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Loans Receivable and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 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 June 30, 2020 and December 31, 2019 by segment and class:

June 30, 2020

December 31, 2019

(In Thousands)

Residential one-to-four family

$

247,471

$

248,381 

Commercial and multi-family

1,643,954

1,606,976 

Construction

111,463

104,996 

Commercial business(1)

309,284

177,642 

Home equity(2)

63,481

64,638 

Consumer

603

682 

2,376,256

2,203,315 

Less:

Deferred loan fees, net

(3,821)

(1,174)

Allowance for loan losses

(28,842)

(23,734)

Sub-total

(32,663)

(24,908)

Total Loans, net

$

2,343,593

$

2,178,407 

(1) Includes business lines of credit and Paycheck Protection Plan (“PPP”) loans of $127.5 million

(2) Includes home equity lines of credit.


‎

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

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.

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 June 30, 2020, and the related portion of the allowances for loan losses that is allocated to each loan class, as of June 30, 2020 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

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 

Beginning Balance, March 31, 2020

3,131 

14,949 

1,105 

3,957 

625 

5 

1,762 

25,534 

Recoveries:

Originated Loans:

-

-

-

-

-

4 

-

4 

Acquired loans initially recorded at fair value:

-

-

-

-

4 

-

-

4 

Sub-total:

-

-

-

-

4 

4 

-

8 

Provisions:

Originated Loans:

(138)

1,830 

229 

154 

59 

(3)

727 

2,858 

Acquired loans initially recorded at fair value:

85 

163 

-

200 

(4)

-

-

444 

Acquired loans with deteriorated credit:

(2)

-

-

-

-

-

-

(2)

Sub-total:

(55)

1,993 

229 

354 

55 

(3)

727 

3,300 

Totals:

Originated Loans:

2,649 

16,697 

1,334 

3,158 

680 

6 

2,489 

27,013 

Acquired loans initially recorded at fair value:

391 

226 

-

1,110 

-

-

-

1,727 

Acquired loans with deteriorated credit:

36 

19 

-

43 

4 

-

-

102 

Ending Balance, June 30, 2020

$

3,076 

$

16,942 

$

1,334 

$

4,311 

$

684 

$

6 

$

2,489 

$

28,842 

Ending Balance attributable to loans:

Individually evaluated for impairment

$

8,233 

$

9,725 

$

-

$

7,255 

$

1,625 

$

-

$

-

$

26,838 

Collectively evaluated for impairment

239,238 

1,634,229 

111,463 

302,029 

61,856 

603 

-

2,349,418 

Total Gross Loans:

$

247,471 

$

1,643,954 

$

111,463 

$

309,284 

$

63,481 

$

603 

$

-

$

2,376,256 

Ending ALLL Attributed to loans individually evaluated for impairment

$

398 

$

318 

$

-

$

2,665 

$

20 

$

-

$

-

$

3,401 

Ending ALLL Attributed to loans collectively evaluated for impairment

2,678 

16,624 

1,334 

1,646 

664 

6 

2,489 

25,441 

Total Ending ALLL:

$

3,076 

$

16,942 

$

1,334 

$

4,311 

$

684 

$

6 

$

2,489 

$

28,842 

(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 six months ended June 30, 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, December 31, 2019

2,722 

15,372 

1,244 

3,790 

333 

-

273 

23,734 

Charge-offs:

Acquired loans initially recorded at fair value:

4 

-

-

-

-

-

-

4 

Sub-total:

4 

-

-

-

-

-

-

4 

Recoveries:

Originated Loans:

-

-

-

302 

-

4 

-

306 

Acquired loans initially recorded at fair value:

-

-

-

-

6 

-

-

6 

Sub-total:

-

-

-

302 

6 

4 

-

312 

Provisions:

Originated Loans:

227 

1,462 

90 

(89)

350 

2 

2,216 

4,258 

Acquired loans initially recorded at fair value:

134 

168 

-

307 

(6)

-

-

603 

Acquired loans with deteriorated credit:

(3)

(60)

-

1 

1 

-

-

(61)

Sub-total:

358 

1,570 

90 

219 

345 

2 

2,216 

4,800 

Totals:

Originated Loans:

2,649 

16,697 

1,334 

3,158 

680 

6 

2,489 

27,013 

Acquired loans initially recorded at fair value:

391 

226 

-

1,110 

-

-

-

1,727 

Acquired loans with deteriorated credit:

36 

19 

-

43 

4 

-

-

102 

Ending Balance, June 30, 2020

$

3,076 

$

16,942 

$

1,334 

$

4,311 

$

684 

$

6 

$

2,489 

$

28,842 

_____________________________

(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 June 30, 2019 (in thousands).

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

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 

Beginning Balance, March 31, 2019

2,907 

15,221 

1,209 

3,367 

268 

-

32 

23,004 

Recoveries:

Originated Loans:

-

-

-

7 

-

-

-

7 

Acquired loans initially recorded at fair value:

3 

-

10 

2 

8 

-

-

23 

Sub-total:

3 

-

-

9 

8 

-

-

30 

Provisions:

Originated Loans:

109 

(826)

245 

660 

9 

1 

118 

316 

Acquired loans initially recorded at fair value:

324 

-

(10)

(2)

(8)

-

-

304 

Acquired loans with deteriorated credit:

114 

(7)

-

28 

-

-

-

135 

Sub-total:

547 

(833)

235 

686 

1 

1 

118 

755 

Totals:

Originated Loans:

2,580 

14,251 

1,454 

3,995 

274 

1 

150 

22,705 

Acquired loans initially recorded at fair value:

731 

-

-

-

-

-

-

731 

Acquired loans with deteriorated credit:

146 

137 

-

67 

3 

-

-

353 

Ending Balance, June 30, 2019

$

3,457 

$

14,388 

$

1,454 

$

4,062 

$

277 

$

1 

$

150 

$

23,789 

_____________________________

(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 six months ended June 30, 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, December 31, 2018

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:

-

-

-

15 

-

-

-

15 

Acquired loans recorded at fair value:

3 

10 

-

3 

11 

-

-

27 

Sub-total:

3 

10 

-

18 

11 

-

-

42 

Provisions:

Originated Loans:

206 

362 

451 

256 

(39)

(1)

(39)

1,196 

Acquired loans initially recorded at fair value:

393 

(10)

-

(3)

(11)

-

-

369 

Acquired loans with deteriorated credit:

107 

(31)

-

3 

-

-

-

79 

Sub-total:

706 

321 

451 

256 

(50)

(1)

(39)

1,644 

Totals:

Originated Loans:

2,580 

14,251 

1,454 

3,995 

274 

1 

150 

22,705 

Acquired loans initially recorded at fair value:

731 

-

-

-

-

-

-

731 

Acquired loans with deteriorated credit:

146 

137 

-

67 

3 

-

-

353 

Ending Balance, June 30, 2019

$

3,457 

$

14,388 

$

1,454 

$

4,062 

$

277 

$

1 

$

150 

$

23,789 

_____________________________

(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, December 31, 2018

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

$

8,455 

$

13,231 

$

-

$

3,938 

$

1,288 

$

-

$

-

$

26,912

Collectively evaluated for impairment

239,926 

1,593,745 

104,996 

173,704 

63,350 

682 

-

2,176,403

Total Gross Loans:

$

248,381 

$

1,606,976 

$

104,996 

$

177,642 

$

64,638 

$

682 

$

-

$

2,203,315

Ending ALLL Attributed to loans individually evaluated for impairment

$

380 

$

342 

$

-

$

2,518 

$

24 

$

-

$

-

$

3,264 

Ending ALLL Attributed to loans collectively evaluated for impairment

2,342 

15,030 

1,244 

1,272 

309 

-

273 

20,470 

Total Ending ALLL:

$

2,722 

$

15,372 

$

1,244 

$

3,790 

$

333 

$

-

$

273 

$

23,734 

(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 and six months ended June 30, 2020 and 2019 (In thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2020

2020

2019

2019

2020

2020

2019

2019

Average

Interest

Average

Interest

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Recorded

Income

Recorded

Income

Originated loans

Investment

Recognized

Investment

Recognized

Investment

Recognized

Investment

Recognized

with no related allowance recorded:

Residential one-to-four family

$

1,976 

$

20 

$

2,818 

$

18 

$

1,987 

$

40 

$

2,753 

$

46 

Commercial and Multi-family

3,896 

45 

11,499 

120 

4,087 

90 

11,903 

254 

Commercial business(1)

2,444 

110 

1,145 

41 

1,999 

151 

1,088 

83 

Home equity(2)

813 

7 

680 

6 

737 

13 

707 

12 

Sub-total:

$

9,129

$

182

$

16,142

$

185

$

8,810

$

294

$

16,451

$

395

Acquired loans initially recorded at fair value

with no related allowance recorded:

Residential one-to-four family

$

1,690 

$

18 

$

2,216 

$

25 

$

1,741 

$

36 

$

2,518 

$

50 

Commercial and Multi-family

3,966 

47 

3,917 

55 

4,111 

94 

3,932 

110 

Commercial business(1)

-

-

51 

1 

-

-

52 

2 

Home equity(2)

255 

3 

336 

3 

61 

-

291 

6 

Consumer

-

-

-

-

218 

6 

7 

-

Sub-total

$

5,911

$

68

$

6,520

$

84

$

6,131

$

136

$

6,800

$

168

Acquired loans with deteriorated credit

with no related allowance recorded:

Residential one-to-four family(3)

$

815 

$

14 

$

929 

$

14 

$

819 

$

28 

$

960 

$

30 

Commercial and Multi-family(3)

718 

7 

5,461 

7 

1,516 

14 

5,850 

13 

Commercial business(1)(3)

864 

2 

829 

-

865 

4 

823 

-

Home equity(2)(3)

34 

-

45 

-

35 

-

46 

-

Sub-total:

$

2,431

$

23

$

7,264

$

21

$

3,235

$

46

$

7,679

$

43

Total Impaired Loans

with no related allowance recorded:

$

17,471

$

273

$

29,926

$

290

$

18,176

$

476

$

30,930

$

606

__________

(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 June 30, 2020 and 2019. (In thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2020

2020

2019

2019

2020

2020

2019

2019

Average

Interest

Average

Interest

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Recorded

Income

Recorded

Income

Originated loans

Investment

Recognized

Investment

Recognized

Investment

Recognized

Investment

Recognized

with an allowance recorded:

Residential one-to-four family

$

914 

$

2 

$

2,452 

$

24 

$

933 

$

10 

$

2,775 

$

49 

Commercial and Multi-family

-

-

-

-

-

-

37 

-

Commercial business(1)

1,056 

25 

574 

27 

1,171 

28 

849 

54 

Home equity(2)

322 

2 

152 

2 

341 

5 

152 

4 

Sub-total:

$

2,292

$

29

$

3,178

$

53

$

2,445

$

43

$

3,813

$

107

Acquired loans initially recorded at fair value

with an allowance recorded:

Residential one-to-four family

$

2,371 

$

4 

$

3,245 

$

28 

$

2,340 

$

30 

$

3,169 

$

52 

Commercial and Multi-family

1,230 

-

897 

4 

1,236 

20 

905 

8 

Commercial business(1)

997 

30 

189 

-

790 

30 

126 

-

Home equity(2)

83 

-

84 

1 

83 

1 

84 

3 

Sub-total:

$

4,681

$

34 

$

4,415

$

33

$

4,449

$

81 

$

4,284

$

63

Acquired loans with deteriorated credit

with an allowance recorded:

Residential one-to-four family(3)

$

520 

$

-

$

447 

$

7 

$

521 

$

7 

$

420 

$

12 

Sub-total:

$

520 

$

-

$

447 

$

7 

$

521 

$

7 

$

420 

$

12 

Total Impaired Loans

with an allowance recorded:

$

7,493

$

63 

$

8,040

$

93

$

7,415

$

131 

$

8,517

$

182

__________

(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

June 30, 2020 and December 31, 2019. (In thousands):

As of June 30, 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

$

1,971

$

2,070

$

-

$

2,010 

$

2,098 

$

-

Commercial and multi-family

3,891

3,936

-

4,469 

4,527 

-

Commercial business(1)

3,887

8,133

-

1,108 

4,069 

-

Home equity(2)

994

995

-

584 

593 

-

Sub-total:

$

10,743

$

15,134

$

-

$

8,171 

$

11,287 

$

-

Acquired loans initially recorded at fair

value with no related allowance

recorded:

Residential one-to-four family

$

1,548

$

1,638

$

-

$

1,843 

$

1,950 

$

-

Commercial and Multi-family

3,893

3,893

-

4,401 

4,402 

-

Commercial business(1)

-

-

-

183 

589 

-

Home equity(2)

247

249

-

205 

206 

-

Sub-total:

$

5,688

$

5,780

$

-

$

6,632 

$

7,147 

$

-

Acquired loans with deteriorated

credit with no related allowance

recorded:

Residential one-to-four family

$

810

$

1,366

$

-

$

827 

$

1,383 

$

-

Commercial and Multi-family

715

1,769

-

3,113 

4,166 

-

Commercial business(1)

862

5,048

-

867 

5,052 

-

Home equity(2)

33

45

-

37 

47 

-

Sub-total:

$

2,420

$

8,228

$

-

$

4,844 

$

10,648 

$

-

Total Impaired Loans

with no related allowance recorded:

$

18,851

$

29,142

$

-

$

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 June 30, 2020 and December 31, 2019. (In thousands):

As of June 30, 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

$

911

$

911

$

38

$

973 

$

973 

$

48 

Commercial business(1)

1,025

1,768

960

1,403 

3,037 

1,029 

Home equity(2)

269

274

17

379 

382 

20 

Sub-total:

$

2,205

$

2,953

$

1,015

$

2,755 

$

4,392 

$

1,097 

Acquired loans initially recorded at fair

value with an allowance

recorded:

Residential one-to-four family

$

2,474

$

2,506

$

357

$

2,278 

$

2,293 

$

325 

Commercial and Multi-family

1,226

1,424

318

1,248 

1,442 

342 

Commercial business(1)

1,481

3,266

1,705

377 

1,489 

1,489 

Home equity(2)

82

82

3

83 

83 

4 

Sub-total

$

5,263

$

7,278

$

2,383

$

3,986 

$

5,307 

$

2,160 

Acquired loans with deteriorated

credit with an allowance

recorded:

Residential one-to-four family

$

519

$

566

$

3

$

524 

$

571 

$

7 

Sub-total:

$

519

$

566

$

3

$

524 

$

571 

$

7 

Total Impaired Loans

with an allowance recorded:

$

7,987

$

10,797

$

3,401

$

7,265 

$

10,270 

$

3,264 

Total Impaired Loans

with no related allowance recorded:

$

18,851

$

29,142

$

-

$

19,647 

$

29,082 

$

-

Total Impaired Loans:

$

26,838

$

39,939

$

3,401

$

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 loan (“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. A loan that was current at December 31, 2019 and modified due to the COVID-19 pandemic 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 June 30, 2020

At December 31, 2019

(In thousands)

Recorded investment in TDRs:

Accrual status

$

16,157

$

17,030 

Non-accrual status

1,097

702 

Total recorded investment in TDRs

$

17,254

$

17,732 

There were no new TDRs for the three months ended June 30, 2020 and for the three months ended June 30, 2019.

TDRs for the six months ended June 30, 2020 totaled $208,352 for one loan and $1.2 million for three loans for the six months ended June 30, 2019.

There were no TDRs for which there was a payment default within twelve months of restructuring for the three or six months ended June 30, 2020.

The following table sets forth the delinquency status of total loans receivable as of June 30, 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)

Residential one-to-four family

$

813 

$

956 

$

450 

$

2,219 

$

245,252 

$

247,471 

$

-

Commercial and multi-family

998 

-

829 

1,827 

1,642,127 

1,643,954 

-

Construction

-

-

-

-

111,463 

111,463 

-

Commercial business(1)

2,514 

134 

2,360 

5,008 

304,276 

309,284 

-

Home equity(2)

446 

76 

427 

949 

62,532 

63,481 

-

Consumer

-

-

-

-

603 

603 

-

Total

$

4,771 

$

1,166 

$

4,066 

$

10,003 

$

2,366,253 

$

2,376,256 

$

-

_________

(1) Includes business lines of credit and PPP loans.

(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 June 30, 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 June 30, 2020 and December 31, 2019, non-accrual loans differed from the amount of total loans past due greater than 90 days due to 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. There was $1.6 million in loans that were less than ninety days past due at June 30, 2020 and December 31, 2019, and $795,000 of loans which were more than ninety days past due and still accruing interest at December 31, 2019. Nonaccrual loans do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $1.1 million at June 30, 2020, and $3.5 million at December 31, 2019. Loans subject to COVID-19-related modifications are not be reported as non-accrual, in accordance with regulatory guidance.

As of June 30, 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)

1,129

1,428 

Home equity(2)

608

347 

Sub-total:

2,743

3,126 

Acquired loans initially recorded at fair value:

Residential one-to-four family

544

291 

Commercial and multi-family

631

217 

Commercial business(1)

513

513 

Home equity(2)

64

13 

Sub-total:

1,752

1,034 

Total

$

4,495

$

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 six months ended June 30, 2020 and December 31, 2019 would have been approximately $509,000 and $967,000, respectively. Interest income recognized on loans returned to accrual status was approximately $509,000 and $1.1 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on nonaccrual status. At June 30, 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.


‎

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 June 30, 2020, we had $0 in assets classified as losses, and $13.6 million in assets classified as substandard, of which $13.6 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 June 30, 2020 (in thousands). As of June 30, 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

$

211,258

$

1,049

$

788

$

213,095

Commercial and multi-family

1,529,731

1,978

1,193

1,532,902

Construction

111,463

-

-

111,463

Commercial business(1)

283,772

1,476

4,566

289,814

Home equity(2)

50,932

-

658

51,590

Consumer

600

-

-

600

Sub-total:

$

2,187,756

$

4,503

$

7,205

$

2,199,464

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

32,410

$

-

$

637

$

33,047

Commercial and multi-family

107,043

217

3,077

110,337

Commercial business(1)

16,952

133

1,481

18,566

Home equity(2)

11,594

-

64

11,658

Consumer

3

-

-

3

Sub-total:

$

168,002

$

350

$

5,259

$

173,611

Acquired loans with deteriorated credit:

Residential one-to-four family

$

775

$

546

$

8

$

1,329

Commercial and multi-family

489

-

226

715

Commercial business(1)

-

51

853

904

Home equity(2)

200

-

33

233

Sub-total:

$

1,464

$

597

$

1,120

$

3,181

Total Gross Loans

$

2,357,222

$

5,450

$

13,584

$

2,376,256

_________

(1) Includes business lines of credit and PPP loans.

(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.


‎