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. 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 Massachusetts, southern Vermont, northeastern New York, New Jersey 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. Acquired loans that are refinanced are transferred to business activity loans. 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: September 30, 2017 December 31, 2016 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ 265,059 $ 18,490 $ 283,549 $ 253,302 $ 34,207 $ 287,509 Single and multi-family 342,426 84,668 427,094 191,819 125,672 317,491 Other commercial real estate 1,462,500 498,094 1,960,594 1,481,223 530,215 2,011,438 Total commercial real estate 2,069,985 601,252 2,671,237 1,926,344 690,094 2,616,438 Commercial and industrial loans: 1,154,988 99,959 1,254,947 908,102 153,936 1,062,038 Total commercial loans 3,224,973 701,211 3,926,184 2,834,446 844,030 3,678,476 Residential mortgages: 1-4 family 1,717,160 258,789 1,975,949 1,583,794 297,355 1,881,149 Construction 6,933 244 7,177 11,178 804 11,982 Total residential mortgages 1,724,093 259,033 1,983,126 1,594,972 298,159 1,893,131 Consumer loans: Home equity 290,144 95,746 385,890 313,521 80,279 393,800 Auto and other 601,905 50,301 652,206 478,368 106,012 584,380 Total consumer loans 892,049 146,047 1,038,096 791,889 186,291 978,180 Total loans $ 5,841,115 $ 1,106,291 $ 6,947,406 $ 5,221,307 $ 1,328,480 $ 6,549,787 The carrying amount of the acquired loans at September 30, 2017 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 $32.2 million (and a note balance of $56.8 million ). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans considered not credit-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 credit-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 September 30, (In thousands) 2017 2016 Balance at beginning of period $ 5,767 $ 6,213 Acquisitions — — Reclassification from nonaccretable difference for loans with improved cash flows 10 688 Change in cash flows that do not affect nonaccretable difference — — Reclassification to TDR — — Accretion (1,712 ) (2,298 ) Balance at end of period $ 4,065 $ 4,603 Nine Months Ended September 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 343 2,106 Change in cash flows that do not affect nonaccretable difference — — Reclassification to TDR — (185 ) Accretion (5,016 ) (4,951 ) Balance at end of period $ 4,065 $ 4,603 The following is a summary of past due loans at September 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 > September 30, 2017 Commercial real estate: Construction $ — $ — $ — $ — $ 265,059 $ 265,059 $ — Single and multi-family 143 260 326 729 341,697 342,426 163 Other commercial real estate 307 — 4,369 4,676 1,457,824 1,462,500 — Total 450 260 4,695 5,405 2,064,580 2,069,985 163 Commercial and industrial loans: Total 1,370 640 8,483 10,493 1,144,495 1,154,988 32 Residential mortgages: 1-4 family 1,055 1,396 2,093 4,544 1,712,616 1,717,160 125 Construction — — — — 6,933 6,933 — Total 1,055 1,396 2,093 4,544 1,719,549 1,724,093 125 Consumer loans: Home equity 74 267 1,872 2,213 287,931 290,144 228 Auto and other 2,620 384 1,115 4,119 597,786 601,905 31 Total 2,694 651 2,987 6,332 885,717 892,049 259 Total $ 5,569 $ 2,947 $ 18,258 $ 26,774 $ 5,814,341 $ 5,841,115 $ 579 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: 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 > September 30, 2017 Commercial real estate: Construction $ 570 $ — $ — $ 570 $ — $ 18,490 $ — Single and multi-family 421 78 2,600 3,099 3,285 84,668 2,385 Other commercial real estate 1,633 145 481 2,259 18,962 498,094 — Total 2,624 223 3,081 5,928 22,247 601,252 2,385 Commercial and industrial loans: Total 634 52 1,284 1,970 1,497 99,959 54 Residential mortgages: 1-4 family 624 383 1,154 2,161 7,167 258,789 30 Construction — — — — — 244 — Total 624 383 1,154 2,161 7,167 259,033 30 Consumer loans: Home equity 23 2 1,220 1,245 930 95,746 — Auto and other 258 29 416 703 358 50,301 14 Total 281 31 1,636 1,948 1,288 146,047 14 Total $ 4,163 $ 689 $ 7,155 $ 12,007 $ 32,199 $ 1,106,291 $ 2,483 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: 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 September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ — $ — $ — $ — $ — $ — Single and multi-family 163 215 378 469 437 906 Other commercial real estate 4,369 481 4,850 4,212 765 4,977 Total 4,532 696 5,228 4,681 1,202 5,883 Commercial and industrial loans: Total 8,451 1,147 9,598 6,285 1,155 7,440 Residential mortgages: 1-4 family 1,968 1,124 3,092 2,223 1,572 3,795 Construction — — — — — — Total 1,968 1,124 3,092 2,223 1,572 3,795 Consumer loans: Home equity 1,644 1,220 2,864 2,675 517 3,192 Auto and other 1,084 402 1,486 952 895 1,847 Total 2,728 1,622 4,350 3,627 1,412 5,039 Total non-accrual loans $ 17,679 $ 4,589 $ 22,268 $ 16,816 $ 5,341 $ 22,157 _______________________________________ (1) At quarter end September 30, 2017 , acquired credit impaired loans accounted for $83 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 September 30, 2017 and December 31, 2016 were as follows: Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total September 30, 2017 Loans receivable: Balance at end of period Individually evaluated for impairment $ 34,064 $ 10,164 $ 2,205 $ 1,860 $ 48,293 Collectively evaluated for impairment 2,035,921 1,144,824 1,721,888 890,189 5,792,822 Total $ 2,069,985 $ 1,154,988 $ 1,724,093 $ 892,049 $ 5,841,115 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 September 30, 2017 Loans receivable: Balance at end of Period Individually evaluated for impairment $ 2,770 $ 592 $ 475 $ 950 $ 4,787 Purchased credit-impaired loans 22,247 1,497 7,167 1,288 32,199 Collectively evaluated for impairment 576,235 97,870 251,391 143,809 1,069,305 Total $ 601,252 $ 99,959 $ 259,033 $ 146,047 $ 1,106,291 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 September 30, 2017 and December 31, 2016: Business Activities Loans September 30, 2017 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - single and multifamily $ — $ — $ — Other commercial real estate loans 19,005 19,005 — Commercial and industrial loans 2,043 2,043 — Residential mortgages - 1-4 family 1,033 1,033 — Consumer - home equity 769 769 — Consumer - other — — — With an allowance recorded: Commercial real estate - single and multifamily $ 162 $ 163 $ 1 Other commercial real estate loans 14,758 14,896 138 Commercial and industrial loans 7,842 8,121 279 Residential mortgages - 1-4 family 1,036 1,172 136 Consumer - home equity 1,052 1,091 39 Consumer - other — — — Total Commercial real estate $ 33,925 $ 34,064 $ 139 Commercial and industrial loans 9,885 10,164 279 Residential mortgages 2,069 2,205 136 Consumer 1,821 1,860 39 Total impaired loans $ 47,700 $ 48,293 $ 593 Business Activities 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 18,905 18,905 — 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 - single and multifamily $ 179 $ 181 $ 2 Other commercial real estate loans 6,306 6,462 156 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 September 30, 2017 (In thousands) Recorded Investment Unpaid Principal Related Allowance With no related allowance: Commercial real estate - single and multifamily $ 216 $ 216 $ — Other commercial real estate loans 195 195 — Commercial and industrial loans 287 287 — Residential mortgages - 1-4 family 165 165 — Consumer - home equity 581 581 — Consumer - other — — — With an allowance recorded: Commercial real estate - single and multifamily $ 871 $ 892 $ 21 Other commercial real estate loans 1,442 1,467 25 Commercial and industrial loans 303 305 2 Residential mortgages - 1-4 family 291 310 19 Consumer - home equity 325 369 44 Total x Commercial real estate $ 2,724 $ 2,770 $ 46 Commercial and industrial loans 590 592 2 Residential mortgages 456 475 19 Consumer 906 950 44 Total impaired loans $ 4,676 $ 4,787 $ 111 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 — 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 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 September 30, 2017 and 2016: Business Activities Loans Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (In thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - single and multifamily $ 84 $ — $ 48 $ 1 Other commercial real estate loans 21,132 934 2,624 111 Commercial and industrial loans 1,825 69 805 26 Residential mortgages - 1-4 family 1,391 29 2,309 51 Consumer - home equity 1,301 26 693 5 Consumer - other — — 1 — With an allowance recorded: Commercial real estate - single and multifamily $ 172 $ 10 $ — $ — Other commercial real estate loans 10,553 363 10,266 351 Commercial and industrial loans 6,493 354 4,609 154 Residential mortgages - 1-4 family 1,187 38 684 21 Consumer - home equity 1,094 32 999 26 Consumer - other — — 104 3 Total Commercial real estate $ 31,941 $ 1,307 $ 12,938 $ 463 Commercial and industrial loans 8,318 423 5,414 180 Residential mortgages 2,578 67 2,993 72 Consumer loans 2,395 58 1,797 34 Total impaired loans $ 45,232 $ 1,855 $ 23,142 $ 749 Acquired Loans Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (In thousands) Average Recorded Cash Basis Interest Average Recorded Cash Basis Interest With no related allowance: Commercial real estate - single and multifamily $ 424 $ 79 $ — $ — Other commercial real estate loans 483 73 546 20 Commercial and Industrial loans 319 4 191 1 Residential mortgages - 1-4 family 170 7 321 9 Consumer - home equity 567 — — — Consumer - other — — 140 1 With an allowance recorded: Commercial real estate - single and multifamily $ 904 $ 36 $ 942 $ 37 Other commercial real estate loans 1,481 56 2,606 127 Commercial and Industrial loans 332 29 404 10 Residential mortgages - 1-4 family 319 12 117 4 Consumer - home equity 387 13 356 13 Consumer - other — — — — Total Other commercial real estate loans $ 3,292 $ 244 $ 4,094 $ 184 Commercial and industrial loans 651 33 595 11 Residential mortgages 489 19 438 13 Consumer loans 954 13 496 14 Total impaired loans $ 5,386 $ 309 $ 5,623 $ 222 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 nine months ended September 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 nine months ended September 30, 2017 and 2016 were attributable to interest rate concessions, principal concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. Three Months Ended September 30, 2017 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other — — — Commercial and industrial 3 1,654 1,654 Residential - 1-4 Family — — — Consumer - Home Equity — — — Total 3 $ 1,654 $ 1,654 Nine Months Ended September 30, 2017 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other 15 $ 13,445 $ 11,718 Commercial and industrial 8 3,471 3,471 Residential - 1-4 Family 2 205 188 Consumer - Home Equity 1 53 53 Total 26 $ 17,174 $ 15,430 Three Months Ended September 30, 2016 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial and industrial 2 404 404 Residential - 1-4 Family 2 5 5 Total 4 $ 409 $ 409 Nine Months Ended September 30, 2016 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other 2 $ 1,049 $ 1,049 Commercial and industrial 4 555 555 Residential - 1-4 Family 2 5 5 Consumer - Home Equity 1 117 117 Total 9 $ 1,726 $ 1,726 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 September 30, 2017, there were no loans that were restructured that had subsequently defaulted during the period. For the nine months ended September 30, 2017, there were two loans that were restructured that had subsequently defaulted during the period. Modifications that Subsequently Defaulted Three Months Ended September 30, 2017 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other — $ — Commercial and industrial — $ — Modifications that Subsequently Defaulted Nine Months Ended September 30, 2017 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other 1 $ 113 Commercial and industrial 1 $ 101 The following table presents the Company’s TDR activity for the three and nine months ended September 30, 2017 and 2016: Three Months Ended September 30, (In thousands) 2017 2016 Balance at beginning of the period $ 44,556 $ 22,122 Principal payments (373 ) (932 ) TDR status change (1) — — Other reductions/increases (2) (1,939 ) — Newly identified TDRs 1,654 409 Balance at end of the period $ 43,898 $ 21,599 Nine Months Ended September 30, (In thousands) 2017 2016 Balance at beginning of the period $ 33,829 $ 22,048 Principal payments (1,527 ) (2,041 ) TDR status change (1) — 2,236 Other reductions/increases (2) (3,834 ) (2,370 ) Newly identified TDRs 15,430 1,726 Balance at end of the period $ 43,898 $ 21,599 _________________________________ (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 September 30, 2017 , the Company maintained foreclosed residential real estate property with a fair value of $288 thousand . Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of September 30, 2017 and December 31, 2016 totaled $4.7 million and $4.8 million , respectively. As of December 31, 2016, foreclosed residential real estate property totaled $151 thousand . |