Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 5 The Company’s customers are primarily located in Stanislaus, San Joaquin, Tuolumne, Inyo, and Mono Counties. As of December 31, 2015, 78% 11% 6% 5% Loan totals were as follows: YEAR ENDED DECEMBER 31, (in thousands) 2016 2015 Commercial real estate: Commercial real estate- construction $ 23,378 $ 19,363 Commercial real estate- mortgages 389,495 363,644 Land 9,823 10,239 Farmland 56,159 29,801 Commercial and industrial 64,201 63,776 Consumer 767 774 Consumer residential 38,672 32,588 Agriculture 28,454 20,847 Total loans 610,949 541,032 Less: Deferred loan fees and costs, net (2,013 ) (3,282 ) Allowance for loan losses (7,832 ) (7,356 ) Net loans $ 601,104 $ 530,394 Loan Origination/Risk Management. Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily may may may may may Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily may third December 31, 2016, 40.9% With respect to loans to developers and builders that are secured by non-owner occupied properties that the Company may may may The Company originates consumer loans utilizing a computer-based credit scoring analysis to supplement the underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, trend and outlook reports are reviewed by management on a regular basis. Underwriting standards for home equity loans follow bank policy, which include, but are not limited to, a maximum loan-to-value percentage of 80%, 36% 42%, The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures. Purchased Credit-Impaired (“PCI”) Loans. 310 30 For acquired loans not considered credit-impaired, the difference between the contractual amounts due (principal amount) and the fair value is accounted for subsequently through accretion. We recognize discount accretion based on the acquired loan’s contractual cash flows using an effective interest rate method. The accretion is recognized through the net interest margin. The following table presents the fair value of purchased credit-impaired and other loans acquired from Mother Lode Bank as of the acquisition date: December 23, 2015 (in thousands) Purchased credit-impaired loans Other purchased loans Total Contractually required payments including interest $ 1,982 $ 44,007 $ 45,989 Less: nonaccretable difference (1,103 ) 0 (1,103 ) Cash flows expected to be collected (undiscounted) 879 44,007 44,886 Accretable yield (14 ) (2,041 ) (2,055 ) Fair value of purchased loans $ 865 $ 41,966 $ 42,831 The following table reflects the outstanding balance and related carrying value of PCI loans as of December 31, 2016 December 31, 2015: (in thousands) December 31, 2016 December 31, 2015 Unpaid principal balance Carrying value Unpaid principal balance Carrying value Commercial real estate: Commercial real estate- construction $ 0 $ 0 $ 0 $ 0 Commercial real estate- mortgages 0 0 196 118 Land 280 33 795 269 Farmland 0 0 0 0 Commercial and industrial 0 0 794 478 Consumer 0 0 0 0 Consumer residential 0 0 0 0 Agriculture 0 0 0 0 Total purchased credit-impaired loans $ 280 $ 33 $ 1,785 $ 865 For the PCI loans, the accretable yield represents the excess of the cash flows expected to be collected at acquisition over the fair value of the loans at the acquisition date, and is accreted into interest income over the estimated remaining life of the purchased credit-impaired loans using the effective yield method, provided that the timing and amount of future cash flows is reasonably estimable. The cash flows expected to be collected are updated each quarter based on current assumptions regarding default rates, loss severities, and other factors that are reflective of current market conditions. Probable decreases in expected cash flows after acquisition result in the recognition of impairment as a specific allowance for loan losses or a charge-off to the allowance. The nonaccretable difference represents the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows, and also reflects the estimated credit losses in the acquired loan portfolio at the acquisition date and can fluctuate due to changes in expected cash flows during the life of the PCI loans. Due to the timing of the Acquisition being near December 31, 2015, December 31, 2015. Non-Accrual and Past Due Loans. may may Year-end non-accrual loans, segregated by class of loans, were as follows: YEAR ENDED DECEMBER 31, (in thousands) 2016 2015 Commercial real estate: Commercial real estate- construction $ 0 $ 0 Commercial real estate- mortgages 0 0 Land 2,715 2,739 Farmland 0 51 Commercial and industrial 306 322 Consumer 0 0 Consumer residential 16 0 Agriculture 0 2,704 Total non-accrual loans $ 3,037 $ 5,816 (1) Excluded from the above non-accrual loan table are Purchased Credit Impaired loans acquired in the MLB Acquisition. Had non-accrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income of approximately $156,000 2016 $376,000 2015. The following table analyzes past due loans including the non-accrual loans in the above table, segregated by class of loans, as of December 31, 2016 December 31, 2016 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Total Past Due Current Purchased Credit Impaired Loans Total Greater Than 90 Days Past Due and Still Accruing Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 23,378 $ 0 23,378 $ 0 Commercial R.E. - mortgages 0 0 0 0 389,495 0 389,495 0 Land 0 0 2,715 2,715 7,075 33 9,823 0 Farmland 0 0 0 0 56,159 0 56,159 0 Commercial and industrial 0 0 302 302 63,899 0 64,201 0 Consumer 0 0 0 0 767 0 767 0 Consumer residential 0 0 16 16 38,656 0 38,672 0 Agriculture 0 0 0 0 28,454 0 28,454 0 Total $ 0 $ 0 $ 3,033 $ 3,033 $ 607,883 $ 33 610,949 $ 0 The following table analyzes past due loans including the non-accrual loans in the above table, segregated by class of loans, as of December 31, 2015 December 31, 2015 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Total Past Due Current Purchased Credit Impaired Loans Total Greater Than 90 Days Past Due and Still Accruing Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 19,363 $ 0 $ 19,363 $ 0 Commercial R.E. – mortgages 0 0 0 0 363,526 118 363,644 0 Land 0 0 2,261 2,261 7,709 269 10,239 0 Farmland 1,182 0 51 1,233 28,568 0 29,801 0 Commercial and industrial 352 0 312 664 62,634 478 63,776 0 Consumer 0 0 0 0 774 0 774 0 Consumer residential 0 0 0 0 32,588 0 32,588 0 Agriculture 0 2,704 0 2,704 18,143 0 20,847 0 Total $ 1,534 $ 2,704 $ 2,624 $ 6,862 $ 533,305 $ 865 $ 541,032 $ 0 Impaired Loans. Impaired loans by class as of December 31, 2016 2015 No 2016 2015. (in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance Average Recorded Investment December 31, 2016 Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Commercial R.E. - mortgages 0 0 0 0 0 0 Land 3,131 2,715 0 2,715 680 2,476 Farmland 0 0 0 0 0 0 Commercial and Industrial 353 4 302 306 0 313 Consumer 0 0 0 0 0 0 Consumer residential 16 16 0 16 0 0 Agriculture 0 0 0 0 0 0 Total $ 3,500 $ 2,735 $ 302 $ 3,037 $ 680 $ 2,789 (in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance Average Recorded Investment December 31, 2015 Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 0 0 Commercial R.E. - mortgages 0 0 0 0 0 301 Land 3,856 0 2,739 2,739 722 2,914 Farmland 63 51 0 51 0 61 Commercial and Industrial 357 322 0 322 0 611 Consumer 0 0 0 0 0 0 Consumer residential 0 0 0 0 0 0 Agriculture 2,704 2,704 0 2,704 0 7 Total $ 6,980 $ 3,077 $ 2,739 $ 5,816 $ 722 3,894 Troubled Debt Restructurings – At December 31, 2016, 6 $3,037,000. December 31, 2015, 5 $3,060,000. no December 31, 2016 2015 . We have allocated $680,000 $722,000 December 31, 2016 2015, During the year ended December 31, 2016, two two 2015. one During 2016 2015, two $308,000 $594,000, December 31, 2016 2015 not not no There was one $289,000 December 31, 2016, no 2015. A loan is considered to be in payment default once it is thirty Quality ratings (Risk Grades) are assigned to all commitments and stand-alone notes. Risk grades define the basic characteristics of commitments or stand-alone note in relation to their risk. All loans are graded using a system that maximizes the loan quality information contained in loan review grades, while ensuring that the system is compatible with the grades used by bank examiners. We grade loans using the following letter system: 1 2 3A 3B 3C 4 5 6 7 8 1. Exceptional Loan 1 -A high level of liquidity and whose debt-servicing capacity exceeds expected obligations by a substantial margin. -Where leverage is below average for the industry and earnings are consistent or growing without severe vulnerability to economic cycles. -Also included in this rating (but not mandatory unless one 110% 2. Quality Loan 2 -Unquestionable debt-servicing capacity to cover all obligations in the ordinary course of business from well-defined primary and secondary -Consistent strong earnings. -A solid equity base. 3A. Better than Acceptable Loan 3 three three 3 3A third 2 -Strong earnings with no loss in last three -Long term experienced management with depth and defined management succession. -The loan has no exceptions to policy. -Loan-to-value on real estate secured transactions is 10% 20% -Very liquid balance sheet that may -Little to no debt on balance sheet. 3B. Acceptable Loan 3B 3A 3C -Are those where the borrower has average financial strengths, a history of profitable operations and experienced management. -Are those where the borrower can be expected to handle normal credit needs in a satisfactory manner. 3C. Marginally Acceptable 3C 3Bs Requires collateral. A credit facility where the borrower has average financial strengths, but usually lacks reliable secondary 4W Watch Acceptable may in a Watch credit is short-term in nature. Loans in this category are usually accounts the Company would want to retain providing a positive turnaround can be expected within a reasonable time frame. Grade 4 5 Other Loans Especially Mentioned (Special Mention) may, -The lending officer may -Questions exist regarding the condition of and/or control over collateral. -Economic or market conditions may -A declining trend in the obligor’s operations or an imbalanced position in the balance sheet exists, but not to the point that repayment is jeopardized. 6 Substandard Loan 7 Doubtful Loan one may may may 40 65 25 40 65 A proper classification of such a credit would show 40 25 35 may 8. Loss may As of December 31, 2016 2015, 8 The following table presents weighted average risk grades of our loan portfolio. December 31, 2016 December 31, 2015 Weighted Average Risk Grade Weighted Average Risk Grade Commercial real estate: Commercial real estate - construction 3.07 3.72 Commercial real estate - mortgages 3.08 3.16 Land 4.39 4.58 Farmland 3.09 3.12 Commercial and industrial 2.70 3.57 Consumer 2.28 1.99 Consumer residential 3.03 3.01 Agriculture 3.08 3.39 Total gross loans 3.06 3.25 The following table presents risk grade totals by class of loans as of December 31, 2016 2015. 1 4 (in thousands) Commercial R.E. Construction Commercial R.E. Mortgages (1) Land (1) Farmland Commercial and Industrial (1) Consumer Consumer Residential Agriculture Total December 31, 2016 Pass $ 22,560 $ 388,365 $ 6,637 $ 56,159 $ 62,770 $ 738 $ 38,300 $ 28,454 $ 603,983 Special mention 818 1,063 - - 189 - - - 2,070 Substandard - 67 2,906 1,242 29 372 - 4,616 Doubtful - - 280 - - - - - 280 Total loans $ 23,378 $ 389,495 $ 9,823 $ 56,159 $ 64,201 $ 767 $ 38,672 $ 28,454 $ 610,949 December 31, 2015 Pass $ 18,312 $ 357,339 $ 6,358 $ 28,568 $ 55,957 $ 745 $ 32,532 $ 18,143 $ 517,954 Special mention - 4,389 110 - 6,153 - - - 10,652 Substandard 1,051 1,916 3,283 1,233 1,416 29 56 2,704 11,688 Doubtful - - 488 - 250 - - - 738 Total loans $ 19,363 $ 363,644 $ 10,239 $ 29,801 $ 63,776 $ 774 $ 32,588 $ 20,847 $ 541,032 (1) Included in the above table is Purchased Credit Impaired loans recorded at their fair value of $33,000 $865,000 December 31, 2016 2015, Allowance for Loan Losses. 310, 450, The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may The Company’s allowance for loan losses consists of three 310 450 450 The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor’s ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship manager level for all commercial loans. When a loan has a calculated grade of 5 Historical valuation allowances are calculated based on the historical loss experience of specific types of loans and the internal risk grade of such loans at the time they were charged-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are periodically updated based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool. The Company’s pools of similar loans include similarly risk-graded groups of commercial and industrial loans, commercial real estate loans, consumer real estate loans and consumer and other loans. General valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Company’s lending management and staff; (ii) the effectiveness of the Company’s loan policies, procedures and internal controls; (iii) changes in asset quality; (iv) changes in loan portfolio volume; (v) the composition and concentrations of credit; (vi) the impact of competition on loan structuring and pricing; (vii) the effectiveness of the internal loan review function; (viii) the impact of environmental risks on portfolio risks; and (ix) the impact of rising interest rates on portfolio risk. Management evaluates the degree of risk that each one Included in the general valuation allowances are allocations for groups of similar loans with risk characteristics that exceed certain concentration limits established by management. Concentration risk limits have been established, among other things, for certain industry concentrations, large balance and highly leveraged credit relationships that exceed specified risk grades, and loans originated with policy exceptions that exceed specified risk grades. Loans identified as losses by management, internal loan review and/or bank examiners are charged-off. Furthermore, consumer loan accounts are charged-off automatically based on regulatory requirements. The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2016 2015. one Allowance for Loan Losses For the Year Ended December 31, 2016 2015 (in thousands) Commercial Commercial Consumer Year Ended December 31, 2016 Real Estate and Industrial Consumer Residential Agriculture Unallocated Total Beginning balance $ 5,920 $ 627 $ 38 $ 426 $ 309 $ 36 $ 7,356 Charge-offs 0 0 (18 ) 0 0 0 (18 ) Recoveries 4 0 5 1 0 0 10 (Reversal of) provision for loan losses 261 70 26 (102 ) 195 34 484 Ending balance $ 6,185 $ 697 $ 51 $ 325 $ 504 $ 70 $ 7,832 Year Ended December 31, 2015 Beginning balance $ 5,963 $ 720 $ 42 $ 388 $ 286 $ 135 $ 7,534 Charge-offs 0 (32 ) (30 ) 0 0 0 (62 ) Recoveries 5 0 4 0 0 0 9 (Reversal of) provision for loan losses (48 ) (61 ) 22 38 23 -99 (125 ) Ending balance $ 5,920 $ 627 $ 38 $ 426 $ 309 $ 36 $ 7,356 The following table details the allowance for loan losses and ending gross loan balances as of December 31, 2016 2015, (in thousands) Commercial Commercial Consumer December 31, 2016 Real Estate and Industrial Consumer Residential Agriculture Unallocated Total Allowance for loan losses for loans: Individually evaluated for impairment $ 680 $ 0 $ 0 $ 0 $ 0 $ 680 Collectively evaluated for impairment 5,505 697 51 325 504 70 7,152 $ 6,185 $ 697 $ 51 $ 325 $ 504 $ 70 $ 7,832 Ending gross loan balances: Individually evaluated for impairment $ 2,715 $ 306 $ 0 $ 16 $ 0 $ 0 $ 3,037 Individually evaluated purchased credit impaired loans 33 0 0 0 0 0 33 Collectively evaluated for impairment 476,107 63,895 767 38,656 28,454 0 607,879 $ 478,855 $ 64,201 $ 767 $ 38,672 $ 28,454 $ 0 $ 610,949 December 31, 2015 Allowance for loan losses for loans: Individually evaluated for impairment $ 722 $ 0 $ 0 $ 0 $ 0 $ 722 Collectively evaluated for impairment 5,198 627 38 426 309 36 6,634 $ 5,920 $ 627 $ 38 $ 426 $ 309 $ 36 $ 7,356 Ending gross loans balances: Individually evaluated for impairment $ 2,790 $ 322 $ 0 $ 0 $ 2,704 $ 0 $ 5,816 Individually evaluated purchased credit impaired loans 387 478 0 0 0 0 865 Collectively evaluated for impairment 419,870 62,976 774 32,588 18,143 0 534,351 $ 423,047 $ 63,776 $ 774 $ 32,588 $ 20,847 $ 0 $ 541,032 Changes in the allowance off-balance-sheet commitments were as follows: (in thousands) YEARS ENDED DECEMBER 31, 201 6 201 5 Balance, beginning of year $ 238 $ 218 Provision charged to operations for off balance sheet 46 7 Acquired balance from Mother Lode Bank (fair value) 0 13 Balance, end of year $ 284 $ 238 The method for calculating the reserve for off-balance-sheet loan commitments is based on a reserve percentage which is less than other outstanding loan types because they are at a lower risk level. This reserve percentage, based on many factors including historical losses and existing economic conditions, is evaluated by management periodically and is applied to the total undisbursed loan commitment balance to calculate the reserve for off-balance-sheet commitments. Reserves for off-balance-sheet commitments are recorded in interest payable and other liabilities on the consolidated balance sheets. At December 31, 2016 2015, $610,949,000 $541,032,000, |