UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
SEPTEMBER 30, 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 October 31, 2000
3,497,280 common shares
<PAGE>
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 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.......................................... 15
Part II - Other Information
Other Information and Signatures................................. 16
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
September 30, December 31,
2000 1999
------------ ------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 12,352 $ 19,000
Federal funds sold 1,925
------------ ------------
Total cash and cash equivalents 14,277 19,000
Interest-bearing balances with banks 1,100 806
Securities available-for-sale 58,734 55,371
Securities held-to-maturity, (Estimated fair
value: $17,270 at September 30, 2000 and $15,892
at December 31, 1999) 17,184 16,009
Total loans 441,983 411,158
Allowance for loan losses (5,213) (5,055)
------------ ------------
Net loans 436,770 406,103
Premises and equipment, net 9,528 9,888
Accrued income receivable 3,475 3,298
Intangible assets, net 1,429 1,412
Other assets 11,391 10,170
------------ ------------
Total assets $ 553,888 $ 522,057
============ ============
LIABILITIES
Noninterest-bearing deposits $ 47,590 $ 46,444
Interest-bearing deposits 387,566 358,887
------------ ------------
Total deposits 435,156 405,331
Securities sold under agreements to repurchase 17,631 16,788
Other borrowed funds 43,813 51,231
Obligated mandatorily redeemable capital
securities of subsidiary trust 5,000
Accrued liabilities 9,007 5,999
------------ ------------
Total liabilities 510,607 479,349
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 10,000,000
shares authorized; 3,559,769 shares issued and
3,497,280 shares outstanding at September 30,
2000 and 3,548,572 shares issued and
3,542,983 shares outstanding at
December 31, 1999) 3,560 3,549
Surplus 28,760 28,454
Retained earnings 13,083 11,491
Accumulated other comprehensive income, net
of tax (tax effect of $152 in 2000 and
$307 in 1999) (294) (597)
Treasury stock (at cost, 62,489 shares in 2000
and 5,589 shares in 1999) (1,828) (189)
------------ ------------
Total shareholders' equity 43,281 42,708
------------ ------------
Total liabilities and
shareholders' equity $ 553,888 $ 522,057
============ ============
See notes to the consolidated financial statements.
1
<PAGE>
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
Interest and dividend income:
Interest and fees on loans $10,437 $ 9,097 $29,810 $26,194
Interest on taxable securities 862 813 2,522 2,366
Interest on nontaxable securities 204 211 587 625
Dividends 82 74 231 217
Other interest 42 19 229 139
-------- -------- -------- --------
Total interest and dividend income 11,627 10,214 33,379 29,541
Interest expense:
Interest on deposits 5,338 3,933 14,871 11,359
Interest on repurchase agreements 227 132 595 339
Interest on other borrowed funds 717 700 1,974 2,001
-------- -------- -------- --------
Total interest expense 6,282 4,765 17,440 13,699
-------- -------- -------- --------
Net interest income 5,345 5,449 15,939 15,842
Provision for loan losses 456 438 1,165 1,442
-------- -------- -------- --------
Net interest income after provision 4,889 5,011 14,774 14,400
Other income:
Service charges on deposit accounts 432 328 1,155 883
Trust division income 52 57 163 172
Income from bank owned insurance 130 103 374 301
Other operating income 276 170 826 557
Net gain on sale of available-for-
sale securities 63
-------- -------- -------- --------
Total other income 890 658 2,518 1,976
Other expense:
Salaries and employee benefits 2,267 2,380 6,981 6,711
Occupancy expense 354 253 1,019 736
Furniture and equipment expense 319 292 930 797
Data processing expense 144 117 332 329
Other operating expense 1,174 1,108 3,671 3,272
-------- -------- -------- --------
Total other expense 4,258 4,150 12,933 11,845
-------- -------- -------- --------
Income before income taxes 1,521 1,519 4,359 4,531
Provision for income taxes 422 422 1,217 1,260
-------- -------- -------- --------
NET INCOME $ 1,099 $ 1,097 $ 3,142 $ 3,271
======== ======== ======== ========
Earnings per share $ 0.31 $ 0.31 $ 0.89 $ 0.93
======== ======== ======== ========
See notes to the consolidated financial statements.
2
<PAGE>
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
Balance at beginning of period $42,677 $41,797 $42,708 $40,680
Comprehensive income:
Net income 1,099 1,097 3,142 3,271
Net change in unrealized gain or
loss on available-for-sale
securities 443 (21) 303 (475)
-------- -------- -------- --------
Total comprehensive income 1,542 1,076 3,445 2,796
Proceeds from issuance of common
stock through the dividend
reinvestment plan 124 317 301
Cash paid in lieu of fractional shares
in stock split (15)
Cash dividends (527) (494) (1,550) (1,383)
Shares acquired for treasury (535) (189) (1,639) (189)
-------- -------- -------- --------
Balance at end of period $43,281 $42,190 $43,281 $42,190
======== ======== ======== ========
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)
Nine months ended September 30,
2000 1999
------------ ------------
Net cash provided by operating activities $ 7,613 $ 7,118
Investing activities
Proceeds from maturities of
securities available-for-sale 4,171 6,730
Purchases of securities available-
for-sale (6,876) (10,494)
Proceeds from maturities of
securities held-to-maturity 1,226 1,874
Purchase of securities held-to-maturity (2,450) (1,310)
Proceeds from sale of equity securities 64
Change in interest-bearing deposits
in other banks (294) 301
Net increase in loans (31,832) (51,776)
Purchase of premises and equipment, net (754) (2,450)
Purchases of insurance contracts, net (905) (220)
------------ ------------
Net cash used in investing activities (37,714) (57,281)
Financing activities
Change in deposits 29,825 50,567
Cash and cash equivalents received in
assumption of deposits, net of assets
acquired 19,361
Cash dividends (1,550) (1,383)
Cash paid in lieu of fractional shares
in stock split (15)
Proceeds from issuance of common stock 317 301
Purchases of treasury stock (1,639) (189)
Change in securities sold under
agreements to repurchase 843 (5,850)
Proceeds from long-term borrowings 12,250 4,500
Repayment of long-term borrowings (12,052) (3,737)
Change in other short-term borrowings (2,616) (5,518)
------------ ------------
Net cash from financing activities 25,378 58,037
------------ ------------
Change in cash and cash equivalents (4,723) 7,874
Cash and cash equivalents at beginning
of year 19,000 12,717
------------ -------------
Cash and cash equivalents at September 30, $ 14,277 $ 20,591
============ =============
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. Management
considers the Company to operate in one segment, banking.
These interim financial statements are prepared without audit and reflect all
adjustments of a normal recurring nature which, in the opinion of Management,
are necessary to present fairly the consolidated financial position of Ohio
Valley Banc Corp. at September 30, 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 nine months ended September
30, 2000 and 1999, Ohio Valley Banc Corp. paid interest in the amount of $16,677
and $12,992, respectively. For the nine months ended September 30, 2000 and
1999, Ohio Valley Banc Corp. paid income taxes of $1,155 and $1,505,
respectively.
Earnings per share is computed based on the weighted average shares outstanding
during the period. Weighted average shares outstanding were 3,513,844 and
3,528,790 for the three months ending September 30, 2000 and September 30, 1999,
respectively. Weighted average shares outstanding were 3,523,399 and 3,529,410
for the nine months ending September 30, 2000 and September 30, 1999,
respectively.
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 which is also recognized net of tax as a separate
component of equity.
On April 1, 1999, the Company adopted Statement 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:
September 30, 2000
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
------------ ---------- ---------- ------------
Securities Available-for-Sale
-----------------------------
U.S. Treasury securities $ 3,997 $ 3 $ (1) $ 3,999
U.S. Government agency
securities 48,662 153 (512) 48,303
Mortgage-backed securities 2,141 (89) 2,052
Marketable equity
securities 4,380 4,380
------------ ---------- ---------- ------------
Total securities $ 59,180 $ 156 $ (602) $ 58,734
============ ========== ========== ============
Securities Held-to-Maturity
---------------------------
Obligations of state and
political subdivisions $ 16,905 $ 203 $ (100) $ 17,008
Mortgage-backed securities 279 1 (18) 262
------------ ---------- ---------- ------------
Total securities $ 17,184 $ 204 $ (118) $ 17,270
============ ========== ========== ============
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 September 30,
2000, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities because certain issuers may have the right to call
or prepay the debt obligations prior to their contractual maturities.
Available-for-Sale Held-to-Maturity
--------------------------- ---------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
Debt securities:
Due in one year
or less $ 8,516 $ 8,508 $ 2,310 $ 2,313
Due in one to
five years 44,143 43,794 7,625 7,740
Due in five to
ten years 3,395 3,395
Due after ten years 3,575 3,560
Mortgage-backed sec. 2,141 2,052 279 262
------------ ------------ ------------ ------------
Total debt
securities $ 54,800 $ 54,354 $ 17,184 $ 17,270
============ ============ ============ ============
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 nine months of 2000 and no sales of debt securities during the first
nine months of 1999. Proceeds from the sale of equity securities during the
first nine months of 1999 were $64 with gross gains of $63 realized.
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
September 30, December 31,
2000 1999
------------ ------------
Real estate loans $ 211,404 $ 201,625
Commercial and industrial loans 131,769 119,585
Consumer loans 98,173 88,942
Other loans 637 1,006
------------ ------------
$ 441,983 $ 411,158
============ ============
At September 30, 2000 and December 31, 1999, loans on nonaccrual status were
approximately $2,681 and $2,953, respectively. Loans past due more than 90 days
and still accruing at September 30, 2000 and December 31, 1999 were $3,938 and
$3,711, 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 nine months ended
September 30 is as follows:
2000 1999
------------ ------------
Balance - January 1, $ 5,055 $ 4,277
Loans charged off:
Real estate 43 28
Commercial 15 113
Consumer 1,137 878
------------ ------------
Total loans charged off 1,195 1,019
Recoveries of loans:
Real estate 4 15
Commercial 4
Consumer 184 161
------------ -----------
Total recoveries 188 180
Net loan charge-offs (1,007) (839)
Provision charged to operations 1,165 1,442
------------ ------------
Balance - September 30, $ 5,213 $ 4,880
============ ============
Information regarding impaired loans: September 30, December 31,
2000 1999
------------ ------------
Balance of impaired loans $ 1,233 $ 1,413
============ ============
Portion of impaired loan balance for which an
allowance for credit losses is allocated $ 1,233 $ 1,413
============ ============
Portion of allowance for loan losses
allocated to the impaired loan balance $ 530 $ 600
============ ============
Average investment in impaired
loans year-to-date $ 1,266 $ 1,570
============ ============
Interest on impaired loans was not material for the periods ended September 30,
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
6.33% of total loans were unsecured at September 30, 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
September 30, 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 $51,363 as compared to $49,826 at
December 31, 1999.
NOTE 6 - OTHER BORROWED FUNDS
Other borrowed funds at September 30, 2000 and December 31, 1999 are comprised
of advances from the Federal Home Loan Bank (FHLB), promissory notes and Federal
Reserve Bank Notes.
FHLB Borrowings Promissory Notes FRB Notes Totals
--------------- ---------------- --------- ---------
2000 $ 31,628 $ 5,716 $ 6,469 $ 43,813
1999 $ 38,746 $ 3,985 $ 8,500 $ 51,231
Pursuant to collateral agreements with the FHLB, advances are secured by certain
qualifying first mortgage loans and by FHLB stock which total $47,442 and $4,107
at September 30, 2000. Fixed rate FHLB advances of $28,128 mature through 2010
and have interest rates ranging from 4.88% to 7.08%. In addition, variable rate
FHLB borrowings represent $3,500.
Promissory notes, issued primarily by the parent company, have fixed rates of
6.50% to 7.25% 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 $ 4,099 $ 2,617 $ 6,469 $ 13,185
2001 10,865 3,094 13,959
2002 5,283 5 5,288
2003 3,098 3,098
2004 85 85
Thereafter 8,198 8,198
--------------- ---------------- --------- --------
$ 31,628 $ 5,716 $ 6,469 $ 43,813
=============== ================ ========= ========
Letters of credit issued on the Bank's behalf by the FHLB to collateralize
certain public unit deposits as required by law totaled $36,926 at September 30,
2000 and $24,000 at December 31, 1999. Various investment securities from the
Bank used to collateralize FRB notes totaled $9,215 at September 30, 2000 and
$9,225 at December 31, 1999. Promissory notes were unsecured at September 30,
2000 and December 31, 1999.
NOTE 7 - TRUST PREFERRED SECURITIES
Obligated mandatorily redeemable capital securities of a subsidiary trust (Trust
Preferred Securities) of $5,000 were issued on October 5, 2000 with a fixed rate
of 10.60% and a final maturity date of September 7, 2030. Trust preferred
securities were unsecured through September 30, 2000.
(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 September 30, 2000, compared to December 31, 1999, and the
consolidated results of operations for the quarterly and year-to-date periods
ending September 30, 2000, compared to the same periods 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. The Company
continued its market expansion in the second quarter of 2000 by opening its
eighth Superbank (Wal-Mart) facility. This new branch is located in Huntington,
West Virginia (Cabell County) and will further strengthen the Company's presence
along the growing I-64 corridor of western West Virginia.
With the advent of the Gramm Leach Bliley Act, the Company participated as an
investor in an acquisition of ProFinance Holdings Corporation, a property and
casualty insurance underwriter and re-insurance company. The total purchase
price of $31,460 was financed by the issuance of $10,000 of senior debt and an
equity investment by five financial holding companies, a private equity firm and
a group of insurance executives. The Company's investment of $1,931 represents a
9% minority ownership of the insurance company that was finalized on October 5,
2000. In addition, the Company formed a subsidiary called Ohio Valley Financial
Services. The subsidiary will be a joint venture insurance agency with an
existing insurance agency with plans to open in Jackson County, Ohio before
year-end. The subsidiary will be able to offer customers life, homeowner and
auto insurance. Management views both the insurance company acquisition and Ohio
Valley Financial Services as unique opportunities to enter the insurance
business and expand the products being offered to the customer.
10
<PAGE>
FINANCIAL CONDITION
The consolidated total assets of Ohio Valley Banc Corp. increased $31,831 or
6.1% during the first nine months to reach $553,888 at September 30, 2000. The
factor contributing most to this growth in assets was loans which grew $30,825.
Loans were funded by growth in deposits of $29,825 or 7.4%. A portion of the
growth in deposits combined with a decrease in cash and cash equivalents of
$4,723 was used to reduce borrowed funds and securities sold under agreements to
repurchase which are collectively down $6,575.
During the first nine months of 2000, loan growth was led by commercial loans
expanding $12,184 or 10.2%. This growth came mostly from loan origination
increases within the Franklin and Jackson counties of Ohio. For the same period,
real estate mortgages grew $9,779 or 4.9%. Approximately 65% of this increase
occurred in Pike county of Ohio as well as the Mason and Cabell counties of West
Virginia. These counties represent newer markets for the Company and management
expects continued loan growth within these new locations. In addition, consumer
loans increased $9,231 or 10.4%. Approximately 67% of this increase occurred
within indirect loans, particularly automobiles, where management has been more
aggressive in its pricing of these products. As a percentage of total loans, the
allowance for loan losses at September 30, 2000 was 1.18%, down from 1.23% at
December 31, 1999. Management 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.
Total deposit growth was led by time deposits increasing $23,510 or 9.7%
followed by savings and interest-bearing demand deposits increasing $5,169 or
4.4%. Non-interest bearing demand deposits also grew $1,146 or 2.5%. During the
first nine months of 2000, management generated deposit growth through more
aggressive pricing on certificates of deposit, particularly in the newer
markets. Additionally, management continues to be successful in generating
additional interest-bearing demand deposits through the Company's Gold Club
account which offers a NOW account along with other banking benefits. The
deposit growth experienced through the first nine months of 2000 has been used
to fund the growth in loans and to reduce borrowed funds.
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 $7,418 from December 31, 1999, as management has focused on
funding loan growth through less costly retail sources of funds in certificates
of deposit. The decrease occurred primarily in overnight borrowings.
Additionally, securities sold under agreements to repurchase are up $843 from
December 31, 1999. Furthermore, on September 7, 2000, the Company completed the
issuance of $5,000 of trust preferred securities. The proceeds from this
issuance will be used to fund the current and upcoming insurance investments, to
help continue the Company's stock repurchases and to support the growth of
additional earning assets.
Total shareholders' equity at September 30, 2000 of $43,281 was up by $573 as
compared to the balance of $42,708 on December 31, 1999. Shareholders' equity
was reduced by the Company's purchase of 56,900 additional treasury shares as
part of the stock repurchase program during the first nine months of
11
<PAGE>
2000 which lowered equity by $1,639. This was offset by year-to-date income of
$3,142 and proceeds of $317 from the issuance of common stock through the
dividend reinvestment plan less cash dividends paid of $1,550, or $.15 per
share. This cash dividend represents 49.3% of the year-to-date income.
Management continues to utilize 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.
RESULTS OF OPERATIONS
Ohio Valley Banc Corp's net income was $1,099 for the third quarter and $3,142
for the first nine months of 2000, up slightly by .2% and down 3.9% compared to
$1,097 and $3,271 for the same periods in 1999. Comparing year-to-date September
30, 2000 to September 30, 1999, return on assets decreased from .91% to .78% and
return on equity decreased from 10.54% to 9.86%. Third quarter earnings per
share equaled last year's $.31 per share and for the first nine months of 2000,
earnings per share was $.89 per share, down 4.3% from 1999's $.93. The primary
contributor to the minimal and decreasing growth in net income was an increase
in noninterest expense of $108 and $1,088 for the third quarter and year-to-date
periods of 2000 as compared to the same periods in 1999 that can be attributed
to the opening of five additional Bank offices. Net interest income was down
slightly by $104 or 1.9% for the third quarter of 2000, but was up $97 or .6%
for the first nine months of 2000 as compared to the same periods in 1999. This
year-to-date increase was primarily due to the growth in earning assets of
$37,582 from December 31, 1999. Net interest income was negatively impacted in
the first nine months of 2000 as compared to the same period in 1999 by a
decline in the net interest margin due to the Bank's increase in funding costs
of 53 basis points combined with a limited increase in asset yields of 5 basis
points. Provision expense was up slightly by $18 for the third quarter, but was
down $277 for the nine months ending September 30, 2000. This year-to-date
decrease in provision expense can be attributed to the $9,779 increase in real
estate mortgages and the $45 decrease in nonperforming loans, both of which
lower the risks associated with the loan portfolio.
The decrease in net interest income after provision for the third quarter of
2000 was offset by a decrease in net noninterest expense of $124 or 3.6% for the
same period. For the first nine months of 2000, the increase in net interest
income after provision was offset by an increase in net noninterest expense of
$546 or 5.5% for the same period. Total other income increased $232 or 35.3% for
the third quarter and $542 or 27.4% over the first nine months in 2000 as
compared to the same periods in 1999. Contributing to the gain was service
charge income, impacted by the growth in deposit account volume, which
contributed an additional $104 and $272 during the third quarter and
year-to-date periods of 2000 as compared to the same periods in 1999. Total
other expense increased $108 or 2.6% and $1,088 or 9.2% for the third quarter
and year-to-date periods of 2000 as compared to the same periods in 1999. These
increases were affected most by the increase of five new offices from June 1999
to June 2000. As a result, increases in occupancy and furniture and equipment
expense totaled $128 and $416 for the third quarter and year-to-date periods of
2000 as compared to the same periods in 1999. Furthermore, the additional
employees hired to staff these new offices was a factor in generating a
year-to-date increase in salaries and employee benefits expense of $270 for the
first nine months of 2000. For the third quarter of 2000, salary and employee
benefits expense was down by $113 as compared to the same periods in 1999 due to
reductions in incentive compensation plans. Contributing to the increase in
other
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<PAGE>
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.
CAPITAL RESOURCES
All of the capital ratio's exceeded the regulatory minimum guidelines as
identified in the following table:
Company Ratios Regulatory
September 30, 2000 December 31, 1999 Minimum
------------------- ------------------ ----------
Tier 1 risk-based capital 11.7% 11.1% 4.00%
Total risk-based capital ratio 13.0% 12.3% 8.00%
Leverage ratio 9.0% 8.1% 4.00%
Cash dividends paid of $1,550 for the first nine months of 2000 represents a
12.1% 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 September 30, 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.
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 $76,421 represented 13.8%
of total assets at September 30, 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 September 30, 2000, the Bank could borrow
an additional $57 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 a decrease of $4,723 in cash and cash
equivalents for the nine months ended September 30, 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
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<PAGE>
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.
14
<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 nine months of 2000.
As of September 30, 2000 Principal Amount Maturing in:
There- Fair Value
2000 2001 2002 2003 2004 after Total 09/30/00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate-Sensitive Assets:
Fixed interest rate loans $ 6,519 $ 6,652 $ 12,271 $ 16,501 $ 23,380 $214,608 $279,931 $281,159
Average interest rate 10.76% 12.04% 12.33% 11.02% 10.13% 8.23% 8.88%
Variable interest rate loans $ 9,433 $ 34,672 $ 3,176 $ 2,448 $ 5,570 $106,753 $162,052 $161,328
Average interest rate 11.27% 11.15% 10.49% 9.38% 9.72% 8.60% 9.39%
Fixed interest rate securities $ 3,809 $ 10,546 $ 11,299 $ 19,384 $ 9,690 $ 21,636 $ 76,364 $ 76,004
Average interest rate 6.55% 6.44% 6.24% 6.19% 6.59% 7.19% 6.58%
Other interest-bearing assets $ 3,025 $ 3,025 $ 3,025
Average interest rate 5.46% 5.46%
Rate-Sensitive Liabilities:
Noninterest-bearing checking $ 6,377 $ 5,522 $ 4,782 $ 4,142 $ 3,587 $ 23,180 $ 47,590 $ 47,590
Savings & Interest-bearing checking $ 20,591 $ 16,857 $ 13,841 $ 11,399 $ 9,416 $ 49,607 $121,711 $121,711
Average interest rate 3.58% 3.63% 3.69% 3.74% 3.79% 4.08% 3.63%
Time deposits $ 60,744 $139,747 $ 38,662 $ 22,350 $ 1,853 $ 2,498 $265,854 $266,066
Average interest rate 5.90% 6.26% 6.45% 6.36% 6.07% 7.00% 6.22%
Fixed interest rate borrowings $ 6,716 $ 10,459 $ 5,288 $ 3,098 $ 85 $ 13,049 $ 38,695 $ 38,855
Average interest rate 5.92% 6.39% 5.42% 5.71% 5.85% 7.57% 6.52%
Variable interest rate borrowings $ 27,600 $ 27,600 $ 27,600
Average interest rate 5.72% 5.72%
15
</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 September 30, 2000.
OHIO VALLEY BANC CORP.
------------------------------------
Date November 14, 2000 /S/ James L. Dailey
----------------- ------------------------------------
James L. Dailey
Chairman of the Board
Date November 14, 2000 /S/ Jeffrey E. Smith
----------------- ------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
16
