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Loans

9 Months Ended

Sep. 30, 2019

Loans and Leases Receivable Disclosure [Abstract]

The following table shows the composition of the Company's loan portfolio as of September 30, 2019 and 2018 and at December 31, 2018:



	September 30, 2019				December 31, 2018				September 30, 2018
Commercial
Real estate	$	368,165,000	29.1	%	$	353,243,000	28.5	%	$	366,390,000	29.5	%
Construction	37,242,000		2.9	%	27,304,000		2.2	%	23,889,000		1.9	%
Other	201,859,000		16.0	%	196,391,000		15.9	%	188,128,000		15.1	%
Municipal	36,522,000		2.9	%	51,128,000		4.1	%	56,704,000		4.6	%
Residential
Term	485,490,000		38.4	%	469,145,000		37.9	%	459,449,000		36.8	%
Construction	14,118,000		1.1	%	17,743,000		1.4	%	18,166,000		1.5	%
Home equity line of credit	94,144,000		7.5	%	98,469,000		8.0	%	105,213,000		8.5	%
Consumer	25,919,000		2.1	%	24,860,000		2.0	%	25,619,000		2.1	%
Total	$	1,263,459,000	100.0	%	$	1,238,283,000	100.0	%	$	1,243,558,000	100.0	%

Loan balances include net deferred loan costs of $7,181,000 as of September 30, 2019, $6,615,000 as of December 31, 2018, and $6,428,000 as of September 30, 2018. Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $308,163,000 at September 30, 2019, were used to collateralize borrowings from the FHLB. This compares to qualifying loans which totaled $290,138,000 at December 31, 2018, and $311,152,000 at September 30, 2018. In addition, commercial, construction and home equity loans totaling $254,076,000 at September 30, 2019, $237,152,000 at December 31, 2018, and $229,769,000 at September 30, 2018, 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 September 30, 2019, 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	$	305,000	$	233,000	$	661,000	$	1,199,000	$	366,966,000	$	368,165,000	$	—
Construction	14,000		279,000		—		293,000		36,949,000		37,242,000		—
Other	35,000		289,000		339,000		663,000		201,196,000		201,859,000		—
Municipal	—		—		—		—		36,522,000		36,522,000		—
Residential
Term	650,000		767,000		3,806,000		5,223,000		480,267,000		485,490,000		—
Construction	—		—		—		—		14,118,000		14,118,000		—
Home equity line of credit	693,000		306,000		868,000		1,867,000		92,277,000		94,144,000		—
Consumer	234,000		317,000		18,000		569,000		25,350,000		25,919,000		18,000
Total	$	1,931,000	$	2,191,000	$	5,692,000	$	9,814,000	$	1,253,645,000	$	1,263,459,000	$	18,000

Information on the past-due status of loans by class of financing receivable 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 by class of financing receivable as of September 30, 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	$	305,000	$	—	$	503,000	$	808,000	$	365,582,000	$	366,390,000	$	—
Construction	—		—		—		—		23,889,000		23,889,000		—
Other	440,000		526,000		416,000		1,382,000		186,746,000		188,128,000		—
Municipal	—		—		—		—		56,704,000		56,704,000		—
Residential
Term	838,000		2,701,000		1,566,000		5,105,000		454,344,000		459,449,000		199,000
Construction	—		—		—		—		18,166,000		18,166,000		—
Home equity line of credit	1,883,000		403,000		565,000		2,851,000		102,362,000		105,213,000		—
Consumer	161,000		14,000		52,000		227,000		25,392,000		25,619,000		50,000
Total	$	3,627,000	$	3,644,000	$	3,102,000	$	10,373,000	$	1,233,185,000	$	1,243,558,000	$	249,000

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 September 30, 2019 and 2018 and at December 31, 2018 is presented in the following table:



	September 30, 2019		December 31, 2018		September 30, 2018
Commercial
Real estate	$	1,807,000	$	1,226,000	$	964,000
Construction	256,000		—		—
Other	6,871,000		8,664,000		9,330,000
Municipal	—		—		—
Residential
Term	6,840,000		4,062,000		3,042,000
Construction	—		—		—
Home equity line of credit	1,078,000		760,000		834,000
Consumer	6,000		15,000		2,000
Total	$	16,858,000	$	14,727,000	$	14,172,000

Impaired loans include troubled debt restructured ("TDR") 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 class of financing receivable as of and for the period ended September 30, 2019 is presented in the following table:



							For the nine months ended September 30, 2019				For the quarter ended September 30, 2019
	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	$	7,332,000	$	7,630,000	$	—	$	7,929,000	$	266,000	$	7,242,000	$	83,000
Construction	978,000		990,000		—		929,000		35,000		980,000		12,000
Other	892,000		930,000		—		997,000		22,000		921,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	10,664,000		12,305,000		—		9,877,000		202,000		10,487,000		63,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	827,000		883,000		—		965,000		16,000		917,000		6,000
Consumer	—		—		—		—		—		—		—
	$	20,693,000	$	22,738,000	$	—	$	20,697,000	$	541,000	$	20,547,000	$	172,000
With an Allowance Recorded
Commercial
Real estate	$	1,717,000	$	1,732,000	$	258,000	$	1,538,000	$	72,000	$	1,721,000	$	23,000
Construction	—		—		—		—		—		—		—
Other	6,440,000		6,949,000		1,275,000		6,918,000		1,000		6,465,000		1,000
Municipal	—		—		—		—		—		—		—
Residential
Term	2,782,000		3,121,000		337,000		2,306,000		61,000		2,858,000		25,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	571,000		590,000		184,000		99,000		—		248,000		—
Consumer	6,000		6,000		6,000		1,000		—		2,000		—
	$	11,516,000	$	12,398,000	$	2,060,000	$	10,862,000	$	134,000	$	11,294,000	$	49,000
Total
Commercial
Real estate	$	9,049,000	$	9,362,000	$	258,000	$	9,467,000	$	338,000	$	8,963,000	$	106,000
Construction	978,000		990,000		—		929,000		35,000		980,000		12,000
Other	7,332,000		7,879,000		1,275,000		7,915,000		23,000		7,386,000		9,000
Municipal	—		—		—		—		—		—		—
Residential
Term	13,446,000		15,426,000		337,000		12,183,000		263,000		13,345,000		88,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,398,000		1,473,000		184,000		1,064,000		16,000		1,165,000		6,000
Consumer	6,000		6,000		6,000		1,000		—		2,000		—
	$	32,209,000	$	35,136,000	$	2,060,000	$	31,559,000	$	675,000	$	31,841,000	$	221,000

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, 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

A breakdown of impaired loans by class of financing receivable as of and for the period ended September 30, 2018 is presented in the following table:



							For the nine months ended September 30, 2018				For the quarter ended September 30, 2018
	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	$	5,954,000	$	6,275,000	$	—	$	5,099,000	$	194,000	$	5,966,000	$	84,000
Construction	741,000		741,000		—		773,000		32,000		741,000		11,000
Other	1,926,000		2,044,000		—		2,146,000		25,000		1,865,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	9,019,000		10,201,000		—		9,515,000		222,000		9,200,000		71,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,068,000		1,128,000		—		1,014,000		15,000		1,033,000		6,000
Consumer	—		—		—		14,000		—		10,000		—
	$	18,708,000	$	20,389,000	$	—	$	18,561,000	$	488,000	$	18,815,000	$	180,000
With an Allowance Recorded
Commercial
Real estate	$	3,456,000	$	3,474,000	$	265,000	$	3,700,000	$	97,000	$	3,461,000	$	30,000
Construction	—		—		—		—		—		—		—
Other	7,923,000		8,231,000		1,890,000		7,345,000		—		7,682,000		—
Municipal	—		—		—		—		—		—		—
Residential
Term	1,909,000		2,085,000		238,000		2,054,000		70,000		2,108,000		22,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	100,000		100,000		7,000		92,000		—		100,000		—
Consumer	2,000		15,000		2,000		—		—		1,000		—
	$	13,390,000	$	13,905,000	$	2,402,000	$	13,191,000	$	167,000	$	13,352,000	$	52,000
Total
Commercial
Real estate	$	9,410,000	$	9,749,000	$	265,000	$	8,799,000	$	291,000	$	9,427,000	$	114,000
Construction	741,000		741,000		—		773,000		32,000		741,000		11,000
Other	9,849,000		10,275,000		1,890,000		9,491,000		25,000		9,547,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	10,928,000		12,286,000		238,000		11,569,000		292,000		11,308,000		93,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,168,000		1,228,000		7,000		1,106,000		15,000		1,133,000		6,000
Consumer	2,000		15,000		2,000		14,000		—		11,000		—
	$	32,098,000	$	34,294,000	$	2,402,000	$	31,752,000	$	655,000	$	32,167,000	$	232,000

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 September 30, 2019, the Company had 82 loans with a balance of $24,281,000 that have been classified as TDRs. This compares to 76 loans with a balance of $25,222,000 and 71 loans with a balance of $25,661,000 classified as TDRs as of December 31, 2018 and September 30, 2018, 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 September 30, 2019:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	19	$	7,559,000	$	249,000
Construction	1	721,000		—
Other	7	6,951,000		1,232,000
Municipal	—	—		—
Residential
Term	52	8,563,000		202,000
Construction	—	—		—
Home equity line of credit	3	487,000		—
Consumer	—	—		—
	82	$	24,281,000	$	1,683,000

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 September 30, 2018:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	16	$	8,542,000	$	138,000
Construction	1	741,000		—
Other	5	7,007,000		1,100,000
Municipal	—	—		—
Residential
Term	46	8,869,000		238,000
Construction	—	—		—
Home equity line of credit	3	502,000		—
Consumer	—	—		—
	71	$	25,661,000	$	1,476,000

As of September 30, 2019, nine of the loans classified as TDRs with a total balance of $1,084,000 were more than 30 days past due. Of these loans, four 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 September 30, 2019:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	3	251,000		131,000
Municipal	—	—		—
Residential
Term	5	666,000		11,000
Construction	—	—		—
Home equity line of credit	1	167,000		—
Consumer	—	—		—
	9	$	1,084,000	$	142,000

As of September 30, 2018, 10 of the loans classified as TDRs with a total balance of $1,271,000 were more than 30 days past due. Of these loans, one 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 September 30, 2018:



	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	1	138,000		—
Municipal	—	—		—
Residential
Term	8	966,000		5,000
Construction	—	—		—
Home equity line of credit	1	167,000		—
Consumer	—	—		—
	10	$	1,271,000	$	5,000

For the nine months ended September 30, 2019, 10 loans were placed 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 September 30, 2019:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	2	$	110,000	$	95,000	$	95,000
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	8	998,000		882,000		73,000
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	10	$	1,108,000	$	977,000	$	168,000

For the nine months ended September 30, 2018, 11 loans were placed on TDR status. The following table shows these TDRs by class and associated specific reserves included in the allowance for loan losses as of September 30, 2018:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	8	$	1,608,000	$	1,606,000	$	42,000
Construction	—	—		—		—
Other	1	6,727,000		6,487,000		1,100,000
Municipal	—	—		—		—
Residential
Term	2	441,000		436,000		26,000
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	11	$	8,776,000	$	8,529,000	$	1,168,000

For the quarter ended September 30, 2019, two loans were placed 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 September 30, 2019:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	—	$	—	$	—	$	—
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	2	317,000		276,000		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	2	$	317,000	$	276,000	$	—

For the quarter ended September 30, 2018, one loan was placed 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 September 30, 2018:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	1	$	552,000	$	552,000	$	—
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	—	—		—		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	1	$	552,000	$	552,000	$	—

As of September 30, 2019, Management is aware of nine loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $1,004,000. There were also 26 loans with an outstanding balance of $8,932,000 that were classified as TDRs and on non-accrual status, of which three loans with an outstanding balance of $398,000 were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of September 30, 2019, there were 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,649,000. This compares to 14 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,337,000 as of September 30, 2018.