GALLIPOLIS, Ohio — Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter ended March 31, 2017, of $3,217,000, an increase of $385,000, or 13.6 percent, from the same period the prior year. Earnings per share for the first quarter of 2017 were $.69, matching the first quarter of 2016. Return on average assets and return on average equity were 1.23 percent and 12.41 percent, respectively, for the first quarter of 2017, versus 1.29 percent and 12.50 percent, respectively, for the same period the prior year.
“Our communities have been very welcoming in new areas served by our Milton Banking Company Division. Their contributions enabled a successful first quarter,” stated Tom Wiseman, President and CEO. “As we put our ‘Community First’, creating an unmatched customer experience, nurturing quality loan growth, and building a unified team will continue to be key strategies in the months to come.”
For the first quarter of 2017, net interest income increased $1,765,000, or 19.4 percent, from the same period last year. Contributing to the growth in net interest income was the growth in earning assets. For the three months ended March 31, 2017, average earning assets increased $164 million from the same period the prior year. The growth in average earning assets was primarily attributable to the loan portfolio, which contributed $153 million of the growth in earning assets. 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 $106 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 $16 million for the first quarter of 2017, as compared to same period last year. 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 quarter ended March 31, 2017, the net interest margin was 4.52 percent, compared to 4.50 percent for the same period the prior year. The improvement in net interest margin was related to higher loan balances relative to total assets.
For the three months ended March 31, 2017, the provision for loan loss expense totaled $145,000, compared to $479,000 for the same period last year, a decrease of $334,000. For the three months ended March, 31, 2017, specific allocations on impaired loans decreased $2,390,000 from December 31, 2016. The decrease in specific allocations was related to a loan relationship no longer being deemed collateral dependent as the borrower’s financial performance improved, which resulted in the removal of a $1,681,000 specific allocation. In addition, management charged off $557,000 of the identified impairment on a separate collateral dependent loan during the quarter. For the three months ended March 31, 2017, net charge-offs totaled $530,000, an increase of $349,000 from the three months ended March 31, 2016. The net charge-offs during the first quarter of 2017 were primarily related to the charge-off of the specific allocation previously mentioned, which had already been provided for in the allowance for loan losses.
Partially offsetting the decrease in specific reserves was the increase in the general reserve for loan losses, which encompasses historical loss trends and certain economic risks related to the loan portfolio. At March 31, 2017, general reserves totaled $6,503,000, an increase of $2,006,000 from December 31, 2016. During the first quarter, we continued to experience lower historical loan loss factors, which prompted management to evaluate our exposure to losses incurred during an economic downturn. Based on historical losses incurred outside our lookback period, management included an economic risk factor to add general reserves for losses based upon the difference in our current historical loss factors and risks in the loan portfolio. Additionally, management evaluated recent changes in loan underwriting standards, which may expose the loan portfolio to additional credit risk. Therefore, an economic risk factor was added, which contributed additional general reserves.
The ratio of nonperforming loans to total loans at March 31, 2017 was 1.19 percent compared to 1.26 percent at December 31, 2016 and 1.24 percent at March 31, 2016. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at March 31, 2017 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was .99 percent of total loans at March 31, 2017, compared to 1.05 percent at December 31, 2016 and 1.19 percent at March 31, 2016.
For the first quarter of 2017, noninterest income totaled $3,113,000, a decrease of $122,000, or 3.8 percent, from the first quarter of 2016. For the three months ended March 31, 2017, tax refund processing fees totaled $1,376,000, a decrease of $378,000 from the same period the prior year. 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. Partially offsetting the decrease in tax refund processing fees was the increase in fee income related to the higher deposit base associated with the Milton acquisition. For the first quarter of 2017, interchange income earned from debit and credit transactions increased $194,000 and service charges on deposit accounts increased $99,000, respectively, from the same period last year.
Noninterest expense totaled $9,375,000 for the first quarter of 2017, an increase of $1,406,000, or 17.6 percent, from the same period last year. Generally, the acquisition of Milton contributed to an increase in most noninterest expense categories, related to having a larger organization after the merger. The Company’s largest noninterest expense, salaries and employee benefits, increased $794,000 from the first quarter of 2016. The increase was primarily related to adding Milton employees, annual merit increases, and higher health insurance expense. The remaining noninterest expenses increased $612,000, led by an increase in data processing, foreclosure costs and professional fees.
The Company’s total assets at March 31, 2017 were $1.037 billion, an increase of $82 million from December 31, 2016 and an increase of $153 million from March 31, 2016. The increase from December 31, 2016 was primarily related to the influx of deposits from seasonal tax refund processing. The increase from March 31, 2016 was primarily related to the acquisition of Milton, which provided $132 million in assets.
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 19 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.