OVBC 10-K & 10-Q changes, risk factors and insider trading
Ohio Valley Banc Corp. · Nasdaq · State Commercial Banks · CIK 894671 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
“Third-party service provider and vendor risks. We could also be adversely affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are further exposed to the risk that third-party service providers may be unable to fulfill their contractual obligations or will be affected by the same risks as the Bank has. …”see in full comparison
“Further, we may be affected by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card PIN numbers and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.”see in full comparison
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,see in full comparisonthefinancialloanassetsportfoliomeasured at amortized cost (loans and securities), off-balance sheet credit exposures, and the allowance forloancredit losses are evaluated. As a result, theincurredexpected credit loss identifiedon loans, or the assigned loan ratingcould change and may require us to increase our provision forloan lossescreditorlosses. This could be impacted by increases in asset risk coming from declines in asset quality, loancharge-offs.lossInexperience,addition,andanyotherdowngraderelevantineconomicloan ratings could impact our level of impaired loans or classified assets.factors. Any increase in ourprovisionallowance forloancredit lossesor loan charge-offsas 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.
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. In addition, a significant portion of our deposits are not insured above applicable FDIC limits. Uninsured depositors, including certain commercial and public‑sector depositors, may be more likely to withdraw funds rapidly in response to adverse news about us or the banking industry generally, or in response to perceived or actual market stress. Rapid or unexpected withdrawals of uninsured deposits could materially increase our funding costs or adversely affect our liquidity position and financial condition. If our deposit levels fall, we could lose a relatively low-cost source ofsee in full comparisonfundingfunding, 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.
Operational system failures and service interruptions. We collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both us and third-party service providers. Our dependence upon automated systems to record and process the Bank’s transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect. Our inability to use these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions.see in full comparisonWe could also be adversely affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are further exposed to the risk that third-party service providers may be unable to fulfill their contractual obligations or will be affected by the same risks as the Bank has. These disruptions may interfere with service to the Bank’s customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism, and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.
Our loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. In accordance with GAAP, we maintain an allowance for credit losses to provide for loansee in full comparisonloandefaults and non-performance, which when combined, we refer to as the allowance for credit losses. Our allowance for credit losses may not be adequate to cover actual credit losses, and future provisions for credit losses could have a materialmaterialadverse effect on our operating results. Our allowance for credit losses is based upon a number of relevant factors, including, but not limited to, trends in the level of nonperforming assets and classified loans, current economic conditions in the primary lending area, prior experience, possible losses arising from specific problem loans, and our evaluation of the risks in the current portfolio. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and allowance for credit losses.Moreover, the Financial Accounting Standards Board (“FASB”) has changed its requirements for establishing the allowance, which was effective for us in the first quarter of 2023.We cannot assure you that we will not further increase the allowance for credit losses or that regulators will not require us to increase this allowance. Either of these occurrences could have a material adverse effect on our financial condition and results of operations.
Full comparison: every changed paragraph (12)
We target our business development and marketing strategy largely to serve the banking and financial services needs of small to
medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger companies. If general economic conditions negatively impact our primary Ohio and West
Virginia Virginia
markets or the other geographic markets in which we operate,markets, our results of operations and financial condition may be negatively affected.
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, thefinancial loanassets portfoliomeasured at amortized cost (loans and securities), off-balance sheet credit exposures, and the allowance for loancredit losses are evaluated. As a result, the incurredexpected credit loss identified on loans, or the assigned loan rating could change
and may require us to increase our provision for loan
lossescredit orlosses. This could be impacted by increases in asset risk coming from declines in asset quality, loan charge-offs.loss Inexperience, addition,and anyother downgraderelevant ineconomic loan ratings could impact our level of impaired loans or classified assets.factors. Any increase in our provisionallowance for loancredit 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.
Commercial and commercial real estate loans comprise a significant portion of our loan portfolio. Commercial loans generally are viewed
viewed as having a higher credit risk than residential real estate or consumer loans because they usually involve larger loan balances to a single borrower and are more susceptible to a risk of default during an economic downturn. Since our loan portfolio
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,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.
Our loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be
insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. In accordance with GAAP, we maintain an allowance for credit losses to provide for loan
loan defaults and non-performance, which when combined, we refer to as the allowance for credit losses. Our allowance for credit losses may not be adequate to cover actual credit losses, and future provisions for credit losses could have a material
material adverse effect on our operating results. Our allowance for credit losses is based upon a number of relevant factors, including, but not limited to, trends in the level of nonperforming assets and classified loans, current economic
conditions in the
primary lending area, prior experience, possible losses arising from specific problem loans, and our evaluation of the risks in the current portfolio. The amount of future losses is susceptible to changes in economic, operating
and other conditions,
including changes in interest rates that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and allowance
for credit losses. Moreover, the Financial Accounting Standards Board (“FASB”) has changed its requirements for establishing the allowance, which was effective for us in the first quarter of 2023. We
cannot assure you that we will not further
increase the allowance for credit losses or that regulators will not require us to increase this allowance. Either of these occurrences could have a material adverse effect on our financial condition and
results of operations.
Operational system failures and service
interruptions. We collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both
us and third-party service providers. Our dependence upon
automated systems to record and process the Bank’s transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third
parties will result in losses and may be difficult to
detect. Our inability to use these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks
have experienced denial of service attacks in which
individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. We
could also be adversely affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently
manipulates our operations or systems. We are further exposed to the risk that third-party service providers may be unable to fulfill their contractual obligations or will be affected by the same risks as the Bank has. These disruptions may
interfere with service to the Bank’s customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism, and international hostilities on our systems or
for the effects of outages or other failures involving power or communications systems operated by others.
Third-party service provider and vendor risks. We could also be adversely affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are further exposed to the risk that third-party service providers may be unable to fulfill their contractual obligations or will be affected by the same risks as the Bank has. These disruptions may interfere with service to the Bank’s customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism, and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others. Further, we may be affected by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card PIN numbers and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.
Employee errors, misconduct, and fraud. Employees could engage in fraudulent, improper, or unauthorized activities on behalf of clients or improper use of confidential information. We may not be able to prevent employee errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.
Cyber-attacks and data security breaches. Management cannot be certain that the security controls we have adopted will prevent unauthorized access to our computer systems or those of our third-party service providers, whom we require to maintain similar controls. A security breach of the computer systems and loss of confidential information, such as customer account numbers or personal information, could result in a loss of customers’ confidence and, thus, loss of business. In addition, unauthorized access to or use of sensitive data could subject us to litigation and liability and costs to prevent further such occurrences.
Further, we may be affected by data breaches at retailers and other third parties who participate in data
interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card PIN numbers and commercial card information used to make purchases at such retailers and other third
parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.
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. In addition, a significant portion of our deposits are not insured above applicable FDIC limits. Uninsured depositors, including
certain commercial and public‑sector depositors, may be more likely to withdraw funds rapidly in response to adverse news about us or the banking industry generally, or in response to perceived or actual market stress. Rapid or unexpected withdrawals
of uninsured deposits could materially increase our funding costs or adversely affect our liquidity position and financial condition. If our deposit levels fall, we could lose a relatively low-cost source of fundingfunding, 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.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition
imposition of restrictions on the operation of an institution, the classification of assets held by an institution, the adequacy of an institution’s allowance for loancredit losses and the ability to complete acquisitions. Additionally, actions by regulatory
regulatory agencies against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders. Even the reduction of regulatory restrictions could have an
adverse effect
on us and our shareholders if such lessening of restrictions increases competition within our industry or market area.
Entities that set generally applicable accounting standards, such as the FASB,Financial Accounting Standards Board, the Securities and Exchange
Commission, and other
regulatory boards, periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. These changes can be difficult to predict and can materially affect
how we record and
report our financial condition and results of operations. 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.
Management's Discussion & Analysis (MD&A)
The information required under this Item 7 by Item 303 of SEC Regulation S-K is incorporated herein by reference to the information presented under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2025 Annual Report to Shareholders.
No wording changes found in this section (only numbers or dates changed in 1 paragraph).
Full comparison: every changed paragraph (0)
What changed in the latest 10-Q
Risk Factors
An investment in our common shares involves risks. Before making an investment decision, you should carefully consider all of the information in this Quarterly Report, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Condensed Consolidated Financial Statements and related notes. In addition, you should carefully consider the risks and uncertainties described in the section entitled “Risk Factors” in our 2025 Annual Report. If any of the identified risks are realized, our business, financial condition, operating results and prospects could be materially and adversely affected. In that case, the trading price of our common shares may decline. In addition, other risks of which we are currently unaware, or which we do not currently view as material, could have a material adverse effect on our business, financial condition, operating results and prospects. As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed under the section entitled "Risk Factors" in Part I, Item 1A of our 2025 Annual Report.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
“The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During 2026, the Company’s net interest margin decreased 24 basis points to 3.92% during the second quarter of 2026 and decreased 4 basis points to 3.97% during the first half of 2026, compared to the same periods in 2025. The decrease in the net interest margin was related to the average cost of funding sources increasing at a greater pace than the yield on earning assets. …”see in full comparison
“Lower earnings during the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily impacted by higher provision expense caused by the collateral impairments of two commercial loan relationships. These collateral deficiencies required specific reserve allocations that contributed to most of the $2,607 and $3,813 increases in provision expense during the three and six months ended June 30, 2026 compared to the same periods in 2025. …”see in full comparison
“Lower earnings during the first quarter of 2026 compared to the first quarter of 2025 were primarily impacted by a $1,206 increase in provision expense caused by the collateral impairments of two commercial loan relationships. Lower earnings were also impacted by both noninterest income and noninterest expense. Noninterest income during the first quarter of 2026 decreased $358 compared to the same period in 2025, impacted primarily by lower electronic refund check and deposit fees. …”see in full comparison
“The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During the first quarter of 2026, the Company’s net interest margin increased 16 basis points to 4.01%, compared to 3.85% during the first quarter of 2025. Positive contributions to margin growth came from the Company’s average earning assets, which increased 8.6% during the first quarter of 2026, mostly from higher-yielding loans. …”see in full comparison
The Company’s efficiency ratio is asee in full comparisonnon-GAAPnon-US GAAP measurement and is defined as noninterest expense as a percentage of fully tax-equivalent net interest income plus noninterest income. The effects of provision expense are excluded from the efficiency ratio. Management believes the efficiency ratio provides investors with important information regarding operational efficiency and operating performance. Management continues to place emphasis on managing its balance sheet mix and interest rate sensitivity as well as developing more innovative ways to generate noninterest revenue. Comparing the three and six months endedMarchJune31,30, 2026 to the sameperiodperiods in 2025, the Company has benefited from an increase in average earning assets, primarily from a composition shift to higher-yieldingloans,loans. However, a composition shift to higher-costing time deposits combined with anincrease$817 market discount on purchased loans from 2025 contributed to decreases in the net interest margin during the three and six months ended June 30, 2026 compared toincreasethe same periods in 2025. Although the net interest margin contracted, the additional growth in average earning assets more than offset the margin decreases resulting in a 5.9% and 9.4% increase in net interest income$1,748,duringorthe13.3%.second quarter and first half of 2026. The growth in net interest income waspartiallyfurtheroffsetenhanced byathedecreasestrong growth in noninterest income during the second quarter of$358,2026,orbringing9.8%,2026’sprimarilyyear-to-dateduenoninterest revenue more in line with the prior year-to-date. The quarterly increase was largely impacted by the unrealized gains on equity securities, as well as higher earnings from debit and credit interchange and BOLI insurance, which helped to counter the negative effects from lower electronic refund check and deposit feesduefromtoanthe expiration of aexpired tax processingagreementagreement. And while noninterest expense increased during 2026, the pace of growth was slowed during the second quarter with the $544 refund from athirdvendorparty.billingInerrortotal,that resulted in a 62.4% and 32.7% decrease in data processing expense during thenetthree and six months ended June 30, 2026. This caused total noninterest expense to increaseinjust 1.8%these two revenue sources was $1,390 fromduring the second quarter of 2026 compared to a 4.5% increase during the linked first quarter of2025. For the three months ended March 31, 2026, noninterest expense increased $483, or 4.5%, from the same period in 2025. The increase was largely related to the $335 increase in salaries and employee benefits.2026. Based on the net increase in revenue sourcesoutpacingand slower cost growth in overhead during theincrease in noninterest expense,quarter, the Company’s efficiency ratio decreased (improved) to61.72%60.08% during the three months endedMarchJune31,30, 2026, compared to 63.09% during the three months ended June 30, 2025. The Company’s year-to-date efficiency ratio also decreased (improved) to 60.89% during the six months ended June 30, 2026, compared to63.95%63.51% during thethreesix months endedMarch 31,June 30, 2025.
During the three and six months endedsee in full comparisonMarchJune31,30, 2026, net interest income increased$1,748,$863, or13.3%,5.9%, and $2,611, or 9.4%, over the sameperiodperiods in 2025.ThisTheincreaseincreaseswaswere primarily related to a$120,686$177,570 and $149,285 increase in average earningassets,assets during the quarterly and year-to-date periods. This was led mostly by a14.0%14.7% and 14.4% increase in averageloans.loans during the three and six months ended June 30, 2026 compared to the same periods in 2025. The growth in average loans was related to the commercial and residential real estate lending segments. The emphasis on higher-yielding loan growth during the firstquarterhalf of 2026 contributed to lower average securitiesandduringinterest-bearingthedeposits with banks, which decreased 5.5%three and14.3%,sixrespectively,monthscomparedendedtoJunethe30,same period in 2025.2026. The decrease in average securities was also impacted by a reduced need for securities to be pledged as collateral to secure public fund deposits.EarningsNet interest earnings werefurthernegativelyenhancedaffected by ahigherlower net interest margin, whichfinisheddecreasedat244.01%basisatpointsMarchduring31,the2026second quarter of 2026, and decreased 4 basis points during the first half of 2026, compared to3.85%theatsameMarchperiods31,in 2025. Margingrowthcontraction,wasespeciallyrelated to an increase induring theyield on earning assets, which outpaced the increase in average costs associated with the Company’s funding sources. The improvement to earning asset yields was directly related to the growth in higher-yielding loans and a 59 basis point improvement in the average yield on securities. The growth in average securities yieldquarter, was largely impacted byseveral bondthetransactionseffects of an $817 market discount on purchased loans thatoccurredwasinrecorded to interest income during the second quarter of 2025thatcomparedreplacedtolower-yieldingnotaxablemarketsecuritiesdiscountwithincomesimilarduringtaxable2026.securitiesMargin decreases were also impacted by the cost of funding sources increasing athigheraratesgreaterofpacereturn.than the yield on earning assets. The cost of funding sources increasedprimarily withinas theCompany’s Negotiable Ordercomposition ofWithdrawal (“NOW”)fundingandsourcessavingsshiftedaccounts,towhile the averagehigher costoncertificates of deposit (“CDs”)decreased.from promotional offerings, and higher money market accounts from individual and business customers.
Full comparison: every changed paragraph (72)
Certain statements contained in this quarterly report on
Form 10-Q (the “report”) and other publicly available documents
incorporated
herein by reference constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and as
defined in the Private Securities Litigation Reform Act of
1995. Such statements are often, but not
always, identified by the use of such words as “believes,” “anticipates,”
“expects,” “intends,” “plan,plans,” “goal,goals,” “seek,seeks,” “project,projects,” “estimate,estimates,”
“strategy,” “future,” “likely,” “may,” “should,” “will,” and other similar
expressions. Such statements involve various important assumptions, risks,
uncertainties, and other factors, many of which are beyond our control,
particularly with regard to
developments related to the current economic and
geopolitical landscape, and which could cause actual results to differ
materially from those expressed in such forward looking statements. However, it
is difficult to predict the effect of known factors,
and Ohio Valley Banc Corp.
(“Ohio Valley”) cannot anticipate all factors that could affect future results.
Important factors that could cause actual results to differ materially from
expectations expressed in or implied in forward looking statements
include, but
are not limited to: the effects of fluctuating interest rates on our customers’
operations and financial condition; changes in political, economic or other factors,
such as inflation rates, recessionary or expansive trends, taxes, tariffs,
the
effects of implementation of legislation and the continuing economic
uncertainty in various parts of the world; competitive pressures; the level of
defaults and prepayment on loans made by Ohio Valley and its direct and
indirect subsidiaries
(collectively, the “Company”); unanticipated litigation,
claims, or assessments; fluctuations in the cost of obtaining funds to make
loans; and regulatory changes. Additional detailed information concerning such
factors is available in the Company’s
filings with the Securities and Exchange
Commission, under the Exchange Act, including the disclosure under the heading
“Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2025 and
elsewhere in this document
(including, without limitation, in conjunction with the forward looking
statements themselves and under the heading “Critical Accounting Estimates”).
All forward looking statements are qualified in their entirety by these and
other cautionary statements that the Company makes from time to time in its
other SEC filings and public communications. Readers are cautioned not to place
undue reliance on such forward looking statements, which speak only as of the
date hereof. The
Company undertakes no obligation and disclaims any duty to
update or revise any forward looking statements, whether as a result of new
information, unanticipated future events or otherwise, except as required by
applicable law.
FINANCIAL RESULTS OVERVIEW: Net income totaled $4,297$2,927 during the
first second quarter
of 2026, a decrease of $109$1,283 from the same period in 2025. Earnings per share
for the firstsecond quarter of 2026 finished at $.91$.62 per share, compared to $.94$.89 per
share during the second quarter of 2025. Net income totaled $7,224 during the
first six months of 2026, a decrease of $1,392 from the same period in 2025.
Earnings per share during the first quartersix months of 2026 finished at $1.53 per
share, compared to $1.83 per share during the first six months of
2025. Lower net earnings had a corresponding
impact on the Company’s annualized
net income to average asset ratio, or return on assets, which decreased 12 42
basis points to 1.08%0.70% during the second quarter of 2026, and decreased 27 basis
points to 0.89% during the first quartersix months of 2026, compared to the same period
periods in 2025. In addition, the Company’s net income to average
equity ratio,
or return on equity, decreased 165397 basis points to 10.17%6.82% during the second
quarter of 2026, and decreased 282 basis points to 8.48% during the first quartersix
months of 2026, compared to the same periodperiods in 2025.
Lower earnings during the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily impacted by higher provision expense caused by the collateral impairments of two commercial loan relationships. These collateral deficiencies required specific reserve allocations that contributed to most of the $2,607 and $3,813 increases in provision expense during the three and six months ended June 30, 2026 compared to the same periods in 2025. Lower earnings were also impacted by growth in noninterest expense, increasing $196 and $679 during the three and six months ended June 30, 2026 compared to the same periods in 2025. Noninterest expense was impacted by higher salaries and employee benefit costs, software and other noninterest expense, partially offset by lower data processing costs. These negative factors were partially offset by growth in net interest and noninterest income, which collectively increased $1,201 and $2,591 during the three and six months ended June 30, 2026 compared to the same periods in 2025. Net interest income grew in large part due to a 12.6% and 10.6% increase in average earning assets during the three and six months ended June 30, 2026, coming primarily from loans. The impacts from earning asset growth were partially offset by decreases in the net interest margin during both the quarterly and year-to-date periods, impacted by higher funding costs. The improvement in noninterest income occurred primarily during the second quarter of 2026 with $377 in unrealized gains earned on equity securities as part of the Company’s participation in the Visa Inc. exchange offer. This contributed to a $338 increase in quarterly noninterest income, while allowing year-to-date noninterest income to finish relatively stable with the prior year-to-date, decreasing by just $20.
Lower earnings during the first quarter of 2026 compared to the first quarter of 2025 were primarily impacted by a $1,206 increase in provision expense
caused by the collateral impairments of two commercial loan relationships. Lower earnings were also impacted by both noninterest income and noninterest expense. Noninterest income during the first quarter of 2026 decreased $358 compared to the same
period in 2025, impacted primarily by lower electronic refund check and deposit fees. Noninterest expense during the first quarter of 2026 increased $483 compared to the same period in 2025, impacted primarily by higher salaries and employee benefit
costs. These negative factors were partially offset by growth in net interest income, which increased $1,748 during the first quarter of 2026 over the same period in 2025, in large part due to an 8.6% increase in average earning assets and a 16 basis
point improvement to the quarterly net interest margin. Earning asset growth came largely from loans, the Company’s highest earning asset, while the yields on earning assets increased at a faster pace than the average costs on interest-bearing
liabilities.
During the three and six months ended MarchJune 31,30, 2026,
net interest income increased $1,748,$863, or 13.3%,5.9%, and $2,611, or 9.4%, over the same period
periods in 2025. ThisThe increaseincreases waswere primarily
related to a $120,686$177,570 and
$149,285 increase in average earning assets,assets during the quarterly and
year-to-date periods. This was led mostly by a 14.0%14.7% and 14.4% increase in
average loans.loans during the three and six months ended June 30, 2026 compared to
the same periods in 2025. The growth in average loans was related to the
commercial and residential real estate lending segments. The emphasis on
higher-yielding loan
growth during the first quarterhalf of 2026 contributed to lower
average securities andduring interest-bearingthe deposits with banks, which decreased 5.5%three and 14.3%,six respectively,months comparedended toJune the30, same period in 2025.2026. The decrease in average securities was
also impacted by a reduced need for securities to be pledged as collateral to
secure public fund deposits. EarningsNet interest earnings were furthernegatively enhancedaffected by a higher
lower net interest
margin, which finisheddecreased at24 4.01%basis atpoints Marchduring 31,the 2026second
quarter of 2026, and decreased 4 basis points during the first half of 2026,
compared to 3.85%the atsame Marchperiods 31,in 2025. Margin growthcontraction, wasespecially related to an increase induring the yield on earning assets, which outpaced the increase in average costs associated with the Company’s funding
sources. The improvement to earning asset yields was directly related to the growth in higher-yielding loans and a 59 basis point improvement in the average yield on securities. The growth in average securities yield
quarter, was largely impacted by several
bondthe transactionseffects of an $817 market discount on
purchased loans that occurredwas inrecorded to interest income during the second quarter
of 2025 thatcompared replacedto lower-yieldingno taxablemarket securitiesdiscount withincome similarduring taxable2026. securitiesMargin decreases were also
impacted by the cost of funding sources increasing at highera ratesgreater ofpace return.than the
yield on earning assets. The cost of funding sources increased primarily withinas the Company’s Negotiable Order
composition of Withdrawal
(“NOW”)funding andsources savingsshifted accounts,to while the averagehigher cost on certificates of deposit
(“CDs”) decreased.from promotional offerings, and higher money market accounts from
individual and business customers.
During the three and six months ended MarchJune 31,30, 2026,
the Company’s provision for credit loss expense increased $1,206$2,607 and $3,813,
when compared to the same periodperiods in 2025. The
increase resulted primarily from
$4,531 aand $2,031$6,561 in specific allocationallocations on two collateral dependent loans.loans
during Thisthe increasethree and six months ended June 30, 2026. These increases in
reserves waswere partially offset by a net decrease in modeled loss rates and a
decrease in certain qualitative risk factors and lower net charge offs.
During the three months ended June 30, 2026, noninterest income increased $338, or 11.9%, over the same period in 2025, while decreasing $20, or 0.3%, during the six months ended June 30, 2026 from the same period in 2025. The quarterly increase was driven by $377 in unrealized gains on equity securities. This was from the Company’s participation in the Visa Inc. exchange offer during the second quarter of 2026 to exchange its Visa B-1 shares for a mix of Visa B-3 and Class C common stock, with the Class C common stock being marked to fair value resulting in the gains on equity securities previously mentioned. Further increases to noninterest income came from higher debit and credit card interchange income, and bank owned life insurance ("BOLI") and annuity asset income, which collectively increased $69 and $293 during the three and six months ended June 30, 2026 compared to the same periods in 2025. Decreases to noninterest income came primarily from electronic refund check and deposit fees, which decreased $135 and $675 during the three and six months ended June 30, 2026 compared to the same periods in 2025. This was due to the expiration of a tax processing agreement with a third party.
During the three months ended March 31, 2026, noninterest income decreased $358, or 9.8%, from the same period in 2025. The decrease was primarily from
electronic refund check and deposit fees, which decreased $540 from 2025. This was due to the expiration of a tax processing agreement with a third party. Also contributing to the decrease was other noninterest income, which was down $68 from 2025,
impacted by less commercial loan servicing fees. The decreases were partially offset by a $138 increase in income from bank owned life insurance due to the receipt of life insurance proceeds and to the $86 increase in debit and credit card interchange
income.
During the three and six months ended MarchJune 31,30, 2026, noninterest expense increased $483,$196, or 4.5%,1.8%,
and $679, or 3.1%, over the same periodperiods in 2025. Noninterest expense was
impacted impacted
mostly by salaries and employee benefits, which increased $335$359 and
$694 during the three and six months ended June 30, 2026 over the same periods
in 2025 due to annual merit increases and higher health insurance premiums. Other
noninterest expense was up $251 and $278 during the three and six months ended
June 30, 2026 over the same periods in 2025 due to higher state taxes, loan
costs, and other miscellaneous expenses associated with troubled credits. Also
increasing was software expense,expense and FDIC insurance, which waswere collectively up
$151 $132and $341 during the three and six months ended June 30, 2026 over 2025,the resultingsame
periods fromin 2025. Software costs increased due to the investment in software to
enhance enhance
internal processes.processes, Noninterest expense was further impacted by a $58 increase inwhile FDIC insurancepremiums expenseincreased relateddue to a higher
assessment base and an increase in the assessment rate in relation to higher
nonperforming loans. Partially offsetting increases in noninterest expense were
lower data processing expenses, which decreased $605 and $619 during the three
and six months ended June 30, 2026 over the same periods in 2025. This was due
to a $544 recovery from a vendor in the second quarter of 2026 for a billing
error.
The $190$319 decreaseand $509 decreases in the Company’s provision
for income taxes during the three and six months ended MarchJune 31,30, 2026, compared
to the same periodperiods in 2025, waswere largely
due to the decrease in operating
income affected by the factors mentioned above, as well as a decrease in the
effective tax rate.
At MarchJune 31,30, 2026, total assets were $1,677,502,$1,661,436, an
increase of $94,848$78,782 from year-end 2025. The increase in assets was primarily
the result of a $78,020
$50,096 increase in loans, and a $31,513 increase in
interest-bearing deposits with banks,banks. Loan growth was led by a 5.7% increase in
the Company’s commercial loan portfolio, and ana $18,7964.5% increase in loans.the Company’s
residential real estate loan portfolio. The increase in interest-bearing
deposits with banks was primarily associated with balances maintained at the
Federal Reserve Bank (“Federal ReserveFRB”) that were
impacted by the first quarteryear-to-date growth in
both interest- and noninterest-bearing deposit liabilities.
At MarchJune 31,30, 2026, total liabilities were $1,506,222, $1,488,050,
up $93,825$75,653 from year-end 2025. Contributing most to this increase were higher
interest-bearing deposit
balances, up $75,378$73,604 from year-end 2025, consisting of
higher balances from time deposits (+11.3%8.8%) and savings, negotiable order of withdrawal ("NOW") and money market
balances (+3.8%5.8%), while noninterest-bearing demand deposits increased 5.9%1.6% from
year-end 2025.
At MarchJune 31,30, 2026, total shareholders' equity was $171,280, $173,386,
up $1,023$3,129 from December 31, 2025. This increase consisted of year-to-date net
income being
partially offset by year-to-date cash dividends paid and an
after-tax increase in net unrealized losses on AFS securities and year-to-date cash dividends paid.securities. Regulatory
capital ratios of the Company remained higher than the "well
capitalized" minimums.
Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025 The following discussion focuses in more detail on the
consolidated financial condition of the Company at MarchJune 31,30, 2026 compared to
December 31, 2025. This
discussion
should be read in conjunction with the interim consolidated financial
statements and the notes included in this Form 10‑Q.
At MarchJune 31,30, 2026, cash and cash equivalents were $125,327, $78,084,
an increase of $79,430,$32,187, or 173.1%,70.1%, from December 31, 2025. The increase came
primarily from
interest-bearing deposits with banks, which were up $78,020,$31,513, or 251.3%, 101.5%,
from year-end 2025. The Company’s interest-bearing FRB clearing account
contributed most to the increase in interest-bearing deposits with banks,
representing 87%80% of cash and cash
equivalents at MarchJune 31,30, 2026. The Company
utilizes its interest-bearing FRB clearing account to manage excess funds, as
well as to assist in funding earning asset growth. The increase in excess funds
during the first three monthshalf of 2026 resulted
primarily from growth in total deposits,
which were up 7.1%5.9% from year-end 2025. The interest rate paid on both the
required and excess reserve balances of the FRB is based on the targeted
federal funds rate established by the Federal Open Market
Committee (“FOMC”).
During the first quarterhalf of 2026, the FOMC took no action to reduce the targeted
federal funds rate, which remains at a target range of 3.50% to 3.75%. The
interest-bearing deposit balances in the FRB are 100% secured by the U.S.
Government.
The balance of total investment securities decreased $2,484, $3,342,
or 1.0%1.3% from year-end 2025. The decrease came mostly from U.S. Government and
U.S. Government agency (“Agency”) mortgage-backed
and U.S. Government securities, which were collectively
down $2,441,$3,654, or 1.0%,1.5%, from year-end 2025. During the first three monthshalf of 2026, total
purchases, net of maturities, for both AgencyU.S. mortgage-backedGovernment and U.S. GovernmentAgency
mortgage-backed securities totaled $9,677.
$17,152. This was completely offset by $9,681 $19,189
in principal repayments coming mostly from Agency mortgage-backed securities.
The monthly repayment of principal has been the primary advantage of Agency
mortgage-backed securities as compared to other types of
investment securities,
which deliver proceeds upon maturity or call date. At MarchJune 31,30, 2026, the
Company’s investment securities portfolio was comprised mostly of Agency
mortgage-backed securities at 62.3%63.0% of total investments, while U.S. Government
securities represented 33.6%.32.7%.
Included in the factors mentioned above were changes
in net unrealized losses associated with AFS debt securities. During the first three months
half of 2026, an
increase in long-term market rates led to a $2,810$2,352 decrease in
the fair value associated with the Company’s AFS securities at MarchJune 31,30, 2026.
The fair value of an investment security moves inversely to interest rates, so
as rates increased, the fair
value decreased, causing the unrealized loss in
the portfolio to increase. These changes in rates are typical and do not impact
earnings of the Company as long as the securities are held to full
maturity.
Also included in total investment securities were marketable equity securities of $376 at June 30, 2026. During the second quarter of 2026, the Company participated in an exchange offer initiated by Visa, Inc., where 954 Visa Class B-1 shares were tendered by the Company in exchange for a mix of Visa Class B-3 and Class C common stock. The Company then marked its Visa Class C common stock to fair value based on the Visa Class A common stock market price as of the exchange date of May 8, 2026. Prior to the exchange offer, the Company’s Class B-1 shares were not marketable and were carried at a $0 cost basis. This initial fair value adjustment of the Company’s Visa Class C common stock resulted in a $349 increase to equity securities. The Company followed with another fair value adjustment at June 30, 2026 that resulted in a $27 increase to equity securities. The changes in fair value from equity securities were recognized in net income.
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 dependentdpendent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination.
The Company’s loan balances increased to $1,214,814 at March 31, 2026, representing an increase of $18,796, or 1.6%, as compared to $1,196,018 at December
31, 2025. The increase in loans came primarily from both the commercial and residential real estate portfolios, as well as the commercial and industrial portfolio, while partially being offset by a decrease in the consumer loan portfolio from year-end
2025.
The Company’s commercial loan portfolio increased $17,964, or 2.8%, from year-end 2025. The most significant driver of this increase was higher loan balances
within the commercial real estate portfolio, which increased $14,206, or 3.0%, from year-end 2025. At March 31, 2026, commercial real estate loans represented the largest segment of the Company’s total loan portfolio at 39.9%. The increase from
year-end 2025 came primarily from new originations within the nonowner-occupied and construction loan segments.
As of MarchJune 31,30, 2026
The Company’s loan balances increased to $1,246,114 at June 30, 2026, representing an increase of $50,096, or 4.2%, as compared to $1,196,018 at December 31, 2025. The increase in loans came primarily from both the commercial and residential real estate portfolios, as well as the commercial and industrial portfolio, while partially being offset by a decrease in the consumer loan portfolio from year-end 2025.
The Company’s commercial loan portfolio increased $36,479, or 5.7%, from year-end 2025. The most significant driver of this increase was higher loan balances within the commercial real estate portfolio, which increased $37,711, or 8.0%, from year-end 2025. At June 30, 2026, commercial real estate loans represented the largest segment of the Company’s total loan portfolio at 40.7%. The increase from year-end 2025 came primarily from new originations within the nonowner-occupied and construction loan segments.
CommercialThe growth in commercial loans werewas alsopartially positively impactedoffset by
a an increasedecrease in the commercial and industrial portfolio, which was updown $3,758, $1,232,
or 2.2%,0.7%, from year-end 2025.
The growthdecrease was impacted by an increase in
principal larger loan originationsrepayments during the quarter.first half of 2026. While management believes
lending opportunities exist in the Company’s markets, future commercial lending
activities will depend upon economic and other related
conditions, such as
general demand for loans in the Company’s primary markets, interest rates
offered by the Company, and the effects of competitive pressure and normal
underwriting considerations. Management will continue to place emphasis on its
commercial lending, which generally yields a higher return on investment as
compared to other types of loans.
At MarchJune 31,30, 2026, residential real estate loans
represented the second largest segment of the Company’s total loan portfolio at 34.9%.
35.1%. During 2026, mortgage rates remained elevated relative to
variable rate
options, which provided the Company with lessfewer opportunities to originate and
sell long-term fixed-rate residential mortgages to the Federal Home Loan
Mortgage Corporation. Due to the elevated mortgage rates, mortgage customers
were were
selecting more in-house variable rate mortgage products than long-term fixed
rate products, which enhanced the growth in the portfolio. As a result,
residential real estate loans increased $5,841,$19,013, or 1.4%,4.5%, from year-end 2025.
The increases in the Company’s commercial and
residential real estate loan portfolios at MarchJune 31,30, 2026 were partially offset
by a decrease in the Company’s
consumer loan portfolio, which was down $5,009, $5,396,
or 3.6%,3.8%, from year-end 2025. This change was impacted by a $3,411,$5,412, or 6.4%, decrease in other consumer loans from year-end 2025, impacted by principal repayments and payoffs. Decreases in consumer loans
also came from a $2,876, or 7.7%, 14.5%,
decrease in automobile loans. This was directly impacted by management’s
strategy to place more emphasis on higher yielding loan portfolios (i.e.
commercial, and to a smaller extent, residential real estate). Indirect
automobile loans bear additional costs from dealers that partially offset
interest revenue and lower the rate of return. As a result, the Company exited
the indirect lending business for automobiles and recreational vehicles in
2024. Decreases in
consumer loans also came from a $4,185, or 7.9%, decrease in
other consumer loans from year-end 2025, impacted by principal repayments and
payoffs. Decreases in consumer loans were partially offset by a $1,278,$4,201, or 2.5%, 8.3%,
increase in home equity lines of credit.
For AFS debt securities, the Company evaluates the
securities at each measurement date to determine whether the decline in the
fair value below the amortized
costs basis is due to credit-related factors or
noncredit-related factors. Upon adoption As
of ASCJune 326 on January 1, 2023, and as of March 31,30, 2026, the Company determined that all AFS securities that
experienced a decline in fair value below the amortized cost basis were due to non-credit
related factors. Therefore, no ACL was recorded, and no provision expense was
recognized during the three
six months ended MarchJune 31,30, 2026.
For HTM debt
securities, the Company evaluates the securities collectively by major security
type at each measurement date to determine expected credit
losses based on the issuer’s
bond rating, historical loss, financial condition, and timely principal and
interest payments. At MarchJune 31,30, 2026, the ACL for HTM debt securities was $1
based on a .02% cumulative default rate taken from the S&P and
Moody’s bond
rating index. This compares to an ACL of $1 at December 31, 2025.
As of MarchJune 31,30, 2026, the ACL for loans totaled $12,943,$16,610, or 1.07%,
1.33%, of total
loans. As of December 31, 2025, the ACL for loans totaled
$11,519, or 0.96%, of total loans. The $1,424,$5,091, or 12.4%,44.2%, increase in the ACL
was impacted
by a $2,031$6,561 increase in specific reserves on loans individually evaluated for
impairment from
year-end 2025. During the first quarterhalf of 2026, the Company
individually evaluated the commercial real estate loans of two borrowers for expected
credit loss. Of the two stressed loan relationships, one is a commercial and
industrial loan to an automobile dealership and the other is a commercial real
estate loan for the construction of a hotel. After measuring the fair value of
the loans’ collateral to the loans’ recorded investment,
the Company identified $2,031
$6,561 in expected losses based on the impairment associated with the
borrowers’ collateral. This resulted in a corresponding charge to provision
expense to establish the specific allocation within the ACL at MarchJune 31,30, 2026. The
Company increase inconsiders the ACLspecific wasallocations alsoto impactedbe byrelated additionalto reservesthis associatedspecific withgroup
of loan growthrelationships and not reflective of $18,796a duringbroader the first quarter of 2026 compared to an $18,529 decreasedeterioration in loan balances during the first quarter of 2025. These increases in specific and general reserves were partially offset by the improvements in
certain qualitative risk factors that included improved
portfolio terms,credit such as reduced exposure to variable rate loans repricing higher and a positive net charge-off trend for consumer loans due to exiting indirect lending, along with improved
general economic conditions. The Company also experienced a decrease in modeled loss rates due to the improvements in GDP and unemployment projections.quality.
The increase in the ACL was also impacted by additional reserves associated with loan growth of $50,096 during the first half of 2026 compared to a $39,442 increase in loan balances during the first half of 2025. These increases in specific and general reserves were partially offset by the improvements in certain qualitative risk factors that included improved portfolio terms, such as reduced exposure to variable rate loans repricing higher and a positive net charge-off trend for consumer loans due to exiting indirect lending, along with improved general economic conditions. The Company also experienced a decrease in modeled loss rates largely due to the improvement in unemployment projections.
The Company
experienced higher delinquency levels as compared to year-end 2025.
Nonperforming loans to total loans increased to 1.64%1.44% at MarchJune 31,30, 2026,
compared to 1.40% at December 31, 2025, while nonperforming assets to total
assets increased to 1.19%1.08% at MarchJune 31,30, 2026, compared to 1.06% at December 31,
2025. The increase in nonperforming loans was primarily related to one
commercial loan being
placed on nonaccrual status during the first quarter of
2026. The loan is secured by commercial
real estate and was identified as having collateral impairment, which required
a specific allocation of the ACL at MarchJune 31,30, 2026.
Management
believes that the ACL at MarchJune 31,30, 2026 was appropriate to absorb expected
losses in the loan portfolio. Changes in the circumstances of
particular
borrowers, as well as adverse developments in the economy, are factors that
could change, and management will make adjustments to the ACL as needed. Asset
quality will continue to remain a key focus of the Company as management
continues to
stress not just loan growth, but quality in loan underwriting.
Deposits
Deposits are used as part of
the Company’s liquidity management strategy to meet obligations for depositor
withdrawals, fund the
borrowing needs of loan customers, and fund ongoing
operations. Deposits continue to be the most significant source of funds used
by the Company to support earning assets. Total deposits at MarchJune 31,30, 2026
increased $94,007,$78,761, or 7.1%,5.9%, from year-end 2025.
The increase in deposits came
primarily from interest-bearing deposit balances, which were up by $75,378,$73,604, or 7.4%,
7.2%, from year-end 2025, while noninterest-bearing deposits increased $18,629, $5,157,
or 5.9%,1.6%, from year-end 2025.
The increase in
interest-bearing deposits came primarily from time deposit balances, which
increased $55,323,$43,136, or 11.3%,8.8%, from year-end
2025, $47,575$58,854 of which was a result
of an increase in retail time deposits. The Company targeted growth in retail
CDs by promoting a special CD rate during the first quarterhalf of 2026 to assist in
funding loan growth. TheThis resulted in the Company alsoutilizing utilizedless more
wholesale CDs
to help fund earning asset demand, which increaseddecreased $7,748$15,718 from year-end
2025.
Further increases in interest-bearing deposits came from NOW account balances, which increased $12,002, or 5.5%, from year-end 2025. The
increase was largely from a $12,671 increase in the Company’s municipal NOW product balances, particularly within the Gallia County, Ohio, and Mason County, West Virginia, market areas.
Savings and money market
balances also increased $8,053,$25,971, or 2.6%,8.4%, from year-end 2025. The increase came
primarily from money market
accounts, which increased $4,913$24,264 from year-end
2025, impacted mostly by increases in the Company’s tiered money market product
(Money Fund) that was introduced in 2023 and offers a higher rate on tiered
deposit balances.balances to both individual and business customers. Savings account
balances balances
increased $3,140$1,707 impacted mostly by the Company’s statement savings
account product.
Further increases in interest-bearing deposits came from NOW account balances, which increased $4,497, or 2.1%, from year-end 2025. The increase was largely from a $4,733 increase in the Company’s municipal NOW product balances, particularly within the Gallia County, Ohio, and Mason County, West Virginia, market areas.
Other borrowed funds were $43,529 $41,822
at MarchJune 31,30, 2026, a decrease of $1,319,$3,026, or 2.9%,6.7%, from year-end 2025. The
decrease was related to the
scheduled principal amortization for applicable
FHLB advances. While deposits continue to be the primary source of funding for
growth in earning assets, management will continue to utilize various wholesale
funding sources to help manage interest rate
sensitivity and liquidity.
Total shareholders' equity at March 31,June
30, 2026 increased $1,023,$3,129, or 0.6%,1.8%, to finish at $171,280,$173,386, as compared to
$170,257 at December 31,
2025. This was primarily from year-to-date net income
partially offset by cash dividends paid and a decrease in accumulated other
comprehensive income. The decrease in accumulated other comprehensive income
was related to the $2,190,$1,833, net of tax, market
depreciation of AFS securities
due to an increase in market interest rates.
For the Three and Six Months Ended
MarchJune 31,30, 2026 and 2025
The following discussion
focuses, in more detail, on the consolidated results of operations of the
Company for the three and six months ended
March 31,June 30, 2026, compared to the same
period in 2025. This discussion should be read in conjunction with the interim
consolidated financial statements and the notes included in this Form 10‑Q.
The most significant portion of the Company's revenue,
net interest income, results from properly managing the spread between interest
income on earning
assets and interest expense incurred on interest-bearing
liabilities. During the three and six months ended MarchJune 31,30, 2026, net interest
income increased $1,748,$863, or 13.3%,5.9%, and $2,611, or 9.4%, compared to the same period
periods in 2025.2025, respectively. The quarterly improvementand year-to-date improvements
during 2026 came from
average earning asset growthgrowth, andpartially offset by a decrease
in the net interest margin. The averageAverage
asset growth was impacted primarily by a composition shift into higher-yielding loans whichand contributedinterest-bearing todeposits with
banks, while the margin improvement,fell combinedas withour afunding decreaseexpenses inoutpaced the average costreturns on
our CDsearning that helped minimize the higher average costs paid on deposits and borrowings.assets.
Total interest and fee income recognized on the
Company’s earning assets increased $2,709,$2,439, or 16.2%,11.6%, during the firstsecond quarter
of 2026, and $5,114, or 12.5%, during the six months ended June 30, 2026, compared
to the same
period periods in 2025. The earnings growth was impacted by interest on
loans, which increased $2,737,$1,995, or 17.3%,11.6%, and $4,732, or 14.3%, during the three
and six months ended June 30, 2026, compared to the same periodperiods in 2025. This
improvement was mostly impacted by increases in both average loan balancesbalances, which increased $156,821
during the second quarter of 2026 and loan yields. Overall, average
loans increased $146,436$151,658 during the first quarterhalf of 2026,2026.
Balance increases came primarily from the commercial and residential real
estate loan portfolios due to higher commercial loan volume and a consumer
preference for short-term, variable rate residential real estate
loans. LoanThe
effects of average loan growth on revenue improvement alsowere camepartially fromoffset by average
loan yields increasingdecreasing 1221 basis points to 6.65%6.61% during the second quarter of
2026 and decreasing 5 basis points to 6.63% during the first quarterhalf of 2026, compared
to the same periodperiods in 2025. The loan yield increasedecreases wascame mostlyprimarily impacted byfrom the
income recognition of an $817 market discount on one purchased commercial and residential
real estate
industrial loan portfolios.that paid off during the second quarter of 2025. While the
market discount benefited loan yields in 2025, the Company recognized no market
discount income on purchased loans during the same periods in 2026, causing
loan yields to decrease. At June 30, 2026, the Company had one purchased
commercial and industrial loan remaining with an unrecognized market discount
of $1,052.
Total interest on securities increased $218, or 10.0%, during the first quarter of 2026, compared to the same period in 2025. The earnings growth was
primarily related to an increase in the average yield on taxable securities. This was impacted by the Company’s decision to sell $36,950 in taxable securities yielding 1.35% during the second half of 2025 and replace them with similar taxable
securities yielding 4.52% with longer durations. As a result, the average yield on taxable securities increased 60 basis points to 3.79% during the first quarter of 2026, compared to the same period in 2025. The yield improvement from taxable
securities completely offset the negative impact of lower average securities balances, which decreased $14,634, or 5.4%, during the first quarter of 2026. Average securities have decreased due to the Company’s emphasis on growing higher-yielding loans
during the first quarter of 2026, as well as a lower need for securities to be pledged as collateral to secure public fund NOW accounts from a year ago, particularly with the Bank’s public fund NOW account deposits with the Ohio Treasurer (the
“Treasurer”) as part of the Ohio Homebuyer Plus program. Securities pledged as collateral to secure the Treasurer deposit balances totaled $58,955 at March 31, 2026, compared to $96,707 at March 31, 2025.
Total interest income from interest-bearing deposits
with banks decreasedincreased $244,$327, or 29.5%,51.2%, during the second quarter of 2026, and
increased $83, or 5.7%, during the first quarterhalf of 2026, compared to the same period
periods in
2025. This was largely from average balance decreasesincreases with the
Company’s interest-bearing FRB clearing account, which decreasedincreased $11,360$44,629 and
$16,789 during the three and six months ended MarchJune 31,30, 2026, compared to the
same periodperiods in 2025. Balances in the FRB clearing balancesaccount wereincreased used
primarily from
interest-bearing deposit growth and net proceeds from securities, which provided
more than enough FRB clearing deposits to assisthelp in fundingfund loan growth, which contributed to the average balance decrease of FRB fundsgrowth during 2026. Further impacting lower interest Interest
income from the FRB clearing account werewas negatively impacted by short-term rate
decreases during 2025. Between September and
December 2025, the FRB took action
to reduce the rate associated with the FRB clearing account by 75 basis points
due to inflationary pressures, which lowered the target federal funds rate to a
range of 3.50% to 3.75% going into 2026. These decreases
in interest rates had
a negative impact on the FRB clearing account’s interest earnings during the firstthree
and quartersix ofmonths ended June 30, 2026.
Total interest on securities increased $101, or 4.3%, during the second quarter of 2026, and $319, or 7.1%, during the first half of 2026, compared to the same periods in 2025. The earnings growth was primarily related to an increase in the average yield on taxable securities. This was impacted by the Company’s decision to sell $36,950 in taxable securities yielding 1.35% during the second half of 2025 and replace them with similar taxable securities yielding 4.52% with longer durations. As a result, the average yield on taxable securities increased 53 basis points to 3.81% during the second quarter of 2026, and 56 basis points to 3.80% during the first half of 2026, compared to the same periods in 2025. The yield improvement from taxable securities completely offset the negative impact of lower average securities balances, which decreased $24,118, or 8.7%, during the second quarter of 2026, and $19,402, or 7.1%, during the first half of 2026, compared to the same periods in 2025. Average securities have decreased largely due to the Company’s emphasis on growing higher-yielding loans during 2026, as well as a lower need for securities to be pledged as collateral to secure public fund NOW accounts from a year ago, particularly with the Bank’s public fund NOW account deposits with the Ohio Treasurer (the “Treasurer”) as part of the Ohio Homebuyer Plus program. Securities pledged as collateral to secure the Treasurer deposit balances totaled $59,044 at June 30, 2026, compared to $81,123 at June 30, 2025.
Total interest expense incurred on the Company’s
interest-bearing liabilities increased $927,$1,576, or 13.9%,24.2%, during the second quarter
of 2026, and $2,503, or 19.0%, during the first quarterhalf of 2026, compared to the
same periodperiods in 2025. The increaseincreases waswere impacted by a $100,539, or 10.2%, increase in average interest-bearing
liability liabilities,growth during both periods, coming mostly from higher time, savings,
and money market deposit balances. The increase in time deposit balances was
impacted by
the Company’s strategy to raise additional retail deposits during the first quarter of
2026 by offering special CD rate offerings during that time.offerings. The increase in savings and money
market account balances were mostly impacted by deposit growth within
the
Company’s tiered money market product (Money Fund) that offered competitive
rates rates.to both individual and business customers. These increases were partially
offset by a decrease in average NOW account balances, which came largely from
lower public fund balances from a year ago.
The growth in interest expense from higher average
interest-bearing liabilities was further impacted by a higher average cost on
average interest-bearing
liabilities during 2026. The average rates on the
Company’s savings, NOW, and money market balances increased 716 basis points to 1.47%
1.57% during the second quarter of 2026, and increased 12 basis points during
the first quarterhalf of 2026, as product rates on tiered money market accounts
adjusted upward, while public fund
NOW account balances shifted to a new higher-costing
cash sweep product offered by the Bank. While product rates on various savings,
NOW, and money market products increased, the Company experienced a decrease in
the weighted average cost of its time
deposit balances. Prior to 2025, market
competition for deposits had resulted in higher rates on short-term CD
offerings. Since then, product rates on retail CDs have decreased during 2025
and into 2026. The Company’s strategy to fund loan growth by
raising additional
retail deposits through special CD rate offerings was in effect during the
second half of 2025. This has allowed a large portion of these short-term
retail CDs to renew at lower rates during the firstthree quarterand ofsix months ended June
30, 2026. As a result of
the rate repricings on retail CDs, the average cost associated with time
deposits decreased by 3016 basis points to 4.04%3.96% during the second quarter of
2026 and decreased 23 basis points to 4.00% during the first three monthshalf of 2026,
compared
to the same periodperiods in 2025. This helped to reduce the expense impacts of
higher average deposit balances, and the average rate increases in specific
savings, NOW and money market products.
The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During 2026, the Company’s net interest margin decreased 24 basis points to 3.92% during the second quarter of 2026 and decreased 4 basis points to 3.97% during the first half of 2026, compared to the same periods in 2025. The decrease in the net interest margin was related to the average cost of funding sources increasing at a greater pace than the yield on earning assets. Comparing the first half of 2026 to the first half of 2025, the yield on average earning assets improved 9 basis points in relation to the growth in higher yielding loans that now comprise a larger percentage of earning assets, along with the yield on taxable securities. However, included in the yield on earning assets for the second quarter and first half of 2025 was the $817 market discount on purchased loans compared to no market discount income during the same periods in 2026, resulting in a 6 basis point decrease to the earning asset yield during the second quarter of 2026. During both the three and six months ended June 30, 2026, the average cost of funds increased as the composition of funding sources shifted to higher cost deposit sources, such as CDs and money market accounts that were offered pursuant to certain promotional offerings mentioned above. These promotional offerings were utilized to fund loan growth and to maintain an appropriate liquidity position. As a result, the average cost of funds increased 21 basis points during the second quarter of 2026 and increased 16 basis points during the first half of 2026, compared to the same periods in 2025. The Company’s primary focus is to invest its funds into higher yielding assets, particularly loans, as opportunities arise. However, if loan balances do not continue to expand and remain a larger component of overall earning assets, the Company will face pressure within its net interest income and margin improvement.
The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During the first quarter
of 2026, the Company’s net interest margin increased 16 basis points to 4.01%, compared to 3.85% during the first quarter of 2025. Positive contributions to margin growth came from the Company’s average earning assets, which increased 8.6% during the
first quarter of 2026, mostly from higher-yielding loans. Margin improvement was also positively impacted by a 12 basis point increase in the average yield on loans, while the average cost of time deposits, which was the primary funding source of
earning assets during the first quarter of 2026, decreased 30 basis points to help limit the rise in interest expense. The Company’s primary focus is to invest its funds into higher yielding assets, particularly loans, as opportunities arise. However,
if loan balances do not continue to expand and remain a larger component of overall earning assets, the Company will face pressure within its net interest income and margin improvement.
Provision for credit losses is recorded to achieve an ACL
that is adequate to absorb estimated losses inherent in the Company’s loan
portfolio, unfunded
loans, and HTM debt securities. Management performs, on a
quarterly basis, a detailed analysis of the ACL that encompasses asset
portfolio composition, asset quality, loss experience and other relevant
economic factors. For the three months ended March
31,June 30, 2026, the Company’s
provision for credit losses expense totaled $3,755, an increase of $2,607 over
the three months ended June 30, 2025. For the six months ended June 30, 2026,
the Company’s provision for credit losses expense totaled $1,622,$5,377, an increase
of $1,206$3,813 over the threesix months ended MarchJune 31,30, 2025.
The
increases in provision for credit loss expense forduring theboth firstperiods quarter of 2026 waswere primarily
related to the establishment of a specific allocationallocations oftotaling $2,031$4,531 and $6,561
during the three and six months ended June 30, 2026 on two commercial loan
relationships that were deemed to be collateral dependent. In addition,
provision for credit loss expense was required to cover net charge-offs of $278 and higher general reserves
for the $18,796 increase in loans sinceduring December 31, 2025.2026. These
increases in reserves were
partially offset by the improvements in certain qualitative risk factors that
contributed to a $1,234 decrease in reserves during the second quarter of 2026,
and a $2,242 decrease in reserves during the first half of 2026, compared to
the same periods in 2025. Factors contributing to lower qualitative risk
included improved portfolio terms, such as reduced exposure to variable rate
loans repricing higher and a positive net charge-off trend for
consumer loans
due to exiting indirect lending, along with improvedlower generalmodeled economicloss conditions.rates in
relation to the improvement in unemployment projections. The Company also
experienced less net charge-offs, which contributed to a $168 and $315 decrease
in provision expense during the three and six months ended June 30, 2026.
Credit loss expense during the quarter2026 was also impacted by
unfunded commitments on off-balance sheet liabilities, which decreased $20$175 and
$195 during the first
quarterthree
and ofsix months ended June 30, 2026, compared to the same periodperiods in
2025. The impact came mostly from lower loss rates on commercial lines during
both the first quarter of 2026.periods.
Noninterest income increased $338, or 11.9%, during the three months ended June 30, 2026, and decreased $20, or 0.3%, during the six months ended June 30, 2026, compared to the same periods in 2025. The quarterly increase was primarily from the $377 in unrealized gains on equity securities from the Company’s participation in the Visa exchange offer previously mentioned. Further increases to noninterest income came from higher debit and credit card interchange fees, which increased $70 and $156 during the three and six months ended June 30, 2026, compared to the same periods in 2025. The growth in interchange income was driven by increases in transaction volume for both debit and credit cards during 2026. Increases also came from BOLI and annuity assets due to the receipt of life insurance proceeds during the first quarter of 2026, leading to a $137 increase in BOLI and annuity earnings during the six months ended June 30, 2026, while remaining relatively stable during the second quarter of 2026, decreasing by $1. Decreases to noninterest income came primarily from a $135 and $675 decrease in electronic refund check and deposit fees during the three and six months ended June 30, 2026, compared to the same periods in 2025. The decrease was due to the expiration of a tax processing agreement with a third party at year-end 2025. The remaining noninterest income categories increased $27 during the three months ended June 30, 2026, and decreased $15 during the six months ended June 30, 2026, impacted by a mix of higher service charges on deposit accounts and a decline in commercial loan servicing fees.
Noninterest income decreased $358, or 9.8%, during the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily
related to the $540 decrease in electronic refund check and deposit fees due to the expiration of a tax processing agreement with a third party. This decrease was partially offset by a $138 increase in income from bank owned life insurance due to the
receipt of life insurance proceeds and to the $86 increase in debit and credit card interchange income. The remaining noninterest income categories decreased $42, which came mostly from a $44 decline in commercial servicing fees.
Noninterest expense increased $483,$196, or 4.5%,1.8%, during
the three months ended MarchJune 31,30, 2026, and increased $679, or 3.1%, during the
six months ended June 30, 2026, compared to the same periodperiods in 2025. TheContributing
most to the increase was the Company’s largest
noninterest expense, salaries
and employee benefits, which increased $335,$359, or 5.6%,5.8%, during the three months
ended June 30, 2026, and $694, or 5.7%, during the six months ended MarchJune 31, 30,
2026, compared to the same periodperiods in 2025. The expense increase was primarily
related to annual merit increases and tohigher health
insurance premiums.
Other noninterest expense increased $251 and $278 during the three and six months ended June 30, 2026 in large part due to higher state taxes, loan costs, and other miscellaneous expenses associated with troubled credits. State taxes included higher West Virginia Business & Occupation and Ohio Financial Institutions taxes. Loan costs included increases to foreclosure and loan vendor expense. Increases in other miscellaneous expenses included the remittance of real estate taxes associated with the properties of select troubled credits.
OVBC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 4 Form 4 filings (2 insiders, 2 trade dates, 199 shares, about $9.0K) and open-market sales in 0 filings. Net open-market shares: 199 (purchases minus sales); net value about $9.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-12 | Michael Seth Isaac |
Open-market purchase | 67 | $44.49 | $3.0K |
| 2026-08-12 | Michael Seth Isaac |
Other | 4 | $44.49 | $190 |
| 2026-08-12 | Barnitz Anna P |
Other | 0 | $44.49 | $10 |
| 2026-08-12 | Barnitz Anna P |
Open-market purchase | 34 | $44.49 | $1.5K |
| 2026-08-12 | Barnitz Anna P |
Other | 51 | $44.49 | $2.2K |
| 2026-05-12 | Michael Seth Isaac |
Other | 4 | $45.84 | $172 |
| 2026-05-12 | Michael Seth Isaac |
Open-market purchase | 65 | $45.84 | $3.0K |
| 2026-05-12 | Barnitz Anna P |
Other | 0 | $45.84 | $10 |
| 2026-05-12 | Barnitz Anna P |
Other | 49 | $45.84 | $2.2K |
| 2026-05-12 | Barnitz Anna P |
Open-market purchase | 33 | $45.84 | $1.5K |
Well-known investors holding OVBC (13F)
None of the 59 investors we track reported a position in their latest 13F.