10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-20914

OHIO VALLEY BANC CORP.

(Exact Name of Small Business Issuer as Specified in its Charter)

Ohio	31-1359191
(State of incorporation)	(I.R.S. Employer Identification No.)

420 Third Avenue
Gallipolis, Ohio	45631
(Address of principal executive offices)	(ZIP Code)

(740) 446-2631

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Shares, Without Par Value	The NASDAQ Stock Market LLC
	(The NASDAQ Global Market)

Securities registered pursuant to Section 12(g) of the Act:

None

    Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES ¨   NO þ

    Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 YES o   NO þ

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ   NO ¨

    Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ   NO ¨

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

YES þ   NO ¨

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  o	Accelerated filer  þ
Non-accelerated filer  o	Smaller reporting company  o
(Do not check if a smaller reporting company)

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o   NO x

    Based on the closing sales price of $17.46 per share on June 30, 2011, the aggregate market value of the issuer’s shares held by non-affiliates on such date was $64,473,425.  For this purpose, shares held by non-affiliates are all outstanding shares except those held by the directors and executive officers of the issuer and those held by The Ohio Valley Bank Company as trustee with respect to which The Ohio Valley Bank Company has sole or shared voting or dispositive power.

    The number of common shares of the registrant outstanding as of March 8, 2012 was 4,029,439.

Documents Incorporated By Reference:

(1)   Portions of the 2011 Annual Report to Shareholders of Ohio Valley Banc Corp. (Exhibit 13) are incorporated by reference into Part I, Item 1 and Part II, Items 5, 6, 7, 7A, 8 and 9A.

(2)   Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 9, 2012 are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14.

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PART I

ITEM 1 - BUSINESS

Organizational History and Subsidiaries

Ohio Valley Banc Corp. (“Ohio Valley” or the “Company”) is an Ohio corporation registered as a financial holding company pursuant to the Bank Holding Company Act of 1956, as amended (“BHC Act”).  Ohio Valley was incorporated under the laws of the State of Ohio on January 8, 1992 and began conducting business on October 23, 1992.  The principal executive offices of Ohio Valley are located at 420 Third Avenue, Gallipolis, Ohio 45631.  Ohio Valley’s common shares are listed on The NASDAQ Global Market under the symbol “OVBC”.  Ohio Valley has one banking subsidiary, The Ohio Valley Bank Company (the “Bank”).  Ohio Valley also owns two nonbank subsidiaries, Loan Central, Inc. (“Loan Central”) and Ohio Valley Financial Services Agency, LLC (“Ohio Valley Financial Services”), which engage in lending and insurance agency services, and two wholly-owned subsidiary trusts formed solely to issue trust preferred securities.  Ohio Valley also owns a minority interest in an insurance company.  Ohio Valley and its subsidiaries are collectively referred to as the “Company.” Ohio Valley’s financial service operations are considered by management to be aggregated in two reportable segments:  banking and consumer finance.  Total revenues from the banking segment, which  accounted for the majority of the Company’s total revenues, totaled 91.8%, 92.9% and 93.4% of total consolidated revenues for the years ended December 31, 2011, 2010 and 2009, respectively.

Interested readers can access Ohio Valley’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, through Ohio Valley’s Internet website at www.ovbc.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate the information contained on Ohio Valley’s website into this Annual Report on Form 10-K).  These reports can be accessed free of charge through a link to The NASDAQ Stock Market’s website from Ohio Valley’s website as soon as reasonably practicable after Ohio Valley electronically files such materials with, or furnishes them to, the Securities and Exchange Commission (“SEC”).

Business of Ohio Valley

As a financial holding company registered under the BHC Act, Ohio Valley’s primary business is community banking.  As of December 31, 2011, Ohio Valley’s consolidated assets approximated to $804,177,000, and total shareholders’ equity approximated to $71,843,000.

Ohio Valley is also permitted to engage in certain non-banking activities under the provisions of the Gramm-Leach-Bliley Act (“GLB Act”), such as securities underwriting and dealing activities, insurance agency and underwriting activities and merchant banking/equity investment activities.  The Company presently engages in insurance underwriting activities through a minority interest in ProAlliance Corp.  Ohio Valley also has an insurance agency in Ohio Valley Financial Services that is used to facilitate the commission receipts on insurance sold by the Bank and Loan Central.  Management will consider opportunities to engage in additional nonbanking activities as they arise.

Business of Bank Subsidiary

A substantial portion of Ohio Valley’s revenue is derived from cash dividends paid by the Bank.   The Bank presently has fourteen offices located in Ohio and West Virginia, all of which offer automatic teller machines (ATMs).  Seven of these offices also offer drive-up services.  The Bank accounted for substantially all of Ohio Valley’s consolidated assets at December 31, 2011.

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The Bank is primarily engaged in commercial and retail banking.  The Bank is a full-service financial institution offering a blend of commercial and consumer banking services within southeastern Ohio as well as western West Virginia.  The banking services offered by the Bank include the acceptance of deposits in checking, savings, time and money market accounts; the making and servicing of personal, commercial, floor plan and student loans; and the making of construction and real estate loans.  The Bank also offers individual retirement accounts, safe deposit boxes, wire transfers and other standard banking products and services.  As part of its lending function, the Bank offers credit card services.  The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”).  In addition to originating loans, the Bank invests in U.S. government and agency obligations, interest-bearing deposits in other financial institutions, and other investments permitted by applicable law.

The Bank began offering trust services in 1981.   The trust department acts as trustee under wills, trusts and profit sharing plans, as executor and administrator of estates, and as guardian for estates of minors and incompetents.  In addition, the trust department performs a variety of investment and security services where the Bank acts as an agent on behalf of the client.  Trust services are available to all customers of the Bank.

Bank customers may conveniently establish new deposit accounts at their own home.  In addition, the Bank offers an automated telephone banking system, OVB Line, which allows customers to access their personal account or business account information, make loan payments or fund transfers and obtain current rate information, all from a touch-tone telephone.  The Bank also offers Internet banking to its customers, which allows customers to perform various transactions using a computer from any location as long as they have access to the Internet and a secure browser.  Specifically, customers can check personal account balances, receive information about transactions within their accounts, make transfers between accounts, stop payment on a check, and reorder checks.  Customers may also pay bills online and can make payments to virtually any business or individual.  Furthermore, the Bank offers other financial management online services, such as cash management and news updates related to repossession auctions, current rates and general bank news.

Business of Loan Central

Loan Central is engaged in consumer finance, offering smaller balance personal and mortgage loans to individuals with higher credit risk history.  Loan Central’s line of business also includes seasonal tax refund loan services.  Loan Central presently has seven offices, all located within southeastern Ohio.

Business of Financial Services Subsidiaries

Ohio Valley Financial Services is a licensed insurance agency that is used to facilitate the receipt of commissions on insurance sold by the Bank and Loan Central.  Ohio Valley Financial Services is licensed by the State of Ohio Department of Insurance.

Ohio Valley also holds a non-majority equity interest in ProAlliance Corp., an insurance company.  ProAlliance Corp. is engaged primarily in specialty property and casualty insurance coverage and has been approved under the guidelines of the State of Ohio Department of Insurance.

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Variable Interest Entities

 Ohio Valley owns two special purpose entities, Ohio Valley Statutory Trust I and Ohio Valley Statutory Trust III.  Together, these Trusts have issued an aggregate $13,500,000 in trust preferred securities.  Ohio Valley has issued a like amount of subordinated debentures to the Trusts in exchange for the proceeds of the issuance of the trust preferred securities.  Ohio Valley used the proceeds to provide additional capital to the Bank to support growth.  Further detail on Ohio Valley Statutory Trusts I and III is located in Ohio Valley’s 2011 Annual Report to Shareholders under “Note H – Subordinated Debentures and Trust Preferred Securities,” in the notes to the Company’s consolidated financial statements for the fiscal year ended December 31, 2011.

Financial Information

 Financial information regarding the Company as of December 31, 2011 and 2010 and results of operations for the past three fiscal years is contained in the Company’s consolidated financial statements for the fiscal year ended December 31, 2011.

Lending Activities

The Company’s loan portfolio decreased $43,014,000 to finish at $598,308,000 in 2011.  The loan portfolio is comprised of commercial (commercial real estate and commercial and industrial), residential real estate and consumer loans, including credit card and home equity loans.  Commercial  loans decreased $17,272,000, or 6.1%, while consumer loans and residential real estate loans decreased $15,353,000, or 12.5%, and $10,389,000, or 4.4%, respectively, as compared to 2010.  Consolidated interest and fee revenue from loans accounted for 80.49%, 82.52%, and 79.82% of total consolidated revenues in 2011, 2010 and 2009, respectively.  The Company’s market area for lending is primarily located in southeastern Ohio and portions of western West Virginia.The Company believes that there is no significant concentration of loans to borrowers engaged in the same or similar industries and does not have any loans to foreign entities.

Residential Real Estate Loans

The Company’s residential real estate loans consist primarily of one- to four-family residential mortgages and carry many of the same customer and industry risks as the commercial loan portfolio.  Real estate loans to consumers are secured primarily by a first lien deed of trust  with evidence of title in favor of the Bank.  The Company also requires proof of hazard insurance, required at the time of closing, with the Bank or Loan Central named as the mortgagee and as loss payee.  The Company generally requires the amount of a residential real estate loan be no more than 80% of the purchase price or the appraisal value of the real estate securing the loan, unless private mortgage insurance is obtained by the borrower for the percentage exceeding 80%.  These loans generally range from one-year adjustable to thirty-year fixed-rate mortgages.  The Company’s market area for real estate lending is primarily located in southeastern Ohio and portions of western West Virginia.  The Bank continues to sell a portion of its new fixed-rate real estate loan originations to the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to enhance customer service and loan pricing.  Secondary market sales of these real estate loans, which have fixed rates with fifteen- to thirty-year terms, have assisted in meeting the consumer preference for long-term fixed-rate loans as well as minimized the Bank’s exposure to interest rate risk.

Commercial Loans

The Company’s commercial loan portfolio consists of loans to corporate borrowers primarily in small to mid-sized industrial and commercial companies that include service, retail and wholesale merchants.  Collateral securing these loans includes equipment, inventory, stock, commercial real estate and rental property.  Commercial loans are considered to have a higher level of risk compared to other types of loans (i.e., single-family residential mortgages, installment loans and credit card loans), although care is taken to minimize these risks.  Numerous risk factors impact this portfolio, such as the economy, new technology, labor rates, cash flow, financial structure and asset quality.  The payment experience on

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commercial loans is dependent on adequate cash flows from the business to service both interest and principal due.  Thus, commercial loans may be more sensitive to adverse conditions in the economy generally or adverse conditions in a specific industry.  The Company diversifies risk within this portfolio by closely monitoring industry concentrations and portfolios to ensure that it does not exceed established lending guidelines.  Underwriting standards require a comprehensive credit analysis and independent evaluation of virtually all larger balance commercial loans by the Bank’s loan committee prior to approval.  New commercial loan originations greater than $750,000 are reviewed and approved by the Executive Committee of the Bank’s Board of Directors.

Consumer Loans

Consumer loans are secured by automobiles, mobile homes, recreational vehicles and other personal property.  Personal loans and unsecured credit card receivables are also included as consumer loans.  The Company makes installment credit available to customers in their primary market area of southeastern Ohio and portions of western West Virginia.  Credit approval for consumer loans requires demonstration of sufficient income to repay principal and interest due, stability of employment, a positive credit record and sufficient collateral for secured loans.  The Company monitors the risk associated with these types of loans by monitoring factors such as portfolio growth, lending policies and economic conditions.  Underwriting standards are continually evaluated and modified based upon these factors.  A qualified compliance officer is responsible for monitoring the performance of his or her respective consumer portfolio and updating loan personnel.  The Company makes credit life insurance and health and accident insurance available to all qualified borrowers, thus reducing their risk of loss when their income is terminated or interrupted.  The Company reviews its respective consumer loan portfolios monthly to charge off loans which do not meet applicable standards.  Credit card accounts are administered in accordance with the same standards as those applied to other consumer loans.  Consumer loans generally involve more risk as to collectibility than mortgage loans because of the type and nature of collateral and, in certain instances, the absence of collateral.  As a result, consumer lending collections are dependent upon the borrower’s continued financial stability and are adversely affected by job loss, divorce or personal bankruptcy and by adverse economic conditions.  Also included in the category of consumer loans are home equity loans.  Home equity lines of credit are generally made as second mortgages and charged a variable interest rate.  Home equity lines are written with ten-year terms but are reviewed annually.

Underwriting Standards

The Company’s underwriting guidelines and standards are updated periodically and are presented to the Board of Directors of the holding company for approval.  The purpose of the standards and guidelines is to grant loans on a sound and collectible basis; to invest available funds in a safe, profitable manner; to serve the legitimate credit needs of the Company’s primary market areas; and to ensure that all loan applicants receive fair and equal treatment in the lending process.  It is the intent of the underwriting guidelines and standards to:  minimize losses by carefully investigating the credit history of each applicant, verify the source of repayment and the ability of the applicant to repay, collateralize those loans in which collateral is deemed to be required, exercise care in the documentation of the application, review, approval, and origination process, and administer a comprehensive loan collection program.  The above guidelines are adhered to and subject to the experience, background and personal judgment of the loan officer assigned to the loan application.  A loan officer may grant, with justification, a loan with variances from the underwriting guidelines and standards.  However, a loan officer may not exceed his or her respective lending authority without obtaining the prior, proper approval from a superior.

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Investment Activities

The Company’s investment policy stresses the management of the investment securities portfolio, which includes both securities held to maturity and securities available for sale, to maximize the return over the long-term in a manner that is consistent with good banking practices and relative safety of principal.  The Company’s investment portfolio is comprised of U.S. Treasury, U.S. government sponsored entity and mortgage-backed securities as well as obligations of state and political subdivisions.  Revenues from interest and dividends on securities accounted for 5.10%, 5.62% and 6.32% of total consolidated revenues in 2011, 2010 and 2009, respectively.The Company currently does not engage in trading account activity.

Funding Activities

Sources of funds for loan and investment activities include “core deposits.”  Core deposits include demand deposits, savings and NOW accounts, and certificates of deposit less than $100,000.  The Company will also utilize certificates of deposit from wholesale markets, when necessary, to support growth in assets.  Borrowings have also been a significant source of funding.  These include advances from the Federal Home Loan Bank, Federal Reserve Bank Notes and securities sold under agreements to repurchase.  Repurchase agreements are financing arrangements with various customers that have overnight maturity terms.  Further fundinghas come fromtwo trust preferred securities offerings through Ohio Valley Statutory Trust I and Ohio Valley Statutory Trust III, totaling $13,500,000.  Ohio Valley used the proceeds to provide additional capital to the Bank to support growth.  

Electronic Refund Check / Electronic Refund Deposit Activities

The Company began its participation in a tax refund loan service in 2006, in which it serves as a facilitator for the clearing of tax refunds for a single tax software provider.  A tax refund clearing agreement between the Bank and software provider requires the Bank to process electronic refund checks (“ERC’s”) and electronic refund deposits (“ERD’s”) presented for payment on behalf of taxpayers containing taxpayer refunds.  The Bank will, in turn, receive a fee paid by the third-party tax software provider for each transaction that is processed.  During the year ended 2011, the Company’s ERC/ERD fees totaled $2,559,000, an increase of $1,779,000, or 228.1%, as compared to the same period in 2010. For the 2011 tax season, the tax software provider was able to expand the number of tax preparers utilizing its software, which contributed to the volume increase in the number of ERC/ERD transactions that were processed. As a result of ERC/ERD fee activity being mostly seasonal, the majority of income will generally be recorded during the first half of the fiscal year, with only minimal income recorded thereafter.

Competition

Competition among providers of financial products and services continues to increase, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives.  The principal factors of competition for the Company’s banking business are the rates of interest charged for loans, the rates of interest paid for deposits, the fees charged for services and the availability and quality of services.  The market area for the Bank is concentrated primarily in the Gallia, Jackson, Pike, Lawrence and Meigs Counties of Ohio as well as the Mason and Cabell Counties of West Virginia.  Some additional business originates from the surrounding Ohio counties of Vinton, Scioto and Ross.  Competition for deposits and loans comes primarily from local banks and savings associations, although some competition is also experienced from local credit unions and insurance companies.  The Company also competes with non-financial institutions that offer financial products and services.  Some of the Company’s competitors are not subject to the same level of regulation and oversight that is required of banks and bank holding companies.  As a result, some of these competitors may have lower cost structures.

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Loan Central’s market presence further strengthens the Company’s ability to compete in the Gallia, Jackson, Lawrence and Pike Counties by serving a consumer base which may not meet the Bank’s credit standards.  Loan Central also operates in Scioto and Ross counties of Ohio, which is outside the Bank’s primary market area.  With the exception of Loan Central’s tax refund loan activities and the Bank’s ERC/ERD activities, the Company’s business is not seasonal, nor is it dependent upon a single or small group of customers.

To continue the expansion of the Bank’s market presence and further enhance customer service, the Bank began a phase of SuperBank branch openings in December 1996.  From 1996 to 2001, the Bank opened eight SuperBank facilities within supermarkets and Wal-Mart stores.  The Bank currently has five SuperBank branches in operation that currently service the market areas of Gallia, Meigs and Lawrence Counties of Ohio as well as Cabell County of West Virginia.

Historically, larger regional institutions, with substantially greater resources, have been generating a growing market presence.  Yet, in recent years, the financial industry continues to consolidate, which affects competition by eliminating some regional and local institutions, while strengthening the acquiring companies.  Many financial institutions are experiencing significant challenges as a result of the economic crisis, resulting in bank failures and significant intervention from the U.S. Government.

Overall, the Company believes it is able to compete effectively in both current and newer markets.  There can be no assurance, however, that our ability to market products and services successfully or to obtain adequate yield on our loans will not be impacted by the nature of the competition that now exists or may later develop.

Supervision and Regulation

The following is a summary of certain statutes and regulations affecting Ohio Valley as well as the Bank and Loan Central.  The summary is qualified in its entirety by reference to such statutes and regulations.

Regulation of Bank Holding Company

Ohio Valley is subject to the requirements of the BHC Act and to the reporting requirements of, and examination and regulation by, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).  The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including, among other things, the ability to:

·   assess civil money penalties;

·   issue cease and desist or removal orders; and

·   require that a bank holding company divest subsidiaries (including its banking subsidiaries).

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In general, the Federal Reserve Board may initiate enforcement action for violations of laws and regulations and unsafe or unsound practices.

Under Federal Reserve Board policy, a bank holding company is expected to serve as a source of financial strength to each subsidiary bank and to commit resources to support those subsidiary banks.  Under this policy, the Federal Reserve Board may require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to the shareholders of the bank holding company if the Federal Reserve Board believes the payment would be an unsafe or unsound practice. In 2009, the Federal Reserve Board issued guidance and regulations which require bank holding companies to provide advance notification of planned dividends under certain circumstances.

The BHC Act requires the prior approval of the Federal Reserve Board in any case where a bank holding company proposes to:

·   acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by it;

·   acquire all or substantially all of the assets of another bank or bank holding company; or

·  merge or consolidate with any other bank holding company.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").  This new law is significantly changing the regulation of financial institutions and the financial services industry.  Because the Dodd-Frank Act requires various federal agencies to adopt a broad range of regulations with significant discretion, many of the details of the new law and the effects they will have on our company will not be known for months and even years.

Many of the provisions of the Dodd-Frank Act apply directly to institutions much larger than ours, and some will affect only institutions with different charters than ours or institutions that engage in activities in which we do not engage.  Among the changes to occur pursuant to the Dodd-Frank Act that can be expected to have an effect on our business are the following:

·   the Dodd-Frank Act creates a Consumer Financial Protection Bureau with broad powers to adopt and enforce consumer protection regulations;

·   new capital regulations for bank holding companies will be adopted, which may impose stricter requirements, and any new trust preferred securities will no longer count toward Tier I capital;

·   the federal law prohibition on the payment of interest on commercial demand deposit accounts was eliminated effective in July 2011;

·   the standard maximum amount of deposit insurance per customer is permanently increased to $250,000, and non-interest bearing transaction accounts will have unlimited insurance through December 31, 2012;

·   the assessment base for determining deposit insurance premiums has been expanded effective April 1, 2011, to include liabilities other than just deposits; and

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·   new corporate governance requirements applicable generally to all public companies in all industries will require new compensation practices, including requiring companies to "claw back" incentive compensation under certain circumstances, to provide shareholders the opportunity to cast a non-binding vote on executive compensation, and to consider the independence of compensation advisers, and new executive compensation disclosure requirements.

In addition, new regulations regarding debit card fees were enacted by the Federal Reserve in October 2011.  The new rules cap debit card interchange fees for banks with $10 billion or more in assets and prohibit network exclusivity arrangements and routing restrictions.  Although the fee standards do not apply to Ohio Valley, competition and other market forces may result in a loss of revenue to us from these fees.

Although it is impossible for us to predict at this time all the effects the Dodd-Frank Act will have on us and the rest of our industry, it is possible that our revenue could decrease, our interest expense could increase and deposit insurance premiums could change, and steps may need to be taken to increase qualifying capital.  We expect that our operating and compliance costs will increase and could adversely affect our financial condition and results of operations.

We cannot predict what other legislation or economic policies of the various regulatory authorities might be enacted or adopted or what other regulations might be adopted or the effects thereof. Future legislation and policies and the effects thereof might have a significant influence on overall growth and distribution of loans, investments and deposits and affect interest rates charged on loans or paid on time and savings deposits. Such legislation and policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

Transactions with Affiliates, Directors, Executive Officers and Shareholders

Section 23A and 23B of the Federal Reserve Act  and  Regulation  W  restrict transactions by  banks  and  their  subsidiaries  with their affiliates.  An  affiliate  of  a  bank is any company or entity which controls, is controlled by or is under common control with the bank.

Generally, Sections 23A and 23B and Regulation W:

·   limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of that bank’s capital stock and surplus (i.e., tangible capital);

·   limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to 20% of that bank’s capital stock and surplus; and

·    require that all such transactions be on terms substantially the same, or at least as favorable to the bank subsidiary, as those provided to a non-affiliate.

The term “covered transaction” includes the making  of  loans to the affiliate, the purchase  of assets from the affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate, and other similar types of transactions.

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A bank’s authority to extend credit to executive officers, directors and greater than 10% shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve Board.  Among other things, these loans must be made on terms substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment.  In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.

Regulation of Ohio State Chartered Banks

As an Ohio state-chartered bank that is not a member of the Federal Reserve Bank (“FRB”), the Bank is supervised and regulated by the Ohio Division of Financial Institutions and the FDIC.

The Bank’s deposits are insured up to applicable limits by the FDIC, and the Bank is subject to the applicable provisions of the Federal Deposit Insurance Act and the regulations of the FDIC.

Various requirements and restrictions under the laws of the United States, the State of Ohio and the State of West Virginia affect the operations of the Bank, including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital and surplus, limitations on payment of dividends, and limitations on branching.

Holding Company Activities

Ohio Valley became a financial holding company during 2000, permitting it to engage in activities beyond those permitted for traditional bank holding companies.  In order to become a financial holding company, a bank holding company and all of its depository institutions must be well capitalized and well managed under federal banking regulations, and the depository institutions must have received a Community Investment Act rating of at least satisfactory.

Financial holding companies may engage in a wide variety of financial activities, including any activity that the Federal Reserve Board and the Treasury Department consider financial in nature or incidental to financial activities, and any activity that the Federal Reserve Board determines complementary to a financial activity and which does not pose a substantial safety and soundness risk.  These activities include securities underwriting and dealing activities, insurance and underwriting activities and merchant banking/equity investment activities.  Because it has authority to engage in a broad array of financial activities, a financial holding company may have several affiliates that are functionally regulated by financial regulators other than the Federal Reserve Board, such as the SEC and state insurance regulators.

Loan Central is supervised and regulated by the State of Ohio Department of Financial Institutions, Division of Consumer Finance.  Ohio Valley’s insurance business investments, Ohio Valley Financial Services and ProAlliance Corp., are both supervised and regulated by the State of Ohio Department of Insurance. The insurance laws and regulations applicable to insurance agencies, including Ohio Valley Financial Services, require education and licensing of individual agents and agencies, require reports and impose business conduct rules.

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The GLB Act provides that if a subsidiary bank of a financial holding company fails to be both well capitalized and well managed, the financial holding company must enter into a written agreement with the Federal Reserve Board within 45 days to comply with all applicable capital and management requirements.  Until the Federal Reserve Board determines that the bank is again well capitalized and well managed, the Federal Reserve Board may impose additional limitations or conditions on the conduct or activities of the financial holding company or any affiliate that the Federal Reserve Board finds to be appropriate or consistent with federal banking laws.  If the financial holding company does not correct the capital or management deficiencies within 180 days, the financial holding company may be required to divest ownership or control of all banks, including state-chartered non-member banks and other well-capitalized institutions owned by the financial holding company.  If an insured bank subsidiary fails to maintain a satisfactory rating under the Community Reinvestment Act, the financial holding company may not engage in activities permitted only to financial holding companies until such time as the bank receives a satisfactory rating.

Capital Requirements

The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies.  The risk-based capital guidelines include both a definition of capital and a framework for calculating weighted risk assets by assigning assets and off-balance sheet items to broad risk categories.  The minimum ratio of capital to risk weighted assets (including certain off-balance sheet items, such as standby letters of credit) to be considered adequately capitalized is 8%.  At least 4.0 percentage points is to be comprised of common shareholders’ equity (including retained earnings but excluding treasury stock), noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less goodwill and certain other intangible assets (“Tier 1 Capital”).  The remainder (“Tier 2 Capital”) may consist of certain amounts of hybrid capital instruments,  mandatory convertible debt securities, subordinated debt, preferred stock not qualifying as Tier 1 Capital and a limited amount of allowance for loan and lease losses.  The Federal Reserve Board also imposes a minimum leverage ratio (Tier 1 Capital to total assets) of 3% for bank holding companies that meet certain specified conditions, including no operational, financial or supervisory deficiencies, and including having the highest regulatory rating.  The minimum leverage ratio is 100-200 basis points higher for other bank holding companies and state member banks based on their particular circumstances and risk profiles and those experiencing or anticipating significant growth.

State non-member banks, such as the Bank, are subject to similar capital requirements adopted by the FDIC.  Ohio Valley and the Bank currently satisfy all applicable capital requirements.  Failure to meet applicable capital guidelines could subject a banking institution to a variety of enforcement remedies available to federal and state regulatory authorities, including the termination of deposit insurance by the FDIC.

Federal banking regulators have established regulations governing prompt corrective action to resolve capital deficient banks.  Under these regulations, institutions which become undercapitalized become subject to mandatory regulatory scrutiny and limitations, which increase as capital continues to decrease.  Such institutions are also required to file capital plans with their primary federal regulator, and their holding companies must guarantee the capital shortfall up to 5% of the assets of the capital deficient institution at the time it becomes undercapitalized.

The current capital requirements are based on the 1998 capital accord of the Basel Committee on Banking Supervision (the “Basel Committee”).  In December 2010 and January 2011, the Basel Committee released a new framework, referred to as “Basel III.”  The banking regulators are considering the extent to which they will apply the Basel III principles to smaller financial institutions, such as Ohio Valley and the Bank.

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Limits on Dividends

The ability of a bank holding company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by its subsidiary banks and other subsidiaries.  However, the Federal Reserve Board expects Ohio Valley to serve as a source of strength to the Bank, which may require it to retain capital for further investments in the Bank, rather than for dividends for shareholders of Ohio Valley.  The Bank may not pay dividends to Ohio Valley if, after paying such dividends, it would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements.  The Bank must have the approval of its regulatory authorities if a dividend in any year would cause the total dividends for that year to exceed the sum of its current year’s net profits and retained net profits for the preceding two years, less required transfers to surplus.  Payment of dividends by the Bank may be restricted at any time at the discretion of its regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking practice or if necessary to maintain adequate capital for the Bank.  These provisions could have the effect of limiting Ohio Valley’s ability to pay dividends on its outstanding common shares.

In addition, FRB policy requires Ohio Valley to provide notice to the FRB in advance of the payment of a dividend to Ohio Valley’s shareholders under certain circumstances, and the FRB may disapprove of such dividend payment if the FRB determines the payment would be an unsafe or unsound practice.

Dividend restrictions are also listed within the provisions of Ohio Valley’s trust preferred security arrangements.  Under the provisions of these agreements, the interest payable on the trust preferred securities is deferral for up to five years and any such deferral would not be considered a default.  During any period of deferral, Ohio Valley would be precluded from declaring or paying dividends to its shareholders or repurchasing any of its common stock.

Deposit Insurance Assessments

The FDIC is an independent federal agency which insures deposits, up to prescribed statutory limits, of federally-insured banks and savings associations and safeguards the safety and soundness of the financial institution industry.

The deposits of the Bank are insured up to statutorily prescribed limits by the FDIC, generally up to a maximum of $250,000 per separately insured depositor and, until December 31, 2012, with no limit for non-interest bearing transactional accounts.  Insurance premiums for insured institutions are determined based upon the member's capital level and supervisory rating provided to the FDIC by the bank's primary federal regulatory and other information the FDIC determines to be relevant to the risk posed to the deposit insurance fund (“DIF”).  Until a change in regulations adopted by the FDIC in February 2011, the assessment rate determined by considering such factors was then applied to the amount of the bank's deposits to determine the bank's insurance premium.  On April 1, 2011, the assessment base was changed from total domestic deposits to average total assets minus average tangible equity.  The new regulations also change the assessment for larger institutions and the assessment rate schedules.

Insurance of deposits may be terminated by the FDIC upon a finding that the insured institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition enacted or imposed by the bank's regulatory agency.  Notice would be given to all depositors before the deposit insurance was terminated.

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On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The special assessment was paid on September 30, 2009 and totaled $373,000.

On November 12, 2009, the FDIC adopted a final rule requiring insured depository institutions to prepay their estimated quarterly risk-based assessments for all of 2010, 2011, and 2012.  The Bank paid a total of $3,567,000 on December 30, 2009 that was recorded as a prepaid asset and will be charged to expense during the periods to which it relates.

The FDIC may impose an additional special assessment if the FDIC estimates that the DIF reserve will fall to a level that would adversely affect public confidence or to a level that will be close to or below zero. Any future special assessments will increase insurance premium expense on deposits if and when they become effective. We cannot provide any assurance as to the ultimate amount or timing of any future special assessments.

Monetary Policy and Economic Conditions

The business of commercial banks is affected not only by general economic conditions, but also by the policies of various governmental regulatory authorities, including the Federal Reserve Board.  The Federal Reserve Board regulates the money and credit conditions and interest rates in order to influence general economic conditions primarily through open market operations in U.S. Government securities, changes in the discount rate on bank borrowings and changes in reserve requirements against bank deposits.  These policies and regulations significantly influence the amount of bank loans and deposits and the interest rates charged and paid thereon, and thus have an effect on earnings.

Patriot Act

The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorist Act of 2001 (the “Patriot Act”) gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements.  Title III of the Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.  Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions.  Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.  The Company has established policies and procedures to comply with the requirements of the Patriot Act.

Employees

As of December 31, 2011, Ohio Valley and its subsidiaries  had  approximately 285 full-time equivalent employees and officers.  Management  considers  its  relationship with its employees and officers to be good.

Other Information

Management anticipates no material effect upon the capital expenditures, earnings and competitive position of the Company by reason of any laws regulating or protecting the environment.  Ohio Valley believes that the nature of the operations of its subsidiaries has little, if any, environmental impact.  Ohio Valley, therefore, anticipates no material capital expenditures for environmental control facilities in its current fiscal year or for the foreseeable future.

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The Bank and Loan Central may be required to make capital expenditures related to properties which they may acquire through foreclosure proceedings in the future.  However, the amount of such capital expenditures, if any, is not currently determinable.

Neither Ohio Valley nor its subsidiaries have any material patents, trademarks, licenses, franchises or concessions.  No material amounts have been spent on research activities, and no employees are engaged full-time in research activities.

Financial Information About Foreign and Domestic Operations and Export Sales

Ohio Valley’s subsidiaries do not have any offices located in a foreign country, and they have no foreign assets, liabilities, or related income and expense.

Statistical Disclosure

The following section contains certain financial disclosures relating to Ohio Valley as required under the SEC’s Industry Guide 3, “Statistical Disclosure by Bank Holding Companies,” or a specific reference as to the location of the required disclosures in Ohio Valley’s 2011 Annual Report to Shareholders, which are incorporated herein by reference.

I.           DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY;  INTEREST RATES AND INTEREST DIFFERENTIAL

                A.&B. The average balance sheet information and the related analysis of net interest earnings for the years ended December 31, 2011, 2010 and 2009 are incorporated herein by reference to the information appearing under the caption “Table I – Consolidated Average Balance Sheet & Analysis of Net Interest Income,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

C. Tables setting forth the effect of volume and rate changes on interest income and expense for the years ended December 31, 2011 and 2010 is incorporated herein by reference to the information appearing under the caption “Table II - Rate Volume Analysis of Changes in Interest Income & Expense,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

II.        INVESTMENT PORTFOLIO

A. Types of Securities - Total securities on the balance sheet were comprised of the following classifications at December 31:

(dollars in thousands)	2011		2010		2009
Securities Available for Sale
U.S. Treasury securities	$	5,513	$	17,079	$	10,557
U.S. Government sponsored entity securities		2,559		7,731		34,122
Agency mortgage-backed securities, residential		77,598		61,029		39,189
Total securities available for sale	$	85,670	$	85,839	$	83,868
Securities Held to Maturity
Obligations of states of the U.S. and
political subdivisions	$	22,825	$	22,149	$	16,553
Agency mortgage-backed securities, residential		23		29		36
Total securities held to maturity	$	22,848	$	22,178	$	16,589

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B. Information required by this item is incorporated herein by reference to the information appearing under the caption “Table III - Securities,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

C. Excluding obligations of the U.S. Government and its agencies, no concentration of securities exists of any issuer that is greater than 10% of shareholders’ equity of Ohio Valley.

III.           LOAN PORTFOLIO

A. Types of Loans - Total loans on the balance sheet were comprised of the following classifications at December 31:

(dollars in thousands)	2011	2010	2009	2008	2007
Residential real estate	$  226,489	$  236,878	$  242,975	$  252,693	$  250,483
Commercial real estate	219,456	226,622	211,004	198,559	196,523
Commercial and industrial	45,200	55,306	66,958	52,022	62,039
Consumer	107,163	122,516	130,419	127,117	128,058
	$  598,308	$  641,322	$  651,356	$  630,391	$  637,103

B. Maturities and Sensitivities of Loans to Changes in Interest Rates - Information required by this item is incorporated herein by reference to the information appearing under the caption “Table VI - Maturity and Repricing Data of Loans”, within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

C.         1. Risk Elements - Gross interest income that would have been recorded on loans that were classified as nonaccrual or troubled debt restructurings if the loans had been in accordance with their original terms is estimated to be $726,000, $1,255,000 and $1,541,000 for the fiscal years ended December 31, 2011, 2010 and 2009, respectively.  The amount of interest income that was included in net income recorded on such loans was $456,000, $717,000 and $1,305,000 for the fiscal years ended December 31, 2011, 2010 and 2009, respectively. Additional information required by this item is incorporated herein by reference to the information appearing under the caption “Table V - Summary of Nonperforming and Past Due Loans,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

2. Potential Problem Loans - At December 31, 2011 and 2010, there were no loans that are not already included in “Table V - Summary of Nonperforming and Past Due Loans” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders, for which management has some doubt as to the borrower’s ability to comply with the present repayment terms.  These loans and their loss exposure have been considered in management’s analysis of the adequacy of the allowance for loan losses.

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3. Foreign Outstandings - There were no foreign outstandings at December 31, 2011, 2010 or 2009.

4. Loan Concentrations - As of December 31, 2011 and 2010, there were no concentrations of loans greater than 10% of total loans which are not otherwise disclosed as a category of loans pursuant to Item III.A. above.  Also refer to the Consolidated Financial Statements regarding concentrations of credit risk found within “Note A-Summary of Significant Accounting Policies” of the notes to the Company’s consolidated financial statements for the fiscal year ended December 31, 2011, located in Ohio Valley’s 2011 Annual Report to Shareholders which is incorporated herein by reference.

D. Other Interest-Bearing Assets - As of December 31, 2011 and 2010, there were no other interest-bearing assets that would be required to be disclosed under Item III.C. if such assets were loans.

IV.           SUMMARY OF LOAN LOSS EXPERIENCE

A. The following schedule presents an analysis of the allowance for loan losses for the fiscal years ended December 31:

(dollars in thousands)	2011			2010			2009			2008			2007
Balance, beginning of year	$	9,386		$	8,198		$	7,799		$	6,737		$	9,412
Loans charged off:
Residential real estate		1,649			971			1,172			225			422
Commercial real estate		2,298			2,766			59			950			3,987
Commercial and industrial		4,725			191			568			214			15
Consumer		1,750			1,951			2,532			2,140			1,617
Total loans charged off		10,422			5,879			4,331			3,529			6,041
Recoveries of loans:
Residential real estate		198			40			41			61			166
Commercial real estate		1,394			70			58			----			131
Commercial and industrial		1,127			25			672			95			117
Consumer		765			1,061			747			719			700
Total recoveries of loans		3,484			1,196			1,518			875			1,114
Net loan charge-offs		(6,938	)		(4,683	)		(2,813	)		(2,654	)		(4,927	)
Provision charged to operations		4,896			5,871			3,212			3,716			2,252
Balance, end of year	$	7,344		$	9,386		$	8,198		$	7,799		$	6,737
Ratio of net charge-offs to average loans outstanding		1.11	%		.72	%		.44	%		.42	%		.78	%
Ratio of allowance for loan losses to
non-performing assets		99.34	%		99.72	%		76.98	%		78.25	%		171.77	%

Discussion of factors that influenced management in determining the amount of additions charged to provision expense is incorporated herein by reference to the information appearing under the caption “Allowance for Loan Losses and Provision Expense” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

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B. Allocation of the Allowance for Loan Losses - Information required by this item is incorporated herein by reference to the information appearing under the caption  “Table IV - Allocation of the Allowance for Loan Losses,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

V.           DEPOSITS

A. Deposit Summary - Information required by this item is incorporated herein by reference to the information appearing under the caption “Table I - Consolidated Average Balance Sheet & Analysis of Net Interest Income,” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

                C.&E. Foreign Deposits - There were no foreign deposits outstanding at December 31, 2011, 2010, or 2009.

D. Schedule of Maturities - The following table provides a summary of total time deposits by remaining maturities for the fiscal year ended December 31, 2011 and 2010:

December 31, 2011			Over		Over
	3 months		3 through		6 through		Over
(dollars in thousands)	or less		6 months		12 months		12 months
Certificates of deposit of $100,000 or greater	$	19,430	$	7,159	$	27,706	$	49,544
Other time deposits of $100,000 or greater		2,887		3,314		3,413		7,606
Total time deposits of $100,000 or greater	$	22,317	$	10,473	$	31,119	$	57,150

December 31, 2010			Over		Over
	3 months		3 through		6 through		Over
(dollars in thousands)	or less		6 months		12 months		12 months
Certificates of deposit of $100,000 or greater	$	18,588	$	15,501	$	38,425	$	63,183
Other time deposits of $100,000 or greater		2,404		1,511		5,012		7,765
Total time deposits of $100,000 or greater	$	20,992	$	17,012	$	43,437	$	70,948

VI.           RETURN ON EQUITY AND ASSETS

Information required by this section is incorporated herein by reference to the information appearing under the caption “Table X - Key Ratios” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Ohio Valley’s 2011 Annual Report to Shareholders.

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VII.           SHORT-TERM BORROWINGS

The following schedule is a summary of securities sold under agreements to repurchase at December 31:

(dollars in thousands)	2011			2010			2009
Balance outstanding at period-end	$	----		$	38,107		$	31,641
Weighted average interest rate at period-end		.00	%		.15	%		.25	%
Average amount outstanding during year	$	19,196		$	26,991		$	27,540
Approximate weighted average interest rate
during the year		.09	%		.21	%		.27	%
Maximum amount outstanding as of any
month-end	$	36,680		$	38,107		$	32,718

Newly enacted banking regulations during the third quarter of 2011 permitted the Company to begin paying interest on its business checking accounts and contributed to the decrease in securities sold under agreements to repurchase balances.

ITEM 1A – RISK FACTORS

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Annual Report on Form 10-K which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements specifically identified as forward-looking statements within this document.  In addition, certain statements in future filings by Ohio Valley with the SEC, in press releases, and in oral and written statements made by or with the approval of Ohio Valley which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  Examples of forward-looking statements include:  (i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Ohio Valley or our management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements.  Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying those statements.

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements.  We desire to take advantage of the “safe harbor” provisions of that Act.

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 those factors identified below.  There is also the risk that Ohio Valley’s management or Board of Directors incorrectly analyzes these risks and forces, or that the strategies Ohio Valley develops to address them are unsuccessful.

Forward-looking statements speak only as of the date on which they are made, and, except as may be required by law, Ohio Valley 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.  All subsequent written and oral forward-looking statements attributable to Ohio Valley or any person acting on our behalf are qualified in their entirety by the following cautionary statements.

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The following are certain risks that management believes are specific to our business.  This should not be viewed as an all-inclusive list of risks or presenting the risk factors listed in any particular order.

The discontinuance of tax refund services pursuant to an arrangement with a single tax software provider could have an adverse effect on our net income.

Through our relationship with a single tax software provider, the Bank offers products to facilitate the payment of tax refunds for customers who electronically file their tax returns. Under this program, the taxpayer may receive a refund anticipation loan (“RAL”) or an ERC/ERD.  In return, the Bank charges a fee for the service.  For the 2011 tax season, the Company recorded RAL fee income of $561,000 and ERC/ERD fee income of $2,559,000.

On February 3, 2011, the Bank received a recommendation from the FDIC to discontinue offering RALs through third parties following the completion of the current tax filing season.  The FDIC expressed concerns regarding the underwriting of RALs based on the 2010 decision by the Internal Revenue Service (the "IRS") to cease providing debt indicator information.  The debt indicator information provided an indication of whether an individual taxpayer would have any portion of the anticipated tax refund offset for delinquent taxes or other debts, such as unpaid child support or delinquent federally funded student loans.  In response to the FDIC's expressions of concern, the Bank discontinued offering RALs through unrelated third-party vendors after April 19, 2011.  As a result, the Bank’s termination of this product will have a negative affect on its results of operations.  The Bank will, though, continue offering ERCs and ERDs through its tax refund clearing agreement with the current software provider.

The Company will continue to face risks within its ERC/ERD business that could potentially terminate its agreement with the third-party software provider.  These risks include not being able to perform the required ERC/ERD clearing services and/or regulatory scrutiny that could lead to a discontinuation in offering the ERC/ERD product.  Also, having an agreement with just one single tax software provider would significantly reduce the Company’s ability to offer ERC’s and ERD’s due to limited alternatives of replacement.  The termination of the ERC/ERD product would have a negative effect on earnings.

Periodic regulatory reviews may affect our financial condition.

The Company is subject to periodic reviews from state and federal regulators, which may impact our financial condition.  As part of the regulatory review, the loan portfolio and the allowance for loan losses are evaluated.  As a result, the incurred loss identified on loans or the assigned loan rating could change and may require us to increase our provision for loan losses or loan charge-offs.  In addition, any downgrade in loan ratings could impact our level of impaired loans or classified assets.  Any increase in our provision for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse affect on our financial condition and results of operations.

Difficult conditions in the financial markets, the real estate market and economic conditions generally may adversely affect our business and results of operations.

Beginning in the latter half of 2007, negative developments in the capital markets resulted in uncertainty in the financial markets and an economic downturn.  The housing market declined, resulting in decreasing home prices and increasing delinquencies and foreclosures.  The credit performance of all types of mortgage and real estate assets, including loans and equity securities, resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks.  Many financial institutions have been forced to seek additional capital or to merge with larger and stronger institutions.  Some financial institutions have failed.

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Concerns over the stability of the financial markets and the economy caused some financial institutions to reduce their lending to customers and to each other.  This tightening of credit led to increased loan delinquencies, lack of customer confidence, increased market volatility and a widespread reduction in general business activity.  Competition among depository institutions for deposits has increased significantly.  It has also become more difficult to assess the creditworthiness of customers and to estimate the losses inherent in our loan portfolio.   

While some improvements in the U.S. economy have occurred, housing prices are still depressed and unemployment remains high compared to levels prior to the recession.  Debt concerns in Europe have added to volatility in the capital markets and concerns over whether improvements in the U.S. economy will continue.  Business activity across a wide range of industries and regions is greatly reduced, and local governments and many companies are in serious difficulty.  A worsening of current conditions would likely adversely affect our business and results of operations, as well as those of our customers.  As a result, we may experience increased delinquencies, foreclosures and customer bankruptcies, as well as decreased loan demand.

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

Congress, the Treasury and the financial institution regulators have taken numerous actions to address the current liquidity and credit situation in the financial markets.  These measures include actions to encourage loan restructuring and modification for homeowners; the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate; and coordinated efforts to address liquidity and other weaknesses in the banking sector.  The long-term effect of actions already taken as well as new legislation is unknown.  Continued or renewed instability in the financial markets could weaken public confidence in financial institutions and adversely affect our ability to attract and retain new customers.

Further, legislation has been proposed that would reduce the amount that our customers are required to pay under existing loan contracts or limit our ability to foreclose on collateral.  There can be no assurance that future legislation will not significantly impact our ability to collect on our loans or recover loaned funds by foreclosure on collateral.

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may adversely affect our business, financial condition and results of operations.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").  This new law is significantly changing the regulation of financial institutions and the financial services industry.  Because the Dodd-Frank Act requires various federal agencies to adopt a broad range of regulations with significant discretion, many of the details of the new law and the effects they will have on our company will not be known for months and even years.

Many of the provisions of the Dodd-Frank Act apply directly only to institutions much larger than ours, and some will affect only institutions with different charters than ours or institutions that engage in activities in which we do not engage.  Among the changes to occur pursuant to the Dodd-Frank Act that can be expected to have an effect on our business are the following:

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·  the Dodd-Frank Act creates a Consumer Financial Protection Bureau with broad powers to adopt and enforce consumer protection regulations;

·   new capital regulations for bank holding companies will be adopted, which may impose stricter requirements, and any new trust preferred securities will no longer count toward Tier I capital;

·   the federal law prohibition on the payment of interest on commercial demand deposit accounts was eliminated effective in July 2011;

·   the standard maximum amount of deposit insurance per customer is permanently increased to $250,000, and non-interest bearing transaction accounts will have unlimited insurance through December 31, 2012;

·   the assessment base for determining deposit insurance premiums has been expanded effective April 1, 2011, to include liabilities other than just deposits; and

·   new corporate governance requirements applicable generally to all public companies in all industries will require new compensation practices, including requiring companies to "claw back" incentive compensation under certain circumstances, to provide shareholders the opportunity to cast a non-binding vote on executive compensation, and to consider the independence of compensation advisers, and new executive compensation disclosure requirements.

In addition, new regulations regarding debit card fees were enacted by the Federal Reserve in October 2011.  The new rules cap debit card interchange fees for banks with $10 billion or more in assets and prohibit network exclusivity arrangements and routing restrictions.  Although the fee standards do not apply to Ohio Valley, competition and other market forces may result in a loss of revenue to us from these fees.

Although it is impossible for us to predict at this time all the effects the Dodd-Frank Act will have on us and the rest of our industry, it is possible that our revenue could decrease, our interest expense could increase and deposit insurance premiums could change, and steps may need to be taken to increase qualifying capital.  We expect that our operating and compliance costs will increase and could adversely affect our financial condition and results of operations.

Changes in economic and political conditions, both national and local, could adversely affect our earnings, cash flows and capital, as our borrowers’ ability to repay loans and the value of the collateral securing our loans decline.

Our success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental fiscal and monetary policies.  Inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore, our financial condition and results of operations.  Because a significant amount of our loans are secured by real estate, additional decreases in real estate values likely would adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure.  Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows.

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In addition, consistent with our community banking philosophy, substantially all of our loans are to individuals and businesses in Ohio and West Virginia.  Therefore, our local and regional economies have a direct impact on our ability to generate deposits to support loan growth, the demand for loans, the ability of borrowers to repay loans, the value of collateral securing our loans (particularly loans secured by real estate), and our ability to collect, liquidate and restructure problem loans.  Consequently, any decline in the economy of this market area could have a material adverse effect on our financial condition and results of operations.  We are less able than larger financial institutions to spread risks of unfavorable local economic conditions across a large number of diversified economies.

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

We target our business development and marketing strategy primarily 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 Ohio and West Virginia markets or the other geographic markets in which we operate, our results of operations and financial condition may be negatively affected.

Adverse changes in the financial markets may adversely impact our results of operations.

The global financial markets have experienced increased volatility and an overall loss of investor confidence in recent years.  While we generally invest in securities with limited credit risk, certain investment securities we hold possess higher credit risk since they represent beneficial interests in structured investments collateralized by residential mortgages.  Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates and implied credit spreads.

Over the last few years, structured investments have been subject to significant market volatility due to the uncertainty of the credit ratings, deterioration in credit losses occurring within certain types of residential mortgages, changes in prepayments of the underlying collateral and the lack of transparency related to the investment structures and the collateral underlying the structured investment vehicles.

We may not be able to access capital when needed.

Ohio Valley and the Bank are required by regulatory authorities to maintain specified levels of capital.  If Ohio Valley experiences increased loan losses, additional capital may need to be obtained.  In addition, Ohio Valley may elect to raise additional capital to support its business, to finance acquisitions, if any, or for other purposes.  Our ability to raise additional capital, if needed, will depend on our financial performance, conditions in the capital markets, economic conditions and a number of other factors, many of which are outside of our control.  There can be no assurance, therefore, that we can raise additional capital at all or on terms acceptable to us.  If we cannot raise additional capital when needed or desired, it may have a material adverse effect on our financial condition, results of operations and prospects.

A default by another larger financial institution could adversely affect financial markets generally.

The commercial soundness of many financial institutions may be closely interrelated as a result of relationships between the institutions.  As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions.  This “systemic risk” may adversely affect our business.

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Increases in FDIC insurance premiums may have a material adverse affect on our earnings.

During 2008 and 2009, there were higher levels of bank failures, which dramatically increased resolution costs of the FDIC and depleted the deposit insurance fund.  In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, the FDIC voted on December 16, 2008 to increase assessment rates of insured institutions uniformly by 7 basis points (7 cents for every $100 of deposits), beginning with the first quarter of 2009.  Additional changes, beginning April 1, 2009, were to require riskier institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels.

The Emergency Economic Stabilization Act of 2008 (the “EESA”) instituted two temporary programs effective through December 31, 2009 to further insure customer deposits at FDIC-member banks: deposit accounts became insured up to $250,000 per customer (up from $100,000) and noninterest bearing transactional accounts became fully insured (unlimited coverage). Since then, the Dodd-Frank Act made the increase in the standard maximum insurance amount permanent, and the unlimited coverage of non-interest bearing transaction accounts was extended until December 31, 2012.

On May 22, 2009, the FDIC adopted a rule that imposed a special assessment for the second quarter of 2009 of 5 basis points on each insured depository institution’s assets minus its Tier 1 capital as of June 30, 2009, which was collected on September 30, 2009.  We paid $373,000.

On November 12, 2009, the FDIC adopted a rule requiring insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012.  The prepaid assessments for these periods were collected on December 30, 2009, along with the regular quarterly risk-based deposit insurance assessment for the third quarter of 2009.  For the fourth quarter of 2009 and for all of 2010, the prepaid assessment rate was based on each institution’s total base assessment rate in effect on September 30, 2009, modified to assume that the assessment rate in effect for the institution on September 30, 2009, was in effect for the entire third quarter of 2009.  On September 29, 2009, the FDIC increased annual assessment rates uniformly by 3 basis points beginning in 2011.  As a result, an institution’s total base assessment rate for purposes estimating an institution’s assessment for 2011 and 2012 was increased by 3 basis points.  Each institution’s prepaid assessment base was calculated using its third quarter 2009 assessment base, adjusted quarterly for an estimated five percent annual growth rate in the assessment base through the end of 2012.  The three-year prepayment was $3,567,000 for us, which will be expensed over three years.

In January 2010, the FDIC issued an advance notice of proposed rule-making asking for comments on how the FDIC’s risk-based deposit insurance assessment system could be changed to include the risks of certain employee compensation as criteria in the assessment system.

Effective April 1, 2011, the assessment base was changed from total domestic deposits to average total assets minus average tangible equity.  The new regulations also change the assessment for larger institutions and the assessment rate schedules.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.  If there are additional financial institution failures, we may be required to pay even higher FDIC premiums. Increases in FDIC insurance premiums may materially adversely affect our results of operations and our ability to continue to pay dividends on our common shares at the current rate or at all.

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

Our earnings depend substantially on our interest rate spread, which is the difference between (i) the rates we earn on loans, securities and other earning assets and (ii) the interest rates we pay on deposits and other borrowings.  These rates are highly sensitive to many factors beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities.  While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that such measures will be effective in avoiding undue interest rate risk.  As market interest rates rise, we will have competitive pressures to increase the rates we pay on deposits, which will result in a decrease of our net interest income and could have a material adverse effect on our financial condition and results of operations.

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

           The policies of the Federal Reserve Board impact us significantly.  The Federal Reserve Board regulates the supply of money and credit in the United States.  Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the value of financial instruments we hold.  Those policies determine to a significant extent our cost of funds for lending and investing. Changes in those policies are beyond our control and are difficult to predict.  Federal Reserve Board policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans.  For example, a tightening of the money supply by the Federal Reserve Board could reduce the demand for a borrower’s products and services.  This could adversely affect the borrower’s earnings and ability to repay its loan, which could have a material adverse effect on our financial condition and results of operations.

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

Making loans carries inherent risks, including interest rate changes over the time period in which loans may be repaid, risks resulting from changes in the economy, risks in dealing with borrowers and, in the case of loans secured by collateral, risks resulting from uncertainties about the future value of the collateral.

Commercial and commercial real estate loans comprise a significant portion of our loan portfolio.  Commercial loans generally are 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 contains a significant number of commercial and commercial real estate loans, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans, and ultimately could have a material adverse effect on our earnings and financial condition.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information provided to us by customers and counterparties, including financial statements and other financial information.  We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.  For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer.  We may also rely on the audit report covering those financial statements.  Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with GAAP or on financial statements and other financial information that are materially misleading.

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If our actual loan losses exceed our allowance for loan losses, our net income will decrease.

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 accounting principles generally accepted in the United States, we maintain an allowance for loan losses to provide for loan defaults and non-performance, which when combined, we refer to as the allowance for loan losses.  Our allowance for loan losses may not be adequate to cover actual credit losses, and future provisions for credit losses could have a material adverse effect on our operating results.  Our allowance for loan losses is based on prior experience, as well as an 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 loan losses.  We cannot assure you that we will not further increase the allowance for loan 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.

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

In our market area, we encounter significant competition from other commercial banks, savings and loan associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds and other financial institutions.  The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial service providers.  Many of our competitors have substantially greater resources and lending limits than we do and may offer services that we do not or cannot provide.  Technology and other changes are allowing parties to complete financial transactions that historically have involved banks at one or both ends of the transaction.  For example, consumers can now pay bills and transfer funds directly without banks.  The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits.  Our ability to maintain our history of strong financial performance and return on investment to shareholders will depend in part on our continued ability to compete successfully in our market area and on our ability to expand our scope of available financial services as needed to meet the needs and demands of our customers.

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

We may have to foreclose on collateral property to protect our investment and may thereafter own and operate such property, in which case we will be exposed to the risks inherent in the ownership of real estate.  The amount that we, as a mortgagee, may realize after a default is dependent upon factors outside of our control, including, but not limited to:  (i) general or local economic conditions; (ii) neighborhood values; (iii) interest rates; (iv) real estate tax rates; (v) operating expenses of the mortgaged properties; (vi) supply of and demand for rental units or properties; (vii) ability to obtain and maintain adequate occupancy of the properties; (viii) zoning laws; (ix) governmental rules, regulations and fiscal policies; and (x) acts of God.  Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may adversely affect the income from the real estate.  Therefore, the cost of operating a real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect our investment, or we may be required to dispose of the real property at a loss.  The foregoing expenditures and costs could adversely affect our ability to generate revenues, resulting in reduced levels of profitability.

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Environmental liability associated with commercial lending could have a material adverse effect on our business, financial condition and results of operations.

In the course of our business, we may acquire, through foreclosure, commercial properties securing loans that are in default.  There is a risk that hazardous substances could be discovered on those properties.  In this event, we could be required to remove the substances from and remediate the properties at our cost and expense.  The cost of removal and environmental remediation could be substantial.  We may not have adequate remedies against the owners of the properties or other responsible parties and could find it difficult or impossible to sell the affected properties.  These events could have a material adverse effect on our financial condition and results of operation.

Our business strategy includes growth plans.  Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a profitable growth strategy.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development.  We cannot assure you that we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations.  Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully implement our business strategy.  Also, if we grow more slowly than anticipated, our operating results could be materially adversely affected.

Our ability to grow successfully will depend on a variety of factors, including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas, our ability to raise sufficient capital and our ability to manage our growth.  While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or growth will be successfully managed.

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

We are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common stock.  The payment of dividends by us is also subject to certain regulatory restrictions.  As a result, any payment of dividends in the future will be dependent, in large part, on our ability to satisfy these regulatory restrictions and our subsidiaries’ earnings, capital requirements, financial condition and other factors.  Although our financial earnings and financial condition have allowed us to declare and pay periodic cash dividends to our shareholders, there can be no assurance that our dividend policy or size of dividend distribution will continue in the future.  Our failure to pay dividends on our common shares could have a material adverse effect on the market price of our common shares.

The loss of key members of our senior management team could adversely affect our business.

We believe that our success depends largely on the efforts and abilities of our senior management.  Their experience and industry contacts significantly benefit us.  In addition, our success depends in part upon senior management’s ability to implement our business strategy.  The competition for qualified personnel in the financial services industry is intense, and the loss of services of any of our senior executive officers or an inability to continue to attract, retain and motivate key personnel could adversely affect our business.  We cannot assure you that we will be able to retain our existing key personnel or attract additional qualified personnel.

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Loss of key employees may disrupt relationships with certain customers.

Our business is primarily relationship-driven in that many of our key employees have extensive customer relationships.  Loss of a key employee with such customer relationships may lead to the loss of business if the customers were to follow that employee to a competitor.  While we believe our relationships with our key producers is good, we cannot guarantee that all of our key personnel will remain with our organization.  Loss of such key personnel, should they enter into an employment relationship with one of our competitors, could result in the loss of some of our customers.

Management’s accounting policies and methods are the basis of how we report our financial condition and results of operations, and these policies may require management to make estimates about matters that are inherently uncertain.

Management’s accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.  Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with generally accepted accounting principles and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations.  In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances yet might result in reporting materially different amounts than would have been reported under a different alternative.

Management has identified several accounting policies that are considered significant (one as being “critical”) to the presentation of our financial condition and results of operations because they require management to make particularly subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.  Because of the inherent uncertainty of estimates about these matters, no assurance can be given that the application of alternative policies or methods might not result in our reporting materially different amounts.

A limited trading market exists for our common shares, which could lead to price volatility.

Your ability to sell or purchase our common shares depends upon the existence of an active trading market for our common shares.  Although our common shares are quoted on The NASDAQ Global Market, the volume of trades on any given day has been limited historically.  As a result, you may be unable to sell or purchase our common shares at the volume, price and time that you desire.  Additionally, a fair valuation of the purchase or sales price of our common shares also depends upon an active trading market, and thus the price you receive for a thinly-traded stock such as our common shares, may not reflect its true value.  The limited trading market for our common shares may cause fluctuations in the market value of our common shares to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market.

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Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.

As part of our business, we collect, process and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties.  Despite the security measures we have in place, our facilities and systems, and those of our third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events.  If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others.  Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risks of litigation and liability, disrupt our operations and have a material adverse effect on our business.

Our organizational documents may have the effect of discouraging a third party from acquiring us  by means of a tender offer, proxy contest or otherwise.

Our articles of incorporation contain provisions that make it more difficult for a third party to gain control or acquire us without the consent of our board of directors.  These provisions also could discourage proxy contests and may make it more difficult for dissident shareholders to elect representatives as directors and take other corporate actions.  These provisions of our governing documents may have the effect of delaying, deferring or preventing a transaction or a change in control that might be in the best interests of our shareholders.

ITEM 1B – UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 2 - PROPERTIES

Ohio Valley does not own or lease any real or personal property.

The principal executive offices of Ohio Valley and the Bank are located at 420 Third Avenue, Gallipolis, Ohio.  The Bank owns six financial service centers located in Gallipolis (Gallia Co.), Jackson (Jackson Co.) and Waverly (Pike Co.) in Ohio and Milton (Cabell Co.) in West Virginia.  The Bank leases seven additional financial service centers located in Gallipolis (Gallia Co.), Pomeroy (Meigs Co.), Columbus (Franklin Co.) and South Point (Lawrence Co.) in Ohio and Point Pleasant (Mason Co.), and Huntington (Cabell Co.) in West Virginia.   The Bank also owns and operates twenty-six ATMs, including twelve off-site ATMs.  Furthermore, the Bank owns a facility and leases two facilities in Gallipolis (Gallia Co.), Ohio which are used for additional office space.   The Bank also owns a facility in Gallipolis (Gallia Co.), Ohio and leases a facility in Point Pleasant (Mason Co.), West Virginia which are both leased out to third parties.

Loan Central conducts its consumer finance operations through seven offices located in Gallipolis (Gallia Co.), Jackson (Jackson Co.), Waverly (Pike Co.), South Point and Ironton (Lawrence Co.), Wheelersburg (Scioto Co.) and Chillicothe (Ross Co.), all in Ohio.  All of these facilities are leased by Loan Central, except for the Wheelersburg (Scioto Co.) facility.  Loan Central leases a portion of its Wheelersburg (Scioto Co.) facility to a third party.  Ohio Valley Financial Services also conducts business within Loan Central’s Jackson (Jackson Co.) facility.

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Management considers all of these properties to be satisfactory for the Company’s current operations.  The Bank, Loan Central and Ohio Valley Financial Services’ leased facilities are all subject to commercially standard leasing arrangements.

  Information concerning the value of the Company’s owned and leased real property and a summary of future lease payments is contained in “Note D – Premises and Equipment” of the notes to the Company’s consoldiated financial statements for the fiscal year ended December 31, 2011, located in Ohio Valley’s 2011 Annual Report to Shareholders.

ITEM 3 - LEGAL PROCEEDINGS

There are no material pending legal proceedings to which Ohio Valley or any of its subsidiaries is a party, other than ordinary, routine litigation incidental to their respective businesses.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER

                 MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The information required under this Item 5 by Items 201(a) through (c) of SEC Regulation S-K is incorporated herein by reference to the information presented under the captions “Summary of Common Stock Data” and “Performance Graph” located in Ohio Valley’s 2011 Annual Report to Shareholders and “Note N - Regulatory Matters” of the notes to the Company’s consolidated financial statements for the fiscal year ended December 31, 2011 located in Ohio Valley’s 2011 Annual Report to Shareholders.

On December 30, 2011, Ohio Valley sold 26,500 of its common shares, without par value, to the Ohio Valley Banc Corp. Employee Stock Ownership Plan (the "ESOP") for an aggregate of $496,000.  No underwriters were involved, and no underwriting discount or commissions were paid.  The sale was exempt from registration under Section 4(2) of the Securities Act of 1933 as a transaction by the issuer not involving any public offering, made only to the ESOP, with respect to which The Ohio Valley Bank Company serves as the Trustee.

Ohio Valley did not purchase any of its shares during the three months ended December 31, 2011.

ITEM 6 - SELECTED FINANCIAL DATA

The information required under this Item 6 by Item 301 of SEC Regulation S-K  is  incorporated  herein  by  reference to  the information presented under the caption “Selected Financial Data” located in Ohio Valley’s 2011 Annual Report to Shareholders.

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ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 The information required under this Item 7 by Item 303 of SEC Regulation S-K with respect to Ohio Valley’s interest rate risk 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 2011 Annual Report to Shareholders.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to interest rate risk, exchange rate risk, equity price risk and commodity price risk.  Ohio Valley does not maintain a trading account for any class of financial instruments, and is not currently subject to foreign currency exchange rate risk, equity price risk or commodity price risk.  Ohio Valley’s market risk is composed primarily of interest rate risk.

The information required under this Item 7A by Item 305 of SEC Regulation S-K is incorporated herein by reference to the information presented under the captions “Interest Rate Sensitivity and Liquidity” and “Interest Rate Sensitivity -- Table VIII” found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located inOhio Valley’s 2011 Annual Report to Shareholders.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Ohio Valley’s consolidated financial statements and related notes are listed below and incorporated herein by reference to Ohio Valley’s 2011 Annual Report to Shareholders.  The supplementary data “Consolidated Quarterly Financial Information (unaudited)” and the “Report of Independent Registered Public Accounting Firm” located in Ohio Valley’s 2011 Annual Report to Shareholders is also incorporated herein by reference.

Consolidated Statements of Condition as of December 31, 2011 and 2010

Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2011, 2010 and 2009

Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009

Notes to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

                 ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable

ITEM 9A – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

With the participation of the Chief Executive Officer (the principal executive officer) and the Vice President and Chief Financial Officer (the principal financial officer) of Ohio Valley, Ohio Valley's management has evaluated the effectiveness of Ohio Valley's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Annual Report on Form 10-K.

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Based on that evaluation, Ohio Valley's Chief Executive Officer and Vice President and Chief Financial Officer have concluded that:

·   information required to be disclosed by Ohio Valley in this Annual Report on Form 10-K and other reports that Ohio Valley files or submits under the Exchange Act would be accumulated and communicated to Ohio Valley's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure;

·   information required to be disclosed by Ohio Valley in this Annual Report on Form 10-K and other reports that Ohio Valley files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and

·   Ohio Valley's disclosure controls and procedures are effective as of the end of the period covered by this Annual Report on Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

“Management’s Report on Internal Control Over Financial Reporting” located in Ohio Valley’s 2011 Annual Report to Shareholders is incorporated into this Item 9A by reference.

Report of Registered Public Accounting Firm

The “Report of Independent Registered Public Accounting Firm” located in Ohio Valley’s 2011 Annual Report to Shareholders is incorporated into this Item 9A by reference.

Changes In Internal Control Over Financial Reporting

There were no changes in Ohio Valley's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during Ohio Valley's fiscal quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, Ohio Valley's internal control over financial reporting.

ITEM 9B – OTHER INFORMATION

None

PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this Item 10 by Items 401, 405, and 407(c)(3), (d)(4) and (d)(5) of SEC Regulation S-K is incorporated herein by reference to the information presented in Ohio Valley’s definitive proxy statement relating to the annual meeting of shareholders of Ohio Valley to be held on May 9, 2012 (the “2012 Proxy Statement”), under the captions “Proxy Items 1 and 2:  Election of Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Compensation of Executive Officers and Directors” of the 2012 Proxy Statement.

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 The Board of Directors of Ohio Valley has adopted a Code of Ethics covering the directors, officers and employees of Ohio Valley and its affiliates, including, without limitation, the principal executive officer, the principal financial officer and the principal accounting officer of Ohio Valley.  The Code of Ethics is posted on Ohio Valley’s website at www.ovbc.com.  Amendments to the Code of Ethics and the waivers of the provisions of the Code of Ethics will also be posted on Ohio Valley’s website.  Interested persons may obtain copies of the Code of Ethics without charge by writing to Ohio Valley Banc Corp., Attention: Larry E. Miller, Secretary, P.O. Box 240, Gallipolis, Ohio 45631.

ITEM 11 - EXECUTIVE COMPENSATION

The information required under this Item 11 by Items 402 and 407(e)(4) and (e)(5) of SEC Regulation S-K is incorporated herein by reference to the information presented under the caption “Compensation of Executive Officers and Directors” and “Proxy Items 1 and 2: Election of Directors – Committees of the Board – Compensation and Management Succession Committee” of the 2012 Proxy Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required under this Item 12 by Item 403 of SEC Regulation S-K is incorporated herein by reference to the information presented under the caption “Ownership of Certain Beneficial Owners and Management” of the 2012 Proxy Statement.

Ohio Valley does not maintain any equity compensation plans requiring disclosure pursuant to Item 201(d) of SEC Regulation S-K.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this Item 13 by Item 404 and Item 407(a) of SEC Regulation S-K is incorporated herein by reference to the information presented under the captions “Certain Relationships and Related Transactions” and “Proxy Items 1 and 2:  Election of Directors” of the 2012 Proxy Statement.

ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this Item 14 by Item 9(e) of Schedule 14A is incorporated herein by reference to the information presented under the captions “Pre-Approval of Services Performed by Independent Registered Public Accounting Firm” and “Services Rendered by the Independent Registered Public Accounting Firm” of the 2012 Proxy Statement.

PART IV

ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A. (1) Financial Statements

The following consolidated financial statements of Ohio Valley appear in the 2011 Annual Report to Shareholders, Exhibit 13, and are specifically incorporated herein by reference under Item 8 of this Form 10-K:

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        Consolidated Statements of Condition as of December 31, 2011 and 2010

Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2011, 2010 and 2009

Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009

        Notes to the Consolidated Financial Statements

        Report of Independent Registered Public Accounting Firm

 (2) Financial Statement Schedules

Financial statement schedules are omitted as they are not required or are not applicable, or the required information is included in the financial statements.

 (3) Exhibits

Reference is made to the Exhibit Index beginning on page 36 of this Form 10-K.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ohio Valley has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			OHIO VALLEY BANC CORP.
Date:	March 15, 2012	By:	/s/  Jeffrey E. Smith
			Jeffrey E. Smith
			Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 15, 2012 by the following persons on behalf of Ohio Valley and in the capacities indicated.

Name	Capacity
/s/Jeffrey E. Smith	Chairman, Chief Executive Officer and Director
Jeffrey E. Smith	(principal executive officer)
/s/Scott W. Shockey	Vice President and Chief Financial Officer
Scott W. Shockey	(principal financial officer and principal accounting officer)
/s/Lannes C. Williamson	Director
Lannes C. Williamson
/s/Anna P. Barnitz	Director
Anna P. Barnitz
/s/David W. Thomas	Director
David W. Thomas
/s/Brent A. Saunders	Director
Brent A. Saunders
/s/Steven B. Chapman	Director
Steven B. Chapman
/s/Thomas E. Wiseman	President and Chief Operating Officer
Thomas E. Wiseman
/s/Harold A. Howe	Director
Harold A. Howe
/s/Roger D. Williams	Director
Roger D. Williams

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EXHIBIT INDEX

The following exhibits are included in this Form 10-K or are incorporated by reference as noted in the following table:

Exhibit Number	Exhibit Description
3(a)	Amended Articles of Incorporation of Ohio Valley (reflects amendments through April 7, 1999) [for SEC reporting compliance only - - not filed with the Ohio Secretary of State].  Incorporated herein by reference to Exhibit 3(a) to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2007 (SEC File No. 0-20914).
3(b)	Code of Regulations of Ohio Valley: Incorporated herein by reference to Exhibit 3(b) to Ohio Valley’s quarterly report on Form 10-Q for the quarter ended June 30, 2010 (SEC File No. 0-20914).
4	Agreement to furnish instruments and agreements defining rights of holders of long-term debt: Filed herewith.
10.1*	The Ohio Valley Bank Company Executive Group Life Split Dollar Plan agreement, dated April 29, 2003, between Jeffrey E. Smith and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.1 to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2006 (SEC File No. 0-20914).
10.2*	Schedule A to Exhibit 10.1 identifying other identical Executive Group Life Split Dollar agreements between The Ohio Valley Bank Company and certain executive officers of Ohio Valley Banc Corp.:  Filed herewith.
10.3*	The Ohio Valley Bank Company Director Retirement agreement, dated December 28, 2007, between Jeffrey E. Smith and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.3 to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2007 (SEC File No. 0-20914).
10.4*	Schedule A to Exhibit 10.3 identifying other identical Director Retirement agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Filed herewith.
10.5*	The Ohio Valley Bank Company Salary Continuation agreement, dated December 28, 2007, between Jeffrey E. Smith and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.5 to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2007 (SEC File No. 0-20914).

36

Exhibit Number	Exhibit Description
10.6(a)*	The Ohio Valley Bank Company Director Deferred Fee agreement, dated December 28, 2007, between Anna P. Barnitz and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.6(a) to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2007 (SEC File No. 0-20914).
10.6(b)*	The Ohio Valley Bank Company Executive Deferred Compensation agreement, dated December 28, 2007, between Jeffrey E. Smith and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.6(b) to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2007 (SEC File No. 0-20914).
10.7(a)*	Schedule A to Exhibit 10.6(a) identifying other identical Director Deferred Fee agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Filed herewith.
10.7(b)*	Schedule A to Exhibit 10.6(b) identifying other identical Executive Deferred Compensation agreements between The Ohio Valley Bank Company and executive officers of Ohio Valley Banc Corp.:  Incorporated herein by reference to Exhibit 10.7(b) to Ohio Valley’s Annual Report on Form 10-K for fiscal year ended December 31, 2010 (SEC File No. 0-20914).
10.8*	Summary of Compensation for Directors and Named Executive Officers of Ohio Valley Banc Corp.:  Filed herewith.
10.9*	Summary of Bonus Program of Ohio Valley Banc Corp.:  Filed herewith.
10.10*	The Ohio Valley Bank Company Supplemental Executive Retirement Plan agreement dated March 6, 2012, between Thomas E. Wiseman and the Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.1 to Ohio Valley’s Current Report on Form 8-K filed on March 9, 2012 (SEC File No. 0-20914).
11	Statement regarding computation of per share earnings (included in Note A of the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.)
13	Ohio Valley’s Annual Report to Shareholders for the fiscal year ended December 31, 2011:  Filed herewith.  (Not deemed filed except for portions thereof specifically incorporated by reference into this Annual Report on Form 10-K.)

37

Exhibit Number	Exhibit Description
21	Subsidiaries of Ohio Valley:  Filed herewith.
23	Consent of Crowe Horwath LLP.:  Filed herewith.
31.1	Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer):  Filed herewith.
31.2	Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer):  Filed herewith.
32	Section 1350 Certifications (Principal Executive Officer and Principal Accounting Officer): Filed herewith.

* Compensatory plan or arrangement.

EX-4

EXHIBIT 4

OHIO VALLEY BANC CORP.

420 Third Avenue, PO Box 240

Gallipolis, OH  45631

(740) 446-2631

March 15, 2012

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C.  20549

RE: Ohio Valley Banc Corp. – Form 10-K for the fiscal year ended December 31, 2011

Gentlemen:

Ohio Valley Banc Corp., an Ohio corporation (“Ohio Valley”), is today filing an Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “Form 10-K”), as executed on March 15, 2012.

Pursuant to the instructions relating to the Exhibits in Item 601(b)(4)(iii) of Regulation S-K, Ohio Valley hereby agrees to furnish the Commission, upon request, copies of instruments and agreements defining the rights of holders of its long-term debt and of the long-term debt of its consolidated subsidiaries, which are not being filed as exhibits to the Form 10-K.  No such instrument represents long-term debt in excess of 10% of the total assets of Ohio Valley Banc Corp. and its subsidiaries on a consolidated basis.

Very truly yours,

/s/ Jeffrey E. Smith

Jeffrey E. Smith

Chairman and CEO

Ohio Valley Banc Corp.

EX-10.2

EXHIBIT 10.2

SCHEDULE A TO EXHIBIT 10.1

The following individuals entered into Executive Group Life Split Dollar Plans with The Ohio Valley Bank Company identified below which are identical to the Executive Group Life Split Dollar Plan, dated April 29, 2003, between Jeffrey E. Smith and The Ohio Valley Bank Company filed herewith.

Date of

Name                                                                           Executive Group Life Split Dollar Plan

Katrinka V. Hart                                                                    March 21, 2000

E. Richard Mahan                                                                   March 23, 2000

Larry E. Miller II                                                                     March 22, 2000

Scott W. Shockey                                                                   March 19, 2009

Thomas E. Wiseman                                                                December 31, 2011

EX-10.4

EXHIBIT 10.4

SCHEDULE A TO EXHIBIT 10.3

The following individuals entered into Director Retirement Agreements with The Ohio Valley Bank Company identified below which are identical to the Director Retirement Agreement, dated December 28, 2007, between Jeffrey E. Smith and The Ohio Valley Bank Company incorporated herein by reference to Exhibit 10.3 to Ohio Valley’s Annual Report on Form 10-K for fiscal year ending December 31, 2007 (SEC File No. 0-20914.

Date of

Name                                                                           Director Retirement Agreement

Anna P. Barnitz                                                                  December 28, 2007

Steven B. Chapman                                                            December 28, 2007

Harold A. Howe                                                                 December 28, 2007

Brent A. Saunders                                                               October 16, 2007

David W. Thomas                                                               June 17, 2008

Roger D. Williams                                                               October 16, 2007

Lannes C. Williamson                                                          December 28, 2007

Thomas E. Wiseman                                                            December 28, 2007

EX-10.7A

EXHIBIT 10.7(a)

SCHEDULE A TO EXHIBIT 10.6(a)

The following individuals entered into Director Deferred Fee Agreements with The Ohio Valley Bank Company identified below which are identical to the Director Deferred Fee Agreement, dated December 28, 2007, between Anna P. Barnitz and The Ohio Valley Bank Company incorporated herein by reference to Exhibit 10.6(a) to Ohio Valley’s Annual Report on Form 10-K for fiscal year ending December 31, 2007 (SEC File No. 0-20914).

Date of

Name                                                                           Director Deferred Fee Agreements

Steven B. Chapman                                                                December 28, 2007

Harold A. Howe                                                                     December 28, 2007

Brent A. Saunders                                                                   October 16, 2007

David W. Thomas                                                                   June 17, 2008

Roger D. Williams                                                                   December 28, 2007

Lannes C. Williamson                                                              December 28, 2007

EX-10.8

EXHIBIT 10.8

SUMMARY OF COMPENSATION FOR

DIRECTORS AND NAMED EXECUTIVE OFFICERS

OF OHIO VALLEY BANC CORP.

Directors

All of the directors of Ohio Valley Banc Corp. (“Ohio Valley”) also serve as directors of its subsidiary, The Ohio Valley Bank Company (the “Bank”).  The directors of Ohio Valley are paid by the Bank for their services rendered as directors of the Bank, not Ohio Valley.  Each director of the Bank who is not an employee of Ohio Valley or any of its subsidiaries (a “Non-Employee Director”) receives $550 per month for his or her services.  Each director of the Bank who is an employee of Ohio Valley or any of its subsidiaries (an “Employee Director”) receives $350 per month for his or her services.  In addition, each director of the Bank receives an annual retainer of $14,700 paid in December of each year for services to be rendered during the following year.

Each Non-Employee Director who is a member of the Executive Committee of the Bank receives $2,000.00 per month for his or her services.  In addition, each Non-Employee Director receives an annual retainer of $16,695 paid in December of each year for services to be rendered during the following year.  This figure was pro-rated for time served for new members.  Included in the Executive Committee Chairman’s current salary is an annual fee of $70,000 for his duties as such.  Employee Directors receive no additional compensation for serving on the Executive Committee.

The Bank maintains a life insurance policy for all directors with a death benefit of two times annual director fees at time of death reduced by 35% at age 65 and 50% at age 70 as part of the Bank’s group term life insurance program.  The life insurance policies terminate upon retirement.  Messrs. Smith and Wiseman, as employees of the Bank, are excluded from this benefit under the terms of the Bank’s group term life insurance program.  The Bank also maintains a Director Retirement Plan for all directors of the Bank and a Deferred Compensation Plan for all directors and executive officers of the Bank.  These documents are filed as Exhibit 10.1, Exhibit 10.3, Exhibit 10.6(a) and Exhibit 10.6(b), respectively, to Ohio Valley’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (SEC File No. 0-20914).

Named Executive Officers

  The following sets forth the current salaries of the executive officers of Ohio Valley named in the Summary Compensation Table in Ohio Valley’s proxy statement (the “Named Executive Officers”):

Name	Current Salary
Jeffrey E. Smith	$234,019
Thomas E. Wiseman	228,585
Scott W. Shockey	123,074
Katrinka V. Hart	154,757
E. Richard Mahan	154,709
Larry E. Miller, II	154,290

Certain Named Executive Officers are entitled to participate in several benefit arrangements, including the Ohio Valley Banc Corp. Bonus Program, the Ohio Valley Bank Company Executive Group Life Split Dollar Plan, the Executive Deferred Compensation Plan, and a supplemental  executive retirement plan (currently only for Messrs. Smith and Wiseman), as set forth in exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6(a), 10.6(b), 10.7(a), 10.7(b), 10.8 and 10.9 to Ohio Valley's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, SEC File No. 0-20914.  In addition, Named Executive Officers are entitled to participate in various benefit plans available to all employees, including a Profit Sharing Retirement Plan, a 401(k) plan, an employee stock ownership plan, group term life insurance, health insurance, disability insurance and a flexible compensation/cafeteria plan, all as described in Ohio Valley's proxy statement for its 2012 annual meeting of shareholders.

EX-10.9

EXHIBIT 10.9

SUMMARY OF BONUS PROGRAM

OF OHIO VALLEY BANC CORP.

The following is a description of the Bonus Program (the "Bonus Program") of Ohio Valley Banc Corp. ("Ohio Valley") provided pursuant to Item 601(b)(10)(iii) of Regulation S-K promulgated by the Securities and Exchange Commission, which requires a written description of a compensatory plan when no formal document contains the compensation information.

The executive officers of the Company receive no compensation from the Company.  Instead they are paid by subsidiaries for services rendered in their capacities as executive officers of subsidiaries of the Company.

The objectives of the bonus component of the Company's compensation program are to: (a) motivate executive officers and other employees and reward such persons for the accomplishment of both  annual and long range goals of the Company and its subsidiaries, (b) reinforce a strong performance orientation with differentiation and variability in individual awards based on contribution to long-range business results and (c) provide a fully competitive compensation package which will attract, reward, and retain individuals of the highest quality.  Prior to the adoption in 2011 of a new salary grade design, all employees of the Company's subsidiaries holding positions with a pay grade of 9 or above were eligible to participate in the Bonus Program, including all subsidiaries' executive officers.  However, as a result of the new salary grade design structure, approximately 22 employees that had previously been graded 9 or higher, fell below that level.  All 22 employees currently serving in these positions were grandfathered into the Bonus Program.

Bonuses payable to participants in the Bonus Program are based on (a) the performance of the Company and its subsidiaries as measured against specific performance targets; (b) each employee's individual performance; and (c) the marketplace range of compensation for employees holding comparable positions.   At the beginning of each fiscal year, the Compensation Committee sets specific performance targets for the Company and its subsidiaries based on a combination of some or all of a number of performance criteria set forth in the Company’s strategic plan.  The targets are based on one or more of the following performance criteria: net income, net income per share, return on assets, return on equity, asset quality (as measured by the ratio of adversely classified assets to tier 1 capital plus the ALLL), tier 1 leverage ratio and efficiency ratio.  It is the objective of the Compensation Committee to establish goals that are “reaching” but “reachable”.  The Committee may not consider the goals to be of equal weight, but, in the aggregate, it considers them to be fundamental metrics which are important to the long-term performance of the Company and which, at the same time, do not expose the Company, nor incent the employees to undertake, excessive risks which would threaten the Company’s long-term value.  At the end of the fiscal year, the aggregate amount available for the payment of a bonus, if any at all, is determined by the Company’s Board of Directors upon recommendation of its Compensation Committee based on an evaluation of the accomplishment of the performance targets.  A bonus may be paid without targets having been established or achieved.  No officer or employee has any right to the payment of a bonus until the Board of Directors has exercised its discretion to award one and the amount to be paid to each person has been determined and announced.

Once the aggregate amount of the bonus pool is determined, individual bonus awards are determined through a formula that applies each employee's performance evaluation score to a “bonus grid”, reflecting the individual employee's job grade, the market place range of compensation for that job grade, and individual job performance using the Evaluation Criteria referenced above.  Employees are evaluated by their supervisors, except for Mr. Smith and Mr. Wiseman, who are evaluated by the Compensation Committee of the Company’s Board of Directors.  The Company’s Board of Directors approves the bonuses payable to the executive officers under the Bonus Program based upon the recommendation of the Compensation Committee.

Bonuses are normally paid in February in cash in a single lump sum, subject to payroll taxes and tax withholdings.

EX-13

OHIO VALLEY BANC CORP.

ANNUAL REPORT 2011

MESSAGE FROM MANAGEMENT

Dear Shareholders and Friends of our Valued Communities,

Enclosed between these covers you will find the summation of your company’s operations for the year 2011.

We would be remiss if we didn’t first recognize the retirement of one of our directors, Robert E. Daniel, who retired from the Board of Directors in May. Mr. Daniel served your board as a representative from one of our area’s largest employers, the healthcare industry. We are pleased that he will continue to serve in an advisory capacity as a Director Emeritus.

We commend the adamant support of our shareholders and customers which led to a successful 2011. OVBC ended the year with net income totaling $5,835,000, a 14.5 percent increase from net income of $5,096,000 for the previous year. Also, earnings per share were $1.46 for 2011 versus $1.28 for 2010, an increase of 14.1 percent.

Capital was the focus for much of 2011 as regulators increased their emphasis on capital standards. With enhanced earnings, the balance of capital increased to even stronger levels in 2011.

Your employees strived to increase Asset Quality by increasing recoveries, working with borrowers who put forth good faith efforts to pay, and by proactively matching appropriate new loans to responsible borrowers. And it worked. Our ratio of nonperforming loans to total loans at December 31, 2011 lowered to .52%, compared to .78% at December 31, 2010.

      At Loan Central, this group of dedicated professionals continued to meet the needs of a growing public with problem credit histories. A seventh office was opened just after the end of the year in the Zane Plaza in Chillicothe, Ohio. We are pleased to welcome Chillicothe manager, Greg Kauffman, to the OVBC family. In 2011, Loan Central contributed an outstanding 19.5% of the total earnings per share to the OVBC bottom line.

These successes highlighted a Year of Celebration in which we celebrated important milestones for many of our offices from the 50th Anniversary of the current Main Office location to the 15th Anniversary of our first in-store bank location. We look forward to celebrating the 140th Anniversary of The Ohio Valley Bank Company with you in 2012.

As always, we thank you for your loyalty and support and humbly submit the following pages for your review.

Sincerely,

/s/Jeffrey E. Smith                                                                       /s/Thomas E. Wiseman

Jeffrey E. Smith                                                                           Thomas E. Wiseman

Chairman and CEO                                                                      President and COO

Ohio Valley Banc Corp.                                                              Ohio Valley Banc Corp.

Being a Community Bank is More Than Words on a Page…

In October, OVB Financial Literacy Leader Hope Roush brought OVB’s Adventures in Credit to elementary schools in our region. Students learned how to use credit wisely, during an interactive superhero-themed program. At left Roush is pictured at Vinton Elementary.

OVB Officer and Waverly Office Manager, Rick Swain, took a few moments away from the Office’s 20th Anniversary Celebration to thank radio listeners for their support over the years.

Over the last few years, OVB has supported major building projects at school districts across our region; including this double donation presentation made to Gallipolis City Schools and Gallia County Local Schools in 2011.

Manager and Bank Officer Joe Wyant doesn’t back away from a challenge, not even when it’s washing windshields at the 20th Anniversary Celebration of the OVB Office in Jackson. Fortunately, his reward came in September when he had the honor of opening the Little Miss Apple Festival Exhibit with 2010 Little Miss McKinley Morris and OVB GenNEXT Advisory Board member Taryn Strawser.

It’s in the Hearts, Minds, and Actions of Our People

In September, the OVB Jackson Pike Office celebrated its 35th year in business. The event was highlighted by the surprise visit of Larry Marr, the branch’s first customer. He is pictured, on the left, with current Jackson Pike Branch Operations Manager Jenny Nicinsky and Chairman and CEO Jeff Smith, who happened to be the first manager of the Jackson Pike branch.

At OVB, we are proud to “invest” in youth through our region’s outstanding county fairs. These events exhibit the best of what our communities have to offer.  Left, OVB Vice President Chris Preston looks on as Account Service Representative Adam Canterbury presents $1,000 to the exhibitor of the Top Steer Born & Raised in Cabell County at the first fair of the season in July.

Right, we stood among an excited crowd to watch one OVB 4-H Scholar crown another as Kalee Edmonds passed the Mason Co. Fair Queen title to Jordan Cullen during the pageant also sponsored by Ohio Valley Bank.

Right, in October, bankers at the OVB Holzer Banking Center, located conveniently inside Holzer Medical Center of Gallipolis, dressed up the office in pink to show support for the hospital’s Susan G. Komen Foundation fundraising efforts.

A TRADITION OF QUALITY PERFORMANCE

Total Return Performance

Year ended December 31, 2011

This is a comparison of five-year cumulative total returns among Ohio Valley Banc Corp.’s common shares, the S & P 500 Index, and the SNL $500 Million-$1 Billion Bank Asset-Size Index. The SNL Index represents stock performance of 79 of the nation's banks located throughout the United States with total assets between $500 Million and $1 Billion (including Ohio Valley Banc Corp.) Calculations are based on an investment of $100 on December 31, 2006 and assumes reinvestment of dividends.

                                                                                                                                                                                                      Period Ending

Index	12/31/06	12/31/07	12/31/08	12/31/09	12/31/10	12/31/11
Ohio Valley Banc Corp.	100.00	102.51	79.35	95.72	88.41	88.06
SNL $500M-$1B Bank Index	100.00	80.13	51.35	48.90	53.38	46.96
S&P 500	100.00	105.49	66.46	84.05	96.71	98.76

Annual Report on Form 10-K

A copy of the company’s annual report on Form 10-K, as filed with the Securities and Exchange Commission, will be forwarded without charge to any shareholder upon written request to: Ohio Valley Banc Corp., Attention: Larry E. Miller, Secretary, P.O. Box 240, Gallipolis, OH 45631. The annual report and proxy statement are also available for viewing or download at www.ovbc.com/go/proxyinfo.

Contact Information

Ohio Valley Banc Corp.

420 Third Avenue, P.O. Box 240, Gallipolis, Ohio 45631

740.446.2631 or 800.468.6682       Web: www.ovbc.com       E-mail: investorrelations@ovbc.com

OHIO VALLEY BANK

Gallipolis, Ohio

Main Office - 420 Third Ave.

Mini Bank - 437 Fourth Ave.

Inside Foodland - 236 Second Ave.

Inside Walmart - 2145 Eastern Ave.

Jackson Pike - 3035 State Route 160

Inside Holzer - 100 Jackson Pike

Loan Office - Walmart Plaza, 2145 Eastern Ave.

Jackson, Ohio

740 East Main St.

Pomeroy, Ohio

Inside Sav-a-Lot - 700 W. Main St.

Rio Grande, Ohio

27 North College Ave.

South Point, Ohio

Inside Walmart - 354 Private Drive

Waverly, Ohio

507 West Emmitt Ave.

Huntington, West Virginia

3331 U.S. Route 60 East

Milton, West Virginia

280 East Main St.

Point Pleasant, West Virginia

328 Viand St.

Web Branch

www.ovbc.com or www.ohiovalleybank.com

LOAN CENTRAL

Chillicothe, Ohio

1080 N. Bridge Street, Unit 43

Gallipolis, Ohio

2145 Eastern Avenue

Jackson, Ohio

345 Main Street

Ironton, Ohio

710 Park Avenue

South Point, Ohio

348 County Road 410

Waverly, Ohio

505 West Emmitt Avenue

Wheelersburg, Ohio

326 Center Street

Ohio Valley Bank ATMs can be found at each office and also at these convenient locations.

Red’s Truck Center, Kerr Road, Bidwell, Ohio

Sav-a-Lot, State Rt. 160, Bidwell, Ohio

Gallia Academy, 2855 Centenary Road, Gallipolis, Ohio

Holzer Medical Center Cafeteria, 100 Jackson Pike, Gallipolis, Ohio

Holzer Clinic, 280 Pattonsville Road, Jackson, Ohio

Foodland, 409 N. Front Street, Oak Hill, Ohio

Bob Evans Sausage Shop, State Rt. 588, Rio Grande, Ohio

BP, Rt 35 & 5 Mile Creek, Fraziers Bottom, WV

Sunoco Foodmart, 3175 Route 60 E., Huntington, WV

Pleasant Valley Hospital, 2520 Valley Drive, Point Pleasant, WV

See our Intelli-Deposit ATM inside the Gallipolis Walmart where you can make a deposit without a deposit slip!

Community First and Always

Ohio Valley Bank believes in community. As a responsible business, we feel it is our duty to invest in our community, whether by monetary means or through volunteerism. We are proud to make a positive impact on our hometowns. In supporting our communities, we achieve our mission to excel as an independent community bank.

The community and charitable organizations that follow are some of those that we “invested” in during 2011 through charitable giving.

American Cancer Society Amer. Free Enterprise Leadership American Legion American Red Cross Amish School Auction AMVETS Area Agency on Aging District 7 Ariel Theatre Baptist for Life of Central Ohio Beaver Lions Club Beaver OktoberFest Bend Area C.A.R.E. Bend Area Food Pantry Boy Scouts of America Buckeye Hills Career Center Cabell Co. 4-H Cabell Co. Canine Assn. Cabell Co. Fair Cabell Co. FFA Cabell Co. Fraternal Order of Police Cabell Co. Kids for Christmas Cabell Co. SOGA Cabell Huntington Hospital Children’s Fund Cabell Midland High School Chester Ball Association Chester Shade Historical Society Childrens Center of Ohio Christian Life Academy City of Milton Fireworks Cystic Fibrosis Earl Neff Pediatric Toy Fund Eastern High School (Pike County) Eastern Youth League Elm Grove Youth League Emancipation Celebration FACTS Youth Fishing Day Fellowship of Christian Athletes FOF Community Concert Fort Hayes Broadcasting Program Fort Hill Christian Youth Camp Franklin County Schools Franklin Heights High School Frank Shriver Family Benefit French Art Colony French City Chili Fest French Colony Chorus Friends of Lake Alma French 500 Clinic Gallery at 409 Gallia Co. 4-H Gallia Co. Agricultural Society Gallia County Cattlemen Assn. Gallia Co. Chamber of Commerce Gallia Co. Chautauqua Gallia Co. CVB Gallia Co. Dairy Committee Gallia Co. Early Childhood Gallia Co. Emancipation Day Gallia Co. Farm Bureau Gallia Co. Gospel Sing Gallia Co. Health Dept. Gallia Co. Junior Fair Gallia Co. Local Schools Gallia Co. Relay for Life Gallia Co. River Recreation Festival Gallia Co. Snack Pack Gallia Co. Wrestling Club Gallia Senior Citizens Ctr. Gallipolis Bass Busters Gallipolis City Schools Gallipolis Elks Gallipolis In Bloom Gallipolis Jr Women's Club Gallipolis Lions Club     Gallipolis Rotary Gallipolis Shrine Club Gallipolis Women’s Bowling League Generation Gallia Girl Scouts of America Gold Girl Group Home Gospel Lighthouse Fundraiser Greenfield Fire Dept. Ladies Aux. Grove City Schools Guiding Hands/Gallco Center Holzer Foundation, Camp Beaver Holzer Hospice Holzer Medical Center Holzer Senior Outreach Jackson ALS Walk Jackson Chamber of Commerce Jackson City Schools Jackson Co. 4-H Jackson Co. Apple Festival Jackson Co. Economic Development Jackson Co. Fair Auction Jackson Elks Fundraiser Jackson Extension Jackson Firefighters Assn. Jackson Jaycees Jackson Rotary Jackson Shop-with-a-Cop Jackson Sideliners Jackson SWCD Jackson/Vinton Farm Bureau John Hereford Benefit Jonathan Goddard Endowment Josh Napper Scholarship Fund Junior Achievement Juvenile Diabetes Research JVAC Industries Kiwanis Lawrence Co. Beef Sweepstakes Lawrence Co. Fair Auction Lawrence Co. FOP Foundation Liberty Union High School Lillian Jones Museum Madison Jewell Baker Fundraiser Main Street Point Pleasant Martha Elementary Mason Co. 4-H Mason Co. Board of Education Mason Co. Chamber of Commerce Mason Co. Community Foundation Mason Co. Fair & Queen Pageant Mason Co. FBLA Mason Co. Little League Mason Co. Reading Council Mason Co. Relay for Life Mason Co. Schools Mason Co. Special Olympics Meigs Chamber of Commerce Meigs Co. 4-H Meigs Co. Fair Livestock Auction Meigs Co. Schools Meigs New Field Celebration Meigs Soil & Water Conservation Meigs VFW MGM Big Green Club Middleport Sternwheeler Riverfest Middleport Youth League Milton Little League Milton Middle School Milton Rotary Mothman Festival 5K Race MU Athletic Association Multiple Sclerosis Society Muscular Dystrophy Association NAACP National Child Safety Council National Super Kids Classic National Wild Turkey Federation Native American Harvest Oak Hill Festival of Flags Oak Hill Local Schools OASIS Benefit Ohio 4-H Foundation Ohio River Live Ohio Valley Christian School Ohio Valley Symphony Ohio Valley Youth Orchestra OH/WV YMCA Youth in Government Old Fort Meigs Ole Car Club OVB 4-H Scholarship Program Pancreatic Research Fund Pike Co. 4-H Pike Co. Chamber of Commerce Pike Co. Fair Livestock Auction Pike Co. Outreach Council Pike Co. Shrine Club Pike Co. Soil & Water Conservation Pike Co. YMCA Point Pleasant River Museum Point Pleasant Sternwheel Regatta Pomeroy-Middleport Lions Club Pomeroy Youth League Rachel Halley Benefit Racine’s Party in Park Festival Rio Grande Memorial Park Riverbend Arts Council River Cities Military Support Group Scott Porter Memorial Fund Special Olympics St. Jude’s Children’s Hospital Susan G. Komen Foundation Syracuse Fire Department Tabernacle of Praise Tour Ohio Band Organ Rally Town of Mason Tu-Endie-Wei FOP United Fund of Jackson County University of Rio Grande Vietnam Veterans Village of Pomeroy Village of Rio Grande Vinton Bean Dinner Vinton Integrity Baseball Washington Elementary Ohio Reads Waverly Foundation Waverly Jingle Bell Parade Waverly Leo Club Waverly Lions Club Waverly Local Schools Waverly Street Festival Wellston City Schools Wellston Ohillco Festival West Virginia Pumpkin Festival Women’s & Children’s Hospital Wilkesville Community Center WV Miners Team WV Soccer  

Directors and Officers

OVBC OFFICERS   Jeffrey E. Smith, Chairman of the Board and Chief Executive Officer Thomas E. Wiseman, President and Chief Operating Officer E. Richard Mahan, Senior Vice President & Chief Credit Officer Larry E. Miller, II, Senior Vice President & Secretary Katrinka V. Hart, Senior Vice President & Chief Lending Officer Mario P. Liberatore, Vice President Cherie A. Elliott, Vice President Jennifer L. Osborne, Vice President Tom R. Shepherd, Vice President Scott W. Shockey, Vice President & Chief Financial Officer Bryan F. Stepp, Vice President Frank W. Davison, Vice President Bryan W. Martin, Vice President David K. Nadler, Vice President Paula W. Clay, Assistant Secretary Cindy H. Johnston, Assistant Secretary   OVBC DIRECTORS   Jeffrey E. Smith Chairman & CEO, Ohio Valley Banc Corp. and Ohio Valley Bank   Thomas E. Wiseman President & COO, Ohio Valley Banc Corp. and Ohio Valley Bank   David W. Thomas, Lead Director Former Chief Examiner, Ohio Division of Financial Institutions bank supervision and regulation   Lannes C. Williamson President, L. Williamson Pallets, Inc. sawmill, pallet manufacturing, and wood processing   Steven B. Chapman Certified Public Accountant, Chapman & Burris CPAs, LLC   Anna P. Barnitz Treasurer & CFO, Bob’s Market & Greenhouses, Inc. wholesale horticultural products and retail landscaping stores   Brent A. Saunders Attorney, Halliday, Sheets & Saunders   President & CEO, Holzer Consolidated Health Systems healthcare   Harold A. Howe Self-employed, Real Estate Investment and Rental Property   Roger D. Williams Former President, Bob Evans Restaurants restaurant operator and food products   OHIO VALLEY BANK DIRECTORS   Jeffrey E. Smith                          Steven B. Chapman Thomas E. Wiseman                  Anna P. Barnitz David W. Thomas                      Brent A. Saunders Lannes C. Williamson                Roger D. Williams Harold A. Howe   DIRECTORS EMERITUS   W. Lowell Call                           Charles C. Lanham James L. Dailey                          Barney A. Molnar Robert E. Daniel                         C. Leon Saunders Art E. Hartley, Sr.                       Wendell B. Thomas     WEST VIRGINIA ADVISORY BOARD   Mario P. Liberatore                    Lannes C. Williamson Anna P. Barnitz                          Stephen L. Johnson Richard L. Handley                    E. Allen Bell Gregory K. Hartley                    John A. Myers Trenton M. Stover     OHIO VALLEY BANK OFFICERS   Jeffrey E. Smith, Chairman of the Board & Chief Executive Officer Thomas E. Wiseman, President and Chief Operating Officer E. Richard Mahan, Executive Vice President & Chief Credit Officer Larry E. Miller, II, Executive Vice President & Secretary Katrinka V. Hart, Executive Vice President & Chief Lending Officer   SENIOR VICE PRESIDENTS Mario P. Liberatore, West Virginia Bank Group Jennifer L. Osborne, Retail Lending Group Tom R. Shepherd, Chief Deposit Officer Scott W. Shockey, Chief Financial Officer Bryan F. Stepp, Corporate Banking West Virginia Frank W. Davison, Financial Bank Group Bryan W. Martin, Administrative Services/Human Resources David K. Nadler, Chief Risk Officer   VICE PRESIDENTS Richard D. Scott, Trust Patrick H. Tackett, Retail Lending Marilyn E. Kearns, Director of Human Resources Fred K. Mavis, Business Development Officer Rick A. Swain, Western Division Branch Manager Bryna S. Butler, Market & E-Strategies Officer Tamela D. LeMaster,  Branch Administration/CRM Christopher L. Preston, Branch Administration/Business Development   ASSISTANT VICE PRESIDENTS Melissa P. Mason, Trust Officer Diana L. Parks,  Internal Auditor Christopher S. Petro, Comptroller Linda L. Plymale, Transit Officer Kimberly R. Williams, Systems Officer Deborah A. Carhart, Shareholder Relations Gregory A. Phillips, Assistant Manager Residential Real Estate Pamela D. Edwards, Special Assets Paula W. Clay, Assistant Secretary Cindy H. Johnston, Assistant Secretary Kyla R. Carpenter, Director of Marketing Toby M. Mannering, Collection Manager Joe J. Wyant, Region Manager Jackson County Allen W. Elliott, Bank Card Manager Brenda G. Henson, Manager Deposit Services D. Jeremy Perkins, Network Systems Gabriel U. Stewart, Chief Information Security Officer Randall L. Hammond, Security Officer/Loss Prevention Barbara A. Patrick, BSA Officer/Loss Prevention Richard P. Speirs, Facilities/Technical Manager and  Director of Administrative Services Aaron S. Rykowski, Senior Compliance Officer E. Kate Cox, Regional Branch Administration   ASSISTANT CASHIERS Stephanie L. Stover, Retail Lending Operations Manager Raymond G. Polcyn, Manager of Loan Production Office Linda L. Hart, Assistant Manager Waverly Office Lori A. Edwards, Secondary Market Manager Brandon O. Huff, AS400 Administrator Lois J. Scherer, Assistant Transit Officer Angela S. Kinnaird, Sales and Support Manager for Deposit Services Linda K. Roe, Employee Development Manager Shawn R. Siders, Credit Analyst Anita M. Good, Regional Branch Manager   LOAN CENTRAL OFFICERS   Katrinka V. Hart, Chairman of the Board Cherie A. Elliott,  President Timothy R. Brumfield, Vice President & Secretary                                         Manager, Gallipolis Office T. Joe Wilson, Manager, South Point Office Joseph I. Jones, Manager, Waverly Office John J. Holtzapfel, Manager, Wheelersburg Office Deborah G. Moore, Manager, Jackson Office Gregory G. Kauffman, Manager, Chillicothe Office   GenNEXT ADVISORY BOARD   Anthony W. Staley             Taryn D. Strawser W. Graham Woodyard         Heidi J. Wood Bryan L. Minear                    Mark A. Crawford Rheadon L. Remy                  Jodie L. McCalla Benjamin M. Sandy  

OHIO VALLEY BANC CORP.

Symbol: OVBC

Email:  investorrelations@ovbc.com

www.ovbc.com

SELECTED FINANCIAL DATA
	Years Ended December 31
	2011			2010			2009			2008			2007
(dollars in thousands, except share and per share data)
SUMMARY OF OPERATIONS:
Total interest income	$	44,040		$	46,514		$	47,623		$	51,533		$	54,947
Total interest expense		10,169			13,547			16,932			20,828			26,420
Net interest income		33,871			32,967			30,691			30,705			28,527
Provision for loan losses		4,896			5,871			3,212			3,716			2,252
Total other income		7,222			6,154			7,598			6,046			5,095
Total other expenses		28,299			26,643			26,160			23,178			22,442
Income before income taxes		7,898			6,607			8,917			9,857			8,928
Income taxes		2,063			1,511			2,272			2,729			2,631
Net income		5,835			5,096			6,645			7,128			6,297
PER SHARE DATA:
Earnings per share	$	1.46		$	1.28		$	1.67		$	1.77		$	1.52
Cash dividends declared per share	$	0.84		$	0.84		$	0.80		$	0.76		$	0.71
Book value per share	$	17.84		$	17.03		$	16.70		$	15.83		$	15.10
Weighted average number of common
shares outstanding		4,001,435			3,984,229			3,983,034			4,018,367			4,131,621
AVERAGE BALANCE SUMMARY:
Total loans	$	625,603		$	653,557		$	641,878		$	629,225		$	628,891
Securities (1)		185,684			148,974			134,117			101,100			91,724
Deposits		720,936			693,845			652,453			606,126			595,610
Other borrowed funds (2)		37,779			50,140			62,405			74,178			74,196
Shareholders' equity		69,866			67,606			64,941			61,346			60,549
Total assets		858,017			848,702			818,952			782,312			769,554
PERIOD END BALANCES:
Total loans	$	598,308		$	641,322		$	651,356		$	630,391		$	637,103
Securities (1)		157,515			165,070			113,307			99,218			100,713
Deposits		687,886			694,781			647,644			592,361			589,026
Shareholders' equity		71,843			68,128			66,521			63,056			61,511
Total assets		804,177			851,514			811,988			781,108			783,418
KEY RATIOS:
Return on average assets		0.68	%		0.60	%		0.81	%		0.91	%		0.82	%
Return on average equity		8.35	%		7.54	%		10.23	%		11.62	%		10.40	%
Dividend payout ratio		57.59	%		65.67	%		47.95	%		42.94	%		46.66	%
Average equity to average assets		8.14	%		7.97	%		7.93	%		7.84	%		7.87	%
(1) Securities include interest-bearing deposits with banks and FHLB stock.
(2) Other borrowed funds include subordinated debentures

1

CONSOLIDATED STATEMENTS OF CONDITION
	As of December 31
	2011			2010
(dollars in thousands, except share and per share data)
Assets
Cash and noninterest-bearing deposits with banks	$	8,914		$	8,979
Interest-bearing deposits with banks		42,716			50,772
Total cash and cash equivalents		51,630			59,751
Securities available for sale		85,670			85,839
Securities held to maturity
(estimated fair value:  2011 - $22,847; 2010 - $21,198)		22,848			22,178
Federal Home Loan Bank stock		6,281			6,281
Total loans		598,308			641,322
Less: Allowance for loan losses		(7,344	)		(9,386	)
Net loans		590,964			631,936
Premises and equipment, net		9,216			9,738
Other real estate owned		4,256			4,403
Accrued income receivable		2,872			2,704
Goodwill		1,267			1,267
Bank owned life insurance and annuity assets		23,097			19,761
Prepaid FDIC insurance		1,609			2,576
Other assets		4,467			5,080
Total assets	$	804,177		$	851,514
Liabilities
Noninterest-bearing deposits	$	138,143		$	91,949
Interest-bearing deposits		549,743			602,832
Total deposits		687,886			694,781
Securities sold under agreements to repurchase		-			38,107
Other borrowed funds		20,296			27,743
Subordinated debentures		13,500			13,500
Accrued liabilities		10,652			9,255
Total liabilities		732,334			783,386
Commitments and Contingent Liabilities (See Note J)		-			-
Shareholders' Equity
Common stock ($1.00 stated value per share,
10,000,000 shares authorized; 2011 - 4,686,295 shares issued;
2010 - 4,659,795 shares issued)		4,686			4,660
Additional paid-in capital		33,473			33,003
Retained earnings		48,435			45,960
Accumulated other comprehensive income		961			217
Treasury stock, at cost (659,739 shares)		(15,712	)		(15,712	)
Total shareholders' equity		71,843			68,128
Total liabilities and shareholders' equity	$	804,177		$	851,514
See accompanying notes to consolidated financial statements

2

CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31	2011			2010			2009
(dollars in thousands, except per share data)
Interest and dividend income:
Loans, including fees	$	41,263		$	43,462		$	44,076
Securities
Taxable		1,776			2,187			2,748
Tax exempt		571			497			451
Dividends		267			275			290
Other interest		163			93			58
		44,040			46,514			47,623
Interest expense:
Deposits		8,436			11,053			13,683
Securities sold under agreements to repurchase		17			57			75
Other borrowed funds		627			1,348			2,085
Subordinated debentures		1,089			1,089			1,089
		10,169			13,547			16,932
Net interest income		33,871			32,967			30,691
Provision for loan losses		4,896			5,871			3,212
Net interest income after provision for loan losses		28,975			27,096			27,479
Noninterest income:
Service charges on deposit accounts		2,218			2,202			2,816
Trust fees		215			233			227
Income from bank owned life insurance and annuity assets		725			741			1,311
Mortgage banking income		386			362			758
Electronic refund check / deposit fees		2,559			780			528
Debit / credit card interchange income		1,387			998			807
Gain (loss) on sale of other real estate owned		(1,224	)		(177	)		38
Other		956			1,015			1,113
		7,222			6,154			7,598
Noninterest expense:
Salaries and employee benefits		16,650			15,647			14,824
Occupancy		1,585			1,609			1,599
Furniture and equipment		1,143			1,214			1,204
Corporation franchise tax		744			745			713
FDIC insurance		1,029			1,061			1,625
Data processing		891			685			670
Foreclosed assets, net		650			67			150
Other		5,607			5,615			5,375
		28,299			26,643			26,160
Income before income taxes		7,898			6,607			8,917
Provision for income taxes		2,063			1,511			2,272
NET INCOME	$	5,835		$	5,096		$	6,645
Other Comprehensive income:
Change in unrealized gains/losses on securities, net of tax		744			(457	)		(16	)
Comprehensive income	$	6,579		$	4,639		$	6,629
Earnings per share	$	1.46		$	1.28		$	1.67
See accompanying notes to consolidated financial statements

3

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 2011, 2010 and 2009
(dollars in thousands, except share and per share data)
								Accumulated
								Other						Total
	Common		Additional		Retained			Comprehensive			Treasury			Shareholders'
	Stock		Paid-In Capital		Earnings			Income			Stock			Equity
Balances at January 1, 2009	$	4,643	$	32,683	$	40,752		$	690		$	(15,712	)	$	63,056
Comprehensive income:
Net income		-		-		6,645			-			-			6,645
Change in unrealized gain on
available for sale securities		-		-		-			(24	)		-			(24	)
Income tax effect		-		-		-			8			-			8
Total comprehensive income		-		-		-			-			-			6,629
Common stock issued to ESOP,
1,000 shares		1		21		-			-			-			22
Cash dividends, $.80 per share		-		-		(3,186	)		-			-			(3,186	)
Balances at December 31, 2009		4,644		32,704		44,211			674			(15,712	)		66,521
Comprehensive income:
Net income		-		-		5,096			-			-			5,096
Change in unrealized gain on
available for sale securities		-		-		-			(693	)		-			(693	)
Income tax effect		-		-		-			236			-			236
Total comprehensive income		-		-		-			-			-			4,639
Common stock issued to ESOP,
16,047 shares		16		299		-			-			-			315
Cash dividends, $.84 per share		-		-		(3,347	)		-			-			(3,347	)
Balances at December 31, 2010		4,660		33,003		45,960			217			(15,712	)		68,128
Comprehensive income:
Net income		-		-		5,835			-			-			5,835
Change in unrealized gain on
available for sale securities		-		-		-			1,127			-			1,127
Income tax effect		-		-		-			(383	)		-			(383	)
Total comprehensive income		-		-		-			-			-			6,579
Common stock issued to ESOP,
26,500 shares		26		470		-			-			-			496
Cash dividends, $.84 per share		-		-		(3,360	)		-			-			(3,360	)
Balances at December 31, 2011	$	4,686	$	33,473	$	48,435		$	961		$	(15,712	)	$	71,843
See accompanying notes to consolidated financial statements

4

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31	2011			2010			2009
(dollars in thousands, except per share data)
Cash flows from operating activities:
Net income	$	5,835		$	5,096		$	6,645
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation		971			1,067			1,071
Net amortization of securities		1,059			666			280
Proceeds from sale of loans in secondary market		13,637			16,825			57,815
Loans disbursed for sale in secondary market		(13,251	)		(16,463	)		(57,057	)
Amortization of mortgage servicing rights		121			122			129
(Recovery) impairment of mortgage servicing rights		(33	)		30			91
Gain on sale of loans		(474	)		(514	)		(978	)
Deferred tax (benefit) expense		340			(462	)		(2	)
Provision for loan losses		4,896			5,871			3,212
Common stock issued to ESOP		496			315			22
Earnings on bank owned life insurance and annuity assets		(725	)		(741	)		(1,311	)
(Gain) loss on sale of other real estate owned		1,224			177			(38	)
Change in accrued income receivable		(168	)		192			276
Change in accrued liabilities		1,397			(718	)		(1,374	)
Change in other assets		857			866			(3,853	)
Net cash provided by operating activities		16,182			12,329			4,928
Cash flows from investing activities:
Proceeds from maturities of securities available for sale		43,193			65,698			41,099
Purchases of securities available for sale		(43,007	)		(69,014	)		(49,922	)
Proceeds from maturities of securities held to maturity		1,449			3,523			1,858
Purchases of securities held to maturity		(2,068	)		(9,126	)		(1,470	)
Net change in loans		34,243			4,829			(25,527	)
Proceeds from sale of other real estate owned		756			1,511			1,050
Purchases of premises and equipment		(449	)		(673	)		(971	)
Proceeds from bank owned life insurance		-			-			1,034
Purchases of bank owned life insurance and annuity assets		(2,611	)		(286	)		(304	)
Net cash provided by (used in) investing activities		31,506			(3,538	)		(33,153	)
Cash flows from financing activities:
Change in deposits		(6,895	)		47,137			55,283
Cash dividends		(3,360	)		(3,347	)		(3,186	)
Change in securities sold under agreements to repurchase		(38,107	)		6,466			7,571
Proceeds from Federal Home Loan Bank borrowings		703			11,475			6,050
Repayment of Federal Home Loan Bank borrowings		(7,562	)		(26,278	)		(16,005	)
Change in other short-term borrowings		(588	)		(163	)		(24,110	)
Net cash provided by (used in) financing activities		(55,809	)		35,290			25,603
Cash and cash equivalents:
Change in cash and cash equivalents		(8,121	)		44,081			(2,622	)
Cash and cash equivalents at beginning of year		59,751			15,670			18,292
Cash and cash equivalents at end of year	$	51,630		$	59,751		$	15,670
Supplemental disclosure:
Cash paid for interest	$	10,875		$	15,022		$	17,791
Cash paid for income taxes		445			2,016			2,730
Non-cash transfers from loans to other real estate owned		1,833			522			1,749
Other real estate owned sales financed by the Bank		344			159			723
See accompanying notes to consolidated financial statements

5

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6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amounts are in thousands, except share and per share data

Note A - Summary of Significant Accounting Policies

Description of Business:  Ohio Valley Banc Corp. ("Ohio Valley") is a financial holding company registered under the Bank Holding Company Act of 1956.  Ohio Valley has one banking subsidiary, The Ohio Valley Bank Company (the "Bank"), as well as a subsidiary that engages in consumer lending to individuals with higher credit risk history, Loan Central, Inc., and a subsidiary insurance agency that facilitates the receipts of insurance commissions, Ohio Valley Financial Services Agency, LLC.  Ohio Valley and its subsidiaries are collectively referred to as the “Company”.

The Company provides a full range of commercial and retail banking services from 21 offices located in central and southeastern Ohio and western West Virginia.  It accepts deposits in checking, savings, time and money market accounts and makes personal, commercial, floor plan, student, construction and real estate loans.  Substantially all loans are secured by specific items of collateral, including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from business operations. The Company also offers safe deposit boxes, wire transfers and other standard banking products and services.  The Bank's deposits are insured by the Federal Deposit Insurance Corporation.  In addition to accepting deposits and making loans, the Bank invests in U. S. Government and agency obligations, interest-bearing deposits in other financial institutions and investments permitted by applicable law.

 The Bank's trust department provides a wide variety of fiduciary services for trusts, estates and benefit plans and also provides investment and security services as an agent for its customers.

Principles of Consolidation: The consolidated financial statements include the accounts of Ohio Valley and its wholly-owned subsidiaries, the Bank, Loan Central, Inc., a consumer finance company, and Ohio Valley Financial Services Agency, LLC, an insurance agency.   All material intercompany accounts and transactions have been eliminated.

Industry Segment Information:  Internal financial information is primarily reported and aggregated in two lines of business, banking and consumer finance.

Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions that are more susceptible to change in the near term involve the allowance for loan losses, mortgage servicing rights, deferred tax assets, the fair value of certain securities, the fair value of financial instruments and the determination and carrying value of impaired loans and other real estate owned.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, interest and noninterest-bearing deposits with banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. The Company reports net cash flows for customer loan transactions, deposit transactions, short-term borrowings and interest-bearing deposits with other financial institutions.

Securities: The Company classifies securities into held to maturity and available for sale categories. Held to maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Securities classified as available for sale include securities that could be sold for liquidity, investment management or similar reasons even if there is not a present intention of such a sale. Available for sale securities are reported at fair value, with unrealized gains or losses included in other comprehensive income, net of tax.

Premium amortization is deducted from, and discount accretion is added to, interest income on securities using the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses are recognized upon the sale of specific identified securities on the completed trade date.

Other-Than-Temporary-Impairments of Securities:  In determining an other-than-temporary-impairment (“OTTI”), management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its

7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

anticipated recovery. The assessment of whether an OTTI decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When an OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Federal Home Loan Bank (”FHLB”) Stock:  The Bank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the Bank's level of borrowings from the FHLB and other factors, and may invest in additional amounts.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Interest income is reported on an accrual basis using the interest method and includes amortization of net deferred loan fees and costs over the loan term using the level yield method without anticipating prepayments.

The amount of the Company's recorded investment is not materially different than the amount of unpaid principal balance for loans at December 31, 2011.

Interest income is discontinued and the loan moved to non-accrual status when full loan repayment is in doubt, typically when the loan is impaired or payments are past due 90 days or over unless the loan is well-secured or in process of collection. Past due status is based on the contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days or over and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.  Interest received on such loans is accounted for on the cash-basis method until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses:  The allowance for loan losses is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged‑off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired.  A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans generally consist of loans with balances of $200 or more on nonaccrual status or nonperforming in nature.  Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and classified as impaired.

8

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

     Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower's prior payment record, and the amount of shortfall in relation to the principal and interest owed.

Commercial and commercial real estate loans are individually evaluated for impairment.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Smaller balance homogeneous loans, such as consumer and most residential real estate, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosure.  Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan's effective rate at inception.  If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.  For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non‑impaired loans and impaired loans that are not individually reviewed for impairment and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 3 years.  This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.  These economic factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  The following portfolio segments have been identified:  Commercial Real Estate, Commercial and Industrial, Residential Real Estate, and Consumer.

Commercial and industrial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole proprietorships, and other business enterprises.  Commercial and industrial loans are generally secured by business assets such as equipment, accounts receivable, inventory, or any other asset excluding real estate and generally made to finance capital expenditures or operations.  The Company's risk exposure is related to deterioration in the value of collateral securing the loan should foreclosure become necessary.  Generally, business assets used or produced in operations do not maintain their value upon foreclosure which may require the Company to write-down the value significantly to sell.

Commercial real estate consists of nonfarm, nonresidential loans secured by owner-occupied and nonowner-occupied commercial real estate as well as commercial construction loans.  An owner-occupied loan relates to a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing business operations conducted by the party, or an affiliate of the party, who owns the property.  Owner-occupied loans that are dependent on cash flows from operations can be adversely affected by current market conditions for their product or service.  A nonowner-occupied loan is a property loan for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.  Nonowner-occupied loans that are dependent upon rental income are primarily impacted by local economic conditions which dictate occupancy rates and the amount of rent charged.  Commercial construction loans consist of borrowings to purchase and develop raw land into 1-4 family residential properties.  Construction loans are extended to individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements.  Repayment of the loans to real estate developers is dependent upon the sale of properties to third parties in a timely fashion upon completion.  Should there be delays in construction or a downturn in the market for those properties, there may be significant erosion in value which may be absorbed by the Company.

Residential real estate loans consist of loans to individuals for the purchase of 1-4 family primary residences with repayment primarily through wage or other income sources of the individual borrower.  The Company's loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination.

9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

Consumer loans are comprised of loans to  individuals  secured by automobiles,  open-end home equity loans  and  other  loans to  individuals for  household, family, and other personal expenditures, both secured and unsecured.  These loans typically have maturities of 5 years or less with repayment dependent on individual wages and income.  The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is necessary.  In recent fiscal years covering 2009, 2010, and 2011, one of the most significant portions of the Company's net loan charge-offs have been from consumer loans.  Never the less, the Company has allocated the highest percentage of its allowance for loan losses as a percentage of loans to the other identified loan portfolio segments due to the larger dollar balances associated with such portfolios.

Concentrations of Credit Risk:  The Company grants residential, consumer and commercial loans to customers located primarily in the southeastern Ohio and western West Virginia areas.

The following represents the composition of the Company’s loan portfolio as of December 31:

% of Total Loans

	2011	2010
Residential real estate loans	37.85%	36.94%
Commercial real estate loans	36.68%	35.34%
Consumer loans	17.92%	19.10%
Commercial and industrial loans	7.55%	8.62%
	100.00%	100.00%

Approximately 3.98% of total loans are unsecured.

The Bank, in the normal course of its operations, conducts business with correspondent financial institutions. Balances in correspondent accounts, investments in federal funds, certificates of deposit and other short-term securities are closely monitored to ensure that prudent levels of credit and liquidity risks are maintained.  At December 31, 2011, the Bank’s primary correspondent balance was $42,402 on deposit at the Federal Reserve Bank, Cleveland, Ohio.

Premises and Equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation, which is computed using the straight-line or declining balance methods over the estimated useful life of the owned asset and, for leasehold improvement, over the remaining term of the leased facility, whichever is shorter. The useful lives range from 3 to 8 years for equipment, furniture and fixtures and 7 to 39 years for buildings and improvements.

Foreclosed assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.  Operating costs after acquisition are expensed. Foreclosed assets totaled $4,256 and $4,403 at December 31, 2011 and 2010.

Goodwill:  Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired.  Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.  Goodwill acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31, 2011 as the date to perform the annual impairment test.  Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Long-term Assets:  Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Mortgage Servicing Rights: A mortgage servicing right (“MSR”) is a contractual agreement where the right to service a mortgage loan is sold by the original lender to another party. When the Company sells mortgage loans to the secondary market, it retains the servicing rights to these loans. The Company’s MSR is recognized separately when acquired through sales of loans and is initially recorded at fair value with the income statement effect recorded in mortgage banking income. Subsequently, the MSR is then amortized in

10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

proportion to and over the period of estimated future servicing income of the underlying loan. The MSR is then evaluated for impairment periodically based upon the fair value of the rights as compared to the carrying amount, with any impairment being recognized through a valuation allowance. Fair value of the MSR is based on market prices for comparable mortgage servicing contracts. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type.  If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income.  At December 31, 2011 and 2010, the Company’s MSR asset portfolio was  $430 and $434, respectively.

Repurchase Agreements: Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.

Earnings Per Share: Earnings per share is based on net income divided by the following weighted average number of common shares outstanding during the periods: 4,001,435 for 2011; 3,984,229 for 2010; 3,983,034 for 2009.  Ohio Valley had no dilutive securities outstanding for any period presented.

Income Taxes: Income tax expense is the sum of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

 A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity, net of tax.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Bank Owned Life Insurance and Annuity Assets:  The Company has purchased life insurance policies on certain key executives.  Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. The Company also purchased an annuity investment in December 2011 that will earn interest.

ESOP: Compensation expense is based on the market price of shares as they are committed to be allocated to participant accounts.

Adoption of New Accounting Standards:

    In December 2010, the Financial Accounting Standards Board (“FASB”) amended existing guidance relating to goodwill impairment testing. This guidance requires that if the carrying amount of a reporting unit is zero or negative, a qualitative assessment be performed to determine if it is more likely than not that goodwill is impaired.  Step 2 of the impairment test shall be performed if it is determined that it is more likely than not that goodwill is impaired. The amendments in this guidance were effective for fiscal years, and interim periods within those years, beginning after December 15, 2010.  The effect of adopting this standard did not have a material effect on the Company's operating results or financial condition.

11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

In April 2011, the FASB issued guidance within the ASU 2011-02 A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring (“TDR”). ASU 2011-02 clarifies when a loan modification or restructuring is considered a TDR. This guidance was effective for the first interim or annual period beginning on or after June 15, 2011, and was applied retrospectively to the beginning of the annual period of adoption. The adoption of this guidance created additional TDR disclosures within Note C – Loans and Allowance for Loan Losses, but did not have an impact on the Company's consolidated financial statements.

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  This guidance is effective for the first interim or annual period beginning on or after December 15, 2011.  The Company is currently evaluating the impact of this amendment and does not anticipate a significant impact to its consolidated financial statements.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statements of changes in shareholders' equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements.  The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011.  Early adoption is permitted.  The Company is currently evaluating the impact of this amendment and does not anticipate a significant impact to its consolidated financial statements.

Loan Commitments and Related Financial Instruments:  Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  These financial instruments are recorded when they are funded.  See Note J for more specific disclosure related to loan commitments.

Dividend Restrictions:  Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to Ohio Valley or by Ohio Valley to its shareholders.   See Note N for more specific disclosure related to dividend restrictions.

Restrictions on Cash:  Cash on hand or on deposit with Fifth Third Bank and the Federal Reserve Bank of $44,018 and $52,233 was required to meet regulatory reserve and clearing requirements at year-end 2011 and 2010.  The balances at Fifth Third Bank do not earn interest.

Fair Value of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note M.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassifications: The consolidated financial statements for 2010 and 2009 have been reclassified to conform with the presentation for 2011.  These reclassifications had no effect on the net results of operations or shareholders’ equity.

12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B - Securities

Securities are summarized as follows:

Securities Available for Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2011
U.S. Treasury securities	$	5,510	$	3	$	----		$	5,513
U.S. Government sponsored entity securities		2,501		58		----			2,559
Agency mortgage-backed securities, residential		76,203		1,407		(12	)		77,598
Total securities	$	84,214	$	1,468	$	(12	)	$	85,670
December 31, 2010
U.S. Treasury securities	$	17,081	$	6	$	(8	)	$	17,079
U.S. Government sponsored entity securities		7,513		230		(12	)		7,731
Agency mortgage-backed securities, residential		60,916		383		(270	)		61,029
Total securities	$	85,510	$	619	$	(290	)	$	85,839

Securities Held to Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
December 31, 2011
Obligations of states and political subdivisions	$	22,825	$	558	$	(559	)	$	22,824
Agency mortgage-backed securities, residential		23		----		----			23
Total securities	$	22,848	$	558	$	(559	)	$	22,847
December 31, 2010
Obligations of states and political subdivisions	$	22,149	$	130	$	(1,109	)	$	21,170
Agency mortgage-backed securities, residential		29		----		(1	)		28
Total securities	$	22,178	$	130	$	(1,110	)	$	21,198

At year-end 2011 and 2010, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

Securities with a carrying value of approximately $46,683 at December 31, 2011 and $90,216 at December 31, 2010 were pledged to secure public deposits and repurchase agreements and for other purposes as required or permitted by law.

The amortized cost and estimated fair value of debt securities at December 31, 2011, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay the debt obligations prior to their contractual maturities.  Securities not due at a single maturity are shown separately.

	Available for Sale				Held to Maturity
Debt Securities:	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	8,011	$	8,072	$	648	$	661
Due in one to five years		----		----		3,901		3,801
Due in five to ten years		----		----		10,289		10,496
Due after ten years		----		----		7,987		7,866
Agency mortgage-backed securities, residential		76,203		77,598		23		23
Total debt securities	$	84,214	$	85,670	$	22,848	$	22,847

There were no sales of debt securities during 2011, 2010 and 2009.

13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B - Securities (continued)

Securities with unrealized losses not recognized in income are as follows:

	Less Than 12 Months						12 Months or More				Total
December 31, 2011		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized  Loss
Securities Available for Sale
Agency mortgage-backed
securities, residential		$	7,621	$	(12	)	$	----	$	----	$	7,621	$	(12	)
Total available for sale		$	7,621	$	(12	)	$	----	$	----	$	7,621	$	(12	)

	Less Than 12 Months						12 Months or More					Total
		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
Securities Held to Maturity
Obligations of states and
political subdivisions		$	664	$	(21	)	$	3,557	$	(538	)	$	4,221	$	(559	)
Total held to maturity		$	664	$	(21	)	$	3,557	$	(538	)	$	4,221	$	(559	)

	Less Than 12 Months						12 Months or More				Total
December 31, 2010		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available for Sale
U.S. Treasury securities		$	9,041	$	(8	)	$	----	$	----	$	9,041	$	(8	)
U.S. Government sponsored
entity securities			1,990		(12	)		----		----		1,990		(12	)
Agency mortgage-backed
securities, residential			27,953		(270	)		----		----		27,953		(270	)
Total available for sale		$	38,984	$	(290	)	$	----	$	----	$	38,984	$	(290	)

	Less Than 12 Months						12 Months or More					Total
		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
Securities Held to Maturity
Obligations of states and
political subdivisions		$	7,510	$	(690	)	$	970	$	(419	)	$	8,480	$	(1,109	)
Agency mortgage-backed
securities, residential			----		----			21		(1	)		21		(1	)
Total held to maturity		$	7,510	$	(690	)	$	991	$	(420	)	$	8,501	$	(1,110	)

Unrealized losses on the Company's debt securities have not been recognized into income because the issuers' securities are of high credit quality and management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  Management does not believe any individual unrealized loss at December 31, 2011 and 2010 represents an other-than-temporary impairment.

14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses

Loans are comprised of the following at December 31:
	2011		2010
Residential real estate	$	226,489	$	236,878
Commercial real estate:
Owner-occupied		142,566		149,042
Nonowner-occupied		55,419		55,989
Construction		21,471		21,591
Commercial and industrial		45,200		55,306
Consumer:
Automobile		45,702		58,271
Home equity		20,507		20,527
Other		40,954		43,718
		598,308		641,322
Less:  Allowance for loan losses		7,344		9,386
Loans, net	$	590,964	$	631,936

The Bank originated refund anticipation loans that contributed fee income of $561 in 2011, $655 in 2010 and $397 in 2009.  As recommended by the FDIC, the Bank ceased offering refund anticipation loans effective April 19, 2011.

Activity in the allowance for loan losses was as follows:	2011			2010			2009
Balance, beginning of year	$	9,386		$	8,198		$	7,799
Loans charged off:
Residential real estate		1,649			971			1,172
Commercial real estate		2,298			2,766			59
Commercial and industrial		4,725			191			568
Consumer		1,750			1,951			2,532
Total loans charged off		10,422			5,879			4,331
Recoveries of loans:
Residential real estate		198			40			41
Commercial real estate		1,394			70			58
Commercial and industrial		1,127			25			672
Consumer		765			1,061			747
Total recoveries of loans		3,484			1,196			1,518
Net loan charge-offs		( 6,938	)		(4,683	)		(2,813	)
Provision charged to operations		4,896			5,871			3,212
Balance, end of year	$	7,344		$	9,386		$	8,198

As a result of management’s evaluation of the trends in the real estate market, the status of long-term, collateral dependent impaired loans and the current regulatory environment, management decided to take partial charge-offs more quickly on collateral dependent impaired loans during the second quarter of 2011.

15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended December 31, 2011:

	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	993		$	3,141		$	3,795		$	1,457		$	9,386
Provision for loan losses		2,188			1,386			439			883			4,896
Loans charged off		(1,649	)		(2,298	)		(4,725	)		(1,750	)		(10,422	)
Recoveries		198			1,394			1,127			765			3,484
Total ending allowance balance	$	1,730		$	3,623		$	636		$	1,355		$	7,344

The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010:

December 31, 2011	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	655	$	----	$	----	$	655
Collectively evaluated for impairment		1,730		2,968		636		1,355		6,689
Total ending allowance balance	$	1,730	$	3,623	$	636	$	1,355	$	7,344
Loans:
Loans individually evaluated for impairment	$	1,085	$	10,153	$	334	$	----	$	11,572
Loans collectively evaluated for impairment		225,404		209,303		44,866		107,163		586,736
Total ending loans balance	$	226,489	$	219,456	$	45,200	$	107,163	$	598,308

December 31, 2010	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	1,698	$	3,407	$	----	$	5,230
Collectively evaluated for impairment		868		1,443		388		1,457		4,156
Total ending allowance balance	$	993	$	3,141	$	3,795	$	1,457	$	9,386
Loans:
Loans individually evaluated for impairment	$	1,784	$	13,460	$	7,862	$	----	$	23,106
Loans collectively evaluated for impairment		235,094		213,162		47,444		122,516		618,216
Total ending loans balance	$	236,878	$	226,622	$	55,306	$	122,516	$	641,322

16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

Information regarding impaired loans is as follows:	2011		2010
Year-end loans with no allocated allowance for loan losses	$	8,081	$	7,884
Year-end loans with allocated allowance for loan losses		3,491		15,222
Total impaired loans	$	11,572	$	23,106
Amount of the allowance for loan losses allocated	$	655	$	5,230
		2011		2010		2009
Average of individually impaired loans during year	$	11,163	$	24,589	$	27,927
Interest income recognized during impairment	$	647	$	1,158	$	1,793
Cash-basis interest income recognized	$	608	$	1,083	$	1,690

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2011:

December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Residential real estate	$	1,136	$	1,085	$	----	$	748	$	36	$	31
Commercial real estate:
Owner-occupied		5,713		5,470		----		5,510		325		317
Nonowner-occupied		1,192		1,192		----		1,247		56		49
Construction		----		----		----		----		----		----
Commercial and industrial		614		334		----		483		40		40
Consumer:
Automobile		----		----		----		----		----		----
Home equity		----		----		----		----		----		----
Other		----		----		----		----		----		----
With an allowance recorded:
Residential real estate		----		----		----		----		----		----
Commercial real estate:
Owner-occupied		420		420		130		84		27		22
Nonowner-occupied		2,396		2,396		437		2,414		128		118
Construction		675		675		88		677		35		31
Commercial and industrial		----		----		----		----		----		----
Consumer:
Automobile		----		----		----		----		----		----
Home equity		----		----		----		----		----		----
Other		----		----		----		----		----		----
Total	$	12,146	$	11,572	$	655	$	11,163	$	647	$	608

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.  The difference in the unpaid principal balance and recorded investment of the Company’s loans was not materially different at year-end 2011.

17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2010:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	1,284	$	1,244	$	----
Commercial real estate:
Owner-occupied		4,719		4,234		----
Nonowner-occupied		2,987		992		----
Construction		743		743		----
Commercial and industrial		671		671		----
Consumer:
Automobile		----		----		----
Home equity		----		----		----
Other		----		----		----
With an allowance recorded:
Residential real estate		540		540		125
Commercial real estate:
Owner-occupied		4,731		4,731		1,125
Nonowner-occupied		2,760		2,760		573
Construction		----		----		----
Commercial and industrial		7,191		7,191		3,407
Consumer:
Automobile		----		----		----
Home equity		----		----		----
Other		----		----		----
Total	$	25,626	$	23,106	$	5,230

Nonaccrual loans and loans past due 90 days or more and still accruing were as follows:

	December 31, 2011		December 31, 2010
Loans past due 90 days or more and still accruing	$	459	$	1,714
Nonaccrual loans	$	2,678	$	3,295

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

classified as impaired loans.

18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of December 31, 2011 and 2010:

December 31, 2011	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	439	$	2,450
Commercial real estate:
Owner-occupied		----		125
Nonowner-occupied		----		86
Consumer:
Automobile		13		12
Home equity		----		5
Other		7		----
Total	$	459	$	2,678

December 31, 2010	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	1,487	$	2,200
Commercial real estate:
Owner-occupied		----		428
Nonowner-occupied		----		432
Consumer:
Automobile		114		100
Home equity		43		104
Other		70		31
Total	$	1,714	$	3,295

19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the aging of the recorded investment of past due loans by class of loans as of December 31, 2011 and 2010:

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	3,662	$	1,144	$	2,889	$	7,695	$	218,794	$	226,489
Commercial real estate:
Owner-occupied		182		----		125		307		142,259		142,566
Nonowner-occupied		69		232		86		387		55,032		55,419
Construction		204		----		----		204		21,267		21,471
Commercial and industrial		171		14		----		185		45,015		45,200
Consumer:
Automobile		864		110		13		987		44,715		45,702
Home equity		75		76		5		156		20,351		20,507
Other		506		162		7		675		40,279		40,954
Total	$	5,733	$	1,738	$	3,125	$	10,596	$	587,712	$	598,308

December 31, 2010	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	4,731	$	1,951	$	3,448	$	10,130	$	226,748	$	236,878
Commercial real estate:
Owner-occupied		1,564		17		428		2,009		147,033		149,042
Nonowner-occupied		87		----		432		519		55,470		55,989
Construction		----		----		----		----		21,591		21,591
Commercial and industrial		15		----		----		15		55,291		55,306
Consumer:
Automobile		1,010		342		213		1,565		56,706		58,271
Home equity		78		50		147		275		20,252		20,527
Other		793		238		101		1,132		42,586		43,718
Total	$	8,278	$	2,598	$	4,769	$	15,645	$	625,677	$	641,322

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) is where the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDR's are considered to be impaired. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or short-term interest-only payment terms.

The Company has allocated reserves for a portion of its TDR’s to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer.

20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the types of TDR loan modifications by class of loans as of December 31, 2011 and December 31, 2010:

	TDR’s Performing to Modified Terms		TDR’s Not Performed to Modified Terms		Total  TDR’s
December 31, 2011
Residential real estate
Interest only payments	$	----	$	283	$	283
Commercial real estate:
Owner-occupied
Interest only payments		3,619		----		3,619
Rate reduction		869		----		869
Maturity extension at lower stated           rate than market rate		219		----		219
Nonowner-occupied
Interest only payments		3,357		----		3,357
Construction
Interest only payments		674		----		674
Commercial and industrial
Interest only payments		334		----		334
Total TDR’s	$	9,072	$	283	$	9,355

	TDR’s Performing to Modified Terms		TDR’s Not Performed to Modified Terms		Total  TDR’s
December 31, 2010
Residential real estate
Interest only payments	$	456	$	----	$	456
Rate reduction		584		----		584
Commercial real estate:
Owner-occupied
Interest only payments		3,886		----		3,886
Rate reduction		887		----		887
Nonowner-occupied
Interest only payments		2,983		----		2,983
Construction
Interest only payments		679		----		679
Commercial and industrial
Interest only payments		671		----		671
Rate reduction		6,668		----		6,668
Total TDR’s	$	16,814	$	----	$	16,814

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

At December 31, 2011, the balance in TDR loans decreased $7,459, or 44.4%, from year-end 2010. This was largely impacted by partial charge-offs and subsequent payoffs recorded on one impaired commercial and industrial loan relationship totaling $6,668 during the first and fourth quarters of 2011. At December 31, 2011 and December 31, 2010, 97% and 100% of the Company’s TDR’s were performing according to their modified terms. The Company allocated $655 and $3,791 in reserves to customers whose loan terms have been modified in TDR’s as of December 31, 2011 and December 31, 2010, respectively. At December 31, 2011, the Company had $81 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s as compared to none at December 31, 2010.

At    The following table presents the post-modification balances of TDR loan modifications by class of loans that occurred during year ended December 31, 2011:

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2011
Residential real estate	$	----	$	----	$	----
Commercial real estate:
Owner-occupied
Rate reduction		1,515		----		1,515
Maturity extension at lower           stated rate than market rate		226		----		226
Nonowner-occupied
Interest only payments		400		----		400
Maturity extension at lower           stated rate than market rate		1,927		----		1,927
Construction		----		----		----
Commercial and industrial		----		----		----
Total TDR’s	$	4,068	$	----	$	4,068

All of the Company’s TDR’s that occurred during the year ended December 31, 2011 were performing in accordance with their modified terms and did not experience any payment defaults within twelve months following the loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The TDR’s described above increased the allowance for losses by $544 and resulted in charge-offs of $414 during the year ended December 31, 2011. As of December 31, 2011, the Company had allocated $130 of reserves to customers whose loan terms have been modified during the year ended December 31, 2011.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. These risk categories are represented by a loan grading scale from 1 through 10. The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and "classified" assets. The Company considers its criticized assets to be loans that are graded 8 and its classified assets to be loans that are graded 9 through 10. The Company's risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500.

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

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

Special Mention (Loan Grade 8). Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies. These loans are considered bankable assets with no apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a troubled debt restructuring should be graded no higher than special mention until they have been reported as performing over one year after restructuring.

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

Substandard (Loan Grade 9).Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of one or more well defined weaknesses and the collateral pledged may inadequately protect collection of the loans. Loss of principal is not likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade 8 loans. Collateral liquidation is considered likely to satisfy debt.

Doubtful (Loan Grade 10).Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which may strengthen the credit can be more accurately determined. These factors may include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.

Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do not meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of December 31, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2011	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	113,118	$	15,664	$	13,784	$	142,566
Nonowner-occupied		31,697		12,815		10,907		55,419
Construction		19,519		----		1,952		21,471
Commercial and industrial		36,633		3,250		5,317		45,200
Total	$	200,967	$	31,729	$	31,960	$	264,656

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

December 31, 2010	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	122,726	$	15,764	$	10,552	$	149,042
Nonowner-occupied		48,569		1,550		5,870		55,989
Construction		15,487		63		6,041		21,591
Commercial and industrial		39,725		3,943		11,638		55,306
Total	$	226,507	$	21,320	$	34,101	$	281,928

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does not consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading.

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on payment activity as of December 31, 2011 and December 31, 2010:

December 31, 2011	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	45,677	$	20,502	$	40,947	$	223,600	$	330,726
Nonperforming		25		5		7		2,889		2,926
Total	$	45,702	$	20,507	$	40,954	$	226,489	$	333,652

December 31, 2010	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	58,057	$	20,380	$	43,617	$	233,191	$	355,245
Nonperforming		214		147		101		3,687		4,149
Total	$	58,271	$	20,527	$	43,718	$	236,878	$	359,394

The Company, through its subsidiaries, grants residential, consumer, and commercial loans to customers located primarily in the southeastern area of Ohio as well as the western counties of West Virginia. Approximately 3.98% of total loans were unsecured at December 31, 2011, up from 3.93% at December 31, 2010.

24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D - Premises and Equipment

Following is a summary of premises and equipment at December 31:

	2011		2010
Land	$	1,890	$	1,890
Buildings		10,334		10,270
Leasehold improvements		2,855		2,897
Furniture and equipment		13,961		13,674
		29,040		28,731
Less accumulated depreciation		19,824		18,993
Total premises and equipment	$	9,216	$	9,738

The following is a summary of the future minimum lease payments for facilities leased by the Company. Lease expense was $492 in 2011, $490 in 2010 and $462 in 2009.

2012	$	501
2013		433
2014		311
2015		174
2016		147
Thereafter		55
	$	1,621

Note E - Deposits

Following is a summary of interest-bearing deposits at December 31:

	2011		2010
NOW accounts	$	101,907	$	101,833
Savings and Money Market		200,072		191,916
Time:
In denominations under $100,000		126,705		156,694
In denominations of $100,000 or more		121,059		152,389
Total time deposits		247,764		309,083
Total interest-bearing deposits	$	549,743	$	602,832

Following is a summary of total time deposits by remaining maturity at December 31, 2011:

2012	$	141,710
2013		68,183
2014		25,710
2015		6,401
2016		4,833
Thereafter		927
Total	$	247,764

Brokered deposits, included in time deposits, were $31,271 and $36,272 at December 31, 2011 and 2010, respectively.

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note F - Securities Sold Under Agreements to Repurchase

 Securities sold under agreements to repurchase are financing arrangements that have overnight maturity terms. At maturity, the securities underlying the agreements are returned to the Company. Newly enacted banking regulations during the third quarter of 2011 permitted the Company to begin paying interest on its business checking accounts and contributed to the decrease in securities sold under agreements to repurchase balances. Information concerning securities sold under agreements to repurchase is summarized as follows at December 31:

Balance outstanding at period-end	$	----		$	38,107
Weighted average interest rate at period-end		.00	%		.15	%
Average amount outstanding during year	$	19,196		$	26,991
Approximate weighted average interest rate
during the year		.09	%		.21	%
Maximum amount outstanding as of any month-end	$	36,680		$	38,107
Securities underlying these agreements at year-end were as follows:
Carrying value of securities	$	----		$	49,436
Fair value	$	----		$	49,552

Note G - Other Borrowed Funds

 Other borrowed funds at December 31, 2011 and December 31, 2010 are comprised of advances from the Federal Home Loan Bank (“FHLB”) of Cincinnati, promissory notes and Federal Reserve Bank (“FRB") Notes.

	FHLB Borrowings		Promissory Notes		FRB Notes		Totals
2011	$	16,548	$	3,748	$	----	$	20,296
2010	$	23,406	$	3,835	$	502	$	27,743

Pursuant to collateral agreements with the FHLB, advances are secured by $243,791 in qualifying mortgage loans, $98,629 in commercial loans and $6,281 in FHLB stock at December 31, 2011. Fixed-rate FHLB advances of $16,548 mature through 2033 and have interest rates ranging from 1.79% to 3.42% and a year-to-date weighted average cost of 2.50%. There were no variable-rate FHLB borrowings at December 31, 2011.

At December 31, 2011, the Company had a cash management line of credit enabling it to borrow up to $95,000 from the FHLB. All cash management advances have an original maturity of 90 days. The line of credit must be renewed on an annual basis. There was $95,000 available on this line of credit at December 31, 2011.

Based on the Company's current FHLB stock ownership, total assets and pledgeable loans, the Company had the ability to obtain borrowings from the FHLB up to a maximum of $180,586 at December 31, 2011. Of this maximum borrowing capacity of $180,586, the Company had $137,038 available to use as additional borrowings, of which $95,000 could be used for short-term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, have fixed rates of 1.52% to 5.00% and are due at various dates through a final maturity date of December 8, 2014. At December 31, 2011, there were no promissory notes payable by Ohio Valley to related parties. See Note K for further discussion of related party transactions.

FRB notes consist of the collection of tax payments from Bank customers under the Treasury Tax and Loan program. These funds have a variable interest rate and are callable on demand by the U.S. Treasury. The interest rate for the Company's FRB notes was zero percent at December 31, 2011 and December 31, 2010. Various investment securities from the Bank used to collateralize FRB notes totaled $725 at December 31, 2011 and $1,270 at December 31, 2010.

Letters of credit issued on the Bank's behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $27,000 at December 31, 2011 and $33,450 at December 31, 2010.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note G - Other Borrowed Funds (continued)

Scheduled principal payments over the next five years:

		FHLB Borrowings		Promissory Notes		FRB Notes		Totals
	2012	$	1,507	$	2,437	$	----	$	3,944
	2013		3,814		166		----		3,980
	2014		3,704		1,145		----		4,849
	2015		1,108		----		----		1,108
	2016		1,026		----		----		1,026
Thereafter			5,389		----		----		5,389
		$	16,548	$	3,748	$	----	$	20,296

Note H - Subordinated Debentures and Trust Preferred Securities

 On September 7, 2000, a trust formed by Ohio Valley issued $5,000 of 10.6% fixed-rate trust preferred securities as part of a pooled offering of such securities. The Company issued subordinated debentures to the trust in exchange for the proceeds of the offering, which debentures represent the sole asset of the trust. Beginning September 7, 2010, the Company’s subordinated debentures were callable upon demand at a premium of 105.30% with the call price declining .53% per year until reaching a call price of par at year twenty through maturity. The subordinated debentures must be redeemed no later than September 7, 2030. Debt issuance costs of $166 were incurred and capitalized and will amortize as a yield adjustment through expected maturity.

On March 22, 2007, a trust formed by Ohio Valley issued $8,500 of adjustable-rate trust preferred securities as part of a pooled offering of such securities. The rate on these trust preferred securities will be fixed at 6.58% for five years, and then convert to a floating-rate term on March 15, 2012, based on a rate equal to the 3-month LIBOR plus 1.68%. There were no debt issuance costs incurred with these trust preferred securities. The Company issued subordinated debentures to the trust in exchange for the proceeds of the offering. The subordinated debentures must be redeemed no later than June 15, 2037.

On March 26, 2007, the proceeds from these new trust preferred securities were used to pay off $8,500 in higher cost trust preferred security debt that was issued on March 26, 2002. This repayment of $8,500 in trust preferred securities was the result of an early call feature that allowed the Company to redeem the entire amount of these subordinated debentures at par value. These higher cost subordinated debentures, which were floating based on a rate equal to the 3-month LIBOR plus 3.60%, not to exceed 11.00%, were redeemed at a floating rate of 8.97%. The replacement of this higher cost debt was a strategy by management to lower interest expense and improve the net interest margin.

Under the provisions of the related indenture agreements, the interest payable on the trust preferred securities is deferrable for up to five years and any such deferral is not considered a default. During any period of deferral, the Company would be precluded from declaring or paying dividends to shareholders or repurchasing any of the Company's common stock. Under generally accepted accounting principles, the trusts are not consolidated with the Company. Accordingly, the Company does not report the securities issued by the trust as liabilities, and instead reports as liabilities the subordinated debentures issued by the Company and held by the trust. Since the Company's equity interest in the trusts cannot be received until the subordinated debentures are repaid, these amounts have been netted.

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note I - Income Taxes

The provision for income taxes consists of the following components:
	2011			2010			2009
Current tax expense	$	1,723		$	1,973		$	2,274
Deferred tax (benefit) expense		340			(462	)		(2	)
Total income taxes	$	2,063		$	1,511		$	2,272
The source of deferred tax assets and deferred tax liabilities at December 31:
Items giving rise to deferred tax assets:		2011			2010
Allowance for loan losses	$	2,551		$	3,262
Deferred compensation		1,558			1,499
Deferred loan fees/costs		376			384
Other real estate owned		440			-
Other		179			179
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(149	)		(151	)
FHLB stock dividends		(1,081	)		(1,081	)
Unrealized gain on securities available for sale		(495	)		(112	)
Depreciation		(250	)		(128	)
Prepaid expenses		(140	)		(166	)
Intangibles		(330	)		(304	)
Other		(1	)		(1	)
Net deferred tax asset	$	2,658		$	3,381
The Company determined that it was not required to establish a valuation allowance for deferred tax assets since management believes that the deferred tax assets are likely to be realized through a carry back to taxable income in prior years or the future reversals of existing taxable temporary differences.
The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate of 34% to income before taxes is as follows:
		2011			2010			2009
Statutory tax	$	2,685		$	2,246		$	3,032
Effect of nontaxable interest		(299	)		(279	)		(264	)
Nondeductible interest expense		16			20			24
Income from bank owned insurance, net		(169	)		(236	)		(196	)
Effect of nontaxable life insurance death proceeds			-			-		(189	)
Effect of state income tax		56			46			74
Tax credits		(245	)		(224	)		(212	)
Other items		19			(62	)		3
Total income taxes	$	2,063		$	1,511		$	2,272
At December 31, 2011 and December 31, 2010, the Company had no unrecognized tax benefits. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months. The Company did not recognize any interest and/or penalties related to income tax matters for the periods presented.
The Company is subject to U.S. federal income tax as well as West Virginia state income tax. The Company is no longer subject to federal or state examination for years prior to 2008. The tax years 2008-2010 remain open to federal and state examinations.

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note J - Commitments and Contingent Liabilities

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for instruments recorded on the balance sheet.

Following is a summary of such commitments at December 31:

	2011		2010
Fixed rate	$	1,456	$	941
Variable rate		54,860		47,843
Standby letters of credit		5,486		5,163

 The interest rate on fixed-rate commitments ranged from 3.13% to 7.38% at December 31, 2011.

 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

 The Company participates as a facilitator of tax refunds pursuant to a clearing agreement with a third-party tax software provider. The clearing agreement is effective through December 31, 2015 and is renewable in 5-year increments. The agreement requires the Bank to process electronic refund checks (“ERC’s”) and electronic refund deposits (“ERD’s”) presented for payment on behalf of taxpayers containing taxpayer refunds. The Bank will, in turn, receive a fee paid by the third-party tax software provider for each transaction that is processed. The agreement is subject to termination if the Bank fails to perform the required clearing services and/or the Bank’s regulators would require the Bank to cease offering the product presented within the agreement.

There are various contingent liabilities that are not reflected in the financial statements, including claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on financial condition or results of operations.

Note K - Related Party Transactions

 Certain directors, executive officers and companies with which they are affiliated were loan customers during 2011. A summary of activity on these borrower relationships with aggregate debt greater than $120 is as follows:

Total loans at January 1, 2011	$	5,889
New loans		131
Repayments		(264	)
Other changes		(668	)
Total loans at December 31, 2011	$	5,088

 Other changes include adjustments for loans applicable to one reporting period that are excludable from the other reporting period, such as changes in persons classified as directors, executive officers and companies’ affiliates.

 Deposits from principal officers, directors, and their affiliates at year-end 2011 and 2010 were $15,807 and $9,271.

29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note L - Employee Benefits

The Bank has a profit-sharing plan for the benefit of its employees and their beneficiaries. Contributions to the plan are determined by the Board of Directors of Ohio Valley. Contributions charged to expense were $218, $210 and $196 for 2011, 2010 and 2009.
Ohio Valley maintains an Employee Stock Ownership Plan (ESOP) covering substantially all employees of the Company. Ohio Valley issues shares to the ESOP, purchased by the ESOP with subsidiary cash contributions, which are allocated to ESOP participants based on relative compensation. The total number of shares held by the ESOP, all of which have been allocated to participant accounts, were 255,381 and 240,703 at December 31, 2011 and 2010. In addition, the subsidiaries made contributions to its ESOP Trust as follows:
	Years ended December 31
	2011		2010		2009
Number of shares issued		26,500		16,407		1,000
Fair value of stock contributed	$	497	$	315	$	22
Cash contributed		65		105		371
Total expense	$	562	$	420	$	393

 Life insurance contracts with a cash surrender value of $21,207 and annuity assets of $1,890 at December 31, 2011 have been purchased by the Company, the owner of the policies. The purpose of these contracts was to replace a current group life insurance program for executive officers, implement a deferred compensation plan for directors and executive officers, implement a director retirement plan and implement supplemental retirement plans for certain officers. Under the deferred compensation plan, Ohio Valley pays each participant the amount of fees deferred plus interest over the participant's desired term, upon termination of service. Under the director retirement plan, participants are eligible to receive ongoing compensation payments upon retirement subject to length of service. The supplemental retirement plans provide payments to select executive officers upon retirement based upon a compensation formula determined by Ohio Valley’s Board of Directors. The present value of payments expected to be provided are accrued during the service period of the covered individuals and amounted to $4,480 and $4,314 at December 31, 2011 and 2010. Expenses related to the plans for each of the last three years amounted to $318, $317 and $321. In association with the split-dollar life insurance plan, the present value of the postretirement benefit totaled $1,580 at December 31, 2011 and $1,351 at December 31, 2010.

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments

     The measurement of fair value under US GAAP uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and  other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant, unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

     The following is a description of the Company’s valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Securities Available For Sale: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2) .For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Mortgage Servicing Rights: Fair value is based on market prices for comparable mortgage servicing contracts.

31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
	Fair Value Measurements at December 31, 2011, Using
	Quoted Prices in
	Active Markets	Significant Other		Significant
	for Identical	Observable		Unobservable
	Assets	Inputs		Inputs
	(Level 1)	(Level 2)		(Level 3)
Assets:
U.S. Treasury securities	_____	$	5,513	_____
U.S. Government sponsored entity securities	_____		2,559	_____
Agency mortgage-backed securities, residential	_____		77,598	_____
	Fair Value Measurements at December 31, 2010, Using
	Quoted Prices in
	Active Markets	Significant Other		Significant
	for Identical	Observable		Unobservable
	Assets	Inputs		Inputs
	(Level 1)	(Level 2)		(Level 3)
Assets:
U.S. Treasury securities	_____	$	17,079	_____
U.S. Government sponsored entity securities	_____		7,731	_____
Agency mortgage-backed securities, residential	_____		61,029	_____

There were no transfers between Level 1 and Level 2 during 2011 or 2010.

Assets and Liabilities Measured on a Nonrecurring Basis
Assets and liabilities measured at fair value on a nonrecurring basis are summarized below:
	Fair Value Measurements at December 31, 2011, Using
	Quoted Prices in
	Active Markets	Significant Other	Significant
	for Identical	Observable	Unobservable
	Assets	Inputs	Inputs
	(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	_____	_____	$	290
Nonowner-occupied	_____	_____		1,959
Construction	_____	_____		587
Mortgage servicing rights	_____	_____		430
Other real estate owned:
Commercial real estate:
Construction	_____	_____		1,814
Commercial and industrial	_____	_____		1,134

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

	Fair Value Measurements at December 31, 2010, Using
	Quoted Prices in
	Active Markets	Significant Other	Significant
	for Identical	Observable	Unobservable
	Assets	Inputs	Inputs
	(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	_____	_____	$	3,606
Nonowner-occupied	_____	_____		2,187
Commercial and industrial	_____	_____		3,785
Residential real estate	_____	_____		414
Mortgage servicing rights	_____	_____		434

 Impaired loans had a principal balance of $11,572 at December 31, 2011. The portion of impaired loans with specific allocations of the allowance for loan losses had a carrying amount of $3,491 and was measured for impairment using the present value of estimated future cash flows. This resulted in a valuation allowance of $655 at December 31, 2011, which contributed to an increase of $218 in provision for loan loss expense during the year ended December 31, 2011. This is compared to an increase of $2,930 in provision for loan loss expense during the previous year ended December 31, 2010. At December 31, 2010, impaired loans had a principal balance of $23,106. The portion of impaired loans with specific allocations of the allowance for loan losses had a carrying amount of $15,222. The loans were measured for impairment using fair value of the underlying collateral and the present value of estimated future cash flows. This resulted in a valuation allowance of $5,230 at December 31, 2010.

Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $430, which is made up of the outstanding balance of $573, net of a valuation allowance of $143 at December 31, 2011. This is compared to a fair value of $434, made up of the outstanding balance of $609, net of a valuation allowance of $175 at December 31, 2010.

Other real estate owned that was measured at fair value less costs to sell at December 31, 2011 had a net carrying amount of $2,948, which is made up of the outstanding balance of $4,214, net of a valuation allowance of $1,266 at December 31, 2011, which resulted in a corresponding write-down of $1,266 for the year ended December 31, 2011. At December 31, 2010, there was no other real estate owned measured at fair value less costs to sell, which resulted in no valuation allowance and no corresponding write-downs from the year ended December 31, 2010.

33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

Federal Home Loan Bank stock: It is not practical to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Loans: The fair value of fixed-rate loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of loan commitments and standby letters of credit was not material at December 31, 2011 or 2010. The fair value for variable-rate loans is estimated to be equal to carrying value. This fair value represents an entry price in accordance with ASC 825. While ASC 820 amended ASC 825 in several respects, this approach to fair value remains an acceptable approach under generally accepted accounting principles.

Deposit Liabilities: The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Borrowings: For other borrowed funds and subordinated debentures, rates currently available to the Bank for debt with similar terms and remaining maturities are used to estimate fair value. For securities sold under agreements to repurchase, carrying value is a reasonable estimate of fair value.

Accrued Interest Receivable and Payable: For accrued interest receivable and payable, the carrying amount is a reasonable estimate of fair value.

In addition, other assets and liabilities that are not defined as financial instruments were not included in the disclosures below, such as premises and equipment and life insurance contracts. The fair value of off-balance sheet items is not considered material (or is based on the current fees or cost that would be charged to enter into or terminate such arrangements).

The fair values of financial assets and liabilities carried on the Company’s consolidated balance sheet include those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The estimated fair values of the Company’s financial instruments at December 31, are as follows:

	2011				2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	51,630	$	51,630	$	59,571	$	59,751
Securities available for sale		85,670		85,670		85,839		85,839
Securities held to maturity		22,848		22,847		22,178		21,198
Federal Home Loan Bank stock		6,281		N/A		6,281		N/A
Loans		590,964		599,782		631,936		637,986
Accrued interest receivable		2,872		2,872		2,704		2,704
Financial liabilities:
Deposits		687,886		690,607		694,781		698,199
Securities sold under agreements to repurchase		-		-		38,107		38,107
Other borrowed funds		20,296		20,565		27,743		26,968
Subordinated debentures		13,500		11,085		13,500		11,507
Accrued interest payable		1,894		1,894		2,600		2,600

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note N - Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that as of December 31, 2011, the Company and the Bank met all capital adequacy requirements to which they were subject.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. At year-end 2011 and 2010, the Bank’s capital met the requirements for the Bank to be deemed well capitalized under the regulatory framework for prompt corrective action.  There have been no conditions or events since that notification that management believes have changed the Bank's category.

     At year-end, consolidated actual capital levels and minimum required levels for the Company and the Bank were:

											Minimum Required
											To Be Well
						Minimum Required					Capitalized Under
						For Capital					Prompt Corrective
	Actual		Actual			Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2011
Total capital (to risk weighted assets)
Consolidated	$	90,288		15.6	%	$	46,174		8.0	%	$	57,718		N/A
Bank		81,991		14.4			45,544		8.0			56,930		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		83,072		14.4			23,087		4.0			34,631		N/A
Bank		74,975		13.2			22,772		4.0			34,158		6.0
Tier 1 capital (to average assets)
Consolidated		83,072		10.3			32,414		4.0			40,517		N/A
Bank		74,975		9.4			31,969		4.0			39,962		5.0
2010
Total capital (to risk weighted assets)
Consolidated	$	87,660		14.5	%	$	48,235		8.0	%	$	60,294		N/A
Bank		79,893		13.4			47,663		8.0			59,578		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		80,101		13.3			24,117		4.0			36,176		N/A
Bank		72,426		12.2			23,831		4.0			35,747		6.0
Tier 1 capital (to average assets)
Consolidated		80,101		9.3			34,326		4.0			42,908		N/A
Bank		72,426		8.5			33,902		4.0			42,377		5.0

Dividends paid by the subsidiaries are the primary source of funds available to Ohio Valley for payment of dividends to shareholders and for other working capital needs. The payment of dividends by the subsidiaries to Ohio Valley is subject to restrictions by regulatory authorities. These restrictions generally limit dividends to the current and prior two years retained earnings. At January 1, 2012 approximately $4,795 of the subsidiaries’ retained earnings were available for dividends under these guidelines. In addition to these restrictions, dividend payments cannot reduce regulatory capital levels below minimum regulatory guidelines. The Board of Governors of the Federal Reserve System also has a policy requiring Ohio Valley to provide notice to the FRB in advance of the payment of a dividend to Ohio Valley's shareholders under certain circumstances, and the FRB may disapprove of such dividend payment if the FRB determines the payment would be an unsafe or unsound practice.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Parent Company Only Condensed Financial Information

Below is condensed financial information of Ohio Valley. In this information, Ohio Valley’s investment in its subsidiaries is stated at cost plus equity in undistributed earnings of the subsidiaries since acquisition. This information should be read in conjunction with the consolidated financial statements of the Company.

CONDENSED STATEMENTS OF CONDITION
	Years ended December 31:
Assets	2011		2010
Cash and cash equivalents	$	1,462	$	1,687
Investment in subsidiaries		84,038		80,087
Notes receivable - subsidiaries		3,743		3,828
Other assets		406		314
Total assets	$	89,649	$	85,916
Liabilities
Notes payable	$	3,748	$	3,835
Subordinated debentures		13,500		13,500
Other liabilities		558		453
Total liabilities	$	17,806	$	17,788
Shareholders’ Equity
Total shareholders’ equity		71,843		68,128
Total liabilities and shareholders’ equity	$	89,649	$	85,916
CONDENSED STATEMENTS OF INCOME
	Years ended December 31:
Income:		2011		2010		2009
Interest on notes	$	134	$	158	$	156
Other operating income		65		68		56
Dividends from subsidiaries		3,500		4,500		4,000
Expenses:
Interest on notes		134		159		157
Interest on subordinated debentures		1,089		1,089		1,089
Operating expenses		287		538		230
Income before income taxes
and equity in undistributed earnings
of subsidiaries		2,189		2,940		2,736
Income tax benefit		439		522		423
Equity in undistributed earnings
of subsidiaries		3,207		1,634		3,486
Net Income	$	5,835	$	5,096	$	6,645

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Parent Company Only Condensed Financial Information (continued)

CONDENSED STATEMENTS OF CASH FLOWS
	Years ended December 31:
Cash flows from operating activities:	2011			2010			2009
Net Income	$	5,835		$	5,096		$	6,645
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(3,207	)		(1,634	)		(3,486	)
Common stock issued to ESOP		496			315			22
Change in other assets		(92	)		(12	)		(7	)
Change in other liabilities		105			64			59
Net cash provided by operating activities		3,137			3,829			3,233
Cash flows from investing activities:
Change in notes receivable		85			402			1,231
Net cash provided by investing activities		85			402			1,231
Cash flows from financing activities:
Change in notes payable		(87	)		(412	)		(1,232	)
Cash dividends paid		(3,360	)		(3,347	)		(3,186	)
Net cash used in financing activities		(3,447	)		(3,759	)		(4,418	)
Cash and cash equivalents:
Change in cash and cash equivalents		(225	)		472			46
Cash and cash equivalents at beginning of year		1,687			1,215			1,169
Cash and cash equivalents at end of year	$	1,462		$	1,687		$	1,215

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note P - Segment Information

    The reportable segments are determined by the products and services offered, primarily distinguished between banking and consumer finance. They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business which are then aggregated if operating performance, products/services, and customers are similar. Loans, investments, and deposits provide the majority of the net revenues from the banking operation, while loans provide the majority of the net revenues for the consumer finance segment. All Company segments are domestic.

Total revenues from the banking segment, which accounted for the majority of the Company's total revenues, totaled 91.8%, 92.9% and 93.4% of total consolidated revenues for the years ended December 31, 2011, 2010 and 2009, respectively.

The accounting policies used for the Company's reportable segments are the same as those described in Note A - Summary of Significant Accounting Policies. Income taxes are allocated based on income before tax expense.

Segment information for the years ended December 31, is as follows:

	Year Ended December 31, 2011
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	30,792	$	3,079	$	33,871
Provision expense	$	4,809	$	87	$	4,896
Noninterest income	$	6,327	$	895	$	7,222
Noninterest expense	$	26,130	$	2,169	$	28,299
Tax expense	$	1,483	$	580	$	2,063
Net income	$	4,697	$	1,138	$	5,835
Assets	$	789,744	$	14,433	$	804,177
	Year Ended December 31, 2010
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	30,074	$	2,893	$	32,967
Provision expense	$	5,717	$	154	$	5,871
Noninterest income	$	5,578	$	576	$	6,154
Noninterest expense	$	24,756	$	1,887	$	26,643
Tax expense	$	1,029	$	482	$	1,511
Net income	$	4,149	$	947	$	5,096
Assets	$	837,359	$	14,155	$	851,514
	Year Ended December 31, 2009
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	27,817	$	2,874	$	30,691
Provision expense	$	3,049	$	163	$	3,212
Noninterest income	$	7,132	$	466	$	7,598
Noninterest expense	$	24,247	$	1,913	$	26,160
Tax expense	$	1,843	$	429	$	2,272
Net income	$	5,810	$	835	$	6,645
Assets	$	797,276	$	14,712	$	811,988

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note Q - Consolidated Quarterly Financial Information (unaudited)

                                                                                                                                                                              Quarters Ended

2011	Mar. 31		Jun. 30		Sept. 30		Dec. 31
Total interest income	$	12,025	$	10,817	$	10,693	$	10,505
Total interest expense		2,822		2,663		2,509		2,175
Net interest income		9,203		8,154		8,184		8,330
Provision for loan losses(1)		2,944		759		1,152		41
Noninterest income		3,659		1,687		1,058		818
Noninterest expense		7,098		6,981		7,001		7,219
Net income		2,033		1,555		886		1,361
Earnings per share	$	0.51	$	0.39	$	0.22	$	0.34
2010
Total interest income	$	12,228	$	11,599	$	11,438	$	11,249
Total interest expense		3,619		3,421		3,328		3,179
Net interest income		8,609		8,178		8,110		8,070
Provision for loan losses(2)		921		721		2,225		2,004
Noninterest income		1,865		1,524		1,382		1,383
Noninterest expense		6,881		6,976		6,863		5,923
Net income		1,906		1,471		421		1,298
Earnings per share	$	0.48	$	0.37	$	0.10	$	0.33
2009
Total interest income	$	12,611	$	11,710	$	11,733	$	11,569
Total interest expense		4,331		4,407		4,285		3,909
Net interest income		8,280		7,303		7,448		7,660
Provision for loan losses		848		296		957		1,111
Noninterest income		2,021		1,818		2,137		1,622
Noninterest expense		6,556		6,915		6,528		6,161
Net income		2,051		1,396		1,700		1,498
Earnings per share	$	0.51	$	0.35	$	0.43	$	0.38

(1) During the first quarter of 2011, the Company began taking partial charge-offs more quickly on collateral dependent impaired loans as a result of management's evaluation of the trends in the real estate market, the status of long-term, collateral dependent impaired loans and the current regulatory environment. The increases in partial charge-offs contributed to a higher historical loan loss factor, which required additional general allocations within the allowance for loan losses.

(2) During the third and fourth quarters of 2010, the Bank experienced an increase in its provision expense as a result of continued credit quality issues with three commercial relationships that resulted in additional impairment charges and partial charge-offs.

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Ohio Valley Banc Corp.

We have audited the accompanying consolidated statements of condition of Ohio Valley Banc Corp. (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. We also have audited the Company's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ohio Valley Banc Corp. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Ohio Valley Banc Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Crowe Horwath LLP

Crowe Horwath LLP

Louisville, KY

March 15, 2012

40

MANAGEMENT'S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

Board of Directors and Shareholders

Ohio Valley Banc Corp.

The management of Ohio Valley Banc Corp. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

The system of internal control over financial reporting as it relates to the consolidated financial statements is evaluated for effectiveness by management. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed Ohio Valley Banc Corp.’s system of internal control over financial reporting as of December 31, 2011, in relation to criteria for effective internal control over financial reporting as described in “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2011, its system of internal control over financial reporting is effective and meets the criteria of the “Internal Control Integrated Framework”.

Crowe Horwath LLP, independent registered public accounting firm, has issued an audit report dated March 15, 2012 on the Company's internal control over financial reporting. That report is contained in Ohio Valley's Annual Report to Shareholders under the heading "Report of Independent Registered Public Accounting Firm”.

Ohio Valley Banc Corp.

/s/ Jeffrey E. Smith

Jeffrey E. Smith

Chairman, CEO

/s/ Scott W. Shockey

Scott W. Shockey

 Vice President, CFO

March 15, 2012

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SUMMARY OF COMMON STOCK DATA

OHIO VALLEY BANC CORP.

 Years ended December 31, 2011 and 2010

INFORMATION AS TO STOCK PRICES AND DIVIDENDS: Ohio Valley’s common shares are traded on The NASDAQ Stock Market under the symbol “OVBC”. The following table summarizes the high and low sales prices for Ohio Valley’s common shares on the NASDAQ Global Market for each quarterly period since January 1, 2010.
2011	High		Low
First Quarter	$	23.26	$	19.21
Second Quarter		23.10		16.50
Third Quarter		18.70		16.01
Fourth Quarter		19.09		17.00
2010	High		Low
First Quarter	$	25.00	$	18.75
Second Quarter		22.49		16.38
Third Quarter		21.79		16.40
Fourth Quarter		20.87		18.23
Shown below is a table which reflects the dividends declared per share on Ohio Valley’s common shares. As of March 9, 2012, the number of holders of record of common shares was 2,141.
Dividends per share		2011		2010
First Quarter	$	0.21	$	0.21
Second Quarter	$	0.21	$	0.21
Third Quarter	$	0.21	$	0.21
Fourth Quarter	$	0.21	$	0.21
Dividends paid by the subsidiaries are the primary source of funds available to Ohio Valley for payment of dividends to shareholders and for other working capital needs. The payment of dividends by the subsidiaries to Ohio Valley is subject to restrictions by regulatory authorities. These restrictions generally limit dividends to the amount of retained earnings for the current and prior two years.
In addition, policy of the Board of Governors of the Federal Reserve System requires Ohio Valley to provide notice to the FRB in advance of the payment of a dividend to Ohio Valley's shareholders under certain circumstances, and the FRB may disapprove of such dividend payment if the FRB determines the payment would be an unsafe or unsound practice.
Dividend restrictions are also listed within the provisions of Ohio Valley's trust preferred security arrangements. Under the provisions of these agreements, the interest payable on the trust preferred securities is deferrable for up to five years and any such deferral would not be considered a default. During any period of deferral, Ohio Valley would be precluded from declaring or paying dividends to its shareholders or repurchasing any of its common stock.

42

PERFORMANCE GRAPH

OHIO VALLEY BANC CORP.

Year ended December 31, 2011

The following graph sets forth a comparison of five-year cumulative total returns among the Company's common shares (indicated “Ohio Valley Banc Corp.” on the Performance Graph), the S & P 500 Index (indicated “S & P 500” on the Performance Graph), and SNL Securities SNL $500 Million-$1 Billion Bank Asset-Size Index (indicated “SNL” on the Performance Graph) for the fiscal years indicated. Information reflected on the graph assumes an investment of $100 on December 31, 2006 in each of the common shares of the Company, the S & P 500 Index, and the SNL Index. Cumulative total return assumes reinvestment of dividends. The SNL Index represents stock performance of 70 of the nation's banks located throughout the United States with total assets between $500 Million and $1 Billion as selected by SNL Securities of Charlottesville, Virginia. The Company is included as one of the 70 banks in the SNL Index.

                         Period ending

Index	12/31/06	12/31/07	12/31/08	12/31/09	12/31/10	12/31/11
Ohio Valley Banc Corp.	100.00	102.51	79.35	95.72	88.41	88.06
SNL $500M-$1B Bank Index	100.00	80.13	51.35	48.90	53.38	46.96
S&P 500	100.00	105.49	66.46	84.05	96.71	98.76

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 The purpose of this discussion is to provide an analysis of the financial condition and results of operations of Ohio Valley Banc Corp. (“Ohio Valley” or the “Company”) that is not otherwise apparent from the audited consolidated financial statements included in this report.  The accompanying consolidated financial information has been prepared by management in conformity with U.S. generally accepted accounting principles (“US GAAP”) and is consistent with that reported in the consolidated statements.  Reference should be made to those statements and the selected financial data presented elsewhere in this report for an understanding of the following tables and related discussion. All dollars are reported in thousands, except share and per share data.

RESULTS OF OPERATIONS:

SUMMARY

Ohio Valley generated net income of $5,835 for 2011, an increase of 14.5% from 2010.  Earnings per share were $1.46 for 2011, an increase of 14.1% from 2010.  The increase in net income and earnings per share for 2011 was primarily due to higher noninterest income combined with improvements in higher net interest income and lower provision for loan loss expense.  Noninterest income grew $1,068, or 17.4%, during 2011, largely from the Company’s tax processing fees.  The Company generates fee income by facilitating tax refund payments in the form of electronic refund check/deposit (“ERC/ERD”) transactions.  ERC/ERD transactions involve the issuing of a tax refund to the taxpayer after the Bank has received the refund from the federal/state government.     In 2011, ERC/ERD fees increased $1,779 over the previous year due to the significant growth in transaction volume of processing tax refund payments during the first half of 2011. This activity was mostly seasonal and had little impact on Company earnings during the third and fourth quarters of 2011.

Further contributing to the Company’s successful year in net income was lower provision for loan loss expense, which decreased $975, or 16.6%, during 2011 as compared to the previous year.  The decrease was in large part due to significant recoveries of commercial loans experienced in 2011 as well as larger impairment charges recorded in 2010.  Net charge-offs during 2011 were up $2,255, or 48.2%, over 2010, but the majority of these charge-offs had already been specifically allocated for within the allowance for loan losses.  As a result, no provision expense was required to be taken against the majority of these additional charge-offs.  Conversely, recoveries of loans did have an immediate impact on lowering provision expense.  Total recoveries during 2011 were $3,484, which increased $2,288, or 191.3%, from 2010, in large part due to successful collection efforts of commercial loan balances that had been previously charged off.  Provision expense also benefited from impairment charges recorded during 2010 that had an opposite effect in 2011.  During the fourth quarter of 2010, the Company identified asset impairment of $1,406 related to one commercial loan relationship with two loans classified as troubled debt restructurings (“TDR’s”).  This impairment charge required specific reserves within the allowance for loan losses, which required a corresponding increase in provision for loan loss expense in 2010 that had the effect of lowering provision expense during 2011.

Further contributing to higher earnings in 2011 was an improved net interest income, which increased $904, or 2.7%, over 2010.  The sustained low-rate environment continues to have an impact in lowering funding costs, as well as causing management to emphasize growing lower-costing, core deposit relationship balances. As a result, interest expense decreased $3,378 during 2011, as compared to 2010. This cost savings completely offset the decrease in interest income of $2,474 during 2011, as compared to 2010.

Partially offsetting the benefits from higher ERC/ERD fees, lower provision expense and higher net interest income were increases in other real estate owned (“OREO”) losses, as well as increases in salaries and employee benefit and foreclosed asset expenses.  OREO losses finished at $1,224 at year-end 2011, up from $177 in losses at year-end 2010.  Higher OREO losses were impacted most by impairment charges taken on two commercial real estate foreclosed properties classified as OREO.  These losses were the result of re-evaluations of the carrying values in 2011 for both OREO properties, which identified $1,266 in total asset impairment.  The impairment charges were recorded as write-downs to the carrying values of both properties and limited the growth in noninterest income during 2011.  Salaries and employee benefit expense increased $1,003, or 6.4%, during 2011, as compared to 2010, in large part due to annual merit increases, higher health insurance premiums and a larger number of employees.  The Company’s foreclosed asset costs also grew to $650 during 2011, an increase of $583 from the previous year.  The increase was mostly related to the foreclosure expenses of two commercial real estate properties, which included taxes and other general costs to maintain both properties.

During 2010, Ohio Valley generated net income of $5,096, a decrease of 23.3% from 2009.  Earnings per share were $1.28 for 2010, a decrease of 23.4% from 2009.  The decrease in net income and earnings per share for 2010 was primarily due to a higher provision for loan loss expense, representing a $2,659, or 82.8%, increase over 2009.  Provision expense increased over 2009 in large part due to increases in both net charge-offs and specific allocations on impaired loans.  Net charge-offs were impacted by partial charge-offs of $2,480 recorded on two commercial loans, while specific allocations were impacted by an impairment charge of $1,406 related to two commercial TDR’s.  Further contributing to lower earnings in 2010 were decreases in other noninterest income sources, including service charges on deposit accounts (down $614, or 21.8%), income from bank owned life insurance (down $570, or 43.5%) and mortgage banking income (down $396, or 52.2%).  Service charge income was mostly impacted by a lower volume of overdrafts being assessed as well as the adoption of new regulatory guidance that limits daily and annual overdraft fees.  The declining effects from bank owned life insurance (“BOLI”) and mortgage banking income during 2010 were the results of timing differences of events that occurred during 2009 that had a limited effect in 2010.  These events included life insurance proceeds of $556 that were received in 2009 and a significant period of mortgage refinancing during the first half of 2009.

Partially offsetting these negative effects of higher provision expense and lower noninterest income was improvement in the Company’s net interest income, which increased $2,276, or 7.4%, over 2009.  Net interest income for the Company grew in large part due to an increase in the Company’s average earning assets and net interest margin improvement.  Average earning asset growth was mostly affected by commercial loans while the net interest margin improvement was mostly affected by a shift from short-term, lower yielding assets being re-invested into higher yielding, longer-term assets combined with a continued decline in the Company’s interest expense in both deposits and borrowings due to the sustained low interest rate environment.

NET INTEREST INCOME

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.  The Company earns interest and dividend income from loans, investment securities and short-term investments while incurring interest expense on interest-bearing deposits, securities sold under agreements to repurchase (“repurchase agreements”) and short- and long-term borrowings.  Net interest income is affected by changes in both the average volume and mix of assets and liabilities and the level of interest rates for financial instruments.  Changes in net interest income are measured by net interest margin and net interest spread.  Net interest margin is expressed as net interest income divided by average interest-earning assets.  Net interest spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.  Both of these are reported on a fully tax-equivalent (“FTE”) basis.  Net interest margin is greater than net interest spread due to the interest earned on interest-earning assets funded from noninterest-bearing funding sources, primarily demand deposits and shareholders' equity.  Following is a discussion of changes in interest-earning assets, interest-bearing liabilities and the associated impact on interest income and interest expense for the three years ended December 31, 2011.  Tables I and II have been prepared to summarize the significant changes outlined in this analysis.

Net interest income on an FTE basis increased $940 in 2011, or 2.8%, compared to the $33,360 earned in 2010, while the Company’s FTE net interest margin increased 7 basis points from 4.16% in 2010 to 4.23% in 2011.  The improvements in both net interest income and net interest margin were mainly due to lower rates paid on interest-bearing deposits, a change in deposit mix to lower-cost core deposits and an increase in the Company’s average earning assets.  The Federal Reserve continues to hold the prime interest rate at 3.25%, and the target federal funds rate remains at a range from 0.0% to 0.25%. The sustained low short-term rates have continued to impact the repricings of various Bank deposit products, including public fund NOW, Gold Club and Market Watch accounts. Interest rates on certificate of deposit (“CD”) balances have also repriced to lower rates (as a lagging effect to the Federal Reserve’s action to maintain short-term interest rates at their low levels) which continues to lower funding costs.  Management continues to emphasize lower-cost core deposit relationship balances which contributed to higher average NOW, savings and money market balances in 2011 (increasing $36,898) while experiencing a lower level of higher-cost time deposit and other borrowed money balances (decreasing $57,817).  Average earning assets grew 1.1% during 2011 compared to 2010, largely from higher average balances being carried at the Federal Reserve and growth in average securities.

Net interest income on an FTE basis increased $2,314 in 2010, or 7.5%, compared to the $31,046 earned in 2009, while the FTE net interest margin increased 16 basis points from 4.00% in 2009 to 4.16% in 2010.  As in 2011, the improvements in 2010 were primarily attributable to lower rates paid on deposits, a shift in deposit composition to lower-cost core deposits and average earning asset growth.  The Company continued to benefit from a sustained low interest rate environment in 2010 that permitted its interest expense to decline, with deposits and borrowings readjusting to current market rates.  The Company also benefited from a deposit composition shift from higher-costing time deposits and other borrowed money (decreasing 4.2% from 2009) to lower-costing NOW, savings and money market deposit accounts (increasing 15.8%).  During 2010, the Company also benefited from the deployment of short-term assets into higher-yielding longer-term assets, such as loans.  The Company’s average earning assets increased 3.4% in 2010, particularly within the higher-yielding loans portfolio.

For 2011, average earning assets grew $8,756, or 1.1%, as compared to growth of $26,518, or 3.4%, in 2010.  Driving this continued growth in earning assets for 2011 was average interest-bearing balances with banks, increasing to $67,947 at year-end 2011, up from $43,450 at year-end 2010 and $27,077 at year-end 2009.  The increasing trend of larger interest-bearing balances with banks is primarily due to seasonal excess funds resulting from the clearing of tax refund checks and deposits.  These ERC/ERD deposits occurred primarily during the first half of 2011 and 2010 and are the result of the Company’s relationship with a third-party tax software provider.  The Company acts as the facilitator for these ERC/ERD transactions and earns a fee for each cleared item.  For the short time the Company holds such refunds, constituting noninterest-bearing deposits, the Company increases its deposits with the Federal Reserve.  This has caused the interest-bearing balances with banks to represent a large percentage of earning assets during the time the Company holds the refunds, although such balances decrease at year-end.  For the year-end December 31, 2011, average interest-bearing balances with banks totaled 8.4% of earning assets, as compared to 5.4% for 2010 and 3.5% for 2009.  As loan growth was challenged during 2011, the Company re-invested a portion of its short-term Federal Reserve balances into longer-term investment securities.  As a result, the Company’s average investment securities, both taxable and tax exempt, increased during 2011, with its percentage of earning assets averaging 14.5% for the year, compared to 13.2% in 2010.  The Company’s average investment securities did not change significantly during 2010, with its percentage of earning assets averaging 13.2%, compared to 13.8% for 2009.  Average loans continue to be the Company’s highest portion of earning assets.  During 2011, average loans decreased $27,954, or 4.3%, compared to 2010.  Average loans during 2010 were limited to an $11,679, or 1.8%, increase from 2009. The Company’s market area for lending continues to be limited due to economic pressures that have negatively impacted consumer spending and have decreased loan demand.  The Company’s installment and real estate portfolios have been affected the most during 2011 and 2010 by these negative factors.  As a result, average loans as a percentage of earning assets have decreased to 77.1% for 2011, as compared to 81.4% for 2010 and 82.7% for 2009, as most of the average earning asset growth in 2011 and 2010 has came from short-term balances with banks and investment securities.

Management continues to focus on generating loan growth as this portion of earning assets provides the greatest return to the Company.  Although loans make up the largest percentage of earning assets, management is comfortable with the current level of loans based on collateral values, the balance of the allowance for loan losses, strict underwriting standards and the Company's well-capitalized status.  Management maintains securities at a dollar level adequate enough to provide ample liquidity and cover pledging requirements.

Average interest-bearing liabilities decreased 4.3% between 2010 and 2011 due to decreasing time deposits, and increased 3.0% between 2009 and 2010 due to increasing savings and money market accounts.  The fluctuations of interest-bearing deposits since 2009 are in large part due to the Company’s preference of core deposit relationship balances over higher-costing time deposits and other borrowing liabilities, which have changed the funding composition mix during this time.  Interest-bearing liabilities continue to be comprised largely of time deposits, which represented 44.0% of total interest-bearing liabilities in 2011. This composition mix, however, has decreased the most since 2009, which represented 48.9% and 51.0% of total interest-bearing liabilities in 2010 and 2009, respectively.  As interest rates on time deposits continued to readjust to current market rates in 2011, competitive pricing pressures grew and contributed to a significant maturity runoff of CD’s during 2011.  In addition, other borrowings lowered to 3.8% of total interest-bearing liabilities in 2011, as compared to 5.5% in 2010 and 7.5% in 2009.  Conversely, the Company’s core deposit segment of interest-bearing liabilities, which include NOW and savings and money market accounts, together represented 47.1% of total interest-bearing liabilities in 2011, as compared to 39.5% in 2010 and 35.2% in 2009.  The primary reason for this composition increase has particularly been in the Company's Market Watch product.  The Market Watch product is a limited transaction investment account with tiered rates that competes with current market rate offerings and serves as an alternative to certificates of deposit for some customers.  With an added emphasis on further building and maintaining core deposit relationships, the Company has marketed several attractive incentive offerings in the past several years to draw customers to this particular product.  The consumer preference for this product has generated a significant amount of funding dollars which have helped to support earning asset growth, maturity runoff of time deposits and payoffs on other borrowed funds.  This composition shift from 2009 to 2011 with higher NOW, savings and money market balances and lower time deposits and other borrowed money has served as a cost effective contribution to the net interest margin.  The average cost of the “growing” NOW, savings and money market account core segment was 0.90%, 1.14% and 1.30% during the years ended 2011, 2010 and 2009, respectively.  The higher average costs of time deposits and other borrowed money segment were 2.08%, 2.58% and 3.37% during the years ended 2011, 2010 and 2009, respectively.

The net interest margin increased to 4.23% in 2011 from 4.16% in 2010 and 4.00% in 2009.  The 7 basis point and 16 basis point improvement from 2011 and 2010 was largely the result of lower average costs on interest-bearing liabilities completely offsetting the lower yields on earning assets, which improved the Company’s net interest rate spread.  During 2011, the net interest rate spread increased 7 basis points to 3.89%, resulting from the decrease in average cost of interest-bearing liabilities of 44 basis points from 2.03% to 1.59%, completely offsetting the decrease in average yield on interest-earning assets of 37 basis points from 5.85% to 5.48%.  During 2010, the net interest rate spread increased 25 basis points to 3.82%, resulting from the decrease in average cost of interest-bearing liabilities of 58 basis points from 2.61% to 2.03% completely offsetting the decrease in average yield on interest-earning assets of 33 basis points from 6.18% to 5.85%.  Partially offsetting the net interest rate spread increase in 2010 was a 9 basis point decrease in contributions of interest-free funds (i.e., demand deposits, shareholders' equity), which lowered from 0.43% in 2009 to 0.34% in 2010.

Lower asset yields caused interest income on an FTE basis to decrease $2,438, or 5.2%, during 2011, and $1,071, or 2.2%, during 2010.  This decline reflects higher liquidity levels and lower loan demand. During 2010 and 2011, average loan balances experienced limited to declining growth while excess funds increased as a result of interest-bearing core deposit growth and an increased volume of short-term tax refund deposits.  The Company continues to invest the majority of its excess funds into its interest-bearing Federal Reserve Bank clearing account, yielding just 0.25%. While these increases in Federal Reserve Bank balances contributed most to the Company’s average earning asset growth during 2011 and 2010, these balances also contributed most to the decrease in earning asset yields, with the majority of the Company’s earning asset growth yielding just 0.25%.  The intention for these short-term Federal Reserve Bank balances that were not related to tax refund clearing items or other seasonal deposits was to re-invest them into future loan growth or longer-term securities with higher interest rate yields to improve the net interest margin.  Further contributing to lower asset yields were yields on loans decreasing 5 basis points from 2010 to 2011 and 22 basis points from 2009 to 2010.  This decrease reflects the extended low interest rate environment the Federal Reserve has been maintaining since it began reducing short-term rates in 2008.  The Company's commercial, participation and real estate loan portfolios have been most sensitive to these decreases in short-term interest rates since that time, particularly the prime interest rate, which remained at 3.25% at year-end 2011.

Further contributing to lower interest income during 2011 and 2010 were decreases in mortgage loan volume as a result of management’s strategy to sell most of its long-term, fixed-rate real estate loans to the secondary market, while retaining the servicing rights to these loans.  As previously discussed, the Federal Reserve continues to maintain interest rates at their low levels, which has had an impact on long-term interest rates that affect mortgage loan pricing.  The lower rates have contributed to a consumer demand for mortgage loan refinancing to help lower their monthly costs.  The interest rate risks associated with satisfying this demand for long-term fixed-rate mortgages prompted management to sell the majority of these real estate loans to the secondary market, while retaining the servicing rights.  This action continues to generate loan sale and servicing fee revenue within noninterest income, but has resulted in an $889, or 5.7%, decrease in real estate interest and fee income during 2011, as compared to 2010.  In addition, 2010 real estate interest and fee income decreased $999, or 6.0%, from 2009.

Included in consumer loan interest income were fees associated with the Company’s refund anticipation loan (“RAL”) tax loan originations.  The Company’s participation with a third-party tax software provider has given the Bank the opportunity to make RALs during the tax refund loan season, typically from January through March. RALs are short-term cash advances against a customer's anticipated income tax refund. During 2011, the Company recognized $561 in RAL fees, compared to $655 during 2010, a decrease of $94, or 14.4%. The Company had an increase of $258, or 65.1%, in RAL fees during 2010 compared to 2009.

The Bank also has a separate agreement with the tax software provider for the Company’s ERC/ERD clearing services. Through the ERC/ERD agreement, the Company serves as a facilitator for the clearing of tax refunds. In recent years, the RAL business has been subject to scrutiny by various governmental and consumer groups who have questioned the fairness and legality of RAL fees and the underwriting risksassociated with originating RALs. The ERC/ERD service does not subject the Bank to the risks related to the RALs and has not been subject to the same scrutiny.

On February 3, 2011, the Bank received a recommendation from the FDIC to discontinue offering RAL loans through third parties following the completion of the 2011 tax filing season. The FDIC expressed concerns regarding the underwriting of RALs based on the 2010 decision by the Internal Revenue Service (the "IRS") to cease providing debt indicator information. In response to the FDIC's expressions of concern, on February 8, 2011, the Bank determined to discontinue offering RALs through unrelated third-party vendors after April 19, 2011. Thus, the Bank’s termination of this product will negatively affect the Company’s results of operations in 2012. The FDIC's concern and recommendation does not affect the Bank's offering of other tax refund products, such as ERC’s and ERD’s. The Bank will, therefore, continue offering ERC’s and ERD’s. Furthermore, the FDIC’s recommendation does not affect the offerings of RALs by Loan Central.

In relation to lower earning asset yields for 2011 and 2010, the Company’s interest-bearing liability costs also decreased 44 basis points during 2011 and 58 basis points during 2010.  The lower costs have caused interest expense to drop $3,378, or 24.9%, from 2010 to 2011 and $3,385, or 20.0%, from 2009 to 2010 as a result of lower rates paid on interest-bearing liabilities.  Since the beginning of 2008, the Federal Reserve Board has reduced the prime and federal funds interest rates by 400 basis points.  Since December 2008, the prime interest rate has been at 3.25% and the target federal funds rate has been in a range of 0.0% to 0.25%.  The sustained low short-term rates have continued to impact the repricings of various Bank deposit products, including public fund NOW, Gold Club and Market Watch accounts. However, contributing most to the decrease in funding costs were interest rates on time deposit balances, which continued to reprice at lower rates during 2011 and 2010 (as a continued lagging effect to the Federal Reserve action to drop short-term interest rates).  The year-to-date weighted average costs of the Company’s time deposits have decreased from 3.24% at year-end 2009 to 2.46% at year-end 2010 and 2.03% at year-end 2011.

Further contributing to lower time deposit expenses has been the Company’s continued emphasis on growing core deposits during 2011 and 2010.  This emphasis has created a deposit composition shift from higher-costing time deposit balances to lower-costing core deposits in NOW, savings and money market balances. As a result of decreases in the average market interest rates mentioned above and the deposit composition shift to lower-costing deposit balances, the Company’s total weighted average funding costs have decreased to 1.59% at year-end 2011 as compared to 2.03% at year-end 2010 and 2.61% at year-end 2009.

The Company has experienced margin improvement during 2011 and 2010 due to a higher deposit mix of lower-costing NOW and money market balances while also benefiting from a sustained low interest rate environment.  However, the pace of improvement lowered in 2011, as the net interest margin increased 7 basis points as compared to a 16 basis point improvement in 2010.  The lower pace of improvement was largely due to higher average balances being carried at the Federal Reserve yielding just 0.25% during 2011.  This, combined with declining average loan balances, has placed increased pressure on net interest margin growth during 2011.

The Company will continue to focus on re-deploying these Federal Reserve balances into higher yielding instruments as opportunities arise. Net interest margin will benefit if these deposits with the Federal Reserve Bank can be re-invested in loans and other longer-term, higher yielding investments. It is difficult to speculate on future changes in net interest margin and the frequency and size of changes in market interest rates. The past several years has seen the banking industry under continued stress due to declining real estate values and asset impairments.  Earlier in 2012, the Federal Reserve announced it would maintain the current state of low interest rates through 2014 or longer to help boost the economy as its recovery has been short of expectations.  However, further decreases in interest rates by the Federal Reserve are estimated to have a negative effect on the Company’s net interest income, as most of its deposit balances are perceived to be at or near their interest rate floors.  The Company will also continue to face pressure on its net interest income and margin improvement unless loan balances begin to expand and become a larger component of overall earning assets.  For additional discussion on the Company's rate sensitive assets and liabilities, please see “Interest Rate Sensitivity and Liquidity” and “Table VIII” within this Management's Discussion and Analysis.

PROVISION EXPENSE

Credit risk is inherent in the business of originating loans.  The Company sets aside an allowance for loan losses through charges to income, which are reflected in the consolidated statement of income as the provision for loan losses.  This provision charge is recorded to achieve an allowance for loan losses that is adequate to absorb losses in the Company’s loan portfolio.  Management performs, on a quarterly basis, a detailed analysis of the allowance for loan losses that encompasses loan portfolio composition, loan quality, loan loss experience and other relevant economic factors.

The Company’s earnings benefited from lower provision expense during 2011, decreasing $975, or 16.6%, as compared to 2010.  Conversely, during 2010, provision expense increased significantly by $2,659, or 82.8%, as compared to 2009.  The impact to provision expense during both 2011 and 2010 is largely related to the changes in specific allocations, net charge-offs and general allocations of the allowance for loan losses.  During 2010, the Company’s increase in provision expense was largely the result of partial charge-offs taken on one commercial loan classified as impaired.  Partial charge-offs of $1,995 were recorded on one commercial real estate loan due to a continued deterioration in collateral values.  At the time of charge-off, the Company had specific allocations of $1,825 within the allowance for loan losses, for which approximately $820 had been recognized prior to 2010.  As a result, the $1,995 in partial charge-offs led to $990 in additional provision expense charges during 2010.  This action had an opposite effect in 2011, contributing to the Company’s lower provision expense.

Also contributing to higher provision expense in 2010 were specific allocations recorded on two commercial loans classified as impaired.   In 2010, the Company identified additional asset impairment of $1,406 related to two commercial and industrial loans from one relationship classified as a TDR.  The Company continues to monitor and make loan modifications to certain troubled loans that will ease payment performance pressures off of the borrower.  GAAP guidance requires an impairment analysis to be performed on loans classified as TDR’s.  This analysis is measured by comparing the present value of expected future cash flows discounted at the loan’s effective interest rate to the cash flows based on the original contractual terms of the loan.  The difference between the two measurements results in an impairment charge.  The additional impairment charges on the two commercial and industrial loans previously mentioned required a specific allocation of the allowance for loan losses and a corresponding increase to provision for loan losses expense.  Partially offsetting this provision expense benefit in 2011 was a continued deterioration in collateral values on the two TDR commercial loans previously mentioned.  During the first quarter of 2011, a current analysis of both loans’ collateral values revealed a $933 impairment that required acorresponding increase to provision expense during 2011.

Beginning in 2011, the Company began to take partial charge-offs more quickly on collateral dependent impaired loans.  As management further evaluated the trends in the real estate market, as well as the status of long-term, collateral dependent impaired loans, the decision to charge off these specific allocations was made.  This led to increased charge-offs during 2011 of $4,543 and also significantly reduced the specific reserve allocations within the allowance for loan losses from $5,230 at December 31, 2010 to $655 at December 31, 2011.  While most of this increase in charge-offs in 2011 did not require a corresponding provision expense entry due to the use of specific reserves that were already recorded prior to 2011, these charge-offs did have an immediate impact on the Company’s general allocations related to its historical loan loss factor. The general allocation, among other things, evaluates the average historical loan losses over the past 36 months.  As a result, the general allocation for commercial and residential real estate loans increased to $5,334 at December 31, 2011 from $2,699 at December 31, 2010, requiring an increase in provision expense.  These charge-off amounts will impact the amount of the Company’s loan loss allowance for three years.  The general allocation also evaluates other factors, such as economic risk, as well as changes in classified and criticized assets.

During 2011, the Company was successful in recovering amounts on previously charged-off loans.  During 2011, total loan recoveries were $3,484, an increase of 2,288, or 191.3%, over 2010.  The majority of loan recoveries were from commercial real estate and commercial and industrial loan balances that had been previously charged off.  The increase in loan recoveries lowered provision expense during 2011.

In large part due to the increase in net charge-offs during 2011, the allowance for loan losses finished at 1.23% of total loans at December 31, 2011, as compared to 1.46% at December 31, 2010. Management believes that the allowance for loan losses was adequate at December 31, 2011 to absorb probable losses in the portfolio. Furthermore, the increase in net charge-offs has increased the Company’s general allocations within the allowance for loan losses, with general allocations to total loans increasing from 0.65% at December 31, 2010 to 1.12% at December 31, 2011. Future provisions to the allowance for loan losses will continue to be based on management’s quarterly in-depth evaluation that is discussed in further detail under the caption “Critical Accounting Policies - Allowance for Loan Losses” within this Management’s Discussion and Analysis.

NONINTEREST INCOME

Total noninterest income increased $1,068, or 17.4%, in 2011 as compared to 2010.  Contributing most to the 2011 growth in noninterest income were increases in seasonal tax refund processing fees and debit/credit card interchange income, partially offset by higher OREO losses.

The successful growth in noninterest revenue was largely due to increased ERC/ERD fees. During 2011, the Company’s ERC/ERD fees increased by $1,779, or 228.1%, as compared to the same period in 2010. The increase was due to a volume increase in the number of ERC/ERD transactions that were processed during the first and second quarters of 2011. For the 2011 tax season, the tax software provider was able to expand the number of tax preparers utilizing its software, which contributed to the volume increase. Because ERC/ERD fee activity is mostly seasonal, the majority of income was recorded during the first half of 2011, with only minimal income recorded thereafter.

The Company also experienced noninterest income growth from its debit and credit interchange income, which increased $389, or 39.0%, during the year ended 2011 as compared to 2010.  The volume of transactions utilizing theCompany’s credit card and Jeanie® Plus debit card continued to increase from a year ago. Beginning in the second half of 2010, the Company began offering incentive-based credit cards that would permit its users to redeem accumulated points for merchandise, as well as cash incentives paid, particularly to business users based on transaction criteria. In addition, similar incentives were introduced to the Company’s Jeanie® Plus debit cards during the first quarter of 2011 to promote customer spending. While incenting debit/credit card customers has increased customer use of electronic payments, which has contributed to higher interchange revenue, the strategy also fits well with the Company’s emphasis on growing and enhancing its customer relationships.

Partially offsetting the noninterest revenue improvements in 2011 from ERC/ERD and debit/credit card interchange fees were higher net losses on the sales of OREO.  During the year ended 2011, sales of OREO resulted in a net loss of $1,224, which was up from the $177 in net OREO losses experienced during the year ended 2010.  The increase in net losses during 2011 was largely attributed to impairment charges taken on two commercial real estate foreclosed properties.  These losses were the result of recent re-evaluations of the carrying values for both properties. Based on weakened market conditions, management applied a discount to the appraised value of the properties and increased the estimated liquidation expenses associated with both properties. The results were a $480 impairment charge recorded in September 2011 and a $786 impairment charge recorded in December 2011.  Collectively, these charges taken on both commercial real estate properties contributed most to the higher year-to-date OREO losses in 2011 as compared to 2010.

 The remaining noninterest income categories were down $53, or 1.2%, during the year ended 2011, as compared to 2010.  These changes were due mostly to lower trust fee income, lower earnings from tax-free BOLI investments and lower loan insurance income due to the decline in loan demand, which has limited insurance sale opportunities.

In 2010, total noninterest income decreased $1,444, or 19.0%, as compared to 2009. This decrease in noninterest income was mostly led by a $614, or 21.8%, decrease in the Company’s service charges on deposit accounts from 2009, particularly overdraft fees.  The volume of overdraft balances decreased in 2010 as customers continued to present fewer checks against non-sufficient funds.  New regulatory guidance adopted in July 2010 placed daily and annual limits on the amount of overdraft fees a customer can be assessed, which also contributed to the decline in overdraft volume.  Decreases in noninterest income during 2010 also came from lower earnings from tax-free BOLI investments, which decreased $570, or 43.5%, during 2010.  BOLI investments are maintained by the Company to fund various benefit plans, including deferred compensation plans, director retirement plans and supplemental retirement plans.  Largely contributing to lower BOLI earnings in 2010 was the collection of $556 in life insurance proceeds during the third quarter of 2009, whereas no life insurance proceeds were received during 2010.  Further decreasing noninterest revenue during 2010 was lower mortgage banking income, which decreased $396, or 52.2%, affected by a reduction in the volume of real estate loans sold to the secondary market.  Historic low interest rates on long-term fixed-rate mortgage loans contributed to an increased consumer demand to refinance their existing mortgages in 2009.  To help manage this consumer demand for longer-termed, fixed-rate real estate mortgages, the Company sold most real estate loans it originated during that period.  This decision to sell long-term fixed-rate mortgages at lower rates was also effective in minimizing the interest rate risk exposure to rising rates.  The Company also experienced higher net losses on the sales of OREO during 2010, which lowered noninterest income by $215, or 565.8%.  The increase in net losses was largely due to the sale of one property during the second quarter of 2010 that resulted in a net loss of $148.  Partially offsetting these noninterest income decreases in 2010 was growth in the Company’s ERC/ERD fees of $252, or 47.7%, affected mostly by a larger volume of transactions that were processed.

NONINTEREST EXPENSE

Management continues to work diligently to minimize the growth in noninterest expense.  For 2011, total noninterest expense increased $1,656, or 6.2%.  Contributing most to the growth in net overhead expense were higher salaries and employee benefits, as well as increases in foreclosure and data processing costs.

The Company’s largest noninterest expense item, salaries and employee benefits, increased $1,003, or 6.4%, during 2011 as compared to 2010.  The increase was largely due to annual merit increases, higher health insurance premiums and an increase in the number of employees.  During 2011, the Company experienced a higher full-time equivalent employee base, increasing from 279 employees at year-end 2010 to 285 employees at year-end 2011, increasing salaries and employee benefit expenses during 2011.  During 2010, salary and employee benefits increased $823, or 5.6%, from 2009.  The increase was largely due to annual merit increases, increased health insurance benefit costs and an increase in the number of employees.  The Company’s full-time equivalent employees increased from 270 employees at year-end 2009 to 279 employees at year-end 2010.

Also contributing to additional noninterest expense during 2011 were foreclosed asset costs which totaled $650 during the year ended 2011, as compared to $67 during the year ended 2010.  This $583 increase in foreclosed asset costs in 2011 was related mostly to two commercial real estate properties.  Foreclosure expenses include the costs in maintaining the properties, which consist of taxes and general maintenance.  During 2010, foreclosed asset expense decreased $83, or 55.3%, as compared to 2009.

The Company also realized increases to its data processing expenses, which increased $206, or 30.1%, during 2011.  The Company continues to take great strides in utilizing the growing technology offered to financial institutions to enhance its loan and deposit products to better serve its customers. Data processing costs include processing services for the Company’s debit and credit cards as well as online and mobile banking technology.  During 2010, data processing expense increased $15, or 2.2%, as compared to 2009.

Various noninterest expense categories decreased from a year ago to partially offset the salary and employee benefit, data processing and foreclosed asset expenses.  Occupancy and furniture/equipment costs decreased $95, or 3.4%, during 2011.  This decrease was largely due to lower depreciation expense on purchased equipment from prior years based on a declining balance method that accelerates depreciation costs in the early stages of the assets’ useful life. With no significant equipment purchases during 2011, the acceleration effect of depreciation has decreased. During 2010, occupancy and furniture/equipment expense increased $20, or 0.7%, as compared to 2009.

  Also partially offsetting the overhead expense increase during 2011 was a $32, or 3.0%, decrease in FDIC premium expense as compared to 2010.  During the fourth quarter of 2009, the FDIC approved an alternative to future special assessments, which was to have all banks prepay twelve quarters worth of FDIC assessments. On December 30, 2009, the Company prepaid its assessment in the amount of $3,567. The prepayment, which included assumptions about future deposit and assessment rate growth, was based on third quarter 2009 deposits. The prepaid amount is being amortized over the entire prepayment period. The monthly expense associated with this prepaid FDIC insurance increased during the first and second quarters of 2011 in relation to growing deposit and assessment assumptions. Beginning April 1, 2011, the assessment base for deposit insurance premiums changed from total domestic deposits to average total assets minus average tangible equity, and the assessment rate schedules changed. The new assessment method has afforded the Company lower net premium assessments during the third and fourth quarters of 2011. While the Company has benefited from having its FDIC insurance expense amortized over twelve quarters, continued declines in the Deposit Insurance Fund could result in the FDIC imposing additional assessments in the future, which could adversely affect the Company's capital levels and earnings.  During 2010, FDIC premium expense decreased $564, or 34.7%, as compared to 2009. This change in lower deposit insurance expense was due to increases in fee assessment rates in 2009 combined with a special assessment of $373 that was applied to all FDIC insured institutions during 2009.

In 2011, the Company’s other noninterest expense decreased $8, or 0.1%, largely from changes in donations, legal, accounting and consulting fees.  In 2010, other noninterest expense increased $157, or 2.8%, from 2009.  The increase was mostly impacted by legal, accounting and consulting fees, which were collectively up $274, or 60.1%, during 2010 as compared to 2009.  This growth was primarily due to various capital planning costs incurred by Ohio Valley, the parent company, during the first half of 2010.  Also impacting other noninterest expense were increases in donations of $214, or 202.0%, over 2009 largely due to local school contributions within Gallia County, Ohio.  These increasing factors were partially offset by decreases in the Company’s stationary, supplies and postage expenses, which were collectively down $260, or 12.2%, from 2009, which demonstrated management’s cost savings focus on maintaining limited growth in overhead expense to help offset the negative effects of higher provision expense and lower noninterest revenue.

The Company’s efficiency ratio is defined as noninterest expense as a percentage of fully tax-equivalent net interest income plus noninterest income. Management continues to place emphasis on managing its balance sheet mix and interest rate sensitivity to help expand the net interest margin as well as developing more innovative ways to generate noninterest revenue. A strong net interest income due to lower funding costs combined with higher noninterest income from ERC/ERD fees has had a positive effect on efficiency during 2011. However, the Company also experienced non-recurring OREO impairment charges of $1,266 which limited the growth in noninterest revenue during 2011.  Furthermore, the Company experienced increased foreclosure costs of $583, primarily during the fourth quarter of 2011, on two commercial real estate properties which contributed to higher overhead expense.  As a result, overhead expense for 2011 has outpaced revenue levels, which has caused the year-to-date efficiency ratio to worsen from the prior period. The efficiency ratio during 2011 increased to 68.2% from the 67.4% experienced during 2010.

FINANCIAL CONDITION:

CASH AND CASH EQUIVALENTS

The Company’s cash and cash equivalents consist of cash, interest- and non-interest bearing balances due from banks and federal funds sold.  The amounts of cash and cash equivalents fluctuate on a daily basis due to customer activity and liquidity needs.  At December 31, 2011, cash and cash equivalents had decreased $8,121, or 13.6%, to $51,630 as compared to $59,751 at December 31, 2010.  The decrease in cash and cash equivalents was largely affected by the Company’s decrease in interest-bearing Federal Reserve Bank clearing account balances. While loan demand remains challenged, the Company continues to utilize its interest-bearing Federal Reserve Bank clearing account to manage its excess funds during periods of significant liquidity. Heading into 2011, the Company saw its deposit liabilities, both interest- and noninterest-bearing, increase $22,259, or 3.3%, during the second half of 2010, which contributed to excess fund levels. In addition, during the first quarter of 2011, the Company experienced higher levels of excess funds due to increased tax refund deposits from its RAL and ERC/ERD tax business. Liquidity levels normalized during the second and third quarters of 2011 as these short-term tax refund deposits were fully disbursed from the Federal Reserve Bank clearing account. During this time, the Company also utilized its Federal Reserve Bank clearing account to manage both investment security purchases and maturities, as well as to fund continued maturities of retail and wholesale CD’s. The interest rate paid on both the required and excess reserve balances of the Company’s Federal Reserve Bank clearing account is based on the targeted federal funds rate established by the Federal Open Market Committee. As of the filing date of this report, the interest rate calculated by the Federal Reserve continues to be 0.25%. This interest rate is similar to what the Company would have received from its investments in federal funds sold, currently in a range of less than 0.25%. Furthermore, Federal Reserve Bank balances are 100% secured.

As liquidity levels vary continuously based on consumer activities, amounts of cash and cash equivalents can vary widely at any given point in time.  The Company’s focus will be to continue to re-invest these liquid funds back into longer-term, higher yielding assets, such as loans and investment securities during 2012 when the opportunities arise.  Further information regarding the Company’s liquidity can be found under the caption “Liquidity” in this Management’s Discussion and Analysis.

SECURITIES

Management's goal in structuring the portfolio is to maintain a prudent level of liquidity while providing an acceptable rate of return without sacrificing asset quality.  Maturing securities have historically provided sufficient liquidity such that management has not sold a debt security in several years, other than renewals or replacements of maturing securities.

During 2011, the balance of total securities did not change significantly on a net basis, increasing just $501, or 0.5%, as compared to 2010, with the ratio of securities to total assets also increasing to 13.5% at December 31, 2011, compared to 12.7% at December 31, 2010.  The Company’s investment securities portfolio consists of U.S. Treasury securities, U.S. Government sponsored entity (“GSE”) securities, U.S. Government agency mortgage-backed securities and obligations of states and political subdivisions.  During the first half of 2011, the Company experienced a significant increase in excess funds resulting from core deposit liability growth during the second half of 2010 and tax refund deposits during the first quarter of 2011. With loan demand remaining challenged, the Company invested a portion of its excess funds into long-term Agency mortgage-backed securities, which have increased $16,563, or 27.1%, from year-end 2010. Typically, the primary advantage of Agency mortgage-backed securities has been the increased cash flows due to the more rapid monthly repayment of principal as compared to other types of investment securities, which deliver proceeds upon maturity or call date. However, with the current low interest rate environment and loan balances on a declining pace, the cash flow that is being collected is being reinvested at lower rates. Principal repayments from Agency mortgage-backed securities totaled $18,920 during 2011.

While security growth has been evident within the Company’s Agency mortgage-backed securities portfolio, it has experienced offsetting decreases in its U.S. Treasury and GSE securities balances, which have decreased $11,566, or 67.7%, and $5,172, or 66.9%, respectively, from year-end 2010. In addition to helping achieve diversification within the Company’s investment securities portfolio, U.S. Treasury and GSE securities have also been used to satisfy pledging requirements for repurchase agreements. During the third quarter of 2011, however, newly enacted legislation permitted business checking accounts to earn interest on their deposits. This legislation has prompted all of the Company’s repurchase agreement accounts to reinvest into either interest-bearing demand accounts subject to normal FDIC insurance coverage or noninterest-bearing demand accounts with unlimited FDIC insurance coverage until the end of 2012. As a result, at December 31, 2011, the Company’s repurchase agreement balance was $0.  With the general decrease in interest rates evident since 2008, the reinvestment rates on debt securities continue to show lower returns during 2011.  The weighted average FTE yield on debt securities at year-end 2011 was 2.36%, as compared to 2.94% at year-end 2010 and 3.38% at year-end 2009.  As a result, the Company’s focus will be to generate interest revenue primarily through loan growth, as loans generate the highest yields of total earning assets.  Table III provides a summary of the portfolio by category and remaining contractual maturity.  Issues classified as equity securities have no stated maturity date and are not included in Table III.

LOANS

In 2011, the Company's primary category of earning assets and most significant source of interest income, total loans, decreased $43,014, or 6.7%, to finish at $598,308.  Lower loan balances were mostly influenced by total consumer loans, which were down $15,353, or 12.5%, from year-end 2010 to total $107,163. The Company’s consumer loans are primarily secured by automobiles, mobile homes, recreational vehicles and other personal property. Personal loans and unsecured credit card receivables are also included as consumer loans. The decrease in consumer loans came mostly from the Company’s automobile lending portfolio, which decreased $12,569, or 21.6%, from year-end 2010. The automobile lending component comprises the largest portion of the Company’s consumer loan portfolio, representing 42.7% of total consumer loans at December 31, 2011. In recent years, growing economic factors have weakened the economy and have limited consumer spending. During this time of economic challenge, the Company continues to maintain a strict loan underwriting process on its consumer auto loan offerings to limit future loss exposure. The Company’s interest rates offered on indirect automobile opportunities have struggled to compete with the more aggressive lending practices of local banks and alternative methods of financing, such as captive finance companies offering loans at below-market interest rates related to this segment. The decreasing trend of auto loan balances should continue during 2012, as the larger institutions and captive finance companies will continue to aggressively compete for a larger share of the market.

The remaining consumer loan products were collectively down $2,784, or 4.3%, which included general decreases in loan balances from recreational vehicles, mobile homes, home equity lines of credit and unsecured loans. Management will continue to place more emphasis on other loan portfolios (i.e. commercial and, to a smaller extent, residential real estate) that will promote increased profitable loan growth and higher returns. Indirect automobile loans bear additional costs from dealers that partially offset interest revenue and lower the rate of return.

Generating residential real estate loans remains a key focus of the Company’s lending efforts. Residential real estate loan balances comprise the largest portion of the Company’s loan portfolio and consist primarily of one- to four-family residential mortgages and carry many of the same customer and industry risks as the commercial loan portfolio.  During 2011, total residential real estate loan balances decreased $10,389, or 4.4%, from year-end 2010 to total $226,489.  The decrease was mostly from the Company’s 15-, 20- and 30-year fixed-rate loans, which were down $12,345, or 7.0%, from year-end 2010. Long-term interest rates continue to remain at historic low levels. In recent years, the Company has experienced periods of increased refinancing demand for long-term, fixed-rate real estate loans, particularly during the first half of 2009 and the second half of 2010, as a result of the historic low rates. Management has determined that originating 100% of the demand for long-term fixed-rate real estate loans at such low rates would present an unacceptable level of interest rate risk. Therefore, to help manage interest rate risk while also satisfying the demand for long-term, fixed-rate real estate loans, the Company has strategically chosen to originate and sell most of its fixed-rate mortgages to the secondary market. During these heavy periods of increased refinancing in 2009 and 2010, consumers were able to take advantage of low rates and reduce their monthly costs. As a result, during the year ended December 31, 2011, refinancing volume that led to secondary market sales trended down, with 118 loans sold totaling $13,637 as compared to 133 loans sold totaling $16,825 during the year ended December 31, 2010.  This trend of secondary market emphasis also contributed to a lower balance of one-year adjustable-rate mortgages, which were down $2,611, or 10.8%, from year-end 2010. The remaining real estate loan portfolio balances increased $4,567 primarily from the Company’s other variable-rate products. The Company believes it has limited its interest rate risk exposure due to its practice of promoting and selling residential mortgage loans to the secondary market. The Company will continue to follow this secondary market strategy until long-term interest rates increase back to a range that falls within an acceptable level of interest rate risk.

Further impacting lower loan balances were decreases in the Company’s commercial loan portfolio, which include both commercial real estate and commercial and industrial loans.  At December 31, 2011, commercial and industrial and commercial real estate loans decreased $10,106, or 18.3%, and $7,166, or 3.2%, respectively, from year-end 2010.  While commercial loans were down, management continues to place emphasis on its commercial lending, which generally yields a higher return on investment as compared to other types of loans.  During 2011, the Company’s 18.3% decrease in the commercial and industrial loan portfolio was largely due to charge-offs and decreasing loan demand.  Commercial and industrial loans consist of loans to corporate borrowers primarily in small to mid-sized industrial and commercial companies that include service, retail and wholesale merchants.  Collateral securing these loans includes equipment, inventory, and stock.

Commercial real estate, the Company’s largest segment of commercial loans, also decreased $7,166, or 3.2%, from year-end 2010, largely due to charge-offs and decreasing loan demand.  This segment of loans consists of owner-occupied, nonowner-occupied and construction loans.  Commercial real estate also includes loan participations with other banks outside the Company’s primary market area.  Although the Company is not actively seeking to participate in loans originated outside its primary market area, it has taken advantage of the relationships it has with certain lenders in those areas where the Company believes it can profitably participate with an acceptable level of risk.  Commercial real estate loans were down largely from its owner-occupied portfolio during 2011, which decreased $6,476, or 4.3%, from year-end 2010.  Owner-occupied loans consist of nonfarm, nonresidential properties.  A commercial owner-occupied loan is a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing operations conducted by the party, or an affiliate of the party, who owns the property.  Owner-occupied loans of the Company include loans secured by hospitals, churches, and hardware and convenience stores.  Nonowner-occupied commercial loans are property loans for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property, such as apartment buildings, condominiums, hotels and motels.  These loans are primarily impacted by local economic conditions, which dictate occupancy rates and the amount of rent charged. Commercial construction loans are extended to individuals as well as corporations for the construction of an individual property or multiple properties and are secured by raw land and the subsequent improvements.

The total commercial loan portfolio, including participation loans, consists primarily of rental property loans (26.5% of portfolio), medical industry loans (11.3% of portfolio), hotel and motel loans (6.7% of portfolio) and land development loans (5.2% of portfolio).  During 2011, the primary market areas for the Company’s commercial loan originations, excluding loan participations, were in the areas of Gallia, Jackson, Pike and Franklin counties of Ohio, which accounted for 44.5% of total originations.  The growing West Virginia markets also accounted for 42.7% of total originations for the same time period.  While management believes lending opportunities exist in the Company’s markets, future commercial lending activities will depend upon economic and related conditions, such as general demand for loans in the Company’s primary markets, interest rates offered by the Company, the effects of competitive pressure and normal underwriting considerations.

The Company continues to monitor the pace of its loan volume. The well-documented housing market crisis and other disruptions within the economy have negatively impacted consumer spending, which has continued to limit the lending opportunities within the Company's market locations. Declines in the housing market since 2009, with falling home prices and increasing foreclosures and unemployment, have continued to result in significant write-downs of asset values by financial institutions. To combat this ongoing potential for loan loss, the Company will remain consistent in its approach to sound underwriting practices and a focus on asset quality. The Company anticipates its overall loan growth in 2012 to be challenged.

ALLOWANCE FOR LOAN LOSSES                                                                           

Tables IV and V have been provided to enhance the understanding of the loan portfolio and the allowance for loan losses.  Management evaluates the adequacy of the allowance for loan losses quarterly based on several factors, including, but not limited to, general economic conditions, loan portfolio composition, prior loan loss experience, and management's estimate of probable incurred losses.  Management continually monitors the loan portfolio to identify potential portfolio risks and to detect potential credit deterioration in the early stages, and then establishes reserves based upon its evaluation of these inherent risks.    Actual losses on loans are reflected as reductions in the reserve and are referred to as charge-offs.  The amount of the provision for loan losses charged to operating expenses is the amount necessary, in management's opinion, to maintain the allowance for loan losses at an adequate level that is reflective of probable and inherent loss.  The allowance required is primarily a function of the relative quality of the loans in the loan portfolio, the mix of loans in the portfolio and the rate of growth of outstanding loans.  Impaired loans, which include loans classified as TDR’s, are considered in the determination of the overall adequacy of the allowance for loan losses.

The continued struggles of our U.S. economy are having a direct impact on the Company’s borrowers, as they continue to experience financial difficulties and liquidity strains. The Company is faced with the ongoing decision of whether to foreclose on these troubled loans and take possession of the collateral or to work with the borrower to modify the original terms of the loan. A successful loan modification not only avoids costly foreclosure proceedings but, more importantly, could result in the full repayment of the loan principal amount. The Company continues to monitor and make loan modifications to certain troubled loans that would ease payment pressures on the borrower. Most generally, the modification “period” of the original terms of the loan is only temporary (i.e. 12 months), after which the loan would resume under the original contractual terms of the loan. GAAP and regulatory guidance identifies certain loan modifications that would be classified as TDR’s, which, in general, is when a bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the bank would not otherwise consider. One such qualification would be if the bank modified the original terms of the loan for the remaining original life of the debt. Modifications of the original terms would include temporarily adjusting the contractual interest rate of the loan or converting the payment method from principal and interest amortization payments to interest-only for a temporary period of time.

During 2011, the Company’s allowance for loan losses decreased $2,042 to finish at $7,344, as compared to $9,386 at year-end 2010.  This decrease in reserves was largely due to the partial charge-offs during the first half of 2011 of various commercial and residential real estate loans classified as impaired and TDR’s.  Beginning in 2011, the Company began to take partial charge-offs more quickly on collateral dependent loans.  As management further evaluated the trends in the real estate market, as well as the status of long-term, collateral dependent impaired loans, the decision to charge off these specific allocations was made.  As a result, net charge-offs during 2011 grew to $6,938, an increase from $4,683 in net charge-offs recorded during 2010.  The majority of net charge-offs were recorded during the first and second quarters of 2011, which totaled $4,278 and $2,332, respectively.

Partially offsetting the growth in net charge-offs and lowering provision expense was an increase in loan recoveries.  In 2011, the Company was successful in recovering amounts on previously charged-off loans.  During 2011, total loan recoveries were $3,484, an increase of $2,288, or 191.3%, over 2010.  The majority of loan recoveries were from commercial real estate and commercial and industrial loan balances that had been previously charged off.

Net charge-offs during the first quarter of 2011 were mostly from two commercial TDR loans with one borrower, for which a $3,839 partial charge-off was recorded due to declining asset values. Of this $3,839 in TDR loan charge-offs, approximately $2,906 had been previously allocated within the allowance for loan losses causing no additional provision expense to be charged. This previous allocation of the allowance for loan losses was the result of GAAP and regulatory guidance, which requires the Company to perform impairment analysis of the asset values on collateral-based TDR loans. This impairment analysis from prior periods resulted in specific allocation increases to the allowance for loan losses and corresponding increases to provision for loan losses expense. Yet, during the first quarter of 2011, a current impairment analysis revealed further deterioration in the collateral values associated with both commercial loans. As a result, it was determined an additional $933 in provision expense was necessary to account for this impairment. During the fourth quarter of 2011, the Company was successful in obtaining payoff from both of these commercial loans which led to the increase in loan recoveries previously mentioned.  The Company will continue to perform the required impairment analysis on both commercial loans and make adjustments to the allowance for loan losses as necessary.

Net charge-offs during the second quarter of 2011 were largely recorded on various collateral-based impaired loans during the month of June, using reserves that had previously been allocated for these loans within the allowance for loan losses. This action came after further cash flow analysis by management and additional feedback from regulators. In the near term, management expects to timely charge off specific reserves on collateral dependent loans.

As a result of the previously mentioned TDR loan charge-offs during the first quarter of 2011, as well as other charge-offs taken during the second quarter of 2011 on various collateral dependent impaired loans, the specific reserve allocations on both TDR and impaired loans decreased from $5,230 at December 31, 2010 to just $655 at December 31, 2011.  Given that a majority of these loan losses had been previously identified and specifically allocated for in periods prior to 2011, increases in provision expense were not required. However, these TDR and impaired loan charge-offs had an immediate impact on the Company’s general allocations related to the historical loan loss factor. This general allocation evaluates the average historical loan losses over the past 36 months and requires general allocations of the allowance for loan losses to be recorded as average loan losses increase. During 2011, the Company’s annualized ratio of net charge-offs to average loans grew to 1.11% as compared to 0.72% during 2010. This change in ratio had an immediate impact on the overall increase to the Company’s general charge-off allocation, which increased $1,099 from year-end 2010, primarily within the commercial real estate and commercial and industrial loan portfolios. Further affecting increases to the general allocations within the allowance for loan losses were the Company’s economic risk factor, classified and criticized asset allocations, which collectively increased $1,434 from December 31, 2010 to December 31, 2011.

The Company’s impaired loans decreased $11,534 from year-end 2010 in large part due to the commercial and residential real estate loan charge-offs previously mentioned. The portions of impaired loans for which there are specific allocations reflect losses that the Company expects to incur, as they will not likely be ableto collect all amounts due according to the contractual terms of the loan. Although impaired loans have been identified as potential problem loans, they may never become delinquent or classified as nonperforming. This was the case with the previously mentioned commercial loans that were partially charged-off during the first quarter of 2011.

The Company was successful in lowering its nonperforming loans to total loans, finishing at 0.52% at December 31, 2011 as compared to 0.78% at December 31, 2010. Nonperforming loans consist of nonaccruing loans and accruing loans past due 90 days or more. Nonperforming loans finished at $3,137 at December 31, 2011, compared to $5,009 at year-end 2010.  Lowering nonperforming loans also had an impact on lowering both the specific allocations of the allowance and corresponding provision expenses for the portfolio risks and credit deterioration of these nonperforming credits. The Company’s nonperforming assets (which includes nonperforming loans and OREO) to total assets ratio also lowered, finishing at 0.92% at December 31, 2011 as compared to 1.11% at December 31, 2010. Approximately 39.9% of nonperforming assets is related to two loans with one commercial borrower totaling $2,948 that was transferred into OREO during the second quarter of 2008. After a re-evaluation of the asset values of both properties during 2011, an impairment write-down of $1,266 was recorded and contributed to the decrease in nonperforming assets from year-end 2010.  Both nonperforming loans and nonperforming assets at December 31, 2011 continue to be in various stages of resolution for which management believes such loans are adequately collateralized or otherwise appropriately considered in its determination of the adequacy of the allowance for loan losses.

As a result of the specific reserve allocations used in the partial charge-offs of both TDR and impaired loans during the first half of 2011, the ratio of the allowance for loan losses to total loans decreased to 1.23% at December 31, 2011, compared to 1.46% at December 31, 2010. Because of the increase in net charge-offs, the Company has seen its general allocations within the allowance for loan losses increase, with its general allocations to total loans increasing from 0.65% at December 31, 2010 to 1.12% at December 31, 2011. Management believes that the allowance for loan losses at December 31, 2011 was adequate and reflected probable incurred losses in the loan portfolio. There can be no assurance, however, that adjustments to the allowance for loan losses will not be required in the future. Changes in the circumstances of particular borrowers, as well as adverse developments in the economy are factors that could change and make adjustments to the allowance for loan losses necessary. Asset quality will continue to remain a key focus, as management continues to stress not just loan growth, but quality in loan underwriting as well

DEPOSITS

Deposits are used as part of the Company’s liquidity management strategy to meet obligations for depositor withdrawals, to fund the borrowing needs of loan customers, and to fund ongoing operations.  Deposits, both interest- and noninterest-bearing, continue to be the most significant source of funds used by the Company to support earning assets.  The Company seeks to maintain a proper balance of “core” deposit relationships on hand while also utilizing various wholesale deposit sources, such as brokered and internet CD balances, as an alternative funding source to manage efficiently the net interest margin.  Deposits are influenced by changes in interest rates, economic conditions and competition from other banks.  The accompanying table VII shows the composition of total deposits as of December 31, 2011.  Total deposits decreased $6,895, or 1.0%, to finish at $687,886 at December 31, 2011, resulting mostly from a net decrease in the Company’s time deposit balances due to increased maturity runoff of CD’s. This change in time deposits from year-end 2010 fits within management’s strategy of focusing on more core deposit balances that include interest-bearing demand, savings, money market and noninterest-bearing deposit balances. Core relationship deposits are considered by management as a primary source of the Bank’s liquidity. The Bank focuses on these kinds of deposit relationships with consumers from local markets who can maintain multiple accounts and services at the Bank. The Company views core deposits as the foundation of its long-term funding sources because it believes such core deposits are more stable and less sensitive to changing interest rates and other economic factors. As a result, the Bank’s core customer relationship strategy has resulted in a higher portion of its deposits being held in NOW, savings and money market accounts at December 31, 2011 than at December 31, 2010, while a lesser portion was being held in brokered and retail time deposits at December 31, 2011 than at December 31, 2010. Furthermore, the Company’s core noninterest-bearing demand accounts increased from year-end 2010.

Deposit decreases from year-end 2010 came mostly from the Company’s time deposits. Historically, time deposits, particularly CD’s, had been the most significant source of funding for the Company’s earning assets, making up 44.5% of total deposits at December 31, 2010. However, these funding sources continue to be less emphasized due to lower market rates and the Company’s focus on growing its core deposit balances. As a result, time deposits represented 36.0% of total deposits at December 31, 2011.  During 2011, time deposits decreased $61,319, or 19.8%, from year-end 2010. With loan balances down 6.7% from year-end 2010, the Company has not needed to employ aggressive funding measures, such as offering higher rates, to attract customer investments in CD’s. Furthermore, as market rates remain at low levels from 2009 and 2010, the Company has seen the cost of its retail CD balances continue to reprice downward (as a lagging effect to the actions by the Federal Reserve) to reflect current deposit rates. As the Company’s CD rate offerings have fallen considerably from a year ago, the Bank’s CD customers have been more likely to consider re-investing their matured CD balances into other short-term deposit products or with other institutions offering the most attractive rates. This has led to an increased maturity runoff within its “customer relation” retail CD portfolio. Furthermore, with the significant downturn in economic conditions, the Bank’s CD customers in general have experienced reduced funds available to deposit with structured terms, choosing to remain more liquid. As a result, the Company has experienced a decrease within its retail CD balances, which were down $39,767 from year-end 2010. The Company’s preference of core deposit funding sources has created a lesser reliance on brokered and internet CD issuances, which were also down $21,552 from year-end 2010. The Company will continue to evaluate its use of brokered CD’s to manage interest rate risk associated with longer-term, fixed-rate asset loan demand.

While time deposits decreased during 2011, the Company’s remaining deposits, both interest- and noninterest-bearing, collectively increased $54,424, or 14.1%, from year-end 2010.  The increase came mostly from a significant portion of the Company’s repurchase agreement funds reinvesting into interest- and noninterest-bearing checking accounts during the second half of 2011.  Prior to 2011, banking regulations prohibited the payment of interest on commercial demand deposit accounts. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, which created significant financial reform. One of those changes, which took effect in the third quarter of 2011, now permits banks to pay interest on business checking accounts. The Company evaluated the effects of this change to its business deposit account relationships, particularly within its repurchase agreement borrowings. Repurchase agreements are financing arrangements with business accounts that have overnight maturity terms. These overnight funds are paid a rate of interest and require various securities to be pledged as collateral. During the third quarter of 2011, the Company began offering to its repurchase agreement depositors the opportunity to reinvest their balances into one of two products: 1) a higher-yielding, interest-bearing demand deposit (Commercial NOW) account that would be subject to standard FDIC insurance coverage, or 2) a noninterest-bearing demand deposit (business checking) account that would have unlimited FDIC insurance coverage up to the end of 2012. As a result, the Company saw 100% of its repurchase agreement balances shift into its core deposit segment. At December 31, 2011, the Company’s interest-free funding source, noninterest-bearing demand deposits, had increased $46,194, or 50.2%, from year-end 2010, with the majority coming from its business checking account growth from the reinvestment of repurchase agreement balances. Also at December 31, 2011, the Company’s interest-bearing demand deposit (NOW) accounts increased $74, or 0.1%, from year-end 2010, mostly within commercial NOW accounts that received reinvested dollars from repurchase agreement balances.  Not only does this provide the Company’s business account relationships with options to better suit their needs, it also fits in its preference to grow core deposits and to establish more solid customer relationships.

Partially offsetting core deposit growth within the Company’s NOW account deposits in 2011 were decreases in public fund account balances, which were down $7,627, or 13.4%, from year-end 2010. This decrease was largely driven by public fund balances related to local city and county school construction projects within Gallia County, Ohio. While the Company feels confident in the relationships it has with its public fund customers, these balances will continue to experience “larger” fluctuations than other deposit account relationships due to the nature of the account activity. Larger public fund balance fluctuations are, at times, seasonal and can be predicted while most other large fluctuations are outside of management’s control. The Company values these public fund relationships it has secured and will continue to market and service these accounts to maintain its long-term relationship.

Interest-bearing deposit growth also came from money market accounts, which were up $4,115, or 2.8%, from year-end 2010. The increase came largely from the Company’s Market Watch product. The Market Watch product is a limited transaction investment account with tiered rates that competes with current market rate offerings and serves as an alternative to certificates of deposit for some customers. With an added emphasis on further building and maintaining core deposit relationships, the Company has marketed several attractive incentive offerings in the past several years to draw customers to this particular product. Most recently, the Company offered a special six-month introductory rate offer of 2.00% APY during 2010’s third quarter for new Market Watch accounts. This special offer was well received by the Bank’s customers and contributed to elevating money market balances during the second half of 2010. The promotion ended during the first quarter of 2011, and the interest rate adjusted down to a current market rate. A portion of deposits have been retained since the lowering of the rate as Market Watch balances are up $4,017, or 2.8%, from year-end 2010.

Additional interest-bearing core deposit growth also came from the Company’s savings account balances, which increased $4,041, or 9.5%, from year-end 2010, coming primarily from its statement savings product. The increase in savings account balances reflects the customer’s preference to remain liquid while the opportunity for market rates to rise in the near future still exists. As CD market rates continue to adjust downward, the spread between a short-term CD rate and a statement savings rate have become close enough for customers to invest their balances into the more liquid statement savings account.

The Company will continue to experience increased competition for deposits in its market areas, which should challenge its net growth. The Company will continue to emphasize growth in its core deposit relationships during 2012, reflecting the Company’s efforts to reduce its reliance on higher cost funding and improving net interest income.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Repurchase agreements, which are financing arrangements that have overnight maturity terms, decreased from $38,107 at December 31, 2010 to $0 at December 31, 2011.  As previously mentioned, the re-distribution of 100% of the Company’s repurchase agreements to other deposit products was due to newly enacted legislation during the third quarter of 2011 which permits banks to now pay interest on its business checking accounts. All of the Company’s repurchase agreement depositors took advantage of two interest-bearing and noninterest-bearing products to reinvest their dollars.  Not only does this provide the Company’s business account relationships with options to better suit their needs, it also fits in its preference to grow core deposits and to establish more solid customer relationships.

OTHER BORROWED FUNDS

The Company also accesses other funding sources, including short-term and long-term borrowings, to fund asset growth and satisfy short-term liquidity needs. Other borrowed funds consist primarily of Federal Home Loan Bank (“FHLB”) advances and promissory notes. During 2011, other borrowed funds were down $7,447, or 26.8%, from year-end 2010. While net loan demand was on a declining pace during 2011, management used the retained deposit proceeds from the first quarter’s seasonal tax activity to repay FHLB borrowings. While deposits continue to be the primary source of funding for growth in earning assets, management will continue to utilize various wholesale borrowings to help manage interest rate sensitivity and liquidity.

OFF-BALANCE SHEET ARRANGEMENTS

As discussed in Notes G and J, the Company engages in certain off-balance sheet credit-related activities, including commitments to extend credit and standby letters of credit, which could require the Company to make cash payments in the event that specified future events occur. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Standby letters of credit are conditional commitments to guarantee the performance of a customer to a third party. While these commitments are necessary to meet the financing needs of the Company’s customers, many of these commitments are expected to expire without being drawn upon. Therefore, the total amount of commitments does not necessarily represent future cash requirements.

CAPITAL RESOURCES

The Company maintains a capital level that exceeds regulatory requirements as a margin of safety for its depositors. As detailed in Note N to the financial statements at December 31, 2011, the Bank’s capital exceeded the requirements to be deemed “well capitalized” under applicable prompt corrective action regulations.  Total shareholders' equity at December 31, 2011 of $71,843 was up $3,715, or 5.5%, as compared to the balance of $68,128 at December 31, 2010. Contributing most to this increase was year-to-date net income of $5,835, partially offset by cash dividends paid of $3,360, or $.83 per share. The Company had treasury stock totaling $15,712 at December 31, 2011, unchanged from year-end 2010.

INTEREST RATE SENSITIVITY AND LIQUIDITY

The Company’s goal for interest rate sensitivity management is to maintain a balance between steady net interest income growth and the risks associated with interest rate fluctuations.  Interest rate risk (“IRR”) is the exposure of the Company’s financial condition to adverse movements in interest rates.  Accepting this risk can be an important source of profitability, but excessive levels of IRR can threaten the Company’s earnings and capital.

The Company evaluates IRR through the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates.  The modeling process starts with a base case simulation, which assumes a static balance sheet and flat interest rates.  The base case scenario is compared to rising and falling interest rate scenarios assuming a parallel shift in all interest rates.  Comparisons of net interest income and net income fluctuations from the flat rate scenario illustrate the risks associated with the current balance sheet structure.

The Company’s Asset/Liability Committee monitors and manages IRR within Board approved policy limits.  The current IRR policy limits anticipated changes in net interest income to an instantaneous increase or decrease in market interest rates over a 12 month horizon to +/- 5% for a 100 basis point rate shock, +/- 7.5% for a 200 basis point rate shock and +/- 10% for a 300 basis point rate shock.  Based on the level of interest rates, management did not test interest rates down 200 or 300 basis points.

    The estimated percentage change in net interest income due to a change in interest rates was within the policy guidelines established by the Board.  With the historical low interest rate environment, management generally has been focused on limiting the duration of assets, while trying to extend the duration of our funding sources to the extent customer preferences will permit us to do so.  The exposure to rising interest rates is primarily related to the level of fixed-rate mortgages, which have contractual terms as long as 30 years.  Presently, management attempts to sell most fixed-rate residential mortgages to the secondary market.  However, the underwriting criteria for secondary market loans continues to become more restrictive.  As a result, we booked a portion of the fixed-rate mortgages originated.  During the later part of 2011, management began limiting the maximum term to 15 years for fixed-rate real estate loans placed in the portfolio, which will reduce the duration of the mortgage portfolio over time.  The exposure to rising interest rates at December 31, 2011 was comparable to the prior year end.  Net interest income decreases in a declining rate environment due to the interest rate on many deposit accounts not being able to adjust downward.  With interest rates so low, deposit accounts are perceived to be at or near an interest rate floor.  Overall, management is comfortable with the current interest rate risk profile which reflects minimal exposure to interest rate changes.

Liquidity relates to the Company's ability to meet the cash demands and credit needs of its customers and is provided by the ability to readily convert assets to cash and raise funds in the market place. Total cash and cash equivalents, held to maturity securities maturing within one year and available for sale securities, totaling $137,948, represented 17.2% of total assets at December 31, 2011. In addition, the FHLB offers advances to the Bank, which further enhances the Bank's ability to meet liquidity demands. At December 31, 2011, the Bank could borrow an additional $137,038 from the FHLB, of which $95,000 could be used for short-term, cash management advances. Furthermore, the Bank has established a borrowing line with the Federal Reserve. At December 31, 2011, this line had total availability of $45,059. Lastly, the Bank also has the ability to purchase federal funds from a correspondent bank. For further cash flow information, see the condensed consolidated statement of cash flows.  Management does not rely on any single source of liquidity and monitors the level of liquidity based on many factors affecting the Company’s financial condition.

INFLATION

Consolidated financial data included herein has been prepared in accordance with US GAAP.  Presently, US GAAP requires the Company to measure financial position and operating results in terms of historical dollars with the exception of securities available for sale, which are carried at fair value.  Changes in the relative value of money due to inflation or deflation are generally not considered.

In management's opinion, changes in interest rates affect the financial institution to a far greater degree than changes in the inflation rate.  While interest rates are greatly influenced by changes in the inflation rate, they do not change at the same rate or in the same magnitude as the inflation rate.  Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as monetary and fiscal policies.  A financial institution's ability to be relatively unaffected by changes in interest rates is a good indicator of its capability to perform in today's volatile economic environment.  The Company seeks to insulate itself from interest rate volatility by ensuring that rate sensitive assets and rate sensitive liabilities respond to changes in interest rates in a similar time frame and to a similar degree.

CRITICAL ACCOUNTING POLICIES

     The most significant accounting policies followed by the Company are presented in Note A to the consolidated financial statements.  These policies, along with the disclosures presented in the other financial statement notes, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.  Management views critical accounting policies to be those that are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements.  Management currently views the adequacy of the allowance for loan losses to be a critical accounting policy.

The allowance for loan losses is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. 

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired.  A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans generally consist of loans with balances of $200 or more on nonaccrual status or nonperforming in nature.  Loans for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. 

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed. 

Commercial and commercial real estate loans are individually evaluated for impairment.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Smaller balance homogeneous loans, such as consumer and most residential real estate, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosure.  Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective rate at inception.  If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.  For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and impaired loans that are not individually reviewed for impairment and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 3 years.  This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.  These economic factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  The following portfolio segments have been identified:  Commercial Real Estate, Commercial and Industrial, Residential Real Estate, and Consumer. 

Commercial and industrial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole proprietorships, and other business enterprises.  Commercial and industrial loans are generally secured by business assets such as equipment, accounts receivable, inventory, or any other asset excluding real estate and generally made to finance capital expenditures or operations.  The Company’s risk exposure is related to deterioration in the value of collateral securing the loan should foreclosure become necessary.  Generally, business assets used or produced in operations do not maintain their value upon foreclosure, which may require the Company to write-down the value significantly to sell. 

Commercial real estate consists of nonfarm, nonresidential loans secured by owner-occupied and nonowner-occupied commercial real estate as well as commercial construction loans.  An owner-occupied loan relates to a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing business operations conducted by the party, or an affiliate of the party, who owns the property.  Owner-occupied loans that are dependent on cash flows from operations can be adversely affected by current market conditions for their product or service.  A nonowner-occupied loan is a property loan for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.  Nonowner-occupied loans that are dependent upon rental income are primarily impacted by local economic conditions which dictate occupancy rates and the amount of rent charged.  Commercial construction loans consist of borrowings to purchase and develop raw land into one- to four-family residential properties.  Construction loans are extended to individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements.  Repayment of the loans to real estate developers is dependent upon the sale of properties to third parties in a timely fashion upon completion.  Should there be delays in construction or a downturn in the market for those properties, there may be significant erosion in value which may be absorbed by the Company.

Residential real estate loans consist of loans to individuals for the purchase of one- to four-family primary residences with repayment primarily through wage or other income sources of the individual borrower.  The Company’s loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination. 

Consumer loans are comprised of loans to individuals secured by automobiles, open-end home equity loans and other loans to individuals for household, family, and other personal expenditures, both secured and unsecured.  These loans typically have maturities of 5 years or less with repayment dependent on individual wages and income.  The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is necessary.  During the last several years, one of the most significant portions of the Company’s net loan charge-offs have been from consumer loans.  Never the less, the Company has allocated the highest percentage of its allowance for loan losses as a percentage of loans to the other identified loan portfolio segments due to the larger dollar balances associated with such portfolios.

CONCENTRATIONS OF CREDIT RISK

The Company maintains a diversified credit portfolio, with residential real estate loans currently comprising the most significant portion.  Credit risk is primarily subject to loans made to businesses and individuals in southeastern Ohio and western West Virginia.  Management believes this risk to be general in nature, as there are no material concentrations of loans to any industry or consumer group.  To the extent possible, the Company diversifies its loan portfolio to limit credit risk by avoiding industry concentrations.

FORWARD LOOKING STATEMENTS

Except for the historical statements and discussions contained herein, statements contained in this report constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 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," and similar expressions.  Such statements involve various important assumptions, risks, uncertainties, and other factors, many of which are beyond our control that could cause actual results to differ materially from those expressed in such forward looking statements.  These factors include, but are not limited to:  changes in political, economic or other factors such as inflation rates, recessionary or expansive trends, and taxes; competitive pressures; fluctuations in interest rates; the level of defaults and prepayment on loans made by the Company; unanticipated litigation, claims, or assessments; fluctuations in the cost of obtaining funds to make loans; and regulatory changes.  Additional detailed information concerning a number of important factors which could cause actual results to differ materially from the forward-looking statements contained in management’s discussion and analysis is available in the Company’s filings with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, including the disclosure under the heading “Item 1A. Risk Factors” of Part 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. 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 intention to republish revised or updated forward looking statements, whether as a result of new information, unanticipated future events or otherwise.

CONSOLIDATED AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST INCOME
Table I	December 31
(dollars in thousands)	2011								2010								2009
	Average			Income/		Yield/			Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
Assets
Interest-earning assets
Interest-bearing balances with banks	$	67,947		$	163		0.24	%	$	43,450		$	93		0.21	%	$	27,077		$	58		0.21	%
Federal fuunds sold		-			-		-			-			-		-			18			-		0.05
Securities:
Taxable		102,740			2,043		1.99			93,846			2,462		2.62			97,124			3,038		3.13
Tax exempt		14,997			849		5.66			11,678			735		6.30			9,916			659		6.64
Loans		625,603			41,414		6.62			653,557			43,617		6.67			641,878			44,223		6.89
Total interest-earning assets		811,287			44,469		5.48	%		802,531			46,907		5.85	%		776,013			47,978		6.18	%
Non-interest-earning assets:
Cash and due from banks		9,855								8,836								8,524
Other nonearning assets		44,957								46,057								42,515
Allowance for loan losses		(8,082	)							(8,722	)							(8,100	)
Total noninterest-earning assets		46,730								46,171								42,939
Total asets	$	858,017							$	848,702							$	818,952
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts	$	104,937		$	1,393		1.33	%	$	100,054		$	1,428		1.43	%	$	92,550		$	1,326		1.43	%
Savings and Money Markets		196,312			1,317		0.67			164,297			1,582		0.96			135,728			1,636		1.21
Time deposits		281,864			5,726		2.03			327,330			8,043		2.46			331,130			10,721		3.24
Repurchase Agreements		19,196			17		0.09			26,991			57		0.21			27,540			75		0.27
Other borrowed money		24,279			627		2.58			36,640			1,348		3.68			48,905			2,085		4.26
Subordinated debentures		13,500			1,089		8.07			13,500			1,089		8.07			13,500			1,089		8.07
Total int-bearing liabilities		640,088			10,169		1.59	%		668,812			13,547		2.03	%		649,353			16,932		2.61	%
Noninterest-bearing liabilities:
Demand Deposit accounts		137,823								102,164								93,045
Other liabilities		10,240								10,120								11,613
Total noninterest-bearing liabilities		148,063								112,284								104,658
Shareholders' equity		69,866								67,606								64,941
Total liabilities and shareholders' equity	$	858,017							$	848,702							$	818,952
Net interest earnings				$	34,300							$	33,360							$	31,046
Net interest earnings as a percent
of interest-earning assets							4.23	%							4.16	%							4.00	%
Net interest rate spread							3.89	%							3.82	%							3.57	%
Avg interest-bearing liabilities
to interest-earning assets							78.90	%							83.34	%							83.68	%

Fully taxable equivalent yields are calculated assuming a 34% tax rate, net of nondeductible interest expense. Average balances are computed on an average daily basis. The average balance for available for sale securities includes the market value adjustment. However, the calculated yield is based on the securities’ amortized cost. Average loan balances include nonaccruing loans. Loan income includes cash received on nonaccruing loans.

RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME & EXPENSE
TABLE II
(dollars in thousands)				2011									2010
	Increase (Decrease)									Increase (Decrease)
	From Previous Years Due To									From Previous Years Due To
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
Interest income
Interest-bearing balances with banks	$	57		$	13		$	70		$	35		$	-		$	35
Federal fuunds sold		-			-			-			-			-			-
Securities:
Taxable		217			(636	)		(419	)		(99	)		(477	)		(576	)
Tax exempt		194			(80	)		114			112			(36	)		76
Loans		(1,853	)		(350	)		(2,203	)		795			(1,401	)		(606	)
Total interest income		(1,385	)		(1,053	)		(2,438	)		843			(1,914	)		(1,071	)
Interest expense
NOW accts		68			(103	)		(35	)		107			(5	)		102
Savings and Money Markets		272			(537	)		(265	)		309			(363	)		(54	)
Time deposits		(1,031	)		(1,286	)		(2,317	)		(122	)		(2,556	)		(2,678	)
Repurchase Agreements		(13	)		(27	)		(40	)		(2	)		(16	)		(18	)
Other borrowed money		(383	)		(338	)		(721	)		(476	)		(261	)		(737	)
Subordinated debentures		-			-			-			-			-			-
Total interest expense		(1,087	)		(2,291	)		(3,378	)		(184	)		(3,201	)		(3,385	)
Net interest earnings	$	(298	)	$	1,238		$	940		$	1,027		$	1,287		$	2,314

 The change in interest due to volume and rate is determined as follows: Volume Variance - change in volume multiplied by the previous year's rate; Yield/Rate Variance - change in rate multiplied by the previous year's volume; Total Variance - change in volume multiplied by the change in rate. The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Fully taxable equivalent yield assumes a 34% tax rate, net of related nondeductible interest expense.

SECURITIES
Table III
As of December 31, 2011
(dollars in thousands)
	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
U.S. Treasury securities	$	5,513		0.23	%	$	-		-		$	-		-		$	-		-
U.S. Government sponsored entity securities		2,559		5.30	%		-		-			-		-			-		-
Obligations of states and political subdivisions		648		7.41	%		3,901		5.20	%		10,289		3.23	%		7,987		5.17	%
Agency mortgage-backed securities, residential		1,148		4.66	%		55,342		3.75	%		16,219		3.44	%		4,912		3.40	%
Total securities	$	9,868		2.53	%	$	59,243		3.85	%	$	26,508		3.36	%	$	12,899		4.50	%

 Tax-equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions using a 34% rate. Weighted average yields are calculated on the basis of the cost and effective yields weighted for the scheduled maturity of each security. Mortgage-backed securities, which have prepayment provisions, are assigned to a maturity category based on estimated average lives. Securities are shown at their carrying values, which include the market value adjustments for available for sale securities.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
TABLE IV
(dollars in thousands)	Years Ended December 31
	2011			2010			2009			2008			2007
Commercial loans(1)	$	4,259		$	6,936		$	5,777		$	5,898		$	5,273
Percentage of loans to total loans		44.23	%		43.96	%		42.68	%		39.78	%		40.63	%
Residential real estate loans		1,730			993			822			806			327
Percentage of loans to total loans		37.85	%		36.94	%		37.30	%		40.09	%		39.31	%
Consumer loans(2)		1,355			1,457			1,599			1,095			1,137
Percentage of loans to total loans		17.92	%		19.10	%		20.02	%		20.13	%		20.06	%
Allowance for Loan Losses	$	7,344		$	9,386		$	8,198		$	7,799		$	6,737
		100	%		100	%		100	%		100	%		100	%
Ratio of net charge-offs
to average loans		1.11	%		0.72	%		0.44	%		0.42	%		0.78	%

The above allocation is based on estimates and subjective judgments and is not necessarily indicative of the specific amounts or loan categories in which losses may ultimately occur.

(1) Includes commercial and industrial and commercial real estate loans.

(2) Includes automobile, home equity and other consumer loans.

SUMMARY OF NONPERFORMING AND PAST DUE LOANS
TABLE V
(dollars in thousands)	At December 31
	2011			2010			2009			2008			2007
Impaired loans	$	11,572		$	23,106		$	27,644		$	21,153		$	6,871
Past due 90 days or more and still accruing		459			1,714			1,639			1,878			927
Nonaccrual		2,678			3,295			3,619			3,396			2,734
Accruing loans past due 90 days or more to
total loans		0.08	%		0.27	%		0.25	%		0.30	%		0.14	%
Nonaccrual loans as a % of total loans		0.45	%		0.51	%		0.56	%		0.54	%		0.43	%
Impaired loans as a % of total loans		1.93	%		3.60	%		4.24	%		3.36	%		1.08	%
Allowance for loan losses as a %
of total loans		1.23	%		1.46	%		1.26	%		1.24	%		1.06	%

     Management believes that the impaired loan disclosures are comparable to the nonperforming loan disclosures except that the impaired loan disclosures do not include single family residential or consumer loans which are analyzed in the aggregate for loan impairment purposes.

Management formally considers placing a loan on nonaccrual status when collection of principal or interest has become doubtful. Furthermore, a  loan should not be returned to the accrual status unless either all delinquent principal or interest has been brought current or the loan becomes well secured and is in the process of collection.

In 2009, the   Company changed its   methodology for identifying impaired loans.  Amounts  as of  December 31, 2008 have  been   reclassified to be   consistent with  the   2009 methodology. The change resulted in reclassifying current or performing loans as impaired loans for which full payment under the original terms is not probable. As of December 31, 2008, $13,054 of loans were reclassified as impaired loans and the related general allowance for loan losses allocation of $2,450 was reclassified as a specific allowance for loan losses. Prior to the change in methodology, the general allowance for loan losses allocation related to these loans was based on historical credit losses, and these allocations were materially consistent with amounts that would have been determined had the loans been classified as impaired. The reclassification had no impact on the allowance for loan losses, the provision for loan losses, net income or retained earnings. Amounts as of December 31, 2008 have been reclassified to be consistent with the 2009 methodology; however, amounts prior to December 31, 2008 have not been reclassified.

MATURITY AND REPRICING DATA OF LOANS
As of December 31, 2011
TABLE VI
(dollars in thousands)
	MATURITY / REPRICING
	Within		After One but
	One Year		Within Five Years		After Five Years		Total
Residential real estate loans	$	33,443	$	29,550	$	163,496	$	226,489
Commercial loans (1)		145,793		95,110		23,753		264,656
Consumer loans (2)		37,085		54,734		15,344		107,163
Total loans	$	216,321	$	179,394	$	202,593	$	598,308
Loans maturing or repricing after one year with:
Variable interest rates							$	96,596
Fixed interest rates								285,391
Total							$	381,987

(1) Includes commercial and industrial and commercial real estate loans.

(2) Includes automobile, home equity and other consumer loans.

DEPOSITS
Table VII
(dollars in thousands)	As of December 31
	2011		2010		2009
Interest-bearing deposits:
NOW accounts	$	101,907	$	101,833	$	91,998
Money Market		153,280		149,165		103,644
Savings accounts		46,792		42,751		38,834
IRA accounts		49,024		49,429		49,841
Certificates of Deposit		198,740		259,654		276,557
		549,743		602,832		560,874
Noninterest-bearing deposits:
Demand deposits		138,143		91,949		86,770
Total deposits	$	687,886	$	694,781	$	647,644

INTEREST RATE SENSITIVITY

Table VIII

Change in	December 31, 2011	December 31, 2010
Interest Rates	% Change in	% Change in
Basis Points	Net Interest Income	Net Interest Income
+300	(2.89%)	(2.47%)
+200	(1.75%)	(1.66%)
+100	(.76%)	(.95%)
-100	(2.36%)	(2.32%)

CONTRACTUAL OBLIGATIONS

Table IX

 The following table presents, as of December 31, 2011, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

	Payments Due In
	Note		One Year		One to		Three to		Over
	Reference		or Less		Three Years		Five Years		Five Years		Total
Deposits without a stated maturity		E	$	440,122	$	-	$	-	$	-	$	440,122
Consumer and brokered time deposits		E		141,710		93,893		11,234		927		247,764
Repurchase agreements		F		-		-		-		-		-
Other borrowed funds		G		3,944		8,829		2,134		5,389		20,296
Subordinated debentures		H		-		-		-		13,500		13,500

KEY RATIOS
TABLE X
	2011			2010			2009			2008			2007
Return on average assets		0.68	%		0.60	%		0.81	%		0.91	%		0.82	%
Return on average equity		8.35	%		7.54	%		10.23	%		11.62	%		10.40	%
Dividend payout ratio		57.59	%		65.67	%		47.95	%		42.94	%		46.66	%
Average equity to average assets		8.14	%		7.97	%		7.93	%		7.84	%		7.87	%

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

NAME	STATE OF INCORPORATION	PERCENTAGE OF OWNERSHIP
The Ohio Valley Bank Company	Ohio	100%
Loan Central, Inc.	Ohio	100%
Ohio Valley Financial Services Agency, LLC	Ohio	100%
Ohio Valley Statutory Trust I	Connecticut	100%
Ohio Valley Statutory Trust III	Delaware	100%

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-178575 on Form S-3, and in Registration Statement No. 333-162811 on Form S-3, of Ohio Valley Banc Corp of our report dated March 15, 2012 related to the consolidated financial statements and effectiveness of internal controls over financial reporting appearing in this Annual Report on Form 10-K of Ohio Valley Banc Corp for the year ended December 31, 2011.

                                                                          /s/Crowe Horwath LLP

                                                          Crowe Horwath LLP

Louisville, Kentucky

March 15, 2012

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Jeffrey E. Smith, certify that:

1.           I have reviewed this Annual Report on Form 10-K of Ohio Valley Banc Corp.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external puposes in accordance with generally accepted accouting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2012	By:	/s/ Jeffrey E. Smith
		Jeffrey E. Smith, Chairman and CEO
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Scott W. Shockey, certify that:

1.           I have reviewed this Annual Report on Form 10-K of Ohio Valley Banc Corp.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external puposes in accordance with generally accepted accouting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 15, 2012	By:	/s/ Scott W. Shockey
		Scott W. Shockey, Vice President and CFO
		(Principal Financial Officer)

EX-32

Exhibit 32

SECTION 1350 CERTIFICATION

In connection with the Annual Report of Ohio Valley Banc Corp. (the “Corporation”) on Form 10-K for the fiscal year ended December 31, 2011 (the “Report”), the undersigned Jeffrey E. Smith, Chairman and Chief Executive Officer of the Corporation, and Scott W. Shockey, Vice President and Chief Financial Officer of the Corporation, each certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

* /s/Jeffrey E. Smith	* /s/Scott W. Shockey
Jeffrey E. Smith	Scott W. Shockey
Chairman and Chief Executive Officer	Vice President Chief Financial Officer
Dated:  March 15, 2012	Dated:  March 15, 2012

* This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.  This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Corporation specifically incorporates it by reference in any such filing.

XML

Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2011

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses

Loans are comprised of the following at December 31:
	2011		2010
Residential real estate	$	226,489	$	236,878
Commercial real estate:
Owner-occupied		142,566		149,042
Nonowner-occupied		55,419		55,989
Construction		21,471		21,591
Commercial and industrial		45,200		55,306
Consumer:
Automobile		45,702		58,271
Home equity		20,507		20,527
Other		40,954		43,718
		598,308		641,322
Less:  Allowance for loan losses		7,344		9,386
Loans, net	$	590,964	$	631,936

The Bank originated refund anticipation loans that contributed fee income of $561 in 2011, $655 in 2010 and $397 in 2009.  As recommended by the FDIC, the Bank ceased offering refund anticipation loans effective April 19, 2011.

Activity in the allowance for loan losses was as follows:	2011			2010			2009
Balance, beginning of year	$	9,386		$	8,198		$	7,799
Loans charged off:
Residential real estate		1,649			971			1,172
Commercial real estate		2,298			2,766			59
Commercial and industrial		4,725			191			568
Consumer		1,750			1,951			2,532
Total loans charged off		10,422			5,879			4,331
Recoveries of loans:
Residential real estate		198			40			41
Commercial real estate		1,394			70			58
Commercial and industrial		1,127			25			672
Consumer		765			1,061			747
Total recoveries of loans		3,484			1,196			1,518
Net loan charge-offs		( 6,938	)		(4,683	)		(2,813	)
Provision charged to operations		4,896			5,871			3,212
Balance, end of year	$	7,344		$	9,386		$	8,198

As a result of management’s evaluation of the trends in the real estate market, the status of long-term, collateral dependent impaired loans and the current regulatory environment, management decided to take partial charge-offs more quickly on collateral dependent impaired loans during the second quarter of 2011.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended December 31, 2011:

	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	993		$	3,141		$	3,795		$	1,457		$	9,386
Provision for loan losses		2,188			1,386			439			883			4,896
Loans charged off		(1,649	)		(2,298	)		(4,725	)		(1,750	)		(10,422	)
Recoveries		198			1,394			1,127			765			3,484
Total ending allowance balance	$	1,730		$	3,623		$	636		$	1,355		$	7,344

The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010:

December 31, 2011	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	655	$	----	$	----	$	655
Collectively evaluated for impairment		1,730		2,968		636		1,355		6,689
Total ending allowance balance	$	1,730	$	3,623	$	636	$	1,355	$	7,344
Loans:
Loans individually evaluated for impairment	$	1,085	$	10,153	$	334	$	----	$	11,572
Loans collectively evaluated for impairment		225,404		209,303		44,866		107,163		586,736
Total ending loans balance	$	226,489	$	219,456	$	45,200	$	107,163	$	598,308

December 31, 2010	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	1,698	$	3,407	$	----	$	5,230
Collectively evaluated for impairment		868		1,443		388		1,457		4,156
Total ending allowance balance	$	993	$	3,141	$	3,795	$	1,457	$	9,386
Loans:
Loans individually evaluated for impairment	$	1,784	$	13,460	$	7,862	$	----	$	23,106
Loans collectively evaluated for impairment		235,094		213,162		47,444		122,516		618,216
Total ending loans balance	$	236,878	$	226,622	$	55,306	$	122,516	$	641,322

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

Information regarding impaired loans is as follows:	2011		2010
Year-end loans with no allocated allowance for loan losses	$	8,081	$	7,884
Year-end loans with allocated allowance for loan losses		3,491		15,222
Total impaired loans	$	11,572	$	23,106
Amount of the allowance for loan losses allocated	$	655	$	5,230
		2011		2010		2009
Average of individually impaired loans during year	$	11,163	$	24,589	$	27,927
Interest income recognized during impairment	$	647	$	1,158	$	1,793
Cash-basis interest income recognized	$	608	$	1,083	$	1,690

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2011:

December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Residential real estate	$	1,136	$	1,085	$	----	$	748	$	36	$	31
Commercial real estate:
Owner-occupied		5,713		5,470		----		5,510		325		317
Nonowner-occupied		1,192		1,192		----		1,247		56		49
Construction		----		----		----		----		----		----
Commercial and industrial		614		334		----		483		40		40
Consumer:
Automobile		----		----		----		----		----		----
Home equity		----		----		----		----		----		----
Other		----		----		----		----		----		----
With an allowance recorded:
Residential real estate		----		----		----		----		----		----
Commercial real estate:
Owner-occupied		420		420		130		84		27		22
Nonowner-occupied		2,396		2,396		437		2,414		128		118
Construction		675		675		88		677		35		31
Commercial and industrial		----		----		----		----		----		----
Consumer:
Automobile		----		----		----		----		----		----
Home equity		----		----		----		----		----		----
Other		----		----		----		----		----		----
Total	$	12,146	$	11,572	$	655	$	11,163	$	647	$	608

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.  The difference in the unpaid principal balance and recorded investment of the Company’s loans was not materially different at year-end 2011.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2010:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	1,284	$	1,244	$	----
Commercial real estate:
Owner-occupied		4,719		4,234		----
Nonowner-occupied		2,987		992		----
Construction		743		743		----
Commercial and industrial		671		671		----
Consumer:
Automobile		----		----		----
Home equity		----		----		----
Other		----		----		----
With an allowance recorded:
Residential real estate		540		540		125
Commercial real estate:
Owner-occupied		4,731		4,731		1,125
Nonowner-occupied		2,760		2,760		573
Construction		----		----		----
Commercial and industrial		7,191		7,191		3,407
Consumer:
Automobile		----		----		----
Home equity		----		----		----
Other		----		----		----
Total	$	25,626	$	23,106	$	5,230

Nonaccrual loans and loans past due 90 days or more and still accruing were as follows:

	December 31, 2011		December 31, 2010
Loans past due 90 days or more and still accruing	$	459	$	1,714
Nonaccrual loans	$	2,678	$	3,295

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of December 31, 2011 and 2010:

December 31, 2011	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	439	$	2,450
Commercial real estate:
Owner-occupied		----		125
Nonowner-occupied		----		86
Consumer:
Automobile		13		12
Home equity		----		5
Other		7		----
Total	$	459	$	2,678

December 31, 2010	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	1,487	$	2,200
Commercial real estate:
Owner-occupied		----		428
Nonowner-occupied		----		432
Consumer:
Automobile		114		100
Home equity		43		104
Other		70		31
Total	$	1,714	$	3,295

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the aging of the recorded investment of past due loans by class of loans as of December 31, 2011 and 2010:

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	3,662	$	1,144	$	2,889	$	7,695	$	218,794	$	226,489
Commercial real estate:
Owner-occupied		182		----		125		307		142,259		142,566
Nonowner-occupied		69		232		86		387		55,032		55,419
Construction		204		----		----		204		21,267		21,471
Commercial and industrial		171		14		----		185		45,015		45,200
Consumer:
Automobile		864		110		13		987		44,715		45,702
Home equity		75		76		5		156		20,351		20,507
Other		506		162		7		675		40,279		40,954
Total	$	5,733	$	1,738	$	3,125	$	10,596	$	587,712	$	598,308

December 31, 2010	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	4,731	$	1,951	$	3,448	$	10,130	$	226,748	$	236,878
Commercial real estate:
Owner-occupied		1,564		17		428		2,009		147,033		149,042
Nonowner-occupied		87		----		432		519		55,470		55,989
Construction		----		----		----		----		21,591		21,591
Commercial and industrial		15		----		----		15		55,291		55,306
Consumer:
Automobile		1,010		342		213		1,565		56,706		58,271
Home equity		78		50		147		275		20,252		20,527
Other		793		238		101		1,132		42,586		43,718
Total	$	8,278	$	2,598	$	4,769	$	15,645	$	625,677	$	641,322

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) is where the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDR's are considered to be impaired. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or short-term interest-only payment terms.

The Company has allocated reserves for a portion of its TDR’s to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

The following table presents the types of TDR loan modifications by class of loans as of December 31, 2011 and December 31, 2010:

	TDR’s Performing to Modified Terms		TDR’s Not Performed to Modified Terms		Total  TDR’s
December 31, 2011
Residential real estate
Interest only payments	$	----	$	283	$	283
Commercial real estate:
Owner-occupied
Interest only payments		3,619		----		3,619
Rate reduction		869		----		869
Maturity extension at lower stated           rate than market rate		219		----		219
Nonowner-occupied
Interest only payments		3,357		----		3,357
Construction
Interest only payments		674		----		674
Commercial and industrial
Interest only payments		334		----		334
Total TDR’s	$	9,072	$	283	$	9,355

	TDR’s Performing to Modified Terms		TDR’s Not Performed to Modified Terms		Total  TDR’s
December 31, 2010
Residential real estate
Interest only payments	$	456	$	----	$	456
Rate reduction		584		----		584
Commercial real estate:
Owner-occupied
Interest only payments		3,886		----		3,886
Rate reduction		887		----		887
Nonowner-occupied
Interest only payments		2,983		----		2,983
Construction
Interest only payments		679		----		679
Commercial and industrial
Interest only payments		671		----		671
Rate reduction		6,668		----		6,668
Total TDR’s	$	16,814	$	----	$	16,814

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

At December 31, 2011, the balance in TDR loans decreased $7,459, or 44.4%, from year-end 2010. This was largely impacted by partial charge-offs and subsequent payoffs recorded on one impaired commercial and industrial loan relationship totaling $6,668 during the first and fourth quarters of 2011. At December 31, 2011 and December 31, 2010, 97% and 100% of the Company’s TDR’s were performing according to their modified terms. The Company allocated $655 and $3,791 in reserves to customers whose loan terms have been modified in TDR’s as of December 31, 2011 and December 31, 2010, respectively. At December 31, 2011, the Company had $81 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s as compared to none at December 31, 2010.

At    The following table presents the post-modification balances of TDR loan modifications by class of loans that occurred during year ended December 31, 2011:

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2011
Residential real estate	$	----	$	----	$	----
Commercial real estate:
Owner-occupied
Rate reduction		1,515		----		1,515
Maturity extension at lower           stated rate than market rate		226		----		226
Nonowner-occupied
Interest only payments		400		----		400
Maturity extension at lower           stated rate than market rate		1,927		----		1,927
Construction		----		----		----
Commercial and industrial		----		----		----
Total TDR’s	$	4,068	$	----	$	4,068

All of the Company’s TDR’s that occurred during the year ended December 31, 2011 were performing in accordance with their modified terms and did not experience any payment defaults within twelve months following the loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The TDR’s described above increased the allowance for losses by $544 and resulted in charge-offs of $414 during the year ended December 31, 2011. As of December 31, 2011, the Company had allocated $130 of reserves to customers whose loan terms have been modified during the year ended December 31, 2011.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. These risk categories are represented by a loan grading scale from 1 through 10. The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and "classified" assets. The Company considers its criticized assets to be loans that are graded 8 and its classified assets to be loans that are graded 9 through 10. The Company's risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

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

Special Mention (Loan Grade 8). Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies. These loans are considered bankable assets with no apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a troubled debt restructuring should be graded no higher than special mention until they have been reported as performing over one year after restructuring.

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

Substandard (Loan Grade 9).Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of one or more well defined weaknesses and the collateral pledged may inadequately protect collection of the loans. Loss of principal is not likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade 8 loans. Collateral liquidation is considered likely to satisfy debt.

Doubtful (Loan Grade 10).Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which may strengthen the credit can be more accurately determined. These factors may include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.

Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do not meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of December 31, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2011	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	113,118	$	15,664	$	13,784	$	142,566
Nonowner-occupied		31,697		12,815		10,907		55,419
Construction		19,519		----		1,952		21,471
Commercial and industrial		36,633		3,250		5,317		45,200
Total	$	200,967	$	31,729	$	31,960	$	264,656

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Loans and Allowance for Loan Losses (continued)

December 31, 2010	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	122,726	$	15,764	$	10,552	$	149,042
Nonowner-occupied		48,569		1,550		5,870		55,989
Construction		15,487		63		6,041		21,591
Commercial and industrial		39,725		3,943		11,638		55,306
Total	$	226,507	$	21,320	$	34,101	$	281,928

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does not consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading.

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on payment activity as of December 31, 2011 and December 31, 2010:

December 31, 2011	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	45,677	$	20,502	$	40,947	$	223,600	$	330,726
Nonperforming		25		5		7		2,889		2,926
Total	$	45,702	$	20,507	$	40,954	$	226,489	$	333,652

December 31, 2010	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	58,057	$	20,380	$	43,617	$	233,191	$	355,245
Nonperforming		214		147		101		3,687		4,149
Total	$	58,271	$	20,527	$	43,718	$	236,878	$	359,394

The Company, through its subsidiaries, grants residential, consumer, and commercial loans to customers located primarily in the southeastern area of Ohio as well as the western counties of West Virginia. Approximately 3.98% of total loans were unsecured at December 31, 2011, up from 3.93% at December 31, 2010

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Securities

12 Months Ended

Dec. 31, 2011

Securities [Abstract]

Securities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B - Securities

Securities are summarized as follows:

Securities Available for Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2011
U.S. Treasury securities	$	5,510	$	3	$	----		$	5,513
U.S. Government sponsored entity securities		2,501		58		----			2,559
Agency mortgage-backed securities, residential		76,203		1,407		(12	)		77,598
Total securities	$	84,214	$	1,468	$	(12	)	$	85,670
December 31, 2010
U.S. Treasury securities	$	17,081	$	6	$	(8	)	$	17,079
U.S. Government sponsored entity securities		7,513		230		(12	)		7,731
Agency mortgage-backed securities, residential		60,916		383		(270	)		61,029
Total securities	$	85,510	$	619	$	(290	)	$	85,839

Securities Held to Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
December 31, 2011
Obligations of states and political subdivisions	$	22,825	$	558	$	(559	)	$	22,824
Agency mortgage-backed securities, residential		23		----		----			23
Total securities	$	22,848	$	558	$	(559	)	$	22,847
December 31, 2010
Obligations of states and political subdivisions	$	22,149	$	130	$	(1,109	)	$	21,170
Agency mortgage-backed securities, residential		29		----		(1	)		28
Total securities	$	22,178	$	130	$	(1,110	)	$	21,198

At year-end 2011 and 2010, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

Securities with a carrying value of approximately $46,683 at December 31, 2011 and $90,216 at December 31, 2010 were pledged to secure public deposits and repurchase agreements and for other purposes as required or permitted by law.

The amortized cost and estimated fair value of debt securities at December 31, 2011, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay the debt obligations prior to their contractual maturities.  Securities not due at a single maturity are shown separately.

	Available for Sale				Held to Maturity
Debt Securities:	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	8,011	$	8,072	$	648	$	661
Due in one to five years		----		----		3,901		3,801
Due in five to ten years		----		----		10,289		10,496
Due after ten years		----		----		7,987		7,866
Agency mortgage-backed securities, residential		76,203		77,598		23		23
Total debt securities	$	84,214	$	85,670	$	22,848	$	22,847

There were no sales of debt securities during 2011, 2010 and 2009.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B - Securities (continued)

Securities with unrealized losses not recognized in income are as follows:

	Less Than 12 Months						12 Months or More				Total
December 31, 2011		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized  Loss
Securities Available for Sale
Agency mortgage-backed
securities, residential		$	7,621	$	(12	)	$	----	$	----	$	7,621	$	(12	)
Total available for sale		$	7,621	$	(12	)	$	----	$	----	$	7,621	$	(12	)

	Less Than 12 Months						12 Months or More					Total
		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
Securities Held to Maturity
Obligations of states and
political subdivisions		$	664	$	(21	)	$	3,557	$	(538	)	$	4,221	$	(559	)
Total held to maturity		$	664	$	(21	)	$	3,557	$	(538	)	$	4,221	$	(559	)

	Less Than 12 Months						12 Months or More				Total
December 31, 2010		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available for Sale
U.S. Treasury securities		$	9,041	$	(8	)	$	----	$	----	$	9,041	$	(8	)
U.S. Government sponsored
entity securities			1,990		(12	)		----		----		1,990		(12	)
Agency mortgage-backed
securities, residential			27,953		(270	)		----		----		27,953		(270	)
Total available for sale		$	38,984	$	(290	)	$	----	$	----	$	38,984	$	(290	)

	Less Than 12 Months						12 Months or More					Total
		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
Securities Held to Maturity
Obligations of states and
political subdivisions		$	7,510	$	(690	)	$	970	$	(419	)	$	8,480	$	(1,109	)
Agency mortgage-backed
securities, residential			----		----			21		(1	)		21		(1	)
Total held to maturity		$	7,510	$	(690	)	$	991	$	(420	)	$	8,501	$	(1,110	)

Unrealized losses on the Company's debt securities have not been recognized into income because the issuers' securities are of high credit quality and management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  Management does not believe any individual unrealized loss at December 31, 2011 and 2010 represents an other-than-temporary impairment.

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CONSOLIDATED STATEMENTS OF CONDITION (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Assets
Cash and noninterest-bearing deposits with banks	$ 8,914	$ 8,979
Interest-bearing deposits with banks	42,716	50,772
Total cash and cash equivalents	51,630	59,751
Securities available for sale	85,670	85,839
Securities held to maturity	22,848	22,178
Federal Home Loan Bank stock	6,281	6,281
Total loans	598,308	641,322
Less: Allowance for loan losses	(7,344)	(9,386)
Net loans	590,964	631,936
Premises and equipment, net	9,216	9,738
Other real estate owned	4,256	4,403
Accrued income receivable	2,872	2,704
Goodwill	1,267	1,267
Bank owned life insurance and annuity assets	23,097	19,761
Prepaid FDIC insurance	1,609	2,576
Other assets	4,467	5,080
Total assets	804,177	851,514
Liabilities
Noninterest-bearing deposits	138,143	91,949
Interest-bearing deposits	549,743	602,832
Total deposits	687,886	694,781
Securities sold under agreements to repurchase	0	38,107
Other borrowed funds	20,296	27,743
Subordinated debentures	13,500	13,500
Accrued liabilities	10,652	9,255
Total liabilities	732,334	783,386
Commitments and Contingent Liabilities (See Note J)	0	0
Shareholders' Equity
Common stock ($1.00 stated value per share, 10,000,000 shares authorized; 2011 - 4,686,295 shares issued; 2010 - 4,659,795 shares issued)	4,686	4,660
Additional paid-in capital	33,473	33,003
Retained earnings	48,435	45,960
Accumulated other comprehensive income	961	217
Treasury stock, at cost (2011 and 2010 - 659,739 shares)	(15,712)	(15,712)
Total shareholders' equity	71,843	68,128
Total liabilities and shareholders' equity	$ 804,177	$ 851,514

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities:
Net income	$ 5,835	$ 5,096	$ 6,645
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	971	1,067	1,071
Net amortization of securities	1,059	666	280
Proceeds from sale of loans in secondary market	13,637	16,825	57,815
Loans disbursed for sale in secondary market	(13,251)	(16,463)	(57,057)
Amortization of mortgage servicing rights	121	122	129
(Recovery) Impairment of mortgage servicing rights	(33)	30	91
Gain on sale of loans	(474)	(514)	(978)
Deferred tax (benefit) expense	340	(462)	(2)
Provision for loan losses	4,896	5,871	3,212
Common stock issued to ESOP	496	315	22
Earnings on bank owned life insurance and annuity assets	(725)	(741)	(1,311)
(Gain) loss on sale of other real estate owned	1,224	177	(38)
Change in accrued income receivable	(168)	192	276
Change in accrued liabilities	1,397	(718)	(1,374)
Change in other assets	857	866	(3,853)
Net cash provided by operating activities	16,182	12,329	4,928
Cash flows from investing activities:
Proceeds from maturities of securities available for sale	43,193	65,698	41,099
Purchases of securities available for sale	(43,007)	(69,014)	(49,922)
Proceeds from maturities of securities held to maturity	1,449	3,523	1,858
Purchases of securities held to maturity	(2,068)	(9,126)	(1,470)
Net change in loans	34,243	4,829	(25,527)
Proceeds from sale of other real estate owned	756	1,511	1,050
Purchases of premises and equipment	(449)	(673)	(971)
Proceeds from bank owned life insurance	0	0	1,034
Purchases of bank owned life insurance and annuity assets	(2,611)	(286)	(304)
Net cash used in investing activities	31,506	(3,538)	(33,153)
Cash flows from financing activities:
Change in deposits	(6,895)	47,137	55,283
Cash dividends	(3,360)	(3,347)	(3,186)
Change in securities sold under agreements to repurchase	(38,107)	6,466	7,571
Proceeds from Federal Home Loan Bank borrowings	703	11,475	6,050
Repayment of Federal Home Loan Bank borrowings	(7,562)	(26,278)	(16,005)
Change in other short-term borrowings	(588)	(163)	(24,110)
Net cash provided by (used in) financing activities	(55,809)	35,290	25,603
Cash and cash equivalents:
Change in cash and cash equivalents	(8,121)	44,081	(2,622)
Cash and cash equivalents at beginning of year	59,751	15,670	18,292
Cash and cash equivalents at end of year	51,630	59,751	15,670
Supplemental disclosure:
Cash paid for interest	10,875	15,022	17,791
Cash paid for income taxes	445	2,016	2,730
Non-cash transfers from loans to other real estate owned	1,833	522	1,749
Other real estate owned sales financed by the Bank	$ 344	$ 159	$ 723

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Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information [Abstract]

Segment Information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note P - Segment Information

    The reportable segments are determined by the products and services offered, primarily distinguished between banking and consumer finance. They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business which are then aggregated if operating performance, products/services, and customers are similar. Loans, investments, and deposits provide the majority of the net revenues from the banking operation, while loans provide the majority of the net revenues for the consumer finance segment. All Company segments are domestic.

Total revenues from the banking segment, which accounted for the majority of the Company's total revenues, totaled 91.8%, 92.9% and 93.4% of total consolidated revenues for the years ended December 31, 2011, 2010 and 2009, respectively.

The accounting policies used for the Company's reportable segments are the same as those described in Note A - Summary of Significant Accounting Policies. Income taxes are allocated based on income before tax expense.

Segment information for the years ended December 31, is as follows:

	Year Ended December 31, 2011
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	30,792	$	3,079	$	33,871
Provision expense	$	4,809	$	87	$	4,896
Noninterest income	$	6,327	$	895	$	7,222
Noninterest expense	$	26,130	$	2,169	$	28,299
Tax expense	$	1,483	$	580	$	2,063
Net income	$	4,697	$	1,138	$	5,835
Assets	$	789,744	$	14,433	$	804,177
	Year Ended December 31, 2010
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	30,074	$	2,893	$	32,967
Provision expense	$	5,717	$	154	$	5,871
Noninterest income	$	5,578	$	576	$	6,154
Noninterest expense	$	24,756	$	1,887	$	26,643
Tax expense	$	1,029	$	482	$	1,511
Net income	$	4,149	$	947	$	5,096
Assets	$	837,359	$	14,155	$	851,514
	Year Ended December 31, 2009
			Consumer		Total
	Banking		Finance		Company
Net interest income	$	27,817	$	2,874	$	30,691
Provision expense	$	3,049	$	163	$	3,212
Noninterest income	$	7,132	$	466	$	7,598
Noninterest expense	$	24,247	$	1,913	$	26,160
Tax expense	$	1,843	$	429	$	2,272
Net income	$	5,810	$	835	$	6,645
Assets	$	797,276	$	14,712	$	811,988

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amounts are in thousands, except share and per share data

Note A - Summary of Significant Accounting Policies

Description of Business:  Ohio Valley Banc Corp. ("Ohio Valley") is a financial holding company registered under the Bank Holding Company Act of 1956.  Ohio Valley has one banking subsidiary, The Ohio Valley Bank Company (the "Bank"), as well as a subsidiary that engages in consumer lending to individuals with higher credit risk history, Loan Central, Inc., and a subsidiary insurance agency that facilitates the receipts of insurance commissions, Ohio Valley Financial Services Agency, LLC.  Ohio Valley and its subsidiaries are collectively referred to as the “Company”.

The Company provides a full range of commercial and retail banking services from 21 offices located in central and southeastern Ohio and western West Virginia.  It accepts deposits in checking, savings, time and money market accounts and makes personal, commercial, floor plan, student, construction and real estate loans.  Substantially all loans are secured by specific items of collateral, including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from business operations. The Company also offers safe deposit boxes, wire transfers and other standard banking products and services.  The Bank's deposits are insured by the Federal Deposit Insurance Corporation.  In addition to accepting deposits and making loans, the Bank invests in U. S. Government and agency obligations, interest-bearing deposits in other financial institutions and investments permitted by applicable law.

 The Bank's trust department provides a wide variety of fiduciary services for trusts, estates and benefit plans and also provides investment and security services as an agent for its customers.

Principles of Consolidation: The consolidated financial statements include the accounts of Ohio Valley and its wholly-owned subsidiaries, the Bank, Loan Central, Inc., a consumer finance company, and Ohio Valley Financial Services Agency, LLC, an insurance agency.   All material intercompany accounts and transactions have been eliminated.

Industry Segment Information:  Internal financial information is primarily reported and aggregated in two lines of business, banking and consumer finance.

Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions that are more susceptible to change in the near term involve the allowance for loan losses, mortgage servicing rights, deferred tax assets, the fair value of certain securities, the fair value of financial instruments and the determination and carrying value of impaired loans and other real estate owned.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, interest and noninterest-bearing deposits with banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. The Company reports net cash flows for customer loan transactions, deposit transactions, short-term borrowings and interest-bearing deposits with other financial institutions.

Securities: The Company classifies securities into held to maturity and available for sale categories. Held to maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Securities classified as available for sale include securities that could be sold for liquidity, investment management or similar reasons even if there is not a present intention of such a sale. Available for sale securities are reported at fair value, with unrealized gains or losses included in other comprehensive income, net of tax.

Premium amortization is deducted from, and discount accretion is added to, interest income on securities using the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses are recognized upon the sale of specific identified securities on the completed trade date.

Other-Than-Temporary-Impairments of Securities:  In determining an other-than-temporary-impairment (“OTTI”), management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

anticipated recovery. The assessment of whether an OTTI decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When an OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Federal Home Loan Bank (”FHLB”) Stock:  The Bank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the Bank's level of borrowings from the FHLB and other factors, and may invest in additional amounts.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Interest income is reported on an accrual basis using the interest method and includes amortization of net deferred loan fees and costs over the loan term using the level yield method without anticipating prepayments.

The amount of the Company's recorded investment is not materially different than the amount of unpaid principal balance for loans at December 31, 2011.

Interest income is discontinued and the loan moved to non-accrual status when full loan repayment is in doubt, typically when the loan is impaired or payments are past due 90 days or over unless the loan is well-secured or in process of collection. Past due status is based on the contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days or over and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.  Interest received on such loans is accounted for on the cash-basis method until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses:  The allowance for loan losses is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged‑off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired.  A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans generally consist of loans with balances of $200 or more on nonaccrual status or nonperforming in nature.  Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and classified as impaired.

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

     Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reasons for the delay, the borrower's prior payment record, and the amount of shortfall in relation to the principal and interest owed.

Commercial and commercial real estate loans are individually evaluated for impairment.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Smaller balance homogeneous loans, such as consumer and most residential real estate, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosure.  Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan's effective rate at inception.  If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.  For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non‑impaired loans and impaired loans that are not individually reviewed for impairment and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 3 years.  This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.  These economic factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.  The following portfolio segments have been identified:  Commercial Real Estate, Commercial and Industrial, Residential Real Estate, and Consumer.

Commercial and industrial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole proprietorships, and other business enterprises.  Commercial and industrial loans are generally secured by business assets such as equipment, accounts receivable, inventory, or any other asset excluding real estate and generally made to finance capital expenditures or operations.  The Company's risk exposure is related to deterioration in the value of collateral securing the loan should foreclosure become necessary.  Generally, business assets used or produced in operations do not maintain their value upon foreclosure which may require the Company to write-down the value significantly to sell.

Commercial real estate consists of nonfarm, nonresidential loans secured by owner-occupied and nonowner-occupied commercial real estate as well as commercial construction loans.  An owner-occupied loan relates to a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing business operations conducted by the party, or an affiliate of the party, who owns the property.  Owner-occupied loans that are dependent on cash flows from operations can be adversely affected by current market conditions for their product or service.  A nonowner-occupied loan is a property loan for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.  Nonowner-occupied loans that are dependent upon rental income are primarily impacted by local economic conditions which dictate occupancy rates and the amount of rent charged.  Commercial construction loans consist of borrowings to purchase and develop raw land into 1-4 family residential properties.  Construction loans are extended to individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements.  Repayment of the loans to real estate developers is dependent upon the sale of properties to third parties in a timely fashion upon completion.  Should there be delays in construction or a downturn in the market for those properties, there may be significant erosion in value which may be absorbed by the Company.

Residential real estate loans consist of loans to individuals for the purchase of 1-4 family primary residences with repayment primarily through wage or other income sources of the individual borrower.  The Company's loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

Consumer loans are comprised of loans to  individuals  secured by automobiles,  open-end home equity loans  and  other  loans to  individuals for  household, family, and other personal expenditures, both secured and unsecured.  These loans typically have maturities of 5 years or less with repayment dependent on individual wages and income.  The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is necessary.  In recent fiscal years covering 2009, 2010, and 2011, one of the most significant portions of the Company's net loan charge-offs have been from consumer loans.  Never the less, the Company has allocated the highest percentage of its allowance for loan losses as a percentage of loans to the other identified loan portfolio segments due to the larger dollar balances associated with such portfolios.

Concentrations of Credit Risk:  The Company grants residential, consumer and commercial loans to customers located primarily in the southeastern Ohio and western West Virginia areas.

The following represents the composition of the Company’s loan portfolio as of December 31:

% of Total Loans

	2011	2010
Residential real estate loans	37.85%	36.94%
Commercial real estate loans	36.68%	35.34%
Consumer loans	17.92%	19.10%
Commercial and industrial loans	7.55%	8.62%
	100.00%	100.00%

Approximately 3.98% of total loans are unsecured.

The Bank, in the normal course of its operations, conducts business with correspondent financial institutions. Balances in correspondent accounts, investments in federal funds, certificates of deposit and other short-term securities are closely monitored to ensure that prudent levels of credit and liquidity risks are maintained.  At December 31, 2011, the Bank’s primary correspondent balance was $42,402 on deposit at the Federal Reserve Bank, Cleveland, Ohio.

Premises and Equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation, which is computed using the straight-line or declining balance methods over the estimated useful life of the owned asset and, for leasehold improvement, over the remaining term of the leased facility, whichever is shorter. The useful lives range from 3 to 8 years for equipment, furniture and fixtures and 7 to 39 years for buildings and improvements.

Foreclosed assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.  Operating costs after acquisition are expensed. Foreclosed assets totaled $4,256 and $4,403 at December 31, 2011 and 2010.

Goodwill:  Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired.  Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.  Goodwill acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31, 2011 as the date to perform the annual impairment test.  Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Long-term Assets:  Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Mortgage Servicing Rights: A mortgage servicing right (“MSR”) is a contractual agreement where the right to service a mortgage loan is sold by the original lender to another party. When the Company sells mortgage loans to the secondary market, it retains the servicing rights to these loans. The Company’s MSR is recognized separately when acquired through sales of loans and is initially recorded at fair value with the income statement effect recorded in mortgage banking income. Subsequently, the MSR is then amortized in

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

proportion to and over the period of estimated future servicing income of the underlying loan. The MSR is then evaluated for impairment periodically based upon the fair value of the rights as compared to the carrying amount, with any impairment being recognized through a valuation allowance. Fair value of the MSR is based on market prices for comparable mortgage servicing contracts. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type.  If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income.  At December 31, 2011 and 2010, the Company’s MSR asset portfolio was  $430 and $434, respectively.

Repurchase Agreements: Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.

Earnings Per Share: Earnings per share is based on net income divided by the following weighted average number of common shares outstanding during the periods: 4,001,435 for 2011; 3,984,229 for 2010; 3,983,034 for 2009.  Ohio Valley had no dilutive securities outstanding for any period presented.

Income Taxes: Income tax expense is the sum of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

 A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity, net of tax.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Bank Owned Life Insurance and Annuity Assets:  The Company has purchased life insurance policies on certain key executives.  Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. The Company also purchased an annuity investment in December 2011 that will earn interest.

ESOP: Compensation expense is based on the market price of shares as they are committed to be allocated to participant accounts.

Adoption of New Accounting Standards:

    In December 2010, the Financial Accounting Standards Board (“FASB”) amended existing guidance relating to goodwill impairment testing. This guidance requires that if the carrying amount of a reporting unit is zero or negative, a qualitative assessment be performed to determine if it is more likely than not that goodwill is impaired.  Step 2 of the impairment test shall be performed if it is determined that it is more likely than not that goodwill is impaired. The amendments in this guidance were effective for fiscal years, and interim periods within those years, beginning after December 15, 2010.  The effect of adopting this standard did not have a material effect on the Company's operating results or financial condition.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

In April 2011, the FASB issued guidance within the ASU 2011-02 A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring (“TDR”). ASU 2011-02 clarifies when a loan modification or restructuring is considered a TDR. This guidance was effective for the first interim or annual period beginning on or after June 15, 2011, and was applied retrospectively to the beginning of the annual period of adoption. The adoption of this guidance created additional TDR disclosures within Note C – Loans and Allowance for Loan Losses, but did not have an impact on the Company's consolidated financial statements.

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  This guidance is effective for the first interim or annual period beginning on or after December 15, 2011.  The Company is currently evaluating the impact of this amendment and does not anticipate a significant impact to its consolidated financial statements.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statements of changes in shareholders' equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements.  The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011.  Early adoption is permitted.  The Company is currently evaluating the impact of this amendment and does not anticipate a significant impact to its consolidated financial statements.

Loan Commitments and Related Financial Instruments:  Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  These financial instruments are recorded when they are funded.  See Note J for more specific disclosure related to loan commitments.

Dividend Restrictions:  Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to Ohio Valley or by Ohio Valley to its shareholders.   See Note N for more specific disclosure related to dividend restrictions.

Restrictions on Cash:  Cash on hand or on deposit with Fifth Third Bank and the Federal Reserve Bank of $44,018 and $52,233 was required to meet regulatory reserve and clearing requirements at year-end 2011 and 2010.  The balances at Fifth Third Bank do not earn interest.

Fair Value of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note M.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.

Reclassifications: The consolidated financial statements for 2010 and 2009 have been reclassified to conform with the presentation for 2011.  These reclassifications had no effect on the net results of operations or shareholders’ equity.

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CONSOLIDATED STATEMENTS OF CONDITION (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Assets
Securities held to maturity, fair Value	$ 22,847	$ 21,198
Shareholders' Equity
Common stock, Stated value per share (in dollars per share)	$ 1	$ 1
Common Stock, Shares authorized (in shares)	10,000,000	10,000,000
Common Stock, Shares issued (in shares)	4,686,295	4,659,795
Treasury stock, shares (in shares)	659,739	659,739

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Related Party Transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions

Note K - Related Party Transactions

 Certain directors, executive officers and companies with which they are affiliated were loan customers during 2011. A summary of activity on these borrower relationships with aggregate debt greater than $120 is as follows:

Total loans at January 1, 2011	$	5,889
New loans		131
Repayments		(264	)
Other changes		(668	)
Total loans at December 31, 2011	$	5,088

 Other changes include adjustments for loans applicable to one reporting period that are excludable from the other reporting period, such as changes in persons classified as directors, executive officers and companies’ affiliates.

 Deposits from principal officers, directors, and their affiliates at year-end 2011 and 2010 were $15,807 and $9,271.

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011
Entity Registrant Name	Ohio Valley Banc Corp.
Entity Central Index Key	0000894671
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float	$ 64,473,425
Entity Common Stock, Shares Outstanding	4,029,439
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011

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Employee Benefits

12 Months Ended

Dec. 31, 2011

Employee Benefits [Abstract]

Employee Benefits

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note L - Employee Benefits

The Bank has a profit-sharing plan for the benefit of its employees and their beneficiaries. Contributions to the plan are determined by the Board of Directors of Ohio Valley. Contributions charged to expense were $218, $210 and $196 for 2011, 2010 and 2009.
Ohio Valley maintains an Employee Stock Ownership Plan (ESOP) covering substantially all employees of the Company. Ohio Valley issues shares to the ESOP, purchased by the ESOP with subsidiary cash contributions, which are allocated to ESOP participants based on relative compensation. The total number of shares held by the ESOP, all of which have been allocated to participant accounts, were 255,381 and 240,703 at December 31, 2011 and 2010. In addition, the subsidiaries made contributions to its ESOP Trust as follows:
	Years ended December 31
	2011		2010		2009
Number of shares issued		26,500		16,407		1,000
Fair value of stock contributed	$	497	$	315	$	22
Cash contributed		65		105		371
Total expense	$	562	$	420	$	393

 Life insurance contracts with a cash surrender value of $21,207 and annuity assets of $1,890 at December 31, 2011 have been purchased by the Company, the owner of the policies. The purpose of these contracts was to replace a current group life insurance program for executive officers, implement a deferred compensation plan for directors and executive officers, implement a director retirement plan and implement supplemental retirement plans for certain officers. Under the deferred compensation plan, Ohio Valley pays each participant the amount of fees deferred plus interest over the participant's desired term, upon termination of service. Under the director retirement plan, participants are eligible to receive ongoing compensation payments upon retirement subject to length of service. The supplemental retirement plans provide payments to select executive officers upon retirement based upon a compensation formula determined by Ohio Valley’s Board of Directors. The present value of payments expected to be provided are accrued during the service period of the covered individuals and amounted to $4,480 and $4,314 at December 31, 2011 and 2010. Expenses related to the plans for each of the last three years amounted to $318, $317 and $321. In association with the split-dollar life insurance plan, the present value of the postretirement benefit totaled $1,580 at December 31, 2011 and $1,351 at December 31, 2010.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Interest and dividend income:
Loans, including fees	$ 41,263	$ 43,462	$ 44,076
Securities:
Taxable	1,776	2,187	2,748
Tax exempt	571	497	451
Dividends	267	275	290
Other Interest	163	93	58
Interest and dividend income	44,040	46,514	47,623
Interest expense:
Deposits	8,436	11,053	13,683
Securities sold under agreements to repurchase	17	57	75
Other borrowed funds	627	1,348	2,085
Subordinated debentures	1,089	1,089	1,089
Interest expense	10,169	13,547	16,932
Net interest income	33,871	32,967	30,691
Provision for loan losses	(4,896)	(5,871)	(3,212)
Net interest income after provision for loan losses	28,975	27,096	27,479
Noninterest income:
Service charges on deposit accounts	2,218	2,202	2,816
Trust fees	215	233	227
Income from bank owned life insurance and annuity assets	725	741	1,311
Mortgage banking income	386	362	758
Electronic refund check / deposit fees	2,559	780	528
Debit/credit interchange income	1,387	998	807
Gain (loss) on sale of other real estate owned	(1,224)	(177)	38
Other	956	1,015	1,113
Noninterest income	7,222	6,154	7,598
Noninterest expense:
Salaries and employee benefits	16,650	15,647	14,824
Occupancy	1,585	1,609	1,599
Furniture and equipment	1,143	1,214	1,204
Corporate franchise tax	744	745	713
FDIC insurance	1,029	1,061	1,625
Data processing	891	685	670
Foreclosed assets, net	650	67	150
Other	5,607	5,615	5,375
Noninterest income	28,299	26,643	26,160
Income before income taxes	7,898	6,607	8,917
Provision for income taxes	2,063	1,511	2,272
NET INCOME	5,835	5,096	6,645
Earnings per share (in dollars per share)	$ 1.46	$ 1.28	$ 1.67
Other Comprehensive income:
Change in unrealized gains/losses on securities, net of taxes	744	(457)	(16)
Total comprehensive income	$ 6,579	$ 4,639	$ 6,629

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Securities Sold Under Agreements to Repurchase

12 Months Ended

Dec. 31, 2011

Securities Sold Under Agreements to Repurchase [Abstract]

Securities Sold Under Agreements to Repurchase

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note F - Securities Sold Under Agreements to Repurchase

 Securities sold under agreements to repurchase are financing arrangements that have overnight maturity terms. At maturity, the securities underlying the agreements are returned to the Company. Newly enacted banking regulations during the third quarter of 2011 permitted the Company to begin paying interest on its business checking accounts and contributed to the decrease in securities sold under agreements to repurchase balances. Information concerning securities sold under agreements to repurchase is summarized as follows at December 31:

Balance outstanding at period-end	$	----		$	38,107
Weighted average interest rate at period-end		.00	%		.15	%
Average amount outstanding during year	$	19,196		$	26,991
Approximate weighted average interest rate
during the year		.09	%		.21	%
Maximum amount outstanding as of any month-end	$	36,680		$	38,107
Securities underlying these agreements at year-end were as follows:
Carrying value of securities	$	----		$	49,436
Fair value	$	----		$	49,552

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Deposits

12 Months Ended

Dec. 31, 2011

Time Deposits [Abstract]

Deposits

Note E - Deposits

Following is a summary of interest-bearing deposits at December 31:

	2011		2010
NOW accounts	$	101,907	$	101,833
Savings and Money Market		200,072		191,916
Time:
In denominations under $100,000		126,705		156,694
In denominations of $100,000 or more		121,059		152,389
Total time deposits		247,764		309,083
Total interest-bearing deposits	$	549,743	$	602,832

Following is a summary of total time deposits by remaining maturity at December 31, 2011:

2012	$	141,710
2013		68,183
2014		25,710
2015		6,401
2016		4,833
Thereafter		927
Total	$	247,764

Brokered deposits, included in time deposits, were $31,271 and $36,272 at December 31, 2011 and 2010, respectively.

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Consolidated Quarterly Financial Information

12 Months Ended

Dec. 31, 2011

Consolidated Quarterly Financial Information [Abstract]

Consolidated Quarterly Financial Information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note Q - Consolidated Quarterly Financial Information (unaudited)

                                                                                                                                                                              Quarters Ended

2011	Mar. 31		Jun. 30		Sept. 30		Dec. 31
Total interest income	$	12,025	$	10,817	$	10,693	$	10,505
Total interest expense		2,822		2,663		2,509		2,175
Net interest income		9,203		8,154		8,184		8,330
Provision for loan losses(1)		2,944		759		1,152		41
Noninterest income		3,659		1,687		1,058		818
Noninterest expense		7,098		6,981		7,001		7,219
Net income		2,033		1,555		886		1,361
Earnings per share	$	0.51	$	0.39	$	0.22	$	0.34
2010
Total interest income	$	12,228	$	11,599	$	11,438	$	11,249
Total interest expense		3,619		3,421		3,328		3,179
Net interest income		8,609		8,178		8,110		8,070
Provision for loan losses(2)		921		721		2,225		2,004
Noninterest income		1,865		1,524		1,382		1,383
Noninterest expense		6,881		6,976		6,863		5,923
Net income		1,906		1,471		421		1,298
Earnings per share	$	0.48	$	0.37	$	0.10	$	0.33
2009
Total interest income	$	12,611	$	11,710	$	11,733	$	11,569
Total interest expense		4,331		4,407		4,285		3,909
Net interest income		8,280		7,303		7,448		7,660
Provision for loan losses		848		296		957		1,111
Noninterest income		2,021		1,818		2,137		1,622
Noninterest expense		6,556		6,915		6,528		6,161
Net income		2,051		1,396		1,700		1,498
Earnings per share	$	0.51	$	0.35	$	0.43	$	0.38

(1) During the first quarter of 2011, the Company began taking partial charge-offs more quickly on collateral dependent impaired loans as a result of management's evaluation of the trends in the real estate market, the status of long-term, collateral dependent impaired loans and the current regulatory environment. The increases in partial charge-offs contributed to a higher historical loan loss factor, which required additional general allocations within the allowance for loan losses.

(2) During the third and fourth quarters of 2010, the Bank experienced an increase in its provision expense as a result of continued credit quality issues with three commercial relationships that resulted in additional impairment charges and partial charge-offs.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments

     The measurement of fair value under US GAAP uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and  other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant, unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

     The following is a description of the Company’s valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring or nonrecurring basis:

Securities Available For Sale: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2) .For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Mortgage Servicing Rights: Fair value is based on market prices for comparable mortgage servicing contracts.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
	Fair Value Measurements at December 31, 2011, Using
	Quoted Prices in
	Active Markets	Significant Other		Significant
	for Identical	Observable		Unobservable
	Assets	Inputs		Inputs
	(Level 1)	(Level 2)		(Level 3)
Assets:
U.S. Treasury securities	_____	$	5,513	_____
U.S. Government sponsored entity securities	_____		2,559	_____
Agency mortgage-backed securities, residential	_____		77,598	_____
	Fair Value Measurements at December 31, 2010, Using
	Quoted Prices in
	Active Markets	Significant Other		Significant
	for Identical	Observable		Unobservable
	Assets	Inputs		Inputs
	(Level 1)	(Level 2)		(Level 3)
Assets:
U.S. Treasury securities	_____	$	17,079	_____
U.S. Government sponsored entity securities	_____		7,731	_____
Agency mortgage-backed securities, residential	_____		61,029	_____

There were no transfers between Level 1 and Level 2 during 2011 or 2010.

Assets and Liabilities Measured on a Nonrecurring Basis
Assets and liabilities measured at fair value on a nonrecurring basis are summarized below:
	Fair Value Measurements at December 31, 2011, Using
	Quoted Prices in
	Active Markets	Significant Other	Significant
	for Identical	Observable	Unobservable
	Assets	Inputs	Inputs
	(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	_____	_____	$	290
Nonowner-occupied	_____	_____		1,959
Construction	_____	_____		587
Mortgage servicing rights	_____	_____		430
Other real estate owned:
Commercial real estate:
Construction	_____	_____		1,814
Commercial and industrial	_____	_____		1,134

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

	Fair Value Measurements at December 31, 2010, Using
	Quoted Prices in
	Active Markets	Significant Other	Significant
	for Identical	Observable	Unobservable
	Assets	Inputs	Inputs
	(Level 1)	(Level 2)	(Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	_____	_____	$	3,606
Nonowner-occupied	_____	_____		2,187
Commercial and industrial	_____	_____		3,785
Residential real estate	_____	_____		414
Mortgage servicing rights	_____	_____		434

 Impaired loans had a principal balance of $11,572 at December 31, 2011. The portion of impaired loans with specific allocations of the allowance for loan losses had a carrying amount of $3,491 and was measured for impairment using the present value of estimated future cash flows. This resulted in a valuation allowance of $655 at December 31, 2011, which contributed to an increase of $218 in provision for loan loss expense during the year ended December 31, 2011. This is compared to an increase of $2,930 in provision for loan loss expense during the previous year ended December 31, 2010. At December 31, 2010, impaired loans had a principal balance of $23,106. The portion of impaired loans with specific allocations of the allowance for loan losses had a carrying amount of $15,222. The loans were measured for impairment using fair value of the underlying collateral and the present value of estimated future cash flows. This resulted in a valuation allowance of $5,230 at December 31, 2010.

Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $430, which is made up of the outstanding balance of $573, net of a valuation allowance of $143 at December 31, 2011. This is compared to a fair value of $434, made up of the outstanding balance of $609, net of a valuation allowance of $175 at December 31, 2010.

Other real estate owned that was measured at fair value less costs to sell at December 31, 2011 had a net carrying amount of $2,948, which is made up of the outstanding balance of $4,214, net of a valuation allowance of $1,266 at December 31, 2011, which resulted in a corresponding write-down of $1,266 for the year ended December 31, 2011. At December 31, 2010, there was no other real estate owned measured at fair value less costs to sell, which resulted in no valuation allowance and no corresponding write-downs from the year ended December 31, 2010.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note M - Fair Value of Financial Instruments (continued)

Federal Home Loan Bank stock: It is not practical to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Loans: The fair value of fixed-rate loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of loan commitments and standby letters of credit was not material at December 31, 2011 or 2010. The fair value for variable-rate loans is estimated to be equal to carrying value. This fair value represents an entry price in accordance with ASC 825. While ASC 820 amended ASC 825 in several respects, this approach to fair value remains an acceptable approach under generally accepted accounting principles.

Deposit Liabilities: The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Borrowings: For other borrowed funds and subordinated debentures, rates currently available to the Bank for debt with similar terms and remaining maturities are used to estimate fair value. For securities sold under agreements to repurchase, carrying value is a reasonable estimate of fair value.

Accrued Interest Receivable and Payable: For accrued interest receivable and payable, the carrying amount is a reasonable estimate of fair value.

In addition, other assets and liabilities that are not defined as financial instruments were not included in the disclosures below, such as premises and equipment and life insurance contracts. The fair value of off-balance sheet items is not considered material (or is based on the current fees or cost that would be charged to enter into or terminate such arrangements).

The fair values of financial assets and liabilities carried on the Company’s consolidated balance sheet include those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The estimated fair values of the Company’s financial instruments at December 31, are as follows:

	2011				2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	51,630	$	51,630	$	59,571	$	59,751
Securities available for sale		85,670		85,670		85,839		85,839
Securities held to maturity		22,848		22,847		22,178		21,198
Federal Home Loan Bank stock		6,281		N/A		6,281		N/A
Loans		590,964		599,782		631,936		637,986
Accrued interest receivable		2,872		2,872		2,704		2,704
Financial liabilities:
Deposits		687,886		690,607		694,781		698,199
Securities sold under agreements to repurchase		-		-		38,107		38,107
Other borrowed funds		20,296		20,565		27,743		26,968
Subordinated debentures		13,500		11,085		13,500		11,507
Accrued interest payable		1,894		1,894		2,600		2,600

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note I - Income Taxes

The provision for income taxes consists of the following components:
	2011			2010			2009
Current tax expense	$	1,723		$	1,973		$	2,274
Deferred tax (benefit) expense		340			(462	)		(2	)
Total income taxes	$	2,063		$	1,511		$	2,272
The source of deferred tax assets and deferred tax liabilities at December 31:
Items giving rise to deferred tax assets:		2011			2010
Allowance for loan losses	$	2,551		$	3,262
Deferred compensation		1,558			1,499
Deferred loan fees/costs		376			384
Other real estate owned		440			-
Other		179			179
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(149	)		(151	)
FHLB stock dividends		(1,081	)		(1,081	)
Unrealized gain on securities available for sale		(495	)		(112	)
Depreciation		(250	)		(128	)
Prepaid expenses		(140	)		(166	)
Intangibles		(330	)		(304	)
Other		(1	)		(1	)
Net deferred tax asset	$	2,658		$	3,381
The Company determined that it was not required to establish a valuation allowance for deferred tax assets since management believes that the deferred tax assets are likely to be realized through a carry back to taxable income in prior years or the future reversals of existing taxable temporary differences.
The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate of 34% to income before taxes is as follows:
		2011			2010			2009
Statutory tax	$	2,685		$	2,246		$	3,032
Effect of nontaxable interest		(299	)		(279	)		(264	)
Nondeductible interest expense		16			20			24
Income from bank owned insurance, net		(169	)		(236	)		(196	)
Effect of nontaxable life insurance death proceeds			-			-		(189	)
Effect of state income tax		56			46			74
Tax credits		(245	)		(224	)		(212	)
Other items		19			(62	)		3
Total income taxes	$	2,063		$	1,511		$	2,272
At December 31, 2011 and December 31, 2010, the Company had no unrecognized tax benefits. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months. The Company did not recognize any interest and/or penalties related to income tax matters for the periods presented.
The Company is subject to U.S. federal income tax as well as West Virginia state income tax. The Company is no longer subject to federal or state examination for years prior to 2008. The tax years 2008-2010 remain open to federal and state examinations.

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Other Borrowed Funds

12 Months Ended

Dec. 31, 2011

OTHER BORROWED FUNDS [Abstract]

Other Borrowed Funds

Note G - Other Borrowed Funds

 Other borrowed funds at December 31, 2011 and December 31, 2010 are comprised of advances from the Federal Home Loan Bank (“FHLB”) of Cincinnati, promissory notes and Federal Reserve Bank (“FRB") Notes.

	FHLB Borrowings		Promissory Notes		FRB Notes		Totals
2011	$	16,548	$	3,748	$	----	$	20,296
2010	$	23,406	$	3,835	$	502	$	27,743

Pursuant to collateral agreements with the FHLB, advances are secured by $243,791 in qualifying mortgage loans, $98,629 in commercial loans and $6,281 in FHLB stock at December 31, 2011. Fixed-rate FHLB advances of $16,548 mature through 2033 and have interest rates ranging from 1.79% to 3.42% and a year-to-date weighted average cost of 2.50%. There were no variable-rate FHLB borrowings at December 31, 2011.

At December 31, 2011, the Company had a cash management line of credit enabling it to borrow up to $95,000 from the FHLB. All cash management advances have an original maturity of 90 days. The line of credit must be renewed on an annual basis. There was $95,000 available on this line of credit at December 31, 2011.

Based on the Company's current FHLB stock ownership, total assets and pledgeable loans, the Company had the ability to obtain borrowings from the FHLB up to a maximum of $180,586 at December 31, 2011. Of this maximum borrowing capacity of $180,586, the Company had $137,038 available to use as additional borrowings, of which $95,000 could be used for short-term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, have fixed rates of 1.52% to 5.00% and are due at various dates through a final maturity date of December 8, 2014. At December 31, 2011, there were no promissory notes payable by Ohio Valley to related parties. See Note K for further discussion of related party transactions.

FRB notes consist of the collection of tax payments from Bank customers under the Treasury Tax and Loan program. These funds have a variable interest rate and are callable on demand by the U.S. Treasury. The interest rate for the Company's FRB notes was zero percent at December 31, 2011 and December 31, 2010. Various investment securities from the Bank used to collateralize FRB notes totaled $725 at December 31, 2011 and $1,270 at December 31, 2010.

Letters of credit issued on the Bank's behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $27,000 at December 31, 2011 and $33,450 at December 31, 2010.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note G - Other Borrowed Funds (continued)

Scheduled principal payments over the next five years:

		FHLB Borrowings		Promissory Notes		FRB Notes		Totals
	2012	$	1,507	$	2,437	$	----	$	3,944
	2013		3,814		166		----		3,980
	2014		3,704		1,145		----		4,849
	2015		1,108		----		----		1,108
	2016		1,026		----		----		1,026
Thereafter			5,389		----		----		5,389
		$	16,548	$	3,748	$	----	$	20,296

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Subordinated Debentures and Trust Preferred Securities

12 Months Ended

Dec. 31, 2011

Subordinated Debentures and Trust Preferred Securities [Abstract]

Subordinated Debentures and Trust Preferred Securities

Note H - Subordinated Debentures and Trust Preferred Securities

 On September 7, 2000, a trust formed by Ohio Valley issued $5,000 of 10.6% fixed-rate trust preferred securities as part of a pooled offering of such securities. The Company issued subordinated debentures to the trust in exchange for the proceeds of the offering, which debentures represent the sole asset of the trust. Beginning September 7, 2010, the Company’s subordinated debentures were callable upon demand at a premium of 105.30% with the call price declining .53% per year until reaching a call price of par at year twenty through maturity. The subordinated debentures must be redeemed no later than September 7, 2030. Debt issuance costs of $166 were incurred and capitalized and will amortize as a yield adjustment through expected maturity.

On March 22, 2007, a trust formed by Ohio Valley issued $8,500 of adjustable-rate trust preferred securities as part of a pooled offering of such securities. The rate on these trust preferred securities will be fixed at 6.58% for five years, and then convert to a floating-rate term on March 15, 2012, based on a rate equal to the 3-month LIBOR plus 1.68%. There were no debt issuance costs incurred with these trust preferred securities. The Company issued subordinated debentures to the trust in exchange for the proceeds of the offering. The subordinated debentures must be redeemed no later than June 15, 2037.

On March 26, 2007, the proceeds from these new trust preferred securities were used to pay off $8,500 in higher cost trust preferred security debt that was issued on March 26, 2002. This repayment of $8,500 in trust preferred securities was the result of an early call feature that allowed the Company to redeem the entire amount of these subordinated debentures at par value. These higher cost subordinated debentures, which were floating based on a rate equal to the 3-month LIBOR plus 3.60%, not to exceed 11.00%, were redeemed at a floating rate of 8.97%. The replacement of this higher cost debt was a strategy by management to lower interest expense and improve the net interest margin.

Under the provisions of the related indenture agreements, the interest payable on the trust preferred securities is deferrable for up to five years and any such deferral is not considered a default. During any period of deferral, the Company would be precluded from declaring or paying dividends to shareholders or repurchasing any of the Company's common stock. Under generally accepted accounting principles, the trusts are not consolidated with the Company. Accordingly, the Company does not report the securities issued by the trust as liabilities, and instead reports as liabilities the subordinated debentures issued by the Company and held by the trust. Since the Company's equity interest in the trusts cannot be received until the subordinated debentures are repaid, these amounts have been netted.

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Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2011

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note J - Commitments and Contingent Liabilities

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for instruments recorded on the balance sheet.

Following is a summary of such commitments at December 31:

	2011		2010
Fixed rate	$	1,456	$	941
Variable rate		54,860		47,843
Standby letters of credit		5,486		5,163

 The interest rate on fixed-rate commitments ranged from 3.13% to 7.38% at December 31, 2011.

 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

 The Company participates as a facilitator of tax refunds pursuant to a clearing agreement with a third-party tax software provider. The clearing agreement is effective through December 31, 2015 and is renewable in 5-year increments. The agreement requires the Bank to process electronic refund checks (“ERC’s”) and electronic refund deposits (“ERD’s”) presented for payment on behalf of taxpayers containing taxpayer refunds. The Bank will, in turn, receive a fee paid by the third-party tax software provider for each transaction that is processed. The agreement is subject to termination if the Bank fails to perform the required clearing services and/or the Bank’s regulators would require the Bank to cease offering the product presented within the agreement.

There are various contingent liabilities that are not reflected in the financial statements, including claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on financial condition or results of operations.

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Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2011

Parent Company Only Condensed Financial Information [Abstract]

Parent Company Only Condensed Financial Information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Parent Company Only Condensed Financial Information

Below is condensed financial information of Ohio Valley. In this information, Ohio Valley’s investment in its subsidiaries is stated at cost plus equity in undistributed earnings of the subsidiaries since acquisition. This information should be read in conjunction with the consolidated financial statements of the Company.

CONDENSED STATEMENTS OF CONDITION
	Years ended December 31:
Assets	2011		2010
Cash and cash equivalents	$	1,462	$	1,687
Investment in subsidiaries		84,038		80,087
Notes receivable - subsidiaries		3,743		3,828
Other assets		406		314
Total assets	$	89,649	$	85,916
Liabilities
Notes payable	$	3,748	$	3,835
Subordinated debentures		13,500		13,500
Other liabilities		558		453
Total liabilities	$	17,806	$	17,788
Shareholders’ Equity
Total shareholders’ equity		71,843		68,128
Total liabilities and shareholders’ equity	$	89,649	$	85,916
CONDENSED STATEMENTS OF INCOME
	Years ended December 31:
Income:		2011		2010		2009
Interest on notes	$	134	$	158	$	156
Other operating income		65		68		56
Dividends from subsidiaries		3,500		4,500		4,000
Expenses:
Interest on notes		134		159		157
Interest on subordinated debentures		1,089		1,089		1,089
Operating expenses		287		538		230
Income before income taxes
and equity in undistributed earnings
of subsidiaries		2,189		2,940		2,736
Income tax benefit		439		522		423
Equity in undistributed earnings
of subsidiaries		3,207		1,634		3,486
Net Income	$	5,835	$	5,096	$	6,645

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Parent Company Only Condensed Financial Information (continued)

CONDENSED STATEMENTS OF CASH FLOWS
	Years ended December 31:
Cash flows from operating activities:	2011			2010			2009
Net Income	$	5,835		$	5,096		$	6,645
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(3,207	)		(1,634	)		(3,486	)
Common stock issued to ESOP		496			315			22
Change in other assets		(92	)		(12	)		(7	)
Change in other liabilities		105			64			59
Net cash provided by operating activities		3,137			3,829			3,233
Cash flows from investing activities:
Change in notes receivable		85			402			1,231
Net cash provided by investing activities		85			402			1,231
Cash flows from financing activities:
Change in notes payable		(87	)		(412	)		(1,232	)
Cash dividends paid		(3,360	)		(3,347	)		(3,186	)
Net cash used in financing activities		(3,447	)		(3,759	)		(4,418	)
Cash and cash equivalents:
Change in cash and cash equivalents		(225	)		472			46
Cash and cash equivalents at beginning of year		1,687			1,215			1,169
Cash and cash equivalents at end of year	$	1,462		$	1,687		$	1,215

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Total
Balances at Dec. 31, 2008	$ 4,643	$ 32,683	$ 40,752	$ 690	$ (15,712)	$ 4,643
Comprehensive Income:
Net Income	0	0	6,645	0	0	6,645
Change in unrealized gain (loss) on available for sale securities				(24)		(16)
Income tax effect				(8)		8
Total comprehensive income						6,629
Common stock issued to ESOP	1	21				(22)
Cash dividends			3,186			3,186
Balances at Dec. 31, 2009	4,644	32,704	44,211	674	(15,712)
Comprehensive Income:
Net Income			5,096			5,096
Change in unrealized gain (loss) on available for sale securities				(693)		(457)
Income tax effect				(236)		236
Total comprehensive income						4,639
Common stock issued to ESOP	16	299				(315)
Cash dividends			3,347			3,347
Balances at Dec. 31, 2010	4,660	33,003	45,960	217	(15,712)	68,128
Comprehensive Income:
Net Income			5,835			5,835
Change in unrealized gain (loss) on available for sale securities				1,127		744
Income tax effect				383		(383)
Total comprehensive income						6,579
Common stock issued to ESOP						(496)
Cash dividends						3,360
Balances at Dec. 31, 2011	$ 4,686	$ 33,473	$ 48,435	$ 961	$ (15,712)	$ 71,843

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Premises and Equipment

12 Months Ended

Dec. 31, 2011

Premises and Equipment [Abstract]

Premises and Equipment

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D - Premises and Equipment

Following is a summary of premises and equipment at December 31:

	2011		2010
Land	$	1,890	$	1,890
Buildings		10,334		10,270
Leasehold improvements		2,855		2,897
Furniture and equipment		13,961		13,674
		29,040		28,731
Less accumulated depreciation		19,824		18,993
Total premises and equipment	$	9,216	$	9,738

The following is a summary of the future minimum lease payments for facilities leased by the Company. Lease expense was $492 in 2011, $490 in 2010 and $462 in 2009.

2012	$	501
2013		433
2014		311
2015		174
2016		147
Thereafter		55
	$	1,621

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Regulatory Matters

12 Months Ended

Dec. 31, 2011

Regulatory Matters [Abstract]

Regulatory Matters

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note N - Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that as of December 31, 2011, the Company and the Bank met all capital adequacy requirements to which they were subject.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. At year-end 2011 and 2010, the Bank’s capital met the requirements for the Bank to be deemed well capitalized under the regulatory framework for prompt corrective action.  There have been no conditions or events since that notification that management believes have changed the Bank's category.

     At year-end, consolidated actual capital levels and minimum required levels for the Company and the Bank were:

											Minimum Required
											To Be Well
						Minimum Required					Capitalized Under
						For Capital					Prompt Corrective
	Actual		Actual			Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2011
Total capital (to risk weighted assets)
Consolidated	$	90,288		15.6	%	$	46,174		8.0	%	$	57,718		N/A
Bank		81,991		14.4			45,544		8.0			56,930		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		83,072		14.4			23,087		4.0			34,631		N/A
Bank		74,975		13.2			22,772		4.0			34,158		6.0
Tier 1 capital (to average assets)
Consolidated		83,072		10.3			32,414		4.0			40,517		N/A
Bank		74,975		9.4			31,969		4.0			39,962		5.0
2010
Total capital (to risk weighted assets)
Consolidated	$	87,660		14.5	%	$	48,235		8.0	%	$	60,294		N/A
Bank		79,893		13.4			47,663		8.0			59,578		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		80,101		13.3			24,117		4.0			36,176		N/A
Bank		72,426		12.2			23,831		4.0			35,747		6.0
Tier 1 capital (to average assets)
Consolidated		80,101		9.3			34,326		4.0			42,908		N/A
Bank		72,426		8.5			33,902		4.0			42,377		5.0

Dividends paid by the subsidiaries are the primary source of funds available to Ohio Valley for payment of dividends to shareholders and for other working capital needs. The payment of dividends by the subsidiaries to Ohio Valley is subject to restrictions by regulatory authorities. These restrictions generally limit dividends to the current and prior two years retained earnings. At January 1, 2012 approximately $4,795 of the subsidiaries’ retained earnings were available for dividends under these guidelines. In addition to these restrictions, dividend payments cannot reduce regulatory capital levels below minimum regulatory guidelines. The Board of Governors of the Federal Reserve System also has a policy requiring Ohio Valley to provide notice to the FRB in advance of the payment of a dividend to Ohio Valley's shareholders under certain circumstances, and the FRB may disapprove of such dividend payment if the FRB determines the payment would be an unsafe or unsound practice.