UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
JUNE 30, 1996
Commission file number: 0-20914
Ohio Valley Banc Corp.
(Exact name of Registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
31-1359191
(I.R.S. Employer Identification Number)
420 Third Avenue. Gallipolis, Ohio 45631
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 446-2631
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X Yes
No
Indicate the number of shares outstanding of the issuers classes of
commom stock, as of the latest practicable date.
Common stock, $10.00 stated value Outstanding at July 31, 1996
1,298,975 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED JUNE 30, 1996
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10-01 of Regulation
S-X is included in this Form 10Q as referenced below:
Consolidated Balance Sheets...................................... 1
Consolidated Statements of Income................................ 2
Condensed Consolidated Statements of Changes in
Shareholders' Equity.......................................... 4
Condensed Consolidated Statements of Cash Flows.................. 5
Notes to the Consolidated Financial Statements................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 11
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
ASSETS
Cash and noninterest-bearing deposits with banks $ 6,393,621 $ 7,605,748
Federal funds sold 3,625,000
Total cash and cash equivalents 6,393,621 11,230,748
Interest-bearing balances with banks 52,461 50,880
Securities available for sale (Note 2) 27,936,467 33,402,258
Securities held to maturity (Approximate market value:
$43,165,000 and $49,616,000 respectively) (Note 2)43,216,924 49,350,373
Total loans (Note 3) 239,231,128 216,756,892
Allowance for loan losses (Note 4) (2,648,505) (2,388,639)
Net loans 236,582,623 214,368,253
Premises and equipment, net 5,720,098 5,577,841
Accrued interest receivable 2,310,265 2,407,319
Other assets 986,621 656,992
Total assets $323,199,080 $317,044,664
LIABILITIES
Noninterest-bearing deposits $ 33,657,022 $ 33,299,593
Interest-bearing deposits 241,615,516 239,069,007
Total deposits 275,272,538 272,368,600
Securities sold under agreements to repurchase 8,817,296 9,504,350
Other borrowed funds (Note 6) 7,357,269 4,729,201
Accrued liabilities 3,251,632 2,865,035
Total liabilities 294,698,735 289,467,186
SHAREHOLDERS' EQUITY
Common stock ($10.00 stated value, 5,000,000 shares authorized; 1,298,975 shares
issued and outstanding at June 30, 1996, 1,029,325 shares issued and
outstanding at December 31, 1995) 12,989,750 10,293,250
Surplus 12,135,263 11,838,736
Retained earnings 3,388,049 5,081,704
Net unrealized gains(losses)avail-for-sale securities (12,717) 363,788
Total shareholders' equity 28,500,345 27,577,478
Total liabilities and shareholders' equity $323,199,080 $317,044,664
See notes to the consolidated financial statements.
1
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Interest income:
Int and fees on loans $ 5,522,133 $ 4,814,922 $ 10,724,617 $ 9,384,827
Int and dividends on
investment securities
Taxable 844,324 1,090,582 1,742,276 2,132,790
Nontaxable 153,860 118,985 309,418 219,823
Dividends 37,528 32,741 74,743 64,998
1,035,712 1,242,308 2,126,437 2,417,611
Int on federal funds sold 57,333 122,923 136,580 205,232
Int on deposits with banks 652 73,101 1,309 150,463
Int on investments 1,093,697 1,438,332 2,264,326 2,773,306
Total int income 6,615,830 6,253,254 12,988,943 12,158,133
Interest expense:
Interest on deposits 2,786,358 2,991,089 5,620,599 5,749,486
Interest on repurchase
agreements 88,314 171,218 188,198 339,767
Interest on other
borrowed funds 77,994 74,018 148,770 148,966
Total int expense 2,952,666 3,236,325 5,957,567 6,238,219
Net interest income 3,663,164 3,016,929 7,031,376 5,919,914
Provision for loan
losses (Note 5) 281,274 134,000 519,076 209,000
Net int income after
provision 3,381,890 2,882,929 6,512,300 5,710,914
Other income:
Service charges on deposit
accounts 198,718 186,103 380,195 358,086
Trust division income 45,962 67,757 121,570 124,462
Other operating income 84,544 59,055 166,210 125,977
Total other income 329,224 312,915 667,975 608,525
Other expense:
Salaries and employee
benefits 1,494,240 1,276,274 2,908,329 2,551,541
FDIC premiums 500 148,656 1,000 297,313
Occupancy expense 103,235 86,057 227,087 173,687
Furniture and equip exp 150,679 128,786 294,147 257,367
Data processing expense 123,118 87,032 229,855 174,032
Other operating expense 705,790 557,776 1,362,354 1,104,383
Total other expense 2,577,562 2,284,581 5,022,772 4,558,323
(Continued)
2
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (Continued)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Income before federal
income taxes $ 1,133,552 $ 911,263 $ 2,157,503 $ 1,761,116
Provision for income
taxes 333,227 274,542 630,612 533,198
Net income $ 800,325 $ 636,721 $ 1,526,891 $ 1,227,918
Earnings per share
(Note 1): $ .62 $ .51 $ 1.18 $ 1.21
Dividends per share
(Note 1): $ .25 $ .24 $ .49 $ .47
Weighted average shares
outstanding (Note 1): 1,295,264 1,260,565 1,292,128 1,255,811
See notes to the consolidated financial statements.
3
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Balance at beginning
of period $ 27,987,692 $ 25,004,141 $ 27,577,478 $ 24,387,516
Net income 800,326 636,721 1,526,891 1,227,918
Proceeds from issuance of common
stock through the dividend
reinvestment plan 271,970 256,573 413,237 502,335
Cash paid in lieu of fractional shares
in stock split (9,214) (11,216) (9,214) (11,216)
Cash dividends (322,744) (301,193) (631,542) (585,220)
Net change in unrealized
depreciation on available-for-sale
securities (227,685) 9,034 (376,505) 72,727
Balance at
end of period $ 28,500,345 $ 25,594,060 $ 28,500,345 $ 25,594,060
See notes to the consolidated financial statements.
4
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30,
1996 1995
Net cash from operating activities $ 2,600,602 $ 2,121,989
Investing activities
Proceeds from maturities of
available-for-sale securities 8,500,000 1,968,491
Purchases of available-for-sale
securities (3,545,078) (1,968,491)
Proceeds from maturities of
held-to-maturity securities 6,635,324 8,029,848
Purchase of held-to-maturity securities (527,618) (10,831,077)
Change in interest-bearing deposits
in other banks (1,581) 1,007,699
Proceeds from sale of student loans 268,894
Loans purchased 138,917
Net increase in loans (22,716,370) (7,920,763)
Purchase of premises and equipment, net (399,839) (309,003)
Net cash from investing activities (12,055,162) (9,615,485)
Financing activities
Net increase in deposit accounts 2,903,938 4,545,343
Cash dividends (631,542) (585,220)
Cash paid in lieu of fractional shares
in stock split (9,214) (11,216)
Proceeds from issuance of common stock 413,237 502,335
Change in securities sold under
agreements to repurchase (687,054) 492,716
Proceeds from other borrowed funds 7,649,523
Repayment of other borrowed funds (5,021,455) (181,964)
Net cash from financing activities 4,617,433 4,761,994
Increase (decrease) in cash and cash
equivalents (4,837,127) (2,731,502)
Cash and cash equivalents at beginning
of period 11,230,748 12,947,047
Cash and cash equivalents at end of period $ 6,393,621 $ 10,215,545
See notes to the consolidated financial statements
5
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
Ohio Valley Banc Corp. and its wholly owned subsidiaries The Ohio Valley
Bank Company and Loan Central, Inc. All material intercompany accounts and
transactions have been eliminated in consolidation.
These interim financial statements are prepared without audit and reflect
all adjustments of a normal recurring nature which, in the opinion of
Management, are necessary to present fairly the consolidated financial
position of Ohio Valley Banc Corp. at June 30, 1996, and its results of
operations and cash flows for the periods presented. The accompanying
consolidated financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances. The
Annual Report for Ohio Valley Banc Corp. for the year ended December 31,
1995, contains consolidated financial statements and related notes which
should be read in conjunction with the accompanying consolidated financial
statements.
The provision for income taxes is based upon the effective income tax rate
expected to be applicable for the entire year.
For consolidated financial statement classification and cash flow reporting
purposes, cash and cash equivalents include cash on hand,
noninterest-bearing deposits with banks and federal funds sold. For the six
months ended June 30, 1996 and June 30, 1995, Ohio Valley Banc Corp. paid
interest in the amount of $6,355,629 and $5,841,515, respectively. For the
six months ended June 30, 1996 and June 30, 1995, Ohio Valley Banc Corp.
paid income taxes of $650,000 and $532,635, respectively.
Earnings per share is computed based on the weighted average shares
outstanding during the period. On April 3, 1996, the Board of Directors
declared a 25% stock split to shareholders of record on April 25, 1996. The
stock split was recorded by transferring from retained earnings an amount
equal to the stated value of the shares issued. Earnings and cash dividends
per share amounts have been retroactively adjusted to reflect the effect of
the stock split.
The Company adopted Statement of Financial Accounting Standard No. 122,
"Accounting for Mortgage Servicing Rights," January 1, 1996, which requires
companies engaging in mortgage banking activities to recognize as separate
assets rights to service mortgage loans for others. The adoption of this
statement had no impact on the Company's consolidated financial statements.
(Continued)
6
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair
values of the investment securities, as presented in the consolidated
balance sheet at June 30, 1996 and December 31, 1995 are as follows:
June 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
Securities Available-for-Sale
U.S. Treasury
securities $ 25,524,119 $ 223,383 $ 65,439 $ 25,682,063
Marketable equity
securities 2,431,617 177,213 2,254,404
Total securities $ 27,955,736 $ 223,383 $ 242,652 $ 27,936,467
Securities Held-to-Maturity
U.S. Government agency
securities $ 29,440,477 $ 80,132 $ 247,723 $ 29,272,886
Obligations of state and
political subdivisions 12,429,914 216,731 84,805 12,561,840
Corporate Obligations 759,593 4,532 764,125
Mortgage-backed securities 586,940 1,159 26,824 561,275
Total securities $ 43,216,924 $ 302,554 $ 359,352 $ 43,160,126
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
Securities Available-for-Sale
U.S. Treasury
securities $ 30,471,046 $ 724,714 $ 25,072 $ 31,170,688
Marketable equity
securities 2,380,017 148,447 2,231,570
Total securities $ 32,851,063 $ 724,714 $ 173,519 $ 33,402,258
Securities Held-to-Maturity
U.S. Government agency
securities $ 34,935,131 $ 258,698 $ 286,236 $ 34,907,593
Obligations of state and
political subdivisions 12,280,605 317,478 28,265 12,569,818
Corporate Obligations 1,511,996 19,393 389 1,531,000
Mortgage-backed securities 622,641 1,426 16,905 607,162
Total securities $ 49,350,373 $ 596,995 $ 331,795 $ 49,615,573
(Continued)
7
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT SECURITIES (Continued)
The amortized cost and estimated fair value of debt investment securities at
June 30, 1996, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because certain borrowers may have
the right to call or prepay the debt obligations prior to their contractual
maturities.
Available for Sale Held to Maturity
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
Debt securities:
Due in one year
or less $ 5,527,826 $ 5,522,188 $ 11,367,304 $ 11,307,649
Due in one to
five years 19,996,293 20,159,875 24,891,927 24,795,758
Due in five to ten years 6,370,753 6,495,444
Mortgage-backed securities 586,940 561,275
Total debt
securities $ 25,524,119 $ 25,682,063 $ 43,216,924 $ 43,160,126
Gains and losses on the sale of investment securities are determined using
the specific identification method. There were no sales of debt or equity
securities during the first six months of 1996 or 1995.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
June 30, December 31,
1996 1995
Real estate loans $110,025,016 $104,398,656
Commercial and industrial loans 55,398,041 44,374,561
Consumer loans 71,580,059 66,783,608
Other loans 1,958,011 1,200,067
$238,961,127 $216,756,892
At June 30, 1996 and December 31, 1995, loans on nonaccrual status were
approximately $1,792,000 and $963,000, respectively. Loans past due more than 90
days and still accruing at June 30, 1996 and December 31, 1995 were $1,496,000
and $2,395,000, respectively. Other real estate owned at June 30, 1996 totaled
$192,046 compared to $202,046 at December 31, 1995.
(Continued)
8
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the six months
ended June 30, 1996 and June 30, 1995 is as follows:
1996 1995
Balance - January 1, $ 2,388,639 $ 2,183,766
Loans charged off:
Real estate 1,250 28,173
Commercial 73,374 181,636
Consumer 217,977 165,365
Total loans charged off 292,601 375,174
Recoveries of loans:
Real estate 6
Commercial 103 2,704
Consumer 33,288 24,929
Total recoveries 33,391 27,639
Net loan charge-offs (259,210) (347,535)
Provision charged to operations 519,076 209,000
Balance - June 30, $ 2,648,505 $ 2,045,231
Information regarding impaired loans at June 30, 1996 and June 30, 1995:
1996 1995
Balance of impaired loans $ 1,604,628 $ 598,255
Less portion for which no allowance for loan losses is allocated
Portion of impaired loan balance for which an allowance for
credit losses is allocated $ 1,604,628 $ 598,255
Portion of allowance for loan losses allocated to the impaired
loan balance $ 100,000 $ 100,000
Information regarding impaired loans for the periods ended June 30, 1996 and
June 30, 1995:
Average investment in
impaired loans for the year $ 1,556,373 $ 638,278
Interest income recognized on
impaired loans including
interest income recognized
on a cash basis 9,396 27,956
Int income recognized on impaired
loans on a cash basis 9,396
(Continued)
9
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - CONCENTRATIONS OF CREDIT RISK AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company, through its subsidiary bank, grants residential, consumer, and
commercial loans to customers located primarily in the southeastern Ohio
area. Approximately 9.53% of total loans are unsecured at June 30, 1996.
The Corporation is a party to financial instruments with off-balance sheet
risk. These instruments are required in the normal course of business to
meet the financial needs of its customers. The contract or notional amounts
of these instruments are not included in the consolidated financial
statements. At June 30, 1996, the contract or notional amounts of these
instruments, which primarily include commitments to extend credit and
standby letters of credit and financial guarantees, totaled approximately
$28,975,000.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at June 30, 1996 and December 31, 1995 are primarily
comprised of advances from the Federal Home Loan Bank (FHLB). Pursuant to
collateral agreements with the FHLB, advances are secured by qualifying
first mortgage loans. Advances at June 30, 1996 and December 31, 1995 have
original principal balances totaling $8,000,000. Interest expense on FHLB
advances for the six months ending June 30, 1996 and 1995 was $137,352 and
$143,566, respectively Promissory notes are due at various dates through a
final maturity date of May 29, 2002.
Interest Balance Balance
Maturity Rates at 6/30/96 at 12/31/95
1996 5.50 $ 2,000,000
1998 5.55 456,757 $ 464,674
2000 6.00-6.15 1,500,000 1,500,000
2002 5.80-6.10 2,465,287 2,624,947
Total FHLB borrowings 6,422,044 4,589,621
Promissory notes 4.50-7.10 935,225 139,580
Total $ 7,357,269 $ 4,729,201
The following table is a summary of the scheduled principal payments for
these borrowings at June 30, 1996:
1996 1997 1998 1999 2000 Thereafter
FHLB
borrowings $2,201,915 $ 362,881 $ 797,305 $ 389,718 $1,913,709 $ 756,516
Promissory notes 49,512 784,532 10,230 15,981 16,780 58,190
(Continued)
10
<PAGE>
OHIO VALLEY BANC CORP
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
INTRODUCTION
The following discussion focuses on the consolidated financial condition of Ohio
Valley Banc Corp. at June 30, 1996, compared to December 31, 1995, and the
consolidated results of operations for the year-to-date and quarterly periods
ending June 30, 1996, compared to the same periods in 1995. The purpose of this
discussion is to provide the reader a more thorough understanding of the
consolidated financial statements. This discussion should be read in conjunction
with the interim consolidated financial statements and the footnotes included in
this Form 10-Q.
The Registrant is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on the liquidity,
capital resources or operations except as discussed herein. Also, the Registrant
is not aware of any current recommendations by regulatory authorities which
would have such effect if implemented.
FINANCIAL CONDITION
Ohio Valley Banc Corp.'s consolidated total assets grew by $6,154,000 or 1.94%
for the first six months of 1996 to reach $323,199,000. During that time, the
Bank experienced an increase in loans of $22,474,000 and a decrease in
investment securities of $11,599,000. In addition, total deposits are up
$2,904,000 and other borrowed funds are up $2,628,000. These changes represent a
strategy employed by management to restructure its balance sheet mix to achieve
higher performance. Maturing investment securities were used to fund loans where
higher yields were recognized and an added benefit of using investments to fund
loans was that management did not have to be as aggressive on pricing deposits.
The end result was a higher yield on earning assets and a lower cost of funds.
For the first half of 1996, management generated a 10.37% increase in total loan
balances. The largest contributor to the growth in loans was commercial loans
which grew $11,023,000 or 24.84% from December 31, 1995 to June 30, 1996. For
the same time period, mortgage loans and consumer loans increased $5,626,000 and
$5,066,000, respectively. At June 30, 1996, the ratio of loans to deposits was
86.91% compared to 79.58% at December 31, 1995. The increase in this ratio was
due to management utilizing matured investment securities to partially fund
loans as loans grew faster than deposits. Loans past due more than 90 days plus
loans placed on nonaccrual status were approximately $3,387,000 or 1.42% of
outstanding balances at June 30, 1996 compared to $3,358,000 or 1.55% of
outstanding balances at the end of 1995. For the first half of 1996, management
provided an additional $310,000 to the allowance for loan losses compared to the
provision expense for the first half of 1995. As a result of the Company's
continued loan growth and introduction of Loan Central, Inc., a finance company
which emphasizes consumer loans, management expects the provision for loan
losses to remain at its current level adjusted to reflect charges to the
allowance for any account carrying a specific allocation.
11
<PAGE>
Total investment securities declined 14.02% from December 31, 1995. The decrease
in investments was due to the reinvestment of maturities and calls into loans
where higher yields were recognized. U.S. Treasury notes and U.S. Government
agencies declined $5,489,000 and $5,495,000 from December 31, 1995. The fair
market value of the investment portfolio was less than the amortized cost by
$76,000 at June 30, 1996 compared to an $816,000 unrealized gain at December 31,
1995. The decrease in market value was due to an increase in market rates during
the first half of 1996. Within the Company's investment 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. The investment portfolio contains
$17,000,000 of structured notes which represents 23.89% of the entire portfolio.
The fair market value of these securities was less than the amortized cost by
$206,000 or 1.48%. Management has the ability and intends to hold these
securities to maturity. The Company has had no sales of investment securities
during 1996 and does not anticipate any sales.
Total deposits at June 30, 1996, of $275,273,000 represents an increase of
$2,904,000 or 1.07% from December 31, 1995. Time deposits accounted for the
growth by increasing $2,233,000. Savings and interest-bearing demand deposits
are up slightly.
Other borrowed funds are primarily advances from the Federal Home Loan Bank
(FHLB), which are used to fund loan growth and management has matched the FHLB
advance repayment terms with loans that have similar repayments. The increase in
promissory notes are a result of Loan Central utilizing this type of debt to
fund loan growth.
Total shareholders' equity at June 30, 1996 of $28,500,000 was 3.35% greater
than the balance of $27,577,000 on December 31, 1995. Contributing to this
increase was year-to-date income of $1,527,000 and proceeds from the issuance of
common stock through the dividend reinvestment plan of $413,000 less cash
dividends paid of $632,000, or $.59 per share (adjusted for stock split). The
cash dividend represents 41.36% of the year-to-date income; although the
Dividend Reinvestment Plan effectively reduces the payout ratio to 14.30%.
Management's decision to effect a five for four stock split was generated by a
desire to make the Company's common stock more accessible to the smaller
investor.
12
<PAGE>
RESULTS OF OPERATIONS
Ohio Valley Banc Corp.'s net income was $800,000 for the second quarter and
$1,527,000 for the first six months of 1996, up 25.70% and 24.35%, respectively,
compared to $637,000 and $1,228,000 for the same periods in 1995. Comparing the
first half of 1996 to the first half of 1995, return on average assets was .96%
compared to .78% and return on average equity was 10.97% compared to 9.94%. The
Company's net income per share for the second quarter was $.62, a 21.57%
increase over 1995's $.51 and $1.18 for the first six months, up 20.41% over
1995's $.98, adjusted for the five for four stock split. Contributing to the
gain in net income over June 30, 1995's performance was net interest income
which exceeded the year-to-date and second quarter of last year by $1,111,000
and $646,000. Total interest income was up $831,000 and total interest expense
was down $281,000 for the first six months of 1996 compared to the same period
in 1995. Due to the change in balance sheet mix as discussed earlier, the
Company had an increase in the spread between earning assets and
interest-bearing liabilities. Management does not expect this trend to the
interest margin to continue indefinitely. The Bank's adjusted cumulative gap
reflects a modest asset sensitive position of 1.16% in the time frame of less
than one year. This gap position is well within the Bank's Asset and Liability
Policy of plus or minus 15%. As a result, the Company does not expect a large
change in net interest income due to an increase or decrease in interest rates.
See the gap table on pages 15 and 16 for more detailed information on asset and
liability ratios.
Other income increased $59,000 and $16,000 over the year-to-date and second
quarter of 1995. The increase is primarily due to service charges on deposit
accounts. Other expense increased $293,000 or 12.82% over the second quarter of
1995 and increased $464,000 or 10.19% over the first six months of 1995. The
increase in salary and employee benefits was due to an increase in the number of
full-time equivalent employees from 183 at June 30, 1995 to 188 at June 30, 1996
and from annual merit increases. The increase in occupancy, furniture and
equipment, and other operating expenses were caused by the expense associated
with the establishment of two offices for Loan Central, Inc. and an additional
building for the Bank used for general office space. The Bank's insurance rate
per $100 of deposits for the first half of 1996 was $0 compared to $.23 for the
first half of 1995. As a result, FDIC premiums are down significantly.
13
<PAGE>
CAPITAL RESOURCES
Shareholders' equity totaled $28,500,000 at June 30, 1996, compared to
$27,577,000 at December 31, 1995. All of the capital ratio's exceeded the
regulatory minimum guidelines as identified in the following table:
Company Ratios Regulatory
June 30, 1996 December 31, 1995 Minimum
------------- ------------------- --------
Tier 1 risk-based capital 12.56% 13.27% 4.00%
Total risk-based capital ratio 13.73% 14.45% 8.00%
Leverage ratio 8.77% 8.54% 4.00-5.00%
Cash dividends paid of $632,000 ($.49 per share) for the first six months of
1996 represents a 7.92% increase over the cash dividends paid during the same
period in 1995 ($.47 per share). The increase in cash dividends paid is due to
the additional shares outstanding during 1996 which were not outstanding during
1995 and to the increase in the dividend paid per share. During the first half
of 1996, the Company issued 11,671 shares under the dividend reinvestment and
stock purchase plan. At June 30, 1996, approximately 54% of the shareholders
were enrolled in the dividend reinvestment plan.
LIQUIDITY
Liquidity relates to the Bank's ability to meet the cash demands and credit
needs of its customers and is provided by the ability to readily convert assets
to cash and raise funds in the market place. Total cash and cash equivalents,
interest-bearing deposits with banks, securities available-for-sale and
held-to-maturity securities maturing within one year of $45,750,000 represented
14.16% of total assets at June 30, 1996. In addition, the Corporation has
established a $16,200,000 line of credit with the Federal Home Loan Bank in
Cincinnati to further enhance the bank's ability to meet liquidity demands. The
Company experienced a decrease of $4,837,000 in cash and cash equivalents for
the six months ended June 30, 1996. See the condensed consolidated statement of
cash flows on page 5 for further cash flow information.
CONCENTRATION OF CREDIT RISK
The Company maintains a diversified credit portfolio, with real estate loans
comprising the most significant portion. Credit risk is primarily subject to
loans made to businesses and individuals in southeastern Ohio. Management
believes this risk to be general in nature, as there are no material
concentrations of loans to any industry or consumer group. To the extent
possible, the Company diversifies its loan portfolio to limit credit risk by
avoiding industry concentrations.
14
<PAGE>
OHIO VALLEY BANC CORP
RATE SENSITIVITY ANALYSIS
As of June 30, 1996
<TABLE>
<CAPTION>
Non-rate
Sensitive
1 To 3 To 1 To & Over
90 Days 12 Months 5 Years 5 Years Total
<S> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-bearing balances
with banks $ 52,461 $ 52,461
Investment securities 11,628,948 $ 14,335,966 $ 36,563,316 $ 8,625,161 71,153,391
Total loans 58,614,742 84,543,903 46,626,588 49,445,895 239,231,128
Total interest-
earning assets 70,296,151 98,879,869 83,189,904 58,071,056 310,436,980
Noninterest-earning assets:
Cash and noninterest-bearing
deposits with banks 6,393,621 6,393,621
Bank premises and equipment 5,720,098 5,720,098
Accrued interest receivable 2,310,265 2,310,265
Other assets 986,621 986,621
Less: Allowance for loan losses (2,648,505) (2,648,505)
Total assets $ 70,296,151 $ 98,879,869 $ 83,189,904 $ 70,833,156 $323,199,080
</TABLE>
(Continued)
15
<PAGE>
OHIO VALLEY BANC CORP
RATE SENSITIVITY ANALYSIS (Continued)
As of June 30, 1996
<TABLE>
<CAPTION>
Non-rate
Sensitive
1 To 3 To 1 To & Over
90 Days 12 Months 5 Years 5 Years Total
<S> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits $ 87,672,769 $ 65,753,785 $ 84,321,962 $ 3,867,000 $241,615,516
Securities sold under agreements
to repurchase 8,817,296 8,817,296
Other borrowed funds 2,132,906 1,046,787 3,588,891 588,685 7,357,269
Total interest-bearing
liabilities 98,622,971 66,800,572 87,910,853 4,455,685 257,790,081
Noninterest-bearing liabilities:
Noninterest-bearing deposits 33,657,022 33,657,022
Accrued liabilities 3,251,632 3,251,632
Total shareholders' equity 28,500,345 28,500,345
Total liabilities and
shareholders' equity $ 98,622,971 $ 66,800,572 $ 87,910,853 $ 69,864,684 $323,199,080
Rate sensitive gap $(28,326,820) $ 32,079,297 $ (4,720,949) $ 53,615,371 $ 49,162,112
Rate sensitive gap as a
percentage of total assets (8.77)% 9.93 % (1.46)% 16.59 % 15.21 %
Cumulative gap $(28,326,820) $ 3,752,477 $ (968,472) $ 52,646,899
Cumulative gap as a
percentage of total assets (8.77)% 1.16 % (0.30)% 16.29 %
</TABLE>
16
<PAGE>
OHIO VALLEY BANC CORP
Part II - Other Information
Submission of Matters to a Vote of Security Holders
Ohio Valley Banc Corp. held its Annual Meeting of Shareholders on April 3,1996,
for the purpose of electing directors and increasing the number of authorized
shares of the Company from 2,000,000 to 5,000,000. Shareholders received proxy
materials containing the information required by these items. Three Directors,
James L. Dailey, Morris E. Haskins, and W. Lowell Call, were nominated for
reelection and were reelected. The proposal to increase the number of shares
authorized was approved. The summary of voting of the 1,032,639 shares
outstanding were as follows:
Director Candidate Shares voted: For Against Abstain
James L. Dailey 861,616 818
Morris E. Haskins 862,434
W. Lowell Call 862,434
Increase in authorized shares 850,685 7,806 3,943
170,205 shares were not voted.
Exhibits and Reports on Form 8-K
A. Exhibits - not applicable
B. Reports - Form 8-K - No reports on Form 8-K were filed by the Registrant
during the first six months of 1996.
OHIO VALLEY BANC CORP.
Date August 13, 1996 /S/ James L. Dailey
James L. Dailey
Chairman and Chief Executive Officer
Date August 13, 1996 /S/ Jeffrey E. Smith
Jeffrey E. Smith
President, Chief Operating Officer
and Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,393,621
<INT-BEARING-DEPOSITS> 52,461
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 43,216,924
<INVESTMENTS-MARKET> 43,160,126
<LOANS> 239,231,128
<ALLOWANCE> 2,648,505
<TOTAL-ASSETS> 323,199,080
<DEPOSITS> 275,272,538
<SHORT-TERM> 10,817,296
<LIABILITIES-OTHER> 3,251,632
<LONG-TERM> 5,357,269
0
0
<COMMON> 12,989,750
<OTHER-SE> 15,510,595
<TOTAL-LIABILITIES-AND-EQUITY> 323,199,080
<INTEREST-LOAN> 10,724,617
<INTEREST-INVEST> 2,126,437
<INTEREST-OTHER> 384,161
<INTEREST-TOTAL> 12,988,943
<INTEREST-DEPOSIT> 5,620,599
<INTEREST-EXPENSE> 5,957,567
<INTEREST-INCOME-NET> 7,031,376
<LOAN-LOSSES> 519,076
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,022,772
<INCOME-PRETAX> 2,157,503
<INCOME-PRE-EXTRAORDINARY> 2,157,503
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,526,891
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 4.71
<LOANS-NON> 1,791,871
<LOANS-PAST> 1,495,552
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 225,000
<ALLOWANCE-OPEN> 2,388,639
<CHARGE-OFFS> 292,601
<RECOVERIES> 33,391
<ALLOWANCE-CLOSE> 2,648,505
<ALLOWANCE-DOMESTIC> 1,686,636
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 961,869
</TABLE>
