NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
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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.
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2
.
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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 2018. 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
Interest-bearing deposits
in banks mature within one year and are carried at cost.
Investment
Securities
Investments
are classified into the following categories:
|
·
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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, 2018 and 2017.
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 equity securities, the entire amount of impairment 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)
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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, 2018 and 2017.
SBA
and Farm Service Agency loans with unpaid balances of $109,000 and $138,000 were being serviced for others as of December 31,
2018 and 2017, respectively. The Company also serviced loans that are participated with other financial institutions totaling
$7,815,000 and $7,941,000 as of December 31, 2018 and 2017, 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, 2018
and 2017.
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, 2018, 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% chance. 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, 2018 and 2017 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 2018, 2017 or 2016.
Stock-Based
Compensation
At
December 31, 2018, the Company had two stock-based compensation plans, which are described more fully in Note 13. Compensation
expense recorded in 2018, 2017, and 2016 totaled $227,000, $273,000 and $331,000, 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 following table. 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 chief decision-makers monitor 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
May 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board
(the “IASB”) jointly issued a comprehensive new revenue recognition standard that supersedes nearly all existing
revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous
revenue recognition guidance in GAAP consisted of broad revenue recognition concepts together with numerous revenue
requirements for particular industries or transactions, which sometimes resulted in different accounting for economically
similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult
to apply to complex transactions. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for
recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that: (1) removes inconsistencies and
weaknesses in revenue requirements; (2) provides a more robust framework for addressing revenue issues; (3) improves
comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) provides
more useful information to users of financial statements through improved disclosure requirements; and (5) simplifies the
preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those
objectives, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09,
“
Revenue from
Contracts with Customers.
” The standard’s core principle is that a company will recognize revenue when
it transfers promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more
judgment and make more estimates than under current guidance. These may include identifying performance obligations in the
contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction
price to each separate performance obligation. The standard was initially effective for public entities for interim and
annual reporting periods beginning after December 15, 2016; early adoption was not permitted. However, in August 2015, the
FASB issued ASU No. 2015-14, “
Revenue from Contracts with Customers - Deferral of the Effective Date
”
which deferred the effective date by one year (i.e., interim and annual reporting periods beginning after December 15, 2017).
For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied
to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current
period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the
date of initial application. In addition, the FASB issued targeted updates to clarify specific implementation issues of ASU
2014- 09. These updates include ASU No. 2016-08,
“
Principal versus Agent Considerations (Reporting Revenue
Gross versus Net),
” ASU No. 2016-10,
“
Identifying Performance Obligations and Licensing,
”
ASU No. 2016-12, “
Narrow-Scope Improvements and Practical Expedients,
” and ASU No. 2016-20
“
Technical
Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.
” The Company has assessed its
revenue streams and reviewed its contracts that could potentially be affected by the ASU including deposit related fees,
interchange fees, and merchant income, to determine the impact the new guidance has on the Company’s financial
position, results of operations or cash flows. The Company adopted ASU No. 2014-09 on January 1, 2018. The effects
of adopting ASU No. 2014-09 did not change the amounts of revenue recorded for the Company’s in-scope revenue
streams.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
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2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
In
January 2016, the FASB issued ASU No. 2016-01, “
Recognition and Measurement of Financial Assets and Financial Liabilities.
”
This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments
by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity
method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair
value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable
fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without
readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates
that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose
the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate
the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value
that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public
business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
(6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of
a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability
at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)
on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the
need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s
other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15,
2017. Early application was permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above.
Early adoption of the other provisions mentioned above were not permitted. The Company adopted ASU No. 2016-01 on January 1, 2018.
The effects of adopting ASU No. 2016-01 resulted in the Company using the exit price notion for valuing financial instruments
in 2018, but did not have a material impact on the Company’s financial position, results of operations or cash flows.
In
February 2016, the FASB issued ASU No. 2016-02, “
Leases.
”
Under the new guidance, lessees will be
required to recognize the following for all leases (with the exception of short-term leases): 1) a lease liability, which is
the present value of a lessee’s obligation to make lease payments, and 2) a right-of-use asset, which is an asset that
represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessor accounting
under the new guidance remains largely unchanged as it is substantially equivalent to existing guidance for sales-type
leases, direct financing leases, and operating leases. Leveraged leases have been eliminated, although lessors can continue
to account for existing leveraged leases using the current accounting guidance. Other limited changes were made to align
lessor accounting with the lessee accounting model and the new revenue recognition standard
.
All entities will
classify leases to determine how to recognize lease-related revenue and expense. Quantitative and qualitative disclosures
will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount,
timing, and uncertainty of cash flows arising from leases. The intention is to require enough information to supplement the
amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing
activities. ASU No. 2016-02 was effective for interim and annual reporting periods beginning after December 15, 2018; early
adoption was permitted. All entities are required to use a modified retrospective approach for leases that exist or are
entered into after the beginning of the earliest comparative period in the financial statements. They have the option to use
certain relief; full retrospective application is prohibited. Based on evaluation of the Company’s current lease
obligations, the Company has determined that the provisions of ASU No. 2016-02 resulted in an increase in assets to recognize
the present value of the lease obligations with a corresponding increase in liabilities. The Company currently leases nine of
its office leases under operating leases. The Company adopted ASU No. 2016-02 on January 1, 2019. The Company’s present
value of future lease payments as of January 1, 2019 is $3,570,000, to be recorded as a right-of-use asset with an
offsetting liability. The effects of adopting ASU No. 2016-02 did not have a material impact on the Company’s financial
position, results of operations or cash flows.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
In
June 2016, 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 improvements
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 is effective for interim and annual reporting periods beginning after December 15,
2019; early adoption is 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, 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 intends to begin processing information with the new CECL specific software during the first part of 2019
and to disclose potential impact of this modeling once it becomes available.
Revenue
From Contracts With Customers
As
discussed above, on January 1, 2018 the Company adopted ASC Topic 606, as revised under ASU’s 2014-09, 2014-08 and 2016-20,
using the modified retrospective method as of January 1, 2018. Other income disclosures for periods beginning after January
1, 2018 are presented under revised ASC Topic 606, which have not materially changed from the prior year amounts. Consistent
with Topic 606, noninterest income covered by this guidance is recognized as services are transferred to our customers in an amount
that reflects the consideration we expect to be entitled to in exchange for those services.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Deposit
Service Charges — Deposit service charges primarily consist of fees earned from our treasury management services.
These services include bill pay, ACH, positive pay, lockbox, remote deposit capture, online banking and cash vault, among others.
Customers are given the option to pay for these services in cash or by offsetting the fees for these services against an earnings
credit that is given for maintaining noninterest-bearing deposits. The Company’s performance obligations on its treasury
services are satisfied either at the time of the transaction or over the course of a month. Most customers pay deposit charges
on a monthly basis.
Merchant
and Bankcard Fees — The Company earns various types of network transaction fees from third party payment network providers
which consist of (i) interchange fees earned from the payment network as a debit card issuer and (ii) ongoing merchant fees earned
by the Company for referring our clients to the payment processing provider which allows our clients to accept credit cards as
a form of payment. The Company is an issuer of debit cards only as it relates to Merchant and Bankcard fees. Interchange
income, which is settled on a daily basis, is recognized as settlement occurs. Chargebacks have not historically been, nor are
they expected to be significant to the overall fee revenue and are recognized upon occurrence. Referral and merchant fees
are recognized when the transaction occurs.
|
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, 2018 and December 31, 2017. 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 the entry price notion for valuing financial
instruments in 2017. 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, 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
|
|
|
|
Carrying
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
December 31, 2017
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
38,467
|
|
|
$
|
38,467
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,467
|
|
Interest-bearing deposits in banks
|
|
|
1,746
|
|
|
|
—
|
|
|
|
1,750
|
|
|
|
—
|
|
|
|
1,750
|
|
Available-for-sale securities
|
|
|
262,322
|
|
|
|
66
|
|
|
|
262,256
|
|
|
|
—
|
|
|
|
262,322
|
|
Held-to-maturity securities
|
|
|
378
|
|
|
|
—
|
|
|
|
404
|
|
|
|
—
|
|
|
|
404
|
|
FHLB stock
|
|
|
3,932
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans and leases, net
|
|
|
308,713
|
|
|
|
—
|
|
|
|
—
|
|
|
|
317,900
|
|
|
|
317,900
|
|
Accrued interest receivable
|
|
|
1,956
|
|
|
|
—
|
|
|
|
1,124
|
|
|
|
832
|
|
|
|
1,956
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
215,528
|
|
|
$
|
215,528
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215,528
|
|
Savings
|
|
|
66,130
|
|
|
|
66,130
|
|
|
|
—
|
|
|
|
—
|
|
|
|
66,130
|
|
Money market
|
|
|
130,032
|
|
|
|
130,032
|
|
|
|
—
|
|
|
|
—
|
|
|
|
130,032
|
|
NOW accounts
|
|
|
64,709
|
|
|
|
64,709
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64,709
|
|
Time Deposits
|
|
|
79,681
|
|
|
|
—
|
|
|
|
79,614
|
|
|
|
—
|
|
|
|
79,614
|
|
Short-term borrowings
|
|
|
3,500
|
|
|
|
3,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,500
|
|
Long-term borrowings
|
|
|
12,000
|
|
|
|
—
|
|
|
|
11,978
|
|
|
|
—
|
|
|
|
11,978
|
|
Accrued interest payable
|
|
|
65
|
|
|
|
—
|
|
|
|
65
|
|
|
|
—
|
|
|
|
65
|
|
Because no 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)
|
The
following methods and assumptions were used by the Company to estimate the fair values of its financial instruments at December
31, 2017:
Cash
and due from banks
: The carrying amounts of cash and short-term instruments, including Federal funds sold, approximate fair
values and are classified as Level 1.
Interest-bearing
deposits in banks
: The fair values of interest-bearing deposits in banks are estimated by discounting their future cash flows
using rates at each reporting date for instruments with similar remaining maturities offered by comparable financial institutions
and are classified as Level 2.
Investment
securities
: For investment securities, fair values are based on quoted market prices, where available, and are classified
as Level 1. If quoted market prices are not available, fair values are estimated using quoted market prices for similar securities
and indications of value provided by brokers and are classified as Level 2.
FHLB
stock
: FHLB stock is not publically traded, as such, it is not practicable to determine the fair value of FHLB stock due to
restrictions placed on its transferability.
Loans
and leases
: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that
reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level
3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar credit quality also resulting in a Level 3 classification.
Impaired loans are valued at the lower of cost or fair value. The methods utilized to estimate the fair value of loans do not
necessarily represent an exit price.
Deposits
:
The fair values disclosed for demand deposits (e.g. interest and non-interest checking, savings, and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amount) resulting
in a Level 1 classification. For time deposits, the fair values for fixed rate certificates of deposit are estimated using a discounted
cash flow methodology that applies market interest rates to a schedule of aggregated expected monthly maturities on time deposits
resulting in a Level 2 classification.
Short-term
and long-term borrowings
: The fair value of short-term borrowings is estimated to be the carrying amount and is classified
as Level 1. The fair value of long-term borrowings is estimated using a discounted cash flow analysis using interest rates currently
available for similar debt instruments and are classified as Level 2.
Accrued
interest receivable and payable
: The carrying amount of accrued interest receivable and accrued interest payable approximates
fair value resulting in a Level 2 or 3 classification consistent with the asset or liability with which it is associated.
Off-balance
sheet instruments
: Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged
to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit
standing. The fair value of commitments was not material at December 31, 2017. They are excluded from the following tables.
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)
|
|
|
|
|
Quoted
Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total
Gains
|
|
December
31, 2018
|
|
Fair
Value
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
(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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total
Gains
|
|
December
31, 2018
|
|
Fair
Value
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
(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
|
)
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR VALUE MEASUREMENTS (
Continued)
|
(Dollars
in thousands)
|
|
|
|
|
Quoted
Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total
Gains
|
|
December
31, 2017
|
|
Fair
Value
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
232,869
|
|
|
$
|
—
|
|
|
$
|
232,869
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate
Debt Securities
|
|
|
6,626
|
|
|
|
—
|
|
|
|
6,626
|
|
|
|
—
|
|
|
|
—
|
|
Obligations
of states and political subdivisions
|
|
|
22,715
|
|
|
|
—
|
|
|
|
22,715
|
|
|
|
—
|
|
|
|
—
|
|
Corporate
stock
|
|
|
112
|
|
|
|
66
|
|
|
|
46
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recurring
|
|
$
|
262,322
|
|
|
$
|
66
|
|
|
$
|
262,256
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total Gains
|
|
December
31, 2017
|
|
Fair
Value
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and liabilities measured on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,598
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,598
|
|
|
$
|
(1,073
|
)
|
Real
estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
178
|
|
|
|
—
|
|
|
|
—
|
|
|
|
178
|
|
|
|
—
|
|
Residential
|
|
|
329
|
|
|
|
—
|
|
|
|
—
|
|
|
|
329
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
961
|
|
|
|
—
|
|
|
|
—
|
|
|
|
961
|
|
|
|
—
|
|
Total
nonrecurring
|
|
$
|
3,066
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,066
|
|
|
$
|
(1,073
|
)
|
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, 2018 or December 31, 2017.
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.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
3.
|
FAIR VALUE MEASUREMENTS (
Continued)
|
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%.
Other
real estate owned
– 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 real estate 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 OREO is the
sales comparison approach less selling costs ranging from 8% to 10%.
|
4.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS
|
At
December 31, 2018 and 2017, 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, 2018, 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, 2018, 2017 and 2016.
At
December 31, 2018 and 2017, 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, 2018 and 2017 consisted of the following (dollars
in thousands):
Available-for-Sale
|
|
2018
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
233,956
|
|
|
$
|
1,184
|
|
|
$
|
(2,271
|
)
|
|
$
|
232,869
|
|
Obligations
of states and political subdivisions
|
|
|
22,281
|
|
|
|
528
|
|
|
|
(94
|
)
|
|
|
22,715
|
|
Corporate
Debt Securities
|
|
|
6,490
|
|
|
|
160
|
|
|
|
(24
|
)
|
|
|
6,626
|
|
Equity
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
stock
|
|
|
51
|
|
|
|
61
|
|
|
|
—
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
262,778
|
|
|
$
|
1,933
|
|
|
$
|
(2,389
|
)
|
|
$
|
262,322
|
|
U.S.
Government Agencies and U.S. Government-sponsored Agencies consist predominately of residential mortgage-backed securities. Net
unrealized losses on available-for-sale investment securities totaling $2,664,000 were recorded, net of $788,000 in tax liabilities,
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 $27,003,000 and
$31,000, respectively. There were no transfers of available-for-sale investment securities during the year ended December 31,
2018.
Net
unrealized gains on available-for-sale investment securities totaling $456,000 were recorded, net of $135,000 in tax liabilities,
as accumulated other comprehensive income within shareholders’ equity at December 31, 2017. 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. There were no transfers of available-for-sale investment securities during the year ended December
31, 2017.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
5.
|
INVESTMENT SECURITIES
(Continued)
|
Proceeds
and gross realized gains from the sale, impairment and call of available-for-sale investment securities for the year ended December
31, 2016 totaled $14,205,000 and $314,000, respectively.
Held-to-Maturity
|
|
2018
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
292
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies and Sponsored Agencies
|
|
$
|
378
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
404
|
|
There
were no sales or transfers of held-to-maturity investment securities for the years ended December 31, 2018, 2017 and 2016.
The
amortized cost and estimated fair value of investment securities at December 31, 2018 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
|
|
$
|
5,234
|
|
|
$
|
5,231
|
|
|
|
|
|
|
|
|
|
After one year through five years
|
|
|
3,595
|
|
|
|
3,575
|
|
|
|
|
|
|
|
|
|
After five years through ten years
|
|
|
13,923
|
|
|
|
13,905
|
|
|
|
|
|
|
|
|
|
After ten years
|
|
|
3,160
|
|
|
|
3,173
|
|
|
|
|
|
|
|
|
|
|
|
|
25,912
|
|
|
|
25,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities not due at a single maturity date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies and Sponsored Agencies
|
|
|
271,685
|
|
|
|
269,049
|
|
|
$
|
292
|
|
|
$
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
297,597
|
|
|
$
|
294,933
|
|
|
$
|
292
|
|
|
$
|
306
|
|
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 $88,460,000 and $55,834,000 and estimated fair values totaling $87,351,000 and $56,021,000
were pledged to secure State Treasury funds on deposit, public agency and bankruptcy trustee deposits and borrowing arrangements
(see Note 10) at December 31, 2018 and 2017, respectively.
Investment
securities with unrealized losses at December 31, 2018 and 2017 are summarized and classified according to the duration of the
loss period as follows (dollars in thousands):
|
|
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
|
)
|
|
|
|
|
|
|
2017
|
|
|
|
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
|
|
$
|
119,455
|
|
|
$
|
(1,148
|
)
|
|
$
|
49,258
|
|
|
$
|
(1,123
|
)
|
|
$
|
168,713
|
|
|
$
|
(2,271
|
)
|
Obligations of states and political
subdivisions
|
|
|
1,130
|
|
|
|
(9
|
)
|
|
|
4,654
|
|
|
|
(85
|
)
|
|
|
5,784
|
|
|
|
(94
|
)
|
Corporate bonds
|
|
|
1,967
|
|
|
|
(24
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,967
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
122,552
|
|
|
$
|
(1,181
|
)
|
|
$
|
53,912
|
|
|
$
|
(1,208
|
)
|
|
$
|
176,464
|
|
|
$
|
(2,389
|
)
|
At
December 31, 2018, the Company held 220 securities of which 26 were in a loss position for less than twelve months and 97 were
in a loss position for twelve months or more. These 97 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,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Real estate – commercial
|
|
$
|
199,894
|
|
|
$
|
185,452
|
|
Real estate – construction
|
|
|
5,685
|
|
|
|
5,863
|
|
Real estate – multi-family
|
|
|
56,139
|
|
|
|
78,025
|
|
Real estate – residential
|
|
|
16,338
|
|
|
|
15,813
|
|
Commercial
|
|
|
29,650
|
|
|
|
25,377
|
|
Lease financing receivable
|
|
|
32
|
|
|
|
205
|
|
Agriculture
|
|
|
4,419
|
|
|
|
1,713
|
|
Consumer
|
|
|
10,714
|
|
|
|
945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,871
|
|
|
|
313,393
|
|
|
|
|
|
|
|
|
|
|
Deferred loan and lease origination fees and costs, net
|
|
|
37
|
|
|
|
(202
|
)
|
Allowance for loan and lease losses
|
|
|
(4,392
|
)
|
|
|
(4,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
318,516
|
|
|
$
|
308,713
|
|
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 $194,431,000 and $209,889,000 at December 31, 2018 and 2017, respectively (see Note 10).
The
components of the Company’s lease financing receivable are summarized as follows (dollars in thousands):
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Future lease payments receivable
|
|
$
|
33
|
|
|
$
|
211
|
|
Residual interests
|
|
|
—
|
|
|
|
—
|
|
Unearned income
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Net lease financing receivable
|
|
$
|
32
|
|
|
$
|
205
|
|
Future
lease payments receivable are as follows (dollars in thousands):
Year Ending
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2019
|
|
$
|
33
|
|
|
|
|
|
|
Total lease payments receivable
|
|
$
|
33
|
|
Salaries
and employee benefits totaling $357,000, $177,000 and $289,000 have been deferred as loan and lease origination costs for the
years ended December 31, 2018, 2017 and 2016, 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, 2018, 2017 and
2016 and the allocation of the allowance for loan and lease losses as of December 31, 2018, 2017 and 2016 by portfolio segment
and by impairment methodology (dollars in thousands):
|
|
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)
|
|
|
December
31, 2016
|
|
|
|
|
|
|
Real
Estate
|
|
|
Other
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-
Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Leases
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for Loan and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
860
|
|
|
$
|
2,369
|
|
|
$
|
228
|
|
|
$
|
813
|
|
|
$
|
319
|
|
|
$
|
1
|
|
|
$
|
77
|
|
|
$
|
78
|
|
|
$
|
230
|
|
|
$
|
4,975
|
|
Provision
for loan losses
|
|
|
(665
|
)
|
|
|
(653
|
)
|
|
|
623
|
|
|
|
(474
|
)
|
|
|
(66
|
)
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
(144
|
)
|
|
|
48
|
|
|
|
(1,344
|
)
|
Loans
charged-off
|
|
|
—
|
|
|
|
(93
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
(127
|
)
|
Recoveries
|
|
|
660
|
|
|
|
427
|
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
124
|
|
|
|
—
|
|
|
|
1,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance allocated to portfolio segments
|
|
$
|
855
|
|
|
$
|
2,050
|
|
|
$
|
851
|
|
|
$
|
446
|
|
|
$
|
253
|
|
|
$
|
1
|
|
|
$
|
64
|
|
|
$
|
24
|
|
|
$
|
278
|
|
|
$
|
4,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
11
|
|
|
$
|
246
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment
|
|
$
|
844
|
|
|
$
|
1,804
|
|
|
$
|
849
|
|
|
$
|
446
|
|
|
$
|
120
|
|
|
$
|
1
|
|
|
$
|
35
|
|
|
$
|
24
|
|
|
$
|
278
|
|
|
$
|
4,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
35,374
|
|
|
$
|
191,129
|
|
|
$
|
73,373
|
|
|
$
|
9,180
|
|
|
$
|
15,718
|
|
|
$
|
404
|
|
|
$
|
2,302
|
|
|
$
|
1,650
|
|
|
$
|
—
|
|
|
$
|
329,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
157
|
|
|
$
|
14,154
|
|
|
$
|
482
|
|
|
$
|
—
|
|
|
$
|
2,147
|
|
|
$
|
—
|
|
|
$
|
357
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
evaluated for impairment
|
|
$
|
35,217
|
|
|
$
|
176,975
|
|
|
$
|
72,891
|
|
|
$
|
9,180
|
|
|
$
|
13,571
|
|
|
$
|
404
|
|
|
$
|
1,945
|
|
|
$
|
1,650
|
|
|
$
|
—
|
|
|
$
|
311,833
|
|
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, 2018 and 2017
(dollars in thousands):
|
|
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
|
|
|
|
December
31, 2017
|
|
|
|
Credit
Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
Real
Estate
|
|
|
Other
Credit Exposure
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Multi-Family
|
|
|
Construction
|
|
|
Residential
|
|
|
Leases
|
|
|
Agriculture
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
23,617
|
|
|
$
|
164,815
|
|
|
$
|
73,644
|
|
|
$
|
5,863
|
|
|
$
|
13,767
|
|
|
$
|
205
|
|
|
$
|
1,713
|
|
|
$
|
713
|
|
|
$
|
284,337
|
|
Watch
|
|
|
96
|
|
|
|
18,083
|
|
|
|
4,381
|
|
|
|
—
|
|
|
|
1,507
|
|
|
|
—
|
|
|
|
—
|
|
|
|
155
|
|
|
|
24,222
|
|
Special
mention
|
|
|
66
|
|
|
|
2,265
|
|
|
|
—
|
|
|
|
—
|
|
|
|
539
|
|
|
|
—
|
|
|
|
—
|
|
|
|
70
|
|
|
|
2,940
|
|
Substandard
|
|
|
—
|
|
|
|
289
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
296
|
|
Doubtful
|
|
|
1,598
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,377
|
|
|
$
|
185,452
|
|
|
$
|
78,025
|
|
|
$
|
5,863
|
|
|
$
|
15,813
|
|
|
$
|
205
|
|
|
$
|
1,713
|
|
|
$
|
945
|
|
|
$
|
313,393
|
|
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, 2018 and 2017 (dollars in thousands):
|
|
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)
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,377
|
|
|
$
|
25,377
|
|
|
$
|
—
|
|
|
$
|
1,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
289
|
|
|
|
289
|
|
|
|
185,163
|
|
|
|
185,452
|
|
|
|
—
|
|
|
|
289
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
78,025
|
|
|
|
78,025
|
|
|
|
—
|
|
|
|
—
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,863
|
|
|
|
5,863
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
146
|
|
|
|
15,667
|
|
|
|
15,813
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
205
|
|
|
|
205
|
|
|
|
—
|
|
|
|
—
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,713
|
|
|
|
1,713
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
944
|
|
|
|
945
|
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
147
|
|
|
$
|
—
|
|
|
$
|
289
|
|
|
$
|
436
|
|
|
$
|
312,957
|
|
|
$
|
313,393
|
|
|
$
|
—
|
|
|
$
|
1,892
|
|
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, 2018, 2017 and 2016
(dollars in thousands):
|
|
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
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
323
|
|
|
|
410
|
|
|
|
—
|
|
|
|
326
|
|
|
|
18
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,968
|
|
|
$
|
6,289
|
|
|
$
|
—
|
|
|
$
|
6,037
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With
an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Real
estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2,138
|
|
|
|
2,217
|
|
|
|
132
|
|
|
|
2,199
|
|
|
|
133
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
596
|
|
|
|
596
|
|
|
|
53
|
|
|
|
611
|
|
|
|
29
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,734
|
|
|
$
|
2,813
|
|
|
$
|
185
|
|
|
$
|
2,810
|
|
|
$
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Real
estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
7,783
|
|
|
|
8,096
|
|
|
|
132
|
|
|
|
7,910
|
|
|
|
416
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
919
|
|
|
|
1,006
|
|
|
|
53
|
|
|
|
937
|
|
|
|
47
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
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
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Residential
|
|
|
329
|
|
|
|
416
|
|
|
|
—
|
|
|
|
331
|
|
|
|
19
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,601
|
|
|
$
|
8,994
|
|
|
$
|
—
|
|
|
$
|
7,840
|
|
|
$
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With
an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,757
|
|
|
$
|
15,237
|
|
|
$
|
355
|
|
|
$
|
14,046
|
|
|
$
|
754
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND LEASE LOSSES
(Continued)
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10,910
|
|
|
|
11,540
|
|
|
|
—
|
|
|
|
11,011
|
|
|
|
558
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Residential
|
|
|
334
|
|
|
|
421
|
|
|
|
—
|
|
|
|
337
|
|
|
|
15
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,244
|
|
|
$
|
11,961
|
|
|
$
|
—
|
|
|
$
|
11,348
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
157
|
|
|
$
|
157
|
|
|
$
|
11
|
|
|
$
|
161
|
|
|
$
|
11
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
3,244
|
|
|
|
3,336
|
|
|
|
246
|
|
|
|
3,308
|
|
|
|
168
|
|
Multi-family
|
|
|
482
|
|
|
|
482
|
|
|
|
2
|
|
|
|
485
|
|
|
|
33
|
|
Residential
|
|
|
1,813
|
|
|
|
1,813
|
|
|
|
133
|
|
|
|
1,837
|
|
|
|
87
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
357
|
|
|
|
357
|
|
|
|
29
|
|
|
|
364
|
|
|
|
21
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,053
|
|
|
$
|
6,145
|
|
|
$
|
421
|
|
|
$
|
6,155
|
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
157
|
|
|
$
|
157
|
|
|
$
|
11
|
|
|
$
|
161
|
|
|
$
|
11
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
14,154
|
|
|
|
14,876
|
|
|
|
246
|
|
|
|
14,319
|
|
|
|
726
|
|
Multi-family
|
|
|
482
|
|
|
|
482
|
|
|
|
2
|
|
|
|
485
|
|
|
|
34
|
|
Residential
|
|
|
2,147
|
|
|
|
2,234
|
|
|
|
133
|
|
|
|
2,174
|
|
|
|
102
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
357
|
|
|
|
357
|
|
|
|
29
|
|
|
|
364
|
|
|
|
21
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,297
|
|
|
$
|
18,106
|
|
|
$
|
421
|
|
|
$
|
17,503
|
|
|
$
|
897
|
|
Interest
income on non-accrual loans is generally recognized on a cash basis and was approximately $43,000, $2,000 and $115,000 for the
years ended December 31, 2018, 2017 and 2016.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
7.
|
ALLOWANCE FOR LOAN AND LEASE LOSSES
(Continued)
|
Troubled
Debt Restructurings
There
was one modification made during the period ended December 31, 2018 and one modification made during the period ended December
31, 2017 that were considered as troubled debt restructurings. 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. The modification of the terms of the loan in 2017 included a reduction of the stated interest
rate for eighteen months according to a bankruptcy court-order as part of a debtor-in-possession financing agreement. The loan
had a pre-modification and post-modification outstanding recorded investment of $2,692,000. In 2017, the balance of the loan was
reduced by principal payments of $57,000 and by a charge-off to the loan and lease allowance of $1,073,000 resulting in a net
balance of $1,562,000. As of December 31, 2018 and 2017, the Company has a recorded investment in troubled debt restructurings
of $6,642,000 and $8,403,000, respectively. The Company has allocated $185,000 and $72,000 of specific allowance for those loans
at December 31, 2018 and 2017 and has not committed to lend additional amounts
The
Company has not committed to lend additional amounts as of December 31, 2018 or December 31, 2017 to borrowers with outstanding
loans that are classified as troubled debt restructurings.
There
were no payment defaults on troubled debt restructurings within 12 months following the modification during the year ended December
31, 2018 and 2017 except for one payment default on the troubled debt restructuring made in 2017 with a loan balance of $1,562,000.
The loan was subsequently reduced $213,000 through charge-off to the loan and lease allowance and sold for no further loss at
$1,349,000.
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,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
206
|
|
|
$
|
206
|
|
Building and improvements
|
|
|
886
|
|
|
|
853
|
|
Furniture, fixtures and
equipment
|
|
|
6,169
|
|
|
|
6,058
|
|
Leasehold improvements
|
|
|
1,721
|
|
|
|
1,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,982
|
|
|
|
8,807
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation
and amortization
|
|
|
(7,911
|
)
|
|
|
(7,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,071
|
|
|
$
|
1,158
|
|
Depreciation
and amortization included in occupancy and furniture and equipment expense totaled $265,000, $333,000 and $420,000 for the years
ended December 31, 2018, 2017 and 2016, 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,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
72,522
|
|
|
$
|
66,130
|
|
Money market
|
|
|
145,831
|
|
|
|
130,032
|
|
NOW accounts
|
|
|
69,489
|
|
|
|
64,709
|
|
Time, $250,000 or more
|
|
|
57,028
|
|
|
|
45,826
|
|
Other time
|
|
|
31,059
|
|
|
|
33,855
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
375,929
|
|
|
$
|
340,552
|
|
The
Company held $29,000,000 in certificates of deposit for the State of California as of December 31, 2018 and 2017. This amount
represents 4.9% of total deposit balances at December 31, 2018 and 5.2% at December 31, 2017.
Aggregate
annual maturities of time deposits are as follows (dollars in thousands):
Year Ending
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2019
|
|
$
|
64,916
|
|
2020
|
|
|
5,923
|
|
2021
|
|
|
8,516
|
|
2022
|
|
|
3,640
|
|
2023
|
|
|
5,092
|
|
Thereafter
|
|
|
—
|
|
|
|
|
|
|
|
|
$
|
88,087
|
|
Interest
expense recognized on interest-bearing deposits consisted of the following (dollars in thousands):
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
26
|
|
|
$
|
22
|
|
|
$
|
19
|
|
Money market
|
|
|
257
|
|
|
|
123
|
|
|
|
128
|
|
NOW accounts
|
|
|
15
|
|
|
|
16
|
|
|
|
18
|
|
Time Deposits
|
|
|
1,061
|
|
|
|
694
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,359
|
|
|
$
|
855
|
|
|
$
|
730
|
|
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, 2018 and 2017.
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 $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. Advances totaling $15,500,000 were outstanding from the FHLB
at December 31, 2017 bearing fixed interest rates ranging from 1.18% to 1.90% and maturing between July 20, 2018 and April 12,
2021. Amounts available under the borrowing arrangement with the FHLB at December 31, 2018 and 2017 totaled $107,262,000
and $117,546,000, 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, 2018 and 2017. Amounts available under the borrowing arrangement with the FRB at December 31, 2018 and 2017 totaled $8,340,000
and $9,085,000, respectively.
The
following table summarizes these borrowings (dollars in thousands):
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term portion of borrowings
|
|
$
|
5,000
|
|
|
|
1.32
|
%
|
|
$
|
3,500
|
|
|
|
1.39
|
%
|
Long-term borrowings
|
|
|
10,500
|
|
|
|
2.02
|
%
|
|
|
12,000
|
|
|
|
1.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
|
|
1.79
|
%
|
|
$
|
15,500
|
|
|
|
1.41
|
%
|
Maturities
on these borrowings are as follows (dollars in thousands):
Year Ending
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2019
|
|
$
|
5,000
|
|
2020
|
|
|
5,000
|
|
2021
|
|
|
2,000
|
|
2022
|
|
|
—
|
|
Thereafter
|
|
|
3,500
|
|
|
|
|
|
|
|
|
$
|
15,500
|
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
The
provision for income taxes for the years ended December 31, 2018, 2017 and 2016 consisted of the following (dollars in thousands):
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
2,701
|
|
|
$
|
974
|
|
|
$
|
3,675
|
|
Deferred
|
|
|
(308
|
)
|
|
|
25
|
|
|
|
(283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
$
|
2,393
|
|
|
$
|
999
|
|
|
$
|
3,392
|
|
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,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance
for loan and lease losses
|
|
$
|
1,328
|
|
|
$
|
1,354
|
|
Unrealized gains on available-for-sale
investment
securities
|
|
|
787
|
|
|
|
135
|
|
Deferred compensation
|
|
|
1,695
|
|
|
|
1,807
|
|
Future state tax deduction
|
|
|
110
|
|
|
|
132
|
|
Other
|
|
|
48
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
3,968
|
|
|
|
3,528
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deferred loan costs
|
|
|
(291
|
)
|
|
|
(136
|
)
|
Federal Home Loan Bank
stock dividends
|
|
|
(139
|
)
|
|
|
(139
|
)
|
Other real estate owned
|
|
|
(50
|
)
|
|
|
(51
|
)
|
Premises and equipment
|
|
|
(24
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(504
|
)
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
3,464
|
|
|
$
|
3,145
|
|
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, 2015 and by state and local taxing authorities
for years before December 31, 2014. There were no unrecognized tax benefits accrued by the Company as of December 31, 2018.
The Company does not expect to have any 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 2018 and
34% in 2017 and 2016 to income before income taxes. The significant items comprising these differences consisted of the following:
|
|
Year
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Federal
income tax statutory rate
|
|
|
21.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
State
franchise tax, net of Federal tax effect
|
|
|
8.1
|
%
|
|
|
6.5
|
%
|
|
|
7.1
|
%
|
Effect
of Federal rate reduction on deferred tax assets
|
|
|
—
|
|
|
|
19.0
|
%
|
|
|
—
|
|
Tax
benefit of interest on loans to/investments in states and political subdivisions
|
|
|
(3.3
|
)%
|
|
|
(6.1
|
)%
|
|
|
(4.7
|
)%
|
Tax-exempt
income from life insurance policies
|
|
|
(1.0
|
)%
|
|
|
(1.7
|
)%
|
|
|
(1.1
|
)%
|
Equity
compensation expense
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Other
|
|
|
(0.6
|
)%
|
|
|
(1.4
|
)%
|
|
|
(0.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
24.3
|
%
|
|
|
50.4
|
%
|
|
|
34.6
|
%
|
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
12.
|
COMMITMENTS,
CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
|
Leases
The
Company leases branch facilities, administrative offices and various equipment under noncancelable operating leases which expire
on various dates through the year 2024. Certain of the leases have five year renewal options. One of the branch facilities is
leased from a current member of the Company’s Board of Directors (see Note 17).
Future
minimum lease payments are as follows (dollars in thousands):
Year Ending
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2019
|
|
$
|
747
|
|
2020
|
|
|
689
|
|
2021
|
|
|
659
|
|
2022
|
|
|
633
|
|
2023
|
|
|
282
|
|
Thereafter
|
|
|
930
|
|
|
|
|
|
|
|
|
$
|
3,940
|
|
Rental
expense included in occupancy, furniture and equipment expense totaled $753,000, $755,000 and $858,000 for the years ended December
31, 2018, 2017 and 2016, 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,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
|
|
Revolving lines of credit secured by 1-4 family residences
|
|
$
|
47
|
|
|
$
|
175
|
|
Commercial real estate, construction and land development commitments secured by real
estate
|
|
|
21,185
|
|
|
|
3,565
|
|
Other unused commitments, principally commercial loans
|
|
|
13,044
|
|
|
|
7,183
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,276
|
|
|
$
|
10,923
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit
|
|
$
|
361
|
|
|
$
|
121
|
|
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.
AMERICAN
RIVER BANKSHARES AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
|
12.
|
COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF
CREDIT RISK
(Continued)
|
Financial
Instruments With Off-Balance-Sheet Risk
(Continued)
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.
In
management’s judgment, a concentration exists in real estate-related loans which represented approximately 87% and 91% of the
Company’s loan portfolio at December 31, 2018 and 2017, respectively. 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 $9,175,000 in uninsured deposits at December 31, 2018. The Company had $6,882,000 in uninsured deposits at December
31, 2017.
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, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
6,404
|
|
|
|
6,747
|
|
|
$
|
0.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock-based
compensation
|
|
|
—
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
6,404
|
|
|
|
6,783
|
|
|
$
|
0.94
|
|
No
shares were antidilutive for the year ended December 31, 2018. Stock options for 34,736 shares and 98,783 shares of common stock
were not considered in computing diluted earnings per common share for the years ended December 31, 2017 and 2016, respectively,
because they were antidilutive.
Stock
Based Compensation
In
2000, the Board of Directors adopted and the Company’s shareholders approved a stock option plan (the “2000 Plan”),
under which 11,140 options remain outstanding at December 31, 2018. 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, 2018, the total number of authorized shares that are available for issuance under the 2010 Plan is 1,287,096.
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. Remaining
awards granted under the 2000 Plan are nonqualified stock options. The 2010 Plan and the 2000 Plan (collectively the “Plans”),
under which equity incentives may be granted to employees and directors under incentive and nonstatutory agreements, require 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
Plans 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 Plans are exercisable until their expiration; however, no new options will be awarded
under the 2000 Plan. The Plans do 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 2016, 2017 or 2018 under either stock-based compensation plans.
A
summary of the outstanding and nonvested stock option activity for the year ended December 31, 2018 is as follows:
|
|
Outstanding
|
|
|
Nonvested
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
Fair Value
|
|
|
|
Shares
|
|
|
Per Share
|
|
|
Shares
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018
|
|
|
97,543
|
|
|
$
|
11.26
|
|
|
|
14,738
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Options vested
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(7,602
|
)
|
|
$
|
2.92
|
|
Options exercised
|
|
|
(21,310
|
)
|
|
$
|
8.89
|
|
|
|
—
|
|
|
$
|
—
|
|
Options expired or canceled
|
|
|
(35,135
|
)
|
|
$
|
15.68
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
41,098
|
|
|
$
|
8.71
|
|
|
|
7,136
|
|
|
$
|
2.94
|
|
A
summary of options as of December 31, 2018 is as follows:
Nonvested:
|
|
|
|
|
Weighted average exercise price of nonvested stock options
|
|
$
|
9.29
|
|
Aggregate intrinsic value of nonvested stock options
|
|
$
|
33,238
|
|
Weighted average remaining contractual term in years of nonvested stock options
|
|
|
6.02
|
|
|
|
|
|
|
Vested:
|
|
|
|
|
Number of vested stock options
|
|
|
33,962
|
|
Number of options expected to vest
|
|
|
14,738
|
|
Weighted average exercise price per share
|
|
$
|
8.59
|
|
Aggregate intrinsic value
|
|
$
|
182,036
|
|
|
|
|
|
|
Weighted average remaining contractual term in years
|
|
|
3.54
|
|
|
|
|
|
|
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
|
|
2018
|
|
|
Life
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$7.07- $8.59
|
|
|
16,542
|
|
|
|
1.19 years
|
|
|
|
16,542
|
|
$8.60- $16.19
|
|
|
34,023
|
|
|
|
5.85 years
|
|
|
|
17,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,098
|
|
|
|
|
|
|
|
33,962
|
|
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, 2018, 2017 and 2016:
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. There were 32,315
shares of restricted stock awarded during 2017. Of the 32,315 restricted common shares, 7,862 will vest one year from the date
of the award, 7,333 will vest 33% per year from the date of the award, and 2,087 will vest 20% per year from the date of the award.
The remaining 15,033 are considered performance based awards. The awards can be earned based upon the stock performance of the
Company’s common stock in relationship to the common stock of the Company’s peer group. The number of shares can be
adjusted by up to 150% of the award if outstanding performance is reached or can be forfeited if minimum performance is not reached.
The 15,033 awards are related to the 2017-2018 performance period and were forfeited as the Company did not meet the minimum performance
target or the employee was terminated prior to the end of the performance period. The weighted average contractual term over which
the restricted stock will vest is 1.50 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, 2018
|
|
|
49,053
|
|
|
$
|
12.27
|
|
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
22,514
|
|
|
$
|
15.44
|
|
Vested
|
|
|
(27,899
|
)
|
|
$
|
13.26
|
|
Cancelled
|
|
|
(11,140
|
)
|
|
$
|
14.54
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2018
|
|
|
32,528
|
|
|
$
|
14.60
|
|
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.
There are no undisbursed commitments to related parties as of December 31, 2018.