BROOKLINE BANCORP INC - 10-Q filing on 2020-05-29

Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2020

The following tables present the changes in the allowance for loan and lease losses in loans and leases by portfolio segment for the periods indicated:



	Three Months Ended March 31, 2020
	Commercial Real Estate		Commercial			Consumer			Total
	(In Thousands)
Balance at December 31, 2019	$	30,285	$	24,826		$	5,971		$	61,082
Adoption of ASU 2016-13 (CECL)	11,694		(2,672		)	(2,390		)	6,632
Charge-offs	—		(2,527		)	(12		)	(2,539		)
Recoveries	—		247			58			305
Provision for loan and lease losses excluding unfunded commitments	40,200		6,900			601			47,701
Balance at March 31, 2020	$	82,179	$	26,774		$	4,228		$	113,181



	Three Months Ended March 31, 2019
	Commercial Real Estate		Commercial			Consumer			Total
	(In Thousands)
Balance at December 31, 2018	$	28,187	$	25,283		$	5,222		$	58,692
Charge-offs	—		(2,512		)	(30		)	(2,542		)
Recoveries	—		388			53			441
Provision for loan and lease losses	162		1,081			207			1,450
Balance at March 31, 2019	$	28,349	$	24,240		$	5,452		$	58,041

The allowance for credit losses for unfunded credit commitments, which is included in other liabilities, was $17.2 million and $1.9 million at March 31, 2020 and December 31, 2019, respectively. The increase in allowance for unfunded commitments

was primarily driven by the effect of the latest available economic forecast of the COVID-19 pandemic which was embedded in the estimated loss models. No credit commitments were charged off against the liability account in the three month periods ended March 31, 2020 and 2019.

Provision for Credit Losses

The provisions for credit losses are set forth below for the periods indicated:



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Provision for loan and lease losses:
Commercial real estate	$	40,200	$	162
Commercial	6,900		1,081
Consumer	601		207
Total provision for loan and lease losses	47,701		1,450
Unfunded credit commitments	6,413		(97		)
Total provision for credit losses	$	54,114	$	1,353

Allowance for Loan and Lease Losses Methodology

Management has established a methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses expected on the loan and lease portfolio. Additions to the allowance for credit losses are made by charges to the provision for credit losses. Losses on loans and leases are charged off against the allowance when all or a portion of a loan or lease is considered uncollectible. Subsequent recoveries on loans previously charged off, if any, are credited to the allowance when realized.

To calculate the allowance, management uses models developed by a third party. The models include: Commercial real estate (CRE) lifetime, Commercial and industrial (C&I) lifetime, Retail lifetime, C&I historical, and Retail historical. Lifetime loss rate models calculate the expected losses over the life of the loan based on loan attributes and reasonable, supportable economic forecasts. Historical loss rate models apply a loss rate to the outstanding balance of the loan. Management uses historical loss rates for condominium association, auto, and government lease portfolio segments because these loans have distinct, historical, or expected loss patterns and a de minimus effect on the overall allowance and provision.

Management elected to use multiple economic forecasts in determining the reserve to account for economic uncertainty. The forecasts include various projections of GDP, interest rates, property price indices, and employment measures. The forecasts are probability-weighted in accordance with best practices and available information at the time of the calculation execution. Scenario weighting and model parameters are reviewed for each calculation and are subject to change. The models recognize that the life of a loan may exceed the economic forecast therefore the models employ mean reversion techniques to predict credit losses for loans that are expected to mature beyond the forecast period. The March 31, 2020 forecasts reflect the immediate and longer-term effects of the COVID-19 pandemic as well as the associated policies and provision provided by local and national authorities.

The CRE lifetime loss rate, C&I lifetime loss rate, and Retail lifetime loss rate models were developed using the historical loss experience of all banks in the model’s developmental dataset. Banks in the model’s developmental dataset may have different loss experiences as well as variances in operational and underwriting procedures from the Company, and therefore, the Company calibrates expected losses for each model using a scalar. Each scalar was calculated by examining the loss rates of peer banks that have similar operations and asset bases. Peer group loss rates were used in the scalar calculation because management believes the peer group’s historical losses provide a better reflection of the Company’s current portfolio and operating procedures than the Company’s historical losses. Qualitative adjustments are also applied to select segments of the loan portfolio where applicable.

Specific reserves are established for loans individually evaluated for impairment when amortized cost basis is greater than the discounted present value of expected future cash flows or, in the case of collateral-dependent loans, when there is an excess of a loan's amortized cost basis over the fair value of its underlying collateral. When loans and leases do not share risk

characteristics with other financial assets they are evaluated individually. Individually evaluated loans are reviewed quarterly with adjustments made to the calculated reserve as necessary.

Beginning January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. As of January 1, 2020, the allowance for loan and lease losses increased by $6.6 million as a result of the adoption of CECL. Prior to January 1, 2020, the Company calculated the allowance for loan and lease losses using the incurred losses methodology.

The general allowance for loan and lease losses was $107.9 million as of March 31, 2020, compared to $59.3 million as of December 31, 2019. The increase in general allowance for loan and lease losses was driven by the effect of the latest available economic forecast of the COVID-19 pandemic on the Company's loan and lease portfolios. The specific allowance for loan and lease losses was $5.3 million as of March 31, 2020, compared to $1.8 million as of December 31, 2019. The specific allowance increased by $3.5 million during the three months ended March 31, 2020 primarily due to the reserves of $2.2 million for an individually evaluated commercial relationship and $1.7 million for another individually evaluated commercial reals estate relationship during the quarter.

As of March 31, 2020, management believes that the methodology for calculating the allowance is sound and that the allowance provides a reasonable basis for determining and reporting on probable losses over the lifetime of the Company’s loan portfolios.

Credit Quality Assessment

At the time of loan origination, a rating is assigned based on the capacity to pay and general financial strength of the borrower, the value of assets pledged as collateral, and the evaluation of third party support such as a guarantor. The Company continually monitors the credit quality of the loan portfolio using all available information. The officer responsible for handling each loan is required to initiate changes to risk ratings when changes in facts and circumstances occur that warrant an upgrade or downgrade in a loan rating. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, adversely risk-rated, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower's ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring ("TDR") loan.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For all loans, the Company utilizes an eight-grade loan rating system, which assigns a risk rating to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. Factors considered include industry and market conditions; position within the industry; earnings trends; operating cash flow; asset/liability values; debt capacity; guarantor strength; management and controls; financial reporting; collateral; and other considerations. In addition, the Company's independent loan review group evaluates the credit quality and related risk ratings in all loan portfolios. The results of these reviews are reported to the Risk Committee of the Board of Directors on a periodic basis and annually to the Board of Directors. For the consumer loans, the Company heavily relies on payment status for calibrating credit risk.

The ratings categories used for assessing credit risk in the commercial real estate, multi-family mortgage, construction, commercial, equipment financing, condominium association and other consumer loan and lease classes are defined as follows:

1 -4 Rating—Pass

Loan rating grades "1" through "4" are classified as "Pass," which indicates borrowers are performing in accordance with the terms of the loan and are less likely to result in loss due to the capacity of the borrower to pay and the adequacy of the value of assets pledged as collateral.

5 Rating—Other Assets Especially Mentioned ("OAEM")

Borrowers exhibit potential credit weaknesses or downward trends deserving management's attention. If not checked or corrected, these trends will weaken the Company's asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

6 Rating—Substandard

Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligors or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy. Although no loss of principal is envisioned, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

7 Rating—Doubtful

Borrowers exhibit well-defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

8 Rating—Definite Loss

Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

Assets rated as "OAEM," "substandard" or "doubtful" based on criteria established under banking regulations are collectively referred to as "criticized" assets.

Credit Quality Information

The following table presents the amortized cost basis of loans in each class by credit quality indicator and year of origination as of March 31, 2020.



	March 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Commercial Real Estate
Pass	$	79,035	$	405,437	$	304,254	$	284,975	$	289,293	$	1,069,498	$	52,470	$	11,622	$	2,496,584
OAEM	—		496		—		—		2,253		14,750		—		—		17,499
Substandard	—		—		466		228		46		12,033		—		67		12,840
Total	79,035		405,933		304,720		285,203		291,592		1,096,281		52,470		11,689		2,526,923
Multi-Family Mortgage
Pass	35,322		112,126		142,968		109,573		130,328		368,436		52,284		12,152		963,189
Substandard	—		—		—		—		84		—						84
Total	35,322		112,126		142,968		109,573		130,412		368,436		52,284		12,152		963,273
Construction
Pass	8,556		68,836		165,940		9,599		8,848		722		9,461		—		271,962
Total	8,556		68,836		165,940		9,599		8,848		722		9,461		—		271,962
Commercial
Pass	19,210		85,409		62,169		80,508		31,373		129,970		286,535		3,589		698,763
OAEM	—		—		25		—		73		40		4,302		376		4,816
Substandard	—		—		785		642		1,809		10,799		981		612		15,628



Doubtful	—		—		—		—		—		—		—		1		1
Total	19,210		85,409		62,979		81,150		33,255		140,809		291,818		4,578		719,208
Equipment Financing
Pass	81,915		372,988		270,215		165,961		83,859		66,392		1,261		736		1,043,327
OAEM	—		—		—		—		1,322		42		—		—		1,364
Substandard	—		969		2,429		2,168		1,457		2,127		—		—		9,150
Doubtful	—		342		366		310		94		100		—		—		1,212
Total	81,915		374,299		273,010		168,439		86,732		68,661		1,261		736		1,055,053
Condominium Association
Pass	809		10,848		6,002		9,380		6,371		16,759		1,659		574		52,402
Substandard	—		—		—		—		130		73		—		—		203
Total	809		10,848		6,002		9,380		6,501		16,832		1,659		574		52,605
Other Consumer
Pass	929		662		8,984		553		579		593		22,446		19		34,765
Substandard	—		—		—		—		—		2						2
Total	929		662		8,984		553		579		595		22,446		19		34,767
Total
Pass	225,776		1,056,306		960,532		660,549		550,651		1,652,370		426,116		28,692		5,560,992
OAEM	—		496		25		—		3,648		14,832		4,302		376		23,679
Substandard	—		969		3,680		3,038		3,526		25,034		981		679		37,907
Doubtful	—		342		366		310		94		100		—		1		1,213
Total	$	225,776	$	1,058,113	$	964,603	$	663,897	$	557,919	$	1,692,336	$	431,399	$	29,748	$	5,623,791

For residential mortgage and home equity loans, the borrowers' credit scores contribute as a reserve metric in the retail loss rate model.



	At March 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Home Equity
Credit Scores
Over 700	$	819	$	4,499	$	4,370	$	3,853	$	1,330	$	16,556	$	275,436	$	3,778	$	310,641
661 - 700	33		522		591		693		350		3,813		43,883		1,746		51,631
600 and below	—		219		281		14		42		610		10,478		917		12,561
Data not available*	—		—		—		—		—		2,018		10,129		1,570		13,717
Total	852		5,240		5,242		4,560		1,722		22,997		339,926		8,011		388,550
Residential
Credit Scores
Over 700	22,590		109,958		83,081		68,973		60,377		155,544		3,793		—		504,316
661 - 700	5,083		22,555		14,052		19,070		11,256		29,870		—		—		101,886
600 and below	3,058		6,541		5,193		9,142		6,736		16,974		—		—		47,644
Data not available*	7,943		20,444		20,383		15,845		5,635		84,733		—		1,357		156,340
Total	$	38,674	$	159,498	$	122,709	$	113,030	$	84,004	$	287,121	$	3,793	$	1,357	$	810,186

_______________________________________________________________________________

* Represents loans and leases for which data are not available.

The following tables present the recorded investment in loans in each class as of December 31, 2019, by credit quality indicator.



	At December 31, 2019
	Commercial Real Estate		Multi- Family Mortgage		Construction		Commercial		Equipment Financing		Condominium Association		Other Consumer		Total
	(In Thousands)
Originated:
Loan rating:
Pass	$	2,379,925	$	896,398	$	239,015	$	688,268	$	1,038,793	$	56,687	$	38,673	$	5,337,759
OAEM	17,006		—		—		10,803		1,389		—		—		29,198
Substandard	3,106		84		—		14,801		7,995		151		1		26,138
Doubtful	—		—		—		3		1,820		—		—		1,823
Total originated	2,400,037		896,482		239,015		713,875		1,049,997		56,838		38,674		5,394,918

Acquired:
Loan rating:
Pass	81,360		35,681		7,033		15,215		2,404		—		108		141,801
OAEM	597		—		—		210		—		—		—		807
Substandard	9,017		—		—		202		7		—		—		9,226
Doubtful	—		—		—		—		—		—		—		—
Total acquired	90,974		35,681		7,033		15,627		2,411		—		108		151,834

Total loans	$	2,491,011	$	932,163	$	246,048	$	729,502	$	1,052,408	$	56,838	$	38,782	$	5,546,752

As of December 31, 2019, there were no loans categorized as definite loss.



	At December 31, 2019
	Residential Mortgage				Home Equity
	(Dollars In Thousands)
Originated:
Loan-to-value ratio:
Less than 50%	$	184,628	22.7	%	$	132,736	35.2	%
50%—69%	293,976		36.1	%	91,681		24.3	%
70%—79%	204,600		25.1	%	81,459		21.6	%
80% and over	25,664		3.2	%	37,371		9.9	%
Data not available*	2,654		0.3	%	—		—	%
Total originated	711,522		87.4	%	343,247		91.0	%

Acquired:
Loan-to-value ratio:
Less than 50%	32,838		4.0	%	16,882		4.5	%
50%—69%	44,754		5.4	%	7,958		2.1	%
70%—79%	14,305		1.8	%	705		0.2	%
80% and over	4,608		0.6	%	4,726		1.3	%
Data not available	6,218		0.8	%	3,301		0.9	%
Total acquired	102,723		12.6	%	33,572		9.0	%

Total loans	$	814,245	100.0	%	$	376,819	100.0	%

_______________________________________________________________________________

* Represents in process general ledger accounts for which data are not available.

The following table presents information regarding foreclosed residential real estate property for the periods indicated:



	At March 31, 2020		At December 31, 2019
	(In Thousands)
Amortized cost basis in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	—	$	110

Age Analysis of Past Due Loans and Leases

The following table presents an age analysis of the amortized cost basis in loans and leases as of March 31, 2020.



	At March 31, 2020
	Past Due												Past Due Greater Than 90 Days and Accruing
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current		Total Loans and Leases				Non-accrual		Non-accrual with No Related Allowance
	(In Thousands)
Commercial real estate loans:
Commercial real estate	$	8,331	$	1,302	$	10,224	$	19,857	$	2,507,066	$	2,526,923	$	268	$	10,937	$	2,933
Multi-family mortgage	1,270		1,022		84		2,376		960,897		963,273		—		85		84
Construction	1,617		4,182		—		5,799		266,163		271,962		—		—		—
Total commercial real estate loans	11,218		6,506		10,308		28,032		3,734,126		3,762,158		268		11,022		3,017
Commercial loans and leases:
Commercial	3,173		8,559		3,169		14,901		704,307		719,208		18		12,991		8,922
Equipment financing	5,885		2,155		6,726		14,766		1,040,287		1,055,053		305		10,356		2,299
Condominium association	1,044		—		—		1,044		51,561		52,605		—		203		130
Total commercial loans and leases	10,102		10,714		9,895		30,711		1,796,155		1,826,866		323		23,550		11,351
Consumer loans:
Residential mortgage	662		—		2,458		3,120		807,066		810,186		452		3,446		3,077
Home equity	1,310		1		468		1,779		386,771		388,550		2		1,059		780
Other consumer	26		4		5		35		34,732		34,767		—		7		—
Total consumer loans	1,998		5		2,931		4,934		1,228,569		1,233,503		454		4,512		3,857
Total loans and leases	$	23,318	$	17,225	$	23,134	$	63,677	$	6,758,850	$	6,822,527	$	1,045	$	39,084	$	18,225

There is no interest income recognized on non-accrual loans for the three months ended March 31, 2020.

The following tables present an age analysis of the recorded investment in originated and acquired loans and leases as of December 31, 2019.



	At December 31, 2019
	Past Due												Loans and Leases Past Due Greater Than 90 Days and Accruing
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current		Total Loans and Leases		Loans and Leases Past Due Greater Than 90 Days and Accruing		Nonaccrual Loans and Leases
	(In Thousands)
Originated:
Commercial real estate loans:
Commercial real estate	$	3,330	$	2,032	$	1,606	$	6,968	$	2,393,069	$	2,400,037	$	51	$	2,751
Multi-family mortgage	3,559		553		—		4,112		892,370		896,482		—		84
Construction	—		—		—		—		239,015		239,015		—		—
Total commercial real estate loans	6,889		2,585		1,606		11,080		3,524,454		3,535,534		51		2,835
Commercial loans and leases:
Commercial	5,010		199		3,875		9,084		704,791		713,875		—		4,707
Equipment financing	3,098		1,558		7,246		11,902		1,038,095		1,049,997		—		9,822
Condominium association	458		—		—		458		56,380		56,838		—		151
Total commercial loans and leases	8,566		1,757		11,121		21,444		1,799,266		1,820,710		—		14,680
Consumer loans:
Residential mortgage	1,014		—		3		1,017		710,505		711,522		—		753
Home equity	794		501		139		1,434		341,813		343,247		2		276
Other consumer	46		1		1		48		38,626		38,674		—		1
Total consumer loans	1,854		502		143		2,499		1,090,944		1,093,443		2		1,030
Total originated loans and leases	$	17,309	$	4,844	$	12,870	$	35,023	$	6,414,664	$	6,449,687	$	53	$	18,545



	At December 31, 2019
	Past Due												Loans and Leases Past Due Greater Than 90 Days and Accruing
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current		Total Loans and Leases		Loans and Leases Past Due Greater Than 90 Days and Accruing		Nonaccrual Loans and Leases⁽¹⁾
	(In Thousands)
Acquired:
Commercial real estate loans:
Commercial real estate	$	539	$	59	$	8,989	$	9,587	$	81,387	$	90,974	$	8,919	$	94
Multi-family mortgage	—		—		—		—		35,681		35,681		—		—
Construction	—		—		—		—		7,033		7,033		—		—
Total commercial real estate loans	539		59		8,989		9,587		124,101		133,688		8,919		94
Commercial loans and leases:
Commercial	—		—		—		—		15,627		15,627		—		202
Equipment financing	—		—		7		7		2,404		2,411		7		—
Total commercial loans and leases	—		—		7		7		18,031		18,038		7		202
Consumer loans:
Residential mortgage	35		75		1,090		1,200		101,523		102,723		1,090		—
Home equity	430		—		42		472		33,100		33,572		40		620
Other consumer	—		—		—		—		108		108		—		—
Total consumer loans	465		75		1,132		1,672		134,731		136,403		1,130		620
Total acquired loans and leases	$	1,004	$	134	$	10,128	$	11,266	$	276,863	$	288,129	$	10,056	$	916

Total loans and leases	$	18,313	$	4,978	$	22,998	$	46,289	$	6,691,527	$	6,737,816	$	10,109	$	19,461

___________________________________________________________

(1) Loans and leases acquired with deteriorated credit quality are always accruing.

Impaired Loans and Leases

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. The loans and leases risk-rated "substandard" or worse are considered impaired. The Company has also defined the population of impaired loans to include nonaccrual loans and TDR loans. Impaired loans and leases which do not share similar risk characteristics with other loans are individually evaluated for credit losses. Specific reserves are established for loans and leases with deterioration in the present value of expected future cash flows or, in the case of collateral-dependent loans and leases, any increase in the loan or lease amortized cost basis over the fair value of the underlying collateral discounted for estimated selling costs. In contrast, the loans and leases which share similar risk characteristics and are not included in the individually evaluated population are collectively evaluated for credit losses.

The following tables present information regarding individually evaluated and collectively evaluated allowance for loan and lease losses for credit losses on loans and leases at the dates indicated. Periods prior to January 1, 2020 are presented in accordance with accounting rules effective at that time.



	At March 31, 2020
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:
Individually evaluated	$	1,672	$	3,488	$	117	$	5,277
Collectively evaluated	80,507		23,286		4,111		107,904
Total	82,179		26,774		4,228		113,181

Loans and Leases:
Individually evaluated	$	15,134	$	29,726	$	8,187	$	53,047
Collectively evaluated	3,747,024		1,797,140		1,225,316		6,769,480
Total	3,762,158		1,826,866		1,233,503		6,822,527



	At December 31, 2019
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:
Originated:
Individually evaluated for impairment	$	7	$	1,672	$	70	$	1,749
Collectively evaluated for impairment	28,415		22,853		5,850		57,118
Total originated loans and leases	28,422		24,525		5,920		58,867

Acquired:
Individually evaluated for impairment	—		—		40		40
Collectively evaluated for impairment	65		197		11		273
Acquired with deteriorated credit quality	1,798		104		—		1,902
Total acquired loans and leases	1,863		301		51		2,215

Total allowance for loan and lease losses	$	30,285	$	24,826	$	5,971	$	61,082

Loans and Leases:
Originated:
Individually evaluated for impairment	$	3,956	$	20,019	$	3,326	$	27,301
Collectively evaluated for impairment	3,531,578		1,800,691		1,090,117		6,422,386
Total originated loans and leases	3,535,534		1,820,710		1,093,443		6,449,687

Acquired:
Individually evaluated for impairment	2,942		397		1,841		5,180
Collectively evaluated for impairment	79,465		15,465		110,758		205,688
Acquired with deteriorated credit quality	51,281		2,176		23,804		77,261
Total acquired loans and leases	133,688		18,038		136,403		288,129

Total loans and leases	$	3,669,222	$	1,838,748	$	1,229,846	$	6,737,816

The following tables include the recorded investment and unpaid principal balances of impaired loans and leases with the related allowance amount, if applicable, for the originated and acquired loan and lease portfolios at the dates indicated. Also presented are the average recorded investments in the impaired loans and leases and the related amount of interest recognized during the period that the impaired loans were impaired.



	At December 31, 2019
	Recorded Investment ₍₁₎		Unpaid Principal Balance		Related Allowance
	(In Thousands)
Originated:
With no related allowance recorded:
Commercial real estate	$	3,899	$	3,892	$	—
Commercial	28,539		28,533		—
Consumer	2,237		2,223		—
Total originated with no related allowance recorded	34,675		34,648		—
With an allowance recorded:
Commercial real estate	68		68		7
Commercial	5,980		6,055		1,672
Consumer	1,224		1,220		70
Total originated with an allowance recorded	7,272		7,343		1,749
Total originated impaired loans and leases	41,947		41,991		1,749

Acquired:
With no related allowance recorded:
Commercial real estate	12,365		12,366		—
Commercial	437		437		—
Consumer	3,516		3,516		—
Total acquired with no related allowance recorded	16,318		16,319		—
With an allowance recorded:
Commercial real estate	—		—		—
Commercial	—		—		—
Consumer	447		447		40
Total acquired with an allowance recorded	447		447		40
Total acquired impaired loans and leases	16,765		16,766		40

Total impaired loans and leases	$	58,712	$	58,757	$	1,789

___________________________________________________________________________

(1) Includes originated and acquired nonaccrual loans of $18.5 million and $0.9 million, respectively as of December 31, 2019.



	Three Months Ended
	March 31, 2019
	Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Originated:
With no related allowance recorded:
Commercial real estate	$	8,699	$	65
Commercial	35,162		349
Consumer	2,732		8
Total originated with no related allowance recorded	46,593		422
With an allowance recorded:
Commercial real estate	469		1
Commercial	8,467		28
Consumer	663		6
Total originated with an allowance recorded	9,599		35
Total originated impaired loans and leases	56,192		457

Acquired:
With no related allowance recorded:
Commercial real estate	9,153		3
Commercial	559		4
Consumer	4,943		15
Total acquired with no related allowance recorded	14,655		22
With an allowance recorded:
Commercial real estate	—		—
Commercial	—		—
Consumer	153		1
Total acquired with an allowance recorded	153		1
Total acquired impaired loans and leases	14,808		23

Total impaired loans and leases	$	71,000	$	480

Troubled Debt Restructuring Loans and Lease

The following table sets forth information regarding TDR loans and leases at the dates indicated:



	At March 31, 2020		At December 31, 2019
	(In Thousands)
Troubled debt restructurings:
On accrual	$	16,480	$	17,076
On nonaccrual	5,819		6,104
Total troubled debt restructurings	$	22,299	$	23,180

Total TDR loans and leases decreased by $0.9 million to $22.3 million at March 31, 2020 from $23.2 million at December 31, 2019, driven primarily by the payments on commercial TDRs, partially offset by the advance on a current TDR loan.

The amortized cost basis in TDR loans and the associated specific credit losses for the loan and lease portfolios, that were modified during the periods indicated, are as follows.



	At and for the Three Months Ended March 31, 2020
		Amortized Cost				Specific Allowance for Credit Losses				Defaulted ⁽¹⁾
	Number of Loans/ Leases	At Modification		At End of Period		Specific Allowance for Credit Losses		Nonaccrual Loans and Leases		Number of Loans/ Leases	Amortized Cost
	(Dollars in Thousands)
Originated:
Commercial real estate	—	$	—			$	—	$	—	1	$	228
Commercial	1	$	297	$	295	$	—	$	295	—	$	—
Equipment financing	2	200		200		—		—		—	—
Total	3	$	497	$	495	$	—	$	295	1	$	228

______________________________________________________________________

(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.



	At and for the Three Months Ended March 31, 2019
		Recorded Investment				Specific Allowance for Loan and Lease Losses				Defaulted ⁽¹⁾
	Number of Loans/ Leases	At Modification		At End of Period		Specific Allowance for Loan and Lease Losses		Nonaccrual Loans and Leases		Number of Loans/ Leases	Recorded Investment
	(Dollars in Thousands)
Originated:
Commercial real estate	1	$	73	$	72	$	9	$	—	1	$	635
Commercial	6	16,754		16,730		—		—		3	1,074
Equipment financing	3	816		815		182		425		1	52
Residential mortgage	—	—		—		—		—		1	341
Total originated	10	$	17,643	$	17,617	$	191	$	425	6	$	2,102

______________________________________________________________________

(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.

The following table sets forth the Company's end-of-period amortized cost basis for TDRs that were modified during the periods indicated, by type of modification.



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Loans with one modification:
Extended maturity	$	295	$	6,319
Combination maturity, principal, interest rate	200		11,298
Total loans with one modification	495		17,617

The TDR loans and leases that were modified for the three months ended March 31, 2020 and 2019 were $0.5 million and $17.6 million, respectively. The decrease in TDR loans and leases that were modified for the three months ended March 31, 2020 was primarily due to the modification of three commercial relationships of $16.5 million.

There were no TDR loans and leases with more than one modification during the three months ended March 31, 2020 and 2019.

The net charge-offs for performing and nonperforming TDR loans and leases for the three months ended March 31, 2020 and March 31, 2019 were $134 thousand and $878 thousand, respectively.

The commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs as of March 31, 2020 was $2.3 million. As of March 31, 2019, there were $2.8 million commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs.

The Coronavirus Aid, Relief and Economic Relief ("CARES") Act and regulatory guidance recently issued by the Federal banking agencies provides that certain short-term loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic are not required to be treated as TDRs under GAAP. As such, the Company suspended TDR accounting for COVID-19 pandemic related loan modifications meeting the loan modification criteria set forth under the CARES Act or as specified in the regulatory guidance. Further, loans granted payment deferrals related to COVID-19 pandemic are not required to be reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral). Please refer to Note 14, Subsequent Events for further information regarding loans and leases modified under the CARES Act.