3 unchanged sentences
Consolidated Balance Sheets
−Removed: September 30,
2021 December 31,
4 unchanged sentences
Marketable equity securities 9,471 9,052
+Added: Investment securities held to maturity, at amortized cost 20,000 10,000
+Added: Total portfolio investments 333,281 266,685
Investment in Federal Home Loan Bank stock 3,116 2,551
1 unchanged sentence
Loans 1,548,924 1,444,050
−Removed: Allowance for loan losses ( 21,683 ) ( 19,088 )
+Added: Allowance for credit losses ( 14,764 ) ( 21,136 )
Net loans 1,534,160 1,422,914
3 unchanged sentences
Premises and equipment, net 38,171 38,102
−Removed: Operating lease right-of-use asset 12,943 14,306
+Added: Operating lease right-of-use assets 11,934 12,440
Goodwill 15,017 15,017
11 unchanged sentences
Junior subordinated debentures 10,310 10,310
−Removed: Operating lease liability 12,881 14,229
+Added: Operating lease liabilities 11,883 12,378
Other liabilities 31,532 37,737
2 unchanged sentences
Preferred stock, $ 1 par value, 2,500,000 shares authorized, none issued or outstanding
−Removed: Common stock, $ 1 par value, 10,000,000 shares authorized, 6,279,304 and 6,558,809 issued and outstanding at September 30, 2020 and December 31, 2019, respectively
+Added: Common stock, $ 1 par value, 10,000,000 shares authorized, 6,206,913 and 6,251,004 issued and outstanding at March 31, 2021 and December 31, 2020, respectively
Additional paid-in capital 39,642 41,808
6 unchanged sentences
Consolidated Statements of Income
−Removed: Three Months Ended Nine Months Ended
−Removed: September 30, September 30,
+Added: Three Months Ended
(In Thousands, Except Per Share Data) 2021 2020
3 unchanged sentences
Dividends on marketable equity securities 87 102
+Added: Interest on investment securities held to maturity 246 —
Dividends on Federal Home Loan Bank stock 23 20
3 unchanged sentences
Interest expense on deposits 949 1,484
−Removed: Interest expense on securities sold under agreements to repurchase — 1 — 41
Interest expense on borrowings 60 71
2 unchanged sentences
Net Interest Income 19,493 15,690
−Removed: Provision (benefit) for loan losses 567 ( 2,075 ) 3,031 ( 1,025 )
−Removed: Net Interest Income After Provision for Loan Losses 17,727 18,381 48,410 49,057
+Added: (Benefit) provision for credit losses ( 1,488 ) 2,060
+Added: Net Interest Income After Provision for Credit Losses 20,981 13,630
Other Operating Income
3 unchanged sentences
Service charges on deposit accounts 290 362
−Removed: Unrealized (loss) gain on marketable equity securities 375 130 ( 347 ) 782
+Added: Unrealized (loss) on marketable equity securities ( 84 ) ( 871 )
Interest rate swap income 92 —
Gain on sale of marketable equity securities, net — 98
−Removed: Gain on sale of investment securities available for sale, net — — — 23
Other income 704 615
8 unchanged sentences
Intangible asset amortization expense 9 12
−Removed: OREO expense (income), net rental income and gains on sale 23 ( 31 ) 8 ( 186 )
+Added: OREO (income) expense, net ( 36 ) ( 36 )
Other operating expense 1,589 1,626
10 unchanged sentences
Consolidated Statements of Comprehensive Income
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
2 unchanged sentences
Securities available for sale:
−Removed: Unrealized gains arising during the period $ 54 $ 83 $ 477 $ 2,816
+Added: Unrealized (losses) arising during the period ($ 1,518 ) ($ 1,330 )
Reclassification of net gains included in net income, net of tax expense
−Removed: of $ 0 for the third quarters of 2020 and 2019, and $ 28 and $ 7 for the
−Removed: nine months ended September 30, 2020 and 2019, respectively — — ( 70 ) ( 16 )
+Added: of $ 0 and $ 28 for the first quarters of 2021 and 2020, respectively
Derivatives and hedging activities:
Unrealized gains (losses) arising during the period 1,260 ( 1,867 )
−Removed: Income tax (expense) benefit related to unrealized gains and losses ( 85 ) ( 23 ) 549 ( 742 )
−Removed: Other comprehensive (loss) income, net of tax 214 ( 631 ) ( 666 ) 386
+Added: Income tax benefit related to unrealized gains and losses 77 1,131
+Added: Other comprehensive loss, net of tax ( 181 ) ( 2,136 )
Comprehensive income $ 12,000 ($ 1,103 )
9 unchanged sentences
Stock-based compensation expense — — 242 — — 242
−Removed: Exercise of stock options and vesting of restricted stock units, net 2 2 ( 2 ) — — —
Repurchase of common stock ( 193 ) ( 193 ) ( 6,117 ) — — ( 6,310 )
Other comprehensive income, net of tax — — — — ( 2,136 ) ( 2,136 )
+Added: Cumulative effect of adoption of accounting principles related to equity compensation expense — — 139 ( 139 ) — —
Net income — — — 1,033 — 1,033
3 unchanged sentences
Stock-based compensation expense — — 238 — — 238
−Removed: Repurchase of common stock ( 150 ) ( 150 ) ( 5,048 ) — — ( 5,198 )
+Added: Exercise of stock options and vesting of restricted stock units, net 2 2 ( 8 ) — — ( 6 )
Other comprehensive income, net of tax — — — — 1,256 1,256
4 unchanged sentences
Stock-based compensation expense — — 237 — — 237
−Removed: Exercise of stock options and vesting of restricted stock units, net 3 3 ( 37 ) — — ( 34 )
Repurchase of common stock ( 89 ) ( 89 ) ( 2,277 ) — — ( 2,366 )
6 unchanged sentences
Exercise of stock options and vesting of restricted stock units, net 17 17 ( 129 ) — — ( 112 )
+Added: Repurchase of common stock ( 45 ) ( 45 ) ( 1,255 ) — — ( 1,300 )
Other comprehensive income, net of tax — — — — 253 253
1 unchanged sentence
Balance as of December 31, 2020 6,251 $ 6,251 $ 41,808 $ 173,498 $ 18 $ 221,575
+Added: See notes to consolidated financial statements
NORTHRIM BANCORP, INC.
7 unchanged sentences
Stock-based compensation expense — — 280 — — 280
+Added: Exercise of stock options and vesting of restricted stock units, net 17 17 ( 295 ) — — ( 278 )
Repurchase of common stock ( 61 ) ( 61 ) ( 2,151 ) — — ( 2,212 )
Other comprehensive loss, net of tax — — — — ( 181 ) ( 181 )
−Removed: Cumulative effect of adoption of accounting principles related to equity compensation expense — — 139 ( 139 ) — —
+Added: Cumulative effect of adoption of ASU 2016-13 — — — 2,400 — 2,400
Net income — — — 12,181 — 12,181
Balance as of March 31, 2021 6,207 $ 6,207 $ 39,642 $ 185,766 ($ 163 ) $ 231,452
−Removed: Cash dividend on common stock ($ 0.34 per share)
−Removed: — — — ( 2,188 ) — ( 2,188 )
−Removed: Stock-based compensation expense — — 238 — — 238
−Removed: Exercise of stock options and vesting of restricted stock units, net 2 2 ( 8 ) — — ( 6 )
−Removed: Other comprehensive income, net of tax — — — — 1,256 1,256
−Removed: Net income — — — 9,900 — 9,900
−Removed: Balance as of June 30, 2020 6,368 $ 6,368 $ 45,006 $ 155,998 ($ 449 ) $ 206,923
−Removed: Cash dividend on common stock ($ 0.35 per share)
−Removed: — — — ( 2,247 ) — ( 2,247 )
−Removed: Stock-based compensation expense — — 237 — — 237
−Removed: Repurchase of common stock ( 89 ) ( 89 ) ( 2,277 ) — — ( 2,366 )
−Removed: Other comprehensive income, net of tax — — — — 214 214
−Removed: Net income — — — 11,855 — 11,855
−Removed: Balance as of September 30, 2020 6,279 $ 6,279 $ 42,966 $ 165,606 ($ 235 ) $ 214,616
See notes to consolidated financial statements
1 unchanged sentence
Consolidated Statements of Cash Flows
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
3 unchanged sentences
Gain on sale of securities, net — ( 98 )
−Removed: Loss on disposal of premises and equipment 22 —
Depreciation and amortization of premises and equipment 789 761
6 unchanged sentences
Deferred loan fees and amortization, net of costs 6,042 ( 148 )
−Removed: Provision (benefit) for loan losses 3,031 ( 1,025 )
−Removed: Benefit for purchased receivables ( 7 ) ( 103 )
+Added: Provision (benefit) for credit losses ( 1,488 ) 2,060
+Added: Provision for purchased receivables — 5
Additions to home mortgage servicing rights carried at fair value ( 1,448 ) ( 663 )
6 unchanged sentences
Net changes in assets and liabilities:
−Removed: (Increase) decrease in accrued interest receivable ( 3,512 ) 19
−Removed: (Increase) in other assets ( 6,443 ) 3,257
−Removed: Decrease in other liabilities 2,980 3,590
−Removed: Net Cash (Used) by Operating Activities ( 27,019 ) ( 22,341 )
+Added: (Increase) in accrued interest receivable ( 264 ) ( 495 )
+Added: Decrease (Increase) in other assets 2,795 ( 3,186 )
+Added: (Increase) decrease in other liabilities ( 6,686 ) 975
+Added: Net Cash Provided (Used) by Operating Activities 44,583 ( 16,941 )
Investing Activities:
3 unchanged sentences
Purchases of FHLB stock ( 569 ) ( 1,943 )
+Added: Purchases of investment securities held to maturity ( 10,000 ) —
Proceeds from sales/calls/maturities of securities available for sale 46,442 44,868
9 unchanged sentences
Increase in deposits 226,336 23,141
−Removed: Decrease in securities sold under repurchase agreements — ( 34,278 )
−Removed: Increase in borrowings 4,846 1,692
+Added: (Decrease) increase in borrowings ( 68 ) 27,986
Repurchase of common stock ( 2,212 ) ( 6,310 )
8 unchanged sentences
Interest paid $ 1,105 $ 1,605
−Removed: Noncash commitments to invest in Low Income Housing Tax Credit Partnerships $ — $ 7,282
Transfer of loans to other real estate owned $ 274 $ 162
13 unchanged sentences
The Company has evaluated subsequent events and transactions for potential recognition or disclosure.
−Removed: Operating results for the interim period ended September 30, 2020 are not necessarily indicative of the results anticipated for the year ending December 31, 2020.
+Added: Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results anticipated for the year ending December 31, 2021.
These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The Company’s significant accounting policies are discussed in Note 1 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
+Added: There have been no significant changes in our application of these accounting policies in 2021, except as noted below.
+Added: As a result of the adoption of Accounting Standards Codification ("ASC") 326 Financial Instruments - Credit Losses on January 1, 2020, the Company has updated the following significant accounting policies.
+Added: Allowance for Credit Losses - Investment Securities:
+Added: For available for sale debt securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.
+Added: Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes.
+Added: Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings.
+Added: The ACL may be reversed if conditions change.
+Added: However, if the Company intends to sell an impaired available for sale debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount must be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis.
+Added: Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in such a situation.
+Added: In evaluating available for sale debt securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors.
+Added: Changes in the ACL are recorded as provision for (or reversal of) credit loss expense.
+Added: Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
+Added: The ACL on held to maturity securities is estimated on a collective basis by major security type.
+Added: At March 31, 2021, the Company’s held to maturity securities consisted of investments in corporate bonds.
+Added: Expected credit losses for these securities are estimated using a discounted cash flow ("DCF") methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
+Added: Accrued interest receivable is excluded from the estimate of credit losses.
+Added: Allowance for Credit Losses - Loans :
+Added: Under the current expected credit loss model adopted by the Company on January 1, 2021, the allowance for credit losses on loans is a valuation allowance estimated at each balance sheet date that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
+Added: The Company estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs.
+Added: In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner.
+Added: Therefore, the Company has made a policy election to exclude accrued interest from the measurement of ACL.
+Added: Expected credit losses are reflected in the ACL through a provision for or (reversal) of credit loss expense.
+Added: When the Company deems all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount.
+Added: The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible when management believes that collection of principal is unlikely.
+Added: Subsequent recoveries, if any, are credited to the ACL when received.
+Added: The Company measures expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics.
+Added: Depending on the nature and size of the pool of financial assets with similar risk characteristics, the Company uses a DCF method or a weighted average remaining life method to estimate expected credit losses quantitatively.
+Added: The Company uses a DCF method for 8 of its 11 loan pools, which represent 98 % of the amortized cost basis of total loans at March 31, 2021.
+Added: The weighted average remaining life method is used for the remaining 3 loan pools primarily because loan level data constraints preclude the use of the DCF model.
+Added: The weighted average remaining life method uses exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.
+Added: The Company utilizes peer historical loss data to estimate credit losses under the weighted average remaining life method.
+Added: Under the DCF method, the Company utilizes complex models to obtain reasonable and supportable forecasts to calculate two predictive metrics, the probability of default ("PD") and loss given default ("LGD").
+Added: The PD measures the probability that a loan will default within a given time horizon and is an assumption derived from regression models which determine the relationship between historical defaults and certain economic variables.
+Added: The Company's regression models for PD utilize the Company's actual historical loan level default data.
+Added: The Company determines a reasonable and supportable forecast and applies that forecast to the regression model to estimate defaults over the forecast period.
+Added: Management leverages economic projections from a reputable and independent third-party to inform its loss driver forecasts over the Company's 4 quarter forecast period.
+Added: Management utilizes and forecasts Alaska unemployment as a loss driver for all of the loans pools that utilized the DCF method.
+Added: Management also utilizes and forecasts either one-year percentage change in the Alaska home price index or the one-year percentage change in the national commercial real estate price index as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.
+Added: Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
+Added: Following the forecast period, the economic variables used to calculate PD revert to a historical average at a constant rate over an 8 quarter reversion period.
+Added: Other assumptions relevant to the discounted cash flow model to derive the quantitative allowance include the LGD, which is the estimate of loss for a defaulted loan, prepayment speeds, and the discount rate applied to future cash flows.
+Added: The DCF method utilizes the effective interest rate of individual assets to discount the expected credit losses over the contractual term of the loan, adjusted for prepayments.
+Added: The LGD is the expected loss which would be realized presuming a default has occurred and primarily measures the value of the collateral or other secondary source of repayment related to the collateral.
+Added: The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets.
+Added: The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructuring.
+Added: In summary, under the DCF method the combination of adjustments for credit expectations (PD and LGD) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level.
+Added: Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”).
+Added: An ACL is established for the difference between the instrument’s NPV and amortized cost basis.
+Added: The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses under the current expected credit loss model adopted by the Company on January 1, 2021:
+Added: Commercial & industrial - Commercial loans are loans for commercial, corporate and business purposes.
+Added: The Company’s commercial business loan portfolio is comprised of loans for a variety of purposes and across a variety of industries.
+Added: These loans include general commercial and industrial loans, loans to purchase capital equipment, and other business loans for working capital and operational purposes.
+Added: Commercial loans are generally secured by accounts receivable, inventory and other
+Added: business assets.
+Added: Also included in commercial loans are our Paycheck Protection Program ("PPP") loans originated during 2020 and 2021.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Commercial real estate - This category of loans consists of the following loan types:
+Added: Owner occupied - This category includes non-farm, non-residential real estate loans for a variety of commercial property types and purposes, including owner occupied commercial real estate loans primarily secured by commercial office or industrial buildings, warehouses or retail buildings where the owner of the building occupies the property.
+Added: Repayment terms vary considerably, interest rates are fixed or variable, and are structured for full, partial, or no amortization of principal.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Non-owner occupied and multifamily - This category includes non-farm, non-residential real estate loans for a variety of commercial property types and purposes, including investment real estate loans that are primarily secured by office and industrial buildings, warehouses or retail buildings where the owner of the building does not occupy the property, non-owner occupied apartment or multifamily residential buildings, and various special purpose properties.
+Added: Repayment terms vary considerably, interest rates are fixed or variable, and are structured for full, partial, or no amortization of principal.
+Added: Generally, these types of loans are thought to involve a greater degree of credit risk than owner occupied commercial real estate as they are more sensitive to adverse economic conditions.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Residential real estate - This category of loans consists of the following loan types:
+Added: 1-4 family residential properties secured by first liens - This category of loans includes term loans secured by first liens on residential real estate.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens - This category of loans includes term loans primarily secured by junior liens on residential real estate and revolving credit lines that are secured by first liens on residential real estate.
+Added: Home equity revolving lines of credit and home equity term loans are included in this group of loans.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: 1-4 family residential construction - This category of loans consists of loans to finance the ground up construction, improvement and/or carrying for sale after the completion of construction of 1-4 family residential properties which will secure the loan.
+Added: These loans may also be secured by tracts or individual parcels of land on which 1-4 family residential properties are being constructed.
+Added: The repayment of construction loans is generally dependent upon the successful completion of the improvements by the builder for the end user, or sale of the property to a third-party.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Other construction, land development, and raw land - This category of loans consists of loans to finance the ground up construction, improvement and/or carrying for sale after the completion of construction of owner occupied and non-owner occupied commercial properties, and loans secured by raw or improved land.
+Added: The repayment of construction loans is generally dependent upon the successful completion of the improvements by the builder for the end user, or sale of the property to a third-party.
+Added: Repayment of land secured loans are dependent upon the successful development and sale of the property, the sale of the land as is, or the outside cash flow of the owners to support the retirement of the debt.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Agricultural production, including commercial fishing - These loans are for the purpose of financing agricultural production, including growing and storing of crops, and for the purpose of financing fisheries and forestries, including loans to commercial fishermen.
+Added: These loans may be secured or unsecured, but any loans for these purposes that are secured by real estate are included in a real estate category.
+Added: The Company utilizes the weighted average remaining life method to quantitatively estimate credit losses for this pool.
+Added: Consumer - Loans used for personal use, which may be secured or unsecured, and customer overdrafts.
+Added: The Company utilizes the DCF method to quantitatively estimate credit losses for this pool.
+Added: Obligations of states and political subdivisions in the US - This category of loans includes all loans made to states, counties municipalities, school districts, drainage and sewer districts, and Indian tribes in the U.S.
+Added: These loans maybe be secured by any type of collateral, including real estate.
+Added: The Company utilizes the weighted average remaining life method to quantitatively estimate credit losses for this pool.
+Added: Other - This category of loans includes all other loans that cannot properly be reported in one of the preceding categories.
+Added: The Company utilizes the weighted average remaining life method to quantitatively estimate credit losses for this pool.
+Added: In addition to the quantitative portion of the ACL derived using either the DCF or weighted average remaining life method, the Company also considers the effects of the following qualitative factors in its calculation of expected losses in the loan portfolio:
+Added: • Lending strategy, policies, and procedures;
+Added: • Quality of internal loan review;
+Added: • Lending management and staff;
+Added: • Trends in underlying collateral values;
+Added: • Competition, legal, and regulatory changes;
+Added: • Economic and business conditions including fluctuations in the price of Alaska North slope crude oil;
+Added: • Changes in trends, volume and severity of adversely classified loans, nonaccrual loans, and delinquencies;
+Added: • Concentration of credit;
+Added: • Changes in the nature and volume of the loan portfolio.
+Added: The qualitative factor methodology is based on quantitative metrics, but also includes a high degree of subjectivity and changes in any of the metrics could have a significant impact on our calculation of the allowance.
+Added: Loans that do not share risk characteristics with other loans in the portfolio are individually evaluated for expected credit losses and are not included in the collective evaluation.
+Added: Loans are identified for individual evaluation during regular credit reviews of the portfolio.
+Added: A loan is generally identified for individual evaluation when management determines that we will probably not be able to collect all amounts due according to the loan contract, including scheduled interest payments.
+Added: When we identify a loan for individual evaluation, we measure expected credit losses using discounted cash flows, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral.
+Added: In these cases, we use the current fair value of the collateral, less selling costs, instead of discounted cash flows.
+Added: The analysis of collateral dependent loans includes appraisals on loans secured by real property, management’s assessment of the current market, recent payment history and an evaluation of other sources of repayment.
+Added: A loan that has been modified or renewed is considered a troubled debt restructuring (“TDR”) when two conditions are met:
+Added: 1) the borrower is experiencing financial difficulty;
+Added: and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.
+Added: The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR.
+Added: The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default.
+Added: Reasonably expected TDRs and executed non-performing TDRs are evaluated individually to determine the required ACL.
+Added: TDRs performing in accordance with their modified contractual terms for a reasonable period of time may be included in the Company’s existing pools based on the underlying risk characteristics of the loan to measure the ACL.
+Added: If we determine that the value of and individually evaluated loan is less than the recorded investment in the loan, we either recognize an allowance for credit losses specific to that loan, or charge-off the deficit balance on collateral dependent loans if it is determined that such amount represents a confirmed loss.
+Added: Subsequent changes in the expected credit losses for loans evaluated individually are included within the provision for credit losses in the same manner in which the expected credit loss initially was recognized or as a reduction in the provision that would otherwise be reported.
+Added: Paycheck Protection Program and other loans guaranteed by the U.S.
+Added: With the passage of the PPP, the Company has actively participated in assisting its customers with applications for loans through the program.
+Added: Loans funded through the PPP program are fully guaranteed by the U.S.
+Added: government subject to certain representations and warranties.
+Added: This guarantee exists at the inception of the loans and throughout the lives of the loans and was not entered into separately and apart from the loans.
+Added: ASC 326 requires credit enhancements that mitigate credit losses, such as the U.S.
+Added: government guarantee on PPP loans, to be considered in estimating credit losses.
+Added: The guarantee is considered “embedded” and, therefore, is considered when estimating credit loss on the PPP loans and other loans guaranteed by the U.S.
+Added: Given that the loans are fully guaranteed by the U.S.
+Added: government and absent any specific loss information on any of our guaranteed loans, the Company does not carry an ACL on its PPP and other loans guaranteed by the U.S.
+Added: government at March 31, 2021 or December 31, 2020.
+Added: Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:
+Added: The Company enters into various types of transactions that involve financial instruments with off-balance sheet risk, including commitments
+Added: to extend credit and standby letters of credit issued to meet customer financing needs.
+Added: We apply the same credit standards to these commitments as in all of our lending activities and include these commitments in our lending risk evaluations.
+Added: The Company’s exposure to credit loss in the event of nonperformance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.
+Added: Such financial instruments are recorded when they are funded.
+Added: The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancellable, through a charge to provision for credit loss expense in the Company’s consolidated statements of income.
+Added: The ACL on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in other liabilities on the Company’s consolidated balance sheets.
+Added: Purchased Receivables and related Allowance for Credit Losses:
+Added: The Company purchases accounts receivable from its customers.
+Added: The purchased receivables are carried at amortized cost, net of an allowance for credit losses.
+Added: Management measures expected credit losses on purchased receivables by evaluating each receivable individually.
+Added: Each quarter, management reviews purchased receivable asset balances compared to assets eligible for advancement of funds in order to determine the exposure to loss for the Company.
+Added: Exposure is zero when outstanding balances exceed assets eligible for advancement.
+Added: Management may determine that an ACL is appropriate for individual purchased receivables based on asset specific facts and circumstances.
+Added: Fees charged to the customer are earned while the balances of the purchases are outstanding, which is typically less than one year.
+Added: Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.
Reclassification of Prior Year Presentation
3 unchanged sentences
Accounting pronouncements implemented in 2021
−Removed: In March 2016, the FASB issued ASU 2016-09 , Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).
−Removed: ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including allowing entities to elect an accounting policy to account for forfeitures as they occur by reversing compensation expense when the award is forfeited instead of estimating future forfeitures that will occur when recognizing compensation expense related to share-based payment awards.
−Removed: The Company elected to account for forfeitures as they occur in accordance with the guidance in ASU 2016-09 on January 1, 2020, which resulted in a $ 139,000 decrease in beginning retained earnings through a cumulative-effect adjustment.
−Removed: In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (“ASU 2017-04”).
−Removed: ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test.
−Removed: The Company adopted ASU 2017-04 on January 1, 2020.
−Removed: The adoption of ASU 2017-04 did not have a material impact on the Company’s consolidated financial position or results of operations.
−Removed: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”).
−Removed: ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits.
−Removed: The Company adopted ASU 2018-13 on January 1, 2020.
−Removed: The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial position or results of operations.
−Removed: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04").
−Removed: ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.
−Removed: The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.
−Removed: The Company adopted ASU 2020-04 as of March 31, 2020.
−Removed: The adoption of ASU 2020-04 did not have a
−Removed: material impact on the Company’s consolidated financial position or results of operations because no contract modifications have been made to date.
−Removed: Accounting pronouncements to be implemented in future periods
−Removed: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13”).
+Added: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13” or “CECL”).
ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.
−Removed: For loans and held-to-maturity debt securities, ASU 2016-13 requires a current expected credit loss ("CECL") measurement to estimate the allowance for credit losses ("ACL") for the remaining estimated life of the financial asset (including off-balance sheet credit exposures) using historical experience, current conditions, and reasonable and supportable forecasts.
−Removed: Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates, but will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.
−Removed: ASU 2016-13 eliminates the existing guidance for purchased credit impaired loans, but requires an allowance for purchased financial assets with more than insignificant deterioration since origination.
−Removed: In addition, ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on improvements in credit.
−Removed: ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's loan portfolio.
+Added: Under ASU 2016-13 financial institutions and other organizations will use forward-looking information to better inform their credit loss estimates but will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.
+Added: ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio.
These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.
+Added: In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
ASU 2016-13 is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2019, and must be applied prospectively.
However, on October 16, 2019 the FASB voted to delay ASU 2016-13 for Smaller Reporting Companies.
−Removed: In addition, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed by the President of the United States that included an option for entities to delay the implementation of ASU 2016-13 until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020.
The Company has elected Small Reporting Company status, which changes the effective date for ASU 2016-13 for the Company to fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2022.
−Removed: Our implementation process includes loss forecasting model development, evaluation of technical accounting topics, updates to our allowance documentation, reporting processes and related internal controls, and overall operational readiness for our adoption of the ASU 2016-13, which will continue until adoption, including parallel runs for CECL alongside our current allowance process.
−Removed: We are in the process of developing, validating, and implementing models used to estimate credit losses under CECL.
−Removed: We have completed substantially all of our loss forecasting models, and we expect to complete the validation process for our loan models during 2020.
−Removed: Our current planned approach for estimating expected life-time credit losses for loans and debt securities includes the following key components:
−Removed: • An initial loss forecast period of one year for all loan portfolio segments and classes of financing receivables and off balance-sheet credit exposures.
−Removed: This period reflects management’s expectation of losses based on forward-looking economic scenarios over that time.
−Removed: • A historical loss forecast period covering the remaining contractual life, adjusted for prepayments, by segment and class of financing receivables based on the change in key historical economic variables during representative historical expansionary and recessionary periods.
−Removed: • A reversion period of up to two years connecting the initial loss forecast to the historical loss forecast based on economic conditions at the measurement date.
−Removed: • Utilization of discounted cash flow ("DCF") methods to measure credit impairment for loans modified in a troubled debt restructuring, unless they are collateral dependent and measured at the fair value of collateral.
−Removed: The DCF methods would obtain estimated life-time credit losses using the conceptual components described above.
−Removed: • For debt securities classified as available-for-sale or held-to-maturity, we plan to utilize the DCF methods to measure the ACL, which will incorporate expected credit losses using the conceptual components described above.
−Removed: We will recognize an ACL for available-for-sale and held-to-maturity debt securities.
−Removed: The ACL on available-for-sale debt securities will be subject to a limitation based on the fair value of the debt securities.
−Removed: Based on the credit quality of our
−Removed: existing debt securities portfolio, we do not expect the ACL for held-to-maturity and available-for-sale debt securities to be significant.
−Removed: As of September 30, 2020, the Company does not hold any debt securities classified as held-to-maturity.
−Removed: The ultimate effect of CECL on our ACL will depend on the size and composition of our loan and investment portfolios, the portfolios' credit quality and economic conditions at the time of adoption, as well as any refinements to our models, methodology and other key assumptions.
−Removed: At adoption, we will have a cumulative-effect adjustment to retained earnings for our change in the ACL .
+Added: Early application was permitted for specified periods.
+Added: The Company elected to early adopt ASU 2016-13 on January 1, 2021 after finalizing data and model validation and our internal governance framework.
+Added: The guidance was applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at January 1, 2021.
+Added: However, certain provisions of the guidance are only required to be applied on a prospective basis.
+Added: Results for periods beginning after January 1, 2021 and presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable US GAAP.
+Added: The Company recorded a net increase in retained earnings of $ 2.4 million upon adoption.
+Added: The transition adjustment includes a decrease in the allowance for credit losses on loans of $ 4.5 million, a decrease in the allowance for credit losses on purchased receivables of $ 73,000 , and an increase in the allowance for credit losses on unfunded commitments of $ 1.2 million, net of the corresponding net decrease in deferred tax assets of $ 954,000 .
+Added: Accounting pronouncements to be implemented in future periods
+Added: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):
+Added: Facilitation of the Effects of Reference Rate Report of Financial Reporting ("ASU 2020-04").
+Added: ASU 2020-04 was issued to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.
+Added: The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued.
+Added: The last expedient is a one-time election to sell or transfer debt securities classified as held to maturity.
+Added: The expedients are in effect from March 12, 2020, through December 31, 2022.
+Added: The Company will be able to use the expedients in this guidance to manage through the transition away from LIBOR, specifically for our loan portfolio, derivative contracts, and bond portfolio.
+Added: In January 2021, the FASB issued ASU No.
+Added: 2021-01, Reference Rate Reform (Topic 848):
+Added: Scope, ("ASU 2021-01").
+Added: The amendments in ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.
+Added: The amendments clarify certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the discounting transition.
+Added: LIBOR is a widely-referenced benchmark rate, which is published in five currencies and a range of tenors, and seeks to estimate the cost at which banks can borrow on an unsecured basis from other banks.
+Added: The administrator of LIBOR, ICE Benchmark Administration, published a consultation in December 2020 regarding its intention to cease the publication of LIBOR after December 31, 2021, with the exception of certain tenors of U.S.
+Added: dollar (USD) LIBOR that it proposed would remain available for use in legacy contracts or as otherwise enumerated by financial regulators until June 30, 2023.
+Added: The Company has some assets and liabilities referenced to LIBOR, such as commercial loans, derivatives, debt securities, and junior subordinated debentures.
+Added: As of March 31, 2021, we had approximately $ 206.0 million of assets, including $ 128.7 million in commercial loans and $ 77.3 million in debt securities, and $ 10.3 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR.
+Added: These amounts exclude derivative assets and liabilities on our consolidated balance sheet.
+Added: As of March 31, 2021, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $ 158.3 million.
+Added: Of this amount, $ 74.0 million in notional value represent commercial loan interest rate swap agreements with commercial banking customers.
+Added: An additional $ 74.0 million in notional value represent corresponding swap agreements with third party financial institutions that offset the commercial loan swaps.
+Added: Swap agreements with third party institutions are $ 84.3 million, including an interest rate swap agreement for $ 10.3 million in notional value related to our junior subordinated debentures.
+Added: Each of the USD LIBOR-linked amounts referenced above are expected to vary in future periods as current contracts expire with potential replacement contracts using an alternative reference rate.
+Added: In an effort to mitigate the risks associated with a transition away from LIBOR, our Asset Liability Committee has undertaken initiatives to:
+Added: (i) develop more robust fallback language and disclosures related to the LIBOR transition, (ii) develop a plan to seek to amend legacy contracts to reference such fallback language or alternative reference rates, (iii) enhance systems to support commercial loans, securities, and derivatives linked to the Secured Overnight Financing Rate and other alternative reference rates, (iv) develop and evaluate internal guidance, policies and procedures focused on the transition away from LIBOR to alternative reference rate products, and (v) prepare and disseminate internal and external communications regarding the LIBOR transition.
+Added: The amendments are in effect from March 12, 2020, through December 31, 2022.
+Added: ASU 2021-01 does not have a material impact on the Company's consolidated financial statements.
Cash and Cash Equivalents
The Company is required to maintain cash balances or deposits with the Federal Reserve Bank of San Francisco ("Federal Reserve Bank") sufficient to meet its statutory reserve requirements and for purposes of settling financial transactions and charges for the Federal Reserve Bank services.
−Removed: The average reserve requirement for the maintenance period for the quarter ended September 30, 2020, was zero .
+Added: The average reserve requirement for the maintenance period for the quarter ended March 31, 2021, was zero .
The Company is required to maintain a $ 250,000 balance with a correspondent bank for outsourced servicing of ATMs.
−Removed: As of September 30, 2020, the Company was required to maintain a $ 100,000 and $ 2.8 million balance with a correspondent bank to collateralize the initial margin and the fair value exposure, respectively, of its interest rate swap to hedge the variability in cash flows arising out of its junior subordinated debentures.
+Added: As of March 31, 2021, the Company was required to maintain a $ 100,000 and $ 2.8 million balance with a correspondent bank to collateralize the initial margin and the fair value exposure, respectively, of its interest rate swap to hedge the variability in cash flows arising out of its junior subordinated debentures.
Investment Securities
−Removed: The amortized cost and estimated fair values of investment securities at the periods indicated are presented below:
−Removed: (In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
−Removed: September 30, 2020
+Added: Marketable Equity Securities
+Added: The Company held marketable equity securities with fair values of $ 9.5 million and $ 9.1 million at March 31, 2021 and December 31, 2020, respectively.
+Added: The gross realized and unrealized gains (losses) recognized on marketable equity securities in other operating income in the Company's Consolidated Statements of Income were as follows:
+Added: Three Months Ended March 31,
+Added: (In Thousands) 2021 2020
+Added: Unrealized (loss) gain on marketable equity securities ($ 84 ) ($ 871 )
+Added: Gain on sale of marketable equity securities, net — 98
+Added: Total ($ 84 ) ($ 773 )
+Added: Debt securities
+Added: Debt securities have been classified in the financial statements as available for sale or held to maturity.
+Added: The following table summarizes the amortized cost, estimated fair value, and allowance for credit losses of debt securities and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities at the periods indicated:
+Added: (In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value
+Added: March 31, 2021
Securities available for sale
4 unchanged sentences
Total securities available for sale $ 303,580 $ 1,668 ($ 1,438 ) $ — $ 303,810
+Added: (In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
+Added: March 31, 2021
+Added: Securities held to maturity
+Added: Corporate bonds $ 20,000 $ — ($ 94 ) $ 19,906
+Added: Allowance for credit losses — — — —
+Added: Total securities held to maturity, net of ACL $ 20,000 $ — ($ 94 ) $ 19,906
+Added: (In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
December 31, 2020
5 unchanged sentences
Total securities available for sale $ 245,871 $ 1,956 ($ 194 ) $ 247,633
−Removed: Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2020 and December 31, 2019 were as follows:
+Added: Securities held to maturity
+Added: Corporate bonds $ 10,000 $ — $ — $ 10,000
+Added: Total securities held to maturity $ 10,000 $ — $ — $ 10,000
+Added: Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2021 and December 31, 2020 were as follows:
Less Than 12 Months More Than 12 Months Total
(In Thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
−Removed: September 30, 2020:
−Removed: Securities available for sale
+Added: March 31, 2021:
Treasury and government sponsored entities $ 147,465 ($ 1,397 ) $ — $ — $ 147,465 ($ 1,397 )
2 unchanged sentences
December 31, 2020:
−Removed: Securities available for sale
Treasury and government sponsored entities $ 31,270 ($ 47 ) $ — $ — $ 31,270 ($ 47 )
+Added: Corporate bonds 3,198 ( 5 ) — — 3,198 ( 5 )
Collateralized loan obligations 23,670 ( 118 ) 2,967 ( 24 ) 26,637 ( 142 )
Total $ 58,138 ($ 170 ) $ 2,967 ($ 24 ) $ 61,105 ($ 194 )
−Removed: The unrealized losses on investments in U.S.
−Removed: treasury and government sponsored entities and collateralized loan obligations in both periods were caused by changes in interest rates.
−Removed: At September 30, 2020 and December 31, 2019, there were 11 and 8 available-for-sale securities with unrealized losses that have been in a loss position for less than twelve months, respectively.
−Removed: There were 1 and 3 securities as of September 30, 2020 and December 31, 2019 that have been in an unrealized loss position for more than twelve months, respectively.
−Removed: The contractual terms of the investments in a loss position do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.
−Removed: Because it is more likely than not that the Company will hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.
−Removed: At September 30, 2020 and December 31, 2019, $ 85.0 million and $ 30.6 million in securities were pledged for deposits and borrowings, respectively.
−Removed: The amortized cost and estimated fair values of debt securities at September 30, 2020, are distributed by contractual maturity as shown below.
+Added: Management evaluates available for sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors.
+Added: Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
+Added: At March 31, 2021, the Company had 22 available for sale securities in an unrealized loss position without an allowance for credit losses.
+Added: At March 31, 2021, the Company had one held to maturity security in an unrealized loss position without an allowance for credit losses.
+Added: Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.
+Added: The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.
+Added: Accordingly, as of March 31, 2021, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.
+Added: At March 31, 2021 and December 31, 2020, $ 80.6 million and $ 77.9 million in securities were pledged for deposits and borrowings, respectively.
+Added: The amortized cost and estimated fair values of debt securities at March 31, 2021, are distributed by contractual maturity as shown below.
Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
3 unchanged sentences
1-5 years 171,862 171,340 0.70 %
+Added: 5-10 years 20,949 20,705 0.76 %
Total $ 224,824 $ 224,493 0.92 %
Corporate bonds
+Added: Within 1 year $ 2,241 $ 2,253 1.17 %
1-5 years $ 37,705 $ 38,109 2.45 %
+Added: 5-10 years 10,000 10,000 5.00 %
Total $ 49,946 $ 50,362 2.90 %
1 unchanged sentence
5-10 years $ 47,990 $ 48,005 1.55 %
−Removed: Over 10 years 23,436 23,213 1.70 %
Total $ 47,990 $ 48,005 1.55 %
2 unchanged sentences
Total $ 820 $ 856 2.14 %
−Removed: The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the three and nine-month periods ending September 30, 2020 and 2019, are as follows:
+Added: The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the three-month periods ending March 31, 2021 and 2020, are as follows:
(In Thousands) Proceeds Gross Gains Gross Losses
−Removed: Three Months Ended September 30, 2020
−Removed: Available for sale securities $ — $ — $ —
−Removed: Three Months Ended September 30, 2019
−Removed: Available for sale securities $ — $ — $ —
−Removed: Nine Months Ended September 30, 2020
+Added: Three Months Ended March 31, 2021
Available for sale securities $ — $ — $ —
−Removed: Nine Months Ended September 30, 2019
+Added: Three Months Ended March 31, 2020
Available for sale securities $ — $ — $ —
−Removed: A summary of interest income for the three and nine-month periods ending September 30, 2020 and 2019, on available for sale investment securities are as follows:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: A summary of interest income for the three-month periods ending March 31, 2021 and 2020, on available for sale investment securities are as follows:
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
5 unchanged sentences
Total $ 778 $ 1,622
−Removed: Loans and Credit Quality
−Removed: The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on the Company's asset quality rating ("AQR") criteria:
−Removed: (In Thousands) Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deeds of trust Consumer other Total
−Removed: September 30, 2020
−Removed: AQR Pass $ 821,117 $ 37,256 $ 82,661 $ 138,886 $ 302,902 $ 40,191 $ 13,726 $ 23,023 $ 1,459,762
−Removed: AQR Special Mention 5,782 — — 2,677 17,178 2,172 176 — 27,985
−Removed: AQR Substandard 8,971 702 — 7,430 613 1,176 148 110 19,150
−Removed: AQR Doubtful 308 — — — — — — — 308
+Added: Loans and Allowance for Credit Losses
+Added: Loans Held for Sale
+Added: Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of March 31, 2021 and December 31, 2020.
+Added: Loans Held for Investment
+Added: The Company adopted ASU 2016-13 effective January 1, 2021.
+Added: Upon adoption, the Company changed its loan segments for purposes of the calculation of the allowance for credit losses.
+Added: Prior to January 1, 2021, the Company's loan segments were based on a combination of loan purpose and loan collateral.
+Added: Effective January 1, 2021 and thereafter, the Company's loan segments are primarily based on loan collateral.
+Added: The following table presents the Company's loan segments as of December 31, 2020 under the legacy segmentation and the new segmentation under ASU 2016-13:
+Added: (In Thousands) Pre-ASU 2016-13
+Added: Commercial loans $ 780,058
+Added: Real estate construction one-to-four family 38,467
+Added: Real estate construction other 80,315
+Added: Real estate term owner occupied 163,597
+Added: Real estate term non-owner occupied 309,074
+Added: Real estate term other 46,620
+Added: Consumer secured by 1st deeds of trust 15,585
+Added: Consumer other 22,069
Subtotal 1,455,785
−Removed: Unearned origination fees, net of origination costs ( 14,485 )
−Removed: Total loans $ 1,492,720
−Removed: December 31, 2019
−Removed: AQR Pass $ 394,107 $ 34,132 $ 61,808 $ 129,959 $ 295,482 $ 38,771 $ 15,860 $ 24,464 $ 994,583
−Removed: AQR Special Mention 2,279 3,337 — 3,828 17,478 2,559 179 — 29,660
−Removed: AQR Substandard 16,304 1,349 — 5,104 — 1,176 159 121 24,213
+Added: Unearned loan fees, net ( 11,735 )
+Added: Total portfolio loans $ 1,444,050
+Added: Post-ASU 2016-13
+Added: Commercial & industrial loans $ 619,304
+Added: Commercial real estate:
+Added: Owner occupied properties 234,364
+Added: Non-owner occupied and multifamily properties 394,860
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens 33,463
+Added: 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 18,114
+Added: 1-4 family residential construction loans 32,760
+Added: Other construction, land development and raw land loans 84,352
+Added: Obligations of states and political subdivisions in the US 15,274
+Added: Agricultural production, including commercial fishing 13,093
+Added: Consumer loans 5,794
+Added: Other loans 4,407
Subtotal $ 1,455,785
−Removed: Unearned origination fees, net of origination costs ( 5,085 )
−Removed: Total loans $ 1,043,371
−Removed: The above table includes $ 375.6 million in Paycheck Protection Program ("PPP") loans administered by the U.S.
−Removed: Small Business Administration ("SBA") within the Commercial loan segment as of September 30, 2020.
−Removed: Additionally, unearned origination fee, net of origination costs includes $ 8.8 million associated with SBA PPP loans.
−Removed: Nonaccrual loans:
−Removed: Nonaccrual loans net of government guarantees totaled $ 11.0 million and $ 14.0 million at September 30, 2020 and December 31, 2019, respectively.
−Removed: Nonaccrual loans at the periods indicated are presented below by segment:
−Removed: (In Thousands) 30-59 Days
−Removed: Past Due 60-89 Days
−Removed: Past Due Greater Than
−Removed: 90 Days Past Due Current Total
−Removed: September 30, 2020
+Added: Unearned loan fees, net ($ 11,735 )
+Added: Total portfolio loans $ 1,444,050
+Added: The following table presents amortized cost and unpaid principal balance of loans:
+Added: March 31, 2021 December 31, 2020
+Added: (In Thousands) Amortized Cost Unpaid Principal Difference Amortized Cost Unpaid Principal Difference
+Added: Commercial & industrial loans $ 695,797 $ 708,704 ($ 12,907 ) $ 612,254 $ 619,304 ($ 7,050 )
+Added: Commercial real estate:
+Added: Owner occupied properties 244,416 245,508 ( 1,092 ) 233,320 234,363 ( 1,043 )
+Added: Non-owner occupied and multifamily properties 399,982 402,477 ( 2,495 ) 392,452 394,860 ( 2,408 )
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens 31,930 32,009 ( 79 ) 33,415 33,510 ( 95 )
+Added: 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 17,536 17,414 122 18,236 18,114 122
+Added: 1-4 family residential construction loans 35,051 35,280 ( 229 ) 32,500 32,760 ( 260 )
+Added: Other construction, land development and raw land loans 86,574 87,558 ( 984 ) 83,463 84,351 ( 888 )
+Added: Obligations of states and political subdivisions in the US 15,795 15,912 ( 117 ) 15,318 15,274 44
+Added: Agricultural production, including commercial fishing 12,901 12,957 ( 56 ) 12,968 13,093 ( 125 )
+Added: Consumer loans 5,563 5,522 41 5,734 5,794 ( 60 )
+Added: Other loans 3,379 3,394 ( 15 ) 4,390 4,407 ( 17 )
+Added: Total 1,548,924 1,566,735 ( 17,811 ) 1,444,050 1,455,830 ( 11,780 )
+Added: Allowance for credit losses ( 14,764 ) ( 21,136 )
+Added: $ 1,534,160 $ 1,566,735 ($ 17,811 ) $ 1,422,914 $ 1,455,830 ($ 11,780 )
+Added: The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $ 17.8 million and $ 11.7 million at March 31, 2021 and December 31, 2020, respectively, and premiums and discounts associated with acquired loans totaling $ 34,000 and $ 47,000 at March 31, 2021 and December 31, 2020, respectively.
+Added: Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 7.1 million and $ 7.1 million at March 31, 2021 and December 31, 2020, respectively, and was included in other assets in the Consolidated Balance Sheets.
+Added: Amortized cost in the above table includes $ 402.5 million and $ 304.6 million as of March 31, 2021 and December 31, 2020, respectively, in PPP loans administered by the U.S.
+Added: Small Business Administration ("SBA") within the Commercial & industrial loan segment.
+Added: Allowance for Credit Losses
+Added: The activity in the ACL related to loans held for investment is as follows:
+Added: Three Months Ended March 31, Beginning Balance Impact of adopting ASC 326 Credit Loss Expense Charge-offs Recoveries Ending Balance
+Added: (In Thousands)
Commercial $ 7,973 ($ 7,973 ) $— $— $— —
−Removed: Real estate construction one-to-four family — — 702 — 702
+Added: Real estate construction 1-4 family 679 ( 679 ) — — — —
+Added: Real estate construction other 1,179 ( 1,179 ) — — — —
Real estate term owner occupied 2,625 ( 2,625 ) — — — —
+Added: Real estate term non-owner occupied 5,133 ( 5,133 ) — — — —
Real estate term other 779 ( 779 ) — — — —
−Removed: Consumer secured by 1st deeds of trust — — — 65 65
+Added: Consumer secured by 1st deed of trust 261 ( 261 ) — — — —
Consumer other 400 ( 400 ) — — — —
−Removed: Total nonperforming loans 115 226 9,241 3,065 12,647
−Removed: Government guarantees on nonaccrual loans — — — ( 1,600 ) ( 1,600 )
−Removed: Net nonaccrual loans $ 115 $ 226 $ 9,241 $ 1,465 $ 11,047
−Removed: December 31, 2019
+Added: Unallocated 2,107 ( 2,107 ) — — — —
+Added: Commercial & industrial loans — 4,348 ( 101 ) ( 163 ) 185 4,269
+Added: Commercial real estate:
+Added: Owner occupied properties — 3,579 ( 215 ) — 2 3,366
+Added: Non-owner occupied and multifamily properties — 4,944 ( 1,240 ) — — 3,704
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens — 673 140 — — 813
+Added: 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens — 419 ( 87 ) — 10 342
+Added: 1-4 family residential construction loans — 454 ( 194 ) — — 260
+Added: Other construction, land development and raw land loans — 1,994 ( 173 ) — — 1,821
+Added: Obligations of states and political subdivisions in the US — 44 ( 8 ) — — 36
+Added: Agricultural production, including commercial fishing — 49 ( 11 ) — 8 46
+Added: Consumer loans — 118 ( 16 ) — 2 104
+Added: Other loans — 3 — — — 3
+Added: Total $ 21,136 ($ 4,511 ) ($ 1,905 ) ($ 163 ) $ 207 $ 14,764
+Added: Three Months Ended March 31, Beginning Balance Provision (benefit) Charge-offs Recoveries Ending Balance
+Added: (In Thousands)
Commercial $ 6,604 $ 1,790 ($ 151 ) $ 26 $ 8,269
−Removed: Real estate construction one-to-four family — — 1,349 — 1,349
+Added: Real estate construction 1-4 family $ 643 $ — $ — $ — $ 643
+Added: Real estate construction other 1,017 262 — — 1,279
Real estate term owner occupied 2,188 242 — — 2,430
+Added: Real estate term non-owner occupied 5,180 311 — — 5,491
Real estate term other 671 39 — 1 711
−Removed: Consumer secured by 1st deeds of trust — — — 68 68
+Added: Consumer secured by 1st deed of trust 270 4 — — 274
Consumer other 436 24 ( 14 ) 7 453
−Removed: Total nonperforming loans 1,937 474 6,010 6,935 15,356
−Removed: Government guarantees on nonaccrual loans ( 268 ) — — ( 1,137 ) ( 1,405 )
−Removed: Net nonaccrual loans $ 1,669 $ 474 $ 6,010 $ 5,798 $ 13,951
−Removed: Past Due Loans:
−Removed: Past due loans and nonaccrual loans at the periods indicated are presented below by segment:
−Removed: (In Thousands) 30-59 Days
−Removed: Accruing 60-89 Days
−Removed: Accruing Greater Than
−Removed: Accruing Total Past
−Removed: Due Nonaccrual Current Total
−Removed: September 30, 2020
+Added: Unallocated 2,079 ( 612 ) — — 1,467
+Added: Total $ 19,088 $ 2,060 ($ 165 ) $ 34 $ 21,017
+Added: The Company adopted ASU 2016-13 effective January 1, 2021.
+Added: Upon adoption, the Company established an ACL of $ 16.6 million.
+Added: The ACL as of March 31, 2021 the ACL decreased to $ 14.8 million primary due to projected improvement in the economic indicators, or loss drivers, that the Company uses to calculate expected lifetime losses.
+Added: The Company primarily uses the DCF method to estimate ACL for loans.
+Added: The Company utilizes and forecasts unemployment in Alaska as our primary loss driver.
+Added: The Company also utilizes and forecasts either the one-year percentage change in the Alaska home price index or the one-year percentage change in the national commercial real estate price index as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses.
+Added: Consistent forecasts of the loss drivers are used across the loan segments.
+Added: At March 31, 2021, as compared to January 1, 2021, the Company forecasted a significantly lower unemployment rate in Alaska, a slightly lower one-year percentage change in the national commercial real estate price index , and a slightly higher one-year percentage change in the Alaska home price index over the reasonable and supportable forecast period.
+Added: Specifically regarding the forecasts used to calculate the March 31, 2021 ACL, management expects unemployment to remain consistent with actual levels observed in Alaska as of December 2020, which remained relatively unchanged in January and February 2021.
+Added: This rate is above pre-pandemic levels over the forecast period, but is lower than rates previously projected by management.
+Added: The following table presents loans individually and collectively evaluated for impairment and their respective allowance for credit loss allocations as of December 31, 2020, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13:
+Added: (In Thousands) Loan Evaluation ALLL Allocations
+Added: Individually Collectively Total Individually Collectively Total
Commercial $ 7,786 $ 764,682 $ 772,468 $ 13 $ 7,960 $ 7,973
−Removed: Real estate construction one-to-four family — — — — 702 37,256 37,958
+Added: Real estate construction 1-4 family 702 $ 37,478 38,180 — 679 679
Real estate construction other — $ 79,403 79,403 — 1,179 1,179
4 unchanged sentences
Consumer other 82 $ 22,168 22,250 — 400 400
−Removed: Subtotal $ 236 $ 2,112 $ — $ 2,348 $ 12,647 $ 1,492,210 $ 1,507,205
−Removed: Unearned origination fees, net of origination costs ( 14,485 )
+Added: Unallocated — — — — 2,107 2,107
Total $ 18,028 $ 1,426,022 $ 1,444,050 $ 13 $ 21,123 $ 21,136
−Removed: December 31, 2019
+Added: The following table presents information pertaining to impaired loans as of December 31, 2020, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13:
+Added: Impaired Loans With a Valuation Allowance Impaired Loans Without a Valuation Allowance
+Added: (In Thousands) Recorded Investment Unpaid Principal Related Allowance Recorded Investment Unpaid Principal
Commercial $ 308 $ 308 $ 13 $ 7,478 $ 8,287
−Removed: Real estate construction one-to-four family — — — — 1,349 37,469 38,818
+Added: Real estate construction 1-4 family — — — 702 702
Real estate construction other — — — — —
4 unchanged sentences
Consumer other — — — 82 87
−Removed: Subtotal $ 1,534 $ — $ — $ 1,534 $ 15,356 $ 1,031,566 $ 1,048,456
−Removed: Unearned origination fees, net of origination costs ( 5,085 )
Total $ 308 $ 308 $ 13 $ 17,720 $ 18,619
−Removed: Impaired Loans:
−Removed: The following table presents information about impaired loans by class as of the periods indicated:
−Removed: (In Thousands) Recorded Investment Unpaid Principal Balance Related Allowance
−Removed: September 30, 2020
−Removed: With no related allowance recorded
−Removed: Commercial - AQR substandard $ 8,668 $ 8,872 $—
−Removed: Commercial - AQR doubtful 308 308 —
−Removed: Real estate construction one-to-four family - AQR substandard 702 702 —
−Removed: Real estate term owner occupied - AQR substandard 7,430 7,515 —
−Removed: Real estate term non-owner occupied - AQR pass 177 177 —
−Removed: Real estate term non-owner occupied - AQR substandard 613 613 —
−Removed: Real estate term other - AQR pass 322 322 —
−Removed: Real estate term other - AQR substandard 1,176 1,176 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 116 116 —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 148 148 —
−Removed: Consumer other - AQR substandard 84 88 —
−Removed: Subtotal $ 19,744 $ 20,037 $—
−Removed: With an allowance recorded
−Removed: Commercial - AQR substandard $ 202 $ 202 $ 41
−Removed: Subtotal $ 202 $ 202 $ 41
−Removed: Commercial - AQR substandard $ 8,870 $ 9,074 $ 41
−Removed: Commercial - AQR doubtful 308 308 —
−Removed: Real estate construction one-to-four family - AQR substandard 702 702 —
−Removed: Real estate term owner-occupied - AQR substandard 7,430 7,515 —
−Removed: Real estate term non-owner occupied - AQR pass 177 177 —
−Removed: Real estate term non-owner occupied - AQR substandard 613 613 —
−Removed: Real estate term other - AQR pass 322 322 —
−Removed: Real estate term other - AQR substandard 1,176 1,176 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 116 116 —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 148 148 —
−Removed: Consumer other - AQR substandard 84 88 —
+Added: The following table presents average impaired loans information, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13, and interest recognized on such loans, for the quarter ended March 31, 2020:
+Added: Three Months Ended March 31, 2020
+Added: (In Thousands) Average Impaired Loans Interest Recognized
+Added: Commercial $ 13,430 $ 30
+Added: Real estate construction 1-4 family 1,132 —
+Added: Real estate construction other — —
+Added: Real estate term owner occupied 6,047 28
+Added: Real estate term non-owner occupied 177 3
+Added: Real estate term other 1,583 7
+Added: Consumer secured by 1st deed of trust 279 5
+Added: Consumer other 89 —
Total $ 22,737 $ 73
−Removed: (In Thousands) Recorded Investment Unpaid Principal Balance Related Allowance
+Added: Credit Quality Information
+Added: As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management utilizes a loan risk grading system called the Asset Quality Rating (“AQR”) system to assign a risk classification to each of its loans.
+Added: The risk classification is a dual rating system that contemplates both probability of default and risk of loss given default.
+Added: Loans are graded on a scale of 1 to 10 and, loans graded 1 – 6 are considered “pass” grade loans.
+Added: Loans graded 7 or higher are considered "classified" loans.
+Added: A description of the general characteristics of the AQR risk classifications are as follows:
+Added: Pass grade loans – 1 through 6:
+Added: The borrower demonstrates sufficient cash flow to fund debt service, including acceptable profit margins, cash flows, liquidity and other balance sheet ratios.
+Added: Historic and projected performance indicates that the borrower is able to meet obligations under most economic circumstances.
+Added: The Company has competent management with an acceptable track record.
+Added: The category does not include loans with undue or unwarranted credit risks that constitute identifiable weaknesses.
+Added: Classified loans:
+Added: Special Mention – 7:
+Added: A "special mention" credit has weaknesses that deserve management's close attention.
+Added: If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset at some future date.
+Added: Substandard – 8:
+Added: A "substandard" credit is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any.
+Added: Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.
+Added: They are characterized by the distinct possibility that Northrim Bank will sustain some loss if the deficiencies are not corrected.
+Added: Doubtful – 9:
+Added: An asset classified "doubtful" has all the weaknesses inherent in one that is classified "substandard-8" with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
+Added: The loan has substandard characteristics, and available information suggests that it is unlikely that the loan will be repaid in its entirety.
+Added: An asset classified "loss" is considered uncollectible and of such little value that its continuance on the books is not warranted.
+Added: This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may be affected in the future.
+Added: The following tables present the Company's portfolio of risk-rated loans by grade and by year of origination.
+Added: Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination.
+Added: Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.
+Added: March 31, 2021 2021 2020 2019 2018 2017 Prior Total
+Added: (In Thousands)
+Added: Commercial & industrial loans
+Added: Pass $ 218,186 $ 275,982 $ 50,311 $ 57,447 $ 26,348 $ 50,851 $ 679,125
+Added: Classified — 344 3,700 3,857 987 7,784 16,672
+Added: Total commercial & industrial loans $ 218,186 $ 276,326 $ 54,011 $ 61,304 $ 27,335 $ 58,635 $ 695,797
+Added: Commercial real estate:
+Added: Owner occupied properties
+Added: Pass $ 24,861 $ 88,524 $ 26,541 $ 13,740 $ 15,422 $ 65,601 $ 234,689
+Added: Classified — 1,497 — 558 — 7,672 9,727
+Added: Total commercial real estate owner occupied properties $ 24,861 $ 90,021 $ 26,541 $ 14,298 $ 15,422 $ 73,273 $ 244,416
+Added: Non-owner occupied and multifamily properties
+Added: Pass $ 20,619 $ 73,970 $ 57,563 $ 34,907 $ 20,746 $ 181,695 $ 389,500
+Added: Classified — — — — 10,482 — 10,482
+Added: Total commercial real estate non-owner occupied and multifamily properties $ 20,619 $ 73,970 $ 57,563 $ 34,907 $ 31,228 $ 181,695 $ 399,982
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens
+Added: Pass $ 2,362 $ 11,563 $ 4,506 $ 891 $ 1,849 $ 8,390 $ 29,561
+Added: Classified — 1,629 509 — — 231 2,369
+Added: Total residential real estate 1-4 family residential properties secured by first liens $ 2,362 $ 13,192 $ 5,015 $ 891 $ 1,849 $ 8,621 $ 31,930
+Added: 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
+Added: Pass $ 916 $ 2,625 $ 4,089 $ 3,950 $ 390 $ 5,327 $ 17,297
+Added: Classified — — — 220 — 19 239
+Added: Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens $ 916 $ 2,625 $ 4,089 $ 4,170 $ 390 $ 5,346 $ 17,536
+Added: 1-4 family residential construction loans
+Added: Pass $ 6,145 $ 13,199 $ 5,253 $ 132 $ 99 $ 9,513 $ 34,341
+Added: Classified — 593 — — 117 — 710
+Added: Total residential real estate 1-4 family residential construction loans $ 6,145 $ 13,792 $ 5,253 $ 132 $ 216 $ 9,513 $ 35,051
+Added: Other construction, land development and raw land loans
+Added: Pass $ 2,198 $ 24,279 $ 40,155 $ 8,510 $ 156 $ 5,528 $ 80,826
+Added: Classified — — — 4,200 — 1,548 5,748
+Added: Total other construction, land development and raw land loans $ 2,198 $ 24,279 $ 40,155 $ 12,710 $ 156 $ 7,076 $ 86,574
+Added: Obligations of states and political subdivisions in the US
+Added: Pass $ — $ 1,289 $ 3,150 $ 432 $ 2,755 $ 8,169 $ 15,795
+Added: Classified — — — — — — —
+Added: Total obligations of states and political subdivisions in the US $ — $ 1,289 $ 3,150 $ 432 $ 2,755 $ 8,169 $ 15,795
+Added: Agricultural production, including commercial fishing
+Added: Pass $ 106 $ 7,356 $ 1,237 $ 1,321 $ 830 $ 2,051 $ 12,901
+Added: Classified — — — — — — —
+Added: Total agricultural production, including commercial fishing $ 106 $ 7,356 $ 1,237 $ 1,321 $ 830 $ 2,051 $ 12,901
+Added: Consumer loans
+Added: Pass $ 179 $ 1,193 $ 991 $ 534 $ 380 $ 2,284 $ 5,561
+Added: Classified — 2 — — — — 2
+Added: Total consumer loans $ 179 $ 1,195 $ 991 $ 534 $ 380 $ 2,284 $ 5,563
+Added: Pass $ — $ 1,761 $ 452 $ 299 $ — $ 867 $ 3,379
+Added: Classified — — — — — — —
+Added: Total other loans $ — $ 1,761 $ 452 $ 299 $ — $ 867 $ 3,379
+Added: Pass $ 275,572 $ 501,741 $ 194,248 $ 122,163 $ 68,975 $ 340,276 $ 1,502,975
+Added: Classified — 4,065 4,209 8,835 11,586 17,254 45,949
+Added: Total loans $ 275,572 $ 505,806 $ 198,457 $ 130,998 $ 80,561 $ 357,530 $ 1,548,924
+Added: Total pass loans $ 275,572 $ 501,741 $ 194,248 $ 122,163 $ 68,975 $ 340,276 $ 1,502,975
+Added: Government guarantees ( 204,708 ) ( 214,883 ) ( 15,208 ) ( 3,643 ) ( 371 ) ( 6,755 ) ( 445,568 )
+Added: Total pass loans, net of government guarantees $ 70,864 $ 286,858 $ 179,040 $ 118,520 $ 68,604 $ 333,521 $ 1,057,407
+Added: Total classified loans $ — $ 4,065 $ 4,209 $ 8,835 $ 11,586 $ 17,254 $ 45,949
+Added: Government guarantees — ( 1,347 ) ( 21 ) — ( 9,730 ) ( 3,320 ) ( 14,418 )
+Added: Total classified loans, net government guarantees $ — $ 2,718 $ 4,188 $ 8,835 $ 1,856 $ 13,934 $ 31,531
+Added: The following table presents the Company's portfolio of risk-rated loans by grade as of December 31, 2020:
+Added: Pass Classified Total
+Added: (In Thousands)
December 31, 2020
−Removed: With no related allowance recorded
−Removed: Commercial - AQR substandard $ 15,517 $ 15,582 $—
−Removed: Real estate construction one-to-four family -AQR substandard 1,349 1,349 —
−Removed: Real estate term owner occupied - AQR substandard 5,104 5,104 —
−Removed: Real estate term non-owner occupied - AQR pass 178 178 —
−Removed: Real estate term other - AQR pass 417 417 —
−Removed: Real estate term other - AQR substandard 1,176 1,176 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 122 122 —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 159 163 —
−Removed: Consumer other - AQR substandard 90 94 —
−Removed: Subtotal $ 24,112 $ 24,185 $—
−Removed: With an allowance recorded
−Removed: Commercial - AQR substandard $ 561 $ 561 $ 17
−Removed: Subtotal $ 561 $ 561 $ 17
−Removed: Commercial - AQR substandard $ 16,078 $ 16,143 $ 17
−Removed: Real estate construction one-to-four family -AQR substandard 1,349 1,349 —
−Removed: Real estate term owner occupied - AQR substandard 5,104 5,104 —
−Removed: Real estate term non-owner occupied - AQR pass 178 178 —
−Removed: Real estate term other - AQR pass 417 417 —
−Removed: Real estate term other - AQR substandard 1,176 1,176 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 122 122 —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 159 163 —
−Removed: Consumer other - AQR substandard 90 94 —
+Added: Commercial $ 758,362 $ 14,106 $ 772,468
+Added: Real estate construction 1-4 family 37,093 1,087 38,180
+Added: Real estate construction other 79,403 — 79,403
+Added: Real estate term owner occupied 152,734 9,990 162,724
+Added: Real estate term non-owner occupied 289,555 17,692 307,247
+Added: Real estate term other 42,900 3,330 46,230
+Added: Consumer secured by 1st deed of trust 15,404 144 15,548
+Added: Consumer other 22,144 106 22,250
+Added: Portfolio loans 1,397,595 46,455 1,444,050
+Added: Government guarantees ( 334,639 ) ( 14,587 ) ( 349,226 )
+Added: Portfolio loans, net of government guarantees $ 1,062,956 $ 31,868 $ 1,094,824
+Added: Past Due Loans:
+Added: The following tables present an aging of contractually past due loans:
+Added: (In Thousands) 30-59 Days
+Added: Past Due 60-89 Days
+Added: Past Due Greater Than
+Added: 90 Days Past Due Total Past
+Added: Due Current Total Greater Than 90 Days Past Due Still Accruing
+Added: March 31, 2021
+Added: Commercial & industrial loans $ 141 $ — $ 1,322 $ 1,463 $ 694,334 $ 695,797 $ —
+Added: Commercial real estate:
+Added: Owner occupied properties — — 1,501 1,501 242,915 244,416 —
+Added: Non-owner occupied and multifamily properties — — — — 399,982 399,982 —
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens — — — — 31,930 31,930 —
+Added: 1-4 family residential properties secured by junior liens
+Added: and revolving secured by 1-4 family first liens 45 42 139 226 17,310 17,536 —
+Added: 1-4 family residential construction loans 526 — 117 643 34,408 35,051 —
+Added: Other construction, land development and raw land loans — — 1,545 1,545 85,029 86,574 —
+Added: Obligations of states and political subdivisions in the US — — — — 15,795 15,795 —
+Added: Agricultural production, including commercial fishing — — — — 12,901 12,901 —
+Added: Consumer loans — — — — 5,563 5,563 —
+Added: Other loans — — — — 3,379 3,379 —
Total $ 712 $ 42 $ 4,624 $ 5,378 $ 1,543,546 $ 1,548,924 $ —
−Removed: The unpaid principal balance included in the tables above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes.
−Removed: The following tables summarize our average recorded investment and interest income recognized on impaired loans for the three and nine-month periods ended September 30, 2020 and 2019:
−Removed: Three Months Ended September 30, 2020 2019
−Removed: (In Thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
−Removed: With no related allowance recorded
−Removed: Commercial - AQR substandard $ 8,564 $ 42 $ 17,616 $ 107
−Removed: Commercial - AQR doubtful 308 — — —
−Removed: Real estate construction one-to-four family - AQR substandard 488 — 1,482 —
−Removed: Real estate term owner occupied- AQR substandard 6,998 47 5,896 34
−Removed: Real estate term non-owner occupied- AQR pass 177 3 242 4
−Removed: Real estate term non-owner occupied- AQR substandard 619 19 — —
−Removed: Real estate term other - AQR pass 348 6 438 8
−Removed: Real estate term other - AQR substandard 1,228 — 1,198 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 117 3 125 3
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 269 — 93 2
−Removed: Consumer other - AQR substandard 84 — 93 —
−Removed: Subtotal $ 19,200 $ 120 $ 27,183 $ 158
−Removed: With an allowance recorded
−Removed: Commercial - AQR substandard $ 226 $ 8 $ 391 $ —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard — — 74 —
−Removed: Subtotal $ 226 $ 8 $ 465 $ —
−Removed: Commercial - AQR substandard $ 8,790 $ 50 $ 18,007 $ 107
−Removed: Commercial - AQR doubtful 308 — — —
−Removed: Real estate construction one-to-four family - AQR substandard 488 — 1,482 —
−Removed: Real estate term owner-occupied - AQR substandard 6,998 47 5,896 34
−Removed: Real estate term non-owner occupied - AQR pass 177 3 242 4
−Removed: Real estate term non-owner occupied - AQR substandard 619 19 — —
−Removed: Real estate term other - AQR pass 348 6 438 8
−Removed: Real estate term other - AQR substandard 1,228 — 1,198 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 117 3 125 3
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 269 — 167 2
−Removed: Consumer other - AQR substandard 84 — 93 —
−Removed: Total Impaired Loans $ 19,426 $ 128 $ 27,648 $ 158
−Removed: Nine Months Ended September 30, 2020 2019
−Removed: (In Thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
−Removed: With no related allowance recorded
−Removed: Commercial - AQR pass $ — $ — $ 711 $ 35
−Removed: Commercial - AQR substandard 9,899 138 17,205 292
−Removed: Commercial - AQR doubtful 103 — — —
−Removed: Real estate construction one-to-four family - AQR substandard 808 — 2,109 —
−Removed: Real estate term owner occupied- AQR substandard 6,586 125 5,896 83
−Removed: Real estate term non-owner occupied- AQR pass 177 10 269 15
−Removed: Real estate term non-owner occupied- AQR substandard 312 20 307 —
−Removed: Real estate term other - AQR pass 380 20 457 24
−Removed: Real estate term other - AQR substandard 1,194 — 998 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 119 9 127 9
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 149 3 215 5
−Removed: Consumer secured by 1st deeds of trust - AQR loss 44 — — —
−Removed: Consumer other - AQR substandard 87 — 63 —
−Removed: Subtotal $ 19,858 $ 325 $ 28,357 $ 463
−Removed: With an allowance recorded
−Removed: Commercial - AQR substandard $ 1,794 $ 8 $ 715 $ —
−Removed: Real estate term other - AQR substandard — — 218 —
−Removed: Consumer secured by 1st deeds of trust - AQR substandard — — 97 —
−Removed: Subtotal $ 1,794 $ 8 $ 1,030 $ —
−Removed: Commercial - AQR pass $ — $ — $ 711 $ 35
−Removed: Commercial - AQR substandard 11,693 146 17,920 292
−Removed: Commercial - AQR doubtful 103 — — —
−Removed: Real estate construction one-to-four family - AQR substandard 808 — 2,109 —
−Removed: Real estate term owner-occupied - AQR substandard 6,586 125 5,896 83
−Removed: Real estate term non-owner occupied - AQR pass 177 10 269 15
−Removed: Real estate term non-owner occupied - AQR substandard 312 20 307 —
−Removed: Real estate term other - AQR pass 380 20 457 24
−Removed: Real estate term other - AQR substandard 1,194 — 1,216 —
−Removed: Consumer secured by 1st deeds of trust - AQR pass 119 9 127 9
−Removed: Consumer secured by 1st deeds of trust - AQR substandard 149 3 312 5
−Removed: Consumer secured by 1st deeds of trust - AQR loss 44 — — —
−Removed: Consumer other - AQR substandard 87 — 63 —
−Removed: Total Impaired Loans $ 21,652 $ 333 $ 29,387 $ 463
+Added: December 31, 2020
+Added: Commercial & industrial loans $ 242 $ 229 $ 2,675 $ 3,146 $ 609,108 $ 612,254 $ —
+Added: Commercial real estate:
+Added: Owner occupied properties 2,203 — 2,459 4,662 228,658 233,320 449
+Added: Non-owner occupied and multifamily properties — — — — 392,452 392,452 —
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens 446 — — 446 32,969 33,415 —
+Added: 1-4 family residential properties secured by junior liens
+Added: and revolving secured by 1-4 family first liens 38 — 139 177 18,059 18,236 —
+Added: 1-4 family residential construction loans — — 702 702 31,798 32,500 —
+Added: Other construction, land development and raw land loans — — 1,545 1,545 81,918 83,463 —
+Added: Obligations of states and political subdivisions in the US — — — — 15,318 15,318 —
+Added: Agricultural production, including commercial fishing — — — — 12,968 12,968 —
+Added: Consumer loans — — 272 272 5,462 5,734 —
+Added: Other loans — — — — 4,390 4,390 —
+Added: Total $ 2,929 $ 229 $ 7,792 $ 10,950 $ 1,433,100 $ 1,444,050 $ 449
+Added: Nonaccrual loans:
+Added: Nonaccrual loans net of government guarantees totaled $ 13.1 million and $ 9.6 million at March 31, 2021 and December 31, 2020, respectively.
+Added: The following table presents loans on nonaccrual status and loan on nonaccrual status for which there was no related allowance for credit losses:
+Added: March 31, 2021 December 31, 2020
+Added: (In Thousands) Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL
+Added: Commercial & industrial loans $ 6,212 $ 2,300 $ 3,848 $ 3,513
+Added: Commercial real estate:
+Added: Owner occupied properties 4,056 4,016 4,620 4,582
+Added: Residential real estate:
+Added: 1-4 family residential properties secured by first liens 2,292 154 160 160
+Added: 1-4 family residential properties secured by junior liens
+Added: and revolving secured by 1-4 family first liens 239 220 242 221
+Added: 1-4 family residential construction loans 117 117 702 702
+Added: Other construction, land development and raw land loans 1,545 1,545 1,545 1,545
+Added: Consumer loans 2 — 3 —
+Added: Total nonperforming loans 14,463 8,352 11,120 10,723
+Added: Government guarantees on nonaccrual loans ( 1,382 ) ( 1,350 ) ( 1,483 ) ( 1,483 )
+Added: Net nonaccrual loans $ 13,081 $ 7,002 $ 9,637 $ 9,240
+Added: There was no interest on nonaccrual loans reversed through interest income during three-month periods ending March 31, 2021 and March 31, 2020, respectively.
+Added: There was no interest earned on nonaccrual loans during three-month periods ending March 31, 2021 and March 31, 2020, respectively.
Troubled Debt Restructurings:
−Removed: Loans classified as troubled debt restructurings (“TDR”) totaled $ 8.5 million and $ 10.1 million at September 30, 2020 and December 31, 2019, respectively.
+Added: Loans classified as TDRs totaled $ 6.5 million and $ 7.9 million at March 31, 2021 and December 31, 2020, respectively.
A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise.
−Removed: 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.
+Added: 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) January 1, 2022 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 has elected to adopt these provisions of the CARES Act.
−Removed: As of September 30, 2020, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:
+Added: As of March 31, 2021, the Company has made the following types of loan modifications related to COVID-19, which are not classified as TDRs with principal balance outstanding of:
(Dollars in thousands) Interest Only Full Payment Deferral Total
14 unchanged sentences
All of the Company's TDRs are included in impaired loans.
−Removed: The following table presents the breakout between newly restructured loans that occurred during the nine months ended September 30, 2020 and restructured loans that occurred prior to 2020 that are still included in portfolio loans.
+Added: There were no newly restructured loans that occurred during the three months ended March 31, 2021.
+Added: There were $ 2.4 million accruing restructured loans and $ 4.2 million nonaccrual restructured loans that occurred prior to 2021 that are still included in portfolio loans.
As discussed above, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2020.
−Removed: The below disclosed restructurings were not related to COVID-19 modifications:
−Removed: Accrual Status Nonaccrual Status Total Modifications
−Removed: (In Thousands)
−Removed: New Troubled Debt Restructurings
−Removed: Commercial - AQR substandard $ 1,565 $ 163 $ 1,728
−Removed: Subtotal $ 1,565 $ 163 $ 1,728
−Removed: Existing Troubled Debt Restructurings $ 802 $ 5,946 $ 6,748
−Removed: Total $ 2,367 $ 6,109 $ 8,476
−Removed: The following tables present newly restructured loans that occurred during the nine months ended September 30, 2020 and 2019, by concession (terms modified):
−Removed: September 30, 2020
−Removed: Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications
−Removed: (In Thousands)
−Removed: Pre-Modification Outstanding Recorded Investment:
−Removed: Commercial - AQR substandard 2 $ — $ 3,249 $ 164 $ — $ 3,413
−Removed: Total 2 $ — $ 3,249 $ 164 $ — $ 3,413
−Removed: Post-Modification Outstanding Recorded Investment:
−Removed: Commercial - AQR substandard 2 $ — $ 1,565 $ 163 $ — $ 1,728
−Removed: Total 2 $ — $ 1,565 $ 163 $ — $ 1,728
−Removed: September 30, 2019
+Added: The disclosed restructurings were not related to COVID-19 modifications.
+Added: March 31, 2020
Number of Contracts Rate Modification Term Modification Payment Modification Combination Modification Total Modifications
2 unchanged sentences
Commercial - AQR substandard 1 $ — $ 3,249 $ — $ — $ 3,249
−Removed: Real estate term owner occupied- AQR substandard 1 — — 192 — 192
Total 1 $ — $ 3,249 $ — $ — $ 3,249
1 unchanged sentence
Commercial - AQR substandard 1 $ — $ 3,281 $ — $ — $ 3,281
−Removed: Real estate term owner occupied- AQR substandard 1 — — 188 — 188
Total 1 $ — $ 3,281 $ — $ — $ 3,281
The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs.
−Removed: There were no in charge-offs in the nine months ended September 30, 2020 on loans that were newly classified as TDRs during the same period.
−Removed: All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the allowance for loan losses ("Allowance").
−Removed: There were no TDRs with specific impairment at September 30, 2020 and December 31, 2019, respectively.
−Removed: The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the nine months ended September 30, 2020 and 2019, respectively.
−Removed: Allowance for Loan Losses
−Removed: The following tables detail activity in the Allowance for the periods indicated:
−Removed: Three Months Ended
−Removed: September 30, Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deed of trust Consumer other Unallocated Total
−Removed: Balance, beginning of period $ 7,366 $ 690 $ 1,215 $ 2,533 $ 5,421 $ 702 $ 258 $ 447 $ 2,021 $ 20,653
−Removed: Charge-Offs ( 56 ) — — ( 85 ) — — — — — ( 141 )
−Removed: Recoveries 600 — — — — 1 — 3 — 604
−Removed: Provision (benefit) 285 10 58 21 61 55 ( 2 ) ( 7 ) 86 567
−Removed: Balance, end of period $ 8,195 $ 700 $ 1,273 $ 2,469 $ 5,482 $ 758 $ 256 $ 443 $ 2,107 $ 21,683
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 41 $ — $ — $ — $ — $ — $ — $ — $ — $ 41
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 8,154 $ 700 $ 1,273 $ 2,469 $ 5,482 $ 758 $ 256 $ 443 $ 2,107 $ 21,642
−Removed: Balance, beginning of period $ 7,123 $ 739 $ 1,112 $ 2,281 $ 6,231 $ 761 $ 322 $ 486 $ 1,463 $ 20,518
−Removed: Charge-Offs ( 22 ) — — — — — — ( 7 ) — ( 29 )
−Removed: Recoveries 709 — — — — 1 — 13 — 723
−Removed: Provision (benefit) ( 1,340 ) ( 122 ) ( 101 ) ( 299 ) ( 703 ) ( 48 ) ( 49 ) ( 62 ) 649 ( 2,075 )
−Removed: Balance, end of period $ 6,470 $ 617 $ 1,011 $ 1,982 $ 5,528 $ 714 $ 273 $ 430 $ 2,112 $ 19,137
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 97 $ — $ — $ — $ — $ — $ 5 $ — $ — $ 102
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 6,373 $ 617 $ 1,011 $ 1,982 $ 5,528 $ 714 $ 268 $ 430 $ 2,112 $ 19,035
−Removed: Nine Months Ended September 30, Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deed of trust Consumer other Unallocated Total
−Removed: Balance, beginning of period $ 6,604 $ 643 $ 1,017 $ 2,188 $ 5,180 $ 671 $ 270 $ 436 $ 2,079 $ 19,088
−Removed: Charge-Offs ( 1,011 ) — — ( 85 ) — — — ( 14 ) — ( 1,110 )
−Removed: Recoveries 656 — — — — 2 — 16 — 674
−Removed: Provision (benefit) 1,946 57 256 366 302 85 ( 14 ) 5 28 3,031
−Removed: Balance, end of period $ 8,195 $ 700 $ 1,273 $ 2,469 $ 5,482 $ 758 $ 256 $ 443 $ 2,107 $ 21,683
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 41 $ — $ — $ — $ — $ — $ — $ — $ — $ 41
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 8,154 $ 700 $ 1,273 $ 2,469 $ 5,482 $ 758 $ 256 $ 443 $ 2,107 $ 21,642
−Removed: Balance, beginning of period $ 5,660 $ 675 $ 1,275 $ 2,027 $ 5,799 $ 716 $ 306 $ 426 $ 2,635 $ 19,519
−Removed: Charge-Offs ( 195 ) — — — — — — ( 11 ) — ( 206 )
−Removed: Recoveries 801 — — — — 28 — 20 — 849
−Removed: Provision (benefit) 204 ( 58 ) ( 264 ) ( 45 ) ( 271 ) ( 30 ) ( 33 ) ( 5 ) ( 523 ) ( 1,025 )
−Removed: Balance, end of period $ 6,470 $ 617 $ 1,011 $ 1,982 $ 5,528 $ 714 $ 273 $ 430 $ 2,112 $ 19,137
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 97 $ — $ — $ — $ — $ — $ 5 $ — $ — $ 102
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 6,373 $ 617 $ 1,011 $ 1,982 $ 5,528 $ 714 $ 268 $ 430 $ 2,112 $ 19,035
−Removed: The following is a detail of the recorded investment, including unearned origination fees, net of origination costs, in the loan portfolio, segregated by amounts evaluated individually or collectively in the Allowance at the periods indicated:
−Removed: (In Thousands) Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deed of trust Consumer other Total
−Removed: September 30, 2020
−Removed: Balance, end of period $ 825,702 $ 37,751 $ 81,772 $ 148,167 $ 318,738 $ 43,245 $ 14,037 $ 23,308 $ 1,492,720
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 9,178 $ 701 $ — $ 7,430 $ 790 $ 1,499 $ 264 $ 84 $ 19,946
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 816,524 $ 37,050 $ 81,772 $ 140,737 $ 317,948 $ 41,746 $ 13,773 $ 23,224 $ 1,472,774
−Removed: December 31, 2019
−Removed: Balance, end of period $ 411,327 $ 38,503 $ 60,906 $ 138,181 $ 311,302 $ 42,200 $ 16,191 $ 24,761 $ 1,043,371
−Removed: Balance, end of period:
−Removed: Individually evaluated
−Removed: for impairment $ 16,077 $ 1,349 $ — $ 5,104 $ 178 $ 1,594 $ 281 $ 90 $ 24,673
−Removed: Balance, end of period:
−Removed: Collectively evaluated
−Removed: for impairment $ 395,250 $ 37,154 $ 60,906 $ 133,077 $ 311,124 $ 40,606 $ 15,910 $ 24,671 $ 1,018,698
−Removed: The following represents the balance of the Allowance for the periods indicated segregated by segment and class:
−Removed: (In Thousands) Commercial Real estate construction one-to-four family Real estate construction other Real estate term owner occupied Real estate term non-owner occupied Real estate term other Consumer secured by 1st deeds of trust Consumer other Unallocated Total
−Removed: September 30, 2020
−Removed: Individually evaluated for impairment:
−Removed: AQR Substandard $ 41 $ — $ — $ — $ — $ — $ — $ — $ — $ 41
−Removed: Collectively evaluated for impairment:
−Removed: AQR Pass 8,009 700 1,273 2,421 5,343 719 251 439 — 19,155
−Removed: AQR Special Mention 141 — — 48 139 39 5 — — 372
−Removed: AQR Substandard 4 — — — — — — 4 — 8
−Removed: AQR Doubtful — — — — — — — — — —
−Removed: Unallocated — — — — — — — — 2,107 2,107
−Removed: $ 8,195 $ 700 $ 1,273 $ 2,469 $ 5,482 $ 758 $ 256 $ 443 $ 2,107 $ 21,683
−Removed: December 31, 2019
−Removed: Individually evaluated for impairment:
−Removed: AQR Substandard $ 17 $ — $ — $ — $ — $ — $ — $ — $ — $ 17
−Removed: Collectively evaluated for impairment:
−Removed: AQR Pass 6,514 588 1,017 2,125 4,829 629 266 431 — 16,399
−Removed: AQR Special Mention 64 55 — 63 351 42 4 — — 579
−Removed: AQR Substandard 9 — — — — — — 5 — 14
−Removed: Unallocated — — — — — — — — 2,079 2,079
−Removed: $ 6,604 $ 643 $ 1,017 $ 2,188 $ 5,180 $ 671 $ 270 $ 436 $ 2,079 $ 19,088
+Added: There were no in charge-offs in the three months ended March 31, 2021 on loans that were newly classified as TDRs during the same period.
+Added: All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the ACL.
+Added: There were no TDRs with specific impairment at March 31, 2021 and December 31, 2020, respectively.
+Added: The Company had no TDRs that defaulted within twelve months of restructure and defaulted during the three months ended March 31, 2021 and 2020, respectively.
Purchased Receivables
−Removed: Purchased receivables are carried at their principal amount outstanding, net of a reserve for anticipated losses that have not yet been identified, and have a maturity of less than one year .
−Removed: Purchased receivable balances are charged against this reserve when management believes that collection of principal is unlikely.
−Removed: Management evaluates the adequacy of the reserve for purchased receivable losses based on historical loss experience by class of receivable and its assessment of current economic conditions.
−Removed: As of September 30, 2020, the Company has one class of purchased receivables.
−Removed: There were no purchased receivables past due at September 30, 2020 or December 31, 2019, and there were no restructured purchased receivables at September 30, 2020 or December 31, 2019.
+Added: Purchased receivables are carried at their principal amount outstanding, net of an allowance for credit losses, and have a maturity of less than one year .
+Added: There were no purchased receivables past due at March 31, 2021 or December 31, 2020, and there were no restructured purchased receivables at March 31, 2021 or December 31, 2020.
Income on purchased receivables is accrued and recognized on the principal amount outstanding using an effective interest method except when management believes doubt exists as to the collectability of the income or principal.
−Removed: Purchased receivables of $ 410,000 related to one customer relationship are considered nonperforming assets as of September 30, 2020 for which the Company is not accruing and recognizing income.
−Removed: There were no nonperforming purchased receivables as of December 31, 2019.
+Added: There were no nonperforming purchased receivables as of March 31, 2021 and December 31, 2020, respectively.
The following table summarizes the components of net purchased receivables for the periods indicated:
−Removed: (In Thousands) September 30, 2020 December 31, 2019
+Added: (In Thousands) March 31, 2021 December 31, 2020
Purchased receivables $ 11,818 $ 13,995
−Removed: Reserve for purchased receivable losses ( 87 ) ( 94 )
+Added: Allowance for credit losses - purchased receivables — ( 73 )
Total $ 11,818 $ 13,922
−Removed: The following table sets forth information regarding changes in the purchased receivable reserve for the three and nine-month periods ending September 30, 2020 and 2019, respectively:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: The following table sets forth information regarding changes in the ACL on purchased receivables for the three-month periods ending March 31, 2021 and 2020, respectively:
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
7 unchanged sentences
Mortgage servicing rights
−Removed: The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three and nine-month periods ended September 30, 2020 and 2019:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three-month periods ended March 31, 2021 and 2020:
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
8 unchanged sentences
(2) Represents changes due to collection/realization of expected cash flows over time.
−Removed: The following table details information related to our serviced mortgage loan portfolio as of September 30, 2020 and December 31, 2019:
−Removed: (In Thousands) September 30, 2020 December 31, 2019
+Added: The following table details information related to our serviced mortgage loan portfolio as of March 31, 2021 and December 31, 2020:
+Added: (In Thousands) March 31, 2021 December 31, 2020
Balance of mortgage loans serviced for others $ 682,827 $ 683,117
MSR as a percentage of serviced loans 1.71 % 1.64 %
−Removed: The Company recognized servicing fees of $ 671,000 and $ 616,000 during the three-month periods ending September 30, 2020 and 2019, respectively and $ 2.0 million and $ 1.8 million during the nine-month periods ending September 30, 2020 and 2019, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.
−Removed: The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of September 30, 2020 and December 31, 2019:
−Removed: September 30, 2020 December 31, 2019
+Added: The Company recognized servicing fees of $ 705,000 and $ 663,000 during the three-month periods ending March 31, 2021 and 2020, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.
+Added: The following table outlines the weighted average key assumptions used in measuring the fair value of MSR as of March 31, 2021 and December 31, 2020:
+Added: March 31, 2021 December 31, 2020
Constant prepayment rate 12.47 % 13.05 %
Discount rate 7.75 % 7.75 %
−Removed: Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at September 30, 2020 and December 31, 2019 were as follows:
−Removed: (In Thousands) September 30, 2020 December 31, 2019
+Added: Key economic assumptions and the sensitivity of the current fair value for MSR to immediate adverse changes in those assumptions at March 31, 2021 and December 31, 2020 were as follows:
+Added: (In Thousands) March 31, 2021 December 31, 2020
Aggregate portfolio principal balance $ 682,827 $ 683,117
Weighted average rate of note 3.52 % 3.62 %
−Removed: September 30, 2020 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change
+Added: March 31, 2021 Base 1.0% Adverse Rate Change 2.0% Adverse Rate Change
Constant prepayment rate 12.47 % 24.94 % 37.40 %
18 unchanged sentences
Commercial servicing rights
−Removed: The commercial servicing right asset ("CSR") has a carrying value $ 1.3 million and $ 1.2 million at September 30, 2020 and December 31, 2019, respectively, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.
−Removed: Total commercial loans serviced for others were $ 267.9 million and $ 252.9 million at September 30, 2020 and December 31, 2019, respectively.
−Removed: Key assumptions used in measuring the fair value of the CSR as of September 30, 2020 and December 31, 2019 include a constant prepayment rate of 12.25 % and a discount rate of 11.70 %.
−Removed: We adopted ASU 2016-02 Leases (Topic 842) ("ASU 2016-02") using the modified retrospective approach with an effective date as of January 1, 2019.
−Removed: We elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.
−Removed: The Company also elected the practical expedient on not separating lease components from nonlease components for all operating leases.
−Removed: Additionally, the Company has elected to not apply ASU 2016-02 to short-term leases.
−Removed: Short-term leases are those leases that, at the lease commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.
−Removed: The Company has lease agreements for land and office facilities that it occupies to operate several of its retail branch locations, as well as one storage facility, that are classified as operating leases and are recognized on the balance sheet as right-of-use ("ROU") assets and lease liabilities.
−Removed: Most of these leases contain options to extend the duration of the leases at management's discretion.
−Removed: Management has recognized these renewal options as part of its ROU asset and lease liabilities when management is reasonably certain to exercise these options.
−Removed: Whether or not management is reasonably certain to exercise such an option is determined based on facts and circumstances for each individual lease.
−Removed: However, if a renewal option is offered at below market terms, management considers the exercise of that option to be reasonably certain for the purposes of calculating its ROU assets and lease liabilities.
−Removed: None of the Company's leases include residual value guarantees, and there are no restrictions or covenants imposed by these leases that impose significant additional financial obligations on the Company.
−Removed: The Company uses the rate implicit in each lease as the discount rate to determine the lease liability, which is the present value of lease payments not yet paid at the lease commencement date.
−Removed: If the rate implicit in each lease is not readily determinable, which is often the case, the Company uses its incremental borrowing rate as the discount rate.
−Removed: The incremental borrowing rate is the rate that the Company would have incurred to borrow the funds necessary to purchase the leased asset over a similar term.
−Removed: As of September 30, 2020, the Company has operating lease ROU assets of $ 12.9 million and operating lease liabilities of $ 12.9 million.
+Added: The commercial servicing right asset ("CSR") has a carrying value $ 1.3 million at March 31, 2021 and December 31, 2020, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.
+Added: Total commercial loans serviced for others were $ 278.3 million and $ 274.6 million at March 31, 2021 and December 31, 2020, respectively.
+Added: Key assumptions used in measuring the fair value of the CSR as of March 31, 2021 and December 31, 2020 include a constant prepayment rate of 9.66 % and a discount rate of 9.46 %.
+Added: The Company's lease commitments consist primarily of agreements to lease land and office facilities that it occupies to operate several of its retail branch locations that are classified as operating leases and are recognized on the balance sheet as right-of-use ("ROU") assets and lease liabilities.
+Added: As of March 31, 2021, the Company has operating lease ROU assets of $ 11.9 million and operating lease liabilities of $ 11.9 million.
As of December 31, 2020, the Company had operating lease ROU assets of $ 12.4 million and operating lease liabilities of $ 12.4 million.
−Removed: The Company did not have any agreements that are classified as finance leases as of September 30, 2020 or December 31, 2019.
+Added: The Company did not have any agreements that are classified as finance leases as of March 31, 2021 or December 31, 2020.
The following table presents additional information about the Company's operating leases:
−Removed: Three Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(In Thousands) 2021 2020
Operating lease cost (1)
−Removed: $ 710 $ 675 $ 2,111 $ 2,030
Short term lease cost (1)
7 unchanged sentences
(In Thousands) Operating Leases
−Removed: 2020 (Three months) $ 678
+Added: 2020 (Nine months) $ 1,951
Thereafter 4,880
8 unchanged sentences
Topic 606 is applicable to noninterest revenue streams such as deposit related fees, interchange fees, merchant services income, and commissions from the sales of mutual funds and other investments.
−Removed: However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606.
−Removed: Substantially all of the Company’s non-interest revenue is generated from contracts with customers.
−Removed: Noninterest revenue streams in-scope of Topic 606 are discussed below.
−Removed: Bankcard fees
−Removed: Bankcard fees are primarily comprised of debit card income and ATM fees.
−Removed: Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks such as Visa or MasterCard.
−Removed: ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM.
−Removed: The Company’s performance obligation for bankcard fees are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.
−Removed: Payments are typically received immediately or in the following month.
−Removed: Service charges on deposit accounts
−Removed: Service charges on deposit accounts consist of general service fees for monthly account maintenance, activity- or transaction-based fees, and account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), and other deposit account related fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.
−Removed: Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed.
−Removed: Payments for service charges on deposit accounts are primarily received immediately or in the following month through a direct charge to customers’ accounts.
−Removed: Other operating income consists of other recurring revenue streams such as merchant services income, commissions from sales of mutual funds and other investments, safety deposit box rental fees, bank check and other check fees, unrealized gains and losses on marketable securities, and other miscellaneous revenue streams.
−Removed: Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees.
−Removed: The Company’s performance obligation for merchant services income is largely satisfied, and related revenue recognized, when the transactions have been completed.
−Removed: Payment is typically received immediately or in the following month.
−Removed: The Company earns commissions from the sale of mutual funds as periodic service fees (i.e., trailers) from Elliott Cove Capital Management typically based on a percentage of net asset value.
−Removed: Trailer revenue is recorded over time, quarterly, as net asset value is determined.
−Removed: The Company also earns commission income from the sale of annuity products.
−Removed: The Company acts as an intermediary between the Company's customer and Elliott Cove Investment Advisors for these transactions, and commissions from annuity product sales are recorded when the Company’s performance obligation is satisfied, which is generally upon the issuance of the annuity policy.
−Removed: The Company does not earn trailer fees on annuity sales.
−Removed: Payment for commissions from sales of mutual funds and other investments and annuity sales is typically received in the following quarter.
−Removed: Other service charges include revenue from safety deposit box rental fees, processing wire transfers, bank check and other check fees, and other services.
−Removed: The Company’s performance obligations for these other revenue streams are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.
−Removed: Payments are typically received immediately or in the following month.
−Removed: The following presents other operating income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine-month periods ended September 30, 2020 and 2019:
−Removed: (In Thousands) Three Months Ended September 30, Nine Months Ended September 30,
+Added: The following presents other operating income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three-month periods ended March 31, 2021 and 2020:
+Added: (In Thousands) Three Months Ended March 31,
Other operating income 2021 2020
7 unchanged sentences
Gains on the sale of other real estate owned ("OREO") are also within the scope of Topic 606 and are recorded within other operating expense on the Company's Consolidated Statements of Income.
−Removed: Gains on the sale of OREO properties were $ 100,000 and $ 63,000 for the three months ended September 30, 2020 and 2019, respectively, and $ 176,000 and $ 380,000 for the nine months ended September 30, 2020 and 2019, respectively .
+Added: Gains on the sale of OREO properties were $ 31,000 and $ 37,000 for the three months ended March 31, 2021 and 2020, respectively.
Derivatives swaps related to community banking activities
3 unchanged sentences
Similarly, the Company could be required to settle its obligations under the agreement if specific regulatory events occur, such as if the Company were issued a prompt corrective action directive or a cease and desist order, or if certain regulatory ratios fall below specified levels.
−Removed: The Company pledged $ 10.7 million as of September 30, 2020 and $ 4.7 million as of December 31, 2019 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.
−Removed: The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 172.8 million and $ 94.4 million at September 30, 2020 and December 31, 2019, respectively.
−Removed: At September 30, 2020, the notional amount of interest rate swaps is made up of thirteen variable to fixed rate swaps to commercial loan customers totaling $ 86.4 million, and thirteen fixed to variable rate swaps with a counterparty totaling $ 86.4 million.
−Removed: Changes in fair value from these thirteen interest rate swaps offset each other in the first six months of 2020.
−Removed: The Company recognized $ 726,000 and zero in fee income related to interest rate swaps in the three month periods ending September 30, 2020 and September 30, 2019, respectively, and $ 743,000 and $ 734,000 in fee income related to interest rate swaps in the nine month periods ending September 30, 2020 and September 30, 2019, respectively.
+Added: The Company pledged $ 7.1 million as of March 31, 2021 and $ 10.7 million as of December 31, 2020 in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.
+Added: The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 201.4 million and $ 196.0 million at March 31, 2021 and December 31, 2020, respectively.
+Added: At March 31, 2021, the notional amount of interest rate swaps is made up of 17 variable to fixed rate swaps to commercial loan customers totaling $ 100.7 million, and 17 fixed to variable rate swaps with a counterparty totaling $ 100.7 million.
+Added: Changes in fair value from these 17 interest rate swaps offset each other in the first three months of 2021.
+Added: The Company recognized $ 92,000 and zero in fee income related to interest rate swaps in the three month periods ending March 31, 2021 and March 31, 2020, respectively.
Interest rate swap income is recorded in other operating income on the Consolidated Statements of Income.
4 unchanged sentences
The floating rate that the dealer pays is equal to the three month LIBOR plus 1.37 % which reprices quarterly on the payment date.
−Removed: This rate was 1.62 % as of September 30, 2020.
−Removed: The Company pledged $ 2.9 million and $ 1.3 million in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of September 30, 2020 and December 31, 2019, respectively.
−Removed: Changes in the fair value of this interest rate swap are reported in other comprehensive income.
−Removed: The unrealized loss on this interest rate swap was $ 2.2 million as of September 30, 2020 and the unrealized loss was $ 534,000 as of December 31, 2019.
+Added: This rate was 1.55 % as of March 31, 2021.
+Added: The Company pledged $ 2.9 million and $ 2.9 million in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of March 31, 2021 and December 31, 2020, respectively.
+Added: Changes in the fair value of this interest rate swap are reported in other comprehensive income on the Consolidated Statements of Income.
+Added: The unrealized loss on this interest rate swap was $ 475,000 as of March 31, 2021 and the unrealized loss was $ 1.7 million as of December 31, 2020.
Derivatives related to home mortgage banking activities
4 unchanged sentences
Market risk with respect to commitments to originate loans arises from changes in the value of contractual positions due to changes in interest rates.
−Removed: RML had commitments to originate mortgage loans held for sale totaling $ 257.3 million and $ 48.8 million at September 30, 2020 and December 31, 2019, respectively.
+Added: RML had commitments to originate mortgage loans held for sale totaling $ 181.4 million and $ 150.3 million at March 31, 2021 and December 31, 2020, respectively.
Changes in the value of RML's interest rate derivatives are recorded in mortgage banking income on the Consolidated Statements of Income.
−Removed: None of these derivatives are designed as hedging instruments.
−Removed: The following table presents the fair value of derivatives not designated as hedging instruments at September 30, 2020 and December 31, 2019:
+Added: None of these derivatives are designated as hedging instruments.
+Added: The following table presents the fair value of derivatives not designated as hedging instruments at March 31, 2021 and December 31, 2020:
(In Thousands) Asset Derivatives
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
Balance Sheet Location Fair Value Fair Value
1 unchanged sentence
Interest rate lock commitments Other assets 2,713 4,034
+Added: Retail interest rate contracts Other assets 588 —
Total $ 9,271 $ 11,421
(In Thousands) Liability Derivatives
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
Balance Sheet Location Fair Value Fair Value
2 unchanged sentences
Total $ 5,970 $ 8,267
−Removed: The following table presents the net gains (losses) of derivatives not designated as hedging instruments for the three and nine-month periods ending September 30, 2020 and 2019:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: The following table presents the net gains (losses) of derivatives not designated as hedging instruments for periods indicated below:
+Added: Three Months Ended March 31,
(In Thousands) Income Statement Location 2021 2020
5 unchanged sentences
We do not offset such financial instruments for financial reporting purposes.
−Removed: The following table summarizes the derivatives that have a right of offset as of September 30, 2020 and December 31, 2019:
−Removed: September 30, 2020 Gross amounts not offset in the Statement of Financial Position
+Added: The following table summarizes the derivatives that have a right of offset as of March 31, 2021 and December 31, 2020:
+Added: March 31, 2021 Gross amounts not offset in the Statement of Financial Position
(In Thousands) Gross amounts of recognized assets and liabilities Gross amounts offset in the Statement of Financial Position Net amounts of assets and liabilities presented in the Statement of Financial Position Financial Instruments Collateral Posted Net Amount
1 unchanged sentence
Interest rate swaps $ 5,970 $ — $ 5,970 $ — $ — $ 5,970
+Added: Retail interest rate contracts 588 — 588 — — 588
Liability Derivatives
Interest rate swaps $ 5,970 $ — $ 5,970 $ — $ 5,970 $ —
−Removed: Retail interest rate contracts 466 — 466 — — 466
December 31, 2020 Gross amounts not offset in the Statement of Financial Position
20 unchanged sentences
as such, the interest rate lock commitment derivatives are classified as Level 3.
−Removed: Interest rate contracts are valued in a model, which uses as its basis a discounted cash flow technique incorporating credit valuation adjustments to reflect nonperformance risk in the measurement of fair value.
−Removed: Although the Company has determined that the
−Removed: majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.
−Removed: However, as of September 30, 2020, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.
+Added: Interest rate contracts are valued in a model, which uses as its basis a discounted cash flow technique incorporating credit valuation
+Added: adjustments to reflect nonperformance risk in the measurement of fair value.
+Added: Although the Company has determined that the majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.
+Added: However, as of March 31, 2021, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.
As a result, the Company has classified its interest rate derivative valuations in Level 2 of the fair value hierarchy.
5 unchanged sentences
The Company is also required to measure certain assets such as equity method investments, goodwill, intangible assets, impaired loans, and OREO at fair value on a nonrecurring basis in accordance with GAAP.
−Removed: Any nonrecurring adjustments to fair value usually result from the writedown of individual assets.
+Added: Any nonrecurring adjustments to fair value usually result from the write-down of individual assets.
The Company uses either in-house evaluations or external appraisals to estimate the fair value of OREO and impaired loans as of each reporting date.
15 unchanged sentences
Estimated fair values as of the periods indicated are as follows:
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
(In Thousands) Carrying Amount Fair Value Carrying Amount Fair Value
7 unchanged sentences
Investment in Federal Home Loan Bank stock 3,116 3,116 2,551 2,551
+Added: Loans held for sale 116,128 116,128 146,178 146,178
Accrued interest receivable 8,243 8,243 7,979 7,979
Interest rate swaps 5,970 5,970 7,387 7,387
+Added: Retail interest rate contracts 588 588 — —
Level 3 inputs:
−Removed: Loans and loans held for sale 1,620,826 1,602,727 1,111,205 1,095,031
+Added: Investment securities held to maturity 20,000 19,906 10,000 10,000
+Added: Loans 1,548,924 1,513,712 1,444,051 1,414,179
Purchased receivables, net 11,818 11,818 13,922 13,922
13 unchanged sentences
(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
−Removed: September 30, 2020
+Added: March 31, 2021
Available for sale securities
6 unchanged sentences
Total marketable equity securities $ 9,471 $ 9,471 $ — $ —
+Added: Corporate bonds $ 19,906 $ — $ — $ 19,906
+Added: Total held to maturity securities $ 19,906 $ — $ — $ 19,906
Interest rate swaps 5,970 — 5,970 —
2 unchanged sentences
Commercial servicing rights 1,327 — — 1,327
+Added: Retail interest rate contracts 588 — 588 —
Total other assets $ 22,255 $ — $ 6,558 $ 15,697
Interest rate swaps $ 6,445 $ — $ 6,445 $ —
−Removed: Retail interest rate contracts 466 — 466 —
Total other liabilities $ 6,445 $ — $ 6,445 $ —
8 unchanged sentences
Total marketable securities $ 9,052 $ 9,052 $ — $ —
+Added: Corporate bonds $ 10,000 $ — $ — $ 10,000
+Added: Total held to maturity securities $ 10,000 $ — $ — $ 10,000
Interest rate swaps 7,387 — 7,387 —
6 unchanged sentences
Total other liabilities $ 10,002 $ — $ 10,002 $ —
−Removed: The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine-month periods ended September 30, 2020 and 2019:
−Removed: (In Thousands) Beginning balance Change included in earnings Purchases and issuances Sales and settlements Ending balance Net change in unrealized gains (losses) relating to items held at end of period
−Removed: Three Months Ended September 30, 2020
−Removed: Interest rate lock commitments $ 4,653 ($ 1,784 ) $ 15,329 ($ 11,679 ) $ 6,519 $ 6,519
−Removed: Mortgage servicing rights 10,721 ( 1,505 ) 1,373 — 10,589 —
−Removed: Commercial servicing rights 1,162 ( 101 ) 225 — 1,286 —
−Removed: Total $ 16,536 ($ 3,390 ) $ 16,927 ($ 11,679 ) $ 18,394 $ 6,519
−Removed: Three Months Ended September 30, 2019
−Removed: Interest rate lock commitments $ 2,072 ($ 553 ) $ 4,569 ($ 4,725 ) $ 1,363 $ 1,363
−Removed: Mortgage servicing rights 10,836 ( 663 ) 1,033 — 11,206 —
−Removed: Commercial servicing rights 999 ( 20 ) 39 — 1,018 —
−Removed: Total $ 13,907 ($ 1,236 ) $ 5,641 ($ 4,725 ) $ 13,587 $ 1,363
+Added: The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three-month periods ended March 31, 2021 and 2020:
(In Thousands) Beginning balance Change included in earnings Purchases and issuances Sales and settlements Ending balance Net change in unrealized gains (losses) relating to items held at end of period
−Removed: Nine Months Ended September 30, 2020
+Added: Three Months Ended March 31, 2021
+Added: Held to maturity securities $ 10,000 $ — $ 10,000 $ — $ 20,000 ($ 94 )
Interest rate lock commitments 4,034 ( 1,147 ) 9,268 ( 9,442 ) 2,713 2,713
2 unchanged sentences
Total $ 26,562 ($ 2,179 ) $ 20,756 ($ 9,442 ) $ 35,697 $ 2,619
−Removed: Nine Months Ended September 30, 2019
+Added: Three Months Ended March 31, 2020
Interest rate lock commitments $ 810 ($ 897 ) $ 7,507 ($ 4,232 ) $ 3,188 $ 3,188
2 unchanged sentences
Total $ 13,944 ($ 1,848 ) $ 8,177 ($ 4,232 ) $ 16,041 $ 3,188
−Removed: There were no changes in unrealized gains and losses for the three and nine-month periods ending September 30, 2020 and 2019 included in other comprehensive income for recurring Level 3 fair value measurements.
−Removed: As of and for the periods ending September 30, 2020 and December 31, 2019, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.
+Added: There were no changes in unrealized gains and losses for the three-month periods ending March 31, 2021 and 2020 included in other comprehensive income for recurring Level 3 fair value measurements.
+Added: As of and for the periods ending March 31, 2021 and December 31, 2020, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.
For loans measured for impairment, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.
(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
−Removed: September 30, 2020
+Added: March 31, 2021
Loans measured for impairment $ 5,995 $ — $ — $ 5,995
3 unchanged sentences
Total $ 308 $ — $ — $ 308
−Removed: The following table presents the gains resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2020 and 2019:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
+Added: The following table presents the gains resulting from nonrecurring fair value adjustments for the three-month periods ended March 31, 2021 and 2020:
+Added: Three Months Ended March 31,
(In Thousands) 2020 2019
2 unchanged sentences
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
−Removed: The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at September 30, 2020 and December 31, 2019:
+Added: The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at March 31, 2021 and December 31, 2020:
Financial Instrument Valuation Technique Unobservable Input Weighted Average Rate Range
−Removed: September 30, 2020
+Added: March 31, 2021
Loans measured for impairment In-house valuation of collateral Discount rate 10 % - 100 %
15 unchanged sentences
The Community Banking segment's principal business focus is the offering of loan and deposit products to business and consumer customers in its primary market areas.
−Removed: As of September 30, 2020, the Community Banking segment operated 16 branches throughout Alaska.
+Added: As of March 31, 2021, the Community Banking segment operated 17 branches throughout Alaska.
The Home Mortgage Lending segment's principal business focus is the origination and sale of mortgage loans for 1-4 family residential properties.
Summarized financial information for the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:
−Removed: Three Months Ended September 30, 2020
−Removed: (In Thousands) Community Banking Home Mortgage Lending Consolidated
−Removed: Interest income $ 18,821 $ 973 $ 19,794
−Removed: Interest expense 1,433 67 1,500
−Removed: Net interest income 17,388 906 18,294
−Removed: Provision for loan losses 567 — 567
−Removed: Other operating income 3,696 17,932 21,628
−Removed: Other operating expense 14,353 9,153 23,506
−Removed: Income before provision for income taxes 6,164 9,685 15,849
−Removed: Provision (benefit) for income taxes 1,249 2,745 3,994
−Removed: Net income $ 4,915 $ 6,940 $ 11,855
−Removed: Three Months Ended September 30, 2019
−Removed: (In Thousands) Community Banking Home Mortgage Lending Consolidated
−Removed: Interest income $ 17,108 $ 729 $ 17,837
−Removed: Interest expense 1,108 423 1,531
−Removed: Net interest income 16,000 306 16,306
−Removed: Provision for loan losses ( 2,075 ) — ( 2,075 )
−Removed: Other operating income 2,944 7,565 10,509
−Removed: Other operating expense 13,126 6,198 19,324
−Removed: Income before provision for income taxes 7,893 1,673 9,566
−Removed: Provision for income taxes 1,550 478 2,028
−Removed: Net income $ 6,343 $ 1,195 $ 7,538
−Removed: Nine Months Ended September 30, 2020
+Added: Three Months Ended March 31, 2021
(In Thousands) Community Banking Home Mortgage Lending Consolidated
2 unchanged sentences
Net interest income 18,734 759 19,493
−Removed: Provision for loan losses 3,031 — 3,031
+Added: Benefit for credit losses ( 1,488 ) — ( 1,488 )
Other operating income 2,274 13,622 15,896
3 unchanged sentences
Net income $ 7,380 $ 4,801 $ 12,181
−Removed: Nine Months Ended September 30, 2019
+Added: Three Months Ended March 31, 2020
(In Thousands) Community Banking Home Mortgage Lending Consolidated
2 unchanged sentences
Net interest income 15,261 429 15,690
−Removed: Benefit for loan losses ( 1,025 ) — ( 1,025 )
+Added: Provision for credit losses 2,060 — 2,060
Other operating income 1,768 4,665 6,433
1 unchanged sentence
Income before provision for income taxes 1,357 ( 81 ) 1,276
−Removed: Provision for income taxes 3,689 645 4,334
+Added: Provision (benefit) for income taxes 266 ( 23 ) 243
Net income $ 1,091 ($ 58 ) $ 1,033
−Removed: September 30, 2020
+Added: March 31, 2021
(In Thousands) Community Banking Home Mortgage Lending Consolidated
6 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.