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


January 29, 2013

GALLIPOLIS, Ohio - Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter
ended December 31, 2012, of $1,604,000, an increase of 17.9 percent from the $1,361,000 earned for the fourth quarter of 2011. Earnings per share for the fourth quarter of 2012 were $.40, up 17.6 percent from the prior year fourth quarter. For the year ended December 31, 2012, net income totaled $7,052,000, a 20.9 percent increase from net income of $5,835,000 for the year ended December 31, 2011. Earnings per share were $1.75 for 2012 versus $1.46 for 2011, an increase of 19.9 percent. Return on average assets and return on average equity were .86 percent and 9.53 percent, respectively, for the year ended 2012, compared to .68 percent and 8.35 percent, respectively, for the same period in the prior year.

“Our fourth quarter capped off a remarkable year that saw earnings reach a level only surpassed once in the Company’s 140 year history. We are extremely proud of the effort put forth by our employees in the face of continued regulatory and economic challenges. We embrace the opportunity to promote our ‘Community First’ mission in 2013 and beyond,” stated Thomas E. Wiseman, President and CEO.

For the fourth quarter of 2012, net interest income decreased $507,000, or 6.1 percent, from the same period last year. For the year ended December 31, 2012, net interest income decreased $1,216,000, or 3.6 percent. Contributing to the lower net interest income was the decline in average earning assets. For the year ended December 31, 2012, average earning assets decreased $39 million, or 4.8 percent, from the same period last year, which occurred primarily in loans. A portion of the decline in average loan balances was due to a targeted reduction in certain underperforming loans and loans with less than desirable interest rate characteristics, such as fixed-rate mortgages. However, the Company’s net interest margin remains strong, and for the year ended December 31, 2012, the net interest margin increased to 4.29 percent, from 4.23 percent for the same period the prior year. The improvement in net interest margin was attributable to a decrease in our funding costs aided by a continued composition shift to lower costing transaction accounts from certificates of deposit and increased tax refund deposits held in noninterest-bearing accounts. Also impacting net interest income in 2012 was the decrease in loan fees associated with refund anticipation loans. After the 2011 tax season, the Bank ceased funding refund anticipation loans as recommended by the FDIC. As a result, refund anticipation loan fees earned in 2012 decreased $561,000 from the same period in 2011.

During the fourth quarter of 2012, a recovery of a loan previously charged-off was recorded totaling $1,250,000. As a result of the net recoveries for the quarter and the corresponding benefit on historical loss factors utilized in estimating the allowance for loan losses, provision expense for the fourth quarter of 2012 decreased $1,481,000 from the prior year fourth quarter. For the year ended December 31, 2012, management provided $1,583,000 to the allowance for loan losses, a decrease of $3,313,000 from the same period last year. The decrease in provision expense was related to the significant decrease in net charge-offs. For the year ended December 31, 2012 net charge-offs decreased $4,915,000 from the same period in 2011. The elevated net charge-offs experienced in 2011 were associated with the deterioration of collateral values on select impaired loans. The ratio of nonperforming loans to total loans was .71 percent at December 31, 2012 compared to 1.27% the prior quarter and .52 percent at December 31, 2011. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at December 31, 2012 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was 1.24 percent of total loans at December 31, 2012, compared to 1.23 percent at December 31, 2011.

For the three months ended December 31, 2012, noninterest income totaled $1,356,000, an increase of $538,000 from 2011’s fourth quarter. Noninterest income totaled $8,483,000 for the year ended December 31, 2012, as compared to $7,222,000 for the same period last year, an increase of $1,261,000, or 17.5 percent. The increase in noninterest income was primarily related to a reduction in losses recognized on foreclosed property. As a result, loss on other real estate owned for the fourth quarter of 2012 decreased $429,000 and for the year ended December 31, 2012, decreased $1,074,000 from their respective time periods in 2011. Also contributing to higher noninterest income was the increase in interchange income and mortgage banking income. By offering incentives to customers to utilize the bank’s debit and credit card for purchases, interchange income increased $313,000, or 22.6 percent, compared to 2011. During 2012, the level of interest rates offered on fixed-rate mortgages by the secondary market has remained low and during certain periods experienced historical lows, leading to an increase in borrowers refinancing their mortgages. As a result, mortgage banking income has increased $240,000, or 62.2 percent, from the year ended 2011. Included in noninterest income is tax processing fees received from a tax software provider. For the year ended December 31, 2012, tax processing fees totaled $2,289,000, a decrease of $270,000 from the same period the prior year. For the 2012 tax season, the number of tax refund items processed has increased; however, the per item fee was reduced from the prior year leading to lower tax processing fees. Although tax processing fees are down, management was pleased with the significant contribution from this revenue source, which accounted for nearly 27 percent of our year-to-date noninterest income.

For the three months ended December 31, 2012, noninterest expense totaled $8,290,000, an increase of $1,071,000 from the same period last year. For the year ended December 31, 2012, noninterest expense totaled $29,741,000, an increase of $1,442,000, or 5.1 percent, from the same period last year. Salaries and employee benefits, the Company’s largest noninterest expense, increased $768,000, or 4.6 percent, for the year ended 2012, as compared to the same period in 2011. The increase was primarily related to retirement benefit costs, while salary expense was limited to an increase of $188,000, or 1.5 percent. Also contributing to higher noninterest expense was the combined year-to-date increase of $917,000 related to donations, advertising, customer rewards for debit and credit card usage and a prepayment penalty associated with the extinguishment of above market FHLB advances. Partially offsetting the increases above was a combined year-to-date decrease of $667,000 related to FDIC insurance premiums, foreclosure costs and furniture and equipment expense. A portion of the increase in 2012 noninterest expense was associated with management electing to leverage the strong earnings by assuming a prepayment penalty to reduce interest expense in future years and to contribute more to the communities we serve by increasing donations.

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 15 offices in Ohio and West Virginia, and Loan Central, with seven consumer finance offices in Ohio. Ohio Valley Bank’s Right Start Checking account was recently named one of the nation’s “Top 10 Student Checking Accounts at Community Banks” by NerdWallet. Learn more about Ohio Valley Banc Corp. at www.ovbc.com.


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Foward-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,” “appears,” “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, taxes, the effects of implementation of the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 and the continuing economic uncertainty in various parts of the world; (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 the Company 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. See Item 1.A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, for further discussion of the risks affecting the business of the Company and the value of an investment in its shares.