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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ended:___________________
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 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
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Shares, Without Par Value
--------------------------------
(Title of Class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S - K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 26, 1999: $105,490,228
The number of common shares of the registrant outstanding
as of February 26,1999: 2,825,436 common shares.
Exhibit Index begins on page 19. Page 1 of 67 pages.
Ohio Valley Banc Corp.
Form l0-K
December 31, 1998
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the 1998 Annual Report to Shareholders of Ohio Valley Banc
Corp. (Exhibit 13) are incorporated by reference into Part I, Item 1 and
Part II, Items 5, 6, 7 and 8.
(2) Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held April 7, 1999 are incorporated by reference into Part III, Items
10, 11, 12 and 13.
Contents of Form 10-K
PART I
Item 1 Business 3
Item 2 Properties 12
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of Security Holders 14
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 15
Item 6 Selected Financial Data 15
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 16
Item 8 Financial Statements and Supplementary Data 16
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 16
PART III
Item 10 Directors and Executive Officers of the Registrant 16
Item 11 Executive Compensation 17
Item 12 Security Ownership of Certain Beneficial Owners and
Management 17
Item 13 Certain Relationships and Related Transactions 17
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
Page 2
PART I
ITEM 1 - BUSINESS
General Description of Business
Ohio Valley Banc Corp. (the Registrant), was incorporated under the laws of
the State of Ohio on January 8, 1992. The Registrant is registered under the
Bank Holding Company Act of 1956, as amended (BHC Act). A substantial portion of
the Registrant's revenue is derived from cash dividends paid by The Ohio Valley
Bank Company, the Registrant's wholly-owned subsidiary (the Bank). The principal
executive offices of the Registrant are located at 420 Third Avenue, Gallipolis,
Ohio 45631.
The Bank was organized on September 24, 1872, under the laws governing private
banking in Ohio. The Bank was incorporated in accordance with the general
corporation laws governing savings and loan associations of the State of Ohio on
January 8, 1901. The Articles of Incorporation of the Bank were amended on
January 25, 1935, for the purpose of authorizing the Bank to transact a
commercial savings bank and safe deposit business and again on January 26, 1950,
for the purpose of adding special plan banking. The Bank was approved for trust
powers in 1980 with trust services first being offered in 1981. The Bank's
deposits are insured up to applicable limits by the Federal Deposit Insurance
Corporation (FDIC).
The Registrant's wholly-owned subsidiary, Loan Central, Inc. (Loan Central),
was formed on February 1, 1996. Loan Central was incorporated under the Ohio
laws governing finance companies.
The Registrant's wholly-owned subsidiary, The Jackson Savings Bank (Jackson),
was acquired in a business combination accounted for using the pooling of
interest method on December 15, 1998. Jackson was incorporated under the laws of
the State of Ohio on January 1, 1899. Jackson's deposits are insured up to
applicable limits by the FDIC.
The Bank is engaged in commercial and retail banking. Loan Central is engaged
in consumer finance. Jackson is engaged primarily in the business of accepting
deposits and issuing first mortgage and consumer loans. Reference is hereby made
to Item 1 (E), "Statistical Disclosure" and Item 8 of this Form 10-K for
financial information pertaining to the Registrant's business through its
subsidiaries.
Description of Ohio Valley Banc Corp.'s Business
The Registrant's business is incident to its 100% ownership of the outstanding
stock of the Bank, Loan Central and Jackson. The Bank is a full-service
financial institution offering a blend of commercial, retail and agricultural
banking services. Loans of all types and checking, savings and time deposits are
offered, along with such services as safe deposit boxes, issuance of travelers'
checks and administration of trusts. Loan Central, a consumer finance company,
offers smaller balance consumer loans to individuals with nonconforming or
nontraditional credit history. Jackson, a state-chartered savings bank,
principally offers first mortgage loans used to finance the purchase,
construction or improvement of residential or other real property. In addition
to originating loans, the Bank and Jackson invest in U.S. Government and agency
obligations, interest-bearing deposits in other financial institutions and other
investments permitted by applicable law.
Page 3
PART I (continued)
Revenues from loans accounted for 80.50% in 1998, 80.62% in 1997 and 79.82% in
1996 of total consolidated revenues. Revenues from interest and dividends on
securities accounted for 12.23%, 13.79% and 15.40% of total consolidated
revenues in 1998, 1997 and 1996, respectively. The Bank presently has twelve
offices, all of which offer automatic teller machines. Six of these offices also
offer drive-up services. The Bank accounted for substantially all of the
Registrant's consolidated assets at December 31, 1998.
The banking business is highly competitive. The market area for the Bank and
Jackson is concentrated primarily in the Gallia, Jackson, Pike and Franklin
Counties of Ohio as well as the Mason and Putnam Counties of West Virginia. Some
additional business originates from the surrounding Ohio counties of Meigs,
Vinton, Scioto and Ross. Competition for deposits and loans comes primarily from
local banks and savings associations, although some competition is also
experienced from local credit unions, insurance companies and mutual funds. In
addition, larger regional institutions, with substantially greater resources,
are becoming increasingly visible. With the formation of Loan Central , the
Registrant is better able to compete in Gallia and Jackson County by serving a
consumer base which may not meet the Bank's credit standards. Loan Central also
operates in Lawrence County which is outside the Bank's primary market area. In
addition, the acquisition of Jackson will further expand the Registrant's market
share in Jackson County by enhancing bank activities. The principal methods of
competition are the rates of interest charged for loans, the rates of interest
paid for deposits, the fees charged for services and the availability and
quality of services. The business of the Registrant and its subsidiaries is not
seasonal, nor is it dependent upon a single or small group of customers.
The Bank and Jackson deal with a wide cross-section of businesses and
corporations which are located primarily in southeastern Ohio. Few loans are
made to borrowers outside this area. Lending decisions are made in accordance
with written loan policies designed to maintain loan quality. The Bank
originates commercial loans, commercial leases, residential real estate loans,
home equity lines of credit, installment loans and credit card loans. The Bank
believes that there is no significant concentration of loans to borrowers
engaged in the same or similar industries and does not have any loans to foreign
entities.
Commercial lending entails significant risks as compared with consumer lending
- - i.e., single-family residential mortgage lending, installment lending and
credit card loans. In addition, the payment experience on commercial loans is
typically dependent on adequate cash flows in order to evaluate whether
anticipated future cash flows will be adequate to service both interest and
principal due. Thus, commercial loans may be subject, to a greater extent, to
adverse conditions in the economy generally or adverse conditions in a specific
industry.
The Registrant's subsidiaries make installment credit available to customers
and prospective customers in their primary market area of southeastern Ohio.
Credit approval for consumer loans requires demonstration of sufficiency of
income to repay principal and interest due, stability of employment, a positive
credit record and sufficient collateral for secured loans. It is the policy of
the subsidiaries to adhere strictly to all laws and regulations governing
consumer lending. A qualified compliance officer is responsible for monitoring
the performance of their respective consumer portfolio and updating loan
personnel. The Registrant's subsidiaries make credit life insurance and health
and accident insurance available to all qualified buyers thus reducing their
risk of loss when a borrower's income is terminated or interrupted. The
Registrant's subsidiaries review their respective consumer loan portfolios
monthly to charge off loans which do not meet that subsidiary's standards.
Credit card accounts are administered in accordance with the same standards as
applied to other consumer loans.
Page 4
PART I (continued)
Consumer loans generally involve more risk as to collectibility than mortgage
loans because of the type and nature of collateral and, in certain instances,
the absence of collateral. As a result, consumer lending collections are
dependent upon the borrower's continued financial stability and thus are more
likely to be adversely affected by job loss, divorce or personal bankruptcy and
by adverse economic conditions.
The market area for real estate lending by the Bank is also located in
southeastern Ohio. The Bank generally requires that the loan amount with respect
to residential real estate loans be no more than 89% of the purchase price or
the appraisal value of the real estate securing the loan, unless private
mortgage insurance is obtained by the borrower for the percentage exceeding 89%.
These loans generally range from one year adjustable to thirty year fixed rate
mortgages. The Bank is currently not originating mortgages for the secondary
market. Real estate loans are secured by first mortgages with evidence of title
in favor of the Bank in the form of an attorney's opinion of title or a title
insurance policy. The Bank also requires proof of hazard insurance with the Bank
named as the mortgagee and as loss payee. Home equity lines of credit are
generally made as second mortgages by the Bank. The home equity lines of credit
are written with ten year terms but are reviewed annually. A variable interest
rate is generally charged on the home equity lines of credit.
The Bank expanded its operations in December 1996 by introducing a supermarket
branch in the Bank's existing market area of Gallia County to further enhance
the Bank's customer service through extended hours and convenience. In January
1997, another branch was opened in Columbus, Ohio (Franklin County) which
represents a new market area for the Bank. The Bank also converted its loan
origination office in Point Pleasant, West Virginia to a full-service branch
providing greater access to its current and future customers. The Bank continued
this growth in 1998 by opening three additional SuperBank branches, two of which
are located within Wal-Mart stores in Gallipolis, Ohio and Cross Lanes, West
Virginia (Putnam County), and the third branch located within a supermarket in
Pomeroy, Ohio (Meigs County). In December 1998, the Registrant acquired Jackson,
conducting business with one office in Jackson, Ohio, to further enhance banking
activities in Jackson County. To expand on Loan Central's success, a fourth
office to be located in Waverly, Ohio is expected to open in early 1999.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting the
Registrant, Bank and Jackson. The summary is qualified in its entirety by
reference to such statutes and regulations.
The Registrant is a bank holding company under the BHC Act, which restricts
the activities of the Registrant and the acquisition by the Registrant of voting
shares or assets of any bank, savings association or other company. The
Registrant is also subject to the reporting requirements of, and examination and
regulation by, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). Subsidiary banks of a bank holding company are subject
to certain restrictions imposed by the Federal Reserve Act on transactions with
affiliates, including any loans or extensions of credit to the bank holding
company or any of its subsidiaries, investments in the stock or other securities
thereof and the taking of such stock securities as collateral for loans or
extensions of credit to any borrower; the issuance of guarantees, acceptances or
letters of credit on behalf of the bank holding company and its
Page 5
PART I (continued)
subsidiaries; purchases or sales of securities or other assets; and the payment
of money or furnishing of services to the bank holding company and other
subsidiaries. Bank holding companies are prohibited from acquiring direct or
indirect control of more than 5% of any class of voting stock or substantially
all of the assets of any bank holding company without the prior approval of the
Federal Reserve Board. A bank holding company and its subsidiaries are
prohibited from engaging in certain tying arrangements in connection with
extensions of credit and/or the provision of other property or services to a
customer by the bank holding company or its subsidiaries.
As Ohio state-chartered banks, the Bank and Jackson are supervised and
regulated by the Ohio Division of Financial Institutions. The deposits of these
banks are insured up to applicable limits by the FDIC and are subject to the
applicable provisions of the Federal Deposit Insurance Act. In addition, the
holding company of any insured financial institution that submits a capital plan
under the federal banking agencies' regulations on prompt corrective action
guarantees a portion of the institution's capital shortfall, as discussed below.
Various requirements and restrictions under the laws of the United States and
the State of Ohio affect the operations of the Bank including requirements to
maintain reserves against deposits, restrictions on the nature and amount of
loans which may be made and the interest that may be charged thereon,
restrictions relating to investments and other activities, limitations on credit
exposure to correspondent banks, limitations on activities based on capital and
surplus, limitations on payment of dividends, and limitations on branching.
Since June 1997, pursuant to federal legislation, the Bank and Jackson have been
authorized to branch across state lines, unless the law of the other state
specifically prohibits the interstate branching authority granted by federal
law.
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies and for state member banks. The risk-based capital guidelines
include both a definition of capital and a framework for calculating weighted
risk assets by assigning assets and off-balance sheet items to broad risk
categories. The minimum ratio of capital to risk weighted assets (including
certain off-balance sheet items, such as standby letters of credit) is 8%. At
least 4.0 percentage points is to be comprised of common stockholders' equity
(including retained earnings but excluding treasury stock), noncumulative
perpetual preferred stock, a limited amount of cumulative perpetual preferred
stock, and minority interests in equity accounts of consolidated subsidiaries,
less goodwill and certain other intangible assets ("Tier 1 capital"). The
remainder ("Tier 2 Capital") may consist, among other things, of mandatory
convertible debt securities, a limited amount of subordinated debt, other
preferred stock and a limited amount of allowance for loan and lease losses. The
Federal Reserve Board also imposes a minimum leverage ratio (Tier 1 capital to
total assets) of 3% for bank holding companies and state member banks that meet
certain specified conditions, including no operational, financial or supervisory
deficiencies, and including having the highest regulatory rating. The minimum
leverage ratio is 100-200 basis points higher for other bank holding companies
and state member banks based on their particular circumstances and risk profiles
and those experiencing or anticipating significant growth. State non-member
banks, such as the Bank and Jackson, are subject to similar capital requirements
adopted by the FDIC.
Page 6
PART I (continued)
The Registrant, Bank and Jackson currently satisfy all capital requirements.
Failure to meet applicable capital guidelines could subject a banking
institution to a variety of enforcement remedies available to federal and state
regulatory authorities, including the termination of deposit insurance by the
FDIC.
The federal banking regulators have established regulations governing prompt
corrective action to resolve capital deficient banks. Under these regulations,
institutions which become undercapitalized become subject to mandatory
regulatory scrutiny and limitations, which increase as capital continues to
decrease. Such institutions are also required to file capital plans with their
primary federal regulator, and their holding companies must guarantee the
capital shortfall up to 5% of the assets of the capital deficient institution at
the time it becomes undercapitalized.
The ability of a bank holding company to obtain funds for the payment of
dividends and for other cash requirements is largely dependent on the amount of
dividends which may be declared by its subsidiary banks and other subsidiaries.
However, the Federal Reserve Board expects the Registrant to serve as a source
of strength to these banks, which may require them to retain capital for further
investments in these banks, rather than for dividends for shareholders of the
Registrant. These banks may not pay dividends to the Registrant if, after paying
such dividends, they would fail to meet the required minimum levels under the
risk-based capital guidelines and the minimum leverage ratio requirements. These
banks must have the approval of their regulatory authorities if a dividend in
any year would cause the total dividends for that year to exceed the sum of
their current year's net profits and retained net profits for the preceding two
years, less required transfers to surplus. Payment of dividends by these banks
may be restricted at any time at the discretion of their regulatory authorities,
if they deem such dividends to constitute an unsafe and/or unsound banking
practice or if necessary to maintain adequate capital for these banks. These
provisions could have the effect of limiting the Registrant's ability to pay
dividends on its outstanding common shares.
Deposit Insurance Assessments and Recent Litigation
The FDIC is authorized to establish separate annual assessment rates for
deposit insurance for members of the Bank Insurance Fund ("BIF") and the Savings
Association Insurance Fund ("SAIF"). The Bank and Jackson are members of the
BIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both BIF
and SAIF members. Under this system, assessments vary based on the risk the
institution poses to its deposit insurance fund. The risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.
Because BIF became fully funded, BIF assessments for healthy commercial banks
were reduced to $0 per year during 1998. Federal legislation, which became
effective September 30, 1996, provides, among other things, for the costs of
prior thrift failures to be shared by both the SAIF and the BIF. As a result of
such cost sharing, BIF assessments for healthy banks during 1999 will be $0.012
per $100 in deposits. Based upon their level of deposits at December 31, 1998,
the projected BIF assessments for the Bank and Jackson would be $39,278 for
1999.
Page 7
PART I (continued)
Monetary Policy and Economic Conditions
The business of commercial banks is affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities, including the Federal Reserve Board. The Federal Reserve Board
regulates the money and credit conditions and interest rates in order to
influence general economic conditions primarily through open market operations
in U.S. Government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements against bank deposits. These policies and
regulations significantly influence the amount of bank loans and deposits and
the interest rates charged and paid thereon, and thus have an effect on
earnings. The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to have significant effects in the future. In view of the changing
conditions in the economy and the money market and the activities of monetary
and fiscal authorities, no definitive predictions can be made as to future
changes in interest rates, credit availability or deposit levels.
Other Information
Management anticipates no material effect upon the capital expenditures,
earnings and competitive position of the Registrant or its subsidiaries by
reason of any laws regulating or protecting the environment. The Registrant
believes that the nature of the operations of the subsidiaries has little, if
any, environmental impact. The Registrant, therefore, anticipates no material
capital expenditures for environmental control facilities in its current fiscal
year or for the foreseeable future. The subsidiaries may be required to make
capital expenditures related to properties which they may acquire through
foreclosure proceedings in the future; however, the amount of such capital
expenditures, if any, is not currently determinable. Neither the Registrant nor
its subsidiaries have any material patents, trademarks, licenses, franchises or
concessions. No material amounts have been spent on research activities and no
employees are engaged full-time in research activities. As of December 31, 1998,
the Registrant and its subsidiaries employed 224 persons full-time and 21
persons part-time. Management considers its relationship with its employees to
be good.
Financial Information About Foreign and Domestic Operations and Export Sales
The Registrant's subsidiaries do not have any offices located in a foreign
country and they have no foreign assets, liabilities, or related income and
expense.
Statistical Disclosure
The following section contains certain financial disclosures relating to the
Registrant as required under the Securities and Exchange Commission's Industry
Guide 3, "Statistical Disclosure by Bank Holding Companies", or a specific
reference as to the location of the required disclosures in the Registrant's
1998 Annual Report to Shareholders which are hereby incorporated herein by
reference.
Page 8
PART I (continued)
Ohio Valley Banc Corp.
Statistical Information
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
A. & B. The average balance sheet information and the related analysis of net
interest earnings for the years ending December 31, 1998, 1997 and 1996 are
included in Table I - "Consolidated Average Balance Sheet & Analysis of Net
Interest Income", within Management's Discussion and Analysis of Operations of
the Registrant's 1998 Annual Report to Shareholders and is incorporated into
this Item 1 by reference.
C. Tables setting forth the effect of volume and rate changes on interest income
and expense for the years ended December 31, 1998, 1997 and 1996 are included in
Table II - "Rate Volume Analysis of Changes in Interest Income & Expense",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this Item 1 by
reference. For purposes of these Tables, changes in interest due to volume and
rate were determined as follows:
Volume Variance - Change in volume multiplied by the previous year's rate.
Rate Variance - Change in rate multiplied by the previous year's volume.
Rate / Volume Variance - Change in volume multiplied by the change in rate.
II. SECURITIES
A. Types of Securities - Total securities on the balance sheet are comprised of
the following classifications at December 31:
(dollars in thousands)
1998 1997 1996
Securities Available-for-Sale
U.S. Treasury securities .................. $18,143 $27,446 $28,467
U.S. Government agency securities ......... 4,114 2,062
Marketable equity securities .............. 3,998 3,861 2,757
------- ------- -------
Total securities available-for-sale ...... $26,255 $33,369 $31,224
======= ======= =======
Securities Held-to-Maturity
U.S. Treasury securities .................. $ 100 $ 500
U.S. Government agency securities ......... 27,693 $24,509 22,441
Obligations of states and
political subdivisions .................. 17,195 13,935 12,252
Corporate obligations ..................... 503 758
Mortgage-backed securities ................ 381 472 546
------- ------- -------
Total securities held-to-maturity ........ $45,369 $39,419 $36,497
======= ======= =======
B. Information required by this item is included in Table III - "Securities",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this item 1 by
reference.
Page 9
PART I (continued)
Ohio Valley Banc Corp.
Statistical Information
C. Excluding obligations of the U.S. Treasury and other agencies and
corporations of the U.S. Government, no concentration of securities exists of
any issuer that is greater than 10% of shareholders' equity of the Registrant.
III. LOAN PORTFOLIO
A. Types of Loans - Total loans on the balance sheet are comprised of the
following classifications at December 31:
(dollars in thousands) 1998 1997 1996 1995 1994
Real estate loans ....... $163,650 $120,697 $112,635 $106,734 $ 97,320
Commercial loans ........ 96,116 78,124 74,666 52,361 55,899
Consumer loans .......... 85,664 78,878 75,047 66,922 55,801
All other loans ......... 1,700 2,568 2,312 1,200 1,954
-------- -------- -------- -------- --------
$347,130 $280,267 $264,660 $227,217 $210,974
======== ======== ======== ======== ========
B. Maturities and Sensitivities of Loans to Changes in Interest Rates -
Information required by this item is included in table VII - "Maturity and
Repricing Data of Loans", within Management's Discussion and Analysis of
Operations of the Registrant's 1998 Annual Report to Shareholders and is
incorporated into this Item 1 by reference.
C. 1. Risk Elements - Information required by this item is included in Table VI
"Summary of Nonperforming and Past Due Loans", within Management's Discussion
and Analysis of Operations of the Registrant's 1998 Annual Report to
Shareholders and is incorporated into this Item 1 by reference.
2. Potential Problem Loans - At December 31, 1998, there are
approximately $275,000 of loans, which are not included in Table VI - "Summary
of Nonperforming and Past Due Loans" within Management's Discussion and Analysis
of Operations of the Registrant's 1998 Annual Report to Shareholders, for which
management has some doubt as to the borrower's ability to comply with the
present repayment terms. These loans and their potential loss exposure have been
considered in management's analysis of the adequacy of the allowance for loan
losses.
3. Foreign Outstandings - There were no foreign outstandings at December 31,
1998, 1997, or 1996.
4. Loan Concentrations - As of December 31, 1998, there were no
concentrations of loans greater than 10% of total loans which are not otherwise
disclosed as a category of loans pursuant to Item III (A) above. Also refer to
the Consolidated Financial Statements regarding concentrations of credit found
within Note A of the Notes to the Consolidated Financial Statements of the
Registrant's 1998 Annual Report to Shareholders incorporated herein by
reference.
Page 10
PART I (continued)
Ohio Valley Banc Corp.
Statistical Information
5. No material amount of loans that have been classified by regulatory
examiners as loss, substandard, doubtful, or special mention have been excluded
from the amounts disclosed as impaired, nonaccrual, past due 90 days or more,
restructured, or potential problem loans.
D. Other Interest-Bearing Assets - As of December 31, 1998, there were no other
interest-bearing assets that would be required to be disclosed under Item III
(C) if such assets were loans. At December 31, 1998, other real estate owned
totaled $31,000.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. The following schedule presents an analysis of the allowance for loan losses
for the years ended December 31:
(dollars in thousands) .... 1998 1997 1996 1995 1994
Balance, beginning of year .... $ 3,390 $ 3,180 $ 2,481 $ 2,261 $ 2,073
Loans charged-off:
Real estate .................. 110 39 5 32 35
Commercial ................... 130 215 78 182
Consumer ..................... 1,433 961 673 304 263
------- ------- ------- ------- -------
Total loans charged-off ..... 1,673 1,215 756 518 298
Recoveries of loans:
Real estate .................. 40 1 5
Commercial ................... 47 41 73 57 4
Consumer ..................... 178 138 54 47 47
------- ------- ------- ------- -------
Total recoveries of loans ... 265 180 127 104 56
Net loan charge-offs .......... (1,408) (1,035) (629) (414) (242)
Provision charged to operations 2,295 1,245 1,328 634 430
------- ------- ------- ------- -------
Balance, end of year .......... $ 4,277 $ 3,390 $ 3,180 $ 2,481 $ 2,261
Ratio of Net Charge-offs to Average Loans - Information required by this
item is included in Table V - "Allocation of the Allowance for Loan Losses",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this Item 1 by
reference. In addition, attention is directed to the caption "Loans" within
Management's Discussion and Analysis of Operations of the Registrant's 1998
Annual Report to Shareholders and is incorporated into this Item 1 by reference.
B. Allocation of the Allowance for Loan Losses - Information required by this
item is included in Table V - "Allocation of the Allowance for Loan Losses",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this Item 1 by
reference.
Page 11
PART I (continued)
Ohio Valley Banc Corp.
Statistical Information
V. DEPOSITS
A. & B. Deposit Summary - Information required by this item is included in Table
I - "Consolidated Average Balance Sheet & Analysis of Net Interest Income",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this Item 1 by
reference.
C. & E. Foreign Deposits - There were no foreign deposits outstanding at
December 31, 1998, 1997, or 1996.
D. Schedule of Maturities - Information required by this item is included in
Note F "Deposits" in the table providing the summary of total time deposits by
remaining maturities, of the Notes to the Consolidated Financial Statements of
the Registrant's 1998 Annual Report to Shareholders and is incorporated into
this Item 1 by reference.
VI. RETURN ON EQUITY AND ASSETS
Information required by this section is included in Table IX - "Key Ratios",
within Management's Discussion and Analysis of Operations of the Registrant's
1998 Annual Report to Shareholders and is incorporated into this Item 1 by
reference.
VII. SHORT-TERM BORROWINGS
The following schedule is a summary of securities sold under agreements to
repurchase at December 31:
(dollars in thousands) 1998 1997 1996
Balance outstanding at period-end .......... $19,066 $12,831 $ 8,714
------- ------- -------
Weighted average interest rate at period-end 3.96% 3.95% 3.50%
------- ------- -------
Average amount outstanding during year ..... $18,148 $11,352 $ 9,813
------- ------- -------
Approximate weighted average interest rate
during the year ............................ 3.77% 3.83% 3.46%
------- ------- -------
Maximum amount outstanding as of any
month-end .................................. $25,112 $16,768 $12,288
------- ------- -------
ITEM 2 - PROPERTIES
The Registrant owns no material physical properties except through the Bank.
The Bank conducts its operations from its main office building at 420 Third
Avenue, in Gallipolis, Ohio 45631. The main office building, Trust/Operations
Center and five of the eleven branch facilities are owned by the Bank.
Page 12
PART I (continued)
The Bank has eleven branch offices. A summary of these properties are as
follows:
1) Mini-Bank Office 437 Fourth Avenue, Gallipolis, OH 45631
2) Jackson Pike Office 3035 State Route 160, Gallipolis, OH 45631
3) Rio Grande Office 416 West College Avenue, Rio Grande, OH 45674
4) Jackson Office 738 East Main Street, Jackson, OH 45640
5) Waverly Office 507 W. Emmitt Avenue, Waverly, OH 45690
6) Columbus Office 3700 South High Street, Columbus, OH 43207
7) Point Pleasant Office 328 Viand Street, Point Pleasant, WV 25550
8) SuperBank-Gallipolis Office 236 Second Avenue, Gallipolis, OH 45631
9) SuperBank-Pomeroy Office 700 West Main Street, Pomeroy, OH 45769
10) Wal-Mart Gallipolis Office 2145 Eastern Avenue, Gallipolis, OH 45631
11) Wal-Mart Cross Lanes Office 100 Nitro Marketplace, Cross Lanes, WV 25315
The Columbus, Point Pleasant, SuperBank and Wal-Mart offices are all leased.
The lease term for the Columbus facility is from July 14, 1996 to July 13, 1999,
with a base rent of $8,010 per year. The Point Pleasant location has a lease
term from July 1, 1997 to June 30, 2017, with a base rent of $30,000 per year.
The lease term for the SuperBank-Gallipolis facility is from December 1, 1996 to
November 30, 2001, with an option to renew for an additional five years. The
base rent is $8,900 per year. The lease term for the SuperBank-Pomeroy facility
is from August 1, 1998 to July 31, 2003, with a base rent of $13,000 per year.
The lease term for the Wal-Mart Gallipolis location is from May 20, 1998 to May
19, 2003, with a base rent of $25,000 per year. The lease term for the Wal-Mart
Cross Lanes location is from August 19, 1998 to August 18, 2003, with a base
rent of $25,000 per year.
The Bank owns a facility at 143 Third Avenue, Gallipolis, Ohio used for
additional office space. The Bank also owns a facility at 441 Second Avenue,
Gallipolis, Ohio, which it leases to The Ohio Company, whose principal place of
business is 155 East Broad Street, Columbus, Ohio 43215. The primary lease term
is from July 1, 1997 to June 30, 2002, with a base rent of $13,800 per year.
Loan Central leases three facilities used as consumer finance offices with one
facility being located at 2145-E Eastern Avenue, Gallipolis, Ohio 45631; a
second facility being located at 348 County Road 410, Suite 3, South Point, Ohio
45680; and third facility being located at 323 East Broadway Street, Jackson,
Ohio 45640. The lease term for the Gallipolis office is from February 1, 1999 to
February 1, 2004, with a base rent of $25,000 in year 1, $25,500 in year 2,
$25,900 in year 3, $26,400 in year 4, and $26,800 in year 5. The lease term for
the South Point office is from February 1, 1999 to February 1, 2004, with a base
rent of $18,000 per year. The lease term for the Jackson office is from January
22, 1998 to January 21, 2001, with a base rent of $9,600 per year.
Jackson leases its office located at 221 Main Street, Jackson, Ohio 45640. The
lease term for this location is from July 1, 1996 to July 1, 1999, with a base
rent of $3,600 per year.
Management considers its properties to be satisfactory for its current
operations.
Page 13
PART I (continued)
ITEM 3 - LEGAL PROCEEDINGS
A complaint was filed December 31, 1998, in Meigs County Common Pleas Court in
Ohio by Frank Herald, Jr. against the Bank. The complaint alleges that the Bank
made an oral loan agreement granting him a $1.5 million line of credit. The
complaint further alleges that the Bank did not act in good faith because it
failed to act on the purported line of credit. Mr. Herald is asking for
judgement in the amount of $10 million, and $50 million in punitive damages.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted during the fourth quarter of 1998 to a vote of
security holders, by solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to Executive Officers who
are directors is incorporated by reference to the information appearing under
the caption "Election of Directors" on page 4 of the Registrant's 1999 Proxy
Statement. Executive officers not required to be disclosed in the Proxy
Statement are presented in the table below. Executive officers serve at the
pleasure of the Board of Directors.
Current Position and
Name and Age Business Experience During Past 5 Years
- ------------ ---------------------------------------
Wendell B. Thomas, 64 Vice President and Secretary of the Registrant
beginning 1995, Senior Vice President and Secretary
of the Bank beginning 1995, Vice President and Senior
Loan Officer of the Bank from 1992 to 1994.
Sue Ann Bostic, 57 Vice President of the Registrant beginning 1996,
Senior Vice President, Administrative Group of the
Bank beginning 1996, Vice President, Support Services
Division of the Bank from 1993 to 1995.
Cherie A. Barr, 32 Vice President of the Registrant beginning 1998,
Senior Vice President and Secretary of Loan Central
beginning 1998, Secretary of Loan Central beginning
1997, Office Manager of Loan Central beginning 1996,
Office Manager, American General Finance, Gallipolis,
Ohio from 1994 to 1996.
Katrinka V. Hart, 40 Vice President of the Registrant beginning 1995,
Senior Vice President, Retail Bank Group of the Bank
beginning 1995, Vice President, Branch Administration
Division of the Bank from 1993 to 1994.
Page 14
PART I (continued)
Current Position and
Name and Age Business Experience During Past 5 Years
- ------------ ---------------------------------------
Charles C. Lanham, 70 Senior Vice President of the Registrant beginning
1997, Executive Vice President of the Bank beginning
1997, Chairman of Bank One, Point Pleasant, West
Virginia, N.A. beginning 1995, President of Bank One,
Point Pleasant, West Virginia, N.A from 1993 to 1995.
Mario P. Liberatore, 53 Vice President of the Registrant beginning 1997,
Senior Vice President, West Virginia Bank Group of
the Bank beginning 1997, President of Bank One, Point
Pleasant, West Virginia, N.A. beginning 1995,
Executive Vice President of Bank One, Point Pleasant,
West Virginia, N.A. from 1993 to 1995.
E. Richard Mahan, 53 Vice President of the Registrant beginning 1995,
Senior Vice President, Commercial Bank Group of the
Bank beginning 1995, Vice President, Lending Division
of the Bank from 1993 to 1994.
Larry E. Miller, II, 34 Vice President of the Registrant beginning 1995,
Senior Vice President, Financial Bank Group of the
Bank beginning 1995, Vice President and Internal
Auditor of the Bank from 1993 to 1994.
Harold A. Howe, 49 Vice President of the Registrant beginning 1998,
President of Jackson beginning 1994.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required under this item is located under the caption "Summary
of Common Stock Data" in the Registrant's 1998 Annual Report to Shareholders. In
addition, attention is directed to the caption "Capital Resources" within
Management's Discussion and Analysis of Operations of the Registrant's 1998
Annual Report to Shareholders and to Note O - "Regulatory Matters". All such
information is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required under this item is incorporated by reference to the
information appearing under the caption "Selected Financial Data" of the
Registrant's 1998 Annual Report to Shareholders.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Operations" appears within the
Registrant's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
Page 15
PART II (continued)
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The information required under this item is included in Table VIII - "Rate
Sensitivity Analysis" and the caption "Liquidity and Interest Rate Sensitivity"
found within Management's Discussion and Analysis of Operations of the
Registrant's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Registrant's consolidated financial statements and related notes are
listed below and incorporated herein by reference to the 1998 Annual Report to
Shareholders. The "Report of Independent Auditors" and the supplementary
"Summarized Quarterly Financial Information" specified by Item 302 of the
Regulation S-K appear within the 1998 Annual Report to Shareholders and are
incorporated by reference.
Consolidated Statements of Condition as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended December 31, 1998, 1997
and 1996
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996
Notes to the Consolidated Financial Statements
Report of Independent Auditors
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
No response required
PART III
Information relating to the following items is included in the Registrant's
definitive proxy statement for the Annual Meeting of Shareholders to be held on
April 7, 1999 ("1999 Proxy Statement") filed with the Commission and is
incorporated by reference to the pages listed below into this form 10-K Annual
Report, provided, that neither the report on executive compensation nor the
performance graph included in the Registrant's definitive proxy statement shall
be deemed to be incorporated herein by reference.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Discussion located at pages 5-6 of 1999 Proxy Statement.
See also Part I - "Executive Officers of the Registrant", beginning on
page 14 of this Form 10-K.
A Form 4 was filed to update the number of shares owned by each Keith
R. Brandeberry and Warren F. Sheets related to the inadvertent
omission of shares owned through an investment club that were not
previously reported. These are the only known such failures to file.
Page 16
PART III (continued)
ITEM 11 - EXECUTIVE COMPENSATION
Discussion located at pages 7-8 of 1999 Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Discussion located at pages 2-4 of 1999 Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Discussion located at page 11 of 1999 Proxy Statement.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. (1) Financial Statements
The following consolidated financial statements of the Registrant appear in
the 1998 Annual Report to Shareholders, Exhibit 13, and are specifically
incorporated by reference under Item 8 of this Form 10-K:
Consolidated Statements of Condition as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to the Consolidated Financial Statements
Report of Independent Auditors
(2) Financial Statement Schedules
Financial statement schedules are omitted as they are not required or are not
applicable, or the required information is included in the financial statements.
(3) Exhibits
Reference is made to the Exhibit Index which is found on page 19 of this Form
10-K.
B. Reports on Form 8-K
Form 8-K/A dated December 15, 1998 was filed to amend the original Form 8-K
which reported the acquisition of Jackson under Item 2 as an acquisition or
disposition of assets. However, the acquisition of Jackson did not constitute
the acquisition of a significant amount of assets. Consequently, the Form 8-K/A
was filed to report the acquisition of Jackson by the Registrant under Item 5 -
Other events and is incorporated into this Form 10-K by reference.
Page 17
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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: March 26, 1999 By /s/James L. Dailey
-----------------------------
James L. Dailey, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 26, 1999 by the following persons on
behalf of the Registrant and in the capacities indicated.
Name Capacity
---- --------
/s/James L. Dailey Chairman, Chief Executive
- ----------------------------- Officer and Director
James L. Dailey
/s/Jeffrey E. Smith President, Chief Operating Officer,
- ----------------------------- Treasurer and Director
Jeffrey E. Smith
/s/Wendell B. Thomas Vice President and
- ----------------------------- Secretary
Wendell B. Thomas
/s/Morris E. Haskins Director
- -----------------------------
Morris E. Haskins
/s/Keith R. Brandeberry, M.D. Director
- -----------------------------
Keith R. Brandeberry, M.D.
/s/W. Lowell Call Director
- -----------------------------
W. Lowell Call
/s/Robert H. Eastman Director
- -----------------------------
Robert H. Eastman
/s/Merrill L. Evans Director
- -----------------------------
Merrill L. Evans
/s/Warren F. Sheets Director
- -----------------------------
Warren F. Sheets
/s/Thomas E. Wiseman Director
- -----------------------------
Thomas E. Wiseman
Page 18
EXHIBIT INDEX
The following exhibits are included in this Form 10-K or are incorporated by
reference as noted in the following table:
Exhibit Number Exhibit Description
3a Amended Articles of Ohio Valley Banc Corp. (as
filed with the Ohio Secretary of State on August
21, 1992) are incorporated herein by reference to
Form 10-K filed for the fiscal year ending
December 31, 1997 [Exhibit 3a(3)] filed March 31,
1998.
3b Code of Regulations of the Registrant are
incorporated herein by reference to Form 8-K (File
# 2-71309) [Exhibit 3b] filed November 6, 1992.
10 Summary of Deferred Compensation Plan for
Directors and Executive Officers is incorporated
herein by reference to Form 10-K filed for the
fiscal year ending December 31, 1997.
11 Statement regarding computation of per share
earnings (included in Note A of the notes to the
Consolidated Financial Statements of this Annual
Report on Form 10-K.)
13 Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1998. [Exhibit is
being filed herewith] (Not deemed filed except for
portions thereof which are specifically
incorporated by reference into this Annual Report
on Form 10-K.)
21 Subsidiaries of the Registrant [Exhibit is being
filed herewith.]
23a Consent by Certified Public Accountants - Crowe,
Chizek and Company LLP. [Exhibit is being
herewith.]
27 Financial Data Schedule. [Exhibit is filed
herewith.]
Page 19