The Company’s loans, net of deferred fees and costs, at June 30, 2020 and December 31, 2019 were comprised of the following (dollars in thousands):

The Company held $12.0 million and $12.7 million in balances of loans guaranteed by the United States Department of Agriculture (USDA), which are included in various categories in the table above, at June 30, 2020 and December 31, 2019, respectively. As these loans are 100% guaranteed by the USDA, no loan loss allowance is required. These loan balances included a purchase premium of $940,000 and $1.0 million at June 30, 2020 and December 31, 2019, respectively. The purchase premium is amortized as an adjustment of the related loan yield on a straight line basis, which is substantially equivalent to the results obtained using the effective interest method. Any unamortized purchase premium remaining on loans prepaid by the borrower is written off.

During the second quarter of 2020, the Company originated loans under the Paycheck Protection Program (PPP) of the Small Business Administration (SBA). These PPP loans totaled $83.5 million at June 30, 2020 and are included in commercial loans. As these loans are 100% guaranteed by the SBA, no loan loss allowance is required. The majority of the PPP loans have a two year term; however, most are expected to be forgiven by the SBA as borrowers use the funds for qualified expenses. These loan balances included net fees of $2.3 million at June 30, 2020, which are being amortized as an adjustment of the related loan yield on a straight line basis, which is substantially equivalent to the results obtained using the effective interest method. Any unamortized fee remaining on loans forgiven or prepaid by the borrower is recorded as income.

At June 30, 2020 and December 31, 2019, the Company’s allowance for loan losses was comprised of the following: (i) a specific valuation component calculated in accordance with FASB ASC 310, Receivables, (ii) a general valuation component calculated in accordance with FASB ASC 450, Contingencies, based on historical loan loss experience, current economic conditions and other qualitative risk factors, and (iii) an unallocated component to cover uncertainties that could affect management’s estimate of probable losses. Management identified loans subject to impairment in accordance with FASB ASC 310.

The following table summarizes information related to impaired loans as of and for the three and six months ended June 30, 2020 (dollars in thousands):

(1)	The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.

(2)	The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs or valuation allowances.

The following table summarizes information related to impaired loans as of December 31, 2019 and for the three and six months ended June 30, 2019 (dollars in thousands):


							Three months ended				Six months ended
	December 31, 2019						June 30, 2019				June 30, 2019
			Unpaid
	Recorded		Principal		Related		Average		Interest		Average		Interest
	Investment ⁽¹⁾		Balance ⁽²⁾		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Mortgage loans on real estate:
Residential 1‑4 family	$	1,483	$	1,850	$	—	$	1,534	$	11	$	1,543	$	21
Commercial		3,226		3,966		—		3,349		35		3,400		69
Construction and land development		328		328		—		—		—		—		—
Multifamily		2,463		2,463		—		2,539		—		2,546		—
Total real estate loans		7,500		8,607		—		7,422		46		7,489		90
Subtotal impaired loans with no valuation allowance		7,500		8,607		—		7,422		46		7,489		90
With an allowance recorded:
Mortgage loans on real estate:
Residential 1‑4 family		1,498		1,808		380		2,133		12		2,133		24
Commercial		378		876		87		722		2		998		4
Construction and land development		48		147		11		4,096		—		4,254		—
Total real estate loans		1,924		2,831		478		6,951		14		7,385		28
Commercial loans		454		460		105		1,822		5		1,875		9
Consumer installment loans		7		7		1		6		—		4		—
Subtotal impaired loans with a valuation allowance		2,385		3,298		584		8,779		19		9,264		37
Total:
Mortgage loans on real estate:
Residential 1‑4 family		2,981		3,658		380		3,667		23		3,676		45
Commercial		3,604		4,842		87		4,071		37		4,398		73
Construction and land development		376		475		11		4,096		—		4,254		—
Multifamily		2,463		2,463		—		2,539		—		2,546		—
Total real estate loans		9,424		11,438		478		14,373		60		14,874		118
Commercial loans		454		460		105		1,822		5		1,875		9
Consumer installment loans		7		7		1		6		—		4		—
Total impaired loans	$	9,885	$	11,905	$	584	$	16,201	$	65	$	16,753	$	127

(1)	The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.

(2)	The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs or valuation allowances.

Troubled debt restructures still accruing interest are loans that management expects to ultimately collect all principal and interest due, but not under the terms of the original contract. A reconciliation of impaired loans to nonaccrual loans at June 30, 2020 and December 31, 2019, is set forth in the table below (dollars in thousands):


	June 30, 2020		December 31, 2019
Nonaccruals	$	4,225	$	5,292
Trouble debt restructure and still accruing		4,898		4,593
Total impaired	$	9,123	$	9,885

Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. There was an insignificant amount of cash basis income recognized during the three and six months ended June 30, 2020 and 2019. For the three months ended June 30, 2020 and 2019, estimated interest income of $100,000 and $196,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. For the six months ended June 30, 2020 and 2019, estimated interest income of $168,000 and $410,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms.

The following tables present an age analysis of past due status of loans by category as of June 30, 2020 and December 31, 2019 (dollars in thousands):


	June 30, 2020
	30‑89 Days		90+ Days Past				Total Past				Total Loans
	Past Due		Due and Accruing		Nonaccrual		Due		Current		Receivable
Mortgage loans on real estate:
Residential 1‑4 family	$	1,999	$	—	$	1,697	$	3,696	$	202,091	$	205,787
Commercial		230		—		636		866		443,057		443,923
Construction and land development		—		—		1,122		1,122		150,407		151,529
Second mortgages		229		—		—		229		5,907		6,136
Multifamily		—		—		—		—		76,587		76,587
Agriculture		—		—		51		51		7,071		7,122
Total real estate loans		2,458		—		3,506		5,964		885,120		891,084
Commercial loans		362		—		707		1,069		261,886		262,955
Consumer installment loans		21		—		12		33		10,224		10,257
All other loans		—		—		—		—		1,014		1,014
Total loans	$	2,841	$	—	$	4,225	$	7,066	$	1,158,244	$	1,165,310


	December 31, 2019
	30‑89 Days		90+ Days Past				Total Past				Total Loans
	Past Due		Due and Accruing		Nonaccrual		Due		Current		Receivable
Mortgage loans on real estate:
Residential 1‑4 family	$	1,308	$	—	$	1,378	$	2,686	$	220,852	$	223,538
Commercial		552		—		1,006		1,558		395,300		396,858
Construction and land development		166		—		376		542		146,024		146,566
Second mortgages		229		—		—		229		6,410		6,639
Multifamily		—		—		2,463		2,463		70,515		72,978
Agriculture		—		—		—		—		8,346		8,346
Total real estate loans		2,255		—		5,223		7,478		847,447		854,925
Commercial loans		1,085		946		62		2,093		189,090		191,183
Consumer installment loans		41		—		7		48		11,115		11,163
All other loans		—		—		—		—		1,052		1,052
Total loans	$	3,381	$	946	$	5,292	$	9,619	$	1,048,704	$	1,058,323

Activity in the allowance for loan losses on loans by segment for the three and six months ended June 30, 2020 and 2019 is presented in the following tables (dollars in thousands):


	Three Months Ended June 30, 2020
			Provision
	March 31, 2020		Allocation		Charge-offs		Recoveries		June 30, 2020
Mortgage loans on real estate:
Residential 1‑4 family	$	2,935	$	547	$	—	$	13	$	3,495
Commercial		4,240		337		—		35		4,612
Construction and land development		1,354		(13)		—		1		1,342
Second mortgages		70		(26)		—		1		45
Multifamily		267		232		—		—		499
Agriculture		45		(1)		—		—		44
Total real estate loans		8,911		1,076		—		50		10,037
Commercial loans		2,546		37		(589)		64		2,058
Consumer installment loans		111		5		(29)		23		110
All other loans		8		—		—		—		8
Unallocated		243		(218)		—		—		25
Total loans	$	11,819	$	900	$	(618)	$	137	$	12,238


	Three Months Ended June 30, 2019
			Provision
	March 31, 2019		Allocation		Charge-offs		Recoveries		June 30, 2019
Mortgage loans on real estate:
Residential 1‑4 family	$	3,339	$	(426)	$	(34)	$	15	$	2,894
Commercial		1,508		461		—		57		2,026
Construction and land development		1,210		154		—		35		1,399
Second mortgages		62		18		—		1		81
Multifamily		361		(169)		—		—		192
Agriculture		23		(23)		—		—		—
Total real estate loans		6,503		15		(34)		108		6,592
Commercial loans		1,958		86		(28)		2		2,018
Consumer installment loans		188		12		(40)		25		185
All other loans		6		15		—		—		21
Unallocated		6		(3)		—		—		3
Total loans	$	8,661	$	125	$	(102)	$	135	$	8,819


	Six Months Ended June 30, 2020
			Provision
	December 31, 2019		Allocation		Charge-offs		Recoveries		June 30, 2020
Mortgage loans on real estate:
Residential 1‑4 family	$	2,685	$	781	$	—	$	29	$	3,495
Commercial		2,196		2,337		—		79		4,612
Construction and land development		1,044		214		—		84		1,342
Second mortgages		79		(36)		—		2		45
Multifamily		248		251		—		—		499
Agriculture		38		6		—		—		44
Total real estate loans		6,290		3,553		—		194		10,037
Commercial loans		1,980		619		(608)		67		2,058
Consumer installment loans		114		40		(104)		60		110
All other loans		7		1		—		—		8
Unallocated		38		(13)		—		—		25
Total loans	$	8,429	$	4,200	$	(712)	$	321	$	12,238


	Six Months Ended June 30, 2019
			Provision
	December 31, 2018		Allocation		Charge-offs		Recoveries		June 30, 2019
Mortgage loans on real estate:
Residential 1‑4 family	$	2,281	$	429	$	(34)	$	218	$	2,894
Commercial		1,810		429		(277)		64		2,026
Construction and land development		1,161		197		(12)		53		1,399
Second mortgages		20		58		—		3		81
Multifamily		371		(179)		—		—		192
Agriculture		17		(17)		—		—		—
Total real estate loans		5,660		917		(323)		338		6,592
Commercial loans		1,894		377		(257)		4		2,018
Consumer installment loans		152		84		(100)		49		185
All other loans		12		9		—		—		21
Unallocated		1,265		(1,262)		—		—		3
Total loans	$	8,983	$	125	$	(680)	$	391	$	8,819

The increase in provision expense reflects the significant increase in commercial real estate and commercial loans classified as special mention due to the possible economic impact COVID-19 may have on these borrowers. The allowance for loan losses could be further impacted by COVID-19; however, the amount of that impact is not currently estimable.

The following tables present information on the loans evaluated for impairment in the allowance for loan losses as of June 30, 2020 and December 31, 2019 (dollars in thousands):


	June 30, 2020
	Allowance for Loan Losses						Recorded Investment in Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Impairment		Impairment		Total		Impairment		Impairment		Total
Mortgage loans on real estate:
Residential 1‑4 family	$	574	$	2,921	$	3,495	$	3,268	$	202,519	$	205,787
Commercial		23		4,589		4,612		3,620		440,303		443,923
Construction and land development		315		1,027		1,342		1,122		150,407		151,529
Second mortgages		—		45		45		—		6,136		6,136
Multifamily		—		499		499		—		76,587		76,587
Agriculture		13		31		44		51		7,071		7,122
Total real estate loans		925		9,112		10,037		8,061		883,023		891,084
Commercial loans		184		1,874		2,058		1,050		261,905		262,955
Consumer installment loans		3		107		110		12		10,245		10,257
All other loans		—		8		8		—		1,014		1,014
Unallocated		—		25		25		—		—		—
Total loans	$	1,112	$	11,126	$	12,238	$	9,123	$	1,156,187	$	1,165,310


	December 31, 2019
	Allowance for Loan Losses						Recorded Investment in Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Impairment		Impairment		Total		Impairment		Impairment		Total
Mortgage loans on real estate:
Residential 1‑4 family	$	380	$	2,305	$	2,685	$	2,981	$	220,557	$	223,538
Commercial		87		2,109		2,196		3,604		393,254		396,858
Construction and land development		11		1,033		1,044		376		146,190		146,566
Second mortgages		—		79		79		—		6,639		6,639
Multifamily		—		248		248		2,463		70,515		72,978
Agriculture		—		38		38		—		8,346		8,346
Total real estate loans		478		5,812		6,290		9,424		845,501		854,925
Commercial loans		105		1,875		1,980		454		190,729		191,183
Consumer installment loans		1		113		114		7		11,156		11,163
All other loans		—		7		7		—		1,052		1,052
Unallocated		—		38		38		—		—		—
Total loans	$	584	$	7,845	$	8,429	$	9,885	$	1,048,438	$	1,058,323

Loans are monitored for credit quality on a recurring basis. These credit quality indicators are defined as follows:

Pass - A pass loan is not adversely classified, as it does not display any of the characteristics for adverse classification. This category includes purchased loans that are 100% guaranteed by U.S. Government agencies of $12.0 million and $12.7 million at June 30, 2020 and December 31, 2019, respectively and PPP loans 100% guaranteed by the SBA of $83.5 million at June 30, 2020.

Special Mention - A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification.

Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful - A doubtful loan has all the weaknesses inherent in a loan classified as substandard with the added characteristics that the weaknesses make collection or liquidation in full, highly questionable and improbable, on the basis of currently existing facts, conditions, and values. The possibility of loss is extremely high.

The following tables present the composition of loans by credit quality indicator at June 30, 2020 and December 31, 2019 (dollars in thousands):


	June 30, 2020
			Special
	Pass		Mention		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1‑4 family	$	191,802	$	12,544	$	1,441	$	—	$	205,787
Commercial		318,456		123,432		2,035		—		443,923
Construction and land development		148,857		1,550		1,122		—		151,529
Second mortgages		5,156		980		—		—		6,136
Multifamily		69,930		6,657		—		—		76,587
Agriculture		6,653		418		51		—		7,122
Total real estate loans		740,854		145,581		4,649		—		891,084
Commercial loans		216,060		41,394		5,501		—		262,955
Consumer installment loans		10,198		47		12		—		10,257
All other loans		998		16		—		—		1,014
Total loans	$	968,110	$	187,038	$	10,162	$	—	$	1,165,310


	December 31, 2019
			Special
	Pass		Mention		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1‑4 family	$	219,210	$	2,964	$	1,364	$	—	$	223,538
Commercial		391,251		3,188		2,419		—		396,858
Construction and land development		145,782		408		376		—		146,566
Second mortgages		6,096		543		—		—		6,639
Multifamily		70,515		—		2,463		—		72,978
Agriculture		8,098		248		—		—		8,346
Total real estate loans		840,952		7,351		6,622		—		854,925
Commercial loans		185,123		2,770		3,290		—		191,183
Consumer installment loans		11,140		16		7		—		11,163
All other loans		1,052		—		—		—		1,052
Total loans	$	1,038,267	$	10,137	$	9,919	$	—	$	1,058,323

In accordance with FASB Accounting Standards Update (ASU) 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, the Company assesses all loan modifications to determine whether they are considered troubled debt restructurings (TDRs) under the guidance. The Company had 19 and 25 loans that met the definition of a TDR at June 30, 2020 and 2019, respectively.

During the three and six months ended June 30, 2020, the Company modified one commercial real estate loan that was considered to be a TDR. The Company granted the borrower six months interest only payment relief and no other changes were made to the loan structure. The loan is 100% guaranteed by the USDA and had a pre- and post-modification balance of $438,000. The Company had no loan modifications considered to be TDRs during the three and six months ended June 30, 2019.

A loan is considered to be in default if it is 90 days or more past due. There were no TDRs that had been restructured during the previous 12 months that resulted in default during the three and six months ended June 30, 2020. There were no TDRs that had been restructured during the previous 12 months that resulted in default during the three months ended June 30, 2019. During the six months ended June 30, 2019, one loan defaulted that had been restructured during the previous 12 months prior to the default. This multifamily real estate loan had a recorded investment of $2.6 million.

In the determination of the allowance for loan losses, management considers TDRs and subsequent defaults in these restructures by reviewing for impairment in accordance with FASB ASC 310-10-35, Receivables, Subsequent Measurement.

At June 30, 2020, the Company had 1-4 family mortgages in the amount of $94.2 million pledged as collateral to the Federal Home Loan Bank for a total borrowing capacity of $77.4 million.