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 and other commercial real estate. 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 Commerce Bank and Trust Company, 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, 2018 December 31, 2017 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ 321,842 $ 52,946 $ 374,788 $ 269,206 $ 84,965 $ 354,171 Other commercial real estate 2,118,039 878,946 2,996,985 1,948,501 962,070 2,910,571 Total commercial real estate 2,439,881 931,892 3,371,773 2,217,707 1,047,035 3,264,742 Commercial and industrial loans: 1,422,857 479,371 1,902,228 1,182,569 621,370 1,803,939 Total commercial loans 3,862,738 1,411,263 5,274,001 3,400,276 1,668,405 5,068,681 Residential mortgages: 1-4 family 2,250,946 247,092 2,498,038 1,808,024 289,373 2,097,397 Construction 11,101 185 11,286 5,177 233 5,410 Total residential mortgages 2,262,047 247,277 2,509,324 1,813,201 289,606 2,102,807 Consumer loans: Home equity 294,261 94,243 388,504 294,954 115,227 410,181 Auto and other 651,429 81,255 732,684 603,767 113,902 717,669 Total consumer loans 945,690 175,498 1,121,188 898,721 229,129 1,127,850 Total loans $ 7,070,475 $ 1,834,038 $ 8,904,513 $ 6,112,198 $ 2,187,140 $ 8,299,338 The carrying amount of the acquired loans at September 30, 2018 totaled $1.8 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 $63.2 million (and a note balance of $153.9 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 $1.8 billion . At December 31, 2017, acquired loans maintained a carrying value of $2.2 billion and purchased credit-impaired loans totaled $97.3 million (note balance of $208.7 million). Loans considered not credit-impaired at acquisition date had a carrying amount of $2.1 billion . The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality : Three Months Ended September 30, (In thousands) 2018 2017 Balance at beginning of period $ 6,304 $ 5,767 Accretion (1,702 ) (872 ) Net reclassifications from (to) nonaccretable difference 564 10 Payments received, net (543 ) (841 ) Disposals — — Balance at end of period $ 4,623 $ 4,064 Nine Months Ended September 30, (In thousands) 2018 2017 Balance at beginning of period $ 11,561 $ 8,738 Accretion (6,620 ) (2,923 ) Net reclassifications from (to) nonaccretable difference 2,218 343 Payments received, net (2,455 ) (2,094 ) Disposals (81 ) — Balance at end of period $ 4,623 $ 4,064 The following is a summary of past due loans at September 30, 2018 and December 31, 2017: Business Activities Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > September 30, 2018 Commercial real estate: Construction $ — $ — $ — $ — $ 321,842 $ 321,842 $ — Other commercial real estate 8,222 395 19,872 28,489 2,089,550 2,118,039 723 Total 8,222 395 19,872 28,489 2,411,392 2,439,881 723 Commercial and industrial loans: Total 6,843 873 3,472 11,188 1,411,669 1,422,857 10 Residential mortgages: 1-4 family 1,919 231 1,829 3,979 2,246,967 2,250,946 339 Construction — — — — 11,101 11,101 — Total 1,919 231 1,829 3,979 2,258,068 2,262,047 339 Consumer loans: Home equity 154 25 1,570 1,749 292,512 294,261 — Auto and other 2,962 548 1,646 5,156 646,273 651,429 49 Total 3,116 573 3,216 6,905 938,785 945,690 49 Total $ 20,100 $ 2,072 $ 28,389 $ 50,561 $ 7,019,914 $ 7,070,475 $ 1,121 Business Activities Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Current Total Loans Past Due > December 31, 2017 Commercial real estate: Construction $ — $ — $ — $ — $ 269,206 $ 269,206 $ — Other commercial real estate 1,925 48 5,474 7,447 1,941,054 1,948,501 457 Total 1,925 48 5,474 7,447 2,210,260 2,217,707 457 Commercial and industrial loans: Total 4,031 1,912 6,023 11,966 1,170,603 1,182,569 128 Residential mortgages: 1-4 family 2,412 242 2,186 4,840 1,803,184 1,808,024 520 Construction — — — — 5,177 5,177 — Total 2,412 242 2,186 4,840 1,808,361 1,813,201 520 Consumer loans: Home equity 444 1,235 1,747 3,426 291,528 294,954 120 Auto and other 3,389 599 1,597 5,585 598,182 603,767 143 Total 3,833 1,834 3,344 9,011 889,710 898,721 263 Total $ 12,201 $ 4,036 $ 17,027 $ 33,264 $ 6,078,934 $ 6,112,198 $ 1,368 Acquired Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > September 30, 2018 Commercial real estate: Construction $ — $ — $ — $ — $ 7,535 $ 52,946 $ — Other commercial real estate 1,820 1,690 3,559 7,069 16,875 878,946 70 Total 1,820 1,690 3,559 7,069 24,410 931,892 70 Commercial and industrial loans: Total 1,260 243 1,452 2,956 31,372 479,371 — Residential mortgages: 1-4 family 781 107 1,192 2,080 5,049 247,092 — Construction — — — — — 185 — Total 781 107 1,192 2,080 5,049 247,277 — Consumer loans: Home equity 350 5 736 1,091 2,010 94,243 — Auto and other 245 98 513 856 336 81,255 14 Total 595 103 1,249 1,947 2,346 175,498 14 Total $ 4,456 $ 2,143 $ 7,452 $ 14,052 $ 63,177 $ 1,834,038 $ 84 Acquired Loans (In thousands) 30-59 Days 60-89 Days 90 Total Past Acquired Total Loans Past Due > December 31, 2017 Commercial real estate: — Construction $ — $ — $ — $ — $ 7,655 $ 84,965 $ — Other commercial real estate 1,487 1,875 2,359 5,721 45,647 962,070 109 Total 1,487 1,875 2,359 5,721 53,302 1,047,035 109 Commercial and industrial loans: Total 1,252 268 1,439 2,959 34,629 621,370 23 Residential mortgages: 1-4 family 957 2,581 1,247 4,785 6,974 289,373 30 Construction — — — — — 233 — Total 957 2,581 1,247 4,785 6,974 289,606 30 Consumer loans: Home equity 286 40 1,965 2,291 1,956 115,227 — Auto and other 346 135 430 911 483 113,902 38 Total 632 175 2,395 3,202 2,439 229,129 38 Total $ 4,328 $ 4,899 $ 7,440 $ 16,667 $ 97,344 $ 2,187,140 $ 200 The following is summary information pertaining to non-accrual loans at September 30, 2018 and December 31, 2017: September 30, 2018 December 31, 2017 (In thousands) Business Acquired Total Business Acquired Total Commercial real estate: Construction $ — $ — $ — $ — $ — $ — Other commercial real estate 19,149 3,415 22,564 5,017 2,250 7,267 Total 19,149 3,415 22,564 5,017 2,250 7,267 Commercial and industrial loans: Total 3,462 1,452 4,914 5,895 1,333 7,228 Residential mortgages: 1-4 family 1,490 1,192 2,682 1,666 1,217 2,883 Construction — — — — — — Total 1,490 1,192 2,682 1,666 1,217 2,883 Consumer loans: Home equity 1,570 736 2,306 1,627 1,965 3,592 Auto and other 1,597 499 2,096 1,454 392 1,846 Total 3,167 1,235 4,402 3,081 2,357 5,438 Total non-accrual loans $ 27,268 $ 7,294 $ 34,562 $ 15,659 $ 7,157 $ 22,816 _______________________________________ (1) At quarter end September 30, 2018 , acquired credit impaired loans accounted for $74 thousand of loans greater than 90 days past due that are not presented in the above table. (2) At December 31, 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. Loans evaluated for impairment as of September 30, 2018 and December 31, 2017 were as follows: Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total September 30, 2018 Loans receivable: Balance at end of period Individually evaluated for impairment $ 24,556 $ 2,314 $ 1,921 $ 971 $ 29,762 Collectively evaluated for impairment 2,415,325 1,420,543 2,260,126 944,719 7,040,713 Total $ 2,439,881 $ 1,422,857 $ 2,262,047 $ 945,690 $ 7,070,475 Business Activities Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2017 Loans receivable: Balance at end of year Individually evaluated for impairment $ 33,732 $ 5,761 $ 3,872 $ — $ 43,365 Collectively evaluated for impairment 2,183,975 1,176,808 1,809,329 898,721 6,068,833 Total $ 2,217,707 $ 1,182,569 $ 1,813,201 $ 898,721 $ 6,112,198 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total September 30, 2018 Loans receivable: Balance at end of Period Individually evaluated for impairment $ 5,005 $ 823 $ 648 $ 509 $ 6,985 Purchased credit-impaired loans 24,410 31,372 5,049 2,346 63,177 Collectively evaluated for impairment 902,477 447,176 241,580 172,643 1,763,876 Total $ 931,892 $ 479,371 $ 247,277 $ 175,498 $ 1,834,038 Acquired Loans (In thousands) Commercial Commercial and Residential Consumer Total December 31, 2017 Loans receivable: Balance at end of year Individually evaluated for impairment $ 4,244 $ 421 $ 2,617 $ 27 $ 7,309 Purchased credit-impaired loans 53,302 34,629 6,974 2,439 97,344 Collectively evaluated for impairment 989,489 586,320 280,015 226,663 2,082,487 Total $ 1,047,035 $ 621,370 $ 289,606 $ 229,129 $ 2,187,140 The following is a summary of impaired loans at September 30, 2018 and December 31, 2017: Business Activities Loans September 30, 2018 (In thousands) Recorded Investment (1) Unpaid Principal Related Allowance With no related allowance: Other commercial real estate loans $ 25,225 $ 31,064 $ — Commercial and industrial loans 1,222 4,947 — Residential mortgages - 1-4 family 698 810 — Consumer - home equity 917 1,602 — Consumer - other — — — With an allowance recorded: Other commercial real estate loans $ 1,397 $ 1,393 $ 16 Commercial and industrial loans 1,311 1,294 58 Residential mortgages - 1-4 family 1,379 1,424 106 Consumer - home equity 41 50 — Consumer - other 14 14 1 Total Commercial real estate $ 26,622 $ 32,457 $ 16 Commercial and industrial loans 2,533 6,241 58 Residential mortgages 2,077 2,234 106 Consumer 972 1,666 1 Total impaired loans $ 32,204 $ 42,598 $ 181 (1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. These amounts are components of total loans and other assets on the Consolidated Balance Sheet. (2) The Unpaid Principal Balance represents the customer's legal obligation to the Company. Business Activities Loans December 31, 2017 (In thousands) Recorded Investment (1) Unpaid Principal Related Allowance With no related allowance: Other commercial real estate loans $ 19,362 $ 22,218 $ — Commercial and industrial loans 2,060 2,629 — Residential mortgages - 1-4 family 660 1,075 — Consumer - home equity 867 1,504 — With an allowance recorded: Commercial real estate - construction $ 159 $ 159 $ 1 Other commercial real estate loans 14,480 15,406 228 Commercial and industrial loans 3,716 4,249 66 Residential mortgages - 1-4 family 1,344 1,446 130 Consumer - home equity 1,014 999 34 Consumer - other 17 17 1 Total Commercial real estate $ 34,001 $ 37,783 $ 229 Commercial and industrial loans 5,776 6,878 66 Residential mortgages 2,004 2,521 130 Consumer 1,898 2,520 35 Total impaired loans $ 43,679 $ 49,702 $ 460 (1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet. (2) The Unpaid Principal Balance represents the customer's legal obligation to the Company. Acquired Loans September 30, 2018 (In thousands) Recorded Investment (1) Unpaid Principal Related Allowance With no related allowance: Other commercial real estate loans $ 4,428 $ 7,361 $ — Commercial and industrial loans 652 742 — Residential mortgages - 1-4 family 547 585 — Consumer - home equity 485 1,172 — Consumer - other 13 15 — With an allowance recorded: Other commercial real estate loans $ 1,202 $ 1,219 $ 15 Commercial and industrial loans 326 325 6 Residential mortgages - 1-4 family 106 127 9 Consumer - home equity 146 146 3 Total x Commercial real estate $ 5,630 $ 8,580 $ 15 Commercial and industrial loans 978 1,067 6 Residential mortgages 653 712 9 Consumer 644 1,333 3 Total impaired loans $ 7,905 $ 11,692 $ 33 (1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet. (2) The Unpaid Principal Balance represents the customer's legal obligation to the Company. Acquired Loans December 31, 2017 (In thousands) Recorded Investment (1) Unpaid Principal Related Allowance With no related allowance: Other commercial real estate loans $ 1,327 $ 3,084 $ — Other commercial and industrial loans 255 310 — Residential mortgages - 1-4 family 658 671 — Consumer - home equity 1,374 1,654 — Consumer - other 27 27 — With an allowance recorded: Other commercial real estate loans $ 2,930 $ 2,541 $ 56 Commercial and industrial loans 165 166 1 Residential mortgages - 1-4 family 166 185 9 Consumer - home equity 433 540 45 Total Commercial real estate $ 4,257 $ 5,625 $ 56 Commercial and industrial loans 420 476 1 Residential mortgages 824 856 9 Consumer 1,834 2,221 45 Total impaired loans $ 7,335 $ 9,178 $ 111 (1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet. (2) The Unpaid Principal Balance represents the customer's legal obligation to the Company. The following is a summary of the average recorded investment and interest income recognized on impaired loans as of September 30, 2018 and 2017: Business Activities Loans Nine Months Ended Nine Months Ended (In thousands) Average Cash Basis Average Cash Basis With no related allowance: Other commercial real estate loans $ 24,277 $ 277 $ 21,216 $ 934 Commercial and industrial loans 2,451 343 1,825 69 Residential mortgages - 1-4 family 683 22 1,391 29 Consumer - home equity 797 10 1,301 26 Consumer - other — — — — With an allowance recorded: Other commercial real estate loans $ 1,415 $ 60 $ 10,725 $ 373 Commercial and industrial loans 1,395 111 6,493 354 Residential mortgages - 1-4 family 1,401 47 1,187 38 Consumer - home equity 44 2 1,094 32 Consumer - other 15 1 — — Total Commercial real estate $ 25,692 $ 337 $ 31,941 $ 1,307 Commercial and industrial loans 3,846 454 8,318 423 Residential mortgages 2,084 69 2,578 67 Consumer loans 856 13 2,395 58 Total impaired loans $ 32,478 $ 873 $ 45,232 $ 1,855 Acquired Loans Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017 (In thousands) Average Cash Basis Average Cash Basis With no related allowance: Other commercial real estate loans $ 4,354 $ 212 $ 907 $ 152 Commercial and industrial loans 552 40 319 4 Residential mortgages - 1-4 family 572 6 170 7 Consumer - home equity 766 2 567 — Consumer - other 16 1 — — With an allowance recorded: Other commercial real estate loans $ 1,225 $ 53 $ 2,385 $ 92 Commercial and industrial loans 202 32 332 29 Residential mortgages - 1-4 family 80 6 319 12 Consumer - home equity 148 4 387 13 Consumer - other — — — — Total Other commercial real estate loans $ 5,579 $ 265 $ 3,292 $ 244 Commercial and industrial loans 754 72 651 33 Residential mortgages 652 12 489 19 Consumer loans 930 7 954 13 Total impaired loans $ 7,915 $ 356 $ 5,386 $ 309 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, 2018 . 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 months ended September 30, 2018 were attributable to interest rate concessions and modified payment terms. The modifications for the nine months ended September 30, 2018 were attributable to interest rate concessions, principal concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. The modifications for the three months ended September 30, 2017 were attributable to interest rate concessions, principal concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. The modifications for the nine months ended September 30, 2017 were attributable to interest rate concessions, principal concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. Three Months Ended September 30, 2018 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial and industrial — $ — $ — Residential - 1-4 Family 1 30 30 Total 1 $ 30 $ 30 Nine Months Ended September 30, 2018 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial and industrial 4 $ 1,995 $ 1,924 Residential - 1-4 Family 2 148 148 Total 6 $ 2,143 $ 2,072 Three Months Ended September 30, 2017 (Dollars in thousands) Number of Pre-Modification Post-Modification Troubled Debt Restructurings Commercial - Other — $ — $ — Commercial and industrial - Other 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 - Other 8 3,471 3,471 Residential - 1-4 Family 2 205 188 Consumer Home Equity 1 53 53 Total 26 $ 17,174 $ 15,430 The following table discloses the recorded investments and numbers of modifications for TDRs where a concession has been made within the previous 12 months, that then defaulted in the respective reporting period. For the three months ended September 30, 2018, there were no loans that were restructured that had subsequently defaulted during the period. For the nine months ended September 30, 2018, there were two loans that were restructured that had subsequently defaulted during the period. Modifications that Subsequently Defaulted Three Months Ended September 30, 2018 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other — $ — Commercial and industrial - Other — $ — Modifications that Subsequently Defaulted Nine Months Ended September 30, 2018 (Dollars in thousands) Number of Contracts Recorded Investment Troubled Debt Restructurings Commercial - Other 1 $ 5,992 Commercial and industrial - Other 1 $ 1,065 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 - Other — $ — 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 - Other 1 $ 101 The following table presents the Company’s TDR activity for the three and nine months ended September 30, 2018 and 2017: Three Months Ended September 30, (In thousands) 2018 2017 Balance at beginning of the period $ 33,507 $ 44,556 Principal payments (3,567 ) (373 ) TDR status change (1) — — Other reductions/increases (2) (1,206 ) (1,939 ) Newly identified TDRs 30 1,654 Balance at end of the period $ 28,764 $ 43,898 Nine Months Ended September 30, (In thousands) 2018 2017 Balance at beginning of the period $ 41,990 $ 33,829 Principal payments (6,718 ) (1,527 ) TDR status change (1) — — Other reductions/increases (2) (8,580 ) (3,834 ) Newly identified TDRs 2,072 15,430 Balance at end of the period $ 28,764 $ 43,898 _________________________________ (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, payoffs, 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, 2018 , the Company maintained no foreclosed residential real estate property. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of September 30, 2018 and December 31, 2017 totaled $6.2 million and $4.9 million , respectively. |