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Loans Receivable and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2020
Loans Receivable and Allowance for Loan Losses [Abstract]  
Loans Receivable and Allowance for Loan Losses Note 7 - Loans Receivable and Allowance for Loan Losses

The following tables present the recorded investment in loans receivable as of March 31, 2020 and December 31, 2019 by segment and class:

March 31, 2020

December 31, 2019

(In Thousands)

Residential one-to-four family

$

268,137 

$

248,381 

Commercial and multi-family

1,577,816 

1,606,976 

Construction

101,692 

104,996 

Commercial business(1)

177,146 

177,642 

Home equity(2)

64,857 

64,638 

Consumer

1,029 

682 

2,190,677 

2,203,315 

Less:

Deferred loan fees, net

(1,086)

(1,174)

Allowance for loan losses

(25,534)

(23,734)

Sub-total

(26,620)

(24,908)

Total Loans, net

$

2,164,057 

$

2,178,407 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Purchased Credit Impaired Loans

The carrying value of loans acquired in the IAB acquisition and accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $1.4 million at March 31, 2020, and $3.8 million at December 31, 2019. Under ASC Subtopic 310-30, these loans, referred to as purchased credit impaired (“PCI”) loans, may be aggregated and accounted for as pools of loans if the loans being aggregated have common risk characteristics. The Company elected to account for the loans with evidence of credit deterioration individually rather than aggregate them into pools. The difference between the undiscounted cash flows expected at acquisition and the investment in the acquired loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non- accretable difference,” are not recognized as a yield adjustment, as a loss accrual or as a valuation allowance. The balance of these loans from other, prior acquisitions was not material.

Increases in expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield on the loans over the remaining life, while decreases in expected cash flows are recognized as impairments through a loss provision and an increase in the allowance for loan and lease losses. Valuation allowances (recognized in the allowance for loan and lease losses) on these impaired loans reflect only losses incurred after the acquisition (representing all cash flows that were expected at acquisition but currently are not expected to be received).

The following table presents changes in the accretable discount on loans acquired with deteriorated credit quality for which the Company applies the provisions of ASC 310-30 (in thousands):

Three months ended March 31, 2020

Three months ended March 31, 2019

Balance, beginning of Period

$

1,681 

$

2,704 

Accretion recorded to interest income

(145)

(253)

Balance, end of Period

$

1,536 

$

2,451 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the unpaid principal balance and the related recorded investment of acquired loans included in the Company’s Consolidated Statements of Financial Condition. (In thousands):

March 31,

December 31,

2020

2019

Unpaid principal balance

$

214,773 

$

226,333 

Recorded investment

183,208 

192,826 

Allowance for Loan Losses

The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a general allocated reserve for performing loans, a specific reserve for impaired loans and an unallocated portion.  

The Company consistently applies the following comprehensive methodology. During the quarterly review of the allowance for loan losses, the Company considers a variety of qualitative factors that include:

Lending Policies and Procedures

Personnel responsible for the particular portfolio - relative to experience and ability of staff

Trend for past due, criticized and classified loans

Relevant economic factors

Quality of the loan review system

Value of collateral for collateral dependent loans

The effect of any concentrations of credit and the changes in the level of such concentrations

Other external factors

The methodology includes the segregation of the loan portfolio into two divisions. Loans that are performing and loans that are impaired. Loans which are performing are evaluated by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent, troubled debt restructured, or adversely classified. These loans are individually evaluated for loan loss either by current appraisal, or net present value. Management reviews the overall estimate for feasibility and establishes the loan loss provision accordingly.

The loan portfolio is segmented into the following loan segments, where the risk level for each class is analyzed when determining the allowance for loan losses:

Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential real estate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying properties may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower.

Commercial and multi-family real estate lending entails additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as economic conditions generally.

Construction lending is generally considered to involve a high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In many cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance.

Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the collateral value securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower. Home equity line of credit lending entails securing an equity interest in the borrower’s home. In many cases, the Bank’s position in these loans is as a junior lien holder to another institution’s superior lien. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

Other consumer loans generally have more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In many cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan. An unallocated component is maintained to cover uncertainties that could affect management’s estimates of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

The impact of COVID-19 on companies is evolving rapidly and its future effects are uncertain. Although several of the Company’s asset quality metrics have not significantly been adversely affected during the first quarter of 2020, management determined it is prudent to increase its loan loss reserves through the addition of $1.5 million in loan loss provisions for the quarter ended March 31, 2020. This compares to a credit to the provision for loan losses of $475,000 during the previous quarter and an $889,000 provision for loan losses in the first quarter a year ago. The loan loss reserve to total loans ratio was 1.17 percent at March 31, 2020 compared to 0.99 percent at March 31, 2019. The increased reserve includes provisions taken in response to changes in risks associated with loan classification assignments and a slowing

economy in New Jersey and New York. The Bank considered qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral and the financial strength of the borrower. All of these factors are likely to be affected by the COVID-19 pandemic.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2020, and the related portion of the allowances for loan losses that is allocated to each loan class, as of March 31, 2020 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Originated Loans:

$

2,422 

$

15,235 

$

1,244 

$

2,945 

$

330 

$

-

$

273 

$

22,449 

Acquired loans initially recorded at fair value:

261 

58 

-

803 

-

-

-

1,122 

Acquired loans with deteriorated credit:

39 

79 

-

42 

3 

-

-

163 

Beginning Balance, January 1, 2020

2,722 

15,372 

1,244 

3,790 

333 

-

273 

23,734 

Charge-offs:

Originated Loans:

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value:

4 

-

-

-

-

-

-

4 

Sub-total:

4 

-

-

-

-

-

-

4 

Recoveries:

Originated Loans:

-

-

-

302 

-

-

-

302 

Acquired loans initially recorded at fair value:

-

-

-

-

2 

-

-

2 

Sub-total:

-

-

-

302 

2 

-

-

304 

Provisions:

Originated Loans:

365 

(368)

(139)

(243)

291 

5 

1,489 

1,400 

Acquired loans initially recorded at fair value:

49 

5 

-

107 

(2)

-

-

159 

Acquired loans with deteriorated credit:

(1)

(60)

-

1 

1 

-

-

(59)

Sub-total:

413 

(423)

(139)

(135)

290 

5 

1,489 

1,500 

Totals:

Originated Loans:

2,787 

14,867 

1,105 

3,004 

621 

5 

1,762 

24,151 

Acquired loans initially recorded at fair value:

306 

63 

-

910 

-

-

-

1,279 

Acquired loans with deteriorated credit:

38 

19 

-

43 

4 

-

-

104 

Ending Balance, March 31, 2020

$

3,131 

$

14,949 

$

1,105 

$

3,957 

$

625 

$

5 

$

1,762 

$

25,534 

Ending Balance attributable to loans:

Individually evaluated for impairment

$

354 

$

332 

$

-

$

2,524 

$

22 

$

-

$

-

$

3,232 

Collectively evaluated for impairment

2,777 

14,617 

1,105 

1,433 

603 

5 

1,762 

22,302 

Totals:

$

3,131 

$

14,949 

$

1,105 

$

3,957 

$

625 

$

5 

$

1,762 

$

25,534 

Loans Receivable:

Originated Loans:

$

232,892 

$

1,463,122 

$

101,692 

$

157,351 

$

51,393 

$

1,019 

$

-

$

2,007,469 

Acquired loans initially recorded at fair value:

33,905 

113,973 

-

18,888 

13,230 

10 

-

180,006 

Acquired loans with deteriorated credit:

1,340 

721 

-

907 

234 

-

-

3,202 

Total Gross Loans:

$

268,137 

$

1,577,816 

$

101,692 

$

177,146 

$

64,857 

$

1,029 

$

-

$

2,190,677 

Ending Balance: Loans individually

evaluated for impairment:

Originated Loans:

$

2,896 

$

3,901 

$

-

$

2,089 

$

1,007 

$

-

$

-

$

9,893 

Acquired loans initially recorded at fair value:

4,099 

5,273 

-

512 

285 

-

-

10,169 

Acquired loans with deteriorated credit:

1,340 

721 

-

865 

34 

-

-

2,960 

Loans individually

evaluated for impairment:

$

8,335 

$

9,895 

$

-

$

3,466 

$

1,326 

$

-

$

-

$

23,022 

Ending Balance: Loans collectively

evaluated for impairment:

Originated Loans:

$

229,996 

$

1,459,221 

$

101,692 

$

155,262 

$

50,386 

$

1,019 

$

-

$

1,997,576 

Acquired loans initially recorded at fair value:

29,806 

108,700 

-

18,376 

12,945 

10 

-

169,837 

Acquired loans with deteriorated credit:

-

-

-

42 

200 

-

-

242 

Loans collectively

evaluated for impairment:

$

259,802 

$

1,567,921 

$

101,692 

$

173,680 

$

63,531 

$

1,029 

$

-

$

2,167,655 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2019 (in thousands).

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Originated Loans:

$

2,374 

$

14,000 

$

1,003 

$

3,869 

$

313 

$

2 

$

189 

$

21,750 

Acquired loans initially recorded at fair value:

335 

-

-

-

-

-

-

335 

Acquired loans with deteriorated credit:

39 

168 

-

64 

3 

-

-

274 

Beginning Balance, January 1, 2019

2,748 

14,168 

1,003 

3,933 

316 

2 

189 

22,359 

Charge-offs:

Originated Loans:

-

111 

-

145 

-

-

-

256 

Sub-total:

-

111 

-

145 

-

-

-

256 

Recoveries:

Originated Loans:

-

-

-

9 

-

-

-

9 

Acquired loans initially recorded at fair value:

-

-

-

-

3 

-

-

3 

Sub-total:

-

-

-

9 

3 

-

-

12 

Provisions:

Originated Loans:

97 

1,188 

206 

(405)

(48)

(2)

(157)

879 

Acquired loans initially recorded at fair value:

69 

-

-

-

(3)

-

-

66 

Acquired loans with deteriorated credit:

(7)

(24)

-

(25)

-

-

-

(56)

Sub-total:

159 

1,164 

206 

(430)

(51)

(2)

(157)

889 

Totals:

Originated Loans:

2,471 

15,077 

1,209 

3,328 

265 

-

32 

22,382 

Acquired loans initially recorded at fair value:

404 

-

-

-

-

-

-

404 

Acquired loans with deteriorated credit:

32 

144 

-

39 

3 

-

-

218 

Ending Balance, March 31, 2019

$

2,907 

$

15,221 

$

1,209 

$

3,367 

$

268 

$

-

$

32 

$

23,004 

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the amount recorded in loans receivable at December 31, 2019. The table also details the amount of total loans receivable that are evaluated individually, and collectively, for impairment and the related portion of the allowance for loan losses that is allocated to each loan class (in thousands).

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for credit losses:

Originated Loans:

$

2,374 

$

14,000 

$

1,003 

$

3,869 

$

313 

$

2 

$

189 

$

21,750 

Acquired loans initially recorded at fair value:

335 

-

-

-

-

-

-

335 

Acquired loans with deteriorated credit:

39 

168 

-

64 

3 

-

-

274 

Beginning Balance, January 1, 2019

2,748 

14,168 

1,003 

3,933 

316 

2 

189 

22,359 

Charge-offs:

Originated Loans:

1 

111 

-

145 

-

-

-

257 

Acquired loans initially recorded at fair value:

65 

118 

-

303 

-

-

-

486 

Sub-total:

66 

229 

-

448 

-

-

-

743 

Recoveries:

Originated Loans:

-

-

-

15 

-

-

-

15 

Acquired loans recorded at fair value:

3 

10 

-

5 

16 

-

-

34 

Sub-total:

3 

10 

-

20 

16 

-

-

49 

Provisions:

Originated Loans:

49 

1,346 

241 

(794)

17 

(2)

84 

941 

Acquired loans initially recorded at fair value:

(12)

166 

-

1,101 

(16)

-

-

1,239 

Acquired loans with deteriorated credit:

-

(89)

-

(22)

-

-

-

(111)

Sub-total:

37 

1,423 

241 

285 

1 

(2)

84 

2,069 

Totals:

Originated Loans:

2,422 

15,235 

1,244 

2,945 

330 

-

273 

22,449 

Acquired loans initially recorded at fair value:

261 

58 

-

803 

-

-

-

1,122 

Acquired loans with deteriorated credit:

39 

79 

-

42 

3 

-

-

163 

Ending Balance, December 31, 2019

$

2,722 

$

15,372 

$

1,244 

$

3,790 

$

333 

$

-

$

273 

$

23,734 

Ending Balance attributable to loans:

Individually evaluated for impairment:

380 

342 

-

2,518 

24 

-

-

3,264 

Collectively evaluated for impairment:

2,342 

15,030 

1,244 

1,272 

309 

-

273 

20,470 

Totals:

$

2,722 

$

15,372 

$

1,244 

$

3,790 

$

333 

$

-

$

273 

$

23,734 

Loans Receivable:

Originated Loans:

$

212,020 

$

1,485,286 

$

104,996 

$

157,413 

$

50,100 

$

674 

$

-

$

2,010,489 

Acquired Loans:

35,010 

118,577 

-

19,319 

14,302 

8 

-

187,216 

Acquired loans with deteriorated credit:

1,351 

3,113 

-

910 

236 

-

-

5,610 

Total Gross Loans:

$

248,381 

$

1,606,976 

$

104,996 

$

177,642 

$

64,638 

$

682 

$

-

$

2,203,315 

Ending Balance: Loans individually

evaluated for impairment:

Originated Loans:

$

2,983 

$

4,469 

$

-

$

2,511 

$

963 

$

-

$

-

$

10,926 

Acquired Loans:

4,121 

5,649 

-

560 

288 

-

-

10,618 

Acquired loans with deteriorated credit:

1,351 

3,113 

-

867 

37 

-

-

5,368 

Loans individually evaluated for impairment:

$

8,455 

$

13,231 

$

-

$

3,938 

$

1,288 

$

-

$

-

$

26,912 

Ending Balance: Loans collectively evaluated for impairment:

Originated Loans:

$

209,037 

$

1,480,817 

$

104,996 

$

154,902 

$

49,137 

$

674 

$

-

$

1,999,563 

Acquired Loans:

30,889 

112,928 

-

18,759 

14,014 

8 

-

176,598 

Acquired loans with deteriorated credit:

-

-

-

43 

199 

-

-

242 

Loans collectively evaluated for impairment:

$

239,926 

$

1,593,745 

$

104,996 

$

173,704 

$

63,350 

$

682 

$

-

$

2,176,403 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three months ended March 31, 2020 and 2019 (In thousands):

Three Months Ended March 31,

2020

2020

2019

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Originated loans

Investment

Recognized

Investment

Recognized

with no related allowance recorded:

Residential one-to-four family

$

1,995 

$

20 

$

3,073 

$

28 

Commercial and Multi-family

4,185 

45 

12,221 

134 

Commercial business(1)

1,055 

41 

1,063 

42 

Home equity(2)

608 

6 

758 

6 

Sub-total:

$

7,843

$

112

$

17,115

$

210

Acquired loans initially recorded at fair value

with no related allowance recorded:

Residential one-to-four family

$

1,838 

$

18 

$

2,753 

$

25 

Commercial and Multi-family

4,220 

47 

3,946 

55 

Commercial business(1)

92 

-

53 

1 

Home equity(2)

204 

3 

230 

3 

Consumer

-

-

11 

-

Sub-total

$

6,354

$

68

$

6,993

$

84

Acquired loans with deteriorated credit

with no related allowance recorded:

Residential one-to-four family(3)

$

823 

$

14 

$

1,019 

$

16 

Commercial and Multi-family(3)

1,917 

7 

6,050 

6 

Commercial business(1)(3)

866 

2 

785 

-

Home equity(2)(3)

36 

-

48 

-

Sub-total:

$

3,642

$

23

$

7,902

$

22

Total Impaired Loans

with no related allowance recorded:

$

17,839

$

203

$

32,010

$

316

__________

(1)Includes business lines of credit.

(2)Includes home equity lines of credit.

(3)Does not include accretable yield on loans acquired with deteriorated credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three months ended March 31, 2020 and 2019. (In thousands):

Three Months Ended March 31,

2020

2020

2019

2019

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Originated loans

Investment

Recognized

Investment

Recognized

with an allowance recorded:

Residential one-to-four family

$

945 

$

8 

$

2,941 

$

25 

Commercial and Multi-family

-

-

56 

-

Commercial business(1)

1,245 

3 

865 

27 

Home equity(2)

377 

3 

153 

2 

Sub-total:

$

2,567

$

14

$

4,015

$

54

Acquired loans initially recorded at fair value

with an allowance recorded:

Residential one-to-four family

$

2,273 

$

26 

$

3,146 

$

24 

Commercial and Multi-family

1,241 

20 

912 

4 

Commercial business(1)

445 

-

-

-

Home equity(2)

83 

1 

84 

2 

Sub-total:

$

4,042

$

47 

$

4,142

$

30

Acquired loans with deteriorated credit

with an allowance recorded:

Residential one-to-four family(3)

$

523 

$

7 

$

366 

$

5 

Sub-total:

$

523 

$

7 

$

366 

$

5 

Total Impaired Loans

with an allowance recorded:

$

7,132

$

68 

$

8,523

$

89

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

(3) Does not include accretable yield on loans acquired with deteriorated credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at

March 31, 2020 and December 31, 2019. (In thousands):

As of March 31, 2020

As of December 31, 2019

Recorded

Unpaid Principal

Related

Recorded

Unpaid Principal

Related

Originated loans

Investment

Balance

Allowance

Investment

Balance

Allowance

with no related allowance recorded:

Residential one-to-four family

$

1,980 

$

2,080 

$

-

$

2,010 

$

2,098 

$

-

Commercial and multi-family

3,901 

3,945 

-

4,469 

4,527 

-

Commercial business(1)

1,001 

3,101 

-

1,108 

4,069 

-

Home equity(2)

632 

644 

-

584 

593 

-

Sub-total:

$

7,514 

$

9,770 

$

-

$

8,171 

$

11,287 

$

-

Acquired loans initially recorded at fair

value with no related allowance

recorded:

Residential one-to-four family

$

1,832 

$

1,939 

$

-

$

1,843 

$

1,950 

$

-

Commercial and Multi-family

4,039 

4,043 

-

4,401 

4,402 

-

Commercial business(1)

-

-

-

183 

589 

-

Home equity(2)

202 

203 

-

205 

206 

-

Sub-total:

$

6,073 

$

6,185 

$

-

$

6,632 

$

7,147 

$

-

Acquired loans with deteriorated

credit with no related allowance

recorded:

Residential one-to-four family

$

819 

$

1,375 

$

-

$

827 

$

1,383 

$

-

Commercial and Multi-family

721 

1,776 

-

3,113 

4,166 

-

Commercial business(1)

865 

5,050 

-

867 

5,052 

-

Home equity(2)

34 

45 

-

37 

47 

-

Sub-total:

$

2,439 

$

8,246 

$

-

$

4,844 

$

10,648 

$

-

Total Impaired Loans

with no related allowance recorded:

$

16,026 

$

24,201 

$

-

$

19,647 

$

29,082 

$

-

__________

(1) Includes business lines of credit.
‎(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at March 31, 2020 and December 31, 2019. (In thousands):

As of March 31, 2020

As of December 31, 2019

Recorded

Unpaid Principal

Related

Recorded

Unpaid Principal

Related

Originated loans

Investment

Balance

Allowance

Investment

Balance

Allowance

with an allowance recorded:

Residential one-to-four family

$

916 

$

917 

$

36 

$

973 

$

973 

$

48 

Commercial business(1)

1,088 

2,539 

974 

1,403 

3,037 

1,029 

Home equity(2)

375 

380 

18 

379 

382 

20 

Sub-total:

$

2,379 

$

3,836 

$

1,028 

$

2,755 

$

4,392 

$

1,097 

Acquired loans initially recorded at fair

value with an allowance

recorded:

Residential one-to-four family

$

2,267 

$

2,284 

$

313 

$

2,278 

$

2,293 

$

325 

Commercial and Multi-family

1,234 

1,431 

332 

1,248 

1,442 

342 

Commercial business(1)

512 

2,030 

1,550 

377 

1,489 

1,489 

Home equity(2)

83 

83 

4 

83 

83 

4 

Sub-total

$

4,096 

$

5,828 

$

2,199 

$

3,986 

$

5,307 

$

2,160 

Acquired loans with deteriorated

credit with an allowance

recorded:

Residential one-to-four family

$

521 

$

569 

$

5 

$

524 

$

571 

$

7 

Sub-total:

$

521 

$

569 

$

5 

$

524 

$

571 

$

7 

Total Impaired Loans

with an allowance recorded:

$

6,996 

$

10,233 

$

3,232 

$

7,265 

$

10,270 

$

3,264 

Total Impaired Loans

with no related allowance recorded:

$

16,026 

$

24,201 

$

-

$

19,647 

$

29,082 

$

-

Total Impaired Loans:

$

23,022 

$

34,434 

$

3,232 

$

26,912 

$

39,352 

$

3,264 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructured (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a concession that would otherwise not be granted to the borrower. If a Paycheck Protection Plan (“PPP”) loan that was current at December 31, 2019 and modified due to the COVID-19 pandemic, it is not considered a TDR. The types of concessions granted generally include, but are not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.

At March 31, 2020

At December 31, 2019

(In thousands)

Recorded investment in TDRs:

Accrual status

$

16,346 

$

17,030 

Non-accrual status

1,103 

702 

Total recorded investment in TDRs

$

17,449 

$

17,732 

TDRs restructured for the three months ended March 31, 2020 totaled $216,102 for one contract and $1,378,000 for three contracts for the three months ended March 31, 2019.

There were no TDRs for which there was a payment default within twelve months of restructuring during the three months ended March 31, 2020 or the three months ended March 31, 2019.

The following table sets forth the delinquency status of total loans receivable as of March 31, 2020:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Originated loans:

Residential one-to-four family

$

1,117 

$

-

$

-

$

1,117 

$

231,775 

$

232,892 

$

-

Commercial and multi-family

3,805 

-

76 

3,881 

1,459,241 

1,463,122 

-

Construction

-

-

-

-

101,692 

101,692 

-

Commercial business(1)

3,086 

-

1,051 

4,137 

153,214 

157,351 

-

Home equity(2)

611 

400 

27 

1,038 

50,355 

51,393 

-

Consumer

-

-

-

-

1,019 

1,019 

-

Sub-total:

$

8,619 

$

400 

$

1,154 

$

10,173 

$

1,997,296 

$

2,007,469 

$

-

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

624 

$

-

$

450 

$

1,074 

$

32,831 

33,905 

$

-

Commercial and multi-family

1,000 

-

631 

1,631 

112,342 

113,973 

-

Commercial business(1)

580 

107 

513 

1,200 

17,688 

18,888 

-

Home equity(2)

296 

-

-

296 

12,934 

13,230 

-

Consumer

-

-

-

-

10 

10 

-

-

Sub-total:

$

2,500 

$

107 

$

1,594 

$

4,201 

$

175,805 

$

180,006 

$

-

Acquired loans with deteriorated credit:

Residential one-to-four family

$

162 

$

-

$

-

$

162 

$

1,178 

1,340 

$

-

Commercial and multi-family

-

-

122 

122 

599 

721 

-

Commercial business(1)

-

-

854 

854 

53 

907 

-

Home equity(2)

-

-

-

-

234 

234 

-

-

Sub-total:

$

162 

$

-

$

976 

$

1,138 

$

2,064 

$

3,202 

$

-

Total

$

11,281 

$

507 

$

3,724 

$

15,512 

$

2,175,165 

$

2,190,677 

$

-

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at March 31, 2020 and December 31, 2019, respectively. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of March 31, 2020 and December 31, 2019, non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans which are maintained on non-accrual status for a minimum of six months until the borrower has demonstrated its ability to satisfy the terms of the restructured loan. Loans subject to COVID-19-related modifications are not be reported as non-accrual, in accordance with regulatory guidance.

As of March 31, 2020

As of December 31, 2019

(In Thousands)

(In Thousands)

Non-Accruing Loans:

Originated loans:

Residential one-to-four family

$

788 

$

590 

Commercial and multi-family

218 

761 

Commercial business(1)

1,189 

1,428 

Home equity(2)

294 

347 

Sub-total:

2,489 

3,126 

Acquired loans initially recorded at fair value:

Residential one-to-four family

602 

291 

Commercial and multi-family

758 

217 

Commercial business(1)

513 

513 

Home equity(2)

-

13 

Sub-total:

1,873 

1,034 

Total

$

4,362 

$

4,160 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the three months ended March 31, 2020 and December 31, 2019 would have been approximately $894,000 and $967,000, respectively. Interest income recognized on loans returned to accrual was approximately $459,000 and $1.1 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on a nonaccrual status. At March 31, 2020 and December 31, 2019, there were $0 and $795,000, respectively, of loans which were more than ninety days past due and still accruing interest.

Nonaccrual loans in the preceding table do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $1.1 million at March 31, 2020, and $3.5 million at December 31, 2019.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the delinquency status of total loans receivable at December 31, 2019:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Originated loans:

Residential one-to-four family

$

1,087 

$

401 

$

-

$

1,488 

$

210,532 

$

212,020 

$

-

Commercial and multi-family

1,290 

940 

616 

2,846 

1,482,440 

1,485,286 

-

Construction

-

-

-

-

104,996 

104,996 

-

Commercial business(1)

1,874 

278 

1,265 

3,417 

153,996 

157,413 

142 

Home equity(2)

161 

63 

116 

340 

49,760 

50,100 

-

Consumer

-

-

-

-

674 

674 

-

Sub-total:

$

4,412 

$

1,682 

$

1,997 

$

8,091 

$

2,002,398 

$

2,010,489 

$

142 

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

265 

$

217 

$

330 

$

812 

$

34,198 

35,010 

$

97 

Commercial and multi-family

318 

-

631 

949 

117,628 

118,577 

556 

Construction

-

-

-

-

-

-

-

Commercial business(1)

300 

-

513 

813 

18,506 

19,319 

-

Home equity(2)

190 

75 

-

265 

14,037 

14,302 

-

Consumer

-

-

-

-

8 

8 

-

Sub-total:

$

1,073 

$

292 

$

1,474 

$

2,839 

$

184,377 

$

187,216 

$

653 

Acquired loans with deteriorated credit:

Residential one-to-four family

$

-

$

-

$

-

$

-

$

1,351 

$

1,351 

$

-

Commercial and multi-family

-

-

2,500 

2,500 

613 

3,113 

-

Construction

-

-

-

-

-

-

-

Commercial business(1)

-

-

856 

856 

54 

910 

-

Home equity(2)

37 

199 

-

236 

-

236 

-

Consumer

-

-

-

-

-

-

-

Sub-total:

$

37 

$

199 

$

3,356 

$

3,592 

$

2,018 

$

5,610 

$

-

Total

$

5,522 

$

2,173 

$

6,827 

$

14,522 

$

2,188,793 

$

2,203,315 

$

795 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Criticized and Classified Assets.

Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.”

When the Company classifies problem assets, the Company may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. As of March 31, 2020, we had $0 in assets classified as losses, and $9.9 million in assets classified as substandard, of which $9.9 million were classified as impaired. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.

The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below:

6 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.

7 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. Loans on “nonaccrual” status. The loan needs special and corrective attention.

8 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.

9 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of March 31, 2020. (In thousands). As of March 31, 2020, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Originated loans:

Residential one-to-four family

$

231,046 

$

1,058 

$

788 

$

232,892 

Commercial and multi-family

1,457,940 

3,987 

1,195 

1,463,122 

Construction

101,692 

-

-

101,692 

Commercial business(1)

153,134 

2,481 

1,736 

157,351 

Home equity(2)

51,099 

-

294 

51,393 

Consumer

1,016 

3 

-

1,019 

Sub-total:

$

1,995,927 

$

7,529 

$

4,013 

$

2,007,469 

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

33,209 

$

-

$

696 

$

33,905 

Commercial and multi-family

110,565 

195 

3,213 

113,973 

Commercial business(1)

17,246 

1,130 

512 

18,888 

Home equity(2)

13,213 

-

17 

13,230 

Consumer

10 

-

-

10 

Sub-total:

$

174,243 

$

1,325 

$

4,438 

$

180,006 

Acquired loans with deteriorated credit:

Residential one-to-four family

$

782 

$

245 

$

313 

$

1,340 

Commercial and multi-family

491 

-

230 

721 

Commercial business(1)

1 

52 

854 

907 

Home equity(2)

200 

-

34 

234 

Sub-total:

$

1,474 

$

297 

$

1,431 

$

3,202 

Total Gross Loans

$

2,171,644 

$

9,151 

$

9,882 

$

2,190,677 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.
‎

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of December 31, 2019. (In thousands). As of December 31, 2019, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Originated loans:

Residential one-to-four family

$

210,094 

$

1,336 

$

590 

$

212,020 

Commercial and multi-family

1,478,472 

4,043 

2,771 

1,485,286 

Construction

104,996 

-

-

104,996 

Commercial business(1)

153,464 

1,796 

2,153 

157,413 

Home equity(2)

49,753 

-

347 

50,100 

Consumer

670 

4 

-

674 

Sub-total:

$

1,997,449 

$

7,179 

$

5,861 

$

2,010,489 

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

34,624 

$

-

$

386 

35,010 

Commercial and multi-family

115,130 

583 

2,864 

118,577 

Commercial business(1)

17,648 

1,159 

512 

19,319 

Home equity(2)

14,270 

-

32 

14,302 

Consumer

8 

-

-

8 

Sub-total:

$

181,680 

$

1,742 

$

3,794 

$

187,216 

Acquired loans with deteriorated credit:

Residential one-to-four family

$

788 

$

248 

$

315 

1,351 

Commercial and multi-family

-

493 

2,620 

3,113 

Commercial business(1)

-

54 

856 

910 

Home equity(2)

199 

-

37 

236 

Sub-total:

$

987 

$

795 

$

3,828 

$

5,610 

Total Gross Loans

$

2,180,116 

$

9,716 

$

13,483 

$

2,203,315 

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


‎