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LOANS AND ALLOWANCE FOR CREDIT LOSSES | 12 Months Ended
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Dec. 31, 2016
LOANS AND ALLOWANCE FOR CREDIT LOSSES [Abstract] |
LOANS AND ALLOWANCE FOR CREDIT LOSSES | NOTE 3. 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 December 31, 2016 and 2015. ﻿
﻿ |  |  |  |  |  |
﻿(Dollars in thousands) |  | 2016 |  | 2015
﻿Construction |  | $ | 84,002 |  | $ | 85,632
﻿Residential real estate |  |  | 325,768 |  |  | 307,063
﻿Commercial real estate |  |  | 382,681 |  |  | 330,253
﻿Commercial |  |  | 72,435 |  |  | 64,911
﻿Consumer |  |  | 6,639 |  |  | 7,255
﻿Total loans |  |  | 871,525 |  |  | 795,114
﻿Allowance for credit losses |  |  | (8,726) |  |  | (8,316)
﻿Total loans, net |  | $ | 862,799 |  | $ | 786,798
﻿ In the normal course of banking business, loans are made to officers and directors and their affiliated interests. These loans are made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with persons who are not related to the Company and are not considered to involve more than the normal risk of collectibility. As of December 31, 2016 and 2015, such loans outstanding, both direct and indirect (including guarantees), to directors, their associates and policy-making officers, totaled approximately $13.3 million and $22.0 million, respectively. During 2016 and 2015, loan additions were approximately $3.3 million and $5.5 million, respectively, and loan repayments were approximately $1.1 million and $2.4 million, respectively. Due to the consolidation of the former Bank subsidiaries and their Board of Directors during 2016, many directors who served on those boards no longer serve as members of the new consolidated Bank as of December 31, 2016. This resulted in approximately $10.8 million in outstanding loans to be excluded for reporting loans made to inside directors of the Company and its subsidiaries as of December 31, 2016. Net loan origination fees, included in balances above, totaled $509 thousand and $357 thousand as of December 31, 2016 and 2015, respectively. ﻿ 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 December 31, 2016 and 2015. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Loans individually |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿evaluated for impairment |  | $ | 8,007 |  | $ | 7,778 |  | $ | 6,088 |  | $ | - |  | $ | 99 |  | $ | - |  | $ | 21,972
﻿Loans collectively |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿evaluated for impairment |  |  | 75,995 |  |  | 317,990 |  |  | 376,593 |  |  | 72,435 |  |  | 6,540 |  |  | - |  |  | 849,553
﻿Total loans |  | $ | 84,002 |  | $ | 325,768 |  | $ | 382,681 |  | $ | 72,435 |  | $ | 6,639 |  | $ | - |  | $ | 871,525
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Allowance for credit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿losses allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Loans individually |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿evaluated for impairment |  | $ | 1,639 |  | $ | 317 |  | $ | 185 |  | $ | - |  | $ | - |  | $ | - |  | $ | 2,141
﻿Loans collectively |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿evaluated for impairment |  |  | 1,148 |  |  | 1,636 |  |  | 2,425 |  |  | 1,145 |  |  | 231 |  |  | - |  |  | 6,585
﻿Total loans |  | $ | 2,787 |  | $ | 1,953 |  | $ | 2,610 |  | $ | 1,145 |  | $ | 231 |  | $ | - |  | $ | 8,726
﻿ During 2016, due to the consolidation of Talbot and CNB, the processes and assumptions affecting the allowance methodology were re-evaluated for a more unified representation of the new consolidated bank. This re-evaluation resulted in a net change in the unallocated portion of the allowance of $776 thousand. ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Construction |  | real estate |  | 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 loans |  | $ | 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 December 31, 2016 and 2015. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Recorded |  |  | Recorded |  |  |  |  |  |  |
﻿ |  | Unpaid |  |  | investment |  |  | investment |  |  |  | Average |  | Interest
﻿ |  | principal |  |  | with no |  |  | with an |  | Related |  | recorded |  | income
﻿(Dollars in thousands) |  | balance |  |  | allowance |  |  | allowance |  | allowance |  | investment |  | recognized
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 7,247 |  | $ | - |  | $ | 3,818 |  | $ | 1,621 |  | $ | 5,707 |  | $ | -
﻿Residential real estate |  |  | 4,013 |  |  | 1,957 |  |  | 1,946 |  |  | 166 |  |  | 3,500 |  |  | -
﻿Commercial real estate |  |  | 1,801 |  |  | 959 |  |  | 193 |  |  | 117 |  |  | 2,144 |  |  | -
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 108 |  |  | -
﻿Consumer |  |  | 99 |  |  | 99 |  |  | - |  |  | - |  |  | 106 |  |  | -
﻿Total |  | $ | 13,160 |  | $ | 3,015 |  | $ | 5,957 |  | $ | 1,904 |  | $ | 11,565 |  | $ | -
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 4,189 |  | $ | 3,479 |  | $ | 710 |  | $ | 18 |  | $ | 4,172 |  | $ | 96
﻿Residential real estate |  |  | 3,875 |  |  | 2,829 |  |  | 1,046 |  |  | 151 |  |  | 4,663 |  |  | 195
﻿Commercial real estate |  |  | 4,936 |  |  | 1,573 |  |  | 3,363 |  |  | 68 |  |  | 5,090 |  |  | 174
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | $ | 13,000 |  | $ | 7,881 |  | $ | 5,119 |  | $ | 237 |  | $ | 13,925 |  | $ | 465
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 11,436 |  | $ | 3,479 |  | $ | 4,528 |  | $ | 1,639 |  | $ | 9,879 |  | $ | 96
﻿Residential real estate |  |  | 7,888 |  |  | 4,786 |  |  | 2,992 |  |  | 317 |  |  | 8,163 |  |  | 195
﻿Commercial real estate |  |  | 6,737 |  |  | 2,532 |  |  | 3,556 |  |  | 185 |  |  | 7,234 |  |  | 174
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 108 |  |  | -
﻿Consumer |  |  | 99 |  |  | 99 |  |  | - |  |  | - |  |  | 106 |  |  | -
﻿Total |  | $ | 26,160 |  | $ | 10,896 |  | $ | 11,076 |  | $ | 2,141 |  | $ | 25,490 |  | $ | 465
﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Recorded |  |  | Recorded |  |  |  |  |  |  |
﻿ |  | Unpaid |  |  | investment |  |  | investment |  |  |  | Average |  | Interest
﻿ |  | principal |  |  | with no |  |  | with an |  | Related |  | recorded |  | income
﻿(Dollars in thousands) |  | balance |  |  | allowance |  |  | allowance |  | allowance |  | investment |  | recognized
﻿December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 11,850 |  | $ | 4,647 |  | $ | 2,882 |  | $ | 588 |  | $ | 8,176 |  | $ | -
﻿Residential real estate |  |  | 2,563 |  |  | 1,773 |  |  | 487 |  |  | 208 |  |  | 2,767 |  |  | -
﻿Commercial real estate |  |  | 2,988 |  |  | 1,813 |  |  | 209 |  |  | 9 |  |  | 2,159 |  |  | -
﻿Commercial |  |  | 175 |  |  | 161 |  |  | - |  |  | - |  |  | 126 |  |  | -
﻿Consumer |  |  | 128 |  |  | 98 |  |  | 23 |  |  | 7 |  |  | 122 |  |  | -
﻿Total |  | $ | 17,704 |  | $ | 8,492 |  | $ | 3,601 |  | $ | 812 |  | $ | 13,350 |  | $ | -
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 4,069 |  | $ | 3,266 |  | $ | 803 |  | $ | 31 |  | $ | 4,080 |  | $ | 84
﻿Residential real estate |  |  | 5,686 |  |  | 2,380 |  |  | 3,306 |  |  | 227 |  |  | 6,947 |  |  | 312
﻿Commercial real estate |  |  | 5,740 |  |  | 1,702 |  |  | 4,038 |  |  | 331 |  |  | 5,943 |  |  | 254
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 27 |  |  | 1
﻿Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | $ | 15,495 |  | $ | 7,348 |  | $ | 8,147 |  | $ | 589 |  | $ | 16,997 |  | $ | 651
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 15,919 |  | $ | 7,913 |  | $ | 3,685 |  | $ | 619 |  | $ | 12,256 |  | $ | 84
﻿Residential real estate |  |  | 8,249 |  |  | 4,153 |  |  | 3,793 |  |  | 435 |  |  | 9,714 |  |  | 312
﻿Commercial real estate |  |  | 8,728 |  |  | 3,515 |  |  | 4,247 |  |  | 340 |  |  | 8,102 |  |  | 254
﻿Commercial |  |  | 175 |  |  | 161 |  |  | - |  |  | - |  |  | 153 |  |  | 1
﻿Consumer |  |  | 128 |  |  | 98 |  |  | 23 |  |  | 7 |  |  | 122 |  |  | -
﻿Total |  | $ | 33,199 |  | $ | 15,840 |  | $ | 11,748 |  | $ | 1,401 |  | $ | 30,347 |  | $ | 651
﻿ The following tables provide a roll-forward for troubled debt restructurings as of December 31, 2016 and December 31, 2015. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  | 1/1/2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2016 |  |  |
﻿ |  | TDR |  | New |  | Disbursements |  | Charge |  | Reclassifications/ |  |  |  | TDR |  | Related
﻿(Dollars in thousands) |  | Balance |  | TDRs |  | (Payments) |  | offs |  | Transfer In/(Out) |  | Payoffs |  | Balance |  | Allowance
﻿For the year ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 4,069 |  | $ | - |  | $ | 120 |  | $ | - |  | $ | - |  | $ | - |  | $ | 4,189 |  | $ | 18
﻿Residential real estate |  |  | 5,686 |  |  | 565 |  |  | (405) |  |  | - |  |  | (1,595) |  |  | (376) |  |  | 3,875 |  |  | 151
﻿Commercial real estate |  |  | 5,740 |  |  | 495 |  |  | (724) |  |  | (117) |  |  | (458) |  |  | - |  |  | 4,936 |  |  | 68
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | $ | 15,495 |  | $ | 1,060 |  | $ | (1,009) |  | $ | (117) |  | $ | (2,053) |  | $ | (376) |  | $ | 13,000 |  | $ | 237
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 4,960 |  | $ | 2,570 |  | $ | (2,022) |  | $ | (590) |  | $ | (1,100) |  | $ | - |  | $ | 3,818 |  | $ | 1,621
﻿Residential real estate |  |  | 445 |  |  | 117 |  |  | (531) |  |  | (23) |  |  | 1,595 |  |  | - |  |  | 1,603 |  |  | 156
﻿Commercial real estate |  |  | - |  |  | - |  |  | (117) |  |  | (258) |  |  | 458 |  |  | - |  |  | 83 |  |  | -
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  |  | 23 |  |  | - |  |  | (23) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | $ | 5,428 |  | $ | 2,687 |  | $ | (2,693) |  | $ | (871) |  | $ | 953 |  | $ | - |  | $ | 5,504 |  | $ | 1,777
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Total |  | $ | 20,923 |  | $ | 3,747 |  | $ | (3,702) |  | $ | (988) |  | $ | (1,100) |  | $ | (376) |  | $ | 18,504 |  | $ | 2,014
﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  | 1/1/2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/15 |  |  |
﻿ |  | TDR |  | New |  | Disbursements |  | Charge |  | Reclassifications/ |  |  |  | TDR |  | Related
﻿(Dollars in thousands) |  | Balance |  | TDRs |  | (Payments) |  | offs |  | Transfer In/(Out) |  | Payoffs |  | Balance |  | Allowance
﻿For the year ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Accruing TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 4,022 |  | $ | - |  | $ | (95) |  | $ | - |  | $ | 142 |  | $ | - |  | $ | 4,069 |  | $ | 31
﻿Residential real estate |  |  | 6,368 |  |  | 1,837 |  |  | (1,195) |  |  | - |  |  | (1,324) |  |  | - |  |  | 5,686 |  |  | 227
﻿Commercial real estate |  |  | 6,237 |  |  | - |  |  | (497) |  |  | - |  |  | - |  |  | - |  |  | 5,740 |  |  | 331
﻿Commercial |  |  | 47 |  |  | - |  |  | (6) |  |  | - |  |  | (41) |  |  | - |  |  | - |  |  | -
﻿Consumer |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | $ | 16,674 |  | $ | 1,837 |  | $ | (1,793) |  | $ | - |  | $ | (1,223) |  | $ | - |  | $ | 15,495 |  | $ | 589
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Nonaccrual TDRs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 3,321 |  | $ | - |  | $ | (214) |  | $ | (1,058) |  | $ | 2,911 |  | $ | - |  | $ | 4,960 |  | $ | 588
﻿Residential real estate |  |  | 3,382 |  |  | - |  |  | (26) |  |  | - |  |  | (2,911) |  |  | - |  |  | 445 |  |  | 141
﻿Commercial real estate |  |  | 346 |  |  | - |  |  | (4) |  |  | (40) |  |  | (302) |  |  | - |  |  | - |  |  | -
﻿Commercial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  |  | 25 |  |  | - |  |  | (2) |  |  | - |  |  | - |  |  | - |  |  | 23 |  |  | 7
﻿Total |  | $ | 7,074 |  | $ | - |  | $ | (246) |  | $ | (1,098) |  | $ | (302) |  | $ | - |  | $ | 5,428 |  | $ | 736
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Total |  | $ | 23,748 |  | $ | 1,837 |  | $ | (2,039) |  | $ | (1,098) |  | $ | (1,525) | * | $ | - |  | $ | 20,923 |  | $ | 1,325
* $1.3 million in subsequently modified TDRs were transferred from accruing TDR classification to accrual status during the third quarter of 2015, thus removing the TDR designation. In accordance with ASC 310-40-50-2 “Creditor Disclosure of Troubled Debt Restructurings,” an impaired loan that has been subsequently restructured in a troubled debt restructuring involving modification of terms need not be included in the disclosures in years after the restructuring if both of the following conditions exist: a) the subsequent restructuring agreement specifies an interest rate equal to or greater than the rate that the creditor was willing to accept at the time of the restructuring for a new loan with comparable risk; and b) the loan is not impaired based on the terms specified by the restructuring agreement. During the period ended December 31, 2015, three loans totaling $1.3 million met the conditions stipulated in ASC 310-40-50-2, and after a careful evaluation of well supported documentation by management, these loans were upgraded to accrual status. The following tables provide information on loans that were modified and considered TDRs during 2016 and 2015. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  | Premodification |  | Postmodification |  |  |
﻿ |  |  |  | outstanding |  | outstanding |  |  |
﻿ |  | Number of |  | recorded |  | recorded |  | Related
﻿(Dollars in thousands) |  | contracts |  | investment |  | investment |  | allowance
﻿TDRs: |  |  |  |  |  |  |  |  |  |  |
﻿For the year ended |  |  |  |  |  |  |  |  |  |  |
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | - |  | $ | - |  | $ | - |  | $ | -
﻿Residential real estate |  | 3 |  |  | 667 |  |  | 688 |  |  | -
﻿Commercial real estate |  | 2 |  |  | 695 |  |  | 572 |  |  | -
﻿Commercial |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | 5 |  | $ | 1,362 |  | $ | 1,260 |  | $ | -
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿For the year ended |  |  |  |  |  |  |  |  |  |  |
﻿December 31, 2015 |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | - |  | $ | - |  | $ | - |  | $ | -
﻿Residential real estate |  | 10 |  |  | 1,835 |  |  | 1,837 |  |  | 19
﻿Commercial real estate |  | 1 |  |  | 2,262 |  |  | 2,347 |  |  | -
﻿Commercial |  | - |  |  | - |  |  | - |  |  | -
﻿Consumer |  | - |  |  | - |  |  | - |  |  | -
﻿Total |  | 11 |  | $ | 4,097 |  | $ | 4,184 |  | $ | 19
During the year ended December 31, 2016, there were five 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 2016 and 2015. 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: |  |  |  |  |  |  |  |
﻿For the year ended |  |  |  |  |  |  |  |
﻿December 31, 2016 |  |  |  |  |  |  |  |
﻿Construction |  | 2 |  | $ | 589 |  | $ | -
﻿Residential real estate |  | 1 |  |  | 23 |  |  | -
﻿Commercial real estate |  | 2 |  |  | 375 |  |  | -
﻿Commercial |  | - |  |  | - |  |  | -
﻿Consumer |  | - |  |  | - |  |  | -
﻿Total |  | 5 |  | $ | 987 |  | $ | -
﻿ |  |  |  |  |  |  |  |
﻿For the year ended |  |  |  |  |  |  |  |
﻿December 31, 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. At December 31, 2016, there were no nonaccrual loans classified as special mention or doubtful and $9.0 million of nonaccrual loans were identified as substandard. The comparable amounts at December 31, 2015 were special mention $0, substandard $12.1 million and doubtful $0, respectively. The following tables provide information on loan risk ratings as of December 31, 2016 and 2015. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Special |  |  |  |  |  |
﻿(Dollars in thousands) |  | Pass/Performing |  | Mention |  | Substandard |  | Doubtful |  | Total
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 72,641 |  | $ | 4,195 |  | $ | 7,166 |  | $ | - |  | $ | 84,002
﻿Residential real estate |  |  | 312,242 |  |  | 6,646 |  |  | 6,880 |  |  | - |  |  | 325,768
﻿Commercial real estate |  |  | 363,461 |  |  | 10,939 |  |  | 8,281 |  |  | - |  |  | 382,681
﻿Commercial |  |  | 71,313 |  |  | 857 |  |  | 265 |  |  | - |  |  | 72,435
﻿Consumer |  |  | 6,540 |  |  | - |  |  | 99 |  |  | - |  |  | 6,639
﻿Total |  | $ | 826,197 |  | $ | 22,637 |  | $ | 22,691 |  | $ | - |  | $ | 871,525
﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Special |  |  |  |  |  |
﻿(Dollars in thousands) |  | Pass/Performing |  | 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 December 31, 2016 and 2015. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  | Accruing |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  | 30-59 days |  | 60-89 days |  | Greater than |  | Total |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Current |  | past due |  | past due |  | 90 days |  | past due |  | Nonaccrual |  | Total
﻿December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Construction |  | $ | 80,079 |  |  | $ | - |  |  | $ | 105 |  |  | $ | - |  |  | $ | 105 |  |  | $ | 3,818 |  |  | $ | 84,002 |
﻿Residential real estate |  |  | 317,992 |  |  |  | 1,778 |  |  |  | 2,095 |  |  |  | - |  |  |  | 3,873 |  |  |  | 3,903 |  |  |  | 325,768 |
﻿Commercial real estate |  |  | 375,552 |  |  |  | 3,219 |  |  |  | 2,758 |  |  |  | - |  |  |  | 5,977 |  |  |  | 1,152 |  |  |  | 382,681 |
﻿Commercial |  |  | 72,272 |  |  |  | 19 |  |  |  | 134 |  |  |  | 10 |  |  |  | 163 |  |  |  | - |  |  |  | 72,435 |
﻿Consumer |  |  | 6,515 |  |  |  | 13 |  |  |  | 2 |  |  |  | 10 |  |  |  | 25 |  |  |  | 99 |  |  |  | 6,639 |
﻿Total |  | $ | 852,410 |  |  | $ | 5,029 |  |  | $ | 5,094 |  |  | $ | 20 |  |  | $ | 10,143 |  |  | $ | 8,972 |  |  | $ | 871,525 |
﻿Percent of total loans |  |  | 97.8 | % |  |  | 0.6 | % |  |  | 0.6 | % |  |  | - | % |  |  | 1.2 | % |  |  | 1.0 | % |  |  | 100.0 | %
﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  | Accruing |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  | 30-59 days |  | 60-89 days |  | Greater than |  | Total |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Current |  | past due |  | past due |  | 90 days |  | 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 | % |  |  | 100.0 | %
The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for 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. ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total
﻿ 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Beginning Balance |  | $ | 1,646 |  | $ | 2,181 |  | $ | 2,999 |  | $ | 558 |  | $ | 156 |  | $ | 776 |  | $ | 8,316
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Charge-offs |  |  | (615) |  |  | (580) |  |  | (503) |  |  | (497) |  |  | (45) |  |  | - |  |  | (2,240)
﻿Recoveries |  |  | 35 |  |  | 298 |  |  | 25 |  |  | 428 |  |  | 16 |  |  | - |  |  | 802
﻿Net charge-offs |  |  | (580) |  |  | (282) |  |  | (478) |  |  | (69) |  |  | (29) |  |  | - |  |  | (1,438)
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Provision |  |  | 1,721 |  |  | 54 |  |  | 89 |  |  | 656 |  |  | 104 |  |  | (776) |  |  | 1,848
﻿Ending Balance |  | $ | 2,787 |  | $ | 1,953 |  | $ | 2,610 |  | $ | 1,145 |  | $ | 231 |  | $ | - |  | $ | 8,726
﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  | Residential |  | Commercial |  |  |  |  |  |  |  |
﻿(Dollars in thousands) |  | Construction |  | real estate |  | real estate |  | Commercial |  | Consumer |  | Unallocated |  | Total
﻿ 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Beginning Balance |  | $ | 1,303 |  | $ | 2,834 |  | $ | 2,379 |  | $ | 448 |  | $ | 229 |  | $ | 502 |  | $ | 7,695
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Charge-offs |  |  | (1,058) |  |  | (283) |  |  | (920) |  |  | (396) |  |  | (67) |  |  | - |  |  | (2,724)
﻿Recoveries |  |  | 125 |  |  | 398 |  |  | 379 |  |  | 319 |  |  | 49 |  |  | - |  |  | 1,270
﻿Net charge-offs |  |  | (933) |  |  | 115 |  |  | (541) |  |  | (77) |  |  | (18) |  |  | - |  |  | (1,454)
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Provision |  |  | 1,276 |  |  | (768) |  |  | 1,161 |  |  | 187 |  |  | (55) |  |  | 274 |  |  | 2,075
﻿Ending Balance |  | $ | 1,646 |  | $ | 2,181 |  | $ | 2,999 |  | $ | 558 |  | $ | 156 |  | $ | 776 |  | $ | 8,316
﻿ Foreclosure Proceedings Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $687 thousand and $581 thousand as of December 31, 2016 and 2015. At December 31, 2016 and 2015, there were 2 and 5 residential properties held in other real estate owned totaling $18 thousand and $460 thousand, respectively. ﻿ Performing TDRs were in compliance with their modified terms and there are no further commitments associated with these loans. ﻿

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