

(in thousands)	June 30, 2020		December 31, 2019
Real estate:
Commercial real estate	$	536,166	$	531,990
One-to-four family residential	420,545		420,020
Construction and development	140,907		132,461
Commercial and industrial	244,587		267,940
SBA PPP, net of deferred income	192,655		—
Tax-exempt	56,065		56,494
Consumer	24,373		30,019
Total loans HFI	$	1,615,298	$	1,438,924
Total loans HFS	$	14,578	$	5,089



(in thousands)	Beginning Balance December 31, 2019		Provision for Loan Losses		Loans Charged-off			Recoveries		Ending Balance June 30, 2020
Real estate:
Commercial real estate	$	3,454	$	671	$	—		$	—	$	4,125
One-to-four family residential	3,323		487		—			5		3,815
Construction and development	1,211		221		(14		)	—		1,418
Commercial and industrial	5,175		110		(1,058		)	50		4,277
SBA PPP, net of deferred income	—		443		—			—		443
Tax-exempt	334		68		—			—		402
Consumer	440		28		(146		)	80		402
Total allowance for loan losses	$	13,937	$	2,028	$	(1,218	)	$	135	$	14,882



(in thousands)	Beginning Balance December 31, 2018		Provision for Loan Losses			Loans Charged-off			Recoveries		Ending Balance December 31, 2019
Real estate:
Commercial real estate	$	3,081	$	373		$	—		$	—	$	3,454
One-to-four family residential	3,146		216			(44		)	5		3,323
Construction and development	951		172			—			88		1,211
Commercial and industrial	4,604		850			(864		)	585		5,175
SBA PPP, net of deferred income	—		—			—			—		—
Tax-exempt	372		(38		)	—			—		334
Consumer	370		237			(311		)	144		440
Total allowance for loan losses	$	12,524	$	1,810		$	(1,219	)	$	822	$	13,937



(in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
Real estate:
Commercial real estate	$	239	$	3,886	$	—	$	4,125
One-to-four family residential	43		3,772		—		3,815
Construction and development	—		1,418		—		1,418
Commercial and industrial	2,004		2,273		—		4,277
SBA PPP, net of deferred income	—		443		—		443
Tax-exempt	—		402		—		402
Consumer	155		247		—		402
Total allowance for loan losses	$	2,441	$	12,441	$	—	$	14,882

Loans:
Real estate:
Commercial real estate	$	2,427	$	533,739	$	—	$	536,166
One-to-four family residential	1,264		419,281		—		420,545
Construction and development	—		140,907		—		140,907
Commercial and industrial	6,929		237,658		—		244,587
SBA PPP, net of deferred income	—		192,655		—		192,655
Tax-exempt	—		56,065		—		56,065
Consumer	158		24,215		—		24,373
Total loans HFI	$	10,778	$	1,604,520	$	—	$	1,615,298



(in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
Real estate:
Commercial real estate	$	260	$	3,194	$	—	$	3,454
One-to-four family residential	31		3,292		—		3,323
Construction and development	10		1,201		—		1,211
Commercial and industrial	2,916		2,259		—		5,175
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		334		—		334
Consumer	71		369		—		440
Total allowance for loan losses	$	3,288	$	10,649	$	—	$	13,937

Loans:
Real estate:
Commercial real estate	$	2,639	$	529,351	$	—	$	531,990
One-to-four family residential	1,193		418,827		—		420,020
Construction and development	38		132,423		—		132,461
Commercial and industrial	8,797		259,143		—		267,940
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		56,494		—		56,494
Consumer	75		29,944		—		30,019
Total loans HFI	$	12,742	$	1,426,182	$	—	$	1,438,924



	Accruing
(in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Loans
Real estate:
Commercial real estate	$	533,734	$	1,184	$	—	$	1,248	$	536,166
One-to-four family residential	419,808		124		—		613		420,545
Construction and development	140,907		—		—		—		140,907
Commercial and industrial	242,838		173		—		1,576		244,587
SBA PPP, net of deferred income	192,655		—		—		—		192,655
Tax-exempt	56,065		—		—		—		56,065
Consumer	24,326		42		—		5		24,373
Total loans HFI	$	1,610,333	$	1,523	$	—	$	3,442	$	1,615,298



	Accruing
(in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Loans
Real estate:
Commercial real estate	$	530,712	$	—	$	—	$	1,278	$	531,990
One-to-four family residential	419,229		184		—		607		420,020
Construction and development	132,423		—		—		38		132,461
Commercial and industrial	264,427		143		—		3,370		267,940
SBA PPP, net of deferred income	—		—		—		—		—
Tax-exempt	56,494		—		—		—		56,494
Consumer	29,973		20		—		26		30,019
Total loans HFI	$	1,433,258	$	347	$	—	$	5,319	$	1,438,924



(in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With no related allowance recorded:
Real estate:
Commercial real estate	$	1,374	$	1,346	$	—	$	1,406
One-to-four family residential	1,048		990		—		1,017
Construction and development	—		—		—		—
Commercial and industrial	1,732		1,412		—		1,437
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	1		2		—		2
Total with no related allowance	4,155		3,750		—		3,862
With allowance recorded:
Real estate:
Commercial real estate	1,268		1,081		239		1,092
One-to-four family residential	281		274		43		200
Construction and development	—		—		—		13
Commercial and industrial	5,530		5,517		2,004		6,715
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	157		156		155		97
Total with related allowance	7,236		7,028		2,441		8,117
Total impaired loans	$	11,391	$	10,778	$	2,441	$	11,979



(in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With no related allowance recorded:
Real estate:
Commercial real estate	$	1,560	$	1,537	$	—	$	2,647
One-to-four family residential	1,040		984		—		1,194
Construction and development	—		—		—		76
Commercial and industrial	1,805		1,474		—		3,685
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	2		2		—		9
Total with no related allowance	4,407		3,997		—		7,611
With allowance recorded:
Real estate:
Commercial real estate	1,263		1,102		260		1,076
One-to-four family residential	216		209		31		339
Construction and development	51		38		10		89
Commercial and industrial	8,544		7,323		2,916		7,746
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	76		73		71		76
Total with related allowance	10,150		8,745		3,288		9,326
Total impaired loans	$	14,557	$	12,742	$	3,288	$	16,937

The interest income recognized on impaired loans for the three months ended June 30, 2020 and June 30, 2019, was $71,000 and $237,000, respectively. The interest income recognized on impaired loans for the six months ended June 30, 2020 and June 30, 2019, was $162,000 and $409,000, respectively.

The restructuring of a loan is considered a TDR if the borrower is experiencing financial difficulties and the bank has granted a concession. Concessions grant terms to the borrower that would not be offered for new debt with similar risk characteristics. Concessions typically include interest rate reductions or below market interest rates, revising amortization schedules to defer principal and interest payments, and other changes necessary to provide payment relief to the borrower and minimize the risk of loss. There were no unfunded commitments to extend credit related to these loans as of June 30, 2020 or December 31, 2019.



(dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total TDRs
Real estate:
Commercial real estate	$	1,176	$	—	$	—	$	1,248	$	2,424
One-to-four family residential	245		—		—		—		245
Construction and development	—		—		—		—		—
Commercial and industrial	—		—		—		13		13
SBA PPP, net of deferred income	—		—		—		—		—
Tax-exempt	—		—		—		—		—
Consumer	—		42		—		—		42
Total	$	1,421	$	42	$	—	$	1,261	$	2,724
Number of TDR loans	8		1		—		4		13



(dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total TDRs
Real estate:
Commercial real estate	$	1,361	$	—	$	—	$	1,278	$	2,639
One-to-four family residential	252		—		—		—		252
Construction and development	—		—		—		38		38
Commercial and industrial	36		—		—		1,869		1,905
SBA PPP, net of deferred income	—		—		—		—		—
Tax-exempt	—		—		—		—		—
Consumer	46		—		—		—		46
Total	$	1,695	$	—	$	—	$	3,185	$	4,880
Number of TDR loans	12		—		—		6		18



	June 30, 2020					June 30, 2019
		Recorded Investment					Recorded Investment
(dollars in thousands)	Loan Count	Pre Modification		Post Modification		Loan Count	Pre Modification		Post Modification
Real estate:
Commercial real estate	—	$	—	$	—	1	$	166	$	166
One-to-four family residential	—	—		—		—	—		—
Construction and development	—	—		—		—	—		—
Commercial and industrial	—	—		—		—	—		—
SBA PPP, net of deferred income	—	—		—		—	—		—
Tax-exempt	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	166	$	166

The TDR described above did not increase the allowance for loan losses as of June 30, 2019. Additionally, there were no defaults on loans during the six months ended June 30, 2020 or June 30, 2019, that had been modified as a TDR during the prior twelve months.

Through June 30, 2020, short-term loan modifications on $272.2 million of loans HFI were made to provide temporary relief to borrowers that have been adversely affected by the outbreak of COVID-19. In accordance with interagency regulatory guidance issued in March 2020, these short-term deferrals are not deemed to be TDRs to the extent they meet the terms of such guidance.

Loans are categorized based on the degree of risk inherent in the credit and the ability of the borrower to service the debt. A description of the general characteristics of the Bank’s risk rating grades follows:

Pass - These ratings are assigned to loans with a risk level ranging from very low to acceptable based on the borrower’s financial condition, financial trends, management strength, and collateral quality.

Special Mention - This category includes loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan.



(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate:
Commercial real estate	$	518,377	$	15,654	$	2,135	$	—	$	—	$	536,166
One-to-four family residential	417,681		1,628		1,236		—		—		420,545
Construction and development	139,570		557		780		—		—		140,907
Commercial and industrial	228,745		8,530		7,312		—		—		244,587
SBA PPP, net of deferred income	192,655		—		—		—		—		192,655
Tax-exempt	56,065		—		—		—		—		56,065
Consumer	24,244		14		115		—		—		24,373
Total loans HFI	$	1,577,337	$	26,383	$	11,578	$	—	$	—	$	1,615,298



(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate:
Commercial real estate	$	515,926	$	14,118	$	1,946	$	—	$	—	$	531,990
One-to-four family residential	416,884		2,021		1,115		—		—		420,020
Construction and development	131,185		565		711		—		—		132,461
Commercial and industrial	247,382		11,473		9,085		—		—		267,940
SBA PPP, net of deferred income	—		—		—		—		—		—
Tax-exempt	56,494		—		—		—		—		56,494
Consumer	29,876		5		138		—		—		30,019
Total loans HFI	$	1,397,747	$	28,182	$	12,995	$	—	$	—	$	1,438,924

Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s ability to repay. As of June 30, 2020, unfunded loan commitments totaled approximately $299.6 million. As of December 31, 2019, unfunded loan commitments totaled approximately $257.0 million.