NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
1.
|
THE
BUSINESS OF THE COMPANY
|
American
River Bankshares (the “Company”) was incorporated under the laws of the State of California in 1995 under the name of
American River Holdings and changed its name in 2004 to American River Bankshares. As a bank holding company, the Company is authorized
to engage in the activities permitted under the Bank Holding Company Act of 1956, as amended, and regulations thereunder. As a
community oriented regional bank holding company, the principal communities served are located in Sacramento, Placer, Yolo, El
Dorado, Amador, and Sonoma counties.
The
Company owns 100% of the issued and outstanding common shares of its banking subsidiary, American River Bank (“ARB”
or the “Bank”). ARB was incorporated in 1983. ARB accepts checking and savings deposits, offers money market deposit
accounts and certificates of deposit, makes secured and unsecured commercial, secured real estate, and other installment and term
loans and offers other customary banking services. ARB operates four full-service banking offices in Sacramento County, one full-service
banking office in Placer County, two full-service banking offices in Sonoma County, and three full-service banking offices in
Amador County. The Company also owns one inactive subsidiary, American River Financial.
ARB
does not offer trust services or international banking services and does not plan to do so in the near future. The deposits of
ARB are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
General
The
accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the
United States of America and prevailing practices within the financial services industry.
Reclassifications
Certain
reclassifications have been made to prior years’ balances to conform to classifications used in 2019. Reclassifications did not
affect prior year net income or shareholders’ equity.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany
transactions and accounts among the Company and its subsidiaries have been eliminated in consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Cash
and Cash Equivalents
For
the purpose of the statement of cash flows, cash and due from banks and Federal funds sold are considered to be cash equivalents.
Generally, Federal funds are sold for one-day periods. Interest-bearing deposits in banks are also considered to be cash equivalents,
mature within one year and are carried at cost.
Investment
Securities
Investments
are classified into the following categories:
|
·
|
Available-for-sale
securities, reported at fair value, with unrealized gains and losses excluded from earnings
and reported, net of taxes, as accumulated other comprehensive income (loss) within shareholders’
equity.
|
|
·
|
Held-to-maturity
securities, which management has the positive intent and ability to hold to maturity,
reported at amortized cost.
|
Management
determines the appropriate classification of its investments at the time of purchase and may only change the classification in
certain limited circumstances. All transfers between categories are accounted for at fair value. There were no transfers during
the years ended December 31, 2019 and 2018.
Gains
or losses on the sale of investment securities are computed on the specific identification method. Interest earned on investment
securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums.
An
investment security is impaired when its carrying value is greater than its fair value. Investment securities that are impaired
are evaluated on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation
to determine whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and
duration of the decline and the intent and ability of the Company to retain its investment in the securities for a period of time
sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine
whether the loss in value is other than temporary. The term “other than temporary” is not intended to indicate that
the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or
that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.
For debt securities, once a decline in value is determined to be other than temporary and management does not intend to sell the
security or it is more likely than not that management will not be required to sell the security before recovery, only the portion
of the impairment loss representing credit exposure is recognized as a charge to earnings, with the balance recognized as a charge
to other comprehensive income. If management intends to sell the security or it is more likely than not that management will be
required to sell the security before recovering its forecasted cost, the entire impairment loss is recognized as a charge to earnings.
For any equity securities, the entire amount of the fair value adjustment is recognized through earnings.
Federal
Home Loan Bank Stock
Investments
in Federal Home Loan Bank of San Francisco (the “FHLB”) stock are carried at cost and are redeemable at par with certain
restrictions. Investments in FHLB stock are necessary to participate in FHLB programs.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Loans
and Leases
Loans
and leases that management has both the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at the principal amounts outstanding, adjusted for unearned income, deferred loan origination fees and costs, purchase
premiums and discounts, write-downs and the allowance for loan and lease losses. Loan and lease origination fees, net of certain
deferred origination costs, and purchase premiums and discounts are recognized as an adjustment to the yield of the related loans
and leases.
For
all classes of loans and leases, the accrual of interest is discontinued when, in the opinion of management, there is an indication
that the borrower may be unable to meet payment requirements within an acceptable time frame relative to the terms stated in the
loan agreement. Upon such discontinuance, all unpaid accrued interest is reversed against current income unless the loan or lease
is well secured and in the process of collection. Interest received on nonaccrual loans and leases is either applied against principal
or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans and
leases are restored to accrual status when the obligation is brought current and has performed in accordance with the contractual
terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer
in doubt.
Direct
financing leases are carried net of unearned income. Income from leases is recognized by a method that approximates a level yield
on the outstanding net investment in the lease.
Loan
Sales and Servicing
Included
in the loan and lease portfolio are Small Business Administration (“SBA”) loans and Farm Service Agency guaranteed loans
that may be sold in the secondary market. At the time the loan is sold, the related right to service the loan is either retained,
with the Company earning future servicing income, or released in exchange for a one-time servicing-released premium. Loans subsequently
transferred to the loan portfolio are transferred at the lower of cost or fair value at the date of transfer. Any difference between
the carrying amount of the loan and its outstanding principal balance is recognized as an adjustment to yield by the interest
method. There were no loans held for sale at December 31, 2019 and 2018.
SBA
and Farm Service Agency loans with unpaid balances of $78,000 and $109,000 were being serviced for others as of December 31, 2019
and 2018, respectively. The Company also serviced loans that are participated with other financial institutions totaling $4,042,000
and $7,815,000 as of December 31, 2019 and 2018, respectively.
Servicing
rights acquired through 1) a purchase or 2) the origination of loans which are sold or securitized with servicing rights retained
are recognized as separate assets or liabilities. Servicing assets or liabilities are initially recorded at fair value and are
subsequently amortized in proportion to and over the period of the related net servicing income or expense. Servicing assets are
periodically evaluated for impairment. Servicing assets were not considered material for disclosure purposes at December 31, 2019
and 2018.
Allowance
for Loan and Lease Losses
The
allowance for loan and lease losses is an estimate of probable credit losses inherent in the Company’s credit portfolio that have
been incurred as of the balance-sheet date. The allowance is established through a provision for loan and lease losses which is
charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses
and loan growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously
charged off amounts is typically recorded as a recovery to the allowance. The overall allowance consists of two primary components,
specific reserves related to impaired credits and general reserves for inherent probable losses related to credits that are not
impaired.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Allowance
for Loan and Lease Losses (Continued)
For
all classes of the portfolio, a loan or lease 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, and the probability
of collecting scheduled principle and interest payments when due. Impaired loans are individually evaluated to determine the extent
of impairment, if any, except for smaller-balance loans that are collectively evaluated for credit risk. When a loan or lease
is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the credit’s
original interest rate, the credit’s observable market price, or the fair value of the collateral if the credit is collateral
dependent. A loan or lease is collateral dependent if the repayment of the credit is expected to be provided solely by the sale
or operation of the underlying collateral.
For
all portfolio segments, a restructuring of a debt constitutes a troubled debt restructuring (“TDR”) if the Company grants
a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not
otherwise consider. Restructured workout loans typically present an elevated level of credit risk as the borrowers are not able
to perform according to the original contractual terms. Loans or leases that are reported as TDRs are considered impaired and
measured for impairment as described above.
For
all portfolio segments, the determination of the general reserve for loans and leases that are not impaired is based on estimates
made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications,
and qualitative factors to include economic trends in the Company’s service areas, industry experience and trends, geographic
concentrations, estimated collateral values, the Company’s underwriting policies, the character of the credit portfolio, and probable
losses inherent in the portfolio taken as a whole.
The
Company determines a separate allowance for each portfolio segment. These portfolio segments include commercial, real estate construction
(including land and development loans), residential real estate, multi-family real estate, commercial real estate, leases, agriculture,
and consumer loans. The allowance for loan and lease losses attributable to each portfolio segment, which includes both impaired
credits and credits that are not impaired, is combined to determine the Company’s overall allowance, which is included as a component
of loans and leases on the consolidated balance sheet and available for all loss exposures.
The
Company assigns a risk rating to all loans and periodically performs detailed reviews of all such loans over a certain threshold
to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination
by independent specialists engaged by the Company and the Company’s regulators. During the internal reviews, management monitors
and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the
fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual
credit. The risk ratings can be grouped into six major categories, defined as follows:
Pass
– A pass loan is a strong credit with no existing or known potential weaknesses deserving of management’s close
attention.
Watch
– A watch credit is a loan or lease that otherwise meets the definition of a standard or minimum acceptable quality
loan, but which requires more than normal attention due to any of the following items: deterioration of borrower financial condition
less severe than those warranting more adverse grading, deterioration of repayment ability and/or collateral value, increased
leverage, adverse effects from a downturn in the economy, local market or industry, adverse changes in local or regional employer,
management changes (including illness, disability, and death), and adverse legal action. Payments are current per the terms of
the agreement. If conditions persist or worsen, a more severe risk grade may be warranted.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Allowance
for Loan and Lease Losses (Continued)
Special
Mention – A special mention credit is a loan or lease that has potential weaknesses that deserve management’s close
attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit
or in the Company’s position at some future date. Special Mention credits are not adversely classified and do not expose the Company
to sufficient risk to warrant adverse classification.
Substandard
– A substandard credit is a loan or lease that is not adequately protected by the current sound worth and paying
capacity of the borrower or the value of the collateral pledged, if any. Credits classified as substandard have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include inadequate cash flow or collateral
support, a project’s lack of marketability, failure to complete construction on time or a project’s failure to fulfill economic
expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are
not corrected.
Doubtful
– Credits classified as doubtful are loans or leases that have all the weaknesses inherent in those classified as
substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently
known facts, conditions and values, highly questionable and improbable.
Loss
– Credits classified as loss are loans or leases considered uncollectible and charged off immediately.
The
general reserve component of the allowance for loan and lease losses also consists of reserve factors that are based on management’s
assessment of the following for each portfolio segment: (1) inherent credit risk, (2) historical losses and (3) other
qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each
portfolio segment described below.
Real
Estate- Commercial – Commercial real estate mortgage loans generally possess a higher inherent risk of loss than
other real estate portfolio segments, except land and construction loans. Adverse economic developments or an overbuilt market
impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact
the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient
cash flow to service debt obligations.
Real
Estate- Construction – These loans generally possess a higher inherent risk of loss than other real estate portfolio
segments. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction
industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in
real estate values significantly impact the credit quality of these loans, as property values determine the economic viability
of construction projects.
Real
Estate- Multi-family – Multi-family loans are non-construction term mortgages for the acquisition, refinance, or
improvement of residential rental properties with generally more than 4 dwelling units. Underwriting is generally based on borrower
creditworthiness, sufficiency of net operating income to service the bank loan payment, and a prudent loan-to-value ratio, among
other factors.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Allowance
for Loan and Lease Losses (Continued)
Real
Estate- Residential – Residential loans are generally loans to purchase or refinance 1-4 unit single-family residences,
either owner-occupied or investor-owned. Some residential loans are short term to match their intended source of repayment through
sale or refinance. The remainder are fixed or floating-rate term first mortgages with an original maturity between 2 and 10 years,
generally with payments based on a 25-30 year amortization.
Commercial
– Commercial loans generally possess a lower inherent risk of loss than real estate portfolio segments because these
loans are generally underwritten to existing cash flows of operating businesses. Debt coverage is provided by business cash flows
and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality
of these loans.
Lease
Financing Receivable – Leases originated by the bank are non-consumer finance leases (as contrasted with
operating leases) for the acquisition of titled and non-titled business equipment. Leases are generally amortized over a period
from 36 to 84 months, depending on the useful life of the equipment acquired. Residual (balloon) payments at lease end range from
0-20% of original cost, and are a non-optional obligation of the lessee. Lessees are contractually responsible for all costs,
expenses, taxes, and liability associated with the leased equipment.
Agricultural
– Loans secured by crop production and livestock are especially vulnerable to two risk factors that are largely
outside the control of the Company and borrowers: commodity prices and weather conditions.
Consumer
– The consumer loan portfolio is comprised of a large number of small loans scheduled to be amortized over a specific
period. Most installment loans are made directly for consumer purchases, but business loans granted for the purchase of heavy
equipment or industrial vehicles may also be included. Also included in the consumer loan portfolio are home equity lines of credit
and loans purchased from a specialty lender that originates classic and collector auto loans. Economic trends determined by unemployment
rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate
that the borrowers’ capacity to repay their obligations may be deteriorating.
Although
management believes the allowance to be adequate, ultimate losses may vary from its estimates. At least quarterly, the Board of
Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic
conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews,
the allowance is adjusted. In addition, the Company’s primary regulators, the FDIC and the California Department of Business Oversight,
as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require
additions to the allowance based on their judgment about information available at the time of their examinations.
Allowance
for Credit Losses on Off-Balance-Sheet Credit Exposures
The
Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates probable incurred losses using
historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in accrued interest payable
and other liabilities on the consolidated balance sheet.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Other
Real Estate Owned (OREO)
Other
real estate owned includes real estate acquired in full or partial settlement of loan obligations. When property is acquired,
any excess of the recorded investment in the loan balance and accrued interest income over the estimated fair market value of
the property less estimated selling costs is charged against the allowance for loan and lease losses. Any excess of the fair value
over the loan balance less estimated selling costs is recorded as noninterest income-other income. A valuation allowance for losses
on other real estate may be maintained to provide for temporary declines in value. The valuation allowance is established through
a provision for losses on other real estate which is included in other expenses. Subsequent gains or losses on sales or write-downs
resulting from permanent impairments are recorded in other income or expense as incurred.
Premises
and Equipment
Premises
and equipment are carried at cost less accumulated depreciation. Land is not depreciated. Depreciation is determined using the
straight-line method over the estimated useful lives of the related assets. The useful life of the building and improvements is
forty years. The useful lives of furniture, fixtures and equipment are estimated to be three to ten years. Leasehold improvements
are amortized over the life of the asset or the term of the related lease, whichever is shorter. When assets are sold or otherwise
disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain
or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred. Impairment
of long-lived assets is evaluated by management based upon an event or changes in circumstances surrounding the underlying assets
which indicate long-lived assets may be impaired.
Goodwill
and Intangible Assets
Business
combinations involving the Company’s acquisition of equity interests or net assets of another enterprise or the assumption of
net liabilities in an acquisition of branches constituting a business may give rise to goodwill. Goodwill represents the excess
of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The value of
goodwill is ultimately derived from the Company’s ability to generate net earnings after the acquisition and is not deductible
for tax purposes. A decline in net earnings could be indicative of a decline in the fair value of goodwill and result in impairment.
For that reason, goodwill is assessed for impairment at least annually. Impairment exists when a reporting unit’s carrying
value of goodwill exceeds its fair value. At December 31, 2019, the Company had one reporting unit and that reporting unit had
positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the
fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it
was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment.
Bank-Owned Life Insurance
The
Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that
can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges
or other amounts due that are probable at settlement.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Income
Taxes
The
Company files its income taxes on a consolidated basis with its subsidiaries. The allocation of income tax expense represents
each entity’s proportionate share of the consolidated provision for income taxes.
The
Company accounts for income taxes using the balance sheet method, under which deferred tax assets and liabilities are recognized
for the tax consequences of temporary differences between the reported amounts of assets and liabilities and their tax bases.
The deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances
during the year. This amount combined with the current taxes payable or refundable, results in the income tax expense for the
current year. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other
assets.
Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. On December
22, 2017, President Trump signed into law “H.R.1” commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).
During 2017, the Company recorded an income tax expense adjustment of $1,220,000 related to the Tax Act. The adjustment relates
to revaluing the Company’s net deferred tax assets using the new lower corporate federal income tax rate of 21% which became
effective January 1, 2018, a reduction from the Company’s 2017 rate of 34%.
The
realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is “more likely than not”
that all or a portion of the deferred tax assets will not be realized. “More likely than not” is defined as greater
than a 50% likelihood. All available evidence, both positive and negative is considered to determine whether, based on the weight
of that evidence, a valuation allowance is needed. Based upon the Company’s analysis of available evidence, the Company determined
that it is “more likely than not” that all of the deferred income tax assets as of December 31, 2019 and 2018 will
be fully realized and therefore no valuation allowance was recorded.
The
Company uses a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions
taken or expected to be taken on a tax return. A tax position is recognized as a benefit only if it is “more likely than
not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions
not meeting the “more likely than not” test, no tax benefit is recorded. Interest expense and penalties associated with
unrecognized tax benefits, if any, are classified as income tax expense in the consolidated statement of income.
Comprehensive
Income
Comprehensive
income is reported in addition to net income for all periods presented. Comprehensive income consists of net income and other
comprehensive income (loss). Unrealized gains and losses on the Company’s available-for-sale investment securities are included
in other comprehensive income (loss), adjusted for realized gains or losses included in net income, net of tax. Total comprehensive
income and the components of accumulated other comprehensive income (loss) are presented in the consolidated statements of comprehensive
income.
Earnings
Per Share
Basic
earnings per share (“EPS”), which excludes dilution, is computed by dividing income available to common shareholders
by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock, such as stock options or restricted stock, result in the issuance
of common stock that share in the earnings of the Company. The treasury stock method has been applied to determine the dilutive
effect of stock options and restricted stock in computing diluted EPS. Earnings and dividends per share are restated for all stock
splits and stock dividends through the date of issuance of the consolidated financial statements.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
There were no stock splits or stock dividends in 2019, 2018 or 2017.
Stock-Based
Compensation
At
December 31, 2019, the Company had one stock-based compensation plan, which is described more fully in Note 13. Compensation expense
recorded in 2019, 2018, and 2017 totaled $338,000, $227,000 and $273,000, respectively. Compensation expense is recognized over
the vesting period on a straight line accounting basis.
The
fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton based option valuation model that
uses the assumptions noted in the table in Footnote 13. Because Black-Scholes-Merton based option valuation models incorporate
ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on historical volatility of the
Company’s stock and other factors. The Company uses historical data to estimate the dividend yield, option life and forfeiture
rate within the valuation model. The expected option life represents the period of time that options granted are expected to be
outstanding. The risk-free rate for the period representing the contractual life of the option is based on the U.S. Treasury yield
curve in effect at the time of grant.
Operating
Segments
While
the Company’s management monitors the revenue streams of the various products and services, operations are managed and financial
performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments
are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable
operating segment.
Recently
Issued Financial Accounting Pronouncements
In
June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-13, “Measurement of
Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses
for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing
the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard
will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred
to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses
and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans,
leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale
(“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a
manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized
cost of the securities. As a result, entities will recognize changes to estimated credit losses immediately in earnings rather
than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired
debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models,
and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized
cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No.
2016-13 was initially scheduled to become effective for the Company for interim and annual reporting periods beginning after December
15, 2019, however, on November 15, 2019 the FASB issued ASU 2019-10 delaying the effective date for smaller reporting companies,
such as the Company, to interim and annual reporting periods beginning after December 15, 2022; early adoption is still permitted
for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions
as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance
is effective (i.e., modified retrospective approach). While the Company is currently evaluating the provisions of ASU No. 2016-13
to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements, including
if it will early adopt the standard, it has taken steps to prepare for the implementation when it becomes effective, such as forming
an internal task force, gathering pertinent data, consulting with outside professionals, evaluating its current IT systems, and
purchasing a software solution. The Company has imported current and historical data into the new software and is currently validating
the data and intends to begin processing information, on a test basis, with the new CECL specific software during 2020 and 2021
and to disclose any material potential impact of this modeling once it becomes available.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR VALUE MEASUREMENTS
|
The
following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and
nonrecurring basis as of December 31, 2019 and December 31, 2018. They indicate the fair value hierarchy of the valuation techniques
utilized by the Company to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined
by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and
inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are
observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations
where there is little, if any, market activity for the asset or liability. In 2018, the Company adopted the provisions of Accounting
Standard Update 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU
2016-01”). ASU 2016-01 requires the Company to use the exit price notion when measuring the fair value of financial instruments.
The Company used the exit price notion for valuing financial instruments in 2018 and 2019. In certain cases, the inputs used to
measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy
within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant
to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the
fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Estimated
fair values are disclosed for financial instruments for which it is practicable to estimate fair value. These estimates are
made at a specific point in time based on relevant market data and information about the financial instruments. These
estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a
particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future
business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and
losses can have a significant effect on fair value estimates and have not been considered in any of these
estimates.
The
carrying amounts and estimated fair values of the Company’s financial instruments are as follows (dollars in thousands):
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR
VALUE MEASUREMENTS (Continued)
|
|
|
Carrying
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
December 31, 2019
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
15,258
|
|
|
$
|
15,258
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,258
|
|
Interest-bearing deposits in banks
|
|
|
2,552
|
|
|
|
—
|
|
|
|
2,552
|
|
|
|
—
|
|
|
|
2,552
|
|
Available-for-sale securities
|
|
|
261,965
|
|
|
|
—
|
|
|
|
261,965
|
|
|
|
—
|
|
|
|
261,965
|
|
Held-to-maturity securities
|
|
|
248
|
|
|
|
—
|
|
|
|
266
|
|
|
|
—
|
|
|
|
266
|
|
FHLB stock
|
|
|
4,259
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans and leases, net
|
|
|
393,802
|
|
|
|
—
|
|
|
|
—
|
|
|
|
396,089
|
|
|
|
396,089
|
|
Accrued interest receivable
|
|
|
1,929
|
|
|
|
—
|
|
|
|
780
|
|
|
|
1,149
|
|
|
|
1,929
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
227,055
|
|
|
$
|
227,055
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
227,055
|
|
Savings
|
|
|
75,820
|
|
|
|
75,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75,820
|
|
Money market
|
|
|
158,319
|
|
|
|
158,319
|
|
|
|
—
|
|
|
|
—
|
|
|
|
158,319
|
|
NOW accounts
|
|
|
69,834
|
|
|
|
69,834
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,834
|
|
Time Deposits
|
|
|
73,809
|
|
|
|
—
|
|
|
|
73,924
|
|
|
|
—
|
|
|
|
73,924
|
|
Short-term borrowings
|
|
|
9,000
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,000
|
|
Long-term borrowings
|
|
|
10,500
|
|
|
|
—
|
|
|
|
10,717
|
|
|
|
—
|
|
|
|
10,717
|
|
Accrued interest payable
|
|
|
120
|
|
|
|
—
|
|
|
|
120
|
|
|
|
—
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
December 31, 2018
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
20,987
|
|
|
$
|
20,987
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,987
|
|
Federal funds sold
|
|
|
7,000
|
|
|
|
7,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,000
|
|
Interest-bearing deposits in banks
|
|
|
1,746
|
|
|
|
—
|
|
|
|
1,746
|
|
|
|
—
|
|
|
|
1,746
|
|
Available-for-sale securities
|
|
|
294,933
|
|
|
|
4,976
|
|
|
|
289,957
|
|
|
|
—
|
|
|
|
294,933
|
|
Held-to-maturity securities
|
|
|
292
|
|
|
|
—
|
|
|
|
306
|
|
|
|
—
|
|
|
|
306
|
|
FHLB stock
|
|
|
3,932
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans and leases, net
|
|
|
318,516
|
|
|
|
—
|
|
|
|
—
|
|
|
|
315,235
|
|
|
|
315,235
|
|
Accrued interest receivable
|
|
|
1,959
|
|
|
|
—
|
|
|
|
1,044
|
|
|
|
915
|
|
|
|
1,959
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
214,745
|
|
|
$
|
214,745
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
214,745
|
|
Savings
|
|
|
72,522
|
|
|
|
72,522
|
|
|
|
—
|
|
|
|
—
|
|
|
|
72,522
|
|
Money market
|
|
|
145,831
|
|
|
|
145,831
|
|
|
|
—
|
|
|
|
—
|
|
|
|
145,831
|
|
NOW accounts
|
|
|
69,489
|
|
|
|
69,489
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,489
|
|
Time Deposits
|
|
|
88,087
|
|
|
|
—
|
|
|
|
88,078
|
|
|
|
—
|
|
|
|
88,078
|
|
Short-term borrowings
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
Long-term borrowings
|
|
|
10,500
|
|
|
|
—
|
|
|
|
10,733
|
|
|
|
—
|
|
|
|
10,733
|
|
Accrued interest payable
|
|
|
63
|
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
63
|
|
Because
no established market exists for a significant portion of the Company’s financial instruments, fair value estimates are based
on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the fair values presented.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR
VALUE MEASUREMENTS (Continued)
|
Assets
and liabilities measured at fair value on a recurring and non-recurring basis are presented in the following table:
(Dollars
in thousands)
December 31, 2019
|
|
Fair
Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
241,887
|
|
|
$
|
—
|
|
|
$
|
241,887
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate
Debt Securities
|
|
|
6,631
|
|
|
|
—
|
|
|
|
6,631
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
|
|
13,447
|
|
|
|
—
|
|
|
|
13,477
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recurring
|
|
$
|
261,965
|
|
|
$
|
—
|
|
|
$
|
261,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
December 31, 2019
|
|
Fair Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities
measured on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed
asset
|
|
$
|
517
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
517
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned:Land
|
|
|
846
|
|
|
|
—
|
|
|
|
—
|
|
|
|
846
|
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonrecurring
|
|
$
|
1,363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,363
|
|
|
$
|
(111
|
)
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR
VALUE MEASUREMENTS (Continued)
|
(Dollars
in thousands)
December 31, 2018
|
|
Fair
Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
269,049
|
|
|
$
|
—
|
|
|
$
|
269,049
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate
Debt Securities
|
|
|
6,508
|
|
|
|
—
|
|
|
|
6,508
|
|
|
|
—
|
|
|
|
—
|
|
Obligations
of states and political subdivisions
|
|
|
14,400
|
|
|
|
—
|
|
|
|
14,400
|
|
|
|
—
|
|
|
|
—
|
|
U.S.
Treasury bonds
|
|
|
4,976
|
|
|
|
4,976
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recurring
|
|
$
|
294,933
|
|
|
$
|
4,976
|
|
|
$
|
289,957
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2018
|
|
Fair
Value
|
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities measured on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
5,274
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,274
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
957
|
|
|
|
—
|
|
|
|
—
|
|
|
|
957
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
nonrecurring
|
|
$
|
6,231
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,231
|
|
|
$
|
(4
|
)
|
U.S.
Government Agencies and Sponsored Agencies consist predominately of residential mortgage-backed securities. There were no transfers
between Levels 1 and 2 during the years ended December 31, 2019 or December 31, 2018.
The following methods
were used to estimate the fair value of each class of financial instrument above:
Available-for-sale
securities – Fair values for investment securities are based on quoted market prices, if available, and are considered
Level 1, or evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information
and are considered Level 2. Pricing applications apply available information, as applicable, through processes such as benchmark
curves, benchmarking to like securities, sector groupings and matrix pricing.
Impaired
loans – The fair value of collateral dependent impaired loans adjusted for specific allocations of the allowance
for loan losses is generally based on recent real estate appraisals and/or evaluations. These appraisals and/or evaluations
may utilize a single valuation approach or a combination of approaches including comparable sales, cost and the income
approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences
between the comparable sales and income and other available data. Such adjustments are usually significant and typically
result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for all Level 3
nonrecurring impaired loans is the sales comparison approach less a reserve for past dues taxes and selling costs ranging
from 8% to 10%.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR VALUE MEASUREMENTS
(Continued)
|
Other
assets and real estate owned – Other assets can contain non-real estate property obtained by repossession of collateral
in the case of a loan default and are measured at fair value, less costs to sell. Certain commercial and residential real estate
properties classified as OREO are measured at fair value, less costs to sell. Fair values are based on recent appraisals and/or
evaluations. These appraisals and/or evaluations may use a single valuation approach or a combination of approaches including
comparable sales, cost and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers
to adjust for differences between the comparable sales and income and other available data. Such adjustments are usually significant
and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for all
Level 3 nonrecurring other assets and OREO is the sales comparison approach less selling costs ranging from 8% to 10%.
|
4.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS
|
At
December 31, 2019 and 2018, goodwill totaled $16,321,000. Goodwill is evaluated annually for impairment under the provisions of
the codification Topic 350, Goodwill and Other Intangibles. The most recent annual assessment was performed as of December
31, 2019, and at that time, the Company’s reporting unit had positive equity and the Company elected to perform a qualitative
assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value,
including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting
unit exceeded its carrying value, resulting in no impairment. Management determined that no impairment recognition was required
for the years ended December 31, 2019, 2018 and 2017.
At
December 31, 2019 and 2018, the Company did not have other intangible assets.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
The
amortized cost and estimated fair value of investment securities at December 31, 2019 and 2018 consisted of the following (dollars
in thousands):
Available-for-Sale
|
|
|
|
|
|
2019
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
239,617
|
|
|
$
|
3,371
|
|
|
$
|
(1,101
|
)
|
|
$
|
241,887
|
|
Obligations
of states and political subdivisions
|
|
|
13,308
|
|
|
|
212
|
|
|
|
(73
|
)
|
|
|
13,447
|
|
Corporate
Debt Securities
|
|
|
6,496
|
|
|
|
135
|
|
|
|
—
|
|
|
|
6,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
259,421
|
|
|
$
|
3,718
|
|
|
$
|
(1,174
|
)
|
|
$
|
261,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
271,685
|
|
|
$
|
984
|
|
|
$
|
(3,620
|
)
|
|
$
|
269,049
|
|
Obligations
of states and political subdivisions
|
|
|
14,440
|
|
|
|
165
|
|
|
|
(205
|
)
|
|
|
14,400
|
|
Corporate
Debt Securities
|
|
|
6,493
|
|
|
|
74
|
|
|
|
(59
|
)
|
|
|
6,508
|
|
U.S.
Treasury securities
|
|
|
4,979
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
4,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
297,597
|
|
|
$
|
1,223
|
|
|
$
|
(3,887
|
)
|
|
$
|
294,933
|
|
U.S.
Government Agencies and U.S. Government-sponsored Agencies consist predominately of residential mortgage-backed securities. Net
unrealized gains on available-for-sale investment securities totaling $2,544,000 were recorded, net of $752,000 in tax liabilities,
as accumulated other comprehensive income within shareholders’ equity at December 31, 2019. Proceeds and gross realized gains
from the sale and call of available-for-sale investment securities for the year ended December 31, 2019 totaled $63,325,000 and
$115,000, respectively. There were no transfers of available-for-sale investment securities during the year ended December 31,
2019.
Net
unrealized losses on available-for-sale investment securities totaling $2,664,000 were recorded, net of $788,000 in tax assets,
as accumulated other comprehensive income within shareholders’ equity at December 31, 2018. Proceeds and gross realized gains
from the sale and call of available-for-sale investment securities for the year ended December 31, 2018 totaled $29,142,000 and
$31,000, respectively. There were no transfers of available-for-sale investment securities during the year ended December 31,
2018.
Proceeds
and gross realized gains from the sale, impairment and call of available-for-sale investment securities for the year ended December
31, 2017 totaled $31,434,000 and $161,000, respectively.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
5.
|
INVESTMENT SECURITIES
(Continued)
|
Held-to-Maturity
|
|
2019
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
248
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
292
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
306
|
|
There
were no sales or transfers of held-to-maturity investment securities for the years ended December 31, 2019, 2018 and 2017.
The
amortized cost and estimated fair value of investment securities at December 31, 2019 by contractual maturity are shown below
(dollars in thousands).
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
500
|
|
|
$
|
501
|
|
|
|
|
|
|
|
|
|
After one year through five years
|
|
|
2,937
|
|
|
|
2,955
|
|
|
|
|
|
|
|
|
|
After five years through ten years
|
|
|
9,196
|
|
|
|
9,351
|
|
|
|
|
|
|
|
|
|
After ten years
|
|
|
7,171
|
|
|
|
7,271
|
|
|
|
|
|
|
|
|
|
|
|
|
19,804
|
|
|
|
20,078
|
|
|
|
|
|
|
|
|
|
Investment securities not due at a single maturity
date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies and
Sponsored Agencies
|
|
|
239,617
|
|
|
|
241,887
|
|
|
$
|
248
|
|
|
$
|
266
|
|
|
|
$
|
259,421
|
|
|
$
|
261,965
|
|
|
$
|
248
|
|
|
$
|
266
|
|
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.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
5.
|
INVESTMENT SECURITIES
(Continued)
|
Investment
securities with amortized costs totaling $127,307,000 and $88,460,000 and estimated fair values totaling $129,643,000 and $87,351,000
were pledged to secure State Treasury funds on deposit, public agency and bankruptcy trustee deposits and borrowing arrangements
(see Note 10) at December 31, 2019 and 2018, respectively.
Investment
securities with unrealized losses at December 31, 2019 and 2018 are summarized and classified according to the duration of the
loss period as follows (dollars in thousands):
|
|
2019
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies and Sponsored
Agencies
|
|
$
|
65,082
|
|
|
$
|
(438
|
)
|
|
$
|
38,380
|
|
|
$
|
(663
|
)
|
|
$
|
103,462
|
|
|
$
|
(1,101
|
)
|
Obligations of states and
political subdivisions
|
|
|
8,060
|
|
|
|
(73
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
8,060
|
|
|
|
(73
|
)
|
|
|
$
|
73,142
|
|
|
$
|
(511
|
)
|
|
$
|
38,380
|
|
|
$
|
(663
|
)
|
|
$
|
111,522
|
|
|
$
|
(1,174
|
)
|
|
|
2018
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies and Sponsored
Agencies
|
|
$
|
39,267
|
|
|
$
|
(310
|
)
|
|
$
|
138,894
|
|
|
$
|
(3,310
|
)
|
|
$
|
178,161
|
|
|
$
|
(3,620
|
)
|
Obligations of states and political
subdivisions
|
|
|
2,168
|
|
|
|
(28
|
)
|
|
|
5,583
|
|
|
|
(177
|
)
|
|
|
7,751
|
|
|
|
(205
|
)
|
U.S. Treasury securities
|
|
|
4,976
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,976
|
|
|
|
(3
|
)
|
Corporate bonds
|
|
|
497
|
|
|
|
(4
|
)
|
|
|
1,938
|
|
|
|
(55
|
)
|
|
|
2,435
|
|
|
|
(59
|
)
|
|
|
$
|
46,908
|
|
|
$
|
(345
|
)
|
|
$
|
146,415
|
|
|
$
|
(3,542
|
)
|
|
$
|
193,323
|
|
|
$
|
(3,887
|
)
|
At
December 31, 2019, the Company held 205 securities of which 41 were in a loss position for less than twelve months and 29 were
in a loss position for twelve months or more. These 29 securities consisted of mortgage-backed, corporate and municipal securities.
The
unrealized loss on the Company’s investments in securities is primarily driven by interest rates. Because the decline in
market value is attributable to a change in interest rates and not credit quality, and because the Company has the ability and
intent to hold these investments until recovery of fair value, which may be maturity, management does not consider these investments
to be other-than-temporarily impaired.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Outstanding
loans and leases are summarized as follows (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Real estate – commercial
|
|
$
|
214,604
|
|
|
$
|
199,894
|
|
Real estate – construction
|
|
|
23,169
|
|
|
|
5,685
|
|
Real estate – multi-family
|
|
|
56,818
|
|
|
|
56,139
|
|
Real estate – residential
|
|
|
29,180
|
|
|
|
16,338
|
|
Commercial
|
|
|
43,019
|
|
|
|
29,650
|
|
Lease financing receivable
|
|
|
—
|
|
|
|
32
|
|
Agriculture
|
|
|
6,479
|
|
|
|
4,419
|
|
Consumer
|
|
|
25,671
|
|
|
|
10,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398,940
|
|
|
|
322,871
|
|
|
|
|
|
|
|
|
|
|
Deferred loan and lease origination fees and costs, net
|
|
|
—
|
|
|
|
37
|
|
Allowance for loan and lease losses
|
|
|
(5,138
|
)
|
|
|
(4,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
393,802
|
|
|
$
|
318,516
|
|
Certain
loans are pledged as collateral for available borrowings with the FHLB and the Federal Reserve Bank of San Francisco (the “FRB”).
Pledged loans totaled $220,918,000 and $194,431,000 at December 31, 2019 and 2018, respectively (see Note 10).
Salaries
and employee benefits totaling $438,000, $357,000 and $177,000 have been deferred as loan and lease origination costs for the
years ended December 31, 2019, 2018 and 2017, respectively.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES
|
The
following tables show the activity in the allowance for loan and lease losses for the years ended December 31, 2019, 2018 and
2017 and the allocation of the allowance for loan and lease losses as of December 31, 2019, 2018 and 2017 by portfolio segment
and by impairment methodology (dollars in thousands):
|
|
December 31, 2019
|
|
|
|
|
|
|
Real Estate
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-
Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for Loan
and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
668
|
|
|
$
|
2,114
|
|
|
$
|
564
|
|
|
$
|
267
|
|
|
$
|
220
|
|
|
$
|
88
|
|
|
$
|
192
|
|
|
$
|
279
|
|
|
$
|
4,392
|
|
Provision for loan losses
|
|
|
275
|
|
|
|
(219
|
)
|
|
|
(235
|
)
|
|
|
719
|
|
|
|
61
|
|
|
|
19
|
|
|
|
74
|
|
|
|
(34
|
)
|
|
|
660
|
|
Loans charged-off
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recoveries
|
|
|
7
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68
|
|
|
|
—
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance allocated to
portfolio segments
|
|
$
|
950
|
|
|
$
|
1,906
|
|
|
$
|
329
|
|
|
$
|
986
|
|
|
$
|
281
|
|
|
$
|
107
|
|
|
$
|
334
|
|
|
$
|
245
|
|
|
$
|
5,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
950
|
|
|
$
|
1,773
|
|
|
$
|
329
|
|
|
$
|
986
|
|
|
$
|
272
|
|
|
$
|
107
|
|
|
$
|
334
|
|
|
$
|
245
|
|
|
$
|
4,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
43,019
|
|
|
$
|
214,604
|
|
|
$
|
56,818
|
|
|
$
|
23,169
|
|
|
$
|
29,180
|
|
|
$
|
6,479
|
|
|
$
|
25,671
|
|
|
$
|
—
|
|
|
$
|
398,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
7,152
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
43,019
|
|
|
$
|
207,452
|
|
|
$
|
56,818
|
|
|
$
|
23,169
|
|
|
$
|
28,728
|
|
|
$
|
6,479
|
|
|
$
|
25,671
|
|
|
$
|
—
|
|
|
$
|
391,336
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
|
|
December 31, 2018
|
|
|
|
|
|
|
Real Estate
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-
Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Leases
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for Loan and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
447
|
|
|
$
|
2,174
|
|
|
$
|
1,047
|
|
|
$
|
269
|
|
|
$
|
205
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
291
|
|
|
$
|
4,478
|
|
Provision for loan losses
|
|
|
422
|
|
|
|
(68
|
)
|
|
|
(483
|
)
|
|
|
(2
|
)
|
|
|
15
|
|
|
|
(1
|
)
|
|
|
57
|
|
|
|
247
|
|
|
|
(12
|
)
|
|
|
175
|
|
Loans charged-off
|
|
|
(213
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(69
|
)
|
|
|
—
|
|
|
|
(282
|
)
|
Recoveries
|
|
|
12
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance allocated to portfolio segments
|
|
$
|
668
|
|
|
$
|
2,114
|
|
|
$
|
564
|
|
|
$
|
267
|
|
|
$
|
220
|
|
|
$
|
—
|
|
|
$
|
88
|
|
|
$
|
192
|
|
|
$
|
279
|
|
|
$
|
4,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
132
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
668
|
|
|
$
|
1,982
|
|
|
$
|
564
|
|
|
$
|
267
|
|
|
$
|
167
|
|
|
$
|
—
|
|
|
$
|
88
|
|
|
$
|
192
|
|
|
$
|
279
|
|
|
$
|
4,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
29,650
|
|
|
$
|
199,894
|
|
|
$
|
56,139
|
|
|
$
|
5,685
|
|
|
$
|
16,338
|
|
|
$
|
32
|
|
|
$
|
4,419
|
|
|
$
|
10,714
|
|
|
$
|
—
|
|
|
$
|
322,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
7,783
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
919
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
29,650
|
|
|
$
|
192,111
|
|
|
$
|
56,139
|
|
|
$
|
5,685
|
|
|
$
|
15,419
|
|
|
$
|
32
|
|
|
$
|
4,419
|
|
|
$
|
10,714
|
|
|
$
|
—
|
|
|
$
|
314,169
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
|
|
December 31, 2017
|
|
|
|
|
|
|
Real
Estate
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-
Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Leases
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance
for Loan and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
855
|
|
|
$
|
2,050
|
|
|
$
|
851
|
|
|
$
|
446
|
|
|
$
|
253
|
|
|
$
|
1
|
|
|
$
|
64
|
|
|
$
|
24
|
|
|
$
|
278
|
|
|
$
|
4,822
|
|
Provision
for loan losses
|
|
|
659
|
|
|
|
(104
|
)
|
|
|
196
|
|
|
|
(177
|
)
|
|
|
(48
|
)
|
|
|
(42
|
)
|
|
|
(33
|
)
|
|
|
(14
|
)
|
|
|
13
|
|
|
|
450
|
|
Loans
charged-off
|
|
|
(1,073
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,073
|
)
|
Recoveries
|
|
|
6
|
|
|
|
228
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance allocated to portfolio segments
|
|
$
|
447
|
|
|
$
|
2,174
|
|
|
$
|
1,047
|
|
|
$
|
269
|
|
|
$
|
205
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
291
|
|
|
$
|
4,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
—
|
|
|
$
|
261
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment
|
|
$
|
447
|
|
|
$
|
1,913
|
|
|
$
|
1,026
|
|
|
$
|
269
|
|
|
$
|
132
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
291
|
|
|
$
|
4,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
25,377
|
|
|
$
|
185,452
|
|
|
$
|
78,025
|
|
|
$
|
5,863
|
|
|
$
|
15,813
|
|
|
$
|
205
|
|
|
$
|
1,713
|
|
|
$
|
945
|
|
|
$
|
—
|
|
|
$
|
313,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
1,598
|
|
|
$
|
10,070
|
|
|
$
|
474
|
|
|
$
|
—
|
|
|
$
|
1,615
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment
|
|
$
|
23,779
|
|
|
$
|
175,382
|
|
|
$
|
77,551
|
|
|
$
|
5,863
|
|
|
$
|
14,198
|
|
|
$
|
205
|
|
|
$
|
1,713
|
|
|
$
|
945
|
|
|
$
|
—
|
|
|
$
|
299,636
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
The
following tables show the loan portfolio allocated by management’s internal risk ratings as of December 31, 2019 and
2018 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
Real Estate
|
|
|
Other Credit Exposure
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
38,085
|
|
|
$
|
208,140
|
|
|
$
|
56,818
|
|
|
$
|
23,169
|
|
|
$
|
28,570
|
|
|
$
|
6,479
|
|
|
$
|
25,596
|
|
|
$
|
386,857
|
|
Watch
|
|
|
4,915
|
|
|
|
6,329
|
|
|
|
—
|
|
|
|
—
|
|
|
|
610
|
|
|
|
—
|
|
|
|
75
|
|
|
|
11,929
|
|
Special mention
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
Substandard
|
|
|
—
|
|
|
|
135
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135
|
|
Doubtful
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
43,019
|
|
|
$
|
214,604
|
|
|
$
|
56,818
|
|
|
$
|
23,169
|
|
|
$
|
29,180
|
|
|
$
|
6,479
|
|
|
$
|
25,671
|
|
|
$
|
398,940
|
|
|
|
December
31, 2018
|
|
|
|
Credit
Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
Real
Estate
|
|
|
Other
Credit Exposure
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Leases
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
29,570
|
|
|
$
|
185,548
|
|
|
$
|
52,301
|
|
|
$
|
5,685
|
|
|
$
|
15,373
|
|
|
$
|
32
|
|
|
$
|
4,419
|
|
|
$
|
10,691
|
|
|
$
|
303,619
|
|
Watch
|
|
|
53
|
|
|
|
13,118
|
|
|
|
3,838
|
|
|
|
—
|
|
|
|
965
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
|
|
17,996
|
|
Special mention
|
|
|
—
|
|
|
|
1,087
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1,088
|
|
Substandard
|
|
|
27
|
|
|
|
141
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
168
|
|
Doubtful
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,650
|
|
|
$
|
199,894
|
|
|
$
|
56,139
|
|
|
$
|
5,685
|
|
|
$
|
16,338
|
|
|
$
|
32
|
|
|
$
|
4,419
|
|
|
$
|
10,714
|
|
|
$
|
322,871
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
The
following tables show an aging analysis of the loan portfolio at December 31, 2019 and 2018 (dollars in thousands):
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Greater
Than
|
|
|
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
Than
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
90 Days
and
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,019
|
|
|
$
|
43,019
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
214,604
|
|
|
|
214,604
|
|
|
|
—
|
|
|
|
—
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,818
|
|
|
|
56,818
|
|
|
|
—
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,169
|
|
|
|
23,169
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,180
|
|
|
|
29,180
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,479
|
|
|
|
6,479
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
75
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75
|
|
|
|
25,596
|
|
|
|
25,671
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
398,865
|
|
|
$
|
398,940
|
|
|
$
|
—
|
|
|
$
|
—
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Greater
Than
|
|
|
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
Than
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
90 Days
and
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,650
|
|
|
$
|
29,650
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
199,894
|
|
|
|
199,894
|
|
|
|
—
|
|
|
|
—
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,139
|
|
|
|
56,139
|
|
|
|
—
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,685
|
|
|
|
5,685
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,338
|
|
|
|
16,338
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,419
|
|
|
|
4,419
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,714
|
|
|
|
10,714
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
322,871
|
|
|
$
|
322,871
|
|
|
$
|
—
|
|
|
$
|
27
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
The
following tables show information related to impaired loans as of and for the years ended December 31, 2019, 2018 and 2017
(dollars in thousands):
|
|
December
31, 2019
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
5,530
|
|
|
$
|
5,664
|
|
|
$
|
—
|
|
|
$
|
5,654
|
|
|
$
|
333
|
|
Residential
|
|
|
318
|
|
|
|
405
|
|
|
|
—
|
|
|
|
323
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,848
|
|
|
$
|
6,069
|
|
|
$
|
—
|
|
|
$
|
5,977
|
|
|
$
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,622
|
|
|
$
|
1,693
|
|
|
$
|
133
|
|
|
$
|
1,719
|
|
|
$
|
101
|
|
Residential
|
|
|
134
|
|
|
|
134
|
|
|
|
9
|
|
|
|
149
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,756
|
|
|
$
|
1,827
|
|
|
$
|
142
|
|
|
$
|
1,868
|
|
|
$
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
7,152
|
|
|
$
|
7,357
|
|
|
$
|
133
|
|
|
$
|
7,373
|
|
|
$
|
434
|
|
Residential
|
|
|
452
|
|
|
|
539
|
|
|
|
9
|
|
|
|
472
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,604
|
|
|
$
|
7,896
|
|
|
$
|
142
|
|
|
$
|
7,845
|
|
|
$
|
461
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
|
|
December
31, 2018
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
5,645
|
|
|
|
5,879
|
|
|
|
—
|
|
|
|
5,711
|
|
|
|
283
|
|
Residential
|
|
|
323
|
|
|
|
410
|
|
|
|
—
|
|
|
|
326
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,968
|
|
|
$
|
6,289
|
|
|
$
|
—
|
|
|
$
|
6,037
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
2,138
|
|
|
$
|
2,217
|
|
|
$
|
132
|
|
|
$
|
2,199
|
|
|
$
|
133
|
|
Residential
|
|
|
596
|
|
|
|
596
|
|
|
|
53
|
|
|
|
611
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,734
|
|
|
$
|
2,813
|
|
|
$
|
185
|
|
|
$
|
2,810
|
|
|
$
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
7,783
|
|
|
|
8,096
|
|
|
|
132
|
|
|
|
7,910
|
|
|
|
416
|
|
Residential
|
|
|
919
|
|
|
|
1,006
|
|
|
|
53
|
|
|
|
937
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,702
|
|
|
$
|
9,102
|
|
|
$
|
185
|
|
|
$
|
8,847
|
|
|
$
|
467
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
|
|
December
31, 2017
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,598
|
|
|
$
|
2,671
|
|
|
$
|
—
|
|
|
$
|
1,808
|
|
|
$
|
108
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
5,674
|
|
|
|
5,907
|
|
|
|
—
|
|
|
|
5,701
|
|
|
|
281
|
|
Residential
|
|
|
329
|
|
|
|
416
|
|
|
|
—
|
|
|
|
331
|
|
|
|
19
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,601
|
|
|
$
|
8,994
|
|
|
$
|
—
|
|
|
$
|
7,840
|
|
|
$
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,396
|
|
|
$
|
4,483
|
|
|
$
|
261
|
|
|
$
|
4,435
|
|
|
$
|
249
|
|
Multi-family
|
|
|
474
|
|
|
|
474
|
|
|
|
21
|
|
|
|
476
|
|
|
|
33
|
|
Residential
|
|
|
1,286
|
|
|
|
1,286
|
|
|
|
73
|
|
|
|
1,295
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,156
|
|
|
$
|
6,243
|
|
|
$
|
355
|
|
|
$
|
6,206
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,598
|
|
|
$
|
2,671
|
|
|
$
|
—
|
|
|
$
|
1,808
|
|
|
$
|
108
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10,070
|
|
|
|
10,390
|
|
|
|
261
|
|
|
|
10,136
|
|
|
|
530
|
|
Multi-family
|
|
|
474
|
|
|
|
474
|
|
|
|
21
|
|
|
|
476
|
|
|
|
33
|
|
Residential
|
|
|
1,615
|
|
|
|
1,702
|
|
|
|
73
|
|
|
|
1,626
|
|
|
|
81
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,757
|
|
|
$
|
15,237
|
|
|
$
|
355
|
|
|
$
|
14,046
|
|
|
$
|
754
|
|
Interest
income on non-accrual loans is generally recognized on a cash basis and was approximately $1,000, $43,000 and $2,000 for the years
ended December 31, 2019, 2018 and 2017.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND
LEASE LOSSES (Continued)
|
Troubled
Debt Restructurings
There
were no modifications made during the period ended December 31, 2019 and one modification made during the period ended December
31, 2018 that was considered a troubled debt restructuring. The modification of the terms of the loan in 2018 was a term out of
a line of credit to an amortizing loan with a rate reduction. The loan had a pre-modification and post-modification outstanding
recorded investment of $18,000. As of December 31, 2019 and 2018, the Company has a recorded investment in troubled debt restructurings
of $5,970,000 and $6,642,000, respectively. The Company has allocated $78,000 and $185,000 of specific allowance for those loans
at December 31, 2019 and 2018 and has not committed to lend additional amounts.
There
were no payment defaults on troubled debt restructurings within 12 months following the modification during the year ended December
31, 2019 and 2018.
A
loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine
whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will
be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under
the Company’s internal underwriting policy.
|
8.
|
PREMISES AND EQUIPMENT
|
Premises
and equipment consisted of the following (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Land
|
|
$
|
206
|
|
|
$
|
206
|
|
Building and improvements
|
|
|
907
|
|
|
|
886
|
|
Furniture, fixtures and equipment
|
|
|
6,475
|
|
|
|
6,169
|
|
Leasehold improvements
|
|
|
1,739
|
|
|
|
1,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,327
|
|
|
|
8,982
|
|
Less accumulated depreciation
and amortization
|
|
|
(8,136
|
)
|
|
|
(7,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,191
|
|
|
$
|
1,071
|
|
Depreciation
and amortization included in occupancy and furniture and equipment expense totaled $226,000, $265,000 and $333,000 for the years
ended December 31, 2019, 2018 and 2017, respectively.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
9.
|
INTEREST-BEARING DEPOSITS
|
Interest-bearing
deposits consisted of the following (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Savings
|
|
$
|
75,820
|
|
|
$
|
72,522
|
|
Money market
|
|
|
158,319
|
|
|
|
145,831
|
|
NOW accounts
|
|
|
69,834
|
|
|
|
69,489
|
|
Time, $250,000 or more
|
|
|
46,218
|
|
|
|
57,028
|
|
Other time
|
|
|
27,591
|
|
|
|
31,059
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
377,782
|
|
|
$
|
375,929
|
|
The
Company held $29,000,000 in certificates of deposit for the State of California as of December 31, 2019 and 2018. This amount
represents 4.8% of total deposit balances at December 31, 2019 and 4.9% at December 31, 2018.
Aggregate
annual maturities of time deposits are as follows (dollars in thousands):
Year Ending
December 31,
|
|
|
|
2020
|
|
$
|
54,234
|
|
2021
|
|
|
8,064
|
|
2022
|
|
|
4,457
|
|
2023
|
|
|
4,988
|
|
2024
|
|
|
2,066
|
|
Thereafter
|
|
|
—
|
|
|
|
|
|
|
|
|
$
|
73,809
|
|
Interest
expense recognized on interest-bearing deposits consisted of the following (dollars in thousands):
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Savings
|
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
22
|
|
Money market
|
|
|
548
|
|
|
|
257
|
|
|
|
123
|
|
NOW accounts
|
|
|
15
|
|
|
|
15
|
|
|
|
16
|
|
Time Deposits
|
|
|
1,487
|
|
|
|
1,061
|
|
|
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,078
|
|
|
$
|
1,359
|
|
|
$
|
855
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
10.
|
BORROWING
ARRANGEMENTS
|
The
Company has $17,000,000 in unsecured short-term borrowing arrangements to purchase Federal funds with two of its correspondent
banks. There were no advances under the borrowing arrangements as of December 31, 2019 and 2018.
In
addition, the Company has a line of credit available with the FHLB which is secured by pledged mortgage loans (see Note 6) and
investment securities (see Note 5). Borrowings may include overnight advances as well as loans with a term of up to thirty years.
Advances totaling $19,500,000 were outstanding from the FHLB at December 31, 2019, bearing fixed interest rates ranging from 1.31%
to 3.17% and maturing between January 1, 2020 and November 24, 2023. Advances totaling $15,500,000 were outstanding from the FHLB
at December 31, 2018, bearing fixed interest rates ranging from 1.18% to 3.17% and maturing between April 30, 2019 and November
24, 2023. Amounts available under the borrowing arrangement with the FHLB at December 31, 2019 and 2018 totaled $143,406,000
and $107,262,000, respectively.
In
addition, the Company entered into a secured borrowing agreement with the FRB in 2008. The borrowing arrangement is secured by
pledging selected loans (see Note 6) and investment securities (see Note 5). There were no advances outstanding as of December
31, 2019 and 2018. Amounts available under the borrowing arrangement with the FRB at December 31, 2019 and 2018 totaled $8,642,000
and $8,340,000, respectively.
The
following table summarizes these borrowings (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
Short-term portion of borrowings
|
|
$
|
9,000
|
|
|
|
1.46
|
%
|
|
$
|
5,000
|
|
|
|
1.32
|
%
|
Long-term borrowings
|
|
|
10,500
|
|
|
|
2.48
|
%
|
|
|
10,500
|
|
|
|
2.02
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,500
|
|
|
|
2.01
|
%
|
|
$
|
15,500
|
|
|
|
1.79
|
%
|
Maturities
on these borrowings are as follows (dollars in thousands):
Year Ending
December 31,
|
|
|
|
2020
|
|
$
|
9,000
|
|
2021
|
|
|
2,000
|
|
2022
|
|
|
5,000
|
|
2023
|
|
|
3,500
|
|
Thereafter
|
|
|
—
|
|
|
|
|
|
|
|
|
$
|
19,500
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
The
provision for income taxes for the years ended December 31, 2019, 2018 and 2017 consisted of the following (dollars in thousands):
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
1,642
|
|
|
$
|
1,001
|
|
|
$
|
2,643
|
|
Deferred
|
|
|
(523
|
)
|
|
|
(229
|
)
|
|
|
(752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
1,119
|
|
|
$
|
772
|
|
|
$
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
733
|
|
|
$
|
508
|
|
|
$
|
1,241
|
|
Deferred
|
|
|
205
|
|
|
|
128
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
938
|
|
|
$
|
636
|
|
|
$
|
1,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
1,397
|
|
|
$
|
608
|
|
|
$
|
2,005
|
|
Deferred
|
|
|
1,222
|
|
|
|
25
|
|
|
|
1,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
2,619
|
|
|
$
|
633
|
|
|
$
|
3,252
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
11.
|
INCOME
TAXES (Continued)
|
Deferred
tax assets (liabilities) consisted of the following (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses
|
|
$
|
1,548
|
|
|
$
|
1,328
|
|
Unrealized losses on available-for-sale investment securities
|
|
|
—
|
|
|
|
788
|
|
Deferred compensation
|
|
|
1,899
|
|
|
|
1,695
|
|
Future state tax deduction
|
|
|
198
|
|
|
|
110
|
|
Premises and equipment
|
|
|
5
|
|
|
|
—
|
|
Lease liabilities
|
|
|
915
|
|
|
|
—
|
|
Other
|
|
|
72
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
4,637
|
|
|
|
3,968
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deferred loan costs
|
|
|
(202
|
)
|
|
|
(291
|
)
|
Unrealized gains on available-for-sale investment securities
|
|
|
(752
|
)
|
|
|
—
|
|
Federal Home Loan Bank stock dividends
|
|
|
(139
|
)
|
|
|
(139
|
)
|
Other real estate owned
|
|
|
(17
|
)
|
|
|
(50
|
)
|
Lease right of use asset
|
|
|
(850
|
)
|
|
|
—
|
|
Premises and equipment
|
|
|
—
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(1,960
|
)
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
2,677
|
|
|
$
|
3,464
|
|
The
Company and its subsidiaries file income tax returns in the United States and California jurisdictions. There are currently no
pending federal, state or local income tax examinations by tax. Furthermore, with few exceptions, the Company is no longer subject
to the examination by federal taxing authorities for the years ended before December 31, 2016 and by state and local taxing authorities
for years before December 31, 2015. There were no unrecognized tax benefits accrued by the Company as of December 31, 2019.
The Company does not expect to have a significant increase or decrease in unrecognized tax benefits in the next twelve months.
The
provision for income taxes differs from amounts computed by applying the statutory Federal income tax rate of 21% in 2019 and
2018 and 34% in 2017 to income before income taxes. The significant items comprising these differences consisted of the following:
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Federal income tax statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
34.0
|
%
|
State franchise tax, net of Federal tax effect
|
|
|
8.3
|
%
|
|
|
8.1
|
%
|
|
|
6.5
|
%
|
Effect of Federal rate reduction on deferred tax assets
|
|
|
—
|
|
|
|
—
|
|
|
|
19.0
|
%
|
Tax benefit of interest on loans to/investments in
states and political subdivisions
|
|
|
(2.9
|
)%
|
|
|
(3.3
|
)%
|
|
|
(6.1
|
)%
|
Tax-exempt income from life insurance policies
|
|
|
(1.0
|
)%
|
|
|
(1.0
|
)%
|
|
|
(1.7
|
)%
|
Equity compensation expense
|
|
|
—
|
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Other
|
|
|
0.2
|
%
|
|
|
(0.6
|
)%
|
|
|
(1.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
25.6
|
%
|
|
|
24.3
|
%
|
|
|
50.4
|
%
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
12.
|
COMMITMENTS,
CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
|
Leases
The
Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, using the alternative transition method whereby
comparative periods were not restated. No cumulative effect adjustment to the opening balance of retained earnings was required.
The Company also elected the package of practical expedients permitted under the transition guidance within the new standard,
which among other things allowed the Company to carry forward the historical lease classifications. Additionally, the Company
elected the hindsight practical expedient to determine the lease term for existing leases.
The
Company leases nine locations for administrative offices and branch locations. All leases were classified as operating leases.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized
on a straight-line basis over the lease term. The Company elected to use the practical expedient to not recognize short-term leases
on the consolidated balance sheet and instead account for them as executory contracts.
Certain
leases include options to renew, with renewal terms that can extend the lease term, typically for five years. One of the branch
facilities is leased from a current member of the Company’s Board of Directors (see Note 17). Lease assets and liabilities include
related options that are reasonably certain of being exercised, however, in the case of those leases that have renewal options,
the Company is not including those additional lease terms as the rates are undeterminable and it has been the Company’s
historical practice to renegotiate lease terms upon expiration of the original lease terms. The depreciable life of leased assets
is limited by the expected lease term.
Adoption
of this standard resulted in the Company recognizing a right of use asset and a corresponding lease liability of $3,570,000 on
January 1, 2019.
Supplemental
lease information at or for the year ended December 31, 2019 is as follows:
Balance Sheet
|
|
|
|
|
Operating lease asset classified as other assets
|
|
$
|
2,875,000
|
|
Operating lease liability classified as other liabilities
|
|
|
3,098,000
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
Operating lease cost classified as occupancy and equipment expense
|
|
$
|
756,000
|
|
Weighted average lease term, in years
|
|
|
5.63
|
|
Weighted average discount rate*
|
|
|
2.97
|
%
|
Operating cash flows
|
|
$
|
754,000
|
|
*The
discount rate was developed by using the fixed rate credit advance borrowing rate at the Federal Home Loan Bank of San Francisco
for a term correlating to the remaining life of each lease.
A
maturity analysis of the Company’s lease liabilities at December 31, 2019 was as follows:
|
|
Balance
|
|
January 1, 2020 to December 31, 2020
|
|
$
|
769,000
|
|
January 1, 2020 to December 31, 2021
|
|
|
739,000
|
|
January 1, 2021 to December 31, 2022
|
|
|
707,000
|
|
January 1, 2022 to December 31, 2023
|
|
|
282,000
|
|
January 1, 2023 to December 31, 2024
|
|
|
273,000
|
|
Thereafter
|
|
|
657,000
|
|
Total lease payments
|
|
|
3,427,000
|
|
Less:
Interest
|
|
|
(329,000
|
)
|
Present value of lease liabilities
|
|
$
|
3,098,000
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
12.
|
COMMITMENTS,
CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK (Continued)
|
Leases
(Continued)
Operating
lease cost included in occupancy, furniture and equipment expense totaled $756,000, $753,000 and $755,000 for the years ended
December 31, 2019, 2018 and 2017, respectively.
Financial
Instruments With Off-Balance-Sheet Risk
The
Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the
financing needs of its customers and to reduce its exposure to fluctuations in interest rates. These financial instruments consist
of commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized on the consolidated balance sheet.
The
Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in
making commitments and standby letters of credit as it does for loans included on the consolidated balance sheet. The following
financial instruments represent off-balance-sheet credit risk (dollars in thousands):
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
|
|
Revolving lines of credit secured by 1-4 family residences
|
|
$
|
41
|
|
|
$
|
47
|
|
Commercial real estate, construction and land
development commitments secured by real estate
|
|
|
22,508
|
|
|
|
21,185
|
|
Other unused commitments, principally commercial loans
|
|
|
17,775
|
|
|
|
13,044
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,324
|
|
|
$
|
34,276
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit
|
|
$
|
300
|
|
|
$
|
361
|
|
At
inception, real estate loan commitments are generally secured by property with a loan to value ratio of 55% to 75%. In addition,
the majority of the Company’s commitments have variable rates.
Commitments
to extend credit are agreements to lend to a client as long as there is no violation of any conditions established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of
the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. Each client’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies
but may include accounts receivable, inventory, equipment and deeds of trust on real estate and income-producing commercial properties.
Standby
letters of credit are conditional commitments issued to guarantee the performance or financial obligation of a client to a third
party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to clients.
Significant
Concentrations of Credit Risk
The
Company grants real estate mortgage, real estate construction, commercial, agricultural and consumer loans to clients throughout
Northern California.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
12.
|
COMMITMENTS, CONTINGENCIES
AND CONCENTRATIONS OF CREDIT RISK (Continued)
|
Significant
Concentrations of Credit Risk (Continued)
In
management’s judgment, a concentration exists in real estate-related loans which represented approximately 81% of the Company’s
loan portfolio at December 31, 2019 and 87% at December 31, 2018. A continued substantial decline in the economy in general, or
a continued decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on
collectability of these loans. However, personal and business income represents the primary source of repayment for a majority
of these loans.
Correspondent
Banking Agreements
The
Company maintains funds on deposit with other federally insured financial institutions under correspondent banking agreements.
The Company had $6,438,000 in uninsured deposits at December 31, 2019. The Company had $9,175,000 in uninsured deposits at December
31, 2018.
Contingencies
The
Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management,
the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or
results of operations of the Company.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Earnings
Per Share
A
reconciliation of the numerators and denominators of the basic and diluted earnings per share computations is as follows (dollars
and shares in thousands, except per share data):
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
Net
|
|
|
Shares
|
|
|
Per-Share
|
|
For the Year Ended
|
|
Income
|
|
|
Outstanding
|
|
|
Amount
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
5,500
|
|
|
|
5,847
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock-based compensation
|
|
|
—
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
5,500
|
|
|
|
5,869
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
4,900
|
|
|
|
5,871
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock-based compensation
|
|
|
—
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
4,900
|
|
|
|
5,909
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
3,198
|
|
|
|
6,349
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock-based compensation
|
|
|
—
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
3,198
|
|
|
|
6,427
|
|
|
$
|
0.50
|
|
No
shares were antidilutive for the year ended December 31, 2019 or for the year ended December 31, 2018. Stock options for 34,736
shares of common stock were not considered in computing diluted earnings per common share for the year ended December 31, 2017,
because they were antidilutive.
Stock
Based Compensation
On
March 17, 2010, the Board of Directors adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan was
approved by the Company’s shareholders on May 20, 2010. At December 31, 2019, the total number of authorized shares that
are available for issuance under the 2010 Plan is 1,269,229. The 2010 Plan provides for the following types of stock-based awards:
incentive stock options; nonqualified stock options; stock appreciation rights; restricted stock; restricted performance stock;
unrestricted Company stock; and performance units. The 2010 Plan, under which equity incentives may be granted to employees and
directors under incentive and nonstatutory agreements, requires that the option price may not be less than the fair value of the
stock at the date the option is granted. The option awards under the 2010 Plan expire on dates determined by the Board of Directors,
but not later than ten years from the date of award.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
13.
|
SHAREHOLDERS’ EQUITY
(Continued)
|
Stock
Based Compensation (Continued)
The
vesting period is generally five years; however, the vesting period can be modified at the discretion of the Company’s Board of
Directors. Outstanding option awards under the 2010 Plan are exercisable until their expiration. The 2010 Plan does not provide
for the settlement of awards in cash and new shares are issued upon exercise of an option.
There
were no options granted in 2017, 2018 or 2019.
A
summary of the outstanding and nonvested stock option activity for the year ended December 31, 2019 is as follows:
|
|
Outstanding
|
|
|
Nonvested
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
Fair Value
|
|
|
|
Shares
|
|
|
Per Share
|
|
|
Shares
|
|
|
Per Share
|
|
Balance, January 1, 2019
|
|
|
41,098
|
|
|
$
|
8.71
|
|
|
|
7,136
|
|
|
$
|
2.94
|
|
Options granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Options vested
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(4,913
|
)
|
|
$
|
3.01
|
|
Options exercised
|
|
|
(11,140
|
)
|
|
$
|
8.50
|
|
|
|
—
|
|
|
$
|
—
|
|
Options expired or canceled
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
29,958
|
|
|
$
|
8.79
|
|
|
|
2,223
|
|
|
$
|
3.24
|
|
A
summary of options as of December 31, 2019 is as follows:
Nonvested:
|
|
|
|
|
Weighted average exercise price of nonvested stock options
|
|
$
|
9.56
|
|
Aggregate intrinsic value of nonvested stock options
|
|
$
|
11,804
|
|
Weighted average remaining contractual term in years
of nonvested stock options
|
|
|
5.39
|
|
|
|
|
|
|
Vested:
|
|
|
|
|
Number of vested stock options
|
|
|
27,735
|
|
Number of options expected to vest
|
|
|
2,223
|
|
Weighted average exercise price per share
|
|
$
|
8.73
|
|
Aggregate intrinsic value
|
|
$
|
170,293
|
|
|
|
|
|
|
Weighted average remaining contractual term in years
|
|
|
4.32
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
13.
|
SHAREHOLDERS’ EQUITY
(Continued)
|
Stock
Based Compensation (Continued)
|
|
Number of
|
|
|
Weighted
|
|
|
Number of
|
|
|
|
Options
|
|
|
Average
|
|
|
Options
|
|
|
|
Outstanding
|
|
|
Remaining
|
|
|
Exercisable
|
|
|
|
December 31,
|
|
|
Contractual
|
|
|
December 31,
|
|
Range of Exercise Prices
|
|
2019
|
|
|
Life
|
|
|
2019
|
|
$7.07- $8.73
|
|
|
5,402
|
|
|
|
2.38 years
|
|
|
|
5,402
|
|
$8.74- $9.56
|
|
|
24,556
|
|
|
|
4.85 years
|
|
|
|
22,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,958
|
|
|
|
|
|
|
|
27,735
|
|
Restricted
Stock
Restricted
stock awards are grants of shares of the Company’s common stock that are subject to forfeiture until specific conditions or goals
are met. Conditions may be based on continuing employment or service and/or achieving specified performance goals. During the
period of restriction, Plan participants holding restricted share awards have voting and cash dividend rights. The restrictions
lapse in accordance with a schedule or with other conditions determined by the Board of Directors as reflected in each award agreement.
Upon the vesting of each restricted stock award, the Company issues the associated common shares from its inventory of authorized
common shares. All outstanding awards under the Plan immediately vest in the event of a change of control of the Company. The
shares associated with any awards that fail to vest become available for re-issuance under the Plan. The following is a summary
of stock-based compensation information as of or for the years ended December 31, 2019, 2018 and 2017:
There
were 33,968 shares of restricted stock awarded during 2019. Of the 33,968 restricted common shares, 11,076 will vest one year
from the date of the award, 18,394 will vest 33% per year from the date of the award, and 4,498 will vest 20% per year from the
date of the award. The weighted average contractual term over which the restricted stock will vest is 2.62 years. There were 22,514
shares of restricted stock awarded during 2018. Of the 22,514 restricted common shares, 8,535 will vest one year from the date
of the award, 11,599 will vest 33% per year from the date of the award, and 2,380 will vest 20% per year from the date of the
award. The weighted average contractual term over which the restricted stock will vest is 2.45 years.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
13.
|
SHAREHOLDERS’ EQUITY
(Continued)
|
Restricted
Stock (Continued)
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
Restricted Stock
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested at January 1, 2019
|
|
|
32,528
|
|
|
$
|
14.60
|
|
Awarded
|
|
|
33,968
|
|
|
$
|
13.67
|
|
Vested
|
|
|
(17,867
|
)
|
|
$
|
14.60
|
|
Cancelled
|
|
|
(4,658
|
)
|
|
$
|
13.91
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2019
|
|
|
43,971
|
|
|
$
|
13.95
|
|
The
shares awarded to employees and directors under the restricted stock agreements vest on applicable vesting dates only to the extent
the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will
forfeit all of the shares that have not vested on the date his or her employment or service is terminated. New shares are issued
upon vesting of the restricted common stock.