Loans

9 Months Ended

Sep. 30, 2020

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their unpaid principal balances, adjusted for any charge-offs, the ALL, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

Loan interest income is accrued daily on outstanding balances. The following accounting policies, related to accrual and nonaccrual loans, apply to all portfolio segments and loan classes, which the Company considers to be the same. The accrual of interest is normally discontinued when a loan is specifically determined to be impaired and/or management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful. Generally, any unpaid interest previously accrued on those loans is reversed against current period interest income. A loan may be restored to accrual status when its financial status has significantly improved and there is no principal or interest past due. A loan may also be restored to accrual status if the borrower makes six consecutive monthly payments or the lump sum equivalent. Income on nonaccrual loans is generally not recognized unless a loan is returned to accrual status or after all principal has been collected. Interest income generally is not recognized on impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Delinquency status is determined based on contractual terms for all portfolio segments and loan classes. Loans past due 30 days or more are considered delinquent. Loans are considered in process of foreclosure when a judgment of foreclosure has been issued by the court.

Loan origination fees and direct loan origination costs are deferred and amortized as an adjustment of the related loan's yield using methods that approximate the interest method. The Company generally amortizes these amounts over the estimated average life of the related loans.

The composition of Net loans as of the balance sheet dates was as follows:


	September 30, 2020		December 31, 2019
	(Dollars in thousands)
Residential real estate	$	182,935	$	192,125
Construction real estate	49,668		69,617
Commercial real estate	317,985		289,883
Commercial	114,868		47,699
Consumer	2,833		3,562
Municipal	97,761		67,358
Gross loans	766,050		670,244
Allowance for loan losses	(7,691)		(6,122)
Net deferred loan (fees) costs	(536)		1,043
Net loans	$	757,823	$	665,165

The Company originated 718 PPP loans totaling $69.8 million classified as commercial loans as of September 30, 2020. There was a total of $2.5 million in origination fees received from the SBA on PPP loans that will be amortized over the respective lives of the loans, of which $311 thousand and $545 thousand was recognized in earnings during the three and nine months ended September 30, 2020, respectively. PPP loans with a carrying value of $2.3 million were pledged as collateral for borrowings from the FRB at September 30, 2020.

Qualifying residential first mortgage loans and certain commercial real estate loans with an aggregate carrying value of $207.9 million and $207.7 million were pledged as collateral for borrowings from the FHLB under a blanket lien at September 30, 2020 and December 31, 2019, respectively.

A summary of current, past due and nonaccrual loans as of the balance sheet dates follows:


September 30, 2020	Current		30-59 Days		60-89 Days		90 Days and Over and Accruing		Nonaccrual		Total
	(Dollars in thousands)
Residential real estate	$	180,973	$	542	$	251	$	520	$	649	$	182,935
Construction real estate	48,337		865		—		444		22		49,668
Commercial real estate	315,296		—		924		—		1,765		317,985
Commercial	114,843		3		7		—		15		114,868
Consumer	2,817		11		5		—		—		2,833
Municipal	97,761		—		—		—		—		97,761
Total	$	760,027	$	1,421	$	1,187	$	964	$	2,451	$	766,050


December 31, 2019	Current		30-59 Days		60-89 Days		90 Days and Over and Accruing		Nonaccrual		Total
	(Dollars in thousands)
Residential real estate	$	187,022	$	2,716	$	1,304	$	811	$	272	$	192,125
Construction real estate	68,731		470		19		368		29		69,617
Commercial real estate	286,795		940		150		—		1,998		289,883
Commercial	47,673		—		5		—		21		47,699
Consumer	3,532		21		6		—		3		3,562
Municipal	67,358		—		—		—		—		67,358
Total	$	661,111	$	4,147	$	1,484	$	1,179	$	2,323	$	670,244

There were no loans in process of foreclosure at September 30, 2020 and two residential real estate loans totaling $64 thousand in process of foreclosure at December 31, 2019. In April 2020, the State of Vermont issued a temporary moratorium on foreclosure actions, which remains in effect until the end of the COVID-19 emergency. Aggregate interest on nonaccrual loans not recognized was $371 thousand as of September 30, 2020 and $271 thousand as of December 31, 2019.