Ohio Valley Banc Corp. Reports 2nd Quarter Earnings

Rhea-AI Summary

Ohio Valley Banc Corp. [Nasdaq: OVBC] reported Q2 2024 consolidated net income of $2,972,000, down $277,000 from Q2 2023. Earnings per share decreased to $0.63 from $0.68 year-over-year. For H1 2024, net income was $5,765,000, a 19.4% decline from H1 2023, with EPS falling to $1.21 from $1.50. Return on average assets and equity for H1 2024 were 0.84% and 8.01%, respectively, down from 1.16% and 10.63% in H1 2023.

The company faced challenges from a difficult interest rate environment and rising inflation-related costs. Q2 net interest income increased by $349,000, while H1 net interest income decreased by $183,000 year-over-year. The allowance for credit losses was 0.91% of total loans as of June 30, 2024. Total assets reached $1.403 billion, up $51 million from December 31, 2023, with loan balances increasing by $68 million.

Positive

• Q2 net interest income increased by $349,000 year-over-year
• Total assets grew to $1.403 billion, up $51 million from December 31, 2023
• Loan balances increased by $68 million since December 31, 2023
• Deposits increased by $51 million since December 31, 2023
• Net interest margin improved by 13 basis points from Q1 to Q2 2024

Negative

• Q2 2024 net income decreased by $277,000 compared to Q2 2023
• H1 2024 net income declined by 19.4% year-over-year
• Earnings per share for H1 2024 decreased to $1.21 from $1.50 in H1 2023
• Return on average assets and equity for H1 2024 declined compared to H1 2023
• H1 2024 net interest income decreased by $183,000 year-over-year
• Noninterest expenses increased by $917,000 for H1 2024 compared to H1 2023
• Ratio of nonperforming loans to total loans increased to 0.50% from 0.26% at year-end 2023

Insights

Financial Analyst

Ohio Valley Banc Corp.'s Q2 2024 results reveal a mixed financial picture. The company reported consolidated net income of $2,972,000, down $277,000 from the same quarter last year. Earnings per share decreased from $0.68 to $0.63. For the first half of 2024, net income fell by 19.4% to $5,765,000.

The bank's performance metrics have weakened, with return on average assets dropping to 0.84% from 1.16% and return on average equity declining to 8.01% from 10.63% year-over-year. These figures suggest challenges in maintaining profitability amid a difficult interest rate environment and rising costs due to inflation.

On a positive note, the bank saw a $349,000 increase in quarterly net interest income, driven by a $129 million rise in average earning assets. However, this was partially offset by a 29 basis point decrease in net interest margin. The bank's decision to increase deposit rates to attract funds in a competitive market has pressured margins.

Loan growth has been strong, with a $50 million increase in the second quarter alone. This growth, however, led to higher provision for credit losses. The allowance for credit losses stood at 0.91% of total loans, up slightly from year-end 2023. The ratio of nonperforming loans to total loans increased to 0.50%, primarily due to a single commercial real estate loan relationship.

Overall, while OVBC is growing its loan portfolio and maintaining deposit growth, it's facing profitability pressures from the current interest rate environment and increased operating costs. The bank's ability to manage these challenges will be important for its performance in the coming quarters.

Market Research Analyst

Ohio Valley Banc Corp.'s latest earnings report offers insights into broader trends affecting regional banks. The introduction of the SWEET HOME OHIO account, a high-interest savings product aimed at encouraging home ownership, reflects the bank's strategic response to the challenging housing market. This initiative aligns with growing concerns about home affordability and could potentially attract new customers in a competitive banking landscape.

The bank's $68 million increase in loan balances since December 2023, particularly in residential and commercial real estate, suggests continued demand in these sectors despite higher interest rates. However, the deemphasis on consumer loans due to profitability concerns highlights the shifting priorities in the bank's lending strategy.

The closure of Race Day Mortgage at the end of 2023 has impacted noninterest income, with no mortgage application referral income in 2024 compared to $247,000 in the first half of 2023. This move reflects the broader challenges in the mortgage industry amid rising interest rates and reduced refinancing activity.

The 19.4% decrease in net income for the first half of 2024 underscores the pressures facing regional banks. Increased competition for deposits, evidenced by the bank's decision to raise rates on deposit accounts, is squeezing net interest margins across the industry. The trend towards higher-cost funding sources like certificates of deposit and wholesale funding is likely to continue impacting profitability in the near term.

OVBC's ongoing stock buyback program, with $1,931,000 in shares repurchased in Q2 2024, signals confidence in the company's value and commitment to returning capital to shareholders. However, this strategy should be monitored in light of the challenging operating environment and potential need for capital to support future growth.

GALLIPOLIS, Ohio, July 26, 2024 /PRNewswire/ -- Ohio Valley Banc Corp. [Nasdaq: OVBC] (the "Company") reported consolidated net income for the quarter ended June 30, 2024, of $2,972,000, a decrease of $277,000 from the same period the prior year. Earnings per share for the second quarter of 2024 were $.63 compared to $.68 for the prior year second quarter. For the six months ended June 30, 2024, net income totaled $5,765,000, a decrease of $1,392,000, or 19.4%, from the same period the prior year. Earnings per share were $1.21 for the first six months of 2024 versus $1.50 for the first six months of 2023. Return on average assets and return on average equity were .84% and 8.01%, respectively, for the first half of 2024, compared to 1.16% and 10.63%, respectively, for the same period in the prior year.

Ohio Valley Banc Corp. President and CEO, Larry Miller said, "Your company continues to face the dual headwinds of a difficult interest rate environment and rising costs due to inflation. These same headwinds affect many, if not everyone, especially when it comes to home ownership and affordability. This is why we were pleased to recently partner with the Ohio state treasurer to offer an enhanced interest savings alternative, our SWEET HOME OHIO account. The purpose of the SWEET HOME OHIO account is to offer high interest savings to encourage individuals to save toward buying a home in Ohio. Visit our website at www.ovbc.com for more details on this exciting new account or stop by your local Ohio Valley Bank office to start your SWEET HOME OHIO savings today!"

For the three months ended June 30, 2024, net interest income increased $349,000, and for the six months ended June 30, 2024, net interest income decreased $183,000 from the same respective periods last year. Contributing to the increase in quarterly net interest income was the $129 million increase in average earning assets, which was partially offset by a decrease in the net interest margin of 29 basis points. For the six months ended June 30, 2024, the decrease in net interest income was attributable to the 44 basis point decrease in the net interest margin, which more than offset the contribution from the $124 million increase in average earning assets. In general, the decrease in the net interest margin for the respective periods 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. Although the net interest margin decreased from the prior year periods, the net interest margin increased 13 basis points from the first quarter to the second quarter of 2024. The increase was related to higher relative balances in loans due to quarterly loan growth of $50 million and to the deposit mix trending back towards checking, NOW, savings and money market deposit accounts since the first quarter of 2024.

For the three months ended June 30, 2024, the provision for credit loss expense totaled $181,000, an increase of $157,000 from the same period last year. The quarterly provision for credit loss expense was primarily associated with the $50 million quarterly increase in loan balances, which was partially offset by quarter-to-date net recoveries of $65,000 and the improvement in a certain economic risk factor for residential loans. For the six months ended June 30, 2024, the provision for credit losses was $932,000, an increase of $419,000 from the same period last year. The year-to-date provision for credit loss expense was primarily associated with the $68 million in loan growth and net charge-offs of $331,000. The allowance for credit losses was .91% of total loans at June 30, 2024, compared to .90% at December 31, 2023, and .80% at June 30, 2023. The ratio of nonperforming loans to total loans increased to .50% at June 30, 2024, compared to .26% at December 31, 2023, and .29% at June 30, 2023. The increase in nonperforming loans was largely impacted by a single loan relationship secured primarily by commercial real estate property.

For the three and six months ended June 30, 2024, noninterest income decreased $12,000 and $83,000, respectively, from the same periods last year. The decreases were largely due 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 $247,000 in commissions earned during the first half of 2023. The decline in other noninterest income was partially offset by the $192,000 year-to-date increase in service charges on deposit accounts.

For the three months ended June 30, 2024, noninterest expense totaled $10,863,000, an increase of $448,000 from the same period last year. For the six months ended June 30, 2024, noninterest expense totaled $21,604,000, an increase of $917,000 from the same period last year. The Company's largest noninterest expense, salaries and employee benefits, increased $345,000 as compared to the second quarter of 2023 and increased $628,000 as compared to the first half 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 $216,000 for the first half of 2024, when compared to the same period last year. Further contributing to higher noninterest expense were data processing and professional fees. For the three months and six months ended June 30, 2024, data processing increased $62,000 and $149,000, respectively, from the same periods last year. The increase was primarily related to debit card processing due to higher transaction volume and to higher costs associated with enhancements to the Company's digital banking platform. Professional fees increased $74,000 during the second quarter of 2024 and increased $127,000 during the first half of 2024, as compared to the same periods in 2023. The increase was related to higher director fees and a general increase in legal fees.

The Company's total assets at June 30, 2024 were $1.403 billion, an increase of $51 million from December 31, 2023. Since December 31, 2023, loan balances increased $68 million, which increase was largely in the residential real estate, commercial real estate and commercial segments. The growth in these segments was partially offset by a decrease in consumer loans, as this segment has been deemphasized by the Company due to profitability relative to other loan portfolio segments. The increase was primarily funded by a $51 million increase in deposits and a $21 million decrease in funds maintained at the Federal Reserve. At June 30, 2024, shareholders' equity increased $1.8 million from year end 2023. As part of the current stock buyback plan, the Company repurchased $1,931,000 in shares during the second quarter of 2024. Of the $5 million in shares authorized to be purchased by the plan, the Company has repurchased a total of $2,967,000.

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				Six months ended
			June 30,				June 30,
			2024		2023		2024		2023
PER SHARE DATA
Earnings per share			$          0.63		$          0.68		$            1.21		$           1.50
Dividends per share			$          0.22		$          0.37		$            0.44		$           0.58
Book value per share			$        30.94		$        28.91		$          30.94		$         28.91
Dividend payout ratio (a)			35.48 %		54.39 %		36.51 %		38.69 %
Weighted average shares outstanding			4,740,073		4,776,520		4,762,923		4,774,999
DIVIDEND REINVESTMENT (in 000's)
Dividends reinvested under
employee stock ownership plan (b)			$              -		$              -		$             202		$            193
Dividends reinvested under
dividend reinvestment plan (c)			$           391		$           637		$             782		$         1,147
PERFORMANCE RATIOS
Return on average equity			8.25 %		9.46 %		8.01 %		10.63 %
Return on average assets			0.86 %		1.03 %		0.84 %		1.16 %
Net interest margin (d)			3.74 %		4.03 %		3.68 %		4.12 %
Efficiency ratio (e)			73.37 %		71.93 %		72.41 %		68.70 %
Average earning assets (in 000's)			$  1,300,720		$  1,171,792		$   1,280,968		$  1,156,896
(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,
			2024		2023		2024		2023
Interest income:
Interest and fees on loans			$       16,130		$       13,293		$        31,380		$       25,569
Interest and dividends on securities			1,076		1,053		2,093		2,145
Interest on interest-bearing deposits with banks			1,446		671		2,863		1,097
Total interest income			18,652		15,017		36,336		28,811
Interest expense:
Deposits			6,102		3,091		12,001		4,923
Borrowings			587		312		1,182		552
Total interest expense			6,689		3,403		13,183		5,475
Net interest income			11,963		11,614		23,153		23,336
Provision for (recovery of) credit losses			181		24		932		513
Noninterest income:
Service charges on deposit accounts			731		653		1,456		1,264
Trust fees			101		82		205		168
Income from bank owned life insurance and
annuity assets			226		211		451		418
Mortgage banking income			40		44		79		91
Electronic refund check/deposit fees			135		135		675		675
Debit / credit card interchange income			1,223		1,215		2,368		2,388
Tax preparation fees			26		33		633		664
Other			219		340		530		812
Total noninterest income			2,701		2,713		6,397		6,480
Noninterest expense:
Salaries and employee benefits			6,186		5,841		12,353		11,725
Occupancy			537		485		1,006		947
Furniture and equipment			326		330		660		628
Professional fees			507		433		993		866
Marketing expense			221		241		446		482
FDIC insurance			161		142		309		280
Data processing			788		726		1,595		1,446
Software			541		588		1,162		1,150
Foreclosed assets			2		7		0		9
Amortization of intangibles			4		6		7		13
Other			1,590		1,616		3,073		3,141
Total noninterest expense			10,863		10,415		21,604		20,687
Income before income taxes			3,620		3,888		7,014		8,616
Income taxes			$           648		639		1,249		1,459
NET INCOME			$        2,972		$        3,249		$          5,765		$         7,157

 

OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)
(in $000's, except share data)							June 30,		December 31,
							2024		2023
ASSETS
Cash and noninterest-bearing deposits with banks							$        14,862		$       14,252
Interest-bearing deposits with banks							92,817		113,874
Total cash and cash equivalents							107,679		128,126
Securities available for sale							162,749		162,258
Securities held to maturity, net of allowance for credit losses of $2 in 2024 and 2023							7,930		7,986
Restricted investments in bank stocks							5,016		5,037
Total loans							1,040,284		971,900
Less:  Allowance for credit losses							(9,431)		(8,767)
Net loans							1,030,853		963,133
Premises and equipment, net							21,466		21,450
Premises and equipment held for sale, net							517		573
Accrued interest receivable							4,300		3,606
Goodwill							7,319		7,319
Other intangible assets, net							1		8
Bank owned life insurance and annuity assets							40,913		40,593
Operating lease right-of-use asset, net							1,114		1,205
Deferred tax assets							6,442		6,306
Other assets							7,018		4,535
Total assets							$   1,403,317		$  1,352,135
LIABILITIES
Noninterest-bearing deposits							$      343,209		$     322,222
Interest-bearing deposits							835,219		804,914
Total deposits							1,178,428		1,127,136
Other borrowed funds							42,056		44,593
Subordinated debentures							8,500		8,500
Operating lease liability							1,114		1,205
Allowance for credit losses on off-balance sheet commitments							629		692
Other liabilities							26,833		26,002
Total liabilities							1,257,560		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							118,531		114,871
Accumulated other comprehensive income (loss)							(11,907)		(11,428)
Treasury stock, at cost (2024 - 779,994 shares; 2023 - 697,321 shares)							(18,679)		(16,748)
Total shareholders' equity							145,757		144,007
Total liabilities and shareholders' equity							$   1,403,317		$  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 (OVBC) earnings per share for Q2 2024?

Ohio Valley Banc Corp's earnings per share for Q2 2024 were $0.63, compared to $0.68 for Q2 2023.

How much did OVBC's net income change in H1 2024 compared to H1 2023?

OVBC's net income for H1 2024 decreased by $1,392,000, or 19.4%, compared to H1 2023, totaling $5,765,000.

What was the total asset value of Ohio Valley Banc Corp as of June 30, 2024?

Ohio Valley Banc Corp's total assets were $1.403 billion as of June 30, 2024, an increase of $51 million from December 31, 2023.

How did OVBC's loan balances change in the first half of 2024?

OVBC's loan balances increased by $68 million since December 31, 2023, primarily in residential real estate, commercial real estate, and commercial segments.

What was Ohio Valley Banc Corp's (OVBC) allowance for credit losses as of June 30, 2024?

OVBC's allowance for credit losses was 0.91% of total loans as of June 30, 2024, compared to 0.90% at December 31, 2023.