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, 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
commom stock, as of the latest practicable date.
Common stock, $1.00 stated value Outstanding at July 31, 1997
1,777,707 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED JUNE 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
June 30, December 31,
1997 1996
------------ -------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 12,024,330 $ 8,687,640
Federal funds sold 1,425,000
------------ ------------
Total cash and cash equivalents 13,449,330 8,687,640
Interest-bearing balances with banks 66,595 77,618
Securities available-for-sale (Note 2) 32,900,731 30,591,988
Securities held-to-maturity (Approximate market
value: $33,870,000 and $36,253,000)(Note 2) 33,590,014 35,996,835
Total loans (Note 3) 262,876,236 254,044,106
Allowance for loan losses (Note 4) (3,145,751) (3,080,494)
------------ ------------
Net loans 259,730,485 250,963,612
Premises and equipment, net 7,225,146 6,365,672
Accrued interest receivable 2,224,329 2,354,809
Other assets 6,871,243 5,884,503
------------ ------------
Total assets $356,057,873 $340,922,677
============ ============
LIABILITIES
Noninterest-bearing deposits $ 34,174,949 $ 34,091,593
Interest-bearing deposits 254,018,686 247,733,542
------------ ------------
Total deposits 288,193,635 281,825,135
Securities sold under agreements to repurchase 16,767,912 8,713,972
Other borrowed funds (Note 6) 14,090,575 17,210,117
Accrued liabilities 5,100,582 2,795,452
------------ ------------
Total liabilities 324,152,704 310,544,676
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 5,000,000
shares authorized; 1,777,707 shares issued
and outstanding at June 30, 1997; $10.00
stated value, 1,318,262 shares issued and
outstanding at December 31, 1996) 1,777,707 13,182,620
Surplus 25,060,211 12,618,641
Retained earnings 4,934,820 4,376,500
Net unrealized gains on available-for-sale
securities 132,431 200,240
------------ ------------
Total shareholders' equity 31,905,169 30,378,001
------------ ------------
Total liabilities and
shareholders' equity $356,057,873 $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 Six months ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,439,567 $ 5,522,133 $ 12,584,031 $ 10,724,617
Interest and dividends on
investment securities
Taxable 798,820 844,324 1,592,770 1,742,276
Nontaxable 153,941 153,860 307,779 309,418
Dividends 51,803 37,528 96,226 74,743
------------ ------------ ------------ ------------
1,004,564 1,035,712 1,996,775 2,126,437
Interest on federal funds sold 71,854 57,333 84,236 136,580
Interest on deposits with banks 1,288 652 2,440 1,309
------------ ------------ ------------ ------------
Interest on investments 1,077,706 1,093,697 2,083,451 2,264,326
------------ ------------ ------------ ------------
Total interest income 7,517,273 6,615,830 14,667,482 12,988,943
Interest expense:
Interest on deposits 3,153,843 2,786,358 6,132,656 5,620,599
Interest on repurchase agreements 90,401 88,314 160,262 188,198
Interest on other borrowed funds 220,702 77,994 470,246 148,770
------------ ------------ ------------ ------------
Total interest expense 3,464,946 2,952,666 6,763,164 5,957,567
------------ ------------ ------------ ------------
Net interest income 4,052,327 3,663,164 7,904,318 7,031,376
Provision for loan losses (Note 4) 202,493 281,274 501,975 519,076
------------ ------------ ------------ ------------
Net interest income after provision 3,849,834 3,381,890 7,402,343 6,512,300
Other income:
Service charges on deposit accounts 192,955 198,718 379,874 380,195
Trust division income 48,665 45,962 96,360 121,570
Other operating income 181,420 84,544 368,140 166,210
------------ ------------ ------------ ------------
Total other income 429,040 329,224 844,374 667,975
Other expense:
Salaries and employee benefits 1,716,934 1,494,240 3,399,469 2,908,329
FDIC premiums 8,970 500 17,468 1,000
Occupancy expense 128,147 103,235 250,564 227,087
Furniture and equipment expense 184,454 150,679 325,801 294,147
Data processing expense 156,000 123,118 312,000 229,855
Other operating expense 822,219 705,790 1,604,530 1,362,354
------------ ------------ ------------ ------------
Total other expense 3,016,724 2,577,562 5,909,832 5,022,772
------------ ------------ ------------ ------------
</TABLE>
(Continued)
2
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (Continued)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income before federal income taxes $ 1,262,150 $ 1,133,552 $ 2,336,885 $ 2,157,503
Provision for income taxes 352,863 333,227 642,736 630,612
------------ ------------ ------------ ------------
Net income $ 909,287 $ 800,325 $ 1,694,149 $ 1,526,891
============ ============ ============ ============
Earnings per share (Note 1): $ .51 $ .47 $ .96 $ .89
============ ============ ============ ============
Dividends per share (Note 1): $ .20 $ .18 $ .39 $ .36
============ ============ ============ ============
Weighted average shares
outstanding (Note 1): 1,773,477 1,727,019 1,768,433 1,722,837
</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 Six months ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 30,964,683 $ 27,987,692 $ 30,378,001 $ 27,577,478
Net income 909,287 800,325 1,694,149 1,526,891
Proceeds from issuance of common
stock through the dividend
reinvestment plan 295,828 271,972 594,909 413,237
Cash paid in lieu of fractional
shares in stock split (10,901) (9,214) (10,901) (9,214)
Cash dividends (353,615) (322,744) (683,180) (631,542)
Net change in unrealized
appreciation on available-
for-sale securities 99,887 (227,686) (67,809) (376,505)
------------ ------------ ------------ ------------
Balance at end of period $ 31,905,169 $ 28,500,345 $ 31,905,169 $ 28,500,345
============ ============ ============ ============
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30,
1997 1996
------------ ------------
Net cash from operating activities $ 3,899,665 $ 2,600,602
Investing activities
Proceeds from maturities of
securities available-for-sale 3,000,000 8,500,000
Purchases of securities available-
for-sale (4,537,443) (3,545,078)
Proceeds from maturities of
securities held-to-maturity 4,032,227 6,635,324
Purchase of securities held-to-maturity (2,431,959) (527,618)
Change in interest-bearing deposits
in other banks 11,023 (1,581)
Net increase in loans (9,268,848) (22,716,370)
Purchase of premises and equipment, net (1,146,701) (399,839)
------------ ------------
Net cash from investing activities (10,341,701) (12,055,162)
Financing activities
Net change in deposits 6,368,500 2,903,938
Cash dividends (683,180) (631,542)
Cash paid in lieu of fractional shares
in stock split (10,901) (9,214)
Proceeds from issuance of common stock 594,909 413,237
Change in securities sold under
agreements to repurchase 8,053,940 (687,054)
Proceeds from long-term borrowings 11,200,000 7,649,523
Repayment of long-term borrowings (5,218,542) (5,021,455)
Change in other short-term borrowings (9,101,000)
------------ ------------
Net cash from financing activities 11,203,726 4,617,433
------------ ------------
Change in cash and cash equivalents 4,761,690 (4,837,127)
Cash and cash equivalents at beginning
of year 8,687,640 11,230,748
------------ -------------
Cash and cash equivalents at end of year $ 13,449,330 $ 6,393,621
============ =============
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, 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 six months ended June 30,
1997 and June 30, 1996, Ohio Valley Banc Corp. paid interest in the amount of
$6,016,077 and $6,355,629, respectively. For the six months ended June 30, 1997
and June 30, 1996, Ohio Valley Banc Corp. paid income taxes of $790,000 and
$650,000, 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 March 31,
1997 and December 31, 1996 are as follows:
June 30, 1997
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities $ 28,570,225 $ 313,060 $ 5,410 $ 28,877,875
U.S. Government agency
securities 1,027,253 2,378 1,029,631
Marketable equity
securities 3,102,600 109,375 2,993,225
------------ ---------- ---------- ------------
Total securities $ 32,700,078 $ 315,438 $ 114,785 $ 32,900,731
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
U.S. Government agency
securities $ 20,191,313 $ 70,180 $ 76,390 $ 20,185,103
Obligations of state and
political subdivisions 12,380,915 325,757 15,601 12,691,071
Corporate Obligations 505,780 4,670 510,450
Mortgage-backed securities 512,006 1,197 29,915 483,288
------------ ---------- ---------- ------------
Total securities $ 33,590,014 $ 401,804 $ 121,906 $ 33,869,912
============ ========== ========== ============
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 June 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 $ 7,458,529 $ 7,520,000 $ 13,520,202 $ 13,475,277
Due in one to
five years 22,138,949 22,387,506 14,089,997 14,205,520
Due in five to
ten years 5,467,809 5,705,827
Mortgage-backed sec. 512,006 483,288
------------ ------------ ------------ ------------
Total debt
securities $ 29,597,478 $ 29,907,506 $ 33,590,014 $ 33,869,912
============ ============ ============ ============
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 six months of 1997 or 1996.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
June 30, December 31,
1997 1996
------------ ------------
Real estate loans $116,990,501 $113,648,586
Commercial and industrial loans 67,342,788 63,174,969
Consumer loans 76,317,312 74,908,483
Other loans 2,225,635 2,312,068
------------ ------------
$262,876,236 $254,044,106
============ ============
At June 30, 1997 and December 31, 1996, loans on nonaccrual status were
approximately $281,000 and $737,000, respectively. Loans past due more than 90
days and still accruing at June 30, 1997 and December 31, 1996 were $3,224,000
and $2,207,000, respectively. Other real estate owned at June 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 six months ended
June 30, 1997 and June 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 102,386 73,374
Consumer 432,882 217,977
------------ ------------
Total loans charged off 538,009 292,601
Recoveries of loans:
Real estate
Commercial 15,103 103
Consumer 86,188 33,288
------------ -----------
Total recoveries 101,291 33,391
Net loan charge-offs (436,718) (259,210)
Provision charged to operations 501,975 519,076
------------ ------------
Balance - June 30, $ 3,145,751 $ 2,648,505
============ ============
Information regarding impaired loans at June 30, 1997 and June 30, 1996:
1997 1996
------------ ------------
Balance of impaired loans $ 440,680 $ 1,604,628
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 $ 440,680 $ 1,604,628
============ ============
Portion of allowance for loan losses
allocated to the impaired loan balance $ 200,000 $ 100,000
============ ============
Information regarding impaired loans for the periods ended June 30, 1997 and
June 30, 1996:
Average investment in impaired
loans for the year $ 444,759 $ 1,556,373
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 8.92% of total loans are unsecured at June 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 June
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 $37,530,000.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at June 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 $18,353,324 at June 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 3/31/97 at 12/31/96
-------- ------- ------------ ------------
1997 5.83 $ 1,000,000 $ 11,675,000
1998 5.55-6.05 7,604,248 448,616
2000 6.00-6.15 1,500,000 1,500,000
2002 5.80-6.10 2,131,301 2,300,788
------------ -------------
Total FHLB borrowings 12,235,549 15,924,404
Promissory notes 4.50-7.10 1,855,026 1,285,713
------------ -------------
Total $ 14,090,575 $ 17,210,117
============ =============
The following table is a summary of the scheduled principal payments for these
borrowings at June 30, 1997:
1997 1998 1999 2000 2001 Thereafter
---- ---- ---- ---- ---- ----------
FHLB borrowings $1,214,301 $7,961,305 $ 389,718 $1,913,709 $ 439,178 $ 317,338
Promissory notes 1,178,844 585,230 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
of Operations.
INTRODUCTION
The following discussion focuses on the consolidated financial condition of Ohio
Valley Banc Corp. at June 30, 1997, compared to December 31, 1996, and the
consolidated results of operations for the year-to-date and quarterly periods
ending June 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
Total assets at June 30, 1997, were $356,058,000 compared to $340,923,000 at
December 31, 1996, representing an increase of 4.4%. Total loans were
$262,876,000 at June 30, 1997, which is $8,832,000 more than the December 31,
1996 level. Total deposits increased to $288,194,000 at June 30, 1997 from
$281,825,000 at December 31, 1996.
For the first half of 1997, commercial loans expanded $4,168,000 or 6.6%
followed by mortgage loan growth of $3,342,000 and consumer loan growth of
$1,409,000. The ratio of loans to deposits was 91.2% at June 30, 1997, compared
to 90.1% at December 31, 1996. The increase in this ratio was attributable to
loan growth along with funding provided by securities sold under agreements to
repurchase which have not been included in this ratio. Loans past due more than
90 days plus loans placed on nonaccrual status were approximately $3,505,000 or
1.33% of outstanding balances at June 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 June 30, 1997 was 1.20% versus 1.21% at December
31, 1996. 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.
The securities portfolio remained level from December 31, 1996 as management
reinvested maturing securities in U.S. Treasury notes or FHLB stock. The fair
market value of the portfolio was higher than the amortized cost by $481,000 at
June 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 $10,500,000 of structured notes which represents 16% of the
entire portfolio. The fair market value of these securities was less than the
amortized cost by $75,000 or .7%. Management has the ability and presently
11
<PAGE>
intends to hold these securities to maturity. $2 million of step-up bonds
matured during the first quarter of 1997. $7.5 million of the structured notes
are scheduled to mature in the second half of 1997. The Company has had no sales
of investment securities during 1997 and does not anticipate any sales.
Total deposits at June 30, 1997, of $288,194,000 represents an increase of
$6,369,000 or 2.3% from December 31, 1996. Time deposits accounted for the
growth by increasing $6,886,000. Savings and interest-bearing demand deposits
are down slightly.
Securities sold under agreements to repurchase increased $8,054,000 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 $3,120,000 from December 31, 1996
due to the repayment of short-term borrowings.
Total shareholders' equity at June 30, 1997 of $31,905,000 was 5.0% greater than
the balance of $30,378,000 on December 31, 1996. Contributing to this increase
was year-to-date income of $1,694,000 and proceeds from the issuance of common
stock through the dividend reinvestment plan of $595,000 less cash dividends
paid of $683,000, or $.39 per share adjusted for stock split. The cash dividend
represents 40.3% of the year-to-date income; although the Dividend Reinvestment
Plan effectively reduces the payout ratio to 5.2%.
RESULTS OF OPERATIONS
Ohio Valley Banc Corp.'s net income was $909,000 for the second quarter and
$1,694,000 for the first six months of 1997, up 13.6% and 11.0%, compared to
$800,000 and $1,527,000 for the same periods in 1996. Second quarter net income
per share, adjusted for the stock split, was $.51, up 8.5% over last year's $.47
and for the first six months of 1997, net income per share was $.96, up 7.9%
over 1996's $.89. Comparing the first half of 1997 to the first half of 1996,
return on average assets was .98% compared to .96% and return on average equity
was 11.02% compared to 10.97%.
The Company's enhanced financial performance was primarily attributable to gains
in net interest income which exceeded the year-to-date and second quarter of
last year by $873,000 and $389,000. The increase in net interest income was due
to the growth in earning assets combined with a higher net interest margin.
Total other income increased $176,000 and $100,000 over the year-to-date and
second 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 $887,000 or 17.7% over the first six
months of 1996 and increased $439,000 or 17.0% over the second quarter of 1996.
With the establishment of additional offices and growth in assets which require
more people to service, the number of full-time equivalent employees increased
12
<PAGE>
by 20 from June 30, 1996 to June 30, 1997. Salary and employee benefits are up
$491,000 over the first half of 1996 and are up $223,000 over the second 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.
CAPITAL RESOURCES
Shareholders' equity totaled $31,905,000 at June 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
June 30, 1997 December 31, 1996 Minimum
------------- ------------------ --------
Tier 1 risk-based capital 12.4% 12.5% 4.00%
Total risk-based capital ratio 13.6% 13.8% 8.00%
Leverage ratio 9.1% 8.9% 4.00%
Cash dividends paid of $683,000 for the first six months of 1996 represents a
8.2% 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 half of 1997, the Company issued
17,697 shares under the dividend reinvestment and stock purchase plan. At June
30, 1997, approximately 59% 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 $59,892,000
represented 16.8% of total assets at June 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 June 30, 1997, the Bank had the full amount of the line of credit available.
The Company experienced an increase of $4,762,000 in cash and cash equivalents
for the six months ended June 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 six months of 1997.
OHIO VALLEY BANC CORP.
------------------------------------
Date August 14, 1997 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman and Chief Executive Officer
Date August 14, 1997 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President, Chief Operating Officer
and Treasurer
14
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<PERIOD-END> JUN-30-1997
<CASH> 12,024,330
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