LOANS

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

LOANS

NOTE 3 - LOANS

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

(in thousands)	March 31, 2014			December 31, 2013
Residential 1-4 family	$	236,608		$	231,113
Residential 5+ multifamily		4,804			4,848
Construction of residential 1-4 family		2,044			1,876
Home equity credit		33,941			34,139
Residential real estate		277,397			271,976
Commercial		95,514			91,853
Construction of commercial		10,230			10,948
Commercial real estate		105,744			102,801
Farm land		3,368			3,402
Vacant land		9,038			9,067
Real estate secured		395,547			387,246
Commercial and industrial		47,030			46,292
Municipal		4,016			4,252
Consumer		3,633			3,889
Loans receivable, gross		450,226			441,679
Deferred loan origination fees and costs, net		1,186			1,182
Allowance for loan losses		(4,894	)		(4,683	)
Loans receivable, net	$	446,518		$	438,178
Loans held-for-sale
Residential 1-4 family	$	120		$	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
March 31, 2014
Residential 1-4 family	$	218,660	$	11,854	$	5,999	$	95	$	—	$	236,608
Residential 5+ multifamily		2,639		1,190		975		—		—		4,804
Construction of residential 1-4 family		2,044		—		—		—		—		2,044
Home equity credit		31,288		1,269		1,384		—		—		33,941
Residential real estate		254,631		14,313		8,358		95		—		277,397
Commercial		71,538		15,897		8,079		—		—		95,514
Construction of commercial		9,214		429		587		—		—		10,230
Commercial real estate		80,752		16,326		8,666		—		—		105,744
Farm land		836		1,408		1,124		—		—		3,368
Vacant land		5,618		258		3,162		—		—		9,038
Real estate secured		341,837		32,305		21,310		95		—		395,547
Commercial and industrial		37,900		8,198		932		—		—		47,030
Municipal		4,016		—		—		—		—		4,016
Consumer		3,500		100		33		—		—		3,633
Loans receivable, gross	$	387,253	$	40,603	$	22,275	$	95	$	—	$	450,226
(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
March 31, 2014
Residential 1-4 family	$	230,872	$	2,272	$	1,423	$	930	$	898	$	213	$	3,464	$	—	$	2,316
Residential 5+ multifamily		4,707		—		—		97		—		—		97		—		—
Construction of residential 1-4 family		2,044		—		—		—		—		—		—		—		—
Home equity credit		32,071		1,075		576		49		48		122		795		—		446
Residential real estate		269,694		3,347		1,999		1,076		946		335		4,356		—		2,762
Commercial		89,722		3,742		435		369		—		1,246		2,050		—		1,841
Construction of commercial		10,094		—		—		—		136		—		136		—		136
Commercial real estate		99,816		3,742		435		369		136		1,246		2,186		—		1,977
Farm land		2,964		20		—		—		—		384		384		—		384
Vacant land		6,057		8		77		—		26		2,870		2,973		26		2,870
Real estate secured		378,531		7,117		2,511		1,445		1,108		4,835		9,899		26		7,993
Commercial and industrial		46,653		267		65		23		22		—		110		—		108
Municipal		4,016		—		—		—		—		—		—		—		—
Consumer		3,511		94		27		1		—		—		28		—		22
Loans receivable, gross	$	432,711	$	7,478	$	2,603	$	1,469	$	1,130	$	4,835	$	10,037	$	26	$	8,123
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 March 31, 2014						Three months ended March 31, 2013
(in thousands)	Quantity		Pre-modification balance		Post-modification balance		Quantity		Pre-modification balance		Post-modification balance
Residential real estate		1	$	48	$	48		—	$	—	$	—
Commercial real estate		1		250		250		2		1,022		1,022
Home equity credit		1		30		30		—		—		—
Troubled debt restructurings		3	$	328	$	328		2	$	1,022	$	1,022
Rate reduction		—	$	—	$	—		2	$	1,022	$	1,022
Interest only and term extension		1		48		48		—		—		—
Debt consolidation and term extension		1		250		250		—		—		—
Interest only		1		30		30		—	$	—	$	—
Troubled debt restructurings		3	$	328	$	328		2	$	1,022	$	1,022

Three loans were restructured during the quarter ended March 31, 2014 and all were current at March 31, 2014.

Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

		March 31, 2014												March 31, 2013
(in		Beginning					Charge-			Reco-		Ending		Beginning					Charge-			Reco-		Ending
thousands)		balance		Provision			offs			veries		balance		balance		Provision			offs			veries		balance
Residential	$	1,938	$	64		$	(74	)	$	2	$	1,930	$	1,934	$	23		$	(18	)	$	—	$	1,939
Commercial		1,385		157			(51	)		—		1,491		1,059		178			—			—		1,237
Land		226		1			(1	)		—		226		301		265			(38	)		—		528
Real estate		3,549		222			(126	)		2		3,647		3,294		466			(56	)		—		3,704
Commercial and industrial		562		16			(1	)		—		577		499		(40	)		(4	)		—		455
Municipal		43		(3	)		—			—		40		36		4			—			—		40
Consumer		105		(47	)		(7	)		6		57		91		(15	)		(13	)		3		66
Unallocated		424		149			—			—		573		440		(19	)		—			—		421
Totals	$	4,683	$	337		$	(134	)	$	8	$	4,894	$	4,360	$	396		$	(73	)	$	3	$	4,686

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
March 31, 2014
Residential 1-4 family	$	230,456	$	894	$	6,152	$	624	$	236,608	$	1,518
Residential 5+ multifamily		3,856		20		948		—		4,804		20
Construction of residential 1-4 family		2,044		12		—		—		2,044		12
Home equity credit		33,447		360		494		20		33,941		380
Residential real estate		269,803		1,286		7,594		644		277,397		1,930
Commercial		90,750		1,013		4,764		365		95,514		1,378
Construction of commercial		10,094		113		136		—		10,230		113
Commercial real estate		100,844		1,126		4,900		365		105,744		1,491
Farm land		2,984		60		384		—		3,368		60
Vacant land		5,945		65		3,093		101		9,038		166
Real estate secured		379,576		2,537		15,971		1,110		395,547		3,647
Commercial and industrial		46,373		539		657		38		47,030		577
Municipal		4,016		40		—		—		4,016		40
Consumer		3,524		34		109		23		3,633		57
Unallocated allowance		—		—		—		—		—		573
Totals	$	433,489	$	3,150	$	16,737	$	1,171	$	450,226	$	4,894
		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
Totals	$	425,421	$	3,117	$	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
March 31, 2014
Performing loans	$	425,540	$	2,900	$	87	$	23	$	425,627	$	2,923
Potential problem loans		7,949		250		179		19		8,128		269
Impaired loans		—		—		16,471		1,129		16,471		1,129
Unallocated allowance		—		573		—		—		—		573
Totals	$	433,489	$	3,723	$	16,737	$	1,171	$	450,226	$	4,894
December 31, 2013
Performing loans	$	419,734	$	2,835	$	157	$	69	$	416,891	$	2,904
Potential problem loans		8,687		252		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
March 31, 2014
Residential 1-4 family	$	4,342	$	4,407	$	4,370	$	605	$	25	$	2,595	$	3,120	$	2,730	$	11
Home equity credit		72		72		84		20		—		423		541		441		—
Residential real estate		4,414		4,479		4,454		625		25		3,018		3,661		3,171		11
Commercial		2,933		3,017		2,854		365		31		1,831		2,393		1,738		11
Construction of Commercial		—		—		—		—		—		136		157		103		—
Farm land		—		—		—		—		—		384		384		384		—
Vacant land		3,092		3,888		3,094		101		3		—		100		—		—
Real estate secured		10,439		11,384		10,402		1,091		59		5,369		6,695		5,396		22
Commercial and industrial		112		149		116		38		—		529		931		553		8
Consumer		—		—		—		—		—		22		22		22		—
Totals	$	10,551	$	11,533	$	10,518	$	1,129	$	59	$	5,920	$	7,648	$	5,971	$	30
December 31, 2013
Residential 1-4 family	$	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