Ohio Valley Banc Corp. (NASDAQ: OVBC) has demonstrated resilience and consistent performance in the face of a challenging macroeconomic landscape. The company, which owns The Ohio Valley Bank Company and Loan Central, Inc., has maintained a strong financial position, delivered steady growth, and provided attractive shareholder returns.
For the full year 2023, Ohio Valley Banc Corp. reported net income of $12,631,000, a testament to the company's ability to navigate economic headwinds. Annual revenue reached $74,479,000, showcasing the strength of Ohio Valley Banc Corp.'s diversified business model. The company's annual operating cash flow stood at $20,746,000, while free cash flow amounted to $17,707,000, providing ample liquidity and financial flexibility.
In the latest quarter ended March 31, 2024, Ohio Valley Banc Corp. continued to deliver solid results. Net income for the quarter was $2,793,000, with revenue reaching $14,886,000. Operating cash flow for the quarter was $928,000, and free cash flow came in at $234,000.
Business Overview
Ohio Valley Banc Corp. is primarily engaged in commercial and retail banking, offering a blend of commercial and consumer banking services within southeastern Ohio and western West Virginia. The company's banking services include the acceptance of deposits, the making and servicing of personal, commercial, and real estate loans, as well as credit card services. Additionally, Ohio Valley Banc Corp.'s Loan Central subsidiary provides consumer finance services.The company's loan portfolio is well-diversified, with commercial real estate loans comprising the largest segment at 33.9% of the total, followed by residential real estate loans at 32.8% and commercial and industrial loans at 16.2%. The consumer loan portfolio accounts for 17.1% of the total. This diversification helps Ohio Valley Banc Corp. mitigate concentration risks and maintain a balanced risk profile.
Geographic Breakdown and Revenue Drivers
Ohio Valley Banc Corp.'s operations are primarily concentrated in southeastern Ohio and western West Virginia, with 17 branch locations across the region. The company's banking segment, which includes The Ohio Valley Bank Company, contributed 93.8% of total consolidated revenues in the first quarter of 2024, while the consumer finance segment, Loan Central, accounted for the remaining 6.2%.Within the banking segment, the company has experienced growth across several key revenue drivers. Net interest income, the largest component of revenue, increased by 25.2% year-over-year in the first quarter, driven by higher yields on the loan portfolio and growth in average earning assets. Noninterest income, which includes fees and other revenue streams, remained relatively stable, declining by 1.9% compared to the same period in the prior year.
The consumer finance segment, Loan Central, has also contributed to Ohio Valley Banc Corp.'s overall performance, with revenue increasing by 3.7% year-over-year in the first quarter of 2024. This segment provides tax refund advance loans and other consumer finance products, diversifying the company's revenue streams.
Financial Strength and Liquidity
Ohio Valley Banc Corp. maintains a strong financial position, with a solid capital base and ample liquidity. As of March 31, 2024, the company's total assets stood at $1,372,599,000, an increase of 1.5% from the end of 2023. Shareholders' equity totaled $145,782,000, representing a healthy equity-to-assets ratio of 10.6%.The company's regulatory capital ratios remain well above the "well-capitalized" minimums, providing a cushion against potential economic uncertainties. Ohio Valley Banc Corp.'s Community Bank Leverage Ratio (CBLR) was 10.65% as of March 31, 2024, significantly higher than the 9.0% requirement for qualifying community banking organizations.
In terms of liquidity, Ohio Valley Banc Corp. maintains a diversified funding base, with deposits representing the primary source of funding. Total deposits stood at $1,148,784,000 as of March 31, 2024, an increase of 1.9% from the end of 2023. The company also has access to additional liquidity sources, such as borrowing capacity from the Federal Home Loan Bank and the ability to raise funds through wholesale channels, providing flexibility to meet its funding needs.
Risks and Challenges
While Ohio Valley Banc Corp. has demonstrated resilience, the company is not immune to the challenges facing the banking industry. The elevated interest rate environment, increased competition for deposits, and potential economic headwinds pose risks that the company must navigate.The company's net interest margin, a key profitability metric, declined by 60 basis points year-over-year in the first quarter of 2024, as the cost of funding sources increased more than the yield on earning assets. Ohio Valley Banc Corp.'s management will need to continue to actively manage its balance sheet and pricing strategies to mitigate margin compression.
Additionally, the company's loan portfolio, while well-diversified, is subject to credit risk. Ohio Valley Banc Corp.'s provision for credit losses increased by 53.6% in the first quarter of 2024 compared to the same period in the prior year, reflecting the need for heightened vigilance in underwriting and portfolio management.
Outlook and Shareholder Returns
Despite the challenges, Ohio Valley Banc Corp. remains focused on delivering value to its shareholders. The company recently declared a quarterly cash dividend of $0.22 per share, payable on August 10, 2024, to shareholders of record as of July 26, 2024. This dividend, coupled with the company's consistent financial performance, underscores Ohio Valley Banc Corp.'s commitment to shareholder returns.Looking ahead, Ohio Valley Banc Corp.'s management team is cautiously optimistic about the company's prospects. While the macroeconomic environment remains uncertain, the company's diversified business model, strong capital position, and prudent risk management practices position it well to navigate the challenges and capitalize on growth opportunities.