The Company has certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. Management reviews and the Board of Directors approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand their business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. However, the cash flows of borrowers may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and generally incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria.

With respect to loans to developers and builders secured by non-owner occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption, lease rates, and financial analysis of developers and property owners. Construction and land development loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction and land development loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or permanent financing from the Company. These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.

The Company originates consumer loans utilizing a judgmental underwriting process. Policies and procedures are developed and modified, as needed, by management to monitor and manage consumer loan risk. This activity, coupled with relatively small loan amounts spread across many individual borrowers, minimizes risk.

The Company engages an independent loan review vendor that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management and the Audit Committee. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020 and provided over $2 trillion in economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, the Company was automatically authorized to originate PPP loans. The PPP provides loans to small businesses who have been affected by economic conditions as a result of COVID-19 to provide cash flow assistance to employers who maintain their payroll (including

healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. During 2021 and 2020, the Company originated 1,351 PPP loans with principal balances of $128.9 million. The PPP loans are 100% guaranteed by the SBA and are eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made if certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. As of December 31, 2021, the Company has received $124.3 million in loan forgiveness from the SBA. The remaining $4.6 million of PPP loans are included in the Commercial loan category with no allowance for loan losses allocated.

In accordance with the SBA terms and conditions on these PPP loans, the Company received approximately $5.4 million in fees associated with the processing of these loans. Upon funding of the loans, these fees were deferred and are being amortized over the life of the loan as an adjustment to yield in accordance with FASB ASC 310-20-25-2. During 2021 and 2020, $3.0 million and $2.2 million of these fees were recognized in income, respectively with $170 thousand remaining to be recognized.

Nearly all the Company’s lending activity occurs within the State of Ohio, including the four counties of Holmes, Stark, Tuscarawas, and Wayne, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and industrial and commercial real estate loans. Credit concentrations, including commitments, as determined using North American Industry Classification Codes (NAICS), to the four largest industries compared to total loans at December 31, 2021, included $52 million, or 9%, of total loans to lessors of non-residential buildings or dwellings; $33 million, or 6%, of total loans to assisted living facilities for the elderly; $28 million, or 5%, of total loans to lessors of other real estate property; and $14 million, or 3%, of total loans to lessors of residential buildings and dwellings. These loans are generally secured by real property and equipment, with repayment expected from operational cash flow. Credit evaluation is based on a review of cash flow coverage of principal, interest payments, and the adequacy of the collateral received.

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2021, 2020, and 2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

During 2021, the increase in the provision for loan losses for construction and land development loans was primarily related to loans to assisted living facilities that have been affected by the COVID-19 pandemic. The decrease in the provision related to commercial, commercial real estate and residential real estate loans was primarily related to the improvement in economic conditions along with fewer delinquent and nonperforming loans and improvement in adversely classified loans. The provision related to consumer loans increased primarily as a result of the increase in historical losses of loans in this category.

During 2020, the increase in the provision for loan losses for commercial real estate loans was primarily related to businesses affected by the COVID economic shutdown. The provision for losses in the construction and land development category also increased due to effects of the COVID shutdown as well as the increase in volume of loans. The provision related to commercial loans decreased primarily as a result of the decrease in loans graded special mention along with the decrease in historical losses of loans in this category.

During 2019, the increase in the provision for loan losses related to commercial loans was primarily related to loans in the sawmill industry affected by tariffs on trade with China along with an increase in loans in the special mention category. The increase in the provision for commercial real estate loans was primarily related to the $13 million increase in loan volume. The increase in the provision related to consumer loans was due to historical losses of loans in this category. The decrease in the provision related to residential real estate loans was primarily related to the decrease in specific allocation amounts related to three mortgage loans.

(Dollars in thousands)	Commercial			Commercial Real Estate			Residential Real Estate			Construction & Land Development			Consumer			Unallocated			Total
December 31, 2021
Beginning balance	$	1,739		$	3,469		$	1,156		$	756		$	352		$	802		$	8,274
Provision for loan losses		(495	)		(639	)		(189	)		624			99			(55	)		(655	)
Charge-offs		(35	)		—			—			—			(95	)					(130	)
Recoveries		31			8			25			—			65						129
Net (charge-offs) recoveries		(4	)		8			25			—			(30	)					(1	)
Ending balance	$	1,240		$	2,838		$	992		$	1,380		$	421		$	747		$	7,618

December 31, 2020
Beginning balance	$	2,408		$	2,153		$	1,152		$	203		$	481		$	620		$	7,017
Provision for loan losses		(722	)		1,413			16			865			(104	)		182			1,650
Charge-offs		(77	)		(138	)		(15	)		(312	)		(100	)					(642	)
Recoveries		130			41			3			—			75						249
Net (charge-offs) recoveries		53			(97	)		(12	)		(312	)		(25	)		—			(393	)
Ending balance	$	1,739		$	3,469		$	1,156		$	756		$	352		$	802		$	8,274

December 31, 2019
Beginning balance	$	2,178		$	1,791		$	1,245		$	258		$	306		$	129		$	5,907
Provision for loan losses		102			361			(100	)		(55	)		341			491			1,140
Charge-offs		(47	)		—			—			—			(211	)					(258	)
Recoveries		175			1			7			—			45						228
Net (charge-offs) recoveries		128			1			7			—			(166	)		—			(30	)
Ending balance	$	2,408		$	2,153		$	1,152		$	203		$	481		$	620		$	7,017

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio segment and impairment method as of December 31:

(Dollars in thousands)	Commercial		Commercial Real Estate		Residential Real Estate		Construction & Land Development		Consumer		Unallocated		Total
2021
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$	208	$	9	$	2	$	—		3	$	—	$	222
Collectively evaluated for impairment		1,032		2,829		990		1,380		418		747		7,396
Total ending allowance balance	$	1,240	$	2,838	$	992	$	1,380	$	421	$	747	$	7,618

Loans:
Loans individually evaluated for impairment	$	342	$	291	$	856	$	329	$	137			$	1,955
Loans collectively evaluated for impairment		123,591		194,463		167,391		45,713		15,937				547,095
Total ending loans balance	$	123,933	$	194,754	$	168,247	$	46,042	$	16,074			$	549,050

2020
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$	4	$	20	$	1	$	—		5	$	—	$	30
Collectively evaluated for impairment		1,735		3,449		1,155		756		347		802		8,244
Total ending allowance balance	$	1,739	$	3,469	$	1,156	$	756	$	352	$	802	$	8,274

Loans:
Loans individually evaluated for impairment	$	2,560	$	2,875	$	756	$	—	$	141			$	6,332
Loans collectively evaluated for impairment		188,980		184,346		176,399		36,038		17,775				603,538
Total ending loans balance	$	191,540	$	187,221	$	177,155	$	36,038	$	17,916			$	609,870

The following table presents loans individually evaluated for impairment by class of loans as of December 31:

(Dollars in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment ¹		Related Allowance		Average Recorded Investment		Interest Income Recognized
2021
Commercial	$	354	$	134	$	208	$	342	$	208	$	1,397	$	23
Commercial real estate		433		233		59		292		9		1,945		85
Residential real estate		925		571		291		862		2		826		31
Construction & land development		646		330		—		330		—		330		—
Consumer		141		23		119		142		3		132		8
Total impaired loans	$	2,499	$	1,291	$	677	$	1,968	$	222	$	4,630	$	147

2020
Commercial	$	2,604	$	1,965	$	597	$	2,562	$	4	$	2,305	$	66
Commercial real estate		3,755		2,673		211		2,884		20		2,569		13
Residential real estate		923		513		247		760		1		782		33
Consumer		143		—		146		146		5		114		7
Total impaired loans	$	7,425	$	5,151	$	1,201	$	6,352	$	30	$	5,770	$	119

2019
Commercial	$	2,982	$	2,541	$	16	$	2,557	$	16	$	2,054	$	68
Commercial real estate		2,952		2,471		176		2,647		17		2,517		11
Residential real estate		1,024		457		396		853		1		1,093		54
Consumer		14		14		—		14		—		12		1
Total impaired loans	$	6,972	$	5,483	$	588	$	6,071	$	34	$	5,676	$	134

The following table presents the aging of accruing past due and nonaccrual loans by class of loans as of December 31:

			Accruing Loans
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Nonaccrual		Total Past Due and Nonaccrual		Total Loans
2021
Commercial	$	123,698	$	5	$	17	$	5	$	208	$	235	$	123,933
Commercial real estate		194,615		—		—		—		139		139		194,754
Residential real estate		167,689		191		—		—		367		558		168,247
Construction & land development		45,713		—		—		—		329		329		46,042
Consumer		15,863		171		—		—		40		211		16,074
Total loans	$	547,578	$	367	$	17	$	5	$	1,083	$	1,472	$	549,050

2020
Commercial	$	190,264	$	51	$	—	$	—	$	1,225	$	1,276	$	191,540
Commercial real estate		185,005		11		—		—		2,205		2,216		187,221
Residential real estate		175,812		606		—		49		688		1,343		177,155
Construction & land development		35,721		—		—		—		317		317		36,038
Consumer		17,713		168		22		—		13		203		17,916
Total loans	$	604,515	$	836	$	22	$	49	$	4,448	$	5,355	$	609,870

The Company offered loan modifications to customers under the COVID-19 loan modification program. Loan modifications consisted of three (3) to four (4) months deferral of principal and interest payments, and extension of maturity date. During 2021, there were five loans

totaling $1.1 million, granted modifications under this program. During 2020, there were 197 loans granted modifications totaling $64.9 million. As of December 31, 2021 there was one modified loan for $125 thousand in nonaccrual status and one loan for $148 thousand that was 30 days past due. All remaining loans provided modifications were performing in accordance with their terms as of December 31, 2021. In accordance with the CARES Act, these loans are not required to be evaluated as TDR’s.

The Company had troubled debt restructurings (“TDRs”) of $1.3 million as of December 31, 2021, with $14 thousand of specific reserves allocated to customers whose loan terms have been modified in TDRs. On December 31, 2021, $1.2 million of the loans classified as TDRs were performing in accordance with their modified terms. The remaining $98 thousand were classified as nonaccrual. On December 31, 2020, the Company had TDRs of $2.8 million, with $30 thousand of specific reserves allocated.

Loan modifications considered TDRs completed during the year ended December 31 were as follows:

(Dollars in thousands)	Number Of Loans Restructured		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
2021
Commercial		4	$	960	$	960
Commercial Real Estate		2		1,686		1,686
Residential Real Estate		1		159		159
Consumer		1		13		13
Total restructured loans		8	$	2,818	$	2,818

2020
Commercial		6	$	648	$	648
Commercial Real Estate		2		177		177
Residential Real Estate		2		189		189
Consumer		6		146		146
Total restructured loans		16	$	1,160	$	1,160

2019
Commercial		1	$	17	$	17
Total restructured loans		1	$	17	$	17

The loans restructured were modified by changing the monthly payment to interest only and extending the maturity dates. No principal reductions were made. There was one loan in the amount of $200 thousand restructured in 2018 that has subsequently defaulted in 2019.

There was no other real estate owned on December 31, 2021, or 2020, respectively. There were no mortgage loans in the process of foreclosure on December 31, 2021, and $21 thousand on December 31, 2020.

The Company categorizes commercial and commercial real estate 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, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial and commercial real estate loans individually by classifying the loans as to credit risk. This analysis includes commercial loans with an outstanding balance greater than $500 thousand. This analysis is performed on an annual basis.

Pass. Loans classified as pass (Cash Secured, Exceptional, Acceptable, Monitor or Pass Watch) may exhibit a wide array of characteristics but at a minimum represent an acceptable risk to the Bank. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity, and adequate cash flow. Loans are considered fully collectible and require an average amount of administration. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank. Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure.

Special Mention. Loans classified as special mention have a material weakness deserving of management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses jeopardizing 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, values, highly questionable, and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Loans listed as not rated are either less than $500 thousand or are included in groups of homogeneous loans. Based on the most recent analysis performed, the risk category of loans by class was as follows on December 31:

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
2021
Commercial	$	114,608	$	5,959	$	2,203	$	—	$	1,163	$	123,933
Commercial real estate		176,547		7,313		10,186		—		708		194,754
Construction & land development		33,205		5,439		329		—		7,069		46,042
Total	$	324,360	$	18,711	$	12,718	$	—	$	8,940	$	364,729

2020
Commercial	$	177,620	$	2,352	$	9,644	$	—	$	1,924	$	191,540
Commercial real estate		161,091		2,545		21,812		—		1,773		187,221
Construction & land development		29,182		—		—		317		6,539		36,038
Total	$	367,893	$	4,897	$	31,456	$	317	$	10,236	$	414,799

Management monitors the credit quality of residential real estate and consumer loans as homogenous groups. These loans are evaluated based on delinquency status and included in the past due table in this section. Nonperforming loans include loans past due 90 days and greater and loans on nonaccrual of interest status.

For the years ended December 31, 2021, and 2020, the Company had outstanding MSRs of $604 thousand and $488 thousand, respectively. No valuation allowance was recorded on December 31, 2021, or 2020, as the fair value of the MSRs exceeded their carrying value. On December 31, 2021, the Company had $133.8 million residential mortgage loans with servicing retained as compared to $107.1 million with servicing retained on December 31, 2020.

Total loans serviced for others approximated $142.1 million and $117.5 million on December 31, 2021, and 2020, respectively.