Loans | Loans The following table shows the composition of the Company's loan portfolio as of September 30, 2021 and 2020 and at December 31, 2020: September 30, 2021 December 31, 2020 September 30, 2020 Commercial Real estate $ 550,077,000 34.0 % $ 442,121,000 29.9 % $ 407,128,000 28.3 % Construction 73,302,000 4.6 % 56,565,000 3.8 % 52,038,000 3.6 % Other 288,121,000 17.8 % 285,015,000 19.3 % 309,297,000 21.5 % Municipal 40,616,000 2.5 % 43,783,000 3.0 % 44,110,000 3.1 % Residential Term 537,811,000 33.3 % 522,070,000 35.3 % 497,667,000 34.6 % Construction 29,358,000 1.8 % 21,600,000 1.5 % 16,101,000 1.2 % Home equity line of credit 74,594,000 4.6 % 79,750,000 5.4 % 82,982,000 5.8 % Consumer 23,333,000 1.4 % 25,857,000 1.8 % 27,323,000 1.9 % Total $ 1,617,212,000 100.0 % $ 1,476,761,000 100.0 % $ 1,436,646,000 100.0 % Loan balances include net deferred loan costs of $6,597,000 as of September 30, 2021, $6,931,000 as of December 31, 2020, and $5,323,000 as of September 30, 2020. Net deferred loan costs have increased from a year ago and decreased year-to-date largely due to unearned fees and deferred costs associated with US Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans originated in 2020 and during the first and second quarters of 2021. Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $356,517,000 at September 30, 2021, were used to collateralize borrowings from the FHLB. This compares to qualifying loans which totaled $378,183,000 at December 31, 2020, and $379,387,000 at September 30, 2020. In addition, commercial, construction and home equity loans totaling $291,188,000 at September 30, 2021, $259,599,000 at December 31, 2020, and $271,905,000 at September 30, 2020, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston. 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, 2021, is presented in the following table: 30-59 Days 60-89 Days 90+ Days All Current Total 90+ Days Commercial Real estate $ 33,000 $ — $ 226,000 $ 259,000 $ 549,818,000 $ 550,077,000 $ 36,000 Construction 13,000 15,000 — 28,000 73,274,000 73,302,000 — Other 92,000 359,000 225,000 676,000 287,445,000 288,121,000 — Municipal — — — — 40,616,000 40,616,000 — Residential Term 549,000 918,000 986,000 2,453,000 535,358,000 537,811,000 190,000 Construction — — — — 29,358,000 29,358,000 — Home equity line of credit 251,000 25,000 131,000 407,000 74,187,000 74,594,000 — Consumer 90,000 202,000 3,000 295,000 23,038,000 23,333,000 3,000 Total $ 1,028,000 $ 1,519,000 $ 1,571,000 $ 4,118,000 $ 1,613,094,000 $ 1,617,212,000 $ 229,000 On March 22, 2020, banking regulators issued an Interagency Statement on Loan Modifications and Reporting in response to the onset of COVID-19; shortly thereafter, on March 30, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was passed. Both the Interagency Statement and the CARES Act provided an exemption for qualified modifications from Troubled Debt Restructure ("TDR") designation, which was extended by the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. The Company actively worked with borrowers impacted by the COVID-19 outbreak and as of September 30, 2021, a total of 1,051 loan modification requests for interest-only payments or deferred payments had been completed in conformance with the Interagency Statement or CARES Act, representing $287,922,000 in loan balances, or approximately 18.3% of the loan portfolio excluding PPP balances. One of these modifications of de minimis amount has been classified as a TDR since being modified. So long as modified terms are met, loans in an active modification are not included in past due loan totals and continue to accrue interest. As of September 30, 2021, loans totaling $6,609,000, or 0.41% of all loans, remained in either their original modification or a subsequent modification. Modification statuses by portfolio segment are summarized below: Commercial/Municipal Loan Modifications Units Percentage Balance Percentage Paid Off 156 26 % $ 35,130,000 15 % Charged Off 1 — % 66,000 — % Subsequent Modification 2 — % 1,014,000 — % Still in Original Modification 1 — % 125,000 — % Out of Modification 445 74 % 197,999,000 85 % Total 605 100 % $ 234,334,000 100 % Residential Real Estate Modifications Units Percentage Balance Percentage Paid Off 73 20 % $ 12,694,000 24 % Subsequent Modification 53 14 % 5,405,000 10 % Still in Original Modification 1 — % 22,000 — % Out of Modification 250 66 % 34,457,000 66 % Total 377 100 % $ 52,578,000 100 % Consumer Loan Modifications Units Percentage Balance Percentage Paid Off 23 34 % $ 209,000 21 % Charged Off 1 1 % 10,000 1 % Subsequent Modification 2 3 % 43,000 4 % Out of Modification 43 62 % 748,000 74 % Total 69 100 % $ 1,010,000 100 % Information on the past-due status of loans by class of financing receivable as of December 31, 2020, is presented in the following table: 30-59 Days 60-89 Days 90+ Days All Current Total 90+ Days Commercial Real estate $ 139,000 $ 190,000 $ 226,000 $ 555,000 $ 441,566,000 $ 442,121,000 $ — Construction 13,000 — 80,000 93,000 56,472,000 56,565,000 — Other 490,000 62,000 2,082,000 2,634,000 282,381,000 285,015,000 1,464,000 Municipal — — — — 43,783,000 43,783,000 — Residential Term 540,000 1,799,000 1,616,000 3,955,000 518,115,000 522,070,000 23,000 Construction — — — — 21,600,000 21,600,000 — Home equity line of credit 1,645,000 324,000 367,000 2,336,000 77,414,000 79,750,000 — Consumer 89,000 42,000 18,000 149,000 25,708,000 25,857,000 18,000 Total $ 2,916,000 $ 2,417,000 $ 4,389,000 $ 9,722,000 $ 1,467,039,000 $ 1,476,761,000 $ 1,505,000 Information on the past-due status of loans by class of financing receivable as of September 30, 2020, is presented in the following table: 30-59 Days 60-89 Days 90+ Days All Current Total 90+ Days Commercial Real estate $ 2,397,000 $ 58,000 $ 454,000 $ 2,909,000 $ 404,219,000 $ 407,128,000 $ — Construction — — 80,000 80,000 51,958,000 52,038,000 — Other 547,000 258,000 1,871,000 2,676,000 306,621,000 309,297,000 1,464,000 Municipal — — — — 44,110,000 44,110,000 — Residential Term 2,550,000 357,000 1,602,000 4,509,000 493,158,000 497,667,000 — Construction — — — — 16,101,000 16,101,000 — Home equity line of credit 868,000 65,000 1,392,000 2,325,000 80,657,000 82,982,000 — Consumer 219,000 28,000 30,000 277,000 27,046,000 27,323,000 30,000 Total $ 6,581,000 $ 766,000 $ 5,429,000 $ 12,776,000 $ 1,423,870,000 $ 1,436,646,000 $ 1,494,000 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, 2021 and 2020 and at December 31, 2020 is presented in the following table: September 30, 2021 December 31, 2020 September 30, 2020 Commercial Real estate $ 604,000 $ 543,000 $ 1,771,000 Construction 23,000 89,000 307,000 Other 1,251,000 1,481,000 503,000 Municipal — — — Residential Term 3,785,000 3,593,000 4,467,000 Construction — — — Home equity line of credit 482,000 1,015,000 2,063,000 Consumer — — — Total $ 6,145,000 $ 6,721,000 $ 9,111,000 Impaired loans include TDR loans 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, 2021 is presented in the following table: For the nine months ended September 30, 2021 For the quarter ended September 30, 2021 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 $ 1,906,000 $ 2,257,000 $ — $ 2,215,000 $ 50,000 $ 2,053,000 $ 15,000 Construction 24,000 25,000 — 69,000 — 24,000 — Other 1,353,000 1,459,000 — 1,534,000 12,000 1,372,000 4,000 Municipal — — — — — — — Residential Term 7,021,000 8,181,000 — 7,231,000 101,000 7,180,000 33,000 Construction — — — 9,000 — — — Home equity line of credit 482,000 516,000 — 725,000 — 546,000 — Consumer 4,000 4,000 — 6,000 — 4,000 — $ 10,790,000 $ 12,442,000 $ — $ 11,789,000 $ 163,000 $ 11,179,000 $ 52,000 With an Allowance Recorded Commercial Real estate $ 894,000 $ 923,000 $ 138,000 $ 940,000 $ 30,000 $ 910,000 $ 10,000 Construction 681,000 681,000 18,000 681,000 17,000 681,000 6,000 Other 402,000 421,000 397,000 466,000 10,000 403,000 5,000 Municipal — — — — — — — Residential Term 1,761,000 1,923,000 129,000 1,753,000 32,000 1,641,000 9,000 Construction — — — — — — — Home equity line of credit 21,000 21,000 — 15,000 — 21,000 — Consumer — — — 1,000 — 3,000 — $ 3,759,000 $ 3,969,000 $ 682,000 $ 3,856,000 $ 89,000 $ 3,659,000 $ 30,000 Total Commercial Real estate $ 2,800,000 $ 3,180,000 $ 138,000 $ 3,155,000 $ 80,000 $ 2,963,000 $ 25,000 Construction 705,000 706,000 18,000 750,000 17,000 705,000 6,000 Other 1,755,000 1,880,000 397,000 2,000,000 22,000 1,775,000 9,000 Municipal — — — — — — — Residential Term 8,782,000 10,104,000 129,000 8,984,000 133,000 8,821,000 42,000 Construction — — — 9,000 — — — Home equity line of credit 503,000 537,000 — 740,000 — 567,000 — Consumer 4,000 4,000 — 7,000 — 7,000 — $ 14,549,000 $ 16,411,000 $ 682,000 $ 15,645,000 $ 252,000 $ 14,838,000 $ 82,000 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, 2020 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 $ 2,060,000 $ 2,368,000 $ — $ 4,123,000 $ 127,000 Construction 89,000 89,000 — 358,000 — Other 1,591,000 1,623,000 — 999,000 15,000 Municipal — — — — — Residential Term 7,335,000 8,629,000 — 8,773,000 193,000 Construction — — — — — Home equity line of credit 1,015,000 1,089,000 — 1,219,000 — Consumer 8,000 8,000 — 1,000 1,000 $ 12,098,000 $ 13,806,000 $ — $ 15,473,000 $ 336,000 With an Allowance Recorded Commercial Real estate $ 969,000 $ 995,000 $ 112,000 $ 1,018,000 $ 43,000 Construction 681,000 681,000 18,000 579,000 30,000 Other 188,000 202,000 169,000 1,193,000 3,000 Municipal — — — — — Residential Term 2,079,000 2,134,000 163,000 2,073,000 65,000 Construction — — — — — Home equity line of credit 24,000 24,000 — 744,000 1,000 Consumer — — — 8,000 — $ 3,941,000 $ 4,036,000 $ 462,000 $ 5,615,000 $ 142,000 Total Commercial Real estate $ 3,029,000 $ 3,363,000 $ 112,000 $ 5,141,000 $ 170,000 Construction 770,000 770,000 18,000 937,000 30,000 Other 1,779,000 1,825,000 169,000 2,192,000 18,000 Municipal — — — — — Residential Term 9,414,000 10,763,000 163,000 10,846,000 258,000 Construction — — — — — Home equity line of credit 1,039,000 1,113,000 — 1,963,000 1,000 Consumer 8,000 8,000 — 9,000 1,000 $ 16,039,000 $ 17,842,000 $ 462,000 $ 21,088,000 $ 478,000 A breakdown of impaired loans by class of financing receivable as of and for the period ended September 30, 2020 is presented in the following table: For the nine months ended September 30, 2020 For the quarter ended September 30, 2020 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 $ 3,730,000 $ 4,528,000 $ — $ 4,673,000 $ 117,000 $ 4,068,000 $ 33,000 Construction 308,000 337,000 — 402,000 — 256,000 — Other 862,000 887,000 — 796,000 19,000 814,000 6,000 Municipal — — — — — — — Residential Term 7,783,000 9,058,000 — 9,173,000 123,000 8,024,000 31,000 Construction — — — — — — — Home equity line of credit 1,478,000 1,551,000 — 1,284,000 10,000 1,438,000 2,000 Consumer — — — — — — — $ 14,161,000 $ 16,361,000 $ — $ 16,328,000 $ 269,000 $ 14,600,000 $ 72,000 With an Allowance Recorded Commercial Real estate $ 1,023,000 $ 1,047,000 $ 135,000 $ 1,032,000 $ 32,000 $ 1,027,000 $ 11,000 Construction 701,000 701,000 19,000 546,000 25,000 701,000 8,000 Other 161,000 183,000 128,000 1,523,000 — 143,000 — Municipal — — — — — — — Residential Term 2,399,000 2,466,000 204,000 2,002,000 63,000 2,207,000 27,000 Construction — — — — — — — Home equity line of credit 886,000 886,000 403,000 981,000 1,000 870,000 1,000 Consumer 10,000 10,000 1,000 10,000 — 3,000 — $ 5,180,000 $ 5,293,000 $ 890,000 $ 6,094,000 $ 121,000 $ 4,951,000 $ 47,000 Total Commercial Real estate $ 4,753,000 $ 5,575,000 $ 135,000 $ 5,705,000 $ 149,000 $ 5,095,000 $ 44,000 Construction 1,009,000 1,038,000 19,000 948,000 25,000 957,000 8,000 Other 1,023,000 1,070,000 128,000 2,319,000 19,000 957,000 6,000 Municipal — — — — — — — Residential Term 10,182,000 11,524,000 204,000 11,175,000 186,000 10,231,000 58,000 Construction — — — — — — — Home equity line of credit 2,364,000 2,437,000 403,000 2,265,000 11,000 2,308,000 3,000 Consumer 10,000 10,000 1,000 10,000 — 3,000 — $ 19,341,000 $ 21,654,000 $ 890,000 $ 22,422,000 $ 390,000 $ 19,551,000 $ 119,000 Troubled Debt Restructured A "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, 2021, the Company had 64 loans with a balance of $10,051,000 that have been classified as TDRs. This compares to 74 loans with a balance of $11,534,000 and 78 loans with a balance of $13,390,000 classified as TDRs as of December 31, 2020 and September 30, 2020, 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, 2021: Number of Loans Balance Specific Reserves Commercial Real estate 10 $ 2,238,000 $ 138,000 Construction 1 681,000 18,000 Other 6 883,000 351,000 Municipal — — — Residential Term 45 6,224,000 129,000 Construction — — — Home equity line of credit 1 21,000 — Consumer 1 4,000 — 64 $ 10,051,000 $ 636,000 The following table shows TDRs by class and the specific reserve as of December 31, 2020: Number of Loans Balance Specific Reserves Commercial Real estate 13 $ 2,558,000 $ 106,000 Construction 1 681,000 18,000 Other 6 717,000 96,000 Municipal — — — Residential Term 51 7,384,000 149,000 Construction — — — Home equity line of credit 2 186,000 — Consumer 1 8,000 — 74 $ 11,534,000 $ 369,000 The following table shows TDRs by class and the specific reserve as of September 30, 2020: Number of Loans Balance Specific Reserves Commercial Real estate 16 $ 4,054,000 $ 130,000 Construction 1 701,000 19,000 Other 6 729,000 92,000 Municipal — — — Residential Term 51 7,430,000 153,000 Construction — — — Home equity line of credit 3 466,000 — Consumer 1 10,000 1,000 78 $ 13,390,000 $ 395,000 As of September 30, 2021, 12 of the loans classified as TDRs with a total balance of $1,095,000 were more than 30 days past due. Of these loans, two 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, 2021: Number of Loans Balance Specific Reserves Commercial Real estate — $ — $ — Construction — — — Other 5 641,000 351,000 Municipal — — — Residential Term 6 450,000 — Construction — — — Home equity line of credit — — — Consumer 1 4,000 — 12 $ 1,095,000 $ 351,000 As of September 30, 2020, 15 of the loans classified as TDRs with a total balance of $2,814,000 were more than 30 days past due. Of these loans, two 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, 2020: Number of Loans Balance Specific Reserves Commercial Real estate 3 $ 1,472,000 $ — Construction — — Other 4 424,000 92,000 Municipal — — Residential Term 6 743,000 — Construction — — — Home equity line of credit 1 165,000 — Consumer 1 10,000 1,000 15 $ 2,814,000 $ 93,000 For the nine months ended September 30, 2021, three loans were placed on TDR status. The following table shows these TDRs, by class and the associated specific reserves included in the allowance for loan losses as of September 30, 2021: Number of Loans Pre-Modification Post-Modification Outstanding Specific Reserves Commercial Real estate — $ — $ — $ — Construction 1 80,000 80,000 — Other 1 261,000 261,000 261,000 Municipal — — — — Residential Term 1 9,000 4,000 — Construction — — — — Home equity line of credit — — — — Consumer — — — — 3 $ 350,000 $ 345,000 $ 261,000 For the nine months ended September 30, 2020, three loans were placed on TDR status. The following table shows these TDRs by class and associated specific reserves included in the allowance for loan losses as of September 30, 2020: Number of Loans Pre-Modification Post-Modification Outstanding Specific Reserves Commercial Real estate — $ — $ — $ — Construction — — — — Other — — — — Municipal — — — — Residential Term 2 235,000 187,000 23,000 Construction — — — — Home equity line of credit — — — — Consumer 1 10,000 10,000 1,000 3 $ 245,000 $ 197,000 $ 24,000 For the quarter ended September 30, 2021, no loans were placed on TDR status. For the quarter ended September 30, 2020, one loan was placed on TDR status. The following table shows this TDR by class and the associated specific reserve included in the allowance for loan losses as of September 30, 2020: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Specific Reserves Commercial Real estate — $ — $ — $ — Construction — — — — Other — — — — Municipal — — — — Residential Term — — — — Construction — — — — Home equity line of credit — — — Consumer 1 10,000 10,000 1,000 1 $ 10,000 $ 10,000 $ 1,000 As of September 30, 2021, Management is aware of eight loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $961,000. There were also 19 loans with an outstanding balance of $1,648,000 that were classified as TDRs and on non-accrual status, of which no loans were in the process of foreclosure. Residential Mortgage Loans in Process of Foreclosure As of September 30, 2021, there were 10 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $839,000. This compares to 17 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $2,083,000 as of September 30, 2020. |