Loans | Loans The following table shows the composition of the Company's loan portfolio as of September 30, 2016 and 2015 and at December 31, 2015 : September 30, 2016 December 31, 2015 September 30, 2015 Commercial Real estate $ 297,808,000 28.9 % $ 269,462,000 27.3 % $ 268,741,000 27.9 % Construction 18,828,000 1.8 % 24,881,000 2.5 % 23,624,000 2.5 % Other 131,198,000 12.8 % 128,341,000 13.0 % 119,097,000 12.4 % Municipal 26,153,000 2.5 % 19,751,000 2.0 % 21,377,000 2.2 % Residential Term 403,159,000 39.2 % 403,030,000 40.7 % 385,145,000 39.9 % Construction 14,269,000 1.4 % 8,451,000 0.9 % 12,029,000 1.2 % Home equity line of credit 111,994,000 10.9 % 110,202,000 11.1 % 109,390,000 11.4 % Consumer 25,583,000 2.5 % 24,520,000 2.5 % 23,748,000 2.5 % Total $ 1,028,992,000 100.0 % $ 988,638,000 100.0 % $ 963,151,000 100.0 % Loan balances include net deferred loan costs of $4,648,000 as of September 30, 2016 , $3,686,000 as of December 31, 2015 , and $3,452,000 as of September 30, 2015 . Pursuant to collateral agreements, qualifying first mortgage loans, which totaled $262,001,000 at September 30, 2016 , $279,463,000 at December 31, 2015 , and $281,925,000 at September 30, 2015 , were used to collateralize borrowings from the FHLB. In addition, commercial, construction and home equity loans totaling $261,416,000 at September 30, 2016 , $243,578,000 at December 31, 2015 , and $251,937,000 at September 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 September 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 $ — $ 385,000 $ 1,101,000 $ 1,486,000 $ 296,322,000 $ 297,808,000 $ — Construction — — — — 18,828,000 18,828,000 — Other 573,000 18,000 53,000 644,000 130,554,000 131,198,000 — Municipal — — — — 26,153,000 26,153,000 — Residential Term 414,000 3,896,000 1,925,000 6,235,000 396,924,000 403,159,000 — Construction — — — — 14,269,000 14,269,000 — Home equity line of credit 310,000 49,000 708,000 1,067,000 110,927,000 111,994,000 — Consumer 124,000 124,000 62,000 310,000 25,273,000 25,583,000 7,000 Total $ 1,421,000 $ 4,472,000 $ 3,849,000 $ 9,742,000 $ 1,019,250,000 $ 1,028,992,000 $ 7,000 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 September 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 $ 193,000 $ 863,000 $ — $ 1,056,000 $ 267,685,000 $ 268,741,000 $ — Construction — 31,000 208,000 239,000 23,385,000 23,624,000 — Other 10,000 — — 10,000 119,087,000 119,097,000 — Municipal — — — — 21,377,000 21,377,000 — Residential Term 982,000 3,012,000 2,956,000 6,950,000 378,195,000 385,145,000 — Construction — — — — 12,029,000 12,029,000 — Home equity line of credit 577,000 — 618,000 1,195,000 108,195,000 109,390,000 — Consumer 146,000 52,000 110,000 308,000 23,440,000 23,748,000 109,000 Total $ 1,908,000 $ 3,958,000 $ 3,892,000 $ 9,758,000 $ 953,393,000 $ 963,151,000 $ 109,000 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 September 30, 2016 and 2015 and at December 31, 2015 is presented in the following table: September 30, 2016 December 31, 2015 September 30, 2015 Commercial Real estate $ 1,222,000 $ 915,000 $ 1,220,000 Construction — 238,000 208,000 Other 412,000 66,000 114,000 Municipal — — — Residential Term 4,475,000 5,260,000 5,491,000 Construction — — — Home equity line of credit 851,000 893,000 948,000 Consumer 170,000 — — Total $ 7,130,000 $ 7,372,000 $ 7,981,000 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 September 30, 2016 is presented in the following table: For the nine months ended September 30, 2016 For the quarter ended September 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 $ 5,530,000 $ 5,601,000 $ — $ 6,559,000 $ 186,000 $ 5,540,000 $ 41,000 Construction — — — 43,000 1,000 10,000 — Other 754,000 801,000 — 1,016,000 33,000 883,000 12,000 Municipal — — — — — — — Residential Term 11,675,000 12,830,000 — 10,830,000 340,000 11,183,000 131,000 Construction — — — — — — — Home equity line of credit 1,334,000 1,705,000 — 1,171,000 26,000 1,080,000 13,000 Consumer 55,000 96,000 — 6,000 3,000 18,000 3,000 $ 19,348,000 $ 21,033,000 $ — $ 19,625,000 $ 589,000 $ 18,714,000 $ 200,000 With an Allowance Recorded Commercial Real estate $ 4,912,000 $ 5,094,000 $ 381,000 $ 3,940,000 $ 130,000 $ 4,899,000 $ 59,000 Construction 788,000 788,000 99,000 834,000 27,000 788,000 9,000 Other 500,000 503,000 68,000 312,000 21,000 519,000 9,000 Municipal — — — — — — — Residential Term 2,456,000 2,667,000 318,000 3,529,000 79,000 2,929,000 13,000 Construction — — — — — — — Home equity line of credit 66,000 68,000 32,000 75,000 1,000 80,000 — Consumer 115,000 115,000 51,000 51,000 2,000 115,000 2,000 $ 8,837,000 $ 9,235,000 $ 949,000 $ 8,741,000 $ 260,000 $ 9,330,000 $ 92,000 Total Commercial Real estate $ 10,442,000 $ 10,695,000 $ 381,000 $ 10,499,000 $ 316,000 $ 10,439,000 $ 100,000 Construction 788,000 788,000 99,000 877,000 28,000 798,000 9,000 Other 1,254,000 1,304,000 68,000 1,328,000 54,000 1,402,000 21,000 Municipal — — — — — — — Residential Term 14,131,000 15,497,000 318,000 14,359,000 419,000 14,112,000 144,000 Construction — — — — — — — Home equity line of credit 1,400,000 1,773,000 32,000 1,246,000 27,000 1,160,000 13,000 Consumer 170,000 211,000 51,000 57,000 5,000 133,000 5,000 $ 28,185,000 $ 30,268,000 $ 949,000 $ 28,366,000 $ 849,000 $ 28,044,000 $ 292,000 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 September 30, 2015 is presented in the following table: For the nine months ended September 30, 2015 For the quarter ended September 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 $ 7,976,000 $ 8,444,000 $ — $ 9,410,000 $ 247,000 $ 8,310,000 $ 65,000 Construction — — — — — — — Other 1,660,000 1,728,000 — 2,077,000 76,000 1,698,000 34,000 Municipal — — — — — — — Residential Term 10,096,000 11,006,000 — 10,482,000 268,000 9,852,000 95,000 Construction — — — — — — — Home equity line of credit 1,484,000 2,135,000 — 1,383,000 36,000 1,498,000 21,000 Consumer — — — 56,000 3,000 62,000 — $ 21,216,000 $ 23,313,000 $ — $ 23,408,000 $ 630,000 $ 21,420,000 $ 215,000 With an Allowance Recorded Commercial Real estate $ 3,252,000 $ 3,332,000 $ 71,000 $ 2,969,000 $ 108,000 $ 3,294,000 $ 37,000 Construction 996,000 996,000 282,000 1,206,000 38,000 996,000 13,000 Other 76,000 83,000 8,000 317,000 4,000 152,000 — Municipal — — — — — — — Residential Term 5,180,000 5,485,000 435,000 5,375,000 166,000 5,429,000 46,000 Construction — — — — — — — Home equity line of credit 66,000 67,000 30,000 227,000 2,000 67,000 — Consumer — — — — — — — $ 9,570,000 $ 9,963,000 $ 826,000 $ 10,094,000 $ 318,000 $ 9,938,000 $ 96,000 Total Commercial Real estate $ 11,228,000 $ 11,776,000 $ 71,000 $ 12,379,000 $ 355,000 $ 11,604,000 $ 102,000 Construction 996,000 996,000 282,000 1,206,000 38,000 996,000 13,000 Other 1,736,000 1,811,000 8,000 2,394,000 80,000 1,850,000 34,000 Municipal — — — — — — — Residential Term 15,276,000 16,491,000 435,000 15,857,000 434,000 15,281,000 141,000 Construction — — — — — — — Home equity line of credit 1,550,000 2,202,000 30,000 1,610,000 38,000 1,565,000 21,000 Consumer — — — 56,000 3,000 62,000 — $ 30,786,000 $ 33,276,000 $ 826,000 $ 33,502,000 $ 948,000 $ 31,358,000 $ 311,000 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 September 30, 2016 , the Company had 75 loans with a value of $22,025,000 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 $24,715,000 classified as TDRs as of December 31, 2015 and September 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 September 30, 2016 : Number of Loans Balance Specific Reserves Commercial Real estate 11 $ 9,221,000 $ 116,000 Construction 1 788,000 99,000 Other 7 841,000 5,000 Municipal — — — Residential Term 53 10,626,000 272,000 Construction — — — Home equity line of credit 3 549,000 — Consumer — — — 75 $ 22,025,000 $ 492,000 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 September 30, 2015 : Number of Loans Balance Specific Reserves Commercial Real estate 16 $ 10,696,000 $ 69,000 Construction 1 788,000 76,000 Other 13 1,621,000 1,000 Municipal — — — Residential Term 53 10,837,000 378,000 Construction — — — Home equity line of credit 5 773,000 — Consumer — — — 88 $ 24,715,000 $ 524,000 As of September 30, 2016 , eight of the loans classified as TDRs with a total balance of $1,060,000 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 September 30, 2016 : Number of Loans Balance Specific Reserves Commercial Real estate — $ — $ — Construction — — — Other — — — Municipal — — — Residential Term 8 1,060,000 78,000 Construction — — — Home equity line of credit — — — Consumer — — — 8 $ 1,060,000 $ 78,000 As of September 30, 2015 , 10 of the loans classified as TDRs with a total balance of $1,593,000 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 September 30, 2015 : Number of Loans Balance Specific Reserves Commercial Real estate — $ — $ — Construction — — — Other — — — Municipal — — — Residential Term 10 1,593,000 96,000 Construction — — — Home equity line of credit — — — Consumer — — — 10 $ 1,593,000 $ 96,000 For the nine months ended September 30, 2016 , no loans were placed on TDR status. This compares to one loan placed on TDR status with a post-modification outstanding balance of $108,000 for the nine months ended September 30, 2015. This was considered a TDR because concessions had been granted to borrowers experiencing financial difficulties. Concessions include reductions in interest rates, principal and/or interest forbearance, payment extensions, or combinations thereof. The following table shows loans placed on TDR status in the nine months ended September 30, 2015, by class of loan and the associated specific reserve included in the allowance for loan losses as of September 30, 2015: Number of Loans Pre-Modification Post-Modification Outstanding Specific Reserves Commercial Real estate — $ — $ — $ — Construction — — — — Other — — — — Municipal — — — — Residential Term 1 111,000 108,000 — Construction — — — — Home equity line of credit — — — — Consumer — — — — 1 $ 111,000 $ 108,000 $ — For the quarter ended September 30, 2016 no loans were placed on TDR status. This compares to one loan placed on TDR status with a post-modification outstanding balance of $108,000 for the quarter ended September 30, 2015. This was considered a TDRs because concessions had been granted to borrowers experiencing financial difficulties. Concessions include reductions in interest rates, principal and/or interest forbearance, payment extensions, or combinations thereof. The following table shows loans placed on TDR status in the three months ended September 30, 2015, by class of loan and the associated specific reserve included in the allowance for loan losses as of September 30, 2015: Number of Loans Pre-Modification Post-Modification Outstanding Specific Reserves Commercial Real estate — $ — $ — $ — Construction — — — — Other — — — — Municipal — — — — Residential Term 1 111,000 108,000 — Construction — — — — Home equity line of credit — — — — Consumer — — — — 1 $ 111,000 $ 108,000 $ — As of September 30, 2016 , Management is aware of six loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $1,062,000 . There were also nine loans with an outstanding balance of $971,000 that were classified as TDRs and on non-accrual status. Three loans with an outstanding balance of $222,000 , that were classified as TDRs, were in the process of foreclosure. Residential Mortgage Loans in Process of Foreclosure As of September 30, 2016 , there were 13 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,508,000 ; this compares to 18 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $2,038,000 as of September 30, 2015 . |