Ohio Valley Banc Corp. Reports 1st Quarter Earnings

Rhea-AI Summary

Ohio Valley Banc Corp. reported a decrease in net income for the 1st quarter of 2024 compared to the same period in 2023. Despite challenges from the interest rate environment impacting net interest margin, the company remains focused on quality loan growth. The net interest margin decreased due to increased funding costs, although average earning assets grew. Loan balances increased, with commercial and residential real estate lending leading the growth. Noninterest income saw a decline due to the closure of Race Day Mortgage, while noninterest expenses increased primarily due to salaries and employee benefits. The provision for credit loss expense and nonperforming loans increased, but the allowance for credit losses also grew. Total assets, deposits, and shareholders' equity showed positive growth. Ohio Valley Banc Corp.'s common stock trades on the NASDAQ Global Market under the symbol OVBC.

Positive

• Consolidated net income for the 1st quarter of 2024 was $2,793,000, a decrease of 28.5% from the same period in 2023.
• Earnings per share for the 1st quarter of 2024 were $.58, compared to $.82 in 2023.
• Return on average assets and return on average equity were .83% and 7.77%, respectively, for the 1st quarter of 2024.
• Net interest income decreased by $532,000 in the 1st quarter of 2024 compared to 2023.
• Provision for credit loss expense increased by $262,000 in the 1st quarter of 2024.
• Noninterest income decreased by $71,000 in the 1st quarter of 2024.
• Noninterest expense increased by $469,000 in the 1st quarter of 2024.
• Total assets at March 31, 2024, were $1.373 billion, an increase of $20 million from December 31, 2023.
• Total deposits increased by $22 million at March 31, 2024, compared to year-end 2023.
• Total shareholders' equity increased by $1.8 million from year-end 2023.

Negative

• The decrease in net income and earnings per share compared to the prior year.
• The decrease in net interest income and net interest margin.
• The increase in provision for credit loss expense and nonperforming loans.
• The decrease in noninterest income related to the closure of Race Day Mortgage.
• The increase in noninterest expense, particularly in salaries and employee benefits.

Insights

Financial Analyst

An analysis of Ohio Valley Banc Corp.'s recent earnings report indicates a notable 28.5% decrease in net income compared to the previous year. Given that earnings per share also decreased from $.82 to $.58, these figures suggest a contraction in profitability which could cause some concern among investors. The reported return on average assets and equity have also diminished, highlighting a potential efficiency issue within the company.

It's also significant that the net interest margin has contracted from 4.21% to 3.61%. This compression indicates that the income generated from interest-earning assets, relative to the cost of servicing liabilities, has declined. While the company attributes this to an unfavorable interest rate environment, the strategy to attract deposits via higher rates should be monitored to assess its sustainability and impact on profitability.

Credit Analyst

From a credit perspective, the uptick in the provision for credit loss expense to $751,000, an increase of $262,000, is a noteworthy development. This rise corresponds with a slight increase in the ratio of nonperforming loans to total loans from the end of the last year. An increase in provisions may indicate the company is expecting higher loan defaults or a deteriorating credit environment, which requires close scrutiny by investors. However, the allowance for credit losses as a percentage of total loans has increased modestly, indicating a conservative stance towards potential future loan losses.

Market Analyst

Regarding noninterest income, the closure of Race Day Mortgage and the consequent absence of mortgage application referral income marks a shift in business operations that should be evaluated for its effect on revenue diversification. Service charges on deposit accounts have risen, which may reflect changing customer behavior or fee adjustments. Additionally, the increase in total assets and deposits, particularly within time deposits, could point to a solid base for funding future loan growth, albeit potentially at higher costs given competitive rates.

GALLIPOLIS, Ohio, April 25, 2024 /PRNewswire/ -- Ohio Valley Banc Corp. [Nasdaq: OVBC] (the "Company") reported consolidated net income for the quarter ended March 31, 2024, of $2,793,000, a decrease of $1,115,000, or 28.5%, from the same period the prior year. Earnings per share for the first quarter of 2024 were $.58, compared to $.82 for the first quarter of 2023. Return on average assets and return on average equity were .83% and 7.77%, respectively, for the first quarter of 2024, versus 1.28% and 11.85%, respectively, for the same period the prior year.

Ohio Valley Banc Corp. President and CEO, Larry Miller stated, "Though this year's unfavorable interest rate environment slowed earnings by reducing the net interest margin as we expected, the Company still netted nearly $2.8 million for the quarter. We believe consistent, quality loan growth is key. We are determined to work even harder to maximize returns and improve the quality of life for our shareholders, employees, customers, and the community as a whole."

For the first quarter of 2024, net interest income decreased $532,000 from the first quarter of 2023. The decrease was largely related to the decrease in the net interest margin, which was partially offset by growth in average earning assets, led by strong growth in the loan portfolio. For the first quarter of 2024, the net interest margin was 3.61%, a decrease from 4.21% for the first quarter of 2023. The decrease in the net interest margin was related to the cost of funding sources increasing more than the yield on earning assets. This increase in the cost of funding was partially linked to the Company's decision to increase rates on deposit accounts to attract deposits amidst heightened market competition for such funds. In addition, the composition of funding sources trended toward certificates of deposit and wholesale funding sources, which generally cost more than other funding sources, such as, checking, NOW, savings and money market deposit products. Partially offsetting the decrease in the net interest margin was the $119 million growth in average earning assets. The average balance of loans for the first quarter of 2024 was $976 million, an increase of $79 million from the first quarter of 2023, led by commercial and residential real estate lending. For the same period, the average balance maintained at the Federal Reserve increased $60 million and average securities decreased $17 million, as maturities were deployed into higher yielding loans.

For the three months ended March 31, 2024, the provision for credit loss expense was $751,000, an increase of $262,000 from the first quarter of 2023. The provision for credit loss expense for the first quarter of 2024 was primarily related to quarterly net charge-offs of $396,000, general reserves associated with the $18 million increase in total loans since December 31, 2023, and a minor increase in select qualitative risk factors. The ratio of nonperforming loans to total loans was .37% at March 31, 2024, compared to .26% at December 31, 2023 and .39% at March 31, 2023. The allowance for credit losses was .93% of total loans at March 31, 2024, compared to .90% at December 31, 2023 and .84% at March 31, 2023.

Noninterest income totaled $3,696,000 for the first quarter of 2024, a decrease of $71,000 from the same period last year. For the first quarter of 2024, other noninterest income decreased $161,000 from the first quarter of 2023. The decrease was largely related to the closure of Race Day Mortgage at the end of 2023. Due to the closure, there was no mortgage application referral income earned in 2024 compared to $231,000 in commissions earned during the first quarter of 2023. The decline in other noninterest income was partially offset by a $114,000 increase in service charges on deposit accounts.

Noninterest expense totaled $10,741,000 for the first quarter of 2024, an increase of $469,000, or 4.6%, from the same period last year. The Company's largest noninterest expense, salaries and employee benefits, increased $283,000, or 4.8%, from the first quarter of 2023. The increase was primarily related to annual merit increases and higher health insurance premiums. However, the growth in salaries and employee benefit expense was partially offset by the elimination of staffing for Race Day Mortgage by April 2023, which resulted in a savings of $192,000 for the first quarter of 2024, when compared to the same period last year. For the three months ended March 31, 2024, data processing expense increased $87,000 from the same period last year. The increase was primarily related to debit card processing due to higher transaction volume. Also contributing to higher noninterest expense for the first quarter of 2024 was a $59,000 increase in software expense, as compared to the same period last year.

The Company's total assets at March 31, 2024 were $1.373 billion, an increase of $20 million from December 31, 2023. The increase in assets was primarily the result of an $18 million increase in loans. At March 31, 2024, total deposits increased $22 million from year end 2023, which occurred primarily within time deposits. Total shareholders' equity increased $1.8 million from year end 2023.

Ohio Valley Banc Corp. common stock is traded on the NASDAQ Global Market under the symbol OVBC. The holding company owns The Ohio Valley Bank Company with 17 offices in Ohio and West Virginia, and Loan Central, Inc. 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; (vii) regulatory changes; and (viii) 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
						March 31,
						2024		2023
PER SHARE DATA
Earnings per share						$               0.58		$             0.82
Dividends per share						$               0.22		$             0.21
Book value per share						$            30.41		$           28.80
Dividend payout ratio (a)						37.60 %		25.64 %
Weighted average shares outstanding						4,785,773		4,773,461
DIVIDEND REINVESTMENT (in 000's)
Dividends reinvested under
employee stock ownership plan (b)						$                202		$              193
Dividends reinvested under
dividend reinvestment plan (c)						$                391		$              510
PERFORMANCE RATIOS
Return on average equity						7.77 %		11.85 %
Return on average assets						0.83 %		1.28 %
Net interest margin (d)						3.61 %		4.21 %
Efficiency ratio (e)						71.47 %		65.70 %
Average earning assets (in 000's)						$     1,261,217		$   1,141,835
(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
(in $000's)			March 31,
			2024		2023
Interest income:
Interest and fees on loans			$          15,250		$         12,276
Interest and dividends on securities			1,017		1,092
Interest on interest-bearing deposits with banks			1,417		426
Total interest income			17,684		13,794
Interest expense:
Deposits			5,899		1,832
Borrowings			595		240
Total interest expense			6,494		2,072
Net interest income			11,190		11,722
Provision for (recovery of) credit losses			751		489
Noninterest income:
Service charges on deposit accounts			725		611
Trust fees			104		86
Income from bank owned life insurance and
annuity assets			225		207
Mortgage banking income			39		47
Electronic refund check/deposit fees			540		540
Debit / credit card interchange income			1,145		1,173
Tax preparation fees			607		631
Other			311		472
Total noninterest income			3,696		3,767
Noninterest expense:
Salaries and employee benefits			6,167		5,884
Occupancy			469		462
Furniture and equipment			334		298
Professional fees			486		433
Marketing expense			225		241
FDIC insurance			148		138
Data processing			807		720
Software			621		562
Foreclosed assets			(2)		2
Amortization of intangibles			3		7
Other			1,483		1,525
Total noninterest expense			10,741		10,272
Income before income taxes			3,394		4,728
Income taxes			601		820
NET INCOME			$            2,793		$           3,908

 

OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)
(in $000's, except share data)							March 31,		December 31,
							2024		2023
ASSETS
Cash and noninterest-bearing deposits with banks							$          15,422		$         14,252
Interest-bearing deposits with banks							113,638		113,874
Total cash and cash equivalents							129,060		128,126
Securities available for sale							162,186		162,258
Securities held to maturity, net of allowance for credit losses of $2 in 2024 and 2023;							7,968		7,986
(estimated fair value:  2024 - $7,248; 2023 - $7,390)
Restricted investments in bank stocks							4,983		5,037
Total loans							989,862		971,900
Less:  Allowance for credit losses							(9,229)		(8,767)
Net loans							980,633		963,133
Premises and equipment, net							21,728		21,450
Premises and equipment held for sale, net							568		573
Accrued interest receivable							4,338		3,606
Goodwill							7,319		7,319
Other intangible assets, net							5		8
Bank owned life insurance and annuity assets							40,745		40,593
Operating lease right-of-use asset, net							1,159		1,205
Deferred tax assets							6,438		6,306
Other assets							5,469		4,535
Total assets							$     1,372,599		$   1,352,135
LIABILITIES
Noninterest-bearing deposits							$        306,574		$       322,222
Interest-bearing deposits							842,210		804,914
Total deposits							1,148,784		1,127,136
Other borrowed funds							43,261		44,593
Subordinated debentures							8,500		8,500
Operating lease liability							1,159		1,205
Allowance for credit losses on off-balance sheet commitments							586		692
Other liabilities							24,527		26,002
Total liabilities							1,226,817		1,208,128
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value per share, 10,000,000 shares authorized;
2024 - 5,490,995 shares issued; 2023 - 5,470,453 shares issued)							5,491		5,470
Additional paid-in capital							52,321		51,842
Retained earnings							116,614		114,871
Accumulated other comprehensive income (loss)							(11,896)		(11,428)
Treasury stock, at cost (697,321 shares)							(16,748)		(16,748)
Total shareholders' equity							145,782		144,007
Total liabilities and shareholders' equity							$     1,372,599		$   1,352,135

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

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SOURCE Ohio Valley Banc Corp.

FAQ

What was Ohio Valley Banc Corp.'s net income for the 1st quarter of 2024?

Ohio Valley Banc Corp. reported a consolidated net income of $2,793,000 for the 1st quarter of 2024, a decrease of $1,115,000 from the same period in 2023.

What is Ohio Valley Banc Corp.'s stock symbol?

Ohio Valley Banc Corp.'s common stock trades on the NASDAQ Global Market under the symbol OVBC.

How did the net interest margin change in the 1st quarter of 2024 compared to 2023?

The net interest margin decreased from 4.21% in the 1st quarter of 2023 to 3.61% in the 1st quarter of 2024.

What led to the increase in noninterest expenses in the 1st quarter of 2024?

Noninterest expenses increased primarily due to salaries and employee benefits, annual merit increases, and higher health insurance premiums.

What was the provision for credit loss expense in the 1st quarter of 2024?

The provision for credit loss expense was $751,000 for the 1st quarter of 2024, an increase of $262,000 from the same period in 2023.