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Loans | 3 Months Ended
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Mar. 31, 2020
Loans And Leases Receivable Disclosure [Abstract] |
Loans |
(4.) | LOANS
The Company’s loan portfolio consisted of the following as of the dates indicated (in thousands):
|  | Principal Amount Outstanding |  |  | Net Deferred Loan (Fees) Costs |  |  | Loans, Net |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | $ | 587,903 |  |  | $ | 965 |  |  | $ | 588,868 |
Commercial mortgage |  |  | 1,109,344 |  |  |  | (1,968 | ) |  |  | 1,107,376 |
Residential real estate loans |  |  | 567,714 |  |  |  | 12,086 |  |  |  | 579,800 |
Residential real estate lines |  |  | 98,996 |  |  |  | 3,117 |  |  |  | 102,113 |
Consumer indirect |  |  | 815,969 |  |  |  | 27,699 |  |  |  | 843,668 |
Other consumer |  |  | 15,249 |  |  |  | 153 |  |  |  | 15,402 |
Total |  | $ | 3,195,175 |  |  | $ | 42,052 |  |  |  | 3,237,227 |
Allowance for credit losses - loans |  |  |  |  |  |  |  |  |  |  | (43,356 | )
Total loans, net |  |  |  |  |  |  |  |  |  | $ | 3,193,871 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | $ | 571,222 |  |  | $ | 818 |  |  | $ | 572,040 |
Commercial mortgage |  |  | 1,108,315 |  |  |  | (2,032 | ) |  |  | 1,106,283 |
Residential real estate loans |  |  | 560,717 |  |  |  | 11,633 |  |  |  | 572,350 |
Residential real estate lines |  |  | 101,048 |  |  |  | 3,070 |  |  |  | 104,118 |
Consumer indirect |  |  | 822,179 |  |  |  | 27,873 |  |  |  | 850,052 |
Other consumer |  |  | 15,984 |  |  |  | 160 |  |  |  | 16,144 |
Total |  | $ | 3,179,465 |  |  | $ | 41,522 |  |  |  | 3,220,987 |
Allowance for credit losses - loans |  |  |  |  |  |  |  |  |  |  | (30,482 | )
Total loans, net |  |  |  |  |  |  |  |  |  | $ | 3,190,505 |
Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $3.8 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively. The Company elected to exclude AIR from the amortized cost basis of loans disclosed throughout this footnote. As of March 31, 2020 and December 31, 2019, AIR for loans totaled $9.4 million and $9.1 million, respectively, and is included in other assets on the Company’s consolidated statements of financial condition. (4.)LOANS (Continued) Past Due Loans Aging The Company’s recorded investment, by loan class, in current and nonaccrual loans, as well as an analysis of accruing delinquent loans is set forth as of the dates indicated (in thousands):
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Nonaccrual |  |  | Current |  |  | Total Loans |  |  | Nonaccrual with no allowance |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | $ | 234 |  |  | $ | 55 |  |  | $ | — |  |  | $ | 289 |  |  | $ | 5,507 |  |  | $ | 582,107 |  |  | $ | 587,903 |  |  | $ | 4,531 |
Commercial mortgage |  |  | 8,476 |  |  |  | — |  |  |  | — |  |  |  | 8,476 |  |  |  | 2,984 |  |  |  | 1,097,884 |  |  |  | 1,109,344 |  |  |  | 824 |
Residential real estate loans |  |  | 2,997 |  |  |  | 1 |  |  |  | — |  |  |  | 2,998 |  |  |  | 1,971 |  |  |  | 562,745 |  |  |  | 567,714 |  |  |  | 1,971 |
Residential real estate lines |  |  | 233 |  |  |  | 3 |  |  |  | — |  |  |  | 236 |  |  |  | 143 |  |  |  | 98,617 |  |  |  | 98,996 |  |  |  | 143 |
Consumer indirect |  |  | 7,127 |  |  |  | 684 |  |  |  | — |  |  |  | 7,811 |  |  |  | 1,777 |  |  |  | 806,381 |  |  |  | 815,969 |  |  |  | 1,777 |
Other consumer |  |  | 98 |  |  |  | 20 |  |  |  | 2 |  |  |  | 120 |  |  |  | — |  |  |  | 15,129 |  |  |  | 15,249 |  |  |  | - |
Total loans, gross |  | $ | 19,165 |  |  | $ | 763 |  |  | $ | 2 |  |  | $ | 19,930 |  |  | $ | 12,382 |  |  | $ | 3,162,863 |  |  | $ | 3,195,175 |  |  | $ | 9,246 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | $ | 361 |  |  | $ | — |  |  | $ | — |  |  | $ | 361 |  |  | $ | 1,177 |  |  | $ | 569,684 |  |  | $ | 571,222 |  |  |  |  |
Commercial mortgage |  |  | 531 |  |  |  | — |  |  |  | — |  |  |  | 531 |  |  |  | 3,146 |  |  |  | 1,104,638 |  |  |  | 1,108,315 |  |  |  |  |
Residential real estate loans |  |  | 929 |  |  |  | 114 |  |  |  | — |  |  |  | 1,043 |  |  |  | 2,484 |  |  |  | 557,190 |  |  |  | 560,717 |  |  |  |  |
Residential real estate lines |  |  | 231 |  |  |  | 37 |  |  |  | — |  |  |  | 268 |  |  |  | 102 |  |  |  | 100,678 |  |  |  | 101,048 |  |  |  |  |
Consumer indirect |  |  | 3,729 |  |  |  | 1,019 |  |  |  | — |  |  |  | 4,748 |  |  |  | 1,725 |  |  |  | 815,706 |  |  |  | 822,179 |  |  |  |  |
Other consumer |  |  | 116 |  |  |  | 8 |  |  |  | 6 |  |  |  | 130 |  |  |  | — |  |  |  | 15,854 |  |  |  | 15,984 |  |  |  |  |
Total loans, gross |  | $ | 5,897 |  |  | $ | 1,178 |  |  | $ | 6 |  |  | $ | 7,081 |  |  | $ | 8,634 |  |  | $ | 3,163,750 |  |  | $ | 3,179,465 |  |  |  |  |
There were no loans past due greater than 90 days and still accruing interest as of March 31, 2020 and December 31, 2019. There were $2 thousand and $6 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2020 and December 31, 2019, respectively. Consumer overdrafts are overdrawn deposit accounts which have been reclassified as loans but by their terms do not accrue interest. The Company recognized no interest income on nonaccrual loans during the three months ended March 31, 2020 and 2019. (4.)LOANS (Continued) Troubled Debt Restructurings A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. Commercial loans modified in a TDR may involve temporary interest-only payments, term extensions, reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, collateral concessions, forgiveness of principal, forbearance agreements, or substituting or adding a new borrower or guarantor. The following presents, by loan class, information related to loans modified in a TDR during the three months ended March 31, 2020 and 2019:
|  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  |  | 1 |  |  | $ | 11,898 |  |  | $ | 11,898 |
Total |  |  | 1 |  |  | $ | 11,898 |  |  | $ | 11,898 |
March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  |  | — |  |  | $ | — |  |  | $ | — |
Total |  |  | — |  |  | $ | — |  |  | $ | — |
The loan restructured during the three months ended March 31, 2020 was on nonaccrual status at the end of the period, with the modifications primarily related to collateral concessions. Nonaccrual loans that are restructured remain on nonaccrual status, but may move to accrual status after they have performed according to the restructured terms for a period of time. The TDR classifications did not have a material impact on the Company’s determination of the allowance for credit losses – loans because the modified loans were evaluated for a specific reserve both before and after restructuring. There were no loans modified as a TDR within the previous 12 months that defaulted during the three months ended March 31, 2020 and 2019. For purposes of this disclosure, a loan modified as a TDR is considered to have defaulted when the borrower becomes 90 days past due. Collateral Dependent Loans Management has determined that specific commercial loans on nonaccrual status and all loans that have had their terms restructured in a troubled debt restructuring where repayment is expected to be provided substantially through the operation or sale of the collateral to be collateral dependent loans. The following table presents the amortized cost basis of collateral dependent loans by collateral type as of March 31, 2020 (in thousands):
|  | Collateral type |  |  |  |  |
|  | Business assets |  |  | Real property |  |  | Total |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | $ | 2,974 |  |  | $ | 4,571 |  |  | $ | 7,545 |
Commercial mortgage |  |  | — |  |  |  | 5,418 |  |  |  | 5,418 |
Total |  | $ | 2,974 |  |  | $ | 9,989 |  |  | $ | 12,963 |
(4.)LOANS (Continued) Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors such as the fair value of collateral. The Company analyzes commercial business and commercial mortgage loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The Company uses the following definitions for 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 or of the Company’s credit position 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 Company will sustain some loss if the deficiencies are not corrected. 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. Loans that do not meet the criteria above that are analyzed individually as part of the process described above are considered “uncriticized” or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics. The following table sets forth the Company’s commercial loan portfolio, categorized by internally assigned asset classification, as of the dates indicated (in thousands):
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | Prior |  |  | Revolving Loans Amortized Cost Basis |  |  | Revolving Loans Converted to Term |  |  | Total |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Business |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Uncriticized |  | $ | 44,451 |  |  | $ | 120,112 |  |  | $ | 99,167 |  |  | $ | 67,821 |  |  | $ | 15,277 |  |  | $ | 26,344 |  |  | $ | 195,088 |  |  | $ | — |  |  | $ | 568,260 |
Special mention |  |  | — |  |  |  | 2,706 |  |  |  | 231 |  |  |  | 1,688 |  |  |  | 218 |  |  |  | 181 |  |  |  | 4,284 |  |  |  | — |  |  |  | 9,308 |
Substandard |  |  | — |  |  |  | 194 |  |  |  | 1,173 |  |  |  | 867 |  |  |  | 453 |  |  |  | 4,200 |  |  |  | 4,407 |  |  |  | — |  |  |  | 11,294 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6 |  |  |  | — |  |  |  | 6 |
Total |  | $ | 44,451 |  |  | $ | 123,012 |  |  | $ | 100,571 |  |  | $ | 70,376 |  |  | $ | 15,948 |  |  | $ | 30,725 |  |  | $ | 203,785 |  |  | $ | — |  |  | $ | 588,868 |
Commercial Mortgage |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Uncriticized |  | $ | 46,283 |  |  | $ | 282,360 |  |  | $ | 214,637 |  |  | $ | 211,456 |  |  | $ | 109,525 |  |  | $ | 232,204 |  |  | $ | 529 |  |  | $ | — |  |  | $ | 1,096,994 |
Special mention |  |  | — |  |  |  | — |  |  |  | 35 |  |  |  | 41 |  |  |  | 1,013 |  |  |  | 250 |  |  |  | — |  |  |  | — |  |  |  | 1,339 |
Substandard |  |  | — |  |  |  | 2,446 |  |  |  | 229 |  |  |  | 1,625 |  |  |  | 157 |  |  |  | 4,387 |  |  |  | 199 |  |  |  | — |  |  |  | 9,043 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 46,283 |  |  | $ | 284,806 |  |  | $ | 214,901 |  |  | $ | 213,122 |  |  | $ | 110,695 |  |  | $ | 236,841 |  |  | $ | 728 |  |  | $ | — |  |  | $ | 1,107,376 |
(4.)LOANS (Continued) The Company utilizes payment status as a means of identifying and reporting problem and potential problem retail loans. The Company considers nonaccrual loans and loans past due greater than 90 days and still accruing interest to be non-performing. The following table sets forth the Company’s retail loan portfolio, categorized by payment status, as of the dates indicated (in thousands):
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | Prior |  |  | Revolving Loans Amortized Cost Basis |  |  | Revolving Loans Converted to Term |  |  | Total |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 28,479 |  |  | $ | 112,239 |  |  | $ | 105,772 |  |  | $ | 83,138 |  |  | $ | 79,834 |  |  | $ | 168,367 |  |  | $ | — |  |  | $ | — |  |  | $ | 577,829 |
Nonperforming |  |  | — |  |  |  | 109 |  |  |  | 584 |  |  |  | 85 |  |  |  | 178 |  |  |  | 1,015 |  |  |  | — |  |  |  | — |  |  |  | 1,971 |
Total |  | $ | 28,479 |  |  | $ | 112,348 |  |  | $ | 106,356 |  |  | $ | 83,223 |  |  | $ | 80,012 |  |  | $ | 169,382 |  |  | $ | — |  |  | $ | — |  |  | $ | 579,800 |
Residential Real Estate Lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 91,044 |  |  | $ | 10,926 |  |  | $ | 101,970 |
Nonperforming |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 46 |  |  |  | 97 |  |  |  | 143 |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 91,090 |  |  | $ | 11,023 |  |  | $ | 102,113 |
Consumer Indirect |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 75,304 |  |  | $ | 255,499 |  |  | $ | 227,717 |  |  | $ | 165,416 |  |  | $ | 79,736 |  |  | $ | 38,219 |  |  | $ | — |  |  | $ | — |  |  | $ | 841,891 |
Nonperforming |  |  | 25 |  |  |  | 441 |  |  |  | 576 |  |  |  | 366 |  |  |  | 289 |  |  |  | 80 |  |  |  | — |  |  |  | — |  |  |  | 1,777 |
Total |  | $ | 75,329 |  |  | $ | 255,940 |  |  | $ | 228,293 |  |  | $ | 165,782 |  |  | $ | 80,025 |  |  | $ | 38,299 |  |  | $ | — |  |  | $ | — |  |  | $ | 843,668 |
Other Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 1,646 |  |  | $ | 4,889 |  |  | $ | 2,868 |  |  | $ | 1,672 |  |  | $ | 730 |  |  | $ | 690 |  |  | $ | 2,907 |  |  | $ | — |  |  | $ | 15,402 |
Nonperforming |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 1,646 |  |  | $ | 4,889 |  |  | $ | 2,868 |  |  | $ | 1,672 |  |  | $ | 730 |  |  | $ | 690 |  |  | $ | 2,907 |  |  | $ | — |  |  | $ | 15,402 |
(4.)LOANS (Continued) Allowance for Credit Losses - Loans The following table sets forth the changes in the allowance for credit losses - loans for the three-month periods ended as of the dates indicated (in thousands):
|  | Commercial Business |  |  | Commercial Mortgage |  |  | Residential Real Estate Loans |  |  | Residential Real Estate Lines |  |  | Consumer Indirect |  |  | Other Consumer |  |  | Total |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses - loan: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance, prior to adoption of ASC 326 |  | $ | 11,358 |  |  | $ | 5,681 |  |  | $ | 1,059 |  |  | $ | 118 |  |  | $ | 11,852 |  |  | $ | 414 |  |  | $ | 30,482 |
Impact of adopting ASC 326 |  |  | (246 | ) |  |  | 7,310 |  |  |  | 3,290 |  |  |  | 607 |  |  |  | (1,234 | ) |  |  | (133 | ) |  |  | 9,594 |
Beginning balance, after adoption of ASC 326 |  |  | 11,112 |  |  |  | 12,991 |  |  |  | 4,349 |  |  |  | 725 |  |  |  | 10,618 |  |  |  | 281 |  |  |  | 40,076 |
Charge-offs |  |  | (8,241 | ) |  |  | — |  |  |  | (98 | ) |  |  | — |  |  |  | (3,424 | ) |  |  | (269 | ) |  |  | (12,032 | )
Recoveries |  |  | 58 |  |  |  | — |  |  |  | 10 |  |  |  | 3 |  |  |  | 1,668 |  |  |  | 150 |  |  |  | 1,889 |
Provision (credit) |  |  | 7,294 |  |  |  | 2,163 |  |  |  | 1,909 |  |  |  | 171 |  |  |  | 1,783 |  |  |  | 103 |  |  |  | 13,423 |
Ending balance |  | $ | 10,223 |  |  | $ | 15,154 |  |  | $ | 6,170 |  |  | $ | 899 |  |  | $ | 10,645 |  |  | $ | 265 |  |  | $ | 43,356 |
March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 14,312 |  |  | $ | 5,219 |  |  | $ | 1,112 |  |  | $ | 210 |  |  | $ | 12,572 |  |  | $ | 489 |  |  | $ | 33,914 |
Charge-offs |  |  | (130 | ) |  |  | — |  |  |  | (31 | ) |  |  | — |  |  |  | (2,982 | ) |  |  | (309 | ) |  |  | (3,452 | )
Recoveries |  |  | 103 |  |  |  | 17 |  |  |  | 6 |  |  |  | 2 |  |  |  | 1,424 |  |  |  | 120 |  |  |  | 1,672 |
Provision (credit) |  |  | (2,118 | ) |  |  | 1,080 |  |  |  | 178 |  |  |  | (39 | ) |  |  | 2,011 |  |  |  | 81 |  |  |  | 1,193 |
Ending balance |  | $ | 12,167 |  |  | $ | 6,316 |  |  | $ | 1,265 |  |  | $ | 173 |  |  | $ | 13,025 |  |  | $ | 381 |  |  | $ | 33,327 |
Evaluated for impairment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually |  | $ | 181 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 183 |
Collectively |  | $ | 11,986 |  |  | $ | 6,314 |  |  | $ | 1,265 |  |  | $ | 173 |  |  | $ | 13,025 |  |  | $ | 381 |  |  | $ | 33,144 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 552,834 |  |  | $ | 995,183 |  |  | $ | 525,036 |  |  | $ | 105,592 |  |  | $ | 872,410 |  |  | $ | 15,941 |  |  | $ | 3,066,996 |
Evaluated for impairment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually |  | $ | 725 |  |  | $ | 1,352 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,077 |
Collectively |  | $ | 552,109 |  |  | $ | 993,831 |  |  | $ | 525,036 |  |  | $ | 105,592 |  |  | $ | 872,410 |  |  | $ | 15,941 |  |  | $ | 3,064,919 |
(4.)LOANS (Continued) Risk Characteristics Commercial business loans primarily consist of loans to small to mid-sized businesses in our market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions, including the impact of the COVID-19 pandemic on small to mid-sized business in our market area, and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any. Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, potentially resulting in higher potential losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral securing the loan. Economic events, including the impact of the COVID-19 pandemic on the ability of the tenants to pay rent at these properties, or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Company’s commercial real estate loans and on the value of such properties. Residential real estate loans (comprised of conventional mortgages and home equity loans) and residential real estate lines (comprised of home equity lines) are generally made based on the borrower’s ability to make repayment from his or her employment and other income but are secured by real property whose value tends to be more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, including the impact of the COVID-19 pandemic on the employment income of these borrowers, the characteristics of individual borrowers, and the nature of the loan collateral. Consumer indirect and other consumer loans may entail greater credit risk than residential mortgage loans and home equities, particularly in the case of other consumer loans which are unsecured or, in the case of indirect consumer loans, secured by depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances such as job loss, illness or personal bankruptcy, including the heightened risk that such circumstances may arise as a result of the COVID-19 pandemic. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

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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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