OHIO VALLEY BANC CORP

SECURITIES

Management’s goal in structuring its investment securities portfolio is to maintain a prudent level of liquidity and to provide an acceptable rate of return without sacrificing asset quality. During 2024, the balance of total securities increased $104,925, or 61.6%, compared to year-end 2023. The increase was related to an increase of U.S. Government securities of $117,733. The growth in this portfolio sector was related to the Company participating in the Treasurer’s Ohio Homebuyer Plus program. As part of this program, the Treasurer deposited $100,000 at a subsidized interest rate in relation to qualifying deposit accounts opened under the terms of the program. Since the Treasurer deposits are classified as public funds, which are required to be collateralized, the Company invested the Treasurer’s funds in U.S. Government securities to be pledged as collateral to the Treasurer. The Company’s investment securities portfolio is now made up mostly of U.S. Government securities, representing 61.1% of total investments at December 31, 2024. During the year ended 2024, the Company utilized a portion of its proceeds from maturities and principal repayments of Agency mortgage-backed securities to fund additional purchases in U.S. Government securities. This reallocation of securities was based on the expected decrease in interest rates and the desire to limit the prepayment risk associated with mortgage-backed securities. This resulted in an $11,884, or 11.2%, decrease in Agency mortgage-backed securities.

During 2024, a decrease in long-term market rates led to a $1,212 increase in the fair value associated with the Company’s AFS securities at December 31, 2024. The fair value of an investment security moves inversely to interest rates, so as rates decreased, the fair value increased, causing the unrealized loss in the portfolio to decrease. These changes in rates are typical and do not impact earnings of the Company as long as the securities are held to full maturity.