Results of Operations and Financial Condition - Form 8-K

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.02.

Results of Operations and Financial Condition

GALLIPOLIS, Ohio - Ohio Valley Banc Corp. [Nasdaq: OVBC] (the "Company") reported consolidated net income for the quarter ended September 30, 2022, of $3,690,000, an increase of $654,000, or 21.5%, from the same period the prior year. Earnings per share for the third quarter of 2022 were $.77 compared to $.63 for the prior year third quarter. For the nine months ended September 30, 2022, net income totaled $9,814,000, an increase of $386,000, or 4.1%, from the same period the prior year. Earnings per share were $2.06 for the first nine months of 2022 versus $1.97 for the first nine months of 2021. Return on average assets and return on average equity were 1.04% and 9.56%, respectively, for the first nine months of 2022, compared to 1.03% and 9.13%, respectively, for the same period in the prior year.

Ohio Valley Banc Corp. President and CEO, Larry Miller said, "It has been another active quarter at OVBC. We believe the best way to maximize shareholder value is by serving our communities as a growing, independent community bank. In this spirit of continued growth, we recently opened our newest location in Ironton, which enabled us to expand our footprint into Lawrence County, Ohio. In addition, we have enjoyed a great year of celebrating Ohio Valley Bank's 150th anniversary with special customer appreciation events and giveaways across all of our locations. As November 1 marks the day we officially opened our doors for the first time, it makes me think about our future. I am eager to see the bank continue to grow and be a strong force within our communities for the next 150 years."

For the third quarter of 2022, net interest income increased $1,486,000, and for the nine months ended September 30, 2022, net interest income increased $1,766,000 from the same respective periods last year. Contributing to the increase in net interest income was the increase in the net interest margin and the growth in average earning assets. In relation to the significant increase in market interest rates during 2022 based on actions taken by the Federal Reserve, the net interest margin has responded positively due to the yield on earning assets increasing more than the cost of interest-bearing liabilities. During 2022, the quarterly net interest margin increased from 3.51% for the first quarter, to 3.64% for the second quarter, and 4.03% for the third quarter. As a result of this positive trend, the current net interest margin now exceeds the prior year. For the nine months ended September 30, 2022, the net interest margin was 3.73%, compared to 3.62% for the same period the prior year. For the nine months ended September 30, 2022, average earning assets increased $30 million from the same period the prior year. The increase was primarily due to average securities, which increased $46 million from the first nine months of last year due to higher average deposit balances. Partially offsetting the growth in securities was the $5 million decrease in average loan balances. The decrease in average loans was related to the repayment of all SBA Paycheck Protection Program (PPP) loans as of the first quarter of 2022. As a result of these repayments, the average balance of PPP loans decreased $18 million and the corresponding interest and fees on PPP loans decreased $960,000 for the first nine months of 2022, as compared to the same period last year.

For the three months ended September 30, 2022, the provision for loan losses was negative $378,000, a decrease of $285,000 from the same period last year. The negative provision expense for the third quarter of 2022 was primarily related to the elimination of a $297,000 specific reserve on a collateral dependent impaired loan due to the full collection of the loan balance. For the nine months ended September 30, 2022, the provision for loan losses was negative $691,000, a decrease of $573,000 from the same period last year. The negative provision for loan loss expense experienced during the first nine months of 2022 was due to a decrease in certain economic risk factors, such as the level of classified and criticized loans and the partial release of the COVID reserve. These improvements contributed to lower general reserves, which more than offset the year-to-date net charge-offs of $981,000, of which $613,000 was related to a single loan relationship. The allowance for loan losses was .56% of total loans at September 30, 2022, compared to .78% at December 31, 2021 and .79% at September 30, 2021. The ratio of nonperforming loans to total loans improved to .46% at September 30, 2022, compared to .56% at December 31, 2021 and .72% at September 30, 2021.

For the three months ended September 30, 2022, noninterest income totaled $2,615,000, an increase of $3,000 from the same period last year. For the nine months ended September 30, 2022, noninterest income totaled $8,971,000, an increase of $514,000 from the same period last year. The increase in year-to-date noninterest income was due to a $506,000 increase in service charges on deposit accounts and a $143,000 increase in interchange income on debit and credit card transactions. These increases were partially offset by a $197,000 decrease in the gain on sale of premises.

For the three months ended September 30, 2022, noninterest expense totaled $10,347,000, an increase of $878,000 from the same period last year. For the nine months ended September 30, 2022, noninterest expense totaled $30,158,000, an increase of $2,205,000 from the same period last year. The Company's largest noninterest expense, salaries and employee benefits, increased $391,000 as compared to the third quarter of 2021 and increased $1,095,000 as compared to the first nine months of 2021. The increase was primarily related to the staffing of Race Day Mortgage and to annual merit increases. Further contributing to higher noninterest expense was other noninterest expense, software expense and data processing. The increase in other noninterest expense was primarily related to the expense associated with purchasing mortgage loan marketing leads for Race Day Mortgage. As a result, other noninterest expense increased $119,000 and $419,000 during the three and nine months ended September 30, 2022, compared to the same periods in 2021, respectively. For the three months and nine months ended September 30, 2022, software expense increased $97,000 and $273,000, respectively, from the same periods last year. The increase was partly due to software platforms utilized by Race Day Mortgage. During the three months ended September 30, 2022, data processing expense increased $109,000, and increased $234,000 during the first nine months of 2022 as compared to the same periods in 2021. The increase was related to higher debit and credit card transaction volume.

The Company's total assets at September 30, 2022 were $1.252 billion, an increase of $3 million from December 31, 2021. During the first nine months of 2022, the Company deployed a portion of the heightened cash balance into higher yielding earning assets. Since December 31, 2021, loan balances increased $25 million and securities increased $7 million. These increases were funded by a $39 million decrease in cash and cash equivalents. At September 30, 2022, total deposits increased $14 million and shareholders' equity decreased $13 million from year end 2021. The decrease in shareholders' equity was related to recording the fair value adjustment for securities classified as available-for-sale. Based on the increase in market rates during the first nine months of 2022, the fair value of securities decreased $19 million on an after-tax basis.

Ohio Valley Banc Corp. common stock is traded on the NASDAQ Global Market under the symbol OVBC. The holding company owns The Ohio Valley Bank Company, with 17 offices in Ohio and West Virginia; Loan Central, Inc. with six consumer finance offices in Ohio; and Race Day Mortgage, Inc., an online consumer direct mortgage company. Learn more about Ohio Valley Banc Corp. at www.ovbc.com.

Caution Regarding Forward-Looking Information

Certain statements contained in this earnings release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "expects," "appears," "intends," "targeted" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying those statements. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including: (i) impacts from the coronavirus (COVID-19) pandemic on our business, operations, customers and capital position; (ii) the impact of COVID-19 on local, national and global economic conditions; unexpected changes in interest rates or disruptions in the mortgage market related to COVID-19 or responses to the health crisis; (iii) changes in political, economic or other factors, such as inflation rates, recessionary or expansive trends, taxes, the effects of implementation of federal legislation with respect to taxes and government spending and the continuing economic uncertainty in various parts of the world; (iv) competitive pressures; (v) fluctuations in interest rates; (vi) the level of defaults and prepayment on loans made by the Company; (vii) unanticipated litigation, claims, or assessments; (viii) fluctuations in the cost of obtaining funds to make loans; (ix) regulatory changes; and (x) other factors that may be described in the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events