Loans | Loans The following table shows the composition of the Company's loan portfolio as of June 30, 2016 and 2015 and at December 31, 2015 : June 30, 2016 December 31, 2015 June 30, 2015 Commercial Real estate $ 303,312,000 29.2 % $ 269,462,000 27.3 % $ 249,414,000 25.9 % Construction 18,439,000 1.8 % 24,881,000 2.5 % 39,504,000 4.1 % Other 136,651,000 13.2 % 128,341,000 13.0 % 128,249,000 13.3 % Municipal 25,531,000 2.5 % 19,751,000 2.0 % 22,821,000 2.4 % Residential Term 403,461,000 38.8 % 403,030,000 40.7 % 378,090,000 39.2 % Construction 13,403,000 1.3 % 8,451,000 0.9 % 14,215,000 1.5 % Home equity line of credit 112,536,000 10.8 % 110,202,000 11.1 % 108,788,000 11.3 % Consumer 24,880,000 2.4 % 24,520,000 2.5 % 22,028,000 2.3 % Total $ 1,038,213,000 100.0 % $ 988,638,000 100.0 % $ 963,109,000 100.0 % Loan balances include net deferred loan costs of $4,478,000 as of June 30, 2016 , $3,686,000 as of December 31, 2015 , and $3,246,000 as of June 30, 2015 . Pursuant to collateral agreements, qualifying first mortgage loans, which totaled $270,293,000 at June 30, 2016 , $279,463,000 at December 31, 2015 , and $284,707,000 at June 30, 2015 , were used to collateralize borrowings from the FHLB. In addition, commercial, construction and home equity loans totaling $263,707,000 at June 30, 2016 , $243,578,000 at December 31, 2015 , and $278,235,000 at June 30, 2015 , were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused. For all loan classes, loans over 30 days past due are considered delinquent. Information on the past-due status of loans by class of financing receivable as of June 30, 2016 , is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate $ 332,000 $ 998,000 $ 296,000 $ 1,626,000 $ 301,686,000 $ 303,312,000 $ — Construction — 29,000 17,000 46,000 18,393,000 18,439,000 — Other 131,000 218,000 314,000 663,000 135,988,000 136,651,000 — Municipal — — — — 25,531,000 25,531,000 — Residential Term 662,000 4,235,000 2,110,000 7,007,000 396,454,000 403,461,000 245,000 Construction — — — — 13,403,000 13,403,000 — Home equity line of credit 764,000 27,000 362,000 1,153,000 111,383,000 112,536,000 68,000 Consumer 283,000 7,000 8,000 298,000 24,582,000 24,880,000 8,000 Total $ 2,172,000 $ 5,514,000 $ 3,107,000 $ 10,793,000 $ 1,027,420,000 $ 1,038,213,000 $ 321,000 Information on the past-due status of loans by class of financing receivable as of December 31, 2015 , is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate $ 603,000 $ — $ 281,000 $ 884,000 $ 268,578,000 $ 269,462,000 $ — Construction 35,000 — 238,000 273,000 24,608,000 24,881,000 — Other 303,000 — 25,000 328,000 128,013,000 128,341,000 25,000 Municipal — — — — 19,751,000 19,751,000 — Residential Term 450,000 2,098,000 2,639,000 5,187,000 397,843,000 403,030,000 100,000 Construction 368,000 — — 368,000 8,083,000 8,451,000 — Home equity line of credit 261,000 255,000 592,000 1,108,000 109,094,000 110,202,000 — Consumer 102,000 26,000 11,000 139,000 24,381,000 24,520,000 11,000 Total $ 2,122,000 $ 2,379,000 $ 3,786,000 $ 8,287,000 $ 980,351,000 $ 988,638,000 $ 136,000 Information on the past-due status of loans by class of financing receivable as of June 30, 2015 , is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate $ 1,850,000 $ — $ 264,000 $ 2,114,000 $ 247,300,000 $ 249,414,000 $ — Construction — — 208,000 208,000 39,296,000 39,504,000 — Other 124,000 — 138,000 262,000 127,987,000 128,249,000 — Municipal — — — — 22,821,000 22,821,000 — Residential Term 810,000 2,314,000 3,146,000 6,270,000 371,820,000 378,090,000 90,000 Construction 160,000 — — 160,000 14,055,000 14,215,000 — Home equity line of credit 649,000 122,000 838,000 1,609,000 107,179,000 108,788,000 35,000 Consumer 152,000 130,000 111,000 393,000 21,635,000 22,028,000 111,000 Total $ 3,745,000 $ 2,566,000 $ 4,705,000 $ 11,016,000 $ 952,093,000 $ 963,109,000 $ 236,000 For all classes, loans are placed on non-accrual status when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status). A loan is "well secured" if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. A loan is "in the process of collection" if collection of the loan is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or, (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future. Cash payments received on non-accrual loans, which are included in impaired loans, are applied to reduce the loan's principal balance until the remaining principal balance is deemed collectible, after which interest is recognized when collected. As a general rule, a loan may be restored to accrual status when payments are current for a substantial period of time, generally six months, and repayment of the remaining contractual amounts is expected or when it otherwise becomes well secured and in the process of collection. Information on nonaccrual loans as of June 30, 2016 and 2015 and at December 31, 2015 is presented in the following table: June 30, 2016 December 31, 2015 June 30, 2015 Commercial Real estate $ 1,227,000 $ 915,000 $ 1,538,000 Construction 46,000 238,000 208,000 Other 378,000 66,000 429,000 Municipal — — — Residential Term 4,291,000 5,260,000 5,698,000 Construction — — — Home equity line of credit 421,000 893,000 964,000 Consumer 115,000 — 95,000 Total $ 6,478,000 $ 7,372,000 $ 8,932,000 Impaired loans include troubled debt restructured and loans placed on non-accrual. These loans are measured at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, a specific reserve is established for the difference, or, in certain situations, if the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, the difference is written off. A breakdown of impaired loans by class of financing receivable as of and for the period ended June 30, 2016 is presented in the following table: For the six months ended June 30, 2016 For the quarter ended June 30, 2016 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income Average Recorded Investment Recognized Interest Income With No Related Allowance Commercial Real estate $ 6,654,000 $ 6,817,000 $ — $ 7,068,000 $ 145,000 $ 6,916,000 $ 66,000 Construction 46,000 46,000 — 60,000 1,000 40,000 — Other 955,000 994,000 — 1,083,000 21,000 1,045,000 13,000 Municipal — — — — — — — Residential Term 10,924,000 12,085,000 — 10,653,000 209,000 10,592,000 118,000 Construction — — — — — — — Home equity line of credit 912,000 1,266,000 — 1,216,000 13,000 1,079,000 5,000 Consumer — — — — — — — $ 19,491,000 $ 21,208,000 $ — $ 20,080,000 $ 389,000 $ 19,672,000 $ 202,000 With an Allowance Recorded Commercial Real estate $ 4,031,000 $ 4,116,000 $ 369,000 $ 3,458,000 $ 71,000 $ 3,518,000 $ 35,000 Construction 788,000 788,000 97,000 857,000 18,000 788,000 10,000 Other 524,000 530,000 158,000 209,000 12,000 337,000 12,000 Municipal — — — — — — — Residential Term 3,181,000 3,266,000 326,000 3,830,000 66,000 3,664,000 23,000 Construction — — — — — — — Home equity line of credit 63,000 64,000 28,000 73,000 1,000 63,000 — Consumer 115,000 115,000 51,000 19,000 — 38,000 — $ 8,702,000 $ 8,879,000 $ 1,029,000 $ 8,446,000 $ 168,000 $ 8,408,000 $ 80,000 Total Commercial Real estate $ 10,685,000 $ 10,933,000 $ 369,000 $ 10,526,000 $ 216,000 $ 10,434,000 $ 101,000 Construction 834,000 834,000 97,000 917,000 19,000 828,000 10,000 Other 1,479,000 1,524,000 158,000 1,292,000 33,000 1,382,000 25,000 Municipal — — — — — — — Residential Term 14,105,000 15,351,000 326,000 14,483,000 275,000 14,256,000 141,000 Construction — — — — — — — Home equity line of credit 975,000 1,330,000 28,000 1,289,000 14,000 1,142,000 5,000 Consumer 115,000 115,000 51,000 19,000 — 38,000 — $ 28,193,000 $ 30,087,000 $ 1,029,000 $ 28,526,000 $ 557,000 $ 28,080,000 $ 282,000 Substantially all interest income recognized on impaired loans for all classes of financing receivables was recognized on a cash basis as received. A breakdown of impaired loans by class of financing receivable as of and for the year ended December 31, 2015 is presented in the following table: Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income With No Related Allowance Commercial Real estate $ 7,173,000 $ 7,496,000 $ — $ 8,990,000 $ 301,000 Construction 30,000 30,000 — 3,000 1,000 Other 1,163,000 1,210,000 — 1,893,000 76,000 Municipal — — — — — Residential Term 11,122,000 12,157,000 — 10,480,000 415,000 Construction — — — — — Home equity line of credit 1,401,000 2,054,000 — 1,400,000 43,000 Consumer — — — 42,000 3,000 $ 20,889,000 $ 22,947,000 $ — $ 22,808,000 $ 839,000 With an Allowance Recorded Commercial Real estate $ 3,544,000 $ 3,627,000 $ 89,000 $ 3,066,000 $ 149,000 Construction 996,000 996,000 302,000 1,153,000 44,000 Other 71,000 77,000 8,000 256,000 5,000 Municipal — — — — — Residential Term 3,966,000 4,193,000 326,000 5,228,000 180,000 Construction — — — — — Home equity line of credit 65,000 66,000 29,000 187,000 3,000 Consumer — — — — — $ 8,642,000 $ 8,959,000 $ 754,000 $ 9,890,000 $ 381,000 Total Commercial Real estate $ 10,717,000 $ 11,123,000 $ 89,000 $ 12,056,000 $ 450,000 Construction 1,026,000 1,026,000 302,000 1,156,000 45,000 Other 1,234,000 1,287,000 8,000 2,149,000 81,000 Municipal — — — — — Residential Term 15,088,000 16,350,000 326,000 15,708,000 595,000 Construction — — — — — Home equity line of credit 1,466,000 2,120,000 29,000 1,587,000 46,000 Consumer — — — 42,000 3,000 $ 29,531,000 $ 31,906,000 $ 754,000 $ 32,698,000 $ 1,220,000 A breakdown of impaired loans by class of financing receivable as of and for the period ended June 30, 2015 is presented in the following table: For the six months ended June 30, 2015 For the quarter ended June 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income Average Recorded Investment Recognized Interest Income With No Related Allowance Commercial Real estate $ 8,986,000 $ 9,436,000 $ — $ 9,959,000 $ 182,000 $ 9,020,000 $ 93,000 Construction — — — — — — — Other 1,789,000 1,855,000 — 2,267,000 42,000 2,069,000 27,000 Municipal — — — — — — — Residential Term 9,636,000 10,537,000 — 10,797,000 173,000 10,458,000 90,000 Construction — — — — — — — Home equity line of credit 1,504,000 2,140,000 — 1,326,000 15,000 1,371,000 8,000 Consumer 95,000 138,000 — 52,000 3,000 80,000 — $ 22,010,000 $ 24,106,000 $ — $ 24,401,000 $ 415,000 $ 22,998,000 $ 218,000 With an Allowance Recorded Commercial Real estate $ 3,580,000 $ 3,671,000 $ 225,000 $ 2,807,000 $ 71,000 $ 3,618,000 $ 39,000 Construction 989,000 989,000 275,000 1,311,000 25,000 1,249,000 13,000 Other 317,000 331,000 275,000 399,000 4,000 471,000 3,000 Municipal — — — — — — — Residential Term 5,784,000 6,082,000 501,000 5,348,000 120,000 5,463,000 60,000 Construction — — — — — — — Home equity line of credit 68,000 69,000 31,000 307,000 2,000 226,000 — Consumer — — — — — — 2,000 $ 10,738,000 $ 11,142,000 $ 1,307,000 $ 10,172,000 $ 222,000 $ 11,027,000 $ 117,000 Total Commercial Real estate $ 12,566,000 $ 13,107,000 $ 225,000 $ 12,766,000 $ 253,000 $ 12,638,000 $ 132,000 Construction 989,000 989,000 275,000 1,311,000 25,000 1,249,000 13,000 Other 2,106,000 2,186,000 275,000 2,666,000 46,000 2,540,000 30,000 Municipal — — — — — — — Residential Term 15,420,000 16,619,000 501,000 16,145,000 293,000 15,921,000 150,000 Construction — — — — — — — Home equity line of credit 1,572,000 2,209,000 31,000 1,633,000 17,000 1,597,000 8,000 Consumer 95,000 138,000 — 52,000 3,000 80,000 2,000 $ 32,748,000 $ 35,248,000 $ 1,307,000 $ 34,573,000 $ 637,000 $ 34,025,000 $ 335,000 Troubled Debt Restructured A troubled debt restructured ("TDR") constitutes a restructuring of debt if the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. To determine whether or not a loan should be classified as a TDR, Management evaluates a loan based upon the following criteria: • The borrower demonstrates financial difficulty; common indicators include past due status with bank obligations, substandard credit bureau reports, or an inability to refinance with another lender, and • The Company has granted a concession; common concession types include maturity date extension, interest rate adjustments to below market pricing, and deferment of payments. As of June 30, 2016 , the Company had 78 loans with a value of $22,595,000 that have been classified as TDRs. This compares to 84 loans with a value of $23,923,000 and 88 loans with a value of $25,791,000 classified as TDRs as of December 31, 2015 and June 30, 2015 , respectively. The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the expected cash flows on the loan at the original interest rate, or, for collateral-dependent loans, using the fair value of the collateral less costs to sell. The following table shows TDRs by class and the specific reserve as of June 30, 2016 : Number of Loans Balance Specific Reserves Commercial Real estate 11 $ 9,459,000 $ 105,000 Construction 1 788,000 97,000 Other 10 1,101,000 78,000 Municipal — — — Residential Term 53 10,693,000 264,000 Construction — — — Home equity line of credit 3 554,000 — Consumer — — — 78 $ 22,595,000 $ 544,000 The following table shows TDRs by class and the specific reserve as of December 31, 2015 : Number of Loans Balance Specific Reserves Commercial Real estate 15 $ 10,350,000 $ 85,000 Construction 1 788,000 94,000 Other 11 1,168,000 1,000 Municipal — — — Residential Term 53 10,875,000 275,000 Construction — — — Home equity line of credit 4 742,000 — Consumer — — — 84 $ 23,923,000 $ 455,000 The following table shows TDRs by class and the specific reserve as of June 30, 2015 : Number of Loans Balance Specific Reserves Commercial Real estate 17 $ 11,754,000 $ 130,000 Construction 1 781,000 68,000 Other 13 1,675,000 — Municipal — — — Residential Term 52 10,789,000 435,000 Construction — — — Home equity line of credit 5 792,000 — Consumer — — — 88 $ 25,791,000 $ 633,000 As of June 30, 2016 , nine of the loans classified as TDRs with a total balance of $979,000 were more than 30 days past due. Of these loans, one loan with a balance of $108,000 had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2016 : Number of Loans Balance Specific Reserves Commercial Real estate — $ — $ — Construction — — — Other 1 10,000 — Municipal — — — Residential Term 8 969,000 49,000 Construction — — — Home equity line of credit — — — Consumer — — — 9 $ 979,000 $ 49,000 As of June 30, 2015 , nine of the loans classified as TDRs with a total balance of $1,455,000 were more than 30 days past due. None of these loans had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2015 : Number of Loans Balance Specific Reserves Commercial Real estate — $ — $ — Construction — — — Other — — — Municipal — — — Residential Term 8 1,271,000 87,000 Construction — — — Home equity line of credit 1 184,000 — Consumer — — — 9 $ 1,455,000 $ 87,000 For the three months and six months ended June 30, 2016 and 2015, no loans were placed on TDR status. As of June 30, 2016 , Management is aware of six loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $1,068,000 . There were also eight loans with an outstanding balance of $879,000 that were classified as TDRs and on non-accrual status. Two loans with an outstanding balance of $117,000 , that were classified as TDRs, were in the process of foreclosure. Residential Mortgage Loans in Process of Foreclosure As of June 30, 2016 , there were 13 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,514,000 ; this compares to 17 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $1,881,000 as of June 30, 2015 . |