Ohio Valley Banc Corp. Reports 3rd Quarter Earnings

• Press Release
• Source: Ohio Valley Banc Corp.
• On 4:15 pm EDT, Monday October 19, 2009

GALLIPOLIS, Ohio, Oct. 19 /PRNewswire-FirstCall/ -- Ohio Valley Banc Corp. (Nasdaq: OVBC - News; the "Company") reported consolidated net income for the quarter ended September 30, 2009, of $1,700,000, a decrease of $185,000, or 9.8 percent, from the $1,885,000 earned for the third quarter of 2008. Earnings per share for the third quarter of 2009 were $.43, down 8.5 percent from the prior year's third quarter. For the nine months ended September 30, 2009, net income totaled $5,147,000, a 7.8 percent decrease from net income of $5,581,000 for the nine months ended September 30, 2008. Earnings per share were $1.29 for the first nine months of 2009 versus $1.38 for the first nine months of 2008, a decrease of 6.5 percent. Return on average assets and return on average equity decreased to .84 percent and 10.66 percent, respectively, for the nine months ended September 30, 2009, as compared to .95 percent and 12.20 percent, respectively, for the same period in the prior year.

The Company's earnings declined primarily due to the increase in FDIC insurance premiums that are being assessed on all FDIC insured financial institutions. For the nine months ended September 30, 2009, our premiums increased $1,148,000 over the same period last year. FDIC premiums for the third quarter of 2009 were up $201,000 from the third quarter of 2008. The higher insurance premiums had a dramatic impact on the financial results of the Company. For the nine months ended September 30, 2009, the net of tax increase in premiums reduced earnings per share by $.19, return on average assets by 9 basis points (1 basis point equals .01%) and return on average equity by 117 basis points. Based on the FDIC's restoration plan, management expects the heightened assessment levels to continue for up to eight years.

Net interest income, the Company's largest revenue source, increased $77,000 for the nine months ended September 30, 2009 compared to the same period last year. Third quarter 2009 net interest income was down $276,000, or 3.6 percent, from the third quarter of 2008. The increase in net interest income for the nine-month period was attributable to growth in the Company's average earning assets, which for the first nine months of 2009 had increased $37,679,000, or 5.1 percent, from the first nine months of 2008. However, the net interest margin started contracting in the second quarter due to higher relative balances being invested in overnight or short-term instruments, which also return lower yields. With deposit growth outpacing loan growth, the balances were deployed in liquid assets to fund either future loan growth or the acquisition of longer-term securities if interest rates rise. Since December 31, 2008, total deposits have increased $61,310,000. The increase was primarily related to management's focus on growing core deposits and the influx of deposits to various public fund accounts. The net interest margin for the third quarter of 2009 was 3.85 percent, a decrease from 4.27 percent for the third quarter of 2008. The net interest margin for the nine months ended September 30, 2009 was 4.01 percent, compared to 4.20 percent for the same period the prior year. Although the net interest margin has been trending down, it appears to have stabilized. Compared to the second quarter of 2009, the third quarter net interest margin improved 7 basis points as funds held in liquid assets were used to fund loan growth.

Contributing to growth in revenue was the increase in noninterest income. Noninterest income totaled $6,111,000 for the nine months ended September 30, 2009, as compared to $4,745,000 for the same period last year, an increase of 28.8 percent. For the three months ended September 30, 2009, noninterest income totaled $2,184,000, an increase of 38.8 percent from 2008's third quarter. Contributing to the double-digit growth in noninterest income was the gain on sale of loans. With the historically low mortgage rates, the Company elected to emphasize secondary market loans to reduce the exposure to rising interest rates. Even though the mortgage is sold, the Company retains the loan servicing and the customer relationship. The increase in volume generated a $603,000 increase in secondary market loan income for the nine months ended September 30, 2009, compared to the same period last year. In conjunction with various benefit plans, the Company maintains an investment in bank owned life insurance on key employees. During the third quarter, the Company received life insurance proceeds of $556,000, which generated an increase in earnings on bank owned insurance. Also contributing to the increase in noninterest income was the processing fee income earned from facilitating the clearing of tax refunds for a tax software provider. With continued growth in transaction volume, the associated fee income increased $251,000, or 93 percent, from the same period in 2008.

For the nine months ended September 30, 2009, noninterest expense totaled $20,134,000, an increase of $2,580,000, or 14.7 percent, when compared to the same period in the previous year. For the third quarter of 2009, noninterest expense increased $588,000, or 9.8 percent, from the third quarter in 2008. The higher FDIC insurance expense that was previously discussed was included in these increases in noninterest expense. The higher premiums contributed over 44 percent of the nine month increase and over 34 percent of the quarterly increase in noninterest expense. Salaries and employee benefits, the Company's largest noninterest expense, increased $814,000, or 7.8 percent, for the first nine months of 2009, as compared to the same period in 2008. Contributing to the increase were annual cost of living adjustments and an increase in the number of full-time equivalent employees from 266 at September 30 2008, to 272 at September 30, 2009. Comparing the nine-month periods, all remaining noninterest expenses were up $618,000, led by communication and equipment expense.

For the nine months ended September 30, 2009, management provided $2,101,000 to the allowance for loan losses, which represented a decrease of $209,000 from the same period last year. For the three months ended September 30, 2009, management provided $957,000 to the allowance for loan losses, an increase of $264,000 from the same period in the prior year. The decrease in the nine month provision expense was related to a decline in net charge-offs, largely due to a $648,000 recovery of a loan previously charged off. The annualized ratio of net charge-offs to average loans for the nine months ended September 30, 2009 was .27 percent, compared to .71 percent for the same period last year. Although net charge-offs declined, this was partially offset by an increase in nonperforming loans. The ratio of nonperforming loans to total loans was 1.10 percent at September 30, 2009 compared to .84 percent at December 31, 2008 and .70 percent at September 30, 2008. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that the allowance for loan losses at September 30, 2009 was adequate and reflects probable incurred losses in the portfolio. The allowance for loan losses was 1.33 percent of total loans at September 30, 2009, compared to 1.24 percent at December 31, 2008 and 1.10 percent at September 30, 2008.

"In this challenging economic environment, I'm pleased to report that our team of dedicated employees earned $1.7 million in the third quarter of 2009 and more than $5.1 million for the nine months ended September 30, 2009," stated Jeffrey E. Smith, President and CEO. "Even though our earnings for the quarter and nine months ended September, 2009 were lower by $185,000 and $434,000, respectively, when compared to 2008, at September 30, 2009 our nonperforming loans to total loans ratio stood at an enviable 1.10% and our nonperforming assets to total assets ratio stood at 1.51%. The lower operating earnings were impacted by lower loan demand generally, and higher FDIC insurance premiums specifically. In addition, the decision to shift real estate mortgage originations to secondary markets in this historically low interest rate environment has lowered interest income; but has decreased interest rate risk and increased liquidity, both of which we believe to be prudent in the current environment. We also believe the increased liquidity coupled with the significant growth in core deposits will increase our institution's flexibility as the economic environment improves."

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 six 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," "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, 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 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, 2008, for further discussion of the risks affecting the business of the Company and the value of an investment in its shares.

      OHIO VALLEY BANC CORP - Financial Highlights (Unaudited)

                                     Three months ended    Nine months ended
                                       September 30,         September 30,
                                      2009       2008       2009       2008
                                      ----       ----       ----       ----
      PER SHARE DATA
        Earnings per share            $0.43      $0.47      $1.29      $1.38
        Cash dividends per share      $0.20      $0.19      $0.60      $0.57
        Book value per share         $16.58     $15.53     $16.58     $15.53
        Dividend payout ratio (a)     46.86%     40.34%     46.43%     41.28%
        Weighted average shares
         outstanding              3,983,009  3,998,509  3,983,009  4,030,542

      PERFORMANCE RATIOS
        Return on average equity      10.27%     12.24%     10.66%     12.20%
        Return on average assets       0.82%      0.96%      0.84%      0.95%
        Net interest margin (b)        3.85%      4.27%      4.01%      4.20%
        Efficiency ratio (c)          67.56%     63.66%     68.38%     62.64%
        Average earning assets
         (in 000's)                $778,660   $729,715   $777,797   $740,118

      (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   Nine months ended
      (in $000's)                       September 30,       September 30,
                                       2009    2008         2009    2008
                                       ----    ----         ----    ----
      Interest income:
           Interest and fees on
            loans                    $10,854 $11,580      $33,300 $35,965
           Interest and dividends on
            securities                   879   1,077        2,754   3,279
                                         ---   -----        -----   -----
                Total interest
                 income               11,733  12,657       36,054  39,244
      Interest expense:
           Deposits                    3,516   3,914       10,527  13,070
           Borrowings                    769   1,019        2,496   3,220
                                         ---   -----        -----   -----
                Total interest
                 expense               4,285   4,933       13,023  16,290
                                       -----   -----       ------  ------
      Net interest income              7,448   7,724       23,031  22,954
      Provision for loan losses          957     693        2,101   2,310
      Noninterest income:
           Service charges on deposit
            accounts                     776     833        2,108   2,323
           Trust fees                     61      59          171     184
           Income from bank owned
            insurance                    755     200        1,158     576
           Gain on sale of loans          95      20          713     110
           Gain (loss) on sale of
            other real estate owned        1       7           28     (31)
           Other                         496     455        1,933   1,583
                                         ---     ---        -----   -----
                Total noninterest
                 income                2,184   1,574        6,111   4,745
      Noninterest expense:
           Salaries and employee
            benefits                   3,838   3,609       11,242  10,428
           Occupancy                     406     404        1,208   1,172
           Furniture and equipment       308     260           874     752
           Data processing               142     176           601     707
           FDIC insurance                322     121         1,303     155
           Other                       1,559   1,417         4,906   4,340
                                       -----   -----         -----   -----
                Total noninterest
                 expense               6,575   5,987        20,134  17,554
                                       -----   -----        ------  ------
      Income before income taxes       2,100   2,618         6,907   7,835
      Income taxes                       400     733         1,760   2,254
                                         ---     ---         -----   -----
      NET INCOME                      $1,700  $1,885        $5,147  $5,581
                                      ======  ======        ======  ======



      OHIO VALLEY BANC CORP - Consolidated Balance Sheets
       (Unaudited)


      (in $000's, except share data)     September 30,   December 31,
                                             2009           2008
                                             ----           ----
      ASSETS
      Cash and noninterest-bearing
       deposits with banks                 $10,088        $16,650
      Federal funds sold                         0          1,031
                                               ---          -----
           Total cash and cash
            equivalents                     10,088         17,681
      Interest-bearing deposits in
       other financial institutions         12,834            611
      Securities available-for-sale         92,651         75,340
      Securities held-to-maturity
       (estimated fair value:  2009 -
       $15,617, 2008 - $17,241)             15,270         16,986
      Federal Home Loan Bank stock           6,281          6,281
      Total loans                          648,370        630,391
        Less:  Allowance for loan
         losses                             (8,622)        (7,799)
                                            ------         ------
           Net loans                       639,748        622,592
      Premises and equipment, net           10,488         10,232
      Accrued income receivable              3,170          3,172
      Goodwill                               1,267          1,267
      Bank owned life insurance             18,446         18,153
      Other assets                           9,734          8,793
                                             -----          -----
                Total assets              $819,977       $781,108
                                          ========       ========

      LIABILITIES
      Noninterest-bearing deposits         $81,576        $85,506
      Interest-bearing deposits            572,095        506,855
                                           -------        -------
           Total deposits                  653,671        592,361
      Securities sold under agreements
       to repurchase                        29,853         24,070
      Other borrowed funds                  41,439         76,774
      Subordinated debentures               13,500         13,500
      Accrued liabilities                   15,461         11,347
                                            ------         ------
                Total liabilities          753,924        718,052

      SHAREHOLDERS' EQUITY
      Common stock ($1.00 stated value,
       10,000,000 shares authorized;
       2009 and 2008 - 4,642,748
       shares issued)                        4,643          4,643
      Additional paid-in capital            32,683         32,683
      Retained earnings                     43,509         40,752
      Accumulated other comprehensive
       income (loss)                           930            690
      Treasury stock at cost (2009 and
       2008 - 659,739 shares)              (15,712)      (15,712)
                                           -------        -------
                Total shareholders'
                 equity                     66,053         63,056
                                            ------         ------
                     Total liabilities and
                      shareholders'
                      equity              $819,977       $781,108
                                          ========       ========

Contact: Scott Shockey, CFO, (740) 446-2631

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