OTE

–

LOANS

AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:	March 31,			December 31,
	2020			2019
Residential real estate	$	307,879		$	310,253
Commercial real estate:
Owner-occupied		55,515			55,825
Nonowner-occupied		137,141			131,398
Construction		34,892			34,913
Commercial and industrial		102,570			100,023
Consumer:
Automobile		61,729			63,770
Home equity		21,894			22,882
Other		53,466			53,710
		775,086			772,774
Less: Allowance for loan losses		(8,729	)		(6,272	)

Loans, net	$	766,357		$	766,502

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

March 31, 2020

and

2019:

March 31, 2020	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,250		$	1,928		$	1,447		$	1,647		$	6,272
Provision for loan losses		926			1,572			624			724			3,846
Loans charged off		(198	)		(516	)		(33	)		(889	)		(1,636	)
Recoveries		24			44			7			172			247
Total ending allowance balance	$	2,002		$	3,028		$	2,045		$	1,654		$	8,729

March 31, 2019	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,583		$	2,186		$	1,063		$	1,896		$	6,728
Provision for loan losses		813			393			473			699			2,378
Loans charged-off		(329	)		(141	)		(233	)		(658	)		(1,361	)
Recoveries		12			14			12			230			268
Total ending allowance balance	$	2,079		$	2,452		$	1,315		$	2,167		$	8,013

The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	409	$	445	$	----	$	854
Collectively evaluated for impairment		2,002		2,619		1,600		1,654		7,875
Total ending allowance balance	$	2,002	$	3,028	$	2,045	$	1,654	$	8,729

Loans:
Loans individually evaluated for impairment	$	428	$	5,088	$	5,207	$	403	$	11,126
Loans collectively evaluated for impairment		307,451		222,460		97,363		136,686		763,960
Total ending loans balance	$	307,879	$	227,548	$	102,570	$	137,089	$	775,086

December 31, 2019	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	385	$	303	$	119	$	807
Collectively evaluated for impairment		1,250		1,543		1,144		1,528		5,465
Total ending allowance balance	$	1,250	$	1,928	$	1,447	$	1,647	$	6,272

Loans:
Loans individually evaluated for impairment	$	438	$	11,300	$	4,910	$	487	$	17,135
Loans collectively evaluated for impairment		309,815		210,836		95,113		139,875		755,639
Total ending loans balance	$	310,253	$	222,136	$	100,023	$	140,362	$	772,774

The following tables present information related to loans individually evaluated for impairment by class of loans as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded
Commercial real estate:
Owner-occupied	$	868	$	868	$	409
Commercial and industrial		1,222		1,222		445
With no related allowance recorded:
Residential real estate		428		428		----
Commercial real estate:
Owner-occupied		3,201		3,201		----
Nonowner-occupied		1,019		1,019		----
Commercial and industrial		3,985		3,985		----
Consumer:
Home equity		403		403		----
Total	$	11,126	$	11,126	$	854

December 31, 2019	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	2,030	$	2,030	$	385
Commercial and industrial		4,861		4,861		303
Consumer:
Automobile		8		8		8
Other		111		111		111
With no related allowance recorded:
Residential real estate		438		438		----
Commercial real estate:
Owner-occupied		1,778		1,778		----
Nonowner-occupied		7,492		7,492		----
Commercial and industrial		49		49		----
Consumer:
Home equity		368		368		----
Total	$	17,135	$	17,135	$	807

The following tables present information related to loans individually evaluated for impairment by class of loans for the

three

months ended

March 31, 2020

and

2019:

	Three months ended March 31, 2020
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded
Commercial real estate:
Owner-occupied	$	875	$	9	$	9
Commercial and industrial		611		7		7
With no related allowance recorded:
Residential real estate		433		4		4
Commercial real estate:
Owner-occupied		2,754		48		48
Nonowner-occupied		1,033		11		11
Commercial and industrial		4,279		66		66
Consumer:
Home equity		385		5		5
Total	$	10,370	$	150	$	150

	Three months ended March 31, 2019
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	1,255	$	7	$	7
Commercial real estate:
Owner-occupied		78		2		2
Nonowner-occupied		360		----		----
Commercial and industrial		984		36		36
Consumer:
Home equity		3		----		----
With no related allowance recorded:
Residential real estate		451		4		4
Commercial real estate:
Owner-occupied		2,862		52		52
Nonowner-occupied		4,177		112		112
Commercial and industrial		5,258		84		84
Total	$	15,428	$	297	$	297

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.

Nonaccrual loans and loans past due

days or more and still accruing include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified as impaired loans.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of

March 31, 2020,

there were

other real estate owned for residential real estate properties, as compared to

$68

December 31, 2019.

In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of

$831

and

$1,780

as of

March 31, 2020

and

December 31, 2019,

respectively.

The following table presents the recorded investment of nonaccrual loans and loans past due

days or more and still accruing by class of loans as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	Loans Past Due 90 Days And Still Accruing		Nonaccrual

Residential real estate	$	360	$	5,867
Commercial real estate:
Owner-occupied		60		348
Nonowner-occupied		----		724
Construction		----		237
Commercial and industrial		1,192		534
Consumer:
Automobile		116		77
Home equity		----		359
Other		255		49
Total	$	1,983	$	8,195

December 31, 2019	Loans Past Due 90 Days And Still Accruing		Nonaccrual

Residential real estate	$	255	$	6,119
Commercial real estate:
Owner-occupied		----		863
Nonowner-occupied		----		804
Construction		----		229
Commercial and industrial		----		590
Consumer:
Automobile		239		61
Home equity		----		392
Other		395		91
Total	$	889	$	9,149

The following table presents the aging of the recorded investment of past due loans by class of loans as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate	$	3,499	$	1,153	$	2,456	$	7,108	$	300,771	$	307,879
Commercial real estate:
Owner-occupied		1,951		----		313		2,264		53,251		55,515
Nonowner-occupied		1,457		----		601		2,058		135,083		137,141
Construction		52		----		68		120		34,772		34,892
Commercial and industrial		287		47		1,726		2,060		100,510		102,570
Consumer:
Automobile		1,200		275		190		1,665		60,064		61,729
Home equity		212		80		255		547		21,347		21,894
Other		519		205		264		988		52,478		53,466
Total	$	9,177	$	1,760	$	5,873	$	16,810	$	758,276	$	775,086

December 31, 2019	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate	$	4,015	$	1,314	$	1,782	$	7,111	$	303,142	$	310,253
Commercial real estate:
Owner-occupied		383		59		144		586		55,239		55,825
Nonowner-occupied		12		----		697		709		130,689		131,398
Construction		186		19		49		254		34,659		34,913
Commercial and industrial		1,320		312		241		1,873		98,150		100,023
Consumer:
Automobile		986		329		246		1,561		62,209		63,770
Home equity		106		18		279		403		22,479		22,882
Other		559		139		443		1,141		52,569		53,710
Total	$	7,567	$	2,190	$	3,881	$	13,638	$	759,136	$	772,774

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDRs are considered to be impaired. The modification of the terms of such loans included

one

or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a reduction in the contractual principal and interest payments of the loan; or short-term interest-only payment terms.

The Company has allocated reserves for a portion of its TDRs to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer.

The following table presents the types of TDR loan modifications by class of loans as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
Residential real estate:
Interest only payments	$	207	$	----	$	207
Commercial real estate:
Owner-occupied
Interest only payments		868		----		868
Reduction of principal and interest payments		1,509		----		1,509
Maturity extension at lower stated rate than market rate		373		----		373
Credit extension at lower stated rate than market rate		391		----		391
Nonowner-occupied
Credit extension at lower stated rate than market rate		394		----		394
Commercial and industrial:
Interest only payments		3,984		----		3,984

Total TDRs	$	7,726	$	----	$	7,726

December 31, 2019	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
Residential real estate:
Interest only payments	$	209	$	----	$	209
Commercial real estate:
Owner-occupied
Interest only payments		882		----		882
Reduction of principal and interest payments		1,521		----		1,521
Maturity extension at lower stated rate than market rate		393		----		393
Credit extension at lower stated rate than market rate		393		----		393
Nonowner-occupied
Credit extension at lower stated rate than market rate		395		----		395
Commercial and industrial:
Interest only payments		4,574		----		4,574
Reduction of principal and interest payments		185		----		185

Total TDRs	$	8,552	$	----	$	8,552

March 31, 2020,

the balance in TDR loans decreased

$826,

9.7%,

from year-end

2019.

The Company’s specific allocations in reserves to customers whose loan terms have been modified in TDRs totaled

$450

March 31, 2020,

as compared to

$227

in reserves at

December 31, 2019.

March 31, 2020,

the Company had

$1,516

in commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs, as compared to

$941

December 31, 2019.

There were

TDR loan modifications that occurred during the

three

months ended

March 31, 2020.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the

three

months ended

March 31, 2019:

		TDRs Performing to Modified Terms				TDRs Not Performing to Modified Terms
Three months ended March 31, 2019	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial real estate:
Owner-occupied
Reduction of principal and interest payments	1	$	1,036	$	1,036	$	----	$	----
Commercial and Industrial:
Reduction of principal and interest payments	1		199		199
Total TDRs	2	$	1,235	$	1,235	$	----	$	----

The TDRs described above had

impact on the allowance for loan losses and resulted in

charge-offs during the

three

months ended

March 31, 2019.

The Company had

TDRs that occurred during the

three

months ended

March 31, 2020

March 31, 2019

that experienced any payment defaults within

twelve

months following their loan modification. A default is considered to have occurred once the TDR is past due

days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Under the terms of the CARE Act, as of

March 31, 2020,

the Company had modified

loans related to the COVID-

pandemic with an aggregate loan balance of

$15,934

that were

not

reported as TDRs in the tables presented above. As of

May 7, 2020,

the volume of COVID-

modifications had increased to

593

loans with an aggregate loan balance of

$128,262.

Credit Quality Indicators:

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, credit documentation, public information, and current economic trends, among other factors. These risk categories are represented by a loan grading scale from

through

11.

The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and ”classified” assets. The Company considers its criticized assets to be loans that are graded

and its classified assets to be loans that are graded

through

11.

The Company’s risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed

$750.

The Company uses the following definitions for its criticized loan risk ratings:

Special Mention.

Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are

not

classified and do

not

expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy

may

be necessary to correct the deficiencies. These loans are considered bankable assets with

apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a TDR should be graded

higher than special mention until they have been reported as performing over

one

year after restructuring.

The Company uses the following definitions for its classified loan risk ratings:

Substandard.

Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of

one

or more well defined weaknesses and the collateral pledged

may

inadequately protect collection of the loans. Loss of principal is

not

likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade

loans. Collateral liquidation is considered likely to satisfy debt.

Doubtful.

Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This classification should be temporary until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which

may

strengthen the credit can be more accurately determined. These factors

may

include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.

Loss

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

not

warranted. This classification does

not

mean that the credit has absolutely

recovery or salvage value, but rather it is

not

practical or desirable to defer writing off this asset yielding such a minimum value even though partial recovery

may

be affected in the future. Amounts classified as loss should be promptly charged off.

Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do

not

meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from

(Prime) to

(Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of

March 31, 2020

and

December 31, 2019,

and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

March 31, 2020	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	47,876	$	1,634	$	6,005	$	55,515
Nonowner-occupied		129,848		6,309		984		137,141
Construction		34,843		----		49		34,892
Commercial and industrial		92,468		4,071		6,031		102,570
Total	$	305,035	$	12,014	$	13,069	$	330,118

December 31, 2019	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	49,486	$	2,889	$	3,450	$	55,825
Nonowner-occupied		123,847		----		7,551		131,398
Construction		34,864		----		49		34,913
Commercial and industrial		89,749		298		9,976		100,023
Total	$	297,946	$	3,187	$	21,026	$	322,159

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are

not

updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does

not

consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading.

For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on repayment activity as of

March 31, 2020

and

December 31, 2019:

March 31, 2020	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total

Performing	$	61,536	$	21,535	$	53,162	$	301,652	$	437,885
Nonperforming		193		359		304		6,227		7,083
Total	$	61,729	$	21,894	$	53,466	$	307,879	$	444,968

December 31, 2019	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total

Performing	$	63,470	$	22,490	$	53,224	$	303,879	$	443,063
Nonperforming		300		392		486		6,374		7,552
Total	$	63,770	$	22,882	$	53,710	$	310,253	$	450,615

The Company, through its subsidiaries, originates residential, consumer, and commercial loans to customers located primarily in the southeastern areas of Ohio as well as the western counties of West Virginia. Approximately

5.13%

of total loans were unsecured at

March 31, 2020,

up from

5.00%

December 31, 2019.