Ohio Valley Banc Corp.
420 Third Avenue
Gallipolis, Ohio 45631
March 17, 2008
VIA EDGAR TRANSMISSION
======================
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Ohio Valley Banc Corp.
Commission File No. 0-20914
CIK No. 0000894671
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2007
Ladies and Gentlemen:
Ohio Valley Banc Corp. (the "Company") is today filing one complete copy of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2007 (the "Form 10-K"), including financial statements and exhibits. The
consolidated financial statements included in the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 2007, which are incorporated
by reference in the Form 10-K, reflect no changes in any accounting principle or
practice or in the method of applying such principle or practice from the
preceding year.
If you have any questions with respect to the enclosed Form 10-K, please do
not hesitate to contact Jeffrey E. Smith at (740) 446-2631.
Very truly yours,
OHIO VALLEY BANC CORP.
By: /s/ Jeffrey E. Smith
-----------------------------------
Jeffrey E. Smith, President and CEO
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, 2007
[ ] 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
OHIO VALLEY BANC CORP.
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(Exact name of negistrant as specified in its charter)
Ohio 31-1359191
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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:
Title of each class Name of each exchange on which registered
Common Shares, Without Par Value The NASDAQ Stock Market LLC
-------------------------------- (The NASDAQ Global Market)
--------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. YES |_| NO |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YES |_| NO |X|
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|
Indicate 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. |X|
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of "large accelerated filer", "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |X|
Non-accelerated filer |_| Smaller reporting company|_|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (defined
in Rule 12b-2 of the Act). YES |_| NO |X|
Based on the closing sales price of $25.10 per share on June 30, 2007, the
aggregate market value of the issuer's shares held by non-affiliates on such
date was $99,677,948. For this purpose, shares held by non-affiliates are all
outstanding shares except those held by the directors and executive officers of
the issuer and those held by The Ohio Valley Bank Company as trustee with
respect to which the Bank has sole or shared voting or dispositive power.
The number of common shares of the registrant outstanding as of March 13,
2008 was 4,051,017.
Documents Incorporated By Reference:
(1) Portions of the 2007 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, 7A and 8.
(2) Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 7, 2008 are incorporated by reference into Part III, Items 10,
11, 12, 13 and 14.
PART I
ITEM 1 - BUSINESS
Organizational History and Subsidiaries
Ohio Valley Banc Corp. ("Ohio Valley") is an Ohio corporation registered as
a financial holding company pursuant to the Bank Holding Company Act of 1956, as
amended ("BHC Act"). Ohio Valley was incorporated under the laws of the State of
Ohio on January 8, 1992 and began conducting business on October 23, 1992. The
principal executive offices of Ohio Valley are located at 420 Third Avenue,
Gallipolis, Ohio 45631. Ohio Valley's common shares are listed on The NASDAQ
Global Market under the symbol "OVBC". Ohio Valley has one banking subsidiary,
The Ohio Valley Bank Company (the "Bank"). Ohio Valley also owns two nonbank
subsidiaries, Loan Central, Inc. ("Loan Central") and Ohio Valley Financial
Services Agency, LLC ("Ohio Valley Financial Services"), which engage in lending
and insurance agency services, and two wholly-owned subsidiary trusts formed
solely to to issue trust preferred securities. Ohio Valley also owns a minority
interest in an insurance company. Ohio Valley and its subsidiaries are
collectively referred to as the "Company." In 2005, Ohio Valley dissolved its
minority equity interest in two title insurance businesses, BSG Title Services,
LLC and OVB Title Services, LLC.
Interested readers can access Ohio Valley's annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, through Ohio Valley's Internet
website at www.ovbc.com (this uniform resource locator, or URL, is an inactive
textual reference only and is not intended to incorporate the information
contained on Ohio Valley's website into this Annual Report on Form 10-K). These
reports can be accessed free of charge through a link to The NASDAQ Stock
Market's website from Ohio Valley's website as soon as reasonably practicable
after Ohio Valley electronically files such materials with, or furnishes them
to, the Securities and Exchange Commission ("SEC").
Business of Ohio Valley
As a financial holding company registered under the BHC Act, Ohio Valley's
primary business is community banking. As of December 31, 2007, Ohio Valley's
consolidated assets approximated to $783,418,000, and total shareholders' equity
approximated to $61,511,000.
Ohio Valley is also permitted to engage in certain non-banking activities
under the provisions of the Gramm-Leach-Bliley Act ("GLB Act"), such as
securities underwriting and dealing activities, insurance agency and
underwriting activities and merchant banking/equity investment activities. The
Company presently engages in insurance agency activities through Ohio Valley
Financial Services and insurance underwriting activities through a minority
interest in ProAlliance Corp. Management will consider opportunities to engage
in additional nonbanking activities as they arise.
Business of Bank Subsidiary
A substantial portion of Ohio Valley's revenue is derived from cash
dividends paid by the Bank. The Bank presently has sixteen offices located in
Ohio and West Virginia, all of which offer automatic teller machines (ATMs).
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Seven of these offices also offer drive-up services. The Bank accounted for
substantially all of Ohio Valley's consolidated assets at December 31, 2007.
The Bank is primarily engaged in commercial and retail banking. The Bank is
a full-service financial institution offering a blend of commercial, consumer
and agricultural banking services within central and southeastern Ohio as well
as western West Virginia. The banking services offered by the Bank include the
acceptance of deposits in checking, savings, time and money market accounts; the
making and servicing of personal, commercial, floor plan and student loans; and
the making of construction and real estate loans. The Bank also offers
individual retirement accounts, safe deposit boxes, wire transfers and other
standard banking products and services. As part of its lending function, the
Bank offers credit card services. The Bank's deposits are insured up to
applicable limits by the Federal Deposit Insurance Corporation ("FDIC"). In
addition to originating loans, the Bank invests in U.S. government and agency
obligations, interest-bearing deposits in other financial institutions, and
other investments permitted by applicable law.
The Bank began offering trust services in 1981. The trust department acts
as trustee under wills, trusts and profit sharing plans, as executor and
administrator of estates, and as guardian for estates of minors and
incompetents. In addition, the trust department performs a variety of investment
and security services where the Bank acts as an agent on behalf of the client.
Trust services are available to all customers of the Bank.
During 2007, the Bank began offering a platform to its customers for
opening deposit accounts online, the fourth in the nation to offer this specific
service. Bank customers may now conveniently establish new deposit accounts at
their own home. In addition, the Bank offers an automated telephone banking
system, OVB Line, which allows customers to access their personal account or
business account information, make loan payments or fund transfers and obtain
current rate information, all from a touch-tone telephone. The Bank also offers
Internet banking to its customers, which allows customers to perform various
transactions using a computer from any location as long as they have access to
the Internet and a secure browser. Specifically, customers can check personal
account balances, receive information about transactions within their accounts,
make transfers between accounts, stop payment on a check, and reorder checks.
Customers may also pay bills online and can make payments to virtually any
business or individual. Furthermore, the Bank offers other financial management
online services such as cash management and news updates related to repossession
auctions, current rates and general bank news.
Business of Loan Central
Loan Central is engaged in consumer finance, offering smaller balance
personal and mortgage loans to individuals with higher credit risk history. Loan
Central's line of business also includes seasonal tax refund loan services. Loan
Central presently has six offices all located within southeastern Ohio.
Business of Financial Services Subsidiaries
Ohio Valley Financial Services sells life insurance as agent. Ohio Valley
Financial Services has been approved under the guidelines of the State of Ohio
Department of Insurance.
Ohio Valley also holds a non-majority equity interest in ProAlliance Corp.,
an insurance company. ProAlliance Corp. is engaged primarily in specialty
property and casualty insurance coverage and has been approved under the
guidelines of the State of Ohio Department of Insurance.
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Variable Interest Entities
Ohio Valley owns two special purpose entities, Ohio Valley Statutory Trust
I and Ohio Valley Statutory Trust III. Together, these Trusts have issued an
aggregate $13,500,000 in trust preferred securities. Ohio Valley has issued a
like amount of subordinated debentures to the Trusts in exchange for the
proceeds of the issuance of the trust preferred securities. Ohio Valley used the
proceeds to provide additional capital to the Bank to support growth. Further
detail on Ohio Valley Statutory Trusts I and III is located in Ohio Valley's
2007 Annual Report to Shareholders under "Note I - Subordinated Debentures and
Trust Preferred Securities," in the notes to the Company's consolidated
financial statements for the fiscal year ended December 31, 2007.
Financial Information
Financial information regarding the Company as of December 31, 2007 and
2006 and results of operations for the past three fiscal years is contained in
the Company's consolidated financial statements for the fiscal year ended
December 31, 2007.
Lending Activities
The Company's loan portfolio increased $11,939,000 to finish at
$637,103,000 in 2007. The loan portfolio is comprised of commercial (commercial
real estate and commercial and industrial), residential real estate and consumer
loans, including credit card and home equity loans. Residential real estate
loans increased $11,934,000, or 5.0%, and commercial loans increased
$10,865,000, or 4.5%, while consumer loans decreased $12,129,000, or 8.7%, as
compared to 2006. Consolidated interest and fee revenue from loans accounted for
84.19%, 83.28%, and 82.61% of total consolidated revenues in 2007, 2006 and
2005, respectively. The Company 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.
Residential Real Estate Loans
The Company's residential real estate loans consist primarily of
one-to-four family residential mortgages and carry many of the same customer and
industry risks as the commercial loan portfolio. Real estate loans to consumers
are secured primarily by a first lien deed of trust with evidence of title in
favor of the Bank. The Company also requires proof of hazard insurance with the
Bank or Loan Central named as the mortgagee and as loss payee. The Company
generally requires the amount of a residential real estate loan 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 Company's market area for real estate
lending is primarily located in southeastern Ohio and portions of western West
Virginia. The Bank continues to sell a portion of its new fixed-rate real estate
loan originations to the Federal Home Loan Mortgage Corporation ("Freddie Mac")
to enhance customer service and loan pricing. Secondary market sales of these
real estate loans, which have fixed rates with fifteen to thirty year terms,
have assisted in meeting the consumer preference for long-term fixed-rate loans
as well as minimized the Bank's exposure to interest rate risk.
Commercial Loans
The Company's commercial loan portfolio consists of loans to corporate
borrowers primarily in small to mid-sized industrial and commercial companies
that include service, retail and wholesale merchants.
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Collateral securing these loans includes equipment, inventory, stock, commercial
real estate and rental property. Commercial loans are considered to have a
higher level of risk compared to other types of loans (i.e., single-family
residential mortgages, installment loans and credit card loans), although care
is taken to minimize these risks. Numerous risk factors impact this portfolio,
such as the economy, new technology, labor rates, cash flow, financial structure
and asset quality. The payment experience on commercial loans is dependent on
adequate cash flows from the business to service both interest and principal
due. Thus, commercial loans may be more sensitive to adverse conditions in the
economy generally or adverse conditions in a specific industry. The Company
diversifies risk within this portfolio by closely monitoring industry
concentrations and portfolios to ensure that it does not exceed established
lending guidelines. Underwriting standards require a comprehensive credit
analysis and independent evaluation of virtually all larger balance commercial
loans by the Bank's loan committee prior to approval. New commercial loan
originations greater than $300,000 are reviewed and approved by the Executive
Committee of the Bank's Board of Directors.
Consumer Loans
Consumer loans are secured by automobiles, mobile homes, recreational
vehicles and other personal property. Personal loans and unsecured credit card
receivables are also included as consumer loans. The Company makes installment
credit available to customers in their primary market area of southeastern Ohio
and portions of western West Virginia. Credit approval for consumer loans
requires demonstration of sufficient income to repay principal and interest due,
stability of employment, a positive credit record and sufficient collateral for
secured loans. The Company monitors the risk associated with these types of
loans by monitoring factors such as portfolio growth, lending policies and
economic conditions. Underwriting standards are continually evaluated and
modified based upon these factors. A qualified compliance officer is responsible
for monitoring the performance of his or her respective consumer portfolio and
updating loan personnel. The Company makes credit life insurance and health and
accident insurance available to all qualified borrowers thus reducing their risk
of loss when their income is terminated or interrupted. The Company reviews its
respective consumer loan portfolios monthly to charge off loans which do not
meet applicable standards. Credit card accounts are administered in accordance
with the same standards as those applied to other consumer loans. 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 are adversely affected by job loss,
divorce or personal bankruptcy and by adverse economic conditions. Also included
in the category of consumer loans are home equity loans. Home equity lines of
credit are generally made as second mortgages and charged a variable interest
rate. Home equity lines are written with ten-year terms but are reviewed
annually.
Underwriting Standards
The Company's underwriting guidelines and standards are updated
periodically and are presented to the Board of Directors of the holding company
for approval. The purpose of the standards and guidelines is to grant loans on a
sound and collectible basis; to invest available funds in a safe, profitable
manner; to serve the legitimate credit needs of the Company's primary market
areas; and to ensure that all loan applicants receive fair and equal treatment
in the lending process. It is the intent of the underwriting guidelines and
standards to: minimize losses by carefully investigating the credit history of
each applicant, verify the source of repayment and the ability of the applicant
to repay, collateralize those loans in which collateral is deemed to be
required, exercise care in the documentation of the application, review,
approval, and origination process, and administer a comprehensive loan
collection program. The above guidelines are adhered to and subject to the
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experience, background and personal judgment of the loan officer assigned to the
loan application. A loan officer may grant, with justification, a loan with
variances from the underwriting guidelines and standards. However, a loan
officer may not exceed his or her respective lending authority without obtaining
the prior, proper approval from a superior.
Investment Activities
The Company's investment policy stresses the management of the investment
securities portfolio, which includes both securities held-to-maturity and
securities available-for-sale, to maximize the return over the long-term in a
manner that is consistent with good banking practices and relative safety of
principal. The Company's investment portfolio is comprised of a significant
amount of mortgage-backed securities and U.S. government agency and sponsored
entity securities. Revenues from interest and dividends on securities accounted
for 7.10%, 6.71%, and 6.69% of total consolidated revenues in 2007, 2006 and
2005, respectively. The Company currently does not engage in trading account
activity.
Funding Activities
Sources of funds for loan and investment activities include "core
deposits." Core deposits include demand deposits, savings and NOW accounts, and
certificates of deposit less than $100,000. The Company will also utilize
certificates of deposit from wholesale markets, when necessary, to support
growth in assets. Borrowings have also been a significant source of funding.
These include advances from the Federal Home Loan Bank, Federal Reserve Bank
Notes and securities sold under agreements to repurchase. Repurchase agreements
are financing arrangements with various customers that have overnight maturity
terms. Further funding has come from two trust preferred securities, Ohio Valley
Statutory Trust I and Ohio Valley Statutory Trust III, totaling $13,500,000.
Ohio Valley used the proceeds to provide additional capital to the Bank to
support growth.
Competition
The financial services industry is highly competitive. As of December 31,
2007, there were 120 bank holding companies operating in the State of Ohio
registered with the Federal Reserve. These holding companies control various
banks throughout Ohio, which compete for business to expand market areas as well
as acquire additional banks. The principal factors of competition for Ohio
Valley's banking business 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 market area for the Bank is
concentrated primarily in the Gallia, Jackson, Pike and Franklin Counties of
Ohio as well as the Mason, Kanawha and Cabell Counties of West Virginia. Some
additional business originates from the surrounding Ohio counties of Meigs,
Vinton, Lawrence, 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 generating a growing market presence. Loan Central's market
presence further strengthens Ohio Valley's ability to compete in the Gallia,
Jackson and Pike Counties by serving a consumer base which may not meet the
Bank's credit standards. Loan Central also operates in the Ohio counties of
Lawrence and Scioto, which are outside the Bank's primary market area.
Additionally, Ohio Valley Financial Services sells life insurance, which further
strengthens the blend of services available to Ohio Valley's consumer base. The
Company's business is not seasonal, nor is it dependent upon a single or small
group of customers.
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To continue the expansion of the Bank's market presence and further enhance
customer service, the Bank began a phase of SuperBank branch openings in
December 1996. From 1996 to 2001, the Bank opened eight SuperBank facilities
within supermarkets and Wal-Mart stores. These branches currently service the
market areas of Gallia, Meigs and Lawrence counties of Ohio as well as the
growing Kanawha and Cabell counties of West Virginia.
Overall, the Company believes it is able to compete effectively in both
current and newer markets. There can be no assurance, however, that our ability
to market products and services successfully or to obtain adequate yield on our
loans will not be impacted by the nature of the competition that now exists or
may later develop.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting
Ohio Valley as well as the Bank and Loan Central. The summary is qualified in
its entirety by reference to such statutes and regulations.
Regulation of Bank Holding Company
Ohio Valley is subject to the requirements of the BHC Act and to the
reporting requirements of, and examination and regulation by, the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). The
Federal Reserve Board also has extensive enforcement authority over bank holding
companies, including, among other things, the ability to:
o assess civil money penalties;
o issue cease and desist or removal orders; and
o require that a bank holding company divest subsidiaries (including its
banking subsidiaries).
In general, the Federal Reserve Board may initiate enforcement action for
violations of laws and regulations and unsafe or unsound practices.
Under Federal Reserve Board policy, a bank holding company is expected to
serve as a source of financial strength to each subsidiary bank and to commit
resources to support those subsidiary banks. Under this policy, the Federal
Reserve Board may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank.
The BHC Act requires the prior approval of the Federal Reserve Board in any
case where a bank holding company proposes to:
o acquire direct or indirect ownership or control of more than 5% of the
voting shares of any bank that is not already majority-owned by it;
o acquire all or substantially all of the assets of another bank or bank
holding company; or
o merge or consolidate with any other bank holding company.
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Transactions with Affiliates, Directors, Executive Officers and Shareholders
Section 23A and 23B of the Federal Reserve Act and Regulation W restrict
transactions by banks and their subsidiaries with their affiliates. An affiliate
of a bank is any company or entity which controls, is controlled by or is under
common control with the bank.
Generally, Sections 23A and 23B and Regulation W:
o limit the extent to which a bank or its subsidiaries may engage in "covered
transactions" with any one affiliate to an amount equal to 10% of that
bank's capital stock and surplus (i.e., tangible capital);
o limit the extent to which a bank or its subsidiaries may engage in "covered
transactions" with all affiliates to 20% of that bank's capital stock and
surplus; and
o require that all such transactions be on terms substantially the same, or
at least as favorable to the bank subsidiary, as those provided to a
non-affiliate.
The term "covered transaction" includes the making of loans to the
affiliate, the purchase of assets from the affiliate, issuance of a guarantee on
behalf of the affiliate, the purchase of securities issued by the affiliate, and
other similar types of transactions.
A bank's authority to extend credit to executive officers, directors and
greater than 10% shareholders, as well as entities such persons control, is
subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated thereunder by the Federal Reserve Board. Among other things, these
loans must be made on terms substantially the same as those offered to
unaffiliated individuals or be made as part of a benefit or compensation program
and on terms widely available to employees, and must not involve a greater than
normal risk of repayment. In addition, the amount of loans a bank may make to
these persons is based, in part, on the bank's capital position, and specified
approval procedures must be followed in making loans which exceed specified
amounts.
Regulation of Ohio State Chartered Banks
As an Ohio state-chartered bank that is not a member of the Federal Reserve
Bank, the Bank is supervised and regulated by the Ohio Division of Financial
Institutions and the FDIC.
The Bank's deposits are insured up to applicable limits by the FDIC, and
the Bank is subject to the applicable provisions of the Federal Deposit
Insurance Act and the regulations of the FDIC.
Various requirements and restrictions under the laws of the United States
and the State of Ohio and the State of West Virginia affect the operations of
the Bank, including requirements to maintain reserves against deposits,
restrictions on the nature and amount of loans that 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.
Holding Company Activities
In November of 1999, the GLB Act was enacted, amending the BHC Act and
modernizing the laws governing the financial services industry. The GLB Act
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authorized the creation of financial holding companies, a new type of bank
holding company with powers exceeding those of traditional bank holding
companies. Ohio Valley became a financial holding company during 2000. In order
to become a financial holding company, a bank holding company and all of its
depository institutions must be well capitalized and well managed under federal
banking regulations, and the depository institutions must have received a
Community Investment Act rating of at least satisfactory.
Financial holding companies may engage in a wide variety of financial
activities, including any activity that the Federal Reserve and the Treasury
Department consider financial in nature or incidental to financial activities,
and any activity that the Federal Reserve Board determines complementary to a
financial activity and which does not pose a substantial safety and soundness
risk. These activities include securities underwriting and dealing activities,
insurance and underwriting activities and merchant banking/equity investment
activities. Because it has authority to engage in a broad array of financial
activities, a financial holding company may have several affiliates that are
functionally regulated by financial regulators other than the Federal Reserve
Board, such as the SEC and state insurance regulators.
Loan Central is supervised and regulated by the State of Ohio Department of
Financial Institutions, Division of Consumer Finance. Ohio Valley's insurance
business investments, Ohio Valley Financial Services and ProAlliance Corp., are
both supervised and regulated by the State of Ohio Department of Insurance. The
insurance laws and regulations applicable to insurance agencies, including Ohio
Valley Financial Services, require education and licensing of individual agents
and agencies, require reports and impose business conduct rules.
The GLB Act provides that if a subsidiary bank of a financial holding
company fails to be both well capitalized and well managed, the financial
holding company must enter into a written agreement with the Federal Reserve
Board within 45 days to comply with all applicable capital and management
requirements. Until the Federal Reserve Board determines that the bank is again
well capitalized and well managed, the Federal Reserve Board may impose
additional limitations or conditions on the conduct or activities of the
financial holding company or any affiliate that the Federal Reserve Board finds
to be appropriate or consistent with federal banking laws. If the financial
holding company does not correct the capital or management deficiencies within
180 days, the financial holding company may be required to divest ownership or
control of all banks, including state-chartered non-member banks and other
well-capitalized institutions owned by the financial holding company. If an
insured bank subsidiary fails to maintain a satisfactory rating under the
Community Reinvestment Act, the financial holding company may not engage in
activities permitted only to financial holding companies until such time as the
bank receives a satisfactory rating.
Capital Requirements
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. 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) to be considered adequately
capitalized is 8%. At least 4.0 percentage points is to be comprised of common
shareholders' 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 of certain
amounts of hybrid capital instruments, mandatory convertible debt securities,
subordinated debt, preferred stock not qualifying as Tier 1 Capital 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
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bank holding companies 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, are subject to similar capital
requirements adopted by the FDIC. Ohio Valley and the Bank currently satisfy all
applicable 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.
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.
Limits on Dividends
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 that may be declared by its subsidiary banks and other subsidiaries.
However, the Federal Reserve Board expects Ohio Valley to serve as a source of
strength to the Bank, which may require it to retain capital for further
investments in the Bank, rather than for dividends for shareholders of Ohio
Valley. The Bank may not pay dividends to Ohio Valley if, after paying such
dividends, it would fail to meet the required minimum levels under the
risk-based capital guidelines and the minimum leverage ratio requirements. The
Bank must have the approval of its regulatory authorities if a dividend in any
year would cause the total dividends for that year to exceed the sum of its
current year's net profits and retained net profits for the preceding two years,
less required transfers to surplus. Payment of dividends by the Bank may be
restricted at any time at the discretion of its regulatory authorities, if they
deem such dividends to constitute an unsafe and/or unsound banking practice or
if necessary to maintain adequate capital for the Bank. These provisions could
have the effect of limiting Ohio Valley's ability to pay dividends on its
outstanding common shares.
Deposit Insurance Assessments
The FDIC is an independent federal agency which insures deposits, up to
prescribed statutory limits, of federally-insured banks and savings associations
and safeguards the safety and soundness of the financial institution industry.
The deposits of the Bank are insured up to statutorily prescribed limits by
the FDIC. Insurance premiums for insured institutions are determined based upon
the member's capital level and supervisory rating provided to the FDIC by the
bank's primary federal regulatory and other information the FDIC determines to
be relevant to the risk posed to the deposit insurance fund. The assessment rate
determined by considering such factors is then applied to the amount of the
bank's deposits to determine the bank's insurance premium. An increase in the
assessment rate could have a material adverse effect on the earnings of the
bank.
11
Insurance of deposits may be terminated by the FDIC upon a finding that the
insured institution has engaged in unsafe or unsound practices, is in an unsafe
or unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition enacted or imposed by the bank's regulatory
agency.
In February 2006, two pieces of legislation commonly referred to as the
Deposit Insurance Reform Acts were enacted. Under that legislation, the Bank
Insurance Fund and the Savings Association Insurance Fund were merged into a new
Deposit Insurance Fund ("DIF"). The Deposit Insurance Reform Acts provide for
several additional changes to the deposit insurance system, including the
following:
o increasing the deposit insurance limit for retirement accounts from
$100,000 to $250,000;
o adjusting the deposit insurance limits (currently $100,000 for most
accounts) every five years based on an inflation index, with the first
adjustment to be effective on January 1, 2011;
o providing pass-through deposit insurance for the deposits of employee
benefit plans (but prohibiting undercapitalized depository institutions
from accepting employee benefit plan deposits);
o allocating an aggregate of $4.7 billion of one-time credits to offset the
premiums of depository institutions based on their assessment based at the
end of 1996;
o establishing rules for awarding cash dividends to depository institutions,
based on their relative contributions to the DIF and its predecessor funds,
when the DIF reserve ratio reaches certain levels; and
o revising the rules and procedures for risk-based premium assessments.
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.
Patriot Act
In response to the terrorist events of September 11, 2001, the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorist Act of 2001 (the "Patriot Act") was signed into law in
October 2001. The Patriot Act gives the federal government new powers to address
terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing and broadened anti-money
laundering requirements. Title III of the Patriot Act takes measures intended to
encourage information sharing among bank regulatory agencies and law enforcement
bodies. Further, certain provisions of Title III impose affirmative obligations
on a broad range of financial institutions. Among other requirements, Title III
and related regulations require regulated financial institutions to establish a
program
12
specifying procedures for obtaining identifying information from customers
seeking to open new accounts and establish enhanced due diligence policies,
procedures and controls designed to detect and report suspicious activity. The
Company has established policies and procedures to comply with the requirements
of the Patriot Act.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") was enacted to
increase corporate responsibility, to provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and to
protect investors by improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws. The changes are intended to
allow shareholders to monitor the performance of companies and directors more
easily and efficiently.
The Sarbanes-Oxley Act addresses, among other matters: audit committees;
corporate responsibility for financial reports; a requirement that chief
executive and chief financial officers forfeit certain bonuses if their
companies issue an accounting restatement as a result of misconduct; a
prohibition on insider trading during pension fund black-out periods; disclosure
of off-balance sheet transactions; conditions for the use of financial
information not in accordance with generally accepted accouting principles; a
prohibition on personal loans to directors and executive officers (excluding
loans by insured depository institutions that are subject to the insider lending
restrictions of the Federal Reserve Act); expedited filing requirements for
stock transaction reports by officers and directors; the formation of the Public
Company Accounting Oversight Board; auditor independence; and various increased
criminal penalties for violations of securities laws.
As mandated by the Sarbanes-Oxley Act, the SEC has adopted rules and
regulations governing, among other issues, corporate governance, auditing and
accounting, executive compensation and enhanced and timely disclosure of
corporate information. The NASDAQ Global Market has also adopted corporate
governance rules. Ohio Valley's Board of Directors has taken a series of actions
to strengthen and improve Ohio Valley's corporate governance practices in light
of the rules of the SEC and The NASDAQ Global Market.
Employees
As of December 31, 2007, Ohio Valley and its subsidiaries had approximately
256 full-time equivalent employees and officers. Management considers its
relationship with its employees and officers to be good.
Other Information
Management anticipates no material effect upon the capital expenditures,
earnings and competitive position of the Company by reason of any laws
regulating or protecting the environment. Ohio Valley believes that the nature
of the operations of its subsidiaries has little, if any, environmental impact.
Ohio Valley, therefore, anticipates no material capital expenditures for
environmental control facilities in its current fiscal year or for the
foreseeable future.
The Bank and Loan Central 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.
13
Neither Ohio Valley 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.
Financial Information About Foreign and Domestic Operations and Export Sales
Ohio Valley'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
Ohio Valley as required under the SEC's Industry Guide 3, "Statistical
Disclosure by Bank Holding Companies," or a specific reference as to the
location of the required disclosures in Ohio Valley's 2007 Annual Report to
Shareholders, which are incorporated herein by reference.
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 ended December 31, 2007, 2006 and 2005 are
incorporated herein by reference to the information appearing under the caption
"Table I - Consolidated Average Balance Sheet & Analysis of Net Interest
Income," within "Management's Discussion and Analysis of Operations" located in
Ohio Valley's 2007 Annual Report to Shareholders.
C. Tables setting forth the effect of volume and rate changes on interest income
and expense for the years ended December 31, 2007 and 2006 is incorporated
herein by reference to the information appearing under the caption "Table II -
Rate Volume Analysis of Changes in Interest Income & Expense," within
"Management's Discussion and Analysis of Operations" located in Ohio Valley's
2007 Annual Report to Shareholders.
II. INVESTMENT PORTFOLIO
A. Types of Securities - Total securities on the balance sheet were comprised of
the following classifications at December 31:
(dollars in thousands) 2007 2006 2005
---- ---- ----
Securities Available-for-Sale
U.S. Government sponsored
entity securities................ $ 39,447 $ 25,183 $ 18,167
Mortgage-backed securities......... 38,616 45,084 48,161
--------- --------- ---------
Total securities available-for-sale $ 78,063 $ 70,267 $ 66,328
========= ========= =========
Securities Held-to-Maturity
Obligations of states of the U.S.
and political subdivisions....... $ 15,933 $ 13,293 $ 12,019
Mortgage-backed securities......... 48 57 69
--------- --------- ---------
Total securities held-to-maturity $ 15,981 $ 13,350 $ 12,088
========= ========= =========
14
B. Information required by this item is incorporated herein by reference to the
information appearing under the caption "Table III - Securities," within
"Management's Discussion and Analysis of Operations" located in Ohio Valley's
2007 Annual Report to Shareholders.
C. Excluding obligations of the U.S. Government and its agencies, no
concentration of securities exists of any issuer that is greater than 10% of
shareholders' equity of Ohio Valley.
III. LOAN PORTFOLIO
A. Types of Loans - Total loans on the balance sheet were comprised of the
following classifications at December 31:
(dollars in thousands) 2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Commercial $251,613 $240,748 $236,536 $226,058 $220,724
Residential real estate 250,483 238,549 235,008 227,234 217,636
Consumer 127,832 139,961 145,815 146,965 134,720
All other 7,175 5,906 173 317 624
-------- -------- -------- -------- --------
$637,103 $625,164 $617,532 $600,574 $573,704
======== ======== ======== ======== ========
B. Maturities and Sensitivities of Loans to Changes in Interest Rates -
Information required by this item is incorporated herein by reference to the
information appearing under the caption "Table VI - Maturity and Repricing Data
of Loans", within "Management's Discussion and Analysis of Operations" located
in Ohio Valley's 2007 Annual Report to Shareholders.
C. 1. Risk Elements - Gross interest income that would have been recorded on
loans that were classified as nonaccrual or troubled debt restructurings is
estimated to be $467,000 for the fiscal year ending December 31, 2007. The
amount recorded on such loans was $401,000. Additional information required by
this item is incorporated herein by reference to the information appearing under
the caption "Table V - Summary of Nonperforming and Past Due Loans," within
"Management's Discussion and Analysis of Operations" located in Ohio Valley's
2007 Annual Report to Shareholders.
2. Potential Problem Loans - At December 31, 2007, there were approximately
$1,312,000 of loans, which are not included in "Table V - Summary of
Nonperforming and Past Due Loans" within "Management's Discussion and Analysis
of Operations" located in Ohio Valley's 2007 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 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,
2007, 2006 or 2005.
4. Loan Concentrations - As of December 31, 2007, 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
15
Statements regarding concentrations of credit risk found within "Note A-Summary
of Significant Accounting Policies" of the notes to the Company's consolidated
financial statements for the fiscal year ended December 31, 2007, located in
Ohio Valley's 2007 Annual Report to Shareholders which note is incorporated
herein by reference.
5. No 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, 2007, there were no other
interest-bearing assets that would be required to be disclosed under Item III.C.
if such assets were loans.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. The following schedule presents an analysis of the allowance for loan losses
for the fiscal years ended December 31:
(dollars in thousands) 2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Balance, beginning of year $9,412 $7,133 $7,177 $7,593 $7,069
Loans charged off:
Residential real estate 422 432 349 823 1,110
Commercial 4,002 3,079 1,295 1,661 2,267
Consumer 1,617 2,120 2,263 2,267 2,661
-------- -------- -------- -------- -------
Total loans charged off 6,041 5,631 3,907 4,751 6,038
Recoveries of loans:
Residential real estate 166 204 336 583 279
Commercial 248 946 912 556 1,057
Consumer 700 1,097 818 843 887
-------- ------- -------- -------- -------
Total recoveries of loans 1,114 2,247 2,066 1,982 2,223
Net loan charge-offs (4,927) (3,384) (1,841) (2,769) (3,815)
Provision charged to operations 2,252 5,663 1,797 2,353 4,339
-------- ------- -------- -------- -------
Balance, end of year $6,737 $9,412 $7,133 $7,177 $7,593
======== ======= ======== ======== =======
Ratio of net charge-offs to
average loans outstanding .78% .54% .31% .47% .68%
======== ======= ======== ======== =======
Ratio of allowance for loan losses
to non-performing assets 171.77% 61.54% 154.36% 142.46% 140.66%
======== ======= ======== ======== =======
Discussion of factors that influenced management in determining the amount of
additions charged to provision expense is incorporated herein by reference to
the information appearing under the caption "Allowance for Loan Losses and
Provision Expense" within "Management's Discussion and Analysis of Operations"
located in Ohio Valley's 2007 Annual Report to Shareholders.
B. Allocation of the Allowance for Loan Losses - Information required by this
item is incorporated herein by reference to the information appearing under the
caption "Table IV - Allocation of the Allowance for Loan Losses," within
"Management's Discussion
16
and Analysis of Operations" located in Ohio Valley's 2007 Annual Report to
Shareholders.
V. DEPOSITS
A. Deposit Summary - Information required by this item is incorporated herein by
reference to the information appearing under the caption "Table I - Consolidated
Average Balance Sheet & Analysis of Net Interest Income," within "Management's
Discussion and Analysis of Operations" located in Ohio Valley's 2007 Annual
Report to Shareholders.
C.&E. Foreign Deposits - There were no foreign deposits outstanding at December
31, 2007, 2006, or 2005.
D. Schedule of Maturities - The following table provides a summary of total time
deposits by remaining maturities for the fiscal year ended December 31, 2007:
Over Over
3 months 3 through 6 through Over
(dollars in thousands) or less 6 months 12 months 12 months
------- -------- --------- ---------
Certificates of deposit of
$100,000 or greater ................. $ 48,093 $ 27,535 $ 28,115 $ 22,749
Other time deposits of
$100,000 or greater ................. 3,575 3,747 3,189 2,178
-------- -------- -------- --------
Total time deposits of
$100,000 or greater ................. $ 51,668 $ 31,282 $ 31,304 $ 24,927
======== ======== ======== ========
VI. RETURN ON EQUITY AND ASSETS
Information required by this section is incorporated herein by reference to the
information appearing under the caption "Table X - Key Ratios" within
"Management's Discussion and Analysis of Operations" located in Ohio Valley's
2007 Annual Report to Shareholders.
VII. SHORT-TERM BORROWINGS
The following schedule is a summary of securities sold under agreements to
repurchase at December 31:
(dollars in thousands) 2007 2006 2005
---- ---- ----
Balance outstanding at period-end .......... $ 40,390 $ 22,556 $ 29,070
-------- -------- --------
Weighted average interest rate at period-end 2.91% 4.20% 3.32%
-------- -------- --------
Average amount outstanding during year ..... $ 27,433 $ 22,692 $ 24,694
-------- -------- --------
Approximate weighted average interest rate
during the year ......................... 3.83% 3.94% 2.60%
-------- -------- --------
Maximum amount outstanding as of any
month-end ............................... $ 40,390 $ 28,312 $ 29,070
-------- -------- --------
ITEM 1A - RISK FACTORS
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained in this Annual Report on Form 10-K which are
not statements of historical fact constitute forward-looking statements within
the meaning of the Private Securities
17
Litigation Reform Act of 1995, including, without limitation, the statements
specifically identified as forward-looking statements within this document. In
addition, certain statements in future filings by Ohio Valley with the SEC, in
press releases, and in oral and written statements made by or with the approval
of Ohio Valley which are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Examples of forward-looking statements include: (i)
projections of income or expense, earnings per share, the payment or non-payment
of dividends, capital structure and other financial items; (ii) statements of
plans and objectives of Ohio Valley or our management or Board of Directors,
including those relating to products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying those statements.
The Private Securities Litigation Reform Act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information so long as those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
discussed in the forward-looking statements. We desire to take advantage of the
"safe harbor" provisions of that Act.
Forward-looking statements involve risks and uncertainties. Actual results
may differ materially from those predicted by the forward-looking statements
because of various factors and possible events, including those factors
identified below. There is also the risk that Ohio Valley's management or Board
of Directors incorrectly analyzes these risks and forces, or that the strategies
Ohio Valley develops to address them are unsuccessful.
Forward-looking statements speak only as of the date on which they are
made, and, except as may be required by law, Ohio Valley undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made to reflect
unanticipated events. All subsequent written and oral forward-looking statements
attributable to Ohio Valley or any person acting on our behalf are qualified in
their entirety by the following cautionary statements.
Changes in interest rates could have a material adverse effect on our financial
condition and results of operations.
Our earnings depend substantially on our interest rate spread, which is the
difference between (i) the rates we earn on loans, securities and other earning
assets and (ii) the interest rates we pay on deposits and other borrowings.
These rates are highly sensitive to many factors beyond our control, including
general economic conditions and the policies of various governmental and
regulatory authorities. While we have taken measures intended to manage the
risks of operating in a changing interest rate environment, there can be no
assurance that such measures will be effective in avoiding undue interest rate
risk. As market interest rates rise, we will have competitive pressures to
increase the rates we pay on deposits, which will result in a decrease of our
net interest income and could have a material adverse effect on our financial
condition and results of operations.
Changes in economic and political conditions could adversely affect our
earnings, as our borrowers' ability to repay loans and the value of the
collateral securing our loans decline.
Our success depends, to a certain extent, upon economic and political
conditions, local and national, as well as governmental monetary policies.
Conditions such as inflation, recession, unemployment, changes in interest
rates, money supply and other factors beyond our control may
18
adversely affect our asset quality, deposit levels and loan demand and,
therefore, our earnings. Because we have a significant amount of real estate
loans, decreases in real estate values could adversely affect the value of
property used as collateral. Adverse changes in the economy may also have a
negative effect on the ability of our borrowers to make timely repayments of
their loans, which would have an adverse impact on our earnings. In addition,
substantially all of our loans are to individuals and businesses in Ohio and
West Virginia. Consequently, any decline in the economy of this market area
could have a material adverse effect on our financial condition and results of
operations.
Recent developments in the residential mortgage and related markets and the
economy may adversely affect our business
Recently, the residential mortgage market in the United States has been
negatively impacted by several economic developments. Those developments include
increasing interest rates and payments on adjustable-rate mortgages, decreasing
housing values and increased credit standards for borrowers. As a result,
delinquencies, foreclosures and losses with respect to residential construction
and mortgage loans have increased and may continue to increase. Additionally,
the lower housing prices and appraisal values may result in additional
delinquencies and loan losses. While the residential real estate loans held in
our portfolio are typically originated using conservative underwriting standards
and do not include sub-prime loans, we do originate and hold fixed- and
adjustable-rate loans and residential construction loans. If the residential
loan market continues to deteriorate, especially in Ohio and our local markets,
our financial condition and results of operation could be adversely affected.
We operate in an extremely competitive market, and our business will suffer if
we are unable to compete effectively.
In our market area, we encounter significant competition from other
commercial banks, savings and loan associations, credit unions, mortgage banking
firms, consumer finance companies, securities brokerage firms, insurance
companies, money market mutual funds and other financial institutions. The
increasingly competitive environment is a result primarily of changes in
regulation, changes in technology and product delivery systems and the
accelerating pace of consolidation among financial service providers. Many of
our competitors have substantially greater resources and lending limits than we
do and may offer services that we do not or cannot provide. Our ability to
maintain our history of strong financial performance and return on investment to
shareholders will depend in part on our continued ability to compete
successfully in our market area and on our ability to expand our scope of
available financial services as needed to meet the needs and demands of our
customers.
Unfavorable local economic conditions could significantly affect our
profitability.
We currently have offices in Ohio and West Virginia. Consistent with our
community banking philosophy, a majority of customers are located in and do
business in that region, and we lend a substantial portion of our capital and
resources to commercial and consumer borrowers in our local banking markets.
Therefore, our local and regional economy has a direct impact on our ability to
generate deposits to support loan growth, the demand for loans, the ability of
borrowers to repay loans, the value of collateral securing our loans
(particularly loans secured by real estate), and our ability to collect,
liquidate and restructure problem loans. If the economies of our banking markets
are adversely affected by a general economic downturn or by other specific
events or trends, the resulting impact could have a direct adverse effect on our
operating results. We are less able than larger financial institutions to spread
risks of unfavorable local economic conditions across a large number of
diversified economies.
19
Our small to medium-sized business target market may have fewer financial
resources to weather a downturn in the economy.
We target our business development and marketing strategy primarily to
serve the banking and financial services needs of small to medium-sized
businesses. These small to medium-sized businesses generally have fewer
financial resources in terms of capital or borrowing capacity than larger
companies. If general economic conditions negatively impact our Ohio and West
Virginia markets or the other geographic markets in which we operate, our
results of operations and financial condition may be negatively affected.
If our actual loan losses exceed our allowance for loan losses, our net income
will decrease.
Our loan customers may not repay their loans according to their terms, and
the collateral securing the payment of these loans may be insufficient to pay
any remaining loan balance. We may experience significant loan losses, which
could have a material adverse effect on our operating results. In accordance
with accounting principles generally accepted in the United States, we maintain
an allowance for loan losses to provide for loan defaults and non-performance,
which when combined, we refer to as the allowance for loan losses. Our allowance
for loan losses may not be adequate to cover actual credit losses, and future
provisions for credit losses could have a material adverse effect on our
operating results. Our allowance for loan losses is based on prior experience,
as well as an evaluation of the risks in the current portfolio. The amount of
future losses is susceptible to changes in economic, operating and other
conditions, including changes in interest rates that may be beyond our control,
and these losses may exceed current estimates. Federal regulatory agencies, as
an integral part of their examination process, review our loans and allowance
for loan losses. We cannot assure you that we will not further increase the
allowance for loan losses or that regulators will not require us to increase
this allowance. Either of these occurrences could have a material adverse effect
on our financial condition and results of operations.
We depend upon the accuracy and completeness of information about customers and
counterparties, which might be misleading.
In deciding whether to extend credit or enter into other transactions with
customers and counterparties, we may rely on information provided to us by
customers and counterparties, including financial statements and other financial
information. We may also rely on representations of customers and counterparties
as to the accuracy and completeness of that information and, with respect to
financial statements, on reports of independent auditors. For example, in
deciding whether to extend credit to a business, we may assume that the
customer's audited financial statements conform with generally accepted
accounting principles and present fairly, in all material respects, the
financial condition, results of operations and cash flows of the customer. We
may also rely on the audit report covering those financial statements. Our
financial condition and results of operations could be negatively impacted to
the extent we rely on financial statements that do not comply with generally
accepted accounting principles or that are materially misleading.
Our earnings are significantly affected by the fiscal and monetary policies of
the U.S. Government and its agencies, sometimes adversely.
The policies of the Federal Reserve Board impact us significantly. The
Federal Reserve Board regulates the supply of money and credit in the United
States. Its policies directly and indirectly influence the rate of interest
earned on loans and paid on borrowings and interest-bearing deposits and can
also affect the value of financial instruments we hold. Those policies determine
to a significant
20
extent our cost of funds for lending and investing. Changes in those policies
are beyond our control and are difficult to predict. Federal Reserve Board
policies can also affect our borrowers, potentially increasing the risk that
they may fail to repay their loans. For example, a tightening of the money
supply by the Federal Reserve Board could reduce the demand for a borrower's
products and services. This could adversely affect the borrower's earnings and
ability to repay its loan, which could have a material adverse effect on our
financial condition and results of operations.
Legislative or regulatory changes or actions, or significant litigation, could
adversely impact us or the businesses in which we are engaged.
The financial services industry is extensively regulated. We are subject to
extensive state and federal regulation, supervision and legislation that govern
almost all aspects of our operations. Laws and regulations may change from time
to time and are primarily intended for the protection of consumers, depositors
and the deposit insurance funds, and not to benefit our shareholders. The impact
of any changes to laws and regulations or other actions by regulatory agencies
may negatively impact us or our ability to increase the value of our business.
Regulatory authorities have extensive discretion in connection with their
supervisory and enforcement activities, including the imposition of restrictions
on the operation of an institution, the classification of assets by the
institution and the adequacy of an institution's allowance for loan losses.
Additionally, actions by regulatory agencies or significant litigation against
us could cause us to devote significant time and resources to defending our
business and may lead to penalties that materially affect us and our
shareholders. Proposals to change the laws governing financial institutions are
frequently raised in Congress and before bank regulatory authorities. It is
impossible to predict the ultimate form any proposed legislation might take or
how it might affect us. Future changes in the laws or regulations or their
interpretation or enforcement could be materially adverse to our business and
our shareholders.
If we foreclose on collateral property and own the underlying real estate, we
may be subject to the increased costs associated with the ownership of real
property, resulting in reduced revenues.
We may have to foreclose on collateral property to protect our investment
and may thereafter own and operate such property, in which case we will be
exposed to the risks inherent in the ownership of real estate. The amount that
we, as a mortgagee, may realize after a default is dependent upon factors
outside of our control, including, but not limited to: (i) general or local
economic conditions; (ii) neighborhood values; (iii) interest rates; (iv) real
estate tax rates; (v) operating expenses of the mortgaged properties; (vi)
supply of and demand for rental units or properties; (vii) ability to obtain and
maintain adequate occupancy of the properties; (viii) zoning laws; (ix)
governmental rules, regulations and fiscal policies; and (x) acts of God.
Certain expenditures associated with the ownership of real estate, principally
real estate taxes and maintenance costs, may adversely affect the income from
the real estate. Therefore, the cost of operating a real property may exceed the
rental income earned from such property, and we may have to advance funds in
order to protect our investment, or we may be required to dispose of the real
property at a loss. The foregoing expenditures and costs could adversely affect
our ability to generate revenues, resulting in reduced levels of profitability.
21
Environmental liability associated with commercial lending could have a material
adverse effect on our business, financial condition and results of operations.
In the course of our business, we may acquire, through foreclosure,
commercial properties securing loans that are in default. There is a risk that
hazardous substances could be discovered on those properties. In this event, we
could be required to remove the substances from and remediate the properties at
our cost and expense. The cost of removal and environmental remediation could be
substantial. We may not have adequate remedies against the owners of the
properties or other responsible parties and could find it difficult or
impossible to sell the affected properties. These events could have a material
adverse effect on our financial condition and results of operation.
Our business strategy includes growth plans. Our financial condition and results
of operations could be negatively affected if we fail to grow or fail to manage
our growth effectively.
We intend to continue pursuing a profitable growth strategy. Our prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in significant growth stages of development. We cannot
assure you that we will be able to expand our market presence in our existing
markets or successfully enter new markets or that any such expansion will not
adversely affect our results of operations. Failure to manage our growth
effectively could have a material adverse effect on our business, future
prospects, financial condition or results of operations and could adversely
affect our ability to successfully implement our business strategy. Also, if we
grow more slowly than anticipated, our operating results could be materially
adversely affected.
Our ability to grow successfully will depend on a variety of factors
including the continued availability of desirable business opportunities, the
competitive responses from other financial institutions in our market areas and
our ability to manage our growth. While we believe we have the management
resources and internal systems in place to successfully manage our future
growth, there can be no assurance growth opportunities will be available or
growth will be successfully managed.
Our ability to pay cash dividends is limited, and we may be unable to pay cash
dividends in the future even if we would like to do so.
We are dependent primarily upon the earnings of our operating subsidiaries
for funds to pay dividends on our common stock. The payment of dividends by us
is also subject to certain regulatory restrictions. As a result, any payment of
dividends in the future will be dependent, in large part, on our ability to
satisfy these regulatory restrictions and our subsidiaries' earnings, capital
requirements, financial condition and other factors. Although our financial
earnings and financial condition have allowed us to declare and pay periodic
cash dividends to our shareholders, there can be no assurance that our dividend
policy or size of dividend distribution will continue in the future. Our failure
to pay dividends on our common shares could have a material adverse effect on
the market price of our common shares.
The loss of key members of our senior management team could adversely affect our
business.
We believe that our success depends largely on the efforts and abilities of
our senior management. Their experience and industry contacts significantly
benefit us. In addition, our success depends in part upon senior management's
ability to implement our business strategy. The competition for qualified
personnel in the financial services industry is intense, and the loss of
services of any of our senior executive officers or an inability to continue to
attract, retain and motivate key personnel could
22
adversely affect our business. We cannot assure you that we will be able to
retain our existing key personnel or attract additional qualified personnel.
Loss of key employees may disrupt relationships with certain customers.
Our business is primarily relationship-driven in that many of our key
employees have extensive customer relationships. Loss of a key employee with
such customer relationships may lead to the loss of business if the customers
were to follow that employee to a competitor. While we believe our relationships
with our key producers is good, we cannot guarantee that all of our key
personnel will remain with our organization. Loss of such key personnel, should
they enter into an employment relationship with one of our competitors, could
result in the loss of some of our customers.
Consumers may decide not to use banks to complete their financial transactions.
Technology and other changes are allowing parties to complete financial
transactions that historically have involved banks at one or both ends of the
transaction. For example, consumers can now pay bills and transfer funds
directly without banks. The process of eliminating banks as intermediaries could
result in the loss of fee income, as well as the loss of customer deposits and
income generated from those deposits.
Management's accounting policies and methods are the basis of how we report our
financial condition and results of operations, and these policies may require
management to make estimates about matters that are inherently uncertain.
Management's accounting policies and methods are fundamental to how we
record and report our financial condition and results of operations. Our
management must exercise judgment in selecting and applying many of these
accounting policies and methods in order to ensure that they comply with
generally accepted accounting principles and reflect management's judgment as to
the most appropriate manner in which to record and report our financial
condition and results of operations. In some cases, management must select the
accounting policy or method to apply from two or more alternatives, any of which
might be reasonable under the circumstances yet might result in reporting
materially different amounts than would have been reported under a different
alternative.
Management has identified several accounting policies as being "critical"
to the presentation of our financial condition and results of operations because
they require management to make particularly subjective and/or complex judgments
about matters that are inherently uncertain and because of the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions. Because of the inherent uncertainty of estimates
about these matters, no assurance can be given that the application of
alternative policies or methods might not result in our reporting materially
different amounts.
A limited trading market exists for our common shares, which could lead to price
volatility.
Your ability to sell or purchase our common shares depends upon the
existence of an active trading market for our common shares. Although our common
shares are quoted on The NASDAQ Global Market, the volume of trades on any given
day has been limited historically. As a result, you may be unable to sell or
purchase our common shares at the volume, price and time that you desire.
Additionally, a fair valuation of the purchase or sales price of our common
shares also depends upon an active trading market, and thus the price you
receive for a thinly-traded stock such as our common shares, may not reflect its
true value. The limited trading market for our common shares may cause
fluctuations
23
in the market value of our common shares to be exaggerated, leading to price
volatility in excess of that which would occur in a more active trading market.
Unauthorized disclosure of sensitive or confidential client or customer
information, whether through a breach of our computer systems or otherwise,
could severely harm our business.
As part of our business, we collect, process and retain sensitive and
confidential client and customer information on behalf of our subsidiaries and
other third parties. Despite the security measures we have in place, our
facilities and systems, and those of our third party service providers, may be
vulnerable to security breaches, acts of vandalism, computer viruses, misplaced
or lost data, programming and/or human errors, or other similar events. If
information security is breached, information can be lost or misappropriated,
resulting in financial loss or costs to us or damages to others. Any security
breach involving the misappropriation, loss or other unauthorized disclosure of
confidential customer information, whether by us or by our vendors, could
severely damage our reputation, expose us to the risks of litigation and
liability, disrupt our operations and have a material adverse effect on our
business.
Our organizational documents may have the effect of discouraging a third party
from acquiring us by means of a tender offer, proxy contest or otherwise.
Our articles of incorporation contain provisions that make it more
difficult for a third party to gain control or acquire us without the consent of
our board of directors. These provisions also could discourage proxy contests
and may make it more difficult for dissident shareholders to elect
representatives as directors and take other corporate actions. These provisions
of our governing documents may have the effect of delaying, deferring or
preventing a transaction or a change in control that might be in the best
interests of our shareholders.
ITEM 1B - UNRESOLVED STAFF COMMENTS
Ohio Valley did not receive any written comments from the staff of the
Securities and Exchange Commission regarding its periodic or current reports
under the Securities Exchange Act of 1934 within 180 days before the fiscal year
ended December 31, 2007.
ITEM 2 - PROPERTIES
Ohio Valley does not own or lease any real or personal property.
The principal executive offices of Ohio Valley and the Bank are located at
420 Third Avenue, Gallipolis, Ohio. The Bank owns six financial service centers
located in Gallipolis (Gallia Co.), Jackson (Jackson Co.) and Waverly (Pike Co.)
in Ohio and Milton (Cabell Co.) in West Virginia. The Bank leases nine
additional financial service centers located in Gallipolis (Gallia Co.), Pomeroy
(Meigs Co.), Columbus (Franklin Co.) and South Point (Lawrence Co.) in Ohio and
Point Pleasant (Mason Co.), Huntington (Cabell Co.), Milton (Cabell Co.) and
Cross Lanes (Kanawha Co.) in West Virginia. The Bank also owns and operates
twenty-six ATMs, including eleven off-site ATMs. Furthermore, the Bank owns a
facility and leases a facility in Gallipolis (Gallia Co.), Ohio which are used
for additional office space. The Bank also owns two facilities in Gallipolis
(Gallia Co.), Ohio and Point Pleasant (Mason Co.), West Virginia which are
leased to third parties.
Loan Central conducts its consumer finance operations through six offices
located in Gallipolis (Gallia Co.), Jackson (Jackson Co.), Waverly (Pike Co.),
South Point and Ironton (Lawrence Co.), and
24
Wheelersburg (Scioto Co.), all in Ohio. All of these facilities are leased by
Loan Central, except for the Wheelersburg (Scioto Co.) facility. Loan Central
leases a portion of its Wheelersburg (Scioto Co.) facility to a third party.
Ohio Valley Financial Services also conducts business within Loan Central's
Jackson (Jackson Co.) facility.
Management considers all of these properties to be satisfactory for the
Company's current operations. The Bank, Loan Central and Ohio Valley Financial
Services' leased facilities are all subject to commercially standard leasing
arrangements.
Information concerning the value of the Company's owned and leased real
property and a summary of future lease payments is contained in "Note E -
Premises and Equipment" of the notes to the Company's consoldiated financial
statements for the fiscal year ended December 31, 2007, located in Ohio Valley's
2007 Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings against Ohio Valley or any
of its subsidiaries, other than ordinary, routine litigation incidental to their
respective businesses.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted during the fourth quarter of 2007 to a vote
of security holders, by solicitation of proxies or otherwise.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The information required under this Item 5 by Items 201(a) through (c) of
SEC Regulation S-K is incorporated herein by reference to the information
presented under the captions "Summary of Common Stock Data" and "Performance
Graph" located in Ohio Valley's 2007 Annual Report to Shareholders and "Note P -
Regulatory Matters" of the notes to the Company's consolidated financial
statements for the fiscal year ended December 31, 2007 located in Ohio Valley's
2007 Annual Report to Shareholders.
Ohio Valley did not sell any of its equity securities without registration
during its 2007 fiscal year.
25
The following table provides information on Ohio Valley's purchases of its
common shares during the three fiscal months ended December 31, 2007:
Maximum Number
Total Number of Shares of Shares That May
Total Number of Average Purchased as Part of Yet Be Purchased
Common Shares Price Paid Publicly Announced Under Publicly Announced
Period Purchased Per Share Plans or Programs(1) Plans or Programs
-------------------------- ------------- -------------- ---------------------- --------------------------
October 1 through
October 31, 2007 ............. 506 $25.00 506 55,484
November 1 through
November 30, 2007 ............ 12,278 $25.01 12,278 43,206
December 1 through
December 31, 2007 ............ 789 $25.00 789 42,417
------------- ------------- ------------- -------------
TOTAL 13,573 $25.01 13,573 42,417
============= ============= ============= =============
(1) On February 9, 2007, Ohio Valley's Board of Directors announced its plan to
repurchase up to 175,000 of its common shares between February 16, 2007 and
February 15, 2008.
ITEM 6 - SELECTED FINANCIAL DATA
The information required under this Item 6 by Item 301 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
caption "Selected Financial Data" located in Ohio Valley's 2007 Annual Report to
Shareholders.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required under this Item 7 by Item 303 of SEC Regulation
S-K with respect to Ohio Valley's interest rate risk is incorporated herein by
reference to the information presented under the caption "Management's
Discussion and Analysis of Operations" located in Ohio Valley's 2007 Annual
Report to Shareholders.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market risk is the risk of loss arising from adverse changes in the fair
value of financial instruments due to interest rate risk, exchange rate risk,
equity price risk and commodity price risk. Ohio Valley does not maintain a
trading account for any class of financial instruments, and is not currently
subject to foreign currency exchange rate risk, equity price risk or commodity
price risk. Ohio Valley's market risk is composed primarily of interest rate
risk.
The information required under this Item 7A by Item 305 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
captions "Interest Rate Sensitivity and Liquidity" and "Interest Rate
Sensitivity -- Table VIII" found within "Management's Discussion and Analysis of
Operations" located in Ohio Valley's 2007 Annual Report to Shareholders.
26
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Ohio Valley's consolidated financial statements and related notes are
listed below and incorporated herein by reference to Ohio Valley's 2007 Annual
Report to Shareholders. The supplementary data "Consolidated Quarterly Financial
Information (unaudited)" and the "Report of Independent Registered Public
Accounting Firm on Financial Statements" located in Ohio Valley's 2007 Annual
Report to Shareholders is also incorporated herein by reference.
Consolidated Statements of Condition as of December 31, 2007 and 2006
Consolidated Statements of Income for the years ended December 31, 2007, 2006
and 2005
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2007, 2006 and 2005
Consolidated Statements of Cash Flows for the years ended December 31, 2007,
2006 and 2005
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Financial Statements
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A - CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
With the participation of the President and Chief Executive Officer (the
principal executive officer) and the Vice President and Chief Financial Officer
(the principal financial officer) of Ohio Valley, Ohio Valley's management has
evaluated the effectiveness of Ohio Valley'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 period covered by this Annual
Report on Form 10-K.
Based on that evaluation, Ohio Valley's President and Chief Executive
Officer and Vice President and Chief Financial Officer have concluded that:
o information required to be disclosed by Ohio Valley in this Annual Report on
Form 10-K would be accumulated and communicated to Ohio Valley's management,
including its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure;
o information required to be disclosed by Ohio Valley in this Annual Report on
Form 10-K would be recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms; and
o Ohio Valley's disclosure controls and procedures are effective as of the end
of the period covered by this Annual Report on Form 10-K to ensure that material
information relating to Ohio Valley and its consolidated subsidiaries is made
known to them, particularly during the period for which the periodic reports of
Ohio Valley, including this Annual Report on Form 10-K, are being prepared.
27
Management's Report on Internal Control Over Financial Reporting
"Management's Report on Internal Control Over Financial Reporting" located
in Ohio Valley's 2007 Annual Report to Shareholders is incorporated into this
Item 9A by reference.
Report of Independent Registered Public Accounting Firm
The "Report of Independent Registered Public Accounting Firm-Internal
Control" located in Ohio Valley's 2007 Annual Report to Shareholders is
incorporated into this Item 9A by reference.
Changes In Internal Control Over Financial Reporting
There were no changes in Ohio Valley's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred
during Ohio Valley's fiscal quarter ended December 31, 2007, that have
materially affected, or are reasonably likely to materially affect, Ohio
Valley's internal control over financial reporting.
ITEM 9B - OTHER INFORMATION
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this Item 10 by Items 401, 405, 406 and 407
(c)(3), (d)(4) and (d)(5) of SEC Regulation S-K is incorporated herein by
reference to the information presented in Ohio Valley's definitive proxy
statement relating to the annual meeting of shareholders of Ohio Valley to be
held on May 7, 2008 (the "2008 Proxy Statement"), under the captions "Election
of Directors", "Section 16(a) Beneficial Ownership Reporting Compliance" and
"Compensation of Executive Officers and Directors" of the 2008 Proxy Statement.
The Board of Directors of Ohio Valley has adopted a Code of Ethics covering
the directors, officers and employees of Ohio Valley and its affiliates,
including, without limitation, the principal executive officer, the principal
financial officer and the principal accounting officer of Ohio Valley.
Interested persons may obtain copies of the Code of Ethics without charge by
writing to Ohio Valley Banc Corp., Attention: Larry E. Miller, Secretary, P.O.
Box 240, Gallipolis, Ohio 45631.
ITEM 11 - EXECUTIVE COMPENSATION
The information required under this Item 11 by Item 402 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
captions "Compensation of Executive Officers and Directors" and "Comensation
Committee Interlocks and Insider Participation"of the 2008 Proxy Statement.
28
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required under this Item 12 by Item 403 of SEC Regulation
S-K is incorporated herein by reference to the information presented under the
caption "Ownership of Certain Beneficial Owners and Management" of the 2008
Proxy Statement.
Ohio Valley does not maintain any equity compensation plans requiring
disclosure pursuant to Item 201(d) of SEC Regulation S-K.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this Item 13 by Item 404 and Item 407(a) of
SEC Regulation S-K is incorporated herein by reference to the information
presented under the captions "Certain Relationships and Related Transactions"
and "Proxy Item 1: Election of Directors" of the 2008 Proxy Statement.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required under this Item 14 by Item 9(e) of Schedule 14A is
incorporated herein by reference to the information presented under the captions
"Pre-Approval of Services Performed by Independent Registered Public Accounting
Firm" and "Services Rendered by the Independent Registered Public Accounting
Firm" of the 2008 Proxy Statement.
PART IV
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. (1) Financial Statements
The following consolidated financial statements of Ohio Valley appear in
the 2007 Annual Report to Shareholders, Exhibit 13, and are specifically
incorporated herein by reference under Item 8 of this Form 10-K:
Consolidated Statements of Condition as of December 31, 2007 and 2006
Consolidated Statements of Income for the years ended December 31, 2007, 2006
and 2005
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2007, 2006 and 2005
Consolidated Statements of Cash Flows for the years ended December 31, 2007,
2006 and 2005
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Financial Statements
(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 beginning on page 31 of this Form
10-K.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Ohio Valley has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
OHIO VALLEY BANC CORP.
Date: March 14 , 2008 By /s/Jeffrey E. Smith
-------- -------------------------
Jeffrey E. Smith
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 14, 2008 by the following persons on behalf of
Ohio Valley and in the capacities indicated.
Name Capacity
---- --------
/s/Jeffrey E. Smith President, Chief Executive Officer
----------------------------- and Director (principal executive
Jeffrey E. Smith officer)
/s/Scott W. Shockey Vice President and Chief Financial
----------------------------- Officer (principal financial officer
Scott W. Shockey and principal accounting officer)
/s/Lannes C. Williamson Director
-----------------------------
Lannes C. Williamson
/s/Anna P. Barnitz Director
-----------------------------
Anna P. Barnitz
/s/David W. Thomas Director
-----------------------------
David W. Thomas
/s/Robert H. Eastman Director
-----------------------------
Robert H. Eastman
/s/Brent A. Saunders Director
-----------------------------
Brent A. Saunders
/s/Steven B. Chapman Director
-----------------------------
Steven B. Chapman
/s/Thomas E. Wiseman Director
-----------------------------
Thomas E. Wiseman
/s/Harold A. Howe Director
-----------------------------
Harold A. Howe
/s/Robert E. Daniel Director
-----------------------------
Robert E. Daniel
/s/Roger D. Williams Director
-----------------------------
Roger D. Williams
30
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
3(a) Amended Articles of Incorporation of Ohio Valley
(reflects amendments through April 7, 1999) [for
SEC reporting compliance only - not filed with the
Ohio Secretary of State]: Filed herewith.
3(b) Code of Regulations of Ohio Valley: Incorporated
herein by reference to Exhibit 3(b) to Ohio
Valley's current report on Form 8-K (SEC File No.
0-20914) filed November 6, 1992.
4 Agreement to furnish instruments and agreements
defining rights of holders of long-term debt:
Filed herewith.
10.1 The Ohio Valley Bank Company Executive Group Life
Split Dollar Plan agreement, dated April 29, 2003,
between Jeffrey E. Smith and The Ohio Valley Bank
Company: Incorporated herein by reference to
Exhibit 10.1 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2006
(SEC File No. 0-20914).
10.2 Schedule A to Exhibit 10.1 identifying other
identical Executive Group Life Split Dollar
agreements between The Ohio Valley Bank Company
and certain executive officers of Ohio Valley Banc
Corp.: Incorporated herein by reference to
Exhibit 10.2 to Ohio Valley's Annual Report on
Form 10-K for fiscal year ending December 31, 2006
(SEC File No. 0-20914).
10.3 The Ohio Valley Bank Company Director Retirement
agreement, dated December 28, 2007,between Jeffrey
E. Smith and The Ohio Valley Bank Company: Filed
herewith.
10.4 Schedule A to Exhibit 10.3 identifying other
identical Director Retirement agreements between
The Ohio Valley Bank Company and directors of Ohio
Valley Banc Corp.: Filed herewith.
10.5 The Ohio Valley Bank Company Salary Continuation
agreement, dated January 12, 2004, between Jeffrey
E. Smith and The Ohio Valley Bank Company: Filed
herewith.
10.6(a) The Ohio Valley Bank Company Director Deferred Fee
agreement, dated December 28, 2007,between Anna P.
Barnitz and The Ohio Valley Bank Company: Filed
herewith.
31
10.6(b) The Ohio Valley Bank Company Executive Deferred
Compensation agreement, dated December 28, 2007,
between Jeffrey E. Smith and The Ohio Valley Bank
Company: Filed herewith.
10.7(a) Schedule A to Exhibit 10.6(a) identifying other
identical Director Deferred Fee agreements between
The Ohio Valley Bank Company and directors of Ohio
Valley Banc Corp.: Filed herewith.
10.7(b) Schedule A to Exhibit 10.6(b) identifying other
identical Executive Deferred Compensation
agreements between The Ohio Valley Bank Company
and executive officers of Ohio Valley Banc Corp.:
Filed herewith.
10.8 Summary of Compensation for Directors and Named
Executive Officers of Ohio Valley Banc Corp.:
Filed herewith.
10.9 Summary of Bonus Program of Ohio Valley Banc
Corp.: Filed herewith.
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 Ohio Valley's Annual Report to Shareholders for
the fiscal year ended December 31, 2007: Filed
herewith. (Not deemed filed except for portions
thereof specifically incorporated by reference
into this Annual Report on Form 10-K.)
20 Proxy Statement for 2008 Annual Meeting of
Shareholders: Incorporated herein by reference
to the registrant's definitive proxy statement
for the 2008 Annual Meeting of Shareholders to be
filed.
21 Subsidiaries of Ohio Valley: Filed herewith
23 Consent of Independent Accountant - Crowe Chizek
and Company LLC: Filed herewith.
31.1 Rule 13a-14(a)/15d-14(a) Certification (Principal
Executive Officer): Filed herewith.
31.2 Rule 13a-14(a)/15d-14(a) Certification (Principal
Financial Officer): Filed herewith.
32 Section 1350 Certifications (Principal Executive
Officer and Principal Accounting Officer): Filed
herewith.
32