January 16, 2007 - For immediate release
Contact: Scott Shockey, CFO (740) 446-2631
Ohio Valley Banc Corp Reports 4th Quarter and Fiscal Year Results
GALLIPOLIS, Ohio - Ohio Valley Banc Corp [Nasdaq: OVBC] reported consolidated
net income for the quarter ended December 31, 2006, of $16,000, or $.00 per
share, compared to $1,979,000, or $.46 per share, for the fourth quarter of
2005. For the year ended December 31, 2006, consolidated net income was
$5,398,000, a decrease of 23.1 percent from the year ended December 31, 2005 net
income of $7,017,000. Earnings per share were $1.27 for the year of 2006 versus
$1.64 for the year of 2005, a decrease of 22.6 percent. Return on average assets
and return on average equity both decreased to .71 percent and 9.00 percent,
respectively, for the twelve months ended December 31, 2006, as compared to .97
percent and 12.18 percent, respectively, for the same time period in the prior
year.
The decline in quarterly and year-to-date earnings was related to a higher
provision for loan losses. Contributing to the higher provision expense was an
increase in both nonperforming loans and loan charge-offs. During the fourth
quarter, a loan relationship totaling $6.7 million, or 1.07 percent of total
loans, was determined by management to be impaired due to certain events and
subsequently placed on nonaccrual status. The loans are primarily secured by
commercial real estate and based on management's assessment of the loan
relationship; a specific allocation for loan losses was made totaling $2
million, which required a corresponding increase in provision for loan losses.
Additionally, management charged off $2.3 million on existing nonperforming
loans during the fourth quarter. While the allowance for loan losses already
reflected the probable loss on these previously identified nonperforming loans,
the charge-offs increased the Company's historical loss experience for
commercial loans, resulting in an increase in the allowance for loan losses for
general allocations to reflect increased risk in the portfolio.
Due to both the increase in specific allocations of the allowance for loan
losses and increased loss history which called for an increase in the general
allocations, management provided $3,731,000 to the allowance for loan losses for
the three months ended December 31, 2006, an increase of $3,082,000 from the
same time period the prior year. For the fiscal year ended December 31, 2006,
the provision for loan losses totaled $5,662,000, as compared to $1,797,000 for
the prior fiscal year, an increase of $3,865,000.
The Company's ratio of nonperforming loans to total loans was at 2.14
percent at December 31, 2006, compared to .41 percent at December 31, 2005. The
ratio of nonperforming assets to total assets was 2.00 percent at December 31,
2006, compared to .62 percent at December 31, 2005. The Company's net
charge-offs for the twelve months ended December 31, 2006 were up $1,543,000
from the same twelve-month period in 2005, occurring primarily in commercial
loans. The allowance for loan losses was 1.51 percent of total loans at December
31, 2006, compared to 1.16 percent at December 31, 2005. Management believes
that the allowance for loan losses is adequate and reflects probable incurred
losses in the portfolio.
Net interest income, the Company's largest revenue source, totaled
$28,490,000 for the twelve months ended December 31, 2006, an increase of
$556,000, or 2.0 percent, over the same time period last year. This increase was
attributable to the growth in the Company's earning assets during 2006,
partially offset by a decline in the net interest margin. The average earning
assets for the year 2006 were up $32,100,000, or 4.7 percent, from the same time
period in 2005, driven by commercial and residential real estate lending. The
net interest margin for the twelve months ended December 31, 2006 was 4.02
percent, compared to 4.11 percent for the same time period the prior year. For
the fourth quarter of 2006, net interest income was down $403,000, or 5.6
percent, from the prior year fourth quarter. Although the Company's earning
assets were up $27,430,000 for the fourth quarter of 2006, as compared to the
fourth quarter of 2005, the growth was more than offset by a lower net interest
margin. Comparing the fourth quarter of 2006 to the fourth quarter of 2005, the
net interest margin was down 36 basis points. The decline in net interest margin
was partially related to a higher balance of loans on nonaccrual status.
Noninterest income totaled $5,830,000 for the twelve months ended December
31, 2006, compared to $5,522,000 for the same time period last year, an increase
of 5.6 percent. For the three months ended December 31, 2006, noninterest income
totaled $1,437,000 and was down 1.5 percent from 2005's fourth quarter.
Contributing to the year-to-date noninterest income growth was the increase in
revenue from additional investments in bank owned life insurance throughout 2005
in addition to life insurance proceeds received in 2006. Furthermore, income
growth continues to be enhanced by the increased volume of transactions
utilizing the Company's Jeanie(R) Plus debit card. Interchange fees earned for
the year 2006 were up 16.1 percent from the year 2005. For the same time period,
monthly service charge fees decreased 17.5 percent due to the growth in the
number of Easy Checking accounts featuring no service charge or minimum balance
requirements. The Easy Checking account, a transaction account with electronic
features, increases the company's core deposits, increases interchange fees and
decreases processing costs.
On a year-to-date basis, noninterest expense totaled $21,199,000 in 2006, a
decrease of $160,000 when compared to the previous year. On a quarter-to-date
basis, noninterest expense decreased $463,000, or 9.1 percent, from the fourth
quarter in 2005. Salaries and employee benefits, the Company's largest
noninterest expense, decreased $340,000, or 2.6 percent, for the twelve months
ended December 31, 2006 and decreased $574,000, or 17.6 percent, for the three
months ended December 31, 2006. The decrease in personnel expense was related to
a decline in the number of employees in addition to a reduction in incentive
compensation due to lower corporate performance. The remaining noninterest
expense categories were collectively up only 2.1 percent, or $180,000, from
2005, led by additional collection expense associated with the higher
nonperforming loans. The emphasis management placed on expense control
contributed to an improvement in efficiency. The efficiency ratio improved to
61.20 percent for 2006, as compared to 63.49 percent for 2005.
Total assets increased $14,642,000 from year end 2005 to reach $764,361,000
at December 31, 2006. The asset growth resulted from an increase in loans of
$7,632,000, occurring primarily in commercial and residential real estate loans.
Funding loan growth was an increase in money market deposits and certificates of
deposit which contributed to total deposit growth of $30,920,000 from year end
2005. The growth in retail deposits permitted the Company to reduce borrowed
funds by $19,141,000 from year end 2005.
"The 2006 financial results are not reflective of the effort given by our
employees but are the result of prudent and necessary actions required to
address asset quality," stated Jeffrey E. Smith, President and CEO. "Employee
efforts contributed to solid growth in both interest and noninterest income and
strong expense control. Those efforts will continue as our lenders, collectors
and attorneys continue to work diligently to resolve or liquidate problem
credits."
Ohio Valley Banc Corp common stock is traded on the NASDAQ Global Market
under the symbol OVBC. The holding company owns three subsidiaries: Ohio Valley
Bank, with 16 offices in Ohio and West Virginia; Loan Central, with five
consumer finance offices in Ohio; and Ohio Valley Financial Services, an
insurance agency based in Jackson, Ohio. Learn more about Ohio Valley Banc Corp
at www.ovbc.com.
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," "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, and taxes; (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. Forward-looking statements speak only as of the date
on which they are made and Ohio Valley 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.
OHIO VALLEY BANC CORP - Financial Highlights (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
------------- ------------ ------------- ---------------
PER SHARE DATA
Earnings per share $0.00 $0.46 $1.27 $1.64
Dividends per share $0.17 $0.16 $0.67 $0.63
Book value per share $14.38 $13.90 $14.38 $13.90
Dividend payout ratio (a) 4639.40% 34.49% 52.56% 38.55%
Weighted average shares outstanding 4,204,616 4,268,096 4,230,551 4,278,562
PERFORMANCE RATIOS
Return on average equity 0.10% 13.38% 9.00% 12.18%
Return on average assets 0.01% 1.06% 0.71% 0.97%
Net interest margin (b) 3.78% 4.14% 4.02% 4.11%
Efficiency ratio (c) 55.44% 58.26% 61.20% 63.49%
Average earning assets (in 000's) $724,415 $696,985 $716,790 $684,690
(a) Total dividends paid as a percentage of net income.
(b) Fully tax-equivalent net interest income as a percentage of average
earning assets.
(c) Noninterest expense as a percentage of fully tax-equivalent net interest
income plus noninterest income.
OHIO VALLEY BANC CORP - Consolidated Statements of Income (Unaudited)
Three months ended Twelve months ended
(in $000's) December 31, December 31,
2006 2005 2006 2005
------------- ------------ ------------- ---------------
Interest income:
Interest and fees on loans $ 12,235 $ 11,362 $ 48,514 $ 42,621
Interest and dividends on securities 1,105 869 3,907 3,450
Total interest income 13,340 12,231 52,421 46,071
Interest expense:
Deposits 5,253 3,682 18,594 12,973
Borrowings 1,282 1,341 5,337 5,164
Total interest expense 6,535 5,023 23,931 18,137
Net interest income 6,805 7,208 28,490 27,934
Provision for loan losses 3,731 649 5,662 1,797
Noninterest income:
Service charges on deposit accounts 742 797 2,987 3,096
Trust fees 56 51 221 211
Income from bank owned insurance 180 149 907 589
Gain on sale of loans 29 32 104 120
Other 430 430 1,611 1,506
Total noninterest income 1,437 1,459 5,830 5,522
Noninterest expense:
Salaries and employee benefits 2,694 3,268 12,497 12,837
Occupancy 339 330 1,338 1,309
Furniture and equipment 309 305 1,120 1,206
Data processing 74 132 687 633
Other 1,205 1,049 5,557 5,374
Total noninterest expense 4,621 5,084 21,199 21,359
Income before income taxes -110 2,934 7,459 10,300
Income taxes -126 955 2,061 3,283
NET INCOME $ 16 $ 1,979 $ 5,398 $ 7,017
OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)
(in $000's, except share and per share data) December 31, December 31,
2006 2005
--------------- -----------------
ASSETS
Cash and noninterest-bearing deposits with banks $ 18,965 $ 18,516
Federal funds sold 1,800 1,100
Total cash and cash equivalents 20,765 19,616
Interest-bearing deposits in other financial institutions 508 510
Securities available-for-sale 70,267 66,328
Securities held-to-maturity
(estimated fair value: 2006 - $13,586, 2005 - $12,373) 13,350 12,088
FHLB stock 6,036 5,697
Total loans 625,164 617,532
Less: Allowance for loan losses (9,412) (7,133)
Net loans 615,752 610,399
Premises and equipment, net 9,812 8,299
Accrued income receivable 3,234 2,819
Goodwill 1,267 1,267
Bank owned life insurance 16,054 15,962
Other assets 7,316 6,734
Total assets $ 764,361 $ 749,719
LIABILITIES
Noninterest-bearing deposits $ 77,960 $ 82,561
Interest-bearing deposits 515,826 480,305
Total deposits 593,786 562,866
Securities sold under agreements to repurchase 22,556 29,070
Other borrowed funds 63,546 76,173
Subordinated debentures 13,500 13,500
Accrued liabilities 10,691 8,839
Total liabilities 704,079 690,448
SHAREHOLDERS' EQUITY
Common stock ($1.00 stated value, 10,000,000 shares authorized; 2006 -
4,626,339 shares issued,
2005 - 4,626,336 shares issued) 4,626 4,626
Additional paid-in-capital 32,282 32,282
Retained earnings 34,404 31,843
Accumulated other comprehensive income (981) (1,231)
Treasury stock at cost (2006 - 432,851 shares, 2005 - 361,365 shares) (10,049) (8,249)
Total shareholders' equity 60,282 59,271
Total liabilities and shareholders' equity $ 764,361 $ 749,719