ALLOWANCE FOR LOAN LOSSES | LOANS Loans were as follows for the dates indicated: March 31, 2016 December 31, 2015 (Dollars in thousands) Commercial $ 158,254 $ 154,830 Residential mortgage 39,919 40,478 Mortgage warehouse 122,328 128,902 Residential construction 2,806 3,301 Home equity 14,311 13,990 Consumer and other 3,171 3,380 Subtotal 340,789 344,881 Net deferred loan costs 298 305 Allowance for loan losses (3,636 ) (3,634 ) Loans, net $ 337,451 $ 341,552 At March 31, 2016 and 2015 , the Bank’s mortgage warehouse division had repurchase agreements with 34 and 29 mortgage companies, respectively. The following table identifies the activity and related interest and fee income attributable to the mortgage warehouse division for the periods presented: Three Months Ended March 31, 2016 2015 (Dollars in thousands) Mortgage Warehouse: Originations $ 1,051,049 $ 765,001 Sold Loans 1,063,755 738,064 Interest income 1,264 1,246 Warehouse fees 340 235 Wire transfer fees 112 73 Loan servicing fees 84 — At March 31, 2016, the total participated balance of mortgage warehouse loans was $91.0 million and the total lines of credit availability was $5.0 million . The Company records a servicing fee on the participated balances. ALLOWANCE FOR LOAN LOSSES The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, 2016 Commercial Residential Mortgage Mortgage Warehouse Residential Construction Home Equity Consumer and Other Total (Dollars in thousands) Allowance for loan losses: Beginning balance $ 2,440 $ 591 $ 460 $ 4 $ 93 $ 46 $ 3,634 Charge-offs — — — — — (4 ) (4 ) Recoveries 1 — — — — 5 6 Provision 42 (13 ) (14 ) (1 ) (9 ) (5 ) — Ending balance $ 2,483 $ 578 $ 446 $ 3 $ 84 $ 42 $ 3,636 Three Months Ended March 31, 2015 Commercial Residential Mortgage Mortgage Warehouse Residential Construction Home Equity Consumer and Other Total (Dollars in thousands) Allowance for loan losses: Beginning balance $ 2,116 $ 676 $ 654 $ 4 $ 90 $ 55 $ 3,595 Charge-offs (20 ) (5 ) — — — (5 ) (30 ) Recoveries — — — — — 5 5 Provision 154 (59 ) 19 1 (5 ) (5 ) 105 Ending balance $ 2,250 $ 612 $ 673 $ 5 $ 85 $ 50 $ 3,675 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of the dates indicated: March 31, 2016 Commercial Residential Mortgage Mortgage Warehouse Residential Construction Home Equity Consumer and Other Total (Dollars in thousands) Allowance for loan losses: Ending balance attributable to loans: Individually evaluated for impairment $ 898 $ 36 $ — $ — $ 15 $ — $ 949 Collectively evaluated for impairment 1,585 542 446 3 69 42 2,687 Acquired with deteriorated credit quality — — — — — — — Total ending allowance $ 2,483 $ 578 $ 446 $ 3 $ 84 $ 42 $ 3,636 Loans: Individually evaluated for impairment $ 2,850 $ 1,309 $ — $ — $ 94 $ — $ 4,253 Collectively evaluated for impairment 155,404 38,505 122,328 2,806 14,217 3,171 336,431 Acquired with deteriorated credit quality — 105 — — — — 105 Total ending loan balance $ 158,254 $ 39,919 $ 122,328 $ 2,806 $ 14,311 $ 3,171 $ 340,789 December 31, 2015 Commercial Residential Mortgage Mortgage Warehouse Residential Construction Home Equity Consumer and Other Total (Dollars in thousands) Allowance for loan losses: Ending balance attributable to loans: Individually evaluated for impairment $ 885 $ 43 $ — $ — $ 17 $ — $ 945 Collectively evaluated for impairment 1,555 548 460 4 76 46 2,689 Acquired with deteriorated credit quality — — — — — — — Total ending allowance $ 2,440 $ 591 $ 460 $ 4 $ 93 $ 46 $ 3,634 Loans: Individually evaluated for impairment $ 2,920 $ 1,283 $ — $ — $ 97 $ — $ 4,300 Collectively evaluated for impairment 151,910 39,089 128,902 3,301 13,893 3,380 340,475 Acquired with deteriorated credit quality — 106 — — — — 106 Total ending loan balance $ 154,830 $ 40,478 $ 128,902 $ 3,301 $ 13,990 $ 3,380 $ 344,881 The following table presents information related to impaired loans by class of loans as of the dates indicated: March 31, 2016 December 31, 2015 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated (Dollars in thousands) With no related allowance recorded: Commercial: Real estate $ 1,334 $ 1,312 $ — $ 1,436 $ 1,366 $ — Residential mortgage 1,144 1,074 — 1,054 988 — Home equity 79 79 — 81 80 — Subtotal 2,557 2,465 — 2,571 2,434 — With an allowance recorded: Commercial: Real estate 1,214 1,214 624 1,214 1,214 624 Construction 25 25 25 41 41 41 Land 430 299 249 431 299 220 Residential mortgage 295 235 36 355 295 43 Home equity 16 15 15 17 17 17 Subtotal 1,980 1,788 949 2,058 1,866 945 Total $ 4,537 $ 4,253 $ 949 $ 4,629 $ 4,300 $ 945 The following tables present loans individually evaluated for impairment by class of loans for the periods indicated: Three Months Ended March 31, 2016 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (Dollars in thousands) With no related allowance recorded: Commercial: Real estate $ 1,350 $ 19 $ 2,933 $ 45 Five or more family — — 3,692 60 Land — — 120 — Residential mortgage 1,081 7 1,098 1 Home equity 80 1 — — Subtotal 2,511 27 7,843 106 With an allowance recorded: Commercial: Real estate 1,214 — 933 — Construction 29 — — — Land 299 — 1,440 — Residential mortgage 236 5 916 2 Home equity 16 — 7 — Subtotal 1,794 5 3,296 2 Total $ 4,305 $ 32 $ 11,139 $ 108 The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of the dates indicated. Nonaccrual Loans Past Due March 31, 2016 December 31, 2015 March 31, 2016 December 31, 2015 (Dollars in thousands) Commercial: Real estate $ 1,362 $ 1,396 — $ — Construction 25 41 — — Land 299 299 — — Residential mortgage 620 590 94 — Home equity 21 23 — — Total $ 2,327 $ 2,349 $ 94 $ — The following tables present the aging of the recorded investment in past due loans by class of loans as of the dates indicated : March 31, 2016 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total (Dollars in thousands) Commercial: Commercial and industrial $ — $ — $ — $ — $ 17,377 $ 17,377 Real estate 401 37 1,311 1,749 94,714 96,463 Five or more family 18 — — 18 22,470 22,488 Construction — — 25 25 12,174 12,199 Land — — — — 9,727 9,727 Residential mortgage — — 624 624 39,295 39,919 Mortgage warehouse — — — — 122,328 122,328 Residential construction: Construction — — — — 1,939 1,939 Land — — — — 867 867 Home equity — — 7 7 14,304 14,311 Consumer and other — — — — 3,171 3,171 Total $ 419 $ 37 $ 1,967 $ 2,423 $ 338,366 $ 340,789 December 31, 2015 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total (Dollars in thousands) Commercial: Commercial and industrial $ — $ — $ — $ — $ 18,117 $ 18,117 Real estate 1,282 — 102 1,384 90,916 92,300 Five or more family 20 — — 20 22,672 22,692 Construction 41 — — 41 11,041 11,082 Land — — — — 10,639 10,639 Residential mortgage 176 — 495 671 39,807 40,478 Mortgage warehouse — — — — 128,902 128,902 Residential construction: Construction — — — — 2,423 2,423 Land — — — — 878 878 Home equity — — 8 8 13,982 13,990 Consumer and other — — — — 3,380 3,380 Total $ 1,519 $ — $ 605 $ 2,124 $ 342,757 $ 344,881 Troubled Debt Restructurings A loan modification is considered a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider but for the borrower’s financial difficulties. The following table presents the Company’s TDRs as of the dates indicated: March 31, 2016 December 31, 2015 (Dollars in thousands) TDRs: Performing in accordance with modified repayment terms $ 1,699 $ 1,720 Nonperforming — — $ 1,699 $ 1,720 Specific reserve $ — $ — TDRs previously disclosed resulted in no charge-offs during the three months ended March 31, 2016 and 2015 . The Company had not committed to lend additional amounts to customers with outstanding TDR loans at March 31, 2016 and December 31, 2015 . The following tables present loans by class modified as TDRs that occurred during the periods indicated: Three Months Ended March 31, 2016 2015 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (Dollars in thousands) Commercial: Real Estate — $ — $ — 1 $ 207 $ 207 Total — $ — $ — 1 $ 207 $ 207 During the three months ended March 31, 2015 , the concession granted by the Company consisted of a reduction in monthly payments. There were no TDRs that defaulted within twelve months following the modification during the three months ended March 31, 2016 and 2015 . A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed by the Company’s Officer Loan Committee. Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The analysis includes loans with risk ratings of Special Mention, Substandard, and Doubtful. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings: Special Mention . Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard . Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful . Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans. The Bank monitors credit quality on loans not rated through the loan’s individual payment performance. The following tables present the risk category of loans by class based on the most recent analysis performed as of the dates indicated: March 31, 2016 Pass Special Mention Substandard Doubtful (Dollars in thousands) Commercial: Commercial and industrial $ 16,963 $ 414 $ — $ — Real estate 92,274 1,570 2,619 — Five or more family 22,488 — — — Construction 12,174 — 25 — Land 9,327 101 299 — Residential mortgage 38,904 21 994 — Mortgage warehouse 122,328 — — — Residential construction: Construction 1,939 — — — Land 867 — — — Home equity 14,217 — 94 — Consumer and other 3,171 — — — Total $ 334,652 $ 2,106 $ 4,031 $ — December 31, 2015 Pass Special Mention Substandard Doubtful (Dollars in thousands) Commercial: Commercial and industrial $ 17,807 $ 310 $ — $ — Real estate 86,548 3,075 2,677 — Five or more family 22,692 — — — Construction 11,041 — 41 — Land 10,258 82 299 — Residential mortgage 39,490 21 967 — Mortgage warehouse 128,902 — — — Residential construction: Construction 2,423 — — — Land 878 — — — Home equity 13,893 — 97 — Consumer and other 3,380 — — — Total $ 337,312 $ 3,488 $ 4,081 $ — Purchased Loans The Company purchased loans during 2007, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was then probable that all contractually required payments would not be collected. The outstanding balance and carrying amount of those loans was as follows: March 31, 2016 December 31, 2015 (Dollars in thousands) Residential mortgage 105 106 Carrying amount, net of allowance of $0 $ 105 $ 106 Accretable yield, or income expected to be collected, was as follows: Three Months Ended March 31, 2016 2015 (Dollars in thousands) Beginning balance $ — $ 18 Reclassification from non-accretable yield — — Accretion of income — (11 ) Ending balance $ — $ 7 For the purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three months ended March 31, 2016 or 2015 . No allowance for loan losses was reversed during the three months ended March 31, 2016 or 2015 . |