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

The Company held $11.9 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 September 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 $906,000 and $1.0 million at September 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 and third quarters of 2020, the Company originated loans under the Paycheck Protection Program (PPP) of the Small Business Administration (SBA). These PPP loans totaled $85.1 million at September 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 $2.0 million at September 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 net fee remaining on loans forgiven or prepaid by the borrower is recorded as income.

At September 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 September 30, 2020 and for the three and nine months ended September 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 nine months ended September 30, 2019 (dollars in thousands):


							Three months ended				Nine months ended
	December 31, 2019						September 30, 2019				September 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	$	—	$	1,514	$	11	$	1,534	$	32
Commercial		3,226		3,966		—		3,308		35		3,372		103
Construction and land development		328		328		—		164		—		82		—
Multifamily		2,463		2,463		—		2,510		—		2,533		—
Total real estate loans		7,500		8,607		—		7,496		46		7,521		135
Subtotal impaired loans with no valuation allowance		7,500		8,607		—		7,496		46		7,521		135
With an allowance recorded:
Mortgage loans on real estate:
Residential 1‑4 family		1,498		1,808		380		1,862		12		1,965		36
Commercial		378		876		87		552		2		847		6
Construction and land development		48		147		11		2,084		—		3,210		—
Total real estate loans		1,924		2,831		478		4,498		14		6,022		42
Commercial loans		454		460		105		1,080		4		1,618		13
Consumer installment loans		7		7		1		6		—		5		—
Subtotal impaired loans with a valuation allowance		2,385		3,298		584		5,584		18		7,645		55
Total:
Mortgage loans on real estate:
Residential 1‑4 family		2,981		3,658		380		3,376		23		3,499		68
Commercial		3,604		4,842		87		3,860		37		4,219		109
Construction and land development		376		475		11		2,248		—		3,292		—
Multifamily		2,463		2,463		—		2,510		—		2,533		—
Total real estate loans		9,424		11,438		478		11,994		60		13,543		177
Commercial loans		454		460		105		1,080		4		1,618		13
Consumer installment loans		7		7		1		6		—		5		—
Total impaired loans	$	9,885	$	11,905	$	584	$	13,080	$	64	$	15,166	$	190

(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 September 30, 2020 and December 31, 2019, is set forth in the table below (dollars in thousands):


	September 30, 2020		December 31, 2019
Nonaccruals	$	4,214	$	5,292
Trouble debt restructure and still accruing		4,753		4,593
Total impaired	$	8,967	$	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 nine months ended September 30, 2020 and 2019. For the three months ended September 30, 2020 and 2019, estimated interest income of $61,000 and $92,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. For the nine months ended September 30, 2020 and 2019, estimated interest income of $152,000 and $284,000, 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 September 30, 2020 and December 31, 2019 (dollars in thousands):


	September 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	$	1,279	$	—	$	1,338	$	2,617	$	201,749	$	204,366
Commercial		—		—		764		764		451,913		452,677
Construction and land development		—		—		572		572		159,194		159,766
Second mortgages		227		—		—		227		6,261		6,488
Multifamily		—		—		—		—		77,787		77,787
Agriculture		—		—		51		51		7,087		7,138
Total real estate loans		1,506		—		2,725		4,231		903,991		908,222
Commercial loans		635		—		1,470		2,105		255,257		257,362
Consumer installment loans		20		—		19		39		10,567		10,606
All other loans		—		—		—		—		1,519		1,519
Total loans	$	2,161	$	—	$	4,214	$	6,375	$	1,171,334	$	1,177,709


	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 nine months ended September 30, 2020 and 2019 is presented in the following tables (dollars in thousands):


	Three Months Ended September 30, 2020
			Provision
	June 30, 2020		Allocation		Charge-offs		Recoveries		September 30, 2020
Mortgage loans on real estate:
Residential 1‑4 family	$	3,495	$	(954)	$	—	$	14	$	2,555
Commercial		4,612		(1,606)		—		5		3,011
Construction and land development		1,342		(254)		—		75		1,163
Second mortgages		45		(9)		—		2		38
Multifamily		499		28		—		—		527
Agriculture		44		7		—		—		51
Total real estate loans		10,037		(2,788)		—		96		7,345
Commercial loans		2,058		(288)		—		19		1,789
Consumer installment loans		110		31		(42)		17		116
All other loans		8		2		—		—		10
Unallocated		25		3,043		—		—		3,068
Total loans	$	12,238	$	—	$	(42)	$	132	$	12,328


	Three Months Ended September 30, 2019
			Provision
	June 30, 2019		Allocation		Charge-offs		Recoveries		September 30, 2019
Mortgage loans on real estate:
Residential 1‑4 family	$	2,894	$	(35)	$	(144)	$	26	$	2,741
Commercial		2,026		1		—		7		2,034
Construction and land development		1,399		(587)		(200)		18		630
Second mortgages		81		(7)		—		2		76
Multifamily		192		17		—		41		250
Agriculture		32		15		—		—		47
Total real estate loans		6,624		(596)		(344)		94		5,778
Commercial loans		1,999		(229)		(98)		3		1,675
Consumer installment loans		185		32		(134)		53		136
All other loans		8		—		—		—		8
Unallocated		3		793		—		—		796
Total loans	$	8,819	$	—	$	(576)	$	150	$	8,393


	Nine Months Ended September 30, 2020
			Provision
	December 31, 2019		Allocation		Charge-offs		Recoveries		September 30, 2020
Mortgage loans on real estate:
Residential 1‑4 family	$	2,685	$	(173)	$	—	$	43	$	2,555
Commercial		2,196		731		—		84		3,011
Construction and land development		1,044		(40)		—		159		1,163
Second mortgages		79		(45)		—		4		38
Multifamily		248		279		—		—		527
Agriculture		38		13		—		—		51
Total real estate loans		6,290		765		—		290		7,345
Commercial loans		1,980		331		(608)		86		1,789
Consumer installment loans		114		71		(146)		77		116
All other loans		7		3		—		—		10
Unallocated		38		3,030		—		—		3,068
Total loans	$	8,429	$	4,200	$	(754)	$	453	$	12,328


	Nine Months Ended September 30, 2019
			Provision
	December 31, 2018		Allocation		Charge-offs		Recoveries		September 30, 2019
Mortgage loans on real estate:
Residential 1‑4 family	$	2,281	$	394	$	(178)	$	244	$	2,741
Commercial		1,810		430		(277)		71		2,034
Construction and land development		1,161		(390)		(212)		71		630
Second mortgages		20		51		—		5		76
Multifamily		371		(162)		—		41		250
Agriculture		17		30		—		—		47
Total real estate loans		5,660		353		(667)		432		5,778
Commercial loans		1,894		129		(355)		7		1,675
Consumer installment loans		152		116		(234)		102		136
All other loans		12		(4)		—		—		8
Unallocated		1,265		(469)		—		—		796
Total loans	$	8,983	$	125	$	(1,256)	$	541	$	8,393

The increase in provision expense reflects the significant increase in commercial real estate and commercial loans classified as special mention due to the inherent 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 September 30, 2020 and December 31, 2019 (dollars in thousands):


	September 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	$	615	$	1,940	$	2,555	$	2,821	$	201,545	$	204,366
Commercial		59		2,952		3,011		3,718		448,959		452,677
Construction and land development		153		1,010		1,163		572		159,194		159,766
Second mortgages		—		38		38		—		6,488		6,488
Multifamily		—		527		527		—		77,787		77,787
Agriculture		14		37		51		51		7,087		7,138
Total real estate loans		841		6,504		7,345		7,162		901,060		908,222
Commercial loans		334		1,455		1,789		1,786		255,576		257,362
Consumer installment loans		5		111		116		19		10,587		10,606
All other loans		—		10		10		—		1,519		1,519
Unallocated		—		3,068		3,068		—		—		—
Total loans	$	1,180	$	11,148	$	12,328	$	8,967	$	1,168,742	$	1,177,709


	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 $11.9 million and $12.7 million at September 30, 2020 and December 31, 2019, respectively, and PPP loans 100% guaranteed by the SBA of $85.1 million at September 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 September 30, 2020 and December 31, 2019 (dollars in thousands):


	September 30, 2020
			Special
	Pass		Mention		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1‑4 family	$	189,923	$	13,104	$	1,339	$	—	$	204,366
Commercial		357,037		93,500		2,140		—		452,677
Construction and land development		158,447		747		572		—		159,766
Second mortgages		5,286		1,202		—		—		6,488
Multifamily		70,964		6,823		—		—		77,787
Agriculture		6,713		374		51		—		7,138
Total real estate loans		788,370		115,750		4,102		—		908,222
Commercial loans		222,378		27,653		7,331		—		257,362
Consumer installment loans		10,537		50		19		—		10,606
All other loans		1,503		16		—		—		1,519
Total loans	$	1,022,788	$	143,469	$	11,452	$	—	$	1,177,709


	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 September 30, 2020 and 2019, respectively.

The Company had no loan modifications considered to be TDRs during the three months ended September 30, 2020. During the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2020. There were no TDRs that had been restructured during the previous 12 months that resulted in default during the three months ended September 30, 2019. During the nine months ended September 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 September 30, 2020, the Company had 1-4 family mortgages in the amount of $92.4 million pledged as collateral to the Federal Home Loan Bank for a total borrowing capacity of $76.7 million.