LOANS

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

LOANS

NOTE 3 - LOANS

The composition of loans receivable and loans held-for-sale is as follows:

(in thousands)	September 30, 2014			December 31, 2013
Residential 1-4 family	$	242,222		$	231,113
Residential 5+ multifamily		5,397			4,848
Construction of residential 1-4 family		2,042			1,876
Home equity credit		34,826			34,139
Residential real estate		284,487			271,976
Commercial		96,096			91,853
Construction of commercial		17,865			10,948
Commercial real estate		113,961			102,801
Farm land		3,301			3,402
Vacant land		9,037			9,067
Real estate secured		410,786			387,246
Commercial and industrial		45,100			46,292
Municipal		6,181			4,252
Consumer		4,027			3,889
Loans receivable, gross		466,094			441,679
Deferred loan origination fees and costs, net		1,203			1,182
Allowance for loan losses		(5,384	)		(4,683	)
Loans receivable, net	$	461,913		$	438,178
Loans held-for-sale
Residential 1-4 family	$	—		$	173

Concentrations of Credit Risk

Salisbury's loans consist primarily of residential and commercial real estate loans located principally in northwestern Connecticut and nearby New York and Massachusetts towns, which constitute Salisbury's service area. Salisbury offers a broad range of loan and credit facilities to borrowers in its service area, including residential mortgage loans, commercial real estate loans, construction loans, working capital loans, equipment loans, and a variety of consumer loans, including home equity lines of credit, and installment and collateral loans. All residential and commercial mortgage loans are collateralized by first or second mortgages on real estate. 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 Salisbury’s market area.

Loan Credit Quality

The composition of loans receivable by risk rating grade is as follows:

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
September 30, 2014
Residential 1-4 family	$	221,221	$	13,755	$	7,152	$	94	$	—	$	242,222
Residential 5+ multifamily		3,253		1,079		1,065		—		—		5,397
Construction of residential 1-4 family		2,042		—		—		—		—		2,042
Home equity credit		32,183		1,179		1,464		—		—		34,826
Residential real estate		258,699		16,013		9,681		94		—		284,487
Commercial		76,287		11,756		8,053		—		—		96,096
Construction of commercial		16,721		563		581		—		—		17,865
Commercial real estate		93,008		12,319		8,634		—		—		113,961
Farm land		817		1,378		1,106		—		—		3,301
Vacant land		5,745		143		3,149		—		—		9,037
Real estate secured		358,269		29,853		22,570		94		—		410,786
Commercial and industrial		39,648		4,641		811		—		—		45,100
Municipal		6,181		—		—		—		—		6,181
Consumer		3,918		81		28		—		—		4,027
Loans receivable, gross	$	408,016	$	34,575	$	23,409	$	94	$	—	$	466,094
(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
December 31, 2013
Residential 1-4 family	$	212,683	$	12,338	$	5,997	$	95	$	—	$	231,113
Residential 5+ multifamily		2,674		1,199		975		—		—		4,848
Construction of residential 1-4 family		1,876		—		—		—		—		1,876
Home equity credit		31,444		1,355		1,340		—		—		34,139
Residential real estate		248,677		14,892		8,312		95		—		271,976
Commercial		67,554		16,044		8,255		—		—		91,853
Construction of commercial		10,257		102		589		—		—		10,948
Commercial real estate		77,811		16,146		8,844		—		—		102,801
Farm land		847		1,421		1,134		—		—		3,402
Vacant land		5,640		288		3,139		—		—		9,067
Real estate secured		332,975		32,747		21,429		95		—		387,246
Commercial and industrial		37,860		7,452		980		—		—		46,292
Municipal		4,252		—		—		—		—		4,252
Consumer		3,739		113		37		—		—		3,889
Loans receivable, gross	$	378,826	$	40,312	$	22,446	$	95	$	—	$	441,679

The composition of loans receivable by delinquency status is as follows:

				Past due
												180		30		Accruing 90
												days		days		days
				1-29		30-59		60-89		90-179		and		and		and		Non-
(in thousands)		Current		days		days		days		days		over		over		over		accrual
September 30, 2014
Residential 1-4 family	$	231,727	$	6,752	$	71	$	1,583	$	1,793	$	296	$	3,743	$	453	$	2,589
Residential 5+ multifamily		5,306		—		1		90		—		—		91		—		90
Construction of residential 1-4 family		2,042		—		—		—		—		—		—		—		—
Home equity credit		34,222		77		96		15		317		99		527		—		630
Residential real estate		273,297		6,829		168		1,688		2,110		395		4,361		453		3,309
Commercial		93,383		1,153		132		193		—		1,235		1,560		—		1,427
Construction of commercial		17,865		—		—		—		—		—		—		—		131
Commercial real estate		111,248		1,153		132		193		—		1,235		1,560		—		1,558
Farm land		2,180		722		15		—		—		384		399		—		384
Vacant land		5,957		190		25		—		—		2,865		2,890		—		2,865
Real estate secured		392,682		8,894		340		1,881		2,110		4,879		9,210		453		8,116
Commercial and industrial		44,341		696		20		28		15		—		63		—		20
Municipal		6,181		—		—		—		—		—		—		—		—
Consumer		3,959		55		6		7		—		—		13		—		22
Loans receivable, gross	$	447,163	$	9,645	$	366	$	1,916	$	2,125	$	4,879	$	9,286	$	453	$	8,158
December 31, 2013
Residential 1-4 family	$	222,356	$	3,853	$	1,795	$	2,622	$	353	$	134	$	4,904	$	—	$	1,525
Residential 5+ multifamily		4,749		—		—		99		—		—		99		—		—
Construction of residential 1-4 family		1,876		—		—		—		—		—		—		—		—
Home equity credit		33,391		129		361		125		—		133		619		—		402
Residential real estate		262,372		3,982		2,156		2,846		353		267		5,622		—		1,927
Commercial		89,434		566		371		108		235		1,139		1,853		—		1,857
Construction of commercial		9,784		1,025		—		139		—		—		139		—		—
Commercial real estate		99,218		1,591		371		247		235		1,139		1,992		—		1,857
Farm land		2,995		23		—		—		—		384		384		—		384
Vacant land		6,058		139		—		—		—		2,870		2,870		—		2,870
Real estate secured		370,643		5,735		2,527		3,093		588		4,660		10,868		—		7,038
Commercial and industrial		45,897		262		112		—		—		21		133		—		134
Municipal		4,252		—		—		—		—		—		—		—		—
Consumer		3,746		113		29		1		—		—		30		—		—
Loans receivable, gross	$	424,538	$	6,110	$	2,668	$	3,094	$	588	$	4,681	$	11,031	$	—	$	7,172

Troubled Debt Restructurings

Troubled debt restructurings occurring during the periods are as follows:

	Three months ended September 30, 2014						Nine months ended September 30, 2014
(in thousands)	Quantity		Pre-modification balance		Post-modification balance		Quantity		Pre-modification balance		Post-modification balance
Residential real estate		1	$	207	$	207		2	$	237	$	237
Commercial real estate		1		399		399		3		846		846
Construction of commercial		1		131		131		1		131		131
Home equity credit		—		—		—		2		72		72
Troubled debt restructurings		3	$	737	$	737		8	$	1,286	$	1,286
Interest only and term extension		—	$	—	$	—		1	$	48	$	48
Term extension and amortization		2		338		338		2		338		338
Debt consolidation and term extension		—		—		—		2		447		447
Debt consolidation, rate reduction, term extension		1		399		399		1		399		399
Interest only		—		—		—		2		54		54
Troubled debt restructurings		3	$	737	$	737		8	$	1,286	$	1,286

Three loans were restructured during the quarter ended September 30, 2014 and all were current at September 30, 2014.

Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

	Three months ended September 30, 2014												Nine months ended September 30, 2014
		Beginning		Provision			Charge-			Reco-		Ending		Beginning		Provision			Charge-			Reco-		Ending
(in thousands)		balance		(benefit)			offs			veries		balance		balance		(benefit)			offs			veries		balance
Residential	$	1,974	$	357		$	(46	)	$	16	$	2,301	$	1,938	$	494		$	(149	)	$	18	$	2,301
Commercial		1,622		89			—			—		1,711		1,385		378			(52	)		—		1,711
Land		184		(17	)		(6	)		—		161		226		33			(98	)		—		161
Real estate		3,780		429			(52	)		16		4,173		3,549		905			(299	)		18		4,173
Commercial and industrial		584		(68	)		—			1		517		561		(57	)		(1	)		14		517
Municipal		44		18			—			—		62		43		19			—			—		62
Consumer		49		11			(3	)		2		59		105		(46	)		(18	)		18		59
Unallocated		645		(72	)		—			—		573		425		148			—			—		573
Totals	$	5,102	$	318		$	(55	)	$	19	$	5,384	$	4,683	$	969		$	(318	)	$	50	$	5,384

The composition of loans receivable and the allowance for loan losses is as follows:

		Collectively evaluated				Individually evaluated				Total portfolio
(in thousands)		Loans		Allowance		Loans		Allowance		Loans		Allowance
September 30, 2014
Residential 1-4 family	$	235,995	$	1,302	$	6,227	$	499	$	242,222	$	1,801
Residential 5+ multifamily		4,370		66		1,027		3		5,397		69
Construction of residential 1-4 family		2,042		17		—		—		2,042		17
Home equity credit		34,148		353		678		61		34,826		414
Residential real estate		276,555		1,738		7,932		563		284,487		2,301
Commercial		91,393		994		4,703		527		96,096		1,521
Construction of commercial		17,734		190		131		—		17,865		190
Commercial real estate		109,127		1,184		4,834		527		113,961		1,711
Farm land		2,917		59		384		—		3,301		59
Vacant land		5,955		64		3,082		38		9,037		102
Real estate secured		394,554		3,045		16,232		1,128		410,786		4,173
Commercial and industrial		44,503		490		597		27		45,100		517
Municipal		6,181		62		—		—		6,181		62
Consumer		3,945		37		82		22		4,027		59
Unallocated allowance		—		573		—		—		—		573
Totals	$	449,183	$	4,207	$	16,911	$	1,177	$	466,094	$	5,384
		Collectively evaluated				Individually evaluated				Total portfolio
(in thousands)		Loans		Allowance		Loans		Allowance		Loans		Allowance
December 31, 2013
Residential 1-4 family	$	225,419	$	897	$	5,694	$	617	$	231,113	$	1,514
Residential 5+ multifamily		3,894		20		954		—		4,848		20
Construction of residential 1-4 family		1,876		11		—		—		1,876		11
Home equity credit		33,689		363		450		30		34,139		393
Residential real estate		264,878		1,291		7,098		647		271,976		1,938
Commercial		87,059		977		4,794		282		91,853		1,259
Construction of commercial		10,948		126		—		—		10,948		126
Commercial real estate		98,007		1,103		4,794		282		102,801		1,385
Farm land		3,018		61		384		—		3,402		61
Vacant land		5,972		64		3,095		101		9,067		165
Real estate secured		371,875		2,519		15,371		1,030		387,246		3,549
Commercial and industrial		45,584		519		708		42		46,292		561
Municipal		4,252		43		—		—		4,252		43
Consumer		3,710		36		179		69		3,889		105
Unallocated allowance		—		425		—		—		—		425
Totals	$	425,421	$	3,542	$	16,258	$	1,141	$	441,679	$	4,683

The credit quality segments of loans receivable and the allowance for loan losses are as follows:

		Collectively evaluated				Individually evaluated				Total portfolio
(in thousands)		Loans		Allowance		Loans		Allowance		Loans		Allowance
September 30, 2014
Performing loans	$	439,458	$	3,112	$	61	$	21	$	439,519	$	3,133
Potential problem loans		9,725		522		12		—		9,737		522
Impaired loans		—		—		16,838		1,156		16,838		1,156
Unallocated allowance		—		573		—		—		—		573
Totals	$	449,183	$	4,207	$	16,911	$	1,177	$	466,094	$	5,384
December 31, 2013
Performing loans	$	416,734	$	2,835	$	157	$	69	$	416,891	$	2,904
Potential problem loans		8,687		282		429		19		9,116		301
Impaired loans		—		—		15,672		1,053		15,672		1,053
Unallocated allowance		—		425		—		—		—		425
Totals	$	425,421	$	3,542	$	16,258	$	1,141	$	441,679	$	4,683

	Impaired loans with specific allowance										Impaired loans with no specific allowance
	Loan balance						Specific		Income		Loan balance						Income
(in thousands)	Book		Note		Average		allowance		recognized		Book		Note		Average		recognized
September 30, 2014
Residential	$	5,107	$	5,252	$	4,392	$	503	$	100	$	2,146	$	2,252	$	2,779	$	38
Home equity credit		179		184		110		61		—		499		513		454		4
Residential real estate		5,286		5,436		4,502		564		100		2,645		2,765		3,233		42
Commercial		3,572		3,746		3,183		527		74		1,131		1,325		1,529		34
Construction of commercial		—		—		—		—		—		131		136		121		3
Farm land		—		—		—		—		—		384		384		384		—
Vacant land		3,082		3,997		3,090		38		10		—		—		—		—
Real estate secured		11,940		13,179		10,775		1,129		184		4,291		4,610		5,267		79
Commercial and industrial		95		140		107		27		—		490		492		528		23
Consumer		—		—		—		—		—		22		22		22		—
Totals	$	12,035	$	13,319	$	10,882	$	1,156	$	184	$	4,803	$	5,124	$	5,817	$	102
December 31, 2013
Residential	$	4,409	$	4,516	$	3,995	$	598	$	99	$	2,073	$	2,522	$	2,285	$	54
Home equity credit		72		72		101		30		2		378		428		251		4
Residential real estate		4,481		4,588		4,096		628		101		2,451		2,950		2,536		58
Commercial		2,777		2,835		2,349		282		127		1,771		2,299		2,411		47
Construction of commercial		—		—		3		—		—		—		20		8		—
Farm land		—		—		—		—		—		384		384		118		—
Vacant land		3,095		3,889		1,853		101		—		—		100		1,430		—
Real estate secured		10,353		11,312		8,301		1,011		228		4,606		5,753		6,503		105
Commercial and industrial		119		154		233		42		1		573		975		595		36
Consumer		—		—		—		—		—		22		22		—		—
Totals	$	10,472	$	11,466	$	8,534	$	1,053	$	229	$	5,201	$	6,750	$	7,098	$	141