Ohio Valley Banc Corp.
420 Third Avenue
Gallipolis, Ohio 45631
March 16, 2006
VIA EDGAR TRANSMISSION
======================
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Ohio Valley Banc Corp.
Commission File No. 0-20914
CIK No. 0000894671
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2005
Ladies and Gentlemen:
Ohio Valley Banc Corp. (the "Company") is today filing one complete copy of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005 (the "Form 10-K"), including financial statements and exhibits. The
consolidated financial statements included in the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 2005, which are incorporated
by reference in the Form 10-K, reflect no changes in any accounting principle or
practice or in the method of applying such principle or practice from the
preceding year.
If you have any questions with respect to the enclosed Form 10-K, please do
not hesitate to contact Jeffrey E. Smith at (740) 446-2631.
Very truly yours,
OHIO VALLEY BANC CORP.
By: /s/ Jeffrey E. Smith
-----------------------------------
Jeffrey E. Smith, President and CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.CD.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION|X| Annual Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange Act
of 1934
For the fiscal year ended: DECEMBERended December 31, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION2005
[ ] Transition Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange
Act of 1934
For the transition period ended:___________________from ______ to ______
Commission file number:File Number: 0-20914
Ohio Valley Banc Corp.OHIO VALLEY BANC CORP.
------------------------------------------------------
(Exact name of registrantnegistrant as specified in its charter)
Ohio ---------------------------------------------31-1359191
- -------------------------------- ------------------------------------
(State or other jurisdiction or organization)
31-1359191
---------------------------------------of (I.R.S. Employer Identification Number)No.)
incorporation or organization)
420 Third Avenue, Gallipolis, Ohio 45631
---------------------------------------------------- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip(ZIP Code)
Registrant's telephone number, including area code: (740) 446-2631740-446-2631
Securities registered pursuant to Section 12 (b)12(b) of the Act: None
Securities registered pursuant to Section 12 (g)12(g) of the Act:
Common Shares, Without Par Value
--------------------------------
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. YES |_| NO |X|
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 |X|
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
Registrantregistrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S - KS-K is not contained herein, and will not be contained, to the
best of Registrant'sregistrant'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. [ ]|X|
Indicate by check mark whether the Registrantregistrant is a large accelerated filer,
an accelerated filer, (as
definedor a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer |_| Accelerated filer |X| Non-accelerated filer |_|
Indicate by check mark whether the registrant is a shell company (defined
in Rule 12b-2 of the Act). Yes __X__ No _____YES |_| NO |X|
The aggregate market value of the outstanding common shares of the
Registrantregistrant held by non-affiliates computed by reference to the average bid and
asked price of the common shares as of June 30, 20042005 was $108,077,532.$102,200,387.
The number of common shares of the Registrantregistrant outstanding as of February
28, 20042006 was 3,430,8594,245,472 common shares.
DOCUMENTS INCORPORATED BY REFERENCEDocuments Incorporated By Reference:
(1) Portions of the 20042005 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 and 8.
(2) Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held April 13, 2005May 10, 2006 are incorporated by reference into Part III,Items 10,
11, 12, 13 and 14.
Exhibit Index begins on page 24.
PART I
ITEM 1 - BUSINESS
Holding Company
---------------Organizational History and Subsidiaries
Ohio Valley Banc CorpCorp. ("Ohio Valley") is an Ohio corporation registered as
a financial holding company thatpursuant 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. Ohio
Valley is registered under the Bank Holding Company Act of 1956, as amended
("BHC Act"). 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 NASDAQNasdaq
National Market under the symbol "OVBC". Ohio Valley's business is
incident to its 100% ownership of the outstanding equity ofValley has one banking subsidiary,
The Ohio Valley Bank Company (the "Bank"),. Ohio Valley also owns two nonbank
subsidiaries, Loan Central, Inc. ("Loan Central") and Ohio Valley Financial
Services Agency, LLC ("Ohio Valley Financial Services")., which engage in lending
and insurance services. Ohio Valley and its subsidiaries are collectively
referred to as the "Company."
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 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, 2005, Ohio Valley's
consolidated assets approximated to $749,719,000 and total shareholders' equity
approximated to $59,271,000.
Ohio Valley is also permitted to engage in certain non-banking activities
under the provisions of the Gramm-Leach-Bliley Act ("GLB Act"), such as
securities underwriting and dealing activities, insurance and underwriting
activities and merchant banking/equity investment activities. The Company
presently engages in insurance and underwriting activities through Ohio Valley
Financial Services. Management will consider opportunities to engage in
additional nonbanking activities as they arise.
Business of Bank Subsidiary
---------------
A substantial portion of Ohio Valley's revenue is derived from cash
dividends paid by the Bank. The Bank was organized on September 24, 1872, under
the laws governing private bankingpresently has sixteen offices located in
Ohio.Ohio and West Virginia, all of which offer automatic teller machines (ATMs).
Seven of these offices also offer drive-up services. The Bank was incorporated in
accordance with the general corporation laws governing savings and loan
associations of the Stateaccounted for
substantially all of Ohio on January 8, 1901. The Articles of
Incorporation of the Bank were amended on January 25, 1935, for the purpose of
authorizing the Bank to transact a commercial savings bank and safe deposit
business and again on January 26, 1950, for the purpose of adding special plan
banking. The Bank was approved for trust powers in 1980 with trust services
first being offered in 1981.Valley's consolidated assets at December 31, 2005.
The Bank is primarily engaged in commercial and retail banking. The Bank is
a full-service financial institution offering a blend of commercial, consumer
and agricultural banking services within central and southeastern Ohio as well
as western West Virginia. LoansThe banking services offered by the Bank include the
acceptance of all types anddeposits in checking, savings, time and time
deposits are offered, along with such services asmoney market accounts; the
making and servicing of personal, commercial, floor plan and
3
student loans; and the making of construction and real estate loans. The Bank
also offers individual retirement accounts, safe deposit boxes, issuancewire transfers
and other standard banking products and services. As part of travelers' checks and administration of trusts.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 presently has sixteen offices,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 which offer automatic teller
machines ("ATM's"). Seven of these offices also offer drive-up services.the Bank.
The Bank accounted for substantiallyoffers an automated telephone banking system, OVB Line, which
allows customers to access their personal account(s) or business account(s)
information, make loan payments or fund transfers and obtain current rate
information all from a touch-tone telephone. The Bank also offers Internet
banking to its customers which allows customers to perform various transactions
using a computer from any location as long as they have access to the Internet
and a secure browser. Specifically, customers can check personal account
balances, receive information about transactions within their accounts, make
transfers between accounts, stop payment on a check, and reorder checks.
Customers may also pay bills online and can make payments to virtually any
business or individual. Furthermore, the Bank offers other financial management
online services such as cash management and news updates related to repossession
auctions, current rates and general bank news.
Business of Ohio Valley's consolidated assets at
December 31, 2004.
Non-bank Subsidiary
------------------- Loan Central was incorporated on February 1, 1996 under the laws of the
State of Ohio governing finance companies.
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 five offices all located within southeastern Ohio.
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Business of Financial Services Subsidiaries
-------------------------------
Ohio Valley Financial Services was formed on January 10, 2000 and is
engaged in sellingsells life insurance. [To who? More about business?] Ohio Valley Financial
Services washas been approved under the guidelines of the State of Ohio Department
of Insurance.
Ohio Valley also holds a non-majority equity interest in three insurance
businesses. The first, BSG Title Services, LLC, was formed on February 28, 2001.
The second, OVB Title Services, LLC, was formed on October 1, 2004. Both
insurance agencies are engaged primarily in title services related to real
estate, commercial and consumer loan customers. The third business is
ProAlliance Corp.,
an insurance company formed on March 18,2004.company. ProAlliance
Corp., previouly a subsidiary of ProFinance Corp., was the result of a dividend
to the owners of ProCentury Corp., formerly known as ProFinance Corp., prior to
an initial public offering of ProCentury Corp. on April 26, 2004.ProAlliance Corp. is engaged primarily in specialty
property and casualty insurance coverage. All investments werecoverage and has been approved under the
guidelines of the State of Ohio Department of Insurance.
During 2005, Ohio Valley dissolved its minority equity interest in two
title insurance businesses. BSG Title Services, LLC and OVB Title Services, LLC
were both dissolved on June 30, 2005 as a result of many secondary market
purchasers of residential real estate loans as well as competition from regional
lending competitiors not requiring title insurance. Ohio Valley felt this would
have had a future negative impact on lower title insurance volume and,
ultimately, lower profitability of these investments.
Variable Interest Entities
--------------------------
Ohio Valley owns two special purpose entities, - Ohio Valley Statutory TrustsTrust
I and II. Prior to 2003, Ohio Valley classifiedStatutory Trust II. Together, these Trusts have issued an
aggregate $13,500,000 in trust preferred securities. Ohio Valley has issued a
like amount of subordinated debentures to the trusts as wholly
owned subsidiaries and consolidated Ohio Valley's ownershipTrusts in exchange for the
4
proceeds of the issuance of the trust preferred securities in Ohio Valley's financial statements as liabilities. Under
accounting guidance outlined by Financial Accounting Standards Board
Interpretation No. 46, Consolidation of Variable Interest Entities, adopted in
2003, the trusts are no longer consolidated. As a result,securities. Ohio Valley does not
reportused the
trust preferred securities issued byproceeds to provide additional capital to the trust as liabilities, and
instead reports as liabilities the subordinated debentures issued by Ohio Valley
and held by the trusts.Bank to support growth. Further
detail on this accounting guidance and the
deconsolidation of Ohio Valley Statutory Trusts I and II is located in Ohio Valley's 20042005
Annual Report to Shareholders under "Note A - Summary of
Significant Accounting Policies" and "Note I - Subordinated Debentures and Trust
Preferred Securities.Securities," Allin the notes to the Company's consolidated financial
statements for the fiscal year ended December 31, 2005.
Financial Information
Financial information regarding the Company for the past three fiscal years
is contained in the Company's consolidated financial statements for the fiscal
year ended December 31, 2005.
Lending Activities
The Company's loan portfolio increased $16,958,000 to finish at
$617,532,000 in 2005. The loan portfolio is comprised of commercial and
industrial, real estate and consumer loans including credit card and home equity
loans. Commercial and industrial loans increased $10,478,000 or 4.6% and real
estate loans increased $7,774,000 or 3.4%, while consumer loans decreased
$1,150,000 or 0.8% as compared to 2004. Consolidated interest and fee revenue
from loans accounted for 89.30%, 77.35% and 81.07% of total consolidated
revenues in 2005, 2004 and 2003, respectively. 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.
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 informationas the economy,
new technology, labor rates, cash flow, financial structure and asset quality.
The payment experience on commercial loans is incorporated hereindependent 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 reference.
Referenceclosely monitoring industry concentrations and portfolios to
ensure that it does not exceed established lending guidelines. Underwriting
standards require a comprehensive credit analysis and independent evaluation of
virtually all larger balance commercial loans by the Bank's loan committee prior
to approval. Commercial loans greater than $300,000 are reviewed and approved by
the Executive Committee of the Bank's Board of Directors.
Real Estate Loans
The Company's real estate loans consist primarily of one-to-four family
residential mortgages and carry many of the same customer and industry risks as
the commercial loan portfolio. Real estate loans to consumers are secured
primarily by a first lien deed of trust with evidence of title in favor of the
Bank. The Company also requires proof of hazard insurance 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 89% of the purchase
price or the appraisal value of the real estate securing the loan, unless
private mortgage insurance is herebyobtained by the borrower for the percentage
exceeding 89%. These loans generally range from one year adjustable
5
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,
assisted in minimizing the Bank's exposure to interest rate risk as rates began
to rise in 2004.
Consumer Loans
Consumer loans are secured by automobiles, mobile homes, recreational
vehicles and other personal property. Personal loans and unsecured credit card
receivables are also included as consumer loans. The Company makes installment
credit available to customers in their primary market area of southeastern Ohio
and portions of western West Virginia. Credit approval for consumer loans
requires demonstration of sufficient income to repay principal and interest due,
stability of employment, a positive credit record and sufficient collateral for
secured loans. The Company monitors the risk associated with these types of
loans by monitoring factors such as portfolio growth, lending policies and
economic conditions. Underwriting standards are continually evaluated and
modified based upon these factors. A qualified compliance officer is responsible
for monitoring the performance of his or her respective consumer portfolio and
updating loan personnel. The Company makes credit life insurance and health and
accident insurance available to all qualified borrowers thus reducing their risk
of loss when their income is terminated or interrupted. The Company reviews its
respective consumer loan portfolios monthly to charge off loans which do not
meet applicable standards. Credit card accounts are administered in accordance
with the same standards as those applied to other consumer loans. Consumer loans
generally involve more risk as to collectibility than mortgage loans because of
the type and nature of collateral and, in certain instances, the absence of
collateral. As a result, consumer lending collections are dependent upon the
borrower's continued financial stability and are adversely affected by job loss,
divorce or personal bankruptcy and by adverse economic conditions. Also included
in the category of consumer loans are home equity loans. Home equity lines of
credit are generally made as second mortgages and charged a variable interest
rate. Home equity lines are written with ten year terms but are reviewed
annually.
Underwriting Standards
The Company's underwriting guidelines and standards are updated
periodically and are presented to Item 1(E)the Board of Directors of the holding company
for approval. The purpose of the standards and guidelines is to grant loans on a
sound and collectible basis; to invest available funds in a safe, profitable
manner; to serve the legitimate credit needs of the Company's primary market
areas; and to ensure that all loan applicants receive fair and equal treatment
in the lending process. It is the intent of the underwriting guidelines and
standards to: minimize losses by carefully investigating the credit history of
each applicant, verify the source of repayment and the ability of the applicant
to repay, collateralize those loans in which collateral is deemed to be
required, exercise care in the documentation of the application, review,
approval, and origination process, and administer a comprehensive loan
collection program. The above guidelines are adhered to and subject to the
experience, background and personal judgment of the loan officer assigned to the
loan application. A loan officer may grant, with justification, a loan with
variances from the underwriting guidelines and standards. However, a loan
officer may not exceed his or her respective lending authority without obtaining
the prior, proper approval from a superior.
6
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 a significant
amount of mortgage-backed securities and U.S. government agency securities.
Revenues from interest and dividends on securities accounted for 6.69%, "Statistical Disclosure"7.13%
and Item 87.23% of this Form 10-Ktotal consolidated revenues in 2005, 2004 and 2003, respectively.
The Company currently does not engage in trading account activity.
Funding Activities
Sources of funds for financial information pertainingloan and investment activities include "core
deposits." Core deposits include demand deposits, savings and NOW accounts, and
certificates of deposit less than $100,000. The Company will also utilize
certificates of deposit from wholesale markets, when necessary, to Ohio Valley's business
through its subsidiaries as required by Item 101supplement
growth in assets. Borrowings have also been a significant source of Regulation S-K.funding.
These include advances from the Federal Home Loan Bank, Federal Reserve Bank
Notes and securities sold under agreements to repurchase. Repurchase agreements
are financing arrangements with various customers that have overnight maturity
terms.
Competition
-----------
The financial services industry is highly competitive. As of December 31,
2005, there were 123 bank holding companies operating in the State of Ohio
registered with the Federal Reserve. These holding companies control various
banks throughout Ohio, which compete for business to expand market areas as well
as acquire additional banks. The principal factors of competition for Ohio
Valley'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 Franklin Counties of
Ohio as well as the Mason, Kanawha and Cabell Counties of West Virginia. Some
additional business originates from the surrounding Ohio counties of Meigs,
Vinton, Lawrence, Scioto and Ross. Competition for deposits and loans comes
primarily from local banks and savings associations, although some competition
is also experienced from local credit unions, insurance companies and mutual
funds. In addition, larger regional institutions, with substantially greater
resources, are generating a growing market presence. Loan Central's market
presence further strengthens Ohio Valley's ability to compete in the Gallia,
Jackson and Pike Counties by serving a consumer base which may not meet the
Bank's credit standards. Loan Central also operates in the Ohio counties of
Lawrence and Scioto, which are outside the Bank's primary market area.
3
Additionally, Ohio Valley Financial Services sells life insurance which further
strengthens the blend of services available to Ohio Valley's consumer base. The
principal factors of competition for Ohio Valley's bankingCompany's 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 business of Ohio Valley and its subsidiaries is not seasonal, nor is it dependent upon a single or small
group of customers.
The Bank deals with a wide cross-section of individuals, businesses and
corporations which are located primarily in southeastern Ohio and western West
Virginia. Few loans are made to borrowers outside this area. Lending decisions
are made in accordance with written loan policies designed to maintain loan
quality. The Bank originates commercial loans, residential real estate loans,
home equity lines of credit, installment loans and credit card loans. The Bank
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.
Commercial lending entails significant risks in its exposure to higher
average dollars per loan as compared with other types of lending (i.e.,
single-family residential mortgage lending, installment lending and credit card
loans). The payment experience on commercial loans is typically dependent on
adequate cash flows 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 Bank and Loan Central make 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. It is the
policy of the Bank and Loan Central to adhere strictly to all laws and
regulations governing consumer lending. A qualified compliance officer is
responsible for monitoring the performance of his or her respective consumer
portfolio and updating loan personnel. The Bank and Loan Central make credit
life insurance and health and accident insurance available to all qualified
borrowers thus reducing their risk of loss when a borrower's income is
terminated or interrupted. The Bank and Loan Central review their respective
consumer loan portfolios monthly to charge off loans which do not meet that
subsidiary's 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.
The market area for real estate lending by the Bank is also located in
southeastern Ohio and portions of western West Virginia. The Bank generally
requires the amount of a residential real estate loan be no more than 89% of the
purchase price or the appraisal value of the real estate securing the loan,
unless private mortgage insurance is obtained by the borrower for the percentage
exceeding 89%. These loans generally range from one year adjustable to thirty
year fixed rate mortgages. In the third quarter of 2002, the Bank began selling
a large 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,
4
which have fixed rates with fifteen to thirty year terms, assisted in minimizing
the Bank's exposure to interest rate risk as rates began to rise in 2004. Real
estate loans are secured by first mortgages with evidence of title in favor of
the Bank in the form of an attorney's opinion of title or a title insurance
policy. The Bank also requires proof of hazard insurance with the Bank named as
the mortgagee and as loss payee. Home equity lines of credit are generally made
as second mortgages by the Bank. The home equity lines of credit are written
with ten year terms but are reviewed annually. A variable interest rate is
generally charged on the home equity lines of credit.
Consolidated revenues from loans accounted for 77.35%, 81.07% and 82.29% of
total consolidated revenues in 2004, 2003 and 2002, respectively. Revenues from
interest and dividends on securities accounted for 7.13%, 7.23% and 7.16% of
total consolidated revenues in 2004, 2003 and 2002, respectively.
To continue the expansion of the Bank's market presence and further enhance
customer service, the Bank began a phase of SuperBank branch openings in
December 1996. From 1996 to 2001, the Bank opened eight SuperBank facilities
within supermarkets and Wal-Mart stores. These new branches service the market areas
of Gallia, Jackson, Meigs and Lawrence counties of Ohio as well as the growing
Kanawha and Cabell counties of West Virginia.
Furthermore, withOverall, the adventCompany believes it is able to compete effectively in both
current and newer markets. There can be no assurance, however, that our ability
7
to market products and services successfully or to obtain adequate yield on our
loans will not be impacted by the nature of the Gramm-Leach-Bliley Act, Ohio Valley has
expanded its business beyond banking services. In October 2000, Ohio Valley
participated in the purchase of ProCentury Corp., a property and casualty
insurance underwriter and reinsurance company. Ohio Valley's interest in
ProCentury Corp. was sold in 2004 through an initial public offeringcompetition that yielded an after-tax gain of $1,625. ProAlliance Corp. was formed as a result of
a dividend paid to the owners of ProCentury Corp. prior to this initial public
offering in 2004.Furthermore, Ohio Valley formed Ohio Valley Financial Services
and two title insurance agencie, BSG Title Services, LLC and OVB Title Services,
LLC.
The financial services industry is likely to become more competitive as
further technological advances enable more companies to provide financial
services on a more efficient and convenient basis.now exists or
may later develop.
Supervision and Regulation
--------------------------
The following is a summary of certain statutes and regulations affecting
Ohio Valley as well as the Bank and Loan Central. The summary is qualified in
its entirety by reference to such statutes and regulations.
Regulation of Bank Holding Company
Ohio Valley is subject to the requirements of the BHC Act and to the
reporting requirements of, and examination and regulation by, the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). The
Federal Reserve Board also has extensive enforcement authority over bank holding
companies, including, among other things, the ability to:
o assess civil money penalties;
5
o issue cease and desist or removal orders; and
o 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.
Under Federal Reserve Board policy, a bank holding company is expected to
serve as a source of financial strength to each subsidiary bank and to commit
resources to support those subsidiary banks. Under this policy, the Federal
Reserve Board may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank.
The BHC Act requires the prior approval of the Federal Reserve Board in any
case where a bank holding company proposes to:
o 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;
o acquire all or substantially all of the assets of another bank or bank
holding company; or
o merge or consolidate with any other bank holding company.
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:
(1)o 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), (2);
8
o 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,surplus; and
(3)o 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, 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.
6
Regulation of Ohio State Chartered Banks
As an Ohio state-chartered bank that is not a member of the Federal Reserve
Bank, the Bank is supervised and regulated by the Ohio Division of Financial
Institutions and the FDIC.
The Bank's deposits are insured up to applicable limits by the FDIC and the
Bank is subject to the applicable provisions of the Federal Deposit Insurance
Act and the regulations of the FDIC.
Various requirements and restrictions under the laws of the United States
and the State of Ohio and the State of West Virginia affect the operations of
the Bank, including requirements to maintain reserves against deposits,
restrictions on the nature and amount of loans that may be made and the interest
that may be charged thereon, restrictions relating to investments and other
activities, limitations on credit exposure to correspondent banks, limitations
on activities based on capital and surplus, limitations on payment of dividends,
and limitations on branching.
Holding Company Activities
In November of 1999, the Gramm-Leach-BlileyGLB Act ("GLB Act") was enacted, amending the BHC Act and
modernizing the laws governing the financial services industry. The GLB Act
authorized the creation of financial holding companies, a new type of bank
holding company with powers exceeding those of traditional bank holding
companies. Ohio Valley became a financial holding company during 2000. 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 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
9
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 Securities and Exchange Commission (the "SEC")SEC and state insurance regulators. The GLB Act directs the
Federal Reserve Board to rely to the maximum extent possible on examinations and
reports prepared by functional regulators. The Federal Reserve Board is also
prohibited from applying any capital standard directly to any functionally
regulated subsidiary that is already in compliance with the capital requirements
of its functional regulator.
Loan Central is supervised and regulated by the State of Ohio Department of
Financial Institutions, Division of Consumer Finance. Ohio Valley's insurance
company investments, ProAlliance Corp., Ohio Valley Financial Services BSG
Title Services, LLC and OVB Title Services, LLCProAlliance Corp. are
allboth supervised and regulated by the State of Ohio Department of Insurance. The
insurance laws and regulations applicable to insurance agencies require
education and licensing of individual agents and agencies, require reports and
impose business conduct rules.
7
The GLB Act provides that if a subsidiary bank of a financial holding
company fails to be both well capitalized and well managed, the financial
holding company must enter into a written agreement with the Federal Reserve
Board within 45 days to comply with all applicable capital and management
requirements. Until the Federal Reserve Board determines that the bank is again
well capitalized and well managed, the Federal Reserve Board may impose
additional limitations or conditions on the conduct or activities of the
financial holding company or any affiliate that the Federal Reserve Board finds
to be appropriate or consistent with federal banking laws. If the financial
holding company does not correct the capital or management deficiencies within
180 days, the financial holding company may be required to divest ownership or
control of all banks, including state-chartered non-member banks and other
well-capitalized institutions owned by the financial holding company. If an
insured bank subsidiary fails to maintain a satisfactory rating under the
Community Reinvestment Act, the financial holding company may not engage in
activities permitted only to financial holding companies until such time as the
bank receives a satisfactory rating.
Capital Requirements
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The risk-based capital guidelines include both a
definition of capital and a framework for calculating weighted risk assets by
assigning assets and off-balance sheet items to broad risk categories. The
minimum ratio of capital to risk weighted assets (including certain off-balance
sheet items, such as standby letters of credit) to be considered adequately
capitalized is 8%. At least 4.0 percentage points is to be comprised of common
shareholders' equity (including retained earnings but excluding treasury stock),
noncumulative perpetual preferred stock, a limited amount of cumulative
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder ("Tier 2 Capital") may consist of certain
amounts of hybrid capital instruments, mandatory convertible debt securities,
subordinated debt, preferred stock not qualifying as Tier 1 Capital and a
limited amount of allowance for loan and lease losses. The Federal Reserve Board
also imposes a minimum leverage ratio (Tier 1 Capital to total assets) of 3% for
bank holding companies that meet certain specified conditions, including no
operational, financial or supervisory deficiencies, and including having the
highest regulatory rating. The minimum leverage ratio is 100-200 basis points
higher for other bank holding companies and state member banks based on their
particular circumstances and risk profiles and those experiencing or
anticipating significant growth.
10
State non-member banks, such as the Bank, are subject to similar capital
requirements adopted by the FDIC. Ohio Valley and the Bank currently satisfy all
applicable capital requirements. Failure to meet applicable capital guidelines
could subject a banking institution to a variety of enforcement remedies
available to federal and state regulatory authorities, including the termination
of deposit insurance by the FDIC.
Federal banking regulators have established regulations governing prompt
corrective action to resolve capital deficient banks. Under these regulations,
institutions which become undercapitalized become subject to mandatory
regulatory scrutiny and limitations, which increase as capital continues to
decrease. Such institutions are also required to file capital plans with their
primary federal regulator, and their holding companies must guarantee the
capital shortfall up to 5% of the assets of the capital deficient institution at
the time it becomes undercapitalized.
8
Limits on Dividends
The ability of a bank holding company to obtain funds for the payment of
dividends and for other cash requirements is largely dependent on the amount of
dividends that may be declared by its subsidiary banks and other subsidiaries.
However, the Federal Reserve Board expects Ohio Valley to serve as a source of
strength to the Bank, which may require it to retain capital for further
investments in the Bank, rather than for dividends for shareholders of Ohio
Valley. The Bank may not pay dividends to Ohio Valley if, after paying such
dividends, it would fail to meet the required minimum levels under the
risk-based capital guidelines and the minimum leverage ratio requirements. The
Bank must have the approval of its regulatory authorities if a dividend in any
year would cause the total dividends for that year to exceed the sum of its
current year's net profits and retained net profits for the preceding two years,
less required transfers to surplus. Payment of dividends by the Bank may be
restricted at any time at the discretion of its regulatory authorities, if they
deem such dividends to constitute an unsafe and/or unsound banking practice or
if necessary to maintain adequate capital for the Bank. These provisions could
have the effect of limiting Ohio Valley's ability to pay dividends on its
outstanding common shares.
Deposit Insurance Assessments
The FDIC is authorizedan independent federal agency which insures deposits, up to
establish separate annualprescribed statutory limits, of federally-issued banks and savings associations
and safeguards the safety and soundness of the financial institution industry.
Insurance Premiums: Insurance premiums for insured institutions are
determined during each semi-annual assessment rates forperiod based upon the members'
respective categorization as well capitalized, adequately capitalized or
undercapitalized. The FDIC assigns banks to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which a bank is assigned
is based on a supervisory evaluation provided to the FDIC by the bank's primary
federal regulator and information which the FDIC determines to be relevant to
the bank's financial condition and the risk posed to the deposit insurance
for members of the Bank Insurance Fund ("BIF") and the Savings
Association Insurance Fund ("SAIF"). The Bank is a member of the BIF. The FDIC
may increasefunds. A bank's assessment rates for either fund if necessary to restore the fund's
ratio of reserves to insured deposits to its target level within a reasonable
time and may decrease such rates if such target level has been met. The FDIC has
established a risk-based assessment system for both BIF and SAIF members. Under
this system, assessments vary basedrate depends on the risk the institution posescapital category and supervisory
category to its
deposit insurance fund. The risk levelwhich it is determined based on the institution's
capital level and the FDIC's level of supervisory concern about the institution.assigned.
The assessment currently ranges from 1.441.32 to 28.4428.32 cents per $100 of
domestic deposits. The Bank is currently paying an assessment rate of 1.441.32 cents
per $100 of domestic deposits. An increase in this assessment rate could have a
material adverse effect on earnings on the Bank, depending on the amount of the
increase.
11
Deposit Insurance Reform Act of 2005: In February of 2006, President Bush
signed into law the Deposit Insurance Reform Act of 2005 and its companion bill,
the Deposit Insurance Reform Conforming Amendments Act of 2005 (collectively,
the "Deposit Insurance Reform Acts"), which provide for the Bank Insurance Fund
(BIF) and the Savings Association Insurance Fund (SAIF) to be merged into a new
Deposit Insurance Fund (DIF). The Deposit Insurance Reform Acts provide for
several additional changes to the deposit insurance system, including the
following:
o Increasing the deposit insurance limit for retirement accounts from $100,000
to $250,000;
o Adjusting the deposit insurance limits (currently $100,000 for most accounts)
every five years based on an inflation index, with the first adjustment to be
effective on January 1, 2011;
o Providing pass-through deposit insurance for the deposits of employee benefit
plans (but prohibiting undercapitalized depository institutions from
accepting employee benefit plan deposits);
o Allocating an aggregate of $4.7 billion of one-time credits to offset the
premiums of depository institutions based on their assessment bases at the
end of 1996;
o Establishing rules for awarding cash dividends to depository institutions,
based on their relative contributions to the DIF and its predecessor funds,
when the DIF reserve ratio reaches certain levels; and
o Revising the rules and procedures for risk-based premium assessments.
The FDIC is required to adopt rules implementing the various provisions of the
Deposit Insurance Reform Acts. The BIF and the SAIF are required to be merged
into the DIF by July 1, 2006, while most of the other provisions are required to
be implemented by November 5, 2006. Ohio Valley is not yet able to determine the
effect the Deposit Insurance Reform Acts will have on Ohio Valley.
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
In response to the terrorist events of September 11, 2001, the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorist Act of 2001 (the "Patriot Act") was signed into law in
October 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
12
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.
Sarbanes-Oxley Act of 2002
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"). The stated goals of the Sarbanes-Oxley Act are
to increase corporate responsibility, to provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and to
9
protect investors by improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws. The proposed changes are
intended to allow shareholders to monitor the performance of companies and
directors more easily and efficiently.
The Sarbanes-Oxley Act addresses, among other matters: audit committees;
corporate responsibility for financial reports; a requirement that chief
executive and chief financial officers forfeit certain bonuses and profits if
their companies issue an accounting restatement as a result of misconduct; a
prohibition on insider trading during pension fund black-out periods; disclosure
of off-balance sheet transactions; conditions for the use of financial
information not in accordance with generally accepted accouting principles; a
prohibition on personal loans to directors and executive officers (excluding
loans by insured depository institutions that are subject to the insider lending
restrictions of the Federal Reserve Act); expedited filing requirements for
stock transaction reports by officers and directors; the formation of the Public
Accounting Oversight Board; auditor independence; and various increased criminal
penalties for violations of securities laws.
As mandated by the Sarbanes-Oxley Act, the SEC has adopted rules and
regulations governing, among other issues, corporate governance, auditing and
accounting, executive compensation and enhanced and timely disclosure of
corporate information. The NASDAQNasdaq Stock Market has also adopted corporate
governance rules. Ohio Valley's Board of Directors has taken a series of actions
to strengthen and improve Ohio Valley's corporate governance practices in light
of the rules of the SEC and The NASDAQNasdaq Stock Market.
Employees
---------
As of December 31, 2004,2005, Ohio Valley and its subsidiaries employed 270had approximately
265 full-time equivalent employees.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.
13
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.
10
Available Information
---------------------
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 from Ohio Valley's website as soon as
reasonably practicable after Ohio Valley electronically files such materials
with, or furnishes them to, the SEC.
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",Companies," or a specific reference as to the
location of the required disclosures in Ohio Valley's 20042005 Annual Report to
Shareholders, which are hereby incorporated herein by reference.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS'STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
A.& B.TheB. The average balance sheet information and the related analysis of net
interest earnings for the years ending December 31, 2005, 2004 2003 and 20022003 is
incorporated herein by reference to the information appearing under the caption
"Table I - Consolidated Average Balance Sheet & Analysis of Net Interest
Income",Income," within "Management's Discussion and Analysis of Operations" located on
page 30 ofin
Ohio Valley's 20042005 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, 2004, 20032005 and 20022004 is incorporated
herein by reference to the information appearing under the caption "Table II -
Rate Volume Analysis of Changes in Interest Income & Expense",Expense," within
"Management's Discussion and Analysis of Operations" located on page 32 ofin Ohio Valley's
20042005 Annual Report to Shareholders. For purposes of these Tables, changes in
interest due to volume and rate were determined as follows:
Volume Variance - Change in volume multiplied by the previous year's rate.
Rate Variance - Change in rate multiplied by the previous year's volume.
Rate / Volume Variance - Change in volume multiplied by the change in rate.
Changes not due solely to either a change in volume or a change in rate have
been allocated proportionally to both changes due to volume and rate.
1114
II. INVESTMENT PORTFOLIO
A. Types of Securities - Total securities on the balance sheet are comprised of
the following classifications at December 31:
(dollars in thousands) 2005 2004 2003 2002
---- ---- ----
Securities Available-for-Sale
U.S. Government agency securities.. $ 18,167 $ 20,087 $ 37,785
$ 66,838
Mortgage-backed securities......... 48,161 48,647 33,364 3,425
FHLB stock......................... 5,421 5,203 5,001
--------- --------- ---------
Total securities available-for-sale $ 74,15566,328 $ 76,35268,734 $ 75,26471,149
========= ========= =========
Securities Held-to-Maturity
Obligations of states of the U.S.
and political subdivisions....... $ 12,019 $ 11,910 $ 12,724
$ 13,821
Mortgage-backed securities......... 69 84 111 169
--------- --------- ---------
Total securities held-to-maturity $ 12,088 $ 11,994 $ 12,835 $ 13,990
========= ========= =========
B. Information required by this item is incorporated herein by reference to the
information appearing under the caption "Table III - Securities",Securities," within
"Management's Discussion and Analysis of Operations" located on page 33 ofin Ohio Valley's
20042005 Annual Report to Shareholders.
C. Excluding obligations of the U.S. Government and its agencies, no
concentration of securities exists of any issuer that is greater than 10% of
shareholders' equity of Ohio Valley.
III. LOAN PORTFOLIO
A. Types of Loans - Total loans on the balance sheet are comprised of the
following classifications at December 31:
(dollars in thousands) 2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Commercial loans $236,536 $226,058 $220,724 $205,508 $173,154
Real estate loans $227,234 $217,636 $224,212 $226,212 $209,724
Commercial235,008 227,234 217,636 224,212 226,212
Consumer loans 226,058 220,724 205,508 173,154 139,826
Consumer loans145,815 146,965 134,720 128,662 108,437
98,013
All other loans 173 317 624 1,179 857 740
-------- -------- -------- -------- --------
$617,532 $600,574 $573,704 $559,561 $508,660 $448,303
======== ======== ======== ======== ========
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 VIIVI - Maturity and Repricing Data
of Loans", within "Management's Discussion and Analysis of Operations" located
on page 35 ofin Ohio Valley's 20042005 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 nonaccrual or past due 90 days is
estimated to be $121,000$97,000 for the fiscal year ending December 31, 2004.2005. Additional
information required by this item is incorporated herein by reference to the
information appearing under the caption "Table VIV - Summary of Nonperforming and
Past Due Loans",Loans,"
15
within "Management's Discussion and Analysis of Operations" located on page 35 ofin Ohio
Valley's 20042005 Annual Report to Shareholders.
12
2. Potential Problem Loans - At December 31, 2004,2005, there are approximately
$1,986,000$2,603,000 of loans, which are not included in "Table VIV - Summary of
Nonperforming and Past Due Loans" within "Management's Discussion and Analysis
of Operations" located on page 35 ofin Ohio Valley's 20042005 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,
2005, 2004 2003 or 2002.2003.
4. Loan Concentrations - As of December 31, 2004,2005, there were no concentrations
of loans greater than 10% of total loans which are not otherwisedisclosedotherwise 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"Note
A-Summary of Significant Accounting Policies" of the Notesnotes to the Consolidated Financial Statements ofCompany's
consolidated financial statements for the fiscal year ended December 31, 2005,
located in Ohio Valley's 20042005 Annual Report to Shareholders which note is
incorporated herein by reference.
5. No amount of loans that have been classified by regulatory examiners as
loss, substandard, doubtful, or special mention have been excluded from the
amounts disclosed as impaired,nonaccrual,past due 90 days or more, restructured,
or potential problem loans.
D. Other Interest-Bearing Assets - As of December 31, 2004,2005, there were no other
interest-bearing assets that would be required to be disclosed under Item III.C.
if such assets were loans.
1316
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) 2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Balance, beginning of year $7,177 $7,593 $7,069 $6,251 $5,385
$5,055
Loans charged-off:
Real estate 349 823 1,110 636 659
92
Commercial 1,295 1,661 2,267 2,272 620
61
Consumer 2,263 2,267 2,661 2,656 1,903 1,642
-------- -------- -------- -------- -------
Total loans charged-off 3,907 4,751 6,038 5,564 3,182 1,795
Recoveries of loans:
Real estate 336 583 279 119 69
4
Commercial 912 556 1,057 158 17
---
Consumer 818 843 887 635 459 231
-------- ------- -------- -------- -------
Total recoveries of loans 2,066 1,982 2,223 912 545
235
Net loan charge-offs (1,841) (2,769) (3,815) (4,652) (2,637)
(1,560)
Provision charged to operations 1,797 2,353 4,339 5,470 3,503 1,890
-------- ------- -------- -------- -------
Balance, end of year $7,133 $7,177 $7,593 $7,069 $6,251 $5,385
======== ======= ======== ======== =======
Ratio of Net Charge-offs to
Average Loans outstanding .31% .47% .68% .86% .56% .36%
======== ======= ======== ======== =======
Ratio of Allowance for Loan Losses
to Non-Performing Assets 154.36% 142.46% 140.66% 83.16% 94.73% 80.70%94.73
======== ======= ======== ======== =======
Discussion on factors which influenced management in determining the amount of
additions charged to provision expense is incorporated herein by reference to
the information appearing under the caption "Loans" within "Management's
Discussion and Analysis of Operations" located on page 33 ofin Ohio Valley's 20042005 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 VIV - Allocation of the Allowance for Loan Losses",Losses," within
"Management's Discussion and Analysis of Operations" located on page 35 ofin Ohio Valley's
20042005 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",Income," within "Management's
Discussion and Analysis of Operations" located on page 30 ofin Ohio Valley's 20042005 Annual
Report to Shareholders.
14
C.&E. Foreign Deposits - There were no foreign deposits outstanding at December
31, 2005, 2004, 2003, or 2002.2003.
17
D. Schedule of Maturities - The following table provides a summary of total time
deposits by remaining maturities for the fiscal year ended December 31, 2004:2005:
Over Over
3 months 3 through 6 through Over
(dollars in thousands) or less 6 months 12 months 12 months
------- -------- --------- ---------
Certificates of deposit of
$100,000 or greater ................. $ 14,92925,577 $ 8,07416,248 $ 31,67741,194 $ 46,00542,261
Other time deposits of
$100,000 or greater ................. 1,249 765 2,075 2,9751,973 1,301 1,606 2,723
-------- --------------- -------- --------
Total time deposits of
$100,000 or greater ................. $ 16,17827,550 $ 8,83917,549 $ 33,75242,800 $ 48,98044,984
======== =============== ======== ========
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 Operations" located on page 40 ofin Ohio Valley's
20042005 Annual Report to Shareholders.
VII. SHORT-TERM BORROWINGS
The following schedule is a summary of securities sold under agreements to
repurchase at December 31:
(dollars in thousands) 2005 2004 2003 2002
---- ---- ----
Balance outstanding at period-end .......... $ 29,070 $ 39,753 $ 24,018 $ 33,052
-------- -------- --------
Weighted average interest rate at period-end 3.32% 1.77% .80% 1.08%
-------- -------- --------
Average amount outstanding during year ..... $ 24,694 $ 24,743 $ 23,396 $ 23,090
-------- -------- --------
Approximate weighted average interest rate
during the year ......................... 2.60% 1.12% .87% 1.56%
-------- -------- --------
Maximum amount outstanding as of any
month-end ............................... $ 29,070 $ 39,753 $ 35,213
$ 33,052
-------- -------- --------
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, (the "Act), 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 revenues, income or loss,expense, earnings or loss 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 itsour management
or its board
15
Board of directors,Directors, including those relating to products or services; (iii)
statements of future economic performance; and (iv) statements of assumptions
underlying such statements. Words such as "believes," "anticipates," "expects,"
"intends," "targeted""targeted," and similar expressions are intended to identify
forward-looking statements but are not the exclusive means of identifying those
statements.
18
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: (i) changes in political,
economic or otherincluding those factors
such as inflation rates, recessionary or expansive
trends, and taxes; (ii) competitive pressures; (iii) fluctuations in interest
rates; (iv) the level of defaults and prepayment on loans made by the Company;
(v) unanticipated litigation, claims, or assessments; (vi) fluctuations in the
cost of obtaining funds to make loans; and (vii) regulatory changes.identified below. There is also the risk that weOhio Valley's management or Board
of Directors incorrectly analyzeanalyzes these risks and forces, or that the strategies
we developOhio 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.
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.
Changes in economic and political conditions could adversely affect our
earnings, as our borrowers' ability to repay loans and the value of the
collateral securing our loans decline.
Our success depends, to a certain extent, upon economic and political
conditions, local and national, as well as governmental monetary policies.
Conditions such as 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 earnings.
Because we have a significant amount of real estate loans, decreases in real
estate values could adversely affect the value of property used as collateral.
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. In addition, substantially all of our loans are
to individuals and businesses in Ohio and West Virginia. 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 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
19
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. 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.
Our profitability depends significantly on the condition of the local and
regional economies where we operate.
We currently have offices in Ohio and West Virginia. Consistent with our
community banking philosophy, a majority of customers are located in and do
business in that region, and we lend a substantial portion of our capital and
resources to commercial and consumer borrowers in our local banking markets.
Therefore, our local and regional economy has 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. If the economies of our banking markets
are adversely affected by a general economic downturn or by other specific
events or trends, the resulting impact could have a direct adverse effect on our
operating results. We are less able than larger financial institutions to spread
risks of unfavorable local economic conditions across a large number of
diversified economies.
Our small to medium-sized business target market may have fewer financial
resources to weather a downturn in the economy.
We target our business development and marketing strategy primarily to
serve the banking and financial services needs of small to medium-sized
businesses. These small to medium-sized businesses generally have fewer
financial resources in terms of capital or borrowing capacity than larger
companies. If general economic conditions negatively impact our Ohio and West
Virginia markets or the other geographic markets in which we operate, our
results of operations and financial condition may be negatively affected.
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
and a reserve for unfunded loan commitments, which when combined, we refer to as
the allowance for loan losses. Our allowance for loan losses may not be adequate
to cover actual credit losses, and future provisions for credit losses could
have a material adverse effect on our operating results. Our allowance for loan
losses is based on prior experience, as well as an evaluation of the risks in
the current portfolio. The amount of future losses is susceptible to changes in
economic, operating and other conditions, including changes in interest rates
that may be beyond our control, and these losses may exceed current estimates.
Federal regulatory agencies, as an integral part of their examination process,
review our loans and allowance for loan losses. We cannot assure you that we
will not further increase the allowance for loan losses or that regulators will
not require us to increase this allowance. Either of these occurrences could
have a material adverse effect on our financial condition and results of
operations.
20
We depend upon the accuracy and completeness of information about customers and
counterparties.
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 generally accepted
accounting principles 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 and results of operations could be negatively impacted to
the extent we rely on financial statements that do not comply with generally
accepted accounting principles or that are materially misleading.
Our earnings are significantly affected by the fiscal and monetary policies of
the Federal Government and its agencies.
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.
Legislative or regulatory changes or actions, or significant litigation, could
adversely impact us or the businesses in which we are engaged.
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
and the deposit insurance funds, and not to benefit our shareholders. 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 by the
institution and the adequacy of an institution's allowance for loan losses.
Additionally, actions by regulatory agencies or significant litigation 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. Proposals to change the laws governing financial institutions are
frequently raised in Congress and before bank regulatory authorities. It is
impossible to predict the ultimate form any proposed legislation might take or
how it might affect us. Future changes in the laws or regulations or their
interpretation or enforcement could be materially adverse to our business and
our shareholders.
21
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.
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 selection.event, we
could be required to remove the substances from and remediate the properties at
our cost and expense. The cost of removal and environmental remediation could be
substantial. We may not have adequate remedies against the owners of the
properties or other responsible parties and could find it difficult or
impossible to sell the affected properties. These events could have a material
adverse effect on our financial condition and results of operation.
Our business strategy includes growth plans. Our financial condition and results
of operations could be negatively affected if we fail to grow or fail to manage
our growth effectively.
We intend to continue pursuing a profitable growth strategy. Our prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in significant growth stages of development. We cannot
assure you that we will be able to expand our market presence in our existing
markets or successfully enter new markets or that any such expansion will not
adversely affect our results of operations. Failure to manage our growth
effectively could have a material adverse effect on our business, future
prospects, financial condition or results of operations and could adversely
affect our ability to successfully implement our business strategy. Also, if we
grow more slowly than anticipated, our operating results could be materially
adversely affected.
Our ability to grow successfully will depend on a variety of factors
including the continued availability of desirable business opportunities, the
competitive responses from other financial institutions in our market areas 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.
22
Our ability to pay cash dividends is limited, and we may be unable to pay cash
dividends in the future even if we elect to do so.
We are dependent primarily upon the earnings of our operating subsidiaries
for funds to pay dividends on our common stock. The payment of dividends by us
is also subject to certain regulatory restrictions. As a result, any payment of
dividends in the future will be dependent, in large part, on our ability to
satisfy these regulatory restrictions and our subsidiaries' earnings, capital
requirements, financial condition and other factors. Although our financial
earnings and financial condition have allowed us to declare and pay periodic
cash dividends to our shareholders, there can be no assurance that our dividend
policy or size of dividend distribution will continue in the future. Our failure
to pay dividends on our common shares could have a material adverse effect on
the market price of our common shares.
The loss of key members of our senior management team could adversely affect our
business.
We believe that our success depends largely on the efforts and abilities of
our senior management. Their experience and industry contacts significantly
benefit us. In addition, our success depends in part upon senior management's
ability to implement our business strategy. The competition for qualified
personnel in the financial services industry is intense, and the loss of
services of any of our senior executive officers or an inability to continue to
attract, retain and motivate key personnel could adversely affect our business.
We cannot assure you that we will be able to retain our existing key personnel
or attract additional qualified personnel.
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.
Consumers may decide not to use banks to complete their financial transactions.
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,
known as disintermediation, could result in the loss of fee income, as well as
the loss of customer deposits and income generated from those deposits.
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
23
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 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.
The price of our common shares may be volatile, which may result in losses for
shareholders.
Several factors could cause the price of our common shares to fluctuate
substantially in the future. These factors include:
o announcements of developments related to our business;
o fluctuations in our results of operations;
o sales of substantial amounts of our securities into the marketplace;
o general conditions in our markets or the worldwide economy;
o a shortfall in revenues or earnings compared to securities analysts'
expectations;
o changes in analysts' recommendations or projections; and
o our announcement of new acquisitions or other projects.
The market price of our common shares may fluctuate significantly in the
future, and these fluctuations may be unrelated to our performance. General
market price declines or market volatility in the future could adversely affect
the price of our common shares, and the current market price may not be
indicative of future market prices.
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 National 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.
We may be a defendant in a variety of litigation and other actions, which may
have a material adverse effect on our financial condition and results of
operation.
We and our subsidiaries may be involved from time to time in a variety of
litigation arising out of our business. Our insurance may not cover all claims
that may be asserted against us, and any claims asserted against us, regardless
of merit or eventual outcome, may harm our reputation. Should the
24
ultimate judgments or settlements in any litigation exceed our insurance
coverage, they could have a material adverse effect on our financial condition
and results of operation. In addition, we may not be able to obtain appropriate
types or levels of insurance in the future, nor may we be able to obtain
adequate replacement policies with acceptable terms, if at all.
Unauthorized disclosure of sensitive or confidential client or customer
information, whether through a breach of our computer systems or otherwise,
could severely harm our business.
As part of our business, we collect, process and retain sensitive and
confidential client and customer information on behalf of our subsidiaries and
other third parties. Despite the security measures we have in place, our
facilities and systems, and those of our third party service providers, may be
vulnerable to security breaches, acts of vandalism, computer viruses, misplaced
or lost data, programming and/or human errors, or other similar events. If
information security is breached, information can be lost or misappropriated,
resulting in financial loss or costs to us or damages to others. Any security
breach involving the misappropriation, loss or other unauthorized disclosure of
confidential customer information, whether by us or by our vendors, could
severely damage our reputation, expose us to the risks of litigation and
liability, disrupt our operations and have a material adverse effect on our
business.
Our organizational documents may have the effect of discouraging a third party
from acquiring us by means of a tender offer, proxy contest or otherwise.
Our articles of incorporation contain provisions that make it more
difficult for a third party to gain control or acquire us without the consent of
our board of directors. These provisions also could discourage proxy contests
and may make it more difficult for dissident shareholders to elect
representatives as directors and take other corporate actions. These provisions
of our governing documents may have the effect of delaying, deferring or
preventing a transaction or a change in control that might be in the best
interest of our shareholders.
Terrorism, acts of war or international conflicts could have a material adverse
effect on our financial condition and results of operations.
Acts or threats of war or terrorism, international conflicts, including
ongoing military operations in Iraq and Afghanistan, and the actions taken by
the United States and other governments in response to such events could
negatively impact general business and economic conditions in the United States.
If terrorist activity, acts of war or other international hostilities cause an
overall economic decline, our financial condition and operating results could be
materially adversely affected. The potential for future terrorist attacks, the
national and international responses to terrorist attacks or perceived threats
to national security and other actual or potential conflicts or acts of war,
including conflict in the Middle East, have created many economic and political
uncertainties that could seriously harm our business and results of operations
in ways that cannot presently be predicted.
ITEM 1B - UNRESOLVED STAFF COMMENTS
Ohio Valley did not receive any written comments from the staff of the
Securities and Exchange Commission regarding its periodic or current reports
under the Securities Exchange Act of 1934 within 180 days before the fiscal year
ended December 31, 2005.
25
ITEM 2 - PROPERTIES
Ohio Valley does not own or lease any real or personal property.
The principal executive offices of Ohio Valley and the Bank are located at
420 Third Avenue, Gallipolis, Ohio. The Bank owns six financial service centers
located in Gallipolis (Gallia Co.), Jackson (Jackson Co.), and Waverly (Pike Co.)
in Ohio and Columbus (FranklinMilton (Cabell Co.), all in Ohio.West Virginia. The Bank leases nine
additional financial service centers located in Gallipolis (Gallia Co.), Jackson
(Jackson Co.), Pomeroy (Meigs Co.), Columbus (Franklin Co.) and South Point
(Lawrence Co.) in Ohio and Point Pleasant (Mason Co.), Huntington (Cabell Co.),
Milton (Cabell Co.) and Cross Lanes (Kanawha Co.) in West Virginia. The Bank
also owns and operates twenty
fivetwenty-five ATMs, including ten off-site ATMs.
Furthermore, the Bank owns a facility and leases a facility in Gallipolis
(Gallia Co.), Ohio which are used for additional office space. The Bank also
owns two facilities in Gallipolis (Gallia Co.), Ohio and Point Pleasant (Mason
Co.), West Virginia which are leased to third parties.
Loan Central conducts its consumer finance operations through five offices
located in Gallipolis (Gallia Co.), Jackson (Jackson Co.), Waverly (Pike Co.),
South Point (Lawrence Co.) and Wheelersburg (Scioto Co.), all in Ohio. All of
these facilities are leased by Loan Central, except for the Wheelersburg (Scioto
Co.) facility. Loan Central leases a portion of its Wheelersburg (Scioto Co.)
facility to a third party. Ohio Valley Financial Services also conducts business
within Loan Central's Jackson (Jackson Co.) facility.
Management considers all of these properties to be satisfactory for the
Company's current operations. The Bank, Loan Central and Ohio Valley Financial
Services' leased facilities are all subject to commercially standard leasing
arrangements.
Information concerning the value of the Company's owned and leased real
property and a summary of future lease payments is contained in "Note E -
Premises and Equipment" of the notes to the Company's consoldiated financial
statements for the fiscal year ended December 31, 2004,2005, located on page 17 ofin Ohio Valley's
20042005 Annual Report to Shareholders.
16
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings against Ohio Valley or any
of its subsidiaries, other than ordinary, routine litigation incidental to their
respective businesses.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted during the fourth quarter of 20042005 to a vote
of security holders, by solicitation of proxies or otherwise.
26
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G of Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K, the following table lists the names and ages of the
executive officers of Ohio Valley as of March 16, 2005,2006, the positions presently
held by those individuals with Ohio Valley and its principal subsidiaries and
their individual business experience during the past five years.
Current Position and
Name and Age Business Experience During Past 5 Years
- ------------------ --------------------------------------------------------------------------------------------
Jeffrey E. Smith, 5556 President and Chief Executive Officer of Ohio Valley
and the BankBank.
Sue Ann Bostic, 6364 Vice President of Ohio Valley beginningsince 1996; Senior Vice
President, Administrative Services Group of the Bank
since 1996.
Cherie A. Barr, 3839 Vice President of Ohio Valley beginningsince 1998; President
of Loan Central since 2000, President and
Secretary of Loan Central from 1999 to 2000.
Katrinka V. Hart, 4647 Senior Vice President since 2003 and Vice President
from 1995 to 2003 of Ohio Valley; Executive Vice
President and Risk Management Officer since 2003,
Senior Vice President, Retail Bank Group from 1995 to
2003 of the Bank.
Mario P. Liberatore, 5960 Vice President of Ohio Valley beginning 1997,since 1997; Senior Vice
President, West Virginia Bank Group of the Bank beginningsince
1997.
E. Richard Mahan, 5960 Senior Vice President and Secretary of Ohio Valley
beginningsince 2000, Executive Vice President and Secretary of
the Bank beginning 2000; Senior Vice
President of Ohio Valley from 1999 to 2000, Executive
Vice President of the Bank from 1999 tosince 2000.
Larry E. Miller, II, 4041 Senior Vice President and Treasurer of Ohio Valley
beginningsince 2000, Executive Vice President and Treasurer of
the Bank beginning 2000; Seniorsince 2000.
David L. Shaffer, 47 Vice President of Ohio Valley from 1999 to 2000, Executive
Vice President of the Bank from 1999 to 2000.
David L. Shaffer, 46 Vice President of Ohio Valley beginningsince 2000, Senior Vice
President, Commercial Bank Group of the Bank beginning 2000; Vice President, Commercial Lending of
the Bank from 1999 tosince
2000.
17
Current Position and
Name and Age Business Experience During Past 5 Years
- ------------------ ---------------------------------------
Sandra L. Edwards, 5758 Vice President of Ohio Valley beginningsince 2000; Senior Vice
President, Financial Bank Group of the Bank beginning 2000,Vice President, Management Information
Systems of the Bank from 1999 tosince
2000.
Scott W. Shockey, 3536 Vice President and Chief Financial Officer since
December 2004 and Assistant Treasurer from 2001 to
December 2003 of Ohio Valley; Senior Vice President
since December 2004, Chief Financial Officer since
2001, Vice President from 2001 to December 2003, and
Assistant Vice President and Comptroller from 1999 to
2001 of the Bank.
Jennifer L. Osborne, 5253 Vice President of Ohio Valley since 2004; Senior Vice
President, Retail Lending Group since 2004 and Vice
President, Retail Lending Group from 1999 to 2003 of
the Bank.
27
Tom R. Shepherd, 3839 Vice President of Ohio Valley since 2004; Senior Vice
President, Retail Deposit Group since 2004, Vice
President, Director of Marketing, Product Management
and Retail Development from 2001 to 2003 and Vice
President, Marketing from 1998 to 2000 of the Bank.
Cindy H. Johnston, 4445 Assistant Secretary of Ohio Valley since 1995;
Assistant Vice President since 2004 and Assistant
Secretary since 1995 of the Bank.
Paula W. Salisbury, 46Clay, 47 Assistant Secretary of Ohio Valley since 1995;
Assistant Vice President since 2004 and Assistant
Secretary since 1995 of the Bank.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, AND 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" located on page 28
ofin Ohio
Valley's 20042005 Annual Report to Shareholders and "Note P -- Regulatory Matters"
of the notes to the Company's Consolidated Financial Statementsconsolidated financial statements for the fiscal
year ended December 31, 20042005 located on page 23 ofin Ohio Valley's 20042005 Annual Report to
Shareholders. The closing price of Ohio Valley's common shares on the NASDAQ
National Market on March 15, 2005 was $33.21.
18
In response to the information required under this Item 5 by Item 701 of
SEC Regulation S-K, Ohio Valley did not sell any of its securities without
registration during its 20042005 fiscal year.
Pursuant to Item 703 of SEC Regulation S-K, the following table provides
information on Ohio Valley's purchases of its common shares during the three
fiscal months ended December 31, 2004:2005:
Maximum Number
Total Number of Shares of Shares That May
Total Number of Average Purchased as Part of Yet Be Purchased
Common Shares Price Paid per Publicly Announced Under Publicly Announced
Period Purchased Common Share Plans or Programs Plans or Programs
-------------------------- ------------- -------------- ---------------------- --------------------------
October 1 through
October 31, 20042005 ............. - - - - - - - - - 107,091165,000
November 1 through
November 30, 20042005 ............ - - - - - - - - - 107,091165,000
December 1 through
December 31, 20042005 ............ 31,260 $32.50 31,260 75,83115,890 $25.05 15,890 149,110
------------- ------------- ------------- -------------
TOTAL 31,260 $32.50 31,260 75,83115,890 $25.05 15,890 149,110
============= ============= ============= =============
28
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 on page 5 ofin Ohio Valley's 20042005 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 Operations" located on pages
29-40 ofin Ohio
Valley's 20042005 Annual Report to Shareholders.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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" and found within "Management's Discussion and Analysis of
Operations" located on pages 37 and 38, respectively, ofin Ohio Valley's 20042005 Annual Report to Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Ohio Valley's consolidated financial statements and related notes are
listed below and incorporated herein by reference to pages 6-26 of Ohio Valley's 20042005 Annual
Report to Shareholders. The supplementary data "Consolidated Quarterly
19
Financial
Information (unaudited)" and the "Report of Independent Registered Public
Accounting Firm on Financial Statements" located on pages 26 and 27,
respectively, ofin Ohio Valley's 20042005 Annual
Report to Shareholders areis also incorporated herein by reference.
Consolidated Statements of Condition as of December 31, 20042005 and 20032004
Consolidated Statements of Income for the years ended December 31, 2005, 2004
2003
and 20022003
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2005, 2004 2003 and 20022003
Consolidated Statements of Cash Flows for the years ended December 31, 2005,
2004 2003 and 20022003
Notes to the Consolidated Financial Statements Report of Independent Registered
Public Accounting Firm on Financial Statements
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Ohio Valley has not changed accountants during the fiscal years ended
December 31, 20042005 and December 31, 2003.2004. Furthermore, during the fiscal years
ended December 31, 20042005 and December 31, 2003,2004, there were no disagreements
between Crowe Chizek and Company LLC ("Crowe Chizek") on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to Crowe Chizek's
satisfaction, would have caused Crowe Chizek to make reference to the subject
matter of the disagreement in connection with its reports on Ohio Valley's
consolidated financial statements for such periods.
29
ITEM 9A - CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
- ----------------------------------
With the participation of the President and Chief Executive Officer (the
principal executive officer) and the Vice PresientPresident 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.
20
Based on that evaluation, Ohio Valley's President and Chief Executive
Officer and Vice PresientPresident and Chief Financial Officer have concluded that:
o information required to be disclosed by Ohio Valley in this Annual Report on
Form 10-K 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;
o information required to be disclosed by Ohio Valley in this Annual Report on
Form 10-K would be recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms; and
o Ohio Valley's disclosure controls and procedures are effective as of the end
of the period covered by this Annual Report on Form 10-K to ensure that
material information relating to Ohio Valley and its consolidated
subsidiaries is made known to them, particularly during the period for which
the periodic reports of Ohio Valley, including this Annual Report on Form
10-K, are being prepared.
Management's Report on Internal Control Over Financial Reporting
- -----------------------------------------
Pursuant"Management's Report on Internal Control Over Financial Reporting" located
in Ohio Valley's 2005 Annual Report to the SEC's Exemptive OrderShareholders is incorporated into this
Item 9A by reference.
Attestation Report of Registered Public Accounting Firm
The "Report of Independent Registered Public Accounting Firm-Internal
Controls" located in Release No. 34-50754 (November 30,
2004), management's annual report on internal control over financial reporting
requiredOhio Valley's 2005 Annual Report to Shareholders is
incorporated into this Item 9A by Item 308(a) of SEC Regulation S-K and the related attestation report
of the registered public accounting firm required by Item 308(b) of SEC
Regulation S-K are not included herein. Ohio Valley will file this information
with the SEC by an amendment to this Form 10-K no later than May 2, 2005.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) that occurred
during Ohio Valley's fiscal quarter ended December 31, 2004,2005, that have
materially affected, or are reasonably likely to materially affect, Ohio
Valley's internal control over financial reporting.
ITEM 9B - OTHER INFORMATION
The following information is disclosed pursuant to Item 5.02 - Departure of
Directors or Principal Officers; Election of Directors; Appointment of Principal
Officers of Form 8-K:
Election of Director
- --------------------
The Board of Directors of Ohio Valley elected Harold A. Howe as a director
of Ohio Valley on January 18, 2005. Mr. Howe, age 54, has served as the
President of Ohio Valley Financial Services since 2000 and as a member of the
Board of Directors of the Bank since 1998. Mr. Howe is self-employed in the real
estate investment and rental business.
Mr. Howe was elected to finish the unexpired term of James L. Dailey who
retired from the Board of Directors of Ohio Valley effective January 18, 2005.
Mr. Dailey continues to serve as the Chairman of the Board of Directors of the
Bank. The Board of Directors of Ohio Valley has nominated Mr. Howe to stand for
re-election to the Board of Directors of Ohio Valley at Ohio Valley's Annual
Meeting of Shareholders on April 13, 2005.
21
On March 2, 2005, Ohio Valley issued a press release announcing Mr. Howe's
election to its Board of Directors. A copy of the press release is included as
Exhibit 99 to this Form 10-K and incorporated herein by reference.
Appointment of Principal Officer
- --------------------------------
On December 14, 2004, Scott W. Shockey was elected as Vice President and
Chief Financial Officer of Ohio Valley and as Senior Vice President of the Bank.
Mr. Shockey, age 35, has also served as Chief Financial Officer of the Bank
since 2001. Mr. Shockey served as Assistant Treasurer of Ohio Valley from 2001
to December 14, 2004; as Vice President of the Bank from 2001 to December 14,
2004; and as Assistant Vice President and Comptroller of the Bank from 1999 to
2001.
The Bank has had and expects to have in the future banking transactions in
the ordinary course of the Bank's business with Mr. Shockey, and members of his
immediate family. All loans and commitments to loan included in such
transactions were made on substantially the same terms, including interest rates
and collateral on loans and repayment terms, as those prevailing at the time for
comparable transactions with other persons and, in the opinion of management,
each such loan and commitment to loan did not involve more than a normal risk of
uncollectibility or present other unfavorable features. All of such loans comply
with Regulation O of the federal banking regulations. The aggregate amount of
loans to Mr. Shockey and affiliates and other associates of Mr. Shockey was
$32,512 at December 31, 2004. As of the date hereof, all of such loans were
performing loans.
The following information is disclosed pursuant to Item 1.01 - Entry into a
Material Definitive Agreement of Form 8-K:
30
Compensation of Directors
- -------------------------
All of the directors of Ohio Valley also serve as directors of the Bank.
The directors of Ohio Valley are paid by the Bank for their services rendered as
directors of the Bank. The form and amount of compensation paid to Ohio Valley's
directors is reviewed periodically by the Compensation and Mangement Succession
Committee of Ohio Valley's Board of Directors as well as the full Board.
On
December 14, 2004, upon the recommendation of the Compensation and Management
Succession Committee, Ohio Valley's Board of Directors increased the amount of
the annual retainer to be paid to each of Ohio Valley's directors by $650.
Accordingly, in December 2004,2005, each director of Ohio Valley received an annual
retainer of $15,350$14,700 for services to be rendered in fiscal 2005.2006. No other changes
were made to the directors' compensation package. A summary of the compensation
paid to Ohio Valley's directors is filed as Exhibit 10.9 to this Form 10-K and
incorporated herein by reference.
22
Long Range Bonus Program Awards
- -------------------------------
Ohio Valley maintains a bonus program (the "Long Range Bonus Program") for
the executive officers and certain other officers of Ohio Valley and the Bank.
Bonuses under the Long Range Bonus Program are calculated based on each
participant's annual performance evaluation and the Bank's achievement of
certain performance criteria. A summary of the Long Range Bonus Program is filed
as Exhibit 10.10 to this Form 10-K and incorporated herein by reference.
In December 2004, the Board of Directors of Ohio Valley, upon the
recommendation of the Compensation and Management Succession Committee, approved
the following bonuses for the executive officers of Ohio Valley under the Long
Range Bonus Program in respect of fiscal 2004 performance:
Jeffrey E. Smith $71,553
E. Richard Mahan $51,554
Larry E. Miller $46,266
Katrinka V. Hart $46,266
Sue Ann Bostic $44,937
Annual Results Bonus
- --------------------
Ohio Valley maintains an Annual Results Bonus Program. The objectives of
the Annual Results Bonus Program are (a) to motivate Ohio Valley's executive
officers and other employees and to reward them for the accomplishment of the
short-term goals of Ohio Valley and its subsidiaries; (b) to reinforce a strong
performance orientation with differentiation and variability in individual
awards based on contribution to annual results; and (c) to provide a competitive
compensation package that will attract, reward and retain employees of the
highest quality. All employees of Ohio Valley and its subsidiaries holding
positions with a pay grade of 8 or above are eligible to participate in the
Annual Results Bonus Program, including all of Ohio Valley's executive officers.
Bonuses payable to participants in the Annual Results Bonus Program are
based on the performance of Ohio Valley and its sibsidiaries against specific
performance targets designated by Ohio Valley's Board of Directors upon the
recommendation of its Compensation and Management Succession Committee. In
January 2004, the Board of Directors designated specific performance targets for
Ohio Valley and its subsidiaries related to earnings growth, return on assets,
return on equity and asset quality for fiscal 2004 (the "2004 Performance
Targets").
In December 2004, Ohio Valley's Board of Directors, upon the recommendation
of the Compensation and Management Succession Committee, (1) determined that the
2004 Performance Targets were achieved (due in part to the sale of Ohio Valley's
interest in ProCentury), (2) set the aggregate amount available for bonuses
under the Annual Results Bonus Program and (3) allocated the aggregate amount
available for bonuses among the various pay grades. All employees in the same
pay grade received the same bonus (except for Mr. Smith as explained below).
Accordingly, Ohio Valley's Board of Directors, upon the recommendation of the
Compensation and Management Succession Committee, approved bonuses for the
23
following executive officers of Ohio Valley under the Annual Results Bonus
Program in respect of fiscal 2004 performance:
E. Richard Mahan $2,000
Larry E. Miller $2,000
Katrinka V. Hart $2,000
Sue Ann Bostic $1,750
Based upon his pay grade, Jeffrey E. Smith, the President and Chief
Executive Officer of Ohio Valley, should have received a bonus of approximately
$2,000. However, the Compensation and Management Succession Committee exercised
its discretion and recommended to the Board of Directors that Mr. Smith receive
a $12,000 bonus under the Annual Results Bonus Program. Ohio Valley's Board of
Directors accepted the recommendation of the Compensation and Management
Succession Committee and awarded the $12,000 bonus to Mr. Smith.
All bonuses under the Annual Results Bonus Program were paid in December
2004 in cash in a single lump sum after deduction of payroll taxes and tax
withholdings.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this Item 10 by Items 401 and 405 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 April 13, 2005May 10, 2006 (the "2005"2006 Proxy
Statement"), under the captions "Proxy Item 1: Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" located on pages 7
through 15 and page 6, respectively, of the 20052006 Proxy
Statement. In addition, certain information concerning executive officers of
Ohio Valley is set forth in Part I of this Annual Report on Form 10-K under the
caption "Executive Officers of the Registrant."
In accordance with the requirements of Item 406 of SEC Regulation S-K, 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. Interested persons
may obtain copies of the Code of Ethics without charge by writing to Ohio Valley
Banc Corp, Attention: E. Richard Mahan, Secretary, P.O. Box 240, Gallipolis,
Ohio 45631.
ITEM 11 - EXECUTIVE COMPENSATION
The information required under this Item 11 by Item 402 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
caption "Compensation of Executive Officers and Directors" located on pages 16
through 23 of the 20052006 Proxy
Statement.
24
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" located on pages
3 through 6 of the 20052006
Proxy Statement.
Ohio Valley does not maintain any equity compensation plans requiring
disclosure pursuant to Item 201(d) of SEC Regulation S-K.
31
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this Item 13 by Item 404 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
caption "Certain Relationships and Related Transactions" located on page 23 of the 20052006 Proxy
Statement.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required under this Item 14 by Item 9(e) of Schedule 14A is
incorporated herein by reference to the information presented under the captions
"Pre-Approval of Services Performed by Independent Registered Public Accounting
Firm" and "Services Rendered by the Independent Registered Public Accounting
Firm" located on pages 25 through 29 of the 20052006 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 20042005 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, 20042005 and 20032004
Consolidated Statements of Income for the years ended December 31, 2005, 2004
2003 and 20022003
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2005, 2004 2003 and 20022003
Consolidated Statements of Cash Flows for the years ended December 31, 2005,
2004 2003 and 20022003
Notes to the Consolidated Financial Statements Report of Independent Registered
Public Accounting Firm on Financial Statements
25
(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 2834 of this Form
10-K.
2632
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 , 2005 By /s/Jeffrey E. Smith
-------- -------------------------
Jeffrey E. Smith
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, , 20052006 by the following persons on behalf of
Ohio Valley and in the capacities indicated.
Name Capacity
---- --------
/s/Jeffrey E. Smith President, Chief Executive Officer
- ----------------------------- and Director (principal executive
Jeffrey E. Smith officer)
/s/Scott W. Shockey Vice President and Chief Financial
- ----------------------------- Officer (principal financial officer
Scott W. Shockey and principal accounting officer)
/s/Lannes C. Williamson Director
- -----------------------------
Lannes C. Williamson
/s/Anna P. Barnitz Director
- -----------------------------
Anna P. Barnitz
/s/W. Lowell Call Director
- -----------------------------
W. Lowell Call
/s/Robert H. Eastman Director
- -----------------------------
Robert H. Eastman
/s/Brent A. Saunders Director
- -----------------------------
Brent A. Saunders
/s/Steven B. Chapman Director
- -----------------------------
Steven B. Chapman
/s/Thomas E. Wiseman Director
- -----------------------------
Thomas E. Wiseman
/s/Harold A. Howe Director
- -----------------------------
Harold A. Howe
27/s/Robert E. Daniel Director
- -----------------------------
Robert E. Daniel
/s/Roger D. Williams Director
- -----------------------------
Roger D. Williams
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
3(a) Amended Articles of Incorporation of Ohio Valley.
Incorporated herein by reference to Exhibit 3(a)
to Ohio Valley's Annual Report on Form 10-K for
fiscal year ending December 31, 1997 (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 current report on Form 8-K (SEC File No.
0-20914) filed November 6, 1992.
4 Agreement to furnish instruments and agreements
defining rights of holders of long-term debt.
Filed herewith.
10.1 Split Dollar Agreement, dated November 11, 1996,
between Jeffrey E. Smith and The Ohio Valley Bank
Company. Incorporated herein by reference to
Exhibit 10.1 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2002
(SEC File No. 0-20914).
10.2 Schedule A to Exhibit 10.1 identifying other
identical Split Dollar Agreements between The Ohio
Valley Bank Company and executive officers of Ohio
Valley Banc Corp. Incorporated herein by reference
to Exhibit 10.2 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2002
(SEC File No. 0-20914).
10.3 Director Retirement Plan, dated October 10, 2002,
between Brent A. Saunders and The Ohio Valley Bank
Company. Incorporated herein by reference to
Exhibit 10.3 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2002
(SEC File No. 0-20914).
10.4 Schedule A to Exhibit 10.3 identifying other
identical director retirement plans between The
Ohio Valley Bank Company and executive officers
who are directors of Ohio Valley Banc Corp.
Incorporated herein by reference to Exhibit 10.4
to Ohio Valley's Annual Report on Form 10-K for
fiscal year ending December 31, 2002 (SEC File No.
0-20914).
34
10.5 Salary Continuation Plan, dated January 2, 1997,
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 ending December 31, 2002
(SEC File No. 0-20914).
28
10.6 Schedule A to Exhibit 10.5 identifying other
identical salary continuation plans between The
Ohio Valley Bank Company and executive officers of
Ohio Valley Banc Corp. Incorporated herein by
reference to Exhibit 10.6 to Ohio Valley's Annual
Report on Form 10-K for fiscal year ending
December 31, 2002 (SEC File No. 0-20914).
10.7 Deferred Compensation Plan, dated November 11,
2002, between Barney A. Molnar and The Ohio Valley
Bank Company. Incorporated herein by reference to
Exhibit 10.7 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2002
(SEC File No. 0-20914).
10.8 Schedule A to Exhibit 10.7 identifying other
identical deferred compensation plans between The
Ohio Valley Bank Company and executive officers or
directors of Ohio Valley Banc Corp. Incorporated
herein by reference to Exhibit 10.8 to Ohio
Valley's Annual Report on Form 10-K for fiscal
year ending December 31, 2002 (SEC File No.
0-20914).
10.9 Summary of Compensation for Directors of Ohio
Valley Banc Corp. Filed herewith.
10.10 Summary of Long Range Bonus Program of Ohio Valley
Banc Corp. Filed herewith.Incorporated herein by reference to
Exhibit 10.10 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2004
(SEC File No. 0-20914).
11 Statement regarding computation of per share
earnings (included in Note A of the Notes to the
Consolidated Financial Statements of this Annual
Report on Form 10-K.)
13 Ohio Valley's Annual Report to Shareholders for
the fiscal year ended December 31, 20042005 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.
29
herewith
23 Consent of Independent Accountant - Crowe Chizek
and Company LLC. Filed herewith.
35
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.
99 Press Release issed by Ohio Valley on March 2,
2005. Filed herewith.
3036