Oak Valley Bancorp(OVLY) - 2022 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents Oak Valley Bancorp's unaudited condensed consolidated financial statements for Q3 and nine-month periods ended September 30, 2022, covering balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Total assets slightly decreased to $1.962 billion as of September 30, 2022, driven by cash redeployment into securities and loans, while liabilities increased to $1.856 billion due to deposits, and equity decreased to $106.2 million due to unrealized losses on available-for-sale securities Condensed Consolidated Balance Sheets (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,962,470 | $1,964,478 | | Cash and cash equivalents | $445,060 | $778,267 | | Securities - available for sale | $510,045 | $262,889 | | Loans, net | $899,939 | $847,847 | | Total Liabilities | $1,856,282 | $1,821,866 | | Deposits | $1,830,882 | $1,806,966 | | Total Shareholders' Equity | $106,188 | $142,612 | | Accumulated other comprehensive (loss) income | ($41,544) | $6,188 | Condensed Consolidated Statements of Income Net income increased to $6.8 million in Q3 2022 and $13.4 million for the nine months, primarily driven by a significant rise in net interest income to $16.8 million and $41.0 million respectively, reflecting higher yields Key Income Statement Data (in thousands, except per share amounts) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $16,772 | $13,296 | $40,963 | $37,526 | | Provision for loan losses | $200 | $0 | $200 | $0 | | Non-interest income | $1,611 | $1,303 | $4,150 | $3,883 | | Non-interest expense | $9,370 | $8,407 | $27,696 | $24,342 | | Net Income | $6,800 | $4,554 | $13,427 | $12,870 | | Net income per diluted share | $0.83 | $0.56 | $1.64 | $1.57 | Condensed Consolidated Statements of Comprehensive Income The company reported a comprehensive loss of $11.4 million in Q3 2022 and $34.3 million for the nine-month period, primarily due to significant unrealized holding losses on available-for-sale securities totaling $18.2 million and $47.7 million respectively, driven by rising interest rates Comprehensive (Loss)/Income (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6,800 | $4,554 | $13,427 | $12,870 | | Total other comprehensive loss | ($18,213) | ($305) | ($47,732) | ($718) | | Comprehensive (loss)/income | ($11,413) | $4,249 | ($34,305) | $12,152 | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $333.2 million for the nine months ended September 30, 2022, primarily due to a $369.8 million net cash outflow from investing activities, offset by $15.3 million from operations and $21.3 million from financing Net Cash Flows for Nine Months Ended September 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $15,318 | $14,316 | | Net cash (used in) from investing activities | ($369,846) | $110,264 | | Net cash from financing activities | $21,321 | $330,877 | | Net (Decrease) Increase in Cash | ($333,207) | $455,457 | Notes to Condensed Consolidated Financial Statements These notes provide detailed information on accounting policies, upcoming CECL model adoption, securities and loan portfolios, asset quality, fair value measurements, and earnings per share, confirming lending to middle-market businesses as the primary revenue source - The company is preparing for the adoption of the Current Expected Credit Loss (CECL) model on January 1, 2023, anticipating earlier recognition of credit losses[20] - As of September 30, 2022, the company reported no non-accrual, past-due, or impaired loans, indicating strong credit quality[45] - The company's primary revenue source is providing loans to middle-market businesses in several California counties[18] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and nine-month 2022 financial performance, highlighting strong net interest income growth, stable credit quality, the impact of rising interest rates on earnings and investment portfolio value, and changes in non-interest income and expenses - Net income for Q3 2022 was $6.8 million and $13.4 million for the first nine months, driven by strong loan and investment portfolio growth and higher earning asset yields[130] - Net interest income increased 26.1% in Q3 2022 and 9.2% in the first nine months, attributed to earning asset growth and positive FOMC rate increases[132] - Total assets decreased slightly by 0.1% from year-end 2021, as cash was deployed into 6.1% net loan growth and a 92.7% increase in investment securities[130] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Company's market risk exposures since December 31, 2021, with ongoing monitoring, especially concerning the COVID-19 pandemic - The Company's exposures to market risk have not changed materially since December 31, 2021[194] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022, with no significant changes to internal control over financial reporting during the quarter or impact from COVID-19 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[195] - No significant changes were made to the Company's internal control over financial reporting during the quarter ended September 30, 2022[196] PART II – OTHER INFORMATION Legal Proceedings The company is not a party to any pending or threatened material legal proceedings, nor are there any involving directors, nominees, or executive officers adverse to the company - There are no pending or threatened material legal proceedings to which the Company is a party[200] Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[201] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[201] Exhibits This section lists the exhibits filed with the quarterly report, including certifications from the Principal Executive Officer and Principal Financial Officer, and financial statements in Inline XBRL format - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1) and financial data in Inline XBRL format (101, 104)[202]