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Note 8 - Loans and Related Allowance for Loan and Lease Losses

9 Months Ended

Sep. 30, 2020

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

NOTE 8 - LOANS AND RELATED ALLOWANCE FOR LOAN AND LEASE LOSSES

The Company’s primary business activity is with customers located within its local Northeastern Ohio trade area, eastern Geauga County, and contiguous counties. The Company also serves the central Ohio market with offices in Dublin, Plain City, Powell, Sunbury, and Westerville, Ohio. Commercial, residential, consumer, and agricultural loans are granted. Although the Company has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in the Company’s immediate trade area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances net of the allowance for loan and lease losses. Interest income is recognized on the accrual method. The accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of interest is doubtful. Interest payments received on nonaccrual loans are applied against the unpaid principal balance until accrual status is restored.

Loan origination fees and certain direct loan origination costs are deferred with the net amount amortized over the contractual life of the loan as an adjustment of the related loan’s yield.

The following tables summarize the primary segments of the loan portfolio and allowance for loan and lease losses (in thousands):

September 30, 2020
Impairment Evaluation
	Individually		Collectively		Total Loans
Loans:
Commercial real estate:
Owner occupied	$	2,300	$	105,042	$	107,342
Non-owner occupied		11,138		299,374		310,512
Multifamily		-		39,622		39,622
Residential real estate		1,225		221,012		222,237
Commercial and industrial		1,624		256,689		258,313
Home equity lines of credit		248		114,975		115,223
Construction and other		-		60,613		60,613
Consumer installment		-		10,534		10,534
Total	$	16,535	$	1,107,861	$	1,124,396

December 31, 2019
Impairment Evaluation
	Individually		Collectively		Total Loans
Loans:
Commercial real estate:
Owner occupied	$	3,474	$	98,912	$	102,386
Non-owner occupied		7,084		295,096		302,180
Multifamily		-		62,028		62,028
Residential real estate		1,278		233,520		234,798
Commercial and industrial		882		88,645		89,527
Home equity lines of credit		351		111,897		112,248
Construction and other		-		66,680		66,680
Consumer installment		1		14,410		14,411
Total	$	13,070	$	971,188	$	984,258

The commercial and industrial loan portfolio as of September 30, 2020 includes $143.8 million in loans issued through the Paycheck Protection Program (PPP) (see Note 10).

The amounts above include net deferred loan origination fees of $5.6 million and $1.3 million at September 30, 2020 and December 31, 2019, respectively. The net deferred loan origination fees at September 30, 2020 include $3.3 million of unearned deferred fees from PPP loans.

September 30, 2020
Ending Allowance Balance Attributable to Loans:
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total Allocation
Loans:
Commercial real estate:
Owner occupied	$	10	$	1,093	$	1,103
Non-owner occupied		403		5,002		5,405
Multifamily		-		346		346
Residential real estate		21		1,350		1,371
Commercial and industrial		60		1,443		1,503
Home equity lines of credit		21		1,305		1,326
Construction and other		-		293		293
Consumer installment		-		12		12
Total	$	515	$	10,844	$	11,359

December 31, 2019
Ending Allowance Balance Attributable to Loans:
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total Allocation
Loans:
Commercial real estate:
Owner occupied	$	45	$	756	$	801
Non-owner occupied		582		2,800		3,382
Multifamily		-		340		340
Residential real estate		28		698		726
Commercial and industrial		3		453		456
Home equity lines of credit		2		930		932
Construction and other		-		103		103
Consumer installment		-		28		28
Total	$	660	$	6,108	$	6,768

The Company’s loan portfolio is segmented to a level that allows management to monitor risk and performance. The portfolio is segmented into Commercial Real Estate (“CRE”) which is further segmented into Owner Occupied (“CRE OO”), Non-owner Occupied (“CRE NOO”), and Multifamily Residential, Residential Real Estate (“RRE”), Commercial and Industrial (“C&I”), Home Equity Lines of Credit (“HELOC”), Construction and Other (“Construction”), and Consumer Installment Loans. The commercial real estate loan segments consist of loans made for the purpose of financing the activities of commercial real estate owners and operators. The residential real estate and HELOC loan segments consist of loans made for the purpose of financing the activities of residential homeowners. The C&I loan segment consists of loans made for the purpose of financing the activities of commercial customers. Although PPP loans are included with C&I loans, the nature of PPP loans differs considerably from the rest of the category. Loans funded through the PPP program are fully guaranteed by the U.S. government. This guarantee exists at the inception of the loans and throughout the lives of the loans and was not entered into separately and apart from the loans. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts. The increases in the allowance for loan loss for the CRE, RRE, C&I, HELOC, and Construction portfolios were partially offset by a decrease in the allowance for the Consumer Installment portfolios.

Management evaluates individual loans in all of the commercial segments for possible impairment based on guidance established by the Board of Directors. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or the loan was modified in a troubled debt restructuring.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of the following methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

The following tables present impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary (in thousands):

September 30, 2020
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial real estate:
Owner occupied	$	1,844	$	1,863	$	-
Non-owner occupied		7,518		7,518		-
Residential real estate		797		927		-
Commercial and industrial		1,336		1,833		-
Home equity lines of credit		81		93		-
Total	$	11,576	$	12,234	$	-

With an allowance recorded:
Commercial real estate:
Owner occupied	$	456	$	456	$	10
Non-owner occupied		3,620		3,894		403
Residential real estate		428		428		21
Commercial and industrial		288		288		60
Home equity lines of credit		167		167		21
Total	$	4,959	$	5,233	$	515

Total:
Commercial real estate:
Owner occupied	$	2,300	$	2,319	$	10
Non-owner occupied		11,138		11,412		403
Residential real estate		1,225		1,355		21
Commercial and industrial		1,624		2,121		60
Home equity lines of credit		248		260		21
Total	$	16,535	$	17,467	$	515

December 31, 2019
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial real estate:
Owner occupied	$	1,772	$	1,772	$	-
Non-owner occupied		3,845		3,845		-
Residential real estate		759		829		-
Commercial and industrial		747		1,524		-
Home equity lines of credit		220		228		-
Consumer installment		1		1		-
Total	$	7,344	$	8,199	$	-

With an allowance recorded:
Commercial real estate:
Owner occupied	$	1,702	$	1,713	$	45
Non-owner occupied		3,239		3,239		582
Residential real estate		519		569		28
Commercial and industrial		135		135		3
Home equity lines of credit		131		131		2
Total	$	5,726	$	5,787	$	660

Total:
Commercial real estate:
Owner occupied	$	3,474	$	3,485	$	45
Non-owner occupied		7,084		7,084		582
Residential real estate		1,278		1,398		28
Commercial and industrial		882		1,659		3
Home equity lines of credit		351		359		2
Consumer installment		1		1		-
Total	$	13,070	$	13,986	$	660

The tables above include troubled debt restructuring totaling $2.9 million and $3.6 million as of September 30, 2020 and December 31, 2019, respectively. The amounts allocated within the allowance for losses for troubled debt restructurings was $36,000 and $33,000 at September 30, 2020 and December 31, 2019, respectively.

The following tables present the average balance and interest income by class, recognized on impaired loans (in thousands):

	For the Three Months Ended September 30, 2020				For the Nine Months Ended September 30, 2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

Commercial real estate:
Owner occupied	$	2,893	$	-	$	3,173	$	55
Non-owner occupied		12,912		129		9,988		387
Residential real estate		1,242		14		1,229		39
Commercial and industrial		1,376		28		1,136		49
Home equity lines of credit		298		1		323		5
Consumer installment		-		-		1		-
Total	$	18,721	$	172	$	15,850	$	535

	For the Three Months Ended September 30, 2019				For the Nine Months Ended September 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

Commercial real estate:
Owner occupied	$	3,548	$	35	$	3,891	$	107
Non-owner occupied		7,796		60		6,426		179
Residential real estate		1,632		14		1,713		37
Commercial and industrial		1,786		20		1,992		44
Home equity lines of credit		150		-		134		1
Construction and other		-		-		810		-
Consumer installment		2		-		2		-
Total	$	14,914	$	129	$	14,968	$	368

Management uses a nine-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized and are aggregated as Pass rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but have potential weaknesses, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan-rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as payment delinquency, bankruptcy, repossession, or death, occurs to raise awareness of a possible credit quality event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Credit Department performs an annual review of all commercial relationships with loan balances of $500,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Company engages an external consultant to conduct loan reviews on a semiannual basis. Generally, the external consultant reviews commercial relationships greater than $250,000 and criticized relationships greater than $150,000. Detailed reviews, including plans for resolution, are performed on criticized loans on at least a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The primary risk of commercial and industrial loans is related to deterioration in the cash flow of the business that may result in the liquidation of the business assets securing the loan. C&I loans are, by nature, secured by less substantial collateral than real estate-secured loans. The primary risk of real estate construction loans is potential delays and disputes during the completion process. The primary risk of residential real estate loans is current economic uncertainties. The primary risk of commercial real estate loans is loss of income of the owner or occupier of the property and the inability of the market to sustain rent levels. Consumer installment loans historically have experienced higher delinquency rates. Consumer installments are typically secured by less substantial collateral than other types of credits.

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk-rating system (in thousands):

			Special						Total
September 30, 2020	Pass		Mention		Substandard		Doubtful		Loans

Commercial real estate:
Owner occupied	$	101,389	$	3,751	$	2,202	$	-	$	107,342
Non-owner occupied		283,379		1,761		25,372		-		310,512
Multifamily		39,622		-		-		-		39,622
Residential real estate		218,450		270		3,517		-		222,237
Commercial and industrial		253,197		2,620		2,496		-		258,313
Home equity lines of credit		113,884		-		1,339		-		115,223
Construction and other		60,613		-		-		-		60,613
Consumer installment		10,522		-		12		-		10,534
Total	$	1,081,056	$	8,402	$	34,938	$	-	$	1,124,396

			Special						Total
December 31, 2019	Pass		Mention		Substandard		Doubtful		Loans

Commercial real estate:
Owner occupied	$	95,518	$	3,951	$	2,917	$	-	$	102,386
Non-owner occupied		292,192		3,038		6,950		-		302,180
Multifamily		62,028		-		-		-		62,028
Residential real estate		231,633		420		2,745		-		234,798
Commercial and industrial		84,136		3,619		1,772		-		89,527
Home equity lines of credit		111,354		-		894		-		112,248
Construction and other		66,680		-		-		-		66,680
Consumer installment		14,398		-		13		-		14,411
Total	$	957,939	$	11,028	$	15,291	$	-	$	984,258

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

Nonperforming assets are nonaccrual loans including nonaccrual troubled debt restructurings (“TDR”), loans 90 days or more past due, other real estate owned, and repossessed assets. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectability of interest and principal. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of principal and interest is doubtful. Payments received on nonaccrual loans are applied against the principal balance.

The following tables present the aging of the recorded investment in past-due loans by class of loans (in thousands):

			30-59 Days		60-89 Days		90 Days+		Total		Total
September 30, 2020	Current		Past Due		Past Due		Past Due		Past Due		Loans

Commercial real estate:
Owner occupied	$	106,416	$	61	$	177	$	688	$	926	$	107,342
Non-owner occupied		306,800		2,379		739		594		3,712		310,512
Multifamily		39,622		-		-		-		-		39,622
Residential real estate		219,234		1,224		342		1,437		3,003		222,237
Commercial and industrial		257,784		320		127		82		529		258,313
Home equity lines of credit		115,025		93		55		50		198		115,223
Construction and other		60,613		-		-		-		-		60,613
Consumer installment		10,169		170		5		190		365		10,534
Total	$	1,115,663	$	4,247	$	1,445	$	3,041	$	8,733	$	1,124,396

			30-59 Days		60-89 Days		90 Days+		Total		Total
December 31, 2019	Current		Past Due		Past Due		Past Due		Past Due		Loans

Commercial real estate:
Owner occupied	$	101,264	$	64	$	-	$	1,058	$	1,122	$	102,386
Non-owner occupied		298,941		-		-		3,239		3,239		302,180
Multifamily		62,028		-		-		-		-		62,028
Residential real estate		232,518		1,439		34		807		2,280		234,798
Commercial and industrial		88,965		190		66		306		562		89,527
Home equity lines of credit		111,792		274		29		153		456		112,248
Construction and other		66,680		-		-		-		-		66,680
Consumer installment		13,378		622		216		195		1,033		14,411
Total	$	975,566	$	2,589	$	345	$	5,758	$	8,692	$	984,258

The following tables present the recorded investment in nonaccrual loans and loans past due over 89 days and still on accrual by class of loans (in thousands):

September 30, 2020	Nonaccrual		90+ Days Past Due and Accruing

Commercial real estate:
Owner occupied	$	1,138	$	-
Non-owner occupied		594		-
Residential real estate		3,462		-
Commercial and industrial		400		-
Home equity lines of credit		859		-
Consumer installment		237		-
Total	$	6,690	$	-

December 31, 2019	Nonaccrual		90+ Days Past Due and Accruing

Commercial real estate:
Owner occupied	$	1,162	$	-
Non-owner occupied		3,289		-
Residential real estate		2,576		-
Commercial and industrial		946		-
Home equity lines of credit		709		-
Consumer installment		197		-
Total	$	8,879	$	-

Interest income that would have been recorded had these loans not been placed on nonaccrual status was $112,000 for the three months ended September 30, 2020 and $47,000 for the three months ended December 31, 2019. Interest income that would have been recorded had these loans not been placed on nonaccrual status was $215,000 for the nine months ended September 30, 2020 and $342,000 for the year ended December 31, 2019.

An allowance for loan and lease losses (“ALLL”) is maintained to absorb losses from the loan portfolio. The ALLL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans.

The Company’s methodology for determining the ALLL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Company’s ALLL. Management also performs impairment analyses on TDRs, which may result in specific reserves.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors.

The classes described above, which are based on the purpose code assigned to each loan, provide the starting point for the ALLL analysis. Management tracks the historical net charge-off activity at the call code level. The historical charge-off factor was calculated using the last twelve consecutive historical quarters.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and nonaccrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL.

The following tables summarize the ALLL within the primary segments of the loan portfolio and the activity within those segments (in thousands):

	For the nine months ended September 30, 2020
	Allowance for Loan and Lease Losses
	Balance									Balance
	December 31, 2019		Charge-offs			Recoveries		Provision		September 30, 2020
Loans:
Commercial real estate:
Owner occupied	$	801	$	(50	)	$	15	$	337	$	1,103
Non-owner occupied		3,382		(3,022	)		73		4,972		5,405
Multifamily		340		-			-		6		346
Residential real estate		726		(51	)		30		666		1,371
Commercial and industrial		456		(185	)		268		964		1,503
Home equity lines of credit		932		(54	)		65		383		1,326
Construction and other		103		-			146		44		293
Consumer installment		28		(396	)		12		368		12
Total	$	6,768	$	(3,758	)	$	609	$	7,740	$	11,359

	For the nine months ended September 30, 2019
	Allowance for Loan and Lease Losses
	Balance										Balance
	December 31, 2018		Charge-offs			Recoveries		Provision			September 30, 2019
Loans:
Commercial real estate:
Owner occupied	$	1,315	$	(31	)	$	3	$	(450	)	$	837
Non-owner occupied		2,862		-			-		622			3,484
Multifamily		474		-			-		(85	)		389
Residential real estate		761		(361	)		44		288			732
Commercial and industrial		969		(393	)		55		(242	)		389
Home equity lines of credit		820		(156	)		28		249			941
Construction and other		100		-			57		(52	)		105
Consumer installment		127		(110	)		7		100			124
Total	$	7,428	$	(1,051	)	$	194	$	430		$	7,001

	For the three months ended September 30, 2020
	Allowance for Loan and Lease Losses
	Balance										Balance
	June 30, 2020		Charge-offs			Recoveries		Provision			September 30, 2020
Loans:
Commercial real estate:
Owner occupied	$	1,038	$	-		$	1	$	64		$	1,103
Non-owner occupied		5,159		(3,021	)		-		3,267			5,405
Multifamily		291		-			-		55			346
Residential real estate		1,167		-			-		204			1,371
Commercial and industrial		1,105		(16	)		29		385			1,503
Home equity lines of credit		1,203		-			49		74			1,326
Construction and other		236		-			111		(54	)		293
Consumer installment		11		(6	)		2		5			12
Total	$	10,210	$	(3,043	)	$	192	$	4,000		$	11,359

	For the three months ended September 30, 2019
	Allowance for Loan and Lease Losses
	Balance										Balance
	June 30, 2019		Charge-offs			Recoveries		Provision			September 30, 2019
Loans:
Commercial real estate:
Owner occupied	$	866	$	-		$	1	$	(30	)	$	837
Non-owner occupied		3,588		-			-		(104	)		3,484
Multifamily		412		-			-		(23	)		389
Residential real estate		747		(360	)		4		341			732
Commercial and industrial		539		(38	)		16		(128	)		389
Home equity lines of credit		936		(18	)		22		1			941
Construction and other		97		-			11		(3	)		105
Consumer installment		119		(22	)		1		26			124
Total	$	7,304	$	(438	)	$	55	$	80		$	7,001

The provision fluctuations during the nine-month period ended September 30, 2020 allocated to:

●

a $2.2 million increase in all lending categories’ qualitative factors during the second and third quarters of 2020 due to the economic uncertainty resulting from the COVID-19 pandemic.

●

owner occupied, non-owner occupied, and commercial and industrial loans are due to an increase in substandard rated credits.

●

non-owner occupied portfolio are also due to the increase of specific reserves for two relationships totaling $1.3 million.

●

commercial and industrial loans are due to growth in loan volume along with an allocation for the PPP loans in the amount of $423,000.

●

residential real estate loans are due to an increase in delinquent residential mortgages.

●

consumer installment loans are due to a large number of student loans that were charged off earlier in the year.

The provision fluctuations during the nine-month period ended September 30, 2019 allocated to:

●

commercial and industrial loans are due to the charge-off of a large relationship of $336,000 from a previous reserve of $358,000 in the first quarter.

●

residential real estate and home equity lines of credit loans are due to charge-offs and portfolio growth.

●

non-owner occupied loans are due to the reclassification of a large construction loan, with a first quarter reserve of $661,000, from construction and other.

The provision fluctuations during the three-month period ended September 30, 2020 allocated to:

●

owner occupied, non-owner occupied, and commercial and industrial loans are due to an increase in substandard rated credits.

●

residential real estate loans are due to an increase in delinquent residential mortgages.

●

non-owner occupied loans are due to the increase in specific reserve and subsequent $3.0 million charge-off of the resolved asset purchased at Sheriff's Sale and booked to OREO for $7.0 million.

The provision fluctuation during the three-month period ended September 30, 2019 allocated to:

●

commercial and industrial loans and commercial real estate loans are due to decreases in volume within these portfolios during the quarter.

●

residential real estate portfolio are due to a strong growth in this portfolio during the quarter.

TDR describes loans on which the bank has granted concessions for reasons related to the customer’s financial difficulties. Such concessions may include one or more of the following:

●

reduction in the interest rate to below-market rates

●

extension of repayment requirements beyond normal terms

●

reduction of the principal amount owed

●

reduction of accrued interest due

●

acceptance of other assets in full or partial payment of a debt

In each case, the concession is made due to deterioration in the borrower’s financial condition, and the new terms are less stringent than those required on a new loan with similar risk. See Note 10 of the financial statements for disclosure of COVID-19 loan forbearance programs.

Additionally, on April 7, 2020, federal banking regulators issued a revised interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The agencies confirmed in working with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.

The following tables summarize troubled debt restructurings that did not meet the exemption criteria above (in thousands):

	For the Three Months Ended
	September 30, 2020
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		1		-		1	$	115	$	115
Commercial and industrial		1		-		1		2		2

	For the Nine Months Ended
	September 30, 2020
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		3		-		3	$	156	$	156
Commercial and industrial		3		-		3		120		119

For the Three Months Ended

September 30, 2019

Number of Contracts

Pre-Modification

Post-Modification

Term

Outstanding Recorded

Troubled Debt Restructurings

Modification

Other

Total

Investment

Residential real estate

For the Nine Months Ended