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Loans

6 Months Ended

Jun. 30, 2020

Loans and Leases Receivable Disclosure [Abstract]

The following table shows the composition of the Company's loan portfolio as of June 30, 2020 and 2019 and at December 31, 2019:


	June 30, 2020						December 31, 2019						June 30, 2019
Commercial
Real estate	$	397,155,000	27.4	%	$	372,810,000	28.7	%	$	359,581,000	28.8	%
Construction	47,169,000		3.2	%	38,084,000		3.0	%	32,785,000		2.6	%
Other	327,967,000		22.6	%	218,773,000		16.9	%	205,910,000		16.5	%
Municipal	49,644,000		3.4	%	41,288,000		3.2	%	36,113,000		2.9	%
Residential
Term	499,693,000		34.4	%	492,455,000		37.9	%	481,349,000		38.5	%
Construction	14,707,000		1.1	%	14,813,000		1.2	%	13,239,000		1.1	%
Home equity line of credit	87,019,000		6.0	%	92,349,000		7.1	%	94,763,000		7.6	%
Consumer	28,269,000		1.9	%	26,503,000		2.0	%	25,392,000		2.0	%
Total	$	1,451,623,000	100.0	%	$	1,297,075,000	100.0	%	$	1,249,132,000	100.0	%

Loan balances include net deferred loan costs of $4,866,000 as of June 30, 2020, $7,419,000 as of December 31, 2019, and $7,124,000 as of June 30, 2019. The decrease in net deferred loan costs year-over-year and year-to-date is attributable to PPP loans originated during the second quarter of 2020. These loans generated gross origination fee income of $3,730,000 and deferred loan costs of $283,000; during the quarter a net of $356,000 was recognized in interest income. Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $399,525,000 at June 30, 2020, were used to collateralize borrowings from the FHLB. This compares to qualifying loans which totaled $296,871,000 at December 31, 2019, and $312,568,000 at June 30, 2019. In addition, commercial, construction and home equity loans totaling $264,343,000 at June 30, 2020, $240,133,000 at December 31, 2019, and $239,481,000 at June 30, 2019, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston.

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 June 30, 2020, 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	$	134,000	$	76,000	$	1,048,000	$	1,258,000	$	395,897,000	$	397,155,000	$	—
Construction	—		—		—		—		47,169,000		47,169,000		—
Other	172,000		11,000		1,741,000		1,924,000		326,043,000		327,967,000		1,464,000
Municipal	—		—		—		—		49,644,000		49,644,000		—
Residential
Term	270,000		1,413,000		1,850,000		3,533,000		496,160,000		499,693,000		—
Construction	—		—		—		—		14,707,000		14,707,000		—
Home equity line of credit	896,000		145,000		1,540,000		2,581,000		84,438,000		87,019,000		—
Consumer	146,000		106,000		9,000		261,000		28,008,000		28,269,000		4,000
Total	$	1,618,000	$	1,751,000	$	6,188,000	$	9,557,000	$	1,442,066,000	$	1,451,623,000	$	1,468,000

On March 22, 2020, banking regulators issued an Interagency Statement on Loan Modifications and Reporting in response to the onset of COVID-19; shortly thereafter, on March 30, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. Both the Interagency Statement and the CARES Act provided an exemption for qualified modifications from Troubled Debt Restructure (TDR) designation. The Company actively worked with borrowers impacted by the COVID-19 outbreak and as of June 30, 2020 a total of 867 loan modification requests had been completed in conformance with the Interagency Statement issued in March, representing $239,484,000 in loan balances, or approximately 16.5% of the overall loan portfolio. These loans have not been classified as TDRs and are not included as past due in any loan delinquency data so long as the modified terms are met.

Information on the past-due status of loans by class of financing receivable as of December 31, 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	$	786,000	$	377,000	$	611,000	$	1,774,000	$	371,036,000	$	372,810,000	$	—
Construction	—		14,000		257,000		271,000		37,813,000		38,084,000		—
Other	2,764,000		465,000		1,799,000		5,028,000		213,745,000		218,773,000		1,464,000
Municipal	—		—		—		—		41,288,000		41,288,000		—
Residential
Term	1,129,000		1,132,000		2,379,000		4,640,000		487,815,000		492,455,000		86,000
Construction	—		—		—		—		14,813,000		14,813,000		—
Home equity line of credit	1,169,000		58,000		1,730,000		2,957,000		89,392,000		92,349,000		—
Consumer	291,000		46,000		10,000		347,000		26,156,000		26,503,000		10,000
Total	$	6,139,000	$	2,092,000	$	6,786,000	$	15,017,000	$	1,282,058,000	$	1,297,075,000	$	1,560,000

Information on the past-due status of loans by class of financing receivable as of June 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	$	240,000	$	—	$	828,000	$	1,068,000	$	358,513,000	$	359,581,000	$	—
Construction	15,000		—		—		15,000		32,770,000		32,785,000		—
Other	2,031,000		—		264,000		2,295,000		203,615,000		205,910,000		—
Municipal	—		—		—		—		36,113,000		36,113,000		—
Residential
Term	1,079,000		2,302,000		3,898,000		7,279,000		474,070,000		481,349,000		664,000
Construction	—		—		—		—		13,239,000		13,239,000		—
Home equity line of credit	698,000		197,000		347,000		1,242,000		93,521,000		94,763,000		—
Consumer	336,000		30,000		9,000		375,000		25,017,000		25,392,000		8,000
Total	$	4,399,000	$	2,529,000	$	5,346,000	$	12,274,000	$	1,236,858,000	$	1,249,132,000	$	672,000

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 June 30, 2020 and 2019 and at December 31, 2019 is presented in the following table:


	June 30, 2020		December 31, 2019		June 30, 2019
Commercial
Real estate	$	1,245,000	$	1,784,000	$	1,532,000
Construction	232,000		256,000		261,000
Other	323,000		6,534,000		7,014,000
Municipal	—		—		—
Residential
Term	4,685,000		5,899,000		5,892,000
Construction	—		—		—
Home equity line of credit	1,854,000		2,171,000		694,000
Consumer	5,000		5,000		—
Total	$	8,344,000	$	16,649,000	$	15,393,000

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 June 30, 2020 is presented in the following table:


							For the six months ended June 30, 2020						For the quarter ended June 30, 2020
	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	$	4,757,000	$	5,013,000	$	—	$	4,975,000	$	84,000	$	4,794,000	$	37,000
Construction	233,000		257,000		—		475,000		—		234,000		—
Other	713,000		737,000		—		787,000		13,000		781,000		10,000
Municipal	—		—		—		—		—		—		—
Residential
Term	8,293,000		9,620,000		—		9,746,000		92,000		9,478,000		25,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,299,000		1,362,000		—		1,207,000		8,000		1,228,000		4,000
Consumer	—		—		—		—		—		—		—
	$	15,295,000	$	16,989,000	$	—	$	17,190,000	$	197,000	$	16,515,000	$	76,000
With an Allowance Recorded
Commercial
Real estate	$	992,000	$	1,015,000	$	199,000	$	1,034,000	$	21,000	$	1,004,000	$	13,000
Construction	701,000		701,000		20,000		468,000		17,000		701,000		7,000
Other	140,000		159,000		132,000		2,213,000		—		157,000		—
Municipal	—		—		—		—		—		—		—
Residential
Term	2,018,000		2,047,000		269,000		1,900,000		36,000		1,800,000		23,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	862,000		862,000		292,000		1,038,000		—		951,000		—
Consumer	5,000		5,000		5,000		15,000		—		5,000		—
	$	4,718,000	$	4,789,000	$	917,000	$	6,668,000	$	74,000	$	4,618,000	$	43,000
Total
Commercial
Real estate	$	5,749,000	$	6,028,000	$	199,000	$	6,009,000	$	105,000	$	5,798,000	$	50,000
Construction	934,000		958,000		20,000		943,000		17,000		935,000		7,000
Other	853,000		896,000		132,000		3,000,000		13,000		938,000		10,000
Municipal	—		—		—		—		—		—		—
Residential
Term	10,311,000		11,667,000		269,000		11,646,000		128,000		11,278,000		48,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	2,161,000		2,224,000		292,000		2,245,000		8,000		2,179,000		4,000
Consumer	5,000		5,000		5,000		15,000		—		5,000		—
	$	20,013,000	$	21,778,000	$	917,000	$	23,858,000	$	271,000	$	21,133,000	$	119,000

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, 2019 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	$	5,235,000	$	5,492,000	$	—	$	7,611,000	$	228,000
Construction	958,000		970,000		—		936,000		47,000
Other	756,000		786,000		—		965,000		29,000
Municipal	—		—		—		—		—
Residential
Term	10,176,000		11,931,000		—		10,033,000		269,000
Construction	—		—		—		—		—
Home equity line of credit	1,087,000		1,151,000		—		997,000		20,000
Consumer	—		—		—		—		—
	$	18,212,000	$	20,330,000	$	—	$	20,542,000	$	593,000
With an Allowance Recorded
Commercial
Real estate	$	1,074,000	$	1,093,000	$	251,000	$	1,528,000	$	60,000
Construction	—		—		—		—		—
Other	6,319,000		6,925,000		1,273,000		6,778,000		—
Municipal	—		—		—		—		—
Residential
Term	2,263,000		2,412,000		237,000		2,424,000		82,000
Construction	—		—		—		—		—
Home equity line of credit	1,401,000		1,412,000		447,000		283,000		—
Consumer	5,000		6,000		5,000		2,000		—
	$	11,062,000	$	11,848,000	$	2,213,000	$	11,015,000	$	142,000
Total
Commercial
Real estate	$	6,309,000	$	6,585,000	$	251,000	$	9,139,000	$	288,000
Construction	958,000		970,000		—		936,000		47,000
Other	7,075,000		7,711,000		1,273,000		7,743,000		29,000
Municipal	—		—		—		—		—
Residential
Term	12,439,000		14,343,000		237,000		12,457,000		351,000
Construction	—		—		—		—		—
Home equity line of credit	2,488,000		2,563,000		447,000		1,280,000		20,000
Consumer	5,000		6,000		5,000		2,000		—
	$	29,274,000	$	32,178,000	$	2,213,000	$	31,557,000	$	735,000

A breakdown of impaired loans by class of financing receivable as of and for the period ended June 30, 2019 is presented in the following table:


							For the six months ended June 30, 2019						For the quarter ended June 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	$	7,230,000	$	7,510,000	$	—	$	8,273,000	$	183,000	$	7,805,000	$	93,000
Construction	982,000		990,000		—		903,000		23,000		990,000		11,000
Other	949,000		978,000		—		1,034,000		14,000		862,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	10,004,000		11,689,000		—		9,571,000		139,000		10,136,000		71,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,000,000		1,065,000		—		989,000		10,000		1,002,000		5,000
Consumer	—		—		—		—		—		—		—
	$	20,165,000	$	22,232,000	$	—	$	20,770,000	$	369,000	$	20,795,000	$	188,000
With an Allowance Recorded
Commercial
Real estate	$	1,731,000	$	1,742,000	$	196,000	$	1,446,000	$	49,000	$	1,677,000	$	23,000
Construction	—		—		—		—		—		—		—
Other	6,633,000		7,022,000		1,320,000		7,144,000		—		6,778,000		—
Municipal	—		—		—		—		—		—		—
Residential
Term	2,632,000		2,813,000		305,000		2,031,000		36,000		2,217,000		19,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	19,000		24,000		9,000		24,000		—		20,000		—
Consumer	—		—		—		1,000		—		1,000		—
	$	11,015,000	$	11,601,000	$	1,830,000	$	10,646,000	$	85,000	$	10,693,000	$	42,000
Total
Commercial
Real estate	$	8,961,000	$	9,252,000	$	196,000	$	9,719,000	$	232,000	$	9,482,000	$	116,000
Construction	982,000		990,000		—		903,000		23,000		990,000		11,000
Other	7,582,000		8,000,000		1,320,000		8,178,000		14,000		7,640,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	12,636,000		14,502,000		305,000		11,602,000		175,000		12,353,000		90,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	1,019,000		1,089,000		9,000		1,013,000		10,000		1,022,000		5,000
Consumer	—		—		—		1,000		—		1,000		—
	$	31,180,000	$	33,833,000	$	1,830,000	$	31,416,000	$	454,000	$	31,488,000	$	230,000

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 June 30, 2020, the Company had 78 loans with a balance of $14,013,000 that have been classified as TDRs. This compares to 81 loans with a balance of $21,424,000 and 83 loans with a balance of $24,454,000 classified as TDRs as of December 31, 2019 and June 30, 2019, 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 June 30, 2020:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	16	$	4,585,000	$	194,000
Construction	1	701,000		20,000
Other	7	777,000		131,000
Municipal	—	—		—
Residential
Term	51	7,477,000		198,000
Construction	—	—		—
Home equity line of credit	3	473,000		—
Consumer	—	—		—
	78	$	14,013,000	$	543,000

The following table shows TDRs by class and the specific reserve as of December 31, 2019:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	17	$	4,836,000	$	246,000
Construction	1	701,000		—
Other	8	6,932,000		1,231,000
Municipal	—	—		—
Residential
Term	52	8,472,000		200,000
Construction	—	—		—
Home equity line of credit	3	483,000		—
Consumer	—	—		—
	81	$	21,424,000	$	1,677,000

The following table shows TDRs by class and the specific reserve as of June 30, 2019:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	19	$	7,624,000	$	192,000
Construction	1	721,000		—
Other	9	7,185,000		1,275,000
Municipal	—	—		—
Residential
Term	51	8,433,000		224,000
Construction	—	—		—
Home equity line of credit	3	491,000		—
Consumer	—	—		—
	83	$	24,454,000	$	1,691,000

As of June 30, 2020, 11 of the loans classified as TDRs with a total balance of $1,479,000 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 June 30, 2020:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	3	247,000		131,000
Municipal	—	—		—
Residential
Term	7	1,066,000		—
Construction	—	—		—
Home equity line of credit	1	166,000		—
Consumer	—	—		—
	11	$	1,479,000	$	131,000

As of June 30, 2019, 15 of the loans classified as TDRs with a total balance of $1,681,000 were more than 30 days past due. Of these loans, three 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 June 30, 2019:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	—	$	—	$	—
Construction	—	—		—
Other	4	392,000		134,000
Municipal	—	—		—
Residential
Term	9	1,094,000		39,000
Construction	—	—		—
Home equity line of credit	2	195,000		—
Consumer	—	—		—
	15	$	1,681,000	$	173,000

For the six months ended June 30, 2020, two loans were placed on TDR status. The following table shows these TDRs, net of principle deductions of $2,000, by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2020:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	—	$	—	$	—	$	—
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	2	235,000		188,000		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	2	$	235,000	$	188,000	$	—

For the six months ended June 30, 2019, nine 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 June 30, 2019:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	2	$	111,000	$	100,000	$	100,000
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	7	805,000		710,000		74,000
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	9	$	916,000	$	810,000	$	174,000

For the quarter ended June 30, 2020, no loans were place on TDR status.

For the quarter ended June 30, 2019, four 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 June 30, 2019:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	2	$	111,000	$	100,000	$	100,000
Construction	—	—		—		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	2	234,000		161,000		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	4	$	345,000	$	261,000	$	100,000

As of June 30, 2020, Management is aware of nine loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $965,000. There were also 23 loans with an outstanding balance of $2,345,000 that were classified as TDRs and on non-accrual status, of which two loans with an outstanding balance of $431,000 were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of June 30, 2020, there were 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $2,028,000. This compares to 11 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,231,000 as of June 30, 2019.