Oak Valley Bancorp

Previous wording

As of December 31, 2024, we had approximately $1.90 billion in total assets, $1.11 billion in total gross loans, and $1.70 billion in total deposits.

Current wording

As of December 31, 2025, we had approximately $2.02 billion in total assets, $1.14 billion in total gross loans, and $1.79 billion in total deposits.

Previous wording

These items, as well as other factors, contributed to the decrease in net income for 2024 to $24.9 million from $30.8 million in 2023, which translates into $3.02 per diluted share in 2024 as compared to $3.75 per diluted share in 2023.

Current wording

These items, as well as other factors, contributed to the decrease in net income for 2025 to $23.9 million from $24.9 million in 2024, which translates into $2.88 per diluted share in 2025 as compared to $3.02 per diluted share in 2024.

Previous wording

Over the past several years, our network of branches and loan production offices have expanded geographically. We currently maintain eighteen full-service offices. We intend to continue our growth strategy in future years through the opening of additional branches and loan production offices as our needs and resources permit.

Current wording

Over the past several years, our network of branches and loan production offices have expanded geographically. We currently maintain nineteen full-service offices. We intend to continue our growth strategy in future years through the opening of additional branches and loan production offices as our needs and resources permit.

Previous wording

Unfavorable trends in inflation prompted the Federal Reserve Open Market Committee, or FOMC, to increase the target federal funds rate in 2022 and 2023, which resulted yield increases on our earning assets. In response to moderating inflation and weakening economic conditions, in 2024 the FOMC made minimal interest rates cuts. In spite of this, we expect the upward trend in our earning asset yield will continue to some degree in 2025 due to continued repricing of existing loans. However, the negative impact of the 2022-2023 FOMC rate hikes was increased rates on deposit accounts, which may continue to some degree into 2025. Deposit interest rates are determined based on customer demand, market surveys of offerings from competitive institutions, and overall liquidity position.

Current wording

Unfavorable trends in inflation prompted the Federal Reserve Open Market Committee, or FOMC, to increase the target federal funds rate (the interest rate banks charge each other for short-term borrowing) in 2022 and 2023, which resulted in yield increases on our earning assets. In response to moderating inflation and weakening economic conditions, in 2024 and 2025 the FOMC approved interest rates cuts. We expect the upward trend in our earning asset yield will continue to some degree in 2026 due to continued repricing of existing loans.

Previous wording

The Fed Funds rate is forecasted to decrease moderately during 2025, which could potentially compress net interest income and net interest margin further, given that our balance sheet is slightly asset sensitive to interest rate changes primarily due to the variable rate loans and interest-earning cash balances.

Current wording

The Fed Funds rate is forecasted to decrease slightly during 2026, which could have a negative impact on net interest income and net interest margin, given that our balance sheet is slightly asset sensitive to interest rate changes primarily due to the variable rate loans and interest-earning cash balances.

Previous wording

We recorded net income for the year ended December 31, 2024 of $24,948,000 or $3.02 per diluted share compared to $30,848,000 or $3.75 per diluted share for the year ended December 31, 2023. The decrease in net income for the year ended December 31, 2024 was primarily due to a decrease of $5,768,000 in net interest income, as a result of an increase in deposit interest expense. Non-interest income decreased by $76,000 in 2024, mainly due to fair value changes on equity securities and decreased NSF fee income. The provision for credit losses decreased compared to last year due to $2.2 million in loan recoveries in 2024, resulting in a $1,620,000 credit loss provision reversal. Non-interest expense increased by $4,860,000 associated with staffing and general operating overhead increases to support the growth of our loan and deposit portfolios.

Current wording

We recorded net income for the year ended December 31, 2025 of $23,913,000 or $2.88 per diluted share compared to $24,948,000 or $3.02 per diluted share for the year ended December 31, 2024. The decrease in net income for the year ended December 31, 2025 was primarily due to an increase in non-interest expense of $4,257,000 associated with staffing and general operating overhead increases to support the growth of our loan and deposit portfolios. The provision for credit losses increased compared to last year due to $2,200,000 in loan recoveries in 2024, resulting in a $1,620,000 credit loss provision reversal, compared to a provision of $805,000 in 2025. There was an increase of $4,581,000 in net interest income, as a result of earning asset growth. Non-interest income increased by $559,000 in 2025, mainly due to fair value changes on equity securities and life insurance death benefit gains.

Previous wording

Net interest income, on a fully tax equivalent basis (“FTE”), decreased $6,278,000 or 8.0% to $72,064,000 for the year ended December 31, 2024, compared to $78,342,000 in 2023. Net interest spread and net interest margin were 3.60% and 4.07%, respectively, for the year ended December 31, 2024, compared to 4.14% and 4.33%, respectively, for the year ended December 31, 2023. This downward trend is mainly due to an increase in deposit interest expense that was necessary to remain competitive with peer banks, preserve liquidity, and continue to grow the balance sheet. The FOMC rate hikes that began in March 2022 resulted in an immediate increase in earning asset yields, but deposit rates experienced a lag effect and did not increase until 2023 and into 2024.

Current wording

Net interest income, on a fully tax equivalent basis (“FTE”), increased $4,556,000 or 6.3% to $76,620,000 for the year ended December 31, 2025, compared to $72,064,000 in 2024. Net interest spread and net interest margin were 3.68% and 4.13%, respectively, for the year ended December 31, 2025, compared to 3.60% and 4.07%, respectively, for the year ended December 31, 2024. This upward trend is mainly due to an increase in the yield of our loan portfolio, and a slight reduction in our deposit interest rates.

Previous wording

The cost of funds on interest-bearing liabilities increased to 1.20% in 2024 compared to 0.46% in 2023 as a result of the competitive environment and customer demand for higher rates. Promotional rates on money market accounts and higher time-deposit rate offerings were utilized to retain deposit relationships, which contributed to the deposit growth of $45.2 million during 2024.

Current wording

The cost of funds on interest-bearing liabilities decreased to 1.16% in 2025 compared to 1.20% in 2024 as a result of the lower interest rate environment. Our cost of funds is below the peer average, but remains competitive. Promotional rates on money market accounts and higher time-deposit rate offerings are utilized strategically to retain deposit relationships and develop new business, which contributed to the deposit growth of $97,272,000 during 2025.

Previous wording

Our earning asset yield increased 20 basis points in 2024 compared to 2023 despite the FOMC cutting the federal funds target rate from a range of 5.25% to 5.50% at the beginning of 2024, to a range of 4.25% to 4.50% by the end of the year. The FOMC rate hikes in 2022 and 2023 continued to have a positive impact on rates of loans that repriced during 2024. The yield on loans recognized an increase of 33 basis points for 2024 as compared to 2023, due to the upward repricing of variable rate loans and higher rate indexes on new loans. Growth in average gross loans of $108.9 million, also contributed to net interest margin expansion.

Current wording

Our earning asset yield increased 4 basis points in 2025 compared to 2024 despite the FOMC cutting the federal funds target rate from a range of 4.25% to 4.50% at the beginning of 2025, to a range of 3.50% to 3.75% by the end of the year. The FOMC rate hikes in 2022 and 2023 continued to have a positive impact on rates of loans that repriced during 2025. The yield on loans recognized an increase of 24 basis points for 2025 as compared to 2024, due to the upward repricing of variable rate loans and higher rate indexes on new loans. Growth in average gross loans of $46,652,000, also contributed to net interest margin expansion.

Previous wording

The net interest margin compression in 2024, is due to the factors discussed above and could worsen if rate indexes on assets were to fall, and/or: 1) deposit interest rates continue to increase due to customer demand, or competitive pressure from peer banks, 2) competition in the lending market restrict significant increases in new loan rates, and 3) deposit growth out-paces loan growth, resulting in higher interest-bearing cash balances, which would offer lower yields than loans and investments depending on the Federal Funds rate as determined by the FOMC.

Current wording

The net interest margin expansion in 2025, is due to the factors discussed above but could worsen if rate indexes on assets were to fall, and/or: 1) deposit interest rates continue to increase due to customer demand, or competitive pressure from peer banks, 2) competition in the lending market restrict significant increases in new loan rates, and 3) deposit growth out-paces loan growth, resulting in higher interest-bearing cash balances, which would offer lower yields than loans and investments depending on the Federal Funds rate as determined by the FOMC.

Previous wording

Changes in volume resulted in decrease in net interest income (on a FTE basis) of $2,641,000 for the year of 2024 compared to the year 2023, and changes in interest rates and the mix resulted in a decrease in net interest income (on a FTE basis) of $3,637,000 for the year 2024 versus the year 2023. Management closely monitors both total net interest income and the net interest margin.

Current wording

Changes in volume resulted in an increase in net interest income (on a FTE basis) of $3,094,000 for the year of 2025 compared to the year 2024, and changes in interest rates and the mix resulted in an increase in net interest income (on a FTE basis) of $1,462,000 for the year 2025 versus the year 2024. Management closely monitors both total net interest income and the net interest margin.

Previous wording

Market rates are in part based on the FOMC target Federal funds interest rate (the interest rate banks charge each other for short-term borrowings). The change in the Federal funds sold rates is the result of target rate changes implemented by the FOMC. In 2020, the FOMC decreased the Federal funds rate by 0.50% and 1.00% on two occasions in March resulting in a range of 0.00% to 0.25% as of December 31, 2020 and 2021. In 2022, the FOMC raised the federal funds rate seven times by an aggregate of 4.00%. In 2023, the FOMC raised the Federal funds rate four times by 0.25% resulting in a range of 5.25% to 5.50%. In 2024, the FOMC cut the Federal funds rate three times by an aggregate of 1.00%, resulting in a range of 4.25% to 4.50%. If FOMC were to cut rates in 2025 or thereafter, we expect this would have a negative impact on our net interest income, due to repricing of interest-bearing cash balances, existing loans and investment securities.

Current wording

Market rates are in part based on the FOMC target Federal funds interest rate. The change in the Federal funds sold rates is the result of target rate changes implemented by the FOMC. In 2020, the FOMC decreased the Federal funds rate by 0.50% and 1.00% on two occasions in March resulting in a range of 0.00% to 0.25% as of December 31, 2020 and 2021. In 2022, the FOMC raised the federal funds rate seven times by an aggregate of 4.00%. In 2023, the FOMC raised the Federal funds rate four times by 0.25% resulting in a range of 5.25% to 5.50%. In 2024, the FOMC cut the Federal funds rate three times by an aggregate of 1.00%, resulting in a range of 4.25% to 4.50%. In 2025, the FOMC cut the Federal funds rate three times by an aggregate of 0.75%, resulting in a range of 3.50% to 3.75%. If FOMC were to cut rates in 2026 or thereafter, we expect this would have a negative impact on our net interest income, due to repricing of interest-bearing cash balances, existing loans and investment securities.

Previous wording

The Company recorded a reversal of provision for credit loss of $1,620,000 and a credit loss provision of $970,000 during the years ended December 31, 2024 and 2023, respectively. The 2024 provision reversal was mainly due to loan recoveries totaling $2.2 million, which was offset in part by loan growth. The loan recoveries in 2024 were primarily from two loans from different borrowers recovered during third quarter of 2024 totaling $1,992,000. Each of the recovered loans date back to the recession period when collateral values were considerably depressed, and one of which was acquired in 2015 when we completed a bank acquisition. The loan recoveries initially increased the allowance for credit losses (“ACL”), which subsequently resulted in the reversal of $1,620,000.

Current wording

The Company recorded a credit loss provision of $805,000, and a credit loss provision reversal of $1,620,000 during the years ended December 31, 2025 and 2024, respectively. The 2025 credit loss provision is mainly due to loan growth and a specific reserve related to one collateral dependent loan that was individually evaluated for impairment. The 2024 provision reversal was mainly due to loan recoveries totaling $2,184,000, which was offset in part by loan growth. The loan recoveries in 2024 were primarily from two loans from different borrowers recovered during third quarter of 2024 totaling $1,992,000. Each of the recovered loans date back to the recession period when collateral values were considerably depressed, and one of which was acquired in 2015 when we completed a bank acquisition. The loan recoveries initially increased the allowance for credit losses (“ACL”), which subsequently resulted in the reversal of $1,620,000.

Previous wording

Current and forecasted macro-economic conditions are closely evaluated among other inputs that our internal credit risk model utilizes to determine the appropriate credit loss allowance. The Company did not have any nonperforming loans as of December 31, 2024 and 2023. The allowance for credit losses was $11,460,000 and $10,896,000 as of December 31, 2024 and 2023, or 1.04% and 1.07%, respectively, of total loans. The decrease as a percentage of total loans corresponds to credit factors within the loan portfolio, and changes to the current and forecasted macro-economic factors that have been established as credit loss indicators within our model. The strong credit quality has resulted in net loan recoveries of $2,184,000 and $112,000 in 2024 and 2023, respectively.

Current wording

Current and forecasted macro-economic conditions are closely evaluated among other inputs that our internal credit risk model utilizes to determine the appropriate credit loss allowance. The Company had one nonperforming loan as of December 31, 2025, a non-owner occupied commercial real estate loan with a balance of $4,587,000, compared to no nonperforming loans as of December 31, 2024. The allowance for credit losses was $12,381,000 and $11,460,000 as of December 31, 2025 and 2024, or 1.08% and 1.04%, respectively, of total loans. The increase as a percentage of total loans corresponds to the nonperforming loan described above, along with credit factors within the loan portfolio and changes to the current and forecasted macro-economic factors that have been established as credit loss indicators within our model. Net loan charge-offs of $65,000 were recorded in 2025, as compared to net loan recoveries of $2,184,000 in 2024.

Previous wording

Noninterest income was $6,555,000 for the year ended December 31, 2024, compared to $6,631,000 for the year 2023. Service charge income decreased to $1,682,000 in 2024 compared to $1,813,000 for 2023, due to a change in the NSF fee schedule that resulted in a decline in NSF Fee income collected on deposit accounts, despite an increase in the number of checking accounts. Debit card transaction fee income decreased to $1,738,000 in 2024 as compared to $1,773,000 in 2023, due to debit card network costs that are included in the net revenue received by the bank. Earnings on the cash surrender value of life insurance recognized an increase of $264,000 in 2024 compared to 2023, due to higher yields and three new life insurance policies purchased during the second quarter of 2024. Mortgage commissions have increased by $11,000 for the year 2024, as compared to 2023, a moderate upward trend but overall demand for home purchases and refinancing remains low due to cost of housing and high interest rates. In 2024, other income decreased by $143,000, primarily due to a negative change in the fair value of equity securities, as compared to 2023. The Company continues to evaluate its deposit product offerings with the intention of continuing to expand its offerings to the consumer and business depositors.

Current wording

Noninterest income was $7,114,000 for the year ended December 31, 2025, compared to $6,555,000 for the year 2024. Service charge income increased to $1,785,000 in 2025 compared to $1,682,000 for 2024, due to an increase in overdraft fee income related to a higher number of checking accounts. Debit card transaction fee income decreased to $1,673,000 in 2025 as compared to $1,738,000 in 2024, due to debit card network costs that are included in the net revenue received by the bank. Earnings on the cash surrender value of life insurance recognized an increase of $145,000 in 2025 compared to 2024, due to higher yields and three new life insurance policies purchased during the second quarter of 2024. Mortgage commissions have increased by $2,000 for the year 2025, as compared to 2024, a moderate upward trend but overall demand for home purchases and refinancing remains low due to cost of housing and high interest rates. In 2025, other income increased by $492,000, primarily due to a positive change in the fair value of equity securities, and death benefit gains recorded from life insurance policy redemptions. The Company continues to evaluate its deposit product offerings with the intention of continuing to expand its offerings to the consumer and business depositors.

Previous wording

Noninterest expense was $46,017,000 for the year ended December 31, 2024, an increase of $4,860,000 or 11.8% compared to $41,157,000 for the year ended 2023. Salaries and employee benefits increased by $2,531,000 in 2024, due to expansion of our staff to support loan and deposit growth, combined with normal merit-based and cost-of-living increases.

Current wording

Noninterest expense was $50,274,000 for the year ended December 31, 2025, an increase of $4,257,000 or 9.3% compared to $46,017,000 for the year ended 2024. Salaries and employee benefits increased by $2,199,000 in 2025, due to expansion of our staff to support loan and deposit growth, combined with normal merit-based and cost-of-living increases.

Previous wording

Occupancy expense realized an increase of $69,000 in 2024 compared to the prior year, primarily from property taxes, rent, and utilities expense.

Current wording

Occupancy expense realized an increase of $134,000 in 2025 compared to the prior year, primarily from rent and depreciation expense on fixed assets.

Previous wording

Data processing fees increased in 2024 over 2023 by $85,000, primarily due to servicing costs on the growing number of loan and deposit accounts, as well as upgrades to our online banking and mobile banking platforms.

Current wording

Data processing fees increased in 2025 over 2024 by $215,000, primarily due to servicing costs on the growing number of loan and deposit accounts, as well as upgrades to our online banking and mobile banking platforms.

Previous wording

Federal Deposit Insurance Corporation (“FDIC”) and California Department of Financial Protection and Innovation (“DFPI”) regulatory assessments increased by $70,000 in 2024 over 2023, mainly due to the increase in deposit balances. FDIC increased the base rate to 0.05%, on an annual basis, for all member banks in order to build up the Deposit Insurance Fund. The FDIC adopted a final rule in June 2022, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The final rule became effective as of January 1, 2023, with an invoice payment date of June 30, 2023. The FDIC said that the increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the Deposit Insurance fund reaches the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028. The final assessment rate for financial institutions is determined by making adjustments to the base rate for various credit quality factors and other risk metrics of the institution as defined by the FDIC. The Company’s risk profile and the related assessment rate remains at a relatively low level due to our strong credit quality, earnings and risk-based capital ratios. Management recognizes that assessments could increase further depending on deposit growth throughout the remainder of 2025, as the FDIC assessment rates are applied to average quarterly total liabilities as the primary basis, and based on FDIC’s discretion to increase the base assessment rate as needed to replenish the Deposit Insurance Fund. Moreover, the FDIC retains the authority and discretion to increase base assessment rates for banking entities in the future, as circumstances warrant.

Current wording

Federal Deposit Insurance Corporation (“FDIC”) and California Department of Financial Protection and Innovation (“DFPI”) regulatory assessments increased by $30,000 in 2025 over 2024, mainly due to the increase in deposit balances. FDIC increased the base rate to 0.05%, on an annual basis, for all member banks in order to build up the Deposit Insurance Fund. The FDIC adopted a final rule in June 2022, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in 2023. The FDIC said that the increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the Deposit Insurance fund reaches the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028. The final assessment rate for financial institutions is determined by making adjustments to the base rate for various credit quality factors and other risk metrics of the institution as defined by the FDIC. The Company’s risk profile and the related assessment rate remains at a relatively low level due to our strong credit quality, earnings and risk-based capital ratios. Management recognizes that assessments could increase further depending on deposit growth throughout the remainder of 2026, as the FDIC assessment rates are applied to average quarterly total liabilities as the primary basis, and based on FDIC’s discretion to increase the base assessment rate as needed to replenish the Deposit Insurance Fund. Moreover, the FDIC retains the authority and discretion to increase base assessment rates for banking entities in the future, as circumstances warrant.

Previous wording

Other operating expenses increased by $2,105,000 in 2024 as compared to 2023, primarily due to an increase in advertising expenses from a direct-mail campaign launched in 2024 targeting consumer deposit accounts, and various general operating expense increases required to support our growing business portfolios and compliance mandates. Some of these included audit expenses, software license fees and charitable contributions.

Current wording

Other operating expenses increased by $1,679,000 in 2025 as compared to 2024, primarily due to an increase in advertising expenses from a direct-mail campaign launched in 2024 targeting consumer deposit accounts, and various general operating expense increases required to support our growing business portfolios and compliance mandates. Some of these included legal expenses, software license fees and charitable contributions.

Previous wording

We reported a provision for income taxes of $7,244,000 and $9,458,000 for the years 2024 and 2023, respectively. The effective income tax rate on income from continuing operations was 22.5% for the year ended December 31, 2024, compared to 23.5% for the year 2023. These provisions reflect accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income and adjusted for the effects of all permanent differences between income for tax and financial reporting purposes (such as earnings on qualified municipal securities, BOLI and certain tax-exempt loans). The disparity between the effective tax rates for 2024 as compared to 2023 is primarily due to tax credits from low-income housing projects as well as tax-free income on municipal securities and loans that comprised a larger proportion of pre-tax income in 2024 as compared to 2023.

Current wording

We reported a provision for income taxes of $6,737,000 and $7,244,000 for the years 2025 and 2024, respectively. The effective income tax rate on income from continuing operations was 22.0% for the year ended December 31, 2025, compared to 22.5% for the year 2024. These provisions reflect accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income and adjusted for the effects of all permanent differences between income for tax and financial reporting purposes (such as earnings on qualified municipal securities, BOLI and certain tax-exempt loans). The disparity between the effective tax rates for 2025 as compared to 2024 is primarily due to tax credits from low-income housing projects as well as tax-free income on municipal securities and loans that comprised a larger proportion of pre-tax income in 2025 as compared to 2024.

Previous wording

The Company’s total assets were $1,900,604,000 at December 31, 2024 compared to $1,842,422,000 at December 31, 2023, an increase of $58,182,000 or 3.2%. Net loans increased by $89,237,000, investments increased $8,455,000, net bank premises and equipment increased $454,000, interest receivable and other assets decreased $370,000, while cash and cash equivalents decreased $47,817,000 for the year ended December 31, 2024 as compared to December 31, 2023.

Current wording

The Company’s total assets were $2,023,116,000 at December 31, 2025 compared to $1,900,604,000 at December 31, 2024, an increase of $122,512,000 or 6.4%. Net loans increased by $36,092,000, investments increased by $17,291,000, net bank premises and equipment increased by $2,728,000, interest receivable and other assets increased by $5,632,000, while cash and cash equivalents increased by $63,428,000 for the year ended December 31, 2025 as compared to December 31, 2024.

Previous wording

Loans gross of the allowance for credit losses and deferred fees were $1,106,535,000 as of December 31, 2024, compared to $1,016,579,000 as of December 31, 2023, an increase of $89,956,000 or 8.9%. The increase was due to an increase of $65,906,000 or 7.4% in commercial real estate loans, an increase of $18,354,000 or 28.1% in commercial and industrial loans, an increase of $2,282,000 or 7.2% in consumer loans, and an increase of $3,414,000 or 13.2% in agriculture loans. The composition remained relatively unchanged as a percentage of total loans, with commercial real estate comprising 87% and 88% of the loan portfolio at December 31, 2024 and 2023, respectively.

Current wording

Loans gross of the allowance for credit losses and deferred fees were $1,143,930,000 as of December 31, 2025, compared to $1,106,535,000 as of December 31, 2024, an increase of $37,395,000 or 3.4%. The increase was due to an increase of $50,508,000 or 5.3% in commercial real estate loans, a decrease of $13,310,000 or 15.9% in commercial and industrial loans, an increase of $527,000 or 1.6% in consumer loans, and a decrease of $330,000 or 1.1% in agriculture loans. The composition remained relatively unchanged as a percentage of total loans, with commercial real estate comprising 88% and 87% of the loan portfolio at December 31, 2025 and 2024, respectively.

Previous wording

Deposits increased $45,156,000 or 2.7% to $1,695,690,000 as of December 31, 2024 compared to $1,650,534,000 at December 31, 2023. Demand, Money Market, and Time Deposits increased by $1,925,000, $17,619,000 and $35,873,000, respectively, while Savings decreased by $10,261,000, as of December 31, 2024 as compared to December 31, 2023.

Current wording

Deposits increased $97,272,000 or 5.7% to $1,792,962,000 as of December 31, 2025 compared to $1,695,690,000 at December 31, 2024. Demand, Money Market, and Time Deposits increased by $79,198,000, $2,814,000 and $21,674,000, respectively, while Savings decreased by $6,414,000, as of December 31, 2025 as compared to December 31, 2024.

Previous wording

Equity increased $17,344,000 or 10.4% to $183,436,000 as of December 31, 2024, compared to $166,092,000 at December 31, 2023. Equity increased due to earnings, and was partially offset by the negative impact interest rates had on our unrealized loss on available-for-sale investment securities.

Current wording

Equity increased $24,539,000 or 13.4% to $207,975,000 as of December 31, 2025, compared to $183,436,000 at December 31, 2024. Equity increased due to earnings, and the decrease in the unrealized loss on available-for-sale investment securities due to lower interest rates.

Previous wording

The Company holds federal funds sold, unpledged available-for-sale securities and salable government guaranteed loans to help meet liquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested. As of December 31, 2024, and 2023, we had $30,270,000 and $36,500,000, respectively, in federal funds sold.

Current wording

The Company holds federal funds sold, unpledged available-for-sale securities and salable government guaranteed loans to help meet liquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested. As of December 31, 2025, and 2024, we had $29,080,000 and $30,270,000, respectively, in federal funds sold.

Previous wording

The fair value of the equity security was $3,169,000 and $3,132,000 at December 31, 2024 and December 31, 2023, respectively. Consistent with ASU 2016-01, equity securities are carried at fair value with the changes in fair value recognized in the consolidated statement of income. Accordingly, the Company recognized an unrealized loss of $74,000 and an unrealized gain of $41,000 during the years ended December 31, 2024 and 2023, respectively.

Current wording

The fair value of the equity security was $3,424,000 and $3,169,000 at December 31, 2025 and December 31, 2024, respectively. Consistent with ASU 2016-01, equity securities are carried at fair value with the changes in fair value recognized in the consolidated statement of income. Accordingly, the Company recognized an unrealized gain of $133,000 and an unrealized loss of $74,000 during the years ended December 31, 2025 and 2024, respectively.

Previous wording

Our available-for-sale investment securities holdings increased by $8,418,000 or 1.6% to $526,496,000 at December 31, 2024, compared to holdings of $518,078,000 at December 31, 2023. The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income.

Current wording

Our available-for-sale investment securities holdings increased by $17,036,000 or 3.2% to $543,532,000 at December 31, 2025, compared to holdings of $526,496,000 at December 31, 2024. The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income.

Previous wording

Total investment securities as a percentage of total assets increased to 27.9% as of December 31, 2024 compared to 28.3% at December 31, 2023. As of December 31, 2024, $305,513,000 of the investment securities were pledged to secure public deposits.

Current wording

Total investment securities as a percentage of total assets decreased to 27.0% as of December 31, 2025 compared to 27.9% at December 31, 2024. As of December 31, 2025, $349,507,000 of the investment securities were pledged to secure public deposits.

Previous wording

As of December 31, 2024, the total unrealized loss on debt securities that were in a loss position for less than 12 continuous months was $3,262,000 with an aggregate fair value of $177,185,000. The total unrealized loss on debt securities that were in a loss position for greater than 12 continuous months was $31,377,000 with an aggregate fair value of $292,476,000.

Current wording

As of December 31, 2025, the total unrealized loss on debt securities that were in a loss position for less than 12 continuous months was $782,000 with an aggregate fair value of $75,474,000. The total unrealized loss on debt securities that were in a loss position for greater than 12 continuous months was $27,409,000 with an aggregate fair value of $362,420,000.

Previous wording

Construction and land loans are classified as commercial real estate loans and decreased $45.2 million in 2024 as compared to 2023, mainly due to the completion of construction on existing projects that converted to permanent financing during 2024. The table below shows an analysis of construction and land loans by type and location. Non-owner-occupied land loans of $5.6 million as of December 31, 2024 included loans for land specified for commercial development of $3.9 million and for residential development of $1.7 million, the majority of which are located in Stanislaus County.

Current wording

Construction and land loans are classified as commercial real estate loans and increased $30.2 million in 2025 as compared to 2024. The table below shows an analysis of construction and land loans by type and location. Non-owner-occupied land loans of $4.8 million as of December 31, 2025 included loans for land specified for commercial development of $3.9 million and for residential development of $1.0 million, the majority of which are located in Stanislaus County.

Previous wording

The majority of the properties taken as collateral are located in Northern California. We employ strict guidelines regarding the use of collateral located in less familiar market areas. Positive trends in Northern California real estate values, the low loan-to-value ratios in our commercial real estate portfolio, and the high percentage of owner-occupied properties further solidify our credit quality position.

Current wording

The majority of the properties taken as collateral are located in Northern California. We employ strict guidelines regarding the use of collateral located in less familiar market areas. Positive trends in Northern California real estate values, the low loan-to-value ratios in our commercial real estate portfolio, and the significant percentage of owner-occupied properties further solidify our credit quality position.

Previous wording

Loans are generally placed on non-accrual status when they become 90 days past due, unless management believes the loan is adequately collateralized and in the process of collection. The past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower has experienced some changes in financial status, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full. OREO consists of properties acquired by foreclosure or similar means and which management intends to offer for sale. The Company did not have any nonperforming loans as of December 31, 2024 and 2023.

Current wording

Loans are generally placed on non-accrual status when they become 90 days past due, unless management believes the loan is adequately collateralized and in the process of collection. The past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower has experienced some changes in financial status, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full. OREO consists of properties acquired by foreclosure or similar means and which management intends to offer for sale. The Company had one non-owner occupied commercial real estate loan with a balance of $4,587,000 classified as a nonperforming loan as of December 31, 2025, as compared to no nonperforming loans as of December 31, 2024.

Previous wording

The Company held no OREO properties as of December 31, 2024 and 2023. Accordingly, the Company had zero non-performing assets recorded on the balance sheet as of December 31, 2024 and 2023.

Current wording

The Company held no OREO properties as of December 31, 2025 and 2024. Accordingly, the Company had non-performing assets of $4,587,000 and $0 recorded on the balance sheet as of December 31, 2025 and 2024, respectively.

Previous wording

The allowance for credit losses increased to $11,460,000 as of December 31, 2024, as compared with $10,896,000 at December 31, 2023. The allowance for credit losses as a percentage of total loans decreased to 1.04% as of December 31, 2024, as compared to 1.07% as of December 31, 2023, due to changes in the macro-economic indicators and qualitative factors used within our CECL model. Based on the current conditions of the loan portfolio, management believes that the $11,460,000 allowance for credit losses at December 31, 2024 is adequate to absorb losses inherent in our loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Current wording

The allowance for credit losses increased to $12,381,000 as of December 31, 2025, as compared with $11,460,000 at December 31, 2024. The allowance for credit losses as a percentage of total loans increased to 1.08% as of December 31, 2025, as compared to 1.04% as of December 31, 2024, due to changes in the macro-economic indicators and qualitative factors used within our CECL model. Based on the current conditions of the loan portfolio, management believes that the $12,381,000 allowance for credit losses at December 31, 2025 is adequate to absorb losses inherent in our loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Previous wording

Diversification, low loan-to-values, strong credit quality and enhanced credit monitoring contribute to a reduction in the portfolio’s overall risk in recent years and help to offset the various inherent credit risks. We continue to monitor the impact of the economic environment, and adjustments to the provision for credit loss will be made accordingly. During 2024, the Company recognized net loan recoveries of $2,184,000 as compared to $112,000 in 2023.

Current wording

Diversification, low loan-to-values, strong credit quality and enhanced credit monitoring contribute to a reduction in the portfolio’s overall risk in recent years and help to offset the various inherent credit risks. We continue to monitor the impact of the economic environment, and adjustments to the provision for credit loss will be made accordingly. During 2025, the Company recognized net loan charge-offs of $65,000, as compared to net loan recoveries of $2,184,000 in 2024.

Previous wording

For various business purposes, we make investments in earning assets other than the interest-earning securities and loans discussed above. The primary other earning assets held by the Company as of December 31, 2024 and 2023, includes the cash surrender value of the BOLI policies, Federal Home Loan Bank stock and Federal Reserve Bank stock. During 2024, we purchased three new life insurance policies on executive officers for a total investment of $5,000,000.

Current wording

For various business purposes, we make investments in earning assets other than the interest-earning securities and loans discussed above. The primary other earning assets held by the Company as of December 31, 2025 and 2024, includes the cash surrender value of the BOLI policies, FHLB stock and Federal Reserve Bank stock. During 2024, we purchased three new life insurance policies on executive officers for a total investment of $5,000,000, compared to no purchases in 2025.

Previous wording

During 2018 and 2022, we committed to invest $5,000,000 and $10,500,000, respectively, in low-income housing tax credit funds (“LIHTC”) to promote our participation in CRA activities, which had unfunded commitments of $5,664,000 and $9,782,000 as of December 31, 2024 and 2023, respectively. For LIHTC investments, we receive the return in the form of tax credits and tax deductions over a period of approximately 15 years.

Current wording

During 2018, 2022 and 2025, we committed to invest $5,000,000, $10,500,000 and $5,000,000, respectively, in low-income housing tax credit funds (“LIHTC”) to promote our participation in CRA activities, which had unfunded commitments of $4,598,000 and $5,664,000 as of December 31, 2025 and 2024, respectively. For LIHTC investments, we receive the return in the form of tax credits and tax deductions over a period of approximately 15 years.

Previous wording

Total deposits at December 31, 2024 and 2023 were $1,695,690,000 and $1,650,534,000, respectively, representing an increase of $45,156,000 or 2.7% in 2024. The average deposits for the year ended December 31, 2024 decreased $52,777,000 or 3.1% to $1,656,045,000 compared to $1,708,822,000 at for the year ended December 31, 2023. Deposit data analysis has resulted in an estimate of $811,351,000 in uninsured deposits, representing the balance that is not covered by FDIC insurance limits as of December 31, 2024.

Current wording

Total deposits at December 31, 2025 and 2024 were $1,792,962,000 and $1,695,690,000, respectively, representing an increase of $97,272,000 or 5.7% in 2025. The average deposits for the year ended December 31, 2025 increased $76,939,000 or 4.6% to $1,732,984,000 compared to $1,656,045,000 for the year ended December 31, 2024. Deposit data analysis has resulted in an estimate of $869,509,000 in uninsured deposits, representing the balance that is not covered by FDIC insurance limits as of December 31, 2025.

Previous wording

Deposits are the Company’s primary source of funds. Due to strategic emphasis by management, core deposits (based on a definition provided by FDIC’s Uniform Bank Performance Report) increased by $32,564,000 or 2.0% in 2024 to $1,654,700,000 at December 31, 2024. The percentage of core deposits to total deposits decreased slightly to 97.6% at December 31, 2024 as compared to 98.3% at December 31, 2023. The average rate paid on time deposits in denominations of over $250,000 was 3.35% and 1.35% for the years ended December 31, 2024 and 2023, respectively. The composition and cost of the Company's deposit base are important components in analyzing the Company's net interest margin and balance sheet liquidity characteristics, both of which are discussed in greater detail in other sections herein. See “Net Interest Income and Net Interest Margin” for further discussion.

Current wording

Deposits are the Company’s primary source of funds. Due to strategic emphasis by management, core deposits (based on a definition provided by FDIC’s Uniform Bank Performance Report) increased by $91,006,000 or 5.5% in 2025 to $1,745,706,000 at December 31, 2025. The percentage of core deposits to total deposits decreased slightly to 97.4% at December 31, 2025 as compared to 97.6% at December 31, 2024. The average rate paid on time deposits in denominations of over $250,000 was 3.53% and 3.35% for the years ended December 31, 2025 and 2024, respectively. The composition and cost of the Company's deposit base are important components in analyzing the Company's net interest margin and balance sheet liquidity characteristics, both of which are discussed in greater detail in other sections herein. See “Net Interest Income and Net Interest Margin” for further discussion.