Oak Valley Bancorp
For the period ended Mar 31, 2026. Filed May 12, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 12, 2026
OVLY$34.32+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001437749-25-034791
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-12.
0001437749-26-016466
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 117 previous paragraphs and 113 current paragraphs.
68 unchanged; 36 reworded; 8 added; 7 removed; 6 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The FOMC rate cuts during 2024 and 2025 totaled 150 basis points, which prompted the Company to reduce the interest rates on certain deposit accounts towards the end of 2024 and into 2025. The resulting average cost of funds was 0.78% for the three-months ended March 31, 2026, as compared to 0.79% in the same period of 2025.
Current report
During the three-month period ended March 31, 2026, the Company recorded a provision for credit losses of $464,000, consisting of a provision for loan losses of $539,000 and a reversal of provisions for off balance sheet items of $75,000. During the three-month period ended March 31, 2025, the Company recorded a provision for credit losses of $274,000, related to the reserve for off balance sheet items. There was one non-accrual loan that was individually evaluated resulting in a specific reserve as of March 31, 2026 and December 31, 2025, a non-owner occupied commercial real estate loan with a balance of $4,574,000 and $4,587,000, respectively.
Current report
Debit card transaction fee income increased by $12,000 for the three-months ended March 31, 2026, compared to the same period in 2025, due to the growth in the number of demand deposit accounts and the continuing industry shift to electronic payment methods.
Current report
Other income increased by $320,000 for the three-months ended March 31, 2026, as compared to the same period of 2025, mainly due to a non-recurring special dividend of $181,000 paid by the Federal Home Loan Bank during the first quarter of 2026.
Current report
Other expense decreased by $28,000 for the three-months ended March 31, 2026, as compared to the same period in 2025, due to normal fluctuations in various general operating expense categories.
Current report
Non-performing assets were $4,574,000 and $4,587,000 as of March 31, 2026 and December 31, 2025, respectively, consisting of the one non-accrual loan discussed above.
Current report
The U.S. Basel III minimum capital ratios do not apply to the Company because it has less than $3 billion in total assets and therefore qualifies as a small bank holding company. The minimum capital ratios apply only to the Bank.
Current report
Proposed rules for U.S. implementation of capital requirements under Basel IV rules, commonly referred to as the “Basel III Endgame”, were initially issued by the U.S. federal banking agencies on July 27, 2023, but such proposed rules were met with strong objections from the banking industry. As a result, on March 19, 2026, the Office of the Comptroller of the Currency, (the “OCC”), FDIC and the Federal Reserve rescinded the Basel III Endgame 2023 proposal and concurrently issued three revised notices of proposed rulemaking. The three proposals include (i) a revised Basel III Endgame proposal that would apply an expanded risk-based approach to Category I and Category II banking organizations, thus narrowing the mandatory scope from the 2023 proposal, with all other banking organizations permitted to opt in; (ii) a revised standardized approach proposal that would reduce risk weights for traditional lending activities for banking organizations not subject to the expanded risk-based approach; and (iii) a revised capital surcharge proposal for globally systemically important bank holding companies. The OCC, FDIC and the Federal Reserve estimate that the revised proposals would decrease aggregate common equity tier 1 capital requirements by approximately 4.8% for Category I and Category II banking organizations, in contrast to the significant capital increases that would have resulted under the Basel III Endgame 2023 proposal. Additionally, the revised proposal would eliminate the requirement to deduct mortgage servicing assets from common equity tier 1 capital, instead assigning a 250% risk weight, which is designed to promote mortgage origination and servicing by banking organizations. The Federal Reserve voted 6-to-1 to advance all three proposals and the FDIC board voted unanimously in favor of the revised Basel III Endgame and standardized approach proposals. The comment period for the revised proposals is scheduled to close on June 18, 2026.
Removed paragraphs (7)
Previous report
Item 2.** ** Management**’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report
In response to FOMC hiked rates during 2022 and 2023, the Company increased rates on certain accounts and deposit products during 2023 in order to remain competitive with our peer group and to maintain current liquidity levels, which remain at a high level. Towards the end of 2024 and into 2025, the Company reduced the interest rates on certain deposit accounts, which resulted in average cost of funds of 0.75% and 0.77% for the three and nine-months ended September 30, 2025, respectively, as compared to 0.83% and 0.75% in the same periods of 2024.
Previous report
Debit card transaction fee income decreased by $21,000 and $50,000 for the three and nine-months ended September 30, 2025, respectively, compared to the same periods in 2024, due to debit card network costs that are included in the net revenue received by the bank.
Previous report
Other income increased by $108,000 and $119,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods of 2024, mainly due to a one-time gain from a life insurance policy redemption during the third quarter of 2025.
Previous report
Other expense increased by $454,000 and $1,709,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods in 2024. The increase was due to various general operating expense increases, which were expected given the expansion of the Company’s business portfolios.
Previous report
Non-performing assets remained at $0 as of September 30, 2025 and December 31, 2024, due to strong credit quality within our loan portfolio.
Previous report
Proposed rules for U.S. implementation of capital requirements under Basel IV rules, commonly referred to as the “Basel III Endgame", were issued by the U.S. federal banking agencies on July 27, 2023 and have not been finalized as of the date of this disclosure. While implementation of the Basel III Endgame has since stalled, Federal Reserve Vice Chair for Supervision, Michelle Bowman, commented in August 2025 that a revised Basel III Endgame is expected to be issued for public comment in early 2026, which the market expects to be more capital-neutral than the original proposal.
Reworded paragraphs (36)
Previous wording
Certain matters discussed in this Quarterly Report on Form 10-Q are“forward-looking statements”* within the meaning of the Private Securities Litigation Reform Act of 1995 and therefore may involve risks, uncertainties and other factors which may cause the Company*’s actual results to be materially different from the results expressed or implied by the Company’s forward-looking statements. * These statements generally appear with words such as*“will,”* “anticipate,” “target,” “believe,” “estimate,” “forecast”,“enhance,” “may,” “intend,” “plan,” “goal,” “believe,” “forecast,” “project,” “outlook,” “expect” or other words of similar meaning.* * Forward-looking statements are not statements of historical fact and may include those that discuss, among others, our strategies, goals, plans, outlook, forecasts, expectations, intentions or other non-historical matters; future operations, financial condition, results of operations, or business developments; and the assumptions that underlie these matters. Although management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.* * Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: the credit exposure of certain loan products and other components of our business that could be impacted by the changing economic and business conditions; changes in monetary, fiscal or tax policy to address changing economic conditions including interest rate policies of the Federal Reserve Board, any of which could cause us to incur additional loan losses and adversely affect our results of operations in the future; economic conditions (both generally and in the markets where the Company operates) including unemployment levels, energy prices, increased energy costs in California, inflation, supply chain issues, a decline in housing prices or collateral values, trade policies and tensions (including as a result of tariffs and other trade disruptions), geopolitical instability, market volatility associated with the political and economic environment and uncertainty surrounding potential legal, regulatory, and policy changes by the current U.S. presidential administration and the risk of a recession or slowed economic growth in the United States economy; the continuing impact of the changing economic conditions on our employees and customers, including consumer income, creditworthiness, confidence, spending and savings; the credit quality of borrowers; the success of our efforts to mitigate the impact of the changing economic conditions; competition from other providers of financial services offered by the Company and our response to competitive pressures; changes in government regulation and legislation; the impact of any failure by the U.S. government to increase the debt ceiling or impacts of the ongoing federal gover…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Certain matters discussed in this Quarterly Report on Form 10-Q are“forward-looking statements”* within the meaning of the Private Securities Litigation Reform Act of 1995 and therefore may involve risks, uncertainties and other factors which may cause the Company*’s actual results to be materially different from the results expressed or implied by the Company’s forward-looking statements. * These statements generally appear with words such as*“will,”* “anticipate,” “target,” “believe,” “estimate,” “forecast,” “enhance,” “may,” “intend,” “plan,” “goal,” “project,” “outlook,” “expect” or the negative of such terms or other words of similar meaning.* * Forward-looking statements are not statements of historical fact and may include those that discuss, among others, our strategies, goals, plans, outlook, forecasts, expectations, intentions or other non-historical matters; future operations, financial condition, results of operations, or business developments; and the assumptions that underlie these matters. Although management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.* * Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: the credit exposure of certain loan products and other components of our business that could be impacted by the changing economic and business conditions; changes in monetary, fiscal or tax policy to address changing economic conditions including interest rate policies of the Federal Reserve Board, any of which could cause us to incur additional loan losses and adversely affect our results of operations in the future; economic conditions (both generally and in the markets where the Company operates) including unemployment levels, energy prices, increased energy costs in California, inflation, supply chain issues, a decline in housing prices or collateral values, trade policies and tensions (including as a result of tariffs and other trade disruptions), geopolitical instability, market volatility associated with the political and economic environment and uncertainty surrounding potential legal, regulatory, and policy changes by the current U.S. presidential administration and the risk of a recession or slowed economic growth in the United States economy; the continuing impact of the changing economic conditions on our employees and customers, including consumer income, creditworthiness, confidence, spending and savings; the credit quality of borrowers; the success of our efforts to mitigate the impact of the changing economic conditions; competition from other providers of financial services offered by the Company and our response to competitive pressures; changes in government regulation and legislation; the impacts of any failure by the U.S. government to increase the debt ceiling or any federal government shut…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Management believes the following were important factors in the Company’s performance during the three and nine-month periods ended September 30, 2025:
Current wording
Management believes the following were important factors in the Company’s performance during the three-month period ended March 31, 2026:
Previous wording
For the three and nine-month periods ended September 30, 2025, the Company recorded net income of $6,693,000 and $17,578,000, respectively, representing decreases of $631,000 and $1,362,000, as compared to the same periods in 2024. Return on average assets (annualized) was 1.35% and 1.22% for the three and nine-months ended September 30, 2025, respectively, as compared to 1.56% and 1.38% for the same periods in 2024. Annualized return on average common equity was 14.30% and 12.71% for the three and nine-months ended September 30, 2025, respectively, as compared to 16.54% and 14.90% for the same periods in 2024. Net income before provisions for income taxes decreased by $1,267,000 and $1,969,000 for the three and nine-month periods ended September 30, 2025, respectively, from the same periods in 2024. The income statement components of these variances are as follows:
Current wording
For the three-month period ended March 31, 2026, the Company recorded net income of $5,309,000, representing an increase of $12,000, as compared to the same period in 2025. Return on average assets (annualized) was 1.07% for the three-months ended March 31, 2026, as compared to 1.13% for the same period in 2025. Annualized return on average common equity was 10.23% for the three-months ended March 31, 2026, as compared to 11.58% for the same period in 2025. Net income before provisions for income taxes increased by $10,000 for the three-month period ended March 31, 2026, from the same period in 2025. The income statement components of these variances are as follows:
Previous wording
Net interest income is the largest source of the Company’s operating income. For the three and nine-month periods ended September 30, 2025, net interest income was $19,197,000 and $55,158,000, respectively, which represents increases of $1,542,000 and $2,970,000, from the comparable periods in 2024. The increase was due to growth of earning assets and upward repricing of our loan yield in spite of short-term rate cuts by the FOMC during 2024 and 2025.
Current wording
Net interest income is the largest source of the Company’s operating income. For the three-month period ended March 31, 2026, net interest income was $18,824,000, which represents an increase of $1,017,000, from the comparable period in 2025. The increase was due to growth of earning assets and upward repricing of our loan yield in spite of short-term rate cuts by the FOMC during 2025.
Previous wording
The net interest margin (net interest income as a percentage of average interest earning assets) was 4.16% and 4.12% for the three and nine-month periods ended September 30, 2025, respectively, as compared to 4.04% and 4.08% for the same periods in 2024. The net interest margin increased compared to prior year due to the rising loan yields, earning asset growth and downward trend of the deposit interest rates. The earning asset yield increased by 5 and 6 basis points for the three and nine-month periods ended September 30, 2025, respectively, as compared to the same periods of 2024.
Current wording
The net interest margin (net interest income as a percentage of average interest earning assets) was 4.12% for the three-month period ended March 31, 2026, as compared to 4.09% for the same period in 2025. The net interest margin increased compared to the prior year due to the rising loan yields, earning asset growth and downward trend of the deposit interest rates. The earning asset yield increased by 1 basis point for the three-month period ended March 31, 2026, as compared to the same period of 2025.
Previous wording
The following table shows the relative impact of changes in average balances of interest earning assets and interest-bearing liabilities, and interest rates earned and paid by the Company on those assets and liabilities for the three and nine-month periods ended September 30, 2025 and 2024:
Current wording
The following table shows the relative impact of changes in average balances of interest earning assets and interest-bearing liabilities, and interest rates earned and paid by the Company on those assets and liabilities for the three-month periods ended March 31, 2026 and 2025:
Previous wording
(2) Yields and interest income on tax-exempt municipal securities and loans have been adjusted to their fully-taxable equivalents, based on a federal marginal tax rate of 21.0%. Non-GAAP tax benefit adjustments of $18 thousand and $482 thousand have been added to GAAP interest income on gross loans and investment securities, respectively, for the three-months ended September 30, 2025, as compared to $19 thousand and $454 thousand in the comparable period of 2024.
Current wording
(2) Yields and interest income on tax-exempt municipal securities and loans have been adjusted to their fully-taxable equivalents, based on a federal marginal tax rate of 21.0%. Non-GAAP tax benefit adjustments of $18 thousand and $521 thousand have been added to GAAP interest income on gross loans and investment securities, respectively, for the three-months ended March 31, 2026, as compared to $18 thousand and $478 thousand, respectively, in the comparable period of 2025. These non-GAAP adjustments are used by management to assess the Company’s performance and provide additional information and transparency to investors with respect to the Company’s gross loans and investment securities. Non-GAAP performance measures do not have a standardized meaning and such measures may not be comparable to similar measures presented by other companies. Non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Previous wording
Shown in the following tables is the relative impact on net interest income of changes in the average outstanding balances (volume) of earning assets and interest-bearing liabilities and the rates earned and paid by the Company on those assets and liabilities for the three and nine-month periods ended September 30, 2025 and 2024. Changes in interest income and expense that are not attributable specifically to either rate or volume are allocated to the rate column below.
Current wording
Shown in the following table is the relative impact on net interest income of changes in the average outstanding balances (volume) of earning assets and interest-bearing liabilities and the rates earned and paid by the Company on those assets and liabilities for the three-month periods ended March 31, 2026 and 2025. Changes in interest income and expense that are not attributable specifically to either rate or volume are allocated to the rate column below.
Previous wording
The table above reflects an increase of $940,000 in net interest income due to changes in volume combined with the overall change in mix of balances during the third quarter of 2025, as compared to the same period of 2024. Changes in earning asset yields and rates on interest-bearing liabilities resulted in an increase of $630,000 to net interest income, over the same period. This increase was mainly due to higher loan yields as our loan portfolio continues to reprice upward.
Current wording
The table above reflects an increase of $779,000 in net interest income due to changes in volume combined with the overall change in mix of balances during the first quarter of 2026, as compared to the same period of 2025. Changes in earning asset yields and rates on interest-bearing liabilities resulted in an increase of $280,000 to net interest income, over the same period. This increase was mainly due to higher loan yields as our loan portfolio continues to reprice upward.
Previous wording
The Company recorded a reversal of provisions for credit losses of $60,000 during the three and nine-month periods ended September 30, 2025 and 2024, related to a decrease in unfunded loan commitments. Credit quality remained stable and our ACL amount was adequate as determined by the output of our CECL internal credit risk model. Non-accrual loans remained at a zero balance throughout the nine-month period ending September 30, 2025, and all of 2024. Management will continue to closely monitor the credit risks to our loan portfolio and may need to make qualitative adjustments depending on factors that may impact the economy and the financial condition of our borrowers.
Current wording
Credit quality remained stable and our ACL amount was adequate as determined by the output of our CECL internal credit risk model. Management will continue to closely monitor the credit risks to our loan portfolio and may need to make qualitative adjustments depending on factors that may impact the economy and the financial condition of our borrowers.
Previous wording
Non-interest income represents service charges on deposit accounts and other non-interest related charges and fees, including fees from mortgage commissions and investment service fee income. For the three and nine-month periods ended September 30, 2025, non-interest income was $1,973,000 and $5,289,000, respectively, representing increases of $127,000 or 6.9% and $164,000 or 3.2%, compared to the same periods in 2024.
Current wording
Non-interest income represents service charges on deposit accounts and other non-interest related charges and fees, including fees from mortgage commissions and investment service fee income. For the three-month period ended March 31, 2026, non-interest income was $1,952,000, representing an increase of $339,000, or 21.0%, compared to the same period in 2025.
Previous wording
The following tables show the major components of non-interest income:
Current wording
The following table shows the major components of non-interest income:
Previous wording
Service charges on deposits increased by $20,000 and $75,000 for the three and nine-months ended September 30, 2025, respectively, compared to the same periods in 2024. The increase was mainly due to overdraft fee income attributable to the growth in consumer demand deposit accounts.
Current wording
Service charges on deposits decreased by $6,000 for the three-months ended March 31, 2026, compared to the same period in 2025. The decrease was mainly due to a reduction in overdraft fee income despite the growth in demand deposit accounts.
Previous wording
Earnings on cash surrender value of life insurance increased by $12,000 and $122,000 for the three and nine-months ended September 30, 2025, respectively, compared to the same periods in 2024, corresponding to higher yields earned in 2025 and three additional policies that were purchased during the second quarter of 2024.
Current wording
Earnings on cash surrender value of life insurance increased by $16,000 for the three-months ended March 31, 2026, compared to the same period in 2025, corresponding to higher yields earned in 2026.
Previous wording
Mortgage commissions increased by $10,000 and $12,000 for the three and nine-months ended September 30, 2025, respectively, compared to the same periods in 2024. Overall, the demand for home purchases and refinancing has decreased in 2024 and 2025, mainly due to rising housing prices and interest rates.
Current wording
Mortgage commissions increased by $2,000 for the three-months ended March 31, 2026, compared to the same period in 2025. Overall, the demand for home purchases and refinancing has decreased in 2025 and 2026, mainly due to rising housing prices and interest rates.
Previous wording
Gain on sales and calls of available-for-sale securities decreased by $2,000 and $114,000 for the three and nine-months ended September 30, 2025, respectively, compared to the same periods in 2024, as there were no sales during the first nine months of 2025, as compared to 17 securities sold during the same period of 2024.
Current wording
A loss on calls of available-for-sale securities of $5,000 was recorded during the three-months ended March 31, 2026, compared to no gain or loss on calls of available-for-sale securities for the same period in 2025. There were no sales during the first three months of 2026 and 2025.
Previous wording
The following tables show the major components of non-interest expenses:
Current wording
The following table shows the major components of non-interest expenses:
Previous wording
Non-interest expenses increased by $1,376,000 or 12.2% and $3,543,000 or 10.3% for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods of 2024. Salaries and employee benefits increased by $680,000 and $1,599,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods of 2024, mainly due to additional staffing expense required to support the continued growth of our business portfolios.
Current wording
Non-interest expenses increased by $1,156,000, or 9.4%, for the three-months ended March 31, 2026, as compared to the same period of 2025. Salaries and employee benefits increased by $812,000 for the three-months ended March 31, 2026, as compared to the same period of 2025, mainly due to additional staffing expense required to support the continued growth of our business portfolios.
Previous wording
Occupancy expenses increased by $126,000 and $80,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods of 2024, due to increases in rent and maintenance costs related to branch facilities.
Current wording
Occupancy expenses increased by $267,000 for the three-months ended March 31, 2026, as compared to the same period of 2025, due to increases in rent and maintenance costs related to branch facilities. Our new Lodi branch was opened in October 2025, and contributed to the increase in overhead expense.
Previous wording
Data processing fees decreased by $86,000 and $110,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods of 2024, due to servicing costs on the growing number of loan and deposit accounts.
Current wording
Data processing fees increased by $95,000 for the three-months ended March 31, 2026, as compared to the same period of 2025, due to servicing costs on the growing number of loan and deposit accounts.
Previous wording
Federal Deposit Insurance Corporation (“FDIC”) and California Department of Financial Protection and Innovation (“DFPI”) regulatory assessments increased by $30,000 and $45,000 for the three and nine-months ended September 30, 2025, respectively, as compared to the same periods in 2024, which was primarily related to deposit growth. The FDIC base rate remained at 0.05%, on an annual basis, for both periods, which is the lowest possible assessment rate for comparable banks. 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 $10,000 for the three-months ended March 31, 2026, as compared to the same period in 2025, which was primarily related to deposit growth. The FDIC base rate remained at 0.05%, on an annual basis, for both periods, which is the lowest possible assessment rate for comparable banks. 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
The Company recorded provisions for income taxes of $1,837,000 and $4,917,000 for the three and nine-month ended September 30, 2025, respectively, representing decreases of $636,000 and $607,000, respectively, compared to the provisions recorded in the comparable periods of 2024. The effective income tax rate on income from continuing operations was 21.5% and 21.9% for the three and nine-months ended September 30, 2025, respectively, compared to 25.2% and 22.6% for the comparable periods of 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, bank owned life insurance and certain tax-exempt loans). The disparity between the effective tax rates for the year-to-date period of 2024 as compared to 2025 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.
Current wording
The Company recorded provisions for income taxes of $1,497,000 for the three-months ended March 31, 2026, representing a decrease of $2,000, compared to the provisions recorded in the comparable period of 2025. The effective income tax rate on income from continuing operations was 22.0% for the three-months ended March 31, 2026, compared to 22.1% for the comparable period of 2025. 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, bank owned life insurance and certain tax-exempt loans). The disparity between the effective tax rates for the year-to-date period of 2026 as compared to 2025 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 2026 as compared to 2025.
Previous wording
Non-accrual loans totaled $0 as of September 30, 2025 and December 31, 2024. At September 30, 2025 and December 31, 2024, there were no loan modifications pursuant to ASU 2022-02, and therefore there were no payment delinquencies on modified loans during the three and nine-months ended September 30, 2025.
Current wording
Non-accrual loans totaled $4,574,000 as of March 31, 2026 and $4,587,000 as of December 31, 2025, consisting of one non-owner occupied commercial real estate loan. At March 31, 2026 and December 31, 2025, there were no loan modifications pursuant to ASU 2022-02, and therefore there were no payment delinquencies on modified loans during the three-months ended March 31, 2026.
Previous wording
As of September 30, 2025 and December 31, 2024, there were no OREO properties. There were no sales, acquisitions or fair value adjustments of OREO properties during the three and nine-months ended September 30, 2025 and 2024.
Current wording
As of March 31, 2026 and December 31, 2025, there were no OREO properties. There were no sales, acquisitions or fair value adjustments of OREO properties during the three-months ended March 31, 2026 and 2025.
Previous wording
Due to credit risk inherent in the lending business, the Company routinely sets aside allowances through charges to earnings. Such charges are not only made for the outstanding loan portfolio, but also for off-balance sheet items, such as commitments to extend credits or letters of credit. Charges for the outstanding loan portfolio have been credited to the allowance for credit losses, whereas charges for off-balance sheet items have been credited to the reserve for off-balance sheet items, which is presented as a component of other liabilities. The Company recorded a reversal of credit loss provisions of $60,000 during the three and nine-months ended September 30, 2025, as compared to a reversal of $1,620,000 for the same periods of 2024. The reversal of $60,000 recorded in the third quarter of 2025 was related to a decrease in unfunded loan commitments, and the $1,620,000 reversal in the prior year was related to two loan recoveries recorded in the third quarter of 2024.
Current wording
Due to credit risk inherent in the lending business, the Company routinely sets aside allowances through charges to earnings. Such charges are not only made for the outstanding loan portfolio, but also for off-balance sheet items, such as commitments to extend credits or letters of credit. Charges for the outstanding loan portfolio have been credited to the allowance for credit losses, whereas charges for off-balance sheet items have been credited to the reserve for off-balance sheet items, which is presented as a component of other liabilities. The Company recorded a provision for credit losses of $539,000 during the three-months ended March 31, 2026, as compared to no provisions during the same period of 2025. The provision of $539,000 recorded in the first quarter of 2026 was related to the specific allowance of the one non-accrual loan that is individually evaluated, in addition to qualitative risk factors within our credit risk model. The Company recorded a reversal of provisions for off balance sheet items of $75,000 during the three-months ended March 31, 2026 due to a decrease in unfunded loan commitments, as compared to a provision of $274,000 during the same period of 2025.
Previous wording
The allowance for credit losses decreased by $40,000 to $11,420,000 as of September 30, 2025, as compared to $11,460,000 as of December 31, 2024, due to net loan charge-offs of $40,000 during the first nine months of 2025. The allowance for credit losses as a percentage of total loans decreased to 1.03% as of September 30, 2025 as compared to 1.04% as of December 31, 2024.
Current wording
The allowance for credit losses increased by $529,000 to $12,910,000 as of March 31, 2026, as compared to $12,381,000 as of December 31, 2025, due to the provision for credit losses of $539,000 during the first three months of 2026. The allowance for credit losses as a percentage of total loans increased to 1.13% as of March 31, 2026 as compared to 1.08% as of December 31, 2025.
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 September 30, 2025, and December 31, 2024, the Company had $247,155,000 and $168,751,000, respectively, in cash and cash equivalents.
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 March 31, 2026, and December 31, 2025, the Company had $201,603,000 and $232,179,000, respectively, in cash and cash equivalents.
Previous wording
Management of the investment securities portfolio focuses on providing an adequate level of liquidity and establishing an interest rate-sensitive position, while earning an adequate level of investment income without taking undue risk. Investment securities that the Company intends to hold until maturity are classified as held-to-maturity securities, and all other investment securities are classified as available-for-sale or equity securities. Currently, all of the investment securities are classified as available-for-sale except for one mutual fund classified as an equity security with a carrying value of $3,364,000 as of September 30, 2025. 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. The carrying values of equity securities are adjusted for unrealized gains or losses through noninterest income in the consolidated statement of income.
Current wording
Management of the investment securities portfolio focuses on providing an adequate level of liquidity and establishing an interest rate-sensitive position, while earning an adequate level of investment income without taking undue risk. Investment securities that the Company intends to hold until maturity are classified as held-to-maturity securities, and all other investment securities are classified as available-for-sale or equity securities. Currently, all of the investment securities are classified as available-for-sale except for one mutual fund classified as an equity security with a carrying value of $3,434,000 as of March 31, 2026. 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. The carrying values of equity securities are adjusted for unrealized gains or losses through noninterest income in the consolidated statement of income.
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. During the three-months ended March 31, 2025, we committed an additional $5,000,000 that included a housing project in our local area that qualified for CRA credit. Unfunded commitments on the LIHTC funds were $5,391,000 and $5,664,000 as of September 30, 2025 and December 31, 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.
Current 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. During the three-months ended March 31, 2025, we committed an additional $5,000,000 that included a housing project in our local area that qualified for CRA credit. Unfunded commitments on the LIHTC funds were $4,394,000 and $4,598,000 as of March 31, 2026 and December 31, 2025, 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 as of September 30, 2025 were $1,774,882,000, an increase of $79,192,000 or 4.7% from the deposit total of $1,695,690,000 as of December 31, 2024. Average deposits increased by $73,712,000 to $1,714,473,000 for the nine-month period ended September 30, 2025, as compared to the same period in 2024.
Current wording
Total deposits as of March 31, 2026 were $1,780,996,000, a decrease of $11,966,000, or 0.7%, from the deposit total of $1,792,962,000 as of December 31, 2025. Average deposits increased by $79,300,000 to $1,772,430,000 for the three-month period ended March 31, 2026, as compared to the same period in 2025.
Previous wording
The U.S. Basel III rules contain capital standards regarding the composition of capital, minimum capital ratios and counter-party credit risk capital requirements. The Basel III rules also include a definition of common equity Tier 1 capital and require that certain levels of such common equity Tier 1 capital be maintained. The rules also include a capital conservation buffer, which imposes a common equity requirement above the new minimum that can be depleted under stress and could result in restrictions on capital distributions and discretionary bonuses under certain circumstances, as well as a new standardized approach for calculating risk-weighted assets. Under the Basel III rules, we must maintain a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6%, a ratio of total capital to risk-weighted assets of at least 8% and a minimum Tier 1 leverage ratio of 4.0%. In addition to the preceding requirements, all financial institutions subject to the Rules, including both the Company and the Bank, are required to establish a "conservation buffer," consisting of common equity Tier 1 capital, which is at least 2.5% above each of the preceding common equity Tier 1 capital ratio, the Tier 1 risk-based ratio and the total risk-based ratio. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.
Current wording
The U.S. Basel III rules contain capital standards regarding the composition of capital, minimum capital ratios and counter-party credit risk capital requirements. The Basel III rules also include a definition of common equity Tier 1 capital and require that certain levels of such common equity Tier 1 capital be maintained. The rules also include a capital conservation buffer, which imposes a common equity requirement above the new minimum that can be depleted under stress and could result in restrictions on capital distributions and discretionary bonuses under certain circumstances, as well as a new standardized approach for calculating risk-weighted assets. Under the Basel III rules, we must maintain a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6%, a ratio of total capital to risk-weighted assets of at least 8% and a minimum Tier 1 leverage ratio of 4.0%. In addition to the preceding requirements, all financial institutions subject to the Rules, including the Bank, are required to establish a "conservation buffer," consisting of common equity Tier 1 capital, which is at least 2.5% above each of the preceding common equity Tier 1 capital ratio, the Tier 1 risk-based ratio and the total risk-based ratio. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.
Previous wording
Failure to meet minimum capital requirements can trigger regulatory actions that could have a material adverse effect on the Company’s financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that rely on quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Current wording
Failure to meet minimum capital requirements can trigger regulatory actions that could have a material adverse effect on the Company’s financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that rely on quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Previous wording
Maintenance of adequate liquidity requires that sufficient resources always be available to meet the Company’s cash flow requirements. Liquidity in a banking institution is required primarily to provide for deposit withdrawals and the credit needs of its customers and to take advantage of investment opportunities as they arise. Liquidity management involves the ability to convert assets into cash or cash equivalents without incurring significant loss, and to raise cash or maintain funds without incurring excessive costs. For this purpose, the Company maintains a portion of funds in cash and cash equivalents, salable government guaranteed loans and securities available for sale. The Company obtains funds from the repayment and maturity of loans as well as deposit inflows, investment security maturities and paydowns, Federal funds purchased, FHLB advances, and other borrowings. The Company’s primary use of funds is the origination of loans, the purchase of investment securities, withdrawals of deposits, maturity of certificate of deposits, and dividends to common stockholders. The Company’s liquid assets as of September 30, 2025 were $494.8 million compared to $431.8 million as of December 31, 2024. The Company’s liquidity level measured as the percentage of liquid assets to total assets was 24.8% as of September 30, 2025, compared to 22.7% as of December 31, 2024. Liquid assets increased during the first nine months of 2025, mainly due to an increase in deposit balances. Management anticipates that cash and cash equivalents on hand and other sources of funds will provide adequate liquidity for operating, investing and financing needs and regulatory liquidity requirements for at least the next twelve months. Management monitors the Company’s liquidity position daily, balancing loan funding/payments with changes in deposit activity and overnight investments.
Current wording
Maintenance of adequate liquidity requires that sufficient resources always be available to meet the Company’s cash flow requirements. Liquidity in a banking institution is required primarily to provide for deposit withdrawals and the credit needs of its customers and to take advantage of investment opportunities as they arise. Liquidity management involves the ability to convert assets into cash or cash equivalents without incurring significant loss, and to raise cash or maintain funds without incurring excessive costs. For this purpose, the Company maintains a portion of funds in cash and cash equivalents, salable government guaranteed loans and securities available for sale. The Company obtains funds from the repayment and maturity of loans as well as deposit inflows, investment security maturities and paydowns, Federal funds purchased, FHLB advances, and other borrowings. The Company’s primary uses of funds are the origination of loans, the purchase of investment securities, withdrawals of deposits, maturity of certificate of deposits, and dividends to common stockholders. The Company’s liquid assets as of March 31, 2026 were $494.8 million compared to $517.6 million as of December 31, 2025. The Company’s liquidity level measured as the percentage of liquid assets to total assets was 24.8% as of March 31, 2026, compared to 25.6% as of December 31, 2025. Liquid assets decreased during the first three months of 2026, mainly due to a decrease in deposit balances. Management anticipates that cash and cash equivalents on hand and other sources of funds will provide adequate liquidity for operating, investing and financing needs and regulatory liquidity requirements for at least the next twelve months. Management monitors the Company’s liquidity position daily, balancing loan funding/payments with changes in deposit activity and overnight investments.
Previous wording
As a secondary source of liquidity, the Company relies on advances from the FHLB to supplement the supply of lendable funds and to meet deposit withdrawal requirements. Advances from the FHLB are typically secured by a portion of the loan portfolio. The FHLB determines limitations on the amount of advances by assigning a percentage to each eligible loan category that will count towards the borrowing capacity. As of September 30, 2025, the Company’s borrowing capacity from the FHLB was approximately $394.9 million and there were no outstanding advances. The Company also maintains a line of credit with two correspondent banks to purchase up to $70 million in federal funds, and approximately $33.6 million borrowing capacity through the FRB Discount Window, for which there were no advances on either borrowing source as of September 30, 2025.
Current wording
As a secondary source of liquidity, the Company relies on advances from the FHLB to supplement the supply of lendable funds and to meet deposit withdrawal requirements. Advances from the FHLB are typically secured by a portion of the loan portfolio. The FHLB determines limitations on the amount of advances by assigning a percentage to each eligible loan category that will count towards the borrowing capacity. As of March 31, 2026, the Company’s borrowing capacity from the FHLB was approximately $417.6 million and there were no outstanding advances. The Company also maintains a line of credit with two correspondent banks to purchase up to $70 million in federal funds, and approximately $28.0 million borrowing capacity through the FRB Discount Window, for which there were no advances on either borrowing source as of March 31, 2026.
Previous wording
As of September 30, 2025 and December 31, 2024, the Company had commitments to extend credit of $206.9 million and $185.8 million, respectively, which includes obligations under letters of credit of $4.5 million and $4.2 million, respectively.
Current wording
As of March 31, 2026 and December 31, 2025, the Company had commitments to extend credit of $202.3 million and $219.0 million, respectively, which includes obligations under letters of credit of $4.1 million and $4.1 million, respectively.
Previous wording
In October 2024, the Consumer Financial Protection Bureau (“CFPB”) finalized a rule to implement Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), which would require certain entities, including the Company and the Bank, to, among other things, make available to a consumer, upon request, information in its control or possession concerning the consumer financial product or service that the consumer obtained from that entity. The compliance date for a depository institution data provider that holds at least $1.5 billion in total assets but less than $3 billion in total assets was April 1, 2029; however, in May 2025, the CFPB filed a motion for summary judgment in the litigation, in which the CFPB stated that it had concluded that the final rule exceeds the agency’s statutory authority. In July 2025, the CFPB filed a motion to stay the proceedings while it conducts a new rulemaking process, which was granted by the district court. In August 2025, the CFPB issued an advanced notice of proposed rulemaking to reconsider its final rule under Section 1033 of the Dodd-Frank Act. Further, in October 2025, the court stayed the compliance dates in the final rule pending the CFPB’s reconsideration rulemaking. We will continue to monitor developments for any potential impact on the Company and the Bank.
Current wording
In October 2024, the Consumer Financial Protection Bureau (“CFPB”) finalized a rule to implement Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), which would require certain entities, including the Company and the Bank, to, among other things, make available to a consumer, upon request, information in its control or possession concerning the consumer financial product or service that the consumer obtained from that entity. The compliance date for a depository institution data provider that holds at least $1.5 billion in total assets but less than $3 billion in total assets was set to be April 1, 2029; however, in May 2025, the CFPB filed a motion for summary judgment, in which the CFPB stated that it had concluded that the final rule exceeds the agency’s statutory authority. In July 2025, the CFPB filed a motion to stay the proceedings while it conducts a new rulemaking process, which was granted by the district court. In August 2025, the CFPB issued an advanced notice of proposed rulemaking to reconsider its final rule under Section 1033 of the Dodd-Frank Act. Further, in October 2025, the court stayed the compliance dates in the final rule pending the CFPB’s reconsideration rulemaking. We will continue to monitor developments for any potential impact on the Company and the Bank.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
(1) Loan fees have been included in the calculation of interest income.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
(2) Yields and interest income on municipal securities and loans have been adjusted to their fully-taxable equivalents, based on a federal marginal tax rate of 21.0%. Non-GAAP tax benefit adjustments of $55 thousand and $1.441 million have been added to GAAP interest income on gross loans and investment securities, respectively, for the nine-months ended September 30, 2025, as compared to $58 thousand and $1.494 million in the comparable period of 2024.
Previous report — wording carried elsewhere
(3) Represents the average rate earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
Previous report — wording carried elsewhere
(4) Represents net interest income as a percentage of average interest-earning assets.
Previous report — wording carried elsewhere
(5) Annual interest rates are computed by dividing the interest income/expense by the number of days in the period multiplied by 365.
Previous report — wording carried elsewhere
(2) Interest income on municipal securities and loans has been adjusted to their fully-taxable equivalents, based on a federal marginal tax rate of 21.0%.
Previous report — wording carried elsewhere
The table above reflects an increase of $1,950,000 in net interest income due to changes in volume combined with the overall change in mix of balances during the first nine months of 2025, as compared to the same period of 2024. Changes in earning asset yields and rates on interest-bearing liabilities resulted in an increase of $965,000 to net interest income, over the same period. This increase was mainly due to higher loan yields as our loan portfolio continues to reprice upward.