The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:

* Includes net premiums and discounts on acquired loans and net deferred fees and costs on loans originated

The CARES Act established a loan program administered through the U.S. Small Business Administration (SBA), referred to as the paycheck protection program (“PPP”). PPP loans are 100% guaranteed by the SBA and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and a term of two years (loans made before June 5, 2020) or five years (loans made on or after June 5, 2020), if not forgiven, in whole or in part. Payments are deferred until either the date on which the SBA remits the amount of forgiveness proceeds to the lender or the date that is 10 months after the last day of the covered period if the borrower does not apply for forgiveness within that 10 month period. Through June 30, 2020, the Company had originated 1,644 PPP loans totaling $195 million, included in commercial and industrial loans. PPP loans did not impact the Company’s allowance for loan loss as a result of the SBA guarantees. Fees totaling $7.0 million were collected from the SBA for these loans in the three months ended June 30, 2020. These fees are deferred and amortized into interest income over the contractual period of the loan. Upon SBA forgiveness, unamortized fees are then recognized into interest income.

In connection with the FSB acquisition, the Company acquired $271 million in total loans, primarily residential real estate. At June 30, 2020, the outstanding principal balance and carrying amount of acquired credit-impaired loans totaled $1.0 million and $0.8 million, respectively. The Company is not recording interest on the acquired credit-impaired loans due to the uncertainty of the cash flows relating to such loans. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at June 30, 2020. The Company did not have any acquired credit-impaired loans as of December 31, 2019.

Credit Quality Indicators

The Company monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”). The primary CQI for the commercial mortgage and commercial and industrial portfolios is the individual loan’s credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan losses:

Acceptable or better

Watch

Special Mention

Substandard

Doubtful

Loss

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process. Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information. Consumer loans also carry smaller balances. Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the primary credit quality indicator for consumer loans. However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.

The following tables provide data, at the class level, of credit quality indicators of certain loans for the dates specified:



June 30, 2020
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	60,145	$	322,501	$	382,646	$	341,667
Watch		31,324		335,492		366,816		76,693
Special Mention		8,316		20,939		29,255		11,100
Substandard		2,206		18,664		20,870		10,229
Doubtful/Loss		-		-		-		-
Total	$	101,991	$	697,596	$	799,587	$	439,689




December 31, 2019
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	73,646	$	451,297	$	524,943	$	165,255
Watch		13,380		171,277		184,657		68,665
Special Mention		8,359		15,725		24,084		7,631
Substandard		2,463		6,737		9,200		9,646
Doubtful/Loss		-		-		-		-
Total	$	97,848	$	645,036	$	742,884	$	251,197

‎

Past Due Loans

The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:



June 30, 2020
(in thousands)

		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance

Commercial and industrial	$	433,264	$	87	$	212	$	63	$	6,063	$	439,689
Residential real estate:
Residential		361,769		34		304		46		2,557		364,710
Construction		154		-		-		-		-		154
Commercial real estate:
Commercial		687,317		-		1,436		-		8,843		697,596
Construction		100,673		-		-		-		1,318		101,991
Home equities		83,417		247		266		-		827		84,757
Consumer and other		3,606		4		2		-		-		3,612
Total Loans	$	1,670,200	$	372	$	2,220	$	109	$	19,608	$	1,692,509

Note: Loan balances do not include $(6.7) million of unaccreted yield adjustments as of June 30, 2020.



December 31, 2019
(in thousands)

		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance

Commercial and industrial	$	245,658	$	705	$	-	$	-	$	4,834	$	251,197
Residential real estate:
Residential		153,630		2,616		888		-		1,438		158,572
Construction		865		-		202		-		-		1,067
Commercial real estate:
Commercial		630,016		3,482		5,879		-		5,659		645,036
Construction		92,667		2,886		720		-		1,575		97,848
Home equities		67,868		354		239		-		890		69,351
Consumer and other		1,907		15		4		-		-		1,926
Total Loans	$	1,192,611	$	10,058	$	7,932	$	-	$	14,396	$	1,224,997

Note: Loan balances do not include $1.5 million of unamortized yield adjustments as of December 31, 2019.

‎

Allowance for loan losses

The following tables present the activity in the allowance for loan losses according to portfolio segment for the six month periods ended June 30, 2020 and 2019:




June 30, 2020
				(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,547	$	9,005	$	155	$	1,071	$	397	$	15,175
Charge-offs		(19)		-		(30)		(29)		(4)		(82)
Recoveries		36		11		18		-		-		65
Provision (Credit)		696		2,609		90		105		96		3,596
Ending balance	$	5,260	$	11,625	$	233	$	1,147	$	489	$	18,754

Allowance for loan
losses:
Ending balance:
Loans acquired with deteriorated
credit quality	$	-	$	-	$	-	$	-	$	-	$	-
Individually evaluated
for impairment		925		5		-		-		-		930
Collectively evaluated
for impairment		4,335		11,620		233		1,147		489		17,824
Total	$	5,260	$	11,625	$	233	$	1,147	$	489	$	18,754

Loans:
Ending balance:
Loans acquired with deteriorated
credit quality	$	77	$	-	$	-	$	876	$	-	$	953
Individually evaluated
for impairment		6,210		10,675		-		2,853		1,280		21,018
Collectively evaluated
for impairment		433,402		788,912		3,612		361,135		83,477		1,670,538
Total	$	439,689	$	799,587	$	3,612	$	364,864	$	84,757	$	1,692,509

* Includes construction loans

Note: Loan balances do not include $(6.7) million of unaccreted yield adjustments as of June 30, 2020.

‎




June 30, 2019
				(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,368	$	8,844	$	106	$	1,121	$	345	$	14,784
Charge-offs		(158)		-		(54)		-		-		(212)
Recoveries		39		-		9		-		-		48
Provision (Credit)		1,023		(207)		69		(238)		(19)		628
Ending balance	$	5,272	$	8,637	$	130	$	883	$	326	$	15,248

Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	374	$	66	$	22	$	35	$	-	$	497
Collectively evaluated
for impairment		4,898		8,571		108		848		326		14,751
Total	$	5,272	$	8,637	$	130	$	883	$	326	$	15,248

Loans:
Ending balance:
Individually evaluated
for impairment	$	4,206	$	6,557	$	22	$	2,993	$	1,635	$	15,413
Collectively evaluated
for impairment		263,299		704,792		1,505		156,936		69,116		1,195,648
Total	$	267,505	$	711,349	$	1,527	$	159,929	$	70,751	$	1,211,061

* Includes construction loans

Note: Loan balances do not include $1.6 million of unamortized yield adjustments as of June 30, 2019.

‎

The following tables present the activity in the allowance for loan losses according to portfolio segment for the three month periods ended June 30, 2020 and 2019.



June 30, 2020
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan			(in thousands)
losses:
Beginning balance	$	5,575	$	10,588	$	91	$	1,418	$	485	$	18,157
Charge-offs		(2)		-		(15)		-		-		(17)
Recoveries		4		11		2		-		-		17
Provision (Credit)		(317)		1,026		155		(271)		4		597
Ending balance	$	5,260	$	11,625	$	233	$	1,147	$	489	$	18,754



June 30, 2019
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan			(in thousands)
losses:
Beginning balance	$	4,754	$	9,049	$	111	$	953	$	340	$	15,207
Charge-offs		(37)		-		(31)		-		-		(68)
Recoveries		17		-		2		-		-		19
Provision (Credit)		538		(412)		48		(70)		(14)		90
Ending balance	$	5,272	$	8,637	$	130	$	883	$	326	$	15,248

* Includes construction loans

‎

Impaired Loans

The following tables provide data, at the class level, for impaired loans as of the dates indicated:



		At June 30, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,862	$	2,090	$	-	$	2,450	$	71	$	8
Residential real estate:
Residential		3,635		4,066		-		3,713		41		30
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		8,924		9,429		-		9,101		176		42
Construction		1,318		1,352		-		1,331		27		-
Home equities		1,280		1,496		-		1,347		25		11
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	17,019	$	18,433	$	-	$	17,942	$	340	$	91


		At June 30, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,375	$	4,487	$	925	$	4,489	$	121	$	2
Residential real estate:
Residential		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		433		443		5		436		11		-
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	4,808	$	4,930	$	930	$	4,925	$	132	$	2

‎


		At June 30, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,237	$	6,577	$	925	$	6,939	$	192	$	10
Residential real estate:
Residential		3,635		4,066		-		3,713		41		30
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		9,357		9,872		5		9,537		187		42
Construction		1,318		1,352		-		1,331		27		-
Home equities		1,280		1,496		-		1,347		25		11
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	21,827	$	23,363	$	930	$	22,867	$	472	$	93



		At December 31, 2019
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	3,798	$	4,112	$	-	$	4,046	$	118	$	143
Residential real estate:
Residential		2,744		3,003		-		2,823		73		63
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		6,019		6,521		-		6,293		225		72
Construction		1,335		1,352		-		1,344		23		50
Home equities		1,453		1,687		-		1,525		64		30
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	15,349	$	16,675	$	-	$	16,031	$	503	$	358

‎


		At December 31, 2019
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	2,760	$	2,808	$	442	$	2,764	$	109	$	63
Residential real estate:
Residential		60		62		5		61		3		1
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		197		197		4		197		8		4
Construction		240		246		5		242		8		9
Home equities		-		-		-		-		-		-
Consumer and other		21		23		21		22		-		1
Total impaired loans	$	3,278	$	3,336	$	477	$	3,286	$	128	$	78


		At December 31, 2019
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,558	$	6,920	$	442	$	6,810	$	227	$	206
Residential real estate:
Residential		2,804		3,065		5		2,884		76		64
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		6,216		6,718		4		6,490		233		76
Construction		1,575		1,598		5		1,586		31		59
Home equities		1,453		1,687		-		1,525		64		30
Consumer and other		21		23		21		22		-		1
Total impaired loans	$	18,627	$	20,011	$	477	$	19,317	$	631	$	436

‎

Troubled debt restructurings

The following tables summarize the loans that were classified as troubled debt restructurings (“TDRs”) as of the dates indicated:



		June 30, 2020
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,919	$	1,696	$	223	$	400
Residential real estate:
Residential		1,667		496		1,171		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,530		3,016		514		-
Construction		-		-		-		-
Home equities		587		134		453		-
Consumer and other		-		-		-		-
Total TDR loans	$	7,703	$	5,342	$	2,361	$	400



		December 31, 2019
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	2,052	$	328	$	1,724	$	26
Residential real estate:
Residential		1,815		449		1,366		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,632		3,075		557		-
Construction		-		-		-		-
Home equities		738		175		563		-
Consumer and other		21		-		21		21
Total TDR loans	$	8,258	$	4,027	$	4,231	$	47

Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.

The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired. As of June 30, 2020, there were no commitments to lend additional funds to debtors owing on loans whose terms have been modified in TDRs.

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the borrower time to improve cash flow or sell the property. Other common concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.

‎

In late March 2020, federal banking regulators issued guidance that modifications made to a borrower affected by the COVID-19 pandemic and governmental shutdown orders do not need to be identified as a TDR if the loan was current at the time a modification plan was implemented. The CARES Act also addressed COVID-19 related modifications and specified that such modifications made on loans that were current as of December 31, 2019 are not TDRs. As of June 30, 2020, the Company had applied this guidance and had made 379 modifications of commercial loans with principal balances totaling $369 million, and 302 modifications of consumer loans with principal balances totaling $38 million.

The following tables present TDR activity by the type of concession granted to the borrower for the three and six month periods ended June 30, 2020 and 2019:


	Three months ended June 30, 2020					Three months ended June 30, 2019
	(Recorded Investment in thousands)					(Recorded Investment in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial and Industrial	-	$	-	$	-	-	$	-	$	-
Residential Real Estate & Construction	-		-		-	-		-		-
Commercial Real Estate & Construction	-		-		-	-		-		-
Home Equities:
Extension of maturity and
interest rate reduction	-		-		-	1		171		171
Consumer and other loans	-		-		-	-		-		-
Other	-		-		-	-		-		-

‎


	Six months ended June 30, 2020					Six months ended June 30, 2019
	(Recorded Investment in thousands)					(Recorded Investment in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial and Industrial	-	$	-	$	-	-	$	-	$	-
Residential Real Estate & Construction:
Combination of concessions	1		56		56	-		-		-
Commercial Real Estate & Construction	-		-		-	-		-		-
Home Equities:
Extension of maturity and
interest rate reduction	-		-		-	2		280		280
Consumer and other loans	-		-		-	-		-		-