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LOANS AND ALLOWANCE FOR LOAN LOSSES
 6 Months Ended
Jun. 30, 2021
LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract]  
LOANS AND ALLOWANCE FOR LOAN LOSSES
NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:

  
June 30,
2021
    
December 31,
2020
  
             
Residential real estate
  
$
281,729
    
$
305,478
  
Commercial real estate:
                
Owner-occupied
    
74,556
      
51,863
  
Nonowner-occupied
    
176,775
      
164,523
  
   Construction
    
32,610
      
37,063
  
Commercial and industrial
    
143,757
      
157,692
  
Consumer:
                
Automobile
    
53,413
      
55,241
  
Home equity
    
20,852
      
19,993
  
Other
    
64,224
      
56,811
  
     
847,916
      
848,664
  
Less:  Allowance for loan losses
    
(6,799
)
    
(7,160
)
                 
Loans, net
  
$
841,117
    
$
841,504
  

Commercial and industrial loans include $8,531 of loans originated under the PPP at June 30, 2021.  These loans are guaranteed by the SBA.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2021 and 2020:

June 30, 2021
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
1,377
    
$
2,346
    
$
1,791
    
$
1,373
    
$
6,887
  
Provision for loan losses
    
(293
)
    
219
      
(55
)
    
156
      
27
  
Loans charged off
    
(25
)
    
(42
)
    
—
      
(240
)
    
(307
)
Recoveries
    
29
      
15
      
4
      
144
      
192
  
Total ending allowance balance
  
$
1,088
    
$
2,538
    
$
1,740
    
$
1,433
    
$
6,799
  

June 30, 2020
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
2,002
    
$
3,028
    
$
2,045
    
$
1,654
    
$
8,729
  
Provision for loan losses
    
64
      
(343
)
    
(349
)
    
235
      
(393
)
Loans charged-off
    
(52
)
    
—
      
(56
)
    
(390
)
    
(498
)
Recoveries
    
10
      
15
      
9
      
109
      
143
  
Total ending allowance balance
  
$
2,024
    
$
2,700
    
$
1,649
    
$
1,608
    
$
7,981
  

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2021 and 2020:

June 30, 2021
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
1,480
    
$
2,431
    
$
1,776
    
$
1,473
    
$
7,160
  
Provision for loan losses
    
(409
)
    
117
      
(3
)
    
270
      
(25
)
Loans charged-off
    
(26
)
    
(52
)
    
(71
)
    
(599
)
    
(748
)
Recoveries
    
43
      
42
      
38
      
289
      
412
  
Total ending allowance balance
  
$
1,088
    
$
2,538
    
$
1,740
    
$
1,433
    
$
6,799
  

June 30, 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
    
990
      
1,229
      
275
      
959
      
3,453
  
Loans charged-off
    
(250
)
    
(516
)
    
(89
)
    
(1,279
)
    
(2,134
)
Recoveries
    
34
      
59
      
16
      
281
      
390
  
Total ending allowance balance
  
$
2,024
    
$
2,700
    
$
1,649
    
$
1,608
    
$
7,981
  

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 June 30, 2021 and December 31, 2020:

June 30, 2021
  
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
  
$
—
    
$
—
    
$
11
    
$
49
    
$
60
  
Collectively evaluated for impairment
    
1,088
      
2,538
      
1,729
      
1,384
      
6,739
  
Total ending allowance balance
  
$
1,088
    
$
2,538
    
$
1,740
    
$
1,433
    
$
6,799
  
                                         
Loans:
                                        
Loans individually evaluated for impairment
  
$
—
    
$
5,550
    
$
2,498
    
$
82
    
$
8,130
  
Loans collectively evaluated for impairment
    
281,729
      
278,391
      
141,259
      
138,407
      
839,786
  
Total ending loans balance
  
$
281,729
    
$
283,941
    
$
143,757
    
$
138,489
    
$
847,916
  

December 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
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
Collectively evaluated for impairment
    
1,480
      
2,431
      
1,776
      
1,473
      
7,160
  
Total ending allowance balance
  
$
1,480
    
$
2,431
    
$
1,776
    
$
1,473
    
$
7,160
  
                                         
Loans:
                                        
Loans individually evaluated for impairment
  
$
411
    
$
5,845
    
$
4,686
    
$
84
    
$
11,026
  
Loans collectively evaluated for impairment
    
305,067
      
247,604
      
153,006
      
131,961
      
837,638
  
          Total ending loans balance
  
$
305,478
    
$
253,449
    
$
157,692
    
$
132,045
    
$
848,664
  

The following tables present information related to loans individually evaluated for impairment by class of loans as of June 30, 2021 and December 31, 2020:

June 30, 2021
  
Unpaid
Principal Balance
    
Recorded
Investment
    
Allowance for Loan
Losses Allocated
  
With an allowance recorded:
                  
   Commercial and industrial
  
$
261
    
$
261
    
$
11
  
   Consumer:
                        
        Other
    
49
      
49
      
49
  
With no related allowance recorded:
                        
Commercial real estate:
                        
Owner-occupied
    
5,165
      
5,163
      
—
  
Nonowner-occupied
    
387
      
387
      
—
  
Commercial and industrial
    
2,237
      
2,237
      
—
  
Consumer:
                        
Home equity
    
33
      
33
      
—
  
Total
  
$
8,132
    
$
8,130
    
$
60
  

December 31, 2020
  
Unpaid
Principal Balance
    
Recorded
Investment
    
Allowance for Loan
Losses Allocated
  
With an allowance recorded:
  
$
—
    
$
—
    
$
—
  
With no related allowance recorded:
                        
Residential real estate
    
418
      
411
      
—
  
Commercial real estate:
                        
Owner-occupied
    
5,256
      
5,256
      
—
  
Nonowner-occupied
    
632
      
589
      
—
  
Commercial and industrial
    
4,686
      
4,686
      
—
  
Consumer:
                        
Home equity
    
34
      
34
      
—
  
       Other
    
50
      
50
      
—
  
Total
  
$
11,076
    
$
11,026
    
$
—
  

The following tables present information related to loans individually evaluated for impairment by class of loans for the three and six months ended June 30, 2021 and 2020:

  
Three months ended June 30, 2021
    
Six months ended June 30, 2021
  
   
Average
Impaired Loans
    
Interest Income
Recognized
    
Cash Basis
Interest Recognized
    
Average
Impaired Loans
    
Interest Income
Recognized
    
Cash Basis
Interest Recognized
  
 
With an allowance recorded:
                                    
   Commercial and industrial
  
$
268
    
$
5
    
$
5
    
$
274
    
$
9
    
$
9
  
   Consumer:
                                                
        Other
    
50
      
1
      
1
      
50
      
1
      
1
  
With no related allowance recorded:
                                                
Commercial real estate:
                                                
Owner-occupied
    
5,190
      
86
      
86
      
5,212
      
164
      
164
  
Nonowner-occupied
    
388
      
7
      
7
      
389
      
14
      
14
  
Commercial and industrial
    
2,636
      
33
      
33
      
3,224
      
81
      
81
  
Consumer:
                                                
Home equity
    
33
      
1
      
1
      
33
      
1
      
1
  
Total
  
$
8,565
    
$
133
    
$
133
    
$
9,182
    
$
270
    
$
270
  

 
Three months ended June 30, 2020
    
Six months ended June 30, 2020
  
   
Average
Impaired Loans
    
Interest Income
Recognized
    
Cash Basis
Interest Recognized
    
Average
Impaired Loans
    
Interest Income
Recognized
    
Cash Basis
Interest Recognized
  
With an allowance recorded:
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
With no related allowance recorded:
                                                
Residential real estate
    
426
      
5
      
5
      
430
      
8
      
8
  
Commercial real estate:
                                                
Owner-occupied
    
4,051
      
44
      
44
      
3,764
      
102
      
102
  
Nonowner-occupied
    
1,018
      
13
      
13
      
1,027
      
24
      
24
  
Commercial and industrial
    
4,355
      
56
      
56
      
4,428
      
129
      
129
  
Consumer:
                                                
       Home equity
    
403
      
3
      
3
      
391
      
8
      
8
  
Total
  
$
10,253
    
$
121
    
$
121
    
$
10,040
    
$
271
    
$
271
  

Accrued interest and net deferred loan fees have been excluded from the recorded investment of loans due to immateriality.

Nonaccrual loans and loans past due 90 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 June 30, 2021, there were no other real estate owned for residential real estate properties, as compared to $43 at December 31, 2020. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $763 and $1,097 as of June 30, 2021 and December 31, 2020, respectively.

The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of June 30, 2021 and December 31, 2020:

June 30, 2021
  
Loans Past Due
90 Days And
Still Accruing
    
Nonaccrual
  
             
Residential real estate
  
$
3
    
$
4,550
  
Commercial real estate:
                
Owner-occupied
    
—
      
1,195
  
Nonowner-occupied
    
—
      
115
  
Construction
    
—
      
131
  
Commercial and industrial
    
—
      
149
  
Consumer:
                
Automobile
    
122
      
61
  
Home equity
    
—
      
131
  
Other
    
46
      
31
  
Total
  
$
171
    
$
6,363
  

December 31, 2020
  
Loans Past Due
90 Days And
Still Accruing
    
Nonaccrual
  
             
Residential real estate
  
$
127
    
$
5,256
  
Commercial real estate:
                
Owner-occupied
    
—
      
205
  
Nonowner-occupied
    
—
      
362
  
Construction
    
—
      
156
  
Commercial and industrial
    
15
      
149
  
Consumer:
                
Automobile
    
146
      
129
  
Home equity
    
—
      
210
  
Other
    
136
      
36
  
Total
  
$
424
    
$
6,503
  

The following table presents the aging of the recorded investment of past due loans by class of loans as of June 30, 2021 and December 31, 2020:

June 30, 2021
  
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
  
$
1,161
    
$
631
    
$
867
    
$
2,659
    
$
279,070
    
$
281,729
  
Commercial real estate:
                                                
Owner-occupied
    
93
      
—
      
1,185
      
1,278
      
73,278
      
74,556
  
Nonowner-occupied
    
184
      
—
      
115
      
299
      
176,476
      
176,775
  
Construction
    
12
      
—
      
—
      
12
      
32,598
      
32,610
  
Commercial and industrial
    
13
      
—
      
149
      
162
      
143,595
      
143,757
  
Consumer:
                                                
Automobile
    
706
      
141
      
175
      
1,022
      
52,391
      
53,413
  
Home equity
    
126
      
127
      
63
      
316
      
20,536
      
20,852
  
Other
    
251
      
95
      
76
      
422
      
63,802
      
64,224
  
Total
  
$
2,546
    
$
994
    
$
2,630
    
$
6,170
    
$
841,746
    
$
847,916
  

December 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
  
$
2,845
    
$
496
    
$
1,663
    
$
5,004
    
$
300,474
    
$
305,478
  
Commercial real estate:
                                                
   Owner-occupied
    
470
      
1,003
      
193
      
1,666
      
50,197
      
51,863
  
   Nonowner-occupied
    
94
      
—
      
362
      
456
      
164,067
      
164,523
  
   Construction
    
—
      
82
      
—
      
82
      
36,981
      
37,063
  
Commercial and industrial
    
1,112
      
11
      
164
      
1,287
      
156,405
      
157,692
  
Consumer:
                                                
   Automobile
    
831
      
131
      
258
      
1,220
      
54,021
      
55,241
  
   Home equity
    
204
      
81
      
113
      
398
      
19,595
      
19,993
  
   Other
    
446
      
76
      
172
      
694
      
56,117
      
56,811
  
Total
  
$
6,002
    
$
1,880
    
$
2,925
    
$
10,807
    
$
837,857
    
$
848,664
  

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 June 30, 2021 and December 31, 2020:

June 30, 2021
  
TDRs
Performing to Modified Terms
    
TDRs Not
Performing to Modified Terms
    
Total
TDRs
  
Commercial real estate:
                  
   Owner-occupied
                  
Reduction of principal and interest payments
  
$
1,471
    
$
—
    
$
1,471
  
Maturity extension at lower stated rate than market rate
    
310
      
—
      
310
  
Credit extension at lower stated rate than market rate
    
380
      
—
      
380
  
Nonowner-occupied
                        
Credit extension at lower stated rate than market rate
    
387
      
—
      
387
  
Commercial and industrial:
                        
Interest only payments
    
2,237
      
—
      
2,237
  
                         
Total TDRs
  
$
4,785
    
$
—
    
$
4,785
  

December 31, 2020
  
TDRs
Performing to Modified Terms
    
TDRs Not
Performing to Modified Terms
    
Total
TDRs
  
Residential real estate:
                  
Interest only payments
  
$
202
    
$
—
    
$
202
  
Commercial real estate:
                        
Owner-occupied
                        
Reduction of principal and interest payments
    
1,486
      
—
      
1,486
  
Maturity extension at lower stated rate than market rate
    
351
      
—
      
351
  
Credit extension at lower stated rate than market rate
    
384
      
—
      
384
  
Nonowner-occupied
                        
Credit extension at lower stated rate than market rate
    
390
      
—
      
390
  
Commercial and industrial:
                        
Interest only payments
    
4,400
      
—
      
4,400
  
                         
Total TDRs
  
$
7,213
    
$
—
    
$
7,213
  

The Company had no specific allocations in reserves to customers whose loan terms have been modified in TDRs at June 30, 2021 and December 31, 2020. At June 30, 2021, the Company had $3,263 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs, as compared to $1,100 at December 31, 2020.

There were no TDR loan modifications that occurred during the three and six months ended June 30, 2021 and 2020 that impacted provision expense or the allowance for loan losses.

During the three and six months ended June 30, 2021 and 2020, the Company had no TDRs 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 90 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.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 and provided guidance on the modification of loans as a result of COVID-19, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current if they are less than 30 days past due on their contractual payments at the time of modification.  As of June 30, 2021, the Company had modified 709 loans related to COVID-19 with an outstanding loan balance of $133,993 that were not reported as TDRs.  As of June 30, 2021, the Company had 13 of these modified loans remaining that were related to COVID-19 with an outstanding loan balance of $183 that were not reported as TDRs in the tables presented above.

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 1 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 8 and its classified assets to be loans that are graded 9 through 11. The Company’s risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $1,000.

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 no 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 no 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 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 that 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 no 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 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of June 30, 2021 and December 31, 2020, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

June 30, 2021
 
  
Pass
    
Criticized
    
Classified
    
Total
  
Commercial real estate:
                        
Owner-occupied
  
$
69,324
    
$
643
    
$
4,589
    
$
74,556
  
Nonowner-occupied
    
172,856
      
3,600
      
319
      
176,775
  
Construction
    
32,610
      
—
      
—
      
32,610
  
Commercial and industrial
    
139,151
      
1,959
      
2,647
      
143,757
  
Total
  
$
413,941
    
$
6,202
    
$
7,555
    
$
427,698
  

December 31, 2020
 
  
Pass
    
Criticized
    
Classified
    
Total
  
Commercial real estate:
                        
Owner-occupied
  
$
46,604
    
$
669
    
$
4,590
    
$
51,863
  
Nonowner-occupied
    
160,324
      
3,629
      
570
      
164,523
  
Construction
    
37,063
      
—
      
—
      
37,063
  
Commercial and industrial
    
150,786
      
2,064
      
4,842
      
157,692
  
Total
  
$
394,777
    
$
6,362
    
$
10,002
    
$
411,141
  

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 June 30, 2021 and December 31, 2020:

June 30, 2021
  
Consumer
    
Residential
        
   
Automobile
    
Home Equity
    
Other
    
Real Estate
    
Total
  
                               
Performing
  
$
53,230
    
$
20,721
    
$
64,147
    
$
277,176
    
$
415,274
  
Nonperforming
    
183
      
131
      
77
      
4,553
      
4,944
  
Total
  
$
53,413
    
$
20,852
    
$
64,224
    
$
281,729
    
$
420,218
  

December 31, 2020
  
Consumer
    
Residential
        
   
Automobile
    
Home Equity
    
Other
    
Real Estate
    
Total
  
                               
Performing
  
$
54,966
    
$
19,783
    
$
56,639
    
$
300,095
    
$
431,483
  
Nonperforming
    
275
      
210
      
172
      
5,383
      
6,040
  
Total
  
$
55,241
    
$
19,993
    
$
56,811
    
$
305,478
    
$
437,523
  

The Company 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 4.07% of total loans were unsecured at June 30, 2021, down from 4.22% at December 31, 2020.