Loans | Loans The following is a summary of loans: (Dollars in thousands) December 31, 2017 December 31, 2016 Amount % Amount % Commercial: Mortgages (1) $1,072,487 32 % $1,074,186 33 % Construction & development (2) 138,008 4 121,371 4 Commercial & industrial (3) 612,334 18 576,109 18 Total commercial 1,822,829 54 1,771,666 55 Residential real estate: Mortgages 1,206,458 35 1,094,824 34 Homeowner construction 20,790 1 27,924 1 Total residential real estate 1,227,248 36 1,122,748 35 Consumer: Home equity lines 258,114 8 264,200 8 Home equity loans 34,353 1 37,272 1 Other (4) 31,527 1 38,485 1 Total consumer 323,994 10 339,957 10 Total loans (5) $3,374,071 100 % $3,234,371 100 % (1) Loans primarily secured by income producing property. (2) Loans for construction of commercial properties, loans to developers for construction of residential properties and loans for land development. (3) Loans to businesses and individuals, a substantial portion of which are fully or partially collateralized by real estate. (4) Loans to individuals secured by general aviation aircraft and other personal installment loans. (5) Includes net unamortized loan origination costs of $3.8 million and $3.0 million , respectively, and net unamortized premiums on purchased loans of $878 thousand and $783 thousand , respectively, at December 31, 2017 and 2016 . At December 31, 2017 and 2016 , there were $1.6 billion and $1.4 billion , respectively, of loans pledged as collateral to the FHLB under a blanket pledge agreement and to the FRB for the discount window. See Note 11 for additional disclosure regarding borrowings. Concentrations of Credit Risk A significant portion of our loan portfolio is concentrated among borrowers in southern New England and a substantial portion of the portfolio is collateralized by real estate in this area. The ability of single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the market area and real estate values. The ability of commercial borrowers to honor their repayment commitments is dependent on the general economy as well as the health of the real estate economic sector in the Corporation’s market area. Nonaccrual Loans The following is a summary of nonaccrual loans, segregated by class of loans: (Dollars in thousands) December 31, 2017 2016 Commercial: Mortgages $4,954 $7,811 Construction & development — — Commercial & industrial 283 1,337 Residential real estate: Mortgages 9,414 11,736 Homeowner construction — — Consumer: Home equity lines 81 — Home equity loans 463 1,058 Other 16 116 Total nonaccrual loans $15,211 $22,058 Accruing loans 90 days or more past due $— $— As of December 31, 2017 and 2016 , loans secured by one- to four-family residential property amounting to $4.4 million and $5.7 million , respectively, were in process of foreclosure. Nonaccrual loans of $3.4 million and $3.5 million , respectively, were current as to the payment of principal and interest as of December 31, 2017 and 2016 . There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2017 . Interest income that would have been recognized had nonaccrual loans been current in accordance with their original terms was approximately $1.3 million , $1.6 million and $1.5 million in 2017 , 2016 and 2015 , respectively. Interest income included in the Consolidated Statements of Income on nonaccrual loans amounted to approximately $335 thousand , $640 thousand and $522 thousand , respectively, in 2017 , 2016 and 2015 . Past Due Loans Past due status is based on the contractual payment terms of the loan. The following tables present an aging analysis of past due loans, segregated by class of loans: (Dollars in thousands) Days Past Due December 31, 2017 30-59 60-89 Over 90 Total Past Due Current Total Loans Commercial: Mortgages $6 $— $4,954 $4,960 $1,067,527 $1,072,487 Construction & development — — — — 138,008 138,008 Commercial & industrial 3,793 2 281 4,076 608,258 612,334 Residential real estate: Mortgages 1,678 2,274 3,903 7,855 1,198,603 1,206,458 Homeowner construction — — — — 20,790 20,790 Consumer: Home equity lines 1,340 — — 1,340 256,774 258,114 Home equity loans 1,458 75 268 1,801 32,552 34,353 Other 29 — 14 43 31,484 31,527 Total loans $8,304 $2,351 $9,420 $20,075 $3,353,996 $3,374,071 (Dollars in thousands) Days Past Due December 31, 2016 30-59 60-89 Over 90 Total Past Due Current Total Loans Commercial: Mortgages $901 $— $7,807 $8,708 $1,065,478 $1,074,186 Construction & development — — — — 121,371 121,371 Commercial & industrial 409 — 745 1,154 574,955 576,109 Residential real estate: Mortgages 5,381 652 6,193 12,226 1,082,598 1,094,824 Homeowner construction — — — — 27,924 27,924 Consumer: Home equity lines 655 26 — 681 263,519 264,200 Home equity loans 776 76 658 1,510 35,762 37,272 Other 32 1 110 143 38,342 38,485 Total loans $8,154 $755 $15,513 $24,422 $3,209,949 $3,234,371 Included in past due loans as of December 31, 2017 and 2016 , were nonaccrual loans of $11.8 million and $18.6 million , respectively. All loans 90 days or more past due at December 31, 2017 and 2016 were classified as nonaccrual. Impaired Loans Impaired loans are loans for which it is probable that the Corporation will not be able to collect all amounts due according to the contractual terms of the loan agreements and loans restructured in a troubled debt restructuring. The following is a summary of impaired loans: (Dollars in thousands) Recorded Investment (1) Unpaid Principal Related Allowance December 31, 2017 2016 2017 2016 2017 2016 No Related Allowance Recorded: Commercial: Mortgages $— $4,676 $— $9,019 $— $— Construction & development — — — — — — Commercial & industrial 4,986 6,458 5,081 6,550 — — Residential real estate: Mortgages 9,069 14,385 9,256 14,569 — — Homeowner construction — — — — — — Consumer: Home equity lines 81 — 81 — — — Home equity loans 476 1,137 476 1,177 — — Other 14 116 14 116 — — Subtotal 14,626 26,772 14,908 31,431 — — With Related Allowance Recorded: Commercial: Mortgages 4,954 5,104 9,910 6,087 1,018 448 Construction & development — — — — — — Commercial & industrial 191 662 212 699 1 3 Residential real estate: Mortgages 715 1,285 741 1,310 104 151 Homeowner construction — — — — — — Consumer: Home equity lines — — — — — — Home equity loans — — — — — — Other 133 28 132 29 6 4 Subtotal 5,993 7,079 10,995 8,125 1,129 606 Total impaired loans $20,619 $33,851 $25,903 $39,556 $1,129 $606 Total: Commercial $10,131 $16,900 $15,203 $22,355 $1,019 $451 Residential real estate 9,784 15,670 9,997 15,879 104 151 Consumer 704 1,281 703 1,322 6 4 Total impaired loans $20,619 $33,851 $25,903 $39,556 $1,129 $606 (1) The recorded investment in impaired loans consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and costs. For accruing impaired loans (troubled debt restructurings for which management has concluded that the collectability of the loan is not in doubt), the recorded investment also includes accrued interest. The following table presents the average recorded investment balance of impaired loans and interest income recognized on impaired loans segregated by loan class: (Dollars in thousands) Average Recorded Investment Interest Income Recognized Years ended December 31, 2017 2016 2015 2017 2016 2015 Commercial: Mortgages $8,425 $13,201 $14,847 $79 $239 $327 Construction & development — — — — — — Commercial & industrial 6,445 3,540 3,415 281 99 130 Residential real estate: Mortgages 14,571 12,848 5,423 444 322 147 Homeowner construction — — — — — — Consumer: Home equity lines 79 354 228 7 10 1 Home equity loans 606 1,233 487 24 38 11 Other 143 147 210 10 11 10 Totals $30,269 $31,323 $24,610 $845 $719 $626 Troubled Debt Restructurings Troubled debt restructurings are classified as impaired loans. The Corporation identifies loss allocations for impaired loans on an individual loan basis. The recorded investment in troubled debt restructurings was $11.2 million and $22.3 million , respectively, at December 31, 2017 and 2016 . These amounts included insignificant balances of accrued interest. The allowance for loan losses included specific reserves for these troubled debt restructurings of $1.1 million and $567 thousand , respectively, at December 31, 2017 and 2016 . As of December 31, 2017 , there were no significant commitments to lend additional funds to borrowers whose loans were restructured. The following table presents loans modified as a troubled debt restructuring: (Dollars in thousands) Outstanding Recorded Investment (1) # of Loans Pre-Modifications Post-Modifications Years ended December 31, 2017 2016 2017 2016 2017 2016 Commercial: Mortgages — 1 $— $776 $— $776 Construction & development — — — — — — Commercial & industrial — 9 — 6,229 — 6,229 Residential real estate: Mortgages — 3 — 4,386 — 4,386 Homeowner construction — — — — — — Consumer: Home equity lines — — — — — — Home equity loans — — — — — — Other — — — — — — Totals — 13 $— $11,391 $— $11,391 (1) The recorded investment in troubled debt restructurings consists of unpaid principal balance, net of charge-offs and unamortized deferred loan origination fees and costs, at the time of the restructuring. For accruing troubled debt restructured loans, the recorded investment also includes accrued interest. The following table provides information on how loans were modified as a troubled debt restructuring: (Dollars in thousands) Years ended December 31, 2017 2016 Below-market interest rate concession $— $— Payment deferral — 1,111 Maturity / amortization concession — 683 Interest only payments — 4,326 Combination (1) — 5,271 Total $— $11,391 (1) Loans included in this classification were modified with a combination of any two of the concessions listed in this table. In 2017 , there were no payment defaults on troubled debt restructured loans modified within the previous 12 months. In 2016 , payment defaults on troubled debt restructured loans modified within the previous 12 months occurred on seven loans totaling $1.6 million . Credit Quality Indicators Commercial The Corporation utilizes an internal rating system to assign a risk to each of its commercial loans. Loans are rated on a scale of 1 to 10. This scale can be assigned to three broad categories including “pass” for ratings 1 through 6, “special mention” for 7-rated loans, and “classified” for loans rated 8, 9 or 10. The loan rating system takes into consideration parameters including the borrower’s financial condition, the borrower’s performance with respect to loan terms, the adequacy of collateral, the adequacy of guarantees and other credit quality characteristics. As of December 31, 2017 and 2016 , the weighted average risk rating of the Corporation’s commercial loan portfolio was 4.70 and 4.68 , respectively. For non-impaired loans, the Corporation takes the risk rating into consideration along with other credit attributes in the establishment of an appropriate allowance for loan losses. See Note 6 for additional information. A description of the commercial loan categories is as follows: Pass - Loans with acceptable credit quality, defined as ranging from superior or very strong to a status of lesser stature. Superior or very strong credit quality is characterized by a high degree of cash collateralization or strong balance sheet liquidity. Lesser stature loans have an acceptable level of credit quality but exhibit some weakness in various credit metrics such as collateral adequacy, cash flow, secondary sources of repayment, or performance inconsistency or may be in an industry or of a loan type known to have a higher degree of risk. Special Mention - Loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s position as creditor at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Examples of these conditions include but are not limited to outdated or poor quality financial data, strains on liquidity and leverage, losses or negative trends in operating results, marginal cash flow, weaknesses in occupancy rates or trends in the case of commercial real estate and frequent delinquencies. Classified - Loans identified as “substandard,” “doubtful” or “loss” based on criteria consistent with guidelines provided by banking regulators. A “substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. The loans are closely watched and are either already on nonaccrual status or may be placed on nonaccrual status when management determines there is uncertainty of collectibility. A “doubtful” loan is placed on nonaccrual status and has a high probability of loss, but the extent of the loss is difficult to quantify due to dependency upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be determined. “Loss” is not intended to imply that the loan has no recovery value but rather it is not practical or desirable to continue to carry the asset. The Corporation’s procedures call for loan ratings and classifications to be revised whenever information becomes available that indicates a change is warranted. The criticized loan portfolio, which generally consists of commercial loans that are risk-rated special mention or worse, and other selected loans are reviewed by management on a quarterly basis, focusing on the current status and strategies to improve the credit. An annual loan review program is conducted by a third party to provide an independent evaluation of the creditworthiness of the commercial loan portfolio, the quality of the underwriting and credit risk management practices and the appropriateness of the risk rating classifications. This review is supplemented with selected targeted internal reviews of the commercial loan portfolio. The following table presents the commercial loan portfolio, segregated by category of credit quality indicator: (Dollars in thousands) Pass Special Mention Classified December 31, 2017 2016 2017 2016 2017 2016 Mortgages $1,067,373 $1,065,358 $— $776 $5,114 $8,052 Construction & development 138,008 121,371 — — — — Commercial & industrial 592,749 559,416 9,804 8,938 9,781 7,755 Total commercial loans $1,798,130 $1,746,145 $9,804 $9,714 $14,895 $15,807 Residential and Consumer The residential and consumer portfolios are monitored on an ongoing basis by the Corporation using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed on an aggregate basis in these relatively homogeneous portfolios. For non-impaired loans, the Corporation assigns loss allocation factors to each respective loan type. See Note 6 for additional information. Various other techniques are utilized to monitor indicators of credit deterioration in the portfolios of residential real estate mortgages and home equity lines and loans. Among these techniques is the periodic tracking of loans with an updated FICO score and an estimated loan to value (“LTV”) ratio. LTV ratio is determined via statistical modeling analyses. The indicated LTV levels are estimated based on such factors as the location, the original LTV ratio, and the date of origination of the loan and do not reflect actual appraisal amounts. The results of these analyses and other loan review procedures are taken into consideration in the determination of loss allocation factors for residential mortgage and home equity consumer credits. See Note 6 for additional information. The following table presents the residential and consumer loan portfolios, segregated by category of credit quality indicator: (Dollars in thousands) Current Past Due December 31, 2017 2016 2017 2016 Residential real estate: Self-originated mortgages $1,070,501 $954,867 $6,413 $11,017 Purchased mortgages 128,102 127,731 1,442 1,209 Homeowner construction 20,790 27,924 — — Total residential loans $1,219,393 $1,110,522 $7,855 $12,226 Consumer: Home equity lines $256,774 $263,519 $1,340 $681 Home equity loans 32,552 35,762 1,801 1,510 Other 31,484 38,342 43 143 Total consumer loans $320,810 $337,623 $3,184 $2,334 Loan Servicing Activities Loans sold with servicing retained result in the capitalization of loan servicing rights. The following table presents an analysis of loan servicing rights: (Dollars in thousands) Loan Servicing Rights Valuation Allowance Total Balance at December 31, 2014 $2,989 ($2 ) $2,987 Loan servicing rights capitalized 1,406 — 1,406 Amortization (1,047 ) — (1,047 ) Decrease in impairment reserve — 1 1 Balance at December 31, 2015 3,348 (1 ) 3,347 Loan servicing rights capitalized 1,412 — 1,412 Amortization (1,267 ) — (1,267 ) Decrease in impairment reserve — 1 1 Balance at December 31, 2016 3,493 — 3,493 Loan servicing rights capitalized 1,104 — 1,104 Amortization (984 ) — (984 ) Decrease in impairment reserve — — — Balance at December 31, 2017 $3,613 $— $3,613 The following table presents estimated aggregate amortization expense related to loan servicing assets: (Dollars in thousands) Years ending December 31: 2018 $899 2019 675 2020 507 2021 381 2022 286 Thereafter 865 Total estimated amortization expense $3,613 Loans sold to others are serviced on a fee basis under various agreements. Loans serviced for others are not included in the Consolidated Balance Sheets. The following table presents the balance of loans serviced for others by type of loan: (Dollars in thousands) December 31, 2017 2016 Residential mortgages $568,311 $522,766 Commercial loans 108,539 101,317 Total $676,850 $624,083 |