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
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(as permitted by Rule 14a-6(e)(2))
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[ ] Definitive Additional Materials
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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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OHIO VALLEY BANC CORP.
P.O. Box 240
Gallipolis, Ohio 45631
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 10, 2006
5:00 p.m.
Gallipolis, Ohio
April 19, 2006
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 10th day of May, 2006, at 5:00 p.m., Eastern Daylight Savings
Time, for the following purposes:
1. To elect four 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 April 12, 2006 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
/s/Jeffrey E. Smith
-------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
OHIO VALLEY BANC CORP.
P.O. Box 240
Gallipolis, Ohio 45631
April 19, 2006
PROXY STATEMENT
This proxy statement and the accompanying proxy are first being mailed
on or about April 19, 2006 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, May 10, 2006, 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. If your common shares are held in the name of your broker/dealer,
financial institution or other holder of record and you wish to revoke your
proxy in person, you must bring an account statement or letter from the
broker/dealer, financial institution or other holder of record indicating how
many common shares you were the beneficial owner of on April 12, 2006, the
record date for voting. 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 April 12, 2006,
are entitled to receive notice of and to vote at the Annual Meeting and any
adjournment. As of March 31, 2006, 4,241,646 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 "WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES", or "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,
2005, including financial statements, is being delivered with this proxy
statement.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates, as of March 31, 2006, 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 330,335(2) 7.79%
Foundation, Inc.
1767 Chestnut Street
Bowling Green, KY 42101
(1) The percent of class is based upon 4,241,646 common shares outstanding as of
March 31, 2006.
(2) Based on information contained in a Schedule 13G filing with the Securities
and Exchange Commission (the "SEC"), dated February 3, 2006. Carol H. Wedge
and Paul D. Wedge, Jr. share voting and investment power over the 330,335
common shares owned by the Morris and Dorothy Haskins Foundation, Inc.
The following table furnishes information regarding the beneficial
ownership of common shares of the Company, as of March 31, 2006, for each
current Director, each nominee for election to the Board of Directors, each
executive officer named in the Summary Compensation Table and 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 1,319 (3) .04%
Sue Ann Bostic (4) 11,683 (5) .28%
W. Lowell Call 21,851 (6) .52%
Steven B. Chapman 1,627 (7) .04%
Robert E. Daniel 540 (8) .02%
Robert H. Eastman 82,699 (9) 1.95%
Katrinka V. Hart (4) 10,095 (10) .24%
Harold A. Howe 15,092 (11) .36%
E. Richard Mahan (4) 7,410 (12) .18%
Larry E. Miller, II (4) 8,721 (13) .21%
Brent A. Saunders 5,617 (14) .14%
Jeffrey E. Smith (4) 19,834 (15) .47%
Roger D. Williams 479 (16) .02%
Lannes C. Williamson 4,584 (17) .11%
Thomas E. Wiseman 14,971 (18) .36%
All Directors and executive
officers as a Group 245,798 (19) 5.80%
(26 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 4,241,646 common shares outstanding on
March 31, 2006.
(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 5,764 common shares held jointly by Mrs. Bostic and her spouse,
as to which she shares voting and investment power; 625 common shares held
by Mrs. Bostic as custodian for her grandchildren; and 5,294 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.
(7) Includes 1,517 common shares held jointly by Mr. Chapman and his spouse, as
to which he shares voting and investment power. The number shown also
includes 110 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 540 common shares held jointly by Mr. Daniel and his spouse, as to
which he shares voting and investment power.
(9) Includes 41,686 common shares held jointly by Mr. Eastman and his spouse,
as to which he shares voting and investment power.
(10) Includes 6,482 common shares held for the account of Ms. Hart in the ESOP.
(11) Includes 7,918 common shares held jointly by Mr. Howe and his spouse, as
to which he shares voting and investment power; 6,902 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 272 common shares held jointly by Mr. Howe and his children as to which
he shares voting and investment power.
(12) Includes 3,739 common shares held jointly by Mr. Mahan and his spouse, as
to which he shares voting and investment power; 174 common shares held by
Mr. Mahan as custodian for his nieces; and 3,497 common shares held for the
account of Mr. Mahan in the ESOP.
(13) Includes 3,771 common shares held jointly by Mr. Miller and his spouse, as
to which he shares voting and investment power; and 4,950 common shares
held for the account of Mr. Miller in the ESOP.
(14) Includes 2,244 common shares held jointly by Mr. Saunders and his spouse,
as to which he shares voting and investment power; 651 common shares held
by Mr. Saunders as custodian for the benefit of his children; 183 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 36 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.
(15) Includes 486 common shares held by Mr. Smith's spouse, as to which she has
sole voting and investment power; 272 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 13,795 common shares
held for the account of Mr. Smith in the ESOP.
(16) Represents common shares held by Mr. Williams' spouse, as to which she has
sole voting and investment power.
(17) Includes 21 common shares held by Mr. Williamson's spouse, as to which she
has sole voting and investment power; and 4,067 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.
(18) Includes 14,165 common shares held jointly by Mr. Wiseman and his spouse,
as to which he shares voting and investment power; and 806 common shares
held by Mr. Wiseman as custodian for the benefit of his children.
(19) See Notes (3) and (5) through (18) above.
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 2005 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 2005 fiscal year, the Company believes that all SEC
filing requirements were met.
PROXY ITEM 1: ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eleven members -
four in the class whose terms expire at the Annual Meeting, four in the class
whose terms expire in 2007 and three in the class whose terms expire in 2008.
Section 2.02(C) of the Company's Regulations provides that the Directors may
change the number of Directors and fill any vacancy created by an increase in
the number of Directors (provided that the Directors may not increase the number
of Directors to more than twelve or reduce the number of Directors to less than
five). On January 24, 2006, the Directors increased the number of Directors from
nine to eleven and, upon the recommendation of the Nominating and Corporate
Governance Committee, elected Robert E. Daniel and Roger D. Williams to fill the
newly-created vacancies. Mr. Williams was added to the class of Directors whose
terms will expire at the Annual Meeting and Mr. Daniel was added to the class of
Directors whose terms will expire in 2007. Messrs. Daniel and Williams have
served as Directors of Ohio Valley Bank (the "Bank") since 2005 and were
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 the Bank, ownership of securities issued by the
Company, 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 E. Daniel, Robert H. Eastman, Roger D. Williams, Lannes C.
Williamson and Thomas E. Wiseman.
The Board of Directors proposes that each of the four 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 four 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.
The following table gives certain information, as of March 31, 2006,
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 2009
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 43 Treasurer and Chief Financial 2001 2003
Officer, Bob's Market and
Greenhouses, Inc.
(horticultural products for
wholesale distribution and
retail landscaping stores)
Roger D. Williams 55 Executive Vice President of 2005 2006
Food Products Division, Bob
Evans Farms, Inc. (restaurant
operator and food products)
Lannes C. Williamson 61 President, L. Williamson 1997 2000
Pallets, Inc. (sawmill; pallet
manufacturing; and wood processing)
Thomas E. Wiseman 47 President, The Wiseman 1992 1992
Agency, Inc. (insurance and
financial services)
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.
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 2007
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
---- --- --------------------------- ---------- ------
Steven B. Chapman 59 Certified Public Accountant, 1999 2001
Chapman & Burris CPA's LLC
(Partner)
Robert E. Daniel 65 Administrator, Holzer Clinic 2005 2006
(multispecialty physician group
practice)
Robert H. Eastman 65 President of Ohio Valley 1986 1992
Supermarkets, Inc. (retail
grocery stores)
Jeffrey E. Smith 56 President and Chief Executive 1987 1992
Officer of the Company and
the Bank
DIRECTORS WITH TERMS EXPIRING IN 2008
W. Lowell Call 69 Retired; Vice President of Bob 1987 1992
Evans Farms, Inc. (restaurant
operator and food products) from
1955 to 2001
Harold A. Howe 55 Self-employed (real estate 1998 2005
investments and rentals); and
President, Ohio Valley Financial
Services Agency, LLC
Brent A. Saunders 48 Attorney at Law, 2001 2003
Halliday, Sheets & Saunders
(Partner)
There are no family relationships among any of the directors, nominees for
election as directors and executive officers of the Company.
Meetings of and Communications with the Board of Directors
The Board of Directors held a total of eleven (11) meetings during the 2005
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
2005 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 13, 2005.
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.
The Audit 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 Audit Committee is posted on the Company's website at www.ovbc.com under
"About Us" in the Ohio Valley Banc Corp. section. 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 2005 fiscal year.
The Report of the Audit Committee for the 2005 fiscal year begins on page 20.
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 Company's website at www.ovbc.com under
"About Us" in the Ohio Valley Banc Corp. section. The Compensation and
Management Succession Committee periodically reviews and reassesses the adequacy
of its charter and recommends changes to the full Board as necessary.
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 four meetings
during the 2005 fiscal year. The Report of the Compensation and Management
Succession Committee on executive compensation relating to the 2005 fiscal year
begins on page 15.
Executive Committee
-------------------
The Executive Committee is comprised of Steven B. Chapman, Robert H.
Eastman, Harold A. Howe, 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 2005 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 Company's website at www.ovbc.com under
"About Us" in the Ohio Valley Banc Corp. section. 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 four meetings during the 2005 fiscal
year.
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, contribute 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.
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.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Remuneration of Executive Officers
The following table shows, for the three fiscal years ended December 31,
2005, 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 2005 ($) ($) ($)
Fiscal Year
--------------------------------------------------------------------------------
Jeffrey E. Smith 2005 $146,664 $88,058 $13,458 (3)
President and Chief 2004 135,092 98,903 13,120
Executive Officer of 2003 131,559 89,352 12,283
the Company and the Bank
E. Richard Mahan 2005 $70,942 $52,150 $7,213 (4)
Senior Vice President 2004 69,279 53,554 7,355
and Secretary of the 2003 65,243 53,429 6,816
Company; Executive
Vice President and
Secretary of the Bank
Larry E. Miller 2005 $70,718 $51,667 $7,369 (5)
Senior Vice President 2004 67,790 48,266 7,202
and Treasurer of the 2003 64,531 53,429 7,060
Company; Executive
Vice President and
Treasurer of the Bank
Katrinka V. Hart 2005 $70,718 $51,667 $7,108 (6)
Senior Vice President 2004 68,468 48,266 6,955
of the Company; 2003 59,674 42,351 5,848
Executive Vice President
and Risk Management Officer
of the Bank
Sue Ann Bostic 2005 $58,717 $45,016 $6,271 (7)
Vice President 2004 56,649 46,687 6,373
of the Company; 2003 54,491 46,604 5,993
Senior Vice President,
Administrative Services
Group of the Bank
(1) "Salary" for Mr. Smith during each of fiscal years 2005, 2004 and 2003
includes Director's fees in the amount of $4,200.
(2) "Bonus" for Mr. Smith includes Director's retainer of $14,700, $15,350
and $14,700 for fiscal 2005, 2004 and 2003, respectively.
(3) Includes $2,327 allocated to Mr.Smith pursuant to Company contributions
and reallocated forfeitures under the Ohio Valley Banc Corp. Profit
Sharing Plan (the "Profit Sharing Plan"); $2,153 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"); $7,928 allocated to Mr. Smith pursuant to Company
contributions and reallocated forfeitures under the ESOP; and $1,050 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 $1,259 allocated to Mr.Mahan pursuant to Company contributions
and reallocated forfeitures under the Profit Sharing Plan; $1,165
allocated to Mr. Mahan pursuant to Company contributions and
reallocated forfeitures under the 401(k) Plan; $4,289 allocated to Mr.
Mahan pursuant to Company contributions and reallocated forfeitures
under the ESOP; and $500 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 $1,362 allocated to Mr. Miller pursuant to Company
contributions and reallocated forfeitures under the Profit Sharing
Plan; $1,260 allocated to Mr. Miller pursuant to Company contributions
and reallocated forfeitures under the 401(k) Plan; $4,640 allocated to
Mr. Miller pursuant to Company contributions and reallocated
forfeitures under the ESOP; and $107 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 $1,306 allocated to Ms. Hart pursuant to Company contributions
and reallocated forfeitures under the Profit Sharing Plan; $1,208
allocated to Ms. Hart pursuant to Company contributions and reallocated
forfeitures under the 401(k) Plan; $4,451 allocated to Ms. Hart
pursuant to Company contributions and reallocated forfeitures under the
ESOP; and $143 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 $1,072 allocated to Mrs. Bostic pursuant to Company
contributions and reallocated forfeitures under the Profit Sharing
Plan; $992 allocated to Mrs. Bostic pursuant to Company contributions
and reallocated forfeitures under the 401(k) Plan; $3,653 allocated to
Mrs. Bostic pursuant to Company contributions and reallocated
forfeitures under the ESOP; and $554 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.
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 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 objective 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 2005 of $142,464,
$70,942, $70,718, $70,718 and $58,717 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
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 2005 performance was $73,358, $52,150, $51,667,
$51,667 and $45,016 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 per share
growth, and asset quality. The specific goals targeted for fiscal 2005 were:
earnings per share 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 2005 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 the payment of no Annual Results Bonus in respect of fiscal
2005 performance for Messrs. Smith, Mahan, Miller, Ms. Hart and Mrs. Bostic,
respectively.
Compensation of President and Chief Executive Officer. The goals for
the Annual Results Bonus for Jeffrey E. Smith in fiscal 2005 consisted of a
specific percentage increase in earnings per share, a targeted return on assets,
a targeted return on equity, and an asset quality component measured by a
targeted ratio of non-performing assets to total assets. While the Company
exceeded the specific goals in earnings per share growth, return on assets, and
return on equity, the Company did not meet its targeted asset quality goal. The
Compensation and Management Succession Committee chose to award no annual
results bonus to Jeffrey E. Smith, President and Chief Executive Officer in
fiscal 2005.
The decision-making process and compensation philosophy of the Company
and the Bank were considered by the Compensation and Management Succession
Committee when determining 2005 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 2005 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.
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 2005, the Board of Directors voted to contribute
$172,066 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 2005 contribution
and reallocated forfeitures is reported in the Summary Compensation Table on
page 14.
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 2005 contribution and reallocated forfeitures
is reported in the Summary Compensation Table on page 14.
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 2005, the Board of Directors voted
to contribute $342,132 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 2005 contributions and
reallocated forfeitures is reported in the Summary Compensation Table on page
14.
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
18. The cost of providing benefits to the participants of the deferred
compensation plan will be offset by the earnings on the life insurance
contracts.
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, Jeffrey E. Smith is the only executive officer who participates 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.
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 2005, 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 2005 for their services. In addition, each
Director of the Bank received an annual retainer of $14,700 in 2005. The
retainer was pro-rated for time served for new Directors of the Bank.
In January 2005, the Board of Directors, upon recommendation of the
Nominating and Corporate Governance Committee, established the position of Lead
Director. The Lead Director's responsibilities are to chair Board and committee
meetings in the absence of the Chief Executive Officer as well as chair the
monthly meetings of the independent Directors. Thomas E. Wiseman has served as
Lead Director since the position's establishment. In addition to the fees
outlined above, Mr. Wiseman received $6,200 for his services as Lead Director in
fiscal 2005.
Each non-employee Director who was a member of the Executive Committee
of the Bank (Steven B. Chapman, Robert H. Eastman, Harold A. Howe, Brent A.
Saunders and Thomas E. Wiseman) received fees of $40,695 in 2005. This figure
was pro-rated for time served for new members. Executive Committee
members who are employees of the Bank (Jeffrey E. Smith, Chairman) receive no
compensation for serving on the Executive Committee. The Executive Committee of
the Bank met forty-eight (48) times in 2005.
The Company maintains a life insurance policy for all Directors with a
death benefit of two times annual Director fees at time of death 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 Company believes that 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.
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
$14,086,464 at December 31, 2005. 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 2005 fiscal year and is expected to render
legal services to the Company and its subsidiaries during the Company's 2006
fiscal year.
Compensation Committee Interlocks and Insider Participation
From time to time, the Company accepts loans from various persons to
raise capital for ongoing operations and to fund the growth of the Company and
its subsidiaries. These loans are evidenced by promissory notes which are sold
by the Company in private placements to accredited investors without
registration under the Securities Act of 1933, as amended. In December 2003, the
Company issued a note to Robert H. Eastman, a Director of the Company and a
member of the Compensation and Management Succession Committee, and his spouse
in the aggregate principal amount of $1,000,000. The principal amount of the
note was repaid in full upon its maturity in June 2005 together with interest.
In March 2004, the Company issued two separate notes to Mr. Eastman and his wife
in the aggregate principal amount of approximately $1,290,850. The principal
amount of these notes was repaid in full upon their maturity in September 2005
together with interest.
In December 2003, the Company issued a note to The Wiseman Agency, Inc.
(the "Wiseman Agency") in the principal amount of $577,000. Thomas E. Wiseman, a
Director of the Company and a member of the Compensation and Management
Succession Committee, is the President of The Wiseman Agency. Mr. Wiseman and
members of his immediate family own The Wiseman Agency. The principal amount of
the note was repaid in full upon its maturity in January 2005 together with
interest. From January 2005 to September 2005, the Company issued eleven
separate notes to the Wiseman Agency in various amounts ranging from $577,000 to
$1,100,000. The maximum amount of any individual note or combination of notes
did not exceed $1,100,000 in fiscal 2005. Each of the notes was repaid upon its
maturity with interest.
During the 2005 fiscal year, the Bank made payments to The Wiseman
Agency, an independent insurance agency, totaling $99,000. Thomas E. Wiseman, a
Director of the Company and the Bank, is President of The Wiseman Agency. Mr.
Wiseman and members of his immediate family own The Wiseman Agency. The payments
made by the Bank to The Wiseman Agency were insurance policy premiums payable by
the Bank to one of its insurers under the terms of the Bank's insurance policies
with the insurance company. The Wiseman Agency, as part of its normal course of
business, collected these premiums from the Bank on behalf of the insurance
company for remittance to the insurance company. The Wiseman Agency retained a
portion of the payments made by the Bank as commissions owed to The Wiseman
Agency by the insurance company.
AUDIT COMMITTEE MATTERS
Report of the Audit Committee of the Board of Directors for the Fiscal Year
Ended December 31, 2005
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
2005 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, 2005, 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.
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, 2005
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, 2005.
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.
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 June 2005, the Audit Committee appointed the accounting firm of
Crowe Chizek to serve as independent registered public accounting firm of the
Company for the 2005 fiscal year. All of the services rendered by Crowe Chizek
to the Company during the 2005 and 2004 fiscal years were pre-approved by the
Audit Committee. Fees billed for services rendered by Crowe Chizek for each of
the 2005 and 2004 fiscal years were:
A. Audit Fees
----------
2005 2004
Fees and Fees and
Service Expenses Expenses
------- -------- --------
Consolidated financial audit of $102,500 $86,600
the Company, including quarterly
reviews, review of Forms 10-Q and 10-K
Attestation of management reports on -0- 2,000
internal controls under FDICIA
Sarbanes-Oxley testing of internal
controls 82,000 98,500
-------- --------
Total $184,500 $187,100
B. Audit-Related Fees
------------------
2005 2004
Fees and Fees and
Service Expenses Expenses
------- -------- --------
Audits of the Company sponsored benefit $16,875 $13,085
plans
Audit of required eligible mortgage loan 750 750
collateral pledged to the Federal Home Loan
Bank of Cincinnati
Educational materials related to the 2,500 26,540
requirements of SEC rules or listing
standards promulgated pursuant to the
Sarbanes-Oxley Act of 2002, including
database software license
-------- --------
Total $20,125 $40,375
C. Tax Fees
--------
U.S. federal, state and local tax planning $1,725 $6,540
and advice
U.S. federal, state and local tax 10,450 12,900
compliance -------- --------
Total $12,175 $19,440
D. All Other Fees
--------------
For the 2005 fiscal year, Crowe Chizek provided services totaling $3,560
related to educational training of members of the Job Evaluation Committee and
services totaling $5,000 related to providing summarized statistical industry
survey data of salary and wage information. There were no other fees billed by
Crowe Chizek for the 2004 fiscal year.
Notification of Appointment of Independent Registered Public Accounting Firm
While the Company is not currently considering the appointment of any
independent registered public accounting firm other than Crowe Chizek, the Audit
Committee has not yet appointed an independent registered public accounting firm
for the 2006 fiscal year. The Audit Committee intends to appoint an independent
registered public accounting firm as soon as practicable. 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.
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, 2000 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 fourteen
(114) 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 114 banks in
the SNL Index.
TOTAL RETURN PERFORMANCE
OVBC, S&P 500 and SNL $500M-$1B Bank Index
2000-2005
Period Ending
----------------------------------------------------------
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-------- -------- -------- -------- -------- --------
OVBC $100 $ 98.44 $ 86.37 $115.41 $146.09 $143.87
S&P 500 $100 $ 88.11 $ 68.64 $ 88.33 $ 97.94 $102.74
SNL $500M-$1B $100 $129.74 $165.63 $238.84 $270.66 $282.26
[Insert Graph Here]
ANNUAL REPORT - FORM 10-K
The Company will provide without charge to any shareholder of record on
April 12, 2006, 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, 2005. 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 2007 Annual Meeting,
presently scheduled for May 9, 2007, must be received by the Company on or
before December 20, 2006. A shareholder proposal received after December 20,
2006, but on or before March 5, 2007, will not be included in the proxy
materials for the 2007 Annual Meeting, but may still be presented by the
shareholder at the 2007 Annual Meeting. The individuals named as proxies for the
2007 Annual Meeting will be entitled to use their discretionary voting authority
on proposals received after March 5, 2007, without any discussion of the matter
in the Company's proxy materials.
Shareholders desiring to nominate candidates for election as directors
at the 2007 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, 2005, 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 2005 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 2005 Annual Report and this proxy statement. A
separate proxy and Notice of Annual Meeting 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 2005 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
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 2005 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, May 10, 2006.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Jeffrey E. Smith
-------------------------------------
Jeffrey E. Smith
President and Chief Executive Officer
OHIO VALLEY BANC CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 10, 2006
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, May 10, 2006
at 5:00 p.m. Eastern Daylight Time, and at any adjournment(s) thereof, as
follows:
1. To elect the following four (4) 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:
Anna P. Barnitz
Roger D. Williams
Lannes C. Williamson
Thomas E. Wiseman
[ ] 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