Ohio Valley Banc Corp. Reports 4th Quarter and Record Fiscal Year Earnings

GALLIPOLIS, Ohio – Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter ended December 31, 2015, of $1,898,000, an increase from the $423,000 earned for the fourth quarter of 2014. Earnings per share for the fourth quarter of 2015 were $.46 compared to $.10 for the prior year fourth quarter. For the year ended December 31, 2015, net income totaled $8,574,000 compared to $8,073,000 for the year ended December 31, 2014, an increase of $501,000, or 6.2 percent. Earnings per share were $2.08 for 2015 versus $1.97 for 2014, an increase of 5.6 percent. Return on average assets and return on average equity were 1.03 percent and 9.66 percent, respectively, for the year ended 2015, compared to 1.01 percent and 9.62 percent, respectively, for the same period in the prior year.

“On behalf of the employees of Ohio Valley Bank and Loan Central, I thank our loyal customers for making possible another record year for the company. A significant decrease in provision for loan loss expense and an increase in average consumer and real estate loan balances played an important role in that success,” said Thomas E. Wiseman, president and CEO. “As part of the company’s Community First mission, plans are well underway to focus on the customer experience, internal unity, and enhanced revenue in 2016. Our management is off to a running start with the signing of a definitive merger agreement with Milton Bancorp, Inc. and a recently opened OVB Loan Office in Athens, Ohio.”

For the fourth quarter of 2015, net interest income decreased $172,000 from the same period last year. For the year ended December 31, 2015, net interest income increased $15,000 from the previous year. Positively impacting net interest income was the growth in earning assets. For the year ended December 31, 2015, average earning assets increased over $27 million, or 3.6 percent, from the same period the prior year. The growth in earning assets was attributable to an increase in interest-bearing deposits with banks and to average loan balances. The growth in interest-bearing deposits with banks was related to higher balances being maintained at the Federal Reserve in relation to seasonal tax refund processing. The growth in loan balances occurred primarily within consumer and residential real estate lending. However, the company might have to wait for the soc 1 vs soc 2 audit report to come in, to view a much more detailed scenario.

Although the Company experienced growth in average earning assets, the net interest margin declined. Contributing to the lower net interest margin was a decrease in asset yields, which more than offset the reduction in the cost of our funding sources. With the prolonged low interest rate environment, there is limited opportunity to further reduce our funding costs, while the average rate on loans continues to trend lower. Additionally, the higher balances maintained at the Federal Reserve have a dilutive effect on the net interest margin due to the balances only earning .25 percent for most of 2015. For the year ended December 31, 2015, the net interest margin was 4.22 percent compared to 4.54 percent for the same period the prior year.

For the three months ended December 31, 2015, provision for loan losses decreased $1,209,000, and for the year ended December 31, 2015, provision for loan losses decreased $1,697,000 from the same respective periods in 2014. The decrease in the fourth quarter and year-to-date provision for loan loss expense was primarily related to a decrease in specific allocations on impaired loans of $1,222,000. Additionally, the Company’s historical loan loss history and economic risk factors utilized to calculate the allowance for loan losses have improved, which required lower general reserves. The ratio of nonperforming loans to total loans was 1.24 percent at December 31, 2015, compared to 1.62 percent at December 31, 2014. For the year ended December 31, 2015, net charge-offs totaled $2,776,000, an increase of $2,168,000 from the same period in 2014. The increase in net charge-offs was partly due to charging off specific allocations on previously identified impaired loans. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at December 31, 2015 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was 1.13 percent of total loans at December 31, 2015, compared to 1.40 percent at December 31, 2014.

For the three months ended December 31, 2015, noninterest income totaled $1,607,000, a decrease of $50,000 from 2014’s fourth quarter. Noninterest income totaled $8,597,000 for the year ended December 31, 2015, as compared to $9,793,000 for the same period last year, a decrease of $1,196,000. The primary contributor to the lower year-to-date noninterest income was the sale of the Company’s nine percent ownership interest in ProAlliance, a specialty property and casualty insurance company. The sale of ProAlliance in 2014 generated a gain on sale of $810,000. Also contributing to lower year-to-date noninterest income was the decrease in tax processing fees. Tax refund processing fees decreased $762,000 for the year ended December 31, 2015, when compared to the same period in 2014. Although the volume of tax refunds processed increased from the prior year, the per item fees received by the Company were lower under the contract with the third-party tax refund product provider that was effective with the 2015 tax refund season. For the year ended December 31, 2015, all other noninterest income sources increased $376,000 from the same period a year ago, led by interchange fees earned on debit and credit card transactions and gain on sale of securities.

For the three months ended December 31, 2015, noninterest expense totaled $6,911,000, a decrease of $846,000 from the same period last year. For the year ended December 31, 2015, noninterest expense totaled $29,619,000, an increase of $326,000, or 1.1 percent, from the same period last year. For the fourth quarter, salaries and employee benefits decreased $937,000, and for the year ended December 31, 2015, salaries and employee benefits decreased $380,000, from the same respective periods in 2014. The decrease in salaries and employee benefits was primarily related to various nonqualified defined benefit plans. During the fourth quarter of 2014, the Company incorporated recently issued data in establishing the liability associated with the nonqualified defined benefit plans resulting in a lump sum increase in benefit expense. After incorporating the most recent data, the benefit expense associated with the plans normalized in 2015. As a result, the expense associated with plans decreased $825,000 for the fourth quarter and decreased $730,000 for the year-to-date period when compared to the same respective periods the prior year. Partially offsetting the decrease in nonqualified benefit expense was an increase of $259,000 in salary and health insurance expense from the prior year. Also contributing to higher noninterest expense was the continued growth in debit and credit card transaction volume. For the year ended December 31, 2015, the data processing and customer rewards related to the higher transaction volume increased expense $214,000 from the same period last year. Further contributing to noninterest expense growth were increases in the areas of audit, foreclosure costs and FDIC insurance.

The Company’s total assets at December 31, 2015 were $796 million, an increase of $18 million, or 2.3 percent, from the prior year. The increase in assets was related to growth in interest-bearing balances with banks and investment securities totaling $18 million. The growth in assets was funded predominately by an increase in deposits of $14 million, which occurred mostly within checking accounts. For 2015, total shareholders’ equity exceeded $90 million, an increase of $4.3 million, or 4.9 percent, from 2014.

With the recent signing of a merger agreement with Milton Bancorp, Inc. (“MBC”), it is anticipated that the transaction will be 8 percent accretive to the Company’s earnings per share in the first full fiscal year of operation following the merger, assuming MBC cost savings of 15 percent. MBC operates five branches with assets of $141 million, loans of $110 million and deposits of $126 million. After the merger, the Company’s total assets will exceed $900 million and branches will increase to 19 locations. The merger consideration was valued at $20 million at the time of signing the merger agreement. The transaction is subject to certain conditions, including the approval of regulatory authorities and the shareholders of MBC. The merger is expected to be completed by the third quarter of 2016.

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 14 offices in Ohio and West Virginia, and Loan Central, with seven 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 which 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; and (vii) regulatory changes. In addition, statements with respect to the merger are subject to additional risks, including, but not limited to, a failure to satisfy the conditions to closing for the merger in a timely manner or at all; failure of the Milton Bancorp shareholders to approve the merger; failure to obtain the necessary governmental approvals for the proposed merger or adverse regulatory conditions in connection with such approvals; the successful completion of the merger and the integration of the businesses; the retention of the acquired customer relationships; disruption to the parties’ businesses as a result of the announcement and pendency of the transaction; and the other risks set forth in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent Annual Report on Form 10-K. 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. See Item 1.A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for further discussion of the risks affecting the business of the Company and the value of an investment in its shares.