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Ohio Valley Banc Corp. Reports 3rd Quarter Earnings

GALLIPOLIS, Ohio, Oct. 26, 2017 /PRNewswire/ -- Ohio Valley Banc Corp. (Nasdaq: OVBC) (the "Company") reported consolidated net income for the quarter ended September 30, 2017, of $1,653,000, an increase from the $358,000 earned for the third quarter of 2016. Earnings per share for the third quarter of 2017 were $.35 compared to $.08 for the prior year third quarter. For the nine months ended September 30, 2017, net income totaled $6,611,000, a 35.0 percent increase from net income of $4,896,000 for the nine months ended September 30, 2016. Earnings per share were $1.41 for the first nine months of 2017 versus $1.15 for the first nine months of 2016. Return on average assets and return on average equity were .87 percent and 8.24 percent, respectively, for the nine months ended September 30, 2017, compared to .74 percent and 6.85 percent, respectively, for the same period in the prior year.

"August 5th marked the one year anniversary of our merger with The Milton Banking Company," commented Thomas E. Wiseman, president and CEO. "Throughout today's earnings announcement you will note the benefits of this strategic alliance; from increased lending relationships to a wider branch network of convenient locations. This is an exciting time as these two companies, both deeply rooted in our shared belief to put Community First, move forward as one fully integrated community bank."

For the third quarter of 2017, net interest income increased $1,283,000, and for the nine months ended September 30, 2017, net interest income increased $4,913,000 from the same respective periods last year. Positively impacting net interest income was the growth in earning assets. For the nine months ended September 30, 2017, average earning assets increased $120 million from the same period the prior year. The growth in average earning assets was attributable to average loans, which increased $130 million. In addition to positive loan growth from existing markets, the growth in loans was supplemented from recent expansion initiatives. During the third quarter of 2016, the Company acquired Milton Bancorp, Inc. ("Milton"), which contributed $106 million to the growth in loans. Furthermore, the Company opened a loan production office in Athens, Ohio in late 2015. Average loans for the Athens location increased $13 million for the first nine months of 2017, as compared to the same period last year. Adding to the contribution from the growth in earning assets was the increase in the strong net interest margin, or profit margin on earning assets. For the nine months ended September 30, 2017, the net interest margin was 4.50 percent, compared to 4.34 percent for the same period the prior year. The improvement in net interest margin was related to the general increase in interest rates and to higher loan balances relative to total earning assets.

For the three months ended September 30, 2017, the provision for loan losses totaled $1,601,000, a decrease of $107,000, and for the nine months ended September 30, 2017, the provision for loan losses totaled $1,921,000, a decrease of $407,000, from the same respective periods in 2016. The provision for loan loss expense incurred for the three months ended September 30, 2017 was primarily related to net charge-offs of $1,241,000 and to an increase in specific reserves on collateral dependent impaired loans of $142,000. For the nine months ended September 30, 2017, the provision for loan loss expense incurred was related to net charge-offs of $2,308,000, which was partially offset by a net decrease in the sum of specific reserves on collateral dependent impaired loans and general reserves for various loan portfolio risks. The ratio of nonperforming loans to total loans was 1.19 percent at September 30, 2017, compared to 1.26 percent at December 31, 2016 and 1.31 percent at September 30, 2016. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at September 30, 2017 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was .94 percent of total loans at September 30, 2017, compared to 1.05 percent at December 31, 2016 and 1.04 percent at September 30, 2016.

For the three months ended September 30, 2017, noninterest income totaled $2,282,000, compared to $1,693,000 for the same period last year, an increase of $589,000. Noninterest income totaled $7,507,000 for the nine months ended September 30, 2017, as compared to $6,789,000 for the same period last year, an increase of $718,000. The increase in noninterest income was related to the higher deposit base associated with the Milton acquisition. For the nine months ended September 30, 2017, interchange income earned from debit and credit transactions increased $642,000 and service charges on deposit accounts increased $161,000, respectively, from the same period last year. In conjunction with various benefit plans for directors and key employees, the Company maintains an investment in bank owned life insurance. During the third quarter, income from bank owned life insurance increased $402,000 in relation to the receipt of life insurance proceeds of $399,000. Partially offsetting the increases above was tax refund processing fees. For the first nine months of 2017, tax refund processing fees totaled $1,667,000, a decrease of $370,000 from the same period the prior year. The decrease was related to the lower per item fee received by the Company under the contract with the third-party tax refund product provider. For the first nine months of 2017, all other noninterest income sources decreased $121,000 from the same period a year ago, led by losses on foreclosed properties.

For the three months ended September 30, 2017, noninterest expense totaled $9,222,000, an increase of $394,000 from the same period last year. For the nine months ended September 30, 2017, noninterest expense totaled $28,473,000, an increase of $3,903,000, or 15.9 percent, from the same period last year. Generally, the acquisition of Milton during the third quarter of 2016 contributed to an increase in most noninterest expense categories, related to having a larger organization after the merger. However, for the nine months ended September 30 2017, merger related expenses decreased $744,000 from the same time period last year. The Company's largest noninterest expense, salaries and employee benefits, decreased $13,000 as compared to the third quarter of 2016 and increased $1,398,000 as compared to the first nine months of 2016. Contributing to the decrease for the third quarter was a one-time $316,000 reduction in non-qualified defined benefit expenses associated with the restructuring of and accounting for post-retirement benefits for a former employee. The year-to-date increase was primarily related to adding Milton employees, annual merit increases, and higher health insurance expense. Also adding to higher noninterest expense was fraud expense. During the second quarter of 2017, management discovered four fraudulent wire transfers associated with a single account relationship totaling $933,000. As of September 30, 2017, management was able to recover $103,000, resulting in a net expense of $830,000. Subsequently, it has been determined that insurance coverage will cover $730,000 of the fraudulent expense, which will be reflected as a recovery in the fourth quarter. Furthermore, a determination of whether or not the company's captive insurance subsidiary will cover all or part of any residual loss is still pending. The remaining noninterest expenses increased $2,419,000 for the first nine months of 2017, as compared to the same period last year, led by data processing, professional fees, and foreclosure expense.

The Company's total assets at September 30, 2017 were $1.020 billion, an increase of $65 million, or 6.8 percent, from December 31, 2016. The increase in assets was related to growth in loans of $43 million and investment securities totaling $10 million. The growth in assets was funded predominately by an increase in deposits of $59 million. At September 30, 2017, total shareholders' equity totaled $110 million, an increase of $5.4 million, or 5.2 percent, from the prior year end.

Ohio Valley Banc Corp. common stock is traded on the NASDAQ Global Market under the symbol OVBC. The holding company owns Ohio Valley Bank, with 19 offices in Ohio and West Virginia, and Loan Central, with six consumer finance offices in Ohio. Learn more about Ohio Valley Banc Corp. at www.ovbc.com.

Caution Regarding Forward-Looking Information

Certain statements contained in this earnings release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "anticipates," "expects," "appears," "intends," "targeted" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying those statements. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including: (i) changes in political, economic or other factors, such as inflation rates, recessionary or expansive trends, taxes, the effects of implementation of federal legislation with respect to taxes and government spending and the continuing economic uncertainty in various parts of the world; (ii) competitive pressures; (iii) fluctuations in interest rates; (iv) the level of defaults and prepayment on loans made by the Company; (v) unanticipated litigation, claims, or assessments; (vi) fluctuations in the cost of obtaining funds to make loans; and (vii) regulatory changes. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events. See Item 1.A. "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for further discussion of the risks affecting the business of the Company and the value of an investment in its shares. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition of Milton as additional information relative to closing date fair values become available.

OHIO VALLEY BANC CORP - Financial Highlights (Unaudited)


















Three months ended


Nine months ended




September 30,


September 30,




2017


2016


2017


2016

PER SHARE DATA










Earnings per share



$ 0.35


$ 0.08


$ 1.41


$ 1.15

Dividends per share



$ 0.21


$ 0.19


$ 0.63


$ 0.61

Book value per share



$ 23.43


$ 22.67


$ 23.43


$ 22.67

Dividend payout ratio (a)



59.49%


242.95%


44.57%


53.19%

Weighted average shares outstanding

4,688,284


4,466,601


4,680,846


4,246,311











DIVIDEND REINVESTMENT (in 000's)








Dividends reinvested under










employee stock ownership plan (b)


$ -


$ -


$ 188


$ 181

Dividends reinvested under










dividend reinvestment plan (c)



$ 370


$ 427


$ 1,167


$ 1,248











PERFORMANCE RATIOS










Return on average equity



6.01%


1.40%


8.24%


6.85%

Return on average assets



0.66%


0.16%


0.87%


0.74%

Net interest margin (d)



4.52%


4.29%


4.50%


4.34%

Efficiency ratio (e)



72.33%


81.47%


72.46%


73.21%

Average earning assets (in 000's)



$ 918,443


$ 848,525


$ 944,842


$ 824,932











(a) Total dividends paid as a percentage of net income.







(b) Shares purchased from OVBC.










(c) Shares may be purchased from OVBC and on secondary market.






(d) Fully tax-equivalent net interest income as a percentage of average earning assets.




(e) Noninterest expense as a percentage of fully tax-equivalent net interest income plus noninterest income.












OHIO VALLEY BANC CORP - Consolidated Statements of Income (Unaudited)






Three months ended


Nine months ended

(in $000's)



September 30,


September 30,




2017


2016


2017


2016

Interest income:










Interest and fees on loans



$ 10,489


$ 9,085


$ 31,410


$ 26,147

Interest and dividends on securities


828


739


2,634


2,360

Total interest income



11,317


9,824


34,044


28,507

Interest expense:










Deposits



757


597


1,985


1,605

Borrowings



292


242


855


611

Total interest expense



1,049


839


2,840


2,216

Net interest income



10,268


8,985


31,204


26,291

Provision for loan losses



1,601


1,708


1,921


2,328

Noninterest income:










Service charges on deposit accounts

541


575


1,575


1,414

Trust fees



64


58


177


174

Income from bank owned life insurance and








annuity assets



577


175


981


575

Mortgage banking income



59


44


164


162

Electronic refund check / deposit fees

0


13


1,667


2,037

Debit / credit card interchange income

863


653


2,506


1,864

Gain (loss) on other real estate owned

(23)


(8)


(94)


0

Other



201


183


531


563

Total noninterest income



2,282


1,693


7,507


6,789

Noninterest expense:










Salaries and employee benefits



5,019


5,032


15,528


14,130

Occupancy



449


466


1,331


1,300

Furniture and equipment



269


285


787


671

Professional fees



434


342


1,338


1,020

Marketing expense



273


249


785


744

FDIC insurance



99


81


366


378

Data processing



564


380


1,652


1,069

Software



365


368


1,102


962

Foreclosed assets



158


61


425


247

Amortization of intangibles



38


0


120


0

Merger related expenses



6


416


33


777

Other



1,548


1,148


5,006


3,272

Total noninterest expense



9,222


8,828


28,473


24,570

Income before income taxes



1,727


142


8,317


6,182

Income taxes



74


(216)


1,706


1,286

NET INCOME



$ 1,653


$ 358


$ 6,611


$ 4,896




OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)













(in $000's, except share data)







September 30,


December 31,








2017


2016

ASSETS










Cash and noninterest-bearing deposits with banks





$ 11,610


$ 12,512

Interest-bearing deposits with banks






38,792


27,654

Total cash and cash equivalents







50,402


40,166

Certificates of deposit in financial institutions





1,820


1,670

Securities available for sale







106,545


96,490

Securities held to maturity (estimated fair value: 2017 - $18,822; 2016 - $19,171)


18,168


18,665

Restricted investments in bank stocks






7,506


7,506

Total loans







777,957


734,901

Less: Allowance for loan losses







(7,313)


(7,699)

Net loans







770,644


727,202

Premises and equipment, net







13,205


12,783

Other real estate owned







2,219


2,129

Accrued interest receivable







2,532


2,315

Goodwill







7,371


7,801

Other intangible assets, net







550


670

Bank owned life insurance and annuity assets





26,576


29,349

Other assets







12,076


7,894

Total assets







$ 1,019,614


$ 954,640











LIABILITIES










Noninterest-bearing deposits







$ 233,178


$ 209,576

Interest-bearing deposits







616,003


580,876

Total deposits







849,181


790,452

Other borrowed funds







36,775


37,085

Subordinated debentures







8,500


8,500

Accrued liabilities







15,196


14,075

Total liabilities







909,652


850,112











SHAREHOLDERS' EQUITY










Common stock ($1.00 stated value per share, 10,000,000 shares authorized;





2017 - 5,352,005 shares issued; 2016 - 5,325,504 shares issued)



5,352


5,326

Additional paid-in capital







47,552


46,788

Retained earnings







72,781


69,117

Accumulated other comprehensive loss





(11)


(991)

Treasury stock, at cost (659,739 shares)





(15,712)


(15,712)

Total shareholders' equity







109,962


104,528

Total liabilities and shareholders' equity





$ 1,019,614


$ 954,640

Contact: Scott Shockey, CFO (740) 446-2631

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SOURCE Ohio Valley Banc Corp.