SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OHIO VALLEY BANC CORP.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Schedule 14A.
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14a-6(i)(3).
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 13, 2005
TO OUR SHAREHOLDERS:
We take pleasure in inviting you to our Annual Meeting of Shareholders, which
will be held on Wednesday, April 13, 2005, at 5:00 p.m., Eastern Daylight Time,
at the Morris and Dorothy Haskins Ariel Theatre, 426 Second Avenue, Gallipolis,
Ohio.
The Annual Meeting will be held for the purpose of electing Directors and
transacting such other business as may properly be brought before it. At the
meeting, we shall also report to you on our operations during the past year and
plans for the future.
The close of business on March 16, 2005 has been fixed as the record date for
determination of shareholders entitled to notice of the Annual Meeting and to
vote at the Annual Meeting or any adjournment thereof.
The formal notice of Annual Meeting, the Proxy Statement and a proxy are
enclosed. After reading the Proxy Statement, will you please promptly fill in,
sign and return to us the enclosed proxy in the envelope provided. Polls will
close promptly at 5:00 p.m. on the day of the Annual Meeting, April 13, 2005. We
urge you to vote to insure that your shares are represented.
Last year, more than 83% of the Company's shares were represented in person or
by proxy at the Annual Meeting. The Company appreciates this interest on your
part.
We hope to see many of you in person at the Annual Meeting. There will be a
social hour beginning at 4:00 p.m. Hors D'oeuvres and beverages will be served,
and we hope you will take this opportunity to become acquainted with the
officers and Directors of your Company.
Sincerely,
Jeffrey E. Smith
President and Chief Executive Officer
Dated: March 23, 2005
OHIO VALLEY BANC CORP.
P.O. Box 240
Gallipolis, Ohio 45631
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 13, 2005
5:00 p.m.
Gallipolis, Ohio
March 23, 2005
To the Shareholders of
Ohio Valley Banc Corp.
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Ohio Valley Banc Corp. (the "Company") will be held at the Morris
and Dorothy Haskins Ariel Theatre, 426 Second Avenue, Gallipolis, Ohio, on
Wednesday, the 13th day of April, 2005, at 5:00 p.m., Eastern Daylight Savings
Time, for the following purposes:
1. To elect three Directors of the Company, each to serve for a
three-year term.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
Only holders of common shares of the Company of record at the close of
business on March 16, 2005 will be entitled to vote at the Annual Meeting and
any adjournment.
You are cordially invited to attend the Annual Meeting. The vote of each
shareholder is important, whatever the number of common shares held. Whether or
not you plan to attend the Annual Meeting, please sign, date and return the
enclosed proxy promptly in the enclosed postage-paid, return-addressed envelope.
Should you attend the Annual Meeting, you may revoke your proxy and vote in
person if you are a registered shareholder. Attendance at the Annual Meeting
will not, in and of itself, constitute revocation of your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey E. Smith
President and Chief Executive Officer
OHIO VALLEY BANC CORP.
P.O. Box 240
Gallipolis, Ohio 45631
March 23, 2005
PROXY STATEMENT
This proxy statement and the accompanying proxy are first being mailed on
or about March 23, 2005 to shareholders of Ohio Valley Banc Corp. (the
"Company") regarding the Annual Meeting of Shareholders to be held at the Morris
and Dorothy Haskins Ariel Theatre, 426 Second Avenue, Gallipolis, Ohio, on
Wednesday, April 13, 2005, at 5:00 p.m., Eastern Daylight Savings Time (the
"Annual Meeting").
A proxy for use at the Annual Meeting accompanies this proxy statement and
is solicited by the Board of Directors of the Company. You may ensure your
representation by completing, signing, dating and promptly returning the
enclosed proxy in the envelope provided. Without affecting any vote previously
taken, you may revoke your proxy at any time before it is voted at the Annual
Meeting (1) by giving written notice of revocation to the Secretary of the
Company, at the address of the Company set forth on the cover page of this proxy
statement; (2) by executing a later-dated proxy which is received by the Company
prior to the Annual Meeting; or (3) if you are the registered owner of your
common shares, by attending the Annual Meeting and giving notice of revocation
in person. Attendance at the Annual Meeting will not, in and of itself,
constitute revocation of a proxy.
If you hold your common shares in "street name" with a broker, financial
institution or other holder of record, you may be eligible to appoint your proxy
electronically via the Internet or telephonically and you may incur costs
associated with the electronic access. If you hold your common shares in street
name, you should review the information provided to you by the holder of record.
This information will describe the procedures to be followed in instructing the
holder of record how to vote the street name common shares and how to revoke
previously given instructions.
Only shareholders of record at the close of business on March 16, 2005, are
entitled to receive notice of and to vote at the Annual Meeting and any
adjournment. As of February 28, 2005, 3,430,859 common shares were outstanding
and entitled to vote at the Annual Meeting. Each common share entitles the
holder thereof to one vote on each matter submitted to the shareholders at the
Annual Meeting. A quorum for the Annual Meeting is a majority of the outstanding
common shares.
The Company will bear the costs of preparing, printing and mailing this
proxy statement, the accompanying proxy and any other related materials, as well
as all other costs incurred in connection with the solicitation of proxies on
behalf of the Company's Board of Directors other than the Internet access and
telephone usage charges a shareholder may incur if a proxy is appointed
electronically through a holder of record. Proxies will be solicited by mail and
may be further solicited, for no additional compensation, by officers, directors
or employees of the Company and its subsidiaries by further mailing, telephone,
facsimile or personal contact. The Company will also pay the standard charges
and expenses of brokers, voting trustees, financial institutions and other
custodians, nominees and fiduciaries, who are record holders of common shares
not beneficially owned by them, for forwarding materials to the beneficial
owners of common shares entitled to vote at the Annual Meeting.
If you are a participant in the Ohio Valley Banc Corp. Employee Stock
Ownership Plan (the "ESOP") and common shares have been allocated to your
account in the ESOP, you will be entitled to instruct the trustee of the ESOP
how to vote those common shares and you will receive your voting instructions
separately. If no instructions are given by you to the trustee of the ESOP, the
trustee will vote the common shares allocated to your ESOP account in its sole
discretion.
The inspectors of election appointed for the Annual Meeting will tabulate
the results of shareholder voting. Common shares represented by properly
executed proxies returned to the Company prior to the Annual Meeting will be
counted toward the establishment of a quorum for the Annual Meeting even though
they are marked "ABSTAIN," "AGAINST," "WITHHOLD AUTHORITY TO VOTE FOR ALL
NOMINEES," "VOTE FOR ALL EXCEPT" or not at all. Brokers who hold common shares
in street name may, under the applicable rules of the exchange and other
self-regulatory organizations of which the brokers are members, sign and submit
proxies for such common shares and may vote such common shares on routine
matters such as the election of Directors. However, brokers who hold common
shares in street name may not vote such common shares on non-routine matters,
including proposals to approve equity-based compensation plans, without specific
instructions from the customer who owns the common shares. Proxies that are
signed and submitted by brokers that have not been voted on certain matters as
described in the previous sentence are referred to as broker non-votes. Broker
non-votes count toward the establishment of a quorum for the Annual Meeting.
The Annual Report of the Company for the fiscal year ended December 31,
2004, including financial statements, is being delivered with this proxy
statement.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates, as of February 28, 2005, certain information
concerning the only shareholder known by the Company to be the beneficial owner
of more than five percent (5%) of the outstanding common shares of the Company.
No. of Common
Shares and
Nature of Percent of
Name and Address Beneficial Ownership Class (1)
---------------- ----------------------- ---------
Morris and Dorothy Haskins 264,268 (2) 7.70%
Foundation, Inc.
1767 Chestnut Street
Bowling Green, KY 42101
(1) The percent of class is based upon 3,430,859 common shares outstanding
as of February 28, 2005.
(2) Based on information contained in a Schedule 13G filing with the
Securities and Exchange Commission (the "SEC"), dated February 9, 2005.
Carol H. Wedge and Paul D. Wedge, Jr. share voting and investment power
over the 264,268 common shares owned by the Morris and Dorothy Haskins
Foundation, Inc.
2
The following table furnishes information regarding the beneficial
ownership of common shares of the Company, as of February 28, 2005, for each
current Director, each nominee for election to the Board of Directors, by each
executive officer named in the Summary Compensation Table and by all current
Directors and executive officers as a group.
No. of Common
Shares and
Nature of Percent of
Name and Address Beneficial Ownership(1) Class (2)
---------------- ----------------------- ----------
Anna P. Barnitz 1,030 (3) .03%
Sue Ann Bostic (4) 8,833 (5) .26%
W. Lowell Call 16,967 (6) .49%
Steven B. Chapman 1,273 (7) .04%
Robert H. Eastman 75,017 (8) 2.19%
Katrinka V. Hart (4) 7,440 (9) .22%
Harold A. Howe 11,915 (10) .35%
E. Richard Mahan (4) 5,523 (11) .16%
Larry E. Miller (4) 6,672 (12) .19%
Brent A. Saunders 4,356 (13) .13%
Jeffrey E. Smith (4) 15,657 (14) .46%
Lannes C. Williamson 3,501 (15) .10%
Thomas E. Wiseman 11,433 (16) .33%
All Directors and executive 171,227 (17) 4.99%
officers as a Group
(14 persons)
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power with respect to all of the common shares reflected in
the table. All fractional common shares have been rounded down to the
nearest whole common share. The Company has never granted options to
purchase its common shares. The mailing address for each of the current
directors and executive officers of the Company is P.O. Box 240,
Gallipolis, Ohio 45631.
(2) The percent of class is based on 3,430,859 common shares outstanding on
February 28, 2005.
(3) Represents common shares held jointly by Mrs. Barnitz and her spouse,
as to which she shares voting and investment power.
(4) Executive officer of the Company named in the Summary Compensation
Table.
(5) Represents 4,513 common shares held jointly by Mrs. Bostic and her
spouse, as to which she shares voting and investment power; 385 common
shares held by Mrs. Bostic as custodian for her grandchildren; and
3,935 common shares held for the account of Mrs. Bostic in the ESOP.
(6) Represents common shares held in a living trust account with Mr. Call
and his spouse as to which they share voting and investment power.
3
(7) Includes 1,185 common shares held jointly by Mr. Chapman and his
spouse, as to which he shares voting and investment power. The number
shown also includes 88 common shares held by a broker for Mr. Chapman's
spouse in a self-directed individual retirement account, as to which
she has sole voting and investment power.
(8) Includes 36,374 common shares held jointly by Mr. Eastman and his
spouse, as to which he shares voting and investment power.
(9) Includes 4,829 common shares held for the account of Ms. Hart in the
ESOP.
(10) Includes 6,179 common shares held jointly by Mr. Howe and his spouse,
as to which he shares voting and investment power; 5,522 common shares
held in a self-directed individual retirement account at Ohio Valley
Bank, as to which Ohio Valley Bank has voting power and Mr. Howe has
investment power; and 212 common shares held jointly by Mr. Howe and
his children as to which he shares voting and investment power.
(11) Includes 2,878 common shares held jointly by Mr. Mahan and his spouse,
as to which he shares voting and investment power; 128 common shares
held by Mr. Mahan as custodian for his nieces; and 2,516 common shares
held for the account of Mr. Mahan in the ESOP.
(12) Includes 2,943 common shares held jointly by Mr. Miller and his spouse,
as to which he shares voting and investment power; and 3,729 common
shares held for the account of Mr. Miller in the ESOP.
(13) Includes 1,752 common shares held jointly by Mr. Saunders and his
spouse, as to which he shares voting and investment power; 508 common
shares held by Mr. Saunders as custodian for the benefit of his
children; 116 common shares held by a broker in a self-directed
individual retirement account, as to which the broker has voting power
and Mr. Saunders has investment power; and 25 common shares in an
investment club held by a broker, as to which the investment club
treasurer has voting power and the members share investment power.
(14) Includes 380 common shares held by Mr. Smith's spouse, as to which she
has sole voting and investment power; 213 common shares held by Mr.
Smith's spouse as custodian for the benefit of his daughter as to which
Mr. Smith's spouse exercises sole voting and investment power; and
10,620 common shares held for the account of Mr. Smith in the ESOP.
(15) Includes 17 common shares held by Mr. Williamson's spouse, as to which
she has sole voting and investment power; and 3,097 common shares held
by a broker in a self-directed individual retirement account, as to
which the broker has voting power and Mr. Williamson has investment
power.
(16) Includes 10,777 common shares held jointly by Mr. Wiseman and his
spouse, as to which he shares voting and investment power; 630 common
shares held by Mr. Wiseman as custodian for the benefit of his
children; and 25 common shares in an investment club held by a broker,
as to which the investment club treasurer has voting power and the
members share investment power.
(17) See Notes (3) and (5) through (16) above.
4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Directors and executive officers as well as any persons
holding more than 10% of the Company's outstanding common shares are required to
report their initial ownership of common shares and any subsequent changes in
their ownership to the SEC. Specific due dates have been established by the SEC
for such filings, and the Company is required to disclose in this proxy
statement any failure to file by those dates. Based on its review of (1) Section
16(a) reports filed on behalf of these individuals for their transactions during
the Company's 2004 fiscal year and (2) documentation received from one or more
of these individuals that no annual Form 5 reports were required to be filed by
them for the Company's 2004 fiscal year, the Company believes that all SEC
filing requirements were met, except that Robert H. Eastman, a Director of the
Company, did not timely file a Form 4 reporting the acquisition of 2,000 of the
Company's common shares in July 2004.
PROXY ITEM 1: ELECTION OF DIRECTORS
The Company's Board of Directors consists of nine members - three in the
class whose terms expire at the Annual Meeting, three in the class whose terms
expire in 2006 and three in the class whose terms expire in 2007. Harold A. Howe
was elected as a Director of the Company effective January 18, 2005 to fill the
vacancy created by the retirement of James L. Dailey on the same date. Mr. Howe
was recommended to the Nominating and Corporate Governance Committee by Jeffrey
E. Smith, President and Chief Executive Officer.
The Board of Directors has reviewed, considered and discussed each
Director's relationships, both direct and indirect, with the Company and its
subsidiaries and the compensation and other payments each Director has both,
directly or indirectly, received from or made to the Company and its
subsidiaries in order to determine whether such Director qualifies as
independent under Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock
Market ("Nasdaq"), and has determined that the Board has at least a majority of
independent Directors. The Board of Directors has determined that each of the
following Directors has no financial or personal ties, either directly or
indirectly, with the Company or its subsidiaries (other than compensation as a
Director of the Company and its subsidiaries, banking relationships in the
ordinary course of business with Ohio Valley Bank (the "Bank") and ownership of
common shares of the Company as described in this proxy statement) and thus
qualifies as an independent Director under Nasdaq Marketplace Rule 4200(a)(15):
Anna P. Barnitz, W. Lowell Call, Steven B. Chapman, Robert H. Eastman, Lannes C.
Williamson and Thomas E. Wiseman.
The Board of Directors proposes that each of the three nominees identified
below be re-elected for a new three-year term. Each nominee was recommended to
the Board of Directors by the Nominating and Corporate Governance Committee.
Each person elected as a Director at the Annual Meeting will hold office for a
term of three years and until his successor is duly elected and qualified or
until his earlier resignation, removal from office or death. The three nominees
for election as Directors receiving the greatest number of votes will be
elected. Common shares represented by properly executed and returned proxies
will be voted FOR the election of the Board of Directors' nominees unless
authority to vote for one or more nominees is withheld. Common shares as to
which the authority to vote is withheld will be counted for quorum purposes, but
will not be counted toward the election of Directors or toward the election of
the individual nominees specified on the proxy.
5
The following table gives certain information, as of February 28, 2005,
concerning each nominee for election as a Director of the Company. Unless
otherwise indicated, each individual has had the same principal occupation for
more than five years.
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN 2008
Position(s) Held with the Director
Company and Its Principal Director of the
Subsidiaries and of the Company
Name Age Principal Occupation(s) Bank Since Since
---- --- --------------------------- ---------- ------
W. Lowell Call 68 Retired; Vice President of 1986 1992
Bob Evans Farms, Inc.
(restaurant operator and food
products) from 1955 to 2001
Harold A. Howe 54 Self-employed (real estate 1998 2005
investments and rentals); and
President, Ohio Valley Financial
Services Agency, LLC
Brent A. Saunders 47 Attorney at Law, 2001 2003
Halliday, Sheets & Saunders
(Partner)
The Board of Directors recommends that shareholders vote FOR the election of the
above nominees.
While it is contemplated that all nominees will stand for election, if one
or more nominees at the time of the Annual Meeting should be unavailable or
unable to serve as a candidate for election as a Director, the individuals
designated as proxy holders reserve full discretion to vote the common shares
represented by the proxies they hold for the election of the remaining nominees
and for the election of any substitute nominee or nominees designated by the
Board of Directors. The Board of Directors knows of no reason why any of the
nominees named above will be unavailable or unable to serve if elected to the
Board.
6
The following table gives certain information concerning the current
Directors who will continue to serve after the Annual Meeting. Unless otherwise
indicated, each individual has had the same principal occupation for more than
five years.
DIRECTORS WITH TERMS EXPIRING IN 2006
Position(s) Held with the Director
Company and Its Principal Director of the
Subsidiaries and of the Company
Name Age Principal Occupation(s) Bank Since Since
---- --- --------------------------- ---------- ------
Anna P. Barnitz 42 Treasurer and Chief Financial 2001 2003
Officer, Bob's Market and
Greenhouses, Inc. (horticultural
products for wholesale distribution
and retail landscaping stores)
Lannes C. Williamson 60 President, L. Williamson 1997 2000
Pallets, Inc. (sawmill; pallet
manufacturing; and wood processing)
Thomas E. Wiseman 46 President, The Wiseman Agency, 1992 1992
Inc. (insurance and financial services)
DIRECTORS WITH TERMS EXPIRING IN 2007
Steven B. Chapman 58 Certified Public Accountant, 1999 2001
Chapman & Burris CPA's LLC
(Partner)
Robert H. Eastman 64 President of Ohio Valley 1986 1992
Supermarkets, Inc. (retail
grocery stores)
Jeffrey E. Smith 55 President and Chief Executive 1986 1992
Officer of the Company and
the Bank
There are no family relationships among any of the directors, nominees for
election as directors and executive officers of the Company.
7
Meetings of and Communications with the Board of Directors
The Board of Directors held a total of twelve (12) meetings during the 2004
fiscal year. Each incumbent Director attended 75% or more of the aggregate of
the total number of meetings held by the Board of Directors and the total number
of meetings held by all committees of the Board of Directors on which the
Director served, in each case during the Director's period of service in the
2004 fiscal year. In accordance with applicable Nasdaq Marketplace Rules, the
independent directors meet in executive session as appropriate matters for their
consideration arise.
The Company encourages all incumbent Directors and Director nominees to
attend each annual meeting of shareholders. All of the incumbent Directors and
Director nominees attended the Company's last annual meeting of shareholders
held on April 14, 2004.
The Company has an informal process by which shareholders may communicate
directly with Directors. Any communication to the Board may be mailed to Thomas
E. Wiseman, Lead Director, in care of Investor Relations at the Company's
headquarters, P.O. Box 240, Gallipolis, Ohio 45631. The mailing envelope should
contain a clear notation indicating that the enclosed letter is a
"Shareholder-Board Communication" or "Shareholder-Director Communication." There
is no screening process, and all shareholder communications that are received
for the Board's attention will be forwarded to all Directors. The Board may
consider the development of more specific communication procedures in the
future, including procedures whereby shareholders may communicate directly with
specific Directors.
Committees of the Board
The Board of Directors has four standing committees: the Audit Committee,
the Compensation and Management Succession Committee, the Executive Committee
and the Nominating and Corporate Governance Committee.
Audit Committee
---------------
The Audit Committee is comprised of Anna P. Barnitz, W. Lowell Call, Steven
B. Chapman (Chairman) and Lannes C. Williamson. The Board of Directors has
determined that each member of the Audit Committee qualifies as independent
under Nasdaq Marketplace Rules 4200(a)(15) and 4350(d)(2) as well as under Rule
10A-3 promulgated under the Exchange Act.
The Board of Directors believes that each member of the Audit Committee has
substantial financial experience and is highly qualified to discharge such
member's duties. Additionally, the Board of Directors has determined that Steven
B. Chapman qualifies as an "audit committee financial expert" for purposes of
Item 401(h) of SEC Regulation S-K based on his training and experience as a
Certified Public Accountant. The Board of Directors has determined that Mr.
Chapman is capable of (i) understanding accounting principles generally accepted
in the United States ("US GAAP") and financial statements, (ii) assessing the
general application of US GAAP in connection with the accounting for estimates,
accruals and reserves, (iii) analyzing and evaluating the Company's consolidated
financial statements, (iv) understanding internal control over financial
reporting, and (v) understanding audit committee functions.
8
The Audit Committee is organized and conducts its business pursuant to a
written charter adopted by the Board of Directors, which is attached to this
proxy statement as Appendix A. A current copy of the charter of the Audit
Committee is also posted on the "Investor Relations" page of the Company's
website at www.ovbc.com under "Charters." At least annually, the Audit Committee
reviews and reassesses the adequacy of its charter and recommends changes to the
full Board as necessary. The Audit Committee is responsible for:
o overseeing the accounting and financial reporting process of the Company
and audits of the Company's financial statements;
o monitoring the Company's financial reporting process and internal control
system;
o overseeing the certification process and other laws and regulations
impacting the Company's quarterly and annual financial statements and
related disclosure controls;
o reviewing and evaluating the audit efforts of the Company's independent
registered public accounting firm and the Company's internal auditing
department;
o providing an open avenue of communication among the Company's independent
registered public accounting firm, financial and senior management,
internal auditing department and the Board of Directors;
o appointing, compensating and overseeing the independent registered public
accounting firm employed by the Company for the purpose of preparing or
issuing an audit report or performing related work; and
o establishing procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters.
In addition, the Audit Committee reviews and pre-approves all audit and
permitted non-audit services provided by the Company's independent registered
public accounting firm and ensures that the registered public accounting firm is
not engaged to perform the specific non-audit services prohibited by law, rule
or regulation. The Audit Committee will also carry out such other
responsibilities as may be delegated to the Audit Committee by the full Board.
The Audit Committee held thirteen meetings during the 2004 fiscal year.
Compensation and Management Succession Committee
------------------------------------------------
The Compensation and Management Succession Committee is comprised of W.
Lowell Call, Robert H. Eastman and Thomas E. Wiseman (Chairman). The Board of
Directors has determined that each member of the Compensation and Management
Succession Committee qualifies as independent under Nasdaq Marketplace Rule
4200(a)(15). In addition, the Board of Directors has determined that each member
of the Compensation and Management Succession Committee qualifies as an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and as a "non-employee director" for purposes of Rule 16b-3 under
the Exchange Act.
The Compensation and Management Succession Committee is organized and
conducts its business pursuant to a written charter adopted by the Board of
Directors. A current copy of the charter of the Compensation and Management
Succession Committee is posted on the "Investor Relations" page of the Company's
website at www.ovbc.com under "Charters." The Compensation and Management
Succession Committee periodically reviews and reassesses the adequacy of its
charter and recommends changes to the full Board as necessary.
9
The purpose of the Compensation and Management Succession Committee is to
discharge the responsibilities of the Board of Directors relating to
compensation of the Company's Directors and executive officers and to prepare an
annual report on executive compensation for inclusion in the proxy statement for
the Company's annual meeting of shareholders. The Compensation and Management
Succession Committee will also carry out such other responsibilities as may be
delegated to it by the full Board.
The Compensation and Management Succession Committee is responsible for
reviewing and approving goals and objectives relevant to the compensation of the
Company's executive officers (including the Chief Executive Officer), evaluating
such executive officers' performance in light of those goals and objectives and
determining compensation based on that evaluation. The Compensation and
Management Succession Committee is also responsible for reviewing the Company's
incentive compensation programs and retirement plans, and recommending changes
to such programs and plans to the Board of Directors as necessary. The
Compensation and Management Succession Committee also reviews any severance or
other termination arrangements to be entered into with the Company's executive
officers. The Compensation and Management Succession Committee held seven
meetings during the 2004 fiscal year.
Executive Committee
-------------------
The Executive Committee is comprised of Steven B. Chapman, James L. Dailey
(member until January 18, 2005), Robert H. Eastman, Harold A. Howe (member since
January 18, 2005), Brent A. Saunders, Jeffrey E. Smith (Chairman) and Thomas E.
Wiseman. The Executive Committee is authorized to act in the intervals between
meetings of the Directors on matters delegated by the full Board. There were
five meetings of the Executive Committee during the 2004 fiscal year.
Nominating and Corporate Governance Committee
---------------------------------------------
The Nominating and Corporate Governance Committee consists of Steven B.
Chapman, Robert H. Eastman (Chairman) and Thomas E. Wiseman. The Board of
Directors has determined that each member of the Nominating and Corporate
Governance Committee qualifies as independent under Nasdaq Marketplace Rule
4200(a)(15). The purposes of the Nominating and Corporate Governance Committee
are to:
o identify qualified candidates for election, nomination or appointment to
the Board and recommend to the full Board a slate of Director nominees
for each annual meeting of the shareholders of the Company;
o make recommendations to the full Board regarding the Directors who shall
serve on committees of the Board; and
o undertake such other responsibilities as may be referred to the
Nominating and Corporate Governance Committee by the full Board.
The Nominating and Corporate Governance Committee is organized and conducts
its business pursuant to a written charter adopted by the Board of Directors. A
current copy of the charter of the Nominating and Corporate Governance Committee
is posted on the "Investor Relations" page of the Company's website at
www.ovbc.com under "Charters." The Nominating and Corporate Governance Committee
periodically reviews and reassesses the adequacy of its charter and recommends
changes to the full Board as necessary. The Nominating and Corporate Governance
Committee held five meetings during the 2004 fiscal year.
10
Nominating Procedures
As described above, the Company has a standing Nominating and Corporate
Governance Committee that has the responsibility to identify and recommend
individuals qualified to become Directors. The Nominating and Corporate
Governance Committee recommended the nominees for election as Directors at the
Annual Meeting. When considering potential candidates for the Board, the
Nominating and Corporate Governance Committee strives to assure that the
composition of the Board, as well as its practices and operation, contributes to
value creation and to the effective representation of the Company's
shareholders. The Nominating and Corporate Governance Committee may consider
those factors it deems appropriate in evaluating Director candidates including
experience, reputation and geographic location. Depending upon the current needs
of the Board, certain factors may be weighed more or less heavily by the
Nominating and Corporate Governance Committee. From time to time, the Nominating
and Corporate Governance Committee may deem it prudent to recruit individuals
with education and expertise in a specific discipline, such as accounting,
finance or law.
In considering candidates for the Board, the Nominating and Corporate
Governance Committee evaluates the entirety of each candidate's credentials and
does not have any specific minimum qualifications that must be met by a
Nominating and Corporate Governance Committee-recommended nominee. However, the
Nominating and Corporate Governance Committee does believe that all members of
the Board should have the highest character and integrity; a reputation for
working constructively with others; sufficient time to devote to Board matters;
and no conflict of interest that would interfere with performance as a Director.
Additionally, the Company is a highly-regulated institution and all Director
candidates are subject to the requirements of applicable federal and state
banking laws and regulations.
The Nominating and Corporate Governance Committee considers candidates for
the Board from any reasonable source, including recommendations from
shareholders and existing Directors. The Nominating and Corporate Governance
Committee does not evaluate candidates differently based on who has made the
recommendation. The Nominating and Corporate Governance Committee has the
authority to hire and pay a fee to consultants or search firms to assist in the
process of identifying and evaluating candidates. No such consultants or search
firms have been used to date and, accordingly, no fees have been paid to
consultants or search firms.
Shareholders may recommend Director candidates for consideration by the
Nominating and Corporate Governance Committee by writing to Robert H. Eastman,
the Chairman of the Nominating and Corporate Governance Committee, at the
Company's executive offices, P.O. Box 240, Gallipolis, Ohio 45631. The
recommendation should give the candidate's name, age, business address,
residence address, principal occupation or employment and number of common
shares beneficially owned. The recommendation should also describe the
qualifications, attributes, skills or other qualities of the recommended
Director candidate. A written statement from the candidate consenting to be
named as a Director candidate and, if nominated and elected, to serve as a
Director should accompany any such recommendation.
11
Shareholders who wish to nominate an individual for election as a Director
at an annual meeting of the shareholders of the Company must comply with the
Company's Code of Regulations regarding shareholder nominations. Shareholder
nominations must be made in writing and delivered or mailed to Robert H.
Eastman, the Chairman of the Nominating and Corporate Governance Committee, at
the Company's executive offices, P.O. Box 240, Gallipolis, Ohio 45631, not less
than 14 days nor more than 50 days prior to any meeting of shareholders called
for the election of Directors. However, if less than 21 days' notice of the
meeting is given to the shareholders, the nomination must be mailed or delivered
to the Chairman of the Nominating and Corporate Governance Committee not later
than the close of business on the seventh day following the day on which the
notice of the meeting was mailed to the shareholders. Each nomination must
contain the following information to the extent known by the nominating
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of common
shares of the Company that will be voted for each proposed nominee; (d) the name
and residence address of the nominating shareholder; (e) the number of common
shares of the Company beneficially owned by the nominating shareholder; and (f)
any other information required to be disclosed with respect to a nominee for
election as a Director under the proxy rules promulgated under the Exchange Act.
Nominations not made in accordance with the Company's Code of Regulations will
not be considered.
12
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Remuneration of Executive Officers
The following table shows, for the three fiscal years ended December 31,
2004, compensation paid by the Company for services in all capacities to Jeffrey
E. Smith, the President and Chief Executive Officer of the Company, and the four
other most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------------------------------------------------
Name and Principal Year Salary(1) Bonus(2) All Other Compensation
Position During 2004 ($) ($) ($)
Fiscal Year
--------------------------------------------------------------------------------
Jeffrey E. Smith 2004 $135,092 $98,903 $13,120 (3)
President and Chief 2003 131,559 89,352 12,283
Executive Officer of 2002 127,770 67,412 12,744
the Company and the Bank
E. Richard Mahan 2004 $69,279 $53,554 $7,355 (4)
Senior Vice President 2003 65,243 53,429 6,816
and Secretary of the 2002 62,360 48,989 7,126
Company; Executive
Vice President and
Secretary of the Bank
Larry E. Miller 2004 $67,790 $48,266 $7,202 (5)
Senior Vice President 2003 64,531 53,429 7,060
and Treasurer of the 2002 61,687 48,989 7,426
Company; Executive
Vice President and
Treasurer of the Bank
Katrinka V. Hart 2004 $68,468 $48,266 $6,955 (6)
Senior Vice President 2003 59,674 42,351 5,848
of the Company; 2002 57,347 42,519 6,415
Executive Vice President
and Risk Management Officer
of the Bank
Sue Ann Bostic 2004 $67,790 $48,266 $7,202 (7)
Vice President 2003 64,531 53,429 7,060
of the Company; 2002 61,687 48,989 7,426
Senior Vice President,
Administrative Services
Group of the Bank
(1) "Salary" for Mr. Smith during each of fiscal years 2004 and 2003
includes Director's fees in the amount of $4,200. Mr. Smith received
Director's fees in the amount of $3,600 during fiscal year 2002.
13
(2) "Bonus" for Mr. Smith includes Director's retainer of $15,350, $14,700
and $14,000 for fiscal 2004, 2003 and 2002, respectively.
(3) Includes $2,373 allocated to Mr. Smith pursuant to Company
contributions and reallocated forfeitures under the Ohio Valley Banc
Corp. Profit Sharing Plan (the "Profit Sharing Plan"); $2,094 allocated
to Mr. Smith pursuant to Company contributions and reallocated
forfeitures under the 401(k) plan which is provided for under the
Profit Sharing Plan (the "401(k) Plan"); $8,020 allocated to Mr. Smith
pursuant to Company contributions and reallocated forfeitures under the
ESOP; and $633 of imputed income for a life insurance policy on the
life of Mr. Smith, pursuant to the terms of the Company's group life
insurance contracts.
(4) Includes $1,312 allocated to Mr. Mahan pursuant to Company
contributions and reallocated forfeitures under the Profit Sharing
Plan; $1,158 allocated to Mr. Mahan pursuant to Company contributions
and reallocated forfeitures under the 401(k) Plan; $4,436 allocated to
Mr. Mahan pursuant to Company contributions and reallocated forfeitures
under the ESOP; and $449 of imputed income for a life insurance policy
on the life of Mr. Mahan, pursuant to the terms of the Company's group
life insurance contracts.
(5) Includes $1,350 allocated to Mr. Miller pursuant to Company
contributions and reallocated forfeitures under the Profit Sharing
Plan; $1,191 allocated to Mr. Miller pursuant to Company contributions
and reallocated forfeitures under the 401(k) Plan; $4,561 allocated to
Mr. Miller pursuant to Company contributions and reallocated
forfeitures under the ESOP; and $100 of imputed income for a life
insurance policy on the life of Mr. Miller, pursuant to the terms of
the Company's group life insurance contracts.
(6) Includes $1,300 allocated to Ms. Hart pursuant to Company contributions
and reallocated forfeitures under the Profit Sharing Plan; $1,147
allocated to Ms. Hart pursuant to Company contributions and reallocated
forfeitures under the 401(k) Plan; $4,392 allocated to Ms. Hart
pursuant to Company contributions and reallocated forfeitures under the
ESOP; and $116 of imputed income for a life insurance policy on the
life of Ms. Hart, pursuant to the terms of the Company's group life
insurance contracts.
(7) Includes $1,115 allocated to Mrs. Bostic pursuant to Company
contributions and reallocated forfeitures under the Profit Sharing
Plan; $985 allocated to Mrs. Bostic pursuant to Company contributions
and reallocated forfeitures under the 401(k) Plan; $3,763 allocated to
Mrs. Bostic pursuant to Company contributions and reallocated
forfeitures under the ESOP; and $510 of imputed income for a life
insurance policy on the life of Mrs. Bostic, pursuant to the terms of
the Company's group life insurance contracts.
Report of the Compensation and Management Succession Committee of the Board of
Directors on Executive Compensation
Philosophy. The compensation philosophy of the Company and the Bank is that
compensation of its executive officers and others should be directly linked to
corporate operating performance. To achieve this correlation, executive
compensation is heavily weighted toward bonuses paid on the basis of corporate
operating performance in both the short run and the long run. In years when the
Company has performed well, its officers have received greater compensation and
in less profitable years, the officers' pay has been negatively impacted to a
substantial degree. The cash compensation program for executive officers
consists of two elements: a base salary component and a bonus component.
14
Decision-Making Process. The executive officers of the Company receive
no compensation from the Company. Instead, they are paid by the Bank for
services rendered in their capacity as executive officers of the Bank.
In 1993, the Company adopted a comprehensive wage and salary administration
plan for the Company and the Bank to be used for all employees, including
executive officers. That plan consists of a number of components: a job grading
process for all jobs in the Company; a performance appraisal process; and a
total compensation benchmarking process to determine compensation market ranges
for all job grades. The components of this plan also apply to both executive
officers and non-executive officers. In 2001, a compensation market range was
developed by Crowe, Chizek and Company LLC ("Crowe Chizek") for all jobs of the
Company including that of Jeffrey E. Smith. These ranges are reviewed annually
using the Crowe Chizek Bank Compensation Survey Data.
Base Salary. The objectives of the base salary component of the cash
compensation plan is to maintain a consistently applied and comprehensively
administered system which evaluates and compensates both executive and
non-executive officers. This system seeks to recognize and reward individual
performance. In addition, the system periodically benchmarks jobs in the banking
and financial services industry to insure the Company's officers are compensated
competitively by job grade and pay range as compared to other financial services
companies similar in size to the Company. The Compensation and Management
Succession Committee evaluated the ability of Mr. Smith and the other executive
officers to achieve or exceed the expected requirements of their jobs based on
the following 10 specific criteria (the "Evaluation Criteria"): 1) job
knowledge-information, 2) priority setting, 3) delegation of duties, 4)
decisiveness, 5) creativity, 6) written & oral communication, 7) initiative &
adaptability, 8) teamwork & open-mindedness, 9) work efficiency &
follow-through, and 10) goal setting. The evaluation conducted by the
Compensation and Management Succession Committee assessed the executive
officers' performance in each of the 10 criteria on a range from 1, the lowest,
to 5, the highest, in increments of .25. These performance ratings and position
in the marketplace range generated a base salary for fiscal 2004 of $130,892,
$69,279, $67,790, $68,468 and $56,649 for Messrs. Smith, Mahan, Miller, Ms. Hart
and Mrs. Bostic, respectively.
Bonuses. The objectives of the bonus component of the Company's cash
compensation program are to: (i) motivate executive officers and other employees
and reward such persons for the accomplishment of both short-term and long-term
objectives of the Company and the Bank, (ii) reinforce a strong performance
orientation with differentiation and variability in individual awards based on
contribution to both annual and long-range business results and (iii) provide a
fully competitive compensation package which will attract, reward, and retain
individuals of the highest quality.
The aggregate bonus paid annually to officers, both executive and
non-executive, has two elements: a component based on progress toward long range
business objectives (the "Long Range Bonus") and a component based on annual
results (the "Annual Results Bonus"). The objective of these two components is
to provide an appropriate balance in emphasis between long term performance and
short term results. The aggregate amount of the Long Range Bonus available for
award to all officers (both executive and non-executive) of the Bank is
determined annually by the Board upon the recommendation of the Compensation and
15
Management Succession Committee. The portion of the aggregate Long Range Bonus
paid to each officer, including President Smith, is a function of the individual
officer's job performance using the Evaluation Criteria referenced above as
applied to a pre-determined bonus grid. Each officer is evaluated by his or her
immediate supervisor, except for the executive officers of the Company who are
evaluated by the Compensation and Management Succession Committee. The Long
Range Bonus paid for fiscal 2004 performance was $71,553, $51,554, $46,266,
$46,266 and $44,937 for Messrs. Smith, Mahan, Miller, Ms. Hart and Mrs. Bostic,
respectively.
The aggregate amount of and the specific goals for the Annual Results Bonus
are approved annually by the Board upon the recommendation of the Compensation
and Management Succession Committee. The specific goals established for the
Annual Results Bonus can consist of one or more specific targets such as:
efficiency ratio, return on assets, return on equity, earnings growth, and asset
quality. The specific goals targeted for fiscal 2004 were: earnings growth,
return on assets, return on equity, and asset quality. The Compensation and
Management Succession Committee met with Mr. Smith and the other executive
officers four (4) times during 2004 to review their individual performance as
well as the progress toward the accomplishment of these goals. The evaluation by
the Compensation and Management Succession Committee generated an Annual Results
Bonus in respect of fiscal 2004 performance of $12,000, $2,000, $2,000, $2,000
and $1,750 for Messrs. Smith, Mahan, Miller, Ms. Hart and Mrs. Bostic,
respectively.
Profit Sharing Retirement Plan. The Company sponsors a qualified Profit
Sharing Retirement Plan for all of its employees, including executive officers.
Each employee who is at least 21 years of age, has completed 1,000 hours and one
year of service to the Company and its subsidiaries, and is employed on the last
day of the plan year is qualified to participate in the Profit Sharing
Retirement Plan. In December 2004, the Board of Directors voted to contribute
$163,632 to the Profit Sharing Retirement Plan. Each participant received a pro
rata share of this contribution as well as a pro rata share of reallocated
forfeitures (such pro rata share, in each case, based upon such participant's
eligible compensation). The executive officers' share of the 2004 contribution
and reallocated forfeitures is reported in the Summary Compensation Table on
page 13.
401(k) Retirement Plan. The Company sponsors a qualified 401(k) Plan under
the Profit Sharing Retirement Plan. Participant qualifications are identical to
those of the Profit Sharing Retirement Plan. In cases where participants made
deferrals to the 401(k) plan, the Company contributed 25% of the first 4% of the
deferral amount, not to exceed 1% of plan compensation. The executive officers'
share of the 2004 contribution and reallocated forfeitures is reported in the
Summary Compensation Table on page 13.
ESOP. The Company sponsors the ESOP for all of its employees, including
executive officers. Participant qualifications are identical to those of the
Profit Sharing Retirement Plan. In December 2004, the Board of Directors voted
to contribute $327,265 to the ESOP. Each participant's share of contributions
and reallocated forfeitures is also identical to those of the Profit Sharing
Retirement Plan. The executive officers' share of the 2004 contributions and
reallocated forfeitures is reported in the Summary Compensation Table on page
13.
Executive Deferred Compensation Plan. The Company maintains a non-qualified
executive deferred compensation plan for all of the Company's executive
officers. Participants in the executive deferred compensation plan are subject
to the same terms and conditions as participants of the Director deferred
compensation plan, as detailed in "Compensation of Directors" on page 17. The
cost of providing benefits to the participants of the deferred compensation plan
will be offset by the earnings on the life insurance contracts.
16
Supplemental Executive Retirement Plan. The Company maintains a
non-qualified supplemental retirement plan (the "SERP") for certain of its
executive officers. Participation in the SERP is at the discretion of the Board
and is designed to supplement the retirement benefits of such participants.
Currently, James L. Dailey and Jeffrey E. Smith participate in the SERP. Under
the SERP, life insurance contracts were purchased by the Company in December
1996, based upon a formula determined by the Board of Directors for each
participant. The Company is the owner of the contracts. Generally the target
benefit is equal to 70% of a participant's final year's annual compensation at
age 65:
o less the participant's projected benefit under the Company's qualified
retirement plans and
o less the participant's projected Social Security benefit.
In the event of a participant's death while actively employed by the Company,
the participant's designated beneficiary will be entitled to the payment of such
benefits. The cost of providing the benefits will be offset by the earnings and
death benefits of the life insurance contracts.
The decision-making process and compensation philosophy of the Company and
the Bank were considered by the Compensation and Management Succession Committee
when determining 2004 compensation for Jeffrey E. Smith, President and Chief
Executive Officer, of the Company and the Bank. The Compensation and Management
Succession Committee believes that the compensation earned by Mr. Smith in 2004
was fair and reasonable when compared with executive compensation levels in the
banking industry as reported in the marketplace range developed. Mr. Smith's
compensation ranked in the middle one-third of the total compensation
marketplace range for his grade.
Submitted by:
Compensation and Management Succession Committee Members
Thomas E. Wiseman, Chairman
W. Lowell Call
Robert H. Eastman
Compensation of Directors
All of the Directors of the Company also serve as Directors of the Bank.
Members of the Board of Directors of the Company receive compensation for their
services rendered as Directors of the Bank, not the Company. In 2004, each
Director who was not an employee of the Company or any of its subsidiaries
received $550 per month for his or her service as a member of the Board of
Directors of the Bank. Directors who were employees of a subsidiary of the
Company received $350 per month in 2004 for their services. In addition, each
Director of the Bank received a retainer of $15,350 in 2004. The retainer was
pro-rated for time served for new Directors of the Bank.
Each non-employee Director who was a member of the Executive Committee of
the Bank received fees of $40,695 in 2004. This figure was pro-rated for time
served for new members. Executive Committee members who are employees of the
Bank receive no compensation for serving on the Executive Committee. The
Executive Committee of the Bank met fifty-one (51) times in 2004.
17
The Company maintains a life insurance policy for all Directors with a
death benefit of two times annual Director fees reduced by 35% at age 65 and 50%
at age 70. The life insurance policies terminate upon retirement.
In December 1996, life insurance contracts were purchased by the Company
for all Directors and certain officers. The Company is the owner of the
contracts. The purpose of these contracts was to replace a current group life
insurance program for executive officers, implement a deferred compensation plan
for Directors and executive officers, implement a Director retirement plan, and
implement a supplemental retirement plan for certain officers. Participants in
the deferred compensation plan, upon reaching age 70, are eligible to receive a
distribution of their contributions, plus accrued interest earned at a
permissible rate on reinvestment of the contributions. If a participant dies
before reaching age 70 and the participant qualifies, the distribution will be
made to the participant's designated beneficiary in an amount equal to what the
participant would have accumulated if the participant had reached age 70 and had
continued to make contributions to the plan. The cost of providing the benefits
to the participants will be offset by the earnings on the life insurance
contracts. Participants in the Director retirement plan, upon reaching age 70,
are eligible to receive 50% of the three (3) prior years' average total
Directors' compensation. The benefit is payable for 120 months for Directors
with 10 years of service or less. The benefit is payable for 240 months for
Directors with more than 10 years of service. If a Director dies during active
service, payment will be made to the Director's designated beneficiary in an
amount equal to what the Director would have received had the Director reached
age 70, except the benefit term will be reduced to 60 months. If the Director
dies during the payment of benefits, payment will be made to the Director's
designated beneficiary for the lesser of the remaining term or 60 additional
months. The cost of providing the benefits to the Directors will be offset by
the earnings on the life insurance contracts.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, through the Bank, has had and expects to have in the future
banking transactions in the ordinary course of the Bank's business with some of
the Directors, officers and principal shareholders of the Company and entities
with which they are associated. All loans and commitments to loan included in
such transactions were made on substantially the same terms, including interest
rates and collateral on loans and repayment terms, as those prevailing at the
time for comparable transactions with other persons and, in the opinion of the
management of the Company, each such loan and commitment to loan did not involve
more than a normal risk of uncollectibility or present other unfavorable
features. All of such loans comply with Regulation O of the federal banking
regulations. The aggregate amount of loans to officers and Directors of the
Company, entities in which such officers and Directors have an interest, and
affiliates and other associates of officers and Directors was $8,461,733 at
December 31, 2004. As of the date hereof, all of such loans were performing
loans.
Brent A. Saunders rendered legal services to the Company and its
subsidiaries during the Company's 2004 fiscal year and is expected to render
legal services to the Company and its subsidiaries during the Company's 2005
fiscal year.
18
AUDIT COMMITTEE MATTERS
Report of the Audit Committee of the Board of Directors for the Fiscal Year
Ended December 31, 2004
The Audit Committee has submitted the following report for inclusion in
this proxy statement:
Role of the Audit Committee, the Independent Registered Public Accounting Firm
and Management
--------------------------------------------------------------------------------
The Audit Committee consists of four Directors who qualify as independent
under Nasdaq Marketplace Rules 4200(a)(15) and 4350(d)(2) as well as under Rule
10A-3 promulgated under the Exchange Act. The Audit Committee operates under a
written charter adopted by the Board of Directors.
The Audit Committee appoints the Company's independent registered public
accounting firm and oversees the Company's financial and reporting processes on
behalf of the Board of Directors. Management is responsible for the Company's
consolidated financial statements and its accounting and financial reporting
processes, including the establishment and maintenance of an adequate system of
internal control over financial reporting. Management is also responsible for
preparing its report on the establishment and maintenance of, and assessment of
the effectiveness of, the Company's internal control over financial reporting.
Crowe Chizek and Company LLC ("Crowe Chizek"), the independent registered public
accounting firm employed by the Company for the 2004 fiscal year, is responsible
for auditing the Company's consolidated financial statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States)
and issuing its attestation report on management's assessment of the
effectiveness of the Company's internal control over financial reporting.
Review and Discussion with Management and the Independent Registered Public
Accounting Firm
--------------------------------------------------------------------------------
As part of its oversight responsibilities, the Audit Committee reviewed and
discussed with management the audited consolidated financial statements of the
Company for the year ended December 31, 2004, including a discussion of the
quality, and not just the acceptability, of the accounting principles applied,
the reasonableness of significant judgments and the clarity of disclosures in
the audited financial statements. The Audit Committee also discussed with
management and Crowe Chizek the adequacy and effectiveness of the Company's
internal control over financial reporting and related accounting and financial
controls. The Audit Committee also discussed with management and Crowe Chizek
the interim financial and other information contained in the Company's earnings
releases and SEC filings.
The Audit Committee discussed with Crowe Chizek the matters required by the
standards of the Public Company Accounting Oversight Board (United States),
including those described in Statement on Auditing Standards Nos. 61 and 90,
Communication with Audit Committees, and, with and without management present,
reviewed and discussed the results of Crowe Chizek's examination of the
Company's consolidated financial statements.
The Audit Committee also discussed with Crowe Chizek that firm's
independence from the Company and its management. The Audit Committee obtained
from Crowe Chizek a formal written statement, consistent with Independence
Standards Board Standard No. 1., Independence Discussions with Audit Committees,
describing all relationships between the Company and Crowe Chizek that might
bear on Crowe Chizek's independence. The Audit Committee discussed with Crowe
Chizek any relationships or services that might affect that firm's objectivity
and satisfied itself as to Crowe Chizek's independence.
19
Management's Representations and Audit Committee Recommendations
----------------------------------------------------------------
Management has represented to the Audit Committee that the Company's
audited consolidated financial statements for the year ended December 31, 2004
were prepared in accordance with accounting principles generally accepted in the
United States. The Audit Committee has reviewed and discussed with management
and Crowe Chizek the audited consolidated financial statements, and management's
report on the establishment and maintenance of, and assessments of the
effectiveness of, the Company's internal control over financial reporting. Based
on the reviews and discussions outlined above, the Audit Committee recommended
to the Board of Directors that the audited financial statements and management's
report on the establishment and maintenance of, and assessment of the
effectiveness of, the Company's internal control over financial reporting, be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004.
Submitted by:
Audit Committee Members
Steven B. Chapman, CPA; Chairman
Anna P. Barnitz
W. Lowell Call
Lannes C. Williamson
Pre-Approval of Services Performed by Independent Registered Public Accounting
Firm
Under applicable SEC rules, the Audit Committee is required to pre-approve
the audit and non-audit services performed by the independent registered public
accounting firm in order to assure that they do not impair that firm's
independence from the Company. The SEC's rules specify the types of non-audit
services that an independent registered public accouting firm may not provide to
its audit client and establish the Audit Committee's responsibility for
administration of the engagement of the independent registered public accounting
firm. Accordingly, the Audit Committee has adopted, and the Board of Directors
has ratified, an Audit and Non-Audit Services Pre-Approval Policy (the
"Pre-Approval Policy"), which sets forth the procedures and the conditions
pursuant to which services proposed to be performed by the Company's independent
registered public accounting firm may be pre-approved.
The purpose of the Pre-Approval Policy is to set forth the procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the independent registered public accounting firm to management.
Consistent with the SEC's rules, the Pre-Approval Policy provides two
different approaches to pre-approving services. Proposed services may either be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval") or require the specific pre-approval of
the Audit Committee ("specific pre-approval"). The combination of these two
approaches in the Pre-Approval Policy results in an effective and efficient
procedure to pre-approve services performed by the independent registered public
accounting firm. As set forth in the Pre-Approval Policy, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committee if it is to be provided by the independent registered
public accounting firm. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require specific pre-approval by the Audit
Committee.
20
The Audit Committee may delegate either type of pre-approval authority to
one or more of its members. The member to whom such authority is delegated must
report, for informational purposes only, any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
Appendices to the Pre-Approval Policy describe the services that have the
general pre-approval of the Audit Committee. The term of any general
pre-approval is 12 months from the date of pre-approval, unless the Audit
Committee considers a different period and states otherwise. The Audit Committee
will annually review and pre-approve the services that may be provided by the
independent registered public accounting firm without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add or subtract
to the list of general pre-approved services from time to time, based on
subsequent determinations.
All requests or applications for services to be provided by the independent
registered public accounting firm that do not require specific approval by the
Audit Committee will be submitted to the Company's internal auditor and must
include a detailed description of the services to be rendered. The internal
auditor will determine whether such services are included within the list of
services that have received the general pre-approval of the Audit Committee. The
Audit Committee will be informed on a timely basis of any such services rendered
by the independent registered public accounting firm.
Requests or applications to provide services that require specific approval
by the Audit Committee will be submitted to the Audit Committee by both the
independent registered public accounting firm and the internal auditor, and must
include a joint statement as to whether, in their view, the request or
application is consistent with the SEC's rules on auditor independence.
The Audit Committee has designated the internal auditor to monitor the
performance of all services provided by the independent registered public
accounting firm and to determine whether such services are in compliance with
the Pre-Approval Policy. The internal auditor will report to the Audit Committee
on a periodic basis on the results of this monitoring. Both the internal auditor
and management will immediately report to the chairman of the Audit Committee
any breach of the Pre-Approval Policy that comes to the attention of the
internal auditor or any member of management.
Services Rendered by Independent Registered Public Accounting Firm
In April 2004, the Audit Committee appointed the accounting firm of Crowe
Chizek to serve as independent registered public accounting firm of the Company
for the 2004 fiscal year. Fees billed for services rendered by Crowe Chizek for
each of the 2004 and 2003 fiscal years were:
21
A. Audit Fees
----------
2004 2003
Fees and Fees and
Service Expenses Expenses
------- -------- --------
Consolidated financial audit of $86,600 $114,310
the Company, including quarterly
reviews, review of Forms 10-Q and 10-K
Attestation of management reports on 2,000 3,200
internal controls under FDICIA
Sarbanes-Oxley testing of internal
controls 98,500 -0-
-------- --------
Total $187,100 $117,510
B. Audit-Related Fees
------------------
Audits of the Company sponsored benefit $13,085 $11,900
plans
Consultations with the Company's -0- 2,750
management as to the accounting or
disclosure treatment of transactions or
events and/or the actual or potential impact
of final or proposed rules, standards or
interpretations by the SEC, FASB, or other
regulatory or standard-setting bodies
Audit of required eligible mortgage loan 750 700
collateral pledged to the Federal Home Loan
Bank of Cincinnati.
Educational materials related to the 26,540 -0-
requirements of SEC rules or listing standards
promulgated pursuant to the Sarbanes-Oxley Act
of 2002
-------- --------
Total $40,375 $15,350
22
C. Tax Fees
--------
2004 2003
Fees and Fees and
Service Expenses Expenses
------- -------- --------
U.S. federal, state and local tax planning $6,540 $3,450
and advice
U.S. federal, state and local tax 12,900 7,850
compliance -------- --------
Total $19,440 $11,300
D. All Other Fees
--------------
There were no fees or expenses billed for Other Services rendered by Crowe
Chizek for either the 2004 and 2003 fiscal years.
All services rendered by Crowe Chizek during fiscal year 2004 were pre-approved
by the Audit Committee.
Notification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee expects to appoint a registered public accounting firm
in April 2005. Crowe Chizek has served as the Company's independent registered
public accounting firm since 1992. The Board of Directors expects
representatives of Crowe Chizek will be present at the Annual Meeting.
Representatives of Crowe Chizek will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
23
PERFORMANCE GRAPH
The following graph sets forth a comparison of five year cumulative total
returns among the Company's common shares (indicated "Ohio Valley Banc Corp." on
the Performance Graph), the S & P 500 Index (indicated "S & P 500" on the
Performance Graph), and SNL Securities SNL $500 Million-$1 Billion Bank
Asset-Size Index (indicated "SNL" on the Performance Graph) for the fiscal years
indicated. Information reflected on the graph assumes an investment of $100 on
December 31, 1999 in each of the common shares of the Company, the S & P 500
Index, and the SNL Index. Cumulative total return assumes reinvestment of
dividends. The SNL Index represents stock performance of one hundred thirteen
(113) of the nation's banks located throughout the United States with total
assets between $500 Million and $1 Billion as selected by SNL Securities of
Charlottesville, Virginia. The Company is included as one of the 113 banks in
the SNL Index.
TOTAL RETURN PERFORMANCE
OVBC, S&P 500 and SNL $500M-$1B Bank Index
1999-2004
Period Ending
----------------------------------------------------------
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------
OVBC $100 $ 77.13 $ 75.93 $ 66.62 $ 89.01 $112.68
S&P 500 $100 $ 91.20 $ 80.42 $ 62.64 $ 80.62 $ 89.47
SNL $500M-$1B $100 $ 95.72 $124.18 $158.54 $228.61 $259.07
[Insert Graph Here]
Source : SNL Financial LC, Charlottesville, VA (434) 977-1600
24
ANNUAL REPORT - FORM 10-K
The Company will provide without charge to any shareholder of record on
March 16, 2005, on the written request of any such shareholder, a copy of the
Company's Annual Report on Form 10-K, including financial statements and
schedules thereto, required to be filed under the Exchange Act for the Company's
fiscal year ended December 31, 2004. Such written request should be directed to
E. Richard Mahan, Secretary, Ohio Valley Banc Corp., P.O. Box 240, Gallipolis,
Ohio 45631, telephone number 1-800-468-6682 or 1-740-446-2631.
PROXY STATEMENT PROPOSALS
Each year, the Board of Directors submits its nominations for election of
Directors at the Annual Meeting of Shareholders. Other proposals may be
submitted by the Board of Directors or shareholders for inclusion in the proxy
materials for action at each year's annual meeting. Any proposal submitted by a
shareholder for inclusion in the proxy materials for the 2006 Annual Meeting,
presently scheduled for May 10, 2006, must be received by the Company on or
before November 23, 2005. A shareholder proposal received after November 23,
2005, but on or before February 6, 2006, will not be included in the proxy
materials for the 2006 Annual Meeting, but may still be presented by the
shareholder at the 2006 Annual Meeting. The individuals named as proxies for the
2006 Annual Meeting will be entitled to use their discretionary voting authority
on proposals received after February 6, 2006, without any discussion of the
matter in the Company's proxy materials.
Shareholders desiring to nominate candidates for election as directors at
the 2006 Annual Meeting must follow the procedures described in "ELECTION OF
DIRECTORS - Nominating Procedures."
REPORTS TO BE PRESENTED AT THE ANNUAL MEETING
There will be presented at the Annual Meeting the Company's Annual Report
for the year ended December 31, 2004, containing financial statements for such
year and the signed opinion of Crowe Chizek and Company LLC, independent
registered public accounting firm, with respect to such financial statements.
The Annual Report is not to be regarded as proxy soliciting material, and the
Company's management does not intend to ask, suggest or solicit any action from
the shareholders with respect to such Annual Report.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
Pursuant to notice delivered to eligible shareholders who share the same
address, the Company and a number of brokers send only one proxy statement and
the 2004 Annual Report to shareholders residing at the same address, unless
different instructions have been received from the affected shareholder.
Accordingly, those registered and beneficial shareholders who share an address
will receive only one copy of the 2004 Annual Report and this proxy statement. A
separate proxy will continue to be included for each shareholder at the shared
address.
Registered shareholders who share an address and would like to receive a
separate 2004 Annual Report and/or a separate proxy statement, or have questions
regarding the householding process, may contact Deborah A. Carhart, Assistant
Vice President, Shareholder Relations, by calling 1-800-468-6682 or
25
1-740-446-2631; or by a written request addressed to Ms. Carhart at The Ohio
Valley Bank Company, P.O. Box 240, Gallipolis, Ohio 45631; or by an e-mail to
InvestorRelations@ovbc.com. Promptly upon request, a separate 2004 Annual Report
and/or a separate proxy statement will be sent. By contacting Ms. Carhart,
registered shareholders sharing an address can also (i) notify the Company that
the registered shareholders wish to receive separate annual reports and proxy
statements in the future or (ii) request delivery of a single copy of annual
reports or proxy statements in the future if they are receiving multiple copies.
Beneficial shareholders should contact their broker/dealers, financial
institution, or other record holders for specific information on the
householding process as it applies to those beneficial shareholders.
OTHER MATTERS
The only business which the Company's management intends to present at the
Annual Meeting consists of the matters set forth in this proxy statement. The
Company's management knows of no other matters to be brought before the Annual
Meeting by any other person or group.
If any other matters should properly come before the Annual Meeting, the
proxy holders will vote thereon in their discretion.
All duly executed proxies received will be voted.
Please sign and date the enclosed proxy and mail it promptly in the
enclosed envelope. Polls will close promptly at 5:00 p.m. on the day of the
Annual Meeting, April 13, 2005.
BY ORDER OF THE BOARD OF DIRECTORS
[Insert Signature Here]
Jeffrey E. Smith
President and Chief Executive Officer
26
Appendix A
OHIO VALLEY BANC CORP.
AUDIT COMMITTEE CHARTER
PURPOSE
This Charter identifies the purpose, composition, meetings, authority, and other
responsibilities and duties of the Audit Committee (the "Committee") of the
Board of Directors (the "Board") of Ohio Valley Banc Corp. (the "Company"). The
Committee shall provide assistance to the corporate directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the
corporation, and the quality and integrity of the financial reports of the
corporation. The Audit Committee's primary duties and responsibilities are to:
o Oversee the accounting and financial reporting processes of the
Corporation and its subsidiaries and audit of the Corporation's
financial statements.
o Serve as independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
o To oversee the certification process and other laws and regulations
impacting the Corporation's quarterly and annual financial statements
and related disclosure controls.
o Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board.
COMPOSITION
The Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board would interfere with the exercise
of his or her independent judgment as a member of the Committee. All committee
members must satisfy the independence requirements of the Nasdaq Stock Market
and Section 10A of the Securities Exchange Act of 1934 and the rules promulgated
by the Securities and Exchange Commission thereunder. All members must be able
to read and understand fundamental financial statements, including the balance
sheet, income statement and cash flow statement. At least one member shall have
past employment experience in finance or accounting or other comparable
experience or background that results in the individual's financial
sophistication including being or having been a CEO or CFO. Committee members
may enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside consultant.
Based upon the recommendation of the Nominating Committee, the members of the
Committee shall be elected by the Board at the annual organizational meeting of
the Board and shall serve until the next organizational meeting or until their
successors shall be duly elected and qualified. Committee Chairman shall also be
elected by the full Board.
A-1
MEETINGS
The Committee shall meet at least four times annually or more frequently as
circumstances require. The Committee will meet in separate executive sessions
with management, the independent auditors and the internal auditors periodically
to discuss any matters that the Committee or one of these groups believes should
be discussed privately. The Committee may ask members of management or others to
attend meetings and provide pertinent information as necessary. Minutes of all
meetings of the Committee shall be submitted to the Board.
AUTHORITY
Independent Accountant
----------------------
o Responsible for the selection, evaluation, retention, or discharge of
the independent accountant.
o The independent accountant shall report directly to the Committee.
o Discuss the financial and/or MD & A with the independent accountant
before each 10Q and 10K is filed.
o Recommend to the Board whether the audited financial statements should
be contained in the Corporation's Annual Report on Form 10K.
o Oversee the work of the independent accountant, including the
resolution of disagreements between management and the independent
auditors.
o Review the performance of the independent accountant and consult with
the independent accountant outside the presence of management about
internal controls and the effectiveness thereof and the completeness
and accuracy of the Corporation's financial statements.
o Review the matters required to be discussed by Statement on Auditing
Standards No. 61 and an explanation from the independent accountant of
the factors to be considered by the independent accountant in
determining the audit scope.
o Pre-approve all audit and non-audit service fees paid to the
independent accountant.
o Confirm the independence of the independent accountant.
Internal Auditor
----------------
o Responsible for the appointment, engagement, performance and
replacement of outside vendors performing internal audit functions.
o Review with the internal auditor the responsibilities, qualifications,
and staffing of the internal audit department.
o Review with the internal auditor the annual audit plan and the process
used to develop the plan.
o Review with the internal auditor any deficiencies found in the internal
audit process and the action of management to correct any such
deficiencies.
o Review the internal auditor's assessment of the performance of the
independent accountant.
A-2
OTHER RESPONSIBILITIES AND DUTIES
Documents/Reports Review
------------------------
o Review and reassess the adequacy of the charter at least annually and
submit any proposed revisions to the Board for consideration and
approval.
o Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review
rendered by the independent accountants.
o Meet with the internal auditor, the independent accountant and
management in separate executive sessions at the Disclosure Committee
Meeting to discuss any matters the Committee or these groups believe
should be discussed privately with the Committee.
Ethical and Legal Compliance
----------------------------
o Review legal and regulatory matters that may have a material effect on
the Corporation's financial statements, compliance policies and
programs and reports from regulators.
o Establish procedures and require the Corporation to obtain or provide
the necessary resources and mechanisms for the receipts, retention and
treatment of complaints received by the Corporation regarding
accounting, internal accounting controls, or auditing matters, and the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
o Review the process for communicating the Corporation's Code of Conduct
and Ethics to company personnel and for monitoring compliance.
o Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be empowered
to retain independent counsel, accountants, or others to assist it in
carrying out its duties. The Corporation shall provide appropriate
funding, as determined solely by the Committee, for payment of
compensation to the independent auditors engaged for the purpose of
preparing or issuing an audit report or performing other audits review
or attest service for the Corporation, compensation to any other
advisors retained by the Committee and ordinary administrative expense
of the Committee that the Committee determines are necessary or
appropriate in carrying out its duties.
o Perform any other activities consistent with this Charter, the
Corporation's Code of Regulations and governing law, as the Committee
or the Board deems necessary or appropriate.
o Pre-approve all "related party transactions" as defined by Regulation
S-K, Item 404.
LIMITATION OF AUDIT COMMITTEE'S ROLE
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles and applicable
rules and regulations. This is the responsibility of management and the
independent auditor.
A-3
OHIO VALLEY BANC CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 13, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Ohio Valley Banc Corp. (the
"Company") hereby appoints Jeffrey E. Smith, Thomas E. Wiseman and E. Richard
Mahan, and each of them with full power of substitution to each, the true and
lawful attorneys and proxies of the undersigned to vote all of the common shares
of the Company which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of the Company, to be held at the Morris and Dorothy Haskins
Ariel Theatre, 426 Second Avenue, Gallipolis, Ohio, on Wednesday, April 13, 2005
at 5:00 p.m. Eastern Daylight Time, and at any adjournment(s) thereof, as
follows:
1. To elect the following three (3) Directors to the Board of Directors for a
term of three years each:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES.
Nominees:
W. Lowell Call
Harold A. Howe
Brent A. Saunders
[ ] Vote For All [ ] Withhold Authority to Vote For all Nominees [ ] Vote for
all except _________
2. In their discretion, the individuals designated to vote this proxy are
authorized to vote upon any other matter (none known at the time of
solicitation of this proxy) which properly comes before the Annual Meeting
or any adjournment thereof.
A majority of said attorneys and proxies, or substitutes, who shall be present
and shall act at the meeting (or if only one should be present and act, then
that one) shall have and exercise all the powers of said attorneys and proxies
hereunder.
UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN, THE COMMON SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE AS
DIRECTORS OF THE COMPANY. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT THEREOF OR IF A NOMINEE FOR ELECTION AS A
DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL
NOT SERVE, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE INDIVIDUALS DESIGNATED TO VOTE THIS PROXY, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S)
AS THE DIRECTORS MAY RECOMMEND.
(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)
OHIO VALLEY BANC CORP.
420 Third Avenue
P.O. Box 240
Gallipolis, Ohio 45631
No. of OVBC Shares:________
Acct No. ________
Please indicate any address change above.
Please fill in, sign, and return this proxy in the enclosed envelope. When
signing as Attorney, Executor, Administrator, Trustee, or Guardian, please give
full title as such. If signer is a corporation, please sign the full corporate
name by authorized officer. Joint Owners should sign individually.
------------------------------- ------------
Shareholder Signature Date
------------------------------- ------------
Shareholder Signature Date