Form 8-K - Current report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.

Date of Report: October 19, 2023 (Date of earliest event reported)

Oak Valley Bancorp (Exact name of registrant as specified in its charter)

CA (State or other jurisdiction of incorporation)	001-34142 (Commission File Number)	26-2326676 (IRS Employer Identification Number)

125 N. Third Ave. Oakdale, CA (Address of principal executive offices)	95361 (Zip Code)

(209) 848-2265 (Registrant's telephone number, including area code)

Not Applicable (Former Name or Former Address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OVLY	The Nasdaq Stock Market, LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition

On October 19, 2023 Oak Valley Bancorp issued a press release, a copy of which is attached as Exhibit 99.1 and incorporated herein by reference. The press release announced the Company’s operating results for the quarter ended September 30, 2023.

The information in this Item 2.02 in this Form 8-K and the Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD Disclosure.

See “Item 2.02. Results of Operations and Financial Condition” which is incorporated by reference in this Item 7.01.

Item 9.01. Financial Statements and Exhibits

(a) Financial statements:

None

(b) Pro forma financial information:

None

(c) Shell company transactions:

None

(d) Exhibits

99.1

Press Release of Oak Valley Bancorp dated October 19, 2023

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 20, 2023
	OAK VALLEY BANCORP
	By: /s/ Jeffrey A. Gall
	Jeffrey A. Gall
	Senior Vice President and Chief Financial Officer (Principal
	Financial Officer and duly authorized signatory)

Exhibit Index
Exhibit No.	Description

99.1	Press Release of Oak Valley Bancorp dated October 19, 2023

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

Exhibit 99.1

PRESS RELEASE

For Immediate Release

Date:

October 19, 2023

Contact:

Chris Courtney/Rick McCarty

Phone:

(209) 848-2265

www.ovcb.com

OAK VALLEY BANCORP REPORTS 3rd QUARTER RESULTS

OAKDALE, CA – 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 September 30, 2023, consolidated net income was $7,354,000, or $0.89 per diluted share (EPS), as compared to $8,404,000, or $1.02 EPS, for the prior quarter and $6,800,000, or $0.83 EPS, for the same period a year ago. Consolidated net income for the nine months ended September 30, 2023 was $24,983,000, or $3.04 EPS, compared to $13,427,000 or $1.64 EPS for the same period of 2022.

The decrease in third quarter net income compared to the prior quarter was due primarily to an increase in deposit interest expense, a credit loss provision and an increase in non-interest expense. 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 the growth of our loan portfolio.

Net interest income for the three months ended September 30, 2023 was $18,938,000, compared to $19,407,000 in the prior quarter, and $16,772,000 in the same period a year ago. Interest expense on deposit accounts increased during the quarter, and our average cost of funds rate increased to 0.33% from 0.16% in the prior quarter and 0.06% 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, we’ve recognized $59.0 million in loan growth, during the prior twelve months.

Net interest margin for the three months ended September 30, 2023 was 4.34%, compared to 4.45% for the prior quarter and 3.61% for the same period last year. 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.

“Net interest income and net interest margin remain strong and continue to have positive impact on profitability. While rate pressures have begun to increase cost of funds, we’ve been pleased with the way our relationship banking model and deposit mix have enabled us to balance customer demand and interest sensitivity with their respective liquidity needs,” stated Rick McCarty, President and Chief Operating Officer.

Non-interest income was $1,566,000 for the quarter ended September 30, 2023, compared to $1,655,000 for the prior quarter and $1,611,000 for the same period last year. The decrease compared to the prior period was due to a negative change in the market value of equity securities, which was partially offset by an increase in service charges.

Non-interest expense totaled $10,578,000 for the quarter ended September 30, 2023, compared to $10,062,000 in the prior quarter and $9,370,000 in the same quarter a year ago. The third 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.

Total assets were $1.84 billion at September 30, 2023, a decrease of $26.3 million and $127.1 million over June 30, 2023 and September 30, 2022, respectively, due to the deposit decreases as described below. Gross loans were $971.2 million at September 30, 2023, an increase of $20.8 million over June 30, 2023 and $59.0 million over September 30, 2022. The Company’s total deposits were $1.67 billion as of September 30, 2023, a decrease of $15.8 million and $164.3 million from June 30, 2023 and September 30, 2022, respectively. The deposit decrease during the third quarter was related to normal balance fluctuations from core deposit accounts. Our liquidity position is very strong as evidenced by $278 million in cash and cash equivalents balances at September 30, 2023.

“We are pleased to report another solid quarter of financial results. We are understandably excited that our relationship teams continue to drive year-over-year loan growth, particularly in the current rate environment,” stated Chris Courtney, CEO. “While we have expanded our branch network and lending footprint in the Sacramento region, to capitalize on these opportunities, we remain committed to attracting banking professionals who align with our commitment to cultivating lifelong relationships with clients by treating them right and helping their businesses excel,” Courtney concluded.

Non-performing assets (“NPA”) remained at zero as of September 30, 2023, as they were for all of 2023 and 2022. The allowance for credit losses (“ACL”) as a percentage of gross loans increased to 1.00% at September 30, 2023, compared to 0.99% at June 30, 2023 and 1.21% at September 30, 2022. The slight increase in the third quarter was related to a provision for credit loss of $300,000, which was mainly due to macro-economic conditions and loan growth of $20.8 million during the third quarter. The Company’s credit quality remains stable and credit loss reserves relative to gross loans remain at acceptable levels as determined by management’s evaluation of the CECL credit risk model.

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.

###

Oak Valley Bancorp
Financial Highlights (unaudited)

($ in thousands, except per share)	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
Selected Quarterly Operating Data:	2023			2023			2023			2022			2022

Net interest income	$	18,938		$	19,407		$	19,543		$	19,113		$	16,772
Provision (reversal of) for credit losses		300			-			(460	)		(1,550	)		200
Non-interest income		1,566			1,655			1,655			1,421			1,611
Non-interest expense		10,578			10,062			9,757			9,611			9,370
Net income before income taxes		9,626			11,000			11,901			12,473			8,813
Provision for income taxes		2,272			2,596			2,676			2,998			2,013
Net income	$	7,354		$	8,404		$	9,225		$	9,475		$	6,800

Earnings per common share - basic	$	0.90		$	1.03		$	1.13		$	1.16		$	0.83
Earnings per common share - diluted	$	0.89		$	1.02		$	1.12		$	1.15		$	0.83
Dividends paid per common share	$	0.16		$	-		$	0.16		$	-		$	0.15
Return on average common equity		19.85	%		23.48	%		28.36	%		33.37	%		21.96	%
Return on average assets		1.57	%		1.79	%		1.93	%		1.90	%		1.35	%
Net interest margin (1)		4.34	%		4.45	%		4.39	%		4.09	%		3.61	%
Efficiency ratio (2)		49.89	%		46.31	%		46.31	%		45.49	%		48.14	%

Capital - Period End
Book value per common share	$	16.29		$	17.76		$	17.08		$	15.33		$	12.86

Credit Quality - Period End
Nonperforming assets/ total assets		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Loan loss reserve/ gross loans		1.00	%		0.99	%		1.01	%		1.03	%		1.21	%

Period End Balance Sheet
($ in thousands)
Total assets	$	1,835,402		$	1,861,713		$	1,940,674		$	1,968,346		$	1,962,470
Gross loans		971,243			950,488			926,820			915,758			912,235
Nonperforming assets		-			-			-			-			-
Allowance for credit losses		9,738			9,411			9,383			9,468			10,997
Deposits		1,666,548			1,682,378			1,769,176			1,814,297			1,830,882
Common equity		135,095			147,122			141,470			126,627			106,188

Non-Financial Data
Full-time equivalent staff		225			213			206			198			209
Number of banking offices		18			18			18			18			17

Common Shares outstanding
Period end		8,293,468			8,281,661			8,281,661			8,257,894			8,258,794
Period average - basic		8,197,083			8,195,270			8,182,737			8,175,871			8,172,836
Period average - diluted		8,232,338			8,227,218			8,226,991			8,213,891			8,206,342

Market Ratios
Stock Price	$	25.08		$	25.19		$	23.66		$	22.65		$	17.87
Price/Earnings		7.05			6.12			5.17			4.93			5.41
Price/Book		1.54			1.42			1.39			1.48			1.39

(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.

	NINE MONTHS ENDED SEPTEMBER 30,
	2023			2022
Profitability
($ in thousands, except per share)
Net interest income	$	57,888		$	40,963
(Reversal of) provision for credit losses		(160	)		200
Non-interest income		4,876			4,150
Non-interest expense		30,397			27,697
Net income before income taxes		32,527			17,216
Provision for income taxes		7,544			3,789
Net income	$	24,983		$	13,427

Earnings per share - basic	$	3.05		$	1.64
Earnings per share - diluted	$	3.04		$	1.64
Dividends paid per share	$	0.32		$	0.30
Return on average equity		23.71	%		13.79	%
Return on average assets		1.76	%		0.92	%
Net interest margin (1)		4.39	%		3.05	%
Efficiency ratio (2)		47.48	%		58.20	%

Capital - Period End
Book value per share	$	16.29		$	12.86

Credit Quality - Period End
Nonperforming assets/ total assets		0.00	%		0.00	%
Loan loss reserve/ gross loans		1.00	%		1.21	%

Period End Balance Sheet
($ in thousands)
Total assets	$	1,835,402		$	1,962,470
Gross loans		971,243			912,235
Nonperforming assets		-			-
Allowance for credit losses		9,738			10,997
Deposits		1,666,548			1,830,882
Stockholders' equity		135,095			106,188

Non-Financial Data
Full-time equivalent staff		225			209
Number of banking offices		18			17

Common Shares outstanding
Period end		8,293,468			8,258,794
Period average - basic		8,191,749			8,167,093
Period average - diluted		8,228,869			8,201,695

Market Ratios
Stock Price	$	25.08		$	17.87
Price/Earnings		6.15			8.13
Price/Book		1.54			1.39

(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.

Document And Entity Information	Oct. 19, 2023
Document Information [Line Items]
Entity, Registrant Name	Oak Valley Bancorp
Document, Type	8-K
Document, Period End Date	Oct. 19, 2023
Entity, Incorporation, State or Country Code	CA
Entity, File Number	001-34142
Entity, Tax Identification Number	26-2326676
Entity, Address, Address Line One	125 N. Third Ave.
Entity, Address, City or Town	Oakdale
Entity, Address, State or Province	CA
Entity, Address, Postal Zip Code	95361
City Area Code	209
Local Phone Number	848-2265
Title of 12(b) Security	Common Stock
Trading Symbol	OVLY
Security Exchange Name	NASDAQ
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0001431567