8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.

Date of Report:  July 22, 2020 (Date of earliest event reported)
Oak Valley Bancorp (Exact name of registrant as specified in its charter)
CA (State or other jurisdiction of incorporation)	001-34142 (Commission File Number)	26-2326676 (IRS Employer Identification Number)
125 N. Third Ave. Oakdale, CA (Address of principal executive offices)	95361 (Zip Code)
(209) 848-2265 (Registrant's telephone number, including area code)
Not Applicable (Former Name or Former Address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OVLY	The Nasdaq Stock Market, LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition

On July 22, 2020 Oak Valley Bancorp issued a press release, a copy of which is attached as Exhibit 99.1 and incorporated herein by reference. The press release announced the Company’s operating results for the quarter and six months ended June 30, 2020.

The information in this Item 2.02 in this Form 8-K and the Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD Disclosure.

See “Item 2.02. Results of Operations and Financial Condition” which is incorporated by reference in this Item 7.01.

Item 9.01. Financial Statements and Exhibits

(a) Financial statements:
            None
(b) Pro forma financial information:
            None
(c) Shell company transactions:
            None
(d) Exhibits
            99.1       Press Release of Oak Valley Bancorp dated July 22, 2020

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 24, 2020 OAK VALLEY BANCORP   By:  /s/ Jeffrey A. Gall                    
     Jeffrey A. Gall
     Senior Vice President and Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

Exhibit Index
Exhibit No.	Description
99.1	Press Release of Oak Valley Bancorp dated July 22, 2020

EX-99.1

Exhibit 99.1

PRESS RELEASE

For Immediate Release

Date: July 22, 2020

Contact:	Chris Courtney/Rick McCarty
Phone:	(209) 848-2265
	www.ovcb.com

OAK VALLEY BANCORP REPORTS 2^nd QUARTER RESULTS AND ANNOUNCES CASH DIVIDEND

OAKDALE, CA–Oak Valley Bancorp (NASDAQ: OVLY) (the “Company”), the bank holding company for Oak Valley Community Bank and their Eastern Sierra Community Bank division, recently reported unaudited consolidated financial results. For the three months ended June 30, 2020, consolidated net income was $2,581,000, or $0.32 per diluted share (EPS), compared to $2,709,000, or $0.33 EPS, for the prior quarter and $2,963,000, or $0. 37 EPS, for the same period a year ago. Consolidated net income for the six months ended June 30, 2020 totaled $5,290,000, or $0.65 EPS, representing a decrease of $777,000 or 12.8% compared to $6,067,000, or $0.75 EPS for the six months ended June 30, 2019.

The 2020 QTD and YTD net income decreases were due to loan loss provisions of $1.86 million and $2.31 million, respectively, which were based on qualitative risk factors related to the COVID-19 pandemic, and a reduction in earning asset yields due to the FOMC rate cuts in March 2020. Offsetting these factors was an increase in loan interest and fee income of $1,092,000 from the $235 million in Paycheck Protection Program (“PPP”) loans funded during the second quarter, as the Bank committed early to being an active participant in the effort to support local businesses through the PPP program. The PPP loans resulted in deferred loan cost GAAP accounting adjustments of $1,095,000 against salary expense during the second quarter of 2020. The Company also benefited from organic growth in the loan and investment portfolios during the three- and six-month periods of 2020, which contributed to net interest income growth, and helped to offset the yield reduction resulting from the FOMC rate cuts.

Net interest income was $11,146,000 for the three months ended June 30, 2020, compared to $10,228,000 for the prior quarter and $10,128,000 for the same period last year. The increase is attributable to interest and fees on PPP loans and organic growth as mentioned above. The Company’s net interest margin for the three months ended June 30, 2020 decreased to 3.55%, compared to 3.93% for the prior quarter, and 4.23% for the same period last year. The interest margin compression was attributable to the FOMC rate cuts in March 2020 which adversely impacted earning assets yields and the infusion of short-term PPP loans which yield 1%.

“Taking everything into account, we’re quite pleased with the continued increase in net interest income. Despite the interest rate environment and current economic uncertainty, we are in a position where the growth and composition of our portfolios has tempered margin compression to a large extent,” stated Rick McCarty, Senior EVP and Chief Operating Officer.

Non-interest income for the three months ended June 30, 2020 totaled $1,023,000, compared to $1,284,000 during the prior quarter, and $1,242,000 for the same period last year. The decrease compared to prior quarters is mainly due to a reduction in NSF fee income. Higher deposit account balances corresponding to PPP and government stimulus payments, coupled with changes in business and consumer spending patterns amid the COVID-19 stay-at-home orders and business lockdowns, resulted in relatively low overdraft activity. Outside of this recent trend, the bank’s core customer base and corresponding service fee income related to servicing loan and deposit accounts, continues to grow at a steady pace.

Non-interest expense for the three months ended June 30, 2020 totaled $6,874,000, compared to $7,449,000 during the prior quarter, and $7,310,000 for the same period last year. The decrease compared to prior periods corresponds to deferred loan cost GAAP accounting adjustments associated with PPP loans, resulting in a $1,095,000 credit to salary expense.

Total assets were $1.465 billion as of June 30, 2020, an increase of $308.2 million over March 31, 2020 and $395.9 million over June 30, 2019. Gross loans were $1.003 billion as of June 30, 2020, an increase of $243.1 million over March 31, 2020, and an increase of $285.0 million over June 30, 2019. The Company’s total deposits were $1.300 billion as of June 30, 2020, an increase of $272.9 million over March 31, 2020 and $350.8 million over June 30, 2019. The June 30, 2020 balance sheet totals were bolstered by the $235 million in PPP loans funded during the second quarter, which consequently increased total deposits, as the PPP funded amounts were credited directly to the borrowers’ deposit accounts.

“Understanding there are many extenuating factors at work, we are gratified with the growth of the bank and our overall operating results,” stated Chris Courtney, President and CEO. “We couldn’t be any happier with the performance of our team members over the past few months. Whether it was answering the call on the PPP front or keeping our branches open to minimize impact on customers, our team has been amazing across the board.”

Non-performing assets as of June 30, 2020 were $927,000, or 0.06% of total assets, compared to $959,000 or 0.08% of total assets as of March 31, 2020, and $906,000, or 0.08%, at June 30, 2019. The decrease compared to the prior period is the result of payments received on non-performing loans. The allowance for loan losses to gross loans decreased to 1.14% at June 30, 2020, compared to 1.26% at March 31, 2020 and 1.22% at June 30, 2019, due to the $235 million in PPP loans that do not require a loan loss reserve as they are guaranteed by the federal government through the SBA program. The provision for loan losses increased to $1,860,000 during the second quarter of 2020, compared to $95,000 in the same period in 2019, due to qualitative risk-based discretionary adjustments in connection with the COVID-19 pandemic and corresponding economic stress.

The Board of Directors of Oak Valley Bancorp at their July 21, 2020 meeting declared the payment of a cash dividend of $0.14 per share of common stock to its shareholders of record at the close of business on Aug 3, 2020. The payment date will be August 14, 2020 and will amount to approximately $1,150,000. This is the second dividend payment made by the Company in 2020.

Oak Valley Bancorp operates Oak Valley Community Bank and their Eastern Sierra Community Bank division, through which it offers a variety of loan and deposit products to individuals and small businesses. They currently operate through 17 conveniently located branches: Oakdale, Turlock, Stockton, Patterson, Ripon, Escalon, Manteca, Tracy, Sacramento, two branches in Sonora, three branches in Modesto, and three branches in their Eastern Sierra division, which includes Bridgeport, Mammoth Lakes and Bishop.

For more information, call 1-866-844-7500 or visit www.ovcb.com.

This press release includes forward-looking statements about the corporation for which the corporation claims the protection of safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the corporation's possible or assumed future financial condition, and its results of operations and business. Forward-looking statements are subject to risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, including increased energy costs in California, credit quality of borrowers, operational factors and competition in the geographic and business areas in which the company conducts its operations. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement.

###

Oak Valley Bancorp
Financial Highlights (unaudited)
($ in thousands, except per share)	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
Selected Quarterly Operating Data:	2020			2020			2019			2019			2019
Net interest income	$	11,146		$	10,228		$	10,350		$	10,445		$	10,128
Provision for loan losses		1,860			450			210			240			95
Non-interest income		1,023			1,284			1,254			1,275			1,242
Non-interest expense		6,874			7,449			7,146			7,157			7,310
Net income before income taxes		3,435			3,613			4,248			4,323			3,965
Provision for income taxes		854			904			1,057			1,092			1,002
Net income	$	2,581		$	2,709		$	3,191		$	3,231		$	2,963
Earnings per common share - basic	$	0.32		$	0.33		$	0.39		$	0.40		$	0.37
Earnings per common share - diluted	$	0.32		$	0.33		$	0.39		$	0.40		$	0.37
Dividends paid per common share	$	-		$	0.140		$	-		$	0.135		$	-
Return on average common equity		8.80	%		9.52	%		11.38	%		11.86	%		11.39	%
Return on average assets		0.75	%		0.95	%		1.12	%		1.18	%		1.13	%
Net interest margin (1)		3.55	%		3.93	%		3.98	%		4.18	%		4.23	%
Efficiency ratio (2)		54.19	%		63.26	%		59.74	%		59.67	%		62.27	%
Capital - Period End
Book value per common share	$	14.60		$	13.92		$	13.71		$	13.31		$	12.98
Credit Quality - Period End
Nonperforming assets/ total assets		0.06	%		0.08	%		0.10	%		0.11	%		0.08	%
Loan loss reserve/ gross loans		1.14	%		1.26	%		1.22	%		1.23	%		1.22	%
Period End Balance Sheet
($ in thousands)
Total assets	$	1,464,880		$	1,156,635		$	1,147,785		$	1,101,132		$	1,068,999
Gross loans		1,003,172			760,109			750,985			732,334			718,158
Nonperforming assets		927			959			1,103			1,200			906
Allowance for loan losses		11,443			9,586			9,146			9,005			8,770
Deposits		1,299,864			1,026,925			1,019,929			977,993			949,090
Common equity		119,907			114,387			112,570			109,320			106,583
Non-Financial Data
Full-time equivalent staff		182			184			182			182			184
Number of banking offices		17			17			17			17			17
Common Shares outstanding
Period end		8,215,407			8,216,714			8,210,147			8,210,637			8,208,853
Period average - basic		8,123,806			8,114,543			8,108,360			8,105,294			8,102,807
Period average - diluted		8,129,531			8,134,621			8,126,507			8,120,096			8,117,192
Market Ratios
Stock Price	$	12.68		$	15.74		$	19.46		$	16.77		$	19.55
Price/Earnings		9.95			11.75			12.46			10.60			13.33
Price/Book		0.87			1.13			1.42			1.26			1.51

	SIX MONTHS ENDED JUNE 30,
($ in thousands, except per share)	2020			2019
Net interest income	$	21,374		$	20,239
Provision for loan losses		2,310			95
Non-interest income		2,307			2,517
Non-interest expense		14,323			14,543
Net income before income taxes		7,048			8,118
Provision for income taxes		1,758			2,051
Net income	$	5,290		$	6,067
Earnings per common share - basic	$	0.65		$	0.75
Earnings per common share - diluted	$	0.65		$	0.75
Dividends paid per common share	$	0.140		$	0.135
Return on average common equity		9.15	%		11.95	%
Return on average assets		0.84	%		1.15	%
Net interest margin (1)		3.72	%		4.19	%
Efficiency ratio (2)		58.58	%		62.24	%
Capital - Period End
Book value per common share	$	14.60		$	12.98
Credit Quality - Period End
Nonperforming assets/ total assets		0.06	%		0.08	%
Loan loss reserve/ gross loans		1.14	%		1.22	%
Period End Balance Sheet
($ in thousands)
Total assets	$	1,464,880		$	1,068,999
Gross loans		1,003,172			718,158
Nonperforming assets		927			906
Allowance for loan losses		11,443			8,770
Deposits		1,299,864			949,090
Common equity		119,907			106,583
Non-Financial Data
Full-time equivalent staff		182			184
Number of banking offices		17			17
Common Shares outstanding
Period end		8,215,407			8,208,853
Period average - basic		8,119,174			8,097,983
Period average - diluted		8,132,076			8,109,842
Market Ratios
Stock Price	$	12.68		$	19.55
Price/Earnings		9.70			12.94
Price/Book		0.87			1.51

(1)  Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 21%.

(2)  Ratio computed on a fully tax equivalent basis using a marginal federal tax rate of 21%.

       A marginal federal/state combined tax rate of 29.56%, was used for applicable revenue.