Oak Valley Bancorp Reports 1st Quarter Results

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Oak Valley Bancorp (NASDAQ: OVLY) reported its financial results for Q1 2023, posting a net income of $9.23 million or $1.12 per diluted share, slightly down from $9.48 million or $1.15 per share in Q4 2022 but significantly higher than the $2.37 million or $0.29 per share a year ago.

The dip in net income compared to the last quarter is attributed to a decrease in loan loss provision reversals, down to $460,000 from $1.55 million. Strong increases in net interest income ($19.54 million) and non-interest income ($1.66 million) helped offset this decline. The net interest margin expanded to 4.39%, driven by higher yields from rate hikes. Total assets decreased to $1.94 billion, with gross loans increasing by $68.1 million year-over-year.

Positive

• Net income increased significantly year-over-year from $2.37 million to $9.23 million.
• Net interest income rose to $19.54 million, up from $10.96 million a year ago.
• Net interest margin expanded to 4.39%, benefiting from increased yields and loan growth.

Negative

• Net income decreased compared to the prior quarter due to lower loan loss provision reversals.
• Total assets fell by $27.7 million from the previous quarter and $5.3 million year-over-year.
• Total deposits decreased by $45.1 million compared to the end of Q4 2022.

OAKDALE, Calif., April 20, 2023 (GLOBE NEWSWIRE) -- Oak Valley Bancorp (NASDAQ: OVLY) (the “Company”), the bank holding company for Oak Valley Community Bank and their Eastern Sierra Community Bank division, recently reported unaudited consolidated financial results for the first quarter of 2023. For the three months ended March 31, 2023, consolidated net income was $9,225,000, or $1.12 per diluted share (EPS). This compared to consolidated net income of $9,475,000, or $1.15 EPS, for the prior quarter and $2,369,000, or $0.29 EPS, for the same period a year ago.

The net income decrease compared to the prior quarter was primarily the result of a decline in the reversal of loan loss provisions to $460,000 in the first quarter, compared to a reversal of $1,550,000 during the fourth quarter of 2022. This difference was offset by quarter over quarter increases in net interest income and non-interest income of $430,000 and $234,000, respectively. The substantial increase in net income compared to the same period a year ago was attributable to rising net interest income resulting from increased yields on earning assets, triggered by FOMC rate hikes, and growth of our investment and loan portfolios.

Net interest income for the three months ended March 31, 2023 was $19,543,000, compared to $19,113,000 in the prior quarter, and $10,958,000 in the same period a year ago. The increase over the prior periods is primarily attributable to increased yields as described above. The year over year increase was also driven in part by loan growth of $68.1 million and investment portfolio growth of $207.8 million.

Net interest margin for the three months ended March 31, 2023 was 4.39%, compared to 4.09% for the prior quarter and 2.51% for the same period last year. The interest margin expansion compared to prior periods was fueled by the impact of FOMC rate increases on earning asset yields and growth of the loan and investment portfolios, as discussed above.

“As our balance sheet grew over the past few years, we were patient with lower yields on higher levels of cash reserves, in anticipation of rising interest rates. That strategy has served us very well over the course of the Fed’s most recent rate cycle,” stated Rick McCarty, President and Chief Operating Officer.

Non-interest income was $1,655,000 for the quarter ended March 31, 2023, compared to $1,421,000 for the prior quarter and $1,168,000 for the same period last year. The increase compared to prior periods was partially due to a rise in fee income from CDARS, a program that offers full FDIC insurance to certain deposit customers, and a gain on sale of investment securities recorded during the first quarter of 2023.

Non-interest expense totaled $9,757,000 for the quarter ended March 31, 2023, compared to $9,611,000 in the previous quarter and $9,122,000 in the same quarter a year ago. The increase in non-interest expense compared to prior periods corresponds primarily to staffing expense and general operating costs related to servicing the growing loan and deposit portfolios, including staff and overhead expense connected to the new Roseville Branch, which opened in December 2022.

Total assets were $1.94 billion at March 31, 2023, a decrease of $27.7 million and $5.3 million from December 31, 2022 and March 31, 2022, respectively. Gross loans were $926.8 million at March 31, 2023, an increase of $11.1 million and $68.1 million over December 31, 2022 and March 31, 2022, respectively. The Company’s total deposits were $1.77 billion at March 31, 2023, a decrease of $45.1 million and $30.1 million from December 31, 2022 and March 31, 2022, respectively. We have experienced nominal negative impacts on liquidity resulting from the recent events in the banking industry. The deposit decrease during the first quarter was related to normal seasonal activity and some movement to higher deposit rates offered by other financial institutions. Our liquidity position is very strong as evidenced by $389 million in cash equivalent balances at March 31, 2023.

“Our relationship management teams remain committed to understanding each client’s needs and tailoring solutions to best meet their objectives,” stated Chris Courtney, CEO. “Our ability to deepen relationships proves our service model has enduring value. As we expand our footprint, we intentionally pursue experienced banking professionals who share in our appreciation of this style of relationship building.”

Non-performing assets (“NPA”) remained at zero as of March 31, 2023, as they were as of December 31, 2022 and March 31, 2022. The allowance for loan losses (“ALLL”) as a percentage of gross loans was 1.01% at March 31, 2023, compared to 1.03% at December 31, 2022 and 1.25% at March 31, 2022. The Company recorded a $460,000 reversal of loan loss provisions during the first quarter, due to improvements in credit quality metrics as calculated by our internal loan risk model. Adoption of CECL resulted in an additional $345,000 to the ALLL, recorded on the implementation date of January 1, 2023. The year-over-year ALLL decrease includes the reversal of a COVID-19 risk-based discretionary reserve of approximately $1.1 million during the fourth quarter of 2022, as it was no longer required due to improved economic conditions. Loan loss reserves relative to gross loans remain at acceptable levels consistent with our internal loan risk model and credit quality remains stable.

Oak Valley Bancorp operates Oak Valley Community Bank & their Eastern Sierra Community Bank division, through which it offers a variety of loan and deposit products to individuals and small businesses. They currently operate through 18 conveniently located branches: Oakdale, Turlock, Stockton, Patterson, Ripon, Escalon, Manteca, Tracy, Sacramento, Roseville, two branches in Sonora, three branches in Modesto, and three branches in their Eastern Sierra division, which includes Bridgeport, Mammoth Lakes, and Bishop. The Company’s Roseville location opened in early 2022 as a Loan Production Office and as a full-service branch in December 2022.

For more information, call 1-866-844-7500 or visit www.ovcb.com.

This press release includes forward-looking statements about the corporation for which the corporation claims the protection of safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the corporation's possible or assumed future financial condition, and its results of operations and business. Forward-looking statements are subject to risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, including increased energy costs in California, credit quality of borrowers, operational factors and competition in the geographic and business areas in which the company conducts its operations. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement.

Oak Valley Bancorp
Financial Highlights (unaudited)
($ in thousands, except per share)		1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
Selected Quarterly Operating Data:		2023			2022			2022			2022			2022
	Net interest income	$	19,543		$	19,113		$	16,772		$	13,233		$	10,958
	(Reversal of) provision for loan losses		(460	)		(1,550	)		200			-			-
	Non-interest income		1,655			1,421			1,611			1,371			1,168
	Non-interest expense		9,757			9,611			9,370			9,205			9,122
	Net income before income taxes		11,901			12,473			8,813			5,399			3,004
	Provision for income taxes		2,676			2,998			2,013			1,141			635
	Net income	$	9,225		$	9,475		$	6,800		$	4,258		$	2,369
	Earnings per common share - basic	$	1.13		$	1.16		$	0.83		$	0.52		$	0.29
	Earnings per common share - diluted	$	1.12		$	1.15		$	0.83		$	0.52		$	0.29
	Dividends paid per common share	$	0.16		$	-		$	0.15		$	-		$	0.15
	Return on average common equity		28.36	%		33.37	%		21.96	%		13.40	%		6.84	%
	Return on average assets		1.93	%		1.90	%		1.35	%		0.88	%		0.50	%
	Net interest margin (1)		4.39	%		4.09	%		3.61	%		2.98	%		2.51	%
	Efficiency ratio (2)		46.31	%		45.49	%		48.14	%		59.68	%		71.70	%
Capital - Period End
	Book value per common share	$	17.08		$	15.33		$	12.86		$	14.38		$	15.95
Credit Quality - Period End
	Nonperforming assets/ total assets		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
	Loan loss reserve/ gross loans		1.01	%		1.03	%		1.21	%		1.19	%		1.25	%
Period End Balance Sheet
($ in thousands)
	Total assets	$	1,940,674		$	1,968,346		$	1,962,470		$	1,991,235		$	1,946,019
	Gross loans		926,820			915,758			912,235			907,627			858,763
	Nonperforming assets		-			-			-			-			-
	Allowance for loan losses		9,383			9,468			10,997			10,785			10,762
	Deposits		1,769,176			1,814,297			1,830,882			1,852,502			1,799,305
	Common equity		141,470			126,627			106,188			118,698			131,649
Non-Financial Data
	Full-time equivalent staff		206			198			209			209			206
	Number of banking offices		18			18			17			17			17
Common Shares outstanding
	Period end		8,281,661			8,257,894			8,258,794			8,254,574			8,255,601
	Period average - basic		8,182,737			8,175,871			8,172,836			8,170,291			8,157,987
	Period average - diluted		8,226,991			8,213,891			8,206,342			8,201,367			8,197,275
Market Ratios
	Stock Price	$	23.66		$	22.65		$	17.87		$	17.20		$	18.45
	Price/Earnings		5.17			4.93			5.41			8.23			15.67
	Price/Book		1.39			1.48			1.39			1.20			1.16
(1) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 21%.
(2) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 21%.
A marginal federal/state combined tax rate of 29.56%, was used for applicable revenue.

Contact: Chris Courtney/Rick McCarty
Phone: (209) 848-2265
www.ovcb.com

FAQ

What were Oak Valley Bancorp's Q1 2023 earnings?

Oak Valley Bancorp reported a net income of $9.23 million or $1.12 per diluted share for Q1 2023.

How did net interest income perform in Q1 2023 for OVLY?

Net interest income for Q1 2023 was $19.54 million, an increase from $10.96 million in Q1 2022.

What is the current status of Oak Valley Bancorp's total assets?

As of March 31, 2023, total assets were $1.94 billion, a decrease from $1.97 billion at the end of Q4 2022.

What was the change in deposits for Oak Valley Bancorp in Q1 2023?

Total deposits decreased by $45.1 million from December 31, 2022, reflecting seasonal fluctuations.