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:
SEPTEMBER 30, 1997
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
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(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.
Yes X No
------- -------
Indicate the number of shares outstanding of the issuers classes of
common stock, as of the latest practicable date.
Common stock, $1.00 stated value Outstanding at October 31, 1997
1,786,556 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
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
Part II - Other Information
Other Information and Signatures ................................ 14
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
------------ -------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 9,738,887 $ 8,687,640
Federal funds sold ............................... 6,377,096
------------ ------------
Total cash and cash equivalents ............. 16,115,983 8,687,640
Interest-bearing balances with banks ............. 94,542 77,618
Securities available-for-sale (Note 2) ........... 34,100,994 30,591,988
Securities held-to-maturity (Approximate market
value: $37,988,000 and $36,253,000)(Note 2) ... 37,614,916 35,996,835
Total loans (Note 3) ............................. 263,924,978 254,044,106
Allowance for loan losses (Note 4) ............... (3,223,238) (3,080,494)
------------ ------------
Net loans ................................... 260,701,740 250,963,612
Premises and equipment, net ...................... 6,750,260 6,365,672
Accrued interest receivable ...................... 2,441,007 2,354,809
Other assets ..................................... 7,785,310 5,884,503
------------ ------------
Total assets ........................... $365,604,752 $340,922,677
============ ============
LIABILITIES
Noninterest-bearing deposits ..................... $ 36,202,044 $ 34,091,593
Interest-bearing deposits ........................ 262,294,080 247,733,542
------------ ------------
Total deposits .............................. 298,496,124 281,825,135
Securities sold under agreements to repurchase ... 15,118,527 8,713,972
Other borrowed funds (Note 6) .................... 13,963,247 17,210,117
Accrued liabilities .............................. 5,121,884 2,795,452
------------ ------------
Total liabilities ...................... 332,699,782 310,544,676
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 5,000,000
shares authorized; 1,786,556 shares issued
and outstanding at September 30, 1997; $10.00
stated value, 1,318,262 shares issued and
outstanding at December 31, 1996) ............. 1,786,556 13,182,620
Surplus .......................................... 25,379,888 12,618,641
Retained earnings ................................ 5,514,840 4,376,500
Net unrealized gains on available-for-sale
securities .................................... 223,686 200,240
------------ ------------
Total shareholders' equity .................... 32,904,970 30,378,001
------------ ------------
Total liabilities and
shareholders' equity ................ $365,604,752 $340,922,677
============ ============
See notes to the consolidated financial statements.
1
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ...... $ 6,616,862 $ 5,855,284 $ 19,200,893 $ 16,579,901
Interest and dividends on
investment securities
Taxable ...................... 825,406 835,236 2,418,176 2,577,512
Nontaxable ................... 156,351 154,910 464,130 464,328
Dividends .................... 53,088 38,283 149,314 113,026
------------ ------------ ------------ ------------
1,034,845 1,028,429 3,031,620 3,154,866
Interest on federal funds sold .. 86,105 8,913 170,341 145,493
Interest on deposits with banks 1,343 711 3,783 2,020
------------ ------------ ------------ ------------
Interest on investments ...... 1,122,293 1,038,053 3,205,744 3,302,379
------------ ------------ ------------ ------------
Total interest income ..... 7,739,155 6,893,337 22,406,637 19,882,280
Interest expense:
Interest on deposits ............ 3,195,055 2,861,879 9,327,711 8,482,478
Interest on repurchase agreements 131,216 79,127 291,478 267,325
Interest on other borrowed funds 213,081 134,024 683,327 282,794
------------ ------------ ------------ ------------
Total interest expense ..... 3,539,352 3,075,030 10,302,516 9,032,597
------------ ------------ ------------ ------------
Net interest income ................ 4,199,803 3,818,307 12,104,121 10,849,683
Provision for loan losses (Note 4) 266,221 238,516 768,196 757,592
------------ ------------ ------------ ------------
Net interest income after provision 3,933,582 3,579,791 11,335,925 10,092,091
Other income:
Service charges on deposit accounts 209,139 204,592 589,013 584,787
Trust division income ........... 48,526 45,257 144,886 166,827
Other operating income .......... 195,052 91,856 563,192 258,066
------------ ------------ ------------ ------------
Total other income ......... 452,717 341,705 1,297,091 1,009,680
Other expense:
Salaries and employee benefits .. 1,802,361 1,581,939 5,201,830 4,490,268
FDIC premiums ................... 9,082 500 26,550 1,500
Occupancy expense ............... 139,052 115,748 389,616 342,835
Furniture and equipment expense 213,589 167,000 539,390 461,147
Data processing expense ......... 100,000 136,100 412,000 365,955
Other operating expense ......... 823,147 729,369 2,427,677 2,091,723
------------ ------------ ------------ ------------
Total other expense ........ 3,087,231 2,730,656 8,997,063 7,753,428
------------ ------------ ------------ ------------
</TABLE>
(Continued)
2
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (Continued)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income before federal income taxes $ 1,299,068 $ 1,190,840 $ 3,635,953 $ 3,348,343
Provision for income taxes ......... 363,507 350,852 1,006,243 981,464
------------ ------------ ------------ ------------
Net income ......................... $ 935,561 $ 839,988 $ 2,629,710 $ 2,366,879
============ ============ ============ ============
Earnings per share (Note 1): ....... $ .52 $ .48 $ 1.48 $ 1.37
============ ============ ============ ============
Dividends per share (Note 1): ...... $ .20 $ .19 $ .59 $ .55
============ ============ ============ ============
Weighted average shares
outstanding (Note 1): ........... 1,782,688 1,737,177 1,773,237 1,727,652
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at beginning of period .... $ 31,905,169 $ 28,500,345 $ 30,378,001 $ 27,577,478
Net income ........................ 935,561 839,988 2,629,710 2,366,879
Proceeds from issuance of common
stock through the dividend
reinvestment plan .............. 328,526 242,932 923,436 656,169
Cash paid in lieu of fractional
shares in stock split .......... (10,901) (9,214)
Cash dividends .................... (355,541) (324,744) (1,038,722) (956,286)
Net change in unrealized
appreciation on available-
for-sale securities ............ 91,255 36,852 23,446 (339,653)
------------ ------------ ------------ ------------
Balance at end of period .......... $ 32,904,970 $ 29,295,373 $ 32,904,970 $ 29,295,373
============ ============ ============ ============
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
1997 1996
------------ ------------
Net cash from operating activities ........... $ 4,103,663 $ 4,400,087
Investing activities
Proceeds from maturities of
securities available-for-sale .......... 3,000,000 9,000,000
Purchases of securities available-
for-sale ............................... (6,314,274) (7,046,953)
Proceeds from maturities of
securities held-to-maturity ............ 9,695,660 10,706,524
Purchase of securities held-to-maturity ... (11,369,457) (621,175)
Change in interest-bearing deposits
in other banks ......................... (16,924) (10,656)
Net increase in loans ..................... (10,506,324) (33,035,688)
Purchase of premises and equipment, net ... (866,488) (463,796)
------------ ------------
Net cash from investing activities ... (16,377,807) (21,471,744)
Financing activities
Net change in deposits .................... 16,670,989 10,985,302
Cash dividends ............................ (1,038,722) (956,286)
Cash paid in lieu of fractional shares
in stock split ......................... (10,901) (9,214)
Proceeds from issuance of common stock .... 923,436 656,169
Change in securities sold under
agreements to repurchase ............... 6,404,555 1,767,721
Proceeds from long-term borrowings ........ 11,200,000 3,500,000
Repayment of long-term borrowings ......... (5,311,870) (1,779,839)
Change in other short-term borrowings ..... (9,135,000) 1,220,000
------------ ------------
Net cash from financing activities ... 19,702,487 15,383,853
------------ ------------
Change in cash and cash equivalents .......... 7,428,343 (1,687,804)
Cash and cash equivalents at beginning
of year ................................... 8,687,640 11,230,748
------------ -------------
Cash and cash equivalents at end of year ..... $ 16,115,983 $ 9,542,944
============ =============
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 September 30, 1997, 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, 1996, 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 nine months ended September
30, 1997 and September 30, 1996, Ohio Valley Banc Corp. paid interest in the
amount of $10,003,007 and $9,449,762, respectively. For the nine months ended
September 30, 1997 and September 30, 1996, Ohio Valley Banc Corp. paid income
taxes of $1,160,000 and $1,000,000, respectively.
Earnings per share is computed based on the weighted average shares outstanding
during the period. On April 9, 1997, the Board of Directors declared a four for
three stock split to shareholders of record on April 21, 1997. 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.
On April 9, 1997, the shareholders approved a proposal to fix the stated capital
of the common shares of the Company at one dollar per share, a change from ten
dollars per share previously applied.
(Continued)
6
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of the securities, as presented in the consolidated balance sheet at September
30, 1997 and December 31, 1996 are as follows:
September 30, 1997
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities ........... $ 28,584,189 $ 371,634 $ 385 $ 28,955,438
U.S. Government agency
securities ........... 2,030,086 20,014 2,050,100
Marketable equity
securities ........... 3,147,800 52,344 3,095,456
------------ ---------- ---------- ------------
Total securities ... $ 33,762,075 $ 391,648 $ 52,729 $ 34,100,994
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
U.S. Government agency
securities ........... $ 23,360,291 $ 66,936 $ 32,501 $ 23,394,726
Obligations of state and
political subdivisions 13,255,218 370,654 11,041 13,614,831
Corporate Obligations ... 504,580 4,820 509,400
Mortgage-backed securities 494,827 1,393 26,968 469,252
------------ ---------- ---------- ------------
Total securities ... $ 37,614,916 $ 443,803 $ 70,510 $ 37,988,209
============ ========== ========== ============
December 31, 1996
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities ............ $ 28,038,794 $ 432,570 $ 4,176 $ 28,467,188
Marketable equity
securities ............ 2,249,800 125,000 2,124,800
------------ ---------- ---------- ------------
Total securities ... $ 30,288,594 $ 432,570 $ 129,176 $ 30,591,988
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
U.S. Government agency
securities ............. $ 22,441,039 $ 100,444 $ 84,667 $ 22,456,816
Obligations of state and
political subdivisions 12,252,242 288,961 29,808 12,511,395
Corporate Obligations ... 758,062 7,838 765,900
Mortgage-backed securities 545,492 1,724 28,551 518,665
------------ ---------- ---------- ------------
Total securities ... $ 35,996,835 $ 398,967 $ 143,026 $ 36,252,776
============ ========== ========== ============
(Continued)
7
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at September 30,
1997, 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 ........... $ 8,461,580 $ 8,512,969 $ 14,887,776 $ 14,923,487
Due in one to
five years ........ 22,152,695 22,492,569 17,013,339 17,111,913
Due in five to
ten years ......... 5,218,974 5,483,557
Mortgage-backed sec. 494,827 469,252
------------ ------------ ------------ ------------
Total debt
securities ........ $ 30,614,275 $ 31,005,538 $ 37,614,916 $ 37,988,209
============ ============ ============ ============
Gains and losses on the sale of securities are determined using the specific
identification method. There were no sales of debt or equity securities during
the first nine months of 1997 or 1996.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
September 30, December 31,
1997 1996
------------ ------------
Real estate loans ................................. $118,553,494 $113,648,586
Commercial and industrial loans ................... 65,073,005 63,174,969
Consumer loans .................................... 77,935,014 74,908,483
Other loans ....................................... 2,363,465 2,312,068
------------ ------------
$263,924,978 $254,044,106
============ ============
At September 30, 1997 and December 31, 1996, loans on nonaccrual status were
approximately $819,000 and $737,000, respectively. Loans past due more than 90
days and still accruing at September 30, 1997 and December 31, 1996 were
$2,938,000 and $2,207,000, respectively. Other real estate owned at September
30, 1997 totaled $217,110, unchanged from December 31, 1996.
(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 nine months ended
September 30, 1997 and September 30, 1996 is as follows:
1997 1996
------------ ------------
Balance - January 1, ........................ $ 3,080,494 $ 2,388,639
Loans charged off:
Real estate ............................ 2,741 1,250
Commercial ............................. 102,385 73,374
Consumer ............................... 670,415 336,288
------------ ------------
Total loans charged off ........... 775,541 410,912
Recoveries of loans:
Real estate
Commercial ............................. 39,778 103
Consumer ............................... 110,311 40,614
------------ -----------
Total recoveries .................. 150,089 40,717
Net loan charge-offs ........................ (625,452) (370,195)
Provision charged to operations ............. 768,196 757,592
------------ ------------
Balance - September 30, ..................... $ 3,223,238 $ 2,776,036
============ ============
Information regarding impaired loans at September 30, 1997 and September 30,
1996:
1997 1996
------------ ------------
Balance of impaired loans ..................... $ 437,096 $ 1,599,876
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 ...... $ 437,096 $ 1,599,876
============ ============
Portion of allowance for loan losses
allocated to the impaired loan balance ........ $ 200,000 $ 100,000
============ ============
Information regarding impaired loans for the periods ended September 30, 1997
and September 30, 1996:
Average investment in impaired
loans for the year ............................ $ 442,967 $ 1,554,196
Interest income recognized on impaired
loans including interest income
recognized on a cash basis .................... 9,396
Interest 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 subsidiaries, grants residential, consumer, and
commercial loans to customers located primarily in the southeastern Ohio area.
Approximately 9.30% of total loans are unsecured at September 30, 1997.
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
September 30, 1997, 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 $36,021,000.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at September 30, 1997 and December 31, 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 which total $18,216,924 at September 30, 1997.
Promissory notes have been issued primarily by the Parent Company and are due at
various dates through a final maturity date of May 29, 2002.
Interest Balance Balance
Maturity Rates at 9/30/97 at 12/31/96
-------- ------- ------------ ------------
1997 5.83 $ 1,000,000 $ 11,675,000
1998 5.55-6.05 7,599,976 448,616
2000 6.00-6.15 1,500,000 1,500,000
2002 5.80-6.10 2,044,641 2,300,788
------------ -------------
Total FHLB borrowings 12,144,617 15,924,404
Promissory notes 4.50-7.10 1,818,630 1,285,713
------------ -------------
Total $ 13,963,247 $ 17,210,117
============ =============
The following table is a summary of the scheduled principal payments for these
borrowings at September 30, 1997:
1997 1998 1999 2000 2001 Thereafter
---- ---- ---- ---- ---- ----------
FHLB borrowings $1,123,368 $7,961,306 $ 389,718 $1,913,709 $ 439,178 $ 317,338
Promissory notes 942,448 785,230 15,981 16,780 52,650 5,541
(Continued)
10
<PAGE>
OHIO VALLEY BANC CORP
Item 2. Management's Discussion and Analysis of Financial Condition and Results
Results of Operations.
INTRODUCTION
The following discussion focuses on the consolidated financial condition of Ohio
Valley Banc Corp. at September 30, 1997, compared to December 31, 1996, and the
consolidated results of operations for the year-to-date and quarterly periods
ending September 30, 1997, compared to the same periods in 1996. 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 $24,682,000 or 7.2%
for the first nine months of 1997 to reach $365,605,000. Contributing to the
growth in assets were the increases in loan balances of $9,881,000 and
investment balances of $5,127,000. Funding the growth in assets were gains in
total deposits of $16,671,000 and in securities sold under agreements to
repurchase of $6,405,000.
For the first nine months of 1997, mortgage loans expanded $4,905,000 or 4.3%
followed by consumer loan growth of $3,027,000 and commercial loan growth of
$1,898,000. The ratio of loans to deposits was 88.4% at September 30, 1997,
compared to 90.1% at December 31, 1996. Loans past due more than 90 days plus
loans placed on nonaccrual status were approximately $3,757,000 or 1.42% of
outstanding balances at September 30, 1997, compared to $2,944,000 or 1.16% of
outstanding balances at the end of 1996. As a percentage of total loans, the
allowance for loan losses at September 30, 1997 was 1.22% versus 1.21% at
December 31, 1996. Management utilizes an extensive system of evaluating the
adequacy of the allowance for loan losses quarterly. Consequently, management
anticipates that it will continue its provision to the allowance for loan losses
at its current level for the foreseeable future and believes the allowance is
adequate to absorb inherent losses in the portfolio based on collateral values.
In addition, the majority of the loan growth has occurred in mortgage loans
which are generally well secured and consumer loans which are lower balance
loans made to many different borrowers.
Total investment securities increased 7.7% from December 31, 1996. The growth
occurred in U.S. Government agencies and state and municipal bonds, which are up
$2,969,000 and $1,003,000. The fair market value of the portfolio was higher
than the amortized cost by $712,000 at September 30, 1997 compared to a $559,000
unrealized gain at December 31, 1996. 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. The investment portfolio contains $6,000,000 of structured
notes which represents 8% of the entire portfolio. The fair market value of
these securities was less than the amortized cost by $23,000 or .4%. $6,500,000
of the structured notes matured during the first nine months of 1997. The
remaining $6,000,000 will mature by April 1998. Management has the ability and
presently intends to hold these securities to maturity. The Company has had no
sales of investment securities during 1997 and does not anticipate any sales.
11
<PAGE>
Total deposits at September 30, 1997, of $298,496,000 represents an increase of
5.9% from December 31, 1996. Time deposits accounted for a majority of the
growth by increasing $11,266,000 or 6.5%. Savings and interest-bearing demand
deposits are up 4.4% and demand deposits are up 6.2%.
Securities sold under agreements to repurchase increased $6,405,000 from
December 31, 1996. Other borrowed funds are primarily advances from the Federal
Home Loan Bank (FHLB), which are used to fund loan growth or short-term
liquidity needs. Other borrowed funds are down $3,247,000 from December 31, 1996
due to the repayment of short-term borrowings.
Total shareholders' equity at September 30, 1997 of $32,905,000 was 8.3% greater
than the balance of $30,378,000 on December 31, 1996. Contributing to this
increase was year-to-date income of $2,630,000 and proceeds from the issuance of
common stock through the dividend reinvestment plan of $923,000 less cash
dividends paid of $1,039,000, or $.59 per share adjusted for stock split. The
cash dividend represents 39.5% of the year-to-date income; although the Dividend
Reinvestment Plan effectively reduces the payout ratio to 4.4%.
RESULTS OF OPERATIONS
Ohio Valley Banc Corp.'s net income was $936,000 for the third quarter and
$2,630,000 for the first nine months of 1997, up 11.4% and 11.1%, compared to
$840,000 and $2,367,000 for the same periods in 1996. Third quarter net income
per share, adjusted for the stock split, was $.52, up 8.3% over last year's $.48
and $1.48 for the first nine months of 1997, up 8.0% over 1996's $1.37. Return
on assets was 1.00% at September 30, 1997, up from .98% a year ago and return on
equity was 11.20% compared to 11.19% for the same time period.
The improved earnings are primarily a result of net interest income, which
surpassed the year-to-date and third quarter of last year by $1,254,000 and
$381,000. The growth in earning assets combined with a higher net interest
margin resulted in additional net interest income. Management anticipates the
net interest margin to stabilize in the future due to the desired mix of loans
to investments being achieved.
Total other income increased $287,000 and $111,000 over the year-to-date and
third quarter of 1996. The increase was related to earnings on life insurance
contracts purchased in the fourth quarter of 1996 to take advantage of the tax
preferenced nature of life insurance contracts and to support additional benefit
packages. Total other expense increased $1,244,000 or 16.0% over the first nine
months of 1996 and increased $357,000 or 13.1% over the third quarter of 1996.
With the establishment of new offices, the conversion of our Point Pleasant
office from a loan origination office to a full-service bank branch and growth
in assets which require more people to service, the number of full-time
equivalent employees increased by 30 from September 30, 1996 to September 30,
1997. Salary and employee benefits are up $712,000 over the first nine months of
1996 and are up $220,000 over the third quarter of 1996. Data processing
expenses increased in relation to the system conversion and credit card
processing. Contributing to the increase in other operating expense was the
supplemental retirement program established in 1997 and general increases in
overhead expenses.
12
<PAGE>
CAPITAL RESOURCES
Shareholders' equity totaled $32,905,000 at September 30, 1997, compared to
$30,378,000 at December 31, 1996. All of the capital ratio's exceeded the
regulatory minimum guidelines as identified in the following table:
Company Ratios Regulatory
September 30, 1997 December 31, 1996 Minimum
------------------ ----------------- --------
Tier 1 risk-based capital 12.7% 12.5% 4.00%
Total risk-based capital ratio 14.0% 13.8% 8.00%
Leverage ratio 9.1% 8.9% 4.00%
Cash dividends paid of $1,039,000 for the first nine months of 1997 represents a
8.6% increase over the cash dividends paid during the same period in 1996. The
increase in cash dividends paid is due to the additional shares outstanding
during 1997 which were not outstanding during 1996 and to the increase in the
dividend paid per share. During the first nine months of 1997, the Company
issued 25,546 shares under the dividend reinvestment and stock purchase plan. At
September 30, 1997, approximately 60% 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 the fair
value of held-to-maturity securities maturing within one year of $65,235,000
represented 17.8% of total assets at September 30, 1997. In addition, the
Corporation has established a $16,900,000 line of credit with the Federal Home
Loan Bank in Cincinnati to further enhance the bank's ability to meet liquidity
demands. As of September 30, 1997, the Bank had the full amount of the line of
credit available. The Company experienced an increase of $7,428,000 in cash and
cash equivalents for the nine months ended September 30, 1997. 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.
13
<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 9, 1997,
for the purpose of electing directors and fixing the stated capital of common
shares of the Company at one dollar per share. Shareholders received proxy
materials containing the information required by these items. Three Directors,
Keith R. Brandeberry, Merrill L. Evans, and Thomas E. Wiseman, were nominated
for reelection and were reelected. The proposal to fix the stated capital at one
dollar per share was approved. The summary of voting of the 1,325,937 shares
outstanding were as follows:
Director Candidate Shares voted: For Against Abstain
- ------------------ --- ------- -------
Keith R. Brandeberry 1,078,539 11,768
Merrill L. Evans 1,069,013 21,294
Thomas E. Wiseman 1,087,115 3,192
Proposal to fix the stated
capital of common shares of the
Company at one dollar per share 1,073,412 1,920 14,975
235,630 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 nine months of 1997.
OHIO VALLEY BANC CORP.
------------------------------------
Date November 14, 1997 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman and Chief Executive Officer
Date November 14, 1997 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President, Chief Operating Officer
and Treasurer
14
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,738,887
<INT-BEARING-DEPOSITS> 94,542
<FED-FUNDS-SOLD> 6,377,096
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