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 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 First Choice Bank, 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. Business activity and acquired loans are serviced, managed, and accounted for under the Company's same control environment. The following is a summary of total loans: June 30, 2017 December 31, 2016 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ 266,859 $ 24,568 $ 291,427 $ 253,302 $ 34,207 $ 287,509 Single and multi-family 356,771 97,950 454,721 191,819 125,672 317,491 Other commercial real estate 1,436,091 507,283 1,943,374 1,481,223 530,215 2,011,438 Total commercial real estate 2,059,721 629,801 2,689,522 1,926,344 690,094 2,616,438 Commercial and industrial loans: Asset based lending 336,698 10,361 347,059 321,270 — 321,270 Other commercial and industrial loans 773,839 107,038 880,877 586,832 153,936 740,768 Total commercial and industrial loans 1,110,537 117,399 1,227,936 908,102 153,936 1,062,038 Total commercial loans 3,170,258 747,200 3,917,458 2,834,446 844,030 3,678,476 Residential mortgages: 1-4 family 1,651,980 271,857 1,923,837 1,583,794 297,355 1,881,149 Construction 9,977 254 10,231 11,178 804 11,982 Total residential mortgages 1,661,957 272,111 1,934,068 1,594,972 298,159 1,893,131 Consumer loans: Home equity 287,732 100,490 388,222 313,521 80,279 393,800 Auto and other 561,916 62,818 624,734 478,368 106,012 584,380 Total consumer loans 849,648 163,308 1,012,956 791,889 186,291 978,180 Total loans $ 5,681,863 $ 1,182,619 $ 6,864,482 $ 5,221,307 $ 1,328,480 $ 6,549,787 The carrying amount of the acquired loans at June 30, 2017 totaled $1.2 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 $40.2 million (and a note balance of $69.3 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 $1.1 billion . At December 31, 2016, acquired loans maintained a carrying value of $1.3 billion and purchased credit-impaired loans totaled $46.8 million (note balance of $86.6 million). Loans considered not impaired at acquisition date had a carrying amount of $1.3 billion . The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality : Three Months Ended June 30, (In thousands) 2017 2016 Balance at beginning of period $ 7,363 $ 6,464 Acquisitions — 708 Reclassification from nonaccretable difference for loans with improved cash flows (85 ) 522 Change in cash flows that do not affect nonaccretable difference (506 ) — Reclassification to TDR — — Accretion (1,005 ) (1,481 ) Balance at end of period $ 5,767 $ 6,213 Six Months Ended June 30, (In thousands) 2017 2016 Balance at beginning of period $ 8,738 $ 6,925 Acquisitions — 708 Reclassification from nonaccretable difference for loans with improved cash flows 333 1,418 Change in cash flows that do not affect nonaccretable difference (1,253 ) — Reclassification to TDR — (185 ) Accretion (2,051 ) (2,653 ) Balance at end of period $ 5,767 $ 6,213 The following is a summary of past due loans at June 30, 2017 and December 31, 2016: Business Activities Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > June 30, 2017 Commercial real estate: Construction $ — $ — $ — $ — $ 266,859 $ 266,859 $ — Single and multi-family 106 — 471 577 356,194 356,771 67 Other commercial real estate 1,932 — 6,443 8,375 1,427,716 1,436,091 168 Total 2,038 — 6,914 8,952 2,050,769 2,059,721 235 Commercial and industrial loans: Asset based lending — — — — 336,698 336,698 — Other commercial and industrial loans 1,470 1,089 7,179 9,738 764,101 773,839 135 Total 1,470 1,089 7,179 9,738 1,100,799 1,110,537 135 Residential mortgages: 1-4 family 1,147 291 2,327 3,765 1,648,215 1,651,980 320 Construction — — — — 9,977 9,977 — Total 1,147 291 2,327 3,765 1,658,192 1,661,957 320 Consumer loans: Home equity 212 86 2,314 2,612 285,120 287,732 184 Auto and other 2,192 329 1,180 3,701 558,215 561,916 6 Total 2,404 415 3,494 6,313 843,335 849,648 190 Total $ 7,059 $ 1,795 $ 19,914 $ 28,768 $ 5,653,095 $ 5,681,863 $ 880 Business Activities Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > December 31, 2016 Commercial real estate: Construction $ — $ — $ — $ — $ 253,302 $ 253,302 $ — Single and multi-family 618 110 624 1,352 190,467 191,819 155 Other commercial real estate 481 2,243 4,212 6,936 1,474,287 1,481,223 — Total 1,099 2,353 4,836 8,288 1,918,056 1,926,344 155 Commercial and industrial loans: Asset based lending — — — — 321,270 321,270 — Other commercial and industrial loans 3,090 1,301 6,290 10,681 576,151 586,832 5 Total 3,090 1,301 6,290 10,681 897,421 908,102 5 Residential mortgages: 1-4 family 1,393 701 4,179 6,273 1,577,521 1,583,794 1,956 Construction 10 — — 10 11,168 11,178 — Total 1,403 701 4,179 6,283 1,588,689 1,594,972 1,956 Consumer loans: Home equity 99 — 2,981 3,080 310,441 313,521 306 Auto and other 2,483 494 968 3,945 474,423 478,368 16 Total 2,582 494 3,949 7,025 784,864 791,889 322 Total $ 8,174 $ 4,849 $ 19,254 $ 32,277 $ 5,189,030 $ 5,221,307 $ 2,438 Acquired Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > June 30, 2017 Commercial real estate: Construction $ — $ — $ — $ — $ — $ 24,568 $ — Single and multi-family 577 — 408 985 3,381 97,950 — Other commercial real estate 682 982 500 2,164 26,454 507,283 — Total 1,259 982 908 3,149 29,835 629,801 — Commercial and industrial loans: Asset based lending — — — — — 10,361 — Other commercial and industrial loans 57 76 1,343 1,476 1,850 107,038 — Total 57 76 1,343 1,476 1,850 117,399 — Residential mortgages: 1-4 family 183 14 1,264 1,461 7,213 271,857 26 Construction — — — — — 254 — Total 183 14 1,264 1,461 7,213 272,111 26 Consumer loans: Home equity 50 — 1,220 1,270 935 100,490 4 Auto and other 612 355 457 1,424 369 62,818 — Total 662 355 1,677 2,694 1,304 163,308 4 Total $ 2,161 $ 1,427 $ 5,192 $ 8,780 $ 40,202 $ 1,182,619 $ 30 Acquired Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > December 31, 2016 Commercial real estate: — Construction $ — $ — $ — $ — $ 47 $ 34,207 $ — Single and multi-family 2 — 437 439 4,726 125,672 — Other commercial real estate 1,555 — 765 2,320 30,047 530,215 — Total 1,557 — 1,202 2,759 34,820 690,094 — Commercial and industrial loans: Asset based lending — — — — — — — Other commercial and industrial loans 1,850 15 1,262 3,127 3,369 153,936 24 Total 1,850 15 1,262 3,127 3,369 153,936 24 Residential mortgages: 1-4 family 321 343 2,015 2,679 7,283 297,355 443 Construction — — — — — 804 — Total 321 343 2,015 2,679 7,283 298,159 443 Consumer loans: Home equity 753 — 870 1,623 957 80,279 353 Auto and other 542 314 1,686 2,542 387 106,012 791 Total 1,295 314 2,556 4,165 1,344 186,291 1,144 Total $ 5,023 $ 672 $ 7,035 $ 12,730 $ 46,816 $ 1,328,480 $ 1,611 The following is summary information pertaining to non-accrual loans at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ — $ — $ — $ — $ — $ — Single and multi-family 404 408 812 469 437 906 Other commercial real estate 6,275 500 6,775 4,212 765 4,977 Total 6,679 908 7,587 4,681 1,202 5,883 Commercial and industrial loans: Other commercial and industrial loans 7,044 1,260 8,304 6,285 1,155 7,440 Total 7,044 1,260 8,304 6,285 1,155 7,440 Residential mortgages: 1-4 family 2,007 1,225 3,232 2,223 1,572 3,795 Construction — — — — — — Total 2,007 1,225 3,232 2,223 1,572 3,795 Consumer loans: Home equity 2,130 1,216 3,346 2,675 517 3,192 Auto and other 1,174 457 1,631 952 895 1,847 Total 3,304 1,673 4,977 3,627 1,412 5,039 Total non-accrual loans $ 19,034 $ 5,066 $ 24,100 $ 16,816 $ 5,341 $ 22,157 _______________________________________ (1) At quarter end June 30, 2017 , acquired credit impaired loans accounted for $96 thousand of loans greater than 90 days past due that are not presented in the above table. (2) At December 31, 2016, acquired credit impaired loans accounted for $83 thousand of loans greater than 90 days past due that are not presented in the above table. Loans evaluated for impairment as of June 30, 2017 and December 31, 2016 were as follows: Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total June 30, 2017 Loans receivable: Balance at end of period Individually evaluated for impairment $ 36,769 $ 7,944 $ 2,225 $ 2,369 $ 49,307 Collectively evaluated for impairment 2,022,952 1,102,593 1,659,732 847,279 5,632,556 Total $ 2,059,721 $ 1,110,537 $ 1,661,957 $ 849,648 $ 5,681,863 Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2016 Loans receivable: Balance at end of year Individually evaluated for impairment $ 25,549 $ 5,705 $ 2,775 $ 2,703 $ 36,732 Collectively evaluated for impairment 1,900,795 902,397 1,592,197 789,186 5,184,575 Total $ 1,926,344 $ 908,102 $ 1,594,972 $ 791,889 $ 5,221,307 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total June 30, 2017 Loans receivable: Balance at end of Period Individually evaluated for impairment $ 2,909 $ 611 $ 484 $ 981 $ 4,985 Purchased credit-impaired loans 29,835 1,850 7,213 1,304 40,202 Collectively evaluated for impairment 597,057 114,938 264,414 161,023 1,137,432 Total $ 629,801 $ 117,399 $ 272,111 $ 163,308 $ 1,182,619 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2016 Loans receivable: Balance at end of year Individually evaluated for impairment $ 4,256 $ 635 $ 308 $ 406 $ 5,605 Purchased credit-impaired loans 34,820 3,369 7,283 1,344 46,816 Collectively evaluated for impairment 651,018 149,932 290,568 184,541 1,276,059 Total $ 690,094 $ 153,936 $ 298,159 $ 186,291 $ 1,328,480 The following is a summary of impaired loans at June 30, 2017 and December 31, 2016: Business Activities Loans June 30, 2017 (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 21,630 21,630 — Other commercial and industrial loans 1,174 1,174 — Residential mortgages - 1-4 family 1,591 1,591 — Consumer - home equity — — — Consumer - other — — — With an allowance recorded: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily 165 166 1 Other commercial real estate loans 14,847 14,973 126 Other commercial and industrial loans 6,642 6,770 128 Residential mortgages - 1-4 family 555 634 79 Consumer - home equity 2,011 2,369 358 Consumer - other — — — Total Commercial real estate $ 36,642 $ 36,769 $ 127 Commercial and industrial loans 7,816 7,944 128 Residential mortgages 2,146 2,225 79 Consumer 2,011 2,369 358 Total impaired loans $ 48,615 $ 49,307 $ 692 Business Activities Loans December 31, 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 18,905 18,905 — Other commercial and industrial loans 382 382 — Residential mortgages - 1-4 family 2,101 2,101 — Consumer - home equity 1,605 1,605 — Consumer - other — — — With an allowance recorded: Commercial real estate - construction $ — $ — $ — Commercial real estate - single and multifamily 179 181 2 Other commercial real estate loans 6,306 6,462 156 Other commercial and industrial loans 5,060 5,324 264 Residential mortgages - 1-4 family 538 674 136 Consumer - home equity 942 1,098 156 Consumer - other — — — Total Commercial real estate $ 25,390 $ 25,548 $ 158 Commercial and industrial loans 5,442 5,706 264 Residential mortgages 2,639 2,775 136 Consumer 2,547 2,703 156 Total impaired loans $ 36,018 $ 36,732 $ 714 Acquired Loans June 30, 2017 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - single and multifamily $ 326 $ 326 $ — Other commercial real estate loans 202 202 — Other commercial and industrial loans 296 296 — Residential mortgages - 1-4 family 391 391 — Consumer - home equity 606 606 — Consumer - other — — — With an allowance recorded: Commercial real estate - single and multifamily $ 878 $ 902 $ 24 Other commercial real estate loans 1,449 1,479 30 Other commercial and industrial loans 311 315 4 Residential mortgages - 1-4 family 89 93 4 Consumer - home equity 339 375 36 Total x Commercial real estate $ 2,855 $ 2,909 $ 54 Commercial and industrial loans 607 611 4 Residential mortgages 480 484 4 Consumer 945 981 36 Total impaired loans $ 4,887 $ 4,985 $ 98 Acquired Loans December 31, 2016 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - single and multifamily $ — $ — $ — Other commercial real estate loans 547 547 — Other commercial and industrial loans — — — Residential mortgages - 1-4 family 208 208 — With an allowance recorded: Commercial real estate - single and multifamily $ 1,250 $ 1,358 $ 108 Other commercial real estate loans 2,209 2,351 142 Other commercial and industrial loans 576 635 59 Residential mortgages - 1-4 family 89 100 11 Consumer - home equity 292 406 114 Total Commercial real estate $ 4,006 $ 4,256 $ 250 Commercial and industrial loans 576 635 59 Residential mortgages 297 308 11 Consumer 292 406 114 Total impaired loans $ 5,171 $ 5,605 $ 434 The following is a summary of the average recorded investment and interest income recognized on impaired loans as of June 30, 2017 and 2016: Business Activities Loans Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 (In thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - single and multifamily $ 99 $ — $ 72 $ 1 Other commercial real estate loans 22,362 473 2,690 3 Other commercial and industrial loans 1,251 16 707 16 Residential mortgages - 1-4 family 1,870 11 1,409 3 Consumer - home equity 90 — 792 5 Consumer - other — — 1 — With an allowance recorded: Commercial real estate - single and multifamily $ 171 $ 8 $ — $ — Other commercial real estate loans 10,056 119 10,144 240 Other commercial and industrial loans 6,902 131 5,576 119 Residential mortgages - 1-4 family 636 7 1,609 36 Consumer - home equity 2,371 17 999 17 Total Commercial real estate $ 32,688 $ 600 $ 12,906 $ 244 Commercial and industrial loans 8,153 147 6,283 135 Residential mortgages 2,506 18 3,018 39 Consumer loans 2,461 17 1,897 24 Total impaired loans $ 45,808 $ 782 $ 24,104 $ 442 Acquired Loans Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 (In thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - construction $ — $ — $ — $ — Commercial real estate - single and multifamily 396 43 125 4 Other commercial real estate loans 269 49 596 — Other commercial and industrial loans 298 1 154 — Residential mortgages - 1-4 family 393 6 100 — Consumer - home equity 771 — — — Consumer - other — — 160 1 With an allowance recorded: Commercial real estate - construction $ — $ — $ — $ — Commercial real estate - single and multifamily 905 12 822 21 Other commercial real estate loans 1,482 19 2,598 77 Other commercial and industrial loans 328 8 233 2 Residential mortgages - 1-4 family 94 1 333 6 Consumer - home equity 390 5 326 6 Consumer - other — — — — Total Other commercial real estate loans $ 3,052 $ 123 $ 4,141 $ 102 Commercial and industrial loans 626 9 387 2 Residential mortgages 487 7 433 6 Consumer loans 1,161 5 486 7 Total impaired loans $ 5,326 $ 144 $ 5,447 $ 117 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, 2017 . 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 ended June 30, 2017 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, 2016 were attributable to interest rate concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. Three Months Ended June 30, 2017 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other 9 $ 10,613 $ 9,385 Commercial and industrial - Other 4 1,793 1,793 Residential - 1-4 Family — — — Consumer - Home Equity — — — Total 13 $ 12,406 $ 11,178 Six Months Ended June 30, 2017 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other 15 $ 13,445 $ 11,718 Commercial and industrial - Other 5 1,817 1,817 Residential - 1-4 Family 2 205 188 Consumer - Home Equity 1 53 53 Total 23 $ 15,520 $ 13,776 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 The following table discloses the recorded investments and numbers of modifications for TDRs where a concession has been made, that then defaulted in the respective reporting period. For the three months ended June 30, 2017, there were no loans that were restructured that had subsequently defaulted during the period. For the six months ended June 30, 2017, there was one loan that was restructured that had subsequently defaulted during the period. Modifications that Subsequently Defaulted Three Months Ended June 30, 2017 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other — $ — Commercial and industrial- Other — $ — Modifications that Subsequently Defaulted Six Months Ended June 30, 2017 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other 1 $ 113 Commercial and industrial- Other 1 $ 101 The following table presents the Company’s TDR activity for the three and six months ended June 30, 2017 and 2016: Three Months Ended June 30, (In thousands) 2017 2016 Balance at beginning of the period $ 34,699 $ 23,654 Principal payments (266 ) (768 ) TDR status change (1) — — Other reductions/increases (2) (1,055 ) (881 ) Newly identified TDRs 11,178 117 Balance at end of the period $ 44,556 $ 22,122 Six Months Ended June 30, (In thousands) 2017 2016 Balance at beginning of the period $ 33,829 $ 22,048 Principal payments (1,154 ) (1,109 ) TDR status change (1) — 2,236 Other reductions/increases (2) (1,895 ) (2,370 ) Newly identified TDRs 13,776 1,317 Balance at end of the period $ 44,556 $ 22,122 _________________________________ (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, 2017 , the Company maintained foreclosed residential real estate property with a fair value of $279 thousand . Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of June 30, 2017 and December 31, 2016 totaled $4.8 million at the end of each period. As of December 31, 2016, foreclosed residential real estate property totaled $151 thousand . |