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Allowance for Credit Losses and Credit Quality of Loans

9 Months Ended

Sep. 30, 2020

Allowance for Credit Losses and Credit Quality of Loans [Abstract]

Allowance for Credit Losses and Credit Quality of Loans

5.	Allowance for Credit Losses and Credit Quality of Loans

As previously mentioned in Note 2 Summary of Significant Accounting Policies, the Company’s January 1, 2020 adoption of CECL resulted in a significant change to our methodology for estimating the allowance for credit losses since December 31, 2019. Portfolio segmentation has been redefined under CECL and therefore prior year tables are presented separately.

The Day 1 increase in the allowance for credit loss on loans relating to adoption of ASU 2016-13 was $3.0 million, which decreased retained earnings by $2.3 million and increased the deferred tax asset by $0.7 million.

There were no new loans purchased with credit deterioration during the nine months ended September 30, 2020. During the third quarter of 2020, the Company purchased $46.4 million of consumer loans at a 1% discount. The allowance for credit losses recorded for these loans on the purchase date was $3.2 million. The Company made a policy election to report AIR in the other assets line item on the balance sheet. AIR on loans totaled $25.5 million at September 30, 2020 and was included in the allowance for loan credit losses to estimate the impact of accrued interest receivable related to loans with short-term modifications due to the pandemic as the length of time between interest recognition and the write-off of uncollectible interest could exceed 120 days which exempts these loans from our policy election for accrued interest receivable. The estimated allowance for credit losses related to AIR at September 30, 2020 was $0.5 million.

The Day 1 and September 30, 2020 allowance for credit losses calculation incorporated a 6-quarter forecast period to account for forecast economic conditions under each scenario utilized in the measurement. For periods beyond the 6-quarter forecast, the model reverted to long-term economic conditions over a 4-quarter reversion period on a straight-line basis.

The quantitative model as of June 30, 2020 incorporated a baseline economic outlook sourced from a reputable third-party that reflected continued economic deterioration from the March 31, 2020 forecasts, with unemployment peaking in the quarter of measurement but sharply improving in the third quarter 2020, while remaining elevated well above the pre-COVID-19 pandemic levels for the entire forecast period and into 2023. National GDP is forecast to rebound strongly in the third quarter 2020 followed by moderately negative growth in the fourth quarter 2020 with increasing growth through 2022 and stabilization in 2023. The June 30, 2020 allowance for credit losses calculation incorporated a 6-quarter forecast period with a 4-quarter reversion period to long-term economic conditions on a straight-line basis. A short-term reduction in prepayment and curtailment speeds was also applied to more reasonably model payment behavior during the COVID-19 national emergency. Additionally, downside and upside scenarios were incorporated and weighted, along with the baseline outlook, to accommodate other potential economic conditions in the quantitative model. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of June 30, 2020. Additional adjustments were made for COVID-19 related factors were not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus, including direct payments to individuals, increased unemployment benefits, deferral/modification initiatives and various government-sponsored loan programs. The commercial & industrial and consumer segment models were based upon percent change in unemployment, with forecast values as of June 30, 2020, well outside the observed historical experience. Therefore, adjustment was required to produce outputs more aligned with default expectations given the forecast economic environment. These factors were considered through a separate quantitative process and incorporated into the estimate for allowance for credit losses at June 30, 2020.

The quantitative model as of September 30, 2020 incorporated a baseline economic outlook sourced from a reputable third-party which reflected an unemployment rate environment well above pre-COVID-19 levels for the entire forecast period and a gradual return to low single digits by the end of 2023. Northeast U.S. GDP was expected to grow moderately over the forecast period after a strong rebound in the third quarter of 2020 with stabilization by the end of 2023. Key assumptions in the baseline economic outlook included a large and effective stimulus package by September 30, 2020 with no secondary surge in COVID-19 cases or pandemic-related business closures. A downside scenario was incorporated and equally weighted, along with the baseline outlook in the quantitative model, which assumed deteriorated economic conditions from the base model as a stimulus package was not in place by the end of the third quarter and the related impact on credit losses is not yet known. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of September 30, 2020. Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus in 2020, including direct payments to individuals, increased unemployment benefits, deferral/modification initiatives and various government-sponsored loan programs. The commercial & industrial and consumer segment models were based upon percent change in unemployment, with forecast values as of September 30, 2020, well outside the observed historical experience. Therefore, adjustments were required to produce outputs more aligned with default expectations given the forecast economic environment. These factors were considered through a separate quantitative process and incorporated into the estimate for allowance for credit losses at September 30, 2020.

The following tables present the activity in the allowance for credit losses by portfolio segment:

(In thousands)	Commercial Loans			Consumer Loans			Residential			Total
Balance as of June 30, 2020	$	50,386		$	40,094		$	23,020		$	113,500
Charge-offs		(624	)		(4,097	)		(58	)		(4,779	)
Recoveries		333			2,123			62			2,518
Provision		1,651			442			1,168			3,261
Ending Balance as of September 30, 2020	$	51,746		$	38,562		$	24,192		$	114,500

(In thousands)	Commercial Loans			Consumer Loans			Residential			Total
Balance as of January 1, 2020 (after adoption of ASC 326)	$	27,156		$	32,122		$	16,721		$	75,999
Charge-offs		(2,353	)		(17,166	)		(863	)		(20,382	)
Recoveries		674			6,168			300			7,142
Provision		26,269			17,438			8,034			51,741
Ending Balance as of September 30, 2020	$	51,746		$	38,562		$	24,192		$	114,500

The increase in the allowance for credit losses from June 30, 2020 to September 30, 2020 was primarily due to the specific allowance for credit losses on individually analyzed credits and a change in loan portfolio mix shift within the consumer portfolio as indirect auto balances declined and other consumer balances increased. The increase in the allowance for credit losses from Day 1 to September 30, 2020 was primarily due to the deterioration of macroeconomic factors surrounding the COVID-19 pandemic.

Individually Evaluated Loans

As of September 30, 2020, there were two relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $10.9 million. The allowance for credit loss was $3.0 million and was determined by an estimate of the fair value of the collateral which consisted of business assets (accounts receivable, inventory and machinery, real estate and equipment). As of June 30, 2020, there were no relationships identified to be evaluated for loss on an individual basis. As of Day 1, there were no relationships identified to be evaluated for loss on an individual basis.

The following table sets forth information with regard to past due and nonperforming loans by loan segment:

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of September 30, 2020
Commercial Loans:
C&I	$	703	$	79	$	12	$	794	$	4,172	$	1,116,189	$	1,121,155
CRE		367		51		-		418		17,242		2,324,815		2,342,475
PPP		-		-		-		-		-		514,558		514,558
Total Commercial Loans	$	1,070	$	130	$	12	$	1,212	$	21,414	$	3,955,562	$	3,978,188
Consumer Loans:
Auto	$	7,639	$	1,534	$	826	$	9,999	$	2,901	$	938,433	$	951,333
Other Consumer		3,373		1,447		1,121		5,941		370		634,011		640,322
Total Consumer Loans	$	11,012	$	2,981	$	1,947	$	15,940	$	3,271	$	1,572,444	$	1,591,655
Residential	$	1,505	$	256	$	620	$	2,381	$	11,211	$	1,977,208	$	1,990,800
Total Loans	$	13,587	$	3,367	$	2,579	$	19,533	$	35,896	$	7,505,214	$	7,560,643

As of September 30, 2020, there were no loans in non-accrual without an allowance for credit losses.

Credit Quality Indicators

The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk. The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and outlook on particular industries. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

For C&I, PPP and CRE loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available. This includes comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment and management. C&I and CRE loans are graded Doubtful, Substandard, Special Mention and Pass. The increase in non-pass credits from December 31, 2019 was primarily due to the Company’s proactive approach to downgrade loans that were both in payment deferral due to the COVID-19 pandemic and in higher risk industries such as entertainment, restaurants, retail, healthcare and accommodations.

Doubtful

A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for Doubtful assets because of the high probability of loss.

Substandard

Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

Special Mention

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a Pass asset, its default is not imminent.

Pass

Loans graded as Pass encompass all loans not graded as Doubtful, Substandard or Special Mention. Pass loans are in compliance with loan covenants and payments are generally made as agreed. Pass loans range from superior quality to fair quality. Pass loans also include any portion of a government guaranteed loan, including PPP loans.

Consumer and Residential Grading System

Consumer and Residential loans are graded as either Nonperforming or Performing.

Nonperforming

Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.

Performing

All loans not meeting any of the above criteria are considered Performing.

The following tables illustrate the Company’s credit quality by loan class by vintage

(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
C&I
By Internally Assigned Grade:
Pass	$	249,835	$	204,978	$	100,664	$	51,944	$	41,297	$	36,030	$	335,169	$	273	$	1,020,190
Special Mention		14,004		10,680		6,410		5,684		3,547		3,634		20,136		50		64,145
Substandard		635		5,614		9,437		3,574		920		5,510		9,586		9		35,285
Doubtful		-		1,351		-		184		-		-		-		-		1,535
Total C&I	$	264,474	$	222,623	$	116,511	$	61,386	$	45,764	$	45,174	$	364,891	$	332	$	1,121,155

CRE
By Internally Assigned Grade:
Pass	$	313,029	$	376,023	$	250,936	$	309,705	$	216,756	$	417,746	$	88,356	$	14,816	$	1,987,367
Special Mention		3,215		41,533		36,718		56,202		40,432		67,110		10,004		-		255,214
Substandard		282		2,937		8,942		8,573		5,709		57,484		6,455		-		90,382
Doubtful		-		1,897		-		-		-		7,615		-		-		9,512
Total CRE	$	316,526	$	422,390	$	296,596	$	374,480	$	262,897	$	549,955	$	104,815	$	14,816	$	2,342,475

PPP
By Internally Assigned Grade:
Pass	$	514,558	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	514,558
Total PPP	$	514,558	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	514,558

Auto
By Payment Activity:
Performing	$	153,299	$	347,290	$	229,833	$	138,721	$	58,144	$	20,296	$	23	$	-	$	947,606
Nonperforming		208		1,135		1,353		655		376		-		-		-		3,727
Total Auto	$	153,507	$	348,425	$	231,186	$	139,376	$	58,520	$	20,296	$	23	$	-	$	951,333

Other Consumer
By Payment Activity:
Performing	$	181,867	$	195,369	$	141,910	$	63,712	$	17,729	$	19,465	$	18,498	$	281	$	638,831
Nonperforming		169		509		305		220		99		179		10		-		1,491
Total Other Consumer	$	182,036	$	195,878	$	142,215	$	63,932	$	17,828	$	19,644	$	18,508	$	281	$	640,322

Residential
By Payment Activity:
Performing	$	158,672	$	222,947	$	225,715	$	191,436	$	171,022	$	724,257	$	271,304	$	13,616	$	1,978,969
Nonperforming		548		137		718		1,138		364		8,788		11		127		11,831
Total Residential	$	159,220	$	223,084	$	226,433	$	192,574	$	171,386	$	733,045	$	271,315	$	13,743	$	1,990,800

Total Loans	$	1,590,321	$	1,412,400	$	1,012,941	$	831,748	$	556,395	$	1,368,114	$	759,552	$	29,172	$	7,560,643

Troubled Debt Restructuring

When the Company modifies a loan in a troubled debt restructuring, such modifications generally include one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount. Residential and Consumer TDRs occurring during 2020 were due to the reduction in the interest rate or extension of the term.

An allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs. If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recorded.

The Company began offering loan modifications to assist borrowers during the COVID-19 national emergency. The CARES Act, along with a joint agency statement issued by banking regulatory agencies, provides that modifications made in response to COVID-19 do not need to be accounted for as a TDR. The Company evaluated the modification programs provided to its borrowers and has concluded the modifications were generally made in accordance with the CARES Act guidance to borrowers who were in good standing prior to the COVID-19 pandemic and are not required to be designated as TDRs. See Note 3 Recent Accounting Pronouncements for more information.

The following tables illustrate the recorded investment and number of modifications designated as TDRs, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
(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
Consumer Loans:
Auto		-	$	-	$	-		1	$	44	$	44
Total Consumer Loans		-	$	-	$	-		1	$	44	$	44
Residential		10	$	659	$	715		24	$	1,619	$	1,745
Total Troubled Debt Restructurings		10	$	659	$	715		25	$	1,663	$	1,789

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial Loans:
C&I		-	$	-		1	$	387
CRE		-		-		1		168
Total Commercial Loans		-	$	-		2	$	555
Residential		9	$	299		45	$	2,280
Total Troubled Debt Restructurings		9	$	299		47	$	2,835

Allowance for Loan Losses

Prior to the adoption of ASU 2016-13 on January 1, 2020, the Company’s calculated allowance for loan losses used the incurred loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

The following table illustrates the changes in the allowance for loan losses by our portfolio segments:

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of June 30, 2019	$	33,152		$	36,534		$	2,479		$	72,165
Charge-offs		(865	)		(6,976	)		(174	)		(8,015	)
Recoveries		132			1,746			13			1,891
Provision		1,021			5,031			272			6,324
Ending Balance as of September 30, 2019	$	33,440		$	36,335		$	2,590		$	72,365

(In thousands)	Commercial Loans			Consumer Loans			Residential Real Estate			Total
Balance as of December 31, 2018	$	32,759		$	37,178		$	2,568		$	72,505
Charge-offs		(2,783	)		(21,336	)		(782	)		(24,901	)
Recoveries		344			4,887			122			5,353
Provision		3,120			15,606			682			19,408
Ending Balance as of September 30, 2019	$	33,440		$	36,335		$	2,590		$	72,365

The following table illustrates the allowance for loan losses and the recorded investment by portfolio segments:

(In thousands)	Commercial Loans		Consumer Loans		Residential Real Estate		Total
As of December 31, 2019
Allowance for loan losses	$	34,525	$	35,647	$	2,793	$	72,965
Allowance for loans individually evaluated for impairment		-		-		-		-
Allowance for loans collectively evaluated for impairment	$	34,525	$	35,647	$	2,793	$	72,965
Ending balance of loans	$	3,444,266	$	2,246,676	$	1,445,156	$	7,136,098
Ending balance of originated loans individually evaluated for impairment		3,488		7,044		7,721		18,253
Ending balance of acquired loans collectively evaluated for impairment		115,266		23,733		125,879		264,878
Ending balance of originated loans collectively evaluated for impairment	$	3,325,512	$	2,215,899	$	1,311,556	$	6,852,967

The following tables set forth information with regard to past due and nonperforming loans by loan class:

(In thousands)	31-60 Days Past Due Accruing		61-90 Days Past Due Accruing		Greater Than 90 Days Past Due Accruing		Total Past Due Accruing		Nonaccrual		Current		Recorded Total Loans
As of December 31, 2019
Originated
Commercial Loans:
C&I	$	1,227	$	-	$	-	$	1,227	$	1,177	$	838,502	$	840,906
CRE		3,576		-		-		3,576		4,847		1,941,143		1,949,566
Business Banking		794		162		-		956		7,035		530,537		538,528
Total Commercial Loans	$	5,597	$	162	$	-	$	5,759	$	13,059	$	3,310,182	$	3,329,000
Consumer Loans:
Indirect Auto	$	11,860	$	2,108	$	1,005	$	14,973	$	2,175	$	1,176,487	$	1,193,635
Specialty Lending		3,153		2,087		1,307		6,547		-		535,516		542,063
Direct		2,564		564		478		3,606		2,475		481,164		487,245
Total Consumer Loans	$	17,577	$	4,759	$	2,790	$	25,126	$	4,650	$	2,193,167	$	2,222,943
Residential Real Estate	$	1,179	$	190	$	663	$	2,032	$	5,872	$	1,311,373	$	1,319,277
Total Originated Loans	$	24,353	$	5,111	$	3,453	$	32,917	$	23,581	$	6,814,722	$	6,871,220

Acquired
Commercial Loans:
C&I	$	149	$	-	$	-	$	149	$	-	$	19,215	$	19,364
CRE		-		-		-		-		-		60,937		60,937
Business Banking		397		287		-		684		382		33,899		34,965
Total Commercial Loans	$	546	$	287	$	-	$	833	$	382	$	114,051	$	115,266
Consumer Loans:
Direct	$	136	$	58	$	-	$	194	$	105	$	23,434	$	23,733
Total Consumer Loans	$	136	$	58	$	-	$	194	$	105	$	23,434	$	23,733
Residential Real Estate	$	575	$	20	$	264	$	859	$	1,106	$	123,914	$	125,879
Total Acquired Loans	$	1,257	$	365	$	264	$	1,886	$	1,593	$	261,399	$	264,878

Total Loans	$	25,610	$	5,476	$	3,717	$	34,803	$	25,174	$	7,076,121	$	7,136,098

The following table provides information on impaired loans specifically evaluated for impairment:

	December 31, 2019
(In thousands)	Recorded Investment Balance (Book)		Unpaid Principal Balance (Legal)		Related Allowance
Originated
With no related allowance recorded:
Commercial Loans:
C&I	$	76	$	302	$
CRE		2,410		2,437
Business Banking		1,002		1,443
Total Commercial Loans	$	3,488	$	4,182
Consumer Loans:
Indirect Auto	$	154	$	242
Direct		6,862		8,335
Specialty Lending		28		28
Total Consumer Loans	$	7,044	$	8,605
Residential Real Estate	$	7,721	$	9,754
Total	$	18,253	$	22,541

Total Loans	$	18,253	$	22,541	$	-

The following table summarizes the average recorded investments on loans specifically evaluated for impairment and the interest income recognized:

	Three Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2019
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated
Commercial Loans:
C&I	$	115	$	-	$	291	$	1
CRE		2,554		30		3,577		91
Business Banking		1,002		7		1,111		18
Total Commercial Loans	$	3,671	$	37	$	4,979	$	110
Consumer Loans:
Indirect Auto	$	213	$	3	$	201	$	9
Direct		7,293		95		7,518		291
Total Consumer Loans	$	7,506	$	98	$	7,719	$	300
Residential Real Estate	$	7,629	$	93	$	7,428	$	252
Total Originated	$	18,806	$	228	$	20,126	$	662

Total Loans	$	18,806	$	228	$	20,126	$	662

The following tables illustrate the Company’s credit quality by loan class:

(In thousands)	As of December 31, 2019
Originated
Commercial Credit Exposure By Internally Assigned Grade:	C&I		CRE		Total
Pass	$	782,763	$	1,868,678	$	2,651,441
Special Mention		28,380		30,519		58,899
Substandard		29,257		50,369		79,626
Doubtful		506		-		506
Total	$	840,906	$	1,949,566	$	2,790,472

Business Banking Credit Exposure By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	524,725	$	524,725
Classified		13,803		13,803
Total	$	538,528	$	538,528

Consumer Credit Exposure By Payment Activity:	Indirect Auto		Specialty Lending		Direct		Total
Performing	$	1,190,455	$	540,756	$	484,292	$	2,215,503
Nonperforming		3,180		1,307		2,953		7,440
Total	$	1,193,635	$	542,063	$	487,245	$	2,222,943

Residential Real Estate Credit Exposure By Payment Activity:	Residential Real Estate		Total
Performing	$	1,312,742	$	1,312,742
Nonperforming		6,535		6,535
Total	$	1,319,277	$	1,319,277

Acquired
Commercial Credit Exposure
By Internally Assigned Grade:	C&I		CRE		Total
Pass	$	17,801	$	60,545	$	78,346
Special Mention		1,269		-		1,269
Substandard		294		392		686
Total	$	19,364	$	60,937	$	80,301

Business Banking Credit Exposure By Internally Assigned Grade:	Business Banking		Total
Non-classified	$	32,030	$	32,030
Classified		2,935		2,935
Total	$	34,965	$	34,965

Consumer Credit Exposure
By Payment Activity:	Direct		Total
Performing	$	23,628	$	23,628
Nonperforming		105		105
Total	$	23,733	$	23,733

Residential Real Estate Credit Exposure By Payment Activity:	Residential Real Estate		Total
Performing	$	124,509	$	124,509
Nonperforming		1,370		1,370
Total	$	125,879	$	125,879

The following table illustrates the recorded investment and number of modifications for modified loans, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
(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 Loans:
C&I		-	$	-	$	-		1	$	65	$	65
Business Banking		-		-		-		2		388		388
Total Commercial Loans		-	$	-	$	-		3	$	453	$	453
Consumer Loans:
Indirect Auto		-	$	-	$	-		9	$	134	$	134
Direct		1		30		37		9		418		434
Total Consumer Loans		1	$	30	$	37		18	$	552	$	568
Residential Real Estate		2	$	186	$	203		10	$	942	$	990
Total Troubled Debt Restructurings		3	$	216	$	240		31	$	1,947	$	2,011

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

	Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
(Dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Consumer Loans:
Indirect Auto		1	$	10		2	$	17
Direct		9		332		24		1,109
Total Consumer Loans		10	$	342		26	$	1,126
Residential Real Estate		9	$	572		19	$	1,087
Total Troubled Debt Restructurings		19	$	914		45	$	2,213