MESSAGE FROM MANAGEMENT
- -----------------------
Convenience...it's not only a word, for Ohio Valley Banc Corp. it's a mission.
We were the first to bring ATMs to the area, we were the first to offer banking
seven days a week, and now we're the first Ohio bank to cross the river.
West Virginia's Ohio Valley Bank
For over a century, the people of West Virginia have come in search of quality
service and experienced personal bankers. Now, we come to them with a convenient
Full Service Bank on their side of the Ohio River. To our old customers we say
"Thank you" for your loyalty and patience and to our new ones we say "Welcome"
to West Virginia's Ohio Valley Bank. The first interstate bank to establish an
office in West Virginia opened its new doors on July 21, 1997. The new 4200
square foot facility opened for business in the first quarter of 1998. This bank
features three drive-thru windows, a drive-thru ATM and plenty of parking. We
didn't build a branch, we built a Bank.
Ohio Valley Bank pushed convenience to the industry's limit in 1997. After a
full year of service, customers agree that the OVB SuperBank is the paramount of
convenience. A revolution in "bankers' hours," the facility is open 62 hours a
week, including evenings and weekends, to handle both teller and lending
transactions.
Ohio Valley Banc Corp. has made the loan process even faster and easier for the
people of Jackson County, Ohio. A convenient new Loan Central office opened in
Jackson during the first quarter of 1998. In addition, customers continually
take advantage of the convenience of Ohio Valley Bank offices in Jackson,
Waverly and Columbus, Ohio.
Means Growth
Ohio Valley Banc Corp. marked an increase in net income of 16 percent for 1997
compared to a year ago. Net income for 1997 was $3.68 million compared to $3.17
million for 1996, a gain of $514 thousand. Net income per share for the year was
$2.07 versus $1.83 per share in 1996. The increase of $.24 per share represented
an increase of 13.11 percent. Cash dividends for 1997 were $.79 per share
compared to $.74 for 1996, an increase of 6.8 percent. Earnings and cash
dividends per share are based on weighted average number of shares outstanding
of 1,778,075 for 1997 and 1,732,568 for 1996.
Total shareholders' equity increased by $3,788,000. The book value of your stock
increased $1.68 to $18.96 per share, based on 1,801,932 shares outstanding
December 31, 1997 versus 1,318,262 for December 31, 1996. The NASDAQ quote on
market value of Ohio Valley Banc Corp. stock at year end 1997 was $35.00 bid and
$38.00 ask. The year end 1996 bid was $26.06 and $27.00 ask. All per share
numbers have been adjusted for the 33-1/3 percent stock split effective April
21, 1997. For further information regarding the financial condition and results
of operation of your Company, we recommend you refer to Management's Discussion
and Analysis of Operations contained in this report.
Page 1
For Your Company
1997 brought about the election of two new officers and the creation of a new
advisory board. Charles Lanham was elected Executive Vice President of Ohio
Valley Bank and Senior Vice President of the Ohio Valley Banc Corp. He is also a
member of the Executive Committee and Board of Directors of Ohio Valley Bank.
Charles was recognized as 1997's "West Virginia Banker of the Year." Mario
Liberatore was elected Senior Vice President of Ohio Valley Bank and Vice
President of Ohio Valley Banc Corp. He has taken on the task of managing the
West Virginia Bank Group and chairing the new West Virginia Advisory Board. The
West Virginia Bank Group becomes the fifth group of Ohio Valley Bank's
organizational structure.
In addition, three new directors joined the Bank: Phil Bowman, Art Hartley, Sr.,
and Lannes Williamson. Bowman, Vice President of Waterloo Coal and President of
R.A. Eberts, joined early in 1997 and has become a valuable resource for
marketing in Jackson County. Hartley, past president of City Ice and Fuel, and
Williamson, president of Williamson Pallets, Inc. and Williamson Wood Products,
are indispensable counselors for our West Virginia Bank Group. All three of
these businessmen are leaders in their communities and assets to your company.
With Hartley, Lanham, Liberatore, and Williamson, the following were elected to
the West Virginia Advisory Board in November: Anna Barnitz, Business
Manager/Treasurer of Bob's Market and Greenhouses, Inc.; Rick Handley, educator
for the Mason County Board of Education; Greg Hartley, President of City Ice and
Fuel, Inc.; Trenton Stover, CPA; and Raymond Yauger, President of Yauger Farm
Supply, Inc. John Musgrave, West Virginia Lottery Director, joined the Board in
February of 1998.
Three officer promotions were also made to help facilitate the continuing growth
of your Company in 1997. Molly Tarbett was promoted to Assistant Vice President,
Deposit Operations Manager, and Brenda Henson to Assistant Cashier, Manager
Customer Service. Cherie Barr was promoted to Secretary, Loan Central.
Now, nine offices strong, Ohio Valley Bank continues to build a lasting trust
with the community. This is proven by the Bank's outstanding customer retention
record and customer base expansion. Loan Central used its first full year of
operation to build a foundation for growth and stability. The finance company is
building relationships with individual, non-business customers in smaller
amounts and higher yields than is possible with the Bank. Each company works to
provide easily accessible financial services for our communities. As we approach
a new millennium, convenience means growth for your company.
Ohio Valley Banc Corp.
James L. Dailey
Chairman of the Board and
Chief Executive Officer
Jeffrey E. Smith
President and
Chief Operating Officer
Page 2
WEST VIRGINIA BANK GROUP REPORT
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In 1997 Ohio Valley Bank broke new banking ground by being the first bank to
take advantage of the new Interstate banking law and entered the West Virginia
market. Your Company got a jumpstart on this venture which proved to be a
definite advantage over the competition.
Three years ago, management foresaw the potential of banking in West Virginia
and prepared for it by establishing the OVB Loan Origination Center in Point
Pleasant. By law, this facility could only distribute and collect loan
applications. The laws changed in June of 1997, permitting Ohio state chartered
banks to have full-service offices in West Virginia. Ohio Valley Bank was ready.
Within a month, we had a full-service office located in downtown Point Pleasant.
However, this was only a temporary office. The new office was completed in the
first quarter of 1998. This office reflects the historic significance of Point
Pleasant. The full-service facility offers 3 convenient drive-thru windows and a
drive-thru ATM.
Senior Vice President Mario Liberatore stated, "The activity generated thus far
at Point Pleasant indicates Ohio Valley Bank is not only well recognized by the
West Virginia market, but very well received." By December 31, the office had
exceeded our expectations in number of accounts opened. These accounts included
demand deposit accounts, certificates of deposit and loans. Customers who have
always come to us and new customers are enjoying the convenience of a hometown
bank.
The West Virginia Advisory Board was formed to give OVB an advantage in this new
market. On the following page, we introduce the new board which consists of Anna
Barnitz, Rick Handley, Greg Hartley, John Musgrave, Trenton Stover and Raymond
Yauger. As mentioned in the Message From Management, these individuals represent
all types of business in Mason County. Their experience has become a valuable
resource for the Bank. Each day we learn more about our new West Virginia
customers in order to effectively market the Bank's products. As we launch the
banking industry into the next millennium, we must remember the importance of
the West Virginia market.
Page 3
GROUP REPORTS
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"The Administrative Services Bank Group has just completed an exciting year,"
said Senior Vice President Sue Ann Bostic. On the heels of the opening of our
Columbus office, we began construction on OVB's first full-service branch in
West Virginia. With the aid of the Research and Development department
personnel, our Wide Area Network was completed which enhances communication
among all our branches.
This group continues to strive to efficiently handle personnel matters and this
year saw the installation of a new payroll system which will give the Human
Resource area the ability to become more flexible in monitoring payroll and
benefits.
The Training area was instrumental in giving over 50 new employees their first
experience in a career in banking. Additionally, with the completion of our new
Multi-Media room at the OVB Annex, our classroom setting gained a new meaning. A
ten week course in Advanced Teller Training was added to the training agenda.
Our goal as we enter another year is to remain focused on optimizing personnel
expense as we continue to grow in new market areas. The Administrative Services
Group looks forward to being a part of 1998 and the opportunity to serve our
employees as well as our valued customers.
Loan Central's two offices finished out 1997 with loan balances of $4 million.
This was an increase of $1.4 million or 52% in our loan portfolio. Loan Central
continues to meet its original goal, which is to help the Banc Corp meet the
communities' total credit needs.
The finance company's loan portfolio is made up of personal, auto, agricultural
and mortgage loans. Our employees' number one goal is to increase the
Corporation's shareholders' return, while giving the best customer service
possible.
"We are proud to announce the opening of our third office located at 323 East
Broadway Street in Jackson, Ohio," said Senior Vice President Mike Francis. "We
currently have approximately 150 loans in our Gallipolis and South Point offices
from customers in the Jackson area. These loans will be moved to the Jackson
office to provide convenience for our customers and a headstart for this new
office."
Plans for the future of Loan Central include upgrading our computer software to
be connected to the Bank's computer networks and changing our loan documents
from preprinted forms to laser printed forms. These forms will be of better
quality and will also cost less to produce.
1997 has been a challenging year for the Retail Bank Group as customers continue
to search for convenience and quality service. If anyone should say convenience
is not important to the customer, he should take a few minutes from his busy
schedule and visit our SuperBank in the downtown Gallipolis Foodland. We
recently celebrated our first full year at the SuperBank. Customers take
advantage of our weekend and evening hours making this office one of our busiest
branches. For many customers, the SuperBank is now a necessity, not merely a
convenience.
Page 4
Soon, we will open our second SuperBank in the Gallipolis Wal-Mart SuperCenter.
Our customers will have the advantage of more non-traditional weekend and
evening banking hours. In addition to our existing customers, any folks from
surrounding counties who want to bank at OVB, but can't make it to our locations
during regular hours, now have an alternative. The extended hours at Wal-Mart
will complement our new, full-service office in Point Pleasant, W. Va.
Everyday we learn more about staying competitive in the lending industry. Our
competition today is not only local banking institutions. We compete with credit
unions, mortgage companies, and now, other services that customers locate on the
internet. Our real estate and installment loan market share has continually
increased in all counties despite the obstacles our lenders face each day from
the increased competition. "Our success may be attributed to our personal touch
and fast, convenient service," said Senior Vice President Katrinka Hart.
OVB must prepare for the new millennium in order to survive and prosper. In
1998, the Retail Group will place special emphasis on "people serving people."
We must focus on customer service and satisfaction. Customers will determine our
success by the choices they make. We will continue to search for new ideas to
continue OVB's tradition of quality and convenience. Examples you may see in the
near future are additional SuperBanks and OVB Jeanie(R) ATMs.
In the COMMERCIAL BANK GROUP, 1997 was a year of "strengthening the foundations"
in order to continue to support our existing customers and to provide
appropriate services and products for new customers. This was a time of lots of
hard work and commitment from many of the entire bank staff in order to help
this transition occur. Our staff and customers have adjusted very well to the
new systems support.
We saw growth and expansion of our portfolio into the central Ohio region and
further expansion in the West Virginia markets. We are extremely pleased with
the new customer base in Columbus. It continues to grow and flourish. Additional
support is being directed to this market in 1998 in order to further establish
ourselves in that market.
The interest rate volatility and shrinking markets make the commercial loan
business more challenging and requires continued training awareness. We are
committed to the continued nurturing of existing customers; knowing their
changing needs and meeting them. Additionally, as we act on our commitment to
cultivate new relationships we are prepared to quickly and flexibly meet their
needs with personal and "red carpet service" in order to attract and keep them.
Page 5
We are continuing to emphasize our Trust Services Department. We believe there
is an unrecognized need among many of our customers and employees alike. Our
Trust Services Department has the expertise and ability to provide the tailored
and personal services many trust customers want and need.
Senior Vice President Rich Mahan explains, "With our familiar faces, experienced
staff, excellent systems, our desire to grow and the help of our directors and
executive staff, the Commercial Bank Group will continue to make a significant
contribution to the profitability of our Bank."
The FINANCIAL BANK GROUP is continually looking for ways to improve customer
service and increase operating efficiencies. The effective use of technology is
one way to achieve such goals.
During 1997 your company made a significant investment in new technology which
will enable us to focus more on the needs of our customers and drive down
operating costs. Now that we have the technology in place, the challenge before
us is to leverage the capabilities of that technology to our advantage. To do so
will require us to rethink our current processes and procedures to determine if
in fact they are still relevant in today's rapidly changing environment.
Simply doing things because "we've always done them that way" will not be good
enough. As we approach the threshold of the 21st Century your company is
preparing for the year 2000 dilemma, the fact that a significant amount of
computer software is challenged with dates beyond 1999. Senior Vice President
Larry Miller stated, "Although we have been assured by our vendor that our
mission critical hardware and software is year 2000 ready, we are planning to
test our systems to verify that fact."
"All of our Bank Groups are working toward continued prosperity into the next
millennium," stated Senior Vice President and Secretary Wendell Thomas. "The
ground work has been laid. OVB and Loan Central have earned large percentages of
the market in the six counties where offices are located. 1998 calls for even
more expansion making the Ohio Valley Banc Corp. one of the most accessible and
trusted financial institutions in the region."
Page 6
DESCRIPTION OF BUSINESS
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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 Bank 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 Bank offers a blend of commercial, retail, and agricultural banking
services. Loans of all types and checking, savings and time deposits are
offered, along with such services as safe deposit boxes, issuance of travelers'
checks and trusts.
The Bank presently has nine offices, six of which offer drive-up services.
In April 1996, the Banc Corp. opened a consumer finance company operating
under the name of Loan Central with offices in Gallipolis, South Point and
Jackson, 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: Wendell B. Thomas, Secretary
420 Third Avenue
P.O. Box 240
Gallipolis, Ohio 45631
Page 7
FINANCIAL HIGHLIGHTS
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
NET INCOME ($000) $ 3,680 $ 3,166 $ 2,728 $ 2,425 $ 2,025
TOTAL ASSETS ($000) $364,095 $340,923 $317,045 $313,525 $292,768
EARNINGS PER SHARE $ 2.07 $ 1.83 $ 1.62 $ 1.49 $ 1.28
DIVIDENDS PER SHARE $ .79 .74 .71 .67 .65
Page 8
SELECTED FINANCIAL DATA
Years Ended December 31
SUMMARY OF OPERATIONS: 1997 1996 1995 1994 1993
(dollars in thousands, except per share data)
Total interest income $ 30,310 $ 27,091 $ 24,996 $ 21,453 $ 20,636
Total interest expense 13,902 12,251 12,663 10,175 10,189
Net interest income 16,408 14,840 12,333 11,278 10,447
Provision for loan losses 1,245 1,319 614 413 975
Total other income 1,860 1,419 1,294 1,135 1,135
Total other expenses 11,920 10,468 9,151 8,510 7,626
Income before income taxes
and cumulative effect of
change in accounting method 5,103 4,472 3,862 3,490 2,981
Income taxes 1,423 1,306 1,134 1,065 881
Cumulative effect of change
in accounting method 75
Net income 3,680 3,166 2,728 2,425 2,025
PER SHARE DATA(1):
Net income per share $ 2.07 $ 1.83 $ 1.62 $ 1.49 $ 1.28
Cash dividends per share $ .79 $ .74 $ .71 $ .67 $ .65
Weighted average number
of shares outstanding 1,778 1,733 1,686 1,630 1,576
AVERAGE BALANCE SUMMARY:
Total loans $261,252 $238,366 $207,447 $195,023 $178,208
Securities (2) 68,422 72,244 92,642 90,139 85,154
Deposits 291,719 278,075 268,742 258,114 250,057
Shareholders' equity 31,867 28,568 25,645 23,078 21,060
Total assets 354,393 327,483 320,142 302,720 289,110
PERIOD END BALANCES:
Total loans $269,779 $254,044 $216,757 $200,320 $185,122
Securities (2) 72,181 66,666 82,804 94,006 90,036
Deposits 293,712 281,825 272,369 263,988 247,190
Shareholders' equity 34,166 30,378 27,577 24,388 22,150
Total assets 364,095 340,923 317,045 313,525 292,768
KEY RATIOS:
Return on average assets 1.04% .97% .85% .80% .70%
Return on average equity 11.55% 11.08% 10.64% 10.51% 9.62%
Dividend payout ratio 37.94% 40.51% 43.77% 45.17% 50.31%
Average equity to
average assets 8.99% 8.72% 8.01% 7.62% 7.28%
(1) Restated for stock splits as appropriate.
(2) Securities include interest-bearing balances with banks.
Page 9
CONSOLIDATED STATEMENTS OF CONDITION
As of December 31 1997 1996
----------------- ---- ----
(dollars in thousands)
ASSETS
Cash and noninterest-bearing deposits with banks $ 7,712 $ 8,688
Federal funds sold 94
-------- --------
Total cash and cash equivalents 7,806 8,688
Interest-bearing balances with banks 103 77
Securities available-for-sale, at estimated fair value 32,659 30,592
Securities held-to-maturity (approximate market value of
$39,935,000 in 1997 and $36,253,000 in 1996) 39,419 35,997
Total Loans 269,779 254,044
Less: Allowance for loan losses (3,290) (3,080)
-------- --------
Net Loans 266,489 250,964
Premises and equipment 7,326 6,366
Accrued income receivable 2,503 2,355
Other assets 7,790 5,884
-------- --------
Total assets $364,095 $340,923
======== ========
LIABILITIES
Noninterest-bearing deposits $ 37,100 $ 34,092
Interest-bearing deposits 256,612 247,733
-------- --------
Total Deposits 293,712 281,825
Securities sold under agreements to repurchase 12,831 8,714
Other borrowed funds 19,479 17,210
Accrued liabilities 3,907 2,796
-------- --------
Total liabilities 329,929 310,545
-------- --------
SHAREHOLDERS' EQUITY
Common stock ($1 stated value: authorized 5,000,000
shares, outstanding 1,801,932 shares issued and
outstanding at December 31, 1997; 1,318,262 shares
issued and outstanding at December 31, 1996) 1,802 13,183
Surplus 25,930 12,619
Retained earnings 6,207 4,376
Net unrealized gain on available-for-sale securities 227 200
-------- --------
Total shareholders' equity 34,166 30,378
-------- --------
Total liabilities and shareholders' equity $364,095 $340,923
======== ========
See accompanying notes to consolidated financial statements
Page 10
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 1997 1996 1995
------------------------------- ---- ---- ----
(dollars in thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans $25,949 $22,755 $19,587
Interest and dividends on securities
Taxable 3,316 3,408 4,195
Nontaxable 635 618 514
Dividends 203 149 136
------- ------- -------
4,154 4,175 4,845
Interest on federal funds sold 202 158 382
Interest on deposits with banks 5 3 182
------- ------- -------
Total interest income 30,310 27,091 24,996
INTEREST EXPENSE:
Interest on deposits 12,548 11,487 11,772
Interest on repurchase agreements 435 339 597
Interest on other borrowed funds 919 425 294
------- ------- -------
Total interest expense 13,902 12,251 12,663
------- ------- -------
NET INTEREST INCOME 16,408 14,840 12,333
Provision for loan losses 1,245 1,319 614
------- ------- -------
Net interest income after provision
for loan losses 15,163 13,521 11,719
OTHER INCOME:
Service charges on deposit accounts 912 898 769
Trust division income 192 197 253
Other operating income 756 352 272
Net realized loss on sale of available-
for-sale securities (28)
------- ------- -------
1,860 1,419 1,294
------- ------- -------
OTHER EXPENSE:
Salaries and employee benefits 7,132 6,206 5,373
FDIC premiums 36 2 310
Occupancy expense 531 453 356
Furniture and equipment expense 749 606 524
Corporation franchise tax 337 382 356
Data processing expense 389 449 323
Other operating expenses 2,746 2,370 1,909
------- ------- -------
11,920 10,468 9,151
------- ------- -------
Income before federal income taxes 5,103 4,472 3,862
Federal income taxes 1,423 1,306 1,134
------- ------- -------
NET INCOME $ 3,680 $ 3,166 $ 2,728
======= ======= =======
Net income per share $ 2.07 $ 1.83 $ 1.62
======= ======= =======
Average shares outstanding 1,778 1,733 1,686
======= ======= =======
See accompanying notes to consolidated financial statements
Page 11
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1997, 1996 and 1995
Net Unrealized
Gain (Loss)
on Available- Total
Common Retained for-Sale Shareholders'
(dollars in thousands) Stock Surplus Earnings Securities Equity
----- ------- -------- ---------- ------
BALANCES AT JANUARY 1, 1995 $ 7,475 $11,018 $ 6,066 $ (171) $24,388
Net income 2,728 2,728
Common Stock split, 33-1/3% 2,507 (2,507)
Cash paid in lieu of fractional
shares in stock split (11) (11)
Common Stock issued, 5,000 shares 50 130 180
Common Stock issued through
dividend reinvestment 261 691 952
Cash dividends, $.71 per share (1,194) (1,194)
Net change in unrealized loss
on marketable equity securities 534 534
------- ------- ------- ------- -------
BALANCES AT DECEMBER 31, 1995 10,293 11,839 5,082 363 27,577
Net income 3,166 3,166
Common Stock split, 25% 2,580 (2,580)
Cash paid in lieu of fractional
shares in stock split (9) (9)
Common Stock issued, 5,500 shares 55 140 195
Common Stock issued through
dividend reinvestment 255 640 895
Cash dividends, $.74 per share (1,283) (1,283)
Net change in unrealized gain
on available-for-sale securities (163) (163)
------- ------- ------- ------- -------
BALANCES AT DECEMBER 31, 1996 13,183 12,619 4,376 200 30,378
Net income 3,680 3,680
Common Stock split, 33-1/3% 442 (442)
Change in stated value from $10 per
per share to $1 per share (11,937) 11,937
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 108 1,143 1,251
Cash dividends, $.79 per share (1,396) (1,396)
Net change in unrealized gain
on available-for-sale securities 27 27
------- ------- ------- ------- -------
BALANCES AT DECEMBER 31, 1997 $ 1,802 $25,930 $ 6,207 $ 227 $34,166
======= ======= ======= ======= =======
See accompanaying notes to consolidated financial statements
Page 12
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 1997 1996 1995
------------------------------- ---- ---- ----
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,680 $ 3,166 $ 2,728
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 705 551 486
Amortization and accretion of securities 47 50 130
Deferred tax benefit 17 (196) (8)
Provision for loan losses 1,245 1,319 614
Gain from sale of student loans (22)
Contribution of common stock to ESOP 237 195 180
FHLB stock dividend (172) (106) (96)
Net loss on sale of equity securities 28
Change in accrued income receivable (148) 53 (87)
Change in accrued liabilities 1,112 (69) 829
Change in other assets (1,301) 257 (180)
------- ------- -------
Net cash provided by operating activities 5,422 5,248 4,574
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available-for-sale 4,500 11,000
Purchases of securities available-for-sale (6,314) (8,708)
Proceeds from maturities of securities
held-to-maturity 14,390 14,063 22,675
Purchases of securities held-to-maturity (17,900) (770) (15,793)
Proceeds from sale of equity securities 364
Change in interest-bearing deposits in other banks (25) (27) 5,008
Proceeds from sale of student loans 1,441
Net increase in loans (16,771) (37,914) (18,266)
Purchases of premises and equipment (1,666) (1,339) (604)
Purchases of insurance contracts (635) (5,210)
------- ------- -------
Net cash used in investing activities (24,421) (28,541) (5,539)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits 11,887 9,456 8,381
Cash dividends (1,396) (1,283) (1,194)
Cash paid in lieu of fractional shares in stock split (11) (9) (11)
Proceeds from issuance of common stock 1,251 895 952
Change in securities sold under agreements to repurchase 4,117 (790) (8,530)
Proceeds from long-term borrowings 11,425 4,500
Repayment of long-term borrowings (6,681) (2,869) (349)
Change in other short-term borrowings (2,475) 10,850
------- ------- -------
Net cash used in financing activities 18,117 20,750 (751)
------- ------- -------
CASH AND CASH EQUIVALENTS:
Change in cash and cash equivalents (882) (2,543) (1,716)
Cash and cash equivalents at beginning of year 8,688 11,231 12,947
------- ------- -------
Cash and cash equivalents at end of year $ 7,806 $ 8,688 $11,231
======= ======= =======
CASH PAID DURING THE YEAR FOR:
Interest $13,250 $12,363 $11,802
Income taxes 1,160 1,360 1,173
See accompanying notes to consolidated financial statements
Page 13
Note A - Summary of Significant Accounting Policies
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) and Loan Central, a
consumer finance company. 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 its main office and 8 branches located in central and southeastern Ohio
as well as West Virginia. Loan Central's operations are conducted through its 3
offices located in Gallipolis, South Point and Jackson, Ohio. 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.
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 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 would 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.
Revenue Recognition: Interest on loans is accrued over the term of the loans
based upon the principal outstanding. Management reviews loans delinquent 90
days or more to determine if the interest accrual should be discontinued. The
carrying value of impaired loans is periodically adjusted to reflect cash
payments, revised estimates for future cash flows and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such and other cash payments are
reported as reductions in carrying value. Increases or decreases in carrying
value due to changes in estimates of future payments or the passage of time are
reported as reductions or increases in bad debt expense.
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.
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
Page 14
Summary of Significant Accounting Policies (continued)
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 area.
The following represents the composition of the loan portfolio at Dec. 31, 1997:
% of Total Loans
----------------
Real Estate loans .......................... 40.87%
Commercial and industrial loans............. 28.96%
Consumer loans ............................. 29.22%
All other loans ............................ .95%
------
100.00%
======
Approximately 9.55% 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, 1997, the Bank's primary
correspondent balance was $2,585,000 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 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 $142,000 at December 31,
1997 and $217,000 at December 31, 1996. There were no transfers of loans to
other real estate in 1997. Transfers of loans to other real estate were $15,000
and $202,000 in 1996 and 1995.
Per Share Amounts: Basic and diluted earnings per share are computed under a new
accounting standard effective in the quarter ended December 31,1997. Basic
earnings per share is based on net income divided by the following weighted
average number of shares outstanding during the periods: 1,778,075 for 1997,
1,732,568 for 1996 and 1,685,853 for 1995. Diluted earnings per share reflects
the dilutive effect of additional common stock equivalents using the treasury
method. Since there are no common stock equivalents outstanding at or during the
years ended December 31, 1997, 1996 and 1995, the weighted average number of
shares used for determining diluted earnings per share were the same as the
number of shares used for basic earnings per share. In April 1997, the Board of
Directors declared a 33-1/3% stock split and in April 1996, the Board of
Directors declared a 25% stock split. All earnings and dividends per share
disclosures have been restated to retroactively reflect these stock splits.
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.
Reclassifications: The consolidated financial statements for 1996 and 1995 have
been reclassified to conform with the presentation for 1997. Such
reclassifications had no effect on the net results of operations.
Page 15
NOTE B - SECURITIES
The amortized cost and estimated fair value of securities as follows:
(dollars in thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1997 Cost Gains Losses Value
- ----------------- ---- ----- ------ -----
Securities Available-for-Sale
-----------------------------
U.S. Treasury securities $27,093 $ 353 $27,446
U.S. Government agency securities 2,028 34 2,062
Marketable equity securities 3,194 $ 43 3,151
------- ----- ----- -------
Total securities available-for-sale $32,315 $ 387 $ 43 $32,659
======= ===== ===== =======
Securities Held-to-Maturity
---------------------------
U.S. Government agency securities $24,509 $ 126 $ 13 $24,622
Obligations of states and
political subdivisions 13,935 422 14,357
Corporate obligations 503 3 506
Mortgage-backed securities 472 1 23 450
------- ----- ----- -------
Total securities held-to-maturity $39,419 $ 552 $ 36 $39,935
======= ===== ===== =======
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- ----------------- ---- ----- ------ -----
Securities Available-for-Sale
-----------------------------
U.S. Treasury securities $28,039 $ 432 $ 4 $28,467
Marketable equity securities 2,250 125 2,125
------- ----- ----- -------
Total securities available-for-sale $30,289 $ 432 $ 129 $30,592
======= ===== ===== =======
Securities Held-to-Maturity
---------------------------
U.S. Government agency securities $22,441 $ 100 $ 84 $22,457
Obligations of states and
political subdivisions 12,252 289 30 12,511
Corporate obligations 758 8 766
Mortgage-backed securities 546 2 29 519
------- ----- ----- -------
Total securities held-to-maturity $35,997 $ 399 $ 143 $36,253
======= ===== ===== =======
Securities with a carrying value of approximately $47,842,000 at December
31, 1997 and $48,307,000 at December 31, 1996 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, 1997, 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 $ 9,266 $ 9,306 $10,928 $10,970
Due in one to five years 19,855 20,202 21,381 21,568
Due in five to ten years 5,768 6,059
Due after ten years 870 888
Mortgage-backed securities 472 450
------- ------- ------- -------
Total debt securities $29,121 $29,508 $39,419 $39,935
======= ======= ======= =======
Proceeds from the sale of equity securities in 1996 were $364,000 with
gross losses of $28,000 realized. There were no sales of debt or equity
securities during 1997 or 1995.
Page 16
NOTE C - LOANS
Loans are comprised of the following at December 31:
(dollars in thousands) 1997 1996
---- ----
Real estate loans $110,247 $102,158
Commercial and industrial loans 78,124 74,666
Consumer loans 78,840 74,908
All other loans 2,568 2,312
-------- --------
Total Loans $269,779 $254,044
======== ========
NOTE D - ALLOWANCE FOR LOAN LOSSES
Following is an analysis of changes in the allowance for loan losses for
years ended December 31:
1997 1996 1995
---- ---- ----
Balance, beginning of year $3,080 $2,388 $2,184
Loans charged-off:
Real estate 39 3 28
Commercial 215 78 182
Consumer 961 673 304
------ ------ ------
Total loans charged-off 1,215 754 514
Recoveries of loans:
Real estate 1
Commercial 41 73 57
Consumer 138 54 47
------ ------ ------
Total recoveries of loans 180 127 104
Net loan charge-offs (1,035) (627) (410)
Provision charged to operations 1,245 1,319 614
------ ------ ------
Balance, end of year $3,290 $3,080 $2,388
====== ====== ======
Information regarding impaired loans is as follows:
1997 1996
---- ----
Balance of impaired loans $430 $449
==== ====
Portion of impaired loan balance for which
an allowance for credit losses is allocated $430 $449
==== ====
Portion of allowance for loan losses allocated
to the impaired loan balance $200 $200
==== ====
Average investment in impaired loans for the year $440 $514
==== ====
Interest on impaired loans was not material for years ending 1997 and 1996.
Page 17
NOTE E - PREMISES AND EQUIPMENT
Following is a summary of premises and equipment at December 31:
(dollars in thousands) 1997 1996
---- ----
Land $ 1,166 $ 1,108
Buildings 6,213 5,445
Furniture and equipment 4,549 3,710
------- -------
11,928 10,263
Less accumulated depreciation 4,602 3,897
------- -------
Total Premises and Equipment $ 7,326 $ 6,366
======= =======
The following is a summary of the future minimum lease payments for facilities
leased by the Company. Lease payments were $83,800 in 1997 and $54,600 in 1996.
1998 $ 83,558
1999 48,525
2000 38,900
2001 38,158
2002 30,000
--------
$239,141
========
NOTE F - DEPOSITS
Following is a summary of interest-bearing deposits at December 31:
1997 1996
(dollars in thousands) ---- ----
NOW accounts $ 29,439 $ 28,492
Savings and Money Market 44,272 45,712
Time:
IRA accounts 28,102 28,044
Certificates of Deposit:
In denominations under $100,000 113,955 109,329
In denominations of $100,000 or more 40,844 36,156
-------- --------
Total time deposits 182,901 173,529
-------- --------
Total interest-bearing deposits $256,612 $247,733
======== ========
Following is a summary of total time deposits by remaining maturities at
December 31:
1997 1996
---- ----
Within one year $133,554 $103,851
From one to two years 33,380 58,513
From two to three years 8,060 2,214
From three to four years 2,902 2,561
From four to five years 3,670 2,577
Thereafter 1,335 3,813
-------- --------
Totals $182,901 $173,529
======== ========
Page 18
NOTE G - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Following is a summary of securities sold under agreements to repurchase at
December 31:
(dollars in thousands) 1997 1996
---- ----
Balance outstanding at period end $12,831 $ 8,714
------- -------
Weighted average interest rate at period end 3.95% 3.50%
------- -------
Average amount outstanding during the year $11,352 $ 9,813
------- -------
Approximate weighted average interest rate
during the year 3.83% 3.46%
------- --------
Maximum amount outstanding as of any month end $16,768 $12,288
------- -------
Securities underlying these agreements at
year-end were as follows:
Carrying value of securities $28,336 $21,728
------- -------
Fair Value $28,634 $21,804
------- -------
NOTE H - OTHER BORROWED FUNDS
(dollars in thousands)
Other borrowed funds at December 31, 1997 and 1996 are comprised of
advances from the Federal Home Loan Bank (FHLB) and promissory notes. Pursuant
to collateral agreements with the FHLB, advances are secured by certain
qualifying first mortgage loans and by FHLB stock which total $27,828,000 and
$2,569,000 at December 31, 1997.
Promissory notes have been issued primarily by Loan Central and are due at
various dates through a final maturity date of May 29, 2002.
Interest Balance Balance
Maturity Rate at 12-31-97 at 12-31-96
- -------- ---- ----------- -----------
1997 6.91% $11,675
1998 5.55%-6.05% $15,096 448
2000 6.00%-6.15% 1,500 1,500
2002 5.80%-6.10% 1,957 2,301
------- -------
Total FHLB borrowings 18,553 15,924
Promissory notes 4.50%-7.10% 926 1,286
------- -------
Total $19,479 $17,210
======= =======
The following table is a summary of the scheduled principal payments for
these borrowings:
FHLB borrowings Promissory notes
--------------- ----------------
1998 $15,493 $885
1999 390 11
2000 1,914 12
2001 439 13
2002 317 5
------- ----
$18,553 $926
======= ====
Page 19
NOTE I - INCOME TAXES
The provision for federal income taxes consists of the following components:
(dollars in thousands) 1997 1996 1995
---- ---- ----
Current tax expense $1,406 $1,502 $1,142
Deferred tax expense (benefit) 17 (196) (8)
------ ------ ------
Total federal income taxes $1,423 $1,306 $1,134
====== ====== ======
The sources of gross deferred tax assets and gross deferred tax liabilities
at December 31:
1997 1996 1995
---- ---- ----
Items giving rise to deferred tax assets:
Allowance for loan losses in excess of tax reserve $ 884 $ 848 $ 637
Deferred compensation 113 22
Other 29 36 7
Items giving rise to deferred tax liabilities:
Investment accretion (94) (72) (44)
Depreciation (94) (68) (67)
FHLB stock dividends (167) (109) (81)
Unrealized gain on securities available-for-sale (117) (103) (188)
Lease receivables (56) (23) (10)
Other (7) (9) (12)
------ ------ ------
Net deferred tax asset $ 491 $ 522 $ 242
====== ====== ======
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:
1997 1996 1995
---- ---- ----
Statutory tax $1,735 $1,521 $1,313
Effect of nontaxable interest
and dividends (242) (243) (197)
Nondeductible interest expense 38 35 26
Insurance contracts (99)
Other items (9) (7) (8)
------ ------ ------
Total federal income taxes $1,423 $1,306 $1,134
====== ====== ======
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.
Page 20
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES(continued)
(dollars in thousands)
Following is a summary of such commitments at December 31:
(dollars in thousands)
Commitments to extend credit 1997 1996
Fixed rate $ 423 $ 680
Variable rate 29,955 21,821
Standby letters of credit 9,265 6,286
The interest rate on fixed rate commitments ranged from 7.875% to 17.90% at
December 31, 1997.
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, 1997, was approximately
$2,762,000.
NOTE K - RELATED PARTY TRANSACTIONS
(dollars in thousands)
Certain directors, executive officers and companies in which they are
affiliated were loan customers during 1997. A summary of activity on these
borrower relationships with aggregate debt greater than $60,000 is as follows:
Total loans at January 1, 1997 $ 4,373
New loans 1,665
Repayments (880)
Other changes 5,500
-------
Total loans at December 31, 1997 $10,658
=======
Other changes include adjustment for loans applicable to one reporting period
that are excludable from the other reporting period.
Page 21
NOTE L - EMPLOYEE BENEFITS
(dollars in thousands)
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 operations were $128,000, $115,000 and
$96,000 for 1997, 1996 and 1995.
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 91,386 and 67,499 at December
31, 1997 and 1996. In addition, the Bank made contributions to its ESOP Trust as
follows:
Years ended December 31
1997 1996 1995
---- ---- ----
Number of shares issued 7 6 5
==== ==== ====
Value of stock contributed $237 $195 $180
Cash contributed 19 35 12
---- ---- ----
Total charged to expense $256 $230 $192
==== ==== ====
In December 1996, life insurance contracts with a cash surrender value of
$5,210,000 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 deferred compensation plan for directors and
executive officers in 1996 and to implement a supplemental retirement program in
1997. The cost of providing the benefits to the participants is expected to be
offset by the earnings on the life insurance contracts.
Page 22
NOTE M - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(dollars in thousands)
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
carrying value of variable rate loans is a reasonable estimate of fair value.
The fair market value of commitments is not material at December 31, 1996 or
1995.
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 of
existing debt. 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:
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Financial assets:
Cash and short-term investments $ 7,909 $ 7,909 $ 8,765 $ 8,765
Securities 72,078 72,594 66,589 66,845
Loans 266,489 266,940 250,964 250,525
Accrued interest receivable 2,503 2,503 2,355 2,355
Financial liabilities:
Deposits (293,712) (294,651) (281,825) (283,181)
Securities sold under agreements
to repurchase (12,831) (12,831) (8,714) (8,714)
Other borrowed funds (19,479) (19,479) (17,210) (17,210)
Accrued interest payable (2,996) (2,996) (2,345) (2,345)
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.
Page 23
NOTE N - REGULATORY MATTERS
The Company and Bank 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 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
------ ----- ------ ----- ------ -----
1997
Total capital (to risk weighted assets)
Consolidated $37,177 14.2% $20,901 8.0% $26,126 10.0%
Bank $33,619 13.0% $20,693 8.0% $25,867 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $33,911 13.0% $10,450 4.0% $15,676 6.0%
Bank $26,429 10.2% $10,347 4.0% $15,520 6.0%
Tier 1 capital (to average assets)
Consolidated $33,911 9.3% $14,577 4.0% $18,222 5.0%
Bank $26,429 7.3% $14,422 4.0% $18,027 5.0%
1996
Total capital (to risk weighted assets)
Consolidated $33,090 13.8% $19,239 8.0% $24,049 10.0%
Bank $30,868 12.9% $19,120 8.0% $23,900 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated $30,083 12.5% $ 9,620 4.0% $14,429 6.0%
Bank $23,880 10.0% $ 9,560 4.0% $14,340 6.0%
Tier 1 capital (to average assets)
Consolidated $30,083 8.9% $13,517 4.0% $16,897 5.0%
Bank $23,880 7.1% $13,418 4.0% $16,773 5.0%
The Company and Bank at year-end 1997 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 Bank's capital structure.
Dividends paid by the Bank 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 subsidiary bank 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,
1997, approximately $3,680,000 of the Bank's 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.
Page 24
NOTE O - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
(dollars in thousands)
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 STATEMENT OF CONDITION at December 31:
Assets 1997 1996
---- ----
Cash and cash equivalents $ 50 $ 50
Investment in subsidiaries 26,952 24,403
Notes receivable - subsidiaries 6,639 4,310
Other assets 1,505 1,664
------- -------
Total assets $35,146 $30,427
======= =======
Liabilities
Notes Payable $ 875
Other liabilities 105 $ 49
------- -------
Total liabilities 980 49
------- -------
Shareholders' Equity
Common Stock $ 1,802 $13,183
Surplus 25,930 12,619
Retained Earnings 6,207 4,376
Net unrealized gain on available-for-sale-securities 227 200
------- -------
Total shareholders' equity 34,166 30,378
------- -------
Total liabilities and shareholders' equity $35,146 $30,427
======= =======
CONDENSED STATEMENT OF INCOME
Years ended December 31:
1997 1996 1995
---- ---- ----
Income:
Interest on deposits $ 48 $ 12
Interest on loans 70 12
Interest on notes 287
Dividends from bank subsidiary 1,000 6,000
Expenses:
Interest on notes 62
Operating expenses 105 87 $ 67
------ ------ ------
Income before federal income taxes and equity
in undistributed earnings of subsidiaries 1,238 5,937 (67)
Federal income tax benefit (81) 21 23
Equity in undistributed earnings of subsidiaries 2,523 (2,792) 2,772
------ ------ ------
Net Income $3,680 $3,166 $2,728
====== ====== ======
Page 25
NOTE O - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (continued)
(dollars in thousands)
CONDENSED STATEMENT OF CASH FLOWS
Years ended December 31: 1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $3,680 $3,166 $2,728
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (2,522) 2,792 (2,772)
Amortization 12 12 12
Change in other assets (1,256) 21
Change in other liabilities 56 8
------ ------ ------
Net cash provided by operating activities (30) 5,991 (24)
------ ------ ------
Cash flows from investing activities:
Purchase of long-term note from subsidiary (4,000)
Change in other short-term investments (875) (300)
Change in subsidiary line of credit (1,454) (310)
Change in interest-bearing deposits 1,403 (1,645)
------ ------
Net cash used in investing activities (926) (6,255)
------ ------
Cash flows from financing activities:
Change in other short-term borrowings 875
Cash dividends paid (1,396) (1,283) (1,194)
Cash paid in lieu of fractional shares in stock split (11) (9) (11)
Proceeds from issuance of common stock 1,488 1,090 1,132
------ ------ ------
Net cash used in financing activities 956 (202) (73)
------ ------ ------
Cash and cash equivalents:
Change in cash and cash equivalents 0 (466) (97)
Cash and cash equivalents at beginning of year 50 516 613
------ ------ ------
Cash and cash equivalents at end of year $ 50 $ 50 $ 613
====== ====== ======
Page 26
NOTE P - LOAN CENTRAL CONDENSED FINANCIAL INFORMATION
(dollars in thousands)
Below is condensed financial information of Loan Central, Inc. This
information should be read in conjunction with the consolidated financial
statements.
CONDENSED STATEMENT OF CONDITION at December 31:
1997 1996
Assets ---- ----
Cash and cash equivalents $ 59 $ 70
Interest-bearing balances with banks 21
Total loans, gross 3,985 2,625
Less: Allowance for loan losses (100) (61)
------- -------
Net loans 3,885 2,564
Premises and equipment 48 54
Other assets 9 18
------- -------
Total assets $ 4,001 $ 2,727
======= =======
Liabilities
Funds borrowed $ 3,674 $ 2,435
Other liabilities 60 52
------- -------
Total liabilities 3,734 2,487
------- -------
Shareholders' Equity
Common stock 50 50
Surplus 250 250
Retained earnings (33) (60)
------- -------
Total shareholders' equity 267 240
------- -------
Total liabilities and shareholders equity $ 4,001 $ 2,727
======= =======
CONDENSED STATEMENT OF INCOME
Years ended December 31:
1997 1996
---- ----
Interest income
Interest on loans $ 627 $ 221
Fees on loans 141 73
Interest on deposits with banks 3 1
------- -------
Total interest income 768 295
Interest expense
Interest on funds borrowed 234 64
------- -------
Total interest expense 234 64
Net interest income 534 231
Provision for loan losses 154 61
------- -------
Net interest income after provision for loan losses 380 170
Page 27
NOTE P - LOAN CENTRAL CONDENSED FINANCIAL INFORMATION (continued)
(dollars in thousands)
Other income
Loan insurance income 39 15
Other operating income 9 3
------- -------
48 18
Other expense
Salaries and employee benefits 207 141
Occupancy expense 44 34
Furniture and equipment expense 15 18
Other operating expense 120 86
------- -------
386 279
------- -------
Income before federal income taxes 42 (91)
Federal income taxes 14 (31)
------- -------
NET INCOME $ 28 $ (60)
======= =======
SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarters Ended
1997 Mar. 31 Jun. 30 Sept. 30 Dec. 31
Total interest income $7,150 $7,518 $7,739 $7,903
Total interest expense 3,298 3,465 3,540 3,599
Net interest income 3,852 4,053 4,199 4,304
Provision for loan losses 300 202 266 477
Net Income 785 909 936 1,050
Net income per share $ .45 $ .51 $ .52 $ .59
1996
Total interest income $6,373 $6,616 $6,893 $7,209
Total interest expense 3,005 2,953 3,075 3,218
Net interest income 3,368 3,663 3,818 3,991
Provision for loan losses 238 281 239 561
Net Income 726 800 840 800
Net income per share $ .42 $ .47 $ .48 $ .46
1995
Total interest income $5,905 $6,253 $6,432 $6,406
Total interest expense 3,002 3,236 3,256 3,169
Net interest income 2,903 3,017 3,176 3,237
Provision for loan losses 75 134 210 195
Net Income 591 637 742 758
Net income per share $ .35 $ .38 $ .44 $ .45
Page 28
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, 1997 and 1996 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, 1997. 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, 1997 and 1996 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Columbus, Ohio
February 5, 1999
Page 29
SUMMARY OF COMMON STOCK DATA
OHIO VALLEY BANC CORP.
Years ended December 31, 1997 and 1996
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 1997 and 1996. The range of market price is compiled from data
provided by the broker based on limited trading and have been restated for the
33-1/3% stock split in 1997 and the 25% stock split in 1996. The quotations are
inter-dealer prices, without retail markup, markdown, or commission, and may not
represent actual transactions.
1997 Low Bid High Bid Low Ask High Ask
- ---- ------- -------- ------- --------
First Quarter $26.06 $28.32 $27.00 $29.25
Second Quarter 28.32 34.75 29.25 38.75
Third Quarter 34.75 35.50 38.50 39.00
Fourth Quarter 35.00 37.00 37.00 39.00
1996 Low Bid High Bid Low Ask High Ask
- ---- ------- -------- ------- --------
First Quarter $21.30 $24.00 $21.90 $27.00
Second Quarter 23.25 25.50 27.00 27.00
Third Quarter 25.13 25.50 27.00 27.00
Fourth Quarter 25.31 26.06 27.00 27.00
Dividends per share 1997 1996
- ------------------- ---- ----
First Quarter $.19 $.18
Second Quarter .20 .18
Third Quarter .20 .19
Fourth Quarter .20 .19
Shown above is a table which reflects the dividends paid per share as
restated for the 33-1/3% stock split in 1997 and the 25% stock split in 1996 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, 1997
the number of holders of common stock was 1,299, an increase from 1,144
shareholders at December 31, 1996.
Page 30
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.
INTRODUCTION
Ohio Valley Banc Corp. (the Company), an Ohio corporation with headquarters in
Gallipolis, commenced operations on October 23, 1992, and has as its wholly
owned subsidiaries, The Ohio Valley Bank Company (the Bank) and Loan Central,
Inc., a consumer finance company.
Chartered under the banking laws of the state of Ohio, the Bank conducts
primarily the same business operations as those often identified with a typical
community bank. The Bank's market area is concentrated primarily in Gallia,
Jackson, Pike and Franklin counties in Ohio and Mason county, West Virginia.
Some additional business originates from the surrounding Ohio counties of Meigs,
Vinton, Scioto and Ross. Loan Central provides consumer loans to individuals
primarily in Gallia and Lawrence counties in Ohio. Competition for deposits and
loans comes primarily from local banks and savings and loan associations,
although some competition is also experienced from local credit unions,
insurance companies and mutual funds. With the formation of Loan Central, the
Company is better able to compete by serving a consumer base which may not meet
the Bank's credit standards.
During 1997, the Bank opened a new branch in Columbus, Ohio, which provided a
new market area. The Bank also converted its loan origination office in Point
Pleasant, West Virginia to a full-service branch providing greater access to its
current and future customers. The Company expects to continue this growth in
1998 by introducing a second SuperBank branch to be located in a local Wal-Mart
store. To expand on Loan Central's success a third office was opened in Jackson,
Ohio, in early 1998.
RESULTS OF OPERATIONS:
SUMMARY
1997 highlights another successful year for shareholders of Ohio Valley Banc
Corp with record earnings. Net income advanced $514,000 or 16.2% in 1997 to
reach $3,680,000. Net income was up $438,000 or 16.1% in 1996. With these
earnings, net income per share increased to $2.07 from $1.83 in 1996, up 13.1%.
Fueling the growth in earnings was asset growth of $23,172,000 or 6.8%.
Accompanying the growth in assets was the balance sheet's improved efficiency in
producing net income. The Company's return on assets (ROA) improved to 1.04% for
1997 which is a continuation from 1996's and 1995's improved ROA of .97% and
.85%. The Company's commitment to enhancing shareholder value was demonstrated
by the market value of your stock being up over 37% from 1996 which was up 23%
from 1995. Additionally, return on equity (ROE) was 11.55% for 1997 compared to
11.08% for 1996 and 10.64% for 1995.
Page 31
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, 1997. 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) expanded $1,579,000 in
1997, an increase of 10.4% over the $15,144,000 earned in 1996. Net interest
income increased 20.6% in 1996 over 1995. For 1997, net interest income growth
resulted from an increase in interest-earning assets combined with a higher net
interest margin. The increase in 1996 was primarily attributable to the
significant increase in the net interest margin along with additional earning
assets.
Average earning assets grew by 6.3% during 1997 to reach $333,402,000. In 1996,
average earning assets grew 2.3% over 1995. Average total loans expanded
$22,886,000 or 9.6% from 1996 and represent 78% of earning assets. This compares
to average loan growth of 14.9% for 1996 and loans representing 76% of earning
assets. Management focuses on generating loan growth as this portion provides
the greatest return to the Company. Average securities declined from $89,639,000
in 1995 to $72,184,000 in 1996 to $68,309,000 in 1997. The shift in earning
assets to loans from securities was a strategy employed by management to
increase the yield on earning assets which resulted in a higher net interest
margin. Furthermore, a portion of the maturing securities were allocated to
higher yielding life insurance contracts. Although loans comprise a larger
percentage of earning assets, management is comfortable with the current level
of loans based on collateral values, the increase in the allowance for loan
losses and the Company's well-capitalized status. Management does not anticipate
to continue the reallocation of securities to loans to the same degree in 1998.
Securities have reached an approximate level which management has targeted.
With fewer securities being reallocated, the need for traditional funding
sources has increased. Average interest-bearing liabilities increased
$21,380,000 or 8.1% between 1996 and 1997 compared to a decrease of $1,397,000
between 1995 and 1996. The composition of interest-bearing liabilities continues
to shift to time deposits due to the higher rates of interest paid. Average time
deposits represented 63.8% of interest-bearing liabilities for 1997, up from
62.1% and 58.1% for 1996 and 1995. The total average balance of NOW accounts,
money markets and savings deposits decreased $6,211,000 or 7.5% from 1996 to
1997 and decreased $5,381,000 or 6.1% from 1995 to 1996. The decline in this
portion of core deposits has had a negative impact on the cost of funds due to
their lower cost.
The net interest margin improved .19% to 5.02% in 1997 from 4.83% in 1996. This
follows a .73% increase in net interest margin in 1996. Contributing to the
improved net interest margin in 1997 was a gain in the net interest spread of
.22%. The yield on earning assets rose .45% compared to funding costs increasing
only .23%. The yield on interest-earning assets improved with higher relative
balances in loans combined with a .39% increase in loan yields to reach 9.95%.
In addition, the yield on securities improved to 6.49% from 6.16%. Total funding
costs increased in relation to time deposits and borrowed funds comprising a
larger percentage of interest-bearing liabilities combined with rate increases.
The impact of interest free funds on the net interest margin declined from .75%
in 1996 to .72% in 1997. The .03% decrease in the contribution of interest free
funding sources combined with the .22% increase in the net interest spread
yielded the .19% increase in the net interest margin. The 1996 increase in net
interest margin was due to a .64% gain in net interest spread with asset yields
rising .51% and funding costs declining .13%. Furthermore, interest free funding
sources provided an additional .09%. Management expects the net interest margin
to level off in 1998 based on balance sheet mix stabilizing and the Company's
minimal exposure to interest rate changes.
Page 32
OTHER INCOME AND EXPENSE
Total other income, excluding securities losses, increased to $1,860,000 for
1997, a 28.5% gain over 1996. Total other income increased 11.8% from 1995 to
1996. Contributing to 1997's additional income was the earnings from life
insurance contracts purchased mostly in the fourth quarter of 1996, which
provided an additional $320,000. The purpose of these contracts was to replace a
current group life insurance program for executive officers and implement a
deferred compensation plan for directors and executive officers in 1996 and to
implement a supplemental retirement program in 1997. The cost of providing the
benefits to the participants is expected to be offset by the tax preferenced
earnings on the life insurance contracts. Within other operating income, gains
were recognized from loan service fees and from commissions earned from loan
insurance sales. For 1996, total other income increased due to service charges
on deposit accounts being up $129,000. Trust division income was down $55,000 in
1996 with the decrease in the trust department's managed assets in the first
quarter of 1996.
Total other expense increased $1,452,000 or 13.9% in 1997 and $1,318,000 or
14.4% in 1996. The most significant expense in this category is salary and
employee benefits. From 1995 to 1997, management staffed three full-service
branches for the Bank and two offices for Loan Central. Related to the growth in
operations was the increase in the number of full-time equivalent employees from
175 at year-end 1995 to 223 at year-end 1997. Salary and employee benefits
increased $926,000 or 14.9% from 1996 to 1997 and increased $833,000 or 15.5%
from 1995 to 1996. 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. Upgrades of equipment to
support growth and processing technology also contributed to the increase. By
investing in this technology, data processing expense is down for 1997. The
15.9% gain in other operating expenses over 1996 was related to a supplemental
retirement program implemented in 1997 for directors which also will be offset
by earnings on life insurance contracts. Additionally, increases were recognized
in computer software depreciation.
In May 1997 a six member committee was formed and charged with the
responsibility of ensuring that the Company will be ready for the Year 2000
transition. This committee has conducted extensive inventories of the Company's
computer software and hardware as well as other equipment that may be microchip
dependent. The vendors associated with the aforementioned hardware and software
were contacted to determine the product's Year 2000 readiness. A Year 2000 plan
has been developed which commits the Company to being Year 2000 compliant by
December 31, 1998, thereby affording the Company one full year to test all
mission critical systems to verify their viability for the Year 2000 and beyond.
Management does not believe that the associated costs relating to the Year 2000
effort will materially affect the Company's results of operations, liquidity and
capital resources. In an effort to assess and assist the Year 2000 efforts of
our customers, the Company sponsored a forum in December of 1997 on Year 2000
date change issues.
Page 33
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.
The portfolio consists primarily of U.S. Treasury notes and U.S. Government
agencies which comprise approximately 75% 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 1997 was 6.64% as compared to 6.47% at year-end
1996. Given current reinvestment rates, the yield on securities will be
challenged in 1998 as higher yielding securities mature. 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. The portfolio was comprised largely of fixed rate issues
and does not contain any issues which would be classified as high risk
mortgage-backed securities.
The Company classifies a portion of its securities as available-for-sale to
provide the flexibility to meet future liquidity needs. At December 31, 1997,
the market value of available-for-sale securities totaled $32,659,000 consisting
mostly of U.S. Treasury notes. Maturing securities have historically provided
sufficient liquidity such that management has not sold a debt security in
several years.
Within the Company's portfolio are securities which are considered to be
structured notes. Structured notes are debt securities other than
mortgage-backed securities whose cash flow characteristics depend on one or more
indices and/or that have embedded forward, put or call options. As of December
31, 1997, the securities portfolio contained $3,000,000 of structured notes.
During 1997, $9,500,000 of the structured notes matured and the remaining
structured notes will mature no later than April 1998. The Company's investment
policy does not allow any future purchases of structured notes due to the thin
trading market for these securities and their greater susceptibility to changes
in market value.
Page 34
LOANS
Total loans increased $15,735,000 or 6.2% in 1997 compared to $37,287,000 or
17.2% in 1996. Residential mortgage loans expanded $8,089,000 or 7.9% in 1997.
The Company generally originates real estate loans for its own portfolio, as
very few loans are sold on the secondary market. Consumer loans grew $3,932,000
representing a 5.3% 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. Commercial loans
increased $3,458,000 or 4.6% including commercial equipment leases which are up
$464,000. Loan Central accounted for $1,360,000 of the consolidated loan growth
for 1997 and has generated a $3,985,000 loan portfolio in less than two years.
Tables V, VI, and VII have been provided to enhance the understanding of the
loan portfolio and the allowance for potential loan losses. The allowance for
loan losses is maintained by management at a level considered adequate to cover
possible 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 future 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, 1997 was
.40% up from .26% at December 31, 1996 due mostly to higher losses in the
consumer loan area. Net charge-offs in both the real estate and commercial loan
areas were relatively low, which represents the overall quality of these
segments of the loan portfolio. Nonperforming loans, which include nonaccrual
loans, and underperforming loans, which include 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. Loans past due more than 90
days plus loans placed on nonaccrual status were approximately $4,196,000 or
1.56% of outstanding balances at December 31, 1997 compared to $2,944,000 or
1.16% of outstanding balances at the end of 1996. The increase in both
nonperforming and underperforming loans are primarily attributable to loans
secured by real estate which are generally well secured.
For 1997, provision expense was down $74,000 compared to the provision expense
for 1996. The decrease in provision expense was associated with the slower loan
growth in 1997, especially in the commercial loan area. In addition, the
portfolio continues to contain a large proportion of low risk residential
mortgages. As a percentage of total loans, the allowance for loan losses at
December 31, 1997 was 1.22% versus 1.21% at December 31, 1996. Management
believes the allowance is adequate to absorb inherent losses in the current
portfolio and anticipates that it will continue its provision to the allowance
for loan losses at its current level for the foreseeable future.
Page 35
DEPOSITS
Interest-earning assets are funded primarily by core deposits. The accompanying
table IV shows the composition of total deposits as of December 31, 1997. Total
deposits grew $11,887,000 or 4.2% to reach $293,712,000 at year-end 1997.
Leading the growth in deposits was time deposit growth of $9,372,000 followed by
growth in noninterest-bearing deposits of $3,008,000. With the expansion in new
and current markets, management expects continued growth in deposits in 1998.
FUNDS BORROWED
In addition to traditional deposits, the Company considers borrowed funds when
evaluating funding sources. Other funds borrowed consist 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. Management has utilized FHLB
advances to fund long-term assets and to fund short-term liquidity needs. At
December 31, 1997, the balance of FHLB advances totaled $18,553,000 compared to
$15,924,000 at December 31, 1996. Management has determined that the use of FHLB
advances is a cost-effective and stable way of generating new money as advance
rates are comparable to rates on certificates of deposit. The weighted average
rate on FHLB advances during 1997 equaled 5.93%. Management will continue to
evaluate borrowings from the FHLB as an alternative funding source. Securities
sold under agreements to repurchase increased $4,117,000 from 1996's level of
$8,714,000. The approximate weighted average interest rate for repurchase
agreements during 1997 was 3.83% which represents a relatively low cost of funds
for the Company. 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 $34,166,000 at December 31, 1997, compared to $30,378,000 at December
31, 1996, which represents growth of 12.5%. All of the capital ratios exceeded
the regulatory minimum guidelines as identified in Note N "Regulatory Matters".
Cash dividends paid of $1,396,000 ($.79 per share) for 1997 represents a 6.8%
increase over the cash dividends paid during 1996. The increase in cash
dividends paid is due to the additional shares outstanding during 1997 which
were not outstanding during 1996 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 1997, the Company issued 35,422 shares under the dividend reinvestment
and stock purchase plan. At December 31, 1997, approximately 62% of the
shareholders were enrolled in the dividend reinvestment plan representing
approximately 11% of total shares outstanding.
Page 36
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.
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 12% and savings and interest-bearing checking accounts assume an
annual decay rate of 20% based on the Company's historical experience.
Prepayments are not included in loan maturities.
Page 37
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
$32,659,000 in securities as available-for-sale at December 31, 1997. In
addition, 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.
Page 38
CONSOLIDATED AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST INCOME
Table I
December 31
------------------------------------------------------------------------------------
1997 1996 1995
(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 $ 113 $ 5 4.44% $ 60 $ 3 4.67% $ 3,003 $ 183 6.09%
with banks
Federal funds sold 3,728 202 5.40 2,999 158 5.27 6,575 382 5.81
Securities:
Taxable 55,609 3,519 6.33 59,883 3,557 5.94 79,696 4,331 5.43
Tax exempt 12,700 911 7.17 12,301 889 7.23 9,943 742 7.46
Loans 261,252 25,988 9.95 238,366 22,788 9.56 207,447 19,587 9.44
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-
earning assets 333,402 30,625 9.19% 313,609 27,395 8.74% 306,664 25,225 8.23%
Noninterest-earning assets:
Cash and due from banks 7,838 7,355 6,839
Other nonearning assets 16,322 9,168 8,786
Allowance for loan losses (3,169) (2,649) (2,147)
-------- -------- --------
Total noninterest-
earning assets 20,991 13,874 13,478
Total assets $354,393 $327,483 $320,142
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 31,568 1,048 3.32% $ 32,238 1,091 3.38% $ 31,695 1,211 3.82%
Savings and Money Market 44,853 1,064 2.37 50,394 1,202 2.38 56,318 1,412 2.51
Time deposits 181,244 10,436 5.76 163,093 9,194 5.64 153,517 9,149 5.96
Repurchase agreements 11,352 435 3.83 9,813 339 3.46 17,790 597 3.36
Other borrowed money 15,182 919 6.05 7,281 425 5.84 4,896 294 6.00
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-
bearing liabilities 284,199 13,902 4.89% 262,819 12,251 4.66% 264,216 12,663 4.79%
Noninterest-bearing liabilities:
Demand deposit accounts 34,054 32,350 27,212
Other liabilities 4,273 3,746 3,069
-------- -------- ------
Total noninterest-
bearing liabilities 38,327 36,096 30,281
Shareholders' equity 31,867 28,568 25,645
-------- --------
Total liabilities and
shareholders' equity $354,393 $327,483 $320,142
======== ======== ========
Net interest earnings $16,723 $15,144 $12,562
======= ======= =======
Net interest earnings as a percent
of interest-earning assets 5.02% 4.83% 4.10%
----- ----- -----
Net interest rate spread 4.30% 4.08% 3.44%
----- ----- -----
Average interest-bearing liabilities
to average earning assets 85.24% 83.80% 86.16%
===== ===== =====
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.
Page 39
RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME & EXPENSE
Table II
1997 1996
----------------------------- ----------------------------
(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 $ 2 $ 2 $ (146) $ (34) $ (180)
Federal funds sold 40 $ 4 44 (191) (33) (224)
Securities:
Taxable (263) 225 (38) (1,150) 376 (774)
Tax exempt 29 (7) 22 171 (24) 147
Loans 2,249 951 3,200 2,953 248 3,201
------- ------- ------- ------- ------- -------
Total interest income 2,057 1,173 3,230 1,637 533 2,170
INTEREST EXPENSE
- ----------------
NOW accounts (22) (21) (43) 21 (141) (120)
Savings and Money Market (132) (6) (138) (143) (67) (210)
Time deposits 1,042 200 1,242 554 (509) 45
Repurchase agreements 57 39 96 (275) 17 (258)
Other borrowed money 478 16 494 139 (8) 131
------- ------- ------- ------- ------- -------
Total interest expense 1,423 228 1,651 296 (708) 412
------- ------- ------- ------- ------- -------
Net interest earnings $ 634 $ 945 $ 1,579 $ 1,341 $ 1,241 $ 2,582
======= ======= ======= ======= ======= =======
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 assuming 34% tax rate,
net of related nondeductible interest expense.
Page 40
SECURITIES
Table III
MATURING
---------------------------------------------------------------------------
As of December 31, 1997 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 $ 9,306 6.80% $18,140 6.61%
Obligations of U.S. Government
agency securities 8,491 5.96% 18,080 6.18%
Obligations of states and
political subdivisions 1,934 7.13% 5,363 7.12% $5,768 7.97% $ 870 8.61%
Corporate Obligations 503 6.95%
Mortgage-backed securities 39 6.71% 433 6.15%
------- ---- ------- ---- ------ ---- ------ ----
Total debt securiities $20,234 6.48% $41,622 6.49% $6,201 7.84% $ 870 8.61%
======= ==== ======= ==== ====== ==== ====== ====
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)
1997 1996 1995
---- ---- ----
Interest-bearing deposits:
NOW accounts $ 29,439 $ 28,493 $ 29,896
Money Market 13,130 13,470 18,524
Savings accounts 31,142 32,242 35,167
IRA accounts 28,102 28,044 29,210
Certificates of Deposit 154,799 145,485 126,272
-------- -------- --------
256,612 247,734 239,069
Noninterest-bearing deposits:
Demand deposits 37,100 34,091 33,300
-------- -------- --------
Total deposits $293,712 $281,825 $272,369
======== ======== ========
Page 41
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
Table V Years Ended December 31
(dollars in thousands) 1997 1996 1995 1994 1993
- ---------------------- ---- ---- ---- ---- ----
Commercial loans $ 879 $ 887 $ 328 $ 628 $ 475
Percentage of loans to total loans 29.91% 30.30% 21.03% 24.63% 25.61%
Real estate loans 118 238 236 136 257
Percentage of loans to total loans 40.87% 40.21% 48.16% 47.58% 44.91%
Consumer loans 949 799 597 544 579
Percentage of loans to total loans 29.22% 29.49% 30.81% 27.79% 29.48%
Unallocated 1,344 1,156 1,228 876 702
------- ------- ------- ------- -------
Allowance for Loan Losses $3,290 $3,080 $2,389 $2,184 $2,013
======= ======= ======= ======= =======
100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= =======
Ratio of net charge-offs
to average loans .40% .26% .20% .12% .37%
======= ======= ======= ======= =======
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) 1997 1996 1995 1994 1993
- ---------------------- ---- ---- ---- ---- ----
Impaired loans $ 430 $ 449 $ 579
Past due-90 days or more and
still accruing $2,724 $1,677
Nonaccrual 473 394
Accruing loans past due 90
days or more to total loans 1.36% .91%
Nonaccrual loans as a % of
total loans .24% .21%
Impaired loans as a % of total loans .16% .18% .27%
Allowance for loans losses as a
% of total loans 1.22% 1.21% 1.10% 1.09% 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 1997, the Company did not recognize any interest income on impaired
loans. Loans not included above that management feels have loss potential total
approximately $200,000. 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, 1997 Maturing/Repricing
(dollars in thousands)
Within After One but
One Year Within Five Years After Five Years Total
-------- ----------------- ---------------- -----
Commercial loans and other $ 58,558 $ 8,257 $13,877 $ 80,692
Real estate loans 54,322 25,654 30,271 110,247
Consumer loans 23,237 46,369 9,234 78,840
-------- ------- ------- --------
Total loans $136,117 $80,280 $53,382 $269,779
======== ======= ======= ========
Loans maturing and loans repricing after one year with:
Variable interest rates $ 31,338
Fixed interest rates 102,324
--------
Total $133,662
========
Page 42
RATE SENSITIVITY ANALYSIS
Table VIII
(dollars in thousands)
As of December 31, 1997 Principal Amount Maturing in:
There- Fair Value
1998 1999 2000 2001 2002 after Total 12/31/97
Rate-Sensitive Assets:
Fixed interest rate loans $ 5,968 $ 7,170 $ 13,051 $ 19,023 $ 13,035 $ 49,717 $107,964 $108,415
Average interest rate 9.41% 11.62% 11.72% 11.11% 10.83% 9.23% 10.23%
Variable interest rate loans $ 40,553 $ 1,291 $ 3,363 $ 7,038 $ 9,670 $ 99,900 $161,815 $161,815
Average interest rate 10.38% 9.84% 10.35% 9.87% 9.34% 8.41% 9.08%
Fixed interest rate securities $ 20,194 $ 10,689 $ 10,239 $ 10,034 $ 10,274 $ 10,304 $ 71,734 $ 72,594
Average interest rate 6.48% 6.83% 6.42% 6.33% 6.34% 7.61% 6.64%
Other interest-bearing assets $ 197 $ 197
Average interest rate 4.49%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 4,452 $ 3,918 $ 3,448 $ 3,034 $ 2,670 $ 19,578 $ 37,100 $ 37,100
Savings & Interest-bearing checking $ 11,259 $ 9,230 $ 7,605 $ 6,300 $ 5,246 $ 34,071 $ 73,711 $ 73,711
Average interest rate 2.57% 2.59% 2.61% 2.63% 2.65% 2.84% 2.71%
Time deposits $133,554 $ 33,380 $ 8,060 $ 2,902 $ 3,670 $ 1,335 $182,901 $183,840
Average interest rate 5.73% 5.83% 6.01% 5.96% 6.54% 7.45% 5.79%
Fixed interest rate borrowings $ 12,807 $ 1,500 $ 1,957 $ 51 $ 16,315 $ 16,315
Average interest rate 5.99% 6.08% 5.99% 7.00% 6.00%
Variable interest rate borrowings $ 15,995 $ 15,995 $ 15,995
Average interest rate 4.34% 4.34%
KEY RATIOS
Table IX
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Return on average assets 1.04% .97% .85% .80% .70%
Return on average equity 11.55% 11.08% 10.64% 10.51% 9.62%
Dividend payout ratio 37.94% 40.51% 43.77% 45.17% 50.31%
Average equity to
average assets 8.99% 8.72% 8.01% 7.62% 7.28%
Page 43
DIRECTORS
OHIO VALLEY BANC CORP
Keith Brandeberry W. Lowell Call
Physician Vice President of Sausage Production
Bob Evans Farms, Inc.
James L. Dailey Robert H. Eastman
Chairman and Chief Executive Officer President
Ohio Valley Banc Corp Ohio Valley Supermarkets, Inc.
Merrill L. Evans Morris E. Haskins
Farmer Retired Bank Executive
President, Evans Enterprises, Inc.
Warren F. Sheets Jeffrey E. Smith
Attorney President and Chief Operating Officer
Ohio Valley Banc Corp
Thomas E. Wiseman
President,
The Wiseman Agency, Inc.
DIRECTORS
OHIO VALLEY BANK COMPANY
Phil A. Bowman Keith R. Brandeberry
Vice President Member Executive Committee
Waterloo Coal Co., Inc. Chairman Examination and
Member Examination and Audit Committee
Audit Committee
W. Lowell Call James L. Dailey
Member Examination and Chairman and
Audit Committee Chief Executive Officer
The Ohio Valley Bank Company
Chairman Executive Committee
Robert H. Eastman Merrill L. Evans
Chairman Marketing and Member Executive Committee
Long Range Planning Committee Member Marketing and Long
Range Planning Committee
Lloyd R. Francis Art E. Hartley, Sr.
Developer Chairman of the Board
Member Marketing and Long City Ice and Fuel, Inc.
Range Planning Committee Member Marketing and Long
Range Planning Committee
Morris E. Haskins Charles C. Lanham
Member Executive Committee Executive Vice President
Member Trust Committee The Ohio Valley Bank Company
Member Executive Committee
Member Trust Committee
Frank H. Mills, Jr. Warren F. Sheets
Farmer Chairman Trust Committee
Member Examination and
Audit Committee
Jeffrey E. Smith Lannes C. Williamson
President and PresidentMember
Chief Operating Officer L. Williamson Pallets, Inc.
The Ohio Valley Bank Company Member Examination and
Member Executive Committee Audit Committee
Member Marketing and
Long Range Planning Committee
Thomas E. Wiseman
Member Executive Committee
Member Trust Committee
DIRECTOR EMERITUS
C. Leon Saunders
Retired Bank Executive
Page 44
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 Wendell B. Thomas
Senior Vice President Vice President and Secretary
Sue Ann Bostic Michael D. Francis
Vice President Vice President
Katrinka V. Hart Mario P. Liberatore
Vice President Vice President
E. Richard Mahan Larry E. Miller, II
Vice President Vice President
Cindy H. Johnston Paula W. Salisbury
Assistant Secretary Assistant Secretary
OFFICERS
LOAN CENTRAL
Jeffrey E. Smith Michael D. Francis
President Senior Vice President
Cherie A. Barr
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
Chairman
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.
Page 45
OFFICERS
OHIO VALLEY BANK COMPANY
James L. Dailey Jeffrey E. Smith
Chairman and President and
Chief Executive Officer Chief Operating Officer
Charles C. Lanham Wendell B. Thomas
Executive Vice President Senior Vice President
and Secretary
Member Executive Committee
Sue Ann Bostic Katrinka V. Hart
Senior Vice President Senior Vice President
Administrative Services Group Retail Bank Group
Member Marketing and Long
Range Planning Committee
Mario P. Liberatore E. Richard Mahan
Senior Vice President Senior Vice President
West Virginia Bank Group Commecial Bank Group
Member Trust Committee
Larry E. Miller, II Patricia L. Davis
Senior Vice President Vice President
Financial Bank Group Management Information
Secretary Examination and Systems
Audit Committee
Bryan W. Martin Richard D. Scott
Vice President Vice President, Trust
Facilities and Technical Secretary Trust Committee
Services
David L. Shaffer Tom R. Shepherd
Vice President Vice President, Marketing
Retail Lending Member Marketing and Long
Range Planning Committee
Sandra L. Edwards Hugh H. Graham, Jr.
Assistant Vice President Assistant Vice President
Operations Center Manager Retail Expansion and Acquisitions
Robert T. Hennesy Larry E. Lee
Assistant Vice President Assistant Vice President
Retail Indirect Lending Manager Cash Services and Security
Jennifer L. Osborne Patrick H. Tackett
Assistant Vice President Assistant Vice President
Retail Lending Operations Manager Retail Direct Lending Manager
Molly K. Tarbett Phyllis P. Wilcoxon
Assistant Vice President Assistant Vice President for
Deposit Operations Manager Shareholder Relations
Darren R. Blake Michael C. Davis
Assistant Cashier Assistant Cashier
Research and Development for MIS Loan Officer
Judy K. Hall Brenda G. Henson
Assistant Cashier Assistant Cashier
Manger, Training and Manager Customer Service
Educational Development
N. Kathryn Massie Billy J. Meadows
Assistant Cashier Assistant Cashier
Telemarketing and Golden Opportunities Program
Quality Control
Linda L. Plymale Scott W. Shockey
Assistant Cashier Assistant Cashier
Operations Center Regulatory Reporting Manager
Timothy V. Stevens Rick A. Swain
Assistant Cashier Assistant Cashier
Retail Development Region Manager Pike County
Cindy H. Johnston Paula Salisbury
Assistant Secretary Assistant Secretary
Page 46