What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-05 · 187 added, 156 removed, 850 unchanged (29% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts) June 30, 2020 December 31, 2019

(In thousands, except share amounts) September 30, 2020 December 31, 2019

Cash and due from banks $ 33,447 $ 24,195

3 unchanged sentences

Equity securities 7,655 7,472

Loans, less allowance for credit losses of $13,937 at June 30, 2020 and $9,130 at December 31, 2019

1,111,954 934,250

Loans, less allowance for credit losses of $14,657 at September 30, 2020 and $9,130 at December 31, 2019 1,095,232 934,250

Bank premises and equipment, net 7,257 7,618

19 unchanged sentences

issued and outstanding:

12,494,597 at June 30, 2020 and 13,052,407 at December 31, 2019

79,059 89,379

12,507,658 at September 30, 2020 and 13,052,407 at December 31, 2019 79,269 89,379

Retained earnings 145,045 135,932

3 unchanged sentences

See notes to unaudited consolidated financial statements.

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CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended June 30, For the Six Months

Ended June 30,

For the Three Months Ended September 30, For the Nine Months

Ended September 30,

(In thousands, except share and per-share amounts) 2020 2019 2020 2019

19 unchanged sentences

Interchange fees 355 374 995 1,101

Net realized gains (losses) on sales of investment securities

( 58 ) 2,459 4,140 3,511

Net realized gains on sales of investment securities 57 1,685 4,197 5,196

Federal Home Loan Bank dividends 71 109 253 348

26 unchanged sentences

See notes to unaudited consolidated financial statements.

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CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

1 unchanged sentence

For the Three Months

Ended June 30, For the Six Months

Ended June 30,

Ended September 30, For the Nine Months

Ended September 30,

(In thousands) 2020 2019 2020 2019

10 unchanged sentences

See notes to unaudited consolidated financial statements.

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CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED JUNE 30, 2020 AND 2019

THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Common Stock Accumulated

3 unchanged sentences

(In thousands, except share amounts) Shares Amount

Balance, March 31, 2019 13,680,930 $ 102,395 $ 124,138 $ 922 $ 227,455

Balance, June 30, 2019 13,488,983 $ 98,210 $ 128,723 $ 4,747 $ 231,680

Net income — — 5,691 — 5,691

9 unchanged sentences

Stock options exercised

8,184 65 — — 65

Repurchase and retirement of common stock

( 188,383 ) ( 3,873 ) ( 3,873 )

Balance, September 30, 2019 13,301,395 $ 94,516 $ 132,935 $ 5,731 $ 233,182

Balance, June 30, 2020 12,494,597 $ 79,059 $ 142,076 $ 7,423 $ 228,558

Balance, March 31, 2020 12,472,939 $ 78,854 $ 141,147 $ ( 1,328 ) $ 218,673

— — 4,344 — 4,344

2 unchanged sentences

Restricted stock granted net of forfeitures

14,090 — — — —

Stock issued under employee stock purchase plan

6 unchanged sentences

8,350 50 — — 50

Balance, June 30, 2020 12,494,597 $ 79,059 $ 142,076 $ 7,423 $ 228,558

Balance, September 30, 2020 12,507,658 $ 79,269 $ 145,045 $ 11,466 $ 235,780

See notes to unaudited consolidated financial statements.

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CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2020 AND 2019

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Comprehensive Income (Loss)

19 unchanged sentences

22,120 163 — — 163

Balance, June 30, 2019 13,488,983 $ 98,210 $ 128,723 $ 4,747 $ 231,680

Balance, September 30, 2019 13,301,395 $ 94,516 $ 132,935 $ 5,731 $ 233,182

Balance, January 1, 2020 13,052,407 $ 89,379 $ 135,932 $ 2,817 $ 228,128

15 unchanged sentences

( 621,379 ) ( 11,052 ) — — ( 11,052 )

Balance, June 30, 2020 12,494,597 $ 79,059 $ 142,076 $ 7,423 $ 228,558

Balance, September 30, 2020 12,507,658 $ 79,269 $ 145,045 $ 11,466 $ 235,780

See notes to unaudited consolidated financial statements.

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CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(In thousands) 2020 2019

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Net (increase) decrease in deferred loan costs ( 5,975 ) 132

Net increase in deferred loan fees ( 5,304 ) ( 16 )

Depreciation 668 1,410

38 unchanged sentences

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,010 $ 43,037

For the Six Months

Ended June 30,

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For the Nine Months

Ended September 30,

(In thousands) 2020 2019

7 unchanged sentences

See notes to unaudited consolidated financial statements.

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Basis of Presentation

5 unchanged sentences

These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2019 Annual Report to Shareholders on Form 10-K.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at June 30, 2020, and the results of its operations and its cash flows for the six-month interim periods ended June 30, 2020 and 2019 have been included.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at September 30, 2020, and the results of its operations and its cash flows for the nine-month interim periods ended September 30, 2020 and 2019 have been included.

The results of operations for interim periods are not necessarily indicative of results for the full year.

6 unchanged sentences

In December 2019, a novel strain of coronavirus, COVID-19, was reported in Wuhan, China.

COVID-19 continues to aggressively spread globally and has spread to over 216 countries, including all 50 states in the United States.

COVID-19 continues to aggressively spread globally, including all 50 states in the United States.

A prolonged COVID-19 outbreak, or any other epidemic that harms the global economy, U.S.

economy, or the economies in which we operate, could adversely affect our operations.

While the spread of COVID-19 has minimally affected our operations as of June 30, 2020, it has caused significant economic disruption throughout the United States as state and local governments issued “shelter at home” orders along with the closing of non-essential businesses.

While the spread of COVID-19 has minimally affected our operations as of September 30, 2020, it has caused significant economic disruption throughout the United States as state and local governments issued “shelter at home” orders along with the closing of non-essential businesses.

The potential financial impact is unknown at this time.

15 unchanged sentences

On August 15, 2019, the FASB issued a proposed Accounting Standards Update (ASU), “Financial

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Instruments -Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

8 unchanged sentences

While the Company is currently unable to reasonably estimate the impact of adopting this new guidance, management expects the impact of adoption will be significantly influenced by the composition and quality of the Company’s loans as well as the economic conditions as of the date of adoption.

The Company also anticipates significant changes to the processes and procedures for calculating the reserve for credit losses and continues to evaluate the potential impact on our consolidated financial statements.

The Company also anticipates changes to the processes and procedures for calculating the reserve for credit losses and continues to evaluate the potential impact on our consolidated financial statements.

FASB Accounting Standards Update (ASU) 2018-13 - Fair Value Measurement (Subtopic 820) :

20 unchanged sentences

Valuations within these levels are based upon:

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Level 1 — Quoted market prices (unadjusted) for identical instruments traded in active exchange markets that the Company has the ability to access as of the measurement date.

7 unchanged sentences

The estimated carrying and fair values of the Company’s financial instruments are as follows (in thousands):

June 30, 2020

September 30, 2020

Amount Fair Value

28 unchanged sentences

These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business

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related to the instruments.

30 unchanged sentences

(h) Accrued Interest Receivable/Payable — The fair value of accrued interest receivable and payable is based on the fair value hierarchy of the related asset or liability.

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(i) Off-Balance Sheet Instruments — Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

1 unchanged sentence

Assets Recorded at Fair Value

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2020:

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2020:

Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis as of June 30, 2020 (in thousands).

The Company is required or permitted to record the following assets at fair value on a recurring basis as of September 30, 2020 (in thousands).

Description Fair Value Level 1 Level 2 Level 3

15 unchanged sentences

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

During the six months ended June 30, 2020, no transfers between levels occurred.

There were no Level 3 assets measured at fair value on a recurring basis at or during the six months ended June 30, 2020.

Also there were no liabilities measured at fair value on a recurring basis at June 30, 2020.

During the nine months ended September 30, 2020, no transfers between levels occurred.

There were no Level 3 assets measured at fair value on a recurring basis at or during the nine months ended September 30, 2020.

Also there were no liabilities measured at fair value on a recurring basis at September 30, 2020.

Non-recurring Basis

1 unchanged sentence

These include assets and liabilities that are measured at the lower of cost or fair value that were recognized at

fair value which was below cost at June 30, 2020.

fair value which was below cost at September 30, 2020.

Fair Value Level 1 Level 2 Level 3

2 unchanged sentences

Total assets measured at fair value on a non-recurring basis $ 1,248 $ — $ — $ 1,248

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At the time a loan is considered impaired, it is valued at the lower of cost or fair value.

9 unchanged sentences

The discounted cash flow methods as prescribed by ASC Topic 310 is not a fair value measurement since the discount rate utilized is the loan’s effective interest rate which is not a market rate.

There were no changes in valuation techniques used during the six months ended ended June 30, 2020.

There were no changes in valuation techniques used during the nine months ended ended September 30, 2020.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.

Once received, the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value is compared with independent data sources such as recent market data or industry-wide statistics.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $ 190,000 with a valuation allowance of $ 24,000 at June 30, 2020, and a resulting fair value of $ 166,000 .

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $ 1,735,000 with a valuation allowance of $ 487,000 at September 30, 2020, and a resulting fair value of $ 1,248,000 .

The valuation allowance represents specific allocations for the allowance for credit losses for impaired loans.

There were no charge-offs related to loans carried at fair value during the six months ended June 30, 2020 and 2019.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended June 30, 2020 and 2019 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at June 30, 2020.

There were no charge-offs related to loans carried at fair value during the nine months ended September 30, 2020 and 2019.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended September 30, 2020 and 2019 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at September 30, 2020.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of December 31, 2019:

21 unchanged sentences

Also there were no liabilities measured at fair value on a recurring basis at December 31, 2019.

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Non-recurring Basis

4 unchanged sentences

Government sponsored entity and agency securities collateralized by residential mortgage obligations, private label mortgage and asset backed securities (PLMABS), corporate debt securities, and obligations of states and political subdivisions securities.

As of June 30, 2020, $ 109,802,000 of these securities were held as collateral for borrowing arrangements, public funds, and for other purposes.

The fair value of the available-for-sale investment portfolio reflected a net unrealized gain of $ 10,538,000 at June 30, 2020 compared to an unrealized gain of $ 3,999,000 at December 31, 2019.

The unrealized gain/(loss) recorded is net of $ 3,115,000 and $ 1,182,000 in tax liabilities (benefits) as accumulated other comprehensive income (loss) within shareholders’ equity at June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, $ 157,758,000 of these securities were held as collateral for borrowing arrangements, public funds, and for other purposes.

The fair value of the available-for-sale investment portfolio reflected a net unrealized gain of $ 16,279,000 at September 30, 2020 compared to an unrealized gain of $ 3,999,000 at December 31, 2019.

The unrealized gain/(loss) recorded is net of $ 4,813,000 and $ 1,182,000 in tax liabilities (benefits) as accumulated other comprehensive income (loss) within shareholders’ equity at September 30, 2020 and December 31, 2019, respectively.

The following table sets forth the carrying values and estimated fair values of our investment securities portfolio at the dates indicated (in thousands):

June 30, 2020

September 30, 2020

Available-for-Sale Securities Amortized Cost Gross

21 unchanged sentences

Total available-for-sale $ 466,747 $ 8,688 $ ( 4,689 ) $ 470,746

Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended June 30, 2020 and 2019 are shown below (in thousands):

For the Three Months Ended June 30, For the Six Months

Ended June 30,

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Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended September 30, 2020 and 2019 are shown below (in thousands):

For the Three Months Ended September 30, For the Nine Months

Ended September 30,

Available-for-Sale Securities 2020 2019 2020 2019

4 unchanged sentences

As market interest rates or risks associated with a security’s issuer continue to change and impact the actual or perceived values of investment securities, the Company may determine that selling these securities and using proceeds to purchase securities that fit with the Company’s current risk profile is appropriate and beneficial to the Company.

The provision for income taxes includes $ 1,224,000 and $ 1,038,000 income tax impact from the reclassification of unrealized net gains on securities to realized net gains on securities for the six months ended June 30, 2020 and 2019, respectively.

The provision (benefit) for income taxes includes $( 17,000 ) and $ 727,000 income tax impact from the reclassification of unrealized net gains/(losses) on available-for-sale securities to realized net gains/(losses) on available-for-sale securities for the three months ended June 30, 2020 and 2019, respectively

The provision for income taxes includes $ 1,241,000 and $ 1,536,000 income tax impact from the reclassification of unrealized net gains on securities to realized net gains on securities for the nine months ended September 30, 2020 and 2019, respectively.

The provision (benefit) for income taxes includes $ 17,000 and $ 498,000 income tax impact from the reclassification of unrealized net gains/(losses) on available-for-sale securities to realized net gains/(losses) on available-for-sale securities for the three months ended September 30, 2020 and 2019, respectively

Investment securities, aggregated by investment category, with unrealized losses as of the dates indicated are summarized and classified according to the duration of the loss period as follows (in thousands):

June 30, 2020

September 30, 2020

Less than 12 Months 12 Months or More Total

29 unchanged sentences

The portion of the impairment that

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is attributable to a shortage in the present value of expected future cash flows relative to the amortized cost should be recorded as a current period charge to earnings.

The discount rate in this analysis is the original yield expected at time of purchase.

As of June 30, 2020, the Company performed an analysis of the investment portfolio to determine whether any of the investments held in the portfolio had an other-than-temporary impairment (OTTI).

The Company evaluated all individual available-for-sale investment securities with an unrealized loss at June 30, 2020 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at June 30, 2020 greater than 10 % of the recorded book value on that date, or which had an unrealized loss of more than $ 10,000 .

As of September 30, 2020, the Company performed an analysis of the investment portfolio to determine whether any of the investments held in the portfolio had an other-than-temporary impairment (OTTI).

The Company evaluated all individual available-for-sale investment securities with an unrealized loss at September 30, 2020 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at September 30, 2020 greater than 10 % of the recorded book value on that date, or which had an unrealized loss of more than $ 10,000 .

The Company also analyzed any securities that may have been downgraded by credit rating agencies.

For those investment securities that met the evaluation criteria, management obtained and reviewed the most recently published national credit ratings for those investment securities.

For those bonds that were obligations of states and political subdivisions with an investment grade rating by the rating agencies, the Company also evaluated the financial condition of the municipality and any applicable municipal bond insurance provider and concluded there were no OTTI losses recorded during the six months ended June 30, 2020.

Government Agencies

At June 30, 2020, the Company held 11 U.S.

At September 30, 2020, the Company held 11 U.S.

Government agency securities of which five were in a loss position for less than 12 months and five had been in a loss position for 12 months or more.

2 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized costs of the investment.

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold, and it is more likely than not that it will not be required to sell, those investments until a recovery of fair value, which may be the maturity date, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Obligations of States and Political Subdivisions

At June 30, 2020, the Company held 74 obligations of states and political subdivision securities of which 12 were in a loss position for less than 12 months.

At September 30, 2020, the Company held 87 obligations of states and political subdivision securities of which 10 were in a loss position for less than 12 months.

The unrealized losses on the Company’s investments in obligations of states and political subdivision securities were caused by interest rate changes.

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell, and it is more likely than not that it will not be required to sell those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations

At June 30, 2020, the Company held 113 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which seven were in a loss position for less than 12 months and 19 have been in a loss position for more than 12 months.

At September 30, 2020, the Company held 118 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which 12 were in a loss position for less than 12 months and 17 have been in a loss position for more than 12 months.

The unrealized losses on the Company’s investments in U.S.

2 unchanged sentences

Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability to hold and does not intend to sell, and it is more likely than not that it will not be required to sell those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Private Label Mortgage and Asset Backed Securities

At June 30, 2020, the Company had a total of 23 Private Label Mortgage and Asset Backed Securities (PLMABS).

Seven of the PLMABS securities were in a loss position for less than 12 months and none have been in loss for more than 12 months at June 30, 2020.

At September 30, 2020, the Company had a total of 24 Private Label Mortgage and Asset Backed Securities (PLMABS).

Four of the PLMABS securities were in a loss position for less than 12 months and none have been in loss for more than 12 months at September 30, 2020.

The Company continues to monitor these securities for indications that declines in value, if any, may be other-than-temporary.

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Corporate Debt Securities

At June 30, 2020, the Company held four corporate debt securities of which two were in a loss position for less than 12 months.

The unrealized losses on the Company’s investments in corporate debt securities were caused by interest rate changes.

The amortized cost and estimated fair value of available-for-sale investment securities at June 30, 2020 by contractual maturity is shown below (in thousands).

At September 30, 2020, the Company held seven corporate debt securities of which two were in a loss position for less than 12 months.

The unrealized loss on the Company’s investments in corporate debt security was caused by interest rate changes.

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2020 by contractual maturity is shown below (in thousands).

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2020

September 30, 2020

Available-for-Sale Securities Amortized Cost Estimated Fair

13 unchanged sentences

Outstanding loans are summarized as follows:

Loan Type (Dollars in thousands) June 30, 2020 % of Total

Loan Type (Dollars in thousands) September 30, 2020 % of Total

Loans December 31, 2019 % of Total

15 unchanged sentences

Total loans $ 1,095,232 $ 934,250

At June 30, 2020 and December 31, 2019, loans originated under Small Business Administration (SBA) programs totaling $ 7,015,000 and $ 21,910,000 , respectively, were included in the real estate and commercial categories, of which, $ 5,204,000 or 74 % and $ 16,372,000 or 75 %, respectively, are secured by government guarantees.

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At September 30, 2020 and December 31, 2019, loans originated under Small Business Administration (SBA) programs totaling $ 24,816,000 and $ 21,910,000 , respectively, were included in the real estate and commercial categories, of which, $ 18,618,000 or 75 % and $ 16,372,000 or 75 %, respectively, are secured by government guarantees.

In addition, the Company participated in the SBA Paycheck Protection Program (PPP) to help provide loans to our business customers to provide them with additional working capital.

At June 30, 2020, 1,077 PPP loans totaling $ 211,575,000 were outstanding and included in the commercial and industrial line item above .

At September 30, 2020, 1,076 PPP loans totaling $ 210,057,000 were outstanding and included in the commercial and industrial line item above.

Allowance for Credit Losses

6 unchanged sentences

For all portfolio segments, the determination of the general reserve for loans that are not impaired is based on estimates made by management, including but not limited to, consideration of historical losses by portfolio segment (and in certain cases peer data) over the most recent 47 quarters, and qualitative factors including economic trends in the Company’s service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company’s underwriting policies, the character of the loan portfolio, and probable losses inherent in the portfolio taken as a whole.

The following table shows the summary of activities for the Allowance as of and for the three months ended June 30, 2020 and 2019 by portfolio segment (in thousands):

The following table shows the summary of activities for the Allowance as of and for the three months ended September 30, 2020 and 2019 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

Beginning balance, April 1, 2020 $ 1,657 $ 7,555 $ 1,236 $ 98 $ 10,546

Provision charged to operations 7 2,834 76 83 3,000

Beginning balance, July 1, 2020 $ 2,087 $ 10,389 $ 1,280 $ 181 $ 13,937

Provision (reversal) charged to operations ( 30 ) 267 60 303 600

Losses charged to allowance ( 43 ) — ( 2 ) — ( 45 )

Recoveries 146 — 19 — 165

Ending balance, June 30, 2020 $ 2,087 $ 10,389 $ 1,280 $ 181 $ 13,937

Ending balance, September 30, 2020 $ 2,160 $ 10,656 $ 1,357 $ 484 $ 14,657

Allowance for credit losses:

Beginning balance, April 1, 2019 $ 1,450 $ 6,709 $ 895 $ 64 $ 9,118

(Reversal) provision charged to operations 372 ( 156 ) 7 77 300

Beginning balance, July 1, 2019 $ 1,800 $ 6,553 $ 911 $ 141 $ 9,405

Provision (reversal) charged to operations 3 508 117 ( 378 ) 250

Losses charged to allowance ( 122 ) — ( 93 ) — ( 215 )

Recoveries 37 — 18 — 55

Ending balance, June 30, 2019 $ 1,800 $ 6,553 $ 911 $ 141 $ 9,405

The following table shows the summary of activities for the Allowance as of and for the six month ended June 30, 2020 and 2019 by portfolio segment (in thousands):

Ending balance, September 30, 2019 $ 1,718 $ 7,061 $ 953 $ ( 237 ) $ 9,495

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The following table shows the summary of activities for the Allowance as of and for the nine month ended September 30, 2020 and 2019 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

4 unchanged sentences

Recoveries 601 — 120 — 721

Ending balance, June 30, 2020 $ 2,087 $ 10,389 $ 1,280 $ 181 $ 13,937

Ending balance, September 30, 2020 $ 2,160 $ 10,656 $ 1,357 $ 484 $ 14,657

Allowance for credit losses:

Beginning balance, January 1, 2019 $ 1,671 $ 6,539 $ 826 $ 68 $ 9,104

(Reversal) provision charged to operations 120 14 68 73 275

Provision (reversal) charged to operations 123 522 185 ( 305 ) 525

Losses charged to allowance ( 172 ) — ( 108 ) — ( 280 )

Recoveries 96 — 50 — 146

Ending balance, June 30, 2019 $ 1,800 $ 6,553 $ 911 $ 141 $ 9,405

The following is a summary of the Allowance by impairment methodology and portfolio segment as of June 30, 2020 and December 31, 2019 (in thousands):

Ending balance, September 30, 2019 $ 1,718 $ 7,061 $ 953 $ ( 237 ) $ 9,495

The following is a summary of the Allowance by impairment methodology and portfolio segment as of September 30, 2020 and December 31, 2019 (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

Ending balance, June 30, 2020 $ 2,087 $ 10,389 $ 1,280 $ 181 $ 13,937

Ending balance, September 30, 2020 $ 2,160 $ 10,656 $ 1,357 $ 484 $ 14,657

Ending balance:

7 unchanged sentences

collectively evaluated for impairment $ 1,426 $ 6,766 $ 862 $ 36 $ 9,090

The following table shows the ending balances of loans as of June 30, 2020 and December 31, 2019 by portfolio segment and by impairment methodology (in thousands):

The following table shows the ending balances of loans as of September 30, 2020 and December 31, 2019 by portfolio segment and by impairment methodology (in thousands):

Commercial Real Estate Consumer Total

Ending balance, June 30, 2020 $ 330,194 $ 702,095 $ 98,062 $ 1,130,351

Ending balance, September 30, 2020 $ 319,240 $ 697,197 $ 97,241 $ 1,113,678

Ending balance:

8 unchanged sentences

$ 125,513 $ 706,506 $ 106,112 $ 938,131

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at June 30, 2020 (in thousands):

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The following table shows the loan portfolio by class allocated by management’s internal risk ratings at September 30, 2020 (in thousands):

Pass Special Mention Sub-Standard Doubtful Total

22 unchanged sentences

Total $ 879,844 $ 28,183 $ 33,838 $ — $ 941,865

The following table shows an aging analysis of the loan portfolio by class and the time past due at June 30, 2020 (in thousands):

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The following table shows an aging analysis of the loan portfolio by class and the time past due at September 30, 2020 (in thousands):

Past Due 60-89

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Total $ 185 $ 599 $ — $ 784 $ 941,081 $ 941,865 $ — $ 1,693

The following table shows information related to impaired loans by class at June 30, 2020 (in thousands):

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The following table shows information related to impaired loans by class at September 30, 2020 (in thousands):

Investment Unpaid

1 unchanged sentence

With no related allowance recorded:

Commercial and industrial $ 7,175 $ 7,175 $ —

Owner occupied $ 380 $ 412 $ —

Real estate construction and other land loans 29 29 —

Commercial real estate 507 544 —

Agricultural real estate 182 189 —

Total real estate 916 985 —

10 unchanged sentences

Equity loans and lines of credit 941 941 13

Consumer and installment 92 95 14

Total consumer 1,033 1,036 27

Total with an allowance recorded 4,450 4,484 739

1 unchanged sentence

The recorded investment in loans excludes accrued interest receivable and net loan origination fees, due to immateriality.

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The following table shows information related to impaired loans by class at December 31, 2019 (in thousands):

19 unchanged sentences

The recorded investment in loans excludes accrued interest receivable and net loan origination fees, due to immateriality.

The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the three months ended June 30, 2020 and 2019 (in thousands).

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

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The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the three months ended September 30, 2020 and 2019 (in thousands).

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Investment Interest

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Total $ 13,602 $ 170 $ 5,237 $ 31

The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the six months ended June 30, 2020 and 2019 (in thousands).

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

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The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the nine months ended September 30, 2020 and 2019 (in thousands).

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Investment Interest

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Equity loans and lines of credit 237 9 650 3

Consumer and installment — — — —

Total consumer 264 6 527 2

Total with no related allowance recorded 3,486 9 3,940 86

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Agricultural real estate 26 2 44 2

Other real estate — — — —

Total real estate 530 10 421 10

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Total $ 11,304 $ 578 $ 5,544 $ 139

Foregone interest on nonaccrual loans totaled $ 74,000 and $ 85,000 for the six month period ended June 30, 2020 and 2019, respectively.

Foregone interest on nonaccrual loans totaled $ 55,000 and $ 53,000 for the three month periods ended June 30, 2020 and 2019, respectively.

Foregone interest on nonaccrual loans totaled $ 135,000 and $ 105,000 for the nine month period ended September 30, 2020 and 2019, respectively.

Foregone interest on nonaccrual loans totaled $ 82,000 and $ 39,000 for the three month periods ended September 30, 2020 and 2019, respectively.

Troubled Debt Restructurings:

As of June 30, 2020 and December 31, 2019, the Company has a recorded investment in troubled debt restructurings of $ 11,781,000 and $ 2,362,000 , respectively.

The Company has allocated $ 93,000 and $ 38,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of June 30, 2020 and December 31, 2019, respectively.

The Company has committed to lend no additional amounts as of June 30, 2020 to customers with outstanding loans that are classified as troubled debt restructurings.

During the six months ended June 30, 2020, two loans were modified as troubled debt restructurings.

As of September 30, 2020 and December 31, 2019, the Company has a recorded investment in troubled debt restructurings of $ 9,228,000 and $ 2,362,000 , respectively.

The Company has allocated $ 33,000 and $ 38,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of September 30, 2020 and December 31, 2019, respectively.

The Company has committed to lend no additional amounts as of September 30, 2020 to customers with outstanding loans that are classified as troubled debt restructurings.

During the nine months ended September 30, 2020, two loans were modified as troubled debt restructurings.

The modification of the terms of such loans included one or a combination of the following:

a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.

a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with

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similar risk.

During the same period, there were no troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven or which resulted in a charge-off or change to the allowance for loan losses.

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The remaining TDRs disclosed below were not related to COVID-19 modifications.

The Company executed loan deferrals on outstanding balances of approximately $ 179 million resulting from the COVID-19 pandemic that were not classified as a TDRs at June 30, 2020.

The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2020 (in thousands):

The Company executed loan deferrals on outstanding balances of approximately $ 60.083 million resulting from the COVID-19 pandemic that were not classified as a TDRs at September 30, 2020.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2020 (in thousands):

Troubled Debt Restructurings:

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(3) Balance outstanding after principal modification, if any borrower reduction to recorded investment.

The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2019 (in thousands):

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2019 (in thousands):

Troubled Debt Restructurings:

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Total 2 $ 132 $ — $ 132 $ 124

During the quarter ended June 30, 2020 no loans were modified as troubled debt restructuring.

Troubled Debt Restructuring

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended June 30, 2019 (in thousands):

Troubled Debt Restructuring Number of Loans Pre-Modification Outstanding Recorded Investment (1) Principal Modification (2) Post Modification Outstanding Recorded Investment (3) Outstanding Recorded Investment

Equity loans and lines of credit 1 $ 119 $ — $ 119 $ 115

Total 1 $ 119 $ — $ 119 $ 115

Troubled Debt Restructurings:

During three months ended September 30, 2020 and September 30, 2019, no loans were modified as troubled debt restructuring.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

There were no defaults on troubled debt restructurings, within twelve months following the modification, during the six months ended and three months ended June 30, 2020 or June 30, 2019.

There were no defaults on troubled debt restructurings, within twelve months following the modification, during the nine months ended and three months ended September 30, 2020 or September 30, 2019.

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Business combinations involving the Company’s acquisition of the equity interests or net assets of another enterprise give rise to goodwill.

Total goodwill at September 30, 2020, was $ 53,777,000 consisting of $ 8,934,000 , $ 14,643,000 , $ 6,340,000 , $ 10,394,000 , and $ 13,466,000 representing the excess of the cost of Bank of Madera County, Service 1st Bancorp, Visalia Community Bank, Sierra Vista Bank, and Folsom Lake Bank, respectively, over the net of the amounts assigned to assets acquired and liabilities assumed in the transactions accounted for under the acquisition method of accounting.

The value of goodwill is ultimately derived from the Company’s ability to generate net earnings after the acquisitions and is not deductible for tax purposes.

A significant decline in net earnings, among other factors, could be indicative of a decline in the fair value of goodwill and result in impairment.

For that reason, goodwill is assessed at least annually for impairment.

The Company’s annual goodwill test is completed as of September 30 each year.

Management determined it appropriate to perform a quantitative goodwill impairment test in the third quarter of 2020.

A third party valuation specialist was engaged to assist with the performance of the test.

Based on this quantitative test, it was determined that the fair value of the reporting unit exceeded the carrying value as of September 30, 2020.

Therefore, there was no impairment of goodwill recorded during the three and nine months ended September 30, 2020.

Borrowing Arrangements

As of June 30, 2020 and December 31, 2019, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 438,589,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 255,973,000 as of June 30, 2020.

FHLB advances are also secured by investment securities with amortized costs totaling $ 197,000 and $ 248,000 and market values totaling $ 208,000 and $ 256,000 at June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and December 31, 2019, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 431,925,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 241,964,000 as of September 30, 2020.

FHLB advances are also secured by investment securities with amortized costs totaling $ 176,000 and $ 248,000 and market values totaling $ 185,000 and $ 256,000 at September 30, 2020 and December 31, 2019, respectively.

The Bank’s credit limit varies according to the amount and composition of the investment and loan portfolios pledged as collateral.

As of June 30, 2020, and December 31, 2019 the Company had no Federal funds purchased.

As of September 30, 2020, and December 31, 2019 the Company had no Federal funds purchased.

Commitments and Contingencies

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The Company uses the same credit policies in making commitments and conditional obligations as it does for loans.

Commitments to extend credit amounting to $ 315,695,000 and $ 291,182,000 were outstanding at June 30, 2020 and December 31, 2019, respectively.

Commitments to extend credit amounting to $ 317,461,000 and $ 291,182,000 were outstanding at September 30, 2020 and December 31, 2019, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract unless waived by the Bank.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Included in commitments to extend credit are undisbursed lines of credit totaling $ 314,105,000 and $ 289,465,000 at June 30, 2020 and December 31, 2019, respectively.

Included in commitments to extend credit are undisbursed lines of credit totaling $ 316,958,000 and $ 289,465,000 at September 30, 2020 and December 31, 2019, respectively.

Undisbursed lines of credit include credits whereby customers can repay principal and request principal advances during the term of the loan at their discretion and most expire between one and 12 months .

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $ 72,368,000 and $ 74,019,000 as of June 30, 2020 and December 31, 2019, respectively.

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $ 86,098,000 and $ 74,019,000 as of September 30, 2020 and December 31, 2019, respectively.

These commitments are agreements to lend to customers, subject to meeting certain construction progress requirements established in the contracts.

The underlying construction loans have fixed expiration dates.

Standby letters of credit and financial guarantees amounting to $ 1,590,000 and $ 1,717,000 were outstanding at June 30, 2020 and December 31, 2019, respectively.

Standby letters of credit and financial guarantees amounting to $ 503,000 and $ 1,717,000 were outstanding at September 30, 2020 and December 31, 2019, respectively.

Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

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Most standby letters of credit and guarantees carry a one year term or less.

The fair value of the liability related to these standby letters of credit, which represents the fees received for their issuance, was not significant at June 30, 2020 or December 31, 2019.

The fair value of the liability related to these standby letters of credit, which represents the fees received for their issuance, was not significant at September 30, 2020 or December 31, 2019.

The Company recognizes these fees as revenue over the term of the commitment or when the commitment is used.

The Company generally requires collateral or other security to support financial instruments with credit risk.

Management does not anticipate any material loss will result from the outstanding commitments to extend credit, standby letters of credit and financial guarantees.

At June 30, 2020 and December 31, 2019, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $ 175,000 and $ 250,000 , respectively.

Management does not anticipate any material loss will result from the outstanding commitments to extend credit, standby letters

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of credit and financial guarantees.

At September 30, 2020 and December 31, 2019, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $ 250,000 .

The contingent allocation for probable loan loss experience on unfunded obligations is calculated by management using an appropriate, systematic, and consistently applied process.

While related to credit losses, this allocation is not a part of the allowance for credit losses and is

considered separately as a liability for accounting and regulatory reporting purposes, and is included in Other Liabilities on the Company’s balance sheet.

While related to credit losses, this allocation is not a part of the allowance for credit losses and is considered separately as a liability for accounting and regulatory reporting purposes, and is included in Other Liabilities on the Company’s balance sheet.

In 2018, the Company sold its credit card portfolio to a third party vendor.

Part of the sale of the portfolio was to provide a guarantee of certain accounts which as of June 30, 2020, the total guarantee was $ 2,475,000 .

Part of the sale of the portfolio was to provide a guarantee of certain accounts which as of September 30, 2020, the total guarantee was $ 2,475,000 .

The Company is subject to legal proceedings and claims which arise in the ordinary course of business.

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Basic Earnings Per Share For the Three Months

Ended June 30, For the Six Months

Ended June 30,

Ended September 30, For the Nine Months

Ended September 30,

(In thousands, except share and per share amounts) 2020 2019 2020 2019

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Diluted Earnings Per Share For the Three Months

Ended June 30, For the Six Months

Ended June 30,

Ended September 30, For the Nine Months

Ended September 30,

(In thousands, except share and per share amounts) 2020 2019 2020 2019

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Diluted earnings per share $ 0.35 $ 0.42 $ 1.05 $ 1.25

No outstanding options or restricted stock awards were anti-dilutive for the six months ended June 30, 2020 and 2019.

During the three-month periods ended June 30, 2020 and 2019, no outstanding options or restricted stock awards were anti-dilutive.

No outstanding options or restricted stock awards were anti-dilutive for the nine months ended September 30, 2020 and 2019.

During the three-month periods ended September 30, 2020 and 2019, no outstanding options or restricted stock awards were anti-dilutive.

Share-Based Compensation

The Company has five share-based compensation plans as described below.

Share-based compensation cost recognized for those plans was $ 248,000 and $ 294,000 for the six months ended June 30, 2020 and 2019, respectively.

The recognized tax benefits for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $ 72,000 and $ 25,000 , respectively, for the six months ended June 30, 2020 and 2019.

The Central Valley Community Bancorp 2000 Stock Option Plan (2000 Plan) expired on November 15, 2010.

The Company has four share-based compensation plans as described below.

Share-based compensation cost recognized for those plans was $ 362,000 and $ 430,000 for the nine months ended September 30, 2020 and 2019, respectively.

The recognized tax benefits for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $ 78,000 and $ 25,000 , respectively, for the nine months ended September 30, 2020 and 2019.

The Central Valley Community Bancorp 2005 Omnibus Incentive Plan (2005 Plan) was adopted in May 2005 and expired March 16, 2015.

While outstanding arrangements to issue shares under these plans, including options, continue in force until their expiration, no new options will be granted under these plans.

While outstanding arrangements to issue shares under this plan, including options, continue in force until their expiration, no new options will be granted under this plan.

The Central Valley Community Bancorp 2015 Omnibus Incentive Plan (2015 Plan) was adopted in May 2015.

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Both plans allow for performance awards that may be in the form of cash or shares of the Company, including restricted stock.

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Outstanding arrangements to issue shares under this plan including options, will continue in force until expiration according to their respective terms.

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Shares are purchased at the end of each of the three-month offering periods at a 10 percent discount from the lower of the closing market price on the Offering Date (first trading day of each offering period) or the Investment Date (last trading day of each offering period).

The Company reserved 500,000 common shares to be set aside for the ESPP, and there were 465,711 shares available for future purchase under the plan as of June 30, 2020.

The Company reserved 500,000 common shares to be set aside for the ESPP, and there were 461,392 shares available for future purchase under the plan as of September 30, 2020.

Stock Option Plan

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The compensation cost for options granted is based on the weighted average grant date fair value per share.

No options to purchase shares of the Company’s common stock were granted during the six months ended June 30, 2020 and 2019.

A summary of the combined activity of the Company’s stock option compensation plans for the six months ended ended June 30, 2020 follows (in thousands, except per share amounts):

No options to purchase shares of the Company’s common stock were granted during the nine months ended September 30, 2020 and 2019.

A summary of the combined activity of the Company’s stock option compensation plans for the nine months ended September 30, 2020 follows (in thousands, except per share amounts):

Shares Weighted

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Options forfeited ( 550 ) $ 7.40

Options outstanding at June 30, 2020 85,770 $ 9.65 1.86 $ 475

Options vested or expected to vest at June 30, 2020 85,770 $ 9.65 1.86 $ 475

Options exercisable at June 30, 2020 85,770 $ 9.65 1.86 $ 475

Options outstanding at September 30, 2020 77,270 $ 10.05 1.77 $ 182,699

Options vested or expected to vest at September 30, 2020 77,270 $ 10.05 1.77 $ 182,699

Options exercisable at September 30, 2020 77,270 $ 10.05 1.77 $ 182,699

Information related to the stock option plan is as follows (in thousands):

For the Three Months

Ended June 30, For the Six Months

Ended June 30,

Ended September 30, For the Nine Months

Ended September 30,

2020 2019 2020 2019

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Excess tax benefit realized for option exercises $ 6 $ — $ 78 $ 25

As of June 30, 2020, there was no remaining unrecognized compensation cost related to stock options granted under all plans.

As of September 30, 2020, there was no remaining unrecognized compensation cost related to stock options granted under all plans.

Restricted and Performance Common Stock Awards

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The cost of these awards is recognized over the vesting period of the awards based on the fair value of our common stock on the date of the grant.

The following table summarizes restricted stock and performance award activity for the six months ended ended June 30, 2020 as follows:

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The following table summarizes restricted stock and performance award activity for the nine months ended September 30, 2020 as follows:

Shares Weighted

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Vested ( 34,703 ) $ 18.23

Nonvested outstanding shares at June 30, 2020 37,453 $ 15.70

During the six months ended June 30, 2020, 20,638 shares of restricted or performance common stock awards were granted.

The restricted and performance common stock awards had a weighted average grant date fair market value of $ 16.54 per share on the date of grant during the six months ended June 30, 2020.

Forfeited ( 367 ) $ 18.42

Nonvested outstanding shares at September 30, 2020 31,487 $ 15.78

During the nine months ended September 30, 2020, 21,397 shares of restricted or performance common stock awards were granted.

The restricted and performance common stock awards had a weighted average grant date fair market value of $ 16.42 per share on the date of grant during the nine months ended September 30, 2020.

Restricted common stock awards fully vest after year one, or vest ratably until fully vested in year three or year five depending on agreement terms.

Performance common stock awards vest immediately.

As of June 30, 2020, there were 37,453 shares of restricted stock that are nonvested and expected to vest.

As of June 30, 2020, there was $ 452,000 of total unrecognized compensation cost related to nonvested restricted common stock awards.

As of September 30, 2020, there were 31,487 shares of restricted stock that are nonvested and expected to vest.

As of September 30, 2020, there was $ 349,000 of total unrecognized compensation cost related to nonvested restricted common stock awards.

Restricted stock compensation expense is recognized on a straight-line basis over the vesting period.

This cost is expected to be recognized over a weighted-average remaining period of 1.03 years and will be adjusted for subsequent changes in estimated forfeitures.

Restricted common stock awards had an intrinsic value of $ 2,296,000 at June 30, 2020.

Restricted common stock awards had an intrinsic value of $ 2,403,000 at September 30, 2020.

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.

What changed 10-Q

Item 1. Financial Statements