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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2024
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 1 – Summary of Significant Accounting Policies of the Company’s 2023 Annual Report.
The following table provides information about the principal classes of the loan portfolio at September 30, 2024 and December 31, 2023.
($ in thousands)September 30, 2024% of Total LoansDecember 31, 2023% of Total Loans
Construction$337,113 7.12 %$299,000 6.40 %
Residential real estate1,570,998 33.19 %1,490,438 32.10 %
Commercial real estate2,276,381 48.09 %2,286,154 49.30 %
Commercial225,083 4.75 %229,939 5.00 %
Consumer317,149 6.70 %328,896 7.10 %
Credit cards7,185 0.15 %6,583 0.10 %
Total loans 4,733,909 100.00 %4,641,010 100.00 %
Allowance for credit losses on loans(58,669)(57,351)
Total loans, net$4,675,240 $4,583,659 
Loans are stated at their principal amount outstanding including any purchase premiums/discounts, deferred fees and costs. Included in loans were deferred costs, net of fees, of $3.4 million and $2.2 million at September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023 included in total loans were $1.52 billion and $1.64 billion in loans acquired as part of the acquisition of TCFC, effective July 1, 2023. These balances were presented net of the related discount which totaled $92.3 million and $108.4 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, included in total loans were $263.4 million and $297.9 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 $3.6 million and $4.7 million at September 30, 2024 and December 31, 2023, respectively.
At September 30, 2024, the Bank was servicing $368.0 million in loans for the Federal National Mortgage Association and $118.5 million in loans for Freddie Mac.
The following table provides information on nonaccrual loans by loan class as of September 30, 2024 and December 31, 2023.
($ in thousands)Non-Accrual with no allowance for credit lossNon-Accrual with an allowance for credit lossTotal Non-Accrual Loans
September 30, 2024
Nonaccrual loans:
Construction$207 $— $207 
Residential real estate6,500 438 6,938 
Commercial real estate3,447 2,239 5,686 
Commercial 490 586 1,076 
Consumer295 463 758 
Credit cards— 179 179 
Total$10,939 $3,905 $14,844 
Interest income $174 $57 $231 
($ in thousands)Non-Accrual with no allowance for credit lossNon-Accrual with an allowance for credit lossTotal Non-Accrual Loans
December 31, 2023
Nonaccrual loans:
Construction$626 $— $626 
Residential real estate5,865 480 6,345 
Commercial real estate4,364 — 4,364 
Commercial176 368 544 
Consumer216 689 905 
Total$11,247 $1,537 $12,784 
Interest income$399 $53 $452 
($ in thousands)Non-Accrual Delinquent LoansNon-Accrual Current LoansTotal Non-Accrual Loans
September 30, 2024
Nonaccrual loans:
Construction$207 $— $207 
Residential real estate4,516 2,422 6,938 
Commercial real estate2,810 2,876 5,686 
Commercial58 1,018 1,076 
Consumer707 51 758 
Credit cards156 23 179 
Total$8,454 $6,390 $14,844 
($ in thousands)Non-Accrual Delinquent LoansNon-Accrual Current LoansTotal Non-Accrual Loans
December 31, 2023
Nonaccrual loans:
Construction$221 $405 $626 
Residential real estate4,137 2,208 6,345 
Commercial real estate1,215 3,149 4,364 
Commercial28 516 544 
Consumer903 2 905 
Total$6,504 $6,280 $12,784 
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.
Consumer credit cards are monitored based on a borrower payment history. Credit card loans are classified as performing and are typically charged off no later than 180 days past due when, or in the opinion of management, the collection of principal or interest is considered doubtful. As of September 30, 2024, there were 7 credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and non-performing.
Loans subject to risk ratings 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 credit 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 tables provides information on loan risk ratings as of September 30, 2024 and gross write-offs during the nine months ended September 30, 2024.
Term Loans by Origination YearRevolving LoansRevolving Converted to Term LoansTotal
($ in thousands)Prior20202021202220232024
September 30, 2024
Construction
Pass$33,471 $10,572 $24,666 $79,428 $90,132 $76,594 $20,283 $1,760 $336,906 
Substandard60 — — 147 — — — — 207 
Total$33,531 $10,572 $24,666 $79,575 $90,132 $76,594 $20,283 $1,760 $337,113 
Gross Charge-offs$— $— $(12)$— $— $— $— $— $(12)
Residential real estate
Pass$343,013 $101,078 $242,689 $402,062 $255,274 $82,959 $120,721 $14,124 $1,561,920 
Special Mention395 530 — — — — 163 — 1,088 
Substandard5,511 — 1,353 295 355 — 476 — 7,990 
Total$348,919 $101,608 $244,042 $402,357 $255,629 $82,959 $121,360 $14,124 $1,570,998 
Gross Charge-offs$(1)$— $— $— $— $— $— $— $(1)
Commercial real estate
Pass$800,556 $282,792 $407,056 $432,621 $213,652 $82,252 $34,021 $— $2,252,950 
Special Mention7,162 — 5,428 — — — 531 — 13,121 
Substandard7,227 — 3,055 — — — 28 — 10,310 
Total$814,945 $282,792 $415,539 $432,621 $213,652 $82,252 $34,580 $— $2,276,381 
Gross Charge-offs$— $— $— $— $— $— $— $— $— 
Commercial
Pass$27,330 $11,866 $43,586 $31,181 $30,278 $28,198 $48,252 $849 $221,540 
Special Mention120 — — — — — — 69 189 
Substandard593 — 9 1,324 524 — 553 351 3,354 
Total$28,043 $11,866 $43,595 $32,505 $30,802 $28,198 $48,805 $1,269 $225,083 
Gross Charge-offs$(45)$(11)$— $(56)$(65)$— $— $— $(177)
Consumer
Pass$889 $11,679 $64,634 $122,668 $68,778 $47,032 $711 $— $316,391 
Special Mention— — — — — — — — — 
Substandard2 3 97 555 101 — — — 758 
Total$891 $11,682 $64,731 $123,223 $68,879 $47,032 $711 $— $317,149 
Gross Charge-offs$(545)$(9)$(217)$(1,578)$(35)$— $(17)$— $(2,401)
Total
Pass$1,205,259 $417,987 $782,631 $1,067,960 $658,114 $317,035 $223,988 $16,733 $4,689,707 
Special Mention7,677 530 5,428 — — — 694 69 14,398 
Substandard13,393 3 4,514 2,321 980 — 1,057 351 22,619 
Total loans by risk category$1,226,329 $418,520 $792,573 $1,070,281 $659,094 $317,035 $225,739 $17,153 $4,726,724 
Total gross charge-offs$(591)$(20)$(229)$(1,634)$(100)$— $(17)$— $(2,591)
Term Loans by Origination YearRevolving LoansRevolving Converted to Term LoansTotal
($ in thousands)Prior20202021202220232024
September 30, 2024
Credit Cards
Performing$— $— $— $— $— $— $7,006 $— $7,006 
Non-Performing— — — — — — 179 — 179 
Total$— $— $— $— $— $— $7,185 $— $7,185 
Gross Charge-offs$— $— $— $— $— $— $(405)$— $(405)
Total loans evaluated by performing status$— $— $— $— $— $— $7,185 $— $7,185 
Total gross charge-offs$— $— $— $— $— $— $(405)$— $(405)
Total Recorded Investment$1,226,329 $418,520 $792,573 $1,070,281 $659,094 $317,035 $232,924 $17,153 $4,733,909 
The following tables provides information on loan risk ratings as of December 31, 2023 and gross write-offs during twelve months ended December 31, 2023.
Term Loans by Origination YearRevolving
loans		Revolving
converted to
term loans		Total
($ in thousands)Prior20192020202120222023
December 31, 2023
Construction
Pass$23,450 $15,721 $14,773 $34,325 $101,426 $100,620 $8,056 $— $298,371 
Substandard199 — — 12 418 — — — 629 
Total$23,649 $15,721 $14,773 $34,337 $101,844 $100,620 $8,056 $— $299,000 
Gross Charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate
Pass$317,528 $54,387 $105,269 $251,269 $392,378 $239,914 $119,777 $874 $1,481,396 
Special Mention154 256 564 503 — — 192 — 1,669 
Substandard6,000 — — — — — 1,373 — 7,373 
Total$323,682 $54,643 $105,833 $251,772 $392,378 $239,914 $121,342 $874 $1,490,438 
Gross Charge-offs$— $— $— $— $— $— $(119)$— $(119)
Commercial real estate
Pass$670,042 $190,753 $311,980 $426,750 $428,240 $210,915 $14,873 $2,138 $2,255,691 
Special Mention14,986 331 — 5,501 4,446 — 100 409 25,773 
Substandard2,119 2,029 — 542 — — — — 4,690 
Total$687,147 $193,113 $311,980 $432,793 $432,686 $210,915 $14,973 $2,547 $2,286,154 
Gross Charge-offs$(512)$— $(814)$— $— $— $— $— $(1,326)
Commercial
Pass$23,771 $12,946 $14,464 $41,621 $35,897 $27,901 $49,160 $22,284 $228,044 
Special Mention143 — — 425 — — 251 — 819 
Substandard160 69 — — 487 — 314 46 1,076 
Total$24,074 $13,015 $14,464 $42,046 $36,384 $27,901 $49,725 $22,330 $229,939 
Gross Charge-offs$(1)$— $— $— $— $— $(242)$(243)
Consumer
Pass$621 $961 $14,158 $76,629 $143,507 $91,415 $699 $— $327,990 
Special Mention— — — — — — 2 — 2 
Substandard— 38 5 80 780 — 1 — 904 
Total$621 $999 $14,163 $76,709 $144,287 $91,415 $702 $— $328,896 
Gross Charge-offs$(522)$— $(16)$(17)$(8)$(4)$(7)$— $(574)
Total
Pass$1,035,412 $274,768 $460,644 $830,594 $1,101,448 $670,765 $192,565 $25,296 $4,591,492 
Special Mention15,283 $587 $564 $6,429 $4,446 $— $545 $409 28,263 
Substandard8,478 2,136 5 634 1,685 — 1,688 46 14,672 
Total loans by risk
category		$1,059,173 $277,491 $461,213 $837,657 $1,107,579 $670,765 $194,798 $25,751 $4,634,427 
Total gross
charge-offs		$(1,035)$— $(830)$(17)$(8)$(4)$(126)$(242)$(2,262)
Credit Cards
Performing$— $— $— $— $— $— $6,583 $— $6,583 
Non-Performing— — — — — — — — — 
Total$— $— $— $— $— $— $6,583 $— $6,583 
Gross Charge-offs$— $— $— $— $— $— $(111)$— $(111)
Total loans evaluated
by performing status		$— $— $— $— $— $— $6,583 $— $6,583 
Total gross charge-offs$— $— $— $— $— $— $(111)$— $(111)
Total Recorded
Investment		$1,059,173 $277,491 $461,213 $837,657 $1,107,579 $670,765 $201,381 $25,751 $4,641,010 
The following tables provide information on the aging of the loan portfolio as of September 30, 2024 and December 31, 2023.
Accruing
($ in thousands)30‑59 days past due60‑89 days past due90 days past due and still accruing30-89 days past due and not accruing90 days past due and not accruingTotal past due
Current Accrual Loans (1)
Current Non-Accrual LoansTotal
September 30, 2024
Construction$410 $— $— $— $207 $617 $336,496 $— $337,113 
Residential real estate956 389 205 2,377 2,139 6,066 1,562,510 2,422 1,570,998 
Commercial real estate95 4,443 — 2,239 571 7,348 2,266,157 2,876 2,276,381 
Commercial56 1 6 — 58 121 223,944 1,018 225,083 
Consumer1,558 896 9 439 268 3,170 313,928 51 317,149 
Credit Cards61 98 234 30 126 549 6,613 23 7,185 
Total$3,136 $5,827 $454 $5,085 $3,369 $17,871 $4,709,648 $6,390 $4,733,909 
Percent of total loans0.07 %0.12 %0.01 %0.11 %0.07 %0.38 %99.49 %0.13 %100.0 %
____________________________________
(1)Includes loans measured at fair value of $10.0 million at September 30, 2024.
Accruing
($ in thousands)30‑59 days past due60‑89 days past due90 days past due and still accruing30-89 days past due and not accruing90 days past due and not accruingTotal past due
Current Accrual Loans (1)
Current Non-Accrual LoansTotal
December 31, 2023
Construction$1,919 $— $— $— $221 $2,140 $296,455 $405 $299,000 
Residential real estate2,420 271 108 1,469 2,668 6,936 1,481,294 2,208 1,490,438 
Commercial real estate16 — — — 1,215 1,231 2,281,774 3,149 2,286,154 
Commercial48 — 488 — 28 564 228,859 516 229,939 
Consumer3,224 1,391 — 24 879 5,518 323,376 2 328,896 
Credit cards35 36 142 — — 213 6,370 — 6,583 
Total$7,662 $1,698 $738 $1,493 $5,011 $16,602 $4,618,128 $6,280 $4,641,010 
Percent of total loans0.17 %0.04 %0.02 %0.03 %0.11 %0.36 %99.50 %0.14 %100.00 %
____________________________________
(1)Includes loans measured at fair value of $9.9 million at December 31, 2023.
The following tables provide a summary of the activity in the ACL allocated by loan class for the three and nine months ended September 30, 2024 and September 30, 2023. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.
($ in thousands)Beginning BalanceCharge-offsRecoveriesNet (charge-offs) recoveriesProvisionsEnding Balance
For three months ended September 30, 2024
Construction$3,471 $— $1 $1 $(578)$2,894 
Residential real estate22,060 — 1 1 1,468 23,529 
Commercial real estate21,424 — — — (147)21,277 
Commercial2,866 (154)1 (153)512 3,225 
Consumer (1)
8,145 (1,015)88 (927)36 7,254 
Credit Card512 (210)— (210)188 490 
Total$58,478 $(1,379)$91 $(1,288)$1,479 $58,669 
____________________________________
(1)Gross charge-offs of consumer loans for the three months ended September 30, 2024 included $156 thousand of demand deposit overdrafts.
($ in thousands)Beginning Balance
Merger Adjustments (2)
Charge-offsRecoveriesNet (charge-offs) recoveriesProvisionsEnding Balance
For Three Months Ended September 30, 2023
Construction$2,386 $3 $— $3 $3 $1,439 $3,831 
Residential real estate9,151 215 — 3 3 9,806 19,175 
Commercial real estate10,267 985 (1,327)— (1,327)12,875 22,800 
Commercial1,956 278 — 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 $1.5 million of demand deposit overdrafts.
(2)Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.
($ in thousands)Beginning
Balance		Charge-
offs		RecoveriesNet (charge-offs)
recoveries		ProvisionsEnding
Balance
For Nine Months Ended September 30, 2024
Construction$3,935 $(12)$7 $(5)$(1,036)$2,894 
Residential real estate21,949 (1)5 4 1,576 23,529 
Commercial real estate20,975 — — — 302 21,277 
Commercial2,671 (177)4 (173)727 3,225 
Consumer (1)
7,601 (2,401)232 (2,169)1,822 7,254 
Credit Card220 (405)9 (396)666 490 
Total$57,351 $(2,996)$257 $(2,739)$4,057 $58,669 
____________________________________
(1)Gross charge-offs of consumer loans for the nine months ended September 30, 2024 included $512 thousands of demand deposit overdrafts.
($ in thousands)Beginning BalanceImpact of ASC 326 Adoption
Merger Adjustments (2)
Charge-offsRecoveriesNet (charge-offs) recoveriesProvisionsEnding Balance
For Nine Months Ended September 30, 2023
Construction$2,973 $1,222 $3 $— 10$10 $(377)$3,831 
Residential real estate2,622 4,974 215 — 3737 11,327 19,175 
Commercial real estate4,899 3,742 985 (1,327)— (1,327)14,501 22,800 
Commercial1,652 401 278 — 1010 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 $1.8 million of demand deposit overdrafts.
(2)Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.
The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment.
September 30, 2024
($ in thousands)Real Estate CollateralOther CollateralTotal
Construction$207 $— $207 
Residential real estate19,600 — 19,600 
Commercial real estate11,905 — 11,905 
Commercial— 3,160 3,160 
Consumer— 756 756 
Total$31,712 $3,916 $35,628 
December 31, 2023
($ in thousands)Real Estate CollateralOther CollateralTotal
Construction$662 $— $662 
Residential real estate8,047 — 8,047 
Commercial real estate6,134 — 6,134 
Commercial— 1,106 1,106 
Consumer— 904 904 
Total$14,843 $2,010 $16,853 
Loan Modifications to Borrowers Experiencing Financial Difficulty
Modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
During the three and nine months ended September 30, 2024 and 2023, no loan modifications were made to borrowers experiencing financial difficulty. During the three and nine months ended September 30, 2024 and 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.
As of September 30, 2024, all loan modification balances with borrowers experiencing financial difficulty that were modified during the preceding 12 months were classified as current non-accrual, of which $98 thousand were for commercial real estate loans and $216 thousand were for commercial loans.
Foreclosure Proceedings
There were $127 thousand of consumer mortgage loans collateralized by residential real estate property and $552 thousand of Commercial Real Estate loans collateralized by Owner Occupied nonfarm nonresidential properties that were in the process of foreclosure as of September 30, 2024 and $175 thousand as of December 31, 2023, respectively. There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at September 30, 2024 and December 31, 2023.