What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 208 added, 296 removed, 678 unchanged (43% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts) March 31, 2022 December 31, 2021

Cash and due from banks $ 32,263 $ 29,412

3 unchanged sentences

Equity securities 7,071 7,416

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

Loans, less allowance for credit losses of $9,864 at March 31, 2022 and $9,600 at December 31, 2021 1,002,178 1,029,511

Bank premises and equipment, net 8,178 8,380

9 unchanged sentences

Total deposits 2,162,360 2,122,797

Junior subordinated deferrable interest debentures 5,155 5,155

Subordinated debentures 39,490 39,454

Accrued interest payable and other liabilities 29,520 40,043

7 unchanged sentences

issued and outstanding:

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

11,752,623 at March 31, 2022 and 11,916,651 at December 31, 2021 62,893 66,820

Retained earnings 178,054 173,393

Accumulated other comprehensive income, net of tax 10,290 14,856

Accumulated other comprehensive (loss) income, net of tax ( 49,287 ) 7,632

Total shareholders’ equity 191,660 247,845

4 unchanged sentences

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) 2022 2021

16 unchanged sentences

Appreciation in cash surrender value of bank-owned life insurance

247 178 596 536

Interchange fees 442 370

31 unchanged sentences

For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

Ended March 31,

(In thousands) 2022 2021

Net income $ 6,086 7,479

Other Comprehensive Income:

Unrealized gains (losses) on securities:

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

Other Comprehensive Loss:

Unrealized losses on securities:

Unrealized holding losses arising during the period ( 80,603 ) ( 13,621 )

Reclassification of net gains included in net income ( 206 ) —

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

Other comprehensive loss, before tax ( 80,809 ) ( 13,621 )

Tax effect 23,890 4,027

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

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

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Common Stock Accumulated

Comprehensive Income (Loss)

(Net of Taxes) Total Shareholders’ Equity

Retained Earnings

(In thousands, except share amounts) Shares Amount

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

Net income — — 4,344 — 4,344

Other comprehensive income — — — 4,043 4,043

Restricted stock granted net of forfeitures

Stock issued under employee stock purchase plan

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

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

— — 6,521 — 6,521

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

Stock issued under employee stock purchase plan

2,470 48 — — 48

Stock-based compensation expense

— 100 — — 100

Cash dividend

— — ( 1,438 ) — ( 1,438 )

Stock options exercised

1,285 10 — — 10

Repurchase and retirement of common stock

( 344,940 ) ( 7,158 ) — — ( 7,158 )

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

Total other comprehensive loss ( 56,919 ) ( 9,594 )

Comprehensive loss $ ( 50,833 ) $ ( 2,115 )

See notes to unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Common Stock Retained Earnings Accumulated

4 unchanged sentences

Net income — — 7,479 — 7,479

Other comprehensive income

— — — 8,649 8,649

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

Stock issued under employee stock purchase plan

7 unchanged sentences

— — ( 1,377 ) — ( 1,377 )

Repurchase and retirement of common stock

( 621,379 ) ( 11,052 ) — — ( 11,052 )

Stock options exercised

43,300 277 — — 277

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

Balance, January 1, 2022 11,916,651 $ 66,820 $ 173,393 $ 7,632 $ 247,845

— — 6,086 — 6,086

Other comprehensive income

— — — ( 4,566 ) ( 4,566 )

Other comprehensive loss — — — ( 56,919 ) ( 56,919 )

Restricted stock granted net of forfeitures

4 unchanged sentences

Stock-based compensation expense

— 310 — — 310

Cash dividend

4 unchanged sentences

( 195,873 ) ( 4,486 ) — — ( 4,486 )

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

Balance, March 31, 2022 11,752,623 $ 62,893 $ 178,054 $ ( 49,287 ) $ 191,660

See notes to unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

(In thousands) 2022 2021

1 unchanged sentence

Net income $ 6,086 $ 7,479

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

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Net decrease (increase) in deferred loan fees 208 ( 559 )

8 unchanged sentences

Increase in bank-owned life insurance, net of expenses ( 242 ) ( 173 )

Net gain on bank-owned life insurance — ( 462 )

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

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

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

Net cash provided by operating activities 32,079 6,822

Net decrease (increase) in accrued interest receivable and other assets 1,574 ( 504 )

Net (decrease) increase in accrued interest payable and other liabilities ( 10,249 ) 69

(Provision) benefit for deferred income taxes ( 435 ) 105

Net cash (used in) provided by operating activities ( 635 ) 6,379

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Proceeds from maturity and principal repayments of available-for-sale investment securities 18,435 11,331

Net decrease (increase) in loans 17,593 ( 160,653 )

Net decrease in loans 27,125 13,507

Purchases of premises and equipment ( 2 ) ( 344 )

Purchases of bank-owned life insurance ( 10,000 ) ( 250 )

FHLB stock redeemed — 467

Proceeds from bank-owned life insurance — 1,550

Proceeds from sale of premises and equipment — 2

2 unchanged sentences

Net increase in demand, interest bearing and savings deposits 44,891 200,112

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

Net decrease in time deposits ( 5,328 ) ( 419 )

Purchase and retirement of common stock ( 4,486 ) —

6 unchanged sentences

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 88,837 $ 214,841

For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

(In thousands) 2022 2021

2 unchanged sentences

Interest $ 172 $ 298

Income taxes $ 6,755 $ 5,120

Operating cash flows from operating leases $ 575 $ 562

7 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 2021 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, 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.

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, 2022, and the results of its operations and its cash flows for the three-month interim periods ended March 31, 2022 and 2021 have been included.

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

24 unchanged sentences

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 2022 due to the fact the Company elected to delay

implementation of the CECL process as allowed by FASB.

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 third quarter of 2022 due to the fact the Company

elected to delay 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.

5 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 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.

The Company believes the adoption of this guidance on activities subsequent to March 31, 2022 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 the COVID-19 pandemic and providing additional information regarding loan modifications.

The revised interagency statement clarifies the interaction between the interagency statement issued on March 22, 2020 and the temporary relief provided by Section 4013 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

Section 4013 allows financial institutions to suspend the requirements to classify certain loan modifications as troubled debt restructurings (“TDRs”).

Section 4013 allows financial institutions to suspend the requirements to classify certain loan modifications troubled debt restructurings (“TDRs”).

The revised statement also provides supervisory interpretations on past due and nonaccrual regulatory reporting of loan modification programs and regulatory capital.

This interagency guidance is expected to reduce the number of TDRs that will be reported in future periods;

however, the amount is indeterminable and will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic .

Section 4013 and the interagency guidance were applied by the Company to loan modifications made related to the COVID-19 pandemic as eligible and appropriate.

The application of the guidance reduced the number of TDRs that were reported.

In December 2020, the Consolidated Appropriations Act, 2021 was signed into law.

Section 541 of this legislation, “Extension of Temporary Relief From Troubled Debt Restructurings and Insurer Clarification,” extended Section 4013 of the CARES Act to the earlier of January 1, 2022 or 60 days after the termination of the national emergency declared relating to COVID-19.

This relief ended on January 1, 2022.

Future TDRs are indeterminable and will depend on future developments, which are highly uncertain and cannot be predicted, including the economic recovery, market volatility and other actions taken by governmental authorities and other third parties as a result of the pandemic.

Fair Value Measurements

11 unchanged sentences

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

September 30, 2021

March 31, 2022

Amount Fair Value

10 unchanged sentences

Deposits 2,162,360 1,888,591 84,045 — 1,972,636

Junior subordinated deferrable interest debentures 5,155 — — 4,322 4,322

Subordinated debentures 39,490 — — 36,844 36,844

Accrued interest payable 478 — 32 446 478

12 unchanged sentences

Deposits 2,122,797 2,010,407 89,923 — 2,100,330

Junior subordinated deferrable interest debentures 5,155 — — 3,693 3,693

Subordinated debentures 39,454 — — 39,463 39,463

Accrued interest payable 202 — 30 172 202

12 unchanged sentences

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 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.

17 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 September 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 March 31, 2022 and December 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, 2021 (in thousands).

Description Fair Value Level 1 Level 2 Level 3

The Company is required or permitted to record the following assets at fair value on a recurring basis under other accounting pronouncements (in thousands):

Fair Value Measurements Using

March 31, 2022 Fair Value Level 1 Level 2 Level 3

Available-for-sale debt securities:

11 unchanged sentences

$ 1,168,827 $ 7,071 $ 1,161,756 $ —

Fair Value Measurements Using

December 31, 2021 Fair Value Level 1 Level 2 Level 3

Available-for-sale debt securities:

Treasury securities $ 9,925 $ — $ 9,925 $ —

Government agencies 379 — 379 —

Obligations of states and political subdivisions 526,467 — 526,467 —

Government sponsored entities and agencies collateralized by residential mortgage obligations

214,439 — 214,439 —

Private label mortgage and asset backed securities

313,220 — 313,220 —

Corporate debt securities 44,778 — 44,778 —

Equity securities 7,416 7,416 — —

Total assets measured at fair value on a recurring basis $ 1,116,624 $ 7,416 $ 1,109,208 $ —

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

2 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 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.

During the periods ended March 31, 2022 and December 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 periods ended March 31, 2022 and December 31, 2021.

Also there were no liabilities measured at fair value on a recurring basis at March 31, 2022 or December 31, 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 September 30, 2021.

Fair Value Level 1 Level 2 Level 3

fair value which was below cost at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 Fair Value Level 1 Level 2 Level 3

Impaired loans:

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

Total assets measured at fair value on a non-recurring basis $ 262 $ — $ — $ 262

December 31, 2021 Fair Value Level 1 Level 2 Level 3

Impaired loans:

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

Total assets measured at fair value on a non-recurring basis $ 262 $ — $ — $ 262

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

9 unchanged sentences

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

There were no changes in valuation techniques used during the nine months ended September 30, 2021.

There were no changes in valuation techniques used during the three months ended March 31, 2022 or the year ended December 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 $ 304,000 with a valuation allowance of $ 42,000 at September 30, 2021, and a resulting fair value of $ 262,000 .

Once received, the assumptions and approaches utilized in the appraisal as well as the overall resultin g 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 $ 280,000 with a valuation allowance of $ 18,000 at March 31, 2022, 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:

Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis as of December 31, 2020 (in thousands).

Description Fair Value Level 1 Level 2 Level 3

Available-for-sale debt securities:

Government agencies $ 680 $ — $ 680 $ —

Obligations of states and political subdivisions 379,565 — 379,565 —

Government sponsored entities and agencies collateralized by residential mortgage obligations

216,298 — 216,298 —

Private label mortgage and asset backed securities

83,508 — 83,508 —

Corporate debt securities 30,041 — 30,041 —

Equity securities

7,634 7,634 — —

Total assets measured at fair value on a recurring basis

$ 717,726 $ 7,634 $ 710,092 $ —

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

Fair values for available-for-sale debt securities in Level 2 are based on quoted market prices for similar securities in active markets.

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators.

During the year ended December 31, 2020, no transfers between levels occurred.

There were no Level 3 assets measured at fair value on a recurring basis at or during the year ended December 31, 2020.

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

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.

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 $ 292,000 with a valuation allowance of $ 30,000 at December 31, 2021, 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.

The investment portfolio consists primarily of U.S.

There were no charge-offs related to loans carried at fair value during the three months ended March 31, 2022 and 2021.

Activity related to changes in the allowance for loan losses related to impaired loans for the three months ended March 31, 2022 and 2021 was not considered significant for disclosure purposes.

There were no liabilities measured at fair value on a non-recurring basis at March 31, 2022 or December 31, 2021.

The investm ent portfolio consists primarily of U.S.

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, 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.

As of March 31, 2022, $ 223,954,000 of these securities were held as collateral for borrowing arrangements, pub lic funds, and for other purposes.

The fair value of the available-for-sale investment portfolio reflected a net unrealized loss of $( 69,974,000 ) at March 31, 2022 compared to an unrealized gain of $ 10,835,000 at December 31, 2021.

The unrealized (loss)/gain recorded is net of $( 20,687,000 ) and $ 3,203,000 in tax (benefits) liabilities as accumulated other comprehensive income (loss) within shareholders’ equity at March 31, 2022 and December 31, 2021, 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, 2021

March 31, 2022

Available-for-Sale Securities Amortized Cost Gross

14 unchanged sentences

Debt securities:

Treasury securities $ 9,988 $ — $ ( 63 ) $ 9,925

Government agencies 373 6 — 379

6 unchanged sentences

Total available-for-sale $ 1,098,373 $ 20,373 $ ( 9,538 ) $ 1,109,208

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):

Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the periods ended March 31, 2022 and 2021 are shown below (in thousands):

For the Three Months

Ended September 30, For the Nine Months

Ended September 30,

Ended March 31,

Available-for-Sale Securities 2022 2021

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 $ 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.

The provision for income taxes includes $ 61,000 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, 2022.

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, 2021

March 31, 2022

Less than 12 Months 12 Months or More Total

2 unchanged sentences

Debt securities:

Treasury securities

$ 9,258 $ ( 730 ) $ — $ — $ 9,258 $ ( 730 )

Government agencies

343 ( 12 ) — — 343 $ ( 12 )

Obligations of states and political subdivisions

11 unchanged sentences

Debt securities:

treasury securities

$ 9,925 $ (63) $ — $ — $ 9,925 $ (63)

Obligations of states and political subdivisions

9 unchanged sentences

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

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 .

As of March 31, 2022, 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, 2022 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at March 31, 2022 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 nine months ended September 30, 2021.

There were no OTTI losses recorded during the three months ended March 31, 2022.

Treasury Securities

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

Treasury security which was in a gain position.

At March 31, 2022, the Company held one U.S.

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

Government Agencies

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

Government agency security which was in a gain position.

At March 31, 2022, the Company held one U.S.

Government agency security which was in a loss position for less than 12 months.

Obligations of States and Political Subdivisions

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.

At March 31, 2022, the Company held 114 obligations of states and political subdivision securities of which 83 were in a loss position for less than 12 months and four have been in a loss position for more 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, 2021.

Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations

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.

At March 31, 2022, the Company held 108 U.S.

Government sponsored entity and agency securities collateralized by residential mortgage obligations of which 33 were in a loss position for less than 12 months and ten 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, 2021.

Private Label Mortgage and Asset Backed Securities

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.

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, 2021.

At March 31, 2022, the Company had a total of 100 Private Label Mortgage and Asset Backed Securities (PLMABS).

73 of the PLMABS securities were in a loss position for less than 12 months and 13 have been in loss for more than 12 months at March 31, 2022.

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

Corporate Debt Securities

At September 30, 2021, the Company held 15 corporate debt securities of which eight were in a loss position for less than 12 months.

At March 31, 2022, the Company held 13 corporate debt securities of which 11 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, 2021 by contractual maturity is shown below (in thousands).

The amortized cost and estimated fair value of available-for-sale investment securities at March 31, 2022 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, 2021

March 31, 2022

Available-for-Sale Securities Amortized Cost Estimated Fair

13 unchanged sentences

Outstanding loans are summarized as follows:

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

Loan Type (Dollars in thousands) March 31, 2022 % of Total

Loans December 31, 2021 % of Total

15 unchanged sentences

Total loans $ 1,002,178 $ 1,029,511

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.

At March 31, 2022 and December 31, 2021, loans originated under Small Business Administration (SBA) programs totaling $ 20,625,000 and $ 23,024,000 , respectively, were included in the real estate and commercial categories, of which, $ 15,922,000 or 77 % and $ 17,720,000 or 77 %, 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, 2021, 341 PPP loans totaling $ 64,260,000 were outstanding and included in the commercial and industrial line item above.

At March 31, 2022, 23 PPP loans totaling $ 3,554,000 were outstanding and included in the commercial and industrial line item above.

At December 31, 2021, 70 PPP loans totaling $ 18,553,000 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 53 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, 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 March 31, 2022 and 2021 by portfolio segment (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

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

Beginning balance, January 01, 2022 $ 2,011 $ 6,741 $ 568 $ 280 $ 9,600

(Reversal) provision charged to operations ( 356 ) 307 31 18 —

1 unchanged sentence

Recoveries 356 — 9 — 365

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

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

Charge-offs ( 43 ) — ( 2 ) — ( 45 )

Recoveries 146 — 19 — 165

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

Ending balance, March 31, 2022 $ 1,993 $ 7,048 $ 525 $ 298 $ 9,864

Allowance for credit losses:

3 unchanged sentences

Recoveries 627 319 52 — 998

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

Allowance for credit losses:

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

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

Charge-offs ( 72 ) — ( 97 ) — ( 169 )

Recoveries 601 — 120 — 721

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):

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

The following is a summary of the Allowance by impairment methodology and portfolio segment as of March 31, 2022 and December 31, 2021 (in thousands):

Commercial Real Estate Consumer Unallocated Total

Allowance for credit losses:

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

Ending balance, March 31, 2022 $ 1,993 $ 7,048 $ 525 $ 298 $ 9,864

Ending balance:

7 unchanged sentences

collectively evaluated for impairment $ 1,404 $ 6,703 $ 564 $ 280 $ 8,951

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):

The following table shows the ending balances of loans as of March 31, 2022 and December 31, 2021 by portfolio segment and by impairment methodology (in thousands):

Commercial Real Estate Consumer Total

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

Ending balance, March 31, 2022 $ 148,972 $ 772,460 $ 89,531 $ 1,010,963

Ending balance:

8 unchanged sentences

$ 170,621 $ 767,464 $ 91,569 $ 1,029,654

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

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at March 31, 2022 (in thousands):

Pass Special Mention Sub-Standard Doubtful Total

22 unchanged sentences

Total $ 988,855 $ 40,845 $ 8,540 $ — $ 1,038,240

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

The following table shows an aging analysis of the loan portfolio by class and the time past due at March 31, 2022 (in thousands):

Past Due 60-89

28 unchanged sentences

Total $ 80 $ — $ — $ 80 $ 1,038,160 $ 1,038,240 $ — $ 946

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

The following table shows information related to impaired loans by class at March 31, 2022 (in thousands):

Investment Unpaid

1 unchanged sentence

With no related allowance recorded:

Commercial real estate $ 486 $ 553 $ —

Equity loans and lines of credit $ 135 $ 170 $ —

2 unchanged sentences

Commercial and industrial 2,281 2,325 556

Agricultural production 779 843 105

Total commercial 8,051 8,150 877

Real estate construction and other land loans 280 280 18

3 unchanged sentences

Equity loans and lines of credit 908 908 2

Total consumer 908 908 2

Total with an allowance recorded 3,624 3,669 583

5 unchanged sentences

With no related allowance recorded:

Commercial and industrial $ 60 $ 61 $ —

Owner occupied 370 409 —

Real estate construction and other land loans 28 28 —

Commercial real estate 512 561 —

Total real estate 910 998 —

Equity loans and lines of credit $ 136 $ 172 $ —

2 unchanged sentences

Commercial and industrial 6,452 6,491 544

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

Commercial real estate 148 149 3

Agricultural real estate 30 29 —

Total real estate 1,706 1,730 271

Equity loans and lines of credit 936 936 9

Consumer and installment 88 93 12

Total consumer 1,024 1,029 21

Total with an allowance recorded 10,072 10,132 631

Total $ 11,186 $ 11,371 $ 631

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 September 30, 2021 and 2020 (in thousands).

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

Investment Interest

Recognized Average

Investment Interest

With no related allowance recorded:

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

Owner occupied — — 385 —

Real estate construction and other land loans 234 — 7 —

Commercial real estate 365 — 689 —

Agricultural real estate — — 120 —

Total real estate 599 — 1,201 —

Equity loans and lines of credit 139 3 178 3

Total with no related allowance recorded 861 3 5,536 3

With an allowance recorded:

Commercial and industrial 5,538 129 5,440 138

Agricultural production 634 714 63

5 unchanged sentences

Equity loans and lines of credit 914 914 4

Consumer and installment — — 70 —

Total consumer 914 914 4

1 unchanged sentence

Total $ 8,586 $ 8,742 $ 649

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

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 March 31, 2022 and 2021 (in thousands).

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Investment Interest

3 unchanged sentences

Commercial and industrial $ 143 $ — $ 15 $ —

Agricultural land and production — — 85 —

Agricultural production 83 — — —

Total commercial 226 — 15 —

2 unchanged sentences

Commercial real estate — — 505 —

Agricultural real estate — — 189 —

Total real estate — — 793 —

3 unchanged sentences

Commercial and industrial 3,329 27 7,002 582

Agricultural land and production 983 — 481 36

Agricultural production 158 — 717 —

Total commercial 3,487 27 7,719 582

8 unchanged sentences

Total $ 5,203 $ 50 $ 11,338 $ 662

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.

Foregone interest on nonaccrual loans totaled $ 4,000 and $ 56,000 for the three month period ended March 31, 2022 and 2021, respectively.

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.

As of March 31, 2022 and December 31, 2021, the Company has a recorded investment in troubled debt restructurings (“TDR”) of $ 3,467,000 and $ 7,640,000 , respectively.

The Company has allocated $ 543,000 and $ 538,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022 and 2021, the terms of certain loans were modified as TDRs.

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.

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.

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

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):

In accordance with such guidance, during 2020 and throughout 2021 the Company offered short-term modifications in response to COVID-19 to borrowers who were current and otherwise not past due.

As of March 31, 2022, there were no such loans remaining on deferral.

During the three months ended March 31, 2022, no loans were modified as troubled debt restructuring.

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.

(2) Principal modification includes principal forgiveness at the time of modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with zero percent contractual interest rate.

(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, 2020 (in thousands):

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:

1 unchanged sentence

Commercial and Industrial 1 $ 333 $ — $ 333 $ 325

Agricultural production 1 850 — 850 779

Total 2 $ 13,775 $ — $ 13,775 $ 7,954

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

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

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

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 nine months ended and three months ended September 30, 2021 or September 30, 2020.

There were no defaults on troubled debt restructurings, within twelve months following the modification, during the three months ended March 31, 2022 or March 31, 2021.

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, 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 March 31, 2022, 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.

3 unchanged sentences

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 nine months of 2021.

No such events or circumstances arose during the first three months of 2022.

Borrowing Arrangements

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.

As of March 31, 2022 and December 31, 2021, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.

Approximately $ 493,500,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $ 284,114,000 as of March 31, 2022.

FHLB advances are also secured by investment securities with amortized costs totaling $ 106,000 and $ 112,000 and market values totaling $ 111,000 and $ 117,000 at March 31, 2022 and December 31, 2021, 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, 2021, and December 31, 2020 the Company had no Federal funds purchased.

As of March 31, 2022, and December 31, 2021 the Company had no Federal funds purchased.

Subordinated Debentures

The following table summarizes the Company’s subordinated debentures:

(Dollars in thousands) March 31, 2022 December 31, 2021

Fixed - floating rate subordinated debentures, due 2031 $ 35,000 $ 35,000

Unamortized debt issuance costs ( 665 ) ( 701 )

Junior subordinated deferrable interest debentures, due October 2036 5,155 5,155

Total subordinated debentures $ 39,490 $ 39,454

Junior Subordinated Debentures

Service 1 st Capital Trust I is a Delaware business trust formed by Service 1 st .

The Company succeeded to all of the rights and obligations of Service 1 st in connection with the merger with Service 1 st as of November 12, 2008.

The Trust was formed on August 17, 2006 for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by Service 1 st .

Under applicable regulatory guidance, the amount of trust preferred securities that is eligible as Tier 1 capital is limited to 25 % of the Company’s Tier 1 capital on a pro forma basis.

At March 31, 2022, all of the trust preferred securities that have been issued qualify as Tier 1 capital.

The trust preferred securities mature on October 7, 2036, are redeemable at the Company’s option, and require quarterly distributions by the Trust to the holder of the trust preferred securities at a variable interest rate which will adjust quarterly to equal the three month LIBOR plus 1.60 %.

The Trust used the proceeds from the sale of the trust preferred securities to purchase approximately $ 5,155,000 in aggregate principal amount of Service 1 st ’s junior subordinated notes (the Notes).

The Notes bear interest at the same variable interest rate during the same quarterly periods as the trust preferred securities.

The Notes are redeemable by the Company on any January 7, April 7, July 7, or October 7 or at any time within 90 days following the occurrence of certain events, such as:

(i) a change in the regulatory capital treatment of the Notes (ii) in the event the Trust is deemed an investment company or (iii) upon the occurrence of certain adverse tax events.

In each such case, the Company may redeem the Notes for their aggregate principal amount, plus any accrued but unpaid interest.

The Notes may be declared immediately due and payable at the election of the trustee or holders of 25 % of the aggregate principal amount of outstanding Notes in the event that the Company defaults in the payment of any interest following the nonpayment of any such interest for 20 or more consecutive quarterly periods.

Holders of the trust preferred securities are entitled to a cumulative cash distribution on the liquidation amount of $ 1,000 per security.

For each January 7, April 7, July 7 or October 7 of each year, the rate will be adjusted to equal the three month LIBOR plus 1.60 %.

As of March 31, 2022, the rate was 1.84 %.

Interest expense recognized by the Company for the three months ended March 31, 2022 and 2021 was $ 333,000 and $ 24,000 , respectively.

Subordinated Debentures

On November 12, 2021, the Company completed a private placement of $ 35.0 million aggregate principal amount of its fixed-to-floating rate subordinated notes (“Subordinated Debt”) due December 1, 2031.

The Subordinated Debt initially bears a fixed interest rate of 3.125 % per year.

Commencing on December 1, 2026, the interest rate on the Subordinated Debt will reset each quarter at a floating interest rate equal to the then-current three month term SOFR plus 210 basis points.

The Company may at its option redeem in whole or in part the Subordinated Debt on or after November 12, 2026 without a premium.

The Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.

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 $ 332,875,000 and $ 326,179,000 were outstanding at September 30, 2021 and December 31, 2020, respectively.

Commitments to extend credit amounting to $ 346,752,000 and $ 326,108,000 were outstanding at March 31, 2022 and December 31, 2021, 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 $ 322,441,000 and $ 314,774,000 at September 30, 2021 and December 31, 2020, respectively.

Included in commitments to extend credit are undisbursed lines of credit totaling $ 346,140,000 and $ 325,674,000 at March 31, 2022 and December 31, 2021, 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 $ 90,269,000 and $ 79,669,000 as of September 30, 2021 and December 31, 2020, respectively.

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $ 88,584,000 and $ 93,263,000 as of March 31, 2022 and December 31, 2021, 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 $ 10,434,000 and $ 11,405,000 were outstanding at September 30, 2021 and December 31, 2020, respectively.

Standby letters of credit and financial guarantees amounting to $ 611,000 and $ 434,000 were outstanding at March 31, 2022 and December 31, 2021, 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

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 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, 2022 or December 31, 2021.

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

1 unchanged sentence

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

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.

At March 31, 2022 and December 31, 2021, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $ 115,000 .

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, 2021, was $ 2,975,000 .

Part of the sale of the portfolio was to provide a guarantee of certain accounts which, as of March 31, 2022, was $ 2,144,500 .

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

5 unchanged sentences

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) 2022 2021

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) 2022 2021

5 unchanged sentences

Diluted earnings per share $ 0.51 $ 0.60

No outstanding options awards were anti-dilutive for the nine months ended September 30, 2021 and 2020.

No outstanding options awards were anti-dilutive for the three months ended March 31, 2022 and 2021.

Share-Based Compensation

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

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.

Share-based compensation cost recognized for those plans was $ 97,000 and $ 101,000 for the three months ended March 31, 2022 and 2021, respectively.

The recognized tax (benefit) expense for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $( 22,000 ) and $ 1,000 , respectively, for the three months ended March 31, 2022 and 2021.

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

3 unchanged sentences

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.

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.

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 447,787 shares available for future purchase under the plan as of September 30, 2021.

The Company reserved 500,000 common shares to be set aside for the ESPP, and there were 442,401 shares available for future purchase under the plan as of March 31, 2022.

Stock Option Plan

5 unchanged sentences

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):

No options to purchase shares of the Company’s common stock were granted during the three months ended March 31, 2022 and 2021.

A summary of the combined activity of the Company’s stock option compensation plans for the three months ended March 31, 2022 follows (in thousands, except per share amounts):

Shares Weighted

4 unchanged sentences

Options exercised ( 11,075 ) $ 11.87

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

Options forfeited ( 1,800 ) $ 12.50

Options outstanding at March 31, 2022 39,930 $ 9.12 0.38 $ 566

Options vested or expected to vest at March 31, 2022 39,930 $ 9.12 0.38 $ 566

Options exercisable at March 31, 2022 39,930 $ 9.12 0.38 $ 566

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,

2021 2020 2021 2020

Ended March 31,

Intrinsic value of options exercised $ 118 $ 1

1 unchanged sentence

Excess tax benefit realized for option exercises $ 22 $ —

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

As of March 31, 2022, there was no remaining unrecognized compensation cost related to stock options granted under all plans.

Restricted and Performance Common Stock Awards

4 unchanged sentences

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 nine months ended September 30, 2021 as follows:

The following table summarizes restricted stock and performance award activity for the three months ended March 31, 2022 as follows:

Shares Weighted

4 unchanged sentences

Forfeited ( 83 ) $ 19.99

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

Nonvested outstanding shares at March 31, 2022 28,586 $ 20.86

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, 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.

As of March 31, 2022, there were 28,586 shares of restricted stock that are nonvested and expected to vest.

As of March 31, 2022, there was $ 284,000 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 2.84 years and will be adjusted for subsequent changes in estimated forfeitures.

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

Restricted common stock awards had an intrinsic value of $ 3,432,000 at March 31, 2022.

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