Ohio Valley Banc Corp. Reports 2nd Quarter Earnings

GALLIPOLIS, Ohio, July 27, 2016

"It certainly is an exciting time as we prepare to close the mergers with Milton Bancorp, Inc. and The Milton Banking Company on August 5^th," stated Thomas E. Wiseman, President and CEO.  "One-time expenses associated with the merger coupled with an expected decrease in tax processing fees contributed to lower year-to-date earnings; however, it must be noted that the merger is not a mere expense, but an investment in the future.  We welcome Milton Bank to the Ohio Valley Bank family as we join these two great community banks to better serve our customers and grow the company."

For the second quarter of 2016, net interest income increased $57,000, and for the six months ended June 30, 2016, net interest income increased $227,000 from the same respective periods last year.  Positively impacting net interest income was the growth in earning assets.  For the six months ended June 30, 2016, average earning assets increased $5 million from the same period the prior year.  The growth in average earning assets was attributable to an increase in both average interest-bearing deposits with banks and investment securities, which was partially offset by a decrease in average loan balances.  Interest-bearing deposits with banks are primarily related to balances being maintained at the Federal Reserve, which increases significantly during the first half of the year in relation to seasonal tax refund processing.  Due to an increase in short-term interest rates in December 2015, the earnings from deposits maintained at the Federal Reserve increased $139,000 for the first six months of 2016, as compared to the same period last year.

The decrease in average loan balances was largely attributable to the payoff throughout 2015 of loans purchased from other financial institutions.  This decrease was partially offset by growth in average commercial and consumer loan balances.  While average loan balances decreased over the first six months of 2016, the balance of total loans at June 30, 2016, was $17 million higher than December 31, 2015.  The opening of the new Athens loan production office in late 2015 has made a significant contribution to the loan growth experienced in 2016.  In addition to the growth in average earning assets, the net interest margin has remained relatively steady.  For the six months ended June 30, 2016, the net interest margin was 4.36 percent, compared to 4.35 percent for the same period the prior year.

For the three months ended June 30, 2016, the provision for loan losses decreased $658,000, and for the six months ended June 30, 2016, the provision for loan losses decreased $101,000, from the same respective periods in 2015.  The decrease in provision for loan losses is consistent with the decrease in both net charge-offs and nonperforming loans.  For the six months ended June 30, 2016, net charge-offs totaled $334,000, a decrease of $1,277,000 from the same period in 2015.  The decrease was largely due to the charge-off of a collateral dependent impaired loan's specific reserve, which occurred in 2015.  The ratio of nonperforming loans to total loans was 1.14 percent at June 30, 2016 compared to 1.24 percent at December 31, 2015 and 1.45 percent at June 30, 2015.  Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at June 30, 2016 was adequate and reflects probable incurred losses in the portfolio.  The allowance for loan losses was 1.15 percent of total loans at June 30, 2016, compared to 1.13 percent at December 31, 2015 and 1.26 percent at June 30, 2015.

For the three months ended June 30, 2016, noninterest income totaled $1,861,000, compared to $1,917,000 for the same period last year.  Noninterest income totaled $5,096,000 for the six months ended June 30, 2016, as compared to $5,406,000 for the same period last year, a decrease of $310,000.  For the first six months of 2016, tax refund processing fees totaled $2,024,000, a decrease of $326,000 from the same period the prior year.  The decrease was related to the lower per item fee received by the Company as defined in the contract with the third-party tax refund product provider.  For the first half of 2016, all other noninterest income sources increased $16,000 from the same period a year ago.

For the three months ended June 30, 2016, noninterest expense totaled $7,773,000, an increase of $219,000 from the same period last year.  For the six months ended June 30, 2016, noninterest expense totaled $15,742,000, an increase of $761,000, or 5.1 percent, from the same period last year.  The Company's largest noninterest expense, salaries and employee benefits, increased $102,000 as compared to the second quarter of 2015 and increased $272,000 as compared to the first half of 2015.  The increase was primarily related to annual merit increases and higher health insurance expense.  Also contributing to higher noninterest expense were expenses related to the announced merger with Milton Bancorp.  During the second quarter, the Company incurred $134,000 in merger related expenses, bringing the year-to-date merger related expenses to $361,000.  The remaining noninterest expenses were limited to an increase of $128,000 for the first six months of 2016, as compared to same period last year.