Major classifications of loans at December 31, 2019 and 2018 are summarized as follows (in thousands):

	December 31, 2019						December 31, 2018
	Amount			% of Total			Amount			% of Total
Residential real estate:
Closed-end 1-4 family - first lien	$	211,440			23.6	%	$	162,249			23.0	%
Closed-end 1-4 family - junior lien		7,653			0.9	%		5,739			0.8	%
Multi-family		18,125			2.0	%		16,938			2.4	%
Total residential real estate		237,218			26.5	%		184,926			26.2	%
Commercial real estate:
Nonfarm nonresidential		288,930			32.2	%		209,391			29.7	%
Farmland		21,089			2.4	%		10,417			1.5	%
Total commercial real estate		310,019			34.6	%		219,808			31.2	%
Construction and land development:
Residential		53,386			6.0	%		39,680			5.6	%
Other		60,140			6.7	%		62,430			8.9	%
Total construction and land development		113,526			12.7	%		102,110			14.5	%
Home equity lines of credit		47,410			5.3	%		39,040			5.5	%
Commercial loans:
Other commercial loans		136,301			15.2	%		112,927			16.0	%
Agricultural		2,826			0.3	%		1,743			0.2	%
State, county, and municipal loans		22,159			2.4	%		19,756			2.9	%
Total commercial loans		161,286			17.9	%		134,426			19.1	%
Consumer loans		40,397			4.5	%		33,867			4.8	%
Total gross loans		909,856			101.5	%		714,177			101.3	%
Allowance for loan losses		(8,679	)		-1.0	%		(6,577	)		-0.9	%
Net discounts		(2,647	)		-0.3	%		(1,902	)		-0.3	%
Net deferred loan fees		(1,425	)		-0.2	%		(1,013	)		-0.1	%
Net loans	$	897,105			100.0	%	$	704,685			100.0	%

For purposes of the disclosures required pursuant to ASC 310, the loan portfolio was disaggregated into segments and then further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. There are three primary loan portfolio segments that include real estate, commercial, and consumer. A class is generally determined based on the initial measurement attribute, risk characteristic of the loan, and the Company’s method for monitoring and assessing credit risk. Classes within the real estate portfolio segment include residential real estate, commercial real estate, construction and land development and home equity lines of credit. The portfolio segments of non-real estate commercial loans and consumer loans have not been further segregated by class.

The following describe risk characteristics relevant to each of the portfolio segments:

Real estate - As discussed below, the Company offers various types of real estate loan products. All loans within this portfolio segment are particularly sensitive to the valuation of real estate:

Residential real estate and home equity lines of credit are repaid by various means such as a borrower’s income, sale of the property, or rental income derived from the property.

Commercial real estate loans include both owner-occupied commercial real estate loans and other commercial real estate loans secured by income producing properties. Owner-occupied commercial real estate loans to operating businesses are long-term financing of land and buildings. These loans are repaid by cash flow generated from the business operation. Real estate loans for income-producing properties such as office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans secured by farmland are repaid by various means such as a borrower’s income, sale of the property, or rental income derived from the property.

Construction and land development loans are repaid through cash flow related to the operations, sale or refinance of the underlying property. This portfolio class includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral.

Commercial loans - The commercial loan portfolio segment includes commercial and industrial loans, agricultural loans and loans to state and municipalities. These loans include those loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or expansion projects. Loans are repaid by business cash flows or tax revenues. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the customers’ business operations.

Consumer loans - The consumer loan portfolio segment includes direct consumer installment loans, overdrafts and other revolving credit loans. Loans in this portfolio are sensitive to unemployment and other key consumer economic measures.

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 December 31, 2019 and 2018 (amounts in thousands). The acquired loans are not included in the allowance for loan losses calculation, as these loans are recorded at fair value and there has been no further indication of credit deterioration that would require an additional provision.

	Real Estate Mortgage Loans
Allowance for Loan Losses	Residential			Commercial			Construction and Land Development			Home Equity Lines Of Credit			Commercial			Consumer			Total
Balance - December 31, 2018	$	1,579		$	1,961		$	942		$	394		$	1,375		$	326		$	6,577
Provision for loan losses		474			1,528			25			(101	)		739			245			2,910
Loan charge-offs		(650	)		-			-			-			(320	)		(200	)		(1,170	)
Loan recoveries		9			112			20			51			116			54			362
Balance - December 31, 2019	$	1,412		$	3,601		$	987		$	344		$	1,910		$	425			8,679
Ending balance:
Individually evaluated for impairment	$	19		$	7		$	-		$	-		$	303		$	-		$	329
Collectively evaluated for impairment	$	1,393		$	3,594		$	987		$	344		$	1,607		$	425		$	8,350
Loans:
Individually evaluated for impairment	$	593		$	2,304		$	146		$	314		$	412		$	-		$	3,769
Collectively evaluated for impairment	$	235,907		$	306,091		$	113,289		$	47,096		$	160,464		$	40,282		$	903,129
Acquired loans with deteriorated credit quality	$	718		$	1,624		$	91		$	-		$	410		$	115		$	2,958
Percent of loans in each category to total loans		26.1	%		34.1	%		12.5	%		5.2	%		17.7	%		4.4	%		100.0	%

	Real Estate Mortgage Loans
Allowance for Loan Losses	Residential			Commercial			Construction and Land Development			Home Equity Lines Of Credit			Commercial			Consumer			Total
Balance - December 31, 2017	$	1,167		$	1,604		$	606		$	333		$	954		$	217		$	4,881
Provision for loan losses		438			453			298			69			566			136			1,960
Loan charge-offs		(41	)		(109	)		-			(20	)		(284	)		(48	)		(502	)
Loan recoveries		15			13			38			12			139			21			238
Balance - December 31, 2018	$	1,579		$	1,961		$	942		$	394		$	1,375		$	326		$	6,577
Ending balance:
Individually evaluated for impairment	$	507		$	54		$	8		$	-		$	143		$	13		$	725
Collectively evaluated for impairment	$	1,072		$	1,907		$	934		$	394		$	1,232		$	313		$	5,852
Loans:
Individually evaluated for impairment	$	2,008		$	1,925		$	158		$	100		$	262		$	54		$	4,507
Collectively evaluated for impairment	$	182,586		$	217,445		$	101,799		$	38,940		$	134,163		$	33,726		$	708,659
Acquired loans with deteriorated credit quality	$	332		$	438		$	153		$	-		$	1		$	87		$	1,011
Percent of loans in each category to total loans		25.9	%		30.8	%		14.3	%		5.5	%		18.8	%		4.7	%		100.0	%

The Bank individually evaluates for impairment all loans that are on nonaccrual status. Additionally, all troubled debt restructurings are individually evaluated for impairment. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral-dependent. Management may also elect to apply an additional collective reserve to groups of impaired loans based on current economic or market factors. Impaired loans are generally placed on nonaccrual status and therefore interest payments received on impaired loans are generally applied as a reduction of the outstanding principal balance.

The following tables present impaired loans by class of loans as of December 31, 2019 and 2018 (amounts in thousands). The purchased credit-impaired loans are not included in these tables because they are carried at fair value and accordingly have no related associated allowance.


December 31, 2019
Nonaccruing Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	114	$	114	$	-	$	114	$	19
Commercial real estate		-		-		-		-		-
Construction and land development		-		-		-		-		-
Total mortgage loans on real estate		114		114		-		114		19
Home equity lines of credit		214		214		214		-		-
Commercial loans		136		136		-		136		136
Consumer loans		-		-		-		-		-
Total Loans	$	464	$	464	$	214	$	250	$	155



Accruing Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	479	$	479	$	479	$	-	$	-
Commercial real estate		2,304		2,304		2,014		290		7
Construction and land development		210		146		146		-		-
Total mortgage loans on real estate		2,993		2,929		2,639		290		7
Home equity lines of credit		100		100		100		-		-
Commercial loans		276		276		109		167		167
Consumer loans		-		-		-		-		-
Total Loans	$	3,369	$	3,305	$	2,848	$	457	$	174



Total Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	593	$	593	$	479	$	114	$	19
Commercial real estate		2,304		2,304		2,014		290		7
Construction and land development		210		146		146		-		-
Total mortgage loans on real estate		3,107		3,043		2,639		404		26
Home equity lines of credit		314		314		314		-		-
Commercial loans		412		412		109		303		303
Consumer loans		-		-		-		-		-
Total Loans	$	3,833	$	3,769	$	3,062	$	707	$	329


December 31, 2018
Nonaccruing Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	1,519	$	1,519	$	118	$	1,401	$	505
Commercial real estate		423		142		142		-		-
Construction and land development		-		-		-		-		-
Total mortgage loans on real estate		1,942		1,661		260		1,401		505
Home equity lines of credit		-		-		-		-		-
Commercial loans		143		143		-		143		143
Consumer loans		-		-		-		-		-
Total Loans	$	2,085	$	1,804	$	260	$	1,544	$	648



Accruing Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	489	$	489	$	370	$	119	$	2
Commercial real estate		1,783		1,783		965		818		54
Construction and land development		221		158		-		158		8
Total mortgage loans on real estate		2,493		2,430		1,335		1,095		64
Home equity lines of credit		100		100		100		-		-
Commercial loans		119		119		119		-		-
Consumer loans		54		54		29		25		13
Total Loans	$	2,766	$	2,703	$	1,583	$	1,120	$	77



Total Impaired Loans	Unpaid Principal Balance		Recorded Investment		Impaired Loans With No Allowance		Impaired Loans With Allowance		Allowance for Loan Losses
Mortgage loans on real estate:
Residential	$	2,008	$	2,008	$	488	$	1,520	$	507
Commercial real estate		2,206		1,925		1,107		818		54
Construction and land development		221		158		-		158		8
Total mortgage loans on real estate		4,435		4,091		1,595		2,496		569
Home equity lines of credit		100		100		100		-		-
Commercial loans		262		262		119		143		143
Consumer loans		54		54		29		25		13
Total Loans	$	4,851	$	4,507	$	1,843	$	2,664	$	725

The following table presents the average recorded investment in impaired loans and the interest income recognized on impaired loans in the years ended December 31, 2019 and 2018 by loan category (in thousands).

	Year Ended December 31, 2019				Year Ended December 31, 2018
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Mortgage loans on real estate:
Residential real estate	$	1,483	$	26	$	2,020	$	23
Commercial real estate		2,271		120		2,117		92
Construction and land development		152		8		163		8
Total mortgage loans on real estate		3,906		154		4,300		123
Home equity lines of credit		275		7		100		6
Commercial loans		387		20		268		9
Consumer loans		32		-		60		3
Total Loans	$	4,600	$	181	$	4,728	$	141

For the years ended December 31, 2019 and 2018, the Bank did not recognize a material amount of interest income on impaired loans.

The following tables present the aging of the recorded investment in past due loans and non-accrual loan balances as of December 31, 2019 and 2018 by class of loans (amounts in thousands).

	Accruing Loans
			30-89 Days		90+ Days		Nonaccrual
As of December 31, 2019	Current		Past Due		Past Due		Loans		Total Loans
Mortgage loans on real estate:
Residential	$	235,339	$	1,190	$	-	$	689	$	237,218
Commercial real estate		309,051		226		-		742		310,019
Construction and land development		112,916		534		-		76		113,526
Total mortgage loans on real estate		657,306		1,950		-		1,507		660,763
Home equity lines of credit		47,003		150		-		257		47,410
Commercial loans		160,288		788		-		210		161,286
Consumer loans		40,004		142		-		251		40,397
Total Loans	$	904,601	$	3,030	$	-	$	2,225	$	909,856

	Accruing Loans
			30-89 Days		90+ Days		Nonaccrual
As of December 31, 2018	Current		Past Due		Past Due		Loans		Total Loans
Mortgage loans on real estate:
Residential	$	181,252	$	1,528	$	19	$	2,127	$	184,926
Commercial real estate		219,578		68		-		162		219,808
Construction and land development		101,993		23		-		94		102,110
Total mortgage loans on real estate		502,823		1,619		19		2,383		506,844
Home equity lines of credit		38,891		24		-		125		39,040
Commercial loans		134,066		217		-		143		134,426
Consumer loans		33,544		234		-		89		33,867
Total Loans	$	709,324	$	2,094	$	19	$	2,740	$	714,177

The Bank 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 Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for their risk ratings:

Accruing Loans – Special Mention: Weakness exists that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. Collateral values generally afford adequate coverage but may not be immediately marketable.

Substandard: Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

Doubtful: Specific weaknesses characterized as Substandard that are severe enough to make collection in full unlikely. There is no reliable secondary source of full repayment. Loans classified as doubtful will usually be placed on non-accrual, analyzed and fully or partially charged off based on a review of any collateral and other relevant factors.

Nonaccrual: Specific weakness characterized as Doubtful that are severe enough for the loan to be placed on nonaccrual status because collection of all contractual principal and interest payments is considered unlikely.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of December 31, 2019 and 2018, and based on the most recent analyses performed, the risk category of loans by class of loans is as follows (amounts in thousands):

			Special
As of December 31, 2019	Pass		Mention		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential	$	232,017	$	3,589	$	1,612	$	-	$	237,218
Commercial real estate		298,980		7,204		3,835		-		310,019
Construction and land development		111,883		1,420		223		-		113,526
Total mortgage loans on real estate		642,880		12,213		5,670		-		660,763
Home equity lines of credit		46,994		59		357		-		47,410
Commercial loans		158,969		1,482		835		-		161,286
Consumer loans		39,564		389		444		-		40,397
Total Loans	$	888,407	$	14,143	$	7,306	$	-	$	909,856

			Special
As of December 31, 2018	Pass		Mention		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential	$	179,132	$	2,435	$	3,270	$	89	$	184,926
Commercial real estate		212,421		4,609		2,778		-		219,808
Construction and land development		101,612		49		449		-		102,110
Total mortgage loans on real estate		493,165		7,093		6,497		89		506,844
Home equity lines of credit		38,530		285		225		-		39,040
Commercial loans		131,449		2,612		343		22		134,426
Consumer loans		33,269		330		268		-		33,867
Total Loans	$	696,413	$	10,320	$	7,333	$	111	$	714,177

At December 31, 2019 and 2018, loans totaling $3.2 million and $3.3 million, respectively, were classified as TDRs and impaired. The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. The Company restructured 6 loans totaling $587 thousand in 2019 and 5 loans totaling $823 thousand in 2018.

During the year ended December 31, 2019 there was 1 residential real estate loan with a balance of $23 thousand, 1 commercial loan with a balance of $14 thousand and 1 consumer loan with a balance of $30 thousand that were modified within the previous twelve months that were in default of their modified terms. During the year ended December 31, 2018 there was 1 residential real estate loan with a balance of $54 thousand and 1 commercial loan with a balance of $143 thousand that were modified within the previous twelve months that were in default of their modified terms.