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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 455 added, 331 removed, 473 unchanged (62% of the section changed)

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CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands, except share and per share data)

September 30,

(dollars in thousands, except share

and per share data)

Cash and noninterest-bearing deposits with banks

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Operating lease liability

Accrued liabilities

Other liabilities

Total liabilities

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2022 - 5,465,707 shares issued;

2021 - 5,447,185

shares issued)

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income

Treasury stock, at cost (2021 - 676,308 shares, 2020 - 659,739 shares)

Accumulated other comprehensive income (loss)

Treasury stock, at cost ( 693,933 shares)

Total shareholders’ equity

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Three months ended

September 30,

Nine months ended

September 30,

Interest and dividend income:

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Debit / credit card interchange income

Gain (loss) on other real estate owned

Gain on other real estate owned

Tax preparation fees

Litigation settlement

Noninterest expense:

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Three months ended

September 30,

Nine months ended

September 30,

Other comprehensive income (loss):

Change in unrealized gain (loss) on available for sale securities

Related tax (expense) benefit

Total other comprehensive income (loss), net of tax

Total comprehensive income

Related tax benefit

Total other comprehensive (loss), net of tax

Total comprehensive income (loss)

See accompanying notes to consolidated financial statements

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Shareholders'

Balance at July 1, 2021

Other comprehensive loss, net

Cash dividends, $ 0.21 per share

Shares acquired for treasury, 16,569 shares

Balance at September 30 , 2021

Balance at July 1, 2020

Other comprehensive loss, net

Cash dividends, $ 0.21 per share

Balance at September 30 , 2020

Comprehensive

Income (Loss)

Shareholders'

Balance at January 1, 2022

Other comprehensive income, net

Other comprehensive loss, net

Cash dividends, $ 0.21 per share

Shares acquired for treasury, 16,569 shares

Balance at September 30 , 2021

Common stock issued to ESOP, 18,522 shares

Balance at March 31, 2022

Balance at January 1, 2021

Other comprehensive income, net

Other comprehensive loss, net

Cash dividends, $ 0.21 per share

Balance at September 30 , 2020

Balance at March 31 , 2021

See accompanying notes to consolidated financial statements

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(dollars in thousands)

Nine months ended

September 30,

Three months ended

Net cash provided by operating activities:

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Proceeds from maturities of certificates of deposit in financial institutions

Purchase of certificates of deposit in financial institutions

Redemptions of federal home loan bank stock

Net change in loans

Loan originations and payments, net

Proceeds from sale of other real estate owned

Purchases of premises and equipment

Disposals of premises and equipment

Purchases of bank owned life insurance and annuity assets

Net cash (used in) investing activities

Net cash provided by (used in) investing activities

Financing activities:

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Cash dividends

Purchases of treasury stock

Proceeds from Federal Home Loan Bank borrowings

Repayment of Federal Home Loan Bank borrowings

Change in other long-term borrowings

Change in other short-term borrowings

Net cash provided by financing activities

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Cash paid for interest

Cash paid for income taxes

Transfers from loans to other real estate owned

Proceeds from bank owned life insurance and annuity assets not settled

Operating lease liability arising from obtaining right-of-use asset

See accompanying notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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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 two wholly-owned subsidiaries, Race Day Mortgage, Inc., a mortgage banking company, and 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, 2021, 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, 2021 are not necessarily indicative of the operating results to be anticipated for the full fiscal year ending December 31, 2021.

The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by U.S.

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 two wholly-owned subsidiaries, Race Day Mortgage, Inc., an Ohio corporation that provides online consumer mortgages (“Race Day”), and 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 March 31, 2022, and its results of operations and cash flows for the periods presented.

The results of operations for the three months ended March 31,

2022 are not necessarily indicative of the operating results to be anticipated for the full fiscal year ending December 31, 2022.

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, 2020 contains consolidated financial statements and related notes which should be read in conjunction with the accompanying consolidated financial statements.

The Annual Report of the Company for the year ended December 31, 2021 contains consolidated financial statements and related

notes which should be read in conjunction with the accompanying consolidated financial statements.

The consolidated financial statements for 2021 have been reclassified to conform to the presentation for 2022.

These reclassifications had no effect on net income or shareholders’ equity.

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 volatility, disrupt financial markets, and increase unemployment levels.

The continued financial impact of COVID-19 depends largely on the actions taken by governmental authorities and other third parties.

In addition, COVID-19 may continue to adversely impact several industries within our geographic footprint for some time 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.

These effects may include an increase in the Company’s allowance for loan losses and valuation impairments on the Company’s securities, impaired loans, goodwill, other real estate owned, and interest rate swap agreements.

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:

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 COVID-19 pandemic has severely restricted the level of economic activity in the U.S.

and around the world since March 2020.

At the outset of the

pandemic, several states and cities across the country, including the Company’s market areas, implemented quarantines, restrictions on travel, shelter at home orders, and restrictions on types of business that may continue to operate.

While most of

these measures and restrictions have been lifted, and many businesses reopened, the Company cannot predict when circumstances may change that would cause some or all of these restrictions to be imposed due to public health concerns.

This reinstatement

of restrictions related to COVID-19 could adversely impact several industries within our geographic footprint and impair the ability of our customers to fulfill their contractual obligations to the Company.

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.

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:

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banking and consumer finance.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses.

Interest income is reported on an accrual basis using the interest method and includes amortization of net deferred loan fees and costs over the loan term using the level yield method without anticipating prepayments.

The amount of the Company’s recorded investment is not materially different than the amount of unpaid principal balance for loans.

Interest income is discontinued and the loan moved to non-accrual status when full loan repayment is in doubt, typically when the loan is impaired or payments are past due 90 days or over unless the loan is well-secured or in process of collection.

Loans that management has the intent and ability to hold

for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses.

Interest income is reported on an accrual basis using

the interest method and includes amortization of net deferred loan fees and costs over the loan term using the level yield method without anticipating prepayments.

The amount of the Company’s recorded investment is not materially different than the

amount of unpaid principal balance for loans.

Interest income is discontinued and the loan moved to non-accrual status when full loan repayment is in doubt, typically when the loan is

impaired or payments are past due 90 days or over unless the loan is well-secured or in process of collection.

Past due status is based on the contractual terms of the loan.

In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Nonaccrual loans and loans past due 90 days or over and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

In all cases, loans are placed on nonaccrual or charged-off at an earlier

date if collection of principal or interest is considered doubtful.

Nonaccrual loans and loans past due 90 days or over and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually

classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

Interest received on such loans is accounted for on the cash-basis method until qualifying for return to accrual.

Interest received on such loans is

accounted for on the cash-basis method until qualifying for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Bank also originates long-term, fixed-rate mortgage loans, with full intention of being sold to the secondary market.

These loans are considered held for sale during the period of time after the principal has been advanced to the borrower by the Bank, but before the Bank has been reimbursed by the Federal Home Loan Mortgage Corporation, typically within a few business days.

Loans sold to the secondary market are carried at the lower of aggregate cost or fair value.

As of September 30, 2021, there were $ 858 in loans held for sale by the Bank, as compared to $ 70 in loans held for sale at December 31, 2020.

These loans are

considered held for sale during the period of time after the principal has been advanced to the borrower by the Bank, but before the Bank has been reimbursed by the Federal Home Loan Mortgage Corporation, typically within a few business days.

sold to the secondary market are carried at the lower of aggregate cost or fair value.

Total loans on the balance sheet included $ 1,476 in loans

held for sale by the Bank as of March 31, 2022, as compared to $ 1,682 in loans held for sale at December 31, 2021.

ALLOWANCE FOR LOAN LOSSES:

The allowance for loan losses is a valuation allowance for probable incurred credit losses.

allowance for loan losses is a valuation allowance for probable incurred credit losses.

Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Subsequent recoveries, if any, are credited to the allowance.

Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.

Subsequent recoveries, if any, are

credited to the allowance.

conditions, and other factors.

Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components.

The specific component relates to loans that are individually classified as impaired.

The specific component relates to loans that are individually classified as

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Loans for which the terms have been

modified and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting

scheduled principal and interest payments when due.

Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

Management determines the significance of payment delays and payment shortfalls on

a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the

principal and interest owed.

Commercial and commercial real estate loans are individually evaluated for impairment.

If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

Smaller balance homogeneous loans, such as consumer and most residential real estate, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosure.

Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective rate at inception.

If a loan is impaired, a portion of the allowance is

allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

Smaller balance homogeneous loans,

such as consumer and most residential real estate, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosure.

Troubled debt restructurings are measured at the present value of estimated

future cash flows using the loan’s effective rate at inception.

If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.

For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The general component covers non-impaired loans and impaired loans that are not individually reviewed for impairment and is based on historical loss experience adjusted for current factors.

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 3 years for the consumer and real estate portfolio segment and 5 years for the commercial portfolio segment.

For troubled debt restructurings that

subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and impaired loans that are not individually reviewed for impairment and is based on

historical loss experience adjusted for current factors.

years for the commercial portfolio segment.

The total loan portfolio’s actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.

These economic factors include consideration of the following:

These economic factors include consideration of the

levels of and trends in delinquencies and impaired loans;

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effects of any changes in risk selection and underwriting standards;

other changes in lending policies, procedures, and practices;

other changes in lending

policies, procedures, and practices;

experience, ability, and depth of lending management and other relevant staff;

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and effects of changes in credit concentrations.

The following portfolio segments have been identified:

The following

portfolio segments have been identified:

Commercial and Industrial, Commercial Real Estate, Residential Real Estate, and Consumer.

Commercial and industrial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole proprietorships, and other business enterprises.

Commercial and industrial loans are generally secured by business assets such as equipment, accounts receivable, inventory, or any other asset excluding real estate and generally made to finance capital expenditures or operations.

Commercial and industrial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole

proprietorships, and other business enterprises.

expenditures or operations.

The Company’s risk exposure is related to deterioration in the value of collateral securing the loan should foreclosure become necessary.

Generally, business assets used or produced in operations do not maintain their value upon foreclosure, which may require the Company to write down the value significantly to sell.

Commercial real estate consists of nonfarm, nonresidential loans secured by owner-occupied and nonowner-occupied commercial real estate as well as commercial construction loans.

An owner-occupied loan relates to a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing business operations conducted by the party, or an affiliate of the party, who owns the property.

Generally, business assets used or produced in operations do not maintain their

value upon foreclosure, which may require the Company to write down the value significantly to sell.

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Commercial real estate consists of nonfarm, nonresidential loans secured by owner-occupied and nonowner-occupied

commercial real estate as well as commercial construction loans.

An owner-occupied loan relates to a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing business operations conducted

by the party, or an affiliate of the party, who owns the property.

Owner-occupied loans that are dependent on cash flows from operations can be adversely affected by current market conditions for their product or service.

A nonowner- occupied loan is a property loan for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.

Nonowner-occupied loans that are dependent upon rental income are primarily impacted by local economic conditions which dictate occupancy rates and the amount of rent charged.

A nonowner- occupied

loan is a property loan for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.

Nonowner-occupied loans that are dependent upon rental income are primarily impacted by

local economic conditions which dictate occupancy rates and the amount of rent charged.

Commercial construction loans consist of borrowings to purchase and develop raw land into 1-4 family residential properties.

Construction loans are extended to individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements.

Repayment of the loans to real estate developers is dependent upon the sale of properties to third parties in a timely fashion upon completion.

Construction loans are extended to

individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements.

Repayment of the loans to real estate developers is dependent upon the sale of properties to

third parties in a timely fashion upon completion.

Should there be delays in construction or a downturn in the market for those properties, there may be significant erosion in value which may be absorbed by the Company.

Residential real estate loans consist of loans to individuals for the purchase of 1-4 family primary residences with repayment primarily through wage or other income sources of the individual borrower.

The Company’s loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination.

Consumer loans are comprised of loans to individuals secured by automobiles, open-end home equity loans and other loans to individuals for household, family, and other personal expenditures, both secured and unsecured.

These loans typically have maturities of 6 years or less with repayment dependent on individual wages and income.

The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is necessary.

Residential real estate loans consist of loans to individuals for the purchase of 1-4 family primary residences with repayment primarily

through wage or other income sources of the individual borrower.

The Company’s loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property

at origination.

Consumer loans are comprised of loans to individuals secured by automobiles, open-end home equity loans and other loans to individuals for

household, family, and other personal expenditures, both secured and unsecured.

These loans typically have maturities of 6 years or less with

repayment dependent on individual wages and income.

The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is

The Company has allocated the highest percentage of its allowance for loan losses as a percentage of loans to the other identified loan portfolio segments due to the larger dollar balances associated with such portfolios.

At September 30, 2021, there were no changes to the accounting policies or methodologies within any of the Company’s loan portfolio segments from the prior period.

At March 31, 2022, there were no changes to the accounting policies or methodologies within any of the Company’s loan portfolio segments from

the prior period.

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 4,783,886 and 4,787,446 for the three months ended September 30, 2021 and 2020, respectively.

The weighted average common shares outstanding were 4,786,246 and 4,787,446 for the nine months ended September 30,2021 and 2020, respectively.

Ohio Valley had no dilutive effect and no potential common shares issuable under stock options or other agreements for any period presented.

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ACCOUNTING GUIDANCE TO BE ADOPTED IN FUTURE PERIODS:

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 4,761,072 and 4,787,446 for the three months ended March 31, 2022 and 2021, respectively.

Ohio Valley had

no dilutive effect and no potential common shares issuable under stock options or other agreements for any period presented.

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.

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

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.

The Bank's 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.

The Bank’s 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.

For SEC filers who are smaller reporting companies, such as the Company, ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

For SEC filers who are smaller reporting companies, such as

the Company, ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326).

The standard addresses the following:

eliminates the accounting guidance for a troubled debt restructuring (“TDR”), will require an entity to determine whether a modification results in a new loan or a continuation of an existing loan, 2) expands disclosures related to modifications, and

3) will require disclosure of current period gross write-offs of financing receivables within the vintage disclosures table.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods

within those fiscal years and are applied prospectively, except with respect to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method.

Early adoption of the amendments in this update

is permitted if ASU 2016-13 has been previously adopted.

An entity may elect to early adopt the amendments regarding TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

The Company is assessing the

impact that the adoption of ASU 2022-02 will have on its consolidated financial statements

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.

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:

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

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.

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:

The fair values for securities are determined by quoted market prices, if available (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.

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.

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:

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).

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.

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Impaired Loans:

At the time a loan is considered impaired, it is valued at the lower of cost or fair value.

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.

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.

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.

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.

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.

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

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.

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

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, which typically amount to approximately 10 % of the fair value of such collateral.

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).

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).

NOTE 2 – FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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, 2021 Using

Fair Value Measurements at March 31,

Quoted Prices in Active

8 unchanged sentences

Interest rate swap derivatives

Fair Value Measurements at December 31, 2020 Using

Fair Value Measurements at December 31,

Quoted Prices in Active

3 unchanged sentences

Unobservable Inputs

Government securities

Government sponsored entity securities

1 unchanged sentence

Interest rate swap derivatives

Liabilities :

Interest rate swap derivatives

There were no transfers between Level 1 and Level 2 during 2021 or 2020.

There were no transfers

between Level 1 and Level 2 during 2022 or 2021.

Assets and Liabilities Measured on a Nonrecurring Basis

There were no assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2021 and December 31, 2020.

There was no other real estate owned that was measured at fair value less costs to sell at September 30, 2021 and December 31, 2020.

There were no corresponding write downs during the three and nine months ended September 30, 2021 and 2020.

There was no quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2021 and December 31, 2020.

Assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

Fair Value Measurements at March 31,

Quoted Prices in Active

Markets for Identical Assets

Significant Other Observable Inputs

Unobservable Inputs

Impaired loans:

Commercial and Industrial

Fair Value Measurements at December 31, 2021 Using

Quoted Prices in Active

Markets for Identical Assets

Significant Other Observable Inputs

Unobservable Inputs

Impaired loans:

Commercial and Industrial

At March 31, 2022, the recorded investment of impaired loans measured for impairment using the fair value of collateral for

collateral-dependent loans totaled $ 1,730 , with a corresponding valuation allowance of $ 66 , resulting in an increase of $ 56 in provision expense during the three months ended

March 31, 2022, with no corresponding charge-offs recognized.

This is compared to an increase of $ 90 in provision expense during the three months ended March 31, 2021.

At December 31, 2021, the recorded investment of impaired loans measured for impairment using the fair value

of collateral for collateral-dependent loans totaled $ 1,993 , with a corresponding valuation allowance of $ 10 , resulting in an increase of $ 10 in provision expense during the year

ended December 31, 2021, with no corresponding charge-offs recognized.

NOTE 2 – FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The carrying amounts and estimated fair values of financial instruments at September 30, 2021 and December 31, 2020 are as follows:

Fair Value Measurements at September 30, 2021 Using

The following table presents quantitative information about Level 3 fair value measurements for

financial instruments measured at fair value on a non-recurring basis at March 31, 2022 and December 31, 2021

March 31, 2022

Weighted Average

Impaired loans:

Commercial and industrial

Sales approach

Adjustment to comparables and equipment comparables

December 31, 2021

Weighted Average

Impaired loans:

Commercial and industrial

Sales approach

Adjustment to comparables and equipment comparables

The carrying amounts and estimated fair values of financial instruments at March 31, 2022 and December 31, 2021 are as follows:

Fair Value Measurements at March 31,

Financial Assets:

10 unchanged sentences

Accrued interest payable

Fair Value Measurements at December 31, 2020 Using

Fair Value Measurements at December 31,

Financial Assets:

10 unchanged sentences

Accrued interest payable

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.

Because no market exists for a significant portion of the

Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

These estimates are subjective

in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.

Changes in assumptions could significantly affect the estimates.

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of securities available for sale and securities held to maturity at September 30, 2021 and December 31, 2020, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive (loss) and gross unrecognized gains and losses:

The following table summarizes the amortized cost and fair value of securities available for sale

and securities held to maturity at March 31, 2022

and December 31, 2021 and the

corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive (loss) and gross unrecognized gains and losses:

Securities Available for Sale

1 unchanged sentence

Gross Unrealized

September 30 , 2021

March 31 , 2022

Government securities

3 unchanged sentences

December 31 , 2021

Government securities

Government sponsored entity securities

4 unchanged sentences

Gross Unrecognized

September 30 , 2021

March 31 , 2022

Obligations of states and political subdivisions

5 unchanged sentences

Total securities

The amortized cost and estimated fair value of debt securities at September 30, 2021, by contractual maturity, are shown below.

Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay the debt obligations prior to their contractual maturities.

The amortized cost and estimated fair value of debt securities at March 31, 2022, by contractual maturity, are shown below.

Actual maturities may

differ from contractual maturities because certain issuers may have the right to call or prepay the debt obligations prior to their contractual maturities.

Securities not due at a single maturity are shown separately.

2 unchanged sentences

Debt Securities:

Amortized Cost

Estimated Fair Value

Amortized Cost

Estimated Fair Value

Due in one year or less

5 unchanged sentences

NOTE 3 – SECURITIES (Continued)

The following table summarizes securities with unrealized losses at September 30, 2021 and December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position:

September 30 , 2021

The following table summarizes securities with unrealized losses at March 31, 2022 and December 31, 2021, aggregated by major security type and length of

time in a continuous unrealized loss position:

March 31 , 2022

Less Than 12 Months

5 unchanged sentences

Government securities

Government sponsored entity securities

Agency mortgage-backed securities,

Government sponsored entity

Agency mortgage-backed

securities, residential

Total available for sale

6 unchanged sentences

Securities Available for Sale

Agency mortgage-backed securities,

Government securities

Government sponsored entity

Agency mortgage-backed securities, residential

Total available for sale

September 30, 2021

March 31 , 2022

Less Than 12 Months

6 unchanged sentences

Total held to maturity

There were no sales of investment securities during the three and nine months ended September 30, 2021 or 2020.

Unrealized losses on the Company’s debt securities have not been recognized into income because the issuers’ securities were of high credit quality as of September 30, 2021, and management does not intend to sell, and it is likely that management will not be required to sell, the securities prior to their anticipated recovery.

Management does no t believe any individual unrealized loss at September 30, 2021 and December 31, 2020 represents an other-than-temporary impairment.

December 31, 2021

Less Than 12 Months

12 Months or More

Unrecognized Loss

Securities Held to Maturity

Obligations of states and political subdivisions

Total held to maturity

There were no sales of

investment securities during the three months ended March 31, 2022 or 2021.

Unrealized losses on the Company’s debt securities have not been recognized into income because the issuers’ securities are of high credit quality as of March 31, 2022, and

management does not intend to sell, and it is likely that management will not be required to sell, the securities prior to their anticipated recovery.

Management does no t believe any individual unrealized loss at March 31, 2022 or December 31, 2021 represents an other-than-temporary impairment.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:

September 30,

Residential real estate

4 unchanged sentences

Allowance for loan losses

Commercial and industrial loans include $ 5,611 of loans originated under the PPP at September 30, 2021.

These loans are guaranteed by the SBA.

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

September 30 , 2021

On March 27, 2020, the Coronavirus Aid, Relief, and Economic

Security Act (“CARES Act”) was signed into law.

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.

There were no commercial and industrial

loans originated under the PPP at March 31, 2022, as compared to $ 446 at December 31, 2021.

These loans are guaranteed by the Small Business Administration (“SBA”).

The following table presents the activity in the allowance for loan losses by portfolio segment for

the three months ended March 31, 2022

March 31 , 2022

and Industrial

4 unchanged sentences

Total ending allowance balance

September 30 , 2020

March 31 , 2021

and Industrial

5 unchanged sentences

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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

September 30, 2021

and Industrial

Allowance for loan losses:

Beginning balance

Provision for loan losses

Loans charged-off

Total ending allowance balance

September 30 , 2020

and Industrial

Allowance for loan losses:

Beginning balance

Provision for loan losses

Loans charged-off

Total ending allowance balance

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, 2021 and December 31, 2020:

September 30 , 2021

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 March 31, 2022 and December 31, 2021:

March 31 , 2022

and Industrial

17 unchanged sentences

Total ending loans balance

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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

September 30 , 2021

Principal Balance

Allowance for Loan

Losses Allocated

The following tables present information related to loans individually evaluated for impairment

by class of loans as of March 31, 2022

and December 31, 2021:

March 31 , 2022

Allowance for

With an allowance recorded:

Commercial and industrial

With no related allowance recorded:

3 unchanged sentences

Commercial and industrial

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

December 31 , 2021

Principal Balance

Allowance for Loan

Losses Allocated

Allowance for

With an allowance recorded:

Commercial and industrial

With no related allowance recorded:

Residential real estate

Commercial real estate:

2 unchanged sentences

Commercial and industrial

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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, 2021 and 2020:

Three months ended September 30, 2021

Nine months ended September 30, 2021

Impaired Loans

Interest Income

Interest Recognized

The following tables present information related to loans individually evaluated for impairment by class of loans for the three months ended March 31, 2022 and 2021:

Three months ended

March 31, 2022

Impaired Loans

2 unchanged sentences

With an allowance recorded:

Commercial and industrial

With no related allowance recorded:

3 unchanged sentences

Commercial and industrial

Three months ended September 30, 2020

Nine months ended September 30, 2020

Impaired Loans

Interest Income

Interest Recognized

Three months ended

March 31, 2021

Impaired Loans

3 unchanged sentences

Commercial real estate:

Nonowner-occupied

Owner-occupied

Commercial and industrial

With no related allowance recorded:

4 unchanged sentences

Commercial and industrial

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

Nonaccrual loans and loans past due 90 days or more and still accruing include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified as impaired loans.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu).

As of September 30, 2021, there were no other real estate owned for residential real estate properties, as compared to $ 43 at December 31, 2020.

In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $ 415 and $ 1,097 as of September 30, 2021 and December 31, 2020, respectively.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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, 2021 and December 31, 2020:

September 30 , 2021

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 March 31, 2022 and December 31, 2021.

In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $ 337 and $ 316 as of March 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 March 31, 2022 and December 31, 2021:

March 31 , 2022

Loans Past Due

14 unchanged sentences

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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

September 30 , 2021

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

March 31 , 2022

Residential real estate

10 unchanged sentences

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty.

A troubled debt restructuring (“TDR”) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower

who is experiencing financial difficulty.

All TDRs are considered to be impaired.

1 unchanged sentence

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;

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 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.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

The following table presents the types of TDR loan modifications by class of loans as of September 30, 2021 and December 31, 2020:

September 30 , 2021

Performing to Modified Terms

The following table presents the types of TDR loan modifications by class of loans as of March 31, 2022 and December 31, 2021:

March 31 , 2022

Performing to

Commercial real estate:

1 unchanged sentence

Reduction of principal and interest payments

Maturity extension at lower stated rate than market rate

Credit extension at lower stated rate than market rate

4 unchanged sentences

December 31 , 2021

Performing to Modified Terms

Residential real estate:

Interest only payments

Performing to

Commercial real estate:

7 unchanged sentences

Interest only payments

The Company had no specific allocations in reserves to customers whose loan terms have been modified in TDRs at September 30 , 2021 and December 31, 2020 .

At September 30 , 2021 , the Company had $ 3,878 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs, as compared to $ 1,100 at December 31, 2020 .

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

There were no new TDR loan modifications that occurred during the three and nine months ended September 30, 2021 and 2020, which resulted in no impact to provision expense or the allowance for loan losses.

During the three and nine months ended September 30, 2021 and 2020, the Company had no TDRs that experienced any payment defaults within twelve months following their loan modification.

A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual.

At March 31, 2022 and December 31, 2021, the Company had no specific allocations in reserves to customers whose loan terms were modified in TDRs.

At March 31, 2022, the Company had $ 3,153 in 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 months ended March 31, 2022 and 2021 and, therefore, had no impact to provision expense or the allowance for loan losses.

During the three months ended March 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.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 and provided guidance on the modification of loans as a result of COVID-19, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

Borrowers are considered current if they are less than 30 days past due on their contractual payments at the time of modification.

As of September 30, 2021, the Company had modified 674 loans related to COVID-19 with an outstanding loan balance of $ 130,365 that were not reported as TDRs.

As of September 30, 2021, the Company had 18 of those modified loans still operating under their deferral terms that were related to COVID-19 with an outstanding loan balance of $ 156 that were not reported as TDRs in the tables presented above.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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 March 31, 2022, the Company had modified 591 loans related to COVID-19 with an outstanding loan balance of $ 107,098 that were not reported as TDRs.

As of March 31, 2022, the Company had 19 of those modified loans still operating under their COVID-19 related deferral terms with an outstanding loan balance of $ 378 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:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such

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.

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 .

1 unchanged sentence

Special Mention.

Loans classified as "special mention" indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency.

These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification.

These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies.

Loans classified as

“special mention” indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency.

These loans will be under constant supervision, are not classified and do

not expose the institution to sufficient risks to warrant classification.

These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the

deficiencies.

These loans are considered bankable assets with no apparent loss of principal or interest envisioned.

2 unchanged sentences

The Company uses the following definitions for its classified loan risk ratings:

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.

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.

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.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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.

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 are 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.

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

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.

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.

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.

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.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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, 2021 and December 31, 2020, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

September 30 , 2021

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 March 31, 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:

March 31 , 2022

Commercial real estate:

7 unchanged sentences

Commercial and industrial

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.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

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, 2021 and December 31, 2020:

September 30 , 2021

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not

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

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 March 31, 2022 and December 31, 2021:

March 31 , 2022

Nonperforming

1 unchanged sentence

Nonperforming

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 4.10 % of total loans were unsecured at September 30, 2021, down from 4.22 % at December 31, 2020.

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 4.69 % of total loans were unsecured at March 31, 2022, up from 4.45 % at December 31, 2021.

NOTE 5 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its

These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual amount of those instruments.

The contract amounts of these instruments are not included in the consolidated financial statements.

At September 30, 2021, the contract amounts of these instruments totaled approximately $ 89,645 , compared to $ 88,456 at December 31, 2020.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for

commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual amount of those instruments.

The contract amounts of these instruments are not included in the consolidated financial

At March 31, 2022,

the contract amounts of these instruments totaled approximately $ 94,498 , compared to $ 89,602 at December 31, 2021.

The Bank uses the same credit policies in making commitments and conditional obligations as it does for instruments recorded on the balance sheet.

Since many of these instruments are expected to expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements.

Since many of these instruments are

expected to expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements.

NOTE 6 - OTHER BORROWED FUNDS

Other borrowed funds at September 30, 2021 and December 31, 2020 are comprised of advances from the Federal Home Loan Bank (“FHLB”) of Cincinnati and promissory notes.

FHLB Borrowings

Promissory Notes

September 30 , 2021

Other borrowed funds at March 31, 2022 and December 31, 2021 are comprised of advances from the Federal Home Loan Bank (“FHLB”)

of Cincinnati and promissory notes.

March 31 , 2022

December 31 , 2021

Pursuant to collateral agreements with the FHLB, advances are secured by $ 272,922 in qualifying mortgage loans, $ 73,204 in commercial loans and $ 5,125 in FHLB stock at September 30, 2021.

Fixed-rate FHLB advances of $ 21,147 mature through 2042 and have interest rates ranging from 1.53 % to 3.31 % and a year-to-date weighted average cost of 2.40 % at September 30, 2021 and December 31, 2020, respectively.

There were no variable-rate FHLB borrowings at September 30, 2021.

NOTE 6 - OTHER BORROWED FUNDS (Continued)

At September 30, 2021, the Company had a cash management line of credit enabling it to borrow up to $ 100,000 from the FHLB.

Pursuant to collateral agreements with the FHLB, advances are secured by $ 262,661 in qualifying mortgage loans, $ 31,904 in commercial loans and $ 5,125 in FHLB stock at March 31, 2022.

Fixed-rate FHLB advances of $ 16,791

mature through 2042 and have interest rates ranging from 1.53 % to 2.97 % and a year-to-date weighted average cost of 2.37 % at March 31, 2022 and 2.39 % at December 31, 2021.

There were no

variable-rate FHLB borrowings at March 31, 2022.

At March 31, 2022, the Company had a cash management line of credit enabling it to borrow up to $ 100,000 from the FHLB, subject to the stock ownership and collateral limitations described in the next paragraph.

All cash management advances have an original maturity of 90 days.

The line of credit must be renewed on an annual basis.

There was $ 100,000 available on this line of credit at September 30, 2021.

Based on the Company's current FHLB stock ownership, total assets and pledgeable loans, the Company had the ability to obtain borrowings from the FHLB up to a maximum of $ 195,703 at September 30, 2021.

Of this maximum borrowing capacity, the Company had $ 109,438 available to use as additional borrowings, of which $ 100,000 could be used for short term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, are due at various dates through a final maturity date of April 13, 2022 , and have fixed rates of 1.00 % and a year-to-date weighted average cost of 1.24 % at September 30, 2021, as compared to 2.20 % at December 31, 2020.

At September 30, 2021 there were four promissory notes payable by Ohio Valley to related parties totaling $ 2,138 as compared to six totaling $ 3,198 at December 31, 2020.

There were no promissory notes payable to other banks at September 30, 2021 and December 31, 2020, respectively.

Letters of credit issued on the Bank's behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $ 65,118 at September 30, 2021 and $ 76,740 at December 31, 2020.

Scheduled principal payments as of September 30, 2021:

There was $ 100,000 available on this line of credit at March 31, 2022.

Based on the Company’s current FHLB stock ownership, total assets and pledgeable loans, the Company had the ability to obtain borrowings from

the FHLB up to a maximum of $ 189,260 at March 31,

Of this maximum borrowing capacity, the Company had $ 107,949 available to use as additional borrowings, of which $ 100,000 could be used for

short term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, are due at various dates through a final maturity date of March 13, 2023 , and have fixed rates ranging from 1.00 %

to 1.30 % and a year-to-date weighted average cost of 1.22 % at March 31, 2022, as compared to 1.23 % at December 31, 2021.

At March 31, 2022

there were six promissory notes payable by Ohio Valley to related parties totaling $ 2,138 .

There were no promissory notes payable to other banks at March 31, 2022

and December 31, 2021, respectively.

Letters of credit issued on the Bank’s behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $ 64,520 at March 31, 2022 and $ 68,380 at December 31, 2021.

Scheduled principal payments as of March 31, 2022:

NOTE 7 – SEGMENT INFORMATION

The reportable segments are determined by the products and services offered, primarily distinguished between banking and consumer finance.

They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.

products/services, and customers are similar.

Loans, investments, and deposits provide the majority of the net revenues from the banking operation, while loans provide the majority of the net revenues for the consumer finance segment.

All Company segments are domestic.

Total revenues from the banking segment, which accounted for the majority of the Company's total revenues, totaled 94.0 % of total consolidated revenues for the quarters end September 30, 2021 and 2020, respectively.

The accounting policies used for the Company's reportable segments are the same as those described in Note 1 - Summary of Significant Accounting Policies.

segments are domestic.

Total revenues from the banking segment, which accounted for the majority of the Company’s total revenues, totaled 90.5 % and 90.8 % of total consolidated revenues

for the quarters end March 31, 2022 and 2021, respectively.

The accounting policies used for the Company’s reportable segments are the same as those described in Note 1 - Summary of Significant

Accounting Policies.

Income taxes are allocated based on income before tax expense.

NOTE 7 – SEGMENT INFORMATION (Continued)

All goodwill is in the banking segment.

Information for the Company’s reportable segments is as follows:

Three Months Ended September 30, 2021

Net interest income

Provision expense

Noninterest income

Noninterest expense

Three Months Ended September 30, 2020

Net interest income

Provision expense

Noninterest income

Noninterest expense

Nine Months Ended September 30, 2021

Three months ended March 31,

Net interest income

2 unchanged sentences

Noninterest expense

Nine Months Ended September 30, 2020

Three months ended March 31,

Net interest income

3 unchanged sentences

NOTE 8 – LEASES

Substantially all of the Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities represent leases for branch buildings and office space to conduct business.

Substantially all of the Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities represent leases for branch

buildings and office space to conduct business.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

The lease expense for these leases are recorded on a straight-line basis over the lease term.

Leases with initial terms in excess of 12 months are recorded as either operating or financing leases on the consolidated balance sheet.

with initial terms in excess of 12 months are recorded as either operating or financing leases on the consolidated balance sheet.

The Company has no finance lease arrangements.

Operating leases have remaining lease terms ranging from 19 months to 20 years, some of which include options to extend the leases for up to 15 years.

Operating lease ROU assets and operating lease liabilities are valued based on the present value of future minimum lease payments, discounted with an incremental borrowing rate for the same term as the underlying lease.

Operating leases have remaining lease terms ranging from 13 months to 19 years, some of which include

options to extend the leases for up to 15 years.

Operating lease ROU assets and operating lease liabilities are valued based on the present

value of future minimum lease payments, discounted with an incremental borrowing rate for the same term as the underlying lease.

The Company has one lease arrangement that contains variable lease payments that are adjusted periodically for an index.

Balance sheet information related to leases was as follows:

September 30, 2021

December 31, 2020

Operating leases:

3 unchanged sentences

Three months ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

Short-term lease expense

Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2021 are as follows:

Operating Leases

2021 (remaining)

Future undiscounted lease payments for operating leases with initial terms of one year or more as of March 31, 2022 are as follows:

Total lease payments

2 unchanged sentences

Other information was as follows:

September 30, 2021

December 31, 2020

Weighted-average remaining lease term for operating leases

1 unchanged sentence

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-Q

Item 1. Financial Statements