10-Q 1 ovly20230930_10q.htm FORM 10-Q ovly20230930_10q.htm
0001431567 Oak Valley Bancorp false --12-31 Q3 2023 9,738 9,468 0 0 50,000,000 50,000,000 8,293,468 8,293,468 8,257,894 8,257,894 0.160 0.150 0.32 0.30 0 0 0 13,000 0 0 0 0 0 0 90 0 0 2 00014315672023-01-012023-09-30 xbrli:shares 00014315672023-11-03 iso4217:USD 00014315672023-09-30 00014315672022-12-31 iso4217:USDxbrli:shares 00014315672023-07-012023-09-30 00014315672022-07-012022-09-30 00014315672022-01-012022-09-30 0001431567us-gaap:DepositAccountMember2023-07-012023-09-30 0001431567us-gaap:DepositAccountMember2022-07-012022-09-30 0001431567us-gaap:DepositAccountMember2023-01-012023-09-30 0001431567us-gaap:DepositAccountMember2022-01-012022-09-30 0001431567us-gaap:DebitCardMember2023-07-012023-09-30 0001431567us-gaap:DebitCardMember2022-07-012022-09-30 0001431567us-gaap:DebitCardMember2023-01-012023-09-30 0001431567us-gaap:DebitCardMember2022-01-012022-09-30 0001431567us-gaap:MortgageBankingMember2023-07-012023-09-30 0001431567us-gaap:MortgageBankingMember2022-07-012022-09-30 0001431567us-gaap:MortgageBankingMember2023-01-012023-09-30 0001431567us-gaap:MortgageBankingMember2022-01-012022-09-30 0001431567us-gaap:CommonStockMember2023-06-30 0001431567us-gaap:AdditionalPaidInCapitalMember2023-06-30 0001431567us-gaap:RetainedEarningsMember2023-06-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-30 00014315672023-06-30 0001431567us-gaap:CommonStockMember2023-07-012023-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-30 0001431567us-gaap:RetainedEarningsMember2023-07-012023-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-30 0001431567us-gaap:CommonStockMember2023-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2023-09-30 0001431567us-gaap:RetainedEarningsMember2023-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-30 0001431567us-gaap:CommonStockMember2022-06-30 0001431567us-gaap:AdditionalPaidInCapitalMember2022-06-30 0001431567us-gaap:RetainedEarningsMember2022-06-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-30 00014315672022-06-30 0001431567us-gaap:CommonStockMember2022-07-012022-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-30 0001431567us-gaap:RetainedEarningsMember2022-07-012022-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-30 0001431567us-gaap:CommonStockMember2022-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2022-09-30 0001431567us-gaap:RetainedEarningsMember2022-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-30 00014315672022-09-30 0001431567us-gaap:CommonStockMember2022-12-31 0001431567us-gaap:AdditionalPaidInCapitalMember2022-12-31 0001431567us-gaap:RetainedEarningsMember2022-12-31 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-31 0001431567us-gaap:CommonStockMember2023-01-012023-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2023-01-012023-09-30 0001431567us-gaap:RetainedEarningsMember2023-01-012023-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommonStockMember2022-12-31 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2022-12-31 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2022-12-31 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-31 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-31 0001431567us-gaap:CommonStockMember2021-12-31 0001431567us-gaap:AdditionalPaidInCapitalMember2021-12-31 0001431567us-gaap:RetainedEarningsMember2021-12-31 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-31 00014315672021-12-31 0001431567us-gaap:CommonStockMember2022-01-012022-09-30 0001431567us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-30 0001431567us-gaap:RetainedEarningsMember2022-01-012022-09-30 0001431567us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2023-01-01 0001431567us-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-09-30 0001431567us-gaap:CollateralizedMortgageObligationsMember2023-09-30 0001431567us-gaap:USStatesAndPoliticalSubdivisionsMember2023-09-30 0001431567ovly:SBAPoolMember2023-09-30 0001431567us-gaap:CorporateDebtSecuritiesMember2023-09-30 0001431567us-gaap:AssetBackedSecuritiesMember2023-09-30 xbrli:pure 0001431567us-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-31 0001431567us-gaap:CollateralizedMortgageObligationsMember2022-12-31 0001431567us-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-31 0001431567ovly:SBAPoolMember2022-12-31 0001431567us-gaap:CorporateDebtSecuritiesMember2022-12-31 0001431567us-gaap:AssetBackedSecuritiesMember2022-12-31 0001431567ovly:DebtSecuritiesCalledDuringThePeriodMember2023-07-012023-09-30 0001431567ovly:DebtSecuritiesCalledDuringThePeriodMember2023-01-012023-09-30 0001431567ovly:DebtSecuritiesCalledDuringThePeriodMember2022-07-012022-09-30 0001431567ovly:DebtSecuritiesCalledDuringThePeriodMember2022-01-012022-09-30 0001431567ovly:DebtSecuritiesSoldDuringPeriodMember2023-01-012023-09-30 0001431567us-gaap:AssetPledgedAsCollateralMemberovly:PublicFundsMember2023-09-30 0001431567us-gaap:AssetPledgedAsCollateralMemberovly:PublicFundsMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2023-09-30 0001431567ovly:ResidentialRealEstateAndOtherConsumerLoansMember2023-09-30 0001431567ovly:AgricultureMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2022-12-31 0001431567ovly:AgricultureMember2022-12-31 0001431567ovly:SBACARESActPaycheckProtectionProgramMember2022-01-012022-12-31 0001431567ovly:SBACARESActPaycheckProtectionProgramMember2023-01-012023-09-30 0001431567ovly:SBACARESActPaycheckProtectionProgramMember2023-09-30 0001431567ovly:SBACARESActPaycheckProtectionProgramMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:FinancialAssetPastDueMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:FinancingReceivables30To59DaysPastDueMember2023-09-30 0001431567us-gaap:FinancingReceivables60To89DaysPastDueMember2023-09-30 0001431567us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-09-30 0001431567us-gaap:FinancialAssetPastDueMember2023-09-30 0001431567us-gaap:FinancialAssetNotPastDueMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:FinancialAssetPastDueMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31 0001431567us-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-31 0001431567us-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-31 0001431567us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-31 0001431567us-gaap:FinancialAssetPastDueMember2022-12-31 0001431567us-gaap:FinancialAssetNotPastDueMember2022-12-31 00014315672022-01-012022-12-31 00014315672022-01-012022-12-30 utr:D 0001431567us-gaap:UnlikelyToBeCollectedFinancingReceivableMember2023-09-30 0001431567us-gaap:UnlikelyToBeCollectedFinancingReceivableMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:SpecialMentionMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:SubstandardMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SubstandardMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SubstandardMember2023-09-30 0001431567ovly:AgricultureMemberus-gaap:PassMember2023-09-30 0001431567us-gaap:PassMember2023-09-30 0001431567us-gaap:SpecialMentionMember2023-09-30 0001431567us-gaap:SubstandardMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:SpecialMentionMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMemberus-gaap:SubstandardMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2022-12-31 0001431567us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SubstandardMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SubstandardMember2022-12-31 0001431567ovly:AgricultureMemberus-gaap:PassMember2022-12-31 0001431567us-gaap:PassMember2022-12-31 0001431567us-gaap:SpecialMentionMember2022-12-31 0001431567us-gaap:SubstandardMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2023-06-30 0001431567us-gaap:CommercialPortfolioSegmentMember2023-06-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2023-06-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2023-06-30 0001431567ovly:AgricultureMember2023-06-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2023-07-012023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2023-07-012023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2023-07-012023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2023-07-012023-09-30 0001431567ovly:AgricultureMember2023-07-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2022-12-31 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommercialPortfolioSegmentMember2023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ConsumerPortfolioSegmentMember2023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMember2023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberovly:AgricultureMember2023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2023-01-012023-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2023-01-012023-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2023-01-012023-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2023-01-012023-09-30 0001431567ovly:AgricultureMember2023-01-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2022-06-30 0001431567us-gaap:CommercialPortfolioSegmentMember2022-06-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2022-06-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2022-06-30 0001431567ovly:AgricultureMember2022-06-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2022-07-012022-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2022-07-012022-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2022-07-012022-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2022-07-012022-09-30 0001431567ovly:AgricultureMember2022-07-012022-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2022-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2022-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2022-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2022-09-30 0001431567ovly:AgricultureMember2022-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-31 0001431567us-gaap:CommercialPortfolioSegmentMember2021-12-31 0001431567us-gaap:ConsumerPortfolioSegmentMember2021-12-31 0001431567us-gaap:ResidentialPortfolioSegmentMember2021-12-31 0001431567ovly:AgricultureMember2021-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMember2022-01-012022-09-30 0001431567us-gaap:CommercialPortfolioSegmentMember2022-01-012022-09-30 0001431567us-gaap:ConsumerPortfolioSegmentMember2022-01-012022-09-30 0001431567us-gaap:ResidentialPortfolioSegmentMember2022-01-012022-09-30 0001431567ovly:AgricultureMember2022-01-012022-09-30 0001431567us-gaap:UnallocatedFinancingReceivablesMember2023-09-30 0001431567us-gaap:UnallocatedFinancingReceivablesMember2022-12-31 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-07-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMember2023-07-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMember2023-07-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMember2023-07-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-01-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:MortgageLoansMember2023-01-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:LandLoansMember2023-01-012023-09-30 0001431567us-gaap:CommercialRealEstatePortfolioSegmentMemberovly:FarmlandLoansMember2023-01-012023-09-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2023-06-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-06-30 0001431567us-gaap:AccountingStandardsUpdate201613Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2023-09-30 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2023-09-30 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2023-09-30 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2023-09-30 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CollateralizedMortgageObligationsMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberovly:SBAPoolMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-31 0001431567us-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2022-12-31 0001431567us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2022-12-31 0001431567us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2022-12-31 0001431567us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberovly:MutualFund1Member2022-12-31
 

 

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

 

OR

 

☐

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to __________

 

Commission file number: 001-34142

 

OAK VALLEY BANCORP

(Exact name of registrant as specified in its charter)

 

California

26-2326676

State or other jurisdiction of

I.R.S. Employer

incorporation or organization

Identification No.

 

125 N. Third Ave., Oakdale, CA  95361

(Address of principal executive offices, zip code)

 

(209) 848-2265

Registrant’s telephone number, including area code

 

Not applicable

(Former name, former address and former fiscal year, 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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ☒   No   ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   ☒   No   ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

 

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.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 8,293,168 shares of common stock outstanding as of November 3, 2023.  

 

 
Table of Contents

 

 

Oak Valley Bancorp

September 30, 2023

 

Table of Contents

 

   

Page

PART I – FINANCIAL INFORMATION

  
     

Item 1.

Financial Statements

 1
     

Condensed Consolidated Balance Sheets at September 30, 2023 (Unaudited) and December 31, 2022

 1
     

Condensed Consolidated Statements of Income for the three and nine-month periods ended September 30, 2023 and September 30, 2022 (Unaudited)

 2
   

Condensed Consolidated Statements of Comprehensive Income for the three and nine-month periods ended September 30, 2023 and September 30, 2022 (Unaudited)

 3
     

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine-month periods ended September 30, 2023 and September 30, 2022 (Unaudited)

 4
     

Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2023 and September 30, 2022 (Unaudited)

 5
     

Notes to Condensed Consolidated Financial Statements (Unaudited)

 6
     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 26
     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 42
     

Item 4.

Controls and Procedures

 42
     

PART II – OTHER INFORMATION

  
     

Item 1.

Legal Proceedings

 43
     

Item 1A.

Risk Factors

43
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 44
     

Item 3.

Defaults Upon Senior Securities

 44
     

Item 4.

Mine Safety Disclosures

 44
     

Item 5.

Other Information

 44
     

Item 6.

Exhibits

 45

 

 
Table of Contents
 

PART I – FINANCIAL STATEMENTS

Item 1. Financial Statements

 

 

OAK VALLEY BANCORP

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

(dollars in thousands)

 

September 30,

  

December 31,

 
  

2023

  

2022

 

ASSETS

        

Cash and due from banks

 $238,836  $415,803 

Federal funds sold

  38,925   13,830 

Cash and cash equivalents

  277,761   429,633 
         

Securities - available for sale

  484,925   527,438 

Securities - equity investments

  2,923   2,990 

Loans, net of allowance for credit losses of $9,738 and $9,468 at September 30, 2023 and December 31, 2022, respectively

  960,213   905,035 

Cash surrender value of life insurance

  31,296   30,218 

Bank premises and equipment, net

  15,938   15,300 

Goodwill and other intangible assets, net

  3,494   3,558 

Interest receivable and other assets

  58,852   54,174 
         
  $1,835,402  $1,968,346 
         

LIABILITIES AND SHAREHOLDERS’ EQUITY

        
         

Deposits

 $1,666,548  $1,814,297 

Interest payable and other liabilities

  33,759   27,423 

Total liabilities

  1,700,307   1,841,720 
         

Shareholders’ equity

        

Common stock, no par value; 50,000,000 shares authorized, 8,293,468 and 8,257,894 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

  25,435   25,435 

Additional paid-in capital

  5,381   5,190 

Retained earnings

  148,436   126,728 

Accumulated other comprehensive loss, net of tax

  (44,157)  (30,727)

Total shareholders’ equity

  135,095   126,626 
         
  $1,835,402  $1,968,346 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1
 
Table of Contents

 

OAK VALLEY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

(in thousands, except per share amounts)

  

THREE MONTHS ENDED
SEPTEMBER 30,

    

NINE MONTHS ENDED
SEPTEMBER 30,

  
   

2023

    

2022

    

2023

    

2022

  

INTEREST INCOME

                                

Interest and fees on loans

   $ 11,489     $ 9,956     $ 32,907     $ 28,492  

Interest on securities

     5,157       4,187       15,442       9,210  

Interest on federal funds sold

     335       87       910       143  

Interest on deposits with banks

     3,368       2,833       11,189       3,895  

Total interest income

     20,349       17,063       60,448       41,740  
                                 

INTEREST EXPENSE

                                

Deposits

     1,411       291       2,559       777  

Total interest expense

     1,411       291       2,559       777  
                                 

Net interest income

     18,938       16,772       57,888       40,963  

Provision for (reversal of) credit losses

     300       200       (160 )     200  

Net interest income after provision for (reversal of) credit losses

     18,638       16,572       58,048       40,763  
                                 

NON-INTEREST INCOME

                                

Service charges on deposits

     488       407       1,365       1,192  

Debit card transaction fee income

     459       441       1,322       1,303  

Earnings on cash surrender value of life insurance

     196       189       578       559  

Mortgage commissions

     6       17       14       72  

Gains on sales and calls of available-for-sale securities

     13       0       156       0  

Other

     404       557       1,441       1,024  

Total non-interest income

     1,566       1,611       4,876       4,150  
                                 

NON-INTEREST EXPENSE

                                

Salaries and employee benefits

     6,505       5,750       19,280       17,084  

Occupancy expenses

     1,149       1,063       3,467       3,089  

Data processing fees

     788       590       2,018       1,737  

Regulatory assessments (FDIC & DFPI)

     305       219       720       741  

Other operating expenses

     1,831       1,748       4,912       5,045  

Total non-interest expense

     10,578       9,370       30,397       27,696  
                                 

Net income before provision for income taxes

     9,626       8,813       32,527       17,217  
                                 

Total provision for income taxes

     2,272       2,013       7,544       3,790  

Net Income

   $ 7,354     $ 6,800     $ 24,983     $ 13,427  
                                 

Net income per share

   $ 0.90     $ 0.83     $ 3.05     $ 1.64  
                                 

Net income per diluted share

   $ 0.89     $ 0.83     $ 3.04     $ 1.64  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2
Table of Contents
 

 

OAK VALLEY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

   

THREE MONTHS ENDED
SEPTEMBER 30,

    

NINE MONTHS ENDED
SEPTEMBER 30,

  

(dollars in thousands)

  

2023

    

2022

    

2023

    

2022

  
                                 

Net income

   $ 7,354     $ 6,800     $ 24,983     $ 13,427  

Other comprehensive loss:

                                

Unrealized holding losses arising during the period

     (25,756 )     (25,858 )     (18,910 )     (67,767 )

Less: reclassification for net gains included in net income

     (13 )     0       (156 )     0  

Other comprehensive loss, before tax

     (25,769 )     (25,858 )     (19,066 )     (67,767 )

Tax benefit related to items of other comprehensive loss

     7,618       7,645       5,636       20,035  

Total other comprehensive loss

     (18,151 )     (18,213 )     (13,430 )     (47,732 )

Comprehensive (loss) income

   $ (10,797 )   $ (11,413 )   $ 11,553     $ (34,305 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3
Table of Contents

 

 

OAK VALLEY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

 

  

THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 
                  

Accumulated

     
          

Additional

      

Other

  

Total

 
  

Common Stock

  

Paid-in

  

Retained

  

Comprehensive

  

Shareholders’

 

(dollars in thousands)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

Equity

 
                         

Balances, July 1, 2023

  8,281,661  $25,435  $5,286  $142,407  $(26,006) $147,122 

Restricted stock issued

  13,250   0   0   0   0   0 

Restricted stock surrendered for tax withholding

  (1,443)  0   (36)  0   0   (36)

Cash dividends declared $0.160 per share of common stock

  0   0   0   (1,325)  0   (1,325)

Stock based compensation

  0   0   131   0   0   131 

Other comprehensive loss

  0   0   0   0   (18,151)  (18,151)

Net income

  0   0   0   7,354   0   7,354 

Balances, September 30, 2023

  8,293,468  $25,435  $5,381  $148,436  $(44,157) $135,095 
                         

Balances, July 1, 2022

  8,254,574  $25,435  $4,903  $111,691  $(23,331) $118,698 

Restricted stock issued

  5,250   0   0   0   0   0 

Restricted stock surrendered for tax withholding

  (1,030)  0   (19)  0   0   (19)

Cash dividends declared $0.150 per share of comon stock

  0   0   0   (1,238)  0   (1,238)

Stock based compensation

  0   0   160   0   0   160 

Other comprehensive loss

  0   0   0   0   (18,213)  (18,213)

Net income

  0   0   0   6,800   0   6,800 

Balances, September 30, 2022

  8,258,794  $25,435  $5,044  $117,253  $(41,544) $106,188 

 

 

  

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 
                  

Accumulated

     
          

Additional

      

Other

  

Total

 
  

Common Stock

  

Paid-in

  

Retained

  

Comprehensive

  

Shareholders’

 

(dollars in thousands)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Income (Loss)

  

Equity

 
                         

Balances, January 1, 2023

  8,257,894  $25,435  $5,190  $126,728  $(30,727) $126,626 

Restricted stock issued

  43,446   0   0   0   0   0 

Restricted stock surrendered for tax withholding

  (7,872)  0   (211)  0   0   (211)

Cash dividends declared $0.32 per share of common stock

  0   0   0   (2,646)  0   (2,646)

Stock based compensation

  0   0   402   0   0   402 

Other comprehensive loss

  0   0   0   0   (13,430)  (13,430)

CECL adoption adjustments

  0   0   0   (629)  0   (629)

Net income

  0   0   0   24,983   0   24,983 

Balances, September 30, 2023

  8,293,468  $25,435  $5,381  $148,436  $(44,157) $135,095 
                         

Balances, January 1, 2022

  8,239,099  $25,435  $4,689  $106,300  $6,188  $142,612 

Restricted stock issued

  27,047   0   0   0   0   0 

Restricted stock forfeited

  (900)  0   0   0   0   0 

Restricted stock surrendered for tax withholding

  (6,452)  0   (121)  0   0   (121)

Cash dividends declared $0.30 per share of common stock

  0   0   0   (2,474)  0   (2,474)

Stock based compensation

  0   0   476   0   0   476 

Other comprehensive loss

  0   0   0   0   (47,732)  (47,732)

Net income

  0   0   0   13,427   0   13,427 

Balances, September 30, 2022

  8,258,794  $25,435  $5,044  $117,253  $(41,544) $106,188 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4
Table of Contents

 

 

OAK VALLEY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

  

NINE MONTHS ENDED
SEPTEMBER 30,

 

(dollars in thousands)

 

2023

  

2022

 
         

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net income

 $24,983  $13,427 

Adjustments to reconcile net income to net cash provided by operating activities:

 

(Reversal of) provision for credit losses

  (160)  200 

Increase (decrease) in deferred fees/costs, net

  37   (154)

Depreciation

  1,003   988 

Amortization of investment securities, net

  858   974 

Unrealized loss on equity securities

  141   495 

Amortization of operating lease right-of-use asset

  (173)  (122)

Stock based compensation

  402   476 

Gain on sales and calls of available for sale securities

  (156)  0 

Earnings on cash surrender value of life insurance

  (578)  (559)

Increase in interest payable and other liabilities

  6,179   1,240 

Decrease (increase) in interest receivable

  299   (2,745)

Decrease in other assets

  1,490   1,079 

Net cash provided by operating activities

  34,325   15,299 
         

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Purchases of available for sale securities

  (40,660)  (334,964)

Purchases of equity securities

  (74)  (52)

Proceeds from the sale of available-for-sale securities

  43,791   0 

Proceeds from maturities, calls, and principal paydowns of securities available for sale

  19,614   19,067 

Investment in LIHTC

  0   (1,240)

Net increase in loans

  (55,401)  (52,138)

Purchase of FHLB Stock

  (720)  0 

Redemption of FHLB stock

  0   257 

Purchase of BOLI policies

  (500)  0 

Purchases of premises and equipment

  (1,641)  (757)

Net cash used in investing activities

  (35,591)  (369,827)
         

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Shareholder cash dividends paid

  (2,646)  (2,474)

Net (decrease) increase in demand deposits and savings accounts

  (153,910)  25,781 

Net increase (decrease) in time deposits

  6,161   (1,865)

Tax withholding payments on vested restricted shares surrendered

  (211)  (121)

Net cash (used in) provided by financing activities

  (150,606)  21,321 
         

NET DECREASE IN CASH AND CASH EQUIVALENTS

  (151,872)  (333,207)
         

CASH AND CASH EQUIVALENTS, beginning of period

  429,633   778,267 
         

CASH AND CASH EQUIVALENTS, end of period

 $277,761  $445,060 
         

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

Cash paid during the period for:

        

Interest

 $2,557  $774 

Operating leases

 $1,142  $995 

Income taxes

 $0  $1,410 
         

NON-CASH INVESTING ACTIVITIES:

        

Change in unrealized loss on securities

 $(19,066) $(67,767)

Change in contributions payable to LIHTC limited partner investment

 $0  $10,500 

Right-of-use asset obtained in exchange for new operating lease liability

 $(390) $0 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5
Table of Contents

 

OAK VALLEY BANCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

NOTE 1 – BASIS OF PRESENTATION

 

Oak Valley Bancorp (“the Company”, “us”, “our”) is the parent holding company for Oak Valley Community Bank (the “Bank”), a California state-chartered bank.  The consolidated financial statements include the accounts of the parent company and its wholly-owned bank subsidiary. Unless otherwise stated, the “Company” refers to the consolidated entity, Oak Valley Bancorp, while the “Bank” refers to Oak Valley Community Bank. All material intercompany transactions have been eliminated. The interim consolidated financial statements included in this Quarterly Report on Form 10-Q are unaudited but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and nine-month periods ended September 30, 2023 are not necessarily indicative of the results of a full year’s operations. Certain prior period amounts have been reclassified to conform to the current period presentation. There was no effect on net income or shareholders’ equity as previously reported as a result of reclassifications. For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, 2022.

 

The Company was incorporated under the laws of the State of California on May 31, 1990, and began operations in Oakdale, California on May 28, 1991. The Company operates branches in Oakdale, Sonora, Bridgeport, Bishop, Mammoth Lakes, Modesto, Manteca, Patterson, Turlock, Ripon, Stockton, Escalon, and Sacramento, California. The Bridgeport, Mammoth Lakes, and Bishop branches operate as a separate division, Eastern Sierra Community Bank. The Company’s primary source of revenue is providing loans to customers who are predominantly middle-market businesses.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s consolidated financial statements include the allowance for credit losses and fair value measurements. The estimates and assumptions may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ from these estimates due to the uncertainty of various qualitative factors. Descriptions of our significant accounting policies are included in Note 1. Summary of Accounting Policies in the Notes to Consolidated Financial Statements in the 2022 Annual Report on Form 10-K.

 

 

 

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). This update revises the methodology used by financial institutions under GAAP to recognize credit losses in the financial statements.  Previously, GAAP required the use of an “incurred loss” model, whereby financial institutions recognize in current period earnings, incurred credit losses and those inherent in the financial statements, as of the date of the balance sheet.  The “incurred loss” methodology for recognizing credit losses delayed recognition until it is probable that a loss has been incurred. ASU 2016-13 replaces such incurred loss impairment model with a new methodology that requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU guidance results in a new model for estimating the allowance for credit losses, commonly referred to as the Current Expected Credit Loss (“CECL”) model.  Under the CECL model, financial institutions are required to estimate future credit losses and recognize those losses in current period earnings.  The amendments within the update were initially effective for fiscal years and all interim periods beginning after December 15, 2019.  In October 2019, FASB approved an amendment that delayed the adoption of this ASU for three years for certain entities including the Company since we are classified as a Smaller Reporting Company. The Company adopted these standards as required on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. There was no cumulative effect adjustment related to our available-for-sale investment portfolio upon adoption and the Company had no securities designated as held-to-maturity as of January 1, 2023.

 

Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with the probable incurred loss method accounting standards.  The transition adjustment of the CECL adoption included an increase in the allowance for credit losses of $346,000, an increase of $547,000 to the reserve for unfunded commitments, a $629,000 decrease to retained earnings, and a $264,000 tax benefit recorded as part of the deferred tax asset in the Company’s Consolidated Balance Sheet.

 

6
Table of Contents
 

In March 2020, FASB issued ASU 2020-04 - Reference Rate Reform (Subtopic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. The ASU was effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, FASB Issued ASU 2022-06 to defer the sunset date from December 31, 2022 to December 31, 2024. The ASU did not have a material impact on our consolidated financial statements. As a result of the phase out of LIBOR immediately after June 30, 2023, our loans that were indexed to LIBOR have transitioned to CME Term SOFR, as of September 30, 2023.

 

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings in Accounting Standards Codification (“ASC”) Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. ASU 2022-02 became effective on January 1, 2023. The adoption of ASU 2022-02 did not have a significant impact on our consolidated financial statements.

 

In March 2023, the FASB issued ASU No. 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. Previously, only Low-Income Housing Tax Credit investments were eligible to apply the proportional amortization method. This ASU becomes effective on January 1, 2024, with early adoption permitted and can be adopted using either a retrospective or modified retrospective transition method. The Company intends to adopt this standard but does not expect it will have a material impact on the consolidated financial statements.

 

 

 

NOTE 3 – SECURITIES

 

Equity Securities

 

The Company held equity securities with fair values of $2,923,000 and $2,990,000 as of September 30, 2023 and December 31, 2022, respectively. There were no sales of equity securities during the three and nine-month periods ended September 30, 2023 and 2022. Consistent with ASC 321, Equity Securities, these securities are carried at fair value with the changes in fair value recognized in the condensed consolidated statements of income. Accordingly, the Company recognized losses of $144,000 and $141,000 during the three and nine-month periods ended September 30, 2023, respectively, as compared to losses of $179,000 and $495,000 during the same periods of 2022.

 

7
Table of Contents
 

Debt Securities

 

Debt securities have been classified in the financial statements as available for sale. The amortized cost and estimated fair values of debt securities as of September 30, 2023 are as follows:

 

(dollars in thousands)

 

Amortized

Cost

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair

Value

 

Available-for-sale securities:

                

U.S. agencies

 $85,500  $4  $(7,636) $77,868 

Collateralized mortgage obligations

  9,348   0   (732)  8,616 

Municipalities

  346,307   137   (48,432)  298,012 

SBA pools

  1,730   4   (4)  1,730 

Corporate debt

  47,503   13   (4,667)  42,849 

Asset backed securities

  57,227   120   (1,497)  55,850 
  $547,615  $278  $(62,968) $484,925 

 

 

The following table details the gross unrealized losses and fair values of debt securities aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2023. Accrued interest receivable of $81,000 is not included in the table.

 

(dollars in thousands)

     

Less than 12 months

  

12 months or more

  

Total

 

Description of Securities

 

Number of

Securities

  

Fair

Value

  

Unrealized

Loss

  

Fair

Value

  

Unrealized

Loss

  

Fair

Value

  

Unrealized

Loss

 

U.S. agencies

  60  $4,921  $(308)  72,523  $(7,328) $77,444  $(7,636)

Collateralized mortgage obligations

  6   4,701   (167)  3,915   (565)  8,616   (732)

Municipalities

  148   126,615   (10,059)  165,602   (38,373)  292,217   (48,432)

SBA pools

  5   119   0   653   (4)  772   (4)

Corporate debt

  13   0   0   40,835   (4,667)  40,835   (4,667)

Asset backed securities

  20   781   (7)  40,893   (1,490)  41,674   (1,497)

Total temporarily impaired securities

  252  $137,137  $(10,541) $324,421  $(52,427) $461,558  $(62,968)

 

 

For available-for-sale debt securities in an unrealized loss position, management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors. In performing this evaluation, management considers the extent which fair value has fallen below amortized cost, changes in ratings by rating agencies, and other information indicating a deterioration in repayment capacity of either the underlying issuer or the borrowers providing repayment capacity in a securitization. If management’s evaluation indicates that a credit loss exists then a present value of the expected cash flows is calculated and compared to the amortized cost basis of the security in question and to the degree that the amortized cost basis exceeds the present value an allowance for credit loss (“ACL”) is established, with the caveat that the maximum amount of the reserve on any individual security is the difference between the fair value and amortized cost balance of the security in question. Any unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income.

 

The unrealized losses are due primarily to rising market yields and not due to credit deterioration. As such, no ACL on available-for-sale securities has been established as of September 30, 2023. The Company does not intend to sell the securities and it is not likely that the Company will be required to sell the securities before the earlier of the forecasted recovery or the maturity of the underlying investment security.

 

8
Table of Contents
 

The amortized cost and estimated fair value of debt securities as of September 30, 2023, segregated by contractual maturity or call date, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

(dollars in thousands)

 

Amortized

  

Fair

 
  

Cost

  

Value

 

Available-for-sale securities:

        

Due in one year or less

 $101,464  $94,217 

Due after one year through five years

  140,631   128,412 

Due after five years through ten years

  226,224   190,005 

Due after ten years

  79,296   72,291 
  $547,615  $484,925 

 

 

The amortized cost and estimated fair values of debt securities as of December 31, 2022 are as follows:

 

(dollars in thousands)

 

Amortized Cost

  

Gross Unrealized

Gains

  

Gross Unrealized

Losses

  

Fair Value

 

Available-for-sale securities:

                

U.S. agencies

 $94,142  $18  $(5,439) $88,721 

Collateralized mortgage obligations

  5,094   0   (483)  4,611 

Municipalities

  361,643   1,017   (31,079)  331,581 

SBA pools

  2,358   10   (6)  2,362 

Corporate debt

  47,512   0   (5,452)  42,060 

Asset-backed securities

  60,313   11   (2,221)  58,103 
  $571,062  $1,056  $(44,680) $527,438 

 

 

The following tables detail the gross unrealized losses and fair values aggregated of debt securities by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2022.

 

(dollars in thousands)

     

Less than 12 months

  12 months or more  

Total

 

Description of Securities

 

Number of

Securities

  

Fair

Value

  

Unrealized

Loss

  

Fair

Value

  

Unrealized

Loss

  

Fair

Value

  

Unrealized

Loss

 

U.S. agencies

  52  $81,936  $(4,451) $3,972  $(988) $85,908  $(5,439)

Collateralized mortgage obligations

  5   4,278   (431)  333   (52)  4,611   (483)

Municipalities

  132   216,154   (16,782)  46,348   (14,297)  262,502   (31,079)

SBA pools

  4   0   0   975   (6)  975   (6)

Corporate debt

  14   30,971   (3,041)  11,089   (2,411)  42,060   (5,452)

Asset backed securities

  24   36,275   (1,669)  14,043   (552)  50,318   (2,221)

Total temporarily impaired securities

  231  $369,614  $(26,374) $76,760  $(18,306) $446,374  $(44,680)

 

 

The Company recognized gains of $13,000 on called securities during the three and nine-month periods ended September 30, 2023, as compared to no gains or losses during the comparable 2022 periods. There were no sales of available-for-sale securities during the three-months ended September 30, 2023. The Company sold 24 securities with a book value of $42,791,000 resulting in gross losses of $72,000 and gross gains of $215,000, for a net gain of $143,000 during the nine-months ended September 30, 2023, as compared to no sales of available-for-sale securities during the three and nine-months ended September 30, 2022.

 

9
Table of Contents
 

Debt securities carried at $265,658,000 and $242,023,000 as of September 30, 2023 and December 31, 2022, respectively, were pledged to secure deposits of public funds.

 

 

 

NOTE 4 – LOANS

 

The Company’s customers are primarily located in Stanislaus, San Joaquin, Tuolumne, Inyo, and Mono Counties. As of September 30, 2023, approximately 87% of the Company’s loans are commercial real estate loans, which include construction loans. Approximately 7% of the Company’s loans are for general commercial uses including professional, retail, and small business. Additionally, 3% of the Company’s loans are for residential real estate and other consumer loans. The remaining 3% are agriculture loans. Loan totals were as follows:

 

(in thousands)

 

September 30, 2023

  

December 31, 2022

 

Commercial real estate:

        

Commercial real estate- construction

 $36,180  $31,257 

Commercial real estate- mortgages

  695,190   650,180 

Land

  19,198   12,539 

Farmland

  94,979   85,989 

Commercial and industrial

  71,682   82,506 

Consumer

  420   375 

Consumer residential

  29,580   31,861 

Agriculture

  24,014   21,051 

Total loans

  971,243   915,758 
         

Less:

        

Deferred loan fees and costs, net

  (1,292)  (1,255)

Allowance for credit losses

  (9,738)  (9,468)

Net loans

 $960,213  $905,035 

 

 

Paycheck Protection Program. With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA under the Coronavirus Aid, Relief and Economic Security Act (as amended, the “CARES Act”), the Company assisted its customers with applications for resources through the program. PPP loans have a two-year term if the loan was approved by the SBA prior to June 5, 2020, and loans approved after that date have a five-year term. All PPP loans earn a contractual interest rate of 1%. SBA forgiveness payments resulted in loan pay-offs of approximately $29 million in 2022 and $1.7 million during the first nine months of 2023. PPP outstanding balances totaled $110,000 and $1,831,000 as of September 30, 2023 and December 31, 2022, respectively. As a result of funding the PPP loans, the Company received fee income that is recorded to total interest income net of deferred loan costs, through amortization over the life of the loans. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government; in addition, the Federal Reserve has indicated that unless a bank has a reason to believe that the SBA guarantee on PPP loans would be jeopardized, then no reserve would be expected on an SBA-guaranteed PPP loan. Therefore, no allowance for credit losses has been allocated by the Company for these PPP loans.

 

Loan Origination/Risk Management. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentration of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

 

10
Table of Contents
 

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily made based on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

 

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. As a general rule, the Company avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting market areas it serves. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. As of September 30, 2023 and December 31, 2022, respectively, approximately 36% and 38% of the outstanding principal balance of commercial real estate loans was secured by owner-occupied properties.

 

With respect to loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analyses of absorption and lease rates and financial analyses of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

 

Agricultural production, real estate and development lending is susceptible to credit risks including adverse weather conditions, pest and disease, as well as market price fluctuations and foreign competition. Agricultural loan underwriting standards are maintained by following Company policies and procedures in place to minimize risk in this lending segment. These standards consist of limiting credit to experienced farmers who have demonstrated farm management capabilities, requiring cash flow projections displaying margins sufficient for repayment from normal farm operations along with equity injected as required by policy, as well as providing adequate secondary repayment and sponsorship including satisfactory collateral support. Credit enhancement obtained through government guarantee programs may also be used to provide further support as available.

 

The Company originates consumer loans utilizing common underwriting criteria specified in policy. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, trend and outlook reports are reviewed by management on a regular basis. Underwriting standards for 1-4 family residential loans, home equity lines and loans follow bank policy, which include, but are not limited to, a maximum loan-to-value percentage of 80%, a maximum housing and total debt ratio of 36% and 42%, respectively, and other specified credit and documentation requirements.

 

The Company maintains an independent loan review program that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Bank’s policies and procedures.

 

Non-Accrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 

11
Table of Contents
 

No loans were on non-accrual status as of September 30, 2023, December 31, 2022, and September 30, 2022.

 

The following table analyzes past due loans including the past due non-accrual loans in the above table, segregated by class of loans, as of September 30, 2023 (in thousands):

 

September 30, 2023

 

30-59

Days Past

Due

  

60-89

Days Past

Due

  

90 Days

or More

Past Due

  

Total Past

Due

  

Current

  

Total

  

90 Days or

More Past

Due and

Still

Accruing

 

Commercial real estate:

                            

Commercial R.E. - construction

 $0  $0  $0  $0  $36,180  $36,180  $0 

Commercial R.E. - mortgages

  0   0   0   0   695,190   695,190   0 

Land

  0   0   0   0   19,198   19,198   0 

Farmland

  0   0   0   0   94,979   94,979   0 

Commercial and industrial

  0   0   0   0   71,682   71,682   0 

Consumer

  0   0   0   0   420   420   0 

Consumer residential

  0   0   0   0   29,580   29,580   0 

Agriculture

  0   188   0   188   23,826   24,014   0 

Total

 $0  $188  $0  $188  $971,055  $971,243  $0 

 

 

The following table analyzes past due loans including the past due non-accrual loans in the above table, segregated by class of loans, as of December 31, 2022 (in thousands):

 

December 31, 2022

 

30-59

Days Past

Due

  

60-89

Days Past

Due

  

90 Days

or More

Past Due

  

Total Past

Due

  

Current

  

Total

  

90 Days or

More Past

Due and

Still

Accruing

 

Commercial real estate:

                            

Commercial R.E. – construction

 $0  $0  $0  $0  $31,257  $31,257  $0 

Commercial R.E. – mortgages

  0   0   0   0   650,180   650,180   0 

Land

  0   0   0   0   12,539   12,539   0 

Farmland

  0   0   0   0   85,989   85,989   0 

Commercial and industrial

  0   0   0   0   82,506   82,506   0 

Consumer

  0   0   0   0   375   375   0 

Consumer residential

  0   0   0   0   31,861   31,861   0 

Agriculture

  0   0   0   0   21,051   21,051   0 

Total

 $0  $0  $0  $0  $915,758  $915,758  $0 

 

 

Collateral Dependent Loans. Management’s evaluation as to the ultimate c