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LOANS AND ALLOWANCE FOR LOAN LOSSES
 9 Months Ended
Sep. 30, 2022
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:

 
September 30,
2022
    
December 31,
2021
  
             
Residential real estate
  
$
272,271
    
$
274,425
  
Commercial real estate:
                
Owner-occupied
    
70,623
      
71,979
  
Nonowner-occupied
    
173,116
      
176,100
  
   Construction
    
41,264
      
33,718
  
Commercial and industrial
    
153,417
      
141,525
  
Consumer:
                
Automobile
    
54,409
      
48,206
  
Home equity
    
26,755
      
22,375
  
Other
    
64,058
      
62,863
  
     
855,913
      
831,191
  
Less:  Allowance for loan losses
    
(4,811
)
    
(6,483
)
                 
Loans, net
  
$
851,102
    
$
824,708
  

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law in response to  coronavirus ("COVID-19"). The CARES Act provided assistance to small businesses through the establishment of the Paycheck Protection Program ("PPP"). The PPP provided small businesses with funds to use for payroll and certain other expenses.  At September 30, 2022, there were no commercial and industrial loans originated under the PPP, as compared to $446 at December 31, 2021. These loans are guaranteed by the Small Business Administration.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2022 and 2021:

September 30, 2022
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
614
    
$
1,846
    
$
1,548
    
$
1,206
    
$
5,214
  
Provision for loan losses
    
(189
)
    
42
      
(308
)
    
77
      
(378
)
Loans charged off
    
(57
)
    
(20
)
    
—
      
(262
)
    
(339
)
Recoveries
    
55
      
29
      
36
      
194
      
314
  
Total ending allowance balance
  
$
423
    
$
1,897
    
$
1,276
    
$
1,215
    
$
4,811
  

September 30, 2021
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
1,088
    
$
2,532
    
$
1,746
    
$
1,433
    
$
6,799
  
Provision for loan losses
    
(34
)
    
10
      
(263
)
    
194
      
(93
)
Loans charged-off
    
(49
)
    
(63
)
    
(25
)
    
(280
)
    
(417
)
Recoveries
    
40
      
115
      
113
      
107
      
375
  
Total ending allowance balance
  
$
1,045
    
$
2,594
    
$
1,571
    
$
1,454
    
$
6,664
  

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2022 and 2021:

September 30, 2022
  
Residential
Real Estate
    
Commercial
Real Estate
    
Commercial
and Industrial
    
Consumer
    
Total
  
Allowance for loan losses:
                              
Beginning balance
  
$
980
    
$
2,548
    
$
1,571
    
$
1,384
    
$
6,483
  
Provision for loan losses
    
(545
)
    
(683
)
    
271
      
266
      
(691
)
Loans charged-off
    
(99
)
    
(36
)
    
(618
)
    
(964
)
    
(1,717
)
Recoveries
    
87
      
68
      
52
      
529
      
736
  
Total ending allowance balance
  
$
423
    
$
1,897
    
$
1,276
    
$
1,215
    
$
4,811
  

September 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
    
(443
)
    
121
      
(260
)
    
464
      
(118
)
Loans charged-off
    
(75
)
    
(115
)
    
(96
)
    
(879
)
    
(1,165
)
Recoveries
    
83
      
157
      
151
      
396
      
787
  
Total ending allowance balance
  
$
1,045
    
$
2,594
    
$
1,571
    
$
1,454
    
$
6,664
  

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 September 30, 2022 and December 31, 2021:

September 30, 2022
  
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
    
423
      
1,897
      
1,276
      
1,215
      
4,811
  
Total ending allowance balance
  
$
423
    
$
1,897
    
$
1,276
    
$
1,215
    
$
4,811
  
                                         
Loans:
                                        
Loans individually evaluated for impairment
  
$
—
    
$
2,020
    
$
—
    
$
28
    
$
2,048
  
Loans collectively evaluated for impairment
    
272,271
      
282,983
      
153,417
      
145,194
      
853,865
  
Total ending loans balance
  
$
272,271
    
$
285,003
    
$
153,417
    
$
145,222
    
$
855,913
  

December 31, 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
  
$
—
    
$
—
    
$
10
    
$
—
    
$
10
  
Collectively evaluated for impairment
    
980
      
2,548
      
1,561
      
1,384
      
6,473
  
Total ending allowance balance
  
$
980
    
$
2,548
    
$
1,571
    
$
1,384
    
$
6,483
  
                                         
Loans:
                                        
Loans individually evaluated for impairment
  
$
—
    
$
5,411
    
$
4,531
    
$
81
    
$
10,023
  
Loans collectively evaluated for impairment
    
274,425
      
276,386
      
136,994
      
133,363
      
821,168
  
          Total ending loans balance
  
$
274,425
    
$
281,797
    
$
141,525
    
$
133,444
    
$
831,191
  

The following tables present information related to loans individually evaluated for impairment by class of loans as of September 30, 2022 and December 31, 2021:

September 30, 2022
  
Unpaid
Principal Balance
    
Recorded
Investment
    
Allowance for Loan
Losses Allocated
  
With an allowance recorded:
  
$
—
    
$
—
    
$
—
  
With no related allowance recorded:
                        
Commercial real estate:
                        
Owner-occupied
    
1,703
      
1,640
      
—
  
Nonowner-occupied
    
380
      
380
      
—
  
   Consumer:
                        
        Home equity
    
28
      
28
      
—
  
Total
  
$
2,111
    
$
2,048
    
$
—
  

December 31, 2021
  
Unpaid
Principal Balance
    
Recorded
Investment
    
Allowance for Loan
Losses Allocated
  
With an allowance recorded:
                  
   Commercial and industrial
  
$
1,993
    
$
1,993
    
$
10
  
With no related allowance recorded:
                        
Commercial real estate:
                        
Owner-occupied
    
5,052
      
5,027
      
—
  
Nonowner-occupied
    
384
      
384
      
—
  
Commercial and industrial
    
2,538
      
2,538
      
—
  
Consumer:
                        
Home equity
    
31
      
31
      
—
  
       Other
    
50
      
50
      
—
  
Total
  
$
10,048
    
$
10,023
    
$
10
  

The following tables present information related to loans individually evaluated for impairment by class of loans for the three and nine months ended September 30, 2022 and 2021:

 
Three months ended September 30, 2022
    
Nine months ended September 30, 2022
  
   
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:
                                                
Commercial real estate:
                                                
Owner-occupied
    
1,650
      
18
      
18
      
1,676
      
66
      
66
  
Nonowner-occupied
    
381
      
8
      
8
      
382
      
22
      
22
  
   Consumer:
                                                
        Home equity
    
14
      
1
      
1
      
22
      
1
      
1
  
Total
  
$
2,045
    
$
27
    
$
27
    
$
2,080
    
$
89
    
$
89
  

 
Three months ended September 30, 2021
    
Nine months ended September 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:
                                    
   Consumer:
                                    
        Other
  
$
49
    
$
1
    
$
1
    
$
49
    
$
2
    
$
2
  
With no related allowance recorded:
                                                
Commercial real estate:
                                                
Owner-occupied
    
5,128
      
74
      
74
      
5,183
      
239
      
239
  
Nonowner-occupied
    
386
      
7
      
7
      
388
      
21
      
21
  
Commercial and industrial
    
3,174
      
111
      
111
      
3,586
      
200
      
200
  
Consumer:
                                                
       Home equity
    
32
      
1
      
1
      
33
      
2
      
2
  
Total
  
$
8,769
    
$
194
    
$
194
    
$
9,239
    
$
464
    
$
464
  

The recorded investment of a loan excludes accrued interest and net deferred origination fees and costs 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). Other real estate owned for residential real estate properties totaled $15 as of September 30, 2022 and December 31, 2021.  In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $459 and $316 as of September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021:

September 30, 2022
  
Loans Past Due
90 Days And
Still Accruing
    
Nonaccrual
  
             
Residential real estate
  
$
203
    
$
1,531
  
Commercial real estate:
                
Owner-occupied
    
—
      
981
  
Nonowner-occupied
    
—
      
72
  
Construction
    
—
      
15
  
Commercial and industrial
    
148
      
149
  
Consumer:
                
Automobile
    
65
      
105
  
Home equity
    
—
      
127
  
Other
    
470
      
75
  
Total
  
$
886
    
$
3,055
  

December 31, 2021
  
Loans Past Due
90 Days And
Still Accruing
    
Nonaccrual
  
             
Residential real estate
  
$
10
    
$
2,683
  
Commercial real estate:
                
Owner-occupied
    
—
      
1,055
  
Nonowner-occupied
    
—
      
—
  
Construction
    
—
      
146
  
Commercial and industrial
    
65
      
150
  
Consumer:
                
Automobile
    
55
      
147
  
Home equity
    
—
      
148
  
Other
    
160
      
17
  
Total
  
$
290
    
$
4,346
  

The following table presents the aging of the recorded investment of past due loans by class of loans as of September 30, 2022 and December 31, 2021:

September 30, 2022
  
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
  
$
1,514
    
$
907
    
$
624
    
$
3,045
    
$
269,226
    
$
272,271
  
Commercial real estate:
                                                
Owner-occupied
    
188
      
—
      
981
      
1,169
      
69,454
      
70,623
  
Nonowner-occupied
    
9
      
6
      
—
      
15
      
173,101
      
173,116
  
Construction
    
34
      
—
      
—
      
34
      
41,230
      
41,264
  
Commercial and industrial
    
96
      
—
      
297
      
393
      
153,024
      
153,417
  
Consumer:
                                                
Automobile
    
760
      
156
      
157
      
1,073
      
53,336
      
54,409
  
Home equity
    
35
      
—
      
127
      
162
      
26,593
      
26,755
  
Other
    
384
      
368
      
514
      
1,266
      
62,792
      
64,058
  
Total
  
$
3,020
    
$
1,437
    
$
2,700
    
$
7,157
    
$
848,756
    
$
855,913
  

December 31, 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
  
$
2,208
    
$
1,218
    
$
921
    
$
4,347
    
$
270,078
    
$
274,425
  
Commercial real estate:
                                                
   Owner-occupied
    
895
      
—
      
153
      
1,048
      
70,931
      
71,979
  
   Nonowner-occupied
    
100
      
—
      
—
      
100
      
176,000
      
176,100
  
   Construction
    
36
      
53
      
33
      
122
      
33,596
      
33,718
  
Commercial and industrial
    
517
      
60
      
215
      
792
      
140,733
      
141,525
  
Consumer:
                                                
   Automobile
    
656
      
148
      
194
      
998
      
47,208
      
48,206
  
   Home equity
    
35
      
165
      
47
      
247
      
22,128
      
22,375
  
   Other
    
401
      
133
      
177
      
711
      
62,152
      
62,863
  
Total
  
$
4,848
    
$
1,777
    
$
1,740
    
$
8,365
    
$
822,826
    
$
831,191
  

Troubled Debt Restructurings:

A 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 September 30, 2022 and December 31, 2021:

September 30, 2022
  
TDRs
Performing to Modified Terms
    
TDRs Not
Performing to Modified Terms
    
Total
TDRs
  
Commercial real estate:
                  
   Owner-occupied
                  
Reduction of principal and interest payments
  
$
419
    
$
—
    
$
419
  
Credit extension at lower stated rate than market rate
    
364
      
—
      
364
  
Nonowner-occupied
                        
Credit extension at lower stated rate than market rate
    
380
      
—
      
380
  
                         
Total TDRs
  
$
1,163
    
$
—
    
$
1,163
  

December 31, 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
  
$
1,455
    
$
—
    
$
1,455
  
Maturity extension at lower stated rate than market rate
    
268
      
—
      
268
  
Credit extension at lower stated rate than market rate
    
375
      
—
      
375
  
Nonowner-occupied
                        
Credit extension at lower stated rate than market rate
    
385
      
—
      
385
  
 Commercial and industrial
                        
Interest only payments
    
2,301
      
—
      
2,301
  
Total TDRs
  
$
4,784
    
$
—
    
$
4,784
  

At September 30, 2022 and December 31, 2021, the Company had no specific allocations in reserves to customers whose loan terms have been modified in TDRs.  At September 30, 2022, the Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs, as compared to $3,199 at December 31, 2021.

There were no TDR loan modifications that occurred during the three and nine months ended September 30, 2022 and 2021, and, therefore, no impact to provision expense or the allowance for loan losses.

During the three and nine months ended September 30, 2022 and 2021, 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 CARES Act 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.  Through September 30, 2022, the Company had modified 521 loans related to COVID-19 with an outstanding loan balance of $97,236 that were not reported as TDRs.  As of September 30, 2022, the Company had 11 of those modified loans still operating under their COVID-19 related deferral terms with an outstanding loan balance of $120 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) that results from potential weak primary repayment source or payment delinquency.  These loans will be under constant supervision and 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 TDRs 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 September 30, 2022 and December 31, 2021, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

September 30, 2022
 
  
Pass
    
Criticized
    
Classified
    
Total
  
Commercial real estate:
                        
Owner-occupied
  
$
67,110
    
$
2,532
    
$
981
    
$
70,623
  
Nonowner-occupied
    
172,926
      
—
      
190
      
173,116
  
Construction
    
41,202
      
—
      
62
      
41,264
  
Commercial and industrial
    
151,371
      
276
      
1,770
      
153,417
  
Total
  
$
432,609
    
$
2,808
    
$
3,003
    
$
438,420
  

December 31, 2021
 
  
Pass
    
Criticized
    
Classified
    
Total
  
Commercial real estate:
                        
Owner-occupied
  
$
66,999
    
$
618
    
$
4,362
    
$
71,979
  
Nonowner-occupied
    
175,901
      
—
      
199
      
176,100
  
Construction
    
33,685
      
—
      
33
      
33,718
  
Commercial and industrial
    
134,983
      
1,862
      
4,680
      
141,525
  
Total
  
$
411,568
    
$
2,480
    
$
9,274
    
$
423,322
  

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 September 30, 2022 and December 31, 2021:

September 30, 2022
  
Consumer
    
Residential
        
   
Automobile
    
Home Equity
    
Other
    
Real Estate
    
Total
  
                               
Performing
  
$
54,239
    
$
26,628
    
$
63,513
    
$
270,537
    
$
414,917
  
Nonperforming
    
170
      
127
      
545
      
1,734
      
2,576
  
Total
  
$
54,409
    
$
26,755
    
$
64,058
    
$
272,271
    
$
417,493
  

December 31, 2021
  
Consumer
    
Residential
        
   
Automobile
    
Home Equity
    
Other
    
Real Estate
    
Total
  
                               
Performing
  
$
48,004
    
$
22,227
    
$
62,686
    
$
271,732
    
$
404,649
  
Nonperforming
    
202
      
148
      
177
      
2,693
      
3,220
  
Total
  
$
48,206
    
$
22,375
    
$
62,863
    
$
274,425
    
$
407,869
  

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 4.76% of total loans were unsecured at September 30, 2022, up from 4.45% at December 31, 2021.