Central Valley(US:CVCY)2019-05-06 17:47markdown [PART 1 FINANCIAL INFORMATION](index=3&type=section&id=PART%201%20FINANCIAL%20INFORMATION) [ITEM 1 FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents unaudited consolidated financial statements, including balance sheets, income statements, and cash flow statements, with detailed notes [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Total assets | $ 1,564,237 | $ 1,537,836 | | Total loans, less allowance for credit losses | 912,692 | 909,591 | | Total deposits | 1,292,564 | 1,282,298 | | Total shareholders' equity | 227,455 | 219,738 | [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) | (In thousands) | For the Quarter Ended March 31, 2019 | For the Quarter Ended March 31, 2018 | |:---------------|:-------------------------------------|:-------------------------------------| | Net income | $ 5,216 | $ 5,291 | | Total interest income | 16,289 | 15,730 | | Total non-interest income | 2,976 | 2,771 | | Total non-interest expenses | 11,667 | 11,368 | | Basic earnings per share | $ 0.38 | $ 0.39 | | Diluted earnings per share | $ 0.38 | $ 0.38 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) | (In thousands) | For the Quarter Ended March 31, 2019 | For the Quarter Ended March 31, 2018 | |:---------------|:-------------------------------------|:-------------------------------------| | Net income | $ 5,216 | $ 5,291 | | Unrealized holding gains (losses) arising during the period | 8,618 | (8,571) | | Total other comprehensive income (loss) | 5,329 | (6,611) | | Comprehensive income (loss) | $ 10,545 | $ (1,320) | [Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS'%20EQUITY) | (In thousands) | January 1, 2019 Balance | March 31, 2019 Balance | |:---------------|:------------------------|:-----------------------| | Total Shareholders' Equity | $ 219,738 | $ 227,455 | | Net income | 5,216 | | | Other comprehensive income | 5,329 | | | Cash dividend ($0.10 per common share) | (1,372) | | | Repurchase and retirement of common stock | (1,874) | | [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) | (In thousands) | For the Quarter Ended March 31, 2019 | For the Quarter Ended March 31, 2018 | |:---------------|:-------------------------------------|:-------------------------------------| | Net cash provided by operating activities | $ 6,902 | $ 6,349 | | Net cash used in investing activities | (10,589) | (29,363) | | Net cash provided by (used in) financing activities | 4,195 | (35,146) | | Increase (decrease) in cash and cash equivalents | 508 | (58,160) | | Cash and cash equivalents at end of period | $ 32,235 | $ 42,223 | [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) - The Company adopted FASB Accounting Standards Update (ASU) 2016-02 - Leases on January 1, 2019, resulting in the recognition of a right-of-use asset and lease liability of approximately **$10 million** on the balance sheet for operating leases[30](index=30&type=chunk) - The Company is evaluating the impact of ASU 2016-13 - Measurement of Credit Losses on Financial Instruments (CECL), effective January 1, 2020, which will require reserves for all expected credit losses over the contractual term of financial assets[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - ASU 2017-04 (Goodwill Impairment) and ASU 2017-08 (Callable Debt Securities) were adopted effective Q1 2019, with no material impact on the Company's financial position, results of operations, or cash flows[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 2. Fair Value Measurements](index=13&type=section&id=Note%202.%20Fair%20Value%20Measurements) - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted market prices for identical instruments), Level 2 (observable market data for similar instruments), and Level 3 (unobservable assumptions)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) | (In thousands) | March 31, 2019 Total Assets Measured at Fair Value on a Recurring Basis | |:---------------|:----------------------------------------------------------------------| | Total assets measured at fair value on a recurring basis | $ 486,968 | | Level 1 (Equity securities) | $ 7,346 | | Level 2 (Available-for-sale debt securities) | $ 479,622 | | Level 3 | $ — | | (In thousands) | December 31, 2018 Impaired Loans Measured at Fair Value on a Non-Recurring Basis | |:---------------|:---------------------------------------------------------------------------------| | Total assets measured at fair value on a non-recurring basis | $ 134 | | Level 3 (Commercial real estate) | $ 134 | [Note 3. Investments](index=17&type=section&id=Note%203.%20Investments) - The available-for-sale investment portfolio shifted from a net unrealized loss of **$6,257 thousand** at December 31, 2018, to a net unrealized gain of **$1,309 thousand** at March 31, 2019[67](index=67&type=chunk) | (In thousands) | March 31, 2019 Estimated Fair Value | December 31, 2018 Estimated Fair Value | |:---------------|:------------------------------------|:-------------------------------------| | Total available-for-sale securities | $ 479,622 | $ 463,905 | | Proceeds from sales or calls (Q1) | 52,985 | 69,315 | | Gross realized gains from sales or calls (Q1) | 1,099 | 1,067 | | Gross realized losses from sales or calls (Q1) | (47) | (252) | - No other-than-temporary impairment (OTTI) losses were recorded for investment securities during the three months ended March 31, 2019, or 2018, as declines in market value were attributed to interest rate changes, not credit quality, and the Company has the ability and intent to hold these investments[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=21&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Total gross loans | $ 921,810 | $ 918,695 | | Allowance for credit losses | (9,118) | (9,104) | | Total loans (net) | $ 912,692 | $ 909,591 | | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Nonaccrual loans | $ 1,548 | $ 2,740 | | Total nonperforming loans | $ 1,548 | $ 2,740 | | Ratio of nonperforming loans to total loans | 0.17% | 0.30% | | Loans considered to be impaired | $ 4,683 | $ 5,909 | | Related allowance for credit losses on impaired loans | $ 101 | $ 90 | - The recorded investment in troubled debt restructurings (TDRs) was **$3,135 thousand** at March 31, 2019, with **$53 thousand** in specific reserves allocated to these loans[97](index=97&type=chunk) [Note 5. Borrowing Arrangements](index=29&type=section&id=Note%205.%20Borrowing%20Arrangements) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | FHLB advances | $ 7,000 | $ 10,000 | - Approximately **$443,162 thousand** in loans were pledged as collateral to the FHLB for the Bank's remaining borrowing capacity of **$287,839 thousand** at March 31, 2019[101](index=101&type=chunk) [Note 6. Leases](index=29&type=section&id=Note%206.%20Leases) - The Bank leases branch facilities and administrative offices under noncancelable operating leases with terms extending through **2028**[102](index=102&type=chunk) | (In thousands) | March 31, 2019 | |:---------------|:---------------| | Present value of operating lease liabilities | $ 10,472 | | Operating lease right-of-use assets | $ 10,472 | | Weighted average remaining lease term | 7 years | | Weighted average discount rate | 2.91% | [Note 7. Commitments and Contingencies](index=31&type=section&id=Note%207.%20Commitments%20and%20Contingencies) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Commitments to extend credit | $ 326,191 | $ 312,274 | | Standby letters of credit and financial guarantees | 2,490 | 2,450 | | Contingent allocation for probable loan loss experience on unfunded obligations | 250 | 225 | - In 2018, the Company sold its credit card portfolio to a third-party vendor and provides a guarantee of certain accounts, totaling **$2,100 thousand** as of March 31, 2019[106](index=106&type=chunk) [Note 8. Earnings Per Share](index=31&type=section&id=Note%208.%20Earnings%20Per%20Share) | (In thousands, except share and per share amounts) | For the Quarter Ended March 31, 2019 | For the Quarter Ended March 31, 2018 | |:---------------------------------------------------|:-------------------------------------|:-------------------------------------| | Basic earnings per share | $ 0.38 | $ 0.39 | | Diluted earnings per share | $ 0.38 | $ 0.38 | | Weighted average common shares used in basic computation | 13,646,489 | 13,669,976 | | Weighted average common shares used in diluted computation | 13,755,615 | 13,804,480 | [Note 9. Share-Based Compensation](index=32&type=section&id=Note%209.%20Share-Based%20Compensation) | (In thousands) | For the Quarter Ended March 31, 2019 | For the Quarter Ended March 31, 2018 | |:---------------|:-------------------------------------|:-------------------------------------| | Share-based compensation cost recognized | $ 143 | $ 74 | | Stock Options (March 31, 2019) | Shares | Weighted Average Exercise Price | |:-------------------------------|:-------|:--------------------------------| | Options outstanding | 139,804 | $ 8.87 | | Restricted Stock Awards (March 31, 2019) | Shares | Weighted Average Grant-Date Fair Value | |:-----------------------------------------|:-------|:---------------------------------------| | Nonvested outstanding shares | 57,827 | $ 16.43 | | Total unrecognized compensation cost | $ 540 | | [ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=ITEM%202%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's perspective on financial condition and results of operations, highlighting key performance indicators and financial metrics [Forward-Looking Statements](index=34&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements, identified by words such as "anticipate," "estimate," "expect," "project," "intend," "commit," and "believe," which are subject to risks and uncertainties[116](index=116&type=chunk) - Risks include increased competitive pressure, changes in interest rates, economic downturns in the Central Valley, ability to maintain growth and net interest margin, decline in asset quality, regulatory changes, real estate market fluctuations, and acquisition-related challenges[116](index=116&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes to the Company's critical accounting policies occurred during the three months ended March 31, 2019[117](index=117&type=chunk) [Overview](index=34&type=section&id=Overview) - Central Valley Community Bancorp is a central California-based bank holding company for Central Valley Community Bank, providing commercial banking services to businesses and individuals[118](index=118&type=chunk) - The Bank operates **21** full-service branches across various counties in central California and is subject to supervision by the California Department of Business Oversight (DBO) and the Federal Deposit Insurance Corporation (FDIC)[120](index=120&type=chunk) [First Quarter of 2019 Financial Highlights](index=35&type=section&id=First%20Quarter%20of%202019%20Financial%20Highlights) | Financial Metric | Q1 2019 | Q1 2018 | |:-----------------|:--------|:--------| | Consolidated Net Income | $5,216,000 | $5,291,000 | | Diluted EPS | $0.38 | $0.38 | | Net Interest Margin (fully tax equivalent basis) | 4.63% | 4.31% | | Annualized Return on Average Equity (ROE) | 9.42% | 10.15% | | Annualized Return on Average Assets (ROA) | 1.35% | 1.30% | | Total Average Assets | $1,540,721,000 | $1,624,504,000 | - The Board of Directors declared an **$0.11 per share** cash dividend payable on May 17, 2019[121](index=121&type=chunk) [Key Factors in Evaluating Financial Condition and Operating Performance](index=36&type=section&id=Key%20Factors%20in%20Evaluating%20Financial%20Condition%20and%20Operating%20Performance) - Key factors for evaluation include Return to shareholders (ROE), Return on average assets (ROA), Development of revenue streams (net interest income and non-interest income), Asset quality, Asset growth, Capital adequacy, Operating efficiency, and Liquidity[124](index=124&type=chunk) | Metric | Q1 2019 | Q1 2018 | |:-------|:--------|:--------| | Annualized ROE | 9.42% | 10.15% | | Annualized ROA | 1.35% | 1.30% | | Net Interest Margin (NIM) | 4.63% | 4.31% | | Efficiency Ratio | 63.92% | 62.59% | - Liquid assets totaled **$519,203 thousand**, representing **33.19%** of total assets at March 31, 2019[134](index=134&type=chunk) [Results of Operations](index=38&type=section&id=RESULTS%20OF%20OPERATIONS) [Net Income for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018](index=38&type=section&id=Net%20Income%20for%20the%20Three%20Months%20Ended%20March%2031,%202019%20Compared%20to%20the%20Three%20Months%20Ended%20March%2031,%202018) | Metric | Q1 2019 | Q1 2018 | |:-------|:--------|:--------| | Net income | $5,216,000 | $5,291,000 | | Basic EPS | $0.38 | $0.39 | | Diluted EPS | $0.38 | $0.38 | | Annualized ROE | 9.42% | 10.15% | | Annualized ROA | 1.35% | 1.30% | - The decrease in net income was primarily due to increased non-interest expense and provision for income taxes, partially offset by higher net interest income and net realized gains on investment securities[135](index=135&type=chunk) - A **$25,000** reversal of the provision for credit losses was recorded in Q1 2019, compared to no provision in Q1 2018[135](index=135&type=chunk) [Interest Income and Expense](index=38&type=section&id=Interest%20Income%20and%20Expense) | Metric | Q1 2019 | Q1 2018 | |:-------|:--------|:--------| | Net interest income before provision for credit losses | $15,835,000 | $15,426,000 | | Yield on average loans | 5.64% | 5.42% | | Yield on average total investments | 3.13% | 2.77% | | Cost of interest-bearing liabilities | 0.24% | 0.15% | | Average interest-earning assets | $1,399,220,000 | $1,476,572,000 | - Net interest income was positively impacted by **$127,000** in nonrecurring income from prepayment penalties and payoff of nonaccrual loans in Q1 2019, compared to **$21,000** in income reversals in Q1 2018[141](index=141&type=chunk) - The average life of the investment portfolio was **3.31 years** at March 31, 2019, with a net pre-tax unrealized gain of **$1,309,000**[143](index=143&type=chunk) [Provision for Credit Losses](index=42&type=section&id=Provision%20for%20Credit%20Losses) - The Company recorded a **$25,000** reverse provision for credit losses in Q1 2019, compared to no provision in Q1 2018[149](index=149&type=chunk) | Metric | Q1 2019 | Q1 2018 | |:-------|:--------|:--------| | Net recoveries | $39,000 | $10,000 | | Nonperforming loans | $1,548,000 | $4,058,000 | | Nonperforming loans as a percentage of total loans | 0.17% | 0.44% | | Annualized net charge-off (recovery) ratio | (0.02)% | 0.00% | | Allowance for Credit Losses | March 31, 2019 | December 31, 2018 | |:----------------------------|:---------------|:------------------| | Total allowance for credit losses | $9,118,000 | $9,104,000 | | Allowance for credit losses to total loans at end of period | 0.99% | 0.99% | [Net Interest Income after Provision for Credit Losses](index=43&type=section&id=Net%20Interest%20Income%20after%20Provision%20for%20Credit%20Losses) | (In thousands) | Q1 2019 | Q1 2018 | |:---------------|:--------|:--------| | Net interest income after provision for credit losses | $15,860 | $15,426 | [Non-Interest Income](index=43&type=section&id=Non-Interest%20Income) | (In thousands) | Q1 2019 | Q1 2018 | |:---------------|:--------|:--------| | Total non-interest income | $2,976 | $2,771 | | Net realized gains on sales and calls of investment securities | 1,052 | 815 | | Customer service charges | 690 | 755 | | Loan placement fees | 139 | 166 | - The **$205,000 (7.40%)** increase in non-interest income was primarily driven by higher net realized gains on investment securities, partially offset by decreases in service charges and loan placement fees[151](index=151&type=chunk) [Non-Interest Expenses](index=44&type=section&id=Non-Interest%20Expenses) | (In thousands) | Q1 2019 | Q1 2018 | |:---------------|:--------|:--------| | Total non-interest expenses | $11,667 | $11,368 | | Salaries and employee benefits | 6,490 | 6,416 | | Occupancy and equipment | 1,479 | 1,537 | | Information technology | 395 (decrease) | 480 | | Efficiency ratio | 63.92% | 62.59% | - The net increase in non-interest expenses was due to increases in information technology, salaries and employee benefits, amortization of intangibles, directors' expenses, and advertising, partially offset by decreases in acquisition and integration expenses, professional services, and data processing[154](index=154&type=chunk) - The increase in information technology expenses was a result of outsourcing network maintenance and IT support in Q4 2018[154](index=154&type=chunk) [Provision for Income Taxes](index=45&type=section&id=Provision%20for%20Income%20Taxes) | (In thousands) | Q1 2019 | Q1 2018 | |:---------------|:--------|:--------| | Provision for income taxes | $1,953 | $1,538 | | Effective income tax rate | 27.24% | 22.52% | - The increase in the effective tax rate was primarily due to a decrease in tax-exempt interest[158](index=158&type=chunk) [Financial Condition](index=45&type=section&id=FINANCIAL%20CONDITION) [Summary of Changes in Consolidated Balance Sheets March 31, 2019 compared to December 31, 2018](index=45&type=section&id=Summary%20of%20Changes%20in%20Consolidated%20Balance%20Sheets%20March%2031,%202019%20compared%20to%20December%2031,%202018) | (In thousands) | March 31, 2019 | December 31, 2018 | Change (%) | |:---------------|:---------------|:------------------|:-----------| | Total assets | $1,564,237 | $1,537,836 | 1.72% | | Total gross loans | 921,810 | 918,695 | 0.34% | | Total investment portfolio | 489,441 | 477,932 | 2.41% | | Total deposits | 1,292,564 | 1,282,298 | 0.80% | | Shareholders' equity | 227,455 | 219,738 | 3.51% | [Fair Value](index=46&type=section&id=Fair%20Value) - The Company measures fair values of financial instruments using a hierarchical framework, where the degree of judgment correlates with the observability of pricing scenarios[161](index=161&type=chunk) [Investments](index=46&type=section&id=Investments) - The total investment portfolio increased by **2.41%** to **$489,441 thousand** at March 31, 2019, with a net unrealized gain of **$1,309 thousand** on available-for-sale securities, compared to a net unrealized loss of **$6,257 thousand** at December 31, 2018[162](index=162&type=chunk) - The Company's loan-to-deposit ratio was **71.32%** at March 31, 2019, which is considered higher than peers due to a comparatively low ratio[162](index=162&type=chunk) - No other-than-temporary impairment (OTTI) losses were recorded for investment securities during the three months ended March 31, 2019, or 2018[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Loans](index=47&type=section&id=Loans) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Total gross loans | $921,810 | $918,695 | | Commercial loans | 107,960 (11.7%) | 109,531 (12.0%) | | Real estate loans | 699,745 (76.1%) | 699,576 (76.2%) | | Consumer loans | 112,351 (12.2%) | 107,996 (11.8%) | - A significant concentration of loans (approximately **95.7%**) existed in commercial and real estate loans at March 31, 2019[167](index=167&type=chunk) - Loans acquired from FLB, SVB, and VCB acquisitions totaled **$175,177 thousand** at March 31, 2019[165](index=165&type=chunk) [Nonperforming Assets](index=48&type=section&id=Nonperforming%20Assets) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Total nonperforming assets | $1,548 | $2,740 | | Nonperforming assets as % of total assets | 0.10% | 0.18% | | Nonaccrual loans | $1,548 | $2,740 | | Ratio of nonperforming loans to total loans | 0.17% | 0.30% | - Nonperforming assets consisted entirely of nonaccrual loans, with no OREO or repossessed assets at March 31, 2019, or December 31, 2018[168](index=168&type=chunk)[171](index=171&type=chunk) [Allowance for Credit Losses](index=49&type=section&id=Allowance%20for%20Credit%20Losses) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Balance, end of period (ALLL) | $9,118 | $9,104 | | Allowance for credit losses to total loans at end of period | 0.99% | 0.99% | | Contingent allocation for probable loan loss experience on unfunded obligations | $250 | $225 | - Excluding acquired loans, the ALLL to total gross loans was **1.22%** at March 31, 2019[175](index=175&type=chunk) - Management believes the ALLL is adequate to absorb probable incurred losses within the loan portfolio, based on a systematic risk evaluation methodology and consideration of economic conditions[149](index=149&type=chunk)[175](index=175&type=chunk) [Goodwill and Intangible Assets](index=51&type=section&id=Goodwill%20and%20Intangible%20Assets) | (In thousands) | March 31, 2019 | |:---------------|:---------------| | Total goodwill | $53,777 | | Carrying value of intangible assets | $2,399 | | Amortization expense (Q1) | $174 | | Estimated remaining core deposit intangible amortization (2019) | $523 | - No goodwill impairment was required based on the annual impairment test in Q3 2018, and no such events arose in Q1 2019[177](index=177&type=chunk)[178](index=178&type=chunk) - Core deposit intangibles are amortized using the straight-line method over estimated lives of **five to ten years**[179](index=179&type=chunk) [Deposits and Borrowings](index=52&type=section&id=Deposits%20and%20Borrowings) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Total deposits | $1,292,564 | $1,282,298 | | Interest-bearing deposits | 742,154 | 731,641 | | Non-interest bearing deposits | 550,410 | 550,657 | | Average non-interest bearing deposits to average total deposits | 42.10% | 40.01% | - Total deposits increased by **$10,266 thousand (0.80%)** due to recurring seasonal patterns[180](index=180&type=chunk) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | FHLB advances | $7,000 | $10,000 | [Capital](index=53&type=section&id=Capital) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Shareholders' equity | $227,455 | $219,738 | | Common stock cash dividends paid (Q1) | $1,372 | $0 (Q1 2018: $962) | | Common stock repurchased and retired (Q1) | 1,874 | 0 (Q1 2018: $0) | - The Company and the Bank met or exceeded all regulatory capital requirements, including Basel III, at March 31, 2019[130](index=130&type=chunk)[184](index=184&type=chunk) | Bank's Regulatory Capital Ratios (March 31, 2019) | Actual Ratio | Minimum Regulatory Requirement | |:--------------------------------------------------|:-------------|:-------------------------------| | Tier 1 Leverage Ratio | 11.64% | 4.00% | | Common Equity Tier 1 Ratio (CET 1) | 15.50% | 7.00% | | Tier 1 Risk-Based Capital Ratio | 15.50% | 8.50% | | Total Risk-Based Capital Ratio | 16.34% | 10.50% | [Liquidity](index=55&type=section&id=Liquidity) - Liquid assets totaled **$519,203 thousand**, or **33.19%** of total assets, at March 31, 2019[134](index=134&type=chunk) - Primary liquidity sources include customer deposits, Federal funds facilities, and FHLB advances, augmented by unpledged securities (**$415,303 thousand**) and available credit lines[190](index=190&type=chunk) | (In thousands) | March 31, 2019 | December 31, 2018 | |:---------------|:---------------|:------------------| | Unsecured Credit Lines (Credit limit) | $40,000 | $40,000 | | Federal Home Loan Bank (Credit limit) | $287,839 | $286,934 | | Federal Reserve Bank (Credit limit) | $3,551 | $4,364 | [ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%203%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Interest rate risk is identified as a significant market risk, with no material change in exposure since the 2018 Annual Report - Interest rate risk is considered a significant market risk that could materially affect the Company's financial condition and results of operations[193](index=193&type=chunk) - There has been no material change in the Company's interest rate risk exposure since the information disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018[193](index=193&type=chunk) [ITEM 4 CONTROLS AND PROCEDURES](index=56&type=section&id=ITEM%204%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were effective, with no material changes to internal controls over financial reporting in Q1 2019 - Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures and concluded they were effective[194](index=194&type=chunk) - No material change in the Company's internal controls over financial reporting occurred during the quarter ended March 31, 2019[194](index=194&type=chunk) [PART II OTHER INFORMATION](index=56&type=section&id=PART%20II%20OTHER%20INFORMATION) [ITEM 1 LEGAL PROCEEDINGS](index=56&type=section&id=ITEM%201%20LEGAL%20PROCEEDINGS) The Company reported no legal proceedings for the period - No legal proceedings to report[195](index=195&type=chunk) [ITEM 1A RISK FACTORS](index=56&type=section&id=ITEM%201A%20RISK%20FACTORS) Refers to risk factors from the 2018 Annual Report on Form 10-K, with no material changes from previously disclosed risks - No material changes from the risk factors previously disclosed in the Company's 2018 Annual Report on Form 10-K[196](index=196&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also materially adversely affect the business, financial condition, and/or operating results[196](index=196&type=chunk) [ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=57&type=section&id=ITEM%202%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details Q1 2019 common stock repurchase activity, with 97,479 shares retired at $1,874 thousand under a $10 million program | Period | Total shares purchased | Average price per share | |:-------|:-----------------------|:------------------------| | 01/1/2019 - 01/31/2019 | 46,281 | $18.71 | | 02/1/2019 - 02/28/2019 | 17,505 | $19.69 | | 03/1/2019 - 03/31/2019 | 33,693 | $19.60 | | Total (Q1 2019) | 97,479 | $19.20 | - During Q1 2019, the Company repurchased and retired **97,479 shares** at an approximate cost of **$1,874,000** under a **$10 million** stock repurchase program expiring on July 18, 2019[199](index=199&type=chunk) [ITEM 3 DEFAULTS UPON SENIOR SECURITIES](index=57&type=section&id=ITEM%203%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities - None to report[200](index=200&type=chunk) [ITEM 4 MINE SAFETY DISCLOSURES](index=57&type=section&id=ITEM%204%20MINE%20SAFETY%20DISCLOSURES) The Company reported no mine safety disclosures - None to report[201](index=201&type=chunk) [ITEM 5 OTHER INFORMATION](index=57&type=section&id=ITEM%205%20OTHER%20INFORMATION) The Company reported no other information - None to report[202](index=202&type=chunk) [ITEM 6 EXHIBITS](index=58&type=section&id=ITEM%206%20EXHIBITS) Lists exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, executive certifications, and XBRL documents - Exhibits include Amended and Restated Articles of Incorporation, Bylaws, Certifications of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(d)/15d-14(a) and Rule 13a-14(b)/15d-14(b)), and various XBRL documents[204](index=204&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) - The report was signed on May 6, 2019, by James M. Ford, President and Chief Executive Officer, and David A. Kinross, Executive Vice President and Chief Financial Officer[206](index=206&type=chunk)