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

GALLIPOLIS, Ohio, Jan. 30, 2018

"The Company enjoyed a very successful 2017, both in our traditional markets and in the Milton Bancorp footprint acquired just 16 months ago.  Last week, we celebrated the announcement of a quarterly dividend paid to shareholders, a commitment we've been keeping for eight consecutive years.  While these achievements were somewhat dimmed by the unexpected expense caused by the recent change in tax code, they are still proof of the Company's strength as we enter into Ohio Valley Bank's 146^th year in business," commented Thomas E. Wiseman, President and CEO of Ohio Valley Banc Corp.  "We will continue to drive not just our company, but also our communities, to thrive in the upcoming year."

For the fourth quarter of 2017, net interest income increased $494,000, and for the year ended December 31, 2017, net interest income increased $5,407,000, or 14.9 percent, from the same respective periods the prior year.  Positively impacting net interest income was the growth in earning assets.  For the year ended December 31, 2017, average earning assets increased $105 million from 2016.  The growth in average earning assets was attributable to average loans, which increased $109 million.  In addition to positive loan growth from existing markets, the growth in loans was supplemented from recent expansion initiatives.  During the third quarter of 2016, the Company acquired Milton Bancorp, Inc. ("Milton"), which contributed $61 million to the growth in loans.  Furthermore, the Company opened a loan production office in Athens, Ohio in late 2015.  Average loans for the Athens location increased $13 million for the year of 2017, as compared to 2016.  Adding to the contribution from the growth in earning assets was the increase in the strong net interest margin, or profit margin on earning assets.  For the year ended December 31, 2017, the net interest margin was 4.49 percent, compared to 4.40 percent for the same period the prior year.  The improvement in net interest margin was related to the general increase in interest rates and to higher loan balances relative to total earning assets.

For the three months ended December 31, 2017, the provision for loan losses totaled $643,000, an increase of $145,000, and for the year ended December 31, 2017, the provision for loan losses totaled $2,564,000, a decrease of $262,000, from the same respective periods in 2016.  The provision for loan loss expense incurred for the three months ended December 31, 2017 was primarily related to net charge-offs of $457,000.  For the year ended December 31, 2017, the provision for loan loss expense incurred was related to net charge-offs of $2,765,000, which were partially offset by a net decrease in the sum of specific reserves on collateral dependent impaired loans and general reserves for various loan portfolio risks.  The ratio of nonperforming loans to total loans was 1.36 percent at December 31, 2017, compared to 1.26 percent at December 31, 2016.  Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at December 31, 2017 was adequate and reflects probable incurred losses in the portfolio.  The allowance for loan losses was .97 percent of total loans at December 31, 2017, compared to 1.05 percent at December 31, 2016.

For the three months ended December 31, 2017, noninterest income totaled $1,928,000, compared to $1,450,000 for the same period last year, an increase of $478,000.  Noninterest income totaled $9,435,000 for the year ended December 31, 2017, compared to $8,239,000 for the same period last year, an increase of $1,196,000, or 14.5 percent.  The year-to-date increase in noninterest income was related to the higher deposit base associated with the Milton acquisition.  For the year ended December 31, 2017, interchange income earned from debit and credit transactions increased $782,000 and service charges on deposit accounts increased $160,000, respectively, from 2016.  In conjunction with various benefit plans for directors and key employees, the Company maintains an investment in bank owned life insurance.  For 2017, income from bank owned life insurance increased $501,000 in relation to the receipt of life insurance proceeds of $514,000.  Partially offsetting the increases above were tax refund processing fees.  For 2017, tax refund processing fees totaled $1,692,000, a decrease of $356,000 from 2016.  The decrease was related to the lower per item fee received by the Company under the contract with the third-party tax refund product provider.  For the year ended December 31, 2017, all other noninterest income sources increased $109,000 from 2016, led by a decrease in losses on foreclosed properties.

For the three months ended December 31, 2017, noninterest expense totaled $8,136,000, a decrease of $193,000 from the same period in 2016.  For the year ended December 31, 2017, noninterest expense totaled $36,609,000, an increase of $3,710,000, or 11.3 percent, from 2016.  Generally, the acquisition of Milton during the third quarter of 2016 contributed to an increase in most noninterest expense categories on a year-to-date basis, related to having a larger organization after the merger.  However, for the year ended December 31 2017, merger related expenses decreased $891,000 from 2016.  The Company's largest noninterest expense, salaries and employee benefits, increased $537,000 as compared to the fourth quarter of 2016 and increased $1,935,000 as compared to the year of 2016.  The year-to-date increase was primarily related to adding Milton employees, annual merit increases, and higher health insurance expense.  As previously reported, management discovered four fraudulent wire transfers associated with a single account relationship totaling $933,000 during the second quarter of 2017.  As of December 31, 2017, management was able to recover $833,000 of the loss, of which $730,000 was recovered during the fourth quarter of 2017 via insurance coverage.  The remaining noninterest expenses increased $2,566,000 for 2017, as compared to 2016, led by data processing, professional fees, and foreclosure expense.

The Company's total assets at December 31, 2017 were $1.026 billion, an increase of $72 million, or 7.5 percent, from December 31, 2016.  The increase in assets was related to growth in loans of $34 million and interest-bearing deposits with banks of $34 million.  The growth in assets was funded predominately by an increase in deposits of $66 million.  At December 31, 2017, total shareholders' equity totaled $109 million, an increase of $4.8 million, or 4.6 percent, from the prior year end.