What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 164 added, 164 removed, 810 unchanged (29% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts) June 30, 2021 December 31, 2020

(In thousands, except share amounts) September 30, 2021 December 31, 2020

Cash and due from banks $ 32,634 $ 34,175

3 unchanged sentences

Equity securities 7,486 7,634

Loans, less allowance for credit losses of $10,439 at June 30, 2021 and $12,915 at December 31, 2020 1,059,506 1,089,432

Loans, less allowance for credit losses of $10,061 at September 30, 2021 and $12,915 at December 31, 2020 1,073,436 1,089,432

Bank premises and equipment, net 8,429 8,228

19 unchanged sentences

issued and outstanding:

12,329,089 at June 30, 2021 and 12,509,848 at December 31, 2020 75,265 79,416

11,987,904 at September 30, 2021 and 12,509,848 at December 31, 2020 68,265 79,416

Retained earnings 167,993 150,749

6 unchanged sentences

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) 2021 2020 2021 2020

18 unchanged sentences

Interchange fees 472 355 1,313 995

Net realized gains (losses) on sales of investment securities ( 79 ) ( 58 ) ( 79 ) 4,140

Net realized gains on sales and calls of investment securities 117 57 38 4,197

Federal Home Loan Bank dividends 84 71 237 253

29 unchanged sentences

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) 2021 2020 2021 2020

3 unchanged sentences

Unrealized holding gains (losses) arising during the period ( 3,552 ) 5,798 ( 6,444 ) 16,477

Reclassification of net (gains) losses included in net income 79 58 79 ( 4,140 )

Other comprehensive income, before tax 10,808 12,424 ( 2,813 ) 6,539

Reclassification of net gains included in net income ( 117 ) ( 57 ) ( 38 ) ( 4,197 )

Other comprehensive income (loss), before tax ( 3,669 ) 5,741 ( 6,482 ) 12,280

Tax effect 1,085 ( 1,698 ) 1,916 ( 3,631 )

Total other comprehensive loss 7,612 8,751 ( 1,982 ) 4,606

Total other comprehensive income (loss) ( 2,584 ) 4,043 ( 4,566 ) 8,649

Comprehensive income $ 3,937 $ 8,387 $ 16,997 $ 21,917

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED JUNE 30, 2021 AND 2020

THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Common Stock Accumulated

3 unchanged sentences

(In thousands, except share amounts) Shares Amount

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

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

Net income — — 4,344 — 4,344

1 unchanged sentence

Restricted stock granted net of forfeitures

14,090 — — — —

Stock issued under employee stock purchase plan

5 unchanged sentences

8,350 50 — — 50

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

Balance, June 30, 2021 12,329,089 $ 75,265 $ 162,910 $ 12,874 $ 251,049

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

— — 6,521 — 6,521

Other comprehensive income — — — ( 2,584 ) ( 2,584 )

Restricted stock granted net of forfeitures

20,967 — — — —

Stock issued under employee stock purchase plan

8 unchanged sentences

( 344,940 ) ( 7,158 ) — — ( 7,158 )

Balance, June 30, 2021 12,329,089 $ 75,265 $ 162,910 $ 12,874 $ 251,049

Balance, September 30, 2021 11,987,904 $ 68,265 $ 167,993 $ 10,290 $ 246,548

See notes to unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2021 AND 2020

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Common Stock Retained Earnings Accumulated

19 unchanged sentences

43,300 277 — — 277

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

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

15 unchanged sentences

( 584,619 ) ( 12,000 ) — — ( 12,000 )

Balance, June 30, 2021 12,329,089 $ 75,265 $ 162,910 $ 12,874 $ 251,049

Balance, September 30, 2021 11,987,904 $ 68,265 $ 167,993 $ 10,290 $ 246,548

See notes to unaudited consolidated financial statements.

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) 2021 2020

2 unchanged sentences

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

Net (increase) decrease in deferred loan fees 1,222 ( 5,975 )

Net decrease (increase) in deferred loan fees 2,203 ( 5,304 )

Depreciation 688 668

3 unchanged sentences

(Reversal of) provision for credit losses ( 3,800 ) 4,975

Net realized losses (gains) on sales and calls of available-for-sale investment securities 79 ( 4,140 )

Net realized gains on sales and calls of available-for-sale investment securities ( 38 ) ( 4,197 )

Net gain on disposal of premises and equipment ( 8 ) ( 6 )

3 unchanged sentences

Net increase in accrued interest receivable and other assets ( 1,878 ) ( 1,394 )

Net increase in accrued interest payable and other liabilities 14,199 417

Net increase (decrease) in accrued interest payable and other liabilities 7,529 ( 1,636 )

Benefit (provision) for deferred income taxes 1,256 ( 1,227 )

13 unchanged sentences

Net increase in demand, interest bearing and savings deposits 335,370 353,622

Net decrease in time deposits ( 42 ) ( 2,993 )

Net increase (decrease) in time deposits 12 ( 5,693 )

Purchase and retirement of common stock ( 12,000 ) ( 11,052 )

3 unchanged sentences

Net cash provided by financing activities 319,444 333,161

Increase in cash and cash equivalents 50,388 65,983

(Decrease) increase in cash and cash equivalents ( 2,585 ) 34,436

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 67,693 $ 87,010

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(In thousands) 2021 2020

12 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 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 June 30, 2021, and the results of its operations and its cash flows for the six-month interim periods ended June 30, 2021 and 2020 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, 2021, and the results of its operations and its cash flows for the nine-month interim periods ended September 30, 2021 and 2020 have been included.

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

33 unchanged sentences

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 June 30, 2021 through December 31, 2022 will not have a material impact on the consolidated financial statements.

The Company believes the adoption of this guidance on activities subsequent to September 30, 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.

17 unchanged sentences

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

June 30, 2021

September 30, 2021

Amount Fair Value

61 unchanged sentences

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, 2021:

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, 2021:

Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis as of June 30, 2021 (in thousands).

The Company is required or permitted to record the following assets at fair value on a recurring basis as of September 30, 2021 (in thousands).

Description Fair Value Level 1 Level 2 Level 3

16 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, 2021, 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, 2021.

Also there were no liabilities measured at fair value on a recurring basis at June 30, 2021.

During the nine months ended September 30, 2021, 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, 2021.

Also there were no liabilities measured at fair value on a recurring basis at September 30, 2021.

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, 2021.

fair value which was below cost at September 30, 2021.

Fair Value Level 1 Level 2 Level 3

Impaired loans:

Real estate-construction and other land loans $ 262 $ — $ — $ 262

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

8 unchanged sentences

Impaired loans evaluated under the discounted cash flow method are excluded from the table above.

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 June 30, 2021.

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 necessarily a market rate.

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

As of June 30, 2021, there were no loans measured using the fair value of the collateral for the collateral dependent loans.

There were no charge-offs related to loans carried at fair value during the six months ended June 30, 2021 and 2020.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended June 30, 2021 and 2020 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at June 30, 2021.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $ 304,000 with a valuation allowance of $ 42,000 at September 30, 2021, and a resulting fair value of $ 262,000 .

The valuation allowance represent 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, 2021 and 2020.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended September 30, 2021 and 2020 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at September 30, 2021.

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:

34 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, 2021, $ 191,882,000 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 $ 18,278,000 at June 30, 2021 compared to an unrealized gain of $ 21,091,000 at December 31, 2020.

The unrealized gain/(loss) recorded is net of $ 5,404,000,000 and $ 6,235,000 in tax liabilities (benefits) as accumulated other comprehensive income (loss) within shareholders’ equity at June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, $ 262,024,000 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 $ 14,609,000 at September 30, 2021 compared to an unrealized gain of $ 21,091,000 at December 31, 2020.

The unrealized gain/(loss) recorded is net of $ 4,319,000,000 and $ 6,235,000 in tax liabilities (benefits) as accumulated other comprehensive income (loss) within shareholders’ equity at September 30, 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):

June 30, 2021

September 30, 2021

Available-for-Sale Securities Amortized Cost Gross

22 unchanged sentences

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

Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended June 30, 2021 and 2020 are shown below (in thousands):

Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended September 30, 2021 and 2020 are shown below (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,

Available-for-Sale Securities 2021 2020 2021 2020

3 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 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.

The provision for income taxes includes $ 11,000 and $ 1,241,000 income tax impact from the reclassification of unrealized net gains on securities to realized net gains on securities for the nine months ended ended September 30, 2021 and 2020, respectively.

The provision for income taxes includes $ 35,000 and $ 17,000 income tax impact from the reclassification of unrealized net gains on available-for-sale securities to realized net gains on available-for-sale securities for the three months ended September 30, 2021 and 2020, 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, 2021

September 30, 2021

Less than 12 Months 12 Months or More Total

2 unchanged sentences

Debt securities:

Treasury securities

$ 9,997 $ ( 3 ) $ — $ — $ 9,997 $ ( 3 )

Obligations of states and political subdivisions

22 unchanged sentences

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

As of June 30, 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 June 30, 2021 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at June 30, 2021 greater than 10 % of the recorded book value on that date, or which had an unrealized loss of more than $ 75,000 .

As of September 30, 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 September 30, 2021 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at September 30, 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.

There were no OTTI losses recorded during the six months ended June 30, 2021.

There were no OTTI losses recorded during the nine months ended September 30, 2021.

Treasury Securities

At June 30, 2021, the Company held two U.S.

Treasury securities of which one security was in a loss position for less than 12 months.

The unrealized loss on the Company’s investment in direct obligations of U.S.

Treasury securities is associated with the general fluctuation of market interest rates and are not an indication of any deterioration in the credit quality of the security issuer.

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, 2021.

At September 30, 2021, the Company held one U.S.

Treasury security which was in a gain position.

Government Agencies

At June 30, 2021, the Company held one U.S.

At September 30, 2021, the Company held one U.S.

Government agency security which was in a gain position.

Obligations of States and Political Subdivisions

At June 30, 2021, the Company held 122 obligations of states and political subdivision securities of which 16 were in a loss position for less than 12 months.

At September 30, 2021, the Company held 129 obligations of states and political subdivision securities of which 25 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, 2021.

Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations

At June 30, 2021, the Company held 115 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which eight were in a loss position for less than 12 months and 11 have been in a loss position for more than 12 months.

At September 30, 2021, the Company held 119 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which 14 were in a loss position for less than 12 months and nine 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, 2021.

Private Label Mortgage and Asset Backed Securities

At June 30, 2021, the Company had a total of 49 Private Label Mortgage and Asset Backed Securities (PLMABS).

18 of the PLMABS securities were in a loss position for less than 12 months and two have been in loss for more than 12 months at June 30, 2021.

At September 30, 2021, the Company had a total of 63 Private Label Mortgage and Asset Backed Securities (PLMABS).

31 of the PLMABS securities were in a loss position for less than 12 months and four have been in loss for more than 12 months at September 30, 2021.

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

Corporate Debt Securities

At June 30, 2021, the Company held 14 corporate debt securities of which five were in a loss position for less than 12 months.

At September 30, 2021, the Company held 15 corporate debt securities of which eight 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 June 30, 2021 by contractual maturity is shown below (in thousands).

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 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.

June 30, 2021

September 30, 2021

Available-for-Sale Securities Amortized Cost Estimated Fair

13 unchanged sentences

Outstanding loans are summarized as follows:

Loan Type (Dollars in thousands) June 30, 2021 % of Total

Loan Type (Dollars in thousands) September 30, 2021 % of Total

Loans December 31, 2020 % of Total

11 unchanged sentences

Total consumer 93,083 8.6 % 92,870 8.3 %

Net deferred origination (fees) costs ( 1,390 ) ( 2,612 )

Net deferred origination fees ( 409 ) ( 2,612 )

Total gross loans 1,083,497 100.0 % 1,102,347 100.0 %

1 unchanged sentence

Total loans $ 1,073,436 $ 1,089,432

At June 30, 2021 and December 31, 2020, loans originated under Small Business Administration (SBA) programs totaling $ 23,685,000 and $ 24,220,000 , respectively, were included in the real estate and commercial categories, of which, $ 18,029,000 or 76 % and $ 18,180,000 or 75 %, respectively, are secured by government guarantees.

At September 30, 2021 and December 31, 2020, loans originated under Small Business Administration (SBA) programs totaling $ 24,499,000 and $ 24,220,000 , respectively, were included in the real estate and commercial categories, of which, $ 18,826,000 or 77 % 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 June 30, 2021, 630 PPP loans totaling $ 109,502,000 were outstanding and included in the commercial and industrial line item above.

At September 30, 2021, 341 PPP loans totaling $ 64,260,000 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.

7 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 51 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, 2021 and 2020 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, 2021 and 2020 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

Beginning balance, April 1, 2021 $ 2,483 $ 8,352 $ 888 $ 333 $ 12,056

Beginning balance, July 1, 2021 $ 2,210 $ 7,050 $ 828 $ 351 $ 10,439

(Reversal) provision charged to operations 118 ( 434 ) ( 230 ) 46 ( 500 )

1 unchanged sentence

Recoveries 21 — 135 — 156

Ending balance, June 30, 2021 $ 2,210 $ 7,050 $ 828 $ 351 $ 10,439

Ending balance, September 30, 2021 $ 2,334 $ 6,616 $ 714 $ 397 $ 10,061

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

Charge-offs ( 43 ) — ( 2 ) — ( 45 )

Recoveries 146 — 19 — 165

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

The following table shows the summary of activities for the Allowance as of and for the six months ended June 30, 2021 and 2020 by portfolio segment (in thousands):

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

The following table shows the summary of activities for the Allowance as of and for the nine months ended September 30, 2021 and 2020 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

4 unchanged sentences

Recoveries 682 319 206 — 1,207

Ending balance, June 30, 2021 $ 2,210 $ 7,050 $ 828 $ 351 $ 10,439

Ending balance, September 30, 2021 $ 2,334 $ 6,616 $ 714 $ 397 $ 10,061

Allowance for credit losses:

3 unchanged sentences

Recoveries 601 — 120 — 721

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

The following is a summary of the Allowance by impairment methodology and portfolio segment as of June 30, 2021 and December 31, 2020 (in thousands):

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

The following is a summary of the Allowance by impairment methodology and portfolio segment as of September 30, 2021 and December 31, 2020 (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

Ending balance, June 30, 2021 $ 2,210 $ 7,050 $ 828 $ 351 $ 10,439

Ending balance, September 30, 2021 $ 2,334 $ 6,616 $ 714 $ 397 $ 10,061

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 June 30, 2021 and December 31, 2020 by portfolio segment and by impairment methodology (in thousands):

The following table shows the ending balances of loans as of September 30, 2021 and December 31, 2020 by portfolio segment and by impairment methodology (in thousands):

Commercial Real Estate Consumer Total

Ending balance, June 30, 2021 $ 241,837 $ 740,893 $ 88,605 $ 1,071,335

Ending balance, September 30, 2021 $ 217,008 $ 773,815 $ 93,083 $ 1,083,906

Ending balance:

8 unchanged sentences

$ 288,563 $ 713,508 $ 91,702 $ 1,093,773

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at June 30, 2021 (in thousands):

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at September 30, 2021 (in thousands):

Pass Special Mention Sub-Standard Doubtful Total

22 unchanged sentences

Total $ 1,032,417 $ 36,406 $ 36,136 $ — $ 1,104,959

The following table shows an aging analysis of the loan portfolio by class and the time past due at June 30, 2021 (in thousands):

The following table shows an aging analysis of the loan portfolio by class and the time past due at September 30, 2021 (in thousands):

Past Due 60-89

28 unchanged sentences

Total $ 5 $ 24 $ 60 $ 89 $ 1,104,870 $ 1,104,959 $ — $ 3,278

The following table shows information related to impaired loans by class at June 30, 2021 (in thousands):

The following table shows information related to impaired loans by class at September 30, 2021 (in thousands):

Investment Unpaid

1 unchanged sentence

With no related allowance recorded:

Real estate construction and other land loans $ 316 $ 316 $ —

Commercial real estate $ 486 $ 553 $ —

Total real estate 799 860 —

Equity loans and lines of credit 138 174 —

35 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, 2021 and 2020 (in thousands).

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

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, 2021 and 2020 (in thousands).

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

Investment Interest

3 unchanged sentences

Commercial and industrial $ 123 $ — $ 4,157 $ —

Agricultural production — — 212 —

Total commercial — — 219 —

Owner occupied — — 385 —

18 unchanged sentences

Total $ 8,629 $ 153 $ 13,602 $ 170

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, 2021 and 2020 (in thousands).

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

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, 2021 and 2020 (in thousands).

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Investment Interest

25 unchanged sentences

Total $ 10,022 $ 355 $ 11,304 $ 578

Foregone interest on nonaccrual loans totaled $ 72,000 and $ 74,000 for the six month period ended June 30, 2021 and 2020, respectively.

Foregone interest on nonaccrual loans totaled 34,000 and 55,000 for the three month period ended June 30, 2021 and 2020, respectively.

Foregone interest on nonaccrual loans totaled $ 101,000 and $ 135,000 for the nine month period ended September 30, 2021 and 2020, respectively.

Foregone interest on nonaccrual loans totaled 30,000 and 82,000 for the three month period ended September 30, 2021 and 2020, respectively.

Troubled Debt Restructurings:

As of June 30, 2021 and December 31, 2020, the Company has a recorded investment in troubled debt restructurings of $ 6,504,000 and $ 7,908,000 , respectively.

The Company has allocated $ 515,000 and $ 20,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of June 30, 2021 and December 31, 2020, respectively.

During the six months ended June 30, 2021, one loan was modified as troubled debt restructurings.

As of September 30, 2021 and December 31, 2020, the Company has a recorded investment in troubled debt restructurings of $ 8,463,000 and $ 7,908,000 , respectively.

The Company has allocated $ 678,000 and $ 20,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of September 30, 2021 and December 31, 2020, respectively.

During the nine months ended September 30, 2021, 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

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 $ 1.37 million resulting from the COVID-19 pandemic that were not classified as a TDRs at June 30, 2021.

The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2021 (in thousands):

The Company executed loan deferrals on outstanding balances of $ 335,950 resulting from the COVID-19 pandemic that were not classified as a TDRs at September 30, 2021.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 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 $ 2,989 $ — $ 2,489 $ 2,489

Real estate-construction and other land loans 1 333 — 333 305

Total 2 $ 3,322 $ — $ 2,822 $ 2,794

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

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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, 2020 (in thousands):

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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Total 2 $ 13,775 $ — $ 13,775 $ 7,954

During the quarters ended June 30, 2021 and 2020, no loans were modified as troubled debt restructurings.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended September 30, 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 $ 2,989 $ — $ 2,489 $ 2,489

Total 1 $ 2,989 $ — $ 2,489 $ 2,489

During the quarter ended September 30, 2020, no loans were modified as troubled debt restructurings.

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, 2021 or June 30, 2020.

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, 2021 or September 30, 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 June 30, 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.

Total goodwill at September 30, 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.

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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.

No such events or circumstances arose during the first six months of 2021.

No such events or circumstances arose during the first nine months of 2021.

Borrowing Arrangements

As of June 30, 2021 and December 31, 2020, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 447,170,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 245,311,000 as of June 30, 2021.

FHLB advances are also secured by investment securities with amortized costs totaling $ 151,000 and $ 169,000 and market values totaling $ 159,000 and $ 178,000 at June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 462,491,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 262,091,000 as of September 30, 2021.

FHLB advances are also secured by investment securities with amortized costs totaling $ 121,000 and $ 169,000 and market values totaling $ 127,000 and $ 178,000 at September 30, 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 June 30, 2021, and December 31, 2020 the Company had no Federal funds purchased.

As of September 30, 2021, and December 31, 2020 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 $ 316,702,000 and $ 326,179,000 were outstanding at June 30, 2021 and December 31, 2020, respectively.

Commitments to extend credit amounting to $ 332,875,000 and $ 326,179,000 were outstanding at September 30, 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 $ 306,144,000 and $ 314,774,000 at June 30, 2021 and December 31, 2020, respectively.

Included in commitments to extend credit are undisbursed lines of credit totaling $ 322,441,000 and $ 314,774,000 at September 30, 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 $ 52,007,000 and $ 79,669,000 as of June 30, 2021 and December 31, 2020, respectively.

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $ 90,269,000 and $ 79,669,000 as of September 30, 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 $ 10,558,000 and $ 11,405,000 were outstanding at June 30, 2021 and December 31, 2020, respectively.

Standby letters of credit and financial guarantees amounting to $ 10,434,000 and $ 11,405,000 were outstanding at September 30, 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.

Those guarantees are primarily issued to support private financial arrangements.

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, 2021 or December 31, 2020.

Standby letters of credit and guarantees carry a one year term or less, many have auto-renewal features.

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, 2021 or December 31, 2020.

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

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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, 2021 and December 31, 2020, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $ 250,000 .

At September 30, 2021 and December 31, 2020, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $ 150,000 and $ 250,000 , respectively.

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

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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, 2021, 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, 2021, was $ 2,975,000 .

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 (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 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 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) 2021 2020 2021 2020

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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) 2021 2020 2021 2020

1 unchanged sentence

Weighted average shares outstanding 12,007,689 12,471,070 12,332,248 12,551,480

Effect of dilutive stock options 49,235 37,398 50,884 54,277

Effect of diluted stock options and restricted stock 37,207 25,104 46,343 44,692

Weighted average shares of common stock and common stock equivalents

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Diluted earnings per share $ 0.54 $ 0.35 $ 1.74 $ 1.05

No outstanding options or restricted stock awards were anti-dilutive for the six months ended June 30, 2021 and 2020.

No outstanding options awards were anti-dilutive for the nine months ended September 30, 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 $ 210,000 and $ 248,000 for the six months ended June 30, 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 $ 46,000 and $ 72,000 , respectively, for the six months ended June 30, 2021 and 2020.

Share-based compensation cost recognized for those plans was $ 310,000 and $ 362,000 for the nine months ended September 30, 2021 and 2020, respectively.

The recognized tax expense (benefit) for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $ 50,000 and $ 78,000 , respectively, for the nine months ended September 30, 2021 and 2020.

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 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.

In October 2017, the Company assumed the Folsom Lake Bank 2007 Equity Incentive Plan (2007 Plan).

The plans provide for awards in the form of incentive stock options, non-statutory stock options, stock appreciation rights, and restricted stock.

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

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.

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

The plan provides for awards in the form of incentive stock options, non-statutory stock options, stock appreciation rights, and restricted stock.

The plan also allows for performance awards that may be in the form of cash or shares of the Company,

including restricted stock.

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 450,257 shares available for future purchase under the plan as of June 30, 2021.

The Company reserved 500,000 common shares to be set aside for the ESPP, and there were 447,787 shares available for future purchase under the plan as of September 30, 2021.

Stock Option Plan

The Company bases the fair value of the options granted on the date of grant using a Black-Scholes Merton option pricing model that uses assumptions based on expected option life and the level of estimated forfeitures, expected stock volatility, risk free interest rate, and dividend yield.

The expected term and level of estimated forfeitures of the Company’s options are based on the Company’s own historical experience.

The Company bases the fair value of the stock options granted on the date of grant using a Black-Scholes Merton option pricing model that uses assumptions based on expected option life and the level of estimated forfeitures, expected stock volatility, risk free interest rate, and dividend yield.

The expected term and level of estimated forfeitures of the Company’s stock options are based on the Company’s own historical experience.

Stock volatility is based on the historical volatility of the Company’s stock.

The risk-free rate is based on the U.

Treasury yield curve for the periods within the contractual life of the options in effect at the time of grant.

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, 2021 and 2020.

A summary of the combined activity of the Company’s stock option compensation plans for the six months ended June 30, 2021 follows (in thousands, except per share amounts):

The risk-free interest rate is based on the U.

Treasury yield curve for the periods within the contractual life of the stock options in effect at the time of grant.

The compensation cost for stock 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, 2021 and 2020.

A summary of the combined activity of the Company’s stock option compensation plans for the nine months ended September 30, 2021 follows (in thousands, except per share amounts):

Shares Weighted

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Options exercised ( 21,285 ) $ 10.44

Options outstanding at June 30, 2021 57,070 $ 9.86 1.06 $ 587

Options vested or expected to vest at June 30, 2021 57,070 $ 9.86 1.06 $ 587

Options exercisable at June 30, 2021 57,070 $ 9.86 1.06 $ 587

Options outstanding at September 30, 2021 55,785 $ 9.92 0.82 $ 650

Options exercisable at September 30, 2021 55,785 $ 9.92 0.82 $ 650

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,

2021 2020 2021 2020

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Excess tax benefit realized for option exercises $ 4 $ 6 $ 50 $ 78

As of June 30, 2021, there was no remaining unrecognized compensation cost related to stock options granted under all plans.

As of September 30, 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.

The following table summarizes restricted stock and performance award activity for the six months ended June 30, 2021 as follows:

The following table summarizes restricted stock and performance award activity for the nine months ended September 30, 2021 as follows:

Shares Weighted

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Forfeited ( 247 ) $ 20.26

Nonvested outstanding shares at June 30, 2021 30,428 $ 19.33

Nonvested outstanding shares at September 30, 2021 24,177 $ 20.50

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 June 30, 2021, there were 30,428 shares of restricted stock that are nonvested and expected to vest.

As of June 30, 2021, there was $ 458,000 of total unrecognized compensation cost related to nonvested restricted common stock awards.

As of September 30, 2021, there were 24,177 shares of restricted stock that are nonvested and expected to vest.

As of September 30, 2021, there was $ 363,000 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 1.61 years and will be adjusted for subsequent changes in estimated forfeitures.

Restricted common stock awards had an intrinsic value of $ 2,880,000 at June 30, 2021.

Restricted common stock awards had an intrinsic value of $ 2,975,000 at September 30, 2021.

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