
	September 30, 2020		December 31, 2019
Commercial	$	641,873	$	431,044
Real estate:
Construction, land and land development	307,328		264,193
1-4 family residential first mortgages	59,043		54,475
Home equity	10,566		12,380
Commercial	1,230,335		1,175,024
Consumer and other	6,051		6,787
	2,255,196		1,943,903
Net unamortized fees and costs	(7,771)		(2,240)
	$	2,247,425	$	1,941,663

Included in commercial loans at September 30, 2020, were $224,489 of loans originated in the Paycheck Protection Program (PPP), which was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted on March 27, 2020, in response to the Coronavirus Disease 2019 (COVID-19) pandemic. The PPP is administered by the Small Business Administration (SBA). PPP loans may be forgiven by the SBA and are 100 percent guaranteed by the SBA. Therefore, no allowance for loan losses is allocated to PPP loans.

Loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income recognized on the interest method based upon the terms of the loan. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio.

Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms. Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year. Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. 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 classified as a troubled debt restructured (TDR) loan when the Company separately concludes that a borrower is experiencing financial difficulties and a concession is granted that would not otherwise be considered. Concessions may include a restructuring of the loan terms to alleviate the burden of the borrower's cash requirements, such as an extension of the payment terms beyond the original maturity date or a change in the interest rate charged. TDR loans with extended payment terms are accounted for as impaired until performance is established. A change to the interest rate would change the classification of a loan to a TDR loan if the restructured loan yields a rate that is below a market rate for that of a new loan with comparable risk. TDR loans with below-market rates are considered impaired until fully collected. TDR loans may also be reported as nonaccrual or 90 days past due if they are not performing per the restructured terms.

The CARES Act also provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time in certain circumstances. This temporary suspension may only be applied to modifications of loans that were not more than 30 days past due as of December 31, 2019 and may not be applied to modifications that are not related to the COVID-19 pandemic. If elected, the temporary suspension may be applied to eligible modifications executed during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020 or 60 days after the termination of the COVID-19 national emergency. On March 22, 2020, April 7, 2020 and August 3, 2020, federal banking regulators in consultation with FASB issued interagency statements that included similar guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic that provide that short-term modifications and additional accommodations made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.

At September 30, 2020, COVID-19-related loan modifications totaled approximately $434,361. The initial modifications primarily included a delay of principal and/or interest payments for up to six months. Additional modifications, including payment deferrals for up to an additional six months, have been made for one hotel company totaling $7,364 and one movie theater company totaling $16,195 as of September 30, 2020. Additional modifications are expected to be made for approximately $67,000 of loans in the hotel industry in mid-November 2020, at the end of the term for the initial modifications. Modified loans continue to accrue interest and are evaluated for past due status based on the revised payment terms.

Based upon its ongoing assessment of credit quality within the loan portfolio, the Company maintains a Watch List, which includes loans classified as Doubtful, Substandard and Watch according to the Company's classification criteria. These loans involve the anticipated potential for payment defaults or collateral inadequacies. A loan on the Watch List is considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

TDR loans totaled $0 and $4 as of September 30, 2020 and December 31, 2019, respectively, and were included in the nonaccrual category. There were no loan modifications considered to be TDR that occurred during the three and nine months ended September 30, 2020 and 2019. No TDR loans that were modified within the twelve months preceding September 30, 2020 and 2019 have subsequently had a payment default. A TDR loan is considered to have a payment default when it is past due 30 days or more. As noted above, COVID-19 related loan modifications are not reported as TDRs.


	September 30, 2020						December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	91	$	91	$	—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	383		383		—		411		411		—
Home equity	—		—		—		31		31		—
Commercial	15,915		15,915		—		5		5		—
Consumer and other	—		—		—		—		—		—
	16,298		16,298		—		538		538		—
With an allowance recorded:
Commercial	1,474		1,474		210		—		—		—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	—		—		—		—		—		—
Home equity	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
	1,474		1,474		210		—		—		—
Total:
Commercial	1,474		1,474		210		91		91		—
Real estate:
Construction, land and land development	—		—		—		—		—		—
1-4 family residential first mortgages	383		383		—		411		411		—
Home equity	—		—		—		31		31		—
Commercial	15,915		15,915		—		5		5		—
Consumer and other	—		—		—		—		—		—
	$	17,772	$	17,772	$	210	$	538	$	538	$	—


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	—	$	—	$	546	$	39	$	54	$	2	$	796	$	39
Real estate:
Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	386		1		16		—		395		4		52		6
Home equity	—		—		35		—		3		—		34		2
Commercial	3,979		4		305		22		1,592		14		495		22
Consumer and other	—		—		—		—		—		—		—		—
	4,365		5		902		61		2,044		20		1,377		69
With an allowance recorded:
Commercial	369		—		—		—		148		—		9		—
Real estate:
Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		—		—
Commercial	—		—		45		6		—		—		76		6
Consumer and other	—		—		—		—		—		—		—		—
	369		—		45		6		148		—		85		6
Total:
Commercial	369		—		546		39		202		2		805		39
Real estate:
Construction, land and land development	—		—		—		—		—		—		—		—
1-4 family residential first mortgages	386		1		16		—		395		4		52		6
Home equity	—		—		35		—		3		—		34		2
Commercial	3,979		4		350		28		1,592		14		571		28
Consumer and other	—		—		—		—		—		—		—		—
	$	4,734	$	5	$	947	$	67	$	2,192	$	20	$	1,462	$	75


	September 30, 2020
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	1,700	$	—	$	—	$	1,700	$	638,699	$	1,474	$	641,873
Real estate:
Construction, land and
land development	—		—		—		—		307,328		—		307,328
1-4 family residential
first mortgages	92		—		—		92		58,568		383		59,043
Home equity	—		—		—		—		10,566		—		10,566
Commercial	—		—		—		—		1,214,420		15,915		1,230,335
Consumer and other	—		—		—		—		6,051		—		6,051
Total	$	1,792	$	—	$	—	$	1,792	$	2,235,632	$	17,772	$	2,255,196


	December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	—	$	—	$	—	$	—	$	430,953	$	91	$	431,044
Real estate:
Construction, land and
land development	—		—		—		—		264,193		—		264,193
1-4 family residential
first mortgages	76		—		—		76		53,988		411		54,475
Home equity	—		—		—		—		12,349		31		12,380
Commercial	—		152		—		152		1,174,867		5		1,175,024
Consumer and other	—		—		—		—		6,787		—		6,787
Total	$	76	$	152	$	—	$	228	$	1,943,137	$	538	$	1,943,903


	September 30, 2020
	Pass		Watch		Substandard		Doubtful		Total
Commercial	$	638,425	$	569	$	2,879	$	—	$	641,873
Real estate:
Construction, land and land development	307,269		59		—		—		307,328
1-4 family residential first mortgages	58,078		335		630		—		59,043
Home equity	10,415		151		—		—		10,566
Commercial	1,188,395		25,136		16,804		—		1,230,335
Consumer and other	6,051		—		—		—		6,051
Total	$	2,208,633	$	26,250	$	20,313	$	—	$	2,255,196


	December 31, 2019
	Pass		Watch		Substandard		Doubtful		Total
Commercial	$	410,070	$	18,680	$	2,294	$	—	$	431,044
Real estate:
Construction, land and land development	264,132		61		—		—		264,193
1-4 family residential first mortgages	52,168		1,841		466		—		54,475
Home equity	12,349		—		31		—		12,380
Commercial	1,146,472		28,475		77		—		1,175,024
Consumer and other	6,787		—		—		—		6,787
Total	$	1,891,978	$	49,057	$	2,868	$	—	$	1,943,903

All loans are subject to the assessment of a credit quality indicator. Risk ratings are assigned for each loan at the time of approval, and they change as circumstances dictate during the term of the loan. The Company utilizes a 9-point risk rating scale as shown below, with ratings 1 - 5 included in the Pass column, rating 6 included in the Watch column, ratings 7 - 8 included in the Substandard column and rating 9 included in the Doubtful column. All loans classified as impaired that are included in the specific evaluation of the allowance for loan losses are included in the Substandard column along with all other loans with ratings of 7 - 8.

Risk rating 5: The borrower's financial condition is less than satisfactory. The loan is still generally paying as agreed, but strained cash flows may cause some slowness in payments. The collateral values adequately preclude loss on the loan. Financial characteristics and trends lag industry statistics. There may be noncompliance with loan covenants.

Risk rating 7: The loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Well-defined weaknesses exist that jeopardize the liquidation of the debt. The Company is inadequately protected by the valuation or paying capacity of the collateral pledged. If deficiencies are not corrected, there is a distinct possibility that a loss will be sustained.

Credit quality indicators for all loans and the Company's risk rating process are dynamic and updated on a continuous basis. Risk ratings are updated as circumstances that could affect the repayment of an individual loan are brought to management's attention through an established monitoring process. Individual bankers initiate changes as appropriate for ratings 1 through 5, and changes for ratings 6 through 9 are initiated via communications with management. The likelihood of loss increases as the risk rating increases and is generally preceded by a loan appearing on the Watch List, which consists of all loans with a risk rating of 6 or worse. Written action plans with firm target dates for resolution of identified problems are maintained and reviewed on a quarterly basis for all segments of loans included on the Watch List.

Commercial loans consist primarily of loans to businesses for various purposes, including revolving lines to finance current operations, inventory and accounts receivable, and capital expenditure loans to finance equipment and other fixed assets. These loans generally have short maturities, have either adjustable or fixed interest rates, and are either unsecured or secured by inventory, accounts receivable and/or fixed assets. For commercial loans, the primary source of repayment is from the operation of the business.

Real estate loans include various types of loans for which the Company holds real property as collateral, and consist of loans on commercial properties and single and multifamily residences. Real estate loans are typically structured to mature or reprice every five to ten years with payments based on amortization periods up to 30 years. The majority of construction loans are to contractors and developers for construction of commercial buildings or residential real estate. These loans typically have maturities of up to 24 months. The Company's loan policy includes minimum appraisal and other credit guidelines.

Consumer loans include loans extended to individuals for household, family and other personal expenditures not secured by real estate. The majority of the Company's consumer lending is for vehicles, consolidation of personal debts and household improvements. The repayment source for consumer loans, including 1-4 family residential and home equity loans, is typically wages.

The allowance for loan losses is established through a provision for loan losses charged to expense. The allowance is an amount that management believes will be adequate to absorb probable losses on existing loans based on an evaluation of the collectability of loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, the review of specific problem loans, and the current economic conditions that may affect the borrower's ability to pay. Loans are charged-off against the allowance for loan losses when management believes that collectability of the principal is unlikely. While management uses the best information available to make its evaluations, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or the other factors relied upon.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that meet the definition of impaired. The general component covers the remaining loans and is based on historical loss experience adjusted for qualitative factors such as delinquency trends, loan growth, economic elements and local market conditions. These same policies are applied to all segments of loans. In addition, regulatory agencies, as an integral part of their examination processes, periodically review the Company's allowance for loan losses, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.


	Three Months Ended September 30, 2020
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	4,318	$	3,300	$	331	$	128	$	13,205	$	81	$	21,363
Charge-offs	—		—		—		—		—		—		—
Recoveries	35		—		—		1		4		—		40
Provision (1)	491		124		29		(2)		3,358		—		4,000
Ending balance	$	4,844	$	3,424	$	360	$	127	$	16,567	$	81	$	25,403

	Three Months Ended September 30, 2019
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	3,732	$	2,286	$	222	$	139	$	10,275	$	83	$	16,737
Charge-offs	(199)		—		—		—		—		—		(199)
Recoveries	168		—		5		27		3		1		204
Provision (1)	12		81		(8)		(19)		233		1		300
Ending balance	$	3,713	$	2,367	$	219	$	147	$	10,511	$	85	$	17,042

	Nine Months Ended September 30, 2020
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	3,875	$	2,375	$	216	$	127	$	10,565	$	77	$	17,235
Charge-offs	—		—		—		(1)		—		—		(1)
Recoveries	79		—		71		3		10		6		169
Provision (1)	890		1,049		73		(2)		5,992		(2)		8,000
Ending balance	$	4,844	$	3,424	$	360	$	127	$	16,567	$	81	$	25,403

	Nine Months Ended September 30, 2019
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Beginning balance	$	3,508	$	2,384	$	250	$	171	$	10,301	$	75	$	16,689
Charge-offs	(254)		—		—		—		—		—		(254)
Recoveries	227		—		14		50		9		7		307
Provision (1)	232		(17)		(45)		(74)		201		3		300
Ending balance	$	3,713	$	2,367	$	219	$	147	$	10,511	$	85	$	17,042


	September 30, 2020
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	210	$	—	$	—	$	—	$	—	$	—	$	210
Collectively evaluated for impairment	4,634		3,424		360		127		16,567		81		25,193
Total	$	4,844	$	3,424	$	360	$	127	$	16,567	$	81	$	25,403

	December 31, 2019
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	3,875		2,375		216		127		10,565		77		17,235
Total	$	3,875	$	2,375	$	216	$	127	$	10,565	$	77	$	17,235


	September 30, 2020
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	1,474	$	—	$	383	$	—	$	15,915	$	—	$	17,772
Collectively evaluated for impairment	640,399		307,328		58,660		10,566		1,214,420		6,051		2,237,424
Total	$	641,873	$	307,328	$	59,043	$	10,566	$	1,230,335	$	6,051	$	2,255,196


	December 31, 2019
			Real Estate
	Commercial		Construction and Land		1-4 Family Residential		Home Equity		Commercial		Consumer and Other		Total
Ending balance:
Individually evaluated for impairment	$	91	$	—	$	411	$	31	$	5	$	—	$	538
Collectively evaluated for impairment	430,953		264,193		54,064		12,349		1,175,019		6,787		1,943,365
Total	$	431,044	$	264,193	$	54,475	$	12,380	$	1,175,024	$	6,787	$	1,943,903