Community West Bancshares - 10-Q quarterly report FY2023 Q3

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-31977

CENTRAL VALLEY COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)


California						77-0539125
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


7100 N. Financial Dr., Suite 101, Fresno, California						93720
(Address of principal executive offices)						(Zip code)

Registrant’s telephone number (559) 298-1775

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, no par value

CVCY

NASDAQ Capital Market

(Title of Each Class)

(Trading Symbol)

(Name of Each Exchange on which Registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☒

Small reporting company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2023 there were 11,814,883 shares of the registrant’s common stock outstanding.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

2023 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART 1	FINANCIAL INFORMATION	2

ITEM 1	FINANCIAL STATEMENTS (Unaudited)	3

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47

ITEM 4	CONTROLS AND PROCEDURES	47

PART II	OTHER INFORMATION	48

ITEM 1	LEGAL PROCEEDINGS	48

ITEM 1A	RISK FACTORS	48

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	51

ITEM 4	MINE SAFETY DISCLOSURES	51

ITEM 5	OTHER INFORMATION	51

ITEM 6	EXHIBITS	52

SIGNATURES		53

PART 1: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share amounts)	September 30, 2023		December 31, 2022

ASSETS
Cash and due from banks	$	27,558	$	25,485
Interest-earning deposits in other banks	47,017		5,685

Total cash and cash equivalents	74,575		31,170

Available-for-sale debt securities, at fair value, net of allowance for credit losses of $0	593,430		648,825
Held-to-maturity debt securities, at amortized cost less allowance for credit losses of $281 at September 30, 2023 and $0 at December 31, 2022	303,451		305,107
Equity securities, at fair value	6,354		6,558
Loans, less allowance for credit losses of $15,534 at September 30, 2023 and $10,848 at December 31, 2022	1,259,877		1,245,456
Bank premises and equipment, net	9,703		7,987

Bank-owned life insurance	41,301		40,537
Federal Home Loan Bank stock	7,136		6,169
Goodwill	53,777		53,777

Accrued interest receivable and other assets	85,755		76,933
Total assets	$	2,435,359	$	2,422,519

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	990,508	$	1,056,567
Interest bearing	1,158,334		1,043,082
Total deposits	2,148,842		2,099,649

Short-term borrowings	—		46,000

Senior debt and subordinated debentures, less debt issuance costs of $447 at September 30, 2023 and $556 at December 31, 2022	69,708		69,599
Accrued interest payable and other liabilities	35,159		32,611
Total liabilities	2,253,709		2,247,859
Commitments and contingencies (Note 6)

Shareholders’ equity:

Preferred stock, no par value; 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, no par value; 80,000,000 shares authorized; issued and outstanding: 11,814,883 at September 30, 2023 and 11,735,291 at December 31, 2022	62,338		61,487

Retained earnings	206,073		194,400
Accumulated other comprehensive loss, net of tax	(86,761)		(81,227)
Total shareholders’ equity	181,650		174,660
Total liabilities and shareholders’ equity	$	2,435,359	$	2,422,519

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands, except share and per-share amounts)	2023		2022		2023		2022
INTEREST INCOME:
Interest and fees on loans	$	17,692	$	14,708	$	51,851	$	39,752
Interest on deposits in other banks	1,481		48		2,930		157

Interest and dividends on investment securities:
Taxable	5,900		4,411		17,612		14,586
Exempt from Federal income taxes	1,393		1,825		4,203		5,144
Total interest income	26,466		20,992		76,596		59,639
INTEREST EXPENSE:
Interest on deposits	5,015		231		10,890		714
Interest on short-term borrowings	—		411		661		1,168
Interest on senior debt and subordinated debentures	924		186		2,732		186
Total interest expense	5,939		828		14,283		2,068
Net interest income before provision for credit losses	20,527		20,164		62,313		57,571
PROVISION FOR CREDIT LOSSES	186		495		476		495
Net interest income after provision for credit losses	20,341		19,669		61,837		57,076
NON-INTEREST INCOME:
Service charges	376		475		1,132		1,558





Net realized losses on sales and calls of investment securities	(39)		(14)		(296)		(777)






Other income	1,246		1,019		3,916		3,303
Total non-interest income	1,583		1,480		4,752		4,084
NON-INTEREST EXPENSES:
Salaries and employee benefits	7,474		7,500		23,483		21,501
Occupancy and equipment	1,490		1,363		4,012		3,869













Other	4,472		3,940		12,951		10,961
Total non-interest expenses	13,436		12,803		40,446		36,331
Income before provision for income taxes	8,488		8,346		26,143		24,829
Provision for income taxes	2,098		1,962		6,501		5,817


Net income	$	6,390	$	6,384	$	19,642	$	19,012
Earnings per common share:
Basic earnings per share	$	0.54	$	0.55	$	1.67	$	1.62
Weighted average common shares used in basic computation	11,742,334		11,678,532		11,723,233		11,723,790
Diluted earnings per share	$	0.54	$	0.55	$	1.67	$	1.62
Weighted average common shares used in diluted computation	11,755,758		11,689,323		11,745,606		11,748,693
Cash dividend per common share	$	0.12	$	0.12	$	0.36	$	0.36

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Net income	$	6,390	$	6,384	$	19,642	19,012
Other comprehensive loss:
Unrealized losses on securities:
Unrealized holding losses arising during the period	(16,107)		(24,378)		(9,955)		(141,308)
Reclassification of net losses included in net income	39		14		296		777


Amortization of net unrealized losses transferred	602		651		1,802		1,045
Other comprehensive loss, before tax	(15,466)		(23,713)		(7,857)		(139,486)
Tax effect	4,573		7,010		2,323		41,232
Total other comprehensive loss	(10,893)		(16,703)		(5,534)		(98,254)
Comprehensive (loss) income	$	(4,503)	$	(10,319)	$	14,108	$	(79,242)

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022



	Common Stock	Retained Earnings	Accumulated Other Comprehensive Loss (Net of Taxes)	Total Shareholders’ Equity
(In thousands, except share amounts)						Shares		Amount
Balance, June 30, 2022			11,717,146	$	60,975	$	183,197	$	(73,919)	170,253
Net income			—	—		6,384		—		6,384
Other comprehensive loss			—	—		—		(16,703)		(16,703)

Stock issued under employee stock purchase plan			3,515	53		—		—		53



Stock-based compensation expense			—	143		—		—		143
Cash dividend			—	—		(1,407)		—		(1,407)

Stock options exercised			11,350	91				—		91
Balance, September 30, 2022			11,732,011	$	61,262	$	188,174	$	(90,622)	$	158,814

Balance, June 30, 2023			11,812,425	$	62,128	$	201,100	$	(75,868)	$	187,360
Net income			—	—		6,390		—		6,390
Other comprehensive loss			—	—		—		(10,893)		(10,893)


Stock issued under employee stock purchase plan			3,025	40		—		—		40
Restricted stock forfeitures			(567)	—		—		—		—

Stock-based compensation expense			—	170		—		—		170
Cash dividend			—	—		(1,417)		—		(1,417)


Balance, September 30, 2023			11,814,883	$	62,338	$	206,073	$	(86,761)	$	181,650

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022



	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss) (Net of Taxes)	Total Shareholders’ Equity
(In thousands, except share amounts)						Shares		Amount
Balance, December 31, 2021			11,916,651	$	66,820	$	173,393	$	7,632	247,845
Net income			—	—		19,012		—		19,012
Other comprehensive loss			—	—		—		(98,254)		(98,254)

Stock issued under employee stock purchase plan			10,071	164		—		—		164
Stock awarded to employees			13,446	—		—		—		—
Restricted stock granted net of forfeitures			42,399	—		—		—		—

Stock-based compensation expense			—	603		—		—		603
Cash dividend			—	—		(4,231)		—		(4,231)
Repurchase and retirement of common stock			(300,761)	(6,814)		—		—		(6,814)
Stock options exercised			50,205	489		—		—		489
Balance, September 30, 2022			11,732,011	$	61,262	$	188,174	$	(90,622)	$	158,814

Balance, December 31, 2022			11,735,291	$	61,487	$	194,400	$	(81,227)	$	174,660
Implementation of ASU 2016-13, Current Expected Credit Loss (CECL) Day 1 Adjustment			—	—		(3,731)		—		(3,731)
Adjusted Balance, January 1, 2023			11,735,291	$	61,487	$	190,669	$	(81,227)	$	170,929
Net income			—	—		19,642		—		19,642
Other comprehensive loss			—	—		—		(5,534)		(5,534)

Stock issued under employee stock purchase plan			10,817	163		—		—		163
Stock awarded to employees			10,347	—		—		—		—
Restricted stock granted net of forfeitures			58,467	—		—		—		—


Stock-based compensation expense			—	689		—		—		689
Cash dividend			—	—		(4,238)		—		(4,238)

Repurchase and retirement of common stock			(39)	(1)		—		—		(1)
Balance, September 30, 2023			11,814,883	$	62,338	$	206,073	$	(86,761)	$	181,650

See notes to unaudited consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
(In thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,642	$	19,012
Adjustments to reconcile net income to net cash provided by operating activities:
Net decrease (increase) in deferred loan fees	158		(419)
Depreciation	454		586
Accretion	(1,435)		(892)
Amortization	6,816		7,201
Stock-based compensation	689		603


Provision for credit losses	476		495

Net realized losses on sales and calls of available-for-sale investment securities	296		777

Net gain on disposal of premises and equipment	(30)		—

Net change in equity securities	204		872

Increase in bank-owned life insurance, net of expenses	(763)		(736)


Net increase in accrued interest receivable and other assets	(4,760)		(6,033)

Net increase (decrease) in accrued interest payable and other liabilities	1,934		(6,860)
Provision for deferred income taxes	(244)		(662)
Net cash provided by operating activities	23,437		13,944
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of available-for-sale investment securities	—		(301,699)
Proceeds from sales or calls of available-for-sale investment securities	12,580		235,645
Proceeds from calls of held-to-maturity investment securities	20		—
Proceeds from maturity and principal repayments of available-for-sale investment securities	28,849		54,691
Proceeds from maturity and principal repayments of held-to-maturity investment securities	1,964		738

Net increase in loans	(19,455)		(185,474)


Purchases of premises and equipment	(4,609)		(115)

FHLB stock purchased	(967)		(574)

Proceeds from sale of premises and equipment	2,469		—
Net cash provided by (used in) investing activities	20,851		(196,788)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand, interest bearing and savings deposits	(46,131)		30,257
Net increase (decrease) in time deposits	95,324		(13,910)
Proceeds from short-term borrowings from Federal Home Loan Bank	3,346,500		2,090,326
Repayments of short-term borrowings to Federal Home Loan Bank	(3,392,500)		(2,065,326)
Proceeds of issuance of senior debt	—		30,000

Repurchase and retirement of common stock	(1)		(6,814)
Proceeds from stock issued under employee stock purchase plan	163		164
Proceeds from exercise of stock options	—		489


Cash dividend payments on common stock	(4,238)		(4,231)

Net cash (used in) provided by financing activities	(883)		60,955
Increase (decrease) in cash and cash equivalents	43,405		(121,889)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	31,170		163,467
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	74,575	$	41,578

See notes to unaudited consolidated financial statements.


	For the Nine Months Ended September 30,
(In thousands)	2023		2022
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest	$	14,180	$	1,525
Income taxes	$	6,700	$	5,614
Operating cash flows from operating leases	$	1,874	$	1,653

Non-cash investing and financing activities:







Transfer of securities from available-for-sale to held-to-maturity	$	—	$	331,230
Transfer of unrealized loss on securities from available-for-sale to held-to-maturity	$	—	$	(25,328)

See notes to unaudited consolidated financial statements.

Note 1. Basis of Presentation

The interim unaudited condensed consolidated financial statements of Central Valley Community Bancorp and subsidiary have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). These interim condensed consolidated financial statements include the accounts of Central Valley Community Bancorp and its wholly owned subsidiary Central Valley Community Bank (the Bank) (collectively, the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2022 Annual Report to Shareholders on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at September 30, 2023, and the results of its operations and its cash flows for the three and nine month interim periods ended September 30, 2023 and 2022 have been included. The results of operations for interim periods are not necessarily indicative of results for the full year.

The preparation of these interim unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Management has determined that since all of the banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment, and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. No customer accounts for more than 10 percent of revenues for the Company or the Bank.

Impact of New Financial Accounting Standards Adopted in 2023

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). In addition, credit losses recognized on available-for-sale debt securities will be presented as an allowance as opposed to a write-down, based on management’s intent to sell the security or the likelihood the Company will be required to sell the security before recovery of the amortized cost basis.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recognized an increase in the allowance for credit losses on loans totaling $3,910,000, a reserve for credit losses for held-to-maturity securities of $776,000, and an increase to the reserve for unfunded commitments of $612,000 with a corresponding decrease, net of taxes, in retained earnings, of $3,731,000 as of January 1, 2023 for the cumulative effect of adopting ASC 326.

The Company also adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures upon the adoption of ASU 2016-13 as of January 1, 2023 on a prospective basis. The amendments in this update eliminated the accounting guidance for troubled debt restructurings (“TDRs”) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, for public business entities, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6. The adoption modified the Company’s disclosures but did not have a material impact on its financial position or results of operations.

In March 2020, the FASB issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Subtopic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. As the Company has an insignificant number of instruments that are applicable to this ASU, management has determined that no impact to the valuations of these instruments are applicable for financial reporting purposes.

Reclassifications - Certain reclassifications have been made to prior year financial statements to conform to the classifications used in 2023. None of the reclassifications had an impact on equity or net income.

Summary of Significant Accounting Policies

The Company has revised the following significant accounting policies as a result of the the adoption of ASU 2016-13.

Allowance for Credit Losses on Available-for-Sale Debt Securities: For available-for-sale (“AFS”) debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of the cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss provision (or credit). Losses are charged against the allowance when management believes that the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Allowance for Credit Losses on Held-to-Maturity Debt Securities: Management measures expected credit losses on held-to-maturity (“HTM”) debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information based on industry data that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into the following major security types: Obligations of States and Political Subdivisions, U.S. Government sponsored Entities and Agencies collateralized by Residential Mortgage Obligations, Private Label Mortgage and Asset Backed Securities, and Corporate Debt Securities.

The Company elected the practical expedient under ASC 326-20-30-5A to exclude accrued interest from the amortized cost basis when measuring potential impairment. Additionally, management notes that due to this election, accrued interest is separately reported from the securities’ amortized cost basis.

Allowance for Credit Losses on Loans: The allowance for credit losses (“ACL”) on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The allowance is established through a provision for credit losses which is charged to expense. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Cash received on previously charged off amounts is recorded as a recovery to the allowance.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience from national and local peer data provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for the differences in the current loan-specific risk characteristics, such as differences in loan-to-values, portfolio mix, or term as well as for changes in environmental conditions, such as changes in unemployment rates, market interest rates, property

values, or other relevant factors. Management may assign qualitative factors to each loan segment if there are material risks or improvements present but not yet captured in the model environment.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company segregates the allowance by portfolio segment. These portfolio segments include commercial, commercial real estate, 1-4 family real estate and consumer loans. The relative significance of risk considerations vary by portfolio segment. Real estate construction loans, as summarized by class within the loan footnote, are disaggregated into either the commercial real estate or 1-4 family real estate allowance segments based on the type of construction loan due to the varying risks between commercial and consumer construction.

Commercial:

Commercial and industrial - Commercial and industrial loans are generally underwritten to existing cash flows of operating businesses. Additionally, economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Past due payments may indicate the borrower’s capacity to repay their obligations may be deteriorating.

Agricultural production - Loans secured by crop production and livestock are especially vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Commercial Real Estate:

Commercial real estate construction and other land loans - Commercial land and construction loans generally possess a higher inherent risk of loss than other real estate portfolio segments. A major risk arises from the necessity to complete projects within specified costs and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial real estate - owner-occupied - Real estate collateral secured by commercial or professional properties with repayment arising from the owner’s business cash flows. To meet this classification, the owner’s operation must occupy no less than 50% of the real estate held. Financial profitability and capacity to meet the cyclical nature of the industry and related real estate market over a significant timeframe is essential.

Commercial real estate - non-owner occupied - Investor commercial real estate loans generally possess a higher inherent risk of loss than other real estate portfolio segments, except land and construction loans. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flows to service debt obligations.

Farmland - Agricultural loans secured by real estate generally possess a higher inherent risk of loss caused by changes in concentration of permanent plantings, government subsidies, and the value of the U.S. dollar affecting the export of commodities.

Multi-family - These properties are generally comprised of more than four rentable units, such as apartment buildings, with each unit intended to be occupied as the primary residence for one or more persons. Multi-family properties are also subject to changes in general or regional economic conditions, such as unemployment, ultimately resulting in increased vacancy rates or reduced rents or both. In addition, new construction can create an oversupply condition and market competition resulting in increased vacancy, reduced market rents, or both. Due to the nature of their use and the greater likelihood of tenant turnover, the management of these properties is more intensive and therefore is more critical to the preclusion of loss.

1-4 Family Real Estate: Including 1-4 family close-ended, revolving real estate loans, and residential construction loans, the degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower’s ability to repay in an orderly fashion. These loans generally possess a lower inherent risk of loss than other real estate portfolio segments. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends may indicate that the borrowers’ capacity to repay their obligations may be deteriorating

Consumer: A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made directly for consumer purchases. Other consumer loans include other open ended unsecured consumer loans. Open ended unsecured loans generally have a higher rate of default than all other portfolio segments and are also impacted by weak economic conditions and trends.

When loans do not share similar risk characteristics, the Company evaluates the loan for expected credit losses on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that

foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. When the Company measures credit losses based on the present value of expected future cash flows, management does not adjust the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Allowance for Credit Losses on Unfunded Commitments: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is adjusted through provision for credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Note 2. Investments

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at September 30, 2023 and December 31, 2022 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses (in thousands):


	September 30, 2023
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Debt securities:
U.S. Treasury securities	$	9,989	$	—	$	(1,373)	$	—	$	8,616
U.S. Government agencies	103		—		(11)		—		92
Obligations of states and political subdivisions	198,823		—		(32,698)		—		166,125
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	93,303		1		(7,358)		—		85,946
Private label mortgage and asset backed securities	392,514		7		(59,870)		—		332,651

Total available-for-sale	$	694,732	$	8	$	(101,310)	$	—	$	593,430

	September 30, 2023
Held-to-Maturity Securities	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
Obligations of states and political subdivisions	$	192,056	$	75	$	(27,959)	$	164,172	$	15
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,675		—		(2,379)		8,296		—
Private label mortgage and asset backed securities	54,943		—		(8,103)		46,840		12
Corporate debt securities	46,058		—		(5,343)		40,715		254
Total held-to-maturity	$	303,732	$	75	$	(43,784)	$	260,023	$	281


	December 31, 2022
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Debt securities:
U.S. Treasury securities	$	9,990	$	—	$	(1,283)	$	8,707
U.S. Government agencies	107		—		(9)		98
Obligations of states and political subdivisions	201,638		—		(26,653)		174,985
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	117,292		4		(7,803)		109,493
Private label mortgage and asset backed securities	411,441		14		(55,913)		355,542

Total available-for-sale	$	740,468	$	18	$	(91,661)	$	648,825


	December 31, 2022
Held-to-Maturity Securities	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
Debt securities:
Obligations of states and political subdivisions	192,004		67		(23,166)		$	168,905
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,430		—		(1,762)		8,668
Private label mortgage and asset backed securities	56,691		—		(5,931)		50,760
Corporate debt securities	45,982		—		(3,066)		42,916
Total held-to-maturity	$	305,107	$	67	$	(33,925)	$	271,249

Proceeds and gross realized gains (losses) from the sales or calls of available-for-sale investment securities for the periods ended September 30, 2023 and 2022 are shown below (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Available-for-Sale Securities	2023		2022		2023		2022
Proceeds from sales or calls	$	205	$	275	$	12,580	$	235,645
Gross realized gains from sales or calls	—		—		—		5,123
Gross realized losses from sales or calls	(39)		(14)		(296)		(5,900)

The provision for income taxes includes a $87,000 and $230,000 income tax benefit from security sales for the nine months ended September 30, 2023 and 2022.

The amortized cost and estimated fair value of available-for-sale and held-to maturity investment securities at September 30, 2023 by contractual maturity is shown below (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


	September 30, 2023				December 31, 2022
Available-for-Sale Securities	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within one year	$	—	$	—	$	—	$	—
After one year through five years	9,991		8,618		—		—
After five years through ten years	35,063		28,981		45,918		38,383
After ten years	163,756		137,142		165,710		145,309
	208,810		174,741		211,628		183,692
Investment securities not due at a single maturity date:

U.S. Government agencies	103		92		107		98
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	93,303		85,946		117,292		109,493
Private label mortgage and asset backed securities	392,516		332,651		411,441		355,542

Total available-for-sale	$	694,732	$	593,430	$	740,468	$	648,825

















	September 30, 2023				December 31, 2022
Held-to-Maturity Securities	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within one year	$	—	$	—	$	—	$	—
After one year through five years	5,968		5,343		132		129
After five years through ten years	75,645		66,265		51,424		46,143
After ten years	110,443		92,564		140,448		122,633
	192,056		164,172		192,004		168,905
Investment securities not due at a single maturity date:
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,675		8,296		10,430		8,668
Private label mortgage and asset backed securities	54,943		46,840		56,691		50,760
Corporate debt securities	46,058		40,715		45,982		42,916
Total held-to-maturity	$	303,732	$	260,023	$	305,107	$	271,249

At September 30, 2023 there were nine issuers of private label mortgage securities in which the Company had holdings of securities in amounts greater than 10% of shareholders’ equity. Investments with these issuers were in senior tranches and/or were rated “AAA” or higher and there were no credit issues identified.

The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	September 30, 2023
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale Securities	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Treasury securities	$	—	$	—	$	8,616	$	(1,373)	$	8,616	$	(1,373)
U.S. Government agencies	—		—		92		(11)		92		(11)
Obligations of states and political subdivisions	—		—		166,125		(32,698)		166,125		(32,698)
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	546		(21)		85,400		(7,337)		85,946		(7,358)
Private label mortgage and asset backed securities	44		(2)		332,607		(59,868)		332,651		(59,870)

Total available-for-sale	$	590	$	(23)	$	592,840	$	(101,287)	$	593,430	$	(101,310)


	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale Securities	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Treasury securities	$	—	$	—	$	8,707	$	(1,283)	$	8,707	$	(1,283)
U.S. Government agencies	—		—		98		(9)		98		(9)
Obligations of states and political subdivisions	90,808		(12,208)		84,177		(14,445)		174,985		(26,653)
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	20,825		(1,058)		88,520		(6,745)		109,345		(7,803)
Private label mortgage and asset backed securities	126,284		(14,529)		229,152		(41,384)		355,436		(55,913)
Total available-for-sale	$	237,917	$	(27,795)	$	410,654	$	(63,866)	$	648,571	$	(91,661)

As of September 30, 2023, the Company had a total of 193 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting of 6 U.S. Treasury securities and U.S. Government agencies, 43 obligations of states and political subdivisions, 61 U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations, and 83 private label mortgage and asset backed securities.

Allowance for Credit Losses on Available-for-Sale Debt Securities

Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors. The Company did not record an ACL on any available for sale securities at September 30, 2023 or upon adoption of ASU 2016-13 on January 1, 2023. As of both dates, the Company considers the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. As of September 30, 2023, the Company determined that it is not more likely than not that there is an intention to sell securities or that the Company would be required to sell securities.

The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate increases and liquidity and were mainly comprised of the following:

•Obligations of States and Political Subdivisions: The unrealized losses on investments in obligations of states and political subdivisions are caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

•U.S. Treasury and Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations: The unrealized losses on the Company’s investments in U.S. treasuries and government sponsored entities and agencies collateralized by residential mortgage obligations were caused by interest rate changes. The contractual cash flows of those investments are guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.

•Private Label Mortgage and Asset Backed Securities: The Company has invested exclusively in AA and AAA tranches of various private label mortgage and asset backed securities. Each purchase is subject to a credit and structure review prior to their purchase. Ratings are reviewed on a quarterly basis in addition to other metrics provided through third-party services. Following review of the financial metrics and ratings, management concluded that the unrealized loss position of the private label mortgage and asset backed securities related exclusively to the fluctuation in market conditions and were not reflective of any credit concerns with the tranches comprising the Company’s investments.

No allowance for credit losses have been recognized on AFS debt securities in an unrealized loss position, as management does not believe that any of the securities are impaired due to credit risk factors as of September 30, 2023 and December 31, 2022.

Allowance for Credit Losses on Held-to-Maturity Debt Securities

The Company separately evaluates its HTM debt securities for any credit losses based on probability of default and loss given default utilizing historical industry data based on investment category, while also considering reasonable and supportable forecasts. The probability of default and loss given default are incorporated into the present value of expected cash flows and compared against amortized cost. The Company recorded an ACL on January 1, 2023 for held-to-maturity debt securities within the corporate bond and private label mortgage securities of $545,000 and $231,000, respectively.

The allowance for credit losses on HTM securities was $281,000 at September 30, 2023.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. For non-rated investment securities, management receives quarterly performance updates to monitor for any credit concerns. There were no HTM securities on nonaccrual or past due over 89 days and still on accrual. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator. U.S. Government sponsored agencies are not included in the below tables as credit ratings are not applicable.


	September 30, 2023
Debt Securities Held-to-Maturity	AAA/AA/A		BBB		Unrated
Obligations of states and political subdivisions	$	192,056	$	—	$	—

Private label mortgage and asset backed securities	46,411		—		8,532
Corporate debt securities	—		30,163		15,895
Total debt securities held-to-maturity	$	238,467	$	30,163	$	24,427

Note 3. Loans and Allowance for Credit Losses on Loans

The majority of the disclosures in this footnote are prepared at the class level, which is equivalent to the call report or call code classification. The roll forward of the allowance for credit losses is presented at the portfolio segment level. Accrued interest receivable on loans of $4,225,000 and $4,512,000 at September 30, 2023 and December 31, 2022 respectively is not included in the loan tables below and is included in other assets on the Company’s balance sheets. Outstanding loans are summarized by class as follows:


Loan Type (Dollars in thousands)	September 30, 2023		December 31, 2022
Commercial:
Commercial and industrial	$	106,061	$	141,197
Agricultural production	25,190		37,007
Total commercial	131,251		178,204
Real estate:
Construction & other land loans	81,264		109,175
Commercial real estate - owner occupied	197,228		194,663
Commercial real estate - non-owner occupied	525,835		464,809
Farmland	123,467		119,648
Multi-family residential	44,794		24,586
1-4 family - close-ended	95,573		93,510
1-4 family - revolving	28,251		30,071
Total real estate	1,096,412		1,036,462
Consumer	46,204		40,252
Total gross loans	1,273,867		1,254,918
Net deferred origination fees	1,544		1,386
Loans, net of deferred origination fees	1,275,411		1,256,304
Allowance for credit losses	(15,534)		(10,848)
Total loans, net	$	1,259,877	$	1,245,456

At September 30, 2023 and December 31, 2022, loans originated under Small Business Administration (SBA) programs totaling $18,246,000 and $19,947,000, respectively, were included in the real estate and commercial categories, of which, $13,955,000 or 76% and $15,333,000 or 77%, respectively, are secured by government guarantees.

Allowance for Credit Losses on Loans

The measurement of the allowance for credit losses on collectively evaluated loans is based on modeled expectations of lifetime expected credit losses utilizing national and local peer group historical losses, weighting of economic scenarios, and other relevant factors. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered key drivers of credit losses within the portfolio. The Company uses a probability-weighted,

multiple scenario forecast approach. These scenarios may consist of a base forecast representing the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions.

When a loan no longer shares similar risk characteristics with other loans, such as in the case of certain nonaccrual loans, the Company estimates the allowance for credit losses on an individual loan basis. There were no loans on nonaccrual or individually evaluated as of September 30, 2023 or December 31, 2022.

The following table shows the summary of activities for the allowance for credit losses for the three months ended September 30, 2023 and 2022 by portfolio segment (in thousands):


	Commercial		Commercial Real Estate		1-4 Family Real Estate		Consumer		Total
Allowance for credit losses:
Beginning balance, July 1, 2023	$	1,477	$	10,684	$	2,489	$	813	$	15,463


Provision (credit) for credit losses (1)	161		195		(71)		(20)		265
Charge-offs	(236)		—		—		(18)		(254)
Recoveries	38		—		2		20		60
Ending balance, September 30, 2023	$	1,440	$	10,879	$	2,420	$	795	$	15,534

(1) Represents credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $186 includes a $(175) credit for held-to-maturity securities and a $96 provision for unfunded loan commitments.


	Commercial			Real Estate		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance, July 1, 2022	$	1,973		$	6,994	$	769	$	137	$	9,873
Provision (credit) for credit losses (1)	118			418		(29)		(7)		500
Charge-offs	—		—	—		(20)		—		(20)
Recoveries	—			—		13		—		13
Ending balance, September 30, 2022	$	2,091		$	7,412	$	733	$	130	$	10,366

(1) Represents credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $495 includes a $5 provision for unfunded loan commitments.

The following table shows the summary of activities for the allowance for credit losses as of and for the nine months ended September 30, 2023 and 2022 by portfolio segment (in thousands):


	Commercial		Commercial Real Estate		1-4 Family Real Estate		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance, January 1, 2023 prior to adoption of ASU 2016-13 (CECL)	$	1,814	$	7,803	$	607	$	284	$	340	$	10,848
Impact of adoption of ASU 2016-13	454		1,693		1,614		489		(340)		3,910

(Credit) provision for credit losses (1)	(630)		1,383		184		30		—		967
Charge-offs	(558)		—		—		(53)		—		(611)
Recoveries	360		—		15		45		—		420
Ending balance, September 30, 2023	$	1,440	$	10,879	$	2,420	$	795	$	—	$	15,534

(1) Represents credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $476 includes a $(495) credit for held-to-maturity securities and a $4 provision for unfunded loan commitments.


	Commercial		Real Estate		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance, January 1, 2022	$	2,011	$	6,741	$	568	$	280	$	9,600
(Credit) provision for credit losses (1)	(269)		671		248		(150)		500
Charge-offs	(18)		—		(120)		—		(138)
Recoveries	367		—		37		—		404
Ending balance, September 30, 2022	$	2,091	$	7,412	$	733	$	130	$	10,366

(1) Represents credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $495 includes a $5 provision for unfunded loan commitments.

During the three and nine month periods ended September 30, 2023, the provision for credit losses was primarily driven by weakening economic scenario forecasts in commercial real estate and multi-family and increases in commercial real estate and multi-family loan balances, partially offset by lower loan balances in the commercial loan segment. Management believes that the allowance for credit losses at September 30, 2023 appropriately reflected expected credit losses in the loan portfolio at that date.

The following table shows the loan portfolio by class, net of deferred fees, allocated by management’s internal risk ratings for the period indicated (in thousands):


	Term Loans Amortized Cost Basis by Origination Year As of September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Converted to Term		Total
Commercial and industrial
Pass/Watch	$	16,221	$	22,452	$	21,652	$	4,966	$	1,852	$	8,127	$	25,568	$	215	$	101,053
Special mention	—		294		151		188		703		276		3,500		—		5,112
Substandard	—		—		—		192		—		87		—		—		279
Total	$	16,221	$	22,746	$	21,803	$	5,346	$	2,555	$	8,490	$	29,068	$	215	$	106,444
Current period gross write-offs	$	241	$	—	$	323	$	—	$	—	$	—	$	—	$	—	$	564

Agricultural production
Pass/Watch	$	144	$	242	$	15	$	—	$	251	$	162	$	15,105	$	999	$	16,918
Special mention	—		—		—		—		—		—		6,940		—		6,940
Substandard	—		1,366		—		—		—		—		—		—		1,366
Total	$	144	$	1,608	$	15	$	—	$	251	$	162	$	22,045	$	999	$	25,224
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction & other land loans
Pass/Watch	$	1,734	$	18,366	$	21,988	$	10,801	$	1,677	$	2,795	$	5,263	$	—	$	62,624
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		2,452		—		—		15,928		—		—		—		18,380
Total	$	1,734	$	20,818	$	21,988	$	10,801	$	17,605	$	2,795	$	5,263	$	—	$	81,004
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate - owner occupied
Pass/Watch	$	13,216	$	23,104	$	20,962	$	28,148	$	22,170	$	82,973	$	2,887	$	—	$	193,460
Special mention	—		—		—		—		—		1,420		247		—		1,667
Substandard	—		—		—		—		—		2,126		—		—		2,126


Total	$	13,216	$	23,104	$	20,962	$	28,148	$	22,170	$	86,519	$	3,134	$	—	$	197,253
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate - non-owner occupied
Pass/Watch	$	71,209	$	114,906	$	77,927	$	40,903	$	23,257	$	181,300	$	12,308	$	—	$	521,810
Special mention	—		600		—		—		—		434		—		—		1,034
Substandard	—		—		—		—		—		2,362		—		—		2,362
Total	$	71,209	$	115,506	$	77,927	$	40,903	$	23,257	$	184,096	$	12,308	$	—	$	525,206
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Farmland
Pass/Watch	$	5,597	$	23,972	$	10,960	$	29,810	$	11,221	$	23,816	$	13,685	$	1,955	$	121,016
Special mention	—		—		—		2,213		—		—		—		—		2,213
Substandard	—		—		—		—		—		196		—		—		196
Total	$	5,597	$	23,972	$	10,960	$	32,023	$	11,221	$	24,012	$	13,685	$	1,955	$	123,425
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family residential
Pass/Watch	$	2,992	$	1,858	$	20,358	$	2,381	$	4,561	$	12,134	$	531	$	—	$	44,815
Special mention	—		—		—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—		—
Total	$	2,992	$	1,858	$	20,358	$	2,381	$	4,561	$	12,134	$	531	$	—	$	44,815
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family - close-ended
Pass/Watch	$	—	$	64,585	$	8,052	$	2,305	$	2,122	$	18,624	$	—	$	—	$	95,688
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	—	$	64,585	$	8,052	$	2,305	$	2,122	$	18,624	$	—	$	—	$	95,688
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family - revolving
Pass/Watch			$	—	$	—	$	—	$	—	$	—	$	22,376	$	6,103	$	28,479
Special mention			—		—		—		—		—		—		—		—
Substandard			—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	22,376	$	6,103	$	28,479
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Pass/Watch	$	23,021	$	9,655	$	7,254	$	2,450	$	2,168	$	2,650	$	640	$	4	$	47,842
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		31		—		—		—		—		—		31
Total	$	23,021	$	9,655	$	7,285	$	2,450	$	2,168	$	2,650	$	640	$	4	$	47,873
Current period gross write-offs	$	20	$	—	$	—	$	—	$	27	$	—	$	—	$	—	$	47



Total loans outstanding (risk rating):
Pass/Watch	$	134,134	$	279,140	$	189,168	$	121,764	$	69,279	$	332,581	$	98,363	$	9,276	$	1,233,705
Special mention	—		894		151		2,401		703		2,130		10,687		—		16,966
Substandard	—		3,818		31		192		15,928		4,771		—		—		24,740
Grand Total	$	134,134	$	283,852	$	189,350	$	124,357	$	85,910	$	339,482	$	109,050	$	9,276	$	1,275,411
Current period total gross write-offs	$	261	$	—	$	323	$	—	$	27	$	—	$	—	$	—	$	611

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


	Pass		Special Mention		Substandard		Doubtful		Total
Commercial:
Commercial and industrial	$	131,300	$	8,707	$	1,655	$	—	$	141,662
Agricultural production	24,926		6,713		5,399		—		37,038
Real Estate:
Construction & other land loans	93,817		—		15,024		—		108,841
Commercial real estate - owner occupied	189,344		3,283		2,169		—		194,796
Commercial real estate - non-owner occupied	458,746		3,440		2,412		—		464,598
Farmland	109,898		8,879		824		—		119,601
Multi-family residential	24,636		—		—		—		24,636
1-4 family - close-ended	93,644		—		—		—		93,644
1-4 family - revolving	30,031		—		266		—		30,297
Consumer:	41,155		2		34		—		41,191
Total	$	1,197,497	$	31,024	$	27,783	$	—	$	1,256,304

The following table shows an aging analysis of the loan portfolio by class at September 30, 2023 (in thousands):


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Loans Past Due > 89 Days, Still Accruing		Non-accrual
Commercial:
Commercial and industrial	$	37	$	—	$	—	$	37	$	106,024	$	106,061	$	—	$	—
Agricultural production	—		—		—		—		25,190		25,190		—		—
Real estate:	—
Construction & other land loans	—		—		—		—		81,264		81,264		—		—
Commercial real estate - owner occupied	—		—		—		—		197,228		197,228		—		—
Commercial real estate - non-owner occupied	—		—		—		—		525,835		525,835		—		—
Farmland	—		—		—		—		123,467		123,467		—		—
Multi-family residential	—		—		—		—		44,794		44,794		—		—
1-4 family - close-ended	—		—		—		—		95,573		95,573		—		—
1-4 family - revolving	—		—		—		—		28,251		28,251		—		—

Consumer	199		—		—		199		46,005		46,204		—		—
Deferred fees	—		—		—		—		$	1,544	1,544		—		—
Total	$	236	$	—	$	—	$	236	$	1,275,175	$	1,275,411	$	—	$	—

The following table shows an aging analysis of the loan portfolio by class at December 31, 2022 (in thousands):


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Loans Past Due > 89 Days, Still Accruing		Non- accrual
Commercial:
Commercial and industrial	$	440	$	—	$	—	$	440	$	140,757	$	141,197	$	—	$	—
Agricultural production	—		—		—		—		37,007		37,007		—		—
Real estate:	—
Construction & other land loans	—		—		—		—		109,175		109,175		—		—
Commercial real estate - owner occupied	250		—		—		250		194,413		194,663		—		—
Commercial real estate - non-owner occupied	4,507		—		—		4,507		460,302		464,809		—		—
Farmland	—		—		—		—		119,648		119,648		—		—
Multi-family residential	—		—		—		—		24,586		24,586		—		—
1-4 family - close-ended	—		—		—		—		93,510		93,510		—		—
1-4 family - revolving	465		—		—		465		29,606		30,071		—		—

Consumer	233		—		—		233		40,019		40,252		—		—
Deferred fees	—		—		—		—		1,386		1,386		—		—
Total	$	5,895	$	—	$	—	$	5,895	$	1,250,409	$	1,256,304	$	—	$	—

As of September 30, 2023 and December 31, 2022 there were no collateral dependent loans.

There was no foregone interest on nonaccrual loans for the three and nine month periods ended September 30, 2023. Foregone interest on nonaccrual loans totaled $75,000 and $132,000 for the three and nine month periods ended September 30, 2022, respectively.

Occasionally, the Company modifies loans to borrowers in financial distress by providing reductions of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. There were no loan modifications granted to borrowers experiencing financial difficulty during the nine month period ended September 30, 2023 or during 2022. As of December 31, 2022, the Company had a recorded investment in troubled debt restructurings (“TDR”) of $2,372,000. The Company allocated $314,000 of specific reserves for those loans at December 31, 2022. The Company committed to lend no additional amounts as of December 31, 2022 to customers with outstanding loans that were classified as troubled debt restructurings.

Note 4. Borrowing Arrangements

As of September 30, 2023 the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances as compared to $46,000,000 at December 31, 2022.

Approximately $575,783,000 in loans and $20,739,000 in securities were pledged under a blanket lien as collateral to the FHLB resulting in borrowing capacity of $340,197,000 as of September 30, 2023. The Bank’s credit limit varies according to the amount and composition of the investment and loan portfolios pledged as collateral. As of September 30, 2023, and December 31, 2022 the Company had no Federal funds purchased.

The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at September 30, 2023 and December 31, 2022:


Credit Lines (In thousands)	September 30, 2023		December 31, 2022
Unsecured Credit Lines
Credit limit	$	110,000	$	110,000
Balance outstanding	$	—	$	—
Federal Home Loan Bank
Credit limit	$	340,197	$	319,309
Balance outstanding	$	—	$	46,000
Collateral pledged	$	596,523	$	687,357
Fair value of collateral	$	497,968	$	565,869
Federal Reserve Bank Term Loan Funding Program
Credit limit	$	37,245	$	—
Balance outstanding	$	—	$	—
Collateral pledged	$	54,380	$	—
Fair value of collateral	$	46,281	$	—
Federal Reserve Bank
Credit limit	$	4,242	$	4,702
Balance outstanding	$	—	$	—
Collateral pledged	$	5,073	$	5,508
Fair value of collateral	$	4,306	$	4,893

Note 5. Senior Debt and Subordinated Debentures

The following table summarizes the Company’s long-term debt:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Fixed - floating rate subordinated debentures, due 2031	$	35,000	$	35,000
Unamortized debt issuance costs	(447)		(556)
Floating rate senior debt bank loan, due 2032	30,000		30,000
Junior subordinated deferrable interest debentures, due October 2036	5,155		5,155
Total subordinated debentures	$	69,708	$	69,599

Junior Subordinated Debentures

Service 1st Capital Trust I is a Delaware business trust formed by Service 1st. The Company succeeded to all of the rights and obligations of Service 1st in connection with the merger with Service 1st as of November 12, 2008. The Trust was formed on August 17, 2006 for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by Service 1st. Under applicable regulatory guidance, the amount of trust preferred securities that is eligible as Tier 1 capital is limited to 25% of the Company’s Tier 1 capital on a pro forma basis. At September 30, 2023, all of the trust preferred securities that have been issued qualify as Tier 1 capital. The trust preferred securities mature on October 7, 2036, are redeemable at the Company’s option, and require quarterly distributions by the Trust to the holder of the trust preferred securities at a variable interest rate which will adjust quarterly to equal the three month SOFR plus 1.60%.

The Trust used the proceeds from the sale of the trust preferred securities to purchase approximately $5,155,000 in aggregate principal amount of Service 1st’s junior subordinated notes (the Notes). The Notes bear interest at the same variable interest rate during the same quarterly periods as the trust preferred securities. The Notes are redeemable by the Company on any January 7, April 7, July 7, or October 7 or at any time within 90 days following the occurrence of certain events, such as: (i) a change in the regulatory capital treatment of the Notes (ii) in the event the Trust is deemed an investment company or (iii) upon the occurrence of certain adverse tax events. In each such case, the Company may redeem the Notes for their aggregate principal amount, plus any accrued but unpaid interest.

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

Holders of the trust preferred securities are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security. For each January 7, April 7, July 7 or October 7 of each year, the rate will be adjusted to equal the three month SOFR plus 1.60%. As of September 30, 2023, the rate was 7.12%. Interest expense recognized by the Company for the three months ended September 30, 2023 and 2022 was $97,000 and $65,000, respectively. Interest expense recognized by the Company for the nine months ended September 30, 2023 and 2022 was $267,000 and $112,000, respectively.

Subordinated Debentures

On November 12, 2021, the Company completed a private placement of $35,000,000 aggregate principal amount of its fixed-to-floating rate subordinated notes (“Subordinated Debt”) due December 1, 2031. The Subordinated Debt initially bears a fixed interest rate of 3.125% per year. Commencing on December 1, 2026, the interest rate on the Subordinated Debt will reset each quarter at a floating interest rate equal to the then-current three month term SOFR plus 2.10%. The Company may at its option redeem in whole or in part the Subordinated Debt on or after November 12, 2026 without a premium. The Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.

Interest expense recognized by the Company for the Subordinated Debentures for the three months ended September 30, 2023 and 2022 was $310,000. Interest expense recognized by the Company for the Subordinated Debentures for the nine months ended September 30, 2023 and 2022 was $929,000.

Senior Debt

On September 15, 2022, the Company entered into a $30,000,000 loan agreement with Bell Bank. Initially, payments of interest only are payable in 12 quarterly payments commencing December 31, 2022. 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. A final payment of outstanding principal and accrued interest is due at maturity on September 30, 2032. Variable interest is payable at the Prime Rate (published by the Wall Street Journal) less 50 basis points.

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. The Company may prepay the loan without penalty with one exception. 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. The loan contains customary representations, covenants, and events of default.

Interest expense recognized by the Company for the Senior Debt for the three and nine months ended September 30, 2023 was $517,000 and $1,536,000, respectively.

Note 6. Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk - In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for loans.

Commitments to extend credit amounting to $271,215,000 and $288,141,000 were outstanding at September 30, 2023 and December 31, 2022, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract unless waived by the Bank. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Included in commitments to extend credit are undisbursed lines of credit totaling $269,267,000 and $286,925,000 at September 30, 2023 and December 31, 2022, respectively. Undisbursed lines of credit include credits whereby customers can repay principal and request principal advances during the term of the loan at their discretion and most expire between one and 12 months.

Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $45,760,000 and $45,604,000 as of September 30, 2023 and December 31, 2022, respectively. These commitments are agreements to lend to customers, subject to meeting certain construction progress requirements established in the contracts. The underlying construction loans have fixed expiration dates.

Standby letters of credit and financial guarantees amounting to $1,948,000 and $1,216,000 were outstanding at September 30, 2023 and December 31, 2022, respectively. Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private financial arrangements. Standby letters of credit and guarantees carry a one year term or less, many have auto-renewal features. The fair value of the liability related to these standby letters of credit, which represents the fees received for their issuance, was not significant at September 30, 2023 or December 31, 2022. The Company recognizes these fees as revenue over the term of the commitment or when the commitment is used.

The Company generally requires collateral or other security to support financial instruments with credit risk. Management does not anticipate any material loss will result from the outstanding commitments to extend credit, standby letters of credit and financial guarantees. At September 30, 2023 and December 31, 2022, the allowance for credit losses of unfunded commitments was $725,000 and $110,000, respectively. The allowance for credit losses of unfunded commitments is calculated by management using an appropriate, systematic, and consistently applied process. While related to credit losses, this allocation is not a part of the allowance for credit losses on loans and is considered separately as a liability for accounting and regulatory reporting purposes, and is included in Other Liabilities on the Company’s balance sheet.

The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or consolidated results of operations of the Company.

Note 7. Other Income and Expense

The following table shows significant components of other non-interest income for the periods indicated:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022		2023		2022
Appreciation in cash surrender value of bank owned life insurance	$	260	$	249	$	763	$	736
Loan placement fees	119		155		415		722
Interchange Fees	450		432		1,353		1,352
Federal Home Loan Bank dividends	134		91		349		258
Other	283		92		1,036		235
Total other non-interest income	$	1,246	$	1,019	$	3,916	$	3,303

The following table shows significant components of other non-interest expense for the periods indicated:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022		2023		2022
Regulatory assessments	$	358	$	224	$	924	$	640
Data processing expense	680		560		1,949		1,649
ATM/Debit card expenses	192		176		569		588
Internet banking	40		29		121		98
Advertising	133		138		382		416
Professional Services	842		613		2,076		1,451
Information technology	915		879		2,697		2,465
Directors’ expenses	150		91		464		184
Loan related expenses	106		156		393		349
Personnel other	51		57		373		219
Amortization of core deposit intangibles	—		139		68		419
Other	1,005		878		2,935		2,483
Total other non-interest expense	$	4,472	$	3,940	$	12,951	$	10,961

Note 8. Earnings Per Share

Basic earnings per share (EPS), which excludes dilution, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options or restricted stock awards, result in the issuance of common stock which shares in the earnings of the Company.

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


Basic Earnings Per Share	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands, except share and per share amounts)	2023		2022		2023		2022


Net income	$	6,390	$	6,384	$	19,642	$	19,012
Weighted average shares outstanding	11,742,334		11,678,532		11,723,233		11,723,790
Basic earnings per share	$	0.54	$	0.55	$	1.67	$	1.62


Diluted Earnings Per Share	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands, except share and per share amounts)	2023		2022		2023		2022


Net income	$	6,390	$	6,384	$	19,642	$	19,012
Weighted average shares outstanding	11,742,334		11,678,532		11,723,233		11,723,790
Effect of diluted stock options and restricted stock	13,424		10,791		22,373		24,903
Weighted average shares of common stock and common stock equivalents	11,755,758		11,689,323		11,745,606		11,748,693
Diluted earnings per share	$	0.54	$	0.55	$	1.67	$	1.62

No options awards were anti-dilutive for the nine months ended September 30, 2022. There were no outstanding options at September 30, 2023. The two-class method for the calculation of earnings per share was applicable for the periods presented, but not materially significant.

Note 9. Share-Based Compensation

In May 2015, the Company adopted the Central Valley Community Bancorp 2015 Omnibus Incentive Plan (2015 Plan). The plan provides for awards in the form of stock options, stock appreciation rights, and restricted stock. The plan also allows for performance awards that may be in the form of cash or shares of the Company’s common stock. With respect to stock options and restricted stock the exercise price in the case of stock options and the grant value in the case of restricted stock may not be less than the fair market value at the date of the award. The options and awards under the plan expire on dates determined by the Board of Directors, but not later than ten years from the date of grant. The vesting period for stock options and restricted stock rights is determined by the Board of Directors and ranges one to five five years. The maximum number of shares that can be issued with respect to all awards under the plan is 875,000. Currently under the 2015 Plan, 612,652 shares remain reserved for future grants as of September 30, 2023.

Share-based compensation cost recognized for the 2015 Plan plans was $170,000 and $689,000 for the three and nine months ended September 30, 2023, respectively, and $143,000 and $603,000 for the three and nine months ended September 30, 2022, respectively. The recognized tax benefit for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $0 for the three and nine months ended September 30, 2023, and $18,000 and $87,000 for the three and nine months ended September 30, 2022, respectively.

Restricted Stock and Common Stock Awards

The 2015 Plan provides for the issuance of restricted common stock to directors and officers and common stock awards based on the achievement of performance goals as determined by the Board of Directors or in accordance with executive employment agreements. Restricted common stock grants typically vest over a one to five-year period. Restricted common stock is subject to forfeiture if employment terminates prior to vesting. The cost of these awards is recognized over the vesting period of the awards based on the fair value of our common stock on the date of the grant.

The shares awarded to employees and directors under the restricted stock agreements vest on applicable vesting dates only to the extent the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment or service is terminated. Common stock awards for performance vest immediately. Holders of restricted stock awards receive non-forfeitable dividends at the same rate as common stockholders and they both share equally in undistributed earnings. Therefore, under the two-class method the difference in EPS is not significant for these participating securities.

The following table summarizes restricted stock activity for the nine months ended September 30, 2023 as follows:


	Shares	Weighted Average Grant-Date Fair Value
Nonvested outstanding shares at December 31, 2022	46,706	$	17.28
Granted	69,692	$	15.86
Vested	(40,387)	$	17.90
Forfeited	(878)	$	15.19
Nonvested outstanding shares at September 30, 2023	75,133	$	15.83

As of September 30, 2023, there were 75,133 shares of restricted stock that are nonvested and expected to vest. As of September 30, 2023, there was $926,085 of total unrecognized compensation cost related to nonvested restricted common stock awards. Restricted stock compensation expense is recognized on a straight-line basis over the vesting period. This cost is expected to be recognized over a weighted-average remaining period of 2.24 years and will be adjusted for subsequent changes in estimated forfeitures. Restricted common stock awards had an intrinsic value of $649,000 at September 30, 2023.

Note 10. Fair Value Measurements

Fair Value Hierarchy

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

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

Level 2 —Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

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

The estimated carrying and fair values of the Company’s financial instruments not carried at fair value are as follows (in thousands):


	September 30, 2023
	Carrying Amount		Fair Value
(In thousands)			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	27,558	$	27,558	$	—	$	—	$	27,558
Interest-earning deposits in other banks	47,017		47,017		—		—		47,017

Held-to-maturity investment securities	303,451		—		260,023		—		260,023
Loans, net	1,259,877		—		—		1,172,613		1,172,613
Financial liabilities:
Time deposits	163,246		—		161,758		—		161,758

Senior debt and subordinated debentures	69,708		—		—		58,848		58,848


	December 31, 2022
	Carrying Amount		Fair Value
(In thousands)			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	25,485	$	25,485	$	—	$	—	$	25,485
Interest-earning deposits in other banks	5,685		5,685		—		—		5,685

Held-to-maturity investment securities	305,107		—		271,249		—		271,249

Loans, net	1,245,456		—		—		1,113,849		1,113,849
Financial liabilities:
Time deposits	67,923		—		67,047		—		67,047
Short-term borrowings	46,000		—		46,000		—		46,000
Subordinated debentures	69,599		—		—		62,504		62,504

The methods and assumptions used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents — The carrying amounts of cash and due from banks, interest-earning deposits in other banks, and Federal funds sold approximate fair values and are classified as Level 1.

(b) Investment securities — The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

(c) Loans — Fair values of loans are estimated as follows: fixed and variable loans are estimated using discounted cash flow analyses, taking into consideration various factors including loan type, credit loss and prepayment expectations. The loan cash flows are discounted to present value using a combination of existing market rates and liquidity spreads as well as underlying index rates and margins on variable rate loans resulting in a Level 3 classification.

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

(e) Short-Term Borrowings — The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

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

Assets Recorded at Fair Value

The Company is required or permitted to record the following assets at fair value on a recurring basis. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:


	Fair Value Measurements Using
September 30, 2023	Fair Value		Level 1		Level 2		Level 3
Available-for-sale debt securities:
U.S. Treasury securities	$	8,616	$	—	$	8,616	$	—
U.S. Government agencies	92		—		92		—
Obligations of states and political subdivisions	166,125		—		166,125		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	85,946		—		85,946		—
Private label mortgage and asset backed securities	332,651		—		332,651		—

Equity securities	6,354		6,354		—		—
Total assets measured at fair value on a recurring basis	$	599,784	$	6,354	$	593,430	$	—


	Fair Value Measurements Using
December 31, 2022	Fair Value		Level 1		Level 2		Level 3
Available-for-sale debt securities:
U.S. Treasury securities	$	8,707	$	—	$	8,707	$	—
U.S. Government agencies	98		—		98		—
Obligations of states and political subdivisions	174,985		—		174,985		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	109,493		—		109,493		—
Private label mortgage and asset backed securities	355,542		—		355,542		—
Equity securities	6,558		6,558		—		—
Total assets measured at fair value on a recurring basis	$	655,383	$	6,558	$	648,825	$	—

There were no changes in valuation techniques used during the nine months ended September 30, 2023 or the year ended December 31, 2022. There were no assets measured on a non-recurring basis at September 30, 2023 and December 31, 2022.

Note 11. Subsequent Events

Dividend Declared

On October 18, 2023, the Board of Directors declared a $0.12 per share cash dividend payable on November 17, 2023 to shareholders of record as of November 3, 2023.

Other Events

On October 3, 2023, the Company executed a sale of property in connection with a branch relocation. The gain recognized on the sale was $371,000. On October 26, 2023, the Company sold $10 million of available-for-sale securities for a net loss of $365,000.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain matters discussed in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein that are not historical facts, such as statements regarding the Company’s current business strategy and the Company’s plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Such risks and uncertainties include, but are not limited to (1) significant increases in competitive pressure in the banking industry; (2) the impact of changes in interest rates; (3) inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in the portfolio or in the secondary market; (4) our ability to mitigate and manage deposit liabilities in a manner that balances the need to meet current and expected withdrawals while investing a sufficient portion of our assets to promote strong earning capacity; (5) changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses; (6) a decline in economic conditions in the Central Valley and the Greater Sacramento Region, including the impact of inflation; (7) the Company’s ability to continue its internal growth at historical rates; (8) the Company’s ability to maintain its net interest margin; (9) the decline in quality of the Company’s earning assets; (10) a decline in credit quality; (11) changes in the regulatory environment; (12) fluctuations in the real estate market; (13) changes in business conditions and inflation; (14) changes in securities markets; (15) regulatory limits on Central Valley Community Bank’s ability to pay dividends to the Company; (16) risks associated with acquisitions, relating to difficulty in integrating combined operations and related negative impact on earnings, and incurrence of substantial expenses; (17) political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, pandemic diseases or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; (18) the other risks set forth in the Company’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2022. Therefore, the information set forth in such forward-looking statements should be carefully considered when evaluating the business prospects of the Company.

When the Company uses in this Quarterly Report on Form 10-Q the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “commit,” “believe,” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and shareholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. 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. The Internet address is: www.sec.gov. In addition, our periodic and current reports are available free of charge on our website at www.cvcb.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

General

We are a central California-based bank holding company for a one-bank subsidiary, Central Valley Community Bank (the “Bank” or “CVCB”). We provide traditional commercial banking services to small and medium-sized businesses and individuals in the communities along the Highway 99 corridor in the Fresno, El Dorado, Madera, Merced, Placer, Sacramento, Stanislaus, San Joaquin, and Tulare Counties of central California.

On October 10, 2023, the Company, entered into an Agreement and Plan of Reorganization and Merger (the “Merger Agreement”) with Community West Bancshares, a California corporation (“Community West”), pursuant to which Community West will merge with and into the Company in an all stock merger (the “Merger”), with the Company as the surviving corporation. Promptly following the completion of the Merger, Community West Bank, N.A. a national banking association chartered by the Office of the Comptroller of the Currency and a wholly owned subsidiary of Community West (“CWB”) will merge with and into CVCB, with CVCB as the surviving entity (the “Bank Merger”) and will continue the commercial banking operations of the combined bank following the bank merger. Effective with the Merger and the Bank Merger the Company and CVCB will be rebranded and change their names to “Community West Bancshares” and “Community West Bank”, respectively. Upon consummation of the Merger, each share of Community West common stock, no par value per share, outstanding immediately prior to the effective time of the Merger will be canceled and converted into the right to receive 0.79 of a share of the Company’s common stock, no par value (the “per share exchange ratio”). Any fractional shares will be paid in cash equal to the product of (i) such fraction, multiplied by the closing price of the Company’s common stock reported on NASDAQ on the last trading day preceding the closing date. Based on the closing price of the Company’s common stock on October 10, 2023, the aggregate merger consideration would be approximately $99.4 million, or $11.15 per share of Community West common stock, assuming 8,851,380 shares of Community West Common Stock and 601,503 Community West stock options outstanding. The completion of the Merger is subject to certain customary conditions and the transaction is expected to close in the second quarter of 2024.

Dividend Declared

On October 18, 2023, the Board of Directors declared a $0.12 per share cash dividend payable on November 17, 2023 to shareholders of record as of November 3, 2023.

Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. 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.

Allowance for Credit Losses

As a result of our January 1, 2023, adoption of Accounting Standards Update (“ASU”) No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” and its related amendments, our methodology for estimating the allowance for credit losses changed significantly from December 31, 2022. The standard replaced the “incurred loss” approach with an “expected loss” approach known as current expected credit loss (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of a financial asset carried at amortized cost. It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”

The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable.

Management’s evaluation of the appropriateness of the allowance for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the allowance for credit losses is a critical accounting estimate as it requires significant reliance on the use of estimates and significant judgment as to the amount and timing of expected future cash flows on criticized loans, significant reliance on historical loss rates, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts.

The allowance for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans.

Going forward, the impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the reserve for

credit losses, and therefore, greater volatility to our reported earnings. See Note 1 to the Consolidated Financial Statements and the “Allowance for Credit Losses on Loans” section below.

Please refer to the Company’s 2022 Annual Report on Form 10-K for a complete listing of critical accounting policies.

Financial Highlights

The significant highlights for the Company as of or for the period ended September 30, 2023 included the following:

•Net income for the third quarter of 2023 increased to $6,390,000 or $0.54 per diluted common share, compared to $6,282,000 and $0.54, respectively, in the second quarter of 2023.

•Net loans increased $14.4 million or 1.16%, and total assets increased $12.8 million or 0.53% at September 30, 2023 compared to December 31, 2022. During the quarter, net loans increased $19.7 million or 1.59%.

•Total deposits increased 2.34% to $2.15 billion at September 30, 2023 compared to December 31, 2022.

•Total cost of deposits increased to 0.90% for the quarter ended September 30, 2023 compared to 0.88% for the quarter ended June 30, 2023.

•Average non-interest bearing demand deposit accounts as a percentage of total average deposits was 44.54% and 50.42% for the quarters ended September 30, 2023 and December 31, 2022, respectively.

•Net interest margin increased to 3.47% for the quarter ended September 30, 2023, from 3.46% for the quarter ended June 30, 2023.

•There were no non-performing assets for the quarter ended September 30, 2023. Additionally, net loan charge-offs were $194,000 and loans delinquent more than 30 days were $236,000.

•Capital positions remain strong at September 30, 2023 with a 8.70% Tier 1 Leverage Ratio; a 12.51% Common Equity Tier 1 Ratio; a 12.81% Tier 1 Risk-Based Capital Ratio; and a 15.81% Total Risk-Based Capital Ratio.

•The Company declared a $0.12 per common share cash dividend, payable on November 17, 2023 to shareholders of record as of November 3, 2023.

Overview

The following is management’s discussion and analysis of the Company’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report.

RESULTS OF OPERATIONS


	For the Three Months Ended						For the Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,
(In thousands, except share and per-share amounts)	2023		2023		2022		2023		2022
Net interest income before (credit) provision for credit losses	$	20,527	$	20,205	$	20,164	$	62,313	$	57,571
Provision (credit) for credit losses	186		(343)		495		476		495
Net interest income after (credit) provision for credit losses	20,341		20,548		19,669		61,837		57,076
Total non-interest income	1,583		1,594		1,480		4,752		4,084
Total non-interest expenses	13,436		13,805		12,803		40,446		36,331
Income before provision for income taxes	8,488		8,337		8,346		26,143		24,829
Provision for income taxes	2,098		2,055		1,962		6,501		5,817
Net income	$	6,390	$	6,282	$	6,384	$	19,642	$	19,012

Net income increased to $6,390,000 for the three months ended September 30, 2023 compared to $6,384,000 for the three months ended September 30, 2022. Basic and diluted earnings per share for the quarter ended September 30, 2023 were $0.54. Basic and diluted earnings per share for the same period in 2022 were $0.55. Net income for the period was impacted by an increase in total non-interest expenses of $633,000, primarily driven by the increase in non-recurring expenses in professional services and regulatory assessment expense, and an increase in the provision for income taxes of $136,000, partially offset by an increase in net interest income before provision for credit losses of $363,000 and an increase in non-interest income of

$103,000. During the quarter ended September 30, 2023, the Company recorded a $186,000 provision for credit losses, compared to $495,000 provision during the quarter ended September 30, 2022.

Net income increased to $19,642,000 for the nine months ended September 30, 2023 compared to $19,012,000 for the nine months ended September 30, 2022. Basic and diluted earnings per share for the nine months ended September 30, 2023 were $1.67. Basic and diluted earnings per share for the same period in 2022 were $1.62. Annualized return on average equity (“ROAE”) was 14.16% for the nine months ended September 30, 2023 compared to 12.98% for the nine months ended September 30, 2022. Annualized return on average assets (“ROAA”) for the nine months ended September 30, 2023 and 2022 was 1.06% and 1.04%, respectively.

The increase in net income for the nine months ended September 30, 2023 compared to the same period in 2022 was primarily driven by an increase of $16,957,000 in total interest income, offset by an increase in total interest expense of $12,215,000. Additionally, the nine month period saw an increase in non-interest income of $668,000 and an increase in non-interest expense of $4,115,000. During the nine months ended September 30, 2023, the Company recorded a $476,000 provision for credit losses, compared to $495,000 provision during the nine months ended September 30, 2022. The provision for credit loses resulted from our assessment of the overall adequacy of the allowance for credit losses on loan, HTM debt securities, and unfunded commitments.

Net Interest Income and Net Interest Margin

The level of net interest income depends on several factors in combination, including yields on earning assets, the cost of interest-bearing liabilities, the relative volumes of earning assets and interest-bearing liabilities, and the mix of products which comprise the Company’s earning assets, deposits, and other interest-bearing liabilities. To maintain its net interest margin, the Company must manage the relationship between interest earned and paid.

The following Distribution, Rate and Yield table presents the average amounts outstanding for the major categories of the Company’s balance sheet, the average interest rates earned or paid thereon, and the resulting net interest margin on average interest earning assets for the periods indicated. Average balances are based on daily averages.

CENTRAL VALLEY COMMUNITY BANCORP

SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES


	For the Three Months Ended September 30, 2023						For the Three Months Ended September 30, 2022
(Dollars in thousands)	Average Balance		Interest Income/ Expense		Average Interest Rate		Average Balance		Interest Income/ Expense		Average Interest Rate
ASSETS
Interest-earning deposits in other banks	$	109,199	$	1,481	5.42	%	$	6,192	$	48	3.10	%
Securities
Taxable securities	755,630		5,900		3.12	%	819,649		4,411		2.15	%
Non-taxable securities (1)	255,788		1,764		2.76	%	276,125		2,311		3.35	%
Total investment securities	1,011,418		7,664		3.03	%	1,095,774		6,722		2.45	%

Total securities and interest-earning deposits	1,120,617		9,145		3.26	%	1,101,966		6,770		2.46	%
Loans (2) (3)	1,266,296		17,692		5.54	%	1,189,762		14,708		4.90	%

Total interest-earning assets	2,386,913		$	26,837	4.46	%	2,291,728		$	21,478	3.72	%
Allowance for credit losses	(15,300)						(9,877)
Non-accrual loans	—						260

Cash and due from banks	28,680						32,144
Bank premises and equipment	11,461						7,984
Other assets	91,231						92,175
Total average assets	$	2,502,985					$	2,414,414
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings and NOW accounts	$	454,151	$	169	0.15	%	$	584,070	$	60	0.04	%
Money market accounts	576,866		2,846		1.96	%	443,301		142		0.13	%
Time certificates of deposit	195,155		2,000		4.07	%	78,563		29		0.15	%

Total interest-bearing deposits	1,226,172		5,015		1.62	%	1,105,934		231		0.08	%
Other borrowed funds	69,691		924		5.30	%	60,794		597		3.93	%
Total interest-bearing liabilities	1,295,863		$	5,939	1.82	%	1,166,728		$	828	0.28	%
Non-interest bearing demand deposits	984,912						1,041,698
Other liabilities	34,231						28,905
Shareholders’ equity	187,979						177,083
Total average liabilities and shareholders’ equity	$	2,502,985					$	2,414,414
Interest income and rate earned on average earning assets			$	26,837	4.46	%			$	21,478	3.72	%
Interest expense and interest cost related to average interest-bearing liabilities			5,939		1.82	%			828		0.28	%
Net interest income and net interest margin (4)			$	20,898	3.47	%			$	20,650	3.57	%

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $371 and $486 at September 30, 2023 and September 30, 2022, respectively.

(2) Loan interest income includes loan costs of $8 and $80 at September 30, 2023 and September 30, 2022, respectively.

(3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.

(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.

CENTRAL VALLEY COMMUNITY BANCORP

SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES


	For the Nine Months Ended September 30, 2023						For the Nine Months Ended September 30, 2022
(Dollars in thousands)	Average Balance		Interest Income/ Expense		Average Interest Rate		Average Balance		Interest Income/ Expense		Average Interest Rate
ASSETS
Interest-earning deposits in other banks	$	74,780	$	2,930	5.22	%	$	55,925	$	157	0.37	%
Securities:
Taxable securities	768,187		17,612		3.06	%	881,860		14,586		2.21	%
Non-taxable securities (1)	256,615		5,321		2.76	%	269,054		6,512		3.23	%
Total investment securities	1,024,802		22,933		2.98	%	1,150,914		21,098		2.44	%

Total securities and interest-earning deposits	1,099,582		25,863		3.14	%	1,206,839		21,255		2.35	%
Loans (2) (3)	1,261,509		51,851		5.50	%	1,098,274		39,752		4.84	%
Total interest-earning assets	2,361,091		$	77,714	4.40	%	2,305,113		$	61,007	3.54	%
Allowance for credit losses	(13,852)						(9,860)
Nonaccrual loans	—						317

Cash and due from banks	27,577						39,152
Bank premises and equipment	9,654						8,139
Other assets	90,507						95,772
Total average assets	$	2,474,977					$	2,438,633
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings and NOW accounts	$	485,329	$	422	0.12	%	$	587,859	$	130	0.03	%
Money market accounts	531,226		6,105		1.54	%	501,700		488		0.13	%
Time certificates of deposit	163,611		4,363		3.57	%	84,994		96		0.15	%

Total interest-bearing deposits	1,180,166		10,890		1.23	%	1,174,553		714		0.08	%
Other borrowed funds	87,741		3,393		5.16	%	59,646		1,354		3.03	%
Total interest-bearing liabilities	1,267,907		$	14,283	1.51	%	1,234,199		$	2,068	0.22	%
Non-interest bearing demand deposits	988,620						977,164
Other liabilities	33,448						31,975
Shareholders’ equity	185,002						195,295
Total average liabilities and shareholders’ equity	$	2,474,977					$	2,438,633
Interest income and rate earned on average earning assets			$	77,714	4.40	%			$	61,007	3.54	%
Interest expense and interest cost related to average interest-bearing liabilities			14,283		1.51	%			2,068		0.22	%
Net interest income and net interest margin (4)			$	63,431	3.59	%			$	58,939	3.42	%

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $1,118 and $1,368 at September 30, 2023 and September 30, 2022, respectively.

(2) Loan interest income includes loan fees of $27 and $410 at September 30, 2023 and September 30, 2022, respectively.

(3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.

(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.

The Volume and Rate Variances table below sets forth the dollar difference in interest earned and paid for each major category of interest-bearing assets and interest-bearing liabilities for the noted periods, and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates. Volume variances are equal to the increase or decrease in the average balance times the prior period rate, and rate variances are equal to the increase or decrease in the average rate times the prior period average balance. Variances attributable to both rate and volume changes are equal to the change in rate times the change in average balance and are included below in the average volume column.


Changes in Volume/Rate	For the Three Months Ended September 30, 2023 and 2022						For the Nine Months Ended September 30, 2023 and 2022
(In thousands)	Volume		Rate		Net		Volume		Rate		Net
Increase (decrease) due to changes in:
Interest income:
Interest-earning deposits in other banks	$	798	$	634	$	1,432	$	52	$	2,721	$	2,773
Investment securities:
Taxable	(344)		1,834		1,490		(1,880)		4,906		3,026
Non-taxable (1)	(170)		(377)		(547)		(301)		(890)		(1,191)
Total investment securities	(514)		1,457		943		(2,181)		4,016		1,835

Loans	947		2,037		2,984		5,908		6,191		12,099

Total earning assets (1)	1,231		4,128		5,359		3,779		12,928		16,707
Interest expense:
Deposits:
Savings, NOW and MMA	29		2,783		2,812		6		5,903		5,909
Time certificate of deposits	43		1,928		1,971		88		4,179		4,267

Total interest-bearing deposits	72		4,711		4,783		94		10,082		10,176
Other borrowed funds	87		241		328		635		1,404		2,039
Total interest-bearing liabilities	159		4,952		5,111		729		11,486		12,215
Net interest income (1)	$	1,072	$	(824)	$	248	$	3,050	$	1,442	$	4,492

(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.

Comparison of the quarter ended September 30, 2023 and September 30, 2022

The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, decreased 10 basis points to 3.47% for the third quarter of 2023, from 3.57% for the third quarter of 2022. Average interest earning assets were $2,386,913,000 for the three months ended September 30, 2023 compared to $2,291,728,000 for the three months ended September 30, 2022. The $95,185,000 increase in average earning assets was attributed to the $76,534,000 or 6.43% increase in average loans, a $103,007,000 increase in interest-earning deposits, partially offset by a $84,356,000 decrease in investment securities. For the three months ended September 30, 2023, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 80 basis points. The effective yield on loans increased 64 basis points. Average interest bearing liabilities increased 11.07% to $1,295,863,000 for the three months ended September 30, 2023, compared to $1,166,728,000 for the same period in 2022.

Interest and fee income from loans increased $2,984,000 or 20.29% for the three months ended September 30, 2023 compared to the same period in 2022. The yield on average loans, excluding nonaccrual loans, was 5.54% for the three months ended September 30, 2023 compared to 4.90% for the same period in 2022.

Interest income from interest-earning deposits in other banks increased $1,433,000 in the three months ended September 30, 2023 to $1,481,000 compared to $48,000 for the same period in 2022. The yield on average interest-earning deposits increased 232 basis points to 5.42% for the three month period ended September 30, 2023 compared to 3.10% for the same period in 2022. Average interest-earning deposits for the three month period ended September 30, 2023 increased $103,007,000 or 1,663.55% to $109,199,000 compared to $6,192,000 for the same period in 2022.

Interest income from total investment securities increased $942,000 in the three months ended September 30, 2023 to $7,664,000 compared to $6,722,000 for the same period in 2022. The yield on average total investment securities increased 58 basis points to 3.03% for the three month period ended September 30, 2023 compared to 2.45% for the same period in 2022.

Average total investment securities for the three month period ended September 30, 2023 decreased $84,356,000 or 7.70% to $1,011,418,000 compared to $1,095,774,000 for the same period in 2022.

Total interest income for the three months ended September 30, 2023 increased $5,474,000 or 26.08% to $26,466,000 compared to $20,992,000 for the three months ended September 30, 2022. The yield on interest earning assets increased 74 basis points to 4.46% on a fully tax equivalent basis for the three months ended September 30, 2023 from 3.72% for the period ended September 30, 2022. The increase was the result of yield changes, increase in interest rates, and asset mix changes. Average interest earning assets increased to $2,386,913,000 for the three months ended September 30, 2023 compared to $2,291,728,000 for the three months ended September 30, 2022.

Interest expense on deposits for the three months ended September 30, 2023 and 2022 was $5,015,000 and $231,000, respectively. The average interest rate on interest bearing deposits increased to 1.62% for the three months ended September 30, 2023 compared to 0.08% for the same period ended September 30, 2022. Average interest-bearing deposits increased 10.87% or $120,238,000 to $1,226,172,000 for the three months ended September 30, 2023 compared to $1,105,934,000 for the same period ended September 30, 2022.

Average other borrowed funds were $69,691,000 with an effective rate of 5.30% for the three months ended September 30, 2023 compared to $60,794,000 with an effective rate of 3.93% for the three months ended September 30, 2022. Total interest expense on other borrowed funds was $924,000 for the three months ended September 30, 2023 and $597,000 for the three months ended September 30, 2022.

The cost of interest-bearing liabilities increased 154 basis points to 1.82% for the three month period ended September 30, 2023 compared to 0.28% for the same period in 2022. The cost of total deposits increased to 0.90% compared to 0.04% for the three month periods ended September 30, 2023 and 2022, respectively. Average non-interest bearing demand deposits decreased 5.45% to $984,912,000 for the three month period ended September 30, 2023 compared to $1,041,698,000 for the same period in 2022. The ratio of average non-interest bearing demand deposits to average total deposits decreased to 44.54% in the three month period ended September 30, 2023 compared to 48.50% for the same period in 2022.

Net interest income before the provision for credit losses for the three months ended September 30, 2023 increased by $363,000 or 1.80% to $20,527,000 compared to $20,164,000 for the same period in 2022. The increase was a result of yield changes, asset mix changes, and an increase in average earning assets, offset by an increase in interest expense on average interest bearing liabilities.

Comparison of the nine months ended September 30, 2023 and September 30, 2022

The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 17 basis points to 3.59% for the nine months ended September 30, 2023, from 3.42% for the same period of 2022. Average interest earning assets were $2,361,091,000 for the nine months ended September 30, 2023 compared to $2,305,113,000 for the nine months ended September 30, 2022. The $55,978,000 increase in average earning assets was attributed to the $163,235,000 or 14.86% increase in average loans and a $18,855,000 increase in interest-earning deposits, partially offset by the $126,112,000 decrease in average total investment securities. For the nine months ended September 30, 2023, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 79 basis points. The effective yield on loans increased 66 basis points. Average interest bearing liabilities increased 2.73% to $1,267,907,000 for the nine months ended September 30, 2023, compared to $1,234,199,000 for the same period in 2022.

Interest and fee income from loans increased $12,099,000 or 30.44% for the nine months ended September 30, 2023 compared to the same period in 2022. The yield on average loans, excluding nonaccrual loans, was 5.50% for the nine months ended September 30, 2023 compared to 4.84% for the same period in 2022. Net interest income for the nine months ending September 30, 2023 was benefited by approximately $87,000 in nonrecurring income from prepayment penalties, compared to $562,000 recorded in the same period in 2022. The impact to interest income from the accretion of the loan marks on acquired loans was $209,000 and $445,000 for the nine months ended September 30, 2023 and 2022, respectively. The remaining balance of accretable loan marks on acquired loans as of September 30, 2023 was $1,063,000.

Interest income from interest-earning deposits in other banks increased $2,773,000 in the nine months ended September 30, 2023 to $2,930,000 compared to $157,000 for the same period in 2022. The yield on average interest-earning deposits increased 485 basis points to 5.22% for the nine month period ended September 30, 2023 compared to 0.37% for the same period in 2022. The increases period-to-period were impacted by the Federal Reserve Bank's rate hikes since the first quarter of 2022, in which rates have increased by 525 basis points, from 0.25% to 5.50%. These have also impacted the increase in the

cost of deposits are this is primarily attributed to volume and rate increases in the money market and time deposit portfolios. Average interest-earning deposits for the nine month period ended September 30, 2023 increased $18,855,000 or 33.71% to $74,780,000 compared to $55,925,000 for the same period in 2022.

Interest income from total investment securities increased $1,835,000 in the nine months ended September 30, 2023 to $22,933,000 compared to $21,098,000 for the same period in 2022. The yield on average total investment securities increased 54 basis points to 2.98% for the nine month period ended September 30, 2023 compared to 2.44% for the same period in 2022. Average total investment securities for the nine month period ended September 30, 2023 decreased $126,112,000 or 10.96% to $1,024,802,000 compared to $1,150,914,000 for the same period in 2022.

Total interest income for the nine months ended September 30, 2023 increased $16,957,000 or 28.43% to $76,596,000 compared to $59,639,000 for the nine months ended September 30, 2022. The yield on interest earning assets increased 86 basis points to 4.40% on a fully tax equivalent basis for the nine months ended September 30, 2023 from 3.54% for the nine months ended September 30, 2022. The increase was the result of yield changes, increase in interest rates, and asset mix changes. Average interest earning assets increased to $2,361,091,000 for the nine months ended September 30, 2023 compared to $2,305,113,000 for the nine months ended September 30, 2022.

Interest expense on deposits for the nine months ended September 30, 2023 and 2022 was $10,890,000 and $714,000, respectively. The average interest rate on interest bearing deposits increased to 1.23% for the nine months ended September 30, 2023 compared to 0.08% for the same period ended September 30, 2022. Average interest-bearing deposits increased 0.48% or $5,613,000 to $1,180,166,000 for the nine months ended September 30, 2023 compared to $1,174,553,000 for the same period ended September 30, 2022.

Average other borrowed funds were $87,741,000 with an effective rate of 5.16% for the nine months ended September 30, 2023 compared to $59,646,000 with an effective rate of 3.03% for the nine months ended September 30, 2022. Total interest expense on other borrowed funds was $3,393,000 for the nine months ended September 30, 2023 and $1,354,000 for the nine months ended September 30, 2022. Included in other borrowings are the junior subordinated deferrable interest debentures acquired from Service 1st, subordinated debt, senior debt, advances on lines of credit, advances from the Federal Home Loan Bank (“FHLB”), and overnight borrowings.

The cost of interest-bearing liabilities increased 129 basis points to 1.51% for the nine months ended September 30, 2023 compared to 0.22% for the same period in 2022. The cost of total deposits increased to 0.67% compared to 0.04% for the nine months ended September 30, 2023 and 2022, respectively. Average non-interest bearing demand deposits increased 1.17% to $988,620,000 for the nine months ended September 30, 2023 compared to $977,164,000 for the same period in 2022. The ratio of average non-interest bearing demand deposits to average total deposits increased to 45.58% in the nine months ended September 30, 2023 compared to 45.41% for the same period in 2022.

Net interest income before the provision for credit losses for the nine months ended September 30, 2023 increased by $4,742,000 or 8.24% to $62,313,000 compared to $57,571,000 for the same period in 2022. The increase was a result of yield changes, asset mix changes, and an increase in average earning assets, offset by an increase in interest expense on average interest bearing liabilities.

Provision for Credit Losses on Loans

The following table sets forth information regarding our provisions for credit losses on loans, charge-offs and recoveries and ending allowance for credit losses for loans at the dates and for the periods indicated:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(Dollars in thousands)	2023			2022			2023			2022
Balance, beginning of period	$	15,463		$	9,873		$	10,848		$	9,600
Impact of ASU 2016-13 adoption	—			—			3,910			—
Provision for credit losses	265			500			967			500
Losses charged to allowance	(254)			(20)			(644)			(138)
Recoveries	60			13			420			404
Balance, end of period	$	15,534		$	10,366		$	15,501		$	10,366
Allowance for credit losses to total loans at end of period	1.22		%	0.85		%	1.22		%	0.85		%

Managing high-risk credits includes developing a business strategy with the customer to mitigate our potential losses. 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. Management believes that the level of allowance for credit losses has been adjusted accordingly.

During the three and nine month periods ended September 30, 2023, the Company recorded a $265,000 and $967,000 provision for credit losses on loans, respectively, compared to $495,000 provision during the three and nine month periods ended September 30, 2022.

The Company had net charge-offs totaling $194,000 and $7,000 for the three months ended September 30, 2023 and 2022, respectively, and net charge-offs of $191,000 for the nine months ended September 30, 2023. The Company had net recoveries totaling $266,000 for the nine months ended September 30, 2022.

The Company has 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. As of September 30, 2023, there were $24,740,000 in classified loans of which $279,000 related to commercial and industrial loans, $1,366,000 to agricultural production, $2,126,000 to owner occupied real estate, $18,380,000 to real estate construction and other land loans, $2,362,000 to non-owner occupied real estate, $196,000 to farmland, and $31,000 to consumer. This compares to $27,783,000 in classified loans of which $1,655,000 related to commercial and industrial loans, $5,399,000 to agricultural production, $2,169,000 to owner occupied real estate, $15,024,000 to real estate construction and other land loans, $2,412,000 to non-owner occupied real estate, $824,000 to farmland, $266,000 to 1-4 family revolving, and $34,000 to consumer as of December 31, 2022.

Non-Interest Income

Non-interest income is comprised of customer service charges, loan placement fees, net gains/losses on sales and calls of investment securities, appreciation in cash surrender value of bank-owned life insurance, FHLB dividends, and other income. Non-interest income was $1,583,000 for the three months ended September 30, 2023 compared to $1,480,000 for the same period in 2022. The $103,000 or 6.96% increase in non-interest income during the three months ended September 30, 2023 was primarily driven by an increase of $191,000 in other income. The increase in other income was the result of increased miscellaneous fee activity. These increases were partially offset by decreases in loan placement fees of $36,000 and a decrease in service charge income of $99,000.

Non-interest income was $4,752,000 for the nine months ended September 30, 2023 compared to $4,084,000 for the same period in 2022. The $668,000 or 16.36% increase in non-interest income during the nine months ended September 30, 2023 was primarily driven by a positive change of $481,000 in net realized losses on sales and calls of investment securities from $777,000 at September 30, 2022 to $296,000 at September 30, 2023 and an increase of $801,000 in other income. The increase in other income was primarily the result of less loss on equity investments recognized during the periods. These increases were partially offset by decreases in loan placement fees of $307,000 and a decrease in service charge income of $426,000.

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 $7,136,000 in FHLB stock. We received dividends totaling $134,000 and $349,000 in the three and nine months ended September 30, 2023, respectively, compared to $91,000 and $258,000 for the three and nine months ended September 30, 2022, respectively.

The following table shows significant components of other non-interest income for the periods indicated:


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Appreciation in cash surrender value of bank owned life insurance	$	260	$	249	$	11	4.4	%	$	763	$	736	$	27	3.7	%
Loan placement fees	119		155		(36)		(23.2)	%	415		722		(307)		(42.5)	%
Interchange fees	450		432		18		4.2	%	1,353		1,352		1		0.1	%
Federal Home Loan Bank dividends	134		91		43		47.3	%	349		258		91		35.3	%
Other	283		92		191		207.6	%	1,036		235		801		340.9	%
Total other non-interest income	$	1,246	$	1,019	$	227	22.3	%	$	3,916	$	3,303	$	613	18.6	%

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. Non-interest expenses increased $633,000 or 4.94% to $13,436,000 for the three months ended September 30, 2023, compared to $12,803,000 for the three months ended September 30, 2022. The net increase for the three months ended September 30, 2023 was primarily the result increases in professional services of $229,000, regulatory assessments of $134,000, information technology of $36,000, and directors’ expenses of $59,000, partially offset by a decrease of the amortization of core deposit intangibles of $139,000 and occupancy and equipment expense of $127,000.

Non-interest expenses increased $4,115,000 or 11.33% to $40,446,000 for the nine months ended September 30, 2023, compared to $36,331,000 for the nine months ended September 30, 2022. The net increase for the nine month period was primarily the result of increases in salaries and employee benefits of $1,982,000, professional services of $625,000, directors’ expenses of $280,000, and information technology of $232,000, partially offset by a decrease of the amortization of core deposit intangible of $351,000.

Salaries and employee benefits increased $1,982,000 or 9.22% to $23,483,000 for the first nine months of 2023 compared to $21,501,000 for the nine months ended September 30, 2022. The increase in salaries and benefits and director expenses was primarily due to credits in post-retirement costs recorded in the prior year, a result of changes in the discount rate compared to expense in the current period. Additionally, increases in salaries and benefits were a reflection of salary adjustments due to market conditions. Full time equivalent employees were 248 for the nine months ended September 30, 2023, compared to 249 for the nine months ended September 30, 2022.

The following table shows significant components of non-interest expense for the periods indicated:


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(Dollars in thousands)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Salaries and employee benefits	$	7,474	$	7,500	(26)		(0.3)	%	$	23,483	$	21,501	1,982		9.2	%
Occupancy and equipment	1,490		1,363		127		9.3	%	4,012		3,869		143		3.7	%
Information technology	915		879		36		4.1	%	2,697		2,465		232		9.4	%
Professional Services	842		613		229		37.4	%	2,076		1,451		625		43.1	%
Data processing expense	680		560		120		21.4	%	1,949		1,649		300		18.2	%
Regulatory assessments	358		224		134		59.8	%	924		640		284		44.4	%
ATM/Debit card expenses	192		176		16		9.1	%	569		588		(19)		(3.2)	%
Directors’ expenses	150		91		59		64.8	%	464		184		280		152.2	%
Advertising	133		138		(5)		(3.6)	%	382		416		(34)		(8.2)	%
Loan related expenses	106		156		(50)		(32.1)	%	393		349		44		12.6	%
Personnel other	51		57		(6)		(10.5)	%	373		219		154		70.3	%
Internet banking	40		29		11		37.9	%	121		98		23		23.5	%
Amortization of core deposit intangibles	—		139		(139)		(100.0)	%	68		419		(351)		(83.8)	%
Other	1,005		878		127		14.5	%	2,935		2,483		452		18.2	%
Total non-interest expense	$	13,436	$	12,803	$	633	4.9	%	$	40,446	$	36,331	$	4,115	11.3	%

Provision for Income Taxes

Our effective income tax rate was 24.72% and 24.87% and for the three and nine month periods ended September 30, 2023, respectively, compared to 23.51% and 23.43% for the three and nine month periods ended September 30, 2022, respectively. The Company reported an income tax provision of $2,098,000 and $6,501,000 for the three and nine month periods ended September 30, 2023, respectively, compared to $1,962,000 and $5,817,000 for the three and nine month periods ended September 30, 2022, respectively.

The effective tax rate was affected by a decrease in the amount of tax-exempt interest recognized during the three and nine month periods ended September 30, 2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense in the consolidated statements of income. 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. As of September 30, 2023 and December 31, 2022, there was no reserve for uncertain tax positions.

FINANCIAL CONDITION

Summary of Changes in Consolidated Balance Sheets

Total assets were $2,435,359,000 as of September 30, 2023, compared to $2,422,519,000 at December 31, 2022, an increase of 0.53% or $12,840,000. Total gross loans were $1,275,411,000 at September 30, 2023, compared to $1,256,304,000 at December 31, 2022, an increase of $19,107,000 or 1.52%. Total cash and cash equivalents increased 139.25% or $43,405,000 to $74,575,000 at September 30, 2023 compared to $31,170,000 at December 31, 2022. The investment portfolio decreased 3.30% or $57,255,000 to $903,235,000 at September 30, 2023 compared to $960,490,000 at December 31, 2022. Total deposits increased 2.34% or $49,193,000 to $2,148,842,000 at September 30, 2023, compared to $2,099,649,000 at December 31, 2022. Shareholders’ equity increased $6,990,000 or 4.00% to $181,650,000 at September 30, 2023, compared to $174,660,000 at December 31, 2022. The increase in shareholders’ equity was driven by the retention of earnings, issuance of common stock, partially offset by the change in unrealized loss and dividends paid. Accrued interest payable and other liabilities was $35,159,000 at September 30, 2023, compared to $32,611,000 at December 31, 2022, an increase of $2,548,000.

Investments

Our investment portfolio consists primarily of private label mortgage, U.S. Government sponsored entities and agencies collateralized by residential mortgage backed obligations, 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. As of September 30, 2023, investment securities with a fair value of $328,700,000, or 36.65% of our investment

securities portfolio, were held as collateral for public funds, short and long-term borrowings, treasury, tax, and for other purposes.

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. Our loan-to-deposit ratio at September 30, 2023 was 59.35% compared to 59.83% at December 31, 2022 and 53.94% at September 30, 2022. The total investment portfolio decreased 3.30% or $57,255,000 to $903,235,000 at September 30, 2023 compared to $960,490,000 at December 31, 2022. The fair value of the available-for-sale investment portfolio reflected a net unrealized loss of $101,302,000 at September 30, 2023, compared to net unrealized losses of $91,643,000 at December 31, 2022 and $80,011,000 at September 30, 2022.

See Note 2 of the Notes to Consolidated Financial Statements (unaudited) included in this report for carrying values and estimated fair values of our investment securities portfolio.

Loans

Total gross loans increased $19,107,000 or 1.52% to $1,275,411,000 as of September 30, 2023, compared to $1,256,304,000 as of December 31, 2022.

The following table sets forth information concerning the composition of our loan portfolio at the dates indicated:


Loan Type (Dollars in thousands)	September 30, 2023		% of Total Loans		December 31, 2022		% of Total Loans
Commercial:
Commercial and industrial	$	106,061	8.3	%	$	141,197	11.2	%
Agricultural production	25,190		2.0	%	37,007		2.9	%
Total commercial	131,251		10.3	%	178,204		14.1	%
Real estate:
Construction & other land loans	81,264		6.4	%	109,175		8.7	%
Commercial real estate - owner occupied	197,228		15.5	%	194,663		15.5	%
Commercial real estate - non-owner occupied	525,835		41.3	%	464,809		37.2	%
Farmland	123,467		9.7	%	119,648		9.5	%
Multi-family residential	44,794		3.5	%	24,586		2.0	%
1-4 family - close-ended	95,573		7.5	%	93,510		7.4	%
1-4 family - revolving	28,251		2.2	%	30,071		2.4	%
Total real estate	1,096,412		86.1	%	1,036,462		82.7	%
Consumer:	46,204		3.6	%	40,252		3.2	%
Total gross loans	1,273,867		100.0	%	1,254,918		100.0	%
Net deferred origination fees	1,544				1,386
Loan, net of deferred origination fees	1,275,411				1,256,304
Allowance for credit losses	(15,534)				(10,848)
Total loans	$	1,259,877			$	1,245,456

As of September 30, 2023, in management’s judgment, a concentration of loans existed in loans commercial real estate representing approximately 63.2% of total loans. This level of concentration of commercial real estate is consistent with 61.4% of total loans at December 31, 2022. Although management believes the loans within this concentration have no more than the normal risk of collectability, a substantial decline in the performance of the economy in general or a decline in real estate values in our primary market areas, in particular, could have an adverse impact on collectability, increase the level of real estate-related non-performing loans, or have other adverse effects which alone or in the aggregate could have a material adverse effect on our business, financial condition, results of operations and cash flows. The Company does not engage in any sub-prime mortgage lending activities.

At September 30, 2023, loans acquired in the Folsom Lake Bank (FLB), Sierra Vista Bank (SVB) and Visalia Community Bank (VCB) acquisitions had a balance of $63,155,000, of which $1,701,000 were commercial loans, $57,187,000 were real estate loans, and $4,267,000 were consumer loans. At December 31, 2022, loans acquired in the FLB, SVB and VCB acquisitions

had a balance of $73,456,000, of which $2,049,000 were commercial loans, $66,583,000 were real estate loans, and $4,824,000 were consumer loans.

We believe that our commercial real estate loan underwriting policies and practices result in prudent extensions of credit, but recognize that our lending activities result in relatively high reported commercial real estate lending levels. Commercial real estate loans include certain loans which represent low to moderate risk and certain loans with higher risks.

Nonperforming Assets

Nonperforming assets consist of nonperforming loans, other real estate owned (OREO), and repossessed assets. Nonperforming loans are those loans which have (i) been placed on nonaccrual status; (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. A loan is classified as nonaccrual when (i) it is maintained on a cash basis because of deterioration in the financial condition of the borrower; (ii) payment in full of principal or interest under the original contractual terms is not expected; 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.

At September 30, 2023 and December 31, 2022 there were no nonperforming assets.

Allowance for Credit Losses on Loans

For additional information regarding provisions to credit losses on loans, see “Provision for credit losses on loans” above. Based on the current conditions of the loan portfolio, management believes that the $15,534,000 is adequate to absorb current expected credit losses in the Company’s loan portfolio. The following table summarizes the allocation for the allowance for credit losses by loan type as of the dates indicated (in thousands):


Loan Type	September 30, 2023		December 31, 2022
Commercial:
Commercial and industrial	$	915	$	1,583
Agricultural production	525		229
Total commercial	1,440		1,812
Real estate:
Construction & other land loans	2,411		1,678
Commercial real estate - owner occupied	1,799		814
Commercial real estate - non-owner occupied	5,548		4,388
Farmland	1,299		863
Multi-family residential	384		60
1-4 family - revolving	1,338		465
1-4 family - revolving	520		142
Total real estate	13,299		8,410

Consumer:	795		286
Total consumer	795		286
Unallocated reserves	—		340
Total allowance for credit losses	$	15,534	$	10,848

As of September 30, 2023, the balance in the allowance for credit losses (ACL) on loans was $15,534,000, or 1.22% of total gross loans, compared to $10,848,000, or 0.86% of total gross loans, as of December 31, 2022. The increase is attributed to the impact of the adoption of ASU 2016-13 and increases in the balance of the Company’s loan portfolio. The balance of unfunded commitments to extend credit on construction and other loans and letters of credit was $271,215,000 as of September 30, 2023, compared to $288,141,000 as of December 31, 2022. At September 30, 2023 and December 31, 2022, the balance of the reserve for unfunded commitments was $725,000 and $110,000, respectively. The reserve for unfunded commitments is calculated by management using appropriate, systematic, and consistently applied processes. While related to credit losses, this allocation is not a part of the ACL on loans and is considered separately as a liability for accounting and regulatory reporting purposes.

The following table illustrates and sets forth additional analysis which portrays the trends that are occurring in the loan portfolio.


	September 30, 2023			December 31, 2022			September 30, 2022
(Dollars in thousands)	Balance	% to Total Loans		Balance	% to Total Loans		Balance	% to Total Loans

Past due loans greater than 30 days	236	0.02	%	5,895	0.47	%	207	0.02	%
Nonaccrual loans	—	—	%	—	—	%	271	0.02	%

Deposits

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits. 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.

Total deposits increased $49,193,000 or 2.34% to $2,148,842,000 as of September 30, 2023, compared to $2,099,649,000 as of December 31, 2022. Interest-bearing deposits increased $115,252,000 or 11.05% to $1,158,334,000 as of September 30, 2023, compared to $1,043,082,000 as of December 31, 2022. Non-interest bearing deposits decreased $66,059,000 or 6.25% to $990,508,000 as of September 30, 2023, compared to $1,056,567,000 as of December 31, 2022. Average non-interest bearing deposits to average total deposits was 45.58% for the nine months ended September 30, 2023 compared to 45.41% for the same period in 2022.

The composition of the deposits and year-to-date average interest rates at September 30, 2023 and December 31, 2022 is summarized in the table below.


(Dollars in thousands)	September 30, 2023		% of Total Deposits		Average Interest Rate		December 31, 2022		% of Total Deposits		Average Interest Rate
NOW accounts	$	257,267	12.0	%	0.13	%	$	324,089	15.4	%	0.06	%
MMA accounts	548,767		25.5	%	1.54	%	435,783		20.8	%	0.17	%
Time deposits	163,245		7.6	%	3.57	%	67,923		3.2	%	0.14	%
Savings deposits	189,055		8.8	%	0.01	%	215,287		10.3	%	0.01	%
Total interest-bearing	1,158,334		53.9	%	1.23	%	1,043,082		49.7	%	0.10	%
Non-interest bearing	990,508		46.1	%			1,056,567		50.3	%
Total deposits	$	2,148,842	100.0	%			$	2,099,649	100.0	%

As of September 30, 2023 there was $883,505,000 in uninsured deposits or 41.12% of total deposits, compared to $975,791,000 and 46.47% as of December 31, 2022.

Other Borrowings

As of September 30, 2023 the Company had no Federal Home Loan Bank (“FHLB”) of San Francisco advances. At December 31, 2022 the Company had $46,000,000 in FHLB advances. We maintain a line of credit with the FHLB collateralized by government securities and loans. Refer to the Liquidity section below for further discussion of FHLB advances.

Capital

Capital serves as a source of funds and helps protect depositors and shareholders against potential losses. Historically, the primary source of capital for the Company has been through retained earnings.

The Company has historically maintained substantial levels of capital. The assessment of capital adequacy is dependent on several factors including asset quality, earnings trends, liquidity and economic conditions. Maintenance of adequate capital levels is integral to providing stability to the Company. 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.

Our shareholders’ equity was $181,650,000 at September 30, 2023, compared to $174,660,000 at December 31, 2022. The increase from December 31, 2022 in shareholders’ equity is the result of an increase in retained earnings from net income of $19,642,000, stock issued under the employee stock purchase plan of $163,000, and the effect of share-based compensation expense of $689,000, offset by common stock cash dividends of $4,238,000, an increase in accumulated other comprehensive loss of $5,534,000, and the adoption of ASU 2016-13 of $3,731,000.

During the first nine months of 2023, the Company declared and paid $4,238,000 in cash dividends ($0.36 per common share) to holders of common stock. The Company declared and paid $4,231,000 in cash dividends ($0.36 per common share) to holders of common stock during the nine months ended September 30, 2022.

The following table presents the Company’s regulatory capital ratios as of September 30, 2023 and December 31, 2022.


(Dollars in thousands)
September 30, 2023	Amount		Ratio
Tier 1 Leverage Ratio	$	217,797	8.70	%
Common Equity Tier 1 Ratio (CET 1)	$	212,797	12.51	%
Tier 1 Risk-Based Capital Ratio	$	217,797	12.81	%
Total Risk-Based Capital Ratio	$	268,890	15.81	%

December 31, 2022	Amount		Ratio
Tier 1 Leverage Ratio	$	205,154	8.37	%
Common Equity Tier 1 Ratio (CET 1)	$	200,154	11.92	%
Tier 1 Risk-Based Capital Ratio	$	205,154	12.22	%
Total Risk-Based Capital Ratio	$	250,556	14.92	%

The following table presents the Bank’s regulatory capital ratios as of September 30, 2023 and December 31, 2022.


(Dollars in thousands)	Actual Ratio				Minimum regulatory requirement (1)				Minimum requirement for “Well-Capitalized” Institution
September 30, 2023	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 Leverage Ratio	$	280,627	11.21	%	$	100,095	4.00	%	$	125,119	5.00	%
Common Equity Tier 1 Ratio (CET 1)	$	280,627	16.50	%	$	76,540	7.00	%	$	110,558	6.50	%
Tier 1 Risk-Based Capital Ratio	$	280,627	16.50	%	$	102,054	8.50	%	$	136,072	8.00	%
Total Risk-Based Capital Ratio	$	297,167	17.47	%	$	136,072	10.50	%	$	170,090	10.00	%

December 31, 2022	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 Leverage Ratio	$	266,373	10.86	%	$	98,075	4.00	%	$	122,594	5.00	%
Common Equity Tier 1 Ratio (CET 1)	$	266,373	15.87	%	$	75,516	7.00	%	$	109,079	6.50	%
Tier 1 Risk-Based Capital Ratio	$	266,373	15.87	%	$	100,688	8.50	%	$	134,251	8.00	%
Total Risk-Based Capital Ratio	$	277,331	16.53	%	$	134,251	10.50	%	$	167,814	10.00	%
(1) The minimum regulatory requirement threshold includes the capital conservation buffer of 2.50%.

Liquidity

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. Our liquidity is actively managed on a daily basis and reviewed periodically by our management and Board of Director’s Asset/Liability Committees. This process is intended to ensure the maintenance of sufficient funds to meet our needs, including adequate cash flow for off-balance sheet commitments.

Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, Federal funds facilities with correspondent banks, and advances from the Federal Home Loan Bank of San Francisco. 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. As of September 30, 2023, the Company had unpledged securities totaling $574,535,000 available as a secondary source of liquidity and total cash and cash equivalents of $74,575,000. Cash and cash equivalents at September 30, 2023 increased 139.25% compared to $31,170,000 at December 31, 2022. 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. At September 30, 2023, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $340,197,000 in unused FHLB secured advances, a $4,242,000 secured credit line at the Federal Reserve Bank, and $37,245,000 available under the Federal Reserve’s Bank Term Loan Funding Program. We believe our liquidity sources to be stable and adequate. At September 30, 2023, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.

The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at September 30, 2023 and December 31, 2022:


Credit Lines (In thousands)	September 30, 2023		December 31, 2022
Unsecured Credit Lines
Credit limit	$	110,000	$	110,000
Balance outstanding	$	—	$	—
Federal Home Loan Bank
Credit limit	$	340,197	$	319,309
Balance outstanding	$	—	$	46,000
Collateral pledged	$	596,523	$	687,357
Fair value of collateral	$	497,968	$	565,869
Federal Reserve Bank Term Loan Funding Program
Credit limit	$	37,245	$	—
Balance outstanding	$	—	$	—
Collateral pledged	$	54,380	$	—
Fair value of collateral	$	46,281	$	—
Federal Reserve Bank
Credit limit	$	4,242	$	4,702
Balance outstanding	$	—	$	—
Collateral pledged	$	5,073	$	5,508
Fair value of collateral	$	4,306	$	4,893

The liquidity of the parent company, Central Valley Community Bancorp, is primarily dependent on the payment of cash dividends by its subsidiary, Central Valley Community Bank, subject to limitations imposed by California statutes and the regulations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our results of operations are highly dependent upon our ability to manage interest rate risk. We consider interest rate risk to be a significant market risk that could have a material effect on our financial condition and results of operations. Interest rate risk is measured and assessed on a quarterly basis.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures with respect to the information generated for use in this Quarterly Report. The evaluation was based in part upon reports

provided by a number of executives. Based upon, and as of the date of the evaluation of the disclosure controls and procedures, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by the Company in the reports that it files or submits is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

There was no change in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

In designing and evaluating disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurances of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None to report.

ITEM 1A. RISK FACTORS

The following discussion supplements the discussion of risk factors affecting us as set forth in Part I, Item 1A. Risk Factors, of our 2022 Annual Report on Form 10-K. The discussion of risk factors, as so supplemented, provides a description of some of the important risk factors that could affect our actual results and could cause our results to vary materially from those expressed in public statements or documents. However, other factors besides those included in the discussion of risk factors, as so supplemented, or discussed elsewhere in other of our reports filed with or furnished to the SEC could affect our business or results.

Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.

The recent high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank have generated significant market volatility among publicly traded bank holding companies. These market developments have negatively impacted customer confidence of the safety and soundness in the financial securities industry. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in the banking system more broadly.

In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could adversely impact the trading prices of our common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business. The cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company could realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the fair value of our securities classified as available-for-sale has declined, resulting in unrealized losses embedded in accumulated other comprehensive loss as a part of shareholders’ equity. If the Company were required to sell such securities to meet liquidity needs, including in the event of deposit outflows or slower deposit growth, it may incur losses.

The loss of our deposit clients or substantial reduction of our deposit balances could force us to fund our business with more expensive and less stable funding sources.

As of September 30, 2023, deposits from our top 100 client relationships accounted for, in the aggregate, 23.08% of our total deposits. The deposits not insured by the FDIC (approximately $883.5 million of uninsured deposits, or 41.12%, of our total deposits of $2.1 billion at September 30, 2023) could present a heightened risk of withdrawal, if such depositors materially decreased the volume of those deposits and it could reduce our liquidity. We have traditionally obtained funds through deposits for use in lending and investment activities. The interest rates stated for borrowings typically exceed the interest rates paid on deposits. Deposit outflows can occur for a number of reasons, including; clients may seek investments with higher yields, clients with uninsured deposits may seek greater financial security during prolonged periods of volatile and unstable market conditions. If a significant portion of our deposits were withdrawn, we may need to rely more heavily on more expensive borrowings and other sources of funding to fund our business and meet withdrawal demands, adversely affecting our net interest margin. The occurrence of any of these events could materially and adversely affect our business, results of operations and financial condition.

Changes in economic, market and political conditions can adversely affect our operating results and financial condition.

We are subject to macroeconomic and interest rate risk due to domestic and global economic instability that has resulted in higher inflation than the United States has experienced in more than 40 years. The global economic impact from the geopolitical events in Europe that is contributing to rising energy and commodity prices, as well as the on-going supply chain disruptions have resulted in inflationary pressures and increases to prevailing interest rates. The Federal Reserve’s Open Market Committee (“FOMC”) last raised the target range for the federal funds rate from 5.00% - 5.25% to 5.25% - 5.50% on July 26, 2023, resulting in a cumulative increase of 375 basis points from July of 2022. These recent increases in prevailing interest rates and the expectation that further increases are likely will impact both our customers and many aspects of our business. Higher interest rates will not only impact the interest we receive on loans and investment securities and the amount of interest we pay our depositors, but could also impact our ability to grow loans and deposits. Rising interest rates, higher commodity prices, and supply chain issues and an overall slowdown in economic growth could also impact the fair value of our assets and adversely impact our asset quality.

The occurrence of fraudulent activity, breaches or failures of information security controls or cybersecurity-related incidents to either our information systems or information systems provided by third party vendors could have a material adverse effect on our business, financial condition and results of operations.

As a financial institution, we are susceptible to fraudulent activity, information security breaches and other cybersecurity-related incidents and attacks that may be committed against us, our customers or our key vendors and business partners, which in turn may result in financial losses or increased costs to us, our customers, or our key vendors and business partners, disclosure or misuse of our information or our customer information, theft or misappropriation of assets (including bank or customer funds), privacy breaches against us or our customers, litigation, regulatory enforcement action, and damage to our reputation. The U.S. government has warned financial institutions of the potential increase in the frequency and severity of malicious cyber-attacks and other activities involving critical infrastructure, specifically including the financial sector, and has encouraged the banking sector to enhance cyber-defenses, and these risks have increased in connection with the current conflict in Europe initiated by Russia against Ukraine. While the Company has taken measures to protect its own and customer funds and confidential information against cyber-attacks, as well as other malicious activities, there can be no assurance that such measures will be successful in thwarting such attacks and activities.

Risks Related to our Recently Announced Merger Agreement

Failure to consummate our announced merger with Community West, or a delay in consummating the merger, could negatively impact the market price of our common stock and could have a material adverse effect on our business, financial condition and results of operations.

On October 10, 2023, we entered into an into an agreement and plan of reorganization and merger with Community West providing for the merger of Community West with and into the Company, with the Company as the surviving entity, (the “Merger”). Immediately following the Merger CWB will merge with and into CVCB, with CVCB surviving the Merger (the “Bank Merger”). In connection with the Merger and Bank Merger, the Company and CVCB will be re-named Community West and Community West Bank, respectively, to reflect the combined companies. The transaction is expected to be completed in the second quarter of 2024 pending shareholder and regulatory approvals and the satisfaction of other customary closing

conditions. We have incurred substantial expenses in connection with the negotiation and preparations for completion of the transactions contemplated by the Merger. If the Merger is not completed, we will have incurred these expenses without realizing the expected benefits of the Merger. If the Merger and Bank Merger are not consummated for any reason, our ongoing business, financial condition and results of operations may be materially adversely affected and the market price of our common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be consummated. If the consummation of the Merger is delayed, including by the receipt of a competing acquisition proposal or by reason of litigation, our business, financial condition and results of operations may also be materially adversely affected. In addition, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merge, without realizing any of the anticipated benefits of completing the Merger.

We may fail to realize the anticipated benefits of the Merger.

The success of the Merger will depend on, among other things, our ability to combine our business with those of Community West and CWB. If we are not able to successfully achieve this objective, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected. Each of the Company, Community West, CVCB and CWB have operated and, until the consummation of the Merger, will continue to operate independently. It is possible that the integration process or other factors could result in the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of CVCB and CWB could choose to discontinue their relationships with the combined company post-merger, which would adversely affect the future performance of the combined company. These transition matters could have an adverse effect on the Company, Community West, CVCB and CWB during the pre-merger period and for an undetermined time after the consummation of the Merger.

The Company, CVCB, Community West and CWB will be subject to business uncertainties and contractual restrictions while the Merge is pending that could adversely affect their respective businesses.

The parties’ efforts to complete the Merger could cause substantial disruptions in the Company’s, CVCB’s, Community West’s and CWB’s respective businesses, which could have an adverse effect on their respective financial results. Among other things, uncertainty as to whether the Merger will be completed may affect the ability of each of the parties to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the merger is pending because employees may experience uncertainty about their future roles with the combined company.

Uncertainty as to the future could adversely affect the Company’s, CVCB’s, Community West and/or CWB respective businesses, reputation and relationships with potential depositors, borrowers and vendors. For example, vendors, customers and others who deal with the Company, CVCB, Community West, or CWB could defer decisions concerning working with such company, or seek to change existing business relationships with such company. Further, a substantial amount of the attention of management and employees of each company is being directed toward the completion of the Merger and thus is being diverted from such company’s day-to-day operations because matters related to the Merger (including integration planning) require substantial commitments of time and resources.

In addition, the merger agreement restricts the Company and Community West from taking certain actions without the other party’s consent while the Merger is are pending. These restrictions may, among other matters, prevent the Company and Community West from pursuing otherwise attractive business opportunities, selling assets, changing the capital structure, entering into other transactions or making other changes to its respective business prior to consummation of the Merger or termination of the merger agreement. These restrictions could have a material adverse effect on the Company’s, CVCB’s, Community West’s and CWB’s business, financial condition and results of operations.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated in the merger agreement may be completed, various approvals must be obtained from the bank regulatory and other governmental authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on us following the Merger. The regulatory approvals may not be received at any time, may not be received in a timely fashion, or may contain conditions on the completion of the Merger that are not anticipated or cannot be met. It is a condition to closing of the Merger that no regulatory approval shall

contain or shall have resulted in, or reasonably be expected to result in the imposition of, any burdensome condition on the combined company following the merger.

The merger agreement may be terminated in accordance with its terms and the merge may not be completed.

The merger agreement and Merger is subject to a number of conditions which must be fulfilled in order to complete the Merger. Those conditions include: approval of the merger agreement by the respective shareholders of the Company and Community West, receipt of requisite regulatory approvals subject to certain limitations set forth in the merger agreement, absence of orders prohibiting completion of the mergers, effectiveness of the registration statement relating to our common stock to be issued in the merger and listing of such shares on the Nasdaq Capital Market, issuance of favorable tax opinions, the continued accuracy of the representations and warranties by the parties, the absence of a material adverse effect on the parties, and the performance by the parties of their covenants and agreements. These conditions to the closing of the Merger may not be fulfilled and, accordingly, the Merger may not be completed. Under the merger agreement, if the merger is not completed by June 30, 2024 (subject to up to a 90 day extension to obtain regulatory approval), either party to the Merger agreement may choose not to proceed with the merger, and the parties can mutually decide to terminate the merger agreement at any time, before or after shareholder approval. In addition, under the merger agreement the Company and Community West, as applicable may elect to terminate the merger agreement in certain other circumstances. If the merger agreement is terminated under these circumstances, Community West may be required to pay a termination fee of $4.0 million to us.

We expect to incur substantial expenses related to the Merger.

We expect to incur substantial expenses in connection with consummation of the Merger and combining the business, operations, networks, systems, technologies, policies and procedures of Community West and CWB. Although we have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of our expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the Merger could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the Merger. As a result of these expenses, we expect to take charges against our earnings before and after the completion of the Merger. The charges taken in connection with the Merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

The merger agreement with Community West provides for a fixed exchange ratio and will not adjust in the event of changes in the price of either the Company’s or Community West common stock and, therefore, the value of the merger consideration in the Merger is subject to change.

The merger agreement provides that each Community West common share will be converted into the right to receive a fixed exchange ratio of a share of our common stock upon completion of the Merger. The exchange ratio is fixed. No adjustments to the exchange ratio will be made based on changes in the price of Community West or our common stock prior to the completion of the Merger. Changes in stock prices may result from a variety of factors, including, among others, general market and economic conditions, changes in our respective businesses, operations and prospects, market assessment of the likelihood that the Merger will be completed as anticipated or at all, and regulatory considerations. Many of these factors are uncertain and beyond the parties control.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None to report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None to report.

ITEM 4. MINE SAFETY DISCLOSURES

None to report.

ITEM 5. OTHER INFORMATION

None to report.

ITEM 6 EXHIBITS



3.1						Amended and Restated Articles of Incorporation of Central Valley Community Bancorp (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2010).

3.2						Bylaws of the Company as amended (incorporated by reference to the Registrant’s Form 10-K filed with the Commission on March 9, 2023).

31.1						Certification of Principal Executive Officer Pursuant to Rule 13a-14(d) / 15d-14(a) of the Securities Exchange Act of 1934.

31.2						Certification of Principal Financial Officer Pursuant to Rule 13a-14(d) / 15d-14(a) of the Securities Exchange Act of 1934.

32.1						Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2						Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

101.INS						XBRL Instance Document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation document

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension labels Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Link Document

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Central Valley Community Bancorp

Date: November 2, 2023			/s/ James J. Kim
			James J. Kim
			President and Chief Executive Officer

Date: November 2, 2023			/s/ Shannon Livingston
			Shannon Livingston
			Executive Vice President and Chief Financial Officer

Community West Bancshares - 10-Q quarterly report FY2023 Q3

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