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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended June 30, 2002

Commission File No. 0-31525

COMMUNITY VALLEY BANCORP
(Exact name of registrant as specified in its charter)

(530) 899-2344
(Registrant's telephone number, including area code)

not applicable
(Former name, former address and former fiscal year, if changed since last report.)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

        Yes o    No ý (This is the first Form 10-Q to be filed by Community Valley Bancorp)

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

        No par value Common Stock—1,997,705 shares outstanding at July 31, 2002.

PART 1—FINANCIAL INFORMATION
Item 1.    FINANCIAL STATEMENTS

COMMUNITY VALLEY BANCORP
CONSOLIDATED BALANCE SHEET
(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

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COMMUNITY VALLEY BANCORP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

3

COMMUNITY VALLEY BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

4

COMMUNITY VALLEY BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

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COMMUNITY VALLEY BANCORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

        In May, 2002, shareholders of Butte Community Bank (the "Bank") approved a plan of reorganization and merger whereby the Bank became a wholly-owned subsidiary of a newly formed bank holding company, Community Valley Bancorp. Management expects that the holding company structure will facilitate growth within the banking field and in areas related to banking, either by the creation of new subsidiaries or the acquisition of existing companies and banks.

        The accompanying unaudited consolidated financial statements of Community Valley Bancorp and subsidiary (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (which consist solely of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods presented have been included. These interim consolidated financial statements should be read in conjunction with the financial statements and related notes contained in the Company's 2001 Annual Report to Shareholders.

        The consolidated financial statements include the accounts of the Company and its wholly owned bank subsidiary, Butte Community Bank. All significant inter-company balances and transactions have been eliminated in consolidation. The results of operations for the three-month and six-month periods ended June 30, 2002 may not necessarily be indicative of the operating results for the full year 2002.

2.    EARNINGS PER SHARE COMPUTATION

        Basic earnings per share are computed by dividing net income by the weighted average common shares outstanding for the period (1,998,696 and 1,997,925 shares for the three and six month periods ended June 30, 2002, and 1,885,098 and 1,859,098 shares for the three and six month periods ended June 30, 2001). Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options were exercised. Diluted earnings per share is computed by dividing net income by the weighted average common shares outstanding for the period plus the dilutive effect of options (137,764 and 120,428 shares for the three and six month periods ended June 30, 2002 and 140,957 and 151,138 shares for the three and six month periods ended June 30, 2001). Earnings per share are retroactively adjusted for stock dividends for all periods presented.

3.    COMPREHENSIVE INCOME

        Comprehensive income is reported in addition to net income for all periods presented. Comprehensive income is made up of net income plus other comprehensive income. Other comprehensive income, net of taxes, is comprised of changes in unrealized gains or losses, net of taxes, on available-for-sale securities, adjusted for the effect of realized gains or losses on available-for-sale securities, net of taxes.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF COMMUNITY VALLEY BANCORP

        The following is Community Valley Bancorp (the "Company") management's discussion and analysis of the significant changes in balance sheet accounts for June 30, 2002 and December 31, 2001 and income and expense accounts for the three and six-month periods ended June 30, 2002 and 2001. The discussion is designed to provide a better understanding of significant trends related to the Company's financial condition, results of operations, liquidity, capital resources and interest rate sensitivity.

        In addition to the historical information contained herein, this report on Form 10-Q contains certain forward-looking statements. The reader of this report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company's actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned, general economic conditions, nationally, regionally and in the operating market areas of the Company and its subsidiaries, changes in the regulatory environment, changes in business conditions and inflation, changes in securities markets, data processing problems, a decline in real estate values in the Company's market area, the California power shortage, the effects of terrorism, including the events of September 11, 2001 and thereafter, and the conduct of the war on terrorism by the United States and its allies, as well as other factors. This entire report should be read putting such forward-looking statements in context.

General Development of Business

        The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated under the laws of the State of California in 2002. As a bank holding company, the Company is authorized to engage in the activities permitted under the Bank Holding Company Act of 1956, as amended, and regulations thereunder. Its principal office is located at 2041 Forest Avenue, Chico, California 95928 and its telephone number is (530) 899-2344.

        The Company owns 100% of the issued and outstanding common shares of Butte Community Bank. Butte Community Bank was incorporated and commenced business in Paradise and Oroville, California, in 1990. Butte Community Bank operates seven full service offices within its primary service areas of Butte and Sutter Counties. The bank also maintains a Loan Production Office in Roseville. Butte Community Bank's primary business is serving the commercial banking needs of small to mid-sized businesses and consumers within those counties. Butte Community Bank accepts checking and savings deposits, offers money market deposit accounts and certificates of deposit, makes secured and unsecured commercial, secured real estate, and other installment and term loans and offers other customary banking services.

Overview

        The Company recorded net income of $972,000 for the quarter ended June 30, 2002, which was a 4.2% decrease from the $1,015,000 reported for the same period of 2001. Diluted earnings per share for the second quarter of 2002 were $0.46, compared to the $0.50 recorded in the second quarter of 2001. The return on average equity (ROAE) and the return on average assets (ROA) for the second quarter of 2002 were 17.19% and 1.42%, respectively, as compared to 21.71% and 1.69%, respectively, for the same period in 2001.

        Net income for the six months ended June 30, 2002 was $2,225,000 (up 13.7%) compared to the $1,957,000 recorded in the first six months of 2001. Through June 30, 2002, diluted earnings per share

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were $1.05, ROAE was 20.32% and ROA was 1.65% as compared to $0.97, 21.79% and 1.70%, respectively, for the same period in 2001.

        Total assets of the Company increased by $9,596,000 (3.5%) from December 31, 2001 to $282,060,000 at June 30, 2002. Net loans totaled $217,493,000, up $13,639,000 (6.7%) from the ending balances on December 31, 2001. Deposit balances at June 30, 2002 totaled $254,533,000, up $8,113,000 (3.3%) from December 31, 2001.

        The Company ended the second quarter of 2002 with a Tier 1 capital ratio of 8.11% and a total risk-based capital ratio of 10.90% versus 7.81% and 11.6%, respectively, at December 31, 2001.

        Table One below provides a summary of the components of net income for the periods indicated:

Table One: Components of Net Income

Results of Operations

Net Interest Income and Net Interest Margin

        Net interest income represents the excess of interest and fees earned on interest earning assets (loans, securities, federal funds sold and investments in time deposits) over the interest paid on deposits and borrowed funds. Net interest margin is net interest income expressed as a percentage of average earning assets.

        The Company's net interest margin was 5.23% for the three months ended June 30, 2002, 5.69% for the three months ended June 30, 2001, 5.16% for the six months ended June 30, 2002 and 5.94% for the six months ended June 30, 2001. Net interest income increased $176,000 (5.8%) for the second quarter of 2002 compared to the same period in 2001. Net interest income increased $155,000 (2.6%) for the six months ended June 30, 2002 over the same period in 2001. The primary reason for this increase was the loan growth and the resulting interest income and fees associated with that growth.

        Interest expense was $780,000 (66.8%) lower in the second quarter of 2002 versus the prior year period. The average balances of interest bearing liabilities were $20,200,000 (11%) higher in the second quarter of 2002 versus the same quarter in 2001. Even though the interest bearing balances increased, rates paid on these liabilities decreased 196 basis points on a quarter over quarter basis. Interest expense was $1,287,000 (51.3%) lower in the six month period ended June 30, 2002 versus the prior year period. The average balances of interest bearing liabilities were $24,625,000 (13.8%) higher in the six-month period ended June 30, 2002 versus the same period in 2001. Rates paid on interest bearing liabilities decreased 180 basis points on a year over year basis. The reason for this decrease was the ability for the Bank to change the mix of the deposits away from higher interest rate certificates of deposit to lower rate demand deposits.

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        Table Two, Analysis of Net Interest Margin on Earning Assets, and Table Three, Analysis of Volume and Rate Changes on Net Interest Income and Expenses, are provided to enable the reader to understand the components and past trends of the Company's interest income and expense. Table Two provides an analysis of net interest margin on earning assets setting forth average assets, liabilities and shareholders' equity; interest income earned and interest expense paid and average rates earned and paid; and the net interest margin on earning assets.

Table Two: Analysis of Net Interest Margin on Earning Assets (Unaudited)

(1)

Loan interest includes loan fees of $320,000 and $310,000 during the three months ended June 30, 2002 and June 30, 2001, respectively.

(2)

Does not include taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes.

(3)

Net interest margin is computed by dividing net interest income by total average earning assets.

(4)

Average yield is calculated based on actual days in quarter (91 for June 30, 2002 and June 30, 2001) and annualized to actual days in year (365 for 2002 and 2001).

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(1)

Loan interest includes loan fees of $605,000 and $578,000 during the six months ended June 30, 2002 and June 30, 2001, respectively.

(2)

Does not include taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes.

(3)

Net interest margin is computed by dividing net interest income by total average earning assets.

(4)

Average yield is calculated based on actual days in period (181 for June 30, 2002 and June 30, 2001) and annualized to actual days in year (365 for 2002 and 2001).

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        Table Three sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates.

Table Three: Analysis of Volume and Rate Changes on Net Interest Income and Expenses (Unaudited)

(1)

The average balance of non-accruing loans is immaterial as a percentage of total loans and, as such, has been included in net loans.

(2)

Amortized loan fees of $320,000 and $310,000 during the three months ended June 30, 2002 and June 30, 2001, respectively, and $605,000 and $578,000 during the six months ended June 30, 2002 and June 30, 2001, respectively, have been included in the interest income computation.

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(3)

Does not include taxable-equivalent adjustments that primarily relate to income on certain securities that is exempt from federal income taxes.

(4)

The rate/volume variance has been included in the rate variance.

Provision for Loan Losses

        The Company provided $150,000 for loan and lease losses for the second quarter of 2002 as compared to $250,000 for the second quarter of 2001. Net loan and lease charge-offs/recoveries for the three months ended June 30, 2002 were $2,000 in recoveries as compared to $76,000 in charge-offs for the three months ended June 30, 2001. For the first six months of 2002, the Company made provisions for loan losses of $253,000 and net loan charge-offs were $3,000 or .002% of average loans and leases outstanding. This compares to provisions for loan losses of $375,000 and net loan charge-offs of $76,000 for the first six months of 2001. The decrease in the provision during 2002 as compared to 2001 was primarily related to the slower growth in the loan and lease portfolio and the year-to-date net charge-offs of $3,000 compared to $76,000 in 2001.

Noninterest Income

        Table Four below provides a summary of the components of noninterest income for the periods indicated (dollars in thousands):

Table Four: Components of Noninterest Income (Unaudited)