LOANS

The Company’s loan portfolio is comprised of the following segments: commercial real estate, commercial and industrial, residential real estate, and consumer loans. Commercial real estate loans includes commercial construction and land development and other commercial real estate loans. Commercial and industrial loans includes loans to commercial businesses, agricultural, and tax exempt loans. Residential real estate loans consists of mortgages for 1-4 family housing. Consumer loans include home equity loans and other installment lending.

The Company’s lending activities are principally conducted in Maine, New Hampshire, and Vermont.

Total loans include business activity loans and acquired loans. Acquired loans are those loans previously acquired from other institutions. The following is a summary of total loans:



	September 30, 2018						December 31, 2017
(in thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction and land development	$	37,525	$	2,926	$	40,451	$	28,892	$	16,781	$	45,673
Other commercial real estate	547,641		251,926		799,567		505,119		275,954		781,073
Total commercial real estate	585,166		254,852		840,018		534,011		292,735		826,746

Commercial and industrial:
Other Commercial	225,965		53,541		279,506		198,051		68,069		266,120
Agricultural	24,478		—		24,478		27,588		—		27,588
Tax exempt	42,578		39,252		81,830		42,365		43,350		85,715
Total commercial and industrial	293,021		92,793		385,814		268,004		111,419		379,423

Total commercial loans	878,187		347,645		1,225,832		802,015		404,154		1,206,169

Residential real estate:
Residential mortgages	643,038		497,481		1,140,519		591,411		564,271		1,155,682
Total residential real estate	643,038		497,481		1,140,519		591,411		564,271		1,155,682

Consumer:
Home equity	55,538		49,655		105,193		51,376		62,217		113,593
Other consumer	10,409		1,637		12,046		7,828		2,341		10,169
Total consumer	65,947		51,292		117,239		59,204		64,558		123,762

Total loans	$	1,587,172	$	896,418	$	2,483,590	$	1,452,630	$	1,032,983	$	2,485,613

The carrying amount of the acquired loans at September 30, 2018 totaled $896.4 million. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $10.7 million (and total note balances of $14.7 million). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Acquired loans considered not impaired at acquisition date had a carrying amount of $885.7 million as of September 30, 2018.

The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer:



	Three Months Ended September 30,
(in thousands)	2018			2017
Balance at beginning of period	$	2,807		$	4,567
Reclassification from nonaccretable difference for loans with improved cash flows	1,985			513
Accretion	(315		)	(423		)
Balance at end of period	$	4,477		$	4,657


	Nine Months Ended September 30,
(in thousands)	2018			2017
Balance at beginning of period	$	3,509		$	—
Acquisitions	—			3,398
Reclassification from nonaccretable difference for loans with improved cash flows	2,031			2,257
Accretion	(1,063		)	(998		)
Balance at end of period	$	4,477		$	4,657

The following is a summary of past due loans at September 30, 2018 and December 31, 2017:

Business Activities Loans



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
September 30, 2018
Commercial real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	37,525	$	37,525	$	—
Other commercial real estate	1,283		146		7,082		8,511		539,130		547,641		—
Total commercial real estate	1,283		146		7,082		8,511		576,655		585,166		—

Commercial and industrial:
Other Commercial	264		17		502		783		225,182		225,965		—
Agricultural	—		—		25		25		24,453		24,478		—
Tax exempt	—		—		—		—		42,578		42,578		—
Total commercial and industrial	264		17		527		808		292,213		293,021		—

Total commercial loans	1,547		163		7,609		9,319		868,868		878,187		—

Residential real estate:
Residential mortgages	931		326		3,814		5,071		637,967		643,038		—
Total residential real estate	931		326		3,814		5,071		637,967		643,038		—

Consumer:
Home equity	247		—		223		470		55,068		55,538		—
Other consumer	109		17		18		144		10,265		10,409		—
Total consumer	356		17		241		614		65,333		65,947		—

Total loans	$	2,834	$	506	$	11,664	$	15,004	$	1,572,168	$	1,587,172	$	—

Business Activities Loans



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2017
Commercial real estate:
Construction and land development	$	—	$	—	$	637	$	637	$	28,255	$	28,892	$	—
Other commercial real estate	965		1,659		5,065		7,689		497,430		505,119		119
Total commercial real estate	965		1,659		5,702		8,326		525,685		534,011		119

Commercial and industrial:
Other Commercial	186		329		702		1,217		196,834		198,051		21
Agricultural	42		159		198		399		27,189		27,588		155
Tax exempt	—		—		—		—		42,365		42,365		—
Total commercial and industrial	228		488		900		1,616		266,388		268,004		176

Total commercial loans	1,193		2,147		6,602		9,942		792,073		802,015		295

Residential real estate:
Residential mortgages	3,096		711		975		4,782		586,629		591,411		—
Total residential real estate	3,096		711		975		4,782		586,629		591,411		—

Consumer:
Home equity	515		—		199		714		50,662		51,376		199
Other consumer	36		24		—		60		7,768		7,828		—
Total consumer	551		24		199		774		58,430		59,204		199

Total loans	$	4,840	$	2,882	$	7,776	$	15,498	$	1,437,132	$	1,452,630	$	494

Acquired Loans



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
September 30, 2018
Commercial real estate:
Construction and land development	$	21	$	—	$	—	$	21	$	158	$	2,926	$	—
Other commercial real estate	442		21		98		561		6,836		251,926		—
Total commercial real estate	463		21		98		582		6,994		254,852		—

Commercial and industrial:
Other Commercial	562		84		—		646		563		53,541		—
Agricultural	—		—		—		—		—		—		—
Tax exempt	—		—		—		—		—		39,252		—
Total commercial and industrial	562		84		—		646		563		92,793		—

Total commercial loans	1,025		105		98		1,228		7,557		347,645		—

Residential real estate:
Residential mortgages	881		314		1,574		2,769		3,094		497,481		—
Total residential real estate	881		314		1,574		2,769		3,094		497,481		—

Consumer:
Home equity	69		13		152		234		23		49,655		—
Other consumer	23		138		—		161		3		1,637		—
Total consumer	92		151		152		395		26		51,292		—

Total loans	$	1,998	$	570	$	1,824	$	4,392	$	10,677	$	896,418	$	—

Acquired Loans



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
December 31, 2017
Commercial real estate:
Construction and land development	$	124	$	9	$	—	$	133	$	258	$	16,781	$	—
Other commercial real estate	278		—		411		689		8,397		275,954		—
Total commercial real estate	402		9		411		822		8,655		292,735		—

Commercial and industrial:
Other Commercial	125		14		49		188		632		68,069		—
Agricultural	—		—		—		—		—		—		—
Tax exempt	—		—		—		—		—		43,350		—
Total commercial and industrial	125		14		49		188		632		111,419		—

Total commercial loans	527		23		460		1,010		9,287		404,154		—

Residential real estate:
Residential mortgages	752		388		614		1,754		3,259		564,271		—
Total residential real estate	752		388		614		1,754		3,259		564,271		—

Consumer:
Home equity	125		117		80		322		38		62,217		16
Other consumer	2		—		—		2		3		2,341		—
Total consumer	127		117		80		324		41		64,558		16

Total loans	$	1,406	$	528	$	1,154	$	3,088	$	12,587	$	1,032,983	$	16

Non-Accrual Loans

The following is summary information pertaining to non-accrual loans at September 30, 2018 and December 31, 2017:



	September 30, 2018						December 31, 2017
(in thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction and land development	$	1	$	—	$	1	$	637	$	—	$	637
Other commercial real estate	8,247		100		8,347		7,146		560		7,706
Total commercial real estate	8,248		100		8,348		7,783		560		8,343

Commercial and industrial:
Other Commercial	1,416		600		2,016		703		463		1,166
Agricultural	287		—		287		43		—		43
Tax exempt	—		—		—		—		—		—
Total commercial and industrial	1,703		600		2,303		746		463		1,209

Total commercial loans	9,951		700		10,651		8,529		1,023		9,552

Residential real estate:
Residential mortgages	7,296		3,100		10,396		3,408		858		4,266
Total residential real estate	7,296		3,100		10,396		3,408		858		4,266

Consumer:
Home equity	462		163		625		130		217		347
Other consumer	100		2		102		95		58		153
Total consumer	562		165		727		225		275		500

Total loans	$	17,809	$	3,965	$	21,774	$	12,162	$	2,156	$	14,318

Loans evaluated for impairment as of September 30, 2018 and December 31, 2017 were as follows:

Business Activities Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
September 30, 2018
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	9,016	$	1,435	$	4,940	$	160	$	15,551
Collectively evaluated	576,150		291,586		638,098		65,787		1,571,621
Total	$	585,166	$	293,021	$	643,038	$	65,947	$	1,587,172

Business Activities Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
December 31, 2017
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	7,604	$	626	$	1,404	$	13	$	9,647
Collectively evaluated	526,407		267,378		590,007		59,191		1,442,983
Total	$	534,011	$	268,004	$	591,411	$	59,204	$	1,452,630

Acquired Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
September 30, 2018
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	98	$	426	$	465	$	—	$	989
Purchased credit impaired	6,994		563		3,094		26		10,677
Collectively evaluated	247,760		91,804		493,922		51,266		884,752
Total	$	254,852	$	92,793	$	497,481	$	51,292	$	896,418

Acquired Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
December 31, 2017
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	241	$	571	$	271	$	63	$	1,146
Purchased credit impaired	8,655		632		3,259		41		12,587
Collectively evaluated	283,839		110,216		560,741		64,454		1,019,250
Total	$	292,735	$	111,419	$	564,271	$	64,558	$	1,032,983

The following is a summary of impaired loans at September 30, 2018 and December 31, 2017:

Business Activities Loans



	September 30, 2018
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	6,776		6,787		—
Other commercial	634		649		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	4,037		4,067		—
Home equity	147		450		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	1	$	1	$	1
Other commercial real estate	2,239		2,338		687
Other commercial	801		816		62
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	903		921		92
Home equity	13		13		—
Other consumer	—		—		—

Total
Commercial real estate	$	9,016	$	9,126	$	688
Commercial and industrial	1,435		1,465		62
Residential real estate	4,940		4,988		92
Consumer	160		463		—
Total impaired loans	$	15,551	$	16,042	$	842

Acquired Loans



	September 30, 2018
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	98		97		—
Other commercial	426		510		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	281		283		—
Home equity	—		—		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	—		—		—
Other commercial	—		—		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	184		189		20
Home equity	—		—		—
Other consumer	—		—		—

Total
Commercial real estate	$	98	$	97	$	—
Commercial and industrial	426		510		—
Residential real estate	465		472		20
Consumer	—		—		—
Total impaired loans	$	989	$	1,079	$	20

Business Activities Loans



	December 31, 2017
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	5,896		5,903		—
Other commercial	218		217		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	1,247		1,260		—
Home equity	13		13		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	637	$	2,563	$	59
Other commercial real estate	1,071		1,132		388
Other commercial	408		408		3
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	157		157		9
Home equity	—		—		—
Other consumer	—		—		—

Total
Commercial real estate	$	7,604	$	9,598	$	447
Commercial and industrial	626		625		3
Residential real estate	1,404		1,417		9
Consumer	13		13		—
Total impaired loans	$	9,647	$	11,653	$	459

Acquired Loans



	December 31, 2017
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	241		352		—
Other commercial	571		584		—
Agricultural	—		—		—
Tax exempt	—		—		—
Residential mortgages	271		278		—
Home equity	63		156		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	—		—		—
Other commercial	—		—		—
Agricultural	—		—		—
Tax exempt	—		—		—
Residential mortgages	—		—		—
Home equity	—		—		—
Other consumer	—		—		—

Total
Commercial real estate	$	241	$	352	$	—
Commercial and industrial	571		584		—
Residential real estate	271		278		—
Consumer	63		156		—
Total impaired loans	$	1,146	$	1,370	$	—

The following is a summary of the average recorded investment and interest income recognized on impaired loans as of September 30, 2018 and 2017:

Business Activities Loans



	Nine Months Ended September 30, 2018				Nine Months Ended September 30, 2017
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Construction and land development	$	—	$	—	$	—	$	—
Other commercial real estate	6,204		46		1,716		64
Other commercial	628		7		99		6
Agricultural	—		—		8		1
Tax exempt loans	—		—		—		—
Residential real estate	4,027		28		1,245		31
Home equity	236		—		13		—
Other consumer	—		—		5		2

With an allowance recorded:
Construction and land development	$	1	$	—	$	637	$	—
Other commercial real estate	1,600		6		693		—
Other commercial	716		—		44		1
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	800		7		268		5
Home equity	13		—		12		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	7,805	$	52	$	3,046	$	64
Commercial and industrial	1,344		7		151		8
Residential real estate	4,827		35		1,513		36
Consumer	249		—		30		2
Total impaired loans	$	14,225	$	94	$	4,740	$	110

Acquired Loans



	Nine Months Ended September 30, 2018				Nine Months Ended September 30, 2017
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Construction and land development	$	—	$	—	$	—	$	—
Other commercial real estate	97		1		89		—
Other commercial	445		1		171		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	124		—		254		1
Home equity	—		—		47		—
Other consumer	—		—		9		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—	$	—
Other commercial real estate	—		—		46		—
Other commercial	—		—		—		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	186		—		—		—
Home equity	—		—		—		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	97	$	1	$	135	$	—
Commercial and industrial	445		1		171		—
Residential real estate	310		—		254		1
Consumer	—		—		56		—
Total impaired loans	$	852	$	2	$	616	$	1

Troubled Debt Restructuring Loans

The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.

The following tables include the recorded investment and number of modifications identified during the three and nine months ended September 30, 2018 and for the three and nine months ended September 30, 2017, respectively. The table includes the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. The modifications for the three and nine months ended September 30, 2018 were attributable to interest rate concessions, maturity date extensions, reamortization or a combination of two concessions. The modifications for the three and nine months ending September 30, 2017 were attributable to interest rate concessions, maturity date extensions, or a combination of both.



	Three Months Ended September 30, 2018
(in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and land development	1	$	2	$	1
Other commercial real estate	1	72		72
Other commercial	5	104		60
Agricultural	—	—		—
Tax exempt	—	—		—
Residential mortgages	2	228		225
Home equity	—	—		—
Other Consumer	—	—		—
Total	9	$	406	$	358


	Three Months Ended September 30, 2017
(in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and land development	—	$	—	$	—
Other commercial real estate	4	144		144
Other commercial	5	483		483
Agricultural	—	—		—
Tax exempt	—	—		—
Residential mortgages	—	—		—
Home equity	—	—		—
Other Consumer	—	—		—
Total	9	$	627	$	627



	Nine Months Ended September 30, 2018
(in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and land development	1	$	2	$	1
Other commercial real estate	9	1,896		1,564
Other commercial	7	556		486
Agricultural	1	167		—
Tax exempt	—	—		—
Residential mortgages	15	2,752		2,168
Home equity	1	100		100
Other Consumer	2	5		4
Total	36	$	5,478	$	4,323


	Nine Months Ended September 30, 2017
(in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Construction and land development	—	$	—	$	—
Other commercial real estate	6	388		333
Other commercial	6	563		549
Agricultural	1	19		18
Tax exempt	—	—		—
Residential mortgages	3	692		675
Home equity	1	13		13
Other Consumer	1	38		37
Total	18	$	1,713	$	1,625

For the three and nine months ended September 30, 2018, there were no loans restructured that had subsequently defaulted during the period.

The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs.

Foreclosure

As of September 30, 2018, the Company maintained foreclosed residential real estate property with a fair value of $68 thousand. As of December 31, 2017, the Company maintained foreclosed residential real estate property with a fair value of $122 thousand. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of September 30, 2018 totaled $3.7 million, primarily from one relationship representing 67% of the foreclosures in process. On December 31, 2017 residential mortgage loans in the process of foreclosure totaled $843 thousand.

Mortgage Banking

Total residential loans included held for sale loans of $0.9 million and $13.4 million at September 30, 2018 and December 31, 2017, respectively.