LOANS | LOANS The Company’s loan portfolio is segregated into the following segments: commercial real estate, commercial and industrial, residential mortgage, and consumer. Commercial real estate loans include construction, single and multi-family, and other commercial real estate classes. Commercial and industrial loans include asset based lending loans, lease financing, and other commercial business loan classes. Residential mortgage loans include classes for 1-4 family owner occupied and construction loans. Consumer loans include home equity, direct and indirect auto, and other. These portfolio segments each have unique risk characteristics that are considered when determining the appropriate level for the allowance for loan losses. A substantial portion of the loan portfolio is secured by real estate in western Massachusetts, southern Vermont, northeastern New York, and in the Bank’s other New England lending areas. The ability of many of the Bank’s borrowers to honor their contracts is dependent, among other things, on the specific economy and real estate markets of these areas. Total loans include business activity loans and acquired loans. Acquired loans are those loans acquired from Parke Bank, Firestone Financial Corp., Hampden Bancorp, Inc., the New York branch acquisition, Beacon Federal Bancorp, Inc., The Connecticut Bank and Trust Company, Legacy Bancorp, Inc., and Rome Bancorp, Inc. The following is a summary of total loans: June 30, 2016 December 31, 2015 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ 218,607 $ 30,428 $ 249,035 $ 210,196 $ 43,474 $ 253,670 Single and multi-family 244,949 42,171 287,120 214,823 36,783 251,606 Other commercial real estate 1,354,086 347,341 1,701,427 1,209,008 345,483 1,554,491 Total commercial real estate 1,817,642 419,940 2,237,582 1,634,027 425,740 2,059,767 Commercial and industrial loans: Asset based lending 325,476 — 325,476 331,253 — 331,253 Other commercial and industrial loans 527,612 181,471 709,083 495,979 221,031 717,010 Total commercial and industrial loans 853,088 181,471 1,034,559 827,232 221,031 1,048,263 Total commercial loans 2,670,730 601,411 3,272,141 2,461,259 646,771 3,108,030 Residential mortgages: 1-4 family 1,519,067 302,702 1,821,769 1,454,233 332,747 1,786,980 Construction 20,965 866 21,831 26,704 1,351 28,055 Total residential mortgages 1,540,032 303,568 1,843,600 1,480,937 334,098 1,815,035 Consumer loans: Home equity 310,565 49,346 359,911 307,159 53,446 360,605 Auto and other 414,486 110,163 524,649 311,328 130,238 441,566 Total consumer loans 725,051 159,509 884,560 618,487 183,684 802,171 Total loans $ 4,935,813 $ 1,064,488 $ 6,000,301 $ 4,560,683 $ 1,164,553 $ 5,725,236 The carrying amount of the acquired loans at June 30, 2016 totaled $1.1 billion . A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $19.7 million (and a note balance of $38.2 million). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans considered not impaired at acquisition date had a carrying amount of $1.0 billion . At December 31, 2015, acquired loans maintained a carrying value of $1.2 billion and purchased credit-impaired loans totaled $21.4 million (note balance of $40.2 million). Loans considered not impaired at acquisition date had a carrying amount of $1.1 billion . The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer: Three Months Ended June 30, (In thousands) 2016 2015 Balance at beginning of period $ 6,464 $ 3,431 Acquisitions 708 4,178 Reclassification from nonaccretable difference for loans with improved cash flows 522 405 Reclassification to TDR — — Accretion (1,481 ) (1,474 ) Balance at end of period $ 6,213 $ 6,540 Six Months Ended June 30, (In thousands) 2016 2015 Balance at beginning of period $ 6,925 $ 2,541 Acquisitions 708 4,178 Reclassification from nonaccretable difference for loans with improved cash flows 1,418 1,736 Reclassification to TDR (185 ) — Accretion (2,653 ) (1,915 ) Balance at end of period $ 6,213 $ 6,540 The following is a summary of past due loans at June 30, 2016 and December 31, 2015: Business Activities Loans (in thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > June 30, 2016 Commercial real estate: Construction $ — $ — $ — $ — $ 218,607 $ 218,607 $ — Single and multi-family 11 — 518 529 244,420 $ 244,949 — Other commercial real estate 1,210 — 5,593 6,803 1,347,283 $ 1,354,086 2,195 Total 1,221 — 6,111 7,332 1,810,310 1,817,642 2,195 Commercial and industrial loans: Asset based lending — — — — 325,476 $ 325,476 — Other commercial and industrial loans 931 2,270 5,934 9,135 518,477 $ 527,612 127 Total 931 2,270 5,934 9,135 843,953 853,088 127 Residential mortgages: 1-4 family 1,907 1,359 3,075 6,341 1,512,726 $ 1,519,067 487 Construction — — 44 44 20,921 $ 20,965 — Total 1,907 1,359 3,119 6,385 1,533,647 1,540,032 487 Consumer loans: Home equity 1,374 5 1,760 3,139 307,426 $ 310,565 43 Auto and other 1,650 238 378 2,266 412,220 $ 414,486 — Total 3,024 243 2,138 5,405 719,646 725,051 43 Total $ 7,083 $ 3,872 $ 17,302 $ 28,257 $ 4,907,556 $ 4,935,813 $ 2,852 Business Activities Loans (in thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > December 31, 2015 Commercial real estate: Construction $ — $ — $ 58 $ 58 $ 210,138 $ 210,196 $ — Single and multi-family 65 160 70 295 214,528 214,823 — Other commercial real estate 1,523 831 3,286 5,640 1,203,368 1,209,008 — Total 1,588 991 3,414 5,993 1,628,034 1,634,027 — Commercial and industrial loans: Asset based lending — — — — 331,253 331,253 — Other commercial and industrial loans 1,202 1,105 7,770 10,077 485,902 495,979 146 Total 1,202 1,105 7,770 10,077 817,155 827,232 146 Residential mortgages: 1-4 family 3,537 857 4,304 8,698 1,445,535 1,454,233 2,006 Construction — — — — 26,704 26,704 — Total 3,537 857 4,304 8,698 1,472,239 1,480,937 2,006 Consumer loans: Home equity 563 20 1,658 2,241 304,918 307,159 61 Auto and other 1,230 132 610 1,972 309,356 311,328 59 Total 1,793 152 2,268 4,213 614,274 618,487 120 Total $ 8,120 $ 3,105 $ 17,756 $ 28,981 $ 4,531,702 $ 4,560,683 $ 2,272 Acquired Loans (in thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > June 30, 2016 Commercial real estate: Construction $ — $ — $ — $ — $ 1,093 $ 30,428 $ — Single and multi-family 341 — 392 733 1,546 42,171 296 Other commercial real estate 15 205 796 1,016 12,957 347,341 — Total 356 205 1,188 1,749 15,596 419,940 296 Commercial and industrial loans: Asset based lending — — — — — — — Other commercial and industrial loans 598 17 1,783 2,398 2,322 181,471 — Total 598 17 1,783 2,398 2,322 181,471 — Residential mortgages: 1-4 family 909 327 2,285 3,521 1,565 302,702 35 Construction — — — — — 866 — Total 909 327 2,285 3,521 1,565 303,568 35 Consumer loans: Home equity 79 — 743 822 116 49,346 185 Auto and other 1,314 123 830 2,267 109 110,163 107 Total 1,393 123 1,573 3,089 225 159,509 292 Total $ 3,256 $ 672 $ 6,829 $ 10,757 $ 19,708 $ 1,064,488 $ 623 Acquired Loans (in thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > December 31, 2015 Commercial real estate: — Construction $ — $ — $ — $ — $ 1,298 $ 43,474 $ — Single and multi-family — 176 227 403 1,380 36,783 127 Other commercial real estate 547 43 1,368 1,958 13,087 345,483 — Total 547 219 1,595 2,361 15,765 425,740 127 Commercial and industrial loans: Asset based lending — — — — — — — Other commercial and industrial loans 1,214 505 1,420 3,139 2,775 221,031 785 Total 1,214 505 1,420 3,139 2,775 221,031 785 Residential mortgages: 1-4 family 2,580 311 1,880 4,771 2,572 332,747 212 Construction — — — — — 1,351 — Total 2,580 311 1,880 4,771 2,572 334,098 212 Consumer loans: Home equity 82 277 837 1,196 118 53,446 111 Auto and other 1,491 145 1,081 2,717 132 130,238 187 Total 1,573 422 1,918 3,913 250 183,684 298 Total $ 5,914 $ 1,457 $ 6,813 $ 14,184 $ 21,362 $ 1,164,553 $ 1,422 The following is summary information pertaining to non-accrual loans at June 30, 2016 and December 31, 2015 June 30, 2016 December 31, 2015 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ — $ — $ — $ 59 $ — $ 59 Single and multi-family 518 96 $ 614 70 100 170 Other commercial real estate 3,398 796 $ 4,194 3,285 1,368 4,653 Total 3,916 892 4,808 3,414 1,468 4,882 Commercial and industrial loans: Other commercial and industrial loans 5,807 1,502 $ 7,309 7,624 597 8,221 Total 5,807 1,502 7,309 7,624 597 8,221 Residential mortgages: 1-4 family 2,588 2,225 $ 4,813 2,298 1,668 3,966 Construction 44 — $ 44 — — — Total 2,632 2,225 4,857 2,298 1,668 3,966 Consumer loans: Home equity 1,717 558 $ 2,275 1,597 727 2,324 Auto and other 378 723 $ 1,101 551 893 1,444 Total 2,095 1,281 3,376 2,148 1,620 3,768 Total non-accrual loans $ 14,450 $ 5,900 $ 20,350 $ 15,484 $ 5,353 $ 20,837 _______________________________________ (1) At quarter end June 30, 2016, acquired credit impaired loans accounted for $306 thousand of non-accrual loans that are not presented in the above table. (2) At December 31, 2015, acquired credit impaired loans accounted for $39 thousand of non-accrual loans that are not presented in the above table. Loans evaluated for impairment as of June 30, 2016 and December 31, 2015 were as follows: Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total June 30, 2016 Loans receivable: Balance at end of period Individually evaluated for impairment $ 12,501 $ 5,081 $ 2,906 $ 1,735 $ 22,223 Collectively evaluated 1,805,141 848,007 1,537,126 723,316 4,913,590 Total $ 1,817,642 $ 853,088 $ 1,540,032 $ 725,051 $ 4,935,813 Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2015 Loans receivable: Balance at end of year Individually evaluated for impairment $ 11,560 $ 7,191 $ 2,812 $ 1,810 $ 23,373 Collectively evaluated for impairment 1,622,467 820,041 1,478,125 616,677 4,537,310 Total $ 1,634,027 $ 827,232 $ 1,480,937 $ 618,487 $ 4,560,683 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total June 30, 2016 Loans receivable: Balance at end of Period Individually evaluated for impairment $ 3,924 $ 1,141 $ 519 $ 572 $ 6,156 Purchased credit-impaired loans 15,596 2,322 1,565 225 19,708 Collectively evaluated 400,420 178,008 301,484 158,712 1,038,624 Total $ 419,940 $ 181,471 $ 303,568 $ 159,509 $ 1,064,488 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2015 Loans receivable: Balance at end of year Individually evaluated for impairment $ 3,749 $ — $ 570 $ 487 $ 4,806 Purchased credit-impaired loans 15,765 2,775 2,572 250 21,362 Collectively evaluated for impairment 406,226 218,256 330,956 182,947 1,138,385 Total $ 425,740 $ 221,031 $ 334,098 $ 183,684 $ 1,164,553 The following is a summary of impaired loans at June 30, 2016 and December 31, 2015: Business Activities Loans June 30, 2016 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily — — — Other commercial real estate loans 1,944 1,944 — Other commercial and industrial loans 200 200 — Residential mortgages - 1-4 family 1,313 1,313 — Consumer - home equity 632 632 — Consumer - other 1 1 — With an allowance recorded: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily — — — Other commercial real estate loans 10,233 10,557 324 Other commercial and industrial loans 4,768 4,881 113 Residential mortgages - 1-4 family 1,443 1,593 150 Consumer - home equity 951 999 48 Consumer - other 96 103 7 Total Commercial real estate $ 12,177 $ 12,501 $ 324 Commercial and industrial loans 4,968 5,081 113 Residential mortgages 2,756 2,906 150 Consumer 1,680 1,735 55 Total impaired loans $ 21,581 $ 22,223 $ 642 Business Activities Loans December 31, 2015 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - construction $ 2,000 $ 2,000 $ — Commercial real estate - single and multifamily — — — Other commercial real estate loans 4,613 4,613 — Other commercial and industrial loans 5,828 5,828 — Residential mortgages - 1-4 family 1,181 1,181 — Consumer - home equity 702 702 — Consumer - other 1 1 — With an allowance recorded: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily — — — Other commercial real estate loans 4,798 4,947 149 Other commercial and industrial loans 1,341 1,362 21 Residential mortgages - 1-4 family 1,479 1,632 153 Consumer - home equity 903 999 96 Consumer - other 101 108 7 Total Commercial real estate $ 11,411 $ 11,560 $ 149 Commercial and industrial loans 7,169 7,190 21 Residential mortgages 2,660 2,813 153 Consumer 1,707 1,810 103 Total impaired loans $ 22,947 $ 23,373 $ 426 Acquired Loans June 30, 2016 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily 124 124 — Other commercial real estate loans 351 351 — Other commercial and industrial loans — — — Residential mortgages - 1-4 family 188 188 — Consumer - home equity — — — Consumer - other 152 152 — With an allowance recorded: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily 775 816 41 Other commercial real estate loans 2,498 2,633 135 Other commercial and industrial loans 1,099 1,141 42 Residential mortgages - 1-4 family 296 331 35 Consumer - home equity 387 420 33 Consumer - other — — — Total Commercial real estate $ 3,748 $ 3,924 $ 176 Commercial and industrial loans 1,099 1,141 42 Residential mortgages 484 519 35 Consumer 539 572 33 Total impaired loans $ 5,870 $ 6,156 $ 286 Acquired Loans December 31, 2015 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Other commercial real estate loans $ 1,722 $ 1,722 $ — Residential mortgages - 1-4 family 274 274 — Consumer - home equity 117 117 — Consumer - other 177 177 — With an allowance recorded: Commercial real estate - single and multifamily $ 638 $ 655 $ 17 Other commercial real estate loans 1,964 2,032 68 Residential mortgages - 1-4 family 266 296 30 Consumer - home equity 167 192 25 Total Other commercial real estate loans $ 4,324 $ 4,409 $ 85 Other commercial and industrial loans — — — Residential mortgages 540 570 30 Consumer 461 486 25 Total impaired loans $ 5,325 $ 5,465 $ 140 The following is a summary of the average recorded investment and interest income recognized on impaired loans as of June 30, 2016 and 2015: Business Activities Loans Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 (in thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - construction $ — $ — $ 2,466 $ 1 Commercial real estate - single and multifamily 72 1 120 — Other commercial real estate loans 2,690 3 12,734 170 Other commercial and industrial loans 707 16 1,447 3 Residential mortgages - 1-4 family 1,409 3 2,281 41 Consumer - home equity 792 5 360 1 Consumer - other 1 — 114 2 With an allowance recorded: Commercial real estate - construction $ — $ — $ — $ — Commercial real estate - single and multifamily — — — — Other commercial real estate loans 10,144 240 6,629 92 Other commercial and industrial loans 5,576 119 329 2 Residential mortgages - 1-4 family 1,609 36 764 17 Consumer - home equity 999 17 — — Consumer - other 105 2 — — Total Commercial real estate $ 12,906 $ 244 $ 21,949 $ 263 Commercial and industrial loans 6,283 135 1,776 5 Residential mortgages 3,018 39 3,045 58 Consumer loans 1,897 24 474 3 Total impaired loans $ 24,104 $ 442 $ 27,244 $ 329 Acquired Loans Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 (in thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - construction $ — $ — $ 664 $ 60 Commercial real estate - single and multifamily 125 4 254 — Other commercial real estate loans 596 — 1,977 3 Other commercial and industrial loans 154 — 51 3 Residential mortgages - 1-4 family 100 — 569 2 Consumer - home equity — — 355 6 Consumer - other 160 1 — — With an allowance recorded: Commercial real estate - construction $ — $ — $ — $ — Commercial real estate - single and multifamily 822 21 2,872 63 Other commercial real estate loans 2,598 77 845 59 Other commercial and industrial loans 233 2 — — Residential mortgages - 1-4 family 333 6 310 5 Consumer - home equity 326 6 — — Consumer - other — — — — Total Other commercial real estate loans $ 4,141 $ 102 $ 6,612 $ 185 Commercial and industrial loans 387 2 51 3 Residential mortgages 433 6 879 7 Consumer loans 486 7 355 6 Total impaired loans $ 5,447 $ 117 $ 7,897 $ 201 Troubled Debt Restructuring Loans The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months . TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan. The following tables include the recorded investment and number of modifications identified during the three and six months ended June 30, 2016 and for the three and six months ended June 30, 2015, respectively. The table includes the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. The modifications for the three and six months ending June 30, 2016 were attributable to interest rate concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. The modifications for the three and six months ending June 30, 2015 were attributable to interest rate concessions, maturity date extensions and modified payment terms. Three Months Ended June 30, 2016 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Consumer - Home Equity 1 117 117 Total 1 117 117 Six Months Ended June 30, 2016 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other 2 1,049 1,049 Commercial and industrial - Other 2 151 151 Consumer - Home Equity 1 117 117 Total 5 1,317 1,317 Three Months Ended June 30, 2015 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Construction 1 $ 1,877 $ 1,877 Commercial - Other 1 1,694 1,694 Commercial and industrial - Other 4 8,159 8,159 Total 6 $ 11,730 $ 11,730 Six Months Ended June 30, 2015 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Construction 1 $ 2,000 $ 2,000 Commercial - Other 2 1,694 1,694 Commercial and industrial - Other 5 8,192 8,192 Total 8 11,886 11,886 The following tables disclose the recorded investments and numbers of modifications for TDRs for the prior year where a concession has been made, that then defaulted in the respective reporting period. For the three and six months ended June 30, 2016, there were no loans that were restructured that had subsequently defaulted during the period. Modifications that Subsequently Defaulted Three Months Ended June 30, 2015 Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other 1 $ 649 Modifications that Subsequently Defaulted Six Months Ended June 30, 2015 Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other 1 $ 649 The following table presents the Company’s TDR activity for the three and six months ended June 30, 2016 and 2015: Three Months Ended June 30, (In thousands) 2016 2015 Balance at beginning of the period $ 23,654 $ 17,204 Principal payments (768 ) (607 ) TDR status change (1) — — Other reductions/increases (2) (881 ) (611 ) Newly identified TDRs 117 9,730 Balance at end of the period $ 22,122 $ 25,716 Six Months Ended June 30, (In thousands) 2016 2015 Balance at beginning of the period $ 22,048 $ 16,714 Principal payments (1,109 ) (1,091 ) TDR status change (1) 2,236 — Other reductions/increases (2) (2,370 ) (1,793 ) Newly identified TDRs 1,317 11,886 Balance at end of the period $ 22,122 $ 25,716 _________________________________ (1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement. (2) Other reductions classification consists of transfer to other real estate owned and charge-offs and advances to loans. The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs. As of June 30, 2016, the Company maintained foreclosed residential real estate property with a fair value of $60 thousand . Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of June 30, 2016 and December 31, 2015 totaled $6.1 million and $7.5 million , respectively. As of December 31, 2015, foreclosed residential real estate property totaled $675 thousand . |