MMA loans

CENTRAL VALLEY COMMUNITY BANCORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS. (Form 10-K)

The MD&A should be read in conjunction with the audited consolidated financial statements of the Company, including the accompanying notes, in section 8 of this annual report.

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) a decline in economic
conditions in the Central Valley and the Greater Sacramento Region; (4) the
Company's ability to continue its internal growth at historical rates; (5) the
Company's ability to maintain its net interest margin; (6) the decline in
quality of the Company's earning assets; (7) a decline in credit quality;
(8) changes in the regulatory environment; (9) fluctuations in the real estate
market; (10) changes in business conditions and inflation; (11) changes in
securities markets (12) risks associated with acquisitions, relating to
difficulty in integrating combined operations and related negative impact on
earnings, and incurrence of substantial expenses; (13) 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;  (14) the
uncertainties related to the Covid-19 pandemic including, but not limited to,
the potential adverse effect of the pandemic on the economy, our employees and
customers, and our financial performance; and (15) the impact of the federal
CARES Act and the significant additional lending activities undertaken by the
Company in connection with the Small Business Administration's Paycheck
Protection Program enacted thereunder, including risks to the Company with
respect to the uncertain application by the Small Business Administration of new
borrower and loan eligibility, forgiveness and audit criteria.  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 Annual Report the words "anticipate," "estimate,"
"expect," "project," "intend," "commit," "believe" and similar expressions, the
Company intends to identify forward-looking statements.
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Such statements are not guarantees of performance and are subject to certain
risks, uncertainties and assumptions, including those described in this Annual
Report.  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.  See also the
discussion of risk factors in Item 1A, "Risk Factors."

We are not able to predict all the factors that may affect future results. You
should not place undue reliance on any forward looking statement, which speaks
only as of the date of this Report on Form 10-K. Except as required by
applicable laws or regulations, we do not undertake any obligation to update or
revise any forward looking statement, whether as a result of new information,
future events or otherwise.

INTRODUCTION

Central Valley Community Bancorp (NASDAQ: CVCY) (the Company) was incorporated
on February 7, 2000.  The formation of the holding company offered the Company
more flexibility in meeting the long-term needs of customers, shareholders, and
the communities it serves.  The Company currently has one bank subsidiary,
Central Valley Community Bank (the Bank) and one business trust subsidiary,
Service 1st Capital Trust 1. The Company's market area includes the central
valley area from Sacramento, California to Bakersfield, California.
During 2021, we focused on asset quality and capital adequacy as well as
managing the COVID-19 affects on businesses, customers and employees.  We also
focused on assuring that competitive products and services were made available
to our clients while adjusting to the many new laws and regulations that affect
the banking industry.
As of December 31, 2021, the Bank operated 20 full-service offices.
Additionally, the Bank maintains a Commercial Real Estate Division, an
Agribusiness Center and a SBA Lending Division.  The Real Estate Division
processes or assists in processing the majority of the Bank's real estate
related transactions, including interim construction loans for single family
residences and commercial buildings. We offer permanent single family
residential loans through our mortgage broker services.

ECONOMIC CONDITIONS

For the years leading up to 2021, the economy, as evidenced by the California,
Central Valley, and Greater Sacramento Region unemployment rates, and housing
prices, were showing moderate and steady improvement.
During 2020 and to a lesser extent in 2021, our business has been, and continues
to be, impacted by the ongoing outbreak of COVID-19. During 2021 and 2020, the
outbreak of COVID-19 has adversely impacted a broad range of industries in which
the Company's customers operate and could impair their ability to fulfill their
financial obligations to the Company. The World Health Organization has declared
COVID-19 to be a global pandemic indicating that almost all public commerce and
related business activities must be, to varying degrees, curtailed with the goal
of decreasing the rate of new infections. As a result, the demand for our
products and services has been and may continue to be significantly impacted.
The spread of the outbreak has caused significant disruptions in the U.S.
economy and has disrupted banking and other financial activity in the areas in
which the Company operates.
We only conduct business in the state of California. California placed
significant restrictions on businesses and individuals at the outset of the
COVID-19 pandemic. While many of these initial restrictions have been lifted,
there is still the possibility that certain restrictions could be re-imposed or
extended to contain further spread if the rate of infection were to surge again
in any of these states, including as a result of the Delta and Omicron variants
that have recently caused an uptick in infections particularly among
non-vaccinated individuals. As a financial institution, we are considered an
essential business and we have therefore continued to operate on a modified
basis throughout the pandemic to comply with governmental restrictions and
public health authority guidelines.

We remain focused on the safety of our employees and the proper functioning of our bank to serve our customers and continue to monitor the continued spread of COVID-19 and its variants. Our branches have been reopened across our footprint.

  The Company's business is dependent upon the willingness and ability of its
employees and customers to conduct banking and other financial transactions.
While there has been no material impact to the Company's employees to date,
COVID-19 could also potentially create widespread business continuity issues for
the Company. If the global response to contain COVID-19 escalates further or is
unsuccessful, the Company could experience an adverse effect on its business,
financial condition and results of operations.
Agriculture and agricultural-related businesses remain a critical part of the
Central Valley's economy.  The Valley's agricultural production is widely
diversified, producing nuts, vegetables, fruit, cattle, dairy products, and
cotton.  The continued future success of agriculture related businesses is
highly dependent on the availability of water and is subject to fluctuation in
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worldwide commodity prices, currency exchanges, and demand. From time to time,
California experiences severe droughts or adverse weather issues, which could
significantly harm the business of our customers and the credit quality of the
loans to those customers. We closely monitor the water resources and the related
issues affecting our customers, and will remain vigilant for signs of
deterioration within the loan portfolio in an effort to manage credit quality
and work with borrowers where possible to mitigate any losses.

PREVIEW

Diluted earnings per share (EPS) for the year ended December 31, 2021 was $2.31
compared to $1.62 and $1.59 for the years ended December 31, 2020 and 2019,
respectively.  Net income for 2021 was $28,401,000 compared to $20,347,000 and
$21,443,000 for the years ended December 31, 2020 and 2019, respectively.  The
increase in net income for 2021 compared to 2020 was driven by a reversal of
provision for credit losses, an increase in net interest income, and an increase
in interchange fees, partially offset by an increase in the provision for income
taxes, an increase in non-interest expense, a decrease in net realized gains on
sales and calls of investment securities, a decrease in loan placement fees, and
a decrease in service charge income. Total assets at December 31, 2021 were
$2,450,139,000 compared to $2,004,096,000 at December 31, 2020.
Return on average equity ("ROE") for 2021 was 11.50% compared to 8.85% and 9.39%
for 2020 and 2019, respectively.  Return on average assets ("ROA") for 2021 was
1.25% compared to 1.11% and 1.36% for 2020 and 2019, respectively.  Total equity
was $247,845,000 at December 31, 2021 compared to $245,021,000 at December 31,
2020.  The increase in shareholders' equity is the result of an increase in
retained earnings from our net income of $28,401,000, the exercise of stock
options in the amount of $256,000, the effect of share-based compensation
expense of $405,000, and stock issued under our employee stock purchase plan of
$204,000, partially offset by a decrease in accumulated other comprehensive
income (AOCI) of $7,224,000, the payment of common stock cash dividends of
$5,757,000 and the repurchase and retirement of common stock of $13,619,000.
Average total loans (including nonaccrual) increased $13,941,000 or 1.32% to
$1,069,653,000 in 2021 compared to $1,055,712,000 in 2020.  In 2021, we recorded
a reversal of provision for credit losses of $4,300,000 compared to a provision
of $3,275,000 in 2020 and a provision of $1,025,000 in 2019.  The Company had
nonperforming assets consisting of $946,000 in nonaccrual loans at December 31,
2021.  At December 31, 2020, nonperforming assets totaled $3,278,000.  Net loan
loss recoveries for 2021 were $985,000 compared to net loan loss recoveries in
the amount of $510,000 for 2020 and net loan loss charge-offs in the amount of
$999,000 for 2019.  Refer to "Asset Quality" below for further information.

Dividend Declared

The Company declared a $0.12 cash dividend per common share, payable on
February 25, 2022 to shareholders of record on February 11, 2022.

Key Factors in Assessing Financial Condition and Operational Performance

When evaluating our financial condition and operating performance, we focus on several key factors, including:

•Return to our shareholders;
•Return on average assets;
•Development of revenue streams, including net interest income and non-interest
income;
•Asset quality;
•Asset growth;
•Capital adequacy;
•Operating efficiency; and
•Liquidity.

Return to Our Shareholders

One measure of our return to our shareholders is the return on average equity
(ROE), which is a ratio that measures net income divided by average
shareholders' equity. Our ROE was 11.50% for the year ended 2021 compared to
8.85% and 9.39% for the years ended 2020 and 2019, respectively.
Our net income for the year ended December 31, 2021 increased $8,054,000
compared to 2020 and decreased $1,096,000 in 2020 compared to 2019.
Contributing to the increase during 2021 compared to 2020 was a reversal of
provision for credit losses, an increase in net interest income, and an increase
in interchange fees, partially offset by a decrease in net realized gains on
sales and calls of investment securities, a decrease in service charge income,
an increase in non-interest expense, a decrease in loan placement fees, and an
increase in the provision for income taxes. During 2020, net income
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compared to 2019 was negatively impacted by an increase in the provision for
credit losses and higher non-interest expenses.  During 2019 net income was
positively impacted by an increase in net interest income and an increase in net
realized gains on sales and calls of investment securities.
Net interest income increased primarily because of increases in loan and fee
income, increases in interest income on investments, and decreases in interest
expense. For 2021, our net interest margin (NIM) decreased 33 basis points to
3.54% compared to 2020 as a result of yield changes and asset mix changes. The
decrease in net interest margin in the period-to-period comparison resulted from
the decrease in the effective yield on interest earning deposits in other banks
and Federal Funds sold and the decrease in the effective yield on average
investment securities, offset by the increase in the yield on the Company's loan
portfolio. Net interest income during 2021 was positively impacted by from the
accretion of the loan marks on acquired loans in the amount of $802,000 and
$1,321,000 for the year ended December 31, 2021 and 2020, respectively. In
addition, net interest income before the provision for credit losses for the
year ended December 31, 2021 benefited by approximately $676,000 in nonrecurring
income from prepayment penalties and payoff of loans, as compared to $805,000
for the year ended December 31, 2020. Excluding these reversals and benefits,
net interest income for the year ended December 31, 2021 increased by $8,779,000
compared to the year ended December 31, 2020.
Non-interest income decreased 34.73% in 2021 compared to 2020 primarily due to a
$3,751,000 decrease in net realized gains on sales and calls of investment
securities, a decrease of $1,118,000 in other income, a decrease in loan
placement fees of $317,000, and a decrease in service charge income of $170,000,
partially offset by an increase in interchange fees of $437,000 and an increase
in appreciation in cash surrender value of bank-owned life insurance of
$129,000. Other income for the year ended December 31, 2020 included a
$1,167,000 gain related to the collection of tax-exempt life insurance proceeds.
Non-interest expenses increased $158,000 or 0.33% to $47,842,000 in 2021
compared to $47,684,000 in 2020. The net increase year over year resulted from
increases in data processing of $348,000, information technology of $477,000,
regulatory assessments of $341,000, occupancy and equipment expenses of
$256,000, personnel of $213,000, salaries and employee benefits of $117,000,
loan related expenses of $75,000, donations of $45,000, education and training
of $42,000 general insurance of $31,000, telephone of $31,000, alarm of $16,000,
and postage of $11,000, partially offset by decreases in professional services
of $733,000, Internet banking expenses of $330,000, directors' expenses of
$193,000, advertising expenses of $136,000, stationary and supplies of $78,000,
risk management expenses of $55,000, amortization of software of $41,000,
amortization of core deposit intangible of $34,000, armored courier of $25,000,
travel and mileage of $24,000, and operating losses of $5,000 in 2021 compared
to 2020. The Company recorded an income tax provision of $9,616,000 for the year
ended December 31, 2021, compared to $6,914,000 for the year ended December 31,
2020, and $8,509,000 for the year ended December 31, 2019. Basic EPS was $2.32
for 2021 compared to $1.62 and $1.60 for 2020 and 2019, respectively.  Diluted
EPS was $2.31 for 2021 compared to $1.62 and $1.59 for 2020 and 2019,
respectively.

Average return on assets

Our ROA is a ratio that measures our performance compared with other banks and
bank holding companies.  Our ROA for the year ended 2021 was 1.25% compared to
1.11% and 1.36% for the years ended December 31, 2020 and 2019, respectively.
The 2021 increase in ROA is primarily due to the increase in net income,
notwithstanding the increase in average assets.  Annualized ROA for our peer
group was 0.93% at December 31, 2021.  Peer group information from S&P Global
Market Intelligence data includes bank holding companies in central California
with assets from $1 billion to $3.5 billion.

Development of revenue streams

Over the past several years, we have focused on not only our net income, but
improving the consistency of our revenue streams in order to create more
predictable future earnings and reduce the effect of changes in our operating
environment on our net income.  Specifically, we have focused on net interest
income through a variety of strategies, including increases in average interest
earning assets, and minimizing the effects of the recent interest rate changes
on our net interest margin by focusing on core deposits and managing our cost of
funds.  Our net interest margin (fully tax equivalent basis) was 3.54% for the
year ended December 31, 2021, compared to 3.87% and 4.51% for the years ended
December 31, 2020 and 2019, respectively.  The decrease in 2021 net interest
margin compared to 2020, resulted from the decrease in the effective yield on
interest earning deposits in other banks and Federal Funds sold, the decrease in
the effective yield on average investment securities, offset by the increase in
the yield on the Company's loan portfolio.  The effective tax equivalent yield
on total earning assets decreased 36 basis points, while the cost of total
interest-bearing liabilities decreased 7 basis points to 0.12% for the year
ended December 31, 2021. Our cost of total deposits in 2021 and 2020 was 0.05%
and 0.09%, respectively, compared to 0.15% for the same period in 2019. Our net
interest income before provision for credit losses increased $8,131,000 or
12.62% to $72,554,000 for the year ended 2021 compared to $64,423,000 and
$63,772,000 for the years ended 2020 and 2019, respectively.
Our non-interest income is generally made up of service charges and fees on
deposit accounts, fee income from loan placements, appreciation in cash
surrender value of bank-owned life insurance, and net gains from sales and calls
of investment
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securities.  Non-interest income in 2021 decreased $4,792,000 or 34.73% to
$9,005,000 compared to $13,797,000 in 2020 and $13,305,000 in 2019.  The
decrease resulted primarily from a decrease in net realized gains on sales and
calls of investment securities, a decrease in service charge income, a decrease
in loan placement fees, a decrease in FHLB dividends, and a decrease in other
income, partially offset by an increase in interchange fees and an increase in
appreciation in cash surrender value of bank-owned life insurance compared to
2020.  Further detail on non-interest income is provided below.

Asset quality

For all banks and bank holding companies, asset quality has a significant impact
on the overall financial condition and results of operations.  Asset quality is
measured in terms of classified and nonperforming loans, and is a key element in
estimating the future earnings of a company.  Total nonperforming assets were
$946,000 and $3,278,000 at December 31, 2021 and 2020, respectively.
Nonperforming assets totaled 0.09% of gross loans as of December 31, 2021 and
0.30% of gross loans as of December 31, 2020. Nonperforming loans were $946,000
and $3,278,000 at December 31, 2021 and 2020, respectively.  The Company had no
other real estate owned at December 31, 2021, or December 31, 2020. No
foreclosed assets were recorded at December 31, 2021 or December 31, 2020.
Management maintains certain loans that have been brought current by the
borrower (less than 30 days delinquent) on nonaccrual status until such time as
management has determined that the loans are likely to remain current in future
periods.
The ratio of nonperforming loans to total loans was 0.09% as of December 31,
2021 and 0.30% as of December 31, 2020. The allowance for credit losses as a
percentage of outstanding loan balance was 0.92% as of December 31, 2021 and
1.17% as of December 31, 2020. The ratio of net recoveries (charge-offs) to
average loans was 0.09% as of December 31, 2021 and 0.05% as of December 31,
2020.

Asset Growth

As revenues from both net interest income and non-interest income are a function
of asset size, the continued growth in assets has a direct impact in increasing
net income and therefore ROE and ROA.  The majority of our assets are loans and
investment securities, and the majority of our liabilities are deposits, and
therefore the ability to generate deposits as a funding source for loans and
investments is fundamental to our asset growth.  Total assets increased 22.26%
during 2021 to $2,450,139,000 as of December 31, 2021 from $2,004,096,000 as of
December 31, 2020.  Total gross loans decreased 5.74% to $1,039,111,000 as of
December 31, 2021, compared to $1,102,347,000 at December 31, 2020.  Total
investment securities increased 55.58% to $1,116,624,000 as of December 31, 2021
compared to $717,726,000 as of December 31, 2020.  Total deposits increased
23.22% to $2,122,797,000 as of December 31, 2021 compared to $1,722,710,000 as
of December 31, 2020.  Our loan to deposit ratio at December 31, 2021 was 48.95%
compared to 63.99% at December 31, 2020.  The loan to deposit ratio of our peers
was 71.00% at December 31, 2021. Peer group information from S&P Global Market
Intelligence data includes bank holding companies in central California with
assets from $1 billion to $3.5 billion.

Capital adequacy

At December 31, 2021, we had a total capital to risk-weighted assets ratio of
15.80%, a Tier 1 risk-based capital ratio of 12.82%, common equity Tier 1 ratio
of 12.48%, and a leverage ratio of 8.03%.  At December 31, 2020, we had a total
capital to risk-weighted assets ratio of 15.58%, a Tier 1 risk-based capital
ratio of 14.50%, common equity Tier 1 ratio of 14.10%, and a leverage ratio of
9.28%.  At December 31, 2021, on a stand-alone basis, the Bank had a total
risk-based capital ratio of 14.18%, a Tier 1 risk based capital ratio of 13.52%,
common equity Tier 1 ratio of 13.52%, and a leverage ratio of 8.47%.  At
December 31, 2020, the Bank had a total risk-based capital ratio of 15.48%, Tier
1 risk-based capital of 14.41% and a leverage ratio of 9.23%.    Note 13   of
the audited Consolidated Financial Statements provides more detailed information
concerning the Company's capital amounts and ratios. As of December 31, 2021,
the Bank met or exceeded all of their capital requirements inclusive of the
capital buffer. The Bank's capital ratios exceeded the regulatory guidelines for
a well-capitalized financial institution under the Basel III regulatory
requirements at December 31, 2021.

Operational efficiency

Operating efficiency is the measure of how efficiently earnings before taxes are
generated as a percentage of revenue.  A lower ratio represents greater
efficiency.  The Company's efficiency ratio (operating expenses, excluding
amortization of intangibles and foreclosed property expense, divided by net
interest income plus non-interest income, excluding net gains and losses from
sale of securities) was 57.16% for 2021 compared to 64.08% for 2020 and 62.77%
for 2019.  The improvement in the efficiency ratio in 2021 was due to the growth
in non-interest income outpacing the increase in non-interest expense. The
Company's net interest income before provision for credit losses plus
non-interest income increased 4.27% to $81,559,000 in 2021 compared to
$78,220,000 in 2020 and $77,077,000 in 2019, while operating expenses increased
0.33% in 2021, 3.44% in 2020, and 2.29% in 2019.
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Liquidity

Liquidity management involves our ability to meet cash flow requirements arising
from fluctuations in deposit levels and demands of daily operations, which
include providing for customers' credit needs, funding of securities purchases,
and ongoing repayment of borrowings. Our liquidity is actively managed on a
daily basis and reviewed periodically by our management and Directors'
Asset/Liability Committee. This process is intended to ensure the maintenance of
sufficient funds to meet our needs, including adequate cash flows 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 and advances from the Federal
Home Loan Bank of San Francisco.  We have available unsecured lines of credit
with correspondent banks totaling approximately $110,000,000 and secured
borrowing lines of approximately $277,130,000 with the Federal Home Loan Bank.
These funding sources are augmented by collection of principal and interest on
loans, the routine maturities and pay downs of securities from our investment
securities portfolio, the stability of our core deposits, and the ability to
sell investment securities.  Primary uses of funds include origination and
purchases of loans, withdrawals of and interest payments on deposits, purchases
of investment securities, and payment of operating expenses.
We had liquid assets (cash and due from banks, interest-earning deposits in
other banks, Federal funds sold, equity securities, and available-for-sale
securities) totaling $1,280,091,000 or 52.25% of total assets at December 31,
2021 and $788,004,000 or 39.32% of total assets as of December 31, 2020.


RESULTS OF OPERATIONS

Net Income

Net income was $28,401,000 in 2021 compared to $20,347,000 and $21,443,000 in
2020 and 2019, respectively.  Basic earnings per share was $2.32, $1.62, and
$1.60 for 2021, 2020, and 2019, respectively.  Diluted earnings per share was
$2.31, $1.62, and $1.59 for 2021, 2020, and 2019, respectively.  ROE was 11.50%
for 2021 compared to 8.85% for 2020 and 9.39% for 2019.  ROA for 2021 was 1.25%
compared to 1.11% for 2020 and 1.36% for 2019.
The increase in net income for 2021 compared to 2020 was driven by a reversal of
provision for credit losses, an increase in net interest income, and an increase
in interchange fees, partially offset by an increase in the provision for income
taxes, an increase in non-interest expense, a decrease in net realized gains on
sales and calls of investment securities, a decrease in loan placement fees, and
a decrease in service charge income. The decrease in net income for 2020
compared to 2019 was primarily due to an increase in provision for credit
losses, a decrease in net realized gains on sales and calls of investment
securities, a decrease in service charge income, and an increase in non-interest
expense, partially offset by an increase in net interest income, an increase in
loan placement fees, and a decrease in the provision for income taxes.

Interest income and expenses

Net interest income is the most significant component of our income from
operations.  Net interest income (the interest rate spread) is the difference
between the gross interest and fees earned on the loan and investment portfolios
and the interest paid on deposits and other borrowings.  Net interest income
depends on the volume of and interest rate earned on interest-earning assets and
the volume of and interest rate paid on interest-bearing liabilities.

The following table sets forth a summary of average balances with corresponding
interest income and interest expense as well as average yield and cost
information for the periods presented.  Average balances are derived from daily
balances, and nonaccrual loans are not included as interest-earning assets for
purposes of this table.

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             SCHEDULE OF AVERAGE BALANCES, AVERAGE YIELDS AND RATES
                                                           Year Ended December 31, 2021                                      Year Ended December 31, 2020                                     Year Ended December 31, 2019
                                                                       Interest             Average                                      Interest            Average                                      Interest            Average
                                                  Average               Income/            Interest                 Average               Income/            Interest                Average               Income/            Interest
(Dollars in thousands)                            Balance               Expense              Rate                   Balance               Expense              Rate                  Balance               Expense              Rate
ASSETS
Interest-earning deposits in other
banks                                       $        104,710          $    129                  0.12  %       $         76,924          $    246                 0.32  %       $         17,893          $    375                 2.10  %
Securities
Taxable securities                                   678,093            14,044                  2.07  %                479,894            11,740                 2.45  %                438,042            13,197                 3.01  %
Non-taxable securities (1)                           238,870             7,096                  2.97  %                 66,299             2,489                 3.75  %                 38,520             1,639                 4.25  %
Total investment securities                          916,963            21,140                  2.31  %                546,193            14,229                 2.61  %                476,562            14,836               

3.11%

Total securities and interest-earning
deposits                                           1,021,673            21,269                  2.08  %                623,117            14,475                 2.32  %                494,455            15,211                 3.08  %
Loans (2) (3)                                      1,067,316            54,077                  5.07  %              1,053,450            52,066                 4.94  %                928,560            51,464                 5.54  %
Total interest-earning assets                      2,088,989          $ 75,346                  3.61  %              1,676,567          $ 66,541                 3.97  %              1,423,015          $ 66,675                 4.69  %
Allowance for credit losses                          (11,482)                                                          (12,242)                                                          (9,337)
Nonaccrual loans                                       2,337                                                             2,262                                                            2,323

Cash and due from banks                               38,202                                                            27,575                                                           25,726
Bank premises and equipment                            8,436                                                             7,476                                                            7,983
Other assets                                         141,133                                                           131,349                                                          124,379
Total average assets                        $      2,267,615                                                  $      1,832,987                                                 $      1,574,089
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and NOW accounts                    $        529,043          $    182                  0.03  %       $        433,742          $    341                 0.08  %       $        370,378          $    566                 0.15  %
Money market accounts                                455,575               661                  0.15  %                300,603               542                 0.18  %                270,918               656                 0.24  %
Time certificates of deposit                          89,875               193                  0.21  %                 89,610               582                 0.65  %                 97,136               706                 0.73  %
Total interest-bearing deposits                    1,074,493             1,036                  0.10  %                823,955             1,465                 0.18  %                738,432             1,928                 0.26  %
Other borrowed funds                                   9,864               266                  2.70  %                  5,155               130                 2.52  %                 21,943               631                 2.88  %
Total interest-bearing liabilities                 1,084,357          $  1,302                  0.12  %                829,110          $  1,595                 0.19  %                760,375          $  2,559                 0.34  %
Non-interest bearing demand deposits                 900,083                                                           744,239                                                          557,348
Other liabilities                                     36,311                                                            29,831                                                           28,014
Shareholders' equity                                 246,864                                                           229,807                                                          228,352
Total average liabilities and
shareholders' equity                        $      2,267,615                                                  $      1,832,987                                                 $      1,574,089
Interest income and rate earned on
average earning assets                                                $ 75,346                  3.61  %                                 $ 66,541                 3.97  %                                 $ 66,675                 4.69  %
Interest expense and interest cost
related to average interest-bearing
liabilities                                                              1,302                  0.12  %                                    1,595                 0.19  %                                    2,559                 0.34  %
Net interest income and net interest
margin (4)                                                            $ 74,044                  3.54  %                                 $ 64,946                 3.87  %                                 $ 64,116                 4.51  %


(1)Interest income is calculated on a fully tax equivalent basis, which includes
Federal tax benefits relating to income earned on municipal bonds totaling
$1,490, $523, and $344 in 2021, 2020, and 2019, respectively.
(2)Loan interest income includes loan fees of $6,474 in 2021, $2,234 in 2020,
and $164 in 2019.
(3)Average loans do not include nonaccrual loans.
(4)Net interest margin is computed by dividing net interest income by total
average interest-earning assets.
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The following table sets forth a summary of the changes in interest income and
interest expense due to changes in average asset and liability balances (volume)
and changes in average interest rates for the periods indicated. The change in
interest due to both rate and volume has been allocated to the change in rate.

                                            For the Years Ended December 

31, 2021 compared for years ended December 31, 2020 Relative to volume/rate changes

                                         to 2020                                                  2019
(In thousands)                                Volume              Rate              Net              Volume               Rate              Net
Increase (decrease) due to changes
in:
Interest income:
Interest-earning deposits in other
banks                                      $       88          $   (205)         $  (117)         $    1,237          $  (1,366)         $  (129)
Investment securities:
Taxable                                         4,848            (2,544)           2,304               1,260             (2,717)          (1,457)
Non-taxable (1)                                 6,478            (1,871)           4,607               1,181               (331)             850
Total investment securities                    11,326            (4,415)           6,911               2,441             (3,048)            (607)

Loans                                             685             1,326            2,011               6,921             (6,319)             602

Total earning assets (1)                       12,099            (3,294)           8,805              10,599            (10,733)            (134)
Interest expense:
Deposits:
Savings, NOW and MMA                              353              (393)             (40)                167               (506)            (339)
Time certificate of deposits                        1              (390)            (389)                (54)               (70)            (124)
Total interest-bearing deposits                   354              (783)            (429)                113               (576)            (463)
Other borrowed funds                              119                17              136                (483)               (18)            (501)
Total interest bearing liabilities                473              (766)            (293)               (370)              (594)            (964)
Net interest income (1)                    $   11,626          $ (2,528)         $ 9,098          $   10,969          $ (10,139)         $   830

(1) Calculated as tax equivalent for securities exempt from federal income tax.

Interest and fee income from loans increased $2,011,000 or 3.86% in 2021
compared to 2020.  Interest and fee income from loans increased $602,000 or
1.17% in 2020 compared to 2019.  The increase in 2021 is primarily attributable
to an increase in average total loans outstanding as well as an increase in the
yield on loans of 13 basis points.
Average total loans for 2021 increased $13,941,000 to $1,069,653,000 compared to
$1,055,712,000 for 2020 and $930,883,000 for 2019.  The yield on loans for 2021
was 5.07% compared to 4.94% and 5.54% for 2020 and 2019, respectively. The
impact to interest income from the accretion of the loan marks on acquired loans
was an increase of $802,000 and $1,321,000 for the years ended December 31, 2021
and 2020, respectively.
Interest income from total investments on a non tax-equivalent basis, (total
investments include investment securities, Federal funds sold, interest-bearing
deposits in other banks, and other securities), increased $5,827,000 or 41.76%
in 2021 compared to 2020. The yield on average investments decreased 24 basis
points to 2.08% for the year ended December 31, 2021 from 2.32% for the year
ended December 31, 2020. Average total investments increased $398,556,000 to
$1,021,673,000 in 2021 compared to $623,117,000 in 2020.  In 2020, total
investment income on a non tax-equivalent basis decreased $915,000 or 6.15%
compared to 2019.
Our investment portfolio consists primarily of securities issued by U.S.
Government sponsored entities and agencies collateralized by mortgage backed
obligations and obligations of states and political subdivision securities.
However, a significant portion of the investment portfolio is mortgage-backed
securities (MBS) and collateralized mortgage obligations (CMOs).  At
December 31, 2021, we held $527,659,000 or 47.57% of the total market value of
the investment portfolio in MBS and CMOs with an average yield of 2.08%.  We
invest in CMOs and MBS as part of our overall strategy to increase our net
interest margin.  CMOs and MBS by their nature are affected by prepayments which
are impacted by changes in interest rates.  In a normal declining rate
environment, prepayments from MBS and CMOs would be expected to increase and the
expected life of the investment would be expected to shorten.  Conversely, if
interest rates increase, prepayments normally would be expected to decline and
the average life of the MBS and CMOs would be expected to extend.  However, in
the current economic environment, prepayments may not behave according to
historical norms. Premium amortization and discount accretion of these
investments affects our net interest income.  Our management monitors the
prepayment trends of these investments and adjusts premium amortization and
discount accretion based on several factors.  These factors include the type of
investment, the investment structure, interest rates, interest rates on new
mortgage loans, expectation of interest rate changes, current economic
conditions, the level of principal remaining on the bond, the bond coupon rate,
the bond origination date, and volume of available bonds in market.  The
calculation of premium amortization and discount accretion is by nature inexact,
and represents management's best estimate of principal pay downs inherent in the
total investment portfolio.
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The cumulative net-of-tax effect of the change in market value of the
available-for-sale investment portfolio as of December 31, 2021 was an
unrealized gain of $7,632,000 and is reflected in the Company's equity.  At
December 31, 2021, the effective duration of the investment portfolio was 4.86
years and the market value reflected a pre-tax unrealized gain of $10,835,000.
Management reviews market value declines on individual investment securities to
determine whether they represent other-than-temporary impairment (OTTI). For the
years ended December 31, 2021, 2020, and 2019, no OTTI was recorded. Future
deterioration in the market values of our investment securities may require the
Company to recognize additional OTTI losses.
A component of the Company's strategic plan has been to use its investment
portfolio to offset, in part, its interest rate risk relating to variable rate
loans.  Measured at December 31, 2021, an immediate rate increase of 200 basis
points would result in an estimated decrease in the market value of the
investment portfolio by approximately $117,000,000.  Conversely, with an
immediate rate decrease of 200 basis points, the estimated increase in the
market value of the investment portfolio would be $123,000,000.  The modeling
environment assumes management would take no action during an immediate shock of
200 basis points.  However, the Company uses those increments to measure its
interest rate risk in accordance with regulatory requirements and to measure the
possible future risk in the investment portfolio.  For further discussion of the
Company's market risk, refer to Quantitative and Qualitative Disclosures about
Market Risk.
Management's review of all investments before purchase includes an analysis of
how the security will perform under several interest rate scenarios to monitor
whether investments are consistent with our investment policy.  The policy
addresses issues of average life, duration, and concentration guidelines,
prohibited investments, impairment, and prohibited practices.
Total interest income in 2021 increased $7,838,000 to $73,856,000 compared to
$66,018,000 in 2020 and $66,331,000 in 2019, respectively.  The increase in 2021
was the result of yield changes and asset mix changes.  The tax-equivalent yield
on interest earning assets decreased to 3.61% for the year ended December 31,
2021 from 3.97% for the year ended December 31, 2020.  Average interest earning
assets increased to $2,088,989,000 for the year ended December 31, 2021 compared
to $1,676,567,000 for the year ended December 31, 2020.  Average
interest-earning deposits in other banks increased $27,786,000 in 2021 compared
to 2020.  Average yield on these deposits was 0.12% compared to 0.32% on
December 31, 2021 and December 31, 2020 respectively.  Average investments and
interest-earning deposits increased $398,556,000 but the tax equivalent yield on
those assets decreased 24 basis points.  Average total loans increased
$13,941,000 and the yield on average loans increased 13 basis points.
The decrease in total interest income for 2020 was the result of yield changes,
decrease in interest rates, and asset mix changes. The tax-equivalent yield on
interest-earning assets increased to 3.97% for the year ended December 31, 2020
from 4.69% for the year ended December 31, 2019.  Average interest-earning
assets increased to $1,676,567,000 for the year ended December 31, 2020 compared
to $1,423,015,000 for the year ended December 31, 2019.  Average total loans
increased and the yield on average loans decreased 60 basis points.
Interest expense on deposits in 2021 decreased $429,000 or 29.28% to $1,036,000
compared to $1,465,000 in 2020 and decreased $892,000 as compared to 2019.  The
yield on interest-bearing deposits decreased 8 basis points to 0.10% in 2021
from 0.18% in 2020.  The yield on interest-bearing deposits decreased 8 basis
points to 0.18% in 2020 from 0.26% in 2019.  Average interest-bearing deposits
were $1,074,493,000 for 2021 compared to $823,955,000 and $738,432,000 for 2020
and 2019, respectively.
Average other borrowings were $9,864,000 with an effective rate of 2.70% for
2021 compared to $5,155,000 with an effective rate of 2.52% for 2020.  In 2019,
the average other borrowings were $21,943,000 with an effective rate of 2.88%.
Included in other borrowings are the junior subordinated deferrable interest
debentures acquired from Service 1st, subordinated debt, advances on lines of
credit, advances from the Federal Home Loan Bank (FHLB), and overnight
borrowings.  The junior subordinated debentures carry a floating rate based on
the three month LIBOR plus a margin of 1.60%. The rate was 1.73% for 2021, 1.84%
for 2020, and 3.59% for 2019. The subordinated debt, issued in 2021, bears a
fixed interest rate of 3.125% per year.
The cost of all interest-bearing liabilities was 0.12% and 0.19% basis points
for 2021 and 2020, respectively, compared to 0.34% for 2019.  The cost of total
deposits decreased to 0.05% for the year ended December 31, 2021, compared to
0.09% and 0.15% for the years ended December 31, 2020 and 2019, respectively.
Average demand deposits increased 20.94% to $900,083,000 in 2021 compared to
$744,239,000 for 2020 and $557,348,000 for 2019. The ratio of average
non-interest demand deposits to average total deposits increased to 45.58% for
2021 compared to 47.46% and 43.01% for 2020 and 2019, respectively.

Net interest income before provision for credit losses

Net interest income before provision for credit losses for 2021 increased
$8,131,000 or 12.62% to $72,554,000 compared to $64,423,000 for 2020 and
$63,772,000 for 2019.  The increase in 2021 was a result of yield changes, asset
mix changes, and an increase in average earning assets, offset by an increase in
average interest bearing liabilities. Our net interest margin (NIM) decreased 33
basis points. Yield on interest earning assets decreased 36 basis points.  The
decrease in net interest margin in the period-to-period comparison resulted
primarily from the decrease in the effective yield on interest earning deposits
in other banks and Federal Funds sold, the decrease in the effective yield on
average investment securities, offset by
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the increase in the yield on the Company's loan portfolio.  Net interest income
before provision for credit losses increased $651,000 in 2020 compared to 2019,
primarily due to the increase in average earning assets, yield changes, asset
mix changes, offset by an increase in average interest bearing liabilities.
Average interest-earning assets were $2,088,989,000 for the year ended
December 31, 2021 with a NIM of 3.54% compared to $1,676,567,000 with a NIM of
3.87% in 2020, and $1,423,015,000 with a NIM of 4.51% in 2019.  For a discussion
of the repricing of our assets and liabilities, refer to Quantitative and
Qualitative Disclosure about Market Risk.

Provision for credit losses

We provide for probable incurred credit losses through a charge to operating
income based upon the composition of the loan portfolio, delinquency levels,
historical losses, and nonperforming assets, economic and environmental
conditions and other factors which, in management's judgment, deserve
recognition in estimating credit losses. Credit risk is inherent in the business
of making loans. Credit risk is inherent in the business of making loans. The
Company establishes an allowance for credit losses on loans through charges to
earnings, which are presented in the statements of income as the provision for
credit losses on loans. Specifically identifiable and quantifiable known losses
are promptly charged off against the allowance. Loans are charged off when they
are considered uncollectible or when continuance as an active earning bank asset
is not warranted.
The provision for credit losses on loans is determined by conducting a quarterly
evaluation of the adequacy of the Company's allowance for credit losses on loans
and charging the shortfall or excess, if any, to the current quarter's expense.
This has the effect of creating variability in the amount and frequency of
charges to the Company's earnings. The provision for credit losses on loans and
level of allowance for each period are dependent upon many factors, including
loan growth, net charge offs, changes in the composition of the loan portfolio,
delinquencies, management's assessment of the quality of the loan portfolio, the
valuation of problem loans and the general economic conditions in the Company's
market area.
The establishment of an adequate credit allowance is based on an allowance model
that utilizes qualitative and quantitative factors, historical losses, loan
level risk ratings and portfolio management tools.  The Board of Directors has
established initial responsibility for the accuracy of credit risk ratings with
the individual credit officer and oversight from Credit Administration who
ensures the accuracy of the risk ratings. Quarterly, the credit officers must
certify the current risk ratings of the loans in their portfolio. Credit
Administration reviews the certifications and reports to the Board of Directors
Audit/Compliance Committee. At least annually the loan portfolio, including risk
ratings, is reviewed by a third party credit reviewer. Regulatory agencies also
review the loan portfolio on a periodic basis. See "Allowance for Credit Losses"
for more information on the Company's Allowance for Loan Loss.
  During the year ended December 31, 2021, the Company recorded a reversal of
provision for credit losses of $4,300,000 compared to a provision of $3,275,000
and $1,025,000 for the same periods in 2020 and 2019, respectively. The recorded
provisions to the allowance for credit losses are primarily the result of our
assessment of the overall adequacy of the allowance for credit losses
considering a number of factors as discussed in the "Allowance for Credit
Losses" section.
During the years ended December 31, 2021, 2020 and 2019 the Company had net
charge-offs (recoveries) totaling $(985,000), $(510,000), and $999,000,
respectively. The net charge-off (recovery) ratio, which reflects net
charge-offs (recoveries) to average loans, was (0.09)%, (0.05)% and 0.11% for
2021, 2020, and 2019, respectively.
Economic pressures may negatively impact the financial condition of borrowers to
whom the Company has extended credit and as a result, when negative economic
conditions are anticipated, we may be required to make significant provisions to
the allowance for credit losses. The Bank conducts banking operations
principally in California's Central Valley. The Central Valley is largely
dependent on agriculture. The agricultural economy in the Central Valley is
therefore important to our business, financial performance and results of
operations. We are also dependent in a large part upon the business activity,
population growth, income levels and real estate activity in this market area. A
downturn in agriculture and the agricultural related businesses could have a
material adverse effect our business, results of operations and financial
condition. The agricultural industry has been affected by declines in prices and
the changes in yields on various crops and other agricultural commodities.
Similarly, weaker prices could reduce the cash flows generated by farms and the
value of agricultural land in our local markets and thereby increase the risk of
default by our borrowers or reduce the foreclosure value of agricultural land
and equipment that serve as collateral for our loans. Further declines in
commodity prices or collateral values may increase the incidence of default by
our borrowers. Moreover, weaker prices might threaten farming operations in the
Central Valley, reducing market demand for agricultural lending. In particular,
farm income has seen recent declines, and in line with the downturn in farm
income, farmland prices are coming under pressure.

We have been and will continue to be proactive in looking for signs of
deterioration within the loan portfolio in an effort to manage credit quality
and work with borrowers where possible to mitigate losses. As of December 31,
2021, there were $8.5 million in classified loans of which $2.6 million related
to commercial and industrial loans, $3.6 million to real estate owner occupied,
and $2.4 million to agricultural production. This compares to $36.1 million in
classified loans as of December 31, 2020 of which $1.2 million related to
agricultural real estate, $3.2 million to real estate construction, $10.4
million to commercial and industrial, $3.3 million to agricultural production,
$9.6 million to commercial real estate, and $7.3 million to real estate owner
occupied.
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As of December 31, 2021, we believe, based on all current and available
information, the allowance for credit losses is adequate to absorb probable
incurred losses within the loan portfolio; however, no assurance can be given
that we may not sustain charge-offs which are in excess of the allowance in any
given period.  Refer to "Allowance for Credit Losses" below for further
information.

Net interest income after provision for credit losses

Net interest income, after allowance for credit losses has been $76,854,000 for 2021 compared to $61,148,000 and $62,747,000 respectively for 2020 and 2019.

Non-interest income

Non-interest income is comprised of customer service charges, gains on sales and
calls of investment securities, income from appreciation in cash surrender value
of bank owned life insurance, loan placement fees, Federal Home Loan Bank
dividends, and other income.  Non-interest income was $9,005,000 in 2021
compared to $13,797,000 and $13,305,000 in 2020 and 2019, respectively. The
$4,792,000 or 34.73% decrease in non-interest income in 2021 was driven by a
decrease of $3,751,000 in net realized gains on sales and calls of investment
securities, a decrease of $1,118,000 in other income, a decrease in service
charge income of $170,000, and a decrease in loan placement fees of $317,000,
partially offset by an increase in interchange fees of $437,000 and an increase
in appreciation in cash surrender value of bank-owned life insurance of
$129,000. Other income for the year ended December 31, 2020 included a
$1,167,000 gain related to the collection of tax-exempt life insurance proceeds.
The 492,000 or 3.70% increase in non-interest income in 2020 resulted primarily
from an increase in loan placement fees, and an increase in other income,
partially offset by a decrease in net realized gains on sales and calls of
investment securities, a decrease in service charge income, and a decrease in
FHLB dividends compared to 2019.
Customer service charges decreased $170,000 to $1,901,000 in 2021 compared to
$2,071,000 in 2020 and $2,756,000 in 2019.  The decreases in 2021 and 2020
resulted from decreases in our NSF fees and lower analysis service charge
income.
During the year ended December 31, 2021, we realized net gains on sales and
calls of investment securities of $501,000, compared to $4,252,000 in 2020 and
$5,199,000 in 2019. The net gains in 2021, 2020, and 2019 were the results of
partial restructuring of the investment portfolio designed to improve the future
performance of the portfolio.  See   Note 3   to the audited Consolidated
Financial Statements for more detail.
Income from the appreciation in cash surrender value of bank owned life
insurance (BOLI) totaled $840,000 in 2021 compared to $711,000 and $728,000 in
2020 and 2019, respectively.  The Bank's salary continuation and deferred
compensation plans and the related BOLI are used as retention tools for
directors and key executives of the Bank.
Interchange fees totaled $1,784,000 in 2021 compared to $1,347,000 and
$1,446,000 in 2020 and 2019, respectively.
We earn loan placement fees from the brokerage of single-family residential
mortgage loans provided for the convenience of our customers.  Loan placement
fees decreased $317,000 in 2021 to $1,974,000 compared to $2,291,000 in 2020 and
$978,000 in 2019.
The Bank holds stock from the Federal Home Loan Bank in relationship with its
borrowing capacity and generally receives quarterly dividends.  As of December
31, 2021 and 2020, we held FHLB stock totaling $5,595,000.  Dividends in 2021
decreased to $321,000 compared to $323,000 in 2020 and $455,000 in 2019.
Other income decreased to $1,684,000 in 2021 compared to $2,802,000 and
$1,743,000 in 2020 and 2019, respectively. Other income for the year ended
December 31, 2020 included a $1,167,000 gain related to the collection of
tax-exempt life insurance proceeds.

Non-interest expenses

Salaries and employee benefits, occupancy and equipment, regulatory assessments,
acquisition and integration-related expenses, data processing expenses,
ATM/Debit card expenses, license and maintenance contract expenses, information
technology, and professional services (consisting of audit, accounting,
consulting and legal fees) are the major categories of non-interest expenses.
Non-interest expenses increased $158,000 or 0.33% to $47,842,000 in 2021
compared to $47,684,000 in 2020, and $46,100,000 in 2019.
Our efficiency ratio, measured as the percentage of non-interest expenses
(exclusive of amortization of core deposit intangibles, other real estate owned,
and repossessed asset expenses) to net interest income before provision for
credit losses plus non-interest income (exclusive of realized gains or losses on
sale and calls of investments) was 57.16% for 2021 compared to 64.08% for 2020
and 62.77% for 2019. The improvement in the efficiency ratio in 2021 and 2020
was due to the growth in non-interest income outpacing the increase in
non-interest expense.
Salaries and employee benefits increased $117,000 or 0.41% to $28,720,000 in
2021 compared to $28,603,000 in 2020 and $26,654,000 in 2019.  Full time
equivalents were 256 for the year ended December 31, 2021 compared to 273 for
the year ended December 31, 2020. The increase in salaries and employee benefits
in 2021 compared to 2020 was the result of an increase of approximately $535,000
in salaries and benefits and lower loan origination costs of approximately
$878,000, offset
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by a decrease of $1,296,000 for directors' and officers' expenses related to the
change in the discount rate used to calculate the liability for salary
continuation, deferred compensation, and split-dollar plans.
For the years ended December 31, 2021, 2020, and 2019, the compensation cost
recognized for equity-based compensation was $405,000, $470,000 and $555,000,
respectively. As of December 31, 2021, there was $273,000 of total unrecognized
compensation cost related to non-vested equity-based compensation arrangements
granted under all plans.  The cost is expected to be recognized over a weighted
average period of 1.55 years.  See   Notes 1     and 14   to the audited
Consolidated Financial Statements for more detail. No options to purchase shares
of the Company's common stock were issued during the years ending December 31,
2021 and 2020. Restricted common stock awards of 31,496 and 21,397 shares were
awarded in 2021 and 2020, respectively.
Occupancy and equipment expense increased $256,000 or 5.53% to $4,882,000 in
2021 compared to $4,626,000 in 2020 and $5,439,000 in 2019. The Company made no
changes in its depreciation expense methodology. The Company operated 20
full-service offices at December 31,2021 and at December 31, 2020.
Regulatory assessments were $831,000 in 2021 compared to $490,000 and $251,000
in 2020 and 2019, respectively.  The assessment base for calculating the amount
owed is based on the formula of average assets minus average tangible equity.
The 2019 lower assessments were the result of the Company receiving its small
business bank credit.
Information technology expense increased $477,000 to $2,868,000 for the year
ended December 31, 2021 compared to $2,391,000 and $2,611,000 in 2020 and 2019,
respectively. Data processing expenses were $2,394,000 in 2021 compared to
$2,046,000 in 2020 and $1,557,000 in 2019. Professional services decreased
$733,000 in 2021 compared to 2020 due to lower legal expenses and consulting
fees.
Amortization of core deposit intangibles was $661,000 for 2021, $695,000 for
2020, and $695,000 for 2019. During 2021, amortization expense related to FLB
core deposit intangibles ("CDI") was $423,000, amortization expense related to
SVB CDI was $101,000, and amortization expense related to Visalia Community Bank
("VCB") CDI was $137,000. During 2020, amortization expense related to FLB CDI
was $423,000, amortization expense related to SVB CDI was $135,000, and
amortization expense related to VCB CDI was $137,000. During 2019, amortization
expense related to FLB CDI was $423,000, amortization expense related to SVB CDI
was $135,000, and amortization expense related to VCB CDI was $137,00.
ATM/Debit card expenses decreased $1,000 to $818,000 for the year ended
December 31, 2021 compared to $819,000 in 2020 and $920,000 in 2019. Other
non-interest expenses decreased $46,000 or 1.25% to $3,734,000 in 2021 compared
to $3,688,000 in 2020 and $4,386,000 in 2019.

The following table describes the significant components of other non-interest expense as a percentage of average assets.

                                         Other          %          Other          %          Other          %
For the years ended December 31,        Expense      Average      Expense      Average      Expense      Average
(Dollars in thousands)                   2021        Assets        2020        Assets        2019        Assets

Stationery/supplies                    $   150        0.01  %    $   228        0.01  %    $   240        0.02  %
Amortization of software                    82           -  %        123        0.01  %        350        0.02  %

Telephone                                  224        0.01  %        193        0.01  %        342        0.02  %
Alarm                                      131        0.01  %        115        0.01  %        100        0.01  %
Postage                                    202        0.01  %        191        0.01  %        218        0.01  %
Armored courier fees                       255        0.01  %        280        0.02  %        284        0.02  %
Risk management expense                     94           -  %        149        0.01  %        232        0.01  %

Donations                                  197        0.01  %        152        0.01  %        212        0.01  %
Personnel other                            374        0.02  %        161        0.01  %        177        0.01  %
Credit card expense                          -           -  %          -           -  %        114        0.01  %
Education/training                         198        0.01  %        156        0.01  %        155        0.01  %
Loan related expenses                      133        0.01  %         58           -  %         52           -  %
General insurance                          202        0.01  %        171        0.01  %        165        0.01  %

Travel and mileage expense                 103           -  %        127        0.01  %        256        0.02  %
Operating losses                           147        0.01  %        142        0.01  %        102        0.01  %
Shareholder services                       107           -  %        109        0.01  %        101        0.01  %
Other                                    1,135        0.05  %      1,333        0.08  %      1,286        0.08  %
Total other non-interest expense       $ 3,734        0.16  %    $ 3,688        0.22  %    $ 4,386        0.28  %



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Provision for Income Taxes

Our effective income tax rate was 25.3% for 2021 compared to 25.4% for 2020 and
28.4% for 2019.  The Company reported an income tax provision of $9,616,000,
$6,914,000, and $8,509,000 for the years ended December 31, 2021, 2020, and
2019, respectively.
Some items of income and expense are recognized in different years for tax
purposes than when applying generally accepted accounting principles leading to
timing differences between the Company's actual tax liability, and the amount
accrued for this liability based on book income. These temporary differences
comprise the "deferred" portion of the Company's tax expense or benefit, which
is accumulated on the Company's books as a deferred tax asset or deferred tax
liability until such time as they reverse.
Realization of the Company's deferred tax assets is primarily dependent upon the
Company generating sufficient future taxable income to obtain benefit from the
reversal of net deductible temporary differences and the utilization of tax
credit carryforwards and the net operating loss carryforwards for Federal and
California state income tax purposes. The amount of deferred tax assets
considered realizable is subject to adjustment in future periods based on
estimates of future taxable income. Under generally accepted accounting
principles, a valuation allowance is required to be recognized if it is "more
likely than not" that the deferred tax assets will not be realized. The
determination of the realization of the deferred tax assets is highly subjective
and dependent upon judgment concerning management's evaluation of both positive
and negative evidence, including forecasts of future income, cumulative losses,
applicable tax-planning strategies, and assessments of current and future
economic and business conditions.
The Company had the net deferred tax assets of $6.31 million and $4.74 million
at December 31, 2021 and 2020, respectively. After consideration of the matters
in the preceding paragraph, the Company determined that it is more likely than
not that the net deferred tax assets at December 31, 2021 and 2020 will be fully
realized in future years.

FINANCIAL CONDITION

Summary of changes in the consolidated balance sheets

The total assets were $2,450,139,000 from December 31, 2021compared to
$2,004,096,000 from December 31, 2020either an increase of 22.26% or $446,043,000. Total gross loans were $1,039,111,000 from December 31, 2021compared to
$1,102,347,000 from December 31, 2020a decrease of $63,236,000 or 5.74%.

the

total investment portfolio (including Federal funds sold and interest-earning
deposits in other banks) increased 65.91% or $496,850,000 to $1,250,679,000.
Total deposits increased 23.22% or $400,087,000 to $2,122,797,000 as of
December 31, 2021, compared to $1,722,710,000 as of December 31, 2020.
Shareholders' equity increased $2,824,000 or 1.15% to $247,845,000 as of
December 31, 2021, compared to $245,021,000 as of December 31, 2020. The
increase in shareholders' equity was driven by the retention of earnings, net of
dividends paid, the decrease in net unrealized gains on available-for-sale (AFS)
securities recorded, net of estimated taxes, in accumulated other comprehensive
income (AOCI), and share repurchases. Accrued interest payable and other
liabilities were $40,043,000 as of December 31, 2021, compared to $31,210,000 as
of December 31, 2020, an increase of $8,833,000.

Just value

The Company measures the fair value of its financial instruments utilizing a
hierarchical framework associated with the level of observable pricing scenarios
utilized in measuring financial instruments at fair value.  The degree of
judgment utilized in measuring the fair value of financial instruments generally
correlates to the level of the observable pricing scenario.  Financial
instruments with readily available actively quoted prices or for which fair
value can be measured from actively quoted prices generally will have a higher
degree of observable pricing and a lesser degree of judgment utilized in
measuring fair value.  Conversely, financial instruments rarely traded or not
quoted will generally have little or no observable pricing and a higher degree
of judgment utilized in measuring fair value.  Observable pricing scenarios are
impacted by a number of factors, including the type of financial instrument,
whether the financial instrument is new to the market and not yet established
and the characteristics specific to the transaction.
 See   Note 2   of the Notes to Consolidated Financial Statements for additional
information about the level of pricing transparency associated with financial
instruments carried at fair value.

Investments

The following table reflects the balances for each category of securities at year-end:

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Contents

Available-for-Sale Securities                                            Amortized Cost at December 31,
(In thousands)                                                     2021                 2020               2019
Treasuries                                                    $      9,988          $       -          $       -
U.S. Government agencies                                               373                651             14,740
Obligations of states and political subdivisions                   512,952            361,734             89,574
U.S. Government sponsored entities and agencies
collateralized by residential mortgage obligations                 213,471            214,203            198,125
Private label mortgage and asset backed securities                 317,089             82,413            155,308
Corporate debt securities                                           44,500             30,000              9,000

Total Available-for-Sale Securities                           $  1,098,373  

$689,001 $466,747


Our investment portfolio consists primarily of U.S. Government sponsored
entities and agencies collateralized by mortgage backed obligations 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
December 31, 2021, investment securities with a fair value of $260,325,000, or
23.47% of our investment securities portfolio, were held as collateral for
public funds, short and long-term borrowings, treasury, tax, and for other
purposes.  Our investment policies are established by the Board of Directors and
implemented by our Investment/Asset Liability Committee.  They are designed
primarily to provide and maintain liquidity, to enable us to meet our pledging
requirements for public money and borrowing arrangements, to generate a
favorable return on investments without incurring undue interest rate and credit
risk, and to complement our lending activities.
Our investment portfolio as a percentage of total assets is generally higher
than our peers due primarily to our comparatively low loan-to-deposit ratio.
Our loan-to-deposit ratio at December 31, 2021 was 48.95% compared to 63.99% at
December 31, 2020.  The loan to deposit ratio of our peers was 71.00% at
December 31, 2021.  Peer group information from S&P Global Market Intelligence
data includes bank holding companies in central California with assets from $1
billion to $3.5 billion. The total investment portfolio, including Federal funds
sold and interest-earning deposits in other banks, increased 65.91% or
$496,850,000 to $1,250,679,000 at December 31, 2021, from $753,829,000 at
December 31, 2020.  The market value of the portfolio reflected an unrealized
gain of $10,835,000 at December 31, 2021, compared to an unrealized gain of
$21,091,000 at December 31, 2020.
  Losses recognized in 2021, 2020, and 2019 were incurred in order to reposition
the investment securities portfolio based on the current rate environment.  As
market interest rates or risks associated with a security's issuer continue to
change and impact the actual or perceived values of investment securities, the
Company may determine that selling these securities and using proceeds to
purchase securities that fit with the Company's current risk profile is
appropriate and beneficial to the Company.
The Board and management have had periodic discussions about our strategy for
risk management in dealing with potential losses should interest rates begin to
rise. We have been managing the portfolio with an objective of optimizing risk
and return in various interest rate scenarios. We do not attempt to predict
future interest rates, but we analyze the cash flows of our investment portfolio
in different interest rate scenarios in connection with the rest of our balance
sheet to design an investment portfolio that optimizes performance.
The Company periodically evaluates each investment security for
other-than-temporary impairment, relying primarily on industry analyst reports,
observation of market conditions and interest rate fluctuations. The portion of
the impairment that is attributable to a shortage in the present value of
expected future cash flows relative to the amortized cost should be recorded as
a current period charge to earnings. The discount rate in this analysis is the
original yield expected at time of purchase.
As of December 31, 2021, the Company performed an analysis of the investment
portfolio to determine whether any of the investments held in the portfolio had
an other-than-temporary impairment (OTTI). The Company evaluated all individual
available-for-sale investment securities with an unrealized loss at December 31,
2021 and identified those that had an unrealized loss for at least a consecutive
12 month period, which had an unrealized loss at December 31, 2021 greater than
10% of the recorded book value on that date, or which had an unrealized loss of
more than $75,000.  The Company also analyzed any securities that may have been
downgraded by credit rating agencies.
For those bonds that met the evaluation criteria, management obtained and
reviewed the most recently published national credit ratings for those bonds.
For those bonds that were obligations of states and political subdivisions with
an investment grade rating by the rating agencies, management also evaluated the
financial condition of the municipality and any applicable municipal bond
insurance provider and concluded that no credit related impairment existed.
There were no OTTI losses recorded during the twelve months ended December 31,
2021, 2020, or 2019.
The amortized cost, maturities and weighted average yield of investment
securities at December 31, 2021 are summarized in the following table.
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                                                                                                                                                          After one through five
(Dollars in thousands)                                                                        In one year or less                                                 years                                                    After five through ten years                                          After ten years                                      Total
Available-for-Sale Securities                                                           Amount                         Yield(1)                      Amount                     Yield(1)                                 Amount                                Yield(1)                  Amount                  Yield(1)                Amount                 Yield(1)
Debt securities(1)
U.S. Treasury securities                                                   $              -                                      -          $                   -                         -          $                    9,988                                       1.25  %       $            -                        -          $      9,988                     1.25  %
U.S. Government agencies                                                                  -                                      -                              -                         -                                   -                                          -                     373                     4.25  %                373                     4.25  %
Obligations of states and political subdivisions (2)                                      -                                      -                          3,690                         -  %                           89,627                                       2.72  %              419,635                     3.79  %            512,952                     3.57  %

United States Government sponsored entities and agencies secured by residential mortgage bonds

                                                          5                                   4.80  %                          16                      5.99  %                            6,056                                       1.44  %              207,394                     2.32  %            213,471                     2.26  %
Private label residential mortgage and asset backed securities                           47                                   4.75  %                      41,890                      3.70  %                           28,155                                       1.31  %              246,997                     2.34  %            317,089                     2.43  %
Corporate debt securities                                                                 -                                      -                              -                         -                              44,500                                       4.44  %                    -                        -                44,500                     4.44  %
                                                                           $             52                                   4.85  %       $              45,596                      3.40  %       $                  178,326                                       2.81  %       $      874,399                     3.03  %       $  1,098,373                     3.01  %


(1)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.  Expected maturities will also differ
from contractual maturities due to unscheduled principal pay downs.
(2)Not computed on a tax equivalent basis.

Loans

Total gross loans decreased $63,236,000 or 5.74% to $1,039,111,000 from
December 31, 2021compared to $1,102,347,000 from December 31, 2020.

The following table presents information regarding the composition of our loan portfolio in December 31, 20212020, 2019, 2018 and 2017.

                                                              2021                                     2020                                    2019                                   2018                                   2017
                                                                     % of Total                               % of Total                             % of Total                             % of Total                             % of Total
Loan Type (Dollars in thousands)                   Amount               Loans               Amount               Loans              Amount              Loans              Amount              Loans              Amount              Loans
Commercial:
Commercial and industrial                      $   136,847                13.2  %       $   273,994                24.9  %       $ 102,541                10.9  %       $ 101,533                11.1  %       $ 100,856                11.2  %
Agricultural production                             40,860                 3.9  %            21,971                 2.0  %          23,159                 2.6  %           7,998                 0.9  %          14,956                 1.7  %
Total commercial                                   177,707                17.1  %           295,965                26.9  %         125,700                13.5  %         109,531                12.0  %         115,812                12.9  %
Real estate:
Owner occupied                                     212,234                20.4  %           208,843                18.9  %         197,946                21.0  %         183,169                19.9  %         204,452                22.7  %
Real estate-construction and other land
loans                                               61,586                 5.9  %            55,419                 5.0  %          73,718                 7.8  %         101,606                11.1  %          96,460                10.7  %
Commercial real estate                             369,529                35.6  %           338,886                30.7  %         329,333                34.9  %         305,118                33.2  %         269,254                29.9  %
Agricultural real estate                            98,481                 9.5  %            84,258                 7.6  %          76,304                 8.1  %          76,884                 8.4  %          76,081                 8.4  %
Other real estate                                   26,084                 2.5  %            28,718                 2.6  %          31,241                 3.3  %          32,799                 3.6  %          31,220                 3.5  %
Total real estate                                  767,914                73.9  %           716,124                64.8  %         708,542                75.1  %         699,576                76.2  %         677,467                75.2  %
Consumer:
Equity loans and lines of credit                    55,620                 5.4  %            55,634                 5.0  %          64,841                 6.9  %          69,958                 7.6  %          76,404                 8.5  %
Consumer and installment                            36,999                 3.6  %            37,236                 3.3  %          42,782                 4.5  %          38,038                 4.2  %          29,637                 3.4  %
Total consumer                                      92,619                 9.0  %            92,870                 8.3  %         107,623                11.4  %         107,996                11.8  %         106,041                11.9  %
Deferred loan (fees) costs, net                        871                                   (2,612)                                 1,515                                  1,592                                  1,359
Total gross loans (1)                            1,039,111               100.0  %         1,102,347               100.0  %         943,380               100.0  %         918,695               100.0  %         900,679               100.0  %
Allowance for credit losses                         (9,600)                                 (12,915)                                (9,130)                                (9,104)                                (8,778)
Total loans (1)                                $ 1,029,511                              $ 1,089,432                              $ 934,250                              $ 909,591                              $ 891,901

(1) Includes nonaccrual loans of:              $       946                              $     3,278                              $   1,693                              $   2,740                              $   2,875



At December 31, 2021, loans acquired in the FLB, SVB and VCB acquisitions had a
balance of $93,201,000, of which $2,111,000 were commercial loans, $83,128,000
were real estate loans, and $7,962,000 were consumer loans, and at December 31,
2020, the acquired loans had a balance of $127,186,000, of which $2,529,000 were
commercial loans, $110,616,000 were real estate loans, and $14,041,000 were
consumer loans.
At December 31, 2021, in management's judgment, a concentration of loans existed
in commercial loans and real-estate-related loans, representing approximately
96.4% of total loans of which 17.1% were commercial and 79.3% were
real-estate-related.  This level of concentration is consistent with 96.7% at
December 31, 2020.  Although we believe the loans
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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
nonperforming 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 was not involved
in any sub-prime mortgage lending activities during the years ended December 31,
2021 and 2020.
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. Contributing to the
commercial and industrial loan growth in 2020 was the issuance of PPP loans. As
of December 31, 2021, gross loans included $18,553,000 in PPP loans which are
fully guaranteed by the SBA as compared to $192,916,000.00 as of December 31,
2020.
The Board of Directors review and approve concentration limits and exceptions to
limitations of concentration are reported to the Board of Directors at least
quarterly.

Loan Maturities

The following table presents information concerning loan maturities and
sensitivity to changes in interest rates of the indicated categories of our loan
portfolio, as well as loans in those categories maturing after one year that
have fixed or floating interest rates at December 31, 2021.
                                                                            

After a

                                                            One Year or           Through Five          After Five
(In thousands) (net of deferred costs)                         Less                  Years                 Years               Total
Loan Maturities:
Commercial and agricultural                               $     87,847      

$63,086 $26,774 $177,707
Real estate construction and other land loans

                   52,139                  5,436               4,011               61,586
Other real estate                                               45,556                160,129             500,643              706,328
Consumer and installment                                         5,983                 13,967              72,669               92,619
                                                          $    191,525      

$242,618 $604,097 $1,038,240
Sensitivity to changes in interest rates: fixed interest rate loans

                           $     67,138      

$149,904 $137,841 $354,883
Variable rate loans (1)

                         124,387                 92,432             466,538              683,357
                                                          $    191,525      

$242,336 $604,379 $1,038,240

(1) Includes floating rate loans which are
currently at their floor rate in accordance with
their respective loan agreement                           $     62,044          $      78,461          $  406,836          $   547,341


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
1) it is maintained on a cost recovery method because of deterioration in the
financial condition of the borrower; 2) payment in full of principal or interest
under the original contractual terms is not expected; or 3) 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. We measure all loans placed
on nonaccrual status for impairment based on the fair value of the underlying
collateral or the net present value of the expected cash flows.
Our consolidated financial statements are prepared on the accrual basis of
accounting, including the recognition of interest income on loans.  Interest
income from nonaccrual loans is recorded only if collection of principal in full
is not in doubt and when cash payments, if any, are received.
Loans are placed on nonaccrual status and any accrued but unpaid interest income
is reversed and charged against income when the payment of interest or principal
is 90 days or more past due.  Loans in the nonaccrual category are treated as
nonaccrual loans even though we may ultimately recover all or a portion of the
interest due.  These loans return to accrual status when the loan becomes
contractually current, future collectability of amounts due is reasonably
assured, and a minimum of six months of satisfactory principal repayment
performance has occurred.  See   Note 4   of the Company's audited Consolidated
Financial Statements in   Item 8   of this Annual Report.
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At December 31, 2021, total nonperforming assets totaled $946,000, or 0.04% of
total assets, compared to $3,278,000, or 0.16% of total assets at December 31,
2020.  Nonperforming assets totaled 0.09% of gross loans as of December 31, 2021
and 0.30% of gross loans as of December 31, 2020. Total nonperforming assets at
December 31, 2021, included nonaccrual loans totaling $946,000, no OREO, and no
repossessed assets. Nonperforming assets at December 31, 2020 consisted of
$3,278,000 in nonaccrual loans, no OREO, and no repossessed assets. At
December 31, 2021 and December 31, 2020, we had no loans considered a troubled
debt restructuring ("TDR") included in nonaccrual loans. See   Note 4   of the
Company's audited Consolidated Financial Statements in   Item 8   of this Annual
Report concerning our recorded investment in loans for which impairment has been
recognized.
A summary of nonaccrual, restructured, and past due loans at December 31, 2021,
2020, 2019, 2018, and 2017 is set forth below.  The Company had no loans past
due more than 90 days and still accruing interest at December 31, 2021 and
2020.  Management is not aware of any potential problem loans, which were
current and accruing at December 31, 2021, where serious doubt exists as to the
ability of the borrower to comply with the present repayment terms.  Management
can give no assurance that nonaccrual and other nonperforming loans will not
increase in the future.

           Composition of Nonaccrual, Past Due and Restructured Loans


(As of December 31, Dollars in thousands)             2021             2020              2019             2018             2017
Nonaccrual Loans:
Commercial and industrial                          $   312          $    

752 $187 $298 $356
agricultural production

                                634                 -                -     -          -                -
Owner occupied real estate                               -               370              416              215                -
Real estate construction and other land
loans                                                    -             1,556                -            1,439            1,397
Agricultural real estate                                 -                 -              321                -                -
Commercial real estate                                   -               512              381              418              976
Equity loans and line of credit                          -                 -               66              320               87
Consumer and installment                                 -                88                -                -                -

Restructured loans (not accrued):

Equity loans and line of credit                          -                 -              322               50               59

Total nonaccrual                                       946             3,278            1,693            2,740            2,875
Accruing loans past due 90 days or more                  -                 -                -                -                -
Total nonperforming loans                          $   946          $  

3,278 $1,693 $2,740 $2,875

Interest foregone                                  $    99          $    

177 $85 $267 $210
Non-performing loans to total loans

                    0.09  %           

0.30% 0.18% 0.30% 0.32% Debts past due 90 days or more

            $     -          $      

– $ – $ – $ – Distressed debt restructurings

              $ 7,640          $  

7,908 $2,040 $3,170 $3,491
Ratio of non-performing loans to allowance for credit losses

                                     9.85  %          

25.38% 18.54% 30.10% 32.75% Loans considered impaired

                    $ 8,586          $ 11,186          $ 3,734          $ 5,909          $ 6,366
Related allowance for credit losses on
impaired loans                                     $   649          $    631          $    40          $    90          $    36



As of December 31, 2021 and 2020, we had impaired loans totaling $8,586,000 and
$11,186,000, respectively.  We measure our impaired loans by using the fair
value of the collateral if the loan is collateral dependent and the present
value of the expected future cash flows discounted at the loan's original
contractual interest rate if the loan is not collateral dependent.  Impaired
loans are identified from internal credit review reports, past due reports,
overdraft listings, and third party reports of examination.  Borrowers
experiencing problems such as operating losses, marginal working capital,
inadequate cash flow or business interruptions which jeopardize collection of
the loan are also reviewed for possible impairment classification.  A loan is
considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due, including
principal and interest, according to the contractual terms of the original
agreement.  Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment
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shortfalls on case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay, the borrower's prior payment record, and the
amount of the shortfall in relation to the principal and interest owed. Loans
determined to be impaired are individually evaluated for impairment. When a loan
is impaired, the Company measures impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate,
except that as a practical expedient, it may measure impairment based on a
loan's observable market price, or the fair value of the collateral if the loan
is collateral dependent.  A loan is collateral dependent if the repayment of the
loan is expected to be provided solely by the underlying collateral.  For
collateral dependent loans secured by real estate, we obtain external appraisals
which are updated periodically, but generally no less than annually to determine
the fair value of the collateral, and we record an immediate charge-off for the
difference between the book value of the loan and the net realizable value,
which is generally defined as appraised value less costs to dispose of the
collateral.  We perform quarterly internal reviews on all criticized and
classified loans.
We place loans on nonaccrual status and classify them as impaired when it
becomes probable that we will not receive the full amount of interest and
principal under the original contractual terms, or when loans are delinquent 90
days or more, unless the loan is both well secured and in the process of
collection.  Management maintains certain loans that have been brought current
by the borrower (less than 30 days delinquent) on nonaccrual status until such
time as management has determined that the loans are likely to remain current in
future periods.  Foregone interest on nonaccrual loans totaled $99,000 for the
year ended December 31, 2021 of which none was attributable to troubled debt
restructurings. Foregone interest on nonaccrual loans totaled $177,000 for the
year ended December 31, 2020 of which none was attributable to troubled debt
restructurings. Foregone interest on nonaccrual loans totaled $85,000 for the
year ended December 31, 2019, of which none was attributable to troubled debt
restructurings.
The following table provides a reconciliation of the change in non-accrual loans
for the year ended December 31, 2021.

                                      Balances                                                           Transfer to          Returns to                                   Balances
                                    December 31,          Additions to                                    Foreclosed            Accrual                                  December 31,
(In thousands)                          2020            Nonaccrual Loans          Net Pay Downs           Collateral            Status             Charge-Offs               2021
Non-accrual loans:
Commercial and industrial           $      752          $            -          $         (385)         $         -          $      (55)         $          -          $         312
Agricultural real estate                     -                   2,141                  (1,507)                   -                   -                     -                    634
Real estate                                882                      17                    (249)                   -                (650)                    -                      -
Real estate construction and
other land loans                         1,556                       -                  (1,531)                   -                 (25)                    -                      -

Consumer                                    88                       -                      (2)                   -                 (86)                    -                      -

Total non-accrual                   $    3,278          $        2,158          $       (3,674)         $         -          $     (816)         $          -          $         946



OREO represents real property taken either through foreclosure or through a deed
in lieu thereof from the borrower. OREO is carried at the lesser of cost or fair
market value less selling costs. As of December 31, 2021, 2020, and 2019, the
Bank had no OREO properties. The Company held no repossessed assets at December
31, 2021, 2020, and 2019, which is included in other assets on the consolidated
balance sheets.

Allowance for Credit Losses

  We have established a methodology for determining the adequacy of the
allowance for credit losses made up of general and specific allocations.  The
methodology is set forth in a formal policy and takes into consideration the
need for an overall allowance for credit losses as well as specific allowances
that are tied to individual loans.  The allowance for credit losses is an
estimate of probable incurred credit losses in the Company's loan portfolio. The
allowance consists of two primary components, specific reserves related to
impaired loans and general reserves for probable incurred losses related to
loans that are not impaired.
  For all portfolio segments, the determination of the general reserve for loans
that are not impaired is based on estimates made by management including, but
not limited to, consideration of historical losses by portfolio segment (and in
certain cases peer loss data) over the most recent 52 quarters, and qualitative
and quantitative factors including economic trends in the Company's service
areas, industry experience and trends, industry and geographic concentrations,
estimated collateral values, the Company's underwriting policies, the character
of the loan portfolio, and probable losses incurred in the portfolio taken as a
whole. Management has determined that the most recent 52 quarters was an
appropriate look-back period based on several factors including the current
global economic uncertainty and various national and local economic indicators,
and a time period sufficient to capture enough data due to the size of the
portfolio to produce statistically accurate historical loss calculations. We
believe this period is an appropriate look-back period.
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In originating loans, we recognize that losses will be experienced and that the
risk of loss will vary with, among other things, the type of loan being made,
the creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the collateral
securing the loan.  The allowance is increased by provisions charged against
earnings and recoveries, and reduced by net loan charge-offs.  Loans are charged
off when they are deemed to be uncollectible, or partially charged off when
portions of a loan are deemed to be uncollectible.  Recoveries are generally
recorded only when cash payments are received.
The allowance for credit losses is maintained to cover probable incurred credit
losses in the loan portfolio.  The responsibility for the review of our assets
and the determination of the adequacy lies with management and our
Audit/Compliance Committee.  They delegate the authority to the Chief Credit
Officer (CCO) to determine the loss reserve ratio for each type of asset and to
review, at least quarterly, the adequacy of the allowance based on an evaluation
of the portfolio, past experience, prevailing market conditions, amount of
government guarantees, concentration in loan types and other relevant factors.
The allowance for credit losses is an estimate of the probable incurred credit
losses in our loan and lease portfolio.  The allowance is based on principles of
accounting: (i) losses accrued for on loans when they are probable of occurring
and can be reasonably estimated and (ii) losses accrued based on the differences
between the value of collateral, present value of future cash flows or values
that are observable in the secondary market and the loan balance.
Management adheres to an internal asset review system and loss allowance
methodology designed to provide for timely recognition of problem assets and
adequate valuation allowances to cover probable incurred losses.  The Bank's
asset monitoring process includes the use of asset classifications to segregate
the assets, largely loans and real estate, into various risk categories.  The
Bank uses the various asset classifications as a means of measuring risk and
determining the adequacy of valuation allowances by using a nine-grade system to
classify assets.  In general, all credit facilities exceeding 90 days of
delinquency require classification and are placed on nonaccrual.
The following table summarizes the Company's loan loss experience, as well as
provisions and recoveries (charge-offs) to the allowance and certain pertinent
ratios for the periods indicated:

(Dollars in thousands)                                    2021                 2020                2019               2018               2017
Loans outstanding at December 31,                    $ 1,038,240          $ 

1,104,959 $941,865 $917,103 $899,320
Average outstanding loans during the year

            $ 1,069,653          $ 1,055,712          $ 930,883          $ 912,128          $ 793,343
Allowance for credit losses:
Balance at beginning of year                         $       12,915       $     9,130          $   9,104          $   8,778          $   9,326
Deduct loans charged off:
Commercial and industrial                                      (46)              (121)            (1,032)               (94)              (197)
Agricultural production                                        -                    -                  -                  -                (10)
Owner occupied                                                 -                    -                  -                  -                (22)

Consumer loans                                              (221)                (108)              (164)              (116)              (235)
Total loans charged off                                     (267)                (229)            (1,196)              (210)              (464)
Add recoveries of loans previously charged
off:
Commercial and industrial                                    701                  612                134                207                850
Agricultural production                                        -                    -                  -                  -                 10
Owner occupied                                                 -                    -                  -                 21                 49
Real estate construction and other land loans                319                    -                  -                  -                  -
Commercial real estate                                         -                    -                  -                 81                 17

Consumer loans                                               232                  127                 63                177                140
Total recoveries                                           1,252                  739                197                486              1,066
Net (charge-offs) recoveries                                 985                  510               (999)               276                602
(Reversal of) Provision for credit losses                 (4,300)               3,275              1,025                 50             (1,150)
Balance at end of year                               $     9,600          $ 

12,915 $9,130 $9,104 $8,778
Allowance for credit losses as a percentage of outstanding loan balance

                                    0.92  %              1.17  %            0.97  %            0.99  %            0.98  %
Net recoveries (charge-offs) to average loans
outstanding                                                 0.09  %              0.05  %           (0.11) %            0.03  %            0.08  %



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Managing credits identified through the risk evaluation methodology includes
developing a business strategy with the customer to mitigate our losses.  Our
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.
The allowance for credit losses is reviewed at least quarterly by the Bank's and
our Board of Directors' Audit/Compliance Committee.  Reserves are allocated to
loan portfolio segments using percentages which are based on both historical
risk elements such as delinquencies and losses and predictive risk elements such
as economic, competitive and environmental factors.  We have adopted the
specific reserve approach to allocate reserves to each impaired asset for the
purpose of estimating potential loss exposure.  Although the allowance for
credit losses is allocated to various portfolio categories, it is general in
nature and available for the loan portfolio in its entirety.  Additions may be
required based on the results of independent loan portfolio examinations,
regulatory agency examinations, or our own internal review process.  Additions
are also required when, in management's judgment, the reserve does not properly
reflect the potential loss exposure.

The breakdown of the allowance for credit losses is shown below:

                                                       2021                                   2020                                  2019                                  2018                                  2017
                                                              Percent                                Percent                               Percent                               Percent                               Percent
                                                              of Loans                               of Loans                              of Loans                              of Loans                              of Loans
                                                              in Each                                in Each                               in Each                               in Each                               in Each
                                                              Category                               Category                              Category                              Category                              Category
Loan Type                                                     to Total                               to Total                              to Total                              to Total                              to Total
(Dollars in thousands)                      Amount             Loans              Amount              Loans              Amount             Loans              Amount             Loans              Amount             Loans
Commercial:
Commercial and industrial                 $ 1,691                 13.2  %       $  1,764                 24.9  %       $ 1,115                 10.9  %       $ 1,604                 11.1  %       $ 1,784                 11.2  %
Agricultural production                       320                  3.9  %            255                  2.0  %           313                  2.6  %            67                  0.9  %           287                  1.7  %
Real estate:
Owner occupied                              1,355                 20.4  %          2,128                 18.9  %         1,319                 21.0  %         1,131                 19.9  %         1,252                 22.7  %
Real estate construction and other
land loans                                    812                  5.9  %          1,204                  5.0  %           932                  7.8  %         1,271                 11.1  %         1,004                 10.7  %
Commercial real estate                      3,805                 35.6  %          4,781                 30.7  %         3,453                 34.9  %         3,017                 33.2  %         1,958                 29.9  %
Agricultural real estate                      697                  9.5  %            838                  7.6  %           925                  8.1  %           947                  8.4  %         1,441                  8.4  %
Other real estate                              72                  2.5  %            223                  2.6  %           140                  3.3  %           173                  3.6  %           140                  3.5  %
Consumer:
Equity loans and lines of credit              256                  5.4  %            457                  5.0  %           425                  6.9  %           419                  7.6  %           464                  8.5  %
Consumer and installment                      312                  3.6  %            634                  3.3  %           472                  4.5  %           407                  4.2  %           361                  3.4  %
Unallocated reserves                          280                                    631                                    36                                    68                                    87
Total allowance for credit losses         $ 9,600                100.0  %       $ 12,915                100.0  %       $ 9,130                100.0  %       $ 9,104                100.0  %       $ 8,778                100.0  %



Loans are charged to the allowance for credit losses when the loans are deemed
uncollectible.  It is the policy of management to make additions to the
allowance so that it remains adequate to cover all probable loan charge-offs
that exist in the portfolio at that time. We assign qualitative and quantitative
factors (Q factors) to each loan category. Q factors include reserves held for
the effects of lending policies, experience, economic trends, and portfolio
trends along with other dynamics which may cause additional stress to the
portfolio.
As of December 31, 2021, the allowance for credit losses (ALLL) was $9,600,000,
compared to $12,915,000 at December 31, 2020, a net decrease of $3,315,000. 

the

net decrease in the ALLL reflected the negative provision and net recoveries
during the year ended December 31, 2021 which was necessitated by management's
observations and assumptions about the existing credit quality of the loan
portfolio.  Net recoveries totaled $985,000 while the reversal of provision for
credit losses was $4,300,000 for the year ended December 31, 2021. The Company's
negative provision for credit losses during the year ended December 31, 2021 is
primarily due to change in qualitative factors related to the economic
uncertainties caused by the COVID-19 pandemic. The balance of classified loans
and loans graded special mention, totaled $8,540,000 and $40,845,000 at
December 31, 2021 and $36,136,000 and $36,406,000 at December 31, 2020,
respectively.  The balance of undisbursed commitments to extend credit on
construction and other loans and letters of credit was $326,108,000 as of
December 31, 2021, compared to $326,179,000 as of December 31, 2020. At December
31, 2021 and 2020, the balance of a contingent allocation for probable loan loss
experience on unfunded obligations was $115,000 and $250,000, respectively. The
contingent allocation for probable loan loss experience on unfunded obligations
is calculated by management using appropriate, systematic, and consistently
applied processes.  While related to credit losses, this allocation is not a
part of ALLL and is considered separately as a liability for accounting and
regulatory reporting purposes.  Risks and uncertainties exist in all lending
transactions and our management and Directors' Loan Committee have established
reserve levels based on economic uncertainties and other risks that exist as of
each reporting period.
                                       47

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Contents

  The ALLL as a percentage of total loans was 0.92% at December 31, 2021, and
1.17% at December 31, 2020. Total loans include FLB, SVB and VCB loans that were
recorded at fair value in connection with the acquisitions of $93,201,000 at
December 31, 2021 and $127,186,000 at December 31, 2020. Excluding these
acquired loans from the calculation, the ALLL to total gross loans was 1.01% and
1.32% as of December 31, 2021 and 2020, respectively, and general reserves
associated with non-impaired loans to total non-impaired loans was 0.98% and
1.59%, respectively. The loan portfolio acquired in the mergers was booked at
fair value with no associated allocation in the ALLL.  The size of the fair
value discount remains adequate for all non-impaired acquired loans; therefore,
there is no associated allocation in the ALLL.  As of December 31, 2021 and 2020
gross loans included loans related to PPP loans which are fully guaranteed by
the SBA in the amount of $18,553,000 and $192,916,000.00, respectively.
Excluding PPP loans and the acquired loans from the calculation, the allowance
for credit losses to total gross loans was 1.04% and 1.65% as of December 31,
2021 and 2020, respectively.
  The Company's loan portfolio balances in 2021 decreased from 2020. Net loans
decreased $59.9 million or 5.50%, at December 31, 2021 compared to December 31,
2020. The net loan decrease consisted of a decrease of $174.4 million in SBA
Paycheck Protection Program (PPP) loans, offset by an increase of $114.4 million
in non-PPP loan growth. The PPP loans held in the loan portfolio are backed by
the SBA at 100%; thus, no allowance is required. Management believes that the
change in the allowance for credit losses to total loans ratios is directionally
consistent with the composition of loans and the level of nonperforming and
classified loans, and by the general economic conditions experienced in the
central California communities serviced by the Company, partially offset by
recent improvements in real estate collateral values.
  Assumptions regarding the collateral value of various under-performing loans
may affect the level and allocation of the allowance for credit losses in future
periods.  The allowance may also be affected by trends in the amount of
charge-offs experienced or expected trends within different loan portfolios.
However, the total reserve rates on non-impaired loans include qualitative and
quantitative factors which are systematically derived and consistently applied
to reflect conservatively estimated losses from loss contingencies at the date
of the financial statements. Based on the above considerations and given recent
changes in historical charge-off rates included in the ALLL modeling and the
changes in other factors, management determined that the ALLL was appropriate as
of December 31, 2021.
Non-performing loans totaled $946,000 as of December 31, 2021, and $3,278,000 as
of December 31, 2020.  Nonperforming loans as a percentage of total loans were
0.09% at December 31, 2021 compared to 0.30% at December 31, 2020.  The Company
had no other real estate owned at December 31, 2021, December 31, 2020, and
December 31, 2019. No foreclosed assets were recorded at December 31, 2021,
December 31, 2020, and December 31, 2019. The allowance for credit losses as a
percentage of nonperforming loans was 1,014.80% and 393.99% as of December 31,
2021 and December 31, 2020, respectively.  In addition, management believes that
the likelihood of recoveries on previously charged-off loans continues to
improve based on the collection efforts of management combined with improvements
in the value of real estate which serves as the primary source of collateral for
loans. Management believes the allowance at December 31, 2021 is adequate based
upon its ongoing analysis of the loan portfolio, historical loss trends and
other factors.  However, no assurance can be given that the Company may not
sustain charge-offs which are in excess of the allowance in any given period.

Good will and intangible assets

  Business combinations involving the Bank's acquisition of the equity interests
or net assets of another enterprise give rise to goodwill.  Total goodwill at
December 31, 2021 was $53,777,000 consisting of $13,466,000, $10,394,000,
$6,340,000, $14,643,000 and $8,934,000 representing the excess of the cost of
FLB, SVB, VCB, Service 1st Bancorp, and Bank of Madera County, respectively,
over the net amounts assigned to assets acquired and liabilities assumed in the
transactions accounted for under the purchase method of accounting.  The value
of goodwill is ultimately derived from the Company's ability to generate net
earnings after the acquisitions and is not deductible for tax purposes. The fair
values of assets acquired and liabilities assumed are subject to adjustment
during the first twelve months after the acquisition date if additional
information becomes available to indicate a more accurate or appropriate value
for an asset or liability.  A significant decline in net earnings, among other
factors, could be indicative of a decline in the fair value of goodwill and
result in impairment.  For that reason, goodwill is assessed at least annually
for impairment.
Management performed an annual impairment test in the third quarter of 2021
utilizing various qualitative factors. Management believes these factors are
sufficient and comprehensive and as such, no further factors need to be assessed
at this time. Based on management's analysis performed, no impairment was
required.
Goodwill is also assessed for impairment between annual tests if a triggering
event occurs or circumstances change that may cause the fair value of a
reporting unit to decline below its carrying amount. Management considers the
entire Company to be one reporting unit. No such events or circumstances arose
during for the year ended December 31, 2021. Changes in the economic
environment, operations of the reporting unit or other adverse events could
result in future impairment charges which could have a material adverse impact
on the Company's operating results.
The intangible assets at December 31, 2021 represent the estimated fair value of
the core deposit relationships acquired in the 2017 acquisition of FLB of
$1,879,000, the 2016 acquisition of SVB of $508,000 and the 2013 acquisition of
VCB of $1,365,000.  Core deposit intangibles are being amortized using the
straight-line method over an estimated life of five to ten years from the date
of acquisition.  The carrying value of intangible assets at December 31, 2021
was $522,000, net of
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$3,230,000 in accumulated amortization expense.  The carrying value at
December 31, 2020 was $1,183,000, net of $2,569,000 in accumulated amortization
expense.  Management evaluates the remaining useful lives quarterly to determine
whether events or circumstances warrant a revision to the remaining periods of
amortization.  Based on the evaluation, no changes to the remaining useful lives
was required.  Management performed an annual impairment test on core deposit
intangibles as of September 30, 2021 and determined no impairment was necessary.
In addition, management determined that no events had occurred between the
annual evaluation date and December 31, 2021 which would necessitate further
analysis. Amortization expense recognized was $661,000 for 2021, $695,000 for
2020 and $695,000 for 2019.

The following table summarizes the Company’s estimated core deposit intangible amortization expense for each of the next five years (in thousands):

   Years Ending December 31,         Estimated Core Deposit Intangible Amortization
   2022                             $                                           454
   2023                                                                          68

   Thereafter                                                                     -
   Total                            $                                           522



Deposits and Borrowings

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, will be insured by the FDIC up to the standard maximum deposit
insurance amount of $250,000 for each deposit insurance ownership category.
Total deposits increased $400,087,000 or 23.22% to $2,122,797,000 as of
December 31, 2021, compared to $1,722,710,000 as of December 31, 2020.
Interest-bearing deposits increased $261,392,000 or 29.11% to $1,159,213,000 as
of December 31, 2021, compared to $897,821,000 as of December 31, 2020.
Non-interest bearing deposits increased $138,695,000 or 16.81% to $963,584,000
as of December 31, 2021, compared to $824,889,000 as of December 31, 2020.  The
Company's deposit balances for the year ended December 31, 2021 increased
through organic growth and PPP loan proceeds retained in customer deposit
accounts. Average non-interest bearing deposits to average total deposits was
45.58% for the year ended December 31, 2021 compared to 47.46% for the same
period in 2020. Based on FDIC deposit market share information published as of
June 2021, our total market share of deposits in Fresno, Madera, San Joaquin,
and Tulare counties was 3.83% in 2021 compared to 3.40% in 2020. Our total
market share in the other counties we operate in (El Dorado, Merced, Placer,
Sacramento, and Stanislaus), was less than 1.00% in 2021 and 2020.
The composition of the deposits and average interest rates paid at December 31,
2021 and December 31, 2020 is summarized in the table below.

                                                December 31,             % of Total               Effective            December 31,             % of Total               Effective
(Dollars in thousands)                              2021                  Deposits                  Rate                   2020                  Deposits                  Rate
NOW accounts                                   $    360,462                     17.0  %                 0.05  %       $    310,697                     18.0  %                 0.11  %
MMA accounts                                        511,448                     24.1  %                 0.15  %            341,088                     19.8  %                 0.18  %
Time deposits                                        90,030                      4.2  %                 0.21  %             89,846                      5.2  %                 0.65  %
Savings deposits                                    197,273                      9.3  %                 0.01  %            156,190                      9.1  %                 0.02  %
Total interest-bearing                            1,159,213                     54.6  %                 0.10  %            897,821                     52.1  %                 0.18  %
Non-interest bearing                                963,584                     45.4  %                                    824,889                     47.9  %
Total deposits                                 $  2,122,797                    100.0  %                               $  1,722,710                    100.0  %


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We have no known foreign deposits.  The following table sets forth the average
amount of and the average rate paid on certain deposit categories which were in
excess of 10% of average total deposits for the years ended December 31, 2021,
2020, and 2019.

                                           2021                         2020                         2019
(Dollars in thousands)              Balance         Rate         Balance         Rate         Balance         Rate
Savings and NOW accounts         $   529,043       0.03  %    $   433,742       0.08  %    $   370,378       0.15  %
Money market accounts            $   455,575       0.15  %    $   300,603       0.18  %    $   270,918       0.24  %

Non-interest bearing demand      $   900,083          -       $   744,239          -       $   557,348          -
Total deposits                   $ 1,974,576       0.05  %    $ 1,568,194       0.09  %    $ 1,295,780       0.15  %


The following table shows the maturity of term deposit certificates and other term deposits of $100,000 or more at December 31, 2021.

(In thousands)
Three months or less       $ 31,308
Over 3 through 6 months       7,712
Over 6 through 12 months     18,090
Over 12 months                8,249
                           $ 65,359



As of December 31, 2021 and 2020, the Company had no short-term or long-term
Federal Home Loan Bank (FHLB) of San Francisco advances. We maintain a line of
credit with the FHLB collateralized by government securities and loans.  Refer
to   Liquidity   section below for further discussion of FHLB advances. The Bank
had unsecured lines of credit with its correspondent banks which, in the
aggregate, amounted to $110,000,000 at December 31, 2021 and 2020, at interest
rates which vary with market conditions. As of December 31, 2021 and 2020, the
Company had no overnight borrowings outstanding under these credit facilities.

Capital resources

Capital serves as a source of funds and helps protect depositors and
shareholders against potential losses.  Historically, the primary sources of
capital for the Company have been internally generated capital through retained
earnings and the issuance of common and preferred stock.
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 $247,845,000 as of December 31, 2021, compared to
$245,021,000 as of December 31, 2020.  The increase in shareholders' equity is
the result of an increase in retained earnings from our net income of
$28,401,000, the exercise of stock options in the amount of $256,000, the effect
of share-based compensation expense of $405,000, and stock issued under our
employee stock purchase plan of $204,000, partially offset by a decrease in
accumulated other comprehensive income (AOCI) of $7,224,000, the payment of
common stock cash dividends of $5,757,000, and the repurchase and retirement of
common stock of $13,619,000.
During 2021, the Bank declared and paid cash dividends to the Company in the
amount of $7,679,000 in connection with the cash dividends to the Company's
shareholders approved by the Company's Board of Directors. The Company declared
and paid a total of $5,757,000 or $0.47 per common share cash dividend to
shareholders of record during the year ended December 31, 2021. During the year
ended December 31, 2021, the Company repurchased and retired common stock in the
amount of $13,619,000.
During 2020, the Bank declared and paid cash dividends to the Company in the
amount of $15,622,000 in connection with the cash dividends to the Company's
shareholders approved by the Company's Board of Directors. The Company declared
and paid a total of $5,530,000 or $0.44 per common share cash dividend to
shareholders of record during the year ended December 31, 2020. During the year
ended December 31, 2020, the Company repurchased and retired common stock in the
amount of $11,052,000.
During 2019 the Bank declared and paid cash dividends to the Company in the
amount of $20,100,000 in connection with the cash dividends to the Company's
shareholders approved by the Company's Board of Directors. The Company
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declared and paid a total of $5,805,000 or $0.43 per common share cash dividend
to shareholders of record during the year ended December 31, 2019. During the
year ended December 31, 2019, the Company repurchased and retired common stock
in the amount of $15,619,000.
The following table sets forth certain financial ratios for the years ended
December 31, 2021, 2020, and 2019.

                                                         2021         2020         2019
Net income:
To average assets                                        1.25  %      1.11  %      1.36  %
To average shareholders' equity                         11.50  %      8.85  %      9.39  %
Dividends declared per share to net income per share    19.72  %     26.99  %     26.22  %
Average shareholders' equity to average assets          10.89  %     12.54  %     14.51  %


Management considers capital requirements as part of its strategic planning
process.  The strategic plan calls for continuing increases in assets and
liabilities, and the capital required may therefore be in excess of retained
earnings.  The ability to obtain capital is dependent upon the capital markets
as well as our performance.  Management regularly evaluates sources of capital
and the timing required to meet its strategic objectives.
The Board of Governors, the FDIC and other federal banking agencies have issued
risk-based capital adequacy guidelines intended to provide a measure of capital
adequacy that reflects the degree of risk associated with a banking
organization's operations for both transactions reported on the balance sheet as
assets, and transactions, such as letters of credit and recourse arrangements,
which are reported as off-balance-sheet items.
The following table presents the Company's regulatory capital ratios as of
December 31, 2021 and December 31, 2020.
(Dollars in thousands)                           Actual Ratio
December 31, 2021                             Amount          Ratio
Tier 1 Leverage Ratio                     $    189,020        8.03  %

Common Equity Tier 1 (CET 1) ratio $184,020 12.48% Capital ratio based on Tier 1 risk

           $    189,020       12.82  %
Total Risk-Based Capital Ratio            $    233,034       15.80  %

December 31, 2020
Tier 1 Leverage Ratio                     $    178,407        9.28  %

Common Equity Tier 1 (CET 1) ratio $173,407 14.10% Capital ratio based on Tier 1 risk

           $    178,407       14.50  %
Total Risk-Based Capital Ratio            $    191,572       15.58  %


The following table presents the Bank’s regulatory capital ratios as at
December 31, 2021 and December 31, 2020

                                                                                                                              Minimum requirement for 

“Well capitalized”

                                                 Actual Ratio                     Minimum regulatory requirement (1)                          Institution
December 31, 2021                        Amount                 Ratio                Amount                 Ratio                    Amount                     Ratio
Tier 1 Leverage Ratio                $    199,329                  8.47  %       $     94,156                  4.00  %       $            117,695                  5.00  %
Common Equity Tier 1 Ratio
(CET 1)                              $    199,329                 13.52  %       $     66,355                  4.50  %       $             95,846                  6.50  %
Tier 1 Risk-Based Capital
Ratio                                $    199,329                 13.52  %       $     88,473                  6.00  %       $            117,964                  8.00  %
Total Risk-Based Capital Ratio       $    209,044                 14.18  %       $    117,964                  8.00  %       $            147,455                 10.00  %

December 31, 2020
Tier 1 Leverage Ratio                $    177,269                  9.23  %       $     76,852                  4.00  %       $             96,065                  5.00  %
Common Equity Tier 1 Ratio
(CET 1)                              $    177,269                 14.41  %       $     55,346                  7.00  %       $             79,945                  6.50  %
Tier 1 Risk-Based Capital
Ratio                                $    177,269                 14.41  %       $     73,795                  8.50  %       $             98,394                  8.00  %
Total Risk-Based Capital Ratio       $    190,434                 15.48  %       $     98,394                 10.50  %       $            122,992      

10.00% (1) The minimum regulatory requirement threshold includes the capital conservation buffer of 2.50%.

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The Company succeeded to all of the rights and obligations of the Service
1st Capital Trust I, a Delaware business trust, in connection with the
acquisition of 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 December 31, 2021, all of the trust preferred securities that have been
issued qualify as Tier 1 capital.  The trust preferred securities mature on
October 7, 2036, are redeemable at the Company's option beginning five years
after issuance, and require quarterly distributions by the Trust to the holder
of the trust preferred securities at a variable interest rate which will adjust
quarterly to equal the three-month LIBOR plus 1.60%.
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 on or after October 7, 2012 or at any time within 90 days
following the occurrence of certain events, such as: (i) a change in the
regulatory capital treatment of the Notes (ii) in the event the Trust is deemed
an investment company or (iii) upon the occurrence of certain adverse tax
events.  In each such case, the Company may redeem the Notes for their aggregate
principal amount, plus any accrued but unpaid interest.
The Notes may be declared immediately due and payable at the election of the
trustee or holders of 25% of the aggregate principal amount of outstanding Notes
in the event that the Company defaults in the payment of any interest following
the nonpayment of any such interest for 20 or more consecutive quarterly
periods.  Holders of the trust preferred securities are entitled to a cumulative
cash distribution on the liquidation amount of $1,000 per security.  For each
January 7, April 7, July 7 or October 7 of each year, the rate will be adjusted
to equal the three month LIBOR plus 1.60%.  As of December 31, 2021, the rate
was 1.73%.  Interest expense recognized by the Company for the years ended
December 31, 2021, 2020, and 2019 was $266,000, $130,000 and $210,000,
respectively.
On November 12, 2021, the Company completed a private placement of $35.0 million
aggregate principal amount of its fixed-to-floating rate subordinated notes
("Subordinated Debt") due December 1, 2031. The Subordinated Debt initially
bears a fixed interest rate of 3.125% per year. Commencing on December 1, 2026,
the interest rate on the Subordinated Debt will reset each quarter at a floating
interest rate equal to the then-current three month term SOFR plus 210 basis
points. The Company may at its option redeem in whole or in part the
Subordinated Debt on or after November 12, 2026 without a premium. The
Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.

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 Directors'
Asset/Liability Committees.  This process is intended to ensure the maintenance
of sufficient funds to meet our needs, including adequate cash flows 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 and advances from the Federal Home Loan Bank of San
Francisco (FHLB).  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 December 31, 2021, the Company had unpledged
securities totaling $856,299,000 available as a secondary source of liquidity
and total cash and cash equivalents of $163,467,000.  Cash and cash equivalents
at December 31, 2021 increased 132.60% compared to December 31, 2020.  Primary
uses of funds include withdrawal of and interest payments on deposits,
origination and purchases of loans, purchases of investment securities, and
payment of operating expenses.
To augment our liquidity, we have established Federal funds lines with various
correspondent banks.  At December 31, 2021, our available borrowing capacity
includes approximately $110,000,000 in Federal funds lines with our
correspondent banks and $277,130,000 in unused FHLB advances.  At December 31,
2021, 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 December 31, 2021 and 2020:
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                                                                             December 31,          December 31,
Credit Lines (In thousands)                                                      2021                  2020

Unsecured lines of credit (interest rate varies by market): Credit limit

                                                                $    110,000          $    110,000
Balance outstanding                                                         $          -          $          -
Federal Home Loan Bank (interest rate at prevailing interest rate):
Credit limit                                                                $    277,130          $    235,371
Balance outstanding                                                         $          -          $          -
Collateral pledged                                                          $    481,437          $    435,152
Fair value of collateral                                                    $    435,089          $    379,831
Federal Reserve Bank (interest rate at prevailing discount interest
rate):
Credit limit                                                                $      9,961          $     13,323
Balance outstanding                                                         $          -          $          -
Collateral pledged                                                          $     10,361          $     13,538
Fair value of collateral                                                    $     10,241          $     13,703


The liquidity of our parent company, Central Valley Community Bancorpdepends mainly on the payment of cash dividends by its subsidiary, Central Valley Community Banksubject to limitations imposed by state and federal regulations.

CRITICAL ACCOUNTING METHODS

The preparation of financial statements in accordance with the accounting
principles generally accepted in the United States ("U.S. GAAP") requires
management to make a number of judgments, estimates and assumptions that affect
the reported amount of assets, liabilities, income and expense in the financial
statements. Various elements of our accounting policies, by their nature,
involve the application of highly sensitive and judgmental estimates and
assumptions. Some of these policies and estimates relate to matters that are
highly complex and contain inherent uncertainties. It is possible that, in some
instances, different estimates and assumptions could reasonably have been made
and used by management, instead of those we applied, which might have produced
different results that could have had a material effect on the financial
statements.
We have identified the following accounting policies and estimates that, due to
the inherent judgments and assumptions and the potential sensitivity of the
financial statements to those judgments and assumptions, are critical to an
understanding of our financial statements. We believe that the judgments,
estimates and assumptions used in the preparation of the Company's financial
statements are appropriate. For a further description of our accounting
policies, see   Note 1   - Summary of Significant Accounting Policies in the
financial statements included in this Form 10­K.

Use of estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Provision for credit losses

Our allowance for credit losses is an estimate of probable incurred losses in
the loan portfolio. Loans are charged off against the allowance when management
believes the uncollectibility of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance for credit losses.
Management's methodology for estimating the allowance balance consists of
several key elements, which include specific allowances on individual impaired
loans and the formula driven allowances on pools of loans with similar risks.
The allowance is only an estimate of the inherent loss in the loan portfolio and
may not represent actual losses realized over time, either of losses in excess
of the allowance or of losses less than the allowance. Our accounting for
estimated loan losses is discussed and disclosed primarily in   Note 1   and

4 to the consolidated financial statements under the heading “Provision for credit losses”.

INFLATION

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The impact of inflation on a financial institution differs significantly from
that exerted on other industries primarily because the assets and liabilities of
financial institutions consist largely of monetary items.  However, financial
institutions are affected by inflation in part through non-interest expenses,
such as salaries and occupancy expenses, and to some extent by changes in
interest rates.
At December 31, 2021, we do not believe that inflation will have a material
impact on our consolidated financial position or results of operations.
However, if inflation concerns cause short term rates to rise in the near
future, we may benefit by immediate repricing of a portion of our loan
portfolio.  Refer to Quantitative and Qualitative Disclosures About Market Risk
for further discussion.

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