The Bank’s lending activities are primarily conducted in and around Dover, New Hampshire and in the areas surrounding its branches. The Bank grants commercial real estate loans, multifamily 5+ dwelling unit loans, commercial and industrial loans, acquisition, development, and land loans, 1–4 family residential loans, home equity line of credit loans and consumer loans. Most loans are collateralized by real estate. The ability and willingness of real estate, commercial and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate sector in the borrowers’ geographic area and the general economy.

On March 27, 2020, the Small Business Administration (“SBA”) established a loan program in response to the COVID-19 pandemic, the Paycheck Protection Program (“PPP”), which was added to the SBA’s 7(a) loan program by of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (such loans, “PPP Loans”). The CARES Act provides that PPP Loans are fully guaranteed as to principal and interest by the SBA. As of June 30, 2020, the Bank originated 269 PPP Loans with aggregate outstanding principal balances of $32.7 million and are included in the commercial and industrial loans category (C+I).

Changes in the allowance for loan losses (“ALL”) for the three and six months ended June 30, 2020 and 2019 by portfolio segment are summarized as follows:

(Dollars in thousands)	CRE			MF			C+I			ADL			RES			HELOC			CON			Unallocated			Total
Balance, December 31, 2018	$	560		$	22		$	232		$	88		$	1,593		$	69		$	7		$	235		$	2,806
Provision for loan losses		84			(1	)		(12	)		55			(8	)		(18	)		(2	)		(98	)		—
Charge-offs		—			—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			—			—			—
Balance, March 31, 2019		644			21			220			143			1,585			51			5			137			2,806
Provision for loan losses		78			1			(4	)		(61	)		143			3			3			(138	)		25
Charge-offs		—			—			—			—			—			—			—			—			—
Recoveries		—			—			—			—			—			—			1			—			1
Balance, June 30, 2019		722			22			216			82			1,728			54			9			(1	)		2,832
Balance, December 31, 2019		781			23			350			145			1,503			52			18			3			2,875
Provision for loan losses		(4	)		25			(63	)		(10	)		140			27			2			(2	)		115
Charge-offs		—			—			—			—			—			—			—			—			—
Recoveries		19			—			—			—			—			—			—			—			19
Balance, March 31, 2020		796			48			287			135			1,643			79			20			1			3,009
Provision for loan losses		(56	)		4			(11	)		88			47			(21	)		27			82			160
Charge-offs		—			—			—			—			—			—			(18	)		—			(18	)
Recoveries		—			—			2			—			—			—			—			—			2
Balance, June 30, 2020	$	740		$	52		$	278		$	223		$	1,690		$	58		$	29		$	83		$	3,153

As of June 30, 2020 and December 31, 2019, information about loans and the ALL by portfolio segment are summarized below:

(Dollars in thousands)	CRE		MF		C+I		ADL		RES		HELOC		CON		Unallocated		Total
June 30, 2020 Loan Balances
Individually evaluated for impairment	$	229	$	—	$	1,018	$	—	$	65	$	—	$	—	$	—	$	1,312
Collectively evaluated for impairment		68,839		6,425		52,678		23,637		217,311		9,359		1,960		—		380,209
Total	$	69,068	$	6,425	$	53,696	$	23,637	$	217,376	$	9,359	$	1,960	$	—	$	381,521
ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		740		52		278		223		1,690		58		29		83		3,153
Total	$	740	$	52	$	278	$	223	$	1,690	$	58	$	29	$	83	$	3,153
December 31, 2019 Loan Balances
Individually evaluated for impairment	$	109	$	—	$	996	$	—	$	66	$	—	$	—	$	—	$	1,171
Collectively evaluated for impairment		70,085		4,888		23,680		18,844		213,256		10,123		1,752				342,628
Total	$	70,194	$	4,888	$	24,676	$	18,844	$	213,322	$	10,123	$	1,752	$	—	$	343,799
ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		781		23		350		145		1,503		52		18		3		2,875
Total	$	781	$	23	$	350	$	145	$	1,503	$	52	$	18	$	3	$	2,875

The following is an aging analysis of past due loans by portfolio segment as of June 30, 2020:

(Dollars in thousands)	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non-Accrual Loans
CRE	$	210	$	—	$	—	$	210	$	68,858	$	69,068	$	—
MF		—		—		—		—		6,425		6,425		—
C+I		—		—		909		909		52,787		53,696		909
ADL		—		—		—		—		23,637		23,637		—
RES		—		43		65		108		217,268		217,376		65
HELOC		8		—		—		8		9,351		9,359		—
CON		—		—		—		—		1,960		1,960		—
	$	218	$	43	$	974	$	1,235	$	380,286	$	381,521	$	974

The following is an aging analysis of past due loans by portfolio segment as of December 31, 2019:

(Dollars in thousands)	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non-Accrual Loans
CRE	$	—	$	—	$	—	$	—	$	70,194	$	70,194	$	—
MF		—		—		—		—		4,888		4,888		—
C+I		—		—		996		996		23,680		24,676		996
ADL		—		—		—		—		18,844		18,844		—
RES		—		19		66		85		213,237		213,322		66
HELOC		—		—		—		—		10,123		10,123		—
CON		—		—		—		—		1,752		1,752		—
	$	—	$	19	$	1,062	$	1,081	$	342,718	$	343,799	$	1,062

There were no loans collateralized by residential real estate property in the process of foreclosure at June 30, 2020 or December 31, 2019.

The following table provides information on impaired loans as of June 30, 2020 and December 31, 2019:

(Dollars in thousands)	Recorded Carrying Value		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
June 30, 2020
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		909		998		—		953		—
ADL		—		—		—		—		—
RES		65		65		—		66		—
HELOC		—		—		—		—		—
CON		—		—		—		—		—
Total impaired loans	$	974	$	1,063	$	—	$	1,019	$	—
December 31, 2019
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		996		1,057		—		344		36
ADL		—		—		—		—		—
RES		66		66		—		67		—
HELOC		—		—		—		—		—
CON		—		—		—		—		—
Total impaired loans	$	1,062	$	1,123	$	—	$	411	$	36

The Bank utilizes a ten-grade internal loan rating system for its commercial real estate, multifamily, commercial and industrial and acquisition, development and land loans. Residential real estate, home equity line of credit and consumer loans are considered “pass” rated loans until they become delinquent. Once delinquent, loans can be rated an 8, 9 or 10 as applicable.

Loans rated 1 through 6: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 7: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Bank will sustain some loss if the weakness is not corrected.

Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 10: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted and should be charged off.

On an annual basis, or more often if needed, the Bank formally reviews the ratings on its commercial and industrial, commercial real estate and multifamily loans. On a periodic basis, the Bank engages an independent third party to review a significant portion of loans within these segments and to assess the credit risk management practices of its commercial lending department. Management uses the results of these reviews as part of its annual review process and overall credit risk administration.

On a quarterly basis, the Bank formally reviews the ratings on its applicable residential real estate and home equity loans if they have become classified as non-accrual. Criteria used to determine ratings consist of loan-to-value ratios and days delinquent.

The following presents the internal risk rating of loans by portfolio segment as of June 30, 2020:

(Dollars in thousands)	Pass		Special Mention		Substandard		Total
CRE	$	68,724	$	115	$	229	$	69,068
MF		6,425		—		—		6,425
C+I		50,877		1,801		1,018		53,696
ADL		23,637		—		—		23,637
RES		217,311		—		65		217,376
HELOC		9,359		—		—		9,359
CON		1,960		—		—		1,960
Total	$	378,293	$	1,916	$	1,312	$	381,521

The following presents the internal risk rating of loans by portfolio segment as of December 31, 2019:

(Dollars in thousands)	Pass		Special Mention		Substandard		Total
CRE	$	70,085	$	—	$	109	$	70,194
MF		4,888		—		—		4,888
C+I		22,208		2,166		302		24,676
ADL		18,844		—		—		18,844
RES		213,256		—		66		213,322
HELOC		10,123		—		—		10,123
CON		1,752		—		—		1,752
Total	$	341,156	$	2,166	$	477	$	343,799

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported. In response to COVID-19, we have implemented a short-term loan modification program to provide temporary payment relief to certain of our borrowers who meet the program's qualifications. This program allows for a deferral or modification of payments for 90 days, which we may extend for an additional 90 days for a maximum of 180 days on a cumulative basis. The program has been offered to both retail and commercial borrowers. The majority of short-term loan modifications for retail loan borrowers consist of deferred payments (which may include principal, interest, and escrow), which are capitalized to the loan balance and recovered through the re-amortization of the monthly payment at the end of the deferral period. For commercial loan borrowers, the majority of short-term modifications consist of allowing the borrower to make interest-only payments with the deferred principal to be due at maturity or repaid as the monthly payment is re-amortized at the next interest reset date as is applicable to the individual loan structure. Alternatively, commercial loan borrowers may defer their full monthly payment similar to the retail loan program outlined above. All loans modified under these programs are maintained on full accrual status during the deferral period. As of June 30, 2020, we have provided temporary payment relief for 134 loans with aggregate outstanding principal balances of $50.3 million. As of June 30, 2020, temporary modifications consisted of 55 commercial loans with aggregate outstanding principal balances of $34.3 million and 79 residential loans with aggregate outstanding principal balances of $16.0 million.

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 elected to adopt these provisions of the CARES Act for the temporary modifications described above.

Certain directors and executive officers of the Company and companies in which they have significant ownership interests are customers of the Bank. Loans outstanding to these persons and entities at June 30, 2020 and December 31, 2019 were $5.4 million and $5.2 million, respectively.