OHIO VALLEY BANC CORP

LOANS

In 2024, the Company’s primary category of earning assets and most significant source of interest income, total loans, increased $89,925, or 9.3%, to $1,061,825. The increase in loan balances came from real estate and commercial lending, which was partially reduced by consumer lending.

Management continues to place emphasis on its commercial lending, which generally yields a higher return on investment as compared to other types of loans. The commercial lending segment increased $51,235, or 10.7%, from year-end 2023, which came mostly from commercial real estate loans. The commercial real estate loan segment comprised 35.1% of the Company’s total loan portfolio at December 31, 2024. Commercial real estate consists of owner-occupied, nonowner-occupied and construction loans. Owner-occupied loans consist of nonfarm, nonresidential properties. A commercial owner-occupied loan is a borrower purchased building or space for which the repayment of principal is dependent upon cash flows from the ongoing operations conducted by the party, or an affiliate of the party, who owns the property. Owner-occupied loans of the Company include loans secured by hospitals, churches, and hardware and convenience stores. Nonowner-occupied loans are property loans for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property, such as apartment buildings, condominiums, hotels, and motels. These loans are primarily impacted by the level of interest rates associated with the debt and to local economic conditions, which dictate occupancy rates and the amount of rent charged. The increase in debt service due to higher interest rates may not be able to be passed on to tenants. As part of the origination process, loan interest rates and occupancy rates are stressed to determine the impact on the borrower’s ability to maintain adequate debt service under different economic conditions. Furthermore, the Company monitors the concentration in any one industry and has established limits relative to capital. In addition, credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant a change in our underwriting standards. Table IV has been provided to illustrate the industry composition of the commercial real estate portfolio. Commercial construction loans are extended to individualsas well as corporations for the construction of an individual property or multiple properties and are secured by raw land and the subsequent improvements. Commercial real estate also includes loan participations with other banks outside the Company’s primary market area. Although the Company is not actively seeking to participate in loans originated outside its primary market area, it has taken advantage of the relationships it has with certain lenders in those areas where the Company believes it can profitably participate with an acceptable level of risk. Commercial real estate loans totaled $372,987 at December 31, 2024, an increase of $50,093, or 15.5%, over the balance of commercial real estate loans at year-end 2023. Most of this growth came from larger originations from nonowner-occupied loans, with balances increasing $28,646, or 16.1%, from year-end 2023. Also, contributing to growth was the construction loan portfolio, which increased $17,332, or 27.8%, from year-end 2023. Lastly, the owner-occupied commercial loan portfolio increased $4,115, or 5.0%, from year-end 2023.