PR Newswire | Jul 28, 2020 11:38AM EDT

07/28 10:37 CDT

Ohio Valley Banc Corp. Reports 2nd Quarter Earnings GALLIPOLIS, Ohio, July 28, 2020

GALLIPOLIS, Ohio, July 28, 2020 /PRNewswire/ -- Ohio Valley Banc Corp. (Nasdaq: OVBC) (the "Company") reported consolidated net income for the quarter ended June 30, 2020, of $2,263,000 compared to $3,079,000 earned for the second quarter of 2019. Earnings per share for the second quarter of 2020 were $.47 compared to $.65 for the prior year second quarter. For the six months ended June 30, 2020, net income totaled $3,265,000 compared to $4,272,000 for the same period the prior year. Earnings per share were $.68 for the first six months of 2020 versus $.90 for the first six months of 2019. Return on average assets and return on average equity were .62 percent and 5.07 percent, respectively, for the first half of 2020, compared to .83 percent and 7.20 percent, respectively, for the same period in the prior year.

Ohio Valley Banc Corp. Chairman and CEO Tom Wiseman said, "As everyone knows, this year has certainly not been short of challenges. Ohio Valley Banc Corp.'s subsidiaries have worked to minimize the impact of the economic downturn and consumer shifts suddenly brought on by the pandemic. While much is still unknown about the lasting effects of these circumstances, know that Ohio Valley Bank and Loan Central will remain steadfast resources for its communities in the days to come."

For the second quarter of 2020, net interest income decreased $858,000, and for the six months ended June 30, 2020, net interest income decreased $2,241,000 from the same respective periods last year. Impacting net interest income was the decrease in net interest margin in relation to the decrease in market rates. The Federal Reserve reduced interest rates by 75 basis points during the second half of 2019 and another 150 basis points in March of 2020, which contributed to a greater decrease in yield on earning assets than the average cost on interest-bearing liabilities. This trend was partly due to interest rates on deposits lagging the decrease in general market rates and certain deposits already being at or near their interest rate floor, which limited the Company's ability to reduce deposit costs to the same magnitude as experienced on earning assets. For the six months ended June 30, 2020, the net interest margin was 4.13 percent, compared to 4.66 percent for the same period the prior year. Also contributing to lower net interest income was the change in the Company's business model for Loan Central's assessment of fees for tax refund advance loans. Starting in 2020, Loan Central changed from only assessing loan fees for the tax refund loan to primarily assessing a fee for preparing the tax return in combination with a reduced loan fee. This fundamental change in the fee structure was imposed upon the Company in order to comply with new regulations. As a result, tax refund advance loan fees for the first half of 2020 decreased $728,000 from the same period last year. The reduction in tax refund advance fees lowered the net interest margin 15 basis points for the first half of 2020. The fee income for tax preparation services was recorded as noninterest income and is discussed below.

For the three months ended June 30, 2020, the provision for loan losses increased $413,000, and for the six months ended June 30, 2020, the provision for loan losses increased $1,882,000, from the same respective periods in 2019. For the three months ended June 30, 2020, the negative provision for loan loss expense of $393,000 was primarily related to the reduction in specific allocations on collateral dependent impaired loans of $854,000. This was partially offset by net loan charge-offs of $355,000 and an increase in certain economic risk factors contributing to higher general reserves. For the six months ended June 30, 2020, the provision for loan losses incurred of $3,453,000 was primarily related to net loan charge-offs of $1,745,000 and an increase in general reserves related to the establishment of an economic risk factor for the coronavirus pandemic. Based on declining economic conditions and increasing unemployment levels, management increased general reserves $2,185,000 to reflect higher anticipated losses due to the expected financial impact of the coronavirus on customers. In association with this higher risk factor, the allowance for loan losses increased to .96 percent of total loans at June 30, 2020 compared to .81 percent at December 31, 2019. The ratio of nonperforming loans to total loans was 1.00 percent at June 30, 2020 compared to 1.30 percent at December 31, 2019.

For the three months ended June 30, 2020, noninterest income totaled $2,249,000, an increase of $246,000 from the same period last year. The increase was due to mortgage banking income, which increased $353,000 from the second quarter of last year in relation to the heightened volume of mortgages being refinanced. Partially offsetting this increase was service charges on deposit accounts, which decreased $184,000 due to lower overdraft fees. Noninterest income totaled $6,691,000 for the six months ended June 30, 2020, an increase of $2,842,000 from the same period last year that was primarily related to receipt of a $2,000,000 settlement payment. The settlement payment was paid to the Bank as part of a settlement agreement signed during the first quarter of 2020. The settlement agreement related to the previously disclosed litigation the Bank had filed against a third-party tax software product provider for early termination of its tax processing contract. Further contributing to the increase was the Company's change in its business model for assessing fees on tax refund advance loans. By primarily charging for the tax preparation services, the Company recorded $634,000 in tax preparation fee income during the first half of 2020. In addition, for the first half of 2020, mortgage banking income increased $374,000, which was partially offset by service charges on deposit accounts, which decreased $194,000, respectively, from the same period last year.

For the three months ended June 30, 2020, noninterest expense totaled $9,602,000, a decrease of $189,000 from the same period last year. For the six months ended June 30, 2020, noninterest expense totaled $19,121,000, a decrease of $238,000 from the same period last year. The Company's largest noninterest expense, salaries and employee benefits, decreased $101,000 as compared to the second quarter of 2019 and decreased $182,000 as compared to the first half of 2019. The decrease was primarily related to the expense savings associated with a lower number of employees from the sale of two branches in December 2019 and the voluntary early retirement program that was completed during the fourth quarter of 2019. Further contributing to lower noninterest expense was professional fees. For the three months and six months ended June 30, 2020, professional fees decreased $216,000 and $290,000, respectively, from the same periods last year. The decrease was in relation to lower litigation related legal fees and to accounting fees. Partially offsetting the expense reductions above was an increase in data processing, which increased $150,000 from the prior year second quarter and increased $214,000 from the first half of 2019. The increase was primarily due to costs associated with the platform used to facilitate Paycheck Protection Program (PPP) loans, credit card processing and website maintenance costs.

The Company's total assets at June 30, 2020 were $1.103 billion, an increase of $90 million from December 31, 2019. The increase in assets was related to a $58 million increase in loans, a $16 million increase in cash and cash equivalents and a $9 million increase in securities. The growth in loans occurred primarily in the commercial segment, which was partially related to the origination of $34 million in PPP loans. The PPP loans are guaranteed by the SBA and have a minimal impact on the allowance for loan losses. The increase in cash and cash equivalents and securities was related to the investment of the heightened deposit balances received during the first half of the year. At June 30, 2020, total deposits had increased $90 million, or 11 percent, from year end in relation to customers receiving stimulus funds and their desire to preserve cash during this uncertain economic environment.

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 16 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) impacts from the novel coronavirus (COVID-19) pandemic on our business, operations, customers and capital position; (ii) higher default rates on loans made to our customers related to COVID-19 and its impact on our customers' operations and financial condition; (iii) the impact of COVID-19 on local, national and global economic conditions; unexpected changes in interest rates or disruptions in the mortgage market related to COVID-19 or responses to the health crisis; (iv) the effects of various governmental responses to the COVID-19 pandemic; (v) 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; (vi) competitive pressures; (vii) fluctuations in interest rates; (viii) the level of defaults and prepayment on loans made by the Company; (ix) unanticipated litigation, claims, or assessments; (x) fluctuations in the cost of obtaining funds to make loans; (xi) regulatory changes; (xii) and other factors that may be described in the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time. 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.

OHIO VALLEY BANC CORP - Financial Highlights (Unaudited)

Three months ended Six months ended

June 30, June 30,

2020 2019 2020 2019

PER SHARE DATA

Earnings per share $ 0.47 $ 0.65 $ 0.68 $ 0.90

Dividends per share $ 0.21 $ 0.21 $ 0.42 $ 0.42

Book value per share $ 27.53 $ 25.99 $ 27.53 $ 25.99

Dividend payout ratio (a) 44.43% 32.45% 61.59% 46.69%

Weighted average shares outstanding 4,787,446 4,763,858 4,787,446 4,756,209

DIVIDEND REINVESTMENT (in 000's)

Dividends reinvested under

employee stock ownership plan (b) $ - $ - $ 154 $ 179

Dividends reinvested under

dividend reinvestment plan (c) $ 372 $ 370 $ 744 $ 721

PERFORMANCE RATIOS

Return on average equity 6.97% 10.22% 5.07% 7.20%

Return on average assets 0.83% 1.19% 0.62% 0.83%

Net interest margin (d) 3.94% 4.43% 4.13% 4.66%

Efficiency ratio (e) 79.01% 76.72% 71.60% 74.17%

Average earning assets (in 000's) $ 1,011,694 $ 973,524 $ 973,851 $ 963,485



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

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

(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 Six months ended

(in $000's) June 30, June 30,

2020 2019 2020 2019

Interest income:

Interest and fees on loans $ 10,639 $ 11,302 $ 21,512 $ 23,214

Interest and dividends on securities 742 856 1,492 1,683

Interest on interest-bearing deposits with banks 18 325 180 644

Total interest income 11,399 12,483 23,184 25,541

Interest expense:

Deposits 1,367 1,512 2,876 2,854

Borrowings 237 318 509 647

Total interest expense 1,604 1,830 3,385 3,501

Net interest income 9,795 10,653 19,799 22,040

Provision for (recovery of) loan losses (393) (806) 3,453 1,571

Noninterest income:

Service charges on deposit accounts 333 517 826 1,020

Trust fees 61 72 129 136

Income from bank owned life insurance and

annuity assets 192 177 409 355

Mortgage banking income 431 78 521 147

Debit / credit card interchange income 930 972 1,873 1,886

Gain (loss) on other real estate owned 18 14 (83) 14

Tax preparation fees 19 --- 634 ---

Litigation settlement 0 --- 2,000 ---

Other 265 173 382 291

Total noninterest income 2,249 2,003 6,691 3,849

Noninterest expense:

Salaries and employee benefits 5,426 5,527 10,881 11,063

Occupancy 449 438 881 891

Furniture and equipment 278 270 540 533

Professional fees 473 689 1,071 1,361

Marketing expense 293 270 561 540

FDIC insurance 24 110 24 113

Data processing 704 554 1,303 1,089

Software 412 427 793 838

Foreclosed assets 36 19 79 125

Amortization of intangibles 17 31 34 62

Other 1,490 1,456 2,954 2,744

Total noninterest expense 9,602 9,791 19,121 19,359

Income before income taxes 2,835 3,671 3,916 4,959

Income taxes 572 592 651 687

NET INCOME $ 2,263 $ 3,079 $ $ 3,265 4,272

OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)

(in $000's, except share data) June 30, December 31

2020 2019

ASSETS

Cash and noninterest-bearing deposits with banks $ 13,388 $ 12,812

Interest-bearing deposits with banks 54,863 39,544

Total cash and cash equivalents 68,251 52,356

Certificates of deposit in financial institutions 2,323 2,360

Securities available for sale 114,987 105,318

Securities held to maturity (estimated fair value: 2020 - $12,134; 2019 - 11,769 12,033$12,404)

Restricted investments in bank stocks 7,506 7,506

Total loans 830,832 772,774

Less: Allowance for loan losses (7,981) (6,272)

Net loans 822,851 766,502

Premises and equipment, net 21,436 19,217

Premises and equipment held for sale, net 645 653

Other real estate owned 226 540

Accrued interest receivable 3,537 2,564

Goodwill 7,319 7,319

Other intangible assets, net 140 174

Bank owned life insurance and annuity assets 35,588 30,596

Operating lease right-of-use asset, net 955 1,053

Other assets 5,462 5,081

Total assets $ 1,102,995 $ 1,013,272

LIABILITIES

Noninterest-bearing deposits $ 266,840 $ 222,607

Interest-bearing deposits 645,007 598,864

Total deposits 911,847 821,471

Other borrowed funds 30,110 33,991

Subordinated debentures 8,500 8,500

Operating lease liability 955 1,053

Accrued liabilities 19,762 20,078

Total liabilities 971,174 885,093

SHAREHOLDERS' EQUITY

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

2020 - 5,447,185 shares issued; 2019 - 5,447,185 shares issued) 5,447 5,447

Additional paid-in capital 51,165 51,165

Retained earnings 88,006 86,751

Accumulated other comprehensive income 2,915 528

Treasury stock, at cost (659,739 shares) (15,712) (15,712)

Total shareholders' equity 131,821 128,179

Total liabilities and shareholders' equity $ 1,102,995 $ 1,013,272

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

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SOURCE Ohio Valley Banc Corp.