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, 2000
Commission file number: 0-20914
Ohio Valley Banc Corp.
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(Exact name of Registrant as specified in its charter)
Ohio
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(State or other jurisdiction of incorporation or organization)
31-1359191
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(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: (740) 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 28, 2000
3,511,187 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
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.......................................... 3
Condensed Consolidated Statements of Cash Flows.................. 4
Notes to the Consolidated Financial Statements................... 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 10
Item 3 - Quantitative and Qualitative Disclosure About
Market Risk.......................................... 14
Part II - Other Information
Other Information and Signatures................................. 15
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31, December 31,
2000 1999
(unaudited)
------------ ------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 13,338 $ 19,000
Federal funds sold 12,875
------------ ------------
Total cash and cash equivalents 26,213 19,000
Interest-bearing balances with banks 543 806
Securities available-for-sale 56,491 55,371
Securities held-to-maturity, (Estimated fair
value: $15,242 at March 31, 2000 and $15,892
at December 31, 1999) 15,360 16,009
Total loans 421,282 411,158
Allowance for loan losses (4,991) (5,055)
------------ ------------
Net loans 416,291 406,103
Premises and equipment, net 10,154 9,888
Accrued income receivable 3,203 3,298
Intangible assets, net 1,494 1,412
Other assets 11,187 10,170
------------ ------------
Total assets $ 540,936 $ 522,057
============ ============
LIABILITIES
Noninterest-bearing deposits $ 48,586 $ 46,444
Interest-bearing deposits 381,193 358,887
------------ ------------
Total deposits 429,779 405,331
Securities sold under agreements to repurchase 14,291 16,788
Other borrowed funds 47,665 51,231
Accrued liabilities 6,351 5,999
------------ ------------
Total liabilities 498,086 479,349
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 10,000,000
shares authorized; 3,548,576 shares issued and
3,537,687 shares outstanding at March 31, 2000
and 3,548,572 shares issued and 3,542,983 shares
outstanding at December 31, 1999) 3,549 3,549
Surplus 28,454 28,454
Retained earnings 12,047 11,491
Accumulated other comprehensive income, net of tax (844) (597)
Treasury stock (at cost, 10,889 shares in 2000
and 5,589 shares in 1999) (356) (189)
------------ ------------
Total shareholders' equity 42,850 42,708
------------ ------------
Total liabilities and
shareholders' equity $ 540,936 $ 522,057
============ ============
See notes to the consolidated financial statements.
1
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OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended March 31,
2000 1999
------------ ------------
Interest and dividend income:
Interest and fees on loans $ 9,495 $ 8,345
Interest on taxable securities 808 767
Interest on nontaxable securities 193 208
Dividends 72 68
Other interest 84 49
------------ ------------
Total interest and dividend income 10,652 9,437
Interest expense:
Interest on deposits 4,631 3,580
Interest on repurchase agreements 150 98
Interest on other borrowed funds 599 698
------------ ------------
Total interest expense 5,380 4,376
------------ ------------
Net interest income 5,272 5,061
Provision for loan losses 302 448
------------ ------------
Net interest income after provision 4,970 4,613
Other income:
Service charges on deposit accounts 333 256
Trust division income 53 56
Other operating income 376 266
------------ ------------
Total other income 762 578
Other expense:
Salaries and employee benefits 2,371 2,139
Occupancy expense 325 230
Furniture and equipment expense 294 230
Data processing expense 70 104
Other operating expense 1,213 1,066
------------ ------------
Total other expense 4,273 3,769
------------ ------------
Income before taxes 1,459 1,422
Provision for income taxes 407 390
------------ ------------
NET INCOME $ 1,052 $ 1,032
============ ============
Earnings per share $ 0.30 $ 0.29
============ ============
(Continued)
2
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OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended March 31,
2000 1999
------------ ------------
Balance at beginning of period $ 42,708 $ 40,680
Comprehensive income:
Net income 1,052 1,032
Net change in unrealized gain on
available-for-sale securities (247) (51)
------------ ------------
Total comprehensive income 805 981
Proceeds from issuance of common
stock through the dividend
reinvestment plan, (4 in 2000
and 7,023 in 1999) 301
Cash dividends (496) (394)
Shares acquired for treasury, (5,300
in 2000 and 0 in 1999) (167)
------------ ------------
Balance at end of period $ 42,850 $ 41,568
============ ============
See notes to the consolidated financial statements.
3
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended March 31,
2000 1999
------------ ------------
Net cash provided by operating activities $ 1,623 $ 1,866
Investing activities
Proceeds from maturities of
securities available-for-sale 1,545 2,100
Purchases of securities available-
for-sale (2,982) (1,763)
Proceeds from maturities of
securities held-to-maturity 856 300
Purchases of securities held-to-
maturity (223)
Change in interest-bearing deposits
in other banks 263 293
Net increase in loans (10,490) (21,107)
Purchases of premises and equipment, net (601) (533)
Purchases of insurance contracts (500) (175)
------------ ------------
Net cash from investing activities (12,132) (20,885)
Financing activities
Change in deposits 24,448 40,207
Cash dividends (496) (394)
Proceeds from issuance of common stock 301
Purchases of treasury stock (167)
Change in securities sold under
agreements to repurchase (2,497) (10,059)
Proceeds from long-term borrowings 1,250 4,500
Repayment of long-term borrowings (2,401) (3,345)
Change in other short-term borrowings (2,415) (11,328)
------------ ------------
Net cash from financing activities 17,722 19,882
------------ ------------
Change in cash and cash equivalents 7,213 863
Cash and cash equivalents at beginning
of year 19,000 12,717
------------ -------------
Cash and cash equivalents at March 31, $ 26,213 $ 13,580
============ =============
See notes to the consolidated financial statements
4
<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, Jackson Savings Bank 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, 2000, 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, 1999, 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,
2000 and 1999, Ohio Valley Banc Corp. paid interest in the amount of $6,256 and
$4,466, respectively. For the three months ended March 31, 2000, no income taxes
were paid as compared to $140 in income taxes that were paid in the same period
for 1999.
Earnings per share is computed based on the weighted average shares outstanding
during the period. For the three months ended March 31, 2000 and 1999, weighted
average shares outstanding were 3,541,471 and 3,527,893, respectively.
The Company adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income". Under this accounting standard, comprehensive
income is 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.
In April 1999, the Company adopted Statment of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 allowed the Company a one time reclassification of securities
held-to-maturity to classification as available-for-sale or trading. The Company
reclassified U.S. Government agency securities with an amortized cost of $27,676
from held-to-maturity to available-for-sale. The securities were transferred
with management's intention of providing greater flexibility in meeting customer
and asset/liability needs. The Company has no derivative or hedging activity
covered by SFAS No. 133.
(Continued)
5
<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 are as
follows:
March 31, 2000
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities $ 5,991 $ 4 $ (4) $ 5,991
U.S. Government agency
securities 45,294 (1,126) 44,168
Mortgage-backed
securities 2,263 (153) 2,110
Marketable equity
securities 4,222 4,222
------------ ---------- ---------- ------------
Total securities $ 57,770 $ 4 $ (1,283) $ 56,491
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
Obligations of state and
political subdivisions $ 15,050 $ 124 $ (220) $ 14,954
Mortgage-backed securities 310 1 (23) 288
------------ ---------- ---------- ------------
Total securities $ 15,360 $ 125 $ (243) $ 15,242
============ ========== ========== ============
December 31, 1999
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
- -----------------------------
U.S. Treasury
securities $ 7,490 $ 21 $ (1) $ 7,510
U.S. Government agency
securities 42,328 1 (807) 41,522
Mortgage-backed securities 2,307 (118) 2,189
Marketable equity
securities 4,150 4,150
------------ ---------- ---------- ------------
Total securities $ 56,275 $ 22 $ (926) $ 55,371
============ ========== ========== ============
Securities Held-to-Maturity
- ---------------------------
Obligations of state and
political subdivisions $ 15,690 $ 151 $ (247) $ 15,594
Mortgage-backed securities 319 1 (22) 298
------------ ---------- ---------- ------------
Total securities $ 16,009 $ 152 $ (269) $ 15,892
============ ========== ========== ============
(Continued)
6
<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,
2000, 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 $ 7,003 $ 6,991 $ 1,821 $ 1,828
Due in one to
five years 44,282 43,168 7,511 7,571
Due in five to
ten years 3,271 3,236
Due after ten years 2,447 2,319
Mortgage-backed sec. 2,263 2,110 310 288
------------ ------------ ------------ ------------
Total debt
securities $ 53,548 $ 52,269 $ 15,360 $ 15,242
============ ============ ============ ============
Gains and losses on the sale of securities are determined using the specific
identification method. There were no sales of debt and equity securities during
the first three months of 2000 and 1999.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
March 31, December 31,
2000 1999
------------ ------------
Real estate loans $ 207,481 $ 201,625
Commercial and industrial loans 121,304 119,585
Consumer loans 91,313 88,942
Other loans 1,184 1,006
------------ ------------
$ 421,282 $ 411,158
============ ============
At March 31, 2000 and December 31, 1999, loans on nonaccrual status were
approximately $2,897 and $2,953, respectively. Loans past due more than 90 days
and still accruing at March 31, 2000 and December 31, 1999 were $2,523 and
$3,711, respectively. Other real estate owned at March 31, 2000 and December 31,
1999 was $43 and $30, respectively.
(Continued)
7
<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 is as follows:
2000 1999
------------ ------------
Balance - January 1, $ 5,055 $ 4,277
Loans charged off:
Real estate 3 16
Commercial 15 45
Consumer 407 298
------------ ------------
Total loans charged off 425 359
Recoveries of loans:
Real estate 11
Commercial 2
Consumer 59 52
------------ -----------
Total recoveries 59 65
Net loan charge-offs (366) (294)
Provision charged to operations 302 448
------------ ------------
Balance - March 31, $ 4,991 $ 4,431
============ ============
Information regarding impaired loans is as follows:
March 31, December 31,
2000 1999
------------ ------------
Balance of impaired loans $ 1,552 $ 1,413
============ ============
Portion of impaired loan balance for which an
allowance for credit losses is allocated $ 1,552 $ 1,413
============ ============
Portion of allowance for loan losses
allocated to the impaired loan balance $ 530 $ 600
============ ============
Average investment in impaired
loans for the year $ 1,552 $ 1,570
============ ============
Interest on impaired loans was not material for the periods ended March 31,
2000 and December 31, 1999.
(Continued)
8
<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 central and southeastern
areas of Ohio as well as the western counties of West Virginia. Approximately
6.44% of total loans were unsecured at March 31, 2000 as compared to 6.54% at
December 31, 1999.
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, 2000, 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 $48,355 as compared to $49,826 at December 31,
1999.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at March 31, 2000 and December 31, 1999 are comprised of
advances from the Federal Home Loan Bank (FHLB), promissory notes and Federal
Reserve Bank Notes.
2000 1999
-------- --------
FHLB Borrowings $ 35,273 $ 38,746
Promissory Notes 3,892 3,985
FRB Notes 8,500 8,500
-------- --------
$ 47,665 $ 51,231
======== ========
Pursuant to collateral agreements with the FHLB, advances are secured by certain
qualifying first mortgage loans and by FHLB stock which total $52,910 and $3,958
at March 31, 2000. Fixed rate FHLB advances of $32,773 mature through 2008 and
have interest rates ranging from 4.88% to 6.15%. In addition, variable rate FHLB
borrowings represent $2,500.
Promissory notes, issued primarily by the parent company, have fixed rates of
5.50% to 7.00% and are due at various dates through a final maturity date of May
29, 2002.
Scheduled principal payments over the next five years are to be:
FHLB borrowings Promissory notes FRB Notes Totals
--------------- ---------------- --------- ---------
2000 $ 12,745 $ 3,624 $ 8,500 $ 24,869
2001 6,865 263 7,128
2002 5,282 5 5,287
2003 3,098 3,098
2004 85 85
Thereafter 7,198 7,198
--------------- ---------------- --------- --------
$ 35,273 $ 3,892 $ 8,500 $ 47,665
=============== ================ ========= ========
Letters of credit issued on the Bank's behalf by the FHLB to collateralize
certain public unit deposits as required by law totaled $32,142 at March 31,
2000 and $24,000 at December 31, 1999. Various investment securities from the
Bank used to collateralize FRB notes totaled $9,350 at March 31, 2000 and $9,225
at December 31, 1999. Promissory notes were unsecured at March 31, 2000 and
December 31, 1999.
(Continued)
9
<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, 2000, compared to December 31, 1999, and the
consolidated results of operations for the quarterly period ending March 31,
2000, compared to the same period in 1999. 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 May 3, 1999, the Company entered into a purchase agreement to acquire two
West Virginia branches of Huntington National Bank. These offices are the Milton
office, located at 280 East Main Street, Milton, and the Barboursville office,
located in the Krogers Supermarket at 5636 U.S. Route 60 East, Barboursville.
The purchase, having been approved by the appropriate regulatory authorities,
was completed in the third quarter of 1999 and has expanded the Company's
banking activities in West Virginia.
Management continued this growth in the fourth quarter of 1999 by establishing
two Superbanks in Wal-Mart stores. The first branch is located in Charleston,
West Virginia and the second branch is located in South Point, Ohio. Management
anticipates the opening of its eighth SuperBank (Wal-Mart) facility to be
located in Huntington, West Virginia (Cabell County). This new branch will
commence operations in the second quarter of 2000 and will further enhance
market expansion along the growing I-64 corridor of western West Virginia.
FINANCIAL CONDITION
The consolidated total assets of Ohio Valley Banc Corp. increased $18,879 or
3.6% to reach $540,936 at March 31, 2000. The contributing factor to this growth
in assets was from loans which grew $10,124. Loans were funded by growth in
deposits of $24,448 or 6.0%, of which a portion was used to reduce borrowed
funds and securities sold under agreements to repurchase which are collectively
down $6,063.
During the first three months of 2000, loan growth was led by real estate
mortgages expanding $5,856 or 2.9%. Over half of the growth has occurred in Pike
and Franklin counties in Ohio and Mason county in West Virginia. These counties
represent newer markets for the Company. Management expects continued loan
growth from these locations as well as from the newer markets entered into
during 1999. For the same time period, consumer loans expanded $2,371 or 2.7%.
Approximately 62% of this increase occurred within indirect loans, particularly
automobiles, where management has been more aggressive. Management anticipates
that it will continue its provision to the allowance for loan losses at
10
<PAGE>
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 well as a higher relative volume of real estate mortgages. A comprehensive
analysis of the allowance for loan and lease loss is performed on a quarterly
basis to ensure its adequacy. As a percentage of total loans, the allowance for
loan losses at March 31, 2000 was 1.19%, down from 1.23% at December 31, 1999.
Total deposit growth was led by savings and interest-bearing demand deposits
increasing $19,222 or 16.5%. While the Company's Gold Club account continues to
impact this area of deposit growth, the largest portion of this increase was
related to the collection and distribution of real estate taxes to various
deposit accounts within the bank. These deposits from tax collections are
short-term in nature and also had an impact on the increase in federal funds
which represent overnight investments. Additionally, time deposits increased
$3,084 or 1.3% and non-interest bearing deposits increased $2,142 or 4.6% during
the first three months of 2000. Management utilized this deposit growth to fund
the growth in loans and to reduce borrowed funds. The new office locations added
in 1999 will continue to assist in generating deposits to fund the Company's
expected loan growth.
Other borrowed funds are primarily advances from the Federal Home Loan Bank,
which are used to fund loan growth or short-term liquidity needs. Other borrowed
funds are down $3,566 from December 31, 1999. The decrease occurred primarily in
overnight borrowings. Furthermore, securities sold under agreements to
repurchase are down $2,497 from December 31, 1999.
Total shareholders' equity at March 31, 2000 of $42,850 was up slightly by $142
as compared to the balance of $42,708 on December 31, 1999. Contributing to this
increase was year-to-date income of $1,052 less cash dividends paid of $496, or
$.14 per share. The cash dividend represents 47.1% of the year-to-date income.
There were minimal proceeds from the issuance of common stock through the
dividend reinvestment plan during the first three months of 2000. Management has
instead utilized the proceeds from reinvested dividends and voluntary cash to
purchase shares on the open market and redistribute these dollars back into the
plan without the need for the issuance of common stock. Furthermore, as part of
the stock repurchase program, the Company purchased 5,300 additional treasury
shares during the first three months of 2000.
RESULTS OF OPERATIONS
Ohio Valley Banc Corp's net income was $1,052 for the first quarter of 2000, up
1.9% compared to $1,032 for the first quarter of 1999. Comparing March 31, 2000
to March 31, 1999, return on assets decreased from .91% to .80% and return on
equity decreased from 10.22% to 9.90%. First quarter earnings per share was $.30
per share, up 3.4% over last year's $.29 per share. The primary contributor to
the gain in net income was an increase in net interest income of $211 or 4.2%,
combined with a decrease in provision expense of $146 as compared to the same
period in 1999. The increase in net interest income was primarily due to the
growth in earning assets of $23,207 from December 31, 1999. Net interest income
was negatively impacted in the first three months of 2000 as compared to the
same period in 1999 by a decline in the net interest margin due to the Bank's
cost of funds increasing 30 basis points and asset yields decreasing 11 basis
points. The gain in net interest income was offset by net noninterest expense
increasing $320 or 10.0% for the first quarter in 2000 compared to the same
period
11
<PAGE>
in 1999. Total other income increased $184 or 31.8% for the first three months
in 2000 compared to the same period in 1999. Contributing to the gain was
service charge income, impacted by the growth in deposit account volume, which
contributed an additional $77 during the first quarter compared to the same
period in 1999. Total other expense increased $504 or 13.4% for the first
quarter compared to the same period in 1999. Contributing the most to this
increase was salary and employee benefits, which are up $232 over the first
three months of 1999. This growth can be attributed to the establishment of new
offices and growth in assets within the second half of 1999 which require more
people to service. As a result, the number of full-time equivalent employees
increased by 14 from March 31, 1999 to March 31, 2000. Additionally, the Company
awarded annual merit increases. The growth in additional offices coupled with
the investment in processing technology provided for the increase in occupancy
expense and furniture and equipment expense. Contributing to the increase in
other operating expense was computer software depreciation and general increases
in overhead expenses. Management believes these increases in operating expenses
that are currently evident from the growth in additional offices are necessary
for the long-term growth of the Company, where income from these newer markets
is expected to increase.
Management is pleased to announce that it did not experience any "Y2K" related
problems at the turn of the century, nor does it anticipate any problems
developing during the year 2000. For the previous three years from 1997 to 1999,
the Company prepared and tested all of its computer equipment, related software
and technology and as a result, was well prepared for any "Y2K" related problems
and did not experience any losses.
CAPITAL RESOURCES
All of the capital ratio's exceeded the regulatory minimum guidelines as
identified in the following table:
Company Ratios Regulatory
March 31, 2000 December 31, 1999 Minimum
---------------- ------------------- ---------
Tier 1 risk-based capital 11.0% 11.1% 4.00%
Total risk-based capital ratio 12.3% 12.3% 8.00%
Leverage ratio 8.0% 8.1% 4.00%
Cash dividends paid of $496 for the first three months of 2000 represents a
25.9% increase over the cash dividends paid during the same period in 1999. The
increase in cash dividends paid is due to the additional shares outstanding
during 2000 which were not outstanding during 1999 and to the increase in the
dividend paid per share. At March 31, 2000, approximately 74% of the
shareholders were enrolled in the dividend reinvestment plan. As part of the
Company's stock purchase program, management has continued to utilize reinvested
dividends and voluntary cash to purchase shares on the open market to be
redistributed through the dividend reinvestment plan.
12
<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, held-to-maturity securities maturing
within one year and securities available-for-sale of $85,068 represented 15.7%
of total assets at March 31, 2000. In addition, the Federal Home Loan Bank in
Cincinnati offers advances to the Bank which further enhances the Bank's ability
to meet liquidity demands. At March 31, 2000, the Bank could borrow an
additional $52 million from the Federal Home Loan Bank. Management also acquired
approximately $22 million in additional deposits from the purchase of two West
Virginia branches of Huntington National Bank completed in the third quarter of
1999. The Company experienced an increase of $7,213 in cash and cash equivalents
for the three months ended March 31, 2000. See the condensed consolidated
statement of cash flows on page 4 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 central and southeastern Ohio as
well as western West Virginia. 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.
FORWARD LOOKING STATEMENTS
Except for the historical statements and discussions contained herein,
statements contained in this report constitute "forward looking statements'
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Act of 1934 and as defined in the Private Securities
Litigation Reform Act of 1995. Such statements are often, but not always,
identified by the use of such words as "believes," "anticipates," "expects," and
similar expressions. Such statements involve various important assumptions,
risks, uncertainties, and other factors, many of which are beyond our control,
that could cause actual results to differ materially from those expressed in
such forward looking statements. These factors include, but are not limited to:
changes in political, economic or other factors such as inflation rates,
recessionary or expansive trends, and taxes; competitive pressures; fluctuations
in interest rates; the level of defaults and prepayment on loans made by the
Company; unanticipated litigation, claims, or assessments; fluctuations in the
cost of obtaining funds to make loans; and regulatory changes. Readers are
cautioned not to place undue reliance on such forward looking statements, which
speak only as of the date hereof. The Company undertakes no obligation and
disclaims any intention to republish revised or updated forward looking
statements, whether as a result of new information, unanticipated future events
or otherwise.
13
<PAGE>
OHIO VALLEY BANC CORP.
MATURITY ANALYSIS
<TABLE>
<CAPTION>
(dollars in thousands)
The following table provides information about the Company's financial instruments that are sensitive to changes in interest
rates. The table presents repricing opportunities strictly by maturity date without regard for repricing dates for variable
rate products. As compared to 12/31/99, there were no significant changes through the first three months of 2000.
As of March 31, 2000 Principal Amount Maturing in:
There- Fair Value
2000 2001 2002 2003 2004 after Total 03/31/00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate-Sensitive Assets:
Fixed interest rate loans $ 7,613 $ 7,488 $ 15,384 $ 18,170 $ 21,117 $194,692 $264,464 $265,760
Average interest rate 9.70% 12.06% 11.93% 10.82% 9.79% 8.06% 8.77%
Variable interest rate loans $ 41,066 $ 4,207 $ 3,698 $ 2,892 $ 6,529 $ 98,426 $156,818 $155,253
Average interest rate 10.61% 10.35% 9.75% 8.92% 9.18% 8.02% 8.87%
Fixed interest rate securities $ 6,546 $ 10,277 $ 11,324 $ 19,478 $ 9,692 $ 15,813 $ 73,130 $ 71,733
Average interest rate 6.46% 6.40% 6.24% 6.19% 6.61% 6.97% 6.48%
Other interest-bearing assets $ 543 $ 543 $ 543
Average interest rate 3.18% 3.18%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 6,510 $ 5,638 $ 4,883 $ 4,228 $ 3,662 $ 23,665 $ 48,586 $ 48,586
Savings & Interest-bearing checking $ 20,793 $ 17,307 $ 14,460 $ 12,126 $ 10,204 $ 60,873 $135,763 $135,763
Average interest rate 3.51% 3.57% 3.63% 3.68% 3.74% 4.01% 3.78%
Time deposits $139,280 $ 70,089 $ 17,031 $ 15,644 $ 1,510 $ 1,876 $245,430 $244,928
Average interest rate 5.58% 5.83% 6.07% 6.19% 5.92% 7.08% 5.74%
Fixed interest rate borrowings $ 16,387 $ 4,615 $ 5,282 $ 3,098 $ 85 $ 7,198 $ 36,665 $ 35,375
Average interest rate 5.44% 5.61% 5.42% 5.71% 5.85% 5.43% 5.45%
Variable interest rate borrowings $ 25,291 $ 25,291 $ 25,291
Average interest rate 5.25% 5.25%
14
</TABLE>
<PAGE>
OHIO VALLEY BANC CORP
Part II - Other Information
Item 1 - Legal Proceedings
- --------------------------
None
Item 2 - Changes in Securities
- ------------------------------
None
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibit 27 - Financial Data Schedule [Exhibit is filed herewith.]
B. No reports on Form 8-K were filed for the quarter ending march 31, 2000.
OHIO VALLEY BANC CORP.
------------------------------------
Date May 12, 2000 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman of the Board
Date May 12, 2000 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,338
<INT-BEARING-DEPOSITS> 543
<FED-FUNDS-SOLD> 12,875
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,491
<INVESTMENTS-CARRYING> 15,360
<INVESTMENTS-MARKET> 15,242
<LOANS> 421,282
<ALLOWANCE> 4,991
<TOTAL-ASSETS> 540,936
<DEPOSITS> 429,779
<SHORT-TERM> 42,656
<LIABILITIES-OTHER> 6,351
<LONG-TERM> 19,300
0
0
<COMMON> 3,549
<OTHER-SE> 39,301
<TOTAL-LIABILITIES-AND-EQUITY> 540,936
<INTEREST-LOAN> 9,495
<INTEREST-INVEST> 1,073
<INTEREST-OTHER> 84
<INTEREST-TOTAL> 10,652
<INTEREST-DEPOSIT> 4,631
<INTEREST-EXPENSE> 5,380
<INTEREST-INCOME-NET> 5,272
<LOAN-LOSSES> 302
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,273
<INCOME-PRETAX> 1,459
<INCOME-PRE-EXTRAORDINARY> 1,459
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,052
<EPS-BASIC> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 4.33
<LOANS-NON> 2,897
<LOANS-PAST> 2,523
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 530
<ALLOWANCE-OPEN> 5,055
<CHARGE-OFFS> 425
<RECOVERIES> 59
<ALLOWANCE-CLOSE> 4,991
<ALLOWANCE-DOMESTIC> 3,480
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,511
</TABLE>
