UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: MARCH 31, 2001 Commission file number: 0-20914 Ohio Valley Banc Corp ---------------------- (Exact name of Registrant as specified in its charter) Ohio (State or other jurisdiction of incorporation or organization) 31-1359191 ---------- (I.R.S. Employer Identification Number) 420 Third Avenue. Gallipolis, Ohio 45631 ---------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (740) 446-2631 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate the number of shares outstanding of the issuers classes of common stock, as of the latest practicable date. Common stock, $1.00 stated value Outstanding at April 30, 2001 3,467,282 common shares
OHIO VALLEY BANC CORP FORM 10-Q QUARTER ENDED MARCH 31, 2001 ================================================================================ Part I - Financial Information Item 1 - Financial Statements Interim financial information required by Regulation 210.10-01 of Regulation S-X is included in this Form 10Q as referenced below: Consolidated Balance Sheets..................................... 1 Consolidated Statements of Income............................... 2 Condensed Consolidated Statements of Changes in Shareholders' Equity......................................... 3 Condensed Consolidated Statements of Cash Flows................. 4 Notes to the Consolidated Financial Statements.................. 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....... 10 Item 3 - Quantitative and Qualitative Disclosure About Market Risk......................................... 14 Part II - Other Information Other Information and Signatures................................ 15
OHIO VALLEY BANC CORP CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands) ================================================================================ March 31, December 31, 2001 2000 ------------ ------------ ASSETS Cash and noninterest-bearing deposits with banks $ 13,480 $ 14,569 Federal funds sold 13,300 ------------ ------------ Total cash and cash equivalent 26,780 14,569 Interest-bearing balances with banks 868 816 Securities available-for-sale 53,415 59,819 Securities held-to-maturity (estimated fair value: 2001 - $16,047 , 2000 - $16,111) 15,463 15,767 Total loans 451,049 448,303 Less: Allowance for loan losses (5,410) (5,385) ------------ ------------ Net loans 445,639 442,918 Premises and equipment, net 9,229 9,285 Accrued income receivable 3,419 4,104 Intangible assets, net 1,364 1,396 Bank owned life insurance 10,058 9,408 Other assets 4,315 3,576 ------------ ------------ Total assets $ 570,550 $ 561,658 ============ ============ LIABILITIES Noninterest-bearing deposits $ 46,992 $ 47,661 Interest-bearing deposits 390,572 384,710 ------------ ------------ Total deposits 437,564 432,371 Securities sold under agreements to repurchase 12,125 18,345 Other borrowed funds 62,083 53,622 Obligated mandatorily redeemable capital securities of subsidiary trust 5,000 5,000 Accrued liabilities 8,821 7,828 ----------- ------------ Total liabilities 525,593 517,166 ----------- ------------ SHAREHOLDERS' EQUITY Common stock ($1.00 stated value, 10,000,000 shares authorized; 2001 - 3,559,771 shares issued, 2000 - 3,559,770 shares issued) 3,560 3,560 Additional paid-in capital 28,760 28,760 Retained earnings 14,401 13,817 Accumulated other comprehensive income 822 436 Treasury stock at cost (2001 - 92,489 shares, 2000 - 72,489 shares) (2,586) (2,081) ----------- ------------ Total shareholders' equity 44,957 44,492 ----------- ------------ Total liabilities and shareholders' equity $ 570,550 $ 561,658 =========== ============ ================================================================================ 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, 2001 2000 ------------- ------------- Interest and dividend income: Loans, including fees $ 10,389 $ 9,495 Securities: Taxable 810 808 Tax exempt 193 193 Dividends 80 72 Other Interest 51 84 ------------- ------------- 11,523 10,652 Interest expense: Deposits 5,256 4,631 Repurchase agreements 175 150 Other borrowed funds 790 599 Obligated mandatorily redeemable capital securities of subsidiary trust 133 ------------- ------------- 6,354 5,380 ------------- ------------- Net interest income 5,169 5,272 Provision for loan losses 427 302 ------------- ------------- Net interest income after provision for loan losses 4,742 4,970 Noninterest income: Service charges on deposit accounts 698 333 Trust fees 55 53 Income from bank owned insurance 138 113 Other 275 263 ------------- ------------- 1,166 762 Noninterest expense: Salaries and employee benefits 2,363 2,371 Occupancy expense 316 325 Furniture and equipment expense 273 294 Data processing expense 107 70 Other 1,320 1,213 ------------- ------------- 4,379 4,273 ------------- ------------- Income before income taxes 1,529 1,459 Provision for income taxes 422 407 ------------- ------------- NET INCOME $ 1,107 $ 1,052 ============= ============= Earnings per share $ 0.32 $ 0.30 ============= ============= ================================================================================ See notes to the consolidated financial statements. 2
OHIO VALLEY BANC CORP CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (dollars in thousands) ================================================================================ Three months ended March 31, 2001 2000 ------------ ------------ Balance at beginning of period $ 44,492 $ 42,708 Comprehensive income: Net income 1,107 1,052 Net change in unrealized gain on available- for-sale securities 386 (247) ------------ ------------ Total comprehensive income 1,493 805 Proceeds from issuance of common stock through dividend reinvestment plan, (2001 - 1 share, 2000 - 4 shares) Cash dividends (2001 - $.15 per share, 2000 - $.14 per share) (523) (496) Shares acquired for treasury (2001 - 20,000 shares, 2000 - 5,300 shares) (505) (167) ------------ ------------ Balance at end of period $ 44,957 $ 42,850 ============ ============ ================================================================================ 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, 2001 2000 ------------ ------------ Net cash provided by operating activities $ 2,418 $ 1,623 Investing activities Proceeds from maturities of securities available-for-sale 9,067 1,545 Purchases of securities available- for-sale (2,000) (2,982) Proceeds from maturities of securities held-to-maturity 291 856 Purchases of securities held-to-maturity (223) Change in interest-bearing deposits in other banks (52) 263 Net increase in loans (3,148) (10,490) Purchases of premises and equipment, net (241) (601) Purchases of insurance contracts, net (530) (500) ------------ ------------ Net cash used in investing activities 3,387 (12,132) Financing activities Change in deposits 5,193 24,448 Cash dividends (523) (496) Purchases of treasury stock (505) (167) Change in securities sold under agreements to repurchase (6,220) (2,497) Proceeds from long-term borrowings 15,025 1,250 Repayment of long-term borrowings (5,395) (2,401) Change in other short-term borrowings (1,169) (2,415) ------------ ------------ Net cash from financing activities 6,406 17,722 ------------ ------------ Change in cash and cash equivalents 12,211 7,213 Cash and cash equivalents at beginning of year 14,569 19,000 ------------ ------------ Cash and cash equivalents at March 31, $ 26,780 $ 26,213 ============ ============ ================================================================================ 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 The accompanying consolidated financial statements include the accounts of Ohio Valley Banc Corp. and its wholly owned subsidiaries The Ohio Valley Bank Company and Loan Central, Inc. All material intercompany accounts and transactions have been eliminated in consolidation. These interim financial statements are prepared without audit and reflect all adjustments of a normal recurring nature which, in the opinion of Management, are necessary to present fairly the consolidated financial position of Ohio Valley Banc Corp. at March 31, 2001, and its results of operations and cash flows for the periods presented. The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by generally accepted accounting principles that might otherwise be necessary in the circumstances. The Annual Report for Ohio Valley Banc Corp. for the year ended December 31, 2000, contains consolidated financial statements and related notes which should be read in conjunction with the accompanying consolidated financial statements. The provision for income taxes is based upon the effective income tax rate expected to be applicable for the entire year. For consolidated financial statement classification and cash flow reporting purposes, cash and cash equivalents include cash on hand, noninterest-bearing deposits with banks and federal funds sold. For the three months ended March 31, 2001 and 2000, Ohio Valley Banc Corp. paid interest in the amount of $6,256 and $4,466, respectively. For the three months ended March 31, 2001, Ohio Valley Banc Corp. paid income taxes of $402 as compared to no income taxes that were paid during the same period in 2000. Earnings per share is computed based on the weighted average shares outstanding during the period. For the three months ended March 31, 2001 and 2000, weighted average shares outstanding were 3,480,615 and 3,541,471, respectively. The majority of the Company's income is derived from commercial and retail business lending activities. Management considers the Company to operate in one segment, banking. ================================================================================ (Continued) 5
OHIO VALLEY BANC CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) ================================================================================ NOTE 2 - SECURITIES The amortized cost, gross unrealized gains and losses and estimated fair values of the securities, as presented in the consolidated balance sheet are as follows: Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Values March 31, 2001 ---------- ----------- ------------ --------- Securities Available-for-Sale - ----------------------------- U.S. Treasury securities $ 2,000 $ 8 $ 2,008 U.S. Government agency securities 43,625 1,237 $ (2) 44,860 Mortgage-backed securities 1,998 4 (2) 2,000 Equity securities 4,547 4,547 ---------- ----------- ------------ --------- Total securities $ 52,170 $ 1,249 $ (4) $ 53,415 ========== =========== ============ ========= Securities Held-to-Maturity - --------------------------- Obligations of state and political subdivisions $ 15,211 $ 609 $ (16) $ 15,804 Mortgage-backed securities 252 1 (10) 243 ---------- ----------- ------------ --------- Total securities $ 15,463 $ 610 $ (26) $ 16,047 ========== =========== ============ ========= December 31, 2000 Securities Available-for-Sale - ----------------------------- U.S. Treasury securities $ 2,499 $ 9 $ 2,508 U.S. Government agency securities 50,127 711 $ (42) 50,796 Mortgage-backed securities 2,065 1 (18) 2,048 Equity securities 4,467 4,467 ----------- ------------ ------------ --------- Total securities $ 59,158 $ 721 $ (60) $ 59,819 =========== ============ ============ ========= Securities Held-to-Maturity - --------------------------- Obligations of state and political subdivisions $ 15,503 $ 383 $ (25) $ 15,861 Mortgage-backed securities 264 1 (15) 250 ----------- ------------ ------------ --------- Total securities $ 15,767 $ 384 $ (40) $ 16,111 =========== ============ ============ ========= ================================================================================ (Continued) 6
OHIO VALLEY BANC CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) ================================================================================ NOTE 2 - SECURITIES (Continued) The amortized cost and estimated fair value of debt securities at March 31, 2001, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay the debt obligations prior to their contractual maturities. Available-for-Sale Held-to-Maturity -------------------------- -------------------------- Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value ------------ ----------- ----------- ----------- Debt securities: Due in one year or less $ 9,031 $ 9,116 $ 1,884 $ 1,897 Due in one to five years 35,594 36,743 6,852 7,151 Due in five to ten years 1,000 1,009 3,523 3,671 Due after ten years 2,952 3,085 Mortgage-backed sec. 1,998 2,000 252 243 ------------ ----------- ----------- ----------- Total debt securities $ 47,623 $ 48,868 $ 15,463 $ 16,047 ============ =========== =========== =========== Gains and losses on the sale of securities are determined using the specific identification method. There were no sales of debt and equity securities during the first three months of 2001 and 2000. NOTE 3 - LOANS Total loans as presented on the balance sheet are comprised of the following classifications: March 31, December 31, 2001 2000 ---------------- ---------------- Real estate loans $ 208,068 $ 209,724 Commercial and industrial loans 144,436 139,826 Consumer loans 97,940 98,013 Other loans 605 740 ---------------- ---------------- $ 451,049 $ 448,303 ================ ================ At March 31, 2001 and December 31, 2000, loans on nonaccrual status were approximately $2,812 and $2,948, respectively. Loans past due more than 90 days and still accruing at March 31, 2001 and December 31, 2000 were $2,449 and $3,691, respectively. ================================================================================ (Continued) 7
OHIO VALLEY BANC CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) ================================================================================ NOTE 4 - ALLOWANCE FOR LOAN LOSSES A summary of activity in the allowance for loan losses for the three months ended March 31 is as follows: 2001 2000 ---------------- ---------------- Balance - January 1, $ 5,385 $ 5,055 Loans charged off: Real estate 43 3 Commercial 5 15 Consumer 516 407 ---------------- ---------------- Total loans charged off 564 425 Recoveries of loans: Real estate 4 Commercial 5 Consumer 153 59 ---------------- ---------------- Total recoveries 162 59 ---------------- ---------------- Net loan charge-offs (402) (366) Provision charged to operations 427 302 ---------------- ---------------- Balance - March 31, $ 5,410 $ 4,991 ================ ================ Information regarding impaired loans is as follows: March 31, December 31, 2001 2000 -------------- --------------- Balance of impaired loans $ 1,003 $ 1,233 ============== =============== Portion of impaired loan balance for which an allowance for credit losses is allocated $ 1,003 $ 1,233 ============== =============== Portion of allowance for loan losses allocated to the impaired loan balance $ 540 $ 530 ============== =============== Average investment in impaired loans year-to-date $ 1,118 $ 1,266 ============== =============== Interest on impaired loans was not material for the periods ended March 31, 2001 and December 31, 2000. ================================================================================ (Continued) 8
OHIO VALLEY BANC CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) ================================================================================ NOTE 5 - CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Company, through its subsidiaries, grants residential, consumer, and commercial loans to customers located primarily in the central and southeastern areas of Ohio as well as the western counties of West Virginia. Approximately 5.88% of total loans were unsecured at March 31, 2001 as compared to 6.25% at December 31, 2000. The Corporation is a party to financial instruments with off-balance sheet risk. These instruments are required in the normal course of business to meet the financial needs of its customers. The contract or notional amounts of these instruments are not included in the consolidated financial statements. At March 31, 2001, the contract or notional amounts of these instruments, which primarily include commitments to extend credit and standby letters of credit and financial guarantees, totaled approximately $51,252 as compared to $52,135 at December 31, 2000. NOTE 6 - OTHER BORROWED FUNDS Other borrowed funds at March 31, 2001 and December 31, 2000 are comprised of advances from the Federal Home Loan Bank (FHLB), promissory notes and Federal Reserve Bank Notes. FHLB borrowings Promissory notes FRB Notes Totals --------------- ---------------- --------- ---------- 2001 $ 50,686 $ 5,897 $ 5,500 $ 62,083 2000 $ 44,753 $ 5,594 $ 3,275 $ 53,622 Pursuant to collateral agreements with the FHLB, advances are secured by certain qualifying first mortgage loans and by FHLB stock which total $76,029 and $4,547 at March 31, 2001. Fixed rate FHLB advances of $50,686 mature through 2010 and have interest rates ranging from 4.88% to 7.08%. Promissory notes, issued primarily by the parent company, have fixed rates of 5.00% to 7.25% and are due at various dates through a final maturity date of May 29, 2002. Scheduled principal payments over the next five years are to be: FHLB borrowings Promissory notes FRB Notes Totals --------------- ---------------- --------- ---------- 2001 $ 8,436 $ 5,399 $ 5,500 $ 19,335 2002 11,042 498 11,540 2003 9,929 9,929 2004 4,484 4,484 2005 2,611 2,611 Thereafter 14,184 14,184 ---------------- ---------------- ---------- ---------- $ 50,686 $ 5,897 $ 5,500 $ 62,083 ================ ================ ========== ========== Letters of credit issued on the Bank's behalf by the FHLB to collateralize certain public unit deposits as required by law totaled $44,845 at March 31, 2001 and $33,100 at December 31, 2000. Various investment securities from the Bank used to collateralize FRB notes totaled $6,315 at March 31, 2001 and $9,165 at December 31, 2000. Promissory notes were unsecured at March 31, 2001 and December 31, 2000. ================================================================================ 9
OHIO VALLEY BANC CORP (dollars in thousands, except per share data) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. INTRODUCTION The following discussion focuses on the consolidated financial condition of Ohio Valley Banc Corp. at March 31, 2001, compared to December 31, 2000, and the consolidated results of operations for the quarterly period ending March 31, 2001, compared to the same period in 2000. 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. FINANCIAL CONDITION The consolidated total assets of Ohio Valley Banc Corp. increased $8,892 or 1.6% to reach $570,550 at March 31, 2001. Contributing to this asset growth was the increase in federal funds sold which grew $13,300 during the first three months of 2001. With the anticipation of upcoming commercial loan originations, management will use the federal funds sold balances as a funding source. The large increase in federal funds sold was funded partially by the maturities of various government agency securities which lead to a total investment decrease of $6,708. The demand for these types of investments decreased due to the decline in yield on reinvestment opportunities as well as the reduced pledging requirements to support public fund deposits. Also contributing to asset growth was loans, which grew $2,746 during the first three months of 2001. Loans were funded by growth in deposits of $5,193 or 1.2%, of which a portion was used to reduce securities sold under agreements to repurchase which are down $6,220. During the first three months of 2001, loan growth was led by commercial loans expanding $4,610 or 3.3%. Approximately 84% of these loans were originated in the primary market areas of Gallia, Jackson, Pike and Franklin counties in Ohio and 9% was from the West Virginia market areas. Real estate mortgages decreased $1,656 and consumer loans decreased $73 during the first three months in 2001. Management believes the allowance is adequate to absorb inherent losses in the portfolio based on collateral values as well as a large portfolio mix of real estate mortgages. A comprehensive analysis of the allowance for loan and lease loss is performed on a quarterly basis to ensure its adequacy. As a percentage of total loans, the allowance for loan losses at March 31, 2001 and December 31, 2000 was 1.20%. Total deposit growth was primarily in savings and interest-bearing demand deposits increasing $8,996 or 7.7%. While the Company's Gold Club account continues to impact this area of deposit growth, the largest portion of this increase was related to the collection of real estate taxes by local municipalities who maintain various deposit accounts within the bank. These deposits from tax collections are short-term in nature and also had an impact on the increase in federal funds which represent overnight 10
investments. This growth was offset by decreases in time deposits of $3,134 and non-interest bearing deposits of $669 during the first three months of 2001. Management utilized this net deposit growth to help fund the growth in loans and to reduce securities sold under agreements to repurchase. Other borrowed funds are primarily advances from the Federal Home Loan Bank, which are used to fund loan growth or short-term liquidity needs. Other borrowed funds are up $8,461 from December 31, 2000, with the increase occurring primarily in long-term FHLB borrowings. Securities sold under agreements to repurchase are down $6,220 from December 31, 2000. Total shareholders' equity at March 31, 2001 of $44,957 was up by $465 as compared to the balance of $44,492 on December 31, 2000. Contributing to this increase was year-to-date income of $1,107 less cash dividends paid of $523, or $.15 per share. The cash dividend represents 47.2% of the year-to-date income. There were minimal proceeds from the issuance of common stock through the dividend reinvestment plan during the first three months of 2001. Management has instead utilized the proceeds from reinvested dividends and voluntary cash to purchase shares on the open market and redistribute these dollars back into the plan without the need for the issuance of common stock. Furthermore, as part of the stock repurchase program, the Company purchased 20,000 additional treasury shares during the first three months of 2001. The stock repurchase program limits the purchase of shares to 5% of the total shares outstanding. As of April 30, 2001, the Company had over 80,800 shares available to purchase. RESULTS OF OPERATIONS Ohio Valley Banc Corp's net income was $1,107 for the first quarter of 2001, up 5.2% compared to $1,052 for the first quarter of 2000. Comparing March 31, 2001 to March 31, 2000, return on assets was unchanged at .80% and return on equity increased from 9.90% to 10.11%. First quarter earnings per share was $.32 per share, up 6.7% over last year's $.30 per share. The primary contributors to the gain in net income was a $404 or 53% increase in noninterest income offset by a $103 decline in net interest income and a $125 increase in provision for loan losses. The decrease in net interest income was primarily due to the increase in the Bank's funding costs resulting in a lower net interest margin. Earning assets increased $9,390 from December 31, 2000 largely due to the growth in federal funds sold. This growth was offset be declines in investment securities and moderate growth in loans. Additionally, the Company's $5,000 trust preferred security that was issued in the fourth quarter of 2000 brought an additional $133 in interest expense during the first three months of 2001 that was not present during the same period last year. As a result, net interest income was negatively impacted in the first three months of 2001 as compared to the same period in 2000 by a decline in the net interest margin due to the Bank's cost of funds increasing 43 basis points and asset yields only increasing by 23 basis points. 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 14. The decrease in net interest income was offset by net noninterest expense decreasing $298 or 8.5% for the first quarter in 2001 compared to the same period in 2000. Total noninterest income increased $404 11
or 53.0% for the first three months in 2001 compared to the same period in 2000. Contributing most to this gain was service charge income, impacted by the addition of new products and services, which contributed an additional $365 during the first quarter compared to the same period in 2000. Total noninterest expense increased $106 or only 2.5% for the first quarter compared to the same period in 2000. Contributing the most to this minimal increase was the decline in salary and employee benefits, which are down $8 over the first three months of 2000. This decline can be attributed to the decrease in the Company's full-time equivalent employee base from 257 at March 31, 2000 to 239 at March 31, 2001, as more emphasis has been placed on reallocating employee responsibilities as opposed to employee expansion. The growth in additional offices and fixed assets experienced in 1999 and 2000 has been stable throughout the first quarter of 2001. This has provided for the decrease in occupancy expense and furniture and equipment expense which are collectively down $30. Furthermore, data processing and other operating expense are up $144 over the first quarter of 2000 due to computer software depreciation and general increases in overhead expenses. CAPITAL RESOURCES All of the capital ratio's exceeded the regulatory minimum guidelines as identified in the following table: Company Ratios Regulatory March 31, 2001 December 31, 2000 Minimum ---------------- ------------------ ---------- Tier 1 risk-based capital 11.1% 11.2% 4.00% Total risk-based capital ratio 12.4% 12.5% 8.00% Leverage ratio 8.5% 8.5% 4.00% Cash dividends paid of $523 for the first three months of 2001 represents a 5.4% increase over the cash dividends paid during the same period in 2000. The increase in cash dividends paid is largely due to the increase in the dividend rate paid per share. At March 31, 2001, approximately 73% of the shareholders were enrolled in the dividend reinvestment plan. As part of the Company's stock repurchase program, management has continued to utilize reinvested dividends and voluntary cash to purchase shares on the open market to be redistributed through the dividend reinvestment plan. On February 28, 2001, the Registrant along with two other financial holding companies acquired BSG Title Services, a title insurance company based in Delaware, Ohio. The Registrant secured a 40% minority interest in this company by investing $20. The new acquisition takes advantage of the Gramm-Leach-Bliley Act and further expands the Registrant's products and services. 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 $82,947 represented 14.5% of total assets at March 31, 2001. 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, 2001, the Bank could borrow an additional $47 million from the Federal Home Loan Bank. The Company experienced an increase of $12,211 in cash and cash equivalents for the three months ended March 31, 2001. See the condensed consolidated statement of cash flows on page 4 for further cash flow information. 12
CONCENTRATION OF CREDIT RISK The Company maintains a diversified credit portfolio, with real estate loans comprising the most significant portion. Credit risk is primarily subject to loans made to businesses and individuals in central and southeastern Ohio as well as western West Virginia. Management believes this risk to be general in nature, as there are no material concentrations of loans to any industry or consumer group. To the extent possible, the Company diversifies its loan portfolio to limit credit risk by avoiding industry concentrations. FORWARD LOOKING STATEMENTS Except for the historical statements and discussions contained herein, statements contained in this report constitute "forward looking statements' within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and as defined in the Private Securities Litigation Reform Act of 1995. Such statements are often, but not always, identified by the use of such words as "believes," "anticipates," "expects," and similar expressions. Such statements involve various important assumptions, risks, uncertainties, and other factors, many of which are beyond our control, that could cause actual results to differ materially from those expressed in such forward looking statements. These factors include, but are not limited to: changes in political, economic or other factors such as inflation rates, recessionary or expansive trends, and taxes; competitive pressures; fluctuations in interest rates; the level of defaults and prepayment on loans made by the Company; unanticipated litigation, claims, or assessments; fluctuations in the cost of obtaining funds to make loans; and regulatory changes. Readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation and disclaims any intention to republish revised or updated forward looking statements, whether as a result of new information, unanticipated future events or otherwise. 13
OHIO VALLEY BANC CORP. MATURITY ANALYSIS <TABLE> <CAPTION> (dollars in thousands) Item 3. Quantitative and Qualitative Disclosure About Market Risk The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents repricing opportunities strictly by maturity date without regard for repricing dates for variable rate products. As compared to 12/31/00, there were no significant changes through the first three months of 2001. As of March 31, 2001 Principal Amount Maturing in: There- Fair Value 2001 2002 2003 2004 2005 after Total 03/31/01 <S> <C> <C> <C> <C> <C> <C> <C> <C> Rate-Sensitive Assets: Fixed interest rate loans $ 8,228 $ 8,264 $ 14,306 $ 22,242 $ 21,761 $204,870 $279,671 $282,513 Average interest rate 10.66% 11.85% 11.80% 10.55% 9.73% 8.23% 8.90% Variable interest rate loans $ 35,541 $ 15,228 $ 2,084 $ 4,660 $ 5,347 $108,518 $171,378 $172,025 Average interest rate 10.08% 9.68% 8.89% 8.86% 9.27% 8.52% 8.98% Fixed interest rate securities $ 8,244 $ 11,274 $ 13,358 $ 10,687 $ 8,792 $ 15,278 $ 67,633 $ 69,462 Average interest rate 6.47% 6.24% 6.23% 6.57% 7.30% 6.94% 6.61% Federal Funds Sold $ 13,300 $ 13,300 $ 13,300 Average interest rate 4.87% 4.87% Other interest-bearing assets $ 868 $ 868 $ 868 Average interest rate 3.08% 3.08% Rate-Sensitive Liabilities: Noninterest-bearing checking $ 6,767 $ 5,793 $ 4,958 $ 4,244 $ 3,633 $ 21,597 $ 46,992 $ 46,992 Savings & Interest-bearing checking $ 21,022 $ 17,401 $ 14,426 $ 11,977 $ 9,959 $ 51,146 $125,931 $125,931 Average interest rate 3.35% 3.37% 3.40% 3.43% 3.45% 3.58% 3.47% Time deposits $150,163 $ 80,896 $ 26,286 $ 3,373 $ 1,848 $ 2,075 $264,641 $268,532 Average interest rate 6.24% 6.08% 6.26% 6.01% 6.60% 6.83% 6.20% Fixed interest rate borrowings $ 13,834 $ 11,540 $ 9,929 $ 4,484 $ 2,611 $ 19,184 $ 61,582 $ 61,708 Average interest rate 6.32% 5.65% 5.52% 5.47% 5.49% 6.90% 6.15% Variable interest rate borrowings $ 17,775 $ 17,775 $ 17,775 Average interest rate 4.47% 4.47% (Continued) 14 </TABLE>
OHIO VALLEY BANC CORP MATURITY ANALYSIS ================================================================================ Item 3. Quantitative and Qualitative Disclosure About Market Risk (continued) The decline in prime rate during the first quarter of 2001 had an immediate impact on the Company's net interest margin due to variable rate assets tied to prime outweighing variable rate liabilities tied to prime. As the year progresses, management expects that impact to be offset by a larger volume of fixed rate liabilities repricing downward quicker than fixed rate assets. Based on the gap model, the Company's one year cumulative gap is liability sensitive, which should benefit the Company over the long term in a declining rate environment. Part II - Other Information Item 1 - Legal Proceedings - -------------------------- None Item 2 - Changes in Securities - ------------------------------ None Item 3 - Defaults Upon Senior Securities - ---------------------------------------- None Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ None Item 5 - Other Information - -------------------------- None Item 6 - Exhibits and Reports on Form 8-K - ------------------------------------------ B. No reports on Form 8-K were filed for the quarter ending March 31, 2001. OHIO VALLEY BANC CORP. ------------------------------------------- Date May 14, 2001 /s/ Jeffrey E. Smith ------------------- ------------------------------------------- Jeffrey E. Smith President and Chief Executive Officer Date May 14, 2001 /s/ Larry E. Miller, II ------------------- ------------------------------------------- Larry E. Miller, II Senior Vice President and Treasurer ================================================================================ 15