Ohio Valley Banc Corp. Reports 2nd Quarter Earnings

Rhea-AI Summary

Ohio Valley Banc Corp. (Nasdaq: OVBC) reported a net income of $2,263,000 for Q2 2020, down from $3,079,000 in Q2 2019. Earnings per share also fell to $0.47 from $0.65. For the first half of 2020, net income decreased to $3,265,000 from $4,272,000, with EPS declining to $0.68 from $0.90. The net interest income dropped by $858,000 in Q2, primarily due to lower interest rates. Noninterest income rose significantly, aided by a $2,000,000 settlement payment. Total assets reached $1.103 billion, an increase of $90 million since December 2019.

Positive

• Noninterest income rose to $6,691,000 for the first half, boosted by a $2,000,000 settlement payment.
• Total assets increased to $1.103 billion, driven by a $58 million rise in loans, including $34 million in PPP loans.
• Noninterest expense decreased by $189,000 in Q2 and $238,000 in the first half, reflecting cost savings.

Negative

• Net income decreased from $3,079,000 in Q2 2019 to $2,263,000 in Q2 2020.
• Earnings per share fell to $0.47 from $0.65 year-over-year.
• Net interest income declined by $858,000 for Q2 2020 and by $2,241,000 for the first half of 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 - $12,404)							11,769		12,033
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

View original content:http://www.prnewswire.com/news-releases/ohio-valley-banc-corp-reports-2nd-quarter-earnings-301101349.html

SOURCE Ohio Valley Banc Corp.

FAQ

What is the latest earnings report for Ohio Valley Banc Corp (OVBC)?

Ohio Valley Banc Corp reported a Q2 2020 net income of $2,263,000 and EPS of $0.47, both down from the previous year.

How did OVBC perform in the first half of 2020?

For the first six months of 2020, OVBC's net income was $3,265,000, a decrease from $4,272,000 in the previous year.

What were the changes in noninterest income for OVBC?

Noninterest income for the first half of 2020 rose to $6,691,000, significantly boosted by a $2,000,000 settlement payment.

What impact did the PPP loans have on OVBC's loan growth?

Ohio Valley Banc Corp saw a $58 million increase in loans, with $34 million attributed to PPP loans.

What is the trend in OVBC's noninterest expenses?

OVBC's noninterest expenses decreased by $189,000 in Q2 2020 and $238,000 for the first half of the year.