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Loans and Allowance for Credit Losses | 6 Months Ended
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Jun. 30, 2016
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 June 30, 2016 and December 31, 2015.
(Dollars in thousands) |  | June 30, 2016 |  | December 31, 2015 |
Construction |  | $ | 81,148 |  | $ | 85,632 |
Residential real estate |  |  | 320,041 |  |  | 307,063 |
Commercial real estate |  |  | 345,713 |  |  | 330,253 |
Commercial |  |  | 66,959 |  |  | 64,911 |
Consumer |  |  | 7,218 |  |  | 7,255 |
Total loans |  |  | 821,079 |  |  | 795,114 |
Allowance for credit losses |  |  | (8,358) |  |  | (8,316) |
Total loans, net |  | $ | 812,721 |  | $ | 786,798 |
Loans are stated at their principal amount outstanding net of any purchase premiums, 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 subsidiary, Shore United Bank (the “Bank”), 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. In the normal course of banking business, risks related to specific loan categories are as follows: Construction loans – Construction loans generally finance the construction of residential real estate for builders and individuals for single family dwellings. In addition, the Bank periodically finances the construction of commercial projects. Credit risk factors include the borrower’s ability to successfully complete the construction on time and within budget, changing market conditions which could affect the value and marketability of projects, changes in the borrower’s ability or willingness to repay the loan and potentially rising interest rates which can impact both the borrower’s ability to repay and the collateral value. Residential real estate – Residential real estate loans are typically made to consumers and are secured by residential real estate. Credit risk arises from the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness, or personal bankruptcy, among other factors. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral. Commercial real estate – Commercial real estate loans consist of both loans secured by owner occupied properties and non-owner occupied where an established banking relationship exists and involves investment properties for warehouse, retail, and office space with a history of occupancy and cash flow. These loans are subject to adverse changes in the local economy and commercial real estate markets. Credit risk associated with owner occupied properties arises from the borrower’s financial stability and the ability of the borrower and the business to repay the loan. Non-owner occupied properties carry the risk of a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies which can adversely impact cash flow. Commercial – Commercial loans are secured or unsecured loans for business purposes. Loans are typically secured by accounts receivable, inventory, equipment and/or other assets of the business. Credit risk arises from the successful operation of the business which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy. Consumer – Consumer loans include home equity loans and lines, installment loans and personal lines of credit. Credit risk is similar to residential real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. The following tables include impairment information relating to loans and the allowance for credit losses as of June 30, 2016 and December 31, 2015.
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 9,670 |  | $ | 9,719 |  | $ | 7,188 |  | $ | 192 |  | $ | 99 |  | $ | - |  | $ | 26,868 |
Loans collectively evaluated for impairment |  |  | 71,478 |  |  | 310,322 |  |  | 338,525 |  |  | 66,767 |  |  | 7,119 |  |  | - |  |  | 794,211 |
Total loans |  | $ | 81,148 |  | $ | 320,041 |  | $ | 345,713 |  | $ | 66,959 |  | $ | 7,218 |  | $ | - |  | $ | 821,079 |
Allowance for credit losses allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 764 |  | $ | 207 |  | $ | 276 |  | $ | 45 |  | $ | - |  | $ | - |  | $ | 1,292 |
Loans collectively evaluated for impairment |  |  | 980 |  |  | 1,828 |  |  | 2,595 |  |  | 632 |  |  | 206 |  |  | 825 |  |  | 7,066 |
Total allowance for credit losses |  | $ | 1,744 |  | $ | 2,035 |  | $ | 2,871 |  | $ | 677 |  | $ | 206 |  | $ | 825 |  | $ | 8,358 |
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 11,598 |  | $ | 7,945 |  | $ | 7,762 |  | $ | 161 |  | $ | 122 |  | $ | - |  | $ | 27,588 |
Loans collectively evaluated for impairment |  |  | 74,034 |  |  | 299,118 |  |  | 322,491 |  |  | 64,750 |  |  | 7,133 |  |  | - |  |  | 767,526 |
Total loans |  | $ | 85,632 |  | $ | 307,063 |  | $ | 330,253 |  | $ | 64,911 |  | $ | 7,255 |  | $ | - |  | $ | 795,114 |
Allowance for credit losses allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 619 |  | $ | 435 |  | $ | 340 |  | $ | - |  | $ | 7 |  | $ | - |  | $ | 1,401 |
Loans collectively evaluated for impairment |  |  | 1,027 |  |  | 1,746 |  |  | 2,659 |  |  | 558 |  |  | 149 |  |  | 776 |  |  | 6,915 |
Total allowance for credit losses |  | $ | 1,646 |  | $ | 2,181 |  | $ | 2,999 |  | $ | 558 |  | $ | 156 |  | $ | 776 |  | $ | 8,316 |
The following tables provide information on impaired loans and any related allowance by loan class as of June 30, 2016 and December 31, 2015. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken.
(Dollars in thousands) |  | Unpaid principal balance |  | Recorded investment with no allowance |  | Recorded investment with an allowance |  | Related allowance |  | Quarter-to- date average recorded investment |  | Year-to-date average recorded investment |  | Interest income recognized |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 11,000 |  | $ | 2,562 |  | $ | 2,867 |  | $ | 739 |  | $ | 5,489 |  | $ | 6,353 |  | $ | - |
Residential real estate |  |  | 5,886 |  |  | 4,046 |  |  | 1,579 |  |  | 134 |  |  | 3,914 |  |  | 3,103 |  |  | - |
Commercial real estate |  |  | 2,832 |  |  | 1,777 |  |  | 409 |  |  | 121 |  |  | 2,058 |  |  | 2,308 |  |  | - |
Commercial |  |  | 212 |  |  | 147 |  |  | 45 |  |  | 45 |  |  | 164 |  |  | 161 |  |  | - |
Consumer |  |  | 99 |  |  | 99 |  |  | - |  |  | - |  |  | 106 |  |  | 114 |  |  | - |
Total |  |  | 20,029 |  |  | 8,631 |  |  | 4,900 |  |  | 1,039 |  |  | 11,731 |  |  | 12,039 |  |  | - |
Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 4,241 |  |  | 3,449 |  |  | 792 |  |  | 25 |  |  | 4,244 |  |  | 4,142 |  |  | 43 |
Residential real estate |  |  | 4,095 |  |  | 2,719 |  |  | 1,376 |  |  | 73 |  |  | 4,931 |  |  | 5,300 |  |  | 102 |
Commercial real estate |  |  | 5,001 |  |  | 1,589 |  |  | 3,412 |  |  | 155 |  |  | 5,066 |  |  | 5,215 |  |  | 85 |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 13,337 |  |  | 7,757 |  |  | 5,580 |  |  | 253 |  |  | 14,241 |  |  | 14,657 |  |  | 230 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 15,241 |  |  | 6,011 |  |  | 3,659 |  |  | 764 |  |  | 9,733 |  |  | 10,495 |  |  | 43 |
Residential real estate |  |  | 9,980 |  |  | 6,764 |  |  | 2,955 |  |  | 207 |  |  | 8,845 |  |  | 8,403 |  |  | 102 |
Commercial real estate |  |  | 7,834 |  |  | 3,366 |  |  | 3,822 |  |  | 276 |  |  | 7,124 |  |  | 7,523 |  |  | 85 |
Commercial |  |  | 212 |  |  | 147 |  |  | 45 |  |  | 45 |  |  | 164 |  |  | 161 |  |  | - |
Consumer |  |  | 99 |  |  | 99 |  |  | - |  |  | - |  |  | 106 |  |  | 114 |  |  | - |
Total |  | $ | 33,366 |  | $ | 16,387 |  | $ | 10,481 |  | $ | 1,292 |  | $ | 25,972 |  | $ | 26,696 |  | $ | 230 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | June 30, 2015 |  |  |  |
(Dollars in thousands) |  | Unpaid principal balance |  | Recorded investment with no allowance |  | Recorded investment with an allowance |  | Related allowance |  | Quarter-to- date average recorded investment |  | Year-to-date average recorded investment |  | Interest income recognized |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 11,850 |  | $ | 4,647 |  | $ | 2,882 |  | $ | 588 |  | $ | 8,478 |  | $ | 8,169 |  | $ | - |
Residential real estate |  |  | 2,563 |  |  | 1,773 |  |  | 487 |  |  | 208 |  |  | 2,041 |  |  | 2,159 |  |  | - |
Commercial real estate |  |  | 2,988 |  |  | 1,813 |  |  | 209 |  |  | 9 |  |  | 2,707 |  |  | 2,698 |  |  | - |
Commercial |  |  | 175 |  |  | 161 |  |  | - |  |  | - |  |  | 95 |  |  | 72 |  |  | - |
Consumer |  |  | 128 |  |  | 98 |  |  | 23 |  |  | 7 |  |  | 123 |  |  | 123 |  |  | - |
Total |  |  | 17,704 |  |  | 8,492 |  |  | 3,601 |  |  | 812 |  |  | 13,444 |  |  | 13,221 |  |  | - |
Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 4,069 |  |  | 3,266 |  |  | 803 |  |  | 31 |  |  | 4,109 |  |  | 4,064 |  |  | 40 |
Residential real estate |  |  | 5,686 |  |  | 2,380 |  |  | 3,306 |  |  | 227 |  |  | 7,393 |  |  | 6,866 |  |  | 160 |
Commercial real estate |  |  | 5,740 |  |  | 1,702 |  |  | 4,038 |  |  | 331 |  |  | 6,238 |  |  | 6,255 |  |  | 116 |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 41 |  |  | 43 |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 15,495 |  |  | 7,348 |  |  | 8,147 |  |  | 589 |  |  | 17,781 |  |  | 17,228 |  |  | 316 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 15,919 |  |  | 7,913 |  |  | 3,685 |  |  | 619 |  |  | 12,587 |  |  | 12,233 |  |  | 40 |
Residential real estate |  |  | 8,249 |  |  | 4,153 |  |  | 3,793 |  |  | 435 |  |  | 9,434 |  |  | 9,025 |  |  | 160 |
Commercial real estate |  |  | 8,728 |  |  | 3,515 |  |  | 4,247 |  |  | 340 |  |  | 8,945 |  |  | 8,953 |  |  | 116 |
Commercial |  |  | 175 |  |  | 161 |  |  | - |  |  | - |  |  | 136 |  |  | 115 |  |  | - |
Consumer |  |  | 128 |  |  | 98 |  |  | 23 |  |  | 7 |  |  | 123 |  |  | 123 |  |  | - |
Total |  | $ | 33,199 |  | $ | 15,840 |  | $ | 11,748 |  | $ | 1,401 |  | $ | 31,225 |  | $ | 30,449 |  | $ | 316 |
The following tables provide a roll-forward for troubled debt restructurings as of June 30, 2016 and June 30, 2015.
(Dollars in thousands) |  | 1/1/16 TDR Balance |  | New TDRs |  | Disbursements (Payments) |  | Charge offs |  | Reclassification/ Transfers In/(Out) |  | Payoffs |  | 6/30/16 TDR Balance |  | Related Allowance |
For the six months ended 6/30/2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 4,069 |  | $ | - |  | $ | 172 |  | $ | - |  | $ | - |  | $ | - |  | $ | 4,241 |  | $ | 25 |
Residential Real Estate |  |  | 5,686 |  |  | 533 |  |  | (350) |  |  | - |  |  | (1,595) |  |  | (179) |  |  | 4,095 |  |  | 73 |
Commercial Real Estate |  |  | 5,740 |  |  | 495 |  |  | (659) |  |  | (117) |  |  | (458) |  |  | - |  |  | 5,001 |  |  | 155 |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  | $ | 15,495 |  | $ | 1,028 |  | $ | (837) |  | $ | (117) |  | $ | (2,053) |  | $ | (179) |  | $ | 13,337 |  | $ | 253 |
Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 4,960 |  | $ | 2,570 |  | $ | (1,847) |  | $ | (254) |  | $ | - |  | $ | - |  | $ | 5,429 |  | $ | 739 |
Residential Real Estate |  |  | 445 |  |  | - |  |  | (293) |  |  | - |  |  | 1,595 |  |  | - |  |  | 1,747 |  |  | 72 |
Commercial Real Estate |  |  | - |  |  | - |  |  | - |  |  | (258) |  |  | 458 |  |  | - |  |  | 200 |  |  | 112 |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | 23 |  |  | - |  |  | (23) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  | $ | 5,428 |  | $ | 2,570 |  | $ | (2,163) |  | $ | (512) |  | $ | 2,053 |  | $ | - |  | $ | 7,376 |  | $ | 923 |
Total TDRs |  | $ | 20,923 |  | $ | 3,598 |  | $ | (3,000) |  | $ | (629) |  | $ | - |  | $ | (179) |  | $ | 20,713 |  | $ | 1,176 |
(Dollars in thousands) |  | 1/1/15 TDR Balance |  | New TDRs |  | Disbursements (Payments) |  | Charge offs |  | Reclassification/ Transfers In/(Out) |  | Payoffs |  | 6/30/15 TDR Balance |  | Related Allowance |
For the six months ended 6/30/2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 4,022 |  | $ | - |  | $ | (39) |  | $ | - |  | $ | 142 |  | $ | - |  | $ | 4,125 |  | $ | 35 |
Residential Real Estate |  |  | 6,368 |  |  | 1,837 |  |  | (245) |  |  | - |  |  | (78) |  |  | - |  |  | 7,882 |  |  | 267 |
Commercial Real Estate |  |  | 6,237 |  |  | - |  |  | (9) |  |  | - |  |  | - |  |  | - |  |  | 6,228 |  |  | 21 |
Commercial |  |  | 47 |  |  | - |  |  | (7) |  |  | - |  |  | - |  |  | - |  |  | 40 |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  | $ | 16,674 |  | $ | 1,837 |  | $ | (300) |  | $ | - |  | $ | 64 |  | $ | - |  | $ | 18,275 |  | $ | 323 |
Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 3,321 |  | $ | - |  | $ | (100) |  | $ | (579) |  | $ | 2,911 |  | $ | - |  | $ | 5,553 |  | $ | 661 |
Residential Real Estate |  |  | 3,382 |  |  | - |  |  | (18) |  |  | - |  |  | (2,911) |  |  | - |  |  | 453 |  |  | - |
Commercial Real Estate |  |  | 346 |  |  | - |  |  | (4) |  |  | (40) |  |  | (302) |  |  | - |  |  | - |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | 25 |  |  | - |  |  | (1) |  |  | - |  |  | - |  |  | - |  |  | 24 |  |  | - |
Total |  | $ | 7,074 |  | $ | - |  | $ | (123) |  | $ | (619) |  | $ | (302) |  | $ | - |  | $ | 6,030 |  | $ | 661 |
Total TDRs |  | $ | 23,748 |  | $ | 1,837 |  | $ | (423) |  | $ | (619) |  | $ | (238) |  | $ | - |  | $ | 24,305 |  | $ | 984 |
The following tables provide information on loans that were modified and considered TDRs during the six months ended June 30, 2016 and June 30, 2015.
(Dollars in thousands) |  | Number of contracts |  | Premodification outstanding recorded investment |  | Postmodification outstanding recorded investment |  | Related allowance |
TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |
For the six months ended June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |  | $ | - |
Residential real estate |  |  | 3 |  |  | 668 |  |  | 668 |  |  | - |
Commercial real estate |  |  | 1 |  |  | 495 |  |  | 495 |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 4 |  | $ | 1,163 |  | $ | 1,163 |  | $ | - |
For the six months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |  | $ | - |
Residential real estate |  |  | 10 |  |  | 1,835 |  |  | 1,837 |  |  | 19 |
Commercial real estate |  |  | - |  |  | - |  |  | - |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |  |  | - |
Total |  |  | 10 |  | $ | 1,835 |  | $ | 1,837 |  | $ | 19 |
During the three and six months ended June 30, 2016, there were four TDRs which were modified. The modifications to these TDRs consisted of reductions in principal, interest and rate as well as payment frequency for one of the TDRs. The following tables provide information on TDRs that defaulted during the six months ended June 30, 2016 and June 30, 2015. Generally, a loan is considered in default when principal or interest is past due 90 days or more.
(Dollars in thousands) |  | Number of contracts |  | Recorded investment |  | Related allowance |
TDRs that subsequently defaulted: |  |  |  |  |  |  |  |  |  |
For the six months ended June 30, 2016 |  |  |  |  |  |  |  |  |  |
Construction |  |  | 1 |  | $ | 241 |  | $ | - |
Residential real estate |  |  | - |  |  | - |  |  | - |
Commercial real estate |  |  | 2 |  |  | 375 |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |
Total |  |  | 3 |  | $ | 616 |  | $ | - |
TDRs that subsequently defaulted: |  |  |  |  |  |  |  |  |  |
For the six months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  | $ | - |  | $ | - |
Residential real estate |  |  | - |  |  | - |  |  | - |
Commercial real estate |  |  | 2 |  |  | 279 |  |  | - |
Commercial |  |  | - |  |  | - |  |  | - |
Consumer |  |  | - |  |  | - |  |  | - |
Total |  |  | 2 |  | $ | 279 |  | $ | - |
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 June 30, 2016 and December 31, 2015.
(Dollars in thousands) |  | Pass/Performing |  | Special mention |  | Substandard |  | Doubtful |  | Total |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 67,567 |  | $ | 4,061 |  | $ | 9,520 |  | $ | - |  | $ | 81,148 |
Residential real estate |  |  | 303,447 |  |  | 6,739 |  |  | 9,855 |  |  | - |  |  | 320,041 |
Commercial real estate |  |  | 320,593 |  |  | 15,980 |  |  | 9,140 |  |  | - |  |  | 345,713 |
Commercial |  |  | 65,795 |  |  | 733 |  |  | 431 |  |  | - |  |  | 66,959 |
Consumer |  |  | 7,119 |  |  | - |  |  | 99 |  |  | - |  |  | 7,218 |
Total |  | $ | 764,521 |  | $ | 27,513 |  | $ | 29,045 |  | $ | - |  | $ | 821,079 |
(Dollars in thousands) |  | Pass/Performing |  | Special mention |  | Substandard |  | Doubtful |  | Total |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 70,214 |  | $ | 3,903 |  | $ | 11,515 |  | $ | - |  | $ | 85,632 |
Residential real estate |  |  | 290,857 |  |  | 8,837 |  |  | 7,369 |  |  | - |  |  | 307,063 |
Commercial real estate |  |  | 302,438 |  |  | 18,699 |  |  | 9,116 |  |  | - |  |  | 330,253 |
Commercial |  |  | 63,628 |  |  | 1,075 |  |  | 208 |  |  | - |  |  | 64,911 |
Consumer |  |  | 7,107 |  |  | 26 |  |  | 122 |  |  | - |  |  | 7,255 |
Total |  | $ | 734,244 |  | $ | 32,540 |  | $ | 28,330 |  | $ | - |  | $ | 795,114 |
The following tables provide information on the aging of the loan portfolio as of June 30, 2016 and December 31, 2015.
|  | Accruing |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Current |  |  | 30-59 days past due |  |  | 60-89 days past due |  |  | 90 days or more past due |  |  | Total past due |  |  | Nonaccrual |  |  | Total |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 75,619 |  |  | $ | - |  |  | $ | 100 |  |  | $ | - |  |  | $ | 100 |  |  | $ | 5,429 |  |  | $ | 81,148 |
Residential real estate |  |  | 311,432 |  |  |  | 934 |  |  |  | 2,050 |  |  |  | - |  |  |  | 2,984 |  |  |  | 5,625 |  |  |  | 320,041 |
Commercial real estate |  |  | 342,536 |  |  |  | 731 |  |  |  | 260 |  |  |  | - |  |  |  | 991 |  |  |  | 2,186 |  |  |  | 345,713 |
Commercial |  |  | 66,763 |  |  |  | 4 |  |  |  | - |  |  |  | - |  |  |  | 4 |  |  |  | 192 |  |  |  | 66,959 |
Consumer |  |  | 7,094 |  |  |  | 19 |  |  |  | - |  |  |  | 6 |  |  |  | 25 |  |  |  | 99 |  |  |  | 7,218 |
Total |  | $ | 803,444 |  |  | $ | 1,688 |  |  | $ | 2,410 |  |  | $ | 6 |  |  | $ | 4,104 |  |  | $ | 13,531 |  |  | $ | 821,079 |
Percent of total loans |  |  | 97.9 | % |  |  | 0.2 | % |  |  | 0.3 | % |  |  | - | % |  |  | 0.5 | % |  |  | 1.6 | % |  |  | 100 | %
|  | Accruing |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | Current |  |  | 30-59 days past due |  |  | 60-89 days past due |  |  | 90 days or more past due |  |  | Total past due |  |  | Nonaccrual |  |  | Total |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 78,082 |  |  | $ | 21 |  |  | $ | - |  |  | $ | - |  |  | $ | 21 |  |  | $ | 7,529 |  |  | $ | 85,632 |
Residential real estate |  |  | 300,563 |  |  |  | 2,139 |  |  |  | 2,102 |  |  |  | - |  |  |  | 4,241 |  |  |  | 2,259 |  |  |  | 307,063 |
Commercial real estate |  |  | 327,370 |  |  |  | - |  |  |  | 861 |  |  |  | - |  |  |  | 861 |  |  |  | 2,022 |  |  |  | 330,253 |
Commercial |  |  | 64,670 |  |  |  | 49 |  |  |  | 31 |  |  |  | - |  |  |  | 80 |  |  |  | 161 |  |  |  | 64,911 |
Consumer |  |  | 7,107 |  |  |  | 13 |  |  |  | 6 |  |  |  | 7 |  |  |  | 26 |  |  |  | 122 |  |  |  | 7,255 |
Total |  | $ | 777,792 |  |  | $ | 2,222 |  |  | $ | 3,000 |  |  | $ | 7 |  |  | $ | 5,229 |  |  | $ | 12,093 |  |  | $ | 795,114 |
Percent of total loans |  |  | 97.8 | % |  |  | 0.3 | % |  |  | 0.4 | % |  |  | - | % |  |  | 0.7 | % |  |  | 1.5 | % |  |  | 100 | %
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 and six months ended June 30, 2016 and 2015. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the three months ended June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,753 |  | $ | 2,014 |  | $ | 3,257 |  | $ | 585 |  | $ | 177 |  | $ | 523 |  | $ | 8,309 |
Charge-offs |  |  | (13) |  |  | (102) |  |  | (265) |  |  | (58) |  |  | (2) |  |  | - |  |  | (440) |
Recoveries |  |  | 10 |  |  | 33 |  |  | 10 |  |  | 57 |  |  | 4 |  |  | - |  |  | 114 |
Net charge-offs |  |  | (3) |  |  | (69) |  |  | (255) |  |  | (1) |  |  | 2 |  |  | - |  |  | (326) |
Provision |  |  | (6) |  |  | 90 |  |  | (131) |  |  | 93 |  |  | 27 |  |  | 302 |  |  | 375 |
Ending balance |  | $ | 1,744 |  | $ | 2,035 |  | $ | 2,871 |  | $ | 677 |  | $ | 206 |  | $ | 825 |  | $ | 8,358 |
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the three months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,884 |  | $ | 2,124 |  | $ | 2,339 |  | $ | 441 |  | $ | 180 |  | $ | 830 |  | $ | 7,798 |
Charge-offs |  |  | (216) |  |  | (142) |  |  | (280) |  |  | (25) |  |  | (35) |  |  | - |  |  | (698) |
Recoveries |  |  | 104 |  |  | 121 |  |  | 2 |  |  | 35 |  |  | 15 |  |  | - |  |  | 277 |
Net charge-offs |  |  | (112) |  |  | (21) |  |  | (278) |  |  | 10 |  |  | (20) |  |  | - |  |  | (421) |
Provision |  |  | 80 |  |  | 215 |  |  | 555 |  |  | 54 |  |  | 8 |  |  | (372) |  |  | 540 |
Ending balance |  | $ | 1,852 |  | $ | 2,318 |  | $ | 2,616 |  | $ | 505 |  | $ | 168 |  | $ | 458 |  | $ | 7,917 |
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the six months ended June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,646 |  | $ | 2,181 |  | $ | 2,999 |  | $ | 558 |  | $ | 156 |  | $ | 776 |  | $ | 8,316 |
Charge-offs |  |  | (254) |  |  | (118) |  |  | (503) |  |  | (125) |  |  | (10) |  |  | - |  |  | (1,010) |
Recoveries |  |  | 16 |  |  | 67 |  |  | 10 |  |  | 122 |  |  | 12 |  |  | - |  |  | 227 |
Net charge-offs |  |  | (238) |  |  | (51) |  |  | (493) |  |  | (3) |  |  | 2 |  |  | - |  |  | (783) |
Provision |  |  | 336 |  |  | (95) |  |  | 365 |  |  | 122 |  |  | 48 |  |  | 49 |  |  | 825 |
Ending balance |  | $ | 1,744 |  | $ | 2,035 |  | $ | 2,871 |  | $ | 677 |  | $ | 206 |  | $ | 825 |  | $ | 8,358 |
(Dollars in thousands) |  | Construction |  | Residential real estate |  | Commercial real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total |
For the six months ended June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,303 |  | $ | 2,834 |  | $ | 2,379 |  | $ | 448 |  | $ | 229 |  | $ | 502 |  | $ | 7,695 |
Charge-offs |  |  | (579) |  |  | (257) |  |  | (320) |  |  | (149) |  |  | (45) |  |  | - |  |  | (1,350) |
Recoveries |  |  | 107 |  |  | 145 |  |  | 15 |  |  | 82 |  |  | 33 |  |  | - |  |  | 382 |
Net charge-offs |  |  | (472) |  |  | (112) |  |  | (305) |  |  | (67) |  |  | (12) |  |  | - |  |  | (968) |
Provision |  |  | 1,021 |  |  | (404) |  |  | 542 |  |  | 124 |  |  | (49) |  |  | (44) |  |  | 1,190 |
Ending balance |  | $ | 1,852 |  | $ | 2,318 |  | $ | 2,616 |  | $ | 505 |  | $ | 168 |  | $ | 458 |  | $ | 7,917 |
Foreclosure Proceedings Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $1.2 million and $581 thousand as of June 30, 2016 and December 31, 2015, respectively.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66008989&loc=d3e5066-111524 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(4)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(6)) -URI http://asc.fasb.org/extlink&oid=6488278&loc=d3e603758-122996 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(3)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=66008989&loc=d3e5162-111524 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03(a)(5)) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(7)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=66008989&loc=d3e5074-111524 + Details
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