2020 Annual Report

The following table presents information on loan classifications at December 31, 2020. The Company had no assets classified as doubtful or loss.

Risk Category

(dollars in thousands)

Watch Substandard

Total

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,516 $

239 $ 14,755

Construction and Land Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate Mortgage: 1 - 4 Family Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CRE Owner Occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

156

156

703

1,498

2,201

— 870 CRE Nonowner Occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,576 12,388 41,964 Total Real Estate Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,279 14,756 45,035 Consumer and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13 13 Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,795 $ 15,164 $ 59,959 The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. Loans that have potential weaknesses that warrant a watchlist risk rating at December 31, 2020, were $44.8 million, compared to $5.3 million at December 31, 2019. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at December 31, 2020 were $15.2 million, compared to $2.7 at December 31, 2019. Subsequent to December 31, 2020, the Company had $8.4 million of substandard loans payoff in the CRE nonowner occupied segment of the portfolio. In response to the COVID-19 pandemic, the Company has been offering loan modifications, when appropriate, to borrowers who were current and otherwise not past due as of December 31, 2019. These include modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered TDRs. 870

The following table presents a rollforward of loan modification activity, by modification type, for the year ended December 31, 2020:

(dollars in thousands)

Interest-Only Payment Deferral Extended Amortization

Total

Principal Balance - Beginning of Period . . . . . $ Initial Modification Granted . . . . . . . . . . . . . Modification Expired . . . . . . . . . . . . . . . . . . . Multiple Modifications Granted . . . . . . . . . . Net Principal Advances (Payments) . . . . . . . Principal Balance - End of Period . . . . . . . . . . $

— $

— $

— $

—

187,354

117,719

— —

305,073

(157,542)

(120,604)

(278,146)

40,271 (8,978)

3,506

4,834

48,611 (8,986) 66,552

(8)

—

61,105 $

613 $

4,834 $

The following table presents a summary of active loan modifications, by loan segment and modification type, at December 31, 2020:

Interest-Only

Payment Deferral Extended Amortization

Total

(dollars in thousands)

Amount # of Loans Amount # of Loans Amount # of Loans Amount # of Loans

Commercial . . . . . . . . . . . . . . . . . $ 5,212

9 $ —

— $ 4,834

1 $ 10,046

10

Real Estate Mortgage: 1 - 4 Family Mortgage . . . . . . .

48

1 1

— —

— —

— — — —

—

48

1 1 3

Multifamily . . . . . . . . . . . . . . . . 23,636

— 23,636 — 613 — 32,209 1 $ 66,552

CRE Owner Occupied . . . . . . .

—

— 11

613

3

CRE Nonowner Occupied . . . . 32,209 Totals. . . . . . . . . . . . . . . . . . . . . $ 61,105

—

—

11 26

22 $ 613

3 $ 4,834

73