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Loans and Allowance for Credit Losses on Loans | 3 Months Ended
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Mar. 31, 2020
Loans and Allowance for Credit Losses on Loans |
Loans and Allowance for Credit Losses on Loans | Note 4 – Loans and Allowance for Credit Losses on Loans Major segments of loans were as follows:
|  | March 31, 2020 |  | December 31, 2019
Commercial |  | $ | 364,626 |  | $ | 332,842
Leases |  |  | 126,237 |  |  | 119,751
Commercial real estate - Investor |  |  | 503,905 |  |  | 520,095
Commercial real estate - Owner occupied |  |  | 349,595 |  |  | 345,504
Construction |  |  | 78,159 |  |  | 69,617
Residential real estate - Investor |  |  | 69,429 |  |  | 71,105
Residential real estate - Owner occupied |  |  | 129,982 |  |  | 136,023
Multifamily |  |  | 195,297 |  |  | 189,773
HELOC |  |  | 93,165 |  |  | 91,605
HELOC - Purchased |  |  | 30,880 |  |  | 31,852
Other 1 |  |  | 15,929 |  |  | 12,258
Total loans, excluding deferred loan costs and PCI loans |  |  | 1,957,204 |  |  | 1,920,425
Net deferred loan costs |  |  | - |  |  | 1,786
Total loans, excluding PCI loans |  |  | 1,957,204 |  |  | 1,922,211
PCI loans |  |  | - |  |  | 8,601
Total loans, including deferred loan costs and PCI loans |  | $ | 1,957,204 |  | $ | 1,930,812
Allowance for credit losses on loans |  |  | (30,045) |  |  | (19,789)
Net loans 2 |  | $ | 1,927,159 |  | $ | 1,911,023
1 The “Other” segment for 2020 includes consumer and overdrafts in this table and in subsequent tables within this footnote 4 - Loans and Allowance for Credit Losses on Loans. 2 Excludes accrued interest receivable of $6.4 million and $6.5 million at March 31, 2020 and December 31, 2019, respectively, that is recorded in other assets on the consolidated balance sheet. In connection with the Company’s adoption of ASU 2016-13 as of January 1, 2020, the PCI loans and deferred fees and costs are included in their respective segments. PCI loans meeting nonperforming criteria were historically excluded from our nonperforming disclosures as long as their cash flows and the timing of such cash flows continue to be estimable and probable of collection. As a result of CECL implementation on January 1, 2020, PCI loans became PCD loans. PCD loans that meet the definition of nonperforming are now included in nonperforming disclosures. It is the policy of the Company to review each prospective credit prior to making a loan in order to determine if an adequate level of security or collateral has been obtained. The type of collateral, when required, will vary from liquid assets to real estate. The Company’s access to collateral, in the event of borrower default, is assured through adherence to lending laws, the Company’s lending standards and credit monitoring procedures. With selected exceptions, the Bank makes loans solely within its market area. There are no significant concentrations of loans where the customers’ ability to honor loan terms is dependent upon a single economic sector, although the real estate related categories listed above represent 74.1% and 75.4% of the portfolio at March 31, 2020, and December 31, 2019, respectively. The following table presents the collateral dependent loans and the related ACL allocated by segment of loans as of March 31, 2020:
|  |  |  |  | Accounts |  |  |  |  |  | ACL
March 31, 2020 |  | Real Estate |  | Receivable |  | Other |  | Total |  | Allocation
Commercial |  | $ | - |  | $ | 2,416 |  | $ | 3 |  | $ | 2,419 |  | $ | 89
Leases |  |  | - |  |  | - |  |  | 264 |  |  | 264 |  |  | 61
Commercial real estate - Investor |  |  | 4,430 |  |  | - |  |  | - |  |  | 4,430 |  |  | 203
Commercial real estate - Owner occupied |  |  | 8,459 |  |  | - |  |  | - |  |  | 8,459 |  |  | 204
Construction |  |  | 2,245 |  |  | - |  |  | - |  |  | 2,245 |  |  | 852
Residential real estate - Investor |  |  | 859 |  |  | - |  |  | - |  |  | 859 |  |  | -
Residential real estate - Owner occupied |  |  | 3,739 |  |  | - |  |  | - |  |  | 3,739 |  |  | 137
Multifamily |  |  | 1,497 |  |  | - |  |  | - |  |  | 1,497 |  |  | 318
HELOC |  |  | 1,004 |  |  | - |  |  | - |  |  | 1,004 |  |  | -
HELOC - Purchased |  |  | 114 |  |  | - |  |  | - |  |  | 114 |  |  | -
Other |  |  | - |  |  | - |  |  | 9 |  |  | 9 |  |  | 3
Total |  | $ | 22,347 |  | $ | 2,416 |  | $ | 276 |  | $ | 25,039 |  | $ | 1,867
The following table presents the activity in the allowance for credit losses (“ACL”) for the three months ended March 31, 2020. The Company’s estimate of the ACL reflects losses over the expected remaining contractual life of the loans.
|  |  |  | Impact of |  | Provision |  |  |  |  |  |
|  | Beginning |  | Adopting |  | for Credit |  |  |  |  |  | Ending
Allowance for credit losses |  | Balance |  | ASC 326 |  | Losses |  | Charge-offs |  | Recoveries |  | Balance
Three months ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 3,015 |  | $ | (292) |  | $ | 539 |  | $ | 97 |  | $ | 12 |  | $ | 3,177
Leases |  |  | 1,262 |  |  | 501 |  |  | 127 |  |  | - |  |  | - |  |  | 1,890
Commercial real estate - Investor |  |  | 6,218 |  |  | (741) |  |  | 536 |  |  | 13 |  |  | 21 |  |  | 6,021
Commercial real estate - Owner occupied |  |  | 3,678 |  |  | (848) |  |  | 329 |  |  | 1,109 |  |  | 1 |  |  | 2,051
Construction |  |  | 513 |  |  | 1,334 |  |  | 2,184 |  |  | - |  |  | - |  |  | 4,031
Residential real estate - Investor |  |  | 601 |  |  | 740 |  |  | 534 |  |  | - |  |  | 21 |  |  | 1,896
Residential real estate - Owner occupied |  |  | 1,257 |  |  | 1,320 |  |  | 769 |  |  | 1 |  |  | 23 |  |  | 3,368
Multifamily |  |  | 1,444 |  |  | 1,732 |  |  | 674 |  |  | - |  |  | - |  |  | 3,850
HELOC |  |  | 1,161 |  |  | 1,526 |  |  | (485) |  |  | 83 |  |  | 141 |  |  | 2,260
HELOC - Purchased |  |  | - |  |  | - |  |  | 850 |  |  | - |  |  | - |  |  | 850
Other |  |  | 640 |  |  | 607 |  |  | (558) |  |  | 98 |  |  | 60 |  |  | 651
|  | $ | 19,789 |  | $ | 5,879 |  | $ | 5,499 |  | $ | 1,401 |  | $ | 279 |  | $ | 30,045
The following table presents activity in the allowance for loan and lease losses for the three months ended at March 31, 2019, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13:
|  |  |  | Provision |  |  |  |  |  |
|  | Beginning |  | for Loan |  |  |  |  |  | Ending
Allowance for loan and lease losses: |  | Balance |  | Losses |  | Charge-offs |  | Recoveries |  | Balance
Three months ended March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 2,832 |  | $ | 202 |  | $ | 12 |  | $ | 30 |  | $ | 3,052
Leases |  |  | 734 |  |  | 71 |  |  | - |  |  | - |  |  | 805
Commercial real estate - Investor |  |  | 5,492 |  |  | 207 |  |  | 144 |  |  | 20 |  |  | 5,575
Commercial real estate - Owner occupied |  |  | 3,835 |  |  | (603) |  |  | 87 |  |  | 3 |  |  | 3,148
Construction |  |  | 969 |  |  | (24) |  |  | - |  |  | (1) |  |  | 944
Residential real estate - Investor |  |  | 629 |  |  | (3) |  |  | 6 |  |  | 16 |  |  | 636
Residential real estate - Owner occupied |  |  | 1,302 |  |  | 4 |  |  | 12 |  |  | 26 |  |  | 1,320
Multifamily |  |  | 1,143 |  |  | 2 |  |  | - |  |  | 8 |  |  | 1,153
HELOC |  |  | 1,449 |  |  | (170) |  |  | - |  |  | 46 |  |  | 1,325
HELOC - Purchased |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Other 1 |  |  | 621 |  |  | 764 |  |  | 84 |  |  | 57 |  |  | 1,358
|  | $ | 19,006 |  | $ | 450 |  | $ | 345 |  | $ | 205 |  | $ | 19,316
1 The “Other” class includes consumer, overdrafts and net deferred costs. Aged analysis of past due loans by class of loans was as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 90 days or
|  |  |  |  |  |  |  | 90 Days or |  |  |  |  |  |  |  |  |  |  | Greater Past
|  | 30-59 Days |  | 60-89 Days |  | Greater Past |  | Total Past |  |  |  |  |  |  |  | Due and
March 31, 2020 |  | Past Due |  | Past Due |  | Due |  | Due |  | Current |  | Total Loans |  | Accruing
Commercial |  | $ | 1,032 |  | $ | 46 |  | $ | 2,279 |  | $ | 3,357 |  | $ | 361,269 |  | $ | 364,626 |  | $ | -
Leases |  |  | 613 |  |  | 63 |  |  | 123 |  |  | 799 |  |  | 125,438 |  |  | 126,237 |  |  | -
Commercial real estate - Investor |  |  | 2,235 |  |  | - |  |  | 1,422 |  |  | 3,657 |  |  | 500,248 |  |  | 503,905 |  |  | 59
Commercial real estate - Owner occupied |  |  | 5,062 |  |  | 2,080 |  |  | 4,060 |  |  | 11,202 |  |  | 338,393 |  |  | 349,595 |  |  | -
Construction |  |  | 675 |  |  | - |  |  | 555 |  |  | 1,230 |  |  | 76,929 |  |  | 78,159 |  |  | 555
Residential real estate - Investor |  |  | 291 |  |  | 100 |  |  | 696 |  |  | 1,087 |  |  | 68,342 |  |  | 69,429 |  |  | -
Residential real estate - Owner occupied |  |  | 4,183 |  |  | 167 |  |  | 2,139 |  |  | 6,489 |  |  | 123,493 |  |  | 129,982 |  |  | 736
Multifamily |  |  | 1,815 |  |  | 561 |  |  | 69 |  |  | 2,445 |  |  | 192,852 |  |  | 195,297 |  |  | -
HELOC |  |  | 1,459 |  |  | - |  |  | 329 |  |  | 1,788 |  |  | 91,377 |  |  | 93,165 |  |  | 56
HELOC - Purchased |  |  | 49 |  |  | - |  |  | 65 |  |  | 114 |  |  | 30,766 |  |  | 30,880 |  |  | -
Other |  |  | 537 |  |  | 3 |  |  | 8 |  |  | 548 |  |  | 15,381 |  |  | 15,929 |  |  | -
Total |  | $ | 17,951 |  | $ | 3,020 |  | $ | 11,745 |  | $ | 32,716 |  | $ | 1,924,488 |  | $ | 1,957,204 |  | $ | 1,406
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Recorded
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Investment
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 90 days or
|  |  |  |  |  |  |  | 90 Days or |  |  |  |  |  |  |  |  |  |  |  |  |  | Greater Past
|  | 30-59 Days |  | 60-89 Days |  | Greater Past |  | Total Past |  |  |  |  |  |  |  |  |  |  | Due and
December 31, 2019 |  | Past Due |  | Past Due |  | Due |  | Due |  | Current |  | Nonaccrual |  | Total Loans |  | Accruing
Commercial |  | $ | 1,271 |  | $ | 925 |  | $ | 2,103 |  | $ | 4,299 |  | $ | 328,399 |  | $ | 144 |  | $ | 332,842 |  | $ | 2,132
Leases |  |  | 362 |  |  | - |  |  | 81 |  |  | 443 |  |  | 118,979 |  |  | 329 |  |  | 119,751 |  |  | 128
Commercial real estate - Investor |  |  | 626 |  |  | 95 |  |  | 343 |  |  | 1,064 |  |  | 517,336 |  |  | 1,695 |  |  | 520,095 |  |  | 348
Commercial real estate - Owner occupied |  |  | 2,469 |  |  | 1,026 |  |  | - |  |  | 3,495 |  |  | 336,829 |  |  | 5,180 |  |  | 345,504 |  |  | -
Construction |  |  | 26 |  |  | - |  |  | - |  |  | 26 |  |  | 69,498 |  |  | 93 |  |  | 69,617 |  |  | -
Residential real estate - Investor |  |  | 141 |  |  | 125 |  |  | - |  |  | 266 |  |  | 70,051 |  |  | 788 |  |  | 71,105 |  |  | -
Residential real estate - Owner occupied |  |  | 3,450 |  |  | 1,351 |  |  | - |  |  | 4,801 |  |  | 128,650 |  |  | 2,572 |  |  | 136,023 |  |  | -
Multifamily |  |  | 10 |  |  | 1,700 |  |  | - |  |  | 1,710 |  |  | 187,995 |  |  | 68 |  |  | 189,773 |  |  | -
HELOC |  |  | 735 |  |  | 50 |  |  | 18 |  |  | 803 |  |  | 89,438 |  |  | 1,364 |  |  | 91,605 |  |  | 20
HELOC - Purchased |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 31,672 |  |  | 180 |  |  | 31,852 |  |  | -
Other 1 |  |  | 28 |  |  | - |  |  | - |  |  | 28 |  |  | 13,997 |  |  | 19 |  |  | 14,044 |  |  | -
Total, excluding PCI |  |  | 9,118 |  |  | 5,272 |  |  | 2,545 |  |  | 16,935 |  |  | 1,892,844 |  |  | 12,432 |  |  | 1,922,211 |  |  | 2,628
PCI loans, net of purchase accounting adjustments |  |  | 261 |  |  | - |  |  | - |  |  | 261 |  |  | 5,377 |  |  | 2,963 |  |  | 8,601 |  |  | -
Total |  | $ | 9,379 |  | $ | 5,272 |  | $ | 2,545 |  | $ | 17,196 |  | $ | 1,898,221 |  | $ | 15,395 |  | $ | 1,930,812 |  | $ | 2,628
1 The “Other” class includes consumer, overdrafts and net deferred costs. The table presents loans on nonaccrual for which there was no related allowance for credit losses as of March 31, 2020, and December 31, 2019:
|  |  | March 31, 2020 |  | December 31, 2019
|  |  |  |  | Nonaccrual |  |  |  | Nonaccrual
|  |  | Nonaccrual |  | With no ACL |  | Nonaccrual |  | With no ACL
Commercial |  |  | $ | 2,418 |  | $ | 2,279 |  | $ | 144 |  | $ | -
Leases |  |  |  | 187 |  |  | 69 |  |  | 329 |  |  | 70
Commercial real estate - Investor |  |  |  | 1,750 |  |  | 1,750 |  |  | 1,695 |  |  | 1,590
Commercial real estate - Owner occupied |  |  |  | 7,436 |  |  | 7,357 |  |  | 5,180 |  |  | 2,366
Construction |  |  |  | 2,245 |  |  | 50 |  |  | 93 |  |  | 93
Residential real estate - Investor |  |  |  | 859 |  |  | 859 |  |  | 788 |  |  | 788
Residential real estate - Owner occupied |  |  |  | 3,406 |  |  | 3,406 |  |  | 2,572 |  |  | 2,475
Multifamily |  |  |  | 69 |  |  | 69 |  |  | 68 |  |  | 68
HELOC |  |  |  | 1,004 |  |  | 1,004 |  |  | 1,364 |  |  | 1,154
HELOC - Purchased |  |  |  | 114 |  |  | 114 |  |  | 180 |  |  | 180
Other |  |  |  | 9 |  |  | 1 |  |  | 19 |  |  | 2
Total, excluding PCI loans |  |  |  | 19,497 |  |  | 16,958 |  |  | 12,432 |  |  | 8,786
PCI loans, net of purchase accounting adjustments |  |  |  | - |  |  | - |  |  | 2,963 |  |  | 2,963
Total |  |  | $ | 19,497 |  | $ | 16,958 |  | $ | 15,395 |  | $ | 11,749
The Company recognized $152,000 of interest on nonaccrual loans during the three months ended March 31, 2020. Credit Quality Indicators The Company categorizes loans into credit risk categories based on current financial information, overall debt service coverage, comparison to industry averages, historical payment experience, and current economic trends. This analysis includes loans with outstanding balances or commitments greater than $50,000 and excludes homogeneous loans such as home equity lines of credit and residential mortgages. Loans with a classified risk rating are reviewed quarterly regardless of size or loan type. The Company uses the following definitions for classified risk ratings: Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The substandard credit quality indicator includes both potential problem loans that are currently performing and nonperforming loans. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Credits that are not covered by the definitions above are pass credits, which are not considered to be adversely rated. The Company follows guidance of ASC 310-20 when determining whether a modification, extension, or renewal of a loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period financing receivables. The following table summarizes loans held for investment by year of origination and the related credit quality indicators at March 31, 2020:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Revolving |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Loans |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Converted |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Revolving |  | To Term |  |
|  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | Prior |  | Loans |  | Loans |  | Total
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 13,380 |  | $ | 48,708 |  | $ | 20,606 |  | $ | 10,684 |  | $ | 3,837 |  | $ | 4,074 |  | $ | 232,347 |  | $ | - |  | $ | 333,636
Special Mention |  |  | - |  |  | 11,152 |  |  | - |  |  | 17 |  |  | 394 |  |  | 49 |  |  | 8,118 |  |  | - |  |  | 19,730
Substandard 1 |  |  | - |  |  | 246 |  |  | 2,672 |  |  | - |  |  | 2,188 |  |  | - |  |  | 6,154 |  |  | - |  |  | 11,260
Total commercial |  |  | 13,380 |  |  | 60,106 |  |  | 23,278 |  |  | 10,701 |  |  | 6,419 |  |  | 4,123 |  |  | 246,619 |  |  | - |  |  | 364,626
Leases |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 14,148 |  |  | 65,670 |  |  | 22,923 |  |  | 10,133 |  |  | 9,848 |  |  | 2,892 |  |  | - |  |  | - |  |  | 125,614
Special Mention |  |  | - |  |  | 359 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 359
Substandard 1 |  |  | - |  |  | - |  |  | - |  |  | 77 |  |  | 187 |  |  | - |  |  | - |  |  | - |  |  | 264
Total leases |  |  | 14,148 |  |  | 66,029 |  |  | 22,923 |  |  | 10,210 |  |  | 10,035 |  |  | 2,892 |  |  | - |  |  | - |  |  | 126,237
Commercial real estate - Investor |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 10,194 |  |  | 187,200 |  |  | 113,009 |  |  | 80,622 |  |  | 61,530 |  |  | 43,051 |  |  | 1,412 |  |  | - |  |  | 497,018
Special Mention |  |  | - |  |  | 153 |  |  | - |  |  | 583 |  |  | 19 |  |  | 59 |  |  | - |  |  | - |  |  | 814
Substandard 1 |  |  | - |  |  | 4,059 |  |  | 146 |  |  | - |  |  | 275 |  |  | 1,593 |  |  | - |  |  | - |  |  | 6,073
Total commercial real estate - investor |  |  | 10,194 |  |  | 191,412 |  |  | 113,155 |  |  | 81,205 |  |  | 61,824 |  |  | 44,703 |  |  | 1,412 |  |  | - |  |  | 503,905
Commercial real estate - Owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 28,511 |  |  | 60,137 |  |  | 86,544 |  |  | 48,503 |  |  | 54,557 |  |  | 48,603 |  |  | 1,828 |  |  | - |  |  | 328,683
Special Mention |  |  | - |  |  | 557 |  |  | 560 |  |  | 2,805 |  |  | 5,325 |  |  | 1,161 |  |  | - |  |  | - |  |  | 10,408
Substandard 1 |  |  | 1,046 |  |  | 3,498 |  |  | 1,054 |  |  | 2,509 |  |  | 1,691 |  |  | 706 |  |  | - |  |  | - |  |  | 10,504
Total commercial real estate - owner occupied |  |  | 29,557 |  |  | 64,192 |  |  | 88,158 |  |  | 53,817 |  |  | 61,573 |  |  | 50,470 |  |  | 1,828 |  |  | - |  |  | 349,595
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 9,239 |  |  | 36,982 |  |  | 16,472 |  |  | 3,248 |  |  | 1,035 |  |  | 1,339 |  |  | 7,388 |  |  | - |  |  | 75,703
Special Mention |  |  | 42 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 42
Substandard 1 |  |  | - |  |  | - |  |  | 2,364 |  |  | - |  |  | - |  |  | 50 |  |  | - |  |  | - |  |  | 2,414
Total construction |  |  | 9,281 |  |  | 36,982 |  |  | 18,836 |  |  | 3,248 |  |  | 1,035 |  |  | 1,389 |  |  | 7,388 |  |  | - |  |  | 78,159
Residential real estate - Investor |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 3,599 |  |  | 22,824 |  |  | 12,634 |  |  | 10,586 |  |  | 3,543 |  |  | 13,388 |  |  | 1,403 |  |  | - |  |  | 67,977
Special Mention |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Substandard 1 |  |  | 346 |  |  | - |  |  | 644 |  |  | 4 |  |  | - |  |  | 458 |  |  | - |  |  | - |  |  | 1,452
Total residential real estate - investor |  |  | 3,945 |  |  | 22,824 |  |  | 13,278 |  |  | 10,590 |  |  | 3,543 |  |  | 13,846 |  |  | 1,403 |  |  | - |  |  | 69,429
Residential real estate - Owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 1,505 |  |  | 27,584 |  |  | 16,814 |  |  | 26,024 |  |  | 11,519 |  |  | 39,578 |  |  | 2,390 |  |  | - |  |  | 125,414
Special Mention |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Substandard 1 |  |  | - |  |  | 73 |  |  | - |  |  | 625 |  |  | 386 |  |  | 3,484 |  |  | - |  |  | - |  |  | 4,568
Total residential real estate - owner occupied |  |  | 1,505 |  |  | 27,657 |  |  | 16,814 |  |  | 26,649 |  |  | 11,905 |  |  | 43,062 |  |  | 2,390 |  |  | - |  |  | 129,982
Multifamily |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 4,167 |  |  | 56,534 |  |  | 45,839 |  |  | 46,900 |  |  | 13,903 |  |  | 20,624 |  |  | 312 |  |  | - |  |  | 188,279
Special Mention |  |  | - |  |  | - |  |  | 1,634 |  |  | - |  |  | 10 |  |  | - |  |  | - |  |  | - |  |  | 1,644
Substandard 1 |  |  | - |  |  | - |  |  | 2,374 |  |  | 619 |  |  | - |  |  | 2,381 |  |  | - |  |  | - |  |  | 5,374
Total multifamily |  |  | 4,167 |  |  | 56,534 |  |  | 49,847 |  |  | 47,519 |  |  | 13,913 |  |  | 23,005 |  |  | 312 |  |  | - |  |  | 195,297
HELOC |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 957 |  |  | 3,541 |  |  | 2,448 |  |  | 2,916 |  |  | 1,176 |  |  | 1,500 |  |  | 78,986 |  |  | - |  |  | 91,524
Special Mention |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 13 |  |  | - |  |  | 13
Substandard 1 |  |  | 29 |  |  | 9 |  |  | 50 |  |  | 67 |  |  | 29 |  |  | 555 |  |  | 889 |  |  | - |  |  | 1,628
Total HELOC |  |  | 986 |  |  | 3,550 |  |  | 2,498 |  |  | 2,983 |  |  | 1,205 |  |  | 2,055 |  |  | 79,888 |  |  | - |  |  | 93,165
HELOC - Purchased |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 30,766 |  |  | - |  |  | - |  |  | 30,766
Special Mention |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Substandard 1 |  |  | - |  |  | 65 |  |  | 49 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 114
Total HELOC - purchased |  |  | - |  |  | 65 |  |  | 49 |  |  | - |  |  | - |  |  | 30,766 |  |  | - |  |  | - |  |  | 30,880
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 258 |  |  | 3,442 |  |  | 1,334 |  |  | 551 |  |  | 737 |  |  | 423 |  |  | 8,835 |  |  | - |  |  | 15,580
Special Mention |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Substandard 1 |  |  | - |  |  | - |  |  | 340 |  |  | 8 |  |  | 1 |  |  | - |  |  | - |  |  | - |  |  | 349
Total other |  |  | 258 |  |  | 3,442 |  |  | 1,674 |  |  | 559 |  |  | 738 |  |  | 423 |  |  | 8,835 |  |  | - |  |  | 15,929
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 85,958 |  |  | 512,622 |  |  | 338,623 |  |  | 240,167 |  |  | 161,685 |  |  | 206,238 |  |  | 334,901 |  |  | - |  |  | 1,880,194
Special Mention |  |  | 42 |  |  | 12,221 |  |  | 2,194 |  |  | 3,405 |  |  | 5,748 |  |  | 1,269 |  |  | 8,131 |  |  | - |  |  | 33,010
Substandard 1 |  |  | 1,421 |  |  | 7,950 |  |  | 9,693 |  |  | 3,909 |  |  | 4,757 |  |  | 9,227 |  |  | 7,043 |  |  | - |  |  | 44,000
Total loans |  | $ | 87,421 |  | $ | 532,793 |  | $ | 350,510 |  | $ | 247,481 |  | $ | 172,190 |  | $ | 216,734 |  | $ | 350,075 |  | $ | - |  | $ | 1,957,204
1 The substandard credit quality indicator includes both potential problem loans that are currently performing and nonperforming loans. Credit quality indicators by loan segment at December 31, 2019 were as follows:
December 31, 2019 |  |  |  |  | Special |  |  |  |  |  |  |  |  |
|  | Pass |  | Mention |  | Substandard 2 |  | Doubtful |  | Total
Commercial |  | $ | 307,948 |  | $ | 13,206 |  | $ | 11,688 |  | $ | - |  | $ | 332,842
Leases |  |  | 119,045 |  |  | 377 |  |  | 329 |  |  | - |  |  | 119,751
Commercial real estate - Investor |  |  | 510,640 |  |  | 4,529 |  |  | 4,926 |  |  |  |  |  | 520,095
Commercial real estate - Owner occupied |  |  | 330,891 |  |  | 6,657 |  |  | 7,956 |  |  | - |  |  | 345,504
Construction |  |  | 69,355 |  |  | - |  |  | 262 |  |  | - |  |  | 69,617
Residential real estate - Investor |  |  | 69,715 |  |  | - |  |  | 1,390 |  |  | - |  |  | 71,105
Residential real estate - Owner occupied |  |  | 132,258 |  |  | 134 |  |  | 3,631 |  |  | - |  |  | 136,023
Multifamily |  |  | 187,560 |  |  | 1,710 |  |  | 503 |  |  | - |  |  | 189,773
HELOC |  |  | 89,804 |  |  | 12 |  |  | 1,789 |  |  | - |  |  | 91,605
HELOC - Purchased |  |  | 31,672 |  |  | - |  |  | 180 |  |  |  |  |  | 31,852
Other 1 |  |  | 13,685 |  |  | - |  |  | 359 |  |  | - |  |  | 14,044
Total, excluding PCI loans |  | $ | 1,862,573 |  | $ | 26,625 |  | $ | 33,013 |  | $ | - |  | $ | 1,922,211
PCI loans, net of purchase accounting adjustments |  |  | 573 |  |  | 261 |  |  | 7,767 |  |  | - |  |  | 8,601
Total |  | $ | 1,863,146 |  | $ | 26,886 |  | $ | 40,780 |  | $ | - |  | $ | 1,930,812
1 The “Other” class includes consumer, overdrafts and net deferred costs. 2 The substandard credit quality indicator includes both potential problem loans that are currently performing and nonperforming loans. The Company had $585,000 and $831,000 in residential real estate loans in the process of foreclosure as of March 31, 2020, and December 31, 2019, respectively. Troubled debt restructurings (“TDRs”) are loans for which the contractual terms have been modified and both of these conditions exist: (1) there is a concession to the borrower and (2) the borrower is experiencing financial difficulties. Loans are restructured on a case-by-case basis during the loan collection process with modifications generally initiated at the request of the borrower. These modifications may include reduction in interest rates, extension of term, deferrals of principal, and other modifications. The Bank participates in the U.S. Department of the Treasury’s (the “Treasury”) Home Affordable Modification Program (“HAMP”) which gives qualifying homeowners an opportunity to refinance into more affordable monthly payments. The specific allocation of the allowance for loan and lease losses for TDRs is determined by calculating the present value of the TDR cash flows by discounting the original payment less an assumption for probability of default at the original note’s issue rate, and adding this amount to the present value of collateral less selling costs. If the resulting amount is less than the recorded book value, the Bank either establishes a valuation allowance (i.e., specific reserve) as a component of the allowance for loan and lease losses or charges off the impaired balance if it determines that such amount is a confirmed loss. This method is used consistently for all segments of the portfolio. The allowance for loan and lease losses also includes an allowance based on a loss migration analysis for each loan category on loans and leases that are not individually evaluated for specific impairment. All loans charged-off, including TDRs charged-off, are factored into this calculation by portfolio segment. TDRs that were modified during the period are as follows: There was no TDR activity for the period ended March 31, 2020.
|  | TDR Modifications |
|  | Three Months Ended March 31, 2019 |
|  | # of |  | Pre-modification |  | Post-modification |
|  | contracts |  | recorded investment |  | recorded investment |
Troubled debt restructurings |  |  |  |  |  |  |  |  |
Commercial real estate - owner occupied |  |  |  |  |  |  |  |  |
Other 1 |  | 1 |  | $ | 58 |  | $ | 58 |
Residential real estate - owner occupied |  |  |  |  |  |  |  |  |
HAMP 2 |  | 1 |  |  | 105 |  |  | 9 |
HELOC |  |  |  |  |  |  |  |  |
HAMP 2 |  | 1 |  |  | 39 |  |  | 34 |
Other 1 |  | 1 |  |  | 39 |  |  | 38 |
Total |  | 4 |  | $ | 241 |  | $ | 139 |
1 Other: Change of terms from bankruptcy court. 2 HAMP: Home Affordable Modification Program. TDRs are classified as being in default on a case-by-case basis when they fail to be in compliance with the modified terms. There was no TDR default activity for the periods ended March 31, 2020, and March 31, 2019, for loans that were restructured within the 12 month period prior to default.

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