Shares of Ohio Valley Banc Corp. (OVBC Quick QuoteOVBC - Free Report) have lost 0.8% since the company reported earnings for the quarter ended March 31, 2025, underperforming the S&P 500 Index’s 1.3% gain during the same period. However, over the past month, OVBC stock surged 44.1%, notably outpacing the S&P 500’s 0.6% decline.

For the first quarter of 2025, Ohio Valley Banc reported a consolidated net income of $4.4 million, up 57.8% from $2.8 million in the same quarter a year ago. Earnings per share jumped 62.1% to $0.94 from $0.58. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Net interest income rose 17.4% to $13.1 million from $11.2 million year over year, benefiting from a 10.8% increase in average earning assets and an improved net interest margin of 3.85%, up from 3.61%.

Revenues from non-interest income declined 1.4% year over year to $3.6 million from $3.7 million, while non-interest expenses edged up 0.7% to $10.8 million from $10.7 million. The growth in average loans was related to the commercial and residential real estate lending segments, partially offset by a reduction in consumer loans.

Other Key Business Metrics

The bank's return on average assets increased to 1.20% from 0.83%, and return on average equity rose to 11.82% from 7.77%, reflecting stronger profitability. The efficiency ratio improved substantially to 63.95% from 71.47% in the first quarter of 2024, indicating better cost management. The company’s largest noninterest expense —salaries and employee benefits — decreased 2.5% due to savings from a voluntary early retirement program initiated in 2024. However, this was offset by higher data processing, marketing, and occupancy costs. Data processing costs rose 14.6% due to increased card transaction volumes and platform upgrades.

The provision for credit losses decreased 44.6% year over year to $0.4 million from $0.8 million. The provision for credit loss expense for the first quarter of 2025 was primarily related to quarterly net charge-offs of $425,000 and additional reserves for certain qualitative risk factors, which were partially offset by lower general reserves associated with the $19 million decrease in total loans since Dec. 31, 2024. The reduction in total loans was primarily related to a $31 million decrease in a warehouse line of credit extended to another mortgage lender. Despite this, non-performing loans rose slightly to 0.48% of total loans from 0.37% a year ago. The allowance for credit losses stood at 0.97% of total loans compared with 0.93% in the year-ago period.

Ohio Valley Banc’s total assets increased to $1.51 billion as of March 31, 2025, from $1.50 billion at the end of 2024. Growth stemmed primarily from a $35 million increase in cash held at the Federal Reserve. The decline in securities holdings by $9 million reflected a lower need to collateralize public funds related to the Ohio Homebuyer Plus program.

Despite the decline in overall loan balances, the company achieved $12 million in organic loan growth in its commercial and residential real estate segments, highlighting a strategic shift away from lower-margin consumer lending. Total deposits rose $9 million during the quarter, primarily within time deposits, while shareholders’ equity increased $5.4 million, driven by retained earnings and improved accumulated other comprehensive income.

Management Commentary

OVBC’s management attributed the strong first-quarter performance to strategic actions taken by the leadership team. According to President and CEO Larry Miller, the bank’s results reflected effective execution of decisions aimed at expanding earning assets, enhancing the net interest margin, and maintaining tight control over overhead expenses. Management expressed satisfaction that these initiatives had begun to translate into tangible improvements in shareholder value. The company also highlighted its operational discipline, noting the efficiency ratio improvement to 63.95% from 71.47% in the prior-year period as a key indicator of enhanced cost management.

Factors Influencing the Headline Numbers

A major contributor to earning asset growth was OVBC’s participation in the Ohio Treasurer’s Ohio Homebuyer Plus program. This initiative spurred the launch of the "Sweet Home Ohio" deposit account, which garnered $7.7 million in participant deposits and $82 million in subsidized state deposits. These funds were largely invested in securities, explaining the $96 million increase in average securities and contributing to improved net interest income. Loan growth in more profitable real estate segments also supported results, while reduced reserves and interest on bank deposits further boosted margins.

On the funding side, the bank benefited from a favorable shift in deposit mix. Lower-cost NOW, money market, checking, and savings accounts grew $127 million year over year, while growth in higher-cost certificates of deposit was limited to $8 million for the first quarter of 2025 compared with the same period last year.

Guidance

OVBC did not provide specific forward guidance. However, management expressed optimism regarding future growth in the warehouse line of credit, contingent on increased mortgage volume and changing funding needs of the client bank. This indicates potential for recovery in loan balances in upcoming quarters.

Other Developments

There were no acquisitions, divestitures, or major business restructurings reported during the quarter. However, Ohio Valley Banc’s early retirement program, initiated in 2024, continues to impact operating expenses positively. No new strategic initiatives or expansions were mentioned in the release.