LOANS

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

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 single and multi-family, commercial construction and land, and other commercial real estate classes. Commercial and industrial loans includes loans to commercial businesses, agricultural and other loans to farmers, and tax exempt loans. Residential real estate loans consists of mortgages for 1 to 4 family housing. Consumer loans include home equity loans, indirect auto 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:

	September 30, 2017						December 31, 2016
(In thousands)	Business Activities  Loans		Acquired Loans		Total		Business Activities  Loans		Acquired Loans		Total
Commercial Real Estate:
Construction and land development	$	33,692	$	15,593	$	49,285	$	14,695	$	—	$	14,695
Other commercial real estate	455,847		288,440		744,287		403,424		—		403,424
Total Commercial Real Estate:	489,539		304,033		793,572		418,119		—		418,119
Commercial and Industrial:
Other Commercial	172,186		68,090		240,276		103,586		—		103,586
Agricultural and other loans to farmers	30,483		—		30,483		31,808		—		31,808
Tax exempt	40,776		45,537		86,313		15,846		—		15,846
Total Commercial and Industrial:	243,445		113,627		357,072		151,240		—		151,240
Total Commercial Loans:	732,984		417,660		1,150,644		569,359		—		569,359
Residential Real Estate:
Residential mortgages	568,277		584,351		1,152,628		506,612		—		506,612
Total Residential Real Estate:	568,277		584,351		1,152,628		506,612		—		506,612
Consumer:
Home equity	50,610		64,695		115,305		46,921		—		46,921
Other consumer	7,645		2,640		10,285		6,172		—		6,172
Total Consumer:	58,255		67,335		125,590		53,093		—		53,093
Total Loans:	$	1,359,516	$	1,069,346	$	2,428,862	$	1,129,064	$	—	$	1,129,064

The carrying amount of the acquired loans at September 30, 2017 totaled $1.069 billion. 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 $14.4 million (and a note balance of $19.5 million). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans considered not impaired at acquisition date had a carrying amount of $1.055 billion.

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 September 30,
(In thousands)	2017			2016
Balance at beginning of period	$	4,567		$	—
Acquisitions	—			—
Reclassification from nonaccretable difference for loans with improved cash flows	513			—
Accretion	(423		)	—
Balance at end of period	$	4,657		$	—

	Nine Months Ended September 30,
(In thousands)	2017			2016
Balance at beginning of period	$	—		$	—
Acquisitions	3,398			—
Reclassification from nonaccretable difference for loans with improved cash flows	2,257			—
Accretion	(998		)	—
Balance at end of period	$	4,657		$	—

The following is a summary of past due loans at September 30, 2017 and December 31, 2016:

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
September 30, 2017
Commercial Real Estate:
Construction and land development	$	—	$	—	$	637	$	637	$	33,055	$	33,692	$	—
Other commercial real estate	407		121		702		1,230		454,617		455,847		—
Total Commercial Real Estate:	407		121		1,339		1,867		487,672		489,539		—
Commercial and Industrial:
Other Commercial	401		150		159		710		171,476		172,186		—
Agricultural and other loans to farmers	600		90		10		700		29,783		30,483		—
Tax exempt	—		—		—		—		40,776		40,776		—
Total Commercial and Industrial:	1,001		240		169		1,410		242,035		243,445		—
Total Commercial Loans:	1,408		361		1,508		3,277		729,707		732,984		—
Residential Real Estate:
Residential mortgages	2,904		172		1,260		4,336		563,941		568,277		—
Total Residential Real Estate:	2,904		172		1,260		4,336		563,941		568,277		—
Consumer:
Home equity	306		25		100		431		50,179		50,610		—
Other consumer	60		21		26		107		7,538		7,645		—
Total Consumer:	366		46		126		538		57,717		58,255		—
													—
Total Loans:	$	4,678	$	579	$	2,894	$	8,151	$	1,351,365	$	1,359,516	$	—

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, 2016
Commercial Real Estate:
Construction and land development	$	—	$	—	$	—	$	—	$	14,695	$	14,695	$	—
Other commercial real estate	195		554		1,665		2,414		401,010		403,424		—
Total Commercial Real Estate:	195		554		1,665		2,414		415,705		418,119		—
Commercial and Industrial:
Other Commercial	61		45		201		307		103,279		103,586		—
Agricultural and other loans to farmers	231		—		—		231		31,577		31,808		—
Tax exempt	—		—		—		—		15,846		15,846		—
Total Commercial and Industrial:	292		45		201		538		150,702		151,240		—
Total Commercial Loans:	487		599		1,866		2,952		566,407		569,359		—
Residential Real Estate:
Residential mortgages	4,484		429		938		5,851		500,761		506,612		—
Total Residential Real Estate:	4,484		429		938		5,851		500,761		506,612		—
Consumer:
Home equity	—		—		15		15		46,906		46,921		—
Other consumer	103		1		6		110		6,062		6,172		—
Total Consumer:	103		1		21		125		52,968		53,093		—
													—
Total Loans:	$	5,074	$	1,029	$	2,825	$	8,928	$	1,120,136	$	1,129,064	$	—

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
September 30, 2017
Commercial Real Estate:
Construction and land development	$	20	$	10	$	—	$	30	$	258	$	15,593	$	—
Other commercial real estate	314		25		591		930		9,760		288,440		—
Total Commercial Real Estate:	334		35		591		960		10,018		304,033		—
Commercial and Industrial:
Other Commercial	396		144		—		540		917		68,090		163
Agricultural and other loans to farmers	—		—		—		—		—		—		—
Tax exempt	—		—		—		—		—		45,537		—
Total Commercial and Industrial:	396		144		—		540		917		113,627		163
Total Commercial Loans:	730		179		591		1,500		10,935		417,660		163
Residential Real Estate:
Residential mortgages	1,089		13		868		1,970		3,398		584,351		—
Total Residential Real Estate:	1,089		13		868		1,970		3,398		584,351		—
Consumer:
Home equity	388		155		193		736		40		64,695		—
Other consumer	12		144		49		205		3		2,640		—
Total Consumer:	400		299		242		941		43		67,335		—
													—
Total Loans:	$	2,219	$	491	$	1,701	$	4,411	$	14,376	$	1,069,346	$	163

Non Accrual Loans

The following is summary information pertaining to non-accrual loans at September 30, 2017 and December 31, 2016:

	September 30, 2017						December 31, 2016
(In thousands)	Business Activities  Loans		Acquired Loans		Total		Business Activities  Loans		Acquired Loans		Total
Commercial Real Estate:
Construction and land development	$	637	$	—	$	637	$	—	$	—	$	—
Other commercial real estate	1,238		591		1,829		2,564		—		2,564
Total Commercial Real Estate:	1,875		591		2,466		2,564		—		2,564
Commercial and Industrial:
Other Commercial	183		—		183		284		—		284
Agricultural and other loans to farmers	53		—		53		31		—		31
Tax exempt	—		—		—		—		—		—
Total Commercial and Industrial:	236		—		236		315		—		315
Total Commercial Loans:	2,111		591		2,702		2,879		—		2,879
Residential Real Estate:
Residential mortgages	2,751		868		3,619		3,419		—		3,419
Total Residential Real Estate:	2,751		868		3,619		3,419		—		3,419
Consumer:
Home equity	151		193		344		90		—		90
Other consumer	103		49		152		108		—		108
Total Consumer:	254		242		496		198		—		198
Total Loans:	$	5,116	$	1,701	$	6,817	$	6,496	$	—	$	6,496

Loans evaluated for impairment as of September 30, 2017 and December 31, 2016 were as follows:

Business Activities Loans

(In thousands)	Commercial real estate		Commercial  and industrial		Residential real estate		Consumer		Total
September 30, 2017
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	2,585	$	138	$	1,744	$	68	$	4,535
Collectively evaluated	486,954		243,307		566,533		58,187		1,354,981
Total	$	489,539	$	243,445	$	568,277	$	58,255	$	1,359,516

Business Activities Loans

(In thousands)	Commercial real estate		Commercial  and industrial		Residential real estate		Consumer		Total
December 31, 2016
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	4,481	$	486	$	1,709	$	33	$	6,709
Collectively evaluated	413,638		150,754		504,903		53,060		1,122,355
Total	$	418,119	$	151,240	$	506,612	$	53,093	$	1,129,064

Acquired Loans

(In thousands)	Commercial real estate		Commercial  and industrial		Residential real estate		Consumer		Total
September 30, 2017
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	408	$	470	$	271	$	156	$	1,305
Purchased Credit Impaired	10,018		917		3,398		43		14,376
Collectively evaluated	293,607		112,240		580,682		67,136		1,053,665
Total	$	304,033	$	113,627	$	584,351	$	67,335	$	1,069,346

The following is a summary of impaired loans at September 30, 2017 and December 31, 2016:

Business Activities Loans

	September 30, 2017
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Commercial real estate other	1,198		1,175		—
Commercial other	96		97		—
Agricultural and other loans to farmers	—		—		—
Tax exempt loans	—		—		—
Residential real estate	1,257		1,267		—
Home equity	13		13		—
Consumer other	—		—		—
With an allowance recorded:
Construction and land development	$	637	$	2,563	$	59
Commercial real estate other	750		808		331
Commercial other	42		42		2
Agricultural and other loans to farmers	—		—		—
Tax exempt loans	—		—		—
Residential real estate	487		487		44
Home equity	55		55		55
Consumer other	—		—		—
Total
Commercial real estate	$	2,585	$	4,546	$	390
Commercial and industrial	138		139		2
Residential real estate	1,744		1,754		44
Consumer	68		68		55
Total impaired loans	$	4,535	$	6,507	$	491

Acquired Loans

	September 30, 2017
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Commercial real estate other	108		107		—
Commercial other	470		483		—
Agricultural and other loans to farmers	—		—		—
Tax exempt loans	—		—		—
Residential real estate	271		278		—
Home equity	156		156		—
Consumer other	—		—		—
With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Commercial real estate other	300		302		168
Commercial other	—		—		—
Agricultural and other loans to farmers	—		—		—
Tax exempt loans	—		—		—
Residential real estate	—		—		—
Home equity	—		—		—
Consumer other	—		—		—
Total
Commercial real estate	$	408	$	409	$	168
Commercial and industrial	470		483		—
Residential real estate	271		278		—
Consumer	156		156		—
Total impaired loans	$	1,305	$	1,326	$	168

Business Activities Loans

	December 31, 2016
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Construction and land development	$	—	$	—	$	—
Commercial real estate other	2,831		2,919		—
Commercial other	130		130		—
Agricultural and other loans to farmers	139		139		—
Tax exempt loans	—		—		—
Residential real estate	1,387		1,504		—
Home equity	16		16		—
Consumer other	2		2		—
With an allowance recorded:
Construction and land development	$	—	$	—	$	—
Commercial real estate other	1,650		3,575		193
Commercial other	217		367		173
Agricultural and other loans to farmers	—		—		—
Tax exempt loans	—		—		—
Residential real estate	322		322		49
Home equity	—		—		—
Consumer other	15		15		9
Total
Commercial real estate	$	4,481	$	6,494	$	193
Commercial and industrial	486		636		173
Residential real estate	1,709		1,826		49
Consumer	33		33		9
Total impaired loans	$	6,709	$	8,989	$	424

The following is a summary of the average recorded investment and interest income recognized on impaired loans as of September 30, 2017 and 2016:

Business Activities Loan

	Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
(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	1,716		64		2,713		131
Commercial other	99		6		141		2
Agricultural and other loans to farmers	8		1		131		8
Tax exempt loans	—		—		—		—
Residential real estate	1,245		31		1,344		55
Home equity	13		—		17		1
Consumer other	5		2		—		1
With an allowance recorded:
Construction and land development	$	637	$	—	$	928	$	—
Commercial real estate other	693		—		551		—
Commercial other	44		1		221		—
Agricultural and other loans to farmers	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	268		5		331		—
Home equity	12		—		—		—
Consumer other	—		—		17		—
Total
Commercial real estate	$	3,046	$	64	$	4,192	$	131
Commercial and industrial	151		8		493		10
Residential real estate	1,513		36		1,675		55
Consumer	30		2		34		2
Total impaired loans	$	4,740	$	110	$	6,394	$	198

Acquired Loans

	Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
(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	89		—		—		—
Commercial other	171		—		—		—
Agricultural and other loans to farmers	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	254		1		—		—
Home equity	47		—		—		—
Consumer other	9		—		—		—
With an allowance recorded:
Construction and land development	$	—	$	—	$	—	$	—
Commercial real estate other	46		—		—		—
Commercial other	—		—		—		—
Agricultural and other loans to farmers	—		—		—		—
Tax exempt loans	—		—		—		—
Residential real estate	—		—		—		—
Home equity	—		—		—		—
Consumer other	—		—		—		—
Total
Commercial real estate	$	135	$	—	$	—	$	—
Commercial and industrial	171		—		—		—
Residential real estate	254		1		—		—
Consumer	56		—		—		—
Total impaired loans	$	616	$	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 and nine months ended September 30, 2017 and for the three and nine months ended September 30, 2016, 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 and nine months ended September 30, 2017 were attributable to interest rate concessions, maturity date extensions, reamortization or a combination of two concessions. The modifications for the three and nine months ending September 30, 2016 were attributable to interest rate concessions, maturity date extensions or a combination of both.

	Three Months Ended September 30, 2017
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial installment	5	$	483	$	483
Agricultural and other loans to farmers	—	—		—
Commercial real estate	4	144		144
Residential real estate	—	—		—
Home equity	—	—		—
Consumer other	—	—		—
Total	9	$	627	$	627

	Three Months Ended September 30, 2016
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial installment	2	$	51	$	51
Commercial real estate	2	936		915
Consumer other	1	9		9
Total	5	$	996	$	975

	Nine Months Ended September 30, 2017
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial installment	6	$	563	$	549
Agricultural and other loans to farmers	1	19		18
Commercial real estate	6	388		333
Residential real estate	3	692		675
Home equity	1	13		13
Consumer other	1	38		37
Total	18	$	1,713	$	1,625

	Nine Months Ended September 30, 2016
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial installment	2	$	51	$	51
Agricultural and other loans to farmers	2	30		24
Commercial real estate	5	1,361		1,326
Consumer Other	1	9		9
Total	10	$	1,451	$	1,410

For the three and nine months ended September 30, 2017, there were no loans that were 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.

As of September 30, 2017, the Company maintained foreclosed residential real estate property with a fair value of $122 thousand. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of September 30, 2017 and December 31, 2016 totaled $772 thousand and $2.4 million, respectively. As of December 31, 2016, foreclosed residential real estate property totaled $90 thousand.