Oak Valley Bancorp(OVLY) - 2025 Q3 - Quarterly Report

Financial Performance - For the three and nine-month periods ended September 30, 2025, the Company recorded net income of $6,693,000 and $17,578,000, representing decreases of 8.6% and 7.8% compared to the same periods in 2024[101] - Return on average assets (annualized) was 1.35% and 1.22% for the three and nine-month periods ended September 30, 2025, down from 1.56% and 1.38% in 2024[101] - Net interest income was $19,197,000 and $55,158,000 for the three and nine-month periods ended September 30, 2025, reflecting increases of $1,542,000 and $2,970,000 from the comparable periods in 2024[104] - Non-interest income for the three and nine-month periods ended September 30, 2025, was $1,973,000 and $5,289,000, representing increases of 6.9% and 3.2% year-over-year, respectively[124] - Non-interest expense increased by $1,376,000 and $3,543,000 for the three and nine-month periods ended September 30, 2025, mainly due to staffing increases and overhead related to servicing growing business portfolios[102] Asset and Liability Management - Total assets increased by $94,812,000 or 5.0%, total net loans increased by $6,062,000 or 0.6%, and deposits increased by $79,192,000 or 4.7% from December 31, 2024 to September 30, 2025[102] - The total assets as of September 30, 2025, were $1,961,374, an increase from $1,863,983 as of September 30, 2024[107] - Total deposits increased by $79,192,000 or 4.7% to $1,774,882,000 as of September 30, 2025, compared to $1,695,690,000 as of December 31, 2024[155] - Average deposits rose by $73,712,000 to $1,714,473,000 for the nine-month period ended September 30, 2025, compared to the same period in 2024[155] - Demand deposits increased by $57,878,000 or 5.3% to $1,159,633,000 as of September 30, 2025[156] Interest Income and Margin - The net interest margin was 4.16% and 4.12% for the three and nine-month periods ended September 30, 2025, compared to 4.04% and 4.08% for the same periods in 2024[106] - For the three months ended September 30, 2025, net interest income increased by $1,570,000 compared to the same period in 2024, driven by a $940,000 increase from volume changes and a $630,000 increase from rate changes[114] - For the nine months ended September 30, 2025, total interest income was $66,550, an increase of $3,616 compared to the same period in 2024[110] - The net interest spread for the nine months ended September 30, 2025, was 3.67%, compared to 3.62% for the same period in 2024[110] Credit Quality - The Company recorded a reversal of credit loss provisions of $60,000 during the three and nine-month periods ended September 30, 2025, compared to a reversal of $1,620,000 during the same periods in 2024[102] - The Company recorded a reversal of provisions for credit losses of $60,000 for the three and nine-month periods ended September 30, 2025, indicating stable credit quality[123] - Non-performing loans remained at a zero balance throughout the nine-month period ending September 30, 2025, indicating strong asset quality[123] - As of September 30, 2025, total non-performing assets remained at $0, indicating strong credit quality within the loan portfolio[143] - The allowance for credit losses decreased to $11,420,000 as of September 30, 2025, down from $11,460,000 as of December 31, 2024, due to net loan charge-offs of $40,000[145] Capital and Liquidity - The Company had $247,155,000 in cash and cash equivalents as of September 30, 2025, compared to $168,751,000 as of December 31, 2024[150] - As of September 30, 2025, the Company's total capital to risk-weighted assets ratio was 16.1%, exceeding the minimum requirement of 10.5%[162] - The Company's Tier I capital to risk-weighted assets ratio was 15.2% as of September 30, 2025, above the minimum requirement of 8.5%[162] - Liquid assets increased to $494.8 million as of September 30, 2025, compared to $431.8 million as of December 31, 2024, representing a liquidity level of 24.8% of total assets[165] - The Company had commitments to extend credit of $206.9 million as of September 30, 2025, up from $185.8 million as of December 31, 2024[168] Operational Strategy - The Company’s shareholder value strategy focuses on enhancing shareholder value, increasing the retail banking franchise's value, and efficiently utilizing capital[100] - Management anticipates that non-interest expenses will continue to increase as the Company grows, but remains committed to cost-control measures[136] - The liquidity management strategy includes maintaining cash and cash equivalents, salable government guaranteed loans, and securities available for sale[165] - The Company had no brokered deposits as of September 30, 2025, maintaining a strategy focused on core deposit growth[157] Regulatory Environment - The CFPB's recent rulemaking process may impact the Company and the Bank, with compliance dates currently stayed pending reconsideration[169] - Proposed Basel III Endgame rules are expected to be more capital-neutral than the original proposal, with a revised version anticipated for public comment in early 2026[162]