Oak Valley Bancorp operates as the bank holding company for Oak Valley Community Bank that provides basic banking services to individuals and business enterprises in Oakdale, California and the surrounding areas.
The focus of the bank is to offer a range of commercial banking services designed for both individuals and small to medium-sized businesses in the two main areas of service of the bank: the Central Valley and the Eastern Sierras.
The bank offers a complement of business checking and s...
Oak Valley Bancorp operates as the bank holding company for Oak Valley Community Bank that provides basic banking services to individuals and business enterprises in Oakdale, California and the surrounding areas.
The focus of the bank is to offer a range of commercial banking services designed for both individuals and small to medium-sized businesses in the two main areas of service of the bank: the Central Valley and the Eastern Sierras.
The bank offers a complement of business checking and savings accounts for its business customers. The bank also offers commercial and real estate loans, as well as lines of credit. Real estate loans are generally of a short-term nature for both residential and commercial lending purposes. Longer-term real estate loans are generally made with adjustable interest rates and contain customary provisions for acceleration. Traditional residential mortgages are available to bank customers through a third party.
The bank offers other services for both individuals and businesses, including online banking, remote deposit capture, mobile banking, merchant services, night depository, extended hours, wire transfer of funds, note collection, and automated teller machines in a national network. The bank does not offer international banking or trust services although the bank may make such services available to the bank's customers through financial institutions with which the bank has correspondent banking relationships. The bank does not offer stock transfer services, nor does it directly issue credit cards.
The company maintains various full-service branch offices (in addition to the company's corporate headquarters) located in the cities of Oakdale, Sonora, Modesto, Bridgeport, Mammoth Lakes, Bishop, Escalon, Patterson, Turlock, Ripon, Stockton, Manteca, Tracy, Sacramento, and Roseville in California.
The bank is an insured bank under the Federal Deposit Insurance Act and is a member of the Federal Reserve. The bank is subject to regulation, supervision and regular examination by the California Department of Financial Protection and Innovation ('DFPI'), the Federal Deposit Insurance Commission ('FDIC') and the Federal Reserve Board ('FRB').
Primary Market Area
The company conducts business from its main office in Oakdale, a city of approximately 23,000 residents located in Stanislaus County, California. Through the company's branches, the company serves customers in the Central Valley, from Fresno to Sacramento, and in foothill locations. The company also reaches into the Highway 395 corridor in the Eastern Sierras and in the towns of Bishop, Mammoth and Bridgeport. Approximately 98% of the company's loans and 90% of the company's deposits are generated from the Central Valley. The Central Valley area includes Stanislaus, San Joaquin, Tuolumne, Sacramento, and Placer counties.
Lending Activities
The company engages in a full complement of lending activities, including commercial real estate loans, commercial business lending and trade finance, Small Business Administration lending, and consumer loans, including automobile loans, home mortgages, credit lines and other personal loans.
Real Estate Loans. The company offers commercial real estate loans to finance the acquisition of new or the refinancing of existing commercial properties, such as office buildings, industrial buildings, warehouses, hotels, shopping centers, automotive industry facilities and multiple dwellings. As of December 31, 2023, consumer and commercial real estate loans constituted 90% of the company's loan portfolio, of which 97% were commercial real estate loans.
Construction loans are consisted of loans on commercial, residential and income-producing properties that generally have terms of 1 year, with options to extend for additional periods to complete construction and to accommodate the lease-up period.
Mini-perm loans finance the purchase and/or ownership of commercial properties, including owner-occupied and income-producing properties. The company also offers mini-perm loans as take-out financing with the company's construction loans. Mini-perm loans are generally made with an amortization schedule ranging from 20 to 25 years, with a lump sum balloon payment due in 3 to 5 years.
Equity lines of credit are revolving lines of credit with repayment term and are collateralized by junior deeds of trust on residential real properties.
The company purchases participation interests in loans made by other financial institutions from time to time. These loans are subject to the same underwriting criteria and approval process as loans made directly by the company.
The company's real estate loans are typically collateralized by first or junior deeds of trust on specific commercial properties and equity lines of credit, and are subject to corporate or individual guarantees from financially capable parties, as available. The properties collateralizing real estate loans are principally located in the company's primary market areas of the California Central Valley and the Eastern Sierra.
Commercial Business Lending. The company offers commercial loans to sole proprietorships, partnerships and corporations, with an emphasis on the real estate related industry. These commercial loans include business lines of credit and commercial term loans to finance operations, to provide working capital or for specific purposes, such as to finance the purchase of assets, equipment or inventory. Since a borrower's cash flow from operations is generally the primary source of repayment, the company's policies provide specific guidelines regarding required debt coverage and other important financial ratios.
Lines of credit are extended to businesses or individuals based on the financial strength and integrity of the borrower and are secured primarily by real estate, accounts receivable and inventory, and have a maturity of one year or less.
Commercial term loans are typically made to finance the acquisition of fixed assets, refinance short-term debts or to finance the purchase of businesses. Commercial term loans generally have terms from one to five years.
Small Business Administration Lending Services. Small Business Administration ('SBA') lending forms an important part of the company's business. The company's SBA lending service places an emphasis on minority-owned businesses. The company's SBA market area includes the geographic areas encompassed by the company's full-service banking offices in the California Central Valley and in the Eastern Sierra. As an SBA lender, the company enables borrowers to obtain SBA loans in order to acquire new businesses, expand existing businesses, and acquire locations in which to do business. The company also participated in the SBA's Paycheck Protection Program ('PPP') established in 2020 to provide economic assistance to small businesses during the COVID-19 pandemic.
Consumer Loans. Consumer loans include personal loans, auto loans, home improvement loans, home mortgage loans, revolving lines of credit and other loans typically made by banks to individual borrowers. The company provides consumer loan products in an effort to diversify the company's product line.
Deposit Activities
The company's primary sources of funds are deposits and loan repayments.
The company offers a variety of accounts for depositors, which are designed to attract both short-term and long-term deposits. These accounts include certificates of deposit ('CDs'), regular savings accounts, money market accounts, checking accounts, savings accounts, health savings accounts and individual retirement accounts. As needs arise, the company augments these customer deposits with brokered deposits. The more significant deposit accounts offered by the company is described below:
Certificates of Deposit. The company offers several types of CDs with a maximum maturity of five years. The substantial majority of the company's CDs have a maturity of one to twelve months and pay compounded interest typically credited monthly or at maturity.
Regular Savings Accounts. The company offers savings accounts that allow for unlimited ATM and in-branch deposits and withdrawals. Interest is compounded daily and paid monthly.
Money Market Account. Money market accounts pay a variable interest rate that is tiered depending on the balance maintained in the account.
Checking Accounts. Checking accounts are generally non-interest and interest-bearing accounts, respectively, and may include service fees based on activity and balances.
Other Sources of Funds
Federal Home Loan Bank Borrowings. To supplement the company's deposits as a source of funds for lending or investment, the company borrows funds in the form of advances from the Federal Home Loan Bank ('FHLB'). The company regularly makes use of Federal Home Loan Bank advances as part of the company's interest rate risk management, primarily to extend the duration of funding to match the longer-term fixed rate loans held in the loan portfolio as part of the company's growth strategy.
As a member of the Federal Home Loan Bank system, the company is required to invest in Federal Home Loan Bank stock based on a predetermined formula.
Advances from the Federal Home Loan Bank are typically secured by the company's entire real estate loan portfolio, which includes residential and commercial loans.
Internet and Mobile Banking
The company offers Internet banking services, which allows the company's customers to access their deposit accounts through the Internet. Customers are able to obtain transaction history and account information, transfer funds between accounts, make person-to-person payments and make online bill payments. The company intends to improve and develop its Internet banking products and delivery channels as the need arises and the company's resources permit. Mobile Banking offers many of the same services as internet banking but also includes mobile check deposit.
Other Services
The company offers ATMs located at branch offices, and customer access to an ATM network. Additionally, the company offers remote deposit capture service to allow commercial deposit customers the convenience of scanning check deposits for quicker access to deposited funds.
Marketing
The company's marketing relies principally upon local advertising and promotional activity and upon personal contacts by the company's directors, officers and shareholders to attract business and to acquaint potential customers with the company's personalized services. The company emphasizes a high degree of personalized client service in order to be able to provide for each customer's banking needs. The company's marketing approach emphasizes the advantages of dealing with an independent, locally managed and state-chartered bank to meet the particular needs of consumers, professionals and business customers in the community.
Competition
Regional Branch Competition. The banking business in California generally, and in the company's primary service area, specifically, is competitive with respect to both loans and deposits and is dominated by a relatively small number of major banks, which have many offices operating over wide geographic areas. These include Wells Fargo Bank, Bank of America, JP Morgan Chase Bank, U.S. Bank, BMO Harris Bank and Citibank. The company competes for deposits and loans principally with these banks, as well as with savings and loan associations, thrift and loan associations, credit unions, mortgage companies, insurance companies, offerors of money market accounts and other lending institutions.
Investment Securities
As of December 31, 2023, the company's investment securities included U.S. agencies; collateralized mortgage obligations; municipalities; SBA pools; corporate debt securities; and asset backed securities.
Supervision and Regulation
The company is subject to regulation under the Bank Holding Company Act of 1956, as amended ('BHCA'). As a bank holding company, the company is regulated and is subject to inspection, examination and supervision by the Federal Reserve Board. It is also subject to the California Financial Code (the 'Financial Code'), as well as limited oversight by the DFPI and the FDIC.
As a California-state chartered bank, the bank is subject to primary supervision, examination and regulation by the DFPI and the Federal Reserve Board. The Federal Reserve Board is the primary federal regulator of state member banks. The bank is also subject to regulation by the FDIC, which insures the bank's deposits as permitted by law.
As a member of the Federal Reserve System, the company is subject to certain regulations of the Board of Governors of the Federal Reserve System. The regulations of these agencies govern most aspects of the company's business, including the filing of periodic reports, and activities relating to dividends, investments, loans, borrowings, capital requirements, certain check-clearing activities, branching, mergers and acquisitions, reserves against deposits, and numerous other areas.
The company's deposits are insured by the FDIC to the maximum amount permitted by law, which is $250,000 per depositor.
As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.
The company is subject to certain requirements and reporting obligations involving the CRA. The FRB's last CRA performance examination was performed on the company and completed in January of 2023 and the company received an overall 'Outstanding' CRA Assessment Rating.
A series of banking laws and regulations beginning with the Bank Secrecy Act in 1970 require banks to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, international drug trafficking, and terrorism. Under the USA Patriot Act, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and 'know your customer' standards in their dealings with high risk customers, foreign financial institutions, and foreign individuals and entities. The company has extensive controls to comply with these requirements.
The GLBA of 1999 imposed requirements on financial institutions with respect to consumer privacy. The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to consumers annually. The GLBA also directs federal regulators to prescribe standards for the security of consumer information. The company is subject to such standards, as well as standards for notifying consumers in the event of a security breach. The company must disclose its privacy policy to consumers and permit consumers to 'opt out' of having certain personal financial information disclosed to unaffiliated third parties. The company is required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal.
The bank's operations are also subject to federal laws applicable to credit transactions, and consumer protection statutes and regulations, such as the: Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; Truth in Savings Act; and rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
The operations of the bank are also subject to the:
Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services;
Check Clearing for the 21st Century Act, which gives 'substitute checks,' such as digital check images and copies made from that image, the same legal standing as the original paper check; and
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended (the 'USA Patriot Act'), which requires financial institutions to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the bank Secrecy Act and the Office of Foreign Assets Control regulations.
Transactions between the company and the bank are quantitatively and qualitatively restricted under Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A places restrictions on the bank's 'covered transactions' with the company, including loans and other extensions of credit, investments in the securities of, and purchases of assets from the company. Section 23B requires that certain transactions, including all covered transactions, be on market terms and conditions. Federal Reserve Regulation W combines statutory restrictions on transactions between the bank and the company with FRB interpretations in an effort to simplify compliance with Sections 23A and 23B.
The company is subject to the disclosure and regulatory requirements of the 1933 Act and the 1934 Act, both as administered by the SEC. As a company listed on the Nasdaq Global Select Market, the company is subject to Nasdaq listing standards for listed companies.
As discussed above, the company is also subject to the Sarbanes-Oxley Act of 2002, provisions of the Dodd-Frank Act, and other federal and state laws and regulations which address, among other issues, required executive certification of financial presentations, corporate governance requirements for board audit committees and their members, and disclosure of controls and procedures and internal control over financial reporting, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Nasdaq has also adopted corporate governance rules, which are intended to allow shareholders and investors to more easily and efficiently monitor the performance of companies and their directors.
Finally, the company is subject to the provisions of the California General Corporation Law, while the bank is also subject to the Financial Code provisions.
History
Oak Valley Bancorp was incorporated under the laws of the state of California in 1990.
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