Loans

12 Months Ended

Dec. 31, 2012

Loans and Allowance for Loan Losses [Abstract]

Loans

5.    Loans

The majority of the Bank’s lending activities are conducted in Massachusetts. The Bank originates construction, commercial and residential real estate loans, commercial and industrial loans, consumer, home equity and other loans for its portfolio.

The following summary shows the composition of the loan portfolio at the dates indicated.

	December 31,
	2012		2011
	(dollars in thousands)
Construction and land development	$	38,618	$	56,819
Commercial and industrial		88,475		82,404
Commercial real estate		576,465		487,495
Residential real estate		281,857		239,307
Consumer		6,823		6,197
Home equity		118,923		110,786
Overdrafts		627		1,484
Total	$	1,111,788	$	984,492

At December 31, 2012, and December 31, 2011, loans were carried net of discounts of $498,000 and $550,000, respectively. Net deferred fees included in loans at December 31, 2012, and December 31, 2011, were $369,000 and $666,000, respectively.

The Company was servicing mortgage loans sold to others without recourse of approximately $26,786,000 and $18,196,000 at December 31, 2012, and December 31, 2011, respectively. The Company had $9,378,000 of residential real estate loans held for sale at December 31, 2012 and $3,389,000 at December 31, 2011.

As of December 31, 2012 and 2011, the Company’s recorded investment in impaired loans was $5,925,000 and $8,102,000, respectively. If an impaired loan is placed on nonaccrual, the loan may be returned to an accrual status when principal and interest payments are not delinquent and the risk characteristics have improved to the extent that there no longer exists a concern as to the collectibility of principal and interest. At December 31, 2012, there were $5,223,000 of impaired loans with a specific reserve of $1,732,000. At December 31, 2011, there were $6,073,000 of impaired loans with a specific reserve of $741,000.

Loans are designated as troubled debt restructures when a concession is made on a credit as a result of financial difficulties of the borrower. Typically, such concessions consist of a reduction in interest rate to a below-market rate, taking into account the credit quality of the note, or a deferment of payments, principal or interest, which materially alters the Bank’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. Restructured loans are included in the impaired loan category.

The composition of nonaccrual loans and impaired loans is as follows:

	December 31,
	2012		2011		2010
	(dollars in thousands)
Loans on nonaccrual	$	4,471		5,827	$	8,068
Loans 90 days past due and still accruing		—		18		50
Impaired loans on nonaccrual included above		2,878		3,468		5,353
Total recorded investment in impaired loans		5,925		8,102		7,963
Average recorded investment of impaired loans		7,043		10,284		9,606
Accruing troubled debt restructures		3,048		4,634		1,248
Interest income not recorded on nonaccrual loans according to their original terms		753		846		1,313
Interest income on nonaccrual loans actually recorded		—		—		—
Interest income recognized on impaired loans		180		155		256

During the first quarter of 2008, the Company purchased a loan for $4,823,000 with a discount of $724,000. The entire discount is classified as an accretable discount. The Company accreted $51,000, $47,000 and $47,000 of the discount during 2012, 2011 and 2010, respectively.

Directors and officers of the Company and their associates are customers of, and have other transactions with, the Company in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features.

The following table shows the aggregate amount of loans to directors and officers of the Company and their associates during 2012.

Balance at December 31, 2011	Additions		Repayments and Deletions		Balance at December 31, 2012
(dollars in thousands)
$4,226	$	1,452	$	1,015	$	4,663