Note

Loans

Loans at

March 31, 2020

and

December 31, 2019

are summarized as follows (in thousands):

	March 31, 2020			December 31, 2019
Real estate loans:
Construction and land development	$	40,279		$	43,164
Secured by 1-4 family residential		230,980			229,438
Other real estate loans		241,374			236,555
Commercial and industrial loans		55,508			50,153
Consumer and other loans		13,726			15,036
Total loans	$	581,867		$	574,346
Allowance for loan losses		(5,584	)		(4,934	)
Loans, net	$	576,283		$	569,412

Net deferred loan fees included in the above loan categories were

$366

thousand and

$340

thousand at

March 31, 2020

and

December 31, 2019

, respectively. Consumer and other loans included

$238

thousand and

$374

thousand of demand deposit overdrafts at

March 31, 2020

and

December 31, 2019

, respectively.

Risk characteristics of each loan portfolio class that are considered by the Company include:

•

family residential mortgage loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral.

•

Real estate construction and land development loans carry risks that the project

may

not

be finished according to schedule, the project

may

not

be finished according to budget, and the value of the collateral

may,

at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who

may

not

be a loan customer,

may

be unable to finish the construction project as planned because of financial pressure or other factors unrelated to the project.

•

Other real estate loans carry risks associated with the successful operation of a business or a real estate project, in addition to other risks associated with the ownership of real estate, because repayment of these loans

may

be dependent upon the profitability and cash flows of the business or project.

•

Commercial and industrial loans carry risks associated with the successful operation of a business because repayment of these loans

may

be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which

may

depreciate over time and cannot be appraised with as much reliability.

•

Consumer and other loans carry risk associated with the continued creditworthiness of the borrower and the value of the collateral, if any. These loans are typically either unsecured or secured by rapidly depreciating assets such as automobiles. They are also likely to be immediately and adversely affected by job loss, divorce, illness, personal bankruptcy, or other changes in circumstances. Consumer and other loans also include purchased consumer loans which could have been originated outside of the Company's market area.

The following tables provide a summary of loan classes and an aging of past due loans as of

March 31, 2020

and

December 31, 2019

(in thousands):

	March 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non-accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	110	$	—	$	110	$	220	$	40,059	$	40,279	$	400	$	—
Secured by 1-4 family residential		1,614		164		170		1,948		229,032		230,980		667		67
Other real estate loans		952		—		411		1,363		240,011		241,374		455		—
Commercial and industrial		40		14		—		54		55,454		55,508		—		—
Consumer and other loans		89		100		19		208		13,518		13,726		—		19
Total	$	2,805	$	278	$	710	$	3,793	$	578,074	$	581,867	$	1,522	$	86

	December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non-accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	—	$	136	$	30	$	166	$	42,998	$	43,164	$	367	$	30
Secured by 1-4 family residential		1,428		306		115		1,849		227,589		229,438		630		67
Other real estate loans		457		—		416		873		235,682		236,555		462		—
Commercial and industrial		45		50		—		95		50,058		50,153		—		—
Consumer and other loans		83		79		—		162		14,874		15,036		—		—
Total	$	2,013	$	571	$	561	$	3,145	$	571,201	$	574,346	$	1,459	$	97

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans. The Company utilizes a risk grading matrix to assign a rating to each of its loans. The loan ratings are summarized into the following categories: pass, special mention, substandard, doubtful, and loss. Pass rated loans include all risk rated credits other than those included in special mention, substandard, or doubtful. Loans classified as loss are charged-off. Loan officers assign risk grades to loans at origination and as renewals arise. The Bank’s Credit Administration department reviews risk grades for accuracy on a quarterly basis and as credit issues arise. In addition, a certain amount of loans are reviewed each year through the Company’s internal and external loan review process. A description of the general characteristics of the loan grading categories is as follows:

Pass –

Loans classified as pass exhibit acceptable operating trends, balance sheet trends, and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower as agreed.

Special Mention –

Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the loan or the Bank’s credit position at some future date.

Substandard –

Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are

not

corrected.

Doubtful –

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on non-accrual status.

Loss –

Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is

not

warranted.

The following tables provide an analysis of the credit risk profile of each loan class as of

March 31, 2020

and

December 31, 2019

(in thousands):

	March 31, 2020
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	39,720	$	—	$	559	$	—	$	40,279
Secured by 1-4 family residential		229,539		519		922		—		230,980
Other real estate loans		238,643		—		2,731		—		241,374
Commercial and industrial		52,325		1,505		1,678		—		55,508
Consumer and other loans		9,692		4,034		—		—		13,726
Total	$	569,919	$	6,058	$	5,890	$	—	$	581,867

	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	42,636	$	—	$	528	$	—	$	43,164
Secured by 1-4 family residential		228,029		524		885		—		229,438
Other real estate loans		233,240		537		2,778		—		236,555
Commercial and industrial		48,527		948		678		—		50,153
Consumer and other loans		10,976		4,060		—		—		15,036
Total	$	563,408	$	6,069	$	4,869	$	—	$	574,346