LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the Company’s loan portfolio, excluding residential loans held for sale, was as follows for the dates indicated:



(In thousands)	March 31, 2020		December 31, 2019
Residential real estate	$	1,064,212	$	1,070,374
Commercial real estate	1,299,860		1,243,397
Commercial	444,830		421,108
Home equity	306,226		312,779
Consumer	24,377		25,772
HPFC	18,257		21,593
Total loans	$	3,157,762	$	3,095,023

The loan balances for each portfolio segment presented above are net of their respective unamortized fair value mark discount on acquired loans and net of unamortized loan origination costs for the dates indicated:



(In thousands)	March 31, 2020			December 31, 2019
Net unamortized fair value mark discount on acquired loans	$	(2,346	)	$	(2,593	)
Net unamortized loan origination costs	3,115			3,111
Total	$	769		$	518

The Company's lending activities are primarily conducted in Maine, but also include loan production offices in Massachusetts and New Hampshire. The Company originates single- and multi-family residential loans, commercial real estate loans, business loans, municipal loans and a variety of consumer loans. In addition, the Company makes loans for the construction of residential homes, multi-family properties and commercial real estate properties. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the geographic area and the general economy.

The HPFC loan portfolio is an acquired loan portfolio. It consists of niche commercial lending to the small business medical field, including dentists, optometrists and veterinarians, across the U.S. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the success of the borrower's business. In 2016, the Company closed HPFC's operations and is no longer originating HPFC loans.

In the normal course of business, the Bank makes loans to certain officers, directors and their associated companies, under terms that are consistent with the Company's lending policies and regulatory requirements and that do not involve more than the normal risk of collectability or present other unfavorable features. At March 31, 2020 and December 31, 2019, outstanding loans to certain officers, directors and their associated companies was less than 5% of the Company's shareholders' equity.

The ALL is management’s best estimate of the inherent risk of loss in the Company’s loan portfolio as of the consolidated statement of condition date. Management makes various assumptions and judgments about the collectability of the loan portfolio and provides an allowance for potential losses based on a number of factors including historical losses. If those assumptions are incorrect, the ALL may not be sufficient to cover losses and may cause an increase in the allowance in the future. Among the factors that could affect the Company’s ability to collect loans and require an increase to the allowance in the future are: (i) financial condition of borrowers; (ii) real estate market changes; (iii) state, regional, and national economic conditions, including consideration of the effect and impact of the COVID-19 pandemic; and (iv) a requirement by federal and state regulators to increase the provision for loan losses or recognize additional charge-offs.

As discussed in Note 2, the Company did not adopt ASU 2016-04, commonly referred to as "CECL", in the first quarter of 2020. The Company's ALL, as presented, has been determined in accordance with its policies and procedures described within its Annual Report on Form 10-K for the year ended December 31, 2019. In light of the COVID-19 pandemic, the Company adjusted its economic qualitative factor ("Q-factor") to estimate the impact of the health crisis on its loan portfolio, based on information available as of March 31, 2020. The Q-factor adjustment resulted in an $800,000 increase in the ALL as of March 31, 2020. The Company will continue to adjust its economic Q-factor in coming quarters, as appropriate, as additional economic data becomes available and/or should the Company experience credit deterioration within its loan portfolio. There were no other significant changes to the Company's ALL methodology during the three months ended March 31, 2020.

The Board of Directors monitors credit risk through the Directors' Loan Review Committee, which reviews large credit exposures, monitors the external loan review reports, reviews the lending authority for individual loan officers when required, and has approval authority and responsibility for all matters regarding the loan policy and other credit-related policies, including reviewing and monitoring asset quality trends, concentration levels, and the ALL methodology. Credit Risk Administration and the Credit Risk Policy Committee oversee the Company's systems and procedures to monitor the credit quality of its loan portfolio, conduct a loan review program, maintain the integrity of the loan rating system, determine the adequacy of the ALL and support the oversight efforts of the Directors' Loan Review Committee and the Board of Directors. The Company's practice is to manage the portfolio proactively such that management can identify problem credits early, assess and implement effective work-out strategies, and take charge-offs as promptly as practical. In addition, the Company continuously reassesses its underwriting standards in response to credit risk posed by changes in economic conditions.

For purposes of determining the ALL, the Company disaggregates its loans into portfolio segments, which include residential real estate, commercial real estate, commercial, home equity, consumer and HPFC. Each portfolio segment possesses unique risk characteristics that are considered when determining the appropriate level of allowance. These risk characteristics unique to each portfolio segment include the following:

Residential Real Estate. Residential real estate loans held in the Company's loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. Collateral consists of mortgage liens on one- to four-family residential properties, including for investment purposes.

Commercial Real Estate. Commercial real estate loans consist of mortgage loans to finance investments in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational, health care facilities and other specific use properties. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Commercial real estate loans are primarily paid by the cash flow generated from the real property, such as operating leases, rents, or other operating cash flows from the borrower.

Commercial. Commercial loans consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate, if applicable. Commercial loans are primarily paid by the operating cash flow of the borrower. Commercial loans may be secured or unsecured.

Home Equity. Home equity loans and lines are made to qualified individuals for legitimate purposes secured by senior or junior mortgage liens on owner-occupied one- to four-family homes, condominiums, or vacation homes. The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines.

Consumer. Consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, auto loans, debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. Consumer loans may be secured or unsecured.

HPFC. Prior to the Company's closing of HPFC's operations in 2016, it provided commercial lending to dentists, optometrists and veterinarians, many of which were start-up companies. HPFC's loan portfolio consists of term loan obligations extended for the purpose of financing working capital and/or purchase of equipment. Collateral consists of pledges of business assets including, but not limited to, accounts receivable, inventory, and/or equipment. These loans are primarily paid by the operating cash flow of the borrower.

The following presents the activity in the ALL and select loan information by portfolio segment for the periods indicated:



(In thousands)	Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			HPFC			Total
At or For The Three Months Ended March 31, 2020
ALL for the three months ended:
Beginning balance	$	5,842		$	12,414		$	3,769		$	2,423		$	507		$	216		$	25,171
Loans charged off	(96		)	(50		)	(253		)	(34		)	(57		)	—			(490		)
Recoveries	2			4			53			4			5			—			68
Provision (credit)⁽¹⁾	149			1,006			545			87			18			(33		)	1,772
Ending balance	$	5,897		$	13,374		$	4,114		$	2,480		$	473		$	183		$	26,521
ALL balance attributable to loans:
Individually evaluated for impairment	$	324		$	34		$	—		$	89		$	—		$	—		$	447
Collectively evaluated for impairment	5,573			13,340			4,114			2,391			473			183			26,074
Total ending ALL	$	5,897		$	13,374		$	4,114		$	2,480		$	473		$	183		$	26,521
Loans:
Individually evaluated for impairment	$	3,286		$	400		$	299		$	370		$	—		$	—		$	4,355
Collectively evaluated for impairment	1,060,926			1,299,460			444,531			305,856			24,377			18,257			3,153,407
Total ending loans balance	$	1,064,212		$	1,299,860		$	444,830		$	306,226		$	24,377		$	18,257		$	3,157,762
At or For The Three Months Ended March 31, 2019
ALL for the three months ended:
Beginning balance	$	6,071		$	11,654		$	3,620		$	2,796		$	234		$	337		$	24,712
Loans charged off	(11		)	(65		)	(236		)	(10		)	(14		)	—			(336		)
Recoveries	2			4			62			—			7			—			75
Provision (credit)⁽¹⁾	91			245			170			241			32			(29		)	750
Ending balance	$	6,153		$	11,838		$	3,616		$	3,027		$	259		$	308		$	25,201
ALL balance attributable to loans:
Individually evaluated for impairment	$	553		$	27		$	—		$	347		$	—		$	—		$	927
Collectively evaluated for impairment	5,600			11,811			3,616			2,680			259			308			24,274
Total ending ALL	$	6,153		$	11,838		$	3,616		$	3,027		$	259		$	308		$	25,201
Loans:
Individually evaluated for impairment	$	4,736		$	410		$	223		$	895		$	—		$	—		$	6,264
Collectively evaluated for impairment	1,012,706			1,258,064			390,759			323,074			20,733			30,842			3,036,178
Total ending loans balance	$	1,017,442		$	1,258,474		$	390,982		$	323,969		$	20,733		$	30,842		$	3,042,442



(In thousands)	Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			HPFC			Total
At or For The Year Ended December 31, 2019
ALL:
Beginning balance	$	6,071		$	11,654		$	3,620		$	2,796		$	234		$	337		$	24,712
Loans charged off	(462		)	(300		)	(1,167		)	(412		)	(301		)	(71		)	(2,713		)
Recoveries	16			49			225			1			19			—			310
Provision (credit)⁽¹⁾	217			1,011			1,091			38			555			(50		)	2,862
Ending balance	$	5,842		$	12,414		$	3,769		$	2,423		$	507		$	216		$	25,171
ALL balance attributable to loans:
Individually evaluated for impairment	$	364		$	30		$	—		$	69		$	—		$	—		$	463
Collectively evaluated for impairment	5,478			12,384			3,769			2,354			507			216			24,708
Total ending ALL	$	5,842		$	12,414		$	3,769		$	2,423		$	507		$	216		$	25,171
Loans:
Individually evaluated for impairment	$	3,384		$	402		$	319		$	373		$	—		$	—		$	4,478
Collectively evaluated for impairment	1,066,990			1,242,995			420,789			312,406			25,772			21,593			3,090,545
Total ending loans balance	$	1,070,374		$	1,243,397		$	421,108		$	312,779		$	25,772		$	21,593		$	3,095,023

(1)

The provision (credit) for loan losses excludes any impact for the change in the reserve for unfunded commitments, which represents management's estimate of the amount required to reflect the probable inherent losses on outstanding letters of credit and unused lines of credit. The reserve for unfunded commitments is presented within accrued interest and other liabilities on the consolidated statements of condition. At March 31, 2020 and 2019, and December 31, 2019, the reserve for unfunded commitments was $24,000, $16,000 and $21,000, respectively.

The following reconciles the provision for loan losses to the provision for credit losses as presented on the consolidated statements of income for the periods indicated:



	Three Months Ended March 31,					Year Ended December 31, 2019
(In thousands)	2020		2019			Year Ended December 31, 2019
Provision for loan losses	$	1,772	$	750		$	2,862
Change in reserve for unfunded commitments	3		(6		)	(1		)
Provision for credit losses	$	1,775	$	744		$	2,861

The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To identify credit concentrations effectively, all commercial and commercial real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes. Shifts in portfolio concentrations are monitored. As of March 31, 2020, the Company's total exposure to the lessors of nonresidential buildings' industry was 13% of total loans and 32% of total commercial real estate loans. There were no other industry exposures exceeding 10% of the Company's total loan portfolio as of March 31, 2020.

To further identify loans with similar risk profiles, the Company categorizes each portfolio segment into classes by credit risk characteristic and applies a credit quality indicator to each portfolio segment. The indicators for commercial, commercial real estate, residential real estate, and HPFC loans are represented by Grades 1 through 10 as outlined below. In general, risk ratings are adjusted periodically throughout the year as updated analysis and review warrants. This process may include, but is not limited to, annual credit and loan reviews, periodic reviews of loan performance metrics, such as delinquency rates, and quarterly reviews of adversely risk rated loans. The Company uses the following definitions when assessing grades for the purpose of evaluating the risk and adequacy of the ALL:

•

Grade 1 through 6 — Grades 1 through 6 represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risks, which is measured using a variety of credit risk criteria, such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.

•

Grade 7 — Loans with potential weakness (Special Mention). Loans in this category are currently protected based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration of the repayment process at some future date. This classification is used if a negative trend is evident in the obligor’s financial situation. Special mention loans do not sufficiently expose the Company to warrant adverse classification.


•	Grade 8 — Loans with definite weakness (Substandard). Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by collateral pledged. Borrowers experience difficulty in meeting debt repayment requirements. Deterioration is sufficient to cause the Company to look to the sale of collateral.

•

Grade 9 — Loans with potential loss (Doubtful). Loans classified as doubtful have all the weaknesses inherent in the substandard grade with the added characteristic that the weaknesses make collection or liquidation of the loan in full highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.


•	Grade 10 — Loans with definite loss (Loss). Loans classified as loss are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset because recovery and collection time may be protracted.

Asset quality indicators are periodically reassessed to appropriately reflect the risk composition of the Company’s loan portfolio. Home equity and consumer loans are not individually risk rated, but rather analyzed as groups taking into account delinquency rates and other economic conditions which may affect the ability of borrowers to meet debt service requirements, including interest rates and energy costs. Performing loans include loans that are current and loans that are past due less than 90 days. Loans that are past due over 90 days and non-accrual loans, including TDRs, are considered non-performing.

The following summarizes credit risk exposure indicators by portfolio segment as of the following dates:



(In thousands)	Residential Real Estate		Commercial Real Estate		Commercial		Home Equity		Consumer		HPFC		Total
March 31, 2020
Pass (Grades 1-6)	$	1,057,552	$	1,254,201	$	439,638	$	—	$	—	$	17,410	$	2,768,801
Performing	—		—		—		304,131		24,372		—		328,503
Special Mention (Grade 7)	469		31,028		1,424		—		—		77		32,998
Substandard (Grade 8)	6,191		14,631		3,768		—		—		770		25,360
Non-performing	—		—		—		2,095		5		—		2,100
Total	$	1,064,212	$	1,299,860	$	444,830	$	306,226	$	24,377	$	18,257	$	3,157,762
December 31, 2019
Pass (Grades 1-6)	$	1,062,825	$	1,196,683	$	415,870	$	—	$	—	$	20,667	$	2,696,045
Performing	—		—		—		310,653		25,748		—		336,401
Special Mention (Grade 7)	473		31,753		2,544		—		—		89		34,859
Substandard (Grade 8)	7,076		14,961		2,694		—		—		837		25,568
Non-performing	—		—		—		2,126		24		—		2,150
Total	$	1,070,374	$	1,243,397	$	421,108	$	312,779	$	25,772	$	21,593	$	3,095,023

The Company closely monitors the performance of its loan portfolio. A loan is placed on non-accrual status when the financial condition of the borrower is deteriorating, payment in full of both principal and interest is not expected as scheduled or principal or interest has been in default for 90 days or more. Exceptions may be made if the asset is secured by collateral sufficient to satisfy both the principal and accrued interest in full and collection is reasonably assured. When one loan to a borrower is placed on non-accrual status, all other loans to the borrower are re-evaluated to determine if they should also be placed on non-accrual status. All previously accrued and unpaid interest is reversed at this time. A loan may return to accrual status when collection of principal and interest is assured and the borrower has demonstrated timely payments of principal and interest for a reasonable period, generally at least six months. Unsecured loans, however, are not normally placed on non-accrual status because they are charged-off once their collectability is in doubt.

The following is a loan aging analysis by portfolio segment (including loans past due over 90 days and non-accrual loans) and a summary of non-accrual loans, which include TDRs, and loans past due over 90 days and accruing as of the following dates:



(In thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Outstanding		Loans > 90 Days Past Due and Accruing		Non-Accrual Loans
March 31, 2020
Residential real estate	$	1,778	$	320	$	2,445	$	4,543	$	1,059,669	$	1,064,212	$	—	$	3,499
Commercial real estate	1,207		1,460		478		3,145		1,296,715		1,299,860		—		646
Commercial	1,315		388		602		2,305		442,525		444,830		—		748
Home equity	1,140		430		1,743		3,313		302,913		306,226		—		2,098
Consumer	58		31		5		94		24,283		24,377		—		4
HPFC	21		144		252		417		17,840		18,257		—		322
Total	$	5,519	$	2,773	$	5,525	$	13,817	$	3,143,945	$	3,157,762	$	—	$	7,317
December 31, 2019
Residential real estate	$	2,297	$	627	$	2,598	$	5,522	$	1,064,852	$	1,070,374	$	—	$	4,096
Commercial real estate	267		1,720		544		2,531		1,240,866		1,243,397		—		1,122
Commercial	548		—		417		965		420,143		421,108		—		420
Home equity	681		238		1,459		2,378		310,401		312,779		—		2,130
Consumer	108		31		23		162		25,610		25,772		—		24
HPFC	—		243		288		531		21,062		21,593		—		364
Total	$	3,901	$	2,859	$	5,329	$	12,089	$	3,082,934	$	3,095,023	$	—	$	8,156

Interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms is estimated to have been $79,000 and $109,000 for the three months ended March 31, 2020 and 2019, respectively.

TDRs:

The Company takes a conservative approach with credit risk management and remains focused on community lending and reinvesting. The Company works closely with borrowers experiencing credit problems to assist in loan repayment or term modifications. TDRs consist of loans where the Company, for economic or legal reasons related to the borrower’s financial difficulties, granted a concession to the borrower that it would not otherwise consider. TDRs typically involve term modifications or a reduction of either interest or principal. Once such an obligation has been restructured, it will remain a TDR until paid in full, or until the loan is again restructured at current market rates and no concessions are granted.

The specific reserve allowance was determined by discounting the total expected future cash flows from the borrower at the original loan interest rate, or if the loan is currently collateral-dependent, using the net realizable value, which was obtained through independent appraisals and internal evaluations. The following is a summary of TDRs, by portfolio segment, and the associated specific reserve included within the ALL for the dates indicated:



	Number of Contracts		Recorded Investment				Specific Reserve
(In thousands, except number of contracts)	March 31, 2020	December 31, 2019	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Residential real estate	21	22	$	2,692	$	2,869	$	324	$	364
Commercial real estate	2	2	338		338		34		30
Commercial	2	2	118		123		—		—
Consumer and home equity	1	1	299		299		89		69
Total	26	27	$	3,447	$	3,629	$	447	$	463

At March 31, 2020, the Company had performing and non-performing TDRs with a recorded investment balance of $3.0 million and $438,000, respectively. At December 31, 2019, the Company had performing and non-performing TDRs with a recorded investment balance of $3.0 million and $636,000, respectively.

In response to the COVID-19 pandemic, the Company worked with businesses and consumers to provide temporary debt payment relief. The Company's payment relief program provided principal and/or interest payment deferrals of 30 to 180 days for businesses and 90 to 180 days for consumers. For loans modified due to the COVID-19 pandemic, the Company may apply the following accounting treatment in this order:

Should a loan modification (i) meet the criteria set forth in Section 4013 of the CARES Act and (ii) the Company elects to apply, then the Company may account for the loan modification in accordance with Section 4013 of the CARES Act. Section 4013 of the CARES Act suspended TDR designation for loan modifications related to the COVID-19 pandemic. In order for the loan modification to qualify under Section 4013 of the CARES Act, the loan must not have been more than 30 days past due as of December 31, 2019. This guidance is applicable for loan modifications beginning on March 1, 2020 and ending on the earlier of (1) December 31, 2020, or (2) the date that is 60 days after the date the national emergency concerning the COVID-19 pandemic declared by the President on March 13, 2020 under the National Emergencies Act terminates.

Should a loan modification (i) not meet the criteria set forth in Section 4013 of the CARES Act or (ii) the Company elects to not apply, but the loan modification (a) meets the criteria provided in the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)," issued by the banking agencies on April 7, 2020, and (b) the Company elects to apply this guidance, then the Company may account for the loan modification in accordance with the interagency guidance. Under this guidance, if the loan was no more than 30 days past due at the time the loan modification program was implemented, the modification was short-term in duration (generally, less than six months), and the modification was related to the COVID-19 pandemic, then it may be presumed that the borrower is not experiencing financial difficulty, and, therefore, that the modification does not qualify as a TDR.


3.	Should a loan modification (i) not meet the criteria set forth in Section 4013 of the CARES Act or the interagency guidance described above, or (ii) the Company elects not to apply the guidance, then the Company would assess the loan modification under its existing accounting policies (GAAP).

There were no loan modifications that qualify as TDRs that occurred for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019, no loans were modified as TDRs within the previous 12 months for which the borrower subsequently defaulted.

Impaired Loans:

Impaired loans consist of non-accrual loans and TDRs that are individually evaluated for impairment in accordance with the Company's policy. The following is a summary of impaired loan balances and the associated allowance by portfolio segment as of and for the periods indicated:



							For the Three Months Ended
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2020:
With an allowance recorded:
Residential real estate	$	2,220	$	2,220	$	324	$	2,307	$	24
Commercial real estate	128		128		34		128		1
Commercial	—		—		—		—		—
Home equity	318		318		89		318		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending balance	2,666		2,666		447		2,753		25
Without an allowance recorded:
Residential real estate	1,066		1,247		—		1,028		3
Commercial real estate	272		431		—		273		3
Commercial	299		665		—		309		2
Home equity	52		190		—		54		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending balance	1,689		2,533		—		1,664		8
Total impaired loans	$	4,355	$	5,199	$	447	$	4,417	$	33
March 31, 2019:
With an allowance recorded:
Residential real estate	$	3,454	$	3,454	$	553	$	3,462	$	30
Commercial real estate	131		131		27		131		1
Commercial	—		—		—		278		—
Home equity	828		828		347		573		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending Balance	4,413		4,413		927		4,444		31
Without an allowance recorded:
Residential real estate	1,282		1,406		—		1,286		10
Commercial real estate	279		455		—		539		3
Commercial	223		286		—		226		2
Home equity	67		265		—		96		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending Balance	1,851		2,412		—		2,147		15
Total impaired loans	$	6,264	$	6,825	$	927	$	6,591	$	46



							For the Year Ended
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2019:
With an allowance recorded:
Residential real estate	$	2,395	$	2,395	$	364	$	2,989	$	110
Commercial real estate	128		128		30		130		11
Commercial	—		—		—		292		—
Home equity	318		318		69		522		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending Balance	2,841		2,841		463		3,933		121
Without an allowance recorded:
Residential real estate	989		1,116		—		1,258		21
Commercial real estate	274		433		—		381		13
Commercial	319		685		—		238		7
Home equity	55		192		—		115		—
Consumer	—		—		—		1		—
HPFC	—		—		—		—		—
Ending Balance	1,637		2,426		—		1,993		41
Total impaired loans	$	4,478	$	5,267	$	463	$	5,926	$	162

Loan Sales:

For the three months ended March 31, 2020 and 2019, the Company sold $69.2 million and $28.0 million, respectively, of fixed rate residential mortgage loans on the secondary market, which resulted in gains on the sale of loans (net of costs) of $1.5 million and $826,000, respectively.

At March 31, 2020 and December 31, 2019, the Company had certain residential mortgage loans with a principal balance of $28.4 million and $11.9 million, respectively, designated as held for sale. The Company has elected the fair value option of accounting for its loans held for sale, and at March 31, 2020 and December 31, 2019, recorded an unrealized loss of $626,000 and $61,000, respectively. For the three months ended March 31, 2020 and 2019, the net change in unrealized losses (gains) on loans held for sale recorded within mortgage banking income, net, on the Company's consolidated statements of income was $565,000 and ($4,000), respectively.

The Company has forward delivery commitments with a secondary market investor on each of its loans held for sale at March 31, 2020 and December 31, 2019. Refer to Note 8 for further discussion of the Company's forward delivery commitments.

In-Process Foreclosure Proceedings:

At March 31, 2020 and December 31, 2019, the Company had $1.4 million and $1.3 million, respectively, of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process. The Company continues to be focused on working these consumer mortgage loans through the foreclosure process to resolution; however, the foreclosure process typically will take 18 to 24 months due to the State of Maine foreclosure laws.

FHLB Advances:

FHLB advances are those borrowings from the FHLBB greater than 90 days. FHLB advances are collateralized by a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain commercial real estate loans, certain pledged investment securities and other qualified assets. The carrying value of residential real estate and commercial loans pledged as collateral was $1.4 billion at March 31, 2020 and December 31, 2019.

Refer to Notes 3 and 6 of the consolidated financial statements for discussion of securities pledged as collateral.