22 unchanged sentences
Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict.
−Removed: statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
+Added: For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
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.
4 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 six months ended June 30, 2022.
+Added: There have been no material changes to the Company’s critical accounting policies during the nine months ended September 30, 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 July 20, 2022, the Board of Directors declared a $0.12 per share cash dividend payable on August 20, 2022 to shareholders of record as of August 5, 2022.
+Added: On October 19, 2022, the Board of Directors declared a $0.12 per share cash dividend payable on November 18, 2022 to shareholders of record as of November 4, 2022.
Economic Conditions
9 unchanged sentences
As a whole the loan portfolio may be subject to the impact of changes in interest rates, a decline in economic conditions in the Central Valley and the Greater Sacramento Region, and inflation.
−Removed: Second Quarter of 2022
−Removed: For the second quarter of 2022, our consolidated net income was $6,542,000 compared to $7,563,000 for the same period in 2021.
−Removed: Diluted EPS was $0.56 for the quarter ended June 30, 2022 compared to $0.60 for the same period in 2021.
−Removed: The decrease in net income during the second quarter of 2022 compared to the same period in 2021 is primarily driven by no provision for credit losses, an increase in net realized losses on sales and calls of investment securities of $890,000, a decrease in loan placement fees of $242,000, a decrease in non-interest income of $1,307,000, and an increase in total non-interest expenses of $453,000, partially offset by an increase in net interest income of $1,729,000.
−Removed: During the quarter ended June 30, 2022, the Company recorded no provision for credit losses, compared to a $1,500,000 reversal of provision during the quarter ended June 30, 2021.
−Removed: Throughout 2020, 2021 and the first six months of 2022, the Company 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 3.48% for the quarter ended June 30, 2022 compared to 3.60% for the same period in 2021.
−Removed: Net interest income, before provision for credit losses, increased $1,729,000, or 9.56%, to $19,810,000 for the second quarter of 2022, compared to $18,081,000 for the same period in 2021.
+Added: Third Quarter of 2022
+Added: For the third quarter of 2022, our consolidated net income was $6,384,000 compared to $6,521,000 for the same period in 2021.
+Added: Diluted EPS was $0.55 for the quarter ended September 30, 2022 compared to $0.54 for the same period in 2021.
+Added: The decrease in net income during the third quarter of 2022 compared to the same period in 2021 is primarily driven by a $500,000 provision for credit losses, an increase in net realized losses on sales and calls of investment securities of $131,000, a decrease in loan placement fees of $312,000, a decrease in non-interest income of $668,000, and an increase in total non-interest expenses of $736,000, partially offset by an increase in net interest income of $1,954,000.
+Added: It’s noted that the increase in non-interest expenses during the quarter are attributed to non-recurring severance expenses and an increase in overtime resulting from a recent conversion in the Company’s core processing system.
+Added: During the quarter ended September 30, 2022, the Company recorded $500,000 provision for credit losses, compared to a $500,000 reversal of provision during the quarter ended September 30, 2021.
+Added: Throughout 2020, 2021 and the first nine months of 2022, the Company adjusted the economic risk and interest risk factors methodology to incorporate the current economic implications from the COVID-19 pandemic as well as the continuing labor shortage.
+Added: In addition, the Company adjusted the factors to incorporate the potential and realized implications from rising interest rates, input price increases and ongoing supply chain disruptions.
+Added: Net interest margin (fully tax equivalent basis) increased to 3.57% for the quarter ended September 30, 2022 compared to 3.47% for the same period in 2021.
+Added: Net interest income, before provision for credit losses, increased $1,954,000, or 10.73%, to $20,164,000 for the third quarter of 2022, compared to $18,210,000 for the same period in 2021.
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 decrease in the yield on the loan portfolio.
−Removed: The effective yield on average investment securities, including interest-earning deposits in other banks and Federal funds sold, increased to 2.58% for the three months ended June 30, 2022, compared to 2.11% for the three months ended June 30, 2021.
−Removed: The effective yield on average loans decreased to 4.76% for the three months ended June 30, 2022, compared to 5.04% for the three months ended June 30, 2021.
−Removed: Total average PPP loans, which have an annual interest rate of 1.00%, were $2,358,000 and $158,490,000 for the three months ended June 30, 2022 and 2021, respectively.
−Removed: Excluding PPP loans from total average loans, the effective yield on average loans for the three months ended June 30, 2022 and 2021 was 4.78% and 4.86%, respectively.
−Removed: The cost of deposits (calculated by dividing annualized interest expense on interest bearing deposits by total deposits), decreased to 0.04% for the quarter ended June 30, 2022 compared to 0.05% for the same period in 2021.
−Removed: Non-interest income decreased $1,307,000 or 62.93% to $770,000 for the quarter ended June 30, 2022 compared to $2,077,000 for the same period in 2021, primarily driven by an increase of $890,000 in net realized losses on sales and calls of investment securities, a decrease in loan placement fees of $242,000, and a decrease of $327,000 in other income, offset by a an increase in service charge income of $77,000, an increase in interchange fees of $7,000, and an increase in appreciation in cash surrender value of bank owned life insurance of $69,000.
−Removed: Non-interest expense for the quarter ended June 30, 2022 increased $453,000 or 3.90% from the comparable period due to increases in salaries and employee benefits, occupancy and equipment, regulatory assessments, information technology expenses, risk management expenses, education and training, telephone expenses, mileage and travel, operating losses, loan related expenses, advertising, ATM/debit card expenses, postage, stationery and supplies, and check printing, partially offset by decreases in professional services, data processing, tax provision, personnel, internet banking expenses, appraisal fees, directors’ expenses, alarm monitoring, donations, amortization of core deposit intangibles, armored courier fees, and amortization of software.
−Removed: Annualized return on average equity (ROE) for the second quarter of 2022 increased to 14.73% compared to 12.25% for the same period in 2021.
+Added: The effective yield on average investment securities, including interest-earning deposits in other banks and Federal funds sold,
+Added: increased to 2.46% for the three months ended September 30, 2022, compared to 2.14% for the three months ended September 30, 2021.
+Added: The effective yield on average loans decreased to 4.90% for the three months ended September 30, 2022, compared to 4.91% for the three months ended September 30, 2021.
+Added: Total average PPP loans, which have an annual interest rate of 1.00%, were $659,000 and $158,490,000 for the three months ended September 30, 2022 and 2021, respectively.
+Added: Excluding PPP loans from total average loans, the effective yield on average loans for the three months ended September 30, 2022 and 2021 was 4.84% and 4.73%, respectively.
+Added: The cost of deposits (calculated by dividing annualized interest expense on interest bearing deposits by total deposits), decreased to 0.04% for the quarter ended September 30, 2022 compared to 0.05% for the same period in 2021.
+Added: Non-interest income decreased $668,000 or 31.10% to $1,480,000 for the quarter ended September 30, 2022 compared to $2,148,000 for the same period in 2021, primarily driven by an increase of $131,000 in net realized losses on sales and calls of investment securities, a decrease in loan placement fees of $312,000, a decrease of $182,000 in other income, and a decrease in interchange fees of $40,000.
+Added: Non-interest expense for the quarter ended September 30, 2022 increased $736,000 or 6.10% from the comparable period due to increases in salaries and employee benefits primarily attributed to non-recurring severance and overtime expenditures.
+Added: Annualized return on average equity (ROE) for the third quarter of 2022 increased to 14.42% compared to 10.41% for the same period in 2021.
The increase in ROE reflects the decrease in average shareholders’ equity, notwithstanding the decrease in net income compared to the prior year.
−Removed: Annualized return on average assets (ROA) was 1.07% and 1.36% for the quarters ended June 30, 2022 and 2021, respectively.
−Removed: Total average equity decreased to $177,615,000 for the second quarter of 2022 compared to $246,959,000 for the second quarter of 2021.
−Removed: The Company declared and paid $0.12 per share in cash dividends to holders of common stock during the second quarters of 2022 and 2021.
+Added: Annualized return on average assets (ROA) was 1.06% and 1.13% for the quarters ended September 30, 2022 and 2021, respectively.
+Added: Total average equity decreased to $177,083,000 for the third quarter of 2022 compared to $250,520,000 for the third quarter of 2021.
+Added: The Company declared and paid $0.12 per share in cash dividends to holders of common stock during the third quarters of 2022 and 2021.
The change in shareholders’ equity was driven by the retention of earnings, net of dividends paid, the decrease in accumulated other comprehensive income (AOCI), and share repurchases.
−Removed: The Company’s average total assets increased $214,249,000 or 9.62% to $2,441,881,000 during the second quarter of 2022 compared to the same period in 2021.
−Removed: Total average interest-earning assets increased $280,278,000 or 13.62% in the second quarter of 2022 compared to the same period of 2021.
−Removed: Total average loans, including nonaccrual loans, increased $5,742,000 or 0.53% in the second quarter of 2022 compared to the same period in 2021.
−Removed: Average total investments and interest-earning deposits in other banks increased $272,165,000 or 27.76% in the quarter ended June 30, 2022 compared to the same period in 2021.
−Removed: Average interest-bearing liabilities increased $228,729,000 or 21.58% in the quarter ended June 30, 2022 compared to the same period in 2021.
−Removed: Average non-interest bearing demand deposits increased 6.08% to $947,724,000 in the second quarter of 2022 compared to $893,441,000 during the same period in 2021.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits was 43.92% in the second quarter of 2022 compared to 45.86% in 2021.
−Removed: First Six Months of 2022
−Removed: For the six months ended June 30, 2022, our consolidated net income was $12,628,000 compared to $15,042,000 for the same period in 2021.
−Removed: Diluted EPS was $1.07 for the first six months of 2022 compared to $1.20 for the first six months of 2021.
−Removed: Net income for the six-month period ended June 30, 2022 decreased 16.05%, compared to the six-month period ended June 30, 2021, primarily driven by an increase in net realized losses on sales and calls of investment securities, a decrease in loan placement fees, and an increase in non-interest expense, partially offset by an increase in net interest income, an increase in service charge income, and a decrease in provision for income taxes.
+Added: The Company’s average total assets increased $96,242,000 or 4.15% to $2,414,414,000 during the third quarter of 2022 compared to the same period in 2021.
+Added: Total average interest-earning assets increased $164,489,000 or 7.73% in the third quarter of 2022 compared to the same period of 2021.
+Added: Total average loans, including nonaccrual loans, increased $120,067,000 or 11.22% in the third quarter of 2022 compared to the same period in 2021.
+Added: Average total investments and interest-earning deposits in other banks increased $42,838,000 or 4.04% in the quarter ended September 30, 2022 compared to the same period in 2021.
+Added: Average interest-bearing liabilities increased $55,816,000 or 5.02% in the quarter ended September 30, 2022 compared to the same period in 2021.
+Added: Average non-interest bearing demand deposits increased 13.75% to $1,041,698,000 in the third quarter of 2022 compared to $915,742,000 during the same period in 2021.
+Added: The ratio of average non-interest bearing demand deposits to average total deposits was 48.50% in the third quarter of 2022 compared to 45.30% in 2021.
+Added: First Nine Months of 2022
+Added: For the nine months ended September 30, 2022, our consolidated net income was $19,012,000 compared to $21,563,000 for the same period in 2021.
+Added: Diluted EPS was $1.62 for the first nine months of 2022 compared to $1.74 for the first nine months of 2021.
+Added: Net income for the nine-month period ended September 30, 2022 decreased 11.83%, compared to the nine-month period ended September 30, 2021, primarily driven by a provision for credit losses, an increase in net realized losses on sales and calls of investment securities, a decrease in loan placement fees, and an increase in non-interest expense, partially offset by an increase in net interest income, an increase in service charge income, and a decrease in provision for income taxes.
Net interest income before the provision for credit losses increased $3,725,000 or 6.92%.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $324,000 and $349,000 for the six months ended June 30, 2022 and 2021, respectively.
−Removed: Net interest income during the first six months of 2022 and 2021 benefited by approximately $440,000 and $434,000, respectively, in nonrecurring income from loan prepayment penalties.
−Removed: Excluding the loan mark accretion and prepayment penalties, net interest income for the six months ended June 30, 2022, increased by $1,790,000 compared to the six-month period ended June 30, 2021.
−Removed: Non-interest income decreased $1,472,000 or 36.11%, and non-interest expense increased $510,000 or 2.22% in the first six months of 2022 compared to the first six months of 2021.
−Removed: During the six months ended June 30, 2022, the Company recorded no provision for credit losses of compared to a $3,300,000 reversal of provision during same period in 2021.
−Removed: Net recoveries of previously charged-off loans totaling $273,000 and $824,000 were recorded during the six months ended June 30, 2022 and 2021, respectively.
−Removed: Annualized return on average equity for the six months ended June 30, 2022 increased to 12.35% compared to 12.21% for the same period in 2021.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $445,000 and $579,000 for the nine months ended September 30, 2022 and 2021, respectively.
+Added: Net interest income during the first nine months of 2022 and 2021 benefited by approximately $562,000 and $438,000, respectively, in nonrecurring income from loan prepayment penalties.
+Added: Excluding the loan mark accretion and prepayment penalties, net interest income for the nine months ended September 30, 2022, increased by $3,735,000 compared to the nine-month period ended September 30, 2021.
+Added: Non-interest income decreased $2,140,000 or 34.38%, and non-interest expense increased $1,246,000 or 3.55% in the first nine months of 2022 compared to the first nine months of 2021.
+Added: During the nine months ended September 30, 2022, the Company recorded $500,000 provision for credit losses compared to a $3,800,000 reversal of provision during same period in 2021.
+Added: Net recoveries of previously charged-off loans totaling $266,000 and $946,000 were recorded during the nine months ended September 30, 2022 and 2021, respectively.
+Added: Annualized return on average equity for the nine months ended September 30, 2022 increased to 12.98% compared to 11.60% for the same period in 2021.
The increase in ROE reflects the decrease in average shareholders’ equity, notwithstanding the decrease in net income compared to the prior year.
−Removed: Annualized return on average assets was 1.03% and 1.39% for the six months ended June 30, 2022 and 2021, respectively.
−Removed: Total average equity decreased to $204,511,000 for the six months ended June 30, 2022 compared to $246,439,000 for the same period in 2021.
+Added: Annualized return on average assets was 1.04% and 1.30% for the nine months ended September 30, 2022 and 2021, respectively.
+Added: Total average equity decreased to $195,295,000 for the nine months ended September 30, 2022 compared to $247,814,000 for the same period in 2021.
The change in shareholders’ equity was driven by the retention of earnings, net of dividends paid, the decrease in accumulated other comprehensive income (AOCI) , and share repurchases.
−Removed: Our average total assets increased $284,707,000 or 13.14% in the first six months of 2022 compared to the same period in 2021.
−Removed: Total average interest-earning assets increased $315,638,000 or 15.81% comparing the first six months of 2022 to the same period in 2021.
−Removed: Average total loans, including nonaccrual loans, decreased $28,520,000 or 2.64% comparing the first six months of 2022 to the same period in 2021.
−Removed: The effective yield on average loans decreased to 4.80% for the six months June 30, 2022, compared to 5.11% for the six months June 30, 2021.
−Removed: Total average PPP loans were $6,820,000 and $169,553,000 for the six months ended June 30, 2022 and 2021 , respectively.
−Removed: Excluding PPP loans from total average loans, the effective yield on average loans for the six months ended June 30, 2022 and 2021 was 4.78% and 5.34%, respectively.
−Removed: Average total investments (securities and interest-earning deposits) increased $341,321,000, or 37.15% in the six-month period ended June 30, 2022 compared to the same period in 2021.
+Added: Our average total assets increased $221,222,000 or 9.98% in the first nine months of 2022 compared to the same period in 2021.
+Added: Total average interest-earning assets increased $264,706,000 or 12.97% comparing the first nine months of
+Added: 2022 to the same period in 2021.
+Added: Average total loans, including nonaccrual loans, increased $21,553,000 or 2.00% comparing the first nine months of 2022 to the same period in 2021.
+Added: The effective yield on average loans decreased to 4.84% for the nine months September 30, 2022, compared to 5.04% for the nine months September 30, 2021.
+Added: Total average PPP loans were $4,935,000 and $140,883,000 for the nine months ended September 30, 2022 and 2021 , respectively.
+Added: Excluding PPP loans from total average loans, the effective yield on average loans for the nine months ended September 30, 2022 and 2021 was 4.79% and 4.90%, respectively.
+Added: Average total investments (securities and interest-earning deposits) increased $240,734,000, or 24.92% in the nine-month period ended September 30, 2022 compared to the same period in 2021.
Average interest-bearing liabilities increased $182,876,000 or 17.39% on a period-to-period comparison.
−Removed: Our net interest margin (fully tax equivalent basis) for the first six months ended June 30, 2022 decreased to 3.34% compared to 3.67% for the same period in 2021.
−Removed: The decrease in net interest margin in the period-to-period comparison resulted primarily from a decrease in the yield on the loan portfolio, a decrease in the effective yield on interest-earning deposits in other banks and Federal funds sold, and an increase in the cost of total interest-bearing liabilities, partially offset by an increase in the effective yield on the Company’s average investment securities.
−Removed: The effective yield on interest-earning assets decreased 28 basis points to 3.45% for the six-month period ended June 30, 2022 compared to 3.73% for the same period in 2021.
−Removed: For the six-month period ended June 30, 2022, the effective yield on investment securities, including Federal funds sold and interest-earning deposits in other banks, increased 21 basis points, compared to the same period in the prior year, and the effective yield on loans decreased thirty-one basis points.
+Added: Our net interest margin (fully tax equivalent basis) for the first nine months ended September 30, 2022 decreased to 3.42% compared to 3.60% for the same period in 2021.
+Added: The decrease in net interest margin in the period-to-period comparison resulted primarily from a decrease in the yield on the loan portfolio and an increase in the cost of total interest-bearing liabilities, partially offset by an increase in the effective yield on the Company’s average investment securities.
+Added: The effective yield on interest-earning assets decreased 12 basis points to 3.54% for the nine-month period ended September 30, 2022 compared to 3.66% for the same period in 2021.
+Added: For the nine-month period ended September 30, 2022, the effective yield on investment securities, including Federal funds sold and interest-earning deposits in other banks, increased 24 basis points, compared to the same period in the prior year, and the effective yield on loans decreased 20 basis points.
The cost of total interest-bearing liabilities increased 11 basis points to 0.22% compared to 0.11% for the same period in 2021.
−Removed: The cost of total deposits, including noninterest bearing accounts decreased to 0.05% compared to 0.06% for the six months ended June 30, 2022 and 2021, respectively.
−Removed: Net interest income before the reversal of provision for credit losses for the six months ended June 30, 2022 was $37,407,000 compared to $35,636,000 for the same period in 2021, an increase of $1,771,000 or 4.97%.
−Removed: Net interest income
−Removed: 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.
+Added: The cost of total deposits, including noninterest bearing accounts decreased to 0.04% compared to 0.05% for the nine months ended September 30, 2022 and 2021, respectively.
+Added: Net interest income before the reversal of provision for credit losses for the nine months ended September 30, 2022 was $57,571,000 compared to $53,846,000 for the same period in 2021, an increase of $3,725,000 or 6.92%.
+Added: 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.
The Bank recovered $562,000 and $438,000, of foregone interest income and prepaid payment penalties in 2022 and 2021, respectively.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $324,000 and $349,000 for the six months ended June 30, 2022 and 2021, respectively.
−Removed: The Bank had non-accrual loans totaling $271,000 at June 30, 2022, compared to $946,000 at December 31, 2021 and $2,035,000 at June 30, 2021.
−Removed: The Company had no other real estate owned or repossessed assets at June 30, 2022, December 31, 2021, or June 30, 2021.
−Removed: At June 30, 2022, we had total net loans of $1,126,091,000, total assets of $2,353,592,000, total deposits of $2,105,997,000, and shareholders’ equity of $170,253,000.
−Removed: Non-interest income was $2,604,000 for the six months ended June 30, 2022 compared to $4,076,000 for the same period in 2021.
−Removed: The $1,472,000 or 36.11% decrease in non-interest income during the six months ended June 30, 2022 was primarily driven by a decrease in loan placement fees of $600,000, a decrease of $603,000 in other income, and an increase of $684,000 in net realized losses on sales and calls of investment securities, offset by an increase in service charge income of $184,000, an increase of $79,000 in interchange fees, an increase of $138,000 in appreciation in cash surrender value of bank-owned life insurance, and an increase in FHLB dividends of $14,000.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $445,000 and $579,000 for the nine months ended September 30, 2022 and 2021, respectively.
+Added: The Bank had non-accrual loans totaling $251,000 at September 30, 2022, compared to $946,000 at December 31, 2021 and $1,597,000 at September 30, 2021.
+Added: The Company had no other real estate owned or repossessed assets at September 30, 2022, December 31, 2021, or September 30, 2021.
+Added: At September 30, 2022, we had total net loans of $1,214,904,000, total assets of $2,425,698,000, total deposits of $2,139,144,000, and shareholders’ equity of $158,814,000.
+Added: Non-interest income was $4,084,000 for the nine months ended September 30, 2022 compared to $6,224,000 for the same period in 2021.
+Added: The $2,140,000 or 34.38% decrease in non-interest income during the nine months ended September 30, 2022 was primarily driven by a decrease in loan placement fees of $912,000, a decrease of $785,000 in other income, and an increase of $815,000 in net realized losses on sales and calls of investment securities, offset by an increase in service charge income of $172,000, an increase of $39,000 in interchange fees, an increase of $140,000 in appreciation in cash surrender value of bank-owned life insurance, and an increase in FHLB dividends of $21,000.
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 12.35% for the six months ended June 30, 2022 compared to 11.50% for the year ended December 31, 2021 and 12.21% for the six months ended June 30, 2021.
−Removed: Our net income for the six months ended June 30, 2022 decreased $2,414,000 or 16.05% to $12,628,000 compared to $15,042,000 for the six months ended June 30, 2021, primarily driven by no reversal of provision for credit losses, an increase in net realized losses on sales and calls of investment securities, 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 service charge income, and an increase in net interest income.
−Removed: Net interest margin (NIM) decreased 33 basis points for the six-month period ended June 30, 2022 compared to the six months ended June 30, 2021.
−Removed: Diluted EPS was $1.07 for the six months ended June 30, 2022 and $1.20 for the same period in 2021.
+Added: Our annualized ROE was 12.98% for the nine months ended September 30, 2022 compared to 11.50% for the year ended December 31, 2021 and 11.60% for the nine months ended September 30, 2021.
+Added: Our net income for the nine months ended September 30, 2022 decreased $2,551,000 or 11.83% to $19,012,000 compared to $21,563,000 for the nine months ended September 30, 2021, primarily driven by a $500,000 provision for credit losses, compared to a $3,800,000 reversal of provision in the prior period, an increase in net realized losses on sales and calls of investment securities, a decrease in loan placement fees, a decrease in non-interest income, and an increase in total non-interest
+Added: expenses, partially offset by a decrease in the provision for income taxes, an increase in interchange fees, an increase in service charge income, and an increase in net interest income.
+Added: Net interest margin (NIM) decreased 18 basis points for the nine-month period ended September 30, 2022 compared to the nine months ended September 30, 2021.
+Added: Diluted EPS was $1.62 for the nine months ended September 30, 2022 and $1.74 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 six months ended June 30, 2022 was 1.03% compared to 1.25% for the year ended December 31, 2021 and 1.39% for the six months ended June 30, 2021.
−Removed: The decrease in ROA for the six months ended June 30, 2022 compared to June 30, 2021 was due to the decrease in net income.
−Removed: Average assets for the six months ended June 30, 2022 was $2,450,903,000 compared to $2,267,615,000 for the year ended December 31, 2021.
+Added: Our annualized ROA for the nine months ended September 30, 2022 was 1.04% compared to 1.25% for the year ended December 31, 2021 and 1.30% for the nine months ended September 30, 2021.
+Added: The decrease in ROA for the nine months ended September 30, 2022 compared to September 30, 2021 was due to the decrease in net income.
+Added: Average assets for the nine months ended September 30, 2022 was $2,438,633,000 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 3.34% for the six months ended June 30, 2022, compared to 3.67% for the same period in 2021.
−Removed: The decrease in net interest margin in the period-over-period comparison resulted primarily from the increase 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.
+Added: The Company’s net interest margin (fully tax equivalent basis) decreased to 3.42% for the nine months ended September 30, 2022, compared to 3.60% 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 yield on the Company’s loan portfolio, the increase on the cost of interest bearing liabilities, offset by the increase in the effective yield on average investment securities (including interest-earning deposits in other banks and Federal funds sold).
Interest-bearing liabilities continue to benefit from low interest rates.
−Removed: In comparing the two periods ending June 30, 2022 and 2021, the effective yield on total earning assets decreased 28 basis points, while the cost of total interest-bearing liabilities increased 9 basis points and the cost of total deposits decreased to 0.05% compared to 0.06%.
−Removed: Net interest income before the reversal of provision for credit losses for the six-month period ended June 30, 2022 was $37,407,000 compared to $35,636,000 for the same period in 2021.
+Added: In comparing the two periods ending September 30, 2022 and 2021, the effective yield on total earning assets decreased 12 basis points, while the cost of total interest-bearing liabilities increased 11 basis points and the cost of total deposits decreased to 0.04% compared to 0.05%.
+Added: Net interest income before the provision for credit losses for the nine-month period ended September 30, 2022 was $57,571,000 compared to $53,846,000 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 six months ended June 30, 2022 decreased $1,472,000 or 36.11%, to $2,604,000 compared to $4,076,000 for the six months ended June 30, 2021.
+Added: Non-interest income for the nine months ended September 30, 2022 decreased $2,140,000 or 34.38%, to $4,084,000 compared to $6,224,000 for the nine months ended September 30, 2021.
The decrease resulted primarily from decreases in loan placement fees, other income, and in net realized losses on sales and calls of investment securities, offset by increases in service charge income, FHLB dividends;
appreciation in cash surrender value of bank-owned life insurance, and interchange fees, compared to the comparable 2021 period.
−Removed: Further detail of non-interest income is provided below.
Asset Quality
1 unchanged sentence
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 $271,000 and $946,000 at June 30, 2022 and December 31, 2021, respectively.
−Removed: Nonperforming assets totaled 0.02% of gross loans as of June 30, 2022 and 0.09% of gross loans as of December 31, 2021.
−Removed: The ratio of nonperforming assets to total assets was 0.01% as of June 30, 2022 and 0.04% as of December 31, 2021.
−Removed: The nonperforming assets at June 30, 2022 and December 31, 2021 consisted of nonaccrual loans of $271,000 and $946,000, respectively.
−Removed: The Company had no other real estate owned (OREO) or repossessed assets at June 30, 2022 or December 31, 2021.
+Added: Total nonperforming assets were $251,000 and $946,000 at September 30, 2022 and December 31, 2021, respectively.
+Added: Nonperforming assets totaled 0.02% of gross loans as of September 30, 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 September 30, 2022 and 0.04% as of December 31, 2021.
+Added: The nonperforming assets at September 30, 2022 and December 31, 2021 consisted of nonaccrual loans of $251,000 and $946,000, respectively.
+Added: The Company had no other real estate owned (OREO) or repossessed assets at September 30, 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 0.87% as of June 30, 2022 and 0.92% as of December 31, 2021.
−Removed: The ratio of net charge-off (recovery) to average loans was (0.05)% for the six months ended June 30, 2022 and (0.09)% as of December 31, 2021.
+Added: The allowance for credit losses as a percentage of the outstanding loan balance was 0.85% as of September 30, 2022 and 0.92% as of December 31, 2021.
+Added: The ratio of net charge-off (recovery) to average loans was (0.03)% for the nine months ended September 30, 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.
−Removed: 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 decreased by $96,547,000 or 3.94% during the six months ended June 30, 2022 to $2,353,592,000 compared to $2,450,139,000 as of December 31, 2021.
−Removed: Total gross loans increased by 9.32% or $96,853,000 to $1,135,964,000 as of June 30, 2022 compared to $1,039,111,000 as of December 31, 2021.
+Added: 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
+Added: investments is fundamental to our asset growth.
+Added: Total assets decreased by $24,441,000 or 1.00% during the nine months ended September 30, 2022 to $2,425,698,000 compared to $2,450,139,000 as of December 31, 2021.
+Added: Total gross loans increased by 17.92% or $186,159,000 to $1,225,270,000 as of September 30, 2022 compared to $1,039,111,000 as of December 31, 2021.
The gross loan increase consisted of a decrease of $18,203,000 in the PPP loans, and an increase of $204,362,000 in non-PPP loan growth.
−Removed: Total deposits decreased 0.79% to $2,105,997,000 as of June 30, 2022 compared to $2,122,797,000 as of December 31, 2021.
−Removed: The Company’s deposit balances for the six months ended June 30, 2022 increased through organic growth.
−Removed: Our loan-to-deposit ratio at June 30, 2022 was 53.94% compared to 48.95% at December 31, 2021.
+Added: Total deposits increased 0.77% to $2,139,144,000 as of September 30, 2022 compared to $2,122,797,000 as of December 31, 2021.
+Added: The Company’s deposit balances for the nine months ended September 30, 2022 increased through organic growth.
+Added: Our loan-to-deposit ratio at September 30, 2022 was 57.28% 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 June 30, 2022, 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 June 30, 2022.
+Added: As of September 30, 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 September 30, 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 55.82% for the six months ended June 30, 2022 compared to 55.96% for the six months ended June 30, 2021.
−Removed: The deterioration in the efficiency ratio was due to the decrease in non-interest income outpacing the increase in non-interest expense.
+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 56.29% for the nine months ended September 30, 2022 compared to 56.46% for the nine months ended September 30, 2021.
+Added: The modest improvement in the efficiency ratio was due to the increase in non-interest income outpacing the increase in non-interest expense.
Further discussion of the change in net interest income and increase 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 2.79% to $41,645,000 for the first six months of 2022 compared to $40,516,000 for the same period in 2021, while operating expenses, net of losses on sale of assets, and amortization of core deposit intangibles, increased 2.55% to $23,248,000 from $22,671,000 for the same period in 2021.
+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, increased 4.22% to $63,789,000 for the first nine months of 2022 compared to $61,209,000 for the same period in 2021, while operating expenses, net of losses on sale of assets, and amortization of core deposit intangibles, increased 3.90% to $35,907,000 from $34,559,000 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 $744,546,000 or 31.63% of total assets at June 30, 2022 and $1,280,091,000 or 52.25% of total assets as of December 31, 2021.
+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 $716,422,000 or 29.53% of total assets at September 30, 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 Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021
−Removed: Net income decreased to $12,628,000 for the six months ended June 30, 2022 compared to $15,042,000 for the six months ended June 30, 2021.
−Removed: Basic and diluted earnings per share for June 30, 2022 were $1.08 and $1.07, respectively.
+Added: Net Income for the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
+Added: Net income decreased to $19,012,000 for the nine months ended September 30, 2022 compared to $21,563,000 for the nine months ended September 30, 2021.
+Added: Basic and diluted earnings per share for September 30, 2022 were $1.62 and $1.62, respectively.
Basic and diluted earnings per share for the same period in 2021 were $1.75 and $1.74, respectively.
−Removed: Annualized ROE was 12.35% for the six months ended June 30, 2022 compared to 12.21% for the six months ended June 30, 2021.
−Removed: Annualized ROA for the six months ended June 30, 2022 and 2021 was 1.03% and 1.39%, respectively.
−Removed: The decrease in net income for the six months ended June 30, 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, an increase in net realized losses on sales and calls of investment securities, and a decrease in loan placement fees, partially offset by an increase in net interest income, a decrease in provision for income taxes, and an increase in service charge income.
−Removed: During the six months ended June 30, 2022, the Company recorded no provision for credit losses, compared to a $3,300,000 reversal of provision during the six months ended June 30, 2021.
−Removed: The lack 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 six months ended June 30, 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.
+Added: Annualized ROE was 12.98% for the nine months ended September 30, 2022 compared to 11.60% for the nine months ended September 30, 2021.
+Added: Annualized ROA for the nine months ended September 30, 2022 and 2021 was 1.04% and 1.30%, respectively.
+Added: The decrease in net income for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily driven by an increase in non-interest expense, a provision for credit losses, an increase in net realized losses on sales and calls of investment securities, and a decrease in loan placement fees, partially offset by an increase in net interest income, a decrease in provision for income taxes, and an increase in service charge income.
+Added: During the nine months ended September 30, 2022, the Company recorded a $500,000 provision for credit losses, compared to a $3,800,000 reversal of provision during the nine months ended September 30, 2021.
+Added: The 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.
+Added: During the nine months ended September 30, 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.
+Added: In addition, the Company adjusted the factors to incorporate the potential and realized implications from rising interest rates, input price increases and ongoing supply chain disruptions.
Interest Income and Expense
6 unchanged sentences
SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES
−Removed: For the Six Months Ended
−Removed: Junes 30, 2022 For the Six Months Ended
−Removed: June 30, 2021
+Added: For the Nine Months Ended
+Added: September 30, 2022 For the Nine Months Ended
+Added: September 30, 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 Six Months Ended June 30, 2022 and 2021
+Added: Changes in Volume/Rate For the Nine Months Ended September 30, 2022 and 2021
(In thousands) Volume Rate Net
16 unchanged sentences
(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
−Removed: Interest and fee income from loans decreased $2,277,000 or 8.33% for the six months ended June 30, 2022 compared to the same period in 2021.
−Removed: Net interest income during the first six months of 2022 was negatively impacted by a decrease in average total loans of $25,683,000 or (2.38)% to $1,051,772,000 compared to $1,077,455,000 for the same period in 2021.
−Removed: The yield on average loans, excluding nonaccrual loans, was 4.80% for the six months ended June 30, 2022 compared to 5.11% for the same period in 2021.
−Removed: Net interest income for the period ending June 30, 2022 was benefited by approximately $440,000 in nonrecurring income from prepayment penalties, compared to $434,000 recorded in the same period in 2021.
−Removed: The impact to interest income from the accretion of the loan marks on acquired loans was $324,000 and $349,000 for the six months ended June 30, 2022 and 2021, respectively.
−Removed: The remaining balance of accretable loan marks on acquired loans as of June 30, 2022 was $1,470,000.
−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 $4,722,000 in the first six months of 2022 to $13,603,000 compared to $8,881,000 for the same period in 2021.
−Removed: The yield on average total investments (total securities and interest-earning deposits) increased 21 basis points to 2.30% for the six month period ended June 30, 2022 compared to 2.09% for the same period in 2021.
−Removed: Average total securities and interest-earning deposits for the first six months of 2022 increased $341,321,000 or 37.15% to $1,260,144,000 compared to $918,823,000 for the same period in 2021.
−Removed: Income from investments represents 36.36% of net interest income for the first six months of 2022 compared to 24.92% for the same period in 2021.
−Removed: 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 June 30, 2022, we held $507,788,000 or 49.96% of the total fair value of the investment portfolio in CMOs with an average yield of 1.92% as compared to $527,659,000 and $322,306,000 with average yields of 2.08% and 1.52% at December 31, 2021 and June 30, 2021, respectively.
−Removed: We invest in CMOs and MBS as part of our overall strategy to increase our net interest margin.
−Removed: CMOs and MBS by their nature react to changes in interest rates.
−Removed: In a normal declining rate environment, prepayments from CMOs and MBS would be expected to increase and the expected life of the investment would be expected to shorten.
−Removed: Conversely, if interest rates increase, prepayments normally would be expected to decline and the average life of the CMOs and MBS would be expected to extend.
−Removed: However, in the current economic environment, prepayments may not behave according to historical norms.
−Removed: Premium amortization and discount accretion of these investments affects our net interest income.
−Removed: 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 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
−Removed: discount accretion represents management’s reasonable estimate of principal pay downs inherent in the total investment portfolio.
−Removed: The net-of-tax unrealized loss on the investment portfolio was $73,919,000 at June 30, 2022 and is reflected in the Company’s equity.
−Removed: At June 30, 2022, the average life of the investment portfolio was 5.92 years and the fair value of the portfolio reflected a net pre-tax unrealized loss of $80,011,000.
+Added: Interest and fee income from loans decreased $777,000 or 1.92% for the nine months ended September 30, 2022 compared to the same period in 2021.
+Added: Net interest income during the first nine months of 2022 was impacted by an increase in average total loans of $23,972,000 or 2.23% to $1,098,274,000 compared to $1,074,302,000 for the same period in 2021.
+Added: The yield on average loans, excluding nonaccrual loans, was 4.84% for the nine months ended September 30, 2022 compared to 5.04% for the same period in 2021.
+Added: Net interest income for the period ending September 30, 2022 was benefited by approximately $562,000 in nonrecurring income from prepayment penalties, compared to $438,000 recorded in the same period in 2021.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $445,000 and $579,000 for the nine months ended September 30, 2022 and 2021, respectively.
+Added: The remaining balance of accretable loan marks on acquired loans as of September 30, 2022 was $1,349,000.
+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 $5,717,000 in the first nine months of 2022 to $19,887,000 compared to $14,170,000 for the same period in 2021.
+Added: The yield on average total investments (total securities and interest-earning deposits) increased 24 basis points to 2.35% for the nine month period ended September 30, 2022 compared to 2.11% for the same period in 2021.
+Added: Average total securities and interest-earning deposits for the first nine months of 2022 increased $240,734,000 or 24.92% to $1,206,839,000 compared to $966,105,000 for the same period in 2021.
+Added: Income from investments represents 34.54% of net interest income for the first nine months of 2022 compared to 26.32% for the same period in 2021.
+Added: The net-of-tax unrealized loss on the investment portfolio was $90,622,000 at September 30, 2022 and is reflected in the Company’s equity.
+Added: At September 30, 2022, the average life of the investment portfolio was 5.95 years and the fair value of the portfolio reflected a net pre-tax unrealized loss of $104,377,000.
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 six months ended June 30, 2022 and 2021, no OTTI was recorded.
+Added: For the nine months ended September 30, 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 June 30, 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 $110,000 or 11.06%.
−Removed: Conversely, with an immediate rate decrease of 200 basis points, the estimated decrease in the market value of the investment portfolio would be $114,000 or 11.46%.
+Added: At September 30, 2022, we estimate an immediate rate increase of 200 basis points would result in an estimated decrease in the market value of the available-for-sale investment portfolio by approximately $63,000 or 9.29%.
+Added: Conversely, with an immediate rate decrease of 200 basis points, the estimated increase in the market value of the investment portfolio would be $67,000 or 9.88%.
Our modeling environment assumes management would take no action during an immediate shock of 200 basis points.
−Removed: However, the Company uses those increments to measure its interest rate risk in accordance with regulatory requirements and risk tolerance policy limits established by the Board of Directors to measure the possible future risk in the investment portfolio.
+Added: However, the Company uses those increments to measure its interest rate risk
+Added: in accordance with regulatory requirements and risk tolerance policy limits established by the Board of Directors to measure the possible future risk in the investment portfolio.
Management’s review of all investments before purchase includes an analysis of how the security will perform under several interest rate scenarios to monitor whether investments are consistent with our investment policy.
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 six months ended June 30, 2022 increased $2,445,000 or 6.75% to $38,647,000 compared to $36,202,000 for the six months ended June 30, 2021.
−Removed: The yield on interest earning assets decreased 28 basis points to 3.45% on a fully tax equivalent basis for the six months ended June 30, 2022 from 3.73% for the period ended June 30, 2021.
+Added: Total interest income on a non-tax equivalent basis for the nine months ended September 30, 2022 increased $4,940,000 or 9.03% to $59,639,000 compared to $54,699,000 for the nine months ended September 30, 2021.
+Added: The yield on interest earning assets decreased 12 basis points to 3.54% on a fully tax equivalent basis for the nine months ended September 30, 2022 from 3.66% for the period ended September 30, 2021.
The decrease was the result of yield changes, decrease in interest rates, and asset mix changes.
−Removed: Average interest earning assets increased to $2,311,916,000 for the six months ended June 30, 2022 compared to $1,996,278,000 for the six months ended June 30, 2021.
+Added: Average interest earning assets increased to $2,305,113,000 for the nine months ended September 30, 2022 compared to $2,040,407,000 for the nine months ended September 30, 2021.
The $264,706,000 increase in average earning assets was attributed to the $240,734,000 increase in average investments, offset by a $23,972,000 or 2.23% decrease in average loans.
−Removed: Interest expense on deposits for the six months ended June 30, 2022 and 2021 was $483,000 and $520,000, respectively.
−Removed: The average interest rate on interest bearing deposits decreased to 0.08% for the six months ended June 30, 2022 compared to 0.10% for the same period ended June 30, 2021.
−Removed: Average interest-bearing deposits increased 19.05% or $193,551,000 to $1,209,430,000 for the six months ended June 30, 2022 compared to $1,015,879,000 for the same period ended June 30, 2021.
−Removed: Average other borrowed funds were $59,062,000 with an effective rate of 2.56% for the six months ended June 30, 2022 compared to $5,155,000 with an effective rate of 1.78% for the six months ended June 30, 2021.
−Removed: Total interest expense on other borrowed funds was $757,000 for the six months ended June 30, 2022 and $46,000 for the six months ended June 30, 2021.
−Removed: 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: Interest expense on deposits for the nine months ended September 30, 2022 and 2021 was $714,000 and $783,000, respectively.
+Added: The average interest rate on interest bearing deposits decreased to 0.08% for the nine months ended September 30, 2022 compared to 0.10% for the same period ended September 30, 2021.
+Added: Average interest-bearing deposits increased 12.27% or $128,385,000 to $1,174,553,000 for the nine months ended September 30, 2022 compared to $1,046,168,000 for the same period ended September 30, 2021.
+Added: Average other borrowed funds were $59,646,000 with an effective rate of 3.03% for the nine months ended September 30, 2022 compared to $5,155,000 with an effective rate of 1.81% for the nine months ended September 30, 2021.
+Added: Total interest expense on other borrowed funds was $1,354,000 for the nine months ended September 30, 2022 and $70,000 for the nine months ended September 30, 2021.
+Added: Included in other borrowings are the junior subordinated deferrable interest debentures acquired from Service 1 st , subordinated debt, senior debt, advances on lines of credit, advances from the Federal Home Loan Bank (“FHLB”) , and overnight borrowings.
The junior subordinated debentures carry a floating rate based on the three month LIBOR plus a margin of 1.60%.
−Removed: The rates were 2.64% and 1.73% at June 30, 2022 and 2021, respectively .
+Added: The rates were 2.64% and 1.73% at September 30, 2022 and December 31, 2021, respectively .
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.
+Added: The senior debt carries a floating rated payable at the Prime Rate less 50 basis points.
See the section on “Financial Condition” for more detail.
−Removed: The cost of interest-bearing liabilities increased 9 basis points to 0.20% for the six-month period ended June 30, 2022 compared to 0.11% for the same period in 2021.
−Removed: The cost of total deposits decreased to 0.05% compared to 0.06% for the six-month periods ended June 30, 2022 and 2021, respectively.
+Added: The cost of interest-bearing liabilities increased 11 basis points to 0.22% for the nine-month period ended September 30, 2022 compared to 0.11% for the same period in 2021.
+Added: The cost of total deposits decreased to 0.04% compared to 0.05% for the nine-month periods ended September 30, 2022 and 2021, respectively.
Average non-interest bearing demand deposits increased 10.41% to $977,164,000 in 2022 compared to $885,008,000 for 2021.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits decreased to 43.85% in the six-month period ended June 30, 2022 compared to 46.11% for the same period in 2021.
+Added: The ratio of average non-interest bearing demand deposits to average total deposits decreased to 45.41% in the nine-month period ended September 30, 2022 compared to 45.83% 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 six months ended June 30, 2022 increased by $1,771,000 or 4.97% to $37,407,000 compared to $35,636,000 for the same period in 2021.
+Added: Net interest income before the provision for credit losses for the nine months ended September 30, 2022 increased by $3,725,000 or 6.92% to $57,571,000 compared to $53,846,000 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 $324,000 and $349,000 for the six months ended June 30, 2022 and 2021, respectively.
−Removed: In addition, net interest income before the provision for credit losses for the six months ended June 30, 2022 was benefited by approximately $440,000 in nonrecurring income from prepayment penalties, as compared to $434,000 in nonrecurring income for the six months ended June 30, 2021.
−Removed: Excluding these reversals and benefits, net interest income for the six months ended June 30, 2022 increased by $1,790,000 compared to the six months ended June 30, 2021.
−Removed: Average interest earning assets were $2,311,916,000 for the six months ended June 30,
−Removed: 2022 with a net interest margin (fully tax equivalent basis) of 3.34% compared to $1,996,278,000 with a net interest margin (fully tax equivalent basis) of 3.67% for the six months ended June 30, 2021.
−Removed: The $315,638,000 increase in average earning assets was attributed to the $341,321,000 increase in average total investments, offset by the $25,683,000 or (2.38)% decrease in average loans.
−Removed: For the six months ended June 30, 2022, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 21 basis points.
+Added: The impact to interest income from the accretion of the loan marks on acquired loans was $445,000 and $579,000 for the nine months ended September 30, 2022 and 2021, respectively.
+Added: In addition, net interest income before the provision for credit losses for the nine months ended September 30, 2022 was benefited by approximately $562,000 in nonrecurring income from prepayment penalties, as compared to $438,000 in nonrecurring income for the nine months ended September 30, 2021.
+Added: Excluding these reversals and benefits, net interest income for the nine months ended September 30, 2022 increased by $3,735,000 compared to the nine months ended September 30, 2021.
+Added: Average interest earning assets were $2,305,113,000 for the nine months ended September 30, 2022 with a net interest margin (fully tax equivalent basis) of 3.42% compared to $2,040,407,000 with a net interest margin (fully tax equivalent basis) of 3.60% for the nine months ended September 30, 2021.
+Added: The $264,706,000 increase in average earning assets was attributed to the $240,734,000 increase in average total investments, offset by the $23,972,000 or 2.23% increase in average loans.
+Added: For the nine months ended September 30, 2022, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 24 basis points.
The effective yield on loans decreased 20 basis points.
−Removed: Average interest bearing liabilities increased 24.24% to $1,268,492,000 for the six months ended June 30, 2022, compared to $1,021,034,000 for the same period in 2021.
+Added: Average interest bearing liabilities increased 17.39% to $1,234,199,000 for the nine months ended September 30, 2022, compared to $1,051,323,000 for the same period in 2021.
Provision for Credit Losses
We provide for probable incurred credit losses through a charge to operating income based upon the composition of the loan portfolio, delinquency levels, historical losses, and nonperforming assets, economic and environmental conditions and other factors which, in management’s judgment, deserve recognition in estimating credit losses.
−Removed: Credit risk is inherent in the business of making loans.
+Added: Credit risk is inherent in the business
+Added: of making loans.
The Company establishes an allowance for credit losses on loans through charges to earnings, which are presented in the statements of income as the provision for credit losses on loans.
19 unchanged sentences
The allocation of the allowance for credit losses is set forth below (in thousands):
−Removed: Loan Type June 30, 2022 December 31, 2021
+Added: Loan Type September 30, 2022 December 31, 2021
Commercial and industrial $ 1,912 $ 1,691
17 unchanged sentences
Managing high-risk credits includes developing a business strategy with the customer to mitigate our potential losses.
−Removed: Management continues to monitor these credits with a view to identifying as early as possible when, and to what extent, additional provisions may be necessary.
+Added: Management continues to monitor these credits with a view to identifying as early as possible when, and to what extent,
+Added: additional provisions may be necessary.
Management believes that the level of allowance for loan losses allocated to commercial and real estate loans has been adjusted accordingly.
−Removed: During the six months ended June 30, 2022, the Company recorded no provision for credit losses, compared to a $3,300,000 reversal of provisi on durin g the six months ended June 30, 2021.
−Removed: The lack 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 six months ended June 30, 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.
−Removed: The Company had net recoveries totaling $273,000 for the six months ended June 30, 2022, and $824,000 for the same period in 2021.
−Removed: Nonperforming loans, consisting entirely of nonaccrual loans, were $271,000 and $946,000 at June 30, 2022 and December 31, 2021, respectively, and $2,035,000 at June 30, 2021.
−Removed: Nonperforming loans as a percentage of total loans were 0.02% at June 30, 2022 compared to 0.09% at December 31, 2021 and 0.19% at June 30, 2021.
−Removed: The Company had no other real estate owned (OREO) at June 30, 2022 or December 31, 2021.
−Removed: The Company held no repossessed assets at June 30, 2022 or December 31, 2021.
−Removed: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans was (0.05)% for the six months ended June 30, 2022, and (0.15)% for the same period in 2021.
+Added: During the nine months ended September 30, 2022, the Company recorded a $500,000 provision for credit losses, compared to a $3,800,000 reversal of provisi on durin g the nine months ended September 30, 2021.
+Added: The 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.
+Added: During the nine months ended September 30, 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 $266,000 for the nine months ended September 30, 2022, and $946,000 for the same period in 2021.
+Added: Nonperforming loans, consisting entirely of nonaccrual loans, were $251,000 and $946,000 at September 30, 2022 and December 31, 2021, respectively, and $1,083,498,000 at September 30, 2021.
+Added: Nonperforming loans as a percentage of total loans were 0.02% at September 30, 2022 compared to 0.09% at December 31, 2021 and 0.15% at September 30, 2021.
+Added: The Company had no other real estate owned (OREO) at September 30, 2022 or December 31, 2021.
+Added: The Company held no repossessed assets at September 30, 2022 or December 31, 2021.
+Added: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans was (0.03)% for the nine months ended September 30, 2022, and (0.12)% 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.
6 unchanged sentences
Similarly, weaker prices could reduce the cash flows generated by farms and the value of agricultural land in our local markets and thereby increase the risk of default by our borrowers or reduce the foreclosure value of agricultural land and equipment that serve as collateral for our loans.
−Removed: Further declines in commodity prices or collateral values may increase the
−Removed: incidence of default by our borrowers.
+Added: Further declines in commodity prices or collateral values may increase the incidence of default by our borrowers.
Moreover, weaker prices might threaten farming operations in the Central Valley, reducing market demand for agricultural lending.
1 unchanged sentence
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 June 30, 2022, there were $10.8 million in classified loans of which $2.5 million related to commercial and industrial loans, $2.2 million to agricultural production, $3.5 million to owner occupied real estate, and $2.5 million in commercial real estate.
+Added: As of September 30, 2022, there were $22.7 million in classified loans of which $1.7 million related to commercial and industrial loans, $3.0 million to agricultural production, $2.2 million to owner occupied real estate, $13.2 to real estate construction and other land loans, and $2.4 million in commercial real estate.
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.
−Removed: As of June 30, 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.
+Added: As of September 30, 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 $37,407,000 for the six months period ended June 30, 2022 and $38,936,000 for the same period in 2021.
+Added: Net interest income, after the provision for credit losses, was $57,071,000 for the nine months period ended September 30, 2022 and $57,646,000 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 $2,604,000 for the six months ended June 30, 2022 compared to $4,076,000 for the same period in 2021.
−Removed: The $1,472,000 or 36.11% decrease in non-interest income during the six months ended June 30, 2022 was primarily driven by a decrease in loan placement fees of $600,000, a decrease of $603,000 in other income, and an increase of $684,000 in net realized losses on sales and calls of investment securities, offset by an increase in service charge income of $184,000, an increase of $79,000 in interchange fees, an increase of $138,000 in appreciation in cash surrender value of bank-owned life insurance, and an increase in FHLB dividends of $14,000.
−Removed: During the six months ended June 30, 2022, we realized a net loss on sales and calls of investment securities of $763,000 compared to a $79,000 net gain for the same period in 2021.
+Added: Non-interest income was $4,084,000 for the nine months ended September 30, 2022 compared to $6,224,000 for the same period in 2021.
+Added: The $2,140,000 or 34.38% decrease in non-interest income during the nine months ended September 30, 2022 was primarily driven by a decrease in loan placement fees of $912,000, a decrease of $785,000 in other income, and an increase of $815,000 in net realized losses on sales and calls of investment securities, offset by an increase in service charge income of $172,000, an increase of $39,000 in interchange fees, an increase of $140,000 in appreciation in cash surrender value of bank-owned life insurance, and an increase in FHLB dividends of $21,000.
+Added: During the nine months ended September 30, 2022, we realized a net loss on sales and calls of investment securities of $777,000 compared to a $38,000 net gain for the same period in 2021.
The net losses 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 and provide needed liquidity for loan growth.
−Removed: Customer service charges increased $184,000 or 20.47% to $1,083,000 for the first six months of 2022 compared to $899,000 for the same period in 2021.
−Removed: Interchange fees increased $79,000 to $920,000 the first six months of 2022 compared to $841,000 for the same period in 2021.
−Removed: Loan placement fees decreased $600,000 or 51.41% to $567,000 for the first six months of 2022 compared to $1,167,000 for the same period in 2021.
−Removed: Other income decreased $603,000 the first six months of 2022 compared to the same period in 2021.
+Added: Customer service charges increased $172,000 or 12.41% to $1,558,000 for the first nine months of 2022 compared to $1,386,000 for the same period in 2021.
+Added: Interchange fees increased $39,000 to $1,352,000 the first nine months of 2022 compared to $1,313,000 for the same period in 2021.
+Added: Loan placement fees decreased $912,000 or 55.81% to $722,000 for the first nine months of 2022 compared to $1,634,000 for the same period in 2021.
+Added: Other income decreased $785,000 the first nine 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 $6,169,000 in FHLB stock.
−Removed: We received dividends totaling $167,000 in the six months ended June 30, 2022, compared to $153,000 for the same period in 2021.
+Added: We received dividends totaling $258,000 in the nine months ended September 30, 2022, compared to $237,000 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 increased $510,000 or 2.22% to $23,528,000 for the six months ended June 30, 2022, compared to $23,018,000 for the six months ended June 30, 2021.
−Removed: The net increase for the first six months of 2022 was primarily the result of increases in information technology of $416,000, regulatory assessments of $83,000, occupancy and equipment expenses of $192,000, professional services of $7,000, advertising of $21,000, general insurance of $15,000, salaries and employee benefits of $84,000, partially offset by decreases in internet banking of $139,000, data processing expenses of $153,000, personnel expenses of $45,000, donations of $9,000, ATM/Debit card expenses of $4,000, operating losses of $29,000, stationary and supplies expenses of $7,000, armored courier expenses of $20,000, directors’ expenses of $61,000, and amortization of software of $4,000.
−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 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 55.82% for the six months ended
−Removed: June 30, 2022 compared to 55.96% for the six months ended June 30, 2021.
+Added: Non-interest expenses increased $1,246,000 or 3.55% to $36,326,000 for the nine months ended September 30, 2022, compared to $35,080,000 for the nine months ended September 30, 2021.
+Added: The net increase for the first nine months of 2022 was primarily the result of increases in salaries and employee benefits of $493,000, information technology of $404,000, occupancy and equipment expenses of $331,000, professional services of $113,000, regulatory assessments of $88,000, operating losses of $62,000, advertising of $30,000, general insurance of $26,000, donations of $29,000, partially offset by decreases in internet banking of $164,000, data processing expenses of $192,000, directors’ expenses of $122,000, personnel expenses of $17,000, ATM/Debit card expenses of $27,000, armored courier expenses of $9,000, and amortization of software of $13,000.
+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 56.29% for the nine months ended September 30, 2022 compared to 56.46% for the nine months ended September 30, 2021.
The modest improvement in the efficiency ratio was due to the increase in non-interest income outpacing the increase in non-interest expense.
−Removed: Salaries and employee benefits increased $84,000 or 0.60% to $14,001,000 for the first six months of 2022 compared to $13,917,000 for the six months ended June 30, 2021.
−Removed: Full time equivalent employees were 244 for the six months ended June 30, 2022, compared to 261 for the six months ended June 30, 2021.
−Removed: Occupancy and equipment expense increased $192,000 or 8.30% to $2,506,000 for the six months ended June 30, 2022 compared to $2,314,000 for the six months ended June 30, 2021.
+Added: Salaries and employee benefits increased $493,000 or 2.35% to $21,501,000 for the first nine months of 2022 compared to $21,008,000 for the nine months ended September 30, 2021.
+Added: The increase in salaries and employee benefits was primarily attributed to non-recurring expenditures relating to severance for the transition of our Chief Financial Officer, and overtime expenditures relating to the Company’s core software conversion.
+Added: Full time equivalent employees were 249 for the nine months ended September 30, 2022, compared to 258 for the nine months ended September 30, 2021.
+Added: Occupancy and equipment expense increased $331,000 or 9.36% to $3,869,000 for the nine months ended September 30, 2022 compared to $3,538,000 for the nine months ended September 30, 2021.
The Company made no changes in its depreciation expense methodology.
−Removed: The Company operated 20 full-service offices at June 30, 2022 and at June 30, 2021.
−Removed: Data processing expense decreased to $1,089,000 for the six months ended June 30, 2022 compared to $1,242,000 for the same period in 2021.
−Removed: Regulatory assessments increased to $416,000 for the six months ended June 30, 2022 compared to $333,000 for the same period in 2021.
+Added: The Company operated 20 full-service offices at September 30, 2022 and at September 30, 2021.
+Added: Data processing expense decreased to $1,649,000 for the nine months ended September 30, 2022 compared to $1,841,000 for the same period in 2021.
+Added: Regulatory assessments increased to $640,000 for the nine months ended September 30, 2022 compared to $552,000 for the same period in 2021.
The assessment base for calculating regulatory assessments is average assets less average tangible equity.
−Removed: Professional services increased by $7,000 in the first six months of 2022 compared to the same period in 2021.
+Added: Professional services increased by $113,000 in the first nine 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 Six Months
−Removed: Ended June 30,
+Added: For the Nine Months
+Added: Ended September 30,
(Dollars in thousands) Other Expense % Average
15 unchanged sentences
Operating losses 139 0.01 % 77 — %
−Removed: Appraisal Fees 28 — % 47 — %
Other 784 0.04 % 689 0.04 %
1 unchanged sentence
Provision for Income Taxes
−Removed: Our effective income tax rate was 23.39% for the six months ended June 30, 2022 compared to 24.77% for the six months ended June 30, 2021.
−Removed: The Company reported an income tax provision of $3,855,000 for the six months ended June 30, 2022, compared to $4,952,000 for the six months ended June 30, 2021.
+Added: Our effective income tax rate was 23.43% for the nine months ended September 30, 2022 compared to 25.10% for the nine months ended September 30, 2021.
+Added: The Company reported an income tax provision of $5,817,000 for the nine months ended September 30, 2022, compared to $7,227,000 for the nine months ended September 30, 2021.
The effective tax rate was affected by the increase in tax-exempt interest.
1 unchanged sentence
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.
−Removed: As of June 30, 2022 and December 31, 2021, there was no reserve for uncertain tax positions.
−Removed: Net Income for the Second Quarter of 2022 Compared to the Second Quarter of 2021
−Removed: Net income decreased to $6,542,000 for the quarter ended June 30, 2022 compared to $7,563,000 for the quarter ended June 30, 2021.
−Removed: Basic earnings per share was $0.56 for the quarter ended June 30, 2022 compared to $0.61 for the same period in 2021.
−Removed: Diluted earnings per share was $0.56 for the quarter ended June 30, 2022 compared to $0.60 for the same period in 2021.
−Removed: Annualized ROE was 14.73% for the quarter ended June 30, 2022 compared to 12.25% for the quarter ended June 30, 2021.
−Removed: Annualized ROA for the three months ended June 30, 2022 was 1.07% compared to 1.36% for the quarter ended June 30, 2021.
−Removed: The decrease in net income during the second quarter of 2022 compared to the same period in 2021 is primarily due to a decrease in total non-interest income of $1,307,000, a lack of a reversal of provision for credit losses of $1,500,000, and an increase in non-interest expenses of $453,000, partially offset by an increase in net interest income before the provision for credit losses of $1,729,000, and a decrease in the provision for income taxes of $510,000.
−Removed: During the quarter ended June 30, 2022, the Company recorded no provision for credit losses, compared to a $1,500,000 reversal of provision during the quarter ended June 30, 2021.
−Removed: Non-interest income decreased $1,307,000 or 62.93% to $770,000 for the quarter ended June 30, 2022 compared to $2,077,000 in the same period in 2021, primarily due to an increase in net realized losses on sales and calls of investment securities of $890,000.
−Removed: In addition, during the second quarter 2022 there was an increase of $77,000 in service charge income , a decrease in other income of $327,000, and an increase of $7,000 in interchange fees, offset by a decrease in loan placement fees of $242,000, compared to the same period in 2021.
+Added: As of September 30, 2022 and December 31, 2021, there was no reserve for uncertain tax positions.
+Added: Net Income for the Third Quarter of 2022 Compared to the Third Quarter of 2021
+Added: Net income decreased to $6,384,000 for the quarter ended September 30, 2022 compared to $6,521,000 for the quarter ended September 30, 2021.
+Added: Basic earnings per share was $0.55 for the quarter ended September 30, 2022 compared to $0.54 for the same period in 2021.
+Added: Diluted earnings per share was $0.55 for the quarter ended September 30, 2022 compared to $0.54 for the same period in 2021.
+Added: Annualized ROE was 14.42% for the quarter ended September 30, 2022 compared to 10.41% for the quarter ended September 30, 2021.
+Added: Annualized ROA for the three months ended September 30, 2022 was 1.06% compared to 1.13% for the quarter ended September 30, 2021.
+Added: The decrease in net income during the third quarter of 2022 compared to the same period in 2021 is primarily due to a decrease in total non-interest income of $668,000, an increase in provision for credit losses of $1,000,000, and an increase in non-interest expenses of $736,000, partially offset by an increase in net interest income before the provision for credit losses of $1,954,000, and a decrease in the provision for income taxes of $313,000.
+Added: During the quarter ended September 30, 2022, the Company recorded a $500,000 provision for credit losses, compared to a $500,000 reversal of provision during the quarter ended September 30, 2021.
+Added: Non-interest income decreased $668,000 or 31.10% to $1,480,000 for the quarter ended September 30, 2022 compared to $2,148,000 in the same period in 2021, primarily due to an increase in net realized losses on sales and calls of investment securities of $131,000.
+Added: In addition, during the third quarter 2022 there was a decrease in loan placement fees of $312,000, a decrease in other income of $182,000, a decrease of $40,000 in interchange fees, and a decrease of $12,000 in service charge income compared to the same period in 2021.
Interest Income and Expense
4 unchanged sentences
For the Three Months Ended
−Removed: June 30, 2022 For the Three Months Ended
−Removed: June 30, 2021
+Added: September 30, 2022 For the Three Months Ended
+Added: September 30, 2021
(Dollars in thousands) Average
35 unchanged sentences
(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $486 and $377 in 2022 and 2021, respectively.
−Removed: (2) Loan interest income includes loan fees of $490 in 2022 and $1,821 in 2021.
+Added: (2) Loan interest income includes loan costs of $80 in 2022 and loan fees $1,076 in 2021.
(3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.
2 unchanged sentences
The change in interest due to both rate and volume has been allocated to the change in rate.
−Removed: Changes in Volume/Rate For the Three Months Ended June 30, 2022 and 2021
+Added: Changes in Volume/Rate For the Three Months Ended September 30, 2022 and 2021
(In thousands) Volume Rate Net
17 unchanged sentences
(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
−Removed: Interest and fee income from loans decreased $673,000 or 4.96% to $12,883,000 for the second quarter of 2022 compared to $13,556,000 for the same period in 2021.
−Removed: Total average loans, including nonaccrual loans, for the second quarter of 2022 increased $5,742,000 or 0.53% to $1,086,167,000 compared to $1,080,425,000 for the same period in 2021.
−Removed: Yield on the loan portfolio, excluding nonaccrual loans, was 4.76% and 5.04% for the second quarters ending June 30, 2022 and 2021, respectively.
−Removed: Net interest income during the second quarters of 2022 and 2021 benefited by approximately $154,000 and $4,000, 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 $102,000 and $176,000 during the quarters ended June 30, 2022 and 2021, respectively.
−Removed: Income from investments represents 38.27% of net interest income for the second quarter of 2022 compared to 26.54% for the same quarter in 2021.
−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 $2,783,000 in the second quarter of 2022 to $7,582,000 compared to $4,799,000, for the same period in 2021.
−Removed: The yield on average total investments increased 47 basis points to 2.58% on a fully tax equivalent basis for the second quarter of 2022 compared to 2.11% on a fully tax equivalent basis for the second quarter of 2021.
−Removed: Average total investments and interest bearing deposits in other banks for the second quarter of 2022 increased $272,165,000 or 27.76% to $1,252,494,000 compared to $980,329,000 for the second quarter of 2021.
−Removed: Total interest income for the second quarter of 2022 increased $2,110,000 or 11.50% to $20,465,000 compared to $18,355,000 for the second quarter ended June 30, 2021.
−Removed: The yield on interest earning assets decreased to 3.60% on a fully tax equivalent basis for the second quarter ended June 30, 2022 from 3.65% on a fully tax equivalent basis for the second quarter ended June 30, 2021.
−Removed: Average interest earning assets increased to $2,338,381,000 for the second quarter ended June 30, 2022 compared to $2,058,103,000 for the second quarter ended June 30, 2021.
−Removed: The $280,278,000 increase in average earning assets was attributed to the $8,113,000 increase in average loans, offset by the $272,165,000 increase in total investments.
−Removed: Interest expense on deposits for the quarter ended June 30, 2022 decreased $21,000 or 8.33% to $231,000 compared to $252,000 for the quarter ended June 30, 2021.
−Removed: The cost of deposits, calculated by dividing annualized interest expense on interest bearing deposits by total deposits, was 0.04% and 0.05% for the quarters ended June 30, 2022 and 2021, respectively.
−Removed: Average interest bearing deposits increased 14.74% or $155,449,000 in the second quarter of 2022 compared to the same period in 2021.
−Removed: Average interest-bearing deposits were $1,210,016,000 for the quarter ended June 30, 2022, with an effective rate paid of 0.08%, compared to $1,054,567,000 for the same period in 2021, with an effective rate paid of 0.10%.
−Removed: Average other borrowed funds totaled $78,435,000 for the quarter ended June 30, 2022, with an effective rate of 2.16% for the quarter ended June 30, 2022 compared to $5,155,000 and 1.71% for the quarter ended June 30, 2021.
−Removed: As a result, interest expense on borrowed funds increased $402,000 to $424,000 for the quarter ended June 30, 2022, from $22,000 for the
−Removed: quarter ended June 30, 2021.
−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 0.20% and 0.10% for the quarters ended June 30, 2022 and 2021.
−Removed: The cost of total deposits was 0.04% and 0.05% for the quarters ended June 30, 2022 and 2021.
−Removed: Average non-interest bearing demand deposits increased 6.08% to $947,724,000 for the quarter ended June 30, 2022 compared to $893,441,000 for the quarter ended June 30, 2021.
−Removed: The ratio of average non-interest bearing demand deposits to average total deposits was 43.92% in the second quarter of 2022 compared to 45.86% for the same period in 2021.
+Added: Interest and fee income from loans increased $1,500,000 or 11.36% to $14,708,000 for the third quarter of 2022 compared to $13,208,000 for the same period in 2021.
+Added: Total average loans, including nonaccrual loans, for the third quarter of 2022 increased $120,067,000 or 11.22% to $1,190,022,000 compared to $1,069,955,000 for the same period in 2021.
+Added: Yield on the loan portfolio, excluding nonaccrual loans, was 4.90% and 4.91% for the third quarters ending September 30, 2022 and 2021, respectively.
+Added: Net interest income during the third quarters of 2022 and 2021 benefited by approximately $92,000 and $4,000, respectively, in nonrecurring income from prepayment penalties and payoff of loans previously on nonaccrual status.
+Added: The accretion of the loan marks on acquired loans increased interest income by $121,000 and $231,000 during the quarters ended September 30, 2022 and 2021, respectively.
+Added: Income from investments represents 31.16% of net interest income for the third quarter of 2022 compared to 29.04% for the same quarter in 2021.
+Added: 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 $995,000 in the third quarter of 2022 to $6,284,000 compared to $5,289,000, for the same period in 2021.
+Added: The yield on average total investments increased 32 basis points to 2.46% on a fully tax equivalent basis for the third quarter of 2022 compared to 2.14% on a fully tax equivalent basis for the third quarter of 2021.
+Added: Average total investments and interest bearing deposits in other banks for the third quarter of 2022 increased $42,838,000 or 4.04% to $1,101,966,000 compared to $1,059,128,000 for the third quarter of 2021.
+Added: Total interest income for the third quarter of 2022 increased $2,495,000 or 13.49% to $20,992,000 compared to $18,497,000 for the third quarter ended September 30, 2021.
+Added: The yield on interest earning assets increased to 3.72% on a fully tax equivalent basis for the third quarter ended September 30, 2022 from 3.52% on a fully tax equivalent basis for the third quarter ended September 30, 2021.
+Added: Average interest earning assets increased to $2,291,728,000 for the third quarter ended September 30, 2022 compared to $2,127,239,000 for the third quarter ended September 30, 2021.
+Added: The $164,489,000 increase in average earning assets was attributed to the $121,651,000 increase in average loans, and by the $42,838,000 increase in total investments.
+Added: Interest expense on deposits for the quarter ended September 30, 2022 decreased $32,000 or 12.17% to $231,000 compared to $263,000 for the quarter ended September 30, 2021.
+Added: The cost of deposits, calculated by dividing annualized interest expense on interest bearing deposits by total deposits, was 0.04% and 0.05% for the quarters ended September 30, 2022 and 2021, respectively.
+Added: Average interest bearing deposits increased 0.02% or $177,000 in the third quarter of 2022 compared to the same period in 2021.
+Added: Average interest-bearing deposits were $1,105,934,000 for the quarter ended September 30, 2022,
+Added: with an effective rate paid of 0.08%, compared to $1,105,757,000 for the same period in 2021, with an effective rate paid of 0.09%.
+Added: Average other borrowed funds totaled $60,794,000 for the quarter ended September 30, 2022, with an effective rate of 3.93% for the quarter ended September 30, 2022 compared to $5,155,000 and 1.71% for the quarter ended September 30, 2021.
+Added: As a result, interest expense on borrowed funds increased $575,000 to $597,000 for the quarter ended September 30, 2022, from $22,000 for the quarter ended September 30, 2021.
+Added: Other borrowings are comprised of advances from the Federal Home Loan Bank, junior subordinated deferrable interest debentures, senior debt, and advances on available unsecured lines of credit with correspondent banks.
+Added: The cost of our interest bearing liabilities was 0.28% and 0.10% for the quarters ended September 30, 2022 and 2021.
+Added: The cost of total deposits was 0.04% and 0.05% for the quarters ended September 30, 2022 and 2021.
+Added: Average non-interest bearing demand deposits increased 13.75% to $1,041,698,000 for the quarter ended September 30, 2022 compared to $915,742,000 for the quarter ended September 30, 2021.
+Added: The ratio of average non-interest bearing demand deposits to average total deposits was 48.50% in the third quarter of 2022 compared to 45.30% for the same period in 2021.
Net Interest Income before Provision for Credit Losses
−Removed: Net interest income before provision for credit losses for the quarter ended June 30, 2022, increased $1,729,000 or 9.56% to $19,810,000 compared to $18,081,000 for the quarter ended June 30, 2021.
−Removed: The increase was due to asset mix changes, and an increase in average interest-bearing liabilities, partially offset by the increase in average interest earning assets.
−Removed: Average interest earning assets were $2,338,381,000 for the quarter ended June 30, 2022, with a net interest margin (fully tax equivalent basis) of 3.48% compared to $2,058,103,000 with a net interest margin (fully tax equivalent basis) of 3.60% for the quarter ended June 30, 2021.
+Added: Net interest income before provision for credit losses for the quarter ended September 30, 2022, increased $1,954,000 or 10.73% to $20,164,000 compared to $18,210,000 for the quarter ended September 30, 2021.
+Added: 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.
+Added: Average interest earning assets were $2,291,728,000 for the quarter ended September 30, 2022, with a net interest margin (fully tax equivalent basis) of 3.57% compared to $2,127,239,000 with a net interest margin (fully tax equivalent basis) of 3.47% for the quarter ended September 30, 2021.
The $164,489,000 increase in average earning assets can be attributed to the $120,067,000 increase in loans, and the $42,838,000 increase in total investments.
−Removed: Average interest bearing liabilities increased 21.58% to $1,288,451,000 for the quarter ended June 30, 2022 compared to $1,059,722,000 for the same period in 2021.
+Added: Average interest bearing liabilities increased 5.02% to $1,166,728,000 for the quarter ended September 30, 2022 compared to $1,110,912,000 for the same period in 2021.
Provision for Credit Losses
−Removed: During the quarter ended June 30, 2022, the Company recorded no provision for credit losses, compared to $1,500,000 reversal of provision during the quarter ended June 30, 2021.
−Removed: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans, was 0.00% for the quarter ended June 30, 2022 compared to 0.04% for the quarter ended June 30, 2021.
−Removed: During the quarter ended June 30, 2022, the Company had net recoveries totaling $9,000 compared to net charge-offs of $117,000 for the same period in 2021.
−Removed: Gross recoveries of previously charged off loan balances during the quarters ended June 30, 2022 and 2021 were $25,000 and $54,000, respectively.
−Removed: Gross charge-offs during the quarters ended June 30, 2022 and 2021 were $16,000 and $171,000, respectively.
+Added: During the quarter ended September 30, 2022, the Company recorded a $500,000 provision for credit losses, compared to $500,000 reversal of provision during the quarter ended September 30, 2021.
+Added: The annualized net charge-off (recovery) ratio, which reflects net charge-offs (recoveries) to average loans, was 0.00% for the quarter ended September 30, 2022 compared to (0.05)% for the quarter ended September 30, 2021.
+Added: During the quarter ended September 30, 2022, the Company had net charge-offs totaling $7,000 compared to net recoveries of $122,000 for the same period in 2021.
+Added: Gross recoveries of previously charged off loan balances during the quarters ended September 30, 2022 and 2021 were $13,000 and $156,000, respectively.
+Added: Gross charge-offs during the quarters ended September 30, 2022 and 2021 were $20,000 and $34,000, respectively.
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.
Non-Interest Income
−Removed: Non-interest income was $770,000 for the quarter ended June 30, 2022 compared to $2,077,000 for the same period ended June 30, 2021.
−Removed: The $1,307,000 or 62.93% decrease in non-interest income for the quarter ended June 30, 2022 was primarily due to recording a $890,000 increase in net realized losses on sales and calls of investment securities, a $327,000 decrease in other income, and a $242,000 decrease in loan placement fees, partially offset by a $77,000 increase in service charge income, a $69,000 increase in appreciation in cash surrender value of bank-owned life insurance, and a $7,000 increase in interchange fees.
−Removed: Customer service charges increased $77,000 or 16.49% to $544,000 for the second quarter of 2022 compared to $467,000 for the same period in 2021, due primarily to an increase in overdraft and analysis fee income.
−Removed: Other income decreased $327,000 or 72.83% to $122,000 for the second quarter of 2022 compared to $449,000 for the same period in 2021.
+Added: Non-interest income was $1,480,000 for the quarter ended September 30, 2022 compared to $2,148,000 for the same period ended September 30, 2021.
+Added: The $668,000 or 31.10% decrease in non-interest income for the quarter ended September 30, 2022 was primarily due to recording a $312,000 decrease in loan placement fees, a $131,000 increase in net realized losses on sales and calls of investment securities, a $182,000 decrease in other income, a $40,000 decrease in interchange fees, a $12,000 decrease in service charge income, partially offset by a $2,000 increase in appreciation in cash surrender value of bank-owned life insurance.
+Added: Customer service charges decreased $12,000 or 2.46% to $475,000 for the third quarter of 2022 compared to $487,000 for the same period in 2021, due primarily to an increase in overdraft and analysis fee income.
+Added: Other income decreased $182,000 or 66.42% to $92,000 for the third quarter of 2022 compared to $274,000 for the same period in 2021.
Non-Interest Expenses
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 $453,000 or 3.90% to $12,083,000 for the quarter ended June 30, 2022 compared to $11,630,000 for the same period in 2021.
−Removed: The net increase quarter over quarter was a result of increases of $217,000 in information technology expenses, increases in occupancy and equipment of $143,000, increases in salaries and employee benefits of $78,000, increases in operating losses of $46,000, increases in regulatory assessments of $22,000, increases in mileage and travel of $51,000, increases in personnel expense of $25,000, increases in telephone expenses of $22,000, increases in education and training expenses of $21,000, and increases in advertising expenses of $10,000.
−Removed: The increases were partially offset by the decreases in data processing expenses of $77,000, decreases in directors’ expenses of $65,000, decreases in Internet banking of $36,000, decreases in amortization of core deposit intangibles of $33,000, decreases in appraisal fees of $29,000, and decreases in professional fees of $11,000.
−Removed: The Company’s efficiency ratio improved to 54.20% for the second quarter of 2022 compared to 55.58% for the second quarter of 2021.
+Added: Non-interest expenses increased $736,000 or 6.10% to $12,798,000 for the quarter ended September 30, 2022 compared to $12,062,000 for the same period in 2021.
+Added: The net increase quarter over quarter was a result of increases in salaries and employee benefits of $409,000, increases in occupancy and equipment of $139,000, increases in professional fees of $106,000, increases in operating losses of $33,000, increases in regulatory assessments of $5,000, increases in mileage and travel of $8,000, increases in personnel expense of $29,000, increases in telephone expenses of $49,000, and increases in advertising expenses of $9,000.
+Added: The increases were partially offset by the decreases in data processing expenses of $39,000, decreases in directors’ expenses of $61,000, decreases in Internet banking of $25,000, decreases in amortization of core deposit intangibles of $35,000, decreases in appraisal fees of $111,000, decreases in education and training expenses of $24,000, and decreases of $12,000 in information technology expenses.
+Added: The Company’s efficiency ratio improved to 57.20% for the third quarter of 2022 compared to 57.66% for the third quarter of 2021.
The improvement in the efficiency ratio is due to the growth in operating revenue outpacing the growth in non-interest expense.
−Removed: Salaries and employee benefits increased $78,000 or 1.12% to $7,057,000 for the second quarter of 2022 compared to $6,979,000 for the second quarter of 2021.
−Removed: The number of full time equivalent (FTE) employees as of June 30, 2022, December 31, 2021 and June 30, 2021 was 248, 273, and 246, respectively.
+Added: Salaries and employee benefits increased $409,000 or 5.77% to $7,500,000 for the third quarter of 2022 compared to $7,091,000 for the third quarter of 2021.
+Added: The increase was primarily attributed to non-recurring severance and overtime expenditures.
+Added: The number of full time equivalent (FTE) employees as of September 30, 2022, December 31, 2021 and September 30, 2021 was 247, 273, and 246, respectively.
Provision for Income Taxes
−Removed: The effective income tax rate was 23.01% for the second quarter of 2022 compared to 24.58% for the same period in 2021.
−Removed: Provision for income taxes totaled $1,955,000 and $2,465,000 for the quarters ended June 30, 2022 and 2021, respectively.
+Added: The effective income tax rate was 23.51% for the third quarter of 2022 compared to 25.86% for the same period in 2021.
+Added: Provision for income taxes totaled $1,962,000 and $2,275,000 for the quarters ended September 30, 2022 and 2021, respectively.
FINANCIAL CONDITION
Summary of Changes in Consolidated Balance Sheets
−Removed: June 30, 2022 compared to December 31, 2021
−Removed: Total assets were $2,353,592,000 as of June 30, 2022, compared to $2,450,139,000 at December 31, 2021, a decrease of 3.94% or $96,547,000.
−Removed: Total gross loans were $1,135,964,000 at June 30, 2022, compared to $1,039,111,000 at December 31, 2021, an increase of $96,853,000 or 9.32%.
−Removed: The total investment portfolio (including Federal funds sold and interest-earning deposits in other banks) decreased 18.13% or $226,810,000 to $1,023,869,000 at June 30, 2022 compared to $1,250,679,000 at December 31, 2021.
−Removed: Total deposits decreased 0.79% or $16,800,000 to $2,105,997,000 at June 30, 2022, compared to $2,122,797,000 at December 31, 2021.
−Removed: Shareholders’ equity decreased $77,592,000 or 31.31% to $170,253,000 at June 30, 2022, compared to $247,845,000 at December 31, 2021.
+Added: September 30, 2022 compared to December 31, 2021
+Added: Total assets were $2,425,698,000 as of September 30, 2022, compared to $2,450,139,000 at December 31, 2021, a decrease of 1.00% or $24,441,000.
+Added: Total gross loans were $1,225,270,000 at September 30, 2022, compared to $1,039,111,000 at December 31, 2021, an increase of $186,159,000 or 17.92%.
+Added: The total investment portfolio (including Federal funds sold and interest-earning deposits in other banks) decreased 20.89% or $261,310,000 to $989,369,000 at September 30, 2022 compared to $1,250,679,000 at December 31, 2021.
+Added: Total deposits increased 0.77% or $16,347,000 to $2,139,144,000 at September 30, 2022, compared to $2,122,797,000 at December 31, 2021.
+Added: Shareholders’ equity decreased $89,031,000 or 35.92% to $158,814,000 at September 30, 2022, compared to $247,845,000 at December 31, 2021.
The decrease in shareholders’ equity was driven by the adverse change in the unrealized losses on available-for-sale (AFS) investment securities, dividends paid, and share repurchases, offset by the retention of e arnings.
−Removed: Accrued interest payable and other liabilities was $28,492,000 at June 30, 2022, compared to $40,043,000 at December 31, 2021, a decrease of $11,551,000.
+Added: Accrued interest payable and other liabilities was $33,177,000 at September 30, 2022, compared to $40,043,000 at December 31, 2021, a decrease of $6,866,000.
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 June 30, 2022, investment securities with a fair value of $185,061,000, or 18.21% 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 September 30, 2022, investment securities with a fair value of $177,503,000, or 18.23% 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 June 30, 2022 was 53.94% compared to 48.95% at December 31, 2021.
+Added: Our loan-to-deposit ratio at September 30, 2022 was 57.28% 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, decreased 18.13% or $226,810,000 to $1,023,869,000 at June 30, 2022, from $1,250,679,000 at December 31, 2021.
−Removed: The fair value of the available-for-sale investment portfolio reflected a net unrealized loss of $80,011,000 at June 30, 2022, compared to a net unrealized gain of $10,835,000 at December 31, 2021.
−Removed: During the second quarter of 2022, the Company re-designated certain securities previously classified as available-for-sale to the held-to-maturity classification.
−Removed: The securities re-designated consisted of obligations of states and political subdivision securities, U.S.
+Added: The total investment portfolio, including Federal funds sold and interest-earning deposits in other banks, decreased 20.89% or $261,310,000 to $989,369,000 at September 30, 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 $104,377,000 at September 30, 2022, compared to a net unrealized gain of $10,835,000 at December 31, 2021.
+Added: During the second quarter of 2022, the Company designated certain securities previously classified as available-for-sale to the held-to-maturity classification.
+Added: The securities designated consisted of obligations of states and political subdivision securities, U.S.
Government sponsored entity and agency securities collateralized by residential mortgage obligations, private label mortgage and asset backed securities, and corporate debt securities with a total carrying value of $306.7 million at April 1, 2022.
−Removed: At the time of re-designation the securities included $25.3 million of pretax unrealized losses in other comprehensive income which is being amortized over the remaining life of the securities in a manner consistent with the amortization of a premium or discount.
+Added: At the time of designation the securities included $25.3 million of pretax unrealized losses in other comprehensive income which is being amortized over the remaining life of the securities in a manner consistent with the amortization of a premium or discount.
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 June 30, 2022 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at June 30, 2022 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 September 30, 2022 and identified those that had an unrealized loss for at least a consecutive 12 month period, which had an unrealized loss at September 30, 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 six months ended June 30, 2021.
−Removed: At June 30, 2022, the Company held one U.S.
−Removed: Treasury securities which was in a loss position for less than 12 months.
−Removed: At June 30, 2022, the Company held one U.S.
+Added: There were no OTTI losses recorded during the nine months ended September 30, 2021.
+Added: At September 30, 2022, the Company held one U.S.
+Added: Treasury securities which was in a loss position for more than 12 months.
+Added: At September 30, 2022, the Company held one U.S.
Government agency security which was in a loss position for less than 12 months.
−Removed: At June 30, 2022, the Company held 98 obligations of states and political subdivision securities of which 86 were in a loss position for less than 12 months and ten have been in a loss position for more than 12 months.
+Added: At September 30, 2022, the Company held 97 obligations of states and political subdivision securities of which 73 were in a loss position for less than 12 months and 22 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 June 30, 2022.
−Removed: At June 30, 2022, the Company held 88 U.S.
−Removed: Government sponsored entity and agency securities collateralized by residential mortgage obligations of which 41 were in a loss position for less than 12 months and four 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 September 30, 2022.
+Added: At September 30, 2022, the Company held 85 U.S.
+Added: Government sponsored entity and agency securities collateralized by residential mortgage obligations of which 49 were in a loss position for less than 12 months and 15 have been in a loss position for more than 12 months.
The unrealized losses on the Company’s investments in U.S.
2 unchanged sentences
Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.
−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 June 30, 2022.
−Removed: At June 30, 2022, the Company had a total of 96 Private Label Mortgage and Asset Backed Securities (PLMABS).
−Removed: 80 of the PLMABS securities were in a loss position for less than 12 months and 11 have been in loss for more than 12 months at June 30, 2022.
−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 June 30, 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 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
+Added: 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, 2022.
+Added: At September 30, 2022, the Company had a total of 97 Private Label Mortgage and Asset Backed Securities (PLMABS).
+Added: 48 of the PLMABS securities were in a loss position for less than 12 months and 45 have been in loss for more than 12 months at September 30, 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 September 30, 2022.
The Company continues to monitor these securities for indications that declines in value, if any, may be other-than-temporary.
−Removed: At June 30, 2022, the Company held 13 corporate debt securities of which 11 were in a loss position for less than 12 months and one has been in a loss position for more than 12 months..
+Added: At September 30, 2022, the Company held 13 corporate debt securities of which 8 were in a loss position for less than 12 months and 5 have been in a loss position for more 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 June 30, 2022.
+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 September 30, 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 increased $96,853,000 or 9.32% to $1,135,964,000 as of June 30, 2022, compared to $1,039,111,000 as of December 31, 2021.
+Added: Total gross loans increased $186,159,000 or 17.92% to $1,225,270,000 as of September 30, 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) June 30, 2022 % of Total
+Added: Loan Type (Dollars in thousands) September 30, 2022 % of Total
Loans December 31, 2021 % of Total
15 unchanged sentences
Total loans $ 1,214,904 $ 1,029,511
−Removed: As of June 30, 2022, in management’s judgment, a concentration of loans existed in commercial loans and loans collateralized by real estate, representing approximately 96.9% of total loans.
+Added: As of September 30, 2022, in management’s judgment, a concentration of loans existed in commercial loans and loans collateralized by real estate, representing approximately 97.1% of total loans.
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.
1 unchanged sentence
The Company does not engage in any sub-prime mortgage lending activities.
−Removed: At June 30, 2022, loans acquired in the Folsom Lake Bank (FLB), Sierra Vista Bank (SVB) and Visalia Community Bank (VCB) acquisitions had a balance of $79,386,000, of which $1,944,000 were commercial loans, $71,874,000 were real estate loans, and $5,568,000 were consumer loans.
+Added: At September 30, 2022, loans acquired in the Folsom Lake Bank (FLB), Sierra Vista Bank (SVB) and Visalia Community Bank (VCB) acquisitions had a balance of $79,232,000, of which $2,140,000 were commercial loans, $72,126,000 were real estate loans, and $4,966,000 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.
2 unchanged sentences
Contributing to the commercial and industrial loan decrease was the forgiveness of PPP loans.
−Removed: As of June 30, 2022, gross loans included $1,137,000 in PPP loans which are fully guaranteed by the SBA as compared to $18,553,000.00 at December 31, 2021.
+Added: As of September 30, 2022, gross loans included $350,000 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.
2 unchanged sentences
Nonperforming loans are those loans which have (i) been placed on nonaccrual status;
−Removed: (ii) been classified as doubtful under our
−Removed: asset classification system;
+Added: (ii) been classified as doubtful under our asset classification system;
or (iii) become contractually past due 90 days or more with respect to principal or interest and have not been restructured or otherwise placed on nonaccrual status.
2 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 June 30, 2022, total nonperforming assets totaled $271,000, or 0.01% of total assets, compared to $946,000, or 0.04% of total assets at December 31, 2021.
−Removed: Total nonperforming assets at June 30, 2022, included nonaccrual loans totaling $271,000, no OREO, and no other repossessed assets.
+Added: At September 30, 2022, total nonperforming assets totaled $251,000, 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 September 30, 2022, included nonaccrual loans totaling $251,000, 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 June 30, 2022 and December 31, 2021, we had no loan considered to be a troubled debt restructuring (“TDRs”) included in nonaccrual loans.
−Removed: A summary of nonperforming loans at June 30, 2022 and December 31, 2021 is set forth below.
−Removed: The Company had no loans past due more than 90 days and still accruing interest at June 30, 2022 or at December 31, 2021.
+Added: At September 30, 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 September 30, 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 September 30, 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) June 30, 2022 December 31, 2021
+Added: (In thousands) September 30, 2022 December 31, 2021
Nonaccrual loans:
9 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 June 30, 2022 and December 31, 2021, we had impaired loans totaling $3,447,000 and $8,586,000, respectively.
+Added: As of September 30, 2022 and December 31, 2021, we had impaired loans totaling $2,665,000 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.
1 unchanged sentence
We place loans on nonaccrual status and classify them as impaired when it becomes probable that we will not receive interest and principal under the original contractual terms, or when loans are delinquent 90 days or more unless the loan is both well secured and in the process of collection.
−Removed: 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 six months of 2022.
+Added: Management maintains certain loans that have been brought current by the borrower (less than 30
+Added: days delinquent) on nonaccrual status until such time as management has determined that the loans are likely to remain current in future periods.
+Added: The following table provides a reconciliation of the change in nonaccrual loans for the first nine months of 2022.
(In thousands) Balance, December 31, 2021 Additions
4 unchanged sentences
Status Charge-
−Removed: Offs Balance, June 30, 2022
+Added: Offs Balance, September 30, 2022
Nonaccrual loans:
4 unchanged sentences
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 June 30, 2022 or December 31, 2021.
−Removed: The Company held no repossessed assets at June 30, 2022 or December 31, 2021.
+Added: We had no OREO properties at September 30, 2022 or December 31, 2021.
+Added: The Company held no repossessed assets at September 30, 2022 or December 31, 2021.
Allowance for Credit Losses
21 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 Six Months
−Removed: Ended June 30, For the Year Ended
−Removed: December 31, For the Six Months
−Removed: Ended June 30,
+Added: For the Nine Months
+Added: Ended September 30, For the Year Ended
+Added: December 31, For the Nine Months
+Added: Ended September 30,
(Dollars in thousands) 2022 2021 2021
Balance, beginning of period $ 9,600 $ 12,915 $ 12,915
−Removed: (Reversal of) provision for credit losses — (4,300) (3,300)
+Added: Provision (reversal of) for credit losses 500 (4,300) (3,800)
Losses charged to allowance (138) (267) (261)
14 unchanged sentences
Additions are also required when, in management’s judgment, the reserve does not properly reflect the potential loss exposure.
−Removed: As of June 30, 2022, the balance in the allowance for credit losses (ALLL) was $9,873,000 compared to $9,600,000 as of December 31, 2021.
−Removed: The increase is attributed to the net recoveries durin g the six months ended June 30, 2022.
−Removed: The balance of undisbursed commitments to extend credit on construction and other loans and letters of credit was $325,400,000 as of June 30, 2022, compared to $326,108,000 as of December 31, 2021.
−Removed: At June 30, 2022 and December 31, 2021, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $115,000.
+Added: As of September 30, 2022, the balance in the allowance for credit losses (ALLL) was $10,366,000 compared to $9,600,000 as of December 31, 2021.
+Added: The increase is attributed to the net recoveries durin g the nine months ended September 30, 2022.
+Added: The balance of undisbursed commitments to extend credit on construction and other loans and letters of credit was $319,346,000 as of September 30, 2022, compared to $326,108,000 as of December 31, 2021.
+Added: At September 30, 2022 and December 31, 2021, the balance of a contingent allocation for probable loan loss experience on unfunded obligations was $110,000 and $115,000, respectively.
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 June 30, 2022, the ALLL was 0.87% of total gross loans compared to 0.92% as of December 31, 2021.
−Removed: Total loans include FLB, SVB and VCB loans that were recorded at fair value in connection with the acquisitions, with values of $79,386,000 at June 30, 2022 and $93,201,000 at December 31, 2021.
−Removed: Excluding these FLB, SVB and VCB loans from the calculation, the ALLL to total gross loans was 0.93% and 1.01% at June 30, 2022 and December 31, 2021, respectively and general reserves associated with non-impaired loans to total non-impaired loans was 0.89% and 0.98%, respectively.
−Removed: As of June 30, 2022, gross loans included $1,137,000 related to PPP loans which are fully guaranteed by the SBA as compared to $18,553,000.00 at December 31, 2021.
−Removed: Excluding PPP loans and the acquired loans from the calculation, the allowance for credit losses to total gross loans was 0.94% and 1.04% as of June 30, 2022 and December 31, 2021, respectively.
−Removed: The Company believes the allowance for credit losses is adequate to provide for probable incurred credit losses within the loan portfolio at June 30, 2022.
+Added: As of September 30, 2022, the ALLL was 0.85% 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 $79,232,000 at September 30, 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 0.90% and 1.01% at September 30, 2022 and December 31, 2021, respectively and general reserves associated with non-impaired loans to total non-impaired loans was 0.87% and 0.98%, respectively.
+Added: As of September 30, 2022, gross loans included $350,000 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 0.90% and 1.04% as of September 30, 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 September 30, 2022.
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 six months ended June 30, 2022 increased.
+Added: The Company’s loan portfolio balances for the nine months ended September 30, 2022 increased.
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 June 30, 2022.
+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
+Added: appropriate as of September 30, 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: June 30, 2022 December 31, 2021 June 30, 2021
+Added: September 30, 2022 December 31, 2021 September 30, 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 June 30, 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.
+Added: Total goodwill at September 30, 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.
12 unchanged sentences
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 June 30, 2022 was $242,000, net of $3,002,000 in accumulated amortization expense.
+Added: The carrying value of intangible assets at September 30, 2022 was $102,000, net of $3,142,000 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 six months of 2022.
−Removed: Amortization expense recognized was $280,000 and $347,000 for the six months ended June 30, 2022 and June 30, 2021, respectively.
+Added: Based on the evaluation, no changes to the remaining useful lives was required in the first nine months of 2022.
+Added: Amortization expense recognized was $419,000 and $521,000 for the nine months ended September 30, 2022 and September 30, 2021, respectively.
The following table summarizes the Company’s estimated remaining core deposit intangible amortization expense for each of the next two years (in thousands):
3 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 decreased $16,800,000 or 0.79% to $2,105,997,000 as of June 30, 2022, compared to $2,122,797,000 as of December 31, 2021.
−Removed: Interest-bearing deposits increased $15,627,000 or 1.35% to $1,174,840,000 as of June 30, 2022, compared to $1,159,213,000 as of December 31, 2021.
−Removed: Non-interest bearing deposits decreased $32,427,000 or 3.37% to $931,157,000 as of June 30, 2022, compared to $963,584,000 as of December 31, 2021.
−Removed: Average non-interest bearing deposits to average total deposits was 43.85% for the six months ended June 30, 2022 compared to 46.11% for the same period in 2021.
−Removed: The Company’s deposit balances for the six months ended June 30, 2022 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 June 30, 2022 and December 31, 2021 is summarized in the table below.
−Removed: (Dollars in thousands) June 30, 2022 % of
+Added: Total deposits increased $16,347,000 or 0.77% to $2,139,144,000 as of September 30, 2022, compared to $2,122,797,000 as of December 31, 2021.
+Added: Interest-bearing deposits decreased $64,747,000 or 5.59% to $1,094,466,000 as of
+Added: September 30, 2022, compared to $1,159,213,000 as of December 31, 2021.
+Added: Non-interest bearing deposits increased $81,094,000 or 8.42% to $1,044,678,000 as of September 30, 2022, compared to $963,584,000 as of December 31, 2021.
+Added: Average non-interest bearing deposits to average total deposits was 45.41% for the nine months ended September 30, 2022 compared to 45.83% for the same period in 2021.
+Added: The Company’s deposit balances for the nine months ended September 30, 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 September 30, 2022 and December 31, 2021 is summarized in the table below.
+Added: (Dollars in thousands) September 30, 2022 % of
Deposits Average Effective
9 unchanged sentences
Other Borrowings
−Removed: As of June 30, 2022 and December 31, 2021, the Company had $9,324,000 Federal Home Loan Bank (“FHLB”) of San Francisco advances.
+Added: As of September 30, 2022 and December 31, 2021, the Company had $25,000,000 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 $170,253,000 at June 30, 2022, compared to $247,845,000 at December 31, 2021.
+Added: Our shareholders’ equity was $158,814,000 at September 30, 2022, compared to $247,845,000 at December 31, 2021.
The decrease from December 31, 2021 in shareholders’ equity is the result of a decrease in accumulated other comprehensive income (AOCI) of $98,254,000, common stock cash dividends of $4,231,000, and stock repurchases of $6,814,000, offset by an increase in retained earnings from net income of $19,012,000, the exercise of stock options of $489,000, stock issued under the employee stock purchase plan of $164,000, the effect of share-based compensation expense of $324,000, and stock awarded to employees of $279,000.
1 unchanged sentence
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.
−Removed: During the six months ended June 30, 2022, the Company repurchased and retired 300,761 shares at an average cost of $22.63 or $6,814,000.
−Removed: During the first six months of 2022, the Company declared and paid $2,824,000 in cash dividends ($0.24 per common share) to holders of common stock.
+Added: During the nine months ended September 30, 2022, the Company repurchased and retired 300,761 shares at an average cost of $22.63 or $6,814,000.
+Added: During the first nine months of 2022, the Company declared and paid $4,231,000 in cash dividends ($0.36 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 r atios as of June 30, 2022 and December 31, 2021.
+Added: The following table presents the Company’s regulatory capital r atios as of September 30, 2022 and December 31, 2021.
(Dollars in thousands)
−Removed: June 30, 2022 Amount Ratio
+Added: September 30, 2022 Amount Ratio
Tier 1 Leverage Ratio $ 198,645 8.26 %
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 June 30, 2022 and December 31, 2021.
+Added: The following table presents the Bank’s regulatory capital ratios as of September 30, 2022 and December 31, 2021.
(Dollars in thousands) Actual Ratio Minimum regulatory requirement (1) Minimum requirement for “ Well-Capitalized ”
−Removed: June 30, 2022 Amount Ratio Amount Ratio Amount Ratio
+Added: September 30, 2022 Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage Ratio $ 257,968 10.73 % $ 96,127 4.00 % $ 120,158 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 June 30, 2022, all of the trust preferred securities that have been issued qualify as Tier 1 capital.
+Added: At September 30, 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%.
8 unchanged sentences
Holders of the trust preferred securities are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security.
−Removed: 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 June 30, 2022, the rate was 2.64%.
+Added: For each January 7,
+Added: April 7, July 7 or October 7 of each year, the rate will be adjusted to equal the three month LIBOR plus 1.60%.
+Added: As of September 30, 2022, the rate was 2.64%.
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.
3 unchanged sentences
The Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.
+Added: On September 15, 2022, the Company entered into a $30 million loan agreement with Bell Bank.
+Added: Initially, payments of interest only are payable in 12 quarterly payments commencing December 31, 2022.
+Added: Commencing December 31, 2025, 27 equal quarterly principal and interest payments are payable based on the outstanding balance of the loan on August 30, 2025 and an amortization of 48 quarters.
+Added: A final payment of outstanding principal and accrued interest is due at maturity on September 30, 2032.
+Added: Variable interest is payable at the Prime Rate (published by the Wall Street Journal) less 50 basis points.
+Added: The loan is secured by the assets of the Company and a pledge of the outstanding common stock of Central Valley Community Bank, the Company’s banking subsidiary.
+Added: The Company may prepay the loan without penalty with one exception.
+Added: If the loan is prepaid prior to August 30, 2025 with funds received from a financing source other than Bell Bank, the Company will incur a 2% prepayment penalty.
+Added: The loan contains customary representations, covenants, and events of default.
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.
3 unchanged sentences
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 June 30, 2022, the Company had unpledged securities totaling $838,154,000 available as a secondary source of liquidity and total cash and cash equivalents of $27,233,000.
−Removed: Cash and cash equivalents at June 30, 2022 decreased 83.34% compared to $163,467,000 at December 31, 2021.
+Added: As of September 30, 2022, the Company had unpledged securities totaling $802,823,000 available as a secondary source of liquidity and total cash and cash equivalents of $41,578,000.
+Added: Cash and cash equivalents at September 30, 2022 decreased 74.56% 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 June 30, 2022, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $260,052,000 in unused FHLB secured advances and a $5,376,000 secured credit line at the Federal Reserve Bank.
+Added: At September 30, 2022, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $277,058,000 in unused FHLB secured advances and a $4,862,000 secured credit line at the Federal Reserve Bank.
We believe our liquidity sources to be stable and adequate.
−Removed: At June 30, 2022, 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 June 30, 2022 and December 31, 2021:
−Removed: Credit Lines (In thousands) June 30, 2022 December 31, 2021
+Added: At September 30, 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 September 30, 2022 and December 31, 2021:
+Added: Credit Lines (In thousands) September 30, 2022 December 31, 2021
Unsecured Credit Lines
16 unchanged sentences
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.