5. Loans

The majority of the Bank’s lending activities are conducted in Massachusetts with other lending activity principally in New Hampshire, Rhode Island, Connecticut and New York. The Bank originates construction, commercial and residential real estate loans, commercial and industrial loans, municipal 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,	2016		2015
(dollars in thousands)
Construction and land development	$	14,928	$	27,421
Commercial and industrial		612,503		452,235
Municipal		135,418		85,685
Commercial real estate		696,173		721,506
Residential real estate		241,357		255,346
Consumer		11,013		10,744
Home equity		211,857		178,020
Overdrafts		684		579

Total	$	1,923,933	$	1,731,536

At December 31, 2016, and December 31, 2015, loans were carried net of discounts of $313,000 and $360,000, respectively. Net deferred fees included in loans at December 31, 2016, and December 31, 2015, were $641,000 and $988,000, respectively.

The Company was servicing mortgage loans sold to others without recourse of approximately $229,730,000 and $185,299,000 at December 31, 2016, and December 31, 2015, respectively. The Company had no residential real estate loans held for sale at December 31, 2016 and December 31, 2015. The Company’s mortgage servicing rights totaled $1,629,000 and $1,305,000 at December 31, 2016 and December 31, 2015, respectively.

As of December 31, 2016 and 2015, the Company’s recorded investment in impaired loans was $3,830,000 and $3,225,000, 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, 2016, there were $3,105,000 of impaired loans with a specific reserve of $173,000. At December 31, 2015, there were $3,051,000 of impaired loans with specific reserves of $250,000.

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,	2016		2015		2014
(dollars in thousands)
Loans on nonaccrual	$	1,084	$	2,336	$	4,146
Loans 90 days past due and still accruing		—		—		—
Impaired loans on nonaccrual included above		304		332		3,031
Total recorded investment in impaired loans		3,830		3,225		6,327
Average recorded investment of impaired loans		3,661		4,490		7,434
Accruing troubled debt restructures		3,526		2,893		3,296
Interest income not recorded on nonaccrual loans according to their original terms		37		91		123
Interest income on nonaccrual loans actually recorded		—		—		—
Interest income recognized on impaired loans		140		104		144

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 2016.


Balance at December 31, 2015	Additions		Repayments and Deletions		Balance at December 31, 2016
(dollars in thousands)
$5,010	$	6,778	$	806	$	10,982