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Loans and Allowance for Credit Losses | 9 Months Ended
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Sep. 30, 2014
Receivables [Abstract] |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | Note 4 – Loans and Allowance for Credit Losses The Company makes residential mortgage, commercial and consumer loans to customers primarily in Talbot County, Queen Anne’s County, Kent County, Caroline County and Dorchester County in Maryland and in Kent County, Delaware. The following table provides information about the principal classes of the loan portfolio at September 30, 2014 and December 31, 2013. At December 31, 2013, $3.5 million of nonaccrual construction loans were classified as held for sale. During the first quarter of 2014, these loans held for sale were reclassified to loans.
|  | September 30, |  | December 31, |
(Dollars in thousands) |  | 2014 |  | 2013 |
Construction |  | $ | 67,366 |  | $ | 64,591 |
Residential real estate |  |  | 276,441 |  |  | 274,857 |
Commercial real estate |  |  | 297,847 |  |  | 304,605 |
Commercial |  |  | 54,207 |  |  | 57,195 |
Consumer |  |  | 9,181 |  |  | 10,671 |
Total loans |  |  | 705,042 |  |  | 711,919 |
Allowance for credit losses |  |  | (8,606) |  |  | (10,725) |
Total loans, net |  | $ | 696,436 |  | $ | 701,194 |
Loans are stated at their principal amount outstanding net of any deferred fees and costs. Interest income on loans is accrued at the contractual rate based on the principal amount outstanding. Fees charged and costs capitalized for originating loans are being amortized substantially on the interest method over the term of the loan. A loan is placed on nonaccrual (i.e., interest income is no longer accrued) when it is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more, unless the loan is well secured and in the process of collection. Any unpaid interest previously accrued on those loans is reversed from income. Interest payments received on nonaccrual loans are applied as a reduction of the loan principal balance unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. A loan is considered impaired if it is probable that the Company will not collect all principal and interest payments according to the loan’s contractual terms. An impaired loan may show deficiencies in the borrower’s overall financial condition, payment history, support available from financial guarantors and/or the fair market value of collateral. The impairment of a loan is measured at the present value of expected future cash flows using the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Generally, the Company measures impairment on such loans by reference to the fair value of the collateral. Once the amount of impairment has been determined, the uncollectible portion is charged off. Income on impaired loans is recognized on a cash basis, and payments are first applied against the principal balance outstanding (i.e., placing impaired loans on nonaccrual status). Generally, interest income is not recognized on impaired loans unless the likelihood of further loss is remote. The allowance for credit losses may include specific reserves related to impaired loans. Specific reserves remain until charge offs are made. Impaired loans do not include groups of smaller balance homogenous loans such as residential mortgage and consumer installment loans that are evaluated collectively for impairment. Reserves for probable credit losses related to these loans are based on historical loss ratios and are included in the formula portion of the allowance for credit losses. See additional discussion under the caption “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. A loan is considered a troubled debt restructuring (“TDR”) if a borrower is experiencing financial difficulties and a creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Loans are identified to be restructured when signs of impairment arise such as borrower interest rate reduction request, slowness to pay, or when an inability to repay becomes evident. The terms being offered are evaluated to determine if they are more liberal than those that would be indicated by policy or industry standards for similar, untroubled credits. In those situations where the terms or the interest rates are considered to be more favorable than industry standards or the current underwriting guidelines of the Company’s banking subsidiaries, the loan is classified as a TDR. All loans designated as TDRs are considered impaired loans and may be on either accrual or nonaccrual status. In instances where the loan has been placed on nonaccrual status, six consecutive months of timely payments are required prior to returning the loan to accrual status. All loans classified as TDRs which are restructured and accrue interest under revised terms require a full and comprehensive review of the borrower’s financial condition, capacity for repayment, realistic assessment of collateral values, and the assessment of risk entered into any workout agreement. Current financial information on the borrower, guarantor, and underlying collateral is analyzed to determine if it supports the ultimate collection of principal and interest. For commercial loans, the cash flows are analyzed, both for the underlying project and globally. For consumer loans, updated salary, credit history and cash flow information is obtained. Current market conditions are also considered. Following a full analysis, the determination of the appropriate loan structure is made. The following tables include impairment information relating to loans and the allowance for credit losses as of September 30, 2014 and December 31, 2013.
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 10,404 |  | $ | 18,599 |  | $ | 8,322 |  | $ | 517 |  | $ | 124 |  | $ | - |  | $ | 37,966 |
Loans collectively evaluated for impairment |  |  | 56,962 |  |  | 257,842 |  |  | 289,525 |  |  | 53,690 |  |  | 9,057 |  |  | - |  |  | 667,076 |
Total loans |  | $ | 67,366 |  | $ | 276,441 |  | $ | 297,847 |  | $ | 54,207 |  | $ | 9,181 |  | $ | - |  | $ | 705,042 |
Allowance for credit losses allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 201 |  | $ | 243 |  | $ | 6 |  | $ | 293 |  | $ | 25 |  | $ | - |  | $ | 768 |
Loans collectively evaluated for impairment |  |  | 1,629 |  |  | 2,145 |  |  | 2,735 |  |  | 505 |  |  | 243 |  |  | 581 |  |  | 7,838 |
Total allowance for credit losses |  | $ | 1,830 |  | $ | 2,388 |  | $ | 2,741 |  | $ | 798 |  | $ | 268 |  | $ | 581 |  | $ | 8,606 |
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 5,569 |  | $ | 19,748 |  | $ | 14,462 |  | $ | 887 |  | $ | 48 |  | $ | - |  | $ | 40,714 |
Loans collectively evaluated for impairment |  |  | 59,022 |  |  | 255,109 |  |  | 290,143 |  |  | 56,308 |  |  | 10,623 |  |  | - |  |  | 671,205 |
Total loans |  | $ | 64,591 |  | $ | 274,857 |  | $ | 304,605 |  | $ | 57,195 |  | $ | 10,671 |  | $ | - |  | $ | 711,919 |
Allowance for credit losses allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 204 |  | $ | 285 |  | $ | 44 |  | $ | 245 |  | $ | 5 |  | $ | - |  | $ | 783 |
Loans collectively evaluated for impairment |  |  | 1,756 |  |  | 3,569 |  |  | 2,985 |  |  | 1,021 |  |  | 238 |  |  | 373 |  |  | 9,942 |
Total allowance for credit losses |  | $ | 1,960 |  | $ | 3,854 |  | $ | 3,029 |  | $ | 1,266 |  | $ | 243 |  | $ | 373 |  | $ | 10,725 |
The following tables provide information on impaired loans and any related allowance by loan class as of September 30, 2014 and December 31, 2013. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken.
|  |  |  | Recorded |  | Recorded |  |  |  | Quarter-to- |  | Year-to-date |
|  | Unpaid |  | investment |  | investment |  |  |  | date average |  | average |
|  | principal |  | with no |  | with an |  | Related |  | recorded |  | recorded |
(Dollars in thousands) |  | balance |  | allowance |  | allowance |  | allowance |  | investment |  | investment |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 10,542 |  | $ | 6,801 |  | $ | 200 |  | $ | 200 |  | $ | 7,492 |  | $ | 7,918 |
Residential real estate |  |  | 3,191 |  |  | 2,300 |  |  | 73 |  |  | 75 |  |  | 2,604 |  |  | 4,014 |
Commercial real estate |  |  | 4,557 |  |  | 2,756 |  |  | - |  |  | - |  |  | 3,132 |  |  | 4,443 |
Commercial |  |  | 1,680 |  |  | 167 |  |  | 298 |  |  | 293 |  |  | 389 |  |  | 558 |
Consumer |  |  | 129 |  |  | 99 |  |  | 25 |  |  | 25 |  |  | 124 |  |  | 55 |
Total |  |  | 20,099 |  |  | 12,123 |  |  | 596 |  |  | 593 |  |  | 13,741 |  |  | 16,988 |
Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 3,403 |  |  | 3,316 |  |  | 87 |  |  | 1 |  |  | 3,404 |  |  | 2,301 |
Residential real estate |  |  | 16,226 |  |  | 12,813 |  |  | 3,413 |  |  | 168 |  |  | 16,190 |  |  | 16,131 |
Commercial real estate |  |  | 5,566 |  |  | 4,799 |  |  | 767 |  |  | 6 |  |  | 5,459 |  |  | 6,826 |
Commercial |  |  | 52 |  |  | 52 |  |  | - |  |  | - |  |  | 54 |  |  | 62 |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 25,247 |  |  | 20,980 |  |  | 4,267 |  |  | 175 |  |  | 25,107 |  |  | 25,320 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 13,945 |  |  | 10,117 |  |  | 287 |  |  | 201 |  |  | 10,896 |  |  | 10,219 |
Residential real estate |  |  | 19,417 |  |  | 15,113 |  |  | 3,486 |  |  | 243 |  |  | 18,794 |  |  | 20,145 |
Commercial real estate |  |  | 10,123 |  |  | 7,555 |  |  | 767 |  |  | 6 |  |  | 8,591 |  |  | 11,269 |
Commercial |  |  | 1,732 |  |  | 219 |  |  | 298 |  |  | 293 |  |  | 443 |  |  | 620 |
Consumer |  |  | 129 |  |  | 99 |  |  | 25 |  |  | 25 |  |  | 124 |  |  | 55 |
Total |  | $ | 45,346 |  | $ | 33,103 |  | $ | 4,863 |  | $ | 768 |  | $ | 38,848 |  | $ | 42,308 |
|  |  |  | Recorded |  | Recorded |  |  |  | Quarter-to- |  | Year-to-date |
|  | Unpaid |  | investment |  | investment |  |  |  | date average |  | average |
|  | principal |  | with no |  | with an |  | Related |  | recorded |  | recorded |
(Dollars in thousands) |  | balance |  | allowance |  | allowance |  | allowance |  | investment |  | investment |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 6,787 |  | $ | 3,709 |  | $ | 240 |  | $ | 203 |  | $ | 5,563 |  | $ | 7,270 |
Residential real estate |  |  | 7,692 |  |  | 3,862 |  |  | 1,304 |  |  | 225 |  |  | 5,094 |  |  | 10,240 |
Commercial real estate |  |  | 5,218 |  |  | 4,261 |  |  | 410 |  |  | 38 |  |  | 3,917 |  |  | 7,829 |
Commercial |  |  | 1,801 |  |  | 547 |  |  | 245 |  |  | 245 |  |  | 740 |  |  | 619 |
Consumer |  |  | 56 |  |  | 43 |  |  | 5 |  |  | 5 |  |  | 49 |  |  | 48 |
Total |  |  | 21,554 |  |  | 12,422 |  |  | 2,204 |  |  | 716 |  |  | 15,363 |  |  | 26,006 |
Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 1,620 |  |  | 1,527 |  |  | 93 |  |  | 1 |  |  | 1,759 |  |  | 14,405 |
Residential real estate |  |  | 14,582 |  |  | 13,177 |  |  | 1,405 |  |  | 60 |  |  | 15,387 |  |  | 11,101 |
Commercial real estate |  |  | 9,791 |  |  | 9,006 |  |  | 785 |  |  | 6 |  |  | 10,201 |  |  | 13,308 |
Commercial |  |  | 95 |  |  | 95 |  |  | - |  |  | - |  |  | 98 |  |  | 105 |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 26,088 |  |  | 23,805 |  |  | 2,283 |  |  | 67 |  |  | 27,445 |  |  | 38,919 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 8,407 |  |  | 5,236 |  |  | 333 |  |  | 204 |  |  | 7,322 |  |  | 21,675 |
Residential real estate |  |  | 22,274 |  |  | 17,039 |  |  | 2,709 |  |  | 285 |  |  | 20,481 |  |  | 21,341 |
Commercial real estate |  |  | 15,009 |  |  | 13,267 |  |  | 1,195 |  |  | 44 |  |  | 14,118 |  |  | 21,137 |
Commercial |  |  | 1,896 |  |  | 642 |  |  | 245 |  |  | 245 |  |  | 838 |  |  | 724 |
Consumer |  |  | 56 |  |  | 43 |  |  | 5 |  |  | 5 |  |  | 49 |  |  | 48 |
Total |  | $ | 47,642 |  | $ | 36,227 |  | $ | 4,487 |  | $ | 783 |  | $ | 42,808 |  | $ | 64,925 |
The following tables provide a roll-forward for troubled debt restructurings as of September 30, 2014 and September 30, 2013.
|  | 12/31/13 |  |  |  |  |  |  |  | Reclassification/ |  |  |  |  |  | 9/30/14 |  |  |
|  | TDR |  | New |  | Disbursements |  | Charge |  | Transfers |  | 9/30/2014 |  |  |  | TDR |  | Related |
(Dollars in thousands) |  | Balance |  | TDRs |  | (Payments) |  | offs |  | In(Out) |  | Loan Sale |  | Payoffs |  | Balance |  | Allowance |
For the nine months ended 9/30/2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 1,620 |  | $ | - |  | $ | (52) |  | $ | (538) |  | $ | 2,643 |  | $ | - |  | $ | (270) |  | $ | 3,403 |  | $ | 1 |
Residential Real Estate |  |  | 14,582 |  |  | - |  |  | 1,324 |  |  | - |  |  | 478 |  |  | - |  |  | (158) |  |  | 16,226 |  |  | 168 |
Commercial Real Estate |  |  | 9,791 |  |  | - |  |  | (71) |  |  | (549) |  |  | (2,508) |  |  | - |  |  | (1,097) |  |  | 5,566 |  |  | 6 |
Commercial |  |  | 95 |  |  | - |  |  | (19) |  |  | - |  |  | - |  |  | - |  |  | (24) |  |  | 52 |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  | $ | 26,088 |  | $ | - |  | $ | 1,182 |  | $ | (1,087) |  | $ | 613 |  | $ | - |  | $ | (1,549) |  | $ | 25,247 |  | $ | 175 |
Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 3,561 |  | $ | - |  | $ | (12) |  | $ | (235) |  | $ | 760 |  | $ | - |  | $ | - |  | $ | 4,074 |  | $ | - |
Residential Real Estate |  |  | 1,884 |  |  | - |  |  | (40) |  |  | (203) |  |  | (1,037) |  |  | - |  |  | (123) |  |  | 481 |  |  | - |
Commercial Real Estate |  |  | 842 |  |  | - |  |  | (91) |  |  | (65) |  |  | (336) |  |  | - |  |  | - |  |  | 350 |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | 26 |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 25 |  |  | 25 |
Total |  | $ | 6,313 |  | $ | - |  | $ | (144) |  | $ | (503) |  | $ | (613) |  | $ | - |  | $ | (123) |  | $ | 4,930 |  | $ | 25 |
Total TDRs |  | $ | 32,401 |  | $ | - |  | $ | 1,038 |  | $ | (1,590) |  | $ | - |  | $ | - |  | $ | (1,672) |  | $ | 30,177 |  | $ | 200 |
|  | 12/31/12 |  |  |  |  |  |  |  | Reclassification/ |  |  |  |  |  | 9/30/13 |  |  |
|  | TDR |  | New |  | Disbursements |  |  |  | Transfers |  | 9/30/2013 |  |  |  | TDR |  | Related |
(Dollars in thousands) |  | Balance |  | TDRs |  | (Payments) |  | Charge offs |  | In(Out) |  | Loan Sale |  | Payoffs |  | Balance |  | Allowance |
For the nine months ended 9/30/2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 27,335 |  | $ | 218 |  | $ | 71 |  | $ | (13,557) |  | $ | (3,521) |  | $ | (7,908) |  | $ | (739) |  | $ | 1,899 |  | $ | 1 |
Residential Real Estate |  |  | 7,017 |  |  | 11,514 |  |  | 166 |  |  | (218) |  |  | (1,349) |  |  | (395) |  |  | - |  |  | 16,735 |  |  | 584 |
Commercial Real Estate |  |  | 17,880 |  |  | 2,211 |  |  | (55) |  |  | (2,062) |  |  | - |  |  | (7,162) |  |  | (108) |  |  | 10,704 |  |  | 92 |
Commercial |  |  | 121 |  |  | - |  |  | (20) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 101 |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  | $ | 52,353 |  | $ | 13,943 |  | $ | 162 |  | $ | (15,837) |  | $ | (4,870) |  | $ | (15,465) |  | $ | (847) |  | $ | 29,439 |  | $ | 677 |
Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 1,448 |  | $ | - |  | $ | (62) |  | $ | (612) |  | $ | 3,521 |  | $ | (57) |  | $ | (368) |  | $ | 3,870 |  | $ | 25 |
Residential Real Estate |  |  | 2,169 |  |  | 258 |  |  | (75) |  |  | (1,218) |  |  | 1,349 |  |  | (759) |  |  | (126) |  |  | 1,598 |  |  | - |
Commercial Real Estate |  |  | 2,970 |  |  | - |  |  | (274) |  |  | (866) |  |  | - |  |  | - |  |  | (1,391) |  |  | 439 |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | 27 |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 26 |  |  | 26 |
Total |  | $ | 6,614 |  | $ | 258 |  | $ | (412) |  | $ | (2,696) |  | $ | 4,870 |  | $ | (816) |  | $ | (1,885) |  | $ | 5,933 |  | $ | 51 |
Total TDRs |  | $ | 58,967 |  | $ | 14,201 |  | $ | (250) |  | $ | (18,533) |  | $ | - |  | $ | (16,281) |  | $ | (2,732) |  | $ | 35,372 |  | $ | 728 |
The following tables provide information on loans that were modified and considered TDRs during the nine months ended September 30, 2014 and September 30, 2013.
|  |  | Premodification |  | Postmodification |  |  |
|  |  | outstanding |  | outstanding |  |  |
|  | Number of |  | recorded |  | recorded |  | Related |
(Dollars in thousands) |  | contracts |  | investment |  | investment |  | allowance |
TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |
For the nine months ended September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |  | $ | - |
Residential real estate |  |  | - |  |  | - |  |  | - |  |  | - |
Commercial real estate |  |  | - |  |  | - |  |  | - |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | - |  | $ | - |  | $ | - |  | $ | - |
For the nine months ended September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 3 |  | $ | 218 |  | $ | 218 |  | $ | - |
Residential real estate |  |  | 6 |  |  | 11,758 |  |  | 11,772 |  |  | 38 |
Commercial real estate |  |  | 4 |  |  | 2,212 |  |  | 2,211 |  |  | 82 |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 13 |  | $ | 14,188 |  | $ | 14,201 |  | $ | 120 |
The following tables provide information on TDRs that defaulted during the nine months ended September 30, 2014 and September 30, 2013. Generally, a loan is considered in default when principal or interest is past due 90 days or more.
|  | Number of |  | Recorded |  | Related |
(Dollars in thousands) |  | contracts |  | investment |  | allowance |
TDRs that subsequently defaulted (1): |  |  |  |  |  |  |  |  |  |
For the nine months ended September 30, 2014 |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |
Residential real estate |  |  | - |  |  | - |  |  | - |
Commercial real estate |  |  | - |  |  | - |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |
Total |  |  | - |  | $ | - |  | $ | - |
TDRs that subsequently defaulted (2): |  |  |  |  |  |  |  |  |  |
For the nine months ended September 30, 2013 |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |
Residential real estate |  |  | 4 |  |  | 1,563 |  |  | - |
Commercial real estate |  |  | 1 |  |  | 1,741 |  |  | 74 |
Commercial |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |
Total |  |  | 5 |  | $ | 3,304 |  | $ | 74 |
(1) These loans were classified as TDRs during 2013. (2) These loans were classified as TDRs during 2012. Management uses risk ratings as part of its monitoring of the credit quality in the Company’s loan portfolio. Loans that are identified as special mention, substandard or doubtful are adversely rated. They are assigned higher risk ratings than favorably rated loans in the calculation of the formula portion of the allowance for credit losses.
The following tables provide information on loan risk ratings as of September 30, 2014 and December 31, 2013.
|  |  |  | Special |  |  |  |  |  |  |
(Dollars in thousands) |  | Pass/Performing |  | mention |  | Substandard |  | Doubtful |  | Total |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 45,937 |  | $ | 9,668 |  | $ | 11,761 |  | $ | - |  | $ | 67,366 |
Residential real estate |  |  | 247,438 |  |  | 16,476 |  |  | 12,437 |  |  | 90 |  |  | 276,441 |
Commercial real estate |  |  | 266,039 |  |  | 20,775 |  |  | 11,033 |  |  | - |  |  | 297,847 |
Commercial |  |  | 51,126 |  |  | 2,450 |  |  | 252 |  |  | 379 |  |  | 54,207 |
Consumer |  |  | 9,040 |  |  | 18 |  |  | 123 |  |  | - |  |  | 9,181 |
Total |  | $ | 619,580 |  | $ | 49,387 |  | $ | 35,606 |  | $ | 469 |  | $ | 705,042 |
|  |  |  | Special |  |  |  |  |  |  |
(Dollars in thousands) |  | Pass/Performing |  | mention |  | Substandard |  | Doubtful |  | Total |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 39,268 |  | $ | 15,884 |  | $ | 9,439 |  | $ | - |  | $ | 64,591 |
Residential real estate |  |  | 235,054 |  |  | 22,638 |  |  | 17,114 |  |  | 51 |  |  | 274,857 |
Commercial real estate |  |  | 255,280 |  |  | 30,105 |  |  | 19,210 |  |  | 10 |  |  | 304,605 |
Commercial |  |  | 52,032 |  |  | 3,691 |  |  | 972 |  |  | 500 |  |  | 57,195 |
Consumer |  |  | 10,451 |  |  | 48 |  |  | 172 |  |  | - |  |  | 10,671 |
Total |  | $ | 592,085 |  | $ | 72,366 |  | $ | 46,907 |  | $ | 561 |  | $ | 711,919 |
The following tables provide information on the aging of the loan portfolio as of September 30, 2014 and December 31, 2013.
|  | Accruing |  |  |  |  |  |  |
|  |  |  |  | 30-59 |  |  | 60-89 |  |  | 90 days |  |  |  |  |  |  |  |  |  |
|  |  |  |  | days past |  |  | days past |  |  | or more |  |  | Total past |  |  |  |  |  |  |
(Dollars in thousands) |  | Current |  |  | due |  |  | due |  |  | past due |  |  | due |  |  | Nonaccrual |  |  | Total |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 59,106 |  |  | $ | 1,259 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,259 |  |  | $ | 7,001 |  |  | $ | 67,366 |
Residential real estate |  |  | 270,851 |  |  |  | 2,142 |  |  |  | 1,074 |  |  |  | - |  |  |  | 3,216 |  |  |  | 2,374 |  |  |  | 276,441 |
Commercial real estate |  |  | 293,827 |  |  |  | 243 |  |  |  | 1,021 |  |  |  | - |  |  |  | 1,264 |  |  |  | 2,756 |  |  |  | 297,847 |
Commercial |  |  | 53,434 |  |  |  | 196 |  |  |  | 112 |  |  |  | - |  |  |  | 308 |  |  |  | 465 |  |  |  | 54,207 |
Consumer |  |  | 8,998 |  |  |  | 57 |  |  |  | 3 |  |  |  | - |  |  |  | 60 |  |  |  | 123 |  |  |  | 9,181 |
Total |  | $ | 686,216 |  |  | $ | 3,897 |  |  | $ | 2,210 |  |  | $ | - |  |  | $ | 6,107 |  |  | $ | 12,719 |  |  | $ | 705,042 |
Percent of total loans |  |  | 97.3 | % |  |  | 0.6 | % |  |  | 0.3 | % |  |  | - | % |  |  | 0.9 | % |  |  | 1.8 | % |  |  |  |
|  | Accruing |  |  |  |  |  |  |
|  |  |  |  | 30-59 |  |  | 60-89 |  |  | 90 days or |  |  |  |  |  |  |  |  |  |
|  |  |  |  | days past |  |  | days past |  |  | more past |  |  | Total past |  |  |  |  |  |  |
(Dollars in thousands) |  | Current |  |  | due |  |  | due |  |  | due |  |  | due |  |  | Nonaccrual |  |  | Total |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 60,642 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 3,949 |  |  | $ | 64,591 |
Residential real estate |  |  | 265,182 |  |  |  | 2,765 |  |  |  | 1,724 |  |  |  | 20 |  |  |  | 4,509 |  |  |  | 5,166 |  |  |  | 274,857 |
Commercial real estate |  |  | 299,295 |  |  |  | 639 |  |  |  | - |  |  |  | - |  |  |  | 639 |  |  |  | 4,671 |  |  |  | 304,605 |
Commercial |  |  | 55,576 |  |  |  | 330 |  |  |  | 247 |  |  |  | 250 |  |  |  | 827 |  |  |  | 792 |  |  |  | 57,195 |
Consumer |  |  | 10,469 |  |  |  | 23 |  |  |  | 131 |  |  |  | - |  |  |  | 154 |  |  |  | 48 |  |  |  | 10,671 |
Total |  | $ | 691,164 |  |  | $ | 3,757 |  |  | $ | 2,102 |  |  | $ | 270 |  |  | $ | 6,129 |  |  | $ | 14,626 |  |  | $ | 711,919 |
Percent of total loans |  |  | 97.1 | % |  |  | 0.5 | % |  |  | 0.3 | % |  |  | - | % |  |  | 0.8 | % |  |  | 2.1 | % |  |  |  |
Management evaluates the adequacy of the allowance for credit losses at least quarterly and adjusts the provision for credit losses based on this analysis. The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three months ended September 30, 2014 and 2013. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the three months ended September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 2,248 |  | $ | 2,354 |  | $ | 2,652 |  | $ | 858 |  | $ | 306 |  | $ | 658 |  | $ | 9,076 |
Charge-offs |  |  | (213) |  |  | (242) |  |  | (35) |  |  | (1,019) |  |  | (6) |  |  | - |  |  | (1,515) |
Recoveries |  |  | 1 |  |  | 229 |  |  | 9 |  |  | 24 |  |  | 7 |  |  | - |  |  | 270 |
Net charge-offs |  |  | (212) |  |  | (13) |  |  | (26) |  |  | (995) |  |  | 1 |  |  | - |  |  | (1,245) |
Provision |  |  | (206) |  |  | 47 |  |  | 115 |  |  | 935 |  |  | (39) |  |  | (77) |  |  | 775 |
Ending balance |  | $ | 1,830 |  | $ | 2,388 |  | $ | 2,741 |  | $ | 798 |  | $ | 268 |  | $ | 581 |  | $ | 8,606 |
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the three months ended September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 4,346 |  | $ | 4,259 |  | $ | 5,514 |  | $ | 1,216 |  | $ | 301 |  | $ | 87 |  | $ | 15,723 |
Charge-offs |  |  | (18,539) |  |  | (4,225) |  |  | (4,056) |  |  | (196) |  |  | (3) |  |  | - |  |  | (27,019) |
Recoveries |  |  | 3 |  |  | 51 |  |  | 20 |  |  | 47 |  |  | 16 |  |  | - |  |  | 137 |
Net charge-offs |  |  | (18,536) |  |  | (4,174) |  |  | (4,036) |  |  | (149) |  |  | 13 |  |  | - |  |  | (26,882) |
Provision |  |  | 16,180 |  |  | 3,645 |  |  | 2,090 |  |  | 205 |  |  | (44) |  |  | 384 |  |  | 22,460 |
Ending balance |  | $ | 1,990 |  | $ | 3,730 |  | $ | 3,568 |  | $ | 1,272 |  | $ | 270 |  | $ | 471 |  | $ | 11,301 |
The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the nine months ended September 30, 2014 and 2013.
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the nine months ended September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,960 |  | $ | 3,854 |  | $ | 3,029 |  | $ | 1,266 |  | $ | 243 |  | $ | 373 |  | $ | 10,725 |
Charge-offs |  |  | (454) |  |  | (1,229) |  |  | (1,648) |  |  | (1,956) |  |  | (153) |  |  | - |  |  | (5,440) |
Recoveries |  |  | 12 |  |  | 335 |  |  | 22 |  |  | 231 |  |  | 21 |  |  | - |  |  | 621 |
Net charge-offs |  |  | (442) |  |  | (894) |  |  | (1,626) |  |  | (1,725) |  |  | (132) |  |  | - |  |  | (4,819) |
Provision |  |  | 312 |  |  | (572) |  |  | 1,338 |  |  | 1,257 |  |  | 157 |  |  | 208 |  |  | 2,700 |
Ending balance |  | $ | 1,830 |  | $ | 2,388 |  | $ | 2,741 |  | $ | 798 |  | $ | 268 |  | $ | 581 |  | $ | 8,606 |
|  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the nine months ended September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 4,387 |  | $ | 5,194 |  | $ | 4,134 |  | $ | 1,682 |  | $ | 407 |  | $ | 187 |  | $ | 15,991 |
Charge-offs |  |  | (20,048) |  |  | (6,114) |  |  | (6,003) |  |  | (419) |  |  | (65) |  |  | - |  |  | (32,649) |
Recoveries |  |  | 5 |  |  | 349 |  |  | 113 |  |  | 149 |  |  | 33 |  |  | - |  |  | 649 |
Net charge-offs |  |  | (20,043) |  |  | (5,765) |  |  | (5,890) |  |  | (270) |  |  | (32) |  |  | - |  |  | (32,000) |
Provision |  |  | 17,646 |  |  | 4,301 |  |  | 5,324 |  |  | (140) |  |  | (105) |  |  | 284 |  |  | 27,310 |
Ending balance |  | $ | 1,990 |  | $ | 3,730 |  | $ | 3,568 |  | $ | 1,272 |  | $ | 270 |  | $ | 471 |  | $ | 11,301 |

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