Oak Valley Bancorp (NASDAQ: OVLY) (the “Company”), the bank holding company for Oak Valley Community Bank and its Eastern Sierra Community Bank division, recently reported unaudited consolidated financial results. For the three months ended June 30, 2023, consolidated net income was $8,404,000, or $1.02 per diluted share (EPS), as compared to $9,225,000, or $1.12 EPS, for the prior quarter and $4,258,000, or $0.52 EPS, for the same period a year ago. Consolidated net income for the six months ended June 30, 2023 was $17,629,000, or $2.14 EPS, compared to $6,627,000 or $0.81 EPS for the same period of 2022.
The decrease in second quarter net income compared to the prior quarter was due primarily to a $460,000 reversal of loan loss provision in the first quarter of 2023 and an increase in non-interest expense during the second quarter. The QTD and YTD increases compared to the same periods of 2022 were related to net interest income increases resulting from increased yields on earning assets, triggered by FOMC rate hikes, combined with growth of investment and loan portfolios.
Net interest income for the three months ended June 30, 2023 was $19,407,000, compared to $19,543,000 in the prior quarter, and $13,233,000 in the same period a year ago. Interest expense on deposit accounts increased during the quarter, and the average cost of funds rate increased to 0.16 percent from 0.10 percent in the prior quarter and 0.05 percent in the same quarter of the prior year. Overall, the rate increases that began in 2022 have had a positive impact on net interest income and resulted in an increase over the 2022 comparable period. In addition to rising yields, the Company recognized $42.9 million and $18.2 million in loan and investment portfolio growth, respectively, during the prior 12 months.
Net interest margin for the three months ended June 30, 2023 was 4.45 percent, compared to 4.39 percent for the prior quarter and 2.98 percent 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.
“We have strategically capitalized on the opportunity to increase yield through investments and loans during this most recent rate cycle, which has undeniably fueled margin expansion and profitability,” stated Rick McCarty, President and Chief Operating Officer.
Non-interest income was $1,655,000 for the quarter ended June 30, 2023, compared to $1,655,000 for the prior quarter and $1,371,000 for the same period last year. The increase compared to the same period a year ago was mainly due to service charges and a positive change in the market value of equity securities.
Non-interest expense totaled $10,062,000 for the quarter ended June 30, 2023, compared to $9,757,000 in the prior quarter and $9,205,000 in the same quarter a year ago. The second quarter increase compared to prior periods is mainly due to staffing expense and general operating costs related to servicing the growing loan and deposit portfolios.
“We are pleased to report another quarter of solid results. Through our relationship banking business model, we have been able to continue generating core loan growth,” stated Chris Courtney, CEO. “Net interest income for the year has been exceptionally strong and we credit our team members for their ongoing commitment to providing clients with first-class service – day in and day out. A key factor in our ability to consistently be competitive when offering financing solutions in the communities we call home is our commitment to building and broadening our relationships with customers.”
The Board of Directors of Oak Valley Bancorp at their July 18, 2023, meeting declared the payment of a cash dividend of $0.16 per share of common stock to its shareholders of record at the close of business on July 31, 2023. The payment date will be Aug. 11, 2023 and will amount to approximately $1,325,000. This is the second dividend payment made by the Company in 2023.
Oak Valley Bancorp operates Oak Valley Community Bank and its 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 branches: Oakdale, Turlock, Stockton, Patterson, Ripon, Escalon, Manteca, Tracy, Sacramento, Roseville, two branches in Sonora, three branches in Modesto, and three branches in the Eastern Sierra division, which includes Bridgeport, Mammoth Lakes, and Bishop.
