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 include multi-family, commercial construction and land development, and other commercial real estate classes. Commercial and industrial loans include loans to commercial and agricultural businesses and tax exempt entities. Residential real estate loans consist of mortgages for 1-to-4 family housing. Consumer loans include home equity loans, auto and other installment loans.

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, 2019						December 31, 2018
(in thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction and land development	$	28,802	$	2,064	$	30,866	$	23,754	$	2,890	$	26,644
Other commercial real estate	672,885		220,022		892,907		555,980		244,075		800,055
Total commercial real estate	701,687		222,086		923,773		579,734		246,965		826,699

Commercial and industrial:
Commercial	239,894		40,490		280,384		234,757		52,470		287,227
Agricultural	21,206		—		21,206		22,317		—		22,317
Tax exempt	66,043		35,073		101,116		56,588		38,738		95,326
Total commercial and industrial	327,143		75,563		402,706		313,662		91,208		404,870

Total commercial loans	1,028,830		297,649		1,326,479		893,396		338,173		1,231,569

Residential real estate:
Residential mortgages	730,516		412,936		1,143,452		670,189		474,509		1,144,698
Total residential real estate	730,516		412,936		1,143,452		670,189		474,509		1,144,698

Consumer:
Home equity	58,556		37,600		96,156		57,898		45,291		103,189
Other consumer	10,234		985		11,219		9,414		1,357		10,771
Total consumer	68,790		38,585		107,375		67,312		46,648		113,960

Total loans	$	1,828,136	$	749,170	$	2,577,306	$	1,630,897	$	859,330	$	2,490,227

The carrying amount of the acquired loans at September 30, 2019 totaled $749.2 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 $8.4 million (and total note balances of $11.5 million). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Acquired loans considered not impaired at the acquisition date had a carrying amount of $740.8 million as of September 30, 2019.

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)	2019			2018
Balance at beginning of period	$	4,195		$	2,807
Reclassification from non-accretable difference for loans with (decreased) improved cash flows	(126		)	1,985
Accretion	(581		)	(315		)
Balance at end of period	$	3,488		$	4,477

	Nine Months Ended September 30,
(in thousands)	2019			2018
Balance at beginning of period	$	4,377		$	3,509
Reclassification from non-accretable difference for loans with improved cash flows	498			2,031
Accretion	(1,387		)	(1,063		)
Balance at end of period	$	3,488		$	4,477

The following is a summary of past due loans at September 30, 2019 and December 31, 2018:

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, 2019
Commercial real estate:
Construction and land development	$	—	$	—	$	73	$	73	$	28,729	$	28,802	$	73
Other commercial real estate	985		56		6,773		7,814		665,071		672,885		—
Total commercial real estate	985		56		6,846		7,887		693,800		701,687		73

Commercial and industrial:
Commercial	772		64		1,145		1,981		237,913		239,894		—
Agricultural	121		72		25		218		20,988		21,206		—
Tax exempt	—		—		—		—		66,043		66,043		—
Total commercial and industrial	893		136		1,170		2,199		324,944		327,143		—

Total commercial loans	1,878		192		8,016		10,086		1,018,744		1,028,830		73

Residential real estate:
Residential mortgages	399		345		871		1,615		728,901		730,516		71
Total residential real estate	399		345		871		1,615		728,901		730,516		71

Consumer:
Home equity	131		65		315		511		58,045		58,556		—
Other consumer	2		7		—		9		10,225		10,234		—
Total consumer	133		72		315		520		68,270		68,790		—

Total loans	$	2,410	$	609	$	9,202	$	12,221	$	1,815,915	$	1,828,136	$	144

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, 2019
Commercial real estate:
Construction and land development	$	12	$	—	$	—	$	12	$	190	$	2,064	$	—
Other commercial real estate	434		—		240		674		4,859		220,022		72
Total commercial real estate	446		—		240		686		5,049		222,086		72

Commercial and industrial:
Commercial	—		41		750		791		249		40,490		387
Agricultural	—		—		—		—		—		—		—
Tax exempt	—		—		—		—		—		35,073		—
Total commercial and industrial	—		41		750		791		249		75,563		387

Total commercial loans	446		41		990		1,477		5,298		297,649		459

Residential real estate:
Residential mortgages	245		519		874		1,638		3,093		412,936		47
Total residential real estate	245		519		874		1,638		3,093		412,936		47

Consumer:
Home equity	356		133		180		669		19		37,600		37
Other consumer	—		—		—		—		—		985		—
Total consumer	356		133		180		669		19		38,585		37

Total loans	$	1,047	$	693	$	2,044	$	3,784	$	8,410	$	749,170	$	543

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, 2018
Commercial real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	23,754	$	23,754	$	—
Other commercial real estate	1,146		—		6,725		7,871		548,109		555,980		—
Total commercial real estate	1,146		—		6,725		7,871		571,863		579,734		—

Commercial and industrial:
Commercial	395		60		402		857		233,900		234,757		50
Agricultural	65		6		25		96		22,221		22,317		—
Tax exempt	—		—		—		—		56,588		56,588		—
Total commercial and industrial	460		66		427		953		312,709		313,662		50

Total commercial loans	1,606		66		7,152		8,824		884,572		893,396		50

Residential real estate:
Residential mortgages	3,565		641		1,309		5,515		664,674		670,189		—
Total residential real estate	3,565		641		1,309		5,515		664,674		670,189		—

Consumer:
Home equity	72		—		—		72		57,826		57,898		—
Other consumer	17		—		11		28		9,386		9,414		—
Total consumer	89		—		11		100		67,212		67,312		—

Total loans	$	5,260	$	707	$	8,472	$	14,439	$	1,616,458	$	1,630,897	$	50

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, 2018
Commercial real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	164	$	2,890	$	—
Other commercial real estate	631		99		211		941		6,143		244,075		—
Total commercial real estate	631		99		211		941		6,307		246,965		—

Commercial and industrial:
Commercial	149		26		494		669		679		52,470		—
Agricultural	—		—		—		—		—		—		—
Tax exempt	—		—		—		—		—		38,738		—
Total commercial and industrial	149		26		494		669		679		91,208		—

Total commercial loans	780		125		705		1,610		6,986		338,173		—

Residential real estate:
Residential mortgages	3,419		254		1,792		5,465		3,095		474,509		—
Total residential real estate	3,419		254		1,792		5,465		3,095		474,509		—

Consumer:
Home equity	198		—		66		264		22		45,291		7
Other consumer	17		—		—		17		3		1,357		189
Total consumer	215		—		66		281		25		46,648		196

Total loans	$	4,414	$	379	$	2,563	$	7,356	$	10,106	$	859,330	$	196

Non-Accrual Loans

The following is summary information pertaining to non-accrual loans at September 30, 2019 and December 31, 2018:



	September 30, 2019						December 31, 2018
(in thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction and land development	$	1	$	—	$	1	$	1	$	—	$	1
Other commercial real estate	8,172		346		8,518		7,873		282		8,155
Total commercial real estate	8,173		346		8,519		7,874		282		8,156

Commercial and industrial:
Commercial	1,268		575		1,843		1,423		643		2,066
Agricultural	234		—		234		265		—		265
Tax exempt	—		—		—		—		—		—
Total commercial and industrial	1,502		575		2,077		1,688		643		2,331

Total commercial loans	9,675		921		10,596		9,562		925		10,487

Residential real estate:
Residential mortgages	3,277		2,063		5,340		4,213		2,997		7,210
Total residential real estate	3,277		2,063		5,340		4,213		2,997		7,210

Consumer:
Home equity	564		154		718		246		201		447
Other consumer	25		—		25		90		1		91
Total consumer	589		154		743		336		202		538

Total loans	$	13,541	$	3,138	$	16,679	$	14,111	$	4,124	$	18,235

Loans evaluated for impairment as of September 30, 2019 and December 31, 2018 are, as follows:

Business Activities Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
September 30, 2019
Balance at end of period
Individually evaluated for impairment	$	8,759	$	1,323	$	2,643	$	13	$	12,738
Collectively evaluated	692,928		325,820		727,873		68,777		1,815,398
Total	$	701,687	$	327,143	$	730,516	$	68,790	$	1,828,136

Acquired Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
September 30, 2019
Balance at end of period
Individually evaluated for impairment	$	257	$	414	$	973	$	—	$	1,644
Purchased credit impaired	5,049		249		3,093		19		8,410
Collectively evaluated	216,780		74,900		408,870		38,566		739,116
Total	$	222,086	$	75,563	$	412,936	$	38,585	$	749,170

Business Activities Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
December 31, 2018
Balance at end of period
Individually evaluated for impairment	$	9,835	$	1,445	$	2,562	$	13	$	13,855
Collectively evaluated	569,899		312,217		667,627		67,299		1,617,042
Total	$	579,734	$	313,662	$	670,189	$	67,312	$	1,630,897

Acquired Loans



(in thousands)	Commercial real estate		Commercial and industrial		Residential real estate		Consumer		Total
December 31, 2018
Balance at end of period
Individually evaluated for impairment	$	188	$	426	$	744	$	—	$	1,358
Purchased credit impaired	6,307		679		3,095		25		10,106
Collectively evaluated	240,470		90,103		470,670		46,623		847,866
Total	$	246,965	$	91,208	$	474,509	$	46,648	$	859,330

The following is a summary of impaired loans at September 30, 2019 and December 31, 2018:

Business Activities Loans



	September 30, 2019
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	5,634		5,675		—
Commercial	657		713		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	2,082		2,236		—
Home equity	—		—		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	1	$	1	$	1
Other commercial real estate	3,124		3,262		989
Commercial	666		694		240
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	561		594		66
Home equity	13		13		1
Other consumer	—		—		—

Total
Commercial real estate	$	8,759	$	8,938	$	990
Commercial and industrial	1,323		1,407		240
Residential real estate	2,643		2,830		66
Consumer	13		13		1
Total impaired loans	$	12,738	$	13,188	$	1,297

Acquired Loans



	September 30, 2019
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	90		90		—
Commercial	414		508		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	616		852		—
Home equity	—		—		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	167		168		12
Commercial	—		—		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	357		376		32
Home equity	—		—		—
Other consumer	—		—		—

Total
Commercial real estate	$	257	$	258	$	12
Commercial and industrial	414		508		—
Residential real estate	973		1,228		32
Consumer	—		—		—
Total impaired loans	$	1,644	$	1,994	$	44

Business Activities Loans



	December 31, 2018
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	8,209		8,301		—
Commercial	649		669		—
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	1,671		1,709		—
Home equity	—		—		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	1	$	1	$	1
Other commercial real estate	1,625		1,660		421
Commercial	796		855		78
Agricultural	—		—		—
Tax exempt loans	—		—		—
Residential real estate	891		916		111
Home equity	13		13		—
Other consumer	—		—		—

Total
Commercial real estate	$	9,835	$	9,962	$	422
Commercial and industrial	1,445		1,524		78
Residential real estate	2,562		2,625		111
Consumer	13		13		—
Total impaired loans	$	13,855	$	14,124	$	611

Acquired Loans



	December 31, 2018
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	188		187		—
Commercial	426		510		—
Agricultural	—		—		—
Tax exempt	—		—		—
Residential mortgages	375		524		—
Home equity	—		—		—
Other consumer	—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Other commercial real estate	—		—		—
Commercial	—		—		—
Agricultural	—		—		—
Tax exempt	—		—		—
Residential mortgages	369		379		41
Home equity	—		—		—
Other consumer	—		—		—

Total
Commercial real estate	$	188	$	187	$	—
Commercial and industrial	426		510		—
Residential real estate	744		903		41
Consumer	—		—		—
Total impaired loans	$	1,358	$	1,600	$	41

The following is a summary of the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2019 and 2018:

Business Activities Loans



	Three Months Ended September 30, 2019				Three Months Ended September 30, 2018
(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	5,528		52		6,639		31
Commercial	747		4		625		2
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	2,041		16		3,955		9
Home equity	—		—		158		—
Other consumer	—		—		—		—

With an allowance recorded:
Construction and land development	$	1	$	—	$	1	$	—
Other commercial real estate	3,217		—		2,214		—
Commercial	654		—		788		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	551		2		888		3
Home equity	12		—		13		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	8,746	$	52	$	8,854	$	31
Commercial and industrial	1,401		4		1,413		2
Residential real estate	2,592		18		4,843		12
Consumer	12		—		171		—
Total impaired loans	$	12,751	$	74	$	15,281	$	45



	Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2018
(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	5,466		56		6,204		46
Commercial	792		7		628		7
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	2,089		47		4,027		28
Home equity	—		—		236		—
Other consumer	—		—		—		—

With an allowance recorded:
Construction and land development	$	2	$	—	$	1	$	—
Other commercial real estate	2,972		29		1,600		6
Commercial	497		—		716		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	540		7		800		7
Home equity	13		—		13		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	8,440	$	85	$	7,805	$	52
Commercial and industrial	1,289		7		1,344		7
Residential real estate	2,629		54		4,827		35
Consumer	13		—		249		—
Total impaired loans	$	12,371	$	146	$	14,225	$	94

Acquired Loans



	Three Months Ended September 30, 2019				Three Months Ended September 30, 2018
(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	88		—		95		—
Commercial	395		—		469		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	702		—		276		—
Home equity	—		—		—		—
Other consumer	—		—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—	$	—
Other commercial real estate	165		—		—		—
Commercial	—		—		—		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	352		—		181		—
Home equity	—		—		—		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	253	$	—	$	95	$	—
Commercial and industrial	395		—		469		—
Residential real estate	1,054		—		457		—
Consumer	—		—		—		—
Total impaired loans	$	1,702	$	—	$	1,021	$	—



	Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2018
(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	89		—		97		1
Commercial	429		—		445		1
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	593		—		124		—
Home equity	—		—		—		—
Other consumer	—		—		—		—

With an allowance recorded:
Construction and land development	$	—	$	—	$	—	$	—
Other commercial real estate	123		—		—		—
Commercial	—		—		—		—
Agricultural	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	361		—		186		—
Home equity	—		—		—		—
Other consumer	—		—		—		—

Total
Commercial real estate	$	212	$	—	$	97	$	1
Commercial and industrial	429		—		445		1
Residential real estate	954		—		310		—
Consumer	—		—		—		—
Total impaired loans	$	1,595	$	—	$	852	$	2

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 non-performing 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, 2019 and 2018, 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. Modifications may include adjustments to interest rates, payment amounts, extensions of maturity, court ordered concessions or other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral.



	Three Months Ended September 30, 2019
(in thousands, except modifications)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Other commercial real estate	4	$	268	$	267
Agricultural	1	141		141
Residential mortgages	2	399		342
Total	7	$	808	$	750


	Three Months Ended September 30, 2018
(in thousands, except modifications)	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
Commercial	5	104		60
Residential mortgages	2	228		225
Total	9	$	406	$	358


	Nine Months Ended September 30, 2019
(in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Other commercial real estate	9	$	543	$	529
Other commercial	4	168		91
Agricultural	1	141		141
Residential mortgages	11	1,133		1,034
Total	25	$	1,985	$	1,795



	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		—
Residential mortgages	15	2,752		2,168
Home equity	1	100		100
Other consumer	2	5		4
Total	36	$	5,478	$	4,323

The following tables summarize the types of loan concessions made for the periods presented:



	Three Months Ended September 30,
	2019			2018
(in thousands, except modifications)	Number of Modifications	Post-Modification Outstanding Recorded Investment		Number of Modifications	Post-Modification Outstanding Recorded Investment
Interest only payments	2	$	90	—	$	—
Forbearance	1	141		1	115
Forbearance and interest only payments	2	176		3	72
Forbearance and maturity concession	—	—		4	143
Forbearance, amortization and maturity concession	2	343		—	—
Maturity concession	—	—		1	28
Total	7	$	750	9	$	358


	Nine Months Ended September 30,
	2019			2018
(in thousands, except modifications)	Number of Modifications	Post-Modification Outstanding Recorded Investment		Number of Modifications	Post-Modification Outstanding Recorded Investment
Interest rate and maturity concession	—	$	—	1	$	16
Interest only payments	2	90		—	—
Interest only payments and maturity concession	2	73		—	—
Amortization and maturity concession	4	273		—	—
Amortization, interest rate and maturity concession	1	77		—	—
Forbearance	3	253		3	271
Forbearance and interest only payments	5	331		6	121
Forbearance and maturity concession	—	—		17	1,774
Forbearance, amortization and maturity concession	7	640		—	—
Maturity concession	—	—		2	440
Restructure with maturity concession	—	—		5	1,419
Other	1	58		2	282
Total	25	$	1,795	36	$	4,323

For the three and nine months ended September 30, 2019, there were no loans that were 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, 2019 and December 31, 2018, the Company maintained bank-owned residential real estate property with a fair value of $2.5 million. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of September 30, 2019 and December 31, 2018 totaled $931 thousand and $1.5 million, respectively.

Mortgage Banking

Total residential loans included held for sale loans of $4.0 million and $168 thousand at September 30, 2019 and December 31, 2018, respectively.