3. Loans and Allowance for Lease and Loan Losses

A summary of the Company’s loan portfolio is as follows:


	At December 31,
	2019		2018
Commercial real estate loans:
Construction	$	20,354	$	12,870
Non-residential		228,157		197,499
Multi-family		20,129		12,661
Residential real estate loans		43,726		43,534
Commercial and industrial loans		90,554		83,203
Consumer loans:
Indirect automobile		360,569		297,144
Home equity		16,276		19,269
Other consumer		9,752		10,826
Total gross loans		789,517		677,006
Net deferred loan costs		9,908		8,042
Allowance for loan losses		(5,954)		(6,646)
Total net loans	$	793,471	$	678,402

At December 31, 2019 and 2018, the unpaid principal balances of loans held for sale, included in the residential real estate category above, were $2,684 and $888, respectively.

The following tables present the classes of the loan portfolio summarized by the pass category and the criticized categories of special mention and substandard within the internal risk system:


	December 31, 2019
	Pass		Special Mention		Substandard		Total
Commercial real estate:
Construction	$	20,354	$	—	$	—	$	20,354
Non-residential		219,485		4,285		4,387		228,157
Multifamily		19,744		—		385		20,129
Residential real estate		41,385		—		2,341		43,726
Commercial and industrial		88,874		597		1,083		90,554
Consumer:
Indirect automobile		359,616		—		953		360,569
Home equity		15,861		—		415		16,276
Other consumer		9,741		—		11		9,752
Total	$	775,060	$	4,882	$	9,575	$	789,517


	December 31, 2018
	Pass		Special Mention		Substandard		Total
Commercial real estate:
Construction	$	12,870	$	—	$	—	$	12,870
Non-residential		186,020		6,840		4,639		197,499
Multifamily		12,261		—		400		12,661
Residential real estate		41,249		—		2,285		43,534
Commercial and industrial		81,111		965		1,127		83,203
Consumer:
Indirect automobile		296,692		—		452		297,144
Home equity		19,071		—		198		19,269
Other consumer		10,816		—		10		10,826
Total	$	660,090	$	7,805	$	9,111	$	677,006

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The past due status of all classes of loans is determined based on contractual due dates for loan payments.

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans:


	December 31, 2019
							Greater Than
			30-59 Days		60-89 Days		90 Days Past		Total Loans
	Current		Past Due		Past Due		Due		Receivable		Non-accrual
Commercial real estate:
Construction	$	20,354	$	—	$	—	$	—	$	20,354	$	—
Non-residential		222,953		409		884		3,911		228,157		3,911
Multifamily		19,744		—		—		385		20,129		385
Residential real estate		42,403		427		116		780		43,726		2,341
Commercial and industrial		89,401		288		198		667		90,554		905
Consumer:
Indirect automobile		351,840		6,494		1,294		941		360,569		953
Home equity		15,726		142		91		317		16,276		415
Other consumer		9,492		201		48		11		9,752		11
Total	$	771,913	$	7,961	$	2,631	$	7,012	$	789,517	$	8,921


	December 31, 2018
							Greater Than
			30-59 Days		60-89 Days		90 Days Past		Total Loans
	Current		Past Due		Past Due		Due		Receivable		Non-accrual
Commercial real estate:
Construction	$	12,870	$	—	$	—	$	—	$	12,870	$	—
Non-residential		193,273		1,466		253		2,507		197,499		2,507
Multifamily		12,487		174		—		—		12,661		—
Residential real estate		42,083		305		615		531		43,534		2,208
Commercial and industrial		82,992		206		1		4		83,203		297
Consumer:
Indirect automobile		291,369		4,429		915		431		297,144		452
Home equity		18,905		264		—		100		19,269		198
Other consumer		10,601		186		29		10		10,826		10
Total	$	664,580	$	7,030	$	1,813	$	3,583	$	677,006	$	5,672

There were no loans greater than 90 days past due and still accruing as of December 31, 2019 or 2018.

The following tables summarize information in regards to impaired loans by loan portfolio class:


	December 31, 2019
	Recorded		Unpaid Principal		Related		Average Recorded
	Investment		Balance		Allowance		Investment
With no related allowance recorded:
Commercial real estate:
Non-residential	$	3,911	$	5,733	$	—	$	3,209
Multifamily		385		409		—		192
Residential real estate		2,341		2,850		—		2,313
Commercial and industrial		905		1,109		—		601
Consumer:
Indirect automobile		607		740		—		441
Home equity		415		467		—		307
Other consumer		11		11		—		10
Total	$	8,575	$	11,319	$	—	$	7,073
With an allowance recorded:
Consumer:
Indirect automobile	$	346	$	376	$	107	$	262
Total	$	346	$	376	$	107	$	262
Total:
Commercial real estate:
Non-residential	$	3,911	$	5,733	$	—	$	3,209
Multifamily		385		409		—		192
Residential real estate		2,341		2,850		—		2,313
Commercial and industrial		905		1,109		—		601
Consumer:
Indirect automobile		953		1,116		107		703
Home equity		415		467		—		307
Other consumer		11		11		—		10
Total	$	8,921	$	11,695	$	107	$	7,335


	December 31, 2018
	Recorded		Unpaid Principal		Related		Average Recorded
	Investment		Balance		Allowance		Investment
With no related allowance recorded:
Commercial real estate:
Construction	$	—	$	—	$	—	$	563
Non-residential		2,507		2,601		—		3,023
Residential real estate		2,285		2,841		—		2,235
Commercial and industrial		297		421		—		758
Consumer:
Indirect automobile		274		320		—		242
Home equity		198		211		—		158
Other consumer		10		10		—		5
Total	$	5,571	$	6,404	$	—	$	6,984
With an allowance recorded:
Commercial real estate:
Non-residential	$	—	$	—	$	—	$	451
Commercial and industrial		—		—		—		9
Consumer:
Indirect automobile		178		191		50		205
Other consumer		—		—		—		2
Total	$	178	$	191	$	50	$	667
Total:
Commercial real estate:
Construction	$	—	$	—	$	—	$	563
Non-residential		2,507		2,601		—		3,474
Residential real estate		2,285		2,841		—		2,235
Commercial and industrial		297		421		—		767
Consumer:
Indirect automobile		452		511		50		447
Home equity		198		211		—		158
Other consumer		10		10		—		7
Total	$	5,749	$	6,595	$	50	$	7,651

A loan is considered impaired when based on current information and events it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans and loans modified as TDRs. Loan modifications, which resulted in these loans being considered TDRs, are primarily in the form of rate concessions and extensions of maturity dates. The Company does not generally recognize interest income on a loan in an impaired status. At December 31, 2019 and 2018, three loans totaling $1,659 and three loans totaling $1,774, respectively, which were included in impaired loans, were identified as TDRs. In 2018, the Company restructured two loans, a residential mortgage and home equity loan, into a single residential mortgage, with a carrying value of $117, which included both rate and term modifications. In 2019, there were no new TDRs. Interest income on impaired loans was immaterial during each of the periods presented. At December 31, 2019 and 2018, all loans were performing in accordance with their restructured terms. During the year ended December 31, 2018, one loan for $19 had defaulted in its modified terms and was charged off. At December 31, 2019 and 2018, the Company had no commitments to advance additional funds to borrowers under TDR loans.

The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying statements of financial condition. The Company and participating lenders share ratably in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders and disburses required escrow funds to relevant parties. At December 31, 2019 and 2018, the Company was servicing loans for participants aggregating $4.6 million and $6.2 million, respectively.

The Company services certain loans that it has sold without recourse to third parties. The aggregate balances of loans serviced for others were $270,730 and $255,892 as of December 31, 2019 and 2018, respectively.

The balance of capitalized servicing rights, included in other assets at December 31, 2019 and 2018, were $2,226 and $2,278, respectively. Fair value exceeds carrying value. No impairment charges related to servicing rights were recognized during the years ended December 31, 2019 or 2018.

The following tables summarize the segments of the loan portfolio and the allowance for lease and loan losses, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment and the activity in the allowance for lease and loan losses for the periods then ended:


	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2019

Allowance for loan losses:
Beginning balance	$	1,080	$	320	$	1,542	$	2,915	$	789	$	6,646
Provision for loan losses		2,679		(302)		(645)		1,332		(604)		2,460
Loans charged-off		(1,750)		—		(312)		(2,083)		(132)		(4,277)
Recoveries		—		81		18		953		73		1,125
Ending balance	$	2,009	$	99	$	603	$	3,117	$	126	$	5,954
Ending balance:
Loans deemed impaired	$	—	$	—	$	—	$	107	$	—	$	107
Loans not deemed impaired	$	2,009	$	99	$	603	$	3,010	$	126	$	5,847
Loan receivables:
Ending balance	$	268,640	$	43,726	$	90,554	$	360,569	$	26,028	$	789,517
Ending balance:
Loans deemed impaired	$	4,296	$	2,341	$	905	$	953	$	426	$	8,921
Loans not deemed impaired	$	264,344	$	41,385	$	89,649	$	359,616	$	25,602	$	780,596


	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2018
Allowance for loan losses:
Beginning balance	$	1,305	$	455	$	879	$	2,150	$	668	$	5,457
Provision for loan losses		(45)		(140)		578		1,539		168		2,100
Loans charged-off		(303)		—		(37)		(1,607)		(66)		(2,013)
Recoveries		123		5		122		833		19		1,102
Ending balance	$	1,080	$	320	$	1,542	$	2,915	$	789	$	6,646
Ending balance:
Loans deemed impaired	$	—	$	—	$	—	$	50	$	—	$	50
Loans not deemed impaired	$	1,080	$	320	$	1,542	$	2,865	$	789	$	6,596
Loan receivables:
Ending balance	$	223,030	$	43,534	$	83,203	$	297,144	$	30,095	$	677,006
Ending balance:
Loans deemed impaired	$	2,507	$	2,285	$	297	$	452	$	208	$	5,749
Loans not deemed impaired	$	220,523	$	41,249	$	82,906	$	296,692	$	29,887	$	671,257

In the normal course of business, the Company grants loans to officers, directors and other related parties. Balances and activity of such loans during the years presented were not material.