Loans

The following table shows the composition of the Company's loan portfolio as of March 31, 2014 and 2013 and at December 31, 2013:



	March 31, 2014				December 31, 2013				March 31, 2013
Commercial
Real estate	$	240,187,000	27.7	%	$	245,943,000	28.2	%	$	250,180,000	29.0	%
Construction	21,686,000		2.5	%	20,382,000		2.3	%	17,090,000		2.0	%
Other	97,276,000		11.2	%	95,289,000		10.9	%	89,874,000		10.4	%
Municipal	17,790,000		2.0	%	19,117,000		2.2	%	15,017,000		1.7	%
Residential
Term	372,479,000		42.9	%	377,218,000		43.0	%	376,029,000		43.5	%
Construction	12,360,000		1.4	%	11,803,000		1.3	%	4,222,000		0.5	%
Home equity line of credit	92,202,000		10.6	%	91,549,000		10.4	%	96,536,000		11.2	%
Consumer	14,934,000		1.7	%	15,066,000		1.7	%	14,529,000		1.7	%
Total	$	868,914,000	100.0	%	$	876,367,000	100.0	%	$	863,477,000	100.0	%

Loan balances include net deferred loan costs of $2,264,000 as of March 31, 2014, $2,086,000 as of December 31, 2013, and $1,901,000 as of March 31, 2013. Pursuant to collateral agreements, qualifying first mortgage loans, which totaled $268,963,000 at March 31, 2014, $266,740,000 at December 31, 2013, and $253,031,000 at March 31, 2013, were used to collateralize borrowings from the FHLB. In addition, commercial, construction and home equity loans totaling $181,617,000 at March 31, 2014, $189,728,000 at December 31, 2013, and $233,980,000 at March 31, 2013, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.

For all loan classes, loans over 30 days past due are considered delinquent. Information on the past-due status of loans by class of financing receivable as of March 31, 2014, is presented in the following table:



	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	330,000	$	55,000	$	1,977,000	$	2,362,000	$	237,825,000	$	240,187,000	$	—
Construction	—		—		208,000		208,000		21,478,000		21,686,000		—
Other	232,000		—		1,614,000		1,846,000		95,430,000		97,276,000		—
Municipal	—		—		—		—		17,790,000		17,790,000		—
Residential
Term	1,177,000		448,000		5,357,000		6,982,000		365,497,000		372,479,000		137,000
Construction	—		—		—		—		12,360,000		12,360,000		—
Home equity line of credit	250,000		40,000		1,046,000		1,336,000		90,866,000		92,202,000		29,000
Consumer	67,000		26,000		58,000		151,000		14,783,000		14,934,000		58,000
Total	$	2,056,000	$	569,000	$	10,260,000	$	12,885,000	$	856,029,000	$	868,914,000	$	224,000

Information on the past-due status of loans by class of financing receivable as of December 31, 2013, is presented in the following table:



	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	82,000	$	259,000	$	745,000	$	1,086,000	$	244,857,000	$	245,943,000	$	—
Construction	—		—		—		—		20,382,000		20,382,000		—
Other	544,000		128,000		2,797,000		3,469,000		91,820,000		95,289,000		—
Municipal	—		—		—		—		19,117,000		19,117,000		—
Residential
Term	229,000		1,913,000		7,002,000		9,144,000		368,074,000		377,218,000		596,000
Construction	47,000		—		—		47,000		11,756,000		11,803,000		—
Home equity line of credit	573,000		145,000		1,001,000		1,719,000		89,830,000		91,549,000		59,000
Consumer	113,000		26,000		388,000		527,000		14,539,000		15,066,000		388,000
Total	$	1,588,000	$	2,471,000	$	11,933,000	$	15,992,000	$	860,375,000	$	876,367,000	$	1,043,000

Information on the past-due status of loans by class of financing receivable as of March 31, 2013, is presented in the following table:



	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		All Past Due		Current		Total		90+ Days & Accruing
Commercial
Real estate	$	709,000	$	1,360,000	$	2,295,000	$	4,364,000	$	245,816,000	$	250,180,000	$	—
Construction	22,000		—		30,000		52,000		17,038,000		17,090,000		—
Other	1,403,000		2,828,000		2,464,000		6,695,000		83,179,000		89,874,000		—
Municipal	—		—		—		—		15,017,000		15,017,000		—
Residential
Term	1,496,000		3,032,000		8,844,000		13,372,000		362,657,000		376,029,000		233,000
Construction	189,000		—		—		189,000		4,033,000		4,222,000		—
Home equity line of credit	916,000		248,000		771,000		1,935,000		94,601,000		96,536,000		—
Consumer	100,000		67,000		156,000		323,000		14,206,000		14,529,000		156,000
Total	$	4,835,000	$	7,535,000	$	14,560,000	$	26,930,000	$	836,547,000	$	863,477,000	$	389,000

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.

Cash payments received on non-accrual loans, which are included in impaired loans, are applied to reduce the loan's principal balance until the remaining principal balance is deemed collectible, after which interest is recognized when collected. As a general rule, a loan may be restored to accrual status when payments are current for a substantial period of time, generally six months, and repayment of the remaining contractual amounts is expected or when it otherwise becomes well secured and in the process of collection. Information on nonaccrual loans as of March 31, 2014 and 2013 and at December 31, 2013 is presented in the following table:



	March 31, 2014		December 31, 2013		March 31, 2013
Commercial
Real estate	$	2,835,000	$	2,457,000	$	4,599,000
Construction	208,000		—		1,045,000
Other	3,008,000		4,370,000		3,152,000
Municipal	—		—		—
Residential
Term	7,103,000		8,484,000		11,098,000
Construction	—		—		—
Home equity line of credit	1,017,000		—		1,030,000
Consumer	—		1,007,000		—
Total	$	14,171,000	$	16,318,000	$	20,924,000

Impaired loans include troubled debt restructured 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 and for the period ended March 31, 2014, 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	$	11,428,000	$	12,066,000	$	—	$	11,735,000	$	94,000
Construction	208,000		208,000		—		69,000		—
Other	4,214,000		5,910,000		—		5,148,000		24,000
Municipal	—		—		—		—		—
Residential
Term	10,985,000		11,898,000		—		11,325,000		188,000
Construction	—		—		—		—		—
Home equity line of credit	1,473,000		1,716,000		—		1,510,000		6,000
Consumer	—		—		—		—		—
	$	28,308,000	$	31,798,000	$	—	$	29,787,000	$	312,000
With an Allowance Recorded
Commercial
Real estate	$	3,832,000	$	3,992,000	$	1,019,000	$	3,533,000	$	34,000
Construction	1,284,000		1,284,000		276,000		1,284,000		16,000
Other	1,044,000		1,097,000		834,000		1,054,000		4,000
Municipal	—		—		—		—		—
Residential
Term	5,939,000		6,195,000		574,000		5,817,000		65,000
Construction	—		—		—		—		—
Home equity line of credit	180,000		181,000		83,000		122,000		1,000
Consumer	—		—		—		—		—
	$	12,279,000	$	12,749,000	$	2,786,000	$	11,810,000	$	120,000
Total
Commercial
Real estate	$	15,260,000	$	16,058,000	$	1,019,000	$	15,267,000	$	128,000
Construction	1,492,000		1,492,000		276,000		1,354,000		16,000
Other	5,258,000		7,007,000		834,000		6,202,000		28,000
Municipal	—		—		—		—		—
Residential
Term	16,924,000		18,093,000		574,000		17,142,000		253,000
Construction	—		—		—		—		—
Home equity line of credit	1,653,000		1,897,000		83,000		1,631,000		7,000
Consumer	—		—		—		—		—
	$	40,587,000	$	44,547,000	$	2,786,000	$	41,596,000	$	432,000

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 and for the year ended December 31, 2013, 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	$	11,813,000	$	12,419,000	$	—	$	11,100,000	$	495,000
Construction	—		—		—		202,000		—
Other	5,617,000		7,309,000		—		4,265,000		322,000
Municipal	—		—		—		—		—
Residential
Term	13,432,000		14,600,000		—		14,396,000		511,000
Construction	—		—		—		—		—
Home equity line of credit	1,555,000		1,791,000		—		1,578,000		32,000
Consumer	—		—		—		—		—
	$	32,417,000	$	36,119,000	$	—	$	31,541,000	$	1,360,000
With an Allowance Recorded
Commercial
Real estate	$	3,122,000	$	3,264,000	$	890,000	$	5,673,000	$	150,000
Construction	1,284,000		1,284,000		272,000		1,795,000		48,000
Other	1,081,000		1,132,000		841,000		1,633,000		28,000
Municipal	—		—		—		—		—
Residential
Term	4,354,000		4,516,000		404,000		4,982,000		162,000
Construction	—		—		—		—		—
Home equity line of credit	93,000		93,000		54,000		98,000		2,000
Consumer	—		—		—		—
	$	9,934,000	$	10,289,000	$	2,461,000	$	14,181,000	$	390,000
Total
Commercial
Real estate	$	14,935,000	$	15,683,000	$	890,000	$	16,773,000	$	645,000
Construction	1,284,000		1,284,000		272,000		1,997,000		48,000
Other	6,698,000		8,441,000		841,000		5,898,000		350,000
Municipal	—		—		—		—		—
Residential
Term	17,786,000		19,116,000		404,000		19,378,000		673,000
Construction	—		—		—		—		—
Home equity line of credit	1,648,000		1,884,000		54,000		1,676,000		34,000
Consumer	—		—		—		—		—
	$	42,351,000	$	46,408,000	$	2,461,000	$	45,722,000	$	1,750,000

A breakdown of impaired loans by class of financing receivable as of and for the period ended March 31, 2013, 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	$	11,010,000	$	11,468,000	$	—	$	10,154,000	$	101,000
Construction	95,000		115,000		—		43,000		1,000
Other	3,580,000		4,315,000		—		3,695,000		27,000
Municipal	—		—		—		—		—
Residential
Term	13,611,000		15,476,000		—		13,078,000		98,000
Construction	—		—		—		—		—
Home equity line of credit	1,683,000		1,912,000		—		1,492,000		8,000
Consumer	—		—		—		—		—
	$	29,979,000	$	33,286,000	$	—	$	28,462,000	$	235,000
With an Allowance Recorded
Commercial
Real estate	$	6,524,000	$	7,217,000	$	1,473,000	$	6,800,000	$	62,000
Construction	2,252,000		2,252,000		760,000		2,975,000		26,000
Other	1,970,000		1,991,000		535,000		2,097,000		9,000
Municipal	—		—		—		—		—
Residential
Term	6,651,000		6,786,000		337,000		6,814,000		64,000
Construction	—		—		—		—		—
Home equity line of credit	—		—		—		174,000		—
Consumer	—		—		—		—		—
	$	17,397,000	$	18,246,000	$	3,105,000	$	18,860,000	$	161,000
Total
Commercial
Real estate	$	17,534,000	$	18,685,000	$	1,473,000	$	16,954,000	$	163,000
Construction	2,347,000		2,367,000		760,000		3,018,000		27,000
Other	5,550,000		6,306,000		535,000		5,792,000		36,000
Municipal	—		—		—		—		—
Residential
Term	20,262,000		22,262,000		337,000		19,892,000		162,000
Construction	—		—		—		—		—
Home equity line of credit	1,683,000		1,912,000		—		1,666,000		8,000
Consumer	—		—		—		—		—
	$	47,376,000	$	51,532,000	$	3,105,000	$	47,322,000	$	396,000

Troubled Debt Restructured

A troubled debt restructured ("TDR") constitutes a restructuring of debt if the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. To determine whether or not a loan should be classified as a TDR, Management evaluates a loan based upon the following criteria:


•	The borrower demonstrates financial difficulty; common indicators include past due status with bank obligations, substandard credit bureau reports, or an inability to refinance with another lender, and


•	The Company has granted a concession; common concession types include maturity date extension, interest rate adjustments to below market pricing, and deferment of payments.

As of March 31, 2014, the Company had 101 loans with a value of $28,796,000 that have been classified as TDRs. This compares to 99 loans with a value of $29,098,000 and 106 loans with a value of $31,147,000 classified as TDRs as of December 31, 2013 and March 31, 2013, respectively. The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the expected cash flows on the loan at the original interest rate, or, for collateral-dependent loans, using the fair value of the collateral less costs to sell.

The following table shows TDRs by class and the specific reserve as of March 31, 2014:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	20	$	12,925,000	$	520,000
Construction	1	1,284,000		277,000
Other	19	2,300,000		103,000
Municipal	—	—		—
Residential
Term	56	11,450,000		346,000
Construction	—	—		—
Home equity line of credit	5	837,000		—
Consumer	—	—		—
	101	$	28,796,000	$	1,246,000

The following table shows TDRs by class and the specific reserve as of December 31, 2013:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	20	$	13,018,000	$	433,000
Construction	1	1,284,000		274,000
Other	20	2,734,000		100,000
Municipal	—	—		—
Residential
Term	53	11,220,000		210,000
Construction	—	—		—
Home equity line of credit	5	842,000		—
Consumer	—	—		—
	99	$	29,098,000	$	1,017,000

The following table shows TDRs by class and the specific reserve as of March 31, 2013:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	20	$	13,715,000	$	313,000
Construction	3	2,317,000		1,194,000
Other	24	3,063,000		40,000
Municipal	—	—		—
Residential
Term	54	11,195,000		1,034,000
Construction	—	—		—
Home equity line of credit	5	857,000		9,000
Consumer	—	—		—
	106	$	31,147,000	$	2,590,000

As of March 31, 2014, 13 of the loans classified as TDRs with a total balance of $1,915,000 were more than 30 days past due. Of these loans, two loans with an outstanding balance of $301,000 had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2014:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	2	$	307,000	$	5,000
Construction	—	—		—
Other	1	3,000		—
Municipal	—	—		—
Residential
Term	9	1,404,000		66,000
Construction	—	—		—
Home equity line of credit	1	201,000		—
Consumer	—	—		—
	13	$	1,915,000	$	71,000

As of March 31, 2013, 11 of the loans classified as TDRs with a total balance of $2,503,000 were more than 30 days past due. Of these loans, two loans with an outstanding balance of $409,000 had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2013:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	2	$	409,000	$	—
Construction	—	—		—
Other	—	—		—
Municipal	—	—		—
Residential
Term	9	2,094,000		421,000
Construction	—	—		—
Home equity line of credit	—	—		—
Consumer	—	—		—
	11	$	2,503,000	$	421,000

For the three months ended March 31, 2014, three loans were placed on TDR status with a post modification outstanding balance of $293,000. This compares to seven loans placed on TDR status with a post modification outstanding balance of $2,948,000 for the three months ended March 31, 2013. These were considered TDRs because concessions had been granted to borrowers experiencing financial difficulties. Concessions include reductions in interest rates, principal and/or interest forbearance, payment extensions, or combinations thereof.

The following tables show loans placed on TDR status in the three months ended March 31, 2014 and 2013, by class of loan and the associated specific reserve included in the allowance for loan losses as of March 31, 2014 and 2013:



For the three months ended March 31, 2014	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	—	$	—	$	—	$	—
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	3	349,000		293,000		3,000
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	3	$	349,000	$	293,000	$	3,000



For the three months ended March 31, 2013	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	2	$	1,897,000	$	1,897,000	$	—
Construction	—	—		—		—
Other	3	546,000		536,000		40,000
Municipal	—	—		—		—
Residential
Term	1	312,000		312,000		—
Construction	—	—		—		—
Home equity line of credit	1	204,000		203,000		—
Consumer	—	—		—		—
	7	$	2,959,000	$	2,948,000	$	40,000

As of March 31, 2014, Management is aware of 12 loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $1,675,000. There were also 17 loans with an outstanding balance of $2,417,000 that were classified as TDRs and on non-accrual status. Five loans with an outstanding balance of $699,000, that were classified as TDRs, were in the process of foreclosure.