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Loans and Credit Quality

9 Months Ended

Sep. 30, 2020

The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on the Company's asset quality rating ("AQR") criteria:


(In Thousands)	Commercial	Real estate construction one-to-four family	Real estate construction other	Real estate term owner occupied	Real estate term non-owner occupied	Real estate term other	Consumer secured by 1st deeds of trust	Consumer other	Total
September 30, 2020
AQR Pass	$821,117	$37,256	$82,661	$138,886	$302,902	$40,191	$13,726	$23,023	$1,459,762
AQR Special Mention	5,782	—	—	2,677	17,178	2,172	176	—	27,985
AQR Substandard	8,971	702	—	7,430	613	1,176	148	110	19,150
AQR Doubtful	308	—	—	—	—	—	—	—	308

Subtotal	$836,178	$37,958	$82,661	$148,993	$320,693	$43,539	$14,050	$23,133	$1,507,205
Less: Unearned origination fees, net of origination costs									(14,485)
Total loans									$1,492,720
December 31, 2019
AQR Pass	$394,107	$34,132	$61,808	$129,959	$295,482	$38,771	$15,860	$24,464	$994,583
AQR Special Mention	2,279	3,337	—	3,828	17,478	2,559	179	—	29,660
AQR Substandard	16,304	1,349	—	5,104	—	1,176	159	121	24,213


Subtotal	$412,690	$38,818	$61,808	$138,891	$312,960	$42,506	$16,198	$24,585	$1,048,456
Less: Unearned origination fees, net of origination costs									(5,085)
Total loans									$1,043,371

The above table includes $375.6 million in Paycheck Protection Program ("PPP") loans administered by the U.S. Small Business Administration ("SBA") within the Commercial loan segment as of September 30, 2020. Additionally, unearned origination fee, net of origination costs includes $8.8 million associated with SBA PPP loans.

Nonaccrual loans: Nonaccrual loans net of government guarantees totaled $11.0 million and $14.0 million at September 30, 2020 and December 31, 2019, respectively. Nonaccrual loans at the periods indicated are presented below by segment:


(In Thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater Than 90 Days Past Due	Current	Total
September 30, 2020
Commercial	$115	$—	$4,634	$2,082	$6,831
Real estate construction one-to-four family	—	—	702	—	702

Real estate term owner occupied	—	226	2,729	809	3,764

Real estate term other	—	—	1,176	—	1,176
Consumer secured by 1st deeds of trust	—	—	—	65	65
Consumer other	—	—	—	109	109
Total nonperforming loans	115	226	9,241	3,065	12,647
Government guarantees on nonaccrual loans	—	—	—	(1,600)	(1,600)
Net nonaccrual loans	$115	$226	$9,241	$1,465	$11,047
December 31, 2019
Commercial	$270	$385	$2,862	$5,636	$9,153
Real estate construction one-to-four family	—	—	1,349	—	1,349

Real estate term owner occupied	1,641	—	623	1,225	3,489

Real estate term other	—	—	1,176	—	1,176
Consumer secured by 1st deeds of trust	—	—	—	68	68
Consumer other	26	89	—	6	121
Total nonperforming loans	1,937	474	6,010	6,935	15,356
Government guarantees on nonaccrual loans	(268)	—	—	(1,137)	(1,405)
Net nonaccrual loans	$1,669	$474	$6,010	$5,798	$13,951

Past Due Loans: Past due loans and nonaccrual loans at the periods indicated are presented below by segment:


(In Thousands)	30-59 Days Past Due Still Accruing	60-89 Days Past Due Still Accruing	Greater Than 90 Days Still Accruing	Total Past Due	Nonaccrual	Current	Total
September 30, 2020
Commercial	$—	$—	$—	$—	$6,831	$829,347	$836,178
Real estate construction one-to-four family	—	—	—	—	702	37,256	37,958
Real estate construction other	—	—	—	—	—	82,661	82,661
Real estate term owner occupied	—	1,421	—	1,421	3,764	143,808	148,993
Real estate term non-owner occupied	—	691	—	691	—	320,002	320,693
Real estate term other	—	—	—	—	1,176	42,363	43,539
Consumer secured by 1st deed of trust	236	—	—	236	65	13,749	14,050
Consumer other	—	—	—	—	109	23,024	23,133
Subtotal	$236	$2,112	$—	$2,348	$12,647	$1,492,210	$1,507,205
Less: Unearned origination fees, net of origination costs							(14,485)
Total							$1,492,720
December 31, 2019
Commercial	$270	$—	$—	$270	$9,153	$403,267	$412,690
Real estate construction one-to-four family	—	—	—	—	1,349	37,469	38,818
Real estate construction other	—	—	—	—	—	61,808	61,808
Real estate term owner occupied	338	—	—	338	3,489	135,064	138,891
Real estate term non-owner occupied	—	—	—	—	—	312,960	312,960
Real estate term other	26	—	—	26	1,176	41,304	42,506
Consumer secured by 1st deed of trust	750	—	—	750	68	15,380	16,198
Consumer other	150	—	—	150	121	24,314	24,585
Subtotal	$1,534	$—	$—	$1,534	$15,356	$1,031,566	$1,048,456
Less: Unearned origination fees, net of origination costs							(5,085)
Total							$1,043,371

Impaired Loans: The following table presents information about impaired loans by class as of the periods indicated:


(In Thousands)	Recorded Investment	Unpaid Principal Balance	Related Allowance
September 30, 2020
With no related allowance recorded


Commercial - AQR substandard	$8,668	$8,872	$—
Commercial - AQR doubtful	308	308	—
Real estate construction one-to-four family - AQR substandard	702	702	—




Real estate term owner occupied - AQR substandard	7,430	7,515	—
Real estate term non-owner occupied - AQR pass	177	177	—

Real estate term non-owner occupied - AQR substandard	613	613	—
Real estate term other - AQR pass	322	322	—
Real estate term other - AQR substandard	1,176	1,176	—
Consumer secured by 1st deeds of trust - AQR pass	116	116	—

Consumer secured by 1st deeds of trust - AQR substandard	148	148	—

Consumer other - AQR substandard	84	88	—
Subtotal	$19,744	$20,037	$—


With an allowance recorded

Commercial - AQR substandard	$202	$202	$41






Subtotal	$202	$202	$41


Total


Commercial - AQR substandard	$8,870	$9,074	$41
Commercial - AQR doubtful	308	308	—
Real estate construction one-to-four family - AQR substandard	702	702	—




Real estate term owner-occupied - AQR substandard	7,430	7,515	—
Real estate term non-owner occupied - AQR pass	177	177	—

Real estate term non-owner occupied - AQR substandard	613	613	—
Real estate term other - AQR pass	322	322	—
Real estate term other - AQR substandard	1,176	1,176	—
Consumer secured by 1st deeds of trust - AQR pass	116	116	—

Consumer secured by 1st deeds of trust - AQR substandard	148	148	—

Consumer other - AQR substandard	84	88	—
Total	$19,946	$20,239	$41


(In Thousands)	Recorded Investment	Unpaid Principal Balance	Related Allowance
December 31, 2019
With no related allowance recorded


Commercial - AQR substandard	$15,517	$15,582	$—
Real estate construction one-to-four family -AQR substandard	1,349	1,349	—

Real estate term owner occupied - AQR substandard	5,104	5,104	—
Real estate term non-owner occupied - AQR pass	178	178	—


Real estate term other - AQR pass	417	417	—
Real estate term other - AQR substandard	1,176	1,176	—
Consumer secured by 1st deeds of trust - AQR pass	122	122	—
Consumer secured by 1st deeds of trust - AQR substandard	159	163	—
Consumer other - AQR substandard	90	94	—
Subtotal	$24,112	$24,185	$—


With an allowance recorded
Commercial - AQR substandard	$561	$561	$17
Subtotal	$561	$561	$17


Total


Commercial - AQR substandard	$16,078	$16,143	$17
Real estate construction one-to-four family -AQR substandard	1,349	1,349	—

Real estate term owner occupied - AQR substandard	5,104	5,104	—
Real estate term non-owner occupied - AQR pass	178	178	—


Real estate term other - AQR pass	417	417	—
Real estate term other - AQR substandard	1,176	1,176	—
Consumer secured by 1st deeds of trust - AQR pass	122	122	—
Consumer secured by 1st deeds of trust - AQR substandard	159	163	—
Consumer other - AQR substandard	90	94	—
Total	$24,673	$24,746	$17

The unpaid principal balance included in the tables above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes.

The following tables summarize our average recorded investment and interest income recognized on impaired loans for the three and nine-month periods ended September 30, 2020 and 2019:


Three Months Ended September 30,	2020				2019
(In Thousands)	Average Recorded Investment	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded


Commercial - AQR substandard	$8,564		$42		$17,616		$107
Commercial - AQR doubtful	308		—		—		—



Real estate construction one-to-four family - AQR substandard	488		—		1,482		—




Real estate term owner occupied- AQR substandard	6,998		47		5,896		34


Real estate term non-owner occupied- AQR pass	177		3		242		4

Real estate term non-owner occupied- AQR substandard	619		19		—		—
Real estate term other - AQR pass	348		6		438		8

Real estate term other - AQR substandard	1,228		—		1,198		—
Consumer secured by 1st deeds of trust - AQR pass	117		3		125		3

Consumer secured by 1st deeds of trust - AQR substandard	269		—		93		2



Consumer other - AQR substandard	84		—		93		—
Subtotal	$19,200		$120		$27,183		$158


With an allowance recorded


Commercial - AQR substandard	$226	$8	$391	$—








Consumer secured by 1st deeds of trust - AQR substandard	—	—	74	—

Subtotal	$226	$8	$465	$—


Total


Commercial - AQR substandard	$8,790	$50	$18,007	$107
Commercial - AQR doubtful	308	—	—	—



Real estate construction one-to-four family - AQR substandard	488	—	1,482	—





Real estate term owner-occupied - AQR substandard	6,998	47	5,896	34


Real estate term non-owner occupied - AQR pass	177	3	242	4

Real estate term non-owner occupied - AQR substandard	619	19	—	—
Real estate term other - AQR pass	348	6	438	8

Real estate term other - AQR substandard	1,228	—	1,198	—

Consumer secured by 1st deeds of trust - AQR pass	117	3	125	3

Consumer secured by 1st deeds of trust - AQR substandard	269	—	167	2



Consumer other - AQR substandard	84	—	93	—
Total Impaired Loans	$19,426	$128	$27,648	$158


Nine Months Ended September 30,	2020				2019
(In Thousands)	Average Recorded Investment	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass	$—		$—		$711		$35

Commercial - AQR substandard	9,899		138		17,205		292
Commercial - AQR doubtful	103		—		—		—



Real estate construction one-to-four family - AQR substandard	808		—		2,109		—





Real estate term owner occupied- AQR substandard	6,586		125		5,896		83


Real estate term non-owner occupied- AQR pass	177		10		269		15

Real estate term non-owner occupied- AQR substandard	312		20		307		—
Real estate term other - AQR pass	380		20		457		24

Real estate term other - AQR substandard	1,194		—		998		—
Consumer secured by 1st deeds of trust - AQR pass	119		9		127		9

Consumer secured by 1st deeds of trust - AQR substandard	149		3		215		5
Consumer secured by 1st deeds of trust - AQR loss	44		—		—		—


Consumer other - AQR substandard	87		—		63		—
Subtotal	$19,858		$325		$28,357		$463


With an allowance recorded

Commercial - AQR substandard	$1,794	$8	$715	$—





Real estate term other - AQR substandard	—	—	218	—


Consumer secured by 1st deeds of trust - AQR substandard	—	—	97	—

Subtotal	$1,794	$8	$1,030	$—


Total
Commercial - AQR pass	$—	$—	$711	$35

Commercial - AQR substandard	11,693	146	17,920	292
Commercial - AQR doubtful	103	—	—	—



Real estate construction one-to-four family - AQR substandard	808	—	2,109	—






Real estate term owner-occupied - AQR substandard	6,586	125	5,896	83


Real estate term non-owner occupied - AQR pass	177	10	269	15

Real estate term non-owner occupied - AQR substandard	312	20	307	—
Real estate term other - AQR pass	380	20	457	24

Real estate term other - AQR substandard	1,194	—	1,216	—

Consumer secured by 1st deeds of trust - AQR pass	119	9	127	9

Consumer secured by 1st deeds of trust - AQR substandard	149	3	312	5
Consumer secured by 1st deeds of trust - AQR loss	44	—	—	—


Consumer other - AQR substandard	87	—	63	—
Total Impaired Loans	$21,652	$333	$29,387	$463

Troubled Debt Restructurings: Loans classified as troubled debt restructurings (“TDR”) totaled $8.5 million and $10.1 million at September 30, 2020 and December 31, 2019, respectively. A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise. The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company has elected to adopt these provisions of the CARES Act. As of September 30, 2020, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:


(Dollars in thousands)	Interest Only	Full Payment Deferral	Total
Portfolio loans	$46,056	$74,337	$120,393
Number of modifications	16	59	75

The Company has granted a variety of concessions to borrowers in the form of loan modifications. The modifications granted can generally be described in the following categories:

Rate Modification: A modification in which the interest rate is changed.

Term Modification: A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification: A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category.

Combination Modification: Any other type of modification, including the use of multiple categories above.

AQR pass graded loans included above in the impaired loan data are loans classified as TDRs. By definition, TDRs are considered impaired loans. All of the Company's TDRs are included in impaired loans.

The following table presents the breakout between newly restructured loans that occurred during the nine months ended September 30, 2020 and restructured loans that occurred prior to 2020 that are still included in portfolio loans. As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019. The below disclosed restructurings were not related to COVID-19 modifications:


	Accrual Status	Nonaccrual Status	Total Modifications
(In Thousands)
New Troubled Debt Restructurings

Commercial - AQR substandard	$1,565	$163	$1,728

Subtotal	$1,565	$163	$1,728
Existing Troubled Debt Restructurings	$802	$5,946	$6,748
Total	$2,367	$6,109	$8,476

The following tables present newly restructured loans that occurred during the nine months ended September 30, 2020 and 2019, by concession (terms modified):


		September 30, 2020
	Number of Contracts	Rate Modification	Term Modification	Payment Modification	Combination Modification	Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	2	$—	$3,249	$164	$—	$3,413

Total	2	$—	$3,249	$164	$—	$3,413
Post-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	2	$—	$1,565	$163	$—	$1,728

Total	2	$—	$1,565	$163	$—	$1,728


		September 30, 2019
	Number of Contracts	Rate Modification	Term Modification	Payment Modification	Combination Modification	Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	5	$—	$—	$509	$1,350	$1,859
Real estate term owner occupied- AQR substandard	1	—	—	192	—	192
Total	6	$—	$—	$701	$1,350	$2,051
Post-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	5	$—	$—	$425	$1,340	$1,765
Real estate term owner occupied- AQR substandard	1	—	—	188	—	188
Total	6	$—	$—	$613	$1,340	$1,953

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs. There were no in charge-offs in the nine months ended September 30, 2020 on loans that were newly classified as TDRs during the same period.

All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the allowance for loan losses ("Allowance"). There were no TDRs with specific impairment at September 30, 2020 and December 31, 2019, respectively.

The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the nine months ended September 30, 2020 and 2019, respectively.