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. (Dollars in thousands) March 31, December 31, Construction $ 78,244 $ 85,632 Residential real estate 310,575 307,063 Commercial real estate 334,754 330,253 Commercial 67,735 64,911 Consumer 7,613 7,255 Total loans 798,921 795,114 Allowance for credit losses (8,309) (8,316) Total loans, net $ 790,612 $ 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 subsidiaries, the loan is classified as a TDR. All loans designated as TDRs are considered impaired loans and may be on either accrual or nonaccrual status. In instances where the loan has been placed on nonaccrual status, six consecutive months of timely payments are required prior to returning the loan to accrual status. All loans classified as TDRs which are restructured and accrue interest under revised terms require a full and comprehensive review of the borrower’s financial condition, capacity for repayment, realistic assessment of collateral values, and the assessment of risk entered into any workout agreement. Current financial information on the borrower, guarantor, and underlying collateral is analyzed to determine if it supports the ultimate collection of principal and interest. For commercial loans, the cash flows are analyzed, both for the underlying project and globally. For consumer loans, updated salary, credit history and cash flow information is obtained. Current market conditions are also considered. Following a full analysis, the determination of the appropriate loan structure is made. 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. (Dollars in thousands) Construction Residential Commercial Commercial Consumer Unallocated Total March 31, 2016 Loans individually evaluated for impairment $ 10,590 $ 7,933 $ 7,880 $ 154 $ 121 $ - $ 26,678 Loans collectively evaluated for impairment 67,654 302,642 326,874 67,581 7,492 - 772,243 Total loans $ 78,244 $ 310,575 $ 334,754 $ 67,735 $ 7,613 $ - $ 798,921 Allowance for credit losses allocated to: Loans individually evaluated for impairment $ 783 $ 189 $ 552 $ - $ - $ - $ 1,524 Loans collectively evaluated for impairment 970 1,825 2,705 585 177 523 6,785 Total allowance for credit losses $ 1,753 $ 2,014 $ 3,257 $ 585 $ 177 $ 523 $ 8,309 (Dollars in thousands) Construction Residential Commercial 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 (Dollars in thousands) Unpaid Recorded Recorded Related Quarter-to- Interest March 31, 2016 Impaired nonaccrual loans: Construction $ 11,167 $ 3,724 $ 2,874 $ 755 $ 7,216 $ - Residential real estate 2,600 2,079 199 77 2,292 - Commercial real estate 3,854 2,774 - - 2,559 - Commercial 172 154 - - 158 - Consumer 128 121 - - 121 - Total 17,921 8,852 3,073 832 12,346 - Impaired accruing TDRs: Construction 3,992 3,194 798 28 4,041 25 Residential real estate 5,655 2,667 2,988 112 5,669 55 Commercial real estate 5,106 1,099 4,007 552 5,363 46 Commercial - - - - - - Consumer - - - - - - Total 14,753 6,960 7,793 692 15,073 126 Total impaired loans: Construction 15,159 6,918 3,672 783 11,257 25 Residential real estate 8,255 4,746 3,187 189 7,961 55 Commercial real estate 8,960 3,873 4,007 552 7,922 46 Commercial 172 154 - - 158 - Consumer 128 121 - - 121 - Total $ 32,674 $ 15,812 $ 10,866 $ 1,524 $ 27,419 $ 126 March 31, 2015 (Dollars in thousands) Unpaid Recorded Recorded Related Quarter-to- Interest December 31, 2015 Impaired nonaccrual loans: Construction $ 11,850 $ 4,647 $ 2,882 $ 588 $ 7,630 $ - Residential real estate 2,563 1,773 487 208 3,360 - Commercial real estate 2,988 1,813 209 9 1,401 - Commercial 175 161 - - 163 - Consumer 128 98 23 7 121 - Total 17,704 8,492 3,601 812 12,675 - Impaired accruing TDRs: Construction 4,069 3,266 803 31 4,073 84 Residential real estate 5,686 2,380 3,306 227 6,338 312 Commercial real estate 5,740 1,702 4,038 331 5,689 254 Commercial - - - - - 1 Consumer - - - - - - Total 15,495 7,348 8,147 589 16,100 651 Total impaired loans: Construction 15,919 7,913 3,685 619 11,703 84 Residential real estate 8,249 4,153 3,793 435 9,698 312 Commercial real estate 8,728 3,515 4,247 340 7,090 254 Commercial 175 161 - - 163 1 Consumer 128 98 23 7 121 - Total $ 33,199 $ 15,840 $ 11,748 $ 1,401 $ 28,775 $ 651 1/1/16 Reclassification/ 3/31/16 TDR New Disbursements Charge Transfers TDR Related (Dollars in thousands) Balance TDRs (Payments) offs In/(Out) Payoffs Balance Allowance For the three months ended 3/31/2016 Accruing TDRs Construction $ 4,069 $ - $ (77) $ - $ - $ - $ 3,992 $ 28 Residential Real Estate 5,686 - (31) - - - 5,655 112 Commercial Real Estate 5,740 - (517) (117) - - 5,106 552 Commercial - - - - - - - - Consumer - - - - - - - - Total $ 15,495 $ - $ (625) $ (117) $ - $ - $ 14,753 $ 692 Nonaccrual TDRs Construction $ 4,960 $ 2,570 $ (691) $ (241) $ - $ - $ 6,598 $ 755 Residential Real Estate 445 - (288) - - - 157 11 Commercial Real Estate - - - - - - - - Commercial - - - - - - - - Consumer 23 - - - - - 23 - Total $ 5,428 $ 2,570 $ (979) $ - $ - $ - $ 6,778 $ 766 Total TDRs $ 20,923 $ 2,570 $ (1,604) $ (358) $ - $ - $ 21,531 $ 1,458 1/1/15 Reclassification/ 3/31/15 TDR New Disbursements Transfers TDR Related (Dollars in thousands) Balance TDRs (Payments) Charge offs In/(Out) Payoffs Balance Allowance For the three months ended 3/31/2015 Accruing TDRs Construction $ 4,022 $ - $ (6) $ - $ - $ - $ 4,016 $ 39 Residential Real Estate 6,368 - (46) - - - 6,322 255 Commercial Real Estate 6,237 - 24 - - - 6,261 23 Commercial 47 - (2) - - - 45 - Consumer - - - - - - - - Total $ 16,674 $ - $ (30) $ - $ - $ - $ 16,644 $ 317 Nonaccrual TDRs Construction $ 3,321 $ - $ (7) $ (363) $ 2,911 $ - $ 5,862 $ 690 Residential Real Estate 3,382 - (9) - (2,911) - 462 - Commercial Real Estate 346 - (2) (40) (238) - 66 - Commercial - - - - - - - - Consumer 25 - (1) - - - 24 - Total $ 7,074 $ - $ (19) $ (403) $ (238) $ - $ 6,414 $ 690 Total TDRs $ 23,748 $ - $ (49) $ (403) $ (238) $ - $ 23,058 $ 1,007 Premodification Postmodification outstanding outstanding Number of recorded recorded Related (Dollars in thousands) contracts investment investment allowance TDRs: For the three months ended March 31, 2016 Construction 1 $ 2,570 $ 2,570 $ - Residential real estate - - - - Commercial real estate - - - - Commercial - - - - Consumer - - - - Total 1 $ 2,570 $ 2,570 $ - For the three months ended March 31, 2015 Construction - $ - $ - $ - Residential real estate - - - - Commercial real estate - - - - Commercial - - - - Consumer - - - - Total - $ - $ - $ - Number of Recorded Related (Dollars in thousands) contracts investment allowance TDRs that subsequently defaulted: For the three months ended March 31, 2016 Construction 1 $ 241 $ - Residential real estate - - - Commercial real estate 1 117 - Commercial - - - Consumer - - - Total 2 $ 358 $ - TDRs that subsequently defaulted: For the three months ended March 31, 2015 Construction 3 $ 363 $ - Residential real estate - - - Commercial real estate 1 40 - Commercial - - - Consumer - - - Total 4 $ 403 $ - 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. Special (Dollars in thousands) Pass/Performing mention Substandard Doubtful Total March 31, 2016 Construction $ 63,823 $ 3,845 $ 10,576 $ - $ 78,244 Residential real estate 294,844 8,735 6,996 - 310,575 Commercial real estate 307,769 17,158 9,827 - 334,754 Commercial 66,638 704 393 - 67,735 Consumer 7,468 24 121 - 7,613 Total $ 740,542 $ 30,466 $ 27,913 $ - $ 798,921 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 Accruing 30-59 60-89 90 days days days past or more Total past (Dollars in thousands) Current past due due past due due Nonaccrual Total March 31, 2016 Construction $ 71,618 $ 28 $ - $ - $ 28 $ 6,598 $ 78,244 Residential real estate 303,339 2,113 2,823 22 4,958 2,278 310,575 Commercial real estate 330,129 1,591 260 - 1,851 2,774 334,754 Commercial 67,525 46 - 10 56 154 67,735 Consumer 7,461 26 2 3 31 121 7,613 Total $ 780,072 $ 3,804 $ 3,085 $ 35 $ 6,924 $ 11,925 $ 798,921 Percent of total loans 97.6 % 0.5 % 0.4 % - % 0.9 % 1.5 % 100 % Accruing 30-59 60-89 90 days or days days past more past Total past (Dollars in thousands) Current past due due due 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 ended March 31, 2016 and 2015. Residential Commercial (Dollars in thousands) Construction real estate real estate Commercial Consumer Unallocated Total For the three months ended March 31, 2016 Allowance for credit losses: Beginning balance $ 1,646 $ 2,181 $ 2,999 $ 558 $ 156 $ 776 $ 8,316 Charge-offs (241) (16) (238) (67) (8) - (570) Recoveries 6 34 - 65 8 - 113 Net charge-offs (235) 18 (238) (2) - - (457) Provision 342 (185) 496 29 21 (253) 450 Ending balance $ 1,753 $ 2,014 $ 3,257 $ 585 $ 177 $ 523 $ 8,309 Residential Commercial (Dollars in thousands) Construction real estate real estate Commercial Consumer Unallocated Total For the three months ended March 31, 2015 Allowance for credit losses: Beginning balance $ 1,303 $ 2,834 $ 2,379 $ 448 $ 229 $ 502 $ 7,695 Charge-offs (363) (114) (40) (124) (10) - (651) Recoveries 3 23 13 47 18 - 104 Net charge-offs (360) (91) (27) (77) 8 - (547) Provision 941 (619) (13) 70 (57) 328 650 Ending balance $ 1,884 $ 2,124 $ 2,339 $ 441 $ 180 $ 830 $ 7,798 Foreclosure Proceedings Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $ 581 |