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

GALLIPOLIS, Ohio, Feb. 8, 2017

"2016 proved to be an exciting year of expansion for the company," stated Thomas E. Wiseman, President and CEO.  "The Milton Bancorp and Milton Banking Company acquisition, while challenging, expanded both our market share and footprint promising to enhance our Community First mission.  We welcome the Milton Bankers and customers to the Ohio Valley Banc Corp. family.  We are also grateful for the confidence in our company and its management demonstrated by our employees and other shareholders who have elected to invest their dividends in additional shares of OVBC.  In 2016, $181,000 of dividends were reinvested in OVBC shares through our employee stock ownership plan, and $1,668,000 of dividends were reinvested through the dividend reinvestment plan."

For the fourth quarter of 2016, net interest income increased $1,904,000, and for the year ended December 31, 2016, net interest income increased $2,831,000 from the same respective periods last year.  Positively impacting net interest income was the growth in earning assets.  For the three months ended December 31, 2016, average earning assets increased $141 million, and for the year ended December 31, 2016, average earning assets increased $62 million from the same respective periods the prior year.  The growth in average earning assets was primarily attributable to the acquisition of Milton Bancorp, Inc. ("Milton") during the third quarter of 2016.  At the time of closing, Milton had total assets of $132 million, of which $113 million was in loans and $6 million was in investment securities.  Also contributing to loan growth was the opening of our Athens loan production office in late 2015.  As of December 31, 2016, the new office had over $19 million in loans outstanding.  Adding to the contribution from the growth in earning assets was the increase in the net interest margin.  For the year ended December 31, 2016, the net interest margin was 4.40 percent, compared to 4.39 percent for the same period the prior year.

For the three months ended December 31, 2016, the provision for loan losses totaled $498,000, an increase of $118,000, and for the year ended December 31, 2016, the provision for loan losses totaled $2,826,000, an increase of $1,736,000, from the same respective periods in 2015.  For the year ended December 31, 2016, the provision for loan loss expense incurred was related to net charge-offs of $1,775,000 and to a net increase in specific reserves on collateral dependent impaired loans of $759,000.  For the year ended December 31, 2015, the provision for loan losses incurred was related to net charge-offs of $2,776,000 offset by a net decrease in specific reserves on collateral dependent impaired loans of $1,222,000.  The ratio of nonperforming loans to total loans was 1.26 percent at December 31, 2016, compared to 1.24 percent at December 31, 2015.  Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at December 31, 2016 was adequate and reflects probable incurred losses in the portfolio.  The allowance for loan losses was 1.05 percent of total loans at December 31, 2016, compared to 1.13 percent at December 31, 2015.

For the three months ended December 31, 2016, noninterest income totaled $1,450,000, compared to $1,607,000 for the same period last year, a decrease of $157,000.  Contributing to the decrease was a reduction in gain on other real estate owned, which decreased $506,000, primarily due to the lower appraised value on one land development property.  Partially offsetting the decrease was an increase of $151,000 in service charges on deposit accounts for the three months ended December 31, 2016, as compared to same time period last year.  The increase was related to the acquisition of Milton's deposit accounts, which totaled $119 million at the time of the merger.  Noninterest income totaled $8,239,000 for the year ended December 31, 2016, as compared to $8,597,000 for the same period last year, a decrease of $358,000.  The decrease in gain on other real estate owned for the quarter led to a $566,000 decrease for the twelve months ended December 31, 2016, as compared to the prior year.  For the year ended December 31, 2016, tax refund processing fees totaled $2,048,000, a decrease of $323,000 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.  Partially offsetting the decreases in noninterest income was the increase of $404,000 in service charges on deposit accounts related to higher overdraft fees and the acquisition of Milton's deposit accounts.  For the full year of 2016, all other noninterest income sources increased $127,000 from the same period a year ago.

For the three months ended December 31, 2016, noninterest expense totaled $8,329,000, an increase of $1,418,000 from the same period last year.  For the year ended December 31, 2016, noninterest expense totaled $32,899,000, an increase of $3,280,000, or 11.1 percent, from the same period last year.  Generally, the acquisition of Milton contributed to an increase in most noninterest expense categories, reflecting both one-time merger related expenses and recurring expenses related to having a larger organization after the merger.  The Company's largest noninterest expense, salaries and employee benefits, increased $628,000 as compared to the fourth quarter of 2016 and increased $1,376,000 as compared to the year ended 2015.  The increase was primarily related to adding Milton employees, annual merit increases, and higher health insurance expense.  Also contributing to higher noninterest expense were one-time expenses related to the merger with Milton.  During the fourth quarter, the Company incurred $153,000 in merger related expenses, bringing the full year merger related expenses to $930,000.  The remaining noninterest expenses increased $974,000 for the year ended December 31, 2016, as compared to the same period last year, led by occupancy, data processing and software expense.

The Company's total assets at December 31, 2016 were $955 million, an increase of $158 million from December 31, 2015.  The acquisition of Milton provided $132 million in assets and $119 million in liabilities.  At December 31, 2016, total shareholders' equity exceeded $104 million, an increase of $14 million from December 31, 2015.  The consideration paid for Milton totaled $18.9 million, of which $11.5 million was the market value of OVBC common shares and $7.4 million was cash.