Oak Valley Bancorp Reports 4th Quarter Results and Announces Cash Dividend
- The company reported a 34.7% increase in net income for the year ended December 31, 2023, compared to the previous year.
- Non-performing assets remained at zero, indicating a strong asset quality.
- The company declared a cash dividend of $0.225 per share of common stock to its shareholders.
- Consolidated net income for the three months ended December 31, 2023, decreased from the prior quarter and year-ago period.
- The decrease in quarterly earnings is attributed to a credit loss provision and an increase in deposit interest expense.
- Total deposits decreased by $16.0 million from September 30, 2023, and $163.8 million from December 31, 2022.
Insights
The reported financial results from Oak Valley Bancorp exhibit a mixed performance, with a noteworthy year-to-date increase of 34.7% in earnings per share (EPS), yet a quarter-to-date (QTD) and year-over-year (YOY) decrease in net income. The provision for credit losses and heightened deposit interest expenses are the primary factors behind the QTD earnings dip. Investors may view the EPS growth positively, but the recent decline could raise concerns about the bank's near-term profitability amidst changing economic conditions.
From an investment perspective, the expansion of the net interest margin (NIM) to 4.33% YTD from 3.32% in the previous year indicates a robust ability to generate income from interest-earning assets, which is a critical metric for bank profitability. However, the slight decrease in NIM in the last quarter may suggest margin pressures that warrant monitoring.
The bank's strong liquidity position, with $216 million in cash and cash equivalents and no outstanding advances on lines of credit, is a positive signal for its financial stability. However, the decrease in total deposits may indicate competitive pressures and a potential shift in customer preferences towards higher-yielding options. This could affect the bank's funding costs and liquidity management strategies going forward.
The banking sector is highly sensitive to interest rate changes and Oak Valley Bancorp's results reflect this. The Federal Open Market Committee (FOMC) rate hikes have positively influenced the bank's earning asset yields, contributing to the overall increase in net interest income. This dynamic is a double-edged sword; while it benefits the yield on assets, it also increases the cost of funds, as seen in the bank's higher deposit interest expenses.
Additionally, the growth in the bank's loan portfolio by $100.8 million YOY suggests an aggressive expansion strategy. This is a significant move in the current economic climate, where loan demand and credit quality can be volatile. Investors may interpret this as a sign of confidence in the bank's underwriting and risk management processes, especially given the report of zero non-performing assets (NPA).
The increase in non-interest income, primarily from changes in the market value of equity securities and deposit account service charges, diversifies the bank's revenue streams. However, the reliance on market-value adjustments can introduce volatility in earnings, which is a factor investors should consider.
Oak Valley Bancorp's financial performance can be viewed in the broader context of the current economic environment, characterized by rising interest rates and inflationary pressures. The bank's ability to navigate these conditions and report an increase in EPS YTD is notable. However, the provision for credit losses reflects a cautious outlook, potentially anticipating a downturn or increased default risk.
The bank's decision to expand its loan portfolio during a period of economic uncertainty could be seen as counter-cyclical, relying on the assumption that the economic fundamentals of their customer base remain strong. This strategy could pay off if the economy remains resilient, but it also exposes the bank to higher credit risk.
The decline in total deposits could be indicative of broader trends in consumer behavior, as depositors seek higher returns due to inflation. This trend may require banks to offer more competitive rates, potentially compressing margins further.
OAKDALE, Calif., Jan. 19, 2024 (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 three months ended December 31, 2023, consolidated net income was
“We are pleased to report historic earnings and a tremendous performance for the year. Our team continues to work diligently to serve our clients and strengthen and expand relationships with the families, individuals, and businesses who are invested in the communities we serve and share in our desire to help our Northern California region to thrive,” stated Chris Courtney, Chief Executive Officer.
Net interest income was
Net interest margin was
“Increased net interest income corresponding to net interest margin expansion has fueled record earnings for the bank and our shareholders this year. We have experienced rate pressure on our cost of funds; however, the impact of increased rates on earning asset yield has outpaced the deposit-side expense,” stated Rick McCarty, President and Chief Operating Officer.
Non-interest income for the fourth quarter and year ended December 31, 2023, totaled
Non-interest expense for the fourth quarter and year ended December 31, 2023, totaled
Total assets were
Non-performing assets (“NPA”) remained at zero as of December 31, 2023, as they were for all of 2023 and 2022. The allowance for credit losses (“ACL”) as a percentage of gross loans increased to
The Board of Directors of Oak Valley Bancorp at their January 16, 2024 meeting, declared the payment of a cash dividend of
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.
| Contact: | Chris Courtney/Rick McCarty | |
| Phone: | (209) 848-2265 | |
| www.ovcb.com |
| Oak Valley Bancorp | ||||||||||||||||
| Financial Highlights (unaudited) | ||||||||||||||||
| ($ in thousands, except per share) | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| Selected Quarterly Operating Data: | 2023 | 2023 | 2023 | 2023 | 2022 | |||||||||||
| Net interest income | $ | 17,914 | $ | 18,938 | $ | 19,407 | $ | 19,543 | $ | 19,113 | ||||||
| Provision for (reversal of) credit losses | 1,130 | 300 | - | (460 | ) | (1,550 | ) | |||||||||
| Non-interest income | 1,755 | 1,566 | 1,655 | 1,655 | 1,421 | |||||||||||
| Non-interest expense | 10,760 | 10,578 | 10,062 | 9,757 | 9,611 | |||||||||||
| Net income before income taxes | 7,779 | 9,626 | 11,000 | 11,901 | 12,473 | |||||||||||
| Provision for income taxes | 1,914 | 2,272 | 2,596 | 2,676 | 2,998 | |||||||||||
| Net income | $ | 5,865 | $ | 7,354 | $ | 8,404 | $ | 9,225 | $ | 9,475 | ||||||
| Earnings per common share - basic | $ | 0.72 | $ | 0.90 | $ | 1.03 | $ | 1.13 | $ | 1.16 | ||||||
| Earnings per common share - diluted | $ | 0.71 | $ | 0.89 | $ | 1.02 | $ | 1.12 | $ | 1.15 | ||||||
| Dividends paid per common share | $ | - | $ | 0.16 | $ | - | $ | 0.16 | $ | - | ||||||
| Return on average common equity | 16.44 | % | 19.85 | % | 23.48 | % | 28.36 | % | 33.37 | % | ||||||
| Return on average assets | 1.27 | % | 1.57 | % | 1.79 | % | 1.93 | % | 1.90 | % | ||||||
| Net interest margin (1) | 4.15 | % | 4.34 | % | 4.45 | % | 4.39 | % | 4.09 | % | ||||||
| Efficiency ratio (2) | 53.08 | % | 49.89 | % | 46.31 | % | 46.31 | % | 45.49 | % | ||||||
| Capital - Period End | ||||||||||||||||
| Book value per common share | $ | 20.03 | $ | 16.29 | $ | 17.76 | $ | 17.08 | $ | 15.33 | ||||||
| Credit Quality - Period End | ||||||||||||||||
| Nonperforming assets/ total assets | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
| Credit loss reserve/ gross loans | 1.07 | % | 1.00 | % | 0.99 | % | 1.01 | % | 1.03 | % | ||||||
| Period End Balance Sheet | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||
| Total assets | $ | 1,842,422 | $ | 1,835,402 | $ | 1,861,713 | $ | 1,940,674 | $ | 1,968,346 | ||||||
| Gross loans | 1,016,579 | 971,243 | 950,488 | 926,820 | 915,758 | |||||||||||
| Nonperforming assets | - | - | - | - | - | |||||||||||
| Allowance for credit losses | 10,896 | 9,738 | 9,411 | 9,383 | 9,468 | |||||||||||
| Deposits | 1,650,534 | 1,666,548 | 1,682,378 | 1,769,176 | 1,814,297 | |||||||||||
| Common equity | 166,092 | 135,095 | 147,122 | 141,470 | 126,627 | |||||||||||
| Non-Financial Data | ||||||||||||||||
| Full-time equivalent staff | 222 | 225 | 213 | 206 | 198 | |||||||||||
| Number of banking offices | 18 | 18 | 18 | 18 | 18 | |||||||||||
| Common Shares outstanding | ||||||||||||||||
| Period end | 8,293,168 | 8,293,468 | 8,281,661 | 8,281,661 | 8,257,894 | |||||||||||
| Period average - basic | 8,200,177 | 8,197,083 | 8,195,270 | 8,182,737 | 8,175,871 | |||||||||||
| Period average - diluted | 8,236,897 | 8,232,338 | 8,227,218 | 8,226,991 | 8,213,891 | |||||||||||
| Market Ratios | ||||||||||||||||
| Stock Price | $ | 29.95 | $ | 25.08 | $ | 25.19 | $ | 23.66 | $ | 22.65 | ||||||
| Price/Earnings | 10.55 | 7.05 | 6.12 | 5.17 | 4.93 | |||||||||||
| Price/Book | 1.50 | 1.54 | 1.42 | 1.39 | 1.48 | |||||||||||
| (1) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of | ||||||||||||||||
| (2) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of | ||||||||||||||||
| A marginal federal/state combined tax rate of | ||||||||||||||||
| YEAR ENDED DECEMBER 31, | ||||||||||||||||
| Profitability | 2023 | 2022 | ||||||||||||||
| ($ in thousands, except per share) | ||||||||||||||||
| Net interest income | $ | 75,802 | $ | 60,076 | ||||||||||||
| Provision for (reversal of) credit losses | 970 | (1,350 | ) | |||||||||||||
| Non-interest income | 6,631 | 5,571 | ||||||||||||||
| Non-interest expense | 41,157 | 37,308 | ||||||||||||||
| Net income before income taxes | 40,306 | 29,689 | ||||||||||||||
| Provision for income taxes | 9,458 | 6,787 | ||||||||||||||
| Net income | $ | 30,848 | $ | 22,902 | ||||||||||||
| Earnings per share - basic | $ | 3.76 | $ | 2.80 | ||||||||||||
| Earnings per share - diluted | $ | 3.75 | $ | 2.79 | ||||||||||||
| Dividends paid per share | $ | 0.32 | $ | 0.300 | ||||||||||||
| Return on average equity | 21.87 | % | 18.21 | % | ||||||||||||
| Return on average assets | 1.64 | % | 1.17 | % | ||||||||||||
| Net interest margin (1) | 4.33 | % | 3.32 | % | ||||||||||||
| Efficiency ratio (2) | 48.81 | % | 54.29 | % | ||||||||||||
| Capital - Period End | ||||||||||||||||
| Book value per share | $ | 20.03 | $ | 15.33 | ||||||||||||
| Credit Quality - Period End | ||||||||||||||||
| Nonperforming assets/ total assets | 0.00 | % | 0.00 | % | ||||||||||||
| Credit loss reserve/ gross loans | 1.07 | % | 1.03 | % | ||||||||||||
| Period End Balance Sheet | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||
| Total assets | $ | 1,842,422 | $ | 1,968,346 | ||||||||||||
| Gross loans | 1,016,579 | 915,758 | ||||||||||||||
| Nonperforming assets | - | - | ||||||||||||||
| Allowance for credit losses | 10,896 | 9,468 | ||||||||||||||
| Deposits | 1,650,534 | 1,814,297 | ||||||||||||||
| Stockholders' equity | 166,092 | 126,627 | ||||||||||||||
| Non-Financial Data | ||||||||||||||||
| Full-time equivalent staff | 222 | 198 | ||||||||||||||
| Number of banking offices | 18 | 18 | ||||||||||||||
| Common Shares outstanding | ||||||||||||||||
| Period end | 8,293,168 | 8,257,894 | ||||||||||||||
| Period average - basic | 8,193,874 | 8,169,305 | ||||||||||||||
| Period average - diluted | 8,230,892 | 8,204,769 | ||||||||||||||
| Market Ratios | ||||||||||||||||
| Stock Price | $ | 29.95 | $ | 22.65 | ||||||||||||
| Price/Earnings | 7.96 | 8.08 | ||||||||||||||
| Price/Book | 1.50 | 1.48 | ||||||||||||||
| (1) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of | ||||||||||||||||
| (2) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of | ||||||||||||||||
| A marginal federal/state combined tax rate of | ||||||||||||||||
FAQ
What is the ticker symbol for Oak Valley Bancorp?
What was the consolidated net income for the year ended December 31, 2023?
What was the main reason for the decrease in quarterly earnings?
What was the net interest income for the year ended December 31, 2023?
What was the total assets at December 31, 2023?
What was the allowance for credit losses as a percentage of gross loans at December 31, 2023?
What dividend was declared by the Board of Directors of Oak Valley Bancorp?
