(Dollars in thousands)	June 30, 2021			December 31, 2020
Commercial and industrial	$	304,178		$	123,675
Paycheck Protection Program		130,489			292,068
Real estate – construction, commercial		143,215			54,702
Real estate – construction, residential		47,894			18,040
Real estate – mortgage, commercial		672,592			273,499
Real estate – mortgage, residential		490,753			213,404
Real estate – mortgage, farmland		6,537			3,615
Consumer		65,220			46,684
Gross loans		1,860,878			1,025,687
Less: Deferred loan fees, net of costs		(1,008	)		(4,271	)
Total	$	1,859,870		$	1,021,416

In 2020, the Company participated in the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (“PPP 1”). Through the PPP 1, the federal government partnered with banks, including the Bank, to provide over $650 billion to small businesses to support payrolls and other operating expenses. PPP 1 loans have a two-year term if originated prior to June 5, 2020 or a five-year term if originated on or subsequent to June 5, 2020 and earn an annual interest rate of 1%. Banks originating PPP 1 loans earned a processing fee of 1%, 3%, or 5% of the loan amount, depending on the size of the loan. The Company originated approximately $363.4 million in PPP 1 loans in 2020, and as of June 30, 2021, $115.0 million of PPP 1 loans were outstanding, including those acquired in the Bay Banks Merger.

In the first and second quarters of 2021, the Company participated in the PPP pursuant to the Economic Aid Act, passed into law on December 27, 2020 (“PPP 2”), and through June 30, 2021, the Company had funded over 20,000 PPP 2 loans for approximately $728.0 million. PPP 2 loans have a contractual term of five years and earn an annual interest rate of 1%. Banks originating PPP 2 loans earned processing fees that were tiered depending on the size of the loan. Specifically, processing fees for loans of not more than $50,000 equaled 50% of the loan balance or $2,500, whichever was less; processing fees for loans more than $50,000 and not more than $350,000 equaled 5% of the loan balance, and processing fees for loans above $350,000 equaled 3% of the loan balance. Of the PPP 2 loans originated in 2021, approximately 19,500 with principal balances of $712.6 million were sold on June 28, 2021. Gross proceeds from the sale were $705.9 million and the Company recorded a pre-tax gain in noninterest income of $24.3 million on the sale after giving effect to $30.9 million of unamortized fees, net of deferred costs, and the sale discount. As of June 30, 2021, the Company held approximately 600 PPP 2 loans with aggregate principal balances and unamortized fees, net of deferred costs, of $15.7 million and $367 thousand, respectively.

The Company believes that the majority of PPP 1 and PPP 2 loans will be forgiven, in accordance with the terms of the program, and will be paid in full pursuant to the U.S. government guarantee.

The Company is accounting for the PPP processing fees in accordance with ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, which requires fees, net of costs, to be deferred and amortized as a component of loan yield over the expected life of the loans, which the Company believes is 1.5 years for PPP 1 loans and one to three years for PPP 2 loans, depending on the individual loan balance. Of the $11.5 million of processing fees received in 2020 for PPP 1 loans, approximately $69 thousand of unamortized fees remain as of June 30, 2021, with $1.1 million and $3.3 million recognized as a component of interest income for the three and six months ended June 30, 2021, respectively. PPP 2 processing fees, net of costs, totaled $40.8 million through the first half of 2021, of which $8.4 million and $9.5 million were recognized as interest income for the three and six months ended June 30, 2021, respectively, and $30.9 million was recognized as part of the gain on sale in the second quarter of 2021.

From the onset of the global COVID-19 pandemic, the Company has proactively addressed the needs of its commercial and individual borrowers by modifying loans allowing for the short-term deferral of principal payments or of principal and interest payments. Pursuant to the CARES Act and the Economic Aid Act, banks have the option to temporarily suspend certain requirements of GAAP related to TDRs to the earlier of January 1, 2022 or the date that is

60 days after the date on which the national emergency terminates if certain conditions are met. All loan modifications made by the Company were made on a good faith basis to borrowers who met the requirements for modifications under the CARES Act. As a result of regulatory and accounting guidance regarding such modifications, the loans were not designated as TDRs as of June 30, 2021 and December 31, 2020. In response to the COVID-19 pandemic, during 2020, the Company approved over 550 loan deferrals for a total of $110.6 million. In addition, Bay Banks approved nearly 400 loan deferrals for approximately $160.0 million. Most of these loans are now past the deferment period and are back on normal payment schedules, and as of June 30, 2021, 16 loans were in deferment for a total of approximately $5.2 million.

The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $598.4 million and $213.3 million were pledged as of June 30, 2021 and December 31, 2020, respectively. Additionally, PPP loans were pledged as collateral for PPPLF advances in the amount of $97.4 million and $281.6 million as of June 30, 2021 and December 31, 2020, respectively.

As a result of the Bay Banks Merger and the 2019 acquisition of Virginia Community Bankshares, Inc., the acquired loan portfolios were initially measured at fair value as of the respective acquisition dates and subsequently accounted for as either purchased performing loans or PCI loans. The following table presents the outstanding principal balance and related recorded investment of these acquired loans included in the consolidated balance sheets as of the dates stated.

(Dollars in thousands)	June 30, 2021		December 31, 2020
PCI loans
Outstanding principal balance	$	108,220	$	1,278
Recorded investment		94,163		1,085
Purchased performing loans
Outstanding principal balance		877,755		97,301
Recorded investment		874,825		96,317
Total acquired loans
Outstanding principal balance		985,975		98,579
Recorded investment		968,988		97,402

The following table presents the changes in the accretable yield for PCI loans for the periods stated.

	For the three months ended						For the six months ended
(Dollars in thousands)	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Balance, beginning of period	$	9,439		$	169		$	123		$	185
Additions		—			—			10,030			—
Accretion		(1,625	)		(16	)		(2,465	)		(32	)
Reclassification of nonaccretable difference due to improvement in expected cash flows		2			—			106			—
Other changes, net		14			—			36			—
Balance, end of period	$	7,830		$	153		$	7,830		$	153

The following tables present the aging of the recorded investment of loans held for investment as of the dates stated.

	June 30, 2021
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Past Due & Nonaccrual		PCI Loans		Current Loans			Total Loans
Commercial and industrial	$	338	$	332	$	—	$	6,180	$	6,850	$	9,235	$	288,093		$	304,178
Paycheck Protection Program		—		—		—		—		—		—		130,489			130,489
Real estate – construction, commercial		16,593		7		9		89		16,698		22,722		103,795			143,215
Real estate – construction, residential		—		—		451		255		706		—		47,188			47,894
Real estate – mortgage, commercial		2,007		—		28		3,220		5,255		52,945		614,392			672,592
Real estate – mortgage, residential		924		2,182		1,308		1,588		6,002		7,905		476,846			490,753
Real estate – mortgage, farmland		—		—		—		—		—		—		6,537			6,537
Consumer		668		226		97		594		1,585		1,356		62,279			65,220
Less: Deferred loan fees, net of costs		—		—		—		—		—		—		(1,008	)		(1,008	)
Total Loans	$	20,530	$	2,747	$	1,893	$	11,926	$	37,096	$	94,163	$	1,728,611		$	1,859,870

	December 31, 2020
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Past Due & Nonaccrual		PCI Loans		Current Loans			Total Loans
Commercial and industrial	$	1,117	$	—	$	—	$	1,310	$	2,427	$	—	$	121,248		$	123,675
Paycheck Protection Program		—		—		—		—		—		—		292,068			292,068
Real estate – construction, commercial		—		—		—		—		—		35		54,667			54,702
Real estate – construction, residential		262		—		—		—		262		—		17,778			18,040
Real estate – mortgage, commercial		771		211		—		3,643		4,625		808		268,066			273,499
Real estate – mortgage, residential		1,062		—		46		881		1,989		242		211,173			213,404
Real estate – mortgage, farmland		—		—		—		—		—		—		3,615			3,615
Consumer		935		334		—		714		1,983		—		44,701			46,684
Less: Deferred loan fees, net of costs		—		—		—				—				(4,271	)		(4,271	)
Total Loans	$	4,147	$	545	$	46	$	6,548	$	11,286	$	1,085	$	1,009,045		$	1,021,416

The following tables present the aging of the recorded investment of PCI loans as of the dates stated.

	June 30, 2021
(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Current Loans		Total Loans
Commercial and industrial	$	—	$	—	$	9,235	$	9,235
Real estate – construction, commercial		13,904		9		8,809		22,722
Real estate – mortgage, commercial		133		28		52,784		52,945
Real estate – mortgage, residential		1,068		1,308		5,529		7,905
Consumer		20		—		1,336		1,356
Total PCI Loans	$	15,125	$	1,345	$	77,693	$	94,163

	December 31, 2020
(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Current Loans		Total Loans
Real estate – construction, commercial		—		—		35		35
Real estate – mortgage, commercial		224		—		584		808
Real estate – mortgage, residential		35		—		207		242
Total PCI Loans	$	259	$	—	$	826	$	1,085

The Company prepares a quarterly analysis of the ALL, with the objective of quantifying portfolio risk into a dollar amount of inherent losses. The ALL is increased through a provision for loan losses charged against income and

decreased by loans charged-off (net of recoveries, if any). Management’s periodic evaluation of the adequacy of the ALL is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used. The ALL consists of specific and general components. The specific component relates to loans that are identified as impaired and meet certain other criteria, such as size. For loans that are classified as impaired, an allowance is established when the discounted cash flows or the net realizable value of underlying collateral, which is equal to the estimated fair value less estimated costs to sell, of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and those loans classified that are not individually evaluated for impairment and is based on historical loss experience adjusted for other internal or external influences on credit quality that are not fully reflected in the historical data.

The Company follows applicable guidance issued by the FASB. This guidance requires that losses be accrued when they are probable of occurring and can be estimated. It also requires that impaired loans, within its scope, be measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, a creditor may measure impairment based on a loan’s observable market price, or the fair value of the underlying collateral if the loan is collateral dependent.

PPP loans are fully guaranteed by the U.S. government; therefore, the Company recorded no ALL for these loans as of June 30, 2021 and December 31, 2020. In future periods, the Company may be required to establish an ALL for these loans, which would result in a provision for loan losses charged to earnings.

The following tables present a summary of the loan portfolio individually and collectively evaluated for impairment as of the dates stated.

	June 30, 2021
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Total
Originated and purchased performing loans:
Commercial and industrial	$	4,810	$	290,133		$	294,943
Real estate – construction, commercial		536		119,958			120,494
Real estate – construction, residential		—		47,894			47,894
Real estate – mortgage, commercial		1,378		618,269			619,647
Real estate – mortgage, residential		976		481,871			482,847
Real estate – mortgage, farmland		—		6,537			6,537
Consumer		—		63,864			63,864
Total originated and purchased performing loans		7,700		1,628,526			1,636,226
PCI loans:
Commercial and industrial		—		9,235			9,235
Real estate – construction, commercial		—		22,721			22,721
Real estate – mortgage, commercial		—		52,945			52,945
Real estate – mortgage, residential		—		7,906			7,906
Consumer		—		1,356			1,356
Total PCI loans		—		94,163			94,163
Gross loans		7,700		1,722,689			1,730,389
Less: Deferred loan fees, net of costs		—		(722	)		(722	)
Total	$	7,700	$	1,721,967		$	1,729,667

	December 31, 2020
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Total
Originated and purchased performing loans:
Commercial and industrial	$	234	$	123,441		$	123,675
Real estate – construction, commercial		—		54,667			54,667
Real estate – construction, residential		—		18,040			18,040
Real estate – mortgage, commercial		1,645		271,046			272,691
Real estate – mortgage, residential		452		212,710			213,162
Real estate – mortgage, farmland		—		3,615			3,615
Consumer		—		46,684			46,684
Total originated and purchased performing loans		2,331		730,203			732,534
PCI loans:
Real estate – construction, commercial		—		35			35
Real estate – mortgage, commercial		—		808			808
Real estate – mortgage, residential		—		242			242
Total PCI loans		—		1,085			1,085
Gross loans		2,331		731,288			733,619
Less: Deferred loan fees, net of costs		—		(736	)		(736	)
Total	$	2,331	$	730,552		$	732,883

The tables above exclude gross PPP loans of $130.5 million and $292.1 million as of June 30, 2021 and December 2020, respectively.

The following tables present information related to impaired loans by loan type as of the dates presented.

	June 30, 2021						December 31, 2020
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no specific allowance recorded:
Commercial and industrial	$	4,735	$	4,735	$	—	$	234	$	234	$	144
Real estate – construction, commercial		535		535		—		—		—		—
Real estate – mortgage, commercial		182		182		—		1,645		2,030		—
Real estate – mortgage, residential		919		919		—		452		571		—
With an allowance recorded:
Real estate – mortgage, commercial		1,188		1,188		387		—		—		—
Real estate – mortgage, residential		57		57		57		—		—		—
	$	7,616	$	7,616	$	444	$	2,331	$	2,835	$	144

	For the three months ended
	June 30, 2021				June 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	4,324	$	49	$	—	$	—
Real estate – construction, commercial		537		8		—		—
Real estate – mortgage, commercial		185		3		—		—
Real estate – mortgage, residential		920		7		581		—
With an allowance recorded:
Commercial and industrial		—		—		265		—
Real estate – mortgage, commercial		1,207		17		—		—
Real estate – mortgage, residential		57		—		376		—
	$	7,230	$	84	$	1,222	$	—

	For the six months ended
	June 30, 2021				June 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	4,409	$	99	$	—	$	—
Real estate – construction, commercial		539		16		—		—
Real estate – mortgage, commercial		210		7		—		—
Real estate – mortgage, residential		890		13		581		—
With an allowance recorded:
Commercial and industrial		—		—		265		1
Real estate – mortgage, commercial		1,211		34		—		—
Real estate – mortgage, residential		116		—		376		2
	$	7,375	$	169	$	1,222	$	3

Impaired loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as non-performing at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. The Company had three TDRs in the amount of $192 thousand as of June 30, 2021, two of which were classified as a TDR due to a change in interest rate and payment terms and one of which was classified as a TDR due to a change in payment terms. The Company had two TDRs in the amount of $142 thousand as of December 31, 2020, one of which was classified as a TDR due to a change in interest rate and payment terms and the other loan was classified as a TDR due to a change in payment terms.

The following table presents an analysis of the change in the ALL by loan type as of and for the periods stated.

	For the three months ended						For the six months ended
(Dollars in thousands)	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
ALL, beginning of period	$	13,402		$	4,897		$	13,827		$	4,572
Charge-offs
Commercial and industrial	$	(857	)	$	—		$	(1,216	)	$	—
Real estate – mortgage		(1	)		—			(13	)		—
Consumer		(133	)		(255	)		(396	)		(574	)
Total charge-offs		(991	)		(255	)		(1,625	)		(574	)
Recoveries
Commercial and industrial		394			—			450			1
Real estate – mortgage		87			—			103			—
Consumer		115			64			252			132
Total recoveries		596			64			805			133
Net charge-offs		(395	)		(191	)		(820	)		(441	)
Provision for loan losses		—			3,500			—			4,075
ALL, end of period	$	13,007		$	8,206		$	13,007		$	8,206

The following tables summarize the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment for the periods stated

	For the three months ended June 30, 2021
(Dollars in thousands)	Commercial and Industrial			Real Estate – Construction Commercial			Real Estate – Construction Residential			Real Estate – Mortgage, Commercial		Real Estate – Mortgage, Residential			Real Estate – Mortgage, Farmland		Consumer			Total
ALL, beginning of period	$	3,459		$	960		$	150			4,215	$	1,485		$	18	$	3,115		$	13,402
Charge-offs		(857	)		—			—			—		(1	)		—		(133	)		(991	)
Recoveries		394			—			—			79		8			—		115			596
Provision for loan losses		502			(208	)		(72	)		1,953		(734	)		5		(1,446	)		—
ALL, end of period	$	3,498		$	752		$	78		$	6,247	$	758		$	23	$	1,651		$	13,007
Individually evaluated for impairment	$	—		$	—		$	—		$	387	$	57		$	—	$	—		$	444
Collectively evaluated for impairment	$	3,498		$	752		$	78		$	5,860	$	701		$	23	$	1,651		$	12,563

	For the six months ended June 30, 2021
(Dollars in thousands)	Commercial and Industrial			Real Estate – Construction Commercial			Real Estate – Construction Residential			Real Estate – Mortgage Commercial		Real Estate – Mortgage Residential			Real Estate – Mortgage, Farmland		Consumer			Total
ALL, beginning of period	$	3,762		$	960		$	150			4,215	$	1,481		$	18	$	3,241		$	13,827
Charge-offs		(1,216	)		—			—			—		(13	)		—		(396	)		(1,625	)
Recoveries		450			—			—			79		24			—		252			805
Provision for loan losses		502			(208	)		(72	)		1,953		(734	)		5		(1,446	)		—
ALL, end of period	$	3,498		$	752		$	78		$	6,247	$	758		$	23	$	1,651		$	13,007
Individually evaluated for impairment	$	—		$	—		$	—		$	387	$	57		$	—	$	—		$	444
Collectively evaluated for impairment	$	3,498		$	752		$	78		$	5,860	$	701		$	23	$	1,651		$	12,563

The Company 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, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk (loan grade). This analysis typically includes larger non-homogeneous loans, such

as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained.

The following tables present the Company’s loan portfolio by internal loan grade as of the dates stated.

	June 30, 2021
(Dollars in thousands)	Grade 1 Prime		Grade 2 Desirable		Grade 3 Good		Grade 4 Acceptable		Grade 5 Pass/Watch		Grade 6 Special Mention		Grade 7 Substandard		Total
Commercial and industrial	$	5,324	$	3,578	$	133,649	$	131,944	$	13,441	$	5,787	$	10,455	$	304,178
Paycheck Protection Program		130,489		—		—		—		—		—		—		130,489
Real estate – construction, commercial		—		538		36,043		76,956		8,625		18,988		2,065		143,215
Real estate – construction, residential		108		33		19,401		21,681		6,416		—		255		47,894
Real estate – mortgage, commercial		—		3,766		325,958		235,860		41,193		56,990		8,825		672,592
Real estate – mortgage residential		1,663		9,393		313,336		142,353		14,530		4,158		5,320		490,753
Real estate – mortgage, farmland		384		—		1,172		4,981		—		—		—		6,537
Consumer		354		44		18,655		43,373		1,685		496		613		65,220
Gross loans	$	138,322	$	17,352	$	848,214	$	657,148	$	85,890	$	86,419	$	27,533	$	1,860,878
Less: Deferred loan fees, net of costs																(1,008	)
Total															$	1,859,870

	December 31, 2020
(Dollars in thousands)	Grade 1 Prime		Grade 2 Desirable		Grade 3 Good		Grade 4 Acceptable		Grade 5 Pass/Watch		Grade 6 Special Mention		Grade 7 Substandard		Total
Commercial and industrial	$	844	$	484	$	23,828	$	85,928	$	7,251	$	4	$	5,336	$	123,675
Paycheck Protection Program		292,068		—		—		—		—		—		—		292,068
Real estate – construction, commercial		—		2,143		19,524		26,324		5,916		218		577		54,702
Real estate – construction, residential		—		—		3,073		8,247		6,458		—		262		18,040
Real estate – mortgage, commercial		—		3,994		128,163		114,977		15,799		2,968		7,598		273,499
Real estate – mortgage residential		—		3,583		101,078		100,601		5,750		158		2,234		213,404
Real estate – mortgage, farmland		444		—		1,175		1,996		—		—		—		3,615
Consumer		324		36		17,062		28,033		521		1		707		46,684
Gross loans	$	293,680	$	10,240	$	293,903	$	366,106	$	41,695	$	3,349	$	16,714	$	1,025,687
Less: Deferred loan fees, net of costs																(4,271	)
Total															$	1,021,416