
	September 30, 2020
(dollars in thousands)	Legacy Loans		Purchased Loans		Total
Construction, land and land development	$	110,162	$	18,129	$	128,291
Other commercial real estate	464,100		45,892		509,992
Total commercial real estate	574,262		64,021		638,283
Residential real estate	168,139		16,979		185,118
Commercial, financial, & agricultural	242,351		12,564		254,915
Consumer and other	20,420		2,870		23,290
Total Loans	$	1,005,172	$	96,434	$	1,101,606


	December 31, 2019
(dollars in thousands)	Legacy Loans		Purchased Loans		Total
Construction, land and land development	$	83,036	$	13,061	$	96,097
Other commercial real estate	481,943		58,296		540,239
Total commercial real estate	564,979		71,357		636,336
Residential real estate	171,341		23,455		194,796
Commercial, financial, & agricultural	91,535		22,825		114,360
Consumer and other	19,245		4,077		23,322
Total Loans	$	847,100	$	121,714	$	968,814

Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. The change in commercial, financial & agricultural loans was primarily a result of commercial and industrial PPP loan originations during the second quarter of 2020, totaling $137.8 million at September 30, 2020. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer loans are originated at the Bank level.

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.

•Grades 1 and 2 – Borrowers with these assigned grades range in risk from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service ability and unblemished past performance, or to exceptionally strong individuals with collateral of unquestioned value that fully secures the loans. Loans in this category fall into the “pass” classification.

•Grades 3 and 4 – Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average.

•Grade 6 – This grade includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned this grade, and these loans often have assigned loss allocations as part of the allowance for loan and lease losses. Generally, loans on which interest accrual has been stopped would be included in this grade.

•Grades 7 and 8 – These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, of which the Company has no loans with these assigned grades at September 30, 2020. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 6.

The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of September 30, 2020 and December 31, 2019. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans
September 30, 2020
Construction, land and land development	$	99,109	$	3,930	$	7,123	$	110,162
Other commercial real estate	422,661		37,241		4,198		464,100
Total commercial real estate	521,770		41,171		11,321		574,262
Residential real estate	157,809		3,720		6,610		168,139
Commercial, financial, & agricultural	238,613		2,320		1,418		242,351
Consumer and other	20,115		123		182		20,420
Total Loans	$	938,307	$	47,334	$	19,531	$	1,005,172

(dollars in thousands)
December 31, 2019
Construction, land and land development	$	82,322	$	445	$	269	$	83,036
Other commercial real estate	459,064		13,438		9,441		481,943
Total commercial real estate	541,386		13,883		9,710		564,979
Residential real estate	159,194		4,632		7,515		171,341
Commercial, financial, & agricultural	86,558		1,973		3,004		91,535
Consumer and other	18,883		148		214		19,245
Total Loans	$	806,021	$	20,636	$	20,443	$	847,100

The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of September 30, 2020 and December 31, 2019. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes. For the period ending September 30, 2020, the Company did not have any loans classified as “doubtful” or a “loss”.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans
September 30, 2020
Construction, land and land development	$	16,430	$	1,620	$	79	$	18,129
Other commercial real estate	43,510		372		2,010		45,892
Total commercial real estate	59,940		1,992		2,089		64,021
Residential real estate	16,585		316		78		16,979
Commercial, financial, & agricultural	10,637		1,889		38		12,564
Consumer and other	2,768		19		83		2,870
Total Loans	$	89,930	$	4,216	$	2,288	$	96,434

December 31, 2019
Construction, land and land development	$	12,996	$	—	$	65	$	13,061
Other commercial real estate	57,881		381		34		58,296
Total commercial real estate	70,877		381		99		71,357
Residential real estate	23,097		249		109		23,455
Commercial, financial, & agricultural	19,443		2,949		433		22,825
Consumer and other	4,077		—		—		4,077
Total Loans	$	117,494	$	3,579	$	641	$	121,714

A loan’s risk grade is assigned at loan origination and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to review at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of six or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.

Loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.


(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
September 30, 2020
Construction, land and land development	$	90	$	—	$	90	$	—	$	110,072	$	110,162
Other commercial real estate	206		—		206		2,586		461,308		464,100
Total commercial real estate	296		—		296		2,586		571,380		574,262
Residential real estate	1,390		—		1,390		3,532		163,217		168,139
Commercial, financial, & agricultural	193		—		193		1,451		240,707		242,351
Consumer and other	49		—		49		102		20,269		20,420
Total Loans	$	1,928	$	—	$	1,928	$	7,671	$	995,573	$	1,005,172

December 31, 2019
Construction, land and land development	$	50	$	—	$	50	$	32	$	82,954	$	83,036
Other commercial real estate	335		—		335		3,738		477,870		481,943
Total commercial real estate	385		—		385		3,770		560,824		564,979
Residential real estate	1,296		—		1,296		3,643		166,402		171,341
Commercial, financial, & agricultural	212		—		212		1,628		89,695		91,535
Consumer and other	21		—		21		138		19,086		19,245
Total Loans	$	1,914	$	—	$	1,914	$	9,179	$	836,007	$	847,100


(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
September 30, 2020
Construction, land and land development	$	136	$	—	$	136	$	79	$	17,914	$	18,129
Other commercial real estate	—		—		—		1,976		43,916		45,892
Total commercial real estate	136		—		136		2,055		61,830		64,021
Residential real estate	—		—		—		78		16,901		16,979
Commercial, financial, & agricultural	159		—		159		38		12,367		12,564
Consumer and other	—		—		—		84		2,786		2,870
Total Loans	$	295	$	—	$	295	$	2,255	$	93,884	$	96,434

December 31, 2019
Construction, land and land development	$	—	$	—	$	—	$	—	$	13,061	$	13,061
Other commercial real estate	83		—		83		—		58,213		58,296
Total commercial real estate	83		—		83		—		71,274		71,357
Residential real estate	57		—		57		—		23,398		23,455
Commercial, financial, & agricultural	553		—		553		—		22,272		22,825
Consumer and other	8		—		8		—		4,069		4,077
Total Loans	$	701	$	—	$	701	$	—	$	121,013	$	121,714


	September 30, 2020
(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With No Related Allowance Recorded
Construction, land and land development	$	6,970	$	7,023	$	—	$	1,806
Commercial real estate	14,635		13,933		—		8,978
Residential real estate	1,985		1,949		—		1,926
Commercial, financial & agriculture	48		48		—		232
Consumer & other	—		—		—		—
	23,638		22,953		—		12,942

With An Allowance Recorded
Construction, land and land development	—		—		—		—
Commercial real estate	2,390		2,395		728		9,334
Residential real estate	480		480		74		1,059
Commercial, financial & agriculture	567		567		567		1,332
Consumer & other	—		—		—		—
	3,437		3,442		1,369		11,725

Purchased Credit Impaired Loans
Construction, land and land development	118		118		—		96
Commercial real estate	120		120		—		79
Residential real estate	16		16		5		14
Commercial, financial & agriculture	57		57		—		50
Consumer & other	192		192		83		117
	503		503		88		356
Total
Construction, land and land development	7,088		7,141		—		1,902
Commercial real estate	17,145		16,448		728		18,391
Residential real estate	2,481		2,445		79		2,999
Commercial, financial & agriculture	672		672		567		1,614
Consumer & other	192		192		83		117
	$	27,578	$	26,898	$	1,457	$	25,023


	December 31, 2019
(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With No Related Allowance Recorded
Construction, land and land development	$	67	$	67	$	—	$	168
Commercial real estate	12,455		11,639		—		13,924
Residential real estate	2,706		2,711		—		3,693
Commercial, financial & agriculture	257		257		—		910
Consumer & other	—		—		—		123
	15,485		14,674		—		18,818

With An Allowance Recorded
Construction, land and land development	—		—		—		80
Commercial real estate	6,379		6,385		1,939		3,898
Residential real estate	757		760		137		367
Commercial, financial & agriculture	2,189		1,989		1,073		722
Consumer & other	—		—		—		—
	9,325		9,134		3,149		5,067
Purchased Credit Impaired Loans
Construction, land and land development	65		65		—		80
Commercial real estate	34		34		—		35
Residential real estate	11		11		6		24
Commercial, financial & agriculture	37		37		—		47
Consumer & other	—		—		—		—
	147		147		6		186
Total
Construction, land and land development	132		132		—		328
Commercial real estate	18,868		18,058		1,939		17,857
Residential real estate	3,474		3,482		143		4,084
Commercial, financial & agriculture	2,483		2,283		1,073		1,679
Consumer & other	—		—		—		123
	$	24,957	$	23,955	$	3,155	$	24,071

The restructuring of a loan is considered a troubled debt restructuring ("TDRs") if both the borrower is experiencing financial difficulties and the Company has granted a concession to the terms of the loan. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2019, which are included in the Company’s 2019 Form 10-K, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of September 30, 2020. The Company had three loan contracts restructured during the three and nine month periods ended September 30, 2020, all three modifications were payment deferral modifications. Two of the loans were commercial real estate totaling $131,000 and there was one commercial loan totaling $97,000. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.

Certain borrowers are currently unable to meet their contractual payment obligations because of the adverse effects of the COVID-19 pandemic. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof, for up to three months. In the absence of other intervening factors, such short-term modifications made on a good faith basis are not categorized as troubled debt restructurings, nor are loans granted payment deferrals related to the COVID-19 pandemic reported as past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral).