Oak Valley Bancorp Reports 2nd Quarter Results and Announces Cash Dividend

OAKDALE, CA--(Marketwired - Jul 20, 2016) - Oak Valley Bancorp (NASDAQ: OVLY), the bank holding company for Oak Valley Community Bank and Eastern Sierra Community Bank, recently reported consolidated financial results. For the three months ended June 30, 2016, consolidated net income was $1,904,000, or $0.24 per diluted common share, compared to $1,509,000, or $0.19 per diluted common share, for the prior quarter and $1,510,000, or $0.19 per diluted common share for the same period a year ago. The increase compared to prior periods is mainly due to accretion of fair value discounts on loans acquired from Mother Lode Bank. 

Net interest income was $8,106,000 for the three months ended June 30, 2016, compared to $7,542,000 for the prior quarter and $6,200,000 for the same period last year. The increase is the result of strong organic loan growth over the past twelve months combined with the acquisition of Mother Lode Bank. The Company's net interest margin for the three months ended June 30, 2016 was 4.03%, compared to 3.76% for the prior quarter, and 3.70% for the same period last year. The increase in net interest margin is mainly attributable to the loan discount accretion. In addition, our strong loan demand has allowed us to deploy low-yielding cash balances into higher yielding commercial loans and investment securities.

Non-interest income for the three months ended June 30, 2016 totaled $1,056,000, compared to $1,037,000 during the prior quarter, and $1,156,000 for the same period last year. The increase compared to the prior quarter is partially the result of increased transaction related fees and service charges associated with the increased number of deposit accounts. Compared to the same period last year, these increases were offset by a reduction in non-recurring gains on called investment securities and FHLB dividend income.

Non-interest expense for the three months ended June 30, 2016 totaled $6,187,000, compared to $6,187,000 during the prior quarter, and $5,193,000 for the same period last year. While flat compared to the prior quarter, the increase compared to last year corresponds to salaries and benefits associated with our new Sonora branch and general operating costs related to servicing the growing loan and deposit portfolios.

Total assets were $925.6 million as of June 30, 2016, an increase of $19.9 million over March 31, 2016 and $161.6 million over June 30, 2015. Gross loans were $579.8 million as of June 30, 2016, an increase of $11.5 million over March 31, 2016, and an increase of $116.3 million over June 30, 2015. The Company's total deposits were $838.5 million as of June 30, 2016, an increase of $16.0 million over March 31, 2016, and an increase of $154.5 million over June 30, 2015.

The balance sheet growth compared to June 30, 2015 includes acquired balances of $78.7 million in assets, including $45.8 million in gross loans, and $71.1 million in total deposits from Mother Lode Bank.

"In the face of industry-wide margin compression, solid loan demand and our continued ability to utilize cash reserves to meet the borrowing needs of the business and ag business communities has been essential in driving profitability," stated Chris Courtney, President and CEO. "The accretive nature of the Mother Lode acquisition has accelerated earnings as expected," concluded Courtney.

Non-performing assets as of June 30, 2016 were $3,884,000, or 0.42% of total assets, compared to $8,763,000, or 0.97% of total assets, as of March 31, 2016, and $5,197,000, or 0.68%, at June 30, 2015. The reduction at June 30, 2016 is due to a $3.9 million non-accrual loan pay-off received from one borrower and a sale of one OREO property during the quarter. The Company recorded provision for loan losses of $125,000 during the second quarter of 2016 due to loan growth, thus decreasing the allowance for loan losses to 1.32% of gross loans at June 30, 2016 compared to 1.33% at March 31, 2016 and 1.59% at June 30, 2015. The decrease in the loan loss reserve percentage compared to June 30, 2015 is primarily due to the loans acquired from Mother Lode Bank that were recorded at fair value and thus did not require a loan loss reserve.

Concurrent with the earnings announcement, the Board of Directors of Oak Valley Bancorp declared the payment of a cash dividend of $0.12 per share of common stock to its shareholders of record at the close of business on August 1, 2016. In aggregate, the distribution will amount to approximately $971,000. The payment date will be August 11, 2016. This is the second dividend payment made by the Company in 2016.

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)		2nd Quarter				1st Quarter				4th Quarter				3rd Quarter				2nd Quarter
Selected Quarterly Operating Data:		2016				2016				2015				2015				2015
	Net interest income	$	8,106			$	7,542			$	6,647			$	6,354			$	6,200
	Provision for (reversal of) loan losses		125				200				-				-				-
	Non-interest income		1,056				1,037				962				965				1,156
	Non-interest expense		6,187				6,187				7,085				5,299				5,193
	Net income before income taxes		2,850				2,192				524				2,020				2,163
	Provision for income taxes		946				683				34				638				653
	Net income	$	1,904			$	1,509			$	490			$	1,382			$	1,510
	Earnings per common share - basic	$	0.24			$	0.19			$	0.06			$	0.17			$	0.19
	Earnings per common share - diluted	$	0.24			$	0.19			$	0.06			$	0.17			$	0.19
	Dividends paid per common share	$	-			$	0.12			$	-			$	0.110			$	-
	Return on average common equity		9.48	%			7.68	%			2.49	%			7.17	%			7.94	%
	Return on average assets		0.85	%			0.67	%			0.24	%			0.70	%			0.81	%
	Net interest margin (1)		4.03	%			3.76	%			3.62	%			3.61	%			3.70	%
	Efficiency ratio (2)		62.48	%			67.46	%			66.65	%			66.95	%			68.23	%
Capital - Period End
	Book value per common share	$	10.14			$	9.76			$	9.69			$	9.55			$	9.43
Credit Quality - Period End
	Nonperforming assets/ total assets		0.42	%			0.97	%			0.88	%			0.65	%			0.68	%
	Loan loss reserve/ gross loans		1.32	%			1.33	%			1.36	%			1.55	%			1.59	%
Period End Balance Sheet
($ in thousands)
	Total assets	$	925,635			$	905,750			$	897,038			$	793,723			$	764,008
	Gross loans		579,774				568,227				541,032				477,327				463,463
	Nonperforming assets		3,884				8,763				7,882				5,123				5,197
	Allowance for loan losses		7,680				7,557				7,356				7,389				7,390
	Deposits		838,458				822,440				814,691				712,577				683,937
	Common equity		81,993				78,960				78,263				77,147				76,165
Non-Financial Data
	Full-time equivalent staff		158				164				158				150				152
	Number of banking offices		16				16				16				15				15
Common Shares outstanding
	Period end		8,088,155				8,088,155				8,078,155				8,078,155				8,072,655
	Period average - basic		8,028,332				8,008,602				7,996,644				7,994,857				7,992,296
	Period average - diluted		8,060,464				8,051,776				8,045,090				8,040,577				8,036,691
Market Ratios
	Stock Price	$	9.75			$	9.27			$	10.40			$	9.46			$	9.86
	Price/Earnings		10.25				12.27				42.78				13.79				13.01
	Price/Book		0.96				0.95				1.07				0.99				1.05
		Six Months Ended June 30,
($ in thousands, except per share)		2016				2015
Net interest income		$	15,648			$	12,401
	Provision for (reversal of) loan losses		325				(125	)
	Non-interest income		2,093				2,183
	Non-interest expense		12,374				10,292
	Net income before income taxes		5,042				4,417
	Provision for income taxes		1,629				1,381
	Net income	$	3,413			$	3,036
	Earnings per common share - basic	$	0.43			$	0.38
	Earnings per common share - diluted	$	0.42			$	0.38
	Dividends paid per common share	$	0.12			$	0.10
	Return on average common equity		8.59	%			8.08	%
	Return on average assets		0.76	%			0.81	%
	Net interest margin (1)		3.90	%			3.72	%
	Efficiency ratio (2)		64.89	%			68.56	%
Capital - Period End
	Book value per common share	$	10.14			$	9.43
Credit Quality - Period End
	Nonperforming assets/ total assets		0.42	%			0.68	%
	Loan loss reserve/ gross loans		1.32	%			1.59	%
Period End Balance Sheet
($ in thousands)
	Total assets	$	925,635			$	764,008
	Gross loans		579,774				463,463
	Nonperforming assets		3,884				5,197
	Allowance for loan losses		7,680				7,390
	Deposits		838,458				683,937
	Common equity		81,993				76,165
Non-Financial Data
	Full-time equivalent staff		158				152
	Number of banking offices		16				15
Common Shares outstanding
	Period end		8,088,155				8,072,655
	Period average - basic		8,018,467				7,982,316
	Period average - diluted		8,056,120				8,030,756
Market Ratios
	Stock Price	$	9.75			$	9.86
	Price/Earnings		11.42				12.86
	Price/Book		0.96				1.05

(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.