LOANS | LOANS The Company’s loan portfolio is comprised of the following segments: commercial real estate, commercial and industrial, residential real estate, and consumer loans. Commercial real estate loans includes commercial construction and land development and other commercial real estate loans. Commercial and industrial loans includes loans to commercial businesses, agricultural, and tax exempt loans. Residential real estate loans consists of mortgages for 1 - 4 family housing. Consumer loans include home equity loans and other installment lending. The Company’s lending activities are principally conducted in Maine, New Hampshire, and Vermont. Total loans include business activity loans and acquired loans. Acquired loans are those loans acquired from Lake Sunapee Bank Group. The following is a summary of total loans: March 31, 2018 December 31, 2017 (in thousands) Business Activities Loans Acquired Loans Total Business Activities Loans Acquired Loans Total Commercial Real Estate: Construction and land development $ 31,073 $ 14,800 $ 45,873 $ 28,892 $ 16,781 $ 45,673 Other commercial real estate 512,093 266,755 778,848 505,119 275,954 781,073 Total Commercial Real Estate 543,166 281,555 824,721 534,011 292,735 826,746 Commercial and Industrial: Other Commercial 210,304 65,198 275,502 198,051 68,069 266,120 Agricultural 26,309 — 26,309 27,588 — 27,588 Tax exempt 43,092 42,302 85,394 42,365 43,350 85,715 Total Commercial and Industrial 279,705 107,500 387,205 268,004 111,419 379,423 Total Commercial Loans 822,871 389,055 1,211,926 802,015 404,154 1,206,169 Residential Real Estate: Residential mortgages 588,465 544,512 1,132,977 591,411 564,271 1,155,682 Total Residential Real Estate 588,465 544,512 1,132,977 591,411 564,271 1,155,682 Consumer: Home equity 52,100 57,766 109,866 51,376 62,217 113,593 Other consumer 7,580 2,070 9,650 7,828 2,341 10,169 Total Consumer 59,680 59,836 119,516 59,204 64,558 123,762 Total Loans $ 1,471,016 $ 993,403 $ 2,464,419 $ 1,452,630 $ 1,032,983 $ 2,485,613 The carrying amount of the acquired loans at March 31, 2018 totaled $993.4 million . 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 $12.1 million (and a note balance of $16.6 million ). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Acquired loans considered not impaired at acquisition date had a carrying amount of $981.3 million as of March 31, 2018 . 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 March 31, (in thousands) 2018 2017 Balance at beginning of period $ 3,509 $ — Acquisitions — 3,398 Reclassification from nonaccretable difference for loans with improved cash flows 199 — Changes in expected cash flows that do not affect the nonaccretable difference — — Reclassification to troubled debt restructurings — — Accretion (361 ) (204 ) Balance at end of period $ 3,347 $ 3,194 The following is a summary of past due loans at March 31, 2018 and December 31, 2017 : Business Activities Loans (in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans Past Due > 90 days and Accruing March 31, 2018 Commercial Real Estate: Construction and land development $ — $ 2 $ 566 $ 568 $ 30,505 $ 31,073 $ — Other commercial real estate 1,008 158 6,656 7,822 504,271 512,093 — Total Commercial Real Estate 1,008 160 7,222 8,390 534,776 543,166 — Commercial and Industrial: Other Commercial 829 12 506 1,347 208,957 210,304 — Agricultural 39 88 101 228 26,081 26,309 2 Tax exempt — — — — 43,092 43,092 — Total Commercial and Industrial 868 100 607 1,575 278,130 279,705 2 Total Commercial Loans 1,876 260 7,829 9,965 812,906 822,871 2 Residential Real Estate: Residential mortgages 624 810 3,772 5,206 583,259 588,465 — Total Residential Real Estate 624 810 3,772 5,206 583,259 588,465 — Consumer: Home equity 174 28 349 551 51,549 52,100 — Other consumer 132 2 — 134 7,446 7,580 — Total Consumer 306 30 349 685 58,995 59,680 — Total Loans $ 2,806 $ 1,100 $ 11,950 $ 15,856 $ 1,455,160 $ 1,471,016 $ 2 Business Activities Loans (in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans Past Due > 90 days and Accruing December 31, 2017 Commercial Real Estate: Construction and land development $ — $ — $ 637 $ 637 $ 28,255 $ 28,892 $ — Other commercial real estate 965 1,659 5,065 7,689 497,430 505,119 119 Total Commercial Real Estate 965 1,659 5,702 8,326 525,685 534,011 119 Commercial and Industrial: Other Commercial 186 329 702 1,217 196,834 198,051 21 Agricultural 42 159 198 399 27,189 27,588 155 Tax exempt — — — — 42,365 42,365 — Total Commercial and Industrial 228 488 900 1,616 266,388 268,004 176 Total Commercial Loans 1,193 2,147 6,602 9,942 792,073 802,015 295 Residential Real Estate: Residential mortgages 3,096 711 975 4,782 586,629 591,411 — Total Residential Real Estate 3,096 711 975 4,782 586,629 591,411 — Consumer: Home equity 515 — 199 714 50,662 51,376 199 Other consumer 36 24 — 60 7,768 7,828 — Total Consumer 551 24 199 774 58,430 59,204 199 Total Loans $ 4,840 $ 2,882 $ 7,776 $ 15,498 $ 1,437,132 $ 1,452,630 $ 494 Acquired Loans (in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Acquired Credit Impaired Total Loans Past Due > 90 days and Accruing March 31, 2018 Commercial Real Estate: Construction and land development $ — $ — $ — $ — $ 260 $ 14,800 $ — Other commercial real estate 411 — 305 716 8,350 266,755 — Total Commercial Real Estate 411 — 305 716 8,610 281,555 — Commercial and Industrial: Other Commercial 208 97 148 453 459 65,198 — Agricultural — — — — — — — Tax exempt — — — — — 42,302 — Total Commercial and Industrial 208 97 148 453 459 107,500 — Total Commercial Loans 619 97 453 1,169 9,069 389,055 — Residential Real Estate: Residential mortgages 1,376 204 771 2,351 3,168 544,512 — Total Residential Real Estate 1,376 204 771 2,351 3,168 544,512 — Consumer: Home equity 292 46 80 418 25 57,766 — Other consumer 3 — — 3 3 2,070 — Total Consumer 295 46 80 421 28 59,836 — Total Loans $ 2,290 $ 347 $ 1,304 $ 3,941 $ 12,265 $ 993,403 $ — Acquired Loans (in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Acquired Credit Impaired Total Loans Past Due > 90 days and Accruing December 31, 2017 Commercial Real Estate: Construction and land development $ 124 $ 9 $ — $ 133 $ 258 $ 16,781 $ — Other commercial real estate 278 — 411 689 8,397 275,954 — Total Commercial Real Estate 402 9 411 822 8,655 292,735 — Commercial and Industrial: Other Commercial 125 14 49 188 632 68,069 — Agricultural — — — — — — — Tax exempt — — — — — 43,350 — Total Commercial and Industrial 125 14 49 188 632 111,419 — Total Commercial Loans 527 23 460 1,010 9,287 404,154 — Residential Real Estate: Residential mortgages 752 388 614 1,754 3,259 564,271 — Total Residential Real Estate 752 388 614 1,754 3,259 564,271 — Consumer: Home equity 125 117 80 322 38 62,217 16 Other consumer 2 — — 2 3 2,341 — Total Consumer 127 117 80 324 41 64,558 16 Total Loans $ 1,406 $ 528 $ 1,154 $ 3,088 $ 12,587 $ 1,032,983 $ 16 Non-Accrual Loans The following is summary information pertaining to non-accrual loans at March 31, 2018 and December 31, 2017 : March 31, 2018 December 31, 2017 (in thousands) Business Activities Loans Acquired Loans Total Business Activities Loans Acquired Loans Total Commercial Real Estate: Construction and land development $ 566 $ — $ 566 $ 637 $ — $ 637 Other commercial real estate 7,401 455 7,856 7,146 560 7,706 Total Commercial Real Estate 7,967 455 8,422 7,783 560 8,343 Commercial and Industrial: Other Commercial 1,532 528 2,060 703 463 1,166 Agricultural 244 — 244 43 — 43 Tax exempt — — — — — — Total Commercial and Industrial 1,776 528 2,304 746 463 1,209 Total Commercial Loans 9,743 983 10,726 8,529 1,023 9,552 Residential Real Estate: Residential mortgages 6,527 2,021 8,548 3,408 858 4,266 Total Residential Real Estate 6,527 2,021 8,548 3,408 858 4,266 Consumer: Home equity 624 277 901 130 217 347 Other consumer 109 55 164 95 58 153 Total Consumer 733 332 1,065 225 275 500 Total Loans $ 17,003 $ 3,336 $ 20,339 $ 12,162 $ 2,156 $ 14,318 Loans evaluated for impairment as of March 31, 2018 and December 31, 2017 were as follows: Business Activities Loans (in thousands) Commercial real estate Commercial and industrial Residential real estate Consumer Total March 31, 2018 Loans receivable: Balance at end of period Individually evaluated for impairment $ 7,641 $ 1,504 $ 4,386 $ 362 $ 13,893 Collectively evaluated 535,525 278,201 584,079 59,318 1,457,123 Total $ 543,166 $ 279,705 $ 588,465 $ 59,680 $ 1,471,016 Business Activities Loans (in thousands) Commercial real estate Commercial and industrial Residential real estate Consumer Total December 31, 2017 Loans receivable: Balance at end of period Individually evaluated for impairment $ 7,604 $ 626 $ 1,404 $ 13 $ 9,647 Collectively evaluated 526,407 267,378 590,007 59,191 1,442,983 Total $ 534,011 $ 268,004 $ 591,411 $ 59,204 $ 1,452,630 Acquired Loans (in thousands) Commercial real estate Commercial and industrial Residential real estate Consumer Total March 31, 2018 Loans receivable: Balance at end of period Individually evaluated for impairment $ 133 $ 598 $ 503 $ — $ 1,234 Purchased Credit Impaired 8,610 459 3,168 28 12,265 Collectively evaluated 272,812 106,443 540,841 59,808 979,904 Total $ 281,555 $ 107,500 $ 544,512 $ 59,836 $ 993,403 Acquired Loans (in thousands) Commercial real estate Commercial and industrial Residential real estate Consumer Total December 31, 2017 Loans receivable: Balance at end of period Individually evaluated for impairment $ 241 $ 571 $ 271 $ 63 $ 1,146 Purchased Credit Impaired 8,655 632 3,259 41 12,587 Collectively evaluated 283,839 110,216 560,741 64,454 1,019,250 Total $ 292,735 $ 111,419 $ 564,271 $ 64,558 $ 1,032,983 The following is a summary of impaired loans at March 31, 2018 and December 31, 2017 : Business Activities Loans March 31, 2018 (in thousands) Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance: Construction and land development $ 566 $ 2,491 $ — Commercial real estate other 5,933 5,944 — Commercial other 962 966 — Agricultural — — — Tax exempt loans — — — Residential real estate 3,586 3,603 — Home equity 362 463 — Consumer other — — — With an allowance recorded: Construction and land development $ — $ — $ — Commercial real estate other 1,142 1,204 433 Commercial other 542 544 132 Agricultural — — — Tax exempt loans — — — Residential real estate 800 801 84 Home equity — — — Consumer other — — — Total Commercial real estate $ 7,641 $ 9,639 $ 433 Commercial and industrial 1,504 1,510 132 Residential real estate 4,386 4,404 84 Consumer 362 463 — Total impaired loans $ 13,893 $ 16,016 $ 649 Acquired Loans March 31, 2018 (in thousands) Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance: Construction and land development $ — $ — $ — Commercial real estate other 133 245 — Commercial other 176 175 — Agricultural — — — Tax exempt loans — — — Residential real estate 503 507 — Home equity — — — Consumer other — — — With an allowance recorded: Construction and land development $ — $ — $ — Commercial real estate other — — — Commercial other 422 436 121 Agricultural — — — Tax exempt loans — — — Residential real estate — — — Home equity — — — Consumer other — — — Total Commercial real estate $ 133 $ 245 $ — Commercial and industrial 598 611 121 Residential real estate 503 507 — Consumer — — — Total impaired loans $ 1,234 $ 1,363 $ 121 Business Activities Loans December 31, 2017 (in thousands) Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance: Construction and land development $ — $ — $ — Commercial real estate other 5,896 5,903 — Commercial other 218 217 — Agricultural — — — Tax exempt loans — — — Residential real estate 1,247 1,260 — Home equity 13 13 — Consumer other — — — With an allowance recorded: Construction and land development $ 637 $ 2,563 $ 59 Commercial real estate other 1,071 1,132 388 Commercial other 408 408 3 Agricultural — — — Tax exempt loans — — — Residential real estate 157 157 9 Home equity — — — Consumer other — — — Total Commercial real estate $ 7,604 $ 9,598 $ 447 Commercial and industrial 626 625 3 Residential real estate 1,404 1,417 9 Consumer 13 13 — Total impaired loans $ 9,647 $ 11,653 $ 459 Acquired Loans December 31, 2017 (in thousands) Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance: Construction and land development $ — $ — $ — Other commercial real estate 241 352 — Other commercial 571 584 — Agricultural — — — Tax exempt — — — Residential mortgages 271 278 — Home equity 63 156 — Other consumer — — — With an allowance recorded: Construction and land development $ — $ — $ — Other commercial real estate — — — Other commercial — — — Agricultural — — — Tax exempt — — — Residential mortgages — — — Home equity — — — Other consumer — — — Total Commercial real estate $ 241 $ 352 $ — Commercial and industrial 571 584 — Residential real estate 271 278 — Consumer 63 156 — Total impaired loans $ 1,146 $ 1,370 $ — The following is a summary of the average recorded investment and interest income recognized on impaired loans as of March 31, 2018 and 2017 : Business Activities Loans Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (in thousands) Average Recorded Investment Cash Basis Interest Income Recognized Average Recorded Investment Cash Basis Interest Income Recognized With no related allowance: Construction and land development $ 589 $ — $ — $ — Commercial real estate other 5,937 — 2,592 34 Commercial other 1,334 — 226 3 Agricultural — — 192 2 Tax exempt loans — — — — Residential real estate 3,591 — 1,500 22 Home equity 444 — 590 — Consumer other — — 44 1 With an allowance recorded: Construction and land development $ — $ — $ — $ — Commercial real estate other 1,144 — 1,723 — Commercial other 187 — 216 — Agricultural — — — — Tax exempt loans — — — — Residential real estate 802 — 321 — Home equity — — — — Consumer other — — 9 — Total Commercial real estate $ 7,670 $ — $ 4,315 $ 34 Commercial and industrial 1,521 — 634 5 Residential real estate 4,393 — 1,821 22 Consumer 444 — 643 1 Total impaired loans $ 14,028 $ — $ 7,413 $ 62 Acquired Loans Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (in thousands) Average Recorded Investment Cash Basis Interest Income Recognized Average Recorded Investment Cash Basis Interest Income Recognized With no related allowance: Construction and land development $ — $ — $ — $ — Commercial real estate other 133 — — — Commercial other 161 1 — — Agricultural — — — — Tax exempt loans — — — — Residential real estate 508 — — — Home equity — — — — Consumer other — — — — With an allowance recorded: Construction and land development $ — $ — $ — $ — Commercial real estate other — — — — Commercial other 434 — — — Agricultural — — — — Tax exempt loans — — — — Residential real estate — — — — Home equity — — — — Consumer other — — — — Total Commercial real estate $ 133 $ — $ — $ — Commercial and industrial 595 1 — — Residential real estate 508 — — — Consumer — — — — Total impaired loans $ 1,236 $ 1 $ — $ — 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 months ended March 31, 2018 and for the three months ended March 31, 2017 , 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 months ended March 31, 2018 were attributable to interest rate concessions, maturity date extensions, reamortization or a combination of two concessions. The modifications for the three months ending March 31, 2017 were attributable to interest rate concessions, maturity date extensions, or a combination of both. Three Months Ended March 31, 2018 (Dollars in thousands) Number of Modifications Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Troubled Debt Restructurings Commercial installment 2 $ 452 $ 448 Agricultural 1 2 2 Commercial real estate 1 167 — Residential real estate 5 1,105 1,099 Consumer other 1 1 1 Total 10 $ 1,727 $ 1,550 Three Months Ended March 31, 2017 (Dollars in thousands) Number of Modifications Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Troubled Debt Restructurings Commercial installment 1 $ 80 $ 80 Residential real estate 2 575 574 Consumer other 1 38 37 Total 4 $ 693 $ 691 For the three months ended March 31, 2018 , there were no loans restructured that had subsequently defaulted during the period. The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs. Foreclosure As of March 31, 2018 , the Company maintained foreclosed residential real estate property with a fair value of $216 thousand . Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of March 31, 2018 and December 31, 2017 totaled $1.6 million and $843 thousand , respectively. As of December 31, 2017 , foreclosed residential real estate property totaled $122 thousand . Mortgage Banking Total residential loans included held for sale loans of $4.8 million and $13.4 million at March 31, 2018 and December 31, 2017, respectively. |