XML 26 R15.htm IDEA: XBRL DOCUMENT

Note 8 - Loans

9 Months Ended

Sep. 30, 2021

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

8. Loans

Most of the Company’s business activities are with customers located in the high-density Asian-populated areas of Southern and Northern California; New York City, New York; Dallas and Houston, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; Edison, New Jersey; Rockville, Maryland; and Las Vegas, Nevada. The Company also has loan customers in Hong Kong. The Company has no specific industry concentration, and generally its loans, when secured, are secured by real property or other collateral of the borrowers. The Company generally expects loans to be paid off from the operating profits of the borrowers, from refinancing by other lenders, or through sale by the borrowers of the secured collateral.

The types of loans in the Company’s Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

December 31, 2020

(In thousands)

Commercial loans
$ 2,871,693 $ 2,836,833

Residential mortgage loans
4,144,789 4,145,389

Commercial mortgage loans
7,835,528 7,555,027

Real estate construction loans
688,195 679,492

Equity lines
433,206 424,555

Installment and other loans
3,370 3,100

Gross loans
$ 15,976,781 $ 15,644,396

Allowance for loan losses
(131,945 ) (166,538 )

Unamortized deferred loan fees, net
(3,835 ) (2,494 )

Total loans, net
$ 15,841,001 $ 15,475,364

As of September 30, 2021, recorded investment in non-accrual loans was $68.7 million. As of December 31, 2020, recorded investment in impaired loans totaled $95.4 million and was comprised of non-accrual loans of $67.7 million and accruing TDRs of $27.7 million. For non-accrual loans, the amounts previously charged off represent 10.6% of the contractual balances for non-accrual loans as of September 30, 2021. For impaired loans, the amounts previously charged off represent 7.1% of the contractual balances for impaired loans as of December 31, 2020.

The following table presents the average recorded investment and interest income recognized on non-accrual loans for the period indicated:

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2021

Average

Recorded

Investment

Interest Income

Recognized

Average

Recorded

Investment

Interest Income

Recognized

(In thousands)

Commercial loans
$ 16,379 $ — $ 22,989 $ —

Real estate construction loans
4,548 50 4,310 220

Commercial mortgage loans
37,017 140 37,964 297

Residential mortgage loans and equity lines
9,831 7 8,976 23

Total non-accrual loans
$ 67,775 $ 197 $ 74,239 $ 540

In connection with the adoption of ASU 2016-13, the Company no longer provides information on impaired loans. The following table presents the average recorded investment and interest income recognized on individually evaluated loans for the period indicated:

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2020

Average

Recorded

Investment

Interest Income

Recognized

Average

Recorded

Investment

Interest Income

Recognized

(In thousands)

Commercial loans
$ 30,346 $ 148 $ 30,723 $ 242

Real estate construction loans
4,368 98 4,444 245

Commercial mortgage loans
40,708 268 37,730 966

Residential mortgage loans and equity lines
16,609 74 15,240 200

Total impaired loans
$ 92,031 $ 588 $ 88,137 $ 1,653

The following table presents non-accrual loans and the related allowance as of September 30, 2021:

September 30, 2021

Unpaid

Principal

Balance

Recorded

Investment

Allowance

(In thousands)

With no allocated allowance

Commercial loans
$ 13,897 $ 10,442 $ —

Real estate construction loans
7,201 5,491 —

Commercial mortgage loans
19,356 18,407 —

Residential mortgage loans and equity lines
6,989 6,813 —

Subtotal
$ 47,443 $ 41,153 $ —

With allocated allowance

Commercial loans
$ 16,739 $ 6,656 $ 1,301

Commercial mortgage loans
18,664 18,561 5,229

Residential mortgage loans and equity lines
2,892 2,312 —

Subtotal
$ 38,295 $ 27,529 $ 6,530

Total non-accrual loans
$ 85,738 $ 68,682 $ 6,530

In connection with the adoption of ASU 2016-13, the Company no longer provides information on impaired loans. The following table presents impaired loans and the related allowance as of December 31, 2020:

December 31, 2020

Unpaid

Principal

Balance

Recorded

Investment

Allowance

(In thousands)

With no allocated allowance

Commercial loans
$ 23,784 $ 20,698 $ —

Real estate construction loans
5,776 4,286 —

Commercial mortgage loans
22,877 22,287 —

Residential mortgage loans and equity lines
6,379 6,307 —

Subtotal
$ 58,816 $ 53,578 $ —

With allocated allowance

Commercial loans
$ 13,703 $ 6,372 $ 1,030

Commercial mortgage loans
31,134 31,003 5,254

Residential mortgage loans and equity lines
5,005 4,452 145

Subtotal
$ 49,842 $ 41,827 $ 6,429

Total impaired loans
$ 108,658 $ 95,405 $ 6,429

The following tables present the aging of the loan portfolio by type as of September 30, 2021, and as of December 31, 2020:

September 30, 2021

30-59 Days

Past Due

60-89 Days

Past Due

90 Days or

More Past

Due

Non-accrual

Loans

Total Past

Due

Loans Not

Past Due

Total

(In thousands)

Commercial loans
$ 15,391 $ 2,326 $ 2,861 $ 17,098 $ 37,676 $ 2,834,017 $ 2,871,693

Real estate construction loans
— — — 5,491 5,491 682,704 688,195

Commercial mortgage loans
458 — 1,472 36,968 38,898 7,796,630 7,835,528

Residential mortgage loans and equity lines
— 2,451 — 9,125 11,576 4,566,419 4,577,995

Installment and other loans
8 — — — 8 3,362 3,370

Total loans
$ 15,857 $ 4,777 $ 4,333 $ 68,682 $ 93,649 $ 15,883,132 $ 15,976,781

December 31, 2020

30-59 Days

Past Due

60-89 Days

Past Due

90 Days or

More Past

Due

Non-accrual

Loans

Total Past

Due

Loans Not

Past Due

Total

(In thousands)

Commercial loans
$ 52,601 $ 3,182 $ 2,947 $ 23,087 $ 81,817 $ 2,755,016 $ 2,836,833

Real estate construction loans
6,257 — — 4,286 10,543 668,949 679,492

Commercial mortgage loans
45,186 18,069 2,035 33,715 99,005 7,456,022 7,555,027

Residential mortgage loans and equity lines
14,315 4,223 — 6,596 25,134 4,544,810 4,569,944

Installment and other loans
43 — — — 43 3,057 3,100

Total loans
$ 118,402 $ 25,474 $ 4,982 $ 67,684 $ 216,542 $ 15,427,854 $ 15,644,396

A TDR is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including a change in the stated interest rate, a reduction in the loan balance or accrued interest, or an extension of the maturity date. Although these loan modifications are considered TDRs, TDR loans that have, pursuant to the Bank's policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for six months are returned to accrual status. The sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms. This would include cash paid by the borrower prior to the restructure to set up interest reserves. Loans classified as TDRs are reported as individually evaluated loans.

The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.

The Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans are removed from the pooling approach discussed in the “Basis of Presentation and Summary of Significant Accounting Policies” above, for the quantitative baseline, and include non-accrual loans, TDRs, and other loans as deemed appropriate by management. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a commercial loan expected to be classified as a TDR. Individually evaluated loans also includes “reasonably expected” TDRs, identified by the Company as a consumer loan for which a borrower’s application of loan modification due to hardship has been received by the Company. Management judgment is utilized to make this determination.

Although the Company took steps to incorporate the impact of the COVID-19 pandemic on the economic conditions and other factors utilized to determine the expected loan losses, if the economic conditions or other factors worsen relative to the assumptions the Company utilized, the expected loan losses will increase accordingly in future periods.

As of September 30, 2021, accruing TDRs were $24.4 million and non-accrual TDRs were $8.3 million compared to accruing TDRs of $27.7 million and non-accrual TDRs of $9.0 million as of December 31, 2020. The Company allocated $181 thousand in reserves to accruing TDRs and $24 thousand to non-accrual TDRs as of September 30, 2021, compared to $122 thousand to accruing TDRs and $24 thousand to non-accrual TDRs as of December 31, 2020. The following tables set forth TDRs that were modified during the three and nine months ended September 30, 2021 and 2020, their specific reserves as of September 30, 2021, and 2020, and charge-offs for the three and nine months ended September 30, 2021, and 2020:

Three Months Ended September 30, 2021

September 30, 2021

No. of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Charge-offs

Specific Reserve

(In thousands)

Commercial loans
— $ — $ — $ — $ —

Residential mortgage loans and equity lines
1 479 479 — 14

Total
1 $ 479 $ 479 $ — $ 14

Three Months Ended September 30, 2020

September 30, 2020

No. of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Charge-offs

Specific Reserve

(In thousands)

Commercial loans
2 $ 2,983 $ 2,983 $ — $ 203

Residential mortgage loans and equity lines
— — — — —

Total
2 $ 2,983 $ 2,983 $ — $ 203

Nine Months Ended September 30, 2021

September 30, 2021

No. of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Charge-offs

Specific Reserve

(In thousands)

Commercial loans
1 $ 686 $ 686 $ — $ —

Residential mortgage loans and equity lines
1 479 479 — 14

Total
2 $ 1,165 $ 1,165 $ — $ 14

Nine Months Ended September 30, 2020

September 30, 2020

No. of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Charge-offs

Specific Reserve

(In thousands)

Commercial loans
5 $ 5,417 $ 5,417 $ — $ 204

Residential mortgage loans and equity lines — — — — —

Total
5 $ 5,417 $ 5,417 $ — $ 204

Modifications of the loan terms in the nine months ended September 30, 2021, were in the form of extensions of maturity dates, which ranged generally from three to twelve months from the modification date.

We expect that the TDRs on accruing status as of September 30, 2021, which were all performing in accordance with their restructured terms, will continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. The ongoing impact of the COVID pandemic, however, could increase the risk of such TDRs becoming non-accrual due to the borrowers’ inability to continue to comply with their restructured terms.

A summary of TDRs by type of concession and by type of loan, as of September 30, 2021, and December 31, 2020, is set forth in the table below:

September 30, 2021

Payment

Deferral

Rate

Reduction

Rate Reduction

and Payment

Deferral

Total

(In thousands)

Accruing TDRs

Commercial loans
$ 1,453 $ — $ — $ 1,453

Commercial mortgage loans
441 5,552 13,114 19,107

Residential mortgage loans
1,726 251 1,869 3,846

Total accruing TDRs
$ 3,620 $ 5,803 $ 14,983 $ 24,406

September 30, 2021

Payment

Deferral

Rate

Reduction

Rate Reduction

and Payment

Deferral

Total

(In thousands)

Non-accrual TDRs

Commercial loans
$ 7,784 $ — $ — $ 7,784

Commercial mortgage loans
— — — —

Residential mortgage loans
500 — — 500

Total non-accrual TDRs
$ 8,284 $ — $ — $ 8,284

December 31, 2020

Payment

Deferral

Rate

Reduction

Rate Reduction

and Payment

Deferral

Total

(In thousands)

Accruing TDRs

Commercial loans
$ 3,983 $ — $ — $ 3,983

Commercial mortgage loans
515 5,635 13,425 19,575

Residential mortgage loans
1,724 275 2,164 4,163

Total accruing TDRs
$ 6,222 $ 5,910 $ 15,589 $ 27,721

December 31, 2020

Payment

Deferral

Rate

Reduction

Rate Reduction

and Payment

Deferral

Total

(In thousands)

Non-accrual TDRs

Commercial loans
$ 8,462 $ — $ — $ 8,462

Residential mortgage loans
523 — — 523

Total non-accrual TDRs
$ 8,985 $ — $ — $ 8,985

The activity within TDRs for the periods indicated is set forth below:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(In thousands)

Accruing TDRs

Beginning balance
$ 27,261 $ 31,671 $ 27,721 $ 35,336

New restructurings
(208 ) 2,983 479 5,417

Restructured loans restored to accrual status
— 263 — 263

Charge-offs
— — — —

Payments
(2,406 ) (6,330 ) (3,553 ) (12,429 )

Restructured loans placed on non-accrual status
(241 ) — (241 ) —

Ending balance
$ 24,406 $ 28,587 $ 24,406 $ 28,587

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(In thousands)

Non-accrual TDRs

Beginning balance
$ 8,402 $ 12,670 $ 8,985 $ 18,048

New restructurings
— — — —

Restructured loans placed on non-accrual status
234 — 241 —

Charge-offs
— — — (4,970 )

Payments (352 ) (2,488 ) (710 ) (2,896 )

Restructured loans restored to accrual status
— (263 ) (232 ) (263 )

Ending balance
$ 8,284 $ 9,919 $ 8,284 $ 9,919

The Company considers a loan to be in payment default once it is 60 to 90 days contractually past due under the modified terms. The Company did not have any loans that were modified as a TDR during the previous twelve months and which had subsequently defaulted as of September 30, 2021.

Under the Company’s internal underwriting policy, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification in order to determine whether a borrower is experiencing financial difficulty.

As of September 30, 2021, there were no commitments to lend additional funds to those borrowers whose loans had been restructured, were considered individually evaluated, or were on non-accrual status.

The CARES Act, signed into law on March 27, 2020, and as extended by the CAA, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020, and the earlier of January 1, 2022 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. In addition, federal bank regulatory authorities have issued guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID-19 and have assured financial institutions that they will neither receive supervisory criticism for such prudent loan modifications, nor be required by examiners to automatically categorize COVID-19-related loan modifications as TDRs. The Company is applying this guidance to qualifying loan modifications.

As part of the on-going monitoring of the credit quality of our loan portfolio, the Company utilizes a risk grading matrix to assign a risk grade to each loan. Loans are risk rated based on analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of sources of repayment, the borrower’s current financial and liquidity status and other relevant information. The risk rating categories can be generally described by the following grouping for non-homogeneous loans:

●
Pass/Watch – These loans range from minimal credit risk to lower than average, but still acceptable, credit risk.

●
Special Mention – Borrower is fundamentally sound, and loan is currently protected but adverse trends are apparent that, if not corrected, may affect ability to repay. Primary source of loan repayment remains viable but there is increasing reliance on collateral or guarantor support.

●
Substandard – These loans are inadequately protected by current sound net worth, paying capacity, or collateral. Well-defined weaknesses exist that could jeopardize repayment of debt. Loss may not be imminent, but if weaknesses are not corrected, there is a good possibility of some loss.

●
Doubtful – The possibility of loss is extremely high, but due to identifiable and important pending events (which may strengthen the loan), a loss classification is deferred until the situation is better defined.

●
Loss – These loans are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

In connection with the adoption of ASU 2016-13, the Company no longer provides information on impaired loans. The following table presents loan portfolio by risk rating as of December 31, 2020:

December 31, 2020

Pass/Watch

Special

Mention

Substandard

Doubtful

Total

(In thousands)

Commercial loans
$ 2,581,128 $ 141,344 $ 108,788 $ 5,573 $ 2,836,833

Real estate construction loans
593,196 82,010 4,286 — 679,492

Commercial mortgage loans
7,202,568 186,283 166,176 — 7,555,027

Residential mortgage loans and equity lines
4,547,052 11,647 11,245 — 4,569,944

Installment and other loans
3,100 — — — 3,100

Total gross loans
$ 14,927,044 $ 421,284 $ 290,495 $ 5,573 $ 15,644,396

The following table summarizes the Company’s loan held for investment by loan portfolio segments, internal risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification:

Loans Amortized Cost Basis by Origination Year

September 30, 2021

2021

2020

2019

2018

2017

Prior

Revolving

Loans

Revolving

Converted to

Term Loans

Total

(In thousands)

Commercial loans

Pass/Watch
$ 552,079 $ 309,944 $ 245,936 $ 188,790 $ 87,579 $ 69,354 $ 1,266,946 $ 7,650 $ 2,728,278

Special Mention
93 570 4,506 1,703 2,871 — 22,073 89 31,905

Substandard
31 6,286 21,896 16,829 13,077 5,319 39,457 6,089 108,984

Doubtful
— — — — — — 901 — 901

Loss
— — — — — — — — —

Total
$ 552,203 $ 316,800 $ 272,338 $ 207,322 $ 103,527 $ 74,673 $ 1,329,377 $ 13,828 $ 2,870,068

YTD period charge-offs
$ — $ 927 $ 507 $ 366 $ — $ 50 $ 17,649 $ — $ 19,499

YTD period recoveries
— — — (75 ) — (169 ) (1,301 ) — (1,545 )

Net
$ — $ 927 $ 507 $ 291 $ — $ (119 ) $ 16,348 $ — $ 17,954

Real estate construction loans

Pass/Watch
$ 160,357 $ 213,737 $ 152,626 $ 64,908 $ 30,272 $ — $ — $ — $ 621,900

Special Mention
4,772 22,233 11,800 17,306 — — — — 56,111

Substandard
— — 3,344 — — 4,066 — — 7,410

Doubtful
— — — — — — — — —

Loss
— — — — — — — — —

Total
$ 165,129 $ 235,970 $ 167,770 $ 82,214 $ 30,272 $ 4,066 $ — $ — $ 685,421

YTD period charge-offs
$ — $ — $ — $ — $ — $ — $ — $ — $ —

YTD period recoveries
— — — — — (76 ) — — (76 )

Net
$ — $ — $ — $ — $ — $ (76 ) $ — $ — $ (76 )

Commercial mortgage loans

Pass/Watch
$ 1,256,784 $ 1,266,048 $ 1,284,803 $ 1,089,005 $ 813,707 $ 1,473,901 $ 177,509 $ — $ 7,361,757

Special Mention
18,826 52,416 45,281 104,703 42,329 82,614 2,499 — 348,668

Substandard
1,116 235 10,906 46,149 1,590 62,095 856 — 122,947

Doubtful
— — — — — — — — —

Loss
— — — — — — — — —

Total
$ 1,276,726 $ 1,318,699 $ 1,340,990 $ 1,239,857 $ 857,626 $ 1,618,610 $ 180,864 $ — $ 7,833,372

YTD period charge-offs
$ — $ — $ — $ — $ — $ — $ — $ — $ —

YTD period recoveries
— — (180 ) — — (21 ) (83 ) — (284 )

Net
$ — $ — $ (180 ) $ — $ — $ (21 ) $ (83 ) $ — $ (284 )

Residential mortgage loans

Pass/Watch
$ 722,013 $ 663,292 $ 731,803 $ 544,362 $ 474,271 $ 992,504 $ — $ — $ 4,128,245

Special Mention
— 140 4,369 1,448 839 589 — — 7,385

Substandard
479 167 1,921 2,520 1,167 4,466 — — 10,720

Doubtful
— — — — — — — — —

Loss
— — — — — — — — —

Total
$ 722,492 $ 663,599 $ 738,093 $ 548,330 $ 476,277 $ 997,559 $ — $ — $ 4,146,350

YTD period charge-offs
$ — $ — $ — $ — $ 3 $ — $ — $ — $ 3

YTD period recoveries
— — — — — (208 ) — — (208 )

Net
$ — $ — $ — $ — $ 3 $ (208 ) $ — $ — $ (205 )

Equity lines

Pass/Watch
$ — $ — $ — $ — $ — $ 7 $ 400,991 $ 31,677 $ 432,675

Special Mention
— — — — — — — — —

Substandard
— — — — — — 1,240 450 1,690

Doubtful
— — — — — — — — —

Loss
— — — — — — — — —

Total
$ — $ — $ — $ — $ — $ 7 $ 402,231 $ 32,127 $ 434,365

YTD period charge-offs
$ — $ — $ — $ — $ — $ — $ — $ — $ —

YTD period recoveries
— — — — — — (8 ) (58 ) (66 )

Net
$ — $ — $ — $ — $ — $ — $ (8 ) $ (58 ) $ (66 )

Installment and other loans

Pass/Watch
$ 2,120 $ 1,250 $ — $ — $ — $ — $ — $ — $ 3,370

Special Mention
— — — — — — — — —

Substandard
— — — — — — — — —

Doubtful
— — — — — — — — —

Loss
— — — — — — — — —

Total
$ 2,120 $ 1,250 $ — $ — $ — $ — $ — $ — $ 3,370

YTD period charge-offs
$ — $ — $ — $ — $ — $ — $ — $ — $ —

YTD period recoveries
— — — — — — — — —

Net
$ — $ — $ — $ — $ — $ — $ — $ — $ —

Total loans
$ 2,718,670 $ 2,536,318 $ 2,519,191 $ 2,077,723 $ 1,467,702 $ 2,694,915 $ 1,912,472 $ 45,955 $ 15,972,946

Net charge-offs/(recoveries)
$ — $ 927 $ 327 $ 291 $ 3 $ (424 ) $ 16,257 $ (58 ) $ 17,323

Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns.

The following table sets forth the balance in the allowance for loan losses by portfolio segment and based on impairment method as of December 31, 2020. This table is no longer presented after December 31, 2020, given the adoption of ASU 2016-13, which has a single impairment methodology.

December 31, 2020

Real Estate

Commercial

Residential

Installment

Commercial

Construction

Mortgage

Mortgage Loans

and

Loans

Loans

Loans

and Equity Lines

Other Loans

Total

(In thousands)

Loans individually evaluated for impairment

Allowance
$ 1,030 $ — $ 5,254 $ 145 $ — $ 6,429

Balance
$ 27,070 $ 4,286 $ 53,289 $ 10,760 $ — $ 95,405

Loans collectively evaluated for impairment

Allowance
$ 67,712 $ 30,854 $ 43,951 $ 17,592 $ — $ 160,109

Balance
$ 2,809,763 $ 675,206 $ 7,501,738 $ 4,559,184 $ 3,100 $ 15,548,991

Total allowance
$ 68,742 $ 30,854 $ 49,205 $ 17,737 $ — $ 166,538

Total balance
$ 2,836,833 $ 679,492 $ 7,555,027 $ 4,569,944 $ 3,100 $ 15,644,396

The following tables set forth activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2021, and September 30, 2020. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three months ended September 30, 2021 and 2020

Residential

Real Estate

Commercial

Mortgage Loans

Installment

Commercial

Construction

Mortgage

and

and Other

Loans

Loans

Loans

Equity Lines

Loans

Total

(In thousands)

June 30, 2021 Ending Balance
$ 40,067 $ 6,119 $ 58,026 $ 27,043 $ 1 $ 131,256

Provision/(reversal) for possible credit losses
674 149 2,786 (609 ) — 3,000

Charge-offs
(2,649 ) — — (3 ) — (2,652 )

Recoveries
121 76 144 — — 341

Net (charge-offs)/recoveries
(2,528 ) 76 144 (3 ) — (2,311 )

September 30, 2021 Ending Balance
$ 38,213 $ 6,344 $ 60,956 $ 26,431 $ 1 $ 131,945

Allowance for unfunded credit commitments June 30, 2021
$ 4,388 $ 3,581 $ 81 $ — $ — $ 8,050

Provision/(reversal) for possible credit losses
329 (396 ) 117 — — 50

Allowance for unfunded credit commitments September 30, 2021
$ 4,717 $ 3,185 $ 198 $ — $ — $ 8,100

Residential

Real Estate

Commercial

Mortgage Loans

Installment

Commercial

Construction

Mortgage

and

and Other

Loans

Loans

Loans

Equity Lines

Loans

Total

(In thousands)

June 30, 2020 Ending Balance
$ 82,256 $ 26,700 $ 41,132 $ 19,592 $ — $ 169,680

Provision/(reversal) for possible credit losses
298 6,012 5,438 752 — 12,500

Charge-offs
(6,956 ) — — — — (6,956 )

Recoveries
3,796 — 95 15 — 3,906

Net (charge-offs)/recoveries
(3,160 ) — 95 15 — (3,050 )

September 30, 2020 Ending Balance
$ 79,394 $ 32,712 $ 46,665 $ 20,359 $ — $ 179,130

Nine months ended September 30, 2021 and 2020

Residential

Real Estate

Commercial

Mortgage Loans

Installment

Commercial

Construction

Mortgage

and

and Other

Loans

Loans

Loans

Equity Lines

Loans

Total

(In thousands)

2021 Beginning Balance
$ 68,742 $ 30,854 $ 49,205 $ 17,737 $ — $ 166,538

Impact of ASU 2016-13 adoption
(31,466 ) (24,307 ) 34,993 19,211 9 (1,560 )

Allowance for loan losses, January 1, 2021
37,276 6,547 84,198 36,948 9 164,978

Provision/(reversal) for possible credit losses
18,891 (279 ) (23,526 ) (10,788 ) (8 ) (15,710 )

Charge-offs
(19,499 ) — — (3 ) — (19,502 )

Recoveries
1,545 76 284 274 — 2,179

Net (charge-offs)/recoveries
(17,954 ) 76 284 271 — (17,323 )

September 30, 2021 Ending Balance
$ 38,213 $ 6,344 $ 60,956 $ 26,431 $ 1 $ 131,945

Allowance for unfunded credit commitments December 31, 2020
$ 4,802 $ 690 $ 101 $ 284 $ 3 $ 5,880

Impact of ASU 2016-13 adoption
3,236 3,135 (66 ) (284 ) (3 ) 6,018

Allowance for loan losses, January 1, 2021
8,038 3,825 35 — — 11,898

Provision/(reversal) for possible credit losses
(3,321 ) (640 ) 163 — — (3,798 )

Allowance for unfunded credit commitments September 30, 2021
$ 4,717 $ 3,185 $ 198 $ — $ — $ 8,100

Residential

Real Estate

Commercial

Mortgage Loans

Installment

Commercial

Construction

Mortgage

and

and Other

Loans

Loans

Loans

Equity Lines

Loans

Total

(In thousands)

2020 Beginning Balance
$ 57,021 $ 19,474 $ 33,602 $ 13,108 $ 19 $ 123,224

Provision/(reversal) for possible credit losses
29,402 13,238 12,718 7,161 (19 ) 62,500

Charge-offs
(13,383 ) — — — — (13,383 )

Recoveries
6,354 — 345 90 — 6,789

Net (charge-offs)/recoveries
(7,029 ) — 345 90 — (6,594 )

September 30, 2020 Ending Balance
$ 79,394 $ 32,712 $ 46,665 $ 20,359 $ — $ 179,130

Reserve for impaired loans
$ 7,704 $ — $ 582 $ 209 $ — $ 8,495

Reserve for non-impaired loans
$ 71,690 $ 32,712 $ 46,083 $ 20,150 $ — $ 170,635

Reserve for off-balance sheet credit commitments
$ 4,297 $ 896 $ 172 $ 294 $ 4 $ 5,663

The U. S. economy has gradually recovered from the COVID-19 pandemic with improving gross national product and a declining unemployment rate in the first half of 2021. This contributed to a positive economic outlook and forecasts that resulted in a decrease to the allowance for credit losses.

Despite the gradual recovery in the first half of 2021,the ongoing COVID-19 pandemic has caused significant disruption in the United States and international economies and financial markets. Although banks have generally been permitted to continue operating, the COVID-19 pandemic has caused disruptions to our business and could cause material disruptions to our business and operations in the future. The Company has continued its efforts to support its customers affected by the pandemic and to maintain asset quality and balance sheet strength, including the following:

•

The Company has provided loans through the SBA's Paycheck Protection Program, (or “PPP”). As of September 30, 2021, 1,514 PPP loans with a current balance of $169.4 million were outstanding and an additional $264.4 million have been forgiven by the U.S. Government. These loans do not carry an allowance for loan losses.

•

The Company has outstanding COVID-19 modifications on approximately six CRE loans totaling $44.8 million as of September 30, 2021, which represented 0.6% of the Bank’s CRE loans and three commercial loans, totaling $2.8 million, which represented 0.1% of the total commercial loans.

•

As of September 30, 2021, there were seven COVID-19 residential mortgage loan modifications outstanding, or $5.1 million, that represented 0.1% of the total residential mortgage portfolio.