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Section 1: 8-K (EARNINGS RELEASE 12/31/19)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

January 29, 2020
Date of Report (Date of earliest event reported)

OHIO VALLEY BANC CORP.    
(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of incorporation)

0-20914
31-1359191
(Commission File Number)
(IRS Employer Identification No.)

420 Third Avenue, Gallipolis, Ohio
45631
(Address of principal executive offices)
(Zip Code)

Registrant's telephone number, including area code:  (740) 446-2631

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).   Emerging growth company   c
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   c
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol
Name of each exchange on which registered
Common shares, without par value
OVBC
The NASDAQ Stock Market LLC (The NASDAQ Global Market)



Section 2 – Financial Information

Item 2.02.  Results of Operations and Financial Condition

On January 29, 2020, Ohio Valley Banc Corp. will issue a press release announcing financial results for its fourth quarter period ended December 31, 2019.  A copy of the press release is furnished with this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

Section 9 – Financial Statements and Exhibits

Item 9.01.  Financial Statements and Exhibits

(a)  Not applicable

(b)  Not applicable

(c)  Not applicable

(d)  Exhibits – The following exhibit is being filed with this Current Report on Form 8-K:

Exhibit Number
 
Description
     
99.1
 
Press release to be issued by Ohio Valley Banc Corp. on January 29,  2020.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




     
OHIO VALLEY BANC CORP.
 
Date:
January 29, 2020
By:
/s/Thomas E. Wiseman
     
Thomas E. Wiseman
Chief Executive Officer















EXHIBIT INDEX



Exhibit Number
 
Description
     
99.1
 
Press release to be issued by Ohio Valley Banc Corp. on January 29,  2020.

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Section 2: EX-99.1 (EARNINGS RELEASE 12/31/19 EXHIBIT 99.1)

EXHIBIT 99.1
January 29, 2020 - For immediate release
Contact:  Scott Shockey, CFO (740) 446-2631
Ohio Valley Banc Corp. Reports 4th Quarter and Fiscal Year Earnings

GALLIPOLIS, Ohio - Ohio Valley Banc Corp. [Nasdaq: OVBC] (the “Company”) reported consolidated net income for the quarter ended December 31, 2019, of $3,498,000, a decrease of $358,000 from the $3,856,000 earned for the fourth quarter of 2018.  Earnings per share for the fourth quarter of 2019 were $.73 compared to $.82 for the prior year fourth quarter.  For the year ended December 31, 2019, net income totaled $9,907,000, a decrease of $2,037,000, or 17.1 percent, from net income of $11,944,000 for the year ended December 31, 2018.  Earnings per share were $2.08 for 2019 versus $2.53 for 2018.  Return on average assets and return on average equity were .96 percent and 8.10 percent, respectively, for the year ended December 31, 2019, compared to 1.12 percent and 10.63 percent, respectively, for the same period in the prior year.

Thomas E. Wiseman, CEO of Ohio Valley Banc Corp., commented, “It’s not often a company records its second highest earnings, and yet feels the year wasn’t a complete success.  2019 began with the loss of a key line of business, tax refund processing.  While much was done to offset this sudden loss, in the final analysis, the revenue associated with this key line, which impacted both interest and noninterest income, simply couldn’t be replicated.  The Company did however take the opportunity to initiate changes that should positively impact expenses moving forward and continued to explore new revenue sources.  That along with the continued positive impact of our community first mission gives us momentum entering 2020.”

For the fourth quarter of 2019, net interest income decreased $427,000, and for the year ended December 31, 2019, net interest income decreased $674,000, from the same respective periods last year.  For the three months ended December 31, 2019, the decrease in net interest income was primarily related to the decrease in the net interest margin, which contracted in relation to actions taken by the Federal Reserve to reduce interest rates during the second half of 2019.  For the three months ended December 31, 2019, the net interest margin was 4.30 percent, compared to 4.50 percent for the same period the prior year.  The primary contributor to lower year-to-date net interest income was the decrease in average earning assets due to not processing tax refunds in 2019.  As previously disclosed in 2018, a third-party tax refund product provider elected to terminate the Ohio Valley Bank’s processing contract early.  During 2018, the processing of tax refunds provided $57 million in average deposits that were invested in the Federal Reserve.  This activity generated approximately $944,000 in interest revenue for the year ended December 31, 2018 that was not replicated in 2019.  For the year ended December 31, 2019, the net interest margin was 4.51 percent, compared to 4.43 percent for the same period the prior year.  The increase in the year-to-date net interest margin was primarily related to the higher balances maintained at the Federal Reserve during 2018, which diluted the net interest margin due to the yield on those balances being less than other earning assets, such as loans and securities.

For the three months ended December 31, 2019 and 2018, the Company recorded recovery of loan losses, which improved by $359,000, and for the year ended December 31, 2019, the provision for loan losses decreased $39,000, from the same respective periods in 2018.  For the three months ended December 31, 2019, the recovery of loan loss expense of $1,015,000 was primarily related to net recoveries of loans previously charged-off totaling $1,135,000.  During the fourth quarter of 2019, the Company received two large recoveries totaling $1,499,000.  In association with the heightened recoveries, the historical loan loss factors improved along with certain economic risk factors, which contributed to lower general reserves.  These improved trends were partially offset by an increase in specific allocations on collateral dependent impaired loans totaling $807,000.  For the year ended December 31, 2019, the provision for loan losses incurred of $1,000,000 was primarily related to year-to-date net loan charge-offs of $1,456,000 and an increase in specific allocations on collateral dependent impaired loans of $709,000, which was partially offset by lower general reserves in relation to improved economic risk factors, such as the level of criticized assets and historical loan loss factors.  The ratio of nonperforming loans to total loans was 1.30 percent at December 31, 2019 compared to 1.25 percent at December 31, 2018.  The allowance for loan losses was .81 percent of total loans at December 31, 2019, compared to .87 percent at December 31, 2018.

For the three months ended December 31, 2019, noninterest income totaled $3,210,000, an increase of $1,813,000 from the same period last year.  Noninterest income totaled $9,166,000 for the year ended December 31, 2019, an increase of $228,000 from the same period last year.  Contributing to the increase for the quarter was the net gain of $1,256,000 from the sale of the New Holland and Mount Sterling branch locations that occurred in the fourth quarter.  Also contributing to higher quarterly noninterest income was the decrease in the loss on sale of other real estate owned, which decreased $570,000 from the prior year fourth quarter.  The primary contributor to this decrease was the liquidation of one foreclosed property during the fourth quarter of 2018, which resulted in a loss on sale of $594,000.  The increase in year-to-date noninterest income was related to the gain on the branch sale and lower losses on other real estate owned, as discussed above.  Interchange income earned from debit and credit transactions also contributed to the increase.  For the year ended December 31, 2019, interchange income increased $243,000 from the same period last year in relation to the growth in number of cards issued and higher transaction volume.  Partially offsetting these increases was the decrease in tax refund processing fees.  In relation to the third-party tax refund provider terminating the contract as previously discussed, the Company experienced a decline in tax processing fees, which is a per item fee for each tax refund processed.  As a result of Ohio Valley Bank not performing such service in 2019, tax processing fees decreased $1,574,000 from year ended December 31, 2018.

For the three months ended December 31, 2019, noninterest expense totaled $10,401,000, an increase of $2,218,000 from the same period last year.  For the year ended December 31, 2019, noninterest expense totaled $39,498,000, an increase of $2,072,000, or 5.5 percent, from the same period last year.  The Company’s largest noninterest expense, salaries and employee benefits, increased $1,398,000 as compared to the fourth quarter of 2018 and increased $1,333,000 as compared to the year ended December 31, 2018.  During the fourth quarter of 2019, the Company offered a voluntary severance package to select employees meeting certain criteria.  In relation to those that accepted the severance package, the Company incurred a one-time expense of $1,507,000, which is anticipated to reduce salary and employee benefit expense going forward.  Absent the severance payout, salary and employee benefit expense would have decreased from the prior year primarily due to the lower number of employees in 2019, which more than offset the expense increase associated with annual merit increases.  Further contributing to higher year-to-date noninterest expense was an increase in professional fees of $492,000 from the year ended December 31, 2018, primarily due to litigation related to the early termination of the Ohio Valley Bank’s tax refund processing contract.  Partially offsetting the increases above was the decrease in FDIC insurance premiums.  For the year ended December 31, 3019, FDIC insurance premiums decreased $334,000 in relation to a lower assessment rate and the receipt of a portion of our premium credit granted by the FDIC during the second half of 2019.

The Company’s total assets at December 31, 2019 were $1.013 billion, a decrease of $17 million from December 31, 2018.  The decrease in assets was related to a $19 million decrease in cash and cash equivalents due to the funding requirement associated with the sale of branches.  Included in the sale of branches was $26 million in deposits, which contributed to the $25 million decrease in total deposits from December 31, 2018.  At December 31, 2019, total shareholders’ equity totaled $128 million, an increase of $10.3 million, or 8.7 percent, from the prior year end.

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 16 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.

Caution Regarding Forward-Looking Information

Certain statements contained in this earnings release that 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 federal legislation with respect to taxes and government spending 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, 2018, 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
   
Twelve months ended
 
   
December 31,
   
December 31,
 
   
2019
   
2018
   
2019
   
2018
 
PER SHARE DATA
                       
  Earnings per share
 
$
0.73
   
$
0.82
   
$
2.08
   
$
2.53
 
  Dividends per share
 
$
0.21
   
$
0.21
   
$
0.84
   
$
0.84
 
  Book value per share
 
$
26.77
   
$
24.87
   
$
26.77
   
$
24.87
 
  Dividend payout ratio (a)
   
28.68
%
   
25.77
%
   
40.37
%
   
33.20
%
  Weighted average shares outstanding
   
4,783,078
     
4,737,193
     
4,767,279
     
4,725,971
 
                                 
DIVIDEND REINVESTMENT (in 000's)
                               
  Dividends reinvested under
                               
     employee stock ownership plan (b)
 
$
-
   
$
-
   
$
179
   
$
173
 
  Dividends reinvested under
                               
     dividend reinvestment plan (c)
 
$
360
   
$
289
   
$
1,438
   
$
1,348
 
                                 
PERFORMANCE RATIOS
                               
  Return on average equity
   
11.05
%
   
13.39
%
   
8.10
%
   
10.63
%
  Return on average assets
   
1.33
%
   
1.49
%
   
0.96
%
   
1.12
%
  Net interest margin (d)
   
4.30
%
   
4.50
%
   
4.51
%
   
4.43
%
  Efficiency ratio (e)
   
75.89
%
   
66.40
%
   
75.02
%
   
70.47
%
  Average earning assets (in 000's)
 
$
967,403
   
$
963,707
   
$
965,047
   
$
997,385
 
                                 
(a) Total dividends paid as a percentage of net income.
                         
(b) Shares purchased from OVBC.
                               
(c) Shares may be purchased from OVBC and on secondary market.
                         
(d) Fully tax-equivalent net interest income as a percentage of average earning assets.
                 
(e) 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,
 
     
2019
     
2018
     
2019
     
2018
 
Interest income:
                               
     Interest and fees on loans
 
$
11,190
   
$
11,231
   
$
45,766
   
$
44,365
 
     Interest and dividends on securities
   
821
     
851
     
3,330
     
3,224
 
     Interest on interest-bearing deposits with banks
   
244
     
287
     
1,221
     
1,608
 
          Total interest income
   
12,255
     
12,369
     
50,317
     
49,197
 
Interest expense:
                               
     Deposits
   
1,580
     
1,221
     
6,026
     
4,155
 
     Borrowings
   
289
     
335
     
1,239
     
1,316
 
          Total interest expense
   
1,869
     
1,556
     
7,265
     
5,471
 
Net interest income
   
10,386
     
10,813
     
43,052
     
43,726
 
Provision for (recovery of) loan losses
   
(1,015
)
   
(656
)
   
1,000
     
1,039
 
Noninterest income:
                               
     Service charges on deposit accounts
   
545
     
533
     
2,118
     
2,084
 
     Trust fees
   
69
     
66
     
264
     
263
 
Income from bank owned life insurance and
                         
       annuity assets
   
170
     
195
     
704
     
717
 
     Mortgage banking income
   
83
     
117
     
310
     
342
 
     Electronic refund check / deposit fees
   
----
     
13
     
5
     
1,579
 
     Debit / credit card interchange income
   
970
     
926
     
3,905
     
3,662
 
     Loss on other real estate owned
   
(64
)
   
(634
)
   
(65
)
   
(559
)
     Net gain on branch divestitures
   
1,256
     
----
     
1,256
     
----
 
     Other
   
181
     
181
     
669
     
850
 
          Total noninterest income
   
3,210
     
1,397
     
9,166
     
8,938
 
Noninterest expense:
                               
     Salaries and employee benefits
   
6,809
     
5,411
     
23,524
     
22,191
 
     Occupancy
   
401
     
418
     
1,771
     
1,754
 
     Furniture and equipment
   
272
     
248
     
1,060
     
1,023
 
     Professional fees
   
549
     
479
     
2,508
     
2,016
 
     Marketing expense
   
31
     
(10
)
   
841
     
777
 
     FDIC insurance
   
----
     
79
     
113
     
447
 
     Data processing
   
367
     
(65
)
   
1,996
     
2,115
 
     Software
   
505
     
373
     
1,705
     
1,533
 
     Foreclosed assets
   
79
     
74
     
266
     
238
 
     Amortization of intangibles
   
117
     
30
     
206
     
135
 
     Other
   
1,271
     
1,146
     
5,508
     
5,197
 
          Total noninterest expense
   
10,401
     
8,183
     
39,498
     
37,426
 
Income before income taxes
   
4,210
     
4,683
     
11,720
     
14,199
 
Income taxes
   
712
     
827
     
1,813
     
2,255
 
NET INCOME
 
$
3,498
   
$
3,856
   
$
9,907
   
$
11,944
 


OHIO VALLEY BANC CORP - Consolidated Balance Sheets (Unaudited)
       
             
(in $000's, except share data)
 
December 31,
   
December 31
 
   
2019
   
2018
 
ASSETS
           
Cash and noninterest-bearing deposits with banks
 
$
12,812
   
$
13,806
 
Interest-bearing deposits with banks
   
39,544
     
57,374
 
     Total cash and cash equivalents
   
52,356
     
71,180
 
Certificates of deposit in financial institutions
   
2,360
     
2,065
 
Securities available for sale
   
105,318
     
102,164
 
Securities held to maturity (estimated fair value:  2019 - $12,404; 2018 - $16,234)
   
12,033
     
15,816
 
Restricted investments in bank stocks
   
7,506
     
7,506
 
Total loans
   
772,774
     
777,052
 
  Less:  Allowance for loan losses
   
(6,272
)
   
(6,728
)
     Net loans
   
766,502
     
770,324
 
Premises and equipment, net
   
19,217
     
14,855
 
Premises and equipment held for sale, net
   
653
     
----
 
Other real estate owned
   
540
     
430
 
Accrued interest receivable
   
2,564
     
2,638
 
Goodwill
   
7,319
     
7,371
 
Other intangible assets, net
   
174
     
379
 
Bank owned life insurance and annuity assets
   
30,596
     
29,392
 
Operating lease right-of-use asset, net
   
1,053
     
----
 
Other assets
   
5,081
     
6,373
 
          Total assets
 
$
1,013,272
   
$
1,030,493
 
                 
LIABILITIES
               
Noninterest-bearing deposits
 
$
222,607
   
$
237,821
 
Interest-bearing deposits
   
598,864
     
608,883
 
     Total deposits
   
821,471
     
846,704
 
Other borrowed funds
   
33,991
     
39,713
 
Subordinated debentures
   
8,500
     
8,500
 
Operating lease liability
   
1,053
     
----
 
Accrued liabilities
   
20,078
     
17,702
 
          Total liabilities
   
885,093
     
912,619
 
                 
SHAREHOLDERS' EQUITY
               
Common stock ($1.00 stated value per share, 10,000,000 shares authorized;
         
  2019 - 5,447,185 shares issued; 2018 - 5,400,065 shares issued)
   
5,447
     
5,400
 
Additional paid-in capital
   
51,165
     
49,477
 
Retained earnings
   
86,751
     
80,844
 
Accumulated other comprehensive income (loss)
   
528
     
(2,135
)
Treasury stock, at cost (659,739 shares)
   
(15,712
)
   
(15,712
)
          Total shareholders' equity
   
128,179
     
117,874
 
               Total liabilities and shareholders' equity
 
$
1,013,272
   
$
1,030,493
 


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