Ohio Valley Banc (OVBC) - 2023 Q4 - Annual Report

Financial Performance - Ohio Valley's consolidated assets increased to approximately $1,352,135,000 in 2023, up from $1,210,787,000 in 2022, representing a growth of 11.7%[15] - Total shareholders' equity rose to approximately $144,007,000 in 2023, compared to $135,028,000 in 2022, marking an increase of 6.9%[15] - The loan portfolio increased by $86,851,000 to finish at $971,900,000 in 2023, with commercial loans growing by $40,205,000 (9.1%) and consumer loans by $24,178,000 (16.3%) compared to 2022[36] - Consolidated interest and fee revenue from loans accounted for 73.59% of total consolidated revenues in 2023, up from 73.16% in 2022[36] - Revenues from interest and dividends on securities accounted for 5.59% of total consolidated revenues in 2023, down from 6.64% in 2022[44] Regulatory Compliance - The Company is subject to the Economic Growth, Regulatory Relief and Consumer Protection Act, which eases regulations for banks with consolidated assets under $100 billion[65] - The Federal Reserve Board requires all depository institutions to maintain reserves at specified levels, with the current reserve requirement ratio at 0%[74] - Compliance with Basel III Capital Rules, effective from January 1, 2015, mandates new minimum capital requirements for smaller banking organizations[77] - As of December 31, 2023, the Bank met the capital ratio requirements to be deemed "well-capitalized" with a common equity tier 1 capital ratio of at least 6.5%, total risk-based capital ratio of at least 10.0%, tier 1 risk-based capital ratio of at least 8.0%, and a leverage ratio of at least 5.0%[87] - The FDIC projected that the Designated Reserve Ratio (DRR) remains on track to reach the statutory minimum of 1.35% ahead of the deadline of September 30, 2028, despite a decline from 1.25% to 1.10% as of June 30, 2023[96] Operational Changes - Ohio Valley discontinued operations of its nonbank subsidiary, OVBC Captive, Inc., in December 2023 due to adverse IRS regulations affecting small captives[16] - The Company raised $8,500,000 through a trust preferred securities offering to support growth[46] - The Bank's participation in a new agreement for processing electronic refund checks and deposits will span five tax seasons from 2021 to 2025[48] - The Company adopted the Current Expected Credit Loss (CECL) model effective January 1, 2023, allowing for a phased-in approach to address regulatory capital impacts[84] Competition and Market Position - The Company faces increasing competition from both traditional and non-traditional financial service providers, impacting interest rates and service fees[51] - Loan Central enhances the Company's competitive position by serving consumers who may not meet traditional credit standards[52] - The company operates in a highly competitive market with significant competition from various financial institutions, which may impact its ability to maintain strong financial performance[154] Risk Management - The allowance for credit losses may not be adequate to cover actual credit losses, which could adversely affect the company's operating results[166] - The company is exposed to risks related to credit quality, particularly in its commercial and commercial real estate loan portfolio, which could lead to significant increases in nonperforming loans[163] - Security breaches or failures in systems could materially affect the company's operations and customer trust, leading to potential financial losses[167] - The company is exposed to liquidity risk, as a decline in customer deposits could lead to increased interest expenses and negatively impact profitability and net interest margin[180] - The company faces risks from cyber-attacks, including potential theft of customer data and the need for significant resources to enhance protective measures[172] Employee Relations - As of December 31, 2023, Ohio Valley had approximately 284 employees and 270 full-time equivalent employees[115] - Ohio Valley's management considers its relationship with employees and officers to be good[115] Cybersecurity - The company is required to report material cybersecurity incidents within four business days of determination[111] - Ohio Valley expects the trend of state-level activity regarding cybersecurity regulations to continue and is monitoring developments[112] - The company has implemented a comprehensive Information Security Program to manage cybersecurity risks, including regular assessments and employee training[196] - Ohio Valley has implemented an Incident Response Plan to address cybersecurity threats, which is reviewed and updated at least annually[197] - The company has not detected significant data loss or material financial losses related to cybersecurity attacks to date, but risks remain high due to evolving threats[198] Shareholder Information - Ohio Valley's common shares are traded on The NASDAQ under the symbol "OVBC," with approximately 2,096 shareholders as of February 29, 2024[207] - The company plans to continue paying quarterly cash dividends comparable to historical levels, subject to various factors including financial condition and regulatory limitations[208] - The Board of Directors has discretion over future cash dividends, which are influenced by operational results and regulatory requirements[208] Legal and Regulatory Risks - The company may be subject to litigation that could adversely affect its financial condition and results of operations[191] - The company is subject to extensive regulatory oversight, and changes in laws and regulations could negatively impact its operations and financial condition[182]