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Net premises and equipment increased by $1.5 million, or 7%, in 2014, due mainly to fixed assets added via the
acquisition of SCVB and new equipment purchased in conjunction with our core system conversion. The net book
value of the Company’s premises and equipment was 1.3% of total assets at December 31, 2014, and 1.4% at
December 31, 2013. Depreciation and amortization included in occupancy and equipment expense was $2.1 million
for both 2014 and 2013.
Other Assets
The Company’s goodwill and other intangible assets totaled $8.0 million at December 31, 2014 relative to $5.5
million at December 31, 2013. The balance at December 31, 2013 consists solely of goodwill that was generated in
connection with our acquisition of Sierra National Bank in 2000, while the increase during 2014 represents the
goodwill and core deposit intangible created by our acquisition of Santa Clara Valley Bank. The Company’s
goodwill and other intangible assets are evaluated annually for potential impairment. Because the estimated fair
value of the Company exceeded its book value (including goodwill and intangible assets) as of the measurement date
and no impairment was indicated, no further testing was deemed necessary and it was determined that goodwill and
other intangible assets were not impaired.
The net cash surrender value of the Company’s bank-owned life insurance increased to $43.0 million at December
31, 2014 from $39.4 million at December 31, 2013, due to $2.1 million in BOLI from SCVB and the addition of
BOLI income to the outstanding net cash surrender value during the course of the year. Refer to the the “Non-
Interest Revenue and Operating Expense” section above for a more detailed discussion of BOLI and the income it
generates.
The line item for “other assets” on the Company’s balance sheet totaled $37.5 million at December 31, 2014, relative
to $40.5 million at December 31, 2013. The $3.0 million decrease is primarily due to lower prepaid current taxes and
a declining level of tax credit funds, partially offset by a higher balance of restricted stock and a higher level of
accrued interest receivable. At year-end 2014, other assets included as its largest components a net deferred tax asset
of $12.8 million, a $7.0 million investment in restricted stock, accrued interest receivable totaling $5.9 million, a $5.8
million investment in low-income housing tax credit funds, and a $1.5 million investment in a small business
investment corporation. Restricted stock is comprised primarily of Federal Home Loan Bank of San Francisco
(“FHLB”) stock held in conjunction with our FHLB borrowings, and is not deemed to be marketable or liquid. Our
net deferred tax asset is evaluated as of every reporting date pursuant to FASB guidance, and we have determined
that no impairment exists.
Deposits
Deposits are another key balance sheet component impacting our net interest margin and other profitability metrics.
Deposits provide liquidity to fund growth in earning assets, and the Company’s net interest margin is improved to the
extent that growth in deposits is concentrated in less volatile and typically less costly non-maturity deposits such as
demand deposit accounts, NOW accounts, savings accounts, and money market demand accounts. Information con-
cerning average balances and rates paid on deposits by deposit type for the past three fiscal years is contained in the
Distribution, Rate, and Yield table located in the previous section under Results of Operations–Net Interest Income
and Net Interest Margin. A distribution of the Company’s deposits showing the balance and percentage of total
deposits by type is presented for the noted periods in the following table:
