 Recoveries of loans previously charged off: New York and other states* 1 89 14 104 Florida - - 3 3 Total recoveries 1 89 17 107 Net loans (recoveries) charged off (1 ) 150 27 176 Provision for loan losses (61 ) 262 99 300 Balance at end of period $ 4,195 39,471 837 44,503 * Includes New York, New Jersey, Vermont and Massachusetts. Six months ended June 30, 2019 Commercial Real Estate Mortgage- 1 to 4 Family Installment Total Balance at beginning of period $ 4,048 39,772 946 44,766 Loans charged off: New York and other states* 7 597 78 682 Florida - 29 31 60 Total loan chargeoffs 7 626 109 742 Recoveries of loans previously charged off: New York and other states* 4 333 10 347 Florida - 35 - 35 Total recoveries 4 368 10 382 Net loans charged off 3 258 99 360 (Credit) provision for loan losses (132 ) 449 (358 ) (41 ) Balance at end of period $ 3,913 39,963 489 44,365 Six months ended June 30, 2018 Commercial Real Estate Mortgage- 1 to 4 Family Installment Total Balance at beginning of period $ 4,324 39,077 769 44,170 Loans charged off: New York and other states* - 370 112 482 Florida - - 6 6 Total loan chargeoffs - 370 118 488 Recoveries of loans previously charged off: New York and other states* 7 192 19 218 Florida - - 3 3 Total recoveries 7 192 22 221 Net loans (recoveries) charged off (7 ) 178 96 267 Provision (recoveries) for loan losses (136 ) 572 164 600 Balance at end of period $ 4,195 39,471 837 44,503 * Includes New York, New Jersey, Vermont and Massachusetts. The Company has identified non-accrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring (“TDR”), as impaired loans. A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured as a TDR. The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2019 and December 31, 2018: June 30, 2019 (dollars in thousands) Commercial Loans 1-to-4 Family Residential Real Estate Installment Loans Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ - - - - Collectively evaluated for impairment 3,913 39,963 489 44,365 Total ending allowance balance $ 3,913 39,963 489 44,365 Loans: Individually evaluated for impairment $ 1,696 19,084 - 20,780 Collectively evaluated for impairment 188,811 3,687,304 9,514 3,885,629 Total ending loans balance $ 190,507 3,706,388 9,514 3,906,409 December 31, 2018 (dollars in thousands) Commercial Loans 1-to-4 Family Residential Real Estate Installment Loans Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ - - - - Collectively evaluated for impairment 4,048 39,772 946 44,766 Total ending allowance balance $ 4,048 39,772 946 44,766 Loans: Individually evaluated for impairment $ 1,424 20,864 - 22,288 Collectively evaluated for impairment 194,722 3,645,384 11,702 3,851,808 Total ending loans balance $ 196,146 3,666,248 11,702 3,874,096 A loan for which the terms have been modified, and for which the borrower is experiencing financial difficulties, is considered a TDR and is classified as impaired. TDR’s at June 30, 2019 and December 31, 2018 are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent. The following tables present impaired loans by loan class as of June 30, 2019 and December 31, 2018: June 30, 2019 New York and other states*: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 1,552 1,722 - 1,419 Other 35 35 - 106 Real estate mortgage - 1 to 4 family: First mortgages 14,100 14,393 - 14,784 Home equity loans 243 263 - 250 Home equity lines of credit 2,395 2,535 - 2,507 Total $ 18,325 18,948 - 19,066 Florida: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 109 109 - 112 Other - - - - Real estate mortgage - 1 to 4 family: First mortgages 2,014 2,014 - 2,178 Home equity loans 81 81 - 83 Home equity lines of credit 251 251 - 253 Total $ 2,455 2,455 - 2,626 Total: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 1,661 1,831 - 1,531 Other 35 35 - 106 Real estate mortgage - 1 to 4 family: First mortgages 16,114 16,407 - 16,962 Home equity loans 324 344 - 333 Home equity lines of credit 2,646 2,786 - 2,760 Total $ 20,780 21,403 - 21,692 * Includes New York, New Jersey, Vermont and Massachusetts. December 31, 2018 New York and other states*: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 1,274 1,444 - 1,503 Other 38 88 - 123 Real estate mortgage - 1 to 4 family: First mortgages 15,210 15,661 - 15,577 Home equity loans 252 272 - 262 Home equity lines of credit 2,772 2,996 - 2,772 Total $ 19,546 20,461 - 20,237 Florida: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 112 112 - 57 Other - - - - Real estate mortgage - 1 to 4 family: First mortgages 2,293 2,399 - 2,455 Home equity loans 84 84 - 86 Home equity lines of credit 253 253 - 326 Total $ 2,742 2,848 - 2,924 Total: (dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Commercial: Commercial real estate $ 1,386 1,556 - 1,560 Other 38 88 - 123 Real estate mortgage - 1 to 4 family: First mortgages 17,503 18,060 - 18,032 Home equity loans 336 356 - 348 Home equity lines of credit 3,025 3,249 - 3,098 Total $ 22,288 23,309 - 23,161 * Includes New York, New Jersey, Vermont and Massachusetts. The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired. Interest income recognized on impaired loans was not material during the three and six months ended June 30, 2019 and 2018. As of June 30, 2019 and December 31, 2018 impaired loans included approximately $11.2 million and $11.1 million of loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans, respectively. Management evaluates impairment on impaired loans on a quarterly basis. If, during this evaluation, impairment of the loan is identified, a charge off is taken at that time. As a result, as of June 30, 2019 and December 31, 2018, based upon management’s evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s). The following table presents, by class, loans that were modified as TDR’s: Three months ended 6/30/2019 Three months ended 6/30/2018 New York and other states*: 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 (dollars in thousands) Commercial: Commercial real estate 1 $ 128 128 - $ - - Real estate mortgage - 1 to 4 family: First mortgages 5 718 718 2 125 125 Home equity loans - - - - - - Home equity lines of credit 3 278 278 - - - Total 9 $ 1,124 1,124 2 $ 125 125 Florida: (dollars in thousands) 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: Commercial real estate - $ - - - $ - - Real estate mortgage - 1 to 4 family: First mortgages - - - - - - Home equity loans - - - - - - Home equity lines of credit - - - - - - Total - $ - - - $ - - * Includes New York, New Jersey, Vermont and Massachusetts. Six months ended 6/30/2019 Six months ended 6/30/2018 New York and other states*: 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 (dollars in thousands) Commercial: Commercial real estate 1 $ 128 128 - $ - - Real estate mortgage - 1 to 4 family: First mortgages 9 1,368 1,368 4 598 598 Home equity loans - - - - - - Home equity lines of credit 3 278 278 2 208 208 Total 13 $ 1,774 1,774 6 $ 806 806 Florida: (dollars in thousands) 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: Commercial real estate - $ - - - $ - - Real estate mortgage - 1 to 4 family: First mortgages - - - - - - Home equity loans - - - - - - Home equity lines of credit - - - - - - Total - $ - - - $ - - * Includes New York, New Jersey, Vermont and Massachusetts. The addition of these TDR’s did not have a significant impact on the allowance for loan losses. In situations where the Company considers a loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s underwriting policy. Generally, the modification of the terms of loans was the result of the borrower filing for bankruptcy protection. Chapter 13 bankruptcies generally include the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order. In the case of Chapter 7 bankruptcies, as previously noted, even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they did not reaffirm the debt. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for Chapter 13 bankruptcy protection, however, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment by the bankruptcy court. During the three months ended June 30, 2019 and 2018 there were no TDR’s that defaulted which had been modified during the last twelve months. The following table presents, by class, TDR’s that defaulted during the six months ended June 30, 2019 and 2018 which had been modified within the last twelve months: Six months ended 6/30/2019 Six months ended 6/30/2018 New York and other states*: Number of Contracts Recorded Investment Number of Contracts Recorded Investment (dollars in thousands) Commercial: Commercial real estate - $ - - $ - Real estate mortgage - 1 to 4 family: First mortgages - - - - Home equity loans - - - - Home equity lines of credit - - 1 3 Total - $ - 1 $ 3 Florida: (dollars in thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Commercial: Commercial real estate - $ - - $ - Real estate mortgage - 1 to 4 family: First mortgages - - 1 72 Home equity lines of credit - - - - Total - $ - 1 $ 72 * Includes New York, New Jersey, Vermont and Massachusetts. The TDR’s that subsequently defaulted described above did not have a material impact on the allowance for loan losses. The Company categorizes non-homogenous loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. On at least an annual basis, the Company’s loan grading process analyzes non-homogeneous loans, such as commercial and commercial real estate loans, individually by grading the loans based on credit risk. The loan grades assigned to all loan types are tested by the Company’s internal loan review department in accordance with the Company’s internal loan review policy. The Company uses the following definitions for classified loans: Special Mention Substandard Doubtful Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “pass” rated loans. As of June 30, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: June 30, 2019 New York and other states*: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 148,331 5,219 153,550 Other 21,258 1,022 22,280 $ 169,589 6,241 175,830 Florida: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 14,404 - 14,404 Other 273 - 273 $ 14,677 - 14,677 Total: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 162,735 5,219 167,954 Other 21,531 1,022 22,553 $ 184,266 6,241 190,507 * Includes New York, New Jersey and Massachusetts. December 31, 2018 New York and other states: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 152,045 4,233 156,278 Other 23,331 999 24,330 $ 175,376 5,232 180,608 Florida: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 15,163 112 15,275 Other 263 - 263 $ 15,426 112 15,538 Total: (dollars in thousands) Pass Classified Total Commercial: Commercial real estate $ 167,208 4,345 171,553 Other 23,594 999 24,593 $ 190,802 5,344 196,146 * Includes New York, New Jersey and Massachusetts. Included in classified loans in the above tables are impaired loans of $1.3 million and 1.4 million at June 30, 2019 and December 31, 2018, respectively. For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Company’s collection area and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The payment status of these homogeneous pools as of June 30, 2019 and December 31, 2018 is included in the aging of the recorded investment of the past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools as of June 30, 2019 and December 31, 2018 is presented in the non-accrual loans table. |