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Loans Receivable and Allowance for Loan Losses
 9 Months Ended
Sep. 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 September 30, 2020 and December 31, 2019 by segment and class:

September 30, 2020

December 31, 2019

(In Thousands)

Residential one-to-four family

$

241,796

$

248,381 

Commercial and multi-family

1,677,668

1,606,976 

Construction

134,769

104,996 

Commercial business(1)

311,204

177,642 

Home equity(2)

60,973

64,638 

Consumer

770

682 

2,427,180

2,203,315 

Less:

Deferred loan fees, net

(3,430)

(1,174)

Allowance for loan losses

(31,760)

(23,734)

Sub-total

(35,190)

(24,908)

Total Loans, net

$

2,391,990

$

2,178,407 

(1) Includes business lines of credit and Paycheck Protection Program (“PPP”) loans

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

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Originated Loans:

$

2,649 

$

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 

Beginning Balance, June 30, 2020

3,076 

16,942 

1,334 

4,311 

684 

6 

2,489 

28,842 

Recoveries:

Originated Loans:

-

-

-

187 

-

-

187 

Acquired loans initially recorded at fair value:

-

-

-

3 

2 

-

-

5 

Sub-total:

-

-

-

190 

2 

-

-

192 

Provisions:

Originated Loans:

33 

1,148 

395 

2,759 

(60)

6 

(2,292)

1,989 

Acquired loans initially recorded at fair value:

28 

583 

-

134 

(2)

-

-

743 

Acquired loans with deteriorated credit:

(3)

-

-

(2)

(1)

-

-

(6)

Sub-total:

58 

1,731 

395 

2,891 

(63)

6 

(2,292)

2,726 

Totals:

Originated Loans:

2,682 

17,845 

1,729 

6,104 

620 

12 

197 

29,189 

Acquired loans initially recorded at fair value:

419 

809 

-

1,247 

-

-

-

2,475 

Acquired loans with deteriorated credit:

33 

19 

-

41 

3 

-

-

96 

Ending Balance, September 30, 2020

$

3,134 

$

18,673 

$

1,729 

$

7,392 

$

623 

$

12 

$

197 

$

31,760 

Ending allowance attributable to loans:

Individually evaluated for impairment

$

385 

$

313 

$

-

$

3,128 

$

27 

$

-

$

-

$

3,853 

Collectively evaluated for impairment

2,749 

18,360 

1,729 

4,264 

596 

12 

197 

27,907 

Total allowance:

$

3,134 

$

18,673 

$

1,729 

$

7,392 

$

623 

$

12 

$

197 

$

31,760 

Ending loan balances:

Individually evaluated for impairment

$

8,533 

$

13,980 

$

-

$

7,163 

$

1,642 

$

-

$

-

$

31,318 

Collectively evaluated for impairment

233,263 

1,663,688 

134,769 

304,041 

59,331 

770 

2,395,862 

Total Gross Loans:

$

241,796 

$

1,677,668 

$

134,769 

$

311,204 

$

60,973 

$

770 

$

-

$

2,427,180 

(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 sets forth the activity in the Company’s allowance for loan losses for the nine months ended September 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:

-

-

-

489 

-

4 

-

493 

Acquired loans initially recorded at fair value:

-

-

-

3 

8 

-

-

11 

Sub-total:

-

-

-

492 

8 

4 

-

504 

Provisions:

Originated Loans:

260 

2,610 

485 

2,670 

290 

8 

(76)

6,247 

Acquired loans initially recorded at fair value:

162 

751 

-

441 

(8)

-

-

1,346 

Acquired loans with deteriorated credit:

(6)

(60)

-

(1)

-

-

(67)

Sub-total:

416 

3,301 

485 

3,110 

282 

8 

(76)

7,526 

Totals:

Originated Loans:

2,682 

17,845 

1,729 

6,104 

620 

12 

197 

29,189 

Acquired loans initially recorded at fair value:

419 

809 

-

1,247 

-

-

-

2,475 

Acquired loans with deteriorated credit:

33 

19 

-

41 

3 

-

-

96 

Ending Balance, September 30, 2020

$

3,134 

$

18,673 

$

1,729 

$

7,392 

$

623 

$

12 

$

197 

$

31,760 

_____________________________

(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 sets forth the activity in the Company’s allowance for loan losses for the three months ended September 30, 2019 (in thousands).

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Originated Loans:

$

2,580 

$

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 

Beginning Balance, June 30, 2019

3,457 

14,388 

1,454 

4,062 

277 

1 

150 

23,789 

Charge-offs:

Originated Loans:

1 

1 

Sub-total:

1 

-

-

-

-

-

-

1 

Recoveries:

Originated Loans:

-

-

-

-

-

-

-

-

Acquired loans initially recorded at fair value:

-

-

-

-

3 

-

-

3 

Sub-total:

-

-

-

-

3 

-

-

3 

Provisions:

Originated Loans:

(145)

421 

83 

(29)

15 

(1)

208 

552 

Acquired loans initially recorded at fair value:

(316)

112 

627 

9 

-

-

432 

Acquired loans with deteriorated credit:

(106)

23 

-

(1)

-

-

-

(84)

Sub-total:

(567)

556 

83 

597 

24 

(1)

208 

900 

Totals:

Originated Loans:

2,434 

14,672 

1,537 

3,966 

289 

-

358 

23,256 

Acquired loans initially recorded at fair value:

415 

112 

627 

12 

-

-

1,166 

Acquired loans with deteriorated credit:

40 

160 

-

66 

3 

-

-

269 

Ending Balance, September 30, 2019

$

2,889 

$

14,944 

$

1,537 

$

4,659 

$

304 

$

-

$

358 

$

24,691 

_____________________________

(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 nine months ended September 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:

1 

111 

-

145 

-

-

-

257 

Sub-total:

1 

111 

-

145 

-

-

-

257 

Recoveries:

Originated Loans:

-

-

-

15 

-

-

-

15 

Acquired loans recorded at fair value:

3 

10 

-

3 

14 

-

-

30 

Sub-total:

3 

10 

-

18 

14 

-

-

45 

Provisions:

Originated Loans:

61 

783 

534 

227 

(24)

(2)

169 

1,748 

Acquired loans initially recorded at fair value:

77 

102 

-

624 

(2)

-

-

801 

Acquired loans with deteriorated credit:

1 

(8)

-

2 

-

-

-

(5)

Sub-total:

139 

877 

534 

853 

(26)

(2)

169 

2,544 

Totals:

Originated Loans:

2,434 

14,672 

1,537 

3,966 

289 

-

358 

23,256 

Acquired loans initially recorded at fair value:

415 

112 

-

627 

12 

-

-

1,166 

Acquired loans with deteriorated credit:

40 

160 

-

66 

3 

-

-

269 

Ending Balance, September 30, 2019

$

2,889 

$

14,944 

$

1,537 

$

4,659 

$

304 

$

-

$

358 

$

24,691 

_____________________________

(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:

2,422

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 nine months ended September 30, 2020 and 2019 (In thousands):

Three Months Ended September 30,

Nine Months Ended September 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

$

2,125 

$

11 

$

2,179 

$

20 

$

2,076 

$

51 

$

2,627 

$

66 

Commercial and Multi-family

5,867 

8 

8,655 

56 

5,211 

98 

9,680 

310 

Commercial business(1)

3,516 

32 

1,131 

43 

2,677 

183 

1,138 

126 

Home equity(2)

966 

6 

598 

6 

855 

19 

649 

18 

Sub-total:

$

12,474

$

57

$

12,563

$

125

$

10,819

$

351

$

14,094

$

520

Acquired loans initially recorded at fair value

with no related allowance recorded:

Residential one-to-four family

$

1,555 

$

5 

$

1,931 

$

23 

$

1,647 

$

41 

$

2,081 

$

73 

Commercial and Multi-family

4,060 

19 

3,882 

55 

4,053 

113 

3,898 

165 

Commercial business(1)

-

-

119 

12 

-

-

96 

14 

Home equity(2)

221 

-

311 

3 

214 

6 

294 

9 

Consumer

-

-

-

-

-

-

-

Sub-total

$

5,836

$

24

$

6,243

$

93

$

5,914

$

160

$

6,369

$

261

Acquired loans with deteriorated credit

with no related allowance recorded:

Residential one-to-four family(3)

$

984 

$

-

$

839 

$

14 

$

929 

$

28 

$

898 

$

44 

Commercial and Multi-family(3)

705 

9 

4,264 

7 

710 

23 

4,666 

20 

Commercial business(1)(3)

864 

21 

894 

-

864 

25 

849 

-

Home equity(2)(3)

17 

-

41 

-

22 

43 

-

Sub-total:

$

2,570

$

30

$

6,038

$

21

$

2,525

$

76

$

6,456

$

64

Total Impaired Loans

with no related allowance recorded:

$

20,880

$

111

$

24,844

$

239

$

19,258

$

587

$

26,919

$

845

__________

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

Three Months Ended September 30,

Nine Months Ended September 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

$

908 

$

-

$

2,032 

$

18 

$

910 

$

10 

$

2,175 

$

67 

Commercial and Multi-family

-

-

-

-

-

-

-

-

Commercial business(1)

1,427 

65 

822 

3 

1,314 

93 

658 

57 

Home equity(2)

321 

1 

268 

1 

339 

6 

229 

5 

Sub-total:

$

2,656

$

66

$

3,122

$

22

$

2,563

$

109

$

3,062

$

129

Acquired loans initially recorded at fair value

with an allowance recorded:

Residential one-to-four family

$

2,472 

$

3 

$

3,291 

$

30 

$

2,404 

$

33 

$

3,286 

$

82 

Commercial and Multi-family

1,221 

-

881 

14 

1,225 

20 

889 

22 

Commercial business(1)

1,403 

17 

377 

-

1,106 

47 

251 

-

Home equity(2)

110 

1 

84 

1 

101 

2 

84 

4 

Sub-total:

$

5,206

$

21 

$

4,633

$

45

$

4,836

$

102 

$

4,510

$

108

Acquired loans with deteriorated credit

with an allowance recorded:

Residential one-to-four family(3)

$

340 

$

-

$

527 

$

7 

$

400 

$

7 

$

473 

$

19 

Commercial and Multi-family

943 

-

-

629 

-

Sub-total:

$

340 

$

-

$

1,470 

$

7 

$

400 

$

7 

$

1,102 

$

19 

Total Impaired Loans

with an allowance recorded:

$

8,202

$

87 

$

9,225

$

74

$

7,799

$

218 

$

8,674

$

256

__________

(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

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

As of September 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

$

2,278

$

2,381

$

-

$

2,010 

$

2,098 

$

-

Commercial and multi-family

7,842

7,891

-

4,469 

4,527 

-

Commercial business(1)

3,144

5,289

-

1,108 

4,069 

-

Home equity(2)

938

940

-

584 

593 

-

Sub-total:

$

14,202

$

16,501

$

-

$

8,171 

$

11,287 

$

-

Acquired loans initially recorded at fair

value with no related allowance

recorded:

Residential one-to-four family

$

1,562

$

1,660

$

-

$

1,843 

$

1,950 

$

-

Commercial and Multi-family

4,227

4,227

-

4,401 

4,402 

-

Commercial business(1)

-

-

183 

589 

-

Home equity(2)

194

196

-

205 

206 

-

Sub-total:

$

5,983

$

6,083

$

-

$

6,632 

$

7,147 

$

-

Acquired loans with deteriorated

credit with no related allowance

recorded:

Residential one-to-four family

$

1,158

$

1,762

$

-

$

827 

$

1,383 

$

-

Commercial and Multi-family

695

1,749

-

3,113 

4,166 

-

Commercial business(1)

865

5,122

-

867 

5,052 

-

Home equity(2)

-

-

-

37 

47 

-

Sub-total:

$

2,718

$

8,633

$

-

$

4,844 

$

10,648 

$

-

Total Impaired Loans

with no related allowance recorded:

$

22,903

$

31,217

$

-

$

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

As of September, 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

$

904

$

906

$

37

$

973 

$

973 

$

48 

Commercial business(1)

1,829

4,614

1,448

1,403 

3,037 

1,029 

Home equity(2)

372

379

24

379 

382 

20 

Sub-total:

$

3,105

$

5,899

$

1,509

$

2,755 

$

4,392 

$

1,097 

Acquired loans initially recorded at fair

value with an allowance

recorded:

Residential one-to-four family

$

2,470

$

2,504

$

347

$

2,278 

$

2,293 

$

325 

Commercial and Multi-family

1,216

1,417

313

1,248 

1,442 

342 

Commercial business(1)

1,325

2,695

1,680

377 

1,489 

1,489 

Home equity(2)

138

139

3

83 

83 

4 

Sub-total

$

5,149

$

6,755

$

2,343

$

3,986 

$

5,307 

$

2,160 

Acquired loans with deteriorated

credit with an allowance

recorded:

Residential one-to-four family

$

161

$

161

$

1

$

524 

$

571 

$

7 

Sub-total:

$

161

$

161

$

1

$

524 

$

571 

$

7 

Total Impaired Loans

with an allowance recorded:

$

8,415

$

12,815

$

3,853

$

7,265 

$

10,270 

$

3,264 

Total Impaired Loans

with no related allowance recorded:

$

22,903

$

31,217

$

-

$

19,647 

$

29,082 

$

-

Total Impaired Loans:

$

31,318

$

44,032

$

3,853

$

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. Pursuant to the CARES Act, 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 September 30, 2020

At December 31, 2019

(In thousands)

Recorded investment in TDRs:

Accrual status

$

16,436

$

17,030 

Non-accrual status

1,145

702 

Total recorded investment in TDRs

$

17,581

$

17,732 

The Company originated five TDR loans totaling $458,181 and three TDR loans totaling $415,652 for the three months ended September 30, 2020 and September 30, 2019, respectively.

The Company originated six TDR loans totaling $674,283 and six TDR loans totaling $1.8 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

For the three months ended September 30, 2020 and September 30, 2019, TDRs, for which there was a payment default within twelve months of restructuring, totaled $602,274 for two loans and $105,000 for one loan, respectively.

For the nine months ended September 30, 2020 and September 30, 2019, TDRs, for which there was a payment default within twelve months of restructuring, totaled $602,274 for two loans and $105,000 for one loan, respectively.

The following table sets forth the delinquency status of total loans receivable as of September 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

$

1,393

$

256

$

670

$

2,319

$

239,477

$

241,796

$

159

Commercial and multi-family

1,773

613

2,594

4,980

1,672,688

1,677,668

1,416

Construction

-

-

-

-

134,769

134,769

-

Commercial business(1)

516

63

2,488

3,067

308,137

311,204

149

Home equity(2)

242

-

427

669

60,304

60,973

-

Consumer

-

-

-

-

770

770

-

Total

$

3,924

$

932

$

6,179

$

11,035

$

2,416,145

$

2,427,180

$

1,724

_________

(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 September 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 September 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 were $3.7 million at September 30, 2020 and $1.6 million at December 31, 2019 in nonaccrual loans that were less than ninety days past due. 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 September 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 September 30, 2020

As of December 31, 2019

(In Thousands)

(In Thousands)

Non-Accruing Loans:

Originated loans:

Residential one-to-four family

$

847

$

590 

Commercial and multi-family

457

761 

Commercial business(1)

3,252

1,428 

Home equity(2)

604

347 

Sub-total:

5,160

3,126 

Acquired loans initially recorded at fair value:

Residential one-to-four family

565

291 

Commercial and multi-family

979

217 

Commercial business(1)

378

513 

Home equity(2)

69

13 

Sub-total:

1,991

1,034 

Total

$

7,151

$

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 nine months ended September 30, 2020 and December 31, 2019 would have been approximately $673,000 and $967,000, respectively. Interest income recognized on loans returned to accrual status was approximately $520,000 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 September 30, 2020 and December 31, 2019, there were $1.7 million 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 September 30, 2020, we had $0 in assets classified as losses, and $18.1 million in assets classified as substandard, of which $18.1 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 September 30, 2020 (in thousands). As of September 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

$

206,900

$

1,040

$

1,103

$

209,043

Commercial and multi-family

1,568,159

2,147

5,152

1,575,458

Construction

134,769

-

-

134,769

Commercial business(1)

286,650

1,426

4,633

292,709

Home equity(2)

49,386

-

711

50,097

Consumer

768

-

-

768

Sub-total:

$

2,246,632

$

4,613

$

11,599

$

2,262,844

Acquired loans initially recorded at fair value:

Residential one-to-four family

$

30,777

$

-

$

657

$

31,434

Commercial and multi-family

97,894

205

3,416

101,515

Commercial business(1)

16,132

132

1,325

17,589

Home equity(2)

10,577

-

69

10,646

Consumer

2

-

-

2

Sub-total:

$

155,382

$

337

$

5,467

$

161,186

Acquired loans with deteriorated credit:

Residential one-to-four family

$

768

$

544

$

7

$

1,319

Commercial and multi-family

487

-

208

695

Commercial business(1)

-

49

857

906

Home equity(2)

230

-

-

230

Sub-total:

$

1,485

$

593

$

1,072

$

3,150

Total Gross Loans

$

2,403,499

$

5,543

$

18,138

$

2,427,180

_________

(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.


‎