Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 4 – LOANS Our customers are primarily located in Stanislaus, San Joaquin, Tuolumne, Inyo, and Mono Counties. As of June 30, 2017, 79% 10% 7% 4% (in thousands) June 30, 2017 December 31, 2016 Commercial real estate: Commercial real estate- construction $ 15,804 $ 23,378 Commercial real estate- mortgages 413,750 389,495 Land 10,016 9,823 Farmland 55,452 56,159 Commercial and industrial 63,854 64,201 Consumer 684 767 Consumer residential 39,301 38,672 Agriculture 24,948 28,454 Total loans 623,809 610,949 Less: Deferred loan fees and costs, net (1,873 ) (2,013 ) Allowance for loan losses (7,854 ) (7,832 ) Net loans $ 614,082 $ 601,104 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, our 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 on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not 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 as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may third June 30, 2017 December 31, 2016, 42.4% 40.9%, With respect to loans to developers and builders that are secured by non-owner occupied properties that the Company may may may Agricultural production, real estate and development lending is susceptible to credit risks including adverse weather conditions, pest and disease, as well as market price fluctuations and foreign competition. Agricultural loan underwriting standards are maintained by following Company policies and procedures in place to minimize risk in this lending segment. These standards consist of limiting credit to experienced farmers who have demonstrated farm management capabilities, requiring cash flow projections displaying margins sufficient for repayment from normal farm operations along with equity injected as required by policy, as well as providing adequate secondary repayment and sponsorship including satisfactory collateral support. Credit enhancement obtained through government guarantee programs may The Company originates consumer loans utilizing common underwriting criteria specified in policy. 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 1 4 not 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 Bank’s policies and procedures. Non-Accrual and Past Due Loans. not may may not Non-accrual loans, segregated by class of loans, were as follows: (in thousands) June 30, 2017 December 31, 2016 Commercial real estate: Commercial real estate- construction $ 0 $ 0 Commercial real estate- mortgages 0 0 Land 1,574 2,715 Farmland 0 0 Commercial and industrial 304 306 Consumer 0 0 Consumer residential 154 16 Agriculture 0 0 Total non-accrual loans $ 2,032 $ 3,037 Excluded from the above non-accrual loan table is the $33,000 one Had non-accrual loans performed in accordance with their original contract terms, we would have recognized additional interest income of approximately $31,000 $68,000 three six June 30, 2017, $38,000 $79,000 2016. The following table analyzes past due loans including the non-accrual loans in the above table, segregated by class of loans, as of June 30, 2017 ( June 30, 2017 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 $ 15,804 $ 0 $ 15,804 $ 0 Commercial R.E. - mortgages 0 0 0 0 413,750 0 413,750 0 Land 0 0 1,574 1,574 8,409 33 10,016 0 Farmland 0 0 0 0 55,452 0 55,452 0 Commercial and industrial 0 0 302 302 63,552 0 63,854 0 Consumer 0 0 0 0 684 0 684 0 Consumer residential 0 0 138 138 39,163 0 39,301 0 Agriculture 0 0 0 0 24,948 0 24,948 0 Total $ 0 $ 0 $ 2,014 $ 2,014 $ 621,762 $ 33 $ 623,809 $ 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, 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 Impaired Loans. no three six June 30, 2017 2016. Impaired loans as of June 30, 2017 December 31, 2016 not (in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance June 30, 2017 Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 0 Commercial R.E. - mortgages 0 0 0 0 0 Land 1,891 0 1,574 1,574 680 Farmland 0 0 0 0 0 Commercial and Industrial 351 304 0 304 0 Consumer 0 0 0 0 0 Consumer residential 154 154 0 154 0 Agriculture 0 0 0 0 0 Total $ 2,396 $ 458 $ 1,574 $ 2,032 $ 680 (in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance December 31, 2016 Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 $ 0 Commercial R.E. - mortgages 0 0 0 0 0 Land 3,131 2,715 0 2,715 680 Farmland 0 0 0 0 0 Commercial and Industrial 353 4 302 306 0 Consumer 0 0 0 0 0 Consumer residential 16 16 0 16 0 Agriculture 0 0 0 0 0 Total $ 3,500 $ 2,735 $ 302 $ 3,037 $ 680 Average recorded investment in impaired loans outstanding as of June 30, 2017 2016 Average Recorded Investment for the (in thousands) Three Months Ended Three Months Ended Six Months Ended Six Months Ended June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016 Commercial real estate: Commercial R.E. - construction $ 0 $ 0 $ 0 $ 0 Commercial R.E. - mortgages 0 0 0 0 Land 1,850 2,498 2,273 2,396 Farmland 0 0 0 0 Commercial and Industrial 304 318 305 316 Consumer 0 0 0 0 Consumer residential 154 0 107 0 Agriculture 0 0 0 0 Total $ 2,308 $ 2,816 $ 2,685 $ 2,712 Troubled Debt Restructurings – At June 30, 2017, 5 $1,894,000. December 31, 2016, 6 $3,037,000. June 30, 2017 December 31, 2016 no We have allocated $ 680,000 June 30, 2017 December 31, 2016. The modification of the terms of such loans typically includes one During the three six June 30, 2017, no one $473,000 six March 31, 2016. not no There were no twelve three six June 30, 2017 2016. ninety Loan Risk Grades – 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 one 110% 2. Quality Loan No 2 -Unquestionable debt-servicing capacity to cover all obligations in the ordinary course of business from well-defined primary and secondary sources. -Consistent strong earnings. -A solid equity base. 3A. Better than Acceptable Loan 3 three three 3 3A third not 2 -Strong earnings with no three -Long term experienced management with depth and defined management succession. -The loan has no -Loan-to-value on real estate secured transactions is 10% 20% -Very liquid balance sheet that may -Little to no 3B. Acceptable Loan 3B 3A 3C not -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 sources of repayment other than the subject collateral. Other common characteristics can include some or all of the following: minimal background experience of management, lacking continuity of management, a start-up operation, erratic historical profitability (acceptable reasons-well identified), lack of or marginal sponsorship of guarantor, and government guaranteed loans. 4W Watch Acceptable may 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 6 Substandard Loan not not 7 Doubtful Loan one may may may not 40 65 25 40 65 A proper classification of such a credit would show 40 25 35 may 8 Loss not not no not may not As of June 30, 2017 December 31, 2016, no 8 The following table presents weighted average risk grades of our loan portfolio: June 30, 2017 December 31, 2016 Weighted Average Risk Grade Weighted Average Risk Grade Commercial real estate: Commercial real estate - construction 3.00 3.07 Commercial real estate - mortgages 3.07 3.08 Land 4.01 4.39 Farmland 3.09 3.09 Commercial and industrial 3.60 2.70 Consumer 2.23 2.28 Consumer residential 3.04 3.03 Agriculture 3.19 3.08 Total gross loans 3.14 3.06 The following table presents risk grade totals by class of loans as of June 30, 2017 December 31, 2016. 1 4 (in thousands) Commercial R.E. Construction Commercial R.E. Mortgages Land (1) Farmland Commercial and Industrial Consumer Consumer Residential Agriculture Total June 30, 2017 Pass $ 15,804 $ 412,779 $ 7,978 $ 55,452 $ 58,562 $ 651 $ 38,785 $ 24,948 $ 614,959 Special mention - 260 - - 4,087 - - - 4,347 Substandard - 711 1,758 - 1,205 33 516 - 4,223 Doubtful - - 280 - - - - - 280 Total loans $ 15,804 $ 413,750 $ 10,016 $ 55,452 $ 63,854 $ 684 $ 39,301 $ 24,948 $ 623,809 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 ( 1 Included in the above table is Purchased Credit Impaired loans recorded at their fair value of $ 33,000 June 30, 2017 December 31, 2016, which were acquired in the MLB Acquisition. Allowance for Loan Losses. 310, 450, not 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 not 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 Bank and the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank’s lending management and staff; (ii) the effectiveness of the Bank’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 three six June 30, 2017 2016. one not Allowance for Loan Losses For the Three and Six Months Ended June 30, 2017 and 2016 (in thousands) Commercial Commercial Consumer Three Months Ended June 30, 2017 Real Estate and Industrial Consumer Residential Agriculture Unallocated Total Beginning balance $ 6,266 $ 735 $ 37 $ 310 $ 447 $ 32 $ 7,827 Charge-offs 0 0 (10 ) 0 0 0 (10 ) Recoveries 0 0 1 1 0 0 2 (Reversal of) provision for loan losses (19 ) 11 2 10 6 25 35 Ending balance $ 6,247 $ 746 $ 30 $ 321 $ 453 $ 57 $ 7,854 Six Months Ended June 30, 2017 Beginning balance $ 6,185 $ 697 $ 51 $ 325 $ 504 $ 70 $ 7,832 Charge-offs 0 0 (17 ) 0 0 0 (17 ) Recoveries 0 0 3 1 0 0 4 (Reversal of) provision for loan losses 62 49 (7 ) (5 ) (51 ) (13 ) 35 Ending balance $ 6,247 $ 746 $ 30 $ 321 $ 453 $ 57 $ 7,854 (in thousands) Commercial Commercial Consumer Three Months Ended June 30, 2016 Real Estate and Industrial Consumer Residential Agriculture Unallocated Total Beginning balance $ 5,998 $ 720 $ 44 $ 398 $ 302 $ 95 $ 7,557 Charge-offs 0 0 (4 ) 0 0 0 (4 ) Recoveries 0 0 2 0 0 0 2 (Reversal of) provision for loan losses 135 (49 ) 13 (11 ) 129 (92 ) 125 Ending balance $ 6,133 $ 671 $ 55 $ 387 $ 431 $ 3 $ 7,680 Six Months Ended June 30, 2016 Beginning balance $ 5,920 $ 627 $ 38 $ 426 $ 309 $ 36 $ 7,356 Charge-offs 0 0 (7 ) 0 0 0 (7 ) Recoveries 3 0 3 0 0 0 6 (Reversal of) provision for loan losses 210 44 21 (39 ) 122 (33 ) 325 Ending balance $ 6,133 $ 671 $ 55 $ 387 $ 431 $ 3 $ 7,680 The following table details the allowance for loan losses and ending gross loan balances as of June 30, 2017, December 31, 2016 March 31, 2016 (in thousands) Commercial Commercial Consumer June 30, 2017 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 5,567 746 30 321 453 57 7,174 $ 6,247 $ 746 $ 30 $ 321 $ 453 $ 57 $ 7,854 Ending gross loan balances: Individually evaluated for impairment $ 1,574 $ 304 $ 0 $ 154 $ 0 $ 0 $ 2,032 Individually evaluated purchased credit impaired loans 33 0 0 0 0 0 33 Collectively evaluated for impairment 493,415 63,550 684 39,147 24,948 0 621,744 $ 495,022 $ 63,854 $ 684 $ 39,301 $ 24,948 $ 0 $ 623,809 December 31, 2016 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 loans 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 June 30, 2016 Allowance for loan losses for loans: Individually evaluated for impairment $ 680 $ 0 $ 0 $ 0 $ 0 $ 680 Collectively evaluated for impairment 5,453 671 55 387 431 3 7,000 $ 6,133 $ 671 $ 55 $ 387 $ 431 $ 3 $ 7,680 Ending gross loans balances: Individually evaluated for impairment $ 2,340 $ 314 $ 0 $ 0 $ 0 $ 0 $ 2,654 Individually evaluated purchased credit impaired loans 286 529 0 0 0 0 815 Collectively evaluated for impairment 450,964 64,516 910 35,275 24,640 0 576,305 $ 453,590 $ 65,359 $ 910 $ 35,275 $ 24,640 $ 0 $ 579,774 Changes in the reserve for off-balance-sheet commitments were as follows: THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2017 2016 2017 2016 Balance, beginning of period $ 289 $ 264 $ 284 $ 238 Provision (Recovery) to Operations for Off Balance Sheet Commitments 13 (7 ) 18 19 Balance, end of period $ 302 $ 257 $ 302 $ 257 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 condensed consolidated balance sheets. At June 30, 2017 December 31, 2016, $623,809,000 $610,949,000, |