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In addition to our full-service branches the Bank has specialized lending units which include a real estate industries
center, an agricultural credit center, and an SBA lending unit. We also have ATMs at all branch locations and offsite
ATMs at six different non-branch locations. Furthermore, the Bank is a member of the Allpoint network, which
provides our customers with surcharge-free access to over 43,000 ATMs across the nation and another 12,000 ATMs
in foreign countries, and our customers have access to electronic point-of-sale payment alternatives nationwide via
the Pulse EFT network. To ensure that account access preferences are addressed for all customers, we provide the
following options: an internet branch which provides the ability to open deposit accounts online; an online banking
option with bill-pay and mobile banking capabilities, including mobile check deposit; a customer service center that
is accessible by toll-free telephone during business hours; and an automated telephone banking system that is usually
accessible 24 hours a day, seven days a week. We offer a multitude of other banking products and services to com-
plement and support our lending and deposit products, including remote deposit capture and automated payroll ser-
vices for business customers.
We have not engaged in any material research activities related to the development of new products or services dur-
ing the last two fiscal years. However, our officers and employees are continually searching for ways to increase
public convenience, enhance customer access to payment systems, and enable us to improve our competitive
position. The cost to the Bank for these development, operations, and marketing activities cannot be calculated with
any degree of certainty. We hold no patents or licenses (other than licenses required by appropriate bank regulatory
agencies), franchises, or concessions. Our business has a modest seasonal component due to the heavy agricultural
orientation of the Central Valley, but as our branches in more metropolitan areas have expanded we have become less
reliant on the agriculture-related base. We are not dependent on a single customer or group of related customers for a
material portion of our core deposits, but for loans we do have what could be considered to be industry
concentrations in loans to the dairy industry (10% of total loans), and to mortgage companies in the form of mortgage
warehouse loans (11% of total loans). Our efforts to comply with government and regulatory mandates on consumer
protection and privacy, anti-terrorism, and other initiatives have resulted in significant ongoing expense to the Bank,
including staffing additions and costs associated with compliance-related software. However, as far as can be
determined there has been no material effect upon our capital expenditures, earnings, or competitive position as a
result of environmental regulation at the Federal, state, or local level.
Recent Developments
In July 2014 the Bank entered into a definitive agreement to acquire Santa Clara Valley Bank, a community bank
with branches in Santa Paula, Santa Clarita, and Fillmore, California. Subsequent to the receipt of requisite
regulatory and shareholder approvals, the deal closed on November 14, 2014. As part of the transaction, cash
consideration of $12.3 million, or $6.00 per share, was paid to SCVB common shareholders, and $3.0 million was
paid to SCVB preferred shareholders to retire outstanding preferred stock and associated warrants. One-time
acquisition costs added $2.1 million to the Company’s pre-tax non-interest expense in 2014. The SCVB acquisition
contributed approximately $62 million to the Company’s outstanding loan balances, $44 million to investment
securities, and $108 million to total deposits.
Recent Accounting Pronouncements
Information on recent accounting pronouncements is contained in Note 2 to the consolidated financial statements.
Competition
The banking business in California in general, and specifically in many of our market areas, is highly competitive.
The industry continues to consolidate, particularly with the relatively large number of FDIC-assisted takeovers of
failed banks and other acquisitions of troubled banks in recent years. There are also many unregulated companies
competing for business in our markets with financial products targeted at profitable customer segments. Many of
those companies are able to compete across geographic boundaries and provide meaningful alternatives to significant
banking products and services. These competitive trends are likely to continue.
With respect to commercial bank competitors, the business is dominated by a relatively small number of major banks
that operate a large number of offices within our geographic footprint. Based on June 30, 2014 FDIC market share
data for the 20 cities within which the Company maintains branches, the largest portion of deposits belongs to Wells
Fargo Bank with 23.6% of total combined deposits, followed by Bank of America (16.2%), JPMorgan Chase (7.3%),
