UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
JUNE 30, 2000
Commission file number: 0-20914
Ohio Valley Banc Corp.
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(Exact name of Registrant as specified in its charter)
Ohio
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(State or other jurisdiction of incorporation or organization)
31-1359191
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(I.R.S. Employer Identification Number)
420 Third Avenue. Gallipolis, Ohio 45631
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (740) 446-2631
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of the issuers classes of
commom stock, as of the latest practicable date.
Common stock, $1.00 stated value Outstanding at July 31, 2000
3,507,658 common shares
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10-01 of Regulation
S-X is included in this Form 10Q as referenced below:
Consolidated Balance Sheets...................................... 1
Consolidated Statements of Income................................ 2
Condensed Consolidated Statements of Changes in
Shareholders' Equity.......................................... 3
Condensed Consolidated Statements of Cash Flows.................. 4
Notes to the Consolidated Financial Statements................... 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 10
Item 3 - Quantitative and Qualitative Disclosure About
Market Risk.......................................... 15
Part II - Other Information
Other Information and Signatures................................. 16
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30,
2000 December 31,
(unaudited) 1999
------------ ------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 12,314 $ 19,000
Federal funds sold 175
------------ ------------
Total cash and cash equivalents 12,489 19,000
Interest-bearing balances with banks 391 806
Securities available-for-sale 59,003 55,371
Securities held-to-maturity, (Estimated fair
value: $15,454 at June 30, 2000 and $15,892
at December 31, 1999) 15,577 16,009
Total loans 432,292 411,158
Allowance for loan losses (5,100) (5,055)
------------ ------------
Net loans 427,192 406,103
Premises and equipment, net 9,907 9,888
Accrued income receivable 3,111 3,298
Intangible assets, net 1,461 1,412
Other assets 11,553 10,170
------------ ------------
Total assets $ 540,684 $ 522,057
============ ============
LIABILITIES
Noninterest-bearing deposits $ 48,367 $ 46,444
Interest-bearing deposits 374,654 358,887
------------ ------------
Total deposits 423,021 405,331
Securities sold under agreements to repurchase 17,152 16,788
Other borrowed funds 50,206 51,231
Accrued liabilities 7,628 5,999
------------ ------------
Total liabilities 498,007 479,349
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 10,000,000
shares authorized; 3,555,047 shares issued
and 3,512,658 shares outstanding at June 30,
2000 and 3,548,572 shares issued and
3,542,983 shares outstanding at
December 31, 1999) 3,555 3,549
Surplus 28,641 28,454
Retained earnings 12,511 11,491
Accumulated other comprehensive income, net
of tax (tax effect of $380 in 2000 and
$307 in 1999) (737) (597)
Treasury stock (at cost, 42,389 shares in 2000
and 5,589 shares in 1999) (1,293) (189)
------------ ------------
Total shareholders' equity 42,677 42,708
------------ ------------
Total liabilities and
shareholders' equity $ 540,684 $ 522,057
============ ============
See notes to the consolidated financial statements.
1
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Interest and dividend income:
Interest and fees on loans $ 9,878 $ 8,753 $19,373 $17,098
Interest on taxable securities 852 785 1,660 1,552
Interest on nontaxable securities 190 206 383 414
Dividends 77 75 149 143
Other interest 103 71 187 120
-------- -------- -------- --------
Total interest and dividend income 11,100 9,890 21,752 19,327
Interest expense:
Interest on deposits 4,902 3,845 9,534 7,426
Interest on repurchase agreements 218 109 367 207
Interest on other borrowed funds 658 604 1,257 1,301
-------- -------- -------- --------
Total interest expense 5,778 4,558 11,158 8,934
-------- -------- -------- --------
Net interest income 5,322 5,332 10,594 10,393
Provision for loan losses 407 557 709 1,005
-------- -------- -------- --------
Net interest income after provision 4,915 4,775 9,885 9,388
Other income:
Service charges on deposit accounts 390 298 723 554
Trust division income 58 59 111 116
Other operating income 418 319 795 585
Net gain on sale of available-for-
sale securities 63 63
-------- -------- -------- --------
Total other income 866 739 1,629 1,318
Other expense:
Salaries and employee benefits 2,343 2,191 4,714 4,330
Occupancy expense 340 253 665 482
Furniture and equipment expense 317 276 611 506
Data processing expense 118 107 189 212
Other operating expense 1,284 1,099 2,497 2,165
-------- -------- -------- --------
Total other expense 4,402 3,926 8,676 7,695
-------- -------- -------- --------
Income before income taxes 1,379 1,588 2,838 3,011
Provision for income taxes 388 447 795 838
-------- -------- -------- --------
NET INCOME $ 991 $ 1,141 $ 2,043 $ 2,173
======== ======== ======== ========
Earnings per share $ 0.28 $ 0.33 $ 0.58 $ 0.62
======== ======== ======== ========
See notes to the consolidated financial statements.
2
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Balance at beginning of period $42,850 $41,568 $42,708 $40,680
Comprehensive income:
Net income 991 1,141 2,043 2,173
Net change in unrealized gain or
loss on available-for-sale
securities 107 (402) (140) (453)
-------- -------- -------- --------
Total comprehensive income 1,098 739 1,903 1,720
Proceeds from issuance of common
stock through the dividend
reinvestment plan 193 193 301
Cash paid in lieu of fractional shares
in stock split (15) (15)
Cash dividends (527) (495) (1,023) (889)
Shares acquired for treasury (937) (1,104)
-------- -------- -------- --------
Balance at end of period $42,677 $41,797 $42,677 $41,797
======== ======== ======== ========
See notes to the consolidated financial statements.
3
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands, except per share data)
Six months ended June 30,
2000 1999
------------ ------------
Net cash provided by operating activities $ 4,767 $ 4,837
Investing activities
Proceeds from maturities of
securities available-for-sale 2,606 3,646
Purchases of securities available-
for-sale (6,368) (6,063)
Proceeds from maturities of
securities held-to-maturity 1,118 370
Purchase of securities held-to-maturity (718) (550)
Proceeds from sale of equity securities 64
Change in interest-bearing deposits
in other banks 415 211
Net increase in loans (21,798) (34,123)
Purchase of premises and equipment, net (723) (964)
Purchases of insurance contracts, net (905) 1
------------ ------------
Net cash used in investing activities (26,373) (37,408)
Financing activities
Change in deposits 17,690 44,753
Cash dividends (1,023) (889)
Cash paid in lieu of fractional shares
in stock split (15)
Proceeds from issuance of common stock 193 301
Purchases of treasury stock (1,104)
Change in securities sold under
agreements to repurchase 364 (8,046)
Proceeds from long-term borrowings 5,250 4,500
Repayment of long-term borrowings (5,976) (3,434)
Change in other short-term borrowings (299) (5,163)
------------ ------------
Net cash from financing activities 15,095 32,007
------------ ------------
Change in cash and cash equivalents (6,511) (564)
Cash and cash equivalents at beginning
of year 19,000 12,717
------------ -------------
Cash and cash equivalents at June 30, $ 12,489 $ 12,153
============ =============
See notes to the consolidated financial statements
4
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of Ohio
Valley Banc Corp. and its wholly owned subsidiaries The Ohio Valley Bank
Company, Jackson Savings Bank and Loan Central, Inc. All material intercompany
accounts and transactions have been eliminated in consolidation. Management
considers the Company to operate in one segment, banking.
These interim financial statements are prepared without audit and reflect all
adjustments of a normal recurring nature which, in the opinion of Management,
are necessary to present fairly the consolidated financial position of Ohio
Valley Banc Corp. at June 30, 2000, and its results of operations and cash flows
for the periods presented. The accompanying consolidated financial statements do
not purport to contain all the necessary financial disclosures required by
generally accepted accounting principles that might otherwise be necessary in
the circumstances. The Annual Report for Ohio Valley Banc Corp. for the year
ended December 31, 1999, contains consolidated financial statements and related
notes which should be read in conjunction with the accompanying consolidated
financial statements.
The provision for income taxes is based upon the effective income tax rate
expected to be applicable for the entire year.
For consolidated financial statement classification and cash flow reporting
purposes, cash and cash equivalents include cash on hand, noninterest-bearing
deposits with banks and federal funds sold. For the six months ended June 30,
2000 and 1999, Ohio Valley Banc Corp. paid interest in the amount of $10,979 and
$8,368, respectively. For the six months ended June 30, 2000 and 1999, Ohio
Valley Banc Corp. paid income taxes of $825 and $1,040, respectively.
Earnings per share is computed based on the weighted average shares outstanding
during the period. Weighted average shares outstanding were 3,519,434 and
3,531,535 for the three months ending June 30, 2000 and June 30, 1999,
respectively. Weighted average shares outstanding were 3,530,453 and 3,529,724
for the six months ending June 30, 2000 and June 30, 1999, respectively.
Comprehensive income includes both net income and other comprehensive income.
Other comprehensive income includes the change in unrealized gains and losses on
securities available-for-sale which is also recognized net of tax as a separate
component of equity.
On April 1, 1999, the Company adopted Statement of Financial Accounting Standard
No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 allowed the Company a one time reclassification of securities
held-to-maturity to classification as available-for-sale or trading. The Company
reclassified U.S. Government agency securities with an amortized cost of $27,676
from held-to-maturity to available-for-sale. The securities were transferred
with management's intention of providing greater flexibility in meeting customer
and asset/liability needs. The Company has no derivative or hedging activity
covered by SFAS No. 133.
(Continued)
5
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of the securities, as presented in the consolidated balance sheet are as
follows:
June 30, 2000
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury securities $ 4,994 $ 3 $ (3) $ 4,994
U.S. Government agency
securities 48,668 45 (1,041) 47,672
Mortgage-backed securities 2,204 (121) 2,083
Marketable equity
securities 4,254 4,254
------------ ---------- ---------- ------------
Total securities $ 60,120 $ 48 $ (1,165) $ 59,003
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
Obligations of state and
political subdivisions $ 15,281 $ 111 $ (213) $ 15,179
Mortgage-backed securities 296 1 (22) 275
------------ ---------- ---------- ------------
Total securities $ 15,577 $ 112 $ (235) $ 15,454
============ ========== ========== ============
December 31, 1999
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
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 state and
political subdivisions $ 15,690 $ 151 $ (247) $ 15,594
Mortgage-backed securities 319 1 (22) 298
------------ ---------- ---------- ------------
Total securities $ 16,009 $ 152 $ (269) $ 15,892
============ ========== ========== ============
(Continued)
6
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at June 30, 2000,
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
Cost Value Cost Value
------------ ------------ ------------ ------------
Debt securities:
Due in one year
or less $ 7,501 $ 7,490 $ 1,768 $ 1,769
Due in one to
five years 45,213 44,211 7,931 7,990
Due in five to
ten years 948 965 3,451 3,376
Due after ten years 2,131 2,044
Mortgage-backed sec. 2,204 2,083 296 275
------------ ------------ ------------ ------------
Total debt
securities $ 55,866 $ 54,749 $ 15,577 $ 15,454
============ ============ ============ ============
Gains and losses on the sale of securities are determined using the specific
identification method. There were no sales of debt and equity securities during
the first six months of 2000 and no sales of debt securities during the first
six months of 1999. Net gains on the sale of equity securities during the first
six months of 1999 were $63.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
June 30, December 31,
2000 1999
------------ ------------
Real estate loans $ 208,544 $ 201,625
Commercial and industrial loans 126,868 119,585
Consumer loans 95,732 88,942
Other loans 1,148 1,006
------------ ------------
$ 432,292 $ 411,158
============ ============
At June 30, 2000 and December 31, 1999, loans on nonaccrual status were
approximately $2,919 and $2,953, respectively. Loans past due more than 90 days
and still accruing at June 30, 2000 and December 31, 1999 were $3,208 and
$3,711, respectively.
(Continued)
7
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the six months ended
June 30 is as follows:
2000 1999
------------ ------------
Balance - January 1, $ 5,055 $ 4,277
Loans charged off:
Real estate 42 24
Commercial 15 94
Consumer 737 590
------------ ------------
Total loans charged off 794 708
Recoveries of loans:
Real estate 1 13
Commercial 4
Consumer 129 97
------------ -----------
Total recoveries 130 114
Net loan charge-offs (664) (594)
Provision charged to operations 709 1,005
------------ ------------
Balance - June 30, $ 5,100 $ 4,688
============ ============
Information regarding impaired loans: June 30, December 31,
2000 1999
------------ ------------
Balance of impaired loans $ 1,538 $ 1,413
============ ============
Portion of impaired loan balance for which an
allowance for credit losses is allocated $ 1,538 $ 1,413
============ ============
Portion of allowance for loan losses
allocated to the impaired loan balance $ 530 $ 600
============ ============
Average investment in impaired
loans year-to-date $ 1,545 $ 1,570
============ ============
Interest on impaired loans was not material for the periods ended June 30, 2000
and December 31, 1999.
(Continued)
8
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 5 - CONCENTRATIONS OF CREDIT RISK AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company, through its subsidiaries, grants residential, consumer, and
commercial loans to customers located primarily in the central and southeastern
areas of Ohio as well as the western counties of West Virginia. Approximately
6.32% of total loans were unsecured at June 30, 2000 as compared to 6.54% at
December 31, 1999.
The Corporation is a party to financial instruments with off-balance sheet risk.
These instruments are required in the normal course of business to meet the
financial needs of its customers. The contract or notional amounts of these
instruments are not included in the consolidated financial statements. At June
30, 2000, the contract or notional amounts of these instruments, which primarily
include commitments to extend credit and standby letters of credit and financial
guarantees, totaled approximately $48,821 as compared to $49,826 at December 31,
1999.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at June 30, 2000 and December 31, 1999 are comprised of
advances from the Federal Home Loan Bank (FHLB), promissory notes and Federal
Reserve Bank Notes.
2000 1999
-------- --------
FHLB Borrowings $ 35,701 $ 38,746
Promissory Notes 6,005 3,985
FRB Notes 8,500 8,500
-------- --------
$ 50,206 $ 51,231
======== ========
Pursuant to collateral agreements with the FHLB, advances are secured by certain
qualifying first mortgage loans and by FHLB stock which total $53,552 and $3,987
at June 30, 2000. Fixed rate FHLB advances of $32,201 mature through 2010 and
have interest rates ranging from 4.88% to 7.08%. In addition, variable rate FHLB
borrowings represent $3,500.
Promissory notes, issued primarily by the parent company, have fixed rates of
6.00% to 7.25% and are due at various dates through a final maturity date of May
29, 2002.
Scheduled principal payments over the next five years are to be:
FHLB borrowings Promissory notes FRB Notes Totals
--------------- ---------------- --------- ---------
2000 $ 10,173 $ 3,150 $ 8,500 $ 21,823
2001 8,865 2,850 11,715
2002 5,282 5 5,287
2003 3,098 3,098
2004 85 85
Thereafter 8,198 8,198
--------------- ---------------- --------- --------
$ 35,701 $ 6,005 $ 8,500 $ 50,206
=============== ================ ========= ========
Letters of credit issued on the Bank's behalf by the FHLB to collateralize
certain public unit deposits as required by law totaled $32,021 at June 30,
2000 and $24,000 at December 31, 1999. Various investment securities from the
Bank used to collateralize FRB notes totaled $9,280 at June 30, 2000 and $9,225
at December 31, 1999. Promissory notes were unsecured at June 30, 2000 and
December 31, 1999.
(Continued)
9
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
INTRODUCTION
The following discussion focuses on the consolidated financial condition of Ohio
Valley Banc Corp. at June 30, 2000, compared to December 31, 1999, and the
consolidated results of operations for the quarterly and year-to-date periods
ending June 30, 2000, compared to the same periods in 1999. The purpose of this
discussion is to provide the reader a more thorough understanding of the
consolidated financial statements. This discussion should be read in conjunction
with the interim consolidated financial statements and the footnotes included in
this Form 10-Q.
The Registrant is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on the liquidity,
capital resources or operations except as discussed herein. Also, the Registrant
is not aware of any current recommendations by regulatory authorities which
would have such effect if implemented.
On May 3, 1999, the Company entered into a purchase agreement to acquire two
West Virginia branches of Huntington National Bank. These offices are the Milton
office, located at 280 East Main Street, Milton, and the Barboursville office,
located in the Krogers Supermarket at 5636 U.S. Route 60 East, Barboursville.
The purchase, having been approved by the appropriate regulatory authorities,
was completed in the third quarter of 1999 and has expanded the Company's
banking activities in West Virginia.
Management continued this growth in the fourth quarter of 1999 by establishing
two Superbanks in Wal-Mart stores. The first branch is located in Charleston,
West Virginia and the second branch is located in South Point, Ohio. The Company
continued its market expansion in the second quarter of 2000 by opening its
eighth Superbank (Wal-Mart) facility. This new branch is located in Huntington,
West Virginia (Cabell County) and will further strengthen the Company's presence
along the growing I-64 corridor of western West Virginia.
With the advent of the Gramm Leach Bliley Act, the Company formed a subsidiary
called Ohio Valley Financial Services. The subsidiary will be a joint venture
with an insurance agency with plans to open in Jackson County, Ohio before
year-end. The subsidiary will be able to offer customers life, homeowner and
auto insurance. In addition, the Company has plans to participate as an investor
in a bank acquisition of an insurance company. The company to be purchased is
Century Surety Group. The Company will combine with four other community banks
and two corporations to purchase the Columbus-based insurer at a total price of
$31,000. Management views both Ohio Valley Financial Services and the insurance
company acquisition as unique opportunities to enter the insurance business and
expand the products being offered to the customer.
FINANCIAL CONDITION
The consolidated total assets of Ohio Valley Banc Corp. increased $18,627 or
3.6% to reach $540,684 at June 30, 2000. The factor contributing most to this
growth in assets was loans which grew $21,134.
10
Loans were funded by growth in deposits of $17,690 or 4.4% and a decrease in
cash and cash equivalents of $6,511. A portion of the growth in deposits was
used to reduce borrowed funds and securities sold under agreements to repurchase
which are collectively down $661.
During the first six months of 2000, loan growth was led by commercial loans
expanding $7,283 or 6.1%. This growth came mostly from loan origination
increases within the Franklin and Jackson counties of Ohio. For the same period,
real estate mortgages grew $6,919 or 3.4%. Approximately 70% of this increase
occurred in Pike county of Ohio as well as the Mason and Cabell counties of West
Virginia. These counties represent newer markets for the Company and management
expects continued loan growth within these new locations. In addition, consumer
loans increased $6,790 or 7.6%. Approximately 65% of this increase occurred
within indirect loans, particularly automobiles, where management has been more
aggressive in its pricing of these products. 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. A
comprehensive analysis of the allowance for loan and lease loss is performed on
a quarterly basis to ensure its adequacy. As a percentage of total loans, the
allowance for loan losses at June 30, 2000 was 1.18%, down from 1.23% at
December 31, 1999.
Total deposit growth was led by time deposits increasing $10,938 or 4.5%
followed by savings and interest-bearing demand deposits increasing $4,829 or
4.1%. Non-interest bearing demand deposits also grew $1,923 or 4.1%. During the
first half of 2000, management generated deposit growth through more aggressive
pricing on certificates of deposit, particularly in the newer markets.
Additionally, management continues to be successful in generating additional
interest-bearing demand deposits through the Company's Gold Club account which
offers a NOW account along with other banking benefits. The deposit growth
experienced through the first six months of 2000 has been used to fund the
growth in loans and to reduce borrowed funds.
Other borrowed funds are primarily advances from the Federal Home Loan Bank,
which are used to fund loan growth or short-term liquidity needs. Other borrowed
funds are down $1,025 from December 31, 1999, as management has focused on
funding loan growth through less costly retail sources of funds in certificates
of deposit. The decrease occurred primarily in overnight borrowings.
Furthermore, securities sold under agreements to repurchase are up $364 from
December 31, 1999.
Total shareholders' equity at June 30, 2000 of $42,677 was down slightly by $31
as compared to the balance of $42,708 on December 31, 1999. Contributing to this
decrease was the Company's purchase of 36,800 additional treasury shares as part
of the stock repurchase program during the first half of 2000 which lowered
shareholders' equity by $1,104. This was offset by year-to-date income of $2,043
and proceeds of $193 from the issuance of common stock through the dividend
reinvestment plan less cash dividends paid of $1,023, or $.15 per share. This
cash dividend represents 50.1% of the year-to-date income. Management continues
to utilize the proceeds from reinvested dividends and voluntary cash to purchase
shares on the open market and redistribute these dollars back into the plan
without the need for the issuance of common stock.
11
RESULTS OF OPERATIONS
Ohio Valley Banc Corp's net income was $991 for the second quarter and $2,043
for the first six months of 2000, down 13.1% and 6.0% compared to $1,141 and
$2,173 for the same periods in 1999. Comparing year-to-date June 30, 2000 to
June 30, 1999, return on assets decreased from .93% to .77% and return on equity
decreased from 10.61% to 9.66%. Second quarter earnings per share was $.28 per
share, down 15.2% over last year's $.33 per share and for the first six months
of 2000, earnings per share was $.58 per share, down 6.5% over 1999's $.62. The
primary contributor to the decrease in net income was an increase in noninterest
expense of $476 and $981 for the second quarter and year-to-date periods of 2000
as compared to the same periods in 1999 that can be attributed to the opening of
five additional Bank offices. Net interest income was down slightly by $10 or
.2% for the second quarter of 2000, but overall, was up $201 or 1.9% for the
first six months of 2000 as compared to the same periods in 1999. This
year-to-date increase was primarily due to the growth in earning assets of
$23,919 from December 31, 1999. Net interest income was negatively impacted in
the first six months of 2000 as compared to the same period in 1999 by a decline
in the net interest margin due to the Bank's cost of funds increasing 41 basis
points and asset yields decreasing 2 basis points. The second quarter decrease
in net interest income for 2000 was offset by a decrease in provision expense of
$150 for the same period. For the six months ending June 30, 2000, the increase
in net interest income was also positively impacted by a decrease in provision
expense of $296 for the same period.
The decrease in net interest income for the second quarter of 2000 was
negatively impacted by an increase in net noninterest expense of $349 or 11.0%
for the same period. For the first six months of 2000, the increase in net
interest income was offset by an increase in net noninterest expense of $670 or
10.5% for the same period. Total other income increased $127 or 17.2% for the
second quarter and $311 or 23.6% over the first six months in 2000 as compared
to the same periods in 1999. Contributing to the gain was service charge income,
impacted by the growth in deposit account volume, which contributed an
additional $92 and $169 during the second quarter and year-to-date periods of
2000 as compared to the same periods in 1999. Total other expense increased $476
or 12.1% and $981 or 12.7% for the second quarter and year-to-date periods of
2000 as compared to the same periods in 1999. These increases were affected most
by the increase of five new offices from June 1999 to June 2000 that resulted in
additional costs associated with new employees hired. As a result, salary and
employee benefits contributed the most to the other expense increase, which are
up $152 for the second quarter and $384 over the first six months of 2000.
Additionally, the Company awarded annual merit increases. The growth in these
additional offices coupled with the investment in processing technology
generated the increase in occupancy expense and furniture and equipment expense.
Contributing to the increase in other operating expense was computer software
depreciation and general increases in overhead expenses. Management believes
these increases in operating expenses that are currently evident from the growth
in additional offices are necessary for the long-term growth of the Company,
where income from these newer markets is expected to increase.
12
CAPITAL RESOURCES
All of the capital ratio's exceeded the regulatory minimum guidelines as
identified in the following table:
Company Ratios
Regulatory
June 30, 2000 December 31, 1999 Minimum
--------------- ------------------ --------
Tier 1 risk-based capital 11.3% 11.1% 4.00%
Total risk-based capital ratio 12.6% 12.3% 8.00%
Leverage ratio 8.0% 8.1% 4.00%
Cash dividends paid of $1,023 for the first six months of 2000 represents a
15.1% increase over the cash dividends paid during the same period in 1999. The
increase in cash dividends paid is due to the additional shares outstanding
during 2000 which were not outstanding during 1999 and to the increase in the
dividend paid per share. At June 30, 2000, approximately 74% of the shareholders
were enrolled in the dividend reinvestment plan. As part of the Company's stock
purchase program, management has continued to utilize reinvested dividends and
voluntary cash to purchase shares on the open market to be redistributed through
the dividend reinvestment plan.
LIQUIDITY
Liquidity relates to the Bank's ability to meet the cash demands and credit
needs of its customers and is provided by the ability to readily convert assets
to cash and raise funds in the market place. Total cash and cash equivalents,
interest-bearing deposits with banks, held-to-maturity securities maturing
within one year and securities available-for-sale of $73,651 represented 13.6%
of total assets at June 30, 2000. 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. At June 30, 2000, the Bank could borrow an additional
$54 million from the Federal Home Loan Bank. Management also acquired
approximately $22 million in additional deposits from the purchase of two West
Virginia branches of Huntington National Bank completed in the third quarter of
1999. The Company experienced a decrease of $6,511 in cash and cash equivalents
for the six months ended June 30, 2000. See the condensed consolidated statement
of cash flows on page 4 for further cash flow information.
CONCENTRATION OF CREDIT RISK
The Company maintains a diversified credit portfolio, with real estate loans
comprising the most significant portion. Credit risk is primarily subject to
loans made to businesses and individuals in central and southeastern Ohio as
well as western West Virginia. Management believes this risk to be general in
nature, as there are no material concentrations of loans to any industry or
consumer group. To the extent possible, the Company diversifies its loan
portfolio to limit credit risk by avoiding industry concentrations.
13
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.
14
OHIO VALLEY BANC CORP.
MATURITY ANALYSIS
(dollars in thousands)
The following table 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. As compared to 12/31/99, there were no significant changes through the first six months of 2000.
As of June 30, 2000 Principal Amount Maturing in:
There- Fair Value
2000 2001 2002 2003 2004 after Total 06/30/00
Rate-Sensitive Assets:
Fixed interest rate loans $ 6,567 $ 7,189 $ 13,999 $ 17,287 $ 22,973 $205,929 $273,944 $276,131
Average interest rate 9.77% 11.94% 12.11% 10.95% 9.96% 8.14% 8.81%
Variable interest rate loans $ 41,537 $ 4,082 $ 3,476 $ 2,758 $ 5,713 $100,782 $158,348 $156,928
Average interest rate 11.07% 10.69% 10.23% 9.28% 9.63% 8.33% 9.21%
Fixed interest rate securities $ 5,302 $ 10,268 $ 11,312 $ 19,482 $ 9,691 $ 19,642 $ 75,697 $ 74,457
Average interest rate 6.46% 6.40% 6.24% 6.19% 6.60% 7.16% 6.55%
Other interest-bearing assets $ 566 $ 566 $ 566
Average interest rate 3.84% 3.84%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 6,481 $ 5,613 $ 4,861 $ 4,209 $ 3,645 $ 23,558 $ 48,367 $ 48,367
Savings & Interest-bearing checking $ 20,756 $ 16,952 $ 13,887 $ 11,411 $ 9,405 $ 48,960 $121,371 $121,371
Average interest rate 3.36% 3.42% 3.47% 3.52% 3.57% 3.89 3.63%
Time deposits $111,632 $ 91,176 $ 26,238 $ 20,453 $ 1,727 $ 2,057 $253,283 $252,496
Average interest rate 5.77% 6.00% 6.31% 6.30% 6.02% 7.03% 5.96%
Fixed interest rate borrowings $ 13,322 $ 8,215 $ 5,288 $ 3,098 $ 85 $ 8,198 $ 38,206 $ 37,124
Average interest rate 5.71% 6.24% 5.42% 5.71% 5.85% 5.58% 5.76%
Variable interest rate borrowings $ 29,152 $ 29,152 $ 29,152
Average interest rate 5.67% 5.67%
15
OHIO VALLEY BANC CORP
Part II - Other Information
Item 1 - Legal Proceedings
- --------------------------
None
Item 2 - Changes in Securities
- ------------------------------
None
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Ohio Valley Banc Corp. held its Annual Meeting of Shareholders on April 12,
2000, for the purpose of electing directors. Shareholders received proxy
materials containing the information required by this item. Three directors,
Merrill L. Evans, Lannes C. Williamson and Thomas E. Wiseman were nominated for
reelection and were reelected. The summary of voting of the 2,895,842 shares
outstanding were as follows:
Director Candidates Shares voted: For Against Abstain
- ------------------- --------- ------- -------
Merrill L. Evans 2,865,212 28,256 2,374
Lannes C. Williamson 2,868,378 25,090 2,374
Thomas E. Wiseman 2,892,678 790 2,374
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibit 27 - Financial Data Schedule [Exhibit is filed herewith.]
B. No reports on Form 8-K were filed for the quarter ending June 30, 2000.
OHIO VALLEY BANC CORP.
------------------------------------
Date August 11, 2000 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman of the Board
Date August 11, 2000 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
16