10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2016

OR

☐ 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 ☑

    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 ☐   NO ☑

    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 ☑   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 ☑   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.  ☑

    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  ☐	Accelerated filer  ☑
Non-accelerated filer  ☐	Smaller reporting company  ☐
(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 ☐   NO ☑

    Based on the closing sales price of $21.86 per share on June 30, 2016, the aggregate market value of the issuer's shares held by non-affiliates on such date was $79,621,793.  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 February 28, 2017 was 4,680,883.

Documents Incorporated By Reference:

(1) Portions of the 2016 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 on May 10, 2017 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 three nonbank subsidiaries, Loan Central, Inc., which engages in lending ("Loan Central"), Ohio Valley Financial Services Agency, LLC, which is used to facilitate the receipt of commissions on insurance sold by the Bank and Loan Central ("Ohio Valley Financial Services"), and OVBC Captive, Inc., a limited purpose property and casualty insurance company ("OVBC Captive").  Ohio Valley also owns one wholly-owned subsidiary trust formed solely to issue a trust preferred security.   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 91.6%, 90.9% and 90.6% of total consolidated revenues for the years ended December 31, 2016, 2015 and 2014, 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, LLC'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, 2016, Ohio Valley's consolidated assets approximated to $954,640,000, and total shareholders' equity approximated to $104,528,000.

Ohio Valley is also  permitted to engage in  certain  non-banking  activities, such as  securities  underwriting and  dealing  activities,  insurance  agency  and underwriting activities and merchant banking/equity investment activities.  Ohio Valley presently has an insurance agency, Ohio Valley Financial Services, which is used to facilitate the receipt of commissions on insurance sold by the Bank and Loan Central. Ohio Valley also has a captive insurance company, OVBC Captive, that is engaged in the business of providing commercial property and various liability insurance to the Company and related entities.  Management will consider opportunities to engage in additional nonbanking activities as they arise.

Information about the Company's business segments is set forth in Note R to the Company's Financial Statements located in Ohio Valley's 2016 Annual Report to Shareholders.

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 nineteen offices located in Ohio and West Virginia, all but two offering automatic teller machines ("ATMs").  Twelve of these offices also offer drive-up services.  The Bank accounted for substantially all of Ohio Valley's consolidated assets at December 31, 2016.

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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.

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 six 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.

OVBC Captive is a pure captive insurance company engaged in providing commercial property and various liability insurance to the Company and affiliates.  OVBC Captive has been approved under the guidelines of the State of Nevada Division of Insurance.

Variable Interest Entities

Ohio  Valley  owns  one  special  purpose  entity, Ohio  Valley  Statutory  Trust III, which has  issued $8,500,000 in  trust  preferred  securities.  Ohio  Valley has  issued a like amount of subordinated debentures to the Trust 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 Trust III is located in Ohio Valley's 2016 Annual Report to Shareholders under "Note J – Subordinated Debentures and Trust Preferred Securities," in the notes to the Company's consolidated financial statements for the fiscal year ended December 31, 2016.

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Financial Information

Financial information regarding the Company as of December 31, 2016 and 2015 and results of operations for the last three fiscal years is contained in the Company's consolidated financial statements for the fiscal year ended December 31, 2016.

Business Combinations

As of the close of business on August 5, 2016, Ohio Valley completed its merger with Milton Bancorp, Inc. ("Milton Bancorp") pursuant to the terms of the Agreement and Plan of Merger dated as of January 7, 2016, by and between Ohio Valley and Milton Bancorp, as amended (the "Merger Agreement").  Pursuant to the terms of the Merger Agreement, Milton Bancorp was merged with and into Ohio Valley.  Immediately following the Merger, The Milton Banking Company ("Milton Bank") was merged with and into the Bank.  The consideration paid for Milton Bancorp totaled $18.875 million, of which $11.444 million was the market value of the Company's common shares and $7.431 million was cash.  The fair value of the common shares issued as part of the consideration paid for Milton Bancorp was determined on the basis of the closing price of the Company's common shares on the acquisition date.  After the merger, the Company's assets totaled approximately $950 million and branches increased to 19 locations.  Further detail on the merger is located in Ohio Valley's 2016 Annual Report to Shareholders under "Note B – Business Combinations" in the notes to the Company's consolidated financial statements for the fiscal year ended December 31, 2016.

Lending Activities

The Company's loan portfolio increased $149,149,000 to finish at $734,901,000 in 2016.  The increase in total loans was due to loans acquired from Milton Bancorp as part of the merger on August 5, 2016.  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.  During 2016, commercial loans increased $63,348,000, or 25.2%, while residential real estate loans increased $62,147,000, or 27.8%, and consumer  loans increased $23,654,000, or 21.4%, as compared to 2015.  Consolidated interest and fee revenue from loans accounted for 76.21%, 74.52%, and 72.89% of total consolidated revenues in 2016, 2015 and 2014, 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 mortgage or 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 (whichever is the lesser) 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. Currently, the Bank's fixed-rate real estate loan offerings are limited to maturity terms up to fifteen years, with 100% of its thirty-year real estate loan demand being sold to Freddie Mac.

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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 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 prior to approval. The Bank's loan committee will review and approve all new commercial loan originations that exceed the originating loan officer's lending limits according to the following thresholds:  up to $750,000 unsecured, up to $3,000,000 secured, and up to $3,000,000 aggregate.  The  Executive Committee of the Bank's Board of Directors will review and approve all new commercial loan originations up to the legal lending limit of the Bank.

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.  The Company's consumer loans also consist of seasonal refund anticipation loans ("RAL's") offered by Loan Central during the tax season.  RAL's are short-term cash advances against a customer's anticipated income tax refund.

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 purposes of the standards and guidelines are 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. 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 5.69%, 5.94% and 5.60% of total consolidated revenues in 2016, 2015 and 2014, 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, money market, 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.  Short- and long-term advances from the Federal Home Loan Bank have also been a significant source of funding.  Further fundinghas come fromone trust preferred securities offering through Ohio Valley Statutory Trust III, totaling $8,500,000.  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 service in 2006, in which it serves as a facilitator for the clearing of tax refunds for a single tax refund product provider.  A tax refund clearing agreement between the Bank and tax refund product 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, in turn, receives a fee paid by the third-party tax software provider for each transaction that is 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.  During the year ended 2016, the Company's ERC/ERD fees totaled $2,048,000, a decrease of $323,000, or 13.6%, as compared to the same period in 2015. Although the volume of ERC/ERD items increased during the 2016 tax season compared to 2015, management anticipated the tax fee revenue would still decrease due to changes in product service agreements. On October 21, 2014, the Bank entered into a new agreement with the third-party tax refund product provider. The new agreement generally provided for a different fee structure, including different fees depending upon the tax refund product selected, and fees that generally will be lower for each refund facilitated, with a reduction in per transaction fees to occur in future years. It is impossible to predict the number of refunds that will be facilitated in the future, the products chosen and therefore the fees that will be received by the Bank. Nevertheless, the Bank anticipates that without an increase in the number of refunds facilitated by the Bank, the fees received by the Bank from this arrangement will continue to be reduced in future years.  This revenue source accounted for 24.9% of the overall noninterest income during the year ended 2016.

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 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 Lawrence, Vinton, Scioto, Athens, Ross, Pickaway and Madison.  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 that may not meet the Bank's credit standards.  Loan Central also operates in Scioto and Ross counties of Ohio, which are 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.

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 have experienced significant challenges as a result of the economic crisis, which resulted 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. The regulation of financial holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the Federal Deposit Insurance Fund and the banking system as a whole, and not for the protection of shareholders.  Applicable laws and regulations restrict permissible activities and investments, and require actions to protect loan, deposit, brokerage, fiduciary and other cuostmers, as well as the Federal Deposit Insurance Fund.  They also may restrict Ohio Valley's abilty to repurchase its common shares or to receive dividends from the Bank, and impose cpatal adequacy and liquidity requirements.

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).

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

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A bank holding company is required to serve as a source of financial strength to each subsidiary bank and to commit resources to support those subsidiary banks.  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. The Federal Reserve Board also requires 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.

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.

If a financial holding company or a subsidiary bank 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 institution 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.

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

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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.

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 a member of the Federal Reserve Bank of Cleveland ("FRB"), the Bank is supervised and regulated primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board.  The Bank is also subject to the regulations of the Consumer Financial Protection Bureau (the "CFPB"), which has broad authority to adopt and enforce consumer protection regulations.

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 certain 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.  Consumer protection laws and regulations include the Equal Credit Opportunity Act and the Fair Housing Act (prohibiting certain types of discriminatory lending practices), the Truth in Lending Act (requiring understandable disclosure of credit terms), the Home Mortgage Dislcosure Act (requiring the collection of data that enables regulatory agencies to determine whether the financial insitutions are serving the housing credit needs of the communities in which they are located), the Real Estate Seteelement Procedures Act (requiring disclosures to borrowers and prohibiting abusive practices that increase borrowers' costs) and the privacy provisions of the Gramm-Leach-Bliley Act (requiring policies and procedures to restrict unauthorized sharing of non-public customer data with nonaffiliated parties and protecting customer information from unauthorized access).

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Capital Requirements

Financial institutions and their holding companies are required to maintain capital as a way of absorbing losses that can, as well as losses that cannot, be predicted.  The Federal Reserve has adopted risk-based capital guidelines for financial holding companies as well as state banks that are members of the Federal Reserve Bank.  The Office of the Comptroller of the Currency and the FDIC have adopted risk-based capital guidelines for national banks and state non-member banks, respectively.  The guidelines provide a systematic analytical framework which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and minimizes disincentives to holding liquid, low-risk assets.  Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

Prior to January 1, 2015, the guidelines included a minimum for the ratio of total capital to risk-weighted assets of 8%, with at least half of the ratio composed of common shareholders' equity, minority interests in certain equity accounts of consolidated subsidiaries and a limited amount of qualifying preferred stock and qualified trust preferred securities, less goodwill and certain other intangible assets (known as "Tier 1" risk-based capital).  The guidelines also provided for a minimum ratio of Tier 1 capital to average assets, or "leverage ratio," of 3% for financial holding companies and bank holding companies that meet certain criteria, including having the highest regulatory rating, and 4% for all other financial holding companies and bank holding companies.

The risk-based capital guidelines adopted by the federal banking agencies are based on the "International Convergence of Capital Measurement and Capital Standard" (Basel I), published by the Basel Committee on Banking Supervision (the "Basel Committee") in 1988.  In 2004, the Basel Committee published a new capital adequacy framework (Basel II) for large, internationally active banking organizations, and in December 2010 and January 2011, the Basel Committee issued an update to Basel II ("Basel III").  The Basel Committee frameworks did not become applicable to banks supervised in the United States until adopted into United States law or regulations.  Although the United States banking regulators imposed some of the Basel II and Basel III rules on banks with $250 billion or more in assets or $10 billion of on-balance sheet foreign exposure, it was not until July 2013 that the United States banking regulators issued final (or, in the case of the FDIC, interim final) new capital rules applicable to smaller banking organizations (the "Basel III Capital Rules"), which also implement certain of the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").  Community banking organizations, including Ohio Valley and the Bank, began transitioning to the new rules on January 1, 2015.  The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phase in from January 1, 2016, through January 1, 2019, and most deductions from common equity tier 1 capital will phase in from January 1, 2015, through January 1, 2019.

The new rules include (a) a new common equity tier 1 capital ratio of at least 4.5 percent, (b) a Tier 1 capital ratio of at least 6.0 percent, rather than the former 4.0 percent, (c) a minimum total capital ratio that remains at 8.0 percent, and (d) a minimum leverage ratio of 4%.

Common equity for the common equity tier 1 capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.

Tier 1 capital includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus and trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

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Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization's own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).  The deductions phase in from 2015 through 2019.

Under the guidelines, capital is compared to the relative risk related to the balance sheet.  To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.  Some of the risk weightings were changed effective January 1, 2015.

The new rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of greater than 2.5 percent composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.  The capital conservation buffer phases in starting on January 1, 2016, at .625%.  The implementation of Basel III is not expected to have a material impact on Ohio Valley's or the Bank's capital ratios.

Pursuant to the Federal Reserve Board's Small Bank Holding Company Policy, a holding company with assets of less than $1 billion and meets certain other requirements is not required to comply with the consolidated capital requirements, although the Bank must comply with the capital requirements.  At December 31, 2016, Ohio Valley's assets totaled $954,640,000, and the Small Bank Holding Company Policy applied to Ohio Valley.  As a result of the Bank's tax refund processing business, however, which causes a substantial temporary increase in Ohio Valley's assets, management expects Ohio Valley's consolidated assets at the end of the first quarter of 2017 to exceed $1 billion.

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.

Effective January 1, 2015, in order to be "well-capitalized," a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 8% and a leverage ratio of at least 5%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level or any capital measure.  Ohio Valley's management believes that the Bank meets the ratio requirements to be deemed "well-capitalized" according to the guidelines described above.

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 capital levels. Dividends are also subject to limitations if the Company or the Bank fails to hold the required capital conservation buffer.  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.  Under Ohio law, the Bank may pay a dividend from surplus only with the approval of its shareholders and the approval of the Superintendent of Financial Institutions.  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.

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In addition, Federal Reserve Board 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.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including the Bank, to prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the deposit insurance fund, and to take enforcement actions against insured institutions.  The FDIC may terminate insurance of deposits of any institution if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or other regulatory agency.

The FDIC assesses a quarterly deposit insurance premium on each insured institution based on risk characteristics of the institution and may also impose special assessments in emergency situations.  The premiums fund the Deposit Insurance Fund ("DIF").  Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio ("DRR"), which is the amount in the DIF as a percentage of all DIF insured deposits.  In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act.  The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%.  Although the FDIC's new rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until the DRR reaches 1.35%.  The rules also provide assessment credits to banks with assets of less than $1 billion for the portion of their assessments that contribute to the increase of the DRR to 1.35%.  The rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.

In addition, all FDIC-insured institutions are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, which was established by the government to recapitalize a predecessor to the DIF.  These assessments will continue until the Financing Corporation bonds mature in 2019.

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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Community Reinvestment Act

The Community Reinvestment Act of 1977 (the "CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.  Under the CRA, each depository institution is required to hep meet the credit needs of its market areas by, among other things, providing credit or other financial assistance to low and moderate-income individuals and communities.  Depository institutions are periodically examined for compliance with the CRA.  As of its most recent evaluation, the Bank was assigned an overall CRA rating of "Satisfactory."

Customer Privacy Protections

The Bank is subject to regulations limiting the ability of financial institutions to disclose non-public information about consumers to nonaffiliated third parties.  These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated party.

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.

Executive and Incentive Compensation

In June 2010, the Federal Reserve Board, the OCC and the FDIC issued joint interagecy guidance on incentive compensation policies (the "Joint Guidance") intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.  This principles-based guidance, which covers all employees that have the ability to affect materially the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization's incentive compensation arrangements should:  (i) provide incentives that do not encourage risk-taking beyond the organization's ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization's board of directors.  The Joint Guidance made incentive compensation part of the regulatory agencies' examination process, with the findings of the supervisory intiatives included in reports of examination and enforcement actions possible.

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In 2011, federal bank regulatory agencies jointly issued proposed rules on incentive-based compensation arrangements under applicable provisions of the Dodd-Frank Act (the "First Proposed Joint Rules").  The First Proposed Joint Rules generally would have applied to financial institutions with $1 billion or more in assets that maintain incentive-based compensation arrangements for certain covered employees.

In May 2016, the federal bank regulatory agencies approved a second joint notice of proposed rules ("the Second Proposed Joint Rules") designed to prohibit incentive-based compensation arrangements that encourage inappropriate risks at financial institutions.  The Second Proposed Joint Rules would apply to covered financial institutions with total assets of $1 billion or more.  The requirements of the Second Proposed Joint Rules would differ for each of three categories of financial institutions:

· Level 1 consists of institutions with assets of $250 billion or more;

· Level 2 consists of institutions with assets of at least $50 billion and less than $250 billion; and

· Level 3 consists of institutions with assets of at least $1 billion and less than $50 billion.

Some of the requirements would apply only to Level 1 and Level 2 institutions.  For all covered institutions, including Level 3 institutions, the Second Proposed Joint Rules would:

· prohibit incentive-based compensation arrangements that are "excessive" or "could lead to material financial loss;"

· require incentive based compensation that is consistent with a balance of risk and reward, effective management and control of risk, and effective governance; and

· require board oversight, recordkeeping and disclosure to the appropriate regulatory agency.

Level 1 and Level 2 institutions would have additional requirements, including deferrals of awards to certain covered persons; potential downward adjustments, forfeitures or clawbacks; and additional risk-management and control standards, policies and procedures.  In addition, certain practices and types of incentive compensation would be prohibited.

Employees

As of December 31, 2016, Ohio Valley and its subsidiaries had approximately 297 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.

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.

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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 2016 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, 2016, 2015 and 2014 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 2016 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, 2016 and 2015 are 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 2016 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)	2016		2015		2014
Securities Available for Sale
U.S. Government sponsored entity securities	$	10,544	$	8,965	$	8,917
Agency mortgage-backed securities, residential		85,946		82,686		76,319
Total securities available for sale	$	96,490	$	91,651	$	85,236
Securities Held to Maturity
Obligations of states of the U.S. and
political subdivisions	$	18,661	$	19,898	$	22,811
Agency mortgage-backed securities, residential		4		5		9
Total securities held to maturity	$	18,665	$	19,903	$	22,820

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 2016 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.

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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)	2016		2015		2014		2013		2012
Residential real estate	$	286,022	$	223,875	$	223,628	$	219,365	$	226,022
Commercial real estate		214,007		169,312		177,612		183,871		175,010
Commercial and industrial		100,589		81,936		83,998		60,803		57,239
Consumer		134,283		110,629		109,530		102,280		100,017
	$	734,901	$	585,752	$	594,768	$	566,319	$	558,288

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 2016 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 $1,235,000, $1,126,000 and $1,203,000 for the fiscal years ended December 31, 2016, 2015 and 2014, respectively.  The amount of interest income that was included in net income recorded on such loans was $779,000, $757,000 and $1,022,000 for the fiscal years ended December 31, 2016, 2015 and 2014, 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 2016 Annual Report to Shareholders.

2. Potential Problem Loans - At December 31, 2016 and 2015, 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 2016 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.

3. Foreign Outstandings - There were no foreign outstandings at December 31, 2016, 2015 or 2014.

4. Loan Concentrations - As of December 31, 2016 and 2015, 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, 2016, located in Ohio Valley's 2016 Annual Report to Shareholders which is incorporated herein by reference.

D. Other Interest-Bearing Assets - As of December 31, 2016 and 2015, there were no other interest-bearing assets that would be required to be disclosed under Item III.C. if such assets were loans.

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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)	2016			2015			2014			2013			2012
Balance, beginning of year	$	6,648		$	8,334		$	6,155		$	6,905		$	7,344
Loans charged off:
Residential real estate		384			828			487			819			1,066
Commercial real estate		63			1,971			235			2			1,949
Commercial and industrial		586			24			41			600			499
Consumer		2,170			1,428			1,216			1,279			1,622
Total loans charged off		3,203			4,251			1,979			2,700			5,136
Recoveries of loans:
Residential real estate		299			386			286			282			140
Commercial real estate		132			204			108			345			35
Commercial and industrial		16			234			392			65			2,027
Consumer		981			651			585			781			912
Total recoveries of loans		1,428			1,475			1,371			1,473			3,114
Net loan charge-offs		(1,775	)		(2,776	)		(608	)		(1,227	)		(2,022	)
Provision charged to operations		2,826			1,090			2,787			477			1,583
Balance, end of year	$	7,699		$	6,648		$	8,334		$	6,155		$	6,905
Ratio of net charge-offs to average loans outstanding		.28	%		.47	%		.10	%		.22	%		.35	%
Ratio of allowance for loan losses to
non-performing assets		67.43	%		69.01	%		74.76	%		122.81	%		90.24	%

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 captions "Provision Expense" and "Allowance for Loan Losses" within "Management's Discussion and Analysis of Financial Condition and Results of Operations" located in Ohio Valley's 2016 Annual Report to Shareholders.

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 2016 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 2016 Annual Report to Shareholders.

C.&E. Foreign Deposits - There were no foreign deposits outstanding at December 31, 2016, 2015, or 2014.

D. Schedule of Maturities - The following table provides a summary of total time deposits of $100,000 or greater by remaining maturities for the fiscal year ended December 31, 2016 and 2015:

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December 31, 2016			Over		Over
(dollars in thousands)	3 months		3 through		6 through		Over
	or less		6 months		12 months		12 months
Total time deposits of $100,000 or greater	$	16,084	$	8,163	$	23,097	$	45,245

December 31, 2015			Over		Over
(dollars in thousands)	3 months		3 through		6 through		Over
	or less		6 months		12 months		12 months
Total time deposits of $100,000 or greater	$	11,448	$	9,476	$	16,469	$	43,227

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 2016 Annual Report to Shareholders.

VII.SHORT-TERM BORROWINGS

During each of the last three fiscal years, the Company's average amount of short-term borrowings was less than 30% of shareholders' equity at the end of the period.

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 and strategic plans, such as mergers; (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.

Changes in economic and political conditions -- local, national and international -- 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, national and even international, 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.  The recent election of a new Untied States President is widely expected to result in substantial, unpredictable changes in economic and political conditions for the United States and the remainder of the world.  Economic turmoil in Europe and Asia and changes in oil production in the Middle East affect the economy and stock prices in the United States.  In June 2016, a vote held in the United Kingdom resulted in a determination that the United Kingdom should exit the European Union.  The details of the exit and how it will affect the United Kingdom and the economy of the United States are unknown.  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.

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.

New laws and increased regulatory oversight may significantly affect our business, financial condition and results of operations.

The financial services industry is extensively regulated.  We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations.  Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors, borrowers, the FDIC's Deposit Insurance Fund and the banking system as a whole, and not to benefit our shareholders.  Regulations affecting banks and financial services businesses are undergoing continuous changes, and management cannot predict the effect of these changes.  Moreover, the recently elected United States President and certain legislators have indicated an intention to make extensive changes to regulations affecting financial institutions.  The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets held by an institution and the adequacy of an institution's allowance for loan losses.  Additionally, actions by regulatory agencies against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders. Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or market area.

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In light of conditions in the global financial markets and the global economy that occurred in the last decade, regulators increased their focus on the regulation of the financial services industry.  New statutes and regulations subjected us to additional restrictions and requirements that have had an impact on our business and results of operations.

In 2013, the Federal Reserve Board published final rules (the "Basel III Capital Rules") establishing a new comprehensive capital framework for U. S. banking organizations.  The rules implement the Basel Committee's December 2010 framework for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act.  The Basel III Capital Rules substantially revise the risk-based capital requirements applicable to financial holding companies and other bank holding companies as well as depository institutions.  The Basel III Capital Rules became effective for us on January 1, 2015 (subject to a phase-in period).  Although the implementation of the Basel III Capital Rules, once fully phased in, is not expected to have a material impact on our capital ratios, any future changes to capital requirements could have such an effect.

In addition to laws, regulations and actions directed at the operations of banks, proposals to reform the housing finance market could negatively affect our ability to sell loans.

Although it is impossible for us to predict at this time what changes in laws and regulations will be implemented and the effect they 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.  Our operating and compliance costs could increase and could adversely affect 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.

Periodic regulatory reviews may affect our financial condition.

We are 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 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.

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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.

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.

We could experience difficulties in effectively integrating the operations of Milton Bancorp and Milton Bank.

Our earnings, financial condition and prospects will depend in part on our ability to integrate successfully the operations of Milton Bancorp and Milton Bank.  We may not be able to achieve fully the strategic objectives and projected operating efficiencies in the merger.  The costs or difficulties relating to the integration of Milton Bancorp and Milton Bank with our organization may be greater than expected or the cost savings from any anticipated economies of scale of the combined organization may be lower or take longer to realize than expected.  Inherent uncertainties exist in integrating the operations of any acquired entity, and we may encounter difficulties, including, without limitation, loss of key employees and customers, disruption of its ongoing business or possible inconsistencies in standards, controls, procedures and policies.  These factors could contribute to our not fully achieving the expected benefits from the merger.    

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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 that we will have inaccurate or incomplete information about borrowers, risks that borrowers will become unable to repay loans; 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.  We may also have concentrated credit exposure to a particular industry, resulting in a risk of a material adverse effect on our earnings or financial condition if there is an event adversely affecting that industry.

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.

We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial condition.

When the Bank sells a mortgage loan, it agrees to repurchase or substitute a mortgage loan if it is later found to have breached any representation or warranty the Bank made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan.  While we have underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, we cannot assurance that no breach or fraud will ever occur.  Required repurchases, substitutions or indemnifications could have an adverse effect on our liquidity, results of operations and financial condition.

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.  Moreover, the Financial Accounting Standards Board has changed its requirements for establishing the allowance, which will be effective for us in the first quarter of 2020.  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.

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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.

The discontinuance of tax refund services, or reduction in fees under a new contract pursuant to an arrangement with a single tax refund product provider could have an adverse effect on our net income.

Through our relationship with a single tax refund product 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 an electronic refund check or electronic refund deposit ("ERC/ERD").  In return, the Bank charges a fee for the service.  For the 2016 tax season, the Company recorded ERC/ERD fee income of $2,048,000.

On October 21, 2014, the Bank entered into a new agreement with the third-party tax refund product provider. The new agreement generally provided for a different fee structure, including different fees depending upon the tax refund product selected, and fees that generally will be lower for each refund facilitated, with a reduction in per transaction fees in future years. It is impossible to predict the number of refunds that will be facilitated, the products chosen and therefore the fees that will be received by the Bank. Nevertheless, we anticipate that without a significant increase in the number of refunds we facilitate, the fees we receive from this arrangement will be significantly reduced in future years.

We will continue to face risks within our ERC/ERD business that could potentially terminate our agreement with the third-party tax refund product 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 tax refund product provider, a termination of that relationship could significantly reduce our 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.

We could suffer a material adverse impact from interruptions in the effective operation of, or security breaches affecting, our computer systems.

We rely heavily on information systems to conduct our business and to process, record, and monitor our transactions.  Risks to the system result from a variety of factors, including the potential for bad acts on the part of hackers, criminals, employees and others.  As one example, in recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions.  We are also at risk for the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.  These risks also arise from the same types of threats to businesses with which we deal.

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Potential adverse consequences of attacks on our computer systems or other threats include damage to our reputation, loss of customer business, litigation and increased regulatory scrutiny, which might also result in financial loss and require additional efforts and expense to attempt to prevent such adverse consequences in the future.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, or other branches in the security of our systems 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 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 the size of dividend distribution will continue in the future, even if we are able to pay dividends.  Our failure to pay dividends on our common shares could have a material adverse effect on the market price of our common shares.

We may be compelled to seek additional capital in the future but 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.  Federal banking agencies have adopted extensive changes to their capital requirements, including raising required amounts and eliminating inclusion of certain instruments from the calculation of capital.  We began transitioning to the new requirements on January 1, 2015.  Ohio Valley may be required to raise additional 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.

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.

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

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.

Structured investments have at times 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.
 

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.

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.

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

Increased bank failures for several years commencing in 2008 greatly 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 took a number of actions, including increasing assessment rates of insured institutions, requiring riskier institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels, changing the assessment base and requiring a prepayment of assessments for over three years.

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.  The FDIC has recently adopted rules revising its assessments in a manner benefitting banks with assets totaling less than $10 billion.  There can be no assurance, though, that assessments will not be changed in the future.

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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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 fourteen financial service centers located in Gallipolis (Gallia Co.), Jackson, Oak Hill and Wellston (Jackson Co.), Waverly (Pike Co.), New Holland (Pickaway Co.), and Mount Sterling (Madison Co.)  in Ohio; and Point Pleasant (Mason Co.), and Milton and Barboursville (Cabell Co.) in West Virginia.  The Bank leases five additional financial service centers located in Gallipolis (Gallia Co.), Pomeroy (Meigs Co.) and Athens (Athens Co.) in Ohio.  The Bank also owns and operates thirty-six ATMs, including nineteen off-site ATMs.  Furthermore, the Bank owns three facilities and leases one facility in Gallipolis (Gallia Co.), Ohio, which are used for additional office space.   The Bank also owns a facility in Gallipolis (Gallia Co.), and a facility in Jackson (Jackson Co.) in Ohio; and a facility in Point Pleasant (Mason Co.), in West Virginia, which are all leased to third parties.

Loan Central conducts its consumer finance operations through six offices located in Gallipolis (Gallia Co.), Jackson (Jackson Co.), Waverly (Pike Co.), South Point (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.

Management considers all of these properties to be satisfactory for the Company's current operations.  The Bank and Loan Centrals' 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 E – Premises and Equipment" of the notes to the Company's consoldiated financial statements for the fiscal year ended December 31, 2016, located in Ohio Valley's 2016 Annual Report to Shareholders.

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ITEM 3 – LEGAL PROCEEDINGS

Not applicable

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 2016 Annual Report to Shareholders and "Note P - Regulatory Matters" of the notes to the Company's consolidated financial statements for the fiscal year ended December 31, 2016 located in Ohio Valley's 2016 Annual Report to Shareholders.

Ohio Valley did not sell any unregistered equity securities during the three months ended December 31, 2016.

Ohio Valley did not purchase any of its shares during the three months ended December 31, 2016.

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 2016 Annual Report to Shareholders.

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 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 2016 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 2016 Annual Report to Shareholders.

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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 2016 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 2016 Annual Report to Shareholders is also incorporated herein by reference.

Consolidated Statements of Condition as of December 31, 2016 and 2015

Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014

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 Senior 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.

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 were 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 2016 Annual Report to Shareholders is incorporated into this Item 9A by reference.

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Report of Registered Public Accounting Firm

The "Report of Independent Registered Public Accounting Firm" located in Ohio Valley's 2016 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, 2016, 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 10, 2017 (the "2016 Proxy Statement"), under the captions "Proxy Item 1:  Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Compensation of Executive Officers and Directors" of the 2017 Proxy Statement.

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 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, 420 Third Avenue, 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 item 1: Election of Directors – Committees of the Board – Compensation and Management Succession Committee" of the 2017 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 2017 Proxy Statement.

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

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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 Item 1:  Election of Directors" of the 2017 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 Independent Registered Public Accounting Firm" of the 2017 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 2016 Annual Report to Shareholders, Exhibit 13,and are specifically incorporated herein by reference under Item 8 of this Form 10-K:

Consolidated Statements of Condition as of December 31, 2016 and 2015

Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014

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 34 of this Form 10-K.

ITEM 16 – FORM 10-K SUMMARY

Not applicable.

32

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 16, 2017	By:	/s/Thomas E. Wiseman
			Thomas E. Wiseman
			President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 16, 2017 by the following persons on behalf of Ohio Valley and in the capacities indicated.

Name	Capacity
/s/Thomas E. Wiseman	President and Chief Executive Officer
Thomas E. Wiseman	(principal executive officer)
/s/Scott W. Shockey	Senior Vice President and Chief Financial Officer
Scott W. Shockey	(principal financial officer and principal accounting officer)
/s/Jeffrey E. Smith	Chairman
Jeffrey E. Smith
/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/Harold A. Howe	Director
Harold A. Howe
/s/Brent R. Eastman	Director
Brent R. Eastman
/s/John G. Jones	Director
John G. Jones
/s/Kimberly A. Canady	Director
Kimberly A. Canady
/s/Edward J. Robbins	Director
Edward J. Robbins

33

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
2(a)	Agreement and Plan of Merger between Ohio Valley Banc Corp. and Milton Bancorp, Inc. dated January 7, 2016:  Incorporated herein by reference to Exhibit 2.1 to Ohio Valley's Current Report on Form 8-K filed on January 7, 2016 (SEC File No. 0-20914).
2(b)	Amendment to Agreement and Plan of Merger by and between Ohio Valley Banc Corp. and Milton Bancorp, Inc., dated April 20, 2016: Incorporated herein by reference to Exhibit 2.1 to Ohio Valley's Current Report on Form 8-K filed on April 21, 2016 (SEC File No. 0-20914).
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 December 31, 2011, between Thomas E. Wiseman 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, 2015 (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.:  Incorporated herein by reference to Exhibit 10.1 to Ohio Valley's Annual Report on Form 10-K for fiscal year ended December 31, 2015 (SEC File No. 0-20914).
10.3(a)*	The Ohio Valley Bank Company Third Amended and Restated Director Retirement Agreement, dated December 18, 2012, between Jeffrey E. Smith and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.3(a) to Ohio Valley's Annual Report on Form 10-K for fiscal year ended December 31, 2012 (SEC File No. 0-20914).
10.3(b)*	Schedule A to Exhibit 10.3(a) identifying other identical Third Amended and Restated Director Retirement Agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Incorporated herein by reference to Exhibit 10.3(b) to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).

34

Exhibit Number	Exhibit Description
10.4*
	The Ohio Valley Bank Company Salary Continuation Agreement, dated January 26, 2016, by and between Larry E. Miller and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.4 to Ohio Valley's Current Report on Form 8-K filed on January 26, 2016 (SEC File No. 0-20914).
10.5*	The Ohio Valley Bank Company Salary Continuation Agreement, dated December 18, 2012, 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, 2012 (SEC File No. 0-20914).
10.6(a)*	The Ohio Valley Bank Company Second Amended and Restated Director Deferred Fee Agreement, dated December 18, 2012, between Thomas E. Wiseman and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.6(a) to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.6(b)*	Schedule A to Exhibit 10.6(a) identifying other identical Second Amended and Restated Director Deferred Fee Agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Incorporated herein by reference to Exhibit 10.7(a) to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.7(a)*	The Ohio Valley Bank Company Executive Deferred Compensation Agreement, dated December 18, 2012, 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, 2012 (SEC File No. 0-20914).
10.7(b)*	First Amendment to The Ohio Valley Bank Company Executive Deferred Compensation Agreement, dated January 26, 2016:  Incorporated herein by reference to Exhibit 10.2 to Ohio Valley's Current Report on Form 8-K filed on January 26, 2016 (SEC File No. 0-20914).
10.7(c)*	The Ohio Valley Bank Company Executive Deferred Compensation Agreement, dated January 26, 2016, between Larry E. Miller 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 January 26, 2016 (SEC File No. 0-20914).
10.7(d)*	Schedule A to Exhibit 10.7(a) 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(d) to Ohio Valley's Annual Report on Form 10-K for fiscal year ended December 31, 2015 (SEC File No. 0-20914).

35

Exhibit Number	Exhibit Description
10.7(e)*	Schedule A to Exhibit 10.7(b) identifying the named executive officers of Ohio Valley Banc Corp. who executed with  The Ohio Valley Bank Company the First Amendment to The Ohio Valley Bank Company Executive Deferred Compensation Agreement:  Incorporated herein by reference to Exhibit 10.3 to Ohio Valley's Current Report on Form 8-K filed on January 26, 2016 (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).
10.11*	The Ohio Valley Bank Company Fourth Amended and Restated Director Retirement Agreement, dated May 13, 2015, between Brent A. Saunders and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.11 to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.12*	Schedule A to Exhibit 10.11 identifying other identical Fourth Amended and Restated Director Retirement Agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Incorporated herein by reference to Exhibit 10.12 to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.13*	The Ohio Valley Bank Company Third Amended and Restated Director Deferred Fee Agreement, dated May 13, 2015, between Brent A. Saunders and The Ohio Valley Bank Company:  Incorporated herein by reference to Exhibit 10.13 to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.14*	Schedule A to Exhibit 10.13 identifying other identical Third Amended and Restated Director Deferred Fee Agreements between The Ohio Valley Bank Company and directors of Ohio Valley Banc Corp.:  Incorporated herein by reference to Exhibit 10.14 to Ohio Valley's Quarterly Report on Form 10-Q for quarterly period ended September 30, 2015 (SEC File No. 0-20914).
10.15*	The Ohio Valley Bank Company Director Retirement Agreement, dated December 14, 2016, between Brent R. Eastman and The Ohio Valley Bank Company:  Filed herewith.
10.16*	The Ohio Valley Bank Company Director Deferred Fee Agreement, dated December 14, 2016, between Brent R. Eastman and The Ohio Valley Bank Company:  Filed herewith.

36

Exhibit Number	Exhibit Description
10.17*	2016 Determination of Director's Fees Agreement for purposes of the Director Deferred Fee Agreements for Directors Thomas, Howe, Wiseman, Barnitz and Saunders:  Filed herewith.
10.18*	2016 Determination of Director's Fees Agreement for purposes of the Director Deferred Fee Agreement for Director Smith:  Filed herewith.
10.19*	2016 Determination of Director's Fees Agreement for purposes of the Director Deferred Fee Agreement for Director Chapman:  Filed herewith.
10.20*	2016 Determination of Director's Fees Agreement for purposes of the Director Retirement Agreement for Directors Thomas, Howe, Smith, Chapman and Wiseman:  Filed herewith.
10.21*	2016 Determination of Director's Fees Agreement for purposes of the Director Retirement Agreement for Directors Barnitz and Saunders:  Filed herewith.
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, 2016:  Filed  herewith.  (Not  deemed filed except for portions thereof specifically incorporated by reference into this Annual Report on Form 10-K.)
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.

37

Exhibit Number	Exhibit Description
101.INS #	XBRL Instance Document:  Submitted electronically herewith. #
101.SCH #	XBRL Taxonomy Extension Schema:  Submitted electronically herewith. #
101.CAL #	XBRL Taxonomy Extension Calculation Linkbase:  Submitted electronically herewith. #
101.DEF #	XBRL Taxonomy Extension Definition Linkbase:  Submitted electronically herewith. #
101.LAB #	XBRL Taxonomy Extension Label Linkbase: Submitted electronically herewith. #
101.PRE #	XBRL Taxonomy Extension Presentation Linkbase:  Submitted electronically herewith. #

* Compensatory plan or arrangement.

# Attached as Exhibit 101 to Ohio Valley's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 are the following documents formatted in XBRL (eXtensive Business Reporting Language): (i) Consolidated Statements of Condition at December 31, 2016 and December 31, 2015; (ii) Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014; (iv) Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (vi) Notes to the Consolidated Financial Statements.

38

EX-4

EXHIBIT 4

OHIO VALLEY BANC CORP.

420 Third Avenue

Gallipolis, OH  45631

(740) 446-2631

March 16, 2017

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, 2016

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, 2016 (the "Form 10-K"), as executed on March 16, 2017.

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 or agreement represents long-term debt exceeding  10% of the total assets of Ohio Valley Banc Corp. and its subsidiaries on a consolidated basis.

Very truly yours,

/s/Thomas E. Wiseman

Thomas E. Wiseman

President and Chief Executive Officer

Ohio Valley Banc Corp.

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 January or February of each year for services to be rendered during the year. This figure was pro-rated for time served for new or retiring members.

Each Non-Employee Director who is a member of the Executive Committee of the Bank receives $2,000 per month for his or her services.  In addition, each Non-Employee Director who is a member of the Executive Committee receives an annual retainer of $16,695 paid in January or February of each year for services to be rendered during the year as members of that committee.  This figure was pro-rated for time served for new or retiring members.  Included in the Executive Committee Chairman's current salary is an annual fee of $50,000 for his duties as such.  Employee Directors receive no additional compensation for serving on the Executive Committee.

Brent A. Saunders, LPA received retainer fees of $20,000 for legal services to the Company and its subsidiaries during the Company's 2016 fiscal year, as approved by the Board of Directors in December 2015.  In December 2016, the Board of Directors of Ohio Valley approved the payment to Mr. Saunders of $20,000 in retainer fees for legal services to the Company and its subsidiaries during the Company's 2017 fiscal year.  The Board of Directors determined that such a relationship does not interfere with Mr. Saunders' exercise of independent judgment in carrying out his responsibilities as a director; rather, in fact, Mr. Saunders' legal experience provides value to his service as a director.

The Bank maintains a life insurance policy for each director 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. Jones, 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. Each director or executive officer is entitled to retirement and deferred compensation agreements, and the Bank has executed agreements with all such persons, except Messrs. Jones and Robbins and Ms. Canady.  These documents are filed as exhibits to various documents filed by Ohio Valley with the Securities and Exchange Commission, as set forth in the Exhibit Index to Ohio Valley's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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	$222,194
Thomas E. Wiseman	345,535
Scott W. Shockey	177,305
Katrinka V. Hart-Harris	180,798
Larry E. Miller, II	197,093

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, Wiseman and Miller).  These benefit plans are set forth in exhibits to various documents filed by Ohio Valley, as set forth in the Exhibit Index to Ohio Valley's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.  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 2017 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. (the "Company") 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 that will attract, reward, and retain individuals of the highest quality.   All employees of the Company's subsidiaries holding positions with a pay grade of 9 or above, as well as some employees who were graded 9 or above before the redesign of the salary structure, are eligible to participate in the bonus program, including all of the named executive officers.  In addition, select employees of the Company, who previously were employees of The Milton Banking Company, are also eligible to participate in 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; and (b) each employee's individual performance.    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.  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 Compensation 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 to, 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, for eligible employees in grades 11 and below, are determined through a formula that applies each employee's performance evaluation score to a "bonus grid," reflecting the individual employee's job grade and individual job performance using the performance criteria referenced above.  For employees in grades 12 and above, individual bonus awards are determined by the level of achievement by the Company and its subsidiaries of some or all of a number of previously mentioned performance metrics. Upon the recommendation of the Compensation Committee and if approved by the Board, individual bonus awards for grades 12 and above are typically awarded as a percent of base compensation.  Employees are evaluated by their supervisors, except for Messrs. Smith, Wiseman and Miller, who are evaluated by the Compensation Committee.  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-10.15

Exhibit 10.15

THE OHIO VALLEY BANK COMPANY

DIRECTOR RETIREMENT AGREEMENT

This DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is adopted this 14th day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY, a state-chartered commercial bank located in Gallipolis, Ohio (the "Company"), and Brent R. Eastman (the "Director").

This Agreement provides specified benefits to the Director, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company.  This Agreement shall be unfunded for tax purposes.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 "Beneficiary" means each designated person or entity, or the estate of the deceased Director, entitled to any benefits upon the death of the Director pursuant to Article 4.

1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more beneficiaries.

1.3 "Board" means the Board of Directors of the Company as from time to time constituted.

1.4 "Code" means the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder, as may be amended from time to time.

1.5 "Disability" means the Director:  (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Company.  Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees or directors of the Company, provided that the definition of "disability" applied under such insurance program complies with the requirements of the preceding sentence.  Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration's or the provider's determination.

1.6 "Effective Date" means November 1, 2016.

1.7 "Fees" means the total annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year.  For purposes of clarity, Fees does not include committee fees of any type, lead director fees or other special director fees.

1.8 "Normal Retirement Age" means the Annual Meeting of Shareholders following the date on which the Director attains age seventy (70).

1.9 "Normal Retirement Date" means the later of Normal Retirement Age or Termination of Service.

1.10 "Plan Administrator" means the plan administrator described in Article 6.

1.11 "Plan Year" means each twelve (12) month period commencing on January 1 and ending on December 31 of each year.

1.12 "Specified Employee" means an employee who at the time of Termination of Service is a key employee of the Company, if any stock of the Company is publicly traded on an established securities market or otherwise.  For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on December 31 (the "identification period").  If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period.

1.13 "Termination for Cause" has the meaning set forth in Article 5.

1.14 "Termination of Service" means a "separation from service" within the meaning of Treasury Regulation §1.409A-1(h) of the Director's service with the Company and any person with whom the Company would be considered a single employer under Code Sections 414(b) and (c) for reasons other than death or Disability.

1.15 "Years of Service" means the total number of twelve (12) month periods during which the Director has served on the Board.

Article 2

Distributions During Lifetime

2.1 Normal Retirement Benefit.  Upon Termination of Service on or after Normal Retirement Age, the Company shall distribute to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit.  The annual benefit under this Section 2.1 is the greater of:  (i) fifty percent (50%) of the Director's three (3) prior years' average Fees; or (ii) fifty percent (50%) of any consecutive three (3) prior years' average Fees.

2.1.2 Payment of Benefit.  The Company shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service.  The annual benefit shall be distributed to the Director for two hundred forty (240) monthly installments.

2.2 Disability Benefit.  If the Director experiences a Disability prior to Normal Retirement Age which results in Termination of Service, the Company shall distribute to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit.  The annual benefit under this Section 2.2 is the greater of:  (1) fifty percent (50%) of the Director's three (3) prior years' average Fees; or (ii) fifty percent (50%) of any consecutive three (3) prior years' average Fees.

2.2.2 Payment of Benefit.  The Company shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service.  The annual benefit shall be distributed to the Director for two hundred forty (240) monthly installments.

2.3 Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Director is considered a Specified Employee, the provisions of this Section 2.3 shall govern all distributions hereunder.  If benefit distributions which would otherwise be made to the Director due to Termination of Service are limited because the Director is a Specified Employee, then such distributions shall not be made during the first six (6) months following Termination of Service.  Rather, any distribution which would otherwise be paid to the Director during such period shall be accumulated and paid to the Director in a lump sum on the first day of the seventh month following Termination of Service.  All subsequent distributions shall be paid in the manner specified.

2.4 Distributions Upon Taxation of Amounts Deferred.  If, pursuant to Code Section 409A, the Federal Insurance Contributions Act or other state, local or foreign tax, the Director becomes subject to tax on the amounts deferred hereunder, then the Company may make a limited distribution to the Director in a manner that conforms to the requirements of Code section 409A.  Any such distribution will decrease the Director's benefits distributable under this Agreement.

2.5 Change in Form or Timing of Distributions.  All changes in the form or timing of distributions hereunder must comply with the following requirements.  The changes:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A and the regulations thereunder;

(b) must, for benefits distributable under Sections 2.1 and 2.2, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(c) must take effect not less than twelve (12) months after the election is made.

Article 3

Distribution at Death

3.1 Death During Active Service.  If the Director dies while in the active service of the Company, the Company shall distribute to the Beneficiary the benefit described in this Section 3.1.  This benefit shall be distributed in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit.  The annual benefit under this Section 3.1 is the greater of:  (i) fifty percent (50%) of the Director's three (3) prior years' average Fees; or (ii) fifty percent (50%) of any consecutive three (3) prior years' average Fees.

3.1.2 Payment of Benefit.  The Company shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing the first day of the fourth month following the Director's death.  The annual benefit shall be distributed to the Beneficiary for sixty (60) months.

3.2 Death During Benefit Period or Before Benefit Distributions Commence.  If the Director dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, or if the Director is entitled to benefit distributions under this Agreement but dies prior to the commencement of said benefit distributions, the Company shall distribute to the Beneficiary the lesser of:  (i) the remaining benefits due the Director; or (ii) sixty (60) additional monthly benefits, commencing on the first day of the fourth month following the Director's death.

Article 4

Beneficiaries

4.1 In General.  The Director shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Director.  The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Company in which the Director participates.

4.2 Designation.  The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent.  If the Director names someone other than the Director's spouse as a Beneficiary, the Plan Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Plan Administrator, executed by the Director's spouse and returned to the Plan Administrator.  The Director's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved.  The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures.  Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled.  The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director's death.

4.3 Acknowledgment.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation.  If the Director dies without a valid Beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary.  If the Director has no surviving spouse, any benefit shall be paid to the personal representative of the Director's estate.

4.5 Facility of Distribution.  If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person.  The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit.  Any distribution of a benefit shall be a distribution for the account of the Director and the Beneficiary, as the case may be, and shall completely discharge any liability under this Agreement for such distribution amount.

Article 5

General Limitations

5.1 Termination for Cause.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement if the Company terminates the Director's service for:

(a) Gross negligence or gross neglect of duties to the Company;

(b) Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Director's service and resulting in a material adverse effect on the Company.

5.2 RESERVED

5.3 Removal.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement if the Director is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.4 Excess Parachute Payment.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement to the extent the benefit would be an excess parachute payment under Section 280G of the Code.

Article 6

Administration of Agreement

6.1 Plan Administrator Duties.  The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with this Agreement to the extent the exercise of such discretion and authority does not conflict with Code Section 409A.

6.2 Agents.  In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as the Plan Administrator sees fit, including acting through a duly appointed representative, and may from time to time consult with counsel who may be counsel to the Company.

6.3 Binding Effect of Decisions.  Any decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Agreement.

6.4 Indemnity of Plan Administrator.  The Company shall indemnify and hold harmless the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator.

6.5 Bank Information.  To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the Director's death, Disability or Termination of Service, and such other pertinent information as the Plan Administrator may reasonably require.

Article 7

Claims And Review Procedures

7.1 Claims Procedure.  The Director or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

7.1.1 Initiation - Written Claim.  The claimant initiates a claim by submitting to the Company a written claim for the benefits.  If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the claimant.

7.1.2 Timing of Company Response.  The Company shall respond to such claimant within ninety (90) days after receiving the claim (or, if such claim is on account of disability, no later than forty-five (45) days).  If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional ninety (90) days (or, if such claim is on account of disability, for not more than two additional thirty (30) day periods) by notifying the claimant in writing, prior to the end of the initial period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.  (If the claim is on account of disability, the notice will also include the standards for entitlement for a benefit, unresolved issues, and information needed to resolve those issues.  The claimant will be given at least 45 days to supply any needed information.  The period that the claimant takes to produce the needed information does not count against the period for deciding the claim.)

7.1.3 Notice of Decision.  If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial.  The Company shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures;

(e) A statement of the claimant's right to bring a civil action following an adverse benefit determination on review; and

(f) In the case of an adverse determination of a claim on account of disability, the information to the claimant shall include, to the extent necessary, the information set forth in Department of Labor Regulation Section 2560.503-1(g)(1).

7.2 Review Procedure.  If the Company denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

7.2.1 Initiation - Written Request.  To initiate the review, the claimant, within sixty (60) days after receiving the Company's notice of denial (or, if such claim is a claim on account of disability, within one-hundred-eighty (180) days), must file with the Company a written request for review.

7.2.2 Additional Submissions - Information Access.  The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.  The Company shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits.

7.2.3 Considerations on Review.  In considering the review, the Company shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

7.2.4 Timing of Company Response.  The Company shall respond in writing to such claimant within sixty (60) days after receiving the request for review (or, if such claim is on account of disability, no later than forty-five (45) days).  If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional sixty (60) days (or, if such claim is on account of disability, no later than forty-five (45) days) by notifying the claimant in writing prior to the end of the initial period that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

7.2.5 Notice of Decision.  The Company shall notify the claimant in writing of its decision on review.  The Company shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits;

(d) A statement of the claimant's right to bring a civil action; and

(e) In the case of an adverse determination of a claim on account of disability, if an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either (i) the specific rule, guideline, protocol, or other similar criterion; or (ii) a statement that such rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of the rule, guideline, protocol, or other similar criterion will be provided free of charge to the claimant upon request.

Article 8

Amendments and Termination

8.1 Amendments.  This Agreement may be amended only by a written agreement signed by the Company and the Director.  However, the Company may unilaterally amend this Agreement to conform to written directives to the Company from its auditors or banking regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.

8.2 Plan Termination Generally.  This Agreement may be terminated only by a written agreement signed by the Company and the Director.  Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement.  Rather, after such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

8.3 Plan Terminations Under Section 409A.  Notwithstanding anything to the contrary in Section 8.2, if this Agreement terminates in the following circumstances:

(a) Within thirty (30) days before or twelve (12) months after a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company as described in Section 409A(a)(2)(A)(v) of the Code, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Company's arrangements which are substantially similar to the Agreement are terminated so the Director and all participants in the Similar Arrangements (as defined below) are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

(b) Upon the Company's dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Director's gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c) Upon the Company's termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Director participated in such arrangements ("Similar Arrangements"), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Company, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Company does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Company takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Company may distribute the amount the Bank has accrued with respect to the Bank's obligations hereunder, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.

Article 9

Miscellaneous

9.1 Binding Effect.  This Agreement shall bind the Director and the Company and their beneficiaries, survivors, executors, administrators and transferees.

9.2 No Guarantee of Service.  This Agreement is not a contract for employment.  It does not give the Director the right to remain as a member of the Board, nor does it interfere with the Company's right to discharge the Director.  It also does not require the Director to remain a member of the Board nor interfere with the Director's right to terminate service at any time.

9.3 Non-Transferability.  Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding and Reporting.  The Company shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement.  Director acknowledges that the Company's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authorities.  The Company shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

9.5 Applicable Law.  This Agreement and all rights hereunder shall be governed by the laws of the State of Ohio, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement.  The Director and the Beneficiary are general unsecured creditors of the Company for the distribution of benefits under this Agreement.  The benefits represent the mere promise by the Company to distribute such benefits.  The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors.  Any insurance on the Director's life or other informal funding asset is a general asset of the Company to which the Director and the Beneficiary have no preferred or secured claim.

9.7 Reorganization.  The Company shall not merge or consolidate into or with another Company, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement.  Upon the occurrence of such event, the term "Company" as used in this Agreement shall be deemed to refer to the successor or survivor bank.

9.8 Entire Agreement.  This Agreement constitutes the entire agreement between the Company and the Director as to the subject matter hereof.  No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation.  Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural

9.10 Alternative Action.  In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Agreement, the Company or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Company, provided that such alternative acts do not violate Section 409A of the Code.

9.11 Headings.  Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity.  In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice.  Any notice or filing required or permitted to be given to the Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

The Ohio Valley Bank Company

Attn:  BOLI Administrator

P O Box 240 420 Third Avenue

Gallipolis OH 45631-0240

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

9.14 Compliance with Section 409A.  This Agreement shall be interpreted and administered consistent with Code Section 409A.

IN WITNESS WHEREOF, the Director and an authorized representative of the Company have signed this Agreement.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
Brent R. Eastman	Title:

EX-10.16

EXHIBIT 10.16

THE OHIO VALLEY BANK COMPANY

DIRECTOR DEFERRED FEE AGREEMENT

This DIRECTOR DEFERRED FEE AGREEMENT (this "Agreement") is adopted this 14th day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY, a state-chartered commercial bank located in Gallipolis, Ohio (the "Company"), and Brent R. Eastman (the "Director").

The purpose of this Agreement is to provide specified benefits to the Director, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company.  This Agreement shall be unfunded for tax purposes.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 "Beneficiary" means each designated person or entity, or the estate of the deceased Director, entitled to any benefits upon the death of the Director pursuant to Article 6.

1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more beneficiaries.

1.3 "Board" means the Board of Directors of the Company as from time to time constituted.

1.4 "Code" means the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder, as may be amended from time to time.

1.5 "Deferral Account" means the Company's accounting of the Director's accumulated Deferrals plus accrued interest.

1.6 "Deferral Election Form" means the form or forms established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate the amount of Deferrals.

1.7 "Deferrals" means the amount of Fees which the Director elects to defer according to this Agreement.

1.8 "Disability" means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Company.  Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees or directors of the Company, provided that the definition of "disability" applied under such insurance program complies with the requirements of the preceding sentence.  Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration's or the provider's determination.

1.9 "Effective Date" means November 1, 2016.

1.10 "Fees" means the total annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year. For purposes of clarity, Fees does not include any lead director fees, committee meeting or chair fees or other special director fees

1.11 "Normal Retirement Age" means the Annual Meeting of Shareholders following the date on which the Director attains age seventy (70).

1.12 "Plan Administrator" means the plan administrator described in Article 8.

1.13 "Plan Year" means each twelve (12) month period commencing on January 1 and ending on December 31 of each year.

1.14 "Specified Employee" means an employee who at the time of Termination of Service is a key employee of the Company, if any stock of the Company is publicly traded on an established securities market or otherwise.  For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on December 31 (the "identification period").  If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period.

1.15 "Termination for Cause" has the meaning set forth in Article 7.

1.16 "Termination of Service" means a "separation from service" within the meaning of Treasury Regulation §1.409A-1(h) of the Director's service with the Company and any person with whom the Company would be considered a single employer under Code Sections 414(b) and (c) for reasons other than death or Disability.

1.17 "Unforeseeable Emergency" means a severe financial hardship to the Director within the meaning of Treasury Regulation §1.409A-3(i)(3) resulting from an illness or accident of the Director, the Director's spouse, the Beneficiary, or the Director's dependent (as defined in Code Section 152 without regard to Code Sections 152(b)(1), (b)(2) and (d)(1)(B)), loss of the Director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Director.

Article 2

Deferral Election

2.1 Elections Generally.  The Director may annually file a Fees Deferral Election Form with the Plan Administrator no later than the end of the Plan Year preceding the Plan Year in which services leading to such Fees will be performed.  Notwithstanding anything to the contrary, the Director may not elect to defer Fees in an amount greater than $10,000 each Plan Year, or such greater or lesser amount as may be established by the Board each Plan Year.

2.2 Initial Election.  After being notified by the Plan Administrator of becoming eligible to participate in this Agreement, the Director may make an initial deferral election by delivering to the Plan Administrator a signed Deferral Election Form and a Beneficiary Designation Form within thirty (30) days of becoming eligible, with respect to any Fees to be paid for services to be performed after such election is made.  The Deferral Election Form shall set forth the amount of Fees to be deferred.  However, if the Director was eligible to participate in any other account balance plans sponsored by the Company (as referenced in Code Section 409A) prior to becoming eligible to participate in this Agreement, the initial election to defer Fees under this Agreement shall not be effective until the Plan Year following the Plan Year in which the Director became eligible to participate in this Agreement.

2.3 Election Changes.  The Director may modify the amount of Fees to be deferred annually by filing a new Deferral Election Form with the Company.  The modified deferral shall not be effective until the calendar year following the year in which such subsequent Deferral Election Form is received by the Company.

2.4 Hardship.  If an Unforeseeable Emergency occurs, the Director, by written instructions to the Company, may discontinue deferrals hereunder.  Any subsequent Deferral Elections may be made only in accordance with Section 2.3 hereof.

Article 3

Deferral Account

3.1 Establishing and Crediting.  The Company shall establish a Deferral Account on its books for the Director and shall credit to the Deferral Account the following amounts:

(a)Any Deferrals hereunder; and

(b)Interest as follows:

(i) At the end of each Plan Year and immediately prior to the payment of any benefits, interest shall be credited on the Deferral Account balance at an annual rate determined by the Board of Directors in its sole discretion, compounded annually; and

(ii) At the end of each Plan Year during any applicable installment period, interest shall be credited on the Deferral Account balance at an annual rate determined by the Board of Directors in its sole discretion, compounded annually.

3.2 Statement of Accounts.  The Plan Administrator shall provide to the Director, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

3.3 Accounting Device Only.  The Deferral Account is solely a device for measuring amounts to be paid under this Agreement.  The Deferral Account is not a trust fund of any kind.  The Director is a general unsecured creditor of the Company for the distribution of benefits.  The benefits represent the mere Company promise to distribute such benefits.  The Director's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by the Director's creditors.

Article 4

Distributions During Lifetime

4.1 Normal Retirement Benefit.  Upon Termination of Service, the Company shall distribute to the Director the benefit described in this Section 4.1 in lieu of any other benefit under this Article.

4.1.1 Amount of Benefit.  The benefit under this Section 4.1 is the Deferral Account balance at Termination of Service.

4.1.2 Payment of Benefit.  The Company shall distribute the benefit to the Director in one hundred twenty (120) consecutive monthly installments commencing on the first day of the month following Termination of Service.

4.2 Disability Benefit.  If the Director experiences a Disability which results in Termination of Service, the Company shall distribute to the Director the benefit described in this Section 4.2 in lieu of any other benefit under this Article.

4.2.1 Amount of Benefit.  The benefit under this Section 4.2 is the Deferral Account balance at Termination of Service.

4.2.2 Payment of Benefit.  The Company shall distribute the benefit to the Director in one hundred twenty (120) consecutive monthly installments commencing on the first day of the month following Termination of Service.

4.3 Hardship Distribution.  If an Unforeseeable Emergency occurs, the Director may petition the Board to receive a distribution from the Agreement (a "Hardship Distribution").  The Board in its sole discretion may grant such petition.  If granted, the Director shall receive, within sixty (60) days, a distribution from the Agreement only to the extent deemed necessary by the Board to remedy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution.  In any event, the maximum amount which may be paid out pursuant to this Section 4.3 is the Deferral Account balance as of the day the Director petitioned the Board to receive a Hardship Distribution.  Such a distribution shall reduce the Deferral Account balance.  A distribution under this Section 4.3 may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Director's assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cancellation of deferrals in accordance with Section 2.4 of this Agreement.

4.4 Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Director is considered a Specified Employee, the provisions of this Section 4.4 shall govern all distributions hereunder.  If benefit distributions which would otherwise be made to the Director due to Termination of Service are limited because the Director is a Specified Employee, then such distributions shall not be made during the first six (6) months following Termination of Service.  Rather, any distribution which would otherwise be paid to the Director during such period shall be accumulated and paid to the Director in a lump sum on the first day of the seventh month following Termination of Service.  All subsequent distributions shall be paid in the manner specified.

4.5 Distributions Upon Taxation of Amounts Deferred.  If, pursuant to Code Section 409A, the Federal Insurance Contributions Act or other state, local or foreign tax, the Director becomes subject to tax on the amounts deferred hereunder, then the Company may make a limited distribution to the Director in a manner that conforms to the requirements of Code section 409A.  Any such distribution will decrease the Director's benefits distributable under this Agreement.

4.6 Change in Form or Timing of Distributions.  All changes in the form or timing of distributions hereunder must comply with the following requirements.  The changes:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A and the regulations thereunder;

(b) must, for benefits distributable under Sections 4.1 and 4.2, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(c) must take effect not less than twelve (12) months after the election is made.

Article 5

Distributions at Death

5.1 Death During Active Service.  If the Director dies while in active service to the Company, the Company shall distribute to the Beneficiary the benefit described in this Section 5.1.  This benefit shall be distributed in lieu of the benefits under Article 4.

5.1.1 Amount of Benefit.  The benefit under Section 5.1 is the Deferral Account balance as of the Director's death.

5.1.2 Payment of Benefit.  The Company shall distribute the benefit to the Beneficiary in one hundred twenty (120) consecutive monthly installments commencing on the first day of the fourth month following the Director's death.

5.2 Death During Distribution of a Benefit.  If the Director dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Company shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Director had the Director survived.

5.3 Death After Termination of Service But Before Payment of a Lifetime Benefit Commences.  If the Director is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Company shall pay to the Director's beneficiary the same benefits that the Director was entitled to prior to death except that the benefit distributions shall commence on the first day of the fourth month following the Director's death.

Article 6

Beneficiaries

6.1 In General.  The Director shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Director.  The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Company in which the Director participates.

6.2 Designation.  The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent.  If the Director names someone other than the Director's spouse as a Beneficiary, the Plan Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Plan Administrator, executed by the Director's spouse and returned to the Plan Administrator.  The Director's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved.  The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures.  Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled.  The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director's death.

6.3 Acknowledgment.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

6.4 No Beneficiary Designation.  If the Director dies without a valid Beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary.  If the Director has no surviving spouse, any benefit shall be paid to the personal representative of the Director's estate.

6.5 Facility of Distribution.  If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person.  The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit.  Any distribution of a benefit shall be a distribution for the account of the Director and the Beneficiary, as the case may be, and shall completely discharge any liability under this Agreement for such distribution amount.

Article 7

General Limitations

7.1 Termination for Cause.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement in excess of the Deferrals if the Company terminates the Director's service for:

(a)Gross negligence or gross neglect of duties to the Company;

(b)Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Director's service and resulting in a material adverse effect on the Company.

7.2 RESERVED

7.3 Removal.   Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement in excess of the Deferrals (i.e., Deferral Account minus interest credited thereon) if the Director is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

7.4 Excess Parachute Payment.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement in excess of the Deferrals to the extent the benefit would be an excess parachute payment under Section 280G of the Code.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties.  The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with this Agreement to the extent the exercise of such discretion and authority does not conflict with Code Section 409A.

8.2 Agents.  In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as the Plan Administrator sees fit, including acting through a duly appointed representative, and may from time to time consult with counsel who may be counsel to the Company.

8.3 Binding Effect of Decisions.  Any decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Agreement.

8.4 Indemnity of Plan Administrator.  The Company shall indemnify and hold harmless the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator.

8.5 Bank Information.  To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the Director's death, Disability or Termination of Service, and such other pertinent information as the Plan Administrator may reasonably require.

Article 9

Claims and Review Procedures

9.1 Claims Procedure.  The Director or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

9.1.1 Initiation - Written Claim.  The claimant initiates a claim by submitting to the Company a written claim for the benefits.  If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the claimant.

9.1.2 Timing of Company Response.  The Company shall respond to such claimant within ninety (90) days after receiving the claim (or, if such claim is on account of disability, no later than forty-five (45) days).  If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional ninety (90) days (or, if such claim is on account of disability, for not more than two additional thirty (30) day periods) by notifying the claimant in writing, prior to the end of the initial period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.  (If the claim is on account of disability, the notice will also include the standards for entitlement for a benefit, unresolved issues, and information needed to resolve those issues.  The claimant will be given at least 45 days to supply any needed information.  The period that the claimant takes to produce the needed information does not count against the period for deciding the claim.)

9.1.3 Notice of Decision.  If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial.  The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a)The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures;

(e) A statement of the claimant's right to bring a civil action following an adverse benefit determination on review; and

(f) In the case of an adverse determination of a claim on account of disability, the information to the claimant shall include, to the extent necessary, the information set forth in Department of Labor Regulation Section 2560.503-1(g)(1).

9.2 Review Procedure.  If the Company denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

9.2.1 Initiation - Written Request.  To initiate the review, the claimant, within sixty (60) days after receiving the Company's notice of denial (or, if such claim is a claim on account of disability, within one-hundred-eighty (180) days), must file with the Company a written request for review.

9.2.2 Additional Submissions - Information Access.  The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.  The Company shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits.

9.2.3 Considerations on Review.  In considering the review, the Company shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

9.2.4 Timing of Company Response.  The Company shall respond in writing to such claimant within sixty (60) days after receiving the request for review (or, if such claim is on account of disability, no later than forty-five (45) days).  If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional sixty (60) days (or, if such claim is on account of disability, no later than forty-five (45) days) by notifying the claimant in writing prior to the end of the initial period that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

9.2.5 Notice of Decision.  The Company shall notify the claimant in writing of its decision on review.  The Company shall write the notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

(a)The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits;

(d) A statement of the claimant's right to bring a civil action; and

(e) In the case of an adverse determination of a claim on account of disability, if an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either (i) the specific rule, guideline, protocol, or other similar criterion; or (ii) a statement that such rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of the rule, guideline, protocol, or other similar criterion will be provided free of charge to the claimant upon request.

Article 10

Amendments and Termination

10.1 Amendments.  This Agreement may be amended only by a written agreement signed by the Company and the Director.  However, the Company may unilaterally amend this Agreement to conform to written directives to the Company from its auditors or banking regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.

10.2 Plan Termination Generally.  This Agreement may be terminated only by a written agreement signed by the Company and the Director.  Except as provided in Section 10.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement.  Rather, after such termination benefit distributions will be made at the earliest distribution event permitted under Article 4 or Article 5.

10.3 Plan Terminations Under Section 409A.  Notwithstanding anything to the contrary in Section 10.2, if this Agreement terminates in the following circumstances:

(a) Within thirty (30) days before or twelve (12) months after a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company as described in Section 409A(a)(2)(A)(v) of the Code, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Company's arrangements which are substantially similar to the Agreement are terminated so the Director and all participants in the Similar Arrangements (as defined below) are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

(b) Upon the Company's dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Director's gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c) Upon the Company's termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Director participated in such arrangements ("Similar Arrangements"), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Company, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Company does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Company takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Company may distribute Deferral Account balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.

Article 11

Miscellaneous

11.1 Binding Effect.  This Agreement shall bind the Director and the Company and their beneficiaries, survivors, executors, administrators and transferees.

11.2 No Guarantee of Service.  This Agreement is not a contract for employment.  It does not give the Director the right to remain as a member of the Board, nor does it interfere with the Company's right to discharge the Director.  It also does not require the Director to remain a member of the Board nor interfere with the Director's right to terminate service at any time.

11.3 Non-Transferability.  Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

11.4 Tax Withholding and Reporting.  The Company shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement.  Director acknowledges that the Company's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authorities.  The Company shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

11.5 Applicable Law.  This Agreement and all rights hereunder shall be governed by the laws of the State of Ohio, except to the extent preempted by the laws of the United States of America.

11.6 Unfunded Arrangement.  The Director and the Beneficiary are general unsecured creditors of the Company for the distribution of benefits under this Agreement.  The benefits represent the mere promise by the Company to distribute such benefits.  The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors.  Any insurance on the Director's life or other informal funding asset is a general asset of the Company to which the Director and the Beneficiary have no preferred or secured claim.

11.7 Reorganization.  The Company shall not merge or consolidate into or with another Company, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement.  Upon the occurrence of such event, the term "Company" as used in this Agreement shall be deemed to refer to the successor or survivor bank.

11.8 Entire Agreement.  This Agreement constitutes the entire agreement between the Company and the Director as to the subject matter hereof No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

11.9 Interpretation.  Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

11.10 Alternative Action.  In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Agreement, the Company or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Company, provided that such alternative acts do not violate Section 409A of the Code.

11.11 Headings.  Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

11.12 Validity.  In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

11.13 Notice.  Any notice or filing required or permitted to be given to the Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

The Ohio Valley Bank Company

Attn:  BOLI Administrator

P O Box 240  420 Third Avenue

Gallipolis OH  45631-0240

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

11.14 Compliance with Section 409A.  This Agreement shall be interpreted and administered consistent with Code Section 409A.

[Signature Page Follows]

IN WITNESS WHEREOF, the Director and an authorized representative of the Company have signed this Agreement.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
Brent R. Eastman	Title:

EX-10.17

EXHIBIT 10.17

The following form of agreement was executed by The Ohio Valley Bank Company and each of the following directors on the dates indicated beside their names:

Name	Date of Agreement
David W. Thomas	December 20, 2016
Harold A. Howe	December 13, 2016
Thomas E. Wiseman	December 13, 2016
Anna P. Barnitz	December 13, 2016
Brent A. Saunders	December 13, 2016

2016 DETERMINATION OF DIRECTOR'S FEES

FOR PURPOSES OF THE DIRECTOR DEFERRED FEE AGREEMENT

FOR _____________

THIS AGREEMENT is made this ______ day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY located in Gallipolis, Ohio (the "Company"), and _________  (the "Director").

The Company and the Director entered into a DEFERRED FEE AGREEMENT most recently amended on ___________ (the "Agreement").

The Director agrees that the definition of "Fees" in Section 1.10 be amended to read as follows effective for deferrals on or after January 1, 2017:

1.10 "Fees" means the total annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year.  For purposes of clarity, Fees does not include any lead director fees, committee meeting or chair fees or other special director fees.

The parties, by executing this Agreement hereby agree to the terms stated herein. 

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
	Title:

EX-10.18

EXHIBIT 10.18

2016 DETERMINATION OF DIRECTOR'S FEES

FOR PURPOSES OF THE DIRECTOR DEFERRED FEE AGREEMENT

FOR JEFFREY E. SMITH

THIS AGREEMENT is made this 13th day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY located in Gallipolis, Ohio (the "Company"), and Jeffrey E. Smith  (the "Director").

The Company and the Director entered into a DEFERRED FEE AGREEMENT most recently amended on May 20, 2003 (the "Agreement").

The Director agrees that the definition of "Fees" in Section 1.1.5 be amended to read as follows effective for deferrals on or after January 1, 2017:

1.1.5 "Fees" means the total annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year.  For purposes of clarity, Fees does not include any lead director fees, committee meeting or chair fees or other special director fees.

The parties, by executing this Agreement hereby agree to the terms stated herein.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
Jeffrey E. Smith	Title:

EX-10.19

EXHIBIT 10.19

2016 DETERMINATION OF DIRECTOR'S FEES

FOR PURPOSES OF THE DIRECTOR DEFERRED FEE AGREEMENT

FOR STEVEN B. CHAPMAN

THIS AGREEMENT is made this 13th day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY located in Gallipolis, Ohio (the "Company"), and Steven B. Chapman (the "Director").

The Company and the Director entered into a DEFERRED FEE AGREEMENT most recently amended on December 18, 2012 (the "Agreement").

The Director agrees that the definition of "Fees" in Section 1.10 be amended to read as follows effective for deferrals on or after January 1, 2017:

1.10  "Fees" means the total annual board retainer, monthly fees paid to all directors and executive committee fees, earned by the Director during a Plan Year.  For purposes of clarity, Fees does not include any lead director fees, committee meeting or chair fees (other than the included executive committee fees) or other special director fees.

The parties, by executing this Agreement hereby agree to the terms stated herein.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
Steven B. Chapman	Title:

EX-10.20

EXHIBIT 10.20

The following form of agreement was executed by The Ohio Valley Bank Company and each of the following directors on the dates indicated beside their names:

Name	Date of Agreement
David W. Thomas	December 20, 2016
Harold A. Howe	December 13, 2016
Jeffrey E. Smith	December 13, 2016
Steven B. Chapman	December 13, 2016
Thomas E. Wiseman	December 13, 2016

2016 DETERMINATION OF DIRECTOR'S FEES

FOR PURPOSES OF THE DIRECTOR RETIREMENT AGREEMENT

FOR _____________

THIS AGREEMENT is made this ______ day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY located in Gallipolis, Ohio (the "Company"), and ______________ (the "Director").

The Company and the Director entered into a DIRECTOR RETIREMENT AGREEMENT most recently amended and restated on ____________________, 20__ (the "Agreement").

The Director agrees that Director's "total annual or monthly fees" for purposes of sections 2.1.1 Normal Retirement Benefit, 2.2.1 Disability Benefit, and 3.1.1 Death During Active Service will include the annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year and will not include committee fees of any type, lead director fees or other special director fees.

The parties, by executing this Agreement hereby agree to the terms stated herein.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
	Title:

EX-10.21

EXHIBIT 10.21

The following form of agreement was executed by The Ohio Valley Bank Company and each of the following directors on the dates indicated beside their names:

Name	Date of Agreement
Anna P. Barnitz	December 13, 2016
Brent A. Saunders	December 13, 2016

2016 DETERMINATION OF DIRECTOR'S FEES

FOR PURPOSES OF THE DIRECTOR RETIREMENT AGREEMENT

FOR _____________

THIS AGREEMENT is made this ______ day of December, 2016, by and between THE OHIO VALLEY BANK COMPANY located in Gallipolis, Ohio (the "Company"), and ______________ (the "Director").

The Company and the Director entered into a DIRECTOR RETIREMENT AGREEMENT most recently amended and restated on ____________________, 20__ (the "Agreement").

The Director agrees that Director's section 1.7 of the Agreement be amended to read as follows:

1.7 "Fees" means the total annual board retainer and monthly fees paid to all directors, earned by the Director during a Plan Year.  For purposes of clarity, Fees does not include committee fees of any type, lead director fees or other special director fees.

The parties, by executing this Agreement, hereby agree to the terms stated herein.

DIRECTOR:	THE OHIO VALLEY BANK COMPANY
	By:
	Title:

EX-13

Ohio Valley Banc Corp

Annual Report 2016

Community

 FIRST

A Message

from

Management

Dear Neighbors and Friends,

IMPACT!

The people of YOUR company strove to make a direct and positive impact on their communities in 2016. Together, we expanded our reach with the addition of John Jones and the Milton Banking Company Division. With the merger, we added an experienced crew of community bankers and two new market areas. The bank's assets as of end of year stand proud at approximately $950 million.

And as we grew, we kept loyal to our roots by donating more than $440,000 to local organizations. Fortunately, we weren't satisfied with just handing over checks. We rolled up our sleeves and pitched in with over 2,600 volunteer hours clocked. We did the things that make this place a little more special like building homes with Habitat for Humanity, cleaning and making repairs at Field of Hope, gathering supplies to help those displaced by the flooding in West Virginia, and brightening faces at local senior centers.
We think Donna Casey of Apple Grove said it best. "A bank that is friendly and helpful. OVB not only takes care of its customers, but helps in their communities..."

"Community First" isn't just something we say. We put community at the heart of all that we do. Now others are starting to take notice and join the call.

In March 2016, Brent Eastman joined our Board of Directors. Mr. Eastman is President and Co-Owner of Ohio Valley Supermarkets. You may recall that his father, Bob Eastman, dedicated many years to the very same board.

Our newest director brought with him the business knowledge that was passed to him by his father and enhances it with his own penchant for modern tactics in marketing and strategy. And while it's true that he is an outstanding local business leader, he also serves as a role model to our employees by example. His own devoted service to the Gallia County Agricultural Society and Gallia County Jr. Fair Board sets the bar for our bankers as they strive to do more for their hometowns.

As we close the books on 2016, join us in saying "Congratulations" to the friendly professionals at Loan Central who in 2016 celebrated 20 years in business. We also honor the bankers of the OVB Main Office on the office's 55th anniversary as well as the OVB Jackson Pike Office on their 40th anniversary and our OVB Jackson and OVB Waverly offices on their respective 25th anniversaries. Special mention goes out to OVB Barboursville and the OVB Athens Loan Office upon completion of their first full year.

We look forward to 2017, Ohio Valley Bank's 145th year in business. We also thank you, our shareholders, for your timeless support of this American success story.

Sincerely,

Jeffrey E. Smith	Thomas E. Wiseman
Chairman of the Board	President and CEO
Ohio Valley Banc Corp.	Ohio Valley Banc Corp.

1

Merger

A NEW PARTNER…

On Friday, August 5, 2016, the Milton Banking Company

merged with Ohio Valley Bank, becoming a new division

of OVB. Over the weekend, MBC accounts and loans

were converted to Ohio Valley Bank's computer systems.

Pictured above are a few of the 52 employees

who in just 3 days put in 755 hours to

make the switchover happen as seamlessly as

possible so that it was business as usual by

Monday morning.

To put that in perspective, if one person did

that work alone, he or she would have to

work full-time for 19 weeks (roughly five months)

to achieve what we did as a team in one weekend!

John Jones and Tom Wiseman (pictured right)

were interviewed by University of Rio Grande

President Dr. Michelle Johnston about the

experience. You can find the interview on

the Rio Grande Cable Access channel on YouTube.

2

...A CONTINUING MISSION

"Perhaps the biggest change is

that we will have access to the

resources of Ohio Valley Bank,

allowing us more time

for community service,

more options for lending, and

 more internet banking

functionality,"

-John Jones to his customers

just prior to the merger

3

2016 Year in Review by the Numbers

$441,438	Dollars given to local charities, schools, and organizations through donations and sponsorships.
2,625.5	Hours Ohio Valley Bank and Loan Central employees actively volunteered in their communities during bank hours.
940,322	Transactions conducted at Ohio Valley Bank offices.
$4,096,380.31	Deposited via OVB Mobile Deposit with cell phones and tablets.
154,735	Secure statements and notices delivered electronically.
5	New, conveniently located offices as part of the Milton Banking Company Division.

4

4,744	Times customers trusted Loan Central with their tax needs.
$284,552.03	Paid in rewards to customers using their OVB Credit Card for purchases.
$686,069.19	Cash back earned by OVB Rewards Checking accountholders.
92,000	Bills paid via free OVB Online Bill Pay
20	Locally themed debit cards that give back to the community.
4 in every 5	Ohio Valley Bank customers say they are extremely likely to recommend OVB to a friend, according to customer surveys.

5

OVBC DIRECTORS   Jeffrey E. Smith Chairman, Ohio Valley Banc Corp. and Ohio Valley Bank   Thomas E. Wiseman President & CEO, 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   Steven B. Chapman Retired Certified Public Accountant   Anna P. Barnitz Treasurer & CFO, Bob's Market & Greenhouses, Inc. wholesale horticultural products and retail landscaping stores   Brent A. Saunders Chairman of the Board, Holzer Health System Attorney, Halliday, Sheets & Saunders healthcare   Harold A. Howe Self-employed, Real Estate Investment and Rental Property   Brent R. Eastman President and Co-owner, Ohio Valley Supermarkets Partner, Eastman Enterprises   John G. Jones President, MBC, Ohio Valley Bank   Kimberly A. Canady, JD Owner, Canady Farms, LLC agricultural products and agronomy services   Edward J. Robbins President & CEO, Ohio Valley Veneer, Inc. wood harvesting, processing and manufacturing of dry lumber & flooring in Ohio, Kentucky, and Tennessee   OVBC OFFICERS   EXECUTIVE OFFICERS Jeffrey E. Smith, Chairman of the Board Thomas E. Wiseman, President and Chief Executive Officer Larry E. Miller, II, Chief Operating Officer and Secretary Katrinka V. Hart-Harris, Senior Vice President Scott W. Shockey, Senior Vice President & Chief Financial Officer Bryan F. Stepp, Vice President   Mario P. Liberatore, Vice President Cherie A. Elliott, Vice President Jennifer L. Osborne, Vice President Tom R. Shepherd, Vice President Frank W. Davison, Vice President Bryan W. Martin, Vice President David K. Nadler, Vice President Ryan J. Jones, Vice President Paula W. Clay, Assistant Secretary Cindy H. Johnston, Assistant Secretary     LOAN CENTRAL OFFICERS Larry E. Miller, II Chairman of the Board Cherie A. Elliott President Timothy R. Brumfield Vice President & Secretary Manager, Gallipolis Office John J. Holtzapfel Compliance Officer & Manager, Wheelersburg Office T. Joe Wilson Manager, Waverly Office Joseph I. Jones Manager, South Point Office Deborah G. Moore Manager, Jackson Office Gregory G. Kauffman Manager, Chillicothe Office     WEST VIRGINIA ADVISORY BOARD Mario P. Liberatore Stephen L. Johnson Richard L. Handley E. Allen Bell Trenton M. Stover John A. Myers

OHIO VALLEY BANK DIRECTORS Jeffrey E. Smith Thomas E. Wiseman  David W. Thomas                              Harold A. Howe                                 Steven B. Chapman                                DIRECTORS EMERITUS W. Lowell Call                                    James L. Dailey                                   Robert E. Daniel                                 Barney A. Molnar Anna P. Barnitz Brent A. Saunders Brent R. Eastman John G. Jones Kimberly A. Canady, JD Edward J. Robbins     C. Leon Saunders Wendell B. Thomas Lannes C. Williamson

6

OHIO VALLEY BANK OFFICERS   EXECUTIVE OFFICERS Jeffrey E. Smith Thomas E. Wiseman Larry E. Miller, II  Katrinka V. Hart-Harris   Scott W. Shockey  Chief Financial Officer Mario P. Liberatore John G. Jones   SENIOR VICE PRESIDENTS Jennifer L. Osborne Tom R. Shepherd Bryan F. Stepp Frank W. Davison Bryan W. Martin David K. Nadler Ryan J. Jones   VICE PRESIDENTS Richard D. Scott Patrick H. Tackett Marilyn E. Kearns Fred K. Mavis Business Rick A. Swain Bryna S. Butler Tamela D. LeMaster Christopher L. Preston    Gregory A. Phillips Diana L. Parks John A. Anderson Kyla R. Carpenter Allen W. Elliott E. Kate Cox Brian E. Hall Daniel T. Roush Gary L. Crabtree Adam D. Massie  Shawn R. Siders Jay D. Miller       Chairman of the Board President and Chief Executive Officer Chief Operating Officer and Secretary Executive Vice President, Director of WV Operations & Special Projects Executive Vice President, Chief Financial Officer President, OVB West Virginia President, MBC   SENIOR VICE PRESIDENTS Retail Lending Chief Deposit Officer Chief Lending Officer Financial Bank Group Chief Administrative Officer Chief Risk/Credit Officer Chief Operating Officer - MBC   VICE PRESIDENTS Trust Corporate Banking Director of Human Resources Business Development Officer Western Division Branch Manager Corporate Communications Branch Administration/CRM Branch Administration Business Development Consumer Lending Internal Audit Liaison Loan Operations Director of Marketing Director of Customer Support Director of Cultural Enhancement Corporate Banking Senior Compliance Officer Lender/Business Development Officer Lender/Business Development Officer Senior Credit Officer Business Development Officer     VICE PRESIDENTS Melissa P. Wooten  Christopher S. Petro Kimberly R. Williams Paula W. Clay Cindy H. Johnston Joe J. Wyant Brenda G. Henson Gabriel U. Stewart Randall L. Hammond Barbara A. Patrick Richard P. Speirs Lori A. Edwards Raymond G. Polcyn Stephanie L. Stover Brandon O. Huff Anita M. Good Angela S. Kinnaird Laura F. Conger Lonnie L. Hunt Ruth R. Murphy  Terri M. Camden Shelly N. Boothe   ASSISTANT CASHIERS Lois J. Scherer Linda K. Roe  Glen P. Arrowood, II Michelle L. Hammond Patricia G. Hapney Anthony W. Staley Jon C. Jones Daniel F. Short Pamela K. Smith William F. Richards       Shareholder Relations Manager & Trust Officer Comptroller Systems Officer Assistant Secretary Assistant Secretary Region Manager Jackson County Manager Deposit Services Chief Information Security Officer Security Officer/Loss Prevention BSA Officer/Loss Prevention Facilities Manager Secondary Market Manager Manager of Loan Production Office Retail Lending Operations Manager Systems Administrator Regional Branch Administrator Customer Support Manager Mortgage Loan Processing Clerk Lender/Business Development Officer Lender/Business Development Officer Human Resources Officer Business Development Officer     EFT Officer Lead Cultural Engineer & Talent Development Specialist Manager of Indirect Lending Escrow Supervisor/Lead Mortgage Loan Documentation Clerk Retail Lending & Personal Banker Product Development Business Sales & Support Western Cabell Region Manager Meigs Region Manager Eastern Cabell Region Manager Advertising Manager

7

OHIO VALLEY BANK   Athens, Ohio Loan Office - 2097 East State St. Suite C   Gallia County, Ohio Main Office - 420 Third Ave. Mini Bank - 437 Fourth Ave. Inside Walmart - 2145 Eastern Ave. Jackson Pike - 3035 State Route 160 Inside Holzer - 100 Jackson Pike Loan Office - Walmart Plaza, 2145 Eastern Ave. Rio Grande - 27 North College Ave.   Jackson County, Ohio Upper Main - 740 East Main St. Downtown - 400 East Main St. Oak Hill - 116 Jackson St. Wellston - 123 South Ohio Ave.   Mt. Sterling, Ohio 255 Yankeetown St.   New Holland, Ohio 25 North Main St.   Pomeroy, Ohio Inside Save-a-Lot - 700 W. Main St.   Waverly, Ohio 507 West Emmitt Ave.   Barboursville, West Virginia 6431 East State Route 60   Milton, West Virginia 280 East Main St.   Point Pleasant, West Virginia 328 Viand St.                                           LOAN CENTRAL   Chillicothe, Ohio 1080 N. Bridge Street, Unit 43   Gallipolis, Ohio 2145 Eastern Avenue   Jackson, Ohio 345 Main Street   South Point, Ohio 348 County Road 410   Waverly, Ohio 505 West Emmitt Avenue   Wheelersburg, Ohio 326 Center Street

8

ohio valley banc corp.

annual report 2016

financials

SELECTED FINANCIAL DATA

	Years Ended December 31
	2016			2015			2014			2013			2012
(dollars in thousands, except share and per share data)
SUMMARY OF OPERATIONS:
Total interest income	$	39,348		$	36,334		$	36,355		$	35,958		$	39,001
Total interest expense		3,022			2,839			2,875			3,573			6,346
Net interest income		36,326			33,495			33,480			32,385			32,655
Provision for loan losses		2,826			1,090			2,787			477			1,583
Total other income		8,239			8,597			9,793			8,518			8,483
Total other expenses		32,899			29,619			29,293			29,375			29,741
Income before income taxes		8,840			11,383			11,193			11,051			9,814
Income taxes		1,920			2,809			3,120			2,939			2,762
Net income		6,920			8,574			8,073			8,112			7,052
PER SHARE DATA:
Earnings per share	$	1.59		$	2.08		$	1.97		$	2.00		$	1.75
Cash dividends declared per share	$	0.82		$	0.89		$	0.84		$	0.73		$	1.09
Book value per share	$	22.40		$	21.97		$	20.94		$	19.62		$	18.66
Weighted average number of common shares outstanding		4,351,748			4,117,675			4,099,194			4,064,083			4,030,322
AVERAGE BALANCE SUMMARY:
Total loans	$	644,690		$	589,953		$	581,690		$	555,314		$	570,166
Securities(1)		196,389			188,754			170,314			175,809			202,413
Deposits		749,054			694,218			673,410			664,061			705,111
Other borrowed funds(2)		39,553			32,878			31,225			26,572			33,538
Shareholders' equity		98,133			88,720			83,887			77,989			74,031
Total assets		899,209			828,444			799,448			779,113			822,573
PERIOD END BALANCES:
Total loans	$	734,901		$	585,752		$	594,768		$	566,319		$	558,288
Securities(1)		151,985			155,900			137,274			133,173			159,791
Deposits		790,452			660,746			646,830			628,877			655,064
Shareholders' equity		104,528			90,470			86,216			80,419			75,820
Total assets		954,640			796,285			778,668			747,368			769,223
KEY RATIOS:
Return on average assets		0.77	%		1.03	%		1.01	%		1.04	%		0.86	%
Return on average equity		7.05	%		9.66	%		9.62	%		10.40	%		9.53	%
Dividend payout ratio		51.79	%		42.74	%		42.62	%		36.56	%		62.29	%
Average equity to average assets		10.91	%		10.71	%		10.49	%		10.01	%		9.00	%

(1) Securities include interest-bearing deposits with banks and restricted investments in bank stocks.

(2) Other borrowed funds include subordinated debentures. 

9

CONSOLIDATED STATEMENTS OF CONDITION

	As of December 31
	2016			2015
(dollars in thousands, except share and per share data)
Assets
Cash and noninterest-bearing deposits with banks	$	12,512		$	9,475
Interest-bearing deposits with banks		27,654			36,055
Total cash and cash equivalents		40,166			45,530
Certificates of deposit in financial institutions		1,670			1,715
Securities available for sale		96,490			91,651
Securities held to maturity (estimated fair value: 2016 - $19,171; 2015 - $20,790)		18,665			19,903
Restricted investments in bank stocks		7,506			6,576
Total loans		734,901			585,752
Less: Allowance for loan losses		(7,699	)		(6,648	)
Net loans		727,202			579,104
Premises and equipment, net		12,783			10,404
Other real estate owned		2,129			2,358
Accrued interest receivable		2,315			1,819
Goodwill		7,801			1,267
Other intangible assets, net		670			----
Bank owned life insurance and annuity assets		29,349			28,352
Other assets		7,894			7,606
Total assets	$	954,640		$	796,285
Liabilities
Noninterest-bearing deposits	$	209,576		$	176,499
Interest-bearing deposits		580,876			484,247
Total deposits		790,452			660,746
Other borrowed funds		37,085			23,946
Subordinated debentures		8,500			8,500
Accrued liabilities		14,075			12,623
Total liabilities		850,112			705,815
Commitments and Contingent Liabilities (See Note L)		----			----
Shareholders' Equity
Common stock ($1.00 stated value per share, 10,000,000 shares authorized; 2016 - 5,325,504 shares issued; 2015 - 4,777,414 shares issued		5,326			4,777
Additional paid-in capital		46,788			35,318
Retained earnings		69,117			65,782
Accumulated other comprehensive income (loss)		(991	)		305
Treasury stock, at cost (659,739 shares)		(15,712	)		(15,712	)
Total shareholders' equity		104,528			90,470
Total liabilities and shareholders' equity	$	954,640		$	796,285

See accompanying notes to consolidated financial statements

10

CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31	2016			2015		2014
(dollars in thousands, except per share data)
Interest and dividend income:
Loans, including fees	$	36,266		$	33,481	$	33,635
Securities:
Taxable		1,961			1,849		1,717
Tax exempt		445			526		555
Dividends		302			293		312
Other interest		374			185		136
		39,348			36,334		36,355
Interest expense:
Deposits		2,154			2,191		2,236
Other borrowed funds		664			478		474
Subordinated debentures		204			170		165
		3,022			2,839		2,875
Net interest income		36,326			33,495		33,480
Provision for loan losses		2,826			1,090		2,787
Net interest income after provision for loan losses		33,500			32,405		30,693
Noninterest income:
Service charges on deposit accounts		1,977			1,573		1,627
Trust fees		227			221		223
Income from bank owned life insurance and annuity assets		725			681		672
Mortgage banking income		227			242		228
Electronic refund check / deposit fees		2,048			2,371		3,133
Debit / credit card interchange income		2,594			2,399		2,174
Gain (loss) on other real estate owned		(467	)		99		113
Gain on sale of securities		----			163		----
Gain on sale of ProAlliance Corporation		----			----		810
Other		908			848		813
		8,239			8,597		9,793
Noninterest expense:
Salaries and employee benefits		18,874			17,498		17,878
Occupancy		1,846			1,599		1,585
Furniture and equipment		922			801		757
Professional fees		1,362			1,375		1,151
Marketing expense		915			860		1,004
FDIC insurance		455			583		483
Data processing		1,455			1,259		1,127
Software		1,316			1,123		1,014
Foreclosed assets		357			347		185
Amortization of intangibles		68			----		----
Merger related expenses		930			----		----
Other		4,399			4,174		4,109
		32,899			29,619		29,293
Income before income taxes		8,840			11,383		11,193
Provision for income taxes		1,920			2,809		3,120
NET INCOME	$	6,920		$	8,574	$	8,073
Earnings per share	$	1.59		$	2.08	$	1.97

See accompanying notes to consolidated financial statements

11

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

For the years ended December 31	2016			2015			2014
(dollars in thousands)
NET INCOME	$	6,920		$	8,574		$	8,073
Other comprehensive income (loss):
Change in unrealized gain (loss) on available for sale securities		(1,963	)		(830	)		1,077
Reclassification adjustment for realized (gains)		----			(163	)		----
		(1,963	)		(993	)		1,077
Related tax (expense) benefit		667			338			(366	)
Total other comprehensive income (loss), net of tax		(1,296	)		(655	)		711
Total comprehensive income	$	5,624		$	7,919		$	8,784

See accompanying notes to consolidated financial statements

12

Consolidated Statements of Changes in

Shareholders' Equity

For the years ended December 31, 2016, 2015, and 2014
(dollars in thousands, except share and per share data)
	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total Shareholders' Equity
Balances at January 1, 2014	$	4,758	$	34,883	$	56,241		$	249		$	(15,712	)	$	80,419
Net income		----		----		8,073			----			----			8,073
Other comprehensive income (loss), net		----		----		----			711			----			711
Common stock issued to ESOP, 14,618 shares		15		336		----			----			----			351
Common stock issued through dividend reinvestment, 4,304 shares		4		99		----			----			----			103
Cash dividends, $.84 per share		----		----		(3,441	)		----			----			(3,441	)
Balances at December 31, 2014		4,777		35,318		60,873			960			(15,712	)		86,216
Net income		----		----		8,574			----			----			8,574
Other comprehensive income (loss), net		----		----		----			(655	)		----			(655	)
Cash dividends, $.89 per share		----		----		(3,665	)		----			----			(3,665	)
Balances at December 31, 2015		4,777		35,318		65,782			305			(15,712	)		90,470
Net income		----		----		6,920			----			----			6,920
Other comprehensive income (loss), net		----		----		----			(1,296	)		----			(1,296	)
Common stock issued to ESOP, 24,572 shares		25		550		----			----			----			575
Acquisition – Milton Bancorp, Inc. 523,518 shares		524		10,920		----			----			----			11,444
Cash dividends, $.82 per share		----		----		(3,585	)		----			----			(3,585	)
Balances at December 31, 2016	$	5,326	$	46,788	$	69,117		$	(991	)	$	(15,712	)	$	104,528

See accompanying notes to consolidated financial statements

13

Consolidated Statements of Cash Flows

For the years ended December 31	2016			2015			2014
(dollars in thousands)
Cash flows from operating activities:
Net income	$	6,920		$	8,574		$	8,073
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		1,126			872			795
Net (accretion) of purchase accounting adjustments		(255	)		----			----
Net amortization of securities		407			432			732
Net realized (gain) on sale of securities		----			(163	)		----
Proceeds from sale of loans in secondary market		6,455			6,746			4,286
Loans disbursed for sale in secondary market		(6,228	)		(6,504	)		(4,058	)
Amortization of mortgage servicing rights		79			93			77
Gain on sale of loans		(306	)		(335	)		(305	)
Amortization of intangible assets		68			----			----
Deferred tax (benefit) expense		(725	)		591			(517	)
Provision for loan losses		2,826			1,090			2,787
Common stock issued to ESOP		575			----			351
Earnings on bank owned life insurance and annuity assets		(725	)		(681	)		(672	)
Gain on sale of ProAlliance Corporation		----			----			(810	)
(Gain) loss on sale of other real estate owned		(22	)		(99	)		(25	)
(Appreciation) write-down of other real estate owned		489			----			(88	)
Change in accrued interest receivable		(496	)		(13	)		95
Change in accrued liabilities		1,461			473			1,326
Change in other assets		1,717			(678	)		(366	)
Net cash provided by operating activities		13,366			10,398			11,681
Cash flows from investing activities:
Net cash acquired from Milton Bancorp, Inc. acquisition		1,770			----			----
Proceeds from sales of securities available for sale		----			10,550			----
Proceeds from maturities of securities available for sale		18,591			15,085			15,318
Purchases of securities available for sale		(20,256	)		(33,251	)		(16,077	)
Proceeds from maturities of securities held to maturity		3,089			3,482			827
Purchases of securities held to maturity		(1,528	)		(626	)		(885	)
Proceeds from maturities of certificates of deposit in financial institutions		490			245			----
Purchases of certificates of deposit in financial institutions		(445	)		(980	)		(980	)
Proceeds from restricted investments in bank stocks		----			----			1,200
Purchases of restricted investments in bank stocks		(566	)		----			----
Net change in loans		(38,299	)		5,049			(29,936	)
Proceeds from sale of other real estate owned		403			458			821
Proceeds from sale of ProAlliance Corporation		----			----			810
Purchases of premises and equipment		(1,683	)		(1,950	)		(985	)
Purchases of bank owned life insurance and annuity assets		----			(3,000	)		----
Net cash (used in) investing activities		(38,434	)		(4,938	)		(29,887	)
Cash flows from financing activities:
Change in deposits		10,150			13,916			17,953
Proceeds from common stock through dividend reinvestment		----			----			103
Cash dividends		(3,585	)		(3,665	)		(3,441	)
Proceeds from Federal Home Loan Bank borrowings		11,102			400			7,575
Repayment of Federal Home Loan Bank borrowings		(1,883	)		(1,671	)		(1,612	)
Change in other long-term borrowings		3,899			----			----
Change in other short-term borrowings		21			113			261
Net cash provided by financing activities		19,704			9,093			20,839
Cash and cash equivalents:
Change in cash and cash equivalents		(5,364	)		14,553			2,633
Cash and cash equivalents at beginning of year		45,530			30,977			28,344
Cash and cash equivalents at end of year	$	40,166		$	45,530		$	30,977
Supplemental disclosure:
Cash paid for interest	$	2,930		$	2,784		$	3,274
Cash paid for income taxes		1,725			2,450			3,567
Transfers from loans to other real estate owned		957			1,381			879
Other real estate owned sales financed by The Ohio Valley Bank Company		316			189			390
Issuance of common stock for Milton Bancorp, Inc. acquisition		11,444			----			----
Net assets acquired from Milton Bancorp, Inc. acquisition, excluding cash and cash equivalents.		3,140			----			----

See accompanying notes to consolidated financial statements

14

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"), an Ohio state-chartered bank that is a member of the Federal Reserve Bank and is regulated primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board.  Ohio Valley also has a subsidiary that engages in consumer lending to individuals with higher credit risk history, Loan Central, Inc.; a subsidiary insurance agency that facilitates the receipts of insurance commissions, Ohio Valley Financial Services Agency, LLC; and a limited purpose property and casualty insurance company, OVBC Captive, Inc.  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 25 offices located in 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., Ohio Valley Financial Services Agency, LLC, and OVBC Captive, Inc.  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: To prepare financial statements in conformity with accounting principles generally accepted in the U.S., management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, noninterest-bearing deposits with banks, federal funds sold and interest-bearing deposits with banks with maturity terms of less than 90 days. 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.

Certificates of deposit in financial institutions:  Certificates of deposit in financial institutions are carried at cost and have maturity terms of 90 days or greater.  The longest maturity date is September 30,2019.

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.

15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

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 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.

Restricted Investments in Bank Stocks:  The Bank is a member of the Federal Home Loan Bank ("FHLB") system.  Additionally, the Bank is a member of the Federal Reserve Bank ("FRB") system.  Members are required to own a certain amount of stock based on their level of borrowings and other factors and may invest in additional amounts.  FHLB stock and FRB stock are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income. The Company has additional investments in other restricted bank stocks that are not material to the financial statements.

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.

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.

16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

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.  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 for the consumer and real estate portfolio segment and 5 years for the commercial portfolio segment. The total loan portfolio's 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 and Industrial, Commercial Real Estate, 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.

17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

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.

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 6 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.  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.

At December 31, 2016, there were no changes to the accounting policies or methodologies within any of the Company's loan portfolio segments from the prior period.

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
	2016			2015
Residential real estate loans		38.92	%		38.22	%
Commercial real estate loans		29.12	%		28.90	%
Consumer loans		18.27	%		18.89	%
Commercial and industrial loans		13.69	%		13.99	%
		100.00	%		100.00	%

Approximately 5.61% of total loans were unsecured at December 31, 2016, down from 6.06% at December 31, 2015.

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, 2016, the Bank's primary correspondent balance was $26,422 on deposit at the Federal Reserve Bank, Cleveland, Ohio.

18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

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  method  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.  Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.  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 $2,129 and $2,358 at December 31, 2016 and 2015.

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. Goodwill is the only intangible asset with an indefinite life on our balance sheet. The Company has selected December 31 as the date to perform its annual qualitative impairment test.  Given that the Company has been profitable and had positive equity, the qualitative assessment indicated that it was more likely than not that the fair value of goodwill was more than the carrying amount, resulting in no impairment.

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 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, 2016 and 2015, the Company's MSR assets were $387 and $429, respectively.
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: 4,351,748 for 2016; 4,117,675 for 2015; 4,099,194 for 2014.  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.

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.

19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

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 for a certain key executive that earns interest.

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

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 L 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 P for more specific disclosure related to dividend restrictions.

Restrictions on Cash:  Cash on hand or on  deposit with a  third-party  correspondent and the  Federal Reserve Bank of $28,102 and $36,535 was required to meet regulatory reserve and clearing requirements at year-end 2016 and 2015.  The balances on deposit with a third-party correspondent do not earn interest.

Derivatives:  At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company's intentions and belief as to likely effectiveness as a hedge.  These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) an instrument with no hedging designation ("stand-alone derivative").

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged.  Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

At December 31, 2016 and 2015, the  Company's  only  derivatives on  hand were  interest  rate  swaps, which are  classified as  stand-alone  derivatives.  See  Note H  for  more  specific disclosures related to interest rate swaps.

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 O.  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 2015 and 2014 have been reclassified to conform with the presentation for 2016.  These reclassifications had no effect on the net results of operations or shareholders' equity.

20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies (continued)

Adoption of New Accounting Standards:  In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)". The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017, with early adoption permitted on January 1, 2017. The adoption of ASU 2014-09 is not expected to have a material effect on the Company's financial statements.

In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities". The update provides updated accounting and reporting requirements for both public and non-public entities. The most significant provisions that will impact the Company are: 1) measurement at fair value of equity securities available for sale, with the changes in fair value recognized in the income statement; 2) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments at amortized cost on the balance sheet; 3) utilization of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) requirement of separate presentation of both financial assets and liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. The update will be effective for interim and annual periods beginning after December 15, 2017, using a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. Early adoption is not permitted. Management is currently evaluating the impact of this update on its Consolidated Financial Statements.

In February 2016, the FASB issued an update (ASU 2016-02, Leases) which will require lessees to record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases, except for short-term leases that are subject to an accounting policy election, will be recorded on the balance sheet for lessees by establishing a lease liability and corresponding right-of-use asset. The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. Management is currently evaluating the impact of the adoption and does not expect to have a material impact on the income statement, but does anticipate an increase in the Company's assets and liabilities.  However, the amounts that will be adjusted are still to be determined.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses". ASU 2016-13 requires entities to report "expected" credit losses on financial instruments and other commitments to extend credit rather than the current "incurred loss" model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, for annual periods and interim periods within those annual periods, beginning after December 15, 2018. Management is currently in the developmental stages, collecting available historical information, in order to assess the expected credit losses.  However, the impact to the financial statements are still yet to be determined.

In August 2016, the FASB issued an update (ASU 2016-15, Statement of Cash Flows) which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  The amendments in this Update apply to all entities, including business entities and not-for-profit entities that are required to present a statement of cash flows, and are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The adoption of ASU 2016-15 is not expected to have a material effect on the Company's financial statements.
 

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B – Business Combinations

As of the close of business on August 5, 2016, Ohio Valley completed its merger with Milton Bancorp, Inc. ("Milton Bancorp") pursuant to the terms of the Agreement and Plan of Merger dated as of January 7, 2016, by and between Ohio Valley and Milton Bancorp (the "Merger Agreement").  Pursuant to the terms of the Merger Agreement, Milton Bancorp was merged with and into Ohio Valley.  Immediately following the Merger, The Milton Banking Company ("Milton Bank") was merged with and into the Bank.  As a result of the Merger and in accordance with the terms of the Merger Agreement, each Milton Bancorp share was converted into the right to receive either 1,636 Ohio Valley common shares, no par value, or cash in the amount of $37,219, subject to certain allocation procedures set forth in the Merger Agreement pursuant to which 80% of the 400 outstanding Milton Bancorp common shares were converted into the right to receive Ohio Valley common shares and the remaining 20% of the outstanding Milton Bancorp common shares were converted into the right to receive cash.  Each of the 1,237 Milton Bancorp preferred shares issued and outstanding were converted into the right to receive a cash payment in the amount of $3,600 per preferred share.  The consideration paid for Milton Bancorp totaled $18,875, of which $11,444 was the market value of the Company's common shares and $7,431 was cash.  Ohio Valley financed part of the cash portion of the purchase price through $5,000 in borrowed funds.  Milton Bank's results of operations were included in the Company's results beginning August 6, 2016.  Merger-related expenses of $930 were recorded to the Company's income statement for the year ended December 31, 2016.  The fair value of the common shares issued as part of the consideration paid for Milton Bancorp was determined in the basis of the closing price of the Company's common shares on the acquisition date.  After the Merger, the Company's assets totaled approximately $950 million and branches increased to 25 locations.

Goodwill of $6,534 arising from the acquisition consisted largely of synergies from combining the operations of the companies.  As the acquisition was treated as a nontaxable stock acquisition transaction, the goodwill was not deductible for tax purposes.  The following table summarizes the consideration paid for Milton Bancorp and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

Consideration:
Cash	$	7,431
Equity instruments		11,444
Fair value of total consideration transferred	$	18,875

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	9,201
Securities		5,868
Restricted investments in bank stock		364
Loans		112,479
Premises and equipment		1,826
Other real estate owned		641
Bank owned life insurance		272
Core deposit intangible asset		738
Other assets		612
Total assets acquired		132,001
Deposits		119,669
Other liabilities		(9	)
Total liabilities assumed		119,660
Total identifiable net assets		12,341
Goodwill		6,534
	$	18,875

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note B – Business Combinations (continued)

                The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date.  The fair value adjustments were determined  using  discounted  contractual cash flows.  However,  the  Company believes that all  contractual  cash  flows related to these  financial  instruments will be collected. As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchase credit impaired loans, which have shown evidence of credit deterioration since origination.  Receivables acquired that were not subject to these requirements include non-impaired loans and customer receivables with a fair value and gross contractual amounts receivable of $111,558 and $112,249 on the date of acquisition.  The Company also acquired purchase credit impaired loans that management deemed to be not material for disclosure.  While the acquisition accounting adjustments have been recorded at year-end 2016, we will continue to evaluate these adjustments, specifically in the area of income taxes. Amounts presented in the table above are subject to change.

Note C - Securities

The following table summarizes the amortized cost and fair value of securities available for sale and securities held to maturity at December 31, 2016 and 2015 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities Available for Sale
December 31, 2016
U.S. Government sponsored entity securities	$	10,624	$	----	$	(80	)	$	10,544
Agency mortgage-backed securities, residential		87,367		495		(1,916	)		85,946
Total securities	$	97,991	$	495	$	(1,996	)	$	96,490
December 31, 2015
U.S. Government sponsored entity securities	$	9,011	$	----	$	(46	)	$	8,965
Agency mortgage-backed securities, residential		82,178		981		(473	)		82,686
Total securities	$	91,189	$	981	$	(519	)	$	91,651

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
Securities Held to Maturity
December 31, 2016
Obligations of states and political subdivisions	$	18,661	$	654	$	(148	)	$	19,167
Agency mortgage-backed securities, residential		4		----		----			4
Total securities	$	18,665	$	654	$	(148	)	$	19,171
December 31, 2015
Obligations of states and political subdivisions	$	19,898	$	892	$	(5	)	$	20,785
Agency mortgage-backed securities, residential		5		----		----			5
Total securities	$	19,903	$	892	$	(5	)	$	20,790

At year-end 2016 and 2015, 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.

There were no sales of debt securities during 2016 and 2014. During 2015, proceeds from the sales of debt securities totaled $10,550 with gross gains of $163 recognized.

Securities with a carrying value of approximately $72,397 at December 31, 2016 and $59,267 at December 31, 2015 were pledged to secure public deposits and repurchase agreements and for other purposes as required or permitted by law.

Unrealized losses on the Company's debt securities have not been recognized into income because the issuers' securities are of high credit quality as of December 31, 2016, 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, 2016 and 2015 represents an other-than-temporary impairment.

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note C - Securities (continued)

The amortized cost and estimated fair value of debt securities at December 31, 2016, 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	$	4,001	$	3,999	$	272	$	275
Due in one to five years		6,623		6,545		7,061		7,342
Due in five to ten years		----		----		8,690		9,029
Due after ten years		----		----		2,638		2,521
Agency mortgage-backed securities, residential		87,367		85,946		4		4
Total debt securities	$	97,991	$	96,490	$	18,665	$	19,171

The following table summarizes securities with unrealized losses at December 31, 2016 and December 31, 2015, aggregated by major security type and length of time in a continuous unrealized loss position:

December 31, 2016	Less than 12 Months						12 Months or More						Total
Securities Available for Sale	Fair Value		Unrealized Loss				Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
U.S. Government sponsored entity securities	$	10,544		$	(80	)		$	----		$	----		$	10,544		$	(80	)
Agency mortgage-backed securities, residential		64,043			(1,916	)			----			----			64,043			(1,916	)
Total available for sale	$	74,587		$	(1,996	)		$	----		$	----		$	74,587		$	(1,996	)

	Less than 12 Months						12 Months or More						Total
Securities Held to Maturity	Fair Value		Unrecognized Loss				Fair Value			Unrecognized Loss			Fair Value			Unrecognized Loss
Obligations of states and political subdivisions	$	3,813		$	(148	)		$	----		$	----		$	3,813		$	(148	)
Total held to maturity	$	3,813		$	(148	)		$	----		$	----		$	3,813		$	(148	)

December 31, 2015	Less than 12 Months						12 Months or More							Total
Securities Available for Sale	Fair Value		Unrealized Loss				Fair Value			Unrealized Loss				Fair Value			Unrealized Loss
U.S. Government sponsored entity securities	$	7,964		$	(46	)		$	----		$	----			$	7,964		$	(46	)
Agency mortgage-backed securities, residential		42,112			(407	)			3,645			(66	)			45,757			(473	)
Total available for sale	$	50,076		$	(453	)		$	3,645		$	(66	)		$	53,721		$	(519	)

	Less than 12 Months						12 Months or More						Total
Securities Held to Maturity	Fair Value		Unrecognized Loss				Fair Value			Unrecognized Loss			Fair Value			Unrecognized Loss
Obligations of states and political subdivisions	$	995		$	(5	)		$	----		$	----		$	995		$	(5	)
Total held to maturity	$	995		$	(5	)		$	----		$	----		$	995		$	(5	)

24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D - Loans and Allowance for Loan Losses

Loans are comprised of the following at December 31:

	2016			2015
Residential real estate	$	286,022		$	223,875
Commercial real estate:
Owner-occupied		77,605			73,458
Nonowner-occupied		90,532			72,002
Construction		45,870			23,852
Commercial and industrial		100,589			81,936
Consumer:
Automobile		59,772			44,566
Home equity		20,861			20,841
Other		53,650			45,222
		734,901			585,752
Less: Allowance for loan losses		(7,699	)		(6,648	)
Loans, net	$	727,202		$	579,104

The following table presents the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2016, 2015 and 2014:

December 31, 2016	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648
Provision for loan losses		(63	)		2,287			(1,112	)		1,714			2,826
Loans charged off		(384	)		(63	)		(586	)		(2,170	)		(3,203	)
Recoveries		299			132			16			981			1,428
Total ending allowance balance	$	939		$	4,315		$	907		$	1,538		$	7,699

December 31, 2015	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		103			(469	)		777			679			1,090
Loans charged off		(828	)		(1,971	)		(24	)		(1,428	)		(4,251	)
Recoveries		386			204			234			651			1,475
Total ending allowance balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648

December 31, 2014	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		458			1,408			(28	)		949			2,787
Loans charged off		(487	)		(235	)		(41	)		(1,216	)		(1,979	)
Recoveries		286			108			392			585			1,371
Total ending allowance balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2016 and 2015:

December 31, 2016	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,535	$	241	$	205	$	2,981
Collectively evaluated for impairment		939		1,780		666		1,333		4,718
Total ending allowance balance	$	939	$	4,315	$	907	$	1,538	$	7,699
Loans:
Loans individually evaluated for impairment	$	717	$	13,111	$	8,465	$	416	$	22,709
Loans collectively evaluated for impairment		285,305		200,896		92,124		133,867		712,192
Total ending loans balance	$	286,022	$	214,007	$	100,589	$	134,283	$	734,901

December 31, 2015	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	311	$	1,850	$	3	$	2,164
Collectively evaluated for impairment		1,087		1,648		739		1,010		4,484
Total ending allowance balance	$	1,087	$	1,959	$	2,589	$	1,013	$	6,648
Loans:
Loans individually evaluated for impairment	$	1,001	$	7,318	$	8,691	$	218	$	17,228
Loans collectively evaluated for impairment		222,874		161,994		73,245		110,411		568,524
Total ending loans balance	$	223,875	$	169,312	$	81,936	$	110,629	$	585,752

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D – 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 the years ended December 31, 2016, 2015 and 2014:

December 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	5,477	$	5,477	$	2,435	$	3,185	$	300	$	300
Nonowner-occupied		384		384		100		390		19		19
Commercial and industrial		392		392		241		391		----		----
Consumer:
Home equity		416		416		205		421		21		21
With no related allowance recorded:
Residential real estate		717		717		----		726		31		31
Commercial real estate:
Owner-occupied		3,638		3,091		----		3,005		178		178
Nonowner-occupied		5,078		3,632		----		3,572		79		79
Construction		1,001		527		----		522		136		136
Commercial and industrial		8,073		8,073		----		7,681		381		381
Total	$	25,176	$	22,709	$	2,981	$	19,893	$	1,145	$	1,145

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204	$	204	$	13	$	13
Nonowner-occupied		396		396		107		402		75		75
Commercial and industrial		4,355		4,355		1,850		3,545		149		149
Consumer:
Home equity		218		218		3		219		8		8
With no related allowance recorded:
Residential real estate		1,001		1,001		----		809		45		45
Commercial real estate:
Owner-occupied		3,812		3,265		----		2,747		181		181
Nonowner-occupied		5,178		2,773		----		3,439		49		49
Construction		680		680		----		544		----		----
Commercial and industrial		4,336		4,336		----		3,985		180		180
Total	$	20,180	$	17,228	$	2,164	$	15,894	$	700	$	700

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 Note D – Loans and Allowance for Loan Losses (continued)

December 31, 2014	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	----	$	----	$	----	$	----	$	6	$	6
Commercial real estate:
Owner-occupied		1,177		1,177		414		471		32		32
Nonowner-occupied		7,656		7,656		2,092		8,303		398		398
Commercial and industrial		2,356		2,356		900		2,441		110		110
Consumer:
Home equity		219		219		6		219		7		7
With no related allowance recorded:
Residential real estate		1,415		1,415		----		882		58		58
Commercial real estate:
Owner-occupied		3,125		2,578		----		2,135		113		113
Nonowner-occupied		1,298		300		----		300		50		50
Commercial and industrial		4,703		4,468		----		2,278		180		180
Total	$	21,949	$	20,169	$	3,412	$	17,029	$	954	$	954

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.

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.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of December 31, 2016 and December 31, 2015, other real estate owned secured by residential real estate totaled $938 and $1,131, respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $1,492 and $988 as of December 31, 2016 and December 31, 2015, respectively.

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, 2016 and 2015:

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2016
Residential real estate	$	132	$	3,445
Commercial real estate:
Owner-occupied		28		1,571
Nonowner-occupied		----		2,506
Construction		----		527
Commercial and industrial		----		867
Consumer:
Automobile		121		5
Home equity		----		34
Other		46		6
Total	$	327	$	8,961

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D – Loans and Allowance for Loan Losses (continued)

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2015
Residential real estate	$	20	$	2,048
Commercial real estate:
Owner-occupied		----		404
Nonowner-occupied		----		2,737
Construction		----		769
Commercial and industrial		----		1,152
Consumer:
Automobile		18		27
Home equity		----		96
Other		1		3
Total	$	39	$	7,236

The following table presents the aging of the recorded investment of past due loans by class of loans as of December 31, 2016 and 2015:

December 31, 2016	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	$	3,728	$	953	$	2,201	$	6,882	$	279,140	$	286,022
Commercial real estate:
Owner-occupied		134		366		1,325		1,825		75,780		77,605
Nonowner-occupied		261		18		2,506		2,785		87,747		90,532
Construction		66		52		182		300		45,570		45,870
Commercial and industrial		1,283		483		800		2,566		98,023		100,589
Consumer:
Automobile		1,091		221		126		1,438		58,334		59,772
Home equity		349		45		----		394		20,467		20,861
Other		685		155		46		886		52,764		53,650
Total	$	7,597	$	2,293	$	7,186	$	17,076	$	717,825	$	734,901

December 31, 2015	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	$	2,564	$	1,484	$	1,708	$	5,756	$	218,119	$	223,875
Commercial real estate:
Owner-occupied		141		33		371		545		72,913		73,458
Nonowner-occupied		35		334		2,737		3,106		68,896		72,002
Construction		----		2		769		771		23,081		23,852
Commercial and industrial		31		88		1,077		1,196		80,740		81,936
Consumer:
Automobile		727		197		36		960		43,606		44,566
Home equity		75		----		76		151		20,690		20,841
Other		420		104		4		528		44,694		45,222
Total	$	3,993	$	2,242	$	6,778	$	13,013	$	572,739	$	585,752

Troubled Debt Restructurings:

A troubled debt restructuring ("TDR") occurs when 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; a reduction in the contractual principal and interest payments of the loan; or short-term interest-only payment terms.

29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D – Loans and Allowance for Loan Losses (continued)

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.

The following table presents the types of TDR loan modifications by class of loans as of December 31, 2016 and December 31, 2015:

	TDR's Performing to Modified Terms		TDR's Not Performing to Modified Terms		Total TDR's
December 31, 2016
Residential real estate:
Interest only payments	$	717	$	----	$	717
Commercial real estate:
Owner-occupied
Interest only payments		284		----		284
Rate reduction		----		232		232
Reduction of principal and interest payments		579		----		579
Maturity extension at lower stated rate than market rate		1,582		----		1,582
Nonowner-occupied
Interest only payments		600		2,210		2,810
Rate reduction		384		----		384
Credit extension at lower stated rate than market rate		574		----		574
Commercial and industrial
Interest only payments		8,074		----		8,074
Credit extension at lower stated rate than market rate		----		391		391
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		213		----		213
Credit extension at lower stated rate than market rate		203		----		203
Total TDR's	$	13,210	$	2,833	$	16,043

	TDR's Performing to Modified Terms		TDR's Not Performing to Modified Terms		Total TDR's
December 31, 2015
Residential real estate:
Interest only payments	$	1,001	$	----	$	1,001
Commercial real estate:
Owner-occupied
Interest only payments		433		----		433
Rate reduction		----		232		232
Reduction of principal and interest payments		604		----		604
Maturity extension at lower stated rate than market rate		1,996		----		1,996
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		300		2,473		2,773
Rate reduction		396		----		396
Commercial and industrial
Interest only payments		7,579		----		7,579
Credit extension at lower stated rate than market rate		226		391		617
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR's	$	12,957	$	3,096	$	16,053

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note D – Loans and Allowance for Loan Losses (continued)

During the twelve months ended December 31, 2016, the TDR's described above decreased the allowance for loan losses and provision expense by $1,112, with corresponding charge-offs of $11.  During the year ended December 31, 2015, the TDR's described above increased the allowance for loan losses and provision expense by $93 with corresponding charge-offs of $1,422.  The charge-offs of $1,422 during 2015 included $1,304 that were related to specific reserves that had already been provided for during 2014, and, as a result, did not impact provision expense during 2015.

At December 31, 2016, the balance in TDR loans decreased $10, or 0.1%, from year-end 2015.  The Company had 82% of its TDR's performing according to their modified terms at December 31, 2016, as compared to 81% at December 31, 2015.  The Company's specific allocations in reserves to customers whose loan terms have been modified in TDR's totaled $546 at December 31, 2016, as compared to $1,669 in reserves at December 31, 2015.  Lower specific reserves in 2016 was impacted by the reduction of $1,160 in specific reserves that were previously related to one commercial and industrial loan relationship. During the second quarter of 2016, a re-evaluation of this borrower's financial performance identified significant improvement, which resulted in a credit quality upgrade to the borrower relationship and no identified collateral impairment.  At December 31, 2016, the Company had $2,427 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR's, as compared to $995 at December 31, 2015.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the years ended December 31, 2016 and 2015:

	TDR's Performing to Modified Terms						TDR's Not Performing to Modified Terms
	Pre-Modification Recorded Investment			Post-Modification Recorded Investment			Pre-Modification Recorded Investment			Post-Modification Recorded Investment
December 31, 2016
Commercial real estate:
Nonowner-occupied
Interest only payments		$	----		$	----		$	226		$	226
Credit extension at lower stated rate than market rate			574			574			----			----
Total TDR's		$	574		$	574		$	226		$	226

	TDR's Performing to Modified Terms				TDR's Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2015
Residential real estate
Interest only payments	$	495	$	495		----		----
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		1,025		1,025		----		----
Commercial and industrial
Credit extension at lower stated rate than market rate		226		226		----		----
Total TDR's	$	1,746	$	1,746		----		----

31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

During the twelve months ended December 31, 2016, the Company placed one commercial real estate TDR totaling $226 on nonaccrual status. The borrower continues to experience financial difficulty and the Company has started the foreclosure process. The Company reviewed the loan's collateral during the third quarter and identified $11 in collateral impairment, which resulted in a partial charge-off of principal. There were no specific allocations of the allowance for loan losses recorded on the impaired TDR loan at December 31, 2016.  All of the Company's loans that were restructured during the twelve months ended December 31, 2015 were performing in accordance with their modified terms.  Excluding the commercial real estate loan of $226 previously mentioned, there were no other TDR's described above at December 31, 2016 and 2015 that experienced any payment defaults within twelve months following their 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 loans modified during the twelve months ended December 31, 2016 increased the provision expense and the allowance for loan losses by $11.  As of December 31, 2016, the Company had no allocation of reserves to customers whose loan terms were modified during the year ended 2016. The loans modified during the twelve months ended December 31, 2015 had no impact on the provision expense or the allowance for loan losses.  As of December 31, 2015, the Company had no allocation of reserves to customers whose loan terms were modified during the year ended of 2015.

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 11. 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 11. The Company's risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500.

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

Special Mention. 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. 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 considered likely to satisfy debt.

Doubtful. 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, and 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. 

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Loss. Loans classified as loss are considered uncollectible and are of such little value that their continuance as bankable assets is not warranted.  This classification does not mean that the credit has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset yielding such a minimum value even though partial recovery may be affected in the future.  Amounts classified as loss should be promptly charged off.

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 re-evaluation date. As of December 31, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2016	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	66,495	$	428	$	10,682	$	77,605
Nonowner-occupied		83,103		2,364		5,065		90,532
Construction		45,325		----		545		45,870
Commercial and industrial		94,091		188		6,310		100,589
Total	$	289,014	$	2,980	$	22,602	$	314,596

December 31, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	62,287	$	6,738	$	4,433	$	73,458
Nonowner-occupied		61,577		6,305		4,120		72,002
Construction		23,080		----		772		23,852
Commercial and industrial		70,852		5,232		5,852		81,936
Total	$	217,796	$	18,275	$	15,177	$	251,248

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau) but not thereafter. 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.

For residential and consumer loan classes, the Company 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, 2016 and December 31, 2015:

	Consumer
December 31, 2016	Automobile		Home Equity			Other			Residential Real Estate			Total
Performing	$	59,646		$	20,827		$	53,598		$	282,445		$	416,516
Nonperforming		126			34			52			3,577			3,789
Total	$	59,772		$	20,861		$	53,650		$	286,022		$	420,305

	Consumer
December 31, 2015	Automobile		Home Equity			Other			Residential Real Estate			Total
Performing	$	44,521		$	20,745		$	45,218		$	221,807		$	332,291
Nonperforming		45			96			4			2,068			2,213
Total	$	44,566		$	20,841		$	45,222		$	223,875		$	334,504

33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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 5.61% of total loans were unsecured at December 31, 2016, down from 6.06% at December 31, 2015.

Note E - Premises and Equipment

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

	2016		2015
Land	$	2,348	$	2,055
Buildings		13,247		10,890
Leasehold improvements		1,238		2,066
Furniture and equipment		5,085		4,334
		21,918		19,345
Less accumulated depreciation		9,135		8,941
Total premises and equipment	$	12,783	$	10,404

The following is a summary of the future minimum operating lease payments for facilities leased by the Company. Operating lease expense was $464 in 2016, $464 in 2015, and $515 in 2014.

2017	$	332
2018		181
2019		54
2020		49
2021		25
	$	641

Note F – Goodwill and Intangible Assets

Goodwill:  The change in goodwill during the year is as follows:

	2016
Beginning of year	$	1,267
Acquired goodwill		6,534
Impairment		----
End of year	$	7,801

Impairment exists when a reporting unit's carrying value of goodwill exceeds its fair value.  At December 31, 2016, the Company's reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that fair value of the reporting unit exceeded its carrying value, including goodwill.  The qualitative assessment indicated that it is more likely than not that fair value of goodwill is more than the carrying value, resulting in no impairment.  Therefore, the Company did not proceed to step one of the annual goodwill impairment testing requirement.

Acquired intangible assets:  Acquired intangible assets were as follows at year-end:

	2016
	Gross Carrying Amount			Accumulated Amortization
Amortized intangible assets:
Core deposit intangibles		$	738		$	68
Other customer relationship intangibles			----			----
Total		$	738		$	68

Amortized intangible assets:

Aggregate amortization expense was $68 for 2016.

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note F – Goodwill and Intangible Assets (continued)

Estimated amortization expense for each of the next five years:

2017	$	156
2018		135
2019		114
2020		94
2021		74
Thereafter		97
Total	$	670

Note G - Deposits

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

	2016		2015
NOW accounts	$	155,051	$	124,524
Savings and Money Market		237,761		200,976
Time:
In denominations of $250,000 or less		168,546		146,975
In denominations of more than $250,000		19,518		11,772
Total time deposits		188,064		158,747
Total interest-bearing deposits	$	580,876	$	484,247

Following is a summary of total time deposits by remaining maturity at December 31, 2016:

2017	$	100,447
2018		53,559
2019		17,611
2020		11,401
2021		4,570
Thereafter		476
Total	$	188,064

Brokered deposits, included in time deposits, were $22,463 and $28,998 at December 31, 2016 and 2015, respectively.

Note H - Interest Rate Swaps

The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.  The Company utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position.  As part of this strategy, the Company provides its customer with a fixed-rate loan while creating a variable-rate asset for the Company by the customer entering into an interest rate swap with the Company on terms that match the loan.  The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution.  These interest rate swaps do not qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative.  At December 31, 2016, the Company had interest rate swaps associated with commercial loans with a notional value of $9,725 and a fair value of $22.  This is compared to interest rate swaps with a notional value of $10,727 and a fair value of $29 at December 31, 2015.  The notional amount of the interest rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement.  To further offset the risk exposure related to market value fluctuations of its interest rate swaps, the Company maintains collateral deposits on hand with a third-party correspondent, which totaled $350 at December 31, 2016 and December 31, 2015.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note I - Other Borrowed Funds

Other borrowed funds at December 31, 2016 and 2015 are comprised of advances from the Federal Home Loan Bank ("FHLB") of Cincinnati and promissory notes.  At December 31, 2016 and 2015, FHLB Borrowings included $73 and $117 in capitalized lease obligations, respectively.

	FHLB Borrowings		Promissory Notes		Totals
2016	$	29,203	$	7,882	$	37,085
2015	$	20,028	$	3,918	$	23,946

Pursuant to collateral agreements with the FHLB, advances are secured by $275,836 in qualifying mortgage loans, $71,443 in commercial loans and $5,365 in FHLB stock at December 31, 2016. Fixed-rate FHLB advances of $29,130 mature through 2042 and have interest rates ranging from 1.34% to 3.31% and a year-to-date weighted average cost of 2.08% at December 31, 2016 and 2015, respectively. There were no variable-rate FHLB borrowings at December 31, 2016.

At December 31, 2016, the Company had a cash management line of credit enabling it to borrow up to $75,000 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 $75,000 available on this line of credit at December 31, 2016.

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 $221,757 at December 31, 2016. Of this maximum borrowing capacity of $221,757, the Company had $147,627 available to use as additional borrowings, of which $75,000 could be used for short-term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, are due at various dates through a final maturity date of August 1, 2026, and have fixed rates ranging from 1.25% to 4.09% and a year-to-date weighted average cost of 2.34% at December 31, 2016, as compared to 1.38% at December 31, 2015. At December 31, 2016, there was one $360 promissory note payable by Ohio Valley to related parties. See Note M for further discussion of related party transactions.  Promissory notes payable to other banks totaled $3,899 at December 31, 2016.

Letters of credit issued on the Bank's behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $45,000 at December 31, 2016 and $34,800 at December 31, 2015.

Scheduled principal payments over the next five years: 

	FHLB Borrowings		Promissory Notes		Totals
2017	$	5,564	$	2,061	$	7,625
2018		2,313		2,140		4,453
2019		2,210		1,218		3,428
2020		2,083		519		2,602
2021		1,832		541		2,373
Thereafter		15,201		1,403		16,604
	$	29,203	$	7,882	$	37,085

Note J - Subordinated Debentures and Trust Preferred Securities

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 was fixed at 6.58% for five years, and then converted to a floating-rate term on March 15, 2012, based on a rate equal to the 3-month LIBOR plus 1.68%.  The interest rate on these trust preferred securities was 2.64% at December 31, 2016 and 2.19% at December 31, 2015.  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.
 

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 Note J - Subordinated Debentures and Trust Preferred Securities (continued)

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.  The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. 

Note K - Income Taxes

The provision for income taxes consists of the following components:

	2016			2015		2014
Current tax expense	$	2,645		$	2,218	$	3,637
Deferred tax (benefit) expense		(725	)		591		(517	)
Total income taxes	$	1,920		$	2,809	$	3,120

The source of deferred tax assets and deferred tax liabilities at December 31:

	2016			2015
Items giving rise to deferred tax assets:
Allowance for loan losses	$	2,538		$	2,302
Unrealized loss on securities available for sale		510			----
Deferred compensation		2,194			2,089
Deferred loan fees/costs		248			273
Other real estate owned		719			370
Accrued bonus		240			166
Purchase accounting adjustments		305			----
Net operating loss		258			----
Other		275			143
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(134	)		(149	)
FHLB stock dividends		(1,078	)		(1,074	)
Unrealized gain on securities available for sale		----			(157	)
Prepaid expenses		(283	)		(234	)
Depreciation and amortization		(823	)		(740	)
Other		(4	)		(5	)
Net deferred tax asset	$	4,965		$	2,984

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 the future reversals of existing taxable temporary differences, deductions against forecasted income and tax planning strategies.

At December 31, 2016, the Company had Section 382 net operating loss carryforwards of approximately $758 that will expire in 2026.

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note K - Income Taxes (continued)

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:

	2016			2015			2014
Statutory tax	$	3,006		$	3,870		$	3,806
Effect of nontaxable interest		(433	)		(437	)		(418	)
Effect of nontaxable insurance premiums		(340	)		(336	)		(142	)
Income from bank owned insurance, net		(239	)		(210	)		(217	)
Effect of postretirement benefits		(19	)		71			238
Effect of nontaxable life insurance death proceeds		----			(11	)		----
Effect of state income tax		64			66			73
Tax credits		(211	)		(221	)		(231	)
Milton Merger Costs		73			----			----
Other items		19			17			11
Total income taxes	$	1,920		$	2,809		$	3,120

At December 31, 2016 and December 31, 2015, 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. As previously reported, the Internal Revenue Service ("IRS") has proposed that Loan Central, as a tax return preparer, be assessed a penalty for allegedly negotiating or endorsing checks issued by the U.S. Treasury to taxpayers.  The penalty would amount to approximately $1.2 million.  Loan Central appealed this matter within the IRS.   Loan Central was notified that the Appeals Office will not concede the penalty, and the penalty has been assessed.  The Company is employing further IRS procedures, and the IRS is currently processing the Company's claims.  The matter may still be resolved at the IRS.  If the matter is not resolved at the IRS, the matter may have to be resolved through the judicial system.   Based on consultation with legal counsel, management remains confident that it is highly unlikely that the penalty recommendation will be sustained.  Therefore, the Company did not recognize any interest and/or penalties related to this matter 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 2013.  The tax years 2013-2015 remain open to federal and state examinations. 

Note L - 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:

	2016		2015
Fixed rate	$	271	$	65
Variable rate		61,786		59,028
Standby letters of credit		5,134		3,322

The interest rate on fixed-rate commitments ranged from 3.75% to 6.25% at December 31, 2016.

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note L - Commitments and Contingent Liabilities (continued)

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 refund product provider. The clearing agreement is effective through December 31, 2019 and is renewable in 3-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 receives a fee paid by the third-party tax refund product 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 M - Related Party Transactions

Certain directors, executive officers and companies with which they are affiliated were loan customers during 2016. A summary of activity on these borrower relationships with aggregate debt greater than $120 is as follows:

Total loans at January 1, 2016	$	3,989
New loans		1,085
Repayments		(528	)
Other changes		1,399
Total loans at December 31, 2016	$	5,945

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 2016 and 2015 were $38,867 and $30,169.

Note N - 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 $290, $288, and $278 for 2016, 2015 and 2014. 

39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note N - Employee Benefits (continued)

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 350,170 and 322,056 at December 31, 2016 and 2015.  In addition, the subsidiaries made contributions to its ESOP Trust as follows: 

	Years ended December 31
	2016		2015		2014
Number of shares issued		24,572		----		14,618
Fair value of stock contributed	$	575	$	----	$	351
Cash contributed		----		674		300
Total expense	$	575	$	674	$	651

Life insurance contracts with a cash surrender value of $27,343 and annuity assets of $2,006 at December 31, 2016 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 $6,328 and $6,033 at December 31, 2016 and 2015. Expenses related to the plans for each of the last three years amounted to $399, $338, and $604. In association with the split-dollar life insurance plan, the present value of the postretirement benefit totaled $3,007 at December 31, 2016 and $3,062 at December 31, 2015.

During the fourth quarter of 2015, the Company recorded $941 in proceeds expected to be received from the settlement of two BOLI policies.  The triggering event occurred in December 2015, resulting in a $908 reduction to BOLI assets and a net gain of $33 that was recorded to income.  The proceeds of $941 had not yet been collected by year-end 2015 and, therefore, were recorded as other assets at December 31, 2015.

Note O - Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

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, or 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.

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Fair Value of Financial Instruments (continued)

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: The fair values for 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: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly 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. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: 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. Fair value is commonly 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. 

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with management's own assumptions of fair value based on factors that include recent market data or industry-wide statistics. On an as-needed basis, the Company reviews the fair value of collateral, taking into consideration current market data, as well as all selling costs that typically approximate 10%.

41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - 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, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----		$	10,544		----
Agency mortgage-backed securities, residential		----			85,946		----

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----		$	8,965		----
Agency mortgage-backed securities, residential		----			82,686		----

There were no transfers between Level 1 and Level 2 during 2016 or 2015.

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, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner-occupied		----		----	$	3,536
Nonowner-occupied		----		----		1,985
Commercial and industrial		----		----		298
Other real estate owned:
Commercial real estate:
Construction		----		----		754

42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Fair Value of Financial Instruments (continued)

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Nonowner-occupied		----		----		$	2,473
Commercial and industrial		----		----			3,779
Other real estate owned:
Commercial real estate:
Construction		----		----			1,147

At December 31, 2016, the recorded investment of impaired loans measured for impairment using the fair value of collateral for collateral-dependent loans totaled $8,732, with a corresponding valuation allowance of $2,913, resulting in an increase of $2,509 in provision expense during the year ended December 31, 2016, with no corresponding charge-offs recognized.  At December 31, 2015, the recorded investment of impaired loans measured for impairment using the fair value of collateral for collateral-dependent loans totaled $7,811, with a corresponding valuation allowance of $1,559, resulting in an increase of $741 in provision expense during the year ended December 31, 2015, with $1,422 in additional charge-offs recognized.

Other real estate owned that was measured at fair value less costs to sell at December 31, 2016 had a net carrying amount of $754, which is made up of the outstanding balance of $2,217, net of a valuation allowance of $1,463 at December 31, 2016. There were $393 in corresponding write-downs during 2016. Other real estate owned that was measured at fair value less costs to sell at December 31, 2015 had a net carrying amount of $1,147, which is made up of the outstanding balance of $2,217, net of a valuation allowance of $1,070 at December 31, 2015. There were no corresponding write-downs during 2015.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2016 and December 31, 2015:

December 31, 2016	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range	(Weighted Average)
Impaired loans:
Commercial real estate:
Owner-occupied	$	3,536	Sales approach	Adjustment to comparables	0% to 65%		13.7	%
			Cost approach	Adjustment to comparables	0% to 29.5%		14.8	%
Nonowner-occupied		1,985	Sales approach	Adjustment to comparables	0% to 250%		58.6	%
Commercial and industrial		298	Sales approach	Adjustment to comparables	0.9% to 9.7%		5.2	%
Other real estate owned:
Commercial real estate:
Construction		754	Sales approach	Adjustment to comparables	0% to 30%		11.7	%

December 31, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range	(Weighted Average)
Impaired loans:
Commercial real estate:
Nonowner-occupied	$	2,473	Sales approach	Adjustment to comparables	0% to 12.5%		5.7	%
Commercial and industrial		3,779	Sales approach	Adjustment to comparables	0.9% to 30%		14.3	%
Other real estate owned:
Commercial real estate:
Construction		1,147	Sales approach	Adjustment to comparables	0% to 35%		15.2	%

43

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 Note O - Fair Value of Financial Instruments (continued)

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 and December 31, 2015 are as follows:

			Fair Value Measurements at December 31, 2016 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	40,166	$	40,166	$	----	$	----	$	40,166
Certificates of deposit in financial institutions		1,670		----		1,670		----		1,670
Securities available for sale		96,490		----		96,490		----		96,490
Securities held to maturity		18,665		----		9,541		9,630		19,171
Restricted investments in bank stocks		7,506		N/A		N/A		N/A		N/A
Loans, net		727,202		----		----		727,079		727,079
Accrued interest receivable		2,315		----		224		2,091		2,315
Financial Liabilities:
Deposits		790,452		209,576		581,340		----		790,916
Other borrowed funds		37,085		----		35,948		----		35,948
Subordinated debentures		8,500		----		5,821		----		5,821
Accrued interest payable		513		4		509		----		513

			Fair Value Measurements at December 31, 2015 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	45,530	$	45,530	$	----	$	----	$	45,530
Certificates of deposit in financial institutions		1,715		----		1,715		----		1,715
Securities available for sale		91,651		----		91,651		----		91,651
Securities held to maturity		19,903		----		9,814		10,976		20,790
Federal Home Loan Bank and Federal Reserve Bank stock		6,576		N/A		N/A		N/A		N/A
Loans, net		579,104		----		----		582,427		582,427
Accrued interest receivable		1,819		----		224		1,595		1,819
Financial Liabilities:
Deposits		660,746		176,499		484,636		----		661,135
Other borrowed funds		23,946		----		23,672		----		23,672
Subordinated debentures		8,500		----		5,368		----		5,368
Accrued interest payable		449		4		445		----		449

44

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note O - Fair Value of Financial Instruments (continued)

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

Certificates of deposit in financial institutions: The carrying amounts of certificates of deposit in financial institutions approximate fair values and are classified as Level 2.

Securities Held to Maturity:  The fair values for securities held to maturity are determined in the same manner as securities held for sale and discussed earlier in this note.  Level 3 securities consist of nonrated municipal bonds and tax credit ("QZAB") bonds.

Restricted Investments in Bank Stocks: It is not practical to determine the fair value of Federal Home Loan Bank, Federal Reserve Bank and United Bankers Bank stock due to restrictions placed on its transferability.

Loans: Fair values of loans are estimated as follows:  The fair value of fixed rate loans is estimated by discounting future cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Deposit Liabilities: The fair values disclosed for noninterest-bearing deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Other Borrowed Funds: The carrying values of the Company's short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification. The fair values of the Company's long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Subordinated Debentures: The fair values of the Company's Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable and Payable: The carrying amount of accrued interest approximates fair value resulting in a classification that is consistent with the earning assets and interest-bearing liabilities with which it is associated.

Off-balance Sheet Instruments:  Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of commitments is not material.

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.

45

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note P - 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.  The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective for the Company and the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.  Under the final rules, minimum requirements increased for both the quantity and quality of capital held by the Company and the Bank. The rules include a new common equity tier 1 capital to risk-weighted assets ratio of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets. The capital conservation buffer began to phase in on January 1, 2016 at 0.625%, and will be phased in over a four-year period, increasing by the same amount on each subsequent January 1, until fully phased-in on January 1, 2019. Further, Basel III rules increased the minimum ratio of tier 1 capital to risk-weighted assets increased from 4.0% to 6.0% and all banks are now subject to a 4.0% minimum leverage ratio. The required total risk-based capital ratio was unchanged. Failure to maintain the required common equity tier 1 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.  In addition, the Federal Reserve Board requires financial holding companies to meet "well capitalized" standards with ratios applicable to banks under the prompt corrective action regulations. Bank holding companies meeting the requirements of the Federal Reserve Board's Small Bank Holding Company Policy are exempt from compliance with the consolidated capital requirements, although their bank subsidiaries are still subject to the bank capital requirements.

Effective May 15, 2015, the Federal Reserve Board amended the Small Bank Holding Company Policy to increase from $500 million to $1 billion the asset threshold for a bank to qualify under the Policy.  Pursuant to that Policy, at December 31, 2016, the Company was not subject to the consolidated capital requirements.  The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.  Management believes that as of December 31, 2016 and 2015, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations 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 2016 and 2015, the Bank met the capital requirements to be deemed well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the institution's category.

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

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2016
Total capital (to risk weighted assets)
Consolidated	$	113,515		16.4	%		N/A		N/A			N/A		N/A
Bank		104,317		15.3		$	54,631		8.0	%	$	68,289		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		97,316		14.0			N/A		N/A			N/A		N/A
Bank		96,946		14.2			30,730		4.5			44,388		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		105,816		15.3			N/A		N/A			N/A		N/A
Bank		96,946		14.2			40,973		6.0			54,631		8.0
Tier 1 capital (to average assets)
Consolidated		105,816		11.2			N/A		N/A			N/A		N/A
Bank		96,946		10.4			37,168		4.0			46,461		5.0

46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note P – Regulatory Matters (continued)

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2015
Total capital (to risk weighted assets)
Consolidated	$	104,047		18.2	%		N/A		N/A			N/A		N/A
Bank		91,006		16.3		$	44,799		8.0	%	$	55,999		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		88,899		15.6			N/A		N/A			N/A		N/A
Bank		84,686		15.1			25,199		4.5			36,399		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		97,399		17.1			N/A		N/A			N/A		N/A
Bank		84,686		15.1			33,599		6.0			44,799		8.0
Tier 1 capital (to average assets)
Consolidated		97,399		12.2			N/A		N/A			N/A		N/A
Bank		84,686		10.8			31,280		4.0			39,100		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 of the Bank and Loan Central, Inc., and 90% of the prior year's net income of OVBC Captive, Inc. At January 1, 2017 approximately $5,884 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 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.

Note Q - 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	2016		2015
Cash and cash equivalents	$	2,747	$	2,233
Investment in subsidiaries		115,057		96,759
Notes receivable – subsidiaries		3,420		3,881
Other assets		52		63
Total assets	$	121,276	$	102,936
Liabilities
Notes payable	$	7,882	$	3,918
Subordinated debentures		8,500		8,500
Other liabilities		366		48
Total liabilities		16,748		12,466
Shareholders' Equity
Total shareholders' equity		104,528		90,470
Total liabilities and shareholders' equity	$	121,276	$	102,936

47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

CONDENSED STATEMENTS OF INCOME

	Years ended December 31:
Income:	2016		2015		2014
Interest on notes	$	52	$	53	$	84
Other operating income		----		----		34
Dividends from subsidiaries		6,900		3,500		3,500
Gain on sale of ProAlliance Corporation		----		----		810
Expenses:
Interest on notes		136		53		84
Interest on subordinated debentures		204		170		165
Operating expenses		667		345		384
Income before income taxes and equity in undistributed earnings of subsidiaries		5,945		2,985		3,795
Income tax benefit		256		167		(108	)
Equity in undistributed earnings of subsidiaries		719		5,422		4,386
Net Income	$	6,920	$	8,574	$	8,073

CONDENSED STATEMENTS OF CASH FLOWS

	Years ended December 31:
Cash flows from operating activities:	2016			2015			2014
Net Income	$	6,920		$	8,574		$	8,073
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of ProAlliance Corporation		----			----			(810	)
Equity in undistributed earnings of subsidiaries		(719	)		(5,422	)		(4,386	)
Common stock issued to ESOP		575			----			351
Change in other assets		11			(16	)		323
Change in other liabilities		318			(141	)		(334	)
Net cash provided by operating activities		7,105			2,995			3,217
Cash flows from investing activities:
Cash paid for Milton Bancorp, Inc. acquisition		(7,431	)		----			----
Proceeds from sale of ProAlliance Corporation		----			----			810
Investment in OVBC Captive		----			----			(250	)
Change in notes receivable		461			(100	)		(262	)
Net cash provided by (used in) investing activities		(6,970	)		(100	)		298
Cash flows from financing activities:
Change in notes payable		3,964			128			262
Proceeds from common stock through dividend reinvestment		----			----			103
Cash dividends paid		(3,585	)		(3,665	)		(3,441	)
Net cash provided by (used in) financing activities		379			(3,537	)		(3,076	)
Cash and cash equivalents:
Change in cash and cash equivalents		514			(642	)		439
Cash and cash equivalents at beginning of year		2,233			2,875			2,436
Cash and cash equivalents at end of year	$	2,747		$	2,233		$	2,875

Note R - 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.

48

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS   

Note R - Segment Information (continued)

Total revenues from the banking segment, which accounted for the majority of the Company's total revenues, totaled 91.6%, 90.9% and 90.6%  of total consolidated revenues for the years ended December 31, 2016, 2015 and 2014, 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.  All goodwill is in the Banking segment.

Segment information is as follows:

	Year Ended December 31, 2016
	Banking		Consumer Finance		Total Company
Net interest income	$	33,019	$	3,307	$	36,326
Provision expense		2,665		161		2,826
Noninterest income		7,589		650		8,239
Noninterest expense		30,257		2,642		32,899
Tax expense		1,530		390		1,920
Net income		6,156		764		6,920
Assets		941,907		12,733		954,640

	Year Ended December 31, 2015
	Banking		Consumer Finance		Total Company
Net interest income	$	30,175	$	3,320	$	33,495
Provision expense		1,055		35		1,090
Noninterest income		7,880		717		8,597
Noninterest expense		26,983		2,636		29,619
Tax expense		2,347		462		2,809
Net income		7,670		904		8,574
Assets		782,715		13,570		796,285

	Year Ended December 31, 2014
	Banking		Consumer Finance		Total Company
Net interest income	$	30,172	$	3,308	$	33,480
Provision expense		2,645		142		2,787
Noninterest income		8,897		896		9,793
Noninterest expense		26,806		2,487		29,293
Tax expense		2,587		533		3,120
Net income		7,031		1,042		8,073
Assets		764,510		14,158		778,668

49

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  

Note S - Consolidated Quarterly Financial Information (unaudited)

	Quarters Ended
	Mar. 31			Jun. 30		Sept. 30			Dec. 31
2016
Total interest income	$	9,770		$	8,913	$	9,824		$	10,841
Total interest expense		670			707		839			806
Net interest income		9,100			8,206		8,985			10,035
Provision for loan losses (1)		479			141		1,708			498
Noninterest income (3)		3,235			1,861		1,693			1,450
Noninterest expense		7,969			7,773		8,828			8,329
Net income		2,832			1,706		358			2,024
Earnings per share	$	0.69		$	0.41	$	0.08		$	0.43
2015
Total interest income	$	9,627		$	8,866	$	9,016		$	8,825
Total interest expense		697			717		731			694
Net interest income		8,930			8,149		8,285			8,131
Provision for loan losses (2)		(78	)		799		(11	)		380
Noninterest income (3)		3,489			1,917		1,584			1,607
Noninterest expense		7,427			7,554		7,727			6,911
Net income		3,624			1,410		1,642			1,898
Earnings per share	$	0.88		$	0.34	$	0.40		$	0.46
2014
Total interest income	$	9,508		$	8,925	$	8,904		$	9,018
Total interest expense		726			738		696			715
Net interest income		8,782			8,187		8,208			8,303
Provision for loan losses (4)		494			1,386		(682	)		1,589
Noninterest income (3)		4,118			1,912		2,106			1,657
Noninterest expense		7,295			6,997		7,244			7,757
Net income		3,564			1,344		2,742			423
Earnings per share	$	0.87		$	0.33	$	0.67		$	0.10

(1) During the third quarter of 2016, the Company experienced higher provision expense that was primarily related to an increase in specific allocations impacted by the decline in collateral values of two impaired commercial real estate loan relationships.  A re-appraisal of the commercial properties securing the loans identified further collateral depreciation, which resulted in a $2,435 increase to the specific allocations related to the loans.

(2) During the first and third quarters of 2015, the Company experienced negative provision expense as a result of lower general allocations of the allowance for loan losses.  General allocations were impacted by improved economic trends that include:  decreasing historical loan loss factor, lower delinquencies and lower classified/criticized assets.

(3) The Company's noninterest income was significantly impacted by seasonal tax refund processing fees.  The Bank serves as a facilitator for the clearing of tax refunds for a single tax refund product provider.  The Bank processes electronic refund checks/deposits associated with taxpayer refunds, and will, in turn, receive a fee paid by the third-party tax refund product provider for each transaction processed.  Due to the seasonal nature of tax refund transactions, the majority of income was recorded during the first quarter.

(4) During the third quarter of 2014, the Company experienced negative provision expense that was primarily related to a decrease in specific allocations impacted by the improvement in collateral values of an impaired commercial real estate loan relationship.  A re-appraisal of the commercial properties securing the loan identified asset appreciation, which resulted in a $524 reduction to the specific allocation related to the loan.

50

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, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2016. We also have audited the Company's internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, 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, 2016, based on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/Crowe Horwath LLP

Crowe Horwath LLP

Louisville, Kentucky

March 16, 2017

51

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, 2016, in relation to criteria for effective internal control over financial reporting as described in the 2013 "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that, as of December 31, 2016, 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 16, 2017 on the Company's consolidated financial statements and 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/Thomas E. Wiseman

Thomas E. Wiseman

President, CEO

/s/Scott W. Shockey

Scott W. Shockey

Senior Vice President, CFO

March 16, 2017

52

Summary of Common Stock Data

OHIO VALLEY BANC CORP.

Years ended December 31, 2016 and 2015

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, 2015.

2016	High		Low
First Quarter	$	24.80	$	21.70
Second Quarter		22.65		21.40
Third Quarter		22.40		21.60
Fourth Quarter		29.34		22.20

2015	High		Low
First Quarter	$	24.56	$	22.40
Second Quarter		23.49		22.10
Third Quarter		25.48		22.40
Fourth Quarter		26.03		23.25

Shown below is a table which reflects the dividends declared per share on Ohio Valley's common shares. As of February 28, 2017, the number of holders of record of common shares was 2,178.

Dividends per share	2016		2015
First Quarter	$	.21	$	.21
Second Quarter		.21		.26
Third Quarter		.19		.21
Fourth Quarter		.21		.21

During the second quarter of 2015, Ohio Valley paid a regular quarterly dividend of $0.21 per share and a special dividend of $0.05 per share.

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 of the Bank and Loan Central, Inc., and 90% of the prior year's net income of OVBC Captive, Inc. 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.

In addition, a 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.

53

Performance Graph

OHIO VALLEY BANC CORP.

Year ended December 31, 2016

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, 2011 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 44 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 44 banks in the SNL Index.

54

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 and which 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, taxes, the effects of implementation of legislation and the continuing economic uncertainty in various parts of the world; 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, 2016. 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.

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 financial 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 $6,920 for 2016, a decrease of 19.3% from 2015.  Earnings per share were $1.59 for 2016, a decrease of 23.6% from 2015.  The decrease in net income and earnings per share for 2016 was largely impacted by higher provision for loan loss expense, salaries and employee benefits and merger related expenses, which were up $1,736, $1,376 and $930, respectively, over 2015.  The increase in provision for loan loss expense came mostly from higher specific allocations of the allowance for loan losses associated with two commercial real estate loan relationships during 2016.  Management's analysis of both collateral dependent impaired loans identified asset impairment, which resulted in charges to provision expense of $2,435 during the year ended 2016.  Partially offsetting these specific allocation increases was a reduction of $1,155 in specific reserves on one commercial and industrial loan relationship due to improvements in the borrower's credit quality and economic performance.  The increase in salaries and employee benefit expenses was largely related to the Company's acquisition of Milton Bancorp, Inc. ("Milton Bancorp") on August 5, 2016, as was the increase in merger expenses.  Immediately following the merger, Milton Bancorp's wholly-owned subsidiary, The Milton Banking Company ("Milton Bank"), was merged with and into the Bank.  The acquisition resulted in the addition of $132,001 in assets and 5 branch locations in Jackson, Madison and Pickaway counties in Ohio.

55

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     During 2016, the Company's net interest income finished strong at $36,326, representing an increase of $2,831, or 8.5%, from 2015.  Average earning assets increased during 2016 by $62,372, or 8.0%, as compared to 2015, coming primarily from loans and investment securities.  The growth in average earning assets was primarily attributable to the acquisition of Milton Bank during the third quarter of 2016.  At the time of closing, the majority of Milton Bank's earning assets consisted of $112,479 in loans and $5,868 in securities.  Further impacting average loan growth was the Company's new Athens, Ohio loan production office, which opened in late 2015.  The new office has served to enhance the Company's market presence in Athens county, generating over $12,300 in average loans during 2016.  Complementing average earning asset growth was an increase in the Company's net interest margin, which finished at 4.40% in 2016, as compared to 4.39% in 2015.  Contributing to the increase in net interest margin were higher asset yields combined with lower funding costs.

The benefits of higher net interest income after provision for loan losses in 2016 were completely offset by a 17.3% increase in net noninterest expense (noninterest expense less noninterest income) during 2016, as compared to 2015.  Noninterest income decreased $358, or 4.2%, from 2015, while noninterest expense increased $3,280, or 11.1%, over 2015. The decrease in noninterest income was affected by lower gains on the sale of other real estate owned ("OREO"), mostly from the lower appraised value on one land development property during the fourth quarter of 2016.  Further impacting lower noninterest income was a reduction in tax processing fees through the Company's electronic refund check/deposit ("ERC/ERD") transactions.  ERC/ERD transactions involve the payment of a tax refund to the taxpayer after the Bank has received the refund from the federal/state government. Although the Bank experienced a higher volume of tax refunds processed in 2016, tax refund processing fees were still lower than the year before, decreasing $323, or 13.6%, as compared to 2015.  The decrease in total fees was due to the reduced per item fees received by the Company under a new contract entered into with the third-party tax refund product provider in October 2014 that impacted 2016's tax season.  Partially offsetting some of the decreases to noninterest income during 2016 were positive contributions from service charges on deposit accounts, which increased $404, or 25.7%, impacted mostly by the acquisition of Milton Bank.  Furthermore, debit/credit card interchange income increased $195, or 8.1%, primarily from the Company's continued marketing approach in offering incentives to customers to utilize the Bank's debit and credit cards for purchases.   The Company's growth in noninterest expenses during 2016 was also impacted by the acquisition of Milton Bank, which contributed to general increases in most noninterest expense categories related to having a larger organization after the merger.  The Company saw its salary and employee benefit expense grow by $1,376, or 7.9%, during 2016, as compared to 2015.  The increase was related to adding Milton Bank employees, annual merit increases, and higher health insurance expense.  Noninterest expense during 2016 was also impacted by merger expenses.  As previously mentioned, the Company recorded $930 in one-time merger related expenses that consisted largely of services to combine the operating systems of the companies, as well as investment banking, accounting, and legal services. Noninterest expense growth was also affected by increases in occupancy, furniture and equipment, data processing and software expense.

56

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For 2015, Ohio Valley generated net income of $8,574, an increase of 6.2% from 2014.  Earnings per share were $2.08 for 2015, an increase of 5.6% from 2014.  The increase in net income and earnings per share for 2015 was primarily due to lower provision for loan loss expense, which was down $1,697 compared to 2014. The decrease in provision for loan loss expense during 2015 was mostly caused by the impact of higher general allocations of the allowance for loan losses experienced during 2014.  The increase in prior year general allocations was mostly due to the downgrades of two impaired commercial credits during the second quarter of 2014, which increased the Company's classified assets and economic risk factors within the allowance for loan losses.  Lower provision expense during 2015 was also impacted by increases in specific allocations of the allowance for loan losses experienced during 2014.  The increase in prior year specific allocations was mostly due to the collateral value impairment of a commercial real estate loan recorded during the fourth quarter of 2014.

During 2015, the Company's net interest income finished relatively stable, increasing $15 from 2014.  Average earning assets increased during 2015 by $26,703, or 3.6%, as compared to 2014, coming primarily from interest-bearing balances with banks and loans.   Interest-bearing balances with banks were impacted by higher balances maintained within the Company's Federal Reserve Bank clearing account, while the increase in average loan balances was reflective of an increased loan demand within the Company's residential real estate and consumer loan portfolios.  While average earning assets grew, the Company's net interest margin decreased 15 basis points from 4.54% in 2014 to 4.39% in 2015.  Contributing to the decline in net interest margin were lower asset yields, which more than offset the reduction in funding costs.  Furthermore, the additional balances maintained within the Federal Reserve clearing account have a dilutive effect on the net interest margin due to the balances only earning 25 basis points for most of 2015. 

The benefits of higher net interest income and lower provision expense in 2015 were partially offset by a 12.2% decrease in noninterest income during 2015, as compared to 2014.  The decrease came largely from the sale of the Company's 9% ownership interest in ProAlliance Corporation ("ProAlliance"), during the third quarter of 2014.  The sale of ProAlliance, a specialty property and casualty insurance company, generated a total gain of $810 during the previous year.  Further impacting lower noninterest income were reduced tax processing fees of $762, or 24.3%, through the Company's ERC/ERD transactions.  The Bank experienced a higher volume of tax refunds processed in 2015, but was still affected by the reduced per item fees from the new contract agreement entered into during the fourth quarter of 2014.  Partially offsetting the decreasing effects of ERC/ERD fees and sale of Pro Alliance, the Company's noninterest income saw positive contributions come from debit/credit card interchange income and gains on sale of securities.  The Company's interchange fees from debit and credit card transactions improved by $225, or 10.4%, during 2015, as compared to 2014, affected by customer incentives that impacted the volume of debit and credit card transactions. Furthermore, the Company took opportunities during the second and third quarters of 2015 to sell some of its lower-yielding, U.S. Government agency ("Agency") mortgage-backed securities.  Proceeds from the sale of securities during 2015 totaled $10,550, with gross gains of $163 recognized, while the Company did not recognize any security sales during 2014.

During 2015, the Company experienced higher costs associated with noninterest expenses, which increased $326, or 1.1%, as compared to the previous year.  Growth in overhead came primarily from professional fees, foreclosure costs and data processing expenses, which collectively increased $518 during 2015.  These increases were partially offset by lower salaries and employee benefits, which decreased $380 during 2015, as compared to the previous year.  This decrease was primarily related to expense recorded in the fourth quarter of 2014 that incorporated the effects of new mortality expectations on various nonqualified defined benefit plans.  The one-time adjustment to expense at the end of 2014 was not repeated in 2015, contributing to the decline in benefit costs.

57

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 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 the percentage of net interest income to 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 exceeds the net interest rate spread because noninterest-bearing sources of funds, principally noninterest-bearing demand deposits and stockholders' equity, also support interest-earning assets. 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, 2016.  Tables I and II have been prepared to summarize the significant changes outlined in this analysis.

Net interest income of $36,985 on an FTE basis increased $2,824 in 2016, or 8.3%, compared to the $34,161 earned in 2015, coming mostly from higher average earning assets.  For the year ended December 31, 2016, average earning assets increased $62,372, or 8.0%, from 2015, which occurred primarily from loans, securities and the Company's Federal Reserve Bank clearing account.  Higher average loan balances were impacted by the acquisition of $112,479 in Milton Bank loans as part of the merger on August 5, 2016.  The acquisition contributed to average balance growth in commercial, residential real estate, and consumer loan balances, which were collectively up $54,737, or 9.3%, during 2016.  The Company also acquired $5,868 in securities as part of the Milton Bank merger, which contributed to the $6,532 net increase in average securities for the year ended December 31, 2016.  The increase came primarily from taxable securities, particularly within the Agency mortgage-backed investment segment.

Complementing the Company's growth in average earning assets was an increase in its FTE net interest margin from 4.39% in 2015 to 4.40% in 2016.  A contributing factor to the FTE net interest margin was the Federal Reserve Bank's action of increasing short-term interest rates in December 2015 by 25 basis points.  This increased the interest rate of the Company's Federal Reserve Bank clearing account from 0.25% to 0.50%.  The net interest margin also benefited from lower rates paid on interest-bearing deposit liabilities and a continued emphasis on lower-cost core deposits.  The Company's interest expense continues to be minimized by a sustained low-rate environment that has lowered the repricing rates of various Bank deposit products, particularly certain interest-bearing demand accounts.  The low rate environment contributed to a decrease in the average cost on NOW accounts from 0.37% at December 31, 2015 to 0.27% at December 31, 2016.  Furthermore, management continues to emphasize its lower-cost core deposit relationship balances, which consist of noninterest-bearing demand accounts and interest-bearing NOW, savings and money market balances.  Over 60% of the acquired Milton Bank deposits consisted of core deposit funding sources.  As a result, the Company benefited from higher core deposit average balances in 2016 (increasing $56,221), which offset the increase to its higher-cost time deposit, other borrowed money and subordinated debenture balances.

58

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

These positive effects to the margin were partially offset by lower yields on loan originations, which have been negatively impacted by the continued low interest rates prevalent in the market.  Also, while interest-bearing deposits continue to reprice, with the prolonged low interest rate environment, there continues to be limited opportunities to further reduce interest rates on the Company's retail funding sources, especially time deposits.  From 2015 to 2016, the weighted average cost of time deposits increased from 0.77% to 0.78%, which represents a change from the interest expense savings that had occurred in previous years.  While the Company has benefited from an emphasis on core deposit funding, management also utilizes higher-cost wholesale funding from Federal Home Loan Bank advances and promissory notes to help manage interest rate sensitivity and liquidity.  These funding sources contributed to a $6,675 average balance increase in other borrowings, which was related to management's decision to fund specific fixed-rate loans with like-term FHLB advances.

Net interest income of $34,161 on an FTE basis increased $44 in 2015, or 0.1%, compared to the $34,117 earned in 2014.  The nominal change in net interest income was impacted by a decrease in the FTE net interest margin, with positive contributions coming from higher average earning assets. For the year ended December 31, 2015, average earning assets increased $26,703, or 3.6%, from 2014, which occurred primarily from loans, securities and the Company's Federal Reserve Bank clearing account.   Higher average loan balances were impacted by a loan demand increase in the residential real estate and consumer loan portfolios during 2015.  In addition, the Company's taxable security purchases increased during 2015, particularly within the Agency mortgage-backed investment segment.  The Company further benefited from increased earnings within taxable securities during 2015, primarily from less bond premium expense on Agency mortgage-backed securities, which contributed to a 7 basis point improvement in the yield on taxable securities.

While average earning assets grew during 2015, the Company experienced a decline in its FTE net interest margin from 4.54% in 2014 to 4.39% in 2015.  The positive effects from average loan growth were completely offset by lower yields on loan originations, which have been negatively impacted by the continued low interest rates prevalent in the market.  The lower margin in 2015 was also impacted by the Company's Federal Reserve Bank clearing account earning just 25 basis points for most of the year.  The low rate on the clearing account combined with the fact that these Federal Reserve Bank balances contributed most to the overall average earning asset growth in 2015, contributed to the margin decline in 2015.  Partially offsetting the negative effects to the margin were lower rates paid on interest-bearing deposit liabilities and a continued change in deposit mix to lower-cost core deposits from time deposit accounts and FHLB borrowings.  For most of 2015, the Federal Reserve held the prime interest rate at 3.25%, and the target federal funds rate at a range from 0.0% to 0.25%. This sustained low-rate environment continued to impact the repricings of various Bank deposit products, especially time deposits.  Interest rates on time deposit balances continue to reprice at lower rates, which continue to lower funding costs.  However, the degree of interest expense savings from time deposits in 2015 versus 2014 has lowered significantly.  With the prolonged low interest rate environment, there continues to be limited opportunities to further reduce interest rates on the Company's retail funding sources, especially time deposits.  Management continues to emphasize its lower-cost core deposit relationship balances, which consist of noninterest-bearing demand accounts and interest-bearing NOW, savings and money market balances.  As a result, the Company benefited from higher core deposit average balances in 2015 (increasing $22,035) while experiencing minimal change to its higher-cost time deposit, other borrowed money and subordinated debenture balances.

For 2016, average earning assets increased $62,372, or 8.0%, as compared to an increase of $26,703, or 3.6%, in 2015.  Average loan balances represent the largest composition of earning assets. During 2016, average loans increased $54,737, or 9.3%, while increasing $8,263, or 1.4%, during 2015.

59

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST INCOME

Table I

(dollars in thousands)	December 31
	2016								2015								2014
	Average Balance			Income/ Expense		Yield/ Average			Average Balance			Income/ Expense		Yield/ Average			Average Balance			Income/ Expense		Yield/ Average
Assets
Interest-earning assets:
Interest-bearing balances with banks	$	74,486		$	374		0.50	%	$	73,383		$	185		0.25	%	$	56,528		$	136		0.24	%
Securities:
Taxable		107,774			2,263		2.10			99,201			2,142		2.16			96,880			2,029		2.09
Tax exempt		14,129			671		4.75			16,170			792		4.90			16,906			835		4.94
Loans		644,690			36,699		5.69			589,953			33,881		5.74			581,690			33,992		5.84
Total interest-earning assets		841,079			40,007		4.76	%		778,707			37,000		4.75	%		752,004			36,992		4.92	%
Noninterest-earning assets:
Cash and due from banks		11,014								10,347								9,749
Other nonearning assets		54,195								47,186								44,764
Allowance for loan losses		(7,079	)							(7,796	)							(7,069	)
Total noninterest-earning assets …		58,130								49,737								47,444
Total assets	$	899,209							$	828,444							$	799,448
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts	$	143,180		$	383		0.27	%	$	125,104		$	462		0.37	%	$	112,644		$	458		0.41	%
Savings and money market		215,760			464		0.21			200,575			431		0.21			201,524			431		0.21
Time deposits		167,584			1,307		0.78			168,969			1,298		0.77			170,196			1,347		0.79
Other borrowed money		31,053			664		2.14			24,378			478		1.96			22,725			474		2.09
Subordinated debentures		8.500			204		2.40			8.500			170		2.00			8.500			165		1.94
Total int.-bearing liabilities		566,077			3,022		0.53	%		527,526			2,839		0.54	%		515,589			2,875		0.56	%
Noninterest-bearing liabilities:
Demand deposit accounts		222,530								199,570								189,046
Other liabilities		12,469								12,628								10,926
Total noninterest-bearing liabilities		234,999								212,198								199,972
Shareholders' equity		98,133								88,720								83,887
Total liabilities and shareholders'equity	$	899,209							$	828,444							$	799,448
Net interest earnings				$	36,985							$	34,161							$	34,117
Net interest earnings as a percent of interest-earning assets							4.40	%							4.39	%							4.54	%
Net interest rate spread							4.23	%							4.21	%							4.36	%
Average interest-bearing liabilities to average earning assets							67.30	%							67.74	%							68.56	%

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.

60

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME & EXPENSE

Table II

(dollars in thousands)	2016									2015
	Increase (Decrease) From Previous Year Due to									Increase (Decrease) From Previous Year Due to
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
Interest income
Interest-bearing balances with banks	$	3		$	186		$	189		$	42		$	7		$	49
Securities:
Taxable		181			(60	)		121			49			64			113
Tax exempt		(97	)		(24	)		(121	)		(36	)		(7	)		(43	)
Loans		3,118			(300	)		2,818			479			(590	)		(111	)
Total interest income		3,205			(198	)		3,007			534			(526	)		8
Interest expense
NOW accounts		60			(139	)		(79	)		48			(44	)		4
Savings and money market		33			----			33			(2	)		2			----
Time deposits		(11	)		20			9			(10	)		(39	)		(49	)
Other borrowed money		140			46			186			34			(30	)		4
Subordinated debentures		----			34			34			----			5			5
Total interest expense		222			(39	)		183			70			(106	)		(36	)
Net interest earnings	$	2,983		$	(159	)	$	2,824		$	464		$	(420	)	$	44

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.

Average loan growth was impacted by the acquisition of Milton Bank on August 5, 2016, which contributed to increases in commercial, residential real estate and consumer loan balances.  Further impacting average loan growth was the addition of the Company's loan production office in Athens, Ohio in the fourth quarter of 2015.  Loan demand in the Athens County market responded very well, producing $19,282 in outstanding loan balances and year-to-date average loan increase of $12,354 at December 31, 2016, as compared to the same period in 2015.  The acquisition of Milton Bank loans combined with the success in Athens County has contributed to a larger composition of average loans to average earning assets at year-end 2016 of 76.7%, as compared to 75.8% at year-end 2015.  During 2015, average earning assets increased $26,703, or 3.6%, as compared to an increase of $20,881, or 2.9%, in 2014.  Average loan balances continue to represent the largest composition of earning assets.   During 2015, average loans increased $8,263, or 1.4%, while increasing $26,376, or 4.8%, during 2014.  Average loan growth was positively impacted by consumer auto and capital lines during the second half of 2014 and all of 2015.  Loan balances also grew from commercial and municipal loan originations during all of 2014.  However, during 2015, the Company began experiencing the negative effects from larger commercial loan payoffs and competitive pressures that limited new commercial loan production within the Company's market areas. This deceleration of commercial loan balances during 2015 contributed to a smaller composition of average loans to average earning assets at year-end 2015 of 75.8%, as compared to 77.4% at year-end 2014.

61

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

While the Company's average investment securities, both taxable and tax exempt, have increased during 2016 and 2015, their percentage of earning assets has declined, averaging 14.5% for 2016, compared to 14.8% for 2015 and 15.1% for 2014.  The Company has focused on growing earning assets primarily through loans, which has contributed to a lower asset composition of securities.  Management continues to focus on generating loan growth as this portion of earning assets provides the greatest return to the Company.  Management maintains securities at a dollar level adequate enough to provide ample liquidity and cover pledging requirements.

The Company's average assets during 2016 and 2015 were also affected by changes in its average interest-bearing balances with banks.  At year-end 2016, average interest-bearing balances with banks increased $1,103, or 1.5%, as compared to an increase of $16,855, or 29.8%, in 2015. These balances are driven primarily by the Company's use of its Federal Reserve Bank clearing account.  The trend of larger average interest-bearing balances with banks has been primarily due to seasonal excess funds that result from the clearing of tax refund checks and deposits.  These ERC/ERD deposits occur primarily during the first half of the year and are the result of the Company's relationship with a third-party tax refund product 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 causes 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 during the second half of the year.  Although the Company experienced loan growth in 2016, much of this was from the acquisition of Milton Bank loans.  However, the Company also experienced organic loan growth, impacted by the Athens, Ohio market.  As loan volume was increasing during 2016, the Company used more of its short-term Federal Reserve funds to satisfy loan demand.  This led to lower average interest-bearing balances with banks, finishing at 8.9% of average earning assets in 2016, as compared to 9.4% and 7.5% in 2015 and 2014, respectively.

Average interest-bearing liabilities increased 7.3% between 2015 and 2016, while increasing 2.3% between 2014 and 2015.  The growth in interest-bearing deposits during 2016 was in large part due to the Milton Bank merger, which resulted in the acquisition of $119,669 in deposits.  Interest-bearing liabilities continue to be comprised largely of time deposits, which represented 29.6%, 32.0% and 33.0% of total interest-bearing liabilities at year-end 2016, 2015 and 2014, respectively. As interest rates on time deposits have continued to readjust to current market rates in 2016, competitive pricing pressures have grown, contributing to a continued maturity runoff of time deposits during 2016 and 2015.  In addition, the Company's other borrowings and subordinated debentures continue to represent the smallest composition of average interest-bearing liabilities, finishing at 7.0%, 6.2% and 6.0% at year-end 2016, 2015 and 2014, respectively.  During 2016, the Company utilized a portion of its FHLB borrowing capacity to fund specific fixed-rate loans with similar maturity terms which led to the composition shift increase.

The Company's core deposit segment of interest-bearing liabilities, which include NOW and savings and money market accounts, together represented 63.4% of average interest-bearing liabilities in 2016, compared to 61.7% in 2015 and 60.9% in 2014.  As certificates of deposit ("CD") market rates continue to adjust downward, and the spread between a short-term CD rate and a statement savings rate is minimal, many customers choose to invest balances into a more liquid product.

The overall composition shift to higher demand, NOW, savings and money market balances combined with a lower composition of time deposits from 2014 to 2016 has served as a cost effective contribution to the net interest margin.  The average cost of the "growing" interest-bearing NOW, savings and money market account core segment was 0.24%, 0.27% and 0.28% during the years ended 2016, 2015 and 2014, respectively.  The higher average cost of the time deposit, other borrowed money and subordinated debenture segments was 1.05%, 0.96% and 0.99% during the years ended 2016, 2015 and 2014, respectively.

62

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The net interest margin increased 1 basis point to 4.40% in 2016 from 4.39% in 2015.  Conversely, the net interest margin decreased 15 basis points to 4.39% in 2015 from 4.54% in 2014.  These changes to the net interest margin are largely impacted by the net interest rate spread.  During 2016, the net interest rate spread increased 2 basis points to 4.23%, resulting from the increase in average yield on interest-earning assets of 1 basis point from 4.75% to 4.76%, combined with 1 basis point decrease in average cost of interest-bearing liabilities from 0.54% to 0.53%.  Partially offsetting the net interest rate spread increase in 2016 was a 1 basis point decrease in contributions from interest-free funds (i.e., demand deposits, shareholders' equity), which lowered from 0.18% in 2015 to 0.17% in 2016.  Conversely, during 2015, the net interest rate spread decreased 15 basis points to 4.21%, resulting from the decrease in average yield on interest-earning assets of 17 basis points from 4.92% to 4.75%, which exceeded the decrease in average cost of interest-bearing liabilities of 2 basis points from 0.56% to 0.54%.

During 2016, total interest income on an FTE basis increased $3,007, or 8.1%, as compared to an increase of $8 during 2015.  The significant interest income improvement from 2015 to 2016 came primarily from average earning asset growth as result of the Milton Bank acquisition.  The acquisition contributed to a 9.3% increase in average loan balances from 2015 to 2016, which was also impacted by average loan growth from the Company's new Athens, Ohio office.  Total interest income growth also came from the Company's Federal Reserve clearing account balances. In December 2015, the Federal Reserve increased short-term rates by 25 basis points. The timing of this rate adjustment benefited the Company, as it entered into the first quarter experiencing significant levels of excess funds from the large volume of ERC/ERD transactions that were maintained within the Federal Reserve clearing account.  These positive contributions to interest income were partially offset by lower loan yields, which decreased 5 basis points from 2015 to 2016 in the sustained low interest rate environment.  The nominal interest income improvement from 2014 to 2015 came primarily from average earning asset growth and improved asset yields associated with taxable securities.  The Company experienced a 1.4% increase in average loan balances from 2014 to 2015, primarily from its residential real estate and consumer loan portfolios.  These positive contributions to interest income completely offset the negative effects of lower loan yields, which decreased 10 basis points from 2014 to 2015.

During 2016, total interest income on average earning assets increased $3,014, or 8.3%, as compared to 2015.  Conversely, total interest income decreased $21, or .06%, during 2015, as compared to 2014.  The changes in interest income from 2015 to 2016 were impacted most by the commercial loan portfolio.  During the third quarter of 2016, the Bank acquired $112,479 in loans as part of the Milton Bank merger, of which 36% were comprised of commercial loans.  Furthermore, the Company experienced growing commercial loan demand within its new loan production office that opened in Athens, Ohio during the fourth quarter of 2016.  Management was pleased with the loan volume production in response to the Company's new market presence in Athens county.  These positive contributions helped to generate a 9.8% increase in average commercial loan balances during 2016, and, as a result, increased commercial interest and fee revenue by $1,272, or 10.0%, during the year ended 2016, as compared to 2015.  The positive results of commercial loan revenue in 2016 is compared to a decrease of $110, or 0.9%, in commercial loan revenue during the year ended 2015, as compared to 2014.  This was largely due to large payoffs of various commercial loans during 2015, along with increasing competition for loan opportunities within the Company's market areas during this time.  The declining loan balances and increasing competitive pressures caused the commercial loan portfolio to stabilize by year-end 2015.

63

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company's interest and fees from its residential real estate loan portfolio increased $685, or 5.9%, during the year ended 2016 compared to 2015.  Conversely, residential real estate interest and fee income decreased $143, or 1.2%, during 2015, as compared to 2014.  The acquired loan balances of Milton Bank consisted of 42% in residential real estate loan balances, which contributed most to the increase in real estate loan revenue during 2016.  When excluding the real estate revenue generated by the Milton Bank branches during 2016, the Company's real estate revenue represents a decrease of $204, or 1.8%, during the year ended 2016.  This is then comparable to the 1.2% decrease experienced during the year ended 2015. A contributing factor to the decline in real estate revenue, excluding Milton Bank, is a composition shift from higher-yielding, long-term, fixed-rate loan balances to lower-yielding, adjustable-rate mortgage originations.  This shift to more lower-yielding loans has placed additional pressure on asset yields.  Furthermore, the Company continues to sell a portion of its long-term, fixed-rate real estate loans to the Federal Home Loan Mortgage Corporation, while retaining the servicing rights for those mortgages.  While this strategy has generated loan sale and servicing fee revenue within noninterest income, it has also contributed to lower interest and fee revenues during 2015 and 2016.

During the year ended 2016, consumer loan interest and fees increased $828, or 9.1%, as compared to 2015, and increased $99, or 1.1%, during the year ended 2015, as compared to 2014.  The improvement in consumer loan revenue during 2016 was impacted most by the acquired loans of Milton Bank, which consisted of 22% in consumer loan balances. Further impacting consumer loan revenue was the average balance growth associated with increased auto loan financings and unsecured consumer loan balances.  However, consumer loan interest during 2016 and 2015 continued to be negatively impacted by lower asset yields reflective of the sustained low rate environment.

The Company's interest income from taxable investment securities improved during both 2016 and 2015, increasing $121, or 5.6%, in 2015 and $113, or 5.6%, in 2015.  Average balance growth during 2016 and 2015 has contributed to higher interest income, particularly in 2016 with the Company acquiring $5,868 in securities as part of the Milton Bank merger.  The improvement came primarily from increased purchases of Agency mortgage-backed securities during 2016.  The positive effects from average balance growth in taxable investment securities were partially offset by a 6 basis point decrease in yield from 2015 to 2016, primarily due to the investment of maturities at market rates lower than the average portfolio yield.  Furthermore, the portfolio of taxable securities acquired from Milton Bank carried a lower average yield than the Company's overall taxable securities yield prior to the merger.  From 2014 to 2015, the yield on securities increased 7 basis points, which was related to the reduction in premium amortization expense on Agency mortgage-backed securities.  Based on a reduction in mortgage refinancing in the general market, the Company experienced a decrease in cash flow on Agency mortgage-backed securities, which resulted in less premium amortization expense and a higher net portfolio yield.

Total interest expense incurred on the Company's interest-bearing liabilities increased $183, or 6.4%, during 2016, while decreasing $36, or 1.3%, during 2015.  The increase in 2016 was primarily from the Milton Bank acquired deposits that generated more interest expense.  However, the Company's interest expense continues to be minimized by a sustained low-rate environment that has impacted the repricings of various Bank deposit products. In addition, over 60% of the acquired Milton Bank deposits consisted of core deposit funding sources.  As a result, the Company experienced a deposit composition shift from a higher level of average time deposits to an increasing level of average core deposit balances in demand, NOW, savings and money market balances.  The Company's average time deposit balances with a weighted average cost of 0.8% decreased $1,385 during 2016 and $1,227 during 2015.  This is compared to an average balance increase of $33,261 and $11,511 in lower costing, interest-bearing core deposit balances with a weighted average cost of less than 0.3% during 2016 and 2015, respectively. As a result of decreases in the average market interest rates mentioned above and the deposit composition shift to lower-costing, interest-bearing deposit balances, the Company's total weighted average funding costs have decreased to 0.53% at year-end 2016, as compared to 0.54% at year-end 2015 and 0.56% at year-end 2014.

64

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Partially offsetting the positive effects of core deposit funding mentioned above was the impact from other borrowed money and subordinated debentures, which collectively increased interest expense by $220 during the year ended 2016, and $9 during the year ended 2015.  The increase was primarily from the average growth in FHLB borrowings which were used to fund the purchases of specific earning assets during 2016.

While the Company experienced margin improvement during 2016 primarily due to improved average loan balances and a higher deposit mix of lower-costing core deposits, the margin decreased 15 basis points during 2015.  Margin compression during 2015 was attributed to the limited opportunities at which interest rates on core deposits could adjust downward.  With interest rates so low, the Company's core deposit accounts are perceived to be at, or near, their interest rate floors.  In addition, the Company's CDs that had higher interest rates have either repriced to current market rates or have matured and left the portfolio.  The Company will continue to focus on growing the average loan portfolio and re-deploying the excess liquidity retained within the Federal Reserve account into higher yielding assets as opportunities arise. Further decreases in interest rates by the Federal Reserve would have a negative effect on the Company's net interest income.  The Company will face pressure on its net interest income and margin improvement if loan balances do not continue 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.  Provision for loan loss 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 provision expense during the years ended 2016, 2015 and 2014 totaled $2,826, $1,090 and $2,787, respectively.  The Company experienced a $2,310 increase in provision expense during 2016, while provision expense decreased $1,697 from 2014 to 2015.  The effects of both variances were largely related to changes in the specific and general allocations within the allowance for loan losses.  Provision expense from 2015 to 2016 was largely impacted by higher specific allocations from year-end 2015.  Specific allocations of the allowance for loan losses identify loan impairment by measuring fair value of the underlying collateral and the present value of estimated future cash flows.  When re-evaluating the impaired loan balances to their corresponding collateral values at December 31, 2016, a specific allocation of $2,535 was needed to fund the allowance for loan losses of the commercial real estate loan segment, up from the $311 specific allocation at December 31, 2015.  This higher reserve allocation was impacted mostly by two impaired commercial real estate loan relationships that required specific reserves of $2,435 at year-end 2016, and required a corresponding increase to provision for loan losses expense.  This was partially offset by a decrease in the specific allocations within the commercial and industrial loan segment, which lowered from $1,850 at December 31, 2015 to $241 at December 31, 2016.  This was due to a reduction in specific reserves that were previously related to one commercial and industrial loan relationship.  Prior to 2016, specific reserves of $1,155 were necessary as a result of collateral impairment.  During the second quarter of 2016, a re-evaluation of this borrower's financial performance identified significant improvement, which resulted in a credit quality upgrade to the borrower relationship and no identified collateral impairment at December 31, 2016.  Provision expense from 2014 to 2015 was largely impacted by higher specific allocations during 2014.  The Company identified the asset impairment of one commercial real estate loan relationship that required specific reserves of $1,340 to be recorded in the fourth quarter of 2014. These impairment charges were based on collateral values and required a corresponding increase to provision for loan losses expense.  Consequently, during the second quarter of 2015, this specific allocation was charged off.  Since this specific allocation had already been provided for during the fourth quarter of 2014, the charge-off did not have an impact to provision expense in 2015.  This contributed to a decrease in the Company's specific allocations from $3,412 at December 31, 2014 to $2,164 at December 31, 2015.

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Provision expense during 2016 was also impacted by general allocations.  The Company's general allocation evaluates several factors that include: average historical loan loss trends, economic risk, asset quality, and changes in classified and criticized assets. At December 31, 2016, general allocations totaled $4,718 as compared to $4,484 at December 31, 2015, mostly from an increase in the loan loss history of the consumer loan segment.  During 2015, the Company experienced improvements (declines) in its average loan loss history, as well as declines in its classified asset portfolio, resulting in lower provision expense and general allocations in 2015, as compared to 2014.

During 2016, the Company's net charge-offs totaled $1,775, as compared to $2,776 in net charge-offs recognized during 2015.  The decrease was largely due to the charge-off of a specific allocation of one impaired commercial real estate loan during 2015.  The charge-off did not have an impact to provision expense since the allocation was already provided for during 2014.  The remaining charge-off increases came primarily from consumer loans.  The effect of lower charge-offs during 2016 had a direct effect in partially offsetting the provision expense increases impacted by higher classified assets and collateral value impairments. During 2015, the Company's net charge-offs totaled $2,776, as compared to $608 in net charge-offs recognized during 2014.  The increase was largely due to the charge-off of a specific allocation of the impaired commercial real estate loan previously mentioned.  The remaining charge-off increases came primarily from residential real estate and other commercial real estate loans.  The effect of higher charge-offs during 2015 had a direct effect in partially offsetting the provision expense decreases impacted by lower classified assets and less collateral value impairments.  Management believes that the allowance for loan losses was adequate at December 31, 2016 to absorb probable losses in the portfolio.  The allowance for loan losses was 1.05% of total loans at December 31, 2016, compared to 1.13% at December 31, 2015 and 1.40% at December 31, 2014.  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

During 2016, total noninterest income decreased $358, or 4.2%, as compared to 2015.  The decline in noninterest revenue was primarily from lower gains on the sale of OREO properties, which finished with a net loss of $467 at year-end 2016, as compared to a net gain of $99 at year-end 2015.  The net OREO loss in 2016 was mostly from the lower appraised value of one land development property during the fourth quarter of 2016.  A re-evaluation of the property resulted in a $393 impairment charge that was recorded as a write-down to the OREO property's carrying value.

 The Company's noninterest income was also negatively impacted by a reduction in seasonal tax refund processing revenue classified as ERC/ERD fees.  During the year ended 2016, the Company's ERC/ERD fees decreased by $323, or 13.6%, as compared to the same period in 2015, largely due to reduced transaction fees associated with each refund facilitated.  On October 21, 2014, the Bank entered into a new agreement with the third-party tax refund product provider. Due to competitive pressures, the new agreement provided for a different fee structure, including different fees depending upon the tax refund product selected, and fees that were lower for each refund facilitated, with a reduction in per transaction fees in future years.   As a result, even though the Company experienced an increase in the number of ERC/ERD transactions that were facilitated, the lower fee structure caused tax processing revenues to be lower than the year before.  As a result of ERC/ERD fee activity being mostly seasonal, the majority of income was recorded during the first half of 2016.  This revenue source accounted for 24.9% of total noninterest income in 2016.

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Also decreasing in 2016 were gains on the sale of securities.  As earning asset yields during 2015 were declining, the Company took opportunities to sell some of its lower-yielding investment securities.  During the second and third quarters of 2015, the Company recorded gross gains of $163 on the sale of $10,387 in Agency mortgage-backed securities, while reinvesting the proceeds into higher-yielding securities. The shift of balances to higher-yielding assets had a positive effect on the margin in 2015.  The Company did not sell any of its securities during 2016.

Partially offsetting the declines in noninterest income were noninterest earnings from the Milton Bank acquisition. In total, the Company benefited from $293 in noninterest income generated by the Milton Bank acquisition during the second half of 2016, consisting mostly of $214 in service charges on deposit accounts.  As a result, the Company's service charges on deposit accounts increased $404, or 25.7%, during 2016.  Further impacting service charge income was a volume increase in overdraft items during 2016.

Noninterest income earnings also came from debit and credit interchange income, which increased $195, or 8.1%, during the year ended 2016 as compared to 2015.  This increase included $75 in debit card interchange income from Milton Bank branches.  The volume of transactions utilizing the Company's credit card and Jeanie® Plus debit card continue to increase from a year ago.  The Company continues to offer incentive-based credit and debit cards that permit their users to redeem accumulated points for merchandise, as well as cash incentives paid, particularly to business users based on transaction criteria. 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.

The Company's remaining noninterest income categories were up $95, or 4.8%, during the year ended 2016 as compared to 2015.  This increase was in large part due to earnings from tax-free bank owned life insurance ("BOLI") investments.

During 2015, total noninterest income decreased $1,196, or 12.2%, as compared to 2014.  The decline in noninterest revenue was primarily from the sale of the Company's 9% ownership interest in ProAlliance during the third quarter of 2014. The Company recorded the first installment of $135 during the first quarter of 2014 and the second installment of $675 in August 2014. The proceeds from the sale of $810 was reported as a gain on sale. The total after-tax impact to the Company's 2014 net income from the gain was $535.

The Company's noninterest income was also negatively impacted by a reduction in seasonal tax refund processing revenue classified as ERC/ERD fees.  During the year ended 2015, the Company's ERC/ERD fees decreased by $762, or 24.3%, as compared to the same period in 2014, largely due to reduced transaction fees associated with each refund facilitated.

Partially offsetting the declines in noninterest income was growth from the Company's debit and credit interchange income, which increased $225, or 10.4%, during the year ended 2015 as compared to 2014.  The increase was related to the larger volume of transactions utilizing the Company's credit card and Jeanie® Plus debit card from 2014.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As earning asset yields during 2015 continued to decline, the Company took opportunities to sell some of its lower-yielding investment securities.  During the second and third quarters of 2015, the Company recorded gross gains of $163 on the sale of $10,387 in Agency mortgage-backed securities, while reinvesting the proceeds into higher-yielding securities. The shift of balances to higher-yielding assets had a positive effect on the margin.

The Company's remaining noninterest income categories were down $12, or 0.3%, during the year ended 2015 as compared to 2014.  This decline was in large part due to service charges on deposit accounts decreasing $54, or 3.3%, impacted by fewer overdraft items from the prior year.

NONINTEREST EXPENSE

Management continues to work diligently to minimize the growth in noninterest expense.  For 2016, total noninterest expense increased $3,280, or 11.1%.  The increase was impacted by the acquisition of Milton Bank, which contributed to general increases in most noninterest expense categories related to having a larger organization after the merger.  Milton Bank's noninterest expense was $1,174 during 2016, coming mostly from salaries and employee benefits, as well as building and equipment costs.  Excluding the impact from Milton Bank, the Company's total noninterest expense would have increased $2,106, or 7.1%, during 2016.

The Company's largest noninterest expense item, salaries and employee benefits, increased $1,376, or 7.9%, during 2016 as compared to 2015.  The increase was largely from the personnel costs associated with Milton Bank, which contributed $754 to this line item during 2016.  The remaining increase of $622 to salaries and employee benefit expense was largely due to annual merit increases and higher health insurance expense.  During 2016, the Company experienced a higher full-time equivalent employee base, increasing from 248 employees at year-end 2015 to 297 employees at year-end 2016, in large part due to the addition of Milton Bank employees.

Noninterest expense during 2016 was also impacted by $930 in one-time merger related expenses related to the acquisition of Milton Bancorp and Milton Bank.  The merger was closed on August 5, 2016.  Merger expenses consisted largely of services to combine the operating systems of both companies, as well as investment banking, accounting, and legal services.  The Company has incurred the majority of its merger related expenses during 2016 and anticipates any remaining merger costs to be minimal.

Noninterest expense increases during 2016 were also impacted by occupancy and furniture/equipment costs, which collectively increased $368, or 15.3%, as compared to 2015.  This increase was impacted mostly by the fixed assets acquired as part of the Milton Bank merger during the third quarter of 2016.  As part of the merger, the Company acquired five full-service branch facilities, one administrative building, and one building that is leased out to a third party.  In total, Milton Bank's premises and equipment expenses totaled $315, consisting mostly of depreciation, repair and maintenance, and utility costs.

Data processing expenses during 2016 increased $196, or 15.6%, as compared to 2015, in relation to the growth in transaction volume with the Company's debit and credit cards, which was also affected by the addition of Milton Bank customers. Higher data processing charges were also impacted by the Company's Big Rewards customer incentive platform.

The Company also recognized a $193, or 17.2%, increase in software expense during 2016. Software costs were partly affected by the addition of Milton Bank and their transition to new system resources.  The Company continues to utilize the software applications available in the banking industry to maximize computer network efficiencies and enhance customer convenience.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The remaining noninterest expense categories increased $217, or 3.0%, during the year-ended 2016, as compared to 2015.  The increases were primarily due to higher marketing, consulting and customer incentive expenses, partially offset by lower FDIC assessment expense.

For 2015, total noninterest expense increased $326, or 1.1%.  Contributing most to the increase in net overhead expense for 2015 were professional fees, foreclosure costs and data processing expenses.  Increases in total noninterest expense were partially offset by decreases in salaries and employee benefits.

The Company's largest noninterest expense item, salaries and employee benefits, decreased $380, or 2.1%, during 2015 as compared to 2014.  The decrease was largely due to lower employee benefit costs associated with various nonqualified defined benefit plans.  During the fourth quarter of 2014, the Company incorporated recently issued data in establishing the liability associated with its nonqualified defined benefit plans.  The data was in relation to new mortality tables issued by the Society of Actuaries ("SOA") in October of 2014.  The SOA-revised mortality tables reflected longer life expectancies, along with an expectation that the trend will continue. In following U.S. generally accepted accounting principles, the Company used the revised mortality tables to update its own assumption data that impact its nonqualified defined benefit plans.  Furthermore, in relation to a decrease in long-term interest rates, management reduced the discount rate assumption for the nonqualified benefit plans.  The combination of these two adjustments being recorded in 2014 and not being repeated in 2015 contributed to a $730 decrease in nonqualified benefit employee benefit expense from the prior year.  Partially offsetting the decreases in employee plan benefit expense was a $259, or 2.0%, increase in salary and health insurance expense. This was primarily due to annual merit increases and higher insurance premiums.  During 2015, the Company experienced a lower full-time equivalent employee base, decreasing from 264 employees at year-end 2014 to 248 employees at year-end 2015.

Noninterest expense during 2015 was also impacted by a decrease of $144, or 14.3%, in marketing costs. The decrease was largely a result of the significant donations made in 2014 as part of the Company's "Community First" initiative that emphasizes giving back to the communities in which it does business.

Noninterest expense during 2015 reflected increases in various overhead areas, including furniture/equipment costs, which increased $44, or 5.8%, as compared to 2014.  This increase was impacted mostly by higher depreciation costs on furniture and equipment purchases related to the Company's new Barboursville, WV branch location that commenced operations in the first quarter of 2015.

During 2015, the Company experienced a $224, or 19.5%, increase in various professional service fees, which included accounting, audit and legal costs.  A portion of this increase was impacted by the anticipated merger between the Company and Milton Bancorp.

Also contributing to higher noninterest expense during 2015 were FDIC assessments, which increased $100, or 20.7%, as compared to 2014. This increase was related to an increase in the average quarterly assessment rates during 2015 versus 2014.

Data processing expenses during 2015 increased $132, or 11.7%, as compared to 2014, in relation to the continued growth in transaction volume with the Company's debit and credit cards. Higher data processing charges were also impacted by the Company's Big Rewards customer incentive platform.

The Company also recognized a $109, or 10.8%, increase in software expense during 2015. The Company continues to utilize the software resources available in the banking industry to maximize computer network efficiencies and enhance customer convenience.

Further contributing to higher noninterest expense during 2015 were foreclosed asset costs, which increased $162, or 87.6%, as compared to 2014. This increase was related to various expenses incurred in 2015 in association with the liquidations of various commercial real estate properties in process of foreclosure. Foreclosure expenses include the costs in maintaining the properties, which consist of taxes, management fees and general maintenance.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In 2015, the Company's other noninterest expenses increased $65, or 1.6%, as compared to 2014.  The increase was largely from customer incentive expenses, increasing $125, or 16.1%, over 2014.  This increasing trend of higher customer incentives has been part of management's emphasis on further building and maintaining core deposit relationships while increasing interchange 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.  During 2016, the Company experienced a nominal increase to its net interest margin as a result of higher earning asset yields complemented by higher average earning asset growth and lower funding costs. Noninterest revenues also decreased by 4.2%, while overhead expenses were up 11.1% from the prior year. As a result, net revenue levels during 2016 were outpaced by higher overhead expense, causing the year-to-date efficiency ratio to increase (regress) to 72.8% at December 31, 2016, as compared to 69.3% at December 31, 2015.  During 2015, the Company experienced net interest margin compression as a result of lower earning asset yields completely offsetting higher average earning asset growth and lower funding costs. Noninterest revenues also decreased by 12.2%, while overhead expenses were up 1.1% from the prior year. As a result, net revenue levels during 2015 were outpaced by higher overhead expense, causing the year-to-date efficiency ratio to increase (regress) to 69.3% at December 31, 2015, as compared to 66.7% at December 31, 2014.

FINANCIAL CONDITION:

CASH AND CASH EQUIVALENTS

The Company's cash and cash equivalents consist of cash, as well as interest- and non-interest bearing balances due from banks.  The amounts of cash and cash equivalents fluctuate on a daily basis due to customer activity and liquidity needs.  At December 31, 2016, cash and cash equivalents had decreased $5,364, or 11.8%, to $40,166 as compared to $45,530 at December 31, 2015.  The decrease in cash and cash equivalents was largely affected by an $8,401, or 23.3%, decrease within the Company's interest-bearing deposits from year-end 2015, mostly from its Federal Reserve Bank clearing account. The Company continues to utilize its interest-bearing Federal Reserve Bank clearing account to manage seasonal tax refund deposits, as well as to fund earning asset growth and maturities of retail CD's. The decrease in funds since year-end 2015 can be attributed to a funding increase of organic loan growth, particularly during the fourth quarter of 2016. The interest rate paid on both the required and excess reserve balances is based on the targeted federal funds rate established by the Federal Open Market Committee, which currently is 0.75%.  In December 2015 and 2016, short-term interest rates were increased by 25 basis points, which had a corresponding effect to the interest revenue growth experienced during the twelve months ended December 31, 2016 on Federal Reserve Bank clearing account balances.  This interest rate is higher than what the Company would have received from its investments in federal funds sold, currently in range of less than 0.75%.  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 invest available funds into longer-term, higher-yielding assets, primarily loans, 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.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTIFICATES OF DEPOSIT

At December 31, 2016, the Company had $1,670 in certificates of deposit owned by the Captive, relatively unchanged from year-end 2015.  The deposits on hand at December 31, 2016 consist of six certificates with maturity terms ranging from less than 1 year up to 3 years.

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.  During 2016, the balance of total securities increased $3,601, or 3.2%, compared to year-end 2015. The acquired investment securities from Milton Bank totaled $5,868, consisting mostly of U.S. Government sponsored entity securities of $2,628 and Agency mortgage-backed securities of $2,845.  The Company's investment securities portfolio is made up mostly of Agency mortgage-backed securities, representing 74.6% of total investments at December 31, 2016. During the year ended 2016, the Company invested $20,938 in new Agency mortgage-backed securities, while receiving principal repayments of $17,381. The monthly repayment of principal has been the primary advantage of Agency mortgage-backed securities as compared to other types of investment securities, which deliver proceeds upon maturity or call date.

Management has not had to sell a debt security in order to maintain sufficient liquidity, as maturing securities have historically accomplished this.  However, as overall average earning asset yields continued to decline from 2014, management took the opportunity to sell some of its lower-yielding, Agency mortgage-backed securities.  During the second and third quarters of 2015, the Company sold $10,387 in Agency mortgage-backed securities that were collectively yielding 1.38% at a gain of $163.  The Company used the proceeds from the sale to help fund new Agency mortgage-backed security purchases totaling $25,150 at an interest yield of 2.0%, which had a positive impact on the net interest margin.  The Company did not sell any of its securities during 2016.

Since 2008, the reinvestment rates on debt securities have shown limited returns due to the sustained low rate environment.  The weighted average FTE yield on debt securities at year-end 2016 was 2.29%, as compared to 2.43% at year-end 2015 and 2.38% at year-end 2014.  As a result of minimal returns on debt securities, 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.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SECURITIES

Table III

	MATURING
As of December 31, 2016	Within One Year						After One but Within Five Years						After Five but Within Ten Years						After Ten Years
(dollars in thousands)	Amount			Yield			Amount			Yield			Amount			Yield			Amount			Yield
U.S. Government   sponsored entity   securities		$	3,999		0.64	%		$	6,545		1.02	%		$	----		----			$	----		----
Obligations of states and   political subdivisions			275		5.10	%			7,342		5.20	%			9,029		5.46	%			2,521		5.46	%
Agency mortgage-backed   securities, residential			139		4.02	%			56,080		2.73	%			28,962		2.16	%			769		2.54	%
Total securities		$	4,413		1.02	%		$	69,967		2.83	%		$	37,991		2.94	%		$	3,290		4.78	%

     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 fair values, which include the market value adjustments for available for sale securities.

LOANS

In 2016, the Company's primary category of earning assets and most significant source of interest income, total loans, increased $149,149, or 25.5%, to finish at $734,901.  As previously mentioned, the significant increase in loan balances came largely from the loans acquired as part of the Milton Bank merger on August 5, 2016.  The impact of higher loan balances came mostly from the commercial loan portfolio, which includes both commercial real estate and commercial and industrial loans.  The increase came primarily from the commercial real estate segment.  Management continues to place emphasis on its commercial lending, which generally yields a higher return on investment as compared to other types of loans.

Commercial real estate, the Company's largest segment of commercial loans, increased $44,695, or 26.4%, from year-end 2015.  At December 31, 2016, the outstanding balance of commercial real estate loans acquired from Milton Bank totaled $22,989, which contributed to most of the 2016 growth.  The Company's commercial real estate loans were also impacted by its Athens, Ohio market.  In December 2015, the Company opened a loan production office in Athens, Ohio to expand its market presence.  Loan demand was very responsive within the Athens location, producing $19,282 in loans during the year ended 2016.  As a result, commercial real estate loan balances from the Athens loan production office have increased $19,123 since year-end 2015.  Commercial real estate 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 experienced growth in all three segments, led by construction loans increasing $22,018, or 92.3%, during 2016.  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.  Nonowner-occupied loans, which increased $18,530, or 25.7%, during 2016, 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.  The Company's owner-occupied loans also increased $4,147, or 5.6%, during 2016.  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.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 At December 31, 2016, the Company's commercial and industrial loan portfolio was also impacted by the Milton Bank acquisition, increasing from year-end 2015 by $18,653, or 22.8%.  The outstanding balance of commercial and industrial loans acquired from Milton Bank totaled $12,526 at December 31, 2016, which contributed to most of the 2016 growth.  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.

Generating residential real estate loans remains a significant focus of the Company's lending efforts. Residential real estate loan balances comprise the largest segment of the Company's total 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 2016, total residential real estate loan balances increased $62,147, or 27.8%, from year-end 2015.  At December 31, 2016, the outstanding balance of residential real estate loans acquired from Milton Bank totaled $44,900, which contributed to most of the year-to-date growth.  The organic loan production within the real estate portfolio consists of increasing short-term adjustable-rate mortgages partially offset by decreasing long-term fixed-rate mortgages. As part of management's interest rate risk strategy, the Company continues to sell most of its long-term fixed-rate residential mortgages to the Federal Home Loan Mortgage Corporation, while maintaining the servicing rights for those mortgages.  A customer that does not qualify for a long-term, secondary market loan may choose from one of the Company's other adjustable-rate mortgage products, which contributed to higher balances of adjustable-rate mortgages from year-end 2015.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Total loans also received positive contributions from the Company's consumer loan portfolio, which increased $23,654, or 21.4%, from year-end 2015.  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. At December 31, 2016, the outstanding balance of consumer loans acquired from Milton Bank totaled $19,193, which contributed to most of the 2016 growth.  The consumer loan portfolio during 2016 benefited mostly from automobile loans, which increased $15,206, or 34.1%, from year-end 2015.  The automobile lending component comprises the largest portion of the Company's consumer loan portfolio, representing 44.5% of total consumer loans at December 31, 2016. In recent years, the Company's interest rates offered on indirect automobile opportunities had 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.  However, in 2015 and 2016, the Company continued to target more auto dealers within its market areas, which increased loan origination opportunities.  In addition, the Company's interest rate offerings on auto loans have become more competitive with local banks, which has contributed to consumer loan growth. With auto loan volume increasing, the Company will continue to maintain a strict loan underwriting process on its consumer auto loan offerings to limit future loss exposure.

The Company will continue to place more emphasis on loan portfolios (i.e. commercial and, to a smaller extent, residential real estate) with higher returns than auto loans.  Indirect automobile loans bear additional costs from dealers that partially offset interest revenue and lower the rate of return.

The Company will continue to follow its secondary market strategy until long-term interest rates increase back to a range that falls within an acceptable level of interest rate risk for the Company.  Furthermore, the Company will continue to monitor the pace of its loan volume and remain consistent in its approach to sound underwriting practices and a focus on asset quality.

ALLOWANCE FOR LOAN LOSSES

Tables IV and V provide information about 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.

Management continues to focus on improving asset quality and lowering credit risk while working to maintain its relationships with its borrowers.  During 2016, the Company's allowance for loan losses increased $1,051, or 15.8%, to finish at $7,699 as compared to $6,648 at year-end 2015.  The change in reserves was largely due to higher specific allocations from year-end 2015.  When re-evaluating the impaired loan balances to their corresponding collateral values at December 31, 2016, a specific allocation of $2,981 was needed to fund the allowance for loan losses, representing an increase of $817, or 37.8%, from year-end 2015.  This higher reserve allocation was impacted mostly by two impaired commercial real estate loan relationships that required specific reserves of $2,435 at December 31, 2016 based on updated collateral values.  The increase in reserves for those loans was partially offset by a reduction of $1,155 in specific reserves that were previously related to one commercial and industrial loan relationship, which received a credit quality upgrade and no identified collateral impairment at year-end 2016. Further offsetting the specific reserve increases was the charge-off of a commercial and industrial loan's specific allocation of $586 during the third quarter of 2016.

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MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On a quarterly basis, management also reviewed various factors that directly impact allocations of the allowance, which include: historical loan losses, loan delinquency levels, local economic conditions and unemployment rates, criticized/classified asset coverage levels and loan loss recoveries. As a result of these factors, the general allocation component of the allowance for loan losses increased $234, or 5.2%, from year-end 2015.  Contributing most to elevated general allocations were increases in classified assets from year-end 2015, consisting mostly of various commercial real estate and commercial and industrial loans being downgraded due to growing risks in their repayment ability. The negative effects of higher classified assets were partially offset by lower net charge-offs during the year ended December 31, 2016, which contributed to a lower average historical loan loss factor from year-end 2015.  The average historical loan loss factor is based on a 5-year loan loss history for commercial loans and 3 years for real estate and consumer loans.  The Company also experienced a decrease in its criticized assets from year-end 2015, which was largely due to the payoffs and risk rating upgrades associated with various commercial real estate and commercial and industrial loans.

Impaired loans at December 31, 2016 increased $5,481, or 31.8%, from year-end 2015, largely from the debt restructuring of one owner-occupied commercial real estate loan relationship during the second quarter of 2016.  The Company also experienced an increase in its troubled assets, with nonperforming loans to total loans finishing at 1.26% at December 31, 2016, up from 1.24% at year-end 2015. Nonperforming loans consist of nonaccruing loans and accruing loans past due 90 days or more.  Nonperforming loans finished at $9,288 at year-end 2016, compared to $7,275 at year-end 2015, due to various commercial real estate and residential real estate loans classified as nonaccrual.  While the nonperforming loan ratio increased from year-end 2015, the Company's nonperforming assets to total assets ratio decreased to 1.20% at year-end 2016, as compared to 1.21% at December 31, 2015.  These changes were largely due to the 19.9% increase in Company assets impacted by the merger with Milton Bancorp.  Nonperforming loans and nonperforming assets at December 31, 2016 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.

 At December 31, 2016, the ratio of the allowance for loan losses decreased to 1.05%, compared to 1.13% at December 31, 2015.  While the balance of the allowance for loan losses increased from year-end 2015 due to higher general and specific allocations, it was the 25.5% increase in total loans that caused the allowance to total loans ratio to decrease.  Loan increases were largely impacted by the Milton Bancorp merger.  Management believes that the allowance for loan losses was 

75

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

Table IV

(dollars in thousands)	Years Ended December 31
	2016			2015			2014			2013			2012
Commercial loans(1)	$	5,222		$	4,548		$	5,797		$	4,193		$	4,729
Percentage of loans to total loans		42.81	%		42.89	%		43.98	%		43.21	%		41.60	%
Residential real estate loans		939			1,087			1,426			1,169			1,329
Percentage of loans to total loans		38.92	%		38.22	%		37.60	%		38.73	%		40.49	%
Consumer loans(2)		1,538			1,013			1,111			793			847
Percentage of loans to total loans		18.27	%		18.89	%		18.42	%		18.06	%		17.91	%
Allowance for loan losses	$	7,699		$	6,648		$	8,334		$	6,155		$	6,905
		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%
Ratio of net charge-offs to average loans		.28	%		.47	%		.10	%		.22	%		.35	%

     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, PAST DUE AND RESTRUCTURED LOANS

Table V

(dollars in thousands)	At December 31
	2016			2015			2014			2013			2012
Impaired loans	$	22,709		$	17,228		$	20,169		$	14,696		$	17,401
Past due 90 days or more and still accruing		327			39			73			78			359
Nonaccrual		8,961			7,236			9,549			3,580			3,626
Accruing loans past due 90 days or more tototal loans		.04	%		.01	%		.01	%		.02	%		.06	%
Nonaccrual loans as a % of total loans		1.22	%		1.23	%		1.61	%		.63	%		.65	%
Impaired loans as a % of total loans		3.09	%		2.94	%		3.39	%		2.60	%		3.12	%
Allowance for loan losses as a % of totalloans		1.05	%		1.13	%		1.40	%		1.09	%		1.24	%

     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. 

76

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MATURITY AND REPRICING DATA OF LOANS

As of December 31, 2016

Table VI

(dollars in thousands)	MATURING / REPRICING
	Within One Year		After One but Within Five Years		After Five Years		Total
Residential real estate loans	$	83,354	$	99,544	$	103,124	$	286,022
Commercial loans(1)		139,088		126,979		48,529		314,596
Consumer loans(2)		42,670		66,866		24,747		134,283
Total loans	$	265,112	$	293,389	$	176,400	$	734,901

Loans maturing or repricing after one year with:
Variable interest rates	$	238,869
Fixed interest rates		230,920
Total	$	469,789

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

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

adequate at December 31, 2016 to absorb probable losses in the 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.  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.

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.  Deposits are attractive sources of funding because of their stability and generally low cost as compared with other funding sources.  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, 2016, 2015 and 2014.  Total deposits increased $129,706, or 19.6%, from the end of 2015 to $790,452 at December 31, 2016.  This deposit growth was largely impacted by the $119,669 in deposits acquired from Milton Bank. The acquired deposits consisted of $46,736 in time deposits, $45,688 in savings, NOW and money market accounts, and $27,245 in noninterest-bearing demand deposits.  At December 31, 2016, the growth in deposit balances came mostly from the Company's "core" deposits, which include noninterest-bearing deposits, as well as interest-bearing demand, savings, and money market deposits. The Company believes core deposits from local consumers who can maintain multiple accounts and services at the Bank are more stable and less sensitive to changing interest rates and other economic factors.  The Company also benefited from a lesser percentage of total deposits being held in brokered and retail time deposits at December 31, 2016 than at December 31, 2015.

77

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 Contributing most to the 2016 growth in deposits was the Company's interest-bearing NOW accounts, which increased $30,527, or 24.5%, during the twelve months ended 2016, as compared to year-end 2015.  This increase was largely driven by growth in public fund account balances. 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 account 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 relationships.

Further increases in the Company's deposit balances came from savings account balances, which increased $35,378, or 52.0%, from year-end 2015, coming primarily from the statement savings product.

Deposit balances were also impacted by the Company's interest-free funding source, noninterest-bearing demand deposits, which were up $33,077, or 18.7%, from year-end 2015.  Demand deposit growth came primarily from the Company's business checking accounts and other noninterest-bearing products, particularly those offering incentive rewards to customers.

The Company's time deposits increased $29,317, or 18.5%, from year-end 2015. Excluding deposits from the Milton Bank acquisition, the Company's time deposits would have decreased from year-end 2015.  This decreasing effect in time deposits from year-end 2015 fits within management's strategy of focusing on more "core" deposit balances and has caused time deposits to represent a smaller percentage of total deposits, finishing at 23.8% of total deposits at December 31, 2016 compared to 24.0% of total deposits at December 31, 2015. Historically, time deposits, particularly CD's, had been the most significant source of funding for the Company's earning assets.  Based on the minimal spread between a short-term CD rate and a statement savings rate, many customers choose to invest balances into a more liquid product, perhaps hoping for rising rates in the near future. Furthermore, the Company's preference of core deposit funding sources has created a lesser reliance on brokered and internet CD issuances in recent years.  As a result, wholesale CD balances decreased $7,503, or 23.8%, during 2016.  The Company will continue to evaluate its use of brokered CD's to manage the Company's liquidity position and interest rate risk associated with longer-term, fixed-rate asset loan demand.

78

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DEPOSITS

Table VII

	As of December 31
(dollars in thousands)	2016		2015		2014
Interest-bearing deposits:
NOW accounts	$	155,051	$	124,524	$	112,571
Money market		134,308		132,901		137,076
Savings accounts		103,453		68,075		61,712
IRA accounts		47,099		40,930		42,406
Certificates of deposit		140,965		117,817		131,271
		580,876		484,247		485,036
Noninterest-bearing deposits:
Demand deposits		209,576		176,499		161,794
Total deposits	$	790,452	$	660,746	$	646,830

 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 and retention within its core deposit relationships during 2016, reflecting the Company's efforts to reduce its reliance on higher cost funding and improving net interest income.

OTHER BORROWED FUNDS

 The Company also accesses other funding sources, including short-term and long-term borrowings, to fund potential asset growth and satisfy short-term liquidity needs. Other borrowed funds consist primarily of FHLB advances and promissory notes. During 2016, other borrowed funds were up $13,139, or 54.9%, from year-end 2015.  The increase was related to management's decision to fund specific fixed-rate loans with like-term FHLB advances during the first and second quarters of 2016.  Furthermore, the Company issued a $5,000 promissory note to a bank during the third quarter of 2016 to help finance the cash disbursements related to the Milton Bancorp acquisition. The note has a 10-year maturity that is fixed for 5 years.  While deposits continue to be the primary source of funding for growth in earning assets, management will continue to utilize FHLB advances and promissory notes to help manage interest rate sensitivity and liquidity.

SUBORDINATED DEBENTURES

The Company received proceeds from the issuance of one trust preferred security on March 22, 2007 totaling $8,500 at a fixed rate of 6.58%.  The trust preferred security is now at an adjustable rate equal to the 3-month LIBOR plus 1.68%.  The Company does not report the securities issued by the trust as a liability, but instead, reports as a liability the subordinated debenture issued by the Company and held by the trust.

79

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OFF-BALANCE SHEET ARRANGEMENTS

As discussed in Notes I and L, 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.Management does not anticipate that the Company's current off-balance sheet activities will have a material impact on the results of operations and financial condition.

CAPITAL RESOURCES

The Company maintains a capital level that exceeds regulatory requirements as a margin of safety for its depositors. As detailed in Note P to the financial statements at December 31, 2016, the Bank's capital exceeded the requirements to be deemed "well capitalized" under applicable prompt corrective action regulations.  Total shareholders' equity at December 31, 2016 of $104,528 was up $14,058, or 15.5%, as compared to the balance of $90,470 at December 31, 2015. Shareholders' equity at December 31, 2016 included $11,444 from the 523,518 shares of common stock that were issued in conjunction with the acquisition of Milton Bancorp. Further contributing to capital growth was year-to-date net income of $6,920, partially offset by cash dividends paid of $3,585, or $.82 per share.

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.

80

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents the Company's estimated net interest income sensitivity:

INTEREST RATE SENSITIVITY
Table VIII
Change in Interest Rates Basis Points	December 31, 2016 % Change in Net Interest Income	December 31, 2015 % Change in Net Interest Income
+300	(.39%)	(.03%)
+200	(.05%)	.18%
+100	.09%	.19%
-100	(1.72%)	(2.48%)

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 the Company to do so.  At December 31, 2016, the interest rate risk profile reflects limited exposure to an increase in interest rates, which is consistent with the interest rate risk profile at December 31, 2015.  In a declining rate environment, net interest income is impacted by 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.  As a result, net interest income decreases in a declining interest rate environment.  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 $136,928, represented 14.3% of total assets at December 31, 2016. In addition, the FHLB offers advances to the Bank, which further enhances the Bank's ability to meet liquidity demands. At December 31, 2016, the Bank could borrow an additional $147,627 from the FHLB, of which $75,000 could be used for short-term, cash management advances. Furthermore, the Bank has established a borrowing line with the Federal Reserve. At December 31, 2016, this line had total availability of $45,105. 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.

81

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 and business combinations to be critical accounting policies.

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. 

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.

82

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 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 for the consumer and real estate portfolio segment and 5 years for the commercial portfolio segment. Prior to 2014, the commercial portfolio's historical loss factor was based on a period of 3 years. During the first quarter of 2014, management extended the loan loss history to 5 years due to the significant decline in net charge-offs that have been experienced since the first quarter of 2012. By extending the historical loan loss period to 5 years, management feels the historical factor is more representative of the expected losses to be incurred on commercial loans. The total loan portfolio's 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 by 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 are 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

CONTRACTUAL OBLIGATIONS

Table IX

     The following table presents, as of December 31, 2016, 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
(dollars in thousands)	Note Reference		One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
Deposits without a stated maturity		G	$	602,388	$	----	$	----	$	----	$	602,388
Consumer and brokered time deposits		G		100,447		71,170		15,971		476		188,064
Other borrowed funds		I		7,625		7,881		4,975		16,604		37,085
Subordinated debentures		J		----		----		----		8,500		8,500
Lease obligations		E		332		235		74		----		641

83

.

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 6 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.  Nevertheless, 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.

Business Combinations:

           Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred and the amount of any noncontrolling interest in the acquiree.  Acquisition related transaction costs are expensed and included in other operational results. When a business is acquired, the Company assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as of the acquisition date.  We are required to record the assets acquired, including identified intangible assets, and the liabilities assumed at their fair value. These often involve estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, inflation, asset growth rates, or other relevant factors. In addition, the determination of the useful lives over which an intangible asset will be amortized is subjective. Under FASB ASC 350 (SFAS No. 142 Goodwill and Other Intangible Assets), goodwill and indefinite-lived assets recorded must be reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill or the indefinite-lived intangible asset.

KEY RATIOS

Table X

	2016			2015			2014			2013			2012
Return on average assets		.77	%		1.03	%		1.01	%		1.04	%		.86	%
Return on average equity		7.05	%		9.66	%		9.62	%		10.40	%		9.53	%
Dividend payout ratio		51.79	%		42.74	%		42.62	%		36.56	%		62.29	%
Average equity to average assets		10.91	%		10.71	%		10.49	%		10.01	%		9.00	%

84

MANAGEMENT's DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

85

Ohio Valley Banc Corp.

Email: investorrelations@ovbc.com

Web: www.ovbc.com

Phone: 1-800-468-6682

Headquarters: 420 Third Avenue, Gallipolis, Ohio

Traded on The NASDAQ Global Market

Symbol OVBC

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 III	Delaware	100%
OVBC Captive, Inc.	Nevada	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 of Ohio Valley Banc Corp of our report dated March 16, 2017 related to the consolidated financial statements and effectiveness of internal controls over financial reporting appearing in this Annual Report on Form 10-K. 

/s/Crowe Horwath LLP

Crowe Horwath LLP

Louisville, Kentucky

March 16, 2017

EX-31.1

Exhibit 31.1

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

I, Thomas E. Wiseman, 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 purposes in accordance with generally accepted accounting 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 16, 2017	By:	/s/Thomas E. Wiseman
		Thomas E. Wiseman, President 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 purposes in accordance with generally accepted accounting 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 16, 2017	By:	/s/Scott W. Shockey
		Scott W. Shockey, Senior 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, 2016 (the "Report"), the undersigned Thomas E. Wiseman, President and Chief Executive Officer of the Corporation, and Scott W. Shockey, Senior 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/Thomas E. Wiseman	/s/Scott W. Shockey
Thomas E. Wiseman	Scott W. Shockey
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer
Dated:  March 16, 2017	Dated:  March 16, 2017

* 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.

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Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 28, 2017	Jun. 30, 2016
Document Information [Line Items]
Entity Registrant Name	OHIO VALLEY BANC CORP
Entity Central Index Key	0000894671
Trading Symbol	ovbc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		4,680,883
Entity Public Float			$ 79,621,793
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Amendment Flag	false

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Consolidated Statements of Condition - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash and noninterest-bearing deposits with banks	$ 12,512	$ 9,475
Interest-bearing deposits with banks	27,654	36,055
Total cash and cash equivalents	40,166	45,530
Certificates of deposit in financial institutions	1,670	1,715
Securities available for sale	96,490	91,651
Securities held to maturity (estimated fair value: 2016 - $19,171; 2015 - $20,790)	18,665	19,903
Restricted investments in bank stocks	7,506	6,576
Total loans	734,901	585,752
Less: Allowance for loan losses	(7,699)	(6,648)
Net loans	727,202	579,104
Premises and equipment, net	12,783	10,404
Other real estate owned	2,129	2,358
Accrued interest receivable	2,315	1,819
Goodwill	7,801	1,267
Other intangible assets, net	670
Bank owned life insurance and annuity assets	29,349	28,352
Other assets	7,894	7,606
Total assets	954,640	796,285
Liabilities
Noninterest-bearing deposits	209,576	176,499
Interest-bearing deposits	580,876	484,247
Total deposits	790,452	660,746
Other borrowed funds	37,085	23,946
Subordinated debentures	8,500	8,500
Accrued liabilities	14,075	12,623
Total liabilities	850,112	705,815
Commitments and Contingent Liabilities (See Note L)
Shareholders’ Equity
Common stock ($1.00 stated value per share, 10,000,000 shares authorized; 2016 - 5,325,504 shares issued; 2015 - 4,777,414 shares issued	5,326	4,777
Additional paid-in capital	46,788	35,318
Retained earnings	69,117	65,782
Accumulated other comprehensive income (loss)	(991)	305
Treasury stock, at cost (659,739 shares)	(15,712)	(15,712)
Total shareholders’ equity	104,528	90,470
Total liabilities and shareholders’ equity	$ 954,640	$ 796,285

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Consolidated Statements of Condition (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Securities held to maturity, fair value	$ 19,171	$ 20,790
Common stock, stated value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	5,325,504	4,777,414
Treasury stock, shares (in shares)	659,739	659,739

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Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest and dividend income:
Loans, including fees	$ 36,266	$ 33,481	$ 33,635
Securities:
Taxable	1,961	1,849	1,717
Tax exempt	445	526	555
Dividends	302	293	312
Other interest	374	185	136
	39,348	36,334	36,355
Interest expense:
Deposits	2,154	2,191	2,236
Other borrowed funds	664	478	474
Subordinated debentures	204	170	165
	3,022	2,839	2,875
Net interest income	36,326	33,495	33,480
Provision for loan losses	2,826	1,090	2,787
Net interest income after provision for loan losses	33,500	32,405	30,693
Noninterest income:
Service charges on deposit accounts	1,977	1,573	1,627
Trust fees	227	221	223
Income from bank owned life insurance and annuity assets	725	681	672
Mortgage banking income	227	242	228
Electronic refund check / deposit fees	2,048	2,371	3,133
Debit / credit card interchange income	2,594	2,399	2,174
Gain (loss) on other real estate owned	(467)	99	113
Gain on sale of securities		163
Gain on sale of ProAlliance Corporation			810
Other	908	848	813
	8,239	8,597	9,793
Noninterest expense:
Salaries and employee benefits	18,874	17,498	17,878
Occupancy	1,846	1,599	1,585
Furniture and equipment	922	801	757
Professional fees	1,362	1,375	1,151
Marketing expense	915	860	1,004
FDIC insurance	455	583	483
Data processing	1,455	1,259	1,127
Software	1,316	1,123	1,014
Foreclosed assets	357	347	185
Amortization of intangibles	68
Merger related expenses	930
Other	4,399	4,174	4,109
	32,899	29,619	29,293
Income before income taxes	8,840	11,383	11,193
Income tax benefit	1,920	2,809	3,120
NET INCOME	$ 6,920	$ 8,574	$ 8,073
Earnings per share (in dollars per share)	$ 1.59	$ 2.08	$ 1.97

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net income	$ 6,920	$ 8,574	$ 8,073
Other comprehensive income (loss):
Change in unrealized gain (loss) on available for sale securities	(1,963)	(830)	1,077
Reclassification adjustment for realized (gains)		(163)
	(1,963)	(993)	1,077
Related tax (expense) benefit	667	338	(366)
Total other comprehensive income (loss), net of tax	(1,296)	(655)	711
Total comprehensive income	$ 5,624	$ 7,919	$ 8,784

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2013	$ 4,758	$ 34,883	$ 56,241	$ 249	$ (15,712)	$ 80,419
Net income			8,073			8,073
Other comprehensive income (loss), net				711		711
Common stock issued to ESOP	15	336				351
Common stock issued through dividend reinvestment	4	99				103
Cash dividends			(3,441)			(3,441)
Balance at Dec. 31, 2014	4,777	35,318	60,873	960	(15,712)	86,216
Net income			8,574			8,574
Other comprehensive income (loss), net				(655)		(655)
Common stock issued to ESOP
Cash dividends			(3,665)			(3,665)
Balance at Dec. 31, 2015	4,777	35,318	65,782	305	(15,712)	90,470
Net income			6,920			6,920
Other comprehensive income (loss), net				(1,296)		(1,296)
Common stock issued to ESOP	25	550				575
Cash dividends			(3,585)			(3,585)
Balance at Dec. 31, 2016	5,326	46,788	69,117	(991)	(15,712)	104,528
Acquisition – Milton Bancorp, Inc. 523,518 shares	$ 524	$ 10,920				$ 11,444

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Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Common Stock [Member]
Common stock issued to ESOP, shares (in shares)	24,572		14,618
Common stock issued through dividend reinvestment, shares (in shares)			4,304
Acquisition – Milton Bancorp, Inc., shares (in shares)	523,518
Retained Earnings [Member]
Cash dividends, per share (in dollars per share)	$ 0.82	$ 0.89	$ 0.84
Common stock issued to ESOP, shares (in shares)	24,572		14,618

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income	$ 6,920	$ 8,574	$ 8,073
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment	1,126	872	795
Net (accretion) of purchase accounting adjustments	(255)
Net amortization of securities	407	432	732
Net realized (gain) on sale of securities		(163)
Proceeds from sale of loans in secondary market	6,455	6,746	4,286
Loans disbursed for sale in secondary market	(6,228)	(6,504)	(4,058)
Amortization of mortgage servicing rights	79	93	77
Gain on sale of loans	(306)	(335)	(305)
Amortization of intangibles	68
Deferred tax (benefit) expense	(725)	591	(517)
Provision for loan losses	2,826	1,090	2,787
Common stock issued to ESOP	575		351
Earnings on bank owned life insurance and annuity assets	(725)	(681)	(672)
Gain on sale of ProAlliance Corporation			(810)
(Gain) loss on sale of other real estate owned	(22)	(99)	(25)
(Appreciation) write-down of other real estate owned	489		(88)
Change in accrued interest receivable	(496)	(13)	95
Change in accrued liabilities	1,461	473	1,326
Change in other assets	1,717	(678)	(366)
Net cash provided by operating activities	13,366	10,398	11,681
Cash flows from investing activities:
Net cash acquired from Milton Bancorp, Inc. acquisition	1,770
Proceeds from sales of securities available for sale		10,550
Proceeds from maturities of securities available for sale	18,591	15,085	15,318
Purchases of securities available for sale	(20,256)	(33,251)	(16,077)
Proceeds from maturities of securities held to maturity	3,089	3,482	827
Purchases of securities held to maturity	(1,528)	(626)	(885)
Proceeds from maturities of certificates of deposit in financial institutions	490	245
Purchases of certificates of deposit in financial institutions	(445)	(980)	(980)
Proceeds from restricted investments in bank stocks			1,200
Purchases of restricted investments in bank stocks	(566)
Net change in loans	(38,299)	5,049	(29,936)
Proceeds from sale of other real estate owned	403	458	821
Proceeds from sale of ProAlliance Corporation			810
Purchases of premises and equipment	(1,683)	(1,950)	(985)
Purchases of bank owned life insurance and annuity assets		(3,000)
Net cash (used in) investing activities	(38,434)	(4,938)	(29,887)
Cash flows from financing activities:
Change in deposits	10,150	13,916	17,953
Proceeds from common stock through dividend reinvestment			103
Cash dividends paid	(3,585)	(3,665)	(3,441)
Proceeds from Federal Home Loan Bank borrowings	11,102	400	7,575
Repayment of Federal Home Loan Bank borrowings	(1,883)	(1,671)	(1,612)
Change in other long-term borrowings	3,899
Change in other short-term borrowings	21	113	261
Net cash provided by financing activities	19,704	9,093	20,839
Cash and cash equivalents:
Change in cash and cash equivalents	(5,364)	14,553	2,633
Cash and cash equivalents at beginning of year	45,530	30,977	28,344
Cash and cash equivalents at end of year	40,166	45,530	30,977
Supplemental disclosure:
Cash paid for interest	2,930	2,784	3,274
Cash paid for income taxes	1,725	2,450	3,567
Transfers from loans to other real estate owned	957	1,381	879
Other real estate owned sales financed by The Ohio Valley Bank Company	316	189	390
Net assets acquired from Milton Bancorp, Inc. acquisition, excluding cash and cash equivalents	3,140
Milton Bancorp, Inc [Member]
Supplemental disclosure:
Issuance of common stock for Milton Bancorp, Inc. acquisition	$ 11,444

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Note A - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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”), an Ohio state-chartered bank that is a member of the Federal Reserve Bank and is regulated primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board. Ohio Valley also has a subsidiary that engages in consumer lending to individuals with higher credit risk history, Loan Central, Inc.; a subsidiary insurance agency that facilitates the receipts of insurance commissions, Ohio Valley Financial Services Agency, LLC; and a limited purpose property and casualty insurance company, OVBC Captive, Inc.  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

25

offices located in 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., Ohio Valley Financial Services Agency, LLC, and OVBC Captive, Inc.  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:

To prepare financial statements in conformity with accounting principles generally accepted in the U.S., management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Cash and Cash Equivalents:

Cash and cash equivalents include cash on hand, noninterest-bearing deposits with banks, federal funds sold and interest-bearing deposits with banks with maturity terms of less than

90

days. 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.

Certificates of deposit in financial institutions

:

Certificates of deposit in financial institutions are carried at cost and have maturity terms of

90

days or greater. The longest maturity date is

September

30,

2019.

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 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.

Restricted Investments in Bank Stocks

:

  The Bank is a member of the Federal Home Loan Bank (“FHLB”) system.  Additionally, the Bank is a member of the Federal Reserve Bank (“FRB”) system. Members are required to own a certain amount of stock based on their level of borrowings and other factors and

may

invest in additional amounts.  FHLB stock and FRB stock are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income. The Company has additional investments in other restricted bank stocks that are not material to the financial statements.

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.

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.  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 for the consumer and real estate portfolio segment and

5

years for the commercial portfolio segment. The total loan portfolio’s 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 and Industrial, Commercial Real Estate, 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.

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

6

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.  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.

At

December

31,

2016,

there were no changes to the accounting policies or methodologies within any of the Company’s loan portfolio segments from the prior period.

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
	2016			2015
Residential real estate loans		38.92	%		38.22	%
Commercial real estate loans		29.12	%		28.90	%
Consumer loans		18.27	%		18.89	%
Commercial and industrial loans		13.69	%		13.99	%
		100.00	%		100.00	%

Approximately

5.61%

of total loans were unsecured at

December

31,

2016,

down from

6.06%

at

December

31,

2015.

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,

2016,

the Bank’s primary correspondent balance was

$26,422

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 method 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.  Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. 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

$2,129

and

$2,358

at

December

31,

2016

and

2015.

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. Goodwill is the only intangible asset with an indefinite life on our balance sheet. The Company has selected

December

31

as the date to perform its annual qualitative impairment test.  Given that the Company has been profitable and had positive equity, the qualitative assessment indicated that it was more likely than not that the fair value of goodwill was more than the carrying amount, resulting in no impairment.

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 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,

2016

and

2015,

the Company’s MSR assets were 

$387

and

$429,

respectively.

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:

4,351,748

for

2016;

4,117,675

for

2015;

4,099,194

for

2014.

  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.

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 for a certain key executive that earns interest.

Employee Stock Ownership Plan:

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

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 L 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 P for more specific disclosure related to dividend restrictions.

Restrictions on Cash

:

  Cash on hand or on deposit with a

third

-party correspondent and the Federal Reserve Bank of

$28,102

and

$36,535

was required to meet regulatory reserve and clearing requirements at year-end

2016

and

2015.

  The balances on deposit with a

third

-party correspondent do not earn interest.

Derivatives:

At the inception of a derivative contract, the Company designates the derivative as

one

of

three

types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These

three

types are

(1)

a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”),

(2)

a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or

(3)

an instrument with no hedging designation (“stand-alone derivative”).

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

At

December

31,

2016

and

2015,

the Company’s only derivatives on hand were interest rate swaps, which are classified as stand-alone derivatives. See Note H for more specific disclosures related to interest rate swaps.

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 O.  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

2015

and

2014

have been reclassified to conform with the presentation for

2016.

  These reclassifications had no effect on the net results of operations or shareholders’ equity.

Adoption of New Accounting Standards:

In

May

2014,

the FASB issued Accounting Standards Update ("ASU")

2014

-

09,

"Revenue from Contracts with Customers (Topic

606)".

The ASU creates a new topic, Topic

606,

to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after

December

15,

2017,

with early adoption permitted on

January

1,

2017.

The adoption of ASU

2014

-

09

is not expected to have a material effect on the Company's financial statements.

In

January

2016,

the FASB issued ASU No.

2016

-

01,

"Recognition and Measurement of Financial Assets and Financial Liabilities". The update provides updated accounting and reporting requirements for both public and non-public entities. The most significant provisions that will impact the Company are:

1)

measurement at fair value of equity securities available for sale, with the changes in fair value recognized in the income statement;

2)

elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments at amortized cost on the balance sheet;

3)

utilization of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and

4)

requirement of separate presentation of both financial assets and liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. The update will be effective for interim and annual periods beginning after

December

15,

2017,

using a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. Early adoption is not permitted. Management is currently evaluating the impact of this update on its Consolidated Financial Statements.

In

February

2016,

the FASB issued an update (ASU

2016

-

02,

Leases) which will require lessees to record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases, except for short-term leases that are subject to an accounting policy election, will be recorded on the balance sheet for lessees by establishing a lease liability and corresponding right-of-use asset. The guidance in this ASU will become effective for interim and annual reporting periods beginning after

December

15,

2018,

with early adoption permitted. Management is currently evaluating the impact of the adoption and does not expect to have a material impact on the income statement, but does anticipate an increase in the Company's assets and liabilities. However, the amounts that will be adjusted are still to be determined.

In

June

2016,

the FASB issued ASU No.

2016

-

13,

"Financial Instruments - Credit Losses". ASU

2016

-

13

requires entities to report "expected" credit losses on financial instruments and other commitments to extend credit rather than the current "incurred loss" model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after

December

15,

2019.

Early adoption is permitted, for annual periods and interim periods within those annual periods, beginning after

December

15,

2018.

Management is currently in the developmental stages, collecting available historical information, in order to assess the expected credit losses. However, the impact to the financial statements are still yet to be determined.

In

August

2016,

the FASB issued an update (ASU

2016

-

15,

Statement of Cash Flows) which addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  The amendments in this Update apply to all entities, including business entities and not-for-profit entities that are required to present a statement of cash flows, and are effective for public business entities for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The adoption of ASU

2016

-

15

is not expected to have a material effect on the Company’s financial statements.

XML

Note B - Business Combinations

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Note B

–

Business Combinations

As of the close of business on

August

5,

2016,

Ohio Valley completed its merger with Milton Bancorp, Inc. (“Milton Bancorp”) pursuant to the terms of the Agreement and Plan of Merger dated as of

January

7,

2016,

by and between Ohio Valley and Milton Bancorp, as amended (the "Merger Agreement"). Pursuant to the terms of the Merger Agreement, Milton Bancorp was merged with and into Ohio Valley. Immediately following the Merger, The Milton Banking Company (“Milton Bank”) was merged with and into the Bank. As a result of the Merger and in accordance with the terms of the Merger Agreement, each Milton Bancorp share was converted into the right to receive either

1,636

Ohio Valley common shares,

no

par value, or cash in the amount of

$37,219,

subject to certain allocation procedures set forth in the Merger Agreement pursuant to which

80%

of the

400

outstanding Milton Bancorp common shares were converted into the right to receive Ohio Valley common shares and the remaining

20%

of the outstanding Milton Bancorp common shares were converted into the right to receive cash. Each of the

1,237

Milton Bancorp preferred shares issued and outstanding were converted into the right to receive a cash payment in the amount of

$3,600

per preferred share. The consideration paid for Milton Bancorp totaled

$18,875,

of which

$11,444

was the market value of the Company’s common shares and

$7,431

was cash. Ohio Valley financed part of the cash portion of the purchase price through

$5,000

in borrowed funds. Milton Bank's results of operations were included in the Company's results beginning

August

6,

2016.

Merger-related expenses of

$930

were recorded to the Company’s income statement for the year ended

December

31,

2016.

The fair value of the common shares issued as part of the consideration paid for Milton Bancorp was determined in the basis of the closing price of the Company's common shares on the acquisition date. After the Merger, the Company's assets totaled approximately

$950

million and branches increased to

25

locations.

Goodwill of

$6,534

arising from the acquisition consisted largely of synergies from combining the operations of the companies. As the acquisition was treated as a nontaxable stock acquisition transaction, the goodwill was not deductible for tax purposes. The following table summarizes the consideration paid for Milton Bancorp and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

Consideration:
Cash	$	7,431
Equity instruments		11,444
Fair value of total consideration transferred	$	18,875
Recognized amounts of identifiable assets acquired and liabilities assumed :
Cash and cash equivalents	$	9,201
Securities		5,868
Restricted investments in bank stock		364
Loans		112,479
Premises and equipment		1,826
Other real estate owned		641
Bank owned life insurance		272
Core deposit intangible asset		738
Other assets		612
Total assets acquired		132,001
Deposits		119,669
Other liabilities		(9	)
Total liabilities assumed		119,660
Total identifiable net assets		12,341
Goodwill		6,534
	$	18,875

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such,

these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchase credit impaired loans, which have shown evidence of credit deterioration since origination. Receivables acquired that were not subject to these requirements include non-impaired loans and customer receivables with a fair value and gross contractual amounts receivable of

$111,558

and

$112,249

on the date of acquisition. The Company also acquired purchase credit impaired loans that management deemed to be not material for disclosure. While the acquisition accounting adjustments have been recorded at year-end

2016,

we will continue to evaluate these adjustments, specifically in the area of income taxes. Amounts presented in the table above are subject to change.

XML

Note C - Securities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

C

- Securities

The following table summarizes the amortized cost and fair value of securities available for sale and securities held to maturity at

December

31,

2016

and

2015

and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities Available for Sale
December 31, 2016
U.S. Government sponsored entity securities	$	10,624	$	----	$	(80	)	$	10,544
Agency mortgage-backed securities, residential		87,367		495		(1,916	)		85,946
Total securities	$	97,991	$	495	$	(1,996	)	$	96,490
December 31, 2015
U.S. Government sponsored entity securities	$	9,011	$	----	$	(46	)	$	8,965
Agency mortgage-backed securities, residential		82,178		981		(473	)		82,686
Total securities	$	91,189	$	981	$	(519	)	$	91,651

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
Securities Held to Maturity
December 31, 2016
Obligations of states and political subdivisions	$	18,661	$	654	$	(148	)	$	19,167
Agency mortgage-backed securities, residential		4		----		----			4
Total securities	$	18,665	$	654	$	(148	)	$	19,171
December 31, 2015
Obligations of states and political subdivisions	$	19,898	$	892	$	(5	)	$	20,785
Agency mortgage-backed securities, residential		5		----		----			5
Total securities	$	19,903	$	892	$	(5	)	$	20,790

At year-end

2016

and

2015,

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.

There were

no

sales of debt securities during

2016

and

2014.

During

2015,

proceeds from the sales of debt securities totaled

$10,550

with gross gains of

$163

recognized.

Securities with a carrying value of approximately

$72,397

at

December

31,

2016

and

$59,267

at

December

31,

2015

were pledged to secure public deposits and repurchase agreements and for other purposes as required or permitted by law.

Unrealized losses on the Company’s debt securities have not been recognized into income because the issuers’ securities are of high credit quality as of

December

31,

2016,

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,

2016

and

2015

represents an other-than-temporary impairment.

The amortized cost and estimated fair value of debt securities at

December

31,

2016,

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	$	4,001	$	3,999	$	272	$	275
Due in one to five years		6,623		6,545		7,061		7,342
Due in five to ten years		----		----		8,690		9,029
Due after ten years		----		----		2,638		2,521
Agency mortgage-backed securities, residential		87,367		85,946		4		4
Total debt securities	$	97,991	$	96,490	$	18,665	$	19,171

The following table summarizes securities with unrealized losses at

December

31,

2016

and

December

31,

2015,

aggregated by major security type and length of time in a continuous unrealized loss position:

December 31, 201 6	Less than 12 Months					12 Months or More				Total
Securities Available for Sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entity securities	$	10,544	$	(80	)	$	----	$	----	$	10,544	$	(80	)
Agency mortgage-backed securities, residential		64,043		(1,916	)		----		----		64,043		(1,916	)
Total available for sale	$	74,587	$	(1,996	)	$	----	$	----	$	74,587	$	(1,996	)

	Less than 12 Months					12 Months or More				Total
Securities Held to Maturity	Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss
Obligations of states and political subdivisions	$	3,813	$	(148	)	$	----	$	----	$	3,813	$	(148	)
Total held to maturity	$	3,813	$	(148	)	$	----	$	----	$	3,813	$	(148	)

December 31, 201 5	Less than 12 Months					12 Months or More					Total
Securities Available for Sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government sponsored entity securities	$	7,964	$	(46	)	$	----	$	----		$	7,964	$	(46	)
Agency mortgage-backed securities, residential		42,112		(407	)		3,645		(66	)		45,757		(473	)
Total available for sale	$	50,076	$	(453	)	$	3,645	$	(66	)	$	53,721	$	(519	)

	Less than 12 Months					12 Months or More				Total
Securities Held to Maturity	Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss
Obligations of states and political subdivisions	$	995	$	(5	)	$	----	$	----	$	995	$	(5	)
Total held to maturity	$	995	$	(5	)	$	----	$	----	$	995	$	(5	)

XML

Note D - Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

D

- Loans and Allowance for Loan Losses

Loans are comprised of the following at

December

31:

	2016			2015
Residential real estate	$	286,022		$	223,875
Commercial real estate:
Owner-occupied		77,605			73,458
Nonowner-occupied		90,532			72,002
Construction		45,870			23,852
Commercial and industrial		100,589			81,936
Consumer:
Automobile		59,772			44,566
Home equity		20,861			20,841
Other		53,650			45,222
		734,901			585,752
Less: Allowance for loan losses		(7,699	)		(6,648	)
Loans, net	$	727,202		$	579,104

The following table presents the activity in the allowance for loan losses by portfolio segment for the years ended

December

31,

2016,

2015

and

2014:

December 31, 2016	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648
Provision for loan losses		(63	)		2,287			(1,112	)		1,714			2,826
Loans charged off		(384	)		(63	)		(586	)		(2,170	)		(3,203	)
Recoveries		299			132			16			981			1,428
Total ending allowance balance	$	939		$	4,315		$	907		$	1,538		$	7,699

December 31, 2015	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		103			(469	)		777			679			1,090
Loans charged off		(828	)		(1,971	)		(24	)		(1,428	)		(4,251	)
Recoveries		386			204			234			651			1,475
Total ending allowance balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648

December 31, 2014	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		458			1,408			(28	)		949			2,787
Loans charged off		(487	)		(235	)		(41	)		(1,216	)		(1,979	)
Recoveries		286			108			392			585			1,371
Total ending allowance balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334

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,

2016

and

2015:

December 31, 2016	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,535	$	241	$	205	$	2,981
Collectively evaluated for impairment		939		1,780		666		1,333		4,718
Total ending allowance balance	$	939	$	4,315	$	907	$	1,538	$	7,699
Loans:
Loans individually evaluated for impairment	$	717	$	13,111	$	8,465	$	416	$	22,709
Loans collectively evaluated for impairment		285,305		200,896		92,124		133,867		712,192
Total ending loans balance	$	286,022	$	214,007	$	100,589	$	134,283	$	734,901

December 31, 2015	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	311	$	1,850	$	3	$	2,164
Collectively evaluated for impairment		1,087		1,648		739		1,010		4,484
Total ending allowance balance	$	1,087	$	1,959	$	2,589	$	1,013	$	6,648
Loans:
Loans individually evaluated for impairment	$	1,001	$	7,318	$	8,691	$	218	$	17,228
Loans collectively evaluated for impairment		222,874		161,994		73,245		110,411		568,524
Total ending loans balance	$	223,875	$	169,312	$	81,936	$	110,629	$	585,752

The following table presents information related to loans individually evaluated for impairment by class of loans as of the years ended

December

31,

2016,

2015

and

2014:

December 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	5,477	$	5,477	$	2,435	$	3,185	$	300	$	300
Nonowner-occupied		384		384		100		390		19		19
Commercial and industrial		392		392		241		391		----		----
Consumer:
Home equity		416		416		205		421		21		21
With no related allowance recorded:
Residential real estate		717		717		----		726		31		31
Commercial real estate:
Owner-occupied		3,638		3,091		----		3,005		178		178
Nonowner-occupied		5,078		3,632		----		3,572		79		79
Construction		1,001		527		----		522		136		136
Commercial and industrial		8,073		8,073		----		7,681		381		381
Total	$	25,176	$	22,709	$	2,981	$	19,893	$	1,145	$	1,145

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204	$	204	$	13	$	13
Nonowner-occupied		396		396		107		402		75		75
Commercial and industrial		4,355		4,355		1,850		3,545		149		149
Consumer:
Home equity		218		218		3		219		8		8
With no related allowance recorded:
Residential real estate		1,001		1,001		----		809		45		45
Commercial real estate:
Owner-occupied		3,812		3,265		----		2,747		181		181
Nonowner-occupied		5,178		2,773		----		3,439		49		49
Construction		680		680		----		544		----		----
Commercial and industrial		4,336		4,336		----		3,985		180		180
Total	$	20,180	$	17,228	$	2,164	$	15,894	$	700	$	700

December 31, 2014	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	----	$	----	$	----	$	----	$	6	$	6
Commercial real estate:
Owner-occupied		1,177		1,177		414		471		32		32
Nonowner-occupied		7,656		7,656		2,092		8,303		398		398
Commercial and industrial		2,356		2,356		900		2,441		110		110
Consumer:
Home equity		219		219		6		219		7		7
With no related allowance recorded:
Residential real estate		1,415		1,415		----		882		58		58
Commercial real estate:
Owner-occupied		3,125		2,578		----		2,135		113		113
Nonowner-occupied		1,298		300		----		300		50		50
Commercial and industrial		4,703		4,468		----		2,278		180		180
Total	$	21,949	$	20,169	$	3,412	$	17,029	$	954	$	954

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.

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.

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of

December

31,

2016

and

December

31,

2015,

other real estate owned secured by residential real estate totaled

$938

and

$1,131,

respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of

$1,492

and

$988

as of

December

31,

2016

and

December

31,

2015,

respectively.

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,

2016

and

2015:

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2016
Residential real estate	$	132	$	3,445
Commercial real estate:
Owner-occupied		28		1,571
Nonowner-occupied		----		2,506
Construction		----		527
Commercial and industrial		----		867
Consumer:
Automobile		121		5
Home equity		----		34
Other		46		6
Total	$	327	$	8,961

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2015
Residential real estate	$	20	$	2,048
Commercial real estate:
Owner-occupied		----		404
Nonowner-occupied		----		2,737
Construction		----		769
Commercial and industrial		----		1,152
Consumer:
Automobile		18		27
Home equity		----		96
Other		1		3
Total	$	39	$	7,236

The following table presents the aging of the recorded investment of past due loans by class of loans as of

December

31,

2016

and

2015:

December 31, 2016	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	$	3,728	$	953	$	2,201	$	6,882	$	279,140	$	286,022
Commercial real estate:
Owner-occupied		134		366		1,325		1,825		75,780		77,605
Nonowner-occupied		261		18		2,506		2,785		87,747		90,532
Construction		66		52		182		300		45,570		45,870
Commercial and industrial		1,283		483		800		2,566		98,023		100,589
Consumer:
Automobile		1,091		221		126		1,438		58,334		59,772
Home equity		349		45		----		394		20,467		20,861
Other		685		155		46		886		52,764		53,650
Total	$	7,597	$	2,293	$	7,186	$	17,076	$	717,825	$	734,901

December 31, 2015	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	$	2,564	$	1,484	$	1,708	$	5,756	$	218,119	$	223,875
Commercial real estate:
Owner-occupied		141		33		371		545		72,913		73,458
Nonowner-occupied		35		334		2,737		3,106		68,896		72,002
Construction		----		2		769		771		23,081		23,852
Commercial and industrial		31		88		1,077		1,196		80,740		81,936
Consumer:
Automobile		727		197		36		960		43,606		44,566
Home equity		75		----		76		151		20,690		20,841
Other		420		104		4		528		44,694		45,222
Total	$	3,993	$	2,242	$	6,778	$	13,013	$	572,739	$	585,752

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) occurs when 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; a reduction in the contractual principal and interest payments of the loan; 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.

The following table presents the types of TDR loan modifications by class of loans as of

December

31,

2016

and

December

31,

2015:

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2016
Residential real estate:
Interest only payments	$	717	$	----	$	717
Commercial real estate:
Owner-occupied
Interest only payments		284		----		284
Rate reduction		----		232		232
Reduction of principal and interest payments		579		----		579
Maturity extension at lower stated rate than market rate		1,582		----		1,582
Nonowner-occupied
Interest only payments		600		2,210		2,810
Rate reduction		384		----		384
Credit extension at lower stated rate than market rate		574		----		574
Commercial and industrial
Interest only payments		8,074		----		8,074
Credit extension at lower stated rate than market rate		----		391		391
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		213		----		213
Credit extension at lower stated rate than market rate		203		----		203
Total TDR’s	$	13,210	$	2,833	$	16,043

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2015
Residential real estate:
Interest only payments	$	1,001	$	----	$	1,001
Commercial real estate:
Owner-occupied
Interest only payments		433		----		433
Rate reduction		----		232		232
Reduction of principal and interest payments		604		----		604
Maturity extension at lower stated rate than market rate		1,996		----		1,996
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		300		2,473		2,773
Rate reduction		396		----		396
Commercial and industrial
Interest only payments		7,579		----		7,579
Credit extension at lower stated rate than market rate		226		391		617
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR’s	$	12,957	$	3,096	$	16,053

During the

twelve

months ended

December

31,

2016,

the TDR’s described above decreased the allowance for loan losses and provision expense by

$1,112,

with corresponding charge-offs of

$11.

During the year ended

December

31,

2015,

the TDR’s described above increased the allowance for loan losses and provision expense by

$93

with corresponding charge-offs of

$1,422.

The charge-offs of

$1,422

during

2015

included

$1,304

that were related to specific reserves that had already been provided for during

2014,

and, as a result, did not impact provision expense during

2015.

At

December

31,

2016,

the balance in TDR loans decreased

$10,

or

0.1%,

from year-end

2015.

The Company had

82%

of its TDR’s performing according to their modified terms at

December

31,

2016,

as compared to

81%

at

December

31,

2015.

The Company’s specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled

$546

at

December

31,

2016,

as compared to

$1,669

in reserves at

December

31,

2015.

Lower specific reserves in

2016

was impacted by the reduction of

$1,160

in specific reserves that were previously related to

one

commercial and industrial loan relationship. During the

second

quarter of

2016,

a re-evaluation of this borrower’s financial performance identified significant improvement, which resulted in a credit quality upgrade to the borrower relationship and no identified collateral impairment. At

December

31,

2016,

the Company had

$2,427

in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to

$995

at

December

31,

2015.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the years ended

December

31,

2016

and

2015:

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2016
Commercial real estate:
Nonowner-occupied
Interest only payments	$	----	$	----	$	226	$	226
Credit extension at lower stated rate than market rate		574		574		----		----
Total TDR’s	$	574	$	574	$	226	$	226

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2015
Residential real estate
Interest only payments	$	495	$	495		----		----
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		1,025		1,025		----		----
Commercial and industrial
Credit extension at lower stated rate than market rate		226		226		----		----
Total TDR’s	$	1,746	$	1,746		----		----

During the

twelve

months ended

December

31,

2016,

the Company placed

one

commercial real estate TDR totaling

$226

on nonaccrual status. The borrower continues to experience financial difficulty and the Company has started the foreclosure process. The Company reviewed the loan's collateral during the

third

quarter and identified

$11

in collateral impairment, which resulted in a partial charge-off of principal. There were no specific allocations of the allowance for loan losses recorded on the impaired TDR loan at

December

31,

2016.

All of the Company’s loans that were restructured during the

twelve

months ended

December

31,

2015

were performing in accordance with their modified terms. Excluding the commercial real estate loan of

$226

previously mentioned, there were

no

other TDR's described above at

December

31,

2016

and

2015

that experienced any payment defaults within

twelve

months following their 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 loans modified during the

twelve

months ended

December

31,

2016

increased the provision expense and the allowance for loan losses by

$11.

As of

December

31,

2016,

the Company had no allocation of reserves to customers whose loan terms were modified during the year ended

2016.

The loans modified during the

twelve

months ended

December

31,

2015

had no impact on the provision expense or the allowance for loan losses. As of

December

31,

2015,

the Company had no allocation of reserves to customers whose loan terms were modified during the year ended of

2015.

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

11.

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

11.

The Company’s risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed

$500.

The Company uses the following definitions for its

criticized

loan risk ratings:

Special Mention.

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.

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 considered likely to satisfy debt.

Doubtful

.

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, and 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. 

Loss

.

Loans classified as loss are considered uncollectible and are of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the credit has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset yielding such a minimum value even though partial recovery

may

be affected in the future. Amounts classified as loss should be promptly charged off.

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 re-evaluation date. As of

December

31,

2016

and

December

31,

2015,

and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2016	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	66,495	$	428	$	10,682	$	77,605
Nonowner-occupied		83,103		2,364		5,065		90,532
Construction		45,325		----		545		45,870
Commercial and industrial		94,091		188		6,310		100,589
Total	$	289,014	$	2,980	$	22,602	$	314,596

December 31, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	62,287	$	6,738	$	4,433	$	73,458
Nonowner-occupied		61,577		6,305		4,120		72,002
Construction		23,080		----		772		23,852
Commercial and industrial		70,852		5,232		5,852		81,936
Total	$	217,796	$	18,275	$	15,177	$	251,248

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau) but not thereafter. 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.

For residential and consumer loan classes, the Company 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,

2016

and

December

31,

2015:

	Consumer
December 31, 2016	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	59,646	$	20,827	$	53,598	$	282,445	$	416,516
Nonperforming		126		34		52		3,577		3,789
Total	$	59,772	$	20,861	$	53,650	$	286,022	$	420,305

	Consumer
December 31, 2015	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	44,521	$	20,745	$	45,218	$	221,807	$	332,291
Nonperforming		45		96		4		2,068		2,213
Total	$	44,566	$	20,841	$	45,222	$	223,875	$	334,504

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

5.61%

of total loans were unsecured at

December

31,

2016,

down from

6.06%

at

December

31,

2015.

XML

Note E - Premises and Equipment

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

E

- Premises and Equipment

Following is a summary of premises and equipment at

December

31:

	2016		2015
Land	$	2,348	$	2,055
Buildings		13,247		10,890
Leasehold improvements		1,238		2,066
Furniture and equipment		5,085		4,334
		21,918		19,345
Less accumulated depreciation		9,135		8,941
Total premises and equipment	$	12,783	$	10,404

The following is a summary of the future minimum operating lease payments for facilities leased by the Company. Operating lease expense was

$464

in

2016,

$464

in

2015,

and

$515

in

2014.

2017	$	332
2018		181
2019		54
2020		49
2021		25
	$	641

XML

Note F - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

F

–

Goodwill and Intangible Assets

Goodwill:

The change in goodwill during the year is as follows:

	2016
Beginning of year	$	1,267
Acquired goodwill		6,534
Impairment		----
End of year	$	7,801

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At

December

31,

2016,

the Company’s reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it is more likely than not that fair value of goodwill is more than the carrying value, resulting in

no

impairment. Therefore, the Company did not proceed to step

one

of the annual goodwill impairment testing requirement.

Acquired intangible assets:

Acquired intangible assets were as follows at year-end:

	2016
	Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:	$	738	$	68
Core deposit intangibles
Other customer relationship intangibles		----		----
Total	$	738	$	68

Aggregate amortization expense was

$68

for

2016.

Estimated amortization expense for each of the next

five

years:

2017	$	156
2018		135
2019		114
2020		94
2021		74
Thereafter		97
Total	$	670

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Note G - Deposits

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

Note

G

- Deposits

Following is a summary of interest-bearing deposits at

December

31:

	2016		2015
NOW accounts	$	155,051	$	124,524
Savings and Money Market		237,761		200,976
Time:
In denominations of $250,000 or less		168,546		146,975
In denominations of more than $250,000		19,518		11,772
Total time deposits		188,064		158,747
Total interest-bearing deposits	$	580,876	$	484,247

Following is a summary of total time deposits by remaining maturity at

December

31,

2016:

2017	$	100,447
2018		53,559
2019		17,611
2020		11,401
2021		4,570
Thereafter		476
Total	$	188,064

Brokered deposits, included in time deposits, were

$22,463

and

$28,998

at

December

31,

2016

and

2015,

respectively.

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Note H - Interest Rate Swaps

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note

H

-

Interest Rate Swaps

The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.  The Company utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position.  As part of this strategy, the Company provides its customer with a fixed-rate loan while creating a variable-rate asset for the Company by the customer entering into an interest rate swap with the Company on terms that match the loan.  The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution.  These interest rate swaps do not qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative.  At

December

31,

2016,

the Company had interest rate swaps associated with commercial loans with a notional value of

$9,725

and a fair value of

$22.

  This is compared to interest rate swaps with a notional value of

$10,727

and a fair value of

$29

at

December

31,

2015.

  The notional amount of the interest rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement. To further offset the risk exposure related to market value fluctuations of its interest rate swaps, the Company maintains collateral deposits on hand with a

third

-party correspondent, which totaled

$350

at

December

31,

2016

and

December

31,

2015.

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Note I - Other Borrowed Funds

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note

I

- Other Borrowed Funds

Other borrowed funds at

December

31,

2016

and

2015

are comprised of advances from the Federal Home Loan Bank (“FHLB”) of Cincinnati and promissory notes. At

December

31,

2016

and

2015,

FHLB Borrowings included

$73

and

$117

in capitalized lease obligations, respectively.

	FHLB Borrowings		Promissory Notes		Totals
2016	$	29,203	$	7,882	$	37,085
2015	$	20,028	$	3,918	$	23,946

Pursuant to collateral agreements with the FHLB, advances are secured by

$275,836

in qualifying mortgage loans,

$71,443

in commercial loans and

$5,365

in FHLB stock at

December

31,

2016.

Fixed-rate FHLB advances of

$29,130

mature through

2042

and have interest rates ranging from

1.34%

to

3.31%

and a year-to-date weighted average cost of

2.08%

at

December

31,

2016

and

2015,

respectively. There were

no

variable-rate FHLB borrowings at

December

31,

2016.

At

December

31,

2016,

the Company had a cash management line of credit enabling it to borrow up to

$75,000

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

$75,000

available on this line of credit at

December

31,

2016.

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

$221,757

at

December

31,

2016.

Of this maximum borrowing capacity of

$221,757,

the Company had

$147,627

available to use as additional borrowings, of which

$75,000

could be used for short-term, cash management advances, as mentioned above.

Promissory notes, issued primarily by Ohio Valley, are due at various dates through a final maturity date of

August

1,

2026,

and have fixed rates ranging from

1.25%

to

4.09%

and a year-to-date weighted average cost of

2.34%

at

December

31,

2016,

as compared to

1.38%

at

December

31,

2015.

At

December

31,

2016,

there was

one

$360

promissory note payable by Ohio Valley to related parties. See Note M for further discussion of related party transactions. Promissory notes payable to other banks totaled

$3,899

at

December

31,

2016.

Letters of credit issued on the Bank’s behalf by the FHLB to collateralize certain public unit deposits as required by law totaled

$45,000

at

December

31,

2016

and

$34,800

at

December

31,

2015.

Scheduled principal payments over the next

five

years: 

	FHLB Borrowings		Promissory Notes		Totals
2017	$	5,564	$	2,061	$	7,625
2018		2,313		2,140		4,453
2019		2,210		1,218		3,428
2020		2,083		519		2,602
2021		1,832		541		2,373
Thereafter		15,201		1,403		16,604
	$	29,203	$	7,882	$	37,085

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Note J - Subordinated Debentures and Trust Preferred Securities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Subordinated Borrowings Disclosure [Text Block]

Note

J

- Subordinated Debentures and Trust Preferred Securities

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 was fixed at

6.58%

for

five

years, and then converted to a floating-rate term on

March

15,

2012,

based on a rate equal to the

3

-month LIBOR plus

1.68%.

  The interest rate on these trust preferred securities was

2.64%

at

December

31,

2016

and

2.19%

at

December

31,

2015.

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.

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. The subordinated debentures

may

be included in Tier

1

capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

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Note K - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

K

- Income Taxes

The provision for income taxes consists of the following components:

	2016			2015		2014
Current tax expense	$	2,645		$	2,218	$	3,637
Deferred tax (benefit) expense		(725	)		591		(517	)
Total income taxes	$	1,920		$	2,809	$	3,120

The source of deferred tax assets and deferred tax liabilities at

December

31:

	2016			2015
Items giving rise to deferred tax assets:
Allowance for loan losses	$	2,538		$	2,302
Unrealized loss on securities available for sale		510			----
Deferred compensation		2,194			2,089
Deferred loan fees/costs		248			273
Other real estate owned		719			370
Accrued bonus		240			166
Purchase accounting adjustments		305			----
Net operating loss		258			----
Other		275			143
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(134	)		(149	)
FHLB stock dividends		(1,078	)		(1,074	)
Unrealized gain on securities available for sale		----			(157	)
Prepaid expenses		(283	)		(234	)
Depreciation and amortization		(823	)		(740	)
Other		(4	)		(5	)
Net deferred tax asset	$	4,965		$	2,984

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 the future reversals of existing taxable temporary differences, deductions against forecasted income and tax planning strategies.

At

December

31,

2016,

the Company had section

382

net operating loss carryforwards of approximately

$758

that will expire in

2026.

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:

	2016			2015			2014
Statutory tax	$	3,006		$	3,870		$	3,806
Effect of nontaxable interest		(433	)		(437	)		(418	)
Effect of nontaxable insurance premiums		(340	)		(336	)		(142	)
Income from bank owned insurance, net		(239	)		(210	)		(217	)
Effect of postretirement benefits		(19	)		71			238
Effect of nontaxable life insurance death proceeds		----			(11	)		----
Effect of state income tax		64			66			73
Tax credits		(211	)		(221	)		(231	)
Milton Merger Costs		73			----			----
Other items		19			17			11
Total income taxes	$	1,920		$	2,809		$	3,120

At

December

31,

2016

and

December

31,

2015,

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. As previously reported, the Internal Revenue Service (“IRS”) has proposed that Loan Central, as a tax return preparer, be assessed a penalty for allegedly negotiating or endorsing checks issued by the U.S. Treasury to taxpayers.  The penalty would amount to approximately

$1.2

million.  Loan Central appealed this matter within the IRS.   Loan Central was notified that the Appeals Office will not concede the penalty, and the penalty has been assessed.  The Company is employing further IRS procedures, and the IRS is currently processing the Company’s claims. The matter

may

still be resolved at the IRS. If the matter is not resolved at the IRS, the matter

may

have to be resolved through the judicial system.   Based on consultation with legal counsel, management remains confident that it is highly unlikely that the penalty recommendation will be sustained.  Therefore, the Company did

not

recognize any interest and/or penalties related to this matter 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

2013.

  The tax years

2013

-

2015

remain open to federal and state examinations. 

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Note L - Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

L

- 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:

	2016		2015
Fixed rate	$	271	$	65
Variable rate		61,786		59,028
Standby letters of credit		5,134		3,322

The interest rate on fixed-rate commitments ranged from

3.75%

 to

6.25%

 at

December

31,

2016.

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 refund product provider. The clearing agreement is effective through

December

31,

2019

and is renewable in

3

-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 receives a fee paid by the

third

-party tax refund product 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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Note M - Related Party Transactions

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

M

- Related Party Transactions

Certain directors, executive officers and companies with which they are affiliated were loan customers during

2016.

A summary of activity on these borrower relationships with aggregate debt greater than

$120

is as follows:

Total loans at January 1, 2016	$	3,989
New loans		1,085
Repayments		(528	)
Other changes		1,399
Total loans at December 31, 2016	$	5,945

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

2016

and

2015

were

$38,867

and

$30,169.

     

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Note N - Employee Benefits

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note

N

- 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

$290,

$288,

and

$278

for

2016,

2015

and

2014.

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

350,170

and

322,056

at

December

31,

2016

and

2015.

  In addition, the subsidiaries made contributions to its ESOP Trust as follows: 

	Years ended December 31
	2016		2015		2014
Number of shares issued		24,572		----		14,618
Fair value of stock contributed	$	575	$	----	$	351
Cash contributed		----		674		300
Total expense	$	575	$	674	$	651

Life insurance contracts with a cash surrender value of

$27,343

and annuity assets of

$2,006

at

December

31,

2016

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

$6,328

and

$6,033

at

December

31,

2016

and

2015.

Expenses related to the plans for each of the last

three

years amounted to

$399,

$338,

and

$604.

In association with the split-dollar life insurance plan, the present value of the postretirement benefit totaled

$3,007

at

December

31,

2016

and

$3,062

at

December

31,

2015.

During the

fourth

quarter of

2015,

the Company recorded

$941

in proceeds expected to be received from the settlement of

two

BOLI policies. The triggering event occurred in

December

2015,

resulting in a

$908

reduction to BOLI assets and a net gain of

$33

that was recorded to income. The proceeds of

$941

had not yet been collected by year-end

2015

and, therefore, were recorded as other assets at

December

31,

2015.

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Note O - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

O

- Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are

three

levels of inputs that

may

be used to measure fair values:

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, or 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:

The fair values for 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:

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly 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. Non-real estate collateral

may

be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level

3

fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned:

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. Fair value is commonly 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. 

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with management’s own assumptions of fair value based on factors that include recent market data or industry-wide statistics. On an as-needed basis, the Company reviews the fair value of collateral, taking into consideration current market data, as well as all selling costs that typically approximate

10%.

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, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----	$	10,544		----
Agency mortgage-backed securities, residential		----		85,946		----

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----	$	8,965		----
Agency mortgage-backed securities, residential		----		82,686		----

There were no transfers between Level

1

and Level

2

during

2016

or

2015.

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, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner-occupied		----		----	$	3,536
Nonowner-occupied		----		----		1,985
Commercial and industrial		----		----		298
Other real estate owned:
Commercial real estate:
Construction		----		----		754

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Nonowner-occupied		----		----	$	2,473
Commercial and industrial		----		----		3,779
Other real estate owned:
Commercial real estate:
Construction		----		----		1,147

At

December

31,

2016,

the recorded investment of impaired loans measured for impairment using the fair value of collateral for collateral-dependent loans totaled

$8,732,

with a corresponding valuation allowance of

$2,913,

resulting in an increase of

$2,509

in provision expense during the year ended

December

31,

2016,

with no corresponding charge-offs recognized. At

December

31,

2015,

the recorded investment of impaired loans measured for impairment using the fair value of collateral for collateral-dependent loans totaled

$7,811,

with a corresponding valuation allowance of

$1,559,

resulting in an increase of

$741

in provision expense during the year ended

December

31,

2015,

with

$1,422

in additional charge-offs recognized.

Other real estate owned that was measured at fair value less costs to sell at

December

31,

2016

had a net carrying amount of

$754,

which is made up of the outstanding balance of

$2,217,

net of a valuation allowance of

$1,463

at

December

31,

2016.

There were

$393

in corresponding write-downs during

2016.

Other real estate owned that was measured at fair value less costs to sell at

December

31,

2015

had a net carrying amount of

$1,147,

which is made up of the outstanding balance of

$2,217,

net of a valuation allowance of

$1,070

at

December

31,

2015.

There were

no

corresponding write-downs during

2015.

The following table presents quantitative information about Level

3

fair value measurements for financial instruments measured at fair value on a non-recurring basis at

December

31,

2016

and

December

31,

2015:

December 31, 2016	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range			(Weighted Average)
Impaired loans:
Commercial real estate:
Owner-occupied	$	3,536	Sales approach	Adjustment to comparables	0%	to	65%		13.7%
			Cost approach	Adjustment to comparables	0%	to	29.5%		14.8%
Nonowner-occupied		1,985	Sales approach	Adjustment to comparables	0%	to	250%		58.6%
Commercial and industrial		298	Sales approach	Adjustment to comparables	0.9%	to	9.7%		5.2%
Other real estate owned:
Commercial real estate:
Construction		754	Sales approach	Adjustment to comparables	0%	to	30%		11.7%

December 31, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range			(Weighted Average)
Impaired loans:
Commercial real estate:
Nonowner-occupied	$	2,473	Sales approach	Adjustment to comparables	0%	to	12.5%		5.7%
Commercial and industrial		3,779	Sales approach	Adjustment to comparables	0.9%	to	30%		14.3%
Other real estate owned:
Commercial real estate:
Construction		1,147	Sales approach	Adjustment to comparables	0%	to	35%		15.2%

The carrying amounts and estimated fair values of financial instruments at

December

31,

2016

and

December

31,

2015

are as follows:

			Fair Value Measurements at December 31, 2016 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	40,166	$	40,166	$	----	$	----	$	40,166
Certificates of deposit in financial institutions		1,670		----		1,670		----		1,670
Securities available for sale		96,490		----		96,490		----		96,490
Securities held to maturity		18,665		----		9,541		9,630		19,171
Restricted investments in bank stocks		7,506		N/A		N/A		N/A		N/A
Loans, net		727,202		----		----		727,079		727,079
Accrued interest receivable		2,315		----		224		2,091		2,315
Financial Liabilities:
Deposits		790,452		209,576		581,340		----		790,916
Other borrowed funds		37,085		----		35,948		----		35,948
Subordinated debentures		8,500		----		5,821		----		5,821
Accrued interest payable		513		4		509		----		513

			Fair Value Measurements at December 31, 2015 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	45,530	$	45,530	$	----	$	----	$	45,530
Certificates of deposit in financial institutions		1,715		----		1,715		----		1,715
Securities available for sale		91,651		----		91,651		----		91,651
Securities held to maturity		19,903		----		9,814		10,976		20,790
Federal Home Loan Bank and Federal Reserve Bank stock		6,576		N/A		N/A		N/A		N/A
Loans, net		579,104		----		----		582,427		582,427
Accrued interest receivable		1,819		----		224		1,595		1,819
Financial Liabilities:
Deposits		660,746		176,499		484,636		----		661,135
Other borrowed funds		23,946		----		23,672		----		23,672
Subordinated debentures		8,500		----		5,368		----		5,368
Accrued interest payable		449		4		445		----		449

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents

: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level

1.

Certificates of deposit in financial institutions

: The carrying amounts of certificates of deposit in financial institutions approximate fair values and are classified as Level

2.

Securities Held to Maturity

:  The fair values for securities held to maturity are determined in the same manner as securities held for sale and discussed earlier in this note.  Level

3

securities consist of nonrated municipal bonds and tax credit (“QZAB”) bonds.

Restricted Investments in

B

ank

S

tock

s

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

Loans

: Fair values of loans are estimated as follows:  The fair value of fixed rate loans is estimated by discounting future cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level

3

classification.  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level

3

classification.  Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Deposit Liabilities

: The fair values disclosed for noninterest-bearing deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level

1

classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level

2

classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level

2

classification.

Other Borrowed Funds

: The carrying values of the Company’s short-term borrowings, generally maturing within

ninety

days, approximate their fair values resulting in a Level

2

classification. The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level

2

classification.

Subordinated Debentures

: The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level

2

classification.

Accrued Interest Receivable and Payable

: The carrying amount of accrued interest approximates fair value resulting in a classification that is consistent with the earning assets and interest-bearing liabilities with which it is associated.

Off-balance Sheet Instruments

:  Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

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.

XML

Note P - Regulatory Matters

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

P

- 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.  The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company and the Bank on

January

1,

2015

with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by

January

1,

2019.

Under the final rules, minimum requirements increased for both the quantity and quality of capital held by the Company and the Bank. The rules include a new common equity tier

1

capital to risk-weighted assets ratio of

4.5%

and a capital conservation buffer of

2.5%

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

January

1,

2016

at

0.625%,

and will be phased in over a

four

-year period, increasing by the same amount on each subsequent

January

1,

until fully phased-in on

January

1,

2019.

Further, Basel III rules increased the minimum ratio of tier

1

capital to risk-weighted assets increased from

4.0%

to

6.0%

and all banks are now subject to a

4.0%

minimum leverage ratio. The required total risk-based capital ratio was unchanged. Failure to maintain the required common equity tier

1

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. In addition, the Federal Reserve Board requires financial holding companies to meet “well capitalized” standards with ratios applicable to banks under the prompt corrective action regulations. Bank holding companies meeting the requirements of the Federal Reserve Board’s Small Bank Holding Company Policy are exempt from compliance with the consolidated capital requirements, although their bank subsidiaries are still subject to the bank capital requirements.

Effective

May

15,

2015,

the Federal Reserve Board amended the Small Bank Holding Company Policy to increase from

$500

million to

$1

billion the asset threshold for a bank to qualify under the Policy. Pursuant to that Policy, at

December

31,

2016,

the Company was not subject to the consolidated capital requirements. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes that as of

December

31,

2016

and

2015,

the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations 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

2016

and

2015,

 the Bank met the capital requirements to be deemed well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2016
Total capital (to risk weighted assets)
Consolidated	$	113,515		16.4	%		N/A		N/A			N/A		N/A
Bank		104,317		15.3		$	54,631		8.0	%	$	68,289		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		97,316		14.0			N/A		N/A			N/A		N/A
Bank		96,946		14.2			30,730		4.5			44,388		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		105,816		15.3			N/A		N/A			N/A		N/A
Bank		96,946		14.2			40,973		6.0			54,631		8.0
Tier 1 capital (to average assets)
Consolidated		105,816		11.2			N/A		N/A			N/A		N/A
Bank		96,946		10.4			37,168		4.0			46,461		5.0

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2015
Total capital (to risk weighted assets)
Consolidated	$	104,047		18.2	%		N/A		N/A			N/A		N/A
Bank		91,006		16.3		$	44,799		8.0	%	$	55,999		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		88,899		15.6			N/A		N/A			N/A		N/A
Bank		84,686		15.1			25,199		4.5			36,399		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		97,399		17.1			N/A		N/A			N/A		N/A
Bank		84,686		15.1			33,599		6.0			44,799		8.0
Tier 1 capital (to average assets)
Consolidated		97,399		12.2			N/A		N/A			N/A		N/A
Bank		84,686		10.8			31,280		4.0			39,100		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 of the Bank and Loan Central, Inc., and

90%

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

January

1,

2017

approximately

$5,884

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 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.

XML

Note Q - Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note

Q

- 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	2016		2015
Cash and cash equivalents	$	2,747	$	2,233
Investment in subsidiaries		115,057		96,759
Notes receivable – subsidiaries		3,420		3,881
Other assets		52		63
Total assets	$	121,276	$	102,936
Liabilities
Notes payable	$	7,882	$	3,918
Subordinated debentures		8,500		8,500
Other liabilities		366		48
Total liabilities		16,748		12,466
Shareholders’ Equity
Total shareholders’ equity		104,528		90,470
Total liabilities and shareholders’ equity	$	121,276	$	102,936

CONDENSED STATEMENTS OF INCOME

	Years ended December 31:
Income:	2016		2015		2014
Interest on notes	$	52	$	53	$	84
Other operating income		----		----		34
Dividends from subsidiaries		6,900		3,500		3,500
Gain on sale of ProAlliance Corporation		----		----		810
Expenses:
Interest on notes		136		53		84
Interest on subordinated debentures		204		170		165
Operating expenses		667		345		384
Income before income taxes and equity in undistributed earnings of subsidiaries..		5,945		2,985		3,795
Income tax benefit		256		167		(108	)
Equity in undistributed earnings of subsidiaries		719		5,422		4,386
Net Income	$	6,920	$	8,574	$	8,073

CONDENSED STATEMENTS OF CASH FLOWS

	Years ended December 31:
Cash flows from operating activities:	2016			2015			2014
Net Income	$	6,920		$	8,574		$	8,073
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of ProAlliance Corporation		----			----			(810	)
Equity in undistributed earnings of subsidiaries		(719	)		(5,422	)		(4,386	)
Common stock issued to ESOP		575			----			351
Change in other assets		11			(16	)		323
Change in other liabilities		318			(141	)		(334	)
Net cash provided by operating activities		7,105			2,995			3,217
Cash flows from investing activities:
Cash paid for Milton Bancorp, Inc. acquisition		(7,431	)		----			----
Proceeds from sale of ProAlliance Corporation		----			----			810
Investment in OVBC Captive		----			----			(250	)
Change in notes receivable		461			(100	)		(262	)
Net cash provided by (used in) investing activities		(6,970	)		(100	)		298
Cash flows from financing activities:
Change in notes payable		3,964			128			262
Proceeds from common stock through dividend reinvestment		----			----			103
Cash dividends paid		(3,585	)		(3,665	)		(3,441	)
Net cash provided by (used in) financing activities		379			(3,537	)		(3,076	)
Cash and cash equivalents:
Change in cash and cash equivalents		514			(642	)		439
Cash and cash equivalents at beginning of year		2,233			2,875			2,436
Cash and cash equivalents at end of year	$	2,747		$	2,233		$	2,875

XML

Note R - Segment Information

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

R

- 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

91.6%,

90.9%

and

90.6%

  of total consolidated revenues for the years ended

December

31,

2016,

2015

and

2014,

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. All goodwill is in the Banking segment.

Segment information is as follows:

	Year Ended December 31, 2016
	Banking		Consumer Finance		Total Company
Net interest income	$	33,019	$	3,307	$	36,326
Provision expense		2,665		161		2,826
Noninterest income		7,589		650		8,239
Noninterest expense		30,257		2,642		32,899
Tax expense		1,530		390		1,920
Net income		6,156		764		6,920
Assets		941,907		12,733		954,640

	Year Ended December 31, 2015
	Banking		Consumer Finance		Total Company
Net interest income	$	30,175	$	3,320	$	33,495
Provision expense		1,055		35		1,090
Noninterest income		7,880		717		8,597
Noninterest expense		26,983		2,636		29,619
Tax expense		2,347		462		2,809
Net income		7,670		904		8,574
Assets		782,715		13,570		796,285

	Year Ended December 31, 2014
	Banking		Consumer Finance		Total Company
Net interest income	$	30,172	$	3,308	$	33,480
Provision expense		2,645		142		2,787
Noninterest income		8,897		896		9,793
Noninterest expense		26,806		2,487		29,293
Tax expense		2,587		533		3,120
Net income		7,031		1,042		8,073
Assets		764,510		14,158		778,668

XML

Note S - Consolidated Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Quarterly Financial Information [Text Block]

Note

S

- Consolidated Quarterly Financial Information

(unaudited)

	Quarters Ended
	Mar. 31			Jun. 30		Sept. 30			Dec. 31
201 6
Total interest income	$	9,770		$	8,913	$	9,824		$	10,841
Total interest expense		670			707		839			806
Net interest income		9,100			8,206		8,985			10,035
Provision for loan losses ( 1 )		479			141		1,708			498
Noninterest income ( 3 )		3,235			1,861		1,693			1,450
Noninterest expense		7,969			7,773		8,828			8,329
Net income		2,832			1,706		358			2,024
Earnings per share	$	0.69		$	0.41	$	0.08		$	0.43
201 5
Total interest income	$	9,627		$	8,866	$	9,016		$	8,825
Total interest expense		697			717		731			694
Net interest income		8,930			8,149		8,285			8,131
Provision for loan losses ( 2 )		(78	)		799		(11	)		380
Noninterest income ( 3 )		3,489			1,917		1,584			1,607
Noninterest expense		7,427			7,554		7,727			6,911
Net income		3,624			1,410		1,642			1,898
Earnings per share	$	0.88		$	0.34	$	0.40		$	0.46
201 4
Total interest income	$	9,508		$	8,925	$	8,904		$	9,018
Total interest expense		726			738		696			715
Net interest income		8,782			8,187		8,208			8,303
Provision for loan losses ( 4 )		494			1,386		(682	)		1,589
Noninterest income ( 3 )		4,118			1,912		2,106			1,657
Noninterest expense		7,295			6,997		7,244			7,757
Net income		3,564			1,344		2,742			423
Earnings per share	$	0.87		$	0.33	$	0.67		$	0.10

(1)

During the

third

quarter of

2016,

the Company experienced higher provision expense that was primarily related to an increase in specific allocations impacted by the decline in collateral values of

two

impaired commercial real estate loan relationships. A re-appraisal of the commercial properties securing the loans identified further collateral depreciation, which resulted in a

$2,435

increase to the specific allocations related to the loans.

(2)

During the

first

and

third

quarters of

2015,

the Company experienced negative provision expense as a result of lower general allocations of the allowance for loan losses. General allocations were impacted by improved economic trends that include: decreasing historical loan loss factor, lower delinquencies and lower classified/criticized assets.

(3)

The Company’s noninterest income was significantly impacted by seasonal tax refund processing fees. The Bank serves as a facilitator for the clearing of tax refunds for a single tax refund product provider. The Bank processes electronic refund checks/deposits associated with taxpayer refunds, and will, in turn, receive a fee paid by the

third

-party tax refund product provider for each transaction processed. Due to the seasonal nature of tax refund transactions, the majority of income was recorded during the

first

quarter.

(4)

During the

third

quarter of

2014,

the Company experienced negative provision expense that was primarily related to a decrease in specific allocations impacted by the improvement in collateral values of an impaired commercial real estate loan relationship. A re-appraisal of the commercial properties securing the loan identified asset appreciation, which resulted in a

$524

reduction to the specific allocation related to the loan.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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”), an Ohio state-chartered bank that is a member of the Federal Reserve Bank and is regulated primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board. Ohio Valley also has a subsidiary that engages in consumer lending to individuals with higher credit risk history, Loan Central, Inc.; a subsidiary insurance agency that facilitates the receipts of insurance commissions, Ohio Valley Financial Services Agency, LLC; and a limited purpose property and casualty insurance company, OVBC Captive, Inc.  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

25

offices located in 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.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation:

The consolidated financial statements include the accounts of Ohio Valley and its wholly-owned subsidiaries, the Bank, Loan Central, Inc., Ohio Valley Financial Services Agency, LLC, and OVBC Captive, Inc.  All material intercompany accounts and transactions have been eliminated.

Segment Reporting, Policy [Policy Text Block]

Industry Segment Information:

  Internal financial information is primarily reported and aggregated in

two

lines of business, banking and consumer finance.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates:

To prepare financial statements in conformity with accounting principles generally accepted in the U.S., management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents:

Cash and cash equivalents include cash on hand, noninterest-bearing deposits with banks, federal funds sold and interest-bearing deposits with banks with maturity terms of less than

90

days. 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.

Certificates of Deposit in Financial Institutions [Policy Text Block]

Certificates of deposit in financial institutions

:

Certificates of deposit in financial institutions are carried at cost and have maturity terms of

90

days or greater. The longest maturity date is

September

30,

2019.

Marketable Securities, Policy [Policy Text Block]

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.

Marketable Securities, Available-for-sale Securities, Policy [Policy Text Block]

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 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.

Investment, Policy [Policy Text Block]

Restricted Investments in Bank Stocks

:

  The Bank is a member of the Federal Home Loan Bank (“FHLB”) system.  Additionally, the Bank is a member of the Federal Reserve Bank (“FRB”) system. Members are required to own a certain amount of stock based on their level of borrowings and other factors and

may

invest in additional amounts.  FHLB stock and FRB stock are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income. The Company has additional investments in other restricted bank stocks that are not material to the financial statements.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

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.

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.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

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.  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 for the consumer and real estate portfolio segment and

5

years for the commercial portfolio segment. The total loan portfolio’s 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 and Industrial, Commercial Real Estate, 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.

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

6

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.  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.

At

December

31,

2016,

there were no changes to the accounting policies or methodologies within any of the Company’s loan portfolio segments from the prior period.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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
	2016			2015
Residential real estate loans		38.92	%		38.22	%
Commercial real estate loans		29.12	%		28.90	%
Consumer loans		18.27	%		18.89	%
Commercial and industrial loans		13.69	%		13.99	%
		100.00	%		100.00	%

Approximately

5.61%

of total loans were unsecured at

December

31,

2016,

down from

6.06%

at

December

31,

2015.

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,

2016,

the Bank’s primary correspondent balance was

$26,422

on deposit at the Federal Reserve Bank, Cleveland, Ohio.

Property, Plant and Equipment, Policy [Policy Text Block]

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 method 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.

Real Estate, Policy [Policy Text Block]

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.  Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. 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

$2,129

and

$2,358

at

December

31,

2016

and

2015.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

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. Goodwill is the only intangible asset with an indefinite life on our balance sheet. The Company has selected

December

31

as the date to perform its annual qualitative impairment test.  Given that the Company has been profitable and had positive equity, the qualitative assessment indicated that it was more likely than not that the fair value of goodwill was more than the carrying amount, resulting in no impairment.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

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.

Transfers and Servicing of Financial Assets, Policy [Policy Text Block]

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 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,

2016

and

2015,

the Company’s MSR assets were 

$387

and

$429,

respectively.

Earnings Per Share, Policy [Policy Text Block]

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:

4,351,748

for

2016;

4,117,675

for

2015;

4,099,194

for

2014.

  Ohio Valley had no dilutive securities outstanding for any period presented.

Income Tax, Policy [Policy Text Block]

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.

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, Policy [Policy Text Block]

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.

Commitments and Contingencies, Policy [Policy Text Block]

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 [Policy Text Block]

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 for a certain key executive that earns interest.

Employee Stock Ownership Plan (ESOP), Policy [Policy Text Block]

Employee Stock Ownership Plan:

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

Loan Commitments, Policy [Policy Text Block]

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 L for more specific disclosure related to loan commitments.

Dividend Restrictions [Policy Text Block]

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 P for more specific disclosure related to dividend restrictions.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restrictions on Cash

:

  Cash on hand or on deposit with a

third

-party correspondent and the Federal Reserve Bank of

$28,102

and

$36,535

was required to meet regulatory reserve and clearing requirements at year-end

2016

and

2015.

  The balances on deposit with a

third

-party correspondent do not earn interest.

Derivatives, Policy [Policy Text Block]

Derivatives:

At the inception of a derivative contract, the Company designates the derivative as

one

of

three

types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These

three

types are

(1)

a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”),

(2)

a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or

(3)

an instrument with no hedging designation (“stand-alone derivative”).

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

At

December

31,

2016

and

2015,

the Company’s only derivatives on hand were interest rate swaps, which are classified as stand-alone derivatives. See Note H for more specific disclosures related to interest rate swaps.

Fair Value of Financial Instruments, Policy [Policy Text Block]

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 O.  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.

Reclassification, Policy [Policy Text Block]

Reclassifications:

The consolidated financial statements for

2015

and

2014

have been reclassified to conform with the presentation for

2016.

  These reclassifications had no effect on the net results of operations or shareholders’ equity.

New Accounting Pronouncements, Policy [Policy Text Block]

Adoption of New Accounting Standards:

In

May

2014,

the FASB issued Accounting Standards Update ("ASU")

2014

-

09,

"Revenue from Contracts with Customers (Topic

606)".

The ASU creates a new topic, Topic

606,

to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after

December

15,

2017,

with early adoption permitted on

January

1,

2017.

The adoption of ASU

2014

-

09

is not expected to have a material effect on the Company's financial statements.

In

January

2016,

the FASB issued ASU No.

2016

-

01,

"Recognition and Measurement of Financial Assets and Financial Liabilities". The update provides updated accounting and reporting requirements for both public and non-public entities. The most significant provisions that will impact the Company are:

1)

measurement at fair value of equity securities available for sale, with the changes in fair value recognized in the income statement;

2)

elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments at amortized cost on the balance sheet;

3)

utilization of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and

4)

requirement of separate presentation of both financial assets and liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. The update will be effective for interim and annual periods beginning after

December

15,

2017,

using a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. Early adoption is not permitted. Management is currently evaluating the impact of this update on its Consolidated Financial Statements.

In

February

2016,

the FASB issued an update (ASU

2016

-

02,

Leases) which will require lessees to record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases, except for short-term leases that are subject to an accounting policy election, will be recorded on the balance sheet for lessees by establishing a lease liability and corresponding right-of-use asset. The guidance in this ASU will become effective for interim and annual reporting periods beginning after

December

15,

2018,

with early adoption permitted. Management is currently evaluating the impact of the adoption and does not expect to have a material impact on the income statement, but does anticipate an increase in the Company's assets and liabilities. However, the amounts that will be adjusted are still to be determined.

In

June

2016,

the FASB issued ASU No.

2016

-

13,

"Financial Instruments - Credit Losses". ASU

2016

-

13

requires entities to report "expected" credit losses on financial instruments and other commitments to extend credit rather than the current "incurred loss" model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after

December

15,

2019.

Early adoption is permitted, for annual periods and interim periods within those annual periods, beginning after

December

15,

2018.

Management is currently in the developmental stages, collecting available historical information, in order to assess the expected credit losses. However, the impact to the financial statements are still yet to be determined.

In

August

2016,

the FASB issued an update (ASU

2016

-

15,

Statement of Cash Flows) which addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  The amendments in this Update apply to all entities, including business entities and not-for-profit entities that are required to present a statement of cash flows, and are effective for public business entities for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The adoption of ASU

2016

-

15

is not expected to have a material effect on the Company’s financial statements.

XML

Note A - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Composition of Loan Portfolio [Table Text Block ]

	% of Total Loans
	2016			2015
Residential real estate loans		38.92	%		38.22	%
Commercial real estate loans		29.12	%		28.90	%
Consumer loans		18.27	%		18.89	%
Commercial and industrial loans		13.69	%		13.99	%
		100.00	%		100.00	%

XML

Note B - Business Combinations (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Consideration:
Cash	$	7,431
Equity instruments		11,444
Fair value of total consideration transferred	$	18,875
Recognized amounts of identifiable assets acquired and liabilities assumed :
Cash and cash equivalents	$	9,201
Securities		5,868
Restricted investments in bank stock		364
Loans		112,479
Premises and equipment		1,826
Other real estate owned		641
Bank owned life insurance		272
Core deposit intangible asset		738
Other assets		612
Total assets acquired		132,001
Deposits		119,669
Other liabilities		(9	)
Total liabilities assumed		119,660
Total identifiable net assets		12,341
Goodwill		6,534
	$	18,875

XML

Note C - Securities (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Available-for-sale Securities [Table Text Block]

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities Available for Sale
December 31, 2016
U.S. Government sponsored entity securities	$	10,624	$	----	$	(80	)	$	10,544
Agency mortgage-backed securities, residential		87,367		495		(1,916	)		85,946
Total securities	$	97,991	$	495	$	(1,996	)	$	96,490
December 31, 2015
U.S. Government sponsored entity securities	$	9,011	$	----	$	(46	)	$	8,965
Agency mortgage-backed securities, residential		82,178		981		(473	)		82,686
Total securities	$	91,189	$	981	$	(519	)	$	91,651

Held-to-maturity Securities [Table Text Block]

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
Securities Held to Maturity
December 31, 2016
Obligations of states and political subdivisions	$	18,661	$	654	$	(148	)	$	19,167
Agency mortgage-backed securities, residential		4		----		----			4
Total securities	$	18,665	$	654	$	(148	)	$	19,171
December 31, 2015
Obligations of states and political subdivisions	$	19,898	$	892	$	(5	)	$	20,785
Agency mortgage-backed securities, residential		5		----		----			5
Total securities	$	19,903	$	892	$	(5	)	$	20,790

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available for Sale				Held to Maturity
Debt Securities:	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	4,001	$	3,999	$	272	$	275
Due in one to five years		6,623		6,545		7,061		7,342
Due in five to ten years		----		----		8,690		9,029
Due after ten years		----		----		2,638		2,521
Agency mortgage-backed securities, residential		87,367		85,946		4		4
Total debt securities	$	97,991	$	96,490	$	18,665	$	19,171

Schedule of Unrealized Loss on Investments [Table Text Block]

December 31, 201 6	Less than 12 Months					12 Months or More				Total
Securities Available for Sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entity securities	$	10,544	$	(80	)	$	----	$	----	$	10,544	$	(80	)
Agency mortgage-backed securities, residential		64,043		(1,916	)		----		----		64,043		(1,916	)
Total available for sale	$	74,587	$	(1,996	)	$	----	$	----	$	74,587	$	(1,996	)

December 31, 201 5	Less than 12 Months					12 Months or More					Total
Securities Available for Sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government sponsored entity securities	$	7,964	$	(46	)	$	----	$	----		$	7,964	$	(46	)
Agency mortgage-backed securities, residential		42,112		(407	)		3,645		(66	)		45,757		(473	)
Total available for sale	$	50,076	$	(453	)	$	3,645	$	(66	)	$	53,721	$	(519	)

Held-to-maturity Securities [Member]

Notes Tables

Schedule of Unrealized Loss on Investments [Table Text Block]

	Less than 12 Months					12 Months or More				Total
Securities Held to Maturity	Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss
Obligations of states and political subdivisions	$	3,813	$	(148	)	$	----	$	----	$	3,813	$	(148	)
Total held to maturity	$	3,813	$	(148	)	$	----	$	----	$	3,813	$	(148	)

	Less than 12 Months					12 Months or More				Total
Securities Held to Maturity	Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss
Obligations of states and political subdivisions	$	995	$	(5	)	$	----	$	----	$	995	$	(5	)
Total held to maturity	$	995	$	(5	)	$	----	$	----	$	995	$	(5	)

XML

Note D - Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	2016			2015
Residential real estate	$	286,022		$	223,875
Commercial real estate:
Owner-occupied		77,605			73,458
Nonowner-occupied		90,532			72,002
Construction		45,870			23,852
Commercial and industrial		100,589			81,936
Consumer:
Automobile		59,772			44,566
Home equity		20,861			20,841
Other		53,650			45,222
		734,901			585,752
Less: Allowance for loan losses		(7,699	)		(6,648	)
Loans, net	$	727,202		$	579,104

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

December 31, 2016	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648
Provision for loan losses		(63	)		2,287			(1,112	)		1,714			2,826
Loans charged off		(384	)		(63	)		(586	)		(2,170	)		(3,203	)
Recoveries		299			132			16			981			1,428
Total ending allowance balance	$	939		$	4,315		$	907		$	1,538		$	7,699

December 31, 2015	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		103			(469	)		777			679			1,090
Loans charged off		(828	)		(1,971	)		(24	)		(1,428	)		(4,251	)
Recoveries		386			204			234			651			1,475
Total ending allowance balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648

December 31, 2014	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		458			1,408			(28	)		949			2,787
Loans charged off		(487	)		(235	)		(41	)		(1,216	)		(1,979	)
Recoveries		286			108			392			585			1,371
Total ending allowance balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334

Allowance For Loan Losses And The Recorded Investment Of Loans [Table Text Block]

December 31, 2016	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,535	$	241	$	205	$	2,981
Collectively evaluated for impairment		939		1,780		666		1,333		4,718
Total ending allowance balance	$	939	$	4,315	$	907	$	1,538	$	7,699
Loans:
Loans individually evaluated for impairment	$	717	$	13,111	$	8,465	$	416	$	22,709
Loans collectively evaluated for impairment		285,305		200,896		92,124		133,867		712,192
Total ending loans balance	$	286,022	$	214,007	$	100,589	$	134,283	$	734,901

December 31, 2015	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	311	$	1,850	$	3	$	2,164
Collectively evaluated for impairment		1,087		1,648		739		1,010		4,484
Total ending allowance balance	$	1,087	$	1,959	$	2,589	$	1,013	$	6,648
Loans:
Loans individually evaluated for impairment	$	1,001	$	7,318	$	8,691	$	218	$	17,228
Loans collectively evaluated for impairment		222,874		161,994		73,245		110,411		568,524
Total ending loans balance	$	223,875	$	169,312	$	81,936	$	110,629	$	585,752

Schedule of Loans Individually Evaluated for Impairment [Table Text Block]

December 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	5,477	$	5,477	$	2,435	$	3,185	$	300	$	300
Nonowner-occupied		384		384		100		390		19		19
Commercial and industrial		392		392		241		391		----		----
Consumer:
Home equity		416		416		205		421		21		21
With no related allowance recorded:
Residential real estate		717		717		----		726		31		31
Commercial real estate:
Owner-occupied		3,638		3,091		----		3,005		178		178
Nonowner-occupied		5,078		3,632		----		3,572		79		79
Construction		1,001		527		----		522		136		136
Commercial and industrial		8,073		8,073		----		7,681		381		381
Total	$	25,176	$	22,709	$	2,981	$	19,893	$	1,145	$	1,145

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204	$	204	$	13	$	13
Nonowner-occupied		396		396		107		402		75		75
Commercial and industrial		4,355		4,355		1,850		3,545		149		149
Consumer:
Home equity		218		218		3		219		8		8
With no related allowance recorded:
Residential real estate		1,001		1,001		----		809		45		45
Commercial real estate:
Owner-occupied		3,812		3,265		----		2,747		181		181
Nonowner-occupied		5,178		2,773		----		3,439		49		49
Construction		680		680		----		544		----		----
Commercial and industrial		4,336		4,336		----		3,985		180		180
Total	$	20,180	$	17,228	$	2,164	$	15,894	$	700	$	700

December 31, 2014	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	----	$	----	$	----	$	----	$	6	$	6
Commercial real estate:
Owner-occupied		1,177		1,177		414		471		32		32
Nonowner-occupied		7,656		7,656		2,092		8,303		398		398
Commercial and industrial		2,356		2,356		900		2,441		110		110
Consumer:
Home equity		219		219		6		219		7		7
With no related allowance recorded:
Residential real estate		1,415		1,415		----		882		58		58
Commercial real estate:
Owner-occupied		3,125		2,578		----		2,135		113		113
Nonowner-occupied		1,298		300		----		300		50		50
Commercial and industrial		4,703		4,468		----		2,278		180		180
Total	$	21,949	$	20,169	$	3,412	$	17,029	$	954	$	954

Schedule of Recorded Investment In Nonaccrual Loans [Table Text Block]

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2016
Residential real estate	$	132	$	3,445
Commercial real estate:
Owner-occupied		28		1,571
Nonowner-occupied		----		2,506
Construction		----		527
Commercial and industrial		----		867
Consumer:
Automobile		121		5
Home equity		----		34
Other		46		6
Total	$	327	$	8,961

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2015
Residential real estate	$	20	$	2,048
Commercial real estate:
Owner-occupied		----		404
Nonowner-occupied		----		2,737
Construction		----		769
Commercial and industrial		----		1,152
Consumer:
Automobile		18		27
Home equity		----		96
Other		1		3
Total	$	39	$	7,236

Past Due Financing Receivables [Table Text Block]

December 31, 2016	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	$	3,728	$	953	$	2,201	$	6,882	$	279,140	$	286,022
Commercial real estate:
Owner-occupied		134		366		1,325		1,825		75,780		77,605
Nonowner-occupied		261		18		2,506		2,785		87,747		90,532
Construction		66		52		182		300		45,570		45,870
Commercial and industrial		1,283		483		800		2,566		98,023		100,589
Consumer:
Automobile		1,091		221		126		1,438		58,334		59,772
Home equity		349		45		----		394		20,467		20,861
Other		685		155		46		886		52,764		53,650
Total	$	7,597	$	2,293	$	7,186	$	17,076	$	717,825	$	734,901

December 31, 2015	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	$	2,564	$	1,484	$	1,708	$	5,756	$	218,119	$	223,875
Commercial real estate:
Owner-occupied		141		33		371		545		72,913		73,458
Nonowner-occupied		35		334		2,737		3,106		68,896		72,002
Construction		----		2		769		771		23,081		23,852
Commercial and industrial		31		88		1,077		1,196		80,740		81,936
Consumer:
Automobile		727		197		36		960		43,606		44,566
Home equity		75		----		76		151		20,690		20,841
Other		420		104		4		528		44,694		45,222
Total	$	3,993	$	2,242	$	6,778	$	13,013	$	572,739	$	585,752

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2016
Residential real estate:
Interest only payments	$	717	$	----	$	717
Commercial real estate:
Owner-occupied
Interest only payments		284		----		284
Rate reduction		----		232		232
Reduction of principal and interest payments		579		----		579
Maturity extension at lower stated rate than market rate		1,582		----		1,582
Nonowner-occupied
Interest only payments		600		2,210		2,810
Rate reduction		384		----		384
Credit extension at lower stated rate than market rate		574		----		574
Commercial and industrial
Interest only payments		8,074		----		8,074
Credit extension at lower stated rate than market rate		----		391		391
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		213		----		213
Credit extension at lower stated rate than market rate		203		----		203
Total TDR’s	$	13,210	$	2,833	$	16,043

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2015
Residential real estate:
Interest only payments	$	1,001	$	----	$	1,001
Commercial real estate:
Owner-occupied
Interest only payments		433		----		433
Rate reduction		----		232		232
Reduction of principal and interest payments		604		----		604
Maturity extension at lower stated rate than market rate		1,996		----		1,996
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		300		2,473		2,773
Rate reduction		396		----		396
Commercial and industrial
Interest only payments		7,579		----		7,579
Credit extension at lower stated rate than market rate		226		391		617
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR’s	$	12,957	$	3,096	$	16,053

Troubled Debt Restructurings on Financing Receivables Pre And Post Modification [Table Text Block]

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2016
Commercial real estate:
Nonowner-occupied
Interest only payments	$	----	$	----	$	226	$	226
Credit extension at lower stated rate than market rate		574		574		----		----
Total TDR’s	$	574	$	574	$	226	$	226

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2015
Residential real estate
Interest only payments	$	495	$	495		----		----
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		1,025		1,025		----		----
Commercial and industrial
Credit extension at lower stated rate than market rate		226		226		----		----
Total TDR’s	$	1,746	$	1,746		----		----

Financing Receivable Credit Quality Indicators [Table Text Block]

December 31, 2016	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	66,495	$	428	$	10,682	$	77,605
Nonowner-occupied		83,103		2,364		5,065		90,532
Construction		45,325		----		545		45,870
Commercial and industrial		94,091		188		6,310		100,589
Total	$	289,014	$	2,980	$	22,602	$	314,596

December 31, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	62,287	$	6,738	$	4,433	$	73,458
Nonowner-occupied		61,577		6,305		4,120		72,002
Construction		23,080		----		772		23,852
Commercial and industrial		70,852		5,232		5,852		81,936
Total	$	217,796	$	18,275	$	15,177	$	251,248

Performing and Nonperforming Loans [Table Text Block]

	Consumer
December 31, 2016	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	59,646	$	20,827	$	53,598	$	282,445	$	416,516
Nonperforming		126		34		52		3,577		3,789
Total	$	59,772	$	20,861	$	53,650	$	286,022	$	420,305

	Consumer
December 31, 2015	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	44,521	$	20,745	$	45,218	$	221,807	$	332,291
Nonperforming		45		96		4		2,068		2,213
Total	$	44,566	$	20,841	$	45,222	$	223,875	$	334,504

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Note E - Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

	2016		2015
Land	$	2,348	$	2,055
Buildings		13,247		10,890
Leasehold improvements		1,238		2,066
Furniture and equipment		5,085		4,334
		21,918		19,345
Less accumulated depreciation		9,135		8,941
Total premises and equipment	$	12,783	$	10,404

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

2017	$	332
2018		181
2019		54
2020		49
2021		25
	$	641

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Note F - Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Goodwill [Table Text Block]

	2016
Beginning of year	$	1,267
Acquired goodwill		6,534
Impairment		----
End of year	$	7,801

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	2016
	Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:	$	738	$	68
Core deposit intangibles
Other customer relationship intangibles		----		----
Total	$	738	$	68

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2017	$	156
2018		135
2019		114
2020		94
2021		74
Thereafter		97
Total	$	670

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Note G - Deposits (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Interest Bearing Deposits [Table Text Block ]

	2016		2015
NOW accounts	$	155,051	$	124,524
Savings and Money Market		237,761		200,976
Time:
In denominations of $250,000 or less		168,546		146,975
In denominations of more than $250,000		19,518		11,772
Total time deposits		188,064		158,747
Total interest-bearing deposits	$	580,876	$	484,247

Maturities of Time Deposits [Table Text Block]

2017	$	100,447
2018		53,559
2019		17,611
2020		11,401
2021		4,570
Thereafter		476
Total	$	188,064

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Note I - Other Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]

	FHLB Borrowings		Promissory Notes		Totals
2016	$	29,203	$	7,882	$	37,085
2015	$	20,028	$	3,918	$	23,946

Schedule of Maturities of Long-term Debt [Table Text Block]

	FHLB Borrowings		Promissory Notes		Totals
2017	$	5,564	$	2,061	$	7,625
2018		2,313		2,140		4,453
2019		2,210		1,218		3,428
2020		2,083		519		2,602
2021		1,832		541		2,373
Thereafter		15,201		1,403		16,604
	$	29,203	$	7,882	$	37,085

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Note K - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2016			2015		2014
Current tax expense	$	2,645		$	2,218	$	3,637
Deferred tax (benefit) expense		(725	)		591		(517	)
Total income taxes	$	1,920		$	2,809	$	3,120

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2016			2015
Items giving rise to deferred tax assets:
Allowance for loan losses	$	2,538		$	2,302
Unrealized loss on securities available for sale		510			----
Deferred compensation		2,194			2,089
Deferred loan fees/costs		248			273
Other real estate owned		719			370
Accrued bonus		240			166
Purchase accounting adjustments		305			----
Net operating loss		258			----
Other		275			143
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(134	)		(149	)
FHLB stock dividends		(1,078	)		(1,074	)
Unrealized gain on securities available for sale		----			(157	)
Prepaid expenses		(283	)		(234	)
Depreciation and amortization		(823	)		(740	)
Other		(4	)		(5	)
Net deferred tax asset	$	4,965		$	2,984

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2016			2015			2014
Statutory tax	$	3,006		$	3,870		$	3,806
Effect of nontaxable interest		(433	)		(437	)		(418	)
Effect of nontaxable insurance premiums		(340	)		(336	)		(142	)
Income from bank owned insurance, net		(239	)		(210	)		(217	)
Effect of postretirement benefits		(19	)		71			238
Effect of nontaxable life insurance death proceeds		----			(11	)		----
Effect of state income tax		64			66			73
Tax credits		(211	)		(221	)		(231	)
Milton Merger Costs		73			----			----
Other items		19			17			11
Total income taxes	$	1,920		$	2,809		$	3,120

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Note L - Commitments and Contingent Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Other Commitments [Table Text Block]

	2016		2015
Fixed rate	$	271	$	65
Variable rate		61,786		59,028
Standby letters of credit		5,134		3,322

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Note M - Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

Total loans at January 1, 2016	$	3,989
New loans		1,085
Repayments		(528	)
Other changes		1,399
Total loans at December 31, 2016	$	5,945

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Note N - Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Employee Stock Ownership Plan (ESOP) Disclosures [Table Text Block]

	Years ended December 31
	2016		2015		2014
Number of shares issued		24,572		----		14,618
Fair value of stock contributed	$	575	$	----	$	351
Cash contributed		----		674		300
Total expense	$	575	$	674	$	651

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Note O - Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

	Fair Value Measurements at December 31, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----	$	10,544		----
Agency mortgage-backed securities, residential		----		85,946		----

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government sponsored entity securities		----	$	8,965		----
Agency mortgage-backed securities, residential		----		82,686		----

	Fair Value Measurements at December 31, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner-occupied		----		----	$	3,536
Nonowner-occupied		----		----		1,985
Commercial and industrial		----		----		298
Other real estate owned:
Commercial real estate:
Construction		----		----		754

	Fair Value Measurements at December 31, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Nonowner-occupied		----		----	$	2,473
Commercial and industrial		----		----		3,779
Other real estate owned:
Commercial real estate:
Construction		----		----		1,147

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

December 31, 2016	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range			(Weighted Average)
Impaired loans:
Commercial real estate:
Owner-occupied	$	3,536	Sales approach	Adjustment to comparables	0%	to	65%		13.7%
			Cost approach	Adjustment to comparables	0%	to	29.5%		14.8%
Nonowner-occupied		1,985	Sales approach	Adjustment to comparables	0%	to	250%		58.6%
Commercial and industrial		298	Sales approach	Adjustment to comparables	0.9%	to	9.7%		5.2%
Other real estate owned:
Commercial real estate:
Construction		754	Sales approach	Adjustment to comparables	0%	to	30%		11.7%

December 31, 2015	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range			(Weighted Average)
Impaired loans:
Commercial real estate:
Nonowner-occupied	$	2,473	Sales approach	Adjustment to comparables	0%	to	12.5%		5.7%
Commercial and industrial		3,779	Sales approach	Adjustment to comparables	0.9%	to	30%		14.3%
Other real estate owned:
Commercial real estate:
Construction		1,147	Sales approach	Adjustment to comparables	0%	to	35%		15.2%

Fair Value, by Balance Sheet Grouping [Table Text Block]

			Fair Value Measurements at December 31, 2016 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	40,166	$	40,166	$	----	$	----	$	40,166
Certificates of deposit in financial institutions		1,670		----		1,670		----		1,670
Securities available for sale		96,490		----		96,490		----		96,490
Securities held to maturity		18,665		----		9,541		9,630		19,171
Restricted investments in bank stocks		7,506		N/A		N/A		N/A		N/A
Loans, net		727,202		----		----		727,079		727,079
Accrued interest receivable		2,315		----		224		2,091		2,315
Financial Liabilities:
Deposits		790,452		209,576		581,340		----		790,916
Other borrowed funds		37,085		----		35,948		----		35,948
Subordinated debentures		8,500		----		5,821		----		5,821
Accrued interest payable		513		4		509		----		513

			Fair Value Measurements at December 31, 2015 Using:
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	45,530	$	45,530	$	----	$	----	$	45,530
Certificates of deposit in financial institutions		1,715		----		1,715		----		1,715
Securities available for sale		91,651		----		91,651		----		91,651
Securities held to maturity		19,903		----		9,814		10,976		20,790
Federal Home Loan Bank and Federal Reserve Bank stock		6,576		N/A		N/A		N/A		N/A
Loans, net		579,104		----		----		582,427		582,427
Accrued interest receivable		1,819		----		224		1,595		1,819
Financial Liabilities:
Deposits		660,746		176,499		484,636		----		661,135
Other borrowed funds		23,946		----		23,672		----		23,672
Subordinated debentures		8,500		----		5,368		----		5,368
Accrued interest payable		449		4		445		----		449

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Note P - Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2016
Total capital (to risk weighted assets)
Consolidated	$	113,515		16.4	%		N/A		N/A			N/A		N/A
Bank		104,317		15.3		$	54,631		8.0	%	$	68,289		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		97,316		14.0			N/A		N/A			N/A		N/A
Bank		96,946		14.2			30,730		4.5			44,388		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		105,816		15.3			N/A		N/A			N/A		N/A
Bank		96,946		14.2			40,973		6.0			54,631		8.0
Tier 1 capital (to average assets)
Consolidated		105,816		11.2			N/A		N/A			N/A		N/A
Bank		96,946		10.4			37,168		4.0			46,461		5.0

	Actual					Minimum Required To Be Adequately Capitalized Under Prompt Corrective Action Regulations					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2015
Total capital (to risk weighted assets)
Consolidated	$	104,047		18.2	%		N/A		N/A			N/A		N/A
Bank		91,006		16.3		$	44,799		8.0	%	$	55,999		10.0	%
Common equity Tier 1 capital (to risk weighted assets)
Consolidated		88,899		15.6			N/A		N/A			N/A		N/A
Bank		84,686		15.1			25,199		4.5			36,399		6.5
Tier 1 capital (to risk weighted assets)
Consolidated		97,399		17.1			N/A		N/A			N/A		N/A
Bank		84,686		15.1			33,599		6.0			44,799		8.0
Tier 1 capital (to average assets)
Consolidated		97,399		12.2			N/A		N/A			N/A		N/A
Bank		84,686		10.8			31,280		4.0			39,100		5.0

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Note Q - Parent Company Only Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Condensed Balance Sheet [Table Text Block]

	Years ended December 31:
Assets	2016		2015
Cash and cash equivalents	$	2,747	$	2,233
Investment in subsidiaries		115,057		96,759
Notes receivable – subsidiaries		3,420		3,881
Other assets		52		63
Total assets	$	121,276	$	102,936
Liabilities
Notes payable	$	7,882	$	3,918
Subordinated debentures		8,500		8,500
Other liabilities		366		48
Total liabilities		16,748		12,466
Shareholders’ Equity
Total shareholders’ equity		104,528		90,470
Total liabilities and shareholders’ equity	$	121,276	$	102,936

Condensed Income Statement [Table Text Block]

	Years ended December 31:
Income:	2016		2015		2014
Interest on notes	$	52	$	53	$	84
Other operating income		----		----		34
Dividends from subsidiaries		6,900		3,500		3,500
Gain on sale of ProAlliance Corporation		----		----		810
Expenses:
Interest on notes		136		53		84
Interest on subordinated debentures		204		170		165
Operating expenses		667		345		384
Income before income taxes and equity in undistributed earnings of subsidiaries..		5,945		2,985		3,795
Income tax benefit		256		167		(108	)
Equity in undistributed earnings of subsidiaries		719		5,422		4,386
Net Income	$	6,920	$	8,574	$	8,073

Condensed Cash Flow Statement [Table Text Block]

	Years ended December 31:
Cash flows from operating activities:	2016			2015			2014
Net Income	$	6,920		$	8,574		$	8,073
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of ProAlliance Corporation		----			----			(810	)
Equity in undistributed earnings of subsidiaries		(719	)		(5,422	)		(4,386	)
Common stock issued to ESOP		575			----			351
Change in other assets		11			(16	)		323
Change in other liabilities		318			(141	)		(334	)
Net cash provided by operating activities		7,105			2,995			3,217
Cash flows from investing activities:
Cash paid for Milton Bancorp, Inc. acquisition		(7,431	)		----			----
Proceeds from sale of ProAlliance Corporation		----			----			810
Investment in OVBC Captive		----			----			(250	)
Change in notes receivable		461			(100	)		(262	)
Net cash provided by (used in) investing activities		(6,970	)		(100	)		298
Cash flows from financing activities:
Change in notes payable		3,964			128			262
Proceeds from common stock through dividend reinvestment		----			----			103
Cash dividends paid		(3,585	)		(3,665	)		(3,441	)
Net cash provided by (used in) financing activities		379			(3,537	)		(3,076	)
Cash and cash equivalents:
Change in cash and cash equivalents		514			(642	)		439
Cash and cash equivalents at beginning of year		2,233			2,875			2,436
Cash and cash equivalents at end of year	$	2,747		$	2,233		$	2,875

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Note R - Segment Information (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Year Ended December 31, 2016
	Banking		Consumer Finance		Total Company
Net interest income	$	33,019	$	3,307	$	36,326
Provision expense		2,665		161		2,826
Noninterest income		7,589		650		8,239
Noninterest expense		30,257		2,642		32,899
Tax expense		1,530		390		1,920
Net income		6,156		764		6,920
Assets		941,907		12,733		954,640

	Year Ended December 31, 2015
	Banking		Consumer Finance		Total Company
Net interest income	$	30,175	$	3,320	$	33,495
Provision expense		1,055		35		1,090
Noninterest income		7,880		717		8,597
Noninterest expense		26,983		2,636		29,619
Tax expense		2,347		462		2,809
Net income		7,670		904		8,574
Assets		782,715		13,570		796,285

	Year Ended December 31, 2014
	Banking		Consumer Finance		Total Company
Net interest income	$	30,172	$	3,308	$	33,480
Provision expense		2,645		142		2,787
Noninterest income		8,897		896		9,793
Noninterest expense		26,806		2,487		29,293
Tax expense		2,587		533		3,120
Net income		7,031		1,042		8,073
Assets		764,510		14,158		778,668

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Note S - Consolidated Quarterly Financial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Quarterly Financial Information [Table Text Block]

	Quarters Ended
	Mar. 31			Jun. 30		Sept. 30			Dec. 31
201 6
Total interest income	$	9,770		$	8,913	$	9,824		$	10,841
Total interest expense		670			707		839			806
Net interest income		9,100			8,206		8,985			10,035
Provision for loan losses ( 1 )		479			141		1,708			498
Noninterest income ( 3 )		3,235			1,861		1,693			1,450
Noninterest expense		7,969			7,773		8,828			8,329
Net income		2,832			1,706		358			2,024
Earnings per share	$	0.69		$	0.41	$	0.08		$	0.43
201 5
Total interest income	$	9,627		$	8,866	$	9,016		$	8,825
Total interest expense		697			717		731			694
Net interest income		8,930			8,149		8,285			8,131
Provision for loan losses ( 2 )		(78	)		799		(11	)		380
Noninterest income ( 3 )		3,489			1,917		1,584			1,607
Noninterest expense		7,427			7,554		7,727			6,911
Net income		3,624			1,410		1,642			1,898
Earnings per share	$	0.88		$	0.34	$	0.40		$	0.46
201 4
Total interest income	$	9,508		$	8,925	$	8,904		$	9,018
Total interest expense		726			738		696			715
Net interest income		8,782			8,187		8,208			8,303
Provision for loan losses ( 4 )		494			1,386		(682	)		1,589
Noninterest income ( 3 )		4,118			1,912		2,106			1,657
Noninterest expense		7,295			6,997		7,244			7,757
Net income		3,564			1,344		2,742			423
Earnings per share	$	0.87		$	0.33	$	0.67		$	0.10

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Note A - Summary of Significant Accounting Policies (Details Textual) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 shares
Number of Reportable Segments	2
Percentage of Loan Portfolio	100.00%	100.00%
Due from Banks	$ 26,422
Repossessed Assets	2,129	$ 2,358
Servicing Asset	$ 387	$ 429
Weighted Average Number of Shares Outstanding, Basic | shares	4,351,748	4,117,675	4,099,194
Restricted Cash and Cash Equivalents	$ 28,102	$ 36,535
Weighted Average Number of Shares Outstanding, Diluted | shares	0	0	0
Goodwill, Impairment Loss	$ 0
Equipment Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Equipment Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	8 years
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	7 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	39 years
Unsecured [Member]
Percentage of Loan Portfolio	5.61%	6.06%
Consumer Portfolio Segment [Member]
Period of Actual Loss History Experienced	3 years
Percentage of Loan Portfolio	18.27%	18.89%
Commercial Portfolio Segment [Member]
Period of Actual Loss History Experienced	5 years
Percentage of Loan Portfolio	13.69%	13.99%

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Note A - Summary of Significant Accounting Policies - Composition of Loan Portfolio (Details)	Dec. 31, 2016	Dec. 31, 2015
% Total Loans	100.00%	100.00%
Residential Portfolio Segment [Member]
% Total Loans	38.92%	38.22%
Commercial Real Estate Portfolio Segment [Member]
% Total Loans	29.12%	28.90%
Consumer Portfolio Segment [Member]
% Total Loans	18.27%	18.89%
Commercial Portfolio Segment [Member]
% Total Loans	13.69%	13.99%

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Note B - Business Combinations (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Aug. 05, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Business Combination, Acquisition Related Costs		$ 930
Assets	$ 950,000	954,640	796,285	$ 778,668
Number of Branches	25
Goodwill		$ 7,801	$ 1,267
Milton Bancorp, Inc [Member]
Business Combination, Number of Common Shares of the Acquiring Entity into Which Common Shares of the Acquired Entity May Be Converted	1,636
Business Acquisition, Cash Which May Be Paid for the Stock of Acquired Entity	$ 37,219
Business Combination, Exchange of Acquired Entity's Common Shares for Cash or Common Shares of Acquiring Entity, Common Shares Reallocation Percentage	80.00%
Business Acquisition, Number of Issued and Outstanding Common Shares of Acquired Entity	400
Business Combination, Exchange of Acquired Entity's Common Shares for Cash or Common Shares of Acquiring Entity, Cash Reallocation Percentage	20.00%
Business Combination, Number of Acquired Entity Preferred Shares Converted to Receive Cash Payment	1,237
Business Combination, Cash Payment from Conversion of Acquired Preferred Shares	$ 3,600
Business Combination, Consideration Transferred	$ 18,875
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	11,444
Payments to Acquire Businesses, Gross	7,431
Payments to Acquire Businesses, Portion Financed in Borrowed Funds	5,000
Business Combination, Acquisition Related Costs	930
Goodwill	6,534
Business Combination, Acquired Receivables, Fair Value	111,558
Business Combination, Acquired Receivables, Gross Contractual Amount	$ 112,249
Business Combination, Number of Common Shares of the Acquiring Entity into Which Common Shares of the Acquired Entity May Be Converted, Par Value	0

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Note B - Business Combinations - Assets and Liabilities Assumed (Details) - USD ($) $ in Thousands	Aug. 05, 2016	Dec. 31, 2016	Dec. 31, 2015
Recognized amounts of identifiable assets acquired and liabilities assumed:
Goodwill		$ 7,801	$ 1,267
Milton Bancorp, Inc [Member]
Consideration:
Cash	$ 7,431
Equity instruments	11,444
Fair value of total consideration transferred	18,875
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	9,201
Securities	5,868
Restricted investments in bank stock	364
Loans	112,479
Premises and equipment	1,826
Other real estate owned	641
Bank owned life insurance	272
Other assets	612
Total assets acquired	132,001
Deposits	119,669
Other liabilities	(9)
Total liabilities assumed	119,660
Total identifiable net assets	12,341
Goodwill	6,534
	18,875
Milton Bancorp, Inc [Member] | Core Deposits [Member]
Recognized amounts of identifiable assets acquired and liabilities assumed:
Core deposit intangible asset	$ 738

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Note C - Securities (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Proceeds from Sale of Available-for-sale Securities		$ 10,550
Available-for-sale Securities, Gross Realized Gains		163
Available-for-sale Securities Pledged as Collateral	72,397	$ 59,267
Debt Securities [Member]
Proceeds from Sale of Available-for-sale Securities	$ 0		$ 0

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Note C - Securities - Securities Available-for-Sale (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Securities available for sale, amortized cost	$ 97,991	$ 91,189
Securities available for sale, gross unrealized gains	495	981
Securities available for sale, gross unrealized losses	(1,996)	(519)
Securities available for sale	96,490	91,651
US Government-sponsored Enterprises Debt Securities [Member]
Securities available for sale, amortized cost	10,624	9,011
Securities available for sale, gross unrealized gains
Securities available for sale, gross unrealized losses	(80)	(46)
Securities available for sale	10,544	8,965
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale, amortized cost	87,367	82,178
Securities available for sale, gross unrealized gains	495	981
Securities available for sale, gross unrealized losses	(1,916)	(473)
Securities available for sale	$ 85,946	$ 82,686

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Note C - Securities - Securities Held-to-Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Securities held to maturity, amortized cost	$ 18,665	$ 19,903
Securities held to maturity, gross unrecognized gains	654	892
Securities held to maturity, gross unrecognized losses	(148)	(5)
Total debt securities	19,171	20,790
US States and Political Subdivisions Debt Securities [Member]
Securities held to maturity, amortized cost	18,661	19,898
Securities held to maturity, gross unrecognized gains	654	892
Securities held to maturity, gross unrecognized losses	(148)	(5)
Total debt securities	19,167	20,785
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities held to maturity, amortized cost	4	5
Securities held to maturity, gross unrecognized gains
Securities held to maturity, gross unrecognized losses
Total debt securities	$ 4	$ 5

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Note C - Securities - Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Due in one year or less	$ 4,001
Due in one year or less	3,999
Due in one year or less	272
Due in one year or less	275
Due in one to five years	6,623
Due in one to five years	6,545
Due in one to five years	7,061
Due in one to five years	7,342
Due in five to ten years
Due in five to ten years
Due in five to ten years	8,690
Due in five to ten years	9,029
Due after ten years
Due after ten years
Due after ten years	2,638
Due after ten years	2,521
Agency mortgage-backed securities, residential	87,367
Agency mortgage-backed securities, residential	85,946
Agency mortgage-backed securities, residential	4
Agency mortgage-backed securities, residential	4
Total debt securities	97,991
Total debt securities	96,490
Total debt securities	18,665	$ 19,903
Total debt securities	$ 19,171	$ 20,790

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Note C - Securities - Securities Available-for-Sale with Unrealized Losses (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Less than 12 Months - Fair Value	$ 74,587	$ 50,076
Less than 12 Months - Unrealized Loss	(1,996)	(453)
12 Months or More - Fair Value		3,645
12 Months or More - Unrealized Loss		(66)
Fair Value	74,587	53,721
Unrealized Loss	(1,996)	(519)
US Government-sponsored Enterprises Debt Securities [Member]
Less than 12 Months - Fair Value	10,544	7,964
Less than 12 Months - Unrealized Loss	(80)	(46)
12 Months or More - Fair Value
12 Months or More - Unrealized Loss
Fair Value	10,544	7,964
Unrealized Loss	(80)	(46)
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Less than 12 Months - Fair Value	64,043	42,112
Less than 12 Months - Unrealized Loss	(1,916)	(407)
12 Months or More - Fair Value		3,645
12 Months or More - Unrealized Loss		(66)
Fair Value	64,043	45,757
Unrealized Loss	$ (1,916)	$ (473)

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Note C - Securities - Securities Held to Maturity with Unrealized Losses (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Less Than 12 Months - Fair Value	$ 3,813	$ 995
Less Than 12 Months - Unrecognized Loss	(148)	(5)
12 Months or More - Fair Value
12 Months or More - Unrecognized Loss
Fair Value	3,813	995
Unrecognized Loss	(148)	(5)
US States and Political Subdivisions Debt Securities [Member]
Less Than 12 Months - Fair Value	3,813	995
Less Than 12 Months - Unrecognized Loss	(148)	(5)
12 Months or More - Fair Value
12 Months or More - Unrecognized Loss
Fair Value	3,813	995
Unrecognized Loss	$ (148)	$ (5)

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Note D - Loans and Allowance for Loan Losses (Details Textual) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Allowance for Loan and Lease Losses, Period Increase (Decrease)		$ 1,112	$ 93
Allowance for Loan and Lease Losses, Write-offs		$ 11	$ 1,422
Percentage of Loan Portfolio		100.00%	100.00%
Impaired Financing Receivable, Related Allowance		$ 2,981	$ 2,164	$ 3,412
Loans and Leases Receivable, Impaired, Commitment to Lend		2,427	$ 995
Minimum Loan Balance For Loans Evaluated by Risk Categories		$ 500
Financing Receivable, Modifications, Subsequent Default, Number of Contracts		0	0
Troubled Debt Restructurings [Member]
Increase (Decrease) in Other Loans		$ (10)
Change In Troubled Debt Restructurings		0.10%
Percentage of Loan Portfolio		82.00%	81.00%
Impaired Financing Receivable, Related Allowance		$ 546	$ 1,669
Unsecured [Member]
Percentage of Loan Portfolio		5.61%	6.06%
Specific Reserves [Member]
Allowance for Loan and Lease Losses, Write-offs			$ 1,304
Specific Reserves [Member] | Troubled Debt Restructurings [Member]
Allowance for Loan and Lease Losses, Write-offs		$ 1,160
Residential Portfolio Segment [Member]
Real Estate Acquired Through Foreclosure		938	1,131
Mortgage Loans in Process of Foreclosure, Amount		$ 1,492	$ 988
Percentage of Loan Portfolio		38.92%	38.22%
Impaired Financing Receivable, Related Allowance
Commercial Real Estate Portfolio Segment [Member]
Percentage of Loan Portfolio		29.12%	28.90%
Troubled Debt Restrucuturings Placed on Nonaccrual Status, Amount		$ 226
Troubled Debt Restrucuturings Placed on Nonaccrual Status, Collateral Impairment	$ 11

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Note D - Loans and Allowance for Loan Losses - Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans	$ 734,901	$ 585,752
Less: Allowance for loan losses	(7,699)	(6,648)
Loans, net	727,202	579,104
Residential Portfolio Segment [Member]
Loans	286,022	223,875
Commercial Real Estate Portfolio Segment [Member]
Loans	214,007	169,312
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans	77,605	73,458
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans	90,532	72,002
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans	45,870	23,852
Commercial and Industrial Portfolio Segment [Member]
Loans	100,589	81,936
Consumer Portfolio Segment [Member]
Loans	134,283	110,629
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans	59,772	44,566
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans	20,861	20,841
Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans	$ 53,650	$ 45,222

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Note D - Loans and Allowance for Loan Losses - Allowance for Loan Losses Activity by Portfolio Segment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Balance	$ 6,648	$ 8,334	$ 6,155
Provision for loan losses	2,826	1,090	2,787
Loans charged off	(3,203)	(4,251)	(1,979)
Recoveries	1,428	1,475	1,371
Balance	7,699	6,648	8,334
Residential Portfolio Segment [Member]
Balance	1,087	1,426	1,169
Provision for loan losses	(63)	103	458
Loans charged off	(384)	(828)	(487)
Recoveries	299	386	286
Balance	939	1,087	1,426
Commercial Real Estate Portfolio Segment [Member]
Balance	1,959	4,195	2,914
Provision for loan losses	2,287	(469)	1,408
Loans charged off	(63)	(1,971)	(235)
Recoveries	132	204	108
Balance	4,315	1,959	4,195
Commercial and Industrial Portfolio Segment [Member]
Balance	2,589	1,602	1,279
Provision for loan losses	(1,112)	777	(28)
Loans charged off	(586)	(24)	(41)
Recoveries	16	234	392
Balance	907	2,589	1,602
Consumer Portfolio Segment [Member]
Balance	1,013	1,111	793
Provision for loan losses	1,714	679	949
Loans charged off	(2,170)	(1,428)	(1,216)
Recoveries	981	651	585
Balance	$ 1,538	$ 1,013	$ 1,111

XML

Note D - Loans and Allowance for Loan Losses - Allowance for Loan Losses and the Recorded Investment of Loans Based On Impairment Method (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Individually evaluated for impairment	$ 2,981	$ 2,164
Collectively evaluated for impairment	4,718	4,484
Total ending allowance balance	7,699	6,648	$ 8,334	$ 6,155
Loans individually evaluated for impairment	22,709	17,228
Loans collectively evaluated for impairment	712,192	568,524
Total ending loans balance	734,901	585,752
Residential Portfolio Segment [Member]
Individually evaluated for impairment
Collectively evaluated for impairment	939	1,087
Total ending allowance balance	939	1,087	1,426	1,169
Loans individually evaluated for impairment	717	1,001
Loans collectively evaluated for impairment	285,305	222,874
Total ending loans balance	286,022	223,875
Commercial Real Estate Portfolio Segment [Member]
Individually evaluated for impairment	2,535	311
Collectively evaluated for impairment	1,780	1,648
Total ending allowance balance	4,315	1,959	4,195	2,914
Loans individually evaluated for impairment	13,111	7,318
Loans collectively evaluated for impairment	200,896	161,994
Total ending loans balance	214,007	169,312
Commercial and Industrial Portfolio Segment [Member]
Individually evaluated for impairment	241	1,850
Collectively evaluated for impairment	666	739
Total ending allowance balance	907	2,589	1,602	1,279
Loans individually evaluated for impairment	8,465	8,691
Loans collectively evaluated for impairment	92,124	73,245
Total ending loans balance	100,589	81,936
Consumer Portfolio Segment [Member]
Individually evaluated for impairment	205	3
Collectively evaluated for impairment	1,333	1,010
Total ending allowance balance	1,538	1,013	$ 1,111	$ 793
Loans individually evaluated for impairment	416	218
Loans collectively evaluated for impairment	133,867	110,411
Total ending loans balance	$ 134,283	$ 110,629

XML

Note D - Loans and Allowance for Loan Losses - Loans Individually Evaluated for Impairment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for Loan Losses Allocated	$ 2,981	$ 2,164	$ 3,412
Unpaid principal balance	25,176	20,180	21,949
Recorded investment	22,709	17,228	20,169
Average impaired loans	19,893	15,894	17,029
Interest income recognized	1,145	700	954
Cash basis interest recognized	1,145	700	954
Residential Portfolio Segment [Member]
Unpaid principal balance - with allowance recorded
Recorded investment - with allowance recorded
Allowance for Loan Losses Allocated
Average impaired loans - with allowance recorded
Interest income recognized - with allowance recorded			6
Cash basis interest recognized - with allowance recorded			6
Unpaid principal balance - with no allowance recorded	717	1,001	1,415
Recorded investment - with no allowance recorded	717	1,001	1,415
Average impaired loans - with no allowance recorded	726	809	882
Interest income recognized - with no allowance recorded	31	45	58
Cash basis interest recognized - with no allowance recorded	31	45	58
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Unpaid principal balance - with allowance recorded	5,477	204	1,177
Recorded investment - with allowance recorded	5,477	204	1,177
Allowance for Loan Losses Allocated	2,435	204	414
Average impaired loans - with allowance recorded	3,185	204	471
Interest income recognized - with allowance recorded	300	13	32
Cash basis interest recognized - with allowance recorded	300	13	32
Unpaid principal balance - with no allowance recorded	3,638	3,812	3,125
Recorded investment - with no allowance recorded	3,091	3,265	2,578
Average impaired loans - with no allowance recorded	3,005	2,747	2,135
Interest income recognized - with no allowance recorded	178	181	113
Cash basis interest recognized - with no allowance recorded	178	181	113
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Unpaid principal balance - with allowance recorded	384	396	7,656
Recorded investment - with allowance recorded	384	396	7,656
Allowance for Loan Losses Allocated	100	107	2,092
Average impaired loans - with allowance recorded	390	402	8,303
Interest income recognized - with allowance recorded	19	75	398
Cash basis interest recognized - with allowance recorded	19	75	398
Unpaid principal balance - with no allowance recorded	5,078	5,178	1,298
Recorded investment - with no allowance recorded	3,632	2,773	300
Average impaired loans - with no allowance recorded	3,572	3,439	300
Interest income recognized - with no allowance recorded	79	49	50
Cash basis interest recognized - with no allowance recorded	79	49	50
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Unpaid principal balance - with no allowance recorded	1,001	680
Recorded investment - with no allowance recorded	527	680
Average impaired loans - with no allowance recorded	522	544
Interest income recognized - with no allowance recorded	136
Cash basis interest recognized - with no allowance recorded	136
Commercial and Industrial Portfolio Segment [Member]
Unpaid principal balance - with allowance recorded	392	4,355	2,356
Recorded investment - with allowance recorded	392	4,355	2,356
Allowance for Loan Losses Allocated	241	1,850	900
Average impaired loans - with allowance recorded	391	3,545	2,441
Interest income recognized - with allowance recorded		149	110
Cash basis interest recognized - with allowance recorded		149	110
Unpaid principal balance - with no allowance recorded	8,073	4,336	4,703
Recorded investment - with no allowance recorded	8,073	4,336	4,468
Average impaired loans - with no allowance recorded	7,681	3,985	2,278
Interest income recognized - with no allowance recorded	381	180	180
Cash basis interest recognized - with no allowance recorded	381	180	180
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Unpaid principal balance - with allowance recorded	416	218	219
Recorded investment - with allowance recorded	416	218	219
Allowance for Loan Losses Allocated	205	3	6
Average impaired loans - with allowance recorded	421	219	219
Interest income recognized - with allowance recorded	21	8	7
Cash basis interest recognized - with allowance recorded	$ 21	$ 8	$ 7

XML

Note D - Loans and Allowance for Loan Losses - Nonaccrual Loans and Loans Past Due 90 Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans past due 90 days and still accruing	$ 327	$ 39
Nonaccrual	8,961	7,236
Residential Portfolio Segment [Member]
Loans past due 90 days and still accruing	132	20
Nonaccrual	3,445	2,048
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans past due 90 days and still accruing	28
Nonaccrual	1,571	404
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans past due 90 days and still accruing
Nonaccrual	2,506	2,737
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans past due 90 days and still accruing
Nonaccrual	527	769
Commercial and Industrial Portfolio Segment [Member]
Loans past due 90 days and still accruing
Nonaccrual	867	1,152
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans past due 90 days and still accruing	121	18
Nonaccrual	5	27
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans past due 90 days and still accruing
Nonaccrual	34	96
Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans past due 90 days and still accruing	46	1
Nonaccrual	$ 6	$ 3

XML

Note D - Loans and Allowance for Loan Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans past due	$ 17,076	$ 13,013
Loans, current	717,825	572,739
Loans	734,901	585,752
Residential Portfolio Segment [Member]
Loans past due	6,882	5,756
Loans, current	279,140	218,119
Loans	286,022	223,875
Commercial Real Estate Portfolio Segment [Member]
Loans	214,007	169,312
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans past due	1,825	545
Loans, current	75,780	72,913
Loans	77,605	73,458
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans past due	2,785	3,106
Loans, current	87,747	68,896
Loans	90,532	72,002
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans past due	300	771
Loans, current	45,570	23,081
Loans	45,870	23,852
Commercial and Industrial Portfolio Segment [Member]
Loans past due	2,566	1,196
Loans, current	98,023	80,740
Loans	100,589	81,936
Consumer Portfolio Segment [Member]
Loans	134,283	110,629
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans past due	1,438	960
Loans, current	58,334	43,606
Loans	59,772	44,566
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans past due	394	151
Loans, current	20,467	20,690
Loans	20,861	20,841
Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans past due	886	528
Loans, current	52,764	44,694
Loans	53,650	45,222
Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due	7,597	3,993
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member]
Loans past due	3,728	2,564
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans past due	134	141
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans past due	261	35
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans past due	66
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans past due	1,283	31
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans past due	1,091	727
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans past due	349	75
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans past due	685	420
Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due	2,293	2,242
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member]
Loans past due	953	1,484
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans past due	366	33
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans past due	18	334
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans past due	52	2
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans past due	483	88
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans past due	221	197
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans past due	45
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans past due	155	104
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	7,186	6,778
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member]
Loans past due	2,201	1,708
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans past due	1,325	371
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans past due	2,506	2,737
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans past due	182	769
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans past due	800	1,077
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans past due	126	36
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans past due		76
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans past due	$ 46	$ 4

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Note D - Loans and Allowance for Loan Losses - TDR Loan Modifications (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Troubled Debt Restructuring	$ 16,043	$ 16,053
Interest Only Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	284
Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	2,810
Contractual Interest Rate Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	232
Contractual Interest Rate Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	384
Reduction of Principal and Interest Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	579
Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	1,582
Interest Rate Below Market Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	574
Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	391
Residential Portfolio Segment [Member] | Interest Only Payments [Member]
Troubled Debt Restructuring	717	1,001
Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		433
Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring		2,773
Commercial Real Estate Portfolio Segment [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		232
Commercial Real Estate Portfolio Segment [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring		396
Commercial Real Estate Portfolio Segment [Member] | Reduction of Principal and Interest Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		604
Commercial Real Estate Portfolio Segment [Member] | Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		1,996
Commercial Real Estate Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		204
Commercial and Industrial Portfolio Segment [Member] | Interest Only Payments [Member]
Troubled Debt Restructuring		7,579
Commercial and Industrial Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	8,074
Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
Troubled Debt Restructuring		617
Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	203
Consumer Portfolio Segment [Member] | Extended Maturity [Member] | Home Equity Loan [Member]
Troubled Debt Restructuring	213	218
Performing Financial Instruments [Member]
Troubled Debt Restructuring	13,210	12,957
Performing Financial Instruments [Member] | Interest Only Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	284
Performing Financial Instruments [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	600
Performing Financial Instruments [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	384
Performing Financial Instruments [Member] | Reduction of Principal and Interest Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	579
Performing Financial Instruments [Member] | Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	1,582
Performing Financial Instruments [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	574
Performing Financial Instruments [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring
Performing Financial Instruments [Member] | Residential Portfolio Segment [Member] | Interest Only Payments [Member]
Troubled Debt Restructuring	717	1,001
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		433
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring		300
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring		396
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Reduction of Principal and Interest Payments [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		604
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		1,996
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		204
Performing Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Only Payments [Member]
Troubled Debt Restructuring		7,579
Performing Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	8,074
Performing Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
Troubled Debt Restructuring		226
Performing Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	203
Performing Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Extended Maturity [Member] | Home Equity Loan [Member]
Troubled Debt Restructuring	213	218
Nonperforming Financial Instruments [Member]
Troubled Debt Restructuring	2,833	3,096
Nonperforming Financial Instruments [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	2,210
Nonperforming Financial Instruments [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring	232
Nonperforming Financial Instruments [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring	391
Nonperforming Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring		2,473
Nonperforming Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Contractual Interest Rate Reduction [Member] | Commercial Real Estate Owner Occupied [Member]
Troubled Debt Restructuring		232
Nonperforming Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
Troubled Debt Restructuring		$ 391
Nonperforming Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member] | Commercial Real Estate Nonowner Occupied [Member]
Troubled Debt Restructuring

XML

Note D - Loans and Allowance for Loan Losses - TDRs Pre-modification and Post-modification (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Performing Financial Instruments [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment	$ 574	$ 1,746
TDR’s Performing to Modified Terms Post- Modification Recorded Investment	574	1,746
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment		495
TDR’s Performing to Modified Terms Post- Modification Recorded Investment		495
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment	574
TDR’s Performing to Modified Terms Post- Modification Recorded Investment	574
Performing Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment		1,025
TDR’s Performing to Modified Terms Post- Modification Recorded Investment		1,025
Performing Financial Instruments [Member] | Commercial and Industrial Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment		226
TDR’s Performing to Modified Terms Post- Modification Recorded Investment		226
Nonperforming Financial Instruments [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment	226
TDR’s Performing to Modified Terms Post- Modification Recorded Investment	226
Nonperforming Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Only Payments [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment	226
TDR’s Performing to Modified Terms Post- Modification Recorded Investment	226
Nonperforming Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Interest Rate Below Market Reduction [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment
TDR’s Performing to Modified Terms Post- Modification Recorded Investment
Nonperforming Financial Instruments [Member] | Commercial Real Estate Portfolio Segment [Member] | Extended Maturity [Member] | Commercial Real Estate Owner Occupied [Member]
TDR’s Performing to Modified Terms Pre- Modification Recorded Investment
TDR’s Performing to Modified Terms Post- Modification Recorded Investment

XML

Note D - Loans and Allowance for Loan Losses - Risk Category of Commercial Loans by Class of Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans receivable	$ 734,901	$ 585,752
Commercial Real Estate Portfolio Segment [Member]
Loans receivable	214,007	169,312
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans receivable	77,605	73,458
Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans receivable	90,532	72,002
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	45,870	23,852
Commercial and Industrial Portfolio Segment [Member]
Loans receivable	100,589	81,936
Commercial Portfolio Segment [Member]
Loans receivable	314,596	251,248
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans receivable	66,495	62,287
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans receivable	83,103	61,577
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	45,325	23,080
Pass [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans receivable	94,091	70,852
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	289,014	217,796
Criticized [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans receivable	428	6,738
Criticized [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans receivable	2,364	6,305
Criticized [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable
Criticized [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans receivable	188	5,232
Criticized [Member] | Commercial Portfolio Segment [Member]
Loans receivable	2,980	18,275
Classified [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Loans receivable	10,682	4,433
Classified [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Loans receivable	5,065	4,120
Classified [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	545	772
Classified [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans receivable	6,310	5,852
Classified [Member] | Commercial Portfolio Segment [Member]
Loans receivable	$ 22,602	$ 15,177

XML

Note D - Loans and Allowance for Loan Losses - Recorded Investment of Residential and Consumer Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans receivable	$ 734,901	$ 585,752
Consumer Portfolio Segment [Member]
Loans receivable	134,283	110,629
Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans receivable	59,772	44,566
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans receivable	20,861	20,841
Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans receivable	53,650	45,222
Residential Portfolio Segment [Member]
Loans receivable	286,022	223,875
Consumer and Residential Portfolio Segment [Member]
Loans receivable	420,305	334,504
Performing Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans receivable	59,646	44,521
Performing Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans receivable	20,827	20,745
Performing Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans receivable	53,598	45,218
Performing Financial Instruments [Member] | Residential Portfolio Segment [Member]
Loans receivable	282,445	221,807
Performing Financial Instruments [Member] | Consumer and Residential Portfolio Segment [Member]
Loans receivable	416,516	332,291
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Automobile Loan [Member]
Loans receivable	126	45
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Loans receivable	34	96
Nonperforming Financial Instruments [Member] | Consumer Portfolio Segment [Member] | Other Consumer Loans [Member]
Loans receivable	52	4
Nonperforming Financial Instruments [Member] | Residential Portfolio Segment [Member]
Loans receivable	3,577	2,068
Nonperforming Financial Instruments [Member] | Consumer and Residential Portfolio Segment [Member]
Loans receivable	$ 3,789	$ 2,213

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Note E - Premises and Equipment (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Leases, Rent Expense, Net	$ 464	$ 464	$ 515

XML

Note E - Premises and Equipment - Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Land	$ 2,348	$ 2,055
Buildings	13,247	10,890
Leasehold improvements	1,238	2,066
Furniture and equipment	5,085	4,334
	21,918	19,345
Less accumulated depreciation	9,135	8,941
Total premises and equipment	$ 12,783	$ 10,404

XML

Note E - Premises and Equipment - Future Minimum Lease Payments (Details) $ in Thousands	Dec. 31, 2016 USD ($)
2017	$ 332
2018	181
2019	54
2020	49
2021	25
	$ 641

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Note F - Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Amortization of Intangible Assets	$ 68
Goodwill, Impairment Loss	$ 0

XML

Note F - Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Beginning of year	$ 1,267
Acquired goodwill	6,534
Impairment	0
End of year	$ 7,801

XML

Note F - Goodwill and Intangible Assets - Intangible Assets (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Gross Carrying Amount	$ 738
Accumulated Amortization	68
Core Deposits [Member]
Gross Carrying Amount	738
Accumulated Amortization	68
Customer Relationships [Member]
Gross Carrying Amount
Accumulated Amortization

XML

Note F - Goodwill and Intangible Assets - Future Estimated Amortization Expense (Details) $ in Thousands	Dec. 31, 2016 USD ($)
2017	$ 156
2018	135
2019	114
2020	94
2021	74
Thereafter	97
Total	$ 670

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Note G - Deposits (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Interest-bearing Domestic Deposit, Brokered	$ 22,463	$ 28,998

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Note G - Deposits - Interest-Bearing Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
NOW accounts	$ 155,051	$ 124,524
Savings and Money Market	237,761	200,976
In denominations of $250,000 or less	168,546	146,975
In denominations of more than $250,000	19,518	11,772
Total	188,064	158,747
Total interest-bearing deposits	$ 580,876	$ 484,247

XML

Note G - Deposits - Time Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
2017	$ 100,447
2018	53,559
2019	17,611
2020	11,401
2021	4,570
Thereafter	476
Total	$ 188,064	$ 158,747

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Note H - Interest Rate Swaps (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deposit Assets	$ 350	$ 350
Interest Rate Swap [Member]
Derivative Asset, Notional Amount	9,725	10,727
Interest Rate Derivative Instruments Not Designated as Hedging Instruments at Fair Value, Net	$ 22	$ 29

XML

Note I - Other Borrowed Funds (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Mar. 22, 2007
Federal Home Loan Bank, Advances, Maturities Summary, Fixed Rate	$ 29,130
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	221,757
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds	147,627
Federal Home Loan Bank, Advances, Maturities Summary, Due in Next Twelve Months	$ 75,000
Debt Instrument, Interest Rate, Stated Percentage	2.64%	2.19%	6.58%
Debt, Weighted Average Interest Rate	2.34%	1.38%
Notes Payable, Related Parties	$ 360
Notes Payable to Bank	3,899
Federal Home Loan Bank, Advances, Maturities Summary, Floating Rate	0
FHLB Line of Credit [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	75,000
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds	75,000
Letters of Credit Outstanding, Amount	$ 45,000	$ 34,800
Minimum [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	1.34%
Debt Instrument, Interest Rate, Stated Percentage	1.25%
Maximum [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	3.31%
Debt Instrument, Interest Rate, Stated Percentage	4.09%
Weighted Average [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	2.08%	2.08%
Residential Mortgage [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	$ 275,836
Commercial Loan [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	71,443
FHLB Stock [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	5,365
Federal Home Loan Bank Advances [Member]
Capital Lease Obligations	$ 73	$ 117

XML

Note I - Other Borrowed Funds - Other Borrowed Funds (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Other borrowed funds	$ 37,085	$ 23,946
Federal Home Loan Bank Advances [Member]
Other borrowed funds	29,203	20,028
Promissory Notes [Member]
Other borrowed funds	$ 7,882	$ 3,918

XML

Note I - Other Borrowed Funds - Scheduled Principal Payments (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
2017	$ 7,625
2018	4,453
2019	3,428
2020	2,602
2021	2,373
Thereafter	16,604
	37,085	$ 23,946
Federal Home Loan Bank Advances [Member]
2017	5,564
2018	2,313
2019	2,210
2020	2,083
2021	1,832
Thereafter	15,201
	29,203	20,028
Promissory Notes [Member]
2017	2,061
2018	2,140
2019	1,218
2020	519
2021	541
Thereafter	1,403
	$ 7,882	$ 3,918

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Note J - Subordinated Debentures and Trust Preferred Securities (Details Textual) - USD ($) $ in Millions	Mar. 22, 2007	Dec. 31, 2016	Dec. 31, 2015
Proceeds from Issuance of Trust Preferred Securities	$ 8.5
Debt Instrument, Interest Rate, Stated Percentage	6.58%	2.64%	2.19%
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.68%

XML

Note K - Income Taxes (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Operating Loss Carryforwards	$ 758
Effective Income Tax Rate Reconciliation, Percent	34.00%
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit	$ 1,200
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense	0	$ 0
Unrecognized Tax Benefits	$ 0	$ 0
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Open Tax Year	2015
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Open Tax Year	2013
Domestic Tax Authority [Member] | Latest Tax Year [Member]
Open Tax Year	2015
Domestic Tax Authority [Member] | Earliest Tax Year [Member]
Open Tax Year	2013

XML

Note K - Income Taxes - Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current tax expense	$ 2,645	$ 2,218	$ 3,637
Deferred tax (benefit) expense	(725)	591	(517)
Total income taxes	$ 1,920	$ 2,809	$ 3,120

XML

Note K - Income Taxes - Deferred Tax Assets and Deferred Tax Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses	$ 2,538	$ 2,302
Unrealized loss on securities available for sale	510
Deferred compensation	2,194	2,089
Deferred loan fees/costs	248	273
Other real estate owned	719	370
Accrued bonus	240	166
Purchase accounting adjustments	305
Net operating loss	258
Other	275	143
Mortgage servicing rights	(134)	(149)
FHLB stock dividends	(1,078)	(1,074)
Unrealized gain on securities available for sale		(157)
Prepaid expenses	(283)	(234)
Depreciation and amortization	(823)	(740)
Other	(4)	(5)
Net deferred tax asset	$ 4,965	$ 2,984

XML

Note K - Income Taxes - Income Tax Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statutory tax	$ 3,006	$ 3,870	$ 3,806
Effect of nontaxable insurance premiums	(340)	(336)	(142)
Effect of postretirement benefits	(19)	71	238
Effect of nontaxable life insurance death proceeds		(11)
Effect of state income tax	64	66	73
Tax credits	(211)	(221)	(231)
Milton Merger Costs	73
Other items	19	17	11
Total income taxes	1,920	2,809	3,120
Nontaxable Interest Income [Member]
Effect of nontaxable income	(433)	(437)	(418)
Bank Owned Insurance Income [Member]
Effect of nontaxable income	$ (239)	$ (210)	$ (217)

XML

Note L - Commitments and Contingent Liabilities (Details Textual)	Dec. 31, 2016	Dec. 31, 2015	Mar. 22, 2007
Debt Instrument, Interest Rate, Stated Percentage	2.64%	2.19%	6.58%
Minimum [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.25%
Maximum [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.09%
Fixed Rate Commitments [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.75%
Fixed Rate Commitments [Member] | Maximum [Member]
Debt Instrument, Interest Rate, Stated Percentage	6.25%

XML

Note L - Commitments and Contingent Liabilities - Commitments (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Standby Letters of Credit [Member]
Other commitment	$ 5,134	$ 3,322
Fixed Rate Commitments [Member]
Other commitment	271	65
Variable Rate Commitments [Member]
Other commitment	$ 61,786	$ 59,028

XML

Note M - Related Party Transactions (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Minimum Related Party Loan	$ 120
Related Party Deposit Liabilities	$ 38,867	$ 30,169

XML

Note M - Related Party Transactions - Related Party Loans (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Total loans at January 1, 2016	$ 3,989
New loans	1,085
Repayments	(528)
Other changes	1,399
Total loans at December 31, 2016	$ 5,945

XML

Note N - Employee Benefits (Details Textual) - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Defined Contribution Plan, Cost Recognized	$ 290	$ 288	$ 278
Employee Stock Ownership Plan (ESOP), Shares in ESOP	350,170	322,056
Cash Surrender Value of Life Insurance	$ 27,343
Deferred Compensation Plan Assets	2,006
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months	6,328	$ 6,033
Defined Benefit Plan, Benefit Obligation	3,007	3,062
Insurance Settlements Receivable		941
Life Insurance, Corporate or Bank Owned, Change in Value		908
Gain on Bank Owned Life nsurance Policies		33
Supplemental Retirement Plans [Member]
Defined Contribution Plan, Cost Recognized	$ 399	$ 338	$ 604

XML

Note N - Employee Benefits - Employee Stock Ownership Plan (ESOP) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of shares issued (in shares)	24,572		14,618
Fair value of stock contributed	$ 575		$ 351
Cash contributed		674	300
Total expense	$ 575	$ 674	$ 651

XML

Note O - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Selling Costs, Percentage	10.00%
Impaired Financing Receivable, Related Allowance	$ 2,981	$ 2,164	$ 3,412
Other Real Estate	754	1,147
Other Real Estate, Gross	2,217	2,217
Real Estate Owned, Valuation Allowance	1,463	1,070
SEC Schedule III, Real Estate, Write-down or Reserve, Amount	393	0
Collateral Dependent Loans [Member]
Impaired Financing Receivable, with Related Allowance, Recorded Investment	8,732	7,811
Impaired Financing Receivable, Related Allowance	2,913	1,559
Provision for Loan Losses Expensed	$ 2,509	741
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down		$ 1,422

XML

Note O - Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member] | Commercial Portfolio Segment [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Assets measured on a recurring basis	10,544	8,965
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member] | Commercial Portfolio Segment [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis	85,946	82,686
Fair Value, Inputs, Level 2 [Member] | Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Assets measured on a nonrecurring basis
Fair Value, Inputs, Level 3 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member]
Assets measured on a nonrecurring basis	3,536
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member]
Assets measured on a nonrecurring basis	1,985	2,473
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Commercial Portfolio Segment [Member]
Assets measured on a nonrecurring basis	298	3,779
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Assets measured on a nonrecurring basis	$ 754	$ 1,147

XML

Note O - Fair Value of Financial Instruments - Level 3 Fair Value Measurements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Market Approach Valuation Technique [Member]
Fair Value	$ 3,536
Valuation Technique	Sales approach
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Market Approach Valuation Technique [Member] | Minimum [Member]
Range	0.00%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Market Approach Valuation Technique [Member] | Maximum [Member]
Range	65.00%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Range	13.70%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Cost Approach Valuation Technique [Member]
Fair Value
Valuation Technique	Cost approach
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Cost Approach Valuation Technique [Member] | Minimum [Member]
Range	0.00%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Cost Approach Valuation Technique [Member] | Maximum [Member]
Range	29.50%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Owner Occupied [Member] | Cost Approach Valuation Technique [Member] | Weighted Average [Member]
Range	14.80%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member] | Market Approach Valuation Technique [Member]
Fair Value	$ 1,985	$ 2,473
Valuation Technique	Sales approach	Sales approach
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member] | Market Approach Valuation Technique [Member] | Minimum [Member]
Range	0.00%	0.00%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member] | Market Approach Valuation Technique [Member] | Maximum [Member]
Range	250.00%	12.50%
Impaired Loans [Member] | Commercial Real Estate Portfolio Segment [Member] | Commercial Real Estate Nonowner Occupied [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Range	58.60%	5.70%
Impaired Loans [Member] | Commercial and Industrial Portfolio Segment [Member] | Market Approach Valuation Technique [Member]
Fair Value	$ 298	$ 3,779
Valuation Technique	Sales approach	Sales approach
Impaired Loans [Member] | Commercial and Industrial Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Minimum [Member]
Range	0.90%	0.90%
Impaired Loans [Member] | Commercial and Industrial Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Maximum [Member]
Range	9.70%	30.00%
Impaired Loans [Member] | Commercial and Industrial Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Range	5.20%	14.30%
Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member] | Market Approach Valuation Technique [Member]
Fair Value	$ 754	$ 1,147
Valuation Technique	Sales approach	Sales approach
Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member] | Market Approach Valuation Technique [Member] | Minimum [Member]
Range	0.00%	0.00%
Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member] | Market Approach Valuation Technique [Member] | Maximum [Member]
Range	30.00%	35.00%
Other Real Estate Owned [Member] | Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Range	11.70%	15.20%

XML

Note O - Fair Value of Financial Instruments - Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Securities available for sale	$ 96,490	$ 91,651
Total debt securities	19,171	20,790
Reported Value Measurement [Member]
Cash and cash equivalents	40,166	45,530
Certificates of deposit in financial institutions	1,670	1,715
Securities available for sale	96,490	91,651
Total debt securities	18,665	19,903
Restricted investments in bank stocks	7,506	6,576
Loans, net	727,202	579,104
Accrued interest receivable	2,315	1,819
Deposits	790,452	660,746
Other borrowed funds	37,085	23,946
Subordinated debentures	8,500	8,500
Accrued interest payable	513	449
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	40,166	45,530
Certificates of deposit in financial institutions	1,670	1,715
Securities available for sale	96,490	91,651
Total debt securities	19,171	20,790
Restricted investments in bank stocks
Loans, net	727,079	582,427
Accrued interest receivable	2,315	1,819
Deposits	790,916	661,135
Other borrowed funds	35,948	23,672
Subordinated debentures	5,821	5,368
Accrued interest payable	513	449
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	40,166	45,530
Certificates of deposit in financial institutions
Securities available for sale
Total debt securities
Restricted investments in bank stocks
Loans, net
Accrued interest receivable
Deposits	209,576	176,499
Other borrowed funds
Subordinated debentures
Accrued interest payable	4	4
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Certificates of deposit in financial institutions	1,670	1,715
Securities available for sale	96,490	91,651
Total debt securities	9,541	9,814
Restricted investments in bank stocks
Loans, net
Accrued interest receivable	224	224
Deposits	581,340	484,636
Other borrowed funds	35,948	23,672
Subordinated debentures	5,821	5,368
Accrued interest payable	509	445
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Certificates of deposit in financial institutions
Securities available for sale
Total debt securities	9,630	10,976
Restricted investments in bank stocks
Loans, net	727,079	582,427
Accrued interest receivable	2,091	1,595
Deposits
Other borrowed funds
Subordinated debentures
Accrued interest payable

XML

Note P - Regulatory Matters (Details Textual) $ in Thousands	Dec. 31, 2016 USD ($)
Statutory Accounting Practices, Statutory Amount Available for Dividend Payments	$ 5,884

XML

Note P - Regulatory Matters - Capital Requirements (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Total capital	$ 113,515	$ 104,047
Total capital to risk weighted assets	16.40%	18.20%
Common equity tier 1	$ 97,316	$ 88,899
Common equity tier 1 capital to risk weighted assets	14.00%	15.60%
Tier 1 capital	$ 105,816	$ 97,399
Tier 1 capital to risk weighted assets	15.30%	17.10%
Tier 1 capital average	$ 105,816	$ 97,399
Tier 1 capital average to risk weighted assets	11.20%	12.20%
Bank [Member]
Total capital	$ 104,317	$ 91,006
Total capital to risk weighted assets	15.30%	16.30%
Total capital for capital adequacy	$ 54,631	$ 44,799
Total capital for capital adequacy to risk weighted assets	8.00%	8.00%
Total capital for well capitalized	$ 68,289	$ 55,999
Total capital for well capitalized to risk weighted assets	10.00%	10.00%
Common equity tier 1	$ 96,946	$ 84,686
Common equity tier 1 capital to risk weighted assets	14.20%	15.10%
Common equity tier 1 capital for capital adequacy	$ 30,730	$ 25,199
Common equity tier 1 capital for capital adequacy to risk weighted assets	4.50%	4.50%
Common equity Tier 1 capital for well capitalized	$ 44,388	$ 36,399
Common equity Tier 1 capital for well capitalized to risk weighted assets	6.50%	6.50%
Tier 1 capital	$ 96,946	$ 84,686
Tier 1 capital to risk weighted assets	14.20%	15.10%
Teir 1 capital for capital adequacy	$ 40,973	$ 33,599
Teir 1 capital for capital adequacy to risk weighted assets	6.00%	6.00%
Tier 1 capital for well capitalized	$ 54,631	$ 44,799
Tier 1 capital for well capitalized to risk weighted assets	8.00%	8.00%
Tier 1 capital average	$ 96,946	$ 84,686
Tier 1 capital average to risk weighted assets	10.40%	10.80%
Teir 1 capital average for capital adequacy	$ 37,168	$ 31,280
Teir 1 capital average for capital adequacy to risk weighted assets	4.00%	4.00%
Tier 1 capital average for well capitalized	$ 46,461	$ 39,100
Tier 1 capital average for well capitalized to average assets	5.00%	5.00%

XML

Note Q - Parent Company Only Condensed Financial Information - Condensed Statements of Condition (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Aug. 05, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash and cash equivalents	$ 40,166		$ 45,530	$ 30,977	$ 28,344
Other assets	7,894		7,606
Total assets	954,640	$ 950,000	796,285	778,668
Subordinated debentures	8,500		8,500
Total liabilities	850,112		705,815
Total shareholders’ equity	104,528		90,470	86,216	80,419
Total liabilities and shareholders’ equity	954,640		796,285
Parent Company [Member]
Cash and cash equivalents	2,747		2,233	$ 2,875	$ 2,436
Investment in subsidiaries	115,057		96,759
Notes receivable – subsidiaries	3,420		3,881
Other assets	52		63
Total assets	121,276		102,936
Notes payable	7,882		3,918
Subordinated debentures	8,500		8,500
Other liabilities	366		48
Total liabilities	16,748		12,466
Total shareholders’ equity	104,528		90,470
Total liabilities and shareholders’ equity	$ 121,276		$ 102,936

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Note Q - Parent Company Only Condensed Financial Information - Condensed Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Gain on sale of ProAlliance Corporation															$ 810
Interest on subordinated debentures													204	170	165
Income before income taxes and equity in undistributed earnings of subsidiaries..													8,840	11,383	11,193
Income tax benefit													1,920	2,809	3,120
Net income	$ 2,024	$ 358	$ 1,706	$ 2,832	$ 1,898	$ 1,642	$ 1,410	$ 3,624	$ 423	$ 2,742	$ 1,344	$ 3,564	6,920	8,574	8,073
Parent Company [Member]
Interest on notes													52	53	84
Other operating income															34
Dividends from subsidiaries													6,900	3,500	3,500
Gain on sale of ProAlliance Corporation															810
Interest on notes													136	53	84
Interest on subordinated debentures													204	170	165
Operating expenses													667	345	384
Income before income taxes and equity in undistributed earnings of subsidiaries..													5,945	2,985	3,795
Income tax benefit													256	167	(108)
Equity in undistributed earnings of subsidiaries													719	5,422	4,386
Net income													$ 6,920	$ 8,574	$ 8,073

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Note Q - Parent Company Only Condensed Financial Information - Condensed Statements of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net income	$ 2,024	$ 358	$ 1,706	$ 2,832	$ 1,898	$ 1,642	$ 1,410	$ 3,624	$ 423	$ 2,742	$ 1,344	$ 3,564	$ 6,920	$ 8,574	$ 8,073
Gain on sale of ProAlliance Corporation															(810)
Common stock issued to ESOP													(575)		(351)
Change in other assets													1,717	(678)	(366)
Net cash provided by operating activities													13,366	10,398	11,681
Proceeds from sale of ProAlliance Corporation															810
Net cash provided by (used in) investing activities													(38,434)	(4,938)	(29,887)
Proceeds from common stock through dividend reinvestment															103
Cash dividends paid													(3,585)	(3,665)	(3,441)
Net cash provided by (used in) financing activities													19,704	9,093	20,839
Cash and cash equivalents at beginning of year				45,530				30,977				28,344	45,530	30,977	28,344
Cash and cash equivalents at end of year	40,166				45,530				30,977				40,166	45,530	30,977
Parent Company [Member]
Net income													6,920	8,574	8,073
Gain on sale of ProAlliance Corporation															(810)
Equity in undistributed earnings of subsidiaries													(719)	(5,422)	(4,386)
Common stock issued to ESOP													575		351
Change in other assets													11	(16)	323
Change in other liabilities													318	(141)	(334)
Net cash provided by operating activities													7,105	2,995	3,217
Cash paid for Milton Bancorp, Inc. acquisition													(7,431)
Proceeds from sale of ProAlliance Corporation															810
Investment in OVBC Captive															(250)
Change in notes receivable													461	(100)	(262)
Net cash provided by (used in) investing activities													(6,970)	(100)	298
Change in notes payable													3,964	128	262
Proceeds from common stock through dividend reinvestment															103
Cash dividends paid													(3,585)	(3,665)	(3,441)
Net cash provided by (used in) financing activities													379	(3,537)	(3,076)
Change in cash and cash equivalents													514	(642)	439
Cash and cash equivalents at beginning of year				$ 2,233				$ 2,875				$ 2,436	2,233	2,875	2,436
Cash and cash equivalents at end of year	$ 2,747				$ 2,233				$ 2,875				$ 2,747	$ 2,233	$ 2,875

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Note R - Segment Information (Details Textual)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Banking [Member]
Concentration Risk, Percentage	91.60%	90.90%	90.60%

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Note R - Segment Information - Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended																								12 Months Ended
	Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Aug. 05, 2016
Net interest income	$ 10,035		$ 8,985		$ 8,206		$ 9,100		$ 8,131		$ 8,285		$ 8,149		$ 8,930		$ 8,303		$ 8,208		$ 8,187		$ 8,782		$ 36,326	$ 33,495	$ 33,480
Provision expense	498	[1]	1,708	[1]	141	[1]	479	[1]	380	[2]	(11)	[2]	799	[2]	(78)	[2]	1,589	[3]	(682)	[3]	1,386	[3]	494	[3]	2,826	1,090	2,787
Noninterest income	1,450	[4]	1,693	[4]	1,861	[4]	3,235	[4]	1,607	[4]	1,584	[4]	1,917	[4]	3,489	[4]	1,657	[4]	2,106	[4]	1,912	[4]	4,118	[4]	8,239	8,597	9,793
Noninterest expense	8,329		8,828		7,773		7,969		6,911		7,727		7,554		7,427		7,757		7,244		6,997		7,295		32,899	29,619	29,293
Tax expense																									1,920	2,809	3,120
Net income	2,024		$ 358		$ 1,706		$ 2,832		1,898		$ 1,642		$ 1,410		$ 3,624		423		$ 2,742		$ 1,344		$ 3,564		6,920	8,574	8,073
Assets	954,640								796,285								778,668								954,640	796,285	778,668	$ 950,000
Banking [Member]
Net interest income																									33,019	30,175	30,172
Provision expense																									2,665	1,055	2,645
Noninterest income																									7,589	7,880	8,897
Noninterest expense																									30,257	26,983	26,806
Tax expense																									1,530	2,347	2,587
Net income																									6,156	7,670	7,031
Assets	941,907								782,715								764,510								941,907	782,715	764,510
Consumer Finance [Member]
Net interest income																									3,307	3,320	3,308
Provision expense																									161	35	142
Noninterest income																									650	717	896
Noninterest expense																									2,642	2,636	2,487
Tax expense																									390	462	533
Net income																									764	904	1,042
Assets	$ 12,733								$ 13,570								$ 14,158								$ 12,733	$ 13,570	$ 14,158

[1] During the third quarter of 2016, the Company experienced higher provision expense that was primarily related to an increase in specific allocations impacted by the decline in collateral values of two impaired commercial real estate loan relationships. A re-appraisal of the commercial properties securing the loans identified further collateral depreciation, which resulted in a $2,435 increase to the specific allocations related to the loans.

[2] During the first and third quarters of 2015, the Company experienced negative provision expense as a result of lower general allocations of the allowance for loan losses. General allocations were impacted by improved economic trends that include: decreasing historical loan loss factor, lower delinquencies and lower classified/criticized assets.

[3] During the third quarter of 2014, the Company experienced negative provision expense that was primarily related to a decrease in specific allocations impacted by the improvement in collateral values of an impaired commercial real estate loan relationship. A re-appraisal of the commercial properties securing the loan identified asset appreciation, which resulted in a $524 reduction to the specific allocation related to the loan.

[4] The Company's noninterest income was significantly impacted by seasonal tax refund processing fees. The Bank serves as a facilitator for the clearing of tax refunds for a single tax refund product provider. The Bank processes electronic refund checks/deposits associated with taxpayer refunds, and will, in turn, receive a fee paid by the third-party tax refund product provider for each transaction processed. Due to the seasonal nature of tax refund transactions, the majority of income was recorded during the first quarter.

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Note S - Consolidated Quarterly Financial Information (Unaudited) (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2014
Allowance for Loan and Lease Losses, Adjustments, Other	$ 2,435	$ (524)

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Note S - Consolidated Quarterly Financial Information (Unaudited) - Consolidated Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended																								12 Months Ended
	Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Total interest income	$ 10,841		$ 9,824		$ 8,913		$ 9,770		$ 8,825		$ 9,016		$ 8,866		$ 9,627		$ 9,018		$ 8,904		$ 8,925		$ 9,508		$ 39,348	$ 36,334	$ 36,355
Total interest expense	806		839		707		670		694		731		717		697		715		696		738		726		3,022	2,839	2,875
Net interest income	10,035		8,985		8,206		9,100		8,131		8,285		8,149		8,930		8,303		8,208		8,187		8,782		36,326	33,495	33,480
Provision for loan losses	498	[1]	1,708	[1]	141	[1]	479	[1]	380	[2]	(11)	[2]	799	[2]	(78)	[2]	1,589	[3]	(682)	[3]	1,386	[3]	494	[3]	2,826	1,090	2,787
Noninterest income (3)	1,450	[4]	1,693	[4]	1,861	[4]	3,235	[4]	1,607	[4]	1,584	[4]	1,917	[4]	3,489	[4]	1,657	[4]	2,106	[4]	1,912	[4]	4,118	[4]	8,239	8,597	9,793
Noninterest expense	8,329		8,828		7,773		7,969		6,911		7,727		7,554		7,427		7,757		7,244		6,997		7,295		32,899	29,619	29,293
Net income	$ 2,024		$ 358		$ 1,706		$ 2,832		$ 1,898		$ 1,642		$ 1,410		$ 3,624		$ 423		$ 2,742		$ 1,344		$ 3,564		$ 6,920	$ 8,574	$ 8,073
Earnings per share (in dollars per share)	$ 0.43		$ 0.08		$ 0.41		$ 0.69		$ 0.46		$ 0.40		$ 0.34		$ 0.88		$ 0.10		$ 0.67		$ 0.33		$ 0.87		$ 1.59	$ 2.08	$ 1.97

[1] During the third quarter of 2016, the Company experienced higher provision expense that was primarily related to an increase in specific allocations impacted by the decline in collateral values of two impaired commercial real estate loan relationships. A re-appraisal of the commercial properties securing the loans identified further collateral depreciation, which resulted in a $2,435 increase to the specific allocations related to the loans.

[2] During the first and third quarters of 2015, the Company experienced negative provision expense as a result of lower general allocations of the allowance for loan losses. General allocations were impacted by improved economic trends that include: decreasing historical loan loss factor, lower delinquencies and lower classified/criticized assets.

[3] During the third quarter of 2014, the Company experienced negative provision expense that was primarily related to a decrease in specific allocations impacted by the improvement in collateral values of an impaired commercial real estate loan relationship. A re-appraisal of the commercial properties securing the loan identified asset appreciation, which resulted in a $524 reduction to the specific allocation related to the loan.

[4] The Company's noninterest income was significantly impacted by seasonal tax refund processing fees. The Bank serves as a facilitator for the clearing of tax refunds for a single tax refund product provider. The Bank processes electronic refund checks/deposits associated with taxpayer refunds, and will, in turn, receive a fee paid by the third-party tax refund product provider for each transaction processed. Due to the seasonal nature of tax refund transactions, the majority of income was recorded during the first quarter.