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OHIO VALLEY BANC CORP 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

OHIO VALLEY BANC CORP

Filing date:

03/14/2025

TLDR:

ELI5:

Ohio Valley Banc Corp., a bank holding company, grew its business in 2024, but made less profit because its expenses increased and it earned less on its loans compared to its costs.

Accession #:

0001140361-25-008828

Published on

Analyst Summary

  • Net income decreased by 12.9% from $12.63 million in 2023 to $10.99 million in 2024.
  • Earnings per share decreased by 12.5% from $2.65 in 2023 to $2.32 in 2024.
  • Net interest income increased by 6.0% from $46.03 million in 2023 to $48.80 million in 2024.
  • Noninterest expense increased significantly by 11.5% from $41.37 million in 2023 to $46.13 million in 2024, driven by a voluntary severance package.
  • Return on Average Assets (ROAA) decreased from 0.99% in 2023 to 0.77% in 2024.
  • Return on Average Equity (ROAE) decreased from 9.24% in 2023 to 7.50% in 2024.
  • Net Interest Margin (FTE) decreased from 3.94% in 2023 to 3.71% in 2024.
  • Total assets increased by 11.2% from $1.35 billion in 2023 to $1.50 billion in 2024.
  • Total loans increased by 9.3% from $971.9 million in 2023 to $1,061.8 million in 2024.
  • Total deposits increased by 13.1% from $1.13 billion in 2023 to $1.28 billion in 2024, significantly impacted by the Ohio Homebuyer Plus program.
  • The company’s efficiency ratio increased from 69.82% to 73.79%, indicating less efficient operations.
  • Operating Profit Margin is 21.58%.
  • Net Profit Margin is 17.75%.
  • Debt-to-Equity Ratio is 9.00.
  • Asset Turnover is 0.062.
  • Revenue Growth is 17.7%.
  • Net Income Growth is -13%.
  • EPS Growth is -12.5%.

Opportunities and Risks

  • Economic and Market Conditions: OVBC is susceptible to economic downturns in its primary markets of Ohio and West Virginia.
  • Interest Rate Risk: Fluctuations in interest rates could negatively impact the company’s net interest margin and borrowers’ ability to repay loans.
  • Competition: The financial services industry is highly competitive, and OVBC faces competition from larger institutions and non-traditional financial service providers.
  • Credit Risk: A significant portion of the loan portfolio consists of commercial and commercial real estate loans, which are considered to have higher credit risk.
  • Cybersecurity: The company faces increasing cybersecurity threats, which could result in data breaches and financial losses.
  • Liquidity Risk: Declining deposit levels and increased reliance on higher-cost funding sources could negatively impact the company’s liquidity.
  • Regulatory Risk: New laws and increased regulatory oversight could significantly affect the company’s business, financial condition, and results of operations.
  • Loan Growth: The company has opportunities to expand its loan portfolio, particularly in commercial lending.
  • Strategic Initiatives: The Ohio Homebuyer Plus program presents an opportunity to attract deposits and increase investment in securities.
  • Technological Advancements: OVBC can leverage technology to improve efficiency and better serve customers.

Potential Implications

Company Performance

  • Expense Management: Implement strategies to control noninterest expenses and improve operational efficiency.
  • Margin Improvement: Focus on strategies to improve the net interest margin, such as optimizing deposit pricing and asset allocation.
  • Monitor Asset Quality: Closely monitor asset quality and maintain adequate reserves for potential credit losses.
  • Cybersecurity Measures: Continue to invest in cybersecurity measures to protect against evolving threats.

Stock Price

  • The Price-to-Earnings Ratio (P/E) is 13.08.
  • The Price-to-Book Ratio (P/B) is 0.95.
  • The Price-to-Sales Ratio (P/S) is 1.61.
  • The Enterprise Value to EBITDA (EV/EBITDA) is 2.57.

Ohio Valley Banc Corp. (OVBC) 10-K Filing Analysis – Fiscal Year 2024

Executive Summary

This report analyzes Ohio Valley Banc Corp.’s (OVBC) 10-K filing for the fiscal year ended December 31, 2024. OVBC, a financial holding company, operates primarily through its banking subsidiary, The Ohio Valley Bank Company. The analysis focuses on key financial performance indicators, risk factors, and management’s discussion to assess the company’s financial health and future prospects. While OVBC demonstrates growth in certain areas, increased expenses and a compressed net interest margin raise concerns. A hold rating is recommended, pending further observation of expense management and margin recovery.

Company Overview

Ohio Valley Banc Corp. is an Ohio-based financial holding company with assets of approximately $1.5 billion. Its primary business is community banking, conducted through The Ohio Valley Bank Company, which operates 17 offices in Ohio and West Virginia. OVBC also has subsidiaries involved in consumer lending and insurance services. The company’s stock is traded on the NASDAQ Global Market under the symbol “OVBC.”

Detailed Analysis

Financial Statement Analysis

Income Statement

  • Net income decreased by 12.9% from $12.63 million in 2023 to $10.99 million in 2024.
  • Earnings per share decreased by 12.5% from $2.65 in 2023 to $2.32 in 2024.
  • Net interest income increased by 6.0% from $46.03 million in 2023 to $48.80 million in 2024.
  • Noninterest income increased by 4.3% from $12.63 million in 2023 to $13.17 million in 2024.
  • Noninterest expense increased significantly by 11.5% from $41.37 million in 2023 to $46.13 million in 2024.

Key Ratios

  • Return on Average Assets (ROAA): Decreased from 0.99% in 2023 to 0.77% in 2024.
  • Return on Average Equity (ROAE): Decreased from 9.24% in 2023 to 7.50% in 2024.
  • Net Interest Margin (FTE): Decreased from 3.94% in 2023 to 3.71% in 2024.
  • Efficiency Ratio: Increased from 69.82% in 2023 to 73.79% in 2024, indicating less efficient operations.

Balance Sheet

  • Total assets increased by 11.2% from $1.35 billion in 2023 to $1.50 billion in 2024.
  • Total loans increased by 9.3% from $971.9 million in 2023 to $1,061.8 million in 2024.
  • Total deposits increased by 13.1% from $1.13 billion in 2023 to $1.28 billion in 2024.
  • Shareholders’ equity increased by 4.4% from $144.0 million in 2023 to $150.3 million in 2024.

Asset Quality

  • Allowance for Credit Losses (ACL) to total loans increased slightly from 0.90% in 2023 to 0.95% in 2024.
  • Nonaccrual loans to total loans increased from 0.25% in 2023 to 0.45% in 2024.

Cash Flow Statement

  • Net cash provided by operating activities decreased from $20.75 million in 2023 to $13.10 million in 2024.
  • Net cash used in investing activities increased from $59.79 million in 2023 to $195.18 million in 2024.
  • Net cash provided by financing activities increased from $121.18 million in 2023 to $137.07 million in 2024.

Management’s Discussion and Analysis (MD&A) Insights

  • Management attributes the decrease in net income to increases in provision for credit losses and noninterest expense, offsetting gains in net interest and noninterest income.
  • The company’s participation in the Ohio Homebuyer Plus program significantly impacted deposit and investment strategies.
  • Management acknowledges increased competition for deposits and the need to manage interest rate sensitivity.
  • The voluntary severance package offered in Q4 2024 significantly increased salary and employee benefit expenses.

Risk and Opportunity Assessment

Risks

  • Economic and Market Conditions: OVBC is susceptible to economic downturns in its primary markets of Ohio and West Virginia.
  • Interest Rate Risk: Fluctuations in interest rates could negatively impact the company’s net interest margin and borrowers’ ability to repay loans.
  • Competition: The financial services industry is highly competitive, and OVBC faces competition from larger institutions and non-traditional financial service providers.
  • Credit Risk: A significant portion of the loan portfolio consists of commercial and commercial real estate loans, which are considered to have higher credit risk.
  • Cybersecurity: The company faces increasing cybersecurity threats, which could result in data breaches and financial losses.
  • Liquidity Risk: Declining deposit levels and increased reliance on higher-cost funding sources could negatively impact the company’s liquidity.
  • Regulatory Risk: New laws and increased regulatory oversight could significantly affect the company’s business, financial condition, and results of operations.

Opportunities

  • Loan Growth: The company has opportunities to expand its loan portfolio, particularly in commercial lending.
  • Strategic Initiatives: The Ohio Homebuyer Plus program presents an opportunity to attract deposits and increase investment in securities.
  • Technological Advancements: OVBC can leverage technology to improve efficiency and better serve customers.

Uncommon Metrics

  • Ohio Homebuyer Plus Program Impact: The filing highlights the specific impact of this program on deposit growth and investment strategy.
  • Severance Package Expense: The one-time expense related to the voluntary severance package is a significant item affecting noninterest expense.

Conclusion and Actionable Insights

OVBC’s 2024 performance reflects a mixed picture. While the company has demonstrated growth in assets, loans, and deposits, the decrease in net income, ROAA, and ROAE, coupled with an increasing efficiency ratio, indicates challenges in profitability and operational efficiency. The increased noninterest expense, particularly due to the severance package, is a concern. The compressed net interest margin also warrants attention.

Overall Assessment: Hold.

Recommendations:

  • Expense Management: Implement strategies to control noninterest expenses and improve operational efficiency.
  • Margin Improvement: Focus on strategies to improve the net interest margin, such as optimizing deposit pricing and asset allocation.
  • Monitor Asset Quality: Closely monitor asset quality and maintain adequate reserves for potential credit losses.
  • Cybersecurity Measures: Continue to invest in cybersecurity measures to protect against evolving threats.

Financial Analysis of Ohio Valley Banc Corp. (OVBC)

1. Commentary

Ohio Valley Banc Corp. demonstrates a mixed financial performance. While the bank has increased its total assets and shareholders’ equity, net income and earnings per share have decreased. The bank’s strategic focus on managing credit risk and maintaining a strong capital position is evident, but declining profitability metrics raise concerns about operational efficiency and revenue generation. Further analysis is needed to understand the drivers behind these trends and assess the long-term sustainability of the bank’s performance.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: Not applicable for banks. Banks generate revenue through interest income and non-interest income.
  • Operating Profit Margin

    • Metric: (Income Before Income Taxes) / (Net Interest Income + Noninterest Income) = $13,376 / ($48,804 + $13,171) = 21.58%
  • Net Profit Margin

    • Metric: Net Income / (Net Interest Income + Noninterest Income) = $10,999 / ($48,804 + $13,171) = 17.75%
  • Return on Assets (ROA)

    • Metric: Net Income / Average Assets = $10,999 / (($1,503,412 + $1,352,135) / 2) = 0.77%
  • Return on Equity (ROE)

    • Metric: Net Income / Average Equity = $10,999 / (($150,328 + $144,007) / 2) = 7.50%
  • Earnings Per Share (EPS) – Basic

    • Metric: $2.32

Liquidity

  • Current Ratio

    • Metric: Current Assets / Current Liabilities. To calculate this accurately, we need to define what constitutes current assets and liabilities for a bank. Assuming cash and cash equivalents, securities available for sale, and accrued interest receivable are current assets, and total deposits, other borrowed funds, and other liabilities are current liabilities: ($83,107 + $268,120 + $4,805) / ($1,275,178 + $39,740 + $28,060) = 0.26
  • Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventory) / Current Liabilities. Banks don’t typically have inventory, so this is similar to the current ratio. ($83,107 + $268,120 + $4,805) / ($1,275,178 + $39,740 + $28,060) = 0.26
  • Cash Ratio

    • Metric: Cash and Cash Equivalents / Current Liabilities = $83,107 / ($1,275,178 + $39,740 + $28,060) = 0.06

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: Total Liabilities / Total Shareholders’ Equity = $1,353,084 / $150,328 = 9.00
  • Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets = $1,353,084 / $1,503,412 = 0.90
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: EBIT / Interest Expense = (Net Income + Provision for Income Taxes + Interest Expense) / Interest Expense = ($10,999 + $2,377 + $26,959) / $26,959 = 1.49

Activity/Efficiency

  • Inventory Turnover

    • Metric: Not applicable for banks.
  • Asset Turnover

    • Metric: Total Revenue / Average Assets = ($75,763 + $13,171) / (($1,503,412 + $1,352,135) / 2) = 0.062

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: Stock Price / EPS = $30.35 / $2.32 = 13.08
  • Price-to-Book Ratio (P/B)

    • Metric: Market Cap / Book Value of Equity. Market Cap = Shares Outstanding * Stock Price. Shares Outstanding = 5,490,995 – 779,994 = 4,711,001. Market Cap = 4,711,001 * $30.35 = $142,976,580. Book Value of Equity = $150,328,000. P/B = $142,976,580 / $150,328,000 = 0.95
  • Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Total Revenue = $142,976,580 / ($75,763,000 + $13,171,000) = 1.61
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents. Total Debt = $39,740 + $8,500 = $48,240. EV = $142,976,580 + $48,240,000 – $83,107,000 = $108,109,580. EBITDA = Net Income + Interest Expense + Taxes + Depreciation & Amortization = $10,999 + $26,959 + $2,377 + $1,676 + $8 = $42,019. EV/EBITDA = $108,109,580 / $42,019,000 = 2.57

Growth Rates

  • Revenue Growth

    • Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = (($75,763 + $13,171) – ($61,865 + $12,629)) / ($61,865 + $12,629) = 0.177 or 17.7%
  • Net Income Growth

    • Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = ($10,999 – $12,631) / $12,631 = -0.13 or -13%
  • EPS Growth

    • Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS = ($2.32 – $2.65) / $2.65 = -0.125 or -12.5%

Other Relevant Metrics

  • Director Retirement and Deferred Fee Agreements
    • Ohio Valley Bank Company has entered into Director Retirement and Deferred Fee Agreements with Seth I. Michael, effective October 1, 2024. These agreements outline the terms of retirement benefits and deferred compensation for directors, including eligibility criteria, payment schedules, and beneficiary designations. These agreements are designed to attract and retain qualified board members.
  • Insider Trading Policy
    • The company has a detailed insider trading policy that restricts trading in company stock by directors, officers, and employees based on material non-public information. The policy prohibits short sales, publicly-traded options, and certain hedging transactions. All transactions involving company stock must be pre-cleared by designated officers.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️