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LOANS | 3 Months Ended
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Mar. 31, 2020
LOANS. |
LOANS | 6. LOANS Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of partial charge-offs, deferred origination costs and fees and purchase premiums and discounts. Loan origination and commitment fees and certain direct and indirect costs incurred in connection with loan originations are deferred and amortized to income over the life of the related loans as an adjustment to yield. When a loan prepays, the remaining unamortized net deferred origination fees or costs are recognized in the current year. Interest on loans is credited to income based on the principal outstanding during the period. The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and report accrued interest separately from the related loan balance in other assets on consolidated balance sheets. Past due status is based on the contractual terms of the loan. Loans that are 90 days past due are automatically placed on non-accrual and previously accrued interest is reversed and charged against interest income. However, if the loan is in the process of collection and the Bank has reasonable assurance that the loan will be fully collectable based upon an individual loan evaluation assessing such factors as collateral and collectability, accrued interest will be recognized as earned. If a payment is received when a loan is non-accrual or a troubled debt restructuring (“TDR”) loan is non-accrual, the payment is applied to the principal balance. A TDR loan performing in accordance with its modified terms is maintained on accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans that were acquired through the acquisition of Community National Bank on June 19, 2015 and First National Bank of New York on February 14, 2014, were initially recorded at fair value with no carryover of the related allowance for loan losses. After acquisition, losses are recognized through the allowance for loan losses. Determining fair value of the loans involves estimating the amount and timing of expected principal and interest cash flows to be collected on the loans and discounting those cash flows at a market interest rate. Some of the loans at the time of acquisition showed evidence of credit deterioration since origination. These loans were considered purchased credit impaired (“PCI”) loans. As of December 31, 2019, the remaining balance of PCI loans was immaterial to the Company’s financial condition and results of operations. Unless otherwise noted, the above policy is applied consistently to all loan segments. Allowance for Credit Losses On January 1, 2020, the Company adopted the CECL Standard, which requires that loans held for investment be accounted for under the current expected credit losses model. The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in the Company’s loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis. Management monitors its entire loan portfolio regularly, with consideration given to detailed analysis of classified loans, repayment patterns, past loss experience, various types of concentrations of credit, current economic conditions, and reasonable and supportable forecasts. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance. The loan loss estimation process involves procedures to appropriately consider the unique characteristics of the Company’s loan portfolio segments. These segments are further disaggregated into loan risk ratings, the level at which credit risk is monitored. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on expected loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit losses in those future periods. Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in our process for estimation of expected credit losses. The allowance level is influenced by loan volumes, loan risk rating migration, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: (1) an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and (2) a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. Loans that do not share similar credit risk characteristics For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, the Company recognizes expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated costs to sell the loan if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. The fair value of real estate collateral is determined based on recent appraised values. Appraisals are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. All appraisals undergo a second review process to ensure that the methodology employed and the values derived are reasonable. Generally, collateral values for real estate loans for which measurement of expected losses is dependent on collateral values are updated every twelve months. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the borrower and its business. Once the expected credit loss amount is determined, an allowance is provided for equal to the calculated expected credit loss and included in the allowance for credit losses. Pursuant to the Company’s policy, credit losses must be charged-off in the period the loans, or portions thereof, are deemed uncollectable. Loans that share similar credit risk characteristics In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segmented into loan types. Loans are designated into loan pools with similar risk characteristics based on product type in conjunction with other homogeneous characteristics. Loan types include commercial real estate mortgages, owner and non-owner occupied; multi-family mortgage loans; residential real estate mortgages and home equity loans; commercial, industrial and agricultural loans, real estate construction and land loans; and consumer loans. In determining the allowance for credit losses, the Company derives an estimated credit loss assumption from a model that categorizes loan pools based on loan type and further segmented by risk rating. This model is known as Probability of Default/Loss Given Default, utilizing a Transition Matrix approach. This model calculates an expected loss percentage for each loan pool by considering the probability of default, based upon the historical transition or migration of loans from performing (various pass ratings) to criticized, and classified risk ratings to default by risk rating buckets using life-of-loan analysis runout periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses (loss given default) per loan pool. The default trigger, which is defined as the earlier of ninety days past-due or non-accrual status, and severity factors used to calculate the allowance for credit losses for loans in pools that share similar risk characteristics with other loans, are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio. These factors include: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio including the terms of the loans; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due and adversely classified or graded loans and the volume of non-accrual loans; (6) the quality of our loan review system; (7) the value of underlying collateral for collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Such factors are used to adjust the historical probabilities of default and severity of loss for current conditions that are not reflective of the model results. In addition, the economic factor includes management expectation of future conditions based on a reasonable and supportable forecast of the economy. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (currently two years), the Bank reverts immediately back to the historical rates of default and severity of loss. Management believes that this transition approach to the Probability of Default/Loss Given Default is a relevant calculation of expected credit losses as there is sufficient volume as well as movement in the risk ratings due to the initial grading system as well as timely updates to risk ratings when necessary. Credit risk ratings are based on management’s evaluation of a credit’s cash flow, collateral, guarantor support, financial disclosures, industry trends and strength of borrowers’ management. Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination. A loan is considered a potential charge-off when it is in default of either principal or interest for a period of 90, 120 or 180 days, depending upon the loan type, as of the end of the prior month. In addition to delinquency criteria, other triggering events may include, but are not limited to, notice of bankruptcy by the borrower or guarantor, death of the borrower, and deficiency balance from the sale of collateral. Unless otherwise noted, the above policy is applied consistently to all loan portfolio segments. Loan Commitments and Related Financial Instruments Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded on the balance sheet when they are funded. In accordance with the CECL Standard, the Company maintains a separate reserve for off-balance sheet credit instruments, which is included in other liabilities on the consolidated statements of financial condition. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors, current conditions and forecasting adjustments used in the allowance for credit loss methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company. At March 31, 2020, the reserve for off-balance sheet credit exposures was immaterial to the Company’s consolidated statements of financial condition and results of operations. The following table sets forth the major classifications of loans:
(In thousands) |  | March 31, 2020 |  | December 31, 2019
Commercial real estate mortgage loans: |  |  |  |  |  |
Owner occupied |  | $ | 529,877 |  | $ | 531,088
Non-owner occupied |  |  | 1,053,901 |  |  | 1,034,599
Multi-family mortgage loans |  |  | 800,556 |  |  | 812,174
Residential real estate mortgage loans |  |  | 485,492 |  |  | 493,144
Commercial, industrial and agricultural loans |  |  | 758,683 |  |  | 679,444
Real estate construction and land loans |  |  | 100,643 |  |  | 97,311
Installment/consumer loans |  |  | 25,051 |  |  | 24,836
Total loans |  |  | 3,754,203 |  |  | 3,672,596
Net deferred loan costs and fees |  |  | 7,927 |  |  | 7,689
Total loans held for investment |  |  | 3,762,130 |  |  | 3,680,285
Allowance for credit losses |  |  | (39,215) |  |  | (32,786)
Loans, net |  | $ | 3,722,915 |  | $ | 3,647,499
Accrued interest receivable on loans totaling $9.0 million at March 31, 2020 and $8.7 million at December 31, 2019 was included in other assets in the consolidated balance sheet and excluded from the table above. As of March 31, 2020 and December 31, 2019, one commercial real estate (“CRE”) mortgage loan totaling $12.6 million was classified as held for sale. The loan was reclassified from loans held for investment to loans held for sale and written down from $16.3 million to the loan’s estimated fair value of $12.6 million, through a $3.7 million charge-off during the 2019 second quarter. Lending Risk The principal business of the Bank is lending in CRE mortgage loans, multi-family mortgage loans, residential real estate mortgage loans, construction loans, home equity loans, commercial, industrial and agricultural loans, land loans and consumer loans. The Bank considers its primary lending area to be Nassau and Suffolk Counties located on Long Island and the New York City boroughs. A substantial portion of the Bank's loans is secured by real estate in these areas. Accordingly, the ultimate collectability of the loan portfolio is susceptible to changes in market and economic conditions in this region. Commercial Real Estate Mortgages Loans in this classification include income producing investment properties and owner-occupied real estate used for business purposes. The underlying properties are located largely in the Bank's primary market area. The cash flows of the income producing investment properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on credit quality. Generally, management seeks to obtain annual financial information for borrowers with loans in excess of $1.0 million in this category. In the case of owner-occupied real estate used for business purposes, a weakened economy and resultant decreased consumer and/or business spending will have an adverse effect on credit quality. Multi-Family Mortgages Loans in this classification include income producing residential investment properties of five or more families. Loans are made to established owners with a proven and demonstrable record of strong performance. Loans are secured by a first mortgage lien on the subject property with a loan to value ratio generally not exceeding 75%. Repayment is derived generally from the rental income generated from the property and may be supplemented by the owners' personal cash flow. Credit risk arises with an increase in vacancy rates, property mismanagement and the predominance of non-recourse loans that are customary in the industry. Residential Real Estate Mortgages and Home Equity Loans Loans in these classifications are generally secured by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, can have an effect on the credit quality in this loan class. The Bank generally does not originate loans with a loan-to-value ratio greater than 80% and does not grant subprime loans. Commercial, Industrial and Agricultural Loans Loans in this classification are made to businesses and include term loans, lines of credit, senior secured loans to corporations, equipment financing and taxi medallion loans. Generally, these loans are secured by assets of the business and repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer and/or business spending, will have an effect on the credit quality in this loan class. Real Estate Construction and Land Loans Loans in this classification primarily include land loans to local individuals, contractors and developers for developing the land for sale or for the purpose of making improvements thereon. Repayment is derived primarily from sale of the lots/units including any pre-sold units. Credit risk is affected by market conditions, time to sell at an adequate price and cost overruns. To a lesser extent, this class includes commercial development projects that the Company finances, which in most cases require interest only during construction, and then convert to permanent financing. Construction delays, cost overruns, market conditions and the availability of permanent financing, to the extent such permanent financing is not being provided by the Bank, all affect the credit risk in this loan class. Installment and Consumer Loans Loans in this classification may be either secured or unsecured. Repayment is dependent on the credit quality of the individual borrower and, if applicable, sale of the collateral securing the loan, such as automobiles. Therefore, the overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan class. Credit Quality Indicators The Company categorizes loans into risk categories of pass, watch, special mention, substandard and doubtful based on relevant information about the ability of borrowers to service their debt including repayment patterns, probable incurred losses, past loss experience, current economic conditions, and various types of concentrations of credit. Assigned risk rating grades are continuously updated as new information is obtained. Loans risk rated special mention, substandard and doubtful are reviewed on a quarterly basis. The Company uses the following definitions for risk rating grades: Pass: Loans classified as pass include current loans performing in accordance with contractual terms, pools of homogenous residential real estate and installment/consumer loans that are not individually risk rated and loans which do not exhibit certain risk factors that require greater than usual monitoring by management. Watch: Loans classified as watch are considered pass rated loans. These loans carry additional risk factors above those of pass loans but do not have all the risk characteristics of loans classified special mention. Such risk factors require monitoring and if left uncorrected, could lead these loans to be downgraded. Special mention: Loans classified as special mention, while generally not delinquent, have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank's credit position at some future date. Substandard: Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in a substandard loan, may also be in delinquency status and have defined weaknesses based on currently existing facts, conditions and values making collection or liquidation in full highly questionable and improbable. The following tables represent loans categorized by internally assigned risk grades as of March 31, 2020 and December 31, 2019:
|  | March 31, 2020
(In thousands) |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | 2015 and Prior |  | Revolving |  | Revolving-Term |  | Total
Commercial real estate owner occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 33,372 |  | $ | 93,641 |  | $ | 52,959 |  | $ | 74,288 |  | $ | 28,317 |  | $ | 183,452 |  | $ | — |  | $ | — |  | $ | 466,029
Watch |  |  | — |  |  | 1,395 |  |  | 6,894 |  |  | 5,502 |  |  | 1,277 |  |  | 29,560 |  |  | — |  |  | — |  |  | 44,628
Special mention |  |  | — |  |  | — |  |  | — |  |  | 10,974 |  |  | 3,577 |  |  | 3,748 |  |  | — |  |  | — |  |  | 18,299
Substandard |  |  | — |  |  | — |  |  | 607 |  |  | — |  |  | — |  |  | 314 |  |  | — |  |  | — |  |  | 921
Total commercial real estate owner occupied |  |  | 33,372 |  |  | 95,036 |  |  | 60,460 |  |  | 90,764 |  |  | 33,171 |  |  | 217,074 |  |  | — |  |  | — |  |  | 529,877
Commercial real estate non-owner occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 39,000 |  |  | 255,073 |  |  | 131,679 |  |  | 197,225 |  |  | 83,651 |  |  | 302,905 |  |  | — |  |  | — |  |  | 1,009,533
Watch |  |  | — |  |  | 4,000 |  |  | 2,949 |  |  | 2,367 |  |  | 8,563 |  |  | 15,560 |  |  | — |  |  | — |  |  | 33,439
Special mention |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 291 |  |  | — |  |  | — |  |  | 291
Substandard |  |  | — |  |  | — |  |  | — |  |  | 9,518 |  |  | — |  |  | 1,120 |  |  | — |  |  | — |  |  | 10,638
Total commercial real estate non-owner occupied |  |  | 39,000 |  |  | 259,073 |  |  | 134,628 |  |  | 209,110 |  |  | 92,214 |  |  | 319,876 |  |  | - |  |  | — |  |  | 1,053,901
Multi-family: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 38,911 |  |  | 293,962 |  |  | 41,294 |  |  | 116,995 |  |  | 146,302 |  |  | 125,591 |  |  | — |  |  | — |  |  | 763,055
Watch |  |  | — |  |  | — |  |  | — |  |  | 8,237 |  |  | 15,801 |  |  | 13,063 |  |  | — |  |  | — |  |  | 37,101
Special mention |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 400 |  |  | — |  |  | — |  |  | 400
Substandard |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Total multi-family |  |  | 38,911 |  |  | 293,962 |  |  | 41,294 |  |  | 125,232 |  |  | 162,103 |  |  | 139,054 |  |  | — |  |  | — |  |  | 800,556
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 8,964 |  |  | 34,254 |  |  | 83,491 |  |  | 109,387 |  |  | 29,478 |  |  | 133,888 |  |  | 55,145 |  |  | 8,085 |  |  | 462,692
Watch |  |  | — |  |  | 465 |  |  | 412 |  |  | 326 |  |  | 588 |  |  | 2,566 |  |  | 399 |  |  | 1,446 |  |  | 6,202
Special mention |  |  | — |  |  | 783 |  |  | 770 |  |  | — |  |  | — |  |  | 9,883 |  |  | 399 |  |  | 777 |  |  | 12,612
Substandard |  |  | — |  |  | 334 |  |  | 308 |  |  | 483 |  |  | — |  |  | 2,158 |  |  | — |  |  | 703 |  |  | 3,986
Total residential real estate |  |  | 8,964 |  |  | 35,836 |  |  | 84,981 |  |  | 110,196 |  |  | 30,066 |  |  | 148,495 |  |  | 55,943 |  |  | 11,011 |  |  | 485,492
Commercial, industrial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 30,490 |  |  | 80,671 |  |  | 48,302 |  |  | 39,169 |  |  | 27,080 |  |  | 40,486 |  |  | 385,474 |  |  | 7,061 |  |  | 658,733
Watch |  |  | 1,599 |  |  | 2,417 |  |  | 15,041 |  |  | 4,043 |  |  | 812 |  |  | 2,827 |  |  | 34,752 |  |  | 3,440 |  |  | 64,931
Special mention |  |  | — |  |  | 384 |  |  | 813 |  |  | 590 |  |  | 604 |  |  | 573 |  |  | 7,752 |  |  | 3,507 |  |  | 14,223
Substandard |  |  | — |  |  | — |  |  | 612 |  |  | 4,987 |  |  | — |  |  | 9,530 |  |  | 998 |  |  | 4,669 |  |  | 20,796
Total commercial, industrial and agricultural |  |  | 32,089 |  |  | 83,472 |  |  | 64,768 |  |  | 48,789 |  |  | 28,496 |  |  | 53,416 |  |  | 428,976 |  |  | 18,677 |  |  | 758,683
Real estate construction and land loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 7,153 |  |  | 41,664 |  |  | 23,069 |  |  | 17,292 |  |  | — |  |  | 4,763 |  |  | — |  |  | — |  |  | 93,941
Watch |  |  | — |  |  | — |  |  | 3,200 |  |  | 1,728 |  |  | — |  |  | 283 |  |  | — |  |  | — |  |  | 5,211
Special mention |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Substandard |  |  | — |  |  | — |  |  | — |  |  | 1,370 |  |  | — |  |  | 121 |  |  | — |  |  | — |  |  | 1,491
Total real estate construction and land loans |  |  | 7,153 |  |  | 41,664 |  |  | 26,269 |  |  | 20,390 |  |  | — |  |  | 5,167 |  |  | — |  |  | — |  |  | 100,643
Installment/consumer loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 103 |  |  | 955 |  |  | 254 |  |  | 145 |  |  | 14 |  |  | 875 |  |  | 21,334 |  |  | 460 |  |  | 24,140
Watch |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 45 |  |  | 45
Special mention |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 101 |  |  | 101
Substandard |  |  | — |  |  | — |  |  | — |  |  | 16 |  |  | — |  |  | — |  |  | — |  |  | 749 |  |  | 765
Total installment/consumer loans |  |  | 103 |  |  | 955 |  |  | 254 |  |  | 161 |  |  | 14 |  |  | 875 |  |  | 21,334 |  |  | 1,355 |  |  | 25,051
Total Loans |  | $ | 159,592 |  | $ | 809,998 |  | $ | 412,654 |  | $ | 604,642 |  | $ | 346,064 |  | $ | 883,957 |  | $ | 506,253 |  | $ | 31,043 |  | $ | 3,754,203
|  | December 31, 2019
(In thousands) |  | Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  | $ | 511,444 |  | $ | 18,426 |  | $ | 1,218 |  | $ | — |  | $ | 531,088
Non-owner occupied |  |  | 1,022,208 |  |  | — |  |  | 12,391 |  |  | — |  |  | 1,034,599
Multi-family |  |  | 811,770 |  |  | 404 |  |  | — |  |  | — |  |  | 812,174
Residential real estate |  |  | 475,949 |  |  | 12,400 |  |  | 4,795 |  |  | — |  |  | 493,144
Commercial, industrial and agricultural |  |  | 643,413 |  |  | 15,670 |  |  | 20,361 |  |  | — |  |  | 679,444
Real estate construction and land loans |  |  | 95,530 |  |  | — |  |  | 1,781 |  |  | — |  |  | 97,311
Installment/consumer loans |  |  | 23,976 |  |  | 103 |  |  | 757 |  |  | — |  |  | 24,836
Total loans |  | $ | 3,584,290 |  | $ | 47,003 |  | $ | 41,303 |  | $ | — |  | $ | 3,672,596
Past Due and Non-accrual Loans The following tables represents the aging of past due loans as of March 31, 2020 and December 31, 2019:
|  | March 31, 2020
|  |  |  |  |  |  |  | 90+ Days |  | Non-accrual |  |  |  |  |  |  |  |  |
|  | 30-59 |  | 60-89 |  | Past Due |  | Including 90 |  | Total Past |  |  |  |  |  |
|  | Days |  | Days |  | And |  | Days or More |  | Due and |  |  |  |  |  |
(In thousands) |  | Past Due |  | Past Due |  | Accruing |  | Past Due |  | Non-accrual |  | Current |  | Total Loans
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  | $ | 586 |  | $ | — |  | $ | — |  | $ | 215 |  | $ | 801 |  | $ | 529,076 |  | $ | 529,877
Non-owner occupied |  |  | 603 |  |  | 771 |  |  | — |  |  | 512 |  |  | 1,886 |  |  | 1,052,015 |  |  | 1,053,901
Multi-family |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 800,556 |  |  | 800,556
Residential real estate |  |  | 6,067 |  |  | 80 |  |  | 343 |  |  | 2,433 |  |  | 8,923 |  |  | 476,569 |  |  | 485,492
Commercial, industrial and agricultural |  |  | 1,727 |  |  | 1,618 |  |  | — |  |  | 1,312 |  |  | 4,657 |  |  | 754,026 |  |  | 758,683
Real estate construction and land loans |  |  | — |  |  | 1,370 |  |  | — |  |  | 121 |  |  | 1,491 |  |  | 99,152 |  |  | 100,643
Installment/consumer loans |  |  | 114 |  |  | 5 |  |  | — |  |  | 16 |  |  | 135 |  |  | 24,916 |  |  | 25,051
Total loans |  | $ | 9,097 |  | $ | 3,844 |  | $ | 343 |  | $ | 4,609 |  | $ | 17,893 |  | $ | 3,736,310 |  | $ | 3,754,203
During the three months ended March 31, 2020, there was no interest earned on non-accrual loans and $15 thousand in accrued interest on non-accrual loans was reversed through interest income.
|  | December 31, 2019
|  |  |  |  |  |  |  | 90+ Days |  | Non-accrual |  |  |  |  |  |  |  |  |
|  | 30-59 |  | 60-89 |  | Past Due |  | Including 90 |  | Total Past |  |  |  |  |  |
|  | Days |  | Days |  | And |  | Days or More |  | Due and |  |  |  |  |  |
(In thousands) |  | Past Due |  | Past Due |  | Accruing |  | Past Due |  | Non-accrual |  | Current |  | Total Loans
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  | $ | 917 |  | $ | 433 |  | $ | — |  | $ | 225 |  | $ | 1,575 |  | $ | 529,513 |  | $ | 531,088
Non-owner occupied |  |  | 98 |  |  | — |  |  | — |  |  | 512 |  |  | 610 |  |  | 1,033,989 |  |  | 1,034,599
Multi-family |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 812,174 |  |  | 812,174
Residential real estate |  |  | 3,053 |  |  | 747 |  |  | 343 |  |  | 2,743 |  |  | 6,886 |  |  | 486,258 |  |  | 493,144
Commercial, industrial and agricultural |  |  | 273 |  |  | 721 |  |  | — |  |  | 736 |  |  | 1,730 |  |  | 677,714 |  |  | 679,444
Real estate construction and land loans |  |  | — |  |  | — |  |  | — |  |  | 123 |  |  | 123 |  |  | 97,188 |  |  | 97,311
Installment/consumer loans |  |  | 124 |  |  | — |  |  | — |  |  | 30 |  |  | 154 |  |  | 24,682 |  |  | 24,836
Total loans |  | $ | 4,465 |  | $ | 1,901 |  | $ | 343 |  | $ | 4,369 |  | $ | 11,078 |  | $ | 3,661,518 |  | $ | 3,672,596
There was no other real estate owned at March 31, 2020 and December 31, 2019. Troubled Debt Restructurings The terms of certain loans were modified and are considered TDRs. The modification of the terms of such loans generally includes one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. The modification of these loans involved loans to borrowers who were experiencing financial difficulties. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine if that borrower is currently in payment default under any of its obligations or whether there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The following table presents loans modified as TDRs during the periods indicated:
|  | Modifications During the Three Months Ended March 31,
|  | 2020 |  | 2019
|  |  |  | Pre- |  | Post- |  |  |  | Pre- |  | Post-
|  |  |  | Modification |  | Modification |  |  |  | Modification |  | Modification
|  |  |  | Outstanding |  | Outstanding |  |  |  | Outstanding |  | Outstanding
|  | Number of |  | Recorded |  | Recorded |  | Number of |  | Recorded |  | Recorded
(Dollars in thousands) |  | Loans |  | Investment |  | Investment |  | Loans |  | Investment |  | Investment
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  | — |  | $ | — |  | $ | — |  | — |  | $ | — |  | $ | —
Non-owner occupied |  | — |  |  | — |  |  | — |  | — |  |  | — |  |  | —
Residential real estate |  | — |  |  | — |  |  | — |  | — |  |  | — |  |  | —
Commercial, industrial and agricultural |  | 1 |  |  | 1,037 |  |  | 1,037 |  | 3 |  |  | 3,209 |  |  | 3,209
Installment/consumer loans |  | — |  |  | — |  |  | — |  | — |  |  | — |  |  | —
Total |  | 1 |  | $ | 1,037 |  | $ | 1,037 |  | 3 |  | $ | 3,209 |  | $ | 3,209
During the three months ended March 31, 2020, there were no charge-offs relating to TDRs and there were no loans modified as TDRs for which there was a payment default within twelve months following the modification. During the three months ended March 31, 2019, there was one charge-off totaling $6 thousand relating to TDRs and there was one loan modified as a TDR for which there was a payment default within twelve months following the modification. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. As of March 31, 2020 and December 31, 2019, the Company had $635 thousand and $405 thousand, respectively, of non-accrual TDRs and $26.9 million and $26.3 million, respectively, of performing TDRs. At March 31, 2020 and December 31, 2019, non-accrual TDRs were unsecured. The Bank has no commitment to lend additional funds to these debtors. The terms of certain other loans were modified during the three months ended March 31, 2020 that did not meet the definition of a TDR. These loans have a total recorded investment at March 31, 2020 of $26.8 million. These loans were to borrowers who were not experiencing financial difficulties. In connection with the COVID-19 relief provided by the CARES Act, the Company is supporting its customers who may experience financial difficulty due to COVID-19 through loan moratoriums and forbearance programs. The Company began offering 90-day payment modifications on a case-by-case basis to those customers whose income was adversely impacted by COVID-19. The loan modifications in this program primarily consist of three-month deferrals of interest and principal payments, which subsequent to March 31, 2020, resulted in loan modifications to approximately 10% of the loan portfolio. These deferrals are not considered TDRs based on interagency guidance issued in March 2020. Collateral Dependent Loans At March 31, 2020, the Company had collateral dependent commercial, industrial and agricultural loans which were individually evaluated to determine expected credit losses. These loans totaled $7.3 million and had a related allowance for credit losses totaling $4.4 million at March 31, 2020. The loans were secured by inventory and other assets. Impaired Loans (prior to the adoption of the CECL Standard) At December 31, 2019 the Company had individually impaired loans as defined by FASB ASC 310, “Receivables” of $27.0 million. For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures in making these judgments. Impaired loans include individually classified non-accrual loans and TDRs. At December 31, 2019, impaired loans also included $1.1 million in other impaired performing loans which were related to borrowers with other performing TDRs. For impaired loans, the Bank evaluates the impairment of the loan in accordance with FASB ASC 310‑10‑35‑22. Impairment is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required. The following table sets forth the recorded investment, unpaid principal balance and related allowance for individually impaired loans at December 31, 2019. The table also sets forth the average recorded investment of individually impaired loans and interest income recognized while the loans were impaired during the period ended March 31, 2019:
|  |  |  |  |  |  |  |  |  |  | Three Months Ended
|  | December 31, 2019 |  | March 31, 2019
|  |  |  |  | Unpaid |  | Related |  | Average |  | Interest
|  | Recorded |  | Principal |  | Allocated |  | Recorded |  | Income
(In thousands) |  | Investment |  | Balance |  | Allowance |  | Investment |  | Recognized
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  | $ | 3,379 |  | $ | 3,401 |  | $ | — |  | $ | 483 |  | $ | —
Non-owner occupied |  |  | 2,296 |  |  | 2,296 |  |  | — |  |  | 2,786 |  |  | 25
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgages |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Home equity |  |  | 294 |  |  | 300 |  |  | — |  |  | — |  |  | —
Commercial, industrial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Secured |  |  | 494 |  |  | 494 |  |  | — |  |  | 1,482 |  |  | 16
Unsecured |  |  | 8,863 |  |  | 8,863 |  |  | — |  |  | 5,617 |  |  | 85
Total with no related allowance recorded |  |  | 15,326 |  |  | 15,354 |  |  | — |  |  | 10,368 |  |  | 126
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Non-owner occupied |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgages |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Home equity |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Commercial, industrial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Secured |  |  | 9,612 |  |  | 9,612 |  |  | 3,435 |  |  | 3,942 |  |  | 36
Unsecured |  |  | 2,045 |  |  | 2,051 |  |  | 1,241 |  |  | — |  |  | —
Total with an allowance recorded |  |  | 11,657 |  |  | 11,663 |  |  | 4,676 |  |  | 3,942 |  |  | 36
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 3,379 |  |  | 3,401 |  |  | — |  |  | 483 |  |  | —
Non-owner occupied |  |  | 2,296 |  |  | 2,296 |  |  | — |  |  | 2,786 |  |  | 25
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgages |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Home equity |  |  | 294 |  |  | 300 |  |  | — |  |  | — |  |  | —
Commercial, industrial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Secured |  |  | 10,106 |  |  | 10,106 |  |  | 3,435 |  |  | 5,424 |  |  | 52
Unsecured |  |  | 10,908 |  |  | 10,914 |  |  | 1,241 |  |  | 5,617 |  |  | 85
Total |  | $ | 26,983 |  | $ | 27,017 |  | $ | 4,676 |  | $ | 14,310 |  | $ | 162
The following tables represent the changes in the allowance for credit losses for the three months ended March 31, 2020 and 2019.
|  | Three Months Ended March 31, 2020
|  |  |  |  |  |  | Residential |  | Commercial, |  | Real Estate |  |  |  |  |
|  | Commercial |  |  |  |  | Real Estate |  | Industrial and |  | Construction |  | Installment/ |  |  |
|  | Real Estate |  | Multi-family |  | Mortgage |  | Agricultural |  | and Land |  | Consumer |  |  |
(In thousands) |  | Mortgage Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Total
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance, prior to adoption of CECL |  | $ | 12,150 |  | $ | 4,829 |  | $ | 1,882 |  | $ | 12,583 |  | $ | 1,066 |  | $ | 276 |  | $ | 32,786
Impact of adopting CECL |  |  | (7,712) |  |  | (3,589) |  |  | 2,182 |  |  | 8,699 |  |  | 1,274 |  |  | 771 |  |  | 1,625
Charge-offs |  |  | (1) |  |  | — |  |  | — |  |  | (215) |  |  | — |  |  | — |  |  | (216)
Recoveries |  |  | — |  |  | — |  |  | 1 |  |  | 19 |  |  | — |  |  | — |  |  | 20
Provision (credit) for credit losses |  |  | 531 |  |  | 83 |  |  | (40) |  |  | 3,459 |  |  | 842 |  |  | 125 |  |  | 5,000
Ending balance |  | $ | 4,968 |  | $ | 1,323 |  | $ | 4,025 |  | $ | 24,545 |  | $ | 3,182 |  | $ | 1,172 |  | $ | 39,215
|  | Three Months Ended March 31, 2019
|  |  |  |  |  |  |  | Residential |  | Commercial, |  | Real Estate |  |  |  |  |  |
|  | Commercial |  |  |  |  | Real Estate |  | Industrial and |  | Construction |  | Installment/ |  |  |
|  | Real Estate |  | Multi-family |  | Mortgage |  | Agricultural |  | and Land |  | Consumer |  |  |
(In thousands) |  | Mortgage Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Total
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 10,792 |  | $ | 2,566 |  | $ | 3,935 |  | $ | 12,722 |  | $ | 1,297 |  | $ | 106 |  | $ | 31,418
Charge-offs |  |  | — |  |  | — |  |  | — |  |  | (242) |  |  | — |  |  | (4) |  |  | (246)
Recoveries |  |  | — |  |  | — |  |  | 1 |  |  | 11 |  |  | — |  |  | — |  |  | 12
Provision (credit) for credit losses |  |  | 307 |  |  | (9) |  |  | (562) |  |  | 582 |  |  | 229 |  |  | 53 |  |  | 600
Ending balance |  | $ | 11,099 |  | $ | 2,557 |  | $ | 3,374 |  | $ | 13,073 |  | $ | 1,526 |  | $ | 155 |  | $ | 31,784
The increase in the first-quarter ACL in 2020 is primarily related to the reasonable and supportable forecast component of the newly adopted CECL Standard. Management believes, based on all of the evidence gathered to date, that COVID-19 will continue to have a meaningful negative impact on economic conditions in 2020, but will be shorter-term in nature, and expects to see an economic recovery begin in 2021 during the second year of the Company’s CECL forecast time horizon. The following table represents the balance in the allowance for loan losses and the recorded investment in loans, as defined under FASB ASC 310-10 (prior to adoption of the CECL Standard), and based on impairment method as of December 31, 2019.
|  | December 31, 2019
|  |  |  |  |  |  |  | Residential |  | Commercial, |  | Real Estate |  |  |  |  |  |
|  | Commercial |  |  |  |  | Real Estate |  | Industrial and |  | Construction |  | Installment/ |  |  |
|  | Real Estate |  | Multi-family |  | Mortgage |  | Agricultural |  | and Land |  | Consumer |  |
(In thousands) |  | Mortgage Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Loans |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | — |  | $ | — |  | $ | — |  | $ | 4,676 |  | $ | — |  | $ | — |  | $ | 4,676
Collectively evaluated for impairment |  |  | 12,150 |  |  | 4,829 |  |  | 1,882 |  |  | 7,907 |  |  | 1,066 |  |  | 276 |  |  | 28,110
Loans acquired with deteriorated credit quality |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
Total allowance for loan losses |  | $ | 12,150 |  | $ | 4,829 |  | $ | 1,882 |  | $ | 12,583 |  | $ | 1,066 |  | $ | 276 |  | $ | 32,786
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 5,675 |  | $ | — |  | $ | 294 |  | $ | 21,014 |  | $ | — |  | $ | — |  | $ | 26,983
Collectively evaluated for impairment |  |  | 1,560,012 |  |  | 812,174 |  |  | 492,507 |  |  | 658,430 |  |  | 97,311 |  |  | 24,836 |  |  | 3,645,270
Loans acquired with deteriorated credit quality |  |  | — |  |  | — |  |  | 343 |  |  | — |  |  | — |  |  | — |  |  | 343
Total loans |  | $ | 1,565,687 |  | $ | 812,174 |  | $ | 493,144 |  | $ | 679,444 |  | $ | 97,311 |  | $ | 24,836 |  | $ | 3,672,596

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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