10 unchanged sentences
In response to the anticipated effects of the pandemic on the U.S.
−Removed: economy, the Board of Governors of the Federal Reserve System (the “FRB”) has taken significant actions, including a reduction in the target range of the federal funds rate to -0-
−Removed: to 0.25% and an indeterminate amount of purchases of Treasury and mortgage-backed securities.
+Added: economy, the Board of Governors of the Federal Reserve System (“FRB”) has taken significant actions, including a reduction in the target range of the federal funds rate to 0.0% to 0.25% and an indeterminate amount of purchases of Treasury and mortgage-backed securities.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.
2 unchanged sentences
businesses through 100% SBA guaranteed loans distributed through banks.
−Removed: These loans are intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and keep their workers employed.
+Added: These loans are intended to guarantee 24 weeks of payroll and other costs to help those businesses remain viable and keep their workers employed.
The SBA exhausted the initial funding for this program on April 15, 2020, but legislation passed on April 24, 2020 to provide additional PPP funds of $310 billion.
−Removed: We obtained approvals for about 3,800 loans, totaling approximately $1.25 billion through May 3, 2020.
+Added: We originated and funded about 4,100 loans, totaling approximately $1.10 billion, through June, 30 2020.
In response to the COVID-19
2 unchanged sentences
The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan.
−Removed: Through May 3, 2020, we have granted temporary payment deferments of interest or of principal and interest for 620 loans in the amount of $940 million, or approximately 13% of our total loan portfolio, at March 31, 2020.
−Removed: As significant uncertainties as to future economic conditions exist, we have taken deliberate actions in response, including the termination of our stock repurchases under our 10b5-1
−Removed: repurchase plan.
−Removed: Additionally, the expected economic deterioration, coupled with the implementation of the expected loss methodology for determining our provision for credit losses, better known as CECL, have contributed to an increased provision for credit losses of $12 million for the first quarter of 2020.
+Added: Through July 10, 2020, we have granted temporary payment deferments of principal, interest or of principal and interest (80% of the deferments have been for both principal and interest) for 820 loans with a gross balance of $1.27 billion, or approximately 15% of our total loan portfolio, at June 30, 2020.
+Added: As of July 10, 2020, 6% of the initial deferments have requested and been granted a second deferment, but it is likely that additional deferments will be granted in future periods.
+Added: Our allowance for credit losses increased in the second quarter as a result of our forecast of a greater decline in economic activity due to the COVID-19
+Added: We recorded a $12 million provision for credit losses for the first quarter of 2020 and recorded an additional $11.5 million in the second quarter.
We continue to monitor the impact of COVID-19
1 unchanged sentence
The extent to which the COVID-19
−Removed: pandemic will impact our operations and financial results during the remainder of 2020 is highly uncertain, but we may experience increased provision for credit losses if the COVID-19 pandemic results in additional economic stress on our borrowers and loan portfolios.
+Added: pandemic will impact our operations and financial results during the remainder of 2020 is highly uncertain, but we may experience increased provision for credit losses if this pandemic results in additional economic stress on our borrowers and loan portfolios.
CRITICAL ACCOUNTING POLICIES
18 unchanged sentences
We adopted the guidance using a modified retrospective approach, as required, and have not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance.
−Removed: The adoption of ASU 2016-13, resulted in a reduction to our opening retained earnings of approximately $1.3 million.
+Added: The adoption of ASU 2016-13,
+Added: resulted in a reduction to our opening retained earnings of approximately $1.3 million.
The ACL policy is described more fully in Note 3 — Summary of Significant Accounting Policies
of the notes to the unaudited condensed consolidated financial statements.
−Removed: Recently Issued Accounting Pronouncements but Not Adopted as of March 31, 2020
+Added: Recently Issued Accounting Pronouncements but Not Adopted as of June 30, 2020
Adoption Timing
2 unchanged sentences
Facilitation of the Effects of Reference Rate Reform on Financial Reporting
−Removed: The FASB issued ASU 2020-04, Reference Rate Reform:
+Added: Issued March 2020
+Added: The FASB issued ASU 2020-04,
+Added: Reference Rate Reform:
Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
1 unchanged sentence
The amendments provide optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met.
−Removed: The amendments primarily include relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity.
+Added: The amendments primarily include relief related to contract modifications and hedging relationships, as well as providing a one-time
+Added: election for the sale or transfer of debt securities classified as held-to-maturity.
This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022.
1 unchanged sentence
Although the Company is assessing the impacts of this transition and exploring alternatives to use in place of LIBOR for various financial instruments, primarily related to our variable-rate loans, our subordinated debentures, and interest rate swap derivatives that are indexed to LIBOR, we do not expect this ASU to have a material impact on the Company’s consolidated financial statements.
−Removed: Issued March 2020
−Removed: ASU 2020-01 "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)
−Removed: The FASB issued ASU 2020-01 "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).
+Added: “Investments - Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)
+Added: The FASB issued ASU 2020-01
+Added: “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).
This ASU clarifies the interactions between ASC 321, ASC 323 and ASC 815 and addresses accounting for the transition into and out of the equity method and also provides guidance on whether equity method accounting would be applied to certain purchased options and forward contracts upon settlement.
2 unchanged sentences
Issued January 2020
−Removed: For the first quarter of 2020, we reported net earnings of $38.0 million, compared with $51.3 million for the fourth quarter of 2019 and $51.6 million for the first quarter of 2019.
−Removed: Diluted earnings per share were $0.27 for the first quarter, compared to $0.37 for the prior quarter and $0.37 for the same period last year.
−Removed: The implementation of CECL resulted in a beginning balance transition adjustment to our allowance for credit losses (“ACL”) of $1.8 million with a cumulative effect adjustment to beginning retained earnings of $1.3 million, net of tax.
−Removed: A $12.0 million credit loss provision was recorded for the first quarter of 2020, due primarily to the forecasted economic disruption resulting from COVID-19.
−Removed: During the quarter, we experienced minimal credit charge-offs of $86,000 and total recoveries of $227,000, resulting in net recoveries of $141,000.
−Removed: At March 31, 2020, total assets of $11.61 billion increased $324.4 million, or 2.88%, from total assets of $11.28 billion at December 31, 2019.
−Removed: Interest-earning assets of $10.40 billion at March 31, 2020 increased $369.7 million, or 3.69%, when compared with $10.03 billion at December 31, 2019.
−Removed: The increase in interest-earning assets was primarily due to a $539.9 million increase in interest-earning balances due from the Federal Reserve, partially offset by a $98.4 million decrease in total loans and a $92.7 million decrease in investment securities.
−Removed: Total investment securities were $2.32 billion at March 31, 2020, a decrease of $92.7 million, or 3.84%, from $2.41 billion at December 31, 2019.
−Removed: At March 31, 2020, investment securities held-to-maturity
+Added: For the second quarter of 2020, we reported net earnings of $41.6 million, compared with $38.0 million for the first quarter of 2020 and $54.5 million for the second quarter of 2019.
+Added: Diluted earnings per share were $0.31 for the second quarter, compared to $0.27 for the prior quarter and $0.39 for the same period last year.
+Added: The allowance for credit losses for the second quarter of 2020 was increased by $11.5 million in provision for credit losses due to the severe economic disruption forecasted as a result of the COVID-19
+Added: During the quarter, we experienced minimal credit charge-offs of $167,000 and total recoveries of $9,000, resulting in net charge-offs of $158,000.
+Added: During the second quarter of 2020, the Company originated, under the SBA Paycheck Protection Program, approximately 4,100 loans, of which $1.10 billion was outstanding at June 30, 2020, resulting in recognition of approximately $8.5 million in loan interest and fee income during the second quarter of 2020.
+Added: At June 30, 2020, total assets of $13.75 billion increased $2.47 billion, or 21.88%, from total assets of $11.28 billion at December 31, 2019.
+Added: Interest-earning assets of $12.52 billion at June 30, 2020 increased $2.49 billion, or 24.83%, when compared with $10.03 billion at December 31, 2019.
+Added: The increase in interest-earning assets was primarily due to a $1.74 billion increase in interest-earning balances due from the Federal Reserve and an $838.0 million increase in total loans, partially offset by a $125.5 million decrease in investment securities.
+Added: Excluding PPP loans, total loans declined by $259.2 million from December 31, 2019.
+Added: Total investment securities were $2.29 billion at June 30, 2020, a decrease of $125.5 million, or 5.20%, from $2.41 billion at December 31, 2019.
+Added: At June 30, 2020, investment securities held-to-maturity
(“HTM”) totaled $613.2 million.
−Removed: At March 31, 2020, investment securities available-for-sale
−Removed: (“AFS”) totaled $1.68 billion, inclusive of a pre-tax
+Added: At June 30, 2020, investment securities available-for-sale
+Added: (“AFS”) totaled $1.68 billion, inclusive of a net pre-tax
unrealized gain of $57.3 million, an increase of $35.4 million from December 31, 2019.
HTM securities declined by $61.3 million, or 9.09%, and AFS securities declined by $64.2 million, or 3.69%, from December 31, 2019.
−Removed: Our tax equivalent yield on investments was 2.45% for the quarter ended March 31, 2020, compared to 2.43% for the fourth quarter of 2019 and 2.57% for the first quarter of 2019.
−Removed: Total loans and leases, net of deferred fees and discounts, of $7.47 billion at March 31, 2020 decreased by $98.4 million, or 1.30%, from December 31, 2019.
−Removed: The decrease in total loans included a $111.6 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year.
−Removed: Excluding dairy and livestock loans, total loans grew by $13.2 million, or 0.18%.
−Removed: The $13.2 million increase in loans included increases of $25.6 million in commercial and industrial loans, $11.1 million in construction loans, and $8.1 million in SBA loans, partially offset by a $26.7 million decrease in commercial real estate loans and collectively a $4.9 million decline in other loan segments.
−Removed: Our yield on loans was 4.95% for the quarter ended March 31, 2020, compared to 5.15% for the fourth quarter of 2019 and 5.27% for the first quarter of 2019.
−Removed: Interest income for yield adjustments related to discount accretion on acquired loans was $4.8 million for the quarter ended March 31, 2020, compared to $6.5 million for the fourth quarter of 2019 and $7.2 million for the first quarter of 2019.
−Removed: Noninterest-bearing deposits were $5.57 billion at March 31, 2020, an increase of $327.1 million, or 6.24%, when compared to December 31, 2019.
−Removed: At March 31, 2020, noninterest-bearing deposits were 61.15% of total deposits, compared to 60.26% at December 31, 2019.
−Removed: Given what is typically a seasonally low quarter for us, deposit growth for the first quarter of 2020 was strong, although some of this growth was inflated by approximately $100 million of short-term noninterest-bearing deposits at the end of the first quarter.
−Removed: Our average cost of total deposits was 0.19% for the quarter ended March 31, 2020, compared to 0.21% for the fourth quarter of 2019 and 0.18% for the first quarter of 2019.
−Removed: Customer repurchase agreements totaled $368.9 million at March 31, 2020, compared to $428.7 million at December 31, 2019.
−Removed: Our average cost of total deposits including customer repurchase agreements was 0.20% for the quarter ended March 31, 2020, 0.21% for the fourth quarter of 2019, and 0.20% for the first quarter of 2019.
−Removed: At March 31, 2020 and December 31, 2019, we had no short-term borrowings, compared to $153.0 million at March 31, 2019.
−Removed: At March 31, 2020, we had $25.8 million of junior subordinated debentures, unchanged from December 31, 2019.
−Removed: Our average cost of funds was 0.21% for the quarter ended March 31, 2020, 0.22% for the fourth quarter of 2019, and 0.25% for the first quarter of 2019.
−Removed: The allowance for credit losses totaled $82.6 million at March 31, 2020, compared to $68.7 million at December 31, 2019.
−Removed: Due to the adoption of CECL, effective on January 1, 2020, a transition adjustment of $1.8 million was added to the beginning balance of the allowance and was increased by $12.0 million in provision for credit losses in the first quarter of 2020 due to the severe economic disruption forecasted to result from the coronavirus pandemic.
−Removed: The allowance for credit losses was 1.11% and 0.91% of total loans and leases outstanding, at March 31, 2020 and December 31, 2019, respectively.
−Removed: As of March 31, 2020, total discounts on acquired loans were $43.4 million.
−Removed: The Company’s total equity was $1.94 billion at March 31, 2020.
+Added: Our tax equivalent yield on investments was 2.22% for the quarter ended June 30, 2020, compared to 2.45% for the first quarter of 2020 and 2.53% for the second quarter of 2019.
+Added: Total loans and leases, net of deferred fees and discounts, of $8.40 billion at June 30, 2020 increased by $838.0 million, or 11.08%, from December 31, 2019.
+Added: The increase in total loans included $1.10 billion in PPP loans and a $131.9 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year.
+Added: Excluding PPP loans and dairy & livestock and agribusiness loans, total loans declined by $127.3 million, or 1.77%.
+Added: The $127.3 million decrease in loans included decreases of $94.4 million in commercial and industrial (C&I) loans, $31.0 million in consumer and other loans, $9.5 million in commercial real estate loans, and collectively $4.4 million in other loan segments.
+Added: Partially offsetting these declines were increases in construction loans and SFR mortgage loans of $8.9 million and $3.1 million, respectively.
+Added: Our yield on loans was 4.77% for the quarter ended June 30, 2020, compared to 4.95% for the first quarter of 2020 and 5.40% for the second quarter of 2019.
+Added: This decline was primarily due to the impact of the Federal Reserve’s rate decreases and the decline in discount accretion income for acquired loans.
+Added: Interest income for yield adjustments related to discount accretion on acquired loans was $4.1 million for the quarter ended June 30, 2020, compared to $4.8 million for the first quarter of 2020 and $8.0 million for the second quarter of 2019.
+Added: Noninterest-bearing deposits were $6.90 billion at June 30, 2020, an increase of $1.66 billion, or 31.57%, when compared to December 31, 2019.
+Added: The significant deposit growth in the second quarter of 2020 was primarily due to proceeds from PPP loans and our customers maintaining greater liquidity.
+Added: At June 30, 2020, noninterest-bearing deposits were 62.83% of total deposits, compared to 60.26% at December 31, 2019.
+Added: Our average cost of total deposits was 0.12% for the quarter ended June 30, 2020, compared to 0.19% for the first quarter of 2020 and 0.19% for the second quarter of 2019.
+Added: Customer repurchase agreements totaled $468.2 million at June 30, 2020, compared to $428.7 million at December 31, 2019.
+Added: Our average cost of total deposits including customer repurchase agreements was 0.12% for the quarter ended June 30, 2020, compared to 0.20% for both the first quarter of 2020 and the second quarter of 2019.
+Added: At June 30, 2020, we had $10.0 million in short-term borrowings with 0% cost, compared to no borrowings at December 31, 2019 and June 30, 2019.
+Added: At June 30, 2020, we had $25.8 million of junior subordinated debentures, unchanged from December 31, 2019.
+Added: Our average cost of funds was 0.13% for the quarter ended June 30, 2020, 0.21% for the first quarter of 2020, and 0.25% for the second quarter of 2019.
+Added: The allowance for credit losses totaled $94.0 million at June 30, 2020, compared to $68.7 million at December 31, 2019.
+Added: Due to the adoption of CECL, effective on January 1, 2020, a transition adjustment of $1.8 million was added to the beginning balance of the allowance and was increased by $23.5 million in provision for credit losses in the first six months of 2020 due to the severe economic disruption forecasted to result from the COVID-19
+Added: At June 30, 2020, ACL as a percentage of total loans and leases outstanding was 1.12%, or 1.29% when PPP loans are excluded.
+Added: This compares to 0.91% at December 31, 2019.
+Added: As of June 30, 2020, total discounts on acquired loans were $39.4 million.
+Added: The Company’s total equity was $1.96 billion at June 30, 2020.
This represented a decrease of $35.0 million, or 1.76%, from total equity of $1.99 billion at December 31, 2019.
−Removed: This decrease was primarily due to repurchase of common stock of $91.7 million under our 10b5-1 stock repurchase program, that was offset by a $25.8 million increase in other comprehensive income resulting from the tax effected impact of the increase in market value of our investment securities portfolio.
−Removed: Equity also increased by $13.6 million in retained earnings for the quarter after $24.4 million in cash dividends were declared by the Company for the first quarter of 2020.
−Removed: Our tangible common equity ratio was 11.3% at March 31, 2020.
+Added: This decrease was primarily due to repurchase of common stock of $91.7 million under our 10b5-1
+Added: stock repurchase program, and $48.8 million in cash dividends, offset by net earnings of $79.6 million and a $24.9 million increase in other comprehensive income resulting from the tax effected impact of the increase in market value of our available-for-sale
+Added: investment securities portfolio.
+Added: Our tangible common equity ratio was 9.6% at June 30, 2020.
Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements.
−Removed: As of March 31, 2020, the Company’s Tier 1 leverage capital ratio totaled 11.60%, our common equity Tier 1 ratio totaled 14.13%, our Tier 1 risk-based capital ratio totaled 14.42%, and our total risk-based capital ratio totaled 15.49%.
+Added: As of June 30, 2020, the Company’s Tier 1 leverage capital ratio totaled 10.59%, our common equity Tier 1 ratio totaled 14.47%, our Tier 1 risk-based capital ratio totaled 14.76%, and our total risk-based capital ratio totaled 15.97%.
We did not elect to phase in the impact of CECL on regulatory capital, as allowed under the interim final rule of the FDIC and other U.S.
3 unchanged sentences
Financial Performance
−Removed: For the Three Months Ended
+Added: Three Months Ended
(Dollars in thousands, except per share amounts)
8 unchanged sentences
Noninterest expense to average assets
−Removed: For the Three Months Ended
+Added: Three Months Ended
+Added: Six Months Ended
(Dollars in thousands, except per share amounts)
17 unchanged sentences
Three Months Ended
+Added: Six Months Ended
(Dollars in thousands)
14 unchanged sentences
The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities.
−Removed: Net interest margin and net interest spread are included on a tax equivalent (TE) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the three months ended March 31, 2020 and 2019.
+Added: Net interest margin and net interest spread are included on a tax equivalent (TE) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the three and six months ended June 30, 2020 and 2019.
Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions.
5 unchanged sentences
The table below presents the interest rate spread, net interest margin and the composition of average interest-earning assets and average interest-bearing liabilities by category for the periods indicated, including the changes in average balance, composition, and average yield/rate between these respective periods.
−Removed: For the Three Months Ended March 31,
+Added: Three Months Ended June 30,
(Dollars in thousands)
23 unchanged sentences
Net interest margin - tax equivalent
−Removed: Includes tax equivalent (TE) adjustments utilizing federal statutory rates of 21% in effect for the three months ended March 31, 2020 and 2019.
−Removed: The non TE rates were 2.38% and 2.49% for the three months ended March 31, 2020 and 2019, respectively.
−Removed: Includes loan fees of $548,000 and $827,000 for the three months ended March 31, 2020 and 2019, respectively.
−Removed: Prepayment penalty fees of $1.5 million and $1.0 million are included in interest income for the three months ended March 31, 2020 and 2019, respectively.
+Added: Includes tax equivalent (TE) adjustments utilizing federal statutory rates of 21% in effect for the three months ended June 30, 2020 and 2019.
+Added: The non TE rates were 2.16% and 2.46% for the three months ended June 30, 2020 and 2019, respectively.
+Added: Includes loan fees of $7.3 million and $727,000 for the three months ended June 30, 2020 and 2019, respectively.
+Added: Prepayment penalty fees of $2.1 million and $1.3 million are included in interest income for the three months ended June 30, 2020 and 2019, respectively.
Includes interest-bearing demand and money market accounts.
+Added: Six Months Ended June 30,
+Added: (Dollars in thousands)
+Added: INTEREST-EARNING ASSETS
+Added: Investment securities (1)
+Added: Available-for-sale
+Added: Tax-advantaged
+Added: Held-to-maturity
+Added: Tax-advantaged
+Added: Investment in FHLB stock
+Added: Interest-earning deposits with other institutions
+Added: Total interest-earning assets
+Added: Total noninterest-earning assets
+Added: INTEREST-BEARING LIABILITIES
+Added: Savings deposits (3)
+Added: Time deposits
+Added: Total interest-bearing deposits
+Added: FHLB advances, other borrowings, and customer repurchase agreements
+Added: Interest-bearing liabilities
+Added: Noninterest-bearing deposits
+Added: Other liabilities
+Added: Stockholders’ equity
+Added: Total liabilities and stockholders’ equity
+Added: Net interest income
+Added: Net interest spread - tax equivalent
+Added: Net interest margin
+Added: Net interest margin - tax equivalent
+Added: Includes tax equivalent (TE) adjustments utilizing federal statutory rates of 21% in effect for the six months ended June 30, 2020 and 2019.
+Added: The non TE rates were 2.28% and 2.48% for the six months ended June 30, 2020 and 2019, respectively.
+Added: Includes loan fees of $7.8 million and $1.6 million for the six months ended June 30, 2020 and 2019, respectively.
+Added: Prepayment penalty fees of $3.6 million and $2.3 million are included in interest income for the six months ended June 30, 2020 and 2019, respectively.
+Added: Includes interest-bearing demand and money market accounts.
The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated.
3 unchanged sentences
Rate and Volume Analysis for Changes in Interest Income, Interest Expense and Net Interest Income
−Removed: Comparision of Three Months Ended March 31,
+Added: Comparison of Three Months Ended June 30,
2020 Compared to 2019
19 unchanged sentences
Net interest income
−Removed: First Quarter of 2020 Compared to the First Quarter of 2019
−Removed: Net interest income, before provision for credit losses, of $102.3 million for the first quarter of 2020 decreased $7.2 million, or 6.60%, compared to $109.5 million for the first quarter of 2019.
−Removed: Interest-earning assets decreased on average by $17.2 million, or 0.17%, from $10.14 billion for the first quarter of 2019 to $10.12 billion for the first quarter of 2020.
−Removed: Our net interest margin (TE) was 4.08% for the first quarter of 2020, compared to 4.39% for the first quarter of 2019.
−Removed: Interest income for the first quarter of 2020 was $107.1 million, which represented an $8.2 million, or 7.09%, decrease when compared to the same period of 2019.
−Removed: Average interest-earning assets decreased by $17.2 million and the average interest-earning asset yield of 4.27%, compared to 4.62% for the first quarter of 2019.
−Removed: The 35 basis point decrease in the interest-earning asset yield over the first quarter of 2019 was primarily due to a 32 basis point decrease in loan yields.
−Removed: Interest income and fees on loans for the first quarter of 2020 of $92.1 million decreased $7.6 million, or 7.59%, when compared to the first quarter of 2019.
−Removed: Average loans decreased $179.8 million for the first quarter of 2020 when compared with the same period of 2019.
−Removed: Discount accretion on acquired loans was $4.8 million for the first quarter of 2020, compared to $7.2 million for the first quarter of 2019.
−Removed: The significant decline in interest rates over the past three quarters had a negative impact on loans yields, which after excluding discount accretion, declined by 18 basis points compared to the prior year.
−Removed: The Federal Reserve lowered short-term interest rates by 150 basis points in the first quarter of 2020, after having lowered them by 75 basis points in the second half of 2019.
−Removed: Interest income from investment securities was $14.0 million for the first quarter of 2020, a $1.1 million, or 7.40%, decrease from $15.2 million for the first quarter of 2019.
−Removed: This decrease was primarily the result of a $79.8 million decline in average investment securities for the first quarter of 2020, compared to the same period of 2019.
−Removed: The non tax-equivalent yield on investments decreased by 11 basis points compared to the first quarter of 2019.
−Removed: Interest expense of $4.8 million for the first quarter of 2020, decreased $944,000, or 16.43%, compared to the first quarter of 2019.
−Removed: Total cost of funds declined to 0.21% for the first quarter of 2020 from 0.25% for the first quarter of 2019.
−Removed: On average, noninterest-bearing deposits were 59.97% of our total deposits for the first quarter of 2020, compared to 58.20% for the first quarter of 2019.
−Removed: In comparison to the first quarter of 2019, our overall cost of funds decreased by four basis points, as noninterest-bearing deposits grew by $161.3 million and overnight borrowings decreased by $159.0 million.
−Removed: Interest-bearing deposits declined by $150.5 million compared to the first quarter of 2019, while the cost of interest-bearing deposits increased by four basis points.
+Added: Comparision of Six Months Ended June 30,
+Added: 2020 Compared to 2019
+Added: Increase (Decrease) Due to
+Added: (Dollars in thousands)
+Added: Interest income:
+Added: Available-for-sale
+Added: Taxable investment securities
+Added: Tax-advantaged
+Added: investment securities
+Added: Held-to-maturity
+Added: Taxable investment securities
+Added: Tax-advantaged
+Added: investment securities
+Added: Investment in FHLB stock
+Added: Interest-earning deposits with other institutions
+Added: Total interest income
+Added: Interest expense:
+Added: Savings deposits
+Added: Time deposits
+Added: FHLB advances, other borrowings, and customer repurchase agreements
+Added: Total interest expense
+Added: Net interest income
+Added: Second Quarter of 2020 Compared to the Second Quarter of 2019
+Added: Net interest income, before provision for credit losses, of $104.6 million for the second quarter of 2020 decreased $6.5 million, or 5.84%, compared to $111.1 million for the second quarter of 2019.
+Added: Interest-earning assets increased on average by $1.43 billion, or 14.39%, from $9.96 billion for the second quarter of 2019 to $11.39 billion for the second quarter of 2020.
+Added: Our net interest margin (TE) was 3.70% for the second quarter of 2020, compared to 4.49% for the second quarter of 2019.
+Added: Interest income for the second quarter of 2020 was $108.0 million, which represented an $8.8 million, or 7.56%, decrease when compared to the same period of 2019.
+Added: Average interest-earning assets increased by $1.43 billion and the average interest-earning asset yield of 3.82%, compared to 4.72% for the second quarter of 2019.
+Added: The 90 basis point decrease in the interest-earning asset yield over the second quarter of 2019 was primarily due to a combination of a 63 basis point decrease in loan yields, a 31 basis point decrease in investment yields and a change in mix of earnings assets with average balances at the Federal Reserve growing to 9.21% of earning asset for the second quarter of 2020, compared to 0.12% for the second quarter of 2019.
+Added: The increase in balances at the Federal Reserve resulted from $1.43 billion in average deposit growth during the second quarter.
+Added: Interest income and fees on loans for the second quarter of 2020 of $95.4 million decreased $6.5 million, or 6.37%, when compared to the second quarter of 2019.
+Added: Average loans increased $488.6 million for the second quarter of 2020 when compared with the same period of 2019, primarily due to $669.6 million in average PPP loans originated in the second quarter of 2020.
+Added: The PPP loans we originated resulted in the recognition of approximately $8.5 million in loan interest and fee income in the second quarter of 2020.
+Added: Discount accretion on acquired loans decreased by $3.9 million compared to the second quarter of 2019.
+Added: The Federal Reserve lowered short-term interest rates by 225 basis points when compared to the end of second quarter of 2019.
+Added: The significant decline in interest rates over the past four quarters had a negative impact on loan yields, which after excluding discount accretion, nonaccrual interest income, and the impact from PPP loans, declined by 42 basis points from the second quarter of 2019.
+Added: Interest income from investment securities was $12.1 million for the second quarter of 2020, a $2.4 million, or 16.74%, decrease from $14.5 million for the second quarter of 2019.
+Added: This decrease was primarily the result of a $118.5 million decline in average investment securities for the second quarter of 2020, compared to the same period of 2019.
+Added: As a result of the decline in interest rates over the past four quarters, the non tax-equivalent
+Added: yield on investments decreased by 30 basis points compared to the second quarter of 2019.
+Added: Interest expense of $3.4 million for the second quarter of 2020, decreased $2.3 million, or 40.83%, compared to the second quarter of 2019.
+Added: Total cost of funds declined to 0.13% for the second quarter of 2020 from 0.25% for the second quarter of 2019.
+Added: On average, noninterest-bearing deposits were 61.74% of our total deposits for the second quarter of 2020, compared to 59.14% for the second quarter of 2019.
+Added: In comparison to the second quarter of 2019, our overall cost of funds decreased by 12 basis points, as average noninterest-bearing deposits grew by $1.11 billion and overnight borrowings decreased by $129.6 million.
+Added: Average interest-bearing deposits increased by $324.9 million compared to the second quarter of 2019, while the cost of interest-bearing deposits decreased by 16 basis points.
+Added: Six Months of 2020 Compared to the Six Months of 2019
+Added: Net interest income, before provision for credit losses, was $206.9 million for the six months ended June 30, 2020, a decrease of $13.7 million, or 6.22%, compared to $220.6 million for the same period of 2019.
+Added: Interest-earning assets increased on average by $708.1 million, or 7.05%, from $10.05 billion for the six months ended June 30, 2019 to $10.75 billion for the current year.
+Added: Our net interest margin (TE) was 3.88% during the first six months of 2020, compared to 4.44% for the same period of 2019.
+Added: Interest income for the six months ended June 30, 2020 was $215.1 million, which represented a $17.0 million, or 7.33%, decrease when compared to the same period of 2019.
+Added: Compared to the first six months of 2019, average interest-earning assets increased by $708.1 million primarily due to PPP loans, and the yield on interest-earning assets decreased by 64 basis points.
+Added: The 64 basis point decrease in the earning asset yield over the first six months of 2020, resulted from a 49 basis point decrease in loan yields from 5.34% for first six months of 2019 to 4.85% for the same period of 2020, and a 21 basis point decline in investment yields, as well as a change in the mix of earning assets resulting from a $634.8 million increase in average balances at the Federal Reserve.
+Added: Average loans as a percentage of earning assets declined from 75.76% for the first six months of 2019 to 72.21% for the first six months of 2020.
+Added: Conversely, average balances at the Federal Reserve grew as a percentage of earning assets from 0.11% in the prior year to 6.01% for the first six months of 2020.
+Added: Interest income and fees on loans for the first six months of 2020 of $187.5 million decreased $14.1 million, or 6.98%, when compared to the same period of 2019.
+Added: Average loans increased $154.7 million for the first six months of 2020 when compared with the same period of 2019, primarily due to $334.8 million in average PPP loans.
+Added: The PPP loans we originated resulted in approximately $6.8 million in fee income and $1.7 million in loan interest during the second quarter of 2020.
+Added: The first six months of 2020 reflected a $6.9 million decrease in discount accretion on acquired loans and nonaccrual interest income when compared to the same period of 2019.
+Added: Loan yields decreased by 49 basis points from the prior six month period, primarily due to lower rates on loans indexed to variable interest rates such as the Bank’s prime rate.
+Added: Excluding the impact of PPP loans, interest income related to purchase discount accretion and nonaccrual interest income, loan yields were 30 basis points lower than the second quarter of 2019.
+Added: Interest income from investment securities was $26.2 million for the six months ended June 30, 2020, a $3.6 million decrease from $29.7 million for the first six months of 2019.
+Added: This decrease was the net result of a $99.0 million decrease in the average investment securities for the first six months of 2020 and a 20 basis point decline in the non tax-equivalent
+Added: yield on securities, compared to the same period of 2019.
+Added: Interest expense of $8.2 million for the six months ended June 30, 2020, decreased by $3.3 million from the same period of 2019.
+Added: The average rate paid on interest-bearing liabilities decreased by 15 basis points, to 0.40% for the first six months of 2020, from 0.55% for the same period of 2019.
+Added: The rate on interest-bearing deposits for the first six months of 2020 decreased by six basis points from the same period in 2019.
+Added: Average interest-bearing liabilities were $62.5 million lower for the first six months of 2020 when compared with the same period of 2019.
+Added: Average interest-bearing deposits grew by $87.6 million.
+Added: Average noninterest-bearing deposits represented 60.92% of our total deposits for the six months ended June 30, 2020, compared to 58.67% for the same period of 2019.
+Added: Total cost of funds for the first six months of 2019 was 0.17%, compared with 0.25% for the same period of 2019.
Provision for Credit Losses
2 unchanged sentences
commonly referred to as CECL, which replaces the “incurred loss” approach with an “expected loss” model over the life of the loan.
−Removed: The allowance for credit losses on loans totaled $82.6 million at March 31, 2020, compared to $68.7 million at December 31, 2019 and $65.2 million as of March 31, 2019.
−Removed: Upon adoption of CECL, a transition adjustment of $1.8 million was added to the beginning balance of the allowance, with no impact on the consolidated statement of earnings, and was increased by $12.0 million in provision for credit losses in the first quarter of 2020 due to the severe economic disruption forecasted as a result of the coronavirus pandemic.
−Removed: During the first quarter of 2020, we experienced minimal credit charge-offs of $86,000 and total recoveries of $227,000, resulting in net recoveries of $141,000.
+Added: The allowance for credit losses on loans totaled $94.0 million at June 30, 2020, compared to $68.7 million at December 31, 2019 and $67.1 million as of June 30, 2019.
+Added: Upon adoption of CECL, a transition adjustment of $1.8 million was added to the beginning balance of the allowance, with no impact on the consolidated statement of earnings, and was increased by $23.5 million in provision for credit losses in the first six months of 2020 due to the severe economic disruption forecasted as a result of the COVID-19
+Added: During the six months ended June 30, 2020, we experienced minimal credit charge-offs of $253,000 and total recoveries of $236,000, resulting in net charge-offs of $17,000.
This compares to a $3.5 million loan loss provision and net recoveries of $19,000 for the same period of 2019.
−Removed: We believe the allowance is appropriate at March 31, 2020.
−Removed: The ratio of the allowance for credit losses to total loans and leases outstanding, net of deferred fees and discount, as of March 31, 2020, December 31, 2019 and March 31, 2019 was 1.11%, 0.91% and 0.86%, respectively.
−Removed: As of March 31, 2020, remaining discounts on acquired loans were $43.4 million.
+Added: We believe the allowance is appropriate at June 30, 2020.
+Added: The ratio of the allowance for credit losses to total loans and leases outstanding, net of deferred fees and discount, as of June 30, 2020, was 1.12%, or 1.29% when PPP loans are excluded.
+Added: This compares to 0.91% and 0.89%, as of December 31, 2019 and June 30, 2019, respectively.
+Added: As of June 30, 2020, remaining discounts on acquired loans were $39.4 million.
Refer to the discussion of “Allowance for Credit Losses” in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
1 unchanged sentence
No assurance can be given that economic conditions which adversely affect the Company’s service areas or other circumstances will or will not be reflected in increased provisions for credit losses in the future, as the nature of this process requires considerable judgment.
−Removed: We may experience increases in the provision for credit losses, in future periods, due to further deterioration in economic conditions from the COVID-19 epidemic.
−Removed: See “Allowance for Credit Losses” under
−Removed: Analysis of Financial Condition
+Added: We may experience increases in the provision for credit losses, in future periods, due to further deterioration in economic conditions from the COVID-19
+Added: See “Allowance for Credit Losses” under Analysis of Financial Condition
Noninterest Income
2 unchanged sentences
The following table sets forth the various components of noninterest income for the periods presented.
−Removed: For the Three Months Ended
+Added: Three Months Ended
+Added: Six Months Ended
(Dollars in thousands)
5 unchanged sentences
Gain on sale of building, net
+Added: Gain on eminent domain condemnation, net
Total noninterest income
−Removed: First Quarter of 2020 Compared to the First Quarter of 2019
−Removed: The $4.7 million decrease in noninterest income was primarily due to a $4.5 million net gain on the sale of one of our bank owned buildings in the first quarter of 2019.
−Removed: Service charges on deposit accounts decreased by $365,000 from the first quarter of 2019.
−Removed: The Durbin Amendment’s cap on interchange fees reduced our debit card interchange fee income for bankcard services by approximately $300,000 when compared to the first quarter of 2019.
+Added: Second Quarter of 2020 Compared to the Second Quarter of 2019
+Added: The $6.1 million decrease in noninterest income was primarily due to a $5.7 million net gain from the legal settlement of an eminent domain condemnation of one of our banking center buildings located in Bakersfield in the second quarter of 2019.
+Added: The Bank enters into interest rate swap agreements with our customers to manage our interest rate risk and enters into identical offsetting swaps with a counterparty.
+Added: The changes in the fair value of the swaps primarily offset each other resulting in swap fee income (refer to Note 8 – Derivative Financial Instruments
+Added: of the notes to the unaudited condensed consolidated financial statements of this report for additional information).
+Added: The second quarter of 2020 included higher swap fee income of $1.8 million compared to the second quarter of 2019, due to higher volume of swap transactions.
+Added: We executed on swap agreements related to new loan originations with a notional amount totaling $126.2 million for the second quarter of 2020, compared to $17.4 million for the second quarter of 2019.
+Added: Service charges on deposit accounts decreased by $1.3 million from the second quarter of 2019.
+Added: This decrease was partially due to the increase in noninterest-bearing deposits held at the Bank by our customers, which earn credits toward the fees associated with the products and services utilized by our business customers.
+Added: The Durbin Amendment’s cap on interchange fees reduced our debit card interchange fee income for bankcard services by approximately $400,000 when compared to the second quarter of 2019.
CitizensTrust consists of Wealth Management and Investment Services income.
2 unchanged sentences
investment products.
−Removed: At March 31, 2020, CitizensTrust had approximately $2.70 billion in assets under management and administration, including $1.95 billion in assets under management.
−Removed: CitizensTrust generated fees of $2.4 million for the first quarter of 2020, an increase of $238,000 compared to the first quarter of 2019, due to the growth in assets under management.
+Added: At June 30, 2020, CitizensTrust had approximately $2.83 billion in assets under management and administration, including $2.02 billion in assets under management.
+Added: CitizensTrust generated fees of $2.5 million for both the second quarter of 2020 and the second quarter of 2019.
The Bank’s investment in BOLI includes life insurance policies acquired through acquisitions and the purchase of life insurance by the Bank on a selected group of employees.
2 unchanged sentences
Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties.
−Removed: Death benefits of $715,000 were included in our BOLI policies for the first quarter of 2020.
+Added: Death benefits of $450,000 were included in our BOLI policies for the second quarter of 2020.
+Added: Six Months of 2020 Compared to the Six Months of 2019
+Added: The $10.7 million decrease in noninterest income for the six months ended June 30, 2020, was primarily due to a $5.7 million net gain from the legal settlement of an eminent condemnation of one of our business financial center buildings in Bakersfield and a $4.5 million net gain on the sale of one of our bank owned buildings in the first six months of 2019.
+Added: Service charges on deposit accounts decreased by $1.6 million from the first six months of 2019.
+Added: This decrease was partially due to the increase in noninterest-bearing deposits held at the Bank by our customers, which earn credits toward the fees associated with the products and services utilized by our business customers.
+Added: In addition, the Durbin Amendment’s cap on interchange fees reduced our debit card interchange fee income for bankcard services by approximately $700,000 when compared to 2019.
+Added: The $1.1 million increase in BOLI income included $1.2 million of death benefits included in our BOLI policies for the first six months of 2020.
+Added: The $929,000 increase in other income included $1.8 million in higher swap fee income, partially offset by decreases in dividend income from various equity investments, other banking fee income and SBA servicing income when compared to the prior six month period.
Noninterest Expense
The following table summarizes the various components of noninterest expense for the periods presented.
−Removed: For the Three Months Ended
+Added: Three Months Ended
+Added: Six Months Ended
(Dollars in thousands)
14 unchanged sentences
Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
−Removed: First Quarter of 2020 Compared to the First Quarter of 2019
+Added: Second Quarter of 2020 Compared to the Second Quarter of 2019
Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets.
−Removed: Noninterest expense as a percentage of average assets was 1.72% for the first quarter of 2020, compared to 1.83% for the first quarter of 2019.
+Added: Noninterest expense as a percentage of average assets was 1.48% for the second quarter of 2020, compared to 1.81% for the second quarter of 2019.
+Added: This decline mostly reflects the $1.39 billion growth in average assets that resulted primarily from $1.43 billion in average deposit growth.
Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses.
−Removed: The efficiency ratio was 42.69% for the first quarter of 2020, compared to 41.01% for the first quarter of 2019.
−Removed: Noninterest expense of $48.6 million for the first quarter of 2020 was $3.0 million, or 5.74%, lower than the first quarter of 2020.
−Removed: There were no merger related expenses related to the Community Bank acquisition for the first quarter of 2020, compared to $3.1 million for the first quarter of 2019.
+Added: The efficiency ratio was 39.75% for the second quarter of 2020, compared to 39.09% for the second quarter of 2019.
+Added: Noninterest expense of $46.4 million for the second quarter of 2020 was $4.1 million, or 8.17%, lower than the second quarter of 2019.
+Added: There were no merger related expenses related to the Community Bank (“CB”) acquisition for the second quarter of 2020, compared to $2.6 million for the second quarter of 2019 primarily due to the consolidation of four banking centers.
+Added: Approximately $900,000, or a 4% increase in salary expense from the prior year was offset by an increase in net deferred loan costs of $1.2 million during the current quarter that were primarily related to the origination of PPP loans.
The year-over-year decrease also included a $567,000 decrease in regulatory assessments, a $396,000 decrease in occupancy and equipment expense primarily due to the consolidation of banking centers, and a $388,000 decrease in Core Deposit Intangible (“CDI”) amortization.
−Removed: These decreases were partially offset by a $1.6 million increase in salaries and employee benefit costs.
−Removed: The Company’s effective tax rate for the three months ended March 31, 2020 was 28.75%, compared to 29.00% for the same periods of 2019.
+Added: These decreases were partially offset by a $328,000 increase in professional services.
+Added: Six Months of 2020 Compared to the Six Months of 2019
+Added: Noninterest expense of $95.0 million for the first six months of 2020 was $7.1 million lower than the prior year period.
+Added: The decrease was primarily due to $5.8 million in merger related expenses for the six months ended June 30, 2019, compared to no merger related expense for the same period of 2020.
+Added: The year-over-year decrease also included a $1.3 million decrease in regulatory assessments, a $983,000 decrease in occupancy and equipment expense and an $800,000 decrease in amortization of CDI.
+Added: These decreases were partially offset by a $1.4 million increase in salaries and benefit costs, a $659,000 increase in professional services and a $201,000 increase in computer software expense.
+Added: Salary and benefit expense would have increased by $2.8 million, or approximately 5%, when a $1.3 million increase in net deferred loan costs is excluded.
+Added: As a percentage of average assets, noninterest expense was 1.59% for the six months ended June 30, 2020, compared to 1.82% for the same period of 2019.
+Added: For the six months ended 2020, the efficiency ratio was 41.20%, compared to 40.04% for the same period of 2019.
+Added: The Company’s effective tax rate for the three and six months ended June 30, 2020 was 29.23% and 29.00%, respectively, compared to 29.00% for the same periods of 2019.
Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged
3 unchanged sentences
ANALYSIS OF FINANCIAL CONDITION
−Removed: Total assets of $11.61 billion at March 31, 2020 increased $324.4 million, or 2.88%, from total assets of $11.28 billion at December 31, 2019.
−Removed: Interest-earning assets totaled $10.40 billion at March 31, 2020, an increase of $369.7 million, or 3.69%, when compared with $10.03 billion at December 31, 2019.
−Removed: The increase in interest-earning assets was primarily due to a $539.9 million increase in interest-earning balances due from the Federal Reserve.
−Removed: Partially offsetting these increases was a $98.4 million decrease in total loans and a $92.7 million decrease in investment securities.
−Removed: The decrease in total loans included a $111.6 million decline in dairy & livestock loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year.
−Removed: Excluding dairy and livestock loans, total loans grew by $13.2 million, or 0.18%.
−Removed: The Company is well positioned to use the excess liquidity built-up
−Removed: during the quarter to fund customer loan requests under the SBA’s Paycheck Protection Program.
−Removed: The SBA exhausted the funding for these loans on April 15, 2020, but through that date we processed 911 loans, totaling $558 million.
−Removed: Total liabilities were $9.67 billion at March 31, 2020, an increase of $377.2 million, or 4.06%, from total liabilities of $9.29 billion at December 31, 2019.
−Removed: Total deposits grew by $408.7 million, or 4.69%.
−Removed: Total equity decreased $52.7 million, or 2.67%, to $1.94 billion at March 31, 2020, compared to total equity of $1.99 billion at December 31, 2019.
−Removed: The $52.7 million decrease in equity was primarily due to the repurchase of 4.9 million shares of common stock for $91.7 million under our 10b5-1 stock repurchase program.
+Added: Total assets of $13.75 billion at June 30, 2020 increased $2.47 billion, or 21.88%, from total assets of $11.28 billion at December 31, 2019.
+Added: Interest-earning assets totaled $12.52 billion at June 30, 2020, an increase of $2.49 billion, or 24.83%, when compared with $10.03 billion at December 31, 2019.
+Added: The increase in interest-earning assets was primarily due to a $1.74 billion increase in interest-earning balances due from the Federal Reserve and an $838.0 million increase in total loans, partially offset by a $125.5 million decrease in investment securities.
+Added: The increase in total loans was due to the origination of approximately 4,100 PPP loans, totaling $1.10 billion at June 30, 2020.
+Added: Excluding PPP loans, total loans declined by $259.2 million from December 31, 2019.
+Added: Total liabilities were $11.79 billion at June 30, 2020, an increase of $2.50 billion, or 29.96%, from total liabilities of $9.29 billion at December 31, 2019.
+Added: Total deposits grew by $2.28 billion, or 26.18%.
+Added: This significant deposit growth in the second quarter of 2020 was primarily due to proceeds from PPP loans and our customers maintaining greater liquidity.
+Added: Total equity decreased $35.0 million, or 1.76%, to $1.96 billion at June 30, 2020, compared to total equity of $1.99 billion at December 31, 2019.
+Added: The $35.0 million decrease in equity was primarily due to the repurchase of 4.9 million shares of common stock for $91.7 million under our 10b5-1
+Added: stock repurchase program.
We previously announced that we suspended this 10b5-1
stock repurchase program due to the uncertainty of the COVID-19
−Removed: We had $38.0 million in net earnings during the quarter, offset by $24.4 million in cash dividends declared and a cumulative effect adjustment to beginning retained earnings of $1.3 million, net of tax, due to the adoption of CECL on January 1, 2020.
+Added: We had $79.6 million in net earnings during the first six months of 2020, offset by $48.8 million in cash dividends declared and a cumulative effect adjustment to beginning retained earnings of $1.3 million, net of tax, due to the adoption of CECL on January 1, 2020.
Our equity also increased by $24.9 million as a result of an increase in other comprehensive income from the increase in our tax adjusted market value of our available-for-sale
2 unchanged sentences
The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations.
−Removed: At March 31, 2020, we reported total investment securities of $2.32 billion.
+Added: At June 30, 2020, we reported total investment securities of $2.29 billion.
This represented a decrease of $125.5 million, or 5.20%, from total investment securities of $2.41 billion at December 31, 2019.
−Removed: The decrease in investment securities was due to cash outflow from the portfolio exceeding new securities purchased in the first quarter of 2020, partially offset by an increase in the fair value of AFS investment securities as a result of declining interest rates.
−Removed: At March 31, 2020, investment securities HTM totaled $642.3 million.
−Removed: At March 31, 2020, our AFS investment securities totaled $1.68 billion, inclusive of a pre-tax
+Added: The decrease in investment securities was due to cash outflow from the portfolio exceeding new securities purchased in the first six months of 2020, partially offset by an increase in the fair value of AFS investment securities as a result of declining interest rates.
+Added: At June 30, 2020, investment securities HTM totaled $613.2 million.
+Added: At June 30, 2020, our AFS investment securities totaled $1.68 billion, inclusive of a pre-tax
net unrealized gain of $57.3 million.
1 unchanged sentence
unrealized gain reported in AOCI on AFS investment securities was $40.3 million.
−Removed: As of March 31, 2020, the Company had a pre-tax
−Removed: net unrealized holding gain on AFS investment securities of $58.5 million, compared to a pre-tax
−Removed: net unrealized holding gain of $21.9 million at December 31, 2019.
The changes in the net unrealized holding gain resulted primarily from fluctuations in market interest rates.
−Removed: For the three months ended March 31, 2020 and 2019, repayments/maturities of investment securities totaled $128.2 million and $107.5 million, respectively.
−Removed: The Company purchased additional investment securities totaling $1.5 million and $19.8 million for the first three months ended March 31, 2020 and 2019, respectively.
−Removed: No investment securities were sold during the first three months of 2020 and 2019.
−Removed: The tables below set forth investment securities AFS and HTM as of the dates presented.
−Removed: March 31, 2020
+Added: For the six months ended June 30, 2020 and 2019, repayments/maturities of investment securities totaled $318.5 million and $220.5 million, respectively.
+Added: The Company purchased additional investment securities totaling $163.6 million and $37.1 million for the six months ended June 30, 2020 and 2019, respectively.
+Added: There were no investment securities sold during the first six months of 2020 and 2019.
+Added: The average duration of our investment securities portfolio was approximately 2.8 years at June 30, 2020.
+Added: The tables below set forth our investment securities AFS and HTM portfolio by type for the dates presented.
+Added: June 30, 2020
Total Percent
−Removed: (Dollars in thousands)
+Added: in thousands)
Investment securities available-for-sale:
21 unchanged sentences
Total held-to-maturity
−Removed: The weighted-average yield (TE) on the total investment portfolio at March 31, 2020 was 2.53% with a weighted-average life of 2.9 years.
−Removed: This compares to a weighted-average yield of 2.54% at December 31, 2019 with a weighted-average life of 3.6 years.
−Removed: The weighted average life is the average number of years that each dollar of unpaid principal due remains outstanding.
−Removed: Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.
−Removed: Approximately 90% of the securities in the total investment portfolio, at March 31, 2020, are issued by the U.S.
−Removed: government or U.S.
−Removed: government-sponsored agencies and enterprises, which have the implied guarantee of payment of principal and interest.
−Removed: As of March 31, 2020, approximately $71.8 million in U.S.
+Added: As of June 30, 2020, approximately $69.3 million in U.S.
government agency bonds are callable.
1 unchanged sentence
Municipal bonds, which represented approximately 9% of the total investment portfolio, are predominately AA or higher rated securities.
−Removed: The allowance for credit losses for held-to-maturity
−Removed: investment securities under the new CECL model was zero at March 31, 2020.
We adopted ASU 2016-13
3 unchanged sentences
Prior to adoption of this standard, when a decline in fair value of a debt security was determined to be other than temporary, an impairment charge for the credit component was recorded, and a new cost basis in the investment was established.
−Removed: During the first quarter of 2020, management determined that credit losses did not exist for securities in an unrealized loss position.
−Removed: As of March 31, 2020, there were no AFS investment securities with an unrealized loss position.
−Removed: The tables below show the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2019, prior to adoption of ASU 2016-13.
+Added: During the second quarter of 2020, management determined that credit losses did not exist for securities in an unrealized loss position.
+Added: The following table presents the Company’s available-for-sale
+Added: investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of June 30, 2020.
+Added: June 30, 2020
+Added: Less Than 12 Months
+Added: 12 Months or Longer
+Added: (Dollars in thousands)
+Added: Investment securities available-for-sale:
+Added: Mortgage-backed securities
+Added: Municipal bonds
+Added: Total available-for-sale
+Added: The table below presents the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2019, prior to adoption of ASU 2016-13.
Management previously reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than-temporary.
17 unchanged sentences
Total held-to-maturity
−Removed: Total loans and leases, net of deferred fees and discounts, of $7.47 billion at March 31, 2020 decreased by $98.4 million, or 1.30%, from $7.56 billion at December 31, 2019.
−Removed: The decrease in total loans included a $111.6 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year.
−Removed: Excluding dairy and livestock loans, total loans grew by $13.2 million, or 0.18%.
−Removed: The $13.2 million increase in loans included increases of $25.6 million in commercial and industrial loans, $11.1 million in construction loans, and $8.1 million in SBA loans, partially offset by a $26.7 million decrease in commercial real estate loans and collectively a $4.9 million decline in other loan segments.
+Added: Refer to Note 4 – Investment Securities
+Added: of the notes to the unaudited condensed consolidated financial statements of this report for additional information on our investment securities portfolio.
+Added: Total loans and leases, net of deferred fees and discounts, of $8.40 billion at June 30, 2020 increased by $838.0 million, or 11.08%, from $7.56 billion at December 31, 2019.
+Added: The increase in total loans included $1.10 billion in PPP loans and a $131.9 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year.
+Added: Excluding PPP loans and dairy & livestock and agribusiness loans, total loans declined by $127.3 million, or 1.77%.
+Added: The $127.3 million decrease in loans included decreases of $94.4 million in commercial and industrial loans, $31.0 million in consumer and other loans, $9.5 million in commercial real estate loans, and collectively $4.4 million in other loan segments.
+Added: Partially offsetting these declines were increases in construction loans and SFR mortgage loans of $8.9 million and $3.1 million, respectively.
The following table presents our loan portfolio by type as of the dates presented.
Distribution of Loan Portfolio by Type
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
1 unchanged sentence
Commercial and industrial
+Added: SBA - Paycheck Protection Program (PPP)
Commercial real estate
3 unchanged sentences
Deferred loan fees, net (1)
−Removed: Gross loans, net of deferred loan fees
+Added: Total loans, net of deferred loan fees
Allowance for credit losses
−Removed: Total loans and lease finance receivables
−Removed: Beginning with March 31, 2020, gross loans are presented net of deferred loan fees by respective class of financing receivables.
−Removed: As of March 31, 2020, $248.2 million, or 4.64% of the total commercial real estate loans included loans secured by farmland, compared to $241.8 million, or 4.50%, at December 31, 2019.
−Removed: The loans secured by farmland included $122.5 million for loans secured by dairy & livestock land and $125.7 million for loans secured by agricultural land at March 31, 2020, compared to $125.9 million for loans secured by dairy & livestock land and $115.9 million for loans secured by agricultural land at December 31, 2019.
−Removed: As of March 31, 2020, dairy & livestock and agribusiness loans of $272.1 million were comprised of $218.0 million for dairy & livestock loans and $54.1 million for agribusiness loans, compared to $323.5 million for dairy & livestock loans and $60.2 million for agribusiness loans at December 31, 2019.
+Added: Total loans and lease finance receivables, net
+Added: Beginning with March 31, 2020, total loans are presented net of deferred loan fees by respective class of financing receivables.
+Added: As of June 30, 2020, 68.76% of the Company’s total loan portfolio consisted of real estate loans, with commercial real estate loans representing 63.85% of total loans.
+Added: As of June 30, 2020, $248.6 million, or 4.63% of the total commercial real estate loans included loans secured by farmland, compared to $241.8 million, or 4.50%, at December 31, 2019.
+Added: The loans secured by farmland included $121.9 million for loans secured by dairy & livestock land and $126.7 million in loans secured by agricultural land at June 30, 2020, compared to $125.9 million for loans secured by dairy & livestock land and $115.9 million for loans secured by agricultural land at December 31, 2019.
+Added: As of June 30, 2020, dairy & livestock and agribusiness loans of $251.8 million were comprised of $201.7 million for dairy & livestock loans and $50.1 million for agribusiness loans, compared to $323.5 million for dairy & livestock loans and $60.2 million for agribusiness loans at December 31, 2019.
Real estate loans are loans secured by conforming trust deeds on real property, including property under construction, land development, commercial property and single-family and multi-family residences.
3 unchanged sentences
Dairy & livestock and agribusiness loans are loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers and farmers.
−Removed: As of March 31, 2020, the Company had $189.5 million of total SBA 504 loans.
+Added: As of June 30, 2020, the Company had $181.2 million of total SBA 504 loans.
SBA 504 loans include term loans to finance capital expenditures and for the purchase of commercial real estate.
2 unchanged sentences
The Bank retains the first lien loan for its term and sells the second lien loan to the SBA subordinated debenture program.
−Removed: A majority of the Bank’s 504 loans are granted for the purpose of commercial real estate acquisition.
−Removed: As of March 31, 2020, the Company had $123.6 million of total SBA 7(a) loans that include a guarantee of payment form the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default.
+Added: A majority of the Bank’s 504 loans are granted for the purpose of commercial
+Added: real estate acquisition.
+Added: As of June 30, 2020, the Company had $119.0 million of total SBA 7(a) loans that include a guarantee of payment form the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default.
The SBA 7(a) loans include revolving lines of credit (SBA Express) and term loans of up to ten (10) years to finance long-term working capital requirements, capital expenditures, and/or for the purchase or refinance of commercial real estate.
−Removed: We have been an active participant in the SBA’s Paycheck Protection Program.
−Removed: Including the second round of funding after Legislation passed on April 24, 2020, we obtained approvals for about 3,800 loans, totaling approximately
−Removed: $1.25 billion as of May 3, 2020.
−Removed: As of March 31, 2020, the Company had $128.0 million in construction loans.
−Removed: This represents 1.72% of total gross loans held-for-investment.
+Added: As an active participant in the SBA’s Paycheck Protection Program, we have originated approximately 4,100 PPP loans, totaling $1.10 billion as of June 30, 2020.
+Added: As of June 30, 2020, the Company had $125.8 million in construction loans.
+Added: This represents 1.50% of total loans held-for-investment.
Although our construction loans are located throughout our market footprint, the majority of construction loans consist of commercial land development and construction projects in Los Angeles County, Orange County, and the Inland Empire region of Southern California.
−Removed: There were no nonperforming construction loans at March 31, 2020.
+Added: There were no nonperforming construction loans at June 30, 2020.
Our loan portfolio is geographically disbursed throughout our marketplace.
The following is the breakdown of our total held-for-investment
−Removed: commercial real estate loans, by region as of March 31, 2020.
−Removed: March 31, 2020
+Added: commercial real estate loans, by region as of June 30, 2020.
+Added: June 30, 2020
Commercial Real Estate
7 unchanged sentences
The table below breaks down our commercial real estate portfolio.
−Removed: March 31, 2020
+Added: June 30, 2020
(Dollars in thousands)
3 unchanged sentences
Represents percentage of reported owner-occupied at origination in each real estate loan category.
−Removed: The loans secured by farmland included $122.5 million for loans secured by dairy & livestock land and $125.7 million for loans secured by agricultural land at March 31, 2020.
+Added: The loans secured by farmland included $121.9 million for loans secured by dairy & livestock land and $126.7 million for loans secured by agricultural land at June 30, 2020.
Other loans consist of a variety of loan types, none of which exceeds 2.0% of total commercial real estate loans.
−Removed: At March 31, 2020, loans to customers in the hotel, restaurant, entertainment, or recreation industries represented approximately 3% of our loan portfolio and loans to customers in educational services were only 1% of the overall portfolio.
−Removed: Other retail related loans, primarily loans collateralized by commercial real estate, comprised approximately 12% of the loan portfolio at March 31, 2020.
−Removed: At origination, these loans were underwritten with loan-to-values
+Added: Commercial real estate loans on retail properties comprised approximately 15% of our CRE loan portfolio at June 30, 2020.
+Added: At origination, these loans on retail properties were underwritten with loan-to-values
averaging approximately 50%.
+Added: Approximately 56% of these loans were originated prior to 2017.
+Added: At June 30, 2020, commercial and industrial loans to customers in the hotel, restaurant, entertainment, or recreation industries represented approximately 4% of our C&I loan portfolio and loans to customers in retail trade were approximately 2% of our C&I loans.
Nonperforming Assets
The following table provides information on nonperforming assets as of the dates presented.
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
1 unchanged sentence
Nonaccrual loans
−Removed: Troubled debt restructured loans (nonperforming)
+Added: Loans past due 90 days or more and still accruing interest
+Added: Nonperforming troubled debt restructured loans (TDRs)
+Added: Total nonperforming loans
Total nonperforming assets
−Removed: Troubled debt restructured performing loans
−Removed: Percentage of nonperforming assets to total loans outstanding,
−Removed: net of deferred fees, and OREO
+Added: Performing TDRs
+Added: Total nonperforming loans and performing TDRs (1)
+Added: Percentage of nonperforming loans and performing TDRs to total loans, net of deferred fees
+Added: Percentage of nonperforming assets to total loans, net of deferred fees, and OREO
Percentage of nonperforming assets to total assets
−Removed: At March 31, 2020, nonaccrual loans and performing TDR loans totaled $9.2 million, or 0.12% of total gross loans, compared to $8.4 million, or 0.11% of total loans at December 31, 2019.
−Removed: At March 31, 2020, total nonaccrual loans and performing TDR loans resulting from troubled debt restructures represented $2.8 million, all of which were performing.
−Removed: Of the $9.2 million total nonaccrual loans and performing TDR loans as of March 31, 2020, $8.5 million were considered collateral dependent and measured using the fair value of the collateral based on current appraisals (obtained within 1 year).
+Added: Includes $7.2 million that were considered collateral dependent and measured using the fair value of the collateral based on current appraisals (obtained within 1 year).
Troubled Debt Restructurings (“TDRs”)
−Removed: Total TDRs were $2.8 million at March 31, 2020, compared to $3.4 million at December 31, 2019.
−Removed: At March 31, 2020, we had zero in nonperforming TDRs and $2.8 million of performing TDRs were accruing interest as restructured loans.
−Removed: Performing TDRs were generally provided a modification of loan repayment terms in response to borrower financial difficulties.
+Added: Total TDRs were $2.8 million at June 30, 2020, compared to $3.4 million at December 31, 2019.
+Added: At June 30, 2020, all of our TDRs were performing and accruing interest as restructured loans.
+Added: Our performing TDRs were generally provided a modification of loan repayment terms in response to borrower financial difficulties.
The performing restructured loans represent the only loans accruing interest at each respective reporting date.
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Upon exiting the deferral program, the measurement of loan delinquency will resume where it had left off upon entry into the program.
−Removed: Through May 3, 2020, we have granted temporary payment deferments of interest or of principal and interest for 90 days on 620 loans in the amount of $940 million, or approximately 13% of our total loan portfolio, at March 31, 2020.
+Added: Through July 10, 2020, we have granted temporary payment deferments of principal, interest or of principal and interest for primarily 90 days on 820 loans with a gross balance of $1.27 billion, or approximately 15% of our total loan portfolio at June 30, 2020.
+Added: Principal and interest deferments represented 80% of the total deferred payments and approximately 6% were second deferment requests approved by the Bank as of July 10, 2020.
+Added: It is likely that additional deferments will be granted in future periods.
+Added: The majority of the loans with payment deferments were Commercial Real Estate loans, which represented approximately $1.10 billion of the $1.27 billion.
+Added: Approximately 7% of the loans with deferred payments are considered classified.
The following table provides a summary of TDRs as of the dates presented.
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
12 unchanged sentences
Total nonperforming TDRs
−Removed: At March 31, 2020, there was no allowance for credit losses allocated to TDRs.
+Added: At June 30, 2020, there was no allowance for credit losses allocated to TDRs.
At December 31, 2019, there was no allowance for credit losses specifically allocated to TDRs.
Impairment amounts identified are typically charged off against the allowance at the time a probable loss is determined.
−Removed: There were no charge-offs on TDRs for the three months ended March 31, 2020 and 2019.
+Added: There were no charge-offs on TDRs for the six months ended June 30, 2020, compared to $78,000 for the six months ended June 30, 2019.
Nonperforming Assets and Delinquencies
7 unchanged sentences
Consumer and other loans
−Removed: % of Total gross loans
+Added: % of Total loans
Past due 30-89
3 unchanged sentences
Consumer and other loans
−Removed: % of Total gross loans
+Added: % of Total loans
Commercial real estate
Total nonperforming, past due, and OREO
−Removed: % of Total gross loans
−Removed: Nonperforming loans, defined as nonaccrual loans plus nonperforming TDR loans, were $6.4 million at March 31, 2020, or 0.09% of total loans.
−Removed: Total nonperforming loans at March 31, 2020 included $4.7 million of nonperforming loans acquired from CB in the third quarter of 2018.
−Removed: This compares to nonperforming loans of $5.3 million, or 0.07% of total loans, at December 31, 2019 and $17.0 million, or 0.22% of total loans, at March 31, 2019.
−Removed: The $1.2 million quarter-over-quarter increase in nonperforming loans was primarily due to $716,000 in nonperforming SBA loans, $437,000 in nonperforming commercial and industrial loans, and $223,000 in nonperforming commercial real estate loans.
−Removed: This was partially offset by a $211,000 decrease in nonperforming consumer and other loans.
+Added: % of Total loans
+Added: As of June 30, 2020, nonperforming loans included $25,000 of commercial and industrial loans past due 90 days or more and still accruing interest.
+Added: Nonperforming loans, defined as nonaccrual loans, nonperforming TDR loans and loans past due 90 days or more and still accruing interest, were $6.8 million at June 30, 2020, or 0.08% of total loans.
+Added: Total nonperforming loans at June 30, 2020 included $4.3 million of nonperforming loans acquired from CB in the third quarter of 2018.
+Added: This compares to nonperforming loans of $5.3 million, or 0.07% of total loans, at December 31, 2019 and $11.3 million, or 0.15% of total loans, at June 30, 2019.
+Added: The $389,000 quarter-over-quarter increase in nonperforming loans was primarily due to increases of $1.7 million in nonperforming commercial real estate loans, $216,000 in nonperforming SFR mortgage loans, and $123,000 in nonperforming consumer and other loans.
+Added: This was partially offset by a $1.2 million decrease in nonperforming SBA loans and a $481,000 decrease in nonperforming commercial and industrial loans.
In response to the COVID-19
2 unchanged sentences
The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan.
−Removed: At March 31, 2020 and December 31, 2019, we had four OREO properties with a carrying value of $4.9 million, compared to one OREO property with a carrying value of $2.3 million at March 31, 2019.
−Removed: There were no additions to or sales of OREO properties during the first quarter of 2020.
+Added: At June 30, 2020 and December 31, 2019, we had four OREO properties with a carrying value of $4.9 million, compared to one OREO property with a carrying value of $2.3 million at June 30, 2019.
+Added: There were no additions to or sales of OREO properties for the six months ended June 30, 2020.
Changes in economic and business conditions have had an impact on our market area and on our loan portfolio.
7 unchanged sentences
of the notes to the unaudited condensed consolidated financial statements.
−Removed: The allowance for credit losses totaled $82.6 million as of March 31, 2020, compared to $68.7 million as of December 31, 2019 and $65.2 million as of March 31, 2019.
−Removed: Upon implementation of CECL, a transition adjustment of $1.8 million was added to the beginning balance of the allowance and was increased by a $12.0 million credit loss provision in the first quarter of 2020 due to the severe forecasted economic disruption forecasted as a result of the coronavirus pandemic.
−Removed: Net recoveries were $141,000 for the three months ended March 31, 2020.
+Added: The allowance for credit losses totaled $94.0 million as of June 30, 2020, compared to $68.7 million as of December 31, 2019 and $67.1 million as of June 30, 2019.
+Added: Our allowance for credit losses at June 30, 2020 was 1.12%, or 1.29% of total loans when excluding the $1.10 billion in PPP loans.
+Added: Upon implementation of CECL, a transition adjustment of $1.8 million was added to the beginning balance of the allowance and was increased by a $23.5 million credit loss provision in the first six months of 2020 due to the severe economic disruption forecasted as a result of the COVID-19
+Added: Net charge-offs were $17,000 for the six months ended June 30, 2020.
This compares to a $3.5 million loan loss provision and $19,000 in net recoveries for the same period of 2019.
3 unchanged sentences
Our economic forecast incorporates a weighting of multiple forecasts.
−Removed: The forecast includes a reasonable and supportable forecast period of two to three years for the macroeconomic variables, which revert to an historical mean based on an input reversion approach.
−Removed: We consider publicly published economic forecasts from multiple sources, including the Moody’s forecast from March 27, 2020 that reflected the most recent available information and forecast of evolving impacts on macroeconomic variables from the COVID-19
−Removed: This stressed economic forecast included a significant contraction in GDP approaching 20% in the second quarter of 2020 and the unemployment rate rising to more than 9% in the second quarter and sustaining at an elevated level through 2020 and into 2021.
−Removed: If the economic forecast deteriorates further due to the COVID-19 epidemic, we may experience increases in the allowance for credit losses in future periods.
+Added: The forecast includes a reasonable and supportable forecast period of two to three years for the macroeconomic variables, which revert to a historical mean based on an input reversion approach.
+Added: We consider publicly published economic forecasts from multiple sources, including Moody’s.
+Added: The forecast continues to reflect the most recent available information on the evolving impacts on macroeconomic variables from the COVID-19
+Added: The resulting stressed economic forecast includes a significant contraction in GDP of 30% in the second quarter of 2020, followed by an 18% rebound in GDP in the third quarter and economic growth not returning until the second half of 2021.
+Added: In addition, the unemployment rate is forecasted to rise to more than 14% in the second quarter and is expected to be at an elevated level through 2022.
+Added: If the economic forecast deteriorates further due to the COVID-19
+Added: epidemic, or the economic impact on our borrowers is more severe than we have forecasted, we may experience increases in the allowance for credit losses in future periods.
The table below presents a summary of charge-offs and recoveries by type, the provision for credit losses on loans, and the resulting allowance for credit losses for the periods presented.
−Removed: As of and For the
−Removed: Three Months Ended
+Added: As of and For
+Added: the Six Months
+Added: Ended June 30,
(Dollars in thousands)
11 unchanged sentences
Total recoveries
−Removed: Net recoveries
+Added: Net (charge-offs) recoveries
Provision for credit losses
12 unchanged sentences
Allowance for credit losses to total loans at end of period
−Removed: Net recoveries to allowance for credit losses
−Removed: Net recoveries to provision for credit losses
−Removed: Includes PCI loans and is net of deferred loan origination fees, costs and discounts.
−Removed: The ACL/Total Loan Coverage Ratio as of March 31, 2020 increased to 1.11%, compared to 0.93% as of January 1, 2020 due to the more severe economic forecast that resulted from the COVID-19
+Added: Net (charge-offs) recoveries to allowance for credit losses
+Added: Net (charge-offs) recoveries to provision for credit losses
+Added: Net of deferred loan origination fees, costs and discounts.
+Added: The ACL/Total Loan Coverage Ratio as of June 30, 2020 increased to 1.12%, compared to 0.93% as of January 1, 2020 due to the more severe economic forecast that resulted from the COVID-19
At implementation of CECL on January 1, 2020, the reserve for unfunded loan commitments included a transition adjustment of $41,000 for our off-balance
sheet credit exposures.
−Removed: The Bank’s CECL methodology also produced an allowance of $9.0 million for our off-balance
+Added: The Bank’s ACL methodology also produced an allowance of $9.0 million for our off-balance
sheet credit exposures, which was unchanged from the allowance at January 1, 2020.
−Removed: While we believe that the allowance at March 31, 2020 was appropriate to absorb losses from known or inherent risks in the portfolio, no assurance can be given that economic conditions, interest rate fluctuations, conditions of our borrowers (including fraudulent activity), or natural disasters, which adversely affect our service areas or other circumstances or conditions, including those defined above, will not be reflected in increased provisions for credit losses in the future.
+Added: While we believe that the allowance at June 30, 2020 was appropriate to absorb losses from known or inherent risks in the portfolio, no assurance can be given that economic conditions, interest rate fluctuations, conditions of our borrowers (including fraudulent activity), or natural disasters, which adversely affect our service areas or other circumstances or conditions, including those defined above, will not be reflected in increased provisions for credit losses in the future.
The primary source of funds to support earning assets (loans and investments) is the generation of deposits.
−Removed: Total deposits were $9.11 billion at March 31, 2020.
−Removed: This represented an increase of $408.7 million, or 4.69%, over total deposits of $8.70 billion at December 31, 2019.
+Added: Total deposits were $10.98 billion at June 30, 2020.
+Added: This represented an increase of $2.28 billion, or 26.18%, over total deposits of $8.70 billion at December 31, 2019.
The composition of deposits is summarized as of the dates presented in the table below.
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
6 unchanged sentences
The amount of noninterest-bearing deposits in relation to total deposits is an integral element in our strategy of seeking to achieve a low cost of funds.
−Removed: Noninterest-bearing deposits totaled $5.57 billion at March 31, 2020, representing an increase of $327.1 million, or 6.24%, from noninterest-bearing deposits of $5.25 billion at December 31, 2019.
−Removed: Noninterest-bearing deposits represented 61.15% of total deposits for March 31, 2020, compared to 60.26% of total deposits for December 31, 2019.
−Removed: Savings deposits, which include savings, interest-bearing demand, and money market accounts, totaled $3.09 billion at March 31, 2020, representing an increase of $76.4 million, or 2.54%, from savings deposits of $3.01 billion at December 31, 2019.
−Removed: Time deposits totaled $451.4 million at March 31, 2020, representing an increase of $5.1 million, or 1.15%, from total time deposits of $446.3 million for December 31, 2019.
−Removed: In order to enhance the Bank’s spread between its cost of funds and interest-earning assets, we first seek noninterest-bearing deposits (the lowest cost of funds to the Bank).
−Removed: Next, we pursue growth in interest-bearing deposits, and finally, we supplement the growth in deposits with borrowed funds (borrowings and customer repurchase agreements).
−Removed: Average borrowed funds, as a percent of total funding (total deposits plus borrowed funds), was 5.19% for the first quarter of 2020, compared to 7.08% for the same period of 2019.
+Added: Noninterest-bearing deposits totaled $6.90 billion at June 30, 2020, representing an increase of $1.66 billion, or 31.57%, from noninterest-bearing deposits of $5.25 billion at December 31, 2019.
+Added: Noninterest-bearing deposits represented 62.83% of total deposits for June 30, 2020, compared to 60.26% of total deposits for December 31, 2019.
+Added: Savings deposits, which include savings, interest-bearing demand, and money market accounts, totaled $3.62 billion at June 30, 2020, representing an increase of $609.4 million, or 20.23%, from savings deposits of $3.01 billion at December 31, 2019.
+Added: Time deposits totaled $459.7 million at June 30, 2020, representing an increase of $13.4 million, or 3.00%, from total time deposits of $446.3 million for December 31, 2019.
We offer a repurchase agreement product to our customers.
2 unchanged sentences
balance in a demand deposit account, in order to earn interest.
−Removed: As of March 31, 2020 and December 31, 2019, total funds borrowed under these agreements were $368.9 million and $428.7 million, respectively, with a weighted average interest rate of 0.26% and 0.44%, respectively.
−Removed: We had no short-term borrowings at March 31, 2020 and December 31, 2019.
−Removed: At March 31, 2020, $6.06 billion of loans and $1.63 billion of investment securities, at carrying value, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.
+Added: As of June 30 2020 and December 31, 2019, total funds borrowed under these agreements were $468.2 million and $428.7 million, respectively, with a weighted average interest rate of 0.20% and 0.44%, respectively.
+Added: At June 30, 2020, we had $10.0 million in short-term borrowings that are interest-free advances from the FHLB.
+Added: We had zero in short-term borrowings at December 31, 2019.
+Added: At June 30, 2020, $6.00 billion of loans and $1.87 billion of investment securities, at carrying value, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.
Aggregate Contractual Obligations
−Removed: The following table summarizes the aggregate contractual obligations as of March 31, 2020.
+Added: The following table summarizes the aggregate contractual obligations as of June 30, 2020.
Maturity by Period
−Removed: Less Than One
(Dollars in thousands)
8 unchanged sentences
These amounts are due to customers.
−Removed: At March 31, 2020, we had no short-term borrowings, compared to zero at December 31, 2019, and $153.0 million at March 31, 2019.
+Added: At June 30, 2020, we had $10.0 million in FHLB short-term borrowings with a cost of 0.0%, compared to zero at December 31, 2019 and June 30, 2019.
Junior subordinated debentures represent the amounts that are due from the Company to CVB Statutory Trust III.
8 unchanged sentences
The following table summarizes the off-balance
−Removed: sheet items at March 31, 2020.
+Added: sheet items at June 30, 2020.
Maturity by Period
7 unchanged sentences
Obligations under letters of credit
−Removed: Total commitments to extend credit to agribusiness were $19.5 million at March 31, 2020.
−Removed: As of March 31, 2020, we had commitments to extend credit of approximately $1.56 billion, and obligations under letters of credit of $50.2 million.
+Added: Total commitments to extend credit to agribusiness were $17.1 million at June 30, 2020.
+Added: As of June 30, 2020, we had commitments to extend credit of approximately $1.67 billion, and obligations under letters of credit of $46.7 million.
Commitments to extend credit are agreements to lend to customers, provided there is no violation of any material condition established in the contract.
5 unchanged sentences
Due to the adoption of CECL on January 1, 2020, a transition adjustment of $41,000 was added to the beginning balance of the reserve for unfunded loan commitments.
−Removed: The Company recorded no provision or recapture of provision for unfunded loan commitments for three months ended March 31, 2020 and 2019.
−Removed: The Company had a reserve for unfunded loan commitments of $9.0 million as of March 31, 2020 and December 31, 2019 included in other liabilities.
+Added: The Company recorded no provision or recapture of provision for unfunded loan commitments for the three and six months ended June 30, 2020 and 2019.
+Added: The Company had a reserve for unfunded loan commitments of $9.0 million as of June 30, 2020 and December 31, 2019 included in other liabilities.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial performance of a customer to a third party.
6 unchanged sentences
As part of this ongoing assessment, the Board of Directors reviews the various components of capital.
−Removed: Total equity decreased $52.7 million, or 2.67%, to $1.94 billion at March 31, 2020, compared to total equity of $1.99 billion at December 31, 2019.
−Removed: The $52.7 million decrease in equity was primarily due to the repurchase of 4.9 million shares of common stock for $91.7 million under our 10b5-1 stock repurchase program.
+Added: Total equity decreased $35.0 million, or 1.76%, to $1.96 billion at June 30, 2020, compared to total equity of $1.99 billion at December 31, 2019.
+Added: The $35.0 million decrease in equity was primarily due to the repurchase of 4.9 million shares of common stock for $91.7 million under our 10b5-1
+Added: stock repurchase program.
We previously announced that we suspended this 10b5-1
stock repurchase program due to the uncertainty of the COVID-19
−Removed: We had $38.0 million in net earnings during the quarter, offset by $24.4 million in cash dividends declared and a cumulative effect adjustment to beginning retained earnings of $1.3 million, net of tax, due to the adoption of CECL on January 1, 2020.
+Added: We had $79.6 million in net earnings during the first six months of 2020, offset by $48.8 million in cash dividends declared and a cumulative effect adjustment to beginning retained earnings of $1.3 million, net of tax, due to the adoption of CECL on January 1, 2020.
Our equity also increased by $24.9 million as a result of an increase in other comprehensive income from the increase in our tax adjusted market value of our available-for-sale
investment securities.
−Removed: Our tangible common equity ratio was 11.3% at March 31, 2020.
−Removed: During the first quarter of 2020, the Board of Directors of CVB declared quarterly cash dividends totaling $0.18 per share.
+Added: Our tangible common equity ratio was 9.63% at June 30, 2020.
+Added: During the second quarter of 2020, the Board of Directors of CVB declared quarterly cash dividends totaling $0.18 per share.
Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future.
2 unchanged sentences
There is no expiration date for this repurchase program.
−Removed: Up to 9,577,917 of such shares may be repurchased from time to time under the Company’s current 10b5-1
+Added: Up to 9,577,917 of such shares were available for repurchase under the Company’s current 10b5-1
plan originally adopted in November, 2018 and subsequently amended in July, 2019.
1 unchanged sentence
stock repurchase program due to the uncertainty of the COVID-19
−Removed: For the three months ended March 31, 2020, the Company repurchased 4,944,290 shares of CVB common stock outstanding under this program.
−Removed: As of March 31, 2020, we have 4,585,145 shares of CVB common stock remaining that are eligible for repurchase under the common stock repurchase program.
+Added: For the six months ended June 30, 2020, the Company repurchased 4,944,290 shares of CVB common stock outstanding under this program.
+Added: As of June 30, 2020, we have 4,585,145 shares of CVB common stock remaining that are eligible for repurchase under the common stock repurchase program.
The Bank and the Company are required to meet risk-based capital standards under the revised capital framework referred to as Basel III set by their respective regulatory authorities.
2 unchanged sentences
To be considered “well-capitalized” for bank regulatory purposes, the Bank and the Company are required to have a CET1 capital ratio equal to or greater than 6.5%, a Tier 1 risk-based capital ratio equal to or greater than 8.0%, a total risk-based capital ratio equal to or greater than 10.0% and a Tier 1 leverage ratio equal to or greater than 5.0%.
−Removed: At March 31, 2020, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios required to be considered “well-capitalized” for regulatory purposes.
+Added: At June 30, 2020, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios required to be considered “well-capitalized” for regulatory purposes.
For further information about capital requirements and our capital ratios, see “Item 1.
2 unchanged sentences
for the year ended December 31, 2019.
−Removed: At March 31, 2020, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios, under the revised capital framework referred to as Basel III, required to be considered “well-capitalized” for regulatory purposes.
+Added: At June 30, 2020, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios, under the revised capital framework referred to as Basel III, required to be considered “well-capitalized” for regulatory purposes.
We did not elect to phase in the impact of CECL on regulatory capital, as allowed under the interim final rule of the FDIC and other U.S.
1 unchanged sentence
The table below presents the Company’s and the Bank’s risk-based and leverage capital ratios for the periods presented.
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
20 unchanged sentences
due to a variety of factors, including the stability of our deposit base, prevailing interest rates, and market conditions.
−Removed: Total deposits of $9.11 billion at March 31, 2020 increased $408.7 million, or 4.69%, over total deposits of $8.70 billion at December 31, 2019.
+Added: Total deposits of $10.98 billion at June 30, 2020 increased $2.28 billion, or 26.18%, over total deposits of $8.70 billion at December 31, 2019.
+Added: This significant deposit growth was primarily due to proceeds from PPP loans and our customers maintaining greater liquidity.
In general, our liquidity is managed daily by controlling the level of liquid assets as well as the use of funds provided by the cash flow from the investment portfolio, loan demand and deposit fluctuations.
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We can obtain additional liquidity from deposit growth by offering competitive interest rates on deposits from both our local and national wholesale markets.
−Removed: At quarter end, we had only $25.8 million in subordinated debt and no other borrowings.
+Added: At June 30, 2020, we had only $25.8 million in subordinated debt and $10.0 million in FHLB short-term borrowings at 0% cost.
The Bank has available lines of credit exceeding $4 billion, most of which is secured by pledged loans.
−Removed: We are well positioned with a balance sheet that is highly liquid, funded almost entirely with core deposits and the availability of significant off-balance
+Added: Our balance sheet has significant liquidity and our assets are funded almost entirely with core deposits.
+Added: Furthermore, we have significant off-balance
sheet sources of liquidity.
5 unchanged sentences
Uses of funds include withdrawal of deposits, interest paid on deposits, increased loan balances, purchases, and noninterest expenses.
−Removed: Below is a summary of our average cash position and statement of cash flows for the three months ended March 31, 2020 and 2019.
+Added: Below is a summary of our average cash position and statement of cash flows for the three and six months ended June 30, 2020 and 2019.
For further details see our “ Condensed Consolidated Statements of Cash Flows
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Consolidated Summary of Cash Flows
−Removed: For the Three Months Ended
+Added: Six Months Ended June 30,
(Dollars in thousands)
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Net cash provided by operating activities
−Removed: Net cash provided by investing activities
+Added: Net cash (used in) provided by investing activities
Net cash provided by (used in) financing activities
Net increase in cash and cash equivalents
−Removed: Average cash and cash equivalents increased by $223.4 million, or 119.81%, to $409.9 million for the three months ended March 31, 2020, compared to $186.5 million for the same period of 2019.
−Removed: At March 31, 2020, cash and cash equivalents totaled $705.7 million.
−Removed: This represented an increase of $533.5 million, or 309.80%, from $172.2 million at March 31, 2019.
+Added: Average cash and cash equivalents increased by $615.7 million, or 334.07%, to $800.0 million for the six months ended June 30, 2020, compared to $184.3 million for the same period of 2019.
+Added: At June 30, 2020, cash and cash equivalents totaled $1.93 billion.
+Added: This represented an increase of $1.75 billion, or 996.04%, from $175.8 million at June 30, 2019.
Interest Rate Sensitivity Management
23 unchanged sentences
Estimated Net Interest Income Sensitivity (1)
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
Interest Rate Scenario
+Added: 12-month Period
+Added: 24-month Period
Interest Rate Scenario
+Added: 12-month Period
+Added: 24-month Period
+ 200 basis points
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EVE uses instantaneous changes in rates, as shown in the table below.
−Removed: Assumptions about the timing and variability of balance sheet cash flows are critical in the
−Removed: EVE analysis.
+Added: Assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis.
Particularly important are the assumptions driving prepayments and the expected duration and pricing of the indeterminate deposit portfolios.
EVE sensitivity is reported in both upward and downward rate shocks.
−Removed: At March 31, 2020 and December 31, 2019, the EVE profile indicates a decline in net balance sheet value due to instantaneous downward changes in rates, compared to an increase resulting from an increase in rates.
+Added: At June 30, 2020 and December 31, 2019, the EVE profile indicates a decline in net balance sheet value due to instantaneous downward changes in rates, compared to an increase resulting from an increase in rates.
Economic Value of Equity Sensitivity
Instantaneous Rate Change
−Removed: March 31, 2020
+Added: June 30, 2020
December 31, 2019
7 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.