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 March 31, 2017

☐

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 May 15, 2017 is 2,782,842.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2017 (unaudited) and DECEMBER 31, 2016	3
	CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (unaudited)	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (unaudited)	5
	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 ( unaudited)	5
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (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	47
Item 4.	CONTROLS AND PROCEDURES	48
PART II. OTHER INFORMATION		49
Item 1.	LEGAL PROCEEDINGS	49
Item 1A.	RISK FACTORS	49
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	49
Item 3.	DEFAULTS UPON SENIOR SECURITIES	49
Item 4.	MINE SAFETY DISCLOSURES	49
Item 5.	OTHER INFORMATION	49
Item 6.	EXHIBITS	49
SIGNATURES		50

PART I - FINANCIAL INFORMATION

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share value)	March 31, 2017			December 31, 2016
ASSETS		(unaudited)
Cash and due from banks	$	6,376		$	5,434
Interest bearing demand deposits with other banks		34,916			30,051
Total cash and cash equivalents		41,292			35,485
Securities
Available-for-sale at fair value		76,849			79,623
Federal Home Loan Bank of Boston stock at cost		3,510			3,211
Loans held-for-sale		53			—
Loans receivable, net (allowance for loan losses: $6,285 and $6,127)		764,665			763,184
Other real estate owned		3,833			3,773
Bank premises and equipment, net		14,574			14,398
Goodwill		12,552			12,552
Intangible assets (net of accumulated amortization: $3,638 and $3,511)		1,611			1,737
Accrued interest receivable		2,431			2,424
Cash surrender value of life insurance policies		14,126			14,038
Deferred taxes		1,361			1,367
Other assets		2,692			3,574
Total Assets	$	939,549		$	935,366
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
Demand (non-interest bearing)	$	201,215		$	218,420
Demand (interest bearing)		132,527			127,854
Money market		182,438			182,476
Savings and other		141,085			135,435
Certificates of deposit		115,151			117,585
Total deposits		772,416			781,770
Repurchase agreements		2,350			5,535
Federal Home Loan Bank of Boston advances		52,745			37,188
Subordinated debt		9,794			9,788
Note payable		335			344
Capital lease liability		417			418
Accrued interest and other liabilities		6,271			6,316
Total Liabilities		844,328			841,359
Shareholders' Equity
Common stock - $0.10 per share par value
Authorized: 5,000,000;
Issued: 2,770,036 and 2,758,086		277			276
Paid-in capital		42,394			42,085
Retained earnings		52,351			51,521
Unearned compensation - restricted stock awards		(288	)		(352	)
Accumulated other comprehensive income, net		487			477
Total Shareholders' Equity		95,221			94,007
Total Liabilities and Shareholders' Equity	$	939,549		$	935,366

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three months ended March 31, (in thousands except per share amounts)		2017		2016
Interest and dividend income
Interest and fees on loans	$	8,342	$	7,930
Interest on debt securities
Taxable		317		293
Tax exempt		164		286
Other interest and dividends		83		74
Total interest and dividend income		8,906		8,583
Interest expense
Deposits		515		509
Repurchase agreements		1		1
Capital lease		17		17
Note payable		2		5
Subordinated debt		156		156
Federal Home Loan Bank of Boston advances		262		231
Total interest expense		953		919
Net interest and dividend income		7,953		7,664
Provision for loan losses		352		463
Net interest and dividend income after provision for loan losses		7,601		7,201
Non-interest income
Trust and wealth advisory		854		784
Service charges and fees		962		702
Gains on sales of mortgage loans, net		49		39
Mortgage servicing, net		45		34
Gains on sales and calls of available-for-sale securities, net		—		2
Other		113		114
Total non-interest income		2,023		1,675
Non-interest expense
Salaries		2,890		2,573
Employee benefits		1,088		1,088
Premises and equipment		895		892
Data processing		472		447
Professional fees		717		380
Collections and other real estate owned		301		186
FDIC insurance		149		134
Marketing and community support		251		201
Amortization of core deposit intangibles		126		155
Other		538		781
Total non-interest expense		7,427		6,837
Income before income taxes		2,197		2,039
Income tax provision		593		527
Net income	$	1,604	$	1,512
Net income allocated to common stock	$	1,594	$	1,499

Basic earnings per common share	$	0.58	$	0.55
Weighted average common shares outstanding, to calculate basic earnings per share		2,749		2,723
Diluted earnings per common share	$	0.58	$	0.55
Weighted average common shares outstanding, to calculate diluted earnings per share		2,768		2,741
Common dividends per share	$	0.28	$	0.28

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Three months ended March 31, (in thousands)		2017			2016
Net income	$	1,604		$	1,512
Other comprehensive income (loss)
Net unrealized gains (losses) on securities available-for-sale		16			(68	)
Reclassification of net realized gains (losses) in net income⁽¹⁾		—			(2	)
Unrealized gains (losses) on securities available-for-sale		16			(70	)
Income tax (expense) benefit		(6	)		24
Unrealized gains (losses) on securities available-for-sale, net of tax		10			(46	)
Comprehensive income	$	1,614		$	1,466

^{(1)
Reclassification adjustments include realized security gains and losses. The gains and losses have been reclassified out of accumulated
other comprehensive income (loss) and have affected certain lines in the consolidated statements of income as follows: The pre-tax
amount is reflected as gains on sales and calls 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)	Common Stock					Paid-in capital			Retained earnings			Unearned compensation restricted stock awards			Accumulated other comp- rehensive income			Total shareholders' equity
	Shares			Amount
Balances at December 31, 2015		2,733,576		$	273	$	41,364		$	47,922		$	(110	)	$	1,125		$	90,574
Net income		—			—		—			1,512			—			—			1,512
Other comprehensive loss, net of tax		—			—		—			—			—			(46	)		(46	)
Common stock dividends declared		—			—		—			(772	)		—			—			(772	)
Stock options exercised		4,050			—		87			—			—			—			87
Issuance of restricted stock awards		15,800			2		464			—			(466	)		—			—
Stock based compensation-restricted stock awards		—			—		—			—			47			—			47
Balances at March 31, 2016		2,753,426		$	275	$	41,915		$	48,662		$	(529	)	$	1,079		$	91,402
Balances at December 31, 2016		2,758,086		$	276	$	42,085		$	51,521		$	(352	)	$	477		$	94,007
Net income		—			—		—			1,604			—			—			1,604
Other comprehensive loss, net of tax		—			—		—			—			—			10			10
Common stock dividends declared		—			—		—			(774	)		—			—			(774	)
Stock options exercised		12,150			1		312			—			—			—			313
Forfeiture of restricted stock awards		(200	)		—		(3	)		—			3			—			—
Stock based compensation-restricted stock awards		—			—		—			—			61			—			61
Balances at March 31, 2017		2,770,036		$	277	$	42,394		$	52,351		$	(288	)	$	487		$	95,221

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three months ended March 31, (in thousands)		2017			2016
Operating Activities
Net income	$	1,604		$	1,512
Adjustments to reconcile net income to net cash provided by operating activities:
(Accretion), amortization and depreciation:
Securities		42			60
Bank premises and equipment		327			306
Core deposit intangible		126			155
Modification fees on Federal Home Loan Bank of Boston advances		57			58
Subordinated debt issuance costs		6			6
Mortgage servicing rights		68			51
Fair value adjustment on loans		(495	)		(586	)
Fair value adjustment on deposits		(24	)		(38	)
(Gains) and losses, including write-downs
Gain on sales and calls of securities available-for-sale, net		—			(2	)
Gain on sales of loans, excluding capitalized servicing rights		(36	)		(19	)
Write-downs of other real estate owned		144			—
Loss on sale/disposals of premises and equipment		—			13
Provision for loan losses		352			463
Proceeds from loans sold		1,881			1,787
Loans originated for sale		(1,898	)		(1,188	)
Decrease (increase) in deferred loan origination fees and costs, net		152			(44	)
Mortgage servicing rights originated		(25	)		(20	)
Increase in mortgage servicing rights impairment reserve		2			20
Increase in interest receivable		(7	)		(144	)
(Increase) decrease in prepaid expenses		(269	)		47
Increase in cash surrender value of life insurance policies		(88	)		(90	)
Decrease in income tax receivable		293			506
Decrease in other assets		813			125
Decrease in accrued expenses		(130	)		(113	)
Increase (decrease) in interest payable		149			(30	)
(Decrease) increase in other liabilities		(64	)		51
Stock based compensation-restricted stock awards		61			47
Net cash provided by operating activities		3,041			2,933
Investing Activities
(Purchase) redemption of Federal Home Loan Bank of Boston stock		(299	)		59
Purchases of securities available-for-sale		(5,016	)		(10,072	)
Proceeds from calls of securities available-for-sale		2,990			5,351
Proceeds from maturities of securities available-for-sale		4,774			2,253
Loan originations and principal collections, net		(1,777	)		(29,674	)
Recoveries of loans previously charged off		83			14
Capital expenditures		(503	)		(644	)
Net cash provided (utilized) by investing activities		252			(32,713	)

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)

Three months ended March 31, (in thousands)		2017			2016
Financing Activities
(Decrease) increase in deposit transaction accounts, net		(6,920	)		3,330
Decrease in time deposits, net		(2,410	)		(2,167	)
Decrease in securities sold under agreements to repurchase, net		(3,185	)		(1,294	)
Federal Home Loan Bank of Boston advances		15,500			—
Principal payments on Federal Home Loan Bank of Boston advances		—			(6	)
Principal payments on note payable		(9	)		(11	)
Decrease in capital lease obligation		(1	)		(2	)
Stock options exercised		313			87
Common stock dividends paid		(774	)		(772	)
Net cash provided (utilized) by financing activities		2,514			(835	)
Net increase (decrease) in cash and cash equivalents		5,807			(30,615	)
Cash and cash equivalents, beginning of period		35,485			62,118
Cash and cash equivalents, end of period	$	41,292		$	31,503
Cash paid during period
Interest	$	765		$	760
Income taxes		300			258
Non-cash investing and financing activities
Transfer from loans to other real estate owned		204			—

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 consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the interim periods presented.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 statement of condition, 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 and impairment of goodwill and intangibles.

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 March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying condensed financial statements should be read in conjunction with the financial statements and notes thereto included in Salisbury's 2016 Annual Report on Form 10-K for the year ended December 31, 2016.

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, August 2015, May 2016, and December 2016, respectively, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, 2015-14, 2016-12, and 2016-20, “Revenue from Contracts with Customers (Topic 606).” The objective of ASU 2014-09 is to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The guidance in ASU 2014-09 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 ASU 2015-14 defer the effective date of ASU 2014-09 to 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 amendments in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but rather affect only certain narrow aspects aimed to reduce the potential for diversity in practice at initial application and the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The amendments in ASU 2016-20 include technical corrections and improvements to Topic 606 and other Topics amended by ASU 2014-09 to increase stakeholders’ awareness of the proposals and to expedite improvements to ASU 2014-09. Salisbury is currently reviewing ASU 2014-09, 2015-14, 2016-12, and 2016-20 to determine if they will have an impact on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – overall (subtopic 825-10): "Recognition and Measurement of Financial Assets and Financial Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early adoption of the other provisions mentioned above is not permitted. Salisbury does not expect ASU No. 2016-01 to have a material impact on the Company's Consolidated Financial Statements; however, the Company will continue to closely monitor developments and additional guidance.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): 1) a lease liability, which is the present value of a lessee's obligation to make lease payments, and 2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessor accounting under the new guidance remains largely unchanged as it is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. Leveraged leases have been eliminated, although lessors can continue to account for existing leveraged leases using the current accounting guidance. Other limited changes were made to align lessor accounting with the lessee accounting model and the new revenue recognition standard. All entities will classify leases to determine how to recognize lease-related revenue and expense. Quantitative and qualitative disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The intention is to require enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. All entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. They have the option to use certain relief; full retrospective application is prohibited. Salisbury is currently evaluating this ASU to determine the impact on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted, but all of the guidance must be adopted in the same period. Adoption of ASU 2016-09 did not have a material effect on the financial results for the first quarter of 2017.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016-13 is effective for “public business entities,” as defined, that are SEC filers for fiscal years and for interim periods with those fiscal years beginning after December 15, 2019. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Salisbury is currently evaluating the provisions of ASU 2016-13 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments." This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification within the statement of cash flows, ASU 2016-15 is not expected to have a material impact on Salisbury’s Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This ASU is intended to simplify and improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under the revised guidance, an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. Entities will be required to apply on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Salisbury is currently evaluating the provisions of ASU 2016-16 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business." The amendments in this ASU are intended to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this ASU provide a screen to determine when a set of input, processes, and outputs is not a business and provides a framework to assist entities in evaluating whether both an input and a substantive process are present. ASU 2017-01 is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance, or for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. Entities should apply the guidance prospectively on or after the effective date. Salisbury is currently evaluating the provisions of ASU 2017-01 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU is intended to allow companies to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019 and interim periods within those years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Entities should apply the guidance prospectively. Salisbury is currently evaluating the provisions of ASU 2017-04 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).” This ASU is intended to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for public entities for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Entities may apply the guidance either retrospectively or modified retrospectively. Salisbury is currently evaluating the provisions of ASU 2017-05 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU is intended to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost and provide additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets. The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments require that an employer disaggregate the service cost component from the other components of net benefit cost. ASU 2017-07 is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. Entities should apply the guidance retrospectively. Salisbury is currently evaluating the provisions of ASU 2017-07 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This ASU will amend the amortization period for certain purchased callable debt securities held at a premium. The Board is shortening the amortization period for the premium to the earliest call date. Under current generally accepted accounting principles, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 is effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. Entities should apply the guidance on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Salisbury is currently evaluating the provisions of ASU 2017-08 to determine the potential impact the new standard will have on Salisbury’s Consolidated Financial Statements.

NOTE 2 - SECURITIES

The composition of securities is as follows:

(in thousands)	Amortized cost basis (1)			Gross un- realized gains			Gross un- realized losses			Fair Value
March 31, 2017
Available-for-sale
Municipal bonds		$	12,816		$	137		$	—		$	12,953
Mortgage-backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises			49,217			221			229			49,209
Collateralized mortgage obligations:
U.S. Government agencies			6,360			3			—			6,363
Non-agency			2,997			419			9			3,407
SBA bonds			1,876			7			1			1,882
CRA mutual funds			838			—			16			822
Corporate bonds			2,000			41			—			2,041
Preferred stock			7			165			—			172
Total securities available-for-sale		$	76,111		$	993		$	255		$	76,849
Non-marketable securities
Federal Home Loan Bank of Boston stock		$	3,510		$	—		$	—		$	3,510
(in thousands)	Amortized cost basis (1)			Gross un- realized gains			Gross un- realized losses			Fair Value
December 31, 2016
Available-for-sale
Municipal bonds		$	15,800		$	197		$	1		$	15,996
Mortgage-backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises			53,407			229			335			53,301
Collateralized mortgage obligations:
U.S. Government agencies			1,470			4			—			1,474
Non-agency			3,327			414			6			3,735
SBA bonds			2,056			9			1			2,064
CRA mutual funds			834			—			16			818
Corporate bonds			2,000			16			3			2,013
Preferred stock			7			215			—			222
Total securities available-for-sale		$	78,901		$	1,084		$	362		$	79,623
Non-marketable securities
Federal Home Loan Bank of Boston stock		$	3,211		$	—		$	—		$	3,211

(1)

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

Salisbury did not sell any available-for-sale securities during the three month periods ended March 31, 2017 and March 31, 2016.

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 loss, the aggregate fair value and gross unrealized loss of securities that have been in a continuous unrealized loss position as of the date presented:

March 31, 2017 (in thousands)	Less than 12 Months				12 Months or Longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale
Mortgage-backed securities	$	30,690	$	223	$	246	$	6	$	30,936	$	229
Collateralized mortgage obligations:
Non-agency		44		5		305		4		349		9
SBA bonds		348		1		74		—		422		1
CRA funds		822		16		—		—		822		16
Total temporarily impaired securities	$	31,904	$	245	$	625	$	10	$	32,529	$	255

At March 31, 2017 there were no other than temporarily impaired securities with unrealized losses.

	Less than 12 Months				12 Months or Longer				Total
December 31, 2016 (in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale
Municipal bonds	$	517	$	1	$	—	$	—	$	517	$	1
Mortgage-backed securities		34,758		329		249		6		35,007		335
Collateralized mortgage obligations
Non-agency		60		—		339		5		399		5
SBA bonds		475		1		—		—		475		1
CRA mutual funds		818		16		—		—		818		16
Corporate bonds		498		3		—		—		498		3
Total temporarily impaired securities		37,126		350		588		11		37,714		361
Other-than-temporarily impaired securities
Collateralized mortgage obligations
Non-agency		174		1		—		—		174		1
Total temporarily impaired and other-than-temporarily impaired securities	$	37,300	$	351	$	588	$	11	$	37,888	$	362

The amortized cost, fair value and tax equivalent yield of securities, by maturity, are as follows:

March 31, 2017 (in thousands)	Maturity	Amortized cost		Fair value		Yield(1)
Municipal bonds	Within 1 year	$	75	$	75		4.92	%
	After 1 year but within 5 years		869		873		5.48
	After 10 years but within 15 years		4,478		4,522		6.64
	After 15 years		7,394		7,483		6.73
	Total		12,816		12,953		6.61
Mortgage-backed securities	U.S. Government agency and U.S. Government-sponsored enterprises		49,217		49,209		2.35
Collateralized mortgage obligations	U.S. Government agency and U.S. Government-sponsored enterprises		6,360		6,363		2.64
	Non-agency		2,997		3,407		4.04
SBA bonds			1,876		1,882		3.48
CRA mutual funds			838		822		4.51
Corporate bonds	After 5 years but within 10 years		2,000		2,041		5.50
Preferred stock			7		172		0.00
Securities available-for-sale		$	76,111	$	76,849		3.29	%

(1) Yield is based on amortized cost.

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 March 31, 2017.

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 maturity, and does not intend to sell these securities. Therefore, management does not consider the twenty securities with unrealized losses at March 31, 2017 to be OTTI.

SBA bonds: The contractual cash flows are guaranteed by the U.S. government. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality since time of purchase. 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 maturity, and does not intend to sell these securities. Therefore, management evaluated the impairment status of these debt securities, and concluded that the gross unrealized losses on two positions were temporary in nature and does not consider these investments to be other-than temporarily impaired at March 31, 2017.

Non-agency CMOs: Salisbury performed a detailed cash flow analysis of its non-agency CMOs at March 31, 2017, 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 March 31, 2017. 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.

CRA mutual funds consist of an investment in a fixed income mutual fund ($822 thousand in total fair value and $16 thousand in total unrealized losses as of March 31, 2017). The severity of the impairment (fair value is approximately 1.91% less than cost) and the duration of the impairment correlates with interest rates in 2017. Salisbury evaluated the near-term prospects of this fund in relation to the severity and duration of the impairment. Based on that evaluation, Salisbury does not consider this investment to be OTTI at March 31, 2017.

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:

Three months ended March 31 (in thousands)		2017		2016
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 March 31, 2017. 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:

	March 31, 2017									December 31, 2016
(In thousands)	Business Activities Loans			Acquired Loans			Total			Business Activities Loans			Acquired Loans			Total
Residential 1-4 family	$	297,111		$	6,016		$	303,127		$	295,030		$	6,098		$	301,128
Residential 5+ multifamily		9,938			5,526			15,464			7,976			5,649			13,625
Construction of residential 1-4 family		10,990			—			10,990			10,951			—			10,951
Home equity lines of credit		35,033			—			35,033			35,487			—			35,487
Residential real estate		353,072			11,542			364,614			349,444			11,747			361,191
Commercial		176,318			72,308			248,626			155,628			79,854			235,482
Construction of commercial		4,352			1,857			6,209			3,481			1,917			5,398
Commercial real estate		180,670			74,165			254,835			159,109			81,771			240,880
Farm land		4,599			—			4,599			3,914			—			3,914
Vacant land		6,567			—			6,567			6,600			—			6,600
Real estate secured		544,908			85,707			630,615			519,067			93,518			612,585
Commercial and industrial		107,491			17,869			125,360			121,144			20,329			141,473
Municipal		8,737			—			8,737			8,626			—			8,626
Consumer		5,080			63			5,143			5,312			68			5,380
Loans receivable, gross		666,216			103,639			769,855			654,149			113,915			768,064
Deferred loan origination fees and costs, net		1,095			—			1,095			1,247			—			1,247
Allowance for loan losses		(5,966	)		(319	)		(6,285	)		(5,816	)		(311	)		(6,127	)
Loans receivable, net	$	661,345		$	103,320		$	764,665		$	649,580		$	113,604		$	763,184
Loans held-for-sale
Residential 1-4 family	$	53		$	—		$	53		$	—		$	—		$	—

Concentrations of Credit Risk

Salisbury's loans consist primarily of residential and commercial real estate loans located principally in northwestern Connecticut, 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:

Business Activities Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
March 31, 2017
Residential 1-4 family	$	288,103	$	6,112	$	2,896	$	—	$	—	$	297,111
Residential 5+ multifamily		7,928		1,849		161		—		—		9,938
Construction of residential 1-4 family		10,990		—		—		—		—		10,990
Home equity lines of credit		33,938		852		243		—		—		35,033
Residential real estate		340,959		8,813		3,300		—		—		353,072
Commercial		166,867		3,720		5,731		—		—		176,318
Construction of commercial		4,239		—		113		—		—		4,352
Commercial real estate		171,106		3,720		5,844		—		—		180,670
Farm land		3,605		—		994		—		—		4,599
Vacant land		6,484		83		—		—		—		6,567
Real estate secured		522,154		12,616		10,138		—		—		544,908
Commercial and industrial		106,007		1,286		198		—		—		107,491
Municipal		8,737		—		—		—		—		8,737
Consumer		5,060		20		—		—		—		5,080
Loans receivable, gross	$	641,958	$	13,922	$	10,336	$	—	$	—	$	666,216

Acquired Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
March 31, 2017
Residential 1-4 family	$	5,909	$	107	$	—	$	—	$	—	$	6,016
Residential 5+ multifamily		5,526		—		—		—		—		5,526
Construction of residential 1-4 family		—		—		—		—		—		—
Home equity lines of credit		—		—		—		—		—		—
Residential real estate		11,435		107		—		—		—		11,542
Commercial		64,985		2,590		4,733		—		—		72,308
Construction of commercial		1,598		—		259		—		—		1,857
Commercial real estate		66,583		2,590		4,992		—		—		74,165
Farm land		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—
Real estate secured		78,018		2,697		4,992		—		—		85,707
Commercial and industrial		16,823		987		59		—		—		17,869
Municipal		—		—		—		—		—		—
Consumer		61		2		—		—		—		63
Loans receivable, gross	$	94,902	$	3,686	$	5,051	$	—	$	—	$	103,639

Business Activities Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
December 31, 2016
Residential 1-4 family	$	285,939	$	6,170	$	2,832	$	89	$	—	$	295,030
Residential 5+ multifamily		5,907		1,906		163		—		—		7,976
Construction of residential 1-4 family		10,951		—		—		—		—		10,951
Home equity lines of credit		34,299		512		676		—		—		35,487
Residential real estate		337,096		8,588		3,671		89		—		349,444
Commercial		145,849		3,759		6,020		—		—		155,628
Construction of commercial		3,366		—		115		—		—		3,481
Commercial real estate		149,215		3,759		6,135		—		—		159,109
Farm land		2,912		—		1,002		—		—		3,914
Vacant land		6,513		87		—		—		—		6,600
Real estate secured		495,736		12,434		10,808		89		—		519,067
Commercial and industrial		118,804		1,734		606		—		—		121,144
Municipal		8,626		—		—		—		—		8,626
Consumer		5,288		24		—		—		—		5,312
Loans receivable, gross	$	628,454	$	14,192	$	11,414	$	89	$	—	$	654,149

Acquired Loans

(in thousands)	Pass		Special mention		Substandard		Doubtful		Loss		Total
December 31, 2016
Residential 1-4 family	$	5,989	$	109	$	—	$	—	$	—	$	6,098
Residential 5+ multifamily		5,649		—		—		—		—		5,649
Construction of residential 1-4 family		—		—		—		—		—		—
Home equity lines of credit		—		—		—		—		—		—
Residential real estate		11,638		109		—		—		—		11,747
Commercial		70,007		4,059		5,788		—		—		79,854
Construction of commercial		1,659		—		258		—		—		1,917
Commercial real estate		71,666		4,059		6,046		—		—		81,771
Farm land		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—
Real estate secured		83,304		4,168		6,046		—		—		93,518
Commercial and industrial		19,110		1,160		59		—		—		20,329
Municipal		—		—		—		—		—		—
Consumer		65		3		—		—		—		68
Loans receivable, gross	$	102,479	$	5,331	$	6,105	$	—	$	—	$	113,915

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

Business Activities Loans

			Past due

									180		30		Accruing
(in thousands)	Current		30-59		60-89		90-179		days		days		90 days		Non-
			days		days		days		and		and		and		accrual
									over		over		over
March 31, 2017
Residential 1-4 family	$	291,506	$	3,624	$	519	$	—	$	1,462	$	5,605	$	—	$	2,138
Residential 5+ multifamily		9,814		124		—		—		—		124		—		161
Construction of residential 1-4 family		10,990		—		—		—		—		—		—		—
Home equity lines of credit		34,418		421		181		13		—		615		—		87
Residential real estate		346,728		4,169		700		13		1,462		6,344		—		2,386
Commercial		173,684		497		344		—		1,793		2,634		—		1,793
Construction of commercial		4,352		—		—		—		—		—		—		—
Commercial real estate		178,036		497		344		—		1,793		2,634		—		1,793
Farm land		3,866		10		—		—		723		733		—		994
Vacant land		6,522		45		—		—		—		45		—		—
Real estate secured		535,152		4,721		1,044		13		3,978		9,756		—		5,173
Commercial and industrial		106,963		129		343		30		26		528		30		26
Municipal		8,737		—		—		—		—		—		—		—
Consumer		5,057		16		7		—		—		23		—		4
Loans receivable, gross	$	655,909	$	4,866	$	1,394	$	43	$	4,004	$	10,307	$	30	$	5,203

Acquired Loans

			Past due

									180		30		Accruing
(in thousands)	Current		30-59		60-89		90-179		days		days		90 days		Non-
			days		days		days		and		and		and		accrual
									over		over		over
March 31, 2017
Residential 1-4 family	$	5,920	$	47	$	49	$	—	$	—	$	96	$	—	$	—
Residential 5+ multifamily		5,526		—		—		—		—		—		—		—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—
Home equity lines of credit		—		—		—		—		—		—		—		—
Residential real estate		11,446		47		49		—		—		96		—		—
Commercial		66,214		2,349		2,179		—		1,566		6,094		—		1,566
Construction of commercial		1,493		106		—				258		364		—		258
Commercial real estate		67,707		2,455		2,179		—		1,824		6,458		—		1,824
Farm land		—		—		—		—		—		—		—		—
Vacant land		—		—		—		—		—		—		—		—
Real estate secured		79,153		2,502		2,228		—		1,824		6,554		—		1,824
Commercial and industrial		16,911		958		—		—		—		958		—		—
Municipal		—		—		—		—		—		—		—		—
Consumer		63		—		—		—		—		—		—		—
Loans receivable, gross	$	96,127	$	3,460	$	2,228	$	—	$	1,824	$	7,512	$	—	$	1,824

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

Business Activities Loans

			Past due

									180		30		Accruing
(in thousands)	Current		30-59		60-89		90-179		days		days		90 days		Non-
			days		days		days		and		and		and		accrual
									over		over		over
December 31, 2016
Residential 1-4 family	$	291,941	$	1,161	$	213	$	327	$	1,388	$	3,089	$	236	$	1,920
Residential 5+ multifamily		7,976		—		—		—		—		—		—		163
Construction of residential 1-4 family		10,951		—		—		—		—		—		—		—
Home equity lines of credit		35,190		155		88		—		54		297		—		519
Residential real estate		346,058		1,316		301		327		1,442		3,386		236		2,602
Commercial		152,905		451		250		1,793		229		2,723		—		2,022
Construction of commercial		3,481		—		—		—		—		—		—		—
Commercial real estate		156,386		451		250		1,793		229		2,723		—		2,022
Farm land		2,402		789		—		—		723		1,512		—		1,002
Vacant land		6,575		25		—		—		—		25		—		—
Real estate secured		511,421		2,581		551		2,120		2,394		7,646		236		5,626
Commercial and industrial		120,719		140		239		46		—		425		20		27
Municipal		8,626		—		—		—		—		—		—		—
Consumer		5,268		26		15		3		—		44		—		4
Loans receivable, gross	$	646,034	$	2,747	$	805	$	2,169	$	2,394	$	8,115	$	256	$	5,657
Acquired Loans
			Past due

									180		30		Accruing
(in thousands)	Current		30-59		60-89		90-179		days		days		90 days		Non-
			days		days		days		and		and		and		accrual
									over		over		over
December 31, 2016
Residential 1-4 family	$	5,954	$	144	$	—	$	—	$	—	$	144	$	—	$	—
Residential 5+ multifamily		5,649		—		—		—		—		—		—		—
Construction of residential 1-4 family		—		—		—		—		—		—		—		—
Home equity lines of credit		—		—		—		—		—		—		—		—
Residential real estate		11,603		144