Oak Valley Bancorp Reports 4th Quarter Results and Announces Cash Dividend
Oak Valley Bancorp (OVLY) reported unaudited consolidated financial results for the three months ended December 31, 2023. Consolidated net income was $5,865,000, a decrease from the prior quarter and year-ago period. However, the net income for the year ended December 31, 2023, totaled $30,848,000, representing an increase of 34.7% compared to the previous year. The decrease in quarterly earnings is attributed to a credit loss provision of $1,130,000 and an increase in deposit interest expense. The company's net interest income was $17,914,000 for the fourth quarter, and $75,802,000 for the year ended December 31, 2023, reflecting a decrease from the prior quarter but an increase from the same period a year ago. Non-interest income and non-interest expense also showed increases for the fourth quarter and year ended December 31, 2023. Total assets, gross loans, and total deposits also experienced fluctuations during the year.
Positive
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.
Negative
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.
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.
01/19/2024 - 09:15 PM
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 $5,865,000 or $0.71 per diluted share (EPS), as compared to $7,354,000 , or $0.89 EPS, for the prior quarter and $9,475,000 , or $1.15 EPS for the same period a year ago. Consolidated net income for the year ended December 31, 2023, totaled $30,848,000 , or $3.75 EPS, representing an increase of 34.7% compared to $22,902,000 , or $2.79 EPS for 2022. The decrease in QTD earnings is mainly due to a credit loss provision of $1,130,000 recorded during the fourth quarter, and an increase in deposit interest expense. The increase in YTD earnings is mainly due to rising net interest income driven by higher yields on earning assets.
“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 $17,914,000 and $75,802,000 for the fourth quarter and year ended December 31, 2023, respectively, compared to $18,938,000 during the prior quarter, $19,113,000 for the fourth quarter of 2022, and $60,076,000 for the year ended December 31, 2022. The QTD decreases from prior quarter and the fourth quarter of 2022 are mainly attributable to an increase in deposit interest expense. The 2023 YTD increase compared to 2022 YTD is due to increased yields on earning assets, triggered by FOMC rate hikes, combined with growth of our loan portfolio. Gross loans increased by $100.8 million year-over-year.
Net interest margin was 4.15% and 4.33% for the fourth quarter and year ended December 31, 2023, respectively, as compared to 4.34% for the prior quarter, 4.09% for the fourth quarter of 2022, and 3.32% for the year ended December 31, 2022. The interest margin decrease compared to the prior quarter was related to deposit interest expense as described above. The net interest margin expansion for 2023 YTD compared to 2022 was fueled by the impact of FOMC rate increases on earning asset yields and growth of the loan portfolio, as discussed above.
“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 $1,755,000 and $6,631,000 , respectively, compared to $1,566,000 during the prior quarter, $1,421,000 for the fourth quarter of 2022, and $5,571,000 for the year ended December 31, 2022. The increases over prior periods were primarily due to changes in the market value of equity securities. YTD results also benefited from an increase in deposit account service charges.
Non-interest expense for the fourth quarter and year ended December 31, 2023, totaled $10,760,000 and $41,157,000 , respectively, compared to $10,578,000 during the prior quarter, $9,611,000 for the fourth quarter of 2022 and $37,308,000 for the year ended December 31, 2022. The fourth quarter and year-to-date increases compared to prior periods correspond to staffing expense and general operating costs related to servicing the loan and deposit portfolios.
Total assets were $1.84 billion at December 31, 2023, an increase of $7.0 million over September 30, 2023, and a decrease of $125.9 million from December 31, 2022. Gross loans were $1.02 billion as of December 31, 2023, an increase of $45.3 million from September 30, 2023, and $100.8 million from December 31, 2022. The Company’s total deposits were $1.65 billion as of December 31, 2023, a decrease of $16.0 million from September 30, 2023, and $163.8 million from December 31, 2022. The deposit decrease during the third quarter was related to normal balance fluctuations from core deposit accounts, and the year-over-year decrease was mainly related to movement to higher deposit rates offered by other financial institutions, including Oak Valley Investments. Our liquidity position is very strong as evidenced by $216 million in cash and cash equivalents balances at December 31, 2023, and the ample lines of credit, which have had no outstanding advances during the last two years.
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 1.07% at December 31, 2023, compared to 1.00% at September 30, 2023 and 1.03% at December 31, 2022. The increase was related to provision for credit losses of $1,130,000 in the fourth quarter of 2023, which was mainly due to macro-economic conditions and loan growth of $100.8 million during the quarter. Given industry concerns of credit risk specific to commercial real estate, management has performed a thorough analysis of this segment as part of the CECL credit risk model’s ACL computation, concluding that the credit loss reserves relative to gross loans remains at acceptable levels, and credit quality remains stable.
The Board of Directors of Oak Valley Bancorp at their January 16, 2024 meeting, declared the payment of a cash dividend of $0.22 5 per share of common stock to its shareholders of record at the close of business on January 29, 2024. The payment date will be February 9, 2024 and will amount to approximately $1,866,000. T his is the first dividend payment made by the Company in 2024.
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 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. YEAR ENDED 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 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.
What is the ticker symbol for Oak Valley Bancorp?
The ticker symbol for Oak Valley Bancorp is OVLY.
What was the consolidated net income for the year ended December 31, 2023?
The consolidated net income for the year ended December 31, 2023, was $30,848,000.
What was the main reason for the decrease in quarterly earnings?
The decrease in quarterly earnings was mainly due to a credit loss provision of $1,130,000 and an increase in deposit interest expense.
What was the net interest income for the year ended December 31, 2023?
The net interest income for the year ended December 31, 2023, was $75,802,000.
What was the total assets at December 31, 2023?
Total assets were $1.84 billion at December 31, 2023.
What was the allowance for credit losses as a percentage of gross loans at December 31, 2023?
The allowance for credit losses as a percentage of gross loans increased to 1.07% at December 31, 2023.
What dividend was declared by the Board of Directors of Oak Valley Bancorp?
The Board of Directors declared a cash dividend of $0.225 per share of common stock to its shareholders.
