Ohio Valley Banc Corp. reports 2nd quarter earnings


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GALLIPOLIS, Ohio — Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter ended June 30, 2019, of $3,079,000, an increase of 3.5 percent from the $2,976,000 earned for the second quarter of 2018. Earnings per share for the second quarter of 2019 were $.65 compared to $.63 for the prior year second quarter. For the six months ended June 30, 2019, net income totaled $4,272,000, a decrease of $2,070,000 from the same period the prior year. Earnings per share were $.90 for the first six months of 2019 versus $1.34 for the first six months of 2018. Return on average assets and return on average equity were .83 percent and 7.20 percent, respectively, for the first half of 2019, compared to 1.16 percent and 11.53 percent, respectively, for the same period in the prior year.

Ohio Valley Banc Corp. CEO Tom Wiseman said, “While earnings increased over the prior quarter demonstrating a positive trend for your company, in the interest of true and complete transparency, we will discuss here the event that resulted in the decrease when comparing the first half of 2019 to the first half of 2018 and the shift in expense control that kept this impact to a minimum. We work to continue our community first mission and the positive impact it has had on the rural areas we serve and call home. Expense control, maximizing efficiencies, seizing opportunities to acquire other banks, and growing existing product and service lines will be key strategies as we end 2019 and plan for 2020.”

For the second quarter of 2019, net interest income increased $13,000, and for the six months ended June 30, 2019, net interest income decreased $110,000 from the same respective periods last year. Impacting net interest income was the decrease in average earning assets due to not processing tax refunds in 2019. As previously disclosed, a third-party tax refund product provider elected to terminate the Bank’s processing contract early. During the first half of 2018, the processing of tax refunds provided $101 million in average deposits that were invested in the Federal Reserve. This activity generated approximately $234,000 in interest revenue during the second quarter of 2018 and $803,000 in interest revenue during the first half of 2018 that was not replicated in 2019. Absent the loss of interest revenue associated with processing tax refunds, net interest income benefitted from the growth in interest income on loans and securities exceeding the growth in interest expense on deposits and borrowed funds. For the six months ended June 30, 2019, interest and fees on loans and securities increased $1,306,000 from the same period last year. This increase was due to a combination of average loan growth and the benefit of rising interest rates throughout 2018. For the same time period, interest expense on deposits and borrowed funds increased $1,004,000, primarily due to certificates of deposit repricing at higher market rates. For the six months ended June 30, 2019, the net interest margin was 4.66 percent, compared to 4.37 percent for the same period the prior year. The increase in net interest margin was primarily related to the higher balances maintained at the Federal Reserve during the first half of 2018, which diluted the net interest margin due to the yield on those balances being less than other earning assets, such as loans and securities.

For the three months ended June 30, 2019, the provision for loan losses decreased $783,000, and for the six months ended June 30, 2019, the provision for loan losses increased $838,000, from the same respective periods in 2018. For the three months ended June 30, 2019, the negative provision for loan loss expense of $806,000 was primarily related to net recoveries of loans previously charged off totaling $194,000, a $227,000 reduction in specific allocations on collateral dependent impaired loans, and the improvement in certain economic risk factors contributing to lower general reserves. For the six months ended June 30, 2019, the provision for loan losses incurred of $1,571,000 was primarily related to net loan charge-offs of $898,000 and higher general reserves in relation to certain economic risk factors. The ratio of nonperforming loans to total loans was 1.36 percent at June 30, 2019 compared to 1.25 percent at December 31, 2018 and 1.45 percent at June 30, 2018. The allowance for loan losses was .95 percent of total loans at June 30, 2019, compared to .87 percent at December 31, 2018 and .98 percent at June 30, 2018.

For the three months ended June 30, 2019, noninterest income totaled $2,003,000, a decrease of $535,000 from the same period last year. Noninterest income totaled $3,849,000 for the six months ended June 30, 2019, a decrease of $1,765,000 from the same period last year. The decrease in noninterest income was primarily related to tax processing fees. In relation to the third-party tax refund provider terminating the contract as previously discussed, the Company experienced a decline in tax processing fees, which is a per item fee for each tax refund processed. As a result of not performing such service in 2019, tax processing fees decreased $1,528,000 from the first half of 2018. In addition, for the first half of 2019, gain on sale of other real estate owned decreased $143,000, which was partially offset by interchange income earned from debit and credit transactions, which increased $93,000, respectively, from the same period last year.

For the three months ended June 30, 2019, noninterest expense totaled $9,791,000, an increase of $117,000 from the same period last year. For the six months ended June 30, 2019, noninterest expense totaled $19,359,000, a decrease of $123,000 from the same period last year. The Company’s largest noninterest expense, salaries and employee benefits, decreased $14,000 as compared to the second quarter of 2018 and decreased $180,000 as compared to the first half of 2018. The decrease was primarily related to the expense savings associated with a lower number of employees more than offsetting the expense increase associated with annual merit increases. Further contributing to lower noninterest expense was data processing and FDIC insurance premiums. For the six months ended June 30, 3019, data processing expense decreased $332,000 from the same period last year in relation to lower consulting fees. For the same period, FDIC insurance premiums decreased $145,000 in relation to a lower assessment rate. Partially offsetting the expense reductions above was an increase in professional fees, which increased $338,000 from the first half of the prior year primarily due to litigation related legal fees.

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 18 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.

Submitted by OVBC.

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