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Loans and Allowance for Credit Losses | 9 Months Ended
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Sep. 30, 2023
Receivables [Abstract] |
Loans and Allowance for Credit Losses | Loans and Allowance for Credit Losses On January 1, 2023, the Company adopted ASC 326. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. For further discussion on the most significant accounting policies that the Company follows see Note 2 – Adoption of Accounting Standards and Note 1 of the Company’s 2022 Annual Report on Form 10-K. All loan information presented as of September 30, 2023 is in accordance with ASC 326. All loan information presented as of December 31, 2022, or a prior date is presented in accordance with previously applicable GAAP. The Company makes residential mortgage, commercial, and consumer loans to customers primarily in Anne Arundel County, Baltimore County, Charles County, Calvert County, St Mary’s County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County and Worcester County in Maryland, Kent and Sussex County, Delaware and in Accomack County and Spotsylvania County in Virginia. The following table provides information about the principal classes of the loan portfolio at September 30, 2023 and December 31, 2022.
(Dollars in thousands) |  | September 30, 2023 |  | % of Total Loans |  | December 31, 2022 |  | % of Total Loans
Construction |  | $ | 328,750 |  |  | 7.12 | % |  | $ | 246,319 |  |  | 9.64 | %
Residential real estate |  | 1,439,464 |  |  | 31.17 | % |  | 810,497 |  |  | 31.71 | %
Commercial real estate |  | 2,283,521 |  |  | 49.45 | % |  | 1,065,409 |  |  | 41.68 | %
Commercial |  | 229,474 |  |  | 4.97 | % |  | 147,856 |  |  | 5.78 | %
Consumer |  | 330,411 |  |  | 7.16 | % |  | 286,026 |  |  | 11.19 | %
Credit Cards |  | 6,099 |  |  | 0.13 | % |  | — |  |  | — | %
Total loans |  | 4,617,719 |  |  | 100.00 | % |  | 2,556,107 |  |  | 100.00 | %
Allowance for credit losses on loans |  | (57,051) |  |  |  |  | (16,643) |  |  |
Total loans, net |  | $ | 4,560,668 |  |  |  |  | $ | 2,539,464 |  |  |
Loans are stated at their principal amount outstanding net of any purchase premiums/discounts, deferred fees and costs. Included in loans were deferred costs, net of fees, of $2.0 million and $1.4 million at September 30, 2023 and December 31, 2022. At September 30, 2023 and December 31, 2022, included in total loans were $307.8 million and $372.2 million in loans, acquired as part of the acquisition of Severn Bancorp, Inc. (“Severn”), effective October 31, 2021. These balances were presented net of the related discount which totaled $4.9 million and $6.7 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023 included in total loans were $1.7 billion acquired as part of the acquisition of TCFC, effective July 1, 2023. These balances were presented net of the related discount which totaled $109.8 million at September 30, 2023. The following purchased credit deteriorated loans were acquired in connection with the merger on the Acquisition Date.
(Dollars in Thousands) |  | Par Value |  | Purchase Discount |  | Allowance |  | Purchase Price
Construction |  | $ | 177 |  |  | $ | (11) |  |  | $ | (3) |  |  | $ | 163 |
Residential real estate |  | 8,379 |  |  | (1,157) |  |  | (215) |  |  | 7,007 |
Commercial real estate |  | 55,779 |  |  | (6,864) |  |  | (985) |  |  | 47,930 |
Commercial |  | 2,137 |  |  | (59) |  |  | (278) |  |  | 1,800 |
Consumer |  | 519 |  |  | (35) |  |  | (14) |  |  | 470 |
Credit Card |  | 999 |  |  | (144) |  |  | (18) |  |  | 837 |
Total |  | $ | 67,990 |  |  | $ | (8,270) |  |  | $ | (1,513) |  |  | $ | 58,207 |
At September 30, 2023, the Bank was servicing $361.8 million in loans for the Federal National Mortgage Association and $100.8 million in loans for Freddie Mac. The following table provides information on nonaccrual loans by loan class as of September 30, 2023.
(Dollars in thousands) |  | Non-accrual with no allowance for credit loss |  | Non-accrual with an allowance for credit loss |  | Total Non-accruals
September 30, 2023 |  |  |  |  |  |
Nonaccrual loans: |  |  |  |  |  |
Construction |  | $ | 147 |  |  | $ | — |  |  | $ | 147 |
Residential real estate |  | 3,603 |  |  | 299 |  |  | 3,902 |
Commercial real estate |  | 3,866 |  |  | — |  |  | 3,866 |
Commercial |  | 174 |  |  | 671 |  |  | 845 |
Consumer |  | 203 |  |  | 19 |  |  | 222 |
Total |  | $ | 7,993 |  |  | $ | 989 |  |  | $ | 8,982 |
Interest income |  | $ | — |  |  | $ | — |  |  | $ | — |
(Dollars in thousands) |  | Non-accrual Delinquent Loans |  | Non-accrual Current Loans |  | Total Non-accruals
September 30, 2023 |  |  |  |  |  |
Nonaccrual loans: |  |  |  |  |  |
Construction |  | $ | 147 |  |  | $ | — |  |  | $ | 147 |
Residential real estate |  | 2,258 |  |  | 1,644 |  |  | 3,902 |
Commercial real estate |  | 749 |  |  | 3,117 |  |  | 3,866 |
Commercial |  | 1 |  |  | 844 |  |  | 845 |
Consumer |  | 221 |  |  | 1 |  |  | 222 |
Total |  | $ | 3,376 |  |  | $ | 5,606 |  |  | $ | 8,982 |
The overall quality of the Bank’s loan portfolio is primarily assessed using the Bank’s risk-grading scale. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators are adjusted based on management’s judgment during the quarterly review process. Loans are graded on a scale of one to ten. Ratings 1 thru 6 – Pass - Ratings 1 thru 6 have asset risks ranging from excellent-low to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks. Rating 7 – Special Mention - These credits have potential weaknesses due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. Special mention loan relationships are reviewed at least quarterly. Rating 8 – Substandard - Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. Substandard loans are the first adversely classified loans on the Bank's watchlist. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor or operating losses. When a loan is assigned to this category the Bank may estimate a specific reserve in the loan loss allowance analysis and/or place the loan on nonaccrual. These assets listed may include assets with histories of repossessions or some that are non-performing bankruptcies. These relationships will be reviewed at least quarterly. Rating 9 – Doubtful - Doubtful assets have many of the same characteristics of substandard with the exception that the Bank has determined that loss is not only possible but is probable. The amount of loss is not discernible due to factors such as merger, acquisition, or liquidation; a capital injection; a pledge of additional collateral; the sale of assets; or alternative refinancing plans. Credits receiving a doubtful classification are required to be on nonaccrual. These relationships will be reviewed at least quarterly. Rating 10 – Loss – Loss assets are uncollectible or of little value. The following table provides information on loan risk ratings as of September 30, 2023 and gross write-offs during the nine months ended September 30, 2023.
|  | Term Loans by Origination Year |  | Revolving Loans |  | Revolving Converted to Term Loans |  | Total
(Dollars in thousands) |  | Prior |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  |  |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction
Pass |  | $ | 27,243 |  |  | $ | 14,732 |  |  | $ | 29,531 |  |  | $ | 40,493 |  |  | $ | 135,418 |  |  | $ | 72,852 |  |  | $ | 8,331 |  |  | $ | — |  |  | $ | 328,600 |
Substandard |  | 138 |  |  | — |  |  | — |  |  | 12 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 150 |
Total |  | $ | 27,381 |  |  | $ | 14,732 |  |  | $ | 29,531 |  |  | $ | 40,505 |  |  | $ | 135,418 |  |  | $ | 72,852 |  |  | $ | 8,331 |  |  | $ | — |  |  | $ | 328,750 |
Gross Charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Residential real estate
Pass |  | $ | 330,183 |  |  | $ | 55,088 |  |  | $ | 107,259 |  |  | $ | 248,445 |  |  | $ | 355,912 |  |  | $ | 218,563 |  |  | $ | 116,868 |  |  | $ | 876 |  |  | $ | 1,433,194 |
Special Mention |  | 41 |  |  | 259 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 192 |  |  | — |  |  | 492 |
Substandard |  | 5,320 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 458 |  |  | — |  |  | 5,778 |
Total |  | $ | 335,544 |  |  | $ | 55,347 |  |  | $ | 107,259 |  |  | $ | 248,445 |  |  | $ | 355,912 |  |  | $ | 218,563 |  |  | $ | 117,518 |  |  | $ | 876 |  |  | $ | 1,439,464 |
Gross Charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate
Pass |  | $ | 683,984 |  |  | $ | 192,789 |  |  | $ | 302,597 |  |  | $ | 430,908 |  |  | $ | 430,214 |  |  | $ | 195,260 |  |  | $ | 16,420 |  |  | $ | 2,202 |  |  | $ | 2,254,374 |
Special Mention |  | 13,931 |  |  | 141 |  |  | — |  |  | 6,184 |  |  | 4,475 |  |  | — |  |  | — |  |  | 426 |  |  | 25,157 |
Substandard |  | 1,498 |  |  | 1,937 |  |  | — |  |  | 555 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,990 |
Total |  | $ | 699,413 |  |  | $ | 194,867 |  |  | $ | 302,597 |  |  | $ | 437,647 |  |  | $ | 434,689 |  |  | $ | 195,260 |  |  | $ | 16,420 |  |  | $ | 2,628 |  |  | $ | 2,283,521 |
Gross Charge-offs |  | $ | (513) |  |  | $ | — |  |  | $ | (814) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1,327) |
Commercial
Pass |  | $ | 25,796 |  |  | $ | 14,254 |  |  | $ | 15,332 |  |  | $ | 43,209 |  |  | $ | 40,337 |  |  | $ | 24,582 |  |  | $ | 62,679 |  |  | $ | 1,641 |  |  | $ | 227,830 |
Special Mention |  | 137 |  |  | — |  |  | — |  |  | 440 |  |  | — |  |  | — |  |  | 75 |  |  | 243 |  |  | 895 |
Substandard |  | 1 |  |  | 186 |  |  | — |  |  | — |  |  | 23 |  |  | — |  |  | 493 |  |  | 46 |  |  | 749 |
Total |  | $ | 25,934 |  |  | $ | 14,440 |  |  | $ | 15,332 |  |  | $ | 43,649 |  |  | $ | 40,360 |  |  | $ | 24,582 |  |  | $ | 63,247 |  |  | $ | 1,930 |  |  | $ | 229,474 |
Gross Charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Consumer
Pass |  | $ | 682 |  |  | $ | 1,258 |  |  | $ | 15,574 |  |  | $ | 83,768 |  |  | $ | 150,126 |  |  | $ | 78,067 |  |  | $ | 713 |  |  | $ | — |  |  | $ | 330,188 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |
Substandard |  | — |  |  | 26 |  |  | — |  |  | 117 |  |  | 78 |  |  | — |  |  | 1 |  |  | — |  |  | 222 |
Total |  | $ | 682 |  |  | $ | 1,284 |  |  | $ | 15,574 |  |  | $ | 83,885 |  |  | $ | 150,204 |  |  | $ | 78,067 |  |  | $ | 715 |  |  | $ | — |  |  | $ | 330,411 |
Gross Charge-offs |  | $ | (45) |  |  | $ | — |  |  | $ | (16) |  |  | $ | (3) |  |  | $ | (1) |  |  | $ | (328) |  |  | $ | (1) |  |  | $ | (5) |  |  | $ | (399) |
Total
Pass |  | $ | 1,067,888 |  |  | $ | 278,121 |  |  | $ | 470,293 |  |  | $ | 846,823 |  |  | $ | 1,112,007 |  |  | $ | 589,324 |  |  | $ | 205,011 |  |  | $ | 4,719 |  |  | $ | 4,574,186 |
Special Mention |  | 14,109 |  |  | 400 |  |  | — |  |  | 6,624 |  |  | 4,475 |  |  | — |  |  | 268 |  |  | 669 |  |  | 26,545 |
Substandard |  | 6,957 |  |  | 2,149 |  |  | — |  |  | 684 |  |  | 101 |  |  | — |  |  | 952 |  |  | 46 |  |  | 10,889 |
Total loans by risk category |  | $ | 1,088,954 |  |  | $ | 280,670 |  |  | $ | 470,293 |  |  | $ | 854,131 |  |  | $ | 1,116,583 |  |  | $ | 589,324 |  |  | $ | 206,231 |  |  | $ | 5,434 |  |  | $ | 4,611,620 |
Total gross charge-offs |  | $ | (558) |  |  | $ | — |  |  | $ | (830) |  |  | $ | (3) |  |  | $ | (1) |  |  | $ | (328) |  |  | $ | (1) |  |  | $ | (5) |  |  | $ | (1,726) |
|  | Term Loans by Origination Year |  | Revolving Loans |  | Revolving Converted to Term Loans |  | Total
(Dollars in thousands) |  | Prior |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  |  |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit Cards
Performing |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6,099 |  |  | $ | — |  |  | $ | 6,099 |
Non-Performing |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6,099 |  |  | $ | — |  |  | $ | 6,099 |
Gross Charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (60) |  |  | $ | — |  |  | $ | (60) |
Total loans evaluated by performing status |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6,099 |  |  | $ | — |  |  | $ | 6,099 |
Total gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (60) |  |  | $ | — |  |  | $ | (60) |
Total Recorded Investment |  | $ | 1,088,954 |  |  | $ | 280,670 |  |  | $ | 470,293 |  |  | $ | 854,131 |  |  | $ | 1,116,583 |  |  | $ | 589,324 |  |  | $ | 212,330 |  |  | $ | 5,434 |  |  | $ | 4,617,719 |
The following tables provide information on the aging of the loan portfolio as of September 30, 2023 and December 31, 2022.
(Dollars in thousands) |  | 30‑59 days past due |  | 60‑89 days past due |  | 90 days past due and still accruing |  | 90 days past due and not accruing |  | Total past due |  | Current Non-accrual |  | Current Accrual Loans (1) |  | Total
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 1,035 |  |  | $ | — |  |  | $ | 65 |  |  | $ | 147 |  |  | $ | 1,247 |  |  | $ | — |  |  | $ | 327,503 |  |  | $ | 328,750 |
Residential real estate |  | 3,036 |  |  | 250 |  |  | 871 |  |  | 1,669 |  |  | 5,826 |  |  | 1,644 |  |  | 1,431,994 |  |  | 1,439,464 |
Commercial real estate |  | 785 |  |  | 445 |  |  | — |  |  | 749 |  |  | 1,979 |  |  | 3,117 |  |  | 2,278,425 |  |  | 2,283,521 |
Commercial |  | 103 |  |  | — |  |  | — |  |  | — |  |  | 103 |  |  | 844 |  |  | 228,527 |  |  | 229,474 |
Consumer |  | 593 |  |  | 2,744 |  |  | 1,160 |  |  | 214 |  |  | 4,711 |  |  | 1 |  |  | 325,699 |  |  | 330,411 |
Credit Cards |  | 61 |  |  | 41 |  |  | 53 |  |  | — |  |  | 155 |  |  | — |  |  | 5,944 |  |  | 6,099 |
Total |  | $ | 5,613 |  |  | $ | 3,480 |  |  | $ | 2,149 |  |  | $ | 2,779 |  |  | $ | 14,021 |  |  | $ | 5,606 |  |  | $ | 4,598,092 |  |  | $ | 4,617,719 |
Percent of total loans |  | 0.1 | % |  | 0.1 | % |  | — | % |  | — | % |  | 0.3 | % |  | 0.1 | % |  | 99.6 | % |  | 100.0 | %
(1)Includes loans measured at fair value of $9.3 million at September 30, 2023.
|  | Accruing |  |  |  |  |  |
(Dollars in thousands) |  | Current (1) |  | 30‑59 days past due |  | 60‑89 days past due |  | 90 days or more past due |  | Total past due |  | Non-accrual |  | PCI |  | Total
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 239,990 |  |  | $ | 4,343 |  |  | $ | 1,015 |  |  | $ | 24 |  |  | $ | 5,382 |  |  | $ | 297 |  |  | $ | 650 |  |  | $ | 246,319 |
Residential real estate |  | 787,070 |  |  | 6,214 |  |  | 891 |  |  | 1,107 |  |  | 8,212 |  |  | 1,259 |  |  | 13,956 |  |  | 810,497 |
Commercial real estate |  | 1,052,314 |  |  | 369 |  |  | — |  |  | 710 |  |  | 1,079 |  |  | 150 |  |  | 11,866 |  |  | 1,065,409 |
Commercial |  | 147,511 |  |  | 15 |  |  | — |  |  | — |  |  | 15 |  |  | 174 |  |  | 156 |  |  | 147,856 |
Consumer |  | 285,750 |  |  | 223 |  |  | 11 |  |  | — |  |  | 234 |  |  | 28 |  |  | 14 |  |  | 286,026 |
Total |  | $ | 2,512,635 |  |  | $ | 11,164 |  |  | $ | 1,917 |  |  | $ | 1,841 |  |  | $ | 14,922 |  |  | $ | 1,908 |  |  | $ | 26,642 |  |  | $ | 2,556,107 |
Percent of total loans |  | 98.3 | % |  | 0.4 | % |  | 0.1 | % |  | 0.1 | % |  | 0.6 | % |  | 0.1 | % |  | 1.0 | % |  | 100.0 | %
(1)Includes loans measured at fair value of $8.4 million at December 31, 2022. The following tables provide a summary of the activity in the ACL allocated by loan class for the three and nine months ended September 30, 2023 and September 30, 2022. 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) |  | Beginning Balance |  | Merger Adjustments (2) |  | Charge-offs |  | Recoveries |  | Net (charge-offs) recoveries |  | Provisions |  | Ending Balance
For three months ended September 30, 2023
Construction |  | $ | 2,386 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 3 |  |  | $ | 3 |  |  | $ | 1,439 |  |  | $ | 3,831 |
Residential real estate |  | 9,151 |  |  | 215 |  |  | — |  |  | 3 |  |  | 3 |  |  | 9,806 |  |  | 19,175 |
Commercial real estate |  | 10,267 |  |  | 985 |  |  | (1,327) |  |  | — |  |  | (1,327) |  |  | 12,875 |  |  | 22,800 |
Commercial |  | 1,956 |  |  | 278 |  |  | — |  |  | 2 |  |  | 2 |  |  | 2,101 |  |  | 4,337 |
Consumer (1) |  | 5,254 |  |  | 14 |  |  | (115) |  |  | 45 |  |  | (70) |  |  | 1,658 |  |  | 6,856 |
Credit Card |  | — |  |  | 18 |  |  | (60) |  |  | — |  |  | (60) |  |  | 94 |  |  | 52 |
Total |  | $ | 29,014 |  |  | $ | 1,513 |  |  | $ | (1,502) |  |  | $ | 53 |  |  | $ | (1,449) |  |  | $ | 27,973 |  |  | $ | 57,051 |
(1)Gross charge-offs of consumer loans for the three months ended September 30, 2023 included $95,000 of demand deposit overdrafts. (2)Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.
(Dollars in thousands) |  | Beginning Balance |  | Charge-offs |  | Recoveries |  | Net (charge-offs) recoveries |  | Provisions |  | Ending Balance
For three months ended September 30, 2022
Construction |  | $ | 3,345 |  |  | $ | — |  |  | $ | 2 |  |  | $ | 2 |  |  | $ | (315) |  |  | $ | 3,032 |
Residential real estate |  | 2,778 |  |  | — |  |  | 12 |  |  | 12 |  |  | 218 |  |  | 3,008 |
Commercial real estate |  | 4,441 |  |  | — |  |  | 243 |  |  | 243 |  |  | 325 |  |  | 5,009 |
Commercial |  | 1,681 |  |  | (202) |  |  | 60 |  |  | (142) |  |  | 368 |  |  | 1,907 |
Consumer |  | 3,238 |  |  | — |  |  | 4 |  |  | 4 |  |  | 79 |  |  | 3,321 |
Total |  | $ | 15,483 |  |  | $ | (202) |  |  | $ | 321 |  |  | $ | 119 |  |  | $ | 675 |  |  | $ | 16,277 |
(Dollars in thousands) |  | Beginning Balance |  | Impact of ASC326 Adoption |  | Merger Adjustments (2) |  | Charge-offs |  | Recoveries |  | Net (charge-offs) recoveries |  | Provisions |  | Ending Balance
For nine months ended September 30, 2023
Construction |  | $ | 2,973 |  |  | $ | 1,222 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 10 |  |  | $ | 10 |  |  | $ | (377) |  |  | $ | 3,831 |
Residential real estate |  | 2,622 |  |  | 4,974 |  |  | 215 |  |  | — |  |  | 37 |  |  | 37 |  |  | 11,327 |  |  | 19,175 |
Commercial real estate |  | 4,899 |  |  | 3,742 |  |  | 985 |  |  | (1,327) |  |  | — |  |  | (1,327) |  |  | 14,501 |  |  | 22,800 |
Commercial |  | 1,652 |  |  | 401 |  |  | 278 |  |  | — |  |  | 10 |  |  | 10 |  |  | 1,996 |  |  | 4,337 |
Consumer (1) |  | 4,497 |  |  | 452 |  |  | 14 |  |  | (399) |  |  | 210 |  |  | (189) |  |  | 2,082 |  |  | 6,856 |
Credit Card |  | — |  |  | — |  |  | 18 |  |  | (60) |  |  | — |  |  | (60) |  |  | 94 |  |  | 52 |
Total |  | $ | 16,643 |  |  | $ | 10,791 |  |  | $ | 1,513 |  |  | $ | (1,786) |  |  | $ | 267 |  |  | $ | (1,519) |  |  | $ | 29,623 |  |  | $ | 57,051 |
(1)Gross charge-offs of consumer loans for the nine months ended September 30, 2023 included $0.4 million of demand deposit overdrafts. (2)Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.
(Dollars in thousands) |  | Beginning Balance |  | Charge-offs |  | Recoveries |  | Net (charge-offs) recoveries |  | Provisions |  | Ending Balance
For nine months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 2,454 |  |  | $ | — |  |  | $ | 9 |  |  | $ | 9 |  |  | $ | 569 |  |  | $ | 3,032 |
Residential real estate |  | 2,858 |  |  | (4) |  |  | 131 |  |  | 127 |  |  | 23 |  |  | 3,008 |
Commercial real estate |  | 4,598 |  |  | (6) |  |  | 948 |  |  | 942 |  |  | (531) |  |  | 5,009 |
Commercial |  | 2,070 |  |  | (416) |  |  | 200 |  |  | (216) |  |  | 53 |  |  | 1,907 |
Consumer |  | 1,964 |  |  | (31) |  |  | 27 |  |  | (4) |  |  | 1,361 |  |  | 3,321 |
Total |  | $ | 13,944 |  |  | $ | (457) |  |  | $ | 1,315 |  |  | $ | 858 |  |  | $ | 1,475 |  |  | $ | 16,277 |
There were no modifications to loans for borrowers experiencing financial difficulty (“BEFD”) during the three and nine months ended September 30, 2023. The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment.
|  | September 30, 2023
(Dollars in thousands) |  | Real Estate Collateral |  | Other Collateral |  | Total
Construction |  | $ | 250 |  |  | $ | — |  |  | $ | 250 |
Residential real estate |  | 7,620 |  |  | — |  |  | 7,620 |
Commercial real estate |  | 5,411 |  |  | — |  |  | 5,411 |
Commercial |  | — |  |  | 1,100 |  |  | 1,100 |
Consumer |  | — |  |  | 1,381 |  |  | 1,381 |
Total |  | $ | 13,281 |  |  | $ | 2,481 |  |  | $ | 15,762 |
The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended September 30, 2023 Foreclosure Proceedings There were $0.7 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of September 30, 2023 and $0.3 million as of December 31, 2022, respectively. There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at September 30, 2023 and one residential real estate property totaling $18,000 at December 31, 2022. Prior to the adoption of ASC 326 The following table provides information about all loans acquired from Severn as of December 31, 2022.
|  | December 31, 2022
(Dollars in thousands) |  | Acquired Loans - Purchased Credit Impaired |  | Acquired Loans - Purchased Performing |  | Acquired Loans - Total
Outstanding principal balance |  | $ | 29,620 |  |  | $ | 349,262 |  |  | $ | 378,882 |
Carrying amount |  |  |  |  |  |
Construction |  | $ | 650 |  |  | $ | 18,761 |  |  | $ | 19,411 |
Residential real estate |  | 13,956 |  |  | 116,118 |  |  | 130,074 |
Commercial real estate |  | 11,866 |  |  | 174,278 |  |  | 186,144 |
Commercial |  | 156 |  |  | 35,687 |  |  | 35,843 |
Consumer |  | 14 |  |  | 697 |  |  | 711 |
Total loans |  | $ | 26,642 |  |  | $ | 345,541 |  |  | $ | 372,183 |
The following table presents a summary of the change in the accretable yield on PCI loans acquired from Severn.
(Dollars in thousands) |  | Nine Months Ended September 30, 2022
Accretable yield, beginning of period |  | $ | 5,367 |
Accretion |  | (1,195) |
Reclassification of nonaccretable difference due to improvement in expected cash flows |  | 399 |
Other changes, net |  | 287 |
Accretable yield, end of period |  | $ | 4,858 |
The following tables include impairment information relating to loans and the ACL on loans as of December 31, 2022.
(Dollars in thousands) |  | Ending balance: Individually evaluated for impairment |  | Ending balance: Collectively evaluated for impairment |  | Acquired Loans- PCI |  | Total (1)
December 31, 2022 |  |  |  |  |  |  |  |
Loan Receivables: |  |  |  |  |  |  |  |
Construction |  | $ | 331 |  |  | $ | 236,901 |  |  | $ | 650 |  |  | $ | 237,882 |
Residential real estate |  | 5,081 |  |  | 791,460 |  |  | 13,956 |  |  | 810,497 |
Commercial real estate |  | 2,540 |  |  | 1,051,003 |  |  | 11,866 |  |  | 1,065,409 |
Commercial |  | 174 |  |  | 147,526 |  |  | 156 |  |  | 147,856 |
Consumer |  | 28 |  | 285,984 |  |  | 14 |  | 286,026 |
Total |  | $ | 8,154 |  |  | $ | 2,512,874 |  |  | $ | 26,642 |  |  | $ | 2,547,670 |
Allowance for credit losses on loans: |  | Allocated to loans individually evaluated for impairment |  | Allocated to loans collectively evaluated for impairment |  | Total |  |
Construction |  | $ | — |  |  | $ | 2,973 |  |  | $ | 2,973 |  |  |
Residential real estate |  | 127 |  |  | 2,495 |  |  | 2,622 |  |  |
Commercial real estate |  | — |  |  | 4,899 |  |  | 4,899 |  |  |
Commercial |  | — |  |  | 1,652 |  |  | 1,652 |  |  |
Consumer |  | — |  |  | 4,497 |  |  | 4,497 |  |  |
Total |  | $ | 127 |  |  | $ | 16,516 |  |  | $ | 16,643 |  |  |
(1)Excludes loans measured at fair value of $8.4 million at December 31, 2022. The following tables provide information on impaired loans and any related allowance by loan class as of December 31, 2022. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken and interest paid on nonaccrual loans that has been applied to principal.
|  | Unpaid principal balance |  | Recorded investment with no allowance |  | Recorded investment with an allowance |  | Related allowance |  | September 30, 2022
(Dollars in thousands) |  |  |  |  |  | Quarter-to-date average recorded investment |  | Year-to-date average recorded investment |  | Interest income recognized
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired nonaccrual loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 297 |  |  | $ | 297 |  |  | $ | — |  |  | $ | — |  |  | $ | 297 |  |  | $ | 314 |  |  | $ | — |
Residential real estate |  | 1,363 |  |  | 1,259 |  |  | — |  |  | — |  |  | 1,639 |  |  | 1,534 |  |  | — |
Commercial real estate |  | 159 |  |  | 150 |  |  | — |  |  | — |  |  | 466 |  |  | 704 |  |  | — |
Commercial |  | 359 |  |  | 174 |  |  | — |  |  | — |  |  | 197 |  |  | 242 |  |  | — |
Consumer |  | 29 |  |  | 28 |  |  | — |  |  | — |  |  | 40 |  |  | 48 |  |  | — |
Total |  | $ | 2,207 |  |  | $ | 1,908 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,639 |  |  | $ | 2,842 |  |  | $ | — |
Impaired accruing TDRs: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 10 |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  | $ | 14 |  |  | $ | 18 |  |  | $ | 1 |
Residential real estate |  | 2,849 |  |  | 1,176 |  |  | 1,539 |  |  | 127 |  |  | 2,750 |  |  | 3,064 |  |  | 83 |
Commercial real estate |  | 1,680 |  |  | 1,680 |  |  | — |  |  | — |  |  | 1,830 |  |  | 2,231 |  |  | 48 |
Commercial |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |
Total |  | $ | 4,539 |  |  | $ | 2,866 |  |  | $ | 1,539 |  |  | $ | 127 |  |  | $ | 4,594 |  |  | $ | 5,319 |  |  | $ | 132 |
Other impaired accruing loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 24 |  |  | $ | 24 |  |  | $ | — |  |  | $ | — |  |  | $ | 304 |  |  | $ | 190 |  |  | $ | 6 |
Residential real estate |  | 1,107 |  |  | 1,107 |  |  | — |  |  | — |  |  | 745 |  |  | 259 |  |  | 3 |
Commercial real estate |  | 710 |  |  | 710 |  |  | — |  |  | — |  |  | 537 |  |  | 493 |  |  | 7 |
Commercial |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |  |  | 7 |  |  | 1 |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |  |  | — |
Total |  | $ | 1,841 |  |  | $ | 1,841 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,599 |  |  | $ | 962 |  |  | $ | 17 |
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 331 |  |  | $ | 331 |  |  | $ | — |  |  | $ | — |  |  | $ | 615 |  |  | $ | 522 |  |  | $ | 7 |
Residential real estate |  | 5,319 |  |  | 3,542 |  |  | 1,539 |  |  | 127 |  |  | 5,134 |  |  | 4,857 |  |  | 86 |
Commercial real estate |  | 2,549 |  |  | 2,540 |  |  | — |  |  | — |  |  | 2,833 |  |  | 3,428 |  |  | 55 |
Commercial |  | 359 |  |  | 174 |  |  | — |  |  | — |  |  | 210 |  |  | 249 |  |  | 1 |
Consumer |  | 29 |  |  | 28 |  |  | — |  |  | — |  |  | 40 |  |  | 67 |  |  | — |
Total |  | $ | 8,587 |  |  | $ | 6,615 |  |  | $ | 1,539 |  |  | $ | 127 |  |  | $ | 8,832 |  |  | $ | 9,123 |  |  | $ | 149 |
There were no loans modified and considered to be TDRs during the three and nine months ended September 30, 2022. All accruing TDRs were in compliance with their modified terms. Both performing and non-performing TDRs had no further commitments associated with them as of December 31, 2022. There were no TDRs which subsequently defaulted within 12 months of modification for the three and nine months ended September 30, 2022. Generally, a loan is considered in default when principal or interest is past due 90 days or more, the loan is placed on nonaccrual, the loan is charged off, or there is a transfer to other real estate owned (OREO) or repossessed assets. The following tables provide information on loan risk ratings as of December 31, 2022.
(Dollars in thousands) |  | Pass/Performing (1) |  | Pass |  | Special Mention |  | Substandard |  | Doubtful |  | PCI |  | Total
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  | $ | 231,160 |  |  | $ | 14,212 |  |  | $ | — |  |  | $ | 297 |  |  | $ | — |  |  | $ | 650 |  |  | $ | 246,319 |
Residential real estate |  | 761,405 |  |  | 32,467 |  |  | 1,239 |  |  | 1,430 |  |  | — |  |  | 13,956 |  |  | 810,497 |
Commercial real estate |  | 929,501 |  |  | 121,711 |  |  | 1,814 |  |  | 517 |  |  | — |  |  | 11,866 |  |  | 1,065,409 |
Commercial |  | 131,084 |  |  | 15,958 |  |  | 484 |  |  | 174 |  |  | — |  |  | 156 |  |  | 147,856 |
Consumer |  | 285,786 |  |  | 196 |  |  | 2 |  |  | 28 |  |  | — |  |  | 14 |  |  | 286,026 |
Total |  | $ | 2,338,936 |  |  | $ | 184,544 |  |  | $ | 3,539 |  |  | $ | 2,446 |  |  | $ | — |  |  | $ | 26,642 |  |  | $ | 2,556,107 |
(1)Includes loans measured at fair value of $8.4 million at December 31, 2022.

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