Note

- 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. New rules became effective for the Company and the Bank on

January 1, 2015,

with full compliance with all of the requirements being fully phased in on

January 1, 2019.

Minimum requirements increased for both the quantity and quality of capital held by the Company and the Bank. The rules include a capital conservation buffer of

2.5%

of risk-weighted assets. The capital conservation buffer began to phase in on

January 1, 2016

0.625%,

and increased by the same amount on each subsequent

January 1

over a

four

-year period. The fully phased-in capital conservation buffer as of

January 1, 2019

2.5%.

Failure to maintain the required common equity tier

capital conservation buffer will result in potential restrictions on a bank's ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

Prompt corrective action regulations applicable to insured depository institutions provide

five

classifications: 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 capital restoration plans are required. At year-end

2019

and

2018,

the Bank met the capital requirements to be deemed well capitalized under the regulatory framework for prompt corrective action. Regulations of the FRB require a state-chartered bank that is a member of a Federal Reserve Bank to maintain certain amounts and types of capital and generally also require bank holding companies to meet such requirements on a consolidated basis. The FRB generally requires bank holding companies that have chosen to become financial holding companies to be “well capitalized,” as defined by FRB regulations, in order to continue engaging in activities permissible only to bank holding companies that are registered as financial holding companies. If, however, a bank holding company, whether or

not

also a financial holding company, satisfies the requirements of the FR’s Small Bank Holding Company Policy (the “SBHCP”), the holding company is

not

required to meet the consolidated capital requirements. As amended effective in

September 2018,

the SBHCP requires that the holding company have assets of less than

billion, that it meet certain qualitative requirements, and that all of the holding company’s bank subsidiaries meet all bank capital requirements. As of

December 31, 2019,

the Company was deemed to meet the SBHCP requirements and so was

not

required to meet consolidated capital requirements at the holding company level.

The following table summarizes the capital ratios (excluding the capital conservation buffer) of the Company and the Bank. The minimums for the Company are those that would have been required if the Company was

not

a small bank holding company under the SBHCP.

	Actual					Minimum Regulatory			Minimum To Be Well
201 9	Amount		Ratio			Capital Ratio			Capitalized (1)
Total capital (to risk weighted assets)
Consolidated	$	134,930		18.7	%		8.0	%		10.0	%
Bank		120,716		17.0			8.0			10.0
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		120,158		16.6			4.5			N/A
Bank		114,772		16.1			4.5			6.5
Tier 1 capital (to risk weighted assets)
Consolidated		128,658		17.8			6.0			6.0
Bank		114,772		16.1			6.0			8.0
Tier 1 capital (to average assets)
Consolidated		128,658		12.5			4.0			N/A
Bank		114,772		11.3			4.0			5.0

	Actual					Minimum Regulatory			Minimum To Be Well
201 8	Amount		Ratio			Capital Ratio			Capitalized (1)
Total capital (to risk weighted assets)
Consolidated	$	127,487		17.7	%		8.0	%		10.0	%
Bank		114,947		16.2			8.0			10.0
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		112,259		15.6			4.5			N/A
Bank		108,547		15.3			4.5			6.5
Tier 1 capital (to risk weighted assets)
Consolidated		120,759		16.7			6.0			6.0
Bank		108,547		15.3			6.0			8.0
Tier 1 capital (to average assets)
Consolidated		120,759		11.8			4.0			N/A
Bank		108,547		10.7			4.0			5.0

(

)

For the Company, these amounts would be required for the Company to engage in activities permissible only for a bank holding company that meets the financial holding company requirements if the Company were

not

subject to the SBHCP. For the Bank, these are the amounts required for the Bank to be deemed well capitalized under the prompt corrective action regulations.

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 and state law. These restrictions generally limit dividends to the current and prior

two

years retained earnings of the Bank and Loan Central, Inc., and

90%

of the prior year’s net income of OVBC Captive, Inc. At

January 1, 2020

approximately

$15,042

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 amount of dividends payable by the Bank is also restricted if the Bank does

not

hold a capital conservation buffer. The ability of Ohio Valley to borrow funds from the Bank is limited as to amount and terms by banking regulations. 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.