What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-04 · 185 added, 323 removed, 714 unchanged (42% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts) March 31, 2021 December 31, 2020

Cash and due from banks $ 31,083 $ 34,175

3 unchanged sentences

Equity securities 7,500 7,634

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

Loans, less allowance for credit losses of $12,056 at March 31, 2021 and $12,915 at December 31, 2020 1,078,284 1,089,432

Bank premises and equipment, net 8,349 8,228

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issued and outstanding:

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

12,524,609 at March 31, 2021 and 12,509,848 at December 31, 2020 79,732 79,416

Retained earnings 156,851 150,749

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CONSOLIDATED STATEMENTS OF INCOME

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

Ended September 30,

For the Three Months

Ended March 31,

(In thousands, except share and per-share amounts) 2021 2020

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Interest on junior subordinated deferrable interest debentures 24 45

Other — 105 — 419

Total interest expense 292 477

Net interest income before provision for credit losses 17,555 16,029

PROVISION FOR CREDIT LOSSES 600 250 4,975 525

(REVERSAL OF) PROVISION FOR CREDIT LOSSES ( 1,800 ) 1,375

Net interest income after provision for credit losses 19,355 14,654

2 unchanged sentences

Appreciation in cash surrender value of bank-owned life insurance

178 184 536 545

Interchange fees 370 333

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For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

Ended March 31,

(In thousands) 2021 2020

2 unchanged sentences

Unrealized gains (losses) on securities:

Unrealized holding gains arising during the period

5,798 3,081 16,477 19,589

Unrealized holding gains (losses) arising during the period ( 13,621 ) ( 1,687 )

Reclassification of net (gains) losses included in net income — ( 4,198 )

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Tax effect 4,027 1,740

Total other comprehensive income 4,043 984 8,649 10,138

Comprehensive income $ 8,387 $ 6,675 $ 21,917 $ 27,132

Total other comprehensive loss ( 9,594 ) ( 4,145 )

Comprehensive (loss) income $ ( 2,115 ) $ 2,478

See notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Common Stock Accumulated

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(In thousands, except share amounts) Shares Amount

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

Net income — — 5,691 — 5,691

Other comprehensive income

— — — 984 984

Restricted stock granted net of forfeitures

( 1,770 ) — — — —

Stock issued under employee stock purchase plan

Stock-based compensation expense

— 136 — — 136

Cash dividend

— — ( 1,479 ) — ( 1,479 )

Stock options exercised

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

— — 4,344 — 4,344

Other comprehensive income

— — — 4,043 4,043

Restricted stock granted net of forfeitures

Stock issued under employee stock purchase plan

4,319 47 — — 47

Stock-based compensation expense

— 113 — — 113

Cash dividend

— — ( 1,375 ) — ( 1,375 )

Stock options exercised

8,350 50 — — 50

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

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Comprehensive Income (Loss)

(Net of Taxes) Total Shareholders’ Equity

Common Stock Retained Earnings

(In thousands, except share amounts) Shares Amount

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

Net income — — 6,623 — 6,623

Other comprehensive income

— — — 10,138 10,138

Other comprehensive loss — — — ( 4,145 ) ( 4,145 )

Stock issued under employee stock purchase plan

9,733 171 — — 171

Stock awarded to employees 6,548 141 141

Restricted stock granted net of forfeitures

18,265 — — — —

Stock-based compensation expense

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— — ( 1,408 ) — ( 1,408 )

Repurchase and retirement of common stock

( 508,983 ) ( 10,199 ) — — ( 10,199 )

Stock options exercised

31,730 207 — — 207

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

Repurchase and retirement of common stock

( 621,379 ) ( 11,052 ) ( 11,052 )

Other comprehensive income

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

Balance, January 1, 2021 12,509,848 $ 79,416 $ 150,749 $ 14,856 $ 245,021

— — 7,479 — 7,479

Other comprehensive loss — — — ( 9,594 ) ( 9,594 )

Restricted stock granted net of forfeitures

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Stock options exercised

43,300 277 — — 277

Repurchase and retirement of common stock

( 621,379 ) ( 11,052 ) — — ( 11,052 )

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

Balance, March 31, 2021 12,524,609 $ 79,732 $ 156,851 $ 5,262 $ 241,845

See notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

(In thousands) 2021 2020

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

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

Net (increase) decrease in deferred loan fees ( 559 ) 36

Depreciation 223 240

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Stock-based compensation 101 121

Provision for credit losses 4,975 525

(Reversal of) provision for credit losses ( 1,800 ) 1,375

Net realized gains on sales of available-for-sale investment securities — ( 4,198 )

Net gain on disposal of premises and equipment ( 2 ) —

Increase in fair value of equity securities ( 183 ) ( 253 )

Net change in equity securities 134 ( 120 )

Increase in bank-owned life insurance, net of expenses ( 173 ) ( 182 )

Net gain on bank-owned life insurance — ( 64 )

Net increase in accrued interest receivable and other assets ( 1,394 ) ( 8,720 )

Net (increase) decrease in accrued interest receivable and other assets ( 504 ) 644

Net increase in accrued interest payable and other liabilities 69 1,464

Provision for deferred income taxes ( 1,227 ) ( 1,345 )

Benefit (provision) for deferred income taxes 105 ( 612 )

Net cash provided by operating activities 6,379 5,931

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Proceeds from maturity and principal repayments of available-for-sale investment securities 11,331 8,136

Net increase in loans ( 160,653 ) ( 23,925 )

Net decrease in loans 13,507 13,616

Purchases of premises and equipment ( 344 ) ( 32 )

Purchases of bank-owned life insurance ( 250 ) ( 1,000 )

FHLB stock redeemed 467 780

Proceeds from bank-owned life insurance — 531

3 unchanged sentences

Net increase in demand, interest bearing and savings deposits 200,112 21,196

Net (decrease) increase in time deposits ( 5,693 ) 445

Proceeds from short-term borrowings from Federal Home Loan Bank

Repayments of short-term borrowings to Federal Home Loan Bank — ( 510,500 )

Proceeds of borrowings from other financial institutions

Repayments of borrowings from other financial institutions

Net decrease in time deposits ( 419 ) ( 3,890 )

Purchase and retirement of common stock — ( 11,052 )

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Net cash provided by financing activities 198,373 5,111

Increase in cash and cash equivalents 34,436 11,310

Increase (decrease) in cash and cash equivalents 144,563 ( 16,412 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 70,278 52,574

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 214,841 $ 36,162

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For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

(In thousands) 2021 2020

2 unchanged sentences

Interest $ 298 $ 502

Income taxes $ 5,120 $ 6,580

Operating cash flows from operating leases $ 562 $ 559

Non-cash investing and financing activities:

Initial recognition of operating lease right-of-use assets $ — $ 10,129

Purchases of available-for-sale investment securities, not yet settled $ — $ 12,718

See notes to unaudited consolidated financial statements.

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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 2020 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 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.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at March 31, 2021, and the results of its operations and its cash flows for the three-month interim periods ended March 31, 2021 and 2020 have been included.

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

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No customer accounts for more than 10 percent of revenues for the Company or the Bank.

Risks and Uncertainties

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

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 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.

However, if these actions are sustained, it may adversely affect several industries within our geographic footprint and impair the ability of our customers to fulfill their contractual obligations to the Company.

This could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, and results of operations.

Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, investments, loans, or deferred tax assets.

Impact of New Financial Accounting Standards:

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The FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures.

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):

On August 15, 2019, the FASB issued a proposed Accounting Standards Update (ASU), “Financial Instruments -Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates,” that would provide private entities and certain small public companies additional time to implement the standards on CECL, leases, and hedging.

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Further, the Company has begun developing internal controls around the CECL process, data, calculations and implementation.

The Company presently plans to generate and evaluate model scenarios under CECL in tandem with its current reserving processes for interim and annual reporting periods during 2021 due to the fact the Company elected to delay implementation of the CECL process as allowed by FASB.

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implementation of the CECL process as allowed by FASB.

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 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) :

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, was issued August 2018.

The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements.

The changes affect all companies that are required to include fair value measurement disclosures.

In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.

The Company adopted this ASU effective January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements and disclosures.

FASB Accounting Standards Update (ASU) 2020-04 - Reference Rate Reform (Subtopic 848) :

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The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements.

The Company believes the adoption of this guidance on activities subsequent to March 31, 2021 through December 31, 2022 will not have a material impact on the consolidated financial statements.

In April 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, (“the agencies”) issued a revised interagency statement encouraging financial institutions to work with customers affected by COVID-19 and providing additional information regarding loan modifications.

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Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

In accordance with applicable guidance, the Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

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.

Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3 — Model-based techniques that use at least one significant assumption not observable in the market.

These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability.

Valuation techniques include management judgment and estimation which may be significant.

There are three levels of inputs that may be used to measure fair values:

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

Level 2 —Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy.

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

September 30, 2020

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March 31, 2021

Amount Fair Value

27 unchanged sentences

Accrued interest payable 65 — 41 24 65

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.

In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

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For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.

Purchased credit impaired (PCI) loans are measured at estimated fair value on the date of acquisition.

Purchased credit

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impaired (PCI) loans are measured at estimated fair value on the date of acquisition.

Carrying value is calculated as the present value of expected cash flows and approximates fair value and included in Level 3.

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Fair value for fixed and variable rate certificates of deposit are estimated using discounted cash flow analyses using interest rates offered at each reporting date by the Company for certificates with similar remaining maturities resulting in a Level 2 classification.

(f) Short-Term Borrowings — The fair values of the Company’s federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, are based on the market rates for similar types of borrowing arrangements resulting in a Level 2 classification.

(g) Other Borrowings — The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(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.

(f) Subordinated Debentures — The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(g) 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.

(h) 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.

The fair value of commitments is not considered significant for financial reporting purposes.

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 September 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 March 31, 2021:

Recurring Basis

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).

The Company is required or permitted to record the following assets at fair value on a recurring basis as of March 31, 2021 (in thousands).

Description Fair Value Level 1 Level 2 Level 3

11 unchanged sentences

$ 776,219 $ 7,500 $ 768,719 $ —

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Securities in Level 1 are mutual funds and fair values are based on quoted market prices for identical instruments traded in active markets.

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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 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.

During the three months ended March 31, 2021, no transfers between levels occurred.

There were no Level 3 assets measured at fair value on a recurring basis at or during the three months ended March 31, 2021.

Also there were no liabilities measured at fair value on a recurring basis at March 31, 2021.

Non-recurring Basis

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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 September 30, 2020.

fair value which was below cost at March 31, 2021.

Fair Value Level 1 Level 2 Level 3

Impaired loans:

Commercial and industrial $ 194 $ — $ — $ 194

Real estate-construction and other land loans 1,262 — — 1,262

Equity loans and lines of credit 923 — — 923

Total impaired loans 2,379 — — 2,379

Other repossessed assets — — — —

Total assets measured at fair value on a non-recurring basis $ 2,379 $ — $ — $ 2,379

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

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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 nine months ended ended September 30, 2020.

There were no changes in valuation techniques used during the three months ended ended March 31, 2021.

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 $ 1,735,000 with a valuation allowance of $ 487,000 at September 30, 2020, and a resulting fair value of $ 1,248,000 .

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $ 2,791,000 with a valuation allowance of $ 412,000 at March 31, 2021, and a resulting fair value of $ 2,379,000 .

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 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.

There were no charge-offs related to loans carried at fair value during the three months ended March 31, 2021 and 2020.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended March 31, 2021 and 2020 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at March 31, 2021.

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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, 2020:

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Also there were no liabilities measured at fair value on a recurring basis at December 31, 2020.

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Non-recurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis.

As of December 31, 2019 there were no loans or assets that were measured at the lower of cost or fair value.

These include the following 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 December 31, 2020 (in thousands):

Fair Value Level 1 Level 2 Level 3

Impaired loans:

Real estate-construction and other land loans $ 1,260 $ — $ — $ 1,260

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans

had a principal balance of $1,528,000 with a valuation allowance of $268,000 at December 31, 2020, and a resulting fair value

of $1,260,000.

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

There were no liabilities measured at fair value on a non-recurring basis at December 31, 2020.

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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 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.

As of March 31, 2021, $ 177,938,000 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 $ 7,470,000 at March 31, 2021 compared to an unrealized gain of $ 21,091,000 at December 31, 2020.

The unrealized gain/(loss) recorded is net of $ 2,208,000 and $ 6,235,000 in tax liabilities (benefits) as accumulated other comprehensive income (loss) within shareholders’ equity at March 31, 2021 and December 31, 2020, respectively.

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

September 30, 2020

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March 31, 2021

Available-for-Sale Securities Amortized Cost Gross

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Total available-for-sale $ 689,001 $ 23,371 $ ( 2,280 ) $ 710,092

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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,

Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended March 31, 2021 and 2020 are shown below (in thousands):

For the Three Months

Ended March 31,

Available-for-Sale Securities 2021 2020

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Gross realized losses from sales or calls — —

Losses recognized in 2020 and 2019 were incurred in order to reposition the investment securities portfolio based on the current rate environment.

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 $ 1,241,000 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

The provision for income taxes includes $ 1,241,000 income tax impact from the reclassification of unrealized net gains on securities to realized net gains on securities for the three months ended March 31, 2020.

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):

September 30, 2020

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March 31, 2021

Less than 12 Months 12 Months or More Total

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Debt securities:

Government agencies

$ 27,125 $ ( 132 ) $ 12,812 $ ( 185 ) $ 39,937 $ ( 317 )

Obligations of states and political subdivisions

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Debt securities:

Government agencies

$ — $ — $ 13,713 $ ( 258 ) $ 13,713 $ ( 258 )

Obligations of states and political subdivisions

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The Company periodically evaluates each investment security for other-than-temporary impairment, relying primarily on industry analyst reports, observation of market conditions, and interest rate fluctuations.

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 portion of the impairment that 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 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 .

As of March 31, 2021, 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 March 31, 2021 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at March 31, 2021 greater than 10 % of the recorded book value on that date, or which had an unrealized loss of more than $ 75,000 .

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 nine months ended September 30, 2020.

There were no OTTI losses recorded during the three months ended March 31, 2021.

Government Agencies

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.

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

Government agencies were caused by interest rate changes.

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 September 30, 2020.

At March 31, 2021, the Company held one U.S.

Government agency security which was in a gain position.

Obligations of States and Political Subdivisions

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.

At March 31, 2021, the Company held 114 obligations of states and political subdivision securities of which 43 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 September 30, 2020.

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Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations

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.

At March 31, 2021, the Company held 114 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which four were in a loss position for less than 12 months and 15 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 September 30, 2020.

Private Label Mortgage and Asset Backed Securities

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.

At March 31, 2021, the Company had a total of 36 Private Label Mortgage and Asset Backed Securities (PLMABS).

13 of the PLMABS securities were in a loss position for less than 12 months and one has been in loss for more than 12 months at March 31, 2021.

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

At March 31, 2021, the Company held ten corporate debt securities of which four 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).

The amortized cost and estimated fair value of available-for-sale investment securities at March 31, 2021 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.

September 30, 2020

March 31, 2021

Available-for-Sale Securities Amortized Cost Estimated Fair

11 unchanged sentences

Total available-for-sale $ 761,249 $ 768,719

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Loans and Allowance for Credit Losses

Outstanding loans are summarized as follows:

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

Loan Type (Dollars in thousands) March 31, 2021 % of Total

Loans December 31, 2020 % of Total

15 unchanged sentences

Total loans $ 1,078,284 $ 1,089,432

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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.

At March 31, 2021 and December 31, 2020, loans originated under Small Business Administration (SBA) programs totaling $ 22,969,000 and $ 24,220,000 , respectively, were included in the real estate and commercial categories, of which, $ 17,252,000 or 75 % and $ 18,180,000 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 September 30, 2020, 1,076 PPP loans totaling $ 210,057,000 were outstanding and included in the commercial and industrial line item above.

At March 31, 2021, 994 PPP loans totaling $ 190,900,000 were outstanding and included in the commercial and industrial line item above.

At December 31, 2020, 989 PPP loans totaling $ 192,916,000 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 49 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 September 30, 2020 and 2019 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

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

Allowance for credit losses:

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, 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):

The following table shows the summary of activities for the Allowance as of and for the three months ended March 31, 2021 and 2020 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

1 unchanged sentence

Beginning balance, January 1, 2021 $ 2,019 $ 9,174 $ 1,091 $ 631 $ 12,915

Provision charged to operations 203 3,887 437 448 4,975

Provision (reversal) charged to operations ( 132 ) ( 1,141 ) ( 229 ) ( 298 ) ( 1,800 )

Losses charged to allowance ( 31 ) — ( 26 ) — ( 57 )

Recoveries 627 319 52 — 998

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

Ending balance, March 31, 2021 $ 2,483 $ 8,352 $ 888 $ 333 $ 12,056

Allowance for credit losses:

Beginning balance, January 1, 2020 $ 1,428 $ 6,769 $ 897 $ 36 $ 9,130

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

Provision charged to operations 225 786 302 62 1,375

Losses charged to allowance ( 28 ) — ( 15 ) — ( 43 )

Recoveries 32 — 52 — 84

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):

Ending balance, March 31, 2020 $ 1,657 $ 7,555 $ 1,236 $ 98 $ 10,546

The following is a summary of the Allowance by impairment methodology and portfolio segment as of March 31, 2021 and December 31, 2020 (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

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

Ending balance, March 31, 2021 $ 2,483 $ 8,352 $ 888 $ 333 $ 12,056

Ending balance:

7 unchanged sentences

collectively evaluated for impairment $ 1,680 $ 8,903 $ 1,070 $ 631 $ 12,284

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):

The following table shows the ending balances of loans as of March 31, 2021 and December 31, 2020 by portfolio segment and by impairment methodology (in thousands):

Commercial Real Estate Consumer Total

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

Ending balance, March 31, 2021 $ 292,300 $ 712,163 $ 89,048 $ 1,093,511

Ending balance:

9 unchanged sentences

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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):

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at March 31, 2021 (in thousands):

Pass Special Mention Sub-Standard Doubtful Total

23 unchanged sentences

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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):

The following table shows an aging analysis of the loan portfolio by class and the time past due at March 31, 2021 (in thousands):

Past Due 60-89

29 unchanged sentences

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

The following table shows information related to impaired loans by class at March 31, 2021 (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 $ 350 $ 352 $ —

12 unchanged sentences

Equity loans and lines of credit 930 930 7

Consumer and installment 92 95 14

Total consumer 1,033 1,036 27

Total with an allowance recorded 10,015 10,115 1,259

10 unchanged sentences

Commercial real estate 512 561 —

Agricultural real estate 321 321 —

Total real estate 910 998 —

3 unchanged sentences

Commercial and industrial 7,342 7,373 339

Commercial real estate 152 153 3

Agricultural real estate 37 37 —

Total real estate 189 190 3

Equity loans and lines of credit 1,291 1,292 35

Total with an allowance recorded 1,504 1,509 40

Total $ 3,734 $ 4,305 $ 40

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

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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

Recognized Average

Investment Interest

With no related allowance recorded:

Commercial and industrial $ 4,157 $ — $ 202 $ —

Agricultural production — — — —

Total commercial 4,157 — 202 —

Owner occupied 385 — 204 —

Real estate construction and other land loans 1,528 1,552 268

3 unchanged sentences

Equity loans and lines of credit 936 936 9

Total with no related allowance recorded 5,536 3 3,864 13

With an allowance recorded:

Commercial and industrial 5,440 138 45 —

Agricultural production 778 11 — —

Total commercial 6,218 149 45 —

Real estate construction and other land loans 656 — — —

Commercial real estate 150 3 156 3

Agricultural real estate 28 1 42 1

Total real estate 834 4 198 4

Equity loans and lines of credit 944 14 1,099 14

Consumer and installment 88 93 12

2 unchanged sentences

Total $ 11,186 $ 11,371 $ 631

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

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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

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 March 31, 2021 and 2020 (in thousands).

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Investment Interest

3 unchanged sentences

Commercial and industrial $ 15 $ — $ 121 $ —

Agricultural production 85 — — —

Total commercial 1,797 — 225 —

Owner occupied 180 — 413 —

18 unchanged sentences

Total $ 11,338 $ 662 $ 6,750 $ 217

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.

Foregone interest on nonaccrual loans totaled $ 56,000 and $ 24,000 for the three months period ended March 31, 2021 and 2020, respectively.

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.

As of March 31, 2021 and December 31, 2020, the Company has a recorded investment in troubled debt restructurings of $ 7,223,000 and $ 7,908,000 , respectively.

The Company has allocated $ 590,000 and $ 20,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021, one loan was 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

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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 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.

As discussed in Note 1 to these financial statements, Section 4013 of the CARES Act and the “ Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) ” provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019 or at the time of modification program implementation, respectively, and the borrowers meet other applicable criteria.

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(Revised) ” provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019 or at the time of modification program implementation, respectively, and the borrowers meet other applicable criteria.

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

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):

The Company executed loan deferrals on outstanding balances of approximately $ 2.80 million resulting from the COVID-19 pandemic that were not classified as a TDRs at March 31, 2021.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2021 (in thousands):

Troubled Debt Restructurings:

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

Commercial and industrial 1 $ 12,925 $ — $ 12,925 $ 7,175

Agricultural production 1 850 — 850 779

Total 2 $ 13,775 $ — $ 13,775 $ 7,954

Real estate-construction and other land loans 1 $ 333 $ — $ 333 $ 325

(1) Amounts represent the recorded investment in loans before recognizing effects of the Troubled Debt Restructurings, if any.

1 unchanged sentence

(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 nine months ended September 30, 2019 (in thousands):

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2020 (in thousands):

Troubled Debt Restructurings:

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 2 $ 132 $ — $ 132 $ 124

Commercial and Industrial 1 $ 12,925 $ — $ 12,925 $ 12,125

Agricultural production 1 850 — 850 850

Total 2 $ 13,775 $ — $ 13,775 $ 12,975

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 nine months ended and three months ended September 30, 2020 or September 30, 2019.

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There were no defaults on troubled debt restructurings, within twelve months following the modification, during the three months ended and three months ended March 31, 2021 or March 31, 2020.

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.

Total goodwill at March 31, 2021, 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.

2 unchanged sentences

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.

Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount.

With the economic risks and uncertainties associated with the COVID-19 pandemic continuing during the first quarter of 2021, management performed a qualitative assessment including performance trends, market information and economic data and determined it was more likely than not that the fair value of the reporting unit exceeded the carrying value.

As such no quantitative goodwill impairment test was required as of March 31, 2021.

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Borrowing Arrangements

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.

As of March 31, 2021 and December 31, 2020, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 453,093,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 244,763,000 as of March 31, 2021.

FHLB advances are also secured by investment securities with amortized costs totaling $ 159,000 and $ 169,000 and market values totaling $ 168,000 and $ 178,000 at March 31, 2021 and December 31, 2020, respectively.

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

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

As of March 31, 2021, and December 31, 2020 the Company had no Federal funds purchased.

Commitments and Contingencies

4 unchanged sentences

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

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 amounting to $ 349,244,000 and $ 326,179,000 were outstanding at March 31, 2021 and December 31, 2020, 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 $ 316,958,000 and $ 289,465,000 at September 30, 2020 and December 31, 2019, respectively.

Included in commitments to extend credit are undisbursed lines of credit totaling $ 337,815,000 and $ 314,774,000 at March 31, 2021 and December 31, 2020, 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 $ 86,098,000 and $ 74,019,000 as of September 30, 2020 and December 31, 2019, respectively.

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $ 74,665,000 and $ 79,669,000 as of March 31, 2021 and December 31, 2020, 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 $ 503,000 and $ 1,717,000 were outstanding at September 30, 2020 and December 31, 2019, respectively.

Standby letters of credit and financial guarantees amounting to $ 11,429,000 and $ 11,405,000 were outstanding at March 31, 2021 and December 31, 2020, 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.

1 unchanged sentence

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 September 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 March 31, 2021 or December 31, 2020.

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

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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 .

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

At March 31, 2021 and December 31, 2020, 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.

1 unchanged sentence

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 September 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 March 31, 2021, the total guarantee was $ 2,475,000 .

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

2 unchanged sentences

Basic earnings per share (EPS), which excludes dilution, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options or restricted stock awards, result in the issuance of common stock which shares in the earnings of the Company.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options or restricted stock awards, result in the

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issuance of common stock which shares in the earnings of the Company.

A reconciliation of the numerators and denominators of the basic and diluted EPS computations is as follows:

Basic Earnings Per Share For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

Ended March 31,

(In thousands, except share and per share amounts) 2021 2020

3 unchanged sentences

Diluted Earnings Per Share For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

Ended March 31,

(In thousands, except share and per share amounts) 2021 2020

5 unchanged sentences

Diluted earnings per share $ 0.60 $ 0.52

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.

No outstanding options or restricted stock awards were anti-dilutive for the three months ended March 31, 2021 and 2020.

Share-Based Compensation

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.

Share-based compensation cost recognized for those plans was $ 101,000 and $ 121,000 for the three months ended March 31, 2021 and 2020, respectively.

The recognized tax expense (benefits) for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $ 1,000 and $( 72,000 ), respectively, for the three months ended March 31, 2021 and 2020.

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

4 unchanged sentences

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.

1 unchanged sentence

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 461,392 shares available for future purchase under the plan as of September 30, 2020.

The Company reserved 500,000 common shares to be set aside for the ESPP, and there were 453,549 shares available for future purchase under the plan as of March 31, 2021.

Stock Option Plan

5 unchanged sentences

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 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):

No options to purchase shares of the Company’s common stock were granted during the three months ended March 31, 2021 and 2020.

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A summary of the combined activity of the Company’s stock option compensation plans for the three months ended March 31, 2021 follows (in thousands, except per share amounts):

Shares Weighted

1 unchanged sentence

Term (Years) Aggregate

Intrinsic Value (In thousands)

Options outstanding at January 1, 2020 121,120 $ 8.73

Intrinsic Value

Options outstanding at December 31, 2020 77,070 $ 10.06

Options exercised ( 100 ) $ 8.02

Options forfeited ( 550 ) $ 7.40

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

Options outstanding at March 31, 2021 76,970 $ 10.06 1.27 $ 653

Options vested or expected to vest at March 31, 2021 76,970 $ 10.06 1.27 $ 653

Options exercisable at March 31, 2021 76,970 $ 10.06 1.27 $ 653

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

For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

2020 2019 2020 2019

Ended March 31,

Intrinsic value of options exercised $ 1 $ 349

1 unchanged sentence

Excess tax benefit realized for option exercises $ — $ 72

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

As of March 31, 2021, 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.

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

The following table summarizes restricted stock and performance award activity for the three months ended March 31, 2021 as follows:

Shares Weighted

Grant-Date Fair Value

Nonvested outstanding shares at January 1, 2020 45,160 $ 17.38

Nonvested outstanding shares at December 31, 2020 30,013 $ 15.60

Granted 10,529 $ 14.98

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Forfeited ( 247 ) $ 20.26

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.

Nonvested outstanding shares at March 31, 2021 27,788 $ 15.81

The shares awarded to employees and directors under the restricted stock agreements vest on applicable vesting dates only to the extent the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment or service is terminated.

Performance common stock awards vest immediately.

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.

As of March 31, 2021, there were 27,788 shares of restricted stock that are nonvested and expected to vest.

As of March 31, 2021, there was $ 126,000 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 0.81 years and will be adjusted for subsequent changes in estimated forfeitures.

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

Restricted common stock awards had an intrinsic value of $ 2,761,000 at March 31, 2021.

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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