Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2022

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

Note C - Loans and Allowance for Loan Losses

Loans are comprised of the following at December 31:

	2022			2021
Residential real estate	$	297,036		$	274,425
Commercial real estate:
Owner-occupied		72,719			71,979
Nonowner-occupied		182,831			176,100
Construction		33,205			33,718
Commercial and industrial		151,232			141,525
Consumer:
Automobile		54,837			48,206
Home equity		27,791			22,375
Other		65,398			62,863
		885,049			831,191
Less: Allowance for loan losses		(5,269	)		(6,483	)
Loans, net	$	879,780		$	824,708

At December 31, 2022 and 2021, net deferred loan origination costs were $663 and $191, respectively. At December 31, 2022 and 2021, net unamortized loan purchase premiums were $1,142 and $1,260, respectively.

The following table presents the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2022 and 2021:

December 31, 2022	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	980		$	2,548		$	1,571		$	1,384		$	6,483
Provision for loan losses		(318	)		(556	)		283			559			(32	)
Loans charged off		(135	)		(36	)		(618	)		(1,399	)		(2,188	)
Recoveries		154			82			57			713			1,006
Total ending allowance balance	$	681		$	2,038		$	1,293		$	1,257		$	5,269

December 31, 2021	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,480		$	2,431		$	1,776		$	1,473		$	7,160
Provision for loan losses		(615	)		(61	)		(258	)		515			(419	)
Loans charged off		(84	)		(115	)		(120	)		(1,162	)		(1,481	)
Recoveries		199			293			173			558			1,223
Total ending allowance balance	$	980		$	2,548		$	1,571		$	1,384		$	6,483

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 December 31, 2022 and 2021:

December 31, 2022	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		681		2,038		1,293		1,257		5,269
Total ending allowance balance	$	681	$	2,038	$	1,293	$	1,257	$	5,269
Loans:
Loans individually evaluated for impairment	$	—	$	1,986	$	—	$	28	$	2,014
Loans collectively evaluated for impairment		297,036		286,769		151,232		147,998		883,035
Total ending loans balance	$	297,036	$	288,755	$	151,232	$	148,026	$	885,049

December 31, 2021	Residential Real Estate		Commercial Real Estate		Commercial & 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 table presents information related to loans individually evaluated for impairment by class of loans as of the years ended December 31, 2022 and 2021:

December 31, 2022	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:	$	—	$	—	$	—	$	—	$	—	$	—
With no related allowance recorded:
Commercial real estate:
Owner-occupied		1,692		1,607		—		1,662		97		97
Nonowner-occupied		379		379		—		382		29		29
Consumer:
Home equity		28		28		—		23		2		2
Total	$	2,099	$	2,014	$	—	$	2,067	$	128	$	128

December 31, 2021	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial and industrial	$	1,993	$	1,993	$	10	$	1,987	$	94	$	94
With no related allowance recorded:
Commercial real estate:
Owner-occupied		5,052		5,027		—		5,151		309		309
Nonowner-occupied		384		384		—		387		29		29
Commercial and industrial		2,538		2,538		—		2,981		139		139
Consumer:
Home equity		31		31		—		32		2		2
Other		50		50		—		49		2		2
Total	$	10,048	$	10,023	$	10	$	10,587	$	575	$	575

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). As of December 31, 2022, the Company had no other real estate owned for residential real estate properties, compared to $15 as of December 31, 2021. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $370 and $316 as of December 31, 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 December 31, 2022 and 2021:

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2022
Residential real estate	$	100	$	1,708
Commercial real estate:
Owner-occupied		—		938
Nonowner-occupied		—		70
Construction		—		75
Commercial and industrial		—		150
Consumer:
Automobile		27		82
Home equity		—		151
Other		411		59
Total	$	538	$	3,233

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2021
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 December 31, 2022 and 2021:

December 31, 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	$	1,799	$	701	$	497	$	2,997	$	294,039	$	297,036
Commercial real estate:
Owner-occupied		97		—		938		1,035		71,684		72,719
Nonowner-occupied		626		5		—		631		182,200		182,831
Construction		40		45		17		102		33,103		33,205
Commercial and industrial		21		—		150		171		151,061		151,232
Consumer:
Automobile		804		240		97		1,141		53,696		54,837
Home equity		204		—		151		355		27,436		27,791
Other		875		113		452		1,440		63,958		65,398
Total	$	4,466	$	1,104	$	2,302	$	7,872	$	877,177	$	885,049

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 December 31, 2022 and December 31, 2021:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
December 31, 2022
Commercial real estate:
Owner-occupied
Reduction of principal and interest payments	$	411	$	—	$	411
Credit extension at lower stated rate than market rate		361		—		361
Nonowner-occupied
Credit extension at lower stated rate than market rate		379		—		379
Total TDRs	$	1,151	$	—	$	1,151

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
December 31, 2021
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 December 31, 2022 and 2021, the Company had no specific allocations in reserves to customers whose loan terms have been modified in TDRs. At December 31, 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 years ended December 31, 2022 and 2021 that impacted provision expense or the allowance for loan losses. 

During the years ended December 31, 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.

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 a 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 re-evaluation date.

As of December 31, 2022 and December 31, 2021, and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2022	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	68,236	$	3,545	$	938	$	72,719
Nonowner-occupied		177,479		5,352		—		182,831
Construction		33,143		—		62		33,205
Commercial and industrial		147,627		1,879		1,726		151,232
Total	$	426,485	$	10,776	$	2,726	$	439,987

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 payment activity as of December 31, 2022 and December 31, 2021:

	Consumer
December 31, 2022	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	54,728	$	27,640	$	64,928	$	295,228	$	442,524
Nonperforming		109		151		470		1,808		2,538
Total	$	54,837	$	27,791	$	65,398	$	297,036	$	445,062

	Consumer
December 31, 2021	Automobile		Home Equity		Other		Residential 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 4.52% of total loans were unsecured at December 31, 2022, up from 4.45% at December 31, 2021.