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Loans

12 Months Ended

Dec. 31, 2018

Loans and Leases Receivable Disclosure [Abstract]

The following table shows the composition of the Company's loan portfolio as of December 31, 2018 and 2017:



	December 31, 2018				December 31, 2017
Commercial
Real estate	$	353,243,000	28.5	%	$	323,809,000	27.8	%
Construction	27,304,000		2.2	%	38,056,000		3.3	%
Other	196,391,000		15.9	%	181,528,000		15.6	%
Municipal	51,128,000		4.1	%	33,391,000		2.9	%
Residential
Term	469,145,000		37.9	%	432,661,000		37.1	%
Construction	17,743,000		1.4	%	17,868,000		1.5	%
Home equity line of credit	98,469,000		8.0	%	111,302,000		9.6	%
Consumer	24,860,000		2.0	%	25,524,000		2.2	%
Total loans	$	1,238,283,000	100.0	%	$	1,164,139,000	100.0	%

Loan balances include net deferred loan costs of $6,615,000 in 2018 and $5,748,000 in 2017. Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate, which totaled $290,138,000 and $239,805,000 at December 31, 2018 and 2017, respectively, were used to collateralize borrowings from the Federal Home Loan Bank of Boston. In addition, commercial, residential construction and home equity loans totaling $237,152,000 at December 31, 2018 and $290,247,000 at December 31, 2017 were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.

At December 31, 2018 and 2017, non-accrual loans were $14,727,000 and $14,736,000, respectively. For the years ended December 31, 2018, 2017 and 2016, interest income which would have been recognized on these loans, if interest had been accrued, was $811,000, $496,000, and $288,000, respectively. Loans more than 90 days past due accruing interest totaled $351,000 at December 31, 2018 and $445,000 at December 31, 2017. The Company continues to accrue interest on these loans because it believes collection of principal and interest is reasonably assured.

Loans to directors, officers and employees totaled $34,566,000 at December 31, 2018 and $34,715,000 at December 31, 2017. A summary of loans to directors and executive officers is as follows:



For the years ended December 31,	2018			2017
Balance at beginning of year	$	22,354,000		$	23,293,000
New loans	1,341,000			867,000
Repayments	(1,192,000		)	(1,806,000		)
Retired director	(354,000		)	—
Balance at end of year	$	22,149,000		$	22,354,000

Information on the past-due status of loans as of December 31, 2018, 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	$	1,274,000	$	—	$	777,000	$	2,051,000	$	351,192,000	$	353,243,000	$	—
Construction	—		10,000		—		10,000		27,294,000		27,304,000		—
Other	455,000		5,000		120,000		580,000		195,811,000		196,391,000		—
Municipal	—		—		—		—		51,128,000		51,128,000		—
Residential
Term	1,097,000		3,518,000		2,023,000		6,638,000		462,507,000		469,145,000		339,000
Construction	76,000		—		—		76,000		17,667,000		17,743,000		—
Home equity line of credit	2,819,000		419,000		493,000		3,731,000		94,738,000		98,469,000		—
Consumer	237,000		25,000		27,000		289,000		24,571,000		24,860,000		12,000
Total	$	5,958,000	$	3,977,000	$	3,440,000	$	13,375,000	$	1,224,908,000	$	1,238,283,000	$	351,000

Information on the past-due status of loans as of December 31, 2017, 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	$	574,000	$	80,000	$	220,000	$	874,000	$	322,935,000	$	323,809,000	$	—
Construction	—		—		—		—		38,056,000		38,056,000		—
Other	542,000		6,663,000		574,000		7,779,000		173,749,000		181,528,000		—
Municipal	—		—		—		—		33,391,000		33,391,000		—
Residential
Term	1,031,000		4,372,000		2,256,000		7,659,000		425,002,000		432,661,000		436,000
Construction	101,000		370,000		—		471,000		17,397,000		17,868,000		—
Home equity line of credit	537,000		445,000		725,000		1,707,000		109,595,000		111,302,000		—
Consumer	159,000		18,000		9,000		186,000		25,338,000		25,524,000		9,000
Total	$	2,944,000	$	11,948,000	$	3,784,000	$	18,676,000	$	1,145,463,000	$	1,164,139,000	$	445,000

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 December 31, 2018 and 2017 is presented in the following table:



As of December 31,	2018		2017
Commercial
Real estate	$	1,226,000	$	752,000
Construction	—		—
Other	8,664,000		9,357,000
Municipal	—		—
Residential
Term	4,062,000		3,778,000
Construction	—		—
Home equity line of credit	760,000		833,000
Consumer	15,000		16,000
Total	$	14,727,000	$	14,736,000

Information regarding impaired loans is as follows:



For the years ended December 31,	2018		2017		2016
Average investment in impaired loans	$	31,805,000	$	29,108,000	$	28,217,000
Interest income recognized on impaired loans, all on cash basis	864,000		784,000		1,104,000



As of December 31,	2018			2017
Balance of impaired loans	$	31,751,000		$	31,392,000
Less portion for which no allowance for loan losses is allocated	(21,030,000		)	(18,023,000		)
Portion of impaired loan balance for which an allowance for loan losses is allocated	$	10,721,000		$	13,369,000
Portion of allowance for loan losses allocated to the impaired loan balance	$	2,308,000		$	1,812,000

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, or, in certain situations, if the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, the difference is written off.

A breakdown of impaired loans by category as of December 31, 2018, 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	$	8,718,000	$	9,161,000	$	—	$	5,536,000	$	380,000
Construction	721,000		721,000		—		762,000		43,000
Other	1,468,000		1,555,000		—		2,037,000		32,000
Municipal	—		—		—		—		—
Residential
Term	9,136,000		10,317,000		—		9,427,000		289,000
Construction	—		—		—		—		—
Home equity line of credit	972,000		1,035,000		—		1,001,000		20,000
Consumer	15,000		42,000		—		13,000		—
	$	21,030,000	$	22,831,000	$	—	$	18,776,000	$	764,000
With an Allowance Recorded
Commercial
Real estate	$	1,042,000	$	1,059,000	$	260,000	$	3,477,000	$	42,000
Construction	—		—		—		—		—
Other	7,791,000		8,216,000		1,696,000		7,471,000		5,000
Municipal	—		—		—		—		—
Residential
Term	1,768,000		1,998,000		335,000		1,982,000		53,000
Construction	—		—		—		—		—
Home equity line of credit	120,000		124,000		17,000		99,000		—
Consumer	—		—		—		—		—
	$	10,721,000	$	11,397,000	$	2,308,000	$	13,029,000	$	100,000
Total
Commercial
Real estate	$	9,760,000	$	10,220,000	$	260,000	$	9,013,000	$	422,000
Construction	721,000		721,000		—		762,000		43,000
Other	9,259,000		9,771,000		1,696,000		9,508,000		37,000
Municipal	—		—		—		—		—
Residential
Term	10,904,000		12,315,000		335,000		11,409,000		342,000
Construction	—		—		—		—		—
Home equity line of credit	1,092,000		1,159,000		17,000		1,100,000		20,000
Consumer	15,000		42,000		—		13,000		—
	$	31,751,000	$	34,228,000	$	2,308,000	$	31,805,000	$	864,000

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 category as of December 31, 2017, 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	$	3,791,000	$	3,996,000	$	—	$	5,124,000	$	164,000
Construction	741,000		741,000		—		62,000		38,000
Other	2,591,000		2,671,000		—		1,908,000		36,000
Municipal	—		—		—		—		—
Residential
Term	9,769,000		10,909,000		—		10,770,000		297,000
Construction	—		—		—		—		—
Home equity line of credit	1,115,000		1,429,000		—		1,351,000		18,000
Consumer	16,000		29,000		—		12,000		—
	$	18,023,000	$	19,775,000	$	—	$	19,227,000	$	553,000
With an Allowance Recorded
Commercial
Real estate	$	3,999,000	$	4,116,000	$	224,000	$	4,460,000	$	152,000
Construction	—		—		—		699,000		—
Other	7,327,000		7,371,000		1,309,000		2,584,000		—
Municipal	—		—		—		—		—
Residential
Term	1,979,000		2,144,000		255,000		2,106,000		79,000
Construction	—		—		—		—		—
Home equity line of credit	64,000		67,000		24,000		32,000		—
Consumer	—		—		—		—		—
	$	13,369,000	$	13,698,000	$	1,812,000	$	9,881,000	$	231,000
Total
Commercial
Real estate	$	7,790,000	$	8,112,000	$	224,000	$	9,584,000	$	316,000
Construction	741,000		741,000		—		761,000		38,000
Other	9,918,000		10,042,000		1,309,000		4,492,000		36,000
Municipal	—		—		—		—		—
Residential
Term	11,748,000		13,053,000		255,000		12,876,000		376,000
Construction	—		—		—		—		—
Home equity line of credit	1,179,000		1,496,000		24,000		1,383,000		18,000
Consumer	16,000		29,000		—		12,000		—
	$	31,392,000	$	33,473,000	$	1,812,000	$	29,108,000	$	784,000

A breakdown of impaired loans by category as of December 31, 2016, 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	$	5,201,000	$	5,614,000	$	—	$	6,252,000	$	220,000
Construction	—		—		—		32,000		—
Other	1,671,000		1,852,000		—		1,074,000		86,000
Municipal	—		—		—		—		—
Residential
Term	11,483,000		12,654,000		—		11,025,000		442,000
Construction	—		—		—		—		—
Home equity line of credit	1,361,000		1,733,000		—		1,213,000		33,000
Consumer	—		—		—		9,000		—
	$	19,716,000	$	21,853,000	$	—	$	19,605,000	$	781,000
With an Allowance Recorded
Commercial
Real estate	$	4,820,000	$	4,925,000	$	505,000	$	4,153,000	$	186,000
Construction	763,000		763,000		100,000		816,000		36,000
Other	72,000		72,000		39,000		317,000		—
Municipal	—		—		—		—		—
Residential
Term	2,186,000		2,328,000		304,000		3,209,000		101,000
Construction	—		—		—		—		—
Home equity line of credit	26,000		28,000		26,000		69,000		—
Consumer	—		—		—		48,000		—
	$	7,867,000	$	8,116,000	$	974,000	$	8,612,000	$	323,000
Total
Commercial
Real estate	$	10,021,000	$	10,539,000	$	505,000	$	10,405,000	$	406,000
Construction	763,000		763,000		100,000		848,000		36,000
Other	1,743,000		1,924,000		39,000		1,391,000		86,000
Municipal	—		—		—		—		—
Residential
Term	13,669,000		14,982,000		304,000		14,234,000		543,000
Construction	—		—		—		—		—
Home equity line of credit	1,387,000		1,761,000		26,000		1,282,000		33,000
Consumer	—		—		—		57,000		—
	$	27,583,000	$	29,969,000	$	974,000	$	28,217,000	$	1,104,000

Troubled Debt Restructured

A 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 December 31, 2018, the Company had 76 loans with a value of $25,222,000 that have been classified as TDRs. This compares to 62 loans with a value of $17,801,000 classified as TDRs as of December 31, 2017. The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the cashflow modification on the loan, 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 December 31, 2018:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	17	$	8,631,000	$	132,000
Construction	1	721,000		—
Other	10	7,298,000		1,276,000
Municipal	—	—		—
Residential
Term	45	8,074,000		160,000
Construction	—	—		—
Home equity line of credit	3	498,000		—
Consumer	—	—		—
	76	$	25,222,000	$	1,568,000

The following table shows TDRs by class and the specific reserve as of December 31, 2017:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	8	$	7,038,000	$	90,000
Construction	1	741,000		—
Other	4	561,000		—
Municipal	—	—		—
Residential
Term	46	8,948,000		233,000
Construction	—	—		—
Home equity line of credit	3	513,000		—
Consumer	—	—		—
	62	$	17,801,000	$	323,000

As of December 31, 2018, nine of the loans classified as TDRs with a total balance of $1,013,000 were more than 30 days past due. None of these loans had been placed on TDR status in the previous 12 months. The following table shows past-due TDRs by class and the associated specific reserves included in the allowance for loan losses as of December 31, 2018:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	—	—		—
Municipal	—	—		—
Residential
Term	8	846,000		26,000
Construction	—	—		—
Home equity line of credit	1	167,000		—
Consumer	—	—		—
	9	$	1,013,000	$	26,000

As of December 31, 2017, 12 of the loans classified as TDRs with a total balance of $1,407,000 were more than 30 days past due. None of these loans had been placed on TDR status in the previous 12 months. The following table shows past-due TDRs by class and the associated specific reserves included in the allowance for loan losses as of December 31, 2017:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	—	—		—
Municipal	—	—		—
Residential
Term	11	1,240,000		44,000
Construction	—	—		—
Home equity line of credit	1	167,000		—
Consumer	—	—		—
	12	$	1,407,000	$	44,000

For the year ended December 31, 2018, 18 loans were place on TDR status. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of December 31, 2018:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	9	$	1,729,000	$	1,727,000	42,000
Construction	—	—		—		—
Other	6	7,116,000		6,798,000		1,276,000
Municipal	—	—		—		—
Residential
Term	3	520,000		507,000		26,000
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	18	$	9,365,000	$	9,032,000	1,344,000

No loans were placed in TDR status in 2017.

As of December 31, 2018, Management is aware of seven loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $935,000. As of December 31, 2018, there were 17 loans with an outstanding balance of $8,197,000 that were classified as TDRs and were on non-accrual status, three of which, with an outstanding balance of $398,000, were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of December 31, 2018, there were 11 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,131,000; this compares to 12 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,777,000 as of December 31, 2017.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details