Company Quick10K Filing
Ohio Valley Banc
Price37.31 EPS2
Shares5 P/E17
MCap178 P/FCF19
Net Debt-70 EBIT18
TEV108 TEV/EBIT6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-16
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-18
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-16
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-16
8-K 2020-10-27
8-K 2020-10-20
8-K 2020-07-27
8-K 2020-07-21
8-K 2020-05-20
8-K 2020-04-27
8-K 2020-04-14
8-K 2020-03-10
8-K 2020-02-25
8-K 2020-01-29
8-K 2020-01-14
8-K 2019-10-25
8-K 2019-10-15
8-K 2019-07-25
8-K 2019-07-16
8-K 2019-05-15
8-K 2019-04-25
8-K 2019-04-16
8-K 2019-02-26
8-K 2019-02-12
8-K 2019-01-29
8-K 2019-01-15
8-K 2018-10-25
8-K 2018-10-16
8-K 2018-07-26
8-K 2018-07-17
8-K 2018-05-16
8-K 2018-04-26
8-K 2018-04-17
8-K 2018-01-30
8-K 2018-01-16

OVBC 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Fair Value of Financial Instruments
Note 3 - Securities
Note 4 - Loans and Allowance for Loan Losses
Note 5 - Financial Instruments with Off - Balance Sheet Risk
Note 6 - Other Borrowed Funds
Note 7 - Segment Information
Note 8 - Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-4 exhibit4_093020.htm
EX-31.1 exhibit311_093020.htm
EX-31.2 exhibit312_093020.htm
EX-32 exhibit32_093020.htm

Ohio Valley Banc Earnings 2020-09-30

Balance SheetIncome StatementCash Flow


United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-20914

OHIO VALLEY BANC CORP.
(Exact name of registrant as specified in its charter)

Ohio
31-1359191
(State of Incorporation)
(I.R.S. Employer Identification No.)

420 Third Avenue, Gallipolis, Ohio
45631
(Address of principal executive offices)
(ZIP Code)

(740) 446-2631
(Registrant’s telephone number, including area code)
_____________________

Securities registered pursuant to Section 12(b) of the Act:

Common shares, without par value
OVBC
The NASDAQ Stock Market LLC
(Title of each class)
(Trading Symbol)
(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,  a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
Emerging growth company
     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

The number of common shares of the registrant outstanding as of November 9, 2020 was 4,787,446.




OHIO VALLEY BANC CORP.

Index

 
Page Number
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited)
 
 
Consolidated Balance Sheets
3
 
Consolidated Statements of Income
4
 
Consolidated Statements of Comprehensive Income
5
 
Consolidated Statements of Changes in Shareholders’ Equity
6
 
Condensed Consolidated Statements of Cash Flows
7
 
Notes to the Consolidated Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
42
Item 4.
Controls and Procedures
43
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
44
Item 1A.
Risk Factors
44
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
Item 3.
Defaults Upon Senior Securities
44
Item 4.
Mine Safety Disclosures
44
Item 5.
Other Information
44
Item 6.
Exhibits
45
     
Signatures
 
46

2



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

OHIO VALLEY BANC CORP.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (dollars in thousands, except share and per share data)

 
September 30,
2020
   
December 31,
2019
 
             
ASSETS
           
Cash and noninterest-bearing deposits with banks
 
$
13,745
   
$
12,812
 
Interest-bearing deposits with banks
   
69,809
     
39,544
 
Total cash and cash equivalents
   
83,554
     
52,356
 
                 
Certificates of deposit in financial institutions
   
2,745
     
2,360
 
Securities available for sale
   
110,349
     
105,318
 
Securities held to maturity (estimated fair value: 2020 - $12,022; 2019 - $12,404)
   
11,674
     
12,033
 
Restricted investments in bank stocks
   
7,506
     
7,506
 
                 
Total loans
   
853,038
     
772,774
 
Less: Allowance for loan losses
   
(7,730
)
   
(6,272
)
Net loans
   
845,308
     
766,502
 
                 
Premises and equipment, net
   
21,332
     
19,217
 
Premises and equipment held for sale, net
   
641
     
653
 
Other real estate owned, net
   
96
     
540
 
Accrued interest receivable
   
3,779
     
2,564
 
Goodwill
   
7,319
     
7,319
 
Other intangible assets, net
   
125
     
174
 
Bank owned life insurance and annuity assets
   
35,796
     
30,596
 
Operating lease right-of-use asset, net
   
918
     
1,053
 
Other assets
   
6,796
     
5,081
 
Total assets
 
$
1,137,938
   
$
1,013,272
 
                 
LIABILITIES
               
Noninterest-bearing deposits
 
$
270,086
   
$
222,607
 
Interest-bearing deposits
   
674,898
     
598,864
 
Total deposits
   
944,984
     
821,471
 
                 
Other borrowed funds
   
29,321
     
33,991
 
Subordinated debentures
   
8,500
     
8,500
 
Operating lease liability
   
918
     
1,053
 
Accrued liabilities
   
21,317
     
20,078
 
Total liabilities
   
1,005,040
     
885,093
 
                 
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 5)
   
     
 
                 
SHAREHOLDERS’ EQUITY
               
Common stock ($1.00 stated value per share, 10,000,000 shares authorized; 2020 - 5,447,185 shares issued; 2019 - 5,447,185 shares issued)
   
5,447
     
5,447
 
Additional paid-in capital
   
51,165
     
51,165
 
Retained earnings
   
89,294
     
86,751
 
Accumulated other comprehensive income
   
2,704
     
528
 
Treasury stock, at cost (659,739 shares)
   
(15,712
)
   
(15,712
)
Total shareholders’ equity
   
132,898
     
128,179
 
Total liabilities and shareholders’ equity
 
$
1,137,938
   
$
1,013,272
 

See accompanying notes to consolidated financial statements

3



OHIO VALLEY BANC CORP.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)

 
Three months ended
September 30,
   
Nine months ended
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
                         
Interest and dividend income:
                       
Loans, including fees
 
$
10,877
   
$
11,362
   
$
32,389
   
$
34,576
 
Securities
                               
Taxable
   
535
     
637
     
1,723
     
1,911
 
Tax exempt
   
73
     
85
     
220
     
253
 
Dividends
   
58
     
91
     
188
     
308
 
Interest-bearing deposits with banks
   
20
     
333
     
200
     
977
 
Other Interest
   
11
     
13
     
38
     
37
 
     
11,574
     
12,521
     
34,758
     
38,062
 
                                 
Interest expense:
                               
Deposits
   
1,274
     
1,592
     
4,150
     
4,446
 
Other borrowed funds
   
174
     
215
     
561
     
676
 
Subordinated debentures
   
44
     
88
     
166
     
274
 
     
1,492
     
1,895
     
4,877
     
5,396
 
Net interest income
   
10,082
     
10,626
     
29,881
     
32,666
 
Provision for (recovery of) loan losses
   
(2
)
   
444
     
3,451
     
2,015
 
Net interest income after provision for loan losses
   
10,084
     
10,182
     
26,430
     
30,651
 
                                 
Noninterest income:
                               
Service charges on deposit accounts
   
423
     
553
     
1,249
     
1,573
 
Trust fees
   
64
     
59
     
193
     
195
 
Income from bank owned life insurance and annuity assets
   
207
     
179
     
616
     
534
 
Mortgage banking income
   
445
     
80
     
966
     
227
 
Debit / credit card interchange income
   
1,130
     
1,049
     
3,003
     
2,935
 
Loss on other real estate owned
   
(1
)
   
(15
)
   
(84
)
   
(1
)
Tax preparation fees
   
9
     
     
643
     
 
Litigation settlement
   
     
     
2,000
     
 
Other
   
157
     
202
     
539
     
493
 
     
2,434
     
2,107
     
9,125
     
5,956
 
Noninterest expense:
                               
Salaries and employee benefits
   
5,973
     
5,652
     
16,854
     
16,715
 
Occupancy
   
481
     
479
     
1,362
     
1,370
 
Furniture and equipment
   
284
     
255
     
824
     
788
 
Professional fees
   
525
     
598
     
1,596
     
1,959
 
Marketing expense
   
306
     
270
     
867
     
810
 
FDIC insurance
   
69
     
     
93
     
113
 
Data processing
   
538
     
540
     
1,841
     
1,629
 
Software
   
318
     
362
     
1,111
     
1,200
 
Foreclosed assets
   
38
     
62
     
117
     
187
 
Amortization of intangibles
   
14
     
27
     
48
     
89
 
Other
   
1,345
     
1,493
     
4,299
     
4,237
 
     
9,891
     
9,738
     
29,012
     
29,097
 
                                 
Income before income taxes
   
2,627
     
2,551
     
6,543
     
7,510
 
Provision for income taxes
   
333
     
414
     
984
     
1,101
 
                                 
NET INCOME
 
$
2,294
   
$
2,137
   
$
5,559
   
$
6,409
 
                                 
Earnings per share
 
$
0.48
   
$
0.45
   
$
1.16
   
$
1.35
 

See accompanying notes to consolidated financial statements
4



OHIO VALLEY BANC CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands)

 
Three months ended
September 30,
   
Nine months ended
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
                         
Net Income
 
$
2,294
   
$
2,137
   
$
5,559
   
$
6,409
 
                                 
Other comprehensive income (loss):
                               
Change in unrealized gain (loss) on available for sale securities
   
(267
)
   
(251
)
   
2,755
     
3,200
 
Related tax (expense) benefit
   
56
     
52
     
(579
)
   
(672
)
Total other comprehensive income (loss), net of tax
   
(211
)
   
(199
)
   
2,176
     
2,528
 
                                 
Total comprehensive income
 
$
2,083
   
$
1,938
   
$
7,735
   
$
8,937
 

See accompanying notes to consolidated financial statements

5



OHIO VALLEY BANC CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(dollars in thousands, except share and per share data)

Quarter-to-date
 
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at July 1, 2020
 
$
5,447
   
$
51,165
   
$
88,006
   
$
2,915
   
$
(15,712
)
 
$
131,821
 
Net income
   
     
     
2,294
     
     
     
2,294
 
Other comprehensive loss, net
   
     
     
     
(211
)
   
     
(211
)
Cash dividends, $0.21 per share
   
     
     
(1,006
)
   
     
     
(1,006
)
Balance at September 30, 2020
 
$
5,447
   
$
51,165
   
$
89,294
   
$
2,704
   
$
(15,712
)
 
$
132,898
 
                                                 
Balance at July 1, 2019
 
$
5,427
   
$
50,492
   
$
83,121
   
$
592
   
$
(15,712
)
 
$
123,920
 
Net income
   
     
     
2,137
     
     
     
2,137
 
Other comprehensive loss, net
   
     
     
     
(199
)
   
     
(199
)
Common stock issued through dividend reinvestment, 10,120 shares
   
10
     
334
     
     
     
     
344
 
Cash dividends, $0.21 per share
   
     
     
(1,001
)
   
     
     
(1,001
)
Balance at September 30, 2019
 
$
5,437
   
$
50,826
   
$
84,257
   
$
393
   
$
(15,712
)
 
$
125,201
 

Year-to-date
 
Common
Stock
   
Additional
Paid-In
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Treasury
Stock
   
Total
Shareholders'
Equity
 
Balance at January 1, 2020
 
$
5,447
   
$
51,165
   
$
86,751
   
$
528
   
$
(15,712
)
 
$
128,179
 
Net income
   
     
     
5,559
     
     
     
5,559
 
Other comprehensive income, net
   
     
     
     
2,176
     
     
2,176
 
Cash dividends, $0.63 per share
   
     
     
(3,016
)
   
     
     
(3,016
)
Balance at September 30, 2020
 
$
5,447
   
$
51,165
   
$
89,294
   
$
2,704
   
$
(15,712
)
 
$
132,898
 
                                                 
Balance at January 1, 2019
 
$
5,400
   
$
49,477
   
$
80,844
   
$
(2,135
)
 
$
(15,712
)
 
$
117,874
 
Net income
   
     
     
6,409
     
     
     
6,409
 
Other comprehensive income, net
   
     
     
     
2,528
     
     
2,528
 
Common stock issued to ESOP, 8,333 shares
   
8
     
320
     
     
     
     
328
 
Common stock issued through dividend reinvestment, 29,219 shares
   
29
     
1,029
     
     
     
     
1,058
 
Cash dividends, $0.63 per share
   
     
     
(2,996
)
   
     
     
(2,996
)
Balance at September 30, 2019
 
$
5,437
   
$
50,826
   
$
84,257
   
$
393
   
$
(15,712
)
 
$
125,201
 

See accompanying notes to consolidated financial statements

6



OHIO VALLEY BANC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(dollars in thousands)

 
Nine months ended
September 30,
 
   
2020
   
2019
 
             
Net cash provided by operating activities:
 
$
7,530
   
$
9,571
 
                 
Investing activities:
               
Proceeds from maturities of securities available for sale
   
23,344
     
14,145
 
Purchases of securities available for sale
   
(25,884
)
   
(20,127
)
Proceeds from maturities of securities held to maturity
   
328
     
2,301
 
Proceeds from maturities of certificates of deposit in financial institutions
   
735
     
 
Purchase of certificates of deposit in financial institutions
   
(1,120
)
   
(295
)
Net change in loans
   
(82,347
)
   
(5,646
)
Proceeds from sale of other real estate owned
   
446
     
393
 
Purchases of premises and equipment
   
(3,101
)
   
(4,828
)
Purchases of bank owned life insurance and annuity assets
   
(4,583
)
   
 
Net cash (used in) investing activities
   
(92,182
)
   
(14,057
)
                 
Financing activities:
               
Change in deposits
   
123,536
     
10,622
 
Proceeds from common stock through dividend reinvestment
   
     
1,058
 
Cash dividends
   
(3,016
)
   
(2,996
)
Repayment of Federal Home Loan Bank borrowings
   
(3,994
)
   
(3,017
)
Change in other long-term borrowings
   
(406
)
   
(1,899
)
Change in other short-term borrowings
   
(270
)
   
 
Net cash provided by financing activities
   
115,850
     
3,768
 
                 
Change in cash and cash equivalents
   
31,198
     
(718
)
Cash and cash equivalents at beginning of period
   
52,356
     
71,180
 
Cash and cash equivalents at end of period
 
$
83,554
   
$
70,462
 
                 
Supplemental disclosure:
               
Cash paid for interest
 
$
5,117
   
$
4,791
 
Cash paid for income taxes
   
1,950
     
890
 
Transfers from loans to other real estate owned
   
86
     
112
 
Initial recognition of operating lease right-of-use asset
   
     
1,280
 
Operating lease liability arising from obtaining right-of-use asset
   
     
1,280
 

See accompanying notes to consolidated financial statements


7



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION:  The accompanying consolidated financial statements include the accounts of Ohio Valley Banc Corp. (“Ohio Valley”) and its wholly-owned subsidiaries, The Ohio Valley Bank Company (the “Bank”), Loan Central, Inc., a consumer finance company (“Loan Central”), Ohio Valley Financial Services Agency, LLC, an insurance agency, and OVBC Captive, Inc., a limited purpose property and casualty insurance company (the “Captive”).  The Bank has one wholly-owned subsidiary, Ohio Valley REO, LLC, an Ohio limited liability company (“Ohio Valley REO”), to which the Bank transfers certain real estate acquired by the Bank through foreclosure for sale by Ohio Valley REO.  Ohio Valley and its subsidiaries are collectively referred to as the “Company.”  All material intercompany accounts and transactions have been eliminated in consolidation.
These interim financial statements are prepared by the Company without audit and reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at September 30, 2020, and its results of operations and cash flows for the periods presented.  The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results to be anticipated for the full fiscal year ending December 31, 2020.  The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by U.S. generally accepted accounting principles (“US GAAP”) that might otherwise be necessary in the circumstances.  The Annual Report of the Company for the year ended December 31, 2019 contains consolidated financial statements and related notes which should be read in conjunction with the accompanying consolidated financial statements.
The consolidated financial statements for 2019 have been reclassified to conform to the presentation for 2020.  These reclassifications had no effect on net income or shareholders’ equity.

CURRENT EVENTS:  In March 2020, the World Health Organization declared the outbreak of the coronavirus (“COVID-19”) as a global pandemic. COVID-19 has continued to negatively impact the global economy, disrupt global supply chains, create significant volatility, disrupt financial markets, and increase unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering-in-place policies has impacted, and may continue to impact, many of the Company’s customers.

The potential financial impact of COVID-19 is unknown at this time and depends largely on the actions taken by governmental authorities and other third parties. In addition, COVID-19 may adversely impact several industries within our geographic footprint and impair the ability of our customers to fulfill their contractual obligations to the Company. This could result in a material adverse effect on our business operations, asset valuations, liquidity, financial condition, and results of operations. Effects may include:

Increased provision for loan losses. Continued uncertainty regarding the severity and duration of COVID-19 and related economic effects will continue to affect the accounting for loan losses. It also is possible that asset quality could worsen, and that loan charge-offs could increase. The Company is actively participating in the Paycheck Protection Program (“PPP”) by providing loans to small businesses negatively impacted by COVID-19. PPP loans are fully guaranteed by the U.S. government, and if that should change, the Company could be required to increase its allowance for loan losses through an additional provision for loan losses charged to earnings.

Valuation and fair value measurement challenges. Material adverse impacts of COVID-19 may result in valuation impairments on the Company’s securities, impaired loans, goodwill, other real estate owned, and interest rate swap agreements.
8



NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:  The accounting and reporting policies followed by the Company conform to US GAAP established by the Financial Accounting Standards Board (“FASB”). The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

INDUSTRY SEGMENT INFORMATION:  Internal financial information is primarily reported and aggregated in two lines of business: banking and consumer finance.

EARNINGS PER SHARE:  Earnings per share are computed based on net income divided by the weighted average number of common shares outstanding during the period.  The weighted average common shares outstanding were 4,787,446 and 4,773,258 for the three months ended September 30, 2020 and 2019, respectively.  The weighted average common shares outstanding were 4,787,446 and 4,761,954 for the nine months ended September 30, 2020 and 2019, respectively. Ohio Valley had no dilutive effect and no potential common shares issuable under stock options or other agreements for any period presented.

ADOPTION OF NEW ACCOUNTING STANDARD UPDATES (“ASU”): In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. For non-public entities, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial position or results of operations.

ACCOUNTING GUIDANCE TO BE ADOPTED IN FUTURE PERIODS:  In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”. ASU 2016-13 requires entities to replace the current “incurred loss” model with an “expected loss” model, which is referred to as the current expected credit loss (“CECL”) model.  These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. A CECL steering committee has developed a CECL model and is evaluating the source data, various credit loss methodologies and model results in relation to the new ASU guidance.  Management expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective.  Management expects the adoption will result in a material increase to the allowance for loan losses balance.  At this time, the impact is being evaluated. On October 16, 2019, the FASB confirmed it would delay the effective date of this ASU for smaller reporting companies, such as the Company, until fiscal years beginning after December 15, 2022.
9



NOTE 2 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of the Company’s valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Securities:  The fair values for securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans:  At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.  In some instances, fair value adjustments can be made based on a quoted price from an observable input, such as a purchase agreement. Such adjustments would be classified as a Level 2 classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

10



NOTE 2 – FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Other Real Estate Owned:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. In some instances, fair value adjustments can be made based on a quoted price from an observable input, such as a purchase agreement.  Such adjustments would be classified as a Level 2 classification.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with management’s own assumptions of fair value based on factors that include recent market data or industry-wide statistics.

On an as-needed basis, the Company reviews the fair value of collateral, taking into consideration current market data, as well as all selling costs that typically approximate 10%.

Interest Rate Swap Agreements:  The fair value of interest rate swap agreements is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments).  The variable cash receipts (or payments) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves (Level 2).

Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:

 
Fair Value Measurements at September 30, 2020 Using
 
   
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable Inputs
(Level 3)
 
Assets:
                 
U.S. Government sponsored entity securities
   
   
$
15,506
     
 
Agency mortgage-backed securities, residential
   
     
94,843
     
 
Interest rate swap derivatives
   
     
1,096
     
 
                         
Liabilities:
                       
Interest rate swap derivatives
   
     
(1,096
)
   
 

 
Fair Value Measurements at December 31, 2019 Using
 
   
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable Inputs
(Level 3)
 
Assets:
                 
U.S. Government sponsored entity securities
   
   
$
16,736
     
 
Agency mortgage-backed securities, residential
   
     
88,582
     
 
Interest rate swap derivatives
   
     
465