20 unchanged sentences
Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report on Form 10-Q.
−Removed: Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed.
+Added: Should one or more of these risks or
+Added: uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed.
The future results and shareholder values of the Company may differ materially from those expressed in these forward-looking statements.
2 unchanged sentences
The Securities and Exchange Commission (SEC) maintains a web site which contains reports, proxy statements, and other information pertaining to registrants that file electronically with the SEC, including the Company.
−Removed: Internet address is:
+Added: The Internet address is:
In addition, our periodic and current reports are available free of charge on our website at www.cvcb.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
2 unchanged sentences
We believe that the Company’s most critical accounting policies are those which the Company’s financial condition depends upon, and which involve the most complex or subjective decisions or assessments.
−Removed: There have been no material changes to the Company’s critical accounting policies during the nine months ended September 30, 2021.
+Added: There have been no material changes to the Company’s critical accounting policies during the three months ended March 31, 2022.
Please refer to the Company’s 2021 Annual Report to Shareholders on Form 10-K for a complete listing of critical accounting policies.
15 unchanged sentences
Dividend Declared
−Removed: On October 20, 2021, the Board of Directors declared a $0.12 per share cash dividend payable on November 19, 2021 to shareholders of record as of November 5, 2021.
−Removed: Impact and Response to COVID-19 Pandemic
−Removed: The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented volatility and disruption in financial markets and deterioration in economic activity and market conditions in the markets we serve.
−Removed: The pandemic has affected our customers and the communities we serve and depending on the duration of the crisis and government actions, the adverse impact on our financial position and results of operations could be significant.
−Removed: In response to the effects of the pandemic on the U.S.
−Removed: economy, the Board of Governors of the Federal Reserve System (“FRB”) has taken significant actions, including a reduction in the target range of the federal funds rate to 0.0% to 0.25% and an indeterminate amount of purchases of Treasury and mortgage-backed securities.
−Removed: On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law.
−Removed: It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic.
−Removed: The CARES Act includes the Paycheck Protection Program (“PPP”), a $349 billion program designed to aid small- and medium-sized businesses
−Removed: through 100% Small Business Administration (“SBA”) guaranteed loans distributed through banks.
−Removed: These loans were intended to guarantee 24 weeks of payroll and other costs to help those businesses remain viable and keep their workers employed.
−Removed: Legislation passed on April 24, 2020 provided additional PPP funds of $310 billion.
−Removed: During 2020, we originated and funded approximately 1,089 loans, totaling $217.2 million.
−Removed: In response to the COVID-19 pandemic and the CARES Act, we also implemented a short-term loan modification program to provide temporary payment relief to certain of our borrowers who meet the program’s qualifications.
−Removed: On January 13, 2021, the SBA reopened the PPP for Second Draw loans to small businesses and non-profit organizations that received a loan through the initial PPP phase.
−Removed: At least $25 billion has been set aside for Second Draw (“round two”) PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.
−Removed: Generally speaking, businesses with more than 300 employees and/or less than a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 are not eligible for Second Draw loans.
−Removed: Further, maximum loan amounts have been increased for accommodation and food service businesses.
−Removed: As of September 30, 2021, we have originated approximately 512 round two loans totaling $78.5 million in outstanding borrowings.
−Removed: The Paycheck Protection Program officially ended on May 31, 2021.
−Removed: The first nine months of 2021 included $3.8 million in recapture of provision for credit losses, as a result of a modest improvement in our economic forecast.
−Removed: In comparison, the first nine months of 2020 included a $5.0 million provision.
−Removed: The Company’s allowance for credit losses at September 30, 2021 of $10.1 million, compares to the pre-pandemic allowance of $9.5 million at December 31, 2019.
−Removed: We continue to monitor the impact of COVID-19 closely.
−Removed: The extent to which the COVID-19 pandemic will impact our operations and financial results during 2021 is highly uncertain, but we may experience continued volatility in the provision for credit losses if this pandemic results in economic stress greater than forecasted on our borrowers and loan portfolios and lower interest income if the current low interest rate environment continues.
−Removed: We only conduct business in the state of California.
−Removed: California placed significant restrictions on businesses and individuals at the outset of the COVID-19 pandemic.
−Removed: While many of these initial restrictions have been lifted, there is still the possibility that certain restrictions could be re-imposed or extended to contain further spread if the rate of infection were to surge again in any of these states, including as a result of the Delta variant that has recently caused an uptick in infections particularly among non-vaccinated individuals.
−Removed: As a financial institution, we are considered an essential business and we have therefore continued to operate on a modified basis throughout the pandemic to comply with governmental restrictions and public health authority guidelines.
−Removed: We remain focused on keeping our employees safe and our bank running effectively to serve our customers and continue to monitor the continued spread of COVID-19 and its Delta variant.
−Removed: Our branches have been reopened across our footprint.
−Removed: Furthermore, the onset and continuation of the COVID-19 pandemic has significantly heightened the level of challenges, risks and uncertainties facing our business and continuation of operations, including the following:
−Removed: • Market interest rates have declined significantly and remain near historic lows, and these reductions, especially if prolonged, could adversely affect our net interest income, net interest margin, and earnings;
−Removed: • We have experienced and continue to anticipate a slowdown in demand for our products and services, including the demand for traditional loans.
−Removed: Although the decline has been offset, in part, due to PPP loans under the CARES Act and other governmental programs established in response to the pandemic, the PPP forgiveness process will continue to lessen the positive impact of these programs;
−Removed: • Volatility in economic forecasts caused by the COVID-19 pandemic create wider uncertainty in the outlook for future net charge off activity resulting in the potential for changing levels of reserves in the allowance for credit losses;
−Removed: • Declines in fair value of investment securities in our portfolio due to economic uncertainties could reduce the unrealized gains reported as part of our consolidated comprehensive income (loss).
−Removed: Third Quarter of 2021
−Removed: For the third quarter of 2021, our consolidated net income was $6,521,000 compared to $4,344,000 for the same period in 2020.
−Removed: Diluted EPS was $0.54 for the quarter ended September 30, 2021 compared to $0.35 for the same period in 2020.
−Removed: The increase in net income during the third quarter of 2021 compared to the same period in 2020 is primarily driven by a decrease in provision for credit losses of $1,100,000, an increase in net interest income of $2,167,000, and an increase in non-interest income of $77,000, partially offset by an increase in total non-interest expenses of $334,000, and an increase in the provision for income taxes of $833,000.
−Removed: During the quarter ended September 30, 2021, the Company recorded a $500,000 reversal of provision for credit losses, compared to a $600,000 provision during the quarter ended September 30, 2020.
−Removed: Throughout 2020 and the first nine months of of 2021, we adjusted the economic risk factor methodology to incorporate the current economic implications from the COVID-19 pandemic.
−Removed: Net interest margin (fully tax equivalent basis) decreased to 3.47% for the quarter ended September 30, 2021 compared to 3.63% for the same period in 2020.
−Removed: The net interest margin period-to-period comparisons were impacted by the increase in the yield on the average investment securities, including interest-earning deposits in other banks and Federal funds sold, offset by the increase in the yield on the loan portfolio and the decrease in the cost of total interest-bearing liabilities.
−Removed: The effective yield on average investment securities, including interest-earning deposits in other banks and Federal funds sold, increased to 2.14% for the three months ended September 30, 2021, compared to 2.07% for the three months ended
−Removed: September 30, 2020.
−Removed: The effective yield on average loans increased to 4.91% for the three months ended September 30, 2021, compared to 4.68% for the three months ended September 30, 2020.
−Removed: The increase in the loan yield was impacted by Company’s issuance of PPP loans.
−Removed: Total average PPP loans, which have an annual interest rate of 1.00%, were $84,292,000 and $211,559,000 for the three months ended September 30, 2021 and 2020, respectively.
−Removed: The cost of deposits (calculated by dividing annualized interest expense on interest bearing deposits by total deposits), decreased to 0.05% for the quarter ended September 30, 2021 compared to 0.09% for the same period in 2020.
−Removed: Non-interest income increased $77,000 or 3.72% to $2,148,000 for the quarter ended September 30, 2021 compared to $2,071,000 for the same period in 2020, primarily driven by an increase in interchange fees of $117,000, an increase of $60,000 in net realized gains on sales and calls of investment securities, an increase in service charge income of $24,000, an increase in Federal Home Loan Bank (“FHLB”) dividends of $13,000, and an increase of $12,000 in other income, offset by a decrease in loan placement fees of $218,000.
−Removed: Non-interest expense for the quarter ended September 30, 2021 increased $334,000 or 2.85% from the comparable period due to increases in salaries and employee benefits, data processing, occupancy and equipment, personnel, regulatory assessments, appraisal fees, alarm monitoring, operating losses, information technology expenses, tax provision, postage, donations, education and training, directors’ expenses, telephone expenses, ATM/debit card expenses, mileage and travel, and amortization of software, partially offset by decreases in professional services, internet banking expenses, risk management expenses, advertising, armored courier fees, stationery and supplies, check printing, and loan related expenses.
−Removed: Annualized return on average equity (ROE) for the third quarter of 2021 increased to 10.41% compared to 7.50% for the same period in 2020.
−Removed: The increase in ROE reflects the increase in net income, as well as the increase in average shareholders’ equity compared to the prior year.
−Removed: Annualized return on average assets (ROA) was 1.13% and 0.90% for the quarters ended September 30, 2021 and 2020, respectively.
−Removed: Total average equity increased to $250,520,000 for the third quarter of 2021 compared to $231,656,000 for the third quarter of 2020.
−Removed: The Company declared and paid $0.12 per share in cash dividends to holders of common stock during the third quarter of 2021, compared to $0.11 in dividends declared and paid during the third quarter of 2020.
−Removed: Our average total assets increased $389,578,000 or 20.20% to $2,318,172,000 during the third quarter of 2021 compared to the same period in 2020.
−Removed: Total average interest-earning assets increased $356,622,000 or 20.14% in the third quarter of 2021 compared to the same period of 2020.
−Removed: Total average loans, including nonaccrual loans, decreased $53,361,000 or 4.75% in the third quarter of 2021 compared to the same period in 2020.
−Removed: Average total investments and interest-earning deposits in other banks increased $409,167,000 or 62.95% in the quarter ended September 30, 2021 compared to the same period in 2020.
−Removed: Average interest-bearing liabilities increased $250,724,000 or 29.15% in the quarter ended September 30, 2021 compared to the same period in 2020.
−Removed: Average non-interest bearing demand deposits increased 13.47% to $915,742,000 in the third quarter of 2021 compared to $807,052,000 during the same period in 2020.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits was 45.30% in the third quarter of 2021 compared to 48.56% in 2020.
−Removed: First Nine Months of 2021
−Removed: For the nine months ended September 30, 2021, our consolidated net income was $21,563,000 compared to $13,268,000 for the same period in 2020.
−Removed: Diluted EPS was $1.74 for the first nine months of 2021 compared to $1.05 for the first nine months of 2020.
−Removed: Net income for the nine-month period ended September 30, 2021 increased 62.52%, compared to the nine-month period ended September 30, 2020, primarily driven by an increase in net interest income, an increase in loan placement fees, a decrease in non-interest expense, and a decrease in the provision for credit losses, partially offset by a decrease in net realized gains on sales and calls of investment securities, a decrease in service charge income, and an increase in provision for income taxes.
−Removed: Net interest income before the provision for credit losses increased $6,200,000 or 13.01%.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $579,000 and $1,039,000 for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Net interest income during the first nine months of 2021 and 2020 benefited by approximately $438,000 and $505,000, respectively, in nonrecurring income from loan prepayment penalties.
−Removed: Excluding the loan mark accretion and prepayment penalties, net interest income for the nine months ended September 30, 2021, increased by $6,727,000 compared to the nine-month period ended September 30, 2020.
−Removed: Non-interest income decreased $4,435,000 or 41.61%, and non-interest expense decreased $225,000 or 0.64% in the first nine months of 2021 compared to the first nine months of 2020.
−Removed: During the nine months ended September 30, 2021, the Company recorded a reversal of provision for credit losses of $3,800,000 compared to $4,975,000 provision during same period in 2020.
−Removed: Net recoveries of previously charged-off loans totaling $946,000 and $552,000 were recorded during the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Annualized return on average equity for the nine months ended September 30, 2021 increased to 11.60% compared to 7.78% for the same period in 2020.
−Removed: The increase in ROE reflects the increase in net income, notwithstanding the increase in average shareholders’ equity compared to the prior year.
−Removed: Annualized return on average assets was 1.30% and 0.99% for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Total average equity was $247,814,000 for the nine months ended September 30, 2021 compared to $227,394,000 for the same period in 2020.
−Removed: The change in shareholders’ equity was
−Removed: driven by the retention of earnings, net of dividends paid, the decrease in net unrealized gains on available-for-sale (AFS) securities , and share repurchases.
−Removed: Our average total assets increased $436,695,000 or 24.52% in the first nine months of 2021 compared to the same period in 2020.
−Removed: Total average interest-earning assets increased $413,076,000 or 25.38% comparing the first nine months of 2021 to the same period in 2020.
−Removed: Average total loans, including nonaccrual loans, increased $35,028,000 or 3.36% comparing the first nine months of 2021 to the same period in 2020.
−Removed: The effective yield on average loans increased to 5.04% for the nine months September 30, 2021, compared to 4.97% for the nine months September 30, 2020.
−Removed: Total average PPP loans were $140,883,000 and $124,303,000 for the nine months ended September 30, 2021 and 2020 , respectively.
−Removed: Excluding PPP loans from total average loans, the effective yield on average loans for the nine months ended September 30, 2021 and 2020 was 4.90% and 5.34%, respectively.
−Removed: Average total investments (securities and interest-earning deposits) increased $378,890,000, or 64.52% in the nine-month period ended September 30, 2021 compared to the same period in 2020.
−Removed: Average interest-bearing liabilities increased $245,080,000 or 30.40% on a period-to-period comparison.
−Removed: Our net interest margin (fully tax equivalent basis) for the first nine months ended September 30, 2021 decreased to 3.60% compared to 3.93% for the same period in 2020.
−Removed: The decrease in net interest margin in the period-to-period comparison resulted primarily from a decrease in the effective yield on the Company’s average investment securities, the increase in the yield on the loan portfolio, and the decrease in the effective yield on interest-earning deposits in other banks and Federal funds sold, partially offset by the decrease in the cost of total interest-bearing liabilities.
−Removed: The effective yield on interest-earning assets decreased 38 basis points to 3.66% for the nine-month period ended September 30, 2021 compared to 4.04% for the same period in 2020.
−Removed: For the nine-month period ended September 30, 2021, the effective yield on investment securities, including Federal funds sold and interest-earning deposits in other banks, decreased 27 basis points, compared to the same period in the prior year, and the effective yield on loans increased seven basis points.
−Removed: The cost of total interest-bearing liabilities decreased 10 basis points to 0.11% compared to 0.21% for the same period in 2020.
−Removed: The cost of total deposits, including noninterest bearing accounts decreased to 0.05% compared to 0.10% for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Net interest income before the reversal of provision for credit losses for the nine months ended September 30, 2021 was $53,846,000 compared to $47,646,000 for the same period in 2020, an increase of $6,200,000 or 13.01%.
−Removed: Net interest income increased as a result of yield changes, and asset mix changes, offset by an increase in average earning assets and an increase in interest-bearing liabilities.
−Removed: The Bank recovered $438,000 and $505,000, of foregone interest income and prepaid payment penalties in 2021 and 2020, respectively.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $579,000 and $1,039,000 for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: The Bank had non-accrual loans totaling $1,597,000 at September 30, 2021, compared to $3,278,000 at December 31, 2020 and $3,458,000 at September 30, 2020.
−Removed: The Company had no other real estate owned or repossessed assets at September 30, 2021, December 31, 2020, or September 30, 2020.
−Removed: At September 30, 2021, we had total net loans of $1,073,436,000, total assets of $2,348,377,000, total deposits of $2,058,092,000, and shareholders’ equity of $246,548,000.
+Added: On April 20, 2022, the Board of Directors declared a $0.12 per share cash dividend payable on May 20, 2022 to shareholders of record as of May 6, 2022.
+Added: Economic Conditions
+Added: The COVID-19 pandemic has caused significant, unprecedented disruption around the world that has affected daily living and negatively impacted the local, state, national and global economies.
+Added: It has caused significant economic and financial disruption that have adversely affected or otherwise impacted our businesses.
+Added: The COVID-19 has not yet been globally contained and the number of cases continues to increase in many locations, including in the United States in which we operate.
+Added: During the course of the continuing pandemic, there have been varying governmental and other responses to slow or control the spread of the COVID-19 and to mitigate the adverse impact of the COVID-19, such as stay at home orders, restrictions on business activities, health and safety guidelines, economic relief for individuals and businesses, and monetary policy measures, such responses have met varying degrees of success, and it remains uncertain whether these actions will be successful in a sustained manner.
+Added: We cannot predict at this time the scope and duration of the pandemic.
+Added: Despite the continuing challenges in recent months, there has been some improvement in the economic environment and resilience in the markets in which we operate.
+Added: With the seemingly wider availability and distribution of vaccinations and the easing of some restrictions in the United States, we have seen steps towards broader containment.
+Added: However, there still remains much uncertainty around containment of the pandemic, which will depend on various factors, including but not limited to, the extent and spread of variants of the virus;
+Added: efficacy of vaccines;
+Added: and government and other actions to mitigate the spread of COVID-19.
+Added: Through the COVID-19 pandemic, the Company was able to react quickly to these changes because of the commitment and flexibility of its workforce coupled with a well-prepared business continuity plan.
+Added: The Company has taken various steps to help our customers, employees, and communities, while maintaining safe and sound banking operations.
+Added: The Company has been assisting customers with loan deferrals and the PPP loans and has provided employees remote working environment while maintaining fully functioning operations in all areas.
+Added: Agriculture and agricultural-related businesses remain a critical part of the Central Valley’s economy.
+Added: The Valley’s agricultural production is widely diversified, producing nuts, vegetables, frui t, cattle, dairy products, and cotton.
+Added: The continued future success of agriculture related businesses is highly dependent on the availability of water and is subject to fluctuation in worldwide commodity prices, currency exchanges, and demand.
+Added: From time to time, California experiences severe droughts or adverse weather issues, which could significantly harm the business of our customers and the credit quality of the loans to those customers.
+Added: Currently, California is experiencing multi-year drought conditions which impacts surface water deliveries to customers.
+Added: In reaction to these conditions, we closely monitor the surface water availability with customer specific budgeting and third party information and surveys.
+Added: There are also certain regulatory impacts that limit the water than can be pumped from underground sources.
+Added: Both sources are closely considered and monitored in the granting and monitoring of our loan exposures, along with related issues affecting our customers.
+Added: We closely monitor the water resources and the related issues affecting our customers, and we will remain vigilant for identifying signs of deterioration within the loan portfolio in an effort to manage cred it quality and work with borrowers where possible to mitigate any losses.
+Added: First Quarter of 2022
+Added: For the first quarter of 2022, our consolidated net income was $6,086,000 compared to $7,479,000 for the same period in 2021.
+Added: Diluted EPS was $0.51 for the quarter ended March 31, 2022 compared to $0.60 for the same period in 2021.
+Added: The decrease in net income during the first quarter of 2022 compared to the same period in 2021 is primarily driven by no reversal of provision for credit losses, a decrease in loan placement fees of $358,000, a decrease in non-interest income of $165,000, and an increase in total non-interest expenses of $57,000, partially offset by a decrease in the provision for income taxes of $587,000, an increase in interchange fees of $72,000, an increase in net realized gains on sales and calls of investment securities of $206,000, an increase in service charge income of $107,000, and an increase in net interest income of $42,000.
+Added: During the quarter ended March 31, 2022, the Company recorded no provision for credit losses, compared to a $1,800,000 reversal of provision during the quarter ended March 31, 2021.
+Added: Throughout 2020, 2021 and the first three months of 2022, we adjusted the economic risk factor methodology to incorporate the current economic implications from the COVID-19 pandemic.
+Added: Net interest margin (fully tax equivalent basis) decreased to 3.19% for the quarter ended March 31, 2022 compared to 3.76% for the same period in 2021.
+Added: The net interest margin period-to-period comparisons were impacted by the decrease in the yield on the average investment securities, including interest-earning deposits in other banks and Federal funds sold, by the decrease in the yield on the loan portfolio and the increase in the cost of total interest-bearing liabilities.
+Added: The effective yield on average investment securities, including interest-earning deposits in other banks and Federal funds sold, decreased to 2.02% for the three months ended March 31, 2022, compared to 2.07% for the three months ended March 31, 2021.
+Added: The effective yield on average loans decreased to 4.85% for the three months ended March 31, 2022, compared to 5.18% for the three months ended March 31, 2021.
+Added: Total average PPP loans, which have an annual interest rate of 1.00%, were $11,329,000 and $178,956,000 for the three months ended March 31, 2022 and 2021, respectively.
+Added: Excluding PPP loans from total average loans, the effective yield on average loans for the three months ended March 31, 2022 and 2021 was 4.87% and 5.11%, respectively.
+Added: The cost of deposits (calculated by dividing annualized interest expense on interest bearing deposits by total deposits), decreased to 0.05% for the quarter ended March 31, 2022 compared to 0.06% for the same period in 2021.
+Added: Non-interest income decreased $165,000 or 8.25% to $1,834,000 for the quarter ended March 31, 2022 compared to $1,999,000 for the same period in 2021, primarily driven by a decrease in loan placement fees of $358,000, and a decrease of $276,000 in other income, offset by an increase of $206,000 in net realized gains on sales and calls of investment securities, an increase in service charge income of $107,000, an increase in interchange fees of $72,000, an increase in appreciation in cash surrender value of bank owned life insurance of $69,000, and an increase in Federal Home Loan Bank (“FHLB”) dividends of $15,000.
+Added: Non-interest expense for the quarter ended March 31, 2022 increased $57,000 or 0.50% from the comparable period due to increases in salaries and employee benefits, occupancy and equipment, professional services, regulatory assessments, appraisal fees, alarm monitoring, information technology expenses, risk management expenses, donations, education and training, directors’ expenses, telephone expenses, mileage and travel, loan related expenses, advertising, and amortization of software, partially offset by decreases in data processing, tax provision, personnel, internet banking expenses, amortization of core deposit intangibles, ATM/debit card expenses, postage, armored courier fees, stationery and supplies, check printing, and operating losses.
+Added: Annualized return on average equity (ROE) for the first quarter of 2022 decreased to 10.51% compared to 12.17% for the same period in 2021.
+Added: The decrease in ROE reflects the decrease in net income, notwithstanding the decrease in average shareholders’ equity compared to the prior year.
+Added: Annualized return on average assets (ROA) was 0.99% and 1.42% for the quarters ended March 31, 2022 and 2021, respectively.
+Added: Total average equity decreased to $231,706,000 for the first quarter of 2022 compared to $245,913,000 for the first quarter of 2021.
+Added: The Company declared and paid $0.12 per share in cash dividends to holders of common stock during the first quarter of 2022, compared to $0.11 in dividends declared and paid during the first quarter of 2021.
+Added: Our average total assets increased $355,948,000 or 16.92% to $2,460,025,000 during the first quarter of 2022 compared to the same period in 2021.
+Added: Total average interest-earning assets increased $351,388,000 or 18.17% in the first quarter of 2022 compared to the same period of 2021.
+Added: Total average loans, including nonaccrual loans, decreased $63,163,000 or 5.84% in the first quarter of 2022 compared to the same period in 2021.
+Added: Average total investments and interest-earning deposits in other banks increased $411,248,000 or 48.01% in the quarter ended March 31, 2022 compared to the same period in 2021.
+Added: Average interest-bearing liabilities increased $266,395,000 or 27.13% in the quarter ended March 31, 2022 compared to the same period in 2021.
+Added: Average non-interest bearing demand deposits increased 11.35% to $940,963,000 in the first quarter of 2022 compared to $845,065,000 during the same period in 2021.
+Added: The ratio of average non-interest bearing demand deposits to average total deposits was 43.77% in the first quarter of 2022 compared to 46.39% in 2021.
Key Factors in Evaluating Financial Condition and Operating Performance
9 unchanged sentences
Our return to shareholders is determined in a ratio that measures the return on average equity (ROE), which is net income divided by average shareholders’ equity.
−Removed: Our annualized ROE was 11.60% for the nine months ended September 30, 2021 compared to 8.85% for the year ended December 31, 2020 and 7.78% for the nine months ended September 30, 2020.
−Removed: Our net income for the nine months ended September 30, 2021 increased $8,295,000 or 62.52% to $21,563,000 compared to $13,268,000 for the nine months ended September 30, 2020, primarily driven by an increase in net interest income, a decrease in non-interest expenses, a reversal of the provision for credit losses, and an increase in loan placement fees, offset by a decrease in net realized gains on sales and calls of investment securities, an increase in provision for income taxes, and a decrease in service charge income.
−Removed: Net interest margin (NIM) decreased 33 basis points for the nine-month period ended
−Removed: September 30, 2021 compared to the nine months ended September 30, 2020.
−Removed: Diluted EPS was $1.74 for the nine months ended September 30, 2021 and $1.05 for the same period in 2020.
+Added: Our annualized ROE was 10.51% for the three months ended March 31, 2022 compared to 11.50% for the year ended December 31, 2021 and 12.17% for the three months ended March 31, 2021.
+Added: Our net income for the three months ended March 31, 2022 decreased $1,393,000 or 18.63% to $6,086,000 compared to $7,479,000 for the three months ended March 31, 2021, primarily driven by no reversal of provision for credit losses,a decrease in loan placement fees, a decrease in non-interest income, and an increase in total non-interest expenses, partially offset by a decrease in the provision for income taxes, an increase in interchange fees, an increase in net realized gains on sales and calls of investment securities, an increase in service charge income, and an increase in net interest income.
+Added: Net interest margin (NIM) decreased 57 basis points for the three-month period ended March 31, 2022 compared to the three months ended March 31, 2021.
+Added: Diluted EPS was $0.51 for the three months ended March 31, 2022 and $0.60 for the same period in 2021.
Return on Average Assets
Our return on average assets (ROA) is a ratio that we use to compare our performance with other banks and bank holding companies.
−Removed: Our annualized ROA for the nine months ended September 30, 2021 was 1.30% compared to 1.11% for the year ended December 31, 2020 and 0.99% for the nine months ended September 30, 2020.
−Removed: The increase in ROA for the nine months ended September 30, 2021 compared to September 30, 2020 was due to the increase in net income, notwithstanding the increase in average assets.
−Removed: Average assets for the nine months ended September 30, 2021 was $2,217,411,000 compared to $1,832,987,000 for the year ended December 31, 2020.
+Added: Our annualized ROA for the three months ended March 31, 2022 was 0.99% compared to 1.25% for the year ended December 31, 2021 and 1.42% for the three months ended March 31, 2021.
+Added: The decrease in ROA for the three months ended March 31, 2022 compared to March 31, 2021 was due to the decrease in net income.
+Added: Average assets for the three months ended March 31, 2022 was $2,460,025,000 compared to $2,267,615,000 for the year ended December 31, 2021.
Median ROA for our peer group was 0.93% for the year ended December 31, 2021.
3 unchanged sentences
Specifically, we have focused on net interest income through a variety of processes, including increases in average interest earning assets, and minimizing the effects of the recent interest rate changes on our net interest margin.
−Removed: The Company’s net interest margin (fully tax equivalent basis) decreased to 3.60% for the nine months ended September 30, 2021, compared to 3.93% for the same period in 2020.
−Removed: The decrease in net interest margin in the period-over-period comparison resulted primarily from the decrease in the effective yield on average investment securities (including interest-earning deposits in other banks and Federal funds sold), offset by an increase in the yield on the Company’s loan portfolio.
+Added: The Company’s net interest margin (fully tax equivalent basis) decreased to 3.19% for the three months ended March 31, 2022, compared to 3.76% for the same period in 2021.
+Added: The decrease in net interest margin in the period-over-period comparison resulted primarily from the decrease in the effective yield on average investment securities (including interest-earning deposits in other banks and Federal funds sold), the decrease in the yield on the Company’s loan portfolio, and the increase on the cost of interest bearing liabilities.
Interest-bearing liabilities continue to benefit from low interest rates.
−Removed: In comparing the two periods ending September 30, 2021 and 2020, the effective yield on total earning assets decreased 38 basis points, while the cost of total interest-bearing liabilities decreased 10 basis points and the cost of total deposits decreased to 0.05% compared to 0.10%.
−Removed: Net interest income before the reversal of provision for credit losses for the nine-month period ended September 30, 2021 was $53,846,000 compared to $47,646,000 for the same period in 2020.
+Added: In comparing the two periods ending March 31, 2022 and 2021, the effective yield on total earning assets decreased 53 basis points, while the cost of total interest-bearing liabilities increased 7 basis points and the cost of total deposits decreased to 0.05% compared to 0.06%.
+Added: Net interest income before the reversal of provision for credit losses for the three-month period ended March 31, 2022 was $17,597,000 compared to $17,555,000 for the same period in 2021.
Our non-interest income generally consists of service charges and fees on deposit accounts, fee income from loan placements and other services, appreciation in cash surrender value of bank-owned life insurance, net gains from sales of investment securities, FHLB dividends, and other income.
−Removed: Non-interest income for the nine months ended September 30, 2021 decreased $4,435,000 or 41.61%, to $6,224,000 compared to $10,659,000 for the nine months ended September 30, 2020.
−Removed: The decrease resulted primarily from decreases in net realized gains on sales and calls of investment securities, service charge income, gain related to the collection of life insurance proceeds, and FHLB dividends;
−Removed: offset by increases in loan placement fees, and interchange fees, compared to the comparable 2020 period.
+Added: Non-interest income for the three months ended March 31, 2022 decreased $165,000 or 8.25%, to $1,834,000 compared to $1,999,000 for the three months ended March 31, 2021.
+Added: The decrease resulted primarily from decreases in loan placement fees and other income, offset by increases in net realized gains on sales and calls of investment securities, service charge income, FHLB dividends;
+Added: and interchange fees, compared to the comparable 2021 period.
Further detail of non-interest income is provided below.
2 unchanged sentences
Asset quality is measured in terms of percentage of total loans and total assets and is a key element in estimating the future earnings of a company.
−Removed: Total nonperforming assets were $1,597,000 and $3,278,000 at September 30, 2021 and December 31, 2020, respectively.
−Removed: Nonperforming assets totaled 0.15% of gross loans as of September 30, 2021 and 0.30% of gross loans as of December 31, 2020.
−Removed: The ratio of nonperforming assets to total assets was 0.07% as of September 30, 2021 and 0.16% as of December 31, 2020.
−Removed: The nonperforming assets at September 30, 2021 and December 31, 2020 consisted of nonaccrual loans of $1,597,000 and $3,278,000, respectively.
−Removed: The Company had no other real estate owned (OREO) or repossessed assets at September 30, 2021 or December 31, 2020.
+Added: Total nonperforming assets were $292,000 and $946,000 at March 31, 2022 and December 31, 2021, respectively.
+Added: Nonperforming assets totaled 0.03% of gross loans as of March 31, 2022 and 0.09% of gross loans as of December 31, 2021.
+Added: The ratio of nonperforming assets to total assets was 0.01% as of March 31, 2022 and 0.04% as of December 31, 2021.
+Added: The nonperforming assets at March 31, 2022 and December 31, 2021 consisted of nonaccrual loans of $292,000 and $3,278,000, respectively.
+Added: The Company had no other real estate owned (OREO) or repossessed assets at March 31, 2022 or December 31, 2021.
Management maintains certain loans that have been brought current by the borrower (less than 30 days delinquent) on nonaccrual status until such time as management has determined that the loans are likely to remain current in future periods.
−Removed: The allowance for credit losses as a percentage of the outstanding loan balance was 0.93% as of September 30, 2021 and 1.17% as of December 31, 2020.
−Removed: The ratio of net charge-off (recovery) to average loans was (0.12)% for the nine months ended September 30, 2021 and (0.05)% as of December 31, 2020.
+Added: The allowance for credit losses as a percentage of the outstanding loan balance was 0.97% as of March 31, 2022 and 0.92% as of December 31, 2021.
+Added: The ratio of net charge-off (recovery) to average loans was (0.10)% for the three months ended March 31, 2022 and (0.09)% as of December 31, 2021.
As revenues from both net interest income and non-interest income are a function of asset size, the growth in assets has a direct impact in increasing net income and therefore ROE and ROA.
The majority of our assets are loans and investment securities, and the majority of our liabilities are deposits, and therefore the ability to generate deposits as a funding source for loans and investments is fundamental to our asset growth.
−Removed: Total assets increased by $344,281,000 or 17.18% during the nine months
−Removed: ended September 30, 2021 to $2,348,377,000 compared to $2,004,096,000 as of December 31, 2020, primarily due to the increase in deposit balances.
−Removed: Total gross loans decreased by 1.71% or $18,850,000 to $1,083,497,000 as of September 30, 2021 compared to $1,102,347,000 as of December 31, 2020.
−Removed: The gross loan decrease consisted of a decrease of $128,656,000 in the PPP loans, offset by an increase of $109,806,000 in non-PPP loan growth.
−Removed: Total deposits increased 19.47% to $2,058,092,000 as of September 30, 2021 compared to $1,722,710,000 as of December 31, 2020.
−Removed: The Company’s deposit balances for the nine months ended September 30, 2021 increased through organic growth and PPP loan proceeds retained in customer deposit accounts.
−Removed: Our loan-to-deposit ratio at September 30, 2021 was 52.65% compared to 63.99% at December 31, 2020.
+Added: Total assets decreased by $27,109,000 or 1.11% during the three months ended March 31, 2022 to $2,423,030,000 compared to $2,450,139,000 as of December 31, 2021.
+Added: Total gross loans decreased by 2.61% or $27,069,000 to $1,012,042,000 as of March 31, 2022 compared to $1,039,111,000 as of December 31, 2021.
+Added: The gross loan decrease consisted of a decrease of $14,999,000 in the PPP loans, as well as a decrease of $12,070,000 in non-PPP loan growth.
+Added: Total deposits increased 1.86% to $2,162,360,000 as of March 31, 2022 compared to $2,122,797,000 as of
+Added: December 31, 2021.
+Added: The Company’s deposit balances for the three months ended March 31, 2022 increased through organic growth.
+Added: Our loan-to-deposit ratio at March 31, 2022 was 46.80% compared to 48.95% at December 31, 2021.
The loan-to-deposit ratio of our peers was 71.00% at December 31, 2021.
11 unchanged sentences
As of August 30, 2018, bank holding companies with consolidated assets of less than $3 billion and banks like Central Valley Community Bank became subject to new capital requirements, and certain provisions of the new rules were phased in through 2019 under the Dodd-Frank Act and Basel III.
−Removed: As of September 30, 2021, the Bank met or exceeded all regulatory capital requirements inclusive of the capital buffer.
−Removed: The Bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2021.
+Added: As of March 31, 2022, the Bank met or exceeded all regulatory capital requirements inclusive of the capital buffer.
+Added: The Bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at March 31, 2022.
The Company’s regulatory capital ratios are presented in the table in the “Capital” section below.
2 unchanged sentences
When measuring operating efficiency, a lower ratio is more favorable.
−Removed: The Company’s efficiency ratio (operating expenses, excluding amortization of intangibles and foreclosed property expense, divided by net interest income before provision for credit losses (computed on a tax equivalent basis) plus non-interest income, excluding gains and losses from sales of securities and OREO, and gains related to the collection of life insurance proceeds) was 56.46% for the nine months ended September 30, 2021 compared to 64.52% for the nine months ended September 30, 2020.
−Removed: The improvement in the efficiency ratio was due to the growth in non-interest income along with the decrease in non-interest expense.
−Removed: Further discussion of the change in net interest income and decrease in operating expenses is below.
−Removed: The Company’s net interest income before provision for credit losses on a non tax-equivalent basis plus non-interest income, net of investment securities related gains, increased 13.53% to $61,209,000 for the first nine months of 2021 compared to $53,914,000 for the same period in 2020, while operating expenses, net of losses on sale of assets, and amortization of core deposit intangibles, decreased 0.65% to $34,559,000 from $34,784,000 for the same period in 2020.
+Added: The Company’s efficiency ratio (operating expenses, excluding amortization of intangibles and foreclosed property expense, divided by net interest income before provision for credit losses (computed on a tax equivalent basis) plus non-interest income, excluding gains and losses from sales of securities and OREO, and gains related to the collection of life insurance proceeds) was 57.66% for the three months ended March 31, 2022 compared to 56.34% for the three months ended March 31, 2021.
+Added: The deterioration in the efficiency ratio was due to the decrease in non-interest income outpacing the increase in non-interest expense.
+Added: Further discussion of the change in net interest income and increase in operating expenses is below.
+Added: The Company’s net interest income before provision for credit losses on a non tax-equivalent basis plus non-interest income, net of investment securities related gains, decreased 1.49% to $19,608,000 for the first three months of 2022 compared to $19,904,000 for the same period in 2021, while operating expenses, net of losses on sale of assets, and amortization of core deposit intangibles, increased 0.81% to $11,305,000 from $11,214,000 for the same period in 2021.
Liquidity management involves the Bank’s ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include providing for customers’ credit needs, funding of securities purchases, and ongoing repayment of borrowings.
5 unchanged sentences
Primary uses of funds include origination and purchases of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and payment of operating expenses.
−Removed: We had liquid assets (cash and due from banks, interest-earning deposits in other banks, Federal funds sold, available-for-sale securities, and equity securities) totaling $1,135,541,000 or 48.35% of total assets at September 30, 2021 and $788,004,000 or 39.32% of total assets as of December 31, 2020.
+Added: We had liquid assets (cash and due from banks, interest-earning deposits in other banks, Federal funds sold, available-for-sale securities, and equity securities) totaling $1,257,664,000 or 51.90% of total assets at March 31, 2022 and $1,280,091,000 or 52.25% of total assets as of December 31, 2021.
RESULTS OF OPERATIONS
−Removed: Net Income for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
−Removed: Net income increased to $21,563,000 for the nine months ended September 30, 2021 compared to $13,268,000 for the nine months ended September 30, 2020.
−Removed: Basic and diluted earnings per share for September 30, 2021 were $1.75 and $1.74, respectively.
+Added: Net Income for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
+Added: Net income decreased to $6,086,000 for the three months ended March 31, 2022 compared to $7,479,000 for the three months ended March 31, 2021.
+Added: Basic and diluted earnings per share for March 31, 2022 were $0.51 and $0.51, respectively.
Basic and diluted earnings per share for the same period in 2021 were $0.60 and $0.60, respectively.
−Removed: Annualized ROE was 11.60% for the nine months ended September 30, 2021 compared to 7.78% for the nine months ended September 30, 2020.
−Removed: Annualized ROA for the nine months ended September 30, 2021 and 2020 was 1.30% and 0.99%, respectively.
−Removed: The increase in net income for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily driven by an increase in net interest income, a decrease in non-interest expense, a reversal of provision for credit losses, and an increase in loan placement fees, partially offset by a decrease in net realized gains on sales and calls of investment securities, an increase in provision for income taxes, and a decrease in service charge income.
−Removed: During the nine months ended September 30, 2021, the Company recorded a $3,800,000 reversal of provision for credit losses, compared to a $4,975,000 provision during the nine months ended September 30, 2020.
+Added: Annualized ROE was 10.51% for the three months ended March 31, 2022 compared to 12.17% for the three months ended March 31, 2021.
+Added: Annualized ROA for the three months ended March 31, 2022 and 2021 was 0.99% and 1.42%, respectively.
+Added: The decrease in net income for the three months ended March 31, 2022 compared to the same period in 2021 was primarily driven by an increase in non-interest expense, no reversal of provision for credit losses, and a decrease in loan placement fees, partially offset by an increase in net interest income, an increase in net realized gains on sales and calls of investment securities, a decrease in provision for income taxes, and an increase in service charge income.
+Added: During the three months ended March 31, 2022, the Company recorded no reversal of provision for credit losses, compared to a $1,800,000 reversal of provision during the three months ended March 31, 2021.
The reversal of provision for credit losses resulted from our assessment of the overall adequacy of the allowance for credit losses considering a number of factors as discussed in the “Allowance for Credit Losses” section.
−Removed: During the nine months ended September 30, 2021, the Company adjusted the economic risk factor methodology to incorporate the current economic implications from the COVID-19 pandemic.
+Added: During the three months ended March 31, 2022, the Company adjusted the economic risk factor methodology to incorporate the current economic implications from the COVID-19 pandemic as well as the continuing labor shortage and ongoing supply chain disruptions.
Interest Income and Expense
6 unchanged sentences
SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES
−Removed: For the Nine Months Ended
−Removed: September 30, 2021 For the Nine Months Ended
−Removed: September 30, 2020
+Added: For the Three Months Ended
+Added: March 31, 2022 For the Three Months Ended
+Added: March 31, 2021
(Dollars in thousands) Average
40 unchanged sentences
The following table sets forth a summary of the changes in interest income and interest expense due to changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.
−Removed: Changes in Volume/Rate For the Nine Months Ended September 30, 2021 and 2020
+Added: Changes in Volume/Rate For the Three Months Ended March 31, 2022 and 2021
(In thousands) Volume Rate Net
6 unchanged sentences
Total investment securities 2,290 (343) 1,947
−Removed: Federal funds sold — — —
Loans (765) (839) (1,604)
8 unchanged sentences
(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
−Removed: Interest and fee income from loans increased $1,841,000 or 4.76% for the nine months ended September 30, 2021 compared to the same period in 2020.
−Removed: Net interest income during the first nine months of 2021 was positively impacted by an increase in average total loans of $34,186,000 or 3.29% to $1,074,302,000 compared to $1,040,116,000 for the same period in 2020.
−Removed: The yield on average loans, excluding nonaccrual loans, was 5.04% for the nine months ended September 30, 2021 compared to 4.97% for the same period in 2020.
−Removed: Net interest income for the period ending September 30, 2021 was benefited by approximately $438,000 in nonrecurring income from prepayment penalties, compared to $505,000 recorded in the same period in 2020.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $579,000 and $1,039,000 for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: The remaining balance of accretable loan marks on acquired loans as of September 30, 2021 was $2,016,000.
−Removed: Interest income from total investments on a non tax-equivalent basis (total investments include investment securities, Federal funds sold, interest bearing deposits in other banks, and other securities) increased $3,937,000 in the first nine months of 2021 to $14,170,000 compared to $10,233,000 for the same period in 2020.
−Removed: The yield on average total investments (total securities and interest-earning deposits) decreased 27 basis points to 2.11% for the nine month period ended September 30, 2021 compared to 2.38% for the same period in 2020.
−Removed: Average total securities and interest-earning deposits for the first nine months of 2021 increased $378,890,000 or 64.52% to $966,105,000 compared to $587,215,000 for the same period in 2020.
−Removed: Income from investments represents 26.32% of net interest income for the first nine months of 2021 compared to 21.48% for the same period in 2020.
+Added: Interest and fee income from loans decreased $1,604,000 or 11.65% for the three months ended March 31, 2022 compared to the same period in 2021.
+Added: Net interest income during the first three months of 2022 was negatively impacted by a decrease in average total loans of $59,860,000 or (5.56)% to $1,017,280,000 compared to $1,077,140,000 for the same period in 2021.
+Added: The yield on average loans, excluding nonaccrual loans, was 4.85% for the three months ended March 31, 2022 compared to 5.18% for the same period in 2021.
+Added: Net interest income for the period ending March 31, 2022 was benefited by approximately $286,000 in nonrecurring income from prepayment penalties, compared to $430,000 recorded in the same period in 2021.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $222,000 and $173,000 for the three months ended March 31, 2022 and 2021, respectively.
+Added: The remaining balance of accretable loan marks on acquired loans as of March 31, 2022 was $1,572,000.
+Added: Interest income from total investments on a non tax-equivalent basis (total investments include investment securities, Federal funds sold, interest bearing deposits in other banks, and other securities) increased $1,939,000 in the first three months of 2022 to $6,021,000 compared to $4,082,000 for the same period in 2021.
+Added: The yield on average total investments (total securities and interest-earning deposits) decreased 5 basis points to 2.02% for the three month period ended March 31, 2022 compared to 2.07% for the same period in 2021.
+Added: Average total securities and interest-earning deposits for the first three months of 2022 increased $411,248,000 or 48.01% to $1,267,880,000 compared to $856,632,000 for the same period in 2021.
+Added: Income from investments represents 34.22% of net interest income for the first three months of 2022 compared to 23.25% for the same period in 2021.
In an effort to increase yields, without accepting unreasonable risk, a significant portion of the investment portfolio is in mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs).
−Removed: At September 30, 2021, we held $481,801,000 or 45.44% of the total fair value of the investment portfolio in CMOs with an average yield of 1.56% as compared to $299,806,000 and $272,504,000 with average yields of 2.15% and 2.30% at December 31, 2020 and September 30, 2020, respectively.
+Added: At March 31, 2022, we held $697,117,000 or 60.01% of the total fair value of the investment portfolio in CMOs with an average yield of 1.82% as compared to $527,659,000 and $322,306,000 with average yields of 2.08% and 1.52% at December 31, 2021 and March 31, 2021, respectively.
We invest in CMOs and MBS as part of our overall strategy to increase our net interest margin.
5 unchanged sentences
Management monitors the prepayment speed of these investments and adjusts premium amortization and discount accretion based on several factors.
−Removed: These factors include the type of investment, the investment structure, interest rates, interest
−Removed: rates on new mortgage loans, expectation of interest rate changes, current economic conditions, the level of principal remaining on the bond, the bond coupon rate, the bond origination date, and volume of available bonds in market.
−Removed: The calculation of premium amortization and discount accretion represents management’s reasonable estimate of principal pay downs inherent in the total investment portfolio.
−Removed: The net-of-tax unrealized gain on the investment portfolio was $10,290,000 at September 30, 2021 and is reflected in the Company’s equity.
−Removed: At September 30, 2021, the average life of the investment portfolio was 5.43 years and the fair value of the portfolio reflected a net pre-tax unrealized gain of $14,609,000.
+Added: These factors include the type of investment, the investment structure, interest rates, interest rates on new mortgage loans, expectation of interest rate changes, current economic conditions, the level of principal remaining on the bond, the bond coupon rate, the bond origination date, and volume of available bonds in market.
+Added: The calculation of premium amortization and
+Added: discount accretion represents management’s reasonable estimate of principal pay downs inherent in the total investment portfolio.
+Added: The net-of-tax unrealized loss on the investment portfolio was $49,287,000 at March 31, 2022 and is reflected in the Company’s equity.
+Added: At March 31, 2022, the average life of the investment portfolio was 4.93 years and the fair value of the portfolio reflected a net pre-tax unrealized loss of $69,974,000.
Management reviews fair value declines on individual investment securities to determine whether they represent an other-than-temporary impairment (OTTI).
Refer to Note 3 of the Notes to Consolidated Financial Statements (unaudited) for more detail.
−Removed: For the nine months ended September 30, 2021 and 2020, no OTTI was recorded.
+Added: For the three months ended March 31, 2022 and 2021, no OTTI was recorded.
Additional deterioration in the market values of our investment securities, if any, may require the Company to recognize OTTI losses in future periods.
A component of the Company’s strategic plan has been to use its investment portfolio to offset, in part, its interest rate risk relating to variable rate loans.
−Removed: At September 30, 2021, we estimate an immediate rate increase of 200 basis points would result in an estimated decrease in the market value of the investment portfolio by approximately $118,000,000 or 10.77%.
+Added: At March 31, 2022, we estimate an immediate rate increase of 200 basis points would result in an estimated decrease in the market value of the investment portfolio by approximately $119,000 or 9.77%.
Conversely, with an immediate rate decrease of 200 basis points, the estimated increase in the market value of the investment portfolio would be $(123,000) or (10.10)%.
3 unchanged sentences
The policy addresses issues of average life, duration, concentration guidelines, prohibited investments, impairment, and prohibited practices.
−Removed: Total interest income on a non-tax equivalent basis for the nine months ended September 30, 2021 increased $5,778,000 or 11.81% to $54,699,000 compared to $48,921,000 for the nine months ended September 30, 2020.
−Removed: The yield on interest earning assets decreased 38 basis points to 3.66% on a fully tax equivalent basis for the nine months ended September 30, 2021 from 4.04% for the period ended September 30, 2020.
+Added: Total interest income on a non-tax equivalent basis for the three months ended March 31, 2022 increased $335,000 or 1.88% to $18,182,000 compared to $17,847,000 for the three months ended March 31, 2021.
+Added: The yield on interest earning assets decreased 53 basis points to 3.29% on a fully tax equivalent basis for the three months ended March 31, 2022 from 3.82% for the period ended March 31, 2021.
The decrease was the result of yield changes, decrease in interest rates, and asset mix changes.
−Removed: Average interest earning assets increased to $2,040,407,000 for the nine months ended September 30, 2021 compared to $1,627,331,000 for the nine months ended September 30, 2020.
−Removed: The $413,076,000 increase in average earning assets was attributed to the $378,890,000 increase in average investments and a $34,186,000 or 3.29% increase in average loans.
−Removed: Interest expense on deposits for the nine months ended September 30, 2021 and 2020 was $783,000 and $1,169,000, respectively.
−Removed: The average interest rate on interest bearing deposits decreased to 0.10% for the nine months ended September 30, 2021 compared to 0.19% for the same period ended September 30, 2020.
−Removed: Average interest-bearing deposits increased 30.59% or $245,080,000 to $1,046,168,000 for the nine months ended September 30, 2021 compared to $801,088,000 for the same period ended September 30, 2020.
−Removed: Average other borrowed funds were $5,155,000 with an effective rate of 1.81% for the nine months ended September 30, 2021 compared to $5,155,000 with an effective rate of 2.74% for the nine months ended September 30, 2020.
−Removed: Total interest expense on other borrowed funds was $70,000 for the nine months ended September 30, 2021 and $106,000 for the nine months ended September 30, 2020.
−Removed: Other borrowings include advances from the Federal Home Loan Bank (“FHLB”), advances on available unsecured lines of credit with correspondent banks, and junior subordinated deferrable interest debentures.
−Removed: The debentures were acquired in the merger with Service 1st and carry a floating rate based on the three month LIBOR plus a margin of 1.60%.
−Removed: The rates were 1.73% and 3.90% at September 30, 2021 and 2020, respectively.
+Added: Average interest earning assets increased to $2,285,160,000 for the three months ended March 31, 2022 compared to $1,933,772,000 for the three months ended March 31, 2021.
+Added: The $351,388,000 increase in average earning assets was attributed to the $411,248,000 increase in average investments, offset by a $59,860,000 or (5.56)% decrease in average loans.
+Added: Interest expense on deposits for the three months ended March 31, 2022 and 2021 was $252,000 and $268,000, respectively.
+Added: The average interest rate on interest bearing deposits decreased to 0.08% for the three months ended March 31, 2022 compared to 0.11% for the same period ended March 31, 2021.
+Added: Average interest-bearing deposits increased 23.76% or $232,076,000 to $1,208,838,000 for the three months ended March 31, 2022 compared to $976,762,000 for the same period ended March 31, 2021.
+Added: Average other borrowed funds were $39,474,000 with an effective rate of 3.37% for the three months ended March 31, 2022 compared to $5,155,000 with an effective rate of 1.86% for the three months ended March 31, 2021.
+Added: Total interest expense on other borrowed funds was $333,000 for the three months ended March 31, 2022 and $24,000 for the three months ended March 31, 2021.
+Added: Included in other borrowings are the junior subordinated deferrable interest debentures acquired from Service 1 st , subordinated debt, advances on lines of credit, advances from the Federal Home Loan Bank (“FHLB”) , and overnight borrowings.
+Added: The junior subordinated debentures carry a floating rate based on the three month LIBOR plus a margin of 1.60%.
+Added: The rates were 1.84% and 1.73% at March 31, 2022 and 2021, respectively .
+Added: The subordinated debt, issued in 2021, initially bears a fixed interest rate of 3.125% per year until December 1, 2026 when the interest rate will reset to a floating rate.
See the section on “Financial Condition” for more detail.
−Removed: The cost of interest-bearing liabilities decreased 10 basis points to 0.11% for the nine-month period ended September 30, 2021 compared to 0.21% for the same period in 2020.
−Removed: The cost of total deposits decreased to 0.05% compared to 0.10% for the nine-month periods ended September 30, 2021 and 2020, respectively.
+Added: The cost of interest-bearing liabilities increased 7 basis points to 0.19% for the three-month period ended March 31, 2022 compared to 0.12% for the same period in 2021.
+Added: The cost of total deposits decreased to 0.05% compared to 0.06% for the three-month periods ended March 31, 2022 and 2021, respectively.
Average non-interest bearing demand deposits increased 11.35% to $940,963,000 in 2022 compared to $845,065,000 for 2021.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits decreased to 45.83% in the nine-month period ended September 30, 2021 compared to 47.24% for the same period in 2020.
+Added: The ratio of average non-interest bearing demand deposits to average total deposits decreased to 43.77% in the three-month period ended March 31, 2022 compared to 46.39% for the same period in 2021.
Net Interest Income before Provision for Credit Losses
−Removed: Net interest income before the reversal of provision for credit losses for the nine months ended September 30, 2021 increased by $6,200,000 or 13.01% to $53,846,000 compared to $47,646,000 for the same period in 2020.
+Added: Net interest income before the reversal of provision for credit losses for the three months ended March 31, 2022 increased by $42,000 or 0.24% to $17,597,000 compared to $17,555,000 for the same period in 2021.
The increase was a result of yield changes, asset mix changes, and an increase in average earning assets, partially offset by an increase in average interest bearing liabilities.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $579,000 and $1,039,000 for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: In addition, net interest income before the provision for credit losses for the nine months ended September 30, 2021 was benefited by approximately $438,000 in nonrecurring income from prepayment penalties, as compared to $505,000 in nonrecurring income for the nine months ended
−Removed: September 30, 2020.
−Removed: Excluding these reversals and benefits, net interest income for the nine months ended September 30, 2021 increased by $6,727,000 compared to the nine months ended September 30, 2020.
−Removed: Average interest earning assets were $2,040,407,000 for the nine months ended September 30, 2021 with a net interest margin (fully tax equivalent basis) of 3.60% compared to $1,627,331,000 with a net interest margin (fully tax equivalent basis) of 3.93% for the nine months ended September 30, 2020.
−Removed: The $413,076,000 increase in average earning assets was attributed to the $378,890,000 increase in average total investments and the $34,186,000 or 3.29% increase in average loans.
−Removed: For the nine months ended September 30, 2021, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks decreased 27 basis points.
−Removed: The effective yield on loans increased seven basis points.
−Removed: Average interest bearing liabilities increased 30.40% to $1,051,323,000 for the nine months ended September 30, 2021, compared to $806,243,000 for the same period in 2020.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $222,000 and $173,000 for the three months ended March 31, 2022 and 2021, respectively.
+Added: In addition, net interest income before the provision for credit losses for the three months ended March 31, 2022 was benefited by approximately $286,000 in nonrecurring income from prepayment penalties, as compared to $430,000 in nonrecurring income for the three months ended March 31, 2021.
+Added: Excluding these reversals and benefits, net interest income for the three months ended March 31, 2022 increased by $137,000
+Added: compared to the three months ended March 31, 2021.
+Added: Average interest earning assets were $2,285,160,000 for the three months ended March 31, 2022 with a net interest margin (fully tax equivalent basis) of 3.19% compared to $1,933,772,000 with a net interest margin (fully tax equivalent basis) of 3.76% for the three months ended March 31, 2021.
+Added: The $351,388,000 increase in average earning assets was attributed to the $411,248,000 increase in average total investments, offset by the $59,860,000 or (5.56)% decrease in average loans.
+Added: For the three months ended March 31, 2022, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks decreased 5 basis points.
+Added: The effective yield on loans decreased 33 basis points.
+Added: Average interest bearing liabilities increased 27.13% to $1,248,312,000 for the three months ended March 31, 2022, compared to $981,917,000 for the same period in 2021.
Provision for Credit Losses
7 unchanged sentences
Quarterly, the credit officers must certify the current risk ratings of the loans in their portfolio.
−Removed: Credit Administration reviews the certifications and reports to the Board of Directors Audit Committee.
+Added: Credit Administration reviews the certifications and reports to the Board of Directors Audit/Compliance Committee.
At least annually, the loan portfolio, including risk ratings, is reviewed by a third party credit reviewer.
4 unchanged sentences
This process includes the utilization of loan delinquency reports, classified asset reports, collateral analysis and portfolio concentration reports to assist in accurately assessing credit risk and establishing appropriate reserves.
−Removed: The allowance for credit losses is reviewed at least quarterly by the Board of Directors’ Audit Committee and by the Board of Directors.
+Added: The allowance for credit losses is reviewed at least quarterly by the Board of Directors’ Audit/Compliance Committee and by the Board of Directors.
General reserves are allocated to loan portfolio categories using percentages which are based on both historical risk elements such as delinquencies and losses and predictive risk elements such as economic, competitive and environmental factors.
5 unchanged sentences
The allocation of the allowance for credit losses is set forth below (in thousands):
−Removed: Loan Type September 30, 2021 December 31, 2020
+Added: Loan Type March 31, 2022 December 31, 2021
Commercial and industrial $ 1,797 $ 1,691
19 unchanged sentences
Management believes that the level of allowance for loan losses allocated to commercial and real estate loans has been adjusted accordingly.
−Removed: During the nine months ended September 30, 2021, the Company recorded a $3,800,000 reversal of provision for credit losses, compared to a $4,975,000 provision during the nine months ended September 30, 2020.
+Added: During the three months ended March 31, 2022, the Company recorded no reversal of provision for credit losses, compared to a $1,800,000 reversal of provisi on durin g the three months ended March 31, 2021.
The reversal of provision for credit losses resulted from our assessment of the overall adequacy of the allowance for credit losses considering a number of factors as discussed in the “Allowance for Credit Losses” section.
−Removed: During the nine months ended September 30, 2021, the Company adjusted the economic risk factor methodology to incorporate the current economic implications from the COVID-19 pandemic.
−Removed: The Company had net recoveries totaling $946,000 for the nine months ended September 30, 2021, and $552,000 for the same period in 2020.
−Removed: Nonperforming loans, consisting entirely of nonaccrual loans, were $1,597,000 and $3,278,000 at September 30, 2021 and December 31, 2020, respectively, and $3,458,000 at September 30, 2020.
−Removed: Nonperforming loans as a percentage of total loans were 0.15% at September 30, 2021 compared to 0.30% at December 31, 2020 and 0.31% at September 30, 2020.
−Removed: The Company had no other real estate owned (OREO) at September 30, 2021 or December 31, 2020.
−Removed: The Company held no repossessed assets at September 30, 2021 or December 31, 2020.
−Removed: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans was (0.12)% for the nine months ended September 30, 2021, and (0.07)% for the same period in 2020.
+Added: During the three months ended March 31, 2022, the Company adjusted the economic risk and interest rate factors to incorporate the potential and realized implications from rising interest rates, input price increases and supply chain backlogs.
+Added: The Company had net recoveries totaling $264,000 for the three months ended March 31, 2022, and $941,000 for the same period in 2021.
+Added: Nonperforming loans, consisting entirely of nonaccrual loans, were $292,000 and $946,000 at March 31, 2022 and December 31, 2021, respectively, and $3,783,000 at March 31, 2021.
+Added: Nonperforming loans as a percentage of total loans were 0.03% at March 31, 2022 compared to 0.09% at December 31, 2021 and 0.35% at March 31, 2021.
+Added: The Company had no other real estate owned (OREO) at March 31, 2022 or December 31, 2021.
+Added: The Company held no repossessed assets at March 31, 2022 or December 31, 2021.
+Added: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans was (0.10)% for the three months ended March 31, 2022, and (0.35)% for the same period in 2021.
Economic pressures may negatively impact the financial condition of borrowers to whom the Company has extended credit and as a result, when negative economic conditions are anticipated, we may be required to make significant provisions to the allowance for credit losses.
11 unchanged sentences
We have been and will continue to be proactive in looking for signs of deterioration within the loan portfolio in an effort to manage credit quality and work with borrowers where possible to mitigate losses.
−Removed: As of September 30, 2021, there were $23.1 million in classified loans of which $1.1 million related to agricultural real estate, $11.1 million to commercial and industrial loans, $3.3 million to agricultural production, $5.5 million to owner occupied real estate, and $1.9 million in commercial real estate.
−Removed: This compares to $36.1 million in classified loans of which $1.2 million related to agricultural real estate, $10.4 million to commercial and industrial loans, $3.3 million to agricultural production, $7.3 million to owner occupied real estate, $9.6 million to commercial real estate, $1.0 million to consumer equity and lines of credit, and $3.2 million to real estate construction and other land loans as of December 31, 2020.
−Removed: As of September 30, 2021, we believe, based on all current and available information, the allowance for credit losses is adequate to absorb probable incurred losses within the loan portfolio.
+Added: As of March 31, 2022, there were $10.7 million in classified loans of which $2.5 million related to commercial and industrial loans, $2.1 million to agricultural production, $3.6 million to owner occupied real estate, and $2.5 million in commercial real estate.
+Added: This compares to $8.5 in classified loans of which $2.6 million related to commercial and industrial loans, $2.4 million to agricultural production, $3.6 million to owner occupied real estate as of December 31, 2021.
+Added: As of March 31, 2022, we believe, based on all current and available information, the allowance for credit losses is adequate to absorb probable incurred losses within the loan portfolio.
However, no assurance can be given that we may not sustain charge-offs which are in excess of the allowance in any given period.
1 unchanged sentence
Net Interest Income after Provision for Credit Losses
−Removed: Net interest income, after the provision for credit losses, was $57,646,000 for the nine months period ended September 30, 2021 and $42,671,000 for the same period in 2020.
+Added: Net interest income, after the provision for credit losses, was $17,597,000 for the three months period ended March 31, 2022 and $19,355,000 for the same period in 2021.
Non-Interest Income
Non-interest income is comprised of customer service charges, loan placement fees, net gains on sales and calls of investment securities, appreciation in cash surrender value of bank-owned life insurance, FHLB dividends, and other income.
−Removed: Non-interest income was $6,224,000 for the nine months ended September 30, 2021 compared to $10,659,000 for the same period in 2020.
−Removed: The $4,435,000 or 41.61% decrease in non-interest income during the nine months ended September 30, 2021 was primarily driven by a decrease of $4,159,000 in net realized gains on sales and calls of investment securities, a decrease in service charge income of $170,000, a decrease of $557,000 in other income, and a decrease in FHLB dividends of $16,000, offset by an increase in loan placement fees of $89,000 and an increase of $318,000 in interchange fees.
−Removed: During the nine months ended September 30, 2021, we realized a net gain on sales and calls of investment securities of $38,000 compared to a $4,197,000 net gain for the same period in 2020.
−Removed: The net gains realized on sales and calls of investment securities in 2021 and 2020 were the result of a partial restructuring of the investment portfolio designed to improve the future performance of the portfolio.
−Removed: Customer service charges decreased $170,000 or 10.93% to $1,386,000 for the first nine months of 2021 compared to $1,556,000 for the same period in 2020.
−Removed: Interchange fees increased $318,000 to $1,313,000 the first nine months of 2021 compared to $995,000 for the same period in 2020.
−Removed: Loan placement fees increased $89,000 or 5.76% to $1,634,000 for the first nine months of 2021 compared to $1,545,000 for the same period in 2020.
−Removed: Other income decreased $557,000 the first nine months of 2021 compared to the same period in 2020.
−Removed: The decrease in other income resulted from a $463,000 gain recorded the first nine months of 2020 related to the collection of tax-exempt life insurance proceeds.
+Added: Non-interest income was $1,834,000 for the three months ended March 31, 2022 compared to $1,999,000 for the same period in 2021.
+Added: The $165,000 or 8.25% decrease in non-interest income during the three months ended March 31, 2022 was primarily driven by a a decrease in loan placement fees of $358,000 and a decrease of $276,000 in other income, offset by an increase of $206,000 in net realized gains on sales and calls of investment securities, an increase in service charge income of $107,000, an increase of $72,000 in interchange fees, an increase of $69,000 in appreciation in cash surrender value of bank-owned life insurance, and an increase in FHLB dividends of $15,000.
+Added: During the three months ended March 31, 2022, we realized a net gain on sales and calls of investment securities of $206,000 compared to a no net gains for the same period in 2021.
+Added: The net gains realized on sales and calls of investment securities in 2022 were the result of a partial restructuring of the investment portfolio designed to improve the future performance of the portfolio.
+Added: Customer service charges increased $107,000 or 24.77% to $539,000 for the first three months of 2022 compared to $432,000 for the same period in 2021.
+Added: Interchange fees increased $72,000 to $442,000 the first three months of 2022 compared to $370,000 for the same period in 2021.
+Added: Loan placement fees decreased $358,000 or 54.49% to $299,000 for the first three months of 2022 compared to $657,000 for the same period in 2021.
+Added: Other income decreased $276,000 the first three months of 2022 compared to the same period in 2021.
The Bank holds stock from the Federal Home Loan Bank (“FHLB”) of San Francisco in conjunction with our borrowing capacity and generally earns quarterly dividends.
We currently hold $5,595,000 in FHLB stock.
−Removed: We received dividends totaling $237,000 in the nine months ended September 30, 2021, compared to $253,000 for the same period in 2020.
+Added: We received dividends totaling $85,000 in the three months ended March 31, 2022, compared to $70,000 for the same period in 2021.
Non-Interest Expenses
Salaries and employee benefits, occupancy and equipment, information technology, regulatory assessments, professional services, Internet banking, and data processing are the major categories of non-interest expenses.
−Removed: Non-interest expenses decreased $225,000 or 0.64% to $35,080,000 for the nine months ended September 30, 2021, compared to $35,305,000 for the nine months ended September 30, 2020.
−Removed: The net decrease for the first nine months of 2021 was primarily the result of decreases in salaries and employee benefits of $45,000, directors’ expenses of $162,000, internet banking of $283,000, professional services of $357,000, advertising of $121,000, ATM/Debit card expenses of $10,000, amortization of software of $43,000, stationary and supplies of $62,000, armored courier of $14,000, and operating losses of $9,000, partially offset by increases in data processing expenses of $357,000, information technology of $257,000, regulatory assessments of $212,000, personnel of $132,000, occupancy and equipment expenses of $59,000, donations of $39,000, general insurance of $20,000, telephone of $14,000, and postage of $9,000.
−Removed: The Company’s efficiency ratio, measured as the percentage of non-interest expenses (exclusive of amortization of core deposit intangible assets and foreclosure expenses) to net interest income before provision for credit losses (calculated on a
−Removed: fully tax equivalent basis) plus non-interest income (exclusive of net realized gains on sales and calls of investments, OREO related gains and losses, and gains related to the collection of life insurance proceeds) was 56.46% for the nine months ended September 30, 2021 compared to 64.52% for the nine months ended September 30, 2020.
−Removed: The improvement in the efficiency ratio was due to the decrease in non-interest expense as well as the growth in non-interest income.
−Removed: Salaries and employee benefits decreased $45,000 or 0.21% to $21,008,000 for the first nine months of 2021 compared to $21,053,000 for the nine months ended September 30, 2020.
−Removed: Full time equivalent employees were 258 for the nine months ended September 30, 2021, compared to 271 for the nine months ended September 30, 2020.
−Removed: The decrease in total salaries and employee benefits was the result of a decrease of $1,186,000 in officers’ expenses related to the change in the discount rate used to calculate the liability for salary continuation, deferred compensation, and split dollar plans;
−Removed: offset by an increase of approximately $429,000 in salaries and benefits and a decrease in loan issuance costs of $731,000.
−Removed: Occupancy and equipment expense increased $59,000 or 1.70% to $3,538,000 for the nine months ended September 30, 2021 compared to $3,479,000 for the nine months ended September 30, 2020.
+Added: Non-interest expenses increased $57,000 or 0.50% to $11,445,000 for the three months ended March 31, 2022, compared to $11,388,000 for the three months ended March 31, 2021.
+Added: The net increase for the first three months of 2022 was primarily the result of increases in information technology of $199,000, regulatory assessments of $61,000, occupancy and equipment expenses of $49,000, professional services of $18,000, advertising of $11,000, donations of $6,000, general insurance of $3,000, salaries and employee benefits of $6,000, directors’ expenses of $4,000, amortization of software of $3,000, partially offset by decreases in internet banking of $103,000, data processing expenses of $76,000, personnel of $70,000, ATM/Debit card expenses of $30,000, operating losses of $17,000, stationary and supplies of $16,000, armored courier of $13,000, and postage of $5,000.
+Added: The Company’s efficiency ratio, measured as the percentage of non-interest expenses (exclusive of amortization of core deposit intangible assets and foreclosure expenses) to net interest income before provision for credit losses (calculated on a fully tax equivalent basis) plus non-interest income (exclusive of net realized gains on sales and calls of investments, OREO related gains and losses, and gains related to the collection of life insurance proceeds) was 57.66% for the three months ended
+Added: March 31, 2022 compared to 56.34% for the three months ended March 31, 2021.
+Added: The modest deterioration in the efficiency ratio was due to the decrease in non-interest income outpacing the increase in non-interest expense.
+Added: Salaries and employee benefits increased $6,000 or 0.09% to $6,944,000 for the first three months of 2022 compared to $6,938,000 for the three months ended March 31, 2021.
+Added: Full time equivalent employees were 244 for the three months ended March 31, 2022, compared to 269 for the three months ended March 31, 2021.
+Added: Occupancy and equipment expense increased $49,000 or 4.40% to $1,162,000 for the three months ended March 31, 2022 compared to $1,113,000 for the three months ended March 31, 2021.
The Company made no changes in its depreciation expense methodology.
−Removed: The Company operated 20 full-service offices at September 30, 2021 and at September 30, 2020.
−Removed: Data processing expense increased to $1,841,000 for the nine months ended September 30, 2021 compared to $1,484,000 for the same period in 2020.
−Removed: Regulatory assessments increased to $552,000 for the nine months ended September 30, 2021 compared to $340,000 for the same period in 2020.
+Added: The Company operated 20 full-service offices at March 31, 2022 and at March 31, 2021.
+Added: Data processing expense decreased to $541,000 for the three months ended March 31, 2022 compared to $617,000 for the same period in 2021.
+Added: Regulatory assessments increased to $222,000 for the three months ended March 31, 2022 compared to $161,000 for the same period in 2021.
The assessment base for calculating regulatory assessments is average assets less average tangible equity.
−Removed: Professional services decreased by $357,000 in the first nine months of 2021 compared to the same period in 2020.
−Removed: Personnel expense included $151,000 for an executive search firm to find a replacement for our retiring President & CEO.
+Added: Professional services increased by $18,000 in the first three months of 2022 compared to the same period in 2021.
The following table shows significant components of other non-interest expense as a percentage of average assets.
−Removed: For the Nine Months
−Removed: Ended September 30,
+Added: For the Three Months
+Added: Ended March 31,
(Dollars in thousands) Other Expense % Average
18 unchanged sentences
Provision for Income Taxes
−Removed: Our effective income tax rate was 25.10% for the nine months ended September 30, 2021 compared to 26.39% for the nine months ended September 30, 2020.
−Removed: The Company reported an income tax provision of $7,227,000 for the nine months ended September 30, 2021, compared to $4,757,000 for the nine months ended September 30, 2020.
+Added: Our effective income tax rate was 23.79% for the three months ended March 31, 2022 compared to 24.95% for the three months ended March 31, 2021.
+Added: The Company reported an income tax provision of $1,900,000 for the three months ended March 31, 2022, compared to $2,487,000 for the three months ended March 31, 2021.
The effective tax rate was affected by the increase in tax-exempt interest.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense in the consolidated statements of income.
−Removed: If deemed necessary, the Company maintains a reserve for uncertain income taxes where the merits of the position taken or the amount of the position that would
−Removed: be ultimately sustained upon examination do not meet a more-likely-than-not criteria.
−Removed: As of September 30, 2021 and December 31, 2020, there was no reserve for uncertain tax positions.
−Removed: Net Income for the Third Quarter of 2021 Compared to the Third Quarter of 2020
−Removed: Net income increased to $6,521,000 for the quarter ended September 30, 2021 compared to $4,344,000 for the quarter ended September 30, 2020.
−Removed: Basic earnings per share was $ 0.54 for the quarter ended September 30, 2021 compared to $ 0.35 for the same period in 2020.
−Removed: Diluted earnings per share was $ 0.54 for the quarter ended September 30, 2021 compared to $ 0.35 for the same period in 2020.
−Removed: Annualized ROE was 10.41% for the quarter ended September 30, 2021 compared to 7.50% for the quarter ended September 30, 2020.
−Removed: Annualized ROA for the three months ended September 30, 2021 was 1.13% compared to 0.90% for the quarter ended September 30, 2020.
−Removed: The increase in net income during the third quarter of 2021 compared to the same period in 2020 is primarily due to a decrease in provision for credit losses of $1,100,000, an increase in net interest income before the provision for credit losses of $2,167,000, and an increase in total non-interest income of $77,000, partially offset by an increase in the provision for income taxes of $833,000 and an increase in non-interest expenses of $334,000.
−Removed: During the quarter ended September 30, 2021, the Company recorded a $ 500,000 reversal of provision for credit losses, compared to a $ 600,000 provision during the quarter ended September 30, 2020.
−Removed: Non-interest income increased $77,000 or 3.72% to $2,148,000 for the quarter ended September 30, 2021 compared to $2,071,000 in the same period in 2020.
−Removed: During the third quarter of 2021 interchange fees increased $117,000, net realized gains on sales and calls of investment securities increased $60,000, service charge income increased $24,000, Federal Home Loan Bank dividends increased $13,000, and other income increased $12,000, offset by a decrease in loan placement fees of $218,000, compared to the same period in 2020.
−Removed: Interest Income and Expense
−Removed: The following table sets forth a summary of average balances with corresponding interest income and interest expense as well as average yield and cost information for the periods presented.
−Removed: Average balances are derived from daily balances, and non-accrual loans are not included as interest earning assets for purposes of this table.
−Removed: CENTRAL VALLEY COMMUNITY BANCORP
−Removed: SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES
−Removed: For the Three Months Ended
−Removed: September 30, 2021 For the Three Months Ended
−Removed: September 30, 2020
−Removed: (Dollars in thousands) Average
−Removed: Balance Interest
−Removed: Expense Average
−Removed: Balance Interest
−Removed: Expense Average
−Removed: Interest-earning deposits in other banks $ 70,980 $ 29 0.16 % $ 98,869 $ 26 0.11 %
−Removed: Taxable securities 746,923 3,842 2.06 % 501,462 2,771 2.21 %
−Removed: Non-taxable securities (1) 241,225 1,794 2.97 % 49,630 561 4.52 %
−Removed: Total investment securities 988,148 5,636 2.28 % 551,092 3,332 2.42 %
−Removed: Total securities and interest-earning deposits
−Removed: 1,059,128 5,665 2.14 % 649,961 3,358 2.07 %
−Removed: Loans (2) (3) 1,068,111 13,208 4.91 % 1,120,656 13,190 4.68 %
−Removed: Total interest-earning assets 2,127,239 $ 18,873 3.52 % 1,770,617 $ 16,548 3.72 %
−Removed: Allowance for credit losses (10,558) (14,261)
−Removed: Non-accrual loans 1,844 2,660
−Removed: Cash and due from banks 39,566 26,993
−Removed: Bank premises and equipment 8,562 7,327
−Removed: Other assets 151,519 135,258
−Removed: Total average assets $ 2,318,172 $ 1,928,594
−Removed: LIABILITIES AND SHAREHOLDERS’ EQUITY
−Removed: Interest-bearing liabilities:
−Removed: Savings and NOW accounts $ 551,590 $ 50 0.04 % $ 457,848 $ 89 0.08 %
−Removed: Money market accounts 464,546 166 0.14 % 307,832 136 0.18 %
−Removed: Time certificates of deposit 89,621 47 0.21 % 89,353 138 0.61 %
−Removed: Total interest-bearing deposits 1,105,757 263 0.09 % 855,033 363 0.17 %
−Removed: Other borrowed funds 5,155 22 1.71 % 5,155 25 1.94 %
−Removed: Total interest-bearing liabilities 1,110,912 $ 285 0.10 % 860,188 $ 388 0.18 %
−Removed: Non-interest bearing demand deposits 915,742 807,052
−Removed: Other liabilities 40,998 29,698
−Removed: Shareholders’ equity 250,520 231,656
−Removed: Total average liabilities and shareholders’ equity $ 2,318,172 $ 1,928,594
−Removed: Interest income and rate earned on average earning assets
−Removed: $ 18,873 3.52 % $ 16,548 3.72 %
−Removed: Interest expense and interest cost related to average interest-bearing liabilities
−Removed: 285 0.10 % 388 0.18 %
−Removed: Net interest income and net interest margin (4) $ 18,588 3.47 % $ 16,160 3.63 %
−Removed: (1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $377 and $118 in 2021 and 2020, respectively.
−Removed: (2) Loan interest income includes loan fees of $1,076 in 2021 and $658 in 2020.
−Removed: (3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.
−Removed: (4) Net interest margin is computed by dividing net interest income by total average interest-earning assets .
−Removed: The following table sets forth a summary of the changes in interest income and interest expense due to changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.
−Removed: Changes in Volume/Rate For the Three Months Ended September 30, 2021 and 2020
−Removed: (In thousands) Volume Rate Net
−Removed: Increase (decrease) due to changes in:
−Removed: Interest income:
−Removed: Interest-earning deposits in other banks $ (7) $ 10 $ 3
−Removed: Investment securities:
−Removed: Taxable 1,356 (285) 1,071
−Removed: Non-taxable (1) 2,165 (932) 1,233
−Removed: Total investment securities 3,521 (1,217) 2,304
−Removed: Federal funds sold — — —
−Removed: Loans (618) 636 18
−Removed: Total earning assets (1) 2,896 (571) 2,325
−Removed: Interest expense:
−Removed: Savings, NOW and MMA 87 (96) (9)
−Removed: Time certificate of deposits — (91) (91)
−Removed: Total interest-bearing deposits 87 (187) (100)
−Removed: Other borrowed funds — (3) (3)
−Removed: Total interest-bearing liabilities 87 (190) (103)
−Removed: Net interest income (1) $ 2,809 $ (381) $ 2,428
−Removed: (1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
−Removed: Interest and fee income from loans increased $18,000 or 0.14% to $ 13,208,000 for the third quarter of 2021 compared to $ 13,190,000 for the same period in 2020.
−Removed: Total average loans, including nonaccrual loans, for the third quarter of 2021 decreased $53,361,000 or 4.75% to $1,069,955,000 compared to $1,123,316,000 for the same period in 2020, due to a decrease of $127,267,000 in PPP loans, offset by an increase of $73,906 in non-PPP loans.
−Removed: Yield on the loan portfolio, excluding nonaccrual loans, was 4.91% and 4.68% for the third quarters ending September 30, 2021 and 2020, respectively.
−Removed: Net interest income during the third quarters of 2021 and 2020 benefited by approximately $4,000 and $52,000, respectively, in nonrecurring income from prepayment penalties and payoff of loans previously on nonaccrual status.
−Removed: The accretion of the loan marks on acquired loans increased interest income by $231,000 and $172,000 during the quarters ended September 30, 2021 and 2020, respectively.
−Removed: Income from investments represents 29.04% of net interest income for the third quarter of 2021 compared to 20.20% for the same quarter in 2020.
−Removed: Interest income from total investments on a non tax equivalent basis (total investments include investment securities, Federal funds sold, interest bearing deposits with other banks, and other securities) increased $2,048,000 in the third quarter of 2021 to $5,289,000 compared to $3,241,000, for the same period in 2020.
−Removed: The yield on average total investments increased seven basis points to 2.14% on a fully tax equivalent basis for the third quarter of 2021 compared to 2.07% on a fully tax equivalent basis for the third quarter of 2020.
−Removed: Average total investments and interest bearing deposits in other banks for the third quarter of 2021 increased $409,167,000 or 62.95% to $1,059,128,000 compared to $649,961,000 for the third quarter of 2020.
−Removed: Total interest income for the third quarter of 2021 increased $2,066,000 or 12.57% to $18,497,000 compared to $16,431,000 for the third quarter ended September 30, 2020.
−Removed: The yield on interest earning assets decreased to 3.52% on a fully tax equivalent basis for the third quarter ended September 30, 2021 from 3.72% on a fully tax equivalent basis for the third quarter ended September 30, 2020.
−Removed: Average interest earning assets increased to $2,127,239,000 for the third quarter ended September 30, 2021 compared to $1,770,617,000 for the third quarter ended September 30, 2020.
−Removed: The $356,622,000 increase in average earning assets was attributed to the the $409,167,000 increase in total investments, offset by $52,545,000 decrease in average loans.
−Removed: Interest expense on deposits for the quarter ended September 30, 2021 decreased $100,000 or 27.55% to $ 263,000 compared to $ 363,000 for the quarter ended September 30, 2020.
−Removed: The cost of deposits, calculated by dividing annualized interest expense on interest bearing deposits by total deposits, was 0.05% and 0.09% for the quarters ended September 30, 2021 and 2020, respectively.
−Removed: Average interest bearing deposits increased 29.32% or $250,724,000 in the third quarter of 2021 compared to the same period in 2020.
−Removed: Average interest-bearing deposits were $1,105,757,000 for the quarter ended September 30, 2021, with an effective rate paid of 0.09%, compared to $855,033,000 for the same period in 2020, with an effective rate paid of 0.17%.
−Removed: Average other borrowed funds totaled $5,155,000 for the quarter ended September 30, 2021, with an effective rate of 1.71% for the quarter ended September 30, 2021 compared to $5,155,000 and 1.94% for the quarter ended September 30, 2020.
−Removed: As a result, interest expense on borrowed funds decreased $3,000 to $22,000 for the quarter ended September 30, 2021, from $25,000 for the quarter ended September 30, 2020.
−Removed: Other borrowings are comprised of advances from the Federal Home Loan Bank, junior subordinated deferrable interest debentures and advances on available unsecured lines of credit with correspondent banks.
−Removed: The cost of our interest bearing liabilities was 0.10% and 0.18% for the quarters ended September 30, 2021 and 2020.
−Removed: The cost of total deposits was 0.05% and 0.09% for the quarters ended September 30, 2021 and 2020.
−Removed: Average non-interest bearing demand deposits increased 13.47% to $915,742,000 for the quarter ended September 30, 2021 compared to $807,052,000 for the quarter ended September 30, 2020.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits was 45.30% in the third quarter of 2021 compared to 48.56% for the same period in 2020.
−Removed: Net Interest Income before Provision for Credit Losses
−Removed: Net interest income before provision for credit losses for the quarter ended September 30, 2021, increased $2,167,000 or 13.51% to $18,210,000 compared to $16,043,000 for the quarter ended September 30, 2020.
−Removed: The increase was due to asset mix changes, and the increase in average interest earning assets, partially offset by an increase in average interest-bearing liabilities.
−Removed: Average interest earning assets were $2,127,239,000 for the quarter ended September 30, 2021, with a net interest margin (fully tax equivalent basis) of 3.47% compared to $1,770,617,000 with a net interest margin (fully tax equivalent basis) of 3.63% for the quarter ended September 30, 2020.
−Removed: The $356,622,000 increase in average earning assets can be attributed to the $409,167,000 increase in total investments, offset by the $53,361,000 decrease in loans.
−Removed: Average interest bearing liabilities increased 29.15% to $1,110,912,000 for the quarter ended September 30, 2021 compared to $860,188,000 for the same period in 2020.
−Removed: Provision for Credit Losses
−Removed: During the quarter ended September 30, 2021, the Company recorded a $ 500,000 reversal of provision for credit losses, compared to $ 600,000 provision during the quarter ended September 30, 2020.
−Removed: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans, was (0.05)% for the quarter ended September 30, 2021 compared to (0.04)% for the quarter ended September 30, 2020.
−Removed: During the quarter ended September 30, 2021, the Company had net recoveries totaling $122,000 compared to net recoveries of $120,000 for the same period in 2020.
−Removed: Gross recoveries of previously charged off loan balances during the quarters ended September 30, 2021 and 2020 were $156,000 and $165,000, respectively.
−Removed: Gross charge-offs during the quarters ended September 30, 2021 and 2020 were $34,000 and $45,000, respectively.
−Removed: The majority of the loans charged off were previously classified and sufficient specific reserves related to these impaired credits were held in the allowance for credit losses in reporting periods prior to the date of charge-off.
−Removed: Non-Interest Income
−Removed: Non-interest income was $2,148,000 for the quarter ended September 30, 2021 compared to $2,071,000 for the same period ended September 30, 2020.
−Removed: The $77,000 or 3.72% increase in non-interest income for the quarter ended September 30, 2021 was primarily due to recording a $117,000 increase in interchange fees, a $60,000 increase in net realized gains on sales and calls of investment securities, a $24,000 increase in service charge income, a $13,000 increase in Federal Home Loan Bank dividends, and a $12,000 increase in other income, partially offset by a $218,000 decrease in loan placement fees.
−Removed: Customer service charges increased $24,000 or 5.18% to $ 487,000 for the third quarter of 2021 compared to $ 463,000 for the same period in 2020, due primarily to an increase in overdraft fee income.
−Removed: Other income increased $12,000 or 4.58% to $ 274,000 for the third quarter of 2021 compared to $ 262,000 for the same period in 2020.
−Removed: Non-Interest Expenses
−Removed: Salaries and employee benefits, occupancy and equipment, regulatory assessments, data processing, acquisition and integration expenses, Internet banking, license and maintenance contracts, and professional services are the major categories of non-interest expenses.
−Removed: Non-interest expenses increased $334,000 or 2.85% to $12,062,000 for the quarter ended September 30, 2021 compared to $11,728,000 for the same period in 2020.
−Removed: The net increase quarter over quarter was a result of increases in salaries and employee benefits of $362,000, increases in information technology expenses of $297,000, increases in occupancy and equipment expenses of $28,000, increases in regulatory assessments of $72,000, increases in appraisal fees of $67,000, increases in ATM/Debit card expenses of $55,000, increases in education and training of $20,000, increases in mileage and travel of $20,000, increases in telephone expenses of $13,000, increases in directors’ expenses of $12,000, increases in operating losses of $10,000, increases in data processing expense of $5,000, and increases in amortization of software of $2,000.
−Removed: The increases were partially offset by a decrease in Internet banking expenses of $113,000, a decrease in professional services of $208,000, a decrease in advertising expenses of $38,000, a decrease in stationery and supplies of $18,000, a decrease of $15,000 in armored courier fees, and a decrease in alarm monitoring expenses of $2,000.
−Removed: During the quarter ended September 30, 2021, nonrecurring expenses included $98,000 related to PPP loan forgiveness processing.
−Removed: The Company’s efficiency ratio decreased to 57.66% for the third quarter of 2021 compared to 63.58% for the third quarter of 2020.
−Removed: The improvement in the efficiency ratio is due to the growth in operating revenue outpacing the increase in non-interest expense.
−Removed: Salaries and employee benefits increased $362,000 or 5.38% to $ 7,091,000 for the third quarter of 2021 compared to $ 6,729,000 for the third quarter of 2020.
−Removed: The increase in total salaries and employee benefits was the result of an increase of approximately $319,000 in salaries and benefits, and an increase of $100,000 in officers’ expenses related to the change in the discount rate used to calculate the liability for salary continuation, deferred compensation, and split dollar plans;
−Removed: offset by a decrease in loan origination costs of $57,000.
−Removed: The number of full time equivalent (FTE) employees as of September 30, 2021, December 31, 2020 and September 30, 2020 was 246, 273, and 269, respectively.
−Removed: Provision for Income Taxes
−Removed: The effective income tax rate was 25.86% for the third quarter of 2021 compared to 24.92% for the same period in 2020.
−Removed: Provision for income taxes totaled $ 2,275,000 and $ 1,442,000 for the quarters ended September 30, 2021 and 2020, respectively.
−Removed: The 2021 effective tax rate was affected by the increase in tax-exempt interest, as well as the reversal of provision for credit losses.
−Removed: The 2020 effective tax rate was affected by the large provision for credit losses which resulted in lower pretax and taxable income, as well as the gain related to the collection of life insurance proceeds.
+Added: If deemed necessary, the Company maintains a reserve for uncertain income taxes where the merits of the position taken or the amount of the position that would be ultimately sustained upon examination do not meet a more-likely-than-not criteria.
+Added: As of March 31, 2022 and December 31, 2021, there was no reserve for uncertain tax positions.
FINANCIAL CONDITION
Summary of Changes in Consolidated Balance Sheets
−Removed: September 30, 2021 compared to December 31, 2020
−Removed: Total assets were $2,348,377,000 as of September 30, 2021, compared to $2,004,096,000 at December 31, 2020, an increase of 17.18% or $344,281,000.
−Removed: Total gross loans were $1,083,497,000 at September 30, 2021, compared to $1,102,347,000 at December 31, 2020, a decrease of $18,850,000 or 1.71%.
−Removed: The total investment portfolio (including Federal funds sold and interest-earning deposits in other banks) increased 46.31% or $349,078,000 to $1,102,907,000 at September 30, 2021 compared to $753,829,000 at December 31, 2020.
−Removed: Total deposits increased 19.47% or $335,382,000 to $2,058,092,000 at September 30, 2021, compared to $1,722,710,000 at December 31, 2020.
−Removed: Shareholders’ equity increased $1,527,000 or 0.62% to $246,548,000 at September 30, 2021, compared to $245,021,000 at December 31, 2020.
−Removed: The increase in shareholders’ equity was driven by the retention of e arnings, net of dividends paid , the decrease in unrealized gains on available-for-sale (AFS) securities, and share repurchases.
−Removed: Accrued interest payable and other liabilities was $38,582,000 at September 30, 2021, compared to $31,210,000 at December 31, 2020, an increase of $7,372,000.
+Added: March 31, 2022 compared to December 31, 2021
+Added: Total assets were $2,423,030,000 as of March 31, 2022, compared to $2,450,139,000 at December 31, 2021, a decrease of 1.11% or $27,109,000.
+Added: Total gross loans were $1,012,042,000 at March 31, 2022, compared to $1,039,111,000 at December 31, 2021, a decrease of $27,069,000 or 2.61%.
+Added: The total investment portfolio (including Federal funds sold and interest-earning deposits in other banks) decreased 2.02% or $25,278,000 to $1,225,401,000 at March 31, 2022 compared to $1,250,679,000 at December 31, 2021.
+Added: Total deposits increased 1.86% or $39,563,000 to $2,162,360,000 at March 31, 2022, compared to $2,122,797,000 at December 31, 2021.
+Added: Shareholders’ equity decreased $56,185,000 or 22.67% to $191,660,000 at March 31, 2022, compared to $247,845,000 at December 31, 2021.
+Added: The decrease in shareholders’ equity was driven by the decrease in unrealized gains on available-for-sale (AFS) securities, and share repurchases, offset by the retention of e arnings, net of dividends paid .
+Added: Accrued interest payable and other liabilities was $29,520,000 at March 31, 2022, compared to $40,043,000 at December 31, 2021, a decrease of $10,523,000.
The Company measures the fair values of its financial instruments utilizing a hierarchical framework associated with the level of observable pricing scenarios utilized in measuring financial instruments at fair value.
6 unchanged sentences
Government sponsored entities and agencies collateralized by residential mortgage backed obligations, private label mortgage and asset backed securities (PLMABS), corporate debt securities, and obligations of states and political subdivision securities and are classified at the date of acquisition as available for sale or held to maturity.
−Removed: As of September 30, 2021, investment securities with a fair value of $262,024,000, or 24.71% of our investment securities portfolio, were held as collateral for public funds, short and long-term borrowings, treasury, tax, and for other purposes.
+Added: As of March 31, 2022, investment securities with a fair value of $223,954,000, or 19.28% of our investment securities portfolio, were held as collateral for public funds, short and long-term borrowings, treasury, tax, and for other purposes.
Our investment policies are established by the Board of Directors and implemented by management.
1 unchanged sentence
The level of our investment portfolio as a percentage of our total earning assets is generally considered higher than our peers due primarily to a comparatively low loan-to-deposit ratio.
−Removed: Our loan-to-deposit ratio at September 30, 2021 was 52.65% compared to 63.99% at December 31, 2020.
+Added: Our loan-to-deposit ratio at March 31, 2022 was 46.80% compared to 48.95% at December 31, 2021.
The loan-to-deposit ratio of our peers was 71.00% at December 31, 2021.
−Removed: The total investment portfolio, including Federal funds sold and interest-earning deposits in other banks, increased 46.31% or $349,078,000 to $1,102,907,000 at September 30, 2021, from $753,829,000 at December 31, 2020.
−Removed: 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 a net unrealized gain of $21,091,000 at December 31, 2020.
+Added: The total investment portfolio, including Federal funds sold and interest-earning deposits in other banks, decreased 2.02% or $25,278,000 to $1,225,401,000 at March 31, 2022, from $1,250,679,000 at December 31, 2021.
+Added: 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 a net unrealized gain of $10,835,000 at December 31, 2021.
The Board and management have had periodic discussions about our strategy for risk management in dealing with potential losses should interest rates begin to rise.
4 unchanged sentences
The discount rate in this analysis is the original yield expected at time of purchase.
−Removed: Management evaluated all 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.
+Added: Management evaluated all 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
+Added: 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.
Management also analyzed any securities that may have been downgraded by credit rating agencies.
For those securities that met the evaluation criteria, management obtained and reviewed the most recently published national credit ratings for those securities.
−Removed: There were no OTTI losses recorded during the nine months ended September 30, 2020.
−Removed: At September 30, 2021, the Company held one U.S.
−Removed: Treasury securities which was in a gain position.
−Removed: At September 30, 2021, the Company held one U.S.
−Removed: Government agency security which was in a gain position.
−Removed: 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.
+Added: There were no OTTI losses recorded during the three months ended March 31, 2021.
+Added: At March 31, 2022, the Company held one U.S.
+Added: Treasury securities which was in a loss position for less than 12 months.
+Added: At March 31, 2022, the Company held one U.S.
+Added: Government agency security which was in a loss position for less than 12 months.
+Added: 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 and corporate debt securities were caused by interest rate changes.
−Removed: 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.
−Removed: At September 30, 2021, the Company held 119 U.S.
−Removed: 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.
+Added: 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 March 31, 2022.
+Added: At March 31, 2022, the Company held 108 U.S.
+Added: 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.
−Removed: Government sponsored entities
−Removed: and agencies collateralized by residential mortgage obligations were caused by interest rate changes.
+Added: Government sponsored entities and agencies collateralized by residential mortgage obligations were caused by interest rate changes.
The contractual cash flows of those investments are guaranteed by an agency or sponsored entity of the U.S.
Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.
−Removed: 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.
−Removed: At September 30, 2021, the Company had a total of 63 Private Label Mortgage and Asset Backed Securities (PLMABS) with a remaining principal balance of $255,324,000 and a net unrealized loss of approximately $1,568,000.
−Removed: 31 of the PLMABS securities were in a loss position for less than 12 months and four has been in loss for more than 12 months at September 30, 2021.
−Removed: 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.
+Added: 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 March 31, 2022.
+Added: At March 31, 2022, the Company had a total of 100 Private Label Mortgage and Asset Backed Securities (PLMABS).
+Added: 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.
+Added: 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 March 31, 2022.
The Company continues to monitor these securities for indications that declines in value, if any, may be other-than-temporary.
−Removed: At September 30, 2021, the Company held 15 corporate debt securities of which eight were in a loss position for less than 12 months.
+Added: 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.
−Removed: 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.
+Added: 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 March 31, 2022.
See Note 3 of the Notes to Consolidated Financial Statements (unaudited) included in this report for carrying values and estimated fair values of our investment securities portfolio.
−Removed: Total gross loans decreased $18,850,000 or 1.71% to $1,083,497,000 as of September 30, 2021, compared to $1,102,347,000 as of December 31, 2020.
+Added: Total gross loans decreased $27,069,000 or 2.61% to $1,012,042,000 as of March 31, 2022, compared to $1,039,111,000 as of December 31, 2021.
The following table sets forth information concerning the composition of our loan portfolio at the dates indicated:
−Removed: Loan Type (Dollars in thousands) September 30, 2021 % of Total
+Added: 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
−Removed: As of September 30, 2021, in management’s judgment, a concentration of loans existed in commercial loans and loans collateralized by real estate, representing approximately 96.5% of total loans.
−Removed: This level of concentration of commercial loans
−Removed: and loans collateralized by real estate is consistent with 96.7% of total loans at December 31, 2020.
+Added: As of March 31, 2022, in management’s judgment, a concentration of loans existed in commercial loans and loans collateralized by real estate, representing approximately 96.6% of total loans.
+Added: This level of concentration of commercial loans and loans collateralized by real estate is consistent with 96.4% of total loans at December 31, 2021.
Although management believes the loans within this concentration have no more than the normal risk of collectability, a substantial decline in the performance of the economy in general or a decline in real estate values in our primary market areas, in particular, could have an adverse impact on collectability, increase the level of real estate-related non-performing loans, or have other adverse effects which alone or in the aggregate could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Company does not engage in any sub-prime mortgage lending activities.
−Removed: At September 30, 2021, loans acquired in the Folsom Lake Bank (FLB), Sierra Vista Bank (SVB) and Visalia Community Bank (VCB) acquisitions had a balance of $99,020,000, of which $2,305,000 were commercial loans, $88,552,000 were real estate loans, and $8,163,000 were consumer loans.
+Added: At March 31, 2022, loans acquired in the Folsom Lake Bank (FLB), Sierra Vista Bank (SVB) and Visalia Community Bank (VCB) acquisitions had a balance of $85,346,000, of which $2,006,000 were commercial loans, $77,280,000 were real estate loans, and $6,060,000 were consumer loans.
At December 31, 2021, loans acquired in the FLB, SVB and VCB acquisitions had a balance of $93,201,000, of which $2,111,000 were commercial loans, $83,128,000 were real estate loans, and $7,962,000 were consumer loans.
1 unchanged sentence
Commercial real estate loans include certain loans which represent low to moderate risk and certain loans with higher risks.
−Removed: Contributing to the commercial and industrial loan growth was the issuance of PPP loans.
−Removed: As of September 30, 2021, gross loans included $64,260,000 in PPP loans which are fully guaranteed by the SBA.
+Added: Contributing to the commercial and industrial loan decrease was the forgiveness of PPP loans.
+Added: As of March 31, 2022, gross loans included $3,554,000 in PPP loans which are fully guaranteed by the SBA as compared to $18,553,000.00 at December 31, 2021 .
The Board of Directors review and approve concentration limits and exceptions to limitations of concentration are reported to the Board of Directors at least quarterly.
7 unchanged sentences
or (iii) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection.
−Removed: At September 30, 2021, total nonperforming assets totaled $1,597,000, or 0.07% of total assets, compared to $3,278,000, or 0.16% of total assets at December 31, 2020.
−Removed: Total nonperforming assets at September 30, 2021, included nonaccrual loans totaling $1,597,000, no OREO, and no other repossessed assets.
+Added: At March 31, 2022, total nonperforming assets totaled $292,000, or 0.01% of total assets, compared to $946,000, or 0.04% of total assets at December 31, 2021.
+Added: Total nonperforming assets at March 31, 2022, included nonaccrual loans totaling $292,000, no OREO, and no other repossessed assets.
Nonperforming assets at December 31, 2021 consisted of $946,000 in nonaccrual loans, no OREO, and no other repossessed assets.
−Removed: At September 30, 2021 and December 31, 2020, we had no loan considered to be a troubled debt restructuring (“TDRs”) included in nonaccrual loans.
−Removed: A summary of nonperforming loans at September 30, 2021 and December 31, 2020 is set forth below.
−Removed: The Company had no loans past due more than 90 days and still accruing interest at September 30, 2021 or at December 31, 2020.
+Added: At March 31, 2022 and December 31, 2021, we had no loan considered to be a troubled debt restructuring (“TDRs”) included in nonaccrual loans.
+Added: A summary of nonperforming loans at March 31, 2022 and December 31, 2021 is set forth below.
+Added: The Company had no loans past due more than 90 days and still accruing interest at March 31, 2022 or at December 31, 2021.
Management can give no assurance that nonaccrual and other nonperforming loans will not increase in the future.
Composition of Nonperforming Loans
−Removed: (In thousands) September 30, 2021 December 31, 2020
+Added: (In thousands) March 31, 2022 December 31, 2021
Nonaccrual loans:
Commercial and industrial $ 292 $ 312
−Removed: Owner occupied real estate — 370
−Removed: Real estate construction and other land loans — 1,556
Agricultural production — 634
−Removed: Commercial real estate 485 512
−Removed: Consumer and installment — 88
Total nonaccrual 292 946
6 unchanged sentences
We measure our impaired loans by using the fair value of the collateral if the loan is collateral dependent and the present value of the expected future cash flows discounted at the loan’s original contractual interest rate if the loan is not collateral dependent.
−Removed: As of September 30, 2021 and December 31, 2020, we had impaired loans totaling $10,060,000 and $11,186,000, respectively.
+Added: As of March 31, 2022 and December 31, 2021, we had impaired loans totaling $3,759,000 and $8,586,000, respectively.
For collateral dependent loans secured by real estate, we obtain external valuations which are updated at least annually to determine the fair value of the collateral, and we record a charge-off for the difference between the book value of the loan and the appraised value less selling costs value of the collateral, unless there is an extenuating circumstance that may positively affect the amount collected.
2 unchanged sentences
Management maintains certain loans that have been brought current by the borrower (less than 30 days delinquent) on nonaccrual status until such time as management has determined that the loans are likely to remain current in future periods.
−Removed: The following table provides a reconciliation of the change in nonaccrual loans for the first nine months of 2021.
+Added: The following table provides a reconciliation of the change in nonaccrual loans for the first three months of 2022.
(In thousands) Balance, December 31, 2021 Additions
4 unchanged sentences
Status Charge-
−Removed: Offs Balance, September 30, 2021
+Added: Offs Balance, March 31, 2022
Nonaccrual loans:
1 unchanged sentence
Agricultural land and industrial 634 — (303) — (331) — —
−Removed: Real estate 882 17 (240) — (174) — 485
−Removed: Real estate construction and other land loans
−Removed: 1,556 — (1,531) — (25) — —
−Removed: Consumer 88 — (2) — (86) — —
Total nonaccrual $ 946 $ — $ (323) $ — $ (331) $ — $ 292
1 unchanged sentence
OREO is initially recorded at fair value less costs to sell and thereafter carried at the lower of cost or fair value, less selling costs.
−Removed: We had no OREO properties at September 30, 2021 or December 31, 2020.
−Removed: The Company held no repossessed assets at September 30, 2021 or December 31, 2020.
+Added: We had no OREO properties at March 31, 2022 or December 31, 2021.
+Added: The Company held no repossessed assets at March 31, 2022 or December 31, 2021.
Allowance for Credit Losses
1 unchanged sentence
The methodology is set forth in a formal policy and takes into consideration the need for an overall allowance for credit losses as well as specific allowances that are tied to individual loans.
−Removed: The allowance for credit losses is an estimate of probable incurred credit losses in the Company’s loan portfolio.
+Added: The allowance for credit losses is an
+Added: estimate of probable incurred credit losses in the Company’s loan portfolio.
The allowance consists of two primary components, specific reserves related to impaired loans and general reserves for probable incurred losses related to loans that are not impaired.
7 unchanged sentences
The allowance for credit losses is maintained to cover probable incurred credit losses in the loan portfolio.
−Removed: The responsibility for the review of our assets and the determination of the adequacy lies with management and our Audit Committee.
−Removed: They delegate the authority to the Chief Credit Officer (CCO) to determine the loss reserve ratio for each type of
−Removed: asset and to review, at least quarterly, the adequacy of the allowance based on an evaluation of the portfolio, past experience, prevailing market conditions, amount of government guarantees, concentration in loan types and other relevant factors.
+Added: The responsibility for the review of our assets and the determination of the adequacy lies with management and our Audit/Compliance Committee.
+Added: They delegate the authority to the Chief Credit Officer (CCO) to determine the loss reserve ratio for each type of asset and to review, at least quarterly, the adequacy of the allowance based on an evaluation of the portfolio, past experience, prevailing market conditions, amount of government guarantees, concentration in loan types and other relevant factors.
The allowance for credit losses is an estimate of the probable incurred credit losses in our loan and lease portfolio.
6 unchanged sentences
The following table sets forth information regarding our allowance for credit losses at the dates and for the periods indicated:
−Removed: For the Nine Months
−Removed: Ended September 30, For the Year Ended
−Removed: December 31, For the Nine Months
−Removed: Ended September 30,
+Added: For the Three Months
+Added: Ended March 31, For the Year Ended
+Added: December 31, For the Three Months
+Added: Ended March 31,
(Dollars in thousands) 2022 2021 2021
9 unchanged sentences
Risks and uncertainties exist in all lending transactions and our management and Board of Directors’ Loan Committee have established reserve levels based on economic uncertainties and other risks that exist as of each reporting period.
−Removed: The allowance for credit losses is reviewed at least quarterly by the Bank’s and our Board of Directors’ Audit Committee.
+Added: The allowance for credit losses is reviewed at least quarterly by the Bank’s and our Board of Directors’ Audit/Compliance Committee.
Reserves are allocated to loan portfolio segments using percentages which are based on both historical risk elements such as delinquencies and losses and predictive risk elements such as economic, competitive and environmental factors.
1 unchanged sentence
At the onset of COVID we established a dedicated qualitative factor to address the lagging effect on our quantitative data.
−Removed: We have materially reduced that factor’s impact on the ALLL given the passage of time and improving economic conditions from mid-2020.
+Added: We have materially reduced that factor’s impact on the ALLL given the passage of time and improving
+Added: economic conditions from mid-2020.
Although the allowance for credit losses is allocated to various portfolio categories, it is general in nature and available for the loan portfolio in its entirety.
1 unchanged sentence
Additions are also required when, in management’s judgment, the reserve does not properly reflect the potential loss exposure.
−Removed: As of September 30, 2021, the balance in the allowance for credit losses (ALLL) was $10,061,000 compared to $12,915,000 as of December 31, 2020.
−Removed: The decrease is attributed to the reversal of provision for credit losses of $3,800,000 during the nine months ended September 30, 2021.
−Removed: The balance of undisbursed commitments to extend credit on construction and other loans and letters of credit was $332,875,000 as of September 30, 2021, compared to $326,179,000 as of December 31, 2020.
−Removed: 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.
+Added: As of March 31, 2022, the balance in the allowance for credit losses (ALLL) was $9,864,000 compared to $9,600,000 as of December 31, 2021.
+Added: The increase is attributed to the net recoveries durin g the three months ended March 31, 2022.
+Added: The balance of undisbursed commitments to extend credit on construction and other loans and letters of credit was $346,752,000 as of March 31, 2022, compared to $326,108,000 as of December 31, 2021.
+Added: 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 appropriate, systematic, and consistently applied processes.
While related to credit losses, this allocation is not a part of the ALLL and is considered separately as a liability for accounting and regulatory reporting purposes.
−Removed: As of September 30, 2021, the ALLL was 0.93% of total gross loans compared to 1.17% as of December 31, 2020.
−Removed: Total loans include FLB, SVB and VCB loans that were recorded at fair value in connection with the acquisitions, with values of $99,020,000 at September 30, 2021 and $127,186,000 at December 31, 2020.
−Removed: Excluding these FLB, SVB and VCB loans from the calculation, the ALLL to total gross loans was 1.02% and 1.32% at September 30, 2021 and December 31, 2020, respectively and general reserves associated with non-impaired loans to total non-impaired loans was 1.00% and 1.41%, respectively.
−Removed: As of September 30, 2021, gross loans included $64,260,000 related to PPP loans which are fully guaranteed by the SBA.
−Removed: Excluding PPP loans and the acquired loans from the calculation, the allowance for credit losses to total gross loans was 1.09% and 1.65% as of September 30, 2021 and December 31, 2020, respectively.
−Removed: The Company believes the allowance for credit losses is adequate to provide for probable incurred credit losses within the loan portfolio at September 30, 2021.
−Removed: loan portfolios acquired in the mergers were booked at fair value with no associated allocation in the ALLL.
+Added: As of March 31, 2022, the ALLL was 0.97% of total gross loans compared to 0.92% as of December 31, 2021.
+Added: Total loans include FLB, SVB and VCB loans that were recorded at fair value in connection with the acquisitions, with values of $85,346,000 at March 31, 2022 and $93,201,000 at December 31, 2021.
+Added: Excluding these FLB, SVB and VCB loans from the calculation, the ALLL to total gross loans was 1.06% and 1.01% at March 31, 2022 and December 31, 2021, respectively and general reserves associated with non-impaired loans to total non-impaired loans was 1.01% and 0.98%, respectively.
+Added: As of March 31, 2022, gross loans included $3,554,000 related to PPP loans which are fully guaranteed by the SBA as compared to $18,553,000.00 at December 31, 2021.
+Added: Excluding PPP loans and the acquired loans from the calculation, the allowance for credit losses to total gross loans was 1.07% and 1.04% as of March 31, 2022 and December 31, 2021, respectively.
+Added: The Company believes the allowance for credit losses is adequate to provide for probable incurred credit losses within the loan portfolio at March 31, 2022.
+Added: The loan portfolios acquired in the mergers were booked at fair value with no associated allocation in the ALLL.
The size of the fair value discount remains adequate for all non-impaired acquired loans.
−Removed: The Company’s loan portfolio balances for the nine months ended September 30, 2021 increased through organic growth.
+Added: The Company’s loan portfolio balances for the three months ended March 31, 2022 decreased.
Management believes that the change in the allowance for credit losses to total loans ratio is directionally consistent with the composition of loans and the level of nonperforming and classified loans, and by the general economic conditions experienced in the central California communities serviced by the Company, partially offset by recent improvements in real estate collateral values.
2 unchanged sentences
However, the total reserve rates on non-impaired loans include qualitative factors which are systematically derived and consistently applied to reflect conservatively estimated losses from loss contingencies at the date of the financial statements.
−Removed: Based on the above considerations and given recent changes in historical charge-off rates included in the ALLL modeling and the changes in other factors, management determined that the ALLL was appropriate as of September 30, 2021.
+Added: Based on the above considerations and given recent changes in historical charge-off rates included in the ALLL modeling and the changes in other factors, management determined that the ALLL was appropriate as of March 31, 2022.
However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period.
The following table illustrates and sets forth additional analysis which portrays the trends that are occurring in the loan portfolio.
−Removed: September 30, 2021 December 31, 2020 September 30, 2020
+Added: March 31, 2022 December 31, 2021 March 31, 2021
(Dollars in thousands) Balance % to Total Loans Balance % to Total Loans Balance % to Total Loans
4 unchanged sentences
Business combinations involving the Company’s acquisition of the equity interests or net assets of another enterprise give rise to goodwill.
−Removed: 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 purchase method of accounting.
+Added: 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 purchase 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.
8 unchanged sentences
Management considers the entire Company to be one reporting unit.
−Removed: No such events or circumstances arose during the first nine months of 2021.
+Added: No such events or circumstances arose during the first three months of 2022.
Changes in the economic environment, operations of the reporting unit or other adverse events could result in future impairment charges which could have a material adverse impact on the Company’s operating results.
−Removed: The intangible assets represent the estimated fair value of the core deposit relationships acquired in the 2017 acquisition of Folsom Lake Bank of $1,879,000, the 2016 acquisition of Sierra Vista Bank of $508,000, and the 2013 acquisition of Visalia Community Bank of $1,365,000.
+Added: The intangible assets represent the estimated fair value of the core deposit relationships acquired in the 2017 acquisition of Folsom Lake Bank of $1,879,000 and the 2013 acquisition of Visalia Community Bank of $1,365,000.
Core deposit intangibles are being amortized using the straight-line method (which approximates the effective interest method) over estimated lives of five to 10 years from the date of acquisition.
−Removed: The carrying value of intangible assets at September 30, 2021 was $662,000, net of $3,090,000 in accumulated amortization expense.
+Added: The carrying value of intangible assets at March 31, 2022 was $382,000, net of $2,862,000 in accumulated amortization expense.
The carrying value at December 31, 2021 was $522,000, net of $3,230,000 accumulated amortization expense.
We evaluate the remaining useful lives quarterly to determine whether events or circumstances warrant a revision to the remaining periods of amortization.
−Removed: Based on the evaluation, no changes to the remaining useful lives was required in the first nine months of 2021.
−Removed: Amortization expense recognized was $521,000 and $521,000 for the nine months ended September 30, 2021 and September 30, 2020, respectively.
−Removed: The following table summarizes the Company’s estimated remaining core deposit intangible amortization expense for each of the next five years (in thousands):
+Added: Based on the evaluation, no changes to the remaining useful lives was required in the first three months of 2022.
+Added: Amortization expense recognized was $140,000 and $174,000 for the three months ended March 31, 2022 and March 31, 2021, respectively.
+Added: The following table summarizes the Company’s estimated remaining core deposit intangible amortization expense for each of the next two years (in thousands):
Years Ended Estimated Core Deposit Intangible Amortization
2 unchanged sentences
All of a depositor’s accounts at an insured depository institution, including all non-interest bearing transactions accounts, are insured by the FDIC up to standard maximum deposit insurance amount of $250,000 for each deposit insurance ownership category.
−Removed: Total deposits increased $335,382,000 or 19.47% to $2,058,092,000 as of September 30, 2021, compared to $1,722,710,000 as of December 31, 2020.
−Removed: Interest-bearing deposits increased $226,022,000 or 25.17% to $1,123,843,000 as of September 30, 2021, compared to $897,821,000 as of December 31, 2020.
−Removed: Non-interest bearing deposits increased $109,360,000 or 13.26% to $934,249,000 as of September 30, 2021, compared to $824,889,000 as of December 31, 2020.
−Removed: Average non-interest bearing deposits to average total deposits was 45.83% for the nine months ended September 30, 2021 compared to 47.24% for the same period in 2020.
−Removed: The Company’s deposit balances for the nine months ended September 30, 2021 increased through organic growth and PPP loan proceeds retained in customer deposit accounts.
−Removed: The composition of the deposits and average interest rates paid at September 30, 2021 and December 31, 2020 is summarized in the table below.
−Removed: (Dollars in thousands) September 30, 2021 % of
+Added: Total deposits increased $39,563,000 or 1.86% to $2,162,360,000 as of March 31, 2022, compared to $2,122,797,000 as of December 31, 2021.
+Added: Interest-bearing deposits increased $77,080,000 or 6.65% to $1,236,293,000 as of March 31, 2022, compared to $1,159,213,000 as of December 31, 2021.
+Added: Non-interest bearing deposits decreased $37,517,000 or 3.89% to $926,067,000 as of March 31, 2022, compared to $963,584,000 as of December 31, 2021.
+Added: Average non-interest bearing deposits to average total deposits was 43.77% for the three months ended March 31, 2022 compared to 46.39% for the same period in 2021.
+Added: The Company’s deposit balances for the three months ended March 31, 2022 increased through organic growth and PPP loan proceeds retained in customer deposit accounts.
+Added: The composition of the deposits and average interest rates paid at March 31, 2022 and December 31, 2021 is summarized in the table below.
+Added: (Dollars in thousands) March 31, 2022 % of
Deposits Average Effective
9 unchanged sentences
Other Borrowings
−Removed: As of September 30, 2021 and December 31, 2020, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.
+Added: As of March 31, 2022 and December 31, 2021, the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances.
We maintain a line of credit with the FHLB collateralized by government securities and loans.
6 unchanged sentences
The Company needs to maintain substantial levels of regulatory capital to give it maximum flexibility in the changing regulatory environment and to respond to changes in the market and economic conditions.
−Removed: Our shareholders’ equity was $246,548,000 at September 30, 2021, compared to $245,021,000 at December 31, 2020.
−Removed: The increase from December 31, 2020 in shareholders’ equity is the result of an increase in retained earnings from net income of $21,563,000, the exercise of stock options of $222,000, stock issued under the employee stock purchase plan of $159,000, the effect of share-based compensation expense of $310,000, and stock awarded to employees of $158,000, offset by a decrease in accumulated other comprehensive income (AOCI) of $4,566,000, common stock cash dividends of $4,319,000, and stock repurchases of $12,000,000.
−Removed: On March 17, 2021, the Board of Directors of the Company approved the adoption of a program to effect repurchases of the Company’s common stock with the intent to purchase up to $12 million worth of the Company’s outstanding common stock.
−Removed: During the nine months ended September 30, 2021, the Company repurchased and retired 584,619 shares at a cost of $12,000,000, completing the stock repurchase program.
−Removed: During the first nine months of 2021, the Company declared and paid $4,319,000 in cash dividends ($0.35 per common share) to holders of common stock.
+Added: Our shareholders’ equity was $191,660,000 at March 31, 2022, compared to $247,845,000 at December 31, 2021.
+Added: The decrease from December 31, 2021 in shareholders’ equity is the result of an increase in retained earnings from net income of $6,086,000, the exercise of stock options of $132,000, stock issued under the employee stock purchase plan of $57,000, the effect of share-based compensation expense of $97,000, and stock awarded to employees of $273,000, offset by a decrease in accumulated other comprehensive income (AOCI) of $56,919,000, common stock cash dividends of $1,425,000, and stock repurchases of $4,486,000.
+Added: On November 17, 2021, the Board of Directors of the Company approved the adoption of a program to effect repurchases of the Company’s common stock with the intent to purchase up to $15 million worth of the Company’s outstanding common stock, or approximately 702,576 shares.
+Added: During the year ended December 31, 2021, the Company repurchased and retired 76,613 shares at an approximate average cost of $21.10 per share.
+Added: During the three months ended March 31, 2022, the Company repurchased and retired 195,873 shares at an average cost of $22.87 or $4,486,000.
+Added: During the first three months of 2022, the Company declared and paid $1,425,000 in cash dividends ($0.12 per common share) to holders of common stock.
The Company declared and paid a total of $5,757,000 in cash dividends ($0.47 per common share) to holders of common stock during the year ended December 31, 2021.
7 unchanged sentences
credit and recourse arrangements, which are reported as off-balance-sheet items.
−Removed: The following table presents the Company’s regulatory capital ratios as of September 30, 2021 and December 31, 2020.
+Added: The following table presents the Company’s regulatory capital r atios as of March 31, 2022 and December 31, 2021.
(Dollars in thousands)
−Removed: September 30, 2021 Amount Ratio
+Added: March 31, 2022 Amount Ratio
Tier 1 Leverage Ratio $ 189,878 7.87 %
7 unchanged sentences
Total Risk-Based Capital Ratio $ 233,034 15.80 %
−Removed: The following table presents the Bank’s regulatory capital ratios as of September 30, 2021 and December 31, 2020.
+Added: The following table presents the Bank’s regulatory capital ratios as of March 31, 2022 and December 31, 2021.
(Dollars in thousands) Actual Ratio Minimum regulatory requirement (1) Minimum requirement for “ Well-Capitalized ”
−Removed: September 30, 2021 Amount Ratio Amount Ratio Amount Ratio
+Added: March 31, 2022 Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage Ratio $ 205,924 8.54 % $ 96,504 4.00 % $ 120,630 5.00 %
11 unchanged sentences
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.
−Removed: At September 30, 2021, all of the trust preferred securities that have been issued qualify as
−Removed: Tier 1 capital.
+Added: 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 beginning five years after issuance, 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%.
9 unchanged sentences
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%.
−Removed: As of September 30, 2021, the rate was 1.73%.
+Added: As of March 31, 2022, the rate was 1.84%.
+Added: 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.
+Added: The Subordinated Debt initially bears a fixed interest rate of 3.125% per year.
+Added: 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.
+Added: The Company may at its option redeem in whole or in part the Subordinated Debt on or after November 12, 2026 without a premium.
+Added: The Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.
Liquidity management involves our ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs and ongoing repayment of borrowings.
2 unchanged sentences
Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, Federal funds facilities with correspondent banks, and advances from the Federal Home Loan Bank of San Francisco.
−Removed: These funding sources are augmented by payments of principal and interest on loans, the routine maturities and pay downs of securities from the securities portfolio, the stability of our core deposits and the ability to sell investment securities.
−Removed: As of September 30, 2021, the Company had unpledged securities totaling $805,824,000 available as a secondary source of liquidity and total cash and cash equivalents of $67,693,000.
−Removed: Cash and cash equivalents at September 30, 2021 decreased 3.68% compared to $70,278,000 at December 31, 2020.
+Added: These funding sources are augmented by payments of principal and interest on loans, the routine maturities and pay downs of securities from the securities portfolio, the stability of our core deposits and the ability to sell
+Added: investment securities.
+Added: As of March 31, 2022, the Company had unpledged securities totaling $944,873,000 available as a secondary source of liquidity and total cash and cash equivalents of $88,837,000.
+Added: Cash and cash equivalents at March 31, 2022 decreased 45.65% compared to $163,467,000 at December 31, 2021.
Primary uses of funds include withdrawal of and interest payments on deposits, originations and purchases of loans, purchases of investment securities, and payment of operating expenses.
As a means of augmenting our liquidity, we have established federal funds lines with our correspondent banks.
−Removed: At September 30, 2021, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $262,091,000 in unused FHLB secured advances and a $10,691,000 secured credit line at the Federal Reserve Bank.
+Added: At March 31, 2022, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $284,114,000 in unused FHLB secured advances and a $8,845,000 secured credit line at the Federal Reserve Bank.
We believe our liquidity sources to be stable and adequate.
−Removed: At September 30, 2021, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.
−Removed: The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at September 30, 2021 and December 31, 2020:
−Removed: Credit Lines (In thousands) September 30, 2021 December 31, 2020
+Added: At March 31, 2022, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.
+Added: The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at March 31, 2022 and December 31, 2021:
+Added: Credit Lines (In thousands) March 31, 2022 December 31, 2021
Unsecured Credit Lines
15 unchanged sentences
The liquidity of the parent company, Central Valley Community Bancorp, is primarily dependent on the payment of cash dividends by its subsidiary, Central Valley Community Bank, subject to limitations imposed by California statutes and the regulations.
−Removed: OFF-BALANCE SHEET ITEMS
−Removed: In the ordinary course of business, the Company is a party to financial instruments with off-balance risk.
−Removed: These financial instruments include commitments to extend credit and standby letters of credit.
−Removed: Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.
−Removed: For an expanded discussion of these financial instruments, refer to Note 7 of the Notes to Consolidated Financial Statements included herein and Note 13 of the Notes to Consolidated Financial Statements in the Company’s 2020 Annual Report on Form 10-K.
−Removed: In the ordinary course of business, the Company is party to various operating leases.
−Removed: For a fuller discussion of these financial instruments, refer to Note 10 of the Notes to Consolidated Financial Statements in the Company’s 2020 Annual Report on Form 10-K.
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.