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Item 1A. Risk Factors

2025-03-14 compared with 2024-03-15 · 74 added, 138 removed, 308 unchanged (41% of the section changed)

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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 as presenting the risk factors listed in any particular order.

This should not be viewed as an all-inclusive

list of risks or as presenting the risk factors listed in any particular order.

Risks Related to Economic, Political and Market Conditions

Economic, political and market risks could adversely affect our earnings and capital through declines in loan demand, quality of investment

securities, our borrowers’ ability to repay loans, the value of the collateral securing our loans, and deposits.

Economic, political and market risks could adversely affect our earnings and capital through declines in loan

demand, quality of investment securities, our borrowers’ ability to repay loans, the value of the collateral securing our loans, and deposits.

Our success depends, to a certain extent, upon local and national economic and political conditions, as well as governmental fiscal

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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.

political developments, such as the military conflicts in Ukraine and the Middle East, have resulted in substantial changes in economic and political conditions for the United States and the remainder of the world.

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.

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

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

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We are less able than larger financial institutions to spread risks of unfavorable local economic conditions across a large number of diversified economies.

Our earnings are significantly affected by the fiscal and monetary policies of the United States Government and its agencies, sometimes adversely.

Our earnings are significantly affected by the fiscal and monetary policies of the United States Government and

its agencies, sometimes adversely.

The policies of the Federal Reserve Board impact us significantly, especially

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This could adversely affect the borrower’s earnings and ability to repay its loan, which could have a material adverse effect on our financial condition and results of

Changes in interest rates could have a material adverse effect on our financial condition and results of operations.

Changes in interest rates could have a material adverse effect on our financial condition and results of

Our earnings depend substantially on our interest rate spread, which is the difference between (i) the rates we earn on loans,

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the ability of our borrowers to repay their loans, particularly as interest rates have been rising and adjustable-rate debt becomes more expensive.

Increased defaults on loans could have a material adverse effect on our financial condition,

results of operations and cash flows.

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 contracts.

LIBOR was 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 derivative financial instruments.

LIBOR is set based on interest rate information reported by certain banks, which are to stop reporting such information after

June 30, 2023.

In the U.S., the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”) as the set of alternative U.S.

dollar reference interest rates.

SOFR is different from LIBOR in

that it is a backward-looking secured rate rather than a forward-looking unsecured rate.

These differences could lead to a greater disconnect between our costs to raise funds for SOFR as compared to LIBOR.

For cash products and loans, ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.

There are operational issues which may create a delay in the

transition to SOFR or other substitute indices, leading to uncertainty across the industry.

These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and

other financial obligations or extensions of credit.

During 2023, the Company’s limited number of loans, derivative contracts, borrowings and other financial instruments transitioned

from LIBOR to using a SOFR rate.

The change to SOFR did not have any adverse effect on our business, financial condition and results of operations.

Adverse changes in the financial markets may adversely

impact our results of operations.

Increased defaults on loans could have a material adverse effect on our financial condition, results

of operations and cash flows.

Adverse changes in the

financial markets may adversely impact our results of operations.

The capital and credit markets have been experiencing unprecedented levels of volatility in recent years.

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“systemic risk” may adversely affect our business.

Recent bank failures have created significant market volatility, regulatory uncertainty, and decreased confidence in the U.S.

banking system.

The recent failures of several high-profile banking institutions in 2023 have caused significant market volatility,

regulatory uncertainty, and decreased confidence in the U.S.

banking system.

These bank failures occurred during a period of rapidly rising interest rates, which among other things, has resulted in unrealized losses in longer duration securities

and more competition for bank deposits, and may increase the risk of a potential economic recession in the United States.

Given the current environment, we may experience more deposit volatility as customers react to adverse events or market

speculation involving financial institutions.

In response to the bank failures, the United States government may adopt a variety of measures and new regulations

designed to strengthen capital levels, liquidity standards, and risk management practices and otherwise restore confidence in financial institutions.

Any reforms, if adopted, could have a significant impact on banks and bank holding companies,

including us.

We may also be subject to any special assessment that the FDIC adopts to recover the loss to the DIF, and such assessment, if significant, could have an adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Business

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

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

In our market area, we encounter significant competition from other commercial banks, savings and loan associations, credit unions,

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technology to deliver products and services that provide convenience to customers and to create additional efficiencies in our operations.

Our small to medium-sized business target market may have fewer financial resources to weather a downturn in the economy.

Our small to medium-sized business target market may have fewer financial resources to weather a downturn in

We target our business development and marketing strategy largely to serve the banking and financial services needs of small to

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Our business strategy includes growth plans.

Our financial condition and results of operations could be negatively affected if we fail to grow or

fail to manage our growth effectively.

Our financial condition and results of operations could be

negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a profitable growth strategy.

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expansion will not adversely affect our results of operations.

Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely

affect our ability to successfully implement our business strategy.

Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect

our ability to successfully implement our business strategy.

Also, if we grow more slowly than anticipated, our operating results could be materially adversely affected.

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opportunities, the competitive responses from other financial institutions in our market areas, our ability to raise sufficient capital and our ability to manage our growth.

While we believe we have the management resources and internal systems

in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or growth will be successfully managed.

While we believe we have the management resources and internal systems in

place to successfully manage our future growth, there can be no assurance growth opportunities will be available or growth will be successfully managed.

We may acquire other financial institutions or parts of institutions in the future and may open new branches.

We also may consider and enter into new lines of business or offer new products or services.

also may consider and enter into new lines of business or offer new products or services.

Expansions of our business involve a number of expenses and risks, including:

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We may also lose customers as we close one or more branches as part of a plan to expand into other areas or become more productive from other branches.

Failure to integrate or adopt new technology may undermine our ability to meet customer demands, leading to adverse effects on our financial

condition and results of operations.

Failure to integrate or adopt new technology may undermine our ability to meet customer demands, leading to

adverse effects on our financial condition and results of operations.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new

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We are subject to periodic reviews from state and federal regulators, which may impact our operations and our financial condition.

As part of the regulatory review, the loan portfolio and the allowance for loan losses are evaluated.

As a result, the incurred loss identified on loans, or the assigned loan rating could change and may require us to increase our provision for

loan losses or loan charge-offs.

part of the regulatory review, the loan portfolio and the allowance for loan losses are evaluated.

As a result, the incurred loss identified on loans, or the assigned loan rating could change and may require us to increase our provision for loan

losses or loan charge-offs.

In addition, any downgrade in loan ratings could impact our level of impaired loans or classified assets.

Any increase in our provision for loan losses or loan charge-offs as required by these regulatory

authorities could have a material adverse effect on our financial condition and results of operations.

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

company status.

Any increase in our provision for loan losses or loan charge-offs as required by these regulatory authorities

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

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

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

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Since our loan

portfolio contains a significant number of commercial and commercial real estate loans, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans, and ultimately could have a material adverse

effect on our earnings and financial condition.

We may also have concentrated credit exposure to a particular industry, resulting in a risk of a material adverse effect on our earnings or financial condition if there is an event adversely

affecting that industry.

on our earnings and financial condition.

We may also have concentrated credit exposure to a particular industry, resulting in a risk of a material adverse effect on our earnings or financial condition if there is an event adversely affecting that

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information

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Our financial

condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with GAAP or on financial statements and other financial information that are materially

We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect

our liquidity, results of operations and financial condition.

We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale

agreements, which could adversely affect our liquidity, results of operations and financial condition.

When the Bank sells a mortgage loan, it agrees to repurchase or substitute a mortgage loan if it is later found to have breached any

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

Failures of, or material breaches in security of, our systems or those of third-party service providers may have a material adverse effect on our

Failures of, or material breaches in security of, our systems or those of third-party service providers may

have a material adverse effect on our business.

We collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both

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we may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate and remediate any security vulnerabilities.

Our ability to pay cash dividends is limited, and we may be unable to pay cash dividends in the future even if we would like to do so.

Our ability to pay cash dividends is limited, and we may be unable to pay cash dividends in the future even if

we would like to do so.

We are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common stock.

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Loss of such key personnel, should they enter into an employment relationship with one of our competitors, could result in the loss of some of our customers.

If we foreclose on collateral property and own the underlying real estate, we may be subject to the increased costs associated with the ownership of

real property, resulting in reduced revenue.

If we foreclose on collateral property and own the underlying real estate, we may be subject to the increased

costs associated with the ownership of real property, resulting in reduced revenue.

We may have to foreclose on collateral property to protect our investment and may thereafter own and operate such property, in which

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maintenance costs, may adversely affect the income from the real estate.

Therefore, the cost of operating a real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect our

investment, or we may be required to dispose of the real property at a loss.

We may also acquire properties with hazardous substances that must be removed or remediated, the costs of which could be substantial, and we may not be able to recover

such costs from the responsible parties.

Therefore, the cost of operating a real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect our investment,

or we may be required to dispose of the real property at a loss.

We may also acquire properties with hazardous substances that must be removed or remediated, the costs of which could be substantial, and we may not be able to recover such costs

from the responsible parties.

The foregoing expenditures and costs could adversely affect our ability to generate revenues, resulting in reduced levels of profitability.

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Your ability to sell or purchase our common shares depends upon the existence of an active trading market for our common shares.

Although our common shares are quoted on The NASDAQ Global Market, the volume of trades on any given day has been limited historically.

As a result, you may be unable to sell or purchase our common shares at the volume, price and time that you

Additionally, a fair valuation of the purchase or sales price of our common shares also depends upon an active trading market, and thus the price you receive for a thinly-traded stock such as our common shares may not reflect its true

The limited trading market for our common shares may cause fluctuations in the market value of our common shares to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market.

Liquidity risk could impair our ability to fund operations and have an adverse impact on our earnings and financial condition.

Although our common

shares are quoted on The NASDAQ Global Market, the volume of trades on any given day has been limited historically.

As a result, you may be unable to sell or purchase our common shares at the volume, price and time that you desire.

Additionally,

a fair valuation of the purchase or sales price of our common shares also depends upon an active trading market, and thus the price you receive for a thinly-traded stock such as our common shares may not reflect its true value.

The limited trading

market for our common shares may cause fluctuations in the market value of our common shares to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market.

Liquidity risk could impair our ability to fund operations and have an adverse impact on our earnings and

financial condition.

Our primary funding and liquidity source to support our business strategies is a stable customer deposit base.

Deposit levels may

be affected by a number of factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, banking industry conditions that can impact customers perceptions of the

safety and soundness of the banking industry generally or of specific financial institutions, and general economic conditions.

If our deposit levels fall, we could lose a relatively low-cost source of funding and our interest expense would likely

increase as we obtain alternative funding to replace lost deposits.

If local customer deposits are not sufficient to fund our normal operations and growth, we will look to outside sources, such as lines of credit with both the Federal Home Loan

Bank of Cincinnati (“FHLB”) and FRB, brokered CDs, a federal funds line with a correspondent bank, and available funds from select deposit placement services.

Although the Bank has historically been able to replace maturing deposits and advances,

no assurance can be given that the Bank would be able to replace such funds in the future if our financial condition were to change.

If we are required to rely more heavily on more expensive funding sources to support asset growth, our revenues

may not increase proportionately to cover our costs, which would have a negative impact to profitability and the net interest margin.

Unrealized losses in the Bank’s investment portfolio could affect liquidity.

As a result of market interest rates increasing during 2022 and 2023, the unrealized losses on the Bank’s investment portfolio also increased.

The increase in unrealized losses is reflected in Accumulated Other Comprehensive Income on the

balance sheet and reduces book capital and therefore its tangible common equity ratio.

Unrealized losses do not affect regulatory capital ratios.

The majority of the Bank’s securities portfolio is classified as AFS and therefore could be sold for

liquidity, investment management or similar reasons even if there is not an intention of such a sale.

Unrealized losses on the AFS debt securities portfolio amounted to $14,661 and $18,751 at December 31, 2023 and 2022, respectively.

not currently intend to sell these securities, if it was required to sell such securities to meet liquidity needs, we may incur losses, which could impair our capital, financial condition, and results of operations and, in the event that our

other funding sources are insufficient, could require us to raise additional capital.

While we have taken actions to maximize our funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden

liquidity needs.

Deposit levels may be

affected by a number of factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, banking industry conditions that can impact customers perceptions of the safety

and soundness of the banking industry generally or of specific financial institutions, and general economic conditions.

If our deposit levels fall, we could lose a relatively low-cost source of funding and our interest expense would likely increase

as we obtain alternative funding to replace lost deposits.

If local customer deposits are not sufficient to fund our normal operations and growth, we will look to outside sources, such as lines of credit with both the Federal Home Loan Bank of

Cincinnati (“FHLB”) and FRB, brokered CDs, a federal funds line with a correspondent bank, and available funds from select deposit placement services.

Although the Bank has historically been able to replace maturing deposits and advances, no

assurance can be given that the Bank would be able to replace such funds in the future if our financial condition were to change.

If we are required to rely more heavily on more expensive funding sources to support asset growth, our revenues may

not increase proportionately to cover our costs, which would have a negative impact to profitability and the net interest margin.

Risks Related to Legal, Regulatory and Accounting Changes

New laws and increased regulatory oversight may significantly affect our business, financial condition and results of operations.

New laws and increased regulatory oversight may significantly affect our business, financial condition and

results of operations.

The financial services industry is extensively regulated.

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The impact of any changes to laws and regulations or other

actions by regulatory agencies may negatively impact us and our ability to increase the value of our business, possibly limiting the services we provide, increasing the potential for competition from non-banks, or requiring us to change the way

Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the

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adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or market area.

Changes in accounting standards, policies, estimates or procedures could impact our reported financial condition or results of operations.

Changes in accounting standards, policies, estimates or procedures could impact our reported financial

condition or results of operations.

Entities that set generally applicable accounting standards, such as the FASB, the Securities and Exchange Commission, and other

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In some cases, we could be required to apply a new or revised standard retroactively, which would result in the restatement of our financial statements for prior periods.

In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL.

CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability.

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.

The Bank has developed a CECL model and is evaluating model results in relation to the new ASU guidance.

The Company adopted

the new accounting standard effective January 1, 2023, and recorded a net charge to retained earnings of $2,209,000 for the cumulative effect.

Upon adoption, the Company increased the allowance for credit losses by $2,162,000.

In addition, a

reserve for unfunded commitments and held to maturity securities was established totaling $631,000 and $3,000, respectively.

The Company elected to utilize the three-year phase in option of the day-one impact of this standard to regulatory capital .

If the methodologies and assumptions used in our CECL model prove to be incorrect, inadequate or we fail to properly transition internal processes

or systems, the allowance for credit losses may be insufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on Ohio Valley’s financial condition and results of

Additionally, the time horizon over which we are required to estimate future credit losses has expanded under CECL, which could result in increased volatility in future allowances for credit losses.

If weak or deteriorating economic

conditions are forecasted, our expectations for credit losses may be altered under CECL, with the potential to negatively affect our financial condition.

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

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in our reporting materially different amounts.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social

and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental,

social and governance (“ESG”) practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety,

diversity, labor conditions and human rights.

Increased ESG-related compliance costs for us as well as among our third-party suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our

common shares.

General Risk Factors

We may be the subject of litigation and other actions, which could have a material adverse effect on our financial condition, results of operations

and cash flows.

We may be the subject of litigation and other actions, which could have a material adverse effect on our

financial condition, results of operations and cash flows.

From time to time, we may be subject to a variety of litigation arising out of our business.

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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