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:
MARCH 31, 1998
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.
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 April 30, 1998
1,811,775 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
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................................. 16
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31, December 31,
1998 1997
------------ ------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 8,222 $ 7,712
Federal funds sold 11,000 94
------------ ------------
Total cash and cash equivalents 19,222 7,806
Interest-bearing balances with banks 118 103
Securities available-for-sale 29,220 32,659
Securities held-to-maturity 36,037 39,419
Total loans 278,113 269,779
Allowance for loan losses (3,442) (3,290)
------------ ------------
Net loans 274,671 266,489
Premises and equipment, net 7,785 7,326
Accrued interest receivable 2,396 2,503
Other assets 8,535 7,790
------------ ------------
Total assets $ 377,984 $ 364,095
============ ============
LIABILITIES
Noninterest-bearing deposits $ 35,306 $ 37,100
Interest-bearing deposits 265,370 256,612
------------ ------------
Total deposits 300,676 293,712
Securities sold under agreements to repurchase 14,524 12,831
Other borrowed funds 23,079 19,479
Accrued liabilities 4,612 3,907
------------ ------------
Total liabilities 342,891 329,929
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 5,000,000
shares authorized; 1,811,775 and 1,801,932
shares issued and outstanding at March 31,
1998 and December 31, 1997) 1,812 1,802
Surplus 26,268 25,930
Retained earnings 6,784 6,207
Net unrealized gains on available-for-sale
securities 229 227
------------ ------------
Total shareholders' equity 35,093 34,166
------------ ------------
Total liabilities and
shareholders' equity $ 377,984 $ 364,095
============ ============
See notes to the consolidated financial statements.
1
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Three months ended March 31,
1998 1997
------------ ------------
Interest income:
Interest and fees on loans $ 6,815 $ 6,144
Interest on taxable securities 819 794
Interest on nontaxable securities 168 154
Dividends 54 44
Other interest 44 14
------------ ------------
Total interest income 7,900 7,150
Interest expense:
Interest on deposits 3,143 2,979
Interest on repurchase agreements
and other borrowed funds 389 319
------------ ------------
Total interest expense 3,532 3,298
------------ ------------
Net interest income 4,368 3,852
Provision for loan losses 356 299
------------ ------------
Net interest income after provision 4,012 3,553
Other income:
Service charges on deposit accounts 202 187
Trust division income 51 47
Other operating income 250 181
------------ ------------
Total other income 503 415
Other expense:
Salaries and employee benefits 1,846 1,683
Occupancy expense 148 122
Furniture and equipment expense 192 141
Data processing expense 111 156
Other operating expense 921 791
------------ ------------
Total other expense 3,218 2,893
------------ ------------
(Continued)
2
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(dollars in thousands, except per share data)
Three months ended March 31,
1998 1997
------------ ------------
Income before federal income taxes $ 1,297 $ 1,075
Provision for income taxes 360 290
------------ ------------
Net income 937 785
------------ ------------
Other comprehensive income, net of tax:
Change in unrealized gains on securities 2 (168)
------------ ------------
Comprehensive income $ 939 $ 617
============ ============
Basic and diluted earnings per share : $ .35 $ .30
============ ============
See notes to the consolidated financial statements.
3
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
Three months ended March 31,
1998 1997
------------ ------------
Balance at beginning of period $ 34,166 $ 30,378
Net income 937 785
Proceeds from issuance of common
stock through the dividend
reinvestment plan 348 299
Cash dividends (360) (329)
Net change in unrealized
appreciation on available-
for-sale securities 2 (168)
------------ ------------
Balance at end of period $ 35,093 $ 30,965
============ ============
See notes to the consolidated financial statements.
4
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, except per share data)
Three months ended March 31,
1998 1997
------------ ------------
Net cash from operating activities $ 1,539 $ 1,927
Investing activities
Proceeds from maturities of
securities available-for-sale 3,500 1,000
Purchases of securities available-
for-sale (3,008)
Proceeds from maturities of
securities held-to-maturity 3,344 4,012
Purchase of securities held-to-maturity (1,783)
Change in interest-bearing deposits
in other banks (14) (24)
Net increase in loans (8,538) (4,521)
Purchase of premises and equipment, net (660) (815)
------------ ------------
Net cash from investing activities (2,368) (5,139)
Financing activities
Net change in deposits 6,964 12,274
Cash dividends (360) (329)
Proceeds from issuance of common stock 348 299
Change in securities sold under
agreements to repurchase 1,693 2,056
Proceeds from long-term borrowings 12,164 11,200
Repayment of long-term borrowings (4,266) (4,091)
Change in other short-term borrowings (4,298) (9,775)
------------ ------------
Net cash from financing activities 12,245 11,634
------------ ------------
Change in cash and cash equivalents 11,416 8,422
Cash and cash equivalents at beginning
of year 7,806 8,688
------------ -------------
Cash and cash equivalents at end of year $ 19,222 $ 17,110
============ =============
See notes to the consolidated financial statements
5
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of Ohio
Valley Banc Corp. and its wholly owned subsidiaries The Ohio Valley Bank Company
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 March 31, 1998, 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, 1997, 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 three months ended March 31,
1998 and March 31, 1997, Ohio Valley Banc Corp. paid interest in the amount of
$3,804 and $2,944, respectively. For the three months ended March 31, 1998 and
March 31, 1997, Ohio Valley Banc Corp. paid income taxes of $50 and $160,
respectively.
Earnings per share is computed based on the weighted average shares outstanding
during the period. For the three months ended March 31, 1998 and March 31, 1997,
weighted average shares outstanding were 2,711,211 and 2,645,001, respectively.
On April 8, 1998, the Board of Directors declared a three for two stock split to
shareholders of record on April 20, 1998. 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. 130,
"Reporting Comprehensive Income". Under this new accounting standard,
comprehensive income is now reported for all periods. Comprehensive income
includes both net income and other comprehensive income. Other comprehensive
income includes the change in unrealized gains and losses on securities
available-for-sale.
(Continued)
6
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of the securities, as presented in the consolidated balance sheet at March 31,
1998 and December 31, 1997 are as follows:
March 31, 1998
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities $ 23,607 $ 333 $ 23,940
U.S. Government agency
securities 2,026 41 2,067
Marketable equity
securities 3,240 $ 27 3,213
------------ ---------- ---------- ------------
Total securities $ 28,873 $ 374 $ 27 $ 29,220
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
U.S. Government agency
securities $ 21,244 $ 165 $ 2 $ 21,407
Obligations of state and
political subdivisions 13,839 402 14,241
Corporate Obligations 502 2 504
Mortgage-backed securities 452 1 19 434
------------ ---------- ---------- ------------
Total securities $ 36,037 $ 570 $ 21 $ 36,586
============ ========== ========== ============
December 31, 1997
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities $ 27,093 $ 353 $ 27,446
U.S. Government agency
securities 2,028 34 2,062
Marketable equity
securities 3,194 $ 43 3,151
------------ ---------- ---------- ------------
Total securities $ 32,315 $ 387 $ 43 $ 32,659
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
U.S. Government agency
securities $ 24,509 $ 126 $ 13 $ 24,622
Obligations of state and
political subdivisions 13,935 422 14,357
Corporate Obligations 503 3 506
Mortgage-backed securities 472 1 23 450
------------ ---------- ---------- ------------
Total securities $ 39,419 $ 552 $ 36 $ 39,935
============ ========== ========== ============
(Continued)
7
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at March 31,
1998, 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 $ 7,782 $ 7,813 $ 8,702 $ 8,738
Due in one to
five years 17,851 18,194 21,654 21,917
Due in five to
ten years 5,229 5,497
Mortgage-backed sec. 452 434
------------ ------------ ------------ ------------
Total debt
securities $ 25,633 $ 26,007 $ 36,037 $ 36,586
============ ============ ============ ============
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 three months of 1998 or 1997.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
March 31, December 31,
1998 1997
------------ ------------
Real estate loans $ 116,829 $ 110,247
Commercial and industrial loans 80,496 78,124
Consumer loans 78,455 78,840
Other loans 2,333 2,568
------------ ------------
$ 278,113 $ 269,779
============ ============
At March 31, 1998 and December 31, 1997, loans on nonaccrual status were
approximately $997 and $1,019, respectively. Loans past due more than 90 days
and still accruing at March 31, 1998 and December 31, 1997 were $2,235 and
$3,177, respectively. Other real estate owned at March 31, 1998 totaled $142,
unchanged from December 31, 1997.
(Continued)
8
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the three months
ended March 31, 1998 and March 31, 1997 is as follows:
1998 1997
------------ ------------
Balance - January 1, $ 3,290 $ 3,080
Loans charged off:
Real estate 2 3
Commercial 119
Consumer 319 194
------------ ------------
Total loans charged off 321 316
Recoveries of loans:
Real estate 38
Commercial 44
Consumer 35 55
------------ -----------
Total recoveries 117 55
Net loan charge-offs (204) (261)
Provision charged to operations 356 299
------------ ------------
Balance - March 31, $ 3,442 $ 3,118
============ ============
Information regarding impaired loans at March 31, 1998 and March 31, 1997:
1998 1997
------------ ------------
Balance of impaired loans $ 555 $ 438
------------ ------------
Portion of impaired loan balance for which an
allowance for credit losses is allocated 555 438
------------ ------------
Portion of allowance for loan losses
allocated to the impaired loan balance 230 200
------------ ------------
Information regarding impaired loans for the periods ended March 31, 1998
and March 31, 1997:
Average investment in impaired
loans for the year $ 555 $ 448
Interest income recognized on
impaired loans 0 0
(Continued)
9
<PAGE>
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 5 - CONCENTRATIONS OF CREDIT RISK AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company, through its subsidiaries, grants residential, consumer, and
commercial loans to customers located primarily in the southeastern Ohio area.
Approximately 9.27% of total loans were unsecured at March 31, 1998 as compared
to 9.55% at December 31, 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 March
31, 1998, 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 $39,110 as compared to $39,643 at December 31,
1997.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at March 31, 1998 and December 31, 1997 are comprised of
advances from the Federal Home Loan Bank (FHLB), Federal Reserve Bank Notes
(FRB)and promissory notes. Pursuant to collateral agreements with the FHLB,
advances are secured by certain qualifying first mortgage loans which total
$28,429 at March 31, 1998. 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 3/31/98 at 12/31/97
-------- ------- ------------ ------------
1998 5.55-6.05 $ 3,427 $ 15,096
1999 5.75 3,164
2000 6.00-6.15 1,500 1,500
2001 5.77-5.82 2,000
2002 5.80-6.10 3,868 1,957
Thereafter 5.13-5.85 4,994
------------ -------------
Total FHLB borrowings 18,953 18,553
Promissory notes 4.50-7.10 1,399 926
FRB notes 5.88 2,727
------------ -------------
Total $ 23,079 $ 19,479
============ =============
The following table is a summary of the scheduled principal payments for these
borrowings at March 31, 1998:
1998 1999 2000 2001 2002 Thereafter
---- ---- ---- ---- ---- ----------
FHLB borrowings $ 3,798 $ 3,719 $ 2,059 $ 2,567 $ 2,429 $ 4,381
Promissory notes $ 1,358 $ 11 $ 12 $ 13 $ 5
FRB notes $ 2,727
(Continued)
10
<PAGE>
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
INTRODUCTION
The following discussion focuses on the consolidated financial condition of Ohio
Valley Banc Corp. at March 31, 1998, compared to December 31, 1997, and the
consolidated results of operations for the first three months of 1998 compared
to the same period in 1997. The purpose of this discussion is to provide the
reader a more thorough understanding of the consolidated financial statements.
This discussion should be read in conjunction with the interim consolidated
financial statements and the footnotes included in this Form 10-Q.
The Registrant is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on the liquidity,
capital resources or operations except as discussed herein. Also, the Registrant
is not aware of any current recommendations by regulatory authorities which
would have such effect if implemented.
On April 8, 1998, the Company entered into a Definitive Purchase Agreement with
Jackson Savings Bank pursuant to which the Company will acquire Jackson Savings
as a wholly-owned subsidiary. Under the terms of the Agreement, each of the
19,400 shares of Jackson Savings will be exchanged for a number of the Company's
common shares with a total market value equal to $163.09. The proposed
acquisition is subject to certain conditions, including the approval of Jackson
Savings Bank shareholders and approval of certain regulatory authorities. The
transaction is expected to be completed in the third quarter of 1998. Jackson
Savings is a full-service savings bank located in Jackson, Ohio with
approximately $15.5 million in assets and $2.7 million in shareholders' equity
at March 31, 1998. Management entered into the agreement to expand and enhance
the Company's banking activities in Jackson County.
FINANCIAL CONDITION
The consolidated total assets of Ohio Valley Banc Corp. grew $13,889 or 3.8% to
reach $377,984 at March 31, 1998. The growth in total assets occurred in federal
funds sold and loans which had increases of $10,906 and $8,334. The growth in
assets was partially offset by securities declining by $6,821. Additional
funding was provided by increases in total deposits of $6,964 and borrowed funds
of $3,600.
For the first quarter of 1998, loan growth was led by mortgage loans expanding
$6,582 driven by low interest rates. The Company has generated a large volume of
new loans as well as refinances. For the same time period, commercial loans grew
$2,372 and consumer loans decreased slightly. At March 31, 1998, the ratio of
loans to deposits was 92.5% compared to 91.9% at December 31, 1997. In recent
years, the Bank has increasingly utilized Federal Home Loan Bank (FHLB)
borrowing as an alternative to deposits for funding. The borrowings offer two
distinct advantages: they are less expensive than deposits for comparable terms
and FHLB borrowings are not subject to pre-mature withdrawal. 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.
As a percentage of total loans, the allowance for loan losses at March 31, 1998
was 1.24% versus 1.22% at December 31, 1997.
11
<PAGE>
The securities portfolio declined $6,821 from December 31, 1997 as the majority
of matured securities were reinvested in loans. As of April 1998, the Company's
last structured note matured. 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 Company's
investment policy does not allow any future purchases of structured notes due to
the thin trading market for these securities and their greater susceptibility to
changes in market value.
Total deposits on March 31, 1998, of $300,676 represents an increase of $6,964
or 2.4% from December 31, 1997. Savings and interest-bearing demand deposits
grew $8,332 or 11.3%. A large portion of the deposit growth was associated with
the collection and distribution of local real estate taxes to various deposit
accounts within the bank. The deposits from tax collections are short-term in
nature and had an impact on the increase in federal funds which represent
overnight investments.
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 up $3,600 from December 31, 1997. The growth in borrowed
funds also is related to the Bank participating in a program with the Federal
Reserve who deposits tax receipts in banks in the form of collateralized
interest-bearing notes. The balance of these notes at March 31, 1998 was $2,727.
Total shareholders' equity at March 31, 1998 of $35,093 was 2.7% greater than
the balance of $34,166 on December 31, 1997. Contributing to this increase was
year-to-date income of $937 and proceeds from the issuance of common stock
through the dividend reinvestment plan of $348 less cash dividends paid of $360,
or $.13 per share adjusted for the stock split. The cash dividend represents
38.4% of the year-to-date income; although the Dividend Reinvestment Plan
effectively reduces the payout ratio to 1.3%. Management's decision to effect a
three for two stock split was generated by a desire to make the Company's common
stock more accessible to the smaller investor.
RESULTS OF OPERATIONS
Ohio Valley Banc Corp's net income was $937 for the first quarter of 1998, up
19.3% compared to $785 for the first quarter of 1997. Comparing March 31, 1998
to March 31, 1997, return on assets increased to 1.04% from .93% and return on
equity increased to 11.02% from 10.36%. The Company's earnings per share was
$.35 per share at March 31, 1998 which was $.05 higher than the $.30 per share
recorded for the first quarter of 1997, adjusted for the stock split. The
primary contributor to the gain in net income was net interest income. Net
interest income increased $516 or 13.4% over the first quarter of 1997 due to
the growth in earning assets accompanied by a higher net interest margin. The
Company achieved a higher net interest margin by allocating a larger percentage
of earning assets to loans. The gain in net interest income was partially offset
by net noninterest expense being up $237 or 9.6%.
12
<PAGE>
Total other income increased $88 or 21.2% over March 31, 1997's total other
income of $415 due primarily to the collection of outstanding insurance
commissions of $41. Total other expense of $3,218 at March 31, 1998, was up $328
or 11.2% from the first quarter of 1997. Contributing to the increase in total
other expense was salary and employee benefits, which increased $163 or 9.7%.
With the establishment of additional offices and growth in assets which require
more people to service, the number of full-time equivalent employees increased
from 206 at March 31, 1997 to 217 at March 31, 1998. Additionally, the Company
awarded annual merit increases. The growth in operations coupled with the
investment in processing technology provided for the increase in occupancy
expense and furniture and equipment expense. The upgrade in technology produced
the decrease in data processing. Contributing to the increase in other operating
expense was computer software depreciation and general increases in overhead
expenses.
In May 1997 a six member committee was formed and charged with the
responsibility of ensuring that the Company will be ready for the Year 2000
transition. This committee has conducted extensive inventories of the Company's
computer software and hardware as well as other equipment that may be microchip
dependent. The vendors associated with the aforementioned hardware and software
were contacted to determine the product's Year 2000 readiness. A Year 2000 plan
has been developed which commits the Company to being Year 2000 compliant by
December 31, 1998, thereby affording the Company one full year to test all
mission critical systems to verify their viability for the Year 2000 and beyond.
Management does not believe that the associated costs relating to the Year 2000
effort will materially affect the Company's results of operations, liquidity and
capital resources. In an effort to assess and assist the Year 2000 efforts of
our customers, the Company sponsored a forum in December of 1997 on Year 2000
date change issues.
CAPITAL RESOURCES
All of the capital ratio's exceeded the regulatory minimum guidelines as
identified in the following table:
Company Ratios Regulatory
March 31, 1998 December 31, 1997 Minimum
-------------- ----------------- --------
Tier 1 risk-based capital 13.0% 13.0% 4.00%
Total risk-based capital ratio 14.2% 14.2% 8.00%
Leverage ratio 9.5% 9.3% 4.00%
Cash dividends paid of $360 for the first three months of 1998 represents a 9.4%
increase over the cash dividends paid during the same period in 1997. The
increase in cash dividends paid is due to the additional shares outstanding
during 1998 which were not outstanding during 1997. During the first quarter of
1998, the Company issued 9,843 shares under the dividend reinvestment and stock
purchase plan. At March 31, 1998, approximately 63% of the shareholders were
enrolled in the dividend reinvestment plan.
13
<PAGE>
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 $57,262 represented
15.2% of total assets at March 31, 1998. In addition, the Corporation has
established a $16,900 line of credit with the Federal Home Loan Bank in
Cincinnati to further enhance the bank's ability to meet liquidity demands. As
of March 31, 1998, the Bank had the full amount of the line of credit available.
The Company experienced an increase of $11,416 in cash and cash equivalents for
the three months ended March 31, 1998. 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.
MATURITY ANALYSIS
<TABLE>
<CAPTION>
(dollars in thousands)
As of March 31, 1998 Principal Amount Maturing in:
There- Fair Value
1998 1999 2000 2001 2002 after Total 03/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate-Sensitive Assets:
Fixed interest rate loans $ 4,595 $ 6,305 $ 11,644 $ 17,931 $ 15,208 $ 59,042 $114,725 $115,256
Average interest rate 9.84% 11.64% 11.81% 11.18% 10.88% 9.09% 10.10%
Variable interest rate loans $ 37,467 $ 1,789 $ 3,163 $ 6,904 $ 9,051 $105,014 $163,388 $163,388
Average interest rate 10.33% 9.90% 10.17% 9.82% 9.35% 8.34% 8.97%
Fixed interest rate securities $ 15,485 $ 11,611 $ 10,350 $ 10,789 $ 7,754 $ 8,921 $ 64,910 $ 65,806
Average interest rate 6.66% 6.90% 6.42% 6.39% 6.39% 7.50% 6.70%
Other interest-bearing assets $ 11,117 $ 11,117 $ 11,117
Average interest rate 5.42% 5.42%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 4,249 $ 4,050 $ 3,253 $ 2,862 $ 2,519 $ 18,373 $ 35,306 $ 35,306
Savings & Interest-bearing checking $ 12,447 $ 10,204 $ 8,408 $ 6,966 $ 5,805 $ 38,214 $ 82,044 $ 82,044
Average interest rate 2.60% 2.62% 2.64% 2.66% 2.68% 2.87% 2.74%
Time deposits $104,492 $ 53,577 $ 11,368 $ 3,769 $ 3,821 $ 6,299 $183,326 $184,076
Average interest rate 5.69% 5.71% 5.90% 5.93% 6.49% 6.39% 5.76%
Fixed interest rate borrowings $ 7,505 $ 3,164 $ 1,500 $ 2,000 $ 3,867 $ 5,043 $ 23,079 $ 23,079
Average interest rate 5.92% 5.75% 6.08% 5.80% 5.92% 5.57% 5.82%
Variable interest rate borrowings $ 14,524 $ 14,524 $ 14,524
Average interest rate 3.92% 3.92%
15
</TABLE>
<PAGE>
OHIO VALLEY BANC CORP
Part II - Other Information
Exhibits and Reports on Form 8-K
- --------------------------------
A. Exhibit 27 - Financial Data Schedule [Exhibit is filed herewith.]
B. Reports - Form 8-K - No reports on Form 8-K were filed by the Registrant
during the first three months of 1998.
OHIO VALLEY BANC CORP.
------------------------------------
Date May 15, 1998 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman and Chief Executive Officer
Date May 15, 1998 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President, Chief Operating Officer
and Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,222
<INT-BEARING-DEPOSITS> 118
<FED-FUNDS-SOLD> 11,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,220
<INVESTMENTS-CARRYING> 36,037
<INVESTMENTS-MARKET> 36,586
<LOANS> 278,113
<ALLOWANCE> 3,442
<TOTAL-ASSETS> 377,984
<DEPOSITS> 300,676
<SHORT-TERM> 25,193
<LIABILITIES-OTHER> 4,612
<LONG-TERM> 12,410
0
0
<COMMON> 1,812
<OTHER-SE> 33,281
<TOTAL-LIABILITIES-AND-EQUITY> 377,984
<INTEREST-LOAN> 6,815
<INTEREST-INVEST> 1,041
<INTEREST-OTHER> 44
<INTEREST-TOTAL> 7,900
<INTEREST-DEPOSIT> 3,143
<INTEREST-EXPENSE> 3,532
<INTEREST-INCOME-NET> 4,368
<LOAN-LOSSES> 356
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,218
<INCOME-PRETAX> 1,297
<INCOME-PRE-EXTRAORDINARY> 1,297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 937
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
<YIELD-ACTUAL> 5.22
<LOANS-NON> 997
<LOANS-PAST> 2,235
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 230
<ALLOWANCE-OPEN> 3,290
<CHARGE-OFFS> 321
<RECOVERIES> 117
<ALLOWANCE-CLOSE> 3,442
<ALLOWANCE-DOMESTIC> 2,078
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,364
</TABLE>
