Ohio Valley Banc Corp. Reports 3rd Quarter Earnings

Updated 3 weeks ago Edited from a Press Release

GALLIPOLIS, Ohio—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.

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