MESSAGE FROM MANAGEMENT
- -----------------------
We dedicate the accomplishments of the last year to you, our shareholders, who
have supported our products, encouraged our expansion, and celebrated our
achievements. Also, your company's growth could not have been reached without a
loyal customer base who has permitted us to remain independent for 127 years.
Some of those that have supported the company for many years, retired in 1999.
For most, "retirement" means rest and relaxation, but these distinguished
individuals still find the time to continue their work.
Charles Lanham, retired from the Ohio Valley Bank Board in 1999, but will
continue to coordinate our government relations efforts. Morris Haskins and
Frank Mills continue to contribute through the Bank's Directors Emeritus
Advisory Board. Lloyd "Shorty" Francis was also a member of the Directors
Emeritus Advisory Board until his passing in the summer of 1999. His memory
still inspires us every day.
In 1999, we welcomed Steve Chapman and Wendell Thomas to the Ohio Valley Bank
Board as the Bank continued its strategic expansion into West Virginia. A new
SuperBank was opened in South Charleston and OVB acquired offices in Milton and
Barboursville. These offices, plus the anticipated opening of our eighth
SuperBank in east Huntington, will strengthen our presence in the growing I-64
corridor.
These new SuperBanks are anchored by the traditional-style Milton Office. This
expansion is patterned after the Jackson, Pike and Franklin County expansions of
1991 and 1996 which established offices that are now major income producers.
OVBC's net income per share for the year was $1.22, an increase of 3.4 percent.
Cash dividends for 1999 were $.53 per share compared to $.44 for 1998, an
increase of 20.5 percent. At the close of business on December 31, 1999, the
average of the Bid and Ask price of OVBC stock was $33.625 compared to $33.20 at
December 31, 1998. All per share numbers are adjusted for the 25 percent stock
split effective April 19, 1999.
Thank you for your involvement in Ohio Valley Bank, your support of Loan
Central, and your new commitment to Jackson Savings Bank.
Sincerely,
James L. Dailey
Chairman and Chief Executive Officer
Jeffrey E. Smith
President and Chief Operating Officer
Description of Business
Ohio Valley Banc Corp commenced operations on October 23, 1992 as a one-bank
holding company with The Ohio Valley Bank Company being the wholly-owned
subsidiary. The Company's headquarters are located at 420 Third Avenue in
Gallipolis, Ohio.
The Ohio Valley Bank Company was organized on September 24, 1872. The Bank is
insured under the Federal Deposit Insurance Act and is chartered under the
banking laws of the State of Ohio. The company currently operates sixteen
offices in Ohio and West Virginia.
In April 1996, the Banc Corp opened a consumer finance company operating under
the name of Loan Central, Inc. with offices in Gallipolis, South Point, Jackson
and Waverly, Ohio.
In December 1998, the Banc Corp purchased Jackson Savings Bank based in Jackson,
Ohio, to be operated as a wholly-owned subsidiary. Jackson Savings Bank is
insured under the Federal Deposit Insurance Act and is chartered under the
banking laws of the State of Ohio.
Form 10-K
A copy of the Company's annual report on Form 10-K, as filed with the Securities
and Exchange Commission, will be forwarded without charge to any stockholder
upon written request to: Ohio Valley Banc Corp, Attention: Charles Lanham,
Secretary, 420 Third Avenue, P.O. Box 240, Gallipolis, OH 45631.
Immediately after the 1999 Shareholders' Meeting, Loan Central opened its fourth
office. In May, Ohio Valley Bank signed an agreement to acquire two branches. In
June, Jackson Savings Bank celebrated 100 years of service. In July, Ohio Valley
Bank was named to the Cleveland Plain Dealer 100, a ranking of Ohio's
top-performing companies. Two new SuperBanks were opened in August and October.
A total of five offices were opened by OVBC subsidiaries this year. In December,
the Ohio Valley Bank Board of Directors promoted Larry E. Miller, II, and E.
Richard Mahan to Executive Vice President of Ohio Valley Bank and Senior Vice
President of Ohio Valley Banc Corp. As executive vice president, Miller's area
will encompass the Financial Bank Group, the Retail Bank Group, West Virginia
Bank Group and Loan Central. Executive Vice President Mahan's experience will
now benefit, not only the Commercial Bank Group, but also the Administrative
Services Group and Jackson Savings Bank.
Larry E. Miller, II
Executive Vice President
1999 was a dynamic year in which your company made unparalleled investments into
new markets. The crown jewel of the company's expansion efforts was our
acquisition of two offices from a larger regional bank on September 24, 1999.
The employees of the Financial Bank Group were very instrumental in introducing
Ohio Valley Bank to over 3 thousand new customers and making the acquisition of
21.7 million dollars in new deposits a successful reality. Countless hours were
spent by Operations personnel to ensure that each new account acquired was
accurately merged into our operating system. Many other employees such as those
in Network Administration and Accounting also played key roles in completing the
acquisition.
Yes, 1999 was a year of unparalleled investing by your company. We have sown the
seeds for future growth and profitability. Now we must focus the company's
financial and human resources to efficiently develop new relationships and
future profits. This focus will lead the Financial, Retail and West Virginia
Bank Groups, as well as Loan Central, throughout the year.
OVB RETAIL BANK GROUP REPORT
by Katrinka V. Hart, Senior Vice President
In 1999, the Retail Bank Group created a new division for one of our most
successful ventures... the SuperBank. The new division was very active over the
past year.
First, we opened our fifth SuperBank. It is located in the Wal-Mart at South
Ridge (South Charleston), West Virginia. Second, a new SuperBank location was
acquired at Pea Ridge (Barboursville), West Virginia, along with a
traditional-style office in Milton, West Virginia. Third, we opened our seventh
SuperBank. It is located in the Wal-Mart at South Point, Ohio.
However, one of the Retail Bank Group's most significant achievements for 1999
was assisting the Administrative Services Group in the staffing and training of
personnel for these new offices and the training of personnel gained through the
Milton and Pea Ridge Office acquisition. Our goal is to staff our offices with
knowledgeable employees that care about our customer's needs. We feel confident
that our new employees will work diligently to bring continued profitability to
you, our shareholders.
OVB WEST VIRGINIA BANK GROUP REPORT
by Mario P. Liberatore, Senior Vice President
The West Virginia Bank Group expanded its presence in West Virginia by opening
two SuperBanks, purchasing two branches from Huntington Bancshares and planning
for one more Wal-Mart SuperBank.
The Point Pleasant Branch continued its exciting growth showing 50% in deposit
growth in 1999. The total growth of the West Virginia Bank Group was more than
$36 million, a 100% deposit increase in 1999.
The bank continued its community support by participation in three county fairs
and various community activities; outstanding among these were the Point
Pleasant River Front Park project, the new Mason County Health Department
building, and the new Marshall University Mid Ohio Valley Center.
With an experienced dedicated staff in place the West Virginia Bank Group is
poised for an exciting 21st Century.
LOAN CENTRAL REPORT
by Cherie A. Barr, President
INCREASED PROFITABILITY AND EXPANSION...
a remarkable 1999 for Loan Central, Inc. We met the challenge by exceeding our
ambitious goals for profitability and expansion with a 53% increase in operating
earnings per share and a return on equity of 10.9%. The company saw net earnings
increased to157.7 thousand from 102.7 thousand in 1998, an increase of almost
54%. The growth in net earnings was primarily due to an increased emphasis in
real estate secured lending. This generated more fee income and helped to reduce
losses with a more valuable secured portfolio.
To help meet our customers needs, in 1999, we opened a fourth office in Waverly,
Ohio and changed locations in Gallipolis and South Point. These offices provide
increased visibility with easier access. We are constantly looking at ways
technology can make our personal service better and more efficient. In 1998, we
upgraded technology to include laser loan forms to make our loan specialists
more productive.
The cornerstones of our growth strategy are the value we placed on our customer
relationships and the quality customer service that we provide.
E. Richard Mahan
Executive Vice President
1999 saw the Commercial Bank Group focused on continuing the quality service to
our existing customer base, which has become our trademark, and looking to new
horizons for expanded business opportunities. We continued our commercial and
retail growth in our Franklin County region with significant increases in
commercial loans and deposits. Additionally, we seized new opportunities for
expansion of our customer base in the Kanawha Valley and Putnam County. We have
developed a very good network in those areas. As 1999 drew to a close we again
directed our attention to another region, Cabell County. With the acquisition of
branches in that area we see a whole new set of possibilities for growth. Our
new commercial loan volume for the year, up almost 18% over 1998, exceeded any
prior year in commercial lending.
The year brought additional changes for the Group with the retirement of friend
and co-worker, Wendell Thomas and the addition of David Shaffer to Commercial
Lending. We miss Wendell and the many years of experiences he had to share. As
David assumes the management of the Commercial Lending functions, he brings with
him many years of banking experience and new ideas which can help us maintain
our service quality, contain costs and grow the portfolio profitably.
The Shareholder Relations department has been extremely busy with the increased
activity of new shareholders, increased participation in the Dividend
Reinvestment and regulatory requirements which keep the work volume increasing.
We are hoping to add an additional employee this coming year which will provide
more support to our department and our shareholders.
Change is an inevitable part of our business with increased competition, the
changing needs of our customers and their companies. With these changes come a
whole new set of opportunities. Encroachment of competition into our local
markets causes us to be keenly aware that our customers are an important asset
and as their needs change we must be familiar with those needs and ready to
respond quickly.
We believe as we adjust to changes and redirect our resources we can continue to
meet the challenges of the 21st century. We will continue to emphasize quality
customer service, more efficient work processes and profitability for our
company and shareholders. We believe that the year 2000 can be another excellent
year of growth for all of our lending region. I am also looking forward to the
many challenges the year holds, including my new responsibilities to the
Administrative Services Group and Jackson Savings Bank.
OVB ADMINISTRATIVE SERVICES GROUP REPORT
by Sue Ann Bostic, Senior Vice President
As we enter each new year and I reflect back on the old one, I think, "this year
can't be as busy as the last one." However, 1999 was indeed as hectic as 1998.
The people of the Administrative Services Bank Group hardly had time to catch
their breath between acquisitions, construction, hiring, and training; but an
exciting year it was.
We kept on our toes with the construction of two new branches, inside the South
Charleston Wal-Mart and the South Point Wal-Mart. Then as fall approached, there
was an acquisition from Huntington Banks of the Milton Branch and the Pea Ridge
Kroger SuperBank. Our couriers had to learn new routes and time constraints in
order to get everyone's daily processing back to our Operations Center on time.
Our mail processing personnel were very excited to add a state-of-the-art piece
of mail equipment which cut their processing time in half. With 524,007 pieces
of mail processed in 1999 (43,667 monthly) this new equipment was a welcomed
addition.
With the opening of new branches comes the hiring of new personnel. A total of
71 employees plus 15 seasonal were added to OVB's staff in 1999. Two hundred
seventy-five (275) employees were paid as of the last payroll of the year.
Needless to say, Human Resources keeps busy tracking these employees and their
benefit plans, vacation/sick days, not to mention every day problems.
Of course, with hiring comes training. These 86 new employees needed in-house
orientation and classroom training before they went into respective branches for
approximately four weeks of additional window training. With two full time
trainers and the support of the Retail Bank Group, this seemingly endless task
was accomplished.
It's exciting to be part of the OVB team and the growth we have seen. The
Administrative Services Group is looking forward to going into 2000 with the
past year behind us and many new opportunities and challenges ahead of us.
JACKSON SAVINGS BANK
by Harold A. Howe, President
100 YEARS OF SERVICE AND COMMITMENT TO JACKSON COUNTY...on June 30, 1999,
Jackson Savings Bank celebrated its 100th anniversary with a customer
appreciation open house and the sale of 100 commemorative baskets, from which
proceeds were donated to the local YMCA.
The past year held a few changes for the 100-year-old institution. In the past,
Jackson Savings Bank primarily handled real estate loans for 1-4 family
dwellings. In the second quarter of 1999, installment loans, car loans and
personal loans were added to our lending portfolio.
Jackson Savings Bank's affiliation with Ohio Valley Banc Corp has enabled us to
be more competitive. We are still the Jackson Savings Bank; however, we have
expanded our product line to offer more of what our customers want and need. In
2000, new products are being considered that would take advantage of the new
financial modernization laws recently enacted.
FINANCIAL HIGHLIGHTS
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
NET INCOME ($000) $ 4,292 $ 4,130 $ 3,782 $ 3,349 $ 2,938
TOTAL ASSETS ($000) $522,057 $447,448 $379,088 $355,986 $331,845
INCOME PER SHARE $ 1.22 $ 1.18 $ 1.10 $ 1.00 $ .90
DIVIDENDS PER SHARE $ .53 .44 .42 .40 .38
DIRECTORS
OHIO VALLEY BANC CORP
Phil A. Bowman Keith Brandeberry
Mining Consultant and Developer Physician
W. Lowell Call James L. Dailey
Vice President of Sausage Production, Chairman and Chief Executive Officer,
Bob Evans Farms, Inc. Ohio Valley Banc Corp.
Robert H. Eastman Merrill L. Evans
President, Farmer,
Ohio Valley Supermarkets, Inc. President, Evans Enterprises, Inc.
Warren F. Sheets Jeffrey E. Smith
Attorney President, Chief Operating Officer
and Treasurer, Ohio Valley Banc Corp.
Thomas E. Wiseman
President,
The Wiseman Agency, Inc.
OFFICERS
OHIO VALLEY BANC CORP
James L. Dailey Jeffrey E. Smith
Chairman and President, Chief Operating Officer,
Chief Executive Officer and Treasurer
Charles C. Lanham E. Richard Mahan
Governmental Relations and Senior Vice President
Secretary
Larry E. Miller, II Cherie A. Barr
Senior Vice President Vice President
Sue Ann Bostic Katrinka V. Hart
Vice President Vice President
Harold A. Howe Mario Liberatore
Vice President Vice President
Cindy H. Johnston Paula W. Salisbury
Assistant Secretary Assistant Secretary
DIRECTORS AND OFFICERS
JACKSON SAVINGS BANK
Harold A. Howe Charles C. Lanham
President and Director Secretary and Director
Phil A Bowman James L. Dailey
Director Director
Wendell B. Thomas Cindy H. Johnston
Director Assistant Secretary
Paula W. Salisbury
Assistant Secretary
OFFICERS
LOAN CENTRAL
Cherie A. Barr Timothy R. Brumfield
President and Secretary Manager, Gallipolis Office
Renae L. Hughes T. Joe Wilson
Manager, Jackson Office Manager, South Point Office
DIRECTORS
OHIO VALLEY BANK COMPANY
Phil A. Bowman Keith R. Brandeberry
W. Lowell Call Steven B. Chapman
CPA
James L. Dailey Robert H. Eastman
Merrill L. Evans Art E. Hartley, Sr.
Chairman of the Board,
City Ice and Fuel, Inc.
Harold A. Howe Warren F. Sheets
President, Jackson Savings Bank
Jeffrey E. Smith Wendell B. Thomas
Retired Bank Executive
Lannes C. Williamson Thomas E. Wiseman
President, L. Williamson
Pallets, Inc.
DIRECTOR EMERITUS
Morris E. Haskins Charles C. Lanham
Retired Bank Executive Governmental Relations & Secretary OVB
Frank H. Mills, Jr. C. Leon Saunders
Farmer Retired Bank Executive
OFFICERS
OHIO VALLEY BANK COMPANY
James L. Dailey Jeffrey E. Smith
Chairman and President and
Chief Executive Officer Chief Operating Officer
Charles C. Lanham E. Richard Mahan
Governmental Relations and Secretary Executive Vice President
Larry E. Miller, II Sue Ann Bostic
Executive Vice President Senior Vice President,
Administrative Services Group
Katrinka V. Hart Mario P. Liberatore
Senior Vice President, Senior Vice President,
Retail Bank Group West Virginia Bank Group
Patricia L. Davis Sandra L. Edwards
Vice President, Vice President,
Research & Technical Applications Management Information Systems
Hugh H. Graham, Jr. Bryan W. Martin
Vice President, Vice President,
Superbank Division Facilities and Technical Services
Jennifer L. Osborne Richard D. Scott
Vice President, Vice President,
Retail Lending Trust
David L. Shaffer Tom R. Shepherd
Vice President, Vice President,
Commercial Lending Marketing
Patrick H. Tackett Molly K. Tarbett
Vice President, Vice President,
Western Division Branch Administrator Retail Operations
Darren R. Blake Robert T. Hennesy
Assistant Vice President, Assistant Vice President,
Network Administrator Retail Indirect Lending Manager
Larry E. Lee Philip E. Miller
Assistant Vice President, Assistant Vice President,
Cash Services and Security Region Manager Franklin County
Scott W. Shockey Timothy V. Stevens
Assistant Vice President, Assistant Vice President,
Comptroller Region Manager Cabell County
Rick A. Swain Phyllis P. Wilcoxon
Assistant Vice President, Assistant Vice President,
Region Manager Pike County Shareholder Relations
Kyla Carpenter Judy K. Hall
Assistant Cashier, Assistant Cashier,
Marketing Officer Manager, Training and Educational
Development
Brenda G. Henson Keith A. Johnson
Assistant Cashier, Assistant Cashier,
Manager Customer Service Collections Manager
Dians L. Parks Christopher S. Petro
Assistant Cashier, Assistant Cashier,
Internal Auditor Regulatory Reporting Manager
Linda L. Plymale Richard P. Speirs
Assistant Cashier, Assistant Cashier,
Operations Officer Maintenance Technical Supervisor
Stephanie L. Stover Cindy H. Johnston
Assistant Cashier Assistant Secretary
Retail Lending Operations Manager
Paula W. Salisbury
Assistant Secretary
WEST VIRGINIA ADVISORY BOARD
Anna P. Barnitz Richard L. Handley
Business Manager/Treasurer Educator,
Bob's Market and Greenhouses, Inc. Mason County Board of Education
Art E. Hartley, Sr. Gregory K. Hartley
President,
City Ice and Fuel, Inc.
Charles C. Lanham Mario P. Liberatore
Advisory Board Chairman and
Senior Vice President W.V. Bank Group
John C. Musgrave Trenton M. Stover
West Virginia Lottery Director CPA/Owner,
Trenton Stover CPA
Lannes C. Williamson R. Raymond Yauger
President,
Yauger Farm Supply, Inc.
SELECTED FINANCIAL DATA
Years Ended December 31
SUMMARY OF OPERATIONS: 1999 1998 1997 1996 1995
(dollars in thousands, except per share data)
Total interest income $ 40,006 $ 35,191 $ 31,453 $ 28,252 $ 26,187
Total interest expense 18,837 15,691 14,517 12,856 13,227
Net interest income 21,169 19,500 16,936 15,396 12,960
Provision for loan losses 2,303 2,295 1,245 1,328 634
Total other income 3,132 2,760 1,860 1,419 1,333
Total other expenses 16,060 14,201 12,293 10,738 9,509
Income before income taxes 5,938 5,764 5,258 4,749 4,150
Income taxes 1,646 1,634 1,476 1,400 1,212
Net income 4,292 4,130 3,782 3,349 2,938
PER SHARE DATA(1):
Net income per share $ 1.22 $ 1.18 $ 1.10 $ 1.00 $ .90
Cash dividends per share $ .53 $ .44 $ .42 $ .40 $ .38
Weighted average number
of shares outstanding 3,530,203 3,502,366 3,426,600 3,341,274 3,253,684
AVERAGE BALANCE SUMMARY:
Total loans $382,353 $305,392 $271,535 $248,833 $217,907
Securities (2) 73,783 74,478 73,303 76,907 97,609
Deposits 376,050 319,493 304,296 290,790 281,158
Shareholders' equity 41,730 38,639 34,449 30,958 27,900
Total assets 488,632 408,482 369,552 342,588 334,942
PERIOD END BALANCES:
Total loans $411,158 $347,130 $280,267 $264,660 $227,217
Securities (2) 72,186 72,419 76,711 71,135 87,771
Deposits 405,331 327,317 306,037 294,325 284,785
Shareholders' equity 42,708 40,680 36,834 32,874 29,861
Total assets 522,057 447,448 379,088 355,986 331,845
KEY RATIOS:
Return on average assets .88% 1.01% 1.02% .98% .88%
Return on average equity 10.29% 10.69% 10.98% 10.82% 10.53%
Dividend payout ratio 43.73% 37.13% 37.81% 39.53% 41.59%
Average equity to
average assets 8.54% 9.46% 9.32% 9.04% 8.33%
(1) Restated for stock splits as appropriate.
(2) Securities include interest-bearing balances with banks.
CONSOLIDATED STATEMENTS OF CONDITION
As of December 31 1999 1998
----------------- ---- ----
(dollars in thousands)
ASSETS
Cash and noninterest-bearing deposits with banks $ 19,000 $ 12,342
Federal funds sold 375
-------- --------
Total cash and cash equivalents 19,000 12,717
Interest-bearing balances with banks 806 795
Securities available-for-sale 55,371 26,255
Securities held-to-maturity 16,009 45,369
Total Loans 411,158 347,130
Less: Allowance for loan losses (5,055) (4,277)
-------- --------
Net Loans 406,103 342,853
Premises and equipment 9,888 8,360
Accrued income receivable 3,298 2,723
Intangible assets, net 1,412
Other assets 10,170 8,376
-------- --------
Total assets $522,057 $447,448
======== ========
LIABILITIES
Noninterest-bearing deposits $ 46,444 $ 45,961
Interest-bearing deposits 358,887 281,356
-------- --------
Total Deposits 405,331 327,317
Securities sold under agreements to repurchase 16,788 19,066
Other borrowed funds 51,231 55,743
Accrued liabilities 5,999 4,642
-------- --------
Total liabilities 479,349 406,768
-------- --------
SHAREHOLDERS' EQUITY
Common stock ($1 stated value: 10,000,000 shares
authorized; 3,548,572 shares issued and 3,542,983
shares outstanding at December 31, 1999; 5,000,000
shares authorized; 2,818,413 shares issued and
outstanding at December 31, 1998) 3,549 2,818
Surplus 28,454 27,598
Retained earnings 11,491 9,797
Accumulated other comprehensive income, net of tax (597) 467
Treasury stock (5,589 shares at cost) (189)
-------- --------
Total shareholders' equity 42,708 40,680
-------- --------
Total liabilities and shareholders' equity $522,057 $447,448
======== ========
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 1999 1998 1997
------------------------------- ---- ---- ----
(dollars in thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans $35,539 $30,550 $26,858
Interest on taxable securities 3,200 3,212 3,361
Interest on nontaxable securities 826 794 635
Dividends 290 245 203
Other interest 151 390 396
------- ------- -------
Total interest income 40,006 35,191 31,453
INTEREST EXPENSE:
Interest on deposits 15,602 13,489 13,163
Interest on repurchase agreements 510 685 435
Interest on other borrowed funds 2,725 1,517 919
------- ------- -------
Total interest expense 18,837 15,691 14,517
------- ------- -------
NET INTEREST INCOME 21,169 19,500 16,936
Provision for loan losses 2,303 2,295 1,245
------- ------- -------
Net interest income after provision
for loan losses 18,866 17,205 15,691
------- ------- -------
OTHER INCOME:
Service charges on deposit accounts 1,237 969 788
Trust division income 225 212 192
Other operating income 1,353 1,137 880
Net gain on sale of
available-for-sale securities 317 442
------- ------- -------
Total other income 3,132 2,760 1,860
------- ------- -------
OTHER EXPENSE:
Salaries and employee benefits 9,190 8,089 7,312
Occupancy expense 1,041 764 537
Furniture and equipment expense 1,115 904 749
Corporation franchise tax 356 368 367
Data processing expense 316 346 419
Other operating expenses 4,042 3,730 2,909
------- ------- -------
Total other expense 16,060 14,201 12,293
------- ------- -------
Income before income taxes 5,938 5,764 5,258
Provision for income taxes 1,646 1,634 1,476
------- ------- -------
NET INCOME $ 4,292 $ 4,130 $ 3,782
======= ======= =======
Earnings per share $ 1.22 $ 1.18 $ 1.10
======= ======= =======
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1999, 1998 and 1997
Accumulated
Other Total
Common Retained Comprehensive Treasury Shareholders'
(dollars in thousands) Stock Surplus Earnings Income Stock Equity
----- ------- -------- ------ ----- ------
BALANCES AT JANUARY 1, 1997 $13,257 $12,964 $ 6,214 $ 439 $32,874
Comprehensive income:
Net income 3,782 3,782
Net change in unrealized gain
on available-for-sale securities 131 131
-------
Total comprehensive income 3,913
Change in stated value from $10
to $1 per share (11,937) 11,937
Common Stock split, 33-1/3% 442 (442)
Cash paid in lieu of fractional
shares in stock split (11) (11)
Common Stock issued, 6,500 shares 6 231 237
Common Stock issued through
dividend reinvestment, 35,422 shares 108 1,143 1,251
Cash dividends, $.42 per share (1,430) (1,430)
------- ------- ------- ------- ------- -------
BALANCES AT DECEMBER 31, 1997 1,876 26,275 8,113 570 36,834
Comprehensive income:
Net income 4,130 4,130
Net change in unrealized gain
on available-for-sale securities (103) (103)
-------
Total comprehensive income 4,027
Common Stock split, 50% 906 (906)
Cash paid in lieu of fractional
shares in stock split (7) (7)
Common Stock issued, 5,450 shares 5 223 228
Common Stock issued through
dividend reinvestment, 31,196 shares 31 1,100 1,131
Cash dividends, $.44 per share (1,533) (1,533)
------- ------- ------- ------- -------- -------
BALANCES AT DECEMBER 31, 1998 2,818 27,598 9,797 467 40,680
Comprehensive income:
Net income 4,292 4,292
Cumulative effect of securities
transfers, net 167 167
Net change in unrealized gain
on available-for-sale securities (1,231) (1,231)
-------
Total comprehensive income 3,228
Common Stock split, 25% 706 (706)
Cash paid in lieu of fractional
shares in stock split (15) (15)
Common Stock issued, 7,500 shares 8 241 249
Common Stock issued through
dividend reinvestment, 16,756 shares 17 615 632
Cash dividends, $.53 per share (1,877) (1,877)
Shares acquired for treasury, 5,589 shares $ (189) (189)
------- ------- ------- ------- ------- -------
BALANCES AT DECEMBER 31, 1999 $ 3,549 $28,454 $11,491 $ (597) $ (189) $42,708
======= ======= ======= ======= ======= =======
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 1999 1998 1997
------------------------------- ---- ---- ----
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,292 $ 4,130 $ 3,782
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,157 947 705
Net amortization and accretion of securities 171 137 47
Amortization of intangible assets 30
Deferred tax benefit (262) (384) 15
Provision for loan losses 2,303 2,295 1,245
Contribution of common stock to ESOP 249 228 237
FHLB stock dividend (280) (190) (172)
Net gain on sale of available-for-sale securities (317) (442)
Change in accrued income receivable (575) (220) (148)
Change in accrued liabilities 1,357 735 1,112
Change in other assets (1,873) 568 (1,339)
------- ------- -------
Net cash provided by operating activities 6,252 7,804 5,484
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available-for-sale 10,587 9,300 4,500
Purchases of securities available-for-sale (13,438) (2,917) (6,314)
Proceeds from maturities of securities
held-to-maturity 2,841 12,850 14,390
Purchases of securities held-to-maturity (1,347) (18,942) (17,900)
Proceeds from sale of equity securities 323 1,075
Change in interest-bearing deposits in other banks (11) 3,128 (478)
Net increase in loans (65,553) (68,271) (16,179)
Purchases of premises and equipment (2,686) (1,981) (1,666)
Purchases of insurance contracts (460) (580) (635)
------- ------- -------
Net cash used in investing activities (69,744) (66,338) (24,282)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits 58,653 21,280 11,712
Cash and cash equivalents received in assumption of
deposits, net of assets acquired 19,361
Cash dividends (1,877) (1,533) (1,430)
Cash paid in lieu of fractional shares in stock split (15) (7) (11)
Proceeds from issuance of common stock 632 1,131 1,251
Purchases of treasury stock (189)
Change in securities sold under agreements to repurchase (2,278) 6,235 4,117
Proceeds from long-term borrowings 8,500 35,164 11,425
Repayment of long-term borrowings (9,818) (8,498) (6,681)
Change in other short-term borrowings (3,194) 9,598 (2,475)
------- ------- -------
Net cash used in financing activities 69,775 63,370 17,908
------- ------- -------
CASH AND CASH EQUIVALENTS:
Change in cash and cash equivalents 6,283 4,836 (890)
Cash and cash equivalents at beginning of year 12,717 7,881 8,771
------- ------- -------
Cash and cash equivalents at end of year $19,000 $12,717 $ 7,881
======= ======= =======
CASH PAID DURING THE YEAR FOR:
Interest $17,496 $15,578 $13,861
Income taxes 2,075 1,715 1,218
See accompanying notes to consolidated financial statements
Note A - Summary of Significant Accounting Policies
Unless otherwise indicated, amounts are in thousands, except per share data.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Ohio Valley Banc Corp. (the Company) and its wholly-owned
subsidiaries, The Ohio Valley Bank Company (the Bank), Loan Central, a consumer
finance company, and Jackson Savings Bank (Jackson). All significant
intercompany balances and transactions have been eliminated.
Industry Segment Information: The Company is engaged in the business of
commercial and retail banking and trust services, with operations conducted
through 21 offices located in central and southeastern Ohio as well as western
West Virginia. These communities are the source of substantially all of the
Company's deposit, loan and trust services. The majority of the Company's income
is derived from commercial and retail business lending activities. Management
considers the Company to operate in one segment, banking.
Use of Estimates in the Preparation of Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Areas involving the use of management's estimates and
assumptions that are more susceptible to change in the near term involve the
allowance for loan losses, the fair value of certain securities, the fair value
of financial instruments and the determination and carrying value of impaired
loans.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand,
noninterest-bearing deposits with banks and federal funds sold. Generally,
federal funds are purchased and sold for one-day periods. The Company reports
net cash flows for customer loan transactions, deposit transactions, short-term
borrowings and interest-bearing deposits with other financial institutions.
Securities: The Company classifies securities into held-to-maturity and
available-for-sale categories. Held-to-maturity securities are those which the
Company has the positive intent and ability to hold to maturity and are reported
at amortized cost. Securities classified as available-for-sale include
marketable equity securities and other securities that management intends to
sell or that could be sold for liquidity, investment management or similar
reasons even if there is not a present intention of such a sale.
Available-for-sale securities are reported at fair value, with unrealized gains
or losses included as a separate component of equity, net of tax.
Premium amortization is deducted from, and discount accretion is added
to, interest income on securities using the level yield method. Gains and losses
are recognized upon the sale of specific identified securities on the completed
transaction basis. Securities are written down to fair value when a decline in
fair value is not temporary.
Loans: Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses. Loans
held for sale are reported at the lower of cost or market, on an aggregate
basis.
Interest income is reported on the interest method and includes
amortization of net deferred loan fees and costs over the loan term. Interest
income is not reported when full loan repayment is in doubt, typically when the
loan is impaired or payments are past due over 90 days (180 days for residential
mortgages). Payments received on such loans are reported as principal
reductions.
Allowance for Loan Losses: Because some loans may not be repaid in full, an
allowance for loan losses is recorded. Increases to the allowance are recorded
by a provision for loan losses charged to expense. Estimating the risk of loss
and the amount of loss on any loan is necessarily subjective. Accordingly, the
allowance is maintained by management at a level considered adequate to cover
losses that are currently anticipated based on past loss experience, general
economic conditions, information about specific borrower situations, including
their financial position and collateral value, and other factors and estimates
which are subject to change over time. While management may periodically
allocate portions of the allowance for specific problem situations, the entire
allowance is available for any charge-offs that occur. A loan is charged off by
management as a loss when deemed uncollectable, although collection efforts
continue and future recoveries may occur.
Summary of Significant Accounting Policies (continued)
Loans are considered impaired if full principal or interest payments
are not anticipated. Impaired loans are carried at the present value of expected
cash flows discounted at the loan's effective interest rate or at the fair value
of the collateral if the loan is collateral dependent. A portion of the
allowance for loan losses is allocated to impaired loans. Smaller-balance
homogeneous loans are evaluated for impairment in total. Such loans include
residential first mortgage loans secured by one-to-four family residences,
residential construction loans, credit card and automobile, home equity and
second mortgage loans. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment. When analysis of borrower
operating results and financial condition indicates that underlying cash flows
of the borrower's business are not adequate to meet its debt service
requirements, the loan is evaluated for impairment. Loans are generally moved to
nonaccrual status when 90 days or more past due. These loans are often also
considered impaired. Impaired loans, or portions thereof, are charged off when
deemed uncollectable. This typically occurs when the loan is 120 or more days
past due.
Concentrations of Credit Risk:
The Company, through its subsidiaries, grants residential, consumer and
commercial loans to customers located primarily in the southeastern Ohio and
western West Virginia areas.
The following represents the composition of the loan portfolio at December 31,
1999:
% of Total Loans
----------------
Real Estate loans 49.04%
Commercial and industrial loans 29.08%
Consumer loans 21.63%
All other loans .25%
------
100.00%
======
Approximately 6.54% of total loans are unsecured.
The Bank, in the normal course of its operations, conducts business
with correspondent financial institutions. Balances in correspondent accounts,
investments in federal funds, certificates of deposit and other short-term
securities are closely monitored to ensure that prudent levels of credit and
liquidity risks are maintained. At December 31, 1999, the Bank's primary
correspondent balance was $7,659 at the Federal Reserve Bank, Cleveland, Ohio.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on the declining balance and
straight-line methods over the estimated useful lives of the various assets.
Maintenance and repairs are expensed and major improvements are capitalized.
Other Real Estate: Real estate acquired through foreclosure or deed-in-lieu of
foreclosure is included in other assets. Such real estate is carried at the
lower of investment in the loan or estimated fair value of the property less
estimated selling costs. Any reduction to fair value at the time of acquisition
is accounted for as a loan charge-off. Any subsequent reduction in fair value is
recorded as a loss on other assets. Costs incurred to carry other real estate
are charged to expense. Other real estate owned totaled $30 at December 31, 1999
and $31 at December 31, 1998. There were no transfers of loans to other real
estate in 1999 or 1997. Transfers of loans to other real estate were $163 in
1998.
Repurchase Agreements: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.
Per Share Amounts: Earnings per share is based on net income divided by the
following weighted average number of shares outstanding during the periods:
3,530,203 for 1999, 3,502,366 for 1998 and 3,426,600 for 1997. The Company had
no dilutive securities outstanding for any period presented. All earnings and
dividends per share disclosures have been restated to retroactively reflect
stock splits of 25%, 50% and 33 1/3% declared in 1999, 1998 and 1997
respectively.
Income Taxes: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available-for-sale which are also recognized as separate
components of equity. The accounting standard that requires reporting
comprehensive income first applies for 1998, with prior information restated to
be comparable.
Reclassifications: The consolidated financial statements for 1998 and 1997 have
been reclassified to conform with the presentation for 1999. Such
reclassifications had no effect on the net results of operations.
NOTE B - SECURITIES
The amortized cost and estimated fair value of securities as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1999 Cost Gains Losses Value
- ----------------- ---- ----- ------ -----
Securities Available-for-Sale
-----------------------------
U.S. Treasury securities $ 7,490 $ 21 $ (1) $ 7,510
U.S. Government agency securities 42,328 1 (807) 41,522
Mortgage-backed securities 2,307 (118) 2,189
Marketable equity securities 4,150 4,150
------- ------ ----- -------
Total securities $56,275 $ 22 $(926) $55,371
======= ====== ===== =======
Securities Held-to-Maturity
---------------------------
Obligations of states and
political subdivisions $15,690 $ 151 $(247) $15,594
Mortgage-backed securities 319 1 (22) 298
------- ------ ----- -------
Total securities $16,009 $ 152 $(269) $15,892
======= ====== ===== =======
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1998 Cost Gains Losses Value
- ----------------- ---- ----- ------ -----
Securities Available-for-Sale
-----------------------------
U.S. Treasury securities $17,807 $ 336 $18,143
U.S. Government agency securities 4,057 67 $ (10) 4,114
Marketable equity securities 3,591 407 3,998
------- ------ ----- -------
Total securities $25,455 $ 810 $ (10) $26,255
======= ====== ===== =======
Securities Held-to-Maturity
---------------------------
U.S. Treasury securities $ 100 $ 100
U.S. Government agency securities 27,693 $ 431 $ (12) 28,112
Obligations of states and
political subdivisions 17,195 571 (21) 17,745
Mortgage-backed securities 381 1 (20) 362
------- ------ ----- -------
Total securities $45,369 $1,003 $ (53) $46,319
======= ====== ===== =======
On April 1, 1999, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 allows the company
a one time reclassification of securities held-to-maturity to classification as
available-for-sale or trading. The Company transferred securities with a par
value of $27,500 previously classified as held-to-maturity to available-for-sale
upon adoption. The unrealized gain, net of tax, on the securities transferred
totaled $167. The Company has no derivative or hedging activity covered by SFAS
No. 133.
Securities with a carrying value of approximately $58,984 at December 31,
1999 and $55,851 at December 31, 1998 were pledged to secure public deposits and
for other purposes as required or permitted by law.
The amortized cost and estimated fair value of debt securities at December
31, 1999, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities because certain issuers may have the right to call
or prepay the debt obligations prior to their contractual maturities.
Available-for-Sale Held-to-Maturity
------------------ ----------------
Estimated Estimated
Amortized Fair Amortized Fair
Debt Securities: Cost Value Cost Value
---- ----- ---- -----
Due in one year or less $ 6,515 $ 6,524 $ 2,389 $ 2,397
Due in one to five years 43,303 42,508 7,486 7,582
Due in five to ten years 3,460 3,422
Due after ten years 2,355 2,193
Mortgage-backed securities 2,307 2,189 319 298
------- ------- ------- -------
Total debt securities $52,125 $51,221 $16,009 $15,892
======= ======= ======= =======
Proceeds from the sale of equity securities in 1999 were $323 with gross
gains of $317 realized. Proceeds from the sale of equity securities during 1998
were $1,075 with gross gains of $459 and gross losses of $17 realized. There
were no sales of debt and equity securities during 1997.
NOTE C - LOANS
Loans are comprised of the following at December 31:
1999 1998
---- ----
Real estate loans $201,625 $163,650
Commercial and industrial loans 119,585 96,116
Consumer loans 88,942 85,664
All other loans 1,006 1,700
-------- --------
Total Loans $411,158 $347,130
======== ========
NOTE D - ALLOWANCE FOR LOAN LOSSES
Following is an analysis of changes in the allowance for loan losses for
years ended December 31:
1999 1998 1997
---- ---- ----
Balance, beginning of year $4,277 $3,390 $3,180
Loans charged-off:
Real estate 41 110 39
Commercial 454 130 215
Consumer 1,298 1,433 961
------ ------ ------
Total loans charged-off 1,793 1,673 1,215
Recoveries of loans:
Real estate 13 40 1
Commercial 23 47 41
Consumer 232 178 138
------ ------ ------
Total recoveries of loans 268 265 180
Net loan charge-offs (1,525) (1,408) (1,035)
Provision charged to operations 2,303 2,295 1,245
------ ------ ------
Balance, end of year $5,055 $4,277 $3,390
====== ====== ======
Information regarding impaired loans is as follows:
1999 1998
---- ----
Balance of impaired loans $1,413 $624
====== ====
Portion of impaired loan balance for which
an allowance for credit losses is allocated $1,413 $624
====== ====
Portion of allowance for loan losses allocated
to the impaired loan balance $ 600 $275
====== ====
Average investment in impaired loans for the year $1,570 $632
====== ====
Interest on impaired loans was not material for years ending 1999 and 1998.
NOTE E - PREMISES AND EQUIPMENT
Following is a summary of premises and equipment at December 31:
1999 1998
---- ----
Land $ 1,375 $ 1,166
Buildings 8,435 7,149
Furniture and equipment 6,784 5,594
------- -------
16,594 13,909
Less accumulated depreciation 6,706 5,549
------- -------
Total Premises and Equipment $ 9,888 $ 8,360
======= =======
The following is a summary of the future minimum lease payments for facilities
leased by the Company. Lease payments were $255 in 1999 and $152 in 1998.
2000 $ 315
2001 306
2002 298
2003 271
2004 174
Thereafter 418
------
$1,782
======
NOTE F - DEPOSITS
Following is a summary of interest-bearing deposits at December 31:
1999 1998
---- ----
NOW accounts $ 74,447 $ 47,190
Savings and Money Market 42,095 53,727
Time:
IRA accounts 34,938 30,870
Certificates of Deposit:
In denominations under $100,000 136,824 105,480
In denominations of $100,000 or more 70,583 44,089
-------- --------
Total time deposits 242,345 180,439
-------- --------
Total interest-bearing deposits $358,887 $281,356
======== ========
Following is a summary of total time deposits by remaining maturities at
December 31:
1999 1998
---- ----
Within one year $178,213 $119,747
From one to two years 40,781 35,851
From two to three years 10,412 9,247
From three to four years 10,663 3,980
From four to five years 937 10,308
Thereafter 1,339 1,306
-------- --------
Totals $242,345 $180,439
======== ========
NOTE G - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Following is a summary of securities sold under agreements to repurchase at
December 31:
1999 1998
---- ----
Balance outstanding at period end $16,788 $19,066
------- -------
Weighted average interest rate at period end 4.54% 3.96%
------- -------
Average amount outstanding during the year $13,961 $18,148
------- -------
Approximate weighted average interest rate
during the year 3.65% 3.77%
------- -------
Maximum amount outstanding as of any month end $16,788 $25,112
------- -------
Securities underlying these agreements at
year-end were as follows:
Carrying value of securities $36,326 $38,485
------- -------
Fair Value $35,793 $39,195
------- -------
NOTE H - OTHER BORROWED FUNDS
Other borrowed funds at December 31, 1999 and 1998 are comprised of
advances from the Federal Home Loan Bank (FHLB), promissory notes and Federal
Reserve Bank Notes. At year-end, other borrowed funds were as follows:
1999 2000
---- ----
FHLB Borrowings $38,746 $47,714
Promissory Notes 3,985 7,919
FRB Notes 8,500 110
------- -------
$51,231 $55,743
======= =======
Pursuant to collateral agreements with the FHLB, advances are secured by
certain qualifying first mortgage loans and by FHLB stock which total $58,120
and $3,891 at December 31, 1999. Fixed rate FHLB advances of $36,246 mature
through 2008 and have interest rates ranging from 4.88% to 6.15%. In addition,
variable rate FHLB borrowings represent $2,500.
Promissory notes, issued primarily by the parent company, have fixed rates
of 5.50% to 7.00% and are due at various dates through a final maturity date of
May 29, 2002. FRB notes are variable rate borrowings with balances that are
subject to change daily.
Scheduled principal payments over the next five years:
FHLB borrowings Promissory notes FRB Notes Total
--------------- ---------------- --------- -----
2000 $16,468 $3,967 $8,500 $28,935
2001 5,615 13 5,628
2002 5,282 5 5,287
2003 3,098 3,098
2004 85 85
Thereafter 8,198 8,198
------- ------ ------ -------
$38,746 $3,985 $8,500 $51,231
======= ====== ====== =======
Letters of credit issued on the Bank's behalf by the FHLB to collateralize
certain public unit deposits required by law totaled $24,000 at December 31,
1999 and $18,189 at December 31, 1998. Various investment securities from the
Bank used to collateralize FRB notes totaled $9,225 at December 31, 1999 and
$6,350 at December 31, 1998. Promissory notes were unsecured at December 31,
1999 and 1998.
NOTE I - INCOME TAXES
The provision for federal income taxes consists of the following components:
1999 1998 1997
---- ---- ----
Current tax expense $1,908 $2,018 $1,461
Deferred tax expense (benefit) (262) (384) 15
------ ------ ------
Total federal income taxes $1,646 $1,634 $1,476
====== ====== ======
The sources of gross deferred tax assets and gross deferred tax liabilities
at December 31:
1999 1998
---- ----
Items giving rise to deferred tax assets:
Allowance for loan losses in excess of tax reserve $1,334 $1,136
Deferred compensation 401 270
Unrealized loss on securities available-for-sale 307
Other 90 60
Items giving rise to deferred tax liabilities:
Investment accretion (25) (25)
Depreciation (124) (122)
FHLB stock dividends (333) (237)
Unrealized gain on securities available-for-sale (241)
Lease receivables (46) (42)
Other (8) (13)
------ ------
Net deferred tax asset $1,596 $ 786
====== ======
The difference between the financial statement tax provision and amounts
computed by applying the statutory federal income tax rate of 34% to income
before taxes is as follows:
1999 1998 1997
---- ---- ----
Statutory tax $2,019 $1,960 $1,788
Effect of nontaxable interest
and dividends (297) (298) (242)
Nondeductible interest expense 46 46 38
Insurance contracts (117) (110) (99)
Other items (5) 36 (9)
------ ------ ------
Total federal income taxes $1,646 $1,634 $1,476
====== ====== ======
Taxes attributable to gains on sale of securities totaled $108 and $150 in
1999 and 1998.
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. The Bank's exposure to credit loss
in the event of nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit, and financial
guarantees written, is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for instruments recorded on the balance
sheet.
Following is a summary of such commitments at December 31:
Commitments to extend credit 1999 1998
Fixed rate $ 3,033 $ 1,379
Variable rate 37,721 36,611
Standby letters of credit 9,072 8,116
The interest rate on fixed rate commitments ranged from 6.875% to 17.90% at
December 31, 1999.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment and income-producing commercial
properties.
There are various contingent liabilities that are not reflected in the
financial statements, including claims and legal action arising in the ordinary
course of business. In the opinion of management, after consultation with legal
counsel, the ultimate disposition of these matters is not expected to have a
material effect on financial condition or results of operations.
The bank subsidiary of the Company is required to maintain average reserve
balances with the Federal Reserve Bank or as cash in the vault. The amount of
those reserve balances for the year ended December 31, 1999, was approximately
$8,394.
NOTE K - RELATED PARTY TRANSACTIONS
Certain directors, executive officers and companies in which they are
affiliated were loan customers during 1999. A summary of activity on these
borrower relationships with aggregate debt greater than $60 is as follows:
Total loans at January 1, 1999 $14,346
New loans 1,586
Repayments (2,120)
Other changes 645
-------
Total loans at December 31, 1999 $14,457
=======
Other changes include adjustment for loans applicable to one reporting period
that are excludable from the other reporting period. In addition, certain
directors, executive officers and companies in which they are affiliated were
recipients of promissory notes issued by the parent company in the amount of
$3,430.
NOTE L - EMPLOYEE BENEFITS
The Bank has a profit-sharing plan for the benefit of its employees and their
beneficiaries. Contributions to the plan are determined by the Board of
Directors. Contributions charged to expense were $131, $111 and $128 for 1999,
1998 and 1997.
The Company maintains an Employee Stock Ownership Plan (ESOP) covering
substantially all of its employees. The Company makes discretionary
contributions to the plan which are allocated to plan participants based on
relative compensation. The total number of shares held by the Plan, all of which
have been allocated to participant accounts were 178,872 and 132,017 at December
31, 1999 and 1998. In addition, the Bank made contributions to its ESOP Trust as
follows:
Years ended December 31
1999 1998 1997
---- ---- ----
Number of shares issued 7,500 5,450 6,500
===== ===== =====
Value of stock contributed $249 $228 $237
Cash contributed 12 19
---- ---- ----
Total charged to expense $261 $228 $256
==== ==== ====
In December 1996, life insurance contracts with a cash surrender value of
$5,210 were purchased by the Company, the owner the of policies. The purpose of
these contracts was to replace a current group life insurance program for
executive officers and implement a supplemental retirement program in 1997. The
cost of providing the benefits to the participants of the supplemental
retirement program is expected to be offset by the earnings on the life
insurance contracts.
NOTE M - OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes for the years ended
December 31, are as follow:
1999 1998 1997
Unrealized holding gains (losses) on ---- ---- ----
available-for-sale securities $(1,548) $ 286 $ 198
Cumulative effect of securities transferred 253
Less: Reclassification adjustment for
gains (losses) later recognized in income 317 442
------- ----- -----
Net unrealized gain (losses) (1,612) (156) 198
Tax effect (548) (53) 67
------- ----- -----
Other comprehensive income $(1,064) $(103) $ 131
======= ===== =====
NOTE N - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Short-term Investments: For short-term instruments, the carrying amount
is a reasonable estimate of fair value.
Securities: For securities, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is estimated using quoted
market prices for similar instruments.
Loans: The fair value of fixed rate loans is estimated by discounting future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities. The
fair market value of commitments is not material at December 31, 1999 or 1998.
Life Insurance Cash Surrender Value: For life insurance cash surrender value,
the carrying amount, is a reasonable estimate of fair value.
Deposit Liabilities: The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase and Other Borrowed Funds: For
other borrowed funds, rates currently available to the Bank for debt with
similar terms and remaining maturities are used to estimate fair value. For
securities sold under agreements to repurchase, carrying value is a reasonable
estimate of fair value.
Accrued Interest Receivable and Payable: For accrued interest receivable and
payable, the carrying amount is a reasonable estimate of fair value.
The estimated fair values of the Company's financial instruments at December
31, are as follows:
1999 1998
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Financial assets:
Cash and short-term investments $ 19,806 $ 19,806 $ 13,512 $13,512
Securities 67,230 67,113 68,039 68,989
FHLB stock 4,150 4,150 3,585 3,585
Loans 406,103 410,373 342,853 348,695
Accrued interest receivable 3,298 3,298 2,723 2,723
Life insurance cash surrender value 7,854 7,854 7,056 7,056
Financial liabilities:
Deposits (405,331) (405,386) (327,317) (328,516)
Securities sold under agreements
to repurchase (16,788) (16,788) (19,066) (19,066)
Other borrowed funds (51,231) (50,141) (55,743) (55,835)
Accrued interest payable (4,487) (4,487) (3,147) (3,147)
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgements regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments , and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgement and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
NOTE O - REGULATORY MATTERS
The Company and subsidiary banks are subject to regulatory capital
requirements administered by federal banking agencies. Capital adequacy
guidelines and prompt corrective action regulations involve quantitative
measures of assets, liabilities, and certain off-balance-sheet items calculated
under regulatory accounting practices. Capital amounts and classifications are
also subject to qualitative judgements by regulators about components, risk
weightings, and other factors, and the regulators can lower classifications in
certain cases. Failure to meet various capital requirements can initiate
regulatory action that could have a direct material effect on the financial
statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
At year-end, consolidated actual capital levels (in thousands) and minimum
required levels for the Company and subsidiary banks were:
Minimum Required
To Be Well
Minimum Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
1999
Total capital (to risk weighted assets)
Consolidated $46,622 12.3% $30,238 8.0% $37,797 10.0%
The Ohio Valley Bank Company $39,830 11.0% $28,953 8.0% $36,192 10.0%
The Jackson Savings Bank $ 2,675 28.5% $ 750 8.0% $ 937 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $41,893 11.1% $15,119 4.0% $22,678 6.0%
The Ohio Valley Bank Company $31,304 8.6% $14,477 4.0% $21,715 6.0%
The Jackson Savings Bank $ 2,558 27.3% $ 375 4.0% $ 562 6.0%
Tier 1 capital (to average assets)
Consolidated $41,893 8.1% $20,707 4.0% $25,884 5.0%
The Ohio Valley Bank Company $31,304 6.3% $19,827 4.0% $24,783 5.0%
The Jackson Savings Bank $ 2,558 14.1% $ 546 3.0% $ 910 5.0%
1998
Total capital (to risk weighted assets)
Consolidated $44,436 13.8% $25,695 8.0% $32,118 10.0%
The Ohio Valley Bank Company $36,930 11.9% $24,803 8.0% $31,004 10.0%
The Jackson Savings Bank $ 2,814 39.7% $ 566 8.0% $ 708 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $40,421 12.6% $12,847 4.0% $19,271 6.0%
The Ohio Valley Bank Company $29,055 9.4% $12,402 4.0% $18,602 6.0%
The Jackson Savings Bank $ 2,642 37.3% $ 283 4.0% $ 425 6.0%
Tier 1 capital (to average assets)
Consolidated $40,421 9.3% $17,385 4.0% $21,731 5.0%
The Ohio Valley Bank Company $29,055 7.0% $16,627 4.0% $20,784 5.0%
The Jackson Savings Bank $ 2,642 16.8% $ 471 3.0% $ 786 5.0%
The Company and subsidiary banks at year-end 1999 were categorized as well
capitalized. Management is not aware of any event or circumstances subsequent to
year-end that would change the Company's or subsidiary banks' capital structure.
Dividends paid by the subsidiaries are the primary source of funds available
to the Company for payment of dividends to shareholders and for other working
capital needs. The payment of dividends by the subsidiaries to the Company is
subject to restrictions by regulatory authorities. These restrictions generally
limit dividends to the current and prior two years retained earnings. At
December 31, 1999, approximately $11,551 of the subsidiaries' retained earnings
were available for dividends under these guidelines. In addition to these
restrictions, as a practical matter, dividend payments cannot reduce regulatory
capital levels below minimum regulatory guidelines. These restrictions do not
presently limit the Company from paying dividends at its historical level.
NOTE P - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Below is condensed financial information of Ohio Valley Banc Corp. In this
information, the parent's investment in subsidiaries is stated at cost plus
equity in undistributed earnings of the subsidiaries since acquisition. This
information should be read in conjunction with the consolidated financial
statements.
CONDENSED STATEMENTS OF CONDITION at December 31:
Assets 1999 1998
---- ----
Cash and cash equivalents $ 50 $ 50
Interest-bearing balances with subsidiaries 1,060 6,804
Investment in subsidiaries 36,205 33,534
Notes receivable - subsidiaries 9,455 8,321
Other assets 101 65
------- -------
Total assets $46,871 $48,774
======= =======
Liabilities
Notes Payable $ 3,955 $ 7,878
Other liabilities 208 216
------- -------
Total liabilities 4,163 8,094
------- -------
Shareholders' Equity
Total shareholders' equity 42,708 40,680
------- -------
Total liabilities and shareholders' equity $46,871 $48,774
======= =======
CONDENSED STATEMENTS OF INCOME
Years ended December 31:
1999 1998 1997
---- ---- ----
Income:
Interest on deposits $ 102 $ 107 $ 48
Interest on loans 12 54 70
Interest on notes 502 386 287
Other operating income 3
Dividends from bank subsidiary 425 1,000 1,000
Expenses:
Interest on notes 263 196 62
Operating expenses 153 181 105
------ ------ ------
Income before federal income taxes and equity
in undistributed earnings of subsidiaries 625 1,173 1,238
Income tax expense (68) (85) (80)
Equity in undistributed earnings of subsidiaries 3,735 3,042 2,624
------ ------ ------
Net Income $4,292 $4,130 $3,782
====== ====== ======
NOTE P - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
CONDENSED STATEMENT OF CASH FLOWS
Years ended December 31: 1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Net income $4,292 $4,130 $3,782
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (3,735) (3,042) (2,624)
Amortization 12
Change in other assets (36) 1,198 (1,256)
Change in other liabilities (8) 111 56
------ ------ ------
Net cash provided by operating activities 513 2,397 (30)
------ ------ ------
Cash flows from investing activities:
Change in other short-term investments (948) (4,434) (875)
Change in subsidiary line of credit (186) 1,750 (1,454)
Change in interest-bearing deposits 5,744 (6,562) 1,403
------ ------ ------
Net cash used in investing activities 4,610 (9,246) (926)
------ ------ ------
Cash flows from financing activities:
Change in other short-term borrowings (3,923) 7,003 875
Cash dividends paid (1,877) (1,506) (1,396)
Cash paid in lieu of fractional shares in stock split (15) (7) (11)
Proceeds from issuance of common stock 881 1,359 1,488
Purchases of treasury stock (189)
------ ------ ------
Net cash used in financing activities (5,123) 6,849 956
------ ------ ------
Cash and cash equivalents:
Change in cash and cash equivalents 0 0 0
Cash and cash equivalents at beginning of year 50 50 50
------ ------ ------
Cash and cash equivalents at end of year $ 50 $ 50 $ 50
====== ====== ======
NOTE Q - ACQUISITION AND INTANGIBLE ASSETS
Effective September 24, 1999, the Bank acquired from Huntington National
Bank (HNB) certain assets and assumed certain deposits and other liabilities in
accordance with a purchase and assumption agreement of the same date.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets acquired and liabilities assumed have been recorded
based on their estimated fair market value at the date of acquisition. A summary
of assets acquired and liabilities assumed follow:
Cash $ 428
Premises and equipment 885
Funds received from HNB 18,933
Goodwill 1,442
-------
Total assets $21,688
=======
Deposit liabilities $21,590
Accrued interest payable and
other liabilities 98
-------
Total liabilities $21,688
=======
Goodwill totaled $1,412 at December 31, 1999 and is being amortized over an
original term of 12 years on a straight line basis. Amortization expense for
goodwill totaled $30 for 1999.
Effective December 15, 1998 Jackson Savings Bank, Jackson, Ohio was
acquired in a business combination accounted for as a pooling of interests. A
total of 74,167 shares of the Company's common stock were issued in exchange for
all of the outstanding shares of Jackson and Jackson became a wholly owned
subsidiary of the Company. The consolidated financial statements have been
restated to include the effect of Jackson for all periods presented based on the
historical amounts reported by Jackson. The following is a summary of the
separate results of operations of the Company and Jackson for the two years
ended December 31, 1998.
Years ended December 31:
1998 1997
Net interest income
Company $18,988 $16,408
Jackson 512 528
------- -------
Combined $19,500 $16,936
======= =======
Net income
Company $ 3,788 $ 3,680
Jackson 342 102
------- -------
Combined $ 4,130 $ 3,782
======= =======
SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarters Ended
1999 Mar. 31 Jun. 30 Sept. 30 Dec. 31
Total interest income $9,437 $9,890 $10,214 $10,465
Total interest expense 4,376 4,558 4,765 5,138
Net interest income 5,061 5,332 5,449 5,327
Provision for loan losses 448 557 437 861
Net Income 1,032 1,141 1,097 1,022
Net income per share $ .29 $ .33 $ .31 $ .29
1998
Total interest income $8,181 $8,720 $ 8,981 $ 9,309
Total interest expense 3,683 3,839 4,027 4,142
Net interest income 4,498 4,881 4,954 5,167
Provision for loan losses 357 535 491 912
Net Income 967 994 1,004 1,165
Net income per share $ .28 $ .28 $ .29 $ .33
1997
Total interest income $7,435 $7,804 $ 8,025 $ 8,189
Total interest expense 3,451 3,619 3,694 3,753
Net interest income 3,984 4,185 4,331 4,436
Provision for loan losses 300 202 266 477
Net Income 810 934 962 1,076
Net income per share $ .24 $ .27 $ .28 $ .31
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Ohio Valley Banc Corp.
Gallipolis, Ohio
We have audited the accompanying consolidated statements of condition of Ohio
Valley Banc Corp., as of December 31, 1999 and 1998 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ohio Valley
Banc Corp. as of December 31, 1999 and 1998 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Columbus, Ohio
February 3, 2000
SUMMARY OF COMMON STOCK DATA
OHIO VALLEY BANC CORP.
Years ended December 31, 1999 and 1998
INFORMATION AS TO STOCK PRICES AND DIVIDENDS: The market for the common stock of
the Company is not highly active and trading has historically been limited. On
February 9, 1996, the Company's common stock was established on NASDAQ
securities market under the symbol "OVBC". Prior to this date a limited market
was created in the first quarter of 1992 through the Ohio Company.
The following table shows bid and ask quotations for the Company's common
stock during 1999 and 1998. The range of market price is compiled from data
provided by the broker based on limited trading and have been restated for the
25% stock split in 1999 and the 50% stock split in 1998. The quotations are
inter-dealer prices, without retail markup, markdown, or commission, and may not
represent actual transactions.
1999 Low Bid High Bid Low Ask High Ask
- ---- ------- -------- ------- --------
First Quarter $32.80 $33.60 $33.60 $35.20
Second Quarter 31.25 34.00 32.38 36.00
Third Quarter 29.25 33.50 29.50 35.00
Fourth Quarter 31.25 35.00 32.00 35.75
1998 Low Bid High Bid Low Ask High Ask
- ---- ------- -------- ------- --------
First Quarter $18.40 $22.13 $19.20 $23.06
Second Quarter 21.86 33.60 22.40 35.20
Third Quarter 32.00 32.40 32.80 34.40
Fourth Quarter 32.00 33.40 33.25 35.60
Dividends per share 1999 1998
- ------------------- ---- ----
First Quarter $.11 $.11
Second Quarter .14 .11
Third Quarter .14 .11
Fourth Quarter .14 .11
Shown above is a table which reflects the dividends paid per share as
restated for the 25% stock split in 1999 and the 50% stock split in 1998 on the
Company's common stock. This disclosure is based on the weighted average number
of shares for each year and does not indicate the amount paid on the actual
shares outstanding at the end of each quarter. As of December 31, 1999 the
number of holders of common stock was 1,766 an increase from 1,600 shareholders
at December 31, 1998.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The purpose of this discussion is to provide an analysis of the
Company's financial condition and results of operations which is not otherwise
apparent from the audited consolidated financial statements included in this
report. The accompanying consolidated financial information has been prepared by
management in conformity with generally accepted accounting principles and is
consistent with that reported in the consolidated statements. Reference should
be made to those statements and the selected financial data presented elsewhere
in this report for an understanding of the following tables and related
discussion.
RESULTS OF OPERATIONS:
SUMMARY
Ohio Valley Banc Corp. generated earnings of $4,292 for 1999 an
increase of 3.9% from 1998. Net income was up 9.2% in 1998. Net income per share
of $1.22 for 1999 represented continued growth from $1.18 in 1998 and $1.10 in
1997. Asset growth for 1999 was $74,609 or 16.7% which grew total assets to
$522,057. The Company's return on assets (ROA) declined to .88% for 1999
compared to 1998's ROA of 1.01% and 1997's ROA of 1.02%. Return on equity (ROE)
was 10.29% for 1999 compared to 10.69% for 1998 and 10.98% for 1997. The average
of the bid and ask price for the Company's stock was $33.625 at December 31,
1999 compared to $33.20 at year-end 1998 and $19.46 at year-end 1997.
NET INTEREST INCOME
The most significant portion of the Company's revenue, net interest
income, results from properly managing the spread between interest income on
earning assets and interest expense on the liabilities used to fund those
assets. Net interest income is affected by changes in both the average volume
and mix of the balance sheet and the level of interest rates for financial
instruments. Changes in net interest income are measured by net interest margin
and net interest spread. Net interest margin is expressed as net interest income
divided by average interest-earning assets. Net interest spread is the
difference between the average yield earned on interest-earning assets and the
average rate paid on interest-bearing liabilities. Both of these are reported on
a taxable equivalent basis. Net interest margin is greater than net interest
spread due to the interest earned on interest-earning assets funded from
noninterest bearing funding sources, primarily demand deposits and stockholders'
equity. Following is a discussion of changes in interest-earning assets,
interest-bearing liabilities and the associated impact on interest income and
interest expense for the three years ending December 31, 1999. Tables I and II
have been prepared to summarize the significant changes outlined in this
analysis.
Net interest income on a fully tax equivalent basis (FTE) grew $1,664
in 1999, an increase of 8.4% over the $19,882 earned in 1998. The growth was
primarily attributable to an increase in earning assets which was partially
offset by decline in net interest margin. For 1998, net interest income
increased 15.3% over 1997. The growth in net interest income for 1998 was
attributable to a higher level of interest-earning assets combined with a higher
net interest margin.
For 1999, average earning assets grew by 19.5% as compared to growth of
10.1% in 1998. Driving the growth in earning assets was the growth in average
loan balances. Average total loans expanded $76,961 or 25.2% from 1998 and
represented 83.4% of earning assets. This compares to average loan growth of
12.5% for 1998 and loans representing 79.6% of earning assets. Management
focuses on generating loan growth as this portion of earning assets provides the
greatest return to the Company. Although loans comprise a larger percentage of
earning assets, management is comfortable with the current level of loans based
on collateral values, the balance of the allowance for loan losses and the
Company's well-capitalized status. Average securities declined from 19.9% of
earning assets for 1997 to 15.9% in 1999. Management maintains securities at a
dollar level adequate enough to provide ample liquidity and cover pledging
requirements.
Average interest-bearing liabilities increased 22.1% between 1998 and
1999 and increased 9.1% between 1997 and 1998. The composition of
interest-bearing liabilities for 1999 has continued to shift away from time
deposits which represented 53.7% of interest-bearing liabilities in 1999
compared to 58.7% in 1998 and 64.5% in 1997. More emphasis has been placed on
other borrowed funds and NOW accounts. Borrowed funds comprised 12.8% of
interest-bearing liabilities for 1999 up from 8.3% in 1998 and 5.1% in 1997. The
use of borrowed funds has been a cost-effective funding source for the Company's
positive loan growth. The average cost of borrowed funds for 1999 is 5.39%
compared to time deposits average cost of 5.50%. The average balance of NOW
accounts increased $29,953 from 1998 to 1999 and comprise 16.7% of
interest-bearing liabilities as compared to 11.2% in 1998 and 10.7% in 1997.
Although these balances were influenced by more aggressive pricing on NOW
accounts, the average cost was less than traditional time deposits.
The net interest margin declined .48% to 4.70% in 1999 from 5.18% in
1998. This follows a .23% increase in the net interest margin in 1998.
Contributing to the decline in net interest margin in 1999 was the decrease in
the net interest spread of .37%. The yield on earning assets decreased .46%
compared to funding costs decreasing .09%. The yield on interest-earning assets
declined due to the return on average loans declining .72% from 1998 in relation
to lower interest rates and competition. This was partially offset by the higher
relative balances in loans. Total funding costs decreased in relation to the
cost of time deposits declining .23% and the balance of time deposits comprising
a smaller percentage of interest-bearing liabilities. Additionally, the cost of
NOW accounts increased .42% and the cost of other borrowed money declined .26%.
The impact of interest free funds on the net interest margin decreased from .76%
in 1998 to .65% in 1999. Contributing to the decline was the slower growth rate
in demand deposits and capital versus the exceptional growth in interest-bearing
liabilities. The .11% decrease in the contribution of interest free funding
sources combined with the .37% decrease in the net interest spread yielded the
.48% decrease in the net interest margin. The 1998 increase in net interest
margin was due to a .20% gain in net interest spread with asset yields rising
.16% versus funding costs decreasing .04%. The gain in net interest spread was
complemented by an increase of .03% from interest free funding sources.
OTHER INCOME AND EXPENSE
Total other income, excluding securities gains and losses, increased
$497 a 21.4% gain over 1998. Total other income increased 24.6% in 1998. Driving
the Company's growth in noninterest income was the increase in service charge
income from the increase in the deposit base from continued expansion into new
markets. Service charges on deposit accounts were up $268 in 1999 and $181 in
1998. Additionally, other operating income increased $216 over 1998 and $257
over 1997 with gains in fee income from debit and credit card transactions,
commissions earned from loan insurance sales and loan service fees.
Total other expense increased $1,859 or 13.1% in 1999 and $1,908 or
15.5% in 1998. The most significant expense in this category is salary and
employee benefits. Through new branch openings and acquisitions, the number of
full-time equivalent employees increased from 222 at year-end 1997 to 270 at
year-end 1999. Salary and employee benefits increased $1,101 or 13.6% from 1998
to 1999 and increased $777 or 10.6% from 1997 to 1998. Associated with the new
offices was an increase in occupancy expense and furniture and equipment
expense. Increased costs are related to depreciation, rental property costs and
utilities. The increase in other operating expenses was related to advertising,
computer software depreciation, conversion expenses from the purchase of the
Huntington branches, merger related expenses associated with the acquisition of
Jackson Savings and general inflationary increases.
YEAR 2000
The Company is pleased to announce that it did not experience any "Y2K"
related problems at the turn of the century, nor does it anticipate any problems
developing during the year 2000. During 1997, the Company began preparing for
"Y2K" by performing thorough inventories of all its computer equipment, related
software and technology, as well as preparing a contingency plan for "Y2K."
During 1998 and 1999, the Company continued its preparation by testing software
and processing systems for the year 2000. No problems were found. As a result of
this extensive preparation and planning, the Company was well prepared for any
"Y2K" related problems and did not experience any losses. Excluding personnel
costs, the Company incurred approximately $40 in expense to prepare for the year
2000.
FINANCIAL CONDITION:
SECURITIES
The second largest component of earning assets is securities.
Management's goal in structuring the portfolio is to maintain a prudent level of
liquidity while providing an acceptable rate of return without sacrificing asset
quality. Maturing securities have historically provided sufficient liquidity
such that management has not sold a debt security in several years.
The portfolio consists primarily of U.S. Treasury notes and U.S.
Government agency bonds which comprise approximately 69% of total securities. As
a result, the portfolio's exposure to credit risk is minimal. The weighted
average FTE yield on debt securities at year-end 1999 was 6.42% as compared to
6.52% at year-end 1998. Given current reinvestment rates, the yield on
securities should remain level in 2000. Table III provides a summary of the
portfolio by category and remaining contractual maturity. Issues classified as
equity securities have no stated maturity date and are not included in Table
III.
LOANS
In 1999, total loans increased $64,028 or 18.4% to reach $411,158. The
largest contributor was residential mortgage loans which experienced tremendous
growth of $37,975 or 23.2% driven by low interest rates and newer market areas.
Over half of this growth occurred in the newer markets of Pike and Franklin
counties in Ohio as well as Mason county in West Virginia. The Company generally
originates real estate loans for its own portfolio, as very few loans are sold
on the secondary market. Commercial loans increased $23,469 or 24.4% with
approximately one-third of this increase coming from loan originations within
the West Virginia market area. Furthermore, the newer markets in Jackson and
Meigs counties of Ohio contributed another one-third of this increase. Consumer
loans grew $3,278 representing a 3.8% gain. A portion of the consumer loans were
originated through indirect lending, primarily from area automobile dealers, and
are subject to the same underwriting as our regular loans. Tables V, VI, and VII
have been provided to enhance the understanding of the loan portfolio and the
allowance for potential loan losses. Management evaluates the adequacy of the
allowance for loan losses quarterly based on several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
loss experience, and management's estimate of probable losses. Actual losses on
loans are reflected as reductions in the reserve and are referred to as
charge-offs. The amount of the provision for loan losses charged to operating
expenses is the amount necessary, in management's opinion, to maintain the
allowance for loan losses at an adequate level. The allowance required is
primarily a function of the relative quality of the loans in the loan portfolio,
the mix of loans in the portfolio and the rate of growth of outstanding loans.
The ratio of net charge-offs to average total loans at December 31,
1999 was .40% down from .46% at December 31, 1998 due mostly to declining losses
in the consumer loan area. Net charge-offs in both the real estate and
commercial loan areas were relatively low, which represent the overall quality
of these segments of the loan portfolio. Nonperforming loans, which include
nonaccrual loans and accruing loans past due 90 days or more, are returned to
performing status when the loan is brought current and has performed in
accordance with contractual terms. Nonperforming loans were approximately $6,664
or 1.62% of outstanding balances at December 31, 1999 compared to $3,087 or .89%
of outstanding balances at the end of 1998. Approximately 54% of this increase
was attributed to two large commercial lines. Near the end of 1999, management
wrote down one of the two lines by $331. At this time, management believes it
has taken the necessary steps to reduce the risks associated with these lines.
For 1999, provision expense was up slightly by $8 compared to the
provision expense for 1998. This minimal increase in provision expense was
largely due to the increases in real estate mortgages for 1999 which typically
represent relatively lower risk loans due to higher, more stable value of
collateral and therefore require a lower allocation of the allowance for loan
losses. As a percentage of total loans, the allowance for loan losses at
December 31, 1999 was 1.23%, unchanged from December 31, 1998. While
nonperforming loan balances have increased from December 31, 1998, management
believes the allowance is adequate to absorb inherent losses in the portfolio
based on collateral values as well as a higher relative volume of real estate
mortgages. Management anticipates that it will continue its provision to the
allowance for loan losses at its current level for the foreseeable future based
on the current status of nonperforming loans.
DEPOSITS
Interest-earning assets are funded primarily by core deposits. The
accompanying table IV shows the composition of total deposits as of December 31,
1999. Total deposits grew $78,014 or 23.8% to reach $405,331 by year-end 1999. A
contributing factor to this increase was the purchase of two West Virginia
branches in the third quarter of 1999 that allowed the Company to acquire
$21,590 in total deposits. Leading the growth in deposits was certificates of
deposits with an increase of $57,839 which helped to fund loan growth as well as
reduce borrowed funds. NOW accounts also contributed to deposit growth with an
increase of $27,256. The Company's new Gold Club product, which offers a NOW
account combined with other banking benefits, led to this increase. This new
product also contributed to the $7,684 decrease in money market accounts.
Additionally, noninterest-bearing deposits increased $483. With the expansion in
new and current markets, management expects continued growth in deposits in
2000.
FUNDS BORROWED
In addition to traditional deposits, the Company considers borrowed
funds when evaluating funding sources. Other funds borrowed consist primarily of
Federal Home Loan Bank (FHLB) advances, securities sold under agreements to
repurchase, and promissory notes. FHLB advances are subject to collateral
agreements and are secured by qualifying first mortgage loans and FHLB stock.
Management has utilized FHLB advances to fund long-term assets and to fund
short-term liquidity needs. At December 31, 1999, the balance of FHLB advances
totaled $38,746 compared to $47,714 at December 31, 1998. FHLB borrowings have
two distinct advantages: they can be less expensive than deposits for comparable
terms and they are not subject to early redemption. Management will continue to
evaluate borrowings from the FHLB as an alternative funding source. Promissory
notes are primarily associated with funding loans at Loan Central and were
issued with terms of one year or less.
CAPITAL RESOURCES
The Company maintains a capital level that exceeds regulatory
requirements as a margin of safety for its depositors and shareholders.
Shareholders' equity totaled $42,708 at December 31, 1999, compared to $40,680
at December 31, 1998, which represents growth of 5.0%. All of the capital ratios
exceeded the regulatory minimum guidelines as identified in Note O "Regulatory
Matters".
Cash dividends paid of $1,877 for 1999 represents a 22.4% increase over
the cash dividends paid during 1998. The increase in cash dividends paid is due
to the additional shares outstanding during 1999 which were not outstanding
during 1998 and an increase in dividends paid per share.
The Company maintains a dividend reinvestment and stock purchase plan.
The plan allows shareholders to purchase additional shares of company stock. A
benefit of the plan is to permit the shareholders to reinvest cash dividends as
well as make supplemental purchases without the usual payment of brokerage
commissions. During 1999, the Company issued 16,756 shares under the dividend
reinvestment and stock purchase plan. At December 31, 1999, approximately 73% of
the shareholders were enrolled in the dividend reinvestment plan. Members of the
plan invested $632 in 1999 which represents 34% of year-to-date dividends paid.
As part of the Company's stock repurchase program, management was able to
utilize reinvested dividends and voluntary cash to purchase shares on the open
market and redistribute them through the dividend reinvestment plan.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company's goal for interest rate sensitivity management is to
maintain a balance between steady net interest income growth and the risks
associated with interest rate fluctuations. Interest rate risk ("IRR") is the
exposure of the Company's financial condition to adverse movements in interest
rates. Accepting this risk can be an important source of profitability, but
excessive levels of IRR can threaten the Company's earnings and capital. It is
management's policy not to position the balance sheet so as to expose the
Company to levels of interest rate risk which could significantly impair
earnings performance or endanger capital.
The Company's asset and liability committee monitors the rate
sensitivity of the balance sheet weekly through parameters established by the
Board of Directors. The committee uses an interest rate sensitivity gap analysis
prepared quarterly to monitor the relationship between the maturity and
repricing of its interest-earning assets and interest-bearing liabilities.
Interest rate sensitivity gap is defined as the difference between the amount of
interest-earning assets and interest-bearing liabilities maturing or repricing
within a specified time period. A gap position is considered positive when the
amount of interest sensitive assets exceed the amount of interest sensitive
liabilities, and is considered negative when the amount interest sensitive
liabilities exceed the amount of interest sensitive assets. Generally, during a
period of rising interest rates, a negative gap would adversely affect net
interest income, while a positive gap would result in an increase in net
interest income. Conversely, during a period of falling interest rates, a
negative gap would result in an increase in net interest income, while a
positive gap would negatively affect net interest income. This analysis assumes
that interest rate changes for interest-earning assets and interest-bearing
liabilities are of the same magnitude and velocity, whereas actual interest rate
changes generally differ in magnitude and velocity. Based on the gap model, the
Company was liability sensitive in the short term and asset sensitive for
periods over five years.
The Company's exposure to interest rate risk is primarily managed
through the selection of the type and repricing characteristics of
interest-earning assets and interest-bearing liabilities. Management can
influence the Company's gap position by offering fixed or variable rate
products, by changing the terms of new loans, investments and time deposits, or
by selling existing assets or repaying certain liabilities. The Company's
ability to manage its gap position can be challenged by customer preferences
which may not meet the Company's goals. The FHLB assists in funding
interest-earning assets by providing advances with similar repricing
characteristics as many of the loans offered by the Company.
Table VIII provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table presents
repricing opportunities strictly by maturity date without regard for repricing
dates for variable rate products. Noninterest-bearing checking deposits assume
an annual decay rate of 13% and savings and interest-bearing checking accounts
assume an annual decay rate of 20% based on the Company's historical experience.
A fundamental difference between the table and the gap model previously
discussed is that the table presents financial intruments based on the date of
expected cash flows while gap analysis only focuses on repricing characteristics
of financial instruments.
Liquidity management should focus on matching the cash inflows and
outflows within the Company's natural market for loans and deposits. This goal
is accomplished by maintaining sufficient asset liquidity along with stable core
deposits. The primary sources of liquidity are interest-bearing balances with
banks, federal funds sold and the maturity and repayment of investments and
loans as well as cash flows provided from operations. The Company has classified
$55,371 in securities as available for sale at December 31, 1999. In addition,
the Federal Home Loan Bank in Cincinnati offers advances to the Bank which
further enhances the Bank's ability to meet liquidity demands. The Bank also has
the ability to purchase federal funds from several of its correspondent banks.
Management does not rely on any single source of liquidity and monitors the
level of liquidity based on many factors affecting the Company's financial
condition. See statement of cash flows.
INFLATION
Consolidated financial data included herein has been prepared in
accordance with generally accepted accounting principles (GAAP). Presently, GAAP
requires the Company to measure financial position and operating results in
terms of historical dollars with the exception of securities available-for-sale,
which are carried at fair value. Changes in the relative value of money due to
inflation or deflation are generally not considered.
In management's opinion, changes in interest rates affect the financial
institution to a far greater degree than changes in the inflation rate. While
interest rates are greatly influenced by changes in the inflation rate, they do
not change at the same rate or in the same magnitude as the inflation rate.
Rather, interest rate volatility is based on changes in the expected rate of
inflation, as well as monetary and fiscal policies. A financial institution's
ability to be relatively unaffected by changes in interest rates is a good
indicator of its capability to perform in today's volatile economic environment.
The Company seeks to insulate itself from interest rate volatility by ensuring
that rate sensitive assets and rate sensitive liabilities respond to changes in
interest rates in a similar time frame and to a similar degree.
FORWARD LOOKING STATEMENTS
Except for the historical statements and discussions contained herein,
statements contained in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Act of 1934 and as defined in the Private Securities
Litigation Reform Act of 1995. Such statements are often, but not always,
identified by the use of such words as "believes," "anticipates," "expects," and
similar expressions. Such statements involve various important assumptions,
risks, uncertainties, and other factors, many of which are beyond our control,
that could cause actual results to differ materially from those expressed in
such forward looking statements. These factors include, but are not limited to:
changes in political, economic or other factors such as inflation rates,
recessionary or expansive trends, and taxes; competitive pressures; fluctuations
in interest rates; the level of defaults and prepayment on loans made by the
Company; unanticipated litigation, claims, or assessments; fluctuations in the
cost of obtaining funds to make loans; and regulatory changes. Readers are
cautioned not to place undue reliance on such forward looking statements, which
speak only as of the date hereof. The Company undertakes no obligation and
disclaims any intention to republish revised or updated forward looking
statements, whether as a result of new information, unanticipated future events
or otherwise.
CONSOLIDATED AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST INCOME
Table I
December 31
------------------------------------------------------------------------------------
1999 1998 1997
(dollars in thousands) -------------------------- -------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ---- ------- ------- ----
ASSETS
- ------
Interest-earning assets:
Interest-bearing balances $ 781 $ 30 3.87% $ 3,079 $ 176 5.71% $ 3,835 $ 194 5.06%
with banks
Federal funds sold 2,485 121 4.87 3,910 214 5.47 3,728 202 5.40
Securities:
Taxable 56,153 3,490 6.21 55,092 3,457 6.27 56,768 3,564 6.28
Tax exempt 16,849 1,183 7.02 16,307 1,136 6.97 12,700 911 7.17
Loans 382,353 35,559 9.30 305,392 30,590 10.02 271,535 26,897 9.91
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-
earning assets 458,621 40,383 8.81% 383,780 35,573 9.27% 348,566 31,768 9.11%
Noninterest-earning assets:
Cash and due from banks 13,146 9,268 7,968
Other nonearning assets 21,517 19,065 16,322
Allowance for loan losses (4,652) (3,631) (3,304)
-------- -------- --------
Total noninterest-
earning assets 30,011 24,702 20,986
Total assets $488,632 $408,482 $369,552
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 66,105 2,514 3.80% $ 36,152 1,222 3.38% $ 31,568 1,048 3.32%
Savings and Money Market 52,628 1,426 2.71 52,671 1,381 2.62 47,216 1,181 2.50
Time deposits 212,091 11,662 5.50 189,955 10,886 5.73 191,317 10,934 5.72
Repurchase agreements 13,961 510 3.65 18,148 685 3.77 11,352 435 3.83
Other borrowed money 50,539 2,725 5.39 26,832 1,517 5.65 15,182 919 6.05
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-
bearing liabilities 395,324 18,837 4.76% 323,758 15,691 4.85% 296,635 14,517 4.89%
Noninterest-bearing liabilities:
Demand deposit accounts 45,226 40,715 34,195
Other liabilities 6,352 5,370 4,273
-------- -------- ------
Total noninterest-
bearing liabilities 51,578 46,085 38,468
Shareholders' equity 41,730 38,639 34,449
-------- -------- --------
Total liabilities and
shareholders' equity $488,632 $408,482 $369,552
======== ======== ========
Net interest earnings $21,546 $19,882 $17,251
======= ======= =======
Net interest earnings as a percent
of interest-earning assets 4.70% 5.18% 4.95%
----- ----- -----
Net interest rate spread 4.05% 4.42% 4.22%
----- ----- -----
Average interest-bearing liabilities
to average earning assets 86.20% 84.36% 85.10%
===== ===== =====
Fully taxable equivalent yields are calculated assuming a 34% tax rate, net of
nondeductible interest expense. Average balances are computed on an average
daily basis. The average balance for available-for-sale securities includes the
market value adjustment. However, the calculated yield is based on the
securities' amortized cost. Average loan balances include nonaccruing loans.
Loan income includes cash received on nonaccruing loans.
RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME & EXPENSE
Table II
1999 1998
----------------------------- ----------------------------
(dollars in thousands) Increase (Decrease) Increase (Decrease)
From Previous Year Due to From Previous Year Due to
----------------------------- ----------------------------
Volume Yield/Rate Total Volume Yield/Rate Total
------ ---------- ----- ------ ---------- -----
INTEREST INCOME
- ---------------
Interest-bearing balances
with banks $ (102) $ (44) $ (146) $ (41) $ 23 $ (18)
Federal funds sold (71) (22) (93) 10 2 12
Securities:
Taxable 66 (33) 33 (105) (2) (107)
Tax exempt 39 8 47 251 (26) 225
Loans 7,279 (2,310) 4,969 3,389 304 3,693
------- ------- ------- ------- ------- -------
Total interest income 7,211 (2,401) 4,810 3,504 301 3,805
INTEREST EXPENSE
- ----------------
NOW accounts 1,122 170 1,292 155 19 174
Savings and Money Market (1) 46 45 141 59 200
Time deposits 1,231 (455) 776 (79) 31 (48)
Repurchase agreements (153) (22) (175) 257 (7) 250
Other borrowed money 1,281 (73) 1,208 662 (64) 598
------- ------- ------- ------- ------- -------
Total interest expense 3,480 (334) 3,146 1,136 38 1,174
------- ------- ------- ------- ------- -------
Net interest earnings $ 3,731 $(2,067) $ 1,664 $ 2,368 $ 263 $ 2,631
======= ======= ======= ======= ======= =======
The change in interest due to both volume and rate has been allocated to volume
and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each. Fully taxable equivalent yield assumes a 34% tax
rate, net of related nondeductible interest expense.
SECURITIES
Table III
MATURING
---------------------------------------------------------------------------
As of December 31, 1999 Within After One but After Five but
(dollars in thousands) One Year Within Five Years Within Ten Years After Ten Years
-------- ----------------- ---------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
U.S. Treasury securities $ 5,005 6.31% $ 2,505 6.42%
Obligations of U.S. Government
agency securities 1,519 6.01% 40,003 6.07%
Obligations of states and
political subdivisions 2,389 7.25% 7,486 7.67% $3,460 7.62% $2,355 7.12%
Mortgage-backed securities 7 8.00% 732 5.95% 1,769 5.65%
------- ---- ------- ---- ------ ---- ------ ----
Total debt securiities $ 8,913 6.51% $50,001 6.32% $4,192 7.33% $4,124 6.47%
======= ==== ======= ==== ====== ==== ====== ====
Tax equivalent adjustments have been made in calculating yields on obligations
of states and political subdivisions using a 34% rate. Weighted average yields
are calculated on the basis of the cost and effective yields weighted for the
scheduled maturity of each security. Mortgage-backed securities, which have
prepayment provisions, are assigned to a maturity based on estimated average
lives. Securities are shown at their carrying values which include the market
value adustments for available-for-sale securities.
DEPOSITS
Table IV as of December 31
(dollars in thousands)
1999 1998 1997
---- ---- ----
Interest-bearing deposits:
NOW accounts $ 74,447 $ 47,190 $ 29,439
Money Market 12,419 20,103 15,455
Savings accounts 29,676 33,624 33,453
IRA accounts 34,938 30,870 28,102
Certificates of Deposit 207,407 149,569 162,488
-------- -------- --------
358,887 281,356 268,937
Noninterest-bearing deposits:
Demand deposits 46,444 45,961 37,100
-------- -------- --------
Total deposits $405,331 $327,317 $306,037
======== ======== ========
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
Table V Years Ended December 31
(dollars in thousands) 1999 1998 1997 1996 1995
- ---------------------- ---- ---- ---- ---- ----
Commercial loans $1,278 $1,132 $ 879 $ 887 $ 328
Percentage of loans to total loans 29.33% 28.18% 28.79% 29.08% 20.06%
Real estate loans 270 264 218 338 328
Percentage of loans to total loans 49.04% 47.14% 43.07% 42.56% 50.49%
Consumer loans 1,444 1,360 949 799 597
Percentage of loans to total loans 21.63% 24.68% 28.14% 28.36% 29.45%
Unallocated 2,063 1,521 1,344 1,156 1,228
------- ------- ------- ------- -------
Allowance for Loan Losses $5,055 $4,277 $3,390 $3,180 $2,481
======= ======= ======= ======= =======
100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= =======
Ratio of net charge-offs
to average loans .40% .46% .38% .25% .19%
======= ======= ======= ======= =======
The above allocation is based on estimates and subjective judgements and is not
necessarily indicative of the specific amounts or loan categories in which
losses may ultimately occur.
SUMMARY OF NONPERFORMING AND PAST DUE LOANS
Table VI
(dollars in thousands) 1999 1998 1997 1996 1995
- ---------------------- ---- ---- ---- ---- ----
Impaired loans $1,413 $ 624 $ 430 $ 449 $ 579
Past due-90 days or more and
still accruing 3,711 2,106 3,607 2,707 $2,785
Nonaccrual 2,953 981 1,019 737 963
Accruing loans past due 90
days or more to total loans .90% .61% 1.29% 1.02% 1.23%
Nonaccrual loans as a % of
total loans .72% .28% .36% .28% .42%
Impaired loans as a % of total loans .34% .18% .15% .17% .25%
Allowance for loans losses as a
% of total loans 1.23% 1.23% 1.21% 1.20% 1.09%
Management believes that the impaired loan disclosures are comparable to the
nonperforming loan disclosures except that the impaired loan disclosures do not
include single family residential or consumer loans which are analyzed in the
aggregate for loan impairment purposes.
During 1999, the Company did not recognize any interest income on impaired
loans. Loans not included above that management feels have loss potential total
approximately $600. The Company has no assets which are considered to be
troubled debt restructurings.
Management formally considers placing a loan on nonaccrual status when
collection of principal or interest has become doubtful. Furthermore, a loan
should not be returned to the accrual status unless either all delinquent
principal or interest has been brought current or the loan becomes well secured
and is in the process of collection.
MATURITY AND REPRICING DATA OF LOANS
Table VII
As of December 31, 1999 Maturing/Repricing
(dollars in thousands)
Within After One but
One Year Within Five Years After Five Years Total
-------- ----------------- ---------------- -----
Commercial loans and other $ 65,921 $ 8,575 $ 46,095 $120,591
Real estate loans 54,081 15,712 131,832 201,625
Consumer loans 22,768 56,245 9,929 88,942
-------- ------- -------- --------
Total loans $142,770 $80,532 $187,856 $411,158
======== ======= ======== ========
Loans maturing or repricing after one year with:
Variable interest rates $ 25,882
Fixed interest rates 242,506
--------
Total $268,388
========
RATE SENSITIVITY ANALYSIS
Table VIII
(dollars in thousands)
As of December 31, 1999 Principal Amount Maturing in:
There- Fair Value
2000 2001 2002 2003 2004 after Total 12/31/99
Rate-Sensitive Assets:
Fixed interest rate loans $ 8,878 $ 8,584 $ 17,232 $ 18,867 $ 19,707 $181,722 $254,990 $260,319
Average interest rate 9.77% 12.02% 11.73% 10.79% 9.65% 8.01% 8.79%
Variable interest rate loans $ 43,495 $ 3,626 $ 4,003 $ 3,020 $ 7,082 $ 94,942 $156,168 $155,109
Average interest rate 10.05% 10.51% 9.32% 8.65% 8.90% 7.81% 8.60%
Fixed interest rate securities $ 8,904 $ 10,285 $ 11,336 $ 19,475 $ 9,693 $ 12,591 $ 72,284 $ 71,263
Average interest rate 6.52% 6.40% 6.24% 6.19% 6.60% 6.94% 6.45%
Other interest-bearing assets $ 806 $ 806 $ 806
Average interest rate 2.48% 2.48%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 6,224 $ 5,390 $ 4,667 $ 4,042 $ 3,500 $ 22,621 $ 46,444 $ 46,444
Savings & Interest-bearing checking $ 18,106 $ 15,010 $ 12,496 $ 10,444 $ 8,763 $ 51,723 $116,542 $116,542
Average interest rate 3.20% 3.26% 3.32% 3.38% 3.43% 3.72% 3.49%
Time deposits $178,213 $ 40,781 $ 10,412 $ 10,663 $ 937 $ 1,339 $242,345 $242,400
Average interest rate 5.48% 5.60% 5.89% 6.02% 5.56% 7.29% 5.55%
Fixed interest rate borrowings $ 16,878 $ 4,365 $ 5,282 $ 3,098 $ 85 $ 8,198 $ 37,906 $ 36,816
Average interest rate 5.40% 5.56% 5.42% 5.71% 5.85% 5.41% 5.45%
Variable interest rate borrowings $ 30,113 $ 30,113 $ 30,113
Average interest rate 4.89% 4.89%
KEY RATIOS
Table IX
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Return on average assets .88% 1.01% 1.02% .98% .88%
Return on average equity 10.29% 10.69% 10.98% 10.82% 10.53%
Dividend payout ratio 43.73% 37.13% 37.81% 39.53% 41.59%
Average equity to
average assets 8.54% 9.46% 9.32% 9.04% 8.33%