Oak Valley Bancorp: A Quarter of Growth and Resilience

Oak Valley Bancorp (OVLY) recently reported its third-quarter earnings, showcasing a robust performance driven by loan growth and strategic management. The California-based bank holding company, which operates Oak Valley Community Bank and Eastern Sierra Community Bank, demonstrated its ability to navigate the evolving financial landscape and maintain a strong earnings trajectory.

The quarter saw consolidated net income of $7,324,000, or $0.89 per diluted share (EPS), representing a 24% increase from the prior quarter and a 1% increase year-over-year. This growth was primarily driven by loan recoveries, which resulted in a reversal of allowance for credit losses of $1,620,000.

Net interest income for the quarter was $17,655,000, a 2% increase from the prior quarter and a 4% decrease from the same period last year. The increase over the prior quarter was attributed to earning asset growth and an increase in average earning asset yield, while the decrease from the same period a year ago was due to an increase in deposit interest expense. Despite this, net interest margin for the quarter remained healthy at 4.04%.

Oak Valley Bancorp's loan portfolio continued to grow, with gross loans reaching $1.08 billion at the end of the quarter, an increase of $5.1 million from the prior quarter and $103.9 million year-over-year. This growth was crucial in minimizing future margin compression amid possible interest rate drops. The bank's strong core deposits helped manage funding costs and maintain a healthy net interest margin.

Non-interest income for the quarter was $1,846,000, a 5% increase from the prior quarter and a 19% increase from the same period last year. The increases were mainly due to unrealized gains on equity securities as a result of lower interest rates, as well as loan growth and deposit interest expense.

Non-interest expense totaled $11,324,000 for the quarter, a 3% decrease from the prior quarter and a 7% increase from the same quarter a year ago. The decrease compared to the prior period was mainly due to charitable contributions and data processing expense, while the increase compared to the same period a year ago was mainly due to staffing expense and general operating costs related to servicing the growing loan and deposit portfolios.

Oak Valley Bancorp's strong performance in the third quarter underscores its commitment to relationship banking and its ability to adapt to changing market conditions. As the bank continues to grow its loan portfolio and manage expenses, it remains well-positioned to maintain a healthy net interest margin and deliver strong earnings in the future.