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 Dec. 31, 2021, consolidated net income was $3,466,000 or $0.42 per diluted share (EPS), as compared to $4,554,000, or $0.56 EPS, for the prior quarter and $4,649,000, or $0.57 EPS for the same period a year ago. Consolidated net income for the year ended Dec. 31, 2021, totaled $16,337,000, or $2.00 EPS, representing an increase of 19.4 percent compared to $13,687,000 or $1.68 EPS for 2020.
The fourth quarter net income decrease was primarily due to a decrease in Paycheck Protection Program (PPP) loan interest and fee income to $1,254,000 during the fourth quarter, compared to $2,679,000 during the third quarter of 2021 and $2,150,000 during the fourth quarter of 2020. The year-to-date increase in net income was mainly due to PPP loan interest and fee income of $8,726,000 in 2021, as compared to $4,720,000 in 2020. Additionally, a reversal of loan loss provisions totaling $635,000 was recognized during the fourth quarter and year-to-date period of 2021, as compared to a reversal of $338,000 during the fourth quarter of 2020 and provisions of $2,165,000 for the year-to-date period of 2020.
The Company has benefited from loan growth, excluding PPP loans, of $27.2 million, and investment portfolio growth of $45.7 million, during the year ended Dec. 31, 2021. This growth in earning assets contributed to net interest income expansion and helped to offset the yield reduction resulting from the current low interest rate environment. $345 million has been funded in new PPP loans since the commencement of the PPP loan program, of which $314 million has been paid down through SBA forgiveness payments, leaving an outstanding balance of $31 million as of Dec. 31, 2021.
“Our team had a truly dynamic performance in 2021. Their work to support local businesses, during these challenging times has been remarkable and we simply couldn’t be more pleased with the way they have put our core values front-and-center in the execution of our mission. Their hard work and dedication was instrumental in helping us reach record level earnings for the year,” stated Chris Courtney, Chief Executive Officer.
Net interest income was $11,309,000 and $48,835,000 for the fourth quarter and year ended Dec. 31, 2021, respectively, compared to $13,296,000 during the prior quarter, $12,128,000 for the fourth quarter of 2020 and $44,957,000 for the year ended Dec. 31, 2020. The fourth quarter decrease compared to prior quarters is attributable to the decrease in PPP loan interest and fees as described above. The year over year increase is attributable to an increase in interest and fees on PPP loans and organic growth as mentioned above.
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 17 branches: Oakdale, Turlock, Stockton, Patterson, Ripon, Escalon, Manteca, Tracy, Sacramento, two branches in Sonora, three branches in Modesto, and three branches in the Eastern Sierra division, which includes Bridgeport, Mammoth Lakes, and Bishop. The Company has received regulatory approval to open a new office in Roseville, which is slated for Spring 2022.
For more information, call 1-866-844-7500 or visit www.ovcb.com.
Net interest margin was 2.55 percent and 3.04 percent for the fourth quarter and year ended Dec. 31, 2021, respectively, as compared to 3.49 percent and 3.59 percent for the same periods of 2020. The interest margin compression was mainly due to an increase in low-yielding cash balances driven by deposit growth and PPP loan forgiveness payments, and from lower overall market rates triggered by the FOMC rate cuts in March 2021, which continue to adversely impact earning asset yields as they reprice and mature.
Non-interest income for the fourth quarter and year ended Dec. 31, 2021, totaled $1,542,000 and $5,426,000, respectively, compared to $1,303,000 during the prior quarter, $1,280,000 for the fourth quarter of 2020, and $4,815,000 for the year ended Dec. 31, 2020. The fourth quarter and year-to-date increases compared to prior periods was mainly due to increases recognized on debit card transaction fees, gains on called investment securities, and investment advisory fees.
Non-interest expense for the fourth quarter and year ended Dec. 31, 2021, totaled $8,877,000 and $33,219,000, respectively, compared to $8,407,000 during the prior quarter, $8,040,000 for the fourth quarter of 2020 and $29,864,000 for the year ended Dec. 31, 2020. The fourth quarter and year-to-date increases compared to prior periods correspond to staffing expense, general operating costs related to servicing the growing loan and deposit portfolios, and a decrease in deferred costs associated with funded loans, which is recorded against salary expense.
Total assets were $1.96 billion at Dec. 31, 2021, an increase of $107.6 million over Sept. 30, 2021, and $452.9 million over Dec. 31, 2020. Gross loans were $860.0 million as of Dec. 31, 2021, a decrease of $12.1 million from Sept. 30, 2021, and $153.1 million from Dec. 31, 2020. The fourth quarter and year-to-date decreases in gross loans were due to decreases in PPP loan balances of $36.0 million and $180.3 million, respectively, as a result of PPP forgiveness payments received from the SBA. The Company’s total deposits were $1.81 billion as of Dec. 31, 2021, an increase of $105.8 million over Sept. 30, 2021, and $439.2 million over Dec. 31, 2020.
“We’ve had transformative growth in our balance sheet over the past two years. At the same time, we have seen considerable changes on the competitive front resulting from recent consolidation within the industry. Coupled together, these factors instill optimism in our outlook for the road ahead,” summarized Rick McCarty, President and Chief Operating Officer.
The Board of Directors of Oak Valley Bancorp at its Jan. 18, 2022, meeting declared the payment of a cash dividend of $0.15 per share of common stock to its shareholders of record at the close of business on Jan. 31, 2022. The payment date will be Feb. 11, 2022 and will amount to approximately $1,236,000. This is the first dividend payment made by the Company in 2022.