Oak Valley Bancorp (OVLY) stock intrinsic value fair value estimate & owner earnings analysis

Oak Valley Bancorp is the holding company for Oak Valley Community Bank, based in Oakdale, California. It takes deposits and makes loans in the Central Valley and the Eastern Sierra. About 88% of its loans are commercial real estate, including construction loans. Stanislaus County (about 20%) and San Joaquin County (about 18%) are the largest county exposures within that book. It also earns roughly $7 million a year in fees and other non-interest income. Owner earnings are cash from operations, adjusted to take out the swing in accrued interest and other assets, less stock compensation and the part of equipment and building spending needed to stay in business. On that basis they were $1.72 to $3.79 per share over the last seven years. The figures were $2.35 in 2019, $2.31 in 2020, $1.72 in 2021, $2.81 in 2022, $3.79 in 2023, $2.58 in 2024 and $2.82 in 2025. We anchor on the median of 2019 to 2025, about $2.60. That window covers a full rate cycle: the low-rate 2020-21 years, the rate-driven peak in 2023 and the normalisation since. Owner earnings grew about 9% in 2025, and the base case starts at 3%, below that. Cash spending on premises rose to $4.1 million in 2025, and we treated nearly all of it as maintenance. Base case: about $40 per share. Earnings grow about 3% a year for ten years, in line with the steady loan and deposit growth this local franchise has shown. After that the earnings level is held flat for about twenty years and then fades to nothing. We credit no expansion into new markets and no margin gains. Bear case: about $20 per share. Earnings fall to around $1.80, near the 2021 level. Credit losses or a real estate downturn hit a loan book that is almost entirely commercial real estate and concentrated in a few California counties, and margins compress. Earnings then stay flat and fade. Bull case: about $58 per share. Earnings hold near the 2023-25 average of about $3.05 and grow about 4% a year. Loans grew 3.4% in 2025, led by commercial real estate up 5.3%. The franchise then persists for the same fade period. What could make this wrong: a downturn in Central Valley real estate values, deposit costs staying high, or a further step up in spending on branches and technology. Cash-flow line items for the working-capital adjustment were only partly tagged in the filings, so that adjustment is our best reconstruction. It has a small effect on the result.