Oak Valley Bancorp Reports 4th Quarter Results

OAKDALE, CA–(Marketwired – Jan 29, 2016) – Oak Valley Bancorp (NASDAQ: OVLY) (the “Company”), the bank holding company for Oak Valley Community Bank and Eastern Sierra Community Bank (the “Bank”), recently reported consolidated financial results for the fourth quarter and year of 2015. For the three months ended December 31, 2015, consolidated net income was $490,000, or $0.06 per diluted share. This compared to consolidated net income of $1,382,000, or $0.17 per diluted share, for the prior quarter and $1,642,000, or $0.20 per diluted share for the same period a year ago. The decrease in net income is attributable to one-time merger related expenses of $1,326,000, net of taxes ($1,971,000 pre-tax), associated with the Mother Lode Bank acquisition completed in December 2015.

Consolidated net income for 2015 totaled $4,908,000, or $0.61 per diluted share, representing a decrease of 31.1% compared to consolidated net income of $7,122,000, or $0.89 per diluted share for 2014. Year-to-date results in 2014 included a $1.88 million reversal of loan loss provisions related to the recovery of a charged off loan which bolstered net income in 2014 from normal operations, and combined with the 2015 merger expenses, further contributed to the year-over-year decrease in earnings.

Total assets were $897 million at December 31, 2015, an increase of $103.3 million over September 30, 2015 and $147.4 million over December 31, 2014. Gross loans were $541 million as of December 31, 2015, an increase of $63.7 million over September 30, 2015, and an increase of $86.6 million over December 31, 2014. The Company’s total deposits were $814.7 million as of December 31, 2015, an increase of $102.1 million over September 30, 2015, and an increase of $145.1 million over December 31, 2014.

The balance sheet growth figures include acquired balances of $77.3 million in assets, including $45.8 million in gross loans, and $71.1 million in total deposits from Mother Lode Bank, which if excluded would equate to organic year-over-year growth from normal operations of $70.1 million in assets, including $40.8 million in gross loans, and $74.0 million in total deposits.

Net interest income was $6,647,000 for the three months ended December 31, 2015, a slight increase of $26,000 from the $6,621,000 for the same period last year. The Company has managed to offset the compression of loan yield with strong loan growth resulting in the slight increase to net interest income. The Company’s net interest margin for the three months ended December 31, 2015 was 3.62%, compared to 3.61% for the prior quarter and 4.19% for the same period last year.

“Fourth quarter results were notably influenced by the Mother Lode acquisition. After absorbing these initial short-term expenses, we are excited about the long-term prospects the merger will bring and the financial impact it will have in 2016,” stated Chris Courtney, President and CEO of the Company and the Bank.

Non-interest expense for the three months ended December 31, 2015 totaled $7,085,000, compared to $5,299,000 during the prior quarter, and $5,252,000 for the same period last year. The increase compared to the prior year is mainly attributed to, as previously mentioned, one-time merger related expenses of $1,971,000 recorded in 2015. Additionally, the increase compared to the same period last year corresponds to growth in full time equivalent staff from 148 to 158, as well as, the addition of the newly constructed Downtown Sonora branch which opened in December 2015. Deposit servicing costs have also increased as a result of the increase in the number of deposit accounts.

Non-interest income for the three months ended December 31, 2015 totaled $962,000, compared to $965,000 during the prior quarter, and $1,086,000 for the same period last year. The decrease compared to the fourth quarter of 2014 is primarily the result of a $159,000 decrease in gains on called investment securities.

Non-performing assets as of December 31, 2015 were $8,167,000, or 0.91% of total assets, compared to $5,123,000, or 0.65% of total assets as of September 30, 2015, and $5,584,000, or 0.74% at December 31, 2014. The ratio of loan loss reserves to gross loans decreased to 1.36% as of December 31, 2015, compared to 1.55%, at September 30, 2015, and 1.66% at December 31, 2014. The increase in non-performing assets is due to one existing loan relationship that was placed on non-accrual status during the fourth quarter and the additional non-performing assets that were acquired from Mother Lode Bank. Improvement in economic conditions and noted trends of credit quality have allowed the Company to maintain its reserve level in spite of recent loan growth. Accordingly, the Company did not record a provision for loan losses in 2015. Additionally, loans acquired from Mother Lode Bank are recorded at fair value and thus did not require a loan loss reserve, which further decreased the loan loss reserve as a percentage of gross loans.

Oak Valley Bancorp operates Oak Valley Community Bank & Eastern Sierra Community Bank, through which it offers a variety of loan and deposit products to individuals and small businesses. They currently operate through 16 conveniently located branches: Oakdale, Turlock, Stockton, Patterson, Ripon, Escalon, Manteca, Tracy, two branches in Sonora, three branches in Modesto, and three branches in their Eastern Sierra Division, which includes Bridgeport, Mammoth Lakes and Bishop.

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) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 
Selected Quarterly Operating Data: 2015 2015 2015 2015 2014 
                 
 Net interest income $6,647 $6,354 $6,200 $6,201 $6,621 
 (Recovery of) provision for loan losses        (125)  
 Non-interest income  962  965  1,156  1,027  1,086 
 Non-interest expense  7,085  5,299  5,193  5,099  5,252 
 Net income before income taxes  524  2,020  2,163  2,254  2,455 
 Provision for income taxes  34  638  653  728  813 
 Net income $490 $1,382 $1,510 $1,526 $1,642 
                  
 Earnings per common share – basic $0.06 $0.17 $0.19 $0.19 $0.21 
 Earnings per common share – diluted $0.06 $0.17 $0.19 $0.19 $0.20 
 Dividends paid per common share $ $0.11 $ $0.100 $ 
 Return on average common equity  2.49% 7.17% 7.94% 8.22% 8.80%
 Return on average assets  0.24% 0.70% 0.81% 0.82% 0.91%
 Net interest margin (1)  3.62% 3.61% 3.70% 3.74% 4.19%
 Efficiency ratio (2)  66.65% 66.95% 68.23% 70.56% 64.50%
                 
Capital – Period End                
 Book value per common share $9.69 $9.55 $9.43 $9.39 $9.29 
                 
Credit Quality – Period End                
 Nonperforming assets/ total assets  0.91% 0.65% 0.68% 0.70% 0.74%
 Loan loss reserve/ gross loans  1.36% 1.55% 1.59% 1.63% 1.66%
                 
Period End Balance Sheet                
($ in thousands)                
 Total assets $897,038 $793,723 $764,008 $753,552 $749,665 
 Gross loans  541,032  477,327  463,463  453,165  454,471 
 Nonperforming assets  8,167  5,123  5,197  5,246  5,584 
 Allowance for loan losses  7,356  7,389  7,390  7,409  7,534 
 Deposits  814,679  712,577  683,937  672,991  669,581 
 Common equity  78,263  77,147  76,165  75,816  75,041 
                 
Non-Financial Data                
 Full-time equivalent staff  158  150  152  148  148 
 Number of banking offices  16  15  15  15  15 
                 
Common Shares outstanding                
 Period end  8,078,155  8,078,155  8,072,655  8,075,355  8,074,855 
 Period average – basic  7,996,644  7,994,857  7,992,296  7,972,225  7,960,108 
 Period average – diluted  8,045,090  8,040,577  8,036,691  8,024,756  8,015,511 
                 
Market Ratios                
 Stock Price $10.40 $9.46 $9.86 $9.86 $10.16 
 Price/Earnings  42.78  13.79  13.01  12.70  12.41 
 Price/Book  1.07  0.99  1.05  1.05  1.09 
                 
                 
  YEAR ENDED          
  DECEMBER 31,          
  2015 2014          
                 
 Net interest income $25,402 $25,289          
 (Recovery of) provision for loan losses  (125) (1,877)         
 Non-interest income  4,110  3,764          
 Non-interest expense  22,676  20,234          
 Net income before income taxes  6,961  10,696          
 Provision for income taxes  2,053  3,574          
 Net income $4,908 $7,122          
                  
 Earnings per common share – basic $0.61 $0.90          
 Earnings per common share – diluted $0.61 $0.89          
 Dividends paid per common share $0.21 $0.17          
 Return on average common equity  6.41% 10.07%         
 Return on average assets  0.63% 1.03%         
 Net interest margin (1)  3.66% 4.11%         
 Efficiency ratio (2)  68.07% 67.38%         
                 
Capital – Period End                
 Book value per common share $9.69 $9.29          
                 
Credit Quality – Period End                
 Nonperforming assets/ total assets  0.91% 0.74%         
 Loan loss reserve/ gross loans  1.36% 1.66%         
                 
Period End Balance Sheet                
($ in thousands)                
 Total assets $897,037 $749,665          
 Gross loans  541,032  454,471          
 Nonperforming assets  8,167  5,584          
 Allowance for loan losses  7,356  7,534          
 Deposits  814,679  669,581          
 Common equity  78,263  75,041          
                 
Non-Financial Data                
 Full-time equivalent staff  158  148          
 Number of banking offices  16  15          
                 
Common Shares outstanding                
 Period end  8,078,155  8,074,855          
 Period average – basic  7,989,088  7,938,052          
 Period average – diluted  8,036,845  7,992,731          
                 
Market Ratios                
 Stock Price $10.40 $10.16          
 Price/Earnings  16.93  11.32          
 Price/Book  1.07  1.09          
   
 (1) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 34%.
 (2) Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 34%, and a marginal federal/state combined tax rate of 41.15% for applicable revenue.
    

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