Gallipolis, Ohio - Ohio Valley Banc Corp. [Nasdaq: OVBC] (the "Company") reported consolidated net income for the quarter ended September 30, 2013, of $1,407,000, an increase of 27.1 percent from the $1,107,000 earned for the third quarter of 2012. Earnings per share for the third quarter of 2013 were $.35, up 29.6 percent from the prior year third quarter. For the nine months ended September 30, 2013, net income totaled $6,572,000, a 20.6 percent increase from net income of $5,448,000 for nine months ended September 30, 2012. Earnings per share were $1.62 for the first nine months of 2013 versus $1.35 for the first nine months of 2012, an increase of 20.0 percent. Return on average assets and return on average equity was 1.11 percent and 11.32 percent, respectively, for the nine months ended September 30, 2013, compared to .87 percent and 9.89 percent, respectively, for the same period in the prior year.
"We are pleased with the quarter and year-to-date results," stated Thomas E. Wiseman, President and CEO. "As we look to the future, we continue to be mindful of soft loan demand throughout our region. Our employees have taken proactive steps to supplement interest income through expense savings and the development of alternative sources of revenue. We continue to benefit from lower loan loss reserves, a direct result of our aggressive handling of troubled assets in prior years. In pursuing our 'Community First' mission, our employees are finding new and innovative ways to connect with each other, our customers, and our communities, all to the benefit of our shareholders."
For the third quarter of 2013, net interest income increased $63,000 from the same period last year. The increase was related to the higher net interest margin for the third quarter, which more than offset the $52 million decline in average assets. The decline in earning assets occurred primarily in low yielding balances at the Federal Reserve, which positively impacted our yield on total earning assets. When combined with the continued decrease in funding costs, the net interest margin increased to 4.57 percent for the third quarter of 2013, as compared to 4.23 percent for the prior year third quarter. For the nine months ended September 30, 2013, net income decreased $640,000, or 2.6 percent. Contributing to the lower year-to-date net interest income was the decline in average earning assets, which was partially offset by a higher net interest margin. For the nine months ended September 30, 2013, average earning assets decreased $42 million from the same period last year, which occurred in Federal Reserve balances and loans. For the nine months ended September 30, 2013, the net interest margin increased to 4.43 percent, from 4.30 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.
For the three months ended September 30, 2013, management provided $309,000 to the allowance for loan losses., a decrease of $874,000 from the same period last year. For the nine months ended September 30, 2013, management provided $151,000 to the allowance for loan losses, a decrease of $2,872,000 from the same period last year. The significant decline in provision for loan loss expense was due to a decrease in charge-offs and nonperforming loans. For the nine months ended September 30, 2013, net charge-offs totaled only $313,000, a decrease of $1,869,000 from the same period in 2012. The ratio of nonperforming loans to total loans was .84 percent at September 30, 2013 compared to 1.27 percent at September 30, 2012. With the continued improvement in asset quality trends, the historical loss factors utilized to estimate the allowance for loan losses have also decreased. As a result, general reserves have decreased, which contributed to lower provision for the three and nine months ended September 30, 2013. Based on the evaluations of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at September 30, 2013 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was 1.21 percent of total loans at September 30, 2013, compared to 1.24 percent at December 31, 2012 and 1.46 percent at September 30, 2013.
For the three months ended September 30, 2013, noninterest income totaled $1,574,000, a decrease of $1000,000 from 2012's third quarter, primarily due to lower mortgage banking income as originations declined due to higher mortgage interest rates. Noninterest income totaled $7,479,000 for the nine months ended September 30, 2013, as compared to $7,127,000 for the same period last year, an increase of $352,000, or 4.9 percent. Contributing to higher year-to-date noninterest income was life insurance proceeds, tax refund processing fees and interchange fee income. In conjunction with various benefit plans for directors and key employees, the Company maintains an investment in bank owned life insurance fee income. During the first quarter, the Company received life insurance proceeds of $452,000. For the nine months ended September 30, 2013, tax processing fees totaled $2,532,000, an increase of $253,000 from the same period the year prior due to an increase in the number of tax refund items processed. Further contributing to revenue growth was the increase in interchange fees earned on debit and credit card transactions. By continuing to offer incentives to customers to utilize the bank's debit and credit cards for purchases, interchange income increased $209,000, or 16.9 percent, for the nine months ended September 30, 2013, as compared to the same period in 2012.
For the three months ended September 30, 2013, noninterest expense totaled $7,320,000, an increase of $363,000 from the same period last year. For the nine months ended September 30, 2013, noninterest expense totaled $22,585,000, an increase of $1,134,000, or 5.3 percent, from the same period last year. Contributing to the increase was salaries and employee benefits, which increased $208,000, or 5.1 percent, for the three months ended September 30, 2013, as compared to the same periods in 2012. The increase was primarily related to annual merit increases and retirement benefit costs. In association with the higher debit and credit card transaction volume, the related customer reward expense has increased as well. For the quarter, customer reward expense increased $53,000, and for the first nine months of 2013, increased $178,000 from the same time periods in 2012. Also contributing to higher year-to-date noninterest expense was the increase in foreclosure costs associated with bank owned properties. For the nine months ended September 30, 2013, foreclosure costs increased $212,000 due to a premium paid with the early redemption of trust preferred securities. During the first quarter of 2013, the Company exercised the option to redeem $5 million in trust preferred securities prior to maturity, which is anticipated to have a favorable impact on future earnings due to the elimination of the annual interest expense on the securities totaling $530,000.
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. Learn more about Ohio Valley Banc Corp. at www.ovbc.com
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, 2012, for further discussion of the risks affecting the business of the Company and the value of an investment in its shares.