Edgar Filing: SALISBURY BANCORP INC

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________ TO ________

Commission file number 0-24751

SALISBURY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Connecticut		06-1514263
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

5 Bissell Street, Lakeville, CT		06039
(Address of principal executive offices)		(Zip code)

(860) 435-9801

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares of Common Stock outstanding as of August 14, 2015 is 2,731,176.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2015 (unaudited) AND DECEMBER 31,2014	3
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (unaudited)	4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (unaudited)	5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (unaudited)	5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 (unaudited)	6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52
Item 4. CONTROLS AND PROCEDURES	54
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS	54
Item 1A. RISK FACTORS	55
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	55
Item 3. DEFAULTS UPON SENIOR SECURITIES	56
Item 4. MINE SAFETY DISCLOSURES	56
Item 5. OTHER INFORMATION	56
Item 6. EXHIBITS	56

PART I - FINANCIAL INFORMATION

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)		June 30, 2015			December 31, 2014
ASSETS		(unaudited	)
Cash and due from banks	$	13,203		$	13,280
Interest bearing demand deposits with other banks		37,217			22,825
Total cash and cash equivalents		50,420			36,105
Securities
Available-for-sale at fair value		79,417			91,312
Federal Home Loan Bank of Boston stock at cost		3,515			3,515
Loans held-for-sale		300			568
Loans receivable, net (allowance for loan losses: $5,059 and $5,358)		677,726			673,330
Other real estate owned		268			1,002
Bank premises and equipment, net		14,020			14,431
Goodwill		12,552			12,552
Intangible assets (net of accumulated amortization: $2,591 and $2,258)		2,657			2,990
Accrued interest receivable		2,292			2,334
Cash surrender value of life insurance policies		13,499			13,314
Deferred taxes		2,834			2,428
Other assets		1,294			1,546
Total Assets	$	860,794		$	855,427
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing)	$	171,022		$	161,386
Demand (interest bearing)		118,293			117,169
Money market		173,488			174,274
Savings and other		123,697			121,387
Certificates of deposit		134,234			141,210
Total deposits		720,734			715,426
Repurchase agreements		2,771			4,163
Federal Home Loan Bank of Boston advances		28,033			28,813
Capital lease liability		423			424
Accrued interest and other liabilities		4,729			4,780
Total Liabilities		756,690			753,606
Shareholders' Equity
Preferred stock - $.01 per share par value		16,000			16,000
Authorized: 25,000; Issued: 16,000 (Series B);
Liquidation preference: $1,000 per share
Common stock - $.10 per share par value		273			272
Authorized: 5,000,000
Issued: 2,731,176 and 2,720,766
Paid-in capital		41,312			41,077
Retained earnings		45,378			42,677
Unearned compensation - restricted stock awards		(229	)		(313	)
Accumulated other comprehensive income		1,370			2,108
Total Shareholders' Equity		104,104			101,821
Total Liabilities and Shareholders' Equity	$	860,794		$	855,427

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

	Three months ended				Six months ended
Periods ended June 30, (in thousands except per share amounts)		2015		2014		2015			2014
Interest and dividend income
Interest and fees on loans	$	7,850	$	4,731	$	15,772		$	9,327
Interest on debt securities
Taxable		298		365		624			745
Tax exempt		357		432		747			878
Other interest and dividends		40		24		73			45
Total interest and dividend income		8,545		5,552		17,216			10,995
Interest expense
Deposits		453		349		897			700
Repurchase agreements		2		1		3			2
Capital lease		17		—		35			18
Federal Home Loan Bank of Boston advances		280		297		562			595
Total interest expense		752		647		1,497			1,315
Net interest and dividend income		7,793		4,905		15,719			9,680
Provision (benefit) for loan losses		196		314		(4	)		651
Net interest and dividend income after provision (benefit) for loan losses		7,597		4,591		15,723			9,029
Non-interest income
Gains on sales and calls of available-for-sale securities, net		11		—		186			—
Trust and wealth advisory		890		939		1,712			1,718
Service charges and fees		778		626		1,509			1,168
Gains on sales of mortgage loans, net		87		32		181			43
Mortgage servicing, net		20		11		(20	)		39
Other		114		74		228			152
Total non-interest income		1,900		1,682		3,796			3,120
Non-interest expense
Salaries		2,449		1,951		4,989			3,795
Employee benefits		960		739		1,965			1,480
Premises and equipment		913		701		1,821			1,374
Data processing		398		433		872			788
Professional fees		593		344		1,243			706
Collections and OREO		228		85		472			221
FDIC insurance		133		124		331			221
Marketing and community support		180		127		290			240
Amortization of core deposit intangibles		164		63		333			118
Merger and acquisition related expenses		—		90		—			391
Other		522		411		1,059			844
Total non-interest expense		6,540		5,068		13,375			10,178
Income before income taxes		2,957		1,205		6,144			1,971
Income tax provision		885		239		1,838			454
Net income	$	2,072	$	966	$	4,306		$	1,517
Net income available to common shareholders	$	2,032	$	926	$	4,226		$	1,431

Basic earnings per common share	$	0.74	$	0.54	$	1.55		$	0.83
Diluted earnings per common share		0.74		0.54		1.54			0.83
Common dividends per share		0.28		0.28		0.56			0.56

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

		Three months ended						Six months ended
Periods ended June 30, (in thousands)		2015			2014			2015			2014
Net income	$	2,072		$	966		$	4,306		$	1,517
Other comprehensive (loss) income
Net unrealized (losses) gains on securities available-for-sale		(739	)		671			(932	)		2,429
Reclassification of net realized gains in net income⁽¹⁾		(11	)		—			(186	)		—
Unrealized (losses) gains on securities available-for-sale		(750	)		671			(1,118	)		2,429
Income tax benefit (expense)		252			(228	)		380			(826	)
Unrealized (losses) gains on securities available-for-sale, net of tax		(498	)		443			(738	)		1,603
Change in unrecognized pension plan costs		—			—			—			—
Income tax (benefit) expense		—			—			—			—
Pension plan income (loss), net of tax		—			—			—			—
Other comprehensive (loss) income, net of tax		(498	)		443			(738	)		1,603
Comprehensive income	$	1,574		$	1,409		$	3,568		$	3,120

^{(1)
Reclassification adjustments include realized security gains and losses. The gains and losses have been reclassified out of other
comprehensive (loss) income and have affected certain lines in the consolidated statements of income as follows: The pre-tax amount
is reflected as gains on sales of available-for-sale securities, net, the tax effect is included in the income tax provision and
the after tax amount is included in net income.}

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

(dollars in thousands) unaudited	Common Stock					Preferred stock		Paid-in capital			Retained earnings			Unearned compensation – restricted stock awards			Accumulated other comp- rehensive income			Total share- holders' equity
	Shares			Amount
Balances at December 31, 2013		1,710,121		$	171	$	16,000	$	13,668		$	42,240		$	(335	)	$	1,046		$	72,790
Net income for period		—			—		—		—			1,517			—			—			1,517
Other comprehensive income, net of tax		—			—		—		—			—			—			1,603			1,603
Common stock dividends declared		—			—		—		—			(959	)		—			—			(959	)
Preferred stock dividends declared		—			—		—		—			(86	)		—			—			(86	)
Issuance of restricted common stock		3,000			—		—		81			—			(81	)		—			—
Forfeiture of restricted common stock		(2,000	)		—		—		(50	)		—			50			—			—
Stock based compensation-restricted
stock awards		—			—		—		—			—			70			—			70
Issuance of common stock for directors		2,160			—		—		65			—			—			—			65
Balances at June 30, 2014		1,713,281		$	171	$	16,000	$	13,764		$	42,712		$	(296	)	$	2,649		$	75,000
Balances at December 31, 2014		2,720,766		$	272	$	16,000	$	41,077		$	42,677		$	(313	)	$	2,108		$	101,821
Net income for period		—			—		—		—			4,306			—			—			4,306
Other comprehensive loss, net of tax		—			—		—		—			—			—			(738	)		(738	)
Common stock dividends declared		—			—		—		—			(1,525	)		—			—			(1,525	)
Preferred stock dividends declared		—			—		—		—			(80	)		—			—			(80	)
Stock options exercised		6,750			1		—		125			—			—			—			126
Issuance of common stock for executives		1,000			—		—		29			—			—			—			29
Issuance of common stock for directors		2,660			—		—		81			—			—			—			81
Stock based compensation-restricted
stock awards		—			—		—		—			—			84			—			84
Balances at June 30, 2015		2,731,176		$	273	$	16,000	$	41,312		$	45,378		$	(229	)	$	1,370		$	104,104

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six months ended June 30, (in thousands)		2015			2014
Operating Activities
Net income	$	4,306		$	1,517
Adjustments to reconcile net income to net cash provided by operating activities:
(Accretion), amortization and depreciation:
Securities		111			110
Bank premises and equipment		610			464
Core deposit intangible		333			118
Mortgage servicing rights		197			165
Fair value adjustment on loans		(1,305	)		13
Fair value adjustment on deposits		(258	)		(4	)
(Gains) and losses, including write-downs
Gain on calls of securities available-for-sale, net		(34	)		—
Gain on sales of securities available-for-sale, net		(152	)		—
Gain on sales of loans, excluding capitalized servicing rights		(78	)		(22	)
Write-downs of other real estate owned		230			—
Loss on sale/disposals of premises and equipment		45			2
(Benefit) provision for loan losses		(4	)		651
Proceeds from loans sold		5,146			2,146
Loans originated for sale		(4,800	)		(1,951	)
Increase in deferred loan origination fees and costs, net		(13	)		(61	)
Mortgage servicing rights originated		(102	)		(22	)
Increase (decrease) in mortgage servicing rights impairment reserve		3			(14	)
Decrease in interest receivable		42			27
Deferred tax benefit		(26	)		(27	)
Decrease in prepaid expenses		116			20
Increase in cash surrender value of life insurance policies		(185	)		(112	)
Increase in income tax receivable		(91	)		(88	)
Decrease (increase) in other assets		129			(43	)
Decrease in accrued expenses		(146	)		(20	)
Decrease in interest payable		(8	)		(4	)
Increase in other liabilities		103			651
Stock based compensation-restricted stock awards		84			70
Net cash provided by operating activities		4,253			3,586
Investing Activities
Maturity of interest-bearing time deposits with other banks		—			738
Redemption of Federal Home Loan Bank of Boston stock		—			912
Purchases of securities available-for-sale		(4,319	)		—
Proceeds from sales of securities available-for-sale		3,861			—
Proceeds from calls of securities available-for-sale		6,480			3,595
Proceeds from maturities of securities available-for-sale		4,830			4,759
Loan originations and principal collections, net		(3,652	)		(19,022	)
Recoveries of loans previously charged off		477			33
Proceeds from sales of other real estate owned		605			—
Cash and cash equivalents acquired from Sharon, CT branch office of another institution		—			17,462
Capital expenditures		(244	)		(1,710	)
Net cash provided by investing activities		8,038			6,767

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Six months ended June 30, (in thousands)		2015			2014
Financing Activities
Increase in deposit transaction accounts, net		12,284			12,897
Decrease in time deposits, net		(6,718	)		(1,071	)
(Decrease) increase in securities sold under agreements to repurchase, net		(1,392	)		1,790
Principal payments on Federal Home Loan Bank of Boston advances		(780	)		(792	)
Decrease in capital lease obligation		(1	)		—
Stock options exercised		126			—
Issuance of shares for director fees		81			65
Issuance of shares for executives		29			—
Common stock dividends paid		(1,525	)		(959	)
Series B preferred stock dividends paid		(80	)		(86	)
Net cash provided by financing activities		2,024			11,844
Net increase in cash and cash equivalents		14,315			22,197
Cash and cash equivalents, beginning of year		36,105			12,711
Cash and cash equivalents, end of period	$	50,420		$	34,908
Cash paid during year
Interest	$	1,763		$	1,319
Income taxes		1,955			569
Non-cash Investing and Financing Activities
Transfer from loans to other real estate owned		101			—
Sharon branch acquisition
Cash and cash equivalents acquired		—			17,462
Net loans acquired		—			63
Fixed assets acquired		—			158
Core deposit intangible		—			488
Deposits assumed		—			18,170
Accrued interest payable assumed		—			1

Salisbury Bancorp, Inc. and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The interim (unaudited) consolidated financial statements of Salisbury Bancorp, Inc. ("Salisbury") include those of Salisbury and its wholly owned subsidiary, Salisbury Bank and Trust Company (the "Bank"). In the opinion of management, the interim unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of Salisbury and the statements of income, comprehensive income, shareholders’ equity and cash flows for the interim periods presented.

The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, expected cash flows from loans acquired in a business combination, other-than-temporary impairment of securities, impairment of goodwill and intangibles and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans.

Certain financial information, which is normally included in financial statements prepared in accordance with generally accepted accounting principles, but which is not required for interim reporting purposes, has been condensed or omitted. Operating results for the interim period ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The accompanying condensed financial statements should be read in conjunction with the financial statements and notes thereto included in Salisbury's 2014 Annual Report on Form 10-K for the year ended December 31, 2014.

The allowance for loan losses is a significant accounting policy and is presented in the Notes to Consolidated Financial Statements and in Management’s Discussion and Analysis, which provides information on how significant assets are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions and estimates underlying those amounts, management has identified the determination of the allowance for loan losses to be the accounting area that requires the most subjective judgments, and as such could be most subject to revision as new information becomes available.

Impact of New Accounting Pronouncements Issued

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606).” The objective of this ASU is to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB voted to approve deferring the effective date by one year (i.e. interim and annual reporting periods beginning after December 15, 2017). Early adoption is permitted, but not before the original effective date (i.e. interim and annual reporting periods beginning after December 15, 2016). The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The standard is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The guidance should be applied on a retrospective basis. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In May 2015, the FASB issued ASU 2015-07: “Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” The objective of this update is to address the diversity in practice related to how certain investments measured at net asset value with redemption dates in the future are categorized within the fair value hierarchy. The amendments in this update remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

NOTE 2 - SECURITIES

The composition of securities is as follows:

(in thousands)	Amortized cost (1)		Gross un- realized gains		Gross un- realized losses			Fair value
June 30, 2015
Available-for-sale
U.S. Treasury notes	$	2,498	$	82	$	—		$	2,580
U.S. Government agency notes		1,490		6		—			1,496
Municipal bonds		33,215		740		(122	)		33,833
Mortgage-backed securities
U.S. Government agencies and U.S. Government-sponsored enterprises		28,191		509		(28	)		28,672
Collateralized mortgage obligations
U.S. Government agencies		2,317		19		—			2,336
Non-agency		5,269		515		(7	)		5,777
SBA bonds		3,583		69		—			3,652
CRA mutual funds		758		—		—			758
Preferred stock		20		293		—			313
Total securities available-for-sale	$	77,341	$	2,233	$	(157	)	$	79,417
Non-marketable securities
Federal Home Loan Bank of Boston stock	$	3,515	$	—	$	—		$	3,515
(in thousands)	Amortized cost (1)		Gross un- realized gains		Gross un- realized losses			Fair value
December 31, 2014
Available-for-sale
U.S. Treasury notes	$	2,699	$	107	$	—		$	2,806
U.S. Government agency notes		5,850		24		—			5,874
Municipal bonds		38,962		1,455		(65	)		40,352
Mortgage-backed securities
U.S. Government agencies and U.S. Government-sponsored enterprises		27,036		688		(15	)		27,709
Collateralized mortgage obligations
U.S. Government agencies		2,657		22		—			2,679
Non-agency		6,056		552		(12	)		6,596
SBA bonds		4,336		129		—			4,465
CRA mutual funds		502		2		—			504
Preferred stock		20		307		—			327
Total securities available-for-sale	$	88,118	$	3,286	$	(92	)	$	91,312
Non-marketable securities
Federal Home Loan Bank of Boston stock	$	3,515	$	—	$	—		$	3,515

(1)

Net of other-than-temporary impairment write-downs recognized in earnings.

Salisbury sold $3.9 million in securities available-for-sale during the six month period ended June 30, 2015, and did not sell any securities available-for-sale during the six month period ended June 30, 2014.

The following table summarizes, for all securities in an unrealized loss position, including debt securities for which a portion of other-than-temporary impairment (OTTI) has been recognized in other comprehensive income, the aggregate fair value and gross unrealized loss of securities that have been in a continuous unrealized loss position as of the date presented:

(in thousands)	Less than 12 Months					12 Months or Longer				Total
	Fair value		Unrealized losses			Fair value		Unrealized losses		Fair value		Unrealized losses
June 30, 2015
Available-for-sale
Municipal bonds	$	3,475	$	(122	)	$	—	$	—	$	3,475	$	(122	)
Mortgage-backed securities		7,251		(28	)		—		—		7,251		(28	)
Collateralized mortgage obligations:							—		—
Non-agency		273		(7	)		—		—		273		(7	)
Total temporarily impaired securities		10,999		(157	)		—		—		10,999		(157	)
Other-than-temporarily impaired securities
Collateralized mortgage obligations:
Non-agency		—		—			—		—		—		—
Total temporarily impaired and other-than-temporarily impaired securities	$	10,999	$	(157	)	$	—	$	—	$	10,999	$	(157	)

Salisbury evaluates securities for OTTI where the fair value of a security is less than its amortized cost basis at the balance sheet date. As part of this process, Salisbury considers whether it has the intent to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of these conditions is met, Salisbury recognizes an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. For securities that meet neither of these conditions, an analysis is performed to determine if any of these securities are at risk for OTTI.

The following summarizes, by security type, the basis for evaluating if the applicable securities were OTTI at June 30, 2015.

U.S. Government agency mortgage-backed securities: The contractual cash flows are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury evaluates these securities for strategic fit and may reduce its position in these securities, although it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be at maturity, and Salisbury does not intend to sell these securities. Therefore, management does not consider these securities to be OTTI at June 30, 2015.

Municipal bonds: Contractual cash flows are performing as expected. Salisbury purchased substantially all of these securities during 2006 - 2008 as bank qualified, insured, AAA rated general obligation or revenue bonds. Salisbury’s portfolio is mostly comprised of tax-exempt general obligation bonds or public-purpose revenue bonds for schools, municipal offices, sewer infrastructure and fire houses, for small towns and municipalities across the United States. In the wake of the financial crisis, most monoline bond insurers had their ratings downgraded or withdrawn because of excessive exposure to insurance for collateralized debt obligations. Where appropriate, Salisbury performs credit underwriting reviews of unrated issuers, including some that have had their ratings withdrawn and are insured by insurers that have had their ratings withdrawn, to assess default risk. For all completed reviews, pass credit risk ratings have been assigned. Management expects to recover the entire amortized cost basis of these securities. It is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be at maturity, and Salisbury does not intend to sell these securities. Therefore, management does not consider these securities to be OTTI at June 30, 2015.

Non-agency CMOs: Salisbury performed a detailed cash flow analysis of its non-agency CMOs at June 30, 2015, to assess whether any of the securities were OTTI. Salisbury uses cash flow forecasts for each security based on a variety of market driven assumptions and securitization terms, including prepayment speed, default or delinquency rate, and default severity for losses including interest, legal fees, property repairs, expenses and realtor fees, that, together with the loan amount are subtracted from collateral sales proceeds to determine severity. In 2009, Salisbury determined that five non-agency CMO securities reflected OTTI and recognized losses for deterioration in credit quality of $1,128,000. Salisbury judged the four remaining securities not to have additional OTTI and all other CMO securities not to be OTTI as of June 30, 2015. It is possible that future loss assumptions could change necessitating Salisbury to recognize future OTTI for further deterioration in credit quality. Salisbury evaluates these securities for strategic fit and depending upon such factor could reduce its position in these securities, although it has no present intention to do so, and it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis.

The following table presents activity related to credit losses recognized into earnings on the non-agency CMOs held by Salisbury for which a portion of an OTTI charge was recognized in accumulated other comprehensive income:

Six months ended June 30 (in thousands)		2015		2014
Balance, beginning of period	$	1,128	$	1,128
Credit component on debt securities in which OTTI was not previously recognized		—		—
Balance, end of period	$	1,128	$	1,128

The Federal Home Loan Bank of Boston (FHLBB) is a cooperative that provides services, including funding in the form of advances, to its member banking institutions. As a requirement of membership, the Bank must own a minimum amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. No market exists for shares of the FHLBB and therefore, they are carried at par value. FHLBB stock may be redeemed at par value five years following termination of FHLBB membership, subject to limitations which may be imposed by the FHLBB or its regulator, the Federal Housing Finance Board, to maintain capital adequacy of the FHLBB. While the Bank currently has no intentions to terminate its FHLBB membership, the ability to redeem its investment in FHLBB stock would be subject to the conditions imposed by the FHLBB. Based on the capital adequacy and the liquidity position of the FHLBB, management believes there is no impairment related to the carrying amount of the Bank’s FHLBB stock as of June 30, 2015. Deterioration of the FHLBB’s capital levels may require the Bank to deem its restricted investment in FHLBB stock to be OTTI. If evidence of impairment exists in the future, the FHLBB stock would reflect fair value using either observable or unobservable inputs. The Bank will continue to monitor its investment in FHLBB stock.

NOTE 3 – LOANS

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

	June 302015									December 31, 2014
(In thousands)	Business Activities Loans			Acquired Loans			Total			Business Activities Loans			Acquired Loans			Total
Residential 1-4 family	$	258,182		$	9,426		$	267,608		$	252,258		$	9,223		$	261,481
Residential 5+ multifamily		5,753			6,320			12,073			5,556			8,735			14,291
Construction of residential 1-4 family		4,534			—			4,534			2,004			—			2,004
Home equity credit		34,033			—			34,033			34,627			—			34,627
Residential real estate		302,502			15,746			318,248			294,445			17,958			312,403
Commercial		103,473			91,821			195,294			98,498			97,899			196,397
Construction of commercial		14,993			8,004			22,997			18,602			9,045			27,647
Commercial real estate		118,466			99,825			218,291			117,100			106,944			224,044
Farm land		3,187			—			3,187			3,239			—			3,239
Vacant land		8,278			—			8,278			9,342			—			9,342
Real estate secured		432,433			115,571			548,004			424,126			124,902			549,028
Commercial and industrial		63,504			57,737			121,241			49,204			68,714			117,918
Municipal		6,519			—			6,519			6,083			—			6,083
Consumer		5,703			102			5,805			4,334			122			4,456
Loans receivable, gross		508,159			173,410			681,569			483,747			193,738			677,485
Deferred loan origination fees and costs, net		1,216			—			1,216			1,203			—			1,203
Allowance for loan losses		(4,915	)		(144	)		(5,059	)		(5,337	)		(21	)		(5,358	)
Loans receivable, net	$	504,460		$	173,266		$	677,726		$	479,613		$	193,717		$	673,330
Loans held-for-sale
Residential 1-4 family	$	300		$	—		$	300		$	568		$	—		$	568

Concentrations of Credit Risk

Salisbury's loans consist primarily of residential and commercial real estate loans located principally in Litchfield County, Connecticut; Dutchess, Orange and Columbia Counties, New York; and Berkshire County, Massachusetts, 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:

Business Activities Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
June 30, 2015
Residential 1-4 family	$	243,772	$	8,253	$	6,065	$	92	$	—	$	258,182
Residential 5+ multifamily		3,733		1,056		964		—		—		5,753
Construction of residential 1-4 family		4,534		—		—		—		—		4,534
Home equity credit		32,429		499		1,105		—		—		34,033
Residential real estate		284,468		9,808		8,134		92		—		302,502
Commercial		91,539		5,163		6,771		—		—		103,473
Construction of commercial		14,420		—		573		—		—		14,993
Commercial real estate		105,959		5,163		7,344		—		—		118,466
Farm land		1,757		324		1,106		—		—		3,187
Vacant land		5,273		74		2,931		—		—		8,278
Real estate secured		397,457		15,369		19,515		92		—		432,433
Commercial and industrial		61,655		1,197		652		—		—		63,504
Municipal		6,519		—		—		—		—		6,519
Consumer		5,669		26		8		—		—		5,703
Loans receivable, gross	$	471,300	$	16,592	$	20,175	$	92	$	—	$	508,159

Acquired Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
June 30, 2015
Residential 1-4 family	$	8,846	$	—	$	580	$	—	$	—	$	9,426
Residential 5+ multifamily		6,320		—		—		—		—		6,320
Construction of residential 1-4 family		—		—		—		—		—		—
Home equity credit		—		—		—		—		—		—
Residential real estate		15,166		—		580		—		—		15,746
Commercial		84,037		3,081		4,703		—		—		91,821
Construction of commercial		7,728		—		276		—		—		8,004
Commercial real estate		91,765		3,081		4,979		—		—		99,825
Farm land		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—
Real estate secured		106,931		3,081		5,559		—		—		115,571
Commercial and industrial		55,715		1,317		620		85		—		57,737
Municipal		—		—		—		—		—		—
Consumer		77		7		—		18		—		102
Loans receivable, gross	$	162,723	$	4,405	$	6,179	$	103	$	—	$	173,410

Business Activities Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
December 31, 2014
Residential 1-4 family	$	232,628	$	12,350	$	7,187	$	93	$	—	$	252,258
Residential 5+ multifamily		3,420		1,072		1,064		—		—		5,556
Construction of residential 1-4 family		2,004		—		—		—		—		2,004
Home equity credit		32,639		807		1,181		—		—		34,627
Residential real estate		270,691		14,229		9,432		93		—		294,445
Commercial		79,975		10,728		7,795		—		—		98,498
Construction of commercial		18,024		—		578		—		—		18,602
Commercial real estate		97,999		10,728		8,373		—		—		117,100
Farm land		772		1,361		1,106		—		—		3,239
Vacant land		6,039		140		3,163		—		—		9,342
Real estate secured		375,501		26,458		22,074		93		—		424,126
Commercial and industrial		44,903		3,527		774		—		—		49,204
Municipal		6,083		—		—		—		—		6,083
Consumer		4,271		53		10		—		—		4,334
Loans receivable, gross	$	430,758	$	30,038	$	22,858	$	93	$	—	$	483,747

Acquired Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
December 31, 2014
Residential 1-4 family	$	8,661	$	—	$	562	$	—	$	—	$	9,223
Residential 5+ multifamily		8,735		—		—		—		—		8,735
Construction of residential 1-4 family		—		—		—		—		—		—
Home equity credit		—		—		—		—		—		—
Residential real estate		17,396		—		562		—		—		17,958
Commercial		89,820		3,830		3,723		526		—		97,899
Construction of commercial		9,045		—		—		—		—		9,045
Commercial real estate		98,865		3,830		3,723		526		—		106,944
Farm land		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—
Real estate secured		116,261		3,830		4,285		526		—		124,902
Commercial and industrial		66,098		1,675		941		—		—		68,714
Municipal		—		—		—		—		—		—
Consumer		96		7		19		—		—		122
Loans receivable, gross	$	182,455	$	5,512	$	5,245	$	526	$	—	$	193,738

The composition of loans receivable by delinquency status is as follows:

Business Activities Loans

			Past due
												180		30
(in thousands)	Current			1-29		30-59		60-89		90-179		days		days			Accruing		Non-
				days		days		days		days		and		and		90 days			accrual
												over		over		and over
June 30, 2015
Residential 1-4 family	$	247,762		$	5,045	$	346	$	1,650	$	1,850	$	1,529	$	5,375		$	—	$	4,403
Residential 5+ multifamily		5,587			77		—		—		—		89		89			—		—
Construction of residential 1-4 family		4,534			—		—		—		—		—		—			—		—
Home equity credit		33,241			62		223		431		—		76		730			—		629
Residential real estate		291,124			5,184		569		2,081		1,850		1,694		6,194			—		5,032
Commercial		100,194			2,235		363		—		—		681		1,044			—		2,326
Construction of commercial		14,993			—		—		—		—		—		—			—		—
Commercial real estate		115,187			2,235		363		—		—		681		1,044			—		2,326
Farm land		2,073			—		—		7		723		384		1,114			—		1,106
Vacant land		5,414			—		5		36		—		2,823		2,864			—		2,859
Real estate secured		413,798			7,419		937		2,124		2,573		5,582		11,216			—		11,323
Commercial and industrial		62,373			604		509		—		—		18		527			—		441
Municipal		6,519			—		—		—		—		—		—			—		—
Consumer		5,611			75		13		4		—		—		17			—		—
Loans receivable, gross	$	488,301		$	8,098	$	1,459	$	2,128	$	2,573	$	5,600	$	11,760		$	—	$	11,764

Acquired Loans

June 30, 2015
Residential 1-4 family	$	7,913	$	197	$	—	$	735	$	—	$	581	$	1,316	$	—	$	581
Residential 5+ multifamily		6,320		—		—		—		—		—		—		—		—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—		—
Home equity credit		—		—		—		—		—		—		—		—		—
Residential real estate		14,233		197		—		735		—		581		1,316		—		581
Commercial		85,759		3,955		—		—		681		1,426		2,107		—		2,107
Construction of commercial		7,728		—		—		—		276		—		276		—		276
Commercial real estate		93,487		3,955		—		—		957		1,426		2,383		—		2,383
Farm land		—		—		—		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—		—		—		—
Real estate secured		107,720		4,152		—		735		957		2,007		3,699		—		2,964
Commercial and industrial		57,017		581		98		41		—		—		139		—		—
Municipal		—		—		—		—		—		—		—		—		—
Consumer		97		5		—		—		—		—		—		—		—
Loans receivable, gross	$	164,834	$	4,738	$	98	$	776	$	957	$	2,007	$	3,838	$	—	$	2,964

Business Activities Loans

			Past due
												180		30
(in thousands)	Current			1-29		30-59		60-89		90-179		days		days			Accruing		Non-
				days		days		days		days		and		and		90 days			accrual
												over		over		and over
December 31, 2014
Residential 1-4 family	$	241,567		$	7,299	$	1,250	$	555	$	976	$	611	$	3,392		$	—	$	2,445
Residential 5+ multifamily		5,467			—		—		—		89		—		89			—		89
Construction of residential 1-4 family		2,004			—		—		—		—		—		—			—		—
Home equity credit		33,488			387		122		528		39		63		752			—		348
Residential real estate		282,526			7,686		1,372		1,083		1,104		674		4,233			—		2,882
Commercial		94,598			2,079		602		—		—		1,219		1,821			—		1,219
Construction of commercial		18,602			—		—		—		—		—		—			—		—
Commercial real estate		113,200			2,079		602		—		—		1,219		1,821			—		1,219
Farm land		2,119			—		13		723		—		384		1,120			—		384
Vacant land		6,422			51		7		—		39		2,823		2,869			—		2,862
Real estate secured		404,267			9,816		1,994		1,806		1,143		5,100		10,043			—		7,347
Commercial and industrial		48,478			582		91		17		36		—		144			17		33
Municipal		6,083			—		—		—		—		—		—			—		—
Consumer		4,274			47		8		5		—		—		13			—		—
Loans receivable, gross	$	463,102		$	10,445	$	2,093	$	1,828	$	1,179	$	5,100	$	10,200		$	17	$	7,380

Acquired Loans

December 31, 2014
Residential 1-4 family	$	8,661	$	—	$	—	$	—	$	—	$	562	$	562	$	—	$562
Residential 5+ multifamily		8,735		—		—		—		—		—		—		—	—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—	—
Home equity credit		—		—		—		—		—		—		—		—	—
Residential real estate		17,396		—		—		—		—		562		562		—	562
Commercial		95,695		1,109		167		—		285		643		1,095		—	1,931
Construction of commercial		9,045		—		—		—		—		—		—		—	—
Commercial real estate		104,740		1,109		167		—		285		643		1,095		—	1,931
Farm land		—		—		—		—		—		—		—		—	—
Vacant land		—		—		—		—		—		—		—		—	—
Real estate secured		122,136		1,109		167		—		285		1,205		1,657		—	2,493
Commercial and industrial		67,665		740		89		220		—		—		309		—	—
Municipal		—		—		—		—		—		—		—		—	—
Consumer		117		5		—		—		—		—		—		—	—
Loans receivable, gross	$	189,918	$	1,854	$	256	$	220	$	285	$	1,205	$	1,966	$	—	$2,493

Interest on non-accrual loans that would have been recorded as additional interest income for the six months ended June 30, 2015 and 2014 had the loans been current in accordance with their original terms totaled $511,000 and $135,000, respectively. The increase is mainly due to the additional loans from the Riverside Bank merger.

Troubled Debt Restructurings

Troubled debt restructurings occurring during the periods are as follows:

Business Activities Loans	Six months ended
	June 30, 2015						June 30, 2014
(in thousands)	Quantity		Pre- modification balance		Post- modification balance		Quantity		Pre- modification balance		Post- modification balance
Residential real estate		1	$	875	$	875		1	$	30	$	30
Commercial real estate		1		184		184		2		447		447
Home equity credit		—		—		—		2		72		72
Troubled debt restructurings		2	$	1,059	$	1,059		5	$	549	$	549
Rate reduction and term extension		1	$	184	$	184		—		—		—
Interest only and term extension		—		—		—		1		48		48
Interest only		—		—		—		2		54		54
Debt consolidation and term extension		—		—		—		2		447		447
Term extension		1		875		875		—		—		—
Troubled debt restructurings		2	$	1,059	$	1,059		5	$	549	$	549

Two loans were modified in troubled debt restructurings during 2015, neither of which was past due at June 30, 2015.

There were no acquired loans modified in troubled debt restructurings during the six months ended June 30, 2015 and 2014.

As of June 30, 2015, the Bank had $1,102,000 in loans collateralized by residential real estate property in the process of foreclosure.

Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

	Business Activities Loans												Acquired Loans
(in thousands)	Three months ended June 30, 2015												Three months ended June 30, 2015
	Beginning balance		Provision			Charge- offs			Reco- veries		Ending balance		Beginning balance		Provision			Charge- offs		Reco- veries		Ending balance
Residential	$	2,386	$	(52	)	$	(188	)	$	1	$	2,147	$	—	$	15		$	—	$	—	$	15
Commercial		1,355		116			(132	)		—		1,339		18		59			—		—		77
Land		176		6			—			—		182		—		—			—		—		—
Real estate		3,917		70			(320	)		1		3,668		18		74			—		—		92
Commercial and industrial		637		52			—			2		691		45		(3	)		—		10		52
Municipal		61		3			—			—		64		—		—			—		—		—
Consumer		120		15			(16	)		4		123		—		—			—		—		—
Unallocated		384		(15	)		—			—		369		—		—			—		—		—
Totals	$	5,119	$	125		$	(336	)	$	7	$	4,915	$	63	$	71		$	—	$	10	$	144

	Business Activities Loans												Acquired Loans
(in thousands)	Six months ended June 30, 2015												Six months ended June 30, 2015
	Beginning balance		Provision			Charge- offs			Reco- veries		Ending balance		Beginning balance		Provision		Charge- offs		Reco- veries		Ending balance
Residential	$	2,306	$	320		$	(481	)	$	2	$	2,147	$	—	$	15	$	—	$	—	$	15
Commercial		1,697		(154	)		(204	)		—		1,339		7		70		—		—		77
Land		164		18			—			—		182		—		—		—		—		—
Real estate		4,167		184			(685	)		2		3,668		7		85		—		—		92
Commercial and industrial		583		(288	)		(56	)		452		691		14		21		—		17		52
Municipal		61		3			—			—		64		—		—		—		—		—
Consumer		117		31			(31	)		6		123		—		—		—		—		—
Unallocated		409		(40	)		—			—		369		—		—		—		—		—
Totals	$	5,337	$	(110	)	$	(772	)	$	460	$	4,915	$	21	$	106	$	—	$	17	$	144
	Business Activities Loans												Acquired Loans
(in thousands)	December 31, 2014												December 31, 2014
	Beginning balance		Provision			Charge- offs			Reco- veries		Ending balance		Beginning balance		Provision		Charge- offs		Reco- veries		Ending balance
Residential	$	1,938	$	657		$	(307	)	$	18	$	2,306	$	—	$	—	$	—	$	—	$	—
Commercial		1,385		355			(84	)		41		1,697		—		7		—		—		7
Land		226		58			(121	)		1		164		—		—		—		—		—
Real estate		3,549		1,070			(512	)		60		4,167		—		7		—		—		7
Commercial and industrial		561		25			(19	)		16		583		—		14		—		—		14
Municipal		43		18			—			—		61		—		—		—		—		—
Consumer		105		16			(28	)		24		117		—		—		—		—		—
Unallocated		425		(16	)		—			—		409		—		—		—		—		—
Totals	$	4,683	$	1,113		$	(559	)	$	100	$	5,337	$	—	$	21	$	—	$	—	$	21

The composition of loans receivable and the allowance for loan losses is as follows:

Business Activities Loans

(in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
June 30, 2015
Residential 1-4 family	$	250,103	$	1,079	$	8,079	$	677	$	258,182	$	1,756
Residential 5+ multifamily		3,871		17		1,882		3		5,753		20
Construction of residential 1-4 family		4,534		31		—		—		4,534		31
Home equity credit		33,319		303		714		37		34,033		340
Residential real estate		291,827		1,430		10,675		717		302,502		2,147
Commercial		99,156		1,054		4,317		96		103,473		1,150
Construction of commercial		14,868		164		125		—		14,993		164
Commercial real estate		114,024		1,218		4,442		96		118,466		1,314
Farm land		2,081		19		1,106		73		3,187		92
Vacant land		5,190		55		3,088		60		8,278		115
Real estate secured		413,122		2,722		19,311		946		432,433		3,668
Commercial and industrial		62,994		664		510		27		63,504		691
Municipal		6,519		64		—		—		6,519		64
Consumer		5,703		123		—		—		5,703		123
Unallocated allowance		—		—		—		—		—		369
Totals	$	488,338	$	3,573	$	19,821	$	973	$	508,159	$	4,915

Acquired Loans

(in thousands)	Collectively evaluated				Individually evaluated				ASC 310-30 loans				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance		Loans		Allowance
June 30, 2015
Residential 1-4 family	$	8,845	$	—	$	581	$	15	$	—	$	—	$	9,426	$	15
Residential 5+ multifamily		6,320		—		—		—		—		—		6,320		—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—
Home equity credit		—		—		—		—		—		—		—		—
Residential real estate		15,165		—		581		15		—		—		15,746		15
Commercial		83,626		2		2,858		60		5,337		—		91,821		62
Construction of commercial		7,728		15		276		—		—		—		8,004		15
Commercial real estate		91,354		17		3,134		60		5,337		—		99,825		77
Farm land		—		—		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—		—		—
Real estate secured		106,519		17		3,715		75		5,337		—		115,571		92
Commercial and industrial		56,210		52		—		—		1,527		—		57,737		52
Municipal		—		—		—		—		—		—		—		—
Consumer		84		—		—		—		18		—		102		—
Unallocated allowance		—		—		—		—		—		—		—		—
Totals	$	162,813	$	69	$	3,715	$	75	$	6,882	$	—	$	173,410	$	144

Business Activities Loans

(in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
December 31, 2014
Residential 1-4 family	$	245,997	$	1,316	$	6,261	$	549	$	252,258	$	1,865
Residential 5+ multifamily		4,536		66		1,020		3		5,556		69
Construction of residential 1-4 family		2,004		13		—		—		2,004		13
Home equity credit		34,231		350		396		9		34,627		359
Residential real estate		286,768		1,745		7,677		561		294,445		2,306
Commercial		93,784		1,018		4,714		486		98,498		1,504
Construction of commercial		18,474		193		128		—		18,602		193
Commercial real estate		112,258		1,211		4,842		486		117,100		1,697
Farm land		2,855		59		384		—		3,239		59
Vacant land		6,245		67		3,097		38		9,342		105
Real estate secured		408,126		3,082		16,000		1,085		424,126		4,167
Commercial and industrial		48,635		532		569		51		49,204		583
Municipal		6,083		61		—		—		6,083		61
Consumer		4,334		117		—		—		4,334		117
Unallocated allowance		—		—		—		—		—		409
Totals	$	467,178	$	3,792	$	16,569	$	1,136	$	483,747	$	5,337

Acquired Loans

(in thousands)	Collectively evaluated				Individually evaluated				ASC 310-30 loans				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance		Loans		Allowance
December 31, 2014
Residential 1-4 family	$	8,661	$	—	$	562	$	—	$	—	$	—	$	9,223	$	—
Residential 5+ multifamily		8,735		—		—		—		—		—		8,735		—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—
Home equity credit		—		—		—		—		—		—		—		—
Residential real estate		17,396		—		562		—		—		—		17,958		—
Commercial		89,820		—		2,502		—		5,577		—		97,899		—
Construction of commercial		9,045		7		—		—		—		—		9,045		7
Commercial real estate		98,865		7		2,502		—		5,577		—		106,944		7
Farm land		—		—		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—		—		—
Real estate secured		116,261		7		3,064		—		5,577		—		124,902		7
Commercial and industrial		66,874		14		—		—		1,840		—		68,714		14
Municipal		—		—		—		—		—		—		—		—
Consumer		103		—		—		—		19		—		122		—
Unallocated allowance		—		—		—		—		—		—		—		—
Totals	$	183,238	$	21	$	3,064	$	—	$	7,436	$	—	$	193,738	$	21

The credit quality segments of loans receivable and the allowance for loan losses are as follows:

Business Activities Loans

June 30, 2015 (in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
Performing loans	$	484,055	$	3,429	$	—	$	—	$	484,055	$	3,429
Potential problem loans		4,282		144		—		—		4,282		144
Impaired loans		—		—		19,822		973		19,822		973
Unallocated allowance												369
Totals	$	488,337	$	3,573	$	19,822	$	973	$	508,159	$	4,915

Acquired Loans

June 30, 2015 (in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
Performing loans	$	167,230	$	69	$	—	$	—	$	167,230	$	69
Potential problem loans		2,465		—		—		—		2,465		—
Impaired loans		—		—		3,715		75		3,715		75
Unallocated allowance												—
Totals	$	169,965	$	69	$	3,715	$	75	$	173,410	$	144

Business Activities Loans

December 31, 2014 (in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
Performing loans	$	457,744	$	3,283	$	—	$	—	$	457,744	$	3,283
Potential problem loans		9,423		509		11		—		9,434		509
Impaired loans		—		—		16,569		1,136		16,569		1,136
Unallocated allowance		—		409		—		—		—		409
Totals	$	467,167	$	4,201	$	16,580	$	1,136	$	483,747	$	5,337

Acquired Loans

December 31, 2014 (in thousands)	Collectively evaluated				Individually evaluated				Total portfolio
		Loans		Allowance		Loans		Allowance		Loans		Allowance
Performing loans	$	187,966	$	21	$	—	$	—	$	187,966	$	21
Potential problem loans		2,708		—		—		—		2,708		—
Impaired loans		—		—		3,064		—		3,064		—
Unallocated allowance		—		—		—		—		—		—
Totals	$	190,674	$	21	$	3,064	$	—	$	193,738	$	21

A specific valuation allowance is established for the impairment amount of each impaired loan, calculated using the fair value of expected cash flows or collateral, in accordance with the most likely means of recovery. Certain data with respect to loans individually evaluated for impairment is as follows:

Business Activities Loans

	Impaired loans with specific allowance										Impaired loans with no specific allowance
(in thousands)	Loan balance							Specific		Income	Loan balance							Income
		Book		Note		Average		allowance		recognized		Book		Note		Average		recognized
June 30, 2015
Residential	$	6,141	$	6,634	$	5,750	$	680	$	69	$	3,820	$	4,110	$	3,043	$	61
Home equity credit		390		412		63		37		5		324		345		611		1
Residential real estate		6,531		7,046		5,813		717		74		4,144		4,455		3,654		62
Commercial		1,607		1,760		2,469		96		21		2,710		3,002		2,130		36
Construction of commercial		—		—		—		—		—		125		131		127		4
Farm land		736		736		423		73		16		370		370		270		—
Vacant land		3,052		3,944		3,088		60		6		36		44		5		—
Real estate secured		11,926		13,486		11,793		946		117		7,385		8,002		6,186		102
Commercial and industrial		69		112		82		27		2		441		471		464		7
Consumer		—		—		—		—		—		—		—		—		—
Totals	$	11,995	$	13,598	$	11,875	$	973	$	119	$	7,826	$	8,473	$	6,650	$	109

Acquired Loans

	Impaired loans with specific allowance										Impaired loans with no specific allowance
(in thousands)	Loan balance							Specific		Income	Loan balance							Income
		Book		Note		Average		allowance		recognized		Book		Note		Average		recognized
June 30, 2015
Residential 1-4 family	$	581	$	716	$	83	$	15	$	—	$	—	$	—	$	488	$	—
Home equity credit		—		—		—		—		—		—		—		—		—
Residential real estate		581		716		83		15		—		—		—		488		—
Commercial		1,526		2,173		218		60		24		1,332		1,843		2,334		18
Construction of commercial		—		—		—		—		—		276		278		79		—
Farm land		—		—		—		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—		—		—		—
Real estate secured		2,107		2,889		301		75		24		1,608		2,121		2,901		18
Commercial and industrial		—		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—		—
Totals	$	2,107	$	2,889	$	301	$	75	$	24	$	1,608	$	2,121	$	2,901	$	18

Business Activities Loans

	Impaired loans with specific allowance										Impaired loans with no specific allowance
(in thousands)	Loan balance							Specific		Income	Loan balance							Income
		Book		Note		Average		allowance		recognized		Book		Note		Average		recognized
December 31, 2014
Residential 1-4 family	$	5,008	$	5,157	$	4,547	$	552	$	128	$	2,273	$	2,395	$	2,703	$	57
Home equity credit		9		24		91		9		—		387		405		441		4
Residential real estate		5,017		5,181		4,638		561		128		2,660		2,800		3,144		61
Commercial		3,383		3,563		3,262		486		108		1,331		1,520		1,468		54
Construction of commercial		—		—		—		—		—		128		134		123		—
Farm land		—		—		—		—		—		384		384		384		—
Vacant land		3,097		3,996		3,090		38		12		—		—		—		—
Real estate secured		11,497		12,740		10,990		1,085		248		4,503		4,838		5,119		115
Commercial and industrial		102		161		106		51		2		467		469		516		30
Consumer		—		—		—		—		—		—		—		19		—
Totals	$	11,599	$	12,901	$	11,096	$	1,136	$	250	$	4,970	$	5,307	$	5,654	$	145

Acquired Loans

	Impaired loans with specific allowance											Impaired loans with no specific allowance
(in thousands)	Loan balance							Specific			Income	Loan balance							Income
		Book		Note		Average		allowance			recognized		Book		Note		Average		recognized
December 31, 2014
Residential 1-4 family	$	—	$	—	$	—	$	—		$	—	$	562	$	716	$	562	$	3
Home equity credit		—		—		—		—			—		—		—		—		—
Residential real estate		—		—		—		—			—		562		716		562		3
Commercial		—		—		—		—			—		2,502		4,014		2,502		12
Construction of commercial		—		—		—		—			—		—		—		—		—
Farm land		—		—		—		—			—		—		—		—		—
Vacant land		—		—		—		—			—		—		—		—		—
Real estate secured		—		—		—		—			—		3,064		4,730		3,064		15
Commercial and industrial		—		—		—		—			—		—		4		—		—
Consumer		—		—		—		—	<