What changed in this filing

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Item 1A. Risk Factors

2021-03-24 compared with 2020-03-16 · 111 added, 119 removed, 344 unchanged (40% of the section changed)

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Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Annual Report on Form 10‑K and other documents that are incorporated herein by reference that are not statements of historical fact

constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements specifically identified as forward-looking statements within this document.

certain statements in future filings by Ohio Valley with the SEC, in press releases, and in oral and written statements made by or with the approval of Ohio Valley which are not statements of historical fact constitute forward-looking statements

within the meaning of the Private Securities Litigation Reform Act.

Examples of forward-looking statements include:

(i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other

financial items;

(ii) statements of plans and objectives of Ohio Valley or our management or Board of Directors, including those relating to products or services and strategic plans, such as mergers;

(iii) statements of future economic performance;

and (iv) statements of assumptions underlying such statements.

Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of

identifying those statements.

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those

statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements.

to take advantage of the “safe harbor” provisions of that Act.

Certain statements contained in this report and other publicly available documents incorporated herein by reference constitute "forward looking statements" within the meaning of

Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and as defined in the Private Securities Litigation Reform Act of 1995.

Such statements are often, but not always, identified by the use of such words as

“believes,” “anticipates,” “expects,” “intends,” “plan,” “goal,” “seek,” “project,” “estimate,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and similar expressions.

Such statements involve various important assumptions, risks,

uncertainties, and other factors, many of which are beyond our control, particularly with regard to developments related to the COVID-19 pandemic, and which could cause actual results to differ materially from those expressed in such forward looking

These factors include, but are not limited to:

the effects of the COVID-19 pandemic on our business, operations, customers and capital position;

higher default rates on loans made to our customers related to COVID-19 and its impact on

our customers’ operations and financial condition;

the impact of COVID-19 on local, national and global economic conditions;

unexpected changes in interest rates or disruptions in the mortgage market related to COVID-19 or responses to the health

the effects of various governmental responses to the COVID-19 pandemic;

changes in political, economic or other factors, such as inflation rates, recessionary or expansive trends, taxes, the effects of implementation of legislation and the

continuing economic uncertainty in various parts of the world;

competitive pressures;

fluctuations in interest rates;

the level of defaults and prepayment on loans made by the Company;

unanticipated litigation, claims, or assessments;

fluctuations in

the cost of obtaining funds to make loans;

and regulatory changes.

Forward-looking statements involve risks and uncertainties.

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them are unsuccessful.

Forward-looking statements speak only as of the date on which they are made, and, except as may be required by law, Ohio Valley undertakes no obligation to update any forward-looking statement to

reflect events or circumstances after the date on which the statement is made to reflect unanticipated events.

All subsequent written and oral forward-looking statements attributable to Ohio Valley or any person acting on our behalf are qualified

in their entirety by the following cautionary statements.

Forward-looking statements speak only as of the date on which they are made.

Readers are cautioned not to place undue reliance on such forward looking statements, which speak

only as of the date hereof.

The Company undertakes no obligation and disclaims any intention to republish revised or updated forward looking statements, whether as a result of new information, unanticipated future events or otherwise.

subsequent written and oral forward-looking statements attributable to Ohio Valley or any person acting on our behalf are qualified in their entirety by the following cautionary statements.

The following are certain risks that management believes are specific to our business.

This should not be viewed as an all-inclusive list of risks or presenting the risk factors listed in any

particular order.

This should not be viewed as an all-inclusive list of risks or presenting the risk factors

listed in any particular order.

Risks Related to Economic, Political and Market Conditions

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Inflation, recession,

unemployment, changes in interest rates, fiscal and monetary policy, tariffs, a United States withdrawal from a significant renegotiation of trade agreements, trade wars, the election of a new United States President in 2020, and other factors

beyond our control may adversely affect our deposit levels and composition, the quality of our assets including investment securities available for purchase, and the demand for loans, which, in turn, may adversely affect our earnings and capital.

Recent political developments have resulted in substantial changes in economic and political conditions for the United States and the remainder of the world.

Economic turmoil in Europe and Asia and changes in oil production in the Middle East

affect the economy and stock prices in the United States.

The timing and circumstances of the United Kingdom leaving the European Union (Brexit) and their effects on the United States are unknown.

Because a significant amount of our loans are

secured by real estate, additional decreases in real estate values likely would adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure.

Adverse changes in the economy may also have a

negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows.

unemployment, changes in interest rates, fiscal and monetary policy, tariffs, a United States withdrawal from a significant renegotiation of trade agreements, trade wars, and other factors beyond our control may adversely affect our deposit levels

and composition, the quality of our assets including investment securities available for purchase, and the demand for loans, which, in turn, may adversely affect our earnings and capital.

Recent political developments have resulted in substantial

changes in economic and political conditions for the United States and the remainder of the world.

Because a significant amount of our loans are secured by real estate, additional decreases in real estate values likely would adversely affect the

value of property used as collateral and our ability to sell the collateral upon foreclosure.

Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have

an adverse impact on our earnings and cash flows.

In addition, consistent with our community banking philosophy, substantially all of our loans are to individuals and businesses in Ohio and West Virginia.

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A transition away from the London Interbank Offered Rate (“LIBOR”) as a reference rate for financial contracts could negatively affect our income and expenses and the value of various financial

LIBOR is used extensively in the United States and globally as a reference rate for various commercial and financial contracts, including adjustable rate mortgages, corporate debt,

interest rate swaps and other derivatives.

In 2017, the United Kingdom’s Financial Conduct Authority announced that in 2021 it would no longer compel banks to submit rates required to calculate LIBOR.

Therefore, it is uncertain at this time to

what extent banks will continue to provide submissions for the calculation of LIBOR after 2021.

As a result of this announcement, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published

recommended fallback language for LIBOR-linked financial instruments, identified and recommended alternatives for LIBOR rates (e.g., the Secured Overnight Financing Rate as the recommended alternative to U.S.

Dollar LIBOR) and proposed

implementations of the recommended alternatives in floating rate instruments, including loans and derivatives.

It is currently unknown whether these recommendations and proposals will be broadly accepted, whether they will continue to evolve, and

what effect of their implementation may have on the markets for floating-rate financial instruments.

Any discontinuance, modification, alternative reference rates or other reforms may adversely affect interest rates on our current or future

indebtedness and other financial instruments.

LIBOR is used extensively in the U.S.

and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate

swaps and other derivatives.

LIBOR is set based on interest rate information reported by certain banks, which may stop reporting such information after 2021.

In November 2020, the Federal Reserve Board issued a statement supporting the release of

a proposal and supervisory statements designed to provide a clear end date for U.S.

Dollar LIBOR (“USD LIBOR”), and the federal banking agencies issued a release encouraging banks to stop entering into USD LIBOR contracts by the end of 2021, noting

that most legacy contracts will mature prior to the date LIBOR ceases to be issued.

It is uncertain at this time the extent to which those entering into financial contracts will transition to any other particular benchmark.

Other benchmarks may

perform differently than LIBOR or other alternative benchmarks or have other consequences that cannot currently be anticipated.

It is also uncertain what will happen with instruments that rely on LIBOR for future interest rate adjustments and

which remain outstanding if LIBOR ceases to exist.

The Federal Reserve Board, in conjunction with the Alternative Reference

Rates Committee, a steering committee comprised of large U.S.

financial institutions, is considering replacing USD LIBOR with a new index calculated by short-term repurchase agreements, backed by U.S.

Treasury securities, otherwise known as the

Secured Overnight Financing Rate ("SOFR").

SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of

submitting panel members.

Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).

SOFR is therefore likely to be lower than LIBOR and is

less likely to correlate with the funding costs of financial institutions.

Whether or not SOFR attains traction as a LIBOR replacement tool remains in question, although transactions using SOFR have been completed, including by Fannie Mae.

Fannie Mae and Freddie Mac ceased accepting adjustable rate mortgages tied to LIBOR and began accepting mortgages based on SOFR in 2020.

We have a limited number of loans, derivative contracts, borrowings and other financial instruments, and continue to enter into loans, derivatives contracts, borrowings and other

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Risks Related to Our Business

The economic impact of COVID-19 or any other pandemic could adversely affect our business, financial condition, liquidity, cash flows, and results of operations.

COVID-19 has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter

in place at home.

This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment.

Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers

(e.g., waiving late payment and other fees).

The federal bank regulatory agencies have encouraged financial institutions to prudently work with affected borrowers, and new legislation has provided relief from reporting loan classifications due to

modifications related to COVID-19.

Given the ongoing and dynamic nature of COVID-19, it is difficult to predict the full impact of the pandemic on our business.

The extent of such impact will depend on future

developments, which are highly uncertain, including when COVID-19 can be controlled and abated and when and how the economy may be reopened.

As of December 31, 2020, the Bank holds and services PPP loans.

These PPP loans are subject to the

provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies.

We expect that the great majority of our PPP borrowers will seek full or partial forgiveness of their loan obligations.

Bank has credit risk on the PPP loans if the SBA determines that there is a deficiency in the manner in which the Bank originates, funds or services loans, including any issue with the eligibility of a borrower to receive a PPP loan.

We could face

additional risks in our administrative capabilities to service our PPP loans and risk with respect to the determination of loan forgiveness.

In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was

a deficiency in the manner in which we originated, funded or serviced the PPP loan, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss

related to the deficiency.

The spread of COVID-19 has also caused us to modify our business practices, including employee work locations, and cancellation of physical participation in meetings,

events and conferences.

Further, technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to such employees to be more limited or less

The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk from phishing, malware, and other cybersecurity attacks, all of which could expose us to risks of data

or financial loss and could seriously disrupt our operations and the operations of any impacted customers.

COVID-19 or a new pandemic could subject us to any of the following risks, any of which could, individually or in the aggregate, have a material adverse effect on our business,

financial condition, liquidity, and results of operations:

demand for our products and services may decline, making it difficult to grow assets and income;

if high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause credit losses to increase;

our allowance for credit losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

as the result of the decline in the Federal Reserve’s target federal funds rate, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing

liabilities, reducing our net interest margin and spread and reducing net income.

Even after the COVID-19 pandemic subsides, the U.S.

economy will likely require time to recover, the length of which is unknown and during which the United States may experience a

Our business could be materially and adversely affected by such recession.

To the extent the effects of COVID-19 adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of

heightening many of the other risks described in this section.

We operate in an extremely competitive market, and our business will suffer if we are unable to compete effectively.

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Findings of deficiencies in compliance with regulations could result in restrictions on our activities or even a loss in our financial holding company status.

We have a material weakness in internal control over financial reporting .

In connection with the

preparation of our financial statements for the year ended December 31, 2019, and the review of such statements by our independent public accounting firm, Crowe LLP, management identified a material weakness in internal controls over financial

reporting, as defined by the Public Company Accounting Oversight Board.

The material weakness was related to the process for monitoring loan activity through the subsequent event period to timely identify changes in loan credit quality

indicators and impairment for conditions existing at period end that may impact the financial statements.

A material weakness is a

deficiency in internal control over financial reporting such that there is a reasonable possibility that a material misstatement would not be prevented or detected in a timely manner.

The material weakness was determined to have existed as of

December 31, 2019.

We are still in the process of remediating the material weakness in internal control over financial reporting, although no changes to financial statements were necessary.

Ohio Valley cannot assure you how quickly the

material weakness will be remediated or that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future.

Any failure to maintain or implement required

controls, or any difficulties we encounter in their implementation, could result in additional significant deficiencies or material weaknesses, cause us to fail to meet our periodic reporting obligations, or result in material misstatements in

our financial statements.

Any such failure could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required

under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated under Section 404.

The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements,

cause us to fail to meet our reporting obligations and cause investors to lose

confidence in our reported financial information, leading to a decline in our stock p rice.

Our exposure to credit risk could adversely affect our earnings and financial condition.

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Either of these occurrences could have a material adverse effect on our financial condition and results of operations.

We may lose business due to declining use by consumers of banks to complete financial transactions or increased depositing of funds electronically with banks outside of our market area, which could negatively affect our net financial condition and

results of operations.

We may lose business due to declining use by consumers of banks to complete financial transactions or increased depositing of funds electronically with banks outside of our market area, which could

negatively affect our net financial condition and results of operations.

Technology and other changes allow parties to complete financial transactions without banks.

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Our failure to pay dividends on our common shares could have a material adverse effect on the market price of our common shares.

We may be compelled to seek additional capital in the future but may not be able to access capital when needed.

Ohio Valley and the Bank are required by regulatory authorities to maintain specified levels of capital.

Federal banking agencies have adopted extensive changes to their capital

requirements, including raising required amounts and eliminating inclusion of certain instruments from the calculation of capital.

If we experience increased loan losses, we may need to obtain additional capital.

In addition, we may elect to

raise additional capital to support its business, to finance acquisitions, if any, or for other purposes.

Our ability to raise additional capital, if needed, will depend on our financial performance, conditions in the capital markets, economic

conditions and a number of other factors, many of which are outside of our control.

There can be no assurance, therefore, that we can raise additional capital at all or on terms acceptable to us.

If we cannot raise additional capital when needed

or desired, it may have a material adverse effect on our financial condition, results of operations and prospects.

The loss of key members of our senior management team could adversely affect our business.

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decrease materially as well as the prices at which our shares trade.

Our organizational documents may have the effect of discouraging a third party from acquiring us by means of a tender offer, proxy contest or otherwise.

Our articles of incorporation contain provisions that make it more difficult for a third party to gain control or acquire us without the consent of our board of directors.

provisions also could discourage proxy contests and may make it more difficult for dissident shareholders to elect representatives as directors and take other corporate actions.

These provisions of our governing documents may have the effect of

delaying, deferring or preventing a transaction or a change in control that might be in the best interests of our shareholders.

The extended disruption of vital infrastructure could negatively impact our results of operations and financial condition.

Our operations depend upon, among other things, our technological and physical infrastructure, including our equipment, facilities and access to the worldwide web via the internet.

While disaster recovery procedures are in place, an extended disruption of our vital infrastructure by fire, power loss, natural disaster, telecommunications failure, computer hacking and viruses, denial of service attacks, terrorist activity or

the domestic and foreign response to such activity, or other events outside of our control, could have a material adverse impact either on the financial services industry as a whole, or on our business, results of operations, and financial

We may be the subject of litigation, which would result in legal liability and damage our business and reputation.

From time to time, Ohio Valley and the Bank may be subject to claims or legal action from customers, employees or others.

Financial institutions like Ohio Valley and the Bank are facing a growing number

of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees.

Future litigation could include claims for substantial compensatory and/or punitive damages or claims for

indeterminate amounts of damages.

Ohio Valley and the Bank are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding their businesses.

These matters

also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

Like other financial institutions, Ohio Valley and the Bank are also subject to risk from potential employee misconduct, including non-compliance with

policies and improper use or disclosure of confidential information.

Substantial legal liability or significant regulatory action against Ohio Valley could materially adversely affect its business, financial condition or results of operations and/or

cause significant reputational harm to its business.

Risks Related to Legal, Regulatory and Accounting Changes

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lessening of restrictions increases competition within our industry or market area.

We are currently assessing the expected effect of the Payday Rule on the Bank’s and Loan Central’s lending businesses and on the Company’s financial condition and results of operations.

complying with this regulation or a determination to discontinue certain types of consumer lending in light of the expense of compliance could have an adverse effect on the financial conditions and results of operations of the Company.

The impact of

this rule on the Bank, both with and without the proposed amendments, is estimated to be minimal.

In addition to laws, regulations and actions directed at the operations of banks, proposals to reform the housing finance market could negatively affect our ability to sell loans.

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our financial condition and results of operations.

Changes in tax laws could adversely affect our financial condition and results of operations.

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes.

Changes to our taxes could have a material

adverse effect on our results of operations.

In addition, our customers are subject to a wide variety of federal, state and local taxes.

Changes in taxes paid by our customers, including changes in the deductibility of mortgage loan related

expenses, may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products.

In addition, such negative effects on our customers could result in defaults on the

loans we have made and decrease the value of mortgage-backed securities in which we have invested.

Increases in FDIC insurance premiums may have a material adverse effect on our earnings.

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losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability.

Ohio Valley became subject to the new standard in the first quarter of 2020.

Upon adoption of CECL,

credit loss allowances may increase, which will decrease retained earnings and regulatory capital.

The federal banking regulators have adopted a regulation that will allow banks to phase in the day-one impact of CECL on regulatory capital over three

CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses.

In October 2019, FASB announced it would delay the effective date of CECL for smaller companies, such as

Ohio Valley, until fiscal years beginning after December 15, 2022.

Upon adoption of CECL, credit loss allowances may increase, which will decrease retained earnings and regulatory capital.

The federal banking regulators have adopted a regulation

that will allow banks to phase in the day-one impact of CECL on regulatory capital over three years.

CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call

report errors, financial misstatements, or operational losses.

Management’s accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors