UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended:
MARCH 31, 2004
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-20914
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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: (740) 446-2631
Not Applicable
------------------------
Former name, former address and formal fiscal year, if changed since last report
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.
X Yes
No
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
X Yes
No
The number of common shares of the Registrant outstanding as of April 30, 2004
was 3,467,261
OHIO VALLEY BANC CORP
FORM 10-Q
QUARTER ENDED MARCH 31, 2004
================================================================================
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
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 11
Item 3 - Quantitative and Qualitative Disclosure About Market Risk 18
Item 4 - Controls and Procedures 19
Part II - Other Information
Item 1 - Legal Proceedings 19
Item 2 - Changes in Securities, Use of Proceeds and Issuer
Repurchases of Equity Securities 20
Item 3 - Defaults Upon Senior Securities 21
Item 4 - Submission of Matters to a Vote of Security Holders 21
Item 5 - Other Information 21
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures
OHIO VALLEY BANC CORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except share and per share data)
================================================================================
March 31, December 31,
2004 2003
------------ ------------
ASSETS
Cash and cash equivalent 15,600 17,753
Interest-bearing deposits in other banks 857 859
Securities available-for-sale 73,242 76,352
Securities held-to-maturity (estimated fair
value: 2004 - $13,450; 2003 - $13,547) 12,592 12,835
Total loans 584,539 573,704
Less: Allowance for loan losses (8,040) (7,593)
------------ ------------
Net loans 576,499 566,111
Premises and equipment, net 9,095 9,142
Accrued income receivable 3,046 2,700
Goodwill 1,267 1,267
Bank owned life insurance 13,358 13,222
Other assets 7,635 7,086
------------ ------------
Total assets $ 713,191 $ 707,327
============ ============
LIABILITIES
Noninterest-bearing deposits $ 64,325 $ 62,235
Interest-bearing deposits 465,761 445,274
------------ ------------
Total deposits 530,086 507,509
Securities sold under agreements to repurchase 24,085 24,018
Other borrowed funds 83,595 101,562
Subordinated debentures 13,500 13,500
Accrued liabilities 7,449 6,330
----------- ------------
Total liabilities 658,715 652,919
----------- ------------
SHAREHOLDERS' EQUITY
Common stock ($1.00 par value per share, 10,000,000
shares authorized; 2004 - 3,667,356 shares
issued, 2003 - 3,658,212 shares issued) 3,667 3,658
Additional paid-in capital 31,216 30,962
Retained earnings 24,279 23,343
Accumulated other comprehensive income 696 624
Treasury stock, at cost (2004 - 200,095 shares;
2003 - 159,611 shares) (5,382) (4,179)
----------- ------------
Total shareholders' equity 54,476 54,408
----------- ------------
Total liabilities and
shareholders' equity $ 713,191 $ 707,327
=========== ============
================================================================================
See notes to the consolidated financial statements.
1
OHIO VALLEY BANC CORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except per share data)
================================================================================
Three months ended
March 31,
2004 2003
------------- -------------
Interest and dividend income:
Loans, including fees $ 9,959 $ 10,687
Securities:
Taxable 734 686
Tax exempt 145 174
Dividends 52 49
Other Interest 1 16
------------- -------------
10,891 11,612
Interest expense:
Deposits 2,741 3,316
Securities sold under agreements
to repurchase 42 53
Other borrowed funds 950 1,088
Subordinated debentures 235
Obligated mandatorily redeemable capital
securities of subsidiary trust 239
------------- -------------
3,968 4,696
------------- -------------
Net interest income 6,923 6,916
Provision for loan losses 768 1,385
------------- -------------
Net interest income after provision
for loan losses 6,155 5,531
Noninterest income:
Service charges on deposit accounts 759 697
Trust fees 52 52
Income from bank owned insurance 163 172
Net gain on sale of loans 6 196
Other 326 329
------------- -------------
1,306 1,446
Noninterest expense:
Salaries and employee benefits 3,040 2,797
Occupancy 328 332
Furniture and equipment 283 237
Data processing 178 160
Other 1,358 1,398
------------- -------------
5,187 4,924
------------- -------------
Income before income taxes 2,274 2,053
Provision for income taxes 708 593
------------- -------------
NET INCOME $ 1,566 $ 1,460
============= =============
Earnings per share $ 0.45 $ 0.42
============= =============
================================================================================
See notes to the consolidated financial statements.
2
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollars in thousands, except share and per share data)
================================================================================
Three months ended
March 31,
2004 2003
------------ ------------
Balance at beginning of period $ 54,408 $ 50,375
Comprehensive income:
Net income 1,566 1,460
Change in unrealized gain (loss) on
available-for-sale securities 109 (236)
Income tax effect (37) 80
------------ ------------
Total comprehensive income 1,638 1,304
Proceeds from issuance of common
stock through dividend reinvestment plan 263 234
Cash dividends (630) (589)
Shares acquired for treasury (1,203)
------------ ------------
Balance at end of period $ 54,476 $ 51,324
============ ============
Cash dividends per share $ 0.18 $ 0.17
============ ============
Shares from common stock issued
through dividend reinvestment plan 9,144 10,547
============ ============
Shares acquired for treasury 40,484
============ ============
================================================================================
See notes to the consolidated financial statements.
3
OHIO VALLEY BANC CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands, except per share data)
================================================================================
Three months ended March 31,
2004 2003
------------ ------------
Net cash provided by operating activities: $ 2,731 $ 2,450
Investing activities:
Proceeds from maturities of
securities available-for-sale 6,285 14,753
Purchases of securities available-
for-sale (3,068) (8,261)
Proceeds from maturities of
securities held-to-maturity 236 38
Change in interest-bearing deposits
in other banks 2 18
Net change in loans (11,207) 85
Proceeds from sale of other real
estate owned (47)
Purchases of premises and equipment (239) (278)
------------ ------------
Net cash from (used) in investing
activities (7,991) 6,308
Financing activities:
Change in deposits 22,577 14,539
Cash dividends (630) (589)
Proceeds from issuance of common stock 263 234
Purchases of treasury stock (1,203)
Change in securities sold under
agreements to repurchase 67 (11,814)
Proceeds from long-term borrowings 3,000 3,390
Repayment of long-term borrowings (5,615) (6,141)
Change in other short-term borrowings (15,352) (2,915)
------------ ------------
Net cash from (used) in financing
activities 3,107 (3,296)
------------ ------------
Change in cash and cash equivalents (2,153) 5,462
Cash and cash equivalents at beginning of period 17,753 23,451
------------ ------------
Cash and cash equivalents at end of period $ 15,600 $ 28,913
============ ============
SUPPLEMENTAL DISCLOSURE
- -----------------------
Cash paid for interest $ 4,524 $ 5,639
Cash paid for income taxes 207 170
Non-cash tranfers from loans to other real
estate owned 50 368
================================================================================
See notes to the consolidated financial statements.
4
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Ohio
Valley Banc Corp. (the "Company") and its wholly-owned subsidiaries, The Ohio
Valley Bank Company (the "Bank"), Loan Central, Inc., a consumer finance company
and Ohio Valley Financial Services Agency, LLC, an insurance company. As further
discussed in Note 1, trusts that had previously been consolidated with the
Company are now reported separately. 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 the
Company at March 31, 2004, and its results of operations and cash flows for the
periods presented. The results of operations for the quarter ended March 31,
2004 are not necessarily indicative of the operating results to be anticipated
for the full fiscal year ending December 31, 2004. The accompanying consolidated
financial statements do not purport to contain all the necessary financial
disclosures required by accounting principles generally accepted in the United
States of America (US GAAP) that might otherwise be necessary in the
circumstances. The Annual Report of the Company for the year ended December 31,
2003, contains consolidated financial statements and related notes which should
be read in conjunction with the accompanying consolidated financial statements.
The accounting and reporting policies followed by the Company conform to US
GAAP. The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates. The allowance for loan losses is particularly subject to
change.
The majority of the Company's income is derived from commercial and retail
lending activities. Management considers the Company to operate in one segment,
banking.
INCOME TAX
Income tax expense is the sum of the current year income tax due or refundable
and the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax consequences of temporary differences
between the carrying amounts and tax bases of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces deferred tax
assets to the amount expected to be realized.
CASH FLOW
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. Generally, federal funds are
purchased and sold for one-day periods. The Company reports net cash flows for
customer loan transactions, deposit transactions, short-term borrowings and
interest-bearing deposits with other financial institutions.
================================================================================
(Continued)
5
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average shares outstanding
during the period. Weighted average shares outstanding were 3,500,359 and
3,469,079 for the three months ending March 31, 2004 and 2003, respectively.
LOANS
Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses.
Interest income on loans is reported on the interest method and includes
amortization of net deferred loan fees and costs over the loan term. Interest
income on loans is not reported when full loan repayment is in doubt, typically
when the loan is impaired or payments are past due over 90 days. Payments
received on such loans are reported as principal reductions.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a valuation allowance for probable incurred
credit losses, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance. Management
estimates the allowance balance required using past loan loss experience, the
nature and volume of the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions, and other
factors. Allocations of the allowance may be made for specific loans, but the
entire allowance is available for any loan that, in management's judgment,
should be charged-off.
The allowance consists of specific and general components. The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as substandard or doubtful. The general component covers
non-classified loans and is based on historical loss experience adjusted for
current factors.
A loan is impaired when full payment under the loan terms is not expected.
Commercial and commercial real estate loans are individually evaluated for
impairment. Impaired loans are carried at the present value of expected cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to impaired loans. Large groups of smaller balance
homogeneous loans, such as consumer and residential real estate loans, are
collectively evaluated for impairment, and accordingly, they are not separately
identified for impairment disclosures.
ACCOUNTING PRONOUNCEMENTS
In 2003, the Company adopted FASB Interpretation 46, Consolidation of Variable
Interest Entities. Interpretation 46, as revised in December 2003, changes the
accounting model for consolidation from one based on consideration of control
through voting interests. Whether to consolidate an entity will now also
consider whether that entity has sufficient equity at risk to enable it to
operate without additional financial support, whether the equity owners in that
entity lack the obligation to absorb expected losses or the right to receive
residual returns of the entity, or whether voting rights in the entity are not
proportional to the equity interest and substantially all the entity's
activities are conducted for an investor with few voting rights.
================================================================================
(Continued)
6
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Prior to 2003, Ohio Valley Statutory Trusts I and II were consolidated in the
Company's financial statements, with the trust preferred securities issued by
the trust reported in liabilities and the subordinated debentures issued by the
Company eliminated in consolidation. Under this new accounting guidance, the
trusts are no longer consolidated with the Company. Accordingly, the Company
does not report the securities issued by the trust as liabilities, and instead
reports as liabilities the subordinated debentures issued by the Company and
held by the trust, as these are no longer eliminated in consolidation. Since the
Company's equity interest in the trusts cannot be received until the
subordinated debentures are repaid, these amounts have been netted. The effect
of no longer consolidating the trust changes certain balance sheet
classifications but does not change the Company's equity or net income.
Accordingly, the amounts previously reported as "obligated mandatorily
redeemable capital securities of a subsidiary trust" in liabilities have been
recaptioned "subordinated debentures" and continue to be presented in
liabilities on the balance sheet.
================================================================================
(Continued)
7
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 2 - LOANS
Total loans as presented on the balance sheet are comprised of the following
classifications:
March 31, December 31,
2004 2003
---------------- ----------------
Commercial and industrial loans $ 227,404 $ 220,724
Real estate loans 219,550 217,636
Consumer loans 137,072 134,720
Other loans 513 624
---------------- ----------------
$ 584,539 $ 573,704
================ ================
At March 31, 2004 and December 31, 2003, loans on nonaccrual status were
approximately $2,102 and $2,655, respectively. Loans past due more than 90 days
and still accruing at March 31, 2004 and December 31, 2003 were $974 and $659,
respectively.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
Following is an analysis of changes in the allowance for loan losses for the
three months ended March 31:
2004 2003
---------------- ----------------
Balance - January 1, $ 7,593 $ 7,069
Loans charged off:
Real estate 106 92
Commercial 224 1,212
Consumer 447 556
---------------- ----------------
Total loans charged off 777 1,860
Recoveries of loans:
Real estate 120 7
Commercial 95 276
Consumer 241 193
---------------- ----------------
Total recoveries 456 476
---------------- ----------------
Net loan charge-offs (321) (1,384)
Provision charged to operations 768 1,385
---------------- ----------------
Balance - March 31, $ 8,040 $ 7,070
================ ================
================================================================================
(Continued)
8
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 3 - ALLOWANCE FOR LOAN LOSSES (continued)
Information regarding impaired loans is as follows:
March 31, December 31,
2004 2003
-------------- ---------------
Balance of impaired loans $ 2,961 $ 1,988
============== ===============
Less portion for which no specific
allowance is allocated $ 687 $ 801
============== ===============
Portion of impaired loan balance for
which a specific allowance for credit
losses is allocated $ 2,274 $ 1,187
============== ===============
Portion of allowance for loan losses
specifically allocated for the
impaired loan balance $ 1,848 $ 475
============== ===============
Average investment in impaired loans
year-to-date $ 3,128 $ 2,082
============== ===============
Interest on impaired loans was not material for the periods ended March 31, 2004
and 2003.
NOTE 4 - 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
4.00% of total loans were unsecured at March 31, 2004 as compared to 3.99% at
December 31, 2003.
The Company 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, 2004, 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 $58,906 as compared to $58,496 at December 31,
2003.
================================================================================
(Continued)
9
OHIO VALLEY BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
================================================================================
NOTE 5 - OTHER BORROWED FUNDS
Other borrowed funds at March 31, 2004 and December 31, 2003 are comprised of
advances from the Federal Home Loan Bank (FHLB) of Cincinnati, promissory
notes and Federal Reserve Bank Notes.
FHLB borrowings Promissory notes FRB Notes Totals
--------------- ---------------- --------- ----------
2004 $ 74,940 $ 6,340 $ 2,315 $ 83,595
2003 $ 90,729 $ 7,031 $ 3,802 $101,562
Pursuant to collateral agreements with the FHLB, advances are secured by certain
qualifying first mortgage loans and by FHLB stock which total $112,409 and
$5,255 at March 31, 2004. Fixed rate FHLB advances of $74,040 mature through
2010 and have interest rates ranging from 3.25% to 6.62%. In addition, variable
rate FHLB borrowings of $900 mature through 2004 and have an interest rate of
1.18%.
Promissory notes, issued primarily by the parent company, have fixed rates of
1.75% to 5.25% and are due at various dates through a final maturity date of
September 30, 2005.
At March 31, 2004, scheduled principal payments through December 31 over the
next five years are as follows:
FHLB borrowings Promissory notes FRB Notes Totals
--------------- ---------------- --------- ----------
2004 $ 16,939 $ 3,099 $ 2,315 $ 22,353
2005 17,117 3,241 20,358
2006 17,609 17,609
2007 4,062 4,062
2008 9,011 9,011
Thereafter 10,202 10,202
---------------- ---------------- ---------- ----------
$ 74,940 $ 6,340 $ 2,315 $ 83,595
================ ================ ========== ==========
Letters of credit issued on the Bank's behalf by the FHLB to collateralize
certain public unit deposits as required by law totaled $27,000 at March 31,
2004 and December 31, 2003. Various investment securities from the Bank used to
collateralize FRB notes totaled $5,895 at March 31, 2004 and $5,995 December 31,
2003.
================================================================================
10
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.
The following discussion focuses on the consolidated financial condition of the
Company and its subsidiaries at March 31, 2004, compared to December 31, 2003,
and the consolidated results of operations for the quarterly period ending March
31, 2004, compared to the same period in 2003. 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.
COMPARISON OF
FINANCIAL CONDITION
AT MARCH 31, 2004 AND DECEMBER 31, 2003
---------------------------------------
INTRODUCTION
The consolidated total assets of the Company increased $5,864 or .8% during the
first three months of 2004 to finish at $713,191. This increase in assets was
primarily due to an increase in the Company's loan portfolio, which is up
$10,835, partially offset by a $3,353 decline in investment securities from
year-end 2003. Loan growth in the first quarter had an impact on the Company's
cash and cash equivalents which are down 12% from year-end 2003. The Company's
first quarter loan growth was funded primarily by an increase in the Company's
total deposits which were up $22,577 or 4.4%, mostly from a 9% increase in time
deposits. Growth in deposits provided additional funds to pay down other
borrowings, which have decreased $17,967 from year-end 2003.
CASH AND CASH EQUIVALENTS
The Company's cash and cash equivalents consist of cash and balances due from
banks and federal funds sold. The amounts of cash and cash equivalents fluctuate
on a daily basis due to customer activity and liquidity needs. At March 31,
2004, cash and cash equivalents totaled $15,600, down 12.1% compared to $17,753
at December 31, 2003. This decrease was primarily attributable to the Company's
increased funding needs related to the growth in the loan portfolio as well as
fewer items in the process of collection at March 31, 2004. Management believes
that the current balance of cash and cash equivalents, although down from
year-end 2003, remains at a level that will meet cash obligations and provide
adequate liquidity. Further information regarding the Company's liquidity can be
found under the caption "Liquidity" in this management's discussion and
analysis.
INVESTMENTS
During the first three months of 2004, investment securities declined $3,353 or
3.8% led by a decline in U.S. government agency securities of $5,190 or 13.7%
offset partially by an increase in higher yielding mortgage-backed securities of
$2,023 or 6.0%. The repositioning of the runoff in U.S. government agency
securities to mortgage-backed investments has been primarily to improve both the
yield in the investment portfolio as well as the timing of cash flows due to the
more rapid repayment of principal in mortgage-backed investments.
11
LOANS
During the first three months of 2004, total loans were up $10,835 or 1.9% from
year-end 2003 primarily due to an increase in commercial loans of $6,680 or
3.0%. This commercial growth came mostly from lending opportunities within the
Company's primary market areas of Gallia, Jackson, Pike and Franklin counties in
Ohio, which accounted for 88% of the total increase. Commercial loans represent
the largest portion of the total loan portfolio of 39% at March 31, 2004 and 38%
at year-end 2003. Continued commercial loan volume in 2004 will be dependent
upon economic conditions as well as general demand for loans in the Company's
market area.
While commercial loans represent the largest portion of the Company's loan
portfolio, generating additional real estate loans also remains a large part of
the Company's interest earning asset efforts for 2004. During the first three
months of 2004, total real estate loans increased $1,914 or .9% from year-end
2003 to reach $219,550. In 2003, the Company's real estate loan portfolio was
impacted by a heavy period of refinancing due to a record low rate interest
environment. This prompted the Company's risk-management strategy of selling its
longer term (15 to 30 year) fixed rate real estate loan originations to the
secondary market while growing its 1 year adjustable rate products. As the
Company's loan portfolio is better positioned for a "rise" in interest rates and
as the heavy period of mortgage refinancing declines, the Company has
experienced real estate loan growth mostly in its 15 year fixed rate products,
which are up $3,100 from year-end.
Consumer loans increased by $2,352 or 1.7% since year-end 2003 to reach
$137,072. Loan growth was led by consumer loan originations in the areas of
automobiles, mobile homes and recreational vehicles, which were collectively up
$1,900 from year-end 2003. The indirect automobile lending area continues to
represent the largest portion of the Company's consumer loan portfolio with
balances of $47,600 and $47,800 at March 31, 2004 and December 31, 2003,
respectively. Growth in the consumer loan portfolio has continued to be impacted
by the low interest rate environment which allows for more aggressive pricing on
these loan types.
ALLOWANCE FOR LOAN LOSSES
During the first three months of 2004, the Company experienced a $1,063 decrease
in net charge offs as compared to the same period in 2003. The decline in net
charge offs, particularly commercial loans, is largely attributed to the
Company's improved nonperforming loan status. The Company's nonperforming loans
for the first quarter ending 2004 totaled $3,076 as compared to $9,506 for the
first quarter ending 2003, which emphasizes management's continued focus on
asset quality. The decreased nonperforming loans improved the Company's ratio of
nonperforming loans as a percentage of total loans to .53% for the first quarter
of 2004 compared to 1.70% at March 31, 2003 and 1.06% at March 31, 2002. The
allowance for loan losses was 1.38% of total loans at March 31, 2004 compared to
1.32% at December 31, 2003 and 1.27% at March 31, 2003. While nonperforming
loans have declined, management has increased the ratio of allowance to total
loans based on an increase in the volume of commercial loan activity and the
continued uncertainty of economic conditions. Management believes that the
allowance for loan losses is adequate to absorb probable losses in the loan
portfolio.
DEPOSITS
Total deposit growth of $22,577 or 4.4% during the first three months of 2004
was primarily in time deposits which increased $26,010 or 9.1%. This growth was
primarily driven by increases in the Company's brokered CD issues which totaled
over $14,000 in additional funding during the first three months of 2004.
12
Management continues to utilize these deposit sources from local and national
markets to not only supplement deposit growth, but also fund growth in earning
assets as well as reduce other borrowed funds. The Company's interest-free
funding source, noninterest bearing demand deposits, grew $2,090 or 3.4% during
the first three months of 2004. This increase occurred mostly in business and
pay-it-safe checking account balances which were up $1,400 over year-end 2003.
In addition, the Company's interest bearing demand deposits declined $5,523 or
3.5% during the same period largely due to decreases in the Company's public
fund and Gold Club NOW account balances.
OTHER BORROWED FUNDS
Other borrowed funds are primarily advances from the Federal Home Loan Bank
("FHLB"), which are used to fund loan growth and short-term liquidity needs.
Other borrowed funds are down $17,967 from December 31, 2003. With the growth in
deposits outpacing asset growth, management was able to reduce short-term
borrowings from the FHLB by $13,175 from year-end 2003. Based on the current
interest rate environment, management prefers funding asset growth with term
deposits as compared to variable rate borrowings.
SHAREHOLDERS' EQUITY
Total shareholders' equity at March 31, 2004 of $54,476 was up by $67 as
compared to the balance of $54,408 on December 31, 2003. Contributing most to
this increase was year-to-date income of $1,566 plus proceeds of $263 from the
issuance of common stock through the dividend reinvestment plan less cash
dividends paid of $630, or $.18 per share year-to-date. While cash dividends
represented 40.2 % of year-to-date income, dividends net of proceeds from the
dividend reinvestment plan represented only 23.4% of year-to-date income.
Partially offsetting this growth in capital was an increase in treasury stock
balances. At March 31, 2004, the Company had treasury stock totaling $5,382, an
increase of $1,203 as compared to the total at year-end 2003. During the first
quarter of 2004, the Company repurchased 40,484 common shares at an average
price of $29.71 per share under the 2004 Stock Repurchase Program. The Company
anticipates repurchasing additional common shares as authorized by its stock
repurchase program.
COMPARISON OF
RESULTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2004 AND 2003
----------------------------------------------
INTRODUCTION
The Company's net income was $1,566 for the first quarter of 2004, up $106 or
7.3% compared to $1,460 for the first quarter of 2003. Comparing March 31, 2004
to March 31, 2003, the annualized quarter-to-date return on assets increased
from .86% to .89%, while return on equity decreased from 11.67% to 11.54%. First
quarter 2004 earnings per share was $.45, up 7.1% over last year's $.42 earnings
per share. The first quarter 2004 gain in net income was primarily due to the
significant improvement in asset quality contributing to a decreased provision
expense by $617.
NET INTEREST INCOME
For the first quarter of 2004, net interest income was relatively even with the
first quarter of 2003, showing a gain of $7 or .1%. The lack of growth in net
interest income is largely due to growth in earning assets being completely
offset by the decline in net interest margin. This net interest margin
compression is the result of declining yields on earning assets combined with
limited opportunities to lower funding costs in this low rate interest
environment. Total interest income decreased by $721 or 6.2% to finish at
13
$10,891 at March 31, 2004. Growth in earning assets of $7,480 was completely
offset by declining yields, which were down 64 basis points as compared to the
first three months in 2003. This can be attributed to the high volume of
mortgage refinancing throughout 2003 that resulted in real estate loan renewals
at significantly lower rates. Total interest expense decreased $728 or 15.5% to
finish at $3,968 at March 31, 2004. The decline in interest expense was largely
impacted by a 55 basis point decrease in the Bank's average funding costs due to
the low interest rate environment. As a result, the Company's net interest
margin decreased to 4.24% in the first quarter of 2004 from 4.36% in the first
quarter of 2003. For additional discussion on the Company's rate sensitive
assets and liabilities, please see Item 3, Quantitative and Qualitative
Disclosure About Market Risk on page 18 of this Form 10-Q.
PROVISION EXPENSE
The Company's provision expense was $768 in the first quarter of 2004, down $617
as compared to the same period in 2003. This significant decrease is largely due
to the Company's improved asset quality as well as lower loan delinquencies. A
$6,430 decline in nonperforming loans as well as a 77% decline in net charge
offs had a direct effect on this 44.5% decrease in the provision for loan losses
during the first quarter of 2004. Future provisions to the allowance for loan
losses will continue to be based on the Company's quarterly minimum adequacy
analysis that is discussed further in detail under the caption "Critical
Accounting Policies - Allowance for Loan Losses" on page 15 of this Form 10-Q.
NONINTEREST INCOME
Total noninterest income decreased $140 or 9.7% for the first quarter of 2004 as
compared to the same period in 2003. Driving this decrease in the first quarter
was the declining volume in the Bank's secondary market sales of new long-term,
fixed rate real estate loan originations which were down $190 at March 31, 2004.
As previously mentioned, the mortgage refinancing boom appears to have peaked
and has resulted in the Bank not having sold a real estate loan to the secondary
market in 2004 as compared to approximately 75 loans being sold in the first
quarter of 2003. Partially offsetting this decrease was a gain in the Company's
service charge revenue on deposit accounts, which was up $62 or 9% over the
first quarter of 2003. This growth in service charge income primarily came from
overdraft fees relative to the consistent average growth in the Company's
checking account balances. At March 31, 2004, the Bank's average checking
account balances were $66,800 as compared to $61,000 and $56,200 for the same
periods in 2003 and 2002.
NONINTEREST EXPENSE
Total noninterest expense increased $263 or 5.3% for the first quarter of 2004
as compared to the same period in 2003. Contributing most to this first quarter
increase was salaries and employee benefits, the Company's largest noninterest
expense item, which increased $243 or 8.7%. This increase was related to the
rising cost of medical insurance, annual merit increases and an increase in the
Bank's full-time equivalent employee base from 232 employees at March 31, 2003
to 244 employees at March 31, 2004. Also adding to the first quarter growth in
noninterest expense were furniture and equipment costs being up $46 or 19% over
the first quarter of 2003. This was largely due to the depreciation of equipment
related the Company's various investments in facility upgrades (Milton, WVa),
operating system upgrades as well as newer "up-to-date" personal computers to
improve employee and network efficiency. The remaining noninterest expense
categories were collectively down $26 or 1% as compared to 2003.
14
CAPITAL RESOURCES
All of the capital ratio's exceeded the regulatory minimum guidelines as
identified in the following table:
Company Ratios Regulatory Well
3/31/04 12/31/03 Minimum Capitalized
------- -------- ----------- -----------
Tier 1 risk-based capital 12.0% 12.0% 4.00% 6.0%
Total risk-based capital ratio 13.3% 13.3% 8.00% 10.0%
Leverage ratio 9.7% 9.5% 4.00% 5.0%
Cash dividends paid of $630 for the first three months of 2004 represents a 7.0%
increase over the cash dividends paid during the same period in 2003. The
increase in cash dividends paid is largely due to an increase in dividend rate
paid per share from $0.17 at March 31, 2003 to $0.18 at March 31, 2004. At March
31, 2004, approximately 76% of the shareholders were enrolled in the dividend
reinvestment plan. As part of the Company's stock purchase program, management
will continue to utilize reinvested dividends and voluntary cash, if necessary,
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 $91,424 represented 12.8%
of total assets at March 31, 2004. 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, 2004, the Bank could borrow an
additional $44 million from the Federal Home Loan Bank. The Company experienced
a decrease of $2,153 in cash and cash equivalents for the three months ended
March 31, 2004. See the condensed consolidated statement of cash flows on page 4
for further cash flow information.
The Company engages in certain off-balance sheet credit-related activities,
including commitments to extend credit and standby letters of credit, which
could require the Company to make cash payments in the event that specified
future events occur. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Standby letters of credit are
conditional commitments to guarantee the performance of a customer to a third
party. While off-balance sheet activities are necessary to meet the financing
needs of the Company's customers, many of these commitments are expected to
expire without being drawn upon; therefore, the total amount of commitments does
not necessarily represent future cash requirements.
15
CRITICAL ACCOUNTING POLICIES
The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements. These policies, along with
the disclosures presented in the other financial statement notes, provide
information on how significant assets and liabilities are valued in the
financial statements and how those values are determined. Management views
critical accounting policies to be those which are highly dependent on
subjective or complex judgments, estimates and assumptions, and where changes in
those estimates and assumptions could have a significant impact on the financial
statements. Management currently views the adequacy of the allowance for loan
losses to be a critical accounting policy.
Allowance for Loan Losses:
To arrive at the total dollars necessary to maintain an allowance level
sufficient to absorb the probable losses at a specific financial statement date,
management has developed procedures to establish and then evaluate the allowance
once determined. The allowance consists of the following components: specific
allocation, general allocation and other estimated general allocation.
To arrive at the amount required for the specific allocation component, the
Company evaluates loans for which a loss may be incurred either in part or
whole. To achieve this task, the Company has created a quarterly report
("Watchlist") which lists loans from each loan portfolio that management deems
to be potential credit risks. The criteria to be placed on this report are: past
due 60 or more days, nonaccrual and loans management has determined to be
potential problem loans. These loans are reviewed and analyzed for potential
loss by the Large Loan Review Committee which consists of the President and
members of senior management with lending authority. The function of the
committee is to review and analyze large borrowers for credit risk, scrutinize
the Watchlist and evaluate the adequacy of the allowance for loan losses and
other credit related issues. The committee has established a grading system to
evaluate the credit risk of each commercial borrower on a scale of 1 (least
risk) to 10 (greatest risk). After the committee evaluates each relationship
listed in the report, a specific loss allocation may be assessed. This
allocation is made up of amounts allocated to the commercial (85%), consumer
(8%) and real estate (7%) loan portfolios. The total specific allocation at
March 31, 2004 was $3,713.
Impaired loans consist of loans with balances of $100 or more on nonaccrual
status or non-performing in nature. These loans are also individually analyzed
and a specific allocation may be assessed based on expected credit loss.
Collateral dependent loans will be evaluated to determine a fair value of the
collateral securing the loan. Non-performing loan balances continue to decline
from the year-end (down 7%). Any changes in the allocation will be reflected in
the specific allocation component. As of March 31, 2004, the total allocation
for impaired loans was $1,848 which is reflected in the specific allocation of
$3,713.
The second component (general allowance) consists of the total loan portfolio
balances minus loan balances already reviewed (specific allocation). A quarterly
large loan report is prepared to provide management with a "snapshot" of
information on larger-balance loans (of $550 or greater), including loan grades,
collateral values, etc. This tool allows management to monitor this group of
borrowers. Therefore, only small balance commercial loans and homogeneous loans
(consumer and real estate loans) have not been specifically reviewed to
determine minor delinquencies, current collateral values and present credit
risk. The Company uses a historic loss risk factor to calculate the probable
losses for this component. This risk factor reflects an actual 12 month
performance evaluation of credit losses per loan portfolio. The risk factor is
achieved by taking the average charge off, per loan portfolio, for the last 12
consecutive months and dividing it by the average loan balance for each loan
portfolio over the same time period. The Company believes that by using a 12
month "rolling" average loss risk factor, the estimated allowance will more
accurately reflect current losses. The total general allowance at March 31, 2004
was $3,856.
16
The final component used to evaluate the adequacy of the allowance includes five
additional areas that management believes can have an impact on collecting all
principal and interest due. These areas are: 1) delinquency trends; 2) current
economic conditions; 3) non-performing loan trends; 4) recovery vs charge off;
and 5) personnel changes. Each of these areas is given a percentage factor, from
a low of 10% to a high of 30%, determined by the importance of the impact it may
have on the allowance. After evaluating each area, an overall factor of 13% was
determined for this reporting period. To calculate the impact of other economic
conditions on the allowance, the total general allowance is multiplied by this
factor. These dollars are then added to the other two components to provide for
economic conditions in the Company's assessment area. The Company's assessment
area takes in ten counties in two states,Ohio and West Virginia. Each assessment
area has its individual economic conditions; however, the Company has chosen to
average the risk factors for compiling the economic risk factor. The total
allocation for this component at March 31, 2004 was $471.
The adequacy of the allowance may be determined by certain specific and
nonspecific allocations; however, the total allocation is available for any
credit losses that may impact the loan portfolios. The Company has determined
the estimated adequate allowance as of March 31, 2004 to be $8,040.
CONCENTRATION OF CREDIT RISK
The Company maintains a diversified credit portfolio, with commercial 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.
SUBSEQUENT EVENTS
On April 26, 2004, the Company sold 450,000 common shares of ProCentury Corp., a
Columbus, Ohio-based property and casualty insurer. The transaction was
completed as part of ProCentury's initial public offering. The sale of stock,
which represents 100% of the Company's ownership in ProCentury, will result in a
pre-tax gain of nearly $2.5 million, or $1.6 million after taxes ($.47 cents per
share).
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; 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.
17
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
================================================================================
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company's goal for interest rate sensitivity management is to maintain a
balance between steady net interest income growth and the risks associated with
interest rate fluctuations. Interest rate risk ("IRR") is the exposure of the
Company's financial condition to adverse movements in interest rates. Accepting
this risk can be an important source of profitability, but excessive levels of
IRR can threaten the Company's earnings and capital.
The Company evaluates IRR through the use of an earnings simulation model to
analyze net interest income sensitivity to changing interest rates. The modeling
process starts with a base case simulation, which assumes a flat interest rate
scenario. The base case scenario is compared to rising and falling interest rate
scenarios assuming a parallel shift in all interest rates. Comparisons of net
interest income and net income fluctuations from the flat rate scenario
illustrate the risks associated with the projected balance sheet structure.
The Company's Asset/Liability Committee monitors and manages IRR within Board
approved policy limits. The current Board approved IRR policy limits anticipated
changes in net interest income over a 12 month horizon to plus or minus 10% of
the base net interest income assuming a parallel rate shock of up 100, 200 and
300 basis points and down 100 basis points. Based on the current interest rate
environment, management did not test interest rates down 200 and 300 basis
points.
The following table presents the Company's estimated net interest income
sensitivity:
March 31, 2004 December 31, 2003
Change in Interest Rates Percentage Change in Percentage Change in
in Basis Points Net Interest Income Net Interest Income
- ------------------------ -------------------- --------------------
+300 .71% .09%
+200 .43% (.14%)
+100 (.01%) (.56%)
-100 1.18% 2.04%
The estimated change in net interest income reflects minimal IRR exposure and is
well within the IRR policy limits established by the Board. As compared to
December, 31, 2003, the Company's balance sheet is more responsive to an
increase in interest rates primarily due to a change in funding composition. For
the first quarter of 2004, FHLB borrowings decreased as a result of the paydown
of variable-rate overnight borrowings. The borrowings were replaced with retail
and wholesale deposits with fixed maturity dates which slow the increase in
interest expense in a rising interest rate environment. In a declining interest
rate environment, net interest income increases from the interest rate floors on
variable rate commercial and real estate loans.
18
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
================================================================================
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
With the participation of the President and Chief Executive Officer (the
principal executive officer) and the Senior Vice President and Treasurer (the
principal financial officer) of the Company, the Company's management has
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as of the end of the quarterly period covered by
this Quarterly Report on Form 10-Q. Based on that evaluation, the Company's
President and Chief Executive Officer and Senior Vice President and Treasurer
have concluded that:
> information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q would be accumulated and
communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure;
> information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q would be recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms; and
> the Company's disclosure controls and procedures are effective as
of the end of the quarterly period covered by this Quarterly
Report on Form 10-Q to ensure that material information relating
to the Company and its consolidated subsidiaries is made known to
them, particularly during the period in which this Quarterly
Report on Form 10-Q is being prepared.
Changes in Internal Control Over Financial Reporting
- ----------------------------------------------------
There were no changes in the Company's internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the
Company's fiscal quarter ended March 31, 2004, that have materially affected or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
Part II - Other Information
Item 1 - Legal Proceedings
There are no pending legal proceedings involving the Company other
than routine litigation incidental to its business. In the opinion
of the Company's management, these proceedings should not,
individually or in the aggregate, have a material adverse effect
on the Company's results of operations or financial condition.
19
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
================================================================================
Part II - Other Information (continued)
Item 2 - Changes in Securities, Use of Proceeds and Issuer Repurchases of Equity
Securities
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Not Applicable.
(e) The following table provides information regarding the
Company's repurchases of its common shares during the fiscal
quarter ended March 31, 2004:
Total Number of Shares Maximum Number
Total Number Average Purchased as Part of of Shares That May
of Shares Price Paid per Publicly Announced Yet Be Purchased
Period Purchased Share Plans or Programs Under the Plan or Programs
-------------------------- ------------- -------------- ---------------------- --------------------------
January 1 - 31, 2004 190 $28.40 190 172,314
February 1 - 29, 2004 189 $29.75 189 174,811
March 1 - 31, 2004 40,105 $29.72 40,105 134,706
-------------
TOTAL 40,484
=============
(1) On June 15, 1999, the Company's Board of Directors authorized
a stock repurchase program to repurchase up to 175,000 shares
of the Company's common stock through open market and
privately negotiated purchases. Upon the program's maturity
date on February 15, 2000, the Company's Board of Directors
have continued to approve extensions to the plan with yearly
terms. Most recently, the stock repurchase program was
authorized to be extended from February 16, 2004 to February
15, 2005, and allow the Company to repurchase up to 175,000
shares of of the Company's common stock through open market
and privately negotiated purchases. The timing of the
purchases, the prices paid and actual number of shares
purchased will depend upon market conditions and limitations
imposed by applicable federal securities laws.
20
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
================================================================================
Part II - Other Information (continued)
Item 3 - Defaults Upon Senior Securities
Not Applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5 - Other Information
Not Applicable.
Item 6 - Exhibits and Reports on Form 8-K:
(a)Exhibits:
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
Section 1350 Certification (Principal Executive Officer and Principal
Financial Officer)
(b)Reports on Form 8-K:
The Company filed a report on Form 8-K dated January 15, 2004 related
to the issuance of a news release announcing its earnings for the
fourth quarter and year-to-date periods ending December 31, 2003.
The Company filed a report on Form 8-K dated January 27, 2004 related
to the approval of a resolution authorizing the repurchase of up to
175,000 shares of the Company's outstanding shares from time to time
in open market or privately negotiated purchases.
21
OHIO VALLEY BANC CORP
(dollars in thousands, except per share data)
================================================================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OHIO VALLEY BANC CORP.
-------------------------------------------
Date May 10, 2004 By: /s/ Jeffrey E. Smith
------------------- -------------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
Date May 10, 2004 By: /s/ Larry E. Miller, II
------------------- -------------------------------------------
Larry E. Miller, II
Senior Vice President and Treasurer
================================================================================
22
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification
I, Jeffrey E. Smith, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Ohio Valley Banc
Corp.;
2) Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based upon such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Signature and Title: By: /s/ Jeffrey E. Smith Date: May 10, 2004
-------------------- ------------
Jeffrey E. Smith
President and CEO
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification
I, Larry E. Miller, II, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Ohio Valley Banc
Corp.;
2) Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based upon such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Signature and Title: /s/ Larry E. Miller, II Date: May 10, 2004
----------------------- ------------
Larry E. Miller, II
Senior VP and Treasurer
EXHIBIT 32
SECTION 1350 CERTIFICATION
In connection with the Quarterly Report of Ohio Valley Banc Corp. (the
"Corporation") on Form 10-Q for the quarterly period ended March 31, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned Jeffrey E. Smith, President and Chief Executive
Officer of the Corporation, and Larry E. Miller, II, Senior Vice President and
Treasurer (Chief Financial Officer) of the Corporation, each certify, pursuant
to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
their knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Corporation.
* /s/ Jeffrey E. Smith * /s/ Larry E. Miller, II
- ---------------------- -------------------------
Jeffrey E. Smith, Larry E. Miller, II
President and Chief Executive Officer Senior Vice President and
Treasurer (Chief Financial
Officer)
Dated: May 10, 2004 Dated: May 10, 2004
* This certification is being furnished as required by Rule 13a - 14(b) under
the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of
Chapter 63 of Title 18 of the United States Code, and shall not be deemed
"filed" for purposes of Section 18 of the Exchange Act or otherwise subject to
the liability of that Section. This certification shall not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except as otherwise stated in such filing.