OVLY's Q2 Earnings Decline Y/Y Due to Higher Operating Costs
Oak Valley Bancorp posts a year-over-year decline in Q2 earnings per share as higher operating expenses and weaker non-interest income offset loan growth and a wider net interest margin.
Shares of Oak Valley Bancorp OVLY have declined 0.5% since the company reported its results for the quarter ended June 30, 2026, outperforming the S&P 500 index, which fell 1.8% over the same period. Over the past month, the stock has declined 1.1%, matching the S&P 500’s 1.1% decrease.
For the second quarter of 2026, Oak Valley Bancorp reported net income of 61 cents per share, down 9% from 67 cents per share recorded in the year-ago quarter. The decline was primarily driven by higher operating expenses and lower non-interest income, partly offset by stronger net interest income and a lower provision for credit losses.
Net interest income increased 4.4% year over year to $18.9 million from $18.2 million.
The company reported net income of $5.1 million compared with $5.6 million in the year-ago quarter, reflecting a decline of 8.5%.
Oak Valley Bancorp Price, Consensus and EPS Surprise
Oak Valley Bancorp price-consensus-eps-surprise-chart | Oak Valley Bancorp Quote
Net Interest Income Strength Offsets Expense Pressure
Net interest income rose as loan growth and higher loan yields supported earnings. Net interest margin improved modestly to 4.15% from 4.11%, while average earning assets increased 4% year over year.
Non-interest income edged down marginally to $1.7 million, reflecting fair value changes in a limited partnership investment. Non-interest expense climbed 13.8% to $14.2 million from $12.4 million, mainly because of higher staffing costs and general operating expenses associated with supporting the company's growth and expanded branch network. The provision for credit losses declined sharply to $0.02 million from $0.3 million in the prior-year quarter.
Balance Sheet Reflects Continued Loan Growth
Total assets stood at $2 billion at June 30, 2026, up 4.2% from a year earlier. Gross loans increased 5% year over year to $1.2 billion, while deposits rose 3.1% to $1.8 billion.
Liquidity remained solid, with cash and cash equivalents totaling $194.8 million at quarter-end. Book value per common share increased to $25.80 from $22.17 a year earlier. The company also expanded its physical footprint, operating 19 banking offices compared with 18 a year earlier, while full-time equivalent staff increased to 246 from 231.
Asset Quality Improves Despite Charge-Off
Credit quality showed mixed trends during the quarter. Non-performing assets declined to $2.6 million from $4.6 million at March 31, 2026, representing 0.13% of total assets versus 0.23% in the previous quarter.
The improvement followed a $1.7 million charge-off on a collateral-dependent loan that had previously been placed on non-accrual status. The remaining balance of that loan was transferred to other real estate owned (OREO). As a result of the charge-off, the allowance for credit losses fell to 0.96% of gross loans from 1.13% in the prior quarter and 1.03% a year earlier.
Management Commentary
President and Chief Executive Officer Rick McCarty said that the company continued to expand its customer base during the quarter. He attributed the results to loan growth, disciplined balance sheet management and a stable net interest margin, adding that management remains focused on a long-term, relationship-driven strategy to support customers, communities and shareholders.
Other Developments
The board of directors declared a cash dividend of 37.5 cents per common share, payable on Aug. 14, 2026, to shareholders of record as of Aug. 3, 2026. The dividend will total approximately $3.2 million and represents the company's second dividend payment of 2026.
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This article originally published on Zacks Investment Research (zacks.com).