Note 3 - Loans

The following table shows the composition of the Company's loan portfolio as of June 30, 2012 and 2011 and at December 31, 2011:

	June 30, 2012				December 31, 2011				June 30, 2011
Commercial
Real estate	$	253,193,000	28.7	%	$	255,424,000	29.5	%	$	263,337,000	29.7	%
Construction		33,072,000	3.8	%		32,574,000	3.8	%		29,386,000	3.3	%
Other		87,833,000	10.0	%		86,982,000	10.1	%		102,499,000	11.6	%
Municipal		16,089,000	1.8	%		16,221,000	1.9	%		19,974,000	2.3	%
Residential
Term		368,876,000	41.8	%		341,286,000	39.5	%		335,807,000	37.9	%
Construction		6,449,000	0.7	%		10,469,000	1.2	%		11,063,000	1.2	%
Home equity line of credit		100,689,000	11.4	%		105,244,000	12.1	%		107,224,000	12.0	%
Consumer		15,613,000	1.8	%		16,788,000	1.9	%		17,639,000	2.0	%
Total	$	881,814,000	100.0	%	$	864,988,000	100.0	%	$	886,929,000	100.0	%

Loan balances include net deferred loan costs of $1,664,000 as of June 30, 2012, $1,386,000 as of December 31, 2011, and $1,365,000 as of June 30, 2011. Pursuant to collateral agreements, qualifying first mortgage loans, which totaled $243,196,000 at June 30, 2012, $211,597,000 at December 31, 2011, and $180,839,000 at June 30, 2011, were used to collateralize borrowings from the Federal Home Loan Bank of Boston. In addition, commercial, construction and home equity loans totaling $232,598,000 at June 30, 2012, $218,417,000 at December 31, 2011, and $329,677,000 at June 30, 2011, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.

Loans on non-accrual status totaled $21,958,000 at June 30, 2012, $27,806,000 at December 31, 2011 and $22,049,000 at June 30, 2011. Loans past due 90 days or greater which are accruing interest totaled $164,000 at June 30, 2012, $1,170,000 at December 31, 2011 and $355,000 at June 30, 2011. The Company continues to accrue interest on these loans because it believes collection of principal and interest is reasonably assured.

Information on the past-due status of loans by class of financing receivable as of June 30, 2012, is presented in the following table:

	30-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	13,000	$	1,858,000	$	1,871,000	$	251,322,000	$	253,193,000	$	-
Construction		119,000		34,000		153,000		32,919,000		33,072,000		-
Other		443,000		1,398,000		1,841,000		85,992,000		87,833,000		-
Municipal		1,560,000		-		1,560,000		14,529,000		16,089,000		-
Residential
Term		3,191,000		7,878,000		11,069,000		357,807,000		368,876,000		-
Construction		-		1,336,000		1,336,000		5,113,000		6,449,000		-
Home equity line of credit		530,000		1,311,000		1,841,000		98,848,000		100,689,000		-
Consumer		189,000		180,000		369,000		15,244,000		15,613,000		164,000
Total	$	6,045,000	$	13,995,000	$	20,040,000	$	861,774,000	$	881,814,000	$	164,000

Information on the past-due status of loans by class of financing receivable as of December 31, 2011, is presented in the following table:

	30-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	2,872,000	$	3,992,000	$	6,864,000	$	248,560,000	$	255,424,000	$	-
Construction		174,000		1,603,000		1,777,000		30,797,000		32,574,000		-
Other		1,431,000		1,192,000		2,623,000		84,359,000		86,982,000		52,000
Municipal		-		-		-		16,221,000		16,221,000		-
Residential
Term		3,331,000		8,843,000		12,174,000		329,112,000		341,286,000		1,118,000
Construction		-		1,198,000		1,198,000		9,271,000		10,469,000		-
Home equity line of credit		480,000		1,134,000		1,614,000		103,630,000		105,244,000		-
Consumer		331,000		16,000		347,000		16,441,000		16,788,000		-
Total	$	8,619,000	$	17,978,000	$	26,597,000	$	838,391,000	$	864,988,000	$	1,170,000

Information on the past-due status of loans by class of financing receivable as of June 30, 2011, is presented in the following table:

	30-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	2,227,000	$	4,051,000	$	6,278,000	$	257,059,000	$	263,337,000	$	-
Construction		117,000		-		117,000		29,269,000		29,386,000		-
Other		544,000		997,000		1,541,000		100,958,000		102,499,000		38,000
Municipal		-		-		-		19,974,000		19,974,000		-
Residential
Term		6,093,000		9,916,000		16,009,000		319,798,000		335,807,000		309,000
Construction		-		334,000		334,000		10,729,000		11,063,000		-
Home equity line of credit		868,000		740,000		1,608,000		105,616,000		107,224,000		-
Consumer		258,000		8,000		266,000		17,373,000		17,639,000		8,000
Total	$	10,107,000	$	16,046,000	$	26,153,000	$	860,776,000	$	886,929,000	$	355,000

For all classes, loans are placed on non-accrual status when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status). A loan is "well secured" if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. A loan is "in the process of collection" if collection of the loan is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or, (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

Information on nonaccrual loans as of June 30, 2012 and 2011 and at December 31, 2011 is presented in the following table:

	June 30, 2012		December 31, 2011		June 30, 2011
Commercial
Real estate	$	5,545,000	$	7,064,000	$	6,746,000
Construction		521,000		2,350,000		771,000
Other		2,361,000		5,784,000		2,095,000
Municipal		-		-		-
Residential
Term		10,723,000		10,194,000		11,260,000
Construction		1,336,000		1,198,000		334,000
Home equity line of credit		1,456,000		1,163,000		740,000
Consumer		16,000		53,000		103,000
Total	$	21,958,000	$	27,806,000	$	22,049,000

Impaired loans include restructured loans and loans placed on non-accrual. These loans are measured at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, a specific reserve is established for the difference.

A breakdown of impaired loans by class of financing receivable as of June 30, 2012, is presented in the following table:

							For six months ended June 30, 2012				For the quarter ended June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
With No Related Allowance
Commercial
Real estate	$	10,313,000	$	10,313,000	$	-	$	9,729,000	$	111,000	$	11,013,000	$	71,000
Construction		1,464,000		1,464,000		-		2,189,000		26,000		1,395,000		13,000
Other		2,249,000		2,249,000		-		2,710,000		16,000		2,439,000		21,000
Municipal		-		-		-		-		-		-		-
Residential										-
Term		8,695,000		8,695,000		-		9,662,000		71,000		9,322,000		41,000
Construction		1,002,000		1,002,000		-		880,000		-		1,042,000		-
Home equity line of credit		740,000		740,000		-		758,000		-		740,000		-
Consumer		-		-		-		6,000		-		-		-
	$	24,463,000	$	24,463,000	$	-	$	25,934,000	$	224,000	$	25,951,000	$	146,000
With an Allowance Recorded
Commercial
Real estate	$	3,482,000	$	3,482,000	$	1,133,000	$	4,026,000	$	16,000	$	3,775,000	$	6,000
Construction		2,155,000		2,155,000		787,000		1,376,000		37,000		2,155,000		37,000
Other		1,851,000		1,851,000		932,000		2,013,000		18,000		1,802,000		13,000
Municipal		-		-		-		-		-		-		-
Residential
Term		10,357,000		10,357,000		966,000		8,487,000		127,000		9,525,000		68,000
Construction		334,000		334,000		48,000		466,000		-		334,000		-
Home equity line of credit		716,000		716,000		300,000		566,000		-		613,000		-
Consumer		16,000		16,000		11,000		15,000		-		15,000		-
	$	18,911,000	$	18,911,000	$	4,177,000	$	16,949,000	$	198,000	$	18,219,000	$	124,000
Total
Commercial
Real estate	$	13,795,000	$	13,795,000	$	1,133,000	$	13,755,000	$	127,000	$	14,788,000	$	77,000
Construction		3,619,000		3,619,000		787,000		3,565,000		63,000		3,550,000		50,000
Other		4,100,000		4,100,000		932,000		4,723,000		34,000		4,241,000		34,000
Municipal		-		-		-		-		-		-		-
Residential
Term		19,052,000		19,052,000		966,000		18,149,000		198,000		18,847,000		109,000
Construction		1,336,000		1,336,000		48,000		1,346,000		-		1,376,000		-
Home equity line of credit		1,456,000		1,456,000		300,000		1,324,000		-		1,353,000		-
Consumer		16,000		16,000		11,000		21,000		-		15,000		-
	$	43,374,000	$	43,374,000	$	4,177,000	$	42,883,000	$	422,000	$	44,170,000	$	270,000

Substantially all interest income recognized on impaired loans for all classes of financing receivables was recognized on a cash basis as received.

A breakdown of impaired loans by class of financing receivable as of December 31, 2011, is presented in the following table:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Recognized Interest Income
With No Related Allowance
Commercial
Real estate	$	5,584,000	$	5,584,000	$	-	$	5,212,000	$	23,000
Construction		5,172,000		5,172,000		-		1,072,000		143,000
Other		6,022,000		6,022,000		-		1,918,000		28,000
Municipal		-		-		-		-		-
Residential
Term		9,875,000		9,875,000		-		9,493,000		54,000
Construction		468,000		468,000		-		961,000		-
Home equity line of credit		739,000		739,000		-		646,000		-
Consumer		37,000		37,000		-		39,000		-
	$	27,897,000	$	27,897,000	$	-	$	19,341,000	$	248,000
With an Allowance Recorded
Commercial
Real estate	$	4,557,000	$	4,557,000	$	808,000	$	2,307,000	$	103,000
Construction		530,000		530,000		33,000		247,000		-
Other		1,020,000		1,020,000		402,000		681,000		19,000
Municipal		-		-		-		-		-
Residential
Term		6,946,000		6,946,000		478,000		5,628,000		228,000
Construction		730,000		730,000		235,000		244,000		-
Home equity line of credit		424,000		424,000		91,000		272,000		-
Consumer		16,000		16,000		11,000		57,000		-
	$	14,223,000	$	14,223,000	$	2,058,000	$	9,436,000	$	350,000
Total
Commercial
Real estate	$	10,141,000	$	10,141,000	$	808,000	$	7,519,000	$	126,000
Construction		5,702,000		5,702,000		33,000		1,318,000		143,000
Other		7,042,000		7,042,000		402,000		2,600,000		47,000
Municipal		-		-		-		-		-
Residential
Term		16,821,000		16,821,000		478,000		15,121,000		282,000
Construction		1,198,000		1,198,000		235,000		1,205,000		-
Home equity line of credit		1,163,000		1,163,000		91,000		918,000		-
Consumer		53,000		53,000		11,000		96,000		-
	$	42,120,000	$	42,120,000	$	2,058,000	$	28,777,000	$	598,000

A breakdown of impaired loans by class of financing receivable as of June 30, 2011, is presented in the following table:

							For six months ended June 30, 2011				For the quarter ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
With No Related Allowance
Commercial
Real estate	$	5,841,000	$	5,841,000	$	-	$	5,151,000	$	12,000	$	5,738,000	$	6,000
Construction		772,000		772,000		-		617,000		72,000		790,000		36,000
Other		1,056,000		1,056,000		-		1,118,000		14,000		1,064,000		7,000
Municipal		-		-		-		-		-		-		-
Residential														-
Term		10,818,000		10,818,000		-		8,957,000		27,000		9,785,000		13,000
Construction		334,000		334,000		-		1,641,000		-		348,000		-
Home equity line of credit		509,000		509,000		-		417,000		-		516,000		-
Consumer		38,000		38,000		-		40,000		-		38,000		-
	$	19,368,000	$	19,368,000	$	-	$	17,941,000	$	125,000	$	18,279,000	$	62,000
With an Allowance Recorded
Commercial
Real estate	$	905,000	$	905,000	$	613,000	$	2,021,000	$	52,000	$	1,785,000	$	26,000
Construction		-		-		-		227,000		-		3,000		-
Other		1,039,000		1,039,000		857,000		652,000		10,000		754,000		5,000
Municipal		-		-		-		-		-		-		-
Residential														-
Term		5,373,000		5,373,000		265,000		5,254,000		114,000		4,978,000		57,000
Construction		-		-		-		192,000		-		192,000		-
Home equity line of credit		231,000		231,000		165,000		256,000		-		281,000		-
Consumer		65,000		65,000		65,000		69,000		-		65,000		-
	$	7,613,000	$	7,613,000	$	1,965,000	$	8,671,000	$	176,000	$	8,058,000	$	88,000
Total
Commercial
Real estate	$	6,746,000	$	6,746,000	$	613,000	$	7,172,000	$	64,000	$	7,521,000	$	32,000
Construction		772,000		772,000		-		844,000		72,000		793,000		36,000
Other		2,095,000		2,095,000		857,000		1,770,000		24,000		1,816,000		12,000
Municipal		-		-		-		-		-		-		-
Residential										-				-
Term		16,191,000		16,191,000		265,000		14,211,000		141,000		14,761,000		70,000
Construction		334,000		334,000		-		1,833,000		-		539,000		-
Home equity line of credit		740,000		740,000		165,000		673,000		-		797,000		-
Consumer		103,000		103,000		65,000		109,000		-		103,000		-
	$	26,981,000	$	26,981,000	$	1,965,000	$	26,612,000	$	301,000	$	26,330,000	$	150,000