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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 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 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, Stafford County, Spotsylvania County and Fredericksburg City in Virginia. The following table provides information about the principal classes of the loan portfolio at March 31, 2024 and December 31, 2023.
(Dollars in thousands)March 31, 2024% of Total LoansDecember 31, 2023% of Total Loans
Construction$299,133 6.43 %$299,000 6.44 %
Residential real estate1,515,134 32.59 %1,490,438 32.11 %
Commercial real estate2,272,867 48.90 %2,286,154 49.27 %
Commercial229,594 4.94 %229,939 4.95 %
Consumer325,076 6.99 %328,896 7.09 %
Credit Cards6,921 0.15 %6,583 0.14 %
Total loans 4,648,725 100.00 %4,641,010 100.00 %
Allowance for credit losses on loans(57,336)(57,351)
Total loans, net$4,591,389 $4,583,659 
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 $2.4 million and $2.2 million at March 31, 2024 and December 31, 2023. At March 31, 2024 and December 31, 2023 included in total loans were $1.6 billion and $1.6 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 $104.2 million and $108.4 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023, included in total loans were $289.0 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 $4.4 million and $4.7 million at March 31, 2024 and December 31, 2023, respectively.
At March 31, 2024, the Bank was servicing $371.1 million in loans for the Federal National Mortgage Association and $117.8 million in loans for Freddie Mac.
The following table provides information on nonaccrual loans by loan class as of March 31, 2024 and December 31, 2023.
(Dollars in thousands)Non-accrual with no allowance for credit lossNon-accrual with an allowance for credit lossTotal Non-accruals
March 31, 2024
Nonaccrual loans:
Construction$— $476 $476 
Residential real estate4 6,379 6,383 
Commercial real estate— 3,643 3,643 
Commercial 1,209 147 1,356 
Consumer694 224 918 
Total$1,907 $10,869 $12,776 
Interest income $187 $33 $220 
(Dollars in thousands)Non-accrual with no allowance for credit lossNon-accrual with an allowance for credit lossTotal Non-accruals
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 
(Dollars in thousands)Non-accrual Delinquent LoansNon-accrual Current LoansTotal Non-accruals
March 31, 2024
Nonaccrual loans:
Construction$210 $266 $476 
Residential real estate3,718 2,665 6,383 
Commercial real estate940 2,703 3,643 
Commercial51 1,305 1,356 
Consumer918 — 918 
Total$5,837 $6,939 $12,776 
(Dollars in thousands)Non-accrual Delinquent LoansNon-accrual Current LoansTotal Non-accruals
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, in the opinion of management, the collection of principal or interest is considered doubtful.
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 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 tables provides information on loan risk ratings as of March 31, 2024 and gross write-offs during the three months ended March 31, 2024.
Term Loans by Origination YearRevolving LoansRevolving Converted to Term LoansTotal
(Dollars in thousands)Prior20202021202220232024
March 31, 2024
Construction
Pass$38,125 $14,343 $25,261 $87,793 $112,241 $12,386 $7,890 $617 $298,656 
Substandard62 — — 415 — — — — 477 
Total$38,187 $14,343 $25,261 $88,208 $112,241 $12,386 $7,890 $617 $299,133 
Gross Charge-offs$— $— $(12)$— $— $— $— $— $(12)
Residential real estate
Pass$370,852 $102,832 $250,832 $400,047 $238,040 $23,294 $107,384 $12,880 $1,506,161 
Special Mention403 552 498 — — — 182 — 1,635 
Substandard5,922 — — — — — 1,416 — 7,338 
Total$377,177 $103,384 $251,330 $400,047 $238,040 $23,294 $108,982 $12,880 $1,515,134 
Gross Charge-offs$(1)$— $— $— $— $— $— $— $(1)
Commercial real estate
Pass$843,547 $306,361 $418,343 $428,863 $211,540 $23,024 $15,782 $— $2,247,460 
Special Mention11,383 — 5,474 4,418 — — 166 — 21,441 
Substandard3,437 — 529 — — — — — 3,966 
Total$858,367 $306,361 $424,346 $433,281 $211,540 $23,024 $15,948 $— $2,272,867 
Gross Charge-offs$— $— $— $— $— $— $— $— $— 
Commercial
Pass$33,571 $14,629 $55,492 $35,027 $29,904 $10,915 $46,160 $394 $226,092 
Special Mention135 — — 1,514 580 — 500 70 2,799 
Substandard402 — — — — — 301 — 703 
Total$34,108 $14,629 $55,492 $36,541 $30,484 $10,915 $46,961 $464 $229,594 
Gross Charge-offs$— $— $— $— $— $— $— $— $— 
Consumer
Pass$1,355 $12,829 $71,502 $136,759 $82,331 $17,387 $677 $— $322,840 
Special Mention— — — — 1,317 — — — 1,317 
Substandard8 7 12 783 108 — 1 — 919 
Total$1,363 $12,836 $71,514 $137,542 $83,756 $17,387 $678 $— $325,076 
Gross Charge-offs$(226)$— $(46)$(238)$— $(15)$— $(525)
Total
Pass$1,287,450 $450,994 $821,430 $1,088,489 $674,056 $87,006 $177,893 $13,891 $4,601,209 
Special Mention11,921 552 5,972 5,932 1,897 — 848 70 27,192 
Substandard9,831 7 541 1,198 108 — 1,718 — 13,403 
Total loans by risk category$1,309,202 $451,553 $827,943 $1,095,619 $676,061 $87,006 $180,459 $13,961 $4,641,804 
Total gross charge-offs$(227)$— $(58)$(238)$— $(15)$— $— $(538)
Term Loans by Origination YearRevolving LoansRevolving Converted to Term LoansTotal
(Dollars in thousands)Prior20202021202220232024
March 31, 2024
Credit Cards
Performing$— $— $— $— $— $— $6,921 $— $6,921 
Total$— $— $— $— $— $— $6,921 $— $6,921 
Gross Charge-offs$— $— $— $— $— $— $(116)$— $(116)
Total loans evaluated by performing status$— $— $— $— $— $— $6,921 $— $6,921 
Total gross charge-offs$— $— $— $— $— $— $(116)$— $(116)
Total Recorded Investment$1,309,202 $451,553 $827,943 $1,095,619 $676,061 $87,006 $187,380 $13,961 $4,648,725 
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
(Dollars 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 $— $6,583 
Total$— $— $— $— $— $— $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 $4,641,010 
The following tables provide information on the aging of the loan portfolio as of March 31, 2024 and December 31, 2023.
Accruing
(Dollars in thousands)
30‑59 days past due
60‑89 days past due
30-89 days past due and not accruing90 days past due and still accruing90 days past
due and not
accruing		Total
past due
Current Accrual Loans (1)
Current
Non Accrual
Loans		Total
March 31, 2024
Construction$— $— $— $— $210 $210 $298,657 $266 $299,133 
Residential real estate2,930 354 723 145 2,995 7,147 1,505,322 2,665 1,515,134 
Commercial real estate433 — — — 940 1,373 2,268,791 2,703 2,272,867 
Commercial2,137 — — — 51 2,188 226,101 1,305 229,594 
Consumer2,200 138 24 1,317 894 4,573 320,503 — 325,076 
Credit Cards58 89 — 98 — 245 6,676 — 6,921 
Total$7,758 $581 $747 $1,560 $5,090 $15,736 $4,626,050 $6,939 $4,648,725 
Percent of total loans0.17 %0.01 %0.02 %0.03 %0.11 %0.34 %99.51 %0.15 %100.0 %
(1)Includes loans measured at fair value of $9.7 million at March 31, 2024.
Accruing
(Dollars in thousands)30‑59 days past due60‑89 days past due30-89 days past due and not accruing90 days past due and still accruing90 days past due and not accruingTotal past dueCurrent Accrual Loans (1)Current Non accrual LoansTotal
December 31, 2023
Construction$1,919 $— $— $— $220 $2,139 $296,456 $405 $299,000 
Residential real estate2,420 271 1,469 108 2,668 6,936 1,481,294 2,208 1,490,438 
Commercial real estate16 — — — 1,222 1,238 2,281,767 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 cards$35 $36 $— $142 $— $213 $6,370 $— $6,583 
Total$7,662 $1,698 $1,493 $738 $5,017 $16,608 $4,618,122 $6,280 $4,641,010 
Percent of total loans0.17 %0.04 %0.03 %0.02 %0.11 %0.37 %99.50 %0.13 %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 months ended March 31, 2024 and March 31, 2023. 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 BalanceCharge-offsRecoveriesNet (charge-offs) recoveriesProvisionsEnding Balance
For three months ended March 31, 2024
Construction$3,935 $(12)$2 $(10)$(367)$3,558 
Residential real estate21,949 (1)2 1 (1,182)20,768 
Commercial real estate20,975 — — — 275 21,250 
Commercial2,671 — 1 1 207 2,879 
Consumer (1)
7,601 (525)76 (449)1,530 8,682 
Credit Card220 (116)8 (108)87 199 
Total$57,351 $(654)$89 $(565)$550 $57,336 
(1)Gross charge-offs of consumer loans for the three months ended March 31, 2024 included $0.2 million of demand deposit overdrafts.
(Dollars in thousands)Beginning BalanceImpact of ASC326 AdoptionCharge-offsRecoveriesNet (charge-offs) recoveriesProvisionsEnding Balance
For Three Months Ended March 31, 2023
Construction$2,973 $1,222 $— $3 $3 $(1,509)$2,689 
Residential real estate2,622 4,974 — 31 31 1,120 8,747 
Commercial real estate4,899 3,742 — — — 1,217 9,858 
Commercial1,652 401 (107)53 (54)(139)1,860 
Consumer4,497 452 — — — 361 5,310 
Total$16,643 $10,791 $(107)$87 $(20)$1,050 $28,464 
The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment.
March 31, 2024
(Dollars in thousands)Real Estate CollateralOther CollateralTotal
Construction$477 $— $477 
Residential real estate19,272 — 19,272 
Commercial real estate5,197 — 5,197 
Commercial— 733 733 
Consumer— 918 918 
Total$24,946 $1,651 $26,597 
December 31, 2023
(Dollars 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 $16,853 
The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended March 31, 2024.
Loan Modifications to Borrowers Experiencing Financial Difficulty
Modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. The following illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02:
Loan ClassesModification Types
Commercial Real Estate
Term extension greater than three months.
Commercial
Term extension greater than three months.
The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during three months ended March 31, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended March 31, 2023.
(dollars in thousands)Term ExtensionInterest Rate ReductionPayment Delay and Term ExtensionTerm Extension and Interest Rate ReductionPayment DelayTotal% of Total Portfolio Segment
March 31, 2024
Construction$— $— $— $— $— $— — %
Residential real estate— — — — — — — %
Residential rentals— — — — — — — %
Commercial real estate117 — — — — 117 0.01 %
Commercial232 — — — — 232 0.10 %
Consumer— — — — — — — %
Credit Cards— — — — — — — %
Total$349 $— $— $— $— $349 0.01 %
The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended March 31, 2023.
(dollars in thousands)Weighted-Average Months of Term Extension
March 31, 2024
Commercial real estate12 months
Commercial12 months
During the three months ended March 31, 2024 and March 31, 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.
The following table present the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of March 31, 2024, and there were no loan modifications made to borrowers experiencing financial difficulty at March 31, 2023.
Accruing
(Dollars in thousands)30‑59 days past due60‑89 days past due90 days past due and still accruing90 days past due and not accruingTotal past dueCurrent AccrualCurrent Non-AccrualTotal Recorded Investment
March 31, 2024
Construction$— $— $— $— $— $— $— $— 
Residential real estate— — — — — — — — 
Commercial real estate— — — — — — 117 117 
Commercial— — — — — — 232 232 
Consumer— — — — — — — — 
Credit Cards— — — — — — — — 
Total$—$—$—$—$—$—$349$349
Foreclosure Proceedings
There were $0.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of March 31, 2024 and $0.2 million as of December 31, 2023, respectively. There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at March 31, 2024 and December 31, 2023.