Oak Valley Bancorp (OVLY) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Our business strategy includes sustainable growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively
2. 02Our financial condition and results of operations are dependent on the economy, particularly in the Bank ’ s market areas
3. 03The amount of our low cost or noninterest-bearing deposits may decrease36% rewritten
4. 04We cannot accurately predict the possibility of weakness in the national or local economy effecting our future operating results
5. 05Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our business operations and our financial condition and results of operations
6. 06Recent bank failures have created significant market volatility, regulatory uncertainty, and decreased confidence in the U.S. banking system
7. 07financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs
8. 08There are risks associated with our lending activities and our allowance for credit losses may prove to be insufficient to absorb actual incurred losses in our loan portfolio
9. 09the duration of the loan
10. 10If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer
11. 11Our underwriting practices may not protect us against losses in our loan portfolio
12. 12Our commercial real estate loans involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers
13. 13Repayment of our commercial and industrial loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may not be sufficient to repay the loan in the event of default
14. 14We are exposed to risk of environmental liabilities with respect to real properties which we may acquire
15. 15Our business is subject to interest rate risk and variations in interest rates may hurt our profits
16. 16New lines of business, new products and services, or strategic project initiatives may subject us to additional risks
17. 17Strong competition within our market areas may limit our growth and profitability41% rewritten

Risks Related to Our Operations

1. 18We face significant operational risks
2. 19Our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses
3. 20Managing reputational risk is important to attracting and maintaining customers, investors and employees
4. 21Liquidity risk could impair our ability to fund operations and jeopardize our financial condition
5. 22We currently hold a significant amount of bank owned life insurance
6. 23We rely on numerous external vendors
7. 24Our holding company relies on dividends from the Bank for substantially all of its income and the net proceeds of capital raising transactions are currently the primary source of funds for cash dividends to our preferred and common stockholders
8. 25We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. At some point, we may need to raise additional capital to support continued growth
9. 26Climate change manifesting as physical or transition risks could adversely affect our operations, businesses and customers

Risks Related to Technology

1. 27Our security measures may not be sufficient to mitigate the risk of a cyber-attack or cyber theft
2. 28Our security measures may not protect us from systems failures or interruptions
3. 29We may be required to expend significant additional resources to continue to modify or enhance our information security infrastructure or to investigate and remediate any information security vulnerabilities in response to continuing information systems security threats
4. 30We rely on communications, information, operating and financial control systems technology from third party service providers, and we may suffer an interruption in those systems

Risks Related to Regulations

1. 31We operate in a highly regulated environment and our operations and income may be affected adversely by changes in laws, rules and regulations governing our operations
2. 32The Dodd-Frank Act provides for various capital requirements and new restrictions on financial institutions and their holding companies. These changes may result in additional restrictions on investments and other activities
3. 33The short-term and long-term impact of the changing regulatory capital requirements and new capital rules is uncertain
4. 34We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties
5. 35Non-compliance with the USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions or operating restrictions
6. 36Increases in deposit insurance premiums and special FDIC assessments will negatively impact our earnings

Risks Related to Tax and Financial Matters

1. 37The Company has a deferred tax asset that may or may not be fully realized
2. 38We may experience future goodwill impairment
3. 39In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our consolidated financial statements, which, if not accurate, may significantly impact our financial results

General Risks

1. 40We depend on our key employees
2. 41Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business
3. 42Anti-takeover provisions could negatively impact our stockholders
4. 43Our business could be negatively affected as a result of actions by activist stockholders
5. 44If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors ’ views of us could be harmed
6. 45If securities or industry analysts do not publish research or reports about our business, or if they publish negative reports about our business, our stock price and trading volume could decline
7. 46The price of our common stock may fluctuate significantly, and this may make it difficult for you to sell shares of common stock owned by you at times or at prices you find attractive
8. 47domestic and international economic factors, such as interest or foreign exchange rates, stock, commodity, credit, or asset valuations or volatility, unrelated to our performance