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Loans

6 Months Ended

Jun. 30, 2021

Loans and Leases Receivable Disclosure [Abstract]

The following table shows the composition of the Company's loan portfolio as of June 30, 2021 and 2020 and at December 31, 2020:


	June 30, 2021				December 31, 2020				June 30, 2020
Commercial
Real estate	$	527,415,000	33.2	%	$	442,121,000	29.9	%	$	397,155,000	27.4	%
Construction	65,794,000		4.1	%	56,565,000		3.8	%	47,169,000		3.2	%
Other	298,747,000		18.8	%	285,015,000		19.3	%	327,967,000		22.6	%
Municipal	41,079,000		2.6	%	43,783,000		3.0	%	49,644,000		3.4	%
Residential
Term	523,344,000		33.0	%	522,070,000		35.3	%	499,693,000		34.4	%
Construction	29,818,000		1.9	%	21,600,000		1.5	%	14,707,000		1.1	%
Home equity line of credit	77,709,000		4.9	%	79,750,000		5.4	%	87,019,000		6.0	%
Consumer	24,358,000		1.5	%	25,857,000		1.8	%	28,269,000		1.9	%
Total	$	1,588,264,000	100.0	%	$	1,476,761,000	100.0	%	$	1,451,623,000	100.0	%

Loan balances include net deferred loan costs of $5,447,000 as of June 30, 2021, $6,931,000 as of December 31, 2020, and $4,866,000 as of June 30, 2020. The decrease in net deferred loan costs year-to-date is attributable to unearned fees and deferred costs associated with PPP loans originated in 2020 and during the first and second quarters of 2021. Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $356,811,000 at June 30, 2021, were used to collateralize borrowings from the FHLB. This compares to qualifying loans which totaled $378,183,000 at December 31, 2020, and $399,525,000 at June 30, 2020. In addition, commercial, construction and home equity loans totaling $259,312,000 at June 30, 2021, $259,599,000 at December 31, 2020, and $264,343,000 at June 30, 2020, 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, 2021, 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	$	75,000	$	—	$	191,000	$	266,000	$	527,149,000	$	527,415,000	$	—
Construction	13,000		—		16,000		29,000		65,765,000		65,794,000		—
Other	62,000		—		821,000		883,000		297,864,000		298,747,000		—
Municipal	—		—		—		—		41,079,000		41,079,000		—
Residential
Term	134,000		773,000		715,000		1,622,000		521,722,000		523,344,000		—
Construction	—		—		—		—		29,818,000		29,818,000		—
Home equity line of credit	43,000		—		246,000		289,000		77,420,000		77,709,000		17,000
Consumer	140,000		104,000		87,000		331,000		24,027,000		24,358,000		87,000
Total	$	467,000	$	877,000	$	2,076,000	$	3,420,000	$	1,584,844,000	$	1,588,264,000	$	104,000

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, which was extended by the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. The Company actively worked with borrowers impacted by the COVID-19 outbreak and as of June 30, 2021, a total of 1,050 loan modification requests for interest-only payments or deferred payments had been completed in conformance with the Interagency Statement or CARES Act, representing $291,668,000 in loan balances, or approximately 19.0% of the loan portfolio excluding PPP balances. One of these modifications of de minimis amount has been classified as a Troubled Debt Restructure since being modified. So long as modified terms are met, loans in an active modification are not included in past due loan totals and continue to accrue interest.

As of June 30, 2021, loans totaling $21,965,000, or 1.4% of all loans, remained in either their original modification or a subsequent modification. Modification statuses by portfolio segment are summarized below:


Commercial/Municipal Loan Modifications
	Units	Percentage		Balance		Percentage
Paid Off	121	20	%	$	19,750,000	8	%
Subsequent Modification	13	2	%	7,800,000		3	%
Still in Original Modification	2	—	%	228,000		—	%
Out of Modification	469	78	%	209,919,000		89	%
Total	605	100	%	$	237,697,000	100	%

Residential Real Estate Modifications
	Units	Percentage		Balance		Percentage
Paid Off	57	15	%	$	10,535,000	20	%
Subsequent Modification	115	30	%	13,320,000		25	%
Still in Original Modification	6	2	%	574,000		1	%
Out of Modification	198	53	%	28,483,000		54	%
Total	376	100	%	$	52,912,000	100	%


Consumer Loan Modifications
	Units	Percentage		Balance		Percentage
Paid Off	21	30	%	$	179,000	17	%
Subsequent Modification	2	3	%	43,000		4	%

Out of Modification	46	67	%	837,000		79	%
Total	69	100	%	$	1,059,000	100	%

Information on the past-due status of loans by class of financing receivable as of December 31, 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	$	139,000	$	190,000	$	226,000	$	555,000	$	441,566,000	$	442,121,000	$	—
Construction	13,000		—		80,000		93,000		56,472,000		56,565,000		—
Other	490,000		62,000		2,082,000		2,634,000		282,381,000		285,015,000		1,464,000
Municipal	—		—		—		—		43,783,000		43,783,000		—
Residential
Term	540,000		1,799,000		1,616,000		3,955,000		518,115,000		522,070,000		23,000
Construction	—		—		—		—		21,600,000		21,600,000		—
Home equity line of credit	1,645,000		324,000		367,000		2,336,000		77,414,000		79,750,000		—
Consumer	89,000		42,000		18,000		149,000		25,708,000		25,857,000		18,000
Total	$	2,916,000	$	2,417,000	$	4,389,000	$	9,722,000	$	1,467,039,000	$	1,476,761,000	$	1,505,000

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

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, 2021 and 2020 and at December 31, 2020 is presented in the following table:


	June 30, 2021		December 31, 2020		June 30, 2020
Commercial
Real estate	$	1,029,000	$	543,000	$	1,245,000
Construction	105,000		89,000		232,000
Other	1,452,000		1,481,000		323,000
Municipal	—		—		—
Residential
Term	3,820,000		3,593,000		4,685,000
Construction	—		—		—
Home equity line of credit	575,000		1,015,000		1,854,000
Consumer	—		—		5,000
Total	$	6,981,000	$	6,721,000	$	8,344,000

Impaired loans include TDR 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 class of financing receivable as of and for the period ended June 30, 2021 is presented in the following table:


							For the six months ended June 30, 2021				For the quarter ended June 30, 2021
	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	$	2,145,000	$	2,490,000	$	—	$	2,295,000	$	35,000	$	2,412,000	$	18,000
Construction	106,000		106,000		—		92,000		—		94,000		—
Other	1,567,000		1,638,000		—		1,615,000		8,000		1,575,000		3,000
Municipal	—		—		—		—		—		—		—
Residential
Term	7,506,000		8,770,000		—		7,256,000		68,000		7,329,000		33,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	574,000		607,000		—		815,000		—		756,000		—
Consumer	6,000		6,000		—		7,000		—		—		—
	$	11,904,000	$	13,617,000	$	—	$	12,080,000	$	111,000	$	12,166,000	$	54,000
With an Allowance Recorded
Commercial
Real estate	$	929,000	$	956,000	$	167,000	$	954,000	$	20,000	$	939,000	$	11,000
Construction	681,000		681,000		19,000		681,000		11,000		681,000		5,000
Other	422,000		439,000		403,000		498,000		5,000		471,000		5,000
Municipal	—		—		—		—		—		—		—
Residential
Term	1,620,000		1,662,000		118,000		1,810,000		23,000		1,662,000		7,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	22,000		22,000		—		11,000		—		15,000		—
Consumer	—		—		—		—		—		—		—
	$	3,674,000	$	3,760,000	$	707,000	$	3,954,000	$	59,000	$	3,768,000	$	28,000
Total
Commercial
Real estate	$	3,074,000	$	3,446,000	$	167,000	$	3,249,000	$	55,000	$	3,351,000	$	29,000
Construction	787,000		787,000		19,000		773,000		11,000		775,000		5,000
Other	1,989,000		2,077,000		403,000		2,113,000		13,000		2,046,000		8,000
Municipal	—		—		—		—		—		—		—
Residential
Term	9,126,000		10,432,000		118,000		9,066,000		91,000		8,991,000		40,000
Construction	—		—		—		—		—		—		—
Home equity line of credit	596,000		629,000		—		826,000		—		771,000		—
Consumer	6,000		6,000		—		7,000		—		—		—
	$	15,578,000	$	17,377,000	$	707,000	$	16,034,000	$	170,000	$	15,934,000	$	82,000

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, 2020 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	$	2,060,000	$	2,368,000	$	—	$	4,123,000	$	127,000
Construction	89,000		89,000		—		358,000		—
Other	1,591,000		1,623,000		—		999,000		15,000
Municipal	—		—		—		—		—
Residential
Term	7,335,000		8,629,000		—		8,773,000		193,000
Construction	—		—		—		—		—
Home equity line of credit	1,015,000		1,089,000		—		1,219,000		—
Consumer	8,000		8,000		—		1,000		1,000
	$	12,098,000	$	13,806,000	$	—	$	15,473,000	$	336,000
With an Allowance Recorded
Commercial
Real estate	$	969,000	$	995,000	$	112,000	$	1,018,000	$	43,000
Construction	681,000		681,000		18,000		579,000		30,000
Other	188,000		202,000		169,000		1,193,000		3,000
Municipal	—		—		—		—		—
Residential
Term	2,079,000		2,134,000		163,000		2,073,000		65,000
Construction	—		—		—		—		—
Home equity line of credit	24,000		24,000		—		744,000		1,000
Consumer	—		—		—		8,000		—
	$	3,941,000	$	4,036,000	$	462,000	$	5,615,000	$	142,000
Total
Commercial
Real estate	$	3,029,000	$	3,363,000	$	112,000	$	5,141,000	$	170,000
Construction	770,000		770,000		18,000		937,000		30,000
Other	1,779,000		1,825,000		169,000		2,192,000		18,000
Municipal	—		—		—		—		—
Residential
Term	9,414,000		10,763,000		163,000		10,846,000		258,000
Construction	—		—		—		—		—
Home equity line of credit	1,039,000		1,113,000		—		1,963,000		1,000
Consumer	8,000		8,000		—		9,000		1,000
	$	16,039,000	$	17,842,000	$	462,000	$	21,088,000	$	478,000

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

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, 2021, the Company had 72 loans with a balance of $10,782,000 that have been classified as TDRs. This compares to 74 loans with a balance of $11,534,000 and 78 loans with a balance of $14,013,000 classified as TDRs as of December 31, 2020 and June 30, 2020, respectively. The impairment carried as a specific reserve in the allowance for loan losses is determined by calculating the present value of 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, 2021:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	13	$	2,490,000	$	166,000
Construction	2	762,000		19,000
Other	7	956,000		357,000
Municipal	—	—		—
Residential
Term	48	6,546,000		118,000
Construction	—	—		—
Home equity line of credit	1	22,000		—
Consumer	1	6,000		—
	72	$	10,782,000	$	660,000

The following table shows TDRs by class and the specific reserve as of December 31, 2020:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	13	$	2,558,000	$	106,000
Construction	1	681,000		18,000
Other	6	717,000		96,000
Municipal	—	—		—
Residential
Term	51	7,384,000		149,000
Construction	—	—		—
Home equity line of credit	2	186,000		—
Consumer	1	8,000		—
	74	$	11,534,000	$	369,000

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

As of June 30, 2021, 11 of the loans classified as TDRs with a total balance of $737,000 were more than 30 days past due. Of these loans, none 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, 2021:


	Number of Loans	Balance		Specific Reserves
Commercial
Real estate	1	$	25,000	$	25,000
Construction	—	—		—
Other	4	419,000		92,000
Municipal	—	—		—
Residential
Term	5	287,000		—
Construction	—	—		—
Home equity line of credit	—	—		—
Consumer	1	6,000		—
	11	$	737,000	$	117,000

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

For the six months ended June 30, 2021, three loans were placed on TDR status. The following table shows this TDR, by class and the associated specific reserve included in the allowance for loan losses as of June 30, 2021:


	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	—	$	—	$	—	$	—
Construction	1	80,000		80,000		—
Other	1	261,000		261,000		261,000
Municipal	—	—		—		—
Residential
Term	1	9,000		4,000		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	3	$	350,000	$	345,000	$	261,000

For the six months ended June 30, 2020, two 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, 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 quarter ended June 30, 2021, 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 June 30, 2021:



	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate	—	$	—	$	—	$	—
Construction	1	80,000		80,000		—
Other	—	—		—		—
Municipal	—	—		—		—
Residential
Term	1	9,000		4,000		—
Construction	—	—		—		—
Home equity line of credit	—	—		—		—
Consumer	—	—		—		—
	2	$	89,000	$	84,000	$	—

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

As of June 30, 2021, Management is aware of eight loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $993,000. There were also 21 loans with an outstanding balance of $1,804,000 that were classified as TDRs and on non-accrual status, of which no loans were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of June 30, 2021, there were 12 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $912,000. This compares to 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $2,028,000 as of June 30, 2020.